Is dispute settlement a threat to democracy?

In a book for the Canadian Centre for Policy Alternatives titled "GATS: How the New WTO's Services Negotiations Threaten Democracy", it is argued that the GATS provisions on domestic regulation pose one of the Agreement's most "dangerous threats to democratic decision-making". The book claims that "governments would be compelled to demonstrate, first, that non-discriminatory regulations were necessary to achieve a WTO-sanctioned legitimate objective and secondly, that no less commercially-restrictive alternative measure was possible". As we have said above, the only circumstances in which any Member would be required to justify a domestic regulation would be in dispute settlement—when a specific measure had been challenged by another Government.

All of the concerns expressed about "deregulation" of services resulting from the GATS or about threats to health and safety standards boil down to the possibility that a measure thought to be discriminatory or unnecessarily restrictive can be challenged in dispute settlement. In the first six years of the existence of the GATS (as of February 2001) there have been no dispute settlement cases based primarily on services, though three cases dealing essentially with trade in goods under the GATT have had significant GATS elements. There has been no challenge to any measure of domestic regulation under the GATS. Nevertheless, cases may arise in the future. But can this really be represented as an assault on democracy?

All Governments are sovereign. Within their own jurisdictions they can reserve the right to act in any way they wish—even to the extent of banning foreign trade altogether, though in such a case, of course, it would make no sense to participate in the WTO. Like all WTO Agreements, the GATS is an agreement to abide by a set of multilaterally agreed rules and therefore entails some surrender of sovereignty. So do all other international agreements. The surrender is voluntary, conditional and temporary: no country is obliged to become or remain a Member of the WTO. But nearly all Governments in the world—over 140 WTO Members and 30 countries negotiating accession—agree that it is worthwhile to accept some negotiated limitations on the otherwise sovereign right to intervene in trade, including the possibility that one of their own measures may be subject to challenge by a trading partner. Should a Government not be able to challenge a measure which it believes to be illegal and damaging to its country's interests? In dispute settlement each of the Governments concerned is representing the interests of its people as it sees them. It is not evident that either case has more democratic legitimacy than the other. If the complaining country loses, is that too a defeat for democracy? To represent the possibility of losing a hypothetical dispute settlement case as an attack on democracy is to deny the legitimacy of international trade agreements and the principle of international cooperation—because participation in any legal system entails accepting that others' rights may sometimes prevail.

Anarchy in international trade relations would imply a far greater loss of sovereignty, above all for the small and weak. Recognizing this, Governments have accepted the obligation to justify and if necessary change disputed trade measures as a price well worth paying, if the alternative is the law of the most powerful. In this they are surely right.

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