09-01 "Resources, Rules and International Political Economy: The Politics of Development in the WTO"



GDAE Working Paper No. 09-01 Resources, Rules and International Political Economy

The ability of developing countries to block investment negotiations was a
function of the WTO’s rules. The Doha Round would not begin if any country objected
(negative consensus rule), so India could condition its authorization of the 2001
Ministerial Declaration on the inclusion of what amounted to a “poison pill” in the area
of IIR. This is a clear instance of institutions providing actors with power and influence
that are disproportionate to their underlying resources.

Yet, as “victories” go, this is a rather limited outcome. From a development
perspective, TRIMS only looks good when contrasted to what the developed countries
sought in the Uruguay Round, sought in the MAI, included in many bilateral investment
treaties (and investment chapters of RBTAs), and in proposals made to the WGTI.39
Developing countries have been able to ward off “more unfavourable” outcomes, but
they have not been able to secure outcomes in line with their preferences. They could not
revise the TRIMS Agreement, as many sought, by placing binding obligations on
investors and home countries and restoring the right to use some investment measures
that were prohibited during the Uruguay Round. In short, they could prevent a “bad
situation” (TRIMS) from getting worse, so to speak, but they remain unable to fashion an
outcome that matches - or even approximates - their preferences. Developing countries
lack the power to accomplish that goal.

Conclusion

In reviewing the North-South politics of IP and investment, I have shown how
institutional arrangements - in particular the consensus rules of the WTO - can give
weaker actors more power and influence than we might expect from simply reading off
the underlying distribution of resources. After all, developed countries are stronger and,
subsequently, a structuralist approach would lead us to expect them to be able to impose
their preferences. Yet they have not: for all their efforts to rewrite the rules regarding IP
and investment in the post-Uruguay Round period, they have not succeeded. Developing
countries - weak as they may be - have seen to it that the WTO’s rules on IP and
investment are essentially the same in 2008 as they were at the conclusion of the Uruguay
Round in 1994. This finding represents a clear tick in the institutionalists’ column.

Yet all the power developing countries have exercised has been essentially
“blocking” power. In both instances, developing countries would like to introduce more
substantive reforms, both to TRIPS and TRIMS, but have been unable to do so. Instead
they settle for clarification of rules that most countries strongly objected to in the first
place and preventing the imposition of what many regard as even more unfavourable
rules. Developing countries have been able to prevent (or at least limit) the imposition of
rules that exceeded what they agreed to in the Uruguay Round, either by clarifying the
rules and thus creating a check on unilateral pressures (IP) or preventing additional
multilateral negotiations (investment). What they have been unable to do, however, is act
proactively - to secure agreement on new WTO rules that are more to their liking.40

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