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Problems in Negotiating Consensus in the

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Problems in Negotiating Consensus in the

    Problems in Negotiating Consensus in the

    World Trade Organization

    John S. Odell

    University of Southern California

    Web: www-rcf.usc.edu/~odell/

    Email: odell@usc.edu

    Abstract

    The WTO, as a forum for new multilateral agreements, has been deadlocked since 1997. This organization suffered two prominent impasses in 1999 and little has changed since Seattle. The greatest public attention has gone to street protesters‟ criticisms, but the organization also has more complex problems. The member states make decisions by consensus, but achieving consensus has become a much more demanding requirement than in the GATT‟s day. An analysis of the causes of paralysis identifies what will need

    to change to permit a resumption of movement toward

    new agreements to improve world trade.

    Presented at a conference at Peking University, 10 July 2001,

    and at the annual convention of the American Political Science Association,

    San Francisco, 30 August 2001

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    The WTO, as a forum for new multilateral agreements, has been deadlocked since 1997. The organization suffered two prominent impasses in 1999 and little has changed since Seattle. The greatest public attention has gone to street protesters‟ criticisms, but the organization also has internal problems. The member states make decisions by consensus, but achieving consensus has become a much more demanding requirement than in the GATT‟s day. This paper outlines the structure and traditional method of making decisions in comparison with other organizations, summarizes problems that emerged at the end of the last decade, and speculates about their causes and the directions the future might take. The most likely scenario at this writing (24 June 2001) seems to be continued stalemate.

    One 1999 stalemate concerned the choice of a successor to Director General Renato Ruggiero, and the second in December at Seattle blocked the launching of a new round of negotiations, which many members had said they favored. The second sacrificed tangible commercial gains, and both damaged the Organization‟s credibility

    with business and governments.

    As everyone knows, American critics used the WTO ministerial conference in Seattle as an occasion to organize a large campaign to protest globalization and to halt or modify trade liberalization. They and allies from other countries circulated pamphlets painting the WTO as an unaccountable tool of greedy corporations and blaming it for world social and environmental problems. On the first day some 40,000 union members, environmentalists, consumer advocates, and students converged on downtown Seattle

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    1chanting “No new round, turnaround.” Police allowed protestors to penetrate the space

    between the convention center and the hotels and block the ministers from entering the hall for a day. Dockworkers up and down the Pacific coast briefly shut down ports in sympathy. A few protestors shattered shop windows and burned trashcans. Police threw tear gas and concussion grenades and eventually called out the National Guard to restore order. Bloody faces and banners denouncing the WTO dominated the televised images.

    Four days later the trade ministers left Seattle without having agreed to launch a new round. They did not even issue a communiqué pledging to keep working with one another. This meeting simply collapsed, with several ministers condemning the organization and the United States for the way they had been treated. The battle of Seattle must rank with the most spectacular failures in the history of trade diplomacy.

    Since then the gridlock has continued. Members have not changed the institution and not one issue has been settled. Meanwhile China and other states are joining. The WTO has become deeply significant for most nations around the world, but without some adjustments to accommodate new realities, it could remain blocked as a setting for achieving new agreements to improve world trade.

    A WEAK, STRONG ORGANIZATION

    Decision making by consensus makes the WTO a weak organization in a sense, yet widespread adherence to this norm ironically is due in part to the organization‟s

    strength in another sense. The WTO Agreement, signed in Marrakesh in 1994, established the Organization‟s constitution. The members are the states that created it by negotiation. Governments speak for their citizens; companies and other NGOs have no

     1 International Trade Reporter [ITR], 1 December 1999, 1980.

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    direct standing except as the member states may decide. The highest body is a Ministerial Conference of representatives from all members, which is to meet at least once every two years. The first three conferences were held in Singapore, Geneva, and Seattle, and Doha, Qatar, will host the 2001 meeting. Between these sessions, the WTO General Council carries out the functions of the Ministerial Conference. The General Council typically consists of members‟ diplomats based in Geneva near the WTO

    headquarters. The Marrakesh agreement also established specialized subsidiary bodies to operate under the guidance of the General Council.

    The WTO is stronger than many intergovernmental organizations in some respects. Most important, WTO decisions become binding contracts, not just exhortations to make best efforts to improve world conditions, like many United Nations resolutions. Agreements to reduce tariffs, reached by signatories to the General Agreement on Tariffs and Trade (GATT), were enacted into the states‟ national laws.

    During the 1970s major GATT parties expanded their common rules to cover non-tariff barriers to trade in goods. Their Uruguay round of negotiations, which ran from 1986 to 1994, vastly expanded the scope of the common rules to cover trade in services, intellectual property rights enforcement, and food safety regulation. The parties began to liberalize agricultural trade and established the World Trade Organization. A much larger number of developing countries accepted many more binding obligations than under GATT. The legislatures of all members implemented these agreements too in national law.

    Moreover, they adopted a novel common institution for settling trade disputes by remarkable delegation of decisions to quasi-judicial bodies in Geneva. A ruling becomes

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    binding automatically unless the members overturn it by consensus. This system is controversial today, with some observers complaining that frequent decisions from the WTO‟s more efficient “judicial” bodies are pushing beyond the consensus that governments have reached on the slow-moving “legislative” side. Dispute settlement is

    beyond the scope of this paper, however.

    In other respects the WTO is a weak organization. It carries forward key practices of signatories to the 1947 GATT, which did not create an organization at all, at least at its origins. The WTO is obviously far from world government; the member states retain significant sovereign rights including the right to withdraw and dismantle their Organization. Article IX of the WTO Agreement provides, “The WTO shall continue the practice of decision-making by consensus followed under GATT 1947.” As a note

    explains, “The body concerned shall be deemed to have decided by consensus on a matter

    submitted for its consideration, if no member, present at the meeting when the decision is taken, formally objects to the proposed decision.” Thus consensus is not identical to unanimity. A member that does not approve of a measure may choose to remain silent and allow a consensus to be reached. But the smallest member has the authority to block a consensus.

    The rules permit majority voting. Article IX continues, “Except as otherwise provided, where a decision cannot be arrived at by consensus, the matter at issue shall be decided by voting.” Each member has one vote and decisions are to be taken by a majority of the votes cast except where provided otherwise. One exception is that the terms of accession of a new member must be approved by two thirds of the members. But resort to decision by vote has been extremely rare in GATT and WTO history, since

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    agreements are expected to be binding contracts. When the vote means a binding obligation, no one wants to be outvoted. Strength produces weakness. On trade matters, domestic pressures are powerful in every country. A member government that lost a vote on a trade agreement that is not acceptable at home might refuse to comply with the decision or even withdraw from the organization. In the worst case the organization could collapse, taking large common interests down with it. After Seattle even small traders like African members, who might be thought sympathetic to majority voting in general, reaffirmed their devotion to the consensus norm in the special case of the WTO.

    Nor does this Organization have a small representative executive board with authority to make operational decisions, or even just reduce the transaction costs of consensus building, unlike the United Nations, the International Monetary Fund, and the World Bank. The General Council meets frequently but it and its subsidiary bodies consist of all 140 members.

    A Director General heads a tiny secretariat. Another powerful norm among members, carried over from the GATT, restricts the Director General‟s influence to that

    of a mediator, public spokesperson, and manager of the secretariat. The DG, unlike the IMF‟s Executive Director, for instance, does not have authority to negotiate on behalf of the organization with any state. The DG‟s meager budget totals $55 million per year—about the size of the World Bank‟s budget for travel. The World Wildlife Fund, one of the largest NGOs, has revenues of about $160 million per year. In these respects the WTO structure is intentionally weak at the center. Insiders favor the slogan that the WTO is “rules-based” and “member-driven.”

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    Traditional practice

    Before 1999, the traditional process of building consensus was led by the two largest traders, the US and the European Community. They would make proposals and attempt to persuade each other on a common position. If they succeeded, they then would attempt to bring other major trading countries on board, beginning with Japan and Canada and progressively expanding the circle. Delegates talked in smaller informal groups outside the formal sessions as well as inside. Negotiators grappling with difficult deadlocks find that it is nearly impossible to get other delegates to relax opposing positions in a meeting with 100 other governments. Once major traders reached a deal, the lower tariffs negotiated were granted to all members, even those that did not “pay” for this gain with a reciprocal concession. Since small markets have little bargaining leverage, they typically were offered the choice of accepting either these benefits negotiated by others for their own purposes or no gains at all. Many developing parties to GATT in fact preferred to opt out of trade liberalization for themselves, believing in those days that it would stunt economic development.

    Directors General have taken informal initiatives to encourage agreements. In the GATT era they established a tradition of inviting representatives of no more than 30 members secretly to a private conference room known as the “Green Room” to try to break impasses. The names of the nations invited to these small meetings were not made public, but typically they included the Quadthe EU, the US, Canada and Japanand

    other members that account for the most trade, with some variation depending on the issue to be discussed. Today, with the EU speaking for 15 developed states, developed countries typically occupy no more than 7 of these chairs. After the quad, a list of likely

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    participants, in descending order of 1996 trade value, includes: Hong Kong-China, Korea, Singapore, Switzerland, Mexico, Malaysia, Australia, Thailand, Brazil, Norway, Indonesia, India, Poland, South Africa, Czech Republic, Philippines, Argentina, Chile, New Zealand, Hungary, Egypt, Colombia, and Pakistan. The People‟s Republic of China

    2would rank high on this list, right after Korea.

    The large majority of WTO members are small traders and are still never invited to the green room or even informed that a meeting is occurring, even though most have moved to open their economies significantly and are clamoring for participation in negotiations. Nothing decided in the green room becomes official unless it is adopted formally by the full WTO.

     Until the late 1990s the small secretariat was not allowed to undertake much centralized effort to communicate directly with societies or build support for the Organization at the grass roots. Generally member governments retained for themselves the function of receiving and managing pressures from constituents.

    PROMINENT FAILURES TO REACH CONSENSUS IN 1999

     The 1999 deadlocks can be traced to three problems in their process of negotiation.

    Unyielding distributive strategies

    Governments accounting for the great bulk of world trade had announced that the purpose of their Seattle conference was to launch a new round of negotiations and set its

    3agenda. Yet the conference probably would have failed to reach agreement on a new

     2 Schott and Watal 2000, table 1. 3 This section draws on Odell (forthcoming).

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    round even if there had been no NGO protests, because of three problems in the Organization itself. One problem was that many member governments used negotiating strategies that leaned strongly toward the distributiveattempting to claim value from

    others--rather than the integrative--proposing deals that would create mutual gains, such

    4as a linear tariff cutting formula. To oversimplify, many opened with lists of demands

    for others to concede while rejecting the others‟ highest priorities. Distributive tactics are common, but they are hardly the only effective means for gaining through negotiation. Sometimes a party offers to fall back from selected demands if others will relax opposition to issues the first wants. In this case many governments held firm at their high resistance points so long that time ran out before they could bridge remaining differences on such a mountain of complex matters.

Geneva process failed to close gaps

    A second face of the problem was that the WTO‟s Geneva institutions failed to reframe these conflicting positions into a consensus. Other multilateral negotiations have begun with an adversarial process yet ended with agreements. In 1986, the GATT parties had also brought conflicting strategies to the table, yet in the end ministers had signed a Punta del Este declaration launching the Uruguay round most of which had been hammered out through earlier struggle among their ambassadors in Geneva. In 1999, the WTO General Council was also expected to prepare much of the declaration to be signed in Seattle. The Geneva phase generated more than 135 inconsistent proposals on fifteen

     4 For a comprehensive typology of negotiation strategies see Odell 2000, chap. 2. A strategy on the distributive end of the spectrum is a set of actions that promote the attainment of one party‟s goals when

    they are in conflict with those of the other parties. A strategy on the purely integrative end is a set of

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    complex issues, but in this case not a single issue was settled before the ministers landed in Seattle.

    By coincidence, a nasty fight over the DG succession delayed serious agenda bargaining until only 8 weeks remained, and this struggle revealed a pattern that has continued. Director General Renato Ruggiero announced he would step down effective 30 April 1999. As this date approached, members lined up behind two main candidates: Mr. Mike Moore, former Trade Minister of New Zealand, and Dr. Supachai Panitchpakdi, Thailand‟s Deputy Prime Minister and Commerce Minister. On the last day, General Council Chair Ali Mchumo of Tanzania reported from his consultations that 62 delegations favored Moore and 59 favored Supachai. He said Moore had support from a wide geographical range of members and faced less determined resistance from his opponents. Mchumo, following a procedure that had been adopted by the members at the

    5outset, proposed Moore as the candidate around whom consensus might be built.

    Immediately Malaysia, speaking for Thailand and the other ASEAN states, formally objected to this proposal, declared that therefore no consensus existed for Moore, and called for a vote. Malaysia had been claiming that its candidate had initially won the support of 65 percent of the delegations that had expressed a preference. Malaysia accused unnamed others, evidently meaning the United States, of taking “subversive and divisive actions” that undermined the system by exercising a secret veto, preventing the

    chair from nominating Supachai until they could twist more arms behind the scenes. Kenya supported Malaysia and urged Mchumo to try to form a consensus behind Supachai. Also endorsing Malaysia‟s position were Japan, Korea, Hong Kong, India,

    actions that promote the attainment of goals that are not in fundamental conflict, actions that expand rather than split the pie. Tactical elements may also be mixed, simultaneously or sequentially.

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