The WTO, Summer 2010

The World Trade Organization (WTO) has been central to my research agenda for a long time now. I am currently in the process of completing a book manuscript that examines African participation and influence in global economic governance. I begin with the assumption that they have to work through coalitions, and then proceed to consider how different institutional environments impact their ability to form and maintain such coalitions. I find that those institutional environments can vary in several important ways, including how specific international and regional institutions overlap. For instance, when institutional environments require rule-making to take place across multiple institutions (such as the case of trade-related food safety measures, where rules are made at the WTO, Codex-Alimentarius Commission and elsewhere), then the obstacles to forming and maintaining coalitions increase. And, indeed, we see African states have more difficulties in impacting rule-making in such environments.

Given the centrality of the WTO to most areas of economic governance, I pay close attention to on-going developments in that organization. This past summer, several stories grabbed my attention: the status of the on-going Doha Round of negotiations, Lamy’s attempts to invigorate that round with a “cocktail approach”, and the on-going struggle to reform trade-distorting US domestic cotton support. This post touches on those themes and several others.

Doha Round Status

The Doha Round is not dead, though reports of its demise recur on a regular basis. One needs to remember that multilateral trade negotiating rounds have always taken a long time to conclude (last time, the Uruguay Round began in 1986 and only officially concluded in 1994). Additionally, there are now many more member states and economic power is more diffuse than it was during past rounds. So it should be no surprise that there have been a number of obstacles to concluding the current round of negotiations. Indeed, towards the beginning of the summer, attempts to conclude the Doha Round seemed to take another blow, as the G8 abandoned a pledge to conclude trade negotiations this year. However, some also cautiously report on continued progress, including sources in India (for instance, The Economic Times).

Director-General Pascal Lamy’s recent report to the WTO General Council tries to frame the WTO’s Doha Round and “Aid for Trade” as important contributions to the UN’s Millennium Development Goals. However, his main strategy for keeping Doha alive seems to be linked to beverages…

“Shaken, Not Stirred.” Cocktail Approaches to Negotiations

My attention has been captured lately by Director-General Pascal Lamy’s new strategy in multilateral negotiations: the cocktail approach. He seems very excited about it. There are three core ingredients to this cocktail: (1) Chair-led consultations, (2) informal bilateral discussions, and (3) consultations with Lamy. He speaks of these dynamics as occurring both horizontally and vertically. The idea, apparently, is that these ingredients are already here, and that what is needed is for us to shake them vigorously (perhaps Lamy has an affinity for Bond, since he says that simply stirring this favorite cocktail of his is not enough).

Generally speaking, his method would involve:“Chair-led processes within the Negotiating Groups, maintaining an overview of the entire negotiating landscape (transparency and inclusiveness), and smaller groups in variable geometry and bilateral contacts remain necessary and essential –moving towards a more horizontal view of the issues (negotiating groups and the TNC remaining the anchor of the negotiating process).”

This is not the first time a cocktail approach has been used to encourage progress in WTO negotiations. The idea goes back at least to Tim Josling and Allan Rae who describe its application to agriculture negotiations back in 1999. The idea, they suggested,was to take current tariff levels and treat each level with a different modality. For instance, states could eliminate tariffs where current levels are below 5%, but for tarriffs that are extremely high (say, 300%) states may agree to simply allow space for bargaining. In their analysis applying the “cocktail” approach did have some benefit for African states. Their approach was embraced by a number of negotiators in the early phases of the Doha Round and continues to be mentioned today.

Looking at the broader negotiation literature, cocktails have had other metaphorical use. Cocktail can refer to a hybrid approach in negotiating tactics by individual actors intent on pushing or securing an advantage (see Matos et al. 1998).

Cotton

I am also asked, when I speak about the role African states play on the cotton issue, whether they are merely following another state’s lead (Brazil). I always say that this might be the case with dispute settlement, where African states have only acted as third-party supporters of Brazil’s activities. However, African states have clearly been leading players in using cotton as an issue to press for greater advantage in negotiations on agriculture in the Doha Round. If Brazil’s strategy has been to use judicial processes, African states have tried to push for a legislated solution.

This summer it became even clearer that Brazil stands alone on the cotton issue. It seems to have forgotten the rhetoric of how the “South”, including Africa, is hurt by wrong-headed agricultural policies in the industrialized “North”. Indeed, Brazil’s cotton farmers now apparently are being paid US subsidies. In return for not applying WTO-authorised trade sanctions, Brazil has decided to accept payment from the US to its farmers. As the Financial Times notes, this just makes them new stakeholders in the US Farm Bill. This is too bad, as Brazilian sanctions, while generating a number of negative externalities for Brazilian consumers and American exporters, could also have generated positive externalities for Africa’s more needy cotton farmers.

The WTO is not just the Doha Round

While the apparent lack of progress in the Doha Round might seem to signal a lack of commitment by the international community to this organization, it is far from being the case that the WTO’s relevance relies only on that round.

For one thing, the WTO administers a number of international agreements. One of those, which member states do not have to sign, is the Government Procurement Agreement. This agreement tries to encourage transparency and the principle of non-discrimination in government procurement. Signing the agreement ensures formal access to government procurement contracts in other signatory countries. The United States is one of 40 such countries. So, as the Financial Times reported, it is not surprising that China is actively trying to negotiate access to the agreement. Accession requires the consent of the current parties (Article XXIV, 2).

Indeed, the WTO has played a central role in economic disputes between the US and China in recent years. See, for instance, recent US concerns about China’s garments and textiles.

The WTO also plays a central role in many economic disputes between Europe and the United States. Two of those disputes, one about European subsidies for Airbus andanother about tariffs on certain electronic products, both resulted in WTO panel decisions that favored the US, though Europe is appealing at least the Airbus decision.

My colleague, Peter Rutland, has a nice piece in the Financial Times about Russia’s bid to enter the WTO. It is, as he notes, “embarrassing” that Russia is the only major economy not included in the 153-member organization. He notes many of the important obstacles to that bid: some member countries (Georgia) don’t like Russia very much these days, Russian leaders don’t always seem particularly committed to the process, and the United States has raised a number of objections along the way. Rutland’s piece is partly a reminder that some of these and other challenges remain, even as US President Obama announced last month a joint commitment with Russia to see the bid through. I think that much of this analysis is right, but I would add one more obstacle to Russia’s bid: the on-going Doha Round. If Russia were to join, it would also have a major voice in the on-going negotiations (especially if they continue to drag out). Russia is a big enough player that it could upset many of the deals and alliances that have been made over the last decade. That could be both good and bad for progress in the negotiations. But is is unlikely that it would be neutral.

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