Policy Update 018 Pre-event Interview No.2

How Should the WTO Respond to a Changing International Community?

YAMAMOTO Yoshinobu
Professor, School of International Politics, Economics and Business, Aoyama Gakuin University

The upcoming RIETI Symposium, entitled "Prospects for the Doha Round: Major Challenges in the Multilateral Trading System and their Implications for Japan" will examine key issues facing the WTO from the following four perspectives: 1) the relationship of the multilateral trading system to the regional trade liberalization agenda; 2) functioning of the WTO system; 3) domestic processes of trade policymaking; and 4) global governance. Ahead of the Symposium, we will run a series of interviews with some of the key participants. For the second of the series, we asked Dr. Yamamoto about the impact of the rising regionalism in East Asia on the WTO negotiation, and the issue of accountability.

Dr. Yamamoto had served as Professor of International Relations at the University of Tokyo from 1989 through 2004. Since 2004, he has been Professor of International Politics at Aoyama Gakuin University. He holds a master's degree in international relations from the University of Tokyo (1968) and a Ph.D. from the University of Michigan (1974). His appointments at foreign institutions include Visiting Scholar at the Center for International Science and Technology Policy, The Elliott School of International Affairs, The George Washington University; and Visiting Professor at the Graduate Institute of International Relations in Geneva. He specializes in international political theory, international security affairs and international political economy.

RIETI: Intra-regional trade is increasing in East Asia and regionalism appears to be on the rise. How does this affect the Doha Round of WTO negotiations?

Yamamoto: When we look at past patterns of WTO negotiations, we see that the Uruguay Round, which was initially scheduled to end in four years, actually took eight. The Doha Round was launched with a deadline set for 2005, but it is clear that the talks will go beyond this time frame. One reason why a conclusion will not come swiftly is because it is difficult to coordinate the different interests of individual countries, and a great deal of political will is needed to bring the negotiations to a close. In other words, the political will and economic interests of the member states need to be in accord for a successful conclusion.

I believe the rise of regional trade liberalization, such as through free trade agreements, is sapping political energy and interest from the WTO's multilateral trade negotiations. Because FTAs are inconsistent with the GATT/WTO's principle of nondiscrimination, one powerful argument against them is that they can lead to major political problems. However, FTAs and preferential trade agreements are not contrary to the WTO framework, and I do not believe that they will become major stumbling blocks to multilateral negotiations. Also, compared to the WTO's "single undertaking" format, where agreements reached must be accepted by member states as a package, and where the conflicting interests of many countries must be coordinated, it is relatively easy to make compromises in a bilateral or regional framework. Therefore, I can understand why regional trade liberalization is making headway. However, I do not think that a rise in regionalism - not just the East Asian Community - will enhance the Doha Round negotiations because it diverts political energy and interest away from the multilateral talks.

RIETI: To what extent do you think the WTO, which plays a role in global governance, fulfills its accountability to stakeholders? If you feel it is not doing enough, what steps need to be taken to address this issue?

Yamamoto: The word "accountability" has been in vogue since the mid-1990s. I understand accountability as a process of offering an appropriate explanation when a certain collective decision has been made, one which allows those affected by that decision, namely stakeholders, to voice their opinions and to keep such decision-makers in check. If we assume the only stakeholders in the WTO are the member states, there would be no problem regarding accountability in terms of the current system. The fact that everything in the WTO, apart from its dispute settlement procedures, is basically decided by consensus means the organization accountable to member governments. Furthermore, the WTO has a much higher degree of accountability than other international organizations such as the International Monetary Fund. Of course, many developing countries argue that their interests are being ignored, or that important decisions are made among major trading countries and that the decision-making process lacks transparency. Such arguments should be appropriately addressed. On the other hand, if we consider the stakeholders to include not just governments but ordinary citizens - farmers, for example - it could be argued that the WTO is not sufficiently accountable. This is because although farmers are greatly affected by the WTO's decisions, they cannot present their opinions officially or exercise their rights because they do not have direct influence over the WTO. But it seems to me that the current system works on the assumption that this is something that should be handled domestically within the member countries.

The WTO's predecessor, the General Agreement on Tariffs and Trade, was launched with 23 member countries; the WTO now has 148 members and is much less homogenous. There is a major difference between the postwar era, where the basis for judging accountability was the relatively narrow economic standards of trade liberalization and promotion of efficiency, and the present, where accountability is linked to issues such as development, the environment, human rights and labor and their relationship to trade. And the influence of groups, especially nongovernmental organizations, which object to the WTO's pursuit of free trade and efficiency, is increasing. This gives rise to the idea that the WTO's stakeholders are not just states but also civil society, including NGOs. The issue now is how to establish a framework for securing accountability in view of this change. For example, the WTO is taking up the issue of development squarely, and there is serious debate on the issue of environment and trade. Since the Marrakesh Agreement, the WTO is also seeking a way to allow NGOs to participate as observers. But I doubt there will be any major changes apart from the steps that the WTO is currently taking.

RIETI: Both the United Nations and the World Bank are cooperating with NGOs in an effort to bring about economic and social development in developing countries. Do you believe the WTO should follow suit, especially in non-trade issues such as the environment and human rights?

Yamamoto: The WTO's scope and its basic principle are the promotion of free trade and economic efficiency, so I think non-trade matters should be dealt with separately, having the World Bank handle development, for example. Of course, there should be cooperation between the two organizations. If I may cite an example of cooperation with NGOs, it is important to consider and discuss with such groups the establishment of funds and facilities to assist in the modernization and restructuring of the cotton industry in developing countries. However, I do not think it is appropriate to set up such an organization within the WTO. In connection with trade and the environment, we have conventions and regulations such as the Convention on International Trade in Endangered Species of Wild Fauna and Flora and the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal; and in terms of security, we have such frameworks as the Kimberly Process regarding conflict diamonds. These sectors are outside the scope of the WTO. It will be difficult to incorporate cooperation with NGOs into the WTO framework, and I think it is unrealistic to expect much change unless a great deal of thinking is put into the effort.

"Legalization has progressed within the WTO much more than in other international organizations. Most WTO officials are experts in such fields as international law. And although political scientists also take part in WTO research during trade negotiations, their role is so limited that one common joke at the organization has it that once the rules are in place, political scientists are no longer needed. However, as the areas covered by WTO rules expand beyond trade to other issues, such as development, various problems arise that cannot be handled through legalization alone. Therefore, in order to tackle such problems, the extent to which political aspects are utilized within WTO framework will become important.

NGOs are closely linked to problems concerning developing countries, and they are strongly interested in such matters as development, the environment, human rights and labor issues. Almost all NGOs do not believe that free trade and efficiency promotion are basic values, or at least they do not emphasize these as their main objectives. I doubt that actively incorporating the demands of NGOs into the WTO's decision-making process will lead to a favorable result. The parties that stress the importance of free trade and efficiency promotion are multinational corporations, and in order to push the WTO negotiations forward, it is necessary for multinational corporations with a strong interest in free trade to become more active. From this standpoint, NGOs are a sort of an obstacle to progress in the WTO's multilateral talks.

However, the international community is undergoing major changes. In the post-Cold War era, market economics have become globally dominant, and many developing countries are striving to join the global market. At the same time, environmental issues have assumed global importance and human rights have become a global norm. Both the quantity and quality of international nongovernmental actors have increased. Indeed, the international community today transcends the nation-state in some respects. Therefore, the need to reorganize the entire system governing the international community is also very great. In the long term, the whole framework including the Bretton Woods system needs to be reconsidered and reorganized. But that is no reason to impetuously bring every single issue, such as development, the environment and human rights, into the WTO. In fact, this may even be counterproductive. Therefore, while we should allow NGOs to participate in the decision-making process to a certain extent, I believe that whole system needs to be reorganized, with the WTO specializing in trade issues and non-trade matters kept separate from it.

>> Original text in Japanese

Interview conducted by Takako Kimura, online editor, on July 11, 2005.

July 11, 2005

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