Negotiations in the World Trade Organization

Design and Performance

Michal Parizek

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429748745
• Edition: 1
• Topic: Politica e relazioni internazionali
• Subtopic: Politica

This book examines the World Trade Organization (WTO) in the context of the global economy in the twenty-first century, arguing that many problems within the institution lie in the disparity between its design and the nature of its tasks.

Studying the global trade regime and the unsuccessful Doha round of trade liberalization negotiations, this volume suggests that important institutional adjustments may be necessary for the WTO and other major international institutions to (re-)gain their ability to manage global economy. It uses extensive new qualitative and quantitative evidence to identify systematic dysfunctions in how the Doha negotiations have been conducted and links these dysfunctions to the exclusively inter-governmental design of interest representation in the WTO. Based on this, the book argues that global economic institutions should consider allowing broader parliamentary and non-state representation of their members.

Presenting findings which can also be applied to other global economic institutions, Negotiations in the World Trade Organization will be useful to students and scholars of international trade, global governance and international political economy.

1 Winners and losers in global economic governance

The purpose of this chapter is to develop the theoretical framework at the core of this book. In the introduction, I have presented its three components. First, the notion of domestic distributive consequences of international agreements and cooperation. Second, the inter-governmental (inter-executive) design of the key global governance bodies. And third, a systemic perspective on the performance of IOs. In this chapter, I combine them in a model explaining why cooperation may often fail when it should not. I start by outlining a “classical” inter-state model of cooperation. In the subsequent sections, I argue that this model does not apply when inter-governmental cooperation produces salient domestic distributive consequences. In such cases, political incentives on the part of states and their executives lead to important cooperation deficiencies.

An inter-state model of negotiations and cooperation

The classical model of international cooperation, as developed especially throughout the 1980s and early 1990s, is based on a situation in which two or more states seek to realize joint gains by “[adjusting] their behaviour to the actual or anticipated preferences of others, through a process of policy coordination”.¹ The states face a mixed-motive structure of interests, whereby they share an interest in the mutual coordination of their policies—of their behavioural patterns—but they disagree about what specific pattern they should converge on.²

Negotiations leading to the emergence of cooperation in this setup consist of the mutual exchange of reciprocal favours and concessions. If possible, a mutually beneficial arrangement is found within a specific issue under negotiation. International institutions provide useful platforms for such negotiations, as they lower their transaction costs.³ If states’ interests within the area under negotiation prove to be too contentious relative to the size of joint gains available, the actors may try to achieve the requisite balance of gains by linking two or more issues. In this model, then, cooperation represents a deal within a larger package, cutting across two or more issue-areas.⁴ Here the role of institutions is to help states ensure that the linkage across issues is credible and durable.⁵

In the archetypical example, the negotiations are conducted on two dimensions, where each of the dimensions is of high priority for one of the actors but not for the other.⁶ For the development of my theoretical argument, the key feature of such inter-state negotiations is that it is assumed that the bulk of domestic (societal) actors support their respective national positions. That means the core conflict of interests is in the distribution of gains across states; the possible conflicts across societal groups within states are secondary.

When the negotiations proceed as they should, at some point appropriate matching interests are identified by the states, in an ideal scenario somewhere around the middle of the zone of possible agreement (if the states are of approximately equal size) or more generally around the Nash bargaining solution.⁷ The joint cooperation gains are realized and each of the parties reaps the corresponding benefits.

Figure 1.1A depicts the above-mentioned situation in a spatial model which I will use to develop my key arguments. Let us start with the model setup. The model has two dimensions, with each corresponding to the amount of behavioural adjustment by one of the parties, as compared to the status quo. On the horizontal axis the behavioural adjustment by state S1 is depicted; on the vertical, the same for state S2. The ideal point of state S1 is located in the top left corner (S1^*), indicating that S1 prefers no behavioural adjustment of its own (on the horizontal axis), and maximum behavioural adjustment by its counterpart S2 (on the vertical axis). For state S2 the reverse is true; its ideal point S2^* is located at the right end of the horizontal axis, whereby all behavioural adjustment is done by S1. The closer the outcome of the negotiations to the respective state’s ideal point, the higher its payoff. The circles centred at S1’s ideal point then capture several of the actor’s indifference curves. They identify the levels of the S1’s gains analogously to how contours on a geographical map identify all points of a certain elevation. The smaller the circles—the closer the points forming them are to the ideal point—the higher the payoff would be for the actor from a deal struck at that point in the bargaining space.⁸ Analogous circles could be drawn for S2, centred at S2’s ideal point S2^* in the bottom right corner.

Figure 1.1 Spatial model of international negotiations (A) and the domestic political dimension of the negotiations in one state (B)

For simplicity, let us now assume that both states are approximately equally powerful, so that no major power asymmetry exists to pre-determine the negotiation outcome. As discussed in the introductory chapter, this is the situation of our analytical interest in the current global order with a major ascent of the rising powers, especially China. I further assume that the negotiating parties are symmetric in other key features—they are approximately equally patient, they have equally attractive inside and outside options, they do not face systematically different information asymmetry problems, etc.⁹ Further, the negotiators of both states are generally equally competent and informed.

In such a symmetric situation, the outcome of the negotiations is likely to lie somewhere around the upward sloping full diagonal line, capturing all the situations in which gains from cooperation are distributed evenly. The downward sloping dotted diagonal corresponds to the “contract curve”, i.e. the set of all Pareto-optimal outcomes. In the model, the intersection of these two lines is of particular importance. It is here that a meaningful deal should lie: it idenjpgies an outcome that is both equitable (symmetric) and efficient (Pareto-optimal). In well-functioning negotiations, as the negotiators engage in bargaining and exchange concessions, an agreement emerges somewhere towards this area, as marked with D, for deal, in the chart. The negotiation positions converge from the extremes—the actors’ ideal points—towards the centre.

In spite of its simplicity, this scheme enables us to connect the international negotiations to domestic politics within the states. Using the vocabulary of two-level games, it connects the international negotiations, level L2 in Putnam’s framework, with the domestic politics in the negotiating states (L1).¹⁰ Because the upward sloping diagonal line idenjpgies the set of possible negotiation outcomes, it also corresponds to the domestic political dimension in the individual negotiating states. In other words, if any possible outcome of the international negotiations will have to lie on, or close to, the upward sloping diagonal, any domestic political choice is effectively reduced to the choice of where on that line the negotiating state would like the final outcome to lie. At one end, in the bottom left corner of the outcome space, the status quo is preserved. No new cooperation emerges and hence no behavioural adjustment occurs. At the other extreme, the top right corner, a full behavioural adjustment by both parties is adopted (in the graph marked with FA, for “full adjustment”). The likely emerging deal that maximizes the payoffs of both states is located in or close to the middle of the dimension, with partial adjustment by both sides. Of course, none of the actors is fully satisfied with such an outcome, as none is able to obtain a deal at or close to its ideal point. However, this dissatisfaction is given by the very setup of the situation of mixed interests, and under normal circumstances should not have any domestic political repercussions.

To see why no domestic contestation of the negotiations is likely to occur, let us extract from Figure 1.1A the domestic political dimension of state S1 and analyse it more carefully. Because the situation is symmetric, the same analysis would also apply to the counterpart state S2. The domestic political dimension extracted from Figure 1.1A is shown in Figure 1.1B. Think of it as a horizontal view of a hill capturing the utility function of state S1. We are standing under the hill, around the ideal point of S2, and looking at what utility our counterpart, S1, will reap from different possible agreements. Given the shape of the utility functions, as depicted by the contours in 1.1A, we would see a symmetric hill with a peak in the middle of the space. This unimodal curve (hill) thus shows the distribution of electoral support behind the possible negotiation outcomes projected above that political dimension. It corresponds to a two-dimensional vertical cross-section through the three-dimensional peak with the electoral situation of S1 depicted in Figure 1.1A.

The key feature of S1’s negotiation position is that, under these circumstances, the government does not face any domestic contestation of its negotiations. There are no domestic political forces that might offer the electorate a better deal than what is being negotiated and proposed by the current executive. As a result, negotiations can proceed without politicization, in the very traditional mode of often secretive negotiations in secluded fora, the results of which are subsequently returned to national parliaments or other bodies for ratification.¹¹

This depiction of the cooperation problem can be translated to a systemic view of IOs as I outlined in the introduction. In this view, IOs are seen as parts of a large global political system with the individual nation states as embedded subsystems.¹² The individual states (L1 level subsystems) are participating in international negotiations (L2 level political system). They supply the international process with political input in the form of their demands, reflecting their national interests. Because the negotiations are not domestically politicized or contested, their supply of political input to the international level is un-hindered.

Figure 1.2 summarizes this two-level setup. The boxes at the bottom represent individual member states, L1 political systems in the classical Putnam’s model.¹³ The rectangle at the top denotes the global negotiations level (L2). The key task of the member states in global governance is to supply the international or supranational body with information about their national interests, especially about what is and is not acceptable for them in the policy-making process. These input flows are indicated with vertical arrows. Their abundance here indeed symbolizes that the flows are present.

Figure 1.2 Depicti...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• List of illustrations
• Abbreviations
• Foreword
• Introduction
• 1. Winners and losers in global economic governance
• 2. Who wanted what in the Doha negotiations?
• 3. Articulating the “red lines”
• 4. Complexity problems
• 5. Who makes decisions?
• 6. Institutional and political solutions
• Conclusions: the WTO as a new “parliament of humanity”?
• Appendix: Interviews and content analysis coding scheme
• Select bibliography
• Index