The 10th WTO Ministerial Conference was held in Nairobi, Kenya from the 15th -18th December, 2015. As outcomes are ambiguous, the conference supports the fact that rules-based systems have become power-oriented playgrounds, leading to a crisis of trade multilateralism.
Power vs. law
It is possible to observe an apparent trend from power-based – before 1980 – to rule-based regimes nowadays, but the core of the issue remains to assess to what extent rules impede power.
On one hand, legislation enables an exit from an era of Hobbesian state of nature where powerful actors prevail towards a system where one set of rules applies to everyone. Assuming that law applies to everyone equally, might suggest that international law could abolish the role of power in world affairs.
On the other hand, even though international economic law – as hard law – constrains states’ behaviour, power continues to play a major role in international economic relations. Therefore, analyzing international economic relations in a rule-based system, “must include a consideration of how, why and when some actors have power over others” – as observed by professors Barnett and Duval in their famous book Power in Global Governance.
Trade, multilateral negotiations and bargaining power
It is usually accepted that trade regimes are the most legalized global economic regimes due to the existence of the WTO, which not only provides a platform for multilateral negotiations to take place, but also equally binds states through dispute settlement mechanisms.
Source: International Organization 54, 3, Summer 2000
The WTO has ruled international trade relations for more than 20 years now.
Its role in diminishing distributional conflict is evident: institutional design has a significant impact on structural power because of the greater constraints it puts on powerful actors.
Within the WTO, developing countries, LDCs and small developed states have a seat at the negotiation table – especially in the Doha Development Agenda, which has the fundamental objective to improve the trading prospects of developing countries.
While agricultural subsidies in the rich world have been a key stumbling block in trade talks over 15 years, LDCs recently obtained some results after African producers threatened to open a case under the WTO’s dispute-settlement mechanism as early as January.
Trade leaders agreed to end cotton subsidies in developed countries immediately and in developing countries by the start of 2017.
In multilateral contexts, ideational power may help weaker parties to borrow power and form coalitions – such as Least Developed Countries (LDC) group and Cotton Four – that counter the structural power of the most powerful actors.
According to International Centre for Trade and Sustainable Development (ICTSD), the LDC group draft submission referred to the difficult issue of cotton, calling for a “satisfactory solution” on the subject as part of the Nairobi decisions; issue on which WTO leaders have agreed on, as well as to end farm subsidies.
Rule-oriented systems therefore redress unfair power imbalances. However, in practice, rules find it hard to completely impede the role of power as ultimately powerful states will always have more options. In trade negotiations, large economies have a higher BATNA (best alternative to a negotiated agreement) thanks to their internal market than smaller economies.
Agenda shaping and rule making
Moreover, the influence in rule elaboration actually depreciates the argument of rules’ neutrality. Indeed, the US and the EU are able to use their material resources and knowledge to design the WTO’s rules and regulations that are intended to advance and protect their interests.
The most powerful states have a privileged position in agenda-shaping, access to specialized knowledge and retain a relative degree of flexibility through rule elaboration. Indeed, while small countries struggle in shaping both agenda and negotiations because of their lack of representation in Geneva and access to unofficial negotiations, the most powerful WTO members’ active presence drives WTO’s agenda.
The US previously brought intellectual property protection and telecommunication liberalization to the WTO through forum-shifting.
At the Tenth WTO Ministerial conference held in Nairobi mid-December, trade leaders announced the expansion of the Information Technology Agreement, which will cut tariffs on $1.3 trillion of IT products, while no proposal to explore ending subsidies that lead to over-fishing in parts of the world was contained in the final declaration.
This shows how strong states like the US optimize their power and advantages within rules-based systems. Powerful WTO members retain greater flexibility to avoid the constraints of WTO rules by setting exceptions, which they are experts at manipulating.
Therefore, power might distort them from the elaboration stage, having for main result to mirror the interest of powerful states.
The WTO might be described as a site of power that reflect and entrench power hierarchies and the interests of powerful states.
When small victory blurs multilateral trade negotiations future
One might recognize that even if it facilitates outcomes favoured by powerful states, it may simultaneously facilitate positive-sum outcomes that would not otherwise emerge. Indeed, alternatives could be better but also much worse. In this particular case, inaction rather than 20 years of negotiations would have resulted in different outcomes. Development was at least on agenda for that much time.
Even though there exists much cynicism about the importance of international law rules, their main purpose is to lower the relevance of power in international economic relations: crystallizing and codifying practices narrows the room for arbitrariness.
As Bloomberg reports, the outcome is “better than I expected, it does something for cotton, it does something for export competition”, said Andrew Crosby, managing director for operations and strategy at ICTSD – even though it remains to be seen to what extent this deal will undermine agricultural subsidies more generally in Europe and the US.
Nairobi was an opportunity for LDCs to obtain concrete results on core issues such as cotton market access and export competition. The decisions, which are legally binding, represent the “most significant outcome on agriculture” seen in the WTO’s 20-year history, WTO Director-General Azevêdo told members.
Such substantive advances – detailed here – have cost them the death of the DDA at a moment where “it is crucial for LDCs that meaningful international trade negotiations continue to be conducted in an inclusive forum”, experts from the ICTSD observe.
The end of the DDA and the trend towards preferential agreements might be unsafe for countries with less bargaining power.