Bean-counting and bad faith

The treacle-like pace of the WTO negotiations prompts many academic commentators to rush the OpEd pages with claims of systemic faults or atherosclerosis. It’s undeniable that the WTO, like the UN, faces a bean counter’s nightmare: a membership whose size defeats easy decision-making, a vast range of rules, and negotiations that have almost fractal complexity. But the system can cope if appropriately tasked. What fails more frequently than the system is the coherence of the enterprise; tested to breaking point by the cynical defection of the most powerful countries from the spirit, and even the specific rules, of the system.

Pascal Lamy—who is no mere accountant—has accurately summarized the bean counter’s view of the problem:

“When you’ve got 22 topics and 148 countries, and within these 22 topics you have eight sub-topics and within these eight sub-topics three parameters, the statistical odds that you will get somewhere are nil. So you have to try and cut the thing up into bits.” (Financial Times)

Put that way, it seems obvious why there has been such travail over the last year on the negotiations with so little to show for result. But, as Lamy knows well, not every part of the puzzle is equally hard to work out and few parts are independent of the others. There are keys that must be found in agriculture, services, development and implementation issues that, once found, will change the complexion of negotiations rapidly (although it may still be an ugly complexion ).

The system is coping reasonably well with the search for these keys. I maintain that when the history of these negotiations is written, the Ministerial meeting at Dalian and the meetings this past week in Paris that seem to have achieved some convergence of will (if not opinion) on the services negotiations—possibly based on a new metric of services liberalization benchmarks be counted as important steps. 

I will try to present an argument in a separate post (there isn’t room here) that these events represent an adaptation of the system to the bean-counting problem that needs to be remarked because it is a reason to be optimistic that the ever-more-pressing needs for cooperative management of global commons—now the chief role of WTO—can feasibly be met by existing institutions.

The greatest enemy of the system is not the statistics of negotiation. It is the constant attack on its coherence by the world’s largest economies. Coherence, credibility, confidence and commitment are essential factors in the success of the global trading system. Without them it will fail because every member of the multilateral system must make an investment in the negotiations (the energy, time, travel of officials, business advocates, analysts) and in the implementation of the agreements (domestic laws, administrative structures, salaries, data-management, and sometimes economic dislocation) in order to secure a ‘slice’ of the benefits for itself and—because the open trading system is a public good—to grow the size of the global trade ‘pie’. Common sense and historical experience affirms that the incentive to invest in the public good—a rules-based global trading system—disappears once the coherence or credibility of the project is called into doubt.

Yet every week we hear news that the EU or USA is willing to do just that. No other members have for so long or so persistently avoided their obligations to comply with a ruling of the WTO Disputes System (USA on FSC subsidies, for example, or the EU on beef hormones or bananas). No other members have so blatantly manipulated the system with their restrictions on garment imports from China once the formal quotas were finally eliminated. No other members have so openly threatened to ignore the fundamental rule against unilateral trade retaliatory measures as these two have over massive industrial subsidies, on either side, to aircraft manufacture.

It’s hardly a surprise then, although deplorable nonetheless, that the EU has cynically decided that it will cheat the ruling of the Dispute Settlement Body (DSU) of the WTO by dumping a mountain of sugar on world markets using subsidies whose illegality have been confirmed by the DSU in April, using the excuse that the arbitrated date for implementing the DSU ruling will not be decided until 28 October. The Commission figures that’s sufficient time for it to dump ten times the amount of sugar that it illegally dumped in 2003, clearing the decks for the adoption of proposed new sugar support policy.

The EU has always exported excess sugar, but the 1.9m tonne figure is about 10 times the level in 2003 and more than twice the amount in 2002. Although European farmers do not receive direct export subsidies for sugar sold in this way, the WTO panel ruled that they were in effect cross-subsidised and hence broke WTO agreements. (Financial Times)

Who will have the confidence to invest in the maintenance of the multilateral rules-based system in the face of this sort of bad faith?

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