Session 5: The Challenge of Coherence in Sustainable Global Governance: The Role of Soft Law in Making Hard Choices
Friday November 9, 2:30 pm Session
Hard and Soft Law in International Institutions:Complements, not Alternatives
Contribution to Second Annual Envireform Conference, November 2001
Nicholas Bayne, London School of Economics and Political Science
Second Annual EnviReform Conference Hard Choices, Soft Law:
Combining Trade, Environment, and Social Cohesion in Global Governance
This contribution looks beyond the specific topics of this conference - labour standards, corporate social responsibility and the environment - to examine the use of hard and soft law in a range of international institutions. Some of these institutions are based on hard law, ie on rule-based systems, and some on soft law, ie on voluntary cooperation. Two examples of the first - the European Union (EU) and the World Trade Organization (WTO) - will be compared with two examples of the second - the Organisation for Economic Cooperation and Development (OECD) and the G7/G8 summit. The broad conclusion drawn from this comparison is that hard law and soft law are not alternatives. They serve different purposes and complement one another.
The European Union
The European Union, like the European Community (EC) before it, relies heavily on hard law, ie on formal obligations applying to all members. It is deeply rooted in the statute law tradition of continental Europe, which Britain has found hard to digest. The EU suffers from the drawback of this statute law tradition, in that it tends to over-legislate. Twice in its history the EU has almost ground to a halt under the burden of excessive law making, once in the late 1970s and again in the early 1990s. But there is no doubt that this capacity for collective law making has driven the economic integration of Europe. It is a principal reason for the success of the EU and for its attraction to those who wish to join it.
Because European governments, and European citizens too, are operating within their own hard law system, they tend to favour rule-making in wider international contexts. This appears, for example, in environmental issues like global warming. EU member governments, driven by European public opinion, are the strongest advocates of the rules embodied in the Kyoto Protocol. For the same reason the EU promoted an agenda for a new trade round that would enlarge the WTO's rule-making capacity, notably in investment and competition.
The EU also makes much use of soft law. Alongside the regulations and directives are recommendations and guidelines. Soft law approaches are used where some or all EU member states are not ready for formal, binding commitments. But in economic, social and environmental issues these soft law procedures are seldom seen as ends in themselves. They are more used as a preparatory technique, or even as a delaying tactic, until agreement can be reached on a formal agreement. Thus the United Kingdom under John Major got the binding 'Social Chapter' of the 1991 Maastricht Treaty converted into a non-binding 'Social Charter'. Similarly, Britain under Tony Blair is seeking to have aspects of corporate social responsibility handled by voluntary cooperation, rather than the binding directives that most other member states favour.
In addition, there is a large element of the European Union that is wholly based on soft law. The Maastricht Treaty created a Union with three pillars: first, the European Community, narrowly defined, covering economic and social issues; second, political cooperation, mainly in foreign policy; and a 'third pillar' covering justice and home affairs. Both the second and third pillars are soft law edifices. But while this leads to less tension within the EU, it produces less impressive results. Pascal Lamy, the European Trade Commissioner, has more power to speak and act for Europe than his foreign policy colleagues Chris Patten or Javier Solana.
The WTO
The World Trade Organization, as created by the Uruguay Round of trade negotiations, is also very largely based on hard law - more so than its predecessor, the General Agreement on Tariffs and Trade (GATT). The WTO has created a worldwide trade regime covering not only manufactures, but also agriculture and services. Its dispute settlement regime has legal force that cannot easily be evaded.
The hard law of the WTO, with over 140 members, naturally differs from the EU with only fifteen. Agreements reached at Geneva do not apply automatically, like regulations agreed at Brussels. They have to be ratified by the national legislatures of all the WTO members. But once in force, they have the effect of law. That makes the WTO appear a very strong regime - stronger, in fact, than its members realised or than the world is ready for. The WTO, like the EU, has fallen into the error of over-legislation.
The WTO is an institution equipped to set rules for trade and to remove trade barriers. It is not equipped to regulate other subjects. But because the WTO system looks so strong, in relation to other multilateral regimes, it has got drawn in where it does not really belong. In retrospect, it was a mistake to include intellectual property and food safety in the Uruguay Round agreements, but the damage has now been done. But it would be wrong to have the WTO regulate labour or environmental standards. This particularly aggravates developing countries, who see new protectionist barriers being raised against them. Developing countries have already concluded that the Uruguay Round results did not help them as much as they had hoped. They have come to feel that the WTO did not treat all its members equally. It was this more than anything that destroyed the Seattle WTO meeting two years ago.
This year's WTO meeting in Doha was a second attempt to launch a new round of trade negotiations. This time it was successful. The declaration agreed by ministers includes many points of importance to developing countries, especially the poorest. Although the non-trade issues have not gone away entirely, largely because of EU pressure on the environment, they have much less salience. Some of the earlier problems, for example in intellectual property, are being addressed. So the prospects for the WTO look much more hopeful.
Soft law has its place in the WTO, as in the GATT before it. The voluntary regime for industrial subsidies under the GATT, dating from the late 1970s, did not have much effect on its own. But it prepared the way for the formal rules agreed during the Uruguay Round. More important, the WTO's Trade Policy Review Mechanism, where countries explain their trade policies to their peers and respond to criticisms, leads only to non-binding recommendations. This part of the WTO works more like the OECD, the next institution to be considered.
The OECD
In contrast to the EU and WTO, the OECD works almost wholly through soft law, ie through voluntary cooperation. The OECD's method could be summed up in the two slogans inscribed in the temple of Apollo at Delphi, in classical Greece: "Know Thyself" and "Nothing in Excess". The institution's value to its members is, first of all, as a source of information and comparative analysis across the whole range of economic and social policies. Second, it provides a place where policies are discussed and modified by persuasion and peer pressure, to make them more internationally coherent and compatible. Without the requirement to produce legally binding results, the OECD is free to be more innovative and experimental. Countries can get good ideas from the OECD, which they can reflect in their national policy and legislation - though often they will claim to have thought of the ideas themselves.
The OECD has the power to conclude legally binding agreements, if its members so decide. But it seldom tries to do so; and when it does, it often does not succeed. This is partly because the persuasion and peer pressure technique of the OECD is not very transparent; partly because it has no compliance machinery; and partly because rules agreed in the OECD will inevitably have an impact on non-member countries, who resent it. This explains why the OECD's Multilateral Agreement on Investment did not work; and why the OECD's rules on tax havens have provoked such resistance.
But if the OECD does not often make rules itself, its soft law activities influence profoundly the making of hard law elsewhere. The OECD makes a vital input into the rules drawn up by wider multilateral institutions. The main content of the Uruguay Round agreements on agriculture and on services - the two areas of greatest advance - were worked out in the less demanding, more intellectual and more experimental context of the OECD.
The G7/G8 Summit
The G7/G8 summit, with its supporting apparatus, relies entirely on voluntary cooperation and soft law. It has no capacity to make hard law and there is no demand that it should. It would be quite unacceptable for this powerful and self-selected group to dictate to the rest of the world. Like the OECD, G7/G8 discussions can be innovative and experimental. The G7/G8 does not have the intellectual resources of the OECD Secretariat. But because it has so few members, it can be very flexible and move surprisingly fast.
Very little that is agreed among the G7 or G8 applies to the members alone. Nearly everything has an impact on wider international decision-making. Here the G8 has a double contribution to make. The first is its capacity to resolve differences among its own members. If the G8 are not agreed on how to act, there will be no agreement on what to do more widely. Second, the G8, if they can agree, can then provide leadership to the multilateral institutions. This is not provided, as sometimes in the past, on a take-it-or-leave-it basis, but as the foundation for wider consensus.
A topical example is in the field of money laundering and freezing terrorist assets. Twelve years ago the G7 summit launched the Financial Action Task Force (FATF) to combat money laundering. This became a free-standing body of wider membership. Within the last eighteen months the G7 have brought international attention back to the FATF, so as to discipline certain countries providing havens for criminal funds. So the terrorist attacks of 11 September found the G7 well positioned to extend the remit of the FATF rapidly to the pursuit of terrorist assets.
Conclusions
Some broad conclusions on hard law and soft law can be drawn from this comparison of the EU and WTO with the OECD and G7/G8, as follows:
First, hard law has the greatest potential. It is more durable, more predictable and usually more transparent. But it is very demanding; and if it is abused or otherwise goes wrong, putting things right is very difficult.Second, soft law can do some things that hard law cannot. It is less demanding and more flexible; it facilitates innovation and experiment. It can provide the essential preparatory phase before people are ready for hard law commitments. But it can also be used as an excuse for not going further and it can come apart under pressure.Third, it is not easy to mix hard law and soft law in the same institution. There are some examples of successful combinations. But normally very different disciplines are required to produce results.Finally, soft law stimuli are often essential to get the hard law moving. Thus the OECD and G7, soft law institutions themselves, make things happen in wider rule-making.To sum it up in a single image: hard law is like marriage; soft law combines features of courtship and cohabitation.
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