The next Director General of WTO

These are unhappy times for the World Trade Organization. Just ten-years after its creation it is struggling to maintain the confidence of it’s members while besieged by violent “anti-globalization” protests and constipated by its own decision-processes. The opportunity to select a new Director General in the next few months looks like a chance to attack these problems from a new angle. A major challenge is to bridge wide differences among countries in their understanding of the WTO Agreements and participation in the trading system. Despite the evidence—most spectacular in China—that opening to the global market is a proven path to growth and that closed economies stay poor, the reluctance of governments in the developing country majority of WTO to open markets in step with the industrialized world, matched with the refusal of rich countries to open their markets to the low cost food, services and manufactures of the developing world, has crashed WTO trade negotiations twice in the past four years. There are four candidates for the Director General’s job. Judged on technical ability and experience, Carlos Perez del Castillo, the former Uruguayan Ambassador to WTO, probably has the edge over the others. He has direct, inside, experience of the management of WTO negotiations at the top level over a long period. He is an economist—who trained in the Australia Bureau of Agricultural Economics at the start of his career—with an excellent reputation as a recent Chairman of the WTO’s General Council. He also has a keen sense of how to manage an issue in the WTO (in 1986 he established a coalition of countries including Australia that later became the Cairns Group) and the administrative experience necessary to run the Secretariat. But the one to beat seems to be Pascal Lamy, the widely admired former Trade Commissioner for the European Commission. He has charisma, charm, an outstanding record in managing the coordination of European trade policy and, probably, the credibility with key governments to take the WTO in new directions. The question is: do we want to move in the direction in which M Lamy is likely to lead? Lamy may well win the support of the USA, which has been cool to the Brazilian candidate: the outgoing US Trade Representative Robert Zoellick has obviously built a good personal relationship with his European counterpart (as has the Australian Trade Minister, Mark Vaile). He has the support of the EU, too, after being nominated by France whose conservative government apparently did not want to offer the Lamy a position at home. Also, he may well win the endorsements of Japan, Korea, the nordic governments and of those developing countries, including Indonesia, whose first concern may be that the Latin American candidates would be too keen on further reform of Agricultural markets. It’s unlikely that the subtle Lamy would defend the ‘old fashioned’ agricultural trade barriers Europe has maintained since the 1950s. His boldest—possibly most characteristic—move as Trade Commissioner was to seize the initiative for re-starting the WTO negotiations after the Cancún disaster by announcing in May 2004 that the EU would agree to eliminate their agricultural export subsidies once the talks resumed, forcing some of his Member governments to scramble to catch-up with the news. But his other instincts are more worrying. As a European socialist Pascal Lamy values the order of regulation and the protection of inchoate ‘community values’ above the ‘disruption’ of market mechanisms and ‘individualism’. When Lamy speaks from the heart—as he did in September last year at a conference on the future of the multilateral trading system—he advocates a new class of exceptions to WTO rules to safeguard ‘social choices’. [A copy of the speech is available at “here”: es/spla242_en.htm] His recommendations for “imposing limits on international integration to defend the legitimacy and diversity of social choices” were delivered in a measured way. But they are only a more sophisticated version of an argument against global market integration promoted by anti-trade and anti-globalist NGOs. It’s a policy fraught with ‘moral danger’ since there are no limits in principle to the ‘social choices’ that such a new class of legitimized barriers would protect and every protectionist in the world could be expected to claim its shelter. There are already ‘exceptional’ provisions built into the WTO that acknowledge the right of governments to take non-compliant action, when necessary, to secure objectives such preserving scarce resources or national security or even ‘public morals’. But in the last few years, the balance between the rules and the exceptions has been set askew by barriers that Europe began to deploy while Lamy was its top trade official. The EU has dramatically expanded its use of WTO exceptions and ‘values based’ protection under the guise of ‘precautionary’ safety bans on imports of food products; or dressed-up as consumer protection in the form of ‘geographical indications’ of origin for food and beverages. Europe has invoked ‘community values’ to justify a ban on the sale of meat from hormone-treated cattle that has no health justification, to limit foreign services competition on the grounds of Europe’s stronger ‘privacy’ concerns about the movement of data and to first ban and then restrict the import of pharmaceuticals and seeds produced with genetic technologies of whose use even the Pope approves. Does the WTO, right now, need a Director-General whose ideas and whose record in office reveal a focus on limiting the impact of international integration when the majority of WTO members are only beginning to realize the opportunities and benefits?  Or does it need a Director-General who will defend and help repair a world market system already showing fractures created in the name of the different values and ‘community preferences’? Creating new barriers in the name of ‘social choices’—as M Lamy advocated—would be an excursion in precisely the wrong direction.

No Comments

Leave a Reply

Your email is never shared.Required fields are marked *