The WTO’s “Dangerous” Election

posted by
on January 21, 2013

The WTO’s “Dangerous” Election

(first of two parts)

 

Nine candidates have thrown their hats into the proverbial ring to succeed Pascal Lamy as Director-General of the World Trade Organization, whose term expires on Aug. 31. So it’s timely to take a careful look at their backgrounds, and also at some of the geo-political crosscurrents that, fairly or unfairly, will eliminate all but the last candidate standing. But the broader context is more important, as the future of this pillar of the global trading system has become a cause of concern.

It takes a little history — an appreciation of a proud track record that, if not totally forgotten, one that world leaders seem to have taken too much for granted in recent years — to understand why this particular change of leadership is so important.

The WTO represents one of the worlds most enduring economic success stories. It began more than a half century ago. In 1947, 23 countries led by the United States — their leaders’ memories fresh from the destructive protectionism and currency wars that had helped fuel two world wars in the 20th century — launched the General Agreement on Tariffs and Trade. The Gatt was designed to administer increasingly enlightened rules that would govern and liberalize international trade. Never again would trade wars be permitted to egg on real shooting wars, major world leaders vowed.

And that core political wisdom has paid off over the ensuing decades. Eight successful Gatt negotiating rounds gradually slashed tariffs, subsidies and other trade barriers that had been holding back prosperity. Today, hundreds of millions of people from all corners of the globe — many of whom have never even heard of the Gatt — enjoy better lives that come with greater economic opportunities, thanks to the foresight of that multilateral institution’s founding members.

Today, the World Trade Organization, which took over the Gatt’s functions in 1995, and is headquartered in the same stately edifice along the shores of Lake Geneva, now has 157 member countries. The WTO presides over more than $22 trillion in annual global trade flows of merchandise and commercial services. But now, the estimable multilateral institution, as renowned trade theorist Jagdish Bhagwati recently told Tom Miles of Reuters, is “really in danger.” The last successful Gatt/WTO trade-liberalizing negotiations were concluded in 1994 — going on two decades ago. The ninth round been mostly dead in the water for much of that time. And meanwhile, but WTO members have undermined the institution’s core principle — that all member countries treat all of their trading partners equally — by cutting hundreds of preferential bilateral and regional pacts, every one of which is aimed at distorting global trade flows by discriminating against those who are not included.

Nobody is presently leading the WTO. Not the United States, anymore. Europe is more focused on its own economic problems, not multilateral trade liberalization. Certainly not Japan, China, or the rest of Asia. India and Brazil? Not much vision there. And definitely not Africa and the Caribbean nations. The WTO has been drifting as an institution since Nov. 1999, when it’s ministerial meetings famously collapsed in acrimony on the streets of Seattle. The WTO’s Doha Round, intended to further slash the world’s remaining trade barriers, has been mostly in intensive care since it’s launch in 2001 — there are more sightings of Elvis these days than of signs of life in the Doha negotiations.

Don’t blame the 600-plus dedicated international civil servants who work at WTO headquarters in Geneva for the Doha doldrums; if it had been up to them, the Doha Round would have been completed years ago. Don’t blame Director-General Pascal Lamy, the energetic-and-able French politician who has worked tirelessly since his term began in 2005. Blame today’s world leaders — mostly second-raters compared to the Gatt’s visionary founders — for not having summoned the political will to give Lamy the necessary support to wrap up the Doha negotiations and give a giant boost to the world economy. (Of the 157 WTO members, only a handful might be singled out for having repeatedly done everything they could to boost the Doha process: Singapore, Hong Kong, New Zealand, Chile, Costa Rica, Australia, plus perhaps Sweden and some enlightened Europeans.)

But as elections are always about renewal, the WTO’s member countries now have a wonderful opportunity to wake up and end the drift.

Three of the nine candidates are from the Asia-Pacific region. Three are from Latin America. Two Africans and one aspiring director-general from Jordan round off the list. The good news is that every one of these people has impressive qualifications. It’s easy to find positive things to say about all of their collective backgrounds and life experiences, as we’ll see shortly. But it is not apparent that every one of them has what it takes to end the drift, or that the WTO’s member countries want that.

Whatever they want, this WTO election sure is different than what many would consider a “normal” one. There won’t be public polls. No focus groups.  No campaign rallies. No television commercials. And there will never be a recorded vote.

The candidates will present themselves to the WTO’s General Council in Geneva on Jan. 29, in public proceedings that will be broadcast on the Internet. They will take questions, drawn from a box at random. And then they will get on the road for the next couple months, making their cases to the usual suspects in various word capital cities: trade officials, political leaders, and — horrors, if the WTO’s pesky band of vociferous anti-trade activists gets wind of this! — even corporate lobbyists. Some of the latter, to be sure, will offer enlightened perspectives in the public interest of strengthening the WTO as an institution. Others will have parochial axes to grind. But all will know how to whisper in the ears of the mighty and good in world capital cities.

In lieu of taking a recorded vote, the powers in the General Council will talk to each other quietly (remember, the WTO is a consensus-based institution where any member can exercise a veto — although it is highly unlikely that the likes of Samoa or Fiji will ever exercise that “right”). They will take various political pulses. They will listen to the whispers and winks-and-nods from interested representatives of the 157 countries. They will consider regional and personal rivalries that come with the territory in world politics. They will receive shared confidences, quietly.

They will ask: which of the nine is your first choice, which ones could you still live with, and which ones are simply unacceptable? And gradually, they will winnow out the field by persuading the losers who lack the necessary political support to “voluntarily” withdraw their candidacies. All these things will happen, until the consensus winner is proclaimed by May 31. When Lamy departs on Aug. 31, the new director-general will immediately begin preparing for the WTO’s next ministerial meetings, which will be held in Bali in early December. That’s when the rest of the world will see clearly whether the new WTO leader will start delivering tangible results that would credibly begin the process of halting the institutional drift.

 

For eight of the nine, at least, the process will be somewhat opaque and unfair, as pure merit can tend to get lost in the shuffle. Some candidates will be dismissed, not for their lack of qualifications, but because they come from the wrong country, or region. Still, while the process has its critics, it’s worked pretty well for more than a half century. By and large, the GATT and WTO have been led by estimable figures: Peter Sutherland, Arthur Dunkel, Mike Moore, to cite just three former directors-general whose names immediately come to mind when thinking of quality leaders.

Here are thumbnail sketches of the first three of the nine candidates, beginning with those from from the Asia-Pacific region. (The remaining six, and the politics they face, will be profiled in this space on Wednesday.)

The three Asian-Pacific aspirants are South Korea’s trade minister, Taeho Bark, Tim Groser, who is New Zealand’s minister of trade (and climate change); and Mari Pangestu, a former Indonesian trade minister who presently is minister of tourism.

First, consider Groser.

Nobody knows the WTO and its politics better than Tim Groser. With Groser, there is no doubt that he would move heaven and earth to spark the WTO and its Doha negotiations. His resume sparkles: New Zealand’s ambassador to Indonesia (1994 -97). New Zealand’s chief negotiator during the Uruguay Round from 1990 to 1994 (the last successful GATT/WTO negotiation).

Groser has been a forceful presence during the Doha talks. As ambassador to the WTO from 2002-2005, he chaired the rules negotiating group, and also headed the group that handled the agriculture negotiations. In 2004, Groser accomplished something really difficult — a so-called “framework” agreement on cutting trade-distorting farm subsidies. That absolutely key deal still could pave the way to a successful conclusion to the Doha process. Groser, who entered New Zealand’s domestic political arena as a member of parliament in 2005, has also been seasoned in domestic political combat (and not just on trade, but the always-contentious issues that come with the territory of his climate-change responsibilities).

Groser’s main problem — and it could sink his candidacy — is that many of the WTO’s members from poor countries don’t want the next director-general to come from a rich, successful free-trading county. New Zealand has prospered in recent decades ever since it summoned the political will to dismantle the many protectionist barriers that had crippled the Kiwi economy. Is it perverse to say that a candidate from such a country should not be qualified to lead the WTO? Of course. But that’s the nature of this particular political process that such perversities are nonetheless widely accepted. (As we’ll see on Wednesday, Costa Rica’s candidate faces the same sort of jealousies, as that Central American country is another that has prospered to the extent it has opened its markets and prospered accordingly.)

Groser also will face suggestions that since another accomplished Kiwi, Mike Moore, has already been the WTO’s director-general, perhaps it’s time for someone from another country. Of course, the same — flimsy — excuse could be offered for not supporting candidates from, say, Mexico, Brazil, or Korea, as officials from those countries have also been playing prominent roles in international organizations. But when it comes to regional- and country rivalries, such potential issues should never be dismissed offhand. In 1999, the race to succeed Director-General Renato Ruggiero became so bitter that the next WTO leader’s term was split between New Zealand’s Moore and Thailand’s Supachai Panitchpakdi, who served from 1999-2002, and then 2002-2005, respectively.

Indonesia’s candidate is also likely to be a strong one.

Mari Pangestu also brings solid credentials to the race: BA in economics, with Honors, from Australian National University. Doctorate in economics from the University of California, Davis. Spent most of the 1990s with the respected Center for Strategic and International Studies in Jakarta, Indonesia’s most influential think tank. Started as a research associate, then became head of the economics department, and was promoted to become CSIS’ executive director in 1997.

Pangestu was tapped in 2004 as trade minister by — as her resume proudly notes — Indonesia’s first directly-elected president, Susilo Bambang Yudhoyono. She helped create Indonesia’s current trade department. Since October of 2011 Pangestu has been Indonesia’s tourism minister, where her resume notes she has also been involved in “creating new organizational structure and system.” So she has management skills.

Pangestu has played important roles in big trade talks: representing Indonesia in the WTO’s Doha Round, and also regional groupings in ASEAN. As trade minister, she also launched bilateral preferential trade deals with Japan and other countries. In the WTO, Pangestu has earned respect for her work with important regional groupings like the G-20 group  of developing nations, and the Cairns Group , which promotes agricultural trade liberalization.

Pangestu’s negotiating experience has been strengthened by her active participation in the so-called Green Room when negotiations heated up. I remember how in 2005, during the WTO’s ministerial meetings in Hong Kong, Pangestu won the respect of both European and American trade officials for both the political savvy and technical expertise that she brought to the always-contentious agricultural negotiations. If she now ends up as the next WTO director-general, nobody would be surprised. With the race to succeed Lamy now in the early stages, forecasts are naturally uncertain. But the well-liked Pangestu could well be the consensus candidate, the last one standing — after the others knock each other out.

Pangestu’s potential problem — like Groser’s and the others — is the country she comes from, although for decidedly different reasons. Indonesia, presently in a chest-thumping economic nationalist mood, has been developing a reputation as a difficult country when it comes to trade liberalization. One recent headline from the Jakarta Post says it all: Indonesia “not ready to join Asia-Pacific free trade plan.” Indonesia hasn’t gone to the mat to try to complete the Doha negotiations, either.

While the elected Indonesian political leaders have been responsible for the protectionist backsliding, the blame could rub off on Pangestu. While in theory, Pangestu’s personal qualifications should be the most important factor, not her country’s negotiating track record, that’s often not the way that the WTO’s politics play out.

When I asked her directly about the above, Pangestu replied that she intends to address publicly the question of her vision in greater depth when the WTO’s General Council meets on Jan. 29. But she offered that if she becomes Lamy’s successor, she will be looking for opportunities for “pulling the lever that will help bridge the divide that has been holding up the talks and find areas of common opportunities.” Her international experience, Pangestu added, has given her “a good understanding of what is needed” to break the Doha logjam.

Korea’s Taeho Bark (many American readers will prefer the more commonly translated last name of “Park,” as the Korean characters for both names are the same) also brings an impressive background to the race. Earned his BA in economics from Seoul National University, went on to become a PhD at the University of Wisconsin-Madison. His academic achievements include stints teaching at Georgetown University, in Washington, D.C., at the Jackson School of International Studies (University of Washington), and at Stanford. He has also been dean for international affairs and director of the Institute for International Studies at Seoul National University.

Bark is by all accounts a very personable man, whose personal accomplishments have been in tandem with the admirable rise of his country as a prosperous member of the international trading system. He has also been a prolific author of articles and books relating to international trade and investment, as well as the Korean economy.

Bark was also a member of the WTO’s Dispute Settlement Panel from 1995-1997. He gave testimony for Korea’s WTO accession before that, and advised the Korean delegation in the Gatt in the early 1990s. He has been Korea’s trade minister since December, 2011. The energetic Korean has been busy negotiating what he calls “WTO-plus” preferential trade deals with a variety of countries including Colombia, Turkey, Australia, China, China-Japan, and a plurilateral deal with ASEAN, Australia, China, India, Japan and New Zealand.

Bark’s resume adds, with commendable understatement, that “despite considerable political sensitivities in both Korea and the United States, he was instrumental in bringing about the entry into force of the Korea-U.S. FTA.”

Some of the continuing aftershocks of that deal illustrate some of the political perils that come with the territory of being a trade minister. The Detroit auto lobby has complained that Bark has been too slow in pressuring the transportation ministry in Seoul to fully implement various technical provisions of the auto industry parts of the trade pact with the Americans. While industry sources are reluctant to confirm whether they will be making their feelings known to the Obama White House — officials at the National Association of Auto Dealers declined to comment — it’s reasonable to speculate that they well might.

When I asked him about this, Bark essentially shrugged and said that taking heat — and often from all sides simultaneously — is part of his job. Issues associated with Korea’s auto-safety system, he notes, “became very complicated with multiple agreements with the United States since 1995 and most recently with the Korea-US FTA.” He says that Korea’s transportation ministry has “attempted to consolidate them to establish the new system, which causes conflicts with the global car makers of the United States.” And if the Americans have been complaining that Bark hasn’t done enough for them, some Korean auto interests protest that he has done too much —- as Bark notes, trade ministers tend to be caught in the crossfires.

Bark explains that during the implementation of his country’s trade deal with the U.S., he has “played a key role in persuading the Ministry, directly and indirectly, for instance, through the President’s office, to suspend the movement and have due consultations with the United States before making the decision.” He adds that he has always resisted protectionism. “Maybe my efforts inside my government went unnoticed by the outside,” Bark suggests.

Coming on Jan. 23: the conclusion —- reporting and analysis of the backgrounds and prospects for the three aspiring WTO leaders from Latin America, the two from Africa, and the contender from the Middle East.