The WTO as Catalyst of Democratization

In a statistical analysis written up a few years ago in the journal Democratization, I found that countries belonging to the World Trade Organization (WTO) or its predecessor, the GATT, were more likely to attempt and sustain democratic government than ones that did not. By contrast, I found no such “boost” from participation in global or regional human-rights treaty regimes. This WTO effect showed up in models that also included a measure of trade openness, suggesting that the increased trade flows that membership is supposed to produce were not the source of the association. The statistical analysis wasn’t properly designed to identify a causal relationship, but I speculated that the WTO effect had to do with institutional and organizational changes it spurred within countries seeking to join:

Of all the organizations included in this analysis, the GATT/WTO is the one most explicitly and exlusively linked over the past half-century to deliberate Western efforts to globalize liberalism as such. Working in tandem with the International Monetary Fund and the World Bank, the GATT/WTO has encouraged developing countries to create and sustain certain laws and practices in order to realize benefits from increased economic exchange with the world’s wealthiest states. Although democracy is not an explicit criterion for membership, it is certainly part of a larger suite of of liberal institutions and norms that are preferred by these organizations and their most powerful members. The decision to participate in this regime sets in motion a range of elite and technical exchanges aimed at producing certain kinds of institutional outcomes. In this manner, formal participation in this liberal project may facilitate or accelerate the development of local and international expectations, and even specific new actors, conducive to the establishment and persistence of democracy.

I was reminded of my conjecture by a story I read this morning on Laos’ ongoing effort to win WTO membership. At this point, 159 countries are already members, so we don’t get that many more chances to observe the effects of joining on domestic political economies. Still, this one seems to fit the story line so far:

After almost a decade of major economic transformation, the Lao People’s Democratic Republic is on the brink of World Trade Organisation (WTO) membership.

But the small country’s Herculean effort to join the exclusive trade club is a reminder to the ten other least developed countries (LDCs) now seeking membership of the cumbersome process involved.

“LDCs think it is easy to accede to the WTO, like becoming a United Nations member, but it is not,” Nicolas Imboden, director of the Geneva-based Ideas Centre, told IPS. The non-governmental organisation has been counselling Lao PDR, whose accession will be completed in October, for fourteen years. It is now starting to assist Liberia and Comoros, two other least developed countries on a waiting list that also includes Afghanistan, Bhutan, Equatorial Guinea, Ethiopia, Sao Tome, Sudan, Vanuatu and Yemen.

“They have to adopt the rules of the WTO and this is a huge task for most of them,” said Imboden. “They must undertake reforms, completely revise their legal systems and establish rules that apply to all foreign investors and importers, without discrimination.”

Imboden noted that many LDCs justify clamouring for membership on the grounds that it will open up new markets, a motive he argued is “flawed”, since LDCs already have good trade relations with most countries.

Rather, the “benefits” of membership are mainly domestic: aligning national economic policies with the WTO regime sets up the basis for improved economic efficiency and attracts companies eager to invest in these countries, not because of their market size, but to export to the neighbouring region.

“Reforms related to WTO accession require a change of attitude, not only a change of law,” Khemmani Pholsena, vice-minister of industry and commerce for Lao PDR, told IPS. “Lao PDR has reviewed and enacted some 25 trade-related laws and 50 other legislations since 2000. And I believe that these reforms will strengthen the rule of law, thereby cutting down on undue privileges and possibilities of corruption.”

If the statistical model is capturing something real, then these transformations should marginally improve the odds that Laos will transition to democracy. Of course, the observed “effect” is probabilistic, not deterministic, so I’m not suggesting that Laos will start holding free elections as soon as it joins.

I do, however, expect that Laos will eventually democratize, and that when it does, that data point will further reinforce the clear liberal trend in human political organization. As far as I’m concerned, what I said at the end of that 2008 paper still holds:

Taking a longer view, the evidence that international integration and the global trend toward democratic rule are interrelated is compelling. In his landmark work on the dynamics of political institutions over time, Paul Pierson reminds us that change processes involving complex causes and slow-moving outcomes are not readily explained by the kinds of models social scientists usually employ, especially in statistical analyses. When we focus narrowly on the kinds of discrete transitional moments studied here, these limitations do not loom so large. If we switch our vision to the long haul, however, they could be critical.

From a historical perspective, we might think of these transition events as the visible signals emanating from a slower-moving but also much-harder-to-quantify process of political and economic development that includes institutions at the levels of state and society as well as regime. Watching for patterns at this temporal and geographic scale is a bit like watching for climate change. The mechanisms generating the larger pattern are extremely complex and undoubtedly include elements of endogeneity, contagion, threshold effects, and feedback loops, to name just some of the possibilities. This kind of causal complexity makes it very hard to isolate the effects of specific variables, especially when the data we might use to test those relationships are often scarce or unreliable. And yet a pattern emerges. The production of greenhouse gases accelerates, temperatures rise, glaciers retreat, and species disappear.

Meanwhile, trade flows swell, international organizations, proliferate, more countries attempt democracy, and fewer of those democracies fail. The nexus of these trends almost certainly lies in the functional links between democracy and economic development–links that promote exactly the kind of positive feedback loops Pierson identifies as a key mechanism for path-dependent change in political institutions. When governments discover they cannot survive by force alone, they must find ways to secure the habitual, quasi-voluntary compliance of the populations they seek to rule. To secure that compliance, they need to promote prosperity and remove incentives to rely on force as a means to effect political change.

The second half of the 20th century demonstrated convincingly that the combination of democratic governance with market-based economies offers the most effective means to achieve those ends in a durable way. That combination does not always produce immediate gains, but at present there appears to be no sustainable alternative, so polities that try democracy and fail almost invariably try again. As Robert Bates argues, ‘The creation of limited government may not be sufficient to secure high levels of investment, much less the growth of national economies. But assurances to investors surely are necessary to secure the formation of capital,’ and thus to allow economic growth to occur. As technological and political developments have expanded the possibilities for global exchange, governments have increasingly reached out to one another in an effort to create new opportunities for growth and then to help their citizens realize the resulting gains. Thus, even as the instantaneous and visible status of many countries’ domestic political institutions remains highly volatile, the historical trajectories point decidedly toward a world increasingly composed of states with elected governments linked by dense networks of economic exchange and political and legal entanglements.

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