The Road to Geneva Will Go Through Latin America

The next Director-General of the World Trade Organization (WTO) will be the first from Latin America and just the second from a developing country.  Ambassador Bashir of Pakistan announced on Friday that Roberto Azevedo from Brazil and Herminio Blanco from Mexico will advance to the final round of consultations while Mari Pangestu from Indonesia, Taeho  Bark from Korea, and Tim Groser from New Zealand withdrew.  One implication is that Christine Lagarde will retain her position as the only woman to date to head the IMF, the World Bank, the International Labor Organization, the United Nations, or the WTO. Other implications are less clear, in part because the consensus-based process discourages frank talk by the candidates.

The final round of the contest to lead the WTO pits an insider against a relative outsider. Members looking for someone familiar, someone with long experience in Geneva, will tilt toward Mr. Azevedo, Brazil’s ambassador to the WTO since 2008 and its chief Doha Round negotiator before that. Those more inclined to an outsider with more diverse experience may opt for Mr. Blanco, who has been in the private sector for over a decade after being Mexico’s chief negotiator on the North American Free Trade Agreement and trade minister from 1994-2000.

I am sympathetic to the assessment from my former Peterson Institute colleague, Gary Hufbauer, that “the U.S. would back the Mexican candidate because of its past interactions with Blanco in NAFTA -- and its more adversarial interactions with Brazil over trade” (gated). For a decade, Brazil and the United States have been battling over cotton subsidies that exceed US commitments under international trade rules. More recently, the US Trade Representative strongly criticized Brazil’s decision to increase tariffs in a number of areas, even though the action was legal under WTO rules. If developing countries tilt toward Azevedo, because Blanco is viewed as too close to the United States and Mexico as too pro-free trade, the process could result in continuation of the lack of trust that undermined the Doha Round negotiations.

Whomever is chosen, the new DG will immediately face the challenge of delivering a success at the December trade ministers meeting in Bali and then finding a way to steer the organization off the shoals of the Doha Round. Both candidates agree that a positive outcome on at least a few Doha agenda items in Bali is essential, and both say they are not willing to give up on the broader Doha Round. Blanco told CGD’s Lawrence MacDonald in a wonkcast that “a substantive solution to the Doha Development Agenda negotiations … is a must.” More colorfully, Azevedo asserted that burying the Doha Round is not a good idea because whatever members try to do next it “is always going to be haunted by the ghost of the Doha Round.”

Sadly, almost no one else believes that WTO members can reach agreement on the Doha Development Agenda as currently constituted. Some argue that the Doha Round is more akin to a vampire than a ghost and the members should put a stake through it. But just as there is no sign that members are willing to compromise in order to bring the round to a successful conclusion, there is also no sign that negotiators are willing to admit failure and move on.

In a new CGD brief, I argue that a better path forward would be to salvage what is possible from the Round in Bali, declare victory, and then move on. There are three elements that could form the basis for a worthwhile, scaled back agreement in Bali. First, a package of customs reform and other measures to facilitate trade is already close to achieving a consensus and it should be possible to clinch a deal there. Another essential element for compromise is duty-free, quota-free market access (DFQF) for least-developed countries. Sadly, the only thing blocking that initiative is American recalcitrance. In the brief, I suggest some ways Congress could address African concerns about preference erosion by strengthening the African Growth and Opportunity Act and mitigating any negative effects from the DFQF initiative.

Finally, agreeing on additional discipline on at least some areas of agricultural support could facilitate compromise and address food security concerns. Moreover, a more significant package than what is currently on the table could be possible if Congress approves the administration’s proposal for food aid reform. During the round, European Union negotiators linked their elimination of export subsidies to US food aid reform so they would come under pressure to deliver if Congress acts. Restrictions on the use export restrictions during price spikes would be another important element of this package.

Moving on after a successful Bali meeting would not mean abandoning the other issues on the Doha Development Agenda—demands for agricultural policy reform are not going away and services liberalization is too important. But it would allow members to rethink what needs to be on the agenda in a new century and how negotiations are conducted. Gary Hufbauer and Jeff Schott propose one possible way forward here. The WTO Director-General does not have a great deal of power but he could be key in nudging members in one direction or the other. Unfortunately, it is difficult to know from the process so far which of the remaining candidates would be more likely to grab the reins and get things moving.