TWN Info Service on WTO and Trade Issues (Sept13/02)
13 September 2013
Third World Network  

Azevedo takes over as D-G in adverse international scenario

Published in SUNS #7649 dated 9 September 2013

Geneva, 4 Sep (Chakravarthi Raghavan*) - The new Director-General of the World Trade Organisation (WTO), Roberto Azevedo, who took over on 1 September and is due to speak to the General Council on 9 September and outline his ideas on speeding up the preparatory work for a mini-package deal at the Bali Ministerial, faces an international scenario more adverse than when he was elected to that office in May.

In a message posted at the WTO website, Azevedo has underscored the forthcoming ninth Ministerial meeting at 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 at 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 an end to the ‘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 the 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 have made the type of concessions that the US and Europe have been demanding for a package deal at Bali (with no give from them), it will no longer be so. (More on that below.)

Unfortunately, the G20 Summit has been effectively derailed by the crisis in Syria and the US moves, backed by France, to take military measures to punish Damascus for its alleged use of chemical weapons in the ongoing civil war, fuelled by Saudi Arabia and other Gulf states, and with the clandestine support of the US, Britain and France.

US President Barack Obama, who had threatened to punish the Assad regime (through ‘limited strikes', for US naval vessels assembling in the area to hurl Tomahawk cruise missiles at Syria), and had intended to do so before going to the G20 summit, has now asked for Congressional authorisation, which can come earliest only next week. Even that at the moment of writing seems uncertain.

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 G20 since 2008.

However, in the kind of macro-economic 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 (TF) agreement (where everyone else are being asked to harmonise 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 G-33 (Indonesia, India and others), 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 a 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 TF.

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

* 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 TF?

As it stands, neither the US nor EU seem willing to yield on the developing country key issues: neither on an LDC package, nor on ending agriculture export subsidy (EC ending it as envisaged at Hong Kong in 2005), nor enabling developing countries like India, Indonesia and others to provide food security to their poor without infringing the 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 EU at the WTO in this situation?

* 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 TF to satisfy the US?

From the narrower focus of the WTO itself, 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 secretariat functions.

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

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

Second, Lamy, as EU Trade Commissioner, managed to overload the WTO agenda with the Doha Work Programme launched in 2001 as a ‘single undertaking', buying 10-years' time for CAP reforms (for the EU to do some box-shifting in agriculture support), as he told the informal EU Parliament meeting shortly after launching the Doha Round.

After taking over as Director-General of the WTO, Lamy has run 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 has managed to reward his chef de cabinet, Ms Arancha Gonzalez of Spain, by getting her appointed to the post of head of the International Trade Centre, run jointly by the WTO and 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. Ms Gonzalez's curriculum vitae shows that her main experience so far has been in secretariat administrative jobs - in the EU Commission at Brussels 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 organisationally is in 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, and 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 the dispute panels and of the Appellate Body, signing on to a ‘no conflicts of interest' provision of sorts, Lamy's own contract does not appear to have had such a provision.

According to some trade diplomats, only the current chair of the WTO's Budget Committee Mr Michael Stone of Hong Kong-China appears to have raised this question - which surfaced as an issue a couple of years ago when Mr. 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 EU against China over restrictions it had placed on the operations of AP Dow Jones, Reuters and Bloomberg news agencies as financial service providers. The dispute itself was settled among 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 (see SUNS #6831 of 9 December 2009) 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 raised the issue, the majors advised him to let things go as Lamy was soon leaving office.

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

How, Mr. 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 set the WTO as an organisation on a sound footing.

(* Chakravarthi Raghavan is Editor Emeritus of the SUNS.)