Working Knowledge
Business Research for Business Leaders
COVID-19 Business Impact Center
10 Jan 2012Working Paper Summaries

The Evolving Basis for Legitimacy of the World Trade Organization: Dispute Settlement and the Rebalancing of Global Interests

by Arthur Daemmrich
The WTO is reconfiguring people's relationships to goods and services by facilitating trade and the consequent conversion of goods and ideas into property, including ones previously gifted or kept local. Unsurprisingly, there has been considerable opposition from the losers in the free trade system and attendant challenges to the legitimacy of the WTO. Arthur Daemmrich argues that understandings of legitimacy change over time, especially as organizations like the WTO interact with organized interests, including member countries and outside NGOs. He provides a brief history of the WTO as an organizational entity managing the institution of free trade, and a case study of a lengthy international trade dispute between Brazil and the United States over agricultural subsidies generally and cotton subsidies in particular. At the WTO, he writes, an important shift has taken place from the strategy of building organizational legitimacy through expanding membership to institutional deepening via the dispute process. Thus the WTO has become one of a few key sites for working out how knowledge claims will be formulated, framed, and validated on the international level. Key concepts include:
  • Through the development of a visibly deliberative approach to dispute resolution, the WTO has gained legitimacy even though decision-making remains in the hands of a narrow band of technical and economic experts.
  • The WTO's own knowledge-making processes should facilitate deliberation without losing credibility. The WTO may soon be compelled to foster greater openness in the dispute adjudication process. A first step would be to accept more amicus briefs and perspectives from non-governmental organizations in dispute cases.
  • At the WTO, it is of vital importance not so much to get the facts right (which indisputably is of significance to the credibility of any one ruling), but to design a knowledge-making and adjudication system with legitimacy worldwide.

Author Abstract

The World Trade Organization (WTO) features prominently in studies of international institutions, although it is often over-simplified either as a tool of rich world domination over the global South or as the only stop-gap preventing a breakdown in the international system. This article analyzes how the WTO has sought legitimacy for itself and for the underlying institution of free trade in the midst of questions regarding its organizational mandate and the management of international trade negotiations. Initially, legitimacy appeared to derive from an expanding membership and the lowering of tariffs in progressively more categories of goods and services. More recently, legitimacy comes from institutional deepening by means of dispute resolution procedures and rulings by the dispute settlement body. This shift, it is argued, raises foundational questions of expertise, the relationship of models to real-world outcomes, and methods for bounding disputes over scientific and economic facts. Based on a case study of Brazil's interaction with the WTO—especially in a decade-long claim against US cotton subsidies—and a trend analysis of over 400 total WTO disputes, I argue that the WTO dispute process is helping to legitimize the institution of free trade through its public display of rational authority and neutral expertise. At the same time, dispute panels have begun to pass judgment on issues of scientific and econometric uncertainty. As a result, the basis for dispute judgment and the broader legitimacy of the WTO is shifting from questions of representation that have long drawn the attention of critics and WTO leaders to epistemological issues, especially concerning the basis of expertise and the design of econometric models. This article provides insights on the resolution of disputes in global trade while contributing to our understanding of the evolving role of scientific and econometric modeling at international organizations.

Paper Information

    Find Related Articles

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.