Saturday, December 24, 2011

WTO, Corruption and Russia's entry

An interesting piece in the Moscow Times alluded to the proposition that Russia's entry into the WTO would have a positive impact on corporate corruption in the country. Stating that entry to the WTO offered an opportunity to reduce corruption, it stated,

"Joining these international institutions brings with it obligations and responsibilities, which the government sooner or later will have to translate into new domestic legislation, and which, when implemented, will have an impact on how companies operate. This offers an important opportunity to decrease corruption in the country."

The expectation that the entry into the multilateral trading organisation would have a bearing on corrupt domestic practises is rather optimistic.

Several commentators have commented on the role of WTO in driving the anti-corruption agenda. Calling the WTO a "natural universal guardian against corruption", Peter Eigen of the Transparency International in 2002 stressed on the role of the WTO along with multiple stakeholders in addressing issues of corruption.

The principle of transparency as enshrined in Article X of GATT mandates that that “all laws, regulations, judicial rulings, and administrative rulings of general application” (collectively “Measures”) be “published promptly in such manner as to enable governments and traders to become acquainted with them.”  Article X:2 prohibits enforcement of measures prior to publication.  Article X:3 requires all measures be administered in a “uniform, impartial and reasonable manner”  and compels Members to establish tribunals or procedures for review of the administrative actions relating to customs matters.

The role of the WTO in promoting transparency and good governance was highlighted by Padideh Ala'i in this paper titled " The WTO and the anti-corruption movement", wherein the importance of the transparency provisions were reiterated,

" The failure of direct efforts to combat corruption shows that for the battle against corruption to succeed there is a need to create a culture that respects transparency and due process. The WTO, more than any other institution, is capable of promoting the culture of transparency and due process. The incremental manner in which the WTO panels and Appellate Body address the lack of transparency and fundamental due process is more likely to reduce opportunities for corrupt acts than setting up an anti-corruption agency as the World Bank has done in Kenya.

 It is the culture of secrecy and lack of information or access to information by a population that allows corruption to take hold and increase. The WTO rules prohibit secrecy and value transparency. The WTO, by providing a forum for a discussion of such issues, allows Members to acknowledge certain core values of good governance that are diametrically opposed to the culture of secrecy.

The problem of corruption has existed from the beginning of time and the WTO can neither solve nor eradicate it. However, the WTO can and does play an important role in promoting transparency and good governance. Over the past few years, the potential of the WTO to enhance values that effectively curb corruption, such as transparency, has increased while, at the same time, other efforts to combat corruption have failed or are likely to fail. Additionally, the rhetoric of anti-corruption has lost some appeal given the actions of the World Bank and others. It is advisable for the WTO to refrain from directly addressing the problem of corruption. The WTO can be most effective in combating corruption indirectly through its many provisions that mandate transparency and due process in the administration of all types of regulation."

An exhaustive paper on the relationship between corruption and international trade and the role of the WTO has been expounded by Krista Nadakavukaren Schefe in the paper titled "Corruption and the WTO Legal System". Recognising that several provisions (including transparency provisions) in the WTO agreements have a direct and indirect impact on addressing the issue of corruption, the paper is more sceptical about the role of WTO in addressing the complex issue. It states,

" The above-mentioned measures found in the positive law of the WTO are modest instruments in reducing corruption opportunities that at the same time liberalize world trade. Each may contribute to reducing the capacity of trade officials to illicitly profit from producers by providing reliable information about the existing level of barriers. Armed with such knowledge, a potential importer will – theoretically – be able to resist demands for extra payments in exchange for gaining entry for her products. The WTO rules on liberalization can, therefore, contribute to the reduction of opportunities for corruption if wielded purposefully to that aim. 

There are two main weaknesses of relying on the WTO trade instruments for corruption reduction. First, existing WTO  measures address only a small part of the scope of “corruption”. Second, the trade instruments’ potential to lower corruption opportunities necessarily rely on traders’ active resistence toward corruption for any actual effects."

Advocating a strong stand that WTO must not engage in the fight against corrupt practises, Philip M.Nichols argues that the WTO should not dilute its original mandate of co-ordinating trade policies between countries.

It could be argued that though there are no specific provisions relating to combating corruption in the WTO agreements, the transparency requirements does have an impact on addressing the issue, though it is not ipso facto sufficient to address such a complex issue. Corruption in the context of international trade has many connotations including corruption at the operational level of the trade official machinery as well as opaqueness in trade policies to benefit interest groups. To expect the WTO agreements to address all such issues would be expecting a magic wand. However, the multilateral trading system through various measures does enhance the scope of transparency which do have a bearing on addressing the issue of corruption.

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