TCS Daily

Who Will Lead WTO?

By Alan Oxley - January 18, 2005 12:00 AM

The World Trade Organization (WTO) is one of the most important international agencies. Its success depends upon its free trade dogma being as pure as possible. Dr. Supachai Panichpakdi, the Thai head of the organization, is due to retire. Who replaces him matters more than who heads the United Nations or the World Bank. The head must be a committed free trader.

Four candidates have announced: Carlos Perez del Castillo, head of the Uruguayan delegation to the WTO; Jaya Krishna Cuttaree a senior official in Mauritius; Luiz Felipe de Seixas CorrĂȘa of Brazil, head of the Brazilian delegation, and Pascal Lamy, the recently retired European Commissioner for Trade.

The winning candidate is selected by a process of consultative exhaustion. If it is hotly contested, the winner will be the candidate to whom there is least objection. This means traditionally the European Union and the United States have to approve. China is new to the organization, but given its new importance in trade, it may also acquire that de facto right.

The most senior candidate is Pascal Lamy, who has served as the European Commission's "Trade Minister." He is held in high regard. He is a solid intellectual. He and. U.S. Trade Representative Robert Zoellick, another policy geek, reportedly relished working through the sorts of sticky problems the WTO now has to address.

Those problems are daunting. Genuine expertise and the capacity to manage highly technical advice from officials is required. The WTO is the sort of organization where officials are quickly found out if they can't cut the mustard. There is no hiding behind high blown speeches like at the UN.

It is also being put around that a Frenchman in charge of the WTO would be devilishly clever. In the "set a thief to catch a thief" vein, the argument is that a former French senior official will know best how to deal with the French. The Doha Round is running behind time and agreement is needed on the issue the Europeans have most trouble moving on - agricultural protection.

French Fox in the Fowl House

The whole idea is just too clever by half, just too European. The first flaw is that the French have not been the main problem in Europe on agricultural reform for at least a decade. Chirac always makes the biggest political play against trade liberalization (it always earns votes at home), but it is Germany that is the problem. Germany has many more small and inefficient farmers than France. Furthermore Lamy's background is in trade, not agricultural policy. In Europe, agricultural ministries call the policy shots.

But there is a bigger and much more serious problem. Lamy is a French socialist. Putting him in charge of the WTO would be like putting the fox in charge of the fowl house. Lamy did a dutiful job arguing in Europe the importance of the multilateral trading system, but you will not find one speech where he extols the virtue and wonder of free trade. All gut free traders do this. They are believers. Lamy is first and foremost a Eurocrat.

Instead he has made horrible speeches (they are all on his website) about how the multilateral trading system needs to be adjusted so it can advance ideas and values that are fundamentally inimical to the free market - creating the right to use the system to advance command and control environmental policies and to lever access to markets to require countries to adopt labor standards.

Greenpeace, Worldwide Fund for Nature, Sierra Club, Friends of the Earth, Public Citizen and Oxfam have all made it their mission to capture the WTO ever since the Seattle riots in 1999. Their strategy has been to work through the Democrat Party and the European Commission. Both have adopted NGO positions that the WTO should change so it can be used to push these non-trade goals.

Lamy would argue this is necessary to "keep a consensus in support of the WTO." This is just NGO pap. The Kerry campaign team differentiated itself from Bush administration trade policy in the election campaign stating environment and labor issues would be "front and centre" in Kerry trade policy. It was playing to its anti-free trade constituents.

In Lamy's final year as commissioner he issued an astonishing post modernist tract arguing that at times, each member of the WTO needed the "room" to reflect "collective preference" in society to ignore basic WTO trade rules (by blocking imports Greens did not like and ignoring basic rules like treating every trading partner on equal terms).

He informed journalists at his last official lunch in Brussels that sooner or later all countries would be as enlightened as the Germans and have the same minister responsible for international trade and environmental affairs.

A Better Alternative?

The idea of any African, with the possible exception of South Africa's trade minister, Alec Irwin, who is a genuine free trader, heading the WTO is a joke, given how irresponsibly the African group has behaved in the WTO in recent years. The Brazilian comes from the Brazilian Foreign Ministry, which has a long tradition of managerialism. It does not breed free traders.

Perez del Castillo is a free trader. He was one of the founders of the Cairns Group of agricultural free traders, has had long experience in the WTO and was trained in agricultural economics in Australia. He is the only one of the candidates who would do. He is respected by his peers in Geneva.

But it would be a mistake to put him or anyone new in the job when it becomes vacant in September. Three months later there is to be a WTO conference in Hong Kong. There is talk there should be an effort to bring the Doha Round to conclusion by then. That would be another mistake. EU trade experts like Professor Jim Rollo at Sussex University believe any deal the EU did then would have to exclude greater agricultural access to EU markets. The European Commission has got to recut its subsidies cake to provide shares for the new members, and it cannot afford to pay more subsidies. The only way to make the deal work inside Europe would be to keep EU markets closed.

Furthermore, it is not practicable for the United States to try to deal on a package of agricultural trade reform, even modest, without considering change to the Farm Bill and that is not due for review until 2006. Only then would it be able to put the necessary pressure on the EU to reconsider its position on opening its farm markets.

The most sensible thing would be to keep Supachai in place until 2006 and then replace him, and with a free trader.

Alan Oxley is a former chairman of the GATT, the predecessor to the WTO.


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