Redesigning the World Trade Organization for the Twenty-first Century

Studies in International Governance is a research and policy analysis series from the Centre for International Governance Innovation (CIGI) and Wilfrid Laurier University Press. Titles in the series provide timely consideration of emerging trends and current challenges in the broad field of international governance. Representing diverse perspectives on important global issues, the series will be of interest to students and academics while serving also as a reference tool for policy-makers and experts engaged in policy discussion.

Redesigning the World Trade Organization for the Twenty-first Century

Debra P. Steger, editor

Wilfrid Laurier University Press acknowledges the financial support of the Government of Canada through its Book Publishing Industry Development Program for its publishing activities. Wilfrid Laurier University Press acknowledges the financial support of the Centre for International Governance Innovation. The Centre for International Governance Innovation gratefully acknowledges support for its work program from the Government of Canada and the Government of Ontario.

Library and Archives Canada Cataloguing in Publication

Redesigning the World Trade Organization for the twenty-first century / Debra P. Steger, editor.

(Studies in international governance series)

Co-published by the International Development Research Centre and the Centre for International Governance Innovation.

Includes bibliographical references and index.
Also available in electronic formats.
ISBN 978-1-55458-156-6

1. World Trade Organization. 2. World Trade Organization—Reorganization. 3. World Trade Organization—Management. I. Steger, Debra P., 1952–II. International Development Research Centre (Canada) III. Centre for International Governance Innovation IV. Series: Studies in international governance

HF1385.R41 2009a                  343’.087                 C2009-903703-3

Library and Archives Canada Cataloguing in Publication

Redesigning the World Trade Organization for the twenty-first century [electronic resource] / Debra P. Steger, editor.

(Studies in international governance series)

Co-published by the International Development Research Centre and the Centre for International Governance Innovation.

Includes bibliographical references and index.
Also available in printed format.
ISBN 978-1-55458-174-0

1. World Trade Organization. 2. World Trade Organization—Reorganization.3. World Trade Organization—Management. I. Steger, Debra P., 1952–II. International Development Research Centre (Canada) III. Centre for International Governance Innovation IV. Series: Studies in international governance

HF1385.R41 2009a                 343’.087                 

Cover design by Blakeley Words+Pictures. Cover image: Pieter Bruegel, The Tower of Babel, courtesy of Das Kunsthistoriche Museum, Vienna. Text design by Catharine Bonas-Taylor.

© 2009 The Centre for International Governance Innovation (CIGI) and Wilfrid Laurier University Press

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Contents

Foreword

Before the end of World War II, an essential element in maintaining the peace and ensuring future economic prosperity was the establishment of three inter-governmental organizations that would work in concert toward economic cooperation and progress. Two of them, the Bretton Woods institutions—the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank)—came into being with little delay. The third, the International Trade Organization (ITO), never came into existence, mainly because the Havana Charter was not ratified by the United States Congress.

In place of the ITO, a group of countries negotiated the General Agreement on Tariffs and Trade (GATT), which, after a precarious start, was brought into effect by means of a protocol of provisional application that offered few guarantees for its survival. Over time, the GATT managed to expand its membership, carry out successive multilateral trade negotiations to liberalize access to markets, and develop a dispute settlement system. The GATT system of multilateral trade agreements was replaced by the newly created World Trade Organization (WTO) in 1995.

Over time, the GATT/WTO system has gradually improved its relationships with the IMF and the World Bank. At the conclusion of the Uruguay Round, ministers agreed to a ‘declaration on achieving greater coherence in global economic policy making’, in which they called on the WTO to pursue cooperation with the IMF and the bank. This ministerial decision accorded with Article III of the Marrakesh Agreement Establishing the WTO, which set out the basic functions of the WTO. The Ministerial Declaration spurred closer relations between the WTO, the IMF, and the World Bank, and a great deal has been achieved.

The overall structure and internal mechanisms of the WTO, the IMF, and the World Bank are not the same. In some respects, they differ noticeably. These differences in institutional structure, decision-making procedures, and cultures inevitably have repercussions for their ability to cooperate in a coherent manner. For historical reasons, the relationship between the three legs of the original Bretton Woods stool has never fully attained the aims of the post-war planners, nor has it led to cohesive policies and efficient allocation of responsibilities.

The world economy has now suffered a severe jolt, testing the very viability of the international financial system. The financial crisis that erupted in 2008 in the United States, and went on to endanger the global economy, has brought into sharp relief the ineffectiveness and lack of coherence in the international economic system. Governments have reacted both individually and jointly to this deepening crisis, and it has become crystal clear that only their utmost efforts will be enough to overcome the recession as it spreads and threatens overall welfare around the world.

One needs only to read the communiqué of the Group of 20 after its November 2008 Summit Meeting to identify the wide range of problem areas in which governments need to cooperate if their individual stimulus efforts are to succeed.

Trade, finance, credit, and monetary policy inevitably transcend national borders. The world economy is one integrated whole. A given measure taken by any one country will inevitably have repercussions on others. Only effective and coordinated cooperative action, including steps that need to be taken by inter-governmental organizations, will help to provide the necessary equilibrium. The leading international organizations have a crucial role to play at this critical juncture, and prominent among them are the IMF, the World Bank, and the WTO.

In response to the global financial crisis, leaders of the Group of 20 nations have committed themselves to reform the Bretton Woods institutions, in particular the IMF and the World Bank. The President of the World Bank and the Managing Director of the IMF have appointed high-level commissions to look into significant and meaningful reform of those two institutions. What about the WTO? Why is it not on the G20 leaders’ radar screen? How can the intricate linkages between international finance and trade be ignored?

The GATT/WTO system is almost exactly as old as the IMF and the World Bank. The WTO also needs institutional reform to put it in step with the demands of the 21st century. All three organizations are woefully outdated. The visions that led to their creation belonged to leaders who had lived through the 1920s, the Great Depression, and the war years.

Today, the world economy is immeasurably more complex, multifaceted, and integrated than it was at the end of World War II. New financial structures, procedures, and interests have multiplied. Many countries have attained independence over this period. Developing countries are now rightfully taking a much greater share in global production, trade, and investment. The rapid economic growth in the emerging economies, in particular, has been stupendous and is bringing with it the rise of a middle class in these countries as well as a host of social, political, and environmental challenges. Multinational corporations are becoming increasingly diverse and powerful. The environment has become a subject of enormous importance for the future of mankind. The world—its problems and challenges—has completely changed since the 1940s when the original Bretton Woods system was conceived.

We are 70 years on and in the middle of a threatening and severe recession. This is the time for action. Governments failed to act in concert in the 1930s, and widespread misery was the outcome of selfish “beggar-thy-neighbour” policies that were designed to respond to each country’s own problems, while they hoped that the devil would take the hind-most. As we well know, he took them all one by one.

Today, we are increasingly witnessing governments taking protectionist and nationalistic measures that may very well yield immediate results from their narrow point of view, but whose cumulative effect will be to isolate economies, obstruct the channels of trade and finance, lead to seriously increased disputes in the WTO and other forums, and impede the economic recovery we are all aiming for.

Within its sphere, the WTO is working to analyze these issues and to propose solutions. This is as it should be, but the current financial crisis calls for more. Most particularly, governments have not taken the unpalatable, difficult decisions they should have adopted in the Group of 20: the acceptance by all of a status quo commitment under which no new restrictive trade measures would be imposed.

Parallel to and provoked by the current crisis, the IMF and the World Bank have initiated their own reform processes. World leaders seem determined to redesign the IMF, in particular, to meet the challenges of the current financial crisis. Should the WTO not join them in an equivalent endeavour, not only will it be left behind, it will have missed the first real opportunity since the multilateral trading system was created to become a strong and valid partner in the Bretton Woods triumvirate.

In the past, the GATT/WTO system has shown its capacity to evolve with the times: witness the gradual evolution of the dispute settlement system; the innovative, although ill-fated, Tokyo Round agreements; the initially controversial, and now fully accepted, incorporation of trade in services into the system; and the massive Uruguay Round outcome. Even the Doha Round negotiations, while not concluded, have shown a tendency toward progressive innovation, especially in the areas of trade rules and dispute settlement. There is reason for optimism when it comes to the rules; however, the institutional aspects of the WTO as an organization are often overlooked.

The Sutherland Report on the future of the WTO in 2004 and the Warwick Report in 2007 have contributed perceptive insights into the functioning, objectives, and special characteristics of the multilateral trading system.

Let us never lose sight of the fact that the WTO agreements are ‘hard law’. Governments are well aware of the direct and indirect consequences of rules and commitments undertaken in the WTO, and they are understandably cautious and prudent. To cite one example: in several rounds, changes in the dispute settlement system were adopted on a provisional basis, and it was only after they had proved to work in practice that the membership adopted them permanently. Any change in the institutional structure and procedures of the WTO will follow the pattern of the past; it will come at the end of a protracted and complex negotiation conducted by its Members and approved under the rule of consensus.

One aspect of the functioning of the WTO that calls for review is the duration of the multilateral trade negotiations. Initial rounds, such as those held at Annecy and Torquay, lasted a few months. Admittedly, the participation and the subject matter were considerably smaller than has been the case subsequently. The Dillon and Kennedy rounds were somewhat longer. Each successive round has taken longer. The Tokyo Round commenced in 1973 and concluded in 1979, the Uruguay Round took place from 1986 to 1994, and the Doha Round, which commenced in 2001, will hopefully finish in 2009 or 2010. The results of the Doha Round will be applied most likely over a transitional period of five years.

Admittedly, governments must conduct multilateral trade negotiations with care, and detailed preparation and consultation is required. Innumerable factors can cut across the best-laid plans, including the vagaries of internal politics. But unfortunately, the overall aims of a multilateral negotiating round risk losing significant contact with reality when there is a lapse of 10 or 15 years between the date of commencement and the date of implementation of the results. In the modern, fast-changing world we live in, this process has to adapt to meet current realities on an ongoing basis.

Clearly, it is imperative that governments conclude the Doha Round at the earliest possible moment, to avoid repeating errors of the past and to prompt economic recovery. But they also need to strengthen and modernize the multilateral trading system by focusing on reform of the WTO as an institution. In doing so, they must ensure that the WTO, the IMF, and the World Bank are capable of responding effectively, through their respective institutional structures, to the extremely close interconnections between their respective spheres of action.

This book explains why institutional reform of the WTO is so necessary at this critical juncture in world history. It contains thoughtful views from contributors on key aspects of the WTO that need to be redesigned to meet the challenges of the 21st century. Moreover, it includes contributions from researchers in the developing world as well as in developed countries. Rather than simply analyzing the current functioning of the WTO, its problems and challenges, this volume is also a call to action. It lays out proposals that are likely to become a blueprint for reform of the WTO as an institution.

Its contents are abundantly worthy of reflection and subsequent action. I recommend it highly to anyone who is concerned about the future of the global economy.

Julio Lacarte Muró
Montevideo, Uruguay
March 2009

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Acknowledgements

This book is the result of a collaborative research project organized by the Emerging Dynamic Global Economies (EDGE) Network together with research institutes and experts around the world. The project was generously funded by Networks of Centres of Excellence Canada (NCE) and the International Development Research Centre (IDRC). Organizational meetings were held in London, England, and in Vancouver, Canada, in 2007. Inspiration and guidance was provided by Professor John H. Jackson, Julio Lacarte Muró, John Weekes, Jane Bradley, Gerhard Erasmus, Gabrielle Marceau, Krista Nadakavukaren-Schefer, Federico Ortino, Seema Sapra, and Peter Van den Bossche at the London meeting. In Vancouver, Padideh Ala’i, Henry Gao, and Julio Lacarte Muró helped to shape the substance and direction of the project. Early drafts of the contributions in this volume were presented and discussed at a workshop called Institutional Reform of the WTO, held at the Centre for International Governance Innovation (CIGI) in Waterloo, Canada, in March 2008.

I am extremely grateful to the contributors who have written and revised many drafts over the course of the past year. Without their hard work and dedication, this book would not have been written. They are Padideh Ala’i, Alberto Alvarez-Jiménez, Ljiljana Biukoviç, Yves Bonzon, Thomas Cottier, Carolyn Deere Birkbeck, Manfred Elsig, Gerhard Erasmus, Henry Gao, Pablo Heidrich, Chin Leng Lim, Seema Sapra, Natalia Shpilkovskaya, Diana Tussie, Peter Van den Bossche, and Heng Wang. Thanks are also due to the participants who attended the CIGI workshop and provided their valuable comments on early drafts of the papers. In addition to the authors, the participants included Manmohan Agarwal, Alan Alexandroff, Agata Antkiewicz, Thomas Bernes, Terry Collins-Williams, William Davey, Michael Ewing-Chow, Pieter Jan Kuijper, Julio Lacarte Muró, John Odell, Sylvia Ostry, Gregory Shaffer, and Robert Wolfe. The workshop was lively, stimulating, and engaging and provided fabulous fodder for the difficult work of revising the papers.

Early versions of some of the papers in this book were published in the Mini-Symposium on Transparency in the WTO in the Journal of International Economic Law, Volume 11 Number 4, December 2008, Oxford University Press. Included in this mini-symposium were articles by Peter Van den Bossche, Yves Bonzon, Padideh Ala’i, and Ljiljana Biukoviç, as well as an introduction by me. Henry Gao and Chin Leng Lim also published an early version of their chapter in the same volume of the Journal of International Economic Law. Our appreciation is extended to Professor John Jackson, editor-in-chief, and his co-editors for graciously agreeing to publish the mini-symposium and the article by Professors Gao and Lim in the journal.

The EDGE Network in its life as the Network of Centres of Excellence was a collaborative, interdisciplinary project involving business leaders, scholars, and government officials from across Canada and around the world. Many people deserve recognition for their tireless efforts and dedication to the success of that enterprise—you know who you are. The Board of Directors and, in particular, Donald Campbell, chair of the Board, deserve commendation and praise for their unwavering loyalty and commitment of valuable time and energies to building the Network. This book and the companion volume edited by EDGE Network research leader Jeremy de Beer, Implementing the World Intellectual Property Organization’s Development Agenda, are the fruits of that labour.

I am deeply indebted to Irena Pawlowski for her indefatigable, dedicated, and loyal assistance in the day-to-day operation of the EDGE Network, including the organization of meetings and workshops, as well as endless administrative, financial, and travel arrangements. David Quayat deserves a special vote of thanks for his remarkable job of tirelessly and persistently editing all the contributions. This book would not have been possible without them.

EDGE Network Research Fellow Alberto Alvarez-Jiménez is to be commended for his diligent, comprehensive research and writing several papers for the project. Natalia Shpilkovskaya also provided industrious and thorough research assistance in the preparation of the papers and bibliography.

The EDGE Network would not exist were it not for the significant funding from the NCE and the IDRC. At the NCE, Jean-Claude Gavrel and Pierre-François Le Fol deserve gratitude for their assistance and support in those critical early years. The wonderful people at IDRC and CIGI have provided ongoing encouragement and assistance for this project, including with the publication and dissemination of this book. In particular, I would like to thank Rohinton Medhora, Robert Robertson, and David O’Brien at IDRC, together with their colleagues Brent Herbert-Copley, Kim Daley, and Bill Carman, for their enthusiastic support of this project. Daniel Schwanen, Agata Antkiewicz, Max Brem, and Jessica Hanson at CIGI have also been very cooperative throughout. Brian Henderson and his team at Wilfrid Laurier University Press deserve recognition and thanks for their meticulous work in bringing this book to fruition.

I also wish to thank the University of Ottawa, and especially Dean Bruce Feldthusen of the Faculty of Common Law, for their continuing support and sustenance of the EDGE Network research projects. From the president to the administrative and financial staff at the University of Ottawa, the EDGE Network has enjoyed tremendous cooperation and assistance since its inception in 2006. For this, I shall always be very grateful.

I dedicate this book with love to my children, Nigel and Alexandra, who bring joy and hope to my life. May we all continue to work together to make your world a better place.

Debra Steger
Faculty of Law
University of Ottawa

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List of Acronyms

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PART I
Why Institutional Reform Is Necessary

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1
Why Institutional Reform of the WTO Is Necessary

DEBRA STEGER

I. Origins of This Book

This book emanates from an international, collaborative project on institutional reform of the World Trade Organization (WTO), organized by the Emerging Dynamic Global Economies (EDGE) Network and funded by Networks of Centres of Excellence Canada and the International Development Research Centre (IDRC). This project, which commenced in 2007, includes major research institutions and leading researchers in Africa, Asia, Europe, North America, and South America. Inspired by the Report of the Consultative Board to Director-General Supachai Panitchpakdi (the Sutherland Report),1 it has three major research themes: decision-making and internal management of the WTO; relationship between the WTO and regional trade agreements; and transparency. The contributions in this book were initially presented and discussed at a workshop, ‘Institutional Reform of the WTO’, held at the Centre for International Governance Innovation (CIGI) in Waterloo, Canada, in March 2008.

In 2003, WTO director-general Supachai Panitchpakdi appointed a consultative board, chaired by former director-general Peter Sutherland, to address institutional challenges facing the WTO in the future. The Sutherland Report was published in 2005, on the tenth anniversary of the WTO, but has met with little response from the Members of the WTO. Among other things, the Sutherland Report expressed serious concern with the spread of preferential trade agreements and recommended that the WTO subject such agreements to meaningful review and effective disciplines. On dialogue with civil society, it suggested that the membership should develop clear objectives for relations with civil society but did not go further to recommend specific avenues for engagement. With respect to decision-making, it recommended that Members take a fresh look at variable geometry as well as approving decisions by a critical mass. It also proposed that the role of the Director-General and Secretariat be strengthened and improved and that a senior officials consultative body be established.2

The Sutherland Report was both comprehensive and pragmatic; it addressed serious questions relating to the governance and legitimacy of the WTO as an international organization. It provided an excellent start—it asked the right questions about very important issues and made pragmatic, practical recommendations. If anything, it did not go far enough.

The first Warwick Commission was established in 2007 with a broad mandate to examine the governance of the multilateral trading system and to make recommendations to improve it. It noted that there is waning support for further opening of markets, particularly in industrialized economies, and emphasized that sustaining the WTO is a collective responsibility on the part of all Members.3 It recommended, inter alia, that consideration be given to the use of a critical mass approach to decision-making. On dispute settlement, it recommended the establishment of a Dispute Settlement ombudsman, the strengthening of transparency mechanisms including acceptance of amicus curiae briefs, and consideration of cash compensation as a remedy when compliance is not forthcoming.4 With respect to preferential trade agreements, the Commission encouraged major industrialized countries to refrain from negotiating such agreements with each other and emphasized the need to clarify WTO disciplines and strengthen review mechanisms for such agreements.5 Finally, it recommended that ‘a process of reflection’ be established in the WTO for Members to consider the challenges facing the multilateral system and develop a plan of action to address them.6

The Doha Development Round has stalled, with little prospect of real progress being made on the negotiating front in the foreseeable future. This is an appropriate moment to reflect on the WTO as an institution and do some serious thinking about reform of the institutional structures of the WTO.

II. Why Institutional Reform of the WTO Is Necessary

There are a number of reasons that institutional reform of the WTO is important at this time in the history of the multilateral trading system.

We are at a transformational moment in the history of the world. The rapid rise of the emerging economies—China, India, and Brazil—has shifted the global power balance, and the influence of the United States as a hegemonic power is declining. The current architecture of the international system was created in the 1940s by developed countries, led by the United States and Great Britain, for a very different world and time. As originally conceived, there were to be two Bretton Woods organizations: the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (the World Bank), and the International Trade Organization (ITO). While countries had agreed to establish the ITO, the organization was stillborn because the agreement was not ratified by the U.S. Congress. In its place, 23 countries negotiated the General Agreement on Tariffs and Trade (GATT), which came into effect by means of a protocol of provisional application. In 1955, GATT contracting parties negotiated an agreement to create the Organization for Trade Cooperation (OTC). However, that organization also was not approved by the U.S. Congress. It was not until 1995, as a result of the conclusion of the Uruguay Round, that the World Trade Organization was born.7

A major challenge for the next decade will be how the international system responds to the dramatic transformation taking place in the global economic and geopolitical landscape. Will the existing international organizations—the IMF, the World Bank, and the WTO—survive or will they be replaced by other new organizations? Will the large emerging economies seek to develop their own alliances and new organizations or will they work within the existing global system?

The financial crisis has highlighted the need for more international regulation of the global economy, not less. The Washington Consensus is no longer the prevailing ideology in Washington and around the globe. Leaders of the Group of 20 nations, including the major emerging economies, have called for a ‘Bretton Woods II’ to reform the IMF, in particular, and the World Bank. France and Germany have promoted a stronger regulatory role for the IMF over the global financial system, while Brazil and India have insisted that global power imbalances in the decision-making structures of the international financial organizations must be addressed first before any expansion of its mandate is contemplated. China has recently signalled that it is willing to contribute more money to the IMF, but only if major changes to its governance structures are made.

All three international organizations face major legitimacy and accountability crises because their internal voting and decision-making structures do not reflect the realities of the new power relationships in the global economy. The heads of the IMF and the World Bank recently appointed high-level commissions to recommend reforms to their internal governance structures. The Sutherland Report and the Report of the First Warwick Commission have made recommendations on the future of the WTO, but both reports have been largely ignored by WTO Members. If the international economic organizations are to be relevant, accountable, and effective in the dynamic global economy of the 21st century, significant institutional reforms are needed. Government leaders need to make this a priority.

Unless developing countries are able to actively participate in the design of new governance procedures for the international economic system, the very relevance and legitimacy of these organizations will be at risk. It is a turbulent time in the international system, but in times of stress and uncertainty, ideas for reform can be a powerful beacon to help guide developments in institution building.

This is a particularly difficult time for international negotiations—witness the problems with the Doha Development Round—because new clubs and alliances have not yet been formed. China and India, in particular, are recognized by the United States and the European Union as major economic powers, but they are criticized for not yet using their influence and fulfilling their responsibilities on the world stage. In the Doha Round, for example, China and India are playing a watching, waiting, and learning game, rather than showing leadership in pressing for a conclusion. The real threat to the international community would come if these major developing country powers were to develop their own alliances and institutions and not participate in the established international economic institutions.

International organizations, including the United Nations, the IMF, and the World Bank, have recognized that their governance structures are outdated and are engaged in major reform processes in order to respond to the criticisms about legitimacy, accountability, and decision-making. However, these concerns are not even on the radar screen of Members of the WTO. Why is this so?

A key reason is that the negotiations in the Doha Development Round have been so difficult and protracted. The primary objective of Director-General Pascal Lamy and WTO Members is to conclude the Doha Round of multilateral negotiations. Until that is concluded, no other major issues can be addressed within the organization. However, the longer the current impasse continues, the greater the risk that the WTO will become increasingly outdated and irrelevant to the world community. As the Warwick Commission astutely observed:

There is evidence that many of the lessons of the 20th century are in danger of being ‘unlearned’ in the 21st century, especially in relation to the importance of multilateral institutions, and the rules, norms and principles that underpin them. That a malaise afflicts the multilateral trade regime is suggested not only by the impasse in the Doha Development Agenda (DDA) negotiations but also by other symptoms in the contemporary global economy linked to the global trade agenda, including the protests that accompany the ministerial meetings of the WTO; near permanent rumblings of discontent by diverse groups of countries from within the organisation; and growing resort to alternative forms of economic governance, including bilateral and regional PTAs.8

Furthermore, a major institutional negotiation in the Uruguay Round led to the establishment of the WTO as an international organization with its own charter9 and quasi-judicial dispute settlement system.10 In the transformation from the GATT to the WTO, important new institutions were established, including the WTO itself and the Appellate Body.11 While the dispute settlement system has functioned effectively and efficiently since 1995, the decision-making processes in the WTO are in need of improvement. When it comes to negotiations and rule-making, the WTO, in many respects, functions much like the old GATT. The new rules for decision-making and amendments, set out in Articles IX and X of the WTO Agreement, are rarely used, and instead, members resort to the familiar GATT practice of decision-making by consensus. The new rule-making procedures in the WTO Agreement have been characterized by commentators as ‘cumbersome’ and even ‘impossible’ to use.12 While there was a recent comprehensive negotiation that led to the establishment of the WTO as an international organization, the Uruguay Round negotiators unfortunately ‘did not get the job done’.13 Much remains to be done to improve and strengthen the governance procedures within the WTO.

The efficiency of the dispute settlement system contrasted with the inefficacy of the decision-making and rule-making system has created an imbalance in the institutional structures of the WTO. The Uruguay Round reforms, including the establishment of the Appellate Body, propelled the dispute settlement system into a judicial model, with compulsory jurisdiction, binding decisions, and arbitral procedures for compliance, setting an example for other international legal systems. The result is a strong, effective dispute settlement mechanism coupled with weak, ineffective, political decision-making procedures. Unlike domestic legal systems, it is almost impossible for decisions of the Appellate Body to be corrected by the legislative bodies—the Ministerial Conference or the General Council. This situation cannot persist indefinitely without damage to the WTO as an institution, especially as pressures increase on the dispute settlement bodies as a result of the inability of Members to negotiate or clarify the rules in the Doha Round.

Because the rule-making procedures of the WTO are so difficult, countries are turning increasingly toward negotiating regional trade agreements. While regional trade regimes have not been shown to provide the same economic benefits as multilateral agreements, there is growing business pressure, especially in the rapidly growing economies of the world, to negotiate new regional arrangements. New regional trade alliances are being forged among developing countries, particularly in Asia and Africa, which have not had a history of regional trade agreements. The United States and the European Union have also embarked on aggressive strategies to negotiate bilateral arrangements with many countries and regional trade agreements around the globe. The explosion of regional trade agreements is causing growing fragmentation of the multilateral trading system and serious erosion of the most-favoured-nation principle.

With the exception of the European Union, the dispute settlement mechanisms of the regional agreements are relatively weak, particularly when compared with the WTO. Thus, while the regional regimes are easier to negotiate and conclude than the WTO is to amend, there is an imbalance between the rule-making and dispute settlement mechanisms of regional agreements. And it is the opposite imbalance from that of the WTO. Although the relationship between the WTO and the regional trade agreements is not clear, we can expect to see more interaction between them in the future. In particular, the strong WTO dispute settlement system will likely be pressed to hear more cases involving possible conflicts or differences between the rules of the WTO and the regional trade agreements.

Looking into the future, a vibrant, relevant WTO would have a mandate to deal with international economic regulation generally, not just trade. The Doha Round is focused on market access: in agriculture, in goods, and in services. Many new issues—competition, investment, technology, environment—are not on the agenda in the current round. As a result, these issues are being negotiated in regional trade agreements and other bilateral agreements. The issues of interest to multinational business, such as rule of law/good governance behind the border, corruption, corporate social responsibility, exchange rates, and immigration, are not even a glimmer in the eye of multilateral trade negotiators. Why not? Partly because the WTO decision-making and rule-making procedures are so cumbersome, if not impossible, to use that governments and private parties have moved to other forums. As a negotiating machine, the WTO is clearly not able to keep pace with the most recent developments in the rapidly changing world economy. It risks becoming irrelevant if its governance structures are not improved to allow for more flexibility in negotiations and rule-making.

Finally, there has been much criticism of the WTO from non-governmental organizations and civil society, challenging its effectiveness, accountability, and legitimacy. These are important concerns that deserve serious consideration by WTO Members. The chapters in this book examine the WTO in light of good governance principles and make recommendations for its strengthening and improvement as an international organization.

The WTO is not sui generis; it is one among international organizations. This is a transformative moment in history for international organizations generally, and the WTO faces effectiveness, legitimacy, and accountability challenges similar to the others. The WTO lacks many of the management structures and rule-making processes that are taken for granted in other international organizations. For example, it does not have an executive body or a management board, a Director-General or Secretariat with real powers to set legislative priorities and propose new rules, a functioning legislative body, formal mechanisms to interact with stakeholders and civil society, or formal structures to approve new rules (other than the consensus of WTO Members acting collectively, as the Contracting Parties did under the GATT 1947). In many ways, it is the ‘least developed’ of the international organizations. Coherence in the international trading system, among other things, demands that the WTO develop more formalized governance structures to put it on a par with other international organizations, make it more functional and efficient, and render it more accountable to all its Members (including developing countries), stakeholders, and the public.

Notes

1 The Future of the WTO: Addressing Institutional Challenges in the New Millennium (Geneva: WTO, 2004).

2 Ibid, at 79–83.

3 The Report of the First Warwick Commission, The Multilateral Trade Regime: Which Way Forward? (Coventry, U.K.: University of Warwick, 2007) 22.

4 Ibid, at 36.

5 Ibid, at 53.

6 Ibid, at 56.

7 For the history of this negotiation, see Debra P. Steger, ‘The World Trade Organization: A New Constitution for the World Trading System’, in Marco Bronckers and Reinhard Quick (eds), New Directions in International Economic Law: Essays in Honour of John H. Jackson (The Hague: Kluwer International 2000) 135–54.

8 Above n 3, at 8.

9 Agreement Establishing the World Trade Organization (WTO Agreement), The Results of the Uruguay Round of Multilateral Trade Negotiations: The Legal Texts (Geneva: WTO: 1994).

10 Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), The Results of the Uruguay Round of Multilateral Trade Negotiations: The Legal Texts (Geneva: WTO, 1994).

11 For the history of that negotiation, see Steger, above n 7.

12 See Marco C.E.J. Bronckers, ‘Better Rules for a New Millennium: A Warning Against Undemocratic Developments in the WTO’, 2 Journal of International Economic Law 547 (1999), at 551–52.

13 Comment from Sylvia Ostry at EDGE Network workshop on ‘Institutional Reform of the WTO’, Waterloo, Canada, March 2008.

2
Reinvigorating Debate on WTO Reform: The Contours of a Functional and Normative Approach to Analyzing the WTO System

CAROLYN DEERE BIRKBECK 1

I. Introduction

The debate on institutional reform and governance of the World Trade Organization (WTO) has now been underway for over 15 years.2 In 1999, only five years after the creation of the WTO, the collapse of the Seattle Ministerial Conference provoked intense demands for reform. By 2003, the failure of the Cancun WTO Ministerial Meeting again sparked debate on WTO reform. Two years later, when Pascal Lamy became WTO Director-General, he proposed that WTO reform should be a key post-Doha priority.3 In the context of the Doha Round of multilateral trade negotiations stumbling forward in fits and starts, the most prominent focus of discussions of WTO reform has been options for improving the WTO negotiation process.

Throughout the past 10 years there have also been a number of broader debates about the governance of the multilateral trading system and calls for institutional reform at the WTO. Most recently, the onset of the global financial crisis in 2008 reignited more wide-ranging interest in the role of the WTO in global economic management, prompting calls for the WTO to do more to sustain a global open trading system, and in particular to take greater leadership on issues of trade finance, aid for trade, and surveillance of protectionist measures.

In the face of existing and emerging global challenges, both critics and supporters of the WTO pose common questions. Is the WTO as we currently know it fit for its purpose? How can the WTO adapt to changing configurations of economic power in trade, while ensuring the weakest countries are properly and effectively represented? How can the WTO better respond to sustainable development concerns, ranging from poverty reduction, development, and food security, to sustainable fisheries and climate change? Is the WTO’s current institutional form appropriate or, are there reforms—incremental, fundamental, or both—that would better equip the WTO to reflect and address both contemporary needs and those likely to emerge in the future?

Amid a growing body of scholarly literature and policy commentary on the governance and institutional reform of the WTO, this chapter proposes a distinctive approach. To set the context, Part II presents a brief overview of key themes in the existing literature, emphasizing the scope of debates on WTO reform. A full review and evaluation of the specific details of proposals offered through the course of these debates is beyond the scope of this chapter. This chapter does, however, highlight the differences among authors regarding what the WTO reform debate is and should be about, including with respect to the feasibility and desirability of a reform agenda. Part III proposes a new five-pronged approach to the question of WTO reform. It argues for (1) analyzing the WTO as a ‘system’; (2) disaggregating and analyzing the governance of each of the functions this system serves and should serve; (3) acknowledging the informal nature and dynamism of many practices regarding the governance of these distinctive WTO functions; (4) grounding reform proposals in clear normative principles and priorities, namely to respond to the needs of developing countries and advancing sustainable development; and (5) devoting greater attention to analyzing the political strategies for achieving proposed reforms.

The chapter concludes with some preliminary observations on the reform priorities this approach reveals.4 It provides indicative examples of how this approach to the WTO reform question yields the prospect of a more broad-ranging reform agenda than many existing studies, and a reinvigorated dialogue on many now ‘tired’ reform themes.

II. Existing Literature on WTO Reform: The State of Debate

The study of WTO governance is concerned with the set of processes, principles, norms, and institutions through which rules and practices for managing global trade are generated and implemented. The study of institutional reform of the WTO relates to a subset of these concerns—those specifically focused on the ‘institutional’ aspects of the WTO. Narrowly speaking, these institutional aspects concern only the formal organizational facets of the WTO. More broadly, reference to the institutional aspects of the WTO may also apply to the cultural habits, practices, rules, and procedures that govern how the work of the WTO is supervised, managed, and implemented. Depending on the topic at hand, authors writing on ‘WTO reform’ sometimes refer explicitly to institutional aspects of that reform.

For some authors, a far wider set of issues falls under the WTO reform umbrella, including proposals for reform in respect of the principles and scope of the WTO’s agreements or the substance of particular aspects of WTO negotiations (such as those related to the Doha Round). For example, when some analysts write of WTO reform, their emphasis is on limiting the scope of the WTO negotiating agenda (i.e., to ensure it does not cover investment issues), or expanding its scope (i.e., to ensure it covers issues of high importance to developing countries, such as movement of labour or the operationalization of principles, such as special and differential treatment). This chapter intentionally focuses tightly on the governance and ‘institutional’ agenda for WTO reform. That said, it is important to acknowledge that the issues are often entangled: some aspects of round negotiations are directly related to issues that arise in discussions of the governance of the multilateral trading system (e.g., disciplines for regional trading agreements, principles of special and differential treatment, reform of the dispute settlement system).

The scope of the literature on WTO governance and institutional reform is vast. As noted above, the majority of attention has been on reform of the WTO’s negotiation process, as well as its dispute settlement process5 and the appropriate relationship and balance between the two.6 Additional recurring areas of interest include (i) the internal governance and management of the WTO Secretariat, its ideal size and budget, as well as the role of the Director-General and the related selection process;7 (ii) the intersection of WTO rules and other global norms on issues ranging from human rights and the environment to food safety and labour standards;8 (iii) the WTO’s relationship with civil society,9 industry, and parliaments;10 (iv) the appropriate role of the WTO in global economic governance and its relationship to other international organizations and agreements;11 (v) the relationship between WTO agreements and the growing number of regional and bilateral trade arrangements; and (vi) the balance between the WTO’s judicial and legislative functions.12

The prominence of each of these areas of debate on governance and institutional reform has fluctuated over time. In the lead-up to the election of the WTO’s Director-General, for instance, debates about the appropriate powers of the Director-General and the election process resurface. Similarly, debates on the ‘Green Room’ tend to intensify around the time of WTO ministerial conferences and mini-ministerial meetings.

The debate on WTO reform has been punctuated by two major reports,13 a series of formal submissions from WTO Members, and a suite of proposals from academics and non-governmental organizations (NGOs) covering a diverse range of reform topics. In 1999, the failure of the Seattle Ministerial Conference prompted then Director-General Mike Moore to call on a group of eminent experts for advice about institutional reform, resulting in a report entitled ‘The Future of the WTO: Addressing Institutional Challenges in the New Millennium WTO’ (the Sutherland Report).

A variety of countries have submitted proposals on aspects of institutional reform, including Canada, Japan, the European Commission, the United Kingdom, and a number of developing countries, such as the Like-Minded Group (LMG) of 15 developing countries (led by India).14 After the 2003 collapse of the Cancun Ministerial Meeting, Pascal Lamy (at that time the European Union’s trade commissioner) famously characterized the WTO as a ‘medieval institution’ and tabled a European Commission proposal for WTO reform. Then, in 2007, amid concerns about the slow progress of the Doha Round and proliferating regional and bilateral trade agreements, the Warwick Commission, an independent commission of experts chaired by a former Canadian minister for trade and foreign affairs, published its report, ‘The Multilateral Trade Regime: Which Way Forward?’ (the Warwick Report).

To date, the vast majority of the scholarly literature on the governance and institutional reform of the WTO has emanated from developed countries and is dominated by the analytical perspective of lawyers and economists.15 The involvement of political scientists and scholars of international relations on the reform agenda has been relatively scarce and recent.16 Despite the long engagement of developing country scholars on questions of trade and development in the multilateral trading system, their input on debates regarding WTO governance and specific proposals on institutional reform has been similarly tentative, general in nature, and recent compared to the intense engagement of developed country scholars on the topic.17 The agenda, contours, and themes of the scholarly literature on institutional reform thus remain strongly defined by the preoccupations of developed country scholars, even where they are development-oriented in purpose.

Academic work on WTO reform is supplemented by a vast body of commentary by former WTO insiders (both from governments and the WTO Secretariat), NGOs, civil society groups, and industry associations, as well as governments and parliamentary bodies.18 Here we find a more consistent interest in what developing countries may have to gain from improvements in the governance and institutional aspects of the WTO. Several intergovernmental organizations have also published documents that include reflections on the purpose and performance of the WTO system and proposals consistent with their respective mandates (e.g., labour, development, public health) and related stakeholder groups.19

The remainder of this section highlights several crosscutting themes that underlie the WTO reform debate. Across the spectrum of scholarly and policy analysts, most studies of WTO governance and institutional reform concur that a core purpose, if not the core purpose of the WTO, should be to protect a stable, multilateral, rules-based approach to international trade. For many of these analysts, the WTO’s agreements represent the ‘rule of law’ in the realm of international trade: a global public good that warrants protection in its own right. Beyond that point of consensus (though still not universally shared), the scope of and prescriptions for reform vary as widely as do perspectives on the usefulness, goals, and mandate of the WTO.

The tensions in the WTO reform debate are amply illustrated in the literature on reform of WTO decision-making, rule-making, and negotiating processes. For free trade advocates, this interest is spurred by concerns about the perceived inefficiency of the WTO system in achieving agreements on trade liberalization. These advocates often cite the economic benefits of liberalization, as well as its contribution to peace and political stability, as justification for seeking more efficient ways to conclude new trade deals.20

Critics counter that proposals for negotiating process reform that aim simply to achieve trade liberalization faster misunderstand the scope of the WTO’s mandate. The WTO is now as much concerned with the regulation of world trade as its liberalization, and the task of negotiating global trade regulations presents different challenges than that of exchanging market access concessions.21 Furthermore, implementation of agreements may involve distinct political, institutional, and budgetary considerations at the national level. Many who share this line of thinking emphasize that while trade liberalization may well be a purpose of the WTO, is it not the purpose of the multilateral trading system and should not be pursued as an end in itself. Rather, trade policy—and trade liberalization—should be shaped in light of public policy objectives, such as growth, employment, and sustainable development, set out in WTO agreements. The appropriate speed and efficiency of negotiation processes able to reflect those goals may rightly vary.

Beyond negotiating processes, some scholars advocate fundamental, structural reforms of the WTO. This includes calls for constitutionalizing the WTO—that is, for constructing a constitution for the WTO—to bolster both the strength and legitimacy of the WTO’s rules.22 The varied proposals that fall under this heading are challenged by those concerned that constitutionalization would erode national sovereignty and risk emphasizing economic goals over broader public policy objectives. Some critics call instead for acknowledging the usefulness of and need for greater political contestation rather than more rules at the WTO, and for creating and maintaining spaces within the WTO where political debate can occur within the multilateral trading system.23

A further crosscutting area of tension has been the debate on how to boost developing country participation in global trade and make the multilateral trade system more responsive to developing countries. Proposals on these issues extend back to the 1960s when Part IV of the General Agreement on Tariffs and Trade (GATT) was established (which, among other elements, introduced the notion of special and differential treatment for developing countries).24 The discussion on how to make the WTO work better for developing countries has subsequently greatly expanded, inspiring increased engagement from governments, NGOs, and scholars alike.25 Here again though, more emphasis has been placed on the immediate and important question of what kinds of trade agreements would best benefit developing countries, rather than on the process of achieving better trade deals or ensuring that the governance of the multilateral system and its institutional features provide the greatest opportunities for the perspectives of developing countries; this question needs to be addressed.

Importantly, the perspectives that development analysts bring to the reform discussion do not always fit neatly within the boundaries of the agendas defined earlier by developed country scholars. There are shared interests in questions of the reform of the WTO’s dispute settlement system and in improving rule-making processes. But development-oriented analysts devote greater attention to matters such as understanding and empowering developing countries in the WTO rule-making process, the potential and pitfalls of coalitions among developing countries, and how to operationalize the principle of special and differential treatment. Developing countries and development advocates devote far more attention to the importance of improved trade-related capacity building and technical assistance as part of the institutional reform debate, though there has been surprisingly little attention to the details of how this significant activity should be provided and governed.26 Developing country analysts and development-oriented analysts also devote greater attention than many developed country counterparts to the interaction between international organizations and regimes, and to the coherence of their work.27 In particular, many development analysts are concerned with ensuring synergy between the work of the WTO, the International Monetary Fund, and the World Bank, as well as the overseas development assistance that bilateral government donors provide.28 There is also a high degree of interest in how the interaction of different international regimes, most notably the trade and climate regimes, affects developing countries.29

A further crosscutting theme that attracts the attention of WTO critics and supporters alike is that of improving the accountability and transparency of the WTO and expanding opportunities for public participation.30 Reacting to the anti-globalization backlash against the WTO around the time of the 1999 Seattle Ministerial Conference, many scholars have also taken up questions about the legitimacy of the institution.31 Some scholars proposed ways to bolster the validity of the WTO, while others argue that only the fundamental transformation of its purpose and processes can boost its legitimacy.32 Further, some scholars argue that the process of vigorous debate within civil society about the pros and cons of ‘constructive engagement’ with the WTO and the prospects for reform are in themselves a source of legitimacy for the institution.33

The result of debates on accountability and legitimacy has been a suite of reform proposals—some more abstract and others very specific—that aim to embed principles of democratic process, inclusiveness, transparency, and representation in WTO decision-making. These in turn have provoked counterproposals and rebuttals. Some developing countries, for instance, oppose calls for greater civil society participation in the WTO’s formal decision-making due to concerns this would offer greater advantages to better-resourced NGOs in developed countries. Some analysts caution against proposals for a greater role for the private sector and/or civil society in WTO deliberations arguing that the trade-offs with efficiency may be too high and that problems of accountability and transparency should first receive attention at the national level, through enhanced and more participatory national trade policy-making processes.34

Civil society organizations have also appealed for constraints on the influence of big business and multinational corporations in the WTO agenda-setting and negotiating process.35 On the other hand, advocates of greater developing country participation in the trading system often argue that the increased engagement of developing country business interests in national preparations for multilateral negotiations is a vital prerequisite for them to extract greater benefits from the multilateral trading system.36

To date, political analysis of the strategies for achieving proposed WTO reforms (and the constraints that frustrate the prospect of such reform efforts) has attracted far less attention than the proposals themselves.37 This reflects a weakness more broadly in the literature on international regimes and organizations, which has offered greater attention to the emergence, formation, and design than to regime change or organizational change.38 That said, some scholars and commentators do consider the politics of the WTO reform debate. Some critics question whether the WTO is in fact amenable to the kinds of fundamental institutional redesign advocated by other scholars.

Skeptics of the prospects for the reform of formal decision-making and negotiation processes at the WTO emphasize, for instance, that trade negotiations are necessarily informal and that prospects for restructuring them from the outside are extremely limited.39 As an alternative, they propose processes of learning and gradual, incremental change as more likely vehicles for change, where players themselves devise more efficient strategies for deal-making. Some analysts also offer strategies for organizing among developing countries.40

A compelling case has also been made that the recurring ‘crises’ of the multilateral trading system—and the reform debates these generate—are used to the advantage of its most powerful Members.41 More broadly, a number of anti- or alter-globalization critics of the WTO system raise fundamental questions about the accountability of the WTO and the status of national sovereignty in the face of powerful global institutions. They question not only the purpose but also the plausibility of many reform proposals, as well as the underlying economic model underpinning the WTO—one that they argue focuses too much on consumption, economic growth, and control of global economic activity by large corporations. They argue that transforming the global economic system, and the WTO included, to promote equity and environmental sustainability requires ‘bottom-up’ democratization through the work and growing power of social movements rather than ‘institutional tinkering’ from above.42

III. A New Approach to WTO Governance and Institutional Reform

This section sets forth five elements of a new approach to the question of appropriate institutional reforms at the WTO that responds to the contemporary global challenges and the evolution of the WTO’s functions and practices.

A. A ‘Systems’ Approach

In 1997, John Jackson described the WTO as a set of legal agreements and an institutional framework to administer the implementation of these agreements, settle trade disputes, and provide a forum for ongoing negotiations.43 In so doing, he reinforced the GATT tradition of seeing the WTO as a legal regime, albeit now with a more formalized institutional structure and stronger dispute settlement mechanism at its heart. Over the past 15 years, however, numerous scholarly efforts have also characterized and analyzed the WTO as an ‘international organization’. While the WTO Secretariat may indeed be characterized and analyzed as an ‘international organization’, this approach has important constraints. In 2006, for instance, a debate on this subject emerged between staff at the WTO Secretariat and the One World Trust regarding the difficulties of applying the literature on the accountability of international organizations to the particular case of the WTO.44 The Secretariat staff argued that the Member-driven character of WTO decision-making and the legally binding nature of agreements among its Members are characteristics that make it difficult to discern what exactly one is holding ‘the WTO’ accountable for and what the WTO is in that context. The Secretariat’s argument is that WTO Members rather than the Secretariat are responsible for the content of particular WTO agreements, and that this distinguishes the institution from large international bureaucracies such as the World Bank and IMF, which have a vast array of activities. This example illustrates the challenges of analyzing the WTO as an ‘organization’.

Day-to-day language provides a hint of how we might more usefully analyze the WTO. The WTO is frequently referred to coterminously as the ‘multilateral trading system’. Rather than examine it as a legal regime or as an ‘organization’, a promising alternative is to examine it as a system. What then would a systems approach involve? We know that the WTO is indeed a legal regime built on contractual legal obligations between Members, but that it is more than a set of agreements.45 The WTO is also clearly more than merely a negotiating forum. The WTO also comprises a Secretariat, which is a discrete international organization and bureaucracy with a budget and work program defined by Members46 that includes responsibilities ranging from the administration of agreements and meetings to the provision of training and technical assistance. Importantly, however, the scope of activities and outcomes for which the WTO Secretariat is directly responsible is smaller than those that WTO Members call on the multilateral trading system to deliver on.

A systems approach acknowledges the composite nature of the WTO and the variety of actors involved in delivering and conducting the various functions and services of the multilateral trading system. While WTO Members conduct most of the formal business of the WTO, the Secretariat provides significant support and conducts important activities. The WTO Appellate Body is, for instance, a distinct but linked international organization with its own budget and working practices. Further, the work of WTO system is animated by interactions among Members (that conduct much of the day-to-day business of the system) and the actions of a host of international agencies, including but not limited to the WTO Secretariat, as well as NGOs (public and private interests), and experts/individuals. This fact is exemplified in the case of the training, technical assistance, and capacity-building function of the WTO system, where some of the work is funded and implemented directly through the Secretariat, but much is implemented through collaborative arrangements with other international organizations and bilateral donors, and also independently by these and non-government actors.47

A systems approach to WTO reform acknowledges the range of actors, in addition to the WTO Secretariat and WTO Members, that ‘do the work’ of the system and explores how they interact to advance that work. This systems approach can then be applied to each of the particular functions the WTO systems serve.

B. A Functional Approach

In addition to its widely discussed negotiation and dispute settlement functions, the WTO system serves a range of additional functions often neglected by scholarly literature, including (i) monitoring and surveillance; (ii) research; (iii) capacity building, technical assistance, and training; (iv) regime maintenance; (v) interaction with other international organizations; and (vi) public outreach and information sharing with a range of non-state stakeholders. A functional approach prompts us to explore how to isolate the appropriate political processes for tackling the distinct functions of the multilateral trading system. The proper formats and processes for negotiation, policy dialogue, problem-solving, monitoring and information exchange, and dispute settlement differ. These may involve various roles for the WTO Secretariat and for its Director-General.

For each of these functions, a series of governance questions can be asked, including about the process through which decisions are made and implemented.48 How are priorities set and who is involved? Who controls budgetary resources? How is performance monitored, assessed, and evaluated? A ‘functional’ approach to studying the WTO that examines each of these independently, and the links between them, yields new insights into the challenges and priorities for reform.49 First, it enables us to see the full range of areas in which governance reforms might generate benefits for sustainable development and developing countries. Second, it provides ‘oxygen’ to now stale debates on issues such as the appropriate degree of public ‘participation’ in WTO activities, the scale of the WTO Secretariat, and how effectively developing countries participate in and influence each of the functions of the system. Third, a functional approach extends the scope of reform literature to consider the full range of the WTO’s functions. The post-negotiation dimension of the multilateral trading system’s activities has a significant impact on Members, especially developing countries. In particular, closer attention to post-agreement bargaining is critical for properly understanding the experience of developing countries in the global trade system and the range of challenges to which proposals for WTO reform should respond. Power politics occur both within global trade talks and in the interpretation and implementation of any resulting agreements.50 There is also a need for greater attention to negotiation processes that occur outside particular trade rounds, such as negotiations related to accessions, the built-in agenda of the Uruguay Round, and ongoing talks that occur in WTO committees. Each of these aspects involves intense political bargaining over timing, trade-offs, adjustments, and burden sharing.

C. Acknowledge Dynamism

The study of WTO reform must begin with an up-to-date appreciation of how WTO decision-making occurs in practice across the WTO’s functions and how this has changed over its first 15 years. The practice of international trade decision-making now differs considerably from that of the early days of the system and, indeed, the prevailing practice at the launch of the Doha Round.51 Whereas, for instance, proposals on WTO reform in the late 1990s focused on concerns about the exclusive nature of the ‘Green Room’ and called for formalization of the negotiating process to enhance representation and transparency, the process of negotiations has now evolved and proven far more dynamic than many commentators acknowledge. Power configurations are evolving, and there is constant improvisation with respect to strategies for reaching consensus and closing deals. One of the clearest examples is that in light of the expanding use of coalitions as tools for representation, the infamous Green Room attracts far less criticism than it had previously. That said, there are still important enduring complaints regarding the ability of most of the more than 100 developing country WTO Members to participate effectively in Green Room processes and WTO decision-making, particularly the poorest and weakest among them.52

There is also far greater involvement by non-state stakeholders across WTO activities than anticipated in much of the initial scholarship on reform. The participation of developing countries in the Dispute Settlement Understanding has evolved as have its practices with regard to public access to proceedings. The WTO Secretariat’s own work is implemented through a variety of formal and informal processes that are dynamic and have evolved over time, and recent analyses have demonstrated how the Secretariat itself may be an actor in its own right, including in WTO negotiations at given moments.53 The WTO’s practices and policies on internal transparency have improved considerably over time.54 Much has also changed since the early, more abstract discussions of the links between trade and so-called non-trade issues. The WTO system has already been called on to respond to an array of global challenges that have taken it well beyond the initial far tidier world of market access negotiations.

D. Grounding Analysis in Normative Purpose

Reforming the WTO demands clarity as to the objectives and benchmarks against which proposals for institutional reform ought to be tested. Scholarly proposals on WTO reform too often lack a clear articulation of the goals and challenges that proposals seek to address or they focus only on a narrow objective. Proposals for reforms necessary to speed the process for reaching new WTO deals, for instance, neglect broader questions on how to ensure the multilateral trading system advances the ends for which it was established, which include improving economic welfare in all countries, poverty reduction, sustainable development, stability in global trade relations, and a guard against beggar-thy-neighbour trade policies. Yet proposals for WTO reforms are frequently advanced on the basis of ill-defined concerns about weak ‘efficiency’ or ‘performance’ without adequate specificity regarding what these concepts mean or the distributional impacts of proposed reforms. Too often scholars write of improving the performance, efficiency, or credibility of the WTO, but it is unclear what they consider the broader normative purpose or benchmarks against which the WTO’s performance, efficiency, or credibility should be judged. A sharper focus on such substantive goals would spur recognition that the mandate and purpose of the multilateral trading system are deeply contested both by WTO Members and its diverse stakeholders.

The focus of reform proposals ought not to be limited to helping sustain the WTO per se, but rather on whether reforms help foster progress toward a WTO system that better delivers on the goals set out in its preamble. If sustainable development and improving the plight of developing countries should be, and indeed are, at the heart of political debates about the global trading regime, the discussion of institutional reform and WTO governance should also be motivated by and judged against its ability to address these challenges. Proposals for WTO reform thus need to address two critical political priorities: (1) how to bolster the relative power of developing countries in the system, and (2) how to ensure the system better responds to sustainable development priorities. The challenge for those concerned with WTO reform is to discern how and in what ways proposed reforms address these two inter-linked goals. Of course, not all commentators share the view that these goals should indeed be a core purpose of the system or of reform, and others may prioritize other aspects of the preamble (such as the calls for raising standards of living and ensuring full employment, or expanding the production of and trade in goods and services). There is, however, a clear political and legal rationale for a focus on sustainable development and developing country needs (recognizing that those of particular countries may vary widely) as a benchmark.

In legal terms, the preamble to the Marrakesh Agreement Establishing the WTO (the WTO Agreement) recognizes the importance of sustainable development, calling on governments to conduct their economic and social objectives in trade relations in a way that allows

for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development.55

The WTO’s preamble also recognizes that the particular needs of developing countries in the trading system include, inter alia, the objective of greater employment. Several of the WTO agreements detail general principles and objectives that emphasize Members’ development and public policy objectives, as well as other national goals such as political security.56 In 2001, WTO Members reaffirmed normative objectives in the Doha Ministerial Declaration, stating their conviction that the open, multilateral trading system and sustainable development ‘can and must be mutually supportive’ (Para 6, Doha Ministerial Declaration) and making development the stated purpose of the Doha Round. In addition, the Doha Declaration on TRIPS (Trade-Related Aspects of Intellectual Property Rights) and Public Health highlighted that trade policies should not stand in the way of efforts by countries to respond to public health priorities. Several WTO Appellate Body decisions have recognized the importance of non-trade considerations and agreements in their reports on trade disputes.57

Those who argue that the WTO ought not to be a ‘development institution’ or a sustainable development organization or indeed anything more than a forum for commercial bargaining have already been overtaken by political reality. Issues of sustainable development and the concerns of developing countries feature prominently in a number of ongoing trade negotiations. The fact that trade deals are so difficult to reach is in part because governments cannot escape the need to address political issues regarding equity, social, and environment impacts. Many of the obstacles to the conclusion of new trade deals are linked to the real-world need for governments to respond to political demands and tension over development and sustainable development challenges. Negotiations are protracted precisely because the issues before states are complex, demand intensive processes of learning (about challenges, implications, and possible solutions), and require time-consuming efforts to build political support for potential deals in Geneva and among Members.

The call for a WTO that is more friendly to sustainable development and developing countries has moved far beyond early debates that pitted pro-development advocates against the WTO in general or trade liberalization in particular.58 Indeed, in the years since the WTO was established, the trade and sustainable development debate has evolved considerably59 as advocates have explored different ways to ensure that the WTO’s substantive rules and agreements, and the balance of concessions in the Doha Round, properly incorporate and address sustainable development considerations. However, skeptics argue that the prospect for achieving, implementing, and enforcing truly balanced rules will remain thwarted until fundamental institutional reforms are achieved that address the broad array of decision-making and governance processes at the WTO.

At the launch of the WTO, environmentalists expressed concern about the potential ‘scale’ effects of liberalized trade on the environment and warned that global trade rules may have a chilling effect on national environmental regulations and undermine global environmental agreements.60 There is now a more nuanced recognition that some trade rules and flows may help promote more environmentally sustainable outcomes while others may drive or contribute to unsustainable production, distribution, and consumption practices.61 Although some argued that the prospect of greening the WTO was structurally limited,62 others now acknowledge that the understanding of trade, environment, and sustainable development issues has evolved considerably and that much progress has been made.63 Indeed, there is now greater involvement of developing countries and experts in defining a southern agenda for trade and environment.64 Some developing countries are now proponents of a sustainable development approach to trade policy formulation and to specific aspects of trade negotiations.65 More generally, the scope of the sustainable development agenda at the WTO has broadened from issues such as eco-labelling requirements and addressing declining global fish stocks, to trade-related dimensions of the effort to stop climate change.66

The call to ground analysis in normative principles and priorities is also one for acknowledging the need to enable rather than suppress political contestation at the WTO. Here, several scholars have already called for bringing more politics into WTO negotiations and decision-making as a desirable outcome and for finding more spaces for political contestation to occur.67 Similarly, the institutional reform agenda is not a technical, legalistic, or bureaucratic matter that can be ‘solved’ without a thorough consideration of the political demands and concerns driving divergent perspectives and expectations about the end goal(s) of the WTO. These will necessarily affect recommendations on the purposes and strategies for WTO reforms.

Debates that slow current WTO negotiations are not about whether sustainable development considerations should be taken into account, but rather how they can be taken into account. On the social front, negotiations on non-agricultural market access and services stall because Members have competing national policy considerations to address with regard to poverty alleviation, the creation of good quality work,68 risks to social cohesion from rapid adjustments, and their own ability to manage the economic and social adjustments. The deadlock on negotiations in agriculture is driven by fundamental concerns about livelihood, food security, and the fate of the ‘bottom billion’ people in the world in approximately 50 failing states that defy efforts to reduce poverty.69

Members have taken up environmental considerations in a discussion of rules on fisheries subsidies and liberalization of trade in environmental goods and services, and there is mounting interest in the relationship between trade rules, the emerging climate regime, and biofuels. Across the range of trade-related environment issues, the challenge is to forge solutions that address social, development, and political considerations and constraints of both developed and developing countries.

The under-representation of developing countries in WTO decision-making and the inadequate response of the WTO system to the varied needs of developing countries remain central challenges in the daily work of the Doha negotiations. Concerns about asymmetric outcomes of the Uruguay Round and the negotiation process have fuelled a broad recognition of the need to improve the accountability and responsiveness of the WTO system to developing country priorities.70 The addition in the Uruguay Round of a strong regulatory agenda to the WTO’s traditional liberalization focus generated significant technical and institutional challenges for developing countries.71 Developed countries have too rarely fulfilled their promises to take development considerations into account in multilateral negotiations or to translate into meaningful outcomes their commitments to provide technical assistance and promote technology transfer.72

The emphasis of WTO Members and the Secretariat on Aid for Trade since 2005 reflects the recognition that capacity building to date has done little to empower developing countries to make effective use of the WTO system. Recognition of the political imperative for greater efforts that assist developing countries has permeated up to key policy-makers, including several Directors-General of the WTO.73 Core challenges for developing countries that remain inadequately addressed include tariff escalation, disciplines on agricultural subsidies, the failure to understand how these countries trade, and the asymmetric nature of accession negotiations for new developing country Members.74 In this context, developing countries have maintained their long-standing calls for special and differential treatment.75 They have added a call for ‘policy space’ to enable them to balance trade liberalization with targeted measures to promote balanced growth, poverty reduction, and industrialization.76 In the Doha Round, they make a forceful case for a more development-oriented round and have articulated clear proposals for how this might be achieved.77 In this endeavour they have been joined by legal scholars,78 development economists,79 and NGOs.80

In sum, the WTO reform discussion takes place in the context of real-world economic, social, and environmental pressures and political debates over ongoing negotiations. They cannot be isolated from them. The current financial crisis illustrates how quickly the interests and priorities of states can shift, highlighting that processes for dialogue and debate within governance systems are especially important at times when global economic performance weakens.

E. Devising Political Strategy

A final aspect of the proposed approach to WTO reform concerns the politics of reform. First, the power politics that permeate the WTO system will surely also affect the political viability and direction of reform.81 An important distinction among scholars is between those focused on devising an ‘ideal type’ of WTO and those focused on politically achievable change in the short and medium term. On both counts, a recurring weakness is that of limited systematic consideration of the political prospects for reform and strategies for making proposed changes happen. There has been careful consideration of the role of the United States in the GATT/WTO system and the prospects of U.S. support for reforms, particularly in Congress.82

Recent shifts in the balance of economic power among states in the negotiations, and particularly the rise of countries like India and China, call for a deeper assessment of the political prospects for reform proposals. More broadly, some scholars have noted the importance in general of sustaining political interest in the WTO as a dynamic and relevant international organization. Already, they note the risk that a WTO with a weak legislative function will undermine the credibility and legitimacy of the strong adjudicative function embodied in the dispute settlement mechanism.83

IV. Conclusion: Political Challenges, Research Priorities, and Proposals

What should a better multilateral trading system look like? To answer this question, this chapter has argued that scholars need to explore new ways of thinking about the purposes of reform and the way in which the WTO is analyzed. It has argued for analyzing the WTO as a system. This approach enables us to properly account for the range of actors that are involved in the work of the WTO. It also broadens the scope and richness of reform proposals and generates different recommendations than analysis that starts by describing the WTO as either an intergovernmental regime or international organization. Further, this chapter has called for attention to the range of functions that the multilateral trading system serves. Asking questions about the governance of particular WTO functions provides new insights into the challenges of reform and broadens the scope for debate about the system as a whole, not just its negotiation and dispute settlement functions.

This chapter has also argued that a clear point of view on the ends and goals of the trading system is a necessary prerequisite for intelligent discussion of WTO reforms and makes the case that proposals for WTO reform should be grounded in the objectives of sustainable development and empowerment of developing countries in global trade governance. An important challenge—not addressed in detail in this chapter—concerns the kinds of indicators, benchmarks, or questions that can be used to measure how WTO reform proposals and governance (that is, the process by which decisions are made and implemented) contribute to, or constrain, progress in the area of sustainable development. Finally, this chapter has argued that reform proposals should acknowledge and allow the need for a permanent space or spaces for political contestation within the global governance or trade—as well as for greater attention to how reform proposals can be made attractive to WTO Members.

To indicate where this analytical approach could lead, this chapter concludes with examples of some of its implications for the WTO reform debate in relation to four of the functions noted above: monitoring, negotiation, research, and capacity building.

A functional approach to the analysis of needs for WTO reform prompts greater attention to the WTO’s monitoring function.84 The recent financial crisis has already spurred interest in greater surveillance by the WTO Secretariat of protectionist measures by Member States. But a careful examination of the monitoring function in light of the dual objectives of ensuring that it helps advance sustainable development and empower developing countries spurs a deeper and broader reform agenda. How could we reform the trade policy review (TPR) process to better serve as a tool to help governments integrate development considerations into trade decision-making? One option would be for the TPR process to include an assessment of the effects of trade rules in light of development objectives and an identification of national trade-related hurdles that impede their realization. The review process could also perform a stronger role as a catalyst for governments to organize appropriate capacity building. Specific reform proposals could include making the trade policy review process open to the public; involving multi-stakeholder processes at the national level in the development of the national trade policy review reports; inviting recognized international experts as commentators in the trade policy review meetings in Geneva; inviting commentaries from other interested national and international parties (for example, other IGOs [inter-governmental organizations], industry groups, NGOs, academics, etc.); and integrating a new component into the trade policy review process for least developed countries (LDCs) that evaluates the fulfilment by developed countries of their capacity building commitments to LDCs. The adoption of a ‘systems’ approach leads us to consider that the monitoring function need not, and perhaps cannot, be performed by the WTO Secretariat alone. Instead, the WTO’s monitoring function might also be improved by engaging non-state actors through an independent monitoring mechanism.

The approach advocated in this chapter might also lead us to move beyond many of the existing proposals for enhancing the research function of the WTO. To date, there have been several calls for greater research capacity within the WTO Secretariat. A development-oriented and systems approach would instead lead us to favour increased support for independent research and analytical capacity in developing countries at the national and/or regional level in universities, think-tanks, and research centres, as well as in the regional/national headquarters of various UN agencies.85 (Some initial steps in this direction are already being taken by the WTO Secretariat, albeit amid calls to still boost the WTO’s own research capacity.) In addition, a sustainable development perspective would prompt us to call on donors and national governments to support national research and analytical capacity that considers trade objectives in light of domestic development goals.

Regarding the WTO’s negotiation function, a systems approach leads us to recognize the prominence of coalitions in negotiations and to consider how there could be stronger financial support to the secretariats of developing country coalitions, drawing on lessons learned from successful experiences (such as those of the coalition of small and vulnerable economies) regarding the effective internal management and operation of coalitions and improving their negotiating capacity.86 Even the smallest countries with a limited interest in market-access issues at stake in specific WTO negotiations have a long-term interest in understanding and contributing to the development of institutional rules, which they also have obligations to implement and enforce at the national level. Support should thus be given to LDC WTO Members to ensure they have permanent representation in Geneva. This can be accomplished either through mandatory contributions by Members to the WTO’s core general budget, or through a voluntary, supplementary contribution scheme. While such measures would not resolve all the questions surrounding the best ways to structure and delineate the scope of WTO negotiations, without representation it is difficult to see how the smallest developing countries can hold the multilateral trading system as a whole accountable to them.

Attention to the specific functions of the WTO system also leads us to consider the engagement of developing countries in decision-making for the system’s capacity-building function. Improved capacity building will depend on developing country leadership to push for more effective aid, better articulate their needs, and extract greater value from existing resources. Effective Aid for Trade and capacity building demands that countries organize themselves and stakeholders in order to benefit from both, including through support for multi-stakeholder decision-making processes on trade policy, negotiating priorities, and implementation. On the governance front, the implication is that developing countries need a stronger role in the management of Aid for Trade. Significant steps have been made in this regard to improve the integrated framework for capacity building to developing countries. However, a careful examination of the data on trade-related assistance and Aid for Trade reveals that the majority of assistance flows through bilateral agencies and a diverse range of multilateral agencies beyond those involved in the integrated framework.87 Developed countries should shift their support from bilateral trade–capacity-building initiatives, often driven by their own mercantilist priorities, to multilateral initiatives that offer great opportunities to delink assistance from developed countries’ priorities. The focus of capacity building must be on establishing durable capacity in developing countries and regions rather than supporting a network of international trade consultants. Another shortcoming concerns limited attention to monitoring and evaluation of capacity building and Aid for Trade. This could be boosted through annual independent evaluations and/or peer reviews of trade-related capacity building from the developing country perspective, which takes a sample of countries and reviews that provision of assistance against the priorities established through the Enhanced Integrated Framework, or in other national development strategies (such as the World Bank’s Poverty Reduction Strategy Papers). The point here is not simply to evaluate assistance on a project-by-project basis, but to seek metrics or benchmarks for discerning how well assistance helps countries implement trade policies, institutions, and initiatives that advance their development. Further, there should be greater monitoring and public disclosure of regarding the performance of each major donor. Proper acknowledgement of the range of actors and levels at which capacity building is needed takes one away from narrow WTO-centric views of the Secretariat’s work on training and technical assistance, but rather sees it in context.

Finally, a functional approach to the question of WTO reform also breathes new life into an often sterile discussion on whether and how to boost ‘civil society participation’.88 The functional approach highlights the ways in which civil society groups already do participate at different levels across the WTO’s negotiation, research, capacity-building, and monitoring activities, as well as the opportunities to further enhance these activities.

Notes

1 This chapter is the product of research supported by the Geneva International Academic Network (GIAN) and the Ford Foundation. The author would like to thank Arunabha Ghosh, Ricardo Meléndez-Ortiz, John Odell, Mayur Patel, Richard Steinberg, Robert Wolfe, and Ngaire Woods for their feedback on the paper as well as the participants in a meeting of the Emerging Dynamic Global Economies (EDGE) Network Workshop on WTO Institutional Reform (13–15 March 2008).

2 See generally Pitou van Dijck and Gerrit Faber (eds), Challenges to the New World Trade Organization (The Hague: Kluwer Law International, 1996); Anne Krueger (ed), The WTO as an International Organization (London: Chicago University Press, 1998); Carolyn Deere Birkbeck and Ricardo Meléndez-Ortiz (eds), Rebuilding Global Trade: Proposals for a Fairer, More Sustainable Future (Geneva: GEG and ICTSD, 2009), http://www.globaleconomicgovernance.org/wp-content/uploads/rebuilding-global-trade.pdf (visited 14 April 2009).

3 Pascal Lamy, ‘Message from the Director General: A World Trade System for the Benefit of All’, http://www.wto.org/english/thewto_e/dg_e/dg_e.htm (visited 9 February 2009).

4 A comprehensive set of recommendations for reform based on this ‘systems’ approach and normative agenda—and their political feasibility—is available in Carolyn Deere Birkbeck, ‘Making Global Trade Governance Work for Developing Countries: Proposals for WTO Reform’, Global Economic Governance Programme Working Paper, University College, Oxford (Forthcoming 2009).

5 See, for example, William J. Davey, ‘The WTO Dispute Settlement System: The First Ten Years’, 8 (1) Journal of International Economic Law 17 (2005); James C. Hecht, ‘Operation of WTO Dispute Settlement Panels: Assessing Proposals for Reform’, 31 (3) Law & Policy in International Business 657 (2000).

6 See, for example, John Barton, Judith Goldstein, Timothy Josling, and Richard H. Steinberg, The Evolution of the Trade Regime: Politics, Law, and Economics of the GATT and the WTO (Princeton: Princeton University Press, 2006); Amrita Narlikar, ‘WTO Decision-Making and Developing Countries’, TRADE Series Working Paper, South Centre (2001), at 42. Narlikar argues, for instance, that perhaps the ‘major and unsustainable discrepancy’ in the WTO is the coupling of an automatic and binding system of laws and surveillance with the informal, ad hoc practice of bargaining and negotiation.

7 Richard Blackhurst, ‘Reforming WTO Decision Making: Lessons from Singapore and Seattle’, in Klaus Deutsch and Bernhard Speyer (eds), The World Trade Organization Millennium Round (London: Routledge, 2001) 295–310. And see Krueger, above n 2.

8 See, for instance, José Alvarez, ‘The WTO as Linkage Machine’, 96 (1) The American Journal of International Law 146 (2002); Robert Howse, ‘From Politics to Technocracy-and Back Again: The Fate of the Multilateral Trading Regime’, 96 (1) The American Journal of International Law 94 (2002); Keith Maskus, ‘Regulatory Standards in the WTO: Comparing Intellectual Property Rights with Competition Policy, Environmental Protection, and Core Labor Standards’, 1 (2) World Trade Review 135 (2002); Joost Pauwelyn, Conflict of Norms in Public International Law: How WTO Law Relates to Other Rules of International Law (Cambridge: Cambridge University Press, 2003) 556; Joost Pauwelyn, ‘The Role of Public International Law in the WTO: How Far Can We Go?’, 95 (3) The American Journal of International Law 535 (2001); Ernst-Ulrich Petersmann, ‘The Human Rights Approach Advocated by the UN High Commissioner for Human Rights and by the International Labour Organization: Is It Relevant for WTO Law and Policy?’, 7 (3) Journal of International Economic Law 605 (2004); Debra P. Steger, ‘Afterword: The “Trade and….” Conundrum—A Commentary’, 96 (1) The American Journal of International Law 135 (2002); Joel P. Trachtman, ‘Institutional Linkage: Transcending “Trade and….”’, 96 (1) The American Journal of International Law 77 (2002).

9 On stakeholder engagement, see Steve Charnovitz, ‘Non-Governmental Organizations and the Original Trade Regime’, 5 Journal of World Trade 111 (1995); Steve Charnovitz, ‘Triangulating the World Trade Organization’, 96 (1) The American Journal of International Law 28 (2002); Steve Charnovitz, ‘Participation of Nongovernmental Organizations in the World Trade Organization’, 17 University of Pennsylvania Journal of International Economic Law 331 (1996), at 332; Daniel Esty, ‘Non-Governmental Organizations at the World Trade Organization: Cooperation, Competition or Exclusion’, 1 Journal of International Economic Law 123 (1998); Robert Housman, ‘Democratizing International Trade Decision-Making’, 27 Cornell International Law Journal 699 (1994); Christophe Bellmann and Richard Gester, ‘Accountability of the World Trade Organization’, 30 (6) Journal of World Trade 31 (1996); Lori Wallach and Michelle Sforza, Whose Trade Organization? Corporate Globalization and the Erosion of Democracy—An Assessment of the World Trade Organization (Washington, D.C.: Public Citizen, 1999).

10 On parliamentary matters, see Meinhard Hilf, ‘How Can Parliamentary Participation in WTO Rule-Making and Democratic Control Be Made More Effective in the WTO?’, Presentation given at the University of Hamburg, 19 June 2003; G. Richard Shell, ‘The Trade Stakeholders Model and Participation by Non-state Parties in the World Trade Organization’, 17 (1) University of Pennsylvania Journal of International Economic Law 359 (1996); Gregory C. Shaffer, ‘Parliamentary Oversight of WTO Rule-Making: The Political and Normative Contexts’, 7 (3) Journal of International Economic Law 629 (2004). Shaffer also explores the conditions under which greater participation by parliamentarians might be possible. In a panel at the 2007 WTO Public Forum, Harlem Désir, the head of the European Parliament’s Trade Committee and an active member of the inter-parliamentary union, emphasized the range of activities the IPU was already undertaking to enhance parliamentary engagement on WTO issues around the world, including informal consultations with the WTO secretariat. Beyond the WTO, concerns about the legitimacy and accountability of global governance have prompted a number of calls for great parliamentary participation in the governance of the global economy. See for instance, Richard Falk and Andrew Strauss, ‘Toward Global Parliament’, 80 (1) Foreign Affairs 212 (2001).

11 Rorden Wilkinson, ‘Peripheralizing Labour: The ILO, WTO and the Completion of the Bretton Woods Project’, in Jeffrey Harrod and Robert O’Brien (eds), Globalized Unions? Theory and Strategies of Organized Labour in the Global Political Economy (London: Routledge, 2002) 204–20. For the WTO’s relationship with WIPO, see Paul Salmon, ‘Cooperation Between WIPO and the WTO’, 17 St. John’s Journal of Legal Commentary 263 (2003); for the WTO’s relationship with the Bretton Woods Institutions, see Richard Blackhurst, ‘The WTO and the Global Economy’, 20 (5) The World Economy 527 (1997); Anne O. Krueger and Sarath Rajapatirana, ‘The World Bank Policies Towards Trade and Trade Policy Reform’, 22 (6) The World Economy 717 (1999); Deborah Siegel, ‘Legal Aspects of the IMF/WTO Relationship: The Fund’s Articles of Agreement and the WTO Agreements’, 96 (3) The American Journal of International Law, 561 (2002); David Vines, ‘The WTO in Relation to the Fund and the Bank: Competencies, Agendas and Linkages’, in Krueger (ed), above n 4, 59–96. The intersection of the WTO’s agreements with public health policies has been reviewed in Carlos Correa (2000), ‘Implementing National Public Health Policies in the Framework of the WTO Agreements’, 34 (5) Journal of World Trade 81 (2000); Globalization and Access to Drugs: Perspectives on the WTO/TRIPS Agreement, Health Economics and Drugs (Geneva: World Health Organization, 1998); WTO/WHO, WTO Agreements and Public Health: A Joint Study by the WHO and WTO Secretariat (Geneva: WHO/World Trade Organization, 2002); John H. Jackson, ‘Fragmentation or Unification Among International Institutions: The World Trade Organization’, 31 International Law and Politics 823 (1999). The discussion of the appropriate role of the Bank and IMF has further evolved with the Aid for Trade discussion.

12 Patrick Low, Miguel Rodriguez Mendoza, and Barbara Kotschwar (eds), Trade Rules in the Making: Multilateral and Regional Trade Arrangements (Washington, D.C.: Brookings Institution Press, 1999); Jagdish Bhagwati, Termites in the Trading System: How Preferential Trade Agreements Undermine Free Trade (Oxford: Oxford University Press, 2008); Richard Baldwin and Patrick Low, Multilateralizing Regionalism: Challenges for the Global Trading System (Cambridge: Cambridge University Press, 2009).

13 See Consultative Board to the Director-General Supachai Panitchpakdi, The Future of the WTO: Addressing Institutional Challenges in the New Millennium (Geneva: World Trade Organization, 2004) and The Warwick Commission, The Multilateral Trade Regime: Which Way Forward? The Report of the First Warwick Commission (Warwick: University of Warwick, 2007) 92. The Warwick Commission report proposed a number of institutional changes at the WTO, including increasing the size of the WTO Secretariat, expanding the powers of the Director-General, and revising the process for reaching new trade deals.

14 See, for instance, WTO Doc T/GC/M91, General Council—Minutes of Meeting—Held in the Centre William Rappard on 26 January 2005; WT/MIN (03)/ST/58, Ministerial Conference—Fifth Session—Cancún, 10–14 September 2003—Honduras—Statement by H.E. Mr. Norman García, Secretary of State, Department of Industry and Commerce; WT/GC/W/477, General Council—Preparatory Process in Geneva and Negotiating Process at Ministerial Conferences—Communication from Australia, Canada, Hong Kong, China, New Zealand, Singapore, Switzerland; WT/MIN(01)/ST/110, Ministerial Conference—Fourth Session—Doha, 9–13 November 2001—Republic of the Fiji Islands—Statement by H.E. Mr. Isikeli Mataitoga, Ambassador, Permanent Representative to the WTO; WT/GC/M/57, General Council—Minutes of Meeting—Held in the Centre William Rappard, 17 and 19 July 2000.

15 See, for example, Krueger above n 2; Sylvia Ostry, ‘The World Trading System: In Dire Need of Reform?’, 17 Temple International & Comparative Law Journal 109 (2003); Rorden Wilkinson, ‘The Contours of Courtship: The WTO and Civil Society’, R. Wilkinson and S. Hughes (eds), Global Governance: Critical Perspectives (London: Routledge, 2000) 193–200; Patrick Macrory, Arthur Appleton, and Michael G. Plummer, The World Trade Organization: Legal, Economic and Political Analysis (New York: Springer Verlag, 2005) 3 vols. Bernard Hoekman and Petros Mavroidis, The World Trade Organization: Law, Economics and Politics (Abingdon: Routledge, 2007) 143.

16 Ngaire Woods and Amrita Narlikar, ‘Governance and the Limits of Accountability: The WTO, the IMF and the World Bank’, 53 (170) International Social Science Journal 569 (2001); Robert Wolfe, ‘The World Trade Organisation’, in Brian Hocking and Steven McGuire (eds), Trade Politics: International, Domestic and Regional Perspectives (London: Routledge, 1999) 207–22.

17 Narlikar, above n 6; Amrita Narlikar, International Trade and Developing Countries: Bargaining Coalitions in the GATT and WTO (London: Routledge, 2003) 260; Amrita Narlikar, The World Trade Organization: A Very Short Introduction (Oxford: Oxford University Press, 2005) 168; South Centre, ‘Institutional Governance and Decision-Making Processes in the WTO’, Analytic Note (Geneva: South Centre, 2003) 53.

18 Numerous proposals for WTO reform have also been made by NGOs such as Third World Network, Oxfam, ActionAid, and the International Centre for Trade and Sustainable Development (ICTSD), among others. In November 2000, for instance, U.K.-based NGOs, including ActionAid, CAFOD, Christian Aid, Consumers International, FIELD, Oxfam, RSPB, and the World Development Movement, co-published a discussion paper on ‘Recommendations for Ways Forward on Institutional Reform of the World Trade Organisation’.

19 See, for instance, Andrew Cornford, ‘Variable Geometry for the WTO: Concept and Precedents’, UNCTAD Discussion Paper No. 171 (May 2004), http:// www.unctad.org/en/docs/osgdp20045_en.pdf (visited 14 April 2009); UNCTAD, Positive Agenda for Developing Countries: Issues for Future Trade Negotiations (Geneva: United Nations, 2000), www.unctad.org/en/docs/itcdtsb10_en.pdf (visited 14 April 2009).

20 The notion that trade liberalization and associated trade rules would be important for peace was a central part of the motivation for creating the GATT system post-WWII. See A. Guinness, ‘International Trade and the Making of Peace’, 20 (4) International Affairs 495 (1944); Herbert Feis, ‘The Geneva Proposal for an International Trade Charter’, 2 (1) International Organization 39 (1948); Jacob Viner, ‘Conflicts of Principle in Drafting a Trade Charter’, 25 (4) Foreign Affairs 612 (1947); C. Wilcox, ‘The Promise of the World Trade Charter’, 27 (3) Foreign Affairs 486 (1949). In 2008, a statement by Pascal Lamy echoed the enduring commitment of many within the WTO system to the relevance of that ideal, stating that ‘there are only advantages in returning to a time in history when the people wanted to create an international system which prevents the repeat of a traumatic situation such as the first world war which they came out of.’ Cited in ‘Socialist Realism Revealed at WTO, ’Tribune de Geneve, 17 March. 2008.

21 Dani Rodrik, One Economics, Many Recipes (Princeton: Princeton University Press, 2007).

22 See, for instance, John O. McGinnis and Mark L. Movsesian, ‘The World Trade Constitution’, 114 Harvard Law Review 511 (2000), at 523–25; Ernst-Ulrich Petersmann, ‘National Constitutions, Foreign Trade Policy, and European Community Law’, 3 (1) European Journal of International Law 1 (1992); Christian Joerges and Ernst-Ulrich Petersmann (eds), Constitutionalism, Multilevel Trade Governance and Social Regulation (Oxford: Hart Publishers, 2006). For an evaluation of these debates, see Deborah Cass, The Constitutionalization of the World Trade Organization: Legitimacy, Democracy, and Community in the International Trading System (Oxford: Oxford University Press, 2005).

23 Robert Howse and Kalypso Nicolaidis, ‘Legitimacy and Global Governance: Why a Constitution for the WTO Is a Step Too Far?’ in R. Porter, Pierre Sauvé, Arvind Subramaniam, and A. Zampetti (eds), Equity, Efficiency and Legitimacy: The Multilateral System at the Millennium (Washington, D.C.: Brookings Institution Press, 2001) 227–63; Steven Charnovitz, ‘WTO Cosmopolitics’, 34 (2) Journal of International Law and Politics 299 (2003); John H. Dunning, ‘The Future of the WTO: A Socio-relational Challenge’, 7 (3) Review of International Political Economy 475 (2002); Robert Howse and Kalypso Nicolaidis, ‘Enhancing WTO Legitimacy: Constitutionalization or Global Subsidiarity?’, 16 (1) Governance 73 (2003); Manfred Elsig, ‘The World Trade Organization’s Legitimacy Crisis: What Does the Beast Look Like?’, 41 (1) Journal of World Trade 75 (2007); Joost Pauwelyn, ‘The Sutherland Report: A Missed Opportunity for Genuine Debate on Trade, Globalization and Reforming the WTO’, 8 (2) Journal of International Economic Law 329 (2005).

24 Murray Gibbs, ‘Special and Differential Treatment in the Context of Globalization’, Proceedings of the G15 Symposium on Special and Differential Treatment in the WTO Agreements in New Delhi, India, on 10 December 1998, www.wto.org/english/tratop_e/devel_e/sem01_e/gibbs_e.doc (visited 16 April 2009); Sheila Page and Peter Kleen, Special and Differential Treatment of Developing Countries in the World Trade Organization (London: Overseas Development Institute, 2004).

25 Faizel Ismail, Mainstreaming Development in the WTO: Developing Countries in the Doha Round (Geneva: FES Geneva and CUTS International, 2007); Joseph Stiglitz and Andrew Charlton, Fair Trade for All: How Trade Can Promote Development (Oxford: Oxford University Press, 2005); Rorden Wilkinson and James Scott, ‘Developing Country Participation in the GATT: A Reassessment’, 7 (2) World Trade Review 473 (2008); Kevin Gallagher (ed), Putting Development First: The Importance of Policy in the WTO and IFI’s (London: Zed Books, 2005).

26 Carolyn Deere Birkbeck, ‘Governing the WTO System: The Capacity-building Function’, Global Economic Governance Programme Working Paper 2009/4, University College, Oxford (2009).

27 Gary Sampson (ed), The Role of the WTO and Global Governance (Tokyo: United Nations University Press, 2001).

28 Debapriya Bhattacharya, ‘Creeping Trade and Phantom Aid: LDCs in the Global Context and Priorities for Reform of Global Governance’, Geneva Lectures on Global Economic Governance (29 January 2008, updated February 2009), http://www.globaleconomicgovernance.org/creeping-trade-and-phantom-aid-ldcs-in-the-global-context-and-priorities-for-reform-of-global-governance-geneva-lectures-on-global-economic-governance (visited 16 April 2009).

29 Birkbeck and Meléndez-Ortiz, above n 2.

30 See Bellmann and Gester, above n 9; Wallach and Sforza, above n 9; Woods and Narlikar, above n 16, at 569.

31 Daniel Esty, ‘The World Trade Organization’s Legitimacy Crisis’, 1 (1) World Trade Review 7 (2002); Elsig, 2005, above, n 23; Matthew Eagleton-Pierce, ‘Uncovering Symbolic Power: Power Analysis, Southern Countries, and the World Trade Organisation’, (Doctoral thesis on file with the University of Oxford, 2007).

32 Some analysts also see accountability as an end in itself, appealing to international human rights norms in that respect. See the work of 3D->Trade-Human Rights-Equitable Economy at http://www.3dthree.org.

33 On this point, some scholars argue that the legitimacy of international institutions is in part derived from conflicts with external agents of change such as social movements. See Balakrishnan Rajagopal, International Law from Below: Development, Social Movements and Third World Resistance (Cambridge: Cambridge University Press, 2003).

34 Robert Wolfe with Mark Halle (eds), Process Matters: Sustainable Development and Domestic Trade Transparency (Winnipeg: International Institute for Sustainable Development, 2007).

35 Susan Sell, ‘Big Business and the New Trade Agreements: The Future of the WTO?’, in Richard Stubbs and G. Underhill (eds), Political Economy and the Changing Global Order (New York: Oxford University Press, 2000) 174–83; Susan Sell, Private Power, Public Law: The Globalisation of Intellectual Property Rights (Cambridge: Cambridge University Press, 2003); Dominic Eagleton, Under the Influence: Exposing Undue Corporate Influence Over Policymaking at the World Trade Organization (London: ActionAid, 2006).

36 Sheila Page, How Developing Countries Trade: The Institutional Constraints (London: Routledge, 1994) 328.

37 Jane Ford, ‘A Social Theory of Trade Regime Change: GATT to WTO’, 4 (3) International Studies Review 115 (2002).

38 See, for instance, Ernst B. Haas, When Knowledge Is Power: Three Models of Change in International Organization (Berkeley: University of California Press, 1990); Laurence R. Helfer, ‘Understanding Change in International Organizations: Globalization and Innovation in the ILO’, 59 Vanderbilt Law Review 649 (2006).

39 For a leading proponent of this perspective, see Robert Wolfe, ‘Can the Trading System Be Governed: Institutional Implications of the WTO’s Suspended Animation’, in Alan S. Alexandroff (ed), Can the World Be Governed? Possibilities for Effective Multilateralism (Waterloo: Wilfrid Laurier University Press, 2008) 289–352; Robert Wolfe, ‘Still Foggy after All These Years: Reform Proposals for the WTO’, in Alan Alexandroff (ed), Trends in World Trade Policy: Essays in Honor of Sylvia Ostry (Durham: Carolina Academic Press, 2007) 133–54; and Robert Wolfe, ‘Decision-making and Transparency in the “medieval” WTO: Does the Sutherland Report Have the Right Prescription?’ 8 (3) Journal of International Economic Law 631 (2005).

40 Peter Drahos, for instance, takes up the question of how developing countries can forge more effective coalitions, particularly in the context of forum-shifting by powerful players. See Peter Drahos, ‘When the Weak Bargain with the Strong: Negotiations in the World Trade Organization’, 8 (1) International Negotiation 79 (2003). See also John Odell, Negotiating Trade: Developing Countries in the WTO and NAFTA (Cambridge; Cambridge University Press, 2006).

41 Rorden Wilkinson, The WTO: Crisis and the Governance of Global Trade (Oxford: Routledge, 2006) 175.

42 James E. Anderson, ‘Why Do Nations Trade (So Little)?’, 5(2) Pacific Economic Review 115 (2000); Mark Rupert, Ideologies of Globalization: Contending Visions of a New World Order (London: Routledge, 2000) 208; Saskia Sassen, Globalization and Its Discontents (New York: New Press, 1998); David Held and Mathias Koenig-Archibungi (eds), Global Governance and Public Accountability (Oxford: Blackwells, 2005); Walden Bello, ‘Why Reform of the WTO Is the Wrong Agenda’ (Focus on Trade 43, December 1999), http://www.tni.org/detail_page.phtml?page=archives_bello_agenda (visited 14 April 2009).

43 See John Jackson, The Jurisprudence of GATT and the WTO (Cambridge: Cambridge University Press, 2000) 497; John Jackson, The World Trading System: Law and Policy of International Economic Relations, 2nd ed. (Cambridge: MIT Press, 1997) 453.

44 The particular issue was the how the One World Trust’s Global Accountability Project (GAP) Framework applied its framework to the WTO. For this case study, see One World Trust, Global Accountability Profile: WTO (London: One World Trust, 2006).

45 For a general introduction to the politics, law, and economics of the WTO, see John Barton, Judith Goldstein, Tim Josling, and Richard Steinberg, The Evolution of the Trade Regime: Politics, Law and the Economics of the GATT and the WTO (Princeton: Princeton University Press, 2006).

46 While most of the literature approaches the WTO system as a regime (see Barton et al., above n 6; Ford, above n 37), the first major volume on the WTO ‘as an international organization’ appeared in 1998 (see Krueger, above n 2).

47 See Deere Birkbeck, above n 26.

48 To date, analyses utilizing this functional approach have been completed on the WTO’s negotiation, dispute settlement, capacity-building, and monitoring functions. See www.globaleconomicgovernance.org/trade.

49 For the application of this functional approach to another international organization, see Carolyn Deere, ‘Reforming Governance to Advance the WIPO Development Agenda’, in Jeremy de Beer (ed), Implementing WIPO’s Development Agenda (Waterloo: Wilfrid Laurier University Press/Centre for International Governance Innovation/International Development Research Centre, 2009).

50 Carolyn Deere, The Implementation Game: The TRIPS Agreement and the Global Politics of Intellectual Property Reform in Developing Countries (Oxford: Oxford University Press, 2008).

51 A 2005 study commissioned by the WTO Secretariat provides a factual account of the first decade of the inner workings of the WTO. See Peter Gallagher, The First Ten Years of the WTO: 1995–2005 (Cambridge: Cambridge University Press, 2005). For more political accounts, see Aileen Kwa, Power Politics in the WTO, 2nd ed. (Bangkok: Focus on the Global South, 2003), http://www.focusweb.org/publications/Books/power-politics-in-the-WTO.pdf (visited 15 April 2009); Manfred Elsig, ‘The World Trade Organization’s Bureaucrats: Runaway Agents or Masters’ Servants?’, NCCR Trade Regulation Working Paper 19 (March 2007), www.nccr-trade.org/images/stories/publications/IP2/MElsig_NCCRWP_Agency.pdf (visited 4 April 2009).

52 Sonia Rolland, ‘Developing Country Coalitions at the WTO: In Search of Legal Support’, 48 Harvard International Law Journal 483 (2007); Mayur Patel, ‘New Faces in the Green Room: Developing Country Coalitions and Decision-Making in the WTO’, Global Economic Governance Programme Working Paper 2007/33, University College (September 2007).

53 See Elsig, above n 51.

54 Padideh Ala’i, ‘From the Periphery to the Center? The Evolving WTO Jurisprudence on Transparency and Good Governance’, 11 (4) Journal of International Economic Law 779 (2008).

55 Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement), in WTO, The Results of the Uruguay Round of Multilateral Trade Negotiations: The Legal Texts (Geneva: WTO, 2004) 3.

56 Carlos Correa, Intellectual Property Rights, the WTO and Developing Countries: The TRIPS Agreement and Policy Options (Penang, Malaysia: Third World Network [TWN], 2000).

57 For examples, see Nathalie Bernasconi-Osterwalder, Daniel Magraw, Maria Julia Oliva, Marcos Orellana, and Elisabeth Tuerk, Environment and Trade: A Guide to WTO Jurisprudence (London: Earthscan, 2005).

58 John Audley, Green Politics and Global Trade: NAFTA and the Future of Environmental Politics (Washington, D.C.: Georgetown University Press, 1997); Marc Williams and Lucy Ford, ‘The World Trade Organisation, Social Movements and Global Environmental Management’, 8 (1) Environmental Politics 268 (1999).

59 Jagdish N. Bhagwati and T.N. Srinivasan ‘Trade and Environment: Does Environmental Diversity Detract from the Case of Free Trade?’ in Jagdish Bhagwati and Robert E. Hudec (eds), Fair Trade and Harmonization: Prerequisites for Free Trade, 2nd ed.(Cambridge: MIT Press, 1996) vol 1, 159–226; Halina Ward and Duncan Brack, Trade, Investment and the Environment (London: Earthscan, 1999); Graciela Chichilnisky, ‘Sustainable Development and North-South Trade’, in Lakshman D. Guruswamy and Jeffrey A. McNeely, Protection of Global Biodiversity: Converging Strategies (Durham, N.C.: Duke University Press, 1998) 101–17; Patrick Low, International Trade and the Environment (Washington, D.C.: World Bank, 2002); Gary Sampson, ‘Is There a Need for Restructuring the Collaboration among the WTO and UN Agencies So as to Harness Their Complementarities?’, 7 (3) Journal of International Economic Law 717 (2004); Eric Neumayer, ‘The WTO and the Environment: Its Past Record Is Better Than Critics Believe, but the Future Outlook Is Bleak’, 4 (3) Global Environmental Politics 1 (2004).

60 Ken Conca, ‘The WTO and the Undermining of Global Environmental Governance’, 7 (3) Review of International Political Economy 484 (2000).

61 Adil Najam, Mark Halle, and Ricardo Meléndez-Ortiz, Trade and Environment: A Resource Book (Geneva: IISD/ICTSD, 2007); World Wildlife Federation (WWF), ‘Reform of the WTO’s Dispute Settlement Mechanism for Sustainable Development’, WWF International Discussion Paper (July 1999), http://powerswitch.panda.org/what_we_do/footprint/transforming_markets/news/?3758/Reform-of-the-WTOs-Dispute-Settlement-Mechanism-for-Sustainable-Development-Discussion (visited 14 April 2009).

62 Erik Beukel, ‘Greening the World Trade Organization Trading Regime? Towards a Structural Power Model’, 4 (2) Journal of International Relations & Development 138 (2001).

63 Daniel Esty, ‘Bridging the Trade-Environment Divide’, 15 (3) Journal of Economic Perspectives 113 (2001).

64 Adil Najam, Mark Halle, Ricardo Meléndez-Ortiz, Envisioning a Sustainable Development Agenda for Trade and Environment (Geneva: IISD/ICTSD, 2007).

65 Chile, for instance, has played a leading role in this respect. See Mario Matus and Eda Rossi, ‘Trade and the Environment in the FTAA: A Chilean Perspective’, in Carolyn Deere and Daniel Esty (eds), Greening the Americas: NAFTA’s Lessons for the Hemispheric Trade (Cambridge: MIT Press, 2002) 259, and Carolyn Deere, ‘Greening Trade in the Americas: An Agenda for Moving Beyond the North-South Impasse’, 38 (1) Journal of World Trade 137 (2004).

66 Carolyn Deere, ‘Fisheries Trade and Sustainable Development: Conflict or Compatibility?’, 15 The Ocean Yearbook, 345 (2002); Carolyn Deere and Elizabeth Havice, Fisheries, Trade and Sustainable Development (Geneva: International Centre for Trade and Sustainable Development, 2006); William M. Reichert, ‘Note, Resolving the Trade and Environment Conflict: The WTO and NGO Consultative Relations’, 5 Minnesota Journal of Global Trade 219 (1996); Aaditya Mattoo and Arvind Subramanian ‘From Doha to the Next Bretton Woods’ 88 (1) Foreign Affairs 15 (2009).

67 Pauwelyn, above n 23; Kalypso Nicolaidis and Robert Howse, ‘Democracy without Sovereignty: The Global Vocation of Political Ethics’ in Tomer Broude and Yuval Shany (eds), The Shifting Allocation of Authority in International Law: Considering Sovereignty, Supremacy and Subsidiarity (Oxford: Hart Publishing, 2008) 163–91; and Howse and Nicolaidis, above n 23, ‘Legitimacy and Global Governance.’

68 World Commission on the Social Dimension of Globalization, A Fair Globalization: Creating Opportunities for All (Geneva: International Labor Organization, 2004); Annie Taylor and Caroline Thomas, Global Trade and Global Social Issues (London: Rout-ledge, 1999); United Nations Development Programme (UNDP), Making Global Trade Work for People (New York: UNDP, 2003); and UNDP, Human Development Report 2005—International Cooperation at a Crossroads: Aid, Trade and Security in an Unequal World (New York: United Nations Development Program, 2005) 372.

69 Paul Collier, The Bottom Billion: Why the Poorest Countries Are Failing and What Can be Done About It (Oxford: Oxford University Press, 2007) 224.

70 For historical reviews of the Uruguay Round, see John Croome, Reshaping the World Trading System: A History of the Uruguay Round, 2nd ed. (Geneva: World Trade Organization, 1999) 400; Terrance P. Stewart, Susan G. Markel, and Michael T. Kerwin, The GATT Uruguay Round: A Negotiating History (1986–1992) (Boston: Kluwer Law and Taxation Publishers, 2003) 342. For historical perspectives on the WTO, see Robert E. Hudec, The GATT Legal System and World Trade Diplomacy (New York: Praeger, 1975).

71 Bhagirath Lal Das, The WTO Agreements: Deficiencies, Imbalances and Required Changes (London: Zed Books/Third World Network, 1998) 128; Joseph Michael Finger and Philip Schuler, ‘Implementation of Uruguay Round Commitments: The Development Challenge’, 23 (4) World Economy 511 (1999).

72 Hesham Youssef, Special and Differential Treatment for Developing Countries in the WTO (Geneva: South Centre, 1999).

73 See Krueger, above n 2; Mike Moore, ‘Efforts to Assist Poor Countries’, 8 (4) Presidents & Prime Ministers 30 (1999); Mike Moore, A World Without Walls: Freedom, Development, Free Trade and Global Governance (Cambridge: Cambridge University Press, 2003) 304; Zhen Kun Wang, Africa’s Role in Multilateral Trade Negotiations (Washington, D.C.: World Bank, 1997) 28.

74 See Page above, n 36.

75 Robert Hudec, Developing Countries in the GATT Legal System (Aldershot: Trade Policy Research Centre, 1987) 246; Diana Tussie and David Glover (eds), The Developing Countries in World Trade: Policies and Bargaining Strategies (Boulder: Lynne Rienner, 1993); Constantine Michalopoulos, Developing Countries in the WTO (Basingstoke: Palgrave, 2001) 294.

76 See Das, above n 71; Bhagirath Lal Das, The Doha Agenda: The New Negotiations on World Trade (London: Zed Books, 2003) 128. For historical reviews of debates on developing countries in the GATT, see GATT, ‘Report of Committee on Trade and Development: Basic Instruments and Selected Documents’, 1984–1985, 32nd Supplement #21, L/5913; Alice H. Amsden and Takashi Hikino, ‘The Bark Is Worse Than the Bite: New WTO Law and Late Industrialization’, 570 Annals of the American Academy of Political and Social Sciences 104 (July 2000); Bela Balassa and Constantine Michalopoulos, ‘Liberalizing Trade between Developed and Developing Countries’, 20 Journal of World Trade Law 3 (1986); Charles Chukwuma Soludo, Osita Ogbu, and Ha-Joon Chang (eds), The Politics of Trade and Industrial Policy in Africa: Forced Consensus? (Ottawa: Africa World Press/IDRC, 2004). On trade, developing countries, and industrialization, see Gallagher, above n 25; Yong-Shik Lee, Reclaiming Development in the World Trading System (Cambridge: Cambridge University Press, 2006) 208; Ha-Joon Chang, Kicking Away the Ladder—Development Strategy in Historical Perspective (London: Anthem Press, 2002) 187.

77 See Faizel Ismail, ‘A Development Perspective on the WTO July 2004 General Council Decision’, 8 (2) Journal of International Economic Law 377 (2004). See also Ismail (2007), above n 25; and Dani Rodrik, ‘Five Simple Principles for World Trade’, The American Prospect, 17 January 2000.

78 Joel P. Trachtman, ‘Legal Aspects of a Poverty Agenda at the WTO: Trade Law and “Global Apartheid”’, 6 (3) Journal of Intellectual Economic Law 3 (2003).

79 Bernard Hoekman, Constantine Michalopoulos, and L. Alan Winters, ‘More Favorable and Differential Treatment of Developing Countries: Toward a New Approach in the World Trade Organization’, World Bank Policy Research Working Paper No. 3107 (1 August 2003); Bernard Hoekman, The Political Economy of the World Trading System: The WTO and Beyond, 2nd ed. (Oxford: Oxford University Press, 2001) 576; Andrew H. Charlton and Joseph E. Stiglitz, ‘A Development-friendly Prioritisation of Doha Round Proposals’, 28 (3) The World Economy 293 (2005).

80 Oxfam, Africa and the Doha Round: Fighting to Keep Development Alive (Oxford: Oxfam, 2005).

81 See Kwa, above n 51; Fatoumata Jawara and Aileen Kwa, Behind the Scenes at the WTO: The Real World of International Trade Negotiations (New York: Zed Books, 2003) 224.

82 Gautam Sen, ‘The United States and the GATT/WTO System’, in Rosemary Foot, Neil MacFarlane, and Michael Mastanduno (eds), US Hegemony and International Organisations (Oxford: Oxford University Press, 2003) 115–38.

83 Richard Steinberg and Judith Goldstein, ‘Regulatory Shift: The Rise of Judicial Liberalization at the WTO’, in Walter Mattli and Ngaire Woods, The Politics of Global Regulation (Princeton University Press, 2009) 211–41.

84 For a critical review of the effectiveness of WTO’s monitoring and surveillance activities, see Arunabha Ghosh, ‘Information Gaps, Information Systems, and the WTO’s Trade Policy Review Mechanism’, Global Economic Governance Programme Working Paper 2008/40, University College (2008). See also proposals in articles by Robert Wolfe, Félix Pena, and Arunabha Ghosh in Deere Birkbeck and Meléndez-Ortiz, above n 2.

85 Diana Tussie (ed), The Politics of Trade: The Role of Research in Trade Policy and Negotiation (Leiden: Martinus Nijhoff, 2009).

86 Mayur Patel, above n 52; Carolyn Deere Birkbeck, Emily Jones, and Ngaire Woods, Manoeuvring at the Margins: Small States in International Trade Negotiations (Oxford: Global Economic Governance Programme and London: Commonwealth Secretariat, forthcoming).

87 Deere Birkbeck, above n 2.

88 Peter Van den Bossche, ‘NGO Involvement in the WTO: A Comparative Perspective’, 11 (4) Journal of International Economic Law 717 (2008); Yves Bonzon, ‘Institutionalizing Public Participation in WTO Decision Making: Some Conceptual Hurdles and Avenues’, 11 (4) Journal of International Economic Law 751 (2008); Mark Halle, ‘Catching up with the Slowest: NGO Accreditation at the WTO’, 11 (3) Bridges Monthly 20 (2007).

PART II
Decision-Making in the WTO

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3
A Two-Tier Approach to WTO Decision-Making

THOMAS COTTIER

I. Background

A. Matching Substance–Structure Pairings

Institutions, structures, and procedures are not ends in themselves. They serve and facilitate the attainment of substantive goals. Domestic political processes are shaped by constitutional law with a view to achieving and securing fundamental goals of justice of a given society. To some extent, these goals are equally defined in constitutional law. The situation is no different for international law and organizations. Decision-making processes serve and facilitate the attainment of legitimate outcomes commensurate with the substantive goals of the organization. Indeed, outputs and the legitimacy of outputs are directly related to the decision-making process and institutional rules through which outputs are generated. Thus structures and procedures need to be shaped in a manner conducive to achieving substantive goals. They need to match and be in line with each other. They are mutually dependent. The authority and legitimacy of the institution relies, in other words, on appropriate substance–structure pairings.1 With the evolution of substance, structures and procedures equally need to change, adapt, and evolve.

The World Trade Organization (WTO) is not immune from needing an appropriate substance–structure pairing. Members need to review the relationship between substance and structure, and assess reform options. Appropriate structures are, as much as trade liberalization, a means to an end: a means to successfully achieve the goals of the organization, depicted in the preambles of the various agreements. In a spirit similar to that of the General Agreement on Tariffs and Trade (GATT) 1947, Member States recognized in the preamble to the Marrakesh Agreement Establishing the World Trade Organization that relations

in the field of trade and economic endeavor should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking to protect and preserve the environment and to enhance the means of doing so in a manner consistent with their respective needs and concerns at different levels of economic development.2

This preamble recognizes that international trade regulation serves different and partially competing goals. It is required to strike a balance between different objectives and maximize the attainment of them. This requires institutions and processes that can cope with these complexities. The authority of the multilateral trading systems depends on it, and structures and procedures are of key importance.3 The challenges are well-known. They are constitutional in nature and entail institutional issues within the WTO, as well as horizontal and vertical problems relating to other fields of international and domestic law, respectively.

Within the WTO the relationship between the political and judicial process is at stake. This relationship includes the proper role and function of the Secretariat vis-à-vis the political and judicial. It covers the effectiveness of decision-making, the role of stakeholders, and the relationship between trade rounds and regular activities in the process of law-making. Horizontal issues include the problem of fragmentation and coherence in relation to other international organizations and domains of international law. Vertically, the relationship between WTO and domestic law and the impact of WTO law in trade policy formulation, implementation, and enforcement within Members are predominant concerns. This includes the relationship between WTO law and regional/preferential trade arrangements. The latter are supposed to operate within the bounds of the multilateral framework but increasingly suffer from inflation and non-compliance with WTO rules.

A number of questions must be addressed under the rubric of WTO reform. How can we achieve a better balance between law-making and judicial refinement of WTO law in and by case law? How can we achieve better policy coordination in addressing borderline issues among trade and other fields governed by other institutions, such as culture, human rights, investment protection, finance, monetary affairs, and development assistance? How do we make sure that WTO rules are taken seriously at home, by legislators and domestic courts alike? How can we, in turn, ensure that rule-making responds to the needs for transparency, accountability, and legitimacy? What are the possible legal tools to bring about a proper, well-balanced system? How can the WTO best be structured to cope with these issues and challenges?

It is striking that underlying institutional issues, notwithstanding the significant challenges they pose, have not been addressed by Members. A wide range of studies and reports, containing suggestions and recommendations, has been essentially ignored in trade diplomacy and capitals.4 Calls by the International Law Association to establish a committee or working group dealing with institutional issues at the WTO have gone without official response.5 Within the Doha Development Agenda, institutional issues have been discussed only in the context of reforming dispute settlement, an area where reform is least required. Some efforts have been made to address the relationship to preferential agreements and to enhance transparency.6 Yet disciplines have not been substantially enhanced, and no common will to strengthen conditions for preferential trade has been found.

Overall, the institutional reform taboo may be explained by expediency and concerns that it may further delay, complicate, and impede the conclusion of the current Doha Development Agenda under the 2005 Hong Kong ministerial program.7 Institutional reform may be seen as a pretext to prolong the current trade round. It may even be seen as a means to filibuster the process. It is not suggested here that institutional change should be undertaken with a view to concluding the Doha Round.8 The Doha Round can and must be completed within the current institutional rules and procedures. Members cannot change the wheels of a running car.

Instead, it is important to recognize that the main difficulties in concluding the Doha Development Agenda are rooted in complex substantive issues, mainly in agriculture. They relate to classical issues of market access that GATT and the WTO have successfully dealt with previously through a process of claims and responses. Reductions of tariffs and domestic measures entail substantial structural adjustment, which takes time to negotiate and implement. Fifty years of arrears in agricultural reform are difficult to address, and the process is bound to take time. The Doha Round remains less than a decade old.

Negotiations within the current round are focused on agriculture, non-agricultural market access, and services. The July 2008 package was limited to these areas and to certain rules.9 They will decide the fate of the Doha Agenda. These issues can and must be dealt with under current procedures. In addition, the current agenda on rule-making is relatively modest. It is limited to implementation and marginal improvements of existing agreements in rules, intellectual property, and trade facilitation. Aid for trade is not likely to result in a new legal framework but is likely to work with funding and donor programs within and outside the WTO. More ambitious tasks, in particular negotiations on trade and investment and trade and competition, were not taken up.

The difficulties in concluding the current Doha Development Agenda are often ascribed to outdated modes of negotiations. This is only partly true. While it is not the case for core concerns and the current agenda, it explains why more ambitious plans in the field of rule-making have failed. Some the issues inscribed into the Doha Agenda show structural deficiencies. Reform of the dispute settlement system came to a halt because the issue was addressed in isolation and without linking the debate to the political process of decision-making, which was left untouched.

Negotiations on trade and environment have largely been a disguise for further market access issues. These negotiations have failed, despite an explicit mandate, to take into account services and matters pertaining to technology transfer and intellectual property rights.10 It is here that the structural limits of present modes of negotiating separately on goods, services, and intellectual property are visible. The WTO has not been able to face complex issues that require the interface of different regulatory areas within the jurisdiction of the Organization. The downsizing of the Doha Agenda in rule-making is attributable in part to structural deficiencies.

These deficiencies need to be addressed with a view to taking up the challenges of a post-Doha agenda.11 Leftovers, unresolved under the current modes of operation, are likely to be carried over. The future is likely to entail complex issues beyond market access. The challenges of climate change mitigation and adaptation and of the financial crisis will require addressing these problems in their full complexity, possibly involving the reregulation of tariffs, production and process methods, subsidies in industrial and agricultural products, and transfer of technologies. Labour standards and other social issues will likely need to need to be addressed. Additionally, new approaches to the regulation of financial services and cooperation with other international organizations, particularly the International Monetary Fund (IMF), the World Bank (IBRD), and the Bank of International Settlements (BIS). Trade and investment as well as trade and competition are likely to be included. The world will need to see more, not less, positive integration and rule-making in meeting these challenges.

The global recession of 2009 will likely make effective decision-making in both the political and judicial arenas imperative in the coming years. Greater sophistication will be required in dealing with the constitutional, horizontal, and vertical issues that are confronting the WTO. The impetus for institutional reform, however, goes beyond climate change and current events. At its core, institutional reform must deal with profound underlying issues in the context of international trade regulation and international economic relations.12

B. The Changing Substance and Context of WTO Law

Long past are the days when the GATT, in light of extensive post–World War II tariff-based protectionism, focused almost exclusively on reducing border protection and enhancing market access for goods traded. True, trade liberalization remains at the heart of the WTO’s work. Market access remains of paramount importance, entailing both border and domestic measures. There was never a clear-cut distinction between the two. National treatment, from the very beginning, related to domestic regulation and conditions of competition. Much of the present Doha Development Agenda still belongs to the classical domain of WTO law relating to border measures: non-agriculture market access negotiations, reduction of agricultural tariffs, improvement of disciplines on trade remedies, progressive expansion of national treatment in services under the General Agreement on Trade in Services (GATS), Aid for Trade, Special and Differential Treatment and Graduation, and the Generalized System of Preferences (GSP) focus on market access. The main difficulties in the negotiations are still in these classical areas of multilateral and bilateral negotiations on trade concessions.

Despite the fact that classic areas of concern remain prominent, important changes have taken place. They amount to a parallel of what Wolfgang Friedman, in his time, termed the changing structure of international law when it moved from a law of coexistence to a law of cooperation under the aegis of the post-war United Nations Charter.13 First, with the progressive reduction of tariffs and the ban on quantitative restrictions on agriculture, the emphasis of regulatory work has shifted to areas pertaining to domestic regulation and securing fair conditions for investment in other fields. Non-tariff barriers addressed in the Agreements on Technical Barriers to Trade and on Sanitary and Phytosanitary Measures, standards on intellectual property in the Agreement on Trade Related Aspects of Intellectual Property (TRIPS Agreement), domestic support in the Agreement on Agriculture, disciplines on subsidies in the Agreement on Subsidies and Countervailing Duties, domestic regulation in GATS, and government procurement all essentially serve as a benchmark for Members’ domestic laws.

Much of the work under the GATT since the Tokyo Round, including the Uruguay Round, has been of a legislative or prescriptive nature. Future negotiations are likely to see the realm of rule-making reinforced. Clear distinctions between negative integration (prescribing limits to national sovereignty) and positive integration (prescribing what Members are obliged to do) have been blurred. But the latter is increasing. The challenges of climate change and linkages between trade and issues such as the environment, human rights, investment protection, intellectual property, and the regulation of services, in particular financial services, will further enhance complex rule-making negotiations. These negotiations will need to take into account elements pertaining to different fields, combining goods, services, and intellectual property alike.

Second, the advent of binding dispute settlement has changed the relationship of rule-making and adjudication. While panel decisions could be blocked under GATT 1947, Members are today bound by decisions rendered pursuant to the Dispute Settlement Understanding (DSU). No longer is there a power of veto in dispute settlement. At the same time, decisions taken by dispute settlement are difficult to review in subsequent legislation. While the instruments of authentic interpretation and of revision of treaty provisions formally exist, the tradition of working and negotiating in trade rounds extending on average to a decade practically exclude the possibility of legislative responses to DSU decisions.14 In fact, the Appellate Body has the last word on interpreting the agreements within the WTO. This results in an imbalance between law-making and adjudication, placing a heavy responsibility on the case law in developing WTO law.

Third, leadership has changed. GATT negotiations in 1947 and successive rounds were launched during the Cold War and led by the United States. The modes of negotiations were developed with a single power dominating the process and others following suit. Eventually, trade negotiations developed into a bipolar framework, with the growth and emergence of post-war Europe negotiating at the table in Geneva with a single voice under a common commercial policy. The core of the Uruguay Round agreement was the product of U.S. and European Communities (EC) bargaining, with the results being eventually multilateralized. Others, such as Japan and large developing countries, played an important but not decisive role.

With the advent of emerging economies, the WTO faces a multipolar world. Since the Cancun Ministerial Meeting, major decisions have required the consent of a number of countries, including Brazil and India. The accession of China to the WTO in 2001 profoundly shifted the negotiating dynamic at the WTO. While China still prefers a discrete voice in multilateral negotiations, it is evident that no major agreement can be achieved without its consent. The future accession of Russia will further change the political economy at the WTO.

Shifts in the club of larger nations are not the only changes that have affected the multipolar world. Medium and small countries have significantly increased their participation and now seek to influence the process through ideas and collation building. Efforts in recent years at building negotiating capacity in smaller Members have paid dividends. Members increasingly operate in a context of flexible, interest-driven coalitions.15 They may belong to more than one grouping, depending on their interests. It is no coincidence that the WTO has seen a growing number of informal coalitions with coordination going beyond the former formula of groups of friends common in the Uruguay Round.

Fourth, information technology has significantly improved the transparency of WTO work and documentation. Information about the WTO and its activities is broadly accessible and allows for much wider participation of nongovernmental organizations.16 The practical role of non-governmental organizations and academic work has significantly enlarged the constituency of the WTO beyond traditional producer interests. More people than ever before are taking an interest in the work of the WTO, which for many years had been a matter of specialists and government officials working outside the limelight of international diplomacy.

C. Incremental Change and Evolution

While the substance and context has evolved, the formal structure of the WTO has remained largely similar to that of the GATT 1947. The most significant changes have been the evolution of the GATT agreements into a single undertaking under the WTO and the fundamental structural changes undertaken in dispute settlement. The modes of daily business and routine of committees and the General Council have not substantially changed over the years. The mantra of a member-driven organization, a forum of negotiation rather than a multilateral body, still prevails.

The iterative process of round-based negotiations has essentially remained the same since the creation of the GATT in 1947. It is hardly framed by international agreements.17 The letter of Article XXVIII GATT on tariff negotiations was left behind a long time ago, and the cycles of multilateral trade negotiations developed their own customary procedures and informal conventions. Detailed voting rules, based on one-state one-vote in GATT 1947, were also included in the Marrakesh Agreement but are not applied even when consensus fails. Specific structures of negotiations are established to meet the challenges of a particular round. The work is undertaken in formal and informal committees on the basis of consensus. Problems that are encountered are addressed informally and bilaterally and are discussed in ad hoc processes, guided by the chair of committees and negotiating groups, and the Director-General of the WTO. The Green Room process, with tailor-made participation of usually some 25 ambassadors of interested and hand-picked Members, is critical to bringing about compromise.

The process is flanked by informal talks and coordination among delegations in Geneva and support by the Secretariat and NGOs. The role of trade ministers largely depends on initiatives by Members and the strategies of the Director-General. While mandatory biannual ministerial meetings are held, informal negotiations take place in between meetings, both within the WTO and outside on the initiative of Members. Linkages between agenda items are made based on strategic as opposed to operational considerations. Negotiations are not structured in a manner conducive to interfacing between different areas, such as goods and services or intellectual property. The structure is characterized by organizational fragmentation, and negotiations are essentially conducted in parallel.

Although the basic modus operandi has not changed, the GATT and the WTO have not been static. Changes have taken place over time and incrementally within the bounds of existing structures. To some extent, diplomacy has been able to adjust to new challenges. Bilateral tariff negotiations have been gradually replaced by multilateral approaches applying formula-based tariff reductions and sectoral initiatives based on critical mass. A comparable evolution may be observed in negotiations on services, which increasingly rely on sectoral agreements and critical mass.

Negotiations on rule-making have been conducted within structures originally designed for negotiating market access concessions. Up until the Uruguay Round, this proved largely successful. It brought about substantive disciplines within the GATT and the TRIPS Agreement and successfully created a number of side agreements under the GATT. Importantly, the ability to undertake legislative work in between rounds has been used. The agreements on telecommunication, financial services, and information technology following the conclusion of the Uruguay Round are examples of this legislative work. So too is the revision of the TRIPS Agreement, following the Doha Declaration on Health, and the revision of the Agreement on Government Procurement. Yet the pattern to date does not show constant or ongoing legislative work between trade rounds. The WTO is far from a proper legislative process of deliberation and decision-making comparable to law-making processes in domestic law. Legislative accomplishments between rounds are the exception rather than the rule. And auxiliary instruments have not been used, even in response to dispute settlement.

Most significantly, the major reform of the dispute settlement system was not accompanied by changes to the political processes of the WTO. This has resulted in a new relationship between the political and judicial within the WTO. Dispute settlement has evolved while negotiations have stalled. Some have argued that the resulting imbalance necessitates a return to the former non-binding dispute settlement. The impact on sovereignty and the prerogatives of domestic legislators is not supported by the weak legitimacy of the WTO.18 Some have argued that what is needed is a strengthened multilateralism and political process. The proper balance should be achieved through an enhanced political process rather than watering down dispute settlement.19 None of this has happened. Further refining of the DSU, in particular the creation of a professional cadre of panel chairs, a college of standing panellists to draw on, and the ability to remand cases from the Appellate Body to the panel, have not found sufficient support.

A new balance is being sought outside of the WTO. Legislators and domestic courts continue to deny the potential of the direct effect of WTO law and decisions in municipal law and of a more nuanced theory of justiciability, in particular in the United States and the European Union. The imbalance between the political and judicial process within the WTO has facilitated a return to a dualist perspective of international law, delinking international and domestic law.20 Legalization at the WTO is met with de-legalization of international law in domestic fora.

In conclusion, the structures of the GATT and the WTO were shaped at different times, and for a different agenda. They were shaped for a process of periodic tariff reductions and not law-making over time. They adjusted incrementally, but the framework has reached its limits. New structural elements, combining past experience and success with current and future regulatory challenges, must be developed. The debate, which will be taking place after the completion of the Doha Agenda, calls for preparation and discussion. The suggestion here is to work toward a two-tier approach to negotiations and rule-making, incrementally building on past experience and constitutional thought.

II. Toward a Two-Tier Approach

A. Rounds and Permanent Fora of Negotiations

The tradition and success of negotiating tariff concessions and reducing levels of domestic support show that trade rounds have been able to create necessary momentum and political pressure. The same is likely to apply to concessions exchanged in the field of services, albeit experience with services has been far more limited. Both areas are able to respond to diverging needs of progressive liberalization and individualized levels of commitment. Processes based on specific requests and offers depend on a framework that allows for liberalization in cycles. Absent deadlines or periods of intense pressure, tariff and services negotiations could hardly succeed. They depend on give and take and the possibility to achieve overall package deals with regard to benefits and concessions made in what essentially has remained a mercantilist approach.

It is the shift to negotiating disciplines relating to domestic regulation in WTO law that calls for a review of the negotiating process. These matters differ from individualized concessions. Rules are inherently uniform for all Members, independent of levels of social and economic development and market size. It is much more difficult to accommodate individualized needs in setting international standards. These matters are complex, evolve at different speeds, and induce different levels of interest on the part of Members. It is here that an interest in the variable geometry of rights and obligations and membership to instruments arises. Rule-making in WTO law thus should be shaped differently from the process of claims and response in tariff and non-tariff concessions. Ideally, these matters should be dealt with under the agenda of ongoing and continuous work undertaken in different standing fora of the WTO.

The question that arises is whether a dual approach could work or whether ongoing legislation and rule-making inherently depend on pressure and the outcomes of market access negotiations. Would it have been possible to conclude the TRIPS Agreement, or the basis framework of GATS and the TRIPS Agreement, outside the Uruguay Round? While there were few operational linkages, it is evident that they were essentially dependent on the overall dynamics of the Uruguay Round. Thus it is hardly possible to build a two-tier approach on a complete distinction of concessions, on the one hand, and rule-making on the other hand. Account must be taken of the political importance of each agenda item, and rule-making cannot be dissociated from the dynamics of trade rounds. Negotiations on framework agreements, setting the stage for decades to come, are bound to be undertaken within the momentum and drive of trade rounds.

How then can we combine the momentum of trade rounds, the political pressure needed to achieve outcomes, and the need for ongoing rule-making? How can we ensure that basic principles, rules, rights, and obligations are shared by all Members as the core of multilateralism while allowing for differentiation commensurate with levels of social and economic development, and largely diverging economic interests among Members? How do we avoid divergences further increasing, as some will be bound and contained by disciplines curbing protectionism while others opt out and are eventually left behind? How can we avoid the situation that those assuming fewer obligations are taken seriously? What can we learn from past experience?

The definition and allocation of different regulatory fields to different regulatory levels with possibly diverging modes of decision-making is a major challenge. Some may argue that the task is futile as Members will never be able to agree, particularly in a multipolar world with traditions of liberal democracy no longer able to impose its ideals and tenets. Yet these objections cannot and must not prevent academic discourse on the matter. It is only when a number of viable options are on the table that diplomacy may be able to take the matter up and find ingenious compromises during long nights of negotiations. We have not explored these options. Some suggestions are put forward here to stimulate debate.

B. Constitutional and Secondary Rules

WTO law, in line with the tenets of public international law, operates as a single type of international agreement. Whether it is the Marrakesh Agreement establishing the Organization, the GATT with its profound and fundamental principles of non-discrimination, the framework of GATS, or the detailed rules of the TRIPS Agreement, and whether it is an understanding or an agreement implementing particular disciplines relating to GATT, or a tariff or a services schedule, they all are of the same standing and legal nature.21 WTO law does not distinguish different and hierarchical sources of law. They all emerge essentially in the same process, and the mutual relationship of the agreements is a horizontal and often unclear one. Likewise, all the WTO instruments enjoy the same status in domestic law forming international agreements of the same type, whether they are dealt with as treaties or as executive agreements.

The time has come to learn from distinctions of primary and secondary sources of law. While primary or constitutional rules setting out basic obligations and the framework for specialized regimes need to be set in an overall bargaining process having the political momentum of a round, the implementation of certain agreed on matters could be left to a secondary process in between rounds. The distinction is firmly established in domestic law with basic distinctions of constitutional law, legislation, executive orders, and administrative regulation. It is well established in EC law with the distinction of primary law and secondary rules, regulations, and directives.

Different sources of law allow the allocation of different modes of decision-making. In international law, the concept of secondary rules is normally used for decisions and acts adopted by the bodies of an international organization. The same is true for the WTO.22 The concept is used here in a different way. It stands for the proposition of introducing different categories of international agreements within the constitutional framework of a multilateral trading system, without necessarily turning the Organization into a body of supranational law. This approach would allow reducing high-level negotiations to core elements and issues within a package deal, and leaving other issues to subsequent and well-framed negotiations.

Basic agreements set out fundamental rights and obligations of a constitutional nature. They are essential and binding on all Members. Today, they comprise the agreement establishing the WTO, the GATT 1994, GATS, and TRIPS. Tomorrow, it could be limited to a single constitutional WTO Agreement comprising the structure and organization; different sources of law and respective modes of decision-making; basic substantive and procedural obligations, in particular non-discrimination; basic disciplines; exceptions and transparency requirements. Such a single basic agreement would necessarily be binding on all Members of the WTO. Rules on amending the agreement will ensure that it remains a truly multilateral instrument and a single undertaking. Variations among Members, currently pursued by means of largely ineffective special and differential treatment (S&D), could be effected by means of graduation by linking the operation of rules to economic thresholds and indicators of competitiveness of a Member or even of specific industries.23

Specific instruments, on the other hand, could be shaped in the form of secondary rules, subject to the constitutional agreement, and not necessarily binding on all Members. Today these instruments comprise Members’ schedules and plurilateral agreements. Tomorrow, they could extend to agreements and understandings implementing particular concepts set out in GATT 1994. It is here that the single undertaking could be left behind and variable geometry could take over. Combinations of single undertaking and variable geometry are conceivable.24 Solutions may be tailor-made, sometimes binding all Members, sometimes not. Under a new WTO Agreement, different categories of instruments could be created and linked to specific procedures and membership requirements, ranging from single undertaking to bilateral, plurilateral, or unilateral obligations.

Importantly, the structures and experience of differentiation are not unknown to the WTO. The examples of negotiations on financial services and telecommunication, mentioned above, demonstrate this point. While these negotiations were perceived as leftover issues, they could have been prospectively designated as a matter to be addressed based on the results achieved in the Uruguay Round. The GATS called for subsequent negotiations on a number of issues, in particular subsidies and safeguards. Efforts might have been more successful if they could have been deliberately pursued on the basis of variable geometry. The elaboration of new rules on access to essential drugs and the amendment of the TRIPS Agreement can be perceived as an exercise in secondary legislation and treaty reform within a given framework. It is worth considering whether it was necessary to undertake the effort as a matter for all Members, or whether it would be sufficient to include those most concerned. Finally, the process of accession follows a route of individualized commitments.

These traditions could form the basis of a new legislative approach, setting out different and distinct avenues of partly shared and partly distinct rights and obligations among Members. It is conceivable to agree on core rights and obligations and leave others to variable geometry. For example, the TRIPS Agreement could have been limited to fundamental rules but have left the elaboration of more specific obligations to a longer-term and better-informed process. It would have offered the possibility of bringing about graduation instead of uniform rules applicable to all countries, independently of levels of social and economic development. In the future, sectoral negotiations in services and in investment and competition could be conducted on such a basis.

A two-tiered approach built on framework agreements and implementing rule-making would enhance the quality of outcomes at the WTO. It would better serve the learning processes of smaller countries and developing countries, many of which have been unable to follow a large and detailed agenda of negotiations. It would allow graduation and the needs of developing countries to be taken into account. In retrospect, a study could be made to determine whether negotiations on GATT side agreements, implementing specific provisions since the Kennedy Round, did not contain elements of secondary legislation. They were bound to stay within the framework of GATT, but were not binding on all Members, and allowed key problems to be addressed by those most affected. The codes may indicate that the idea of secondary legislation does not exclude variable geometry when it comes to follow-up and detailed rules on a particular subject matter. Such an approach could allow for more graduation than the monolithic approach of the Uruguay Round and the Doha Agenda.

C. Linking by Most-Favoured-Nation and Graduation

Fundamental rules in the constitutional framework will offer the basis for linking results achieved in secondary rules. Importantly, the obligation to grant most-favoured-nation treatment applies to all Members, whether or not signatory to a particular rule of secondary order. The basic philosophy of the multilateral system obliges Members to grant most-favoured-nation status to all other Members, irrespective of whether they adhere to a particular instrument of secondary order. The principle implies free-riding, which needs to be addressed in defining the critical mass of membership required.25

Secondary rules may leave others aside, while granting rights to all third parties representing smaller trade flows in a particular field. Not committing these countries is tolerable from a point of view of conditions of competition. Yet once outsiders reach competitiveness, mechanisms need to be designed in the constitutional instrument to include them. It is here that the concept of graduation is required. While a Member may not form part of an agreement in the first place, it may eventually be obliged to join if certain conditions are met in real economic terms. Members of the multilateral system, therefore, may be eventually obligated to abide by multilateral rules. This prospect should give them the right to determine whether they want to take part in the negotiations in the first place or be prepared eventually to accept the results.

Such an approach is similar to that of plurilateral agreements, in particular the Government Procurement Agreement, while also combined with graduated commitments. A Member would not be entitled to benefit from rights without eventually joining when a certain threshold of competitiveness is reached. This flows from the logic and experience of a truly multilateral system, as opposed to preferential agreements and bilateralism. The approach of working with thresholds defining obligations to join could overcome the inherent weaknesses of variable geometry witnessed under the Tokyo Round Codes.

D. Allocating Different Modes of Decision-Making

The two-tiered approach is meaningful only if it is linked to differentiation in decision-making. There is no compelling need to apply the same decision-making process to all WTO matters. It should be recalled that fundamental reliance on consensus in dispute settlement—a specific mode of decision-making—no longer applies in the process of assessing rights and obligations between two or more Members.

It is thus conceivable to distinguish modes of decision-making in relation to primary and to secondary rules. Primary rules could continue to operate under a rigid principle of consensus, or alternatively with consensus-minus or weighted voting with a particular quorum required, building on existing WTO provisions. Secondary rules could be subject to alternative means, such as consensus based on critical mass or weighted voting. In some instances, voting on the basis of one-vote one-state could be feasible, for example within an executive committee. The two-tiered approach offers the potential to adopt varied strategies of decision-making with respect to basic obligations and of secondary norms. It also allows the adoption of different variants within these categories. A single approach to decision-making must be rejected. Adopting different modes will facilitate finding future agreement on sensitive issues.

1. Consensus

Consensus is the primary mode of decision-making within the WTO. In fact, consensus is the mode of decision-making in a number of international organizations.26 Consensus is based on equal representation of Members under the principle of sovereign equality. States see their interests best defended by consensus diplomacy. It has been most suitable for trade rounds and package deals. Of course, consensus does not imply that Members are of equal importance and weight. Consensus implies an informal system of weighted voting, as powerful Members are able to block consensus more easily than small and medium-sized countries. In essence, it allows large players to block decisions in political processes while the same remedy is available to others only at great political cost. It ascribes power that, in reality, does not exist for most. The recourse to the alleged democratic legitimacy of consensus, stressing sovereign equality, therefore is merely formal and does not offer a true and transparent account of power relations.

In WTO decision-making, the crucial question is whether large Members need to retain veto powers in order to work within the Organization. More precisely, the question is whether single large Members need to be in a position to block the adoption of a particular decision. Realists certainly would say so, as control of international organizations is one of the main motivations for hegemonic powers to participate. Debate is needed to determine whether this rationale is suitable in a multipolar world. Blocking decisions today comes at high political cost and may no longer be a tempting option. Successful decision-making requires coalitions, and blocking may thus be limited to such coalitions. Thus the United States and the European Union jointly, or Brazil and India or China jointly, may be able to block proposals, but none of them could do so in their own right. In other words, the system should adopt a consensus-minus rule.

In positive terms, a principle of consensus-minus could become the core feature of a reasonably stable multipolar world. Consensus-minus will be highly contentious, and its use may be limited to issues of secondary legislation discussed above. While trade rounds and negotiations of framework agreements may continue to depend on consensus, consensus-minus may apply failing consensus in matters of implementing framework agreements and work programs adopted. Again, it is possible to modulate consensus rules for primary and secondary rules, or even within these categories. A new balance for the principle of consensus-minus in dispute settlement could thus be found. Both are forms of decision-making operating on a secondary level and are subject to fundamental agreement and consensus on underlying treaties. Furthermore, consensus-minus may be positively formalized by adopting a system of weighted voting.

2. Weighted Voting

The idea of weighted voting reflects past experiences in the WTO and other international organizations that decision-making based on the sovereign equality of states has not transpired in rule-making. Sovereign equality does not sufficiently respond to existing power relations. If formal voting is to be applied and transparency achieved, voting rights should be shaped in a manner that appropriately reflects the relative importance of Members within a multilateral system. The principle was widely applied in international organizations in the post-war architecture beyond Bretton Woods.27 Weighted voting can be based on a number of criteria such as share of trade, GDP, dependence on foreign trade, and population size. Calculations show that a balanced allocation of voting rights and powers to industrialized, emerging, and developing countries is possible and can be achieved.28

In practical terms weighted voting would implement the principle of consensus-minus, as major powers are not able to block the adoption of a decision on their own. And since decision-making in the WTO is generally a matter of coalition building, weighted voting would also give a voice to medium-sized and smaller Members. It is wrong to reject weighted voting simply based on past experience in the Bretton Woods system.29 There are alternatives available that would render the system reasonably attractive and equitable to all Members alike. Weighted voting can be applied in matters pertaining to primary rules as well as to secondary rules. It also can be used in adopting instruments of limited membership, thus complementing the critical mass approach.

Weighted voting still is generally considered ‘outside the box’ thinking.30 Yet this conclusion has been drawn without careful examination of modalities and the potential to modulate the principle for primary and secondary sources. Moreover, political scientists should look into the benefits of the system for governments seeking to balance competing interests. Results adopted on the basis of weighted voting and in a transparent manner allow governments to concede defeat at home and protect themselves from the pressure to block consensus.

3. Critical Mass

Critical mass is an approach to bring about variable geometry on the level of secondary rules to which all Members need not adhere. Members may agree to negotiate a particular legal obligation provided that the main markets, and thus the main partners, are included.31 The inclusion of key players is a prerequisite while others may abstain. The results of such negotiations are subject to most-favoured-nation, thus all Members of the WTO benefit, even though they do not participate in the agreement and are not subject to its obligations. Past experience with sectoral initiatives in tariff reductions in the Uruguay Round shows that this certainly is a viable avenue for addressing trade concessions. As long as the main markets are included, free-riding by those absent from the agreement is a lesser burden than the risk of failing to achieve agreement under the consensus rule.

The impact of critical mass in rule-making requires careful consideration. There is a risk of creating a variety of asymmetric rights and obligations. It may also encourage parties to abstain, thus avoiding the costs and benefits of locking-in, potentially further widening the gap between those subject and not subject to international disciplines fostering competition. It should be recalled that the main incentive to opt for a single undertaking in the Uruguay Round was to avoid the disadvantages of variable geometry inherent in the code approach of the Kennedy and Tokyo Rounds. The concern could be addressed by defining those areas where critical mass negotiations may take place and those that would be excluded. Again, the two-tiered approach allows different modes of decision-making to be combined and an overall balance to be sought that would render the overall system more flexible.

E. Institutional Issues

Ever since their inception, the GATT and the WTO have worked with flat institutional hierarchies, reflecting their single form of legal undertakings. All Members are represented in the General Council and committees. Unlike most other international organizations, the WTO does not have a formal executive or steering committee with appointed and rotating membership. The steering function is assumed by the informal green room process under the guidance of the Director-General, and by informal conferences of ministers and officials from capitals.32 This informal mode renders access to negotiations a volatile affair except for the main powers. Small and medium-sized economies, let alone the least developed countries, risk being sidelined.33 Members are forced to work within a system of flexible coalitions. The system has worked reasonably well, though it has been criticized for lacking transparency and accountability. Members and domestic constituencies face frustration when omitted from the informal inner circles and excluded from negotiations.

Efforts at institutional reform could be built on a two-tiered approach incorporating various modes of decision-making discussed above. Different bodies could operate on different decision-making processes. Some could continue to operate on the basis of consensus, or consensus-minus (as in the Dispute Settlement Body [DSB]). Some could be subject to weighted voting. Others may be suited to operate under a one-member one-vote model. The powers of ministerial meetings, the council, and committees could be shaped accordingly. The two-tiered approach would allow examination of the potential role of a parliamentary assembly and the assignment of specific functions not only of an advisory nature, but also possibly entailing decision-making powers in an effort to enhance the democratic legitimacy of the Organization.34

Conceivably, a consultative or executive committee could be created, which includes major powers and represents other Members on the basis of their size, geography, and level of development based on rotating membership fixed for a number of years.35 The Executive Committee would need to ensure that all pertinent interests and regions have a voice in decision-making. It could be composed of Members reflecting all regions and levels of development, including least-developed Members. Criticism voiced about previous efforts to create a steering body (G-18) and the difficulties in bringing about effective representation need to be taken into account.36

The Executive Committee could be responsible for preparing major procedural decisions to be taken by the General Council and ministerial meetings. It could decide on issues relating to the agenda of an ongoing round and work on secondary legislation and housekeeping matters, including the appointment of key Secretariat personnel. Some matters could be allocated to the Executive Committee for final determination, while others may be subject to referendum in the General Council. In other areas, the Executive Committee could be limited to providing advice and consultation. Decision-making would be by consensus, but subject to voting, which on this level would allocate each Member one voice of equal importance. Comparative studies may assist in learning from the experience of other organizations, some of which have shown a much higher level of organization and structure than the WTO.

Finally, institutional reform should also address the status and role of the Secretariat.37 Again, the two-tiered approach allows functions to be defined in more specific terms. While it may continue to work under established modes in some areas, its role in others may be defined more precisely commensurate with the legal framework and instrument at hand. Both in the process of law-making and that of dispute settlement, its functions could entail limited powers to take initiatives and defend the common concerns of the multilateral trading system.

III. The Way Forward

A. Formal or Incremental Reform?

The GATT and the WTO were built on experience. The 1947 Agreement was modelled after the bilateral trade agreements of the United States of that era. They provided the basis for an incremental evolution both of the negotiating process and of dispute settlement within a broadly defined framework. The latter emerged in practice and was codified for the first time only in 1979. Decision-making and the structures of rounds evolved in diplomacy and do not find expression in binding legal documents. The powers of the Secretariat depend much more on its expertise and skills than statutorily defined functions and tasks. Perhaps the flexibility offered in past and present structures, and the ease of developing customary practices, amounts to the great strength of the WTO. Its success in bringing down tariff and non-tariff barriers may well be assigned to a structure that allows for trial and error.

We are faced with the question whether reform should continue to take place under this philosophy. Is it possible to adjust to the changing structure of international economic law by changing practices under the current WTO agreements? Suggestions to work with an informal directorate, critical mass, restrictions on veto practices in the tradition of a Luxembourg compromise, enhanced recourse to authentic interpretation of existing agreements, enhancing informal initiatives of the Secretariat, building better relations with other international organizations in daily life, all seem to belong to a philosophy building on incremental change.

Or have we reached the limits in the quest for appropriate structure – substance pairings? Do we need formal reform? Should decision-making be formally reviewed? Should an executive body be established? Should the powers and role of the Secretariat be better defined? Should relations to other international organizations be more formally defined? What measures should be taken to further enhance the transparency of the negotiating process? What is necessary to render legislative responses to dispute settlement decisions a viable option, contributing to a better sharing of responsibilities between the political and the judicial process?

Given the difficulties in reaching agreement, the informal avenue is attractive.38 On the other hand, a deliberate effort to change the rules provides more transparency and is better placed to restore and enhance the legitimacy of the Organization.39 Debra Steger concludes that

the WTO needs major surgery in order to respond effectively to the new political realities in the international economic system. The WTO is not the old GATT, and members should abandon the mantras, myths and misunderstandings that are no longer relevant.40

The idea of a two-tiered approach allows for a wide range of options to be explored and offers a critical mass for negotiations and compromise. Regardless of whether a formal or informal route is to be pursued, it is important to explore possible options from the outset. Most importantly, the goals of a reform must be defined. Whether such reforms are eventually implemented formally or incrementally is a secondary issue. It may be possible to develop a two-tiered approach within the existing framework. Given the effect of WTO rules on daily life, issues of legitimacy, transparency, and accountability are key to the Organization’s future and must be taken into account in designing an appropriate path for reform.

B. Defining the Goals of Reform

Whatever reform routes are chosen, a debate on the goals of reform is imperative in order to secure commonly agreed directions for the multilateral system in a globalizing and multipolar world. It is not simply a matter of redesigning institutions. Legitimacy with regard to transparency and representation in the decision-making process must be prioritized. The goals set forth in the preamble of the WTO remain applicable today in times of globalization. However, they must be bolstered by more specific targets. Answers to substance–structure pairings will depend on specific answers to a host of questions that need to be raised and discussed:

• How can one bring about and secure output legitimacy of rules?

• What is the role of WTO in a world of multilayered governance?

• How can checks and balances against protectionism be attained while allowing for appropriate policy space?

• To what extent should the WTO enjoy enhanced autonomy in supporting these goals?

• How does one properly define the relationship of multilateralism and preferential agreements?

• How does one properly define the relationship with other organizations in a horizontal legal order?

• How does one define the relationship between the WTO and domestic law?

• Should it be entirely left to constitutional law, or is there a shared interest in finding common ground within a doctrine of multilayered governance?

• How does one redefine sovereignty to the benefit of people?41

These are basic questions. They need to be asked. People will have different responses, and so they will adopt different but informed attitudes to institutional reform. Although perceptions may differ, a shared understanding that the quest for appropriate substance–structure pairings cannot take place without assessing and defining the fundamental goals of reform is essential.

C. Launching the Debate

The ideas sketched out above merely indicate that there is room to think about alternative options. All of this requires in-depth studies of options and intensive debate. The debate should clearly be delinked from the fate of the Doha Development Agenda. It is not appropriate to change the rules of the game while gambling is going on. The debate should go past the current round of negotiations, regardless of its outcome. The problems noted above will continue to exist well beyond the current round. A successful conclusion of the Doha round will create the impetus to improve the multilateral system. A failure will create the need to make efforts to save it. The underlying problems remain common to both outcomes.

Further debate on the potential and options for implicit and explicit institutional reform will likely take place in academic circles, which will hopefully inform thinking by governments. At the WTO, it would be feasible to create a standing consultative committee that bridges academia, NGOs, governments, and the Secretariat, essentially assuming the role of a think-tank. In due course, and with a view to preparing post-Doha structures, a standing WTO committee on legal and institutional affairs should be set up, building on the lost traditions of the Committee on the Functioning of GATT (FOG) during the Uruguay Round. The calls of the International Law Association to create such a committee should be taken seriously by capitals. The current state of affairs, the lack of attention and interest paid to issues of decision-making, and structures of decision-making outside the field of dispute settlement is one of the main factors explaining the lack of well-developed options ready for debate.

Notes

1 Thomas Cottier, ‘Constitutional Trade Regulation in National and International Law: Structure-Substance Pairings’, 8 National Constitutions and International Economic Law 409 (1993), at 411; Thomas Cottier, ‘Preparing for Structural Reform in the WTO’, 10 Journal of International Economic Law 497 (2007).

2 WTO, The Results of the Uruguay Round of Multilateral Trade Negotiations: The Legal Texts (Geneva: WTO, 2004) 4.

3 John H. Jackson, World Trade and the Law of GATT (Indianapolis: Bobbs-Merrill, 1969) 788 (stating ‘[i]n the long run, it may well be the machinery that is most important (i.e., the procedures), rather than the existence of any one or another specific rule of trade conduct.’).

4 This is true both for the Sutherland Report and the Warwick Report: Consultative Board to the Director-General Supachai Panitchpakdi, The Future of the WTO: Addressing Institutional Challenges in the New Millennium (Geneva: WTO, 2004); Warwick Commission, The Multilateral Trade Regime: Which Way Forward?, Report of the First Warwick Commission (Coventry: University of Warwick, 2007).

5 International Law Association, ‘Toronto Conference (2006), International Trade Law, Seventh Report of the Committee’, at para 38(b), http://www.ila-hq.org/download.cfm/docid/B8DE7062-B7A2-4BA3-92F38D46C61FA203 (visited 11 March 2009).

6 Transparency Mechanism for Regional Trade Agreements, WT/L/671, Adopted on 14 December 2006..

7 See Doha Work Programme, WT/MIN(05)DEC (22 December 2005), Ministerial Conference Sixth Session, Hong Kong, 13–18 December 2005.

8 See also Peter Sutherland, ‘The World Trade Organization at Ten Years’, 4 World Trade Review 341 (2005), at 353.

9 See World Trade Organization, ‘July 2008 Package: Negotiating Texts and Reports’, http://www.wto.org/english/tratop_e/dda_e/meet08_texts_e.htm (visited 10 March 2009).

10 Ministerial Declaration, WT/Min(01)/Dec/1, adopted 14 November 2001, at paras. 31–32.

11 See also Joost Pauwelyn, ‘New Trade Politics for the 21st Century’, 11 Journal of International Economic Law 559 (2008) (stressing the need for reform of the operating system after 60 years).

12 See Debra Steger, ‘The Culture of the WTO: Why It Needs to Change’, in W.J. Davey and John H. Jackson (eds), The Future of International Economic Law (Oxford: Oxford University Press, 2008) 45–57; Debra Steger, ‘The Culture of the WTO: Why It Needs to Change’, 10 Journal of International Economic Law 483 (2007).

13 Wolfgang Friedman, The Changing Structure of International Law (New York: Columbia University Press, 1964) 365–69.

14 For a detailed account, see Claus-Dieter Ehlermann and Lothar Ehring, ‘Are WTO Decision-Making Procedures Adequate for Making, Revising, and Implementing Worldwide and Plurilateral? Rules?’, in E.U. Petersmann and James Harrison (eds), Reforming the World Trading System: Legitimacy, Efficiency and Democratic Governance (Oxford: Oxford University Press, 2005) 497–502; Robert Wolfe, ‘Can the Trading System Be Governed? Institutional Implications of the WTO’s Suspended Animation’, The Centre for International Governance and Innovation, Working Papers No. 30 (September 2007), http://www.cigionline.org (visited 10 March 2008); Andreas Ziegler and Yves Bonzon, ‘How to Reform WTO Decision-making? An Analysis of the Current Functioning of the Organization from the Perspectives of Efficiency and Legitimacy’, NCCR Working Paper 2007/23 (May 2007).

15 For a survey of WTO coalitions, see Wolfe, ibid, at 46.

16 See Debra P. Steger, ‘Mini-Symposium on Transparency in the WTO’, 11 Journal of International Economic Law 705 (2008).

17 There is a wide literature on the political functioning of the GATT and the WTO; for a survey, see Thuo Gathii, ‘The High Stakes of WTO Reform: Behind the Scenes at the WTO: The Real World of Trade Negotiations’, 104 Michigan Law Review 1361 (2006) (reviewing Fatoumata Jawara and Aileen Kwa, Behind the Scenes at the WTO: The Real World of Trade Negotiations—The Lessons of Cancun [London: Zed Books, 2004]); Robert Wolfe, ‘Informal Political Engagement in the WTO: Are Mini-Ministerials a Good Idea?’, in J.M. Curtis and Dan Ciuriak (eds), Trade Policy Research 2004 (Ottawa: Minister of Public Works and Government Services, 2004) 27–91.

18 In particular see Claude Barfield, Free Trade, Sovereignty, Democracy (Washington, D.C.: AEI Press, 2001).

19 See Ehlermann and Ehring, above n 14; Thomas Cottier and Satoko Takenoshita, ‘The Balance of Power in WTO Decision-making: Towards Weighted Voting in Legislative Response’, 58 Aussenwirtschaft 171 (2003); Thomas Cottier and Satoko Takenoshita, ‘Decision-making and the Balance of Powers in WTO Negotiations: Towards Supplementary Weighted Voting’, in Stefan Griller (ed), At the Crossroads: The World Trading System and the Doha Round (Vienna: Springer, 2007) 181–231.

20 This in particular can be observed in the case of the European Court of Justice which, unlike U.S. courts, is not legally barred from applying WTO law in a domestic context: see Geert A. Zonnekeyn, Direct Effect of WTO Law (London: Cameron May, 2008).

21 Petros C. Mavroidis, ‘No Outsourcing of Law? WTO Law as Practiced by WTO Courts’, 102 American Journal of International Law 421 (2008), at 427.

22 Ibid, at 429.

23 Thomas Cottier, ‘From Progressive Liberalization to Progressive Regulation’, 9 Journal of International Economic Law 779 (2006).

24 Pierre Sauvé and Craig Van Grasstek, ‘The Consistency of WTO Rules: Can the Single Undertaking Be Squared with Variable Geometry?’, 9 Journal of International Economic Law 837 (2006), at 851 ff.

25 Manfred Elsig, ‘WTO Decision-Making: Can We Get a Little Help from the Secretariat and the Critical Mass?’ in this volume.

26 This is not unique to the WTO; see Erica Gould, ‘When Do IO Voting Rules Matter?: A Comparative Analysis of International Organizations’ Formal Decision-Making Rules’, draft paper November 2007 (on file with author) (summarizing that formal rules are applied to unimportant matters only).

27 See Stephan Zamora, ‘Voting in International Economic Organizations’, 74 American Journal of International Law 566 (1980); cf. Debbie A. Efraim, Legal Aspects of International Organization: Sovereign (In)equality in International Organizations, vol. 34 (New York: Springer, 2000).

28 See Cottier and Takenoshita, ‘The Balance of Power in WTO Decision-making,’ above n 19.

29 Cf. Hector R. Torres, ‘Reforming the International Monetary Fund—Why Its Legitimacy Is at Stake’, in Davey and Jackson (eds), above n 12, 5–22; Frank J. Garcia, ‘Global Justice and the Bretton Woods Institutions’, in ‘Global Justice and the Bretton Woods Institutions’ 10 Journal of International Economic Law 461 (2007); Richard N. Cooper and Edwin M. Truman, ‘The IMF Quota Formula: Linchpin of Fund Reform’, Policy Briefs in International Economics, No. PB07-1 (February 2007), http://www.iie.com/publications/pb/pb07-1.pdf (visited 10 March 2009).

30 See, for example, Peter Norgaard Pederson, ‘The WTO Decision-Making Process and Internal Transparency’, 5 World Trade Review 103 (2006), at 131; Sutherland, above n 8.

31 Elsig, WTO Decision-Making.

32 Wolfe, above n 14.

33 Oxfam, ‘Institutional Reform of the WTO’, Oxfam Great Britain Discussion Paper, March 2000, http://www.oxfam.org.uk/resources/policy/trade/downloads/wto_ reform.rtf (visited 10 March 2009).

34 See Markus Krajewski, ‘Democratic Governance as an Emerging Principle of International Economic Law’, Society of International Economic Law Conference, Geneva, 15–17 July 2008, http://www.sielnet.org/Default.aspx?pageId=160208 (10 March 2009).

35 A consultative board is suggested by Richard Blackhurst and David Hartridge, ‘Improving the Capacity of WTO Institutions to Fulfill their Mandate’, in Petersmann and Harrison (eds), above n 14, at 454–67; Jeffrey Schott and Jayashree Watal, ‘Decision-making in the WTO’, in Jeffery J. Schott (ed), The WTO After Seattle (Washington, D.C.: Institute for International Economics, 2000) 283–91.

36 See Kent Jones, ‘Regionalism and the Problem of Representation in the WTO’, 19 September 2007 (on file with author) (discussing underlying agency problems).

37 The role of the Secretariat is explored in Manfred Elsig, ‘The World Trade Organizations’ Bureaucrats: Runaway Agents or Masters’ Servants’, NCCR Trade Regulation, Working Paper No. 2007/19, online: <http://www.nccr-trade.org/nccr-publications/10.html>; Robert E. Hudec, ‘The Role of the GATT Secretariat in the Evolution of the WTO Dispute Settlement Procedure’, in J. Bhagwati and M. Hirsch (eds), The Uruguay Round and Beyond: Essays in Honour of Arthur Dunkel (New York: Springer, 1998) 101–20. Cf. John Odell, ‘Chairing a WTO Negotiation’, 8 Journal of International Economic Law 425 (2005).

38 Such as the conclusion reached by Ehlermann and Ehring, above n 14.

39 Pauwelyn, above n 11; Krajewski, above n 34.

40 Steger, above n 12.

41 See John H. Jackson, Sovereignty, the WTO, and Changing Fundamentals of International Law (Cambridge: Cambridge University Press, 2006).

4
WTO Decision-Making: Can We Get a Little Help from the Secretariat and the Critical Mass?

MANFRED ELSIG

I. Introduction

The current design of the international organization system regulating the world economy was conceived by a small group of experts and politicians from the United States and Great Britain in the early 1940s. The mandates and principles guiding the World Bank, the International Monetary Fund, and the envisaged International Trade Organization were inspired by Keynesianism and embraced by British and U.S. economists and high-ranking civil servants. These ideas also resonated well within the political establishments across the transatlantic community.1 Two explanations, in the form of necessary conditions, for the genesis of the global economic architecture have been advanced: first, the existence of a ‘constitutional moment’ after the end of World War II; and second, the presence of a liberal hegemonic power to provide for an open and stable trade and monetary regime.2 Today, the creation of new international organizations is rare despite the opening of a new constitutional moment of liberal orientation after the end of the Cold War.3 Not only is the establishment of new international organizations costly, but there exists already a multitude of institutions that claim (sometimes competing) regulatory authority over just about all policy issues. Abandoning non-performing international organizations is also difficult.

Thus internal reform is the most likely observed outcome when thinking about reforming international organizations. However, redesigning the rules governing existing international organizations presents a number of challenges. The power of the status quo stands out as a particular problem.4 First, actors have learned and adapted to decision rules over time, allowing them to navigate the system efficiently given the opportunities and constraints of existing rules. This leads, in many cases, to the development of a substantial degree of ‘loyalty’ toward existing rules and resistance to change.5 Second, from the field of psychology, we also need to take seriously the argument that actors are more likely to defend existing practices and are relatively risk-averse when it comes to new modes of decision-making where outcomes are hard to predict. Thus actors seek a high degree of certainty that post-reform governance models will not lead to pareto-inferior outcomes as measured in procedural and outcome influence. Third, powerful nations hold a veto on the issue of redesign. If they are satisfied with the status quo, the contra-factual case that they will profit from design change is most likely the hardest challenge to be faced in reform activities.

This chapter discusses two reform suggestions related to improving decision-making within the World Trade Organization (WTO). These proposals have been promoted in two recent reports that discuss the future of the WTO. The first (the Sutherland Report) advocates inter alia a stronger role for the WTO Secretariat.6 The second (the Warwick Report) endorses a critical mass approach to decision-making.7 This chapter explores both proposals further with a view to improving and streamlining decision-making within the WTO. Selected evidence from current and past practices in European Union (EU) decision-making is discussed for the purpose of comparison across IOs (international organizations). The chapter is organized as follows. First, some reflections related to reforming the current system are presented. Second, a more prominent role for the WTO Secretariat in negotiations is discussed as well as new decision-making rules. Third, alternative decision-making approaches leading to variable geometry (in particular ‘critical mass’) are analyzed. The chapter concludes with a note on challenges that may influence future discussions on reform in the context of the multilateral trading system.

II. Reflections on Reform

A. The Need for Reform

In recent years, international organizations have been subject to intensified scrutiny from an ever-growing number of stakeholders. Many IOs suffer from poor performance and appear insufficiently equipped to deal with 21st-century challenges. The causes of underperformance, however, are not only found within the organizations, but largely emanate from conflicting interests of the members delegating to international organizations. In the case of the WTO, this is borne out by the lack of timely responses to new challenges and general difficulties in finding consensus on further liberalization of markets and designing new rules to govern the world economy.

Early liberal contributions in the international relations literature analyzed various ways international organizations help overcome obstacles to cooperation.8 However, the nature of cooperation and the urgency of internationally agreed policy responses to the challenges of globalization have changed over time. In today’s world, international organizations need to provide services beyond the general functions attributed to them in the past. These functions have included the lowering of transaction costs and information asymmetries as well as the enhancement of compliance. International organizations are increasingly being called on to engage in positive integration and harmonization initiatives that differ from traditional attempts to coordinate policies and find mutually acceptable domestic practices and standards. In addition to increased attention paid to performance, existing power structures behind international organizations have moved farther into the public and scholarly spotlight. In this respect, the institutional capacity of international organizations to control abuses of power by leading states within the system is increasingly being assessed.9 Alongside this notion of creating accountable international organizations, the broader concept of legitimacy receives continued attention.10

The WTO offers one of the most legalized multilateral platforms for dispute settlement. The dispute resolution system has had some success in controlling arbitrary discrimination, but owing to the nature of international politics it is not feasible to eliminate the asymmetry of power completely.11 Despite its shortcomings, the performance of the new Understanding on Rules and Procedures Governing the Settling of Disputes (DSU) has been widely assessed as positive in overcoming key deficiencies of the General Agreement on Tariffs and Trade (GATT)–type diplomacy in resolving trade disputes.12 However, the institutional architecture of the WTO’s legislative branch, the negotiation platform, has not kept up with the redesign of the litigation apparatus during the Uruguay Round negotiations, resulting in institutional imbalance within the WTO.

B. WTO Reform in Perspective

In approaching WTO reform, four introductory remarks follow to put reform proposals into a wider perspective of institutional change. First, reform projects can take various forms. The most likely reform type is incremental in nature and is characterized by small and modest steps to accommodate some of the pressures from outside and within the system. Examples of this type of incremental change include the modification of informal processes, practices to increase transparency, and granting greater access to a larger group of Members to allow them to participate in restricted deal-breaking negotiation circles (e.g., the Green Room). A number of initiatives to modify informal decision rules followed the failure of the Seattle Ministerial in 1999. These ad hoc measures focused on issues of transparency and participation.13

In contrast to incremental reform steps, package deals are more likely to lead to substantial redesign. Big reform steps are usually part of horse-trading deals that lead to (difficult to anticipate) design changes. As the Uruguay Round results indicate, grand institutional redesign is easier to carry through as part of a ‘single undertaking’. Against this background, it is interesting to note that WTO Members have excluded negotiations on decision-making rules in the current Doha Round. This reluctance to engage with design change also speaks for WTO Members’ lack of interest in tackling governance issues.14 In the words of a long-time panellist and former ambassador ‘the members are like elephants: they are ponderous and are resistant to change’.15 Governance issues usually do not figure prominently on the agenda at the onset of a trade round. It is not surprising that the reform of the DSU was introduced only in the second half of the Uruguay Round negotiations. In light of the GATT/WTO negotiation history, the hope that the inter-round period will be utilized to work on governance reforms corresponds to turning a blind eye to redesign.

Second, dominating paradigms are difficult to change. Paradigms serve various functions. They are often constructed, advanced, and defended by the powerful insiders of a system and by those who expect to profit from the status quo.16 As a consequence, impetus for reform needs to develop from outside the inner circles of international organizations. Three paradigms have become central to the WTO: the ‘member-driven’ nature of the Organization, the consensus principle, and the ‘single undertaking’.17 The perception of many WTO Members is that these paradigms serve their interests and thus they are reluctant to engage in debates over change. In other words, a type of mental ‘decision-making trap’ has been created.18 This chapter critically addresses above paradigms and builds an alternative approach that could assist in resolving the current impasse in WTO decision-making.

Third, the WTO is not an institution sui generis. Thus this chapter advocates learning from other IOs and suggests a comparative perspective on decision-making. As the WTO is one of the most legalized international organizations, this chapter encourages comparison with the most advanced IO in global governance: the EU.19 Therefore, when discussing reform proposals, selected lessons from EU integration are introduced into the analysis.

Fourth, there is no such thing as an optimal decision-making system in any polity. Value judgments largely depend on the political theory that underpins the analysis.20 Whereas some mechanisms might score well on the input side (i.e., access, transparency, and intensive and non-hierarchical deliberation), other decision-making tools might score better on the output side (i.e., delegation, closed negotiations, qualified majority voting). In addition, increasing input legitimacy could improve overall acceptance by stakeholders but might not translate into output legitimacy (e.g., performance). Any detailed reform discussion calls for a dynamic assessment of the potential effects on input and output legitimacy, as well as important trade-offs between the two.

III. Additional Help from the Secretariat

A. The Current Role of the Secretariat

The Warwick Report was largely silent on the function of the WTO Secretariat. In contrast, the Sutherland Report elaborates on the role of the Director-General and the WTO staff in a chapter dedicated to this topic (Chapter IX). The report refers to a type of malaise; the Director-General acts more as an international spokesperson and marketing executive than as an important player in the negotiations. In addition, the lack of intellectual input from the Secretariat and the Deputy Directors-General is lamented. Further exploration of the optimal use of advice, expertise, and deal-brokering capacities is suggested. In the view of the Sutherland Report, the WTO system suffers from ‘a proliferation of back-seat drivers, each seeking a different destination, with no map and no intention of asking the way’.21 In conclusion, the report calls for a new institutional voice and the establishment of a true guardian of the treaties by clarifying the poorly defined roles of the Director-General and the WTO Secretariat.22

The weak role of the Secretariat in multilateral trade negotiations has to be read in conjunction with the ‘member-driven’ nature of the WTO. Evidence indicates that the role of the Secretariat in the negotiation processes has decreased over time.23 Active membership, an increase in the average size of trade missions, more attention paid to trade negotiations, and a greater number of services offered by the Geneva advisory community has weakened the role of the Secretariat in negotiations. At the same time, the reluctance of Members to delegate powers to the Secretariat has not changed. The growing dominance of WTO Members might also be a reflection of increasing attention being paid to controlling international organizations’ outcomes more generally. However, ‘member-driven’ governance creates costs that are often underestimated.24 These ‘sovereignty-related costs’ need to be weighed against the benefits of delegating greater responsibility to the Secretariat and potential delegation costs such as the abuse of the Secretariat’s autonomy.

B. Strengthening the Secretariat

There are various ways to empower the Secretariat. One option would be to formally increase the role of the Director-General and the Secretariat in managing negotiations to achieve similar standards to those that applied in the pre-Doha era. This would be a move in the direction suggested by the Sutherland Report:

The Director-General and Secretariat should have the capacity and the standing to be at the centre of negotiations during Ministerial meetings. Deputy Directors-General and divisional Directors should work alongside facilitators throughout the proceedings.25

This option could be further enhanced by asking the senior officials to become more involved in the negotiations by chairing certain committees, which was a practice in previous trade rounds.26

A more radical approach to strengthening the Secretariat within decision-making would consist of transferring agenda setting prerogatives to the Director-General. What would be the rationale of arming the Director-General with such powers? The Doha Round has become bogged down in a peculiar version of the ‘endless cycling’ dilemma. In the absence of any clear institutionalized agenda setting, parties constantly table proposals.27 The current WTO system follows opaque processes leading up to a flow of negotiation texts that eventually form the basis of final negotiations. There is insufficient transparency as to the role of various actors in agenda setting. Most often, texts emerge from discussions in informal negotiation groups. Throughout the process, the chair (a representative of a Member State) with the help of the Secretariat steers the process by tabling ‘non-papers’ to Members. In these papers, the chair attempts to exclude certain items from the negotiation list and to specify key issues to be resolved. Only toward the end of negotiations, when signals from Members become explicit, will the chair table formal negotiation texts. Thereafter a complex system of bargaining dynamics emerges: additional concessions are exchanged and linkages created, and the pressure to obtain a final result mounts. This is the time when the Director-General is usually asked to provide some compromise formula.

One way to overcome endless cycling within a complex system of decision-making is to streamline decision-making procedures by allocating agenda-setting power to an elected group (e.g., a new form of the Consultative Group of 18) or a supranational actor (e.g., Secretariat, Director-General).28 This chapter advocates strengthening the role of the Director-General and the Secretariat. WTO Members should grant more responsibility to these supranational actors by delegating agenda-setting powers in the context of the negotiations.

C. Complementing the Secretariat’s Powers: Reforming Decision Rules

An additional step to complement shifting agenda-setting prerogatives would be exploring means of moving away from the consensus principle and abandoning the single-package approach. These are difficult ‘cultural’ hurdles to overcome, as the consensus principle and the single undertaking have received near universal support from WTO Members in recent years.29 However, reform would not require a giant institutional change, as there are already provisions in the WTO Agreements that allow for certain decisions to be taken—if consensus fails—under different modes of qualified majority voting.30

Inspiration for greater delegation of authority to the WTO Secretariat and differentiated decision rules can be found by looking to the experiences of the EU. European Union decision-making in many regulatory fields is characterized by a two-step approach.31 Translating this mechanism to the WTO, the Secretariat would table proposals based on the input of the WTO Members in the various committees that serve an advisory function. These proposals should not reflect the median of all positions formally and informally communicated, but the Secretariat would balance the vital interests of the Members and represent systemic interests that are supranational in character. As a second step, these proposals would be discussed and deliberated on by the General Council or other specialized committees and accepted or rejected based on a qualified majority voting procedure.

The one-state-one-vote model needs to be revisited, as it does not reflect the fact that states are diverse in size, leadership, and capacity to offer market access to other parties. The current system, with its small group negotiations, already recognizes a hierarchy among states within the international trading system. A qualified majority voting system would only formalize the existing hierarchy and tackle the current ‘organized hypocrisy’.32

While moving toward a qualified majority voting system could be an objective, it seems obvious not all areas demand the same voting thresholds. Decisions on interpreting provisions of the Customs Valuation Agreement should be treated differently from negotiations on new rules that intrude into national cultural and societal environments. In addition, Members should not engage individually in painstaking regime management issues, such as micromanaging budgets or constraining research activities. They should be encouraged to decide by qualified majority voting to delegate more autonomy to the Secretariat. Delegation could be accompanied by new oversight mechanisms such as reporting requirements or establishing an independent evaluation office.

The history of U.S. trade policy in the late 1920s and early 1930s illustrates the costs of Congress controlling and micromanaging trade policy.33 This eventually led to pressure to delegate on an ad hoc basis more power from Congress to the president.34 The internal EU debate on allocating competence between member states and the Community to ‘negotiate trade’ is also instructive in understanding drivers for change.35 While qualified majority voting had been the dominant approach in negotiations related to trade in goods since the inception of the Community’s trade policy, the modes of decision-making related to other trade issues (i.e., services and intellectual property rights) gradually shifted over time from unanimity to qualified majority voting. Two key factors have led to increased delegation and strengthening of Community competence: the increasing number of EU members and the growing need to provide leadership within the trading system.36 Today’s challenges for the WTO as an organization can be viewed in a similar light.

Finally, to accommodate concerns related to sovereignty transfer, increased delegation to the Secretariat must go hand in hand with additional ‘on the spot control’ by Members. The suggestion by the Sutherland Report to convene yearly meetings among ministers to resolve certain issues and, if necessary, engage in horse-trading, as happens in the EU during council meetings, would be an additional control mechanism to sell ‘more delegation’ at home.

IV. Variable Geometry and Critical Mass in the GATT/WTO

The idea of using variable geometry approaches is not new in the GATT/WTO context. In order to discuss different techniques of variable geometry, a distinction is usually suggested between three types of differentiated membership schemes: special and differential treatment for certain groups of developing countries, plurilateral agreements, and critical mass agreements.37 The focus below will be on the latter two forms of variable geometry. It is argued that the sharp distinction between critical mass (as discussed in the Warwick Report) and plurilateral agreements should be reconsidered. The following section suggests paying more attention to welfare-enhancing effects of cooperation and the consequences of various incentives to free-ride.

A. The Plurilateral Experience

A variable geometry approach received lukewarm approval in the Sutherland Report. In this context, the authors explicitly referred to plurilateral approaches. The report states:

[T]here should be a re-examination of the principle of plurilateral approaches to WTO negotiations. This should pay particularly sensitive attention to the problems that those not choosing to participate might face. Further, the approach should not permit small groups of members to bring into the WTO issues which are strongly and consistently opposed by substantial sections of the rest of the membership.38

There have been mixed experiences with so-called plurilateral agreements. These agreements by nature exempt non-members from most-favoured-nation benefits.39 Two stand out: the Agreement on Government Procurement (GPA) of 1996 and the Agreement on Trade in Civil Aircraft of 1980.40

The support for the creation of the plurilateral GPA largely developed within the Organization for Economic Co-operation and Development (OECD). The agreement was first designed as an optional code during the Tokyo Round negotiations.41 Unlike other codes, however, public procurement was not taken up in the ‘single undertaking’ exercise of the Uruguay Round. While key developing countries attempted to move the issue onto the multilateral agenda, existing parties to the agreement were skeptical. They feared lack of progress by including all Members and opted for a separate agreement, which led to significant amendments and extensions of the existing agreement.42 The GPA brought about considerable cooperation and market opening and produced aggregate benefits for the signatories. However, it has not been successful in attracting new members.43

More recently, the existing plurilateral public procurement agreement has been supplemented by two multilateral initiatives: first, preparatory work on transparency in procurement practices; and second, multilateral negotiations on public procurement of services. Neither initiative has made much progress.44 Advancement in the negotiations has been ‘hampered by the somewhat schizophrenic manner in which WTO Members have approached the subject, with calls for the development of multilateral disciplines for services procurement sitting alongside existing plurilateral disciplines […] as well as calls for a set of multilateral rules on transparency and due process in public purchasing.’45 In August 2004, the council agreed that the issue of transparency ‘will not form part of the Doha Work Programme and therefore no work towards negotiations […] will take place within the WTO during the Doha Round.’46

The other plurilateral agreement still in existence is the Agreement on Trade in Civil Aircraft. It was the ‘only sector-specific agreement covering a manufactured product that was successfully negotiated in the Tokyo Round.’47 However, it suffered from disputes related to subsidies in markets largely characterized by oligopolistic structures. Both plurilateral agreements have attracted only a small membership. The sponsors include countries that have highly competitive producers and service providers in the sectors concerned. Owing to the lack of competitiveness of non-participants, these plurilateral agreements do not pose a significant most-favoured-nation concern, nor an issue of free-riding, which will be discussed below.48

B. The Warwick Version of Critical Mass and the Tokyo Codes

The Warwick Report has pushed the idea of variable geometry by introducing its version of critical mass decision-making. The authors of the report argue that ‘we have a clear precedent from the Tokyo Codes on standards, import licensing, anti-dumping, subsidies and countervailing measures and customs valuation’ as ‘negotiated outcomes relying on critical mass for their acceptance have been applied on a MFN basis’.49 They refer to a decision of 29 November 1979 adopted during the Tokyo Codes adoption period.50 Thus the authors argue that the logic of critical mass was applied during the Tokyo Round negotiations, but they do not elaborate further on the lessons learned. A cautionary reading of automatic most-favoured-nation extension in relation to the Tokyo Codes is warranted.

Whereas GATT membership increased in the 1970s and nearly 100 members were engaged in the Tokyo Round negotiations, only a small group, driven mostly by the United States and the European Community, were actively involved in negotiations of the Tokyo Codes.51 The negotiations were organized in a manner resembling a top-down pyramid shape.52 First, negotiations proceeded within bilateral (U.S.–EC) and small-group settings (U.S., EC, Japan, and Canada: also called the Quad). Second, after initial agreement among these groups, the dominant actors attempted to multilateralize the results by offering some concessions to other potential parties to the agreements.53 The codes, however, were not the priority issue for developing countries.54 During the Tokyo Round, developing countries were focused on promoting a development agenda and pushed for special treatment in more systematic ways. Toward the end of the negotiations, some developing countries became more engaged in the codes negotiations, but the concessions offered by the key actors were perceived as too vague and as failing to fulfil the objectives of the Tokyo Declaration.55

On the process side, developing countries lacked the means to participate and lamented the failure to achieve a multilateral character. As one trade expert noted, ‘smaller industrialized countries also complained bitterly about the lack of multilateralism, though they still accepted the results’.56 The key deals were struck between the United States, the European Community, and Japan. In other words, the critical mass was very small during the negotiations on non-tariff barriers. In total only 17 members signed the process-verbal, which represented the formal acceptance of all the results.57 This of course represented a political and a legal problem of ‘how to integrate the Tokyo Round accords into the GATT legal framework in the context of a political process that had left the majority of the GATT membership frustrated and alienated’.58

Did the codes extend most-favoured-nation to non-signatories? The Warwick Report suggests that the Tokyo Codes negotiations applied such a logic characterizing a critical mass approach. However, a closer analysis of the negotiating history shows that this is far from clear. The declaration that launched the Tokyo Round and wording from the final negotiations suggest that these codes applied without discrimination to non-members.59 At the same time, the notion of ‘conditional most-favoured-nation’ was widely accepted. Non-signatories were, to some degree, denied benefits originating from the codes, including the rights to participate equally in the committees to implement the codes. Winham writes:

[I]n two cases—the government-procurement and subsidy/countervail codes—the substantive benefits of the agreements were intended to apply only to signatories. For example, the access to government tendering which was extended in the former code was available only to firms in other signatory countries, while on the latter code nations like the United States made the injury test in countervail procedures contingent on the acceptance by other countries of the code’s disciplines on subsidies.60

Thus the fine line between a plurilateral and a critical mass approach is difficult to draw here. Some codes could be labeled a partial critical mass. As most-favoured-nation extension was far from obvious, the parties were left in limbo as to the exact risks of discriminatory treatment.

C. The Post-Uruguay Round Sector Agreements

The idea of critical mass emerged again during the sector negotiations on trade in services after the Uruguay Round. The sector agreements represented initiatives to liberalize markets.61 Can we learn any lessons from these agreements that seem to have followed the critical mass approach? Three stand out: the Information Technology Agreement, the Basic Telecom Agreement, and the Financial Services Agreement.62

First, there is a north–south pattern of membership (similar to that for the plurilateral agreements and the codes). These agreements offer sector market opening for products of great interest to industries in highly developed countries, and active membership is so far largely limited to OECD countries. In the case of the Information Technology Agreement, there is evidence that Quad interests in particular had been reflected. In this respect, a strong push came from a G7 Ministerial Conference on the global information society.63 Individual firms and industry associations representing the knowledge and financial services industries lobbied hard for improved market access. In particular, the U.S. government showed great interest in these agreements, particularly the financial services agreement. In contrast, developing countries faced strong domestic political constraints, feared increasing liberalization in vulnerable sectors, and were hampered by their lack of competitiveness. Participation increased because of the differentiated levels of commitments for developing countries and the perception of many Members that they would have to sign the agreements to attract foreign direct investments.

Second, there was an implicit (and in the case of the Information Technology Agreement explicit) understanding that agreements need to attract a sufficient number of producers or service providers in order to function properly.64 Leading negotiators strategically signalled exemptions if other key actors did not make sufficient commitments. The Basic Telecom Agreement negotiations were deadlocked in 1996, and the U.S. representatives lamented that the offers on the table were still inadequate ‘in part because the required “critical mass” of membership (to prevent free-riding) had not been achieved’.65 In their assessment of the Basic Telecom Agreement, Hoekman and Kostecki further stress, slightly euphemistically, that ‘additional time allowed a number of developing countries to improve their offer’.66 The story has been similar in the financial services negotiations, in which the United States (and other countries) signalled in 1995 that they would not improve their commitments and would take broad most-favoured-nation exemptions based on reciprocity should others not reconsider their offers.

Third, further work following initial successes has been very difficult, calling into question the sustainability of these initiatives over time. With respect to the Information Technology Agreement, various attempts to enlarge product coverage failed. In most sector initiatives, there was a strong push for market opening among leading service providers. However, the momentum generated in the mid-1990s lasted only a short time. In addition, liberalization of financial services sectors was affected by the East Asian financial crises in the second half of the 1990s and has recently made no tangible progress.

D. Critical Mass: Most-Favoured-Nation and the Incentives to Free-ride

The Warwick Report discusses critical mass related to market access and rules, and refers mainly to the post–Uruguay Round sector negotiations.67 In addition, the report lists certain criteria that should be observed when relying on a critical mass approach. In sum, the Warwick Report demands that results of critical mass negotiations not affect ‘the existing balance of rights and obligations’ and that the rights acquired by the signatories ‘shall be extended to all Members on a non-discriminatory basis, with the obligations falling only on signatories’. Thus the report shares the view that critical mass and non-discrimination (extending most-favoured-nation to non-participants) go hand in hand. The report contains some mixed signals: while an existing but not often used decision-making procedure is promoted, the report attaches onerous conditions for pursuing a type of variable geometry. By explicitly referring to unconditional most-favoured-nation when using critical mass, the report might have even gone beyond the status quo. It remains puzzling why the Warwick Report excluded the potential of plurilateral agreements from its analysis and did not pay more attention to the rich history of codes negotiated during the Tokyo Round and the post–Uruguay Round agreements. In any case, a dogmatic view of most-favoured-nation as advocated in the report’s proposals could turn out to be a non-starter as future initiatives will be constrained from the outset.

Instead of using a dichotomous distinction based on most-favoured-nation, greater focus should be placed on the benefits of cooperation and on the free-riding incentives that differ from sector to sector and between market-opening and rule-making.68 Free-riding not only might affect the outcomes of the negotiations but also exhibits spoiling capacities throughout the negotiations.

What are the free-riding effects related to different regulatory schemes and various liberalization efforts to increase market access in goods and services? There is variance as to the free-rider incentives prevalent in regulatory or market-liberalizing cooperation. The incentive structure for those participating (and abstaining) in critical mass negotiations appears different. If some leading trading nations agree to increase generic standards through a critical mass approach, they will anticipate the effects of the most-favoured-nation extension clause. It is to be expected that parties will negotiate in the shadow of the market power of the non-participants.69 Participants need to have a sort of safeguard that allows them to take measures against abuse of free-riding (as witnessed in the ITA and financial services cases).70 If this is not the case, critical mass agreements will likely be limited in scope and effect.71 Free-rider issues affect the degree of integration and cooperation as witnessed by the existence of various levels of commitments. In other words, Members need to receive some benefits of cooperating beyond existing rules.

These incentives are even more applicable to market-opening strategies, where countries are even more critical about free-riding (e.g., lowering reciprocal tariffs in medical devices or environmental goods if other important exporters abstain from joining the critical mass and continue levying higher tariffs). In these cases, the free-riding effects might be even more direct and transparent than in cases related to rules or generic standards (e.g., health provisions or environmental standards).

What flows from the above is the suggestion to revisit a dogmatic stand on most-favoured-nation extension. To attach too many conditions discourages solutions in the WTO context and further shifts these issues to bilateral or regional trade arrangements. What is important in designing rules for the application of critical mass is creating incentives for non-members to join. There should be no additional strings attached. The general procedures for accession to the WTO have set a bad precedent in this respect as joining the agreement becomes burdensome due to the need to make bilateral deals with all members.

E. The EU Experience with Enhanced Cooperation

The concept of variable geometry has been debated in the field of EU integration studies for quite some time. However, it remains disputed whether variable geometry in the EU context is a temporary deviation from a uniform ideal or has more permanent features.72 In the former interpretation, variable geometry is perceived as a dynamic approach whereby a handful of members integrates faster. Those engaging in additional cooperation are perceived as ‘avant-gardist’ or part of ‘core Europe’ in a multi-speed community.73 Participation in integration projects (e.g., in the common currency zone) allows for some type of club benefits.74 The decision on non-participation is related mainly to sovereignty concerns as governments acknowledge the functional logic of further integration, but are constrained by domestic politics. This concept is different from ‘Europe à la carte’.75 In the EU context, the British opt-out from social policy (differentiation in the so-called social protocol in the Maastricht Treaty) comes to mind. This exception seems more a long-term opt-out following the ‘à la carte’ logic. This type of laggard strategy by some members slows deeper integration efforts by other members.76

Overall, there are few empirical cases of differentiated integration in the EU (e.g., Schengen regime, Western European Union, common currency). Nevertheless, debates on how to deal with variable geometry in more systematic ways have increased in recent years. During intergovernmental conferences, EU members have attempted to spell out more clearly the conditions under which variable geometry should proceed.77 A new concept that came up in the second half of the 1990s has been the mechanism of ‘enhanced cooperation’.78 The Amsterdam Treaty has described the mechanism as a last resort that can be triggered ‘when (the Council) has established that the objectives of such cooperation cannot be attained within a reasonable period by the Union as a whole’. The idea was to find an institutional answer to the growing heterogeneity among EU member states in view of enlargement. Existing members anticipated additional pressures for flexibility mechanisms to follow the examples of Schengen and the Euro. The majority of countries aspired to control for future differentiation (and groups cooperating outside the legal system, such as the Schengen regime) by channelling new initiatives through the EU’s institutional framework.79 However, the specific obligations attached to applying ‘enhanced cooperation’ were hindering its use, such as the last resort condition, the high threshold for initiating the process, and the minimum number of members to be included. Later reforms have redesigned rules to allow for more flexibility to trigger the process to make it more attractive. In addition, more attention has been paid to the relations with non-members and to designing mechanisms to prevent non-members from arbitrarily having an impact on decision-making within the more integrationist group.80

What are the potential lessons to be drawn from the EU’s experience with variable geometry generally and with ‘enhanced cooperation’ in particular? There seems to be an implicit understanding that variable geometry is a possible avenue for integration. However, many member states and supranational actors (including the Commission and the European Parliament) seem reluctant to go down this path. There is a widespread perception that ‘enhanced cooperation’ could create discrimination, and concerns have been voiced in relation to failure to join the avant-gardist camp. There exists an ambiguous attitude of members to let others move ahead, with a tendency to attach excessively stringent rules. However, while new initiatives under ‘enhanced cooperation’ have not yet materialized, some evidence suggests that the possibility to apply this method may unlock certain negotiations.81 In other words, the existence of an option for recourse to a flexible instrument to move more quickly among a like-minded group might under certain conditions encourage laggards to move. However, if conditions are too onerous, the threat of moving more quickly within institutional rules might not be credible.82 This could be instructive in thinking about how to design critical mass in the world trading system. In light of existing ‘outside’ modes of variable geometry (e.g., bilateral and regional trade agreements), it is even more urgent to consider going down a path of differentiated integration under the auspices of the WTO.

V. Conclusion

This chapter has discussed two reform proposals and has attempted to sketch a new scenario for decision-making in the WTO. Strengthening the Secretariat, combined with a move toward more structured decision-making processes beyond the single package approach and consensual decision-making represent the best way forward for the WTO. Furthermore, empowering the Secretariat by allocating agenda-setting power could assist in overcoming some of the endless cycling problems as witnessed in the Doha Round. In addition, a redesign of procedures and decision rules (e.g., the selective recourse to qualified majority voting, dropping the ‘single undertaking’) could help mainstream processes.

As to the critical mass approach, the above discussion questions the potential of using this type of variable geometry as approved by the authors of the Warwick Report. This chapter has argued that the conditions advocated by the Warwick Commission might be too onerous in light of the history of variable geometry in the GATT/WTO and the EU. It could be further asked whether not all negotiations (including classical tariff negotiations where a deal needs to be struck between principal suppliers of individual goods and key importers) have followed a version of the critical mass approach.83 In reflecting on the variance in negotiation processes across the Tokyo Codes, Winham concludes that ‘the answer appears to lie not in the negotiation process itself, but rather in the substance of what was being negotiated’.84 In any case, more systematic research is needed to understand the promises and perils of critical mass decision-making. In addition, more experiments with this approach are needed to test the effects of partial most-favoured-nation exemptions on degrees of integration.

Finally, this chapter suggests combining various reform measures. A stronger supranational actor (e.g., the Secretariat) could play a role in a critical mass approach, not least by representing the interests of the membership as a whole and in particular by assisting those who remain (temporarily) outside.

The time for rethinking WTO decision-making is ripe. In light of the inertia of the status quo, it seems that only a package solution that would allow for some concession-trading could be a potential avenue for change. Such a package, however, as the Uruguay Round has shown, cannot be an institutional reform package alone, but needs to be enhanced with tangible concessions on additional market-opening commitments. For the current round, a reform discussion is too late, but it would become pertinent again should the Doha Round fail. But here lies a paradox. Moving toward a more mature system of decision-making with clearer mandates and committee deadlines will make trade rounds redundant. However, in order to put in place a more elaborate and up-to-date system of decision-making, an institutional design package would need to be adopted in the context of another trade round.

A. More Challenges Ahead?

There are a multitude of factors that explain the current deadlock in WTO negotiations. The lack of leadership is one important factor. The ‘liberal transatlantic moment’ has lost momentum. The transatlantic partnership has suffered some of its worst crises since the end of World War II. These crises, which developed in the security field, have certainly affected the capacities of the United States and the European Union to manage and drive international trade negotiations. Three additional elements, which are subjects of study and debate in the field of international relations, seem to have affected cooperation incentives in the current Doha Round.

First, an (older) controversy that has divided neo-realists and neo-liberal scholars could be instructive in understanding newer developments in the global trading system: the role of absolute versus relative gains from international cooperation.85 As we move toward a multipolar trade world, some of the leading actors (the United States and the European Union) are showing signs of reluctance to agree to deals that asymmetrically profit other emerging nations (relative gains concerns). Not only are these types of agreements difficult to sell at home to negatively affected constituencies, but some emerging powers (e.g., China and Brazil) pose certain challenges to the United States (and to some degree to the European Union) with regard to foreign and security policy. There is lack of research on these systemic pressures and their potential effects on different negotiation strategies in the future, including pursuit of greater bilateral agreements.86 However, there is a real concern that the current financial crisis and the negative spill-over effects on growth figures within the real economy will make parties even more suspicious and lend support to those actors pushing for relative gains.

Second, the relationship between regionalism, bilateralism, and multilateralism continues to affect current trade negotiations. Key trade powers have, over the last decade, redesigned their venue-shopping strategies. In particular, they have created additional platforms to negotiate trade that function as strong alternatives to the multilateral trade arena. These outside options affect, in the words of negotiation theories, the potential zone of agreement. States with strong alternatives will hold out to get a better deal. In addition, export-oriented firms that are pushing for liberalization of markets might be satisfied with bilateral and regional approaches as long as these offer substantial increase in export opportunities. This in turn will lower the support of export industries to counterbalance import-competing industries’ voices within the multilateral context.

Third, there is a commitment problem related to the growing power of legalization of some international arrangements. The increase in the binding nature of international trade law has affected the willingness of trading nations to commit to additional liberalization.87 The argument runs that WTO Members are reluctant to adopt new rules and to agree on additional market liberalization as they (and their domestic interest groups) have learned the lessons of a strong dispute settlement system. In addition, many of the parties have come to realize that changing rules is difficult in a consensus-driven organization and thus the ‘shadow of cooperation’ increases. As states value future benefits of cooperation, there is an incentive to bargain hard for a good deal, leading to costly stand-offs.88

A final observation relates to developing countries. A key challenge remains to assist developing countries (beyond the powerful developing countries) in benefiting more from the multilateral trading system. The history of EU integration has shown that in order to successfully create a common market with rules that in the long run apply to all market actors from various members, rich members need to provide incentives and resources to assist the integration process. The EU has invested considerable financial resources in developing infrastructure and other basic services in its less developed regions. Within the WTO context, the aid-for-trade debate has opened an additional door for developing instruments to assist smaller and weaker parties to further integrate into the world trading system. Financial assistance to address supply-side constraints should go hand in hand with technical assistance to mainstream trade within national development strategies and should be coordinated better among international organizations working in this area. In addition, special and differential treatment for the least developed countries means also finding new and innovative ways to empower weaker states within existing and future governance models.

Notes

1 John Ikenberry, Liberal Order and Imperial Ambition (Cambridge, U.K.: Polity, 2006).

2 Charles Kindleberger, The World in Depression, 1929–39 (Berkeley: University of California Press, 1973); Ikenberry, ibid.

3 See Francis Fukuyama, The End of History and the Last Man (New York: Free Press, 1992). The genesis of the World Trade Organization (WTO) and the International Criminal Court (ICC) stand out. However, the creation of the WTO falls into the category of redesign of a de facto existing international organization.

4 Institutionalist research programs have called the power of the status quo the existing ‘stickiness’ of institutions.

5 On the concept of loyalty, see Albert Hirschman, Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations and States (Cambridge, Mass.: Harvard University Press, 1970).

6 Consultative Board to the Director-General Supachai Panitchpakdi, The Future of the WTO: Addressing Institutional Challenges in the New Millennium (Geneva: WTO, 2004).

7 Warwick Commission, The Multilateral Trade Regime: Which Way Forward? (Coventry: University of Warwick, 2007).

8 Robert Keohane, After Hegemony: Cooperation and Discord in the World Political Economy (Princeton: Princeton University Press, 1984).

9 Ruth Grant and Robert Keohane, ‘Accountability and Abuses of Power in World Politics’, 99 American Political Science Review 29 (2005).

10 The input side of a legitimate political system includes participation, deliberation, and mechanisms to hold actors accountable; the output side addresses the contribution toward improving societal problem-solving; Manfred Elsig, ‘The World Trade Organization’s Legitimacy Crises: What Does the Beast Look Like?’, 41 Journal of World Trade 75 (2007).

11 See Grant and Keohane, above n 9; weaker parties might face potential repercussions from more powerful parties if future interaction or collaboration is foreseen. In other words, the prospect of future cooperation reduces incentives to litigate against a big trading partner. There also remains the question whether the losing party will implement (and to what degree) court rulings.

12 It is yet another question to what extent the rules reflect the interests of the powerful actors in the system.

13 Peter Pedersen, ‘WTO Decision-Making and Internal Transparency’, 5 World Trade Review 103 (2006).

14 This relates to rule-making. Negotiations on modifying the DSU are currently underway. They are not formally part of the Doha negotiations, but the pressure to link negotiations on reforming dispute settlement with other trade issues is present. In order to achieve ‘results’, linkages will eventually prove pivotal. This is reflected in a public statement by the chairman of the Dispute Settlement Body (DSB) of the Special Session made at a conference held at the Graduate Institute, Geneva: ‘The DSB reform needs the round, the round does not need the DSB reform and will not wait for us’ (Ambassador Ronald Saborío Soto, 27 February 2008).

15 Discussion, Waterloo Canada, 14 March 2008.

16 John Ruggie, ‘International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order’, 36 International Organization 379 (1982).

17 On mantras and myths, see John Jackson, ‘The WTO “Constitution” and Proposed Reforms: Seven “Mantras” Revisited’, 4 Journal of International Economic Law 67 (2001); and Debra Steger, ‘The Culture of the WTO: Why It Needs Change’, 10 Journal of International Economic Law 483 (2007).

18 Fritz Scharpf, ‘The Joint-Decision Trap: Lessons from German Federalism and European Integration’, 66 Public Administration 239 (1988).

19 On legalization, see Judith Goldstein, Miles Kahler, Robert Keohane, and Anne-Marie Slaughter, ‘Introduction: Legalization and World Politics’, 54 International Organization 401 (2000); Judith Goldstein and Lisa Martin, ‘Legalization, Trade Liberalization, and Domestic Politics: A Cautionary Note’, 54 International Organization 603 (2000).

20 Elsig, above n 10.

21 Consultative Board to the Director-General Supachai Panitchpakdi, above n 6, at 77.

22 Article VI of the Marrakesh Agreement Establishing the World Trade Organization reads: ‘1. There shall be a Secretariat of the WTO (hereinafter referred to as “the Secretariat”) headed by a Director-General. 2. The Ministerial Conference shall appoint the Director-General and adopt regulations setting out the powers, duties, conditions of service and term of office of the Director-General. 3. The Director-General shall appoint the members of the staff of the Secretariat and determine their duties and conditions of service in accordance with regulations adopted by the Ministerial Conference. 4. The responsibilities of the Director-General and of the staff of the Secretariat shall be exclusively international in character. In the discharge of their duties, the Director-General and the staff of the Secretariat shall not seek or accept instructions from any government or any other authority external to the WTO. They shall refrain from any action which might adversely reflect on their position as international officials. The Members of the WTO shall respect the international character of the responsibilities of the Director-General and of the staff of the Secretariat and shall not seek to influence them in the discharge of their duties.’

23 Gilbert Winham, International Trade and the Tokyo Round Negotiation (Princeton: Princeton University Press, 1986); Manfred Elsig, ‘Agency Theory and the WTO: Complex Agency and “Missing Delegation”?’, Paper Manuscript (2008); Consultative Board to the Director-General Supachai Panitchpakdi, above n 6.

24 Alexander Thompson, ‘Principal Problems: UN Weapons Inspections in Iraq and Beyond’, Paper Delivered at the Annual Convention of the International Studies Association, San Diego, 2006.

25 Consultative Board to the Director-General Supachai Panitchpakdi, above n 6, at 82.

26 Elsig, above n 23.

27 William Riker, ‘Implications from the Dis-equilibrium of Majority Rule for the Study of Institutions’, 74 American Political Science Review 432 (1980); for other functional reasons to empower the Secretariat, see Elsig, above n 23.

28 On the Consultative Group of 18, see Richard Blackhurst and David Hartridge, ‘Improving the Capacity of WTO Institutions to Fulfil their Mandate’, 7 Journal of International Economic Law 705 (2004).

29 The combination of single package and consensus has led to a type of ‘decision-trap’ from which it is difficult to escape. In addition, it may have produced the opposite of what was envisaged. Van Grasstek and Sauvé put it as follows: ‘[P]aradoxically, instead of encouraging bold deals by causing each country to focus on those parts of the package that they most dearly desire, the single undertaking might promote timidity by causing each country to focus on those things that they most fear’; see Craig Van Grasstek and Pierre Sauvé, ‘The Consistency of the WTO Rules: Can the Single Undertaking Be Squared with Variable Geometry?’, 9 Journal of International Economic Law 837 (2006), at 858.

30 See Steger and Shpilkovskaya, this volume; current voting is based on a one-country one-vote basis.

31 The dominating mode is the co-decision procedure. The commission proposes new regulation (agenda setting) while the European Council and the European Parliament have the right to accept or reject the proposed regulation (co-decision). Regulation is adapted only when both institutions agree.

32 Richard Steinberg, ‘In the Shadow of Law or Power? Consensus Based Bargaining in the GATT/WTO’, 56 International Organization 339 (2002); some original work has been done on various forms of weighted voting; see Thomas Cottier and Satoko Takenoshita, ‘The Balance of Power in WTO Decision-Making: Towards Weighted Voting in Legislative Response’, 58 Aussenwirtschaft 171 (2003).

33 See the detailed analysis of the Smoot-Hawley Tariff Act by Elmer Eric Schattschneider, Politics, Pressures and the Tariff (New York: Prentice-Hall, 1935).

34 The Reciprocal Trade Agreement Act (RTAA) in 1934 marked the beginning of a system of increased delegation (limited in time) to the executive branch (later called the fast-track procedure and today the trade promotion authority). These mechanisms have increasingly enabled control over the worst forms of protectionist cherry-picking by Congress.

35 Manfred Elsig, The EU’s Common Commercial Policy (Aldershot: Ashgate Publisher, 2002).

36 Ibid; increased delegation to the Community was a move away from the model of ‘shared competence’ between member states and the Community. Thus decision rules changed from consensus to qualified majority voting.

37 This chapter does not analyze the first type of approach (special and differential treatment).

38 Consultative Board to the Director-General Supachai Panitchpakdi, above n 6, at 82.

39 The most-favoured-nation (MFN) treatment principle states that parties may not discriminate between trading partners that are members of the GATT/WTO system. Exempting most-favoured-nation means that parties will not give equal treatment to those that have not joined the plurilateral agreement. It is not clear whether the authors of the Sutherland Report deliberately aimed to make a distinction between plurilateral agreements (excluding MFN) and critical mass approaches (with application of most-favoured-nation).

40 Other post–Tokyo Round plurilateral agreements were the International Dairy Agreement and the International Bovine Meat Agreement. Both ended in 1997. ‘Countries that had signed the agreements decided that the sectors were better handled under the Agriculture and Sanitary and Phytosanitary agreements. Some aspects of their work had been handicapped by the small number of signatories. For example, some major exporters of dairy products did not sign the Dairy Agreement, and the attempt to cooperate on minimum prices therefore failed—minimum pricing was suspended in 1995 (at http://www.wto.org).’ In other words, the absence of an important market actor limited positive integration, as a type of free-riding option (selling at lower prices) stalled cooperation efforts.

41 The GPA is based on the principles of openness, transparency, and non-discrimination, which apply to members’ procurement, while the coverage varies from one member to another.

42 Sue Arrowsmith, Government Procurement and the WTO (The Hague: Kluwer Law International, 2003).

43 Currently, there are 39 members (including 27 EU member states).

44 Diana Zacharias, ‘Art XIII GATS’, in Rüdiger Wolfrum, Peter-Tobias Stoll, and Clemens Feinäugle (eds), WTO-Trade in Services (Leiden: Martinus Nijhoff Publishers, 2008) 272–86.

45 Pierre Sauvé, ‘Completing the GATS Framework: Addressing Uruguay Round Leftovers’, 57 Aussenwirtschaft 301 (2002) 305.

46 WTO General Council, Doha Work Programme, WT/L/579, Adopted 4 August 2004, online: http://www.wto.org/english/tratop_e/dda_e/ddadraft_31jul04_e.doc.

47 Bernard Hoekman and Michel Kostecki, The Political Economy of the World Trading System (Oxford: Oxford University Press 2001) 380; the agreement ‘eliminates import duties on all aircraft, other than military aircraft, as well as on all other products covered by the agreement—civil aircraft engines and their parts and components, all components and sub-assemblies of civil aircraft, and flight simulators and their parts and components (at http://www.wto.org)’.

48 In the context of the negotiations on the public procurement code during the Tokyo Round, developing countries’ concerns related to the lack of opportunities in coverage that could have provided opportunities for low-cost producers, see Winham, above n 23.

49 Few countries signed the codes.

50 See Warwick Commission, above n 7, at 30–31. The decision reads: ‘The contracting parties (…) note that existing rights and benefits under the GATT of contracting parties not being parties to these agreements (…) are not affected by these agreements (L/4905).’

51 These were all negotiations on rules (positive integration).

52 Winham, above n 23.

53 This hierarchical negotiation process varied from one code to another. In the negotiations on standards (technical barriers to trade), there was active involvement from a greater number of countries; the negotiation history on subsidies and countervailing duties reads more like a transatlantic story; Winham, above n 23.

54 In the 1970s, in parallel to the GATT negotiations, developing countries invested time and resources to develop an alternative venue for regulating the world economy: the United Nations Conference on Trade and Development (UNCTAD).

55 Ria Kamper, ‘The Tokyo Round: Results and Implications for Developing Countries’, World Bank Staff Working Paper No. 372 (1980); Winham, above n 23.

56 Kamper, ibid, at 25.

57 Argentina was the only developing country among the signatories, ibid.

58 Winham, above n 23, at 354.

59 Annex 7 of GATT 1979 as agreed in the final negotiations reaffirmed that non-signatories were not affected by these agreements. In addition, they were granted the right to participate with observer status in committee work related to the codes. This was initially resisted by the Quad because of confidentiality and efficiency concerns; Winham, above n 23.

60 Winham, above n 23, at 355. This was confirmed by one of the U.S. negotiators involved in the subsidies and countervailing duties negotiations. The former trade official acknowledged that conditional MFN was used as a key strategic tool throughout the negotiations to pressure important members to join the agreement (Interview, 10 December 2008); see also Kamper, above n 55.

61 This is a form of negative integration. In the current trade round, the concept of critical mass is applied in services negotiations (e.g., group negotiations) and in non-agricultural market access negotiations (e.g., zero-for-zero negotiations for certain products and sectors).

62 It is beyond the scope of this chapter to offer a detailed analysis of these negotiations, but the chapter attempts to focus on key lessons.

63 Hoekman and Kostecki, above n 47.

64 In the case of the ITA, 90 percent of total production of information technology products had to be included under the agreement, ibid.

65 Ibid, at 261.

66 Ibid, at 261.

67 It is noteworthy that all three service sector agreements have been about market opening and not about rules. A partial exception is the reference paper in the telecom agreement, which provides for legal guidelines in relation to sector liberalization.

68 In addition, as trade patterns change and more countries compete in the same markets, the size of critical mass has increased.

69 This is a liberal argument. From a realist perspective, free-riding incentives can be addressed by using sticks to push for the conclusion of agreements and limiting the loopholes; see Lloyd Gruber, Ruling the World: Power Politics and the Rise of Supranational Institutions (Princeton: Princeton University Press, 2000). See also Steinberg, above n 32.

70 Free-riders will attempt not to engage in the critical mass negotiations as they get a lunch for free. In addition, they are not required to justify their position (absence), which differs from the situation in multilateral negotiations using ‘single undertaking’.

71 The sector agreements under the GATS have shown that obstacles to extend coverage and membership are difficult to overcome when automatic MFN extension applies (e.g., financial services agreement.) The leading providers of financial services have shown more enthusiasm for negotiating accession agreements with important new members than for elaborating and extending the sector agreements further.

72 Markus Jachtenfuchs, ‘Democracy and Governance in the European Union’. European Integration Online Papers (EIoP) No. 2 (1997), at 5; Alexander Stubb, ‘The 1996 Inter-governmental Conference and the Management of Flexible Integration’, 4 Journal of European Public Policy 37 (1997).

73 Fritz Scharpf, ‘Notes Toward a Theory of Multilevel Governing in Europe’, MPIfG Discussion Paper No. 5 (2000), at 24.

74 In the case of the Euro, it is assumed that integration benefits will materialize in the long run, while short-term adjustment costs exist.

75 In the context of the global trading system, this could be labelled ‘WTO à la carte’. The Tokyo Codes taking up non-tariff issues were presented as a ‘à la carte’ integration. Following the Tokyo Round, the view developed within the trade community that this amounted to cherry-picking and thus undermined the global trading system. This debate encouraged the development of the notion of ‘single undertaking’ not least to attempt to address free-riding.

76 Variation in labour-related standards has further hindered additional integration in the field of services (including labour mobility); see debate on Bolkestein Directive.

77 Stubb, above n 72.

78 See Eric Philippart, ‘Optimising the Mechanisms for “Enhanced Cooperation” within the EU: Recommendations for the Constitutional Treaty’, CEPS Policy Brief No. 33 (2003).

79 Philippe De Schoutheete, ‘Closer Cooperation: Political Background and Issues in the Negotiations’, in Jörg Monar and Wolfgang Wessels (eds), The European Union after Amsterdam (London: Continuum, 2001).

80 See also Philippart, above n 78;Treaty of Lisbon Report, Joint Study (Brussels: European Policy Centre, Egmont and CEPS 2007).

81 There is evidence that the variable geometry option has had an impact on integration efforts in relation to taxation or the European arrest warrant; see Philippart, above n 78.

82 There are additional examples of finding constructive ways to design flexibility mechanisms should a group of countries decide to integrate further. These include opt-out or light methods such as ‘constructive abstention’ in the Common Foreign and Security Policy (CFSP) or the ‘opt-out method’ of Schengen; for a discussion on the different flexibility mechanisms that developed in the areas of Common Foreign and Security Policy, Economic and Monetary Union, and Freedom, Security and Justice, see Treaty of Lisbon Report, above n 80.

83 Winham makes this argument when referring to the Kennedy and the Tokyo Round, above n 23.

84 Ibid, at 369.

85 This notion of absolute and relative gains should not be confused with the concept of absolute and relative advantage as discussed in the classical trade theory literature.

86 See Frank Grundig, ‘Patterns of International Cooperation and the Explanatory Power of Relative Gains: An Analysis of Cooperation on Global Climate Change, Ozone Depletion, and International Trade’, 50 International Studies Quarterly 781 (2006).

87 Goldstein and Martin, above n 19.

88 James Fearon, ‘Bargaining, Enforcement and International Cooperation’, 52 International Organization 269 (1998).

5
Improvements to the WTO Decision-Making Process: Lessons from the International Monetary Fund and the World Bank

ALBERTO ALVAREZ-JIMÉNEZ

I. Introduction

A comparative assessment of the internal governance of the WTO, the International Bank for Reconstruction and Development (the World Bank), and the International Monetary Fund (IMF) is a valuable tool to improve on recommendations to enhance the WTO decision-making process. This is because some of the WTO reform proposals include suggestions similar to what is already in place at both the IMF and the World Bank. However, for this comparative analysis to arrive at meaningful recommendations, it has to take into account two important issues: first, the Bank’s and the IMF’s organs and decision-making processes are, obviously, related to each organizations’ particular mandate and objectives. Care must be taken when suggesting that institutional features of the Bank and the IMF be employed by the WTO. Second, these three organizations have been subject to increasing criticism in recent years and, at the time of this writing, are undergoing important reform processes as a result of the current world financial crisis. Consequently, any recommendations for the WTO based on the institutional history of the IMF and the Bank must be adjusted to current trends in institutional design, marked not only by concerns for efficiency but also for adequate representation of developing and least developed countries.1

This chapter illustrates how the history of the World Bank and the IMF, and particularly of the functioning of and inter-relationship between their boards and managements, may assist in improving recommendations to create a consultative body in the WTO and to enhance the position of the WTO Director-General and the WTO Secretariat. This chapter is divided into four parts. Part II analyzes the internal management of the IMF and the role played by each of its decision-making bodies, the relationship between them, and the decision-making processes that have adopted. Part III carries out a similar assessment of the World Bank. Part IV looks at the WTO, and makes recommendations to improve proposals aimed at enhancing WTO decision-making. Finally, Part V presents some general conclusions.

II. Internal Management of the IMF

The IMF was created with the aims of promoting international monetary cooperation, orderly exchange arrangements among its Members, exchange stability, and furnishing Member States with financial assistance for balance of payment difficulties. The IMF pursues these objectives through two main activities that are carried out by all its organs: surveillance and the provision of conditional financial assistance.2 The former relates to the provision of advice to IMF Members regarding adequate economic policies and the use of peer pressure to persuade Members to pursue such policies. The latter involves providing Members with, subject to conditions related to the adoption of sound economic policies recommended by the IMF, financial assistance to resolve temporary balance of payments difficulties.3

Today, the IMF has 185 member countries, which were traditionally divided into two groups: the industrial economies and the developing countries. The former have not drawn on the Fund for decades but dominate the IMF’s decision-making process, while the latter do draw on the IMF but do not control decision-making.4 Until recently, there was a third category of IMF Members: those with broad access to capital markets and that have accumulated large reserves, such as Asian and oil-exporting countries. These Members made infrequent use of the IMF’s resources and, therefore, did not need to follow its policy recommendations.5 The current economic crisis may produce a shift among these emerging markets. Already Hungary, Ukraine, Iceland, Pakistan, Latvia, Serbia, and Belarus have asked the IMF for financial support to cope with the crisis,6 and negotiations are underway with El Salvador and Turkey.7 Other European Union countries, such as Romania, Estonia, Bulgaria, and Lithuania, may soon join the growing list of countries seeking IMF assistance.8

A recent evaluation of IMF governance carried out by the IMF Independent Evaluation Office (IEO) points out that the strongest feature of such governance is effectiveness, while the weakest aspect is the accountability and voice of developing country Members.9

IMF governance occurs within three bodies: the Board of Governors, the Executive Board, and the IMF management. In general terms, the Articles of Agreement approved in Bretton Woods have a clear emphasis on rules rather than on principles. However, reforms introduced at the end of the 1970s reversed this. The result has been an IMF that vests a wide discretion in the Executive Board, guided by principles identified by the IMF’s Members.10 The IMF system of governance has evolved and adapted to the needs of new conditions in the global financial world.11 However, according to the IEO, the IMF lacks ‘clarity on the respective roles of the different governance bodies, and in particular between the Board and Management.’12

A. The Board of Governors

The Board of Governors is the highest organ of the IMF, and includes representatives from each IMF Member. The Board of Governors is authorized to delegate some of its powers to the Executive Board, though the Articles of Agreement regard some decisions as non-delegable, such as the allocation or cancellation of special drawing rates, changes to the duration of the basic period of allocation, alteration of the charges of allocation,13 and amendments the Articles of Agreement and the By-laws.14

The Board of Governors is advised by two ministerial committees: the Development Committee; and the International Monetary and Financial Committee (IMFC). The former is a joint committee of the IMF and the Bank that makes suggestions to each organization’s boards of governors concerning economic development in emerging countries.

The IMFC is responsible for advising the Board of Governors on inter alia proposals made by the Executive Board to amend the Articles of Agreement, and situations that put the international monetary and financial system at risk. The IMFC is made up of 24 members, usually governors, and its membership reflects the composition of the Executive Board. Each country and group of countries that elect a member of the Executive Board also appoint members to the IMFC. Its mandate is

supervising the management and adaptation of the international monetary system, including the continuing operation of the adjustment process, and in this connection reviewing developments in global liquidity and the transfer of real resources to developing countries.

… considering proposals by the executive directors to amend the Articles of Agreement; and

… dealing with sudden disturbances that might threaten the [international monetary] system.15

The IMFC has played an important role in recent years in major Fund initiatives, and its advisory character has transformed it into a body that, at the ministerial level, endorses decisions made by the Executive Board.16 At the time of this writing, IMF Members are assessing the issue of putting into operation an already existing council, provided for by the Articles of Agreement, as a political decision-making body that would replace the IMFC. The composition would be similar to that of the Group of 20 and would give some emerging nations a say within the Fund in line with their current economic clout.17

B. The Executive Board: Its Structure and Decision-Making Process

The Executive Board allows IMF Members to exercise control over the day-to-day operation of the Fund.18 The mandate of the Executive Board is to conduct the business of the IMF. This means that the Executive Board is the policy organ of the IMF, oversees all of the Fund’s lending operations,19 and discusses at length all the issues related to the operation of the IMF, from periodic assessments of IMF Members’ economies to economic policy topics of particular importance to the global economy. At its inaugural meeting, the Board of Governors virtually delegated all of its powers to the Executive Directors, except the discretion to admit new members and the power to change quotas.

The size of the Executive Board has increased as membership in the IMF has grown.20 Initially made up of 12 members, the Executive Board now has 24 executive directors. Japan, Germany, France, the United Kingdom, Saudi Arabia, China, Russia, and the United States have representatives on the Executive Board. The other 16 executive directors represent various groupings of IMF Members and vote on behalf of their groups.21

Under Section C of the Rules and Regulations of the IMF, the IMF Managing Director has the power to call meetings of the Executive Board. If requested by an executive director, the Managing Director must call a meeting. The agenda of the Executive Board is set by the Managing Director, but any item requested by an executive director must be placed on the agenda. New agenda items can be included on condition of unanimity among executive directors present at the meeting.22

The decision-making process at the Executive Board is complex. Decisions by the Executive Board are taken on the basis of proposals tabled either by executive directors or by the IMF Managing Director. The Board operates through standing committees that the Executive Board can create on its own initiative.23 These committees do not decide on behalf of the Executive Board, but make recommendations to it. Committees and subcommittees of the Executive Board do not engage in formal voting.

These committees allow executive directors to discuss issues in more detail before placing them before the Executive Board as a whole, to deliberate and make recommendations separately from those of IMF management, and to allocate responsibilities with an aim to increasing the Board’s efficiency.24

In addition to standing committees, the Executive Board operates informally through the creation of ad hoc committees. This practice of informal committees has existed since the IMF’s earliest days.25 The purpose of informal committees is to allow executive directors to express ideas without worrying about speaking on behalf of their constituent Members. This also gives IMF staff the opportunity to canvass the views of executive directors, resulting in the refinement of proposals put to the Executive Board.26 The ad hoc committee process has proven an invaluable tool in Executive Board decision-making.27 Moreover, informal committees have also been used as a tool for deeper analysis and reflection when there are major disagreements among Executive Board members.28 Ad hoc committees have also been set up to discuss particular issues between executive directors and staff when there have been different views between them.29

The foregoing discussion of the decision-making processes of the Executive Board and the IMFC demonstrates that both have horizontal and vertical dimensions. The horizontal dimension here refers to the Executive Board operating through standing and ad hoc committees of different composition, which creates input for the Board’s deliberations and decisions. The horizontal dimension occurs among IMF Executive Board members, the IMFC, and management.

C. Voting in the IMF

The allocation of voting power has been one of the most criticized features of the IMF governance in recent years. Voting at the Executive Board is weighted according to quota contributions denominated in Special Drawing Rights (SDR). Each member has 250 basic votes and receive an additional vote for each SDR 100,000 of quota.30 The United States has 16.77 percent of the total voting power in the IMF. Countries with more than 15 percent of the voting power have a de facto veto within the IMF.31 This includes a veto over changes in the number of members of the Executive Board and amendments to the Articles of Agreement. Measured by the number of seats and compared to its voting power, the European Union is overrepresented on the Executive Board. Like the United States, the aggregated voting power of European Union countries at the IMF is sufficient to give the EU a veto.

The voting majority required to adopt a decision as the Executive Board varies with the type of decision being considered. Generally speaking, a simple majority is required. However, amendments adopted in the 1970s brought about an increase in the number of decisions that require a special majority of either 70 percent or, in some cases, 85 percent. Given that, as was mentioned, the 1970 reforms gave more discretion to the IMF, Members created certain safeguards to prevent abuse of discretion.32 It was expected that groups of Members—developing countries, the European Members, and the United States—would have enough voting capacity to block decisions affecting their interests.

Recent reforms have introduced changes to the voting rules in order to respond to the significant criticism that the IMF has not given a sufficiently powerful voice to either emerging economies or developing and least developed countries. The process started in 2006, when the Fund increased the quota for China, Korea, Mexico, and Turkey. Under the new formula for the allocation of voting rights, 135 Members increased their voting power.33 The reforms also included an increase in basic votes for low-income countries.34

Although executive directors have the right to call for a vote, current practice considers such a call impolite. This rejection of formal voting is attributable, in part, to the disproportionate voting power held by some Members.35 Normally, the level of consensus required to adopt a decision is determined by the Managing Director, who ascertains the ‘sense of the meeting’.36 This sense is determined once all executive directors have had the opportunity to speak and to respond to the comments of other executive directors. Based on this discussion, the Managing Director produces a written summary of views in great detail, and the executive directors make comments, which are included in the written summary.37 Even decisions that require a special majority are typically made by consensus, though Members’ voting power does influence decision-making. When adopting the decision, executive directors and the Managing Director know what the final result would have been had a vote been called, and the IMF ‘Secretariat keeps an informal record of the count of the vote’.38

Final decisions of the Board are carefully drafted and designed to reflect the views of as many executive directors as possible, while achieving effective outcomes.39 A practice in the summary has developed that enhances the executive directors’ role. First, summaries of decisions reflect all views, including minority views;40 and second, summaries related to the Board’s consultations with individual Members are disclosed as public information notices, subject to the Member in question’s approval. Once approved, Executive Board decisions are then implemented by IMF staff.41

D. The Role of the Managing Director42

The Articles of Agreement do not say much about the Managing Director, other than to provide that he or she chairs the Executive Board, is to be selected by the Executive Board, and ‘shall be chief of the operating staff of the Fund and shall conduct, under the direction of the Executive Board, the ordinary business of the Fund…’.43 The Managing Director is in charge of the daily operations of the Fund in the sense that he or she executes the general policies approved by the Board, carries out economic surveillance of IMF Members, and designs the lending operations to countries in difficulty.

IMF Managing Directors have sought to expand the scope of their work beyond daily operations of the IMF. According to the first historian of the IMF, J. Keith Horsefield, ‘The principal reason for the strengthening of the staff’s position was that it had opportunities for exercising initiative, and took them’44 during the first two decades of operation. In addition, Managing Directors have been a key actor in ensuring the Fund’s effectiveness,45 and their role has been adjusted in response to challenges in the world economy and to the particular personalities of those who have been appointed.46

E. Relations Between the Executive Board and Management

In 1948, the functions of the Executive Board and the Managing Directors were clarified. The Executive Board retained the power to formulate policy and to take decisions on major problems, and the Managing Director and the IMF staff were charged with the duty to study major problems that had to be resolved by the Board and to present conclusions and make recommendations in this regard.47 The Managing Director and staff have also been responsible for executing Fund policies and handling negotiations with IMF Members.48

Over time, the role of the IMF staff has expanded considerably. This has been the result of a number of factors, including the provision of technical assistance and advice to Members and enhanced consultations between Members and the IMF staff in national capitals. Technical assistance has often provided outside of the scrutiny of the Executive Board, which allows IMF staff to gather information that was not otherwise available to the Executive Board.49 As the relationship between IMF staff and Members evolved, executive directors increasingly found that issues were being resolved by the staff before the Executive Board took action.50 Consultations between IMF staff and Members provided the opportunity for staff to assist Members in resolving policy difficulties on a regular basis.51 Often, high-ranking officials or Members would consult in advance with staff about possible IMF reaction to proposed actions at the national level.52

Although this has been the general trend, the increase in the relative influence of IMF management and staff has been nuanced and involves a number of factors that must be properly understood. First, the importance of the role of the Managing Director does not mean that the degree of influence held by the Executive Board has not ebbed and flowed over time. Indeed, the relative clout of IMF management has not resulted in the Executive Board becoming a little more than a rubber stamp. Instead, the Executive Board has debated sometimes at great length suggestions by management53 and has rejected important proposals by IMF staff.54 On other occasions, the Board has accepted changes in policy recommended by staff, though the scope of the change has not always matched staff recommendations.

In recent years, key activities of the Fund, such as surveillance, which seem to be carried out by management exclusively in its interaction with local authorities, are in fact conducted under precise guidelines approved by the Executive Board.55 The same can be said of decisions involving the use of Fund resources. Although the negotiations of the program with national authorities are delegated by the Board to management, and the former’s involvement takes place at the end of the process, the Board’s influence is felt because its adopted policies must be met in order for the program to be approved by the Board.56

In sum, although the relations between the Executive Board and the Managing Director are characterized by the pre-eminence of the latter, the former is still an important actor within the Fund’s decision-making process.

F. The Steering of the IMF

Although the Managing Director plays a significant role in guiding the organization, the IMF remains an intergovernmental organization. Members play the central role in decision-making within the IMF. In practice, the IMF has been steered by the G10, led by the United States; then by the G5; and today by the G7 (comprising France, Germany, Japan, the United Kingdom, Canada, Italy, and the United States).57 The Independent Evaluation Office (IEO) of the IMF has criticized the significant influence that large members have on the day-to-day operation of the IMF, with the Asian crisis of the 1990s highlighted as a major example.58

The situation is different for borrowing countries. Not only do they not steer the IMF, but the Fund has some degree of power to direct their economic policies. Borrowing countries depend on the Fund’s endorsement of their policies to have access to capital markets.59

A review of each of the relevant organs of the Fund illustrates that the Board of Governors is, due to its size, unable to provide meaningful political guidance. However, it has addressed this deficiency by creating, first, the Interim Committee and then the IMFC, which evolved from an advisory body to a genuine locus of decision-making.60 As for the Executive Board, recent analysis has shown that, although it has delegated much of its powers to management, it has retained its character as a decision-making body, particularly in key areas of the operation of the Fund, such as surveillance and the use of the IMF resources.61

A historical evaluation of the operation of the governance structure and operation of the Fund reveals some of their shortcomings. The IMF has not always been able to ensure that key Members observe prudent economic policies; voting rights have been slow to reflect contemporary economic realities; and the Fund’s contingencies for grave financial crises, such as those of Latin America in the 1980s and Russia and Asia in the 1990s, have been widely criticized. The issue of a democratic deficit has arisen, associated with developing countries’ lack of influence within the Fund’s decision-making process.62 Finally, the IMF has been unable to anticipate systemic crises, such as the current crisis caused by the U.S. housing market.63

However, the current economic crisis has provided an opportunity for the re-emergence of the IMF as an important actor in the international financial system. In order to allow it to provide financial support to members affected, Japan has loaned the IMF U.S. $100 billion.64 The IMF is seeking to double its lending base to U.S. $500 billion.65 In addition, the ongoing crisis seems to have finally added momentum to additional governance reform, including addressing a democratic deficit. A realization within the Fund is emerging that that developing country members and other emerging economies deserve more of a say within the decision-making process and that the time has come for Europe to accept that it is overrepresented in the IMF.66

Finally, a meaningful comparative analysis between the IMF and WTO must take into account the ongoing reform process at the Fund and the main criticisms that have been raised regarding the IMF’s governance structure and operation. In the IEO’s views, the Executive Board should play a supervisory role and should provide strategic guidance and focus less on an executive role so as to enhance accountability within the organization.67 As for the IMFC, the IEO has recommended its replacement with the council established under the Articles of Agreement, which should decide by consensus and only exceptionally by voting.68 The IEO has also suggested that the Executive Board focus on supervising management, restricting its executive functions to systemic issues,69 and that Board committees should always be chaired by an Executive Director.70

The IEO has also made recommendations to the functioning of Executive Board committees. In an attempt to enhance the role played by developing country members, one recommendation is to have the council chair rotate, so as to allow representatives from these countries to be appointed to this position.71 In addition, the IEO is of the view that council members could split their votes to reflect different views in their constituencies.72 Additionally, it has been suggested that Executive Directors should all be elected, eliminating the current five appointed directors representing the five largest shareholders. Such a move would open the possibility of reducing the representation problem present in some constituencies with a significant number of Members, thereby improving voice and representation.73 Put together, the IEO’s reform proposals seek to achieve a balance between effectiveness, accountability, and voice within the IMF governance.74

Likewise, the High-Level Panel on IMF Board Accountability has made important recommendations to improve the accountability of both the Executive Board and the Managing Director. One proposal that was advanced was to create a committee to oversee the performance of the Executive Board. The Executive Board should also create a process for assessing the Management Director’s performance, overseen by a Board Committee.75

In addition to these reforms, others have emphasized the need for the IMF’s to increase its legitimacy by engaging with legislatures. The Executive Board has endorsed such an approach:

The Working Group encouraged Executive Directors and staff to continue their outreach efforts to and emphasized the importance of an ongoing dialogue with national legislators for the Fund’s work. The Working Group agreed that greater interaction between the legislators and the Fund would be particularly beneficial to the Fund, as it would help build understanding of economic reforms and IMF programs, and could provide a useful avenue for informing and receiving comments from legislators about the work of the Fund and its role in the international financial system in general. Directors emphasized that the Fund’s outreach should be a two-way dialogue and that it was just as important to listen to legislators. They considered that the focus should be on broader policy or regional issues instead of country issues, given the Fund’s mandate to promote global financial stability and growth. Directors recognized that the impact of our outreach will only be evident over time, and will require a prolonged effort.76

The reform process and the overall strengthening of the IMF have been expedited in recent months owing to the current financial crisis. The G20 agreed in London on 2 April 2009 to make available for the IMF substantial additional resources to foster growth in developing country and emerging market economies. These new resources are the following: (1) $250 billion immediately available and up to $500 billion; (2) further progress in the implementation of the IMF Flexible Credit Line and its amended lending and conditionality requirements available to IMF members to cope with balance of payments financing difficulties; (3) a new general SDR allocation of $250 billion aimed at increasing global liquidity.77

The G20 has also committed itself to press for reforms of both the IMF and the Bank in their governance, mandate, and scope

to reflect changes in the world economy and the new challenges of globalization, and … emerging and developing countries, including the poorest, must have greater voice and representation. This must be accompanied by action to increase the credibility and accountability of the institutions.78

As to the particular steps related to the reform process, the G20 has agreed to ensure that the Board of Governors provides more strategic direction to the Executive Board and IMF management and to increase the IMF’s accountability.79 Finally, the G20 has determined that the selection process of the IMF Managing Director and senior IMF staff will be carried out in a more transparent way.

Having described the basic overall decision-making structure in the IMF, illustrated some of its most significant weaknesses, and described some of the suggested reforms, this chapter now looks at IMF decision-making in certain specific contexts. This more detailed view will allow consideration of the decision-making processes employed to address specific types of issues.80

G. Decision-Making for the Adoption of Specific Decisions

1. Decisions Regarding Reforms to the Articles of Agreement

Amending the Articles of Agreement requires the approval of the Board of Governors. However, the Executive Board and IMF management have also played a role in this process, which is far from surprising given their mandates and their knowledge of both the organization and its Members.

For instance, the second amendment of the Fund’s Articles of Agreement was initially discussed by the ad hoc Committee of Twenty, an informal committee of the Board of Governors. The committee’s proposals were adopted by the Board of Governors, which in 1974 established the specific areas of the Articles to be amended and ordered the Executive Board to prepare a draft.81 It is important to mention that, despite the fact that the Committee of Twenty was unable to agree, it kept the process moving by ordering the Executive Board to present proposals. In other words, the Executive Board was used as a forum to debate those issues upon which the Committee of Twenty did not reach consensus.82 When the Executive Board was unable to achieve agreement, it sought further advice from the Interim Committee of the Board of Governors.83

Management was also deeply involved in the decision-making process for the second amendment of the Articles of Agreement. Once the Committee of Twenty determined the issues that the second amendment should deal with, management prepared a memorandum for discussion by the Executive Board, which was constantly redrafted during the course of these negotiations.84 Also worth mentioning is one of the ways in which management acted during these deliberations. It sought to frame the scope of some of the issues to be amended according to the instructions provided by the Committee of Twenty.85 Subsequently, management acted as a broker by suggesting alternatives in light of deliberations within the Executive Board,86 which significantly contributed to generating consensus.

2. Decisions Concerning IMF General Policies87

Introducing new policies and amending those already in place at the IMF begins with a Governor’s initiative or a set of Governors acting together at an annual meeting.88 When a Governor takes the initiative, he or she has already discussed the issue with his or her own government or group of governments, and the given executive director follows up on the idea. Usually, proposals made by Governors give the Managing Director the opportunity to press for reforms that have already been discussed within the Fund.89 Once the need for a new policy is established, the work begins for the staff, Managing Director, Executive Directors, and Board of Governors.90

Executive Directors can request revisions of any of the policies of the Fund at any time. This is true even if there is no a mandatory review clause inserted in the respective decision or policy,91 which gives executive directors significant institutional power to shape the IMF’s policy. If the issue is raised during meetings of the Executive Board, an informal committee of staff from different departments is created to assess the topic.

If the need for a new policy is identified by staff as a result of the performance of their functions of surveillance or advice, the issue is first examined by a small group of senior officials, usually the Managing Director, the Deputy Managing Director, the General Counsel, the head of the Research Department, and other staff members.92 If additional study is required, the issue is assigned to a department, which prepares analytical papers that are sent to the Board for informational purposes only.

At this stage of the process of the design of a new policy identified by staff, the Executive Board starts getting involved through informal meetings in which the general policy is discussed and alternatives evaluated. Staff participates in such meetings. While this process is going on, the Managing Director may start exploring the views and reactions of Governors, particularly those in the Group of Ten. Once the Managing Director is sure of the Governors’ support, the new policy is put before the Executive Board.93

In recent years, the preparation and discussion of policies have involved both the Board and management over a period of several months. Policy proposals are approved by Board consensus.94

In sum, the policy amendment and formulation process at the IMF is both top-down and bottom-up. The process is also flexible in the sense that, in the case of bottom-up decision-making, management consults with the Executive Board and the Group of Ten on alternatives to facilitate a decision. Furthermore, the decision-making process is intertwined at three levels of the Fund: G10, Executive Board, and management. Finally, management has been involved in the development of new policies, regardless of who identified the need.

3. Decisions Regarding Budgetary Issues

According to Section 20 of the By-Laws of the IMF, the IMF Managing Director sets the agenda with regard to the IMF budget and has to present the IMF annual administrative budget to the IMF Executive Board for approval. However, the Executive Board analyzes the budget in detail prior to approving it.95

Budgetary issues are discussed by the Standing Committee on the Budget, created in 1994 and chaired by the Managing Director.96 The creation of the standing committee signalled the Executive Board’s desire to engage the budget process at an early stage. There have been tensions between management and the Executive Board regarding the precise role of the committee and its terms of reference,97 with executive directors seeking a more active role and Managing Directors attempting to preserve their power by submitting the budget proposal to the Executive Board for its approval at the final stages of the process of elaboration.98 Management has ensured that it retains control over the committee not only by holding the chair, but by ensuring that committee membership be restricted to a one-year term.99

As can be seen, the decision-making process for budgetary issues is significantly different than the process employed for policy development. Management plays a lead, if not central role in the formulation of the IMF budget. The Executive Board is struggling for a more decisive voice, but its contribution to the Fund’s budget-setting process remains marginal.

H. Summary Regarding Decision-Making Processes

From the foregoing discussion, a number of broad observations can be made about IMF decision-making.

1. The Board of Governors, the Executive Board, and IMF management play different roles, depending on the subject matter.

First, the Board of Governors does not decide in full and on its own, as expected, and has delegated its powers to informal committees of the Board, the Interim Committee, and even sometimes the Executive Board, providing it with specific instructions.

Second, the Executive Board does not always play the same role in all decision-making processes. There are occasions in which the Executive Board is the dominant voice (decisions related to the Fund’s policies), others in which it functions under the specific guidelines provided by the Board of Governors or the Steering Committee (determinations regarding amendments to the Articles), and finally, others in which the Executive Board has no meaningful voice (budgetary issues).

Third, the Managing Director’s role in decision-making is variable. Sometimes this involves following the instructions of G10 countries and at other times this role equals that of the Executive Directors or is at least as influential (decisions regarding changes to the IMF’s policies). There are also decision-making processes in which the Managing Director is the dominant player (budgetary determinations and decisions related to Members’ policies, among others).

2. IMF management is regularly involved in virtually all decision-making processes and can trigger the adoption of political decisions, such as determinations related to IMF policies.

3. The initiative to trigger decision-making processes resides with a number of actors: the Governor or group of Governors, the Executive Director or a group of Executive Directors, and the Managing Director.

The subject matter of the decision has conditioned the nature of the actor that can trigger the decision-making process. The greater the political character of the decision to be made, the higher the increased involvement of IMF’s political organs. The higher the technical nature of the decision, the lower the level of the IMF hierarchy that—as a matter of reality—can trigger the decision-making process.

In sum, IMF decision-making is context-specific. It is sufficiently flexible to meet organizational needs and seems to acknowledge the need to involve different actors depending on the subject of the decision.

III. The Governance of the World Bank

The World Bank provides financial and technical assistance to developing and least developed countries and loans at market interest rates to developing and least developed countries. Its main organs are the Board of Governors, the Board of Directors, and its internal management, headed by the President. Today, the World Bank has 185 Members, which can be divided into two basic categories: non-borrowing Members, namely, industrialized states; and borrowing Members, namely, developing and least developed countries.

Pursuant to Article V(2) of the Articles of Agreement, all the powers of the World Bank are vested in the Board of Governors. Each World Bank Member appoints a representative to the Board of Governors for a five-year term. Decisions by the Board are taken by majority vote. The Board of Governors has delegated most of its powers to the Board of Directors, though it retains the power to admit new members, increase or decrease the bank’s capital stock, and to suspend members.100

A. The Board of Directors: Its Structure and Decision-Making Process

The World Bank’s Board of Directors has three main functions: to approve funding projects for World Bank Members submitted by the Bank President, to determine the general policies that must be followed in the operation of the Bank, and to inform the Board of Governors of the World Bank’s activities.101

The Board of Directors, originally composed of 12 members, currently has 24 directors. Five members are appointed by the largest shareholders—France, the United Kingdom, the United States, Japan, and Germany. The remaining 19 directors are elected by Members through the formation of constituencies of Member States.102 The President of the World Bank is selected by the Board of Directors103 and can attend Board meetings. The President votes at Board meetings only in the event of a tie.

The Board of Directors operates through five standing committees: the Audit Committee, Budget Committee, Personnel Committee, Committee on Development Effectiveness (CODE), and Committee on Governance and Executive Directors’ Administrative Matters.104 Executive directors are members of one of more of these committees in addition to being members of the Steering Committee.105 The Board’s work program is annually determined by the Corporate Secretariat in consultation with the Steering Committee and management.106 Committees do not adopt decisions on behalf of the Board. However, contrary to IMF practice, they are always chaired by executive directors.107 In addition, the procedure for the operation of the Bank’s committees is more elaborate than at the IMF. Once a committee end its deliberations, a detailed summary identifying their views is prepared by staff. This summary is presented to committee members for comments and is not public. The summary specifies those issues the committee has reached consensus on and those that require further deliberation by the Board.108

Membership in committees is determined by the President, who nominates executive directors for the Board to appoint. Committee membership usually comprises eight executive directors, four each from borrowing and non-borrowing bank members.109 This practice attenuates the voting power within the Board’s decision-making process.110

Informality is a central feature of the World Bank’s decision-making processes. The World Board’s unofficial meetings, referred to by various names, help to provide the Board of Directors with advice and guidance.111

B. Voting in the World Bank

The World Bank has a system of decision-making based on weighted voting, in which each member country possesses 250 votes plus one additional vote for each share it has in the World Bank’s capital stock.112 North American and European countries have always had significant voting power. In 1947, they cast 74 percent of total votes; in 1971, they cast 61 percent. New members, coming from Africa, Asia, and the Middle East, have increased their voting power from 15 percent in 1947 to 28 percent. Latin American voting power has remained virtually unchanged, at approximately 8.3 percent.113 This means that the G10, constituting the Bank’s major shareholders, has enough of a majority (more than 50 percent of the votes) to adopt decisions within the Board of Governors and has veto power regarding amendments to the Articles of Agreement, although the group lacks the majority to push for such amendments, which require 85 percent of the votes.114 Although all World Bank Members possess the right to vote, as Foch states, ‘[n]ot all can make their voice heard and weigh on the decision making’.115

Despite the fact that the Board of Directors has a system of weighted voting, the Board decides on the basis of consensus, and few decisions are put to a vote. However, the composition of the Board does determine what issues are brought to the Board and how they are decided.116 As Griffith-Jones notes, ‘[i]ndirectly, consensus does reflect the voting power of member countries’.117 In fact, former Bank officials have accepted that, when their five largest shareholders agree on a particular issue, the Board adopts their position as a decision.118 Consequently, the G10 has a de facto power to influence the assignment of funds and their conditionality clauses.119

C. The President and Management

According to Article V(5) of the Articles of Agreement, the President acts under the direction of the Board of Directors. In practice, however, the President is in charge of the day-to-day operation of the Bank and is the head of management, which, under the guidance of the Board of Directors, is in charge of loans, guarantees, new policies, country assistance strategies, borrowing, and financial determinations.120

Given that the World Bank gets its resources from the financial community and not from governments, the President enjoys broad discretion and less political supervision by members.121 Past Presidents have worked to expand the role of their office, particularly during the Bank’s early years. During the World Bank’s first 25 years, long-term and short-term borrowing increased and expanded into new areas such as education, agriculture, water, and family planning. This was well beyond the initial conception of lending for electric power and transportation projects: a view still held by some Bank Members.122

D. Relations between the Board of Directors and the President

Since its early years, the independence of management from the Board in the day-to-day operations of the World Bank has been a pre-eminent institutional characteristic.123 Among the factors that have contributed to this significant independence are the expansion of the World Bank’s responsibilities and the limited tenure in office of executive directors.124 As a result, the President has significant power to steer the organization. It is the President who generally sets the agenda for the meetings of Board of Directors and, therefore, determines what issues the Board will decide on and when. Moreover, the President has broad discretion regarding budgetary procedures, procurement, and personnel.125 Importantly, the President is also vested with the power to make recommendations on policy matters, which may or may not be adopted by the executive directors.126

However, the President’s power is not without its limits. First, although the President has some control over the Board of Executive Directors’ agenda, such control faces some restrictions. When a proposed course of action faces significant opposition by influential executive directors, the President often delays the inclusion of the topic on the agenda of the Board.127 In this circumstance, it is the Board that has the power, as a matter of reality, to determine when issues will be included on the agenda by the President.

Second, historians of the World Bank have noted that the role of the Board has often been determined by the personality of the President. A strong President tends to result in Boards that feel they must act as a brake on the President.128 Therefore, Presidents have not been able to reign at will over the Executive Board or Board of Directors.

In sum, the President is certainly the dominant voice in his relationship with the Board, but that voice may be strong or weak depending on a number of circumstances.

E. The Steering of the World Bank

The fact that the President, not the Board of Directors, runs the World Bank has not prevented large shareholders from having significant influence in the day-to-day operations of the Bank.129 The influence of the United States is important, despite the fact that its contributions and voting power have declined.130 In total, non-borrowing members possess 62 percent of the votes at the World Bank.131 On the other hand, developing and least developed countries lack influence because of their lack of collective action and their lack of involvement in the management of the organization. Borrowing countries do not vote against loans, fearing that the reasons justifying such refusals may apply to them in the future.132

The functioning of the World Bank illustrates that one of its major institutional weaknesses is its inability to give borrowing countries a more prominent voice in the decision-making process. The World Bank has received broad criticism for this and is in the process of addressing it in its reform process.

There are two types of changes that have been suggested and/or already implemented to enhance the voice and participation of developing countries in the decision-making process of the World Bank: structural and non-structural.133 The following are the non-structural options recommended by the Development Committee (created by both the IMF and the World Bank):

1. Higher representation of staff from developing countries in the World Bank’s senior management;

2. A communications dimension in projects funded by the World Bank;134

3. Enhanced Board effectiveness;135

4. An increased role in the appointment of the President;

5. Length of executive directors’ tenure;136 and

6. Capacity building in executive directors’ offices.

The recommended structural reforms include changing (1) the World Bank’s voting structure, (2) the World Bank’s capital stock, (3) the composition of the Board of Directors,137 and (4) special majorities.

Another recommendation that has been made is to establish particular majorities regarding a set of decisions in which the substantial support of developing and transition countries would be required.138 Also, there has been discussion about certain decisions being taken only if approved by a majority of developing and transition members (double majority).139

As with the IMF, the G20 has decided to directly involve the World Bank in finding solutions to the ongoing financial crisis by speeding up the Bank’s reform process under the same guiding principles of the reform of the IMF: to update mandates and governance; to increase the voice of developing and emerging members; and to enhance the Bank’s accountability.140 In addition, and to respond to the impact the crisis is having on developing countries, the Bank, supported by the G20, has launched the Global Trade Liquidity Program to provide support to exporters and importers in countries of this character. The initiative has $50 billion available to achieve its objective.141

Overall, a review of the history of the operation of the bank yields mixed reviews. To some, the Bank has helped borrowing Members to develop through an outward-looking policy. However, those opposing such a policy criticize the Bank for a lack of results and for its lack of attention to equity and the environment. The World Bank has also changed its focus over the years. Sometimes it had prioritized growth through trade and foreign investment. Today its goal is to fight poverty in developing and the least developed countries. In recent years, and until the current financial crisis, the World Bank has become a less important player for Members. Many middle-income countries did not need the World Bank since they could obtain funding in the financial markets; others simply no longer required its loans.142 However, the current crisis may well mean a revival of the World Bank, which is actively involved in helping countries in difficult circumstances.143

F. Decision-Making for the Adoption of Specific Decisions

1. Decisions Regarding Bank Policies

A change in Bank policy may come from a management initiative. The change is subject to a deep analysis followed by a report authored by a top official. The report is then discussed internally within the Managing Committee. Once the report has been fully debated, and even if there is no consensus on it, it is sent to the Board of Directors for informal discussion at the Board’s seminars.144 Generally, the Board discusses policy papers twice. First, it debates the principles of the policy and then the policy itself.145

In recent years, the decision-making process for changes to the Bank’s policies has often been triggered by management, in particular by the Operations Policy and Country Services vice-presidency. Management prepares a draft, which is circulated for comments to internal and external experts, clients, and stakeholders, such as NGOs. The outcome of this process is then submitted for additional comments to the responsible units and then to managing directors and ultimately to the Board of Directors.146

The Bank President has significant control over the agenda in respect of Bank policies. By the time proposals have arrived for informal discussion before the Board, they have been fully debated by management and have added legitimacy as a result of consultations with outside stakeholders.

2. Decision-Making for Loans to Members

The decision-making process for loans starts when the Bank designs a Country Assistance Strategy (CAS) for a given Member. The strategy details the financial and technical assistance the Bank is willing to grant a Member and the projects that may be carried out to achieve the strategy’s objectives. Bank Members participate in the elaboration of their CAS. Members are in charge of preparing projects, but they are nonetheless assisted by the Bank. Once the project is approved by the Member, negotiations about the conditions of the loan start. Operational personnel from the Bank prepare Project Evaluation Documents (PED) and Program Documents (PD), which are submitted to the President, who decides when to submit them to the Board.147

Before making a loan, the executive directors, in particular the executive director who was elected by the Member that is the borrower or guarantor of the loan, approve all the documents. Such approvals are understood to mean that the Board—which is the interpreter of the Articles of Agreement—regards the transaction as falling within the sphere of the Articles.148

Loan approvals have certain dynamics, though. The Board is reluctant not to approve a loan on the terms negotiated by the President and management, since not approving could be seen as a vote of no confidence in the country seeking the loan, and in management’s handling of the loan program. Nonetheless, the Board has instruments to make its voice heard, such as requesting that the President and management not include certain issues in a future loan149 or requiring information early in the negotiating process between the Bank and a Member seeking a loan.150 Generally speaking, the Board asks questions, identifies problems, and discourages initiatives that members may not be ready to adopt.151 But the role of some executive directors in loan approvals may go well beyond this stage and include a role during the negotiations themselves—for example, requiring management to speed up or give priority to certain loans the directors are concerned about.152

G. Summary

Some features of the World Bank’s decision-making process during its history have been the following:

• A Governor or group of Governors may trigger the decision-making process at the Board of Governors level.

• Some political decisions by the Board of Governors level include interacting with Board of Directors, who, under the guidance of Governors, analyze issues and develop proposals that are sent back to the Governors for deliberation and decision.

• Some decision-making processes, particular those related to loans to Member States, take place at various levels simultaneously: Management, in consultation with the given elected executive director, negotiates with the member concerned.

• Management is usually involved in all decisions and has the power to take the initiative and trigger decision-making processes within the World Bank. In addition, the President can be an important ally of Governors in the political process, leading to the inclusion of their issues within their Board of Governor’s agenda.

• Finally, the significance of the influence of the Board of Directors varies, depending on the type of decision at hand. Sometimes, it plays an important role (particularly when it approves an operation but asks that certain issues not be included in future loans). But in others, particularly in cases where major World Bank Members deal directly with the President, it plays a limited role.

IV. Proposals for Reform of the WTO Internal Management in Light of Those of the IMF and the World Bank153

Having described some features of the operation of the IMF and the World Bank, this section seeks to use this experience to improve proposals already made to enhance the WTO internal management and its decision-making process. Any WTO Member that relies on the experience of the IMF or World Bank must take account of the current trends in institutional design, characterized not only by concerns for efficiency but also for proper representation of developing and least developed countries.

A. Creation of a WTO Consultative Body

There has been a recommendation to create a consultative body within the WTO decision-making process.154 Suggestions regarding the mandate and composition vary among authors. On one hand, the Sutherland Report, recommends the creation of a consultative body to be chaired and convened by the WTO Director-General. Ministers or senior officials would participate in this body.155 Blackhurst and Hartridge share this view and suggest that the body would lack decision-making power.156 However, Steger and Shpilkovskaya go further and suggest that this body should have advisory, executive, and super-visorial roles.157 Common ground among these authors is that membership cannot be exclusive and that, on the contrary, it must be fully representative of the whole WTO Membership.

The experience of the IMF’s IMFC provides support for the creation of a consultative body within the WTO to improve the effectiveness of its decision-making process. Such experience can be valuable in two ways: first, it illustrates how the body could function to introduce new dynamics to trade negotiations in order to break deadlocks; and, second, the IMFC’s experience could guide WTO Members in determining the profile of those individuals appointed to the body.

As to the first, the combination of delegation with instructions from the IMFC to the Executive Board has sometimes made inter-state negotiations in the IMF possible. The ability of the IMF Executive Board to go back to the IMFC to assess progress and agree on new instructions for the former has introduced new dynamism to decision-making processes within the Fund, and it has been a valuable process in overcoming deadlock. A similar interaction could take place between the WTO Ministerial Conference and a WTO consultative body concerning the negotiation of new trade rounds, but also between the consultative body and the Councils of Trade in Goods and Services, and the Council for TRIPS.158 In effect, WTO councils or committees could also advance issues for further negotiations before the consultative body regarding topics for which consensus is elusive within the councils or committees.

Second, if the WTO body, either consultative or executive, is to play a meaningful role in improving the efficiency of the operation of the WTO decision-making process, the experience of the IMFC regarding its composition could be relevant. The IMFC is made up of IMF governors, namely, finance ministers or heads of central banks. It is the combination of the knowledge and domestic political power of the IMFC’s members that has permitted it to become such a significant actor within the IMF’s decision-making process. Consequently, the WTO consultative body should be made up of trade ministers capable of making their voices heard within the WTO and their national government. The body would then provide ministerial-level advice to the Ministerial Conference, the General Council, the WTO Director-General, and other WTO political bodies.159

As to the mandate, the consultative body could be asked to provide advice regarding mainly issues in a round of negotiations and concerning the implementation of the existing covered agreements. Such a body should have 24 to 30 members and be truly representative of the WTO Membership. Finally, to be able to play a meaningful role within the WTO, the consultative body or its members should be allowed to trigger decision-making processes in particular circumstances.160 Or, at a minimum, the understanding in creating the body should avoid constraints triggering more formal decision-making and allow the body initiative to evolve through interactions with the Director-General.

B. New Role for the Director-General and the Secretariat

The Sutherland Report, Steger and Shpilkovskaya, and others have proposed enhancing the role of the WTO Director-General (DG) and the Secretariat.161 Perhaps the only insight that the history of the World Bank and the IMF can offer to WTO Managing Directors is that IMF Managing Directors and World Bank Presidents have been willing to take advantage of the opportunities they have found to increase the institutional relevance of their positions. DGs should behave in a similar way. They have done so recently. For instance, Director-General Panitchpakdi set some precedents that, in addition to seeking the achievement of important objectives of the Organization, had as a side effect the enhancing of the Director-General. Examples of this include the establishment of the consultative board that rendered the Sutherland Report and the creation of an NGO advisory body. The Sutherland Report did not receive the attention it deserved, nor was the NGO Advisory Body well received, even by prominent NGOs, who decided not to participate in it.162 Nonetheless, these two attempts constitute examples that may have some precedential value and that add to past experiences that show that DGs have some margin of action.

Another potential and more effective way in which the DG and the Secretariat’s institutional position within the Organization can be enhanced is by identifying the type of decisions in which their role can be more prominent.163 This approach is directly drawn from the experience of the IMF and the World Bank, in which the roles of both managements within decision-making processes vary according to the type of decision in question.

However, before attempting to tackle this subject, it is important to link the issue of the enhancement of the DG and the Secretariat to the context of the ongoing reform of the Bretton Woods institutions: any enhancement must take place on the condition that both the DG and the Secretariat act as neutral players and do not openly or covertly favour positions adopted by developed country Members, which has not always been the case. In effect, according to Nordström, the Secretariat has sometimes been perceived by developing countries as advancing developed countries’ positions.164 If the DG and the Secretariat are not seen as neutral players, any attempt to enhance their institutional position will be doomed by developing and least developed countries’ opposition.165

The WTO Secretariat has the capacity to take make important contributions to the WTO decision-making process and to play a more important role. Indeed, the Secretariat is present in all WTO spheres of action and, consequently, possesses a wide and complete view of the Organization. In effect, the Secretariat participates in all negotiations, in the implementation of each of the covered agreements, and in dispute settlement proceedings at the panel level. In addition, it carries out the trade review of all WTO Members and provides technical assistance to developing and least developed members. Undoubtedly, it is an actor with knowledge of the four corners of the WTO and is in a position to identify needs for change at various levels of the Organization.

Having said this, this chapter turns to identify the type of decision-making processes in which the Secretariat should be given a more active role: those related to internal secondary normativity, secondary soft law, and binding decisions concerning technical issues.

1. The Secretariat and Internal Secondary Normativity

Footer defines this kind of norm as the rules and procedures for meetings of WTO political bodies or other matters of internal procedure.166 This legal category, in principle, does not create rights and obligations for WTO Members, and therefore, there are factual differences for a distinct decision-making process in which the Secretariat can seize the initiative and play a more active role.

The practice of the Organization reveals that the role of the Secretariat in the design of these rules has been at times more important. Footer specifically refers to the 1995 Technical Note on the Accession Process,167 which contains a practical guide for WTO Members to carry out accession negotiations as an example of this situation.

2. The Secretariat and Its Initiative Regarding Secondary Soft Law

There should also be some room for the Secretariat to take the initiative regarding non-binding secondary rules, or secondary soft law. As Footer states with great precision, soft law may not be legally binding but may be legally relevant.168 The notion of soft law requires certain clarification. In her words,

In the WTO context soft law may be addressed to the membership collectively, or occasionally to individual Members. Primary soft law has a normative content but where it differs from primary hard law is that it has not been adopted in treaty form. It may declare new norms—sometimes intended as a precursor to the adoption of a later hard treaty text—or it may elaborate or reaffirm norms previously set forth in binding or non-binding instruments.169

This soft law is expressed in the issuing of recommendations and comments by supervisory or monitoring bodies170 and has in fact already played different roles in the WTO, such as supplementing hard rules or precursors to ‘hard law’.171 The WTO Secretariat could go further in taking the initiative to produce external non-binding regulations, and it is in a privileged position to do so.172 Given that this kind of norm does not create new rights and obligations, the Secretariat could well be in a position to exert initiative if it sees the need to do so and to be an active participant in the decision-making process.

3. The Secretariat and Binding WTO Law Regarding Technical Issues

It was seen in the first two parts of this chapter that the more technical the issue, the more initiative that managements at both the IMF and the Bank have had to trigger decision-making processes related to the given subject matter. As was illustrated, this situation has its roots in the fact that the Bank’s and IMF’s staff gain important knowledge of members on the basis of the negotiations for the selection, design, approval, and execution of the Bank’s projects or by virtue of the consultations between IMF staff and country authorities regarding their macroeconomic policies.

Could the Secretariat be in a position in which it had privileged access to technical information that could allow it to identify technical issues that require new rules, the fine-tuning of the existing ones, or outright changes? Yes, the Secretariat is usually involved in dealing with complex technical issues such as discussion in relevant WTO political bodies at different levels, ongoing negotiations, trade review reports carried out by the Secretariat,173 dispute settlement, and implementation of the covered agreements. These channels give the Secretariat privileged information regarding the identification of technical issues that require adjustment, which offers the Secretariat the opportunity to trigger decision-making processes aimed at this result. Thus the Secretariat could start the process within the competent WTO political body and the given process could move up into the hierarchical ladder to the General Council or the Ministerial Conference.174

In sum, it can be said that there are areas in which the enhancing of the role of the Secretariat may face less resistance by WTO Members, such as the issuing of internal regulation and secondary soft law, and the fine-tuning or modification of binding rules regarding certain technical issues. The DG and the Secretariat could draw on these gains in institutional relevance to expand their roles to other areas of WTO hard law so as to contribute to increasing the efficiency of the WTO decision-making process. However, there is a precondition for this project to have a chance of success: the Secretariat’s neutrality, in the sense that it must be perceived by Members to act in each particular occasion with due consideration for the specific positions adopted by members of all kinds.

Although it is known that the Secretariat can informally take some initiative,175 the ultimate question is whether the Secretariat has the legal authorization to trigger WTO decision-making processes. To begin with, the functioning of international organizations and their organs would be seriously impaired if they could exclusively carry out those actions they have been explicitly authorized to do. Instead, the authorization can be implicit, and it can be found in Article III.1 of the Marrakesh Agreement Establishing the World Trade Organization, providing for the functions of the WTO to be read in the context of its objectives. Thus, as long as the Secretariat, as expected, is exerting initiative within any of the functions of the WTO and to favour one of its objectives, it is possible to state that the Secretariat has sufficient legal grounds to do so. Obviously, any final determination will rest within the authority of the WTO membership.

V. Conclusion

The chapter has shown that an assessment of the history of the World Bank and the IMF regarding their operations and of the relations between their Boards and managements can offer some lessons to improve on the recommendations to enhance the WTO decision-making process. Such lessons have not been drawn on the basis of a mechanistic comparative approach. On the contrary, the analysis carried out in this chapter has taken into account, first, the particularities of the World Bank’s and IMF’s mandates and goals; and second, the current trends in international institutional design, marked not only by concerns for efficiency but also for the appropriate representation of developing and least developed countries.

On these bases, this chapter has concluded that the IMF IMFC’s experience provides further support for the creation of a consultative body in the WTO as a potential valuable decision-making organ capable of breaking deadlocks in trade negotiations. In addition, the above-mentioned experience also suggests that to achieve this result, the WTO consultative body should be made up of trade ministers.

Finally, the chapter has also illustrated that the IMF’s and World Bank’s past operation can be useful to give content to the proposal for enhancing the institutional position of the WTO Director-General and the Secretariat. In particular, the experience of the World Bank’s and the Fund’s management—which has defined their different roles, depending on the type of decision in question—can guide the search for situations in which the strengthening of the WTO Secretariat can take place. These situations are the decision-making process for the adoption of internal procedural norms for some operations of WTO political bodies, secondary non-binding rules, and exceptionally, for binding rules of a technical nature. Regarding this set of determinations, the Secretariat should be recognized as able to exert certain initiatives in triggering decision-making processes within the WTO.

Notes

1 The historical assessment this chapter presents is largely based on the official histories of the IMF and the Bank concerning the evolution of the decision-making bodies of these two international organizations, the development of the relations between such bodies during certain epochs, and how decision-making processes have been conducted as to certain types of determinations at particular times. A complete analysis of all those issues from a full historical perspective and for both the IMF and the Bank goes well beyond the scope of this chapter.

2 Alexander Mountford, ‘The Formal Governance Structure of the International Monetary Fund’, Independent Evaluation Office. International Monetary Fund. Background Paper BP/08/01. at 6, http://ieo-imf.org/eval/complete/pdf/05212008/BP08_01.pdf (visited 19 February 2009).

3 Ibid, at 6.

4 See Margaret de Vries, ‘The Process of Policy Making’ in Margaret G. de Vries and J. Keith Hosefield (eds), The International Monetary Fund 1945–1965 (Washington: International Monetary Fund, 1969) vol. 2, 6, and James M. Boughton, Silent Revolution: The International Monetary Fund 1979–1989 (Washington: International Monetary Fund, 2001) 1022.

5 Daniel D. Bradlow, ‘The Governance of the IMF: The Need for Comprehensive Reform’, at 7 (Presentation given at the meeting of the G24 Technical Committee, September 2006, on file with author).

6 See http://www.imf.org/external/index.htm (visited 21 February 2009).

7 See IMF, ‘As Contingency, IMF Aims to Double Its Lendable Resources’. 2 February 2009, http://www.imf.org/external/pubs/ft/survey/so/2009/POL020209A.htm (visited 18 February 2009).

8 See Stefan Wagstyl, ‘How Not to Annoy Someone from Central or Eastern Europe’, Financial Times, 27 February 2009, http://www.ft.com/cms/s/0/5618118a-0507-11de-8166-000077b07658.html (visited 1 March 2009).

9 See Independent Evaluation Office. International Monetary Fund, ‘Governance of the IMF. An Evaluation’, 2008, http://www.ieo-imf.org/eval/complete/pdf/05212008/CG_main.pdf (visited 12 February 2009), at 1. [IEO, ‘Evaluation IMF Governance].

10 See Alexander Mountford, ‘The Historical Development of IMF Governance’, Independent Evaluation Office, International Monetary Fund, Background Paper BP/08/02, http://ieo-imf.org/eval/complete/pdf/05212008/BP08_02.pdf (visited 21 February 2009), at 5.

11 Ibid, at 6.

12 See IEO, ‘Evaluation IMF Governance’, above n 9, at 1.

13 See Margaret Garritsen de Vries, The International Monetary Fund 1972–1978: Cooperation on Trial (Washington: International Monetary Fund, 1985) vol. 2, 966.

14 See Boughton, above n 4, at 1022.

15 Resolution 54-9, adopted 30 September 1999, as quoted by Mountford, ‘Formal IMF Governance’, above n 2, at 8.

16 Ibid.

17 Reuters, ‘IMF Mulls New Council to Empower Emerging Nations.’ 13 February 2009. http://www.reuters.com/article/bondsNews/idUSN1140849920090213?sp=true (visited 21 February 2009).

18 See de Vries, ‘Policy Making’, above n 4, at 8.

19 See Mountford, ‘Formal IMF Governance’, above n 2, at 13.

20 See Boughton, above n 4, at 1040–41.

21 Ibid.

22 Section C-6 of the By-Law Rules and Regulations of the IMF. http://www.imf.org/external/pubs/ft/bl/rr03.htm (visited 10 March 2009).

23 See Article XII, Section 2(j) of the IMF Articles of Agreement. http://www.imf.org/external/pubs/ft/aa/aa12.htm#2 (visited 10 March 2009).

24 See Jeff Chelsky, ‘The Role and Evolution of Executive Board Standing Committees in IMF Corporate Governance’, Independent Evaluation Office of the International Monetary Fund. BP/08/04. (April 2008), at 8. http://www.ieo-imf.org/eval/complete/pdf/05212008/CG_background7.pdf (visited 18 September 2008).

25 See de Vries, ‘Policy Making’, above n 4, at 17.

26 See Garritsen, Cooperation on Trial, above n 13, at 990.

27 See J. Keith Horsefield, The International Monetary Fund 1945–1965 (Washington, D.C.: International Monetary Fund, 1969) vol. 1, 259.

28 Se ibid, at 311.

29 For a specific situation in which this incidence took place, see Horsefield, above n 27, at 345–46.

30 See online: IMF available at http://www.imf.org/external/np/exr/facts/quotas.htm. For a detailed description of the history of the quota formulas, see http://www.imf.org/external/np/exr/ib/2007/041307.htm.

31 See Peter B. Kenen, ‘Reform of the International Monetary Fund’, CSR No 29 (Council on Foreign Relations, 2007) http://www.cfr.org/content/publications/attachments/IMF_CSR29.pdf (visited 30 August 2008). See also http://www.imf.org/external/np/sec/memdir/members.htm (visited 28 February 2009).

32 See Mountford, ‘Historial IMF Governance’, above n 12, at 11–12.

33 See http://www.imf.org/external/about/govrep.htm (visited 15 February 2008).

34 See Mountford, ‘Formal IMF Governance’, above n 2, at 18.

35 See Joseph Gold, as quoted by Andres Rigo Sureda, ‘Informality and Effectiveness in the Operation of the International Bank for Reconstruction and Development’, 6 Journal of International Economic Law 565 (2003), at 572.

36 See Garritsen, Cooperation on Trial, above n 13, at 988. The Board defined the sense of the meeting as ‘a position supported by Executive Directors having sufficient votes to carry the question were a vote to be taken’. Boughton, above n 4, at 1032.

37 See Garritsen, Cooperation on Trial, above n 13, at 989.

38 See Mountford, ‘Formal IMF Governance’, above n 2, at 19.

39 See de Vries, ‘Policy Making’, above n 4, at 16.

40 See Mountford, ‘Formal IMF Governance’, above n 2, at 16. However, the IEO states that summings-up are usually vague or contradictory and that minority views are not always detailed. See IEO, ‘Evaluation IMF Governance’, above n 9, at 14.

41 See de Vries, ‘Policy Making’, above n 4, at 16.

42 The Managing Director is appointed by the Europeans by virtue of an agreement with the United States, who decided in 1946 that its priority was to appoint the President of the World Bank. See Boughton, above n 4, at 1043.

43 Article XII Section 4(b) of the IMF Articles of Agreement. http://www.imf.org/external/pubs/ft/aa/aa12.htm#2.

44 See Horsefield, above n 27, at 472.

45 See IEO, ‘Evaluation IMF Governance’, above n 9, at 17.

46 See Mountford, ‘Formal IMF Governance’, above n 2, at 21.

47 See Horsefield, above n 27, at 197.

48 Ibid.

49 Ibid, at 471, and de Vries, ‘Policy Making’, above n 4, at 11–12.

50 See Horsefield, above n 27, at 472. Sometimes, such negotiations were not endorsed by the Board, which introduced changes. See ibid, at 473.

51 See de Vries, ‘Policy Making’, above n 4, at 13.

52 Ibid.

53 See Horsefield, above n 27, at 244, 247.

54 For an example, see ibid, at 457–58.

55 See Mountford, ‘Formal IMF Governance’, above n 2, at 18.

56 Ibid.

57 See Edwin M. Truman, ‘Overview on IMF Reform’, in Edwin M. Truman (ed), Reforming the IMF for the 21st Century (Washington, D.C.: Institute for International Economics, 2006) 31, 85, and Mountford, ‘Historical IMF Governance’, above n 12, at 8.

58 See Independent Evaluation Office, Annual Report 2003 at 13. available at http://www.imf.org/external/np/ieo/2003/ar/Report.pdf.

59 See Bradlow, above n 5, at 13.

60 See Mountford, ‘Historical IMF Governance’, above n 12, at 18.

61 Ibid, at 18–20.

62 See Mountford, ‘Historical IMF Governance’, above n 12, at 14.

63 Australia’s prime minister criticized the fund for not having anticipated the ongoing financial crisis. See Reuters, ‘IMF Mulls New Council to Empower Emerging Nations’.

64 International Monetary Fund, ‘IMF Signs $100 Billion Borrowing Agreement with Japan.’ 13 February 2009. http://www.imf.org/external/pubs/ft/survey/so/home.aspx (visited 21 February 2009).

65 International Monetary Fund, ‘As Contingency, IMF Aims to Double Its Lendable Resources’. 2 February 2009. http://www.imf.org/external/pubs/ft/survey/so/2009/POL020209A.htm (visited 18 February 2009).

66 As to proposals for reform regarding the governance of the IMF, see Edwin M. Truman, ‘The G20 and International Institution Reform: Unfinished IMF Reform’, http://www.voxeu.org/index.php?q=node/2896 (visited 20 February 20090), and Edwin Truman, ‘Globalization Goes into Reverse?, http://www.petersoninstitute.org/realtime/?p=453 (visited 20 February 2009).

67 See IEO, ‘Evaluation IMF Governance’, above n 9, at 19.

68 Ibid, at 20.

69 Ibid.

70 Ibid, at 21.

71 Ibid, at 20.

72 Ibid, at 19.

73 Ibid, at 21.

74 Concerns for voice are at the forefront of the ongoing reform, and there have been proposals aimed at establishing a double majority for certain types of determinations. According to the High-Level Panel on IMF Board Accountability, double-majority voting ‘seeks to balance the interest of the few industrialized countries with large economies and the interest of the more numerous developing countries with smaller economies’. (High-Level Panel on IMF Board Accountability, ‘Key Findings & Recommendations’, 10 April 2007, at 10. http://www.new-rules.org/docs/imf_board_accountability.pdf [visited 10 March 2008].) According to Woods, by establishing the double majority rule, powerful vote holders would be compelled to try to create coalitions representing more varied types of states and, in particular, borrowing countries. (See Ngaire Woods, ‘The Globalizers in Search of a Future: Four reasons Why the IMF and the World Bank Must Change, and Four Ways They Can’ [Center for Global Development, 2006], at 5.) This could be done by extending the double majority requirement already existing in the IMF. Today, the decision to expel a Member or to deny it its rights must be adopted by a minimum of 85 percent of voting power and a 60 percent majority of members. (See Ngaire Woods and Domenico Lombardi, ‘Effective Representation and the Role of Coalitions within the IMF’ [GEG Working Paper 2005/17], at 15. Double majority voting exists in the EU Council of Ministers and the Global Environment Facility in the World Bank. See ibid.).

In consequence, the first majority would be calculated on the basis of weighed votes, but a second majority would be required within the Board. However, Chowla has gone even further in the definition of how the double majority should be designed. He argues that a chair-based majority would not increase developing countries’ voices, because developed country executive directors would still dominate the Board, which would not require them to seek higher levels of consensus. See Peter Chowla, ‘At Issue: Double Majority Decision Making at the IMF: Implementing Effective Broad Voting Reform’, http//brettonwoodsproject.org/doc/wbimfgov/implementingDM.pdf, referred to by the IMF website (visited 25 February 2008). Therefore, he has suggested that the second majority should be a state majority, so that chairs would have the number of votes of the members in their constituency. (See ibid.).

75 See High-Level Panel on IMF Board Accountability, above n 74, at i, ii.

76 International Monetary Fund, ‘Report of the Working Group of IMF Executive Directors on Enhancing Communication with National Legislators’, 15 January 2004, http//www.imf.org/external/np/ed/2004/ecnl/index.htm (visited 25 February 2008). Likewise, Kahler states that ‘legislative engagement can produce strong positive effects on program implementation, offsetting possible costs to negotiate efficiently’. Miles Kahler, Internal Governance and IMF Performance in Edwin M. Truman (ed), Reforming The IMF for the 21st Century (Washington, D.C.: Institute for International Economics, 2006) 268.

77 See G20, ‘Final Communiqué: The Global Plan for Recovery and Reform’, 2 April 2009, paras 18–19, http://www.g20.org/Documents/final-communique.pdf (visited 6 April 2009).

78 Ibid, para 20.

79 Ibid.

80 This is an analysis conducted on the basis of the IMF history and seeks to identify different decision-making processes that can be useful for a comparative assessment with that of the WTO. It is not claimed that today the decisions indicated below are taken through the decision-making process here described.

81 Paramount among them was to amend the IMF provisions on gold, to legalize the position of members with floating rates, and to create a permanent and representative council of governors to supervise the management and adaptation of the international monetary system. See Garritsen, Cooperation on Trial, above n 13, at 686.

82 Ibid, at 691.

83 Ibid, at 709–22.

84 Ibid, at 686.

85 Ibid, at 694.

86 Ibid, at 715.

87 Such policies may be related to the creation or amendment of the IMF’s loan instruments—facilities—and their most important terms, such as the Poverty Reduction and Growth Facility, Exogenous Shocks Facility, Stand-By Arrangements, the Flexible Credit Line, the Extended Fund Facility, and the emergency assistance for natural disasters. The need to introduce changes may arise due to drastic alterations in external conditions. Examples are the oil shocks of the seventies, the debt crisis of the eighties, the transition process in Eastern and Central Europe during the nineties, and the current world financial crisis. See in this regard International Monetary Fund, ‘IMF Lending’, http://www.imf.org/external/np/exr/facts/howlend.htm (visited 5 April 2009). Detailed explanations of the IMF policies go beyond the scope of this chapter, since they are specifically related to the operation of the Fund and therefore have not significant value for the comparative exercise carried out here.

88 See Garritsen, Cooperation on Trial, above n 13, at 963.

89 Ibid.

90 Ibid, at 965.

91 Ibid, at 989.

92 See de Vries, ‘Policy Making’, above n 4, at 17.

93 Ibid.

94 See Mountford, ‘Formal IMF Governance’, above n 2, at 19.

95 See Garritsen, Cooperation on Trial, above n 13, at 984.

96 See Chelsky, above n 24, at 17.

97 Ibid, at 11.

98 Ibid, at 34.

99 Ibid, at 23.

100 See Edward S. Mason and Robert E. Asher, The World Bank since Bretton Woods (Washington, D.C.: Brookings Institution, 1973) 29.

101 See Arthur Foch, ‘The Governance of the World Bank: Analysis and Implications of the Decisional Power of the G10’ Documents de Travail du Centre d’Economie de la Sorbonne. Centre de la Recherche Scientifique. 2008. http://halshs.archives-ouvertes.fr/docs/00/23/54/36/PDF/R08007.pdf (visited 15 February 2008), at 13.

102 For a detailed description of the operation of constituencies, see ibid, at 13–14.

103 In practice, the United States appoints the President of the Bank.

104 See World Bank, ‘Board of Directors’, http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/ORGANIZATION/BODEXT/0,,pagePK:64020055~theSitePK:278036,00.html (visited 7 April 2009).

105 See World Bank, ‘Board Work Program’, http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/ORGANIZATION/BODEXT/0,,contentMDK:50004944~menuPK:
64020021~pagePK:64020054~piPK:64020408~theSitePK:278036,00.html (visited 7 April 2009).

106 For the content of the annual program, see ibid.

107 See Chelsky, above n 24, at 36.

108 Ibid.

109 See Rigo Sureda, above n 35, at 582.

110 Ibid, at 585.

111 Ibid, at 582.

112 See World Bank, ‘Voting Powers’, http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/ORGANIZATION/BODEXT/
0,,contentMDK:21429866~menuPK:64020035~pagePK:64020054~piPK:64020408~theSitePK:278036,00.html (visited 7 April 2009).

113 See Mason and Asher, above n 100, at 64.

114 See Foch, above n 101, at 9.

115 Ibid, at 11.

116 See Stephany Griffith-Jones, Governance of the World Bank, http:/stephany.acrewoods.net/_documents/Governance_of_the_World_Ban._Paper_prepared_for_DFID.pdf at 6 (visited 15 February 2008).

117 Ibid.

118 See Foch, above n 101, at 15.

119 Ibid, at 16.

120 For further President’s responsibilities and prerogatives, see below Part II.D.

121 However, Foch highlights the Bank’s President cannot make decisions without endorsement by the United States, European members, and Japan. See Foch, above n 101, at 17.

122 See Mason and Asher, above n 100, at 101–2.

123 See Devesh Kapur, ‘The Changing Anatomy of Governance of the World Bank’, in Jonathan R. Pincus and Jeffrey A. Winters (eds), Reinventing the World Bank (Ithaca: Cornell University Press, 2002) 55.

124 Ibid.

125 Ibid, at 60.

126 See Rigo Sureda, above n 35, at 567.

127 See Mason and Asher, above n 100, at 93.

128 Ibid, at 94.

129 Woods quotes a British aid official as stating, ‘We construct an elaborate mechanism for setting priorities and discipline in the Bank, and then as donors we bypass this mechanism by setting up separate financial incentives to try to get the Bank to do what we want.’ Ngaire Woods, ‘Power Shift: Do We Need Better Global Economic Institutions?’ (Institute for Public Policy Research, 2007), at 21.

130 See Kapur, above n 123, at 63–64. The United States has more than 16 percent of the voting power and retains veto over amendments of the World Bank’s Articles of Agreement, which requires 85 percent majority. See Griffith-Jones, above n 116, at 4. Examples of such influence are several. After India’s and Pakistan’s testing of nuclear weapons, Improvements to WTO Decision-Making Alberto Alvarez-Jiménez 123 loans to these countries were curtailed to sectors unrelated to humanitarian issues. After a U.S. president visited India, the Bank changed its position and made a loan for the power sector. See Rigo Sureda, above n 35, at 588.

131 See Griffith-Jones, above n 116, at 4.

132 See Kapur, above n 123, at 67.

133 Development Committee (Joint Ministerial Committee of the Board of Governors of the Bank and the Fund on the Transfer or Real Resources to Developing Countries), ‘Voice and Participation of Developing and Transition Countries in Decision Making at the World Bank,’ at 1 (2007), http://siteresources.worldbank.org/DEVCOMMINT/Documentation/21510673/DC2007-0024(E)Voice.pdf (visited 13 February 2008).

134 The Bank believes that this strategy in World Bank–financed projects should involve consultations and communications with local communities, stakeholders, NGOs, and other beneficiaries, which would increase ownership, would allow the identification of key local realities required for successful implementation, and would contribute to governments’ accountability to its citizens. See ibid, at 4.

135 The Board of Executive Directors has determined that to improve its effectiveness the following actions must be carried out: enhance the Board’s role in strategic priority setting; better design spheres of action between the Board and senior management as to strategy and policy making; improve Board’s oversight and following-up and evaluation of implementation of its decisions. Ibid, at 5.

136 Ibid, at 3.

137 Ibid, at 2.

138 Ibid, at 19.

139 Ibid.

140 See G20, above n 77, para 20.

141 See World Bank, ‘New Trade Finance Program to Provide up to $50 Billion Boost to Trade in Developing Countries’, Press Release No 2009/291/IFC-EXC, 2 April 2009, http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22127460~pagePK:64257043~piPK:437376~theSitePK:4607,00.html (visited 6 April 2009).

142 For a review of the operation of the bank, see Jessica Einborn, ‘Reforming the World Bank: Creative Destruction’, 85 Foreign Affairs 17 (2006).

143 See World Bank, ‘Financial Crisis. What the World Bank Is Doing’ http://www.worldbank.org/html/extdr/financialcrisis/ (visited 2 March 2009).

144 See Devesh Kapur, John P. Lewis, and Richard Webb, The World Bank: Its First Half Century (Washington, D.C.: Brookings Institution, 1997). vol. 1, 336–38.

145 See Rigo Sureda, above n 35, at 581. The Bank’s policies relate to the support of economic and social development in areas such as agriculture, infrastructure, urban development, health, education, operation of the judiciary, and the improving of the management of public resources. See World Bank, ‘Products & Services’, http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/0,,contentMDK:
20120721~menuPK:232467~pagePK:41367~piPK:51533~theSitePK:40941,00.html (visited 7 April 2009).

For the purpose of this chapter, it is not necessary to provide additional details regarding the World Bank’s policies, since they are intimately related to its mandates and objectives.

146 See World Bank, A Guide to the World Bank (Washington, D.C.: World Bank, 2003) 41, and Rigo Sureda, above n 35, at 579.

147 See Foch, above n 101, at 12.

148 See Mason and Asher, above n 100, at 90.

149 For an illustration of this situation, see ibid, at 285–87.

150 Ibid, at 91.

151 Ibid, at 94.

152 Ibid, at 92.

153 This chapter does not provide a description of the internal management of the WTO, since other authors analyze it in this volume.

154 See among others, Richard Blackhurst and David Hartridge, ‘Improving the Capacity of the WTO Institutions to Fulfil Their Mandate’, 7 Journal of International Economic Law 705 (2004).

155 The Sutherland Report, though, assigned the consultative body a limited role, since it should have neither negotiating nor executive powers. See Report by the Consultative Board to the Director-General Supachai Panitchpakdi, The Future of the WTO: Addressing Institutional Challenges in the New Millennium (Geneva: WTO, 2004) para 324.

156 See Blackhurst and Hartridge, above n 154, at 708.

157 See in this volume, Debra P. Steger and Natalia M. Shpilkovskaya, ‘Internal Management of the WTO: Room for Improvement’.

158 The Ministerial Conference has adopted decisions that have given instructions to lower WTO political organs, such as councils. See WTO Ministerial Conference, ‘Implementation-Related Issues and Concerns’, WT/MIN(01)/17 (20 November 2001). See in this regard, Pieter-Jan Kuijper, ‘WTO Institutional Aspects’, in Daniel Bethlemen, Donald McRae, Rodney Neufeld, and Isabella Van Damme (eds), The Oxford Handbook of International Trade Law (Oxford: Oxford University Press, 2009) 79. References to this article allude to its unpublished version.

159 The fact that the WTO consultative body would be made up of trade ministers would not prevent it from convening often, for instance, twice a year. The IMFC meets with such frequency. See International Monetary Fund, ‘Governance Structure’, http://www.imf.org/external/about/govstruct.htm (visited 7 April 2009).

160 Nonetheless, this is far from suggesting that the Board should have initiative power regarding any type of decision.

161 See Sutherland Report, above n 155, para 313, and Steger and Shpilkovskaya, above n 157. Traditionally, GATT/WTO Members have been reluctant to delegate significant powers to the WTO Secretariat. See in this regard, Kuijper, above n 158, at 7. This is not to say that the Secretariat does not perform important functions during the consultations process carried out within WTO political bodies. Hordström highlights how the Secretariat is usually involved even in the case of informal meetings during negotiations, and along with the Director-General, has some control over the process. He also mentions that the Secretariat also plays an advisory role to chairmen of WTO bodies. See Hakan Nordström, ‘The World Trade Organization Secretariat in a Changing World’, 39 Journal of World Trade 819 (2005), at 844. See also in this regard, and ratifying the Secretariat’s informal powers, Mary E. Footer, An Institutional and Normative Analysis of the World Trade Organization (Leiden: Martinus Nijhoff Publishers, 2006) 171.

162 See Kuijper, above n 158, at 22.

163 The Secretariat’s involvement in WTO decision-making processes is not always the same. As Isabel Fetchtner has shown, in the case of waivers decisions, the Secretariat’s participation varies from little relevance, as in the case with the waiver for the EC-ACP preferences, to active intervention, as was the case of the waivers suspending GATT Article II to allow WTO Members to implement domestically changes to the Harmonized System when their GATT schedules have not yet incorporated such changes. See Isabel Feitchner, ‘Law-Making in the WTO: The Law and Politics of the WTO Waiver Power’ (Presentation given at the American Society of International Law Research Colloquium, UCLA School of Law, 13 February 2009, on file with the author). This varied degree of intervention within the WTO decision-making process is far from surprising given the multiple mandates the Secretariat has.

164 See Nordström, above n 161, at 835.

165 There are ways in which the Secretariat may exert a wide initiative and display broad levels of neutrality that may appease WTO Members of all kinds. For instance, when exerting its initiative, the Secretariat could table formally or informally proposals based on different alternatives, and not only a single proposal. Such strategy may be seen as one in which the Secretariat increases its institutional role without intruding into the spheres of Members’ prerogatives. In addition, the use of proposals by the Secretariat is a tool that enhances its role and preserves the member-driven character of the WTO. Although the following is not an illustration of a case in which the Secretariat exerted initiative in the way suggested here, there is an example in which the design of alternatives by the Secretariat has been used as a tool within a decision-making process. For instance, in the decision-making process that led to the adoption of biennial budgeting, despite the fact that Article VII:1 of the Marrakesh Agreement Establishing the World Trade Organization establishes annual budgeting, the Committee on Budget, Finance and Administration requested the Legal Division to provide the possible instruments to overcome this hurdle. The solution, a decision by the General Council, was one of the options suggested by the division. See Footer, WTO Institutional Analysis, above n 161, at 220.

166 Ibid, at 281. This is certainly not to say that this kind of norm is unimportant. It may be well to recall Main’s classic statement: ‘Substantive law has at first the look of being gradually secreted in the interstices of procedure.’ As quoted by Sir Gerald Fitzmau-rice, ‘Judicial Innovation—Its Uses and Perils—As Exemplified in Some of the Work of the International Court of Justice during Lord McNair’s Period of Office’, in Cambridge Essays in International Law: Essays in Honour of Lord McNair (London: Steven & Sons, 1965) 24 n 1.

167 WTO Secretariat, ‘Accession—Procedures for Negotiations under Article XII, Note by the Secretariat’, WT/ACC/1, 24 March 1995.

168 See Mary E. Footer, ‘The Role of “Soft Law” Norms in Reconciling the Antinomies of WTO Law’, (Presentation given at the Inaugural Conference of the Society of International Economic Law, Geneva, July 15–17, 2008, at 4, on file with the author.

169 Ibid, at 7. This without saying that the distinction between hard law and soft law in international organization is clear-cut. As Prosper Weil states:

The acts accomplished by subjects of international law are so diverse in character that that it is not a simple matter for a jurist to determine what may be called the normativity threshold. i.e. the line of transition between the non-legal and the legal, between what does not constitute a norm and what does.

Prosper Weil, ‘Towards Normativity in International Law’, 77 American Journal of International Law 413 (1983), at 415. Quoted by Footer, WTO Institutional Analysis, above n 161, at 273.

170 See Footer, ‘Soft Law’, above n 168, at 8.

171 Ibid, at 11–13.

172 Moreover, such a move has an important recent precedent: see WTO Secretariat, ‘Recommended Procedures for Implementing the Transparency Obligations of the SPS Agreement (Article 7). Note by the Secretariat’, WTO Doc. G/SPS/W/215/Rev 2, 22 April 2008. The non-binding character is evidenced in the following words: ‘Members are also encouraged to use the “Procedure to Enhance Transparency of Special and Differential Treatment in Favour of Developing Countries” (G/SPS/33).’ See ibid, para 34, http://www.wto.org/english/news_e/news08_e/sps_30may08_e.htm (visited 1 March 2008).

173 See Donald B. Keesing, ‘Improving Trade Policy Reviews in the World Trade Organization’, 52 Policy Analyses in International Economics, Institute for International Economics 52, 1998.

174 While it is not possible to say that complex political issues may not lie behind the most arcane technical issues in trade policy and regulation, the fact is that the opposite is not true either, and there may be technical trade issues that may not have extreme political sensitivity, which could open the door for some initiative by the Director-General and Secretariat.

175 See Footer, WTO Institutional Analysis, above n 161, at 134.

PART III
Internal Management of the WTO

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6
Internal Management of the WTO: Room for Improvement

DEBRA STEGER AND NATALIA SHPILKOVSKAYA 1

I. Introduction

The focus of this book is on the World Trade Organization (WTO) as an institution. As we know, the WTO faces many challenges. Some commentators believe it faces a legitimacy crisis.2 While the difficulties of the Uruguay Round and failures of the ministerial conferences in Seattle and Cancun have faded, new obstacles to the effective functioning of the WTO as an institution have emerged. In particular, the rapid rise in the economic and political power of some large developing economies, such as China, India, and Brazil, is having a major impact on the functioning of the WTO. The lack of progress in the Doha Round of multilateral trade negotiations is a sign that all is not well with the decision-making and rule-making machinery of the WTO. The proliferation of regional trade agreements, partly in response to the impasse in the multilateral negotiations, is also diverting precious government resources and attention from the WTO to regional negotiations. A major dilemma, as the Warwick Commission has noted, is that while public support for trade liberalization and trade agreements is waning significantly in developed countries, the developing world is becoming more convinced of the benefits of trade agreements for their domestic economies.3

In June 2003, former WTO Director-General Supachai Panitchpakdi appointed a distinguished group of experts to take a long-term view on the future of the WTO as an institution. The report of the Consultative Board, The Future of the WTO: Addressing Institutional Challenges in the New Millennium (the Sutherland Report) was released in 2005 on the 10th anniversary of the WTO.4 Another independent commission, chaired by a former Canadian trade minister, Pierre Pettigrew, was established in 2007 to examine the role of the WTO in the multilateral trading system. The report of the First Warwick Commission, The Multilateral Trade Regime: Which Way Forward? (the Warwick Report), was released in December 2007.5 Both reports identify key institutional problems in the WTO and suggest practical recommendations for reform. Their proposals were carefully chosen to ensure that they were capable of being implemented without new rules or agreements having to be negotiated. Despite the relevant and pragmatic conclusions of these two reports, the Members of the WTO have to date shown no appetite for institutional reform of the Organization.

This chapter focuses on issues related to the internal management of the WTO and provides preliminary proposals for reform of the WTO. The efficiency of an organization and its achievements depend, to a certain extent, on the internal management of the organization. Relevant considerations include whether the bodies of the organization possess enough authority to take the necessary actions and decisions; whether these bodies are equipped to react promptly and appropriately to changing situations; whether there are specific procedures that provide clearly defined processes for rule-making proposals to be considered and approved; and whether the rule-making procedures work in practice, allowing the organization to respond to current realities and power relationships. All these questions are relevant for the evaluation of the internal management of the WTO.

II. Different Visions of the Future of the WTO

The first question that might be asked is whether there is a need to reform the institutional architecture of the WTO.

Where one stands on this question depends on what one believes is the mandate of the WTO. Several experts see the mandate of the WTO as fundamentally focused on trade liberalization.6 For these people, not surprisingly, the WTO is functioning effectively as it is, as a member-driven organization. In their view, it does not need major institutional reform. It simply needs to get on with the business of negotiating new trade rules. Most Members of the WTO take this view. Other experts believe that the WTO should have a broader mandate in the future as the organization responsible for international economic regulation in the global economy.7 For these people, the WTO clearly requires major institutional reform to improve its decision- and rule-making machinery if it is to remain relevant and effective in the world of the future.

To those holding the former point of view, the WTO functions much like the old GATT. It is a member-driven organization with trade liberalization as its key purpose and mandate. While there are no formal decision-making structures in the WTO, the time-honoured practice of consensus decision-making has worked effectively in the past, including in the Uruguay Round, and is the only legitimate, effective, and fair means to take decisions in the future. Recognizing the need for diplomacy and politics in rule-making in the WTO, and noting, in particular, the concern with giving developing country Members a greater voice and influence, the experts favouring the current system are generally opposed to the idea of changing the consensus rule in decision-making and tend not to favour the establishment of a management board or other small committees made up of only some of the WTO Members.8

Other experts view the mandate of the WTO as extending to international economic regulation generally and are concerned that the WTO does not have the institutional capacity to allow it to function effectively. While not wanting to turn the WTO into a ‘world government’, proponents of a broader mandate for the WTO emphasize that there is currently an imbalance between the strong, legally binding dispute settlement mechanism, on the one hand, and the comparatively weak, cumbersome, political rule-making and negotiating machinery, on the other.9

Marco Bronckers observes that the rule-making and amendment procedures in the WTO make it ‘practically impossible’ and ‘very cumbersome’ to clarify or amend existing rules.10 He worries that

governments may too easily think that progress can be made in the WTO through enforcement; that litigation in the WTO is a faster, more convenient way to resolve difficult issues than an open exchange at the negotiating table. That is worrying because it undermines democratic control over international co-operation and rule-making, and it prevents a more broad-based participation of all stakeholders in the formulation of international rules.11

John Jackson notes that there are advantages and disadvantages to the consensus-based decision-making process: ‘One downside of requiring full consensus is that it may be a recipe for impasse, stalemate, and paralysis. In other words, the result may be that things do not get done.12 Concern with the difficulties of decision-making by consensus has led Professor Jackson to propose a ‘critical mass’ approach, which has been endorsed by the Warwick Commission. Jackson’s idea is ‘to develop a practice where countries refrain from blocking consensus when a critical mass of countries support a proposed change. This critical mass of countries could be expressed as an overwhelming majority of countries and an overwhelming amount of the trade weight in the world, such as 90 percent of both of these factors. In addition, there could be other factors’.13

Thomas Cottier and Satoko Takenoshita go further and suggest supplementing the consensus rule with a weighted-voting system that Members may use in situations when consensus cannot be reached. They take the view that although the current system (one Member, one vote) represents the formal equality of Members, it is imbalanced because it does not take into account the real political and economic power of Members. They propose weighted-voting rules based on a formula with several variables, including contributions to the WTO, gross domestic product, openness of markets, population, and/or basic vote. They consider that this mechanism may be useful in helping to overcome the major difficulties in trade negotiations, in talks between rounds, and in the regular business affairs of the WTO.14

Gary Hufbauer has suggested even more radical changes to the voting system in the WTO, favouring a weighted-voting formula. He argues that without this surgical conversion of WTO voting procedures, there is no chance for a successful conclusion of multilateral trade negotiations. He considers that obstruction in decision-making by Members who represent less than 10 percent of world trade is dangerous.15

The Warwick Commission considered the idea of a weighted-voting system based on two thresholds: country size (established percentage of global trade or global national income) and a minimum number of Members that voted in support of a decision. While the commission stated that such a combination of thresholds could protect the interests of both big and small countries, it nevertheless decided to refrain from recommending a weighted-voting system. Instead, it decided to support the critical mass approach.16

At the root of these differing visions of the WTO are different views of its essential purpose and mandate. For those who believe that the mandate of the WTO is trade liberalization through reciprocal exchanges of concessions, reform of the WTO is not needed. For those who consider that the mandate of the WTO should extend to international economic regulation more generally, institutional reform is an urgent priority.

It is difficult to envision the future of the WTO as an institution without speculating on its future mandate. However, Director-General Supachai Panitchpakdi, in his foreword to the Sutherland Report, emphasized that the purpose of that report was ‘to examine the functioning of the institution—the WTO—and to consider how well equipped it is to carry the weight of future responsibilities and demands’.17

The assumptions of this chapter are that the WTO is in urgent need of institutional reform.18 The mandate of the WTO is no longer clear, and ‘[t]he WTO should be recognized for what it is—an international organization that regulates trade as well as international economic relations generally.19 In fact,

[t]he WTO needs major surgery in order to respond effectively to the new political realities of the international economic system.… [M]embers should recognize that the mandate of the WTO is not exclusively confined to the liberalization of trade; it includes development as well as a host of other topics that relate to international economic regulation generally. Institutional reform of the WTO is needed to provide it with the architecture and decision making machinery to make it a vibrant, responsive and accountable international organization, relevant to governments, companies and people in the 21st century.20

III. Is There a Structural Problem with the Decision-Making Rules in the WTO?

The second question that might be asked is whether the focus of WTO institutional reform should be on the decision-making rules themselves or on the processes by which the rules are negotiated. The decision-making rules in the WTO were negotiated in the Uruguay Round and are contained in the Marrakesh Agreement Establishing the World Trade Organization (the WTO Agreement).21 Many experts believe that the key problem with WTO decision-making is that the consensus rule in Article IX:1 is too rigid and, therefore, renders decision-making and rule-making in the WTO ‘difficult and susceptible to paralysis’.22 Some alternative proposals to consensus decision-making have been developed, for example, weighted-voting and different approval methods depending on the types of decisions.23 More emphasis should be placed on the processes by which decisions are made in the WTO. Additionally, formal structures need to be developed within the WTO at the front end of the decision- and rule-making system to allow for proposals to be presented to WTO councils and committees for approval under the existing rules in the WTO Agreement.

Before turning to this chapter’s proposals, it is worthwhile to describe briefly the decision-making and rule-making framework in the WTO and how the current system functions in practice.

A. Decision-Making Rules of the WTO

The WTO Agreement sets out two methods for decision-making in the WTO: consensus (as the primary rule, continuing the practice under the GATT 1947) and voting (as a secondary rule in circumstances when consensus cannot be reached or the rules specifically provide otherwise). Each Member of the WTO is entitled to one vote, except for the European Community, which has the number of votes equal to the number of its member states that are WTO Members.24

The consensus principle emanated from practice under the GATT 1947, although the formal rules in Article XXV:4 of the GATT 1947 called for decisions of the CONTRACTING PARTIES to be taken by majority vote, or in certain cases, by a two-thirds majority of votes. However, as early as 1959, in practice, most decisions were taken by the CONTRACTING PARTIES on the basis of consensus (except for waivers, accessions, and certain amendments).25 The shift from majority voting to the consensus rule can be explained partly by the increasing number of contracting parties and by the emergence of coalitions based on, for example, geopolitical or economic interests. In addition, there was considerable influence from some other international organizations that preferred the principle of consensus decision-making.

The consensus requirement in the WTO does not require unanimity of all Members. Article XI:1 of the WTO Agreement explicitly clarifies that “[t]he body concerned shall be deemed to have decided by consensus if no Member present at the meeting when the decision is taken formally objects to the proposed decision.” Article IX provides that ‘where a decision cannot be arrived at by consensus, the matter at issue shall be decided by voting’. However, in the history of the WTO, with the exception of the accession of Ecuador in 1995,26 no proposal has been made for a decision to be made by voting. For consensus decisions, Rule 16 of the Rules of Procedure for Sessions of the Ministerial Conference and Meetings of the General Council provides that ‘[a] simple majority of the Members shall constitute a quorum’.27

Under Article IX, interpretations of the WTO Agreement and waivers of WTO obligations are to be approved by a three-fourths majority of the Members. Adoption of financial regulations and annual budgets by the General Council, amendments of the Multilateral Trade Agreements contained in Annex 1A and C, and accessions to the WTO shall be taken by a two-thirds majority of Members (respectively, Articles VII:3, X:4 and XII:2 of the WTO Agreement). However, since 15 November 1995, the General Council has sought decisions by consensus on matters related to requests for waivers or accession to the WTO.28

There are also exceptional cases in which the majority vote rule does not apply, notably decisions taken by the Dispute Settlement Body;29 decisions on waivers regarding an ‘obligation subject to a transition period or a period for staged implementation that the requesting Member has not performed by the end of the relevant period’;30 and decisions on adding a new plurilateral trade agreement to Annex 4 of the WTO Agreement. In these cases, Members are obliged to follow the consensus rule or other rules set out in the relevant agreement.

The Rules of Procedure for Meetings of the Council for Trade in Goods31, of the Council for Trade in Services,32 and of the Council for TRIPS33 guide decision-making by these bodies. In particular, Rule 33 provides that ‘[w]here a decision cannot be arrived at by consensus, the matter at issue shall be referred to the General Council for decision’.34

Article X of the WTO Agreement establishes a complex set of amending procedures. Pursuant to Article X:1, the general amendment procedure consists of three stages:

1. A WTO Member or a relevant council35 (within its authority) can propose an amendment to the WTO Agreement or Multilateral Trade Agreements in Annex 1 and submit that proposal to the Ministerial Conference;

2. The Ministerial Conference takes a decision, by consensus, on submitting the proposed amendment to Members for acceptance (if consensus cannot be reached, the Ministerial Conference may take a decision by two-thirds majority of all Members); and

3. Members may accept the proposed amendment by depositing an instrument of acceptance with the Director-General of the WTO within a specified period, after which the amendment will come into force.

There are several qualifications and exceptions to this general procedure, which are specified in paragraphs 2-10 of Article X of the WTO Agreement. The important point to note is that the amendment procedures in Article X make it very difficult, if not impossible, to either amend existing WTO agreements or add new ones. As a result, these rules have, thus far, not been used by Members.

B. Current Practices of Conducting Negotiations in the WTO

Although Articles II and III of the WTO Agreement contemplated new rules, amendments, and even new agreements could be negotiated at any time, WTO Members continue the GATT practice of negotiating new rules only in the context of broad, multilateral trade rounds. Such rounds are formally commenced pursuant to specific terms of reference that are agreed by the Minis-terial Conference on the basis of consensus. Under the authority of the General Council, the Trade Negotiations Committee is responsible for supervision of new negotiating rounds and ‘establishing appropriate negotiating mechanisms as required and supervising the progress of the negotiations’,36 and is required to report to regular meetings of the General Council.37 As was the practice under the GATT 1947, informal consultations are a vital mechanism for reaching mutually acceptable solutions among Members.

There is no standard procedure for conducting negotiations in the WTO. Traditionally, the chairs of special sessions and negotiating groups have had the leading role in facilitating negotiations. They facilitate negotiations through convening, as appropriate, meetings of the full negotiating groups or special sessions, as well as informal smaller groups to deal with specific issues. Thus meetings are conducted in several different formats: formal (short, filled with Members’ statements that are mostly for the record); informal (more open and sometimes emotional discussions); open-ended (where every Member may come into the negotiation room); small group consultations (Members come by the chair’s invitation); and confessionals (private meetings between Members and the chair). Chairs may encourage interested Members to meet in small groups in their individual capacities to work together to narrow issues of contention. Work in small groups is seen as a productive way to build compromises that can lead to consensus. After a common understanding on issues within a small group of key players is found, the number of participants may gradually increase to the level of all WTO Members. This is referred to as the ’concentric circles‘ approach.

The Director-General may play an active role in stimulating consultations among key Members as a way to facilitate the search for a compromise, using different occasions and variable forums and formats.

It is important to note that the practice of holding meetings in small groups, specifically ‘Green Room’ meetings, has been criticized for lack of transparency and inclusiveness of all Members in the negotiation process. Some developing countries have complained that trade negotiations are conducted in secret and have requested more ‘effective and real participation by all Members’.38 One of the methods that developing countries have been actively using to get into meetings with limited participation is through informal coalitions of their own. Currently, there are several informal, coalition groups involved in the Doha Round negotiations, including the Group of 20; the Group of 33; NAMA 11; the African Group; the Least-developed Countries Group; the African, Caribbean, and Pacific (ACP) Group; and the Association of South East Asian Nations Group. In small group meetings, the interests of coalitions are represented by their country coordinators, who are expected to inform other members of the coalitions on discussions that occurred at the negotiating table. Thus coalitions of developing countries are a means of managing multilateral trade negotiations and building consensus, as well as increasing transparency and inclusiveness in decision-making. The practice and experience of these informal groups should be taken into account in developing more formalized mechanisms for rule-making and decision-making in the WTO.

C. Is There a Need for Reform of the Rules?

It is clear that the WTO rules on decision-making and amendments are complex. However, they also provide flexibilities, including through fall-backs to majority or enhanced-majority voting, which Members have been reluctant to utilize. Despite all the difficulties, achievement of consensus is still possible. Members have been able to adopt some key decisions based on consensus since 1995. Recent important decisions include the Decision of the General Council on Transparency Mechanism for Regional Trade Agreements;39 the Minis-terial Declaration on Trade in Information Technology Products;40 the Declaration on the TRIPS Agreement and Public Health;41 and the Waiver Concerning Kimberley Process Certification Scheme for Rough Diamonds.42

Is the problem with WTO decision-making and rule-making to be found in the rules in Articles IX and X of the WTO Agreement, or does it lie in the lack of formal structures for decision-making and rule-making proposals to move forward in the WTO system? The problem lies in the front end (input process) of the WTO system, rather than in the back end (approval process).

IV. Improving the Management Processes of the WTO

While it may be very difficult or even impossible to change the decision-making and amendment rules in the WTO, it is worth considering formalizing the informal decision-making processes to make them more effective and inclusive. It is not necessary to modify the decision-making and amendment provisions in Articles IX and X of the WTO Agreement. As indicated previously, these provisions allow for decisions to be made by consensus, but if that is not achievable, in most cases the rules provide for resort to different types of majority voting.

While a great deal of attention has been paid in the academic literature to voting rules, the difficulties with rule-making and decision-making in the WTO may not lie in the rules themselves, but in the culture or attitudes of the WTO Members. It is not the approval of proposals at the end of the process that seems to be the problem but rather the lack of formal mechanisms and procedures at the beginning of and during the process that hampers decision-making. The problems with the rule-making and decision-making apparatus in the WTO lie in its internal governance structures as well as in the attitudes of Members. In order to fulfil its mandate, the WTO must have the necessary structures to enable it to function effectively, efficiently, and accountably.

In comparison to other international organizations or most national governments, the WTO lacks many of the management structures that are taken for granted in most other rule-making systems. For example, it does not have an executive body, a parliament or a legislative body, or a bureaucracy that plays a formative role in setting legislative priorities and in rule-making. Compare, for illustrative purposes, the institutional structure of the European Union, which has a council, a parliament, and a commission that all have specific rule-making authority. The WTO need not emulate the European Union, but it is useful to think of these general institutional functions in developing models for the governance of the WTO.

What reforms should be introduced to make the WTO stronger, more effective, efficient, and accountable to its Members and the world at large?

The notion of “good governance” must be the key guiding principle in any reform of the WTO as an institution. Taking into account conventional wisdom from codes of good governance in the public and private sectors and academic studies of international organizations, as well as the recent governance assessment of the International Monetary Fund (IMF) by the Independent Evaluation Office, the following four dimensions of good governance should be taken into account: effectiveness, efficiency, accountability, and representation.43

‘Effectiveness’ refers to the ability of the organization and its specific bodies to fulfil their functions with quality results in a timely manner. Preconditions for effective governance include clearly defined responsibilities for each element in the organizational structure and coherence in the functioning of the different bodies, including information sharing.44

‘Efficiency’ refers to the optimization of operational costs together with maximum and appropriate utilization of personnel within the organization. Any duplication in the responsibilities assigned to institutional bodies and staff should be avoided.45

‘Accountability’ exists at two levels. First, the staff and management of the organization must be responsible to the Members for carrying out their instructions. Second, the organization must be responsible to the outside world in carrying out its mandate. Accountability must be built into the very operational culture of the organization and be based on clearly defined and established criteria so that the process of assessing performance and results is as objective as possible.46

‘Representation’ refers to the ability of Members to have their views considered and to participate in the decision-making process. It also applies to the ability of other stakeholders (civil society groups, non-governmental organizations, business associations, and parliamentarians) to present their views and to have them considered.47

The following proposals to improve and enhance WTO governance structures are made in the light of these four key elements of good governance.

A. A WTO Management Board

Many international organizations, including the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (the World Bank), the World Health Organization, the International Labour Organization, the United Nations Development Program, and the Organization for Economic Cooperation and Development (OECD), have a management board and an executive body or its equivalent. The WTO does not have a formal body analogous to these executive boards, although the idea of such a body was contemplated by the drafters of the Havana Charter for an International Trade Organization (the Havana Charter) and has been discussed at various points in GATT/WTO history, including during the Uruguay Round.48

The drafters of the Havana Charter contemplated creating an executive within the Organization that would have had specific functions. In fact, they carefully developed the basic elements for establishing an executive board, including its composition (18 Members selected by the conference), voting rules, and rules of procedure, as well as its potential responsibilities. It is important to note that the drafters planned to give the Executive Board both executive and supervisory functions. In particular, Article 81:1 of the Havana Charter would have enabled the Executive Board to ‘be responsible for the execution of the policies of the Organization and … exercise the powers and perform the duties assigned to it by the Conference. It shall supervise the activities of the Commissions and shall take such action upon their recommendations as it may deem appropriate’.49

Later, following the creation of the Interim Committee in the IMF, the CONTRACTING PARITES of the GATT 1947 established the Consultative Group of 18, first on a provisional basis in 1975, and then on a permanent basis in 1979.50 Importantly, the Consultative Group of 18 required rotation of its membership, a process that was carefully followed by the contracting parties. One of the problems in the operation of this group was that it was not very transparent, and documents were not always distributed among all contracting parties. At the same time, according to the reports of the Consultative Group of 18 to the GATT Council, the group made a substantial contribution to the operation of the GATT and the launching of the Uruguay Round negotiations. It was the only forum for the discussion of agricultural policy in 1981–82 and the first to discuss new subjects such as trade in services, intellectual property, and trade-related investment in the GATT 1947. In spite of this, the group was discontinued after 1985.51

During the Uruguay Round, the idea of the establishment of a management board was proposed by the United States in the Functioning of the GATT System (FOGS) Negotiating Group.52 Although this proposal was not ultimately adopted, it is worthwhile to describe some of its elements. The United States proposed the establishment of a management board that would meet at the level of ministers between the biennial plenary meetings of the CONTRACTING PARTIES at the ministerial level and would perform the same functions as what became, in fact, the Ministerial Conference. The management board would have consisted of 18 members whose seats would have been distributed on the basis of the frequency of the Trade Policy Review Mechanism. The management board would have had limited decision-making powers delegated to it by the CONTRACTING PARTIES. It was suggested also that the CONTRACTING PARTIES might assign issues to the management board when achieving consensus proved to be elusive. In addition to the powers assigned to it by the Ministerial Conference, the management board was also

• to serve as a forum for discussion of trade issues of common concern and to resolve issues referred to it by the GATT Council or taken up by the board on its own initiative;

• to assist in the preparation of agendas and other preparations for meetings of the CONTRACTING PARTIES at the ministerial level (including decisions to initiate trade negotiations);

• to take primary responsibility for developing an outline, for consideration by the CONTRACTING PARTIES of a successor organization to the GATT;

• to serve as a nominating committee for the selection of the Director-General and Deputy Directors-General; and

• to guide continuing cooperation between the GATT and the international financial institutions.53

In its proposal, the United States suggested creating a management board that would possess delegated authority to take decisions, engage in agenda setting, and carry out general administrative tasks. This proposal, however, was not received positively by other Uruguay Round participants, mainly because of concerns about the limited membership of the proposed management board and its broad functions.

Today, looking at the list of functions of the management board proposed by the United States in 1990, we are reminded of the recent history of the WTO, including difficulties with the preparation of ministerial conferences and with the launching of the Doha Round, as well as the long stalemate and paralysis that occurred in the selection of a Director-General to replace Renato Ruggiero in 1999.

Diversification of the membership and the growing number of different informal groupings for seeking consensus in the WTO demonstrate the need for a management board or an executive body of some type in the Organization. While informal meetings, Green Room meetings, and consultations may contribute, in the end, to positive outcomes, problems still exist with the lack of transparency and legitimacy, especially for those Members that are not included in the small group meetings. The Doha Ministerial Declaration notes Members’ recognition of the challenges resulting from the expanding membership and confirms the ‘collective responsibility to ensure internal transparency and the effective participation of all Members’.54

The idea of a management board has been around since 1947 and continues to be the subject of vigorous debate. While some commentators believe that there is an urgent need for establishment of such a body,55 others consider it unnecessary or even dangerous.56

The idea of a management board or a senior officials’ consultative body resurfaced again recently as one of the recommendations in the Sutherland Report. It recommended the establishment of a senior officials’ consultative body whose main functions would be to discuss political and economic matters, provide some political guidance, and facilitate the transition of negotiations taking place in the WTO to the Ministerial Conference.57 Importantly, it would not be vested with executive or negotiating powers. It would be an advisory body to the Director-General without real decision-making power or authority. The consultative body would consist of a maximum of 30 members, who would be capital-based representatives at the level of senior officials or ministers or both. Some Members (major trading nations) would participate in the work of the consultative body on a permanent basis, while others would rotate in a manner similar to the procedure used in the executive boards of the IMF and World Bank. The consultative body, chaired by the Director-General, would meet two to four times per year, and the Director-General would report the results of these meetings to all Members.58

The Sutherland Report stressed that the combination of frequency of meetings and participation by countries on a rotating basis should provide the opportunity for all Members to be represented in the consultative body. When necessary, the consultative body would meet wholly or partially at ministerial meetings. Moreover, the Sutherland Report does not exclude the possibility that the consultative body, if represented at the level of ministers, could replace informal ‘mini-ministerial’ meetings in the WTO. While the Sutherland Report would formalize some senior officials’ groups, such as the Evian Group, it would not go so far as to establish a formal limited-membership decision-making and priority-setting body similar to the executive boards of the IMF and the World Bank or as contemplated by the U.S. proposal in the Uruguay Round.59

Richard Blackhurst suggests that a formal consultative body with management and decision-making powers is needed in the WTO to deal with what he characterizes as the ‘Green Room’ problem. He recommends a consultative body that would be a steering committee with 24 members and considers that the largest trading nations would have individual seats with the remaining Members being divided into groups. Each of these groups would have one seat that would be rotated among the members of the group. Participants would be Geneva-based ambassadors, rather than senior officials from capitals. Meetings of the consultative body would take place only in situations in which the Green Room could not accommodate all Members wishing to participate in the debate. Importantly, in contrast with the World Bank and IMF executive boards, a WTO consultative body would not have authority to take decisions that bind all Members, but it would have powers to consult, debate, and negotiate. The consultative body would prepare recommendations and present them to Members for approval.60

A different vision of a management body has been promoted by Matsushita, Schoenbaum, and Mavroidis. They suggest establishing an executive body of the General Council that would have the authority to make decisions. This executive body would comprise permanent members and members who would serve fixed terms on a rotational basis. Selection of the members of the executive body would be based on objective criteria such as countries’ level of gross domestic product, share of world trade, and population. In addition, other criteria may be used in to order to ensure appropriate representation of developing countries and geographical balance. This system would provide every Member with an opportunity to be on the executive body.61

What role should a management board play in the WTO? What responsibilities should the Ministerial Conference or General Council delegate to a management board? How would it be composed, ensuring representation by all Members as well as accountability, effectiveness, and efficiency?

The WTO would benefit most from a management board vested with consultative, executive, and supervisory functions, similar to the executive board contemplated in the Havana Charter and, to a lesser extent,62 the proposal of the United States in the Uruguay Round. It would be accountable to the General Council and give instructions to the Director-General. Key principles of good governance should be foremost in its design and functioning. In particular, such a board must be representative, accountable, and transparent in its responsibilities and relations with Members as well as efficient, effective, and transparent in its decision-making functions.

The difficulties encountered by Members in finding mutually acceptable solutions in the Doha Development Round indicate that there is a need for a formal, limited-membership management board that could contribute to finding compromise positions in negotiations. A management board would also be useful when WTO councils or committees fail to achieve consensus on specific proposals. In addition, there is a need for a board that could engage in strategic thinking and help to set priorities to further the mandate of the Organization. The General Council could request the management board to consider specific issues and propose potential solutions. The management board could seek the advice of the Director-General, the Secretariat, and the Members. At the same time, the management board should be able, on its own initiative, to submit advice or make recommendations to the General Council on international economic and trade matters.

The direct involvement of all Members in dealing with administrative matters that relate to the internal functioning of the WTO (for example, budget and planning for meetings) is time-consuming, ineffective, and inefficient. A management board could potentially supervise and work with the Secretariat through the approval and monitoring of administrative guidelines governing staff, introduction and maintenance of an accountability framework for the Director-General and the Secretariat staff, control over expenditure of funds, and adoption of rules concerning preparation by the Secretariat for ministerial conferences. It could also have responsibilities for setting priorities and general direction for the WTO, for example, by setting agendas for ministerial conferences, developing priorities for future negotiations, and assisting in the process of selecting Directors-General, Deputy Directors-General, and Appellate Body Members.

In addition, the General Council could vest the management board with other responsibilities as it deems appropriate. Importantly, the management board should have decision-making powers on matters that fall within its competence. In order to ensure efficiency and effectiveness, its functions should be clearly defined, and overlap in responsibilities with other WTO councils and committees should be avoided to the greatest extent possible.

Composition of the management board would be the most difficult hurdle in establishing such a body. There are two major challenges: (1) determining the number of members on the board; and (2) designing the selection process. The principles of good governance should be taken into account in designing such a board. On the one hand, a smaller board would likely be more effective and efficient in taking decisions and setting priorities than a larger board.63 On the other hand, a larger board would be more accountable and representative of the Members. The executive boards of the IMF, the World Bank, the World Health Organization, and the United Nations Development Program have 24, 24, 34, and 32 members respectively. Membership of a WTO management board could be in the range of 25 to 30 members. Although it would be difficult to decide how members should be selected to serve on this body, a mechanism could be developed that does take into account the unique history and experience of the WTO, rather than following any particular model.

The General Council should select management board members, and qualification requirements such as knowledge and expertise in trade policy matters should be a prerequisite. In the formula for the selection process for potential members of the management board, a number of principles could be taken into account, including but not limited to equitable geographic representation, representation of different levels of economic development, share of world trade, and regional integration. Existing informal regional groups in the WTO could be formalized and given official representatives on the board. At the same time, representatives sitting on the board would be accountable to specific groups within the Organization. In that way, formal accountability structures could be established vis-à-vis the membership. Most importantly, a rotational scheme would need to be devised so that all WTO Members could have an opportunity to serve on the board at some point. Openness and transparency in all its functions and activities would be required to ensure representativeness and accountability to all the Members.

Establishment of a management board would be an important step toward more effective, efficient, and transparent governance of the WTO. Such a board could serve a number of useful functions, including supervising the general administration of the budget and the Secretariat, planning for ministerial conferences and important meetings, agenda setting for future negotiations, and assistance in the selection of Directors-General, Deputy Directors-General, and Appellate Body Members.

B. Roles of the Director-General and the Secretariat

The roles of the Director-General and the Secretariat are central to the effective and efficient functioning of any international organization. One of the mantras of Members is that the WTO is a ‘member-driven’ organization. However, as Professor Jackson has noted, this is also one of the reasons that the WTO has not always been efficient and effective, especially in its negotiation and rule-making functions.64 The Sutherland Report notes that while the Secretariat continues to be highly regarded, ‘the mutual confidence between delegations and WTO staff has been less obvious than in the past’.65 Moreover, Members view the Secretariat’s role as exclusively one of support for the Members, and the Members do not usually welcome any demonstration of initiative on the part of the Secretariat.66

The Sutherland Report recognizes the importance of enhancing the role of the Director-General and giving the Secretariat the authority to defend the multilateral trading system and to promote its principles. It emphasizes that

[t]he WTO needs a convincing and persistent institutional voice of its own. If Members are not prepared to defend and promote the principles they subscribe to, then the Secretariat must be free to do so. Indeed, it should be encouraged, even required, to do so.67

The report also stresses that ‘the membership should also encourage and stimulate a greater intellectual output from the Secretariat’.68 It calls for the Secretariat to take more of a lead on policy issues and in communicating the WTO’s message to the public.69

The Sutherland Report also advocates that only the best-qualified candidates with technical competence and experience should be considered for the post of the Director-General. It also suggests that the ‘powers and duties’ of the Director-General be specifically defined, based on the advice of former Directors-General.70 Depending on the roles of the Director-General and the Secretariat, the report suggests that proper adjustments may be necessary regarding the number of Deputy Directors-General and the allocation of their responsibilities. For example, if the Secretariat’s role is passive and the Director-General is heavily engaged in regular contact with politicians in capitals, then it may be appropriate to appoint a single deputy as a chief executive officer. If the approach is the opposite, then more deputies (two or three) may be necessary.71

It is vitally important to strengthen the role and autho