Do Developing countries have much of a voice in WTO Decision-Making?

Richard Anderson

IP2012 Regional and Economic International Organisations

This essay will focus on the influence that developing countries have on the WTO decision-making. In my essay, I intend to explore the principle features of the decision making processes, and illustrate ways in which rules and procedures can make a difference. At the heart of the WTO lies a major and unsustainable discrepancy, my essay will try to explore this notion in light of the developing countries. This essay will look at the power developing countries have or lack of it within this institution, as well as the shared aims and ideals that liaise the together. Through this essay I am to investigate the notion of collective bargaining and how effective it really is with regards to the WTO in areas of policy and decision making. The question at hand is an intriguing one, which is my reason for researching it, I believe it is relatively difficult to understand from the surface how developing and at least developed countries are a majority in the World Trade Organisation(WTO) and yet still has the least influence or voice within . However, the closer we look into the institution the more answer seems to manifest.

Soon after the World War II a group of countries, namely the winners set out to create institutions which would eradicate any issues that may be cause of further wars. The principle idea was to employ use of the United Nations as the resolution on deterrent of war as well as eliminating the economic causes of war by establishing three international economic institutions. The three institutions were thereafter referred to as the Bretton Woods. These institutions were: The International Monetary Fund (IMF), The World Bank, and The International Trade Organisation (ITO). From the very beginning, the US Congress did not seem to resent the establishment of the World Bank or the IMF but on the other hand had much dispute towards the notion of having an International Trade Organisation on the grounds that it would concede too much sovereignty to an international body. On these grounds it seems fair to assume that the ITO was stillborn. The provisional agreement for the ITO, the General Agreement on Tariffs and Trade (GATT) became the agreement and furthermore the organisation for formulating and implementing, through dispute settlement, the international trade rules. As a result of negotiation, in 1995, this agreement on trade in goods became the World Trade Organisation.

(http:/aic.ucdavis.edu/oa/smith.pdf)

The WTO is a well established international organisation and is well renowned for assuring to all member states the provision of opportunity to interact on multilateral basis. By instituting a system of guidelines, regulations and norms of inter-state conduct, it sets to minimise bilateral exploitation and even trim down the number of multiple bilateral deals; consequentially increasing multilateral deals and lowering transaction cost. It is the only organisation that globally deals with international trade; it heads to exercise minimal measures to ensure members can interact on a relatively equal basis and for this, members must agree on all significant decisions by consensus.

(Hoekman & Kostecki 2001, p37)

Of course, the definition of the term “developing countries” is worth including in this essay so as to understand exactly who they are, why they are titled as such, and what sort of affiliation they have with the WTO. Narlikar illustrates; and quite well if I may add, what she believes the term constitutes in her literature “The World Trade Organisation, A short introduction.” The developing world is at least as much a product of self-designation developing world is at least as much a product of self-designation by the countries concerned and recognition by other members of the group, as it is of any objective criteria applied by outsiders. Her argument is corroborated by the WTO itself. The WTO does not directly categorise what constitutes a developing country in it maintains “Developing countries in the WTO are designated on the basis of self-selection although this is not necessarily automatically accepted in all WTO bodies.

(htt://www.wto.org/English/thewto_e/whatis_e/tif_e/org7_e.htm)

The WTO possesses four fundamental features which are the cornerstones for the institution’s decision making. To begin with, the WTO is a one-member-one-vote organisation. This feature makes it markedly different to the Bretton Woods international financial institutions, such as the International Monetary Fund (IMF) and The World Bank, where all decisions are based on weighted voting system. A classic example is that of the IMF, whereby, “the larger a country's quota in the IMF—determined broadly by its economic size—the more votes the country has, in addition to its basic votes, of which each member has an equal number.”

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Contrary to this, within WTO each member has one vote and all of them have the right to initiative. Irrespective of any weighting on the percentage of world trade held, contributions paid or any other criteria whatsoever each member is allowed equal status. This is what the Establishing WTO Agreement Article IX: 1 stipulates (Parameswaran 2004, p197). The one-member one-vote guarantees that developing countries, officially, share an official voice with their developed counterparts, regardless of the trade shares. Developing countries comprise about “100 of the 152 members,” building a simple majority is not an especially difficult task. On these grounds it seems the rule of taking most decisions by simple majority offers a substantial advantage to developing countries. If weighed against the problem of developing countries in pressuring decision making in the IMF where a lot of decisions require “85% majority, giving the US effective veto power due to its voting share 17.56%” and the WTO comes into view as an environment considerably more approving for developing countries (Narlikar 2005, p43). It is intriguing to note that none of the developing countries have sought to exploit their power of majority votes. As oppose to the UN General Assembly which Narlikar claims has been “ridden with the tyranny of the majority.” This irony can be explained through the second pillar or tenet of the WTO decision making; consensus-based decision making.

(Narlikar 2005, p8).

The notion of consensus-based decision, instead of majority voting, is a continuation of GATT practice and remains formally incorporated in Article IX: 1 of the Marrkesh Agreement which stipulates: “The WTO shall continue the practice of decision making by consensus followed under GATT 1947. Except as otherwise provided, where a decision can not be arrived at by consensus, the matter at issue shall be decided by voting. In all this, it becomes clearer why developing countries have hardly ever, if at all, been able to utilise the power of large numbers in the GATT and WTO .

(Narlikar,2005,p44).

The third principle the decision making of the WTO rests upon is the fact that it is a “member-driven” organisation. If we look carefully the evolution of the GATT, which was not an international organisation but in fact a contract, one can see where the member driven nature of the WTO derives. In 1951, the WTO was in light of the fact that the decision-making sessions of the Contracting Parties were not enough and thus an inter-sessional committee was established. By 1960 it was substituted by a Council of Representatives –also a body of national delegates- with superior powers for the general running of the GATT. “The Secretariat that was eventually established was formally known as the Interim Commission for the International Trade Organisation (ICITO).” The Secretariat of the WTO, while considerably bigger than that of its predecessor is still “small compared to the over 2500 strong IMF and nearly 6000 staff members of the World Bank.” It has no decision-making powers. In the IMF and the World Bank, the personnel of the “organisations work directly with the governments in preparing, monitoring and enforcing conditionalities, with the approval of the Executive Boards, which is seldom withheld.” On the other hand, in the WTO, the members themselves take decisions and enforce them through Dispute Settlement Body if necessary, which leaves the Secretariat with the job of providing technical and administrative assistance.

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The last of the four pillars that the WTO’s decision making process rests upon, is the reliance on a complex system of informal processes that can drive a consensus out 142 members irresolute members. The significance of informal processes in trade diplomacy is acknowledged even on the WTO website. Head of Delegations meeting (HODs) is an informal consultation; consultations of this calibre can involve the entire membership. Smaller group meetings are also commonly devised to reach consensus. Green Room meetings belong to this group. They are summoned on the initiative of the Direct General and usually include what is known as the Quad (US, EU, Canada, and Japan). Countries that express a vital interest in the discussion are also sometimes included in the meetings. The consultations have also usually included countries that have been invited to Green Room sessions that included countries that have played a primary role in the GATT/WTO.

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Examples of developing countries that have been invited are to the Green Room consultations include India, Brazil, Jamaica and even more recently Bangladesh. (Narlikar 2005, p47).

Contrary to the equality that the WTO claims to grant to its members, most of the processes described above act as a double edged sword. Here onwards, I will evaluate serious problems of participation that developing countries face with these crucial pillars that WTO decision making stand on. Consensus based decision making not only deprives developing countries from making full use of the equal status that they share with their more developed counterparts as a result of the Agreement; in fact, at times it may be found to actively work to the damage of developing countries participation. Assuming that the country is present; the consensus-based decision-making procedure “ascribes considerable importance to having a permanent presence or, perhaps more accurately, an active knowledgeable presence” It is here that developing countries come into contact with a severe problem with the decision making process. ()
One of the various problems is the number of permanent delegations in Geneva. A recent study in 2000 found that 24 member countries have no permanent presence in Geneva. These countries do not have the ability to object to the consensus that different bodies the WTO arrive at in their everyday workings. Numerous developing countries find it challenging to attend the meetings of the WTO, particularly if they must also cover all the other international organisations in Geneva with their small delegations. The difference in representation between the developed and developing countries presents a vast disadvantage against developing countries and weakens their participation within the WTO. Moreover, consensus decision is conducted through open discussion and this poses another problem for developing countries. If a country wants to reject a proposal, it must do so openly and clearly in the presence of other members. Developing countries mentioned how they sometimes fear the consequences of expressing their objections publicly, and as a result choose the option of remaining silent. The Absence of objection is observed as consensus, and consequently developing countries end up giving in to decisions that they actually have a problem with. A political atmosphere where members are intimidated and marginalised is an undemocratic one, and is in principle the opposite of what the WTO advocate. (Narlikar 2005, p44).

Like “watching paint that never dries” is how Sheila Page of the Overseas Development Institute, a London think-tank, describes the experience of following the Doha round of global trade negotiations. Launched in 2001 by the members of the World Trade Organisation (WTO), the talks seek to cut tariffs and farm subsidies, as well as liberalizing trade in services. On July 25th, hopes of an unlikely deal, brokered by Pascal Lamy, the WTO’s relentless director-general, at a summit in Geneva, briefly rose. But on July 29th, after nine days of negotiations, the mix turned gloopy once again.

( http://www.economist.com/finance/displayStory.cfm?story_id=11848592)

The Uruguay round arguably extended beyond this nettlesome detail. Many developing countries believe that the earlier round was lopsided, doing little to constrain the farm policies of the rich world even as it placed heavy obligations on the poor in areas such as intellectual property (IP). In the Doha round, they wanted to get their own back, by asking more of the rich world than they offered in return. As a result, this round was if anything too narrow, not too sprawling. Had IP rights still been on the table, for example, it is harder to imagine rich countries allowing talks to fail on behalf of their farmers.

The member-driven aspect of the decision making in the WTO is advantages in some ways to developing countries. The limited power given to the Secretariat ensures members themselves are responsible for managing the organisation this is not quite the case in the IFIs. However, it is worth noting that a small Secretariat, (in contrast to the IMF and World Bank) means that the cost of research and representation members must be equipped with little help form the institution. This is likely to resort in power hierarchies, whereby more powerful or rich members are best-equipped and able to negotiate deals to their benefit. For example, the Brussel summit of 1990, the US delegation consisted of over 400 delegates which were more than the combined total of the staff for the sub-Saharan Africa and Latin America. The member driven nature of the decision making process has underlined the power asymmetries within the system.()

The agendas of the WTO have evolved into increasingly technical issues. In order to negotiate and bargain these technical matters of interest effectively, the presence of qualified staff with expertise in the area is crucial. Often, it is the developed countries that are able to summon technical experts into Geneva quickly and effectively. Developing countries, if present at all are more times than not reduce to observing only without active participation. Their small delegations are a lot of the time unable to make informed decisions or choices that can present a challenge for the preparations of their developed counterparts. Developing countries have another problem with the member- driven quality of the decision making procedure which is the bombardment of sessions delegates are dealt. Many delegates find the number if meetings that they must attend as unbearable and unmanageable. As the dimension to the expansion of the WTO agenda increases so do the numbers of meetings. Developing countries are known to have small delegations so even if they manage to attend all overlapping meetings; they are too exhausted to make effective use of their presence. (Narlikar 2005, p46).

There are some strong points about the constitution of informal decision making. The advantages include the fact that members can choose the level of involvement they will maintain in a specific negotiation according to their interest. This is better than a pre-determined executive board that permanently include some members and exclude others. Nevertheless, there are many noticeable problems with informal processes in WTO Decision making. The most apparent problem is the lack of transparency, developing countries have argued this has just appeared but has derived from its predecessor. Informal meetings were often invitation only or through a process of self selection by a small clique within the WTO. The most famous for this sort of meeting were known as the Green Room meetings. In these cases the Secretariat would often treat the list of the invitees as confidential in order to avoid a flood of requests for participation form the excluded.

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Although there remain many defaults and much that lies against developing countries with the decision making process of the WTO, to an extent developing countries should apply more effort to influence the process. Strategies that developing countries need to employ on their own, regardless of the rate and implications of institutional reform, such that they are able to make use of the existing key features of WTO decision-making to their best advantage. One of the primary methods developing countries must exercise to enhance their participatory abilities in the WTO lies at the national level. Among the causes that developing countries identify for their marginalisation from the WTO, an important one is the weak interest and concern that domestic capitals have for international trade policy matters. One developing country delegate pointed out that trade rules rarely have election making or breaking potential in developing countries, and for that reason alone capitals decide not to invest into sufficient resources in capacity-building at domestic level or at the delegation level. Little policy coordination exists between the capitals and the delegations in Geneva for many developing countries, this can only mean that while delegations can put into effect considerable negotiating flexibility due to their independence from domestic pressures, but they are also deprived of the research-based and political back-up that is needed to negotiate effectively. Besides working on their individual capacity and Geneva presence, the second means of bettering the participation of developing countries in the WTO is by their bargaining together, i.e. through coalitions. Coalitions allow a pooling of organisational resources, and enable countries with less well defined interests to release themselves of the research efforts of allies and a possible country-wise division of research and labour across issue areas. In addition, by negotiating together, developing world hold greater weight in terms of trade shares and political clout and can hence exercise more influence than when they bargain individually. Collective bargaining power based on greater economic weight might resemble the ‘coercive power of trade unions’. When power is thus aggregated and achieves a critical mass, the weak too acquire a capacity to say ‘no’ and affect the outcome of international decision-making through their participation or otherwise. Even when the coalition does not enhance the strength of the members sufficiently to hold the strong at ransom, large membership enhances the credibility of demands through the legitimacy that comes from large numbers in institutions that espouse norms of international democracy.

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Nonetheless, perhaps more recently the situation is changing; Brazil has won a landmark victory at the World Trade Organisation that could spell the beginning of the end of rich countries' subsidy payments to their farmers. The WTO has ruled that $1.5bn (£830m) of annual subsidies given by the United States government to its 25,000 cotton farmers is mostly illegal. The provisional ruling is confidential, but trade sources said pubic confirmation would be available as soon as next month and could start a domino effect whereby much of the £300bn in subsidies lavished on the rich world's farmers might tumble. Analysts said, however, that, even if the US Congress agrees to scale back cotton subsidies, implementing the changes could take up to two years. But campaigners were not convinced. Matt Griffith, a trade policy analyst at the charity Cafod, said: "That Brazil brought this case is a sign of desperation that so little has been done to tackle rich-country subsidies. It sets a valuable precedent in an attempt to call the US and other lavish subsidisers to book."

Oxfam spokeswoman Celine Charveriat agreed: "This would be a huge victory, not just for Brazil but particularly for 10 million poor African farmers whose livelihoods have been crippled by unfair competition."

(http://www.guardian.co.uk/business/2004/apr/28/brazil.usnews)

Ultimately, developing countries recognise that they need to somehow increase their Geneva presence, increase coordination between Geneva and their capitals, and increase interest, resource, and research commitments at the national level to allow more informed participation in the WTO. This acknowledgement of limitations of processes at the domestic level presents a remarkable contrast to the dismissal of the GATT as a ‘Rich Man’s Club’ by developing countries in the past and their refusal to even try to participate on equal terms in the institution. Underlying this self-critique has been the recognition that it is up to the developing countries themselves to assert their voice in the WTO and represents the first step to empowerment. Nonetheless, to a large extent there should also be recognition I believe that there are some serious problems within the process that need consideration for reform in order to step closer towards the goal for more effective participation of developing countries

REFERENCES:

HOEKMAN, B & KOSTECKI, M (2001) The Political Economy of the World Trading System: The WTO and Beyond, 2nd ed, Oxford: Oxford University Press.

KATRAK & STRANGE (2004) The WTO & Developing Countries: ed Palagrave Macmillan

NARLIKAR, A & TUSSIE, D (2004) The G20 at the Cancun Ministerial: Developing Countries and their Evolving Coalitions at the WTO, World Economy, Vol. 27, 7 (947-966) Oxford: Blackwell Publishing.

NARLIKAR, A (2005) The World Trade Organization: A Very Short Introduction, Oxford: Oxford University Press.

WILKINSON, (2001) Multilateralism and the WTO: ed Anthony Rowe Ltd Eastbourne.

Ashley Seager, (2004) “WTO rules American cotton subsidy illegal”

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(http://www.economist.com/finance/displayStory.cfm?story_id=11848592)

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“WTO DECISION-MAKING AND