Principal–agent theory and the World Trade Organization: Complex agency and ‘missing delegation’
| Author | Manfred Elsig |
| Date | 01 September 2011 |
| Published date | 01 September 2011 |
| DOI | 10.1177/1354066109351078 |
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JR
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European Journal of
International Relations
17(3) 495–517
© The Author(s) 2010
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DOI: 10.1177/1354066109351078
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Corresponding author:
Manfred Elsig, University of Bern — World Trade Institute, Hallerstrasse 6, Bern 3012, Switzerland.
Email: manfred.elsig@wti.org
Principal–agent theory and the
World Trade Organization:
Complex agency and
‘missing delegation’
Manfred Elsig
University of Bern, Switzerland
Abstract
This article analyses the World Trade Organization within a principal–agent framework.
The concept of complex agent is introduced to focus on the variety of actors that
comprise an international organization. Special attention is paid to the relationship
between contracting parties’ representatives and the Secretariat. In the empirical part,
the article analyses the role of the Secretariat in assisting negotiations and presents
evidence of declining influence. It is shown how principal–agent theory can contribute
to addressing this puzzle of ‘missing delegation’. The article concludes with a cautionary
note as to the ‘location’ of international organizations’ emerging pathologies and calls
for additional research to address the relationship between material and social sources
to explain behaviour of the key actors within the complex agency.
Keywords
International organization, negotiations, principal–agent theory, World Trade Organization
Introduction
The World Trade Organization (WTO) has come under increased scrutiny from various
groups with different political orientations. For neo-liberals the WTO has departed from its
original mission of tearing down obstacles to trade. They deplore an apparent trend towards
transforming the WTO into a development agency that does not overcome mercantilist
prerogatives. Meanwhile, social democrats decry the limits to taking up non-trade concerns,
complain about an increasing inequality resulting from the trading system and lament an
overtly liberal agenda. Finally, conservative groups denounce what they perceive as
increasing pressure from Geneva to reform domestic policies that are culturally and socially
embedded within the national political context (Elsig, 2007b). This new degree of
496 European Journal of International Relations 17(3)
intrusiveness into regulatory domains, the perceived loss of sovereignty and the struggle
over orientation has led to many calls to do away with Geneva judges and bureaucrats. Yet,
does the WTO Secretariat wield sufficient power to merit it being a prime target of protest?
Evidence of WTO staff and judges blatantly exploiting their autonomy, however, is hard to
find. There have been few cases reported when contracting parties’ reactions to alleged
‘abuse’ of autonomy have been remarkably vocal.1
Some studies have addressed the inner life of the institution (Blackhurst, 1998; Cortell
and Peterson, 2006; Croome, 1995; Odell, 2005; Thompson and Snidal, 2005; Xu and
Weller, 2004). However, in comparison with its sister organizations, the International
Monetary Fund (IMF) and the World Bank, we know little about the Secretariat’s autonomy
in day-to-day regime management. WTO contracting parties are usually eager to empha-
size that the global trade institution is a member-driven organization and that the man-
date calls for the WTO staff to assist them to carry out a variety of tasks.
The article aims to look behind the facade of member-driven organizations and to
further enhance conceptual tools to explain the functioning of international organizations
(IOs). In particular, the article strives to contribute to an emerging literature on the role
of international civil servants. Conceptually, working within a principal–agent (PA)
framework, this article addresses issues on both sides of the PA equation that have so far
not been sufficiently studied. In particular, the article focuses on the rationale for delega-
tion within IOs. In addition, it provides evidence of a weakening role of the WTO
Secretariat in trade negotiations over time and asks why further delegation to the
Secretariat appears difficult. Whereas in settling trade disputes, the organization (and in
particular its judges) have received some autonomy as a result of the Uruguay Round deal,
in current negotiations the civil servants are kept on a short leash. It is argued that leading
functionalist explanations suggest good reasons for an additional transfer of tasks to the
Secretariat; yet, contracting parties show great reluctance to further delegation. This puz-
zle of ‘missing delegation’ will be analysed in the second part of the article.
The article is organized as follows. First, it briefly sketches the puzzle of missing delega-
tion. Second, it provides a discussion on how agency is treated in the international relations
(IR) literature and reviews existing PA-based analyses. Third, it presents a conceptual PA
framework that can assist in analysing the politics of delegation within IOs. Fourth, it
describes the various functions of the Secretariat in the context of trade negotiations and
presents evidence that suggests a decreasing role over time. This is followed by a discus-
sion of functionalist explanations that predict more delegation to the Secretariat. After
addressing alternative explanations from the IO literature and state-centric approaches,
the article then turns to the omitted variable focusing on the preferences of member states’
representatives. The article concludes with a cautionary note as to the location of patholo-
gies within IOs and calls for additional research into the relationship between material and
social sources to explain behaviour of contracting parties’ delegates.
The puzzle
The article builds on the empirical observation that the influence of the WTO Secretariat in
international trade negotiations has been declining. The Secretariat is defined here as the
Director-General (DG) and the regular staff involved in assisting the negotiations. It is a puz-
zle insofar as prominent functional explanations suggest that a large group of WTO
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