By Martina Fuchs
In its first week without a captain, the World Trade Organization (WTO) is not only faced with an unprecedented leadership vacuum or the biggest crisis in its 25-year history, but an urgent need to stay relevant while embracing the technological and geopolitical realities nowadays, trade experts warned.
The Geneva-based global trade watchdog has de facto become leaderless on Aug. 31 with the departure of Director-General Roberto Azevedo, who surprisingly announced in May that he would step down one year before the official end of his term.
World Trade Organization (WTO) Director-General Roberto Azevedo attends a press conference at the WTO headquarters in Geneva, Switzerland, July 23, 2020.
Azevedo, who will join soft drinks and food company PepsiCo as chief corporate affairs officer, is leaving his successor with a massive set of challenges, ranging from intensifying trade tensions between major members, rising protectionism, to the worst economic recession, triggered by the COVID-19 pandemic, since the Great Depression.
QUESTIONS OVER FUNCTION
The WTO, which was founded in 1995 to replace the General Agreement on Tariffs and Trade (GATT), is the only global international organization dealing with the rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.
While critics have warned of the imminent “death of the WTO,” Bernard Hoekman, professor at the Robert Schuman Center for Advanced Studies in the European University Institute, said such claims were exaggerated.
“The real question is whether a critical mass of WTO members will be willing to engage in reform discussions that will make the organization relevant for the global governance of 21st century trade, which centers increasingly on trade in services and policies that affect the growth of the ongoing structural transformation of the economy towards digitization, disintermediation and automation,” he told Xinhua in a recent interview.
“There are ongoing plurilateral discussions on some of the key policy areas, for example on e-commerce and domestic regulation of services, which is a positive dynamic,” he said.
“International organizations rarely die but they can become irrelevant. Only when enough governments see the value in doing business at the WTO will it revive,” Simon Evenett, professor of international trade at St Gallen University in Switzerland, told Xinhua.
REFORMS, REFORMS, REFORMS
How to reform the organization and its rule-based multilateral trading system is now hanging like the sword of Damocles over the eight candidates, who threw their hats in the ring for the top job of the WTO.
The WTO is due to begin three rounds of consultations this month — dubbed “confessionals” — in which all of its 164 members confidentially voice their preferences, gradually eliminating the names on the list. This process is expected to last at least until November, provided that there are no delays.
The candidates running for the top post of new director-general meanwhile have promised sweeping reforms of the WTO’s three major functions of dispute settlement, multilateral trade negotiations and trade policy.
Candidate Abdel-Hamid Mamdouh from Egypt told Xinhua in a recent interview that restoring the deadlocked negotiation function would be his number one priority.
Kenya’s Amina Mohamed stressed that she would update the WTO’s rulebook “so that it’s fit for purpose and in sync with the global developments, global aspirations and respond properly to global challenges.”
“The world has moved on. The question is whether trade diplomats can leave their comfort zone and embrace the realities of 21st century technological and geopolitical rivalry,” Evenett said.
DISPUTE SETTLEMENT PARALYSIS
The other pressing issue that needs fixing is the WTO’s dispute settlement mechanism, which is currently paralyzed.
The Appellate Body, considered as the supreme court for global trade disputes, is supposed to have seven judges and needs a minimum of three to function. The U.S. administration has been blocking new appointments for more than two years, with claims that the court had gone beyond its remit.
“Without an effective system to address trade conflicts, there is no incentive to negotiate new agreements. The current crisis is an opportunity to reform the approach taken in the WTO to resolving disputes,” Hoekman said.
WTO members including China and the European Union set up a temporary arbitration system earlier this year that allows them to overcome the current paralysis and solve trade disputes among themselves.
Jesus Seade Kuri, Mexico’s candidate for the director-general, told Xinhua that restarting the dispute settlement system would be on top of his reform agenda and suggested creating a new supervision mechanism for the Appellate Body.
Irrespective of who takes the helm, the ultimate winner will have to brace himself or herself for new post-COVID-19 realities, a plunge in global trade and re-establish the WTO as an advocate for international trade.
Aerial photo taken on Aug. 25, 2020 shows containers loaded with commodities at the Shihu port in Shishi, southeast China’s Fujian Province. (Xinhua/Song Weiwei)
According to the body’s annual trade forecast published in April, global trade in goods is expected to drop by between 13 percent to 32 percent in 2020, before rebounding by 21-24 percent in 2021.
In theory, Azevedo’s successor should be selected by Nov. 7, four days after the U.S. presidential election, under an agreed elimination process that is based on consensus.
But as the selection process for the new director-general still continues, insiders have cautioned that the leadership void could last for months.
With U.S. President Donald Trump having previously threatened to pull the United States out of the WTO, although no firm plans have been announced, another great unknown remains to be how much influence the U.S. will be exerting on that process in the run-up to the appointment of the WTO chief.