Understanding the World Trade Organisation

by Marc Geddes

The WTO was launched on 01 January 1995 to add further vigour to the recovering global economy and to contribute to an expansion in the volume and value of world trade. The WTO is underpinned by its main aim to ensure that trade flows as smoothly, predictably and freely as possible. This includes a desire to liberalise trade, implement multilateral trade agreements, provide a forum for negotiations, administer international trade disputes and act as a surveillance mechanism for trade policies. [1] The foundation of the WTO came from the General Agreement on Tariffs and Trade (GATT) that formed the bedrock of international trade since the Second World War. Indeed, the GATT itself was formed to prevent the protectionism of the 1930s (also called ‘the tariff wars of the thirties’) that arguably led to the catastrophic events of 1939-45. [2] On this point alone, the WTO has met success: despite the financial crises since 2008, no ‘tariff war’ has occurred and protectionism has remained low. [3] This is impressive, and suggests a degree of output legitimacy, on which much neo-liberal economic and political policy rests.

In contrast, however, the WTO has also expanded its mandate beyond any agreed measure. The WTO not only contains the old GATT, but also an agreement on trade in services, trade-related issues of intellectual property rights (TRIPS) and monitors trade through the Trade Policy Review Mechanism (TPRM). The remit, then, has expanded considerably since 1995, which flags up issues of input and procedural legitimacy, as well as tensions with national sovereignty. The main consequence, and perhaps ‘problem’, is that the WTO is committed to trade at any cost. This has caused widespread concern, especially with regard to environmental protection versus trade liberalisation. Historically, the WTO has always favoured trade. In one case, for example, the WTO ruled that the USA could not impose an embargo on how tuna was produced in their imports. This meant not only that free trade ‘trumped’ national legislation, but also that lower environmental regulation was seen as acceptable (regardless of animal welfare or environmental consequences). [4]

Decision-Making at the WTO

There are two ways to look at decision-making: in theory (de jure) and in practice (de facto). The WTO is particularly proud of its formal voting procedure because this is ‘even more democratic than majority rule because no decision is made until everyone agrees’. In practice, of course, this is not what happens. Prominent decisions are made in so-called ‘green room meetings’, i.e., meetings held behind closed doors by the major power brokers – including the USA, Canada, the EU and Japan (but increasingly also China and some of the BRIC countries). [5] Consensus politics rarely works at the best of times, but it most clearly fails at the international level. [6] This is for one reason: economic peer pressure. Developed countries use their proportional share of economic power to ensure compliance from their developing counterparts. One delegate claimed: ‘You will be ignored unless you are a major trading partner’. [7] This is a massive dent in the democratic claim of the Organisation, which deeply questions its input legitimacy. The WTO is dominated by western powers, who have the economic power and political resources to ensure they get their way pretty much most of the time in favour of de-regulation. This economic problem is reinforced by the Appellate Body, the ‘authoritative interpreter’ of WTO rules. [8] This rule-based mechanism exists as a law-court to interpret trade liberalisation and settle disputes. Decisions are both binding and final. Crucially, the vast majority of rules favour western powers. One remarkable finding is that the USA has participated in every single Appellate Body proceeding (as either complainant, defendant or third party) except one since 1995. [9]

Accountability Mechanisms

The WTO’s claim to accountability comes in two forms: an impressive website that details pretty much everything going on, making it hugely accessible to the public and media; and through active engagement with Non-Governmental Organisations (or NGOs). These are important, because they seek to represent the interests of a diverse range of groups (and include business associations as well as environmental groups). In principle, this seems a good call, as it should be able to neutralise the resource-dependencies of less developed countries by better equipped NGOs. There is a catch, though: all WTO-NGO relations are at the discretion of the WTO, which means that involvement is little more than the Organisation courting NGOs at will. Moreover, the WTO is predisposed to trade liberalisation, therefore usually giving greater access to those NGOs that are positive about its aims and objectives. Dialogue, then, is sometimes shallow and rarely representative.

That said, civil society groups remain a key potential to address the legitimacy deficit raised above. Reformists argue that only through further NGO participation of whatever sort will alleviate issues of representativeness and responsiveness. The increased input from NGO activity will garner more ideas and improve policy results. Specialised knowledge will give technical expertise for policy-implementation that the WTO otherwise doesn’t possess. And finally, participation would give more credence to WTO decisions because more interests have been consulted. [10]

Evaluating the WTO

Where does this leave us? Some have given up on the WTO, calling its latest ministerial round ‘dead as dodo’ and others a ‘zombie’. Must we go so far? Unfortunately, the current legitimacy deficit of the WTO seems to suggest that the current Doha ‘Development’ Round will not achieve a great deal. The WTO is beset by institutional inertia: it faces insurmountable problems in relation to trade liberalisation, representativeness and equal member influence by nation-states. It is difficult to pin down how exactly the WTO will move forward from these problems, and something that ought to be treated with caution – the WTO will, in the end, affect us all. However, the more dangerous speculative question is this: does global economic governance, in general, face a legitimacy deficit? If so, then this seriously inhibits our attempts to deal with the global economic crises that beset the present political order.

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Notes

[1] B. Hoekman and M. Kostecki (2001) The Political Economy of the World Trading System: The WTO and Beyond (second ed.), Oxford: Oxford University Press, p.51.

[2] R. Wilkinson (2005) ‘The World Trade Organization and the Regulation of International Trade’, in Kelly, D. and Grant, W. (eds.) The Politics of International Trade in the Twenty-first Century: Actors, Issues and Regional Dynamics, Basingstoke: Palgrave Macmillan, p.16.

[3] WTO, ‘Overview of Development in the International Trading Environment’, Document WT/TPR/OV/14, 14 November 2011, p.3.

[4] R. Peet, Unholy Trinity: The IMF, World Bank and WTO, London: Zed Books, pp.173-83; J. Stiglitz (2002) Globalization and its Discontents, London: Penguin Books, p.216.

[5] For example, see F. Jawara and A. Kwa (2004) Behind the Scenes at the WTO: Real World of International Trade Negotiations (updated ed.), London: Zed Books.

[6] I have attempted to suggest this in some of my previous blog posts, especially the ones with Chantal Mouffe. See the tag ‘contestation’.

[7] Jawara and Kwa, Behind the Scenes, p.274.

[8] J. Smith (2004) ‘Inequality in International Trade? Developing countries and institutional change in WTO dispute settlement’, Review of International Political Economy 11:3, p.568.

[9] Accurate as at 2004. See ibid., pp.555-61.

[10] M. Williams (2005) ‘Civil Society and the World Trading System’, in Kelly, D. and Grant, W. (eds.) The Politics of International Trade in the Twenty-first Century: Actors, Issues and Regional Dynamics, Basingstoke: Palgrave Macmillan, pp.42-3.

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