WTO’s Legitimacy and Interstate Economic Interdependences in the Age of Trump and Brexit

and Stefan Kolev
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  • Westsächsische Hochschule Zwickau, Wilhelm-Röpke-Institut, Erfurt, Germany, Germany
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Benjaminvon Engelhardt, Die Welthandelsorganisation (WTO) und demokratische Legitimität: Globale Ordnung zur Regelung wirtschaftlicher Interdependenzen und ihre Auswirkungen auf territorial organisierte Demokratie, Mohr Siebeck, Tübingen2016, 347 pages

Benjamin von Engelhardt, Die Welthandelsorganisation (WTO) und demokratische Legitimität: Globale Ordnung zur Regelung wirtschaftlicher Interdependenzen und ihre Auswirkungen auf territorial organisierte Demokratie, Mohr Siebeck, Tübingen 2016, 347 pages

This is an extremely timely book. Benjamin von Engelhardt’s dissertation in law at Humboldt University which is at the core of the volume was defended already in 2015 and thus ahead of the intricacies which have emerged since the presidential elections in the US and the Brexit referendum in the UK in 2016, so it is legitimate to also call the book a prescient one. The age of fragility which we have the mixed privilege to live in, and its looming international economic tensions, has made the arguments presented by Engelhardt more topical than they were when many citizens and scholars still saw globalization as a process unfolding within a stable framework that, despite various critiques, was often taken for granted.

The world has dramatically changed over those past years. Amid the Knightian uncertainty around Brexit as of September 2019, the only credible anchor the UK’s trade partners in the EU and elsewhere can rely upon is the UK’s membership in the WTO and thus the certainty that the rules of the WTO are the minimum of free trade which the UK will sustain. Even more worrisome for the international law framework is the haphazardly destructive behavior of the US under the current president who could have inflicted even larger damage to the country’s trade partners if the president’s scope of discretion was not constrained by the rules of the WTO. However, these international rules as well as constitutionalism in general – both on the international and on the national level – have increasingly become the subject of a severe stress test. The attacks stem from rather diverse directions, and the critics can be found both on the left and on the right (Rohac 2019). And the animosities target not only the “rules of the game” of globalization such as those institutionalized in the WTO, but have also become palpable in the national democratic domain: Even in the countries of the rule of law tradition as the UK and the US, politicians like the current US president and UK prime minister openly complain about the written and unwritten constraints which the tradition of constitutionalism and its institutions impose on themselves. In other words, Trump and Johnson complain of what the problematic historiography of Nancy MacLean has described as being amid a “democracy in chains” (MacLean 2017). The citizen opposed to politicians striving for omnipotence can thus only hope that these institutional “chains” will successfully pass the stress test.

Engelhardt’s book, written as a theoretical treatise ahead of the recent impasses, unfolds its practical persuasive power in this very context. He addresses a question which, at least since the consent of numerous countries to found the WTO in 1994, has attracted attention from all social sciences and, at least since the protests in Seattle in 1999, also from large parts of the citizenry of Western and non-Western societies: the question about the legitimacy of this Geneva-based institution. Out of the most recent critiques of the WTO’s legitimacy, one book deserves a special mention: Quinn Slobodian’s “Globalists” (Slobodian 2018), also reviewed in this journal’s previous volume (Kolev 2018). In his intriguing portrayal of what he suggests to be called the neoliberal “Geneva School”, Slobodian charges several generations of Genevan economists and lawyers sharing an ordoliberal vision of economy and society for having institutionalized the organizationally loose GATT into the WTO, and Engelhardt engages with the works of a number of these “Genevan ordoglobalists” like Ernst-Ulrich Petersmann and Frieder Roessler. For Slobodian, the WTO presents an illegitimate infringement on the democratic sovereignty of the member states, primarily (but not only) for the economic policy of states in the Global South, a position shared by large parts of the literature discussed by Engelhardt.

Engelhardt makes a truly convincing case that such a perspective, pervasive as it may be especially in the literature produced by political scientists, is flawed. In a nutshell, he asks how legitimacy may be (re)assessed in a world where not only the vertical relations between nation-states and international organization like the WTO matter, but also where horizonal economic interdependences between nation-states are as ubiquitous as they have become over the past decades of globalization – not only via trade, but also via investment flows and migration. His extremely detailed historical study of the concept of legitimacy, as well as of the related concept of sovereignty, indicates that we commonly use those concepts by focusing them exclusively on the nation-state as their defining entity. While this must not change per se, the picture does change dramatically if the concept of interdependence is added, that is if we bear in mind that policies of a democratically governed nation-state can unfold substantial negative effects on the welfare of this nation state’s trade partners. These effects may start as economic tensions “only” like those of the US and China today, but can easily accumulate over time and culminate in open conflict. In our highly interconnected world, does the democratic citizen of country A continue to be “only” responsible, liable and accountable for effects limited to country A if the democratic process of country A also seriously affects country B through their trade relationships? Or do we need forms of governance to capture these externalities produced by country A’s behavior, realizing that the legitimacy of these governance institutions relates precisely to the potential for (and ubiquity of) negative externalities, leading to the necessity of a Weltinnenpolitik? In our current climate change debates, the answer for so many scholars and citizens is a clear “yes” – but, strangely, many of these same scholars and citizens reply to that same externalities question with a “no” when it comes to trade.

The position which Engelhard embraces claims that a clear “yes” would also be the wise response regarding trade. Seen from this perspective, the WTO’s specific procedures like “green room” negotiations or the “single undertaking” principle must, of course, remain a subject of continuous critique by scholars and citizens alike, and Part III contains Engelhardt’s own contributions as to possible improvements in terms of degree of transparency and quality of participation. However, the general role of the WTO in precluding nation-states from harming their trade partners can be perceived as a substantial achievement in the perennially fragile context of international law, especially given the fairly good record of settling a number of intricate conflicts since the WTO’s inception through formats like the Dispute Settlement Body. This role of the WTO is not only not an infringement on the legitimacy of nation-states but, according to Engelhardt, a “compensatory order for national legitimacy deficits” when authorities of nation-states must actually be held accountable and legitimize themselves for the harm they may – and, in our current word, increasingly do – impose on one’s partners in a global economy abounding in multi-channel (trade, investment, migration) interstate interdependences.

The book has a number of merits. Opposing the (sometimes substantiated) prejudices against dissertations as produced by young legal scholars, Engelhardt has written his profound study in an extremely elegant and chapterwise even captivating manner. Resonating with this reviewer’s interests, the historical expositions on the concepts of legitimacy and sovereignty presented in Part II are fascinating: They convince the reader that history of ideas can be conducted in a highly productive and illuminating manner for current issues. Engelhardt tracks here that unconstrained sovereignty, a notion underlying many contemporary critiques of the WTO, has been a highly contended issue ever since Jean Bodin’s formative definition attempts in the 16th century. Also, when wrestling with different notions of the nation and the people, Engelhardt points at the dangers of focusing the notion of legitimacy on an overly narrow notion of the people, as is most palpable in Carl Schmitt amid the darkest hours of the 20th century.

The body of literature incorporated by Engelhardt is not only massive in quantitative terms, but is also highly diverse in terms of interdisciplinary (and lingual) breadth. This may also be the greatest quality of the book: The author not only provides an original perspective on the legal issues at stake, but also proves detailed knowledge of economic theory, especially on the domain of international economics, and of political theory, especially on the domain of history of political thought at the interfaces to legal and economic thought. Finally, and compounding the merits listed above, Engelhardt has written a book that takes the concept of order very seriously and thus certainly qualifies as a contribution to the revival of Ordnungsökonomik in recent years. The tiny drop of bitterness here is that his book indicates, yet again, how the ordoliberal tradition of law and economics, transcending this specific interdisciplinary boundary already during the Freiburg School’s inception phase, has survived much better in law than it has in economics – at least as seen from today’s economics departments in Germany. In the US, the revival of institutional economics, especially by the Virginia and the Bloomington Schools, has fortunately rekindled this type of interdisciplinary reasoning.

Engelhardt’s book exemplifies that institutions can not only constrain freedom, as many WTO critics emphasize, but that institutions can at the same time also enable freedom and diversity (Ostrom 2005, pp. 16–22). In our age of fragility and uncertainty, it appears reasonable to preserve and carefully reform these institutional rules, rules which Engelhardt very adequately depicts as being in line with Kant’s project of an international legal order for the genuinely cosmopolitan society of mankind. In contrast, revolutionary proposals aiming at abolishing anchors like the WTO are likely to harm especially countries in the Global South: In such a case of “internationally unconstrained democratic sovereignty”, these countries would be exposed even more to the policy externalities as produced by wannabe omnipotent enemies of constitutionalism in Western democracies.

References

  • Kolev, Stefan (2018), Yet Another Neoliberal School? Geneva and Its Ordoglobalists, ORDO – Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, Vol. 69, pp. 523–528.

  • MacLean, Nancy (2017), Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America, New York.

  • Ostrom, Elinor (2005), Understanding Institutional Diversity, Princeton.

  • Rohac, Dalibor (2019), In Defense of Globalism, Lanham.

  • Slobodian, Quinn (2018), Globalists: The End of Empire and the Birth of Neoliberalism, Cambridge.

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  • Kolev, Stefan (2018), Yet Another Neoliberal School? Geneva and Its Ordoglobalists, ORDO – Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, Vol. 69, pp. 523–528.

  • MacLean, Nancy (2017), Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America, New York.

  • Ostrom, Elinor (2005), Understanding Institutional Diversity, Princeton.

  • Rohac, Dalibor (2019), In Defense of Globalism, Lanham.

  • Slobodian, Quinn (2018), Globalists: The End of Empire and the Birth of Neoliberalism, Cambridge.

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