Rising protectionism sparks keen interest in saving the multilateral trading system
As home to World Health Organization, Geneva is already at the centre of pandemic-related policy making. Last week saw yet another flurry of activity, on the shores of Lac Léman – at the World Trade Organization. Face-masked officials accompanied interested candidates who were there to present their case to become the next chief of the international trade body.
At a time when WTO’s leadership is needed most, when world merchandise trade could fall by a third, the current WTO Chief Roberto Azevêdo will step down at the end of August this year. Even before the pandemic, the WTO has been struggling to get its members together to make rules for international trade. It has suffered, what some would call body blows, in the form of the U.S. administration effectively suspending the world’s top international court by refusing to appoint judges.
Rising protectionism, trade wars, a general lack lustre approach towards the multilateral trading system, and a world economy in a deep contraction, puts a great burden of expectations on the next boss of the WTO. Come the pandemic, the crucial role of WTO became even more significant as the enforcer of global trade and intellectual property rules.
Stalled containers in oceans, suspended supply chains, export restrictions on medical equipment and even the world’s fish – all these are governed by and depend on a functional multilateral rules-based trading system not held hostage by short-term populist politics. This election matters as much to the world, as it does to the WTO itself.
Geneva Health Files brings you a peek into the election process so far and why it matters.
WHY IS THIS ELECTION IMPORTANT?
Elections for the top boss of any large international organization is a conduit to understand prevailing geopolitical powerplay. And this is no different. With large powers on both sides of the Atlantic, looking inwards, there are spaces opening up for keen players to step in and take charge directly or from behind the scenes. For example, a recent report by Politico suggested UK’s efforts to make space in Geneva post-Brexit, while recognizing that “The U.K. is no longer part of the EU, which is among the top trio in Geneva, together with the U.S. and China. Following those three, India, Brazil and Japan are the group with the most political and economic weight. Britain fits in only with a third group of countries such as Mexico, Canada and South Korea.” (Look also to WHO to understand this in a wider context, where the U.S. and China also face up each other, with the EU quickly gaining ground.)
The current period is of vital significance given the state of the world economy and literally, the health of the world’s peoples. Trading patterns and economic assumptions of many decades have been upended in a matter of months since the pandemic struck in early January. The new chief would not only have to contend with legacy issues of the institution itself, but also has to use her (or his) powers and skills to bring countries together to play their part in getting the WTO to deliver solution in a world that hopes to build back better.
A number of issues, plague the organization, notably, the impasse at the Appellate Body – a mechanism for resolving trade disputes in a rules-based system, stands suspended due the American refusal to cooperate in the process for the appointment of judges to this international trade court. (Some believe that there is no guarantee that a potentially new administration in the U.S. may solve this.) Therefore, a new WTO chief, no matter who, should ideally be able to push countries in a direction where the crises around the AB is resolved. Candidates who are not deft with negotiating political pressures may be unable to break this impasse. Already, the U.S. has threatened to leave the WTO. (In parallel, President Donald Trump has already announced that the U.S. will leave the WHO.)
A worsening pandemic points to greater protectionism with some countries already imposing tariffs against others. With the Appellate Body unable to resolve disputes, the international trading system risks coming under greater uncertainty in an already challenging time.
The organization is headed to its next ministerial in 2021 where 164 member countries come together to work on trade mechanisms on a host of issues. The ministerial is the highest decision-making body of the WTO.
THE ELECTION PROCESS OF THE WTO CHIEF
It is significant that when WTO cast its net to choose the next boss – it received eight candidatures. As a member state driven organization, this shows that there is deep interest in saving the multilateral trading system even as protectionist trade voices become shriller. Egypt, Kenya, the Republic of Korea, Mexico, Moldova, Nigeria, Saudi Arabia, and the UK nominated candidates for the post of the Director General. Some of the nominations came just on time, when the window closed on July 8.
It was in mid-May 2020, that DG Azevêdo made his announcement to step down, a year ahead of the conclusion of his second four-year term. (This left the WTO to find a candidate in three months’ time, instead of taking the usual nine.)
The procedures for the Director-General selection process, adopted by WTO members in 2002, says, “In the event of a vacancy in the post of Director-General, the General Council shall designate one of the existing Deputy Directors-General to serve as Acting Director-General until the appointment of a new Director-General. The Chair of the General Council shall initiate, as soon as possible, a process for appointment of a new Director-General, in keeping with the procedures set out herein, and may establish expedited deadlines as necessary in consultation with Members.”
After consultations, General Council Chair David Walker announced a month-long period for members to submit their nominations. This period came to a close on July 8. Last week candidates met with WTO members at a special General Council meeting (15th-17th July) to make present themselves and make statements.
Ambassador Walker (New Zealand) also spelled out timelines for the next phases in the selection process as per defined procedures. It is understood that the process of the candidates engaging with WTO members (campaigning for support) will continue till 7 September. Later, the final phase of the selection process is expected to begin, that as per guidelines, cannot be more than two months. In a press release earlier, WTO explained that the Chair of the General Council, “Ambassador Walker, together with the Chairs of the Dispute Settlement Body (Dacio Castillo of Honduras) and Trade Policy Review Body (Harald Aspelund of Iceland), will consult with all WTO members to assess their preferences and seek to determine which candidate is best placed to attract consensus support. This phase may involve more than one stage of consultations as members seek to narrow the field of candidates.” More details are awaited on the specific stages in the final phase.
Under the 2002 agreed procedures for selecting the DG, the General Council “shall designate one of the existing Deputy Directors-General to serve as Acting Director-General until the appointment of a new Director-General” since a new candidate will not be in place by September 1, 2020. (DG Azevêdo steps down on August 31). The four Deputy Directors-General are Yonov Frederick Agah (Nigeria), Karl Brauner (Germany), Alan Wolff (US), and Yi Xiaozhun (China).
One source at WTO said that the election of the WTO DG is rife with opacity. “Even the elections at the Vatican are more transparent,” a source who spoke on the condition of anonymity told Geneva Health Files. “The selection process is not very transparent, often members won’t say who they are supporting until the General Council decides by consensus on one of the candidates. There will be some members who will announce their favourites in advance, so far none have”, the source added.
Consensus is crucial. It is the only way the winning candidate survives elimination. Typically, a few key delegates will consult countries and forge a consensus around the chosen one.
To understand the importance of consensus, look no further than 1999. Incredible as it may sound – in 1999, countries could not agree on a candidate. Eventually, both served a three-year term each. (Mike Moore – 1999-2002 and Supachai Panitchkpakdi – 2002-2005).
“The atmosphere then was opaque and poisonous. Countries would not want a repeat of that”, a source familiar with the events of 1999 recounted.
So, WTO is no stranger to a politicised election process for appointing its director general. Over the fall, we will witness if and how countries may converge around a single candidate in a hyper-politicised environment like the current one.
What the consultation process could entail has been described in a fair amount of detail. See below as stated in a 2002 document titled “PROCEDURES FOR THE APPOINTMENT OF DIRECTORS-GENERAL”:
CONSENSUS IN WTO LANGUAGE
15. In the final two months of the process, the General Council shall proceed, through a process of consultations, to narrow the field of candidates and ultimately to arrive at its choice for appointment.
16. In arriving at its choice, the General Council shall aim to reach a decision by consensus.
17. The Chair, with the assistance of the facilitators, shall consult all Members, including non-resident Members, in order to assess their preferences and the breadth of support for each candidate. The ultimate aim of the consultation process shall be to identify the candidate around whom consensus can be built. In order to do this, it may be necessary to conduct successive consultations to identify the candidate or candidates least likely to attract such a consensus.
18. The outcome of the consultations shall be reported to the membership at each stage. It is understood that the candidate or candidates least likely to attract consensus shall withdraw. The number of candidates expected to withdraw at each stage shall be determined according to the initial number of candidates, and made known in advance. This process shall be repeated in successive stages on the basis of a revised slate of candidates each time, with the aim of establishing consensus around one candidate.
19. At the end of the final stage of the consultative process, the Chair, with the support of the facilitators, shall submit the name of the candidate most likely to attract consensus and recommend his or her appointment by the General Council.
Recourse to voting as a last resort (This has not happened at WTO so far)
20. If, after having carried out all the procedures set out above, it has not been possible for the General Council to take a decision by consensus by the deadline provided for the appointment, Members should consider the possibility of recourse to a vote as a last resort by a procedure to be determined at that time. Recourse to a vote for the appointment of a Director-General shall be understood to be an exceptional departure from the customary practice of decision-making by consensus, and shall not establish any precedent for such recourse in respect of any future decisions in the WTO.
THE CANDIDATES AND WHAT THEY SAID
An overtly political election or a divided membership will endanger the process. The U.S. and China, both have to agree on the candidate. This might indicate that the candidate probably will have to walk a tightrope to win consensus from opposing factions as it were. (For example, see the Reuters story on the Kenyan candidate seeking Washington’s backing and giving an “apparent nod” in reference to Appellate Body’s over-reach as claimed by the U.S.)
Both Reuters and Bloomberg have declared Kenya’s Amina C. Mohamed as an early front runner in the race. Here is a wrap of all candidates in the fray.
It is fascinating to read the pitches of these candidates, their visions to reform WTO. Geneva Health Files pulled out some key quotes from their public statements.
Jesús Seade Kuri: Nominated by Mexico has said that he was an “influential” GATT Ambassador for Mexico and Chief Negotiator for the Uruguay Round, was a GATT Deputy Director General in the team “called in to rescue the negotiations that were all but collapsed”. (Nominated 8th June)
Key quote: “I am also fully convinced that, with the WTO in crisis mode, and for a DG more involved as some members may wish to have at this point in time, it is of the essence that the DG has a solid command of the arcane world of the WTO and trade negotiations; that he or she be aware and be sensitive to the reasons behind certain balances in the texts, and in command of the alternatives that may have been formulated or could be explored. In the absence of this fundamental sure-footedness on the WTO’s inner workings, at the first serious discussion among senior trade negotiators, the new DG will quickly be marginalized and sidelined.”Kuri [mexico]
Abdel-Hamid Mamdouh: Nominated by Egypt. Mamdouh recounted his days when he began as a negotiator for Egypt in 1985. He joined the GATT secretariat in 1990. (Nominated 9th June)
Key quote: “The truth is, that the consensus, our common purpose, has faded. One might say we are still in the same boat, but we are rowing in different directions. This will not hold. At some point, possibly very soon, if the situation is not corrected, the hull of the boat will break under the tension of differences. In any legal system, there needs to be a balance between the “legislative” and the “judicial” functions. For the WTO, these are the negotiating and the dispute settlement functions. While dispute settlement gained strength due to the inherent automaticity of procedures, the negotiating function has broken down. This created an unsustainable imbalance.”mamdouh [egypt]
Ngozi Okonjo-Iweala: Nominated by Nigeria. Former finance minister of Nigeria, a trained development economist, who has had stints at the World Bank and at Gavi – The Vaccine Alliance. Okonjo-Iweala has been recently been appointed as the African Union (AU) Special Envoy to mobilize international financial support for the fight against COVID-19 and World Health Organization (WHO) Special Envoy for Access to COVID-19 Tools Accelerator. (Nominated 9 June)
Key quote: “With political will, outstanding issues of subsidies that lead to overfishing and unsustainable fishing can be concluded. Agriculture has complex moving parts on which substantial progress will need to be made, be it on domestic support, Public Stockholding for Food Security (PSH), Special Safeguard Mechanism (SSM), Cotton or market access.”okonjo-iweala [nigeria]
A spokesperson representing Ngozi told Geneva Health Files:
“If Dr. Ngozi is selected as DG, she will put in place collaboration with the right organizations and initiatives so the WTO is helping to eliminate undue barriers and restrictions to vaccines. She believes it is very important that life-saving vaccines are available to rich and poor countries at the same time, while respecting the intellectual property rights of those who have developed and manufactured them. She would combine the experience she’s had at Gavi with the WTO’s work.”
Tudor Ulianovschi: nominated by Moldova. Moldova’s former Minister of Foreign Affairs. (Nominated 16th June)
“I believe that providing timely transparency with respect to trade and trade-related measures taken or withdrawn in the context of the COVID-19 crisis was of critical importance and relevance. Members need to seek further monitorization of these measures on an ad hoc basis, stressing that trade restrictive emergency measures aimed at protecting health, shall be imposed only if deemed necessary,.. and these shall be targeted, proportionate, transparent and temporary, not create unnecessary barriers to trade or disruption to global supply chains, and be consistent with WTO rules. In the same time its necessary to continue to advocate for withdrawal of such measures as soon as situation improves.”ulianovschi [moldova]
Yoo Myung-hee: Nominated by the Republic of Korea. Country’s first female Trade Minister. (Nominated 24 June)
Key quote: “My 25-year career in international trade has taught me that solid groundwork is the basis of an agreement, and political will is what closes the deal. I have dealt with both the technical details of agreements, as well as engaged in finalizing major trade agreements as Trade Minister. I believe my extensive experience and expertise will enable me to offer insights and creative solutions to restore and revitalize the WTO.”myung-hee [korea]
Amina C. Mohamed: Nominated by Kenya. Former Foreign Affairs and International Trade Minister for Kenya. Has chaired all of the WTO’s highest decision-making bodies, including the Ministerial Conference in 2015, the General Council in 2005, and the Dispute Settlement Body and the Trade Policy Review Body in 2004. (She said she has undertaken negotiations in every corner of the WTO building.) (Nominated 7 July)
Key quote: “History tells us how the stifling of trade through protectionist reactions made the Great Depression of the 1930s last longer and cut deeper. The GATT and subsequently the WTO were established precisely to prevent such mutually destructive behaviour.
…Renewal has to start with facing up to the defects that have weakened the system in recent years: the inability to update rules to reflect the changing realities of how trade is conducted; the sterility of ideological standoffs; the retreat into defensiveness; and the sense of the benefits of trade not being equitably shared.”mohamed [kenya]
Mohammad Maziad Al-Tuwaijri: Nominated by Saudi Arabia. The country’s former Minister of Economy and Planning and a career banker. (Nominated 8th July)
Key quote: “My family comes from generations of traders. I grew up with stories about my grandfather’s travels by caravan across the desert to trade throughout our region. He and other traders were guided by the North Star, just as they were in all of your trading histories.
In my view, the only way for the WTO to succeed is for Members to establish goals, then set a course, following their True North toward those goals. In the journey of WTO Members, the DG is a compass to help Members stay on the path toward their goals with the support of the Secretariat. Businesses and governments cannot function without direction and leadership. And the WTO is no different.”al-tuwaijri [saudi arabia]
Liam Fox: nominated by the UK. Member of Parliament and former UK Secretary for International Trade and President of the Board of Trade. (Nominated 8th July)
Key quote: “I commit to you today that if you give me the honour of becoming the next DG then I will ensure that at least half of the WTO’s most senior leadership team are women. 10 I believe that the empowerment of women, including through trade, is a fundamental economic and development objective – just as fundamental as access to education or political expression. I also believe that in support of that goal we should send out an unequivocal message about the powerful and equal role of women in trade right here, in the WTO”fox [uk]
In a report by Third World Network, trade envoys cited that some of the candidates “chose to give primacy to the plurilateral initiatives over the multilateral Doha Development Agenda negotiations”. (Moldova, Korea and Kenya). It is understood that the candidates seek to accelerate work on the five plurilateral Joint Statement Initiatives (JSIs) on electronic commerce, investment facilitation, disciplines for MSMEs (micro, small, and medium enterprises), trade and gender, and domestic regulation in services.
The report also added that these candidates “more or less appeared to toe the line of the developed countries, particularly the US, in insisting that a special examination is needed in terms of how S&DT can be factored in the negotiations”, citing a trade envoy. Largely, candidates support the issue of special and differential treatment (S&DT) on grounds that it is a core principle of the WTO, the TWN report said.
WHAT ROLE DOES THE DG OF WTO PLAY?
For all the brouhaha around the elections, the powers of the WTO Director-General are limited, but the role can be a crucial one, particularly in bringing countries together for reforms and other priorities.
The Marrakesh Agreement Establishing the World Trade Organization, describes the DG’s role in less than 200 words, a WTO official pointed out. Article VI states that “The responsibilities of the Director-General and of the staff of the Secretariat shall be exclusively international in character. In the discharge of their duties, the Director-General and the staff of the Secretariat shall not seek or accept instructions from any government or any other authority external to the WTO. They shall refrain from any action which might adversely reflect on their position as international officials. The Members of the WTO shall respect the international character of the responsibilities of the Director-General and of the staff of the Secretariat and shall not seek to influence them in the discharge of their duties.”
Members want the new chief to be able to stand up to powerful countries. “Although, there was not much he could do given the nature of the role, there is still a sense that the current DG was unable to use his good offices for convening members, around a number of issues particularly the impasse at the Appellate Body”, a source requesting anonymity told Geneva Health Files.
WTO procedures state that “candidates should have extensive experience in international relations, encompassing economic, trade and/or political experience; a firm commitment to the work and objectives of the WTO; proven leadership and managerial ability; and demonstrated communications skills.”
It appears that strong political experience may be crucial given the precarious state of play at the WTO today.
“The DG is not a super hero, he cannot propose anything. This is very much a member state driven organization. For a DG to be effective, he will need the member states behind him,” the source said. Many of the candidates recognise these limitations as evidenced during their interactions with the press.
“However, the DG has persuasive powers, he can guide countries to certain positions. He is the public face of the institution,” the source explained. It is also a function of the time and the environment when a chief assumes office.
Tailpiece: There has been a lot of discussion on whether nationality plays a role in the appointment of the DG, whether it is time for an African candidate and if it should be a woman. Since its creation in 1995, WTO has been led by three Europeans, and one each from Oceania, Asia and South America. There is no principle of regional rotation at WTO.
The women bidding for the top job at WTO including the Nigerian and the Kenyan candidates, said that while they were proud to be of inspiration for women globally, they seemed to suggest that the position of the DG requires someone with relevant political, negotiating and other skills but that it does not necessarily have to be viewed in gender terms. This kind of framing is was not surprising, but one hoped that the candidates could have taken a clear and a more pronounced stand on the WTO being led by a woman.
Perhaps it is time for several firsts for the WTO: a woman director-general, or its first boss from Africa, steering it through one of the most critical moments in its 25 year old history.
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