Problems in Negotiating Consensus in the World Trade Organization



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Problems in Negotiating Consensus in the

World Trade Organization

John S. Odell

University of Southern California

Web: www-rcf.usc.edu/~odell/

Email: odell@usc.edu
Abstract

The WTO, as a forum for new multilateral agreements, has been deadlocked since 1997. This organization suffered two prominent impasses in 1999 and little has changed since Seattle. The greatest public attention has gone to street protesters’ criticisms, but the organization also has more complex problems. The member states make decisions by consensus, but achieving consensus has become a much more demanding requirement than in the GATT’s day. An analysis of the causes of paralysis identifies what will need to change to permit a resumption of movement toward

new agreements to improve world trade.


Presented at a conference at Peking University, 10 July 2001,

and at the annual convention of the American Political Science Association,


San Francisco, 30 August 2001
The WTO, as a forum for new multilateral agreements, has been deadlocked since 1997. The organization suffered two prominent impasses in 1999 and little has changed since Seattle. The greatest public attention has gone to street protesters’ criticisms, but the organization also has internal problems. The member states make decisions by consensus, but achieving consensus has become a much more demanding requirement than in the GATT’s day. This paper outlines the structure and traditional method of making decisions in comparison with other organizations, summarizes problems that emerged at the end of the last decade, and speculates about their causes and the directions the future might take. The most likely scenario at this writing (24 June 2001) seems to be continued stalemate.

One 1999 stalemate concerned the choice of a successor to Director General Renato Ruggiero, and the second in December at Seattle blocked the launching of a new round of negotiations, which many members had said they favored. The second sacrificed tangible commercial gains, and both damaged the Organization’s credibility with business and governments.

As everyone knows, American critics used the WTO ministerial conference in Seattle as an occasion to organize a large campaign to protest globalization and to halt or modify trade liberalization. They and allies from other countries circulated pamphlets painting the WTO as an unaccountable tool of greedy corporations and blaming it for world social and environmental problems. On the first day some 40,000 union members, environmentalists, consumer advocates, and students converged on downtown Seattle chanting “No new round, turnaround.”1 Police allowed protestors to penetrate the space between the convention center and the hotels and block the ministers from entering the hall for a day. Dockworkers up and down the Pacific coast briefly shut down ports in sympathy. A few protestors shattered shop windows and burned trashcans. Police threw tear gas and concussion grenades and eventually called out the National Guard to restore order. Bloody faces and banners denouncing the WTO dominated the televised images.

Four days later the trade ministers left Seattle without having agreed to launch a new round. They did not even issue a communiqué pledging to keep working with one another. This meeting simply collapsed, with several ministers condemning the organization and the United States for the way they had been treated. The battle of Seattle must rank with the most spectacular failures in the history of trade diplomacy.

Since then the gridlock has continued. Members have not changed the institution and not one issue has been settled. Meanwhile China and other states are joining. The WTO has become deeply significant for most nations around the world, but without some adjustments to accommodate new realities, it could remain blocked as a setting for achieving new agreements to improve world trade.

A WEAK, STRONG ORGANIZATION


Decision making by consensus makes the WTO a weak organization in a sense, yet widespread adherence to this norm ironically is due in part to the organization’s strength in another sense. The WTO Agreement, signed in Marrakesh in 1994, established the Organization’s constitution. The members are the states that created it by negotiation. Governments speak for their citizens; companies and other NGOs have no direct standing except as the member states may decide. The highest body is a Ministerial Conference of representatives from all members, which is to meet at least once every two years. The first three conferences were held in Singapore, Geneva, and Seattle, and Doha, Qatar, will host the 2001 meeting. Between these sessions, the WTO General Council carries out the functions of the Ministerial Conference. The General Council typically consists of members’ diplomats based in Geneva near the WTO headquarters. The Marrakesh agreement also established specialized subsidiary bodies to operate under the guidance of the General Council.

The WTO is stronger than many intergovernmental organizations in some respects. Most important, WTO decisions become binding contracts, not just exhortations to make best efforts to improve world conditions, like many United Nations resolutions. Agreements to reduce tariffs, reached by signatories to the General Agreement on Tariffs and Trade (GATT), were enacted into the states’ national laws. During the 1970s major GATT parties expanded their common rules to cover non-tariff barriers to trade in goods. Their Uruguay round of negotiations, which ran from 1986 to 1994, vastly expanded the scope of the common rules to cover trade in services, intellectual property rights enforcement, and food safety regulation. The parties began to liberalize agricultural trade and established the World Trade Organization. A much larger number of developing countries accepted many more binding obligations than under GATT. The legislatures of all members implemented these agreements too in national law.

Moreover, they adopted a novel common institution for settling trade disputes by remarkable delegation of decisions to quasi-judicial bodies in Geneva. A ruling becomes binding automatically unless the members overturn it by consensus. This system is controversial today, with some observers complaining that frequent decisions from the WTO’s more efficient “judicial” bodies are pushing beyond the consensus that governments have reached on the slow-moving “legislative” side. Dispute settlement is beyond the scope of this paper, however.

In other respects the WTO is a weak organization. It carries forward key practices of signatories to the 1947 GATT, which did not create an organization at all, at least at its origins. The WTO is obviously far from world government; the member states retain significant sovereign rights including the right to withdraw and dismantle their Organization. Article IX of the WTO Agreement provides, “The WTO shall continue the practice of decision-making by consensus followed under GATT 1947.” As a note explains, “The body concerned shall be deemed to have decided by consensus on a matter submitted for its consideration, if no member, present at the meeting when the decision is taken, formally objects to the proposed decision.” Thus consensus is not identical to unanimity. A member that does not approve of a measure may choose to remain silent and allow a consensus to be reached. But the smallest member has the authority to block a consensus.

The rules permit majority voting. Article IX continues, “Except as otherwise provided, where a decision cannot be arrived at by consensus, the matter at issue shall be decided by voting.” Each member has one vote and decisions are to be taken by a majority of the votes cast except where provided otherwise. One exception is that the terms of accession of a new member must be approved by two thirds of the members. But resort to decision by vote has been extremely rare in GATT and WTO history, since agreements are expected to be binding contracts. When the vote means a binding obligation, no one wants to be outvoted. Strength produces weakness. On trade matters, domestic pressures are powerful in every country. A member government that lost a vote on a trade agreement that is not acceptable at home might refuse to comply with the decision or even withdraw from the organization. In the worst case the organization could collapse, taking large common interests down with it. After Seattle even small traders like African members, who might be thought sympathetic to majority voting in general, reaffirmed their devotion to the consensus norm in the special case of the WTO.

Nor does this Organization have a small representative executive board with authority to make operational decisions, or even just reduce the transaction costs of consensus building, unlike the United Nations, the International Monetary Fund, and the World Bank. The General Council meets frequently but it and its subsidiary bodies consist of all 140 members.

A Director General heads a tiny secretariat. Another powerful norm among members, carried over from the GATT, restricts the Director General’s influence to that of a mediator, public spokesperson, and manager of the secretariat. The DG, unlike the IMF’s Executive Director, for instance, does not have authority to negotiate on behalf of the organization with any state. The DG’s meager budget totals $55 million per year—about the size of the World Bank’s budget for travel. The World Wildlife Fund, one of the largest NGOs, has revenues of about $160 million per year. In these respects the WTO structure is intentionally weak at the center. Insiders favor the slogan that the WTO is “rules-based” and “member-driven.”
Traditional practice

Before 1999, the traditional process of building consensus was led by the two largest traders, the US and the European Community. They would make proposals and attempt to persuade each other on a common position. If they succeeded, they then would attempt to bring other major trading countries on board, beginning with Japan and Canada and progressively expanding the circle. Delegates talked in smaller informal groups outside the formal sessions as well as inside. Negotiators grappling with difficult deadlocks find that it is nearly impossible to get other delegates to relax opposing positions in a meeting with 100 other governments. Once major traders reached a deal, the lower tariffs negotiated were granted to all members, even those that did not “pay” for this gain with a reciprocal concession. Since small markets have little bargaining leverage, they typically were offered the choice of accepting either these benefits negotiated by others for their own purposes or no gains at all. Many developing parties to GATT in fact preferred to opt out of trade liberalization for themselves, believing in those days that it would stunt economic development.

Directors General have taken informal initiatives to encourage agreements. In the GATT era they established a tradition of inviting representatives of no more than 30 members secretly to a private conference room known as the “Green Room” to try to break impasses. The names of the nations invited to these small meetings were not made public, but typically they included the Quad—the EU, the US, Canada and Japan—and other members that account for the most trade, with some variation depending on the issue to be discussed. Today, with the EU speaking for 15 developed states, developed countries typically occupy no more than 7 of these chairs. After the quad, a list of likely participants, in descending order of 1996 trade value, includes: Hong Kong-China, Korea, Singapore, Switzerland, Mexico, Malaysia, Australia, Thailand, Brazil, Norway, Indonesia, India, Poland, South Africa, Czech Republic, Philippines, Argentina, Chile, New Zealand, Hungary, Egypt, Colombia, and Pakistan. The People’s Republic of China would rank high on this list, right after Korea.2

The large majority of WTO members are small traders and are still never invited to the green room or even informed that a meeting is occurring, even though most have moved to open their economies significantly and are clamoring for participation in negotiations. Nothing decided in the green room becomes official unless it is adopted formally by the full WTO.

Until the late 1990s the small secretariat was not allowed to undertake much centralized effort to communicate directly with societies or build support for the Organization at the grass roots. Generally member governments retained for themselves the function of receiving and managing pressures from constituents.
PROMINENT FAILURES TO REACH CONSENSUS IN 1999

The 1999 deadlocks can be traced to three problems in their process of negotiation.



Unyielding distributive strategies

Governments accounting for the great bulk of world trade had announced that the purpose of their Seattle conference was to launch a new round of negotiations and set its agenda.3 Yet the conference probably would have failed to reach agreement on a new round even if there had been no NGO protests, because of three problems in the Organization itself. One problem was that many member governments used negotiating strategies that leaned strongly toward the distributive—attempting to claim value from others--rather than the integrative--proposing deals that would create mutual gains, such as a linear tariff cutting formula.4 To oversimplify, many opened with lists of demands for others to concede while rejecting the others’ highest priorities. Distributive tactics are common, but they are hardly the only effective means for gaining through negotiation. Sometimes a party offers to fall back from selected demands if others will relax opposition to issues the first wants. In this case many governments held firm at their high resistance points so long that time ran out before they could bridge remaining differences on such a mountain of complex matters.


Geneva process failed to close gaps

A second face of the problem was that the WTO’s Geneva institutions failed to reframe these conflicting positions into a consensus. Other multilateral negotiations have begun with an adversarial process yet ended with agreements. In 1986, the GATT parties had also brought conflicting strategies to the table, yet in the end ministers had signed a Punta del Este declaration launching the Uruguay round most of which had been hammered out through earlier struggle among their ambassadors in Geneva. In 1999, the WTO General Council was also expected to prepare much of the declaration to be signed in Seattle. The Geneva phase generated more than 135 inconsistent proposals on fifteen complex issues, but in this case not a single issue was settled before the ministers landed in Seattle.

By coincidence, a nasty fight over the DG succession delayed serious agenda bargaining until only 8 weeks remained, and this struggle revealed a pattern that has continued. Director General Renato Ruggiero announced he would step down effective 30 April 1999. As this date approached, members lined up behind two main candidates: Mr. Mike Moore, former Trade Minister of New Zealand, and Dr. Supachai Panitchpakdi, Thailand’s Deputy Prime Minister and Commerce Minister. On the last day, General Council Chair Ali Mchumo of Tanzania reported from his consultations that 62 delegations favored Moore and 59 favored Supachai. He said Moore had support from a wide geographical range of members and faced less determined resistance from his opponents. Mchumo, following a procedure that had been adopted by the members at the outset, proposed Moore as the candidate around whom consensus might be built.5

Immediately Malaysia, speaking for Thailand and the other ASEAN states, formally objected to this proposal, declared that therefore no consensus existed for Moore, and called for a vote. Malaysia had been claiming that its candidate had initially won the support of 65 percent of the delegations that had expressed a preference. Malaysia accused unnamed others, evidently meaning the United States, of taking “subversive and divisive actions” that undermined the system by exercising a secret veto, preventing the chair from nominating Supachai until they could twist more arms behind the scenes. Kenya supported Malaysia and urged Mchumo to try to form a consensus behind Supachai. Also endorsing Malaysia’s position were Japan, Korea, Hong Kong, India, Pakistan, Egypt, Uganda, Zimbabwe, Cameroon, Mexico, Haiti, and Cuba. Other members spoke up for the chair’s position even though they had favored Supachai. Still others, including many in Latin America, complained that Malaysia and its coalition were trying to change the agreed rules at the end of the game because they disliked the result. The European Union members were deeply divided between the candidates. Many members firmly opposed taking a vote. Heated, insulting rhetoric flew in the General Council room and the meeting ended with no consensus and no Director General in office for four months.

Many developing countries backing Supachai felt the WTO had been biased against them and were convinced it was past time for the Director General to come from a developing country. Statements by Supachai, on the other hand, had raised concerns in the US that he might lean in favor of the developing at the expense of the developed.6 But each broad group--developed and developing countries—distributed itself across the two candidates. Finally at a 22 July meeting, Bangladesh and Australia brokered a compromise. Moore and Supachai would each be appointed to the post for a three-year term, Moore first, with no possibility that either could be extended or reappointed. All agreed this split term should not be a precedent and that they should design new procedures for future appointments of the Director General by September 2000. For the first time, then, a coalition led by developing countries had formally exercised its authority to block a consensus negotiated without their support. This had never happened under GATT. The first southern Director General will take office in 2002.

Geneva work on the ministerial declaration finally got serious in October. One of the two most contentious issues was agriculture. The Uruguay round agreements had already mandated that talks over two areas—agriculture and services—would resume by 2000. But the proper objective for the new agriculture talks proved to be highly contentious. Exporting countries insisted that the next round should end all special treatment for farm products, but the European Union, Japan, Korea, and other high-cost producers refused to agree to cuts in government support that deep, especially not before the round had even begun.

Meanwhile, India led in framing what came to be called the implementation issue. India and the Like Minded Group of ten other developing countries generated a number of proposals designed to shift value from the rich to the poor states and delay or obstruct the launching of a new round. The central argument was that the Uruguay round agreements, as developed countries had implemented them, were profoundly unfair to the developing members. The poor had made substantial commitments to open their markets and take other steps, in the expectation of gaining increased market access for their exports especially in agriculture and textiles and clothing. The rich countries had failed to implement valuable market openings in both areas. Some developing countries felt the WTO had been imposed on them in almost colonial fashion. Vague provisions promising special, differential treatment in favor of developing countries had not been implemented concretely. Furthermore, India argued, certain developed countries have been using antidumping measures to harass exporters, and have been using dispute settlement to attack legitimate developing country policies. Subsidies normally used by developed countries are considered non-actionable under these rules, while subsidies usually used by developing countries are actionable.7 India criticized calls for a comprehensive new round, arguing that the organization should concentrate instead on correcting imbalances and flaws in the implementation of existing agreements. It proposed specific developed country concessions in the rules on subsidies, antidumping, sanitary, and investment measures, and promised virtually no negotiating gain to the developed.8

Implementation turned out to have more than one meaning. The second was the point that least-developed members were having difficulty living up to some of their own commitments. Forty least-developed members face enormous challenges to human development. Many are shaken by internal political instability and even war. New 1994 rules, such as those on protecting intellectual property rights (TRIPS), food safety (SPS), and customs administration, implied serious new institution building in these countries—much more than changing a duty rate in the customs code. The Uruguay round overlooked these costs, which a World Bank study estimated to be as much as a full year’s development budget.9

More generally, Uruguay round rules were written with little thought about competing development priorities or domestic adjustment costs they would impose. Trade liberalization everywhere, even when it generates aggregate economic gains, forces painful economic and social changes on the society. Developing countries—the middle- income as well as the poorest--lack social safety nets that could absorb some of the worst social costs of openness. Industrial countries historically put welfare states in place before liberalizing their own trade. Developing countries in 1994 had already committed to open their markets much more than industrial countries had done before they had domestic programs to cushion the blows. Official development assistance was not increasing in the aggregate to help with these problems. For some countries, exposing themselves to even more global competition under these institutional conditions seemed premature. Other developing countries were seriously interested in a new round of reciprocal opening, at least covering certain sectors.

In Geneva, delegations took one another’s issues hostage. Pakistan, India, Egypt, Malaysia, Mexico, and others said they opposed negotiating any new rules until they had been satisfied on implementation of existing ones.10 The Cairns group of farm exporters refused to talk about any other issues until they had been satisfied on agriculture. The EU insisted it could not show flexibility on agriculture until others had agreed to negotiate over its priority items such as new rules on investment and competition policy. Washington was cool to these EU priorities and refused to talk about antidumping measures or textiles, which were important for Japan and developing countries respectively, under any circumstances. The US belatedly added a proposal to discuss core labor standards in the WTO, an idea that was anathema to most developing countries. These were the same governments that had committed to launching a round in Seattle.

The fight over the DG succession, besides delaying the drafting, had also left two key mediators—the General Council Chair and the new Director General—in remarkably weak positions to lead divided members to a consensus. In addition, the chairman issued a bloated, 33-page draft “declaration” that simply compiled nearly every competing stand at the outset, which perversely encouraged foot-dragging even more. Once delegations saw their positions in the chair’s text, the bargaining process amounted to convincing parties to give up things already won, making it even more difficult to achieve any consensus.11 Chairs of other multilateral negotiations have put forward a single draft text only after informal discussions have indicated that a consensus was likely to form around that language.

Director General Moore called informal small meetings in the green room, but delegates generally repeated the same uncompromising positions they had been taking in the larger venue.12 It was becoming clear that Geneva was “full of developing country delegates insisting that they are not going to be ‘rolled’ this time, as they believe they were in the Uruguay round.”13 Moore also met bilaterally with many delegations. The secretariat asked former deputy director-general Anwarul Hoda to meet privately with delegations to explore for a possible deal on implementation.14

Finally on 23 November Moore and Mchumo threw in the towel, pointing to remaining gaps over agriculture and implementation above all. After a year of work, the best they could send to ministers was the 33-page hodgepodge that no one thought was adequate for action at a ministerial conference.

Mismanagement in Seattle

On top of the first two problems--the firm distributive strategies and the failure of the Geneva institutions to bridge any gaps--management of the Seattle conference itself threw additional obstacles in the way of consensus. In fact the former Secretary General of the Commonwealth called this the worst organized international conference he had attended in 40 years of public life.15 This third problem may explain why the meeting collapsed utterly, without even a disappointing agreement on a future WTO work programme.

For one thing, the host government’s local arrangements were remarkably unfavorable for consensus building. In particular, the schedule did not allow enough time for the work at hand. Then the host government lost control of the streets and lost one of the scheduled working days. At the end of the conference there were signs of significant progress, but the work could not continue past the scheduled deadline, as has often occurred in GATT, because Seattle had rented the hall for the next day to a convention of optometrists.

On top of the street chaos and tear gas, President Clinton increased developing country ministers’ outrage with a famously provocative statement about labor standards. “Ultimately I would favor a system in which sanctions would come for violating any provision of a trade agreement,” Clinton declared. 16 “The worst thing in the process in Seattle,” observed a Southeast Asian diplomat who was there, “was President Clinton’s statement. It hardened the resolve of a lot of developing countries to resist. This statement was a godsend to those who did not want a round.”17

Third, the United States minister, Ambassador Charlene Barshefsky, choose to play the role of conference chair as well as US chief negotiator. By many accounts, she did not play the mediating role as effectively as had some chairs of past multilateral conferences. In fact, she amplified rather than dampening the resentments and suspicions that were already driving this conflict. She made statements that others found arrogant and insulting, one EU representative said.18

Late Thursday with 24 hours remaining, Barshefsky decided to commence small “green room” sessions to work on remaining gaps. Some excluded ministers, left in the dark about what was happening inside, objected vehemently. The African ministers, who had spent much time preparing and whose leader, Kenya, was not in the green room, issued a formal statement saying:

There is no transparency in the proceedings and African countries are being marginalized and generally excluded on issues of vital importance for our peoples and their future. We are particularly concerned over the stated intentions to produce a ministerial text at any cost including at the cost of procedures designed to secure participation and consensus. . . .We will not be able to join the consensus required to meet the objectives of this Ministerial Conference.19

Delegates from Jamaica and Guyana tried to force their way into the green room. The Dominican Republic’s ambassador, a US-educated economist, complained: “They still think the WTO is a club. They still think 20 countries can decide for the rest of us.”20 Many believed Barshefsky was determined to force an agenda favorable to US preferences in the small group and then present it to the 135 on a take it or leave it basis.21

Meanwhile, surprisingly, ministers meeting in the regular large negotiating committees actually had been moving close to agreement on an agenda including five issue areas. Their informal accomplishments, despite all these obstacles, reinforce the impression that a better yearlong WTO process would have made a significant difference even given the protestors’ campaign. The services section of the declaration was virtually finished. Canada’s Agriculture Minister, Lyle Vanclief, said, “good progress was made on agriculture. . . . We got down to millimeters away from a statement on export subsidies that we could all live with.”22 Many governments agreed to launch a round including industrial tariffs, though India and a few others continued to link this area to implementation.23 On transparency in government procurement, India was the only country that did not join in the consensus.24

On implementation, Hoda had been hard at work behind the scenes and by Friday morning had a lengthy, specific text that he believed might have been accepted if other elements of a package had fallen into place. The text, in addition to hortatory language, had ministers agreeing to extend the time for least-developed countries to comply with the sanitary and customs valuation agreements (as the Africans had proposed), as well as the time during which they would be shielded from certain legal complaints under the TRIMS and TRIPS agreements. The collapse meant developing countries lost concrete gains that may have been close to approval. Since the US remained adamant against new commitments on antidumping and textiles, the compromise text provided little of practical value on those issues, however. 25

On labor, US negotiators reportedly fell back to accepting any plan that allowed a set of international organizations including the WTO examine these issues,26 and something like the EU proposal might have been accepted, at least in a climate not soured by tear gas and Clinton’s provocative statement.27 Little headway was made toward a consensus on investment, competition policy, environment, or increasing the transparency of dispute settlement.28

Time ran out and the conference simply ended. Pascal Lamy, the European Union’s lead negotiator, blamed the fiasco on “the complexity of the negotiation.” He said the developing countries are now playing a greater role than ever before in the process. “The process itself has to be reassessed and maybe rebuilt.” Chairperson Barshefsky in her concluding remarks said: “We found that the WTO has outgrown the processes appropriate to an earlier time. . . . An increasing and necessary view, generally shared among the members, was that we needed a process which had a greater degree of internal transparency and inclusion to accommodate a larger and more diverse membership.”29



LITTLE CHANGE SINCE 1999

Despite these sentiments, WTO institutions have changed hardly at all since 1999 and the parties remain gridlocked. To date, nothing more has been heard about new procedures for selecting the next Director General that would avoid another paralyzing conflict when Supachai’s term ends in 2005.

The green room as it functioned in 1999 clearly lacked legitimacy. Excluded members had no say in who was invited and were not even informed what was happening inside. In early November, Bolivia, Uganda and other small states had objected to this lack of transparency and asked the management to take corrective steps in Seattle, so their ministers would not be presented with a fait accompli again, as had occurred in Singapore.30 These reasonable steps were not taken and no institutional reforms have been adopted since.

In 2000 members reaffirmed their devotion to the consensus rule. Proposals for changing institutions within that rule have been advanced but then ignored. The African group insisted that the organization needed a more inclusive process prior to the point of decision. They called for new guidelines that would clearly identify the circumstances under which informal consultations such as the green room are to be initiated and with whom and by whom. Participants should have a clear obligation to report regularly to the full body, and to take other members’ views into account in these consultations.31

Schott and Watal (2000) proposed to make WTO negotiations both more efficient and more legitimate by formally creating a small permanent steering or management group. The group would consist of 20 states with seats allocated according to objective criteria such as shares of world trade, provided that some seats were reserved for currently under-represented regions in Africa, Asia, the Middle East, and the Caribbean. Countries would be encouraged to pool their trade figures and share a seat. Coalitions would be voluntary and they would choose their own representative for a particular meeting. This steering group would reduce the transaction costs of negotiating compromises but would not have authority to act for the organization, unlike the IMF Board for instance. Binding agreements would still require consensus in the full body. Schott and Watal contend that this institution would have functioned better in 1999.

Small developing and least-developed countries have firmly rejected such schemes in the past on the grounds that formally creating a small body could undercut the possibility of majority rule by voting.32 The actual alternative here, however, has been not majority rule but deadlock and frustration for many.

In 2000 the Director General and the chair of the General Council began efforts to rebuild confidence and restart a dialogue. The mandated talks over agriculture and services were set into slow motion in an atmosphere marked by suspicion and cynicism. The General Council chairperson evolved a technique of encouraging informal discussions among small groups of countries to explore possible solutions, and he won praise for his efforts.33 But a new “work programme” to address developing countries’ complaints regarding implementation left many of them deeply disappointed by the end of the year.34 Virtually nothing was agreed. Essentially industrial countries continued to hold back concessions on these issues until developing countries agreed to a new round, while India, Egypt and Pakistan continued to refuse until industrial countries made some implementation concessions first. Some of this probably was tactical positioning for relative advantage should a deal be reached.

The WTO also gave little attention to the demands of critical NGOs to allow them greater direct access to its decision making. The Organization has been holding symposia for NGOs in parallel with the closed ministerial meetings and during the periods between them, and the secretariat has created a World Wide Web site for more effective presentation of the Organization’s perspectives. A year after Seattle, one Geneva diplomat compared the Organization to a boxer still staggering around in a daze after a knockout.35

During early 2001, OECD and APEC political leaders again called in general terms for a new WTO round. Yet there was little visible evidence that the same leaders were relaxing the restrictions on their Geneva agents that had blocked such an agreement for two years.36 The European Commission did float ideas for making its proposals for new agreements on investment and competition policy more modest.37 But in March one close observer reported, “In essence, there is no real bargaining going on in Geneva.”38 Informal discussions continued at a stately pace, but private sector pressure for a round wider than agriculture and services remained difficult to detect. In the US, the new Bush administration was still filling senior official posts and not offering any active leadership in preparing for a new round. U.S. sentiment for adding labor standards to trade agreements had not waned; in fact a prominent business organization announced that some accommodation to labor and environmental values had become necessary. But there was no greater sign of receptivity on the part of developing countries.

CONCLUSION


What does all this imply for the future of consensus building in the WTO? The fights that erupted in 1999 showed that the WTO has changed fundamentally from the old GATT days. Enforcement of the rules is now more automatic, and partly as a result, far more members are taking an active interest in every new development. Developing countries are now willing to use their formal authority to block WTO consensus unless the deal on the table satisfies their needs as they see them. Thanks to their newfound confidence and determination, the first Director General from a developing country will take office in 2002. No longer will small developing members sit passively on the sidelines and ratify a fait accompli designed for others’ purposes. China’s accession will add a large poor member with complex domestic problems whose acquiescence will also be needed for consensus. Achieving consensus will require working harder, earlier to win support from all members, including small developing traders.

At the same time, developing countries have much to gain from new negotiations. Stalemate denies them economic opportunities that might be realized through bargaining, including with each other (or through unilateral liberalization). Their trade interests are hardly homogeneous; they trade different and sometimes complementary goods and services. Most individual developing members have incentives to abandon leading blockers like India and Egypt, when they feel their economies can be advanced more by agreement.

Consider four different futures for the WTO during the next few years, two unlikely and two others more likely.

Scenario 1. Members adopt constitutional amendments to institutionalize the common interest to a greater extent while maintaining the consensus rule. They create a small steering group, or give the Director General greater authority or influence, or both. Small traders organize themselves into coalitions and are represented in and informed about the central group, raising the legitimacy of informal bargaining that takes place there. Bargaining remains complex and time-consuming, since the same differences of view are present and the results affect prosperity across nearly the entire world. But the transaction costs of campaigning for a consensus are much lower than when it is necessary to communicate with 140 embassies. Members of the steering group are in closer touch with views of the entire membership, and thus at least less likely to drive the organization into another train wreck like Seattle.

There is no evidence that such a scenario is in the offing. It seems much more likely that members will keep the structure weak at the center and the transaction costs of consensus high. Thus with a much larger active membership, stalemates will be more difficult to overcome and will last longer. Individual members get limited help from the center in devising and implementing integrative strategies. Informal consultations retain a slight odor of illegitimacy unless they are made more transparent to excluded states. There is also no realistic prospect of constitutional amendments granting NGOs a formal place in either negotiations or dispute settlement in the medium term.

Scenario 2. Another equally unlikely future is a broader strategy from the industrial countries to link trade negotiations with greater development assistance. Development deficits and absence of social safety nets are serious practical constraints on less developed governments whose assent is necessary for deeper WTO integration, even those whose leaders agree with the theory of comparative advantage for the long term. If industrial countries put on the negotiating table significantly higher levels of funding to address these deficits, at least for countries that attract little private foreign investment, they could expect the less developed to accept greater market opening.

In fact, little consideration is being given to such an ambitious issue linkage. Official development assistance remains limited. Donor governments implement trade policy and development assistance through different bureaucracies and largely ignore connections between the two, just as they rejected linkage between trade talks and debt relief during the 1980s. The World Bank has a program devoted to trade, but only minor coordination takes place between the World Bank and the World Trade Organization.

Scenario 3. At the same time, WTO ministers including developing countries came remarkably close to informal agreement to launch a limited new round covering five issue areas even in the chaos of Seattle. In a third broad scenario, members decide to begin WTO negotiations on that limited package, without greater foreign aid, deferring other issues until political support increases later.

Of course rules vary as to how much change they require and how much space they leave for other development programs. In this scenario, parties eventually accept partial agreements that achieve consensus by allowing small developing and least developed members to opt out of some new obligations (and benefits). One new deal, for example, mandates specific disciplines worldwide but allows a country to request an exemption as long as its level of development and its share of world trade are below concrete thresholds. Such an agreement still covers most of world trade including large developing countries, while exempting many small traders depending on the levels set. As countries develop or expand their trade, they lose their exemptions.

Another new agreement follows the example of the General Agreement on Trade in Services (GATS). This modest à la carte model established liberal principles for all services trade, but these principles are not binding except on sectors for which the member chooses to make a specific commitment. Many developing countries made few commitments when they signed the GATS. (They also gained little economic efficiency.) The deal breaks new ground by extending WTO principles to a new area but leaves until later the task of implementing the principles in commercially meaningful ways in some countries. If more governments decide to liberalize in their own interest, this framework provides norms for how to do so and offers a means of binding the new policies through international commitments.

Even more limited agreements are voluntary or plurilateral. Subsets of WTO members have created deals whose rights and duties apply only to signatories. One pertains to trade in civil aviation, another to government procurement. The latter has only eleven signatories. The more limited the agreement, the less valuable it is to proponents, naturally. Limited deals could also codify discrimination, contrary to the WTO’s central principle.

Scenario 4 is continued stalemate. In this future, leading governments maintain their strong and inconsistent demands in the WTO while putting most of their political capital into other projects—regional enlargement for Europe, hemispheric free trade in the Americas, bilateral agreements for Japan. The typical developing country reasons that opening its market further to regional neighbors only, or not opening further to anyone for several years, feels more comfortable than accepting greater global competition soon. The focus for negotiating new trade agreements shifts away from the WTO to regional and bilateral settings. The Geneva dispute settlement process continues to work out the meanings of the Uruguay round agreements, and societies continue to work at taking advantage of those agreements.

At the present writing number 4 seems most likely, but only time will tell which future actually arrives.

WORKS CITED


Blackhurst, Richard. Forthcoming. Reforming WTO Decision Making: Lessons from Singapore and Seattle. In Klaus Gunter Deutsch and Bernhard Speyer, eds. Freer Trade in the Next Decade: Issues in the Millennium Round in the World Trade Organization. London: Routledge.

Finger, J. Michael and Philip Schuler. 1999. Implementation of Uruguay Round Commitments: The Development Challenge. Policy Research Working Paper 2215. Washington: The World Bank.

Odell, John S. 2000. Negotiating the World Economy. Ithaca, NY: Cornell University Press.

--------. Forthcoming. “The Seattle Impasse and Its Implications for the World Trade Organization.” In The Political Economy of International Trade Law, a festschrift honoring Robert E. Hudec, ed. by Daniel L. M. Kennedy and James D. Southwick. Cambridge: Cambridge University Press.



Schott, Jeffrey J. and Jayashree Watal. 2000. Decision-making in the WTO. Washington, Institute for International Economics. International Economic Policy Briefs 00-2. Available at www.iie.com/policybriefs/


1 International Trade Reporter [ITR], 1 December 1999, 1980.

2 Schott and Watal 2000, table 1.

3 This section draws on Odell (forthcoming).

4 For a comprehensive typology of negotiation strategies see Odell 2000, chap. 2. A strategy on the distributive end of the spectrum is a set of actions that promote the attainment of one party’s goals when they are in conflict with those of the other parties. A strategy on the purely integrative end is a set of actions that promote the attainment of goals that are not in fundamental conflict, actions that expand rather than split the pie. Tactical elements may also be mixed, simultaneously or sequentially.

5 ITR, 12 May 1999, 810.

6 Interview with an American trade official, Washington, June 2000.

7 Communication from India, “Concerns regarding Implementation of Provisions relating to Differential and More Favourable Treatment of Developing and Least-Developed Countries in Various WTO Agreements,” WT/GC/2/108, 13 November 1998.

8 ITR, 9 June 1999, 967-68.

9 Finger and Schuler 1999.

10 Inside US Trade [IUST], 5 November 1999, 16.

11 Interviews, Geneva, June 2000. This insight is consistent with psychological prospect theory, the laboratory finding that subjects take greater risks (e.g., of no agreement) to avoid losses than to achieve gains of the same magnitude.

12 Interviews with three Secretariat leaders and two delegates, Geneva, June 2000.

13 World Trade Agenda [WTA], 8 November 1999, 9.

14 IUST, 5 November 1999, 4, 15.

15WTA, 8 December 1999, 6.

16 Seattle Post-Intelligencer, 1 December 1999, 1.

17 Interview in Geneva, June 2000.

18 WTA, 8 December 1999, 6. See Odell (forthcoming) for additional evidence and analysis.

19 Statement of Dr. John Abu, Minister of Trade and Industry of the Republic of Ghana, on behalf of African Ministers of Trade, in Seattle, 2 December 1999. Permanent Delegation of the Organization of African Unity in Geneva.

20 Los Angeles Times, 5 December 1999, A20.

21 ITR, 10 December 1999, 11-12.

22 ITR, 9 December 1999, 1997; IUST, 3 December 1999, 4-5; New York Times, 4 December 1999, A6.

23 India, Ministry of Commerce and Industry, India and the WTO Newsletter, November-December 1999 (http://commin.nic.in/doc/wtonovdec2.htm).

24 WTA, 8 December 1999, 8.

25“Annex: Possible Decisions at Seattle on Implementation,” 0545 hours 3 December 1999, [courtesy Anwarul Hoda and Balkrishan Zutshi]. Also New York Times, 4 December 1999, A6.

26 New York Times, 2 December 1999, A1.

27 WTA, 8 December 1999, 8.

28 An EU negotiator indicated later that the EU actually could have accepted a package deal with little on investment or competition policy besides agreement to continue studying these issues, if the package had had sufficient value on other issues. Interview, Brussels, 14 July 2000.

29ITR, 9 December 1999, 1992.

30 Minutes of meeting of WTO General Council, 3 and 4 November 1999, WT/GC/M/50, 2-3; Blackhurst (forthcoming).

31 Interview, Geneva, June 2000.

32 Schott and Watal 2000, 3. Blackhurst (forthcoming) proposes a similar representative consultative group that would meet only when the green room could not accommodate all members wishing to attend.

33 WTA, 20 November 2000, 3.

34 Ibid.

35 WTA, 20 November 2000, 1.

36 IUST, 18 May 2001, 1.

37 IUST, 30 March 2001, 13.

38 WTA, 26 March 2001, 2.



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