World Trade Organization (WTO) observers generally agree that the WTO’s next director-general faces significant challenges to help the WTO membership find a path forward as a group to foster further trade liberalization, help better integrate developing and least developed countries into the global economy and permit the addressing of the 21st century trade-related issues affecting businesses, workers and communities – in other words to retain or regain its relevance in the global rule making arena.
To obtain that relevancy a leading international trade lawyer and veteran WTO watcher says next Director-General Roberto Azevedo of Brazil, a consummate insider in Geneva circles, must confront five challenges.
“The challenges I see are enormous and flow from a number of issues, some obvious and widely acknowledged and others seldom focused on,” said Terence P. Stewart, managing partner of the international trade law firm Stewart and Stewart.
The first challenge lies in the shift of the power structure of the WTO membership, specifically the growing importance and influence of advanced developing countries like China, India and Brazil. Without a consensus being reached among the major players, both developed and advanced developing countries, about the proper distribution of responsibility, the stalled Doha trade liberalization negotiations cannot move forward, according to Stewart.
“The WTO’s impasse on completing Doha has occurred despite having had an exceptionally talented ‘insider’ in the director-general position for the past eight years. Although from a developed country, France, Pascal Lamy had all of the knowledge of the players, issues and the negotiating process to have achieved success if the test was simply the talents of the director-general,” Stewart said.
Second, the Doha Development Agenda was launched as an effort to help better integrate developing and least-developed countries into the multilateral trading system. However, “from the beginning, there have been large differences in the understanding of WTO members about what a development round should achieve,” Stewart said.
For example, during the negotiations preceding Doha, the so-called Uruguay Round, developing countries were expected to make market openings of roughly two-thirds the size of those of developed countries. That ratio has not been followed in the Doha negotiations, Stewart said. Some of the difficulties in reaching agreement on changes flow from the lesser percentage changes for developing countries versus developed countries and the resulting perception that there is not balance (from developed country perspectives).
“Moreover, many developing countries view Doha as a chance to rebalance the Uruguay Round by modifying commitments already undertaken by developing countries,” Stewart said. “The problem is some developed countries simply do not accept that the Doha negotiations envisioned that liberalization achieved in the Uruguay Round can be turned back in Doha.”
The third challenge, Stewart said, is the evolution of the dispute settlement system within the WTO which has resulted in many members opting to not negotiate on issues where there is known to be no agreement and seeing whether a right can be achieved through litigation in the hope that the WTO’s Appellate Body will create a right for the complaining party or an obligation for the defending party through their construction of existing agreements despite the silence in such documents.
“I have heard from many WTO members that they prefer to take their chances with litigation instead of with the historic practice of negotiating rights and obligations with trading partners,” Stewart said. “This haunts the WTO negotiating function but is seldom recognized as a problem.”
Fourth, different members are interested in liberalizing at different speeds with some seeking change relatively quickly, some moderately, others slowly, and some not at all. The recent explosion of regional and bilateral free trade agreement negotiations for those members interested in faster liberalization is rooted in these disparate views, Stewart said.
The fifth challenge is simply the inability of the WTO since its inception to handle negotiations quickly or to the cause’s emergence of new issues important to the global community – business, workers and, communities. New issues such as climate change, or new versions of historic issues like currency misalignment through state intervention have risen in importance to many observers and government, but the trade implications and potential for agreed upon rules agreed are not the subject of intense work programs or negotiations within the WTO. The result is a disconnect to the major private sector players affected by global trade and global trade rules.
“Lack of meaningful progress makes the WTO’s agenda less relevant to the business community, workers, and other groups that care about a trading system that addresses matters of importance to their lives,” Stewart said.
Stewart’s complete remarks and legal analysis are available at stewartlaw.com