Globalization has driven the world into the state of greater openness, interdependence  and  integration.  As  widely  recognized, the dynamics of globalization  offer  new, vast  opportunities  as  well  as  risks. It has forged links between people and between markets, and bolstered  the  post-World War II  expansion  in  the  scale of production, trade and investment  through such mechanism as trade liberalization,deregulation and privatization. As a result,  economies in several parts of the world have benefited from the rise  in living standard and employment.

            But not all countries benefit from globalization nor are benefits evenly distributed. Globalization has accentuated  disparities  within  and  between countries. The empirical studies confirm that  globalization has widened not only the gap between the rich and poor countries but also the gap within the developing world. Some developing countries have gained  relatively  more than  others  from  globalization, while  some  have  actually  suffered    from further marginalization and severe economic instability.

            It  is misleading to perceive globalization exclusively from  one  angle or another, good or evil. Globalization has a double face due  to its capacity to  generate  both  positive  and  negative  impacts. In term of the mixture of both  impacts  it  tends  to  deliver, globalization  is  not  different  from other influential  forces  in  the  world, e.g.  governmental  policies, advanced technologies, or economic growth.

        U.S. Federal Reserve Chairman Alan Greenspan said in his remarks (1998)  “As  in  the  past, our advanced economy is primarily driven by  how human psychology molds the value system that drives a competitive market economy. And  that  process  is  inextricably  linked  to human nature, which appears  essentially  immutable  and, thus, anchors  the  future  to the past.” Human nature plays important role in shaping the globalization. Its pace and direction  can  be  influenced  by  coherent and complementary international economic policies and close relations between countries and peoples.

        The case of East Asia represents both success and failure in response to globalization.Economic development of several East Asian countries had  been geared  towards  export-oriented  industrialization  and market-friendly liberalization. They experienced high  GDP growth  for a  decade  until 1997 when the  “miracle”  was interrupted by the financial crisis which was rooted in  premature  financial  liberalization  with  weak  institutional  structures  of financial and banking systems, and poor governance in the capital markets. The  East  Asian  crisis  represents the latest in a series of severe financial crisis, after the U.K. crisis in 1976, the Scandinavian crisis in 1991, and the Mexican crisis in 1995, which generally originated from inadequately prepared financial liberalization.

        Ippei Yamazawa (1999) points out that “…while  almost  all  the  East Asian  developing  economies  achieved  a 7-10 per cent annual growth  of  GDP, they did not grow independently. Rather, their growth was interrelated with each other through steady expansion of trade and investment across border.”

        The East Asian crisis and its contagion exemplify failure to counteract the  detrimental  impact   of  globalization. The  crisis  destabilized   the economies  of  the  affected  countries  and  generated  tremendous  social repercussions, aggravating  poverty  and  shortcomings  in  education   and health  care. Despite  these  acute  pains, the affected developing countries have continued to proceed on the path of market-oriented reform rather than turning  inward  and  lifting  protectionist  barriers. On  the  other  hand,  the developed  countries  have  also  kept  their  market  relatively  open. These positive responses have, in turn, contributed to the  economic revival  of  the affected countries and regions.

        For preventive measures, the recent crisis bears an important lesson for  developing  countries to exercise greater prudence and circumspection in  their  macro-economic  management  and  financial  liberalization.  They should  not  be  forced  against  their  will  to engage in an under-supervised liberalization  effort  without  global  mechanism  to  promptly  and effectively rescue  them  from  possible  financial  collapse. Furthermore, it is essential that the  international  efforts  be  continued  in  order to develop an effective mechanism to prevent or contain the recurrence of the potential financial crises.

        It is also important to note that, in this highly interconnected world, any economy can no longer develop successfully in isolation. In fact, most developing countries are striving to integrate into the globalized economy, though with different capacities according to different stages of economic development and other relevant factors: geographical, political, and social. Their participation in the regional integration or cooperation schemes aimed at elimination of trade and investment barriers and regulatory harmonization also reflects their determined efforts towards integration at the global level. Furthermore, the prospects of trade creation for countries in a region would also explain the recent proliferation of regional and sub-regional groupings.

        Increasing strength of regionalism appears to push the globalization process forward. Regional economic integration and cooperation could complement and reinforce the multilateral liberalization. However, there are also risks associated with this trend. Rapid and premature paces of economic integration may provoke social tensions and frictions within developing countries. In spite of an absence of any discriminatory measures against non-member countries, regional integration tends to result in trade diversion with regard to these countries. Therefore, constant monitoring must be undertaken on possible adverse impacts from globalization and regional integration.

        At the dawn of 21st century, a new era of technology-driven globalization has emerged. Advances in information technologies and the spread of the Internet have led to increasing electronic connectivity with lower costs of business transactions and information exchanges between people around the world. Concomitantly, modern biotechnological breakthroughs have provided powerful tools for further improvement in human life and health, as well as in agricultural and industrial production. Technological revolution has become a driving force in the global “New Economy” and holds the promise of raising productivity, output, and living standard. But the New Economy also brings new concerns as profound economic and social changes are taking place on all levels – be it global, regional, national or individual, and on all spheres – economic, political, social, and cultural. Greater complexity and intense competition would permeate throughout the global marketplace.

        The advent of the New Economy characterized by speed, flexibility and innovation has witnessed the changing rules of the game, and fundamental adjustments in employment, communications, transportation, production, investment, and business practices and strategies. All of these will impact on and lead to the transformation of the global economic relations.

        The main challenge for all countries in the new millennium is the building up of capacity to adapt constantly to the New Economy in which knowledge, technology and learning are the key to economic growth. The adaptation requires such foundations as educated and skilled workforce as well as policies, regulatory regime and infrastructure that support technology transfers, innovation and information exchanges.

        The challenges are indeed much greater for the developing countries in their applications of the new technologies and adjustments to absorb swift changes in the national and global economy. The technology-driven globalization has created the global digital and knowledge divide which exposes the increased vulnerability of developing countries.

        In this context, self-reliance at the national level is first and foremost imperative in striving toward the New Economy. We must also realize that in this globalized world, it is the shared interest and responsibility of the world community to bridge this sharp divide with greater efficiency. The cohesive concrete efforts at international, regional and bilateral levels are required not only in facilitating the transition of the developing countries to and their utilization of the benefits from the New Economy, but also in minimizing the economic and social risks involved. These efforts should concentrate on the needs for access and utilization of technologies; capacity building concerning key fundamentals such as human resource development, infrastructure, and regulatory system; and social safety net.

        It is gratifying to note that at their recent meeting in Okinawa the leaders of G-8 nations pledged to overcome international information and knowledge divide. In the Okinawa Charter on Global Information Society, they outlined their goals and objectives in the pursuit of information technology opportunities, and stressed their renewed commitment to the principle of inclusion: everyone, everywhere should be enabled to participate and no one should be excluded from the benefits of the global information society. They also agreed to establish a Digital Opportunity Task Force, or “dot force”, with a view to integrating their efforts into a broader international approach by mobilizing the resources and coordinating the efforts of governments, the private sector, foundations, multilateral and international institutions and others. Indeed, this positive initiative by the G-8 leaders is essential and timely. All the stakeholders need to work in close collaboration to ensure effective and successful implementation of this Charter.

        In this increasingly interactive global economy, the rule of law and international and institutional cooperation at all levels play crucial roles in preserving economic and social harmony and predictability through conflict prevention and resolution as well as in promoting global prosperity. The framework of international and institutional cooperation, especially under the multilateral system, should be designed to stimulate and support widespread, strict observance of the global rule of law and to contribute more meaningfully to the developing countries’ efforts in utilizing economic opportunities to overcome difficult challenges of the New Economy. Major countries must also refrain from the use of unilateral restrictions or sanctions to force other countries to comply with their laws and standards on environment, labor rights or human rights.

        Bruce Stokes (1999/2000) reminds us that “… it is also foresighted not to acknowledge just how much more difficult and costly protectionism is today than it was two generations ago. Trade represents a growing share of the world economy. Merchandise trade account for 37 per cent of global gross domestic product (GDP) in 1998, up from 27 per cent in 1980. Any future interruption of that commerce would have a greater impact on economic growth than ever.”

        For the interest of the world community, the primacy of the multilateral system must be preserved and the system be further strengthened, not weakened. Ceasing to adapt the system to the new economic environment would undermine the functioning of the system itself and the credibility of multilateralism, leading to precariousness and disturbances in the global economy.

        We must foster the conditions that promote the balanced and equitable evolution of the multilateral trading and financial systems with a view to increasing the effectiveness of the system functioning, creating a level playing field by reducing systemic imbalances and biases, ensuring fair treatment and distribution of benefits from the systems, and providing adequate safeguards against adverse effects of the systems and the globalization.

        Moreover, in this evolutionary process, developing countries should be provided with adequate economic means and flexibility in pursuit of their development objectives through integration into the global system. Increased integration of the developing countries would not only contribute to their growth and development, but also lead to global prosperity.

        Recent special studies on “Trade, Income Disparity and Poverty” (1999) commissioned by the WTO Secretariat report the finding that, in a world economy marked by increasing income gaps between poor and rich countries, trade can be a factor in bringing about convergence in incomes between countries. A parallel finding is that trade-related income convergence is accompanied by faster growth in the liberalizing countries. In addition, the studies also conclude that trade liberalization is generally a positive contributor to poverty alleviation. However, it is recognized that most reforms will create some losers (some even in the long run), and trade reforms could exacerbate poverty temporarily.

        These studies confirm important contribution trade liberalization can make to income convergence and poverty alleviation. However, there are not only winners of trade reforms in this globalize world, but also losers, a significant number of them. International efforts should focus on assistance in containing losers’ intractable economic and social problems.

        The new institutional framework of the World Trade Organization (WTO) accommodates continuous negotiations. The multilateral trading rules have evolved through the following three main channels:

        First, the mandated reviews of a number of existing Provisions, Agreements, and Understandings, e.g. the reviews of Article 27.3(b) (Protection of Plant, Animals and biological processes) of Trade-Related Intellectual Property Rights Agreement, Article 31 (Application of Articles 6.1, 8, and 9) of Agreement on Subsidies and Countervailing Measures, and the Understanding on Rules and Procedures Governing the Settlement of Disputes.

        Second, the mandated negotiations, i.e. negotiations on Agriculture and Services.

        Third, “further” negotiations as stipulated in Article III (2) of the Marrakesh Agreement Establishing the World Trade Organization. The Agreement leaves open to the readiness and willingness of the members to launch a new round of multilateral negotiations.

        Some of the WTO mandated reviews of the trading rules are on-going. In some areas, there is progress, but in others, the moves have been slow. In addition, the mandated negotiations on Agriculture and Services have already started early this year. As for the third channel, uncertainty still clouds over the schedule and agenda of an anticipated launch of a new round.

        At present, international economic dialogues center around such key issues as the WTO’s new round of trade negotiations, the reform of international financial architecture, and coherence and cooperation between the Bretton Woods Institutions and other relevant specialized organizations. Parties joining these dialogues are so diverse as to include the environmentalists, the consumer advocates, the human rights and the labor rights activists who are determined to reduce the powerful influence of globalization. In large measure, the multilateral framework of the WTO, the International Monetary Fund (IMF) and the World Bank has become major target of populist backlash against globalization and liberalization in international trade and finance.

        The third WTO Ministerial Conference held in Seattle in December 1999 drew the violent protests, certainly a rude wake-up call for the WTO member governments. As Trade Ministers in the end failed in their efforts to launch a new round of multilateral trade negotiations, the protesters claimed victory from the Seattle debacle. However, there is a combination of factors that engendered this unfortunate ending. But its main cause in fact lies in the lack of political will by WTO members to make compromises on their different stances, notably among the major players, regarding the content of the new round’s agenda.

        There are growing pressures for the reform of certain aspects of the multilateral trading system and the WTO, its operator. These pressures are associated with a number of factors. Most important among them are listed as follows:

        First, global economic changes. The momentum of globalization and the on-going, profound changes in the global economic sphere warrant international rethinking concerning, among other things, the impacts on development, environment, human and labor rights; equitable distribution of benefits from globalization; and international economic management.

        The faith in market-driven capitalism has increased and led to greater integration of the developing countries and countries in transition into the global economy and the multilateral trading system. They have benefited from their integration and economic openness. However, they are also concerned about the increased dependency on global markets. Being the weaker economies, they are more prone to be vulnerable to the potential adverse effects of globalization.

        Second, expanding membership and pending accession. Compared to the GATT membership of merely 23 at its inception in 1947, the membership of the WTO, in the sixth year after its establishment in 1995, has grown from 125 to 139 at present. Pending accession of around 28 countries, the WTO membership will be subsequently enlarged and would ultimately cover the whole spectrum of world trade. With the possibility of enlarged membership of 160-170 countries in the next three to four years, the WTO should address an important question of institutional manageability sooner rather than later.

        Third, progress in trade liberalization and stronger trade rules. As a result of the multilateral negotiations in the past GATT rounds over the past fifty years, trading rules had been strengthened and extended to cover all trade in services, trade–related intellectual property rights, and trade-related investment measures. This set of rules are subject to more effective enforcement through the new, binding dispute settlement mechanism which empowers the member-driven WTO to grant or not to grant approval to the requests for trade retaliation by the members in dispute. This mechanism would therefore be perceived by critics of trade liberalization as a deterrent against the enforcement of certain social policies and standards particularly those concerning environment, and labor rights. Some advanced country members of the WTO have been sympathetic to this view and, with the emphasis on the link between trade and these non-trade issues, have insisted on their inclusion in the agenda of the new round of multilateral negotiations. But the developing country members have been united in expressing strong opposition to this proposition. This divergence contributed significantly to the Seattle fiasco in December 1999.

        Fourth, growing popular concerns. Outside the WTO, with mounting WTO’s incursion into national sovereignty, skeptics have been lashing out at the constraints the WTO rules and disciplines have placed on the exercise of domestic policies. They steadfastly maintain that the benefits from trade liberalization do not justify the costs. These criticisms have gained increasingly popular support. In many countries, the uncertain outcomes and the uneven distribution of benefits from the Uruguay Round, in national and global contexts, has often been the cause of the public outcry, particularly from those who oppose to trade liberalization and globalization. In developing countries, the lack of substantial short or medium term benefits from market liberalization has made it difficult to solicit political support from the general public and the parliament for the passage of certain legislation in order to comply with multilateral agreements and commitments.

        Fifth, developing countries’ growing discontent. In response to political backlashes at home against trade liberalization, most developing countries, the total number of which accounting for almost four-fifths of WTO membership, have generally expressed dissatisfaction with lower than expected benefits from the Uruguay Round. It is apparent that the outcome of the Round has favored and benefited developed countries much more than developing ones. In the services sector, the developing countries’ constant call for more progressive trade liberalization in labor services has not met with positive response by the developed world. In the goods sector, the market access commitments particularly in the areas where developing countries generally are better able to compete, e.g. agriculture and textiles & clothing, have not been meaningfully implemented by the developed countries. On the other hand, the distorting agricultural policies of export subsidies and domestic support continue to be pursued vigorously among the more advanced economies. These policies and practices have not only hindered access to the markets of the more advanced economies, but also unfairly suppressed export competitiveness of the developing countries in the world agricultural market.

        Broadly speaking, notwithstanding global progress in trade liberalization, the least developed countries continue to be negatively affected by the problem of marginalization and the use of some forms of protectionism are also rising, particularly anti-dumping and countervailing actions. Specifically, Bruce Stokes (1999) pinpoints that the use of countervailing duties is growing, but the cases affect an extremely small portion of trade – only 0.7 per cent of total U.S. imports over the last decade have been hit with these duties. However, antidumping cases are particularly pernicious because the accused is generally found guilty. The mere threat of an anti-dumping action is often sufficient to cause exporters to curtail shipment of their products. More broadly, the new information economy is a fertile field for subtle and innovative forms of protectionism. Thus, the seeds of future protectionism do exist and bear close watching.

        It should be added here that although we have to admit to the developing countries’ concerns and discontent, we cannot interpret this to imply a state of North-South divide in the WTO. The WTO membership encompasses countries of different sizes, large, medium and small, with different levels of economic development. The interests and concerns are very diverse among the developing as well as among the developed country members, and thus there are instances of convergence and divergence among members according to the issues of their interests and concerns, regardless of their sizes or stages of development.

        Sixth, proposed extension of WTO rules to cover some new issues. There are a host of new issues some developed country members have been proposing for negotiations and possible inclusion into existing trade rules. Other than environment and labor rights, the proposed issues include trade and competition policy, trade and investment, transparency in government procurement, e-commerce, and biotechnology. A fair amount of works has been undertaken in the WTO on some of these issues. Some are more ripe for negotiations. However, several issues remain the major sources of controversy in the WTO due to large divergence in the positions of members. At Seattle Ministerial Conference, trade and competition policy and trade and investment were the two main areas where the positions of developed country members were far apart, while the developing country members found the U.S. proposal to establish a new WTO Working Group on Trade and labor largely offensive and staged their obstinate opposition.

        Seventh, the WTO decision-making process and transparency. There are some serious concerns and criticisms on these sensitive issues, especially the followings:

(1) Decision-making by consensus :

The in-house differences that culminated in compromises through consensus practices have featured prominently in the multilateral trade negotiations since the early days of the GATT more than fifty years ago. But bridging the differences for consensus in the decision-making process of the WTO, the only organization empowered to operate the extensive multilateral trading system, appears to be, in comparison to the GATT regime, much more difficult and time-consuming. With the WTO’s increasing workload and its complexity, the tendency of slower process of decision-making could possibly impede the WTO achievements, due to the links of issues in the WTO work programs and trade-offs between members.

(2) Lack of internal transparency :

Unlike in the past, developing countries have become more active and vocal in their participation in the WTO negotiations. Some developing country members have called for increased internal transparency especially by expanding participation in the so-called “green room” consultative process or by any other approach so as to prevent “fait accompli” that would be forced upon developing countries.

(3) Lack of external transparency :

The WTO, accused of being secretive, was strongly urged to provide more transparency to the public and allow the participation of civil society in its work process.

The WTO needs to seriously address all concerns and criticisms with open attitude. In essence, we should not lose sight of the fact that, first, the main task of the WTO is to develop an integrated, more viable and durable multilateral trading system. Second, trade liberalization is merely a means, not an end in itself. The purpose of trade liberalization efforts is to achieve growth and sustainable development as enshrined in the Marrakesh Agreement.

        Clearly, there are certain shortcomings of the multilateral trading system, some of them surfaced during the Seattle Ministerial Conference. But these shortcomings are different in nature and impact, therefore they deserve different degrees of attention and treatment. In redressing them, the solutions for some might be found simply in the fine-tuning exercises under the existing work program of the WTO, but for others the solutions would essentially be subject to a new round of multilateral negotiations.

        However, there are a number of important questions for the WTO in the face of global economic changes.

        First - whether all of the old GATT procedural approaches and practices inherited and embraced in the current WTO rules can be deemed suitable ?

        Second - whether the existing WTO rules are sufficient to promote freer trade and to ensure a level playing field in global commerce ?

        Then, the related questions are: Where changes are necessary ? How and when they should be adjusted ?

        Based on the GATT rules and practices, the WTO provisions represent an upgraded GATT model. Article IX of the Marrakesh Agreement Establishing the WTO stipulates that the WTO shall continue the practice of decision-making by consensus followed under GATT 1947. The Agreement also recognizes as possible situation where a decision cannot be arrived at by consensus, thus allows a decision by voting in which each member is entitled to one vote. In such a situation, decisions of the Ministerial Conference and the General Council shall be taken by a majority of the vote cast, unless otherwise provided in the Agreement or in the relevant Multilateral Trade Agreement. Decision to adopt an interpretation shall be taken by a three-fourths majority of the members. And in exceptional circumstances, the Ministerial Conference may decide to waive an obligation imposed on a member by the Marrakesh Agreement or any of the Multilateral Trade Agreements, provided that any such decision shall be taken by three fourths of the members. In this context, it should be noted that, in comparison to the equivalent GATT provision (Article XXV), the Marrakesh Agreement introduces a new condition setting a time limit of not exceeding 90 days for the Ministerial Conference to consider a request for a waiver and decide by consensus, if consensus is not reached during that period, any decision to grant a waiver shall be taken by the strengthened majority voting requirement of three fourths of the members.

        It is clear that the WTO rules permit the decision-making by voting as alternative route in absence of consensus, and also introduces some new conditions to the decision-making provisions in order to ensure smooth and efficient functioning of the organization. Nevertheless, the WTO members have so far been determined to maintain the practice of consensus and have refrained from resorting to voting. The consensus practice has certainly helped to ensure the opportunity that open for participation of all members, large or small, in the decision-making process.

        However, in view of further enlargement of the WTO membership and complicated nature of future issues, it would be worthwhile to consider the voting alternative in some exceptional cases in which the WTO members could jointly agree to fix reasonable time periods in their strive for consensus so that the decision making is not to be blocked by possibly long absence of consensus.

        The green room informal consultative process, an approach inherited from the GATT days, was identified as one of the major problems in the conduct of negotiations at the Seattle Ministerial Conference that caused much resentment among the developing countries. With the limitation of around twenty five to thirty member countries invited to participate in the green room sessions, many developing countries were left outside this crucial part of the decision-making process.

        The green room approach is generally considered as practical and essential for maintaining the manageability of the WTO. However, it is also important to ensure balance and neutrality in the conduct of this process. The selection of participants by the key criteria of regional representation and substantial trade interests in the specific issue under negotiations needs to be re-examined for improvement. The General Council’s non-binding guideline on the selection criteria and the procedural aspect of the green room process should be established and made transparent. This guideline should also include elements such as the briefings or the informal meetings to inform the non-participants of the result of each green room session, and increased means of communication between the green room meetings and the General Council.

        In parallel to the green room process, the initiatives of the members to form the core group(s) of countries on an informal and flexible basis would foster the processes of the WTO decision-making and the multilateral negotiations. For the sake of effectiveness, the optimum size of a core group should not go beyond 15-20 participating countries. The composition of each core group may vary according to the prevailing issues, there by the mix should be relatively flexible. Any core group of course should not in any way dominate but facilitate the focused discussion and deliberation. It must be conform to the principles of openness, non-discriminatory and transparency.

        The WTO Director-General and the General Council Chairperson should also increase the frequency of their consultations with the members as part of the consensus-building process. In addition, the informal open-ended meetings should be convened more frequently with an aim of increased transparency and understanding of the members’ interests and concerns. As for the non-resident representatives of the members, they should be kept abreast of the WTO’s activities and progress in implementation of the Work Plan through their participation in the briefings, the symposia and other means such as the video conferences and the Internet.

        In anticipation of increased complications involving the WTO, several ideas have been floated. Prime Minister Tony Blair has suggested the appointment of a group of eminent persons to advise the General Council on the future path of the WTO. Back in 1983, former Director-General Arthur Dunkle established a panel of seven distinguished persons to develop a report on problems affecting the multilateral trading system. The panel, representing industrialized and developing countries made fifteen specific recommendations to strengthen a more open multilateral system as a counter-measure to the crisis prevailing in the trading system at the time. We should not preclude the possibility of the need to resort to such ad-hoc panel or a standing executive committee for constructive, non-binding recommendations relating to systemic, procedural or macro-economic perspectives.

        It is recognized that public understanding and support is crucial to the success of the WTO and the multilateral trading system. The civil society have persistently called for the greater accountability and transparency of the WTO. In response, the WTO has intensified efforts to gain public trust through increased dialogues with the civil society and extended scope of dissemination of the de-restricted official documents for information of all interested parties, including on the Internet, on a regular basis. In addition, the WTO has held different special symposia as fora for exchange of views with them. For instance, a symposium held at Seattle prior to the Ministerial Conference was opened to the participation of 672 accredited NGOs. All of these measures have enabled constructive interactions between the WTO and the civil society. However, in making the WTO process more open to the civil society, the legally binding nature of the multilateral trade agreements requires a balanced approach which maintains the vigor of member-driven characteristic of the WTO. A compromised arrangement may have to be established which could permit regular consultation with the accredited representatives of NGOs without jeopardizing the process of official deliberations by legitimate representatives of governments of member countries.

        The larger the WTO membership, the greater would be the global economic gains from the exchange of concessions and trade liberalization. The current 28 applicants for WTO membership, almost all of them developing countries and countries in transition, have been engaged in the process of accession. Their accessions, forming a major part of their integration into the global economy, will contribute substantially towards a universal application of multilateral trading rules. In many cases, the costs of adjustments by the acceding countries could be relatively high, while the benefits from multilateral system have yet to be reaped. In the accession process, the applying countries should be encouraged, rather than discouraged, to readily take concrete steps upon their accessions to comply fully with the negotiated commitments. They should not be required to accept unreasonable “WTO plus” conditions for accession. The special and differential treatment should also be applied to the acceding developing countries. In some specific cases, certain transition periods for adjustments may be considered to be granted to facilitate the accession procedure.

        The new dispute settlement mechanism empowers the WTO with effective tools to enforce the multilateral trade rules and disciplines. The strength of this mechanism rests mainly on the introduction of “negative consensus” approach to facilitate the establishment of a panel, the adoption of panel and the Appellate Body reports, and the authorization to suspend concessions or other obligations as well as procedural framework and time limits in the panel proceedings, and surveillance of the implementation of the rulings. In comparison to the GATT system, the WTO’s binding dispute settlement system is more comprehensive, intricate, and automatic. Increasing public backlashes against the WTO lead to an observation that this young but powerful organization has become a victim of its own success.

        The number of trade dispute settlement cases in the WTO has increased steadily since its inception in 1995. With their diverse perspectives, both developed and developing country members have actively made recourses to the dispute settlement system. Changing patterns of comparative advantages, extended scope of the WTO rules and disciplines, vague legal provisions, and deficiency in the compliance of the WTO rules would be major contributors to the intensification of trade conflicts and increasing recourses to the dispute settlement system. More importantly, this trend also reflects the renewed confidence in the rule-based multilateral trading system. In overall perspective, the new dispute settlement system has functioned well. However, there are growing concerns that the dispute process is being overly extended, overly litigious, and underfunded.

        One of the positive elements in the WTO Agreement and the covered agreements is the special and differential (S&D) provisions for the developing country members. The Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) contains a number of provisions setting forth more favorable procedures and timeframes for dispute settlement involving developing country members. For example,

1. members are required to give special attention to the particular problems and interests of developing country members during consultations (Article 4:10).
2. In a dispute between a developing country member and a developed country member, the panel shall, if it is requested by the former, include at least one panelist from a developing country (Article 8:10).
3. According to Article 12:10, the period for consultations involving a measure taken by a developing country member may be extended and the panel shall afford sufficient time for the developing country member to prepare and present its arguments.
4. In disputes involving a developing country member, the panel’s report shall explicitly indicate how S&D provisions that form part of the covered agreements raised by the developing country member have been taken into account (Article 12:11).
5. The DSU also requires that during the surveillance of the implementation of recommendations and rulings, particular attention should be paid to matters affecting the interests of developing country members with respect to measures which have been subject to dispute settlement (Article 21: 2).
6. The WTO, according to Article 27:2, shall make available a qualified legal expert to provide legal advice and assistance to developing country member which so requests in the dispute settlement.
7. Moreover, there are provisions in some covered agreements which provide for more favourable dispute resolution procedures for developing country members. An example is Article 27:7 of the Subsidies Agreement.

        It is thus not a surprise that developing countries have been actively participating in the dispute settlement proceedings in the WTO, especially in areas of their interests and concerns such as Textiles & Clothing, Agriculture and Anti-Dumping measures.

        But serious problem encountered by most developing country members is obviously the lack of resources. The inadequacy of human, financial, and institutional resources has deterred developing country members from effectively participating in the multilateral process, including the dispute settlement proceedings. Therefore, it must be strongly emphasized that more technical and financial assistance should be provided to the developing country members to improve their capacity in complying with and benefiting from the WTO rules as well as participating effectively in the dispute settlement proceedings.

1. Trade in Services

The General Agreement on Trade in Services (GATS) contains only a few special provisions on dispute settlement. These provisions permit violation complaints in case of failure to carry out obligations or specific commitments under the Agreement without reference to the traditional GATT concept of nullification or impairment of treaty benefits (Article XXIII: 1). For the sake of the integrated nature of the WTO dispute settlement system, Article XXII:1 and XXIII:1 provide that the DSU also applies to consultations and disputes on trade in services. This is so in spite of legal and procedural differences between “GATT disputes” and “GATS disputes”.

 

Hence, GATS panels will be required to clarify on a case–by–case basis whether, and to what extent, GATT interpretations and the GATT dispute settlement practices will be legally relevant also for the settlement of disputes under the GATS. Complexities may arise for some service activities for which special dispute settlement procedures may be applicable, such as in pre-shipment inspection services. It can be questionable whether the GATS and its dispute settlement system are applicable in such a case. The complexity of the issues involved and the broader coverage of the GATS would make it extremely difficult to ensure predictability and consistency when the disputes in the service sector are to be tackled on a case–by–case basis.

 

2. Trade-Related Intellectual Property Rights (TRIPS)

        The TRIPS Agreement contains a single provision on dispute settlement, Article 64, which provides that “provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied by the Dispute Settlement Understanding shall apply to consultations and the settlement of disputes under this Agreement except as otherwise specifically provided herein”. This may raise some serious legal problems such as the relationship between the WTO dispute settlement system and the dispute settlement provisions in the agreements on intellectual property outside the preview of WTO, the consistency of the interpretations of the TRIPS Agreement and numerous intellectual property conventions, for instance the Paris Convention for the Protection of Industrial Property and the Berne Convention for the Protection of Literary and Artistic Works.

(3) Anti-Dumping Measures

        Article 17:6 of the Agreement of Implementation of Article VI of GATT 1994 (the Anti-dumping Agreement), which is one of the most strongly criticized provisions of the Agreement, stipulates that:

   “In examining the matter referred to in paragraph 5 :

(i) in its assessment of the facts of the matter, the panel shall determine whether the authorities’ establishment of the facts was proper and whether their evaluation of the facts was unbiased and objective. If the establishment of the facts was proper and the evaluation was unbiased and objective, even though the panel might have reached a different conclusion, the evaluation shall not be overturned ;

(ii) the panel shall interpret the relevant provisions of the Agreement in accordance with customary rules of interpretation of public international law. Where the panel finds that a relevant provision of the Agreement admits of more than one permissible interpretation, the panel shall find the authorities’ measure to be in conformity with the Agreement if it rests upon one of those permissible interpretations”.

        The provision is based on the assumption that the parties to a multilateral agreement may construe their respective rights and obligations in a divergent and conflicting manner. It could, as observed by Ernst-Ulrich Petersmann (1997), transform the WTO into a “tower of Babel” and be in conflict with the declared objective of the WTO dispute settlement procedures to protect legal security, including the maintenance of a proper balance between the rights and obligations of members. As such it might have destabilizing repercussions for the general WTO dispute settlement procedures.

        Another important question is whether the Anti-dumping Agreement is self-contained in the sense that WTO members could not take measures against dumping not provided for under the Agreement (Bourgeois, 1997). Any approaches different from what is contained in the multilateral rules would make the settlement of anti-dumping disputes an extremely complicated matter.

        The WTO dispute settlement system is intended to serve as a central element in providing security and predictability to the multilateral trading system, preserving the rights and obligations of member countries and clarifying the provisions of the covered agreements in accordance with customary rules of interpretation of public international law. After almost six years of the WTO operation, it is quite evident that the dispute settlement system is in need of repair. Besides the problem of ruling compliance, the shortcomings in the rules and procedures, including those mentioned above and the compliance provisions of Article 21 on surveillance of implementation and Article 22 on compensation and suspension of concessions of the DSU, have also been major impediments to an efficient functioning of the system. Thus, the amendment should be undertaken with aim of ensuring fairness for all parties in disputes and eliminating ambiguities or lacunae in the WTO Agreement and covered agreements.

        Special attention should be paid to the needs of the developing country members. In legal term, equality for the developing country members is based on the proposition that they possess knowledge, competence, expertise and resources of the same or comparable level to that of the developed country members. Developing country members need to be well-prepared and well-equipped for their participation in dispute settlement proceedings, so that equality in law will actually translate into practice. Increased assistance and cooperation from the developed country members, in addition to that provided for in the DSU, should be encouraged.

        In order to ensure equitable decisions and rulings, WTO panels should be encouraged to seek information from any relevant sources and to consult experts in order to obtain their opinions on certain aspects of the matters in dispute. Article 13.2 of the DSU and provisions of some covered agreements pave the way for such opinion and information gathering which would help enhance confidence in the WTO dispute settlement system.

        On the administrative aspect, the WTO Secretariat has an inadequate number of qualified staffs, especially lawyers, to assist in the dispute settlement proceedings. In view of the complexity of matters in disputes and increasing recourse to the dispute settlement system, the shortage of qualified staffs has certainly produced an adverse impact on the functioning of the system. To redress this situation, increased resources need to be urgently formed.

        Trade and finance in this globalized world have been inextricably linked. Financial problems cannot be solved without a thorough investigation into trade problems and solutions, and vice versa. Protectionist trade measures may limit the impact of exchange rate adjustments designed to deal with macroeconomic imbalance. Thus, there needs to be coherence between trade and financial liberalization programs for one to be supportive of the other. It is best to have both trade and financial liberalization proceeding together at a reasonable speed.

        In general, developing countries do not have solid foundations for financial regulations and therefore are more vulnerable to abrupt changes. To insulate themselves from the danger of short-term capital mobility, they should adopt policies to attract long-term capital inflows in the form of foreign direct investment. Furthermore, they should be prudent not to have fully open capital accounts too early in the day.

        It goes without saying that the International Monetary Fund (IMF), the World Bank and the WTO should coordinate their efforts more closely to enable the developing countries to cope with the challenges and to gain more advantages offered by trade and financial liberalization. The global economic stability and growth in the 21^st century hinges upon greater coherence in the policies of these key organizations in making trade and finance work for sustainable development.

        The WTO also needs to have more frequent consultations and closer collaboration with other relevant international organizations such as UNCTAD, WHO, WIPO, ILO, UNDP and UNEP whose policies, functions and roles could be supportive to the tasks of the WTO.

        The East Asian financial crisis has awakened renewed urgency for international financial architecture reform. So far, there have been widespread discussions and deliberations as well as a series of multilateral initiatives, but all these activities and ideas have not been translated into even modest changes in global finance or monetary infrastructure.

        It should be noted that the International Financial Institutional Advisory Commission chaired by Allan Meltzer issued a report to the U.S. Congress in March. The report makes several core recommendations which are considered valid and important. They are: (1) the IMF should focus on short-term macroeconomic stability by being available as a rules-based, short-term lender of last resort to countries that face financial emergencies; (2) while the IMF should be a short-term lender of last resort, it should stop being a long-term lender of last resort; (3) the World Bank should refocus its efforts on providing only those services the borrowing governments cannot obtain or provide by themselves; (4) the World Bank could do more if it spent more time providing “global public goods”, such as increased knowledge about health and agricultural problem of tropical countries; (5) the Commission calls the United States, the other rich countries, the IMF and the World bank to completely cancel debts owed by the heavily-indebted poor countries, in conjunction with developing economic and social reform programs in the debtor countries. However, Jeffrey Sachs (2000) wrote that “The report immediately produced a rather heated controversy in Washington.”

        In this respect, there are indeed grave concerns about an absence of political will and leadership of the major countries, as well as the IMF and the World Bank, to take proper action for global institutional reform at the root causes and to implement more meaningful measures for the poor countries, especially the poorest among the poor.

        Although the recent QUAD’s initiative in providing duty-free and quota-free treatment for essentially all goods originated from the least developed countries (LDCs) is considered a constructive step forward, it fails to meet the expectation of a complete coverage of the LDC’s exports. It should be noted that optimal solution to the LDCs’ problems requires more than the piecemeal provision of increased market access opportunities for the LDCs or the international assistance for their capacity-building and economic restructuring. The most critical problem confronting the LDCs is the heavy burden of high debts, which needs to be tackled immediately and effectively. Such bilateral and multilateral actions, not rhetoric, are urgently needed.

NEW WTO ROUND OF NEGOTIATIONS  

        Six years have elapsed since the conclusion of the Uruguay Round. Positive outcome of the Round is a major contributor toward further trade liberalization and more coherent international economic policies. In view of the tremendous changes in the global economy, a new round of multilateral trade negotiations continues to be in the focus of the WTO after the Seattle debacle. Support of the WTO members for the new round of negotiations, indeed, hinges on the prospects of net gains each and every member deems to reap. So far, there remains a broad support for the new round which requires a balanced agenda that is sufficiently broad-based to respond to the interests of all members. However, the developing country members have played down their expectations of the new round, due to the disappointing experiences from the Uruguay Round and the prevalence of non-tariff measures such as AD, CVD and sanitary and phyto-sanitary measures. They call for a “development” round that provides greater and more meaningful market access as well as strengthened multilateral trade system that fully addresses their developmental needs and concerns. Furthermore, divergent views and positions among the WTO members still remain. Most controversial among them involves the efforts of some advanced country members to include environment and labor rights on the negotiating agenda. The developing country members’ opposition to this proposed inclusion remains intractable. It is felt that the advanced country members desire to modify or strengthen the WTO rules to suit their own norms and standards, and thus the WTO is being forced to take these non-trade issues on board, though the organization obviously lacks expertise. They fear that the inclusion would hinder the WTO from functioning properly and effectively. Moreover, the imposition of trade sanctions linked with these non-trade issues would not solve problems, but is more likely to produce damages economically and socially to all involved.

        In the fast-paced global economy, the WTO should start the new round of multilateral trade negotiations sooner rather than later to pursue further trade liberalization, rule-making and institutional reforms. But with the Seattle experience, it should also be realized that we must not be overly ambitious. In term of the scope of the new round’s agenda, there are a number of options that needed to be elaborated further :

1. gradual approach relying on the existing mandates (the built-in agenda) and possibly supplement them with new initiatives;
2. sector and product-specific approach;
3. comprehensive approach (as the single undertaking Uruguay Round).

        Besides these three approaches, there are other new ideas such as a “round-up” suggested by Jeffrey Schott (1998). Under this approach, a series of seamless trade negotiations could be conducted with new talks starting immediately after a package of trade agreements is concluded. Each round-up would built on the result of previous accord. This initiative should also be considered in depth.

        The WTO members need to continue to work closely together to build a consensus on what and how should be done to strengthen the multilateral trading system. This process should be moved forward toward consensus, hopefully, within next year. In the meantime, there is also an urgent need for the confidence build-up with a sense of partnership among the WTO members. To dispel dissatisfaction and gain trust of the developing country members, the developed country members should exercise their leadership by, for instance, adhering fully to the WTO disciplines and rulings; refraining from taking any new distorting measures that would undercut the market access commitments or cause harm to developing country members’ exports and competitiveness; taking immediate action in lowering trade barriers without having to wait for the new round; and canceling debts of the least developed countries. Such initiatives would create significant positive impact contributing to global economic welfare and stability, as well as to consensus-building on the new round of multilateral trade negotiations.

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