18.708 0.208 0.207 0.215 0.753 0.998 1.000
EU28
18.575 0.206 0.205 0.214 0.748 0.998 1.000
Japan
8.256 0.082 0.081 0.073 0.641 0.719 0.961
China
6.525 0.063 0.063 0.059 0.597 0.657 0.892
India
4.128 0.039 0.039 0.039 0.563 0.598 0.726
Canada
2.796 0.026 0.026 0.026 0.541 0.565 0.654
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Thomas Cottier / Satoko TakenoshitaHypothesis 2Model 2a
Hong Kong
2.064 0.019 0.019 0.019 0.530 0.549 0.615
Mexico
1.997 0.019 0.019 0.018 0.529 0.546 0.610
Korea
1.798 0.017 0.017 0.017 0.526 0.543 0.600
Brazil
1.731 0.016 0.016 0.016 0.525 0.540 0.594Model 2bCountry
voteshare
SSISM
2/3
Inclusiveness3/4
SM
2/3
3/4
USA
16.116 0.179 0.179 0.181 0.752 0.999 1.000
EU28
16.002 0.177 0.178 0.179 0.748 0.999 1.000
Japan
7.232 0.072 0.072 0.070 0.636 0.791 0.989
China
5.752 0.056 0.057 0.056 0.596 0.708 0.959
India
3.645 0.035 0.035 0.035 0.561 0.631 0.831
Canada
2.506 0.024 0.024 0.024 0.541 0.588 0.725
Hong Kong
1.879 0.018 0.018 0.018 0.531 0.566 0.668
Mexico
1.822 0.017 0.017 0.017 0.529 0.563 0.665
Korea
1.651 0.015 0.015 0.016 0.526 0.558 0.652
Brazil
1.595 0.015 0.015 0.015 0.526 0.555 0.644Model 2b’Country
voteshare
SSISM
2/3
Inclusiveness3/4
SM
2/3
3/4
USA
18.707 0.213 0.213 0.218 0.791 1.000 1.000
EU28
16.190 0.176 0.176 0.181 0.710 0.998 1.000
Japan
7.208 0.071 0.071 0.067 0.633 0.746 0.979
China
5.721 0.055 0.056 0.054 0.595 0.675 0.934
India
3.661 0.035 0.035 0.034 0.560 0.611 0.788
Canada
2.460 0.023 0.023 0.023 0.539 0.573 0.690
Hong Kong
1.831 0.017 0.017 0.017 0.529 0.554 0.642
Mexico
1.831 0.017 0.017 0.017 0.529 0.554 0.642
Korea
1.659 0.015 0.016 0.016 0.526 0.550 0.629
Brazil
1.545 0.014 0.014 0.014 0.524 0.545 0.618
To be continued.
Towards Supplementary Weighted Voting
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Hypothesis 2Model 2cCountry
voteshare
SSISM
2/3
Inclusiveness3/4
SM
2/3
3/4
USA
18.012 0.203 0.202 0.208 0.764 1.000 1.000
EU28
17.078 0.189 0.188 0.195 0.736 1.000 1.000
Japan
8.072 0.081 0.080 0.074 0.681 0.823 0.997
Canada
2.802 0.026 0.027 0.026 0.542 0.576 0.785
China
2.802 0.026 0.027 0.026 0.542 0.576 0.785
Hong Kong
2.135 0.020 0.020 0.020 0.532 0.558 0.714
Korea
1.801 0.017 0.017 0.017 0.527 0.549 0.680
Mexico
1.801 0.017 0.017 0.017 0.527 0.549 0.680
Singapore
1.601 0.015 0.015 0.015 0.524 0.544 0.664
Taiwan
1.534 0.014 0.014 0.014 0.523 0.542 0.653Model 2c’Country
voteshare
SSISM
2/3
Inclusiveness3/4
SM
2/3
3/4
USA
20.107 0.229 0.229 0.242 0.782 1.000 1.000
EU28
17.969 0.196 0.196 0.208 0.717 1.000 1.000
Japan
8.016 0.080 0.077 0.069 0.679 0.746 0.994
Canada
2.806 0.026 0.026 0.025 0.542 0.568 0.740
China
2.739 0.025 0.026 0.025 0.541 0.566 0.732
Hong Kong
2.138 0.020 0.020 0.019 0.532 0.551 0.679
Mexico
1.804 0.017 0.017 0.016 0.527 0.543 0.651
Korea
1.737 0.016 0.016 0.016 0.526 0.531 0.646
Singapore
1.536 0.014 0.014 0.014 0.523 0.537 0.627
Taiwan
1.536 0.014 0.014 0.014 0.523 0.537 0.627
The table shows the list of ten countries with highest voting weight, denoted as vote-share, for each models. Then the calculated results for indices (SSI and Inclusiveness), tested for three majority rules (simple majority (SM), 2/3 and 3/4) are shown for each listed Member.
2. InclusivenessAs for the Inclusiveness Index, the consensus rule ensures the absolute inclusiveness to the decision-making for all countries. The
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Thomas Cottier / Satoko Takenoshita
introduction of a weighted voting system significantly lowers theprobability to be included for all members, except for the EU andthe US who enjoy absolute levels of inclusiveness in almost allmodels for 2/3rd and 3/4th majority requirements. This ensures thatthe interests of two economically influential countries to be fullyreflected in the process of decision-making. For other Members, theinclusiveness is reduced gradually according to the voting weight,by up to 50%. The double majority rule slightly increases the inclusiveness index for most Members, except for the EU and the USand Japan in some instances.3. Decision ProbabilityThe Decision Probability Index shown in Table 6, demonstrates thatany move from consensus will significantly improve the decisionmaking efficiency. Self-evidently, the lower the majority rule, thehigher the Decision Probability Index. The probability of decisionmaking under simple majority is about 50%, whereas they are moreor less than 16% for 2/3rd and less than 5% for 3/4th majority ruleunder Hypothesis 2. Under Hypothesis 1, the probability is evenhigher. It amounts to 50% for simple majority rule, to over 20% for2/3rd and less than 10% for 3/4th majority rule requirements.The double majority rule significantly decreases the index andthe level of decrease is less for higher majority rule. This is becausethe higher the majority rule, the more likely it is that the largernumber of Members is in any case included in the decisions made.Especially, since simple majority in terms of voting weight can beachieved by very small number of countries, the introduction of adouble majority is an effective tool in safeguarding the possibilityof a systematic exclusion of small countries in decision making.It should be noted that the different majority rules among thesame model largely influence decision probability whereas it doesnot change the voting power for individual countries very much.This finding implies that once the allocation of voting weights arechosen for adoption, the attention in the choice of majority rule canbe placed more on the efficiency of the voting body and inclusiveness.
Towards Supplementary Weighted Voting
219
Table 6: Decision Probability IndicesSimpleHypothesis 1
2/3rd
double
3/4th
double
double
Model 1a
0.499
0.271
0.218
0.131
0.090
0.064
Model 1b
0.499
0.270
0.201
0.126
0.059
0.047
Model 1c
0.501
0.264
0.231
0.136
0.093
0.069
Hypothesis 2Model 2a
0.499
0.285
0.154
0.100
0.044
0.035
Model 2b
0.499
0.292
0.116
0.083
0.017
0.016
Model 2b’
0.499
0.290
0.138
0.095
0.027
0.023
Model 2c
0.500
0.287
0.138
0.093
0.022
0.021
Model 2c’
0.500
0.286
0.162
0.106
0.037
0.033
Source: Calculations by the authors.
4. Assessment of the Power AnalysisThe power analysis in this section makes it that the Hypothesis 2 ismore appropriate in balancing the voting power between the groupof industrial countries and developing countries, as well as betweenthe EU and the US. The result confirms the analysis on votingweight discussed in the previous section.The assessment of various voting power indices reveals thatthere is a clear trade-off when introducing a weighted voting system: the loss of voting power and of inclusiveness for a majority ofMembers versus improved efficiency in decision-making process.It should be reminded, however, that power relations also existunder the current consensus rule as recourse to blocking powers isnot evenly spread in reality. As described above, smaller countriesor groups of countries cannot readily take recourse to blockingwithout facing difficulties elsewhere. The introduction of weightedvoting may merely make such power relations more transparent. Inthis sense, the loss of voting power of many countries in real termsmay not be as significant as they may think and may be more thancompensated by a more efficient organization protecting their MFNbased market access rights.Finally, it is important to note that the statistical models employed ignore the dynamics of flexible coalition building in theWTO, and more empirical work would be required to be able tomake conclusive statements on the impact of power relations
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Thomas Cottier / Satoko Takenoshita
among Members under consensus and weighted voting. The trendtowards interests groups in a variable geometry, depending on different subject matters, renders such estimations very difficult andhardly predictable, except for the fact that weighted voting clearlywould render stalemates and blocking of negotiations much lesslikely than today under the current regime where consensus is notsupplemented by a meaningful and realistic voting system in theWTO. In the same vein, it will be important to assess the impact ofincreasing regionalism and the formation of trading blocks in coming years which the WTO is supposed to bring and hold togetherunder the multilateral trading system.V. ConclusionIn light of an increasing complexity of WTO negotiations and therisk of ongoing and time-consuming stalemates, the finding of aclear imbalance between the negotiating process entirely dependenton consensus and dispute settlement which no longer allows forunilateral blocking, this paper suggest to supplement consensuswith a system of weighted voting. Sovereign equality of States andthe law of international organizations do not exclude to take intoaccount factual differences among Members of the WTO in defining in law voting rights and thus influence in legal terms.In this paper we presented models for weighted voting systemto WTO decision-making subsequent to our previous paper, basedon different variables – contribution to the WTO, GDP, marketopenness, population and / or basic votes. A legitimate decisionmaking based on weighted voting model was sought by achievingsimplicity, transparency, robustness to a changing economic climateand a Member’s relative power, more balanced representation, andno veto power to any individual voting entity. The former threewere achieved by the function of the formula we proposed, and thelatter two can be achieved by excluding intra-EU trade and definingthe EU28 as a single unit. A meaningful model of weighted votingwould require this in order to provide a reasonable balance ofpower between industrial and developing countries and between theUS and the EU alike. (As a practical matter, it would also entail aredefinition of EU contributions to the WTO to some 20%, with thedifference to be taken up by other Members) The models presentedshow that a reasonable balance can be achieved among the majortrading blocks. Smaller countries formally lose voting powers butbenefit from a higher efficiency of the process. In light of a limited
Towards Supplementary Weighted Voting
221
blocking powers of these groups, the trade off may well be worthconsidering their stakes in the multilateral trading system.
ReferencesRichard E. Baldwin (1994), Towards an Integrated Europe, London(Centre for Economic Policy Research) 1994.Claude E. Barfield (2001), Free Trade, Sovereignty, Democracy:The Future of the World Trade Organization, Washington/D.C.(AEI Press) 2001.Ariel Buira (2003), The Governance of the IMF in a Global Economy, Research Papers of the Intergovernmental Group ofTwenty-Four on International Monetary Affairs and Development, Washington/D.C. 2003 (available at http://www.g24.org/buiragva.pdf).James S. Coleman (1971), Control of Collectivities and the Powerof a Collectivity to Act, in: Bernhardt Lieberman (ed.), SocialChoice, New York (Gordon & Breach) 1971, 269-300.Thomas Cottier / Satoko Takenoshita (2003), The Balance of Powerin WTO Decision-Making: Towards Weighted Voting in Legislative Response, in: Aussenwirtschaft 59 (2003), 171-214.William Davey (2003), Mini-Symposium on the Desirability of theWTO Permanent Panel, in: Journal of International EconomicLaw 6 (2003) No. 1, 175-261.Sara Dillon (1999), Fuji-Kodak, the WTO, and the Death of Domestic Political Constituencies, in: Minnesota Journal ofGlobal Trade 8 (1999) No. 2, 197-248.Claus-Dieter Ehlermann (2002a), Six years on the Bench of the‘World Trade Court’. Some Personal Experiences as Memberof the Appellate Body of the World Trade Organization, in:Journal of World Trade 36 (2002) No. 4, 605-639.Claus-Dieter Ehlermann (2002b), The Evolving WTO Constitution:Tensions between Dispute Settlement Processes and the Diplomatic and Treaty-making Activities of the WTO, Paper presented at the 2nd Annual WTO Conference, Dispute Resolutionand the WTO Constitution, The British Institute of Interna-
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tional and Comparative Law, London, May 15th, 2002 (on filewith the author).Joseph Gold (1974), Developments in the Law and Institutions ofInternational Economic Relations – Weighted Voting Power:Some Limits and Some Problems, in: American Journal of International Law 68 (1974) No. 4, 687-708.IMF (2001), Alternative Quota Formula: Considerations, Preparedby the Treasurer’s and Statistics Departments, Washington/D.C. 2001, available at http://www.imf.org/external/np/tre/quota/2001/eng/aqfc.pdf (14.7.2005).IMF (2002), Transcript of an Economic Forum ‘Governing the IMF’,September 17th, 2002, Washington/D.C., available at http://www.imf.org/external/np/tr/2002/tr020917a.htm (14.7.2005).Konstantin J. Joergens (1999), True Appellate Procedure or only aTwo Stage Process? A Comparative View on the AppellateBody under the WTO Dispute Settlement Understanding, in:Law and Policy in International Business 30 (1999) No. 2,193-230.Thomas König / Thomas Bräuninger (1998), The Inclusiveness ofEuropean Decision Rules, in: Journal of Theoretical Politics 10(1998) No. 1, 125-142.Markus Krajewski (2001), Verfassungsperspektiven und Legitimation des Rechts der Welthandelsorganisation, Berlin (Duncker& Humblot) 2001.Matthias Oesch (2003), Standards of Review in WTO DisputeResolution, Oxford (Oxford University Press) 2003.Ernst-Ulrich Petersmann (ed.) (2002), Preparing the Doha Development Round: Improvements and Clarifications of the WTODispute Settlement Understanding, Conference Report, RobertSchuman Centre for Advanced Studies, Florence (EuropeanUniversity Institute) 2002.Lloyd S. Shapley / Martin Shubik (1954), A method for evaluatingthe distribution of power in a committee system, in: TheAmerican Political Science Review 48 (1954) No. 3, 787-792.Reprinted in: Alvin E. Roth (ed.), The Shapley Value, Cambridge/MA (Cambridge University Press) 1988, 41-48.Andrew Shoyer (1998), The Future of WTO Dispute Settlement, in:Proceedings of the American Society of International Law 92(1998), 75-79.
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Philip D. Straffin (1988), The Shapley-Shubik and Banzhaf powerindices as probabilities, in: Alvin E. Roth (ed.), The ShapleyValue, Cambridge/MA (Cambridge University Press) 1988,71-82.Alan O. Sykes (1999), Regulatory Protectionism and the Law ofInternational Trade, in: University of Chicago Law Review 66(1999) No. 1, 1-46.Mika Widgrén (1995), Voting power and control in the EU: theimpact of the EFTA entrants, in: Richard Baldwin / PerttiHaaparanta / Jaakko Kiander (eds.), Expanding Membershipof the EU, Cambridge/MA (Cambridge University Press)1995, 113-142.WTO (1995). WTO Analytical Index. Guide to GATT Law andPractice, 2 vols., Geneva (World Trade Organization) 1995.
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Appendix A: Evolution of the IMF Quota Formulas28The Original Bretton Woods Formula:QC = (0.02Y + 0.05R + 0.010M + 0.10V)(1 + X/Y)where: QC = Calculated QuotaY = National incomeR = Gold and foreign exchange reservesX, M= Average annual exports or imports overfive-year periodV = Maximum fluctuation in exports definedas the difference between the highest and lowestvalueof exports during five-year period1962/63 Revision of the Formula and Multi-Formula System:The change in quota calculation was made by utilizing a dualstructure of ten formulae, with different sets of data for eachstructure, each consisting of revised Bretton Woods Formulaand four derived formulae. The use of different set of data mirrors the improvements in the reporting of invisible transactionsand transfers. For example, P, the current payments in Set IIData, replaced M, merchandise imports in the Set I Data. Further, the original coefficients were reduced by half for RevisedBretton Woods.Revised Bretton Woods:Q1 = (0.01Y + 0.025R + 0.05M + 0.2276V)(1 + X/Y)Q*1 = (0.01Y + 0.025R + 0.05P + 0.2276VC)(1 + C/Y)where: Y, R, X, M = as defined in original Bretton WoodsformulaQ1 = Quota calculated with Set I dataQ*1 = Quota calculated with Set II dataC, P = Average annual current receipts or paymentsover a recent five-year periodV, VC = Variability of annual exports or currentreceipts, defined as one standard deviation from thecentered five-year moving average, for a recent 13yearperiod
28
Source: IMF (2001).
Towards Supplementary Weighted Voting
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Modified Formulae on Set I Data (that use trade data):Scheme III: Q2 = (0.0065Y + 0.078M + 0.5065V)(1 + X/Y)Scheme IV: Q3 = (0.0045Y + 0.070M + 0.9622VC)(1 + X/Y)Scheme M4: Q4 = 0.005Y + 0.044M + 0.044X + 1.044VScheme M7: Q5 = 0.0045Y + 0.039M + 0.039X + 1.304VModified Formulae on Set II Data (that use data for trade, invisibletransactions and transfers):The coefficients remain the same but V and X are replaced byVC and C, respectively, for each scheme.Scheme III: Q*2 = (0.0065Y + 0.078P + 0.5065VC)(1 + C/Y)Scheme IV: Q*3 = (0.0045Y + 0.070P + 0.9622VC)(1 + C/Y)Scheme M4: Q*4 = 0.005Y + 0.044P + 0.044C + 1.044VCScheme M7: Q*5 = 0.0045Y + 0.039P + 0.039C + 1.304VCalculated quota:Qc = Max[ Mean (Q1, Q*i), Qˆ]where: Qˆ = Mean of the lowest two of the Mean (Qi, Q*i),i = 2 to 5and the value of Qi (i = 2 to 5) and Q*i (i = 1 to 5)have been normalized so that their totals equal thatofQ1.1981/82 Revision of the 1962/63 Formulae (that use GDP data anda broader definition of reserves):There are four changes made. First, the five formulae of Set IData are eliminated and those of Set II Data are utilized exclusively. Second, national income was replaced by GDP for Y.Third, measure of R, reserves, is broadened. Finally the coefficients of four derived formulae are reduced by 20 percent tosoften the impact of sharp price rise due to the oil shocks of1973/74 and 1979.Bretton Woods: Q1 = (0.01Y + 0.025R + 0.05P +0.2276VC)(1 + C/Y)Scheme III: Q2 = (0.0065Y + 0.0205125R + 0.078P+0.4052VC)(1 + C/Y)Scheme IV: Q3 = (0.0045Y + 0.03896768R + 0.07P +0.76976VC)(1 + C/Y)
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Thomas Cottier / Satoko Takenoshita
Scheme M4: Q4 = 0.005Y + 0.042280464R + 0.044(P +C) + 0.8352VCScheme M7: Q5 = 0.0045Y + 0.05281008R + 0.039(P +C) + 1.0432VCwhere:Y = GDP in a recent yearR = Average value of gold, SDRs, ECUs,IMF reserve positions, and foreign exchangereserves in a recent yearC, P, VC = as defined in 1962/63.Calculated Quota:QC = Max (Q1, Mean of lowest two of Q2, Q3, Q4, Q5)where the values of Qi (i= 2 to 5) have been normalized so thatthe totals of Qi equal that of Q1.
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Appendix B: Source of VariablesContribution:WTO contribution share is determined proportional to eachMember’s share (%) of total trade of all Members, includingtrade in goods, services and intellectual property rights for therecent past three years for which data is available. When aMember has less than 0.015 share of total trade, a minimumcontribution of 0.015 per cent is allocated in such case.The contribution of 2003 is used for the calculation of votingweight, which covers the trade period of 1998–2000. Thesource to WTO contribution calculation is Balance of Payments statistics (BoP) from the IMF14. When IMF BoP is notavailable, National Accounts, IMF International Financial Statistics (IFS) or World Bank Development Indicators (WDI) arereferred to. The IMF BPM5 components included in goods andcommercial services are:xx
xx
Goods: (same as BPM5 goods except nonmonetary goldheld as a store of value)General Merchandise, Goods for processing, Repairs ongoods, Goods procured in ports by carriers, Non monetarygold (except nonmonetary gold held as a store of value);Commercial services: (same as BPM5 services except government services)Transportation, Travel, Communications services,Construction services, Insurance services, Financial services, Computer and information services, Royalties andlicense fees, Other business services, Personal, culturaland recreational services.
GDP:The level of GDP is calculated as average over three years(1998, 1999, 2000). The data is taken from WDI On-line,whose original data source is World Bank national accountsdata and OECD National Accounts data files. The exceptionsto this are for following countries:
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Thomas Cottier / Satoko Takenoshita
x
Cyprus: National Statistics – current GDP in local currency is converted into US$ by the exchange rate of thesame yearx Liechtenstein: UN Statistics Division (Internet: http://unstats.un.org/unsd/cdbdemo). The number is the UN estimate, derived only from 1990x Taiwan: National Statistics (GNP, not GDP