Decision-making and negotiation processes
The WTO, as an international organization, is characterized by a legalism that had evaded the GATT because of its provisional nature. But as we shall find in these papers, alongside the powerful legalism of its agreements, structures, and enforcement capacity sit informal and ad hoc GATT-derived decision-making and negotiation processes. These processes may have worked for the GATT, whose legal standing, mandate, and active membership were limited, and which could (just about) function as an exclusive club. But the use of those same processes by the significantly more powerful WTO is highly problematic. At the heart of the WTO lies a major and unsustainable discrepancy: extreme legalization, particularly in the enforcement of its rules through the dispute settlement mechanism, on the one hand, and an inordinate reliance on de facto improvisation in the making of those rules, on the other. This incongruity is important in terms of the coherence (or the lack thereof) of the WTO as an international institution. But it also has some far-reaching implications for the existing power asymmetries within the WTO.
In these papers, I will explore the principal features of these processes, and illustrate ways in which rules and procedures make a difference. My central argument here is that the standard operating procedures of the WTO are a reflection of power imbalances between the developed and developing countries, and they further exacerbate these inequalities. We will focuses on decision-making processes in the WTO, while the second highlights its negotiation rules and formulae.
Decision-making processes in the WTO
In terms of its everyday workings, the WTO codifies many of the processes that had evolved in the GATT regime. Three features are central to all its decision-making processes: voting rules, the norm of consensus-based decision-making, and the importance of informal procedures that underlie all the stated formalities.
First, and deriving directly from GATT practice, the WTO is a one-member-one-vote organization, in striking contrast to the IMF and the World Bank which have systems of weighted voting. For instance, in the case of the IMF, the voting power of countries depends on the size of their respective quotas, which in turn are supposed to reflect their weights in the international economy.
The Agreement establishing the WTO, however, explicitly states that each member shall have one vote in meetings, and further ensures that formal meetings, barring a few exceptions that were highlighted in the previous papers, shall be open to the entire membership.
In terms of the actual counting of votes, most important decisions in the WTO are supposed to be taken by means of a simple majority. Exceptions to this rule are specified in Articles IX and X of the Agreement and in the relevant plurilateral agreement. In this matter too, the WTO presents a contrast to the IMF and the World Bank, where most decisions require an 85% majority. This gives effective veto power to the US, which commands about 17.5% of the votes. The requirement of a simple majority for a decision to be accepted in the WTO is important in that it imparts considerable voting power to developing countries, which form well over two-thirds of the entire membership. Interestingly, however, developing countries have never actually sought recourse to their overwhelming strength in numbers, in contrast to the UN General Assembly, which has often been ridden with the tyranny of the majority. The reason for this can be found in the second tenet of WTO decision-making: the norm of consensus.
Decision-making on the basis of consensus
Despite the existence of elaborate voting procedures, most decisions in the GATT were in practice taken on the basis of consensus. This GATT practice has been codified in Article IX.1 of the Agreement establishing the WTO. Consensus is arrived at ‘if no Member, present at the meeting when the decision is taken, formally objects to the proposed decision’. The most immediate power implication of this practice is that developing countries have never been able to make use of the power of large numbers in the GATT or the WTO.
But consensus-based decision-making disadvantages developing countries in several other ways. First, the simple requirement of the consensus norm, that no member present objects to the decision, translates into quite a difficult condition for developing countries. About 22 member countries of the WTO have no delegations present in Geneva to voice their objection to the decision under discussion. Even for those countries with a presence in Geneva, attendance is an issue when several parallel meetings are involved. In a study that conducted in 2001, the average size of a developing country delegation was less than half the average size of a developed country delegation. Even a presence in all the multiple meetings in the WTO is difficult under these circumstances, let alone an informed and active presence. Especially in the context of the member-driven character of the WTO, where the onus of preparation and participation for a WTO meeting falls on the members themselves, developing countries find themselves ill-equipped to participate effectively in the consensus-making process. Second, deriving again from the GATT, exclusive, club-like meetings are often used for the purpose of reaching consensus. As the majority developing countries have traditionally found themselves frequently excluded from such meetings, consensus-based decision making is interpreted by at least some countries as an exclusionary device that the strong use against the weak. Small-group meetings in the WTO, however, are not simply a product of the consensus norm. Rather, they form part of the third feature of WTO decision-making: a general culture, again GATT-derived, which has thrived on informal diplomatic procedures rather than formal rules of negotiation.
The importance of informal processes in WTO diplomacy
The importance of informal processes in the WTO derives at least partly from the GATT’s use of the so-called Principal Supplier Principle (PSP), which usually involved initial discussions between the principal supplier and consumer rather than an open discussion involving the entire membership. It is also a product of the equal representation that it allows its members, which means that several other processes are needed besides the plenary meetings to beat the consensus into shape. The importance of informal processes in trade diplomacy is recognized even on the WTO website. Some informal consultations, such as the Heads of Delegations meetings (HODs), can involve the entire membership. Others involve smaller groups, such as the so-called Green Room meetings that take place at the initiative of the director-general. The existence of these informal processes allows members to exercise the flexibility that is often key to brokering compromise in a difficult trade negotiation. But when informality and a lack of rules become effectively written into the very basis of an institution, two sets of problems emerge.
The first set of problems is a lack of transparency and predictability. For developing countries, which attach considerable value to the predictability that comes from belonging to a rules-based institution, informality generates some serious difficulties. Green Room meetings in the GATT, and the WTO, were until recently especially notorious for this: the old-style Green Room worked by invitation only, and even the list of invitees was treated as confidential. Particularly in the aftermath of the failed Seattle Ministerial Conference, the opaqueness of such consultations and their exclusionary effects came under severe criticism. For instance, before the Seattle talks were brought to a close, African trade ministers issued the following statement on 2 December 1999: There is no transparency in the proceedings and African countries are being marginalised and generally excluded on issues of vital importance for our peoples and their future. We are particularly concerned over the stated intentions to produce a ministerial text at any cost including at the cost of procedures designed to secure participation and consensus.
We reject the approach that is being employed and we must point out that under the present circumstances, we will not be able to join the consensus required to meet the objectives of the Ministerial Conference.
A group of Latin American and Caribbean countries issued a similar statement. In the face of such trenchant criticism, a conscious attempt has been made by all parties concerned to improve the process. The schedules of small-group meetings and the list of invitees are now announced; members can self-select participation; at least some minutes are published; and the meetings are open-ended and directed only towards consensus-building rather than any decision-making. But several problems persist. Often developing countries find that they are not well-equipped to even identify their interests in some of the highly technical areas to claim their right to participation in a small-group meeting. They also find that they are unable to exercise the threat to block in the final stages of decision-making if they have not attended the consensus-building small-group meetings. In addition to this, informality places considerable discretion in the hands of the chairpersons at all levels of the WTO hierarchy. These key individuals define the agenda and frequency of meetings as well as the lists of invitees, and can thereby exercise an important influence on negotiated outcomes. In the absence of rules about exactly what the chair can do and how he or she can do it, the role that certain chairpersons choose to play inevitably becomes a source of conflict.
Finally, the importance of informal processes means that the WTO retains what Rubens Ricupero, Secretary General of the United Nations Conference on Trade and Development (UNCTAD), describes as the ‘almost English club atmosphere’ of the GATT. This inaccessible culture of the institution, along with language barriers, makes effective participation an especially daunting task for the smaller and newer members of the WTO. As a result, developing countries, in coalitions or individually, have put forth proposals for institutional reform that envisage a WTO whose functioning is tightly bound by a clearly specified set of formal rules and procedures.
The second set of problems resulting from the lack of specific rules to govern the WTO is that it makes the WTO especially prone to power-based improvisation. In the absence of generally agreed rules to deal with difficult situations, we have examples of several stopgap measures that are somehow cobbled together to become a part of the customary practice of the WTO. Decisions arrived at on the basis of such contested rules are bound to lack legitimacy. Examples of problems deriving from such haphazard improvisation and ad hoc rule-making abound in the short history of the WTO. The last Ministerial Conference that was held in Cancun in September 2003 provides some useful examples of these problems. The outcome of the Cancun Ministerial process is discussed in detail in Chapter 6.
At this point, suffice it to note that conference ended in deadlock. Which was at least as much a product of some questionable negotiation and decision-making processes gone seriously awry, as substantive disagreements among the negotiating parties?
All WTO Ministerial Conferences use a draft text of some kind as the starting point for the negotiation. The traditional GATT and WTO practice for drafting a text for a Ministerial Conference involved putting together a ‘bracketed text’, that is, a text in which all the contested proposals of different parties were put within square brackets and were negotiated at the ministerial conference.
But in the run-up to the Cancun Ministerial, the Chair of the General Council, Ambassador Carlos Perez del Castillo, issued a draft text for the Ministerial ‘on his own responsibility’ in close cooperation with the Director-General. The Castillo draft did ‘not
purport to be agreed in any part on this stage’, and claimed to be without prejudice to any delegation’s position on any issue. Nonetheless, the text played a critical role in setting the agenda for negotiation at the Cancun Ministerial, particularly in the parts that it chose to include and exclude. For instance, it was seen to favour the position of some developed countries through its inclusion of modalities for negotiating the ‘Singapore issues’ (so-called after the Singapore Ministerial of 1996, where some developed countries had tried to expand WTO coverage to trade and investment, competition policy, government procurement, and trade facilitation). Since 1996, developing countries had consistently fought tooth and nail against even an inclusion of these issues, let alone agree upon the modalities for their negotiations. The reaction of developing countries to this text was, expectedly, hostile. They attacked it not only for its substance, but also for constituting the chair’s text rather than the traditional bracketed text. And yet the Castillo draft was used as the text for the Cancun Ministerial Conference.
The fact that the Castillo draft was issued in the first place and further utilized as the draft ministerial text in Cancun in spite of such opposition can be explained by the precedent that it had in the Harbinson draft. Stuart Harbinson, as the Chair of the General Council, had issued a similar draft in the run lambasted the draft for ignoring their viewpoints. Nonetheless, the text was used as the draft ministerial text for the Doha conference; it provided the precedent for the Castillo draft at Cancun; and in the absence of any rules on the process of arriving at a text or defining the role of the chair, developing countries could do little of consequence to stop this process. The episode illustrates how, in the absence of clear rules about decision-making in the WTO, the powerful are able to improvise precedents to their advantage. Attempts by the weak to overturn such precedents are usually unsuccessful.
Another example of such controversial rule improvisation can be found in the notion of ‘explicit consensus’. As a result of India’s insistence at the Doha Ministerial Conference, the final text agreed that negotiations on the Singapore issues would take place in the fifth ministerial conference, the Cancun Ministerial, ‘on the basis of a decision to be taken, by explicit consensus, at that session’. The insertion of this phrase was regarded as a major victory for developing countries. In practice, however, the phrase had no legal foundation or precise definition, and it left room for the inevitable dispute that followed at Cancun. Developing countries’ interpretation of the phrase was that explicit consent was necessary for any negotiation on the Singapore issues; developed countries saw it as implying there already existed agreement on starting the negotiations and explicit consensus was needed only on modalities. Much of this conflict at Cancun could have been avoided had there been adequate definitions and rules in place.
Cancun also saw complaints by developing countries about the process of appointment of the so-called ‘Facilitators’ and also the way in which they carried out their appointed tasks. This practice of choosing Facilitators (also referred to as ‘Friends of the Chair’), to assist the Chairperson of the Ministerial Conference in small-group consultations over specific issues, has some precedence in the GATT and the WTO. However, no attempt has been made to clarify the basis or criteria of this selection process; as a result, it has frequently been dogged by controversy. Recognizing the crucial role that Facilitators can play in agenda-setting, developing countries at Cancun questioned the process of selection, and their method of operation and resulting outcomes. Many felt that their persistent opposition to several paragraphs within the original text, particularly on agriculture and the Singapore issues, had been blatantly ignored until the final day of the conference as a result of such poor ‘facilitating’.
Finally, the scale on which rules are missing in the WTO is illustrated in the controversy generated by the simple decision of drawing the conference proceedings to a close. All precedent had led members to believe that the Cancun meeting would continue well after the scheduled deadline of 14 September. The decision taken by Minister Derbez to close the conference as per the scheduled deadline generated vociferous and mixed reactions.
Some alleged that Derbez had come under US pressure; others criticized him for his lack of appreciation of the shenanigans and brinkmanship that have come to characterize GATT/WTO meetings; still others praised him for managing to salvage the conference through the perfunctory six-paragraph declaration. These debates, however, miss the important purpose of belonging to an organization such as the WTO, which is to provide its members with a credible set of rules and guidelines for their multilateral interaction. By adhering to old GATT habits, and its culture of corridor diplomacy and unwritten protocols of interaction, the WTO is unable to fulfill this crucial function.