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A. the GATT and the BWI

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A. the GATT and the BWI International Organizations Law Review 3: 267–315, 2006 ©2006 Koninklijke Brill NV, Leiden, The Netherlands. INTERNATIONAL ECONOMIC POLICY-MAKING: EXPLORING THE LEGAL LINKAGES BETWEEN THE WORLD TRADE ORGANIZATION AND THE BRETTON WOODS INSTITUTIONS JAN WOUTERS1 AND DOMINIC COPPENS2 This contribution aims to shed some light upon the legal relationship between the three main pillars of the international economic architecture: the World Trade Organization (WTO), and its predecessor the GATT 1947, focusing on trade; the International Monetary Fund (IMF or Fund), guarding international monetary and financial stability; and the World Bank, specializing in the field of development. We will examine various aspects of the legal interactions between, on the one hand, the GATT/WTO, and, on the other hand, the IMF and the World Bank, labeled as the Bretton Woods Institutions (BWI). The general legal linkages between the three institutions are first of all explored from a historical perspec- tive (Section I). Section II elaborates upon the different levels of consultation between the WTO and BWI, whereas Section III discusses the involvement of the WTO and BWI in the deliverance of Aid for Trade, which by definition raises interesting questions of collaboration between aid and trade institutions. Finally, various aspects of the legal interactions between the WTO and the BWI are analysed more in depth (Section IV), namely, (i) the relationship between BWI programmes and WTO rules (the substantive level), and (ii) the role of the BWI in the dispute settlement system of the WTO (the procedural level). I. THE GENERAL LEGAL FRAMEWORK FROM A historical PERSPECTIVE A. The GATT and the BWI At the end of Second World War, it broadly was recognized that enhanced international economic cooperation was needed to prevent beggar-thy-neighbour policies, such as competitive devaluations and protectionism, that had turned the international economy into the Great Depression (1930s), contributing to 1 Professor of International Law and the Law of International Organizations, Director of the Institute for International Law, Leuven University; Of Counsel, Linklaters De Bandt, Brussels. 2 Assistant at the Institute for International Law, Leuven University. 268 Jan Wouters and Dominic Coppens IOLR 2006 the circumstances which resulted in Second World War. To this end, participants of 45 countries met in Bretton Woods in July 1944 and created the IMF and the International Bank for Reconstruction and Development (IBRD), the two first pillars of the post-war international economic architecture. The topic “trade” was as such not on the agenda because the conference was held under the auspices of finance ministers, whereas trade fell under the competence of other ministries.3 Yet, participants favoured the creation of a third pillar, an international organization that would liberalize trade.4 The IMF’s primary responsibility was to promote international monetary cooperation and to guard exchange rate stability (to avert competitive devaluations) by overlooking the par value system and providing short-term balance-of-payment assistance to this end. Clearly, the founding fathers recognized the complementarity of monetary stability and international trade since one of the Fund’s purposes is to “facilitate the expansion and balanced growth of international trade.”5 The primary responsibility of the IBRD6 was to channel capital from international capital markets to countries that needed a capital injection for their reconstruction and development (longer-term project assistance).7 Its Articles of Agreement 3 Jackson expresses a provocative thought: “[i]t is interesting to speculate, […], how history might have been different if the Bretton Woods conference had indeed taken up the entire subject matter of economic relations including trade.” J.H. Jackson, The World Trade Organization – Constitution and Jurisprudence (London, Royal Institute of International Affairs, 1998), 15. 4 J.H. Jackson, loc. cit., supra n. 3, 15-16; D.E. Siegel, “Legal Aspects of the IMF/WTO Relationship: the Fund’s Articles of Agreement and the WTO Agreements,” 96 A.J.I.L. (2002), 561, at 563. Dominguez points to Resolution VII at the Bretton Woods Conference that recommended the creation of an organization dealing with trade: K.M. Dominguez, “The Role of International Organizations in the Bretton Woods System”, in M.D. Bordo and B. Eichengreen (eds.), A Retrospective on the Bretton Woods System – Lessons for International Monetary Reform (Chicago, The University of Chicago Press, 1993), 368. 5 IMF, Articles, art. I(ii). See also, IMF, Articles, art. I(iv). 6 The IBRD was the first agency of the “World Bank Group”. Nowadays the World Bank Group consists of five agencies: the IBRD, the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID). The term “World Bank” encompasses the IBRD and IDA. 7 Although the primary focus of the IBRD was the reconstruction of European countries, this function was partly overtaken by the Marshall plan and the IBRD shifted its focus to developing countries. Because the interest rate of the IBRD created a too heavy burden for most developing countries, the IDA was set up in 1960 in order to grant concessional loans. .
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