Life is not only … choice but also interpretation.
James G. March and Johan P. OlsenFootnote 1
1. Introduction: enter the world trade community
The conventional image of the WTO may best be portrayed as a global ‘contract’ in which trading nations pursue free trade through reciprocal bargaining. Under this bargaining, opening up one's own market, such as through tariff concessions, is a price that a country pays to acquire access to its trading partner's market. Each trading nation is eager to minimize its tariff concessions (costs) and maximize its market access (benefits). In sum, exports are virtue and imports vice.Footnote 2
Admittedly, this rationalist framework provides a powerful heuristic. As long as our everyday lives cannot be detached from these material conditions, the aforementioned bargaining-based, contractarian model not only explains states' behaviors but also may predict them. The point is, however, that no optic is perfect: this conventional framework cannot exhaust such explanation and prediction. For example, the contractarian model alone might not fully capture rich state practices under the dispute settlement system, often dubbed the crown jewel of the WTO. The actual operation of the WTO dispute settlement system, composed of a complaining party's framing of another trading nation's measure as a violation of WTO norms, a defending party's responding justification, and a WTO tribunal's eventual ruling, requires more sophisticated account than mere bargaining.
Admittedly, the contractarian model still appears to work, as it depicts the traditional quid pro quo tariff reduction negotiations. Yet domestic regulations have nowadays begun to replace tariffs with a new type of trade barrier.Footnote 3 Left uncoordinated, these non-tariff barriers (NTBs) clog the arteries of global commerce, with or without protectionist purposes. The problem is that trading nations cannot simply bargain away these NTBs, as informed by the contractarian model, because they are difficult to quantify and thus are not amenable to conventional give-and-take. On the contrary, those NTBs must be dismantled, or mitigated, through learning and understanding. In fact, varying rhetorical devices, including notification, inquiries, justificatory responses, and deliberation, constitute a main modus operandi in such sectors as the sanitary and phytosanitary (SPS) measures.Footnote 4 Yet the contractarian model cannot effectively embrace this emerging discursive nexus between trade and regulation.Footnote 5
In addition to this descriptive dilemma, the contractarian framework is hardly susceptible to normative concerns. Bargaining under the WTO contract is inevitably driven by mercantilist competition. First, WTO members – both developed and developing countries – tend to equate national interests with those of major domestic producers that are in favor of exports but resistant to imports. Second, any bargaining is prone to power dynamics among contracting parties. Unsurprisingly, powerful countries in general are likely to enjoy a better leverage vis-à-vis less powerful countries. For example, although some of rich countries' current farm protection measures, such as subsidies, may violate both the letter and the spirit of WTO rules, they can still refuse to articulate and bind those rules in the negotiations.Footnote 6
The Doha crisis has painfully revealed this normative deficit, which may be dubbed development failure. Some WTO members simply regard the Doha Round as yet another commercial negotiation in which they could press other countries for the latter's market opening in return for the former countries' reduction of chronic agricultural protections. Under this bargaining mentality, the world's poorest countries' weak bargaining positions prevent them from tapping free trade, as has eloquently been demonstrated by the torpor of agricultural trade liberalization. However, one of the very properties of globalization, i.e., interdependence, has made this development disparity increasingly intolerable.Footnote 7 ‘(P)overty anywhere constitutes a danger to prosperity everywhere.’Footnote 8 The recent global financial crisis has amplified the necessity of a communal bond within the global trading system. A global trade contract by its nature cannot fully account for these collective risks.
The aforementioned discontents with the rationalist framework compel us to envision a new way of understanding the WTO. We need an alternative optic through which we can rediscover what the contractarian model has omitted. Moreover, unless we question the long-held bargaining framework of the WTO, the future of the world trading system could witness a frustrating continuation of self-fulfilling prophesies.
In this regard, this article proposes an alternative framework of the world trading system as a ‘community’. The world trade community framework views the WTO operation as a web of social interactions among WTO members steered by legal discourse. Under the new framework, the meaning of worldly factors, such as power and interest, is not always given: it is to be interpreted. As norms and discourse construct the very meaning of power and interest, these ideational factors can effectively structure state actions. The main thesis of the Article is both descriptive and normative. It is descriptive in that it attempts to seek an alternative explanation on what guides WTO members' actions. It is also normative in that the social framework proposed in the Article identifies and addresses normative concerns of the world trading system.
Importantly, the Article does not claim that the new framework always works. Under certain circumstances, brute material factors may simply obviate any illustrative room for ideational factors. Neither would the mere adoption of the community framework necessarily guarantee cooperation among WTO members. Nonetheless, some of the most challenging regulatory disputes that the WTO faces today, ranging from genetically modified organisms to renewable energy subsidies, tend to require structural, systemic, and long-term solutions, which the new framework appears to be better equipped to deal with.
Against this background, the article unfolds in the following sequence. Section 2 characterizes the operational logic of the world trade community as norm-governed discourse. Here, WTO norms function as a language of the world trade community. The section also explores the main aspects of trade norms qua language, such as sharedness, rhetoric, and reproduction. Section 3 introduces three institutionalized modes of discourse: adjudication, peer review, and negotiation–consultation. This section highlights differing properties of each mode of discourse that represent its unique social configuration within the world trade community. Section 4 argues that these three modes of WTO discourse, distinctive as they may be, should not be appreciated in isolation. The section observes that each mode is indeed interrelated to another, and that such interrelationships could generate both positive and negative outcomes. Section 5 concludes.
2. The modus operandi of the world trade community: norm-governed discourse
2.1 WTO norms as a language
As discussed above, the new social framework views the WTO as a community of law and thus highlights its normative properties.Footnote 9 In this regard, what is happening within the WTO community is based on legal principles and legal reasoning. Its consistent and systematic operation based on norms engenders principled arguments that are predictable based on similar situations.Footnote 10 This norm-based operation furnishes the WTO with a firm communal bond which is unfathomable by the contract model alone. Given this repeated, collective, and self-referential nature, one can reasonably conceptualize WTO norms as a common language (lingua franca) within the WTO community. Note that ‘norms’ are defined broadly for the purpose of this article: they include not only codified rules but also various interpretive practices – administrative and judicial – emerging from within the community.
Importantly, the meaning of language adopted in this article does not merely denote a medium for conveying information. In such a case, action coordination via language might proceed in a strategic and manipulative manner.Footnote 11 In contrast, the true import of language in legal discourse, as used in the WTO context, is a communicative one, which concerns an interlocking dimension, such as argumentation, persuasion, and perspective-taking.Footnote 12 This communicative understanding of language is oriented toward action coordination and social integration. Therefore, legal discourse is a communicative action which establishes certain stabilized standards or expectations.Footnote 13
First of all, WTO norms qua social knowledge provide WTO members with typified schemata through which they understand specific WTO situations, such as a dispute.Footnote 14 Take the Hormones disputeFootnote 15 as an example. In Hormones, the EU bans the beef imports from the US on the grounds that it was administered with growth-promotion hormones. The US would view the situation through the lens of relevant preexisting WTO norms, such as the GATT, the SPS Agreement, and other case law. Here, the high degree of typicality, that is, the degree to which the factual pattern in question resembles the preexisting stock of social knowledge (WTO norms), tends to accord the US an immediate familiarity with these norms and satisfy the US with its own interpretation of the situation at hand. Then, the US would communicate its own interpretation to the EU, and the former would anticipate possible responses from the latter also drawn from the same stock of social knowledge based on WTO norms.
Importantly, both the US and the EU's practical use of social knowledge is basically selective, reflecting each nation's motivation in a particular situation. The US' use of WTO norms as an importing, not exporting, country would feature a completely different vector from the current situation. In fact, one might reasonably speculate that the US's invocation of WTO norms as an importing country in another dispute would be quite similar to that of the EU in the current situation. This idealized nature of WTO norms sustains itself as a stable stock of social knowledge.
Although the high typicality allows WTO members to rely on their prior knowledge of WTO norms, some situations could lead them to question their prior knowledge. Suppose, as an hypothetical case, the EU bans the cloned beef imported from the US. In its protest to the EU, the US would attempt to identify any relevant schemata out of WTO norms. First, it might not locate any WTO case law that would immediately satisfy the level of typification it needs. Then, it would revert to the less direct yet still relevant stock of knowledge, such as the SPS Agreement. It would first attempt to apply certain plausible schemata stipulated in Annex A of the Agreement, such as disease-causing organisms or contaminants, to the situation at hand. Of course, this new typification might trigger a different typification from the EU that would better serve its situation in the dispute.
The WTO tribunal would eventually accept, reject, or modify such new typifications from both countries. Note that as far as the WTO discourse is concerned, WTO panelists or Appellate Body members are not passive umpires, but active interlocutors. They do not merely pick a better rhetoric between two disputing parties: they often reconstruct their rhetoric and create a new one as guided by the WTO's normative goals. The outcome of this discourse, including both countries' claims (typifications) and the WTO tribunal's own interpretation (re-typifications), could alter the preexisting stock of WTO norms.
The objectified nature of WTO norms qua social knowledge detached from subjective knowledge characterizes them as a language.Footnote 16 Social norms, such as WTO norms, are comprised of predetermined sets of meaning patterns that are idealized from episodic, situation-specific sets of knowledge. It is the unique faculty of language as a medium of communication, such as syntactic regularities and connectional possibilities, which enables social actors to learn, confirm, transfer, and even generate knowledge about realities within the meaning context of the WTO community. As a language, WTO norms can even provide knowledge that WTO members may not immediately experience.
As a common referential structure, WTO norms function as a set of commonly accepted ideas that shape both trading nations' and private businesses' sense of what is socially real.Footnote 17 For example, Mexico would not question, and thus would take for granted, the US's commitment under the latter's tariff schedules that the latter would impose no tariffs on tequila exports from the former. Likewise, a Texan liquor retailer may plan to market Mexican tequila without worrying that she might suddenly be compelled to pay tariffs for tequila imports in the future.
2.2 Sharedness, rhetoric, and reproduction
Analogous to a language, WTO norms feature three main attributes: sharedness, rhetoric, and reproduction. First, narratives shared by those who use the same language define a community where those narratives emerge alongside its historical pathway. As Robert Cover aptly observed, any legal entity or community cannot be separated from the ‘narratives that locate it and give it meaning’.Footnote 18 These narratives are nothing but a collective representation of shared ideas and experiences among the GATT/WTO members over six decades of uninterrupted discursive practices.Footnote 19 These narratives are more stable than any anecdotal, individual observations since they have been collectively elaborated for decades.Footnote 20
One cannot understand the WTO without appreciating those collective behavioral patterns in various institutionalized forms, for example a panel proceeding or a peer review session under the TBT (Technical Barriers to Trade) Committee.Footnote 21 They are non-trivial social facts that enable us to agree intersubjectively on the social reality named the WTO.Footnote 22 In other words, through these social facts, social actors – states and individuals alike – naturalize and constitute epistemological bases for understanding the WTO.Footnote 23 Speaking the same (WTO) language may not solve all the problems, but it can certainly initiate a dialogue and be a first step to problem-solving; more importantly, it may change the nature of the problem by rebuilding social reality around the WTO.Footnote 24
This sharedness of the WTO language translates into its public nature. Any language is public in that it is a product of cultural representation of a given community.Footnote 25 A language would lose its rationale if it could be privatized. In contrast, a contractarian model of the WTO would accord, based on the notion of party autonomy, the dispositive power to a bargain struck by negotiating members. From a contractarian standpoint, parties should be allowed to settle in whatever terms they would entertain between themselves. Admittedly, under the current WTO dispute settlement procedure, complainants and defendants do settle on their own terms. Nonetheless, from the standpoint of the WTO community, even this type of settlement might not be completely dispositive. In other words, those terms of settlement should still be within the acceptable purview of WTO norms because they may affect other parties. The language used by any two parties, no matter how convenient to themselves, cannot change the grammar and syntax of the lingua franca commonly used in the community.
For example, after a heated negotiation followed by an epic WTO dispute on cotton subsidies,Footnote 26 the US, the defendant, and Brazil, the complainant, struck a deal. Under the deal, euphemistically labeled the ‘framework agreement’, the US (the Commodity Conservation Corporation) agreed to subsidize the Brazilian cotton farmers (the Brazilian Cotton Institute) up to $147 million annually in the name of technical assistance.Footnote 27 However, this payment would not absolve the US of its WTO obligation as long as it maintained its cotton subsidies, which had been found to be inconsistent with the WTO subsidy norms. In fact, other cotton-producing countries, in particular the group of African, Caribbean, and Pacific (ACP) countries, complained that such buying out of violations hurt cotton producers in poor countries and aggravated inequality in treatment.Footnote 28 To the extent that these countries could initiate a new adjudication on the same issue and that they would prevail against the US, the previous negotiation between the US and Brazil might not be dispositive.
Second, WTO narratives originate from various rhetorical practices, such as discussing, arguing, debating, persuading, deliberating, and learning,Footnote 29 within the WTO's socio-legal context. These rhetorical practices distinguish the WTO's discourse from a pure bargaining process. While bargaining plays a strategic role, the discursive practice serves an interpretive function. Here, interpretation is more than a literal reduction of legal text to law.Footnote 30 Instead, it is an intersubjective process of ‘mirroring’ or ‘reflected appraisals’.Footnote 31 Each member's own interpretation of both facts and norms in a particular dispute setting may or may not converge with that of another member.Footnote 32 Parties in the dispute may address such hermeneutical divergence through ritualized forms of dialogue, such as the establishment of a panel, surveillance of parties' compliance, and even enforcement consultation, under the Dispute Settlement Understanding (DSU). These rituals not only glue WTO members together by imbuing a deep-seated sense of relatedness but also create collective meanings in members' normative interactions within the mechanism, such as consultations, argumentations, persuasion, settlement, and compliance.Footnote 33
If the parties cannot achieve dialectical closure, institutional interlocutors, such as panelists or Appellate Body members, may intervene via adjudication and seal this interpretive gap. Once issued and publicized, an end-product of the foregoing dialogue or trilogue, such as a panel or an Appellate Body decision, immediately constitutes an interpretive foundation for another case in the future. This process of hermeneutical convergence tends to set in motion a virtuous circle since it generates the so-called ‘elicitative’ trust by communicating the expectation for cooperation from the other party.Footnote 34 To enhance their communicative power, institutional interlocutors often frame esoteric legal doctrines into generally accessible principles, such as good faith.Footnote 35
Third, WTO norms are not only transmitted but also preserved and reproduced through routinized patterns of certain sequential actions.Footnote 36 As other occasions arise, they are reproduced with their basic meanings intact.Footnote 37 Peter Goodrich's linguistic-discursive understanding of law helps capture these reproductive aspects of WTO norms. Goodrich identified certain linguistic-discursive elements in law, such as organized appropriation of norms, prioritization over widely recognized meanings, and selective rejection of alternative meanings.Footnote 38
WTO norms exhibit these elements. First of all, the existence of common law-type precedents bespeaks organized appropriation of rules. The WTO Agreement provides that ‘the WTO shall be guided by the decisions, procedures and customary practices followed by the Contracting Parties to GATT 1947 and the bodies established in the framework of GATT 1947’.Footnote 39 Likewise, the Appellate Body in Shochu II highlighted this very point. It ruled that:
Adopted panel reports are an important part of the GATT acquis. They are often considered by subsequent panels. They create legitimate expectations among WTO Members, and, therefore, should be taken into account where they are relevant to any dispute … We agree that a panel could nevertheless find useful guidance in the reasoning of an unadopted panel report that it considered to be relevant.Footnote 40
In other words, regardless of technical formality (adopted or unadopted), panel reports are meant to be systematically appropriated among WTO members as useful precedents. Therefore, any given panel report may remain usable not only for the parties concerned. It will be used, namely cited, quoted, and referenced, even by third parties and future WTO tribunals, such as panels and the Appellate Body, that desire to make, and reinforce, their own arguments and reasoning by means of repeating what they interpret the original reports would have meant.
Next, the jurisprudential use of certain legal precepts, such as good faith and due process,Footnote 41 as recurrent referential points is tantamount to the use of widely recognized meanings. The WTO court frequently invokes interstitial norms, namely general principles of law,Footnote 42 not necessarily because they are binding in and of themselves, but more because they are essential to process legal reasoning.Footnote 43 Thus, the use of these general principles of law tends to facilitate legal communication, not only between the court and disputing parties, but also between the court and other WTO members. This way, any particular decision of the WTO court potentially constitutes an important element of the broader WTO jurisprudence. It is one effective way to augment the intersubjective nature of the court's reasoning in that such fundamental principles are widely shared and accepted in any community of law, such as the WTO's community.
Finally, a certain mechanism must exist to screen out meanings that do not conform to norms. Utterances that contradict the grammar and syntax of a given language are to be rejected. This authoritative selectivity is a key factor in securing coherence that any kind of judicially reproductive system may require. For example, the Appellate Body, as an official interlocutor of the WTO, has unequivocally rejected an alternative, pro-zeroing interpretation of the Antidumping Code, to which a minority of WTO members, including the US, refers, and yet is inconsistent with the well-established WTO jurisprudence. The Appellate Body also criticized a panel's rebellious departure from the well-established anti-zeroing jurisprudence as it emphasized that only the Appellate Body can ‘uphold, modify or reverse’ panels' legal interpretations.Footnote 44
Of course, this stability does not necessarily equate to non-adaptability. As the grammar and syntax of a language may change over time, so do WTO norms. In fact, the GATT/WTO's gradual yet undeniable path toward juridification lends credence to such evolution. Specific meanings of various GATT/WTO vocabularies, ranging from ‘nullification or impairment’ to ‘like products’, have been subject to interpretive change,Footnote 45 particularly as the initial GATT contract transformed into a community.Footnote 46
3. Reinterpreting the WTO operation: three modes of WTO discourse
WTO norms as a language of WTO discourse are not monolithic. Different institutionalized forms may channel different kinds of socially meaningful patterns of practice, which are eventually crystallized into socially acceptable norms. From this perspective, three conventional institutionalized forms of the WTO operation, i.e., adjudication, peer review, and negotiation–consultation, can be understood as three different modes of WTO discourse. Each mode provides a distinctive avenue in which various actors interact and communicate as they use and at the same time develop shared WTO norms.Footnote 47 Importantly, these different forms of WTO discourse subsequently engender numerous derivative discourses. That is, numerous communications and interactions in trade and trade-related areas of everyday lives are based on various types of social knowledge, such as panel reports, minutes of committee meetings, working party reports, and negotiation history.Footnote 48 It is through such derivative discourse that various micro-participants of the WTO community, such as producers, importers, and NGOs,Footnote 49 engage in, and ultimately sponsor, the WTO discourse. Derivative discourse may even reduce the relative significance of primary institutionalized forms of WTO discourse. For example, WTO members have recently become less litigious, which may attest to the enhanced level of understanding and routinization of WTO norms in everyday lives.Footnote 50
As social-rhetorical fora, these three institutionalized modes of WTO discourse affirm, modify, and generate legitimate (socially acceptable) norms. Importantly, an intermodal dynamic among these three discursive modes adds a critical layer of complication to the normative operation of the world trade community, as discussed below. It is through this intermodal dynamics that the world trade community may still maintain a largely coherent normative solidarity despite instantaneous diverging typifications (interpretations) of WTO members.Footnote 51
3.1 Adjudication
Adjudication is a distinctive form of WTO discourse, vis-à-vis peer review and negotiation–consultation, in that it involves an arbiter, such as a panel or the Appellate Body, which manages the discourse in a hierarchical, not horizontal, sense. The main role of this impartial interlocutor is to resolve a dispute by rendering an independent decision binding both disputants. Sophisticated procedural rules under the DSU symbolize the characteristically serious nature of this mode of discourse. All participants of adjudicative discourse, such as complaining parties, defending parties, the WTO Secretariat, and even panelists (or the Appellate Body members), share rich and well-established communicative foundations offered by the WTO language, namely substantive norms based on various WTO legal documents and jurisprudence and procedural norms grounded in DSU and its supplementary rules. In accordance with such communicative foundations, those participants complain, respond, argue, counter-argue, refute, prove, reason, interpret, and judge. Even after a panel or the Appellate Body renders a decision, the discourse continues if a losing party refuses to comply and a winning party challenges such non-compliance under Articles 21 and 22 of the DSU.
Note that the WTO adjudication as a full-blown mode of legal discourse was not programmed at the outset of the GATT. In fact, it has emerged over a long period of time. The GATT in its origin was biased in favor of dispositive settlement of disputes, rather than full adjudication. Its contractarian nature led GATT contracting parties to be obsessed with the restoration of any breach of a delicate balance of tariff concessions established after laborious tariff negotiations. The legal barometer for such balance was the nullification or impairment under GATT Article XXIII.
However, the subsequent accumulation of cases generated a set of jurisprudence that reconfigured the GATT dispute settlement system from private arbitration to public litigation. The once-quintessential requirement of nullification or impairment, which was a hallmark of GATT remedies, was marginalized.Footnote 52 The violation itself became what really mattered, rather than its commercial consequences. In terms of legal, not necessarily dispositive, discourse, any particular outcome of litigation, be it a panel ruling or an Appellate Body ruling, has now been part of a coherent set of discourse in the form of precedent. Technically speaking, such a ruling binds only disputants to that particular case, which demonstrates a strong semblance to arbitration. Nonetheless, these rulings as past units of discourse guide subsequent WTO rulings. After rounds of these guided rulings, the original ‘informal normativity’ turns into a more established ‘legal normativity’, such as case law or jurisprudence.Footnote 53 John Jackson demonstrates a stronger, and more direct, position on this reproductive effect of precedents. He observes that a WTO panel or the Appellate Body decision, once adopted, in general obligates all WTO members to change their policies consistent with the decision.Footnote 54 Likewise, even a settlement between WTO members is made in the shadow of the WTO jurisprudence. In this sense, a settlement is also a discursive outcome informed by precedents.
Importantly, this social dimension of adjudicative discourse is distinct from the conventional triadic dispute resolution, which some scholars argue might represent a ‘sociologically impoverished universe’.Footnote 55 Owen Fiss contends that individualistic party structure equates a judge with a passive referee. According to him, such passive role deprives the judge of the broader sociological-structural dynamics behind any given dispute that potentially affect multiple parties. In contrast, WTO adjudication can be depicted as a constitutional adjudication whose remedy requires the elimination of threats to the WTO's fundamental values, rather than focusing entirely on individual compensation.Footnote 56 Here, a judge may transcend private interests, such as the restoration of the status quo, and instead enunciate norms in a prospective sense.Footnote 57 Therefore, theorized as a form of discourse, WTO adjudication does not necessarily translate into an adversarial mechanism. Instead, WTO adjudication depends on assumed general duties to cooperate among adjudicative participants.Footnote 58 In this regard, the locus standi (‘legal interest’) is more liberal than in a typical domestic litigation. Participating in a WTO discourse (adjudication) benefits the WTO community as a whole, which confirms the hypothesis of a ‘communitization’ of WTO norms.Footnote 59
Indeed, the WTO's unique ‘third party’ intervention policy attests to the social dimension of adjudicative discourse. In stark contrast to an ordinary, domestic adversarial litigation structure, the WTO dispute resolution system is quite liberal in allowing non-disputants (third parties) to participate in the panel and the Appellate Body proceedings. For example, Article 4.11 facilitates third parties' access to consultation through a lenient locus standi requirement,Footnote 60 while Article 10.2 grants third parties with a substantial interest to submit their comments to the panel.
Note the innate public nature of adjudicative discourse substantiated by the WTO's liberal third party policy. Granted, third parties may be incentivized to intervene since a particular adjudicative outcome affects them in an economic sense.Footnote 61 However, even without direct commercial interests involved, a third party may engage in a WTO discourse initiated by other WTO members for the sake of public systemic interests.Footnote 62 Such access tends to offer third parties an opportunity to contribute to the shaping of the very discourse in which they participate.Footnote 63 Naturally, this institutionalized channel for third parties both broadens and deepens the WTO discourse among its members.
Therefore, third party interventions play a critical norm-sponsoring role in the WTO community. Not only are third parties entitled to exchange submissions with the parties of the dispute, but also the WTO tribunal should reflect third parties' submissions in its decision.Footnote 64 Here, WTO members can effectively expand what would have otherwise been a bilateral discourse to a multilateral one. The WTO tribunal can establish a valuable discursive connection to the enlarged WTO membership beyond the parties directly concerned in a particular dispute.Footnote 65 Those interventions may even help legitimize a panel or the Appellate Body's finding that references them. In sum, third parties as norm sponsors help preserve the normative integrity of the WTO's community. They convert an otherwise private exchange between a complaining and defending party into a public discourse.Footnote 66
Perhaps, the public (multilateral) nature of WTO adjudication may also explain why the ratio of settlement in the WTO setting is far lower than in the domestic setting.Footnote 67 In the WTO dispute settlement system, commercial stakes as well as long-term normative considerations motivate an adjudicative discourse. Governments themselves often initiate certain disputes to establish legal precedents, even without serious commercial considerations.Footnote 68
3.2 Peer review
While adjudication remains a judicial, hierarchical form of WTO discourse, peer review in various avenues, such as WTO Committees and the Trade Policy Review Mechanism (TPRM), represents an administrative, horizontal type of discourse. It is administrative, or trans-governmental, in that sector-specific administrative agencies, rather than trade diplomats, are directly involved in the discourse. It is horizontal in that no higher authority, such as the WTO Appellate Body, directs parties' discourse. One of the most salient features of the WTO system created in the Uruguay Round is the institutionalization of such peer review, as seen in the TBT Agreement, the SPS Agreement, and the TPRM Agreement. These side agreements require WTO members to engage in ‘justificatory discourse’Footnote 69 through various discursive avenues, such as notifications, inquiries, and reason-giving. By framing their inquiries and responses within the context and terms of WTO norms, both an inquirer and a respondent transmit WTO norms to each other.
For example, the TPRM Agreement provides a regular peer review forum where WTO members collectively monitor whether an individual member's trade policies and practices are consistent with WTO norms. In each trade policy review, a policy statement written by the monitored WTO member and the WTO Secretariat's independent report are available to WTO members. Based on these documents, WTO members hold several meetings under the auspices of the Trade Policy Review Body where WTO members discuss a wide range of trade and trade-related measures by the monitored WTO member. As the monitored WTO member responds to other WTO members' inquiries in these meetings, it justifies its measures as being in compliance with WTO norms.Footnote 70
Justificatory discourse enables WTO members to generate ‘regulatory learning and adaptation’, which might not be fully captured by rationalist narratives.Footnote 71 This social element of regulatory dialogue tends to sensitize regulating (importing) states as to the external (trade) impact of their regulations on affected (exporting) members and thus motivate regulating states to modify or repeal the original regulations.Footnote 72 Notably, clarification on the meaning of some SPS provisions often results from informal discussions among working-level government officials, rather than from the Appellate Body reports.Footnote 73 This endogenous nature of social interaction among like-minded regulators explains the ‘normative self-understanding’ among them, which eventually forms their collective identity.Footnote 74
The recently initiated ‘SPS Information Management System’ (SPS IMS) may serve as an empirical confirmation of the aforementioned social thesis of peer review. The SPS IMS is an inclusive source that enables users, both governments and the public, to locate and obtain information on notified measures, specific trade concerns, SPS Committee documents, domestic enquiry points, and the authorities that handle notification.Footnote 75 This database helps not only WTO members but also private businesses to locate various SPS information in a way that serves their particular needs. It is a user-friendly system which provides a variety of search criteria such as ‘geographical groupings, product codes, comment periods, keywords, etc’.
This type of innovative institutionalization greatly facilitates an administrative discourse among regulators from WTO member countries by broadening the base of shared information on members' SPS measures. Any WTO member can now easily identify any questionable SPS measure from another member which may affect the former's exporters. Then, the former can designate it as a ‘specific trade concern’ which is numerically coded for identification purposes, such as ‘STC 229’. Within the SPS Committee, members discuss and debate on these STCs as they challenge or defend them. Under certain circumstances, WTO members can easily defuse trade disputes via dialogue before they are escalated to full-blown complaints for adjudication.
Granted, peer review might not necessarily deliver the desired outcome, such as enhanced compliance. A number of potential obstacles may hinder its full manifestation. Due to its soft, non-binding nature, peer review may end up with the titular ‘cheap talks’. Furthermore, developing countries' participation in these meetings is limited due to their lack of technical and financial capacities.Footnote 76 These obstacles lead to questions on the legitimacy of WTO discourse. Nonetheless, various empirical studies point out that social actors are more likely to change their behaviors when they are regularly given an opportunity to examine and defend their original position in the face of new information.Footnote 77 This is especially so when members of committees manage to produce ‘secondary law’,Footnote 78 such as decisions and recommendations, as a result of their deliberations.
Ironically, however, this informal and provisional nature of peer review tends to ‘open up space for less powerful actors to articulate their position’.Footnote 79 As Nico Krisch aptly observes, a formal, concentrated regulatory decision-making setting is likely to be exposed to power disparities and thus vulnerable to regulatory capture. In contrast, peer review enables less powerful actors, such as developing countries, to contest dominant regulatory positions and thus maintain a pluralist structure of regulatory governance.
3.3 Negotiation–consultation
In a conventional sense, negotiation may be synonymous with bargaining. Bargaining tends to be strategic: it reflects the market logicFootnote 80 and involves economic exchanges between parties.Footnote 81 Ministerial meetings where tariff reduction negotiations take place may best suit this conventional definition of negotiation. At the same time, however, negotiation may serve other purposes, such as fact-finding or persuasion. By juxtaposing and debating over contested facts, a negotiation may turn into a consultation, which enables an impartial assessment of the situation and therefore narrows down parties' original differences.Footnote 82 For this reason, WTO norms not only encourageFootnote 83 but also mandateFootnote 84 parties concerned to engage in a consultation when they encounter any disputes. In fact, a majority of disputes have been resolved in the consultation stage.Footnote 85 At the same time, however, parties might not engage in genuine discourse in the consultation stage if they had already decided to move to the next stage, adjudication. They might attempt to minimize any substantial discussion on a given dispute as they heeded a subsequent panel procedure.Footnote 86
Notably, negotiation–consultation is by far less formal than other modes of WTO discourse, such as adjudication or peer review. Although flexibility may be a virtue, negotiation–consultation is still prone to an innate risk of inequity. To induce the counterpart to accept its position, a more politically powerful party may mobilize various kinds of threats against a less powerful one.Footnote 87 Superpowers, such as the US and the EU, enjoy enormous advantages in drafting WTO rules since they can deploy unsurpassed resources, such as legal staff.Footnote 88 Considering an average of ten meetings per working day in the WTO,Footnote 89 how could poor countries effectively follow up all those meetings and reflect their positions in final policy drafts?
Importantly, however, the conventional dimension of negotiation represented by reciprocal bargaining has increasingly become anachronistic, and even misleading.Footnote 90 The conventional modus operandi of trade negotiation was mutual tariff reduction based on reciprocal bargaining.Footnote 91 Under the new trade reality, however, the changing nature of trade barriers should be taken seriously. Administrative barriers, such as domestic regulations, have recently replaced the traditional mode of trade barriers, such as tariffs, which are generally in decline after a series of trade rounds in the past.Footnote 92 Trading nations cannot simply bargain away these new non-tariff barriers. To tackle these barriers, they should first understand the nature of each other's regulations and learn to broaden their common regulatory grounds through discursive practices, such as argumentation, persuasion, and deliberation.
Once WTO members disabuse themselves of anachronistic mercantilism and embrace the reality of economic interdependency, the nature of negotiation shifts from negotiation (reciprocal bargaining) to consultation (cooperative dialogue). The recent success of the WTO ‘Information Technology Agreement’ (ITA) provides a case in point, particularly in stark contrast to the epic failure of the Doha Round talks. Global production chains characterize IT products, ranging from semiconductors to flat panel displays (FPDs) to wireless internet equipment. Their production is divided into multiple stages in multiple countries in a way that minimizes transaction costs. This contemporary reincarnation of the classical division of labor among participating countries benefits both developed and developing countries that contribute different production factors, be they labor, capital, or technology, to manufacture one single product. Moreover, IT products tend to generate enormous derivative trades in services, such as software development and online travel reservation.Footnote 93 Sparked by a rare moment of collective enlightenment, a selected group of WTO members launched the ITA in 1996 to facilitate the global stream of IT products by eliminating their tariffs. This initiative has proved to be one of the greatest successes in WTO history. The original 28 members have grown into the current 74 members; the total world exports of IT products have tripled since its inception.
The ITA Committee circumspectly incubated the cooperation-inducing shift from negotiation to consultation. Under the auspices of the ITA, the Committee provides a discursive forum for ITA participants to resolve their specific concerns arising under the ITA. For example, in 2000 the US and the EU consulted with Thailand under the Committee regarding the latter's origin certificates requirement imposed on certain IT imports. The US and the EU's interpretation of the ITA eventually persuaded Thailand to undo the requirement.Footnote 94
All told, negotiation as a mode of WTO discourse, for the purposes of this article, is defined rather broadly, connoting not only the conventional reciprocal bargaining but also the discursive properties of consultation.Footnote 95 In reality, the latter dimension of negotiation often overshadows the former. The latter may shape the former from a normative perspectiveFootnote 96 since not every bargain may emerge from a pure normative vacuum. In fact, it transpires in the shadow of WTO norms.Footnote 97 Even bilateral settlements still remain in the public sphere: they may be subject to further surveillance and monitoring by the WTO community. All mutually acceptable solutions must be disclosed and subject to potential intervention from the rest of WTO members.Footnote 98 It is in this context that WTO norms provide negotiating parties with ‘institutional power’ that can effectively check ‘compulsory power’.Footnote 99
In the same vein, negotiation need not be a zero-sum game. Negotiating parties can continuously adjust their different interpretations and eventually expand their shared grounds. In this sense, negotiation may be understood as cross-persuasion: one party's persuasion is contingent on that of the other party.Footnote 100 The dynamic outcome of such negotiation, qua cross-persuasion, holds the potential for a positive sum in the form of regulatory convergence. After all, negotiation as a mode of discourse adopted in this article bears a public nature where WTO members sustain the discourse in a collective sense.Footnote 101
4. The intermodal dynamic of the WTO discourse
Distinctive as these three modes of WTO discourse may be, each of them should not be understood in isolation. In fact, each mode is somehow interrelated to another. Such a dynamic may be positive or negative.
4.1 Adjudication v. peer review
Peer review may redress a certain limitation intrinsic to adjudication. For example, peer review may prevent adjudication from generating undesirable circumstances due to one of the latter's structural attributes, such as adversarial finality. In some highly controversial issues, such as food regulation, both importing and exporting are often sharply divided by ostensibly irreconcilable dogmatic positions. These issues involve diverging, and often conflicting, socio-cultural positions in different regulatory jurisdictions.Footnote 102 Entwined with vested commercial interests and seasonal politics, disputes around those issues are often emotionally escalated.
In this situation, disputants are likely to fashion their claims into flamboyant rhetoric to produce self-serving narratives, rather than engaging in a workman-like discourse.Footnote 103 The Hormones dispute between the US and the EU is a case in point. This dispute, whose origin dates back to the GATT era in the 1980s, was adjudicated under the WTO twice, in 1998 and 2008. It still remains unresolved. Here, the US position, which supports the safety of hormone-treated beef for human consumption, and the EU position, which questions the safety of the same product, are diametrically opposed to each other. What we often witness in this kind of dispute is a vicious circle of non-compliance and subsequent re-litigation.Footnote 104
In dealing with those disputes resulting from fundamental socio-cultural differences, adjudication should yield to regulatory dialogue via peer review or consultation. Here, the 2001 breakthrough between Canada and Brazil over the mad cow disease (BSE) incidence provides a case in point. The Canadian import ban on Brazilian beef, for the fear of mad cow disease (BSE), in February 2001 invited fierce protest from Brazil, which threatened to sue Canada before the WTO tribunal.Footnote 105 Soon, however, parties elected to address the issue in the SPS Committee instead of pursuing adjudication. In the course of deliberation under the SPS Committee, Brazil proposed a new mandate for developed countries to notify the WTO of the introduction of SPS measures that may negatively affect trade opportunities of developing countries.Footnote 106
The SPS Committee eventually adopted this proposal in the form of a revised ‘Recommended Procedures for Implementing the Transparency Obligations of the SPS Agreement (Article 7)’.Footnote 107 Both Brazil and Canada agreed that the dispute had been resolved with the adoption of the revised recommendation. The aforementioned example is not an isolated anecdote. In fact, an increasing number of SPS concerns have been resolved through regulatory discourse under the SPS Committee instead of by WTO adjudication.Footnote 108 Nearly 30% of the ‘specific trade concerns’ reported to the SPS Committee were addressed by discussions and consultations under the Committee.Footnote 109
Admittedly, such soul-searching regulatory dialogue should not be taken for granted. It requires trust-building and thus takes time. Any outcome of regulatory dialogue, if fully implemented, requires both parties concerned to engage in serious risk communication efforts within their own domestic jurisdictions.Footnote 110 These efforts are seldom visible and appreciable. Politicians subject to short-term election cycles are often impatient with this vague, long-term vision. Pressured by interest groups, they are often tempted to have recourse to a quicker, more direct strategy, such as litigation. Given this situation, once an exporting country requests a consultation with an importing country, such a consultation may be a preparatory step for a subsequent full litigation, rather than a genuine effort toward reconciliation.
Also, peer review might not prevent a dispute from full adjudication. For example, not all IT disputes are resolved in the ITA Committee. The Committee failed to resolve a recent dispute over the EU's refusal to accord certain IT products, such as flat panel displays and set top boxes, duty-free treatment under the ITA. A WTO panel eventually struck down the EU's tariff treatment on these IT products.Footnote 111 This panel report is significant in that it upheld the evolutionary nature of technology by prioritizing functionality over product properties of IT products. One might reasonably speculate that such a finding will reinforce discursive power of those who advocate the expansion of the ITA.Footnote 112
4.2 Adjudication v. negotiation–consultation
First of all, adjudication has a unique faculty to negotiation. For example, when trade negotiators struggle to draft a decision or agreement, they seldom create new meanings for each provision from scratch. Their discourse (negotiation) is mediated by, and at the same time based on, the outcome of previously established discourses, be it adjudication or peer review, which collectively constitute the GATT aquis.Footnote 113 Note that a number of DSU provisions are simply a codification of past GATT practices. Trade negotiators in the Uruguay Round did not invent the panel proceeding under Articles 6–16 of the DSU for the first time. In fact, they imported this time-honored practice from the past discourse under the old GATT. Likewise, the Superfund decision in 1987Footnote 114 shaped the principle of presumption of ‘nullification or impairment’ with the demonstration of violations, as stipulated in Article 3 of the DSU. Also, we might easily notice that a number of key precepts under the SPS Agreement, such as ‘less trade-restrictive’ means (Article 5.6), originate from the old GATT jurisprudence, such as the Section 337 decision in 1989.Footnote 115
In contrast, adjudication and negotiation may often cancel each other out. To settle or litigate is always a difficult decision for disputing parties. WTO norms are basically structured in a way that consultation toward settlement is a precondition to full adjudication. GATT Article XXII:1 provides that each contracting party shall accord an ‘adequate consideration for consultation to another contracting party with respect to any dispute arising under the GATT. The WTO DSU even prefers settlement through consultation to adjudication. DSU Article 3.7 stipulates that ‘a solution mutually acceptable to the parties to a dispute and consistent with the covered agreements is clearly to be preferred.’
Those scholars who adopt a rationalist approach do not take this primacy of consultation seriously. According to them, settlement through consultation and adjudication is simply a matter of rational choice informed by strategic calculations. For example, Andrew Guzman and Beth Simmons argue that WTO members elect to settle in those disputes where transfer payments are relatively easy (such as disputes involving tariff rates) and adjudicate in other disputes where such transfer payments are difficult (such as disputes involving health and safety issues).Footnote 116 As long as the choice between settlement and adjudication is dictated by rational calculation, it is not possible to fully explain the structural primacy of consultation.
From a social framework proposed in this article, however, such primacy of consultation can be easily understood. The operative nature of adjudication is adversarial and therefore inevitably accompanies a certain social cost, such as escalation of antagonism, in its course. This confrontational structure of litigation may increase the level of hostility among trading nations and thus poison the atmosphere for subsequent negotiation. In this context, the former WTO Director-General Pascal Lamy warned that replacing negotiation with litigation could undermine the delicate balance between interpretation of existing texts and the creation of new ones.Footnote 117 In the same vein, DSU Article 3.7 warns that ‘before bringing a case, a Member shall exercise its judgement as to whether action under these procedures would be fruitful’. Therefore, from a normative standpoint consultative discourse should precede adjudicative discourse.
Moreover, once disputants enter into an adjudicative mode, certain factors beyond their control might further complicate settlement. For example, the institutionalization of third parties' liberal access to the WTO dispute settlement mechanism may be a mixed blessing. Currently, third parties participate in about 60% of all WTO disputes.Footnote 118 As William Davey warns, such prominence of third party interventions could be a disservice to the WTO dispute settlement mechanism since they often hold very different views than disputants.Footnote 119 Even when third parties raise systemic legal issues that might matter to the whole WTO membership, complicating the original dispute tends to inevitably diminish space for settlement between the parties concerned.Footnote 120 Therefore, third party participation in general is likely to hamper early settlement and instead provoke full adjudication.Footnote 121 While such full adjudication exhibits a law-generating function of WTO discourse, it may also suppress another form of discourse that may contribute to conflict resolution in a more amicable way.
On the other hand, however, a deadlock in the consultation–negotiation mode of discourse tends to spur an adjudicative mode of discourse, thereby generating the risk of over-litigation. As the negotiation track closes with the collapse of Doha Round talks, more WTO members venture to litigate their way to enhanced access to foreign markets.Footnote 122 In particular, some WTO members may be determined to resolve those issues unaddressed in the Doha negotiation via the WTO dispute settlement mechanism. This litigation drive appears inevitable for now. Since the failure of the Doha deal, Brazil has planned to sue the US for the latter's cotton subsidies and tariffs on Brazilian ethanol.Footnote 123 Brazil originally expected that the US would reduce its subsidies on a wide range of farm products such as cotton and ethanol; however, the failure of the negotiation has led Brazil to have recourse to WTO litigation in the same matter.Footnote 124 In sum, while the abundance of litigation may be an auspicious sign of rule of law in the WTO system, more and harder cases will soon overburden the system and test its integrity.Footnote 125
4.3 Peer Review v. negotiation–consultation
As discussed above, the nature of negotiation has recently shifted from traditional bargaining to consultation or cooperative dialogue. To this extent, negotiation increasingly resembles peer review. Indeed, this new perspective merits even more consideration of the the very nature of the WTO's future homework, such as services, food security, and non-tariff barriers. The remaining hardest nuts to crack in the future seem to hinge not on episodic, big time bargains but more on workman-like, diurnal regulatory dialogue that could widen shared grounds among members: not overnight by negotiation, but only incrementally by mutual understanding.
In this regard, ramifications of the recent Bali breakthrough, in particular the Trade Facilitation Agreement, which rekindled the moribund Doha Round trade negotiations, are non-trivial, although disappointing to some in scope.Footnote 126 For a moment, WTO members suspended a tacit commitment to the taken-for-granted mercantilist attitude.Footnote 127 Ironically, WTO delegates in Bali could deliver the deal only by stopping bargaining. For that moment, at least, they appeared to realize that the old bargaining model based on an instant quid pro quo mentality might not always work. They subscribed to the critical proposition that trade is not a game of winning or losing and that a trading nation might not always need to outsmart its trading partner to get a better deal.
Once WTO members refocus their negotiation under this social framework, they will soon realize that each trade negotiation on a certain subject must be guided by a peer review process under a corresponding WTO committee on the same subject. For example, negotiations on agricultural subsidies must be in parallel with simultaneous peer review processes under the Agriculture Committee, the Cotton Sub-Committee, and the Committee on Subsidies and Countervailing Measures. Accordingly, negotiations must not be driven by a rigid, on–off deal mentality, as eloquently demonstrated in the notion of ‘single-undertaking’. Instead, they must be flexible and incremental.
This sober recognition of this vital operational flexibility, which leaves room for talk, and therefore learning, among WTO members, is the true accomplishment of the Bali deal.Footnote 128 The Trade Facilitation Agreement certainly departs from the legalistic rigidity symbolized by the single-undertaking principle. As a framework agreement, its implementation requires WTO members to fill in a number of unknown details. This room for talk is essential under the social framework proposed in this article. Learning, and subsequently better understanding, of each other's system and situation, not bargaining, is key to overcome new barriers borne not of protectionism but of differences in both administrative culture and the level of economic development.
5. Conclusion
The new community framework, if widely shared among trading nations, may enable them to embrace new ideas that have remained largely inconceivable under the old mindset. For this purpose, the WTO and its norms must become exoteric, not esoteric, to its broad community, including not only its state members but also individual economic players, such as producers, importers, distributors, retailers, wholesalers, forwarders, shippers, bankers, and consumers. This social marketing of the WTO may disabuse the public of those mercantilist myths preached by special interests and politicians who cater to those interests. Also, the better-informed public will engage in better deliberation, which will in turn shape better trade policy. In this regard, trade scholars and the WTO Secretariat should work together to create an accessible heuristic on the WTO and its operation. Such a heuristic will accord the world trade community a much improved language.
