Ec304 A1

Does the work of the WTO rely on a trade-off between effectiveness and
legitimacy?
To deal with this question sufficiently it is necessary to first assess what is meant by
the terms legitimacy and effectiveness in respect to the work of the WTO and next
analyse the implications achieving each has on the progress and imposition of
agreements and laws by The World Trade Organisation (WTO). The WTO, formerly
known as the General Agreement on Tariffs and Trade (GATT) before 1995, is the
only global international organisation dealing with the rules of trade between nations1.
Although the WTO states that its aim is to ‘help producers of goods and services,
exporters, and importers’2, the legitimacy and fairness of WTO agreements and
ministerial conferences has often been called to question. In contrast to the GATT, in
an effort to become legitimate and as a result of the increasingly globalised world, the
WTO must integrate the wishes of the ever-stronger G-20 group of developing
countries into its negotiations to remain an effective trade negotiator. As a result, the
WTO has had to make preferential agreements for some members, change the
procedure of conference rounds and ‘green room’ discussions and extend talks, in the
case of the Uruguay round, for over half the original time to maintain its standing as a
legitimate organisation. Recently however, this trade-off has resulted in a deadlock in
the most recent WTO talks, the Doha Round, threatening the effectiveness of the
organisation altogether.
To analyse the effectiveness of international organisations such as the WTO, it must

first be established what is meant by ‘effectiveness’. In this essay, the definition
coined by Young et al. that effectiveness ‘is a matter of the contributions that
institutions make to solving the problems that motivate actors to… create them’3 will
be used to judge the premise that the WTO has had to compromise more effective
trade policies in order to maintain legitimacy. This essay will consider effectiveness
both from an economic approach, incorporating a legal definition of effectiveness
with economic efficiency criterion, as well as political effectiveness; successful
progress may be both highly inefficient and exhibit low levels of legal compliance but
is effective, if the behaviour of the WTO members changes in a manner that helps to
manage the problems that the WTO has set out to tackle4.
The WTO’s legitimacy has been questioned due to various processes adopted by the
organisation from its origins at the GATT; its members establish WTO policies and
authority in a variety of ways, with no direct democratic underpinning. In addition, a
lot of WTO lawmaking happens during dispute resolutions as opposed to beforehand
and often national governments are vulnerable to inadequately represent both the
concerns and values of their constitutes in the quest to represent special interests5.
Legitimacy is a term difficult to define and hence problematic to judge. According to
the Oxford English dictionary, it is the ‘condition of being in accordance with law of
1 WTO website, http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm, visited
04/12/09
2 WTO website, visited 04/12/09.
3 Levy, M. and Young, O., The Effectiveness of International Environmental
Regimes: causal connections and behavioural mechanisms (1999), Massachusetts,
USA, p. 3
4 Levy, M. and Young, O., The Effectiveness of International Environmental
Regimes, p. 5-6
5 Atik, J., International Law Review, 33 (2000-2001), “Democratizing the WTO”, p.
455
0708828
principle’6. However, it is crucial to organisations, since ‘their survival can depend on
their ability to establish and sustain it’7.
If the Dornbusch-Scott theory of legitimacy holds true, it is clear why the WTO in
particular needs to be legitimate. This theory states that members are more likely to
comply willingly with directives if they attribute authority with their directive’s
power exercise8. Therefore, in order to be legitimate, the WTO must not only adhere
to more democratic processes, but also promote outcomes that members will approve
of. However, as disputes on agriculture between powerful members of the WTO
continue, with the EU, US and Japan wishing to protect their farmers as opposed to
Brazil, Australia and Argentina wishing to access free markets, whilst developing
countries struggle to meet increasingly stringent food safety standards imposed in
developed countries9, such solutions are difficult to find.
Some argue that the WTO favours liberalisation over legitimacy. According to its
critics, the WTO is accountable to no one, and must increase diverse participation in
order for continued problems of legitimacy to cease10 despite the WTO’s increased
membership of 147. This critique argues that actually, free trade and market
integration are not the WTO’s objectives and only a limited objective of preventing
national discrimination should be attempted11. However, this essay will argue that the
benefits of trade liberalisation, if fully achieved, would be for every member of the
WTO, even developing, smaller countries. In fact the trade-off between this proposed
legitimacy, though the WTO should become more transparent, should only be as a
means to achieving better effectiveness in implementing multilateral liberalising
policies.
To adequately understand then whether a trade-off is necessary between economic

and political effectiveness and legitimacy, it must be asked what the supposed
problems are that the WTO was created to solve. In general, the WTO’s central aim is
to promote free trade12. In theory, a liberalisation of markets can benefit both
consumers and producers at a worldwide level, if liberalisation exists across all
markets. In fact, gains from trade are often estimated highly. For instance, if the ratio
of trade to GDP increased by one percentage point, income per person is estimated to
increase by 0.5% - 2%13. The WTO’s main proposition to liberalise world trade
would, in theory, benefit all of the WTO members. Collier for example, argues that
had developing countries participated fully and on equal terms with the developed
6 The Compact Edition of the Oxford English Dictionary (1971) Oxford University
Press.
7 Johnson, C., Legitimacy processes in organisations (2004) Elsevier JAI, Oxford, p.
239
8 Walker, H. et al., Social Forces, 64 (1986) p. 620-643, “Legitimation, Endorsement
and Stability”, p. 634
9 Athukorola, P., Agricultural Trade Reforms in the Doha Round: A Developing
Country Perspective (2004) Division of Economics, Australian National University,
p. 4
10 Cass, D., The Constitutionalization of the World Trade Organization (2005)
Oxford University Press, Oxford, p. 222-223
11 Cass, D., The Constitutionalization of the World Trade Organization, p. 225
12 Brakman, S. et al., Nations and Firms in the Global Economy (2006), Cambridge
University Press, Cambridge, p. 277
13 Frankel, J. and Romer, D., The American Economic Review, (89)3, (1999) p. 379-
399, “Does Trade Cause Growth?”
0708828
countries in the GATT, they could have achieved far faster and better-distributed
growth, as shown by the experience of East Asian countries that adopted outward-
oriented strategies of development from the mid-1960s.14
In practice however, it is very difficult to achieve trade restrictions at world price.

Although trade at any reduced tariff price may seem preferential, the legitimacy of the
WTO depends on making such a lowered tariff fair for all of its members. Many
critics voice concerns of infant industries, declining industries and an uneven balance
of power on a global scale that impede on any liberalisation which is not multilateral
since, where competition is imperfect, such potential gains of economic policies could
be offset by other losses. It is here that the WTO faces a compromise between
economic effectiveness, in using policies that are beneficial to the efficiency of
markets, and the legitimacy of the WTO’s actions. Indeed, though trade is important
to developing countries and their continued engagement in the global trading system
is essential, the theoretical benefits of liberalising trade do not necessarily imply that
the WTO has always promoted economics development in developing countries
sufficiently15. For instance, although seventy per cent of exports go to developed
countries, most of these exports come from just a few developing countries, the East
Asian dragons and China16.
Whilst the WTO has strived to become more legitimate, by encouraging more
members to take part in discussions, the result is a more legitimate but less
economically effective organisation, though arguably more politically progressive as
a result of a more diverse membership. Now that the WTO has a larger membership
than that of the GATT, which was ‘basically a marketplace for OECD countries to
strike deals for reciprocal trade liberalisation’17, it is harder to reach agreements18.
Whilst rounds of talks prior to the Doha Round of negotiations have been ‘remarkably
successful’19, with tariffs on non-agricultural imports in to developing countries being
lowered, some import tariffs remain in place, particularly on labour-intensive
manufactured goods that are imported from developing to developed countries.
Indeed the influx of members in the WTO compared to the GATT has been one of the
key causes for a slow-down in effective negotiations. Whereas the GATT had only
three main participants for much of its time, the US, Japan and the EU, who were all
keen to reduce trade barriers, and only a few developing countries who often chose to
marginalise themselves via the ‘Special and Differential Treatment’ (SDT) act, the
WTO has a variety of members with differing priorities20. In addition, the GATT
negotiations were helped by the exclusion of developing countries, for which Collier
argues SDTs were to legitimise this exclusion process21. In sum, the GATT ‘was
14 Collier, P., The World Economy, 29 (2006), 1423-1449, “Why the WTO is
Deadlocked and What Can Be Done About It”, p. 9.
15 Jones, K., Who’s Afraid of the WTO? (2004) Oxford University Press, Oxford, p.
148
16 McDonald, B., The World Trading System: The Uruguay Round and Beyond,
(1998) MacMillan Press Ltd, London, p. 47
Deadlocked and What Can Be Done About It”, p. 1425.
18 Collier, P., The World Economy, p. 1423
0708828
unfriendly, if not actively hostile, to the interests of developing countries’22,
illegitimate as an organization imposing international standards. And yet, under
GATT’s auspices, eight successful rounds of MTNs for reducing barriers to trade
have been concluded.23
In contrast to the GATT, the WTO relies on the incorporation of developing countries
and moving from a duopoly of negotiations mainly between the EU and the US, to
147 bargaining units ‘makes the sheer mechanics of reaching agreements within a
very limited timetable much more difficult’.24 For this reason, the Doha Round ‘may
thus become the first major multilateral trade negotiation to fail since the 1930s’25.
Whilst prior to this round developing countries have often fluctuated and
compromised, attempts by the US and EU to divide the group of developing countries
led by Brazil and India at the Doha Round have not succeeded and the group has not
disintegrated26.
It would seem that in the WTO’s effort to become legitimate post-Seattle, it has had
to compromise on both economic and political effectiveness. Though primarily due to
pressure from the US, some smaller countries such as El Salvador have deflected27,
the WTO has remained more legitimate with the continued engagement of the G-20.
The entrance of the G-20 as a new key actor however has meant that reforms, in
particular concerning the ‘Singapore issues’ of investment, competition policy,
government procurement and trade facilitation, (which mainly benefit developing
countries) were not agreed in the Cancun ministerial meeting in September 2003, a
meeting ‘designed to get negotiations rolling once more’28. The lack of agreement has
also stalled political effectiveness; the meeting revealed what have come to be
irreconcilable positions of many developing countries and some other WTO members
on whether to start negotiating Singapore issues at all29. If this continues, there is a
possibility that the WTO will become ineffective altogether, since trade agreements
may start to be made bilaterally and preferentially on a regional basis, leaving out
developing countries from negotiations altogether, as they would otherwise find it
difficult to negotiate many differing and fair bilateral agreements against more
politically powerful countries30.
22 Srinivasan, T., The Future of the Global Trading System Doha

Round, Cancún Ministerial and Beyond, (2003) Economic Growth
Center, Yale University, p. 9
Round, Cancún Ministerial and Beyond, p. 8
Deadlocked and What Can Be Done About It”, p. 1449
25 Bergsten, F., Foreign Affairs, Special WTO edition (2005) “Rescuing the Doha
Round”, p. 1
30 Jones, K., Who’s Afraid of the WTO? p. 149
0708828
Developing countries in particular want access to manufacturing and agricultural
markets, as opposed to the developed countries wishes of greater access to the
services market and security for investment31. These conflicting interests make
decisions and negotiations made by the WTO a more complicated process, requiring
fairness in implied decisions since the WTO’s legitimacy became questioned by
developing countries collectively where their perceived interests did not seem to be
served. For example, the WTO’s legitimacy was brought in to stark question during
the riots held outside of the 1999 Seattle talks. Protestors attacked both WTO policies
and its authority to revoke national and local regulation32 and controversy emerged as
several developing countries claimed that they were deliberately excluded from
important meetings, and the WTO was charged with a lack of representation33.
Developing countries had no voice in the ‘Green Room’ process at the Seattle session
in which a selected group of countries participated in the negotiations and decided on
an agenda34.
The Millennium Round also faltered as a result of doubts concerning the distribution
of power within the WTO and a realisation by mainly developing countries after the
Uruguay Round that the preferential agreements made there have not led to the
benefits that were expected35. After this, in an effort to regain an air of legitimacy, the
WTO invited informal discussions on each topic, with any delegation wishing to
participate being invited to do so. This process of holding simultaneously informal
discussions on each topic and formal meetings at which ministers made their
statements avoided much of the unhappiness associated with the “Green Room”
process of earlier ministerials36. However, again in July of 2008, trade ministers from
30 delegations assembled in ‘green room’ negotiations but a list of the countries
invited was not made public and no formal record of discussions was made. Yet, with
147 members, it is clear that an effective meeting including each delegate would
make rectifying decisions nearly impossible in informal discussions.
The WTO has however granted preferential agreements to developing countries. In

doing so though, the WTO has created one of the key impediments to the economic
effectiveness of the WTO’s liberalisation of trade. These preferential agreements were
given to developing countries on the grounds that they could not take on the same
obligations as developed countries but should still, however, benefit from the
obligations assumed by developed economies, under the Most Favoured Nation
principle37. The MFN principle was instilled as a result of lobbying by developing
countries and means that all WTO member countries should be treated the same. This
principle increases efficiency of negotiations, since time-consuming bilateral talks are

32 Atik, J., “Democratizing the WTO”, in International Law Review, 33 (2000-2001)
p. 451
160
Center, Yale University, p.17
37 McDonald, B., The World Trading System: The Uruguay Round and Beyond, p. 49
0708828
no longer needed38. However, it also has the ramifications of developing and
developed countries maintaining tariffs and subsidies, creating a distortion by tilting
market access and incentives to produce to countries which may not have comparative
advantage in these products39, impeding on the economic effectiveness of the WTO.
Nevertheless, the MFN principle has been politically effective until now, in that
members of the WTO have remained meeting in talks to find agreements. However,
excusing developing countries from reciprocity has arguably led to their
marginalisation within the WTO, and the resulting allegations that these measures
result in giving these countries ‘crumbs from the rich man’s table’ have tested the
political effectiveness of such measures40.
These smaller, marginalised developing countries represent one of two main groups
of developing countries that are members of the WTO. Whilst one group would like
to have reciprocal liberalisation, the other is made up of countries currently
marginalised in the world economy that have been granted ‘special and differential’
market access advantages by the OECD and have little interest in bargaining over
market access41. Hence the WTO must either irrevocably lose its legitimacy among
the developing world by marginalising these countries, or try to negotiate an
agreement that suits everyone. Perhaps now, to encourage smaller, marginalised
countries to participate positively in further talks, the WTO may need to let some
countries have preferential treatment over and above prior measures, if they agree to
support the rest of the round42. Without such concedes, political effectiveness of the
WTO may be weakened significantly. Hence it is vital that the WTO keeps the
interest of developing countries in its negotiations; developing countries stand to gain
from the Doha Round agreements.
However, there is some evidence that despite the questions of the governance of the
WTO in the face of its new members, that developing countries were motivated to be
more accommodating given the rise in protectionist demand in the developed
countries following the economic slow down since 2000 and in the post-September 11
atmosphere43. For many developing countries, their main or only assets are often
primary commodities, either agricultural or mining44, in particular sub-Saharan Africa.
However, the legitimacy questions previously hanging over the WTO seem to be
lifting as a result of the WTOs trade-off for legitimacy over economic effectiveness;
Africa’s original ambivalence towards negotiations has now ‘given way to [an]
advocacy for an ambitious outcome to the [Doha] Round’45. Perhaps the improved
transparency and more diverse membership of the WTO has in fact improved the
154
41 Collier, P., The World Economy, 29 (2006), p. 1430
42 Collier, P., The World Economy, 29 (2006), p. 1436
Center, Yale University, p.17
45 Hohmann, H., Agreeing and Implementing the Doha Round of the WTO (2008)
Cambridge University Press, Cambridge, p. 33
0708828
WTO’s political effectiveness in changing many developing countries opinions of the
WTO’s motives.
Though concerns about the WTOs’ legitimacy remain, such as its dispute mechanism,
without this mechanism, smaller and less powerful countries would not be able to
resolve trade conflicts in the same way as is possible through the WTO46. In this case,
the WTO favours effectiveness over transparency, and is right in doing so. When the
WTO Dispute Settlement Body finds that a national measure does not adhere to WTO
obligations, the offending member is expected to change its law to conform to the
WTO law47. In fact, for the WTO to be effective at all, allowing a majority of
members who are willing to agree to rules concerning themselves is necessary, since
it is unrealistic to believe that rule proliferation will take place with universal
agreement.
To conclude, the WTO has been held in a continuous battle between legitimacy and
effectiveness since its origin. Recently though, the increasing number and dominance
of developing countries has strained the traditional governance system48, leaving the
WTO needing to reform its design in order for its effectiveness to improve. At the
moment, the democratic nature and improved transparency of the organisation has
meant that in order to continue as a recognised authority in international trade
negotiations, the WTO has had to submit to drawn-out talks and less economic policy
reform as public pressure and developing countries hold firm that their demands be
considered as well as the politically powerful EU and US. Though the US and the EU
can no longer dominate talks, not should they from a legitimacy perspective, the result
is a loss of effectiveness in the WTO’s main principles, to liberalise world trade.
However, from a political effectiveness point of view, the recent resurge of talks
during the Doha Round, and the noticed change in Africa’s defensiveness towards
WTO policies, despite the current protectionist climate, gives hope that the WTO’s
improved legitimacy can lead to economically efficient outcomes in multilateral talks.
Bibliography
Athukorola, P., Agricultural Trade Reforms in the Doha Round: A Developing

Country Perspective (2004) Division of Economics, Australian National University.
http://rspas.anu.edu.au/economics/publish/papers/wp2004/wp-econ-2004-05.pdf.
Visited 04/12/09.
Atik, J., “Democratizing the WTO”, in International Law Review, 33 (2000-2001).
Bergsten, F., Foreign Affairs, Special WTO edition (2005) “Rescuing the Doha
Round”.
Brakman, S., Garretsen, H., van Marrewik, C. and van Witteloostuijn, A., Nations
and Firms in the Global Economy (2006), Cambridge University Press, Cambridge.
Cass, D., The Constitutionalization of the World Trade Organization (2005) Oxford
University Press, Oxford.
150
47 Atik, J., “Democratizing the WTO”, in International Law Review, 33 (2000-2001)
p.452
0708828
Collier, P., The World Economy, 29 (2006), 1423-1449, “Why the WTO is
Deadlocked and What Can Be Done About It”.
Frankel, J. and Romer, D., The American Economic Review, (89)3, (1999) p. 379-399,
“Does Trade Cause Growth?”.
Hohmann, H., Agreeing and Implementing the Doha Round of the WTO (2008)
Cambridge University Press, Cambridge.
Johnson, C., Legitimacy processes in organisations (2004) Elsevier JAI, Oxford.
Jones, K., Who’s Afraid of the WTO? (2004) Oxford University Press, Oxford.
Levy, M. and Young, O., The Effectiveness of International Environmental Regimes:

causal connections and behavioural mechanisms (1999) Massachusetts, USA.
McDonald, B., The World Trading System: The Uruguay Round and Beyond, (1998)
MacMillan Press Ltd, London.
Srinivasan, T., The Future of the Global Trading System Doha

Center, Yale University Press, New York.
The Compact Edition of the Oxford English Dictionary (1971) Oxford University
Press, Oxford.
Walker, H., Thomas, G. and Zelditch, M. Social Forces, 64 (1986) p. 620-643,

“Legitimation, Endorsement and Stability”.
WTO website, http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm, visited

04/12/09
0708828

Ec304 A1

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Ec304 A1

Uploaded by

Copyright:

Available Formats

Does the work of the WTO rely on a trade-off between effectiveness and

To analyse the effectiveness of international organisations such as the WTO, it must

To adequately understand then whether a trade-off is necessary between economic

In practice however, it is very difficult to achieve trade restrictions at world price.

22 Srinivasan, T., The Future of the Global Trading System Doha

The WTO has however granted preferential agreements to developing countries. In

31 Collier, P., The World Economy, p. 1425

Athukorola, P., Agricultural Trade Reforms in the Doha Round: A Developing

Atik, J., “Democratizing the WTO”, in International Law Review, 33 (2000-2001).

Johnson, C., Legitimacy processes in organisations (2004) Elsevier JAI, Oxford.

Levy, M. and Young, O., The Effectiveness of International Environmental Regimes:

Srinivasan, T., The Future of the Global Trading System Doha

Walker, H., Thomas, G. and Zelditch, M. Social Forces, 64 (1986) p. 620-643,

WTO website, http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm, visited

You might also like