Troubled talks threaten WTO’s credibility

Financial Times, London, January 24, 2007

By Alan Beattie

To blame the World Trade Organisation for the stalling of trade liberalisation andthe troubled Doha round of talks is like blaming a World Cup final referee for the quality of football.

The WTO secretariat, with a couple of hundred professional-level staff, advises, facilitates, informs and sometimes mediates trade negotiations, but in general does not direct them.The WTO refers to itself as a “member-driven organisation”. In the institutional trade-off between agility and democratic accountability it leans heavily towards the latter. It reaches decisions by consensus, which in theory gives each of the 150 member countries a veto.

In his previous incarnation as European Union trade commissioner, Pascal Lamy, WTO director-general, labelled this procedure “medieval”.

Consensus takes time. The last successful round of trade talks took seven years; Doha has been going for more than five and, though showing signs of life, is still in deep trouble. But few trade observers and officials doubt that WTO credibility is worth preserving.

A growing part of the WTO’s role is to rule on disputes under existing agreements. Panels of arbiters convened by the WTO have declared subsidies on US cotton and European sugar illegal, and spurred Congress to rewrite its tax law twice in response to a ruling that it was illegally supporting exporters. One concern among officials is that, if the Doha round fails, the US in particular will regard the WTO as redundant and ignore its judicial decisions.

Ngaire Woods, director of the global economic governance programme at Oxford University, says that concern about the Doha round and the WTO are overstated. “I don’t think it has ever meant much to refer to the WTO as one-member-one-vote,” she says. “Is a country like Mali ever really going to use its veto?” In effect, Ms Wood says, while countries in the International Monetary Fund and the World Bank have formal voting weights based on a formula, the WTO has an informal system based on the size of each country’s market.

And as all international institutions struggle to cope with the global shift of economic heft towards Asia, this medieval structure may in fact help it modernise. Allowing the emergence of giant economies automatically to be reflected in de facto power around the negotiating table may be easier than having to revise formal voting weights.

In the Doha round, for example, the Group of 20 developing countries, led by Brazil, formed in 2003 and rapidly became a serious force in the talks. Although technically only negotiating on agriculture, the G20 has shown how powerful a substantial number of big emerging markets can be across the whole area of international trade policy.

Mr Lamy recently told the FT: “The G20 has encouraged a wider coalition of developing countries to act together within the trading system. The WTO is one of the few places where the geographical and economic changes of the recent past are reflected in changes in the representation around the table.”

Ms Woods says Mr Lamy and Supachai Panitchpakdi, his predecessor, have tried to adapt existing procedures.

The informal “green room” process, for example, which seeks consensus privately among a few countries before involving the wider membership, was much criticised when it was dominated by the US, EU and Japan. Instead of abolishing it, Mr Supachai and Mr Lamy have legitimised it by widening the range of countries invited to include representatives.

If the Doha round does not revive, the WTO will still exist but its role as a forum for governance of the global economy will be diminished. Pradeep Mehta, of the Centre for International Trade, Economics and Environment, a research institute, notes with irony the WTO’s attention is occupied by a tussle between its two richest members in the Doha talks. “The WTO is trying to accommodate the developing countries. But at the moment progress is being held up by the dispute between the EU and the US,” he says.

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