The club approach to multilateral trade lawmaking.

AuthorLamp, Nicolas
PositionAbstract into III. The Club Approach in the History of Multilateral Trade Lawmaking B. The Self-Perpetuating Club: Participation in GATT Negotiations 3. Who Needs to Agree: Critical Mass Approaches to Lawmaking, p. 107-149

Abstract

The World Trade Organization (WTO) stands at the center of an emerging structure of global economic governance. Its rules affect important aspects of everyone's lives--how much people pay for the products that they purchase, what types of employment are open to them, and which medicines they can access. And yet, while the WTO was conceived as a "negotiating machine" that would develop rules in sync with an increasingly dynamic global economy, negotiations on a new set of global trade rules have now been deadlocked for over a decade. This impasse is all the more surprising in light of the fact that the multilateral trade regime was, up until the establishment of the WTO in 1995, one of the most productive engines of international lawmaking. The present Article explores why multilateral trade lawmaking used to work, and why it is no longer working today.

A key part of the answer is that before the establishment of the WTO, the multilateral trading system worked as a "club," which allowed the major trading powers to manipulate the circle of participants in trade negotiations depending on how these powers weighed the costs and benefits of the participation of additional states. The Article identifies three factors that led the major trading nations to adopt this approach: (1) the greater practicality of negotiations among a smaller group of countries, (2) the insiders' greater influence on the outcome of the negotiations, and (3) the chance to subsequently compel outsiders to join the agreement on the insiders' terms. The Article shows how the major trading powers were able to implement the club approach to multilateral trade lawmaking throughout the pre-WTO era-an ability that accounts for much of the legislative dynamism of that time. The Article then argues that the founding of the WTO, while itself an example of the successful employment of the club logic, has made the use of the club approach in the multilateral trading system much more difficult, if not impracticable. As a result, the pace of lawmaking in the multilateral trading system is now circumscribed by the need to seek the support, or at least acquiescence, of all WTO members.

Table of Contents I. Introduction II. Conceptualizing Clubs in Multilateral Trade Lawmaking III. The Club Approach in the History of Multilateral Trade Lawmaking A. The Club Within: GATT and the ITO B. The Self-Perpetuating Club: Participation in GATT Negotiations 1. Who Can Negotiate: The Principle of Payment and the Principal Supplier Rule 2. What Can Be Negotiated: Limitations on Products and Policies 3. Who Needs to Agree: Critical Mass Approaches to Lawmaking 4. Who Gets to Be in the Room: From the Bridge Club to the Green Room C. The Self-Transcending Club: The Single Undertaking and the Founding of the WTO D. The Internalized Club: Lawmaking in the WTO 1. Accession Negotiations 2. Variable Geometry 3. Differentiation of Obligations IV. Conclusion I. Introduction

The World Trade Organization (WTO) stands at the center of an emerging structure of global economic governance. Its rules affect important aspects of everyone's lives-how much people pay for the products that they purchase, what types of employment are open to them, and which medicines they can access. And yet, while the WTO was conceived as a "negotiating machine" (1) that would develop rules in sync with an increasingly dynamic global economy, negotiations on a new set of global trade rules have now been deadlocked for over a decade. This impasse is all the more surprising in light of the fact that the multilateral trade regime was, up until the establishment of the WTO in 1995, one of the most productive engines of international lawmaking. The present Article explores why multilateral trade lawmaking used to work, and why it is no longer working today.

A key part of the answer, the Article suggests, is that before the establishment of the WTO, the multilateral trading system worked as a "club." It is not uncommon to see the institutions of the multilateral trade regime-the General Agreement on Tariffs and Trade (2) (GATT) in particular-described as a "club." (3) Some use this label to evoke the pragmatism, informality, and insularity that characterized the GATT. (4) Others employ the concept to highlight the extent to which many countries, especially developing countries, have historically been excluded from meaningful participation in trade lawmaking and from the benefits of the trade regime. (5) However, the concept has remained more of a political catchphrase than a systematically developed analytical tool. The present Article takes inspiration from economic theory to give the club concept more analytical depth and then employs the refined concept to explore the history, legal ramifications, and political implications of the club approach to multilateral trade lawmaking.

Economic theory defines clubs by reference to the characteristics of the goods that the members of the club share. (6) Put simply, a club good is a good that is best shared with some, but not too many, others. (7) As a consequence, the club members seek to exclude those whose participation would pose higher costs than benefits. (8) To say that states adopt a club approach to multilateral lawmaking, then, is to say that they seek to manipulate the circle of participants depending on how they weigh the costs and benefits of the participation of additional states.

The observation that the major trading nations have perceived participation in multilateral trade lawmaking as a club good is by no means trivial. In fact, there are good reasons, as well as historical precedents, for treating participation in trade lawmaking as a private or a public good, rather than a club good. As recently as the early twentieth century, both the United States and the United Kingdom saw trade lawmaking as a private good that was best "shared" with no one else. In the United States, Congress was for the most part unwilling to let anyone interfere with its autonomy in setting tariff levels. (9) And the United Kingdom was "stubborn[ly] unilateral ..." for different reasons; the status of free trade in its political culture was such that it saw any attempt to bargain over trade policy as heresy. (10) Conversely, it is not implausible to see participation in trade lawmaking as a public good. U.S. Secretary of State Cordell Hull, the intellectual father of the Reciprocal Trade Agreements program, (11) famously saw one of the principal objectives of an international trade regime in the promotion of international peace. (12) Arguably, the regime was more likely to serve this function when more states participated in its creation and subsequently adhered to it. Indeed, many international lawmaking endeavours aim for universal adherence and are therefore as inclusive as possible. The U.S. plans for an International Trade Organization (ITO) were no exception. (13) The ITO was supposed to be a universal organization with low barriers to entry, (14) negotiated in the framework of the United Nations through a process culminating in a multilateral conference open to all members of the United Nations (the Havana Conference). (15)

What, then, prompted the major trading nations to complement this universal ambition with, and eventually abandon it in favor of, the club approach to multilateral trade lawmaking that is embodied in the GATT? Examination of the historical material reveals three factors that led these nations to see participation in multilateral trade lawmaking as a club good: (1) the greater practicality of negotiations among a smaller group of countries, (2) the insiders' greater influence on the outcome of the negotiations, and (3) the possibility subsequently to compel outsiders to join the agreement on the insiders' terms (leverage). As shown below, these three rationales for using the club approach help explain the patterns of participation in multilateral trade lawmaking from the GATT/ITO preparatory negotiations to the present. While the tools employed by the major trading nations to implement the club approach, and the constraints that they have faced in doing so, have evolved, these underlying rationales have largely retained their force.

There are at least three reasons why it is important to understand the club approach to multilateral trade lawmaking. First, an understanding of how multilateral trade lawmaking has worked in the past can shed light on the reasons why, except in certain constellations, it no longer works today. While the club approach has been a pervasive feature of lawmaking throughout the history of the trading system, the opportunities for employing the club approach in the WTO are much diminished. This is not only due to the requirement that new plurilateral agreements can only be added to the WTO Agreement (and thus made subject to the dispute settlement system) with the consensus of the entire membership. (16) The Article also argues that the club approach has become a victim of its own success. In the Uruguay Round of trade negotiations, (17) the major developed countries managed to leverage the club approach to force the developing countries to assume an unprecedented level of obligations. It is unlikely that they will ever be able to replicate this feat: not only have developing countries become adept at resisting the club dynamics of the GATT era, but the very success of the club approach in the Uruguay Round also means that the multilateral trading system is now too valuable to the developed countries for them to credibly threaten to abandon it in favor of a new club. Based on the history of multilateral trade lawmaking, one would expect that the most promising avenues for lawmaking are those in which elements of the club dynamic are still present, such as negotiations for accession to the WTO, negotiations in the context of existing plurilateral agreements, (18) negotiations of agreements whose benefits...

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