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That man from Rio

Geo-politics defined new WTO chief’s candidacy,geo-economics will shape his tenure

Written by Sanjaya Baru |
May 15, 2013 3:08:38 am

Geo-politics defined new WTO chief’s candidacy,geo-economics will shape his tenure

During his relentless travel around the world over the past few weeks,seeking support for his candidature,the newly named director general of the World Trade Organisation (WTO),Brazil’s Roberto Carvalho de Azevedo would have realised that the world is far more complicated than most imagine it to be. While the new geo-politics of the BRICS (Brazil,Russia,India,China,South Africa) and the old binaries of North-South and East-West defined his candidature,since Latin America claimed it was its turn at Geneva,his agenda and his success will depend on his ability to manage and traverse the increasingly complex overlapping and intersecting economic interests and regional partnerships that define the global economy today.

The media’s lazy caricaturing of Azevedo as a voice of the “South” and of “protectionism’,compared to his more free trade-oriented OECD rival,Mexico’s Herminio Blanco,captures only one dimension of this complex reality. Moreover,the “North vs South” caricature of the Azevedo-Blanco race is unfair to Mexico,which has been a spokesperson of the global South on many issues. Mexico being a member of the North American Free Trade Agreement (NAFTA) and the US backing the Mexican candidate did not make the Brazil vs Mexico race a North-South one. The point has been made that Azevedo collected votes from every continent.

While the US would have been expected to back a Mexican,the European Union was,in fact,sharply divided and an internal vote went narrowly in Mexico’s favour. Clearly,a beleaguered EU chose to impose group discipline,opting for the Spanish-speaking Mexican over a Portuguese-speaking Brazilian. Even African nations were divided and some did vote for the Mexican.

While the BRICS have been happy to claim Azevedo as one of their own,the fact remains that the Durban Declaration adopted at the last BRICS summit,barely a month ago,stopped short of naming the Brazilian as the jointly supported candidate of the BRICS. The declaration merely stated that the next WTO director-general should be a “representative of a developing country”. Mexico too views itself a developing country,though it is a member of the OECD.

In Geneva,where Azevedo has spent the last five years as Brazil’s ambassador and where he is widely respected and well regarded as the senior-most trade diplomat in town,the new director general is seen more as an “organisation man”,an insider,rather than merely a “voice of the South”,as a senior WTO diplomat put it to me.

The WTO’s first chief,Peter Sutherland,was a trade diplomat who moved from the GATT to the WTO at the latter’s inception. The retiring director general,Pascal Lamy,is a businessman turned politician turned diplomat. Both were EU trade commissioners. All other DGs have been trade ministers and organisational “outsiders”. Given the nature of diplomatic protocol,ministers tend to gravitate to their own flock and regard ambassadors as lesser mortals. This has proved to be a barrier in the day-to-day running of the WTO and in the management of negotiations.

WTO insiders welcomed Azevedo’s appointment precisely because he was not a minister but is a highly regarded diplomat with a firm grasp of the organisation that he will now head. This qualification is seen as critical to the WTO’s revival at a time when the real challenge to the WTO comes not from the traditional North-South battles within,but from the increasingly dangerous entrenchment of regional trade agreements (RTAs) and plurilateral free trade agreements (FTAs) and the marginalisation of multilateralism.

While free trade purists have always rejected regional and plurilateral trading arrangements,the WTO’s charter chose to be pragmatic and regarded RTAs and FTAs as building blocks of,rather than barriers to,the multilateral trading system. Even India,a strong advocate and defender of multilateralism in trade,has pursued several RTAs and FTAs over the past decade.

The game,however,has changed. Unable to get an outcome of its liking in the Doha Development Round,and wary of a rising China,the US is vigorously pursuing a Trans-Pacific Partnership (TPP) and a Trans-Atlantic Trade and Investment Partnership (TTIP). These initiatives are aimed at queering the pitch for the Doha Round,bringing issues that developing countries have been resisting,like labour,environmental standards and higher intellectual property rights protection,into trade agreements. Not to be left out of this game,China took the initiative to launch its own plurilateral FTA in the garb of the Regional Comprehensive Economic Partnership (RCEP). While India has gone along with this so far,its interests,like those of the Latin American and African economies that are outside the TPP/TTIP/RCEP fold,would lie in strengthening multilateralism rather than succumbing to regionalism. India’s difficulties in negotiating an FTA with both the ASEAN and EU are a reminder of the importance of multilateralism. African economies have also become assertive on this count as they see themselves on the cusp of a new era of growth and globalisation.

Azevedo has struck the right chord on this issue with his,albeit optimistic and hopeful,observation: “We hear many analysts express concern with the proliferation of negotiations of regional agreements,free trade areas,or plurilateral understandings. Whatever the reasons behind these initiatives,I firmly believe that the countries entering those initiatives would gladly negotiate a much broader and more encompassing multilateral deal. What we must do is ensure that the multilateral trading system remains the main tool for trade liberalisation.”

What,however,complicates the picture is the fact that on a range of issues facing the WTO the divisions are not always along North-South lines. The emergence of China as a major exporting and importing power has divided the South,with several developing countries,including Brazil,concerned about China’s exchange rate policy in the context of their growing trade deficit with China. There are other faultlines along the four major areas — trade in goods,trade in services,trade in agriculture and IPRs — that cut across both North-South and East-West divides.

Given the many challenges facing the WTO,Azevedo’s strategy for saving multilateralism must be crafted in a way that appeals to a plurality of the G-20 membership. He must arrive at the next G-20 summit with a strategy aimed at ensuring the victory of multilateralism over regionalism in trade. Clearly,Azevedo has to be a consensus builder,bridging the many divides in the global trading system. Perhaps Brazil,more than any other major trading nation,can play that role. And that,more than any other reason,may explain Azevedo’s convincing victory.

The writer is director for geo-economics and strategy,International Institute for Strategic Studies and honorary senior fellow,Centre for Policy Research,Delhi

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