World Trade Organization judicialization and preference convergence in EU trade policy: making the agent's life easier

Abstract

Some feared that judicialization in the World Trade Organization (WTO) would decrease WTO members' propensity to support multilateral trade liberalization. Yet, in 2001 WTO members launched a new round of multilateral trade negotiations, fervently supported by the European Union (EU) despite the influence of domestic protectionist forces. This contribution offers an explanation of why judicialization elicited increased convergence of policy preferences between a liberalizing agent (Commission) and multiple principals (economic interests). I identify three judicialization-led rationales for this: the empowerment of exporters relative to protectionist forces; the enhanced attractiveness of the WTO as an institutional location for international regulatory standards; and the strengthening of incentives to engage positively in negotiations to offset the likely costs of adverse panel rulings. I show the plausibility of this argument through an empirical analysis of EU politics in three negotiation areas in the Doha Round: services; agriculture; and the ‘Singapore issues’.

Keywords:

• Doha Round
• European Union
• judicialization
• negotiations
• principal–agent framework
• WTO

ACKNOWLEDGEMENTS

An earlier version of the paper was presented at the Joint Sessions of the European Consortium for Political Research held in Lisbon, 14–19 April 2009. I wish to thank Andreas Dür, Manfred Elsig, Dirk De Bièvre, Hans Diels, Marcel Hanegraaff and the anonymous reviewers for valuable comments.

Notes

‘WTO judicialization’ hereafter. For this conceptualization of the strengthened enforcement mechanisms in the WTO see De Biévre (2006). I choose not to use the term ‘legalization’ (Goldstein et al. 2000) because while legalization is an appropriate concept for the process of law-making, the term judicial and its derivations appears more apt to refer to court-like procedures, such as international dispute settlement and domestic quasi-judicial review procedures. Both terms, however, refer to the same phenomenon, namely the changes introduced to the Dispute Settlement Mechanism with the creation of the WTO. In the GATT, consensus was required to form a panel, adopt a report and authorize retaliation for non-compliance. In the present system, the adoption of legal rulings and the authorization of retaliation is no longer conditional upon consent by the defendant (see Goldstein and Steinberg 2008; Hudec 2000; Zangl 2008).

The authors use the term ‘legalization’. Consistently with what I argued in note 1, I use the term ‘judicialization’ when referring to their argument in the text.

It needs be stressed here that other arguments can be found in the literature. Rosendorff (2005), for instance, conceives of increased judicialization as an institutional innovation that allows WTO members to compensate their trading partners' losses, if they choose to violate existing commitments. As such, he argues, judicialization may increase flexibility and the stability of co-operation. However, Rosendorff bases his analysis of the WTO DSM on a false dychotomy between the presence or absence of mechanisms for compensation. The GATT dispute settlement mechanism already provided mechanisms for compensation. These had to be approved by unanimity, i.e., also by the defendant. Under the WTO, such veto option is no longer available, and what is more sanctions can also be authorized against the opposition of the defendant. If flexibility is to mean compensation, no actual increase in flexibility resulted from the creation of the WTO dispute settlement body. Increased judicialization therefore increased the bindingness of WTO commitments, while keeping constant the possibility for compensation during the consultation phase. For these reasons, in assessing whether and how judicialization affects the prospects for co-operation, I side with Goldstein and Martin (2000) in considering increased transparency and enhanced bindingness of trade rules as the two most relevant characteristics of judicialization.

A debate exists in the literature as to whether the WTO Dispute Settlement Body (DSB) should rather be conceived as a ‘trustee’, namely an independent body in relation to which re-contracting tools, and less effective at influencing than in relation to ‘agents’ (Alter 2008). I take the view here that although the DSB enjoys ample discretion, re-contracting dynamics are still central to its relationship with WTO members and, thus, that the PA framework remains a useful analytical tool in this context.

As discussed in the introduction (Dür and Elsig 2011), under specific circumstances it can be useful to conceive of the informal contractual relations between economic actors and political actors as a principal–agent relationship.