To What Extent has the World Trade Organization Established a System of Effective Global Governance?

Posted on April 1, 2010 in Specials

Harsh Kothari:

The formation of the General Agreements on Trade and Tariffs (GATT) in 1948 with various success and failures led to the formation of the World Trade Organization (WTO) in 1995 following the Tokyo and Uruguay rounds.[1] Since then the WTO has managed to incorporate 151 members in the institution that are required to abide by the trade laws that the WTO sets. The following essay will analyze objectively and normatively in regards to the effectiveness of the WTO in systematic Global Governance, although my focal point of argument will lead to decide that although the WTO has won various successes in global governance, the failures have been equally distinct, for which reason the legitimacy of the WTO would be in question, hence undermining the WTO’s effectiveness of the established system of global governance.

In order to understand how the WTO manages its global governing, it is paramount to recall the general structure of the WTO. The most significant body within the framework of the WTO is the Ministerial Conference that is made up of member states that meets once in two years.[2] Though the General Council, which meets several times every year in Geneva is made up of representatives and counsels of particular member states.[3] The members of the General Council also facilitate in the functioning of other structural bodies such as the Dispute Settlement Body (DSB).[4] Although there are other layers that go down the pyramid in the structure of the WTO, this essay will mainly use the functions of the above listed structures as the core pivot in arguing the question. Theoretically speaking, it would be fair to state that the WTO can practice what it claims with the structure it currently has, this being “to assist human society achieve its common purpose in a sustainable manner, that is with equity and justice”.[5]However, when analyzing carefully as to how the WTO has been functioning since its creation, one would learn that the organization, significantly because of its structure, loses a credible amount of legitimacy, and also undermines other core values that would be in the interest of humanity, as the WTO itself emphasises the importance for pursuit of nations to the “right to health and education or core labour standards”[6]and further “to favour values of public morals, the protection of health of people, animals and health or the conservation of natural resources”.[7]

Currently there are 151 member states at the Ministerial Conference, and during their meet every two years, they discuss various important issues concerning trade issues, and try to prioritize the opening of the markets. Of course, it is understandable that the opening of markets is not favourable to all state economies, for which reason certain proposals are passed and others are not. A fair yet an interesting drawback of these meetings are that the agreements must be ratified only by consensus (not to confuse with unanimity).[8] As democratic and fair this may sound, the practicality does not always work out well because usually the matters that are to be discussed in the Ministerial Conferences are pre-decided by the General Council that is based in Geneva, and the major problem is that not all states, especially those financially deprived do not have representatives and counsels.[9] For which reason, whenever a negotiation fails due to controversial matters, the financially weak countries revert to solving the disagreement through the Dispute Settlement Body, where financial backing is helpful to hire lawyers and counsels for that particular case, and this situation, which is of course a more defensive posture for the less wealthy nation, and so the more powerful countries have an upper-hand in attaining the results they wish for negotiations or trade conflict resolution.[10] To make matters worse for the poorer countries, which make up the majority of the WTO, a minority number of states form the so-called “Green Room”, whereby this group of states attempt to finalize “preliminary agreements on matters under negotiation, and then present them to the rest of the delegations”.[11] During the Ministerial Conference in Seattle, various states were agitated because of this peculiar behaviour of the powerful states, and the negotiations broke down entirely on the last day of the rounds.[12] According to Peter Sutherland and John Sewell, the “Green Rooms… understandably grew” since most states would aspire to be in the ‘ruling’ economic circle of the world.[13] Of course, it is difficult to deny that the WTO did attempt to create a somewhat democratic state-to-state representation structurally, and also by constitutionalising a one state, one vote system unlike the International Monetary Fund and the World Bank.[14] Leaving alone the internal structural problems, it is also important to note that 41 States are still not WTO members, and so the deals made by the WTO members may seem unfair to non-members. This essentially also makes the WTO an institution that is not entirely global yet. Therefore, the practical functionalities undermine the democracy and in a sense creates an elite circle of states among the institution, hence making quite a few decisions taken by the WTO illegitimate in the perspective of the states who are not ‘privileged’ in the institution, which is obviously a reason to question the effectiveness of the WTO’s global governance.

Despite these failures of the WTO, it is vital to acknowledge that the organization has managed to recruit most states of world, so it would be fair to the WTO, it is also important to analyze the successes it has in lifting the positions of various countries, and opening the markets of most countries as well. There has been a “remarkable emergence of developing nations as significant players in the global economy”[15] such as India and China. One possible reason for this, out of many would be that there has been an increase from 4 per cent to 24 per cent of increase in world exports of manufacturers cumulative of all developing nations.[16] To add to this, it is also useful to consider the dramatic hike in investment that took place in developing countries by “industrial country firms and portfolio investors, and increasingly by investors from emerging market countries”.[17] In fact the “stock of foreign direct investment” in relation to the GDP increased by three-fold for the developing countries at an average of 5.9 per cent to 16.6 per cent from 1980 to 1997.[18] Unfortunately however, this is only one side of the coin, because the poorer countries of the world have raw materials of about 75 per cent that could be exported but are not processed, and the export that they are able to do is as narrow as 70 per cent of national exports coming from only three major export sources.[19] The poor countries for this reason become vulnerable, and in fact become less competitive, and so could be bullied, to say the least, more easily by the more powerful countries that have their financial interests invested in the local markets of these countries. Logically speaking these types of countries should ideally protect their local businesses from strong western businesses that infiltrate in the market, though breaking WTO laws would have dire circumstances, hence the only choice left would be to open up their markets. According to many developing nations, the justice that the WTO provides is unfair.[20] This is because WTO members have to open up their markets, and if their economies are not opened enough, they are liable to face sanctions from other countries. One of the most significant differences between the GATT and the WTO is that the “WTO was vested with legal personality”[21], so that if at all a state takes any unilateral measures against another state, then either that particular state could be subject to sanctions, and if there is ambiguity as whether a state has violated any WTO law or not, then the matter will be taken to the Dispute Settlement Process.[22] Since many states do not have representatives and counsels in the General Council, having a viable chance to compete a powerful nation in disputes in Dispute Settlement Processes would be difficult. In this respect the WTO fails to provide fair justice to nations who are in an extreme need of it, hence the WTO is on the receiving end of criticism from the majority of the nations within its membership, disabling systematic governance to flow smoothly, and of course, once again lose a certain level of democratic legitimacy.

On a grander scale, there is also a concern of not only the states as a whole receiving democratic treatment, but also the individuals concerned in each WTO member states having their democratic rights distorted. At times the opening of markets may be against the interests of the majority of the population of a specific state, for which reason they may have elected a particular government representative, but since every WTO member state has to change her domestic laws in accordance to the WTO’s constitution[23], the democratic rights of the people who elected a particular leader in the first place would be undermined. In this respect it could be said that the “WTO’s authority even eclipses national governments”[24], which of course accentuates the cause of globalization, but at the same time diminishes the sovereignty of any given state, even if it is the most powerful country among the member state of the WTO. In addition to that the negotiations that happen during the Ministerial Council conferences are not open to public knowledge[25]; hence the media or public has no access to know how the negotiations took place and how the decisions were made[26]. In Seattle talks of 1999, more than 50,000 people demonstrated against the WTO’s agenda[27], of course that meeting arguably broke down for other reasons as stated earlier, but the point of the matter is that the following meeting took place in Doha, Qatar, where the freedom of expression is not imposed among the masses. Sceptics of the WTO argue that the elites and corporate that help govern the WTO do not want any public interference with state negotiations. At a grass-root democratic level, the WTO in this respect has no legitimacy whatsoever to even exist, and so for state-leaders to persuade the masses that the WTO enforces a fair and systematic form of global governance becomes a bit too difficult.

Further agitations are caused for the states and its peoples when events do not conform to what WTO leaders such as Lamy Pascal claim about certain goals of the WTO, such as “to favour values of public morals, the protection of health of people, animals and health or the conservation of natural resources”.[28] When WTO attorneys make rulings where the American law that protects sea turtles was considered, by the WTO, as a “barrier to free trade”[29], or for that matter ruling that the American clean air standards and laws that protected the dolphin in American waters were also considered illegal[30], the masses, and the government, rightly so would be infuriated. In this respect the WTO has prioritized financial wealth in the form of trade agreements to be more valuable than the environment, which not only undermines democracy but also values that are regarded highly by the WTO and its members by itself. Similar agitation had taken place when the European Union treated hormone-treated beef as illegal for health related reasons, but the WTO contradicted that ruling and forced the European Union to change its laws since the original EU laws were not affirming to the WTO standards of trade.[31] This level of agitation at a public level is existing within the states that withhold must power in the WTO, so it would be fair to assume that the level of infuriation would be much higher at a public level in the developing countries. States were at dismay in the 2003 talks of Cancun, Mexico, because “a remarkable new alliance of developing countries argued that the unfair global agricultural system had to be cleaned up first”[32] that the developed countries were trying to impose and expand new issues.[33] “The tragic suicide of Korean farmer Lee Kyung Hae”[34] was what sparked this consensus among various states; of course, these talks fell apart as well.[35] Since consensus rules within the Ministerial Council, it becomes quite difficult to manage so many different perspectives with varied values and priorities to come to an agreement. So not only does this cause to delegitimize the existence of the WTO among a mass population, but states within the WTO cannot get to agree with each other, hence undermining the governance of the organization.

To be fair to the WTO, they do have modes for certain Non-Governmental Organizations (NGOs) to participate in Dispute Settlements through the General Council[36] when it comes to protecting the environment, health matters, and of course labour standards. Unfortunately however, there is not direct rights that NGO’s can have in regards to WTO issues[37], and interestingly it could be argued that commercial corporate companies have a better base than the NGO’s in terms of influence in the WTO. In fact, in many cases, information in relation to negotiation processes is not given to the NGO’s (and the public) but is in practice given to certain concerned corporate groups.[38] Hence the successes of NGO’s are less probable than that of bigger companies. A relevant example would be of Guatemala, where the government in cooperation with certain NGO groups tried to decrease infant mortality rates, of course the preferred and original medical guideline was to encourage mothers to breastfeed their children, however the WTO set standards and guidelines where they pushed products of certain milk companies and deemed it to be more superior medically, of course, the initial result was that the babies seemed more nourished, but eventually this led to more infant mortality because the powder the WTO pushed to be used had to be mixed with water.[39] The water in the affected regions was medically unsafe, so the babies eventually died of infant diarrhoea.[40] So in most cases it has been seen that the WTO has treated finance as more valuable than of any other kind of humane value, and so corporate companies in this sense overpower the people of the world, even if those people are meant to be living in a democratically driven state. Although it could be argued here that the WTO has managed to use its legal and political power, influence, and finance to change policies in various countries, the cost at which they do so is much higher than any financial value that could possibly be calculated. This in return means that the WTO get criticised by the increasing number of NGO’s, governments, and of course the people of individual states, hence making global governance difficult. As seen in various Ministerial Talks, which have failed, it also seems that there is a strong rift between powerful nations and developing nations, making it hard for the WTO to enforce multilateral trade negotiations, and finally, losing legitimacy among its members and the masses.

Finally, an issue including the structure of the WTO that is impractical for fair global governance resulting in unfair practices of justice leads states and peoples of the states to view the WTO negatively despite of some of the economic successes it has brought about. Due to the impractical structure, the negotiations at the Ministerial Level become weak, and the representation at the General Council becomes imbalanced in terms of opportunities given to each state to perform their rights, the powerful members of the WTO could influence the organization to financially and politically control the economies and social structures of the various parts of the world, but at the expense of legitimacy. Therefore these failures undermine the effectiveness of the global governance of the World Trade Organization, which according to a high volume of the masses in democratic institutions, should not be existing the way it is.

Bibliography

Lamy, Pascal. “Towards Global Governance?” www.wto.org. 21 Oct. 2005. World Trade Organization. 07 Mar. 2008 .

Ricupero, Rubens. “WTO, Global Governance and New Trade Round.” 2001. www.twnside.org. 07 Mar. 2008 .

Sutherland, Peter, and John Sewell. “Challenges Facing the WTO and Policies to Address Global Governance.” UNU (2000): 86-118. 03 Mar. 2008 .

Wallach, Lori. “Free Trade – the Price Paid.” www.globalissues.org. 13 Apr. 2005. 3 Mar. 2008 .

Willets, Peter. “Civil Society Networks in Global Governance: Remedying the World Trade Organization’s Deviance From Global Norms.”www.city.ac.uk. 20 Sept. 2002. City University, London. 03 Mar. 2008 .

Winham, Gilbert R. Global Political Economy. Ed. John Ravenhill. 2nd ed. Vol. 1st. Oxford: Oxford UP, 2004. 88-113.

“World Trade Organization.” www.globalexchange.org. 28 Oct. 2007. 02 Mar. 2008 .

[1] Winham, Gilbert R. Global Political Economy. Ed. John Ravenhill. 2nd ed. Vol. 1st. Oxford: Oxford UP, 2004. 88-113.

[2] Winham, Gilbert R. Global Political Economy. Ed. John Ravenhill. 2nd ed. Vol. 1st. Oxford: Oxford UP, 2004. 88-113.

[3] Winham, Gilbert R. Global Political Economy. Ed. John Ravenhill. 2nd ed. Vol. 1st. Oxford: Oxford UP, 2004. 88-113.

[4] Winham, Gilbert R. Global Political Economy. Ed. John Ravenhill. 2nd ed. Vol. 1st. Oxford: Oxford UP, 2004. 88-113.

[5] Lamy, Pascal. “Towards Global Governance?” www.wto.org. 21 Oct. 2005. World Trade Organization. 07 Mar. 2008 .

[6] Lamy, Pascal. “Towards Global Governance?” www.wto.org. 21 Oct. 2005. World Trade Organization. 07 Mar. 2008 .

[7] Lamy, Pascal. “Towards Global Governance?” www.wto.org. 21 Oct. 2005. World Trade Organization. 07 Mar. 2008 .

[8] Winham, Gilbert R. Global Political Economy. Ed. John Ravenhill. 2nd ed. Vol. 1st. Oxford: Oxford UP, 2004. 88-113.

[9] Sutherland, Peter, and John Sewell. “Challenges Facing the WTO and Policies to Address Global Governance.” UNU (2000): 86-118. 03 Mar. 2008 .

[10] Ricupero, Rubens. “WTO, Global Governance and New Trade Round.” 2001. www.twnside.org. 07 Mar. 2008 .

[11] Sutherland, Peter, and John Sewell. “Challenges Facing the WTO and Policies to Address Global Governance.” UNU (2000): 86-118. 03 Mar. 2008 .

[12] Sutherland, Peter, and John Sewell. “Challenges Facing the WTO and Policies to Address Global Governance.” UNU (2000): 86-118. 03 Mar. 2008 .

[13] Sutherland, Peter, and John Sewell. “Challenges Facing the WTO and Policies to Address Global Governance.” UNU (2000): 86-118. 03 Mar. 2008 .

[14] Ricupero, Rubens. “WTO, Global Governance and New Trade Round.” 2001. www.twnside.org. 07 Mar. 2008 .

[15] Sutherland, Peter, and John Sewell. “Challenges Facing the WTO and Policies to Address Global Governance.” UNU (2000): 86-118. 03 Mar. 2008 .

[16] Sutherland, Peter, and John Sewell. “Challenges Facing the WTO and Policies to Address Global Governance.” UNU (2000): 86-118. 03 Mar. 2008 .

[17] Sutherland, Peter, and John Sewell. “Challenges Facing the WTO and Policies to Address Global Governance.” UNU (2000): 86-118. 03 Mar. 2008 .

[18] Sutherland, Peter, and John Sewell. “Challenges Facing the WTO and Policies to Address Global Governance.” UNU (2000): 86-118. 03 Mar. 2008 .

[19] Sutherland, Peter, and John Sewell. “Challenges Facing the WTO and Policies to Address Global Governance.” UNU (2000): 86-118. 03 Mar. 2008 .

[20] Sutherland, Peter, and John Sewell. “Challenges Facing the WTO and Policies to Address Global Governance.” UNU (2000): 86-118. 03 Mar. 2008 .

[21] Winham, Gilbert R. Global Political Economy. Ed. John Ravenhill. 2nd ed. Vol. 1st. Oxford: Oxford UP, 2004. 88-113.

[22] Winham, Gilbert R. Global Political Economy. Ed. John Ravenhill. 2nd ed. Vol. 1st. Oxford: Oxford UP, 2004. 88-113.

[23] Sutherland, Peter, and John Sewell. “Challenges Facing the WTO and Policies to Address Global Governance.” UNU (2000): 86-118. 03 Mar. 2008 .

[24] “World Trade Organization.” www.globalexchange.org. 28 Oct. 2007. 02 Mar. 2008 .

[25] “World Trade Organization.” www.globalexchange.org. 28 Oct. 2007. 02 Mar. 2008 .

[26] “World Trade Organization.” www.globalexchange.org. 28 Oct. 2007. 02 Mar. 2008 .

[27] “World Trade Organization.” www.globalexchange.org. 28 Oct. 2007. 02 Mar. 2008 .

[28] Lamy, Pascal. “Towards Global Governance?” www.wto.org. 21 Oct. 2005. World Trade Organization. 07 Mar. 2008 .

[29] “World Trade Organization.” www.globalexchange.org. 28 Oct. 2007. 02 Mar. 2008 .

[30] “World Trade Organization.” www.globalexchange.org. 28 Oct. 2007. 02 Mar. 2008 .

[31] “World Trade Organization.” www.globalexchange.org. 28 Oct. 2007. 02 Mar. 2008 .

[32] “World Trade Organization.” www.globalexchange.org. 28 Oct. 2007. 02 Mar. 2008 .

[33] “World Trade Organization.” www.globalexchange.org. 28 Oct. 2007. 02 Mar. 2008 .

[34] “World Trade Organization.” www.globalexchange.org. 28 Oct. 2007. 02 Mar. 2008 .

[35] “World Trade Organization.” www.globalexchange.org. 28 Oct. 2007. 02 Mar. 2008 .

[36] Willets, Peter. “Civil Society Networks in Global Governance: Remedying the World Trade Organization’s Deviance From Global Norms.” www.city.ac.uk. 20 Sept. 2002. City University, London. 03 Mar. 2008 .

[37] Willets, Peter. “Civil Society Networks in Global Governance: Remedying the World Trade Organization’s Deviance From Global Norms.” www.city.ac.uk. 20 Sept. 2002. City University, London. 03 Mar. 2008 .

[38] Wallach, Lori. “Free Trade – the Price Paid.” www.globalissues.org. 13 Apr. 2005. 3 Mar. 2008 .

[39] Wallach, Lori. “Free Trade – the Price Paid.” www.globalissues.org. 13 Apr. 2005. 3 Mar. 2008 .

[40] Wallach, Lori. “Free Trade – the Price Paid.” www.globalissues.org. 13 Apr. 2005. 3 Mar. 2008 .

The writer is a senior writer of Youth Ki Awaaz.

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