The Institutional Environment: Canada and the World Trade Organization

1. The Institutional Environment:Canada and the World Trade Organization Geoffrey Hale Political Science 3170 The University of Lethbridge October 14, 2010

2. What is the WTO • Organizational Structure and Governance • Facts, myths, and theoretical insights. • Canada’s Evolving Role at the WTO • Trade “Clubs”, Canada and the WTO

3. Other major governance issues • Budget – distributed in proportion to member countries’ share of global trade – EU > 40%; US: 13.5%; China: 5.9%; Canada 3.36% • Total Budget - 189 MM CHF  $C 180 MM. • Decision-making • By consensus – not unanimity (except for changes to general principles guiding WTO), but not against opposition of major trading power. • Usually requires “log rolling” among major nations, coalitions • ¾ vote on interpretations of WTO rules, waiving disciplines against members. • Two-thirds vote for technical rule changes, approving “accession” of new members.

4. WTO Accession Process • Applicants must agree to WTO processes, make binding undertakings re: own trade and related policies. • Must negotiate entry with existing WTO members who may negotiate specific terms in return for approving accession. • Negotiations typically “asymmetric” • Negotiations have become more demanding with growth, diversity of existing WTO membership.

5. WTO Facts and Myths • WTO is intergovernmental organization • Members determine start (and terms) of new negotiating rounds • National governments broker level and terms of autonomy on specific rule clusters • Medium-sized and smaller countries benefit from “club rules” capacity to cooperate in rule enforcement • WTO is not international trade constitution – precluded by detailed negotiations on rules. • Still major power asymmetries. • Rule commitments are cumulative. • Medium-sized, smaller countries cannot compel compliance of large countries, although international coalitions help.

6. Other useful policy insights (per Froese) • Political institutions still matter as much as economic ones in trade policies • National / regional decision-making structures determine terms and context of participation, negotiating positions, especially of larger, medium-sized trading countries. • National sovereignty not incompatible with global governance • Governments still retain capacity for policy discretion within boundaries of international, regional agreements. • Policy “realism” heavily circumscribed by realities of interdependence for large, small countries alike. • WTO embedded within complex networks of international, regional and sectoral agreements with interconnected implications.

7. Canada’s Evolving Role at the WTO • Canada still 5th largest trading country in world • 11th or 12th largest if individual European countries and/or Hong Kong included • But – no longer one of “inner core” players in global negotiations • Reflects shift in power of different “trade clubs” at WTO

8. Factors in Canada’s declining role at WTO • International • Emergence of large developing countries (e.g. China, India, Brazil) has broadened “inner circle” at WTO • Australia now playing leading role as leader of agricultural exporting countries • Growing important of regional and bilateral trade agreements • Canada-related issues “trivial” to WTO outcomes (per Wolfe. • Domestic • Canadian domestic trade options constrained by persistence of minority governments, related salience of regional issues (e.g. protection of supply management) • Growing impact of competitive liberalization, pursuit of regional trade deals on Cdn. priorities. • Post-2004 division of Commons’ Foreign Affairs / Trade ctees. • Relative decline of DFAIT influence within fed. gov’t?

9. The Politics of Trade Clubs (per Wolfe) • Wolfe – “group of states associated for a particular purpose” • Potential roles: • “Analytical burden sharing” – coordination of national strategies • May involve log-rolling among members with complementary trade priorities. • Keohane & Nye – “places where ‘insiders’ know the rules and ‘outsiders’ have limited influence • Proliferation of issues under review at multiple WTO committees requires all but largest states to focus efforts on areas of key importance.

10. Features of major trade clubs • Common characteristics • e.g. region or level of development • Common objectives • Reduction of barriers to agricultural trade (e.g. Cairns Group) • Protection of domestic farm sectors (G-10, G-33) • “Bridge clubs” – organized to broker differences among competing positions.

11. Factors contributing to “club” growth • Growing number of members • Networking through clubs critical for smaller countries to exercise any influence over trade negotiations • WTO tradition of consensus decision-making • Clusters of states more likely to secure accommodation of positions or provide blocking coalitions until accommodation secured. • WTO tradition of “single undertaking” • “nothing is agreed until everything is agreed”

12. Implications for WTO Processes • Emergence of negotiations through “series of nested ‘concentric circles’” • WTO Plenary Meetings (formalities) • Informal Plenaries • Technical experts’ meetings • “Green Room”  inclusive core group representing key trade clubs relevant to issue. • Wolfe notes Doha roadblock between Brazil, India-led groups, US, EU  attempted bridging by G-4 (US, EU, Brazil, India), G-6 (+ Australia, Japan)