European Affairs

Fall 2002

 

Trade Relations
New Man in Geneva Needs to Re-Brand the WTO
By David Woods

 

He campaigned for eighteen months to secure what is billed as the hottest seat in the global trade arena. When he arrived in Geneva, at the end of August, to take the reins as Director-General of the World Trade Organization, Supachai Panitchpakdi, former Deputy Prime Minister and Commerce Minister of Thailand, found the sobering reality.

A cramped personal office, a miserable salary, an ageing Lexus (which sometimes doubles up to deliver mail) to carry him about town, a secretariat budget that would not even meet the travel bill for other major institutions, a disaffected - recently almost surly - staff and an uncooperative set of member states and local ambassadors firmly dug into a multiplicity of negotiating trenches: this is the true currency of the top job in world trade.

Mr. Supachai also arrives on the scene in a period when Transatlantic trade relations are as edgy as they have ever been and more than capable of breaking up into commercial mayhem. Further, he has just over two years to bring direction and results in the Doha Round of trade negotiations, the biggest multilateral bargaining effort since the Uruguay Round rewrote the global trade rules and replaced the old GATT with the WTO, in the 1980s and 1990s.

His predecessor, Mike Moore of New Zealand, succeeded - despite a disastrous WTO meeting in Seattle in late 1999 and many other hurdles - in having the new round launched under his watch. He saw China enter the Organization. Mr. Supachai has three major applicants - Russia, Saudi Arabia and Vietnam - all sitting on his doorstep and hoping to win entry tickets in the three years that he will be in office.

That is his biggest problem: just three years to get some results. True, he has made such a positive initial impact that some diplomats are already muttering about the possibility of an extension to his term of office. Few, however, currently give him much hope of seeing the Doha Round to fruition, even though negotiations are supposed to conclude by January 2005. There is frenetic activity but precious little sign of movement on the substance of any of the many dossiers. Bringing Russia into the fold would be a coup, but even there the negotiations - which have already lasted nine years - continually accelerate and brake depending on political priorities and sensitivities in Washington, Brussels and Moscow. Currently the talks have slowed almost to a standstill.

The fact is, Mr. Supachai is a victim of the failure of Geneva's diplomats to make a coherent decision in 1999 on the appointment of a new Director-General to replace Italy's Renato Ruggiero. They scrapped endlessly and bloodily for a year and then weakly decided to award the job to both candidates: giving Mr. Moore and then Mr. Supachai hopelessly short terms of three years each.

With any luck, new procedures will be agreed before the search starts for a successor to Mr. Supachai. In seeking such rules, the WTO's member governments would do well to keep in mind the essence of the Director-General's role. It is not, of course, to represent the country or the region from which he (no she has ever been nominated) originates.

Thailand gets some international kudos from having its man in Geneva. But if he ever sought to wield influence in Bangkok's favor, or that of the Association of South-East Asian Nations, he would be in deep trouble. In substantive terms, it is almost a handicap for any capital to have its own national in what must be seen to be a neutral seat of minimal power.

Mr. Ruggiero, and Ireland's Peter Sutherland before him, had to lean away from any hint of supporting European causes. Mr. Ruggiero was actually criticized for appearing to side with Washington too often. Similarly, Mr. Supachai must not portray himself simply as the standard-bearer for the developing countries. If he tries to be so, he will be sidelined by Washington, Brussels, Tokyo and the other big players.

So, even if he behaves correctly, what power does Mr. Supachai have at his disposal? The answer is very little, at least formally. Yet the job has a subtle significance. Everything depends on the personality, fundamental understanding of negotiating dossiers and processes, patience, diplomatic skill and judgment of the man in the Director-General's chair.

Although it is a more substantial institution, today's WTO is not so very different in this respect from the GATT. The key to success is recognizing that the Director-General is the guardian of a system. Unlike any other multilateral institution, the trade organization is a collection of legal agreements and procedures with a set of deeply embedded and longstanding principles as its foundations.

The system needs to be supported, explained, promoted and protected. That is Mr. Supachai's role; and by careful maneuvering within those terms of reference, he has the opportunity to push the entire institution forward. In short, the WTO could be likened to a pirate ship captained by a cardinal.

At its best, the members are nudged gently along in the right direction. In the 1980s, Arthur Dunkel, the GATT's Director-

General, used his stewardship of the system to prod the membership into launching the Uruguay Round. It was a remarkably astute, painstaking and subtle performance that stopped the United States and the European Union from going their own way and cutting adrift developing countries unwilling to negotiate.

In the 1990s, Mr. Sutherland led from the front, placing a series of grenades under the negotiators and succeeding, in just six months, in concluding the round. Different styles, but both taking their credibility from the responsibility of the WTO's head for the system.

More recently there has been a tendency toward political correctness and something close to embarrassment at the idea of defending the system in its own right. Because of the supercharged debate on globalization, concepts such as open markets, competition, liberalization and non-discrimination are no longer accepted as self-evidently virtuous. The WTO always had a choice: stick to basic and proven principles or reinvent itself to provide a comfortable and sympathetic mirror for current political preoccupations.

Seattle and its aftermath led to the projection of the WTO as the answer to global poverty, and a view of its mission as a development organization rather than a set of trade rules. While it is certainly a vehicle that provides opportunities for development, it cannot deliver wealth, or investment, or productive industries - and certainly not public health, a clean environment or enhanced labor rights as activists too often insist.

In other words, the WTO now needs a branding makeover. If Supachai can get the institution's role clear, then he will have a much better chance of using the few tools at his disposal to good purpose. Apart from the ability to travel the world promoting the cause of open trade, those tools essentially amount to a collection of procedures through which he can adjust the accelerator pedal and steering wheel of the many parallel negotiations that will need to progress if the Doha Round is to come to anything. He must also use them deftly if the current enthusiasm for bilateral trade deals and free-trade agreements is to further the multilateral system rather than undermine it.

Certainly he has his work cut out with Transatlantic trade relations. While the two sides have a variety of substantive differences in the Doha Round negotiations, it is their use of the WTO's dispute settlement procedures that gives Supachai most cause for concern.

While the close relationship of equals between U.S. Trade Representative Robert Zoellick and EU Trade Commissioner Pascal Lamy has been productive, it has not stopped the continuing proliferation of formal disputes between the WTO's two biggest players.

True, many of the current disputes - notably that on a U.S. tax regime for exporting companies (FSC) - date back to the era of competitive litigation in the WTO between their predecessors Charlene Barshefsky and Leon Brittan. For the moment, however, the dispute procedure is the one aspect of the WTO that is delivering results, and everyone is keen to take advantage. Smaller countries are taking a lesson from the two big trading blocs and following suit.

These serious disputes can only be resolved with great resolution and intelligence. The United States has retaliatory measures still in place over the European Union's continued ban on imports of hormone-reared beef. But that is peanuts - a few hundred million dollars - compared to what might lie ahead. The Europeans already have over $4 billion of potential retaliation in their locker because of a WTO judgment against the U.S. FSC tax regime; by this time next year a WTO panel finding against U.S. steel safeguards might add a further $2 billion.

These sums are too enormous for Brussels to consider their imposition seriously. But if the Europeans relinquish their weapons without the United States acting to put right the complaints, then the dispute procedure will have been shown to be a paper tiger. At the same time, responsible voices in the U.S. Congress are already pouring scorn on the Geneva dispute process for being biased against the United States, and warning that legislators in Washington may start to ignore WTO findings. The irresistible force is confronting the immovable object.

This is clearly worrying Mr. Supachai. The "crown jewels" of his institution are at risk. He is already signaling to Washington and Brussels that they should desist from retaliation and put real effort into resolving disputes out of court. His room for improving this disturbing state of Transatlantic trade relations is limited.

Traditionally, Europe and the United States have allowed the Director-General to intervene effectively only when they have wished it. Disputes generally follow their own path through WTO procedures. It may be that Mr. Supachai will seek to dissuade Brussels and Washington from launching new dispute complaints at a time when the system is already overwhelmed with cases and potential trade retaliatory measures overhang two-way trade to a frightening extent.

None of this is to say that the poorest countries do not need or deserve the active support of the WTO's new Director-General. It is generally accepted that if these states are eventually to agree to new trade rules and further liberalization in the Doha Round they need a lot of help. Technical assistance has to be delivered: Mr. Supachai will simply have to decide how much, and of what type, the WTO - with a staff of little more than 500 - can itself deliver.

Getting other institutions to contribute in a coherent and complementary manner was a challenge for his two predecessors. It remains a work in progress: the level of technical assistance has been raised hugely, but whether it is all well-directed and well-delivered is quite another question.

Essentially, this kind of support for poor nations is a matter of organization, coordination and management. But what of those duties of a Director-General that rely more on personality, political astuteness and communications skills? Can Mr. Supachai talk comfortably and convincingly to the House Ways and Means Committee, the European Parliament, the AFL-CIO, Greenpeace and the Japanese farm cooperatives?

Nobody yet knows the answers to these questions. Initial impressions suggest that he is a thoughtful man, who listens. His tendency to speak publicly from the hip - which infuriated Washington and Brussels frequently after his election - seems to have given way to a more prudent public presentation since he arrived in Geneva.

But he must also run his secretariat. Many members of his staff have had a bad time in recent years. Increasingly undervalued by the national delegations, their relationship with Mr. Moore was strained. Nevertheless, with a careful touch and a sense of leadership, disillusionment in any institution can be turned around quickly, and that seems to be happening.

Mr. Supachai has chosen as two of his deputies highly experienced Washington and Brussels trade hands - Rufus Yerxa (a former Deputy U.S. Trade Representative and U.S. Ambassador to the WTO at the end of the Uruguay Round) and Roderick Abbott (Head of the EU Mission to Geneva in the late 1990s and a trade official with the EU Commission since 1973). Those appointments and that of the director of his office, Stuart Harbinson, previously Hong Kong's permanent representative and probably the most respected diplomat in Geneva, have already gone far to restore confidence.

Mr. Supachai speaks softly. But few doubt there is steel behind the quietness. Ultimately, his success or failure may be determined less by his roots in the developing world than by the refined traditions of consensus-building, backed up by negotiating toughness that mark the Orient.