2.- THE WTO AND THE LABOUR AND
 ENVIRONMENTAL STANDARDS



    T h e     W o r l d     T r a d e     O r g a n i s a t i o n     (W  T  O)

The Panel argued that the WTO provides too few services to its members, because it is understaffed and underfunded. It pointed out that the WTO’s budget in 2000 was under $80 million, as against $583 million for the IMF. It took legal aid to the smaller and poorer member countries, in order to help them mount a legal defence against an unwarranted anti-dumping action by a much larger country, as an example of a service that the WTO ought to provide to its members, but presently does not. It called for a larger budget for the WTO.

The other issue that the Panel took up with regard to the WTO is its governance. This is what the Panel argued:

Like the General Agreement on Tariffs and Trade before it, the WTO works by consensus. The informal negotiations in the ‘Green Room’ that normally precede achievement of a consensus are conducted among a limited group of essentially self-selected countries. This process is now close to collapse, partly as a result of the increased numbers of countries involved, but mainly because the developing-country members have a far greater stake in the world trading system than they used to. Under the Uruguay Round accords, members can no longer pick and choose which of the negotiated agreements they will subscribe to—they are obliged to abide by all of them. Hence they cannot stand aside from the process of negotiation in any important area without endangering their interests. Many countries found after the Uruguay Round that they had accepted a series of obligations that had been developed without their participation, and which they would have great difficulty in implementing.
There is a case for establishing a small steering group that can be delegated responsibility for negotiating consensus on future trade accords among WTO member countries. Such a group should not undercut countries’ rights and obligations in the WTO, nor should it supersede the rule of decision making by consensus. It need not involve proportional or weighted voting. Each member should retain the ultimate decision to accept or decline participation in trade pacts. Ideally, the composition of the steering group should be representative of the total WTO membership, and participation should be based on clear, simple, and objective criteria (See footnote).

What the Panel urged is a structure for day-to-day governance that is much closer to the Executive Boards of the Bretton Woods institutions than to the WTO or the United Nations. That is not to endorse the weighting system that underlies the representation in Bank and Fund, or even to suggest that the WTO should start taking votes instead of agreeing by consensus. What it does reflect is recognition that decision-making in a world of 180-odd countries cannot efficiently be done in a meeting with every country represented individually. It requires that the larger countries be present. But it also demands that the smaller countries have a systematic channel by which they can be kept informed of the impact of what is being proposed on their interests, and through which they can express their interests when necessary. That is what the idea of a steering group was intended to secure.


    L a b o u r     a n d     E n v i r o n m e n t a l     S t a n d a r d s

The Panel expressed its opposition to the idea of imposing on the WTO responsibility for policing labour and environmental standards. However, this was not because of opposition to the enunciation and international enforcement of standards in either of those areas. There were two quite different reasons for wanting to keep those subjects out of the WTO. One is to avoid loading yet more responsibilities on an organisation that we had just argued to be too small to do what it is already called on to do. The other is to reduce the chance that sanctions supposedly being imposed in support of those objectives might be misappropriated for protectionist purposes.

The Panel argued that a more appropriate way to address the issue of labour standards would be to strengthen the ILO. It argued that the ILO ought to be quicker than it has been in the past to condemn governments that violate its conventions, and that it should be able to impose economic sanctions, perhaps in the form of fines, on persistent offenders. It confessed, however, that ILO reform needs more careful thought than the Panel was able to address to the issue, and argued that there is a case for convening another Panel charged specifically with developing concrete proposals for its reform. One issue is what would happen if a country refused to pay a fine that had been imposed on it for violating labour standards. It is difficult to see how one could avoid a fallback right to use trade sanctions in the event of such a refusal, inasmuch as there are few other sanctions (short of military force) that the outside world has potentially available.

In the environmental domain, the Panel argued that the sundry organisations that now share policy responsibility should be consolidated into a single Global Environment Organisation with standing equivalent to that of the WTO, the IMF, and the World Bank. The sundry organisations of which it was thinking are the United Nations Environment Program based in Nairobi, the UN Commission on Sustainable Development in New York, and the Global Environment Facility in Washington, plus the secretariats established to enforce environmental treaties like the Montreal Protocol. The central role of such an organisation would be to build and enforce rules of mutual forbearance in the environmental arena analogous to those that the GATT/WTO has developed in relation to trade (Esty, Daniel C. (1994), "Greening the GATT: Trade, Environment and the Future (Washington: Institute for International Economics).Esty 1994Esty, Daniel C. (1994), "Greening the GATT: Trade, Environment and the Future (Washington: Institute for International Economics).). In addition, Esty envisages the GEO having a mandate to “to work with the GATT [as it then was] to establish a functional division of responsibilities where trade and environmental policies intersect, as well as rules and procedures for weighing and balancing trade and environmental goals and programs when they fell into conflict. The goal should be for environmental policy judgments to be made by the GEO and trade policy determinations by the GATT. Where an issue contains elements of both, each organization should play a role. Footnote: Where the two institutions come to conflicting conclusions and cannot resolve a policy dispute, there would need to be a recourse to some outside arbiter.” (Esty, Daniel C. (1994), "Greening the GATT: Trade, Environment and the Future (Washington: Institute for International Economics).Esty 1994, p.83Esty, Daniel C. (1994), "Greening the GATT: Trade, Environment and the Future (Washington: Institute for International Economics).)


Chapter 3.- The Bretton Woods Institutions



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(1) Footnote: A formula for achieving this was suggested b Jeffrey J. Schott and Jayashree Watal, "Decision-making in the WTO", IIE Policy Brief 00-2, March 2000. A very similar approach was advocated by the Jamaican Ambassador to the United States Richard Bernal in a letter to the Financial Times on 5 February 2001.      Back to the text