In the Shadow of Law or Power? Consensus-Based Bargaining and Outcomes in the GATT/WTO

TLDR

In GATT/WTO bargaining, law‑based consensus tends to be Pareto‑improving and symmetrical, whereas power‑based bargaining produces asymmetrical, potentially non‑Pareto‑improving outcomes, and the decision‑making rules persist because they supply information that powerful states use in agenda setting. This article explains how consensus decision making has operated in practice in the GATT/WTO. Empirical analysis reveals that trade rounds are initiated via law‑based bargaining but closed through power‑based bargaining, with agenda setting dominated by the European Community and the United States, illustrating that GATT/WTO consensus decision making is an organized hypocrisy that accommodates asymmetrical power while claiming sovereign equality.

Abstract

This article explains how consensus decision making has operated in practice in the General Agreement on Tariffs and Trade/World Trade Organization (GATT/WTO). When GATT/WTO bargaining is law-based, consensus outcomes are Pareto-improving and roughly symmetrical. When bargaining is power-based, states bring to bear instruments of power that are extrinsic to rules, invisibly weighting the process and generating consensus outcomes that are asymmetrical and may not be Pareto-improving. Empirical analysis shows that although trade rounds have been launched through law-based bargaining, hard law is generated when a round is closed, and rounds have been closed through power-based bargaining. Agenda setting has taken place in the shadow of that power and has been dominated by the European Community and the United States. The decision making rules have been maintained because they help generate information used by powerful states in the agenda-setting process. Consensus decision making at the GATT/WTO is organized hypocrisy, allowing adherence to the instrumental reality of asymmetrical power and the sovereign equality principle upon which consensus decision making is purportedly based.