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What do you need to know: The WTO Director-General’s Resignation

Roberto Azevêdo at the World Trade Organization’s Public Forum 2019 . Photo: © WTO/Jay Louvion

The World Trade Organization’s Director General, Roberto Azevêdo announced his resignation effective 31 August of this year. His tenure will end three years into his second four year term which was otherwise due to expire in 2021.

Azevêdo’s departure annouoncement comes in a week where a bill to withdraw the United States from the organization was introduced in the US House of Representatives by the Democratic Chairs of the Transportation & Infrastructure, and Energy and Commerce Committees. This following the introduction of a Joint Resolution to the same effect in the US Senate by Republican Senator Josh Hawley of Missouri.

It comes as the organisation finds its dispute resolution function paralyzed by a US Appellate Body blockade, a potentially existential budget battle looms, its scheduled ministerial conference cancelled and even supportive members eyeing unilateral trade action in contravention of its principles.

At perhaps the most perilous time in its 25-year history, the WTO will be without a formally appointed leader, and the forthcoming selection process for his replacement hands the US yet another opportunity to exercise an effective veto over the organization’s future.

But you’re busy, so what do you need to know?

Is this resignation a big deal?

While not likely to be the straw that breaks its back, this unfortunately timed resignation is still a hefty new weight for an exhausted WTO camel whose knees were already trembling. As the kids would say, “It’s not great.”

While opinions on the Roberto Azevêdo’s performance vary, his departure couldn’t come at a worse time, and the process to replace him is both very long and just as susceptible to being held hostage by an ornery member as everything else in the organisation.

As a global champion of rules based trade, the WTO’s ‘DG’ has an important role to play in making the full throated case against the rising tide of export restrictions, protectionism and unilateralism unleashed by the US-China trade tensions and exacerbated by Covid-19. Now is no time for the system to be without its Knight in Shiny Armani.

As the head of the WTO secretariat, the director general was poised to play a key role in steering the organisation through what now seems a near inevitable battle over its budget at the end of the year. If the US once again blocked adoption of the WTO’s budget, it would have been up to him to try and forge a compromise, or make the difficult and controversial decisions required to keep the lights on, staff paid and fondue pot glowing in the face of an unapproved budget.

As the chair of the trade negotiations committee, the director general offers convening power, good offices, and a consensus building voice. With critical negotiations around fisheries subsidies, e-commerce, investment, and WTO reform all hanging in the balance, the absence of a Director-General only further decreases the likelihood of progress (perhaps from Hail Mary Pass to Igloo in Hell).

What happens now – Interim Director-General?

Upon Mr Azevêdo’s departure at the end of August, The rules now require the WTO General Council – a meeting of all WTO Members which serves as its highest decision making-body outside of a ministerial conference to appoint one of the four Deputy-Directors General as an interim director.

This presents a potential hurdle, as the WTO General Council makes decisions by consensus. Therefore, even a single member’s objection could prevent the appointment of an interim leader for the organisation.

The current deputies are Yonov Frederick Agah of Nigeria, Karl Brauner of Germany, Alan Wolff of the United States and Yi Xiaozhun of China. For obvious reasons, neither the US nor the Chinese DDGs are likely candidates for unanimous approval, and it is not impossible to envisage objections to Agah and Brauner as well – either personally or on general principle to sabotage the organisation further.

What happens next – A new Director-General?

Whether an interim DG is appointed or not, the WTO members will need to begin the process of selecting a new Director-General.

The procedure is lengthy and would ordinarily begin nine months before a DG’s term is set to expire. Once the process begins, WTO members have one month to nominate candidates, which must be their own nationals.

After this month is over, the candidates are expected to come to Geneva and meet with the WTO missions. The next seven months are to be spent weening the applicants down to a single final consensus candidate.

Is there politics?

Oh my god yes. While the Director-General has no legal authority to make or enforce the rules, WTO members are still intensely jealous of the position and allergic to any candidate they feel might impede their interests.

Arriving at a single consensus candidate requires a raft of compromises, trades and deals even at the best of times, which of course the current situation is not.

What happens if no consensus candidate can be found?

Theoretically, the rules do allow for a vote by the membership to select a Director-General. However, this procedure is both a measure of last-resort and intended primarily for a situation where the membership is split between two or more valid candidates and agrees by consensus on a vote to break the deadlock.

Were the US or some other member to block all candidates as a matter of principle, they would also likely oppose a vote. Even if a vote could then be forced regardless, it would only fuel the fires of those who argue the WTO has gone rogue.

So what does it all mean?

On its own, this resignation does not fundamentally change the state of play. The WTO is severely weakened, partially paralysed and increasingly in the crosshairs of the US, where concerns about it extend beyond the Trump administration and across party lines.

It does however rob the WTO of an experienced, consensus-approved leader at a time when both the organisation and the cause of rules-based trade desperately need one.

Still, though slim, there is hope the DG selection process might serve to revitalise the organisation. Long rumored candidacies like that of Kenya’s formidable Amina Mohamed, who chaired the 10th WTO Ministerial Conference to a successful conclusion and would be the organization’s first female and first African Director-General, offer a path to a more globally representative future.

In his exclusive Borderlex blog series, ExplainTrade founder Dmitry Grozoubinski (@DmitryOpines) takes a relentlessly pragmatic look at the World Trade Organization with one question in mind: “You’re busy, what do you need to know?”

 

4 Comments

  1. roderick.abbott@ecipe.org

    In your view, how many countries actually do argue that the WTO has “gone rogue” ? This is not the same question as how many, for various reasons, support the idea of WTO reform; nor do countries that feel the WTO has under-performed in various areas all think it has gone rogue.
    i hear a lot about this but it is almost all from the USA or reflecting views of the current administration, or Republican politicians or lawyers. Much of it is anti-China rather than anti-WTO as such, the two have become combined. Sen. Hawley may have gone rogue and is pressing a pro-sovereignty platform

  2. Dmitry Grozoubinski

    Hi Roderick,

    Complicated question to answer simply.

    The US is certainly the most vocal and probably the most concerned with the WTO as a whole ‘going rogue,’ if you set aside the occasional gripe from countries like India.

    However, the US is far from alone in its concerns regarding the Appellate Body exceeding its remit and taking the law into their own hands, though they are the only ones going so far as to kill it.

    With all that said, if the WTO were to force a vote for basically the first time in its history, red flags would go up well beyond Washington DC. Once you break that levy and start voting on things to override Members, the temptation is to keep doing it. To name just one example, Developed Countries are outnumbered about 41-123 in the WTO, and so would be crushed on any vote to expand Special and Differential Treatment.

    I hope that helps,
    – Dmitry

  3. Prosper

    Hello Dmitry!

    In my view, it is a problematic that WTO rules don’t define the concept of a “Least Developed”, “Developing” and “Developed” country! While I don’t know why the choice was left to countries to decide under which group they fall, could you please share your knowledge, if any, of why? I think there is a need to set out clear and objective criteria defining who is a Least Developed Country (but at least for this group the WTO bases on the UN list of LDCs), a Developing and a Developed Country. Wouldn’t that prevent a kind of disatisfaction of some WTO member countries like that of USA in regard with China being treated as a Developing country? May be or not!

  4. roderick.abbott@ecipe.org

    Dmitry, thanks for you reply. I have seen no evidence that any other country joined the USA in blocking successive new appointments to the Appellate Body in 2016-17. In discussions in the General Council it was mostly the USA expressing its concerns in repetitive fashion, with others more focused on other WTO reform issues. In the background regular tweets in Washington.
    All documented in Inside US Trade. So what conclusion should I draw ?.

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