Following the failure of the Seattle Ministerial meeting, there have been widespread calls for fundamental reform of the governance of the WTO. A number of concrete proposals have been made, ranging from allowing direct access to the WTO for NGOs, to the establishment of an Executive Committee and a parliament. A joint CEPR/ECARES/World Bank Conference, entitled 'The World Trading System Post-Seattle: Institutional Design, Governance and Ownership', analysed the functioning of the WTO as an international forum for cooperation on trade-related issues and assessed options for institutional reform. Held in Brussels on 14/15 July 2000, the Conference was organized by Bernard Hoekman (World Bank and CEPR), André Sapir (ECARES, Université Libre de Bruxelles, European Commission and CEPR) and L Alan Winters (University of Sussex and CEPR).

The first paper of the conference, 'GATT-Think', was presented by Kyle Bagwell (Columbia University) and co-authored by Robert Staiger. Drawing on the theoretical literature on trade agreements, the authors described a foundation for the GATT and the WTO. In particular, they asked: what problem does a trade agreement solve? Bagwell argued that the answer is a terms-of-trade externality that arises when the trade-policy decisions of one government affect the welfare of another government. In this context, he asked whether the GATT/WTO rules make any economic sense and focused on the principles of reciprocity and non-discrimination (MFN) which are recognized as the pillars of the GATT. On the whole, reciprocity neutralizes the problem. MFN is also necessary for reciprocity to work, and further helps to protect third countries.

In his discussion of the paper, Robert Madelin (European Commission) addressed two questions. First, what can these theories on trade agreements tell us about appropriate design, and how can they be developed so as to be useful and relevant in Geneva? Second, how can they be presented and extended in order to help the trade community defend the WTO against globaphobia? Madelin stressed that the notion of cost-shifting, which is highlighted in the paper, is potentially illuminating and is one direction in which research could usefully be expanded. He argued that cost-shifting is a powerful notion, which raises the question of what rules should we make about rules?

In 'The WTO Trading Regime: Functioning, Equity and Democratic Legitimacy', Paolo Guerrieri (University of Rome 'La Sapienza') examines the main structural weaknesses of the current WTO trading regime and highlights the most urgent changes and procedural reforms needed in the governance of the international trade system. He grouped these weaknesses into three main categories: functioning, equity and legitimacy. First, a number of steps could be taken to improve the functioning of the organization and increase its transparency. Second, equity is related to the fact that LDCs were disappointed with the fulfilment of the commitments made in the Uruguay Round and the WTO in Seattle, and these countries should be brought more effectively into the trading system. And third, many parties have criticized the WTO in recent years for becoming involved in issues previously thought to fall under the domain of domestic sovereignty. Guerrieri also called for easier access to WTO documents and a strengthening of its links with the NGOs.

Jim Rollo (University of Sussex) began by saying that he did not disagree with the main philosophical issues raised in Guerrieri's paper. However, he claimed that there are a number of different ways to think about legitimacy, which might help to clarify the organization of the WTO. 'Output legitimacy' addresses the problem of what the WTO is producing and whether people like it. 'Process legitimacy' includes issues such as transparency and accountability. He remarked that one of the main reasons for the failure of Seattle was that LDCs were not given a substantive and meaningful role in the negotiations.

André Sapir presented 'NGOs, Civil Society and the WTO', in which he argued that the work of NGOs should be evaluated in terms of whether it increases or decreases both the level of transparency in trade policy decisions and the quality of the WTO's work. He argued that there are two classes of NGOs: 'consumer' NGOs and those whose agendas have nothing to do with trade (but with other issues such as environment, human rights etc). Among the non-consumer NGOs that are concerned with the trade agenda, he further distinguished two more types: the 'fundamentalists', who are opposed to global capitalism on ideological grounds, and the 'realists', who know that the WTO is different from the other international organizations because of the Dispute Settlement Mechanism. Sapir concluded by calling for greater transparency in the trade policy of Member States and for the continued work of NGOs to improve this transparency at the domestic level.

In terms of what NGOs can bring to trade policy, Jayanti Durai (Consumers International, London) argued that they represent different stakeholders' interests in the multilateral trading system. She thought they were able to produce original policy and data analysis; act as consultants, watchdogs or enforcement agents; and improve the awareness of the general public. They enrich public dialogue, enhance legitimacy and bring new perspectives to old problems. Durai argued that NGOs can strengthen developing countries because they represent an alternative source of information, improve the transparency of local markets and strengthen the competitiveness of domestic consumers. She conceded that not all NGOs are the same and highlighted the need to balance different interests and to ensure equal representation from different regions.

The last paper of the Friday session, 'Do We Need an Undertaker for the Single Undertaking? Considering the Angles of Variables Geometry', was presented by Philip I Levy (Yale University). He posed four questions relating to the scope of the next round. Are broad rounds too complicated (such as the Uruguay Round, for instance)? Are single-sector negotiations a good alternative? Where can we draw the line on the inclusion of topics? What is the effect of the 'Single Undertaking' requirement? The main policy implications obtained from Levy's analysis suggest that single-sector negotiations are dangerous. Broad rounds are more desirable. He concluded that instead of repeating the Uruguay Round's Single Undertaking Approach in future rounds, the WTO should pursue broad rounds with 'variable geometry' – i.e. countries would be able to sign up to only those parts to which they agreed.

Balkrishan Zutshi (former Ambassador of India to the World Trade Organisation) agreed with the idea that single-sector, sector-by-sector negotiations are not likely to take place or to succeed in the future. He claimed that there is a distinction between the information technology agreement (ITA) negotiations, which are genuinely single-sector negotiations, and negotiations in telecommunications and financial services. Within these sectors there is a possibility of exchange of concessions, especially in ITA where it was perceived by developing countries that the sector was of interest to them. Zutshi thought that a much deeper analysis of what happened in these sectors would be useful, but that they would not be a good guide to the likely outcome in other sectors. The theory in the paper was very useful, but it is necessary to be aware that other than in the case of tariffs, it is difficult to estimate the costs and benefits of different approaches. In his view, much insight can be extracted by studying the actual negotiation process and the outcomes.

The Saturday session started with John Odell (University of Southern California) who presented 'The Seattle Impasse and Its Implications for the World Trade Organization'. Odell began by highlighting the differences between Seattle and the Uruguay Round. Some of the 1999 proposals would have authorized the WTO to encroach upon issues usually regulated at the national level. Other disadvantages were the WTO's stronger enforcement capacity as compared to the pre-1994 GATT, which induced a much greater sense of caution over what might be agreed. Conversely, in 1999 the macroeconomic environment of many countries was better than in 1982. Also, the end of the cold war proved to be an impulse for the expansion and further integration of the trading system. However, the process suffered from problems relating to the parties' negotiating tactics, the WTO's preparatory process in Geneva and the management of the Seattle meeting. Odell concluded that in the future governments should adopt more effective negotiating strategies, small countries should not be excluded from the negotiation and the US should not chair the WTO negotiations.

Hervé Jouanjean (European Commission) noted that in Geneva a number of extreme issues managed to dominate the agenda at the expense of more important questions. He felt that in Seattle the difficulties between the EU and the US played a major role in the disputes as did the negative mood that was created, especially among the LDCs. He insisted on the need to reinforce the internal transparency of the WTO, not only at the national level, in the organization, but also vis-à-vis the LDCs.

In discussing the Odell paper, David Luke (Organization for African Unity, Geneva) focused on the need to improve the WTO's decision-making. He noted that the Seattle conference was managed in a way that did not fully take into account the fact that the membership of the WTO had grown substantially since the Uruguay Round. African ministers went to Seattle with the expectation that they would be fully involved in the deals that needed to be made for the launching of a new round, yet they were mostly excluded from the negotiations. After Seattle, the African Group at the WTO proposed to enhance the internal transparency of the WTO as well as the effective participation of all members. On the management of meetings, they pointed to the need to rationalize the scheduling. In terms of the ministerial conferences, the Group made two main proposals: substantial preparatory work should be completed before such conferences, and a committee should be established as the main forum for decision-making.

Michael Finger (World Bank) and Julio Nogues (UNIDO and Ministry of Economy, Argentina) presented 'WTO Negotiations and the Domestic Politics of Protection and Reform'. Nogues began by explaining the outcome of the Uruguay Round for developing countries in terms of imbalance. Specifically from the perspective of Argentina, he outlined the dynamic effects that began to emerge from areas where Argentina both gave and received concessions. First, Argentina introduced liberalization in most categories of tradable services, and the outperformance of services in some sectors (e.g. communications) was astonishing – imports in tradable services increased by 62% between 1992 and 1998. The quality of services and the stock of FDI flows have also increased – FDI flows have more than tripled. In terms of trade in goods, average tariff rates have decreased considerably. Export taxes were dismantled, and the biggest remaining non-tariff barrier is in the auto sector with Brazil. However, there were some increasing deficits for trade in goods with OECD countries. This was due to Argentina facing increasing imports from industrialized countries, mainly in capital goods, combined with stagnant exports because of the increased level of assistance that most industrialized countries gave to agriculture.

Michael Finger argued that the implementation of the Uruguay Round agreements is proving to be very costly for developing countries in terms of the expenditure of real resources that it entails. This situation contrasts sharply with the earlier rounds, when tariff reductions, which cost nothing in resource terms to implement, were more central to the outcome. He also argued that the US entered the round with virtually no flexibility, because US trade policy is essentially set by the private sector via the various consultative committees that are required and the the political system is dependent on private funding. In response, Balkrishan Zutshi argued that the international negotiations have two structural weaknesses: the constitutional scheme of the US and the EU's structure. In the US, it is the legislator who is in charge of the policy; in the EU, there are negotiations between Member States beforehand. Zutshi was unsure whether this situation could ever be resolved.

In 'Governance Challenges for the WTO: How to Increase the Benefits of Participation for Developing Countries', Diana Tussie (Latin American School for Social Sciences (FLACSO), Argentina) analysed the developing countries' agenda. She looked at the demand from LDCs from three perspectives: the use of the WTO code, which is useful for international institutions but allows some autonomy of government decisions; 'put your house in order', implying the need for signals that there is better access to the market for LDCs; and 'give us a place at the table', necessitating some representation rules. Jamel Zarrouk (Arab Monetary Fund) noted that Tussie's paper was related to the previous paper presented by André Sapir, whose arguments he supported. Although he agreed that NGOs have a larger role to play at the national rather than at the international level, he argued that the World Bank model presented in the paper is not appropriate for the WTO. The World Bank has used NGOs and created a friendly atmosphere for the NGOs to work in, but this is not possible for the WTO. He added that it is not sufficient to allow LDCs to sit around the table; more has to be done such as developing the capacity-building of LDCs.

Bernard Hoekman and Petros Mavroidis (Université de Neuchâtel and CEPR) presented 'Enforcing WTO Commitments: Dispute Settlements and Developing Countries – Something Happened on the Way to Heaven'. The authors examined whether the WTO's 'Dispute Settlement Understanding' was biased against LDCs. They highlighted the incentives that existed to use the system, noting that it was first necessary to have information on illegal acts and, in terms of information access, there is an asymmetry between LDCs and industrialized countries. The authors suggested that there is an 'upstream' and a 'downstream' dimension of enforcement in WTO obligations. They argued that strengthening national enforcement mechanisms can help make the WTO a more relevant instrument from an economic development perspective by increasing the ownership of negotiated commitments. It may also relax the constraint of having to convince a government to bring a case to the WTO and reduce the burden of dispute settlement procedures at the WTO level. They also added that the private sector must play a much greater role in enforcement.

Marco Bronckers (Stibbe Simont Monahan Duhot, Brussels) raised two main criticisms. First, the emphasis on remedies was misplaced. As a lawyer, he believed that a finding of illegality should receive greater attention. In this case, developed and developing countries become symmetric. Second, Bronckers felt that the solution given by the authors (i.e. that the developed countries should be obliged to renegotiate with the developing countries) would not make any difference. He thought that other proposals should be made such as introducing a system of penalties as in the EU with the European Court of Justice.

'Reciprocity and the Political Economy of Harmonization and Mutual Recognition of Regulatory Measures', was presented by Thierry Verdier (DELTA, Paris, and CEPR) and Akiko Suwa-Eisenmann (INRA-LEA and DELTA, Paris). The authors discussed issues relating to negotiations on regulations when the WTO is involved. The two questions raised were whether it is legitimate for the WTO to be involved in these issues, and whether the WTO is equipped to do so. The authors considered a map of country characteristics, such as market size and different technologies, and linked them to the setting of international rules. The main conclusions obtained from their analysis are as follows. First, in a unilateral setting, the sectors that are in the medium range for a number of dimensions (e.g. local market size) are the ones that will also be most prone to the implementation of regulation for protectionist reasons. Second, reciprocity and bilateral regulation negotiations are likely to be more effective in counteracting regulatory protectionism when the countries are symmetric. And third, Mutual Recognition Agreements (MRA) are likely to share the same characteristics as harmonization schemes for symmetric countries.

Natalie Chen (ECARES, Université Libre de Bruxelles) concentrated on the possible extensions of the model. In the basic bilateral trade model used, there is no assumption of the types of goods that are produced. Regulations are more difficult to define because they get more and more complex if the good in question has a large number of characteristics. Dynamics could also be introduced by considering the role of research and development. Chen also questioned whether the hypothesis made in the model that 'each country trusts the other and believes in the certification system of the partner country' is not too optimistic, especially when considering LDC.

The last paper of the conference, 'Coherence with No 'Here': WTO Co-operation with the World Bank and the IMF', was presented by Alan Winters. Winters considered coherence from the point of view of the WTO. He defined it as a situation in which different policies are all pulling in the same direction, or, at least, not pulling in different directions. Yet he claimed that incoherence is a very likely state of the world given that different actors have different objectives and different views about how policies are linked to outcomes. As an illustration of areas where there is incoherence, Winters listed monetary and fiscal policy, international macroeconomic coordination and domestic policy regimes. On the whole, he argued that the WTO and the Bretton Woods Institutions are already highly coherent, in that they are mutually supportive in many domains. To conclude, Winters thought that coherence is primarily a rhetorical device: when we refer to it in specific circumstances and propose concrete actions it is useful, but otherwise coherence really means 'I want you to try harder to achieve my goals'.

Patrick Low (World Trade Organization) began by stating that there has never been a real sense given to the concept of coherence. When the discussion started, the LDCs were particularly nervous because they saw it as a vehicle that would be used to bring compliance with WTO and Bank conditionality lending. He agreed with the idea that information played an important role in any discussion of coherence. He also emphasized the concept of ownership. One aspect of coherence activities that was not mentioned in the paper relates to the integrated framework that relates to technical assistance for developing countries.

The conference ended with a 'Summing Up Panel Session'. Rashad Cassim (Trade and Industrial Policy Secretariat, South Africa) noted that he found André Sapir's characterization of NGOs in terms of 'fundamentalists' and 'realists' very useful. He added a few additional reasons why policy-makers in developing countries tend to be marginalized from the negotiations. One obvious reason was the resource asymmetry of these countries, since their human capital is relatively low. Another need is to focus on identifying very clearly the convergence between domestic interests and the WTO disciplines. This is an area that requires a lot of research in national countries and is linked to reducing the role of the WTO in the national economic and political process.

Pierre Defraigne (European Commission) noted the lessons that could be learned from the messages brought back from Seattle by Pascal Lamy, the EU Commissioner for Trade. First, civil society wants a rule-based system. Second, LDCs want effective market access. And third, the business community wants a new round. Defraigne concluded that the real challenge of the Uruguay Round is the effective integration of LDCs in an open and rule-based trading system. This led him to ask whether the usual mercantilist approach ('markets for markets'), which is unfair for the developing countries, is still a valid one, and whether there is not the need to adopt a new paradigm. He also suggested that there is a need to strengthen the three pillars of the global governance system; this would improve coherence and so help disentangle the WTO from social and environmental debates. There is also a need to reform the internal functioning of the WTO as a precursor for a new round. Finally, he claimed that the three main features that all international organizations should provide in a context of a globalized world economy are inclusiveness, effectiveness and transparency.

Finally, Constantine Michalopoulos (World Bank) stated that the international architecture typically evolves incrementally. He noted that major changes (for instance, the Uruguay Round and the WTO) occurred as a result of major catastrophes in the 1980s. During the conference, much had been said about trade protectionism but nothing about the debt crisis that most developing countries were facing in the 1980s. The system needs greater ownership by LDCs, which can only come from greater responsiveness to LDCs' concerns. Michalopoulos felt that the agriculture agreement was a major improvement, but unfortunately focused on developed countries and not on LDCs. In conclusion, Michalopoulos wondered how many of the existing issues will be resolved in advance of a new round and how many will be left for a new round.

Rapporteur: Natalie Chen (ECARES, Université Libre de Bruxelles)