WTO in Transition - The Current Status of the WTO Framework and its Future

In November 2001, the new "Doha Development Agenda" of the World Trade Organization (WTO) was declared. Negotiations are ongoing, with the aim to reach an agreement by 2004. But it's hard to say that they are making smooth progress. In particular, areas such as "trade and investment", "trade and competition policy", and "trade and environment" are not doing so well. These areas are called "issues of non-trade concerns" because they do not necessarily meet the WTO's goal of "trade liberalization". The question of how to seek the development of the WTO framework by dealing with these issues may sound like journalistic analysis, but it is also an academic field of interest in terms of getting a grasp on what exactly the WTO framework is.

The WTO is an international regime established as the successor to the GATT (General Agreement on Tariffs and Trade), which was founded in the late 1940s. Until the establishment of the WTO in 1995, GATT only covered trade in goods. But the WTO came to deal with trade in not only goods but in services (General Agreement on Trade in Services, GATS) and intellectual property (Agreement on Trade-Related Aspects of Intellectual Property Rights, TRIPS Agreement).

The Marrakesh Agreement establishing the WTO states that, "the WTO shall provide the common institutional framework for the conduct of trade relations among its Members," (Article 2) and declares trade to be the subject of the WTO. But while mentioning trade in services, GATS actually provides the framework for the domestic service industry, such as restrictions on the telecommunications sector. Furthermore, while talking about, "aspects concerning trade-related matters," TRIPS actually offers an international regulation on intellectual property. Given such circumstances, it is only natural that some may have trouble calling WTO an international regime on trade. Moreover, some might see WTO transforming itself into an international regime on economic matters in general. The concept of negotiating issues such as "trade and investment", "trade and competition policy", and "trade and environment", and creating trade and competition rules within the WTO framework is based on the philosophy of viewing the WTO framework as an international regime and having it develop into a more comprehensive international regulatory body. This kind of thinking was stronger before the start of the new round, with some calling for issues such as labor standards, culture, and even human rights to be included as topics for negotiation.

Even if the WTO was considered a trade regime, the question of whether it would be able to negotiate and create agreements with "liberalization of trade" as its central theme had already been debated in the 1980s during GATT's rapid development.

In the late 1980s, when the United States recognized the decreasing dolphin population as a direct result of tuna-fishing, and banned the import of tuna which had not been caught in accordance specific regulations, the issue of whether such measures were compatible with GATT came to be debated. Ever since the U.S. ban on tuna imports was judged to be violating GATT rules as regards the dispute settlement mechanism, the relationship between trade regulation and environmental preservation became the center of attention. As a result, some have started to call the GATT "anti-environmental". As it is effective to take restrictive measures on trade for the sake of environmental preservation, similar problems have since risen, and it became necessary for the GATT, and later the WTO, to deal swiftly with the issue of "trade and environment". It was a major accomplishment for the WTO to declare in the preamble of its agreement that Member nations, "seek both to protect and preserve the environment and to enhance the means for doing so".

The "trade and environment" issue has illustrated the need for the WTO framework to take into account other policy values while maintaining economic liberalization as its core objective.

A country's trade policies are not formulated independently of other areas. For example, in the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, implementation of trade measures for environmental protection has proved to be effective. Similarly, measures taken in other areas have had an impact on trade in one way or another. For example, if we decide to conduct school education in English, the import of English books from English-speaking nations like the United States and Britain will increase. The question of whether to conduct education in English is an educational matter, but education policies will affect trade. While it would be inappropriate to evaluate educational issues from the standpoint of trade, what if the issue was culture, or tax policies? What about agricultural issues?

If the international regulation of the WTO or the GATT was weak, there would be no need to quarrel over the question of the organization and its relationship to other policy values. All the nations have to do is negotiate among themselves based on their own discretion. But the situation changes when the dispute settlement mechanism within GATT becomes more structured and the GATT regulation is strengthened. It is no coincidence that the problem of "trade and environment" arose in the 1980s. With the strengthening of its dispute settlement mechanism, it became necessary to negotiate policy values at the GATT and the WTO. Hence, since the establishment of WTO, "trade and health" issues, such as the import ban on hormone-beef from the U.S. and the EU, or the asbestos problem of Canada and the EU, have arisen as an inevitable course of events.

While it is true that the nations tried to extend the scope of WTO by taking advantage of its dispute settlement mechanism, it is also true that the strengthening of its dispute settlement mechanism has called for the need to extend the organization's scope.

Is there then no opposition to transforming the WTO from a trade to economic regime? The current state of negotiations on "trade and investment" shows that opposition to seeing the WTO expanding its scope is arising from various fields. Originally, the declaration of the new round was supposed to take place at the Seattle ministerial talks held in 1999, but the talks ended in failure because the issue of whether or not to include labor standards could not be resolved.

In the current international climate where globalization and interdependence is being sought, many would agree that the WTO constitutes an important infrastructure for the international community. But complex problems are associated with the direction this issue is taking.

The WTO is often likened to a unicycle. The WTO framework carries within itself a mechanism that could collapse if it does not continue operating. The conservatives of the countries are very influential. Take for example the textile and steel industries of the United States or the agriculture industry in Japan. Unless liberalization continues to be promoted, the political mechanism is such that the inward strength of a nation could easily pull itself towards taking protective trade measures. The WTO must continue to move on, but the next question is, in which direction should the organization move? This is a question we must all face.

In keeping with the key point of how one should deal with issues of non-trade concerns in relation to the WTO framework, a group of law scholars, together with experts on international politics and international economics, gathered to form the "study group on trade laws in the new era" inside the Research Institute of International Trade and Industry of the (former) Ministry of International Trade and Industry. Following the reorganization into the Research Institute of Economy, Trade and Industry, the group entered a second phase to continue discussions. The results of the study will be published in the book, "WTO at the Crossroads- An Analysis of Non-Trade Issue Linkages" (Toyo Keizai).

The feature of the study group is that, while evaluating the characteristics of the WTO and its compatibility with other areas from the standpoint of legal study, the group also focused on how the issue can be viewed from the standpoint of political and economic study. In other words, the group adopted an interdisciplinary approach. Another feature was the participation in the discussions of officials from METI who are, or have in the past been engaged in WTO activities. Hence in every session, the researchers were confronted with the same problems the WTO experienced in the field; that made it possible for us to evaluate whether our analysis would be effective in actually resolving these various problems. The interrelationship between the people working in the field and those in academia was one very fruitful result of our endeavors.

Of the eleven members who participated in the study group, nine contributed to the book, while Mr. Ichiro Araki of REITI, who frequently attended our sessions, also contributed an article. The outline of the book is as follows:

Chapter 1 (Akira Kotera) offers an overview of issues of non-trade concerns in the WTO. Chapter 2 (Sadao Nagaoka) argues from the standpoint of international economics that if economic efficiency was to be a nation's incentive, then there would be no need for the WTO to regulate issues of non-trade concerns. On the other hand, Chapter 3 (Tatsuo Akaneya) argues, from the standpoint of international politics, that it is inevitable that issues of non-trade concerns be brought before the WTO framework. These chapters constitute the introduction.

Chapter 4 and following discuss specific areas based mainly on legal discipline. Chapter 4 (Isamu Mamiya) deals with the issue of the exhaustion of intellectual property rights (the parallel import issue), and argues that there are problems which must be fundamentally addressed between TRIPS and GATT. Chapter 5 (Katsunori Abe) argues that while there will always be an element of uncertainty in the economic efficacy of investment rules, it is desirable to allow a certain degree of discretion to nations receiving the investment. Chapter 6 (Daitaro Kishii) deals with the WTO restrictions from the standpoint of their impact on domestic economic laws, and argues that, unlike the GATT, the WTO framework makes domestic law effective while promoting democracy within the country. Chapter 7 (Atsushi Nakagawa) discusses how "trade and environment" became an issue in WTO/GATT and notes the difficulty in resolving the issue. Chapter 8 (Yoo Hyuck Soo) deals with labor standards, noting that by dealing with issues of non-trade concerns the WTO will transform into a, "regime with a human face". This section argues that whether or not such transformation will take place lies in the hands of member nations, particularly the developing nations. Chapter 9 (Takao Suami) analyzes how WTO/GATT deals with culture and argues the inevitability of issues of non-trade concerns becoming problematic in the course of the WTO's development, while noting the difficulty in resolving such issues. Chapter 10 (Ichiro Araki) outlines the context of how non-trade interests came to be viewed as a problem.

In general, the book argues that endeavors regarding issues of non-trade concerns will transform the WTO framework, and that political decision-making is necessary to resolve the problems although such a decision would likely face various difficulties. I believe the book has succeeded in outlining the significance as well as the background of issues of non-trade concerns in the WTO.

In this endeavor, the results of the study will be published in Japanese. But interest in this issue is obviously shared by scholars around the world. During our study and editing process of the book, various journals and papers which dealt with issues of non-trade concerns in WTO were published in English. While I am confident the content of our book meets the academic standard of research outside Japan, we will not be able to participate in international forums for the time being as the book has been published in Japanese.

Our goal this time was to 1) take an interdisciplinary approach, and 2) seek results through interaction between those in the field and those in academia. On the other hand, while obtaining research papers and various other materials on how to view the WTO framework from international sources, the actual discussions took place among those whose base of activity is Japan, and the results too are directed to a domestic audience. In retrospect, the researchers regret that the study had not been conducted with a view to presenting the findings in a more international environment, since the study is about an international phenomenon, such as the WTO is. Various applicative issues, such as how to see the WTO framework from an international democratic stance, have since been suggested and discussions about how to address these issues are currently ongoing. Our next step will be to conduct the study through interaction in international settings with a goal to presenting the findings before an international audience.

>> Original text in Japanese