The Future of the WTO: Report by the Consultative Board

In June 2003, World Trade Organization (WTO) Director-General Supachai Panitchpakdi established a Consultative Board (CB) and requested it to identify the institutional challenges that the WTO now faces and to deliver its recommendations to tackle those challenges.[1] The CB, chaired by former GATT Director-General Peter Sutherland, consisted of seven other eminent persons: Jagdish Bhagwati (University Professor at Columbia University), Kwesi Botchwey (former Minister of Finance of Ghana), Niall FitzGerald (Chairman of Reuters), Koichi Hamada (Professor of Economics at Yale University), John H. Jackson (University Professor of Law at Georgetown University), Celso Lafer (former Brazilian Minister of Foreign Relations), and Thierry de Montbrial (President of the French Institute of International Relations).

 

The CB Report

 

The CB Report, entitled The Future of the WTO: Addressing Institutional Challenges in the New Millennium, was released on January 17, 2005 in connection with the WTO's tenth anniversary. The Report not only focuses on "institutional improvements," but also responded to some criticisms of the WTO that, in the CB's view, have been greatly "misunderstood and misrepresented."[2] It comprises nine chapters dealing with trade liberalization in general (Chapter I), the WTO?'s norms (Chapters II-III), and its institution (Chapters IV-IX). The Report was drafted on the basis of independence and collegiality[3] without any legal implications as to Members' rights and obligations.[4]

 

Contents of the Report

 

Chapter I: Globalization and the WTO: The Case for Liberalizing Trade

 

Taking note of the ever-increasing membership from 23 nations in the old GATT (1948) to nearly 150 in the WTO (2004), the CB identified a wide consensus on the benefits of trade liberalization among trading nations. Then, the CB responded to frequently cited criticisms against globalization and the WTO, such as a threat to human rights, the "race-to-the-bottom,"and environmental degradation. At the same time, the CB emphasized the importance of domestic social safety nets (adjustment programs) and the real benefits that the world's poorest countries, as WTO Members, realize from strengthening the multilateral trading system.

 

Chapter II: The Erosion of Non-Discrimination

 

In an unusually intense tone, the CB critically observed that the Most-Favored-Nation (MFN) principle, a central principle of the multilateral trading system, has been degraded into an exception amidst the "spaghetti bowl" of "Preferential Trade Agreements" (PTAs) and an "endless assortment of miscellaneous trade deals." While acknowledging the "building block" possibility of certain PTAs, the CB mostly focused on their "stumbling block" phenomena, such as the creation of vested interests, the distraction of resources for multilateral negotiations, and the injection of particular non-trade objectives, such as significant labor and environmental protection, into trade agreements. The CB recommended that discriminatory preferences be remedied through effective reduction of tariff and non-tariff barriers on an MFN basis, that the GATT provision governing regionalism, i.e., Article XXIV, should be clarified, and that Members actively monitor activities of PTAs through the surveillance mechanism, i.e., the Trade Policy Review Mechanism (TPRM).

 

Chapter III: Sovereignty

 

The CB was quite critical of the traditional notion of sovereignty. It opined that this "mantra," due to its inherent ambiguity, has often been misused as a "red herring" for protectionism. In an attempt to re-define this tricky concept, the CB focused on its practical meaning regarding issues of allocation of decision-making power among different institutions, i.e., vertical coordination. The CB concluded that positive effects of international cooperation and the rule of law exceed any possible negative effect from some loss of "policy space?" at the domestic level.

 

Chapter IV: Coherence and Coordination with Intergovernmental Organizations

 

While supporting the basic premise of horizontal coordination between the WTO and other international organizations, the CB nonetheless advised that observer status be based on "functional complementarities" and that inter-institutional initiatives with other international organizations such as the IMF and UNCTAD not compromise the WTO's special nature. The CB recommended that the WTO Secretariat be strengthened in its resources and capabilities to be on an equal footing with the secretariats of other international organizations for better coordination.

 

Chapter V: Transparency and Dialogue with Civil Society

 

The CB acknowledged the growing salience and importance of partnership with non-governmental organizations (NGOs) and civil society, and noted that the WTO has succeeded in improving transparency to a significant extent. However, it also acknowledged that certain "understandable reservations" have been voiced regarding additional external transparency and civil society engagement, such as disparity of competence and financial capacity among NGOs, disproportionate burdens imposed on developing countries in engaging with those non-Members, and loss of confidentiality in trade negotiations. The CB recommended that the primary responsibility in this matter rest with Member countries, that the WTO's Secretariat work with NGOs from poor countries, and that the WTO Secretariat's administrative capacity and financial resources be increased to meet these challenges.

 

Chapter VI: The WTO Dispute Settlement System

 

The CB began its analysis of the WTO dispute settlement system by expressing "much satisfaction with its practices and performance" and emphasizing the important principle of "do no harm" in any reform process. The CB noted that the Dispute Settlement Body applies customary international law when appropriate, particularly in treaty interpretation, although it can be argued that particular WTO norms, such as those relating to remedies in dispute settlement proceedings, would "trump" customary international law. The CB raised certain problematic issues, such as the inherent limitation of the enforcement (retaliation) mechanism due to economic asymmetries between rich and poor. While the CB endorsed some reform ideas, such as the Appellate Body's capacity of "remand" to the first level panel and the establishment of a roster of panelists, it strongly rejected any notion of "diplomatic veto" of a final dispute settlement report. The CB recommended that general criteria and procedures be developed for amicus submissions. Notably, the CB stressed that the system should be better understood to the general public.

 

Chapter VII: A Results-Oriented Institution -- Decision-Making and Variable Geometry

 

While the CB recognized a legacy of decision-making by consensus, it also highlighted the rule's growing problems of inefficiency and inflexibility, especially considering the sheer size of the WTO's membership. The CB issued multiple recommendations in this matter, ranging from a plurilateral option ("variable geometry" allowing some members to take on greater or lesser obligations) to a "contractual right" of least developed countries to receive technical and financial assistance in implementing new agreements.

 

Chapter VIII: A Results-Oriented Institution -- Political Reinforcement and Efficient Process

 

Based on the WTO's member-driven nature, the CB called for more vigorous political involvement in the WTO's enterprise. The CB recommended, among other things, that the WTO Ministerial Conferences be held annually, that a WTO Summit of World Leaders be held every five years, and that a senior officials' consultative body be established.

 

Chapter IX: The Role of the Director-General and Secretariat

 

The CB, envisioning an active role of the WTO's Secretariat as the "Guardian of the Treaties," recommended that the Secretariat endeavor to protect the WTO's institutional and legal integrity through greater intellectual input into the Members' policy-making processes. Against this backdrop, the CB recommended "meaningful" increases in the WTO's budget. The CB also recommended that the "powers and duties" of the WTO Director-General be clarified and that the Director-General be appointed by merit only, not by political considerations.

 

Prospects

 

As the Director-General, Supachai Panitchpakdi, highlighted, the CB Report was intended to facilitate a "process of reflection," not to affect the pending Doha Round negotiations.[5] The Report will serve as an informative basis for the upcoming WTO Public Symposium in Geneva in April 2005.[6] The United States, welcoming the Report, vowed to participate in the public discussions ahead.[7] However, it remains to be seen what kind of impact the Report, and debates which it may stimulate, will exert on the on-going Doha Round negotiations and the Hong Kong Ministerial Conference in December, despite the Director-General's disclaimer.

 

About the author:

 

Sungjoon Cho is Assistant Professor of Law, Chicago-Kent College of Law, Illinois Institute of Technology.

 

 

[1] The CB Report, Foreword, at 2. This Report can be downloaded from the WTO website at http://www.wto.org/english/thewto_e/10anniv_e/10anniv_e.htm#future.

 

[2] The CB Report, Preface, at 5.

 

[3] Id.

 

[4] The CB Report, the cover page.

 

[5] The CB Report, Foreword, at 2.

 

[6] WTO, WTO News: WTO Holds Its 2005 Annual Public Symposium -- "WTO After 10 Years: Global Problems and Multilateral Solutions," http://www.wto.org/english/news_e/events_e/symp05_e/symposium_2005_e.htm

 

[7] USTR, Statement from USTR Spokesman Richard Mills on Sutherland Report on the WTO, Jan. 17, 2005, http://www.ustr.gov/Document_Library/Spokesperson_Statements/Statement_from_USTR_Spokesman_

Richard_Mills_on_Sutherl_Report_on_the_WTO.html