As a result of the most recent round of negotiations, the new World Trade Organization has gained increased legislative authority over member nations through its streamlined system for settling international trade disputes. Free Trade, Sovereignty, Democracy, a new book published by the AEI Press, contends that in the future such a system may allow the WTO to undermine democratic control over international cooperation and rule making.

The author, AEI scholar Claude E. Barfield, writes that individual countries must establish safeguards to ensure that the WTO is held accountable for decisions affecting their citizens and potentially trumping their domestic laws. In the past, the organization (known until recently as the General Agreement on Tariffs and Trade) solved trade disputes through a diplomatic approach that stressed conciliation and problem solving.

But since 1995, the organization has shifted to a more legalist dispute settlement mechanism to quickly arbitrate disagreements. Proponents of the new system hold that legally binding rules produce more certainty, predictability, and fairer treatment for member states.

But Barfield contends that the new "judicialized" WTO dispute settlement system is substantively and politically unsustainable. It is not sustainable substantively because there is no real consensus among WTO members on many of the complex regulatory issues that the dispute settlement panels and appellate body will be asked to rule upon. In many instances, moreover, the underlying treaty text contains gaps, ambiguities, and contradictory language.

The streamlined system is not sustainable politically, he writes, because the imbalance between ineffective rule-making procedures and highly efficient judicial mechanisms will increasingly pressure the panels and the appellate body to "create" law, raising intractable questions of democratic legitimacy.

To correct those flaws, Barfield recommends the adoption of alternatives that will reintroduce some of the former elements of "diplomatic" flexibility that characterized the earlier GATT regime. Conciliation, mediation, and voluntary arbitration should be added as real alternatives, he writes.

Further, decisions made by a dispute settlement panel currently stand unless there is virtual unanimity among WTO members against a decision. Barfield suggests that if a substantial minority of WTO members clearly opposes a decision, a blocking mechanism should be invoked to set aside that decision until further negotiations produce a consensus.

Barfield recommends that the United States continue to deny the Direct Effect doctrine, under which a nation agrees that its domestic laws will automatically be bound by rules negotiated under a treaty or trade agreement. The U.S. Congress should establish a joint committee to review the impact of international treaties and declarations on U.S. domestic laws and regulations. In addition, national legislatures, including the U.S. Congress, should be more vigilant in retaining final determination over the content of domestic regulation and in setting precise boundaries when shifting authority to international organizations.

"To deal with the complex new issues presented by national regulations inside the border, the WTO will have to adopt a less rigid, more flexible dispute settlement system, one that does not promise a 'correct' legal answer to every problem," Barfield concludes. "The best means of achieving continued democratic legitimacy is for the WTO to remain a government-to-government organization, one in which governments take decisions in the WTO after having sorted through and resolved the conflicting claims and demands of competing interests in the domestic political process."

Jagdish Bhagwati, an external adviser to the WTO director-general, writes, "The WTO has come under vitriolic attack . . . as an institution that undermines democratic governance in member states. Barfield's new book is the antidote that we have all been waiting for. Penetrating and comprehensive, reflecting total familiarity with legal and economic literature, it is a tour de force."