Journal of International Economic Law (2002) 565–575 © Oxford University Press

BOOK REVIEWS

Free Trade, Sovereignty, Democracy: The Future of the World Trade

Organization. BY CLAUDE E. BARFIELD, The AEI Press, Washington 2001.
ISBN 0–8447–4157–4, 245pp.
Since the World Trade Organization came into existence in 1995, its dispute settlement
system has been heralded as ‘the jewel in the crown’. And, in the first few years of its
operation, government officials and academic commentators have agreed that the dispute
settlement system is working effectively, perhaps too effectively, especially when compared
with the rule-making bodies in the WTO. A new book has been published which asserts a
bold and provocative thesis – the ‘crown jewel’ is not only beginning to tarnish, but it is
‘constitutionally flawed’.
This book, entitled Free Trade, Sovereignty, Democracy: The Future of the World Trade
Organization, by Claude E. Barfield, Director, Science and Technology Studies with the
American Enterprise Institute in Washington, has received a great deal of attention in
Geneva and many other cities. Why has this book resonated so profoundly in some circles?
I think it is because Barfield asks a number of timely and important questions about the
functioning of the WTO as an international institution – pertinent questions the trade
policy community has been reluctant to address. Having asked some very penetrating ques-
tions, Barfield unfortunately provides a superficial and unsatisfactory analysis, relying too
heavily on the opinion of a small group of former GATT Secretariat and government
officials. Because his understanding of the system is weak, some of his key conclusions are
flawed. Having said this, there is much food for thought in this book for trade policy
practitioners, academics and students of the WTO.
Barfield opens with a critical central theme: the WTO faces formidable challenges – to
its internal and external legitimacy – which threaten to undermine its goals of trade liberaliz-
ation. The threat to its internal legitimacy comes from ‘a formidable constitutional flaw’,
which is ‘the imbalance between the WTO’s consensus-plagued, inefficient rule-making
procedures and its highly efficient dispute settlement system – an imbalance that creates
pressure to ‘legislate’ new rules through adjudication and thereby flout the mandate that
dispute settlement judgments must neither add to nor diminish the rights and obligations
of WTO members’.1 The threat to its external legitimacy comes from outside groups
(‘NGOs’) and individuals which proclaim that the WTO is undemocratic and lacks political
accountability.
Convinced that ‘the WTO is overextended and in danger of losing authority and legitim-
acy as the arbiter of trade disputes among the world’s trading nations’, Barfield contends
that the new ‘judicial’ dispute settlement system is ‘substantively and politically unsustain-
able’.2 It is not sustainable substantively, he maintains, because the treaty text contains
extensive gaps, ambiguities and contradictory terms which demonstrate the lack of a real
consensus among WTO Members on what the rules are and, more importantly, what they
mean. The system, he asserts, is also unsustainable politically because the ‘constitutional
flaw’ of the imbalance between the highly efficient dispute settlement mechanism and the

1
Claude E. Barfield, Free Trade, Sovereignty, Democracy: The Future of the World Trade Organization
(Washington: AEI Press 2001), at 1.
2
Ibid, at 5.
566 Journal of International Economic Law (JIEL) 5(2)

inefficient rule-making procedures will increasingly pressure panels and the Appellate Body
into ‘creating’ law ‘raising intractable questions of democratic legitimacy’.3
The plan of the book is as follows. Barfield first provides a brief overview of the history
of GATT and WTO dispute settlement, highlighting the two approaches to dispute settle-
ment that have characterized the system over the years, namely the ‘diplomatic’ approach
that stresses conciliation and the more ‘judicial’ approach that seeks to provide certainty
and predictability in the interpretation and application of the rules. He then outlines the
major aspects of the dispute settlement system and provides a very brief statistical review
of the cases to date. Barfield proceeds to describe what he views as ‘the structural flaws of
the new system’ and asserts a few examples of ‘judicial creativity’ on the part of the WTO
Appellate Body which demonstrate the pressures to introduce what he calls ‘soft law’ and
‘customary law’.4 He surveys the secondary literature on WTO dispute settlement, outlines
some critiques of the system, and evaluates proposals from some academics and NGOs
calling for greater openness and participation of non-state actors in the WTO.
The book concludes with the author’s recommendations. Relating to the dispute settle-
ment system, he pleads for a return to more flexible, ‘diplomatic’ procedures by ‘forcing
mediation and conciliation on issues that clearly divide WTO member states and are likely
to have politically explosive consequences that would damage the system; and creating a
blocking mechanism at the end of the DSU process that would set aside Appellate Body
decisions when a substantial minority of WTO members registered disagreement with the
decision in the Dispute Settlement Body’.5 With respect to the calls for greater openness,
Barfield maintains that the WTO must remain a government-to-government organization,
and, as such, there is no place for the participation of NGOs or the general public in WTO
rule-making or dispute settlement proceedings. However, he does recommend that the
WTO take some steps towards greater transparency, including early publication of govern-
ment submissions in dispute settlement proceedings; allowing NGOs and the public to
observe ‘opening sessions’ of panel and Appellate Body proceedings; more outreach sem-
inars, conferences and meetings to seek the views of outside interest groups; greater divers-
ity in the composition of panels, including appointing experts from other ‘allied fields’, as
well as trade; and allowing the Director-General to convene public hearings in certain,
politically contentious disputes in which ‘moderators’ would take testimony from experts
and suggest solutions acceptable to all parties.
Finally, he recommends that the WTO institute a more formal and regularized system
of consultation with outside interest groups and experts, and that the Director- General
establish an Eminent Persons Group to examine the systemic problems and issues sur-
rounding WTO governance and the relationship between the WTO and other international
regimes. The latter two recommendations have already been implemented by the WTO.
Barfield is correct in his observation that there appears to be an asymmetry between the
efficient and effective dispute settlement system and the less efficient rule-making system
in the WTO. However, the remedy for this problem does not lie in returning to the ‘diplo-
matic’ model of dispute settlement. The ‘judicial’ model was developed precisely because
the ‘diplomatic’ model did not work effectively – it did not always resolve disputes and it
favoured the more powerful over the smaller, weaker states. And, although the rule-making
procedures of the WTO are cumbersome and slow, they have not yet been put to the test.
Since 1995, very few proposals to interpret or amend provisions of the treaty have actually
been made by Members. Unlike its predecessor, the GATT, the WTO Agreement provides
a variety of rule-making procedures, some of which require a consensus decision of a WTO

3
Ibid, at 7.
4
Ibid, Chapter 4.
5
Ibid, at 19 (emphasis added).
 Book Reviews 567

body while others require approval by a specified majority of Members. The practice of
taking decisions by consensus, which the WTO inherited from the GATT, is not well
understood by outside observers. However, these procedures can be made to work effec-
tively when Member governments want to take decisions. What is lacking in the WTO is
not new decision making procedures, but rather the leadership, commitment and collective
political will of Members of the WTO to make the rule-making system work. Ministers did
agree to a broad, sweeping agenda for the Doha Round last November, and if they are able
to reach agreement on the issues in this Round, there will be decisions implementing those
results.
If the problem is that the dispute settlement system is highly efficient while the rule-
making system is inefficient, should WTO Members not focus on how to make the rule-
making system more efficient, rather than return to an ineffective and inefficient model of
dispute settlement? If the system is working very well in one aspect and poorly in another
aspect, should the effective part be changed to make it less effective, or should the ineffect-
ive part be improved to make it stronger and more effective? Simple logic dictates that
Members should fix the part that does not work, and leave the well-functioning part alone.
Barfield argues that there are serious questions of legitimacy and accountability – a
‘democratic deficit’ – stemming from the inability of the rule-making bodies in the WTO
to correct decisions of the Appellate Body or panels. He is also sceptical of the rule of
international law generally, which he believes ‘lacks the fundamentals of democratic legitim-
acy that make judicial enforcement palatable in domestic legal systems’. Here, Barfield
simply fails to understand the fundamental nature of the WTO as an international system
of rules – as part of public international law. The WTO Agreement is a treaty which is
legally binding upon the states parties to it. It is much more than a mere contract or a
forum for governments to talk and exchange tariff and other concessions. Under this treaty,
WTO Members have ‘rights and obligations’ that they can enforce by bringing complaints
against other Members. The WTO Agreement is a lengthy and complex treaty, with numer-
ous detailed provisions and comprehensive obligations. But it is no more riddled with major
gaps, ambiguities or contradictions than other treaties, domestic constitutions or statutes.
Thomas Franck, a renowned international legal scholar, in his book, The Power of Legitimacy
Among Nations, maintains that ambiguous or unclear treaty text can be made determinant
through a ‘clarification process’ which itself is recognized as legitimate, such as an interna-
tional dispute settlement process.6 Perhaps recognizing this, Uruguay Round negotiators
expressly provided in the Dispute Settlement Understanding that a fundamental purpose
of the WTO dispute settlement system is ‘to clarify the existing provisions of those agree-
ments in accordance with customary rules of interpretation of public international law’.7 The
purpose of an effective and legitimate dispute settlement system is not only to assist govern-
ments in resolving their disputes but also to clarify the provisions of the treaty.
Barfield echoes the recommendations of the WTO Director-General and others who
have encouraged governments to consider greater recourse to mediation, conciliation and
arbitration mechanisms as means of resolving disputes. However, the Director-General
cannot ‘direct’ or ‘force’ the parties to a dispute to use one of these mechanisms, if they
do not feel it is in their interest to use them. Conciliation, mediation and arbitration proced-
ures are available in the WTO dispute settlement system, as they were in the previous
GATT system. The question is why do Members of the WTO not use them? How would
a panel or the Director-General decide which cases are so difficult or politically contentious

6
Thomas M. Franck, The Power of Legitimacy Among Nations, (Oxford, UK: Oxford University Press
1990), at 50–66.
7
WTO Understanding on Rules and Procedures Governing the Settlement of Disputes, Article 3.2 (emphasis
added).
568 Journal of International Economic Law (JIEL) 5(2)

that they will cause harm to the WTO? Moreover, who should be given this awesome
responsibility as the guardian of the WTO? I would argue that the Director-General should
not be given this task, as his office is, by its nature, a high political office, not that of an
independent ombudsman for the system. In order to perform his job properly, he needs to
retain maximum flexibility to broker political deals in negotiations. He cannot be the ‘polit-
ical fixer’ and an independent, impartial arbiter at the same time.
A final comment on Barfield’s dispute settlement recommendations. I do not agree with
his recommendation for a minority blocking mechanism for the adoption of panel and
Appellate Body reports. It is anomalous that the WTO still requires panel and Appellate
Body judgments to be adopted by the Dispute Settlement Body. The decisions of other
international tribunals, such as the International Court of Justice, are legally effective upon
their issuance by the tribunal, not after their adoption or approval by a political body.
Rather than comparing the present WTO system with the previous GATT system, one
might ask: why is adoption of panel and Appellate Body reports by the Dispute Settlement
Body required at all? Arbitration awards made under Articles 21.3(c), 22.6 or 25 of the
Dispute Settlement Understanding are not required to be adopted by the Dispute Settle-
ment Body, and yet they are binding upon Members. Why then do we continue to require
that panel and Appellate Body reports be adopted by the Dispute Settlement Body?
Barfield also sets the threshold for blocking adoption of reports far too low – more than
a third of the WTO Membership could be involved as parties and third parties in a particu-
lar dispute (e.g. European Communities – Bananas). In doing so, he fails to recognize that
WTO Members act in certain groupings or blocks, for example, countries in the ASEAN
Group and the African Group work together to develop common positions on most issues.
In addition to certain informal groupings, some Members have informal alliances with other
Members because of existing or future regional trade arrangements. The United States was
the strongest proponent of decision making by consensus in the Uruguay Round because
it realized that almost all other countries in the world are allied in some sort of regional or
other grouping, and as a result, it feared that it could be overruled by a coalition of, for
example, developing countries or by the EU and countries informally aligned with the EU.
If the problem is that the rule-making procedures in the WTO are not effective, then
Members should focus their reform efforts on those procedures, rather than tinkering with
the dispute settlement system which is efficient and effective. And, if Members believe that
certain disputes may be too politically charged and could threaten the system, then they
should exercize great prudence and caution before bringing complaints in such cases. For
the most part, Members have been politically savvy in this regard – for example, the United
States – Helms-Burton case was not finally prosecuted by the European Communities, des-
pite threats to do so, and the Japan – Autos case was settled by the United States and Japan
in its early stages back in 1996. Another recent example of prudence on the part of disput-
ing Members is the Chile – Swordfish case, which was settled by the European Communities
and Chile.
Although WTO Members should seriously consider reforming the rule-making proced-
ures of the WTO to make them more efficient, realistically, there is very little, if any,
support for such a proposal. The developing countries and smaller countries in the WTO
will not agree to cede decision-making authority to any groups that do not include them.
Likewise, the United States, the most powerful country in the system, will not agree to
decision making rules based on any mechanism other than consensus. Why? Because the
United States realizes that the developing countries, if they decide to act as a block, repres-
ent an overwhelming majority of WTO Members. Similarly, the European Union can call
on the support of a large number of countries which have, or would like to have, regional
trade arrangements with it. The United States cannot count on the same support from
other countries in the WTO. Reform of the rules, therefore, would be almost impossible.
 Book Reviews 569

However, Members can make the existing rules work when there is the political will to
do so.
The real threat to the legitimacy of the WTO comes not from the possibility that panels
and the Appellate Body may overreach in some of their decisions, but rather from the
non-transparent nature of the process by which those decisions are made. In his conclusions
and recommendations, Barfield appears to take the internal legitimacy problems of the
WTO far more seriously than he does its external legitimacy problems. However, the chal-
lenge to the legitimacy of the WTO by NGOs and the general public is potentially far more
damaging to the credibility and long-term sustainability of the multilateral trading system
than its internal institutional difficulties.
In response to the calls for greater openness in the WTO, Barfield draws a distinction
between greater transparency and allowing participation of NGOs and civil society in dis-
pute settlement proceedings or meetings of WTO political bodies. With respect to access
to information, he recommends that all documents presented by governments in dispute
settlement proceedings, excluding those containing business confidential information,
should be made public upon their filing with the Secretariat. This would be a welcome
step, even though some governments already make their own submissions available to the
public. With respect to opening up panel and Appellate Body hearings to the public, he
recommends a more cautious, step-by-step approach, commencing with allowing the public
to observe at ‘opening sessions’ of panel and Appellate Body hearings. Although he favours
the steps already taken by the WTO to reach out to civil society by holding seminars,
conferences and meetings with interest groups on certain issues, such as trade and the
environment, he recommends against allowing private persons or groups to attend meetings
of the councils and committees of the WTO.
Barfield also disagrees with the Appellate Body’s rulings on the admissibility of amicus
curiae briefs in dispute settlement proceedings. He equates the submission of briefs by amici
curiae as tantamount to allowing private persons standing to file complaints against WTO
Members. This is a basic misunderstanding of the function of amici curiae as ‘friends of the
court’ in dispute settlement proceedings.8 Regardless of the legal niceties, he echoes the
views of the majority of WTO Members which believe that rules on the admission of amici
curiae briefs should be negotiated by Member governments and not allowed in by virtue of
rulings of panels or the Appellate Body in individual cases.
Barfield takes the position that ‘the best means of achieving continued democratic legit-
imacy is for the WTO to remain a government-to-government organization, one in which
governments take decisions to the WTO after having sorted through and resolved the con-
flicting claims and demands of competing interests in the domestic political process’. The
WTO is likely to remain a government-to-government organization for the foreseeable
future, and the time is not ripe for allowing private persons to bring complaints against
Member governments. The demise of the OECD negotiations on a Multilateral Agreement
on Investment and the experience with Chapter 11 of the North American Free Trade
Agreement to date have demonstrated that there is a growing tide of public opinion against
allowing private persons to challenge regulatory actions of governments before international
tribunals.
Unlike Barfield, I do not see a problem with panels or the Appellate Body accepting for
consideration amicus curiae briefs in certain cases in which they believe it would be helpful
in resolving the disputes. Panels are entitled, under Article 13 of the Dispute Settlement
Understanding, to seek information and advice from any person or body they deem useful

8
See Debra P. Steger, ‘Amicus Curiae: Participant or Friend? The WTO and NAFTA Experience’,
in A. von Bogdandy, P. Mavroidis, and Y. Meny (eds), European Integration and International Coor-
dination Studies in Transnational Economic Law in Honour of Claus-Dieter Ehlermann (Kluwer Law
2002).
570 Journal of International Economic Law (JIEL) 5(2)

in resolving the disputes, and panels have made good use of those powers especially in
cases in which scientific or medical expert opinion was needed. Why would allowing panels
and the Appellate Body to have access to a broad range of information and opinion make
the WTO any less a government-to-government organization? Furthermore, what is the
rationale for not allowing members of the public to observe panel meetings, Appellate Body
hearings and meetings of WTO councils and committees? Opening up such meetings can
only help to better inform the public and dispel some of the misunderstandings about how
the WTO actually operates. The real meetings at which important issues are negotiated
and agreed do not take place within the WTO building at all. The important meetings are
the meetings that take place outside the WTO in the offices of the delegations. As the
formal meetings of the WTO councils and committees are largely talk-shops, not unlike
meetings of the United Nations organizations, what is the harm in allowing NGOs and
members of the public to observe those meetings?
There is a struggle for legitimacy in the WTO, and the dispute settlement system has
become the battleground. There are conflicting pulls on the system. From within, Member
governments perceive the dispute settlement system as essentially diplomatic and want to
maintain their control over it. From outside, NGOs and representatives of civil society
argue that the WTO must become more open and allow the participation of private stake-
holders. Claude Barfield, reflecting the views of some ‘insiders’ within the WTO Secretariat
and Member governments, argues for a return to the ‘diplomatic’ model of dispute settle-
ment – for procedures that will not guarantee binding legal decisions in every case but that
will give governments the flexibility to deal with disputes through political means. With
respect to the external legitimacy challenge, Barfield maintains that the WTO should
remain a government-to-government organization, and although he favours allowing the
public greater access to information, he opposes participation by NGOs and civil society
in dispute settlement proceedings and in meetings of WTO councils and committees. He
also believes that the Appellate Body overstepped its authority in finding that it could accept
and consider amicus curiae briefs, and he recommends that the Appellate Body retract these
rulings and leave this matter for future negotiation by WTO Members.
If the WTO is to deal with its external legitimacy crisis, it must move, and be seen to
move, decisively in the direction of greater openness and transparency. There is simply no
excuse, given the gravity of decisions made by the WTO, for dispute settlement proceedings
that operate in secret, behind closed doors. Submissions should be made public, hearings
and panel meetings should be opened up to the public, and amicus curiae briefs should be
admitted when they are deemed pertinent and useful by panels and the Appellate Body.
The threat to the sustained viability of the multilateral trading system from outside is real
and must be dealt with if the WTO is to continue on its course of trade liberalization. That
can only be achieved if Member governments respond to this challenge by making the
system more transparent, visible and accountable. Governments will not lose control over
the WTO if non-state actors are allowed access to information, to attend hearings and
meetings as observers, and to submit amicus curiae briefs to panels and the Appellate Body.
Governments, both at home and in Geneva, will be observed and held accountable by their
constituents. Opening up the WTO can only contribute positively to its external legitimacy
and help to ensure its continued credibility and viability as an international organization.

Debra P. Steger9

9
Former Director, WTO Appellate Body (1995–2001); Visiting Professor, University of Toronto
Faculty of Law.
 Book Reviews 571

Free Trade, Sovereignty, Democracy: The Future of the World Trade

Organization. BY CLAUDE E. BARfiELD, The AEI Press, Washington 2001.
ISBN 0–8447–4157–4, 245pp.
In a recent book on Free Trade, Sovereignty, Democracy,10 Claude Barfield from the Amer-
ican Enterprise Institute offers thoughtful US perspectives on some of the ‘constitutional
problems’ of the World Trade Organization (WTO): tensions between its ‘legislative’ and
‘judicial’ functions; their inadequate control by national parliaments and by ‘We the People;
‘democracy deficits’ of non-transparent intergovernmental rule-making and of international
‘judicial legislation’ in the WTO; claims of non-governmental organizations (NGOs) for
direct participation in WTO decision-making processes, or for corporatist institutional
reforms of the WTO following the precedent of the International Labor Organization.
Barfield’s premise is that sovereignty and democracy can be effectively protected only at
the national level. This widespread US view leads him to call for political reforms of the
‘overextended’ and ‘politically unsustainable’ WTO adjudication (e.g. by more reliance on
mediation and conciliation than international adjudication). The international legal con-
straints of the US should be limited also in the WTO (e.g. by returning to the previous
GATT practice of a ‘minority blocking mechanism’, and by substituting compensation as
an alternative for the WTO rules on termination of illegal measures and retaliation). Many
of his reform proposals (e.g. to empower the Director-General to ‘direct contending
member states to settle their differences’, or to exact compensation ‘through a monetary
fine’) have remained controversial already under the old GATT 1947. Views on the demo-
cratic legitimacy of such power-orientated rather than rule-orientated reforms are bound to
differ. Those familiar with dispute settlement practices under the old GATT 1947 will also
recall the rare invocation and frequent failures of mediation and conciliation of GATT
disputes by the GATT Director-General. GATT contracting parties, like WTO members,
have usually preferred to insist on rule of law rather than to compromise the multilateral
rules ratified by domestic parliaments.
Perhaps the most important policy lesson of Barfield’s analysis is that proposals for WTO
reforms are often influenced by domestic constitutional experiences of the countries con-
cerned. Following World War II, the US was the main architect and protector of the multi-
lateral economic and political post-war order. The aggression in September 2001 seems to
have reinforced unilateralist US perceptions of sovereignty, democracy and international law.
For understandable reasons, there is much more confidence in the uniquely successful,
democratic cooperation among 50 states under the US Constitution than in the UN legal
system which does not effectively protect human rights and democracy in many of the 189
UN member states.11
The necessary US and EU leadership for WTO reforms could benefit from clarification
of why US and EU approaches to international law often diverge in important respects.
The internal EU experience – that rule of law among nations is no less important than within
nations, and international adjudication can protect EU citizens against abuses of power by
their own governments – underlies some of the bold EU proposals for further legalization
of the WTO dispute settlement system, for instance by moving from ad hoc to more per-
manent WTO panelists, by converting the mandate of WTO Appellate Body members into
full-time appointments, introducing a new remand authority for the Appellate Body, and

10
Claude Barfield, Free Trade, Sovereignty, Democracy. The Future of the World Trade Organiztion, AEI
Press Washington 2001.
11
Cf. E.-U. Petersmann, ‘Constitutional Primacy and Indivisibility of Human Rights in International
Law? The Unfinished Human Rights Revolution and the Emerging Global Integration Law’, in S.
Griller (ed), International Economic Governance and Non-Economic Issues, (Vienna: Springer 2002.
572 Journal of International Economic Law (JIEL) 5(2)

strengthening WTO rules on implementation of dispute settlement rulings.12 The US

experiences with regional dispute settlement mechanisms (e.g. under NAFTA Chapters
11,19 and 20) are, however, fundamentally different from the EU experiences with legal
and judicial remedies in European integration law.13 Whereas European integration rests
on mutually complementary national and international constitutional guarantees (e.g. in
Article 6 EU Treaty), the US has never followed the example of EC member states by
adjusting its national constitutional law to the requirements of international integration
(e.g. by making the transfer of sovereign powers to international organizations conditional
on international guarantees of human rights and democratic governance, as e.g. in Article
23 of the German Basic Law).
Building consensus on future reforms of the WTO legal and dispute settlement system
will benefit from promoting transparent discussions on the fundamental constitutional
problems discussed in Barfield’s book. For instance, do WTO legal constraints on unilat-
eralism promote – rather than threaten – freedom of citizens and democracy across frontiers?
Does the European experience with international democracy, or with collective exercise of
sovereign powers in functionally limited international organizations, offer lessons for future
WTO reforms? Can national parliaments effectively control the thousands of unilateral and
bilateral policy measures (e.g. customs tariffs) in international relations with 200 other
sovereign states, and their redistributive effects among domestic citizens, without multilateral
treaties limiting foreign policy discretion by transparent, non-discriminatory rules?

I. FREE TRADE AND DEMOCRACY

National democracies give priority to human rights, popular sovereignty and community
values inside national borders. Even though ‘international legislation’ by means of multilat-
eral treaties has become no less important for citizen welfare than national legislation, most
national parliaments do not effectively control international rule-making.14 Liberal trade
has become recognized as the most important instrument for increasing economic resources
necessary for enjoying and protecting human rights. Yet, the worldwide recognition of
human rights has contributed little to overcoming the centuries-old, national traditions of
discriminating against foreigners, foreign goods, foreign services and foreign investments.
An important post-war lesson is that, even in democracies, welfare-reducing protectionist
biases can often be overcome only through reciprocal international rules (such as WTO and
EU law) limiting the prisoner’s dilemma and constitutional failures of nation states in a
globalized world. European integration confirms that liberal trade, human rights and consti-
tutional democracy can be protected most effectively across frontiers by means of collective
international constitutional restraints on foreign policy powers (such as the customs union and
common market principles in the EC’s treaty constitution), including new forms of interna-

12
See: Contribution of the European Communities and its Member States to the Improvement of the
WTO Dispute Settlement Understanding, Communication from the EC, WTO doc TN/DS/W/1 of
13 March 2002.
13
For instance, the investment rules and provisions for mixed international arbitration in NAFTA
Chapter 11, and the so far 21 investment disputes under Chapter 11, have no parallel in EC law.
Nor does EC law envisage dispute settlement mechanisms similar to those in Chapters 19 and 20 of
NAFTA. It currently appears utopian to believe that the US would ever be willing to submit to
international adjudication similar to the comprehensive jurisdiction of the EC Court of Justice.
14
This was the main conclusion of the comparative study by J. Jackson and A. Sykes (eds), Implementing
the Uruguay Round (Ann Arbor: Michigan University Press 1997.
 Book Reviews 573

tional democracy protecting self-government and self-development of citizens across national

border barriers.
EU law protects economic liberties and other fundamental rights (including private access
to courts, to local elections and to the European Parliament) of EU citizens regardless of
their nationalities and across national frontiers. This legal and judicial protection of equal
freedoms and other fundamental rights of EU citizens has enhanced new forms of participat-
ory democracy and deliberative democracy in the EU. Entitlement and involvement of citizens
as legal subjects of integration law have also proven to be effective mechanisms for de-
politicization of transnational disputes and decentralized enforcement of EU rules by private
citizens and national judges. EU law, and even more so WTO law, protect national sover-
eignty to adopt regulatory and safeguard measures for non-economic policy goals. The EU
concept of a social market economy combines economic and social citizen rights, consumer-
driven competition rules and constitutional guarantees of human rights and democracy in
a much more balanced manner than in worldwide international law.

II. SOVEREIGNTY AND WTO LAW

In democracies, sovereignty belongs to the citizens, not to governments. In the modern
global village, personal autonomy, self-development and welfare of citizens depend ever
more on access to foreign goods and services (e.g. food, information, education and medical
services). Also enjoyment and protection of human rights depend on scarce economic
resources. Hence, mutually beneficial division of labour and citizen rights, just as human
rights, must not end at national borders. They can be effective only to the extent that
citizens have participatory rights, and legal and judicial remedies against abuses of govern-
ment powers, not only at the national level but also vis-à-vis collective exercise of govern-
ment powers at international levels. ‘Individual sovereignty’, popular sovereignty, state sov-
ereignty and the collective exercise of limited government powers in international
organizations (such as the UN Security Council, the WTO Dispute Settlement Body, the
EC) must be reconciled in a mutually coherent manner protecting and promoting human
rights at national and international levels.15
It has become an anachronism that – even though goods and services are produced,
traded and consumed by individuals – WTO rules grant rights and obligations only to
governments which, for centuries, have abused their trade policy powers for welfare-
reducing protectionism. Neither human rights nor the benefits of trade, competition and
investments depend on the nationality of citizens. Just as international law and international
organizations are indispensable for protecting human rights and freedom of trade across
frontiers, new forms of international democracy must complement our traditional forms of
local and national democracy so as to enhance democratic legitimacy of international govern-
ance.
European integration suggests that, the less effective traditional forms of direct and rep-
resentative democracy risk to become in distant international organizations (e.g. the parlia-
mentary assemblies in the EC, in the Council of Europe and in the Western European
Union), the more important are new forms of transnational citizen rights (such as the
market freedoms and social rights accorded by EC law) and their judicial protection across
frontiers. On the worldwide level, cosmopolitan democracy based on equal human rights
must complement democracy at local and national levels. As inside national democracies,
constitutional democracy at the international level cannot protect human rights and rule of

15
Cf. E.-U. Petersmann, ‘From State Sovereignty toward Sovereignty of Citizens in the International
Relations Law of the EU?’. In N. Walker (ed), Sovereignty in Transition (Oxford: Hart 2002.
574 Journal of International Economic Law (JIEL) 5(2)

law effectively without judicial remedies and judicial review of national and international
restrictions of equal liberties and other rights and obligations.16

III. CONSTITUTIONALISM AS A PROCESS DEPENDS ON

INTERNATIONAL LAW
The US Constitution of 1787 has served as a model for many democracies in the world.
Yet, due to their introverted focus on a demos, national constitutions rarely deal with the
new tasks of constituting international organizations, of constitutionally limiting and
restraining abuses of their powers, and of protecting and promoting human rights in inter-
national rule-making and international adjudication. Both the EC treaty constitution as well
as the ‘WTO constitution’ resulted not from one ‘big bang’, but from numerous piecemeal
improvements through successive international negotiations; the still highly imperfect
nature of these treaty constitutions illustrates that, given our ‘constitutional ignorance’
(Hayek) and the ubiquity of conflicts of interests and policy constraints, ‘constitutionaliz-
ing’ national and international government powers remains a neverending task and political
process.
European integration, and the current review of the EC’s treaty constitution by a European
Convention composed of representatives from national and EU parliaments and govern-
ments, offer important lessons for promoting democratic international governance in constitu-
tionally limited international organizations. The democratic acceptability of the results of
future WTO negotiations will likewise be promoted by transparent constitutional debates
not only among government representatives but also in civil society, parliaments and NGOs
at national and international levels. The lesson of the recent negative Irish referendum on
amendments of the EU Treaties is that international treaties (e.g. on future WTO reforms)
may not be ratified by parliaments and by ‘We the people’ if the treaties are not understood,
or are perceived as illegitimate (‘If you don’t know, vote no’).
By admitting non-state members (such as the EC, Hong Kong and Taiwan), and by
protecting freedom, non-discrimination and rule of law across frontiers, WTO rules have
limited state sovereignty for the benefit of the citizens. The numerous WTO exceptions and
safeguard clauses give clear priority to sovereign rights of member countries to adopt regu-
latory and safeguard measures for non-economic reasons. It is true, as explained by Barfield,
that parliaments must exercise much stronger control over WTO negotiations and WTO
activities at national and international levels. For the urgently needed democratic reforms
of global governance, however, the international parliamentary, judicial and advisory civil
society institutions in the EU offer more appropriate lessons than nationalist, unilateralist
or purely intergovernmental concepts. Similar to US leadership in the construction of the
multilateral post-war international order and in the fight against international terrorism, the
US should join forces with the EU for leadership in laying more democratic, constitutional
foundations for a rules-based world trading system.
As the dominant military hegemon, the US has legitimate reasons to emphasize its unilat-
eral strategic options. The primary foreign policy challenge of the EU as a civilian power

16
Just as national and international judicial protection of individual liberty rights and other human
rights (e.g. by the EC Court of Justice and the European Court of Human Rights) requires judicial
balancing among rights based on principles of non-discrimination, necessity and proportionality, the
WTO jurisprudence on equal rights of WTO Members has inevitably given rise to similar balancing
processes and balancing principles. On the ever increasing references, in WTO jurisprudence, to
general principles of law (such as due process, estoppel, equity, ‘effet utile’, ‘force majeure’, ‘nemo
judex in sua re’, good faith, necessity and proportionality) see M. Hilf, ‘Power, Rules and Principles –
Which Orientation for WTO Law?’, JIEL 4 (2001), at 111 et seq.
 Book Reviews 575

remains to explain why long-term strategic interests – also of the US – require rules-based
foreign policies and democratic strengthening of international law and worldwide organiza-
tions, including judicial protection of rule of law across frontiers for the benefit of con-
sumers, traders, producers, investors and other citizen interests. The success of the new
round of WTO negotiations requires, apart from more effective parliamentary oversight at
national levels, additional democratic reforms also at the international level of WTO institu-
tions, including effective judicial protection of rule of law and individual rights in interna-
tional trade. While the UN goal of preventing military aggression may justify a focus on
military power, the WTO objective or promoting worldwide freedom, non-discriminatory
competition, economic welfare and rule of law requires worldwide international treaties
and organizations – provided the latter are effectively controlled by national parliaments
and respect and promote human rights.

Prof. Ernst-Ulrich Petersmann*

* BP Chair for Transatlantic Relations, European University Institute in Florence, Italy.