Endogenous Learning and Consensual Understanding in Multilateral Negotiations: Arguing and Bargaining in the WTO

People at home and trade negotiators in Geneva cannot bargain what they do not understand, and what they bargain must be based on consensual understanding among the relevant actors, whether or not they agree on what to do about it. Consensual understanding is endogenous, arising in an argumentative process of learning structured by constitutive principles of a regime. In a departure from both rationalist and constructivist approaches to negotiation analysis in political science, my goal in this paper is to try to advance analysis of these questions by exploring the contribution that deliberation or arguing makes to learning. My proposition is that something happens at the multilateral negotiation table in addition to bargaining, something that alters either the understanding of themselves and their interests that participants brought to the table, or how they understand the nature of social reality in a domain. Such learning would be endogenous to the negotiations, because it happens through interaction. This approach requires distinguishing simple learning (acquisition of new information about the context, or the preferences of others) from complex learning (new understanding of cause/effect relations in a domain), which also requires distinguishing consensual understanding from a mutual adjustment of positions. I then specify how this model might be susceptible to empirical investigation. I show how individual issues within a negotiation can be treated as cases susceptible to comparative analysis at a moment in time. I explore this possibility in a comparison of the contribution of consensual understanding to the outcome of negotiation of selected issues in the current Doha Round of multilateral trade negotiations in the World Trade Organization. I then infer the results of arguing from the textual deposits left by negotiations in order to assess the presence or absence of consensual understanding. Finally, I attempt to correlate consensual understanding with the negotiation status of the issues as of the end of the failed Doha Round ministerial of July 2008.WTO, Bargaining, Learning, Agricultural and Food Policy, International Development, International Relations/Trade,

Revisiting the "Compliance-vs.-Rebalancing" Debate in WTO Scholarship a Unified Research Agenda

This paper constitutes an attempt to reframe and eventually deflate the ongoing “compliance-vs.-rebalancing” debate which has permeated WTO scholarship for the last 10 years. At face value, this controversy circles around object and purpose of WTO enforcement and the legal nature of dispute panels’ recommendations: Compliance advocates maintain that the objective of WTO enforcement is to induce compliance with DSB panel/AB rulings, and to deter future violations of the Agreement, while rebalancing advocates detect an inherent “pay-or-perform” logic in WTO enforcement. In the paper we examine the shortcomings of each approach separately. Our main criticism, however, concerns the substance of the entire debate. We find that scholars on both sides of the compliance/rebalancing controversy put an unduly rigid emphasis on the subsequent issues of WTO enforcement and the interpretation of the wording of the dispute settlement understanding. They thereby neglected systemic issues of contracting, viz. the nature of contractual entitlements, the need for trade policy flexibility mechanisms and the optimal design of the appropriate remedies. We redefine and recalibrate the compliance/rebalancing controversy along the lines of the nature of the WTO contract. This results in to three key findings: First, none of the two schools of thought succeeds in giving an accurate picture of the WTO treaty. Second, the two perspectives actually portray two strikingly different concepts of the WTO contract, and therefore have been at cross-purposes from the very beginning. This implies a third finding: The two schools of thought essentially describe different facets of the same complex WTO contract. Hence, they have hardly been at loggerheads at all, and are actually complementing each other in important aspects. We lay out a unified research agenda that practitioners, economists, trade lawyers, and international relations scholars alike can accept. The agenda may contribute to reconciling the two opposing views and help WTO scholarship tackle the real systemic issues of the WTO Agreement.WTO, dispute settlement, incomplete contracts, remedies, enforcement

The GST and Financial Services: Pausing for Perspective

The treatment of financial services has long been viewed as one of the more technical, and difficult, areas in value added taxation. Financial intermediaries add value by reducing transaction costs for clients. While in principle this value added should be taxed under a comprehensive VAT, this has proven to be difficult to do in practice because of measurement issues.  The predominant approach adopted in most countries — albeit with several variations on the theme — has thus been to exempt most financial services from VAT. This was the approach adopted in Canada at the initiation of the GST just over twenty years ago. While this approach is far from perfect, and introduces several distortions into the economy, it has by and large been concluded that it is the most practical approach to dealing with financial services under a VAT. Two decades of legal wrangling and Ottawa’s habit of retroactively legislating changes to the GST as it relates to financial services have served to muddy the waters in Canada.  Recent changes have significantly altered the scope for exemption and resulted in an uneven playing field across financial services. This paper argues that the best solution for Canada is to stick with the exemption approach, but to go back to basics with an eye for reducing existing distortions and restoring a semblance of neutrality. Specifically, the paper calls for a reset of the “arranging for” exemption for financial services; the creation of a new GST-recovery system for financial services; a new structure for taxing imported supplies; and a limit to retroactive legislative amendments and minimum requirements for future amendments. The authors also argue that consideration should be given to zero-rating “business to business” financial transactions so as to remove the GST embedded in transactions between financial institutions and businesses

The Future of the World Trade Organization

The continued difficulties of the World Trade Organization to achieve further multilateral trade liberalization in the Doha Round negotiations have raised questions about its continued relevance. This paper firstly identifies and assesses the key developments in the Doha Round that have contributed to the present stalemate. Secondly, it presents several options that the organization could consider for defining its future work program, given the new realities of global economic engagement, especially the emergence of global production networks. Most importantly, the paper assesses the possibility of including new disciplines covering areas that can help the growth of these drivers of global economic integration. Such an initiative could include three sets of issue: trade facilitation measures, an equitable investment regime, and effective disciplines for curbing non-tariff barriers

Policy-Making in the EU: Achievements, Challenges and Proposals for Reform. CEPS Paperbacks. June 2009

This report is the product of a joint project initiated by the Centre for European Policy Studies and the Swedish Confederation of Enterprise. Three expert groups of academics, policy-makers, business representatives and other stakeholders were formed to analyse the major issues and challenges facing the European Union today and to put forward recommendations for reform that can realistically be implemented in the short and medium term. The expert groups focused on EU Decision-Making, Better Regulation and Implementation & Subsidiarity

Financing the European Union: New Context, New Responses. Bruegel Policy Contribution September 2020.

Roughly two thirds of the European Union’s budget is financed out of member states’ national tax revenues. These resources, based on gross national incomes, are transparent, fair and in line with the principle of subsidiarity but they lead to political debates that emphasise the cost of EU spending rather than the benefits, and add to the perception of the EU budget in terms of net balances, rather than value added. The financing of the EU budget must be reassessed in the light of the July 2020 decision to launch the Next Generation EU programme. Budget resources could include a plastics charge, a carbon border adjustment mechanism, a digital tax, revenues from emissions trading and a financial transactions tax. We evaluate these options against four criteria: whether the origin of the revenue can be assigned to a particular member state; whether the revenue can be raised in isolation or requires pan-European tax coordination; whether the new resource can help reduce tax distortions in the EU; and whether the resource is related to EU policies. Revenues from emissions allowances fit these criteria best. Carbon emissions do not primarily cause damage only where they occur. Taking the EU cap on emissions as a given, additional emissions in a particular member state should be regarded as a negative externality on other member states. Emission reduction objectives are set at EU level. Whoever auctions off an allowance, wherever the corresponding emission occurs in the EU, and wherever the resulting good or service is consumed, the impact on common policy outcomes is the same. In this regard, proceeds from the sale of emissions trading system allowances are not that different from customs duties. Compared to the ETS, the other candidates for EU own resources are less convincing. Carbon border adjustments are intended to limit international competitive distortions rather than to generate revenue. Digital taxes and minimum corporate taxes are best left to the process underway in the Organisation for Economic Co-operation and Development. On a financial transactions tax there is no agreement within the EU. Total ETS revenues up to 2050 would approach €800 billion in a realistic scenario and possibly even €1.5 trillion assuming the scope of the ETS and the share of auctioned permits are increased. ETS revenues therefore would be largely sufficient to repay the Next Generation EU debt. However they would generate distributional effects, and so part of the revenues should finance grandfathered rights that would accrue to the member states. The EU can tackle the distributional issues involved in the reform of own resources

New Zealand: financing retirement: lessons from the New Zealand Way on necessary reforms

In at least some respects, the pensions "problem" is a reflection of a country's profile and history. To set this paper in perspective, Table 1 shows New Zealand at a glance. It both explains New Zealand and summarises what this paper defines as the "New Zealand Way" (definitions on page 3). [insurt Table 1] In summary, New Zealand is relatively young (for a developed country); the cost to taxpayers of pensions (both public and private) is relatively low and, although that cost is expected to about double in the next 45 years, is less than what many developed countries pay now in total (including the cost of tax incentives for private provision). New Zealanders are at present neither forced, nor encouraged through tax incentives, to save privately for retirement.

The Political Economy of the 2014-2020 Common Agricultural Policy: An Imperfect Storm. CEPS Paperback, 17 August 2015

After five years of debates, consultations and negotiations, the European institutions reached an agreement in 2013 on the Common Agricultural Policy (CAP) for the 2014-2020 period. The outcome has major implications for the EU’s budget and farmers’ incomes but also for Europe’s environment, its contribution to global climate change and to food security in the EU and in the world. It was decided to spend more than €400 billion during the rest of the decade on the CAP.The official claims are that the new CAP will take better account of society's expectations and lead to far-reaching changes by making subsidies fairer and ‘greener’ and making the CAP more efficient. It is also asserted that the CAP will play a key part in achieving the overall objective of promoting smart, sustainable and inclusive growth. However, there is significant scepticism about these claims and disappointment with the outcome of the decision-making, the first in which the European Parliament was involved under the co-decision procedure. In contrast to earlier reforms where more substantive changes were made to the CAP, the factors that induced the policy discussions in 2008-13 and those that influenced the decision-making did not reinforce each other. On the contrary, they sometimes counteracted one another, yielding an ‘imperfect storm’ as it were, resulting in more status quo and fewer changes. This book discusses the outcome of the decision-making and the factors that influenced the policy choices and decisions. It brings together contributions from leading academics from various disciplines and policy-makers, and key participants in the process from the European Commission and the European Parliament