Pay attention to the WTO leadership contest: It matters!

Bernard Hoekman, Petros Mavroidis

03 April 2013

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The Director-General race

The WTO Membership is going through a leadership transition. After eight years at the helm the incumbent Director-General, Pascal Lamy, steps down on 1 September 2013. Nine individuals from different parts of the globe, all with extensive experience in the area of trade policy, have been nominated by their governments to replace him. The set of candidates includes three women, four current Ministers in the sitting governments of their countries, and three others with Ministerial experience.

Seven of the candidates have contributed essays to a just published Vox eBook titled: “The race for WTO Director-General: Seven candidates speak”. It is freely downloadable from here.

Choice of the new DG matters

Who replaces Mr Lamy matters:

  • First, the WTO can and should play an important role in improving the growth prospects of the global economy.

Currently it is not performing anywhere near potential because it is not helping to generate the trade liberalisation and domestic-policy reforms that would help stimulate investment and job creation.

Given the grim economic situation confronting many of its major members, the opportunity cost of this state of affairs is large. There is extensive research showing that the potential gains from further liberalisation and facilitation of trade are large. And to a large extent such gains do not entail fiscal costs – they do not require expanding government expenditures (see for example, Hoekman and Jackson, 2013; Hufbauer, Schott and Wong, 2010 and Mattoo and Martin, 2011).

  • Second, there are systemic issues at stake.

The WTO is a rules-based multilateral regime that was created in order to help prevent a recurrence of beggar-thy-neighbour nationalistic trade policies of the type that prevailed between the two world wars.

Many countries are beginning to turn away from the WTO as the premier forum in which they negotiate the rules of the game for trade and investment policies. Even if this is beneficial for the countries concerned, it can easily be detrimental for the system as a whole if it is not managed in a way that ensures the end result is not a splintering of the world economy into different blocs with their own rules of the game.

WTO directorship: No smooth sailing

The WTO is going through difficult times. In 2001, WTO members launched the Doha Round, the first round of multilateral trade negotiations to be held since the creation of the WTO in 1995. The negotiations were aimed at further liberalising trade in goods and services, agreeing to new disciplines on trade-distorting agricultural policies and addressing specific concerns of developing countries. Twelve years later, the talks are deadlocked.

Major trading powers such as the US and the EU, traditionally the bulwark of multilateral cooperation on trade-related policies, are increasingly devoting administrative and political resources to the pursuit of regional and preferential trade agreements of varying kinds. These include arrangements with broad coverage of policies affecting trade and investment in goods and services and that deal with many of the same issues that are also on the table in the WTO. Prominent examples are the Trans-Pacific Partnership talks between the US and a group of Asia-Pacific nations and the recently launched negotiation between the EU and the US on a Transatlantic Trade and Investment Partnership Agreement. A major reason for the shift in focus away from the WTO is the perception of the governments of the countries involved that not enough progress can be made through the Doha Round in liberalising access to markets on a global (multilateral) basis.

Role of the Director-General

The Director-General of the WTO does not have a magic wand that can be used to remove the fundamental constraints and factors that have impeded the successful conclusion of an ambitious Doha Round outcome. But he or she does have a critical role to play in helping the membership to identify and pursue options that will promote growth in ways that do not undermine the multilateral trading system.

There is more to the WTO than concluding trade deals. It administers a set of far-reaching agreements that discipline the use of national trade policies – these cover over 95% of all global trade in goods and services. Moreover, the WTO has put in place the only dispute-adjudication regime in international relations that has done away with unilateral threats and countermeasures.

It is little known outside trade circles but it has become the busiest state-to-state international court extant, with WTO members having brought over 450 cases since the WTO was created in 1995. These dimensions of the WTO tend to be neglected in terms of public attention but they are critically important in maintaining international cooperation on trade matters and providing traders with the certainty they need to invest and engage in international trade.

The Director-General, as the head of the WTO Secretariat, plays an important role in managing these services that are provided to the membership. He or she has an important role in explaining the many contributions that the WTO makes to sustaining peaceful international relations.

The eBook

Never before has the head of the global trading system confronted so many important challenges simultaneously. In the eBook, seven of the candidates lay out their views on the challenges confronting the WTO and how to address them.

There are many commonalities in their diagnosis of the challenges that confront the WTO and how to respond to them.

  • Many agree that there must be greater flexibility — for example for allowing progress to be made incrementally by 'harvesting' deals on specific issues instead of waiting for everything to be agreed in a comprehensive package.
  • Most also stress the need for the WTO to discuss and address policy matters that are currently not on the table in the Doha Round.

Taken together the views expressed suggest there is scope for optimism regarding the prospects for the WTO to continue to play the important role it was created to fulfil as there is a clear recognition that business as usual should not be an option.

References

Hoekman, B and S Jackson, (2013), “Reinvigorating the trade policy agenda: Think supply chain!”, VoxEU.org, 23 January.

Hufbauer G, J Schott and W Foong Wong (2010), “Figuring out the Doha Round”, VoxEU.org, 22 February.

Mattoo, A and W Martin, (2011), “Unfinished business? The WTO’s Doha Development Agenda", VoxEU.org, 8 November.

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Topics:  International trade

Tags:  WTO, WTO Director-General, world trade governance

Professor and Director of Global Economics, Robert Schuman Centre for Advanced Studies, European University Institute; Research Fellow, CEPR

Edwin B. Parket Professor of Law at Columbia Law School, New York; Professor of Law at the University of Neuchatel, on leave at the European University Institute. and a CEPR Research Fellow.

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