The WTO and Law and Development: The Domestic Connection

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INTRODUCTION

When I first heard that the title of this panel was "How to Make the Doha Round a Genuine 'Development' Round," I was skeptical. Many economists seem to believe that the economic benefits for developing countries of further trade liberalization are both limited and unevenly distributed. One reason for this is that a great deal of trade liberalization has already taken place. Another reason is that, strikingly, the form of trade liberalization that seems guaranteed to generate the greatest economic gains, namely liberalization of trade in the services of low-skill laborers, barely seems to be on the Doha Agenda. Yet another reason is that the types of liberalization that seem to be the focus of the Doha round have mixed effects on developing countries. Here, agriculture is the prime example. Removing developed country subsidies on agriculture and enhancing market access for developing countries threatens to improve the fortunes of food-exporting developing countries such as Brazil and Argentina. At the same time, however, it threatens to adversely affect developing countries that are net food importers or currently enjoy preferential market access. There is also uncertainty about whether the benefits of liberalizing agricultural trade will trickle down to the poorest of the poor. (1)

In contrast to these limited expectations for reform of the international trade regime, many development economists seem to believe that reforms of domestic legal and political institutions in developing countries have the potential to generate significant economic benefits. An influential school of thought, sometimes referred to as the New Institutional Economics, adheres to the view that the quality of domestic institutions is one of the primary determinants of societies' economic fortunes. (2)

What I would like to suggest today is that if we are going to think about how the Doha round can become a true development round, we ought to think not only about the narrow question of how WTO law affects international trade, but also the somewhat broader question of how WTO law affects the overall institutional structure of developing countries.

CONNECTIONS BETWEEN THE INTERNATIONAL AND THE DOMESTIC

What are the mechanisms through which international economic law affects domestic law? I have counted five distinct mechanisms. Some of them, probably the first two, are obvious and have attracted a great deal of attention. Others may be less obvious.

Restricting Disguised Barriers to Trade

This is one of the two aspects of the relationship between the international and the domestic that has attracted a great deal of attention. Reviewing ostensibly nondiscriminatory domestic laws to see whether they are actually disguised restrictions on international trade is the bread and butter of the WTO regime.

Imposing Minimum Standards

This is the other source of tension between the international and the domestic that has attracted a great deal of attention. The hottest flashpoint has been the TRIPS Agreement which, as is well known, compels WTO members to adopt intellectual property regimes that meet certain minimum criteria. The other important examples are the SPS agreement and the TBT agreement, both of which contemplate supranational scrutiny of domestic legal regimes for consistency with principles such as necessity, consistency with international standards, scientific justification and transparency.

Tolerating Bilateral Conditionality

WTO law also can influence the evolution of domestic law in developing countries by shielding them from, or exposing them to, the use of tariff preferences as a means of pressuring them into adopting legal reforms. This issue naturally arises in the course of the accession process but it is also an issue for countries that are already members of the WTO. One aspect of this issue arose in the EC-GSP case. …