Legal Framework for International Business

1.Voting Procedures

First, and deriving directly from the GATT practice, the WTO is a one-member- one-vote organization, in striking contrast to the IMF and the World Bank which have systems of weighted voting. For instance, in the case of the IMF, the voting power of countries depends on the size of their respective quotas, which in turn are supposed to reflect their weights in the international economy.

The Agreement establishing the WTO, however, explicitly states that each member shall have one vote in meetings, and further ensures that formal meetings, shall be open to the entire membership.

In terms of the actual counting of votes, most important decisions in the WTO are supposed to be taken by means of a simple majority. Exceptions to this rule are specified in Articles IX and X of the Agreement and in the relevant plurilateral agreement. In this matter, too, the WTO presents a contrast to the IMF and the World Bank, where most decisions require an 85% majority. This gives effective veto power to the US, which commands about 17.5% of the votes. The requirement of a simple majority for a decision to be accepted in the WTO is important in that it imparts considerable voting power to developing countries, which form well over two-thirds of the entire membership. Interestingly, however, developing countries have never actually sought recourse to their overwhelming strength in numbers, in contrast to the UN General Assembly, which has often been ridden with the tyranny of the majority. The reason for this can be found in the second tenet of the WTO decision-making: the norm of consensus.

2.Decision-making on the basis of consensus

Despite the existence of elaborate voting procedures, most decisions in the GATT were in practice taken on the basis of consensus. This GATT practice has been codified in Article IX.1 of the Agreement establishing the WTO. Consensus is arrived at ‘if no Member, present at the meeting when the decision is taken, formally objects to the proposed decision’. The most immediate power implication of this practice is that developing countries have never been able to make use of the power of large numbers in the GATT or the WTO. But consensus-based decision-making disadvantages developing countries in several other ways.

First, the simple requirement of the consensus norm, that no member present objects to the decision, translates into quite a difficult condition for developing countries. About 22 member countries of the WTO have no delegations present in Geneva to voice their objection to the decision under discussion. Even for those countries with a presence in Geneva, attendance is an issue when several parallel meetings are involved. The average size of a developing country delegation was less than half the average size of a developed country delegation. Even a presence in all the multiple meetings in the WTO is difficult under these circumstances, let alone an informed and active presence. Especially in the context of the member-driven character of the WTO, where the onus of preparation and participation for a WTO meeting falls on the members themselves, developing countries find themselves ill-equipped to participate effectively in the consensus-making process.

Second, deriving again from the GATT, exclusive, club-like meetings are often used for the purpose of reaching consensus. As the majority developing countries have traditionally found themselves frequently excluded from such meetings, consensus-based decision making is interpreted by at least some countries as an exclusionary device that the strong use against the weak. Small-group meetings in the WTO, however, are not simply a product of the consensus norm. Rather, they form part of the third feature of WTO decision-making: a general culture, again GATT-derived, which had thrived on informal diplomatic procedure rather than formal rules of negotiation.