European Affairs

It Is Time to Review the Workings of the WTO     Print Email
Hugo Paemen

Hugo PaemenIt is time to move on from hand-wringing post mortems of the failed WTO Ministerial meeting in Cancun in September 2003 and try to draw some lessons both for the short-term prospects of the Doha Round of multilateral trade negotiations and for the longer-term future of the World Trade Organization itself.

The Cancun meeting was supposed to be a mid-term review of the Doha Round, and as such it showed that the Round, and the "Doha Development Agenda," which is its overall mandate, have not made the progress that had been hoped for. This is not an unprecedented situation. The mid-term review of the Uruguay Round in Montreal was nearly as un-promising as was Cancun.

There are evidently great differences between the Uruguay Round and the Doha Round. In particular, there are a greater number of active participants this time, and the WTO has acquired a worldwide political profile, which, unhappily, is often linked to negative perceptions of globalization. It was probably also this increased political dimension of the WTO that helped to create the high expectations for Cancun, which went far beyond the scope of a mid-term review.

This also meant that the failure of Cancun was more than a disappointing mid-term review of the Doha Round. After the failed meeting in Seattle in 1999, and the long wrangle over the availability of cheap drugs to combat HIV/AIDS in developing countries, Cancun has reinforced the suspicion that the WTO has some longer term problems, quite apart from the immediate problems linked to the Round itself.

It would be an exaggeration, however, to claim that the WTO is in a deep crisis. If it were, there would not be so many countries trying to join the organization and its dispute settlement system would not enjoy the authority it does. At the same time, it cannot be denied that the WTO is going through a period of serious challenges and problems, of both a short-term and a long-term nature.

The short term problems relate to the complex mandate of the Doha Development Agenda as well as to deficiencies of governance at the WTO. The Ministers who met in Doha in 2001 abandoned the traditional objective of multilateral trade negotiations, the pursuit of worldwide access for the national export capacities of the participants. Instead, the Doha Ministerial Declaration sought to place the "needs and interests" of the developing countries "at the heart of the work program" it adopted.

No special rules, criteria or benchmarks, however, have been established to assess the achievement of these goals. This multilateral negotiation aims at accommodating, in the first place, the needs of one group of participants who would themselves assess whether the negotiations had succeeded.

I imagine that those who accepted this procedure in Doha were aware of the risks involved in following that route, which was the price they were ready to pay in order to launch a new round of negotiations, the overall objective of which was a better integration of the developing world into the global trading system.

The ambiguity of the Agenda does not only result from the fact that one group of participants will also be the final judge of the negotiated results. It also has to do with some endemic ambivalence in the relationship between trade and development. We all believe in a generally positive correlation between the two, which can be best exemplified by the fact that there are no examples of countries that have significantly reduced poverty without significantly increasing their exports. But, in the real world, we also recognize that, as the Doha Declaration pointed out, positive efforts are needed to ensure that developing countries, and especially the least developed among them, secure a share in the growth of world trade commensurate with the needs of their economic development.

The need for such specific positive measures appears clearly when we consider for instance that the G7 countries, with 10 percent of the world's population, account for more than half of world trade. The developing countries, with more than 50 percent of the world's population, account for over 30 percent of world trade. But the 49 least developed countries account for less than 0.5 percent of world trade. These considerations justify measures such as the EU initiative to open its markets to "Everything But Arms" from the least developed countries. They can also be invoked in support of special measures in sectors like cotton and sugar.

The message, therefore, should not be that not much can be done for the developing world through trade negotiations. On the contrary, the aim should rather be to tailor a real development agenda to their real needs, which are not necessarily reflected in general "special and differential treatment" provisions during negotiations between the major trading partners. Some of the developing countries, the most developed ones, will evidently benefit, because their products can easily compete with the products of the developed world.

Some balance between the respective interests of the parties could probably have been maintained under a strong leadership. But, it is no secret that this has been lacking. The Doha Round has suffered from a problem of governance, especially with regard to its over-ambitious agenda and its short deadlines.

Now that the Round is in trouble, there are theoretically two realistic options: either to delay the Round or to make it less ambitious. A delay would have some very negative effects: it would weaken the WTO even more as an organization, de-motivate the traditional constituencies that support multilateral negotiations and further damage the reputations of the WTO and other multilateral organizations in the eyes of the general public.

The negotiation of a reduced package, therefore, seems to be the logical option. Inevitably, everybody's ambitions will have to be reduced in such an exercise. Agriculture will remain an essential component of any development agenda, as will a reasonable element of special and differential treatment, as well as some balanced general trade liberalization measures in goods and services. The so-called Singapore issues, such as new rules for investment, competition and government procurement, will, I imagine, be maintained on the WTO agenda, but probably with a different timetable.

It would be useful if such a reduced package were dealt with in a way that would pre-figure a new approach for future negotiations, which I think, should imply the following elements:

  • More decentralized negotiating procedures.
  • Use of the framework of the two-year work programs and the biennial ministerial meetings, preferably to be held at WTO headquarters in Geneva, putting an end to the present traveling circuses of thousands of ministers, officials, media representatives, NGOs and others in far-flung corners of the globe.
  • Greater involvement of political, professional, business and NGO representatives in the preparations of the negotiations.
  • A readiness by all participants, especially the major ones, to take their share of responsibility in contributing to the success of the overall negotiations. Tactics are always part of the game, but they risk getting out of control, especially in a very complex and highly political negotiation: an example in Cancun was the undeniable link between the common U.S.-EU document on agriculture and the probably temporary, but inauspicious formation of a Group of 21 or more developing countries as a counterweight.

As for the WTO's longer-term problems, it must be remembered that the Organization had an unfortunate start on the world scene. First, there was the irresponsible way in which successive Directors General were designated. Linked to that was the resulting loss of authority and leadership traditionally enjoyed by the Director General of the GATT, the WTO's predecessor, and an increase in the political role of the President of the General Council.

This was illustrated in Cancun when four African cotton producing countries unexpectedly introduced demands for sweeping changes in the market for their products. As nobody had been detailed to take care of this problem, the person most readily available appeared to be the clearly not overburdened Director General of the WTO.

This development, it must be said, has resulted at least partly from a conscious decision by the member states, in the name of a so-called "members driven" organization, to diminish the powers of the Director General. The organization has also been weakened by having much too small a staff in relation to its overall ambitions, and by its increasing identification with all the real or perceived negative features of globalization.

The Doha Development Agenda quite naturally strengthened the focus on North-South issues. It introduced a stronger political dimension into the negotiations with more active participation of ministers and a greater appetite for immediate results. At the same time, the traditional constituencies in favor of multilateral trade negotiations in the developed countries lost an equivalent amount of interest and started looking for more direct, and preferably bilateral, ways of solving their problems.

All these factors require stronger rather than weaker leadership, not least because the international trade constituency has undoubtedly become more complicated and diversified. There are more actors and more issues, and there is a higher degree of sophistication and sensitivity in the trade policy community and beyond - particularly in a wider public opinion that NGOs are very actively seeking to beguile.

In these circumstances, a hard look is needed at what type of WTO is desirable, workable and politically viable. The present leaders cannot conduct such a review, if only because they have to finish the Doha Round. The review should cover at least the following issues:

  • The role and authority of the Director General, including his or her designation, the length of the term to be served and an expansion of the headquarters staff.
  • The format of multilateral negotiations, including the role of Rounds, the biennial working programs foreseen by the WTO agreement, the ministerial meetings, the concept of the single undertaking (in which all parties are committed to all the results of negotiations), regional trade agreements, the most-favored-nation principle for rules and the role of the ambassadors in Geneva.
  • The idea of an Executive/Interim Committee to act as a high-level steering group.
  • The consensus rule that allows each participant a veto.
  • The involvement of the various political, business and NGO constituencies.

Given that it is not advisable for the present leadership to conduct this review, one could perhaps have recourse to what regularly happened in the days of the good old GATT. During that period, and at crucial moments in its history, the Director General brought together a small group of outside "wise men," who, in total independence, took a close look at the world trade situation, the working of the international trading system and the institutions. It seems to me that the time is ripe for such an independent review, leading to some solid recommendations. In fact, I think it is rather urgent.

That being said, there is no doubt that, at the end of the day, it will always be the member states of the WTO that will have to take their political responsibility, and in that respect, even in the present changing times, the attitude of the United States and the European Union will remain a decisive factor.

Ambassador Hugo Paemen is a Senior Advisor at Hogan & Hartson LLP. Before that, he served as Head of the European Commission's Washington Delegation and as the Commission's Deputy Director-General for External Relations, where he was the Commission's chief negotiator during the Uruguay Round of the WTO. He was the official spokesman of the first Delors Commission and was Chef de Cabinet of European Commission Vice President, Viscount Etienne Davignon. A career diplomat, Ambassador Paemen has served in the Belgian Embassies in Geneva, Paris, and Washington, DC. This article is based on remarks made at The European Institute on November 4, 2003.

 

This article was published in European Affairs: Volume number V, Issue number I in the Winter of 2004.