By the Blouin News Business staff

WTO seeks a new leader and a new role

by in Global Economy.

Herminio Blanco (L) and Roberto Azevêdo (R), head to head to lead the WTO. Photo: AFP/Getty Images

Herminio Blanco (L) and Roberto Azevêdo (R) go head-to-head to lead the WTO. Photo: AFP/Getty Images

The World Trade Organization (WTO) could decide its new director-general as soon as May 8, with a formal announcement due by month’s end. The two remaining contenders are Mexico’s Herminio Blanco (above, left) and Brazil’s Roberto Azevêdo. They are vieing to run the global trade organization which is looking more and more lost as countries increasingly develop regional and bilateral trade deals independently of the WTO’s multilateral trade remit.

Regardless of who takes over in Geneva on September 1 from Pascal Lamy, the Frenchman who has held the job since 2005,  the WTO will have a boss from Latin American for the first time since its creation in 1995 in succession to the General Agreement on Tariffs and Trade (GATT). Latin American advocates are savoring the moment. They claim that the recognition of having both finalists, pared down from an original list of nine candidates in a three-stage process, is a way to highlight the achievements accomplished by the region and to strengthen its global influence.

The more skeptical note that several countries in the region — Brazil and Argentina among them — have been leaning further towards protectionism in recent years. They say the appointment of a new director-general is simply an opportunity to give the multilateral organization a facelift and yet another final chance to re-launch the current but long stalled — if not already dead — Doha round of global trade talks.

Herminio Blanco, a key figure in Mexico’s trade and industry ministry between 1985 and 2000, is seen as the frontrunner. He was from the Institutional Revolutionary Party (PRI), which is back in government today, prompting speculation that President Enrique Peña Nieto has done much campaigning on his behalf. Peña Nieto sees the benefit to Mexico of presenting itself as a free trading nation, and the importance to being at the top table of global multilateral institutions.

WTO needs to remain relevant in the face of the huge increase in regional trade agreements, currently negotiated. — Herminio Blanco

Blanco’s biggest asset is that he was a chief negotiator of the North American Free Trade Agreement (NAFTA) between 1990 and 1993. Holder of a doctorate from the famously free-market economics school at the University of Chicago, Blanco is today chief executive of IQOM, an international trade consultancy. “WTO needs to remain relevant in the face of the huge increase in regional trade agreements, currently negotiated,” he wrote on his Twitter account.

As well as the vote of his home country, Blanco may be able to count on those of some of the 44 nations with which Mexico has free trade agreements, among the most of any country. He can reportedly rely on the votes of the European Union’s member countries. In the past they have voted as a bloc to ensure that the director-general is their preferred candidate.

Roberto Azevêdo has been Brazil’s ambassador to the WTO since 2008. He is promoting his insider status to the full. “Anybody who doesn’t know the system is going to take years before he understands the language of the organization. I don’t think we have that time. We should be in a position to move, and move quickly,” he said on his Twitter account on April 29.

His detractors claim that though a Geneva insider, Azevêdo lacks the experience of serving as a trade minister or in any other high-level governmental position.

Azevêdo reportedly has India’s support and that of several African nations, in part due to the good relations between Brazil and many African countries. He has distanced himself from his country, and Brazil’s growing protectionism, saying he will be a neutral negotiator of global trade frictions: “As director of the WTO [I] will not be representing Brazil,” he told Reuters.

Anybody who doesn’t know the system is going to take years before he understands the language of the organization. — Roberto Azevêdo

Whichever man gets the job, he will have to deal immediately with the failure of the WTO’s biggest initiative, the Doha Round of global trade talks that aimed for further liberalization. Lamy declared them at an “impasse” in October 2011. Not much has changed since. There are signs that their is a desire among WTO members to at least give it a decent burial, and move on to a more modest deal.

Global trade talks need to be invigorated in order to revive world trade growth, which fell to 2% in 2012, down from 5.2% in 2011. For 2013 it is projected to grow at 3.3%, still below the 20-year average of 5.3% and well below the pre-crisis trend of 6.0% (1990-2008).

The bigger question in Geneva, and beyond, is if the world might abandon the dream of global free trade.  With GDP and trade growth sluggish and unemployment at records in many countries stirring protectionist sentiments, new forms of protectionism such as currency wars could easily lead to old-fashioned trade wars.

The new WTO boss needs to make the organization more inclusive of developing nations, and ease the power of the developed countries in the organization, which, critics say, have ignored the development needs of emerging economies. Expanding its object from purely trade to trade and development, and giving an equal voice to the developing country’s interests, would give the WTO an opportunity to regain its centrality to the global economic system. A Latin American leader could be the perfect director-general to do so.