Implicit Linkage: Current System Improvement

2.1.2.3. Implicit Linkage: Current System Improvement

The third approach calls for the establishment of the linkage between trade and non-trade issues in an implicit manner. This approach looks for soft reforms within the WTO system with little steps forward that facilitate the subsequent steps. It does not accept that the trade forum should not care about non-trade issues, nor does it look for bridging between these issues in an explicit way.

Instead, it focuses on the available tools within the WTO system and by proposing solutions to make these tools more efficient and operative, it tries to avoid both legitimacy problems which are caused as a result of the non-linkage approach and efficacy problems caused by the explicit linkage.

2.1.2.3.1. Negotiation Stage

The explicit linkage studies the existing potential within the current in force WTO Agreement and proposes several instruments in the negotiation and the dispute settlement stages for each of the linkage issues to establish an implicit linkage and further proposes the incorporation of non-trade problems in the trade forum. The implicit linkage advocators propose the possibility of changing the standards, (non-trade issues) and renegotiate its tariffs and concessions with its trading partners.³¹⁰ For WTO Members in the current mechanism of the WTO this tool

309 Ibid. p.335

310 General Agreement on Tariffs and Trade, Article XXVIII: "…. a contracting party may, by negotiation and agreement with any contracting party with which such concession was initially negotiated and with any other contracting party determined by the CONTRACTING PARTIES to have a principal supplying interest a contracting party … may, by negotiation and agreement with any contracting party with which such concession was initially negotiated and with any other contracting party determined by the CONTRACTING PARTIES to have a principal supplying interest … and subject to consultation with any other contracting party determined by the CONTRACTING PARTIES to have a substantial interest in such concession, modify or withdraw a concession included in the appropriate schedule annexed to this Agreement. … and subject to

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permits the WTO Members to raise their standards with the possibility of compensating for potential economic losses within the current WTO arrangement.

However, this possibility requires the agreement and approval of all other trade partners for any change in the schedules and in order to obtain approval, the WTO uses a certification procedure through which the Secretariat of the WTO circulates a member's proposed changes to all WTO members, who may notify objections.

The fact that the concerned members must negotiate to reach a satisfactory point for overcoming any objections before the Director-General of the WTO can certify the proposed changes to a schedule as final and binding has resulted in the fact that this potential can rarely be achieved and therefore makes it difficult to be presented as an efficient solution.³¹¹

Following this approach, some academics have proposed an economic view to the schedules of commitment of WTO Members within which those WTO Members who decide to raise or lower their national standards would be allowed to raise or lower their committed trade tariffs to the extent of market access value.³¹² They highlight the importance of market access commitments as the cornerstone of the WTO Agreement upon which the WTO Members are allowed to change their national standards and tariffs freely while respecting the economic value of their commitments. According to this economic approach to the WTO commitments, the externalities resulting from the disrespecting of international standards which do not have an economic value and relate to humanitarian concerns and human rights values, are not entitled to be addressed in the WTO. Therefore the WTO is only concerned with pecuniary externalities which include both the race-to-the-bottom and regulatory chill and the proposal provides the justificatory basis for WTO Members to change their tariffs whenever they decide to change their consultation with any other contracting party determined by the CONTRACTING PARTIES to have a substantial interest in such concession, modify or withdraw a concession included in the appropriate schedule annexed to this Agreement."

311 A WTO Secretariat Publication, "A Handbook on Reading Wto Goods and Services Schedules,"

Cambridge University Press (2009)., p.17

312 Kyle Bagwell, Petros C. Mavroidis, and Rober W. Staiger, "It’s a Question of Market Access,"

American Journal of International Law 96(2002).p.69

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standards in order to maintain the economic value of their market access commitments and the WTO Agreement does not concern itself with non-pecuniary externalities.³¹³

2.1.2.3.2. Judicial Process

Since the establishment of the WTO, one of the real driving forces behind the WTO's approach toward the trade-linkage issue has been the dispute settlement (DS) system. The interpretations of the WTO covered agreements rendered by Panels and the Appellate Body have played a significant role in completing the WTO agreement. While these interpretations, which are unavoidable elements of the dispute settlement mechanism, became necessary due to gaps and political ambiguities within the WTO contract, such tools could even bridge the trade and non-trade issues on the judicial stage. However these interpretations caused from the existing gaps which have been named by some commentators as "Creative Ambiguities", provide the WTO DS with a legitimacy problem within the WTO judiciary power.³¹⁴

The legitimacy problem in fact reflects the existing debate on the nature of the WTO DS. While the political and diplomatic approach to the WTO DS could open the way to look more flexible at trade linkages and non-trade issues, the legalistic approach requires that the DS organs act on principles that confer them power. As a result of a long debate on the nature of the GATT DS mechanism concerning the issue of whether there should be a rule-based system with a legalistic approach or a flexible diplomatic mechanism with a political approach, the Dispute Settlement Understanding (DSU) tends to lean more to the rule-based legalistic nature for WTO DS.³¹⁵

313 Ibid. p. 75

314 Sylvia Ostry, "Efficiency, Equity and Legitimacy: The Multilateral Trading System at the Millennium," J.F. Kennedy School of Government, Harvard (June 2000). p.6

315 Dunoff, "The Death of the Trade Regime." p.754

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The trade-linkage issue shows itself in the legalistic approach, in the relation of the WTO Agreement with other international agreements and norms. In other words, the issue of incorporating the non-trade issues and international standards which have been left outside of the WTO forum has been studied in a broader scheme of WTO law and international law. In describing the relationship between WTO and international law several opposite views have been presented and discussed. At one extreme side of this debate, some researchers have looked at the WTO as a special forum totally distinct from international law which should be governed and ruled by its own rules and regulations (Lex Specialis).³¹⁶ They refer to the WTO DSU Article 3³¹⁷ which asks the panels to only consider WTO law and believe in the relevancy of only customary rules of interpretation in international law to the WTO and refuse any substantive link between international law and WTO law.³¹⁸ According to this view, the panels must act on principles that confer on them power and if they rule on domains which are currently contested, it would be transformed from a legal to a political domain, hence undermining their institutional position. Therefore, any "delegalization" of WTO DS proceedings would delegitimize the system and the more the system becomes politicized, the greater would be the possibility of non-compliance and the non-resolution of disputes.³¹⁹

On the other positive extreme side, others look at the WTO Agreement as a product of international relations that should take into account the international norms and standards.³²⁰ They hold the trade forum accountable to human rights by permitting trade sanctions against violation of preemptory norms and as the WTO is an organization formed within the ambits of international law, the UN

316 Marceau, "Wto Dispute Settlement and Human Rights." p.756

317 Article III: "2.The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system. The Members recognize that it serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law. Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements."

318 Joel P. Trachtman, "The Domain of Wto Dispute Resolution," Harvard International Law Journal 40(1999).,p.343.

319 Dunoff, "The Death of the Trade Regime." p.755

320 Joost Pauwelyn, "Conflict of Norms in Public International Law: How Wto Law Relates to Other Rules of International Law," Cambridge University Press (2003).

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Charter takes precedence over conflicting obligations and hence, human rights must be protected.³²¹

However other moderate views and solutions in between the two positive and negative approaches have been presented and these look to establish a bridge between the WTO and international law in a softer manner. Some academics have called for a so called "Passive Virtues" solution in which the WTO DS should play a constrained role in contested issues of trade linkages. The advocators of this approach believe that when a trade measure, based on an international treaty is challenged in the WTO, panels could defer from going forward unless and until the dispute resolution procedures under that international treaty have been exhausted.³²²

2.1.3. Dilemma of Legitimacy and Efficacy: WTO as