Democratic Defi cit Argument
D. Does the WTO Promote Democracy?
Th us far, this chapter has discussed democratic defi cit in the processes of the WTO, which casts doubt on the legitimacy of its exercise of substantive power. Th is sec-tion briefl y addresses a related but diff erent issue: do the WTO and the free trade agenda promote democratic governance at national levels? Th at is, do WTO rules help create the conditions for democracy?
WTO Director- General Pascal Lamy has stated that global trade rules, along with international human rights law, are ‘a rampart against totalitarianism’.¹68 Indeed, it is commonly argued that economic openness promotes political open-ness¹69 in the following ways. Economic openness promotes economic growth,¹70 which helps to create new economic elites, who can challenge the authority of dic-tatorial government power, creating further space for civil society. It leads to the creation of a middle class, which is more educated and which eventually demands
¹66 Such ratifi cation is required under Article 6 of the Lisbon Treaty. See Press Release, ‘European Commission and Council of Europe kick off joint talks on EU’s Accession to the Convention on Human Rights’, 7 July 2010, at <http://europa.eu/rapid/pressReleasesAction.do?reference=IP/10/
906&type=HTML> accessed 9 October 2010.
¹67 See, eg, World Commission on the Social Dimension of Globalisation, A Fair Globalization:
Promoting Opportunities for all (ILO, Geneva, 2004).
¹68 Pascal Lamy, ‘Towards shared responsibility and greater coherence: human rights, trade and macroeconomic policy’(Speech at the Colloquium on Human Rights in the Global Economy, Co- organized by the International Council on Human Rights and Realizing Rights, Geneva, 13 January 2010) <http://www.wto.org/english/news_e/sppl_e/sppl146_e.htm> accessed 20 September 2010.
¹69 See Joel R Paul, ‘Do International Trade Institutions Contribute to Economic Growth and Development?’ (2003) 44 Virginia Journal of International Law 285, 337–8.
¹70 Th e orthodox view is that economic openness promotes economic growth. However, there are challenges to that view: see Chapter 5, Parts D and E.
greater political and social freedom.¹7¹ Finally, foreign investors demand adher-ence to the rule of law, as arbitrary decision- making intolerably threatens their investments.¹7² Th ese theories are backed up by evidence: democracy, and civil and political freedoms tend to fl ourish in richer developed States, which generally have more liberal trade regimes, than poorer developing countries, which generally have more restrictive regimes.¹7³
Martin Wolf has posited that economic freedoms and the promotion of a fl our-ishing private sector help to ensure the separation of wealth and power. If the pub-lic political sector dominates economic decisions, they dominate economic power.
‘Power becomes the only route to wealth.’¹74 Furthermore, political elites are inevit-ably tempted to utilize oppressive means to maintain their power as ‘loss of power threatens a loss of livelihood’.¹75 Growing economies are also important for the maintenance of democracy and human rights. Not only do they provide govern-ments with the resources to provide for positive rights, but it prevents ‘zero sum’
societies, where one person’s gain necessarily results in another person’s loss, which can help to foster authoritarian governments.¹76
However, the above arguments are contestable. As discussed in Chapter 5, some developing States have experienced de- industrialization and poor eco-nomic performance rather than growth. Th e link between free trade and economic growth is not clear- cut. In any case, WTO policies do not dictate domestic wealth distribution, so few may benefi t from resultant economic growth. Th e benefi ts of economic growth might fl ow only to a small elite, and there may be corrupt connivance between these elites and the government.
Furthermore, foreign investment is attracted to the ‘rule of law’ in certain areas such as security of contract and property rights; it is generally indiff erent to the rule of law in the area of civil, political or social freedoms, such as rights of free expression or freedom to join trade unions. Singapore has long had an open economy, yet has a poor record on civil and political freedoms. Similarly, economic reforms in China have not been matched by signifi cant political and social reform.¹77
In this respect, it may be noted that the spread of marketization across the world has accompanied greater global inequality.¹78 When gaps between the elites and the poor grow, there is a more pronounced divergence in their interests, leading
¹7¹ Garcia, above n 18, 59. See also Jagdish Bhagwati, Free Trade Today (Princeton University Press, Princeton, NJ, 2002) 43–4.
¹7² See, eg, World Bank, World Development Report 2002: Building Institutions for Markets (World Bank, Washington DC, 2002) via <http://www.worldbank.org/wdr/2001/fulltext/fulltext2002 .htm> accessed 20 September 2010.
¹7³ See Daniel T Griswold, ‘Trading Tyranny for Freedom: How Open Markets till the soil for Democracy’ (2004) Trade Policy Analysis no 26, 4–12 <http://www.freetrade.org/node/37> accessed 20 September 2010.
¹74 Martin Wolf, Why Globalisation Works (Yale Nota Bene, London, 2005) 30.
¹75 Ibid, 30. ¹76 Ibid, 30.
¹77 Daniel J Gervais, ‘Trips 3.0: Policy Calibration and Innovation Displacement’ in Chantal Th omas and Joel P Trachtman (eds), Developing Countries in the WTO Legal System (Oxford University Press, New York, 2009) 363, 393.
¹78 See Chapter 5, text at notes 151–79.
to the likely generation of rules and institutions which favour the latter over the former.¹79 Greater inequality may lead to greater marginalization and intolerance of the poor.
Professor Amy Chua has questioned the assumption that the twin trajectories of free trade and democracy in the developed world recur in the developing world.
First, she notes that the development of democracy and free trade regimes in indus-trialized States was a slow process; universal suff rage and economic liberalization evolved over centuries. In contrast, the comparable transitions in many developing States have been remarkably swift, and have not allowed time for the develop-ment of appropriate economic safety nets for losers from economic liberalization, constitutional guarantees or other domestic laws that protect minorities, or the development of aspirational pro- market ideologies amongst a population, includ-ing those not currently benefi tinclud-ing from free markets.¹80 In such circumstances, the impoverished majority may be very hostile to the inequalities created by free markets, at least until a substantial middle class emerges, so democratization and marketization may pull in diff erent directions unless redistribution measures are put in place.
More disturbingly, Chua notes that many developing States have dominant ethnic minorities, who seem to have benefi ted disproportionately from economic globalization, which in turn has generated hostility and confl ict.
Examples of this phenomenon include Chinese minorities in South East Asia, Indians in Fiji and Africa, whites in South Africa and Zimbabwe, and foreign investors all over the world. Marketization in such circumstances can generate a majoritarian backlash against the relevant minority (as in Zimbabwe with land seizures from white farmers, anti- Chinese riots in Indonesia in 1998, and measures to penalize foreign investors in Bolivia), a backlash against democracy by a govern-ment elite in cahoots with the economic elite (such as the pro- Chinese dictatorship of Suharto in Indonesia or pro- Indian government of Moi in Kenya), or, worst of all, majoritarian ethnic violence, including genocide, against the relevant minority (for example, Hutu against Tutsi in Rwanda, Serbs against Croats in the former Yugoslavia).¹8¹ Chua concedes that ethnic confl ict is caused by many factors, but posits that the tension caused by the coincidence of racial divides with economic divides is a dangerous brew.¹8²
In order to stave off internal hostility in such situations, States must ensure that domestic inequality is contained and that appropriate redistributive measures are
¹79 Th omas Pogge, ‘Growth and Inequality: Understanding Recent Trends and Political Choices’ (Winter 2008) Dissent, 6, <http://www.dissentmagazine.org/article/?article=990> accessed 20 September 2010.
¹80 See generally Amy Chua, ‘Th e Paradox of Free Market Democracy: Rethinking Development Policy’ (2000) 41 Harvard International Law Journal 287.
¹8¹ See, generally, Amy Chua, World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability (Doubleday, New York, 2002). See also Anne Orford, ‘Locating the International: Military and Monetary Interventions after the Cold War’ (1997) 38 Harvard International Law Journal 443, 455–9, detailing the role played by IMF and World Bank policies prior to the eruption of genocidal confl ict in the former Yugoslavia.
¹8² Chua, above n 181, 16.
in place.¹8³ Th erefore, Chua’s contentions do not indicate that States should eschew marketization and free trade. Th ey indicate that the process should be managed and properly sequenced, as is argued in Chapter 5.