Azevedo takes over as WTO DG in adverse international scenario

The WTO’s new Director-General Roberto Azevedo is confronted with the continuing impasse in the Doha Round trade talks as well as the prospect of making changes in the running of the organization, notes Chakravarthi Raghavan in the following article, written in the first week of the Brazilian’s tenure.

GENEVA: The new Director-General of the World Trade Organization, Roberto Azevedo, who took over on 1 September and is due to speak to the WTO General Council on 9 September and outline his ideas on speeding up the preparatory work for a mini-package deal at the Bali Ministerial Conference, faces an international scenario more adverse than when he was elected to that office in May.

In a message posted on the WTO website, Azevedo has underscored the forthcoming ninth WTO Ministerial Conference in Bali (3-6 December) as a key priority and that “a successful meeting there will provide a much needed shot in the arm for the global economy and the WTO.”

Azevedo is due to make his first international appearance at the summit meeting of the Group of 20 major economies in St. Petersburg this week, whose formal agenda is for the G20 leaders to focus on the global economic situation and provide some guidance for governmental actions by various members, in the wake of the US Federal Reserve and other central banks reversing course on their five-year-old unorthodox monetary measures to prop up the economy.

Even the hint of a “tapering” has resulted in stormy weather for the leading emerging economies, whose strong growth (mainly based on speculative free capital inflows) has provided considerable support over the last five years for a global economy buffeted by the financial crisis in the US and other centres.

All the major emerging economies (including Brazil, India, Indonesia and Turkey) are witnessing dramatic falls in the values of their currencies vis-a-vis the US dollar, and have been forced to, or are in the process of, hiking up interest rates to support their currencies.

As such, even if it had been feasible and equitous for them to make the type of concessions that the US and Europe have been demanding for a package deal at Bali (with no give from the developed countries), it will no longer be so.

Unfortunately, the G20 summit has been effectively derailed by the crisis in Syria.

No doubt, despite the open and hidden wrangles now expected over Syria at the summit, the G20 will still come up with some anodyne statements for a successful Bali meeting and the conclusion of the Doha Round – but it will make no more difference than the statements of the G8 since 2005, and the G20 since 2008.

Negotiating impasse

In the kind of macroeconomic situations they are facing, it will be virtually impossible for any of the developing countries to act on the trade front.

The negotiations on the key issues appear to be still at an impasse.

While the US and Europe continue to demand concessions from the leading emerging markets and other developing countries on the so-called trade facilitation agreement (where everyone else is being asked to harmonize their systems to the US procedures), the US and the EU are refusing to make any concessions on the limited proposals in agriculture.

The issue of food security raised by the developing-country G33 grouping, and for the mini-package to include the parts of the draft agriculture modalities text on this aspect, remains unresolved.

The US is standing firm on its position of “no concessions”, while India has adopted food security legislation guaranteeing provision of minimum food requirements to its huge population of the poor and needy. And with India facing elections next year, no government there can give up on this and also make concessions to the US on trade facilitation.

Ministers of developing countries going to Bali will be faced with two major issues:

l     First: Is any mini-package that may emerge between now and Bali sufficiently balanced to enable them to take on more commitments and make concessions to the US on trade facilitation?

As it stands, neither the US nor the EU seems willing to yield on the key developing-country issues: neither on a package for the least developed countries nor on ending agricultural export subsidies, nor enabling developing countries like India, Indonesia and others to provide food security to their poor without infringing the WTO Agreement on Agriculture.

Could any of the leading developing countries (both India and Indonesia, among others, are due to go through general elections next year) once again yield to the US and the EU at the WTO in this situation?

l     Second: Can they do so and agree on a Bali package on a provisional basis as envisaged in the Doha Ministerial Declaration and its single-undertaking work programme, or would they be expected to commit the folly of a definitive trade facilitation accord to satisfy the US?

Secretariat operations

From the narrower focus of the WTO itself, ex-Brazilian ambassador to the WTO Azevedo, who has the reputation among his former colleagues as a believer in the system, faces the prospect of making changes in the way the trade body’s secretariat functions.

First and foremost, since the time of Renato Ruggiero, WTO Directors-General have tended to bypass the accredited ambassadors, choosing to go over their heads and deal with ministers and heads of government/state. This approach has not produced any tangible results, only media headlines.

How Azevedo will strike a balance will be watched with some interest by his former colleagues.

Second, Azevedo’s predecessor Pascal Lamy, during the latter’s term as EU Trade Commissioner, managed to overload the WTO agenda with the Doha Work Programme launched in 2001 as a single undertaking, thereby buying 10 years’ time for EU agricultural reforms (for the EU to do some box-shifting in its agriculture support measures), as Lamy told an informal EU Parliament meeting shortly after the Doha Round was launched.

After taking over as Director-General of the WTO, Lamy ran the WTO secretariat over the last eight years with a small tight group led by his chef de cabinet, with other officials merely carrying out orders.

[Before leaving office, Lamy managed to reward his chef de cabinet, Arancha Gonzalez of Spain, by getting her appointed as head of the International Trade Centre, run jointly by the WTO and the UN Conference on Trade and Development (UNCTAD). The ITC was set up in 1964 with a narrow focus of providing technical assistance to developing-country enterprises (and now the transitional economies too) to promote exports. Gonzalez’s curriculum vitae shows that her main experience so far has been in secretariat administrative jobs – as Lamy’s chef de cabinet when he was EU Trade Commissioner, and then moving with him from Brussels to Geneva as his WTO chef de cabinet.]

Under eight years of Lamy’s stewardship as Director-General, the WTO secretariat organizationally is in a shambles, according to several secretariat officials unwilling to be cited. Secretariat morale has been low, with many directors and senior officials out of the loop of secretariat policy and decision-making processes.

Another failing, one for which the membership is responsible, apparently has been that while the WTO, at US insistence, from the beginning insisted on its officials, members of dispute panels and of the Appellate Body, signing on to a “no conflicts of interest” provision of sorts, Lamy’s own contract did not appear to have had such a provision.

According to some trade diplomats, only the current chair of the WTO’s Budget Committee, Michael Stone of Hong Kong-China, appears to have raised this question – which surfaced as an issue a couple of years ago when Lamy accepted a post as Director of the Thomson Reuters Founders Share Company. Thomson Reuters is a news agency, as well as a financial service provider in terms of the WTO Financial Annex definitions.

Early in 2009, a dispute was raised at the WTO by the US and the EU against China over restrictions the latter had placed on the operations of the news agencies AP, Dow Jones, Reuters and Bloomberg as financial service providers. The dispute itself was settled among the parties in consultations, but until end-2009, the terms of the settlement had not been notified to the WTO.

At the time the story of Lamy’s appointment to the Thomson Reuters Founders Share Company Board came out in end-December 2009 (a Brazilian paper first published the story, including the monetary payments – annual remuneration to attend meetings and travel and other expenses – attached to the job), the WTO, in response to queries, announced that Lamy was turning over any payments as Director to WTO charities. But this did not resolve issues of conflicts of interest. Developing-country members seemed concerned about such a conflict of interest, but not one raised it at the General Council.

Why the chairs of the Budget Committee in earlier years did not raise the issue is not clear, but when this year’s chair brought it up, the majors advised him to let things go as Lamy would soon be leaving office.

Some trade diplomats said even the Budget Committee’s oversight of the WTO budget, both appropriations and spending, has been less than desirable.

How Azevedo, as a former Brazilian diplomat (and Brazilian diplomacy has a longer history than that of other developing countries), will set things right remains to be seen. But if he does, it will perhaps go a long way to setting the WTO as an organization on a sound footing. (SUNS7649)

Third World Economics, Issue No. 553, 16-30 Sept 2013, pp 7-8