Developing countries and negotiations in the WTO

The process and outcome of WTO negotiations are influenced
by a myriad of factors and players. Developing countries are
especially disadvantaged in this respect as a result of
their delegations' relative lack of technical expertise and
insufficient political and economic clout. In addition,
negotiators may pursue narrow sectoral or personal interests
at the expense of maximizing national welfare.

by Vinod Rege

GENEVA: Trade negotiations in an organization like the WTO are
mainly motivated by two broad objectives: improvements in
access to markets, through removal of tariffs and other
barriers to trade; and, wherever possible, harmonizing rules
and regulations which countries apply to goods and services
exported and imported.

Developing countries generally are at a disadvantage in
participating in international trade negotiations for varied
reasons - their weaker bargaining position and their inability
to carry out technical preparations for participation in such
negotiations. These difficulties are more pronounced in the
negotiations on rule-making because of the more technical and
complex nature of the issues discussed.

Public-choice approach

Two case studies done under the Commonwealth Secretariat's
technical assistance programme, applying a public-policy
approach to the negotiations (on the Customs Valuation and
Pre-Shipment Inspection agreements), give some insight into
the problems and difficulties which developing countries
encounter in participating in international trade negotiations
on rule-making. The public-choice approach seeks to analyze
the political process, and the interaction between the economy
and the political life within the country and relations with
other countries, by using tools of neo-classical economic

The public-choice approach proceeds on the basis that there
is not one but many actors who influence the negotiating
approach that is ultimately adopted by the country in
international economic, trade and other negotiations. These
include the various sectoral interest groups which lobby for
the protection of their sectoral interests, the political
leaders who may wish to use the negotiations to fulfil their
election promises or to build up their own political future,
the bureaucrats who may have an interest in promoting the
importance of their ministries or in some cases their own
interests, and lastly the negotiators themselves, who may have
their personal axe to grind. This could result in the
negotiating approach that is ultimately adopted, being not
necessarily always in the interest of the general public or
the consumers who are ultimately expected to benefit from
trade negotiations.

Secondly, the public-choice approach assumes that these
various actors may have differing self-interests, but pursue
them rationally and in a systematic way to maximize their
economic benefits, taking into account political,
institutional and other constraints under which they operate.

Thirdly, it assumes that the various actors who influence
the decision-making process are not always fully informed on
all aspects which the issue under consideration raises and are
thus often "rationally ignorant". Thus, the various actors who
influence the decisions, even though they may act rationally,
are not always fully informed on all aspects of the issues
under discussion.

In the multilateral trade negotiations on rule-making, such
"rational ignorance" on the part of the negotiators may relate
to the economic and non-economic factors that make it
necessary for the other countries to adopt administrative
rules, procedures and practices that are different from their
own or to the reasons that make it difficult for them to
accept the rules which are proposed as a basis for

Overcoming rational ignorance

It is, however, always possible for negotiators to get over
such rational ignorance by seeking information, holding
consultations on a bilateral basis and, if necessary, making
visits to the countries concerned.

The resources and time spent for this purpose are, however,
the result of cost-benefit calculations. Negotiators would be
more willing to seek such information, if necessary through
consultations and visits, from countries which are in strong
bargaining positions and without whose full support it would
be difficult to reach compromise solutions. They may not make
such effort if the countries which are expressing concerns
about the proposed rules are those which, because of the lack
of political and economic clout, have weaker bargaining
positions and are on the periphery in the negotiating process.

In the Tokyo Round for instance, the EU negotiators were
honest enough to recognize that one of the reasons why no
progress was being made in the negotiations was their
insufficient understanding of the US and the Canadian
valuation systems. They, therefore, went, at the invitation of
the American and Canadian authorities, on a four-week study
tour to Washington and Ottawa to get first-hand information on
how the valuation systems of these two countries worked, which
helped them in drafting a compromise proposal that was to
provide a basis for the Agreement that was ultimately

The opposite situation, however, was noticeable in the
attitude of developed countries towards the concerns and
problems expressed by developing countries in relation to the
Agreement's basic provisions. Developing countries came out
of the Tokyo Round negotiations on customs valuation with a
great degree of dissatisfaction. In particular, they felt
that accession to the Agreement would limit the ability of
their customs officials to deal with the cases where goods
were deliberately under- or over-valued by the importers.

The inability of developed-country negotiators to
understand and appreciate the reasons advanced by the
developing-country negotiators for the wide prevalence of
valuation malpractices in their countries could in part be
attributed to the existence of "rational ignorance" on the
part of the developed-country negotiator of the economic
conditions and the trading environment prevailing in the
developing countries, which provided traders the incentive to
indulge in such practices. On hindsight, it would appear that
if the EU officials had also visited the customs services in
a few developing countries, there would have been better
appreciation of the concerns that were being expressed by the
negotiators from developing countries.

In the event, it took nearly twelve years of discussions at
international level to satisfy the developed-country
negotiators of the legitimacy of developing-country concerns
and to secure in the Uruguay Round of negotiations the
acceptance of the solution that would considerably improve the
ability of the customs services to deal with valuation
malpractices under the provisions of the Agreement.

"Veil of uncertainty"

In the case of negotiators from developing countries, a
further handicap arises because of their lack of knowledge of
the precise implications for their economies and their trade
of the proposals that are under discussion.

The case studies suggest that participants from developing
countries may, even during the most crucial stage of the
negotiations, remain uncertain of the probable effects on the
economy and trade of their countries of the proposed rules....
the majority of them participate in the multilateral trade
negotiations under the "veil of uncertainty" and not on the
basis of "prism of interest" which assumes that the
negotiators are fully aware of the consequences to their
economies of the new rules. Such uncertainty often makes them
adopt negotiating strategies "to contain the damage" that they
perceive could result from the acceptance of the rules rather
than negotiate for the maximization of the benefits to their

Thus (in the customs valuation area), during the Tokyo
Round, they tried to contain the damage by negotiating a
Protocol that would provide them a grace period of five years
after accession to implement the discipline of the Agreement.

Again, in the area of preshipment inspections (in the
Uruguay Round)... their strategy in the negotiations in the
final phase was to contain the damage by agreeing to a
compromise formulation, which they hoped would not require the
preshipment inspection (PSI) companies to change significantly
their existing practices.

The analysis in the case studies brings out three main
features of international trade negotiations that were held in
the past in GATT. Firstly, because of the hegemony exercised
by the two major players, namely the US and the European
Union, the agenda for the negotiations as well as the
principles on which the new rules should be based and their
content is largely determined by them.

Secondly, as the subjects for negotiations are brought to
organizations like the WTO by these two major players
generally after the preparatory work at inter-ministerial
level has been completed and after consultations with
concerned national interest groups and discussions with other
developed countries have been held in such fora as the OECD,
they are far more prepared for discussions and negotiations
than the developing countries in participating in multilateral
negotiations. The latter suffer from further handicaps in
participating in such negotiations, as the bureaucrats in
these countries often lack technical expertise; financial and
human resources that could be applied for the examination and
study of subjects that are discussed at international level
are limited; the mechanism required for inter-departmental
cooperation and consultation to identify negotiating interests
and to decide on the negotiating approaches is not as yet well
developed; and the various interest groups which, through
lobbying, assist and influence the governments in determining
the policy approaches either do not exist or, where they
exist, are not effective.

The influence of these factors on the effectiveness with
which different delegations are able to follow their perceived
national interests, may vary from country to country. As a
general proposition, however, it may be possible to say as a
result of these handicaps, most of the developing-country
negotiators remain "uncertain", even during the crucial and
even concluding phase of the negotiations, about the benefits
that would accrue to their trade and of the economic costs
they would have to bear, when the proposals that are under
negotiation are accepted and implemented. This uncertainty
only makes them react to the proposals during the
negotiations, with a view to avoiding the negative effects and
to contain the damage, rather than negotiate for the
maximization of their economic benefits.

Thirdly, the existence on the part of the negotiators of
"rational ignorance", particularly of non-economic conditions
like trading practices and environment and the attitude of the
people in countries with whom they are negotiating towards
abiding by the law, may pose problems of communication and
even vitiate the process of negotiations. Such lack of
detailed knowledge may be found on the part of negotiators
irrespective of the countries which they represent. In
multilateral trade negotiations, however, the existence of
such rational ignorance on the part of negotiators from
developed countries may affect solutions being adopted that
meet fully the concerns that are expressed by some of the
developing countries.

Non-transparent negotiations

The case studies further bring out that negotiations are
often carried out in small groups and, as such, are not always
transparent to those who are not invited to participate.

In the Tokyo Round for instance, the draft text of the
Agreement on Customs Valuation was brought to GATT for
discussions and negotiations only after tentative agreements
had been reached on the main provisions among developed
countries. To ensure that such an experience was not repeated
in the Uruguay Round, developing countries had pressed for and
secured, immediately after the launching of the negotiations,
the acceptance of a time framework and programme for work in
each of the areas that were selected for the negotiations.
The elaboration of such negotiating programmes and other steps
taken by the Secretariat went a long way in creating
conditions for the improved participation of all countries,
particularly of developing countries, in the negotiations.

However, during the last crucial and bargaining phase of
the negotiations in a number of areas, the negotiations were
carried out on an informal basis in small groups.
Participation in these meetings was restricted to a limited
number of delegations. The other delegations were informed of
the progress made in the meetings of such small groups by
holding, at periodic intervals, formal meetings of the main
negotiating groups.

In adopting such procedures, the leading delegations and
the Secretariat were influenced by the consideration that the
detailed negotiations in most of the areas like anti-dumping,
subsidies and countervailing measures or in new areas (like
trade-related aspects of intellectual property rights and
trade and services) were becoming highly technical in nature.
It was felt that because of the highly technical nature and
the lack of technical expertise, not all delegations would be
able to make a useful contribution, if they were to
participate in the negotiations on all subjects. The
delegations were therefore encouraged to participate in the
negotiations on the subjects in which they had vital
negotiating interests and had also members who had the
necessary expertise.

The motivation for the adoption of these procedures was
thus to ensure that purposeful negotiations took place among
members who were knowledgeable and had the necessary

In one crucial area, however, the motivation of both the
leading delegations and the Secretariat in arranging meetings
in a small group was different. This was the area of the
negotiations on the institutional framework. The initial
negotiations which ultimately resulted in agreement on the
establishment of the World Trade Organization, were started
early in 1990 and were carried out in the first half of the
year in absolute secrecy, in meetings arranged over lunches
and dinners among a limited group of fourteen or so
Ambassadors to which two or three representatives of the
Secretariat were invited to attend.

The main reason for delegations who had taken the
initiative for starting the discussions on the subject to keep
them secret and confined to a limited number of delegations,
representing countries belonging to different regions, was the
extremely politically sensitive nature of the proposal. The
proposal for the establishment of an international
organization in the trade field, similar to organizations like
the IMF and the World Bank in the financial field, had been
under discussion at international level for over four decades,
with countries holding widely different views. Public opinion,
at least in some of the countries, was far from favourable to
the establishment of such an organization. Because of this,
those who were initiating the discussions did not desire that
the proposal be known to all participants and to the general
public unless agreements were reached among key delegations
representing countries at different stages of development. It
was their expectation that once such agreement was reached in
such a small group of key delegations on the broad elements of
the proposal, it would not be difficult to reach at a later
stage consensus in the negotiations on a multilateral basis
among all countries. In this, later developments proved them

The Secretariat, with its understandable self-interest in
enhancing its role and improving its image through the
transformation of GATT into the WTO, was only too willing to
act as a midwife for the birth of the new organization.

Apart from the establishment of the WTO, the main thrust of
the proposal was to ensure that all member countries accept
all of the associated agreements that were negotiated in the
Tokyo Round as well as those that would result from the
negotiations in the Uruguay Round. Many of the developing
countries, which had not acceded to the Tokyo Round
agreements, were, however, not fully aware of these proposals
that were being considered secretly in the small group.

Throughout the first nine months or so of 1990, they seemed
to have proceeded on the assumption that they would have an
option not to join the Agreement, if they considered that the
changes and improvements being negotiated did not meet their
expectations and requirements.

It is evident from the case study on customs valuation that
these negotiations in the small group were kept secret and
most of the developing-country participants did not know that
acceptance of the agreement would be mandatory on all
countries.... Likewise, in the negotiations in the area of
preshipment inspections, the lack of transparency resulted in
the delegations from developing countries that were actively
participating in the negotiations, being not aware that they
would have to accept the agreement till only a few months
before agreement was reached at the technical level on the
outstanding issues.

Pursuing narrow interests

The public-choice approach is critical of the assumption
that the nations, while they may consult the various interest
groups, base their negotiating policies and approaches on
identified national interests and negotiate in international
economic and trade conferences with a view to maximizing their
social welfare. It holds, on the other hand, that because of
the personal perceptions and preferences of bureaucrats, the
interests of their political masters and the pressures exerted
on them by the interest groups, they may adopt negotiating
approaches that may serve narrow sectoral or other interests
rather than the larger economic and trade interest of the
country....It is also not uncommon for the ultimate policy
approach adopted by a country to be influenced by the
perceptions, ideological beliefs, interests and behaviour of
the bureaucrats responsible for the policy formulations and of
the political masters to whom they report.

Most of the issues discussed in the international
organizations require inter-departmental cooperation. It is,
however, well known that bureaucrats do not always like to
cooperate and share work with other departments; they
therefore tend to choose an option that would enable them to
advance their individual perceptions and interests of the
department where they work in order to control the policy
rather than choose the one that would bring the highest
benefit to the nation as a whole. And even within the
framework of the policy approach decided at the national level
after consultations with the various departments and interest
groups, the actual positions taken by the negotiators may be
influenced by such factors as their desire to project
themselves, to secure recognition and acceptance from fellow
delegations or to gain prestige by getting elected as chairmen
of the committees.

It has not been possible to analyze the extent to which the
interest groups were active at the national levels in the
examination of the issues that were discussed in the areas of
customs valuation and preshipment inspections. However, at the
international level, the views taken by the International
Chamber of Commerce at the various stages of negotiations were
to have significant impact on the attitude taken by the two
major players, the United States and the EU, in the
negotiations on both these areas.

The policy approach adopted at national level could be
influenced by the desire on the part of the negotiators to
build up the importance of their department or organization.
For instance, during the Tokyo Round, the decision on the part
of the EU negotiators to change their negotiating approach
from developing valuation rules based on Brussels Definition
of Value (BDV) in favour of the system that was to be
ultimately embodied in the Agreement on Customs Valuation, was
influenced both by their view that the new system would not
only mark an improvement over the BDV system but would also
enable the Commission bureaucrats to gain and enhance control
over the customs administrations of member states.

The flexibility which the national bureaucrats and the
actual negotiators have in adopting negotiating approaches on
the basis of their personal perceptions and views is greater
where the subjects discussed are of a technical nature or
relate mainly to administrative rules and procedures that do
not raise significant conceptual issues of the policy ... (as)
the subjects are far removed from the attention of the
interest groups and of the press, which could mould the
opinion of the general public.

Developing-country negotiators

In general, it would further appear that the possibility of
the negotiating approaches being determined on the basis of
such personal views and perceptions is far likelier in the
case of negotiators from developing countries than in the case
of their counterparts from developed countries.... In a large
number of the developing countries, the mechanism for
arranging inter-departmental consultations in order to
determine the policy approach the country should adopt on the
subjects under discussion in international fora has not been
well established in all countries. And where such a mechanism
exists, it is not always used, because of inter-departmental
rivalries.... in most cases, the policy is determined by a few
bureaucrats from the ministry responsible for representing the
country in the concerned international organization, on the
basis of their own assessment of the perceived state interest,
taking into account, where possible, the views of the foreign
ministry and negotiators on the scene. They are able to do
this, as in most cases, the industrial and other interest
groups, whose interests may be affected by the new rules and
disciplines that may be developed at international level, are
not vocal and active in expressing their concerns. Given the
magnitude of the economic and social problems which most of
these countries face at domestic level, the political parties
and general public have also so far shown little interest in
the issues discussed at the international level, particularly
in the rule-making area.

It is not, therefore, unusual for the negotiators, at least
those from some of the developing countries, to declare
proudly that the policy of their governments on many of the
subjects discussed in the international organizations in which
they represent, is largely made by them. The freedom and
autonomy which they enjoy also make them more vulnerable to
persuasion by the delegations with whom they are negotiating
to their point of view. In reaching compromises on the basis
of such persuasion, the possibility of the negotiator's
decision being influenced by the interest he would have in
securing acceptance and recognition and in building up his
reputation as an effective diplomat who avoids confrontation
and knows when and how to compromise, cannot be entirely ruled

But the extent to which negotiating approaches may be
influenced by such personal considerations should not,
however, be exaggerated. Most of the negotiators are men of
honour, great integrity and intellectual honesty, who abide by
basic values and attach the highest importance to their
countries' national interests....It would therefore be both
unrealistic and wrong to hold, as is sometimes done, whenever
compromises are reached that are not looked upon with favour
by the critics, that the negotiators must have "given in" for
personal recognition or other advantages... negotiators from
developing countries participate in multilateral negotiations
on the basis of inadequate knowledge of the economic
consequences that the adoption of new rules or the
modification of the old ones may have on their trade or

The autonomy and the freedom which the bureaucrats may have
at present are also partly due to the lack of interest on the
part of the general public in the economic and trade issues
that are discussed at international level. However, recent
years particularly have witnessed in a number of developing
countries a trend towards greater interest, on the part of
both the industry and other interest groups as well as the
general public, in the issues that are discussed in
organizations like WTO.... (Under the WTO) all developing
countries would be further required to accept and abide by the
obligations which the various WTO legal instruments impose.
The flexibility that is available to developing countries in
the implementation of some of the obligations under the
provisions for special and differential treatment to these
countries would gradually disappear... by the year 2005... the
WTO legal system would have to be applied by all countries on
a uniform basis.

These developments would inevitably lead to the industry
and trade sectors and the general public taking an active
interest in the activities of the WTO. This would gradually
make negotiators from those developing countries which at
present enjoy a considerable degree of autonomy, reluctant to
go by their personal perceptions, views and assessments and
look for instructions from home, before taking any

Apart from national delegations, the other actors which
could influence both the process of negotiations and its
outcome are the international organizations and the
bureaucrats working in these organizations.

Influence of international organizations

The international organizations help the negotiating
process by preparing background documents analyzing the
various issues under discussion... and provide technical
assistance to developing countries and increasingly to the
economies in transition for their improved participation in
the negotiations.

But each international organization has, however, its own
"ideal", which is determined by the reasons which led to its
establishment, its stated objectives and its mandate. Like
public interest groups, they, in pursuance of their specific
mandate and ideal, pursue policies which, while securing
fulfilment of their objectives, increase their importance and
build up their image. In expressing their views in background
documents or in providing technical assistance, the
organizations are, however, often constrained by the
functional role which the secretariats are expected to perform
as well as the political realities under which they operate.

The views taken by the international organizations on the
subjects under negotiation could thus vary.... because of the
different perspectives from which the organizations study and
examine the issues.

International organizations, by their very nature, cannot,
however, act on their own. Their policies are evolved by
interaction among three sets of actors - delegates
representing the member states who give broad directions and
determine the work programme through meetings of the general
assemblies, councils, executive boards and budget committees;
the elected head of the organization and his deputies who
provide leadership to the organization and are responsible for
execution of the work programme; and the professional staff
which work in these organizations.

The professional staff are drawn from different countries
and have different cultural backgrounds. But for this
difference... their behaviour pattern is similar to that of
the national bureaucrats. In fact, the public-choice approach
would suggest that the economic incentives which apply to the
behaviour of the national bureaucrats also apply to the
international bureaucrats. Thus, they may show the same
reluctance to cooperate with other organizations or even with
their colleagues from the same organization as the national
delegations may show in cooperating with other ministries.
Where they have a choice between alternative courses of
action, they will ordinarily choose one that gives the
organization or the department in which they work more power
and prestige. Like bureaucrats at the national level, they may
be also "rationally ignorant". Such rational ignorance may
relate to the work which other organizations are doing or even
to the work which the other divisions in the same organization
are doing.

Some public-choice analysts, however, consider that these
characteristics which depict the behaviour of the bureaucrats
at national level "are more pronounced in the international
than in the national setting". Member states (at international
level) are not in a position to exercise direct control on
international bureaucrats because the objectives of different
member states in relation to the work done by bureaucrats may
not be the same and may even conflict.

Political realities

(In theory), the international bureaucrats, even those at
the middle level (Directors or Chiefs of Division), are
considered to have... far more discretionary authority and
freedom to act on the basis of an objective analysis and
assessment of the situation and according to their
intellectual persuasion, leanings, beliefs and convictions
than their counterparts in national governments. In practice,
however, such freedom of action may be constrained by the
political realities surrounding the organization in which the
officials are working. In most of the organizations, the
countries which have economic strength and are politically
important exercise disproportionate power and authority. This
is so whether the formal decisions are taken by a system of
weighted voting, as is the case with organizations like the
World Bank and the IMF, or by consensus where decisions are
taken on the basis of one country one vote, as in the case of
the WTO..... (in actual practice) the US and the EU exercise,
at present, overall hegemony over the activities in all these
three organizations.

These realities could influence the way the discretion and
freedom of action that is available to the international
officials is used by them. They may be more forthcoming when
the initiatives taken or actions contemplated are consistent
with the policy approaches of the dominant players or conform
to the dominant ideology or views prevailing at the time.
They would be willing to take initiatives that may not be
liked by these players.... only if in their judgement the
initiatives taken may be tolerated and not objected to by the
major players.

Moreover, member states with economic and political
strength often use formal and informal means to ensure that
international civil servants exercise discretion in ways that,
in their view, are neutral, impartial and responsible. The
formal means used include curtailment of the financial
resources for activities that are considered to be superfluous
or not in the national interest. In extreme situations, in
order to chastise an organization, they may threaten to or
even actually withdraw from the organization for a temporary
period. Alternatively, they may protest to the management
against officials who have taken initiatives that they do not
approve of and press for their being shifted from the
positions they hold or for their contracts not being renewed.

Most of the studies that have so far been undertaken on the
application of the public-choice approach to international
organizations primarily deal with the behaviour of delegations
and its impact on the process and outcome of the negotiations
or on the functioning of the international organization. The
few studies that also cover the behaviour of the international
bureaucrats relate to the functioning of the staff of the IMF
and the World Bank. ... in a recent public-choice analysis of
the political economy of the IMF, Rolad Vaubel observes that
the unwillingness of the staff to adopt some of the policy
measures that could reduce the rigour of conditions imposed by
it in making loans to countries was mainly due to their
apprehensions that their acceptance would reduce their "power"
over recipient countries and thus their prestige. The fact
that in most cases the loan policies and the attached
conditions would be supported by the Executive Board, in which
developed countries, because of the weighted system of voting,
have a dominant voice, further encourages such behaviour on
the part of the staff.

These views differ significantly from the "dirty-work
hypothesis" developed in the past by some political
analysts... (who viewed) bureaucrats working in organizations
like the World Bank and the IMF as "selfless" individuals and
dedicated internationalists, who had nothing but the recipient
country's interests in mind.

WTO officials take pride in saying that they are the only
international bureaucrats who remain true to the oath to
remain neutral which all persons joining the international
civil service have to take. They express no views and take no
sides. They only prepare factual papers that provide the
basis for discussions and reports reflecting the main points
made in the discussions. The responsibility for taking views
lies entirely with the member states acting jointly in the
meetings of either the Council or the Committees.


This, of course, is a fiction; it is promoted because it
suits the interests of both the Secretariat and the member
states. In practice, as the two case studies show, because of
it being a Secretariat of a negotiating body as well as a body
responsible for the settlement of disputes, the officials tend
to be more cautious and circumspect in expressing opinions and
weigh carefully the possible reactions of member states in
expressing opinions on subjects on which differences of view
exist among member states.

The role which the officials from the secretariats of
international organizations should play and the mechanism that
should be adopted for the supervision and control of the
discretionary authority available to them, is indeed too wide
a subject to be addressed on the basis of the case studies of
negotiations in two areas.

It also raises important related questions of personnel
policy, particularly in relation to the background and
experience of the officer responsible for work, and the steps
that may have to be taken, through training, field visits and
study tours, to reduce their "rational ignorance" and to
increase their awareness of the political and economic
realities in which people in different countries live. These
questions would merit separate study and further research.
(Third World Economics No. 191, 16-31 August 1998)

(Vinod Rege is a retired senior official of the GATT
Secretariat, and is currently a consultant in the Commonwealth
Secretariat. The above edited general views of relevance to
the negotiations at the WTO have been extracted from a paper
presented by him at a recent seminar on the WTO Preshipment
Inspection Agreement.)