Does It Matter Who Will Be The Next Director of the WTO?

M. Shafaeddin

This coming spring, a new Director General of the World Trade Organization (WTO) is to be chosen. Nine candidates have thrown their hats into the ring to replace Pascal Lamy, the current Director General (DG). A recent forum and debate was held with five of the candidates at the Institute of Management and development (IMD-Lausanne, Switzerland), which prompted a lively discussion as to why the press is not paying more attention to the contest to replace Lamy or the candidates vying for this position.

In my view, the main issue is not the question of awareness of the press on the appointment of the DG. Far more important are key issues surrounding the functions and the philosophy behind GATT/WTO rules.

To be sure, I believe that international trade should be governed by some rules; otherwise there will be uncertainty and high risks not only in international trade, but also in production and investment. I also agree with the views of Cordell Hull, the visionary American architect of the post-World War II trading system on the need for “fairness and equality…” in international trade rules. Yet, I take issue with some of the claims made about the meaning of “fairness and equality” in this regard. For example, some have argued that the WTO rules should be “non-discriminatory,” and no group should be given “special treatment”; the negotiations on Doha Round should “deliver results”.

The real question is whether the GATT/WTO rules are fair and equitable and whether the demand of developed countries during the negotiation of the Doha Development Round has been consistent with the spirit of a Development Round. These issues require extensive analysis. But let me raise a few questions and mention just a few points here.

An important issue is the question of “fairness” and “non- discriminatory” treatment.  Professor Ha-Joon Chang of Cambridge University has referred to an interesting analogy. If a child is told to involve himself with a heavy-weight champion in wrestling, the same rule should not be applied to both.

Similarly, in international trade relations: should countries at different levels of industrialization and development be treated the same way? Absolutely not. Have the industrialized countries followed a type of trade policy regime, when they were at a similar level of industrialization and development, which they lecture developing countries to follow today? Are the agricultural policies of developed countries (particularly EU) “non-discriminatory”, “fair and equitable”?  Are not they discriminatory against developing countries, but in favor of developed countries? Are not developed countries given “special treatments” despite the fact that they are at higher levels of development?  If international trade has to be liberalized, why not in agriculture? Similarly, should not access to new technology be free? Is Intellectual Property Right Agreement justified simply because the inventors and innovators should be rewarded (by protection) for developing new technology? If so, why not an industrialist in a developing country who embarks on production of a product for the first time while he faces established large firms of industrialized countries? Is the lack of full, or appropriate, implementation of existing GATT/WTO rules by developed countries fair and non-discriminatory? (Many cases considered by the Dispute Settlement Mechanism of WTO go against developed countries; but even when the verdict against them, they sometimes do not implement it!).

Some have suggested, correctly, that the WTO is losing the spotlight because of a “widespread malaise” toward it.  The problem is that developing countries have little confidence in WTO and GATT/WTO rules. They have submitted to the significant pressure from developed countries during the previous trade rounds. They did so, not only because they were weak, but also because many of them did not have sufficient information, and knowledge about the consequence of what they were agreeing with. Many were overwhelmed by the dominant economic philosophy of the time: “neo-liberalism.”

Things have changed to some extent during the last decade or so. Developing countries have witnessed the consequences of the agreed WTO rules. They are better informed; they have seen the bankruptcy of the ideology of neo-liberalism and its advocacy of across-the-board and universal trade liberalization. Frederick List mentioned several decades ago that “political economy, in matters of international commerce, must draw its lessons from experience”.

Developing countries are justified in believing that “no agreement is better than a bad agreement,” or not to be interested in “delivering results.” If the negotiation should deliver results, the question is what sort of results: for whom and for what. Fair and equitable results, or just: results for the sake of results? The reason the negotiation is prolonged is that developing countries believe that the results should be conducive to their process of industrialization and development. Can they be?[1] The issue of the choice of the Director-General is secondary to this issue, although it is not unrelated.

[1] Some of these issues are discussed by the author following the failure of the Seattle Meeting of WTO in 2000 (Free Trade Or Fair Trade? An Enquiry Into The Causes Of Failure In Recent Trade Negotiations,” UNCTAD Discussion Papers 153, 2001 United Nations Conference on Trade and Development. For further readings please see also his publications under: https://sites.google.com/site/shafaeddin/