Redesigning the World Trade Organization for the Twenty-first Century

5. Improvements to the WTO Decision-Making Process: Lessons from the International Monetary Fund and the World Bank

91 5 Improvements to the WTO Decision-Making Process: Lessons from the International Monetary Fund and the World Bank ALBERTO ALVAREZ-JIMÉNEZ I. Introduction A comparative assessment of the internal governance of the WTO, the International Bank for Reconstruction and Development (the World Bank), and the International Monetary Fund (IMF) is a valuable tool to improve on recommendations to enhance theWTO decision-making process.This is because some of the WTO reform proposals include suggestions similar to what is already in place at both the IMF and the World Bank.However,for this comparative analysis to arrive at meaningful recommendations, it has to take into account two important issues: first, the Bank’s and the IMF’s organs and decision-making processes are, obviously, related to each organizations’ particular mandate and objectives.Care must be taken when suggesting that institutional features of the Bank and the IMF be employed by the WTO. Second, these three organizations have been subject to increasing criticism in recent years and, at the time of this writing, are undergoing important reform processes as a result of the current world financial crisis. Consequently, any recommendations for the WTO based on the institutional history of the IMF and the Bank must be adjusted to current trends in institutional design, marked not only by concerns for efficiency but also for adequate representation of developing and least developed countries.1 This chapter illustrates how the history of the World Bank and the IMF, and particularly of the functioning of and inter-relationship between their boards and managements, may assist in improving recommendations to create a consultative body in the WTO and to enhance the position of the WTO DirectorGeneral and the WTO Secretariat. This chapter is divided into four parts. Part II analyzes the internal management of the IMF and the role played by each of its decision-making bodies, the relationship between them, and the decisionmaking processes that have adopted. Part III carries out a similar assessment of the World Bank. Part IV looks at the WTO, and makes recommendations to improve proposals aimed at enhancing WTO decision-making. Finally, Part V presents some general conclusions. II. Internal Management of the IMF The IMF was created with the aims of promoting international monetary cooperation, orderly exchange arrangements among its Members, exchange stability, and furnishing Member States with financial assistance for balance of payment difficulties. The IMF pursues these objectives through two main activities that are carried out by all its organs: surveillance and the provision of conditional financial assistance.2 The former relates to the provision of advice to IMF Members regarding adequate economic policies and the use of peer pressure to persuade Members to pursue such policies. The latter involves providing Members with, subject to conditions related to the adoption of sound economic policies recommended by the IMF, financial assistance to resolve temporary balance of payments difficulties.3 Today, the IMF has 185 member countries, which were traditionally divided into two groups: the industrial economies and the developing countries. The former have not drawn on the Fund for decades but dominate the IMF’s decision-making process,while the latter do draw on the IMF but do not control decision-making.4 Until recently, there was a third category of IMF Members: those with broad access to capital markets and that have accumulated large reserves, such as Asian and oil-exporting countries. These Members made infrequent use of the IMF’s resources and, therefore, did not need to follow its policy recommendations.5 The current economic crisis may produce a shift among these emerging markets. Already Hungary, Ukraine, Iceland, Pakistan, Latvia,Serbia,and Belarus have asked the IMF for financial support to cope with the crisis,6 and negotiations are underway with El Salvador and Turkey.7 Other European Union countries, such as Romania, Estonia, Bulgaria, and Lithuania, may soon join the growing list of countries seeking IMF assistance.8 A recent evaluation of IMF governance carried out by the IMF Independent Evaluation Office (IEO) points out that the strongest feature of such governance is effectiveness, while the weakest aspect is the accountability and voice of developing country Members.9 IMF governance occurs within three bodies: the Board of Governors, the Executive Board, and the IMF management. In general terms, the Articles of Agreement approved in Bretton Woods have a clear emphasis on rules rather 92 Part II Decision-Making in the WTO than...