The EU as an Effective Trade Power Strategic Choice of Judicial Candidates in the Context of the World Trade Organization

Strategic Choice of Judicial Candidates in the Context of the World Trade Keywords: International Organization, Legalization, Court, World Trade Organization, European Union, Foreign

Working Paper No 2013/28| June 2013

The EU as an Effective Trade Power? Strategic Choice of

Judicial Candidates in the

Context of the World Trade

Keywords: International Organization, Legalization, Court, World Trade Organization, European Union, Foreign Policy, Effectiveness.

NCCR TRADE WORKING PAPERS are preliminary documents posted on the NCCR Trade Regulation website (<www.nccr‐trade.org>) and widely circulated to stimulate discussion and critical comment These papers have not been formally edited Citations should refer

to an “NCCR Trade Working Paper”, with appropriate reference made to the author(s)

The EU as an Effective Trade Power? Strategic Choice

of Judicial Candidates in the Context of the World

Trade Organization

(Forthcoming: International Relations)

Actor, power and effectiveness

The European Union in trade politics: Actorness from day one

In the area of external trade the European Community (EC1) has been

an influential international actor from its very beginning As MemberStates decided to create a Common Market and a functioning CustomsUnion, the step of delegating sufficient power to the Communityinstitutions in order enable them to speak with ‘one voice’ in tradenegotiations was a logical act Not only was there a need to coordinateforeign economic policies among Member States, but in the area oftrade policy it was necessary to pursue a single policy on thetreatment of imports and exports of goods (in particular administrating

a single tariff system and implementing uniform product standards)

The EC quickly became accepted as a heavyweight inmultilateral trade talks conducted in the context of the GeneralAgreement on Tariffs and Trade (GATT) The EC was recognized as atrade power and its presence in the 1960s, defined by the influence itexerted on other actors, was felt instantly While Member Statescontinue to be official members of the GATT and its successororganization, the World Trade Organization (WTO), to this day, othercontracting parties quickly accepted the European Commission as therepresentative voice and chief negotiator of the Community in therespective trade rounds (eg, the Dillon Round (1960–61) and theKennedy Round (1964–67)).2 Therefore, the mainstream tradeliterature did not pay particular attention to concepts related to

1 I refer to EC when explicit reference is made to the pre-Maastricht period, otherwise I use the term European Union (EU).

2 Michael Johnson, European Community Trade Policy and the Article 113 Committee (London: The Royal Institute of International Affairs, 1998); Manfred Elsig, The EU’s

Common Commercial Policy: Institutions, Interests and Ideas (Aldershot: Ashgate

Publisher, 2002).

actorness that developed in the foreign policy literature.3 Today, the

EU has achieved (facilitated by various rounds of enlargement) thestatus of the most powerful trading entity as measured in terms ofoverall trade flows in goods and services and the market access it canoffer to foreign products

Notwithstanding the strong presence of the EC (and later the EU)

as a trade actor, there was surprisingly little research into thefunctioning and the effects of trade policy until the second half of the1990s.4 In addition, many authors started to place EU trade policy in acomparative perspective in order to avoid falling into some romanticN=1 trap.5 To sum up, a growing number of students of European tradepolicy accepted the similarities to statehood and questioned a

potential sui generis character of the polity.

What type of trade power?

In recent years, a growing number of scholars have studied extensivelythe EU’s position in various regulatory venues (multilateral, regional,bilateral) as well as its use of unilateral trade measures (eg in the area

of anti-dumping or related to preferential schemes such as duty-freeaccess for certain products from least-developed countries) As thestudy on EU trade policy had a late start, the younger generation ofscholars was strongly socialized within an international relationsliterature that took domestic politics seriously Research focused onsocietal preferences and the effect of the institutional setting onpreference aggregation Various middle-range theories fromcomparative politics and international relations were successfullyapplied in the field (eg, principal–agent theory, historicalinstitutionalism, or pluralism) Interestingly and ironically, discussions

3 Arne Niemann and Charlotte Bretherton, ‘EU External Policy at the Crossroads: The Challenge of Actorness and Effectiveness’, this issue.

4 Stephen Woolcock and Michael Hodges, ‘EU Policy in the Uruguay Round’, in Helen

and William Wallace (eds.) Policy-Making in the European Union (Oxford: Oxford

University Press, 1996), pp 301–24; Sophie Meunier and Kalypso Nicolạdis, ‘Who Speaks for Europe? The Delegation of Trade Authority in the European Union’,

Journal of Common Market Studies, 37(3), 1999, pp 477–501; Alasdair Young, ‘The

Adaptation of European Foreign Economic Policy: From Rome to Seattle’, Journal of

Common Market Studies, 38(1), 2000, pp 93–116.

5 Dirk De Bièvre and Andreas Dür, ‘Constituency Interests and Delegation in

European and American Trade Policy’, Comparative Political Studies, 38(10), 2005,

pp 1271–96; see also Arlo Poletti and Dirk De Bièvre, ‘The Political Science of

European Trade Policy: A Literature Review with a Research Outlook’, Comparative

European Politics, 2013, forthcoming.

on civilian or normative power, while prominent in other foreign policyfields, were largely absent among students of trade policy, even

though the raison d’être for these concepts relied heavily on the

attractiveness of Europe’s economic success With the exception of afew scholars using critical political-economy approaches (in thetradition of neo-Marxist and dependency theories), the field has hardlyfocused on (normative) concepts related to the nature of EU tradepolicy

One of the few notable attempts to capture EU trade policy interms of a power concept was the contribution by Meunier andNicoläidis.6 While these authors call the EU a ‘conflicted trade power’,their contribution adds to the perception that the EU is a normal, state-like trading power whose policies are shaped by domestic interests andthat, given a multitude of foreign policy objectives, a lack of coherence(‘conflicted outcomes’) is a normal phenomenon They argue that

‘the EU is conflicted within, as different member stategovernments, influenced by a host of domestic actors, hold verydifferent views on how to wield such power through trade The

EU is also conflicted between its own guiding principles, whichoften appear to contradict one another – such as championingmultilateralism while blanketing the planet with bilateral tradeagreements, or promoting the cause of economic developmentwhile protecting European agriculture.’7

The internal complexity of the EU exacerbates the lack of a granddesign or overall objective and makes trade policy appear to be simply

a negotiated result of private groups with vested interests, MemberStates’ (changing) preferences and (more or less) activism by theEuropean Commission.8 Meunier and Nicolạdis view the observedtrade policy outcome more as a result of efforts to replicate internalmarket liberalization than crude forms of domination Put differently,the power pattern we witness is less a realist-type of ‘trade as foreignpolicy tool’, than a result of the path-dependency linked to the decision

to create an internal market that should be ‘externalized’ In the end,their concept casts doubt about the possibility of clearly labelling the

6 Sophie Meunier and Kalypso Nicolạdis, ‘The European Union as a Conflicted Trade

Power’, Journal of European Public Policy, 13(6), 2006, pp 906–25.

7 Meunier and Nicolạdis, ‘Conflicted Trade Power’, p 907

8 This supports the point made in the introduction that ‘studies have exposed the lack of (genuinely) normative intentions/commitment’ (Niemann and Bretherton,

‘Challenge of Actorness and Effectiveness’)

EU in terms of an exclusive ‘type’ or ‘category’ of power and thereforethey add to those voices that stress the limitations of a ‘what sort ofpower’ debate in respect to trade policy.

Effectiveness in trade policy

While measuring the effects of power in trade policy, as in other fields,

is a difficult task, there is consensus in the literature that the EU hasnot been ineffective In this sense, I disagree with Smith and concurwith Ginsberg when focusing on trade policy.9 There is enoughevidence that the EU has shown various forms of effectiverepresentation Effectiveness, however, is linked to the question ofinstitutional set-up The development of the institutional machinery of

EU trade policy and the constitutional changes needed to switch fromthe intergovernmental approach (mixed competence) to thecommunity approach (exclusive competence) were significantlyaffected by debates about effectiveness The recurring demands by theEuropean Commission in the run-up to intergovernmental conferences

to be delegated additional competence in trade policy were alwaysframed within a discourse centring on the lack of ‘effective’representation.10 The drivers for increasing the EU’s competence were

on the one hand largely external, as the nature of trade politics shiftedfrom tearing down high tariffs to regulating trade-related concernsranging from intellectual property rights, public procurement, andproduct standards to newer areas including investment liberalization,competition policy, taxation or environmental protection On the otherhand, a growing number of EU Members made consensual decision-making and shared competence untenable as a means to aggregatepreferences internally

This article mainly focuses on effectiveness and addresses threequestions outlined in the introduction.11 First, how can ‘effectiveness’

be evaluated? Second, how does the external environment condition

EU effectiveness? And third, how does the EU’s effectiveness compare

9 Hazel Smith, European Union Foreign Policy: What Is It and What It Does (London: Pluto, 2002); Roy H Ginsberg, The European Union in International Relations:

Baptism by Fire (Lanham, MD: Rowman and Littlefield, 2001).

10 Arne Niemann, ‘Conceptualising Common Commercial Policy Treaty Revision: Explaining the Stagnancy and Dynamics from the Amsterdam IGC to the Treaty of

Lisbon’, European Integration online Papers, 15, Article 6, 2011; Elsig, The EU’s

Common Commercial Policy.

11 Niemann and Bretherton, ‘Challenge of Actorness and Effectiveness’.

with that of other important powers? In addressing these questions, Idistinguish two dimensions of ‘effectiveness’: ‘effectiveness inrepresentation’ and ‘effectiveness in impact’ Effectiveness inrepresentation suggests that those speaking on behalf of the EU areable to aggregate the different demands into a unified position Theemphasis here is on avoiding a multitude of views being signalledexternally and abstaining from acting in an uncoordinated fashion.12 Inother words, the focus is on the nexus between the intra-EUinstitutional setting and the ability of the European Commission to act

as the ‘single voice’ The idea of ‘effectiveness in impact’ can beequated with ‘goal attainment’.13 In the EU context, the objective could

be defined as the pursuit of European societal interests at large (asopposed to short-term gains one-sidedly pushed by special interestgroups or veto players among the Member States) Overall EU impact(attaining its stated policy goals), however, is conditioned by twofactors: first, the degree of EU coordinated action, and second, theexternal context In other words, reaching a defined objective(effectiveness in impact) is dependent upon effective representationand is conditioned by external factors, such as the behaviour andinterest constellation of other states and the institutional setting at theinternational level (eg, decision-making procedures)

In order to address the first two questions, the empirical part ofthis article focuses on the effectiveness of the EU in nominatingcandidates to serve in one of the most legalized international court-likeinstitutions: the World Trade Organization’s Appellate Body (hereafterAB) It addresses the performance of the EU in selecting its owncandidates The case study that follows covers the period from 1995 to

2009 During that period the external environment remained largelystable (the EU continued to be a key trade power),14 while the EU’sinternal-set up underwent significant modifications This allows us to

12 Such a conceptualization fuses two of the elements proposed to capture actorness:

‘output cohesion’ and ‘autonomy’, see Joseph Jupille and James A Caporaso,

‘States, Agency and Rules: the European Union in Global Environmental Politics’, in

Carolyn Rhodes (ed.) The European Union in the World Community (Boulder, CO: Lynne Rienner, 1998), pp 213–29 ; see also Niemann and Bretherton, ‘Challenge of

Actorness and Effectiveness’.

13 Oran R Young, International Governance: Protecting the Environment in a

Stateless Society (Ithaca, NY: Cornell University Press, 1994)

14 India and Brazil have been active members in the GATT/WTO system since the late 1980s The Russian Federation joined the organization in 2012 Only, the impact of China that acceded to the WTO in 2001 has been increasing in recent years.

draw conclusions about the nexus between internal institutions andexternal outcomes The case study shows that delegation to EUinstitutions (the European Commission) increased effectiveness inrepresentation; the record for effectiveness in impact is, however,more ambiguous This is largely a result of the conditioning factors and

in particular is a reflection of the nature of courts Finally, we discusseffectiveness with respect to the US experience in nominatingcandidates to address the third question

Empirical discussion

The empirical part first outlines some of the key features of the WTO’sdispute settlement system with special focus on the appealsinstitution It then describes the key processes of nominating andselecting judicial candidates and outlines the strategic options forpowerful trade actors This is followed by a discussion on how effectivethe EU has been over time (and in comparison with the US) relying onthe above conceptualization

Appointment of judicial candidates at the World Trade

Organization

During the Uruguay Round talks, negotiators agreed on a drasticreform of the system for settling trade conflicts.15 In the transformationfrom a system of diplomatic bargaining to a highly legalized institutionone of the things that stands out is the creation of an appealsinstitution: the Appellate Body (AB).16 This new court-like institutionmakes final recommendations that de facto can not be overturned The

AB consists of seven members who are elected for a term of fouryears, renewable once Three AB Members (ABMs) serve on individualcases brought to the AB (called division), following a secret rotation

15 Thomas Bernauer, Manfred Elsig and Joost Pauwelyn, ‘The Dispute Settlement Mechanism: Analysis and Problems’, in Amrita Narlikar, Martin Daunton, and Robert

M Stern (eds.) Oxford Handbook on the World Trade Organization (Oxford: Oxford

University Press, 2012), pp 485–506.

16 Other reform steps include the ‘right to a panel’ (eg, agreement to abandon the option to block the launching of a case), the automatic adoption of reports (eg, the losing party can no longer block a report), an institutionalized ‘decentralized’ system of sanctioning, where the winning party is granted the authority to apply sanctions against the losing party if the latter does not comply with the reports’ recommendations

principle which makes it impossible for WTO ‘contracting parties’ toanticipate the composition of the AB for a specific case.17

The role of the AB in interpreting WTO law has increased overthe years fuelled by the lack of progress in trade negotiations (thelegislative arm of the WTO) Many contentious cases have beenbrought to the AB and by the end of 2011 the AB had issued 105reports as last instance By default the AB has engaged in precedent-setting and has closed some contractual gaps which parties (inparticular losing parties) object to as judicial rule-making As members

of international courts, such as the WTO, are difficult to control oncethey are selected, WTO Members pay particular attention to theselection of new ABMs.18

In 1994, a preparatory Committee was mandated to provideguidance as to the implementation of the negotiated provisions.19 Itsuggested a two-stage system of nomination and selection ofcandidates While WTO Members nominate candidates (1st stage), agroup of six officials (comprising the Director-General (DG) and theChairpersons of five important WTO bodies (General Council, DisputeSettlement, Goods, Services, and Trade-related Intellectual PropertyRights)) select candidates who are subject to being accepted byconsensus by the Membership (2nd stage) Against the background ofapproval by consensus, this Committee ‘consults’ closely withMembers throughout the process Over time, selection of candidates toserve on the AB has become more politicized and the limited wiggleroom for the Group of Six (G6) has further decreased The firstselection process concerned all seven ABMs at the same time, whichallowed the G6 some strategic options (as all seven ABMs had to beaccepted or rejected as a group) Over time, the selection processeshave de facto transformed into single seat competitions As a result ofpoliticization, candidates today spend much more time in bilateralmeetings in Geneva (and increasingly travel to Washington, DC andBrussels) where they undergo a careful screening process as Membersattempt to find out the exact preferences of the candidates

17 Given that the EU and US are often involved in disputes (as complainant or defendant), it is not unusual to find the US or the EU ABM is sitting on a division that hears such cases.

18 Manfred Elsig and Mark Pollack, ‘Agents, Trustees, and International Courts: Nomination and Appointment of Judicial Candidates in the WTO Appellate Body’,

European Journal of International Relations (forthcoming 2013).

19 WT/DSB/1 (10 February 1995).

The WTO AB is a ‘selective court’ as opposed to a

‘representational court’ where each country can nominate judges who

in turn are accepted by others without much discussion (see forinstance European Court of Human Rights).20 This implies that theprocess is competitive and nominating states have to be very strategic

in choosing who they propose at the first stage The WTO treatiesremain rather general regarding the profile and composition of the AB.The drafters of the Dispute Settlement Understanding (DSU) agreedthat ABMs ‘shall be broadly representative of membership’ (Art 17.3DSU) This was partially clarified by the preparatory Committee in

1994, which suggested that ‘factors such as different geographicalareas, levels of development, and legal systems shall be duly takeninto account’.21 In addition, the expertise was circumscribed to allowfor the resolution of ‘issues of law covered in the panel reports andlegal interpretations developed by the panel.’22 This meant that notonly candidates with extensive legal training were qualified to act asCourt members

The strategic options for powerful states

In terms of representation, the WTO treaties did not suggest that someMembers would have the privilege of having a permanent seat at the

AB table Yet, from the beginning the US and the EU demanded a seatand this was not contested by other WTO Members.23 A quasi-permanent seat enlarges the agenda-setting power of the partiesconcerned Knowing that a candidate is not in competition with othercountries’ candidates, de facto gives the nominating party thestrategic advantage of proposing a candidate who closely matches its

20 Erik Voeten, ‘The Politics of International Judicial Appointments: Evidence from the

European Court of Human Rights’, International Organization, 61(4), 2007, pp 669–

Arena’, Review of International Studies, 16(3), 1990, pp 19–37 The EU and the US

even demanded two seats each in the run-up to the first selection This demand, however, was not seen as legitimate by other parties and was not accepted Yet, it

bolstered the case for a permanent seat (Elsig and Pollack, ‘Agents, Trustees and

International Courts’)

preferences Put differently, the nominating states (US and EU) in a

‘two-stage game’ are less constrained in agenda-setting (they haveless need to incorporate the preferences of the WTO membership).24

Besides the de facto permanent seat, the views of the powerfulstates (in particular the US and the EU) are also important when itcomes to appointing the other ABMs Similar to the US, the EU holdspower of veto over the selections of other candidates, not leastbecause it has no need to fear that if it behaves uncooperatively in theselection process in one round (eg blocks a certain candidate) thatcountries will veto (all) EU candidates in the next round While all WTOMembers can potentially veto individual candidates by signalling to theChair of the G6 that they will not support that candidate, it is clear thatmore powerful states face fewer constraints in actually using thisblocking power

Against the background of strategic agenda-setting and keeping roles (through the power to block candidates), I argue that the

gate-EU has increased its overall effectiveness However, it has not yetdeveloped the same strategic behaviour on the level of agenda-setting

as the US exhibits The same applies in respect to its influence on theselection of other candidates Increased effectiveness in representationand, partially, in impact is a result of more delegation to the EuropeanCommission in managing this process, as shown below In the followingsection, we focus on the EU and in particular on the nomination of itsown candidates

The EU: The relationship between delegation and effectiveness

The first selection

In the 17 years of the existence of the AB, the EU has so far beencalled upon to fill three vacancies (1995, 2001, and 2009) Below, Idiscuss these three individual selections by focusing on developments

in the politics of WTO dispute settlement (external environment), internal changes at the level of processes (internal environment) andresulting EU effectiveness (representation and impact) The very firstselection process was chaired by Australian Ambassador Don Kenyon.The G6 (supported by the majority of the Membership) laid emphasis

EU-on selecting highly qualified individuals who were able to build up thereputation of this novel institution in the context of a member-driven

24 Elsig and Pollack, ‘Agents, Trustees and International Courts’.