Christopher McCrudden Gives 2008 Rubin Lecture

The battle between nations that favor trade linkages and those that find them discriminatory may be heading for a WTO showdown, said Rubin Lecturer Christopher McCrudden.
 The tensions between government social policies and economic liberalization may be building towards a showdown in the World Trade Organization, which could have broad implications for the future of trade.
That was among the insights offered last week by Christopher McCrudden, professor of human rights law at Oxford University, who delivered the 34th annual Rubin Lecture April 16 at Jerome L. Greene Hall.
Governments have long set conditions on those from whom they procure goods and services to advance their own social goals, ranging from affirmative action to fair labor standards. In recent years, however, the practice, known as “linkage,” has conflicted with international trade agreements, where such policies – even those created to address past discrimination -- can be challenged for violating anti-protectionist and corruption rules.
“My primary interest is where should the balance be struck?” said McCrudden, whose research focuses on the intersection where law, politics and economics meet. His book, Buying Social Justice: Equality, Government Procurement and Legal Change, closely examines the issue.
The conflict almost came to a head in the WTO court in the late 1990s, when lawmakers in the state of Massachusetts enacted a policy that banned the state from procuring goods and services from any company doing business with Myanmar (formerly the nation of Burma). Had the U.S. Supreme Court in 2000 not ruled the Massachusetts’ law -- which was aimed at protesting Myanmar’s human right and labor policies -- impinged upon the power of the U.S. president, the case would probably have ended up in an international court for violating the WTO, McCrudden said.
“My prediction is that the WTO dispute settlement process seems likely to be called [to address this contradiction] on at some point,” McCrudden said.
The United States pioneered “linkages” in the 1900s and has used them to promote fair labor standards. For example, it has refused to award contracts to American companies that used sweat shops, enacting “buy American policies” laws in World War I, and later using affirmative action and minority set-asides to promote racial advancement, McCrudden said.
The practice has since spread internationally. Canada and Australia have used “linkages” to advance indigenous-owned businesses. And, in recent years, South Africa and Malaysia, have used linkages to promote post-Apartheid integration and the advancement of ethnic Malay-owned businesses, respectively. India is considering extending linkages to promote social advancement by members of lower castes, and Brazil may use them to promote fair trade.
But linkages conflict with trade agreements for the very reason they are so effective -- their broad economic implications. Many governments spend between 10 percent to 20 percent of their GDP on procurement and, as national budgets are strained, trade negotiators have placed growing emphasis on making procurement spending more efficient, transparent and commercially driven.
That has raised fundamental tensions between the sovereign social policies of some nations, and trade regulators -- not to mention the World Bank, which bases the terms of some loans on language in trade treaties.      
“This is only one example of a much broader debate,” McCrudden said. “Developing nations are blocking future multilateral agreements because of the potential future impact” on their own social policies.
At the Doha round of talks, Malaysia killed the prospect of introducing transparency into government procurement, he said. And “a lot of developing nations have been opting out of GPA,” the “agreement on Government procurement,” which is the WTO’s legally binding position on the issue, he said. Both Malaysia and South Africa have “considered the benefits of joining and have decided its too high a price.”
Part of the reason the issue has yet to be resolved, he argued, is that WTO members have “seen it as a side issue” and “dealt with it episodically.”
Conversely, the European Commission, where McCrudden has served on the committee examining equality law, has made some progress on the issue.  
Linkages, he said, were the issue of contentious debates in the EC’s early days, he said. In the 1980s, critics like Margaret Thatcher increasingly condemned linkages, and they came under legal attack for being protectionist.
“The power of national government is being redefined,” McCrudden says. “Domestic linkages have changed. But equally, European procurement regulation has adapted in the face of domestic procurement linkages. Both have benefited from this engagement. Members will continue to need to adapt, but the board outlines of a compromise are there. ”
The WTO is far away from reaching that ideal and WTO courts will likely be forced to mediate.