A liberal international trade market can be promoted and protected through international organizations. Such organizations provide a platform for various countries with different levels of economic development to come together and help each other protect mutual interests and spark further economic development. The World Trade Organization is one of these institutions. The World Trade Organization, with roots traceable to the Bretton Woods Conference, promotes the liberalization of trade and nondiscrimination; however, its ineffective decision making process posses a challenge to the principles it was established on. One possible solution to this problem is changing the basis of the decision making process from consensus and Single Undertaking to critical mass decision making.
The roots of the World Trade Organization can be traced back to the Bretton Woods Conference, even though the organization itself is not considered a Bretton Woods institution. In the Bretton Woods conference, world leaders agreed to create three institutions that would promote international economic development: the World Bank, the International Monetary Fund, and the International Trade Organization (Mingst, 2017). The International Trade Organization was never created, but its principles were used to create the General Agreements on Tariffs and Trade which would later become the World Trade Organization (Mingst, 2017). The General Agreements on Tariffs and Trade, or GATT, served as a “system of international institutional governance” that would allow markets to be open and nondiscriminatory while ensuring that states continued to develop domestically (Capling, 2009). Negotiations within GATT occurred multilaterally between countries with shared interests, and once an agreement was reached, it would be expanded to the other participants within GATT (Mingst, 2017). Individual states, however, were allowed to claim exemptions if the agreement would cause domestic issues (Mingst, 2017). GATT was later formalized, and the name was changed to the World Trade Organization.
With the formalization of this institution, ” the global trade regime now had a firm legal foundation, a strong organizational basis, and an effective dispute settlement mechanism to ensure the enforcement of multilateral trade rules and disciplines” (Capling, 2009). The World Trade Organization, and its predecessor GATT are based on the same principles. Both organizations support trade liberalization, nondiscrimination, reciprocity, and transparency (Karns, 2015). However, the World Trade Organization achieved political prominence, which GATT lacked, through its implementation of ministerial meetings which allows members to meet regularly (Mingst, 2017). According to its website, the WTO is mainly a place for member states to negotiate trade agreements, and settle any disputes that arise from those agreements (“What is the WTO”). A major difference between GATT and the WTO, is that the World Trade Organization was able to establish the Trade Practice Review Mechanism, which allows the monitoring of the practices of member states, and the Dispute Settlement Body, which allows member states to settle trade disputes in front of a panel (Mingst, 2017). Although the WTO promotes nondiscrimination, its decision making practices are undermining this very principle.
One key challenge facing the World Trade Organization is its decision making process. The decision making process of the WTO is based on consensus and Single Undertaking (Capling, 2009). According to Karns, consensus allows all member states to make a motion, introduce and withdraw proposals, or block consensus (Karns, 2015). Single Undertaking, regarding negotiations, means that everything must be agreed upon before moving forward (Capling, 2009). Regarding obligations, Single Undertaking means that, once an agreement has been negotiated, member states are obligated to subscribe to it and are not allowed to opt-in or opt-out (Capling, 2009). Although there is no opt-in or opt-out option, agreements often include built-in exemptions and flexibilities that result in a large variance in obligations for different countries (Lanoszka, 2017). Consensus is seen as a way to prevent change and protect the status quo, while Single Undertaking has made member states reluctant to include new issues in the agenda (Capling, 2009). These two principles that make up the WTO’s decision making process cause problems within the organization because of how power is divided between member states. Within the World Trade Organization, relative market size is the main source of power (Karns, 2015). By using market size to determine power within the WTO, developed countries inevitably control the decision making process. Less developed countries with small markets would have significantly less power than countries like the United States and China, and would not block or make a motion out of fear of retaliation from powerful states. This imbalance of power created within the organization favors the interests of developed countries, and allows them to take economic opportunities that are more needed in less developed countries (Karns, 2015). The ineffective decision making process that is perpetuated by the imbalance of power within the WTO needs to be changed to allow all states to have equal opportunities when it comes to the terms of trade agreements.
A possible solution for the challenge presented by the World Trade Organization’s decision making process is to make decisions based on the critical mass framework. Within the critical mass decision making framework, member states of the WTO that have a combined majority of shares in the product being discussed in negotiations can assume that the non-participation of other states will pose no threat to the effectiveness of any agreement that is reached and implemented (Gallagher, 2009). This framework is similar to GATT’s flexibility in negotiations because it allows groups of members that share the same interests or trade the same products to propose and negotiate new ideas and initiatives (Capling, 2009). The developed, and more powerful countries would no longer hold the most power because they don’t produce every product on the market, therefore, the presence of these countries is not essential in all negotiations. Within this framework, less developed countries could come together, and gain more control of the negotiations that will impact them the greatest by proposing their own initiatives without fear of retaliation from developed countries. The critical mass framework allows the countries that would be the most affected by changes in agreements regarding a specific market or product, for example the import and export of wheat, to have a bigger say in the guidelines of those agreements. Critical mass agreements in different sectors would allow large sections of the global market to be liberalized which would result in the stabilizing of prices of those commodities (Gallagher, 2009). Critical mass agreements ensure that nondiscrimination is followed in a very simple way.
The World Trade Organization was established to promote the liberalization of the international trade market, and provide a place where member states could negotiate trade agreements and solve any problems that arose from those agreements. In theory, the decision making process of the World Trade Organization allows all member states to have a voice in all negotiations; however, in practice, this is not necessarily true. The decision making process allows developed countries with larger markets to have the most power, and this dissuades less developed countries from pursuing agreements that will be of greater benefit to them out of fear of retaliation. By eliminating the principles of consensus and Single Undertaking from the WTO’s decision making process, and replacing it with the critical mass framework, there would be more balance of power amongst member states and the decision making process would produce agreements that are more effective and beneficial to all members.
Capling, Ann , and Richard Higgott. “Introduction: The Future of the Multilateral Trade System —What Role for the World Trade Organization?” Global Governance, vol. 15, 2009, pp. 313–325.
Gallagher , Peter, and Andrew Stoler. “Critical Mass as an Alternative Framework for Multilateral Trade Negotiations.” Global Governance, vol. 15, 2009, pp. 375–392.
Karns, Margaret P., et al. International Organizations: The Politics and Processes of Global Governance. Lynne Rienner Publishers INC, 2015.
Lanoszka , Anna. “Multinationals, International Arbitration, and the World Trade System: Confronting the Inconvenient Issues in the WTO.” International Journal of Business and Economic Development, vol. 5, no. 1, Mar. 2017, pp. 1–10.
Mingst, Karen A., and Ivan M. Arreguín-Toft. Essentials of international relations. W.W. Norton & Company, 2017.
“What is the World Trade Organization?” WTO | Understanding the WTO – what is the world trade organization?, World Trade Organization, www.wto.org/english/thewto_e/ whatis_e/tif_e/fact1_e.htm.