WTO NEWS: SPEECHES DG PASCAL LAMY
Geneva, 14 March 2006
The WTO in the Archipelago of Global Governance
Institute of International Studies
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Mr Director,
Ladies, Gentlemen,
I have been in Geneva for six months and I am still learning a lot about
both Geneva and the WTO. One recent discovery is that there is a very
famous “squat” in town known as “the Rhino” — it is talked about in the
newspapers and even on the Internet!
Another recent discovery is that there is another very famous squat in
Geneva – the HEI Library's squat at the Centre William Rappard …
Indeed, the HEI and the WTO have much in common and we share many
things: our interest in international relations, proximity to the Lac
Leman centre and our premises.
While our premises are certainly of concern to me, it is our shared
interest in international relations that accounts for my presence among
you this evening and is at the origin of the subject I have been asked
to address.
What is the WTO's place in global governance?
Debate, projects, rantings some will say, have always accompanied major
economic, technological and political changes. From Seneca to Kant, from
Braudel to Habermas, from the era of colonial conquest to the two world
wars of the last century, breakdown has alternated with ideas on the
building of a new world order. And if locus geni has any meaning,
Geneva, the League of Nations, the creation of the United Nations should
be of inspiration to us.
It is not surprising, then, that the current wave of globalization should have put global governance back on the agenda as an item for discussion. Indeed, coinciding as it does with a period of exceptionally dynamic expansion of market capitalism, the present wave has particular features: it is, or it could be defined in terms of, a simultaneous contraction of space and time arising from technological change brought about by the information technology revolution: in one century, the time it takes to send information from London to Bombay has dropped from 24 hours to 5 seconds. In the last century, it took 50 years for western living standards to double. Now, the Chinese standard of living doubles in ten years.
Globalization itself is not new. The growing pace and current speed of the phenomenon are what set people's minds wondering, or indeed reeling. As if there were renewed fear of unregulated global capitalism and the ensuing withdrawal prompted by concerns of identity or security. The feeling of anxiety generated by uncontrolled globalization is a natural phenomenon. Many people have a feeling of being dispossessed of their own fate, a sense that they have no means of influencing the course of world events. Such a feeling can become poison to democracy, which is based on the idea that “my ballot can change things”. As if the rudder of the world were swinging to and fro with no helmsmen to steer a course. Plato enquired as to what charioteer was needed to steer the chariot, which symbolized the city. More than 2300 years later we are faced with a similar question, but the city has become global and undergone a change of scale, while governance has not changed scale, being still largely based on the concept of the sovereignty of nation States.
But what should we understand by the term governance? Why has it re-emerged in public debate? And above all, why is it frequently associated with globalization?
It would appear to have been used first in 12th century France, where it was a technical term designating the administration of baillages, or bailiwicks. As with the word government, it comes from the Latin word for “rudder”, conveying the idea of “steering”. From France it crossed the Channel and in England came to designate the method of organising feudal power. Underlying feudal power were adjacent “suzerainties” among which there had to be coherence. There was no central power as such, but a body, primus inter pares, whose purpose was to settle disputes peacefully and see that any conflicting interests were reconciled in consultation with those involved. In a word, its job was to hold the rudder and steer the ship away from the reefs. Governance thus focused on unity – not uniqueness – of interests. If we liken international society to a medieval society in its lack of any organised central power, then it needs governance. In other words a concept that affords a basis for the organization of power, or the elements of consultation and dialogue necessary to securing greater harmony.
If the concept of governance disappeared in the 16th century with the emergence of the State, it is because the two notions “governance” and “government” are profoundly different. Governance removes the political dimension from government. The latter belongs to States and their particular modes of government, legitimacy and representativeness. Governance is a decision-making process which focuses on permanent negotiation between stakeholders. Through consultation, dialogue and exchange, governance seeks to ensure coexistence and in some cases coherence between different and sometimes divergent points of view. This involves seeking some common ground and extending it to the point where joint action can be envisaged.
Today, global governance as it has been shaped over the best part of a century, is an archipelago of organizations specialising in specific areas: human rights, health, trade, finance, migration, social rights.
To situate the WTO in this archipelago, the criticism levelled against the Organization is a good starting point.
Two major objections are usually raised against the WTO. The first is that it is hegemonic: the WTO and trade dominate all else and impose their own order — the market order. The other is that the WTO is isolated and its insularity betrays a reprehensible disorder.
First of all, say the critics, the WTO dominates the system of international relations. Trade matters overhang, as it were, other aspects that are more important for people, such as health, social standards or the environment.
The critics assert that because multinational firms influence WTO negotiations, people's health will be sacrificed to excessive protection of intellectual property. Patents at prohibitive prices make generic medicines unaffordable for poor countries devastated by numerous epidemics.
Environmentalist critics object that priority is given to the productivity of production processes to the detriment of a longer term outlook. By encouraging competition, they say, the WTO incites firms to overlook the constraint required by environment and thus favours non-sustainable development.
As to culture, the WTO encourages uniformity of thought leading to loss of the real wealth of nations, namely their cultural diversity.
Added to these “sectoral” objections, there is more systemic criticism focussing on the dispute settlement mechanism, whose own brand of efficiency means that trade liberalization takes precedence over values which, while every bit as legitimate, do not enjoy the same protection in law.
While some thus see the WTO as a superpower, others complain that it is powerless, and that it is insulated inside the boundary of its own competence and impervious to the legal order of any other international body.
The actions of international organizations are thus juxtaposed, being hemmed in by the organization's own legal order, and this, say the critics, leads to global disorder. Every organization produces rules and in the absence of any ranking of international rules, the many entanglements and contradictions lead to regulatory chaos. How can one reconcile the absence of a social clause in the WTO corpus of laws, with the ILO standards? How can one ensure coherence between the Convention on Biological Diversity and GATT/WTO agreements when these treaties do not have the same membership? Where should one lay down the requirements for essential food aid to respond to humanitarian disasters? At the WTO? At the FAO, at the World Food Programme? The criticism levelled here is that the system is unable to establish order among the different rules. The WTO is thus cut off, hemmed in by too narrow a legal order.
What are we to make of these criticisms, which are in fact quite contradictory? Is the WTO hegemonic or insular? Or is it both?
To answer these questions we need to look at the facts, at what is concrete, at positive law. And this is what the facts tell us:
Without doubt, the WTO is a powerful and sophisticated organization. But
this does not make it hegemonic. Without doubt, it continues to be
limited by its sphere of competence and there are good reasons for this.
But the present system can be refined and it affords room for
improvement.
In my view the WTO is indeed quite powerful and sophisticated: its
legislative basis is important and it has the institutional capacity to
produce new rules, amendments and implementing instruments; in addition
it has strong enforcement mechanisms — that include surveillance and
monitoring mechanisms — as well as adjudication. Yet, as I will further
discuss, the WTO is not hegemonic and it does take into account other
international norms and the work of other international organisations.
Let's look first at these features of the WTO.
The WTO is a treaty of some 500 pages of text with more than 2000 pages
of scheduled commitments. In addition, 50 years of GATT practice and
decisions — what we call the “GATT acquis” — are now included as part of
the new WTO treaty. But in WTO the trade rules are always being
negotiated. The Doha Development Agenda, the DDA, is what we call in our
jargon a “Round” of negotiations. In rounds of negotiations a broad
series of issues are open to negotiation.
But formally the Charter of the WTO is clear: the WTO provides a
permanent forum for negotiations among its Members concerning their
multilateral trade relations. States need permanent forums for
discussions and negotiations and, in that perspective, the institutional
structure of the WTO is well developed. We have various levels and forms
of decision —making that can be multi-stage and sequential. In all, it
ensures that issues brought to the WTO cannot simply be swept away.
An example of our legislative marathons is the series of staged
decisions that allowed us to formally amend the TRIPS Agreement to be
able to adapt and respond to urgent needs of developing countries.
The process began in Doha on November 2001 when Ministers declared that
it is important to implement and interpret the TRIPS Agreement which had
been negotiated 10 years ago in a way that supports public health — by
promoting both access to existing medicines and the creation of new
medicines. Ministers also issued a separate declaration on TRIPS and
public health, designed to respond to concerns about the possible
implications of the TRIPS Agreement for access to medicines. That
declaration left some unfinished business. So the work continued.
Indeed, in August 2003 the General Council successfully adopted a Waiver
that made it easier for poorer countries to obtain cheaper generic
versions of patented medicines. But the work was not over — such a
waiver was temporary and needed to be transformed into a permanent
amendment.
Finally, in December 2005, Members in Geneva agreed on the wording that
transformed the provisions of the waiver into a permanent amendment.
This amendment will now be formally built into the TRIPS Agreement when
two-thirds of the WTO’s Members have ratified the change.
You can see that, when faced with a political stimulus, we managed to
put forward legislative solutions throughout our chain of
decision-making to respond and adapt to the new realities faced by WTO
Members.
But there is more. One benchmark to assess the power and level of
institutional sophistication of an international organisation is the
capacity of such an organisation to produce legislative material, to
adopt norms that can affect Members' behaviour and choices. If it is
true that the WTO Secretariat and the WTO bodies do not have any general
power to adopt formally binding legislation, there are some embryos of
norms-making by WTO bodies in cases where they are able to adopt
effective decisions that ensure pragmatic responses to specific needs
and, in this sense, these bodies produce forms of “droit dérivé” or
secondary treaty legislation.
For example, the WTO treaty bestows upon the General Council the treaty
power to adopt amendments, waivers, interpretations and accession
protocols through decisions which do not necessarily require any
additional ratification by Members. These decisions constitute, in my
view, a form of lawful exercise of secondary treaty legislation.
Certain other WTO bodies also appear to have the treaty bestowed
authority to adopt certain decisions or to take certain actions that
could have a direct bearing on WTO obligations. I'll give you two
examples, but there are many more.
For instance, the SPS Agreement provides that the relevant Committee
“shall carry out the functions necessary to implement the provisions of
the agreement”. On this basis, the Committee adopted a Decision which
implements and complements the provisions of the Agreement. That
decision provides that “In the context of facilitating the
implementation of Article 4, the importing Member should explain the
objective and rationale of the measure and identify clearly the risks
that the relevant measure is intended to address. The importing Member
should indicate the appropriate level of protection which its SPS
measure is designed to achieve”. You see that this decision has
positively added to the WTO in adopting more detailed and specific rules
to implement broad treaty provisions.
Another example would include the action by the Subsidies Committee to
terminate those subsidies on environment that could not be challenged
before the WTO adjudicating bodies. The Subsidies Agreement provided
that this Committee could decide whether to continue such green
subsidies. In December 1999 the Subsidies Committee implicitly decided
not to extend such provisions and that was that! This decision has had
significant consequences by effectively terminating several Articles of
the Subsidies Agreement. This is another legal action by a WTO body that
can be viewed as a form of law-making.
There is also evidence of the evolving institutional nature of the WTO.
So, not only can the WTO decide on rules by negotiation and adoption of
international treaties but there already exists a domain for WTO bodies
to complement these traditional treaties by “secondary legislation”.
More importantly perhaps the WTO has also developed strong enforcement
mechanisms. By enforcement mechanisms I mean both our
transparency-surveillance-monitoring mechanisms and our binding dispute
settlement systems. Let's look first at the potentially innovative
surveillance mechanisms that we have in place.
The WTO Agreement contains multiple notification and legislation review
exercises by the entire membership. Another feature of the WTO, is the
opportunity for cross-notification, whereby a Member notifies the WTO of
a measure not notified by its originating Member. This process ensures
further transparency in creating an obligation for the originating
Member to justify its position regarding such cross-notified measure.
All notifications and cross-notifications are reviewed and commented by
Members in relevant Committees/Councils.
Another collective monitoring process exists with Regional Trade
Agreements. In 1996, our Members established a Committee with a mandate
to carry out the examination of RTAs and to provide a forum for the
consideration of their systemic implications for the multilateral
trading system and the relationship between them. These examinations are
conducted on the basis of information provided by the parties to the RTA.
With the Uruguay Round, we also set up a new Trade Policy Review
Mechanism (TPRM) which is a “Peers' Review Process” that covers the full
range of individual Members' trade policies and practices and their
impact on the functioning of the multilateral trading system. The
purpose is to enable a collective appreciation and evaluation of these
policies and practices. The TPRM report also examines the impact on the
multilateral trading system of such policies and practices. The reviews
are set against the background of each country's wider economic and
developmental needs, policies, objectives, and of its external economic
environment.
Very recently, Member states have expanded the reach of our
surveillance-monitoring mechanisms. In Hong Kong, we agreed that at
least 97% of the rich countries' LDCs' imports would be duty-free and
quota free — that is without any trade restrictions, with the aim of
reaching later a full coverage. In my view this is quite an achievement.
To monitor the situation, we set up a new review process. The HK
decision provides that the Committee on Trade and Development shall
annually review the steps taken to provide duty-free and quota-free
market access to the LDCs and report to the General Council for
appropriate action.
Members are now discussing where and how to implement this new review
process. This is again a very innovative process that is evidence of the
level of legal and institutional sophistication of the WTO which can
explain why States, weak and strong — make great use of this forum.
Finally, one of the enforcement mechanisms of the WTO is concerned with
the formal adjudication of disputes between Members. Some have written
that the WTO dispute settlement mechanism is “the jewel in the Crown”.
True, the WTO dispute settlement mechanism is unique. It can be
triggered easily and quickly, and panels and the Appellate Body will
often be expected to make rapid rulings on any WTO-related grief.
Allegations that WTO trade is affected generally suffices to formally
trigger the regular WTO dispute settlement process through a simple
request for consultations in writing. Procedural steps happen
automatically, within pre-determined time-limits. When requested, a
panel must be established, reports of the panel and Appellate Body must
be adopted by the Dispute Settlement Body (composed of all Members) and
retaliatory sanctions must also be authorized. After adjudication, the
entire WTO membership maintains surveillance and monitors the
implementation of the dispute conclusions by the losing country. And,
importantly, if implementation fails, the winning party is entitled to
obtain permission to impose trade sanctions and even cross-retaliation.
Another unique provision of the DSU rules out all unilateral measures.
Only the WTO can decide whether Members' measures or actions are
consistent with WTO rules. The WTO is one of a rare system that has
managed well to regulate countermeasures from powerful States in
subjecting their exercise to prior approval by the collective
membership.
So, yes, the WTO is a sophisticated system for rules making and for
ensuring their enforcement. But this does not mean that the WTO is
hegemonic and does not take into account other international norms and
other international organisations. On the contrary, the WTO is not more
important than other international organisations and WTO norms do not
necessarily supersede or trump other international norms.
As you know, in international law, all norms are equal except (i) those
included in the so-called “peremptory norms” or jus cogens and
(ii) those that would be in conflict with the UN Charter (Art. 103).
I believe that none of the work that we do in the WTO corresponds to any
of these two exceptions; so, generally, we can all admit that WTO norms
are equal to other international norms.
In fact the GATT, and now the WTO, recognizes that trade is not the only
policy that Members can favour. The WTO contains various exception
provisions referring to policy objectives other than trade where policy
matters are often under the responsibility of other international
organisations. Our Appellate Body has managed to operationalize these
exception provisions so as to provide Members with policy space for
non-WTO concerns. Let me give you a few examples of how our system deals
with non trade concerns.
First, WTO Members are entitled to determine the level of protection for
the environment, health, morality if they wish, even if such national
standards are above existing international standards.
Second, in WTO, exceptions referring to such non-trade concerns, are not
to be interpreted narrowly; exceptions should be interpreteted according
to their ordinary meaning of the non-trade policy invoked. In this
context our Appellate Body has insisted that exceptions cannot be
interpreted and applied so narrowly that they have no relevant or
effective application. There must always be a balance between WTO market
access obligations and the rights of government to favour policies other
than trade.
Under the WTO, the Appellate Body has extended the availability of WTO
exceptions that refer to non-WTO concerns which are subject to what we
call a “necessity test”. When assessing whether a measure is “necessary”
for the protection of health or other non-trade concern, a new balancing
test is to be used. Such an assessment will have to balance (i) the
value at issue — and the importance of this value is very important and
will affect the entire assessment process; (ii) the choice of measure;
(iii) the trade impact of the restriction.
Once a measure is considered “necessary” there is always an assessment
of whether such measure is indeed applied in a non-protectionist manner.
With this approach, Members' restrictions based on important values and
implemented in good faith will be able to prevail over WTO market access
obligations.
This is why in US — Shrimp, the United States managed to maintain
its import restriction against shrimps from Asia based on the
environmental need to conserve and preserve turtles as natural
resources. In several disputes involving the health of human beings and
animals, the Appellate Body repeated that members can set very high
standards of health protection as long as they are consistent and
coherent. Another example includes the dispute between Canada and the
European Communities over the importation of asbestos-related
material. There again, the EC import restriction was upheld since it was
based on authentic health risks and there were no alternative measures
that could guarantee zero risk as required by the EC regulation. Again,
recently in the US — Gambling dispute, the Appellate Body
confirmed that the US can have the level of “public morals” it wants,
assuming that the measure is not protectionist and coherent.
In sum, the WTO does take into account other norms of international law;
and absent protectionism, a WTO restriction based on non-WTO norms, will
trump WTO norms on market access. Moreover, I believe that in
leaving Members with the necessary policy space to favour non-WTO
concerns, the WTO also recognizes the specialization, expertise and
importance of other international organizations.
And this brings me to my next line of argumentation. If it is true that
the WTO can be singled out as a uniquely powerful organization, it is
not acting alone in the international sphere and existing relations
among international organisations already reflect a coherence which is
one of the elements of governance.
Let me describe how in the WTO we have been sensitive to issues of
international coherence with other international organisations and how,
once again, we have developed pragmatic solutions to ensure some global
governance.
With the failure of the Havana Charter in 1948, that was going to link
trade, labour, commodities, development and finances, many would argue
that international organisations are all acting unilaterally in a
broken-up fashion without any collective direction. For instance, as I
already mentioned, many complain that the WTO ignores labour standards,
human rights or specific health needs of developing countries. On this,
my take is that we already have good material in place which should
serve as the basis for our collective work in the months and years to
come.
Let me share with you a few examples of how in the WTO we actually work
and collaborate with other international organisations.
Bretton Woods institutions: The WTO Charter calls for improved coherence
between the WTO the IMF and the WB. In this context, the WTO DG has a
specific mandate to continue to work to reinforce coherence between
these specific international organisations.
Bretton Woods and UN System: a notable programme of interagency
cooperation on technical assistance and capacity building is the
Integrated Framework for LDCs, which involves the WTO, IMF, World Bank,
UNCTAD, ITC and UNDP. This interagency cooperation is expanding with the
ongoing work on Aid-for-Trade programme which brings these organisations
together with regional development banks.
We have formal cooperation agreements with UNCTAD generally and together
we have set up the International Trade Centre — the ITC. In the area of
standards setting, we now have a mechanism — The Standards and Trade
Development Facility — which involves the WTO, World Bank, FAO, World
Health Organization and the World Organization for Animal Health. Its
purpose is to assist developing countries establish and implement SPS
standards to ensure health protection and facilitate trade expansion.
In the area of trade and environment, the WTO and UNEP have entered into
a cooperation arrangement.
Through the work of its Councils and Committees, the WTO also maintains
extensive institutional relations with several other international
organisations. There are some 75 international organisations that have
obtained formal or ad hoc observer status in WTO bodies. The WTO
is also participating as an observer in many international
organisations. Although the extent of such cooperation varies,
coordination and coherence between the work of the WTO and that of other
international organisations continue to evolve in a pragmatic manner.
For example, although there is no formal agreement between the WHO and
the WTO, the WTO has observer status in the WHO and the WHO has observer
status in the SPS and TBT Committees. The FAO/WHO Joint Codex
Alimentarius Commission, International Plant Protection Convention and
the World Organization for Animal Health have observer status in the SPS
Committee, and the WTO participates as an observer in the meetings of
these bodies.
These are just a few examples of our interactions and coherence efforts
with other international organisations. But, in practice, there are many
more exchanges that take place amongst secretariats of international
organisations. Coherence in global economic policy-making goes much
beyond the WTO's formal and specific cooperation arrangements. Indeed,
the WTO Secretariat maintains working relations with almost 200
international organisations in activities ranging from statistics,
research, standard-setting, and technical assistance and training.
Indeed, there are WTO provisions which explicitly provide that measures
complying with standards and norms developed in other specific
international organisation — like in Codex for instance — are presumed
to be compatible with WTO. So WTO Members have no choice but to be
directly concerned by the work of Codex!
In the context of the Doha Round, the WTO Secretariat has also been
collaborating closely with the secretariats of some multilateral
environmental agreements (MEAs), as well as other international
organizations, including UNEP and UNCTAD, which have been regularly
attending WTO meetings.
Finally, in the context of the implementation of WTO Agreements and of
the Doha Work Programme, the WTO cooperates on an ad hoc basis with a
large number of intergovernmental organizations, including many regional
bodies.
We have thus established, in a manner which I hope will convince you,
that the WTO is neither a power-hungry merchant ogre nor a Geneva gnome
cowering in his lair, and that its place in the archipelago of current
international governance is that of an open-minded participant ready for
dialogue and by now fully integrated in a network of administrative,
legal and political solidarity that is frequently overlooked. And I tend
to think that if its legislative or judicial musculature on occasion
makes the WTO seem cumbersome, this is because its Member States have
for fifty years engaged in gymnastics which they have practised less
strenuously in other forums.
That being said – and this will be my conclusion, can the WTO not do better and contribute more to the attainment of objectives approved and pursued by international society such as the United Nations Millennium Goals? And my answer to that question is: yes. Mostly in the area which today has pride of place in international governance, namely development, and in which efforts to secure coherence are still needed.
I remain convinced that the WTO's mandate regarding the opening up of markets constitutes an essential contribution to development and to the improvement of collective well-being. It is nevertheless true that the opening up of trade can deliver real benefits only if it is accompanied by other polices, which allow reconciliation of flexibility and job security: education policy, employment policy, research and innovation policy. Some of these must be implemented at national level while others are effective only if applied internationally through the action of specialized agencies: ILO, UNESCO, WHO … Coherence between the various international public policies – and they are eminently complementary – is therefore essential. The focus here should be on securing coherence of action between the international organizations rather than on sweeping institutional reform.
Globalization presupposes balanced international cooperation across the board. The best trade policy cannot alone promote growth and development. Premature market opening can even destabilize a country's economy in the absence of certain accompanying policies. This is why sound macro-economic policies must be supplemented by structural policies.
Among the structural polices, I will refer first to good governance
practices at national level, without which corruption and a lack of
transparency maximize social inequalities rather than optimizing
collective welfare. A number of international organizations work to this
end, including the IMF, the World Bank, the OECD … The WTO too has an
important role to play in enhancing transparency through trade
facilitation.
But such action must also be supplemented by investment policies in
order to develop local infrastructure. Here too, the World Bank, the IMF,
and the regional development banks are there to provide the developing
countries with financial and technical support to promote their
production and export capacities. As to the WTO, it must contribute its
own particular know-how in the area of commercial infrastructure.
But what is physical capital without human capital? Education and training policies are essential to allow everyone to participate in the most productive sectors of a country's economy. And training is the more necessary as a country opening up to international trade will see far-reaching changes in its economy and increased specialization in the sectors where it is most productive.
The setting up of an “Aid for Trade” programme, in which the WTO is now involved, can enable us to reconcile trade and development. It must help the developing countries to honour their multilateral commitments through technical – or possibly financial – assistance allowing them to give practical effect to the agreements. More broadly, the “Aid for Trade” initiative must give the developing countries more means with which to transform into growth and poverty reduction the benefits that accrue to them from more open trade. This, as I said, implies new physical or human infrastructure.
Putting development needs at the heart of trade liberalization is not first and foremost an institutional matter. It is primarily a question of political coherence. This is the main challenge of the current negotiations - from which you have afforded me a short break, and I thank you. A challenge that consists in building a “Geneva consensus” based on the idea that opening up trade, or indeed just opening up, is what we need in order to make our world a little less unjust, a little more desirable. A necessary condition, one might say, for attainment of the more global objectives of international society. One condition among others for one WTO among others.
Thank you for your attention.