A New Leader for the WTO - Kimberly Elliott and Arvind Subramanian

Candidates to succeed Pascal Lamy as the Director General of the World Trade Organization (WTO) presented themselves before the general council last week. All but two of the nine candidates are from developing countries, in sharp contrast to those who led the WTO in the past, all but one of whom were from high-income countries. Is this a good sign for the WTO or not? Does this leadership succession process have implications for trade and development? On this week’s Wonkcast, CGD senior fellows Kimberly Elliott and Arvind Subramanian answer these questions and discuss (and sometimes disagree about) what the selection process says about the vitality of the WTO, as well as the importance of the WTO in an era where regional and bilateral trade agreements threaten to sideline the global trade body.

Kim, a trade expert and author of Delivering on Doha: Farm Trade and the Poor, says that a strong WTO matters for small, poor countries. “I think it’s particularly important to have a multilateral, rules-based system for the most poor and vulnerable countries in the world,” she says. “With the proliferation of regional trade agreements, the poorest countries tend to not be involved and aren’t able to negotiate. It’s the multilateral rules that protect them from being bullied.” Those who follow the WTO tend to support the organization’s “one country one vote” governing structure, which helps to even the playing field for small, poor countries when dealing with the rich and powerful. Arvind, a joint fellow at the Peterson Institute for International Economics and former official at the General Agreement on Tarrifs and Trade (GATT), the predecessor to the WTO, argues that the WTO is too democratic – an unconventional view he put forth in a recent Financial Times article. “There’s something like 157 members in the WTO and any one of those can block negotiations. Legitimacy could be undermining the effectiveness of the institution,” he says.  Trade liberalization, which ultimately supports shared global prosperity, tends to be furthered when big countries engage directly with each other, he says, adding that in the WTO small countries can too easily block such discussions and halt progress, as has happened with the deadlocked Doha Development Round of trade talks. Kim rejects that view. The Doha is deadlocked, she says, not because poor countries are blocking negotiations but because the big players have been unable to agree. “The rich countries actually do have more of a voice in the WTO,” Kim argues. “In theory, a small country could block, but there are lots of ways developed countries can put pressure on the least developed ones. So yes, we need to reform the process but I don't think it’s fundamentally the ‘one country one vote’ policy that needs to change.” Does the WTO still matter? What would happen, I ask Arvind and Kim, in a world without the WTO? “It’s not very difficult to imagine this because that’s what’s happening already,” says Arvind. “For the first time, I’m very worried. The big countries are beginning to negotiate these bilateral treaties amongst themselves -- the biggest one being the Trans-Pacific Partnership (TPP). Soon there will be a scramble amongst the big countries doing deals amongst themselves, and then the importance of the WTO will diminish.” Kim agrees that multilateral agreements reached through the WTO would be preferable to agreements like the TPP. Returning to the selection of a new WTO Director General, we discuss how different the current crop of candidates—three women and six men, all but two from developing countries—is from past WTO heads, as Kim noted with composite photos of the two groups in a recent blog post. “The expectation this time is the nominee will be from a developing country,” Kim says. “Does it matter? It matters in terms of the overall global system that we have diversity. It is a more open process.” The virtues of diversity notwithstanding, Arvind says he is worried that none of the world’s big trading powers has put forth a candidate. “I suspect this is because they don't give a damn, and if that’s the case there is cause for concern,” he says. “You worry if the big guys are going to go off and do deals on their own.” We end with a short discussion on the recent visit to CGD of one of the candidates, former Indonesian trade minister Mari Pangestu, where at a roundtable discussion and in a subsequent Wonkcast interview to be released soon the candidate touched on emerging trade issues, including export bans and carbon trading schemes. CGD has invited the eight other candidates to also visit CGD and appear on the Wonkcast. Stay tuned. My thanks to Alex Gordon for editing the Wonkcast, and Aaron King for a draft of this blog post.