This article empirically examines the WTO’s dispute settlement performance over the past decade. Dispute settlement is the most significant deliverable of WTO governance and embodies all that is both problematic and progressive about that international institution. The article analyzes a number of important and unforeseen institutional consequences of the shift from an informal GATT mechanism to the mandatory norms and processes of WTO litigation. The rise to prominence of antidumping trade remedy action, a retaliatory dynamic of dispute settlement and the continued dominance of developed countries at the Dispute Settlement Mechanism (DSM) has contributed greatly to the current negotiating deadlock.
Cet article examine du point de vue empirique la façon dont l’Organisation Mondiale du Commerce (OMC) a géré les différends entre ses membres au cours de la dernière décennie. Un des éléments-clés de cette politique interne a été l’ « Organe de règlement des différends » (ORD) qui représente un des acquis réels de l’OMC dont les procédés restent en même temps largement déterminés par les pays développés. L’article en arrive à la conclusion que ce manque d’équilibre entre ces derniers d’une part et les pays en développement d’autre part est la raison principale de l’échec des négociations du cycle de Doha.
Der Aufsatz stellt eine empirische Untersuchung der Streitschlichtungspraxis der WHO innerhalb der letzten zehn Jahre dar. Das Streitschlichtungsverfahren ist die bemerkenswerteste Leistung der WHO-Politik und erhellt zugleich den zukunftsweisenden wie den problematischen Aspekt dieser Institution. Der Artikel untersucht eine Reihe wichtiger, aber unvorhergesehener Konsequenzen des Übergangs von dem informellen GATT-Mechanismus zu dem förmlichen, prozedural geregelten Streitschlichtungsverfahren der WHO. Das Überhandnehmen von Antidumping-Verfahren, die Tendenz zu Vergeltungsstrategien sowie die anhaltende Dominanz der Industrieländer innerhalb der Streitschlichtungsverfahren haben entscheidend zur gegenwärtigen Blockierung der WHO beigetragen.
Corps de l’article
The World Trade Organization (WTO) has acquired a huge expertise in negotiating complex agendas. But after five years at the negotiating table, governments are running out of time to save the Doha round of multilateral trade negotiations (Drache and Froese 2006). The core problem is not that members are opposed to open markets, but that the current agenda is too big and complex to craft a deal (Drache 2005). Susan Schwab, the US Trade Representative hit the nail on the head when she said that a weak deal is worse than no deal at all – “if you do one of these once every generation, and your objective is to liberalize trade, why would you settle for something that doesn’t do a whole lot to liberalize trade?” (Alden and Beattie 2006). So far Doha-lite has few supporters. Institutionally, the WTO is caught between powerful competing interests and factions. Every government wants greater access for its competitive industries, but each major trading country is committed to protecting its uncompetitive domestic producers (see Table 1 below). Doha negotiations are a crazy quilt of offers, counter-offers, bluffs and vetoes.
The popular perception is that agricultural subsidies are the biggest roadblock to successfully concluding Doha. In reality, the reason why trade negotiations are going nowhere is that WTO’s rules and processes are inadequate to the Herculean task it has set for itself. In the ‘medieval’ process of trade liberalization, the WTO is not only hamstrung by special interests, but also by the realities of global politics which have roughly intruded on the theory of trade liberalization (Wolfe 2005: 631-45).
The WTO grew from a proactive tariff reduction regime to a full-bodied trade governance forum over the previous decade. Perception is that trade liberalization is still driven by developed countries. But growth of the WTO’s membership has significantly changed the liberalization dynamic. WTO law is rooted in an American system of common law and corporate regulation (Pauwelyn 2003: 121-140). However emerging economies are increasingly influencing its institutional trajectory. In China, India and Brazil, industrial capacity and an emerging middle class are sparking growth rates that challenge the economic superiority of North America and Europe. As a result, a new balance of power is emerging in the heart of the organization.
This article empirically examines the WTO’s dispute settlement performance over the past decade. Dispute settlement is the most significant deliverable of WTO governance and embodies all that is both problematic and progressive about the trade institution. We analyze a number of important and unforeseen institutional consequences of the shift from an informal GATT mechanism to the mandatory norms and processes of WTO litigation. The rise to prominence of antidumping trade remedy action, a retaliatory dynamic of dispute settlement and the continued dominance of developed countries at the Dispute Settlement Mechanism (DSM) has contributed greatly to the current negotiating deadlock (Birdsall et al 2005; Ostry 2006; Helleiner 2000).
The WTO faces a representational crisis because many of its processes and outcomes do not reflect the needs of a majority of its membership (Stiglitz and Charlton 2006). This is a primary reason the WTO system is breaking down. The fact is that 60% of the membership has never used the DSM. After a decade in existence, WTO panels still operate according to a hermetically sealed set of rules and processes, and take no interest in many emerging developments in the international society of states beyond narrow trade parameters. New instruments of public international law and the rapid growth of countervailing political forces have scrambled the field of play. The balance of power is shifting but the WTO’s political culture has been slow to respond. The new institutional arrangements agreed to at Uruguay have turned out to be an unstable platform for broadening. 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 interdependent planet. The WTO is on the sidelines in this process. We are not naïve about the role of power in the post-Westphalian system, but whatever the shortcomings of the current state of public international law, the WTO remains a juridical silo at a time when globalization requires broader and deeper links between international governance mechanisms (Cutler 2001: 133-50).
2 Antidumping: The New Zero-sum Game of Trade Multilateralism
Dumping is the practice of exporting a product for less than the cost of producing it, or for less than the ‘normal value’ of the product on the firm’s home market (Government of Canada, Dept of Finance 2005). Dumping is a popular way to reduce a glut on one’s own market, and agricultural goods are sometimes treated this way. Canadian dairy producers have been taken to the WTO for this practice (WTO 1999). Dumping is also a useful way to gain access to a foreign market dominated by other firms. Chinese goods are often hit with antidumping duties for this reason (Livdahl and Masuda 2005).
In economic terms dumping is a rational, profit-maximizing action, with little or no harm to global welfare (Mankiw and Swagel 2005: 107-119). In many cases, dumping goods on foreign markets can even improve consumer welfare by lowering prices. On the domestic market, producers sometimes sell their goods below cost in an effort to clear inventory or break into a market dominated by rival producers. However, in international trade, where countries have very different factor endowments, selling goods for less than the cost of production is considered by the WTO to be an unfair form of competition. Antidumping is a global bad because it is frequently used by the global north against southern producers whose primary comparative advantage is cheap labour. Global north countries use it against each other to protect market share for domestic industries – needless to say, antidumping measures are frequently subject to abuse, and reforming the rules that regulate them is key to creating a fairer trading system. Nevertheless proactive state involvement in competition is essential in an era of mounting economic question marks (Young and Wainio 2005: 23-46; Lindsey and Ikenson 2001).
Paradoxically, antidumping actions are now lower than historic highs in 1999 and 2001. But there were still more than 200 antidumping actions notified to the WTO in 2004 (see Figure 1). A mind-boggling 2637 antidumping initiations were reported to the WTO in the ten years between 1995 to 2004. Only about 5% of these went to the panel process, yet antidumping triggers a cycle of relentless trade politics that benefits the most powerful traders – a fact the WTO has been quick to recognize and slow to rectify. This bare-knuckle reliance on antidumping as a trade strategy has four steps: push hard for concessions from trading partners during negotiations, concede less in return, exploit the legal loopholes found in WTO governance, craft a deal and then withdraw the complaint. This explains why so many antidumping actions are little more than a bargaining chip in the ongoing negotiating game of trade-roulette.
Governments rely on aggressive litigation strategies to shelter industries faced with competitive pressure and cut costs up and down the production chain. Figure 1 includes both dispute settlement initiations as well as national trade remedy actions reported as per the Agreement on Antidumping. The increased reliance on antidumping measures is a perverse effect of the cost-cutting spree undertaken by the world’s largest multinationals throughout the 1990s, which placed hundreds of thousands of northern manufacturing jobs at risk and stirred the wrath of domestic publics. Governments could not remain passive bystanders when entire sectors were thrown into chaos by structural adjustment. As is to be expected in these circumstances, antidumping filings are cyclical, rising and falling with a predictable regularity. Antidumping actions peaked with the dot-com bubble in 2001, and since then more than 200 antidumping complaints continue to be filed annually.
Bourgeois and Messerlin (1998) examined European antidumping cases between 1980 and 1997 and found an inverse relationship between the height of the tariff wall protecting domestic firms and the frequency of their involvement in antidumping cases. As tariffs fell, countries engaged more frequently in antidumping trade remedy actions. Second, in this legal culture, the losers are small developing economies such as the African, Caribbean and Pacific (ACP) nations. As Brown, Hoekman and Ozden have shown, poor countries are most frequently the target of antidumping actions; they are less likely to settle cases and more likely to face high dumping duties. They are also less likely to bring their cases to the WTO (2005: 349-371).
The case of China exemplifies the present policy quagmire surrounding antidumping. China has been the single biggest target of antidumping remedies in recent years because according to the WTO, it is a non-market economy (NME), a generalized category left over from Cold-War era trade politics (de Jonquieres 2006). In the past decade, China has lessened government controls, strengthened private property rights and met the standards for WTO accession. Ironically Russia, yet to qualify for WTO membership, has actually moved backwards on economic reform but has already been recognized by the US and EU as a market economy.
NME status is a magnet for antidumping violations. Imagine that a Chinese firm produces handbags and sells them at home for $ 10 apiece and in foreign markets for the same price. Handbag manufacturers in the US, who sell their product for $ 25 apiece, complain to the Department of Commerce that Chinese manufacturers are dumping handbags on the American market. Article 2.1 of the Antidumping Agreement states that
“a product is to be considered as being dumped, i.e. introduced into the commerce of another country at less than its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country.”
The usual test of dumping is a comparison of handbag prices on the domestic market and their price in foreign markets. But China is a non-market economy according to the WTO, which means that its industries are assumed to be heavily subsidized and that functions to drive down the price of handbags in the domestic market. So the WTO allows complainants to use a proxy market to test domestic prices. If the Department of Commerce examines the price of handbags on the Indian market, and finds that they are sold for $ 15 apiece, antidumping duties may be levied against Chinese handbags. NME status means that even if Chinese handbags are produced according to free market rules, manufacturers may still face steep duties when selling in the US. The real issue behind the use of these trade measures is a surge in cheap exports, not unfair trade practices per se. Antidumping measures are a blunt instrument wielded against China because northern manufacturing has been hard hit by China’s rise. The export surges, in textiles for example, are unlike anything seen before. Between January and June 2005, Chinese positions in European textile markets grew by up to 500%. Europe negotiated quantitative restrictions, reverting to managed trade in this sensitive sector where Chinese competition puts close to half a million jobs at risk (European Union Trade Commission 2005).
China has been slapped with 338 antidumping measures since its accession five years ago (WTO in 2001). The most frequent complainants have been the EU, US and India, who applied measures against Chinese chemicals, base metals and electronics. China, however, has learned the value of antidumping measures for protecting domestic producers as well. As one of the most active users of antidumping measures, China has imposed dozens of measures on chemicals from the EU, steel from Japan, and paper from the United States and Korea, as the list of the top ten antidumping remedy initiators shows below (see Figure 2 below).
There is a bizarre convergence between North American, European, Latin American and Asian economies which all use antidumping as part of their trade and industrial policy toolboxes. In this super-competitive international environment, many members view trade multilateralism as a gestalt. What was once a rising tide lifting all boats is now a zero-sum game. The WTO’s non-performance in this area has had a corrosive effect on other areas of trade regulation, such as dispute settlement, which we will discuss below.
3 The Evolution of Antidumping in the GATT/WTO System
The regulation of non-tariff protectionism is now an important part of any modern trade regime because liberal antidumping laws at the transnational level often act as a stand-in for an international competition policy (Mankiw and Swagel 2005). Competition policy is off the table in the Doha round ensuring that antidumping remains an issue for the foreseeable future. Why is this? A supranational competition policy is contentious and would require the global north to implement many of the structural adjustment policies that have been foisted on the developing world by international financial institutions (Anderson 2003: 87-108). In theory competition policy allows countries the flexibility to reform Fordist mass-production industries faced with cheap foreign imports. They are designed to manage structural adjustment when needed. But antidumping remedies, when subject to US trade politics, frequently pander to the lowest common denominator allowing political insiders to maintain market share at great cost to consumers and tax payers. (Odessey 2006)
In a liberalized international environment, there are significant political and economic implications for small members and WTO legitimacy (Anderson 2003). For one, small members cannot afford the cost of subsidies, or for that matter, expensive antidumping remedies. Poor southern countries lack the ability to enforce compliance in the event that they win against a larger developed country. For another, the WTO’s free trade ideal takes a hit when its biggest proponents preach free trade while simultaneously maintaining lucrative stop-gap measures for influential business insiders – as much true in Europe and Asia as it is in the United States. Export credit agencies are but one of the latest and most innovative uses of proactive industrial support to sweep the European Union and Japan. They support domestic exporters who are trying to crack markets in Turkey, Mexico, Iran and China. These agencies protect the investment of domestic exporters, significantly lowering the risk of emerging markets for medium-sized industry leaders (Wolfe 2006). In 2004, EU governments spent $ 73 billion on state aid for industry. This is a high-water mark; subsidies are higher today than they were five years ago (Marsden 2005). Many forms of subsidization are illegal under EU law, but thanks to the many loopholes, the EU commission is powerless to stop states from supporting their corporate sectors.
Making the Link between Antidumping and Subsidies
Antidumping trade remedies are almost always linked to the charge of unfair subsidization. US producers are way ahead of the pack because they have relied on antidumping remedies as their preferred form of protectionism since the Smoot Hawley Tariff Act was signed into law on June 17, 1930 (Destler 2005). To wit, the US practice of subsidising and providing anti-dumping relief to their steel industry has already generated complaints on 13 separate issues around US trade in steel products. Canada has also been targeted by the US and New Zealand for the subsidy/anti-dumping protectionism of its dairy industry (Government of Canada 1999), its civilian aircraft by Brazil (Government of Canada 1997) and its automotive sector by Japan and EC (Government of Canada 1998). India took the EC to the WTO regarding its anti-dumping protection of Europe’s textile industries (European Communities 1998).
In each of these leading cases, the WTO failed to impose its brand of regulatory convergence, despite a show of compliance on the part of defendants. When states are ordered to stop subsidizing domestic industry, they simply switch tracks or tweak policies to remain in bounds according to the Agreement on Subsidies and Countervailing Measures. One example of this commercial practice is Brazil’s subsidization of Embraer and Canada’s financing deals with Bombardier. These firms remain global rivals and both countries continue to pursue national interests in the lucrative market for regional jets (Krikorian 2005: 921-975). Embraer and Bombardier hold a special status and continue to enjoy preferential treatment from their respective governments. To ignore the large role of subsidies in development is to overlook Krugman’s argument that trade competitiveness and hard-won market access are inevitably the outcome of a high-powered and focused industrial strategy, not the abstract principles of comparative advantage (Krugman 1990).
Of course, not every country’s industrial policies will be forward-looking and innovative. But what is indisputable is the fact that the state continues to have a large role to play in shaping the trade advantages enjoyed by domestic industry. Globalization has not hollowed out state authority to anywhere near the degree many believe. Pundits keep repeating this mantra, but the rise of China shows how misleading this idea is. State controlled companies remain surprisingly resilient actors in a post-Washington Consensus era. Despite market liberalization measures, state-owned enterprises still account for 80% of China’s economic output. Unsurprising for a quasi-communist authoritarian state, but what of Europe? For Finland, they account for just under 80% of economic activity. In the Netherlands, one of the most market-friendly jurisdictions, state enterprises control about 50% of all corporate assets. For Sweden, Italy and France, the number is closer to 30% (Financial Times March 10, 2006).
Even more importantly, in these jurisdictions the state is frequently the largest employer, making Walmart’s 1.3 million workers appear to be a drop in the bucket (Featherstone 2005). Washington Consensus rules should have been a red light for states, but they haven’t stopped developed countries that are committed to export performance in an increasingly competitive marketplace (Bergsten 2005).
4 The Dispute Settlement Gap
Global civil society activists have been right to emphasize 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.
After almost a decade, it is disappointing to learn that southern countries still do not use the Dispute Settlement Mechanism (DSM) as much as developed countries (Bellow & Kwa 2003); 1997 was the year of greatest inequality at the DSM, with developed countries bringing more than forty cases, and developing countries fewer than ten. By 2004, only twenty cases were brought to the WTO, with developing countries initiating seven, or 35% of total cases. This was down from 2003, when 28 cases were initiated and developing countries accounted for 19 of them, or 68% of all cases. When four-fifths of the membership is classified as developing, this is a significant commentary on the current institutional arrangement (Drache 2005). Of the 148 members, 81 have never used the DSM. Further, 278 of 329 cases taken to the DSM to date involve developed countries as complainants or respondents. Dispute settlement has not been democratized in the least, and the wealthiest traders ought to be alarmed by the failure to get the rules right for the poorest members.
Global trade politics has developed its own institutional forms and challenges (Braithwaite & Drahos 2000). Many of the disputes brought by the developed north to the DSM have roots in previous cases. Sometimes, as in the Bananas Case, they are the result of long-running bilateral disputes that the WTO is unable to resolve. Other times, as in the Boeing/Airbus disputes between the US and EU, they are the result of retaliatory litigation. This retaliatory dynamic is the result of clashing norms and standards. One area where this dynamic is most in evidence is in the area of food safety because the EU has imposed extensive restrictions on genetically modified organisms. It touches a raw nerve for civil society activists who believe the WTO is unfit to decide “what we should eat, and what farmers should grow,” (Beattie, February 8, 2006) as well as for heavily subsidized American agricultural producers who view European markets as the next logical frontier of market expansion. It is a top priority of the WTO to eliminate this rift. In fact, Lamy has staked his leadership of the WTO on getting the Doha back on track by making substantial gains for the global south while placating civil society with talk of ‘humanizing globalization’ (Lamy 2006). He has given new legitimacy to the fact that states bear the final responsibility for articulating collective preferences and accommodating democratic choice (Charnovitz 2005: 449-472)
It is telling that north-north disputes are much more frequent (so far 127 cases) than are south-south disputes (51 cases). In fact, north-north disputes by far surpass both the number of north-south and south-north disputes. A developed country is nearly twice as likely to initiate a dispute against another developed country as against a developing country. Moreover, a northern country was sued only 40% of the time by a southern country. In the future, with India and others becoming more active, this could change.
Out of the 329 cases taken to the DSM, 203 cases, or 62%, have been launched against developed countries. When we look at the number of cases in which developed members are involved as co-complainants or co-respondents, the number rises significantly; 278 of 329 cases involve developed countries as complainants or respondents. In percentage terms, this means that 85% of WTO disputes involve at least one developed country. Only 15% of disputes (51 of 329 cases) involve only southern interests. If the WTO is to survive future rounds, southern countries will need to buy into the DSM in a way they have not in the past ten years.
So far, there is little optimism for a sea-change in DSM usage. Only 67 members are on record as having participated in at least one dispute, and 33 of these have been involved in three or fewer cases (see Figure 3). Canada, US, EU and Japan file the largest number of complaints and responses – unsurprisingly as they account for around 60% of the world’s merchandise exports. The US is far and away the biggest user of the consultations system, filing at least 30% more complaints than the EC, and almost twice as many responses. Most users of the DSM have almost no actual experience with the panel process, and many developing nations are only tangentially involved in dispute settlement although they have large interests at stake. For example many developing countries were involved on both sides in the Bananas dispute, which paradoxically was actually a market access battle between the EU and US. The US succeeded in reasserting its long-standing geopolitical interests in central and South American markets. The irony is that the WTO system was supposed to empower small trading countries and mitigate historic power inequalities. Instead it pitted poor African and Caribbean nations against small economies in Latin America. This case is typical of current dispute settlement dynamics in which developing countries are enlisted proxies for the hard power interests of the global north.
Why has southern participation in dispute settlement remained so low, despite the rise of strong traders such as China, India, Brazil, Argentina and Mexico? There are two simple reasons. First, for many developing nations, post-colonial sovereignty was hard-won, and governments do not want to cede policy space to external experts. In this vein, non-governmental organizations also argue that local capacities should be developed by governments, not by multinational corporations that are more concerned with shareholder value than they are with the quality of life of southern citizens (OXFAM 2001). Second, the failures of structural adjustment in the 1980s and 90s reinforce the view that supranational trade governance is a risky endeavour with neo-colonial overtones (Bellow 2003). Developing countries ceded a lot of ground in the Uruguay Round, trading services and intellectual property liberalization for binding dispute settlement and promises on agricultural market access. Over the past five years there has been little movement on Doha priorities (see Annex 1). And even the Joint Integrated Technical Assistance Program (JITAP), designed to prepare developing countries to access WTO legal processes, has made very little difference in the dispute settlement numbers.
5 New Geographies of Power
How can we understand the WTO’s massive procedural imbalances in the context of global trade politics? Up until the present round launched in 2001 the WTO operated like the GATT club of elite nations, with little understanding of the new international environment in which negotiating momentum has shifted away from the US and EU towards Brazil, India, China, South Africa and Mexico (the BRICSAM bloc) (Antkiewitz & Whalley 2005). Power has also leached to dozens of side deals, regional trade agreements and bilateral arrangements. In the prescient words of Sylvia Ostry at the Pre-G8 academic conference in Glasgow in June 2005, this new geography of power is the end of the GATT-style multilateral system as we know it. The new configuration taking shape is a curious hybrid of American unilateralism, European collective preferences, Chinese market power, regional trade agreements, and an adjudicative system that is a lawyer’s delight and a diplomat’s nightmare.
The WTO was supposed to represent the collective preference of democratic societies for open markets, but now the Doha round is kept alive 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. International public policy has powered ahead thanks to international agreements on development and poverty reduction (UN Millennium Development Goals), poverty reduction (UN Conference on Social Development), and human rights (A Duty to Protect).
Some of the most impressive milestones are the international ban on landmines (1997), the International Criminal Court (1998), and the Earth Summit in Rio de Janeiro (2002), which spawned six international environmental agreements on the issues of biodiversity, climate change (the Kyoto Protocol), desertification, and the sustainability of migratory fish stocks among others (Cooper 2004). There has never been a comfortable fit among the dozens of treaties, conventions, diplomatic understandings and legal principles that comprise the body of public international law. International treaties were meant to be the high standard of the international system with a capacity to bring global governance to the next level. After a decade the WTO is still not pulling its weight. Compare the faded glory of the most-favoured nation and non-discrimination principles of global trade to other international milestones like the polluter pays principle (1971) and the principle of cultural pluralism (2001) (International Institute on Sustainable Development, 2006). One can see how much a laggard the WTO is, and how few and far between are its triumphs. It was intended to be the epicentre of a new international order, but rather than presiding over a bigger and more robust system of international public law, it has become a juridical silo.
It is telling that business has not rallied to the Doha round, and while there is still time for business leaders to do so, the world’s largest economic actors are staying on the sidelines because services, investment and intellectual property negotiations are all stalled. It will require more than the exhortations of CEOs to resuscitate them. The largest corporate actors are now backing bilateral deals that often do a better job of integrating and harmonizing national regulations. Those who argue for deeper trade integration at this point are clearly confused about the new geographies of power. The information technologies are empowering individuals and groups in civil society. Globalization, far from being the great leveller, has made politics intensely local. Sceptical publics are electing governments that do not look to corporate power to tame international markets.
One result of the lack of progress at Doha has been that multinationals are having to rethink their strategies. These “globally integrated enterprises”, to use the parlance of Samuel Palmisano, IBM’s chief executive officer, are structurally and operationally plugging into multiple national regulatory environments (2006). It is very likely that trade relations in the future will rely more on the procedures of private international law (those national regulations that govern the bureaucratic relationships between states) than on the sort of grand-treaty making of which the Doha round may be the last example. This is the classic two-track approach the WTO has tried to discourage; but it continues to make good business sense. The world’s largest corporations know that what happens at Doha affects them, but the risks of throwing their political capital into the Doha round is not equal to the limited rewards on offer.
As Doha inches along, it is entirely likely that progress will fall below even the diminished expectations of trade diplomats (de Jonquieres 2005). On agricultural export subsidies, the US and EU have made progress but are still far apart. Domestic farm support and agricultural tariffs remain deal breakers. After bitter wrangling, the US has made some concessions on cotton subsidies, but not enough to call negotiations in this symbolically important sector a win for West African producers. Talks on services and industrial goods liberalization are at an impasse and there are no good deals on the horizon (see Annex 1).
Ruggie reminds us that the goals of trade liberalization have never been literally free trade, but developing rules and norms to smooth international transactions (1982: 379-415). By Ruggie’s measure the WTO is gasping for air (Drope and Hansens 2006). Woolcock is deeply pessimistic about the prospects for raising rule-related issues in WTO negotiations given the current lack of consensus among members on textiles, agriculture and services (2005). Making better rules that will pave the way for growth and development is not something that members can expect to debate, even in the medium term. In the final analysis the WTO needs better rules to get better outcomes. But it needs better outcomes to stay aloft long enough to make better rules. There are no champions of reform other than the many NGOs, and trade bureaucrats do not listen to them. And so, as more deadlines are missed, it becomes increasingly unlikely that the WTO will pull out of its long, slow descent.
The original goals of the WTO, as stated in the Marrakesh Agreement, were to raise standards of living for the poorest nations and to develop trade strategies for sustainable development (WTO 2002: 26). It is worth recalling its expansive vision of open trade and equitable outcomes. The GATT/ WTO set out to be a powerful voice in world affairs, but is now a vision manquée. The three challenges discussed above – the WTO’s antidumping procedures, its representational crisis and its silo mentality to international law – suggest that the trading system is due for a major overhaul. So far no one has been able to chart a successful course to renew the WTO. What are the obstacles in the path? We don’t know if the US and the EU can reach a deal on agriculture, textiles and services. We don’t know what leadership role China will assert if any. We don’t even understand whether global business will spend scarce political capital to get the Doha Round on track. We cannot even predict what deal global south leaders would be willing to accept on cotton, agriculture and whether they would be willing to trade off financial services liberalization for agricultural access. Global civil society is also a wild card because no one knows the current capacity of the anti-globalization movement to organize a worldwide backlash.
The prospects for salvaging the Doha Development Round are slim. A large disconnect exists between trade orthodoxy and the realities of the international trade regime. There is a great potential for framework agreements to be useful for small countries because they are used to enhance the freedom states have to regulate property rights (Drahos 2005). Economic property rights have a clear and fundamental role to play in development, as Coase pointed out almost five decades ago (1960: 1-23).
The failure to make the DSM accessible to all is a systemic failure on the part of the WTO. If there is a generalization to be made, it is that the DSM has not created a power-blind framework for dispute settlement. But WTO rules are not written in stone. If they do not produce superior outcomes, they should be changed. This is the big idea that needs to migrate from the margins to the centre of the WTO’s agenda.
Finally the WTO has to reflect the interests of the majority of its stakeholders. This is the sine qua non of multilateralism and for building a sustainable democratic international order. The global south is not onside, the EU and the US cannot bridge their differences and with China and India flexing their muscles, trade Cassandras are predicting a train wreck. Much is in flux. What is indisputable is that the WTO is in a race against the clock and its institutional life is on the line.
The Byrd Amendment is the most recent example of the way that anti-dumping is used to protect mature industries that employ a large number of workers and carry on well-organized lobbying efforts and exert significant political influence domestically. American softwood lumber producers have pocketed more than $ 5 billion in punitive levies since 2001. Canada and the US have just crafted a compromise deal that imposes quantitative restrictions on Canadian softwood for the third time in the past twenty years. The deal allows US producers to keep $ 1 billion of the illegal duties collected. A significant reason for American success with trade remedy action is that the US Congress has a high degree of autonomy that has no equivalent elsewhere – a power which regional interests exploit very effectively. See www.dfait-maeci.gc.ca/eicb/softwood for a full account of the dispute.
JITAP has been widely supported by social democratic nations in Europe and by Canada. The US is much more reluctant to provide funds for technical capacity building. For more research on the difficult issue of technical assistance, consult www.jitap.org.
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