(The conclusion of a two-part series)
Note to readers: Yesterday, in an article headlined “Fed Up,” I reported that many members of the World Trade Organization have reached the end of their patience with a handful of members — India, and a few African and Latin Americans who love to nurture their grudges against the “rich” countries. Frustrations that such countries have poisoned the WTO’s negotiation atmosphere have been gradually building since the WTO was launched in 1995. The tipping point came in July, when India’s new prime minister, Narendra Modi, vetoed the only successful multilateral trade negotiation the WTO has ever conducted.
As the future viability of this vital international trade rule-making institution is now on the line, it’s important to take a closer look at how the present fight started, and why. Today’s report offers more details on: where Modi is coming from, exactly what he wants, and who his sympathizers are. While India claims to speak for the world’s poor, that certainly is not the view of an increasing number of developing countries around the world. India’s trade distorting agriculture subsidies have caused food riots in parts of Asia, Africa, and Latin America. These days, complaints of the harm that India is inflicting upon other poor countries are surfacing again, particularly in Rwanda and other African countries. Concluding, the report highlights how leading WTO member countries plan to move on, with or without the cooperation of India and the other laggard countries.
So where is Modi coming from?
Modi, proudly, is a hardline Hindu right-winger, an economic nationalist who boasts of a 56-inch chest. He is a tough guy, a man who loves a brawl. His top political aide is dodging a prosecution for various murders. Modi himself has denied (unconvincingly) his role in the killings of some 2,000 Muslims in organized riots in his home state of Gujarat, back in 2002.
And in the past week, Modi has rather exuberantly been raining mortars and machine-gun fire across a populated India-Pakistan border area of Kashmir. The fighting, which has broken a tenuous truce reached in 2003, has so far killed nearly 20 civilians and displaced nearly 20,000 civilians, according to news reports. “The prime minister’s office has instructed us to ensure that Pakistan suffers deep and heavy losses,” a senior Indian Home Ministry official has told Reuters reporters Rupam Jain Nair and Mehreen Zara-Malik. Modi himself has boasted that “it is the enemy that is screaming.” Kashmir, with the possible exception of the Korean DMZ, is perhaps the world’s most dangerous border. A border where Hot Heads on both sides brandish their nuclear weapons.
Some of the other opinions that Modi brandishes are less scary, but well, unusual. Speaking to the United Nations General Assembly in New York on Sept. 27, Modi called for an “International Yoga Day.” He asserted that “yoga,” “spiritualism” and clean living could contribute to a better global environment. “By changing our lifestyle and creating consciousness, it can help us deal with climate change,” he explained to the diplomatic dignitaries. Meanwhile, back in New Delhi, the clean-living prime minister has authorized “hundreds of projects” to clear pristine forests, making way for mega power plants and other industrial projects that previous Indian governments had rejected on environmental grounds, Tommy Wilkes has reported for Reuters.
Modi held the WTO’s trade-facilitation package hostage to India’s demands to be allowed — permanently — to violate existing WTO restrictions on the subsidies it is allowed to dole out to uncompetitive Indian subsistence farmers. Adding to the indignity: previous Indian governments had agreed to those WTO rules in the 1980s. And the Indian government that Modi replaced in May had duly signed onto the Bali Package last December. As U.S. Trade Representative Michael Froman said last week, India has now “reneged” on its signed obligations.
Moreover, Modi’s demands have left WTO diplomats scratching their heads, wondering what he might have been smoking.
Since obtaining independence from Great Britain in 1947, India’s leaders have never figured out how to feed their people. In the name of “food security,” Indian governments have been buying food from the country’s farmers, paying above-market prices. The grains are then stockpiled. Perhaps half of the mountains of grain rot away, or are eaten by rats. Much of the rest is siphoned off by corrupt (politically connected) operators for sale on the black market.
What doesn’t rot or is not stolen is then doled out to feed India’s infamously malnourished urban population — especially when elections loom, which in India is often.
Perhaps because politics trumps economics, Indian politicians — no matter which party is in power — have been increasing the subsidies, making bigger stockpiles. And they have been demanding permission from the WTO to keep jacking up the subsidies as much as they want, even higher than the allowable limits that Indian governments have pledged to honor.
In Bali last December, the Indian negotiators won a generous four-year “peace clause.” That gave New Delhi four years to go ahead and violate existing WTO limitations by increasing agriculture subsidies, without fear of being held legally accountable. As the purpose of the WTO’s trade negotiations is to reduce trade barriers, not allow additional protectionism, this was arguably overly generous.
Yet the four-year grace period still wasn’t enough for Modi, when he came into office in May. He demanded that India be given the “permanent” right to break the existing rules — and right away, by the end of this year, thank you. Many diplomats, in many ways, have told the new Indian leader that this would never happen. Undeterred, Modi, somewhat joyously, brought down the Bali Package, thus shaking the foundations of trust that the WTO must have to remain viable.
At least, the ploy has generally played well at home. Indian officials have launched a whispering campaign, some of which has made its way into various Indian news accounts, falsely accusing the WTO’s top leadership of favoring the rich countries.
Claiming the Moral High Ground
Modi, like all of his predecessors dating to Jawaharlal Nehru (who ran India from 1947 to 1964, useful information for readers who are crossword puzzle addicts), has claimed that he holds the high moral ground. We are simply demanding the rights to feed our own poor, and we are the champion the world’s poor, so goes the refrain.
India is the world’s largest exporter of (subsidized) rice. The subsidies distort food markets in other countries by driving down prices. That’s bad enough in normal years for farmers in African and other nations who have to compete with the cheap Indian rice. Of course, the Europeans and Americans aren’t exactly innocents in such matters. But at least they have long ago moved away from stockpiling surpluses that cause real damage in world markets, preferring to pay their farmers cash subsidies that are considered less trade-distorting.
But India seems stuck on stockpiling and other protectionist schemes that cause real harm to trading partners. Remember the 2008 food riots in Haiti, Cameroon, Senegal and other countries? Global rice prices had skyrocketed after India put a damper on supplies by slapping on export controls during the previous year’s election season. Not only has no Indian politician ever apologized for the damage those export controls inflicted — after coming to power this May, Modi quickly imposed new price controls on onions and potatoes.
More recently, Rwanda’s trade minister, Francois Kanimba, explained to Shawn Donnan, the world trade editor of the Financial Times, how India’s present agriculture subsidies are hurting his country’s farmers. Rice and sugar from India had been reaching Rwanda “at such low prices [that] you are left wondering if these are really global market prices, simply explained by the competitiveness of the Indian economy,” Kanimba said. Donnan noted that the same concerns are being expressed in Nigeria, Benin, and other African food importers. This is “why the solution India is seeking at the WTO, which celebrates its 20th birthday in January, is unlikely to be palatable to many of its members,” Donnan concluded.
India’s claims to speak for the world’s poor used to be accepted automatically in the Third World. Signs that that’s been changing surfaced at the WTO’s Bali meetings last December. At a press conference, India’s then top trade official, Anand Sharma, asserted that India was only seeking “food security” for poor people everywhere. Sharma was humiliated by a furious journalist from Benin, one of the world’s poorest countries. “You don’t speak for us,” the Benin journalist angrily shouted. Those of us who were in the room will never forget the emotions on display at that press conference. (For further details, see “India’s Bali Debacle,” which I authored for the Wall Street Journal Asia. The piece, along with two other investigative reports into India’s WTO stance in recent years, is posted on the Wall Street Journal section of www.rushfordreport.com.)
These days, Modi’s been enjoying his success in having placed himself on the WTO’s center stage, even though he is playing the role of a pariah. Modi knows he enjoys the tacit backing of envious fellow economic nationalists in places like Venezuela, Bolivia, Zimbabwe, Ecuador and Cuba. Such leaders love to nurture their grudges against the rich countries, seeing the WTO as a tool of the rich. President Jacob Zuma of South Africa runs with this crowd. These days, Zuma must be especially envious of Narendra Modi’s nerve.
Zuma is another economic nationalist who is skeptical that the WTO’s multilateral trade liberalizing negotiations will benefit South Africa. But he might be better advised to seek some sound economic advice as to why South Africa’s economy has been losing its dynamism.
Two very savvy Pretoria-based authorities on what used to be called “political economy” — Mzukisi Qobo of the University of Pretoria and Peter Draper, of Tutwa Consulting — recently succinctly explained Zuma’s attitude on economics in a May 27 article in South Africa’s Business Day. Under Zama’s economic guidance, South Africa’s economic growth has been on a steady decline, Qobo and Draper noted. Nor does Zuma seem to grasp the “gravity” of the economic challenges that are holding his country back, they added. “He also seems to have given up on leaving a great economic legacy, and instead prefers to manage a balancing act of contending factions within the African National Congress (ANC).”
Zuma’s trade minister, Rob Davies, is a member of the Politburo of South Africa’s Communist Party. That fact speaks well of Davies’ personal courage in having opposed apartheid in the days when to do so was to risk one’s life. But it doesn’t necessarily suggest that Davies’ economic credentials are sterling. Many African observers worry that South Africa, traditionally the most solid African economy that still regards itself as the “gateway” to the rest of Africa, will inevitably be left behind. Watch the East Africans — especially the emerging ties and improved infrastructure linking Rwanda, Tanzania, Uganda and Kenya — many African watchers say. Yes, these countries also have their own economic weaknesses. And in the WTO, the East Africans seem to be split on whether to speak out in favor of India, or against. Still, one has a growing sense that their future could be brighter than South Africa’s, depending upon how well they manage to integrate themselves into the global economy. At some point, the South Africans will likely kick themselves for their lack of economic foresight.
Zuma first worked earlier this year behind the scenes with the Addis Ababa-based African Union (an opaque organization which wasn’t even a participant in the Bali negotiations) to reopen the Bali deal. Conveniently, Zuma’s former wife now heads the AU. But Zuma and the AU came under intense pressure, mainly from Europeans and Americans, but also by dozens of other WTO member countries. They backed down during African Union meetings held in Malabo, Equatorial Guinea, in August. Since then the African Group of WTO members has basically been holding their tongues, trying to pretend that what India has done, hasn’t really happened. (For the background, see “Power Plays in the WTO,” www.rushfordreport.com, June 3, 2014). South African and African Union officials declined repeated requests for comment, as did a spokesman for the WTO’s Africa Group.
In sum, what the Africans started and India’s Modi finished was the tipping point. Leading circles in the WTO — the “North” definitely, and many in the “South” — believe that this time, the chronic naysayers have simply gone too far.
An Uncertain Plurilateral Future
While the WTO’s future is presently clouded, one thing appears clear: no longer will a handful of malcontents be allowed to poison the chances of dismantling as many of the world’s remaining trade barriers as possible. That means the WTO will turn away from its tradition of conducting trade-liberalizing negotiations on a multilateral basis. Instead, there will be smaller groups of like-minded countries that will work together to facilitate trade flows. This is the so-called plurilateral option.
The future likely model has precedents. The WTO’s Government Procurement Agreement has 43 member countries (counting the European Union’s 28). The GPA’s rules, which are only extended to participating countries, are aimed at improving transparency and competitive bidding when governments agree to award contracts to all bidders (as opposed to just doling out lucrative contracts to well-connected domestic cronies). China, New Zealand, and eight other countries have been negotiating to join in that plurilateral. No African country has shown interest in joining in such an experiment in open government. Nor has India.
India is, however, a member of the WTO’s Information Technology Agreement, a plurilateral WTO success story that dates to 1997. ITA signatories, including India, have slashed tariffs on imports of high-tech gadgets like computers and telecommunications equipment. But India has refused to participate in ongoing negotiations to expand the ITA’s product coverage to include new inventions — iPhones, iPods and so forth — that weren’t invented in the 1990s. In fact, Modi has already moved in the opposite direction: jacking up tariffs on imports of iPhones.
Late last week, the WTO’s director-general, Roberto Azevedo, described the uncertain future for further WTO multilateral trade negotiations, especially if “no solution” is found for the “Bali impasse.” In such a case, the director-general noted to a business audience in Toronto on Oct. 9, “then members must ask themselves some tough questions — about how they see the future of the Bali package and the post-Bali agenda. And what this means for the WTO’s negotiating function.”
Translated from the nuanced diplomatic language, Azevedo was pointing to a plurilateral future for the WTO, at least until the benefits of multilateral trade liberalization become apparent to the laggards. It might even turn out that the Bali deal will proceed as a plurilateral arrangement. India and the backward-looking African and Latin countries will be offered the choice to be left behind, if they prefer. Such, it appears, is their future — at least until the day comes when they will be willing to take off their economic dunce caps.
Power Plays in the WTO
The African Union — which lacks official standing to participate in the World Trade Organization’s multilateral trade-liberalization negotiations — has nonetheless sparked a high-stakes diplomatic dogfight inside the WTO’s headquarters along the Rue de Lausanne in Geneva. The bitter wrangling threatens to derail the most significant negotiating success — the only such success — that the WTO has enjoyed in nearly two decades. (The WTO was launched in 1995, succeeding its venerable predecessor multilateral trade rules-making institution, the General Agreement on Tariffs and Trade.)
Should the African Union’s power play succeed, the WTO’s credibility would be seriously damaged. “All the air will go out of our balloon,” as one European trade negotiator who asks to remain anonymous puts it. The reputation for effective leadership that has been forged by the WTO’s energetic new director general, Brazil’s Roberto Azevedo, (who succeeded outgoing Pascal Lamy last September) would be tarnished. Most importantly, aspirations that millions of impoverished people from the poorer corners of the world have for better lives once again would be put on indefinite hold.
The story’s backdrop — and the agendas driving some of the secretive operatives whose fingerprints are all over the AU’s power play — dates to the anti-globalist passions of December 1999, when some of the same people famously helped wreck the WTO’s 3rd Ministerial Conference in Seattle. But the current news is pegged to important events that transpired only six months ago, on Indonesia’s famous resort island of Bali.
On Dec. 7, 2013 there were plenty of well-deserved smiles inside the convention center in Nusa Dua, Bali. After four days of intensive negotiations at the WTO’s 9th ministerial conference, the multilateral trade organization’s 159 member countries had finally overcome years of failure to negotiate a truly big international trade deal. “In recent weeks the WTO has come alive,” declared an exuberant Azevedo. “I am delighted to say that, for the first time in our history: the WTO has truly delivered.”
Win-win, for the global economy
Delivered, big time. The deal promised to boost global trade flows substantially, upwards of one trillion dollars in the coming years, according to economic guesstimates. The core of the Bali Package was a so-called “trade facilitation” agreement. Trade facilitation involves a win-win trade-off: more money and technical assistance given by rich Europeans and North Americans to poorer countries in the developing world. Trade facilitation dollars and euros help smooth international trade flows in places that badly need helping hands.
In the poorer parts of Africa, Asia and Latin America, borders are notorious for being clogged. Blame the usual suspects: bureaucratic red tape that raises the costs of transactions by slowing them down, corrupt customs officials, bad roads, inefficient ports, and such. The WTO’s richer countries are already giving about $400 million annually in trade-facilitation aid to help streamline border crossings, according to OECD figures. (Unsurprisingly, Sweden and Norway have been among the most dedicated players, and also the WTO’s International Trade Centre and the World Bank.) According to the OECD, the poorest WTO member countries stand to cut their transaction costs by more than 14 percent, if the Bali Package is fully implemented. And as soon as it is, more trade-facilitation dollars are promised.
Bali was also a big win for multinational corporations — Apple, Vodafone, GE and Caterpillar, FedEx and UPS, Ericsson, E-bay, it’s a very long list — that are poised to profit from seamless movements of goods and services across presently difficult borders. But anyone with a heart would say the biggest winners — the point bears repeating — were the millions of presently poor people throughout Africa, Latin America and Asia who will have new chances to earn decent livings, thanks to the expanded commercial opportunities. Many of these deserving people have probably never heard of the WTO or its Bali Package. So there was good reason for the smiles last December in Bali.
But not everybody left Bali smiling. A handful of the WTO’s more economically troubled members who are always suspicious of rich-country motives — including Ecuador, Bolivia, and some members of the African Union who had resisted the Bali Package — griped that the Bali deal was designed to be legally binding.
Also, in recent months, some countries like Uganda and Tanzania, which had supported trade facilitation in Bali, have apparently had second thoughts about implementing the agreement. “[R]atification of the trade facilitation agreement within the next 12 months implies that Tanzania shall be compelled to import even more goods from developing countries, thus further threaten its ailing local industries and ignite job losses,” reporter Bernard Ampulla noted in April in Tanzania’s leading Daily News. “Moreover, Tanzanian producers find it difficult to meet international competitiveness standards and other technical standards, this being an area which still needs a lot of capacity building.”
In Bali, WTO members had agreed they would draw up a formal protocol to implement the deal by July 31. The legally binding accord would then go into effect by the end of July 2015, or as soon as two thirds of the WTO’s member countries (soon to be 160, with the accession of Yemen) ratify it. Negotiators left the Nusa Dua convention center exhausted, but with high expectations that only the technical language leading to ratification remained to be ironed out.
Most importantly, the atmosphere of distrust and mutual suspicions that had dogged previous WTO ministerial meetings had started to fade away. The success in Bali spurred hopes for quick progress to (finally) conclude the broader Doha Round of trade liberalization negotiations that has made little progress since they were launched in 2001.
But it took only a little over three months for the old resentments to burst back into the open. Now, it is uncertain whether the Bali Package will be implemented on its intended schedule — or derailed.
Surprise attack from Addis Ababa
On April 27, the African Union’s trade commissioner, Fatima Acyl, issued a startling statement from the African Union’s headquarters in Addis, Ababa, Ethiopia. In it, the commissioner revealed that, at an “extraordinary session,” the AU’s trade ministers had decided that the Bali Package should not be implemented until the broader Doha Round would be concluded. (Acyl refuses to identify which African trade officials had attended the meeting.)
Acyl, a former deputy general of the Agricultural Bank of Chad, is a polished young woman, fluent in English, French, and Arabic. She was born in Washington, D.C. on May 5 (her biography does not list the year, nor note that the African diplomat is eligible to hold an American passport). She earned an MBA with honors at Ohio’s Xavier University, in Cincinnati. In the 1990s, she was an associate in PricewaterhouseCoopers’ offices in Chicago, Il. The personable Acyl was subsequently promoted several times, ending up as a manager. Her resume marks her as a rising African star.
But perhaps a lesser star in leading WTO circles in Geneva, where it has been noted that Acyl’s otherwise impressive resume does not identify any previous experience in international trade negotiations. The available public record indicates that since she was named to her present position in October 2012, Acyl has been inside the WTO’s Geneva headquarters perhaps only a handful of times, involving ceremonial occasions. The African Union has only an “ad hoc” outside observer status in the WTO, and has no role in official WTO negotiations. Acyl did not respond to repeated attempts for comment.
But there is no doubt that Acyl’s April 27 statement boldly asserted a leading role for the African Union, in instructing African ambassadors to the WTO on how they should handle implementation of the Bali Package.
“A number of our countries feel that the decisions reached in Bali, while noteworthy and commendable, were not the most optimal decisions in terms of Africa’s interests,” Acyl noted. “We have to reflect and learn from the lessons of Bali on how we can ensure that our interests and priorities are adequately addressed in the Post Bali Negotiations.”
Then she added the sentence that has resulted in the present WTO impasse in Geneva: “It is important that at this Ministerial, we instruct the negotiators of the Africa Group in Geneva to formally submit language on the Protocol of Amendment — the legal instrument that will enter the TF Agreement into force at the WTO — to the effect that the Trade Facilitation agreement will be provisionally implemented and in completion of the entire Doha Round of Negotiation.”
The Doha process has been halted several times in the past thirteen years, most recently in 2008. WTO members have failed to agree on a variety of thorny issues involving agriculture subsidies, intellectual property rights, enhanced access to protected markets for both goods and services, preventing environmentally destructive fishing practices, to cite some of the most politically sensitive.
The Bali Package’s driving idea with separating the Bali Package for early ratification was to demonstrate that the WTO could start delivering important economic benefits to all members — aiming to spark revival of the broader Doha process.
But now the African Union wants to hold the Bali deal hostage, as Africa’s bargaining chip in the overall Doha issues. Acyl admitted as much in her April 27 statement, asserting that withholding formal implementation of the Bali Package “creates strong negotiating leverage to achieve satisfactory outcomes” in the broader Doha negotiations. Whatever one’s views on trade liberalization, the “extraordinary” AU session constituted an extraordinary power play.
Talks in Geneva
Taking its cue from the AU, the WTO’s Africa Group of countries has followed the April 27 instructions. (The Africa Group’s members are essentially the same as the AU’s; with the exception that Morocco isn’t a member of the African Union. In Geneva, Lesotho’s WTO ambassador is the spokesman for the group.)
On May 26 the WTO’s trade-facilitation panel met in Geneva to draw up the official protocol for implementing the Bali Package. At that meeting, Lesotho’s Ambassador Nkopane Monyane, introduced a document that he said reflected the African Union’s April 27 statement — essentially recommending only “provisional” implementation of the Bali Package, based on the outcome of subsequent Doha negotiations. The ambassador suggested informal consultations to resolve the differences.
The next day, Uganda, which speaks for the least-developed WTO members, submitted language that would clearly peg implementation of the Bali Package to conclusion of the Doha Round. In the meetings, Tanzania and South Africa also played important supporting roles, according to diplomats who were present on both days.
Strip away the legalese and the bottom line was clear: The Africans had essentially sought to re-open the Bali negotiations. (Talk about punching above their weight in the WTO: South Africa, Tanzania, Uganda and Lesotho together comprise one-ninth of one percent of global trade flows.)
“No Bali, No Doha”
The African negotiating ploy has not been well received. When he heard about Fatima Acyl’s April 27 statement at a meeting in Paris last month, Karel De Gucht, the European Union’s trade commissioner, hit the ceiling. The gruff Belgian’s outburst was not meant for public attribution; EU officials decline to comment. But privately, several diplomats interviewed for this article say De Gucht issued a very blunt warning to the African Union: No Bali, No Doha. Kill the Bali Package, and you kill the Doha Round.
In last month’s Geneva meetings of the WTO’s trade facilitation group, representatives from a range of countries — including Norway, the EU, the United States, Mexico, Hong Kong, Costa Rica, Australia, New Zealand, and Singapore — have echoed De Gucht’s warnings, although in more diplomatically nuanced language. The Bali deal has very generous terms for the African countries, they have argued. The pro-Bali WTO leaders have noted how the trade-facilitation deal was designed to take the political poison out of the air, and build confidence for the successful conclusion of the broader Doha process. Don’t destroy the crucial good will, the Africans are being urged.
The African side of the story
The only African ambassador who responded to a request for comment was Lesotho’s Nkopane Monyane.
The African Union “is a member driven organ based in Addis Ababa, that takes continental decisions not attributable to any single member,” the ambassador explains. “Lesotho as a member, with a resident Ambassador in Addis, has not made any effort counter the Bali process.”
Concerns that his country is out to delay or kill the Bali deal are based on mere “speculative misinformation,” he insists. “I will guarantee that you will not find any evidence, written oral or in any form of presentation, of Lesotho as a sovereign state advocating a delay in the implementation of the Bali Decision.” The ambassador adds: “Lesotho remains fully committed to the successful implementation of Bali, conclusion of the DDA and stability of the Multilateral Trading System.” (DDA refers to the Doha “Development” Round.)
Other experienced WTO watchers point out that Africans are legitimately concerned that the Europeans and Americans have been slow to detail precisely how they intend to implement their Bali (financial) promises. When the Africans say, “Show us the money” on trade facilitation, they aren’t necessarily being cynical, one senior European diplomat observes.
Moreover, there is plenty of room for skepticism that the rich countries still lack the political will to make the necessary bargains that would resolve the difficult Doha Round issues. The Africans are clearly right to complain that the Obama White House in Washington, D.C. has never assigned a high priority either to the WTO or its Doha process. It is important to understand that there are “good-faith” reasons for African doubts about the rich countries’ intentions, as another well-placed European trade official puts it.
But not all players have reputations for supporting WTO negotiations in good faith. Enter the South Centre. Based in Geneva, the South Centre’s 51 member governments range from Algeria to Zimbabwe. North Korea (not a WTO member) apparently finds the intergovernmental organization as a listening post, as does Iran (not a member, but which has official observer status in the WTO).
On trade, the Centre serves as a useful platform to advance the views of WTO member countries that tend to resist trade liberalization: Malaysia, Bolivia, Cuba, South Africa, Venezuela, and Tanzania. The South Centre does not cultivate a reputation for transparency; it refuses to disclose the sources of its financing, other than to assert on its website that the majority comes from member countries.
Transparent or not, the South Centre’s fingerprints are evident in the ongoing African moves to delay or undo implementation of the Bali Package’s trade-facilitation deal. The legal arguments advanced by the African Union’s Fatima Acyl, for example, dovetail with language used by the South Centre. On Nov. 15, 2013, the Centre published a “South Experts’ Report” that argued that the WTO should reject any Bali Package that would be legally binding upon poor countries. The “least developed countries should be exempted from undertaking binding commitments,” the document asserted. The paper also argued that any deal that might be reached on trade facilitation in Bali only be implemented upon the subsequent conclusion of the Doha Round.
To veteran WTO observers, the fact that the African Union used the same legal arguments first advanced by the South Centre is no coincidence. The South Centre’s executive director, Martin Khor, declines to comment. (A Centre spokesman was not authorized to share any information that wasn’t already on the organization’s website.)
Khor is a well-known figure in Geneva, where his basic approach to the WTO is that it lacks transparency and is a forum where rich countries foist their will upon poor countries.
Khor played a leading role in the vociferous anti-globalist demonstrations that wrecked the WTO’s 1999 Seattle meetings. He opposed the launch of the Doha Round two years later, and in 2003 helped cause the acrimonious collapse of the WTO’s meetings in Cancun. Another South Centre activist who has long been in the same anti-globalist network is Aileen Kwa. Kwa has written a book based on the premise that the WTO’s Doha negotiations are “a byword for the perversion of democracy.”
Last December, Khor worked against adoption of the trade-facilitation deal in Bali as an official member of the delegation from Ecuador.
A Malaysian, he has long been considered close to former Malaysian Prime Minister Mahathir Mohammad. (Long known for his tart tongue when it comes to anything American, Mahathir has recently blamed the CIA for a conspiracy to hide information on missing Malaysian Airlines flight MH370. Khor, a columnist for the Malaysian newspaper, The Star, has also been railing against spying by U.S. intelligence agencies.)
Ironically, while Khor is a strong critic of any economic proposal tainted with American backing, he personally has long benefitted from American financial support. For example, the Rockefeller Brothers Fund, which formerly supported Khor when the activist was with the Third World Network, has given the South Centre $1.6 million since 2009. Last year, the Ford Foundation chipped in another $250,000 — saying that the money was needed because “financial markets need the oversight of democratic institutions to ensure transparency and accountability.” (Another irony: of well-heeled American philanthropy citing transparency as justification for supporting an organization that has North Korea as a member.)
The $1.8 million American cash from Ford and Rockefeller far outweighs what some South Centre members contribute in dues to the WTO. Last year, Kenya, Ghana, Tanzania, and Uganda, for instance, contributed a collective $362,481 in WTO dues. Given the South Centre’s secrecy, it is not possible to compare the sums such member countries give to the WTO.
WTO watchers will have their next opportunity to learn if the Africans have released their Bali hostage when the trade-facilitation group meets again on June 24 in Geneva to consider adopting the protocol for implementing the Bali Package. Stay tuned.
On Jan. 29 at the World Trade Organization’s headquarters in Geneva, the nine candidates who are in the running to replace the outgoing Pascal Lamy as the next WTO director-general will present themselves in a formal, public meeting of the General Council. Then they will mostly get on the road, making their cases to the powers-that-be in various world capitals. After several months of gradually winnowing out the field in discrete private consultations with interested officials from the WTO’s 157 member countries, the General Council will pick the “consensus” winner by May 31. The winner will take office on Aug. 31, and then have three months to prepare for the WTO’s next ministerial meetings, to be held the first week of December in Bali.
On Monday, I reported why veteran WTO watchers consider this election to be especially important for the venerable multilateral institution’s future, citing the prescient warning from economist Jagdish Bhagwati that the WTO is now in real “danger.” And I reported on the qualifications of three of the nine candidates who come from the Asia-Pacific: Tim Groser of New Zealand, Indonesia’s Mari Pangestu; and Taeho Bark, South Korea’s candidate. Today, the rest of the field.
Three come from Latin America, two from Africa, and one from the Middle East. Altogether, it’s a strong field — although it is not clear which of the nine would exercise truly strong leadership. Nor is it clear that the top political leaders in major world capitals really are focused on the importance of selecting such a leader. And as outgoing Director-General Lamy has learned, without that necessary backing, no WTO head, no matter how dedicated and energized, can stop the institutional drift.
We left the story off with South Korea’s candidate, Taeho Bark, a man whose career has risen in tandem with his country’s admirable economic growth. As his country’s trade minister, Bark has taken heat from both Korea’s domestic automakers and the Detroit auto lobby — each of which has accused Minister Bark of not doing enough to advance their own agendas. Bark explained that such political fire comes with the territory, especially when emotions run high in the international trade arena (which is to say, most of the time).
Speaking of an admirable quality of learning to handle the inevitable political heat that is part- and parcel of international trade negotiations, consider Anabel Gonzalez. She’s Costa Rica’s candidate to lead the WTO.
Gonzalez has long been a rising star in her country’s trade ministry. She graduated with highest honors from the University of Costa Rica’s law school, and earned her masters in law in 1988 from Georgetown University Law Center, in Washington, D.C.
From 1991 to 1997 Gonzalez was director general for international trade negotiations in Costa Rica’s foreign-trade ministry. In that capacity, she was her country’s chief negotiator in the FTAA — the acronym for the Free Trade Area of the Americas — process. She was also the coordinator of Costa Rica’s positions in the Gatt’s Uruguay Round. During that period, Gonzalez handled politically charged negotiations with the European Union and the United States over banana-import issues. She was also involved in bringing Costa Rica’s successful challenge in the WTO’s dispute settlement process to the protectionist U.S. restrictions on Costa Rican underwear.
Gonzalez was special ambassador for U.S. trade affairs from 2002 to 2004, during which time she was Costa Rica’s lead negotiator for the DR-CAFTA preferential trade deal. Before that, she was chief negotiator for her country’s preferential trade accords with Canada, Chile, the Dominican Republic and Panama. President Laura Chinchilla tapped her as trade minister in 2010.
Gonzalez’ memorable performance during the stormy 1999 WTO ministerial meetings in Seattle is worth noting. That ministerial, President Bill Clinton anticipated, would launch a new multilateral trade liberalizing round, a Seattle Round. It didn’t happen — thanks to the same Clinton, who made an uncharacteristic political blunder and precisely the wrong time.
The Seattle ministerial is mostly remembered for the emergence of the vociferous band of anti-globalist protestors who trashed the streets, egging on the collapse of the ministerial meetings. But inside the closed-door meetings, the atmosphere was even more poisonous. Representatives from the WTO’s poorer member countries were outraged when they read on the first day of the ministerial what Clinton had said in an interview with a Seattle newspaper reporter. The American president basically sank the launch of the “Seattle Round” by suggesting that economic sanctions might be imposed upon countries that failed to meet the protectionist AFL-CIO’s notion of “fair trade.”
And when emotions were running the highest in Seattle, Gonzalez happened to chair the trade and labor group’s meetings. Those meetings were perhaps as stormy as it ever gets in the international trade arena. By all accounts, Gonzalez handled herself with aplomb — even courageously, at perhaps the moment when the WTO’s current institutional drift began. There would be no Seattle Round. The Doha Round, launched two years later, is still stuck on the same tensions between the wealthy developed WTO member countries, and the (sometimes rightly) resentful poorer ones. But now, if the test for the next WTO leader is a demonstrated ability to demonstrate leadership under fire, Gonzalez long ago passed it.
Gonzalez is also well connected to leading international trade circles, serving for instance as chair of the World Economic Forum’s Global Agenda Council on Trade. But she does have some detractors — although nobody has spoken out for public attribution — stemming from what was apparently a turbulent tenure as director of the WTO’ agriculture and commodities division from Feb. 2006 – Jan. 2009. Gonzalez recalls that “the time I spent at the Ag Division was a highly charged time, particularly the year 2008, as it was a moment of very intense negotiations in the context of Doha — we were probably as close as ever to have reached agreement.” With the stakes so high, adds: “I saw a lot of shouting” by just about everyone. But “all this is water under the bridge, as it should be in the context of professional relations in my view.”
At least Brazil’s candidate, Roberto Azevedo, doesn’t have to worry about personal jealousies. Azevedo, who is Brazil’s ambassador to the WTO, could be the most well-liked trade diplomat in Geneva, a city where charm is an especially valuable political currency. But Azevedo’s “problem” could be a bigger one: regional jealousies. And those might not be dismissed so lightly.
The reference is to the political dynamics that always seem to be in play when Brazil and Mexico have competing interests in Latin America. Each of these two countries, it often seems, love nothing better than to assert its own regional influence by knocking the other. And Mexico’s candidate to head the WTO, Herminio Blanco, is a heavyweight.
Blanco’s heavyweight credentials begin with the Ph.D. in Economics he earned at the University of Chicago in 1978. His career quickly took off that year: he became senior advisor to Mexico’s finance minister. Blanco taught economics at Rice University, in Houston, Texas, from 1980 – 1985; from 1985 – 1988 he was a member of the Council of Economic Advisors, which advised President Miguel de la Madrid, an economic reformer.
As vice-minister for international trade negotiations in 1993 and 1994, Blanco was Mexico’s chief trade negotiator, leading his country into the successful completion of the Gatt’s Uruguay Round in 1994. He then went on to become minister for trade and industry, serving until 2000. Notably, Blanco lead the Mexican government’s lobbying to approve the Nafta trade deal with Canada and the United States — no small political accomplishment, and a valuable education in what universities call “political economy.”
In the last decade, Blanco’s been active in the private sector: member of the boards of CYDSA, the Mexican chemical manufacturer, and of the country’s leading bank, BANORTE; and also of the pro-trade Cordell Hull Institute. In 2002 Blanco founded and became chairman of the board of Soluciones Estrategicas, which provides high-tech security — associated with cloud computing, database protections, and so forth — with IT security providers like Websense and Palo Alto. And in 2005 he founded IQOM Inteligencia Comercial, which provides online daily analysis of government trade measures that affect corporations involved in Latin America.
To be sure, the other heavyweight country in the region also has a candidate who can throw diplomatic punches.
Roberto Azevedo has been Brazil’s ambassador to the WTO since 2008. A member of Brazil’s foreign service since 1984, Azevedo hasn’t yet reached ministerial rank. But the well-liked Brazilian diplomat certainly has been given important tasks. He has been Brazil’s chief negotiator for the Doha Round, so he has seen first-hand how the politics have played out behind closed doors. And as vice-minister for economic and technological affairs, Azevedo has supervised MERCOSUR’s trade negotiations with countries beyond Latin America.
Azevedo, although educated as an electrical engineer (and in international relations at the Institute Rio Branco, which is Brazil’s foreign ministry’s diplomatic academy), can also point to some impressive legal accomplishments in the (very important) WTO dispute resolution process.
He has successfully litigated WTO cases that targeted European and American airplane subsidies, and also U.S. cotton subsidies that were determined to be inconsistent with WTO rules. These are significant accomplishments — and for the political skills displayed, not just the solid legal cases that Azevedo and his advisors put together.
In recent days, Azevedo has become deeply involved in WTO discussions of how to resolve the very politically touchy issues associated with currency appreciations and depreciations that can affect (or distort) global trade flows. The touchy part, of course, comes with the many complaints about how China is managing its Renminbi — a subject of hot dispute between Brazil, China, the United States and other countries. Azevedo is credited by WTO insiders for displaying deft diplomatic skills in the talks, as well as an impressive grasp of a complex diplomatic and economic set of issues.
Apart from the famous Brazilian-Mexican rivalry for leadership in anything, Azevedo conceivably could have a second problem that could come up when the WTO General Council starts weighing the nine candidates. In the press release that Brazil’s foreign ministry issued to announce its support for Azevedo’s aspirations to lead the WTO, there was this interesting statement: “The Brazilian candidacy reflects the importance the country attaches to the strengthening of the WTO.”
The reason the foreign ministry’s statement has raised some eyebrows is that it has never been obvious to everyone just how serious Brazil has ever been about strengthening the WTO. Certainly in the Doha negotiations, Brazilian intransigence has always been cited as one of the important reasons the talks have floundered. Azevedo has had a seat at the table, but he’s never been authorized to deliver. Will the members of the WTO’s General Council — few of whom themselves come from countries that are free of blame for the Doha impasse — punish Azevedo for his country’s difficult negotiating positions?
Similar questions directed at what they might be able to deliver as head of the WTO are also likely to be asked of the two African candidates. Remember how some African delegates cheered on the floor of the convention center in Cancun, when the 2003 WTO ministerial meetings collapsed? Insiders in elite international trade circles certainly do — although, again, few of them bring really “clean hands” to the table.
[This writer, like more than a few outsiders who try to figure out such things, isn’t sure whether it’s mainly the rich countries’ undeniable selfishness that have plagued the Doha process, or the bitter Third World resentments, where no “concession” they are handed ever seems to be enough. Even better-informed insiders love to argue this. Regardless, when Kenya’s Amina Mohamed and Alan Kyerematen of Ghana make their presentations before the General Council on Jan. 29, such questions will be hanging in the air, even if they might not be voiced out loud.]
Regardless of how each candidate may, or may not, be able to bridge the rich-country, poor-country divide that has torn the fabric of the Doha talks, both African contenders bring some strong personal qualities to the table.
Amina Mohamed — everyone seems to call her by her first name — is one of the bright lights of Kenya’s diplomatic service. Amina’s very popular in Geneva (especially in the General Council, which will pick Lamy’s successor).
She earned her legal diplomas from the University of Kiev and the Kenya School of Law — and then earned a post-graduate diploma in International Relations from Oxford. She speaks fluent, English, Russian, Swahili, and her resume notes a “working knowledge” of French.
Amina started her career as a legal advisor in Kenya’s Ministry of Foreign Affairs in 1986, with her legal portfolio steadily expanding through the 1990s. In 2000, Amina became Kenya’s ambassador to the United Nations and other International Organizations in Geneva, notably including the WTO.
She knows the WTO very well, having chaired the WTO’s Dispute Settlement Body in 2004, and then as chairman of the General Council in 2005. It was then that I first became aware of Amina’s diplomatic skills. At the time, the General Council (and some African missions in Geneva) were embroiled in the emotional post-Cancun impasse that had already put the Doha Round, as Pascal Lamy put it, in “intensive care.” While the impasse wasn’t, of course, resolved, Ambassador Amina Mohamed won widespread plaudits for her patient diplomacy. She definitely has what’s sometimes called “people skills.”
Amina has served since July, 2011 as United Nations Assistant Secretary General and Deputy Executive Director of the United Nations Environment Programme — called by its acronym, UNEP — in Nairobi.
The other African candidate, Ghana’s Alan Kyerematen, is one of the leading political figures of his country (although his presidential candidacy was unsuccessful). Kyerematen is also known for his diplomatic abilities. This is a very attractive guy, and a man with considerable political skills who knows his economics.
Kyerematen is a former ambassador to the United States (2001 – 2003). He was his country’s Minister of Trade and Industry from 2003 to 2007. His resume notes that Kyerematen was “one of the lead negotiators for Africa the WTO Ministerial Conference in Cancun in 2003.” (To the best of my knowledge, Kyerematen wasn’t one who helped wreck the negotiations.)
Critics who might be inclined to suspect Kyerematen because of the crowd he represented in Cancun in 2003 might we well-advised to consider his performance two years later when WTO ministers next met in Hong Kong. Those meetings are still remembered for the positive negotiating atmosphere they fostered. And Kyerematen was again one of the key insiders who met in the most important closed-door meetings. So having seen it all from an important insider’s perspective, Kyerematen should know what it would take to bring the Doha Round back to life.
To the extent he can articulate a vision of how to resolve the impasse, Kyerematen could become a strong player in the WTO elections process. He’s got the backing — and the ear of — the African Union and of the ACP Group of African, Caribbean and Pacific nations.
Another impressive part of Kyerematen’s resume comes to mind when reading the WTO’s trade policy review of Ghana, which was released in 2008. The WTO reviewers gave the West African country good marks, noting that “trade liberalization has helped to achieve higher economic growth” by cutting tariffs and enacting various structural reforms. Growth had been an impressive 6.2% in 2006, the report noted. That economic good news came on Trade Minister Kyerematen’s watch.
Another Kyerematen-pushed initiative: UNCTAD’s World Investment Forum, which now annually publishes a World Investment Report. That report provides documentation on which countries have taken steps to attract much-needed foreign investment, and which have not. Ghana has been one of the star African performers.
The ninth candidate to succeed Pascal Lamy isn’t as well known in WTO circles as the others. But just a quick review of his resume shows why Jordan’s Ahmad Hindawi has earned a respectful hearing. He’s got a PhD in Manufacturing Engineering/Management from the UK’s Birmingham University. He also earned a masters in science degree (industrial engineering) from the University of Jordan, and a BS in Aeronautical Engineering from Purdue University.
Hindawi has moved for the last quarter century in the most economically progressive business circles in the Middle East. Hindawi was Jordan’s Minister of Industry and Trade from 2004 – 2005, where he played a leading role in Jordan’s preferential trade agreement with the United States, Jordan’s WTO accession, and also in promoting closer economic ties with the European Union.
Hindawi established a regional management consultancy firm, Hindawi Excellence Group in 2006, which operates from Dubai. In his spare time, he likes to play basketball. (Pascal Lamy’s well-known passion as a marathon runner is sometimes linked in the public mind with the patience he has displayed in steering the WTO. Perhaps Hindawi’s supporters will remind the General Council that basketball, when played at its highest levels, is a team sport.)
We’ll all learn more about him — and the other aspiring WTO leaders — on Jan. 29, when the contest between the nine candidates really gets going. Stay tuned.