Flexibility or Gridlock? The Promises and Perils of Popularizing Plurilateral Agreements at the WTO

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Editor’s Note: This post responds to Bernard Hoekman and Petros Mavroidis’ article in the current issue of EJIL Vol. 26 (2015), No. 2, titled “WTO ‘à la carte’ or ‘menu du jour’? Assessing the case for more Plurilateral Agreements”. For a post by the authors of the article, introducing their piece, see here. For other comments see here and here . For the authors’ concluding response, see here.

Professors Bernard Hoekman and Petros Mavroidis’ EJIL article WTO ‘a la carte’ or ‘menu du jour’? Assessing the Case for More Plurilateral Agreements provokes much thought on opportunities for achieving better flexibility and neutralizing gridlocks at the WTO. The article was published soon after WTO Director General Roberto Azevedo lamented the organization’s failure to reach a work programme under the Doha Development Agenda (DDA) under its 31 July 2015 deadline, which could conceivably impede trade negotiations at the next WTO Ministerial Conference at Nairobi in December 2015. Professors Hoekman and Mavroidis provide a brilliant exposition of the factors to be considered in using the plurilateral agreement (PA) route while attempting to build multilateral agreement on more frontiers of world trade.

While I completely agree with Professors Hoekman and Mavroidis that more ‘variable geometry’ is needed now to breathe life into the trade negotiations mandate of the WTO, I do wonder whether devoting organizational resources at this stage to develop a PA ‘code of conduct’ with transparent terms on the mode of negotiating issue-specific PAs, is something that the WTO can politically afford at this stage of institutional stagnation and negotiations inertia over the DDA. A PA duly approved by the WTO membership under Art. X.9 of the WTO Agreement could indeed be a viable path to achieve harmonization and discipline over non-tariff measures, but how could this be harnessed to incentivize reaching a multilateral agreement among WTO members? If the two remaining PAs to date – on civil aircraft and government procurement – have not been universally ratified or widely opted into by WTO members to date, how can this be done under a strategically-crafted PA (as Hoekman and Mavroidis appear to suggest in proposing more usage of this route under an upfront code of conduct addressing the scope of coverage, e.g. an issue for WTO Plus, or a WTO Minus X issue on regulatory policy cooperation)?

If we go back to the voluminous literature explaining the 15 years of deadlock to date under the DDA, there are promises and perils in going down the PA route to save the WTO from gridlock. For one, an issue-driven PA might not be the most efficient instrument for articulating and negotiating already very diverse and evolving configurations of developing country interests, with the BRICS countries possibly having different trading interests as other Middle Income Countries/MICs, and other regional developing country groupings such as the MERCOSUR, ASEAN, ACP, COMESA countries. Because the PA ultimately has to obtain approval from the entire WTO membership, this makes the PA approval process vulnerable to similar negotiating gridlocks as with the DDA to date. As Paul Collier rightly argued a decade ago, with WTO membership being largely composed of developing countries, “[t]he concept of policy coherence, and its implication that an appropriate objective of trade policy should be to promote development, is not consistent with the use of trade policy purely for self-interest. Hence the GATT bargaining model of reciprocated concessions is no longer entirely appropriate.” Manfred Elsig and Cedric Dupont specifically point out that for Doha, the gridlock and division between and among the United States, the European Union, Brazil, and India “have hindered progress and contributed to the lowering of overall ambitions as to the market-liberalizing outcome”.

Second, as noted by Professors Hoekman and Mavroidis, there may well be corresponding burdens on the WTO Secretariat over the administration of new PAs, which could also disincentivize their adoption. While the WTO’s vast funding from contributions of its membership should not make resource allocation on different tracks of parallel negotiations (plurilateral and multilateral) that much of a concern, as Professors Hoekman and Mavroidis acknowledged in earlier work in regard to the Agreement on Government Procurement (AGP) [Petros Mavroidis and Bernard Hoekman, The World Trade Organization’s Agreement on Government Procurement: Expanding Disciplines, Declining Membership?, World Bank Policy Research Papers, 1999], fewer countries had the technical capacity and domestic wherewithal at that time to join the AGP in a multilateralized setting. Even to this day, the AGP accession among the rest of the WTO membership remains very much a glacial affair. The WTO Secretariat’s ongoing technical assistance and capacity-building to WTO members for purposes of facilitating accession to the AGP, will have to be replicated for any and all PAs in the future, with no guarantees that the PA will indeed expeditiously achieve the desired multilateral outcome.

Finally, even if PAs may be argued as not necessarily being trade-diversionary in the way that preferential trade agreements (PTAs) could arguably be, I am somewhat less skeptical of the promising use of PAs than Stephen Woolcock’s position that we should take the PTA route, rather than the PA route, because of the latter’s low probability of being accepted by the WTO membership. Market demand will always find (and already did, in the past) a way of incentivizing enough critical global players to reach agreement on an issue-based basis, as recently seen from the United States’ leading role in securing cooperation from 50 trading partners to agree on the landmark expansion of the Information Technology Agreement to phase out tariffs in more technology export lines. Professors Hoekman and Mavroidis rightly point out in their EJIL article that “[w]hat is needed are clear ex ante rules on PAs that ensure that such agreements are not vehicles for some countries to escape their general or specific WTO obligations and that the interests of small/poor countries are protected.”

The devil will be in the details – and how to muster the political support and equal representation necessary to ensure that a standardized way of negotiating and creating PAs following a ‘Code of Conduct’ will ensure legitimate and universal acceptance from, as well as frequent use by, the WTO membership. Professors Hoekman and Mavroidis sketch several factors to consider in devising such a code of conduct (such as a proviso that any WTO member opposing a PA be made to explain reasons for opposition), but I would suggest that disparities in policy, institutional, resource, politics, and legal factors behind the current DDA deadlock also be taken into account in designing the appropriate Code of Conduct to move forward with PAs. Issue-based PAs are no less immune to the same challenge of relevance to changing WTO constituencies as the multilateral negotiations under the DDA, and one can expect the same clamor for more equitable and democratic representation of developing countries in drawing up the global trade agenda to likewise infuse a PA circumscribed to specific issues. Perhaps it will be quicker, indeed, to reach an agreement on an issue-by-issue basis under the PA route than through the single undertaking path of reciprocal concessions fostered under multilateral trade negotiations. Certainly there is less of a fear that a WTO-membership approved PA will have the effect of diverting global trade, as opposed to PTAs which could potentially do so for specific regions, clubs of States, or geographic clusters.

If there must be a “WTO 2.0” – whether this is done multilaterally, or by PA, or by PTA – its new DNA has to internalize that the historic postwar global market dominance of the Quad (the US, Europe, Canada, and Japan) now has given way to calibrating interests of the G20, the BRICS nations (Brazil, India, China, South Africa), the developing country membership of the WTO and the increasingly resonant emerging market voices all urging development as the ultimate point and objective of wealth creation through global trade. ‘Green Room’ politics (e.g. GATT-style negotiations limited to smaller elite groupings at the discretionary invitation of the WTO Director-General and the influence of the Quad) would have to be abandoned for another negotiating model that does not sidestep the new voices and emerging market players in world trade. The WTO’s Committee on Trade and Environment and Committee on Trade and Development, along with other ‘trade-and’ working groups (e.g. trade and technology transfer; trade, debt and finance, among others) might have to take broader and deeper functional and operational roles to assist in facilitating and reconciling developing country concerns in the lead-up to drawing up the WTO’s work programme for multilateral trade negotiations.

Such structural or institutional reforms that deepen developing country engagement could, perhaps, be ‘pilot-tested’ under a PA Code of Conduct that draws more inputs from the WTO membership to ensure its even-handedness, transparency, and legitimacy on issue-based trade regulation. Certainly Professor Hoekman and Professor Mavroidis’ cogent article on the potentials and pitfalls to PAs is one critically important step to rethinking and reimagining the contemporary dynamics and structures of international trade negotiations.

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Jakob Cornides says

October 1, 2015

The advantage of PA negotiations is that they allow a coalition of the willing to go forward - and what the willing agree upon often creates a platform that others will join later on. So, those who are most willing to engage are usually those who will be defining the rules.

The GPA is a very good example how this works. While in other areas of WTO work there is nearly deadlock, the GPA is progressing. The rules of the 1994 agreement have been updated, and there is a constant flux of new accessions or accession requests. Originally the GPA was a rather small club consisting only f OECD countries, but in the last years the membership has broadened, with Taiwan, Armenia, Montenegro, New Zealand, and Moldova, having acceded, while the accession of Ukraine is already decided. Accession negotiations are well under way with Chine, while Australia and Tajikistan have just recently submitted their first formal offers.

Not sure whether this could be a model for all other areas of Trade policy, but for public procurement it definitely works well.

Diane Desierto says

October 1, 2015

Agreed. The Agreement on Government Procurement might also have attracted more accessions up to its current 45 Members, because of the urgency to strengthen foreign investment regulatory frameworks - especially given the wave of public-private partnerships in the last decade for more capital recipient States.

I would add that while the 'coalition of the willing' take the lead in drafting the issue-based PA, it's also the silence of the rest of the membership that enables the new rules to be written. If the rest of the members do not see the PA issue as a threat to their economic interests, their acquiescence to the issue-based PA will make passage swifter.