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Systemic Failures of ‘Disconnected’ Multilevel Governance Any democratic parliament failing - after more than 10 years of negotiations - to adopt monetary, financial, trade or environmental legislation necessary for protecting consumer welfare would lose democratic support by reasonable citizens. In worldwide institutions, however, such governance failures to protect public goods are not effectively controlled or sanctioned by parliaments and citizens. In the more than 30’000 pages of WTO law, for instance, ‘constitutional requirements’ such as promotion of ‘consumer welfare’, human rights and democratic accountability are nowhere mentioned.

Disorder in the United Nations (UN) and Bretton Woods Systems The ‘Bretton Woods’ system of international monetary and ‘soft’ financial regulation has failed to prevent the destruction of millions of jobs and of private investments worth trillions of US dollars during the financial crises and ‘great recession’ since 2008. The related disputes over ‘exchange rate manipulations’ and excessive imbalances of currencies (e.g. due to the large US trade deficit and associated surpluses in China, Japan, Germany and oil-exporting countries), like the unrepresentative governance structures of the IMF, illustrate systemic ‘governance failures’ of the international monetary and financial system. The WTO has contributed to limiting protectionist responses to the international financial crisis as they happened during the ‘beggar-thy neighbour’ policies in the 1930s.

But the inadequate progress made during 10 years of Doha Round negotiations, like the uncertainties over whether the WTO can ever implement future Doha Round agreements as a ‘single undertaking’, reveal ‘governance failures’ also in the world trading system. The failures of the UN system to protect human rights, prevent poverty and climate change, and protect many other international public goods have prompted former UN Secretary-General K. Annan to conclude – in his final address as UN Secretary-General to world leaders assembled in the UN General Assembly on 19 September 2006 that the power-oriented international legal system is widely perceived as ‘unjust, discriminatory and irresponsible’ and has failed to effectively respond to the three global challenges to the United Nations: ‘to ensure that globalization would benefit the entire human race; to heal the disorder of the post-Cold War world, replacing it with a genuinely new world order of peace and freedom; and to protect the rights and dignity of individuals, particularly women, which were so widely trampled underfoot.’ According to Kofi Annan, these three challenges – ‘an unjust world economy, world disorder and widespread contempt for human rights and the rule of law’ – entail divisions that ‘threaten the very notion of an international community, upon which the UN stands.’ (Annan, 2006) Legal Disintegration of the World Trading System?

The transformation of the fragmented ‘GATT à la carte system’ into an integrated WTO legal and dispute settlement system among 153 WTO members remains the most successful example of

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worldwide economic and legal cooperation in history. The failure of WTO members to conclude their 10 years of Doha Round negotiations entails not only enormous opportunity costs in terms of potential trade gains and consumer welfare (cf. the data and estimates in Messerlin, 2011; Hoekman and Nicita, 2010; Bhagwati and Sutherland, 2011). It also prevents moving from the ‘old agenda’ of ‘Uruguay Round leftovers’ to the ‘new trade agenda issues’ like liberalization and regulation of international services trade that are increasingly addressed outside the WTO in hundreds of bilateral and regional economic agreements. Beyond undermining the function of the WTO as a global forum for future negotiations on trade liberalization and regulation (e.g. of international food and energy security, trade-related competition rules, ‘multilateralizing’ bilateral and regional preferential trade regimes, contributing to the international climate change and water security regimes), a failure to conclude the Doha Round negotiations also risks undermining the WTO legal and dispute settlement system. The already more than 250 WTO panel reports, Appellate Body reports and arbitration awards adopted by the WTO Dispute Settlement Body since 1996 reflect a progressive judicial clarification and development of the WTO legal system that risks being challenged as lacking democratic legitimacy if the WTO rule-making system can no longer be used effectively for ‘balancing’ or correcting judicial clarifications of WTO rules. The increasing circumvention of the WTO by bilateral and regional rulemaking outside the WTO should be used as ‘building blocks’ rather than ‘stumbling blocks’ of the world trading system (Gao and Lim, 2008); but the controversies over the WTO-consistency of many of these agreements (like the Anti-Counterfeiting Trade Agreement concluded in December 2011 among more than 30 WTO members) also illustrates the risk of increasing dispute settlement outside the WTO and of return to intergovernmental power politics.

The ‘Constitutional Failures’ of ‘Disconnected’ Multilevel Governance Must be Limited by ‘Access Rights’ and Judicial Protection of Rule of Law Since World War II, the interrelationships between national and international public goods have prompted states to create ever more international organizations and intergovernmental networks for multilevel governance of international public goods. The US Reciprocal Trade Agreements Act of 1934 and the subsequent US ‘fast track legislation’ for concluding GATT Rounds reflected the constitutional insight that multilevel rule-making at international and domestic levels must be ‘linked’ (e.g. by congressional advance authorization of reciprocal trade liberalization negotiated by professionals out of the public eye) in order to limit welfare-reducing ‘protection biases’ against foreign goods and foreigners (Dam and Hull, 2005, pp.83–96). Just as the human rights commitments under the UN Charter and UN human rights instruments condition the democratic legitimacy of UN law on protecting human rights, so should WTO law acknowledge that WTO market access commitments and trade regulation derive their democratic legitimacy from protecting freedom, transnational rule of law and consumer welfare for the benefit of citizens. The refusal by the US Congress to extend the 2002 fast-track legislation to conclude the Doha Round negotiations, like its refusal to grant fast-track legislation for climate change negotiations, has inhibited the US ability to exercise leadership in international negotiations by weakening the capacity of ‘partisan congressional politics’ to compromise. The inadequate cooperation among national and international rulemaking, administrative and judicial governance institutions undermines the legitimacy and effectiveness of multilevel governance and of transnational rule of law. The global government networks have been created in response to the realities of global interdependence requiring multilevel governance of interdependent public goods. Yet, their increasingly ‘disaggregated sovereignty’ (Slaughter, 2004) remains without adequate constitutional restraints; the ‘disconnections’ among worldwide and domestic rule-making and judicial procedures weaken the capacity and constitutional restraints of governments to protect international public goods.

In the US Congress, for instance, rent-seeking interest-group politics often justifies hegemonic trade and environmental regulation by introverted ‘constitutional nationalism’ such as claims that US Cosmopolitan ‘Aggregate Public Goods’ Must be Protected by Cosmopolitan Access Rights and Judicial Remedies domestic law should not be ‘infected’ by incorporation of non-democratic intergovernmental regulation, and US courts should not limit hegemonic use of US power politics and ‘efficient breaches of international law’. Yet, insistence by trade politicians on ‘freedom of maneuver’ for intergovernmental power politics entails that – also inside constitutional democracies – ‘democratic government, if nominally omnipotent, becomes as a result of unlimited powers exceedingly weak, the playball of all the separate interests it has to satisfy to secure majority support’ (Hayek, 1982, p.99).

The often one-sided influence on positive law of ‘standards’ elaborated by non-governmental lobbies illustrates the frequent accountability problems, anti-competitive distortions (e.g. by governmentsupported cartels), and inadequate constitutional restraints of intergovernmental economic regulation accommodating organized interest groups.8 The more worldwide institutions (like the WTO) for the collective supply of international public goods build on ‘private-public partnerships’ protecting national and regional public goods ‘bottom-up’ (e.g. national and regional standard-setting institutions), the stronger becomes the need for extending national and regional ‘access rights’ and judicial remedies of citizens beyond national and regional borders. Authoritarian ‘Westphalian regulatory approaches’ whose treatment of citizens as mere objects lacks democratic legitimacy and support, fail to adequately regulate the legal, political and economic interrelationships between the different governance levels and related collective action problems of international public goods – like the ‘coherence gap’ and ‘legitimacy gap’ discussed in the keynote speech by P. Lamy, and the ‘jurisdiction gaps’, ‘governance gaps’, ‘incentive gaps’, ‘participation gaps’ and ‘rule of law gaps’ discussed in the following Section.9 ‘Westphalian Multilevel Governance’ of Public Goods Lacks Adequate Constitutional Restraints New Modes of Multilevel Economic Governance without Effective Constitutional Restraints for the Benefit of Citizens International governance among diplomats – often claiming broad foreign policy discretion, but denying legal and judicial accountability vis-à-vis domestic citizens (e.g. for their violations of international economic agreements ratified by domestic parliaments) – is progressively transformed by

new modes of ‘multilevel governance’. Examples include:

- economic coordination among heads of governments or finance ministers in the Group of 20 systematically important economies;

- delegation by the G20 of specified tasks to existing international organizations like the Bretton Woods institutions and the WTO;

- creation of new governance institutions by the G20 like the Financial Stability Board established in 2009;

- delegation by the G20 of certain tasks to intergovernmental networks like the central bank cooperation in the framework of the Bank for International Settlement;

- increasing inter-parliamentary networks - like the regular inter-parliamentary meetings during WTO Ministerial Conferences - so as to better inform and coordinate national parliaments in their control of multilevel governance;

See the case-studies in Joerges and Petersmann (2006, chapter 7-14).

On the ‘jurisdiction gap’, ‘incentive gap’ and ‘participation gap’ see Kaul et al. (1999, p.450 ff; Petersmann, 2011b).

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- explicit rules and procedures for coordinating the functionally limited, but often ‘overlapping jurisdictions’ of worldwide governance institutions (e.g. based on Article V WTO Agreement, the joint ‘Development Committee’ of the IMF and World Bank Boards of Governors);

- rules, procedures and institutions for coordinating worldwide and regional economic organizations (e.g.

based on Articles XXIV GATT and V GATS and the WTO Committee for Regional Trade Agreements), regional and national governance networks (e.g. the ‘comitology procedure’ inside the EU and the EEA), or national and international judicial proceedings (e.g. the preliminary ECJ ruling procedure at the request of national courts in the EU, the preliminary EFTA Court and MERCOSUR opinion procedures at the request of national courts in the EEA and MERCOSUR);

- international treaty rules (e.g. in the WTO Agreements on Technical Barriers to Trade and (Phyto)Sanitary Standards) providing for participation of contracting parties in the work of nongovernmental organizations (e.g. for preparation of technical regulations, product and production standards, sanitary standards) and for legal presumptions that compliance with privately agreed standards is also treaty-consistent;

- cooperation among regional and worldwide networks of competition, environmental, central bank and other regulatory agencies;

- informal networks of producers of agricultural, mineral, industrial and medical products as well as of internet and financial services cooperating in the elaboration of international product and production standards (e.g. for drugs, cosmetics, breast milk substitutes, conflict diamonds); and

- ever more diverse ‘private-public partnerships’ in the conduct of, e.g., WTO dispute settlement proceedings, carbon emission trading systems, protection of common environmental concerns (like biodiversity) and promotion of ‘corporate social responsibility’.

The more complex, informal and non-transparent such interactions among private and public, national and international governance levels are, the stronger becomes the need for multilevel, legal and institutional ‘checks and balances’ limiting regulatory abuses and addressing collective action problems more coherently. Claims of ‘autonomous systems’ (like ‘member-driven WTO law’) and of the need for ‘confidential negotiations’ (rather than public ‘ideal speech situations’ promoting ‘reasonable solutions’) are often motivated by selfish claims of ‘national interests’ and vested group interests.

Multilevel ‘Jurisdiction Gaps’ and resultant ‘Governance Gaps’ The jurisdiction gap, i.e. the limited jurisdiction and incapacity of individual states to provide most global public goods unilaterally without international cooperation, requires delegation of limited powers to, and their collective exercise in, international institutions subject to multilevel restraints of abuses of public and private power. Constituting, limiting, regulating and justifying joint governance powers of more than hundred states with often conflicting short-term interests raises difficult ‘constitutional questions’.

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