WTO NEWS: SPEECHES DG PASCAL LAMY
Geneva, 14 March 2006
The WTO in the Archipelago of Global Governance
Institute of International Studies
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
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
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.