Vol. 16 No. 10 (October, 2006) pp.849-853
THE EVOLUTION OF THE TRADE REGIME: POLITICS, LAW, AND ECONOMICS OF THE GATT AND THE WTO, by John H. Barton, Judith L. Goldstein, Timothy E. Josling, and Richard H. Steinberg. Princeton, NJ: Princeton University Press, 2006. 256pp. Cloth. $29.95 / £18.95. ISBN: 0691124507.
Reviewed by Matthew Schaefer, Professor of Law, University of Nebraska College of Law. Email: mschaefer1 [at] UNL.EDU.
The operation of the World Trade Organization (WTO) involves an ever increasing, complex web of economics, national politics, international diplomacy, and law. The WTO system is currently under strain, as displayed by the difficulty in concluding its latest round of multilateral trade negotiations, the Doha Round. The difficulty in the current negotiations is due, at least in part to the system’s prior success, but also because of the increasingly complicated politics, diplomacy and law involved within the institution. The WTO’s predecessor, the General Agreement on Tariffs and Trade (GATT), was remarkably successful in lowering border barriers, largely tariffs on goods. The WTO’s mission, since its creation in 1995, has been far broader: to tackle non-tariff, non-border barriers more comprehensively, to lower restrictions to both goods and services, to enhance intellectual property protection, and to re-integrate agriculture and textiles trade within the system. Additionally, the WTO seeks to achieve these goals among an ever increasing membership that now exceeds 150 countries. Thus, the “low-hanging fruit” on the trade agenda has largely been addressed, leaving the current Doha Round to pick the more difficult “high hanging fruit” but with many more participants with multiple ideas on how best to reach that fruit.
The four authors of THE EVOLUTION OF THE TRADE REGIME, John Barton, Judith Goldstein, Timothy Josling, and Richard Steinberg, perform a much needed academic and public service in describing and analyzing the complexity of the operation of the WTO and the complexity of the immediate and long-range challenges facing the institution. This is no surprise given their multi-disciplinary backgrounds and varied professional experiences, and that their inspiration for writing the book was the acrimonious 1999 Seattle Ministerial meeting that failed to launch a new Round of negotiations. Although previous attempts to launch new Rounds were unsuccessful in the GATT/WTO system, Seattle was a very public display of the impact of domestic politics, including the rise of non-governmental organizations (NGO) interested in the workings of the WTO, and the complications arising from a more diversified membership body, including many more developing countries (with distinct interests) asserting themselves more forcefully in negotiations. The Seattle Ministerial failure was cured two years later in Doha with the launch of a new Round shortly after the tragic events of 9/11. However, the pace of progress [*850] in the Doha Round negotiations show that the underlying tensions regarding such issues as trade remedies, agriculture, and textiles remain. Indeed, solving some of these issues in the negotiations has become even more complex with the accession of China to the WTO.
The multi-disciplinary approach taken by THE EVOLUTION OF THE TRADE REGIME will provide any student (graduate or undergraduate) from the fields of political science, law or economics (or any future policy maker) great insights, both theoretical and practical, into the current and future operations and challenges of the WTO. From a theoretical perspective, one can find a variety of international relations analysis in the book, including realist theory, regime theory and liberal IR theory. Indeed, the opening chapter provides a “political analysis of the trade regime” and includes sub-chapters on “state power and international trade institutions” and “non-state actors and domestic institutional design.”
Throughout the book, in both theoretical and practical sections, the reader will find that the authors avoid dogma, and present the appropriate level of nuanced analysis. For example, in the sub-chapter on “state power,” the authors note that while “some analysts evaluate state power in the aggregate,” one should really look to “a specific negotiating context, like trade negotiations, in which only some dimensions of power are likely to be brought to bear” and thus “the measure of power must be more tailored” (p.10).
While providing a realist analysis based on state power, it becomes clear that the authors believe that regime and particularly liberal IR theory are better predictive models for the WTO system. As the authors put it: “few interests other than survival can be ascribed to all states. Some other theory . . . about interests is necessary to supplement a pure international approach” (p.14). Indeed, many of the sections describing particular substantive WTO agreements conclude with an analysis of the domestic political framework and consequences surrounding the agreement. For example, after describing the Trade-Related Intellectual Property Agreement (TRIPs), the authors discuss the domestic implications: adjustment of regulations to “provide minimum levels of protection where such protection may not be in the interests of that country” and provision of “means of effective enforcement,” including by necessity the “establishment of a patent office, education of lawyers and judges about the nature of IP rights, constraints on the corruption of judges and other officials that administer and adjudicate IP rights” (p.142). Given the potential impact on domestic policies and resources, it is little wonder that the TRIPs agreements (and many other WTO agreements) raise issues of “capacity building” within developing countries.
It is no surprise, given the authors’ preference for regime theory, and especially liberal IR theory perspective, that the book involves collaboration among legal and political science/international affairs academics. Regime theorists believe in the [*851] possibility of gains from cooperation or in non-zero sum interactions and outcomes. Formal legal institutions can be a means to reduce transaction and monitoring costs from continuous one-off bargaining. Liberal IR theorists believe that domestic politics, including domestic constitutional structures and divisions of power, can influence state interests and thus state behavior. The trading system has traditionally been quite fertile ground for cooperation among regime and/or liberal IR theorists and lawyers. Indeed, it would be difficult for a political scientist seeking to explain state behavior in the WTO to ignore the legal aspects of the institution (or the domestic constitutional and legal orders of its member states).
One of the WTO’s main advancements over its predecessor institution was the creation of a more judicialized dispute settlement process. Under the old GATT, a defendant nation alleged to be violating its commitments, could simply “block” the dispute settlement process at various stages by voicing objection. In contrast, the WTO allows for an “automatic” right to a dispute settlement panel, “automatic” adoption of dispute settlement reports, and “automatic” authorization of retaliation in event of prolonged non-compliance by a losing defendant country. Thus, the WTO has “teeth” that its predecessor lacked. The WTO also involved the creation of a first-of-its-kind Appellate Body that has the power to review “lower” dispute settlement panel findings. While the GATT process obtained remarkably high compliance rates by losing defendant countries, the WTO also has achieved high-compliance with much tougher and expanded substantive rules vis-à-vis the GATT.
Treatment of the dispute settlement system in THE EVOLUTION OF THE TRADE REGIME will be of interest to both political science and law students. After a thorough review of how the system operates, the authors discuss one of the key current controversies in the operation of the system: whether judicial lawmaking is occurring and to what extent. The authors analyze several recent cases to determine the extent to which either “gap filling” or “clarifying ambiguity” occurs and whether this amounts to “lawmaking.” The authors conclude that lawmaking occurs in both forms, but that gap filling is primarily limited to the procedural realm; however, there are limits and constraints that will hopefully keep both types of lawmaking within acceptable political bounds. The authors find that “it is difficult to conclude from the foregoing signals the US government currently perceives that judicial lawmaking has fundamentally prejudiced its interests” (p.87). Some constraints on judicial lawmaking mentioned as possibilities by the authors may pose significant practical difficulties because of the consensus decision-making procedure that prevails in the WTO. For instance, correcting a case of judicial lawmaking through formal interpretation by members, or even in the context of a negotiating Round, becomes difficult, or at best costly, to member(s) seeking the correction. Nevertheless, it is likely that other checks and limits on the Appellate Body will suffice. [*852]
Throughout the book, the authors offer plenty of “practical” insights on WTO operations. For instance, national government negotiators are well aware of the so-called “green room” process during trade negotiations, but only the more specialist outsiders are probably familiar with it. THE EVOLUTION OF THE TRADE REGIME illuminates: “These Green Room caucuses, named after a room in the WTO building in which they have sometimes taken place, consist of twenty to thirty-five countries that are interested in the text being discussed. . . . [T]he agenda for . . . round-launching ministerials . . . and round closing ministerials has been set in Green Room caucuses” (p.64). There was some backlash against this Green Room process at the Seattle Ministerial but this “‘concentric circles’ model” continues today despite “being the primary object of concern by developing countries that want greater internal transparency” (p.65).
The book devotes a whole chapter to the issue of expanded WTO membership and the challenges that developing countries face. The authors, typical of the level of nuance and detailed analysis in this book, during their discussion do not simply lump all developing countries into one large group sharing the same interests and goals. China is addressed in a separate sub-section, and developing countries with different levels of economic growth and industrialization are distinguished. Nevertheless, the authors consider broadly shared concerns, such as internal transparency, and analyze general asymmetries based on market power. For example, the more judicialized dispute settlement system has been used by developing countries more widely than the old GATT system, and it is viewed as more equitable than a system emphasizing power-based negotiations to resolve disputes. The WTO system limits but does not eliminate the effect of power differences. For example, “the imposition of sanctions by a developing country on a developed country that declined to implement a decision could very well be to the disadvantage of the developing country itself” (p.171). Developing countries also might face “additional asymmetries,” including staffing and informational challenges.
Another example of “insider”-type knowledge is the description of the WTO secretariat. The authors note that the secretariat “plays a key role in dispute settlement” and that “members of the secretariat influence decisions, through advice to panel participants and informal recommendations on written reports” (p.212). They also discuss the evolving relationship within the secretariat between professional staff and the more political upper-echelon officials. The secretariat staff (as well as the dispute settlement panelists and Appellate Body members) are the very so-called faceless bureaucrats that many NGOs (representing environmental and other interests) have long complained about holding too much power. The traditional response to NGO requests for access to the trading system was that their input could occur only at the national level. However, the WTO has changed that exclusive national means of input, and done so through an act of what some might describe as judicial lawmaking. Although there is no [*853] explicit provision in the dispute settlement agreement allowing for amicus briefs, the Appellate Body interpreted general language regarding access to information to allow itself and dispute settlement panels to consider amicus briefs from NGOs. The irony is obvious: the faceless bureaucrats whom NGOs charged with undermining democratic policy choices are the ones that have allowed NGOs greater access to the WTO dispute settlement mechanism. The authors give a fulsome account of the benefits and drawbacks of greater NGO participation in national trade policy-making processes and in the WTO. One key factor highlighted is the need for the WTO to maintain its legitimacy. The authors believe that further inclusion of NGOs in national policy-making processes, as well as in the WTO, will positively influence legitimacy. However, they describe several problems with direct participation of NGOs, including that fact that many member nations “lack active and indigenous NGOs and . . . perceive active NGOs as representing” (pp.201-202) industrialized country interests.
The final challenge the authors address is that of regionalism (or the proliferation of Free Trade Agreements (FTAs)). The original GATT, like the WTO system, allows an exception to the most-favored-nation (MFN) obligation for FTAs. Hundreds of FTAs have been concluded, and the numbers continue to increase. Even nations that traditionally resisted such agreements have engaged in this activity. Roughly one-half of world trade occurs under these (and other) preferential regimes. A question raised by the authors is whether the WTO should “reinstitute a multispeed approach” as opposed to its current “single undertaking” approach, in which all WTO nations are party to (nearly) all substantive agreements under the WTO institutional umbrella. Alternatively, “special treatment within common rules” might be negotiated.
Like many of the other challenges facing the WTO, the issue of regionalism and the WTO’s response to it, lends no easy solutions or answers. However, students of today (as well as incoming policy makers and new legislators with trade policy interests or responsibilities) will be well served by the theoretical and practical analysis provided by THE EVOLUTION OF THE TRADE REGIME as they begin to think of and propose solutions to the complex challenges facing the WTO system.
© Copyright 2006 by the author, Matthew Schaefer.