What is the WTO? And is it undemocratic?

In the past few weeks we’ve seen a revival of the old claim that the WTO is undemocratic. Why? Because it has become a weapon in the Brexit war of words. As ever, the truth is more complicated.

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By Peter Ungphakorn
POSTED AUGUST 17, 2018 | UPDATED AUGUST 29, 2018

It all began when hard-Brexiters started to claim that if the UK and EU fail to reach agreement, this wouldn’t be “no deal”. It would be a World Trade Deal — the new term they now use to describe operating on WTO terms, which some also claim would be the best outcome.

BRIEFLY
• The WTO is 164 member governments who operate an international trading system based on agreed rules
• Is it democratic? Yes and no

JUMP TO
What is the WTO?
What about the Secretariat?
It’s member-driven
Is the WTO democratic?
Don’t compare the WTO and EU
Find out more

The response from some Remainers is to criticise the WTO. If their enemies like it, it must be bad. One repeated claim is that the WTO is undemocratic. “When did you last vote for your representative in the WTO?” and “How can I find my WTO MP?” were among the questions.

There’s a lot wrong with the WTO, and a lot right, but these new attacks miss the point completely.

We might as well demand direct elections to the United Nations, World Health Organization, International Labour Organization and the rest.

We’d then be talking about world government.

To see why they miss the point, we first need to look at what the WTO really is.

What is the WTO?Back to top

The simple answer is: “The WTO is 164 member governments who operate an international trading system based on agreed rules.”

Let’s look more closely.

  1. The WTO is a meeting place. It’s where governments go to sort out trade problems they face with each other internationally.

LEGAL BASIS: Agreement Establishing the World Trade Organization (WTO Agreement)
Art.1 (establishment)
Art.2 (scope)
Art.3 (functions)

They meet to negotiate. They reach agreement (yes they do, from time to time). And then they continue meeting to monitor how well they are a sticking to those agreements.

And they also meet as a kind of court to pass legal rulings on whether governments are indeed abiding by those agreements — keeping their promises.

Yes, although that legal process, officially known as dispute settlement, is handled by small groups called panels, and another small group, which hears appeals, the whole process is managed by the WTO’s full membership.

And that means the WTO is two other things.

  1. It’s a system of trade agreements, which discipline governments’ trade policies so that international trade is not a free-for-all — the rule of law rather than the law of the jungle.
  2. It’s 164 member governments (the present total). When I worked in the WTO we were often asked “What does the WTO think about [something or other].” The answer? “It has 164 views” — because the WTO is its 164 members and they may well have different opinions about that something-or-other. In fact each country may have more than one opinion on a particular issue, but let’s not get into that.

Decisions among those 164 member governments are by consensus, if any one among them, big or small, cannot accept a decision, there’s no deal.

The Secretariat is not the WTO: The building where the Secretariat works is also called “the WTO” but it also houses the meeting rooms
The Secretariat is not the WTO: The building where the Secretariat works is also called “the WTO” but it also houses the meeting rooms

What about the Secretariat?Back to top

LEGAL BASIS: WTO Agreement
Art.6 (Secretariat)

Some people think the WTO Secretariat is the WTO, but strictly speaking that’s not correct. The Secretariat is a bureaucracy set up to help member governments operate the trading system.

It’s true that the head of the Secretariat is called the Director-General of the WTO, because the WTO is also an international organisation, like the United Nations, UN Environment Programme or the World Bank. But the WTO DGs are still the servants of the members, a cause of frustration for some of them.

WTO organigram
Meetings, meetings, meetings: Almost the entire WTO organisation chart consists of meetings of the full membership in various forms. Click the image or follow the link to see it full size

It’s member-drivenBack to top

164 MEMBERS
The WTO currently has 164 members. All but four are countries, including the EU’s member states. One additional member is the European Union itself. Three are officially not countries but “separate customs territories”. They are Hong Kong China, Macao China and Chinese Taipei.

The best way to appreciate just how much the WTO is an organisation of its members is to look at its organigram.

This consists entirely of meetings of members: a ministerial conference and various councils, committees, working parties, working groups and so on. Each of these comprises the full membership — all 164 member governments. It even includes (bottom right) negotiations meetings.

LEGAL BASIS: WTO Agreement
Art.4 (structure)

All of them are chaired by ambassadors or other delegates from the members. One exception is the “Trade Negotiations Committee”, whose chair is traditionally the WTO director-general. But when the negotiators get down to specific subjects such as agriculture or fishing subsidies, those sessions are also chaired by ambassadors or other delegates.

The members are determined to keep control.

There are three exceptions to this. Two committees deal with “plurilateral” agreements, meaning only some members have signed them. Here, the principle is still the same. The committees comprise all the countries that have signed these agreements.

The third is the Appellate Body. This consists of seven specialist judges supported by a separate, small secretariat, who hear appeals in legal disputes. Even then, its work is controlled by the full WTO membership in the Dispute Settlement Body.

Is the WTO democratic?Back to top

This is a difficult one. The short answer is yes and no.

The WTO is definitely democratic among its governments. The consensus rule means all members have equal say. Voting is available as a fallback, but so far members have rejected that option.

But does it represent the people? At least as much as any other international organisation. Some governments are democratic; some are not.

The top decision-making body is the ministerial conference which meets about every two years.

So if our country’s trade minister (or its economic or foreign affairs minister) is elected or appointed by an elected government, then we have an elected representative running the WTO.

For example, Canada’s trade minister is an elected member of its parliament. The US minister responsible for the WTO is the US Trade Representative, appointed by the president and confirmed by Congress.

The ambassadors and delegates representing our country would also be under instructions from an elected or democratically appointed minister.

If our country is a dictatorship, then I’m afraid our representative is probably not elected (allowing for multiple shades of grey over what those words actually mean). But no one wants the WTO to interfere in that, so it just accepts whatever each country’s domestic system produces.

Seattle protests 1999 Seattle Municipal Archives, (CC BY 2.0)
World government? The famous anti-WTO protests, Seattle 1999

Don’t compare the WTO and EUBack to top

One of the problems is that in the Brexit debate people are comparing the WTO with the European Union, which has an elected parliament as well as a council of member states meeting regularly at ministerial or head-of-government level.

The comparison is false. The EU has a bureaucracy with executive power and a legislature which handles laws. The WTO’s bureaucracy — the Secretariat — has no executive power. The closest equivalent to legislation in the WTO is its trade agreements and they are negotiated by all the governments together.

Is it a good idea for the WTO to be run by directly elected representatives? Only if you believe that directly elected politicians are better at negotiating some pretty technical and complicated trade agreements than our trade ministers and their officials. Or if you believe in world government.

The 1999 Ministerial Conference in Seattle saw the largest civil society protests in the WTO’s history. What happened outside the conference even become a movie.

One of my lasting memories from Seattle was protestors simultaneously complaining that the WTO had too much power (they over-estimated it), and demanding direct elections to the WTO, which would have made the WTO an organ of world government and in theory much more powerful.

Find out moreBack to top

On the WTO website:

On this blog


Updates: August 19, 2018 — added two more links to the “Find out more” section; August 29, 2018 — added links referencing the legal basis in the WTO Agreement

Photocredits:
• WTO meeting: the Trade Negotiations Committee, November 28, 2017 © WTO
• WTO building main entrance with statue of “Justice” by Luc Jagi (1925) © WTO
• WTO protesters on 7th Avenue, 1999, Fleets and Facilities Department Imagebank Collection, Seattle Municipal Archives, CC BY 2.0


 

How does the Trade Facilitation Agreement really affect Brexit?

Those who see no problems if the UK and EU fail to strike a deal regularly claim the WTO’s Trade Facilitation Agreement will come to the rescue. They are wrong.

By Peter Ungphakorn
POSTED AUGUST 16, 2018 | UPDATED AUGUST 19, 2018

“The new Trade Facilitation Treaty commits members to facilitating trade, not obstructing it.” So wrote Iain Duncan Smith, former cabinet minister, Conservative Party leader and vocal Leave campaigner, in the Telegraph on August 15, 2018.

The argument is made with increasing frequency by “hard” Brexiters, who claim trade between Britain and the EU will not be disrupted, even if there is no agreement between them about their trading relationship when the UK leaves the EU.

Similar claims have been heard from former UK trade minister (1990–92) Lord (Peter) Lilley in the Times the previous day, economic adviser Ruth Lea on Brexit Central, and international economic law professor David Collins, on Brexit Central and in the Spectator.

JUMP TO
What is it?
‘To the extent possible’
‘Shall’

A number of other arguments have been challenged, particularly on what WTO rules might or might not say about checks on product safety and standards and other issues.

This comment focuses only on the WTO’s Trade Facilitation Agreement because the claims are so wrong we can wonder if those making the claims have actually ever looked at the agreement or a summary.

Basically, the Trade Facilitation Agreement is irrelevant to the question of whether the UK and EU can check each other’s goods.

It’s not difficult to find. There’s a whole section of the WTO website on the subject, with links to an even better site, the TFA Facility.

What is it?Back to top

The agreement is important. The main purpose is to slash the costs of trading by cutting red tape when goods cross borders. So it calls for streamlined procedures, paperwork handled electronically and as simply as possible, and so on. It also breaks new ground by allowing developing countries to promise to reform their procudures on condition they receive aid to implement it.

Because customs and other procedures in developing countries tend to be slow and cumbersome, it’s these countries that stand to gain the most from implementing the agreement.

But it would be wrong to say the agreement is targeted at only or even mainly developing countries. Far from it. There are important provisions that developed countries like the EU and UK have to respect or face legal challenges.

It’s just that the provisions dealing with electronic paperwork and streamlined procedures don’t fall into that category. They are written in a way that only requires countries to do their best to comply. And what “doing their best” means is left up to them.

To see how this works, it’s useful to compare how different parts of the agreement are written. In some parts the compulsory “shall”, meaning “must”, appears frequently. In other parts it’s phrases like “to the extent possible”. Let’s see which they are.

Easily accessible: screenshot of articles applying to all countries as presented on the TFA Facility website
Easily accessible: screenshot of articles applying to all countries as presented on the TFA Facility website. Click the image to see it full size

‘To the extent possible’Back to top

This is what the agreement’s Article 7 (“release and clearance of goods”) paragraph 1 says on “pre-arrival processing”:

1.1. Each Member shall adopt or maintain procedures allowing for the submission of import documentation and other required information, including manifests, in order to begin processing prior to the arrival of goods with a view to expediting the release of goods upon arrival.

1.2. Members shall, as appropriate, provide for advance lodging of documents in electronic format for pre-arrival processing of such documents.

Note “with a view to” in paragraph 1.1 and “as appropriate” in 1.2. These phrases allow countries quite a lot of leeway in implementing pre-arrival processing, particularly in electronic form.

Phrases like “as appropriate”, “as rapidly as possible”, “within the shortest possible time”, “to the extent possible”, ”wherever practicable”, and “encouraged to” appear throughout this article, all the way down to paragraph 9, which deals with perishable goods:

9.1 With a view to preventing avoidable loss or deterioration of perishable goods, and provided that all regulatory requirements have been met, each Member shall provide for the release of perishable goods:

(a) under normal circumstances within the shortest possible time; and
(b) in exceptional circumstances where it would be appropriate to do so, outside the business hours of customs and other relevant authorities.

9.2 Each Member shall give appropriate priority to perishable goods when scheduling any examinations that may be required.

9.3 Each Member shall either arrange or allow an importer to arrange for the proper storage of perishable goods pending their release. The Member may require that any storage facilities arranged by the importer have been approved or designated by its relevant authorities. The movement of the goods to those storage facilities, including authorizations for the operator moving the goods, may be subject to the approval, where required, of the relevant authorities. The Member shall, where practicable and consistent with domestic legislation, upon the request of the importer, provide for any procedures necessary for release to take place at those storage facilities.

9.4 In cases of significant delay in the release of perishable goods, and upon written request, the importing Member shall, to the extent practicable, provide a communication on the reasons for the delay.

We could also take a look at Article 8 on border agency cooperation. Note “to the extent possible and practicable”, “mutually agreed terms” (relevant for “no deal” between the UK and EU), “with a view to” and “may include”. Again, not exactly compulsory:

1. Each Member shall ensure that its authorities and agencies responsible for border controls and procedures dealing with the importation, exportation, and transit of goods cooperate with one another and coordinate their activities in order to facilitate trade.

2. Each Member shall, to the extent possible and practicable, cooperate on mutually agreed terms with other Members with whom they share a common border with a view to coordinating procedures at border crossings to facilitate cross-border trade. Such cooperation and coordination may include:

(a) alignment of working days and hours;
(b) alignment of procedures and formalities;
(c) development and sharing of common facilities;
(d) joint controls;
(e) establishment of one stop border post control.

The fact is, developed countries like the UK and EU already implement these provisions, and if anyone is dissatisfied with how well they are complying there’s little they can do about it under this agreement.

‘Shall’Back to top

But note that the provision on release and clearance of goods doesn’t appear in the agreement until Article 7. That’s a pretty low priority.

What do the previous six articles deal with? Answer: rule-making, decision-making, transparency and the ability to comment. Here’s the list:

  • Article 1: Publication and Availability of Information
  • Article 2: Opportunity to comment, information before entry into force and consultations
  • Article 3: Advance Rulings
  • Article 4: Procedures for appeal or review
  • Article 5: Other measures to enhance impartiality, non-discrimination and transparency
  • Article 6: Disciplines on fees and charges imposed on or in connection with importation and exportation and penalties

In these articles, the compulsory “shall” appears much more often. For example, new regulations must generally be published in advance. Or, if an importer asks for an advance ruling on what the customs category a particular product, and therefore what the customs duty is, Article 3 begins:

“Each Member shall issue an advance ruling in a reasonable, time-bound manner to the applicant that has submitted a written request containing all necessary information. If a Member declines to issue an advance ruling, it shall promptly notify the applicant in writing, setting out the relevant facts and the basis for its decision.”

The UK and EU will have to (or “shall”) comply with these requirements each time the situation arises in the future. Even then, Article 2 on the opportunity to comment features “to the extent practicable” in its two key paragraphs.

In other words the compulsory bits have nothing to do with frictionless border procedures.

But they are important to help traders understand what each countries’ rules are.


See also: Does the WTO require countries to control their borders?

Updates: August 19, 2018: minor edit for clarity
Photocredit: Port photo by Martin Damboldt, Pexels, public domain (CC0)