Open Plurilateral Agreements, International Regulatory Cooperation and the WTO
| Author | Charles Sabel,Bernard Hoekman |
| Published date | 01 September 2019 |
| DOI | http://doi.org/10.1111/1758-5899.12694 |
| Date | 01 September 2019 |
Open Plurilateral Agreements, International
Regulatory Cooperation and the WTO
Bernard Hoekman
EUI and CEPR, Italy
Charles Sabel
Columbia Law School, New York
Abstract
Sustained high growth in many developing countries (‘the rise of the rest’) combined with long-standing World Trade Organi-
zation (WTO) working practices hamper the ability of the WTO to perform its routine functions and paralyze efforts to adapt
to new circumstances. For want of an alternative, preferential trade agreements have taken up some of the slack in addressing
differences in domestic regulation of product safety, environmental and social conditions, but these are exclusionary and inef-
ficient from a global perspective. In this article, we argue that a new type of agreement based on open plurilateral coopera-
tion offers better prospects for groups of countries to explore and develop their potential common interests on regulatory
matters, while safeguarding core aspects of their national regulatory sovereignty and increasing the possibility of regenerating
the WTO from within.
Policy Implications
•A new instrument –the open plurilateral agreement (OPA) –should be created within the WTO to encourage issue or
domain specific regulatory cooperation outside of trade agreements.
•Open plurilateral cooperation allows groups of countries to explore and develop their potential common interests on regu-
latory matters.
•Open plurilateral agreements offer a mechanism to reduce the trade costs created by international differences in regula-
tion while ensuring national democratic control and accountability.
•The determination of regulatory equivalence for purposes of membership of open plurilateral agreements should be
linked to provision of capacity building services.
Rapid growth in developing economies (‘the rise of the rest’)
combined with long-standing working practices hampers
the ability of the World Trade Organization (WTO) to per-
form its routine functions and paralyzes efforts to adapt to
new circumstances, above all the decreasing importance of
tariffs and the increasing importance of regulatory differ-
ences as impediments to trade. Domestic regulation of pro-
duct safety, environmental protection and competition
policy are increasingly addressed in preferential trade agree-
ments (PTAs), typically among regional trading partners
(e.g., the Comprehensive and Progressive Agreement for
Transpacific Partnership –CPTPP) or between a trading area
and a key partner (e.g., the Comprehensive Economic and
Trade Agreement between Canada and the EU) (see e.g.,
D€
ur et al., 2014; Hofmann et al., 2018). Palanco and Sauv
e
(2018) describe and discuss the coverage of regulatory
cooperation chapters in recent trade agreements. Such
agreements often address matters covered by the WTO but
with additional rigor –so-called WTO-plus provisions –and
may also cover matters previously unaddressed by the WTO
–WTO-extra provisions, to use the terminology of Horn
et al. (2010). PTAs by design are discriminatory. Often they
are exclusionary as well in that they are not open to any
country that wants to join them. PTAs are thus as much or
more a device for opting out of the current system as for
augmenting it. Because they are broad trade deals –more
limited variants of the regime embodied by the WTO –PTAs
are as likely to be challenged politically as instruments of an
excessive and unwanted globalization as the WTO itself.
Despite, indeed often because of their innovative ambitions,
PTAs in practice do little to extend the reach of multilateral
rulemaking to urgent new topics while rendering the institu-
tional foundations of global trade more fragile.
In parallel to the expansion in use of PTAs, extensive reg-
ulatory coordination occurs outside the WTO, in sector-or
product-specific international regimes (see Overdevest and
Zeitlin, 2018; Pacheco et al., 2018; Zeitlin and Overdevest,
2019). In the case of trade in some environmentally sensitive
goods, such as forest products and palm oil, concerns that
commerce in these goods does not further threaten
Global Policy (2019) 10:3 doi: 10.1111/1758-5899.12694 ©2019 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 10 . Issue 3 . September 2019 297
Research Article
endangered species, contribute to deforestation or under-
mine the rights of native communities have led to the
emergence of national laws barring, for example, import of
wood harvested in violation of various legal requirements.
Such arrangements have a direct bearing on the ability of
firms to export products to markets where such regulation
has been adopted. The resulting regimes differ from PTAs in
that they are not discriminatory and not designed to be
exclusionary. The burden of coordinating consistent imple-
mentation and enforcement of many similar yet subtly dif-
ferent national norms and procedures arising within these
patchwork regimes is great; and the strains of bearing that
burden, together with many other signs of fragility, rein-
force, if only indirectly, the sense we can no more count on
the spontaneous self-organization of states facing common
threats to protect core values in global commerce than we
can rely on the comprehensive, top-down response of PTAs.
This article extrapolates from successful cases of far-rang-
ing or deep international regulatory cooperation in domains
such as sustainable forestry and trade in timber, food safety
and civil aviation to propose a novel vehicle –the open
develop potential common interests in discrete regulatory
domains within the WTO, while safeguarding key aspects of
their national regulatory sovereignty. To avoid the pitfalls of
PTAs and patchwork regimes, OPAs will be formally orga-
nized as multilateral agreements. We argue that an OPA is a
valuable regulatory instrument in and of itself; that the WTO
has multiple potential roles –ranging from transparency ser-
vices and technical assistance to dispute resolution –to play
in establishing such an institutional facility; and that doing
so can support the regeneration of the WTO from within.
The proposal is at once a concrete project for reform and a
heuristic for understanding the mismatch between current
developments in trade governance and how conceptually to
come to grips with it.
The article is organized as follows. The following section
introduces the main features of what we understand when
using the term OPA. The third section discusses briefly how
changes in the organization of production have made regu-
lation –and importantly regulation requiring deep and con-
tinuing cooperation to establish the equivalence of trade
partners’regimes –an increasingly prominent issue in trade
relations. We then present case studies of two kinds of
regimes that most closely approximate OPAs, starting with
the bottom-up development of the regime to regulate trade
in forest products. This type of regime is standalone and
incompletely integrated. Only recently has there been a pro-
liferation of the institutions for mutual monitoring and
review that would make for effective implementation and
enforcement of its norms. Its development illustrates the
possibilities but also the difficulties of achieving cooperation
without any overarching institutional support of the kind
inclusion in a reformed WTO could provide. To better under-
stand the operation of governance based on regulatory
equivalence, we consider an alternate approximation to
OPAs: bilateral regimes that are deeply integrated through
joint review and deliberation. The case studies here are of
food safety and civil aviation, typical of the kinds of arrange-
ments, based on treaties or executive agreements, that have
emerged ad hoc in response to the manifest need for close,
regular collaboration in the absence of generally accepted
methods for institutionalizing it.
In the fourth section we take up the blockages in the
WTO. For analytic purposes, we distinguish immediate or
proximate drivers of obstruction having to do with changes
in the external environment and WTO working practices
from structural causes having to do with the very constitu-
tion of the WTO itself as the embodiment of a particular
understanding of how to regulate global trade. Among the
proximate causes figure the redistribution of power from
the advanced to developing countries, the backlash against
trade as one emblem of a threatening globalization in many
of the advanced countries, and the understanding of con-
sensus rules that has come to be habitual in WTO decision-
making. Of the fundamental causes, most significant is
surely the assumption that trade is self-evidently a global
problem, and as such should be regulated by a single, com-
prehensive multilateral agreement, adopted and periodically
renewed by consensus of the members acting as a sover-
eign body. From this it followed that the only international
trade agreements compatible with the WTO itself are either
those that effectively exclude other members but reflect
comprehensive ambitions and ‘sovereign’legitimation on a
smaller scale –PTAs, covering ‘substantially all trade’of sig-
natories as homuncular versions of the WTO –or narrower,
domain-specific agreements that can be nested in the WTO
because they are subject explicitly or implicitly to consensus
requirements of the body of members as a whole. Two
options currently exist, at least formally, for such domain-
specific agreements among a subset of the WTO member-
ship: plurilateral agreements (PAs) allowing signatories to
discriminate against non-parties if all WTO members assent
to their registration, and critical mass agreements that, in
contrast, do not require consensus because they do not dis-
criminate against non-parties. The former are practically
irrelevant because of the consensus requirement, the latter
because they create insurmountable free rider problems, as
newcomers have the trade benefits accorded to the original
parties without undertaking the regulatory adjustments
required of the initiators.
The fifth section turns to OPAs as an alternative form of
smaller group cooperation and discusses how the WTO can
help to make OPAs truly open and how OPAs can open the
WTO. Precisely because OPAs authorize and encourage a
process of consensus building and transformation that is
(initially) partial, involving some but not all of the members,
and are embedded in the routine operation of the WTO,
rather than accorded the legitimating dignity of deliberation
in a ‘constituent’or ‘sovereign’bargaining round, they seem
to offend the very constitution of the WTO. We argue to the
contrary. Because OPAs are provisional, placing regulatory
cooperation under continuing democratic control, they are
respectful of national sovereignty and thus deeply consis-
tent with the legitimating principles of the WTO. Yet they
also offer a mechanism for the generation of rich and
©2019 University of Durham and John Wiley & Sons, Ltd. Global Policy (2019) 10:3
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