The WTO and Trade Sovereignty - Part 1: Does the WTO's Normative Framework Undermine it?


1. Introduction


This piece (in a two-part analysis) proposes to consider whether and to what extent countries in the multilateral trading system are exploiting the mechanisms provided for under World Trade Organisation (‘WTO’) Law and Policy, which permit the use of trade agreements between countries. The piece will specifically approach the discussion from the point of view of countries facing traditionally truncated trade sovereignty, as brought about by the WTO and its comprehensive regulation of global trade.

In order to fully engage with and understand the significance of Regional Trade Agreements (‘RTAs’) within the context of global trade—as will be discussed in more length in Part 2—this piece will move to consider inter alia how the WTO has come to regulate international trade by way of a normative framework. It will move to briefly consider how said framework regulates trade relationships, and further, how certain States use (or, abuse) the mechanisms provided for by the WTO to circumvent certain key rules. The aforesaid all prima facie being in a bid to secure some form of trade sovereignty, which has otherwise been usurped by the institutional framework.


The use of RTAs is not a new occurrence, however, the continually growing use of RTAs is an undeniably modern occurrence. This piece proposes that this inundation is, to a large extent, rooted in, and related to another contemporary issue, namely; the reclaiming of national (trade) sovereignty by WTO members in the greater multilateral trade system. This desirability of reclaiming trade sovereignty within the modern context can be clearly evidenced by perhaps one of the most well publicised and contentious international happenings in modern history, the so-called ‘BREXIT’[1].


We are reminded then that whilst the concepts of the WTO’s legislative framework and use of RTAs seem far-flung from our day-to-day lives, they have the potential to have a direct impact on a society that is increasingly fuelled by socio-economic pressures and protectionist governments.


2. The Normative Framework:


Although it is beyond the scope of this piece to discuss the mechanics of WTO Law and Policy at length [2], it will briefly discuss its proposed normative framework. The following extract sets out the modus operandi of the WTO:


“[The WTO adopts] a bilateral approach to multilateral [trade] bargaining according to which reciprocal negotiations… occur on a voluntary basis through time between pairs of countries or among small numbers of countries, with the results of these bilateral negotiations then [being] “multilateralised” to the full WTO membership…”[3]


In addition, when considering the WTO’s scope one may also find that the WTO purports to:


“[P]rovide the common institutional framework for the conduct of trade relations among its members in matters related to [international trade].” [4]


The WTO to a large extent is geared towards ‘levelling the playing field’ and creating a sustainable and equal-opportunity based framework whereby international trade can be governed [5]. The following passage by Peter Sutherland is quite appropriate:


“[T]he greatest economic challenge facing the world is the need to create an international system that not only maximizes global growth, but also achieves a greater measure of equity, a system that both integrates emerging powers and assists currently marginalized countries in their efforts to participate in worldwide economic expansion… The most important means available to secure [economic] peace and prosperity into the future is to develop effective multilateral approaches and institutions.” [6] [emphasis added]


Expanding on this focus on equality, arguably two of the most important foundational concepts upon which this supposedly level playing field is built, is that of the most-favoured nation obligation (‘MFN’) [7] and the national treatment obligation (‘NT’) [8]. These two concepts are pivotal to the WTO’s proposed normative framework and flow from Article 1 and 3 of the 1994 General Agreement on Tariffs and Trade (‘1994 GATT’) [9], respectively. The 1994 GATT is one of a number of key Multilateral Trade Agreements (‘MTAs’) developed and enacted by the WTO, which are prescribed to be binding on all WTO members [10].


Of these two foundational concepts, the most important for the present discussion is that of the MFN. Under this tenet, member States are obliged to treat each other indifferently in the global multilateral trading system. For example, if a particular customs duty or tariff is imposed on one member State, it must be imposed on all member states. Countries are not generally allowed to discriminate between their trading partners, and should maintain a universal rapport [11].


3. The Age Old Debate: Trade Sovereignty v. Trade Liberalisation and Globalisation


With the above being said, it is prudent to note further that, much like virtually any other international organisation, the WTO operates primarily on the basis of sovereignty and consent [12]. Membership to the WTO is rooted in a treaty—the Marrakesh Agreement Establishing the World Trade Organisation (the ‘Marrakesh Agreement’) [13]. Accordingly, the same rules as provided for by inter alia, the Vienna Convention on the Law of Treaties, apply, including signature, ratification, and ascent [14].


However, it must be borne in mind that if a country would like to become a member of the WTO it must consent to abide strictly by the WTO’s normative framework [15]. One might think then, with an equality-focussed approach as articulated above, progressive concepts such as the MFN, furthered by the rose-coloured promise of globalisation and trade liberalisation, that the normative framework can surely not be a bad-bet for would-be members? The current 164 WTO member states (as of 29 July 2016) [16], would surely agree.


Removing the rose-coloured glasses, it becomes prudent to note the metaphorical ‘elephant in the room’. One cannot escape the age-old criticism toward the WTO and the predecessor thereto, the 1947 General Agreement on Tariffs and Trade (‘1947 GATT’), that it is said to be ‘in the business of sovereignty crushing’ [17].


Whether or not this criticism is substantiated [18], however, it is only fair to note that normative frameworks are by their nature inherently a ‘give-and-take’ relationship. To this end, the classic example of Thomas Hobbes’ ‘social contract’ comes to mind as penned in his seminal work, the Leviathan [19]. This concept of course being pivoted on the balance between an individual (or groups of individuals) relinquishing some or all of its liberty, in exchange for a degree of common security [20].


As this analysis progresses, it may become clear that a degree of what Thomas Hobbes further presented as ‘sovereignty by institution’ under the social contract theory, comes into play under the umbrella of the WTO, and in particular by way of the mechanics and role of RTAs. This operates, broadly on the rationale that states voluntarily agree to bind themselves under the authority of a single ruling entity and then through the ‘rule’ of said entity, ultimately are able to articulate and protect their own interests [21].


The question then arises, what liberty in particular is traded for membership to the global multilateral trading system? This consideration comes down to that of national (economic) sovereignty versus globalisation of trade or international economic integration [22]. It is advanced by certain authors that there is an inherent pyramidical design to the WTO, constructed that atop the pyramid is multilateralism (i.e. the normative framework developed by the WTO, which applies coherently to all WTO member states), in the middle is regionalism and/or bilateralism (i.e. the negotiated normative framework imposed by the WTO to trade relationships between specific member states) and at the very bottom the domestic trade and economic policies of individual WTO members (i.e. the degree of ‘self-autonomy’ remaining under WTO integration) [23]. When taking into consideration the this notion of an inherent pyramidical design proposed by the WTO in relation to the international trading system, it becomes less and less difficult to see why the WTO may be perceived to be firmly aligned with the latter.


4. Interim Conclusion


Although sceptics and anti-reformists will perpetually align themselves with the position that the WTO plays puppeteer to the trading system, one must look deeper and truly engage with the values which the WTO attempts to establish, instil and advance. Having a unified, established a certain way for states to interact with the multilateral trading system may arguably have more benefits than not. Part 2 of this analysis, explores the argument that, if the WTO were truly not in-touch with reality and the requirements of a modern, dynamic, and ever-developing trading system, it would not have included express provisions in respect of RTA’s.


5. References


[1] John O’Sullivan, ‘The Brexit Debate: A Trade-off between sovereignty and economics’ (The Economist – Buttonwood’s Notebook, 2 March 2016) <www.economist.com/blogs/buttonwood/2016/03/brexit-debate> accessed 28 July

2020.

[2] Marrakesh Agreement Establishing the World Trade Organization (15 April 1994), 1867 U.N.T.S. 154 (‘Marrakesh Agreement’); General Agreement on Tariffs and Trade 1994, Annex 1A to the Marrakesh Agreement Establishing the World Trade Organization (15 April 1994), 1867 U.N.T.S. 187 (‘GATT 1994’); General Agreement on Trade in services, Annex 1B to the Marrakesh Agreement Establishing the World Trade Organization (15 April 1994), 1869 U.N.T.S. 14 (‘GATS’).

[3] Kyle Bagwell & Robert Staiger, ‘The WTO: Theory and Practice’ (WTO Academic Visiting Program, 12 October 2009) <www.wto.org/english/res_e/reser_e/ersd200911_e.pdf> accessed 26 July 2020.

[4] Marrakesh Agreement, Art. 2.

[5] Marrakesh Agreement, see generally, the Preamble.

[6] Peter Sutherland, ‘Beyond the Market, a Different Kind of Equity’ (International Herold Tribune, 20 February 1997) <www.nytimes.com/1997/02/20/opinion/IHT-beyond-the-market-a-different-kind-of-equity.html> accessed 23 July 2020.

[7] GATT 1994, Art. 1.

[8] GATT 1994, Art. 3.

[9] GATT 1994, Art. 1 & Art. 3.

[10] GATT 1994, Art.1.

[11] World Trade Organisation, ‘Principles of the Trading System’ (Understanding the WTO, 2020) <www.wto.org/english/theWTO_e/whatis_e/tif_e/fact2_e.htm> accessed 3 August 2020; Peter van den Bossche & Werner Zdouc, The Law and Policy of the World Trade Organisation (3rd ed, Cambridge University Press 2013), 34 – 35.

[12] Duncan Hollis “Why State Consent Still Matters – Non-State Actors, Treaties and the Changing Sources of International Law.” (2005) 23 Berkley Journal of International Law 144; Andrew Guzman, ‘The Consent Problem in International Law’ (Berkeley Program in Law and Economics, Working Paper Series, 10 March 2011) <https://escholarship.org/uc/item/04x8x174> accessed 25 July 2020.

[13] Marrakesh Agreement.

[14] Vienna Convention on the Law of Treaties (23 May 1969), 1155 U.N.T.S. 331.

[15] Andrew Guzman, How International Law Works: A Rational Choice Theory (1st ed, Oxford University Press 2008) 285.

[16] World Trade Organisation, ‘Members and Observers’ (Understanding the WTO: The Organisation, 2016) <www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm> accessed 22 July 2020.

[17] Kyle Bagwell & Robert Staiger, ‘National Sovereignty in the Wold Trading System’ (2001) 22 Harvard Intl L Rev 54.

[18] Stewart Patrick, ‘Trump’s Search for Absolute Sovereignty Could Destroy the WTO’ (World Politics Review, 25 March 2019) <www.worldpoliticsreview.com/insights/27692/wto-reforms-are-needed-but-trump-s-demands-could-destroy-the-organization> accessed 27 July 2020; World Trade Organisation, ‘Top 10 Reasons to Oppose the World Trade Organisation? Criticism, yes… misinformation, no!’ (3rd WTO Ministerial Conference, 1999) <www.wto.org/english/thewto_e/minist_e/min99_e/english/misinf_e/09sov_e.htm> accessed 28 July 2020.

[19] Thomas Hobbes, Leviathan (first published 1651, Penguin 1985).

[20] Thomas Mautner, The Penguin Dictionary of Philosophy (first published 1996, Penguin 2000), 526.

[21] Thomas Hobbes, Leviathan (first published 1651, Penguin 1985).

[22] Kyle Bagwell & Robert Staiger, ‘National Sovereignty in the Wold Trading System’ (2001) 22 Harvard Intl L Rev 54.

[23] Rafael Leal-Arcas, ‘Proliferation of Regional Trade Agreements: Complementing or Supplanting Multilateralism.’ (2011) 11 Chicago J of Intl L 2, 598.




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