«EUI Working Papers RSCAS 2012/23 ROBERT SCHUMAN CENTRE FOR ADVANCED STUDIES Global Governance Programme-18 MULTILEVEL GOVERNANCE OF INTERDEPENDENT ...»
WTO General Council, 1996a, 1996b; WTO Secretariat, 2003a). There are two main points in the Coherence Mandate worth emphasizing: first, the inter-linkages of policies with regard to trade, finance and macroeconomic policies with the purpose of expanding trade, growth and sustainable development, correction of external imbalances, as well as the links between trade and development (trade, aid, and debt), “whereby the need for adequate and timely flow of concessional and nonconcessional financial and real investment resources and further efforts to address the debt are needed to complement trade liberalization in bringing growth and development.” (Auboin, 2007, p.21);
second, the social costs often associated with trade liberalization and the complementary role of the World Bank (and the IMF) in alleviating adjustment hardship.
The Cooperation Agreement, on the other hand, “provides the basis for carrying forward the WTO's Ministerial mandate to achieve greater coherence in global economic making.” (WTO General Council, 1996a) Not only did it essentially formalize the informal relationship between the two institutions that went back to the days of the GATT 1947 but went beyond that: mutual granting of observer status, consultation between the secretariats and the staff of institutions, exchange of information and access to databases (WTO General Council, 1996a, paragraph 11).
In accordance with the spirit of the Cooperation Agreement, which sought to establish channels of interaction that, in the long run, would substitute for the lack of an international forum for the world's ministers of trade, finance, and development, a two-tier consultation mechanism has been set in motion. The high-tier comprises: i) The International Monetary and Finance Committee (“IMFC”) is the primary advisory body of the IMF Board of Governors, where the World Bank participates as an observer and the WTO Director-General attends its meetings (WTO Secretariat, 2003a Annex 1, paragraph 57; Pascal Lamy, 2006); ii) The WTO's General Council functions as the main forum of coordination between the WTO and the World Bank. Its chairman holds special informal meetings on coherence which representatives of the Bank (as well as the IMF) are invited to attend (WTO General Council, 1999; WTO Secretariat, 2003a Annex 1 paragraph 61); iii) The Director-General of the WTO regularly consults with the President of the World Bank on issues of collaboration and coherence of policies and the product of their consultations reflects in their joint statements.15 The lower-tier consultations among staff members are distinguished in those that require a standing invitation and those for which special invitations are needed.16 In both cases, the point is the acquisition of first-hand information and the contribution of all three institutions in coherent and mutually-supportive policies. It should be noted, though, that neither the World Bank, nor the IMF for that matter, have been granted an observer status in the Trade Negotiations Committee (“TNC”) and its subsidiary bodies, despite the general right of participation under the Cooperation Agreement (Pascal Lamy, 2006, paragraph 13). These informal contacts between the staff of the two institutions have raised concerns of Member States with regard to jurisdiction, transparency, control etc. (Wouters and Coppens, 2006, p.20, referring to WTO Director-General, 1996, and Benedek, 1998, p.489). As a After the failure of the Cancún Council, the heads of the World Bank and the IMF wrote to the WTO Members reminding them of the potential benefits that would accrue from the conclusion of the Doha Round (Rodrigo de Rato and Paul Wolfowitz, 2005) See WTO General Council (1996a, paragraph 5). The WTO's Secretariat enjoys a comparable observer status at the meetings of the Executive Directors of the World Bank, World Bank – WTO Cooperation Agreement, at paragraph 4.
response to these critiques, the Director-General of the WTO has reassured the Member states that, in case of inconsistency, he will first notify and consult with them, and will address the World Bank only upon their consent (Wouters and Coppens, 2006).
From an economic policy point of view, the collaboration between the two institutions merges two distinct approaches, the 'aid-for-development' pursued by the Bank and the 'trade-for-development' approach followed by the GATT/WTO. The former is broader, enveloping a multitude of strategies that target the elimination of all kinds of deprivations developing countries suffer from, and rendering trade an important tool in doing so. The latter, as explained above, has a narrower scope, focusing on the increase of developing countries' capacity to trade and, consequently, develop. The 'Aid for Trade' agenda that has sprung from this merger synthesizes elements that are commonplace in these two distinct, yet complementary approaches. At the same time, the 'Aid for Trade' is a two-pronged agenda.
The first prong scrutinizes the so-called supply-side constraints (i.e. regulations, infrastructure, investment climate etc.) that have so far impeded developing countries from producing and exporting on a level playing field in the trading system because of a lack of capacity and assistance. In this light, the Integrated Framework (IF), conceived at the 1996 Singapore Ministerial Conference (WTO Committee on Trade and Development, 2004) and inaugurated in 1997, at the High-Level Meeting on LDCs Trade Development, was supposed to function as a platform for coordinating trade-related capacity and technical assistance. It addressed issues concerning LDCs but it excluded developing countries. Several other bilateral and multilateral donors with experience in the field of development (World Bank, IMF, ITC, WTO, UNDP, and UNCTAD) joined the WTO in this effort.
Due to its initial implementation impediments, 17 the IF had to be “reinvented” as an Enhanced Integrated Framework (EIF) in order to serve more effectively three primary objectives: i) “mainstream trade into national development strategies”; ii) “set up structures needed to coordinate the delivery of trade-related technical assistance”; and iii) “build capacity to trade, which also includes addressing critical supply-side constraints.” (see ‘WTO Enhanced Integrated Framework’, 2012). The EIF has a structure similar to that of the IF (‘EIF Governance Framework’, 2012): it is a partnership among six agencies (among which the World Bank is the main agency for trade mainstreaming), 18 donors, observer agencies (e.g. UNIDO), the Executive Secretariat, and the Trust Fund Manager. It is supported by a Multi-Donor Trust Fund – of US$ 120 million as of January 20 – (for the complete list of partner agencies as well as donors, see ‘Who we work with’, 2012), and it is currently active in 47 countries.
The Standards and Trade Development Facility (STDF, 2012) is an additional channel for providing technical assistance and capacity-building to developing countries for the implementation of their SPS obligations. The SDTF was established in 2002 with the participation of the World Bank, the WHO, the World Organization for Animal Health, the FAO, and the WTO. Its main operations are that of financing and coordinating. The project preparation grants (PPGs) are disbursed to developing countries who have a hard time complying with SPS standards. In this case, the beneficiaries could be both public and private organizations who work in the field of generating and/or harmonizing SPS Discussing the handicaps of the IF, Wouters and Coppens (2006) have noted that the IF has been limited to LDCs although “a similar mechanism could be of use in other countries.” Also, the Joint Integrated Technical Assistance Program (JITAP), established by the WTO, UNCTAD and ITC to “help African countries to benefit from the multilateral trade system by offering technical assistance” does not involve the World Bank or the IMF, “despite clear synergies with the IF in the deliverance of technical assistance.” Other weakness associated with the IF are the inadequate financial and human resources, and responsibility and control dispersed among agencies and donors (Wouters and Coppens, 2006, p.24, note 137 therein and 25, cross-referring to WTO IFSC, 2006, p.3).
The World Bank assists LDCs to draft their Diagnostic Trade Integration Study (“DTIS”), wherein their trade reforms and assistance priorities are listed. The WTO's TPR process and Secretariat are supposed to contribute in the process in accordance with (WTO Director-General, 2004, paragraph 21) Can the 'Development Dimension' of the WTO Be Secured Without Stronger Synergies Between WTO and World Bank?
standards. In preparing projects that will later receive a grant, the SDTF cooperates with other SPSrelated organizations and initiatives, such as the EIF.
Conformity with WTO Agreements has often proved to be a rather expensive enterprise not only in terms of extensive investment in the fields of technology, administration, and knowledge and expertise. Suffice to mention at this point that compliance with the SPS Agreement, for instance, presupposes the existence of a robust scientific network (laboratories, scientific tests and analyses, as well as personnel capable of conducting and analyzing these tests) ready to provide the evidence required for imposing and maintaining GATT-inconsistent restrictions or standards that are simply not identical to those found in some international convention (WTO SPS, 1994; WTO-GATT, 1994, Article 2, paragraph 1 and 2, and Article 3-5), and that, in any case, member states are required to guarantee transparency in the process of introducing and enforcing SPS regulations (WTO SPS, 1994 Article 7, 8). Governments must establish enquiry points and publish in advance all the SPS measures they adopt. Additionally, they have to notify foreign exporters as well as the relevant international bodies. The Bank has significantly assisted developing countries in implementing their SPS obligations. In most cases, this kind of assistance has been placed in a more general “development context” of increasing agricultural productivity, protecting health, and ensuring food security (Finger and Schuler, 2002).
The WTO Customs Valuation Agreement 19 and the WTO Intellectual Property Rights Agreement (WTO TRIPS, 1994) present similar implementation costs for developing countries, and thus render Bank's collaboration crucial. Customs practices in most developing countries differ significantly from those in the more trade-advanced countries: poorly trained officials, corruption, excessively long, noncodified procedures, and ineffective provisions for appeal. The Bank has adopted several potential reform programs (computerization, cargo controls, training of management and staff, rewriting of legislation etc.) which, in some cases, reach a cost of US $ 10 million per country (Finger and Schuler, 2002, p.495). Equally, in the case of the TRIPS Agreement, scientific calibration, new legislation, and civil and criminal penalties for infringement of IPRs, if member states wish to abide with the obligations flowing from the IPR international conventions.
The examples of the SPS, Customs Valuation, and TRIPS Agreements illustrate what a substantial undertaking the implementation of the WTO is and how it requires financial resources that go beyond what is already budgeted by developing countries' governments. However, on top of the implementation costs, trade liberalization creates significant adjustment costs, which is the second prong of the Aid for Trade agenda. According to the OECD, adjustment is the use of policy instruments to facilitate the adaptation to a structural change in the economic environment (Bacchetta and Jansen, 2003). Preference erosion, introduction of more stringent food safety standards, agricultural liberalization are only some of the trade policies that place a heavy adjustment onus on developing countries, which, traditionally, have had less resources to neutralize the negative impacts of trade liberalization (through education, business support services and institutions, market analysis etc.). The Task Force that was introduced for the optimal operationalization of the Aid for Trade, has recognized that inadequate adjustment-cost support is one of the major gaps in the development strategies. However, trade-adjustment assistance is incorporated into the Aid for Trade activities only to the extent that these “activities have been explicitly identified as trade-related priorities in the recipient country's national development strategies.” (WTO Aid for Trade Task Force, 2006). The beneficiary country is urged to establish national Aid for Trade Committees, which should, among other tasks, assess the national adjustment needs and broker financing for such programs The WTO has started paying particular emphasis on adjustment assistance as a means for tying developing countries to the negotiations wagon. Therefore, the Bank is under increasing pressure to deliver such The Agreement was negotiated during the Uruguay Round of Multilateral Trade Negotiations to make Article VII of the (GATT, 1947) more precise and operative. Agreement on the Implementation of Article VII of the (WTO-GATT, 1994).
kind of assistance (Sutherland and WTO, 2004). 20 The World Bank Independent Evaluation Group has recommended the creation of a “concrete program of adjustment assistance […] to respond to traderelated shocks that developing countries may face” (Wouters and Coppens, 2006, p.28). However, the Doha Round did not 'give birth' to a new funding facility.
Turning the possibility of Aid for Trade into reality relies on the concerted initiatives of the WTO and the Bank. The Director-General of the WTO has been quite explicit about that: “It has never been the goal of the WTO to direct or dictate how Aid for Trade should be delivered. We are not a development agency. Except for our involvement in training, we have little specific expertise and limited resources. The WTO is about making trade possible.” (Pascal Lamy, 2007). In the case of developing countries, development assistance is the necessary accompaniment to trade opening. For that reason, the involvement of other actors, the Bank's in particular, is crucial.