TCS Daily

What Might Trip Up the WTO

By Daniel Drezner - September 19, 2003 12:00 AM

Although I have strenuously argued in favor of completing the Doha round of World Trade Organization talks, there is a nagging concern I have about the WTO's future direction. For this I blame John Opel and Edmund Pratt.


In the mid-1980's, Opel was the CEO for IBM, and Pratt was the chairman of Pfizer. In March 1986, they co-founded the Intellectual Property Committee (IPC), a group of twelve multinational corporations in the entertainment, pharmaceutical, and information industries. The IPC was committed to more rigorous enforcement of intellectual property rights (IPR) at the global level. As Susan Sell discusses at length in Private Power, Public Law, the IPC lobbied three U.S. presidents and countless foreign governments to secure the Trade Related Aspects of Intellectual Property Rights (TRIPS) into the Uruguay round of trade negotiations.


The economic merits of TRIPS and IPR are fiercely debated among economists and activists alike. What concerns me, however, is not the substantive implications of TRIPS -- it's the precedent of putting them under the auspices of the WTO.


Until TRIPS, there was a very clear dividing line between what the global trade regime covered and what it didn't. The trade rules were designed to liberalize barriers to the exchange of products. Except for extreme circumstances, those rules said nothing about the processes through which products are made. It was generally accepted that if the global trade body intervened in such questions, it would constitute an unwarranted intervention into the national regulations of member countries. And for good reason -- it's relatively costless for countries to remove border-level barriers to trade, but relatively expensive to enact and enforce new domestic regulations over production processes. TRIPS, however, was expressly designed to regulate production processes -- namely, whether firms respected intellectual property rights in their operations.


Whatever the valid reasons for linking IPR to trade, the negative effects of TRIPS have been substantial. First, the agreement imposed a significant burden on developing countries to adhere to more rigorous standards. Second, the agreement's effect on the provision of AIDS drugs had a polarizing effect on the global politics of trade, prompting anti-globalization activists to make absurd and disgusting claims about the WTO's responsibility for the deaths of millions of Africans. Third, in creating TRIPS the members of the WTO erased the dividing line between the liberalization of trade in products and the regulation of processes.


Three years ago, Keith Maskus warned about the implications of TRIPS for future WTO negotiations:


Observers often write about TRIPS as though the rules it contains are comparable to disciplines against trade restrictions. While there are certainly parallels, particularly to the extent that weak IPRs interfere with trade, these two policy regimes differ fundamentally. First, trade restrictions are border measures that inherently discriminate between home and foreign interests. The same cannot necessarily be said about the partial harmonization of IPRs standards put forward by TRIPS. These standards apply without discrimination to domestic and foreign interests, meaning that the TRIPS Agreement extends the reach of WTO rules into domestic business regulation....


In effect, TRIPS ushers into the system of global trading rules an extensive mechanism for disciplining processes (standards) in addition to products.


This fact raises the question of whether other standards belong in the WTO. Critics of TRIPS wonder why, if IPRs are included in the WTO to protect capital, labor standards are not also needed to protect workers, environmental regulations to protect natural resources, and competition policy to protect consumers. Whatever the misunderstandings of IPRs implicit in this question, it is not easily dismissed.


Maskus goes on to argue that there is no economic reason to include labor or environmental standards within the WTO. He's right -- the data strongly suggests that the WTO does not need to step in to prevent regulatory races to the bottom.


The thing is, arguing that the WTO should only regulate the areas preferred by multinational corporations is a tough political sell. There is likely to be sustained pressure for the WTO to expand its reach into entirely new governance areas over the next several decades.


It remains unlikely that anti-globalization activists will ever be able to get the WTO to seriously consider adding social regulation to the mix. However, it is possible that the European Union will. Consider that the stumbling block at Cancun was the EU's insistence on pushing the "Singapore issues" of trade-related measures on investment, antitrust, and government procurement. The EU also insisted at Doha on including environmental issues in the negotiation agenda as well. Both the United States and the European Union have made disturbing noises about the inclusion of "Sustainable Impact Assessments" for new trade agreements.


A strong case can be made that the WTO should govern some of these issues -- particularly procurement. However, some of these issues will create the same onerous compliance burdens on developing countries as TRIPS. It is not surprising that these issues proved so difficult in Cancun.


The European Union's eagerness to expand the WTO's bailiwick also gives one pause. It's worth remembering that 15 years ago, economists and international relations scholars looked at the EU as an effort to liberalize European economies. Now the EU looks a bit different. Policy processes that generate illogical macroeconomic rules, incoherent foreign policies, insane agriculture subsidies, and interminable constitutional proposals have not showered Brussels with economic glory. Is it paranoid to think that the EU wants to remake the WTO in its own image?


From an American perspective, the push to lower barriers to trade are an excellent combination of pursuing one's self-interest while helping one's fellow man. The push to harmonize domestic regulations across the board may be more than the WTO could, and should, handle.


Daniel W. Drezner is Assistant Professor of Political Science at the University of Chicago. He keeps a daily weblog at

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