Rufus Yerxa, Deputy Director General of the World Trade Organisation (left) with the author (right)
The ongoing process to select a new Director General (DG) has provoked much interest and speculation in the financial press. Debate has hinged not only on who the new DG will be (nine candidates are in contention), but also on the very future of the organisation itself, and the challenges that the new incumbent will face are enormous.
My interest in the World Trade Organisation was piqued by a small item in our media newstream a few weeks ago; it was about a meeting held in Davos. The purpose of the meeting was to explore ways to deliver substantial results at the 9th WTO Ministerial Conference which will take place in Bali, Indonesia, in December 2013. Like most people who follow these things from afar, everything I knew about the WTO hinged around the failure of the final round of the Doha Talks in 2008. The word was that as a consequence of this the WTO had become a demoralised and moribund organisation, the very existence of which was in question. Out of curiosity I did a little research and the more I dug, the more I was intrigued. So I set myself the rather daunting challenge of trying to de-mystify the organisation and to bring to light the lesser known aspects of the role it plays in executing its primary function, which is to open trade for the benefit of all. A key ally in this task was Deputy Director General Rufus H. Yerxa with additional enlightenment provided by his fellow Deputy Director General Harsha V. Singh.
Mr. Yerxa, a Trade Lawyer by profession, has been in both private practice as well as public service during his distinguished career. He was the U.S. Ambassador to the General Agreement on Tariffs and Trade (GATT) which was a precursor to the WTO. He was invited to join the World Trade Organisation for a 3 year term in 2003 by the previous Director General and is now coming to the end of his second 4 year mandate under Pascal Lamy, the current Director General. Mr. Singh, who is an economist, was also involved in GATT and after a tenure as a senior civil servant in his home country, was invited to join the WTO by the current DG.
While Mr. Yerxa concedes that the failure thus far of the Doha Round has indeed been a blow to the prestige and credibility of the organisation, he contends that many of its achievements have not been given the attention they deserve. These include its role as an appellate body in the settlement of disputes between member states. Hundreds of disputes have been settled over the years and, while sovereign nations are not legally bound to comply, the rate of compliance has been over 80%. Other highlights include the strengthening of the monitoring system and the rule of law to ensure that member states do not impose discriminatory standards that hinder a free exchange of goods and services. Increasing the membership to its current strength of 159 has also been important. Bringing countries like China, Taiwan, Russia and Saudi Arabia into the fold was no mean achievement because the rules and conditions of membership are strict and sovereign states are expected to reform and modify their own structures in order to abide by them. Both Mr. Yerxa and Mr. Singh agree that perhaps one of the most important (and under appreciated) achievements in recent times was the monitoring mechanism put in place by Mr. Lamy and his Secratariat team during the financial crisis of 2009 which contributed to member states honouring their commitments and not backsliding into protectionism during difficult times. There was a real danger of this at the time and the measures that were undertaken helped to stem the rot and set the world economy on a path to gradual recovery. While major problems remain in Europe, green shoots are clearly visible in Asia and the United States...
As for the sensitive issue of the Doha Round, the three obvious questions were (a) What were the major sticking points? (b) What went wrong? And (c), how can the stalemate be broken? In response to the first question Mr. Yerxa uses the interesting analogy of an ‘exchange rate’. Essentially how much the BRICS and Least Developed Countries (LDCs) are willing to open their markets to manufactured goods and services from the developed nations ‘in exchange’ for an opening of their markets to agricultural products from the poorer countries by reducing subsidies paid to farmers in the developed world. With well entrenched agricultural lobbies in both Europe as well as the USA, this is a tall order indeed. As to what went wrong, informed observers feel that the expectation was that successful negotiations between small groups of countries with mutual interests would generate the momentum for a major breakthrough. This did not happen and the resulting stalemate led to a breakdown in the talks. The financial crisis of 2009 was the final nail in the coffin... A major consequence of this was that member states started giving more importance to Regional Trade Agreements (RTAs) and Preferential Trade Agreements (PTAs) which risk marginalising the WTO. As of January 2013, some 546 notifications of RTAs had been received and of these, 354 were in force. Two recent initiatives in this regard are the Trans-Pacific Partnership (TPP) and the recently started negotiations between the EU and the USA to establish a mutual trade pact. Some observers see these less as purely linked to trade and more as a part of the US’s China containment policy.
To return to the WTO and its uncertain future, how it tackles these challenges will depend largely on the skills, both as a diplomat and a technocrat, of the candidate who takes over from Mr. Lamy as the next Director General in September. The selection process is more complex than a papal conclave and takes several months to complete. Candidates are first subjected to gruelling questioning by the General Council about their merits and vision before embarking on a world tour to lobby the 159 member states. The selection is coordinated by a committee of three members (commonly called ‘the troika’ in the popular press) who are the presidents of the General Council, the Dispute Settlement Body and the Trade Policy Review Board. In the initial round, Member countries are asked individually to attend a "confessional" type meeting, in which each of them states their preferred candidates.. Based on the responses it receives, The Troika gradually begins dropping candidates with the fewest supporters and those candidates are expected to voluntarily withdraw from the race. The process goes through several rounds, depending on the number of candidates until a final selection is made.This time around, nine candidates, six men and three women, have thrown their hats into the ring. The Troika have decided that for such a large number it will take three rounds to narrow the choice to a final winner. Even with four candidates being dropped in the first round and three in the second, the Troika will have its work cut out for it during the coming months.
The first round of consultations will start on 2nd April and the final announcement is expected to be made before 31 May. The new DG will take office on 1 September.
In his speech to the General Council when he presented his vision for his second mandate, Mr. Lamy quoted the poet Carl Sandburg who once said: “A politician should have three hats. One for throwing into the ring, one for talking through and one for pulling rabbits out of if elected.” While there is no shortage of hats at the WTO (witness the nine thrown in) there is unfortunately, a woeful shortage of rabbits...
