Reboot the WTO template

Updated: Aug 23 2006, 05:30am hrs
The WTO has acquired a huge expertise in negotiating complex agendas. But after five years at the negotiating table, governments ran out of time to save the Doha Round of multilateral trade negotiations. The core problem is not that members are opposed to open markets, but that the Doha agenda was too big and complex to craft a deal. What should have been a development Round instead became an endless cycle of recrimination, backbiting and brinksmanship.

The negotiations were a crazy quilt of offers, counter-offers, bluffs and vetoes, particularly in the contentious area of agriculture. Up to the very end, America and Europe remained committed to protecting uncompetitive farm practices at the expense of southern producers. However, the Doha Round collapsed under the weight of many more failures than agriculture. What northern negotiators fail to recognise is that the WTO faces an increasing number of non-tariff protectionist strategies employed by northern and southern countries. More important, WTOs governance processes do not reflect the needs of a majority of its membership. Southern countries reap fewer rewards from the international trade regime than do the worlds richest traders.

Finally, after a decade in existence, the WTO continues to run an outdated operating system based upon the interests of the quad countries (the US, EU, Japan and Canada). Despite the supposed software upgrade at Doha, the system takes no interest in many emerging developments in the international society of states. More dangerous is the fact that the balance of power is drifting south, causing the WTOs operating system to seize up and crash.

The new institutional arrangements agreed to at the end of the Uruguay Round have turned out to be an unstable platform for future negotiators. In the areas of cultural diversity, human security and public health, there has been a proliferation of new international instruments of public law that have been created to handle the challenges of a smaller, more inter-dependent planet. The WTO is on the sidelines in this process. We are not nave about the role of power in the current international system, but whatever the shortcomings of the current state of public international law, the WTO remains a juridical silo at a time when globalisation requires broader and deeper links between international governance mechanisms.

The Representational Crisis Global civil society activists have been right to emphasise the vast inequality of institutional trade outcomes for rich and poor countries. At first, income inequality among the membership did not seem to affect the performance of the WTO. But over time, the power imbalance has been shown to have significant institutional side effects that lower the morale of the membership and nurture an environment of distrust and recrimination. But the good news is that the WTOs institutional trajectory is increasingly influenced by emerging economies. In China, India and Brazil, industrial capacity and an emerging middle class are sparking growth rates which challenge the economic superiority of North America and Europe. As a result, a new balance of power is emerging in the heart of the organisation. Still, there is a very large disconnect. Southern countries still do not use the Dispute Settlement Mechanism as much as developed countries. When four-fifths of the membership is classified as developing, this is a significant commentary on the current institutional arrangement. Of the 148 members, 81 have never used the trade court. Dispute settlement has not been democratised in the least, and the wealthiest traders ought to be alarmed by the failure to get the rules right for the poorest members.

The WTO was supposed to represent the collective preference of democratic societies for open markets, but the Doha Round was run into the ground by clever legalistic juggling and ambitious bureaucrats trained in the dark arts of public relations. Far from being a rainmaker, the WTO has been plagued by a drought of good ideas about its place in the international system. Compare the faded glory of the most-favoured nation and non-discrimination principles of global trade to other international milestones like the advance of human rights law, the growth of environmental standards such as the polluter pays principle, the UN Millenium Goals to eradicate poverty and promote gender equity and Unescos efforts towards greater cultural diversity. One can see how much a laggard the WTO is, and how few and far between are its triumphs.

The WTO set out to be a powerful voice in world affairs, but is now a vision manqu. Its procedures for dealing with non-tariff protectionist measures, its representational crisis and its silo mentality to international law suggest that the trading system is due for a major overhaul. Remarkably, all countries are committed to a fair and equitable trading order. World trade continues to skyrocket and regional trade deals are also on the rise. Open trade can be a force for development and poverty reduction, or it can be a vehicle for greater inequality and corporate enrichment at the expense of the global south.

The lesson is that if the rules do not produce superior outcomes, they should be changed. This is the big idea being driven by the new geographies of power in India, China and Brazil. Mercosur bears watching as an alternative to the WTO template. India should play a leadership role in reworking the rules and restarting the negotiations. A trading system that works for everyone is the right destination. Now we need a new road map to get there.

Daniel Drache is Associate Director, Robarts Centre for Canadian Studies and Professor of Political Science, York University Toronto Canada. Marc D Froese is research associate, Robarts Centre for Canadian Studies and completing his doctoral dissertation on industrial policy and trade law