The World Trade Organization, Legitimacy and the Development Problematic. Dean Coldicott – University of Melbourne

Abstract: In the face of a multitude of challenges from a plethora of actors (state, non-state and other international organisations) the WTO is being forced to confront what role the organisation is to play in the 21st century. This paper addresses questions of legitimacy and the organization's responses, and will argue that the centralisation of the WTO within the international system of economic governance is leading to a significant shift in the scope and nature of the WTO itself from a narrowly defined trade focus to a more expansive ‘trade and non-trade considerations’ focus through the processes and practices of increasingly complex multilateralism and regime interplay. This shift is further complicated by the tensions inherit in these non-trade considerations and the interests of developing nation members of the WTO. These are examined through two such issues, namely public health and labour standards.

Key Words: World Trade Organization, Legitimacy, Development, Complex Multilateralism, Regime Interplay, Public Health, Labour Standards.

Introduction With the completion of the Uruguay Round negotiations of the General Agreement on Tariffs and Trade (GATT) the trading regime shifted significantly into a new era. Along with the original GATT agreement the newly formed World Trade Organization (WTO) also had the General Agreement on Trade in Services (GATS) and Trade Related Aspects of Intellectual Property Rights agreement (TRIPS) to administer, greatly expanding the scope and reach of the organization.

The WTO makes it explicitly clear that its constitutive principles are that the trading system should be freer, without discrimination, predictable, more competitive, and more beneficial for less developed countries. In practice the norms of Most-Favoured-Nation (MFN), National Treatment and Freer trade through negotiation, condition the rules and practices of the multilateral trading system that is the WTO. However, the expansion of the trade regime has brought the organization into the realms of a number of difficult trade and non-trade considerations, particularly in the areas of labour standards and public health. This expansion has lead to concerns of overreach and a legitimacy deficit, and in turn responses to these Page 1 of 27

tensions will have serious repercussions for both the WTO and global governance. In addition to these concerns and tensions, each of these considerations reveals another tension with the interests of the developed and developing members of the WTO, complicating matters further.

The Seattle Ministerial of 1999 is widely identified as a turning point for the World Trade Organization (WTO), and more broadly global economic governance, in focussing concerted attention on the legitimacy of the organization and its impact upon the lives of billions of people. This ‘crisis of legitimacy’ has been highlighted by many, offering a variety of causes and solutions (Bodansky 1999; Elsig 2007; Esty 2002; Van den Bossche and Alexovicova 2005; Weinstein and Charnovitz 2001). This paper is concerned primarily with the legitimacy concerns raised by the expansion of the WTO into overlapping policy domains, particularly in the areas of the labour standards and public health. This paper operates at a broad level of abstraction asserting that the WTO after just over a decade finds itself a victim of its own success. This ‘success’ may lead to its expansion, contraction or indeed implosion. In tracing events from the WTO’s inception through to the present gridlock in negotiations, we will first examine the legitimacy challenges faced by the organization before moving onto the emergence of an increasingly complex form of multilateralism and the politics of regime interplay. This in turn leads to potential shifts in the practice of global governance more broadly towards an increasingly formal inclusion of non-state actors into the modern state-centric system of multilateralism as it is broadly defined. From here the tensions between these non-trade considerations and the development goals of the current negotiating round are examined.

One of the key aspects of the WTO that captures the imagination of a whole range of interests is the organization’s ‘teeth’, its legally binding dispute settlement mechanism. The completion of the Uruguay Round of the GATT led to the international trading system finally resting on an equal footing with the International Monetary Fund (IMF) and the World Bank with the emergence of the WTO in 1995. Within a few short years, the WTO perhaps could be seen to surpass the Bretton Woods institutions, due in large part to the gravitational pull of its ‘teeth’ and the lure of market access. With the rapid expansion in membership, as well as the reach and impact of the WTO’s rules over the last 13 years, has come increased pressures and strain. Challenges to the legitimacy, accountability and transparency of the organization can be evidenced from a number of perspectives. Given these increasing challenges to the WTO and it’s impact in a wide range of policy domains, it can be argued that broadly, it is the manner in which the WTO sets the principles and mechanisms of its engagement with a wide variety of Page 2 of 27

actors in these realms that will ultimately decide the fate of the organization in the 21st Century. This is both a challenge of procedure and principles.

This paper examines the legitimacy crisis and challenges posed by the incorporation of nontrade considerations and the tensions created within the context of the goals of the Doha Development Round, and development more broadly. In doing so a framework to analyse complex multilateralism, particularly involving the interplay of international organisations, state and non-state actors, is presented to provide both an empirical and normative research tool.

Legitimacy Explored It is necessary to explore the concept of legitimacy and its implications before applying it to the WTO. Ian Hurd reminds us that “legitimacy matters to international institutions and to the nature of the international system as a whole” (Hurd 1999). If an institution lacks legitimacy, “then their claims to authority are unfounded and they are not entitled to our support” (Buchanan and Keohane 2006). Without legitimacy, an institution must resort to either coercion or material inducements to maintain authority, neither of which are desirable for obvious reasons, none more so than the costs of maintaining such a situation. Legitimacy permits “actors to coordinate their support for particular institutions by appealing to their common capacity to be moved by moral reasons, as distinct from purely strategic or exclusively self-interested reasons” (Buchanan and Keohane 2006). Allen Buchanan and Robert Keohane extend this argument in asserting “It is important not only that global governance institutions be legitimate, but that they are perceived to be legitimate” (2006). The perception, Buchanan and Keohane argue, is imperative “because, in a democratic era, multilateral institutions will only thrive if they are viewed as legitimate by democratic publics” (Buchanan and Keohane 2006). However, other forms are also important for multilateral institutions, particularly output legitimacy. Output legitimacy is where “political choices are legitimate if and because they effectively promote the common welfare of the constituency in question” (Scharpf 1999). Whereas Input legitimacy is where political choices are legitimate if they are “derived from the authentic preferences of the members” of the constituency in question (Scharpf 1999).

Legitimacy, as I understand and employ it here, is the normative belief by an actor or actors that they should comply with a rule or institution (Hurd 1999). Legitimacy is commonly taken to mean the right to rule or govern. The concept is “a quality that society ascribes to an actor’s identity, interests, or practices, or to an institution’s norms, rules and principles” (Reus-Smit 2007). The most important point is that legitimacy is socially ascribed and can only be given, not imposed. Page 3 of 27

No action, actor or institution can be depicted as legitimate if it is not recognised socially as being rightful (Reus-Smit 2007). Legitimacy is about right, not might. Christian Reus-Smit reminds us that “[b]ecause of its inherently social nature, legitimacy should not be conflated with other social values. Politicians, journalists, and scholars frequently use the language of legitimacy interchangeably with the language of rationality, justice, legality, and morality” (Buchanan and Keohane 2006; Reus-Smit 2007). Rationality, justice, legality and morality can be seen as practices and principles of an institution or actor, which may give reason to the social support of a legitimacy claim. Legitimacy must also not be conflated with optimal efficacy and efficiency (Buchanan and Keohane 2006). Efficacy and efficiency may be contributing factors to the legitimacy of an institution or actor, but it may not always be the case that efficacy and efficiency are enough to be recognised as legitimate. Political authority is dependent upon, and intimately connected to, legitimacy (Reus-Smit 2007).

Without legitimacy, political power becomes difficult to maintain without resorting to means of coercion or material inducements, both of which can be very costly and temporary solutions. Legitimacy is “a social phenomenon, grounded in intersubjective meanings and values, and constructed through social communication” (Reus-Smit 2007). Therefore an institution’s legitimacy depends upon both the practices and principles of the institution as well as the broader community within which it is constituted, through a mixture of input and output legitimacy that manages to derive the requisite recognition of is legitimation constituency. Furthermore, an international institution establishes its legitimacy “through the rhetorical construction of self-images and the public justification of priorities and practices, and other actors contest or endorse these representations through similar rhetorical processes” (ReusSmit 2007). That is to say not only do the practices and principles of an institution matter, but also how these are represented publicly by the institution and other actors has a great deal of bearing on its legitimacy.

This raises the question as to how an actor, particularly an international regime, commands legitimacy? For Reus-Smit, an international regime would be seen to command legitimacy when its decisions and actions as well as identity and interests are socially sanctioned (Reus-Smit 2007). That is, when the international community (inclusive principally of sovereign states, but also to a lesser degree other international organizations and non-governmental organizations) view the actions, decisions, identity and interests as appropriate, legitimacy and hence authority is conveyed to the international organization. Furthermore the legitimacy of “the norms, rules, Page 4 of 27

and principles that undergird and license these actions” can also be subject to social sanction (Reus-Smit 2007). So when an institution can be said to command legitimacy its normative principles are generally seen as fair and deserving of compliance for reasons other than fear (Reus-Smit 2007). This is reinforced by rhetoric as well as practice in the international community.

A Crisis of Legitimacy Legitimacy is crucial for the WTO, as legitimacy provides for authority, and authority enables a governing body to attain its goals with efficiency and efficacy as “most compliance is unproblematic and only occasional deviance needs to be policed” (Hurd 1999). When we say that an institution such as the WTO is suffering a crisis of legitimacy, we are talking about a critical turning point where the institution needs to adapt or “suffer a decline in its power to achieve its ends” (Eckersley 2007). That is, a lack of social recognition reduces the authority of the institution to act effectively to achieve its prescribed goals. Robyn Eckersley suggests that this adaptation may take one of two paths: material levers such as inducement or coercion, or an attempt to recover the social recognition of being rightful and relevant (2007). We can exclude the use of material levers to resolve a crisis of legitimacy as this does not address the underlying issues, it merely prolongs them (Hurd 1999; Reus-Smit 2007). Such a crisis may be short-lived, acute, or more prolonged, chronic (Reus-Smit 2007). “Restoring legitimacy effectively means reconstituting the social basis of power, which provides a much more stable and lasting resolution to a legitimacy crisis that the resort to material levers” (Eckersley 2007). To restore legitimacy an institution must “recalibrate the relationship between its social identity, purposes, and practices, and the prevailing social norms that define the parameters of rightful agency and action; and, second, realign its realm of political action with its social constituency of legitimation” (Reus-Smit 2007). The institution’s legitimacy will be restored when its practices and principles are once again internalised by, and in harmony with, the international community and the standards, laws, rules and norms present within this community (Hurd 1999). In order to maintain this legitimacy the institution must ensure that its sphere of action and its “social constituency of legitimation” are “coextensive, or at least approximate one another” (Reus-Smit 2007). It would appear that in the case of the WTO we have seen a disconnect here, as the trading regime has expanded its sphere of action without adequately addressing the expanded social constituency.

For much of the second-half of the last century the world trade regime operated for the most part without any challenges to its legitimacy “derived almost entirely from its perceived efficacy Page 5 of 27

and value as part of the international economic management structure” (Esty 2002), or to put it another way, because of its output legitimacy. As we have seen at the beginning of the 21st century, this is no longer the case. Actors, both state and non-state, inside and outside of the trade regime, have serious concerns regarding the WTO and the actions and implications of its activities and policies, especially where it is seen to be encroaching on increasingly diverse areas of human activity. As Daniel Esty argues “Trade is no longer considered to be an obscure policy domain best left to technical experts. Instead, trade issues and initiatives are now a major focus of public attention and discussion across the world” (2002)(10). Indeed the days of quiet negotiations behind closed doors under the ‘club-model’ seem to be long gone, regardless of the nostalgia of some of its member states. With this growing public attention has come repeated and increasing challenges to the WTO’s legitimacy, some of it misplaced, and yet some of it substantive.

After 50 years of trade negotiations under the GATT that had significantly reduced tariffs, the WTO emerged in 1995 to take the principal role in managing global economic interdependence. The WTO embarked upon ambitious new areas of trade rules that have a much greater impact on other policy domains. Where the GATT’s output legitimacy had been taken for granted whilst it served its narrowly focussed goals well, the WTO can no longer rely upon delivering trade liberalization in and for its own sake to maintain legitimacy in the eyes of its members and especially the broader public (Esty 2002). This waning output legitimacy has prompted a new focus on the perceived lack of input legitimacy. The concern over the impact of WTO rules on labour standards and public health have contributed significantly to the crisis of legitimacy, both within the community of states and global civil society more broadly. “[T]he international trading system has not adapted to a rapidly changing global scene – and now faces a serious legitimacy crisis (Esty 2002).” This crisis involves not only concern about the way in which the WTO governs world trade, but also normative questions of whether it has the right to encroach upon so many non-trade policy domains.

In a rather circular argument, it can be seen that the allure of greater market access has led to an exponential rise in the WTO’s membership, whilst the WTO dispute settlement mechanism has led to an expansion in the areas of trade rules that have in turn led to greater economic integration. This expanding and deepening of the trade regime has subsequently influenced the lives of many in ways never before experienced. The extended reach of the WTO has led to cries of overreach as a result of the organization being no longer solely focussed on trade Page 6 of 27

liberalization (Esty 2002). This has added significant attention and pressure to the organization as those affected begin to seriously question the procedural and normative legitimacy of the WTO. Hence the WTO can be said to be a victim of its own success, and that this success has contributed considerably to its current crisis of legitimacy. Or as Esty argues, derivative legitimacy afforded by the popular sovereignty of unelected officials from far-removed nations is no longer sufficient (Esty 2002).

As the realms covered by the WTO’s rules expand it is increasingly coming into contact with communities of interest that transgress nation-state borders. In particular, environmental and human rights non-governmental organizations (NGOs), trade unions, and intergovernmental organizations such as the International Labour Organization (ILO) and the World Health Organization (WHO), have seen a need to either respond directly to the policies of the WTO or seek a voice in the WTO’s policy and dispute settlement processes themselves. Indeed, as Esty argues the WTO is experiencing a “democratic deficit” restricting civil society “participation in global politics to electing national representatives who will designate trade ministry officials to represent the nation in a narrowly confined intergovernmental dialogue produces a terribly thin reed of popular sovereignty on which to build the legitimacy of the WTO” (Esty 2002). With the emergence of the WTO we have seen an expansion beyond the narrow ‘trade in goods focus’ of the GATT, which has presented challenges to the input legitimacy of the organization that was previously all but ignored in the face of the output legitimacy of the GATT.

It has become very clear that this can no longer be the case. Buchanan and Keohane argue that today “to be legitimate a global governance institution must possess certain epistemic virtues that facilitate the ongoing critical revision of its goals, through interaction with agents and organizations outside the institution” (Buchanan and Keohane 2006). If the WTO continues to make decisions that privilege economic efficiency over other significant values that are in tension, such as public health and human rights, the legitimacy and authority derived therein will continue to decline to a crisis point, if indeed this has not already been reached (Esty 2002). Esty takes this argument further proclaiming “The trade community today needs to bend over backwards to recognize the validity of the other policy goals and values that are impinged upon by the trading system” (Esty 2002). To this extent the WTO has given recognition to some nontrade norms but this recognition is ad hoc and uneven. In particular, the WTO incorporated a norm recognizing the primacy of Public Health through the Doha Declaration on TRIPS and

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Public Health but has been less open to the attempted inclusion or even discussion of Labours Standards.

A much more complex and fluid international system is emerging, with the WTO at the forefront of global governance and economic integration and simultaneously awry with contemporary norms associated with good public policymaking (Esty 2002). This poses significant challenges, as mentioned above, in terms of addressing both its traditional constituency of nation-states as well as an expanded constituency of other international regimes and non-state actors often with conflicting interests and values. Esty argues that the WTO “needs to re-establish its reputation for efficacy”, make new connections with “publics around the world” and “strengthen the broader institutional structure of checks and balances within which the WTO operates” (Esty 2002). Specifically, the institution needs to reinvent itself and the way in which it engages with such a broad constituency, integrating into an ever more complex and interdependent system of global governance that impacts upon the way in which people live and want to live. “In this regard, we must find more robust modalities and substantive principles by which to square the economic gains of more efficient markets with other public priorities, such as poverty alleviation, environmental protection, or the promotion of human rights” (Esty 2002). Such a shift in practice and principle leads to questions of civil society engagement and the problems of addressing such different constituencies, principally state and non-state actors. What appears to be emerging in response, in one form or another, can be described as complex multilateralism (incorporating state and non-state actors) and regime interplay (incorporating the complex interdependence of overlapping policy regimes). Fully realised these practices may provide a solution to the current legitimacy dilemmas faced by the WTO.

Complex Multilateralism and Regime Interplay – Broadening the Legitimation Constituency For Ruggie, “international economic regimes do not determine international economic transactions. For determinants we have to look deeper into basic structural features of the world political economy” (Ruggie, 1982). However international economic regimes are still very relevant to international economic transactions, in that they mediate by providing an environment where transactions can be seen to be “complimentary to the normative frameworks of the regimes having a bearing on them” (Ruggie, 1982). Hence international regimes are not simply exercises of basic distributions of interstate power, but a synthesis of power and legitimated social purpose, and the cause and effect reasoning for the emergence of international regimes, particularly the GATT/WTO in this case, becomes increasingly complex. Page 8 of 27

Ruggie argues that a “decline of hegemony would not necessarily lead to the collapse of regimes, provided that shared purposes are held constant” (Ruggie, 1982). Rather any decline in hegemony should see a move towards a shared social purpose that should see a relative continuity of the normative framework within regimes. “In short, the result would be “normgoverned” change” (Ruggie, 1982). The major point to be taken from Ruggie’s work is that whilst there may be observed change in the instrumentalities of international regimes it is the prevalence of norms that is most important when discussing regimes and regime change in the international system. In relation to this particular research the shift from the GATT regime to the IO that is the WTO is incredibly significant. With this change in the instrumentalities has come an increase in the scope of both the issues and actors associated with the change in status and power of the Organization within the international system.

Miles Kahler illustrates that the major postwar global regimes have been governed by “minilateralist” groupings within them (including GATT). Thus, these regimes were not merely controlled by hegemony, thereby avoiding problems of legitimacy. The process of decolonisation placed a strain on these “minilateralist” groupings in the 1960s and 1970s. Nonetheless, in the subsequent, GATT rounds Kahler finds little evidence that states encountered overwhelming difficulties in formulating institutional apparatus that obliged larger numbers of participants while retaining the facility to arrive at decisions. (Ruggie, 1992) However Ruggie argues that to comment on “the content of international economic orders and about the regimes that serve them, it is necessary to look at how power and legitimate social purpose become fused to project political authority into the international system.” (Ruggie, 1982)

Robert O’Brien, Anne Marie Goetz, Jan Aart Scholte and Marc Williams (2000) take the next step in this theoretical evolution and begin to sketch out what they term complex multilateralism. O’Brien et al. observe that the nature of governance and authority in multilateral economic institutions is in transition (O'Brien et al. 2000). This transition is “a movement away from a multilateralism based primarily on the activity of states”(O'Brien et al. 2000). For O’Brien et al. the practice of multilateralism has become more complicated in accommodating the demands of Global Social Movements, and perhaps the interests of international business. Their aim in putting forward this expanded definition is “to capture real world changes” (O'Brien et al. 2000). To a certain extent their definition accomplishes this, however I contend that this is no more than an important first step in exploring the concept of complex multilateralism. Page 9 of 27

O’Brien et al. declare that their concept of complex multilateralism is a shift away from the conventional understanding of multilateralism as a basic institutional form coordinating relations amongst three or more states. The concept of complex multilateralism that is being advocated here is yet another step beyond these more basic meanings and contends that to some extent the practice of multilateralism has always been more complex than these definitions would allow for. The most obvious example here is the tripartite structure of the International Labour Organization.

O’Brien et al. “identify five central characteristics of complex multilateralism”(O'Brien et al. 2000). These are; varied institutional modification, conflicting motivations and goals, ambiguous results, differential state impact, and finally, a more social agenda. Here we can agree that indeed multilateral institutions are modifying themselves in response to pressure from civil society and questions of legitimacy. The goals of the institutions and the civil society actors are at odds in terms of policy direction in the most part. The achievements of social movements to effect change at the level of generalised principles have been relatively ineffectual, doing very little to hamper the performance of the institutions. The practice of complex multilateralism does have a varied bearing upon states depending upon the standing of particular states within the international system. Finally, it is not difficult at all to concede that complex multilateralism has broadened the policy agenda to include more social issues. This point, more than that prior, resonates with the argument being made in this paper, as it is through this broadening agenda that we find the concept of complex multilateralism in practice in tandem with the processes of regime interplay. As we will explore further shortly, the expansion of the reach of the WTO has resulted in a more complex form of multilateralism within the WTO, whether this was intentional or not.

A deeper and broader understanding of complex multilateralism can be achieved by looking at all of the actors involved and the practices and structures that have evolved. Complex multilateralism works as an extension of what is commonly understood to be the modern state system. In addition to merely extending the range of actors involved in multilateral institutions, a more complete characterization of the practice of complex multilateralism also requires taking into account the interaction between overlapping regimes, and the power relationships between all actors, state, non-state in and across other regimes. The Complex Multilateralism Literature to date largely ignores the occurrence of regime interplay, rendering it in its present form as not Page 10 of 27

much more than a novel description. Helping us answer the what questions, not so much the why or how questions?

Regime interplay refers to the phenomena whereby a regime interacts with another regime and has a significant impact upon that regime, in terms of development or effectiveness (Oberthür and Gehring 2006; Stokke 2001). Both the interaction and impact may be intentional or unintentional, and the impact may be supportive, obstructive or neutral. Young argues “[i]nstitutional overlaps occur regularly in all social settings: they can be expected to become more common and more significant as the density of institutional arrangements operating in the same social space increases” (Young 2002). Within the social setting of the international community we are clearly witnessing an increase in the density of institutional arrangements operating in the same social spaces that sets the background for this paper to operate as it examines the politics that occur as a result. Within the domestic levels regime interplay is, and has been, a common place happening where an abundance of mechanisms have been developed to manage these overlaps to protect and/or enhance social welfare (Young 2002). These mechanisms are yet to be developed or employed effectively at the international level. The politics of regime interplay “feature a complex mix of efforts to enhance social welfare and to promote the interests of individual participants” (Young 2002). This leads to problems for policy makers attempting to balance efficiency with fairness when designing and maintaining regimes to solve collective problems (Schelling 1978; Young 2002).

The regime interplay literature provides the missing link in addressing the overlap that complex multilateralism fails to address, whereas the complex multilateralism approach provides the tools for dealing with the full range of actors involved, especially non-state actors. The focus of this paper is on regime maintenance and the political interplay in managing the tensions between the competing norms emanating from various regimes within the international system. In short, we are looking at the overlap and interplay between the trade and labour regimes, the trade and global health regimes, and the underlining legitimacy crisis that requires outcomes for a constituency of legitimation that comprises developed and developing states as well as various non-state actors.

As stated earlier, the efficacy of the WTO’s legally binding dispute settlement mechanism has lead to a wide array of conflicts involving trade and other policy interests being settled there. This along with the expanded rules afforded by the WTO’s creation has essentially been the Page 11 of 27

catalyst for the much increased social constituency of the WTO, and hence its much more complex constituency of legitimation. Such a constituency leaves no choice but to the practice of complex multilateralism in one guise or another. This expanded sphere of action has meant the inclusion, at least in terms of discourse and at times practice, of other international regimes and non-state actors in areas of trade rules that overlap with non-trade norms such as environmental protection, labour standards, and public health. In the future the practice of complex multilateralism can only continue to become more interdependent requiring clear principles to be developed by the WTO for addressing trade and other overlapping policy concerns. Esty goes so far as to argue “as the trade agenda intersects with other policy domains such as environmental protection, trade logic and principles cannot be counted upon to reconcile appropriately the competing policy pressures” (Esty 2002). In what could be termed a stronger form of complex multilateralism, Esty argues that the WTO policymaking process could be enhanced by moving towards greater transparency by engaging with non-governmental interests via open debate to encompass a greater range of views from civil society. Qualifying this by stating that NGOs would not get a vote in decision-making, but that the voice would be beneficial as decision makers would be exposed to a greater range of views, questions, data, analyses, and options (Esty 2002). Given the overlapping policy realms it would also be important to include other international organisations in the policy areas mentioned above this would include the ILO and the WHO. Such engagement would clearly improve the legitimacy of the WTO to some extent across its broad social constituency. In order for this level of engagement to be realised the WTO would need to develop and incorporate clear and consistent principles into the legal framework of the WTO at the political level. These would need to consider core principles sharing the same status as its constitutive principles of free trade, non-discrimination, predictability, competitiveness, and more beneficial for less developed countries.

Exploring the policy overlap with the labour standards and public health regimes, the practices of complex multilateralism and regime interplay emerge whereby governance in these areas lies in the contestation and cooperation between the WTO, member-states, other international regimes, non-governmental organizations and civil society, and private business interests. In particular the emergence of the multilateral organization with teeth is particularly appealing to issue areas that are attracted to the prospect of enforcing rules where there has been a history of weak recommendations and ineffective regimes. In addition to those areas that are ‘forum shopping’ there is an equal draw for those who wish to voice their concerns over the impact of Page 12 of 27

the WTO on both trade and non-trade related areas. This increased scope has added to the numerous legitimacy challenges and expanded the social constituency of the WTO beyond simply the concerns of traditional state actors (particularly the tensions between the developed and lesser developed members) to also include the interests and concerns of other international regimes and non-state actors to varying degrees and across a plethora of policy areas. To put it simply, without engaging in some form of complex multilateralism the WTO is in danger of imploding under the weight of monumental expectation.

The Development Problematic The next section of this paper examines the overlap of the WTO with Core Labour Standards, and Public Health to illuminate the problematic triangular relationship between the respective issue of overlap, legitimacy challenges and Doha Development Agenda within WTO.

Core Labour Standards Attempts to incorporate a Core Labour Standards 1 norm within the World Trade Organization (WTO) have experienced a rather turbulent and unsuccessful path towards inclusion. Although labour standards are now widely accepted, as evidenced by the large number of ratifications, differences prevail in the ways in which these standards are conceptualised and implemented within countries. The diversity of understandings and practices in relation to core labour standards are said to vary depending upon levels of development, income, institutions and political, social, and cultural conditions (Stern 2003). This issue has been divisive within the WTO with developing and developed members approaching the discussions with varied levels of distrust and scepticism as to the intent behind arguments and proposals. The belief amongst developing WTO members tends to be that attempts to introduce these standards into the WTO are thinly veiled attempts at protecting domestic industries in developed countries and/or that labour standards are beyond the scope of the WTO and therefore the use of trade measures to enforce labour standards is illegitimate. This is evidenced very quickly upon browsing the participant statements of the WTO Ministerial Conferences.

The linkage between international trade and labour standards is far from a recent development. Indeed observers have noted this linkage “has been a consistent feature of international 1

Core labour standards have a similar status to basic human rights (and some have found their way into human rights regimes). Core labour standards have been established through the 184 conventions of the International Labour Organization (ILO). Within these 184 conventions, there are eight that have received broad ratification, and from these come the four core labour standards as defined by the ILO’s 1998 Declaration on Fundamental Principles and Rights at Work. The four standards are: freedom of association and effective recognition of the right to collective bargaining; the elimination of forced or compulsory labour; the effective abolition of child labour; and the elimination of discrimination with respect to employment and occupation. Page 13 of 27

regulatory endeavours since the end of the 19th century” (Alston 2006). Multilateral agreements conditioning international trade in support of social policies began in 1904 with the convention to restrict the trade in sexual services of women and the 1906 convention to restrict the trade in toxic phosphorous matches (Charnovitz 2006). The ‘fair competition’ campaign after World War I seeking minimum labour standards was considerably trade-driven, with the earliest ILO traderelated Recommendation Concerning the Prevention of Anthrax (No. 3) coming in 1919 (Alston 2006; Charnovitz 2006). These early forays into the trade and labour linkage did not solidify into international conventions and law, “partly because the United States did not join the ILO until 1934 and also because international trade law remained embryonic until much later in the century” (Alston 2006). Post-World War II the United Nations Charter and the ILO’s Declaration of Philadelphia began to bridge the gap between economic and social policy in order to establish a ‘working peace system’ (Alston 2006).

At the conclusion of World War II the trade regime that was to be created was to incorporate labour standards as an essential component. The Havana Charter establishing the International Trade Organization (ITO), which failed to materialize, included an article that explicitly recognized that “unfair labour conditions, particularly in production for export, create difficulties in international trade, and, accordingly, each Member shall take whatever action may be appropriate and feasible to eliminate such conditions within its territory” (ITO 1948). Following the failure of the ITO to materialize, the General Agreement on Tariffs and Trade (GATT) limped forward as an ad hoc stripped down international trade regime to deal primarily with the technical issues of tariff reduction in the absence of a formal Organization with a broader mandate. The GATT was envisaged as a narrow agreement that would be a part of the ITO, and therefore did not pay any attention to the incorporation of labour standards, with the exception of an article prohibiting the trade in goods made with prison labour and a token statement regarding full employment in it’s preamble (Stern 2003; Wilkinson 2002).

Within the GATT the US, as the primary advocate, failed initially to win enough support of the contracting parties to include a labour standards article in 1953 (Stern 2003; Thomas 2004). During the Tokyo (1973-1979) and Uruguay (1986-1994) Rounds of the GATT the US again attempted to raise debate over the incorporation of labour standards. At each occasion they did not garner enough support for their inclusion (Stern 2003; Wilkinson 2002). However, at the conclusion of the Uruguay Round in Marrakesh, the US signalled that they would pursue the issue of the incorporation of labour standards in future negotiations (Stern 2003). At this point Page 14 of 27

the US pushed forward, endeavouring to draft a ‘social clause’ that would contain core labour standards and “trade sanctions for non-compliance that might eventually be incorporated into the WTO” (Stern 2003) as the US had done with the NAFTA side agreement on Labour.

During the Uruguay Round of the GATT negotiations the ILO secretariat put forward the proposal that the ILO and the WTO be jointly responsible for international core labour standards. Under this proposal the ILO was to be responsible for the monitoring and reporting on international core labour standards whilst the WTO would be charged with the enforcement of any breaches via trade-related sanctions. The discussion of this proposal was halted in 1995 due to disagreements within the ILO Working Party on the Social Dimensions of the Liberalization of International Trade (Stern 2003). After this the ILO pursued the much less ambitious alternative of a research program into the effects of trade liberalisation on international core labour standards and the consideration of ways in which the ILO might promote these standards effectively (OECD 1996; Stern 2003).

Wilkinson argues that in the development of the international trade regime there is evidence of a systematic ‘unhinging’ of the linkage between trade liberalisation and core labour standards prior to the establishment of the WTO (Wilkinson 2002). In the face of this continued resistance the US has been including labour standards provisions in bilateral and regional trade agreements and legislation since the 1980s (Stern 2003). The EU also has incentive arrangements for tariff preferences for countries that comply with the eight ILO core labour conventions (Stern 2003).

Within the WTO the issue of trade and labour standards linkage has been raised at each Ministerial Conference, with the issue receiving a significant amount of attention particularly at the Singapore and Geneva conferences respectively. As figure 1 shows 62 percent of participants at the 1996 Singapore Conference referred to this debate, 18 percent at Geneva in 1998, 47 percent at Seattle in 1999, 19 percent at Doha in 2001, 3 percent at Cancún in 2003, and finally 2 percent at Hong Kong in 2005.

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Fig. 1. WTO Ministerial Participant Statements Referring to Labour Standards

1996 1998 1999 2001 2003 2005

70% 60% 50%

Singapore - 62% Geneva - 18% Seattle - 47% Doha - 19% Cancun - 3% Hong Kong - 2%

40% 30% 20% 10% 0%

1996 Singapore Ministerial During the 1996 Singapore Ministerial there was a determined effort by developing nations to prevent the ‘social clause’, via the additional items from Uruguay, being debated and subsequently being subject to the WTO’s dispute settlement mechanism (Wilkinson 2002). Even so the US along with the EU, Canada, and Japan pursued the incorporation of labour standards within the framework of the Singapore Ministerial (Stern 2003). It was the ‘social clause’ that dominated the Singapore Ministerial with the outcome a strong statement in support of core labour standards, albeit with some ambivalence for the role of the WTO. The Singapore Ministerial declared: We renew our commitment to the observance of internationally recognized core labour standards. The International Labour Organization (ILO) is the competent body to set and deal with these standards, and we affirm our support for its work in promoting them. We believe that economic growth and development fostered by increased trade and further trade liberalisation contribute to the promotion of these standards. We reject the use of labour standards for protectionist purposes, and agree that the comparative advantage of countries, particularly low-wage developing countries, must in no way be put into question. In this regard, we note that the WTO and ILO Secretariats will continue their existing collaboration (WTO 2004). This statement as it reads was largely unobjectionable, however “many analysts and stakeholders did object that the Ministers did not do anything tangible to support the ILO’s work” (Charnovitz 2006). The statement can and was indeed seen to reflect both the view of developing and developed WTO members. Largely, for developing members it was the end of the discussion, for developed members it was only the beginning. It is the varying interpretations of this declaration that fuelled the discussion at Geneva, Seattle and Doha. Page 16 of 27

Figure 2 breaks down the participant statements from the respective WTO Ministerial Conferences to display the support for the inclusion or exclusion from the WTO agenda of discussions relating to the Trade-Labour Standards linkage. Developed countries almost exclusively argued for the inclusion of a discussion on Labour Standards and Trade at each conference, whilst developing countries show almost unanimously those arguing to leave this discussion off of the official agenda. At the Singapore Conference, 40.5 percent of all participants opposed discussion of Labour Standards within the WTO, whereas only 21.4 percent supported including them in some form. Almost every statement, for inclusion or exclusion, affirmed their support for Core Labour Standards and rejected the use of Labour Standards for protectionist purposes irrespective of the position they took on the debate.

Fig. 2. Statements supporting the inclusion or exclusion of Labour Standards

70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

1996 Singapore

1998 Geneva

1999 Seattle

2001 Doha

2003 Cancun

2005 Hong Kong

Exclusion

40.5%

6.7%

29.9%

10.5%

0.6%

0.0%

Inclusion

21.4%

10.9%

17.5%

8.5%

2.5%

1.7%

1998 Geneva Ministerial The Geneva Ministerial Conference of 1998 witnessed the first large-scale public demonstrations against the WTO. The timing of this, along with the broader anti-globalisation events that followed, can be viewed as pivotal to the re-introduction of labour standards linkage with trade regulation. It would seem that the climate was just right for a ‘social clause’ within the WTO, if those standing outside waving placards were symptomatic of the global community. The idea of making explicit the connection between trade and labour standards was becoming pre-eminent in calls to address the “social consequences of ‘market failure’” (Wilkinson 2002). Page 17 of 27

Regardless, as Figure 1 and Figure 2 above show, the Trade-Labour Standards Linkage was not as big an issue for WTO members at this conference with 18 percent of participant statements making a reference to issue. The issue was to be taken up at an ILO conference the following month, which perhaps accounts for the apparent drop in interest, however some members statements reflected enthusiasm for progress at the ILO in this area. However, the arguments in the WTO Ministerial fell along similar lines with 6.7 percent of statements calling for the exclusion of Labour Standards from the agenda (primarily from developing members) and 10.9 percent of the members calling for the inclusion of Labour Standards on the agenda of a new round (primarily from developed members). The statement by Mr. Leif Pagrotsky, Trade Minister of Sweden is indicative of the statements expressed by developed WTO members: Sweden reaffirms its strong support for the conclusion in the ILO of a declaration and an effective follow up mechanism on core labour standards this coming June, but would also like to see more attention being paid to the cooperation between the WTO and the ILO secretariats. A seminar addressing possible forms for this cooperation, thereby proceeding from declaration to active support for the important work of the ILO, would be welcome. (Pagrotsky 1998) The sentiments of developing members was generally that the ILO remained the competent body for dealing with these issues and Singapore Declaration has been the end of this discussion in the WTO.

1998 ILO Declaration The WTO’s 1996 declaration that the ILO was the competent body for administering international labour law sparked a renewed effort by the ILO at consolidation and streamlining. Perhaps the most important outcome was the soft law instruments known as the ILO Declaration on Fundamental Principles and Rights at Work. The Declaration reaffirms the following four core labour standards: 1. Freedom of association and the effective recognition of the right to collective bargaining; 2. The elimination of all forms of forced or compulsory labour; 3. The effective abolition of child labour; and 4. The elimination of discrimination in respect of employment and occupation. These standards are applied to Member States whether or not they have ratified the key related conventions. The Declaration also established new measures for monitoring these core labour standards (Alston 2006; Thomas 2004). The Declaration transformed the discourse of international labour rights, attracting a huge amount of attention from both supporters and opponents. The focus upon Core Labour Standards is seen by many as a resolution of the controversial debate over trade and labour standards by providing the framework that can be applied and enforced. But for others it is the Page 18 of 27

soft law character of the Declaration that is of great concern, relegating labour rights to a much weaker and ambiguous position in international law (Alston 2006).

1999 Seattle Ministerial The failed Seattle WTO Ministerial of 1999 witnessed an escalation in public demonstrations by anti-globalisation protesters. These protesters came from a wide array of Non-Governmental organizations (NGOs). In addition the situation was not assisted by the scheduling of the ministerial in the immediate lead-up to a US presidential election. As Wilkinson has argued, this “generated a perception that much of the US’s position on labour and civil society issues served partisan domestic political interests rather than those of the WTO and its membership” (Wilkinson 2002).

To add fuel to the fire, President Bill Clinton had told a reporter that he favoured a coercive path for worker rights in the WTO through a working group within the organisation to establish a set of core labour standards for trade agreements to be enforceable through trade sanctions (Charnovitz 2006). The perceptions of domestic political interests in play along with Clinton’s remarks permeated through the conference with escalating tensions as the US along with the EU sought to establish the aforementioned working party and were met with a “resurgence of hostility as developing countries sought yet again to put an end to the debate” (Wilkinson 2002). For some observers these interstate tensions were as much a factor in the failure of the Seattle Ministerial Conference as the protesters making headlines outside (Charnovitz 2006).

Indeed, as Figure 1 and Figure 2 above show, at Seattle the Trade-Labour Standards Linkage once again being pursued by the US as the primary entrepreneur became a hot topic in the Ministerial with 47 percent of the participants making a statement on Labour Standards, with 29.9 percent arguing for their exclusion from the WTO agenda with 17.5 percent arguing in favour of the inclusion of this debate. Again the debate fell primarily along the developing/developed divide.

2001 Doha Ministerial In the wake of the protests at Seattle the WTO moved to incorporate limited participation by Non-Governmental Organizations (NGOs) and increased efforts to cater more for developing countries in the lead up to the Doha Ministerial Conference. The issue of Labour Standards still lingered, however Doha was to take Labour Standards off the agenda “and put an end to suggestions that the WTO explore in some way the relationship between trade and labour standards” (Wilkinson 2002). The Doha Declaration acknowledges labour standards but Page 19 of 27

developing members held firm ensuring that the issue would not be a part of the negotiations. The Doha Ministerial Declaration states: We reaffirm our declaration made at the Singapore Ministerial Conference regarding internationally recognized core labour standards. We take note of work under way in the International Labour Organization (ILO) on the social dimension of globalization. Wilkinson argues that after repeated attempts, “… it is unlikely that issue will once again become the subject of serious discussion within the WTO” (Wilkinson 2002). Underscoring this argument by pointing out that, “developing countries as emerging markets, providers of raw materials and cheap labour have become increasingly strategically important to early 21st century capitalism. As such their concerns must be addressed or be perceived to be addressed, as a matter of importance” (Wilkinson 2002). It is within this context that the WTO was established and has increasingly operated within over the course of the attempts to incorporate labour standards.

2003 Cancún Ministerial and 2005 Hong Kong Ministerial At the 2003 Cancún Ministerial the Trade-Labour Standards linkage debate had all but disappeared with no mention of Labour Standards in the Ministerial Declaration and only 3 percent of participants making any reference to Labour Standards in their statements. Belgium, Canada, Italy and New Zealand made statements calling for discussion on the Trade-Labour Standards linkage within the WTO, whilst Guatemala made a statement asserting “it is essential that trade development and progress go hand in hand with improved living standards and the creation of decent jobs in developing countries”(Ramírez Ceberg 2003). At the 2005 Hong Kong Ministerial only Italy, Norway and Sweden made statements in support of discussing the TradeLabour Standards linkage with no mention being made in the Ministerial Declaration.

The Road to Exclusion As evidenced by the brief discussion above, the push to incorporate Labour Standards in the agenda of the WTO can be attributed to both the history of the Trade-Labour linkage and the processes of complex multilateralism and regime interplay in the role of NGOs, the ILO and other intergovernmental regimes in the international community challenging the legitimacy of the WTO for not incorporating labour standards, whilst the resistance and exclusion of this linkage can be attributed to the concern of the majority of developing members of the WTO and their challenge that the incorporation of such standards at present would be illegitimate. As a result the discussion has continued outside of the WTO in the ILO, OECD and UNCTAD, with minimal collaboration on less divisive issues between the WTO and ILO.

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Public Health Unlike the long history of the Trade-Labour Standards linkage the overlap between Trade and Public Health is a relatively recent development. The debate regarding the primacy of public health over trade indeed has not been questioned in relation to the WTO agreements; it is the implementation and interpretation that have been the issue, particularly where the TRIPS agreement is concerned. The primacy of public health has received strong support within the WTO with the adoption of a decision by the WTO’s members to make it easier for poorer countries to waive sections of the TRIPS agreement to respond to public health crises.

The biggest area of contention regarding the WTO and public health has been in the negotiation of the Agreement on TRIPS, specifically in the use of flexible arrangements for pharmaceutical patents by lesser-developed countries in facing public health crises. This argument has been drawn out and highly public. Before joining the WTO very few developing countries had any patent protection legislation. The TRIPS agreement has resulted in an abrupt increase in the cost of pharmaceuticals in most countries, thereby diminishing the amount of public funding for primary healthcare. For people living in developing countries this is of particular consequence as there are not the same levels of public and private healthcare infrastructure to insulate against such market shocks.

1996 Singapore Ministerial, 1998 Geneva Ministerial and 1999 Seattle Ministerial In the earlier WTO Ministerial Conferences the issue of TRIPS and Public Health was not raised. Where Public Health was raised it was in relation to concerns over the competing and interrelated interests of trade and public health principally in relation to the General Agreement on Trade in Services (GATS), as well as concerns over the trade barriers imposed by the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS). At the Seattle Ministerial the TRIPS-Public Health issue was only mentioned by the Holy See with concern expressed over the lack of technology transfer as called for by the agreement.

2001 Doha Ministerial At the 2001 Doha Ministerial Conference the TRIPS-Public Health Issue exploded. As Figure 3 shows, the percentage of participants whose statements referred to public health jumped from 10 percent at Seattle in 1999 to 39 percent at Doha. Almost every one of the 60 participant statements asserted the primacy of public health in relation to the TRIPS agreement in light of the legal challenges launched by 39 pharmaceutical companies backed by the US government against the South African government’s revised South African Medicines and Related Substances Control Act (Kobori 2002). The Act allowed for the repeal of patent rights for Page 21 of 27

pharmaceutical products in response to public health crisis in line with the TRIPS Agreement’s exceptions. The legal challenge was withdrawn in April 2001 in the face of mounting domestic and international political pressure and Kenya soon followed South Africa’s lead passing “a patent act including a provision on compulsory licensing and parallel importation rights of antiretroviral medicine” (Kobori 2002).

Fig. 3. WTO Ministerial Participant Statements Referring to Public Health

1996 1998 1999 2001 2003 2005

60% 50% 40%

Singapore - 2% Geneva - 11% Seattle - 10% Doha - 39% Cancun - 58% Hong Kong - 23%

30% 20% 10% 0%

At the Doha ministerial conference in 2001 the WTO affirmed that “the TRIPS Agreement does not and should not prevent Members from taking measures to protect public health.” (WTO 2001) The main Doha Declaration of November 2001 underscored the importance of implementation and interpretation of the TRIPS Agreement in a way that supported public health via the promotion of both access to existing medicines and the creation of new medicines. It was decided that members would have the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses would be granted. However there was still confusion as to under what circumstances these measures were to be taken and the deadline for a decision in this area was extended to the end of 2002 (WTO 2001, 2003).

On the 20th of December 2002, in an official press release, Director-General Supachai Panitchpakdi expressed disappointment over the failure by member governments to reach agreement before the prescribed deadline in negotiations on special and differential treatment for developing countries and access to essential medicines for poor countries lacking the capacity to manufacture such drugs (WTO 2002). The chairman of the Council for TradePage 22 of 27

Related Aspects of Intellectual Property Rights, Eduardo Pérez Motta of Mexico, told the general council that the differences over the diseases that would be covered by the draft decision on intellectual property and health had not been resolved through the intensive consultations (WTO 2002). The US had claimed that the draft was too open-ended on the range of diseases the decision would cover (WTO 2003). The US wanted the draft to include exceptions for compulsory licensing and parallel importing measures for only the ‘big three’ diseases, these being HIV/AIDS, tuberculosis and malaria.

2003 Cancún Ministerial On the 30th of August 2003, just days prior to the Cancún Ministerial Conference, the Council for TRIPS announced that a draft decision had been reached whereby legal changes to the TRIPS agreement now make it easier for lesser-developed countries to import cheaper generic drugs made under compulsory licensing if they lack the capacity to produce the medicines domestically (WTO 2003). This prompted Director-General Supachai Panitchpakdi to lay claim that “It proves once and for all that the organization can handle humanitarian as well as trade concerns” (WTO 2003). The WTO Secretariat claims that this decision describes members’ ‘shared understanding’ on how exemptions to the agreement on TRIPS are to be interpreted and implemented by lesser-developed countries in response to public health needs (WTO 2003).

During the conference the TRIPS-Public Health issue was even more of interest to participants than at Doha. As Figure 3 above shows, 58 percent of participant’s statements made mention of Public Health with the vast majority of those celebrating the breakthrough of the August 2003 decision that demonstrated that the WTO was capable of addressing social and development issues.

2005 Hong Kong Ministerial On 6 December 2005 the WTO General Council made the earlier TRIPS amendments relating to Public Health for developing countries permanent. The Hong Kong Ministerial Conference commenced a week later on 13 December where 39 percent of participants commented upon public health in their official statement, with near exclusive support expressed for the decision.

The Road to Primacy The legitimacy of the WTO in the case of TRIPS and Public Health was challenged from both within the WTO by its developing members and from without by NGOs and the broader civil society. The primacy of public health and the WTO’s capacity to deliver and generate output Page 23 of 27

legitimacy through the implementation of the TRIPS exceptions for public health created much debate both inside and outside of the WTO. This issue was played out through processes of complex multilateralism and regime interplay and has ultimately been resolved as a response to the legitimacy deficit created by the TRIPS Agreement in relation to developing nations ability to respond to public health crisis.

Conclusion – The Gravitational Pull and Shadow of the WTO It is the ability of the WTO to legally enforce it rules and principles that has created a ‘gravitational pull’ for an ever-expanding range of global issues calling for new areas of multilateral rules. This is not likely to abate without serious repercussions from their inclusion or the strengthening of alternative regimes to provide for the types of outcomes that are being sought. The incorporation of a universal ‘social clause’ is highly contentious and receives support and resistance from all angles. It is the allure of the WTO’s teeth and frustration with the other regimes gums that give rise to and drive the arguments in support of this option. Many however suggest that given the political practices and trade-oriented focus of the WTO this outcome would be disastrous for these policy concerns in that they would remain subservient to trade issues (Esty 2002). With the increasing pace of complex multilateralism the standards of legitimacy and mechanisms of accountability must evolve to include more than merely the sanction of nation-states (Buchanan and Keohane 2006).

A stronger form of complex multilateralism would appear to be heading towards what AnneMarie Slaughter describes as networked governance. For Slaughter such an outcome would see a rejection of a centralized approach to global governance. National governments and national government officials must remain the primary focus of political loyalty and the primary actors on the global stage. If, however, they are to be actors in national and global policymaking simultaneously, officials would have to be able to think at once in terms of the national and the global interest and to sort out the relative priorities of the two on a case-by-case basis (Slaughter 2004). We are heading towards Slaughter’s networked governance but are a long way from reaching this destination. There are signs that the WTO is striving for the normative and procedural legitimacy in its rules and principles as described by Hurd, although the actions of some of its members at times exhibit the traits of coercion and self-interest. The WTO in the 21st century posits a great deal of potential for the future of global governance if it can effectively manage the tensions between the ever-expanding trade regime and the human race that the regime is derived to support. The future lies in the ways in which the WTO responds to these governance

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challenges and in turn this could have certain implications for the very nature of global governance in the 21st Century.

However, at present the international trade regime continues to cast a long shadow across other international regimes whereby even the likelihood of an overlap with the WTO’s rules may dissuade another regime from attempting to make use of trade sanctions or trade limiting mechanisms to achieve its mandate. The two ‘non-trade issues’ raised in this paper demonstrate the complexities the WTO faces as it grapples with internal and external legitimacy challenges as the broadening and deepening of the trade regime draws it into further overlaps and interplay with other policy domains. This phenomenon clearly suggests a need within the WTO for increased engagement with other international organisations such as the World Bank, IMF, ILO, OECD, WHO, regional organisations, UNCTAD, and other UN specialised agencies. However this broadened engagement remains politically sensitive as developing nations remain sceptical to what could amount to further barriers to trade and disguised protectionism. A satisfactory completion to the Doha Development Round for the WTO’s developing members would go along way to resolving this apparent impasse.

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