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What is really missing in trade policy is an eye for the big picture. In and around the WTO, a
pea-soup fog of details and techniques obscures a wider view, a strategic sense of how the
international trading system is poised and where it is heading. Momentous forces whirl
around the WTO. The cross-border integration of markets and technological change will
continue to pose great challenges for WTO rules and procedures, as will the evolution of
international public and private law. My focus is a third great force: power and politics.
How do shifts in foreign policy post-Cold War and post-September 11th affect trade policy?
How does ‘high politics’ — the provision of international security (military or otherwise) —
impinge on the ‘low politics’ of trade negotiations? Where do US unilateralism and
multilateral co-operation meet in the WTO? These weighty questions are stepping-stones to
the biggest political question facing the WTO system: how will it accommodate itself to, and
to what extent will it be shaped by, overwhelming US power in international relations for the
foreseeable future? Trade policy wonks do not address these issues head-on, but they will
hugely influence the course of the Doha Round and the WTO’s post-round future.
US leadership and international politics: shifting sands
The WTO is the grandchild of specific post-World War II, Cold War political conditions.
American leadership secured the peace for the non-communist world, but successive US
administrations chose to achieve goals of global security and prosperity through
intergovernmental co-operation and international institutions. The GATT was the most
successful expression of such ‘liberal internationalism’.
This macro-political environment has changed in key respects. First, with the collapse of the
Soviet Imperium, no serious challenge exists to US leadership abroad. Second, Europe is
weak and divided; and Japan is consumed by intractable domestic problems. Both are
internally sclerotic and externally pusillanimous. Third, the transatlantic alliance, while still
important, is no longer the fulcrum of international relations. Europe is in relative decline
and other powers are on the rise: notably China, but also Brazil and India. Politics and
economics are shifting to Asia-Pacific, from the Indian Ocean to Tierra del Fuego. Fourth,
September 11th has transformed American foreign policy. Its legacy is a more assertive US on
the international stage, more willing to act unilaterally if needs must, less willing to indulge carping, fair-weather friends. Welcome back to the nineteenth-century world of ‘liberal
imperialism’.
Multilateralism, however, remains important. The WTO is its foremost expression, especially
through its dispute settlement mechanism which houses a growing corpus of international
public law. But multilateralism cannot evade wider geopolitical shifts: its matrix, now as
before, is underlying power relationships. The raw reality is that international rules and cooperation
cannot work without robust US leadership, which on occasion has to be unilateral
when others lack the will and capacity to exercise global responsibilities. In other words:
unilateralism and multilateralism are not mutually exclusive; twentieth-century liberal
internationalism is empty rhetoric without an element of nineteenth-century liberal
imperialism.
The Achilles Heel of the Kant-Cobden-Wilson liberal internationalist tradition is its political
naivetй, quite in contrast to the sober, pragmatic realism of Adam Smith and David Hume.
Both combine their economic liberalism — the progressive removal of artificial restrictions on
economic activity — with political realism. To them, international economic integration takes
place in a real world of nation-states in which some are more powerful than others. National
governance is key; and imperial governance cannot be overlooked. True, multilateral cooperation
has a bigger role to play than was the case one or two centuries ago, but it should
not be exaggerated.
The central lesson for the WTO is that, in the context of established rules and procedures, it
requires clear and constructive US political leadership. But the US cannot act alone: it needs
pragmatic ‘coalitions of the willing’, especially with middle powers in Latin America and
Asia.
Can the WTO hold its ground in these shifting sands of international politics? That will prove
difficult. Trends inside the WTO system make it that much harder to adapt effectively to
external change. To these trends I now turn.
From GATT to WTO: trends and alarm bells
Much has changed in the transition from GATT to WTO. The Uruguay Round
agreements take the WTO wider, with broader sectoral coverage, and deeper into
domestic regulations, all underpinned by much stronger dispute settlement. WTO
membership has expanded considerably. Four underlying trends need to be
highlighted, all of which ring alarm bells.
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The WTO is in danger of regulatory overload and has a creeping standards harmonisation
agenda. Detailed, prescriptive regulations are intended (at least implicitly) to bring
developing country standards up to developed country norms. The TRIPS agreement on
intellectual property sets the precedent for pressure to harmonise labour, environmental,
food safety and other product standards. This ‘intrusionism’ in the domestic policies and
institutions of the developing world is noxious: economically, it raises developing
countries’ costs out of line with comparative advantages and has a chilling effect on labourintensive
exports; politically, it goes too far in curtailing national regulatory autonomy.
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The legalisation of the WTO is double-edged. Dispute settlement has generally worked well.
However, given that countries almost invariably go to dispute settlement, governments
have more incentive to fill in regulatory gaps in WTO agreements through litigation. This is a dangerous and slippery slope. A large, diverse gathering of sovereign nations such as the
WTO, with at best a brittle political consensus, must make collective policy choices through
diplomacy and negotiation, not by default through dispute settlement.
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The WTO is increasingly politicised. Externally, it is buffeted by a combination of old-style
protectionist interests and new-style NGOs. Even more worrying are its deeper internal
fissures. The vast expansion of membership since the late 1980s has made decision-making
more unwieldy and snail-like. Day by day, the ‘UN-isation’ of the WTO gathers pace.
Windy rhetoric, adversarial point-scoring, political grandstanding and procedural nit
picking seem to have substituted for serious decision-making.
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The regionalisation of the world economy, i.e. the accelerating spread of discriminatory
bilateral and regional trade agreements (RTAs), seems to be pre-programmed, not least in
reaction to stalled multilateral liberalisation. RTAs are by no means uniformly bad, but they
do lead to a ‘spaghetti-bowl’ of discriminatory red tape, and risk diverting political
attention and negotiating resources away from the WTO.
Taken together, these pressures have virtually crippled the GATT’s traditional strength: its
ability to deliver results through effective diplomacy and negotiation. The WTO as a
negotiating mechanism has not really functioned since the late 1990s. The launch of the Doha
Round was a blip on the screen, made possible by the need to respond swiftly to the post-
September 11th crisis. Since then, however, next-to-no progress has been made in the round:
the WTO appears to have reverted to pre-Doha drift and deadlock. The state of the WTO
makes one wonder whether it will ever be capable of passing Joseph Conrad’s ‘shadow line’
— from a world of callow irresponsibility to an adult world of real, solid, fixed things.
What needs to be done to get the WTO, and with it the Doha Round, across that shadow line?
Rediscovering a raison d’кtre
The WTO needs to rediscover a core purpose, something lost in the post-GATT transition.
This should be the old GATT’s raison d’кtre: the progressive reduction and removal of barriers
to trade, underpinned by simple, transparent and non-discriminatory rules. In post-GATT
conditions, this market access agenda has to range wider (broader sectoral coverage) and
venture deeper (procedural disciplines to make trade-related domestic regulations more
transparent).
With such a focus, the WTO would fulfill its limited but not unimportant constitutional
function: to be a helpful auxiliary to national trade (and wider) economic policies. Good trade
policy, like internationalism and charity, begins at home, not in the WTO, nor indeed in any
other international organisation. Unilateral measures — ‘from below’ — are the first instance
of trade policy. At best, WTO rules and procedures can bolster domestic reforms, but never
initiate or drive them.
How does the Doha Development Agenda (DDA) fit into this scheme? The real
‘development’ gains from the DDA are to be had from the core market access negotiations on
agriculture, non-agricultural goods and services. Reducing tariff and non-tariff barriers to
trade in goods and services — including the barriers that throttle South-South trade — would
bring bigger gains by far for developing countries than all the other items in the round put
together.
Market access is the bread and butter of the round and should have overriding priority. A
sign of a round going nowhere is when more attention is devoted to squabbles over
implementation issues, Special and Differential Treatment, TRIPS-and-public health, and the
Singapore issues than to market access. This is indicative of the WTO’s wider malaise.
Back to politics: getting the WTO moving again
Mending the WTO’s broken negotiating mechanism depends on the key developed and
developing member governments. They will have to overcome the increasing messiness of
the WTO’s intergovernmental politics. My surmise is that, for the WTO to be workable again,
its political template will have to adjust in line with broader geopolitical as well as economic
policy realities.
The present understanding is that the US and the EU co-lead in the WTO enterprise. The EU,
sadly, is one of the biggest headaches in the WTO. Its scandalous agricultural protectionism is
the main stumbling block, but it is also trying to insert dubious regulation into the WTO, e.g.
on environmental standards and geographical indications of origin.
No doubt the EU will continue to be a WTO heavyweight, and transatlantic co-operation will
remain vital. Nevertheless, co-equality is not the right recipe for the WTO’s future: the US
must gradually move out in front. Only US leadership can push the WTO in a clearer market
access direction. However, for leadership to be effective, like-minded coalitions are needed.
They are to be found mainly in Asia-Pacific. Here there are countries large and small with a
strong market access focus in the WTO: agricultural exporters in the Cairns Group, industrial
exporters in East Asia, and the services-oriented global cities of Hong Kong and Singapore.
Crucially, these coalitions potentially include China, whose broadly constructive behaviour in
the WTO so far resembles that of Brazil more than India.
Conclusion: a turning point for the WTO?
The scenario sketched above is of course hedged about with if’s and but’s. Big question marks
hang over the US: Internally, will protectionist politics prevent the Administration from
exercising credible leadership abroad? Externally, will it have the sensibility and staying
power to construct viable coalitions-of-the-willing?
What if WTO trends of regulatory overload, UN-style decision-making and negotiating
stalemate are not arrested? What if the Doha Round remains stuck, or delivers only modest
gains?
If a substantial market access package does not come out of the round — probably by 2006/7
at the latest — the US, the Cairns Group and others will lose patience and interest. Real
business will switch to bilateral and regional tracks. As ever, the main impulse for
liberalisation will be unilateral, emerging from this-or-that country, but RTAs will replace the
WTO as the external reinforcement mechanism. The WTO will continue to have a not
insignificant role, especially through dispute settlement. But its days as a vehicle for
liberalisation will be numbered.
This is not a catastrophic 1930s-style scenario. However, there are real risks and costs. The
sacrificial victim will be the GATT’s cardinal principle: non-discrimination. The world will be
sliced into overlapping, discriminatory trading arrangements, making trade policies less transparent and ratcheting up trade tensions, some of which will be taken to WTO dispute
settlement. Multilateral rules will count for less; and power relationships will shape the
system to an even greater extent. The big losers will be the poor and weak, i.e. low-income
and least-developed countries, either shut out of preferential access to the markets of the
bigger powers, or forced to accept inappropriate conditions (such as minimum labour and
environmental standards).
‘Events, dear boy, events,’ as Harold Macmillan once said. As ever, these will shape, if not
wholly determine, the twists-and-turns of the WTO after Cancun. The odd global crisis may
intervene to concentrate otherwise distracted minds. Whether this will be enough to salvage
the WTO is open to question.
Footnote:
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Razeen Sally is Senior Lecturer in International Political Economy at the London School of Economics, Director
of Trade Policy at the Commonwealth Business Council, and Senior Associate Fellow at the Institute of
Southeast Asian Studies in Singapore. This article first appeared in The World Trade Brief 2003, and is
reproduced with permission of Agenda Publishing.
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