New WTO chief inherits crisis-plagued body | Business| Economy and finance news from a German perspective | DW | 08.05.2013
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New WTO chief inherits crisis-plagued body

The World Trade Organization (WTO) threatens to fall into obscurity, as it is proving unable to overcome differences among its members. Its new leader Robert Azevedo needs diplomatic diligence to ensure its survival.

On Tuesday, representatives of the 159 World Trade Organization member states, meeting in Geneva, reached consensus on Robert Carvalho de Azevedo of Brazil to head the global trade body. Azevedo, a career diplomat and Brazil's permanent representative to the WTO, takes over at a time when the organization is in crisis.

Trade experts are skeptical that the new WTO leader can instill a new sense of unity in the trade body, which once was established as a forum for setting global trade rules, reducing barriers to commerce and settling disputes.

"Whoever is heading the WTO is dependent on the policies and attitudes of its main members," Rolf J. Langhammer, economist with the Kiel Institute for the World Economy, told DW. But these were lacking the political will to reduce global trade barriers, he added.

Glory days long gone

Under WTO's precursor organization, the so-called General Agreement on Tariffs and Trade (GATT), free trade proponents were in a majority, forging rapid progress on a series of global trade agreements. By the middle of the 1960s, trade tariffs were substantially lowered following six rounds of trade talks.

Row of harvest combines in a field

Industrialized nations seek access to third world markets to sell their subsidized crops.

The last round of talks under GATT, which had begun in Punta del Este, Uruguay, in 1986, already lasted seven years - three years more than originally scheduled. Nevertheless, participating states were able to come up with a 22,000-page agreement.

Apart from further lowering tariffs around the globe, GATT made first tentative moves to liberalize agricultural policy, including proposals to scrap farm subsidies and import quotas.

In 1995, WTO was founded, and its first round of talks in Doha, Qatar, in 2001, already laid bare the huge differences over agricultural policy among its members.

While industrialized countries refused to scrap their farm subsidies, emerging countries, as well as developing nations, maintained import tariffs to protect their national markets.

The conflict even stopped an agreement on the free movement of services and industrial goods, as well as halted a voting reform in the trade body. However, a compromise on the Doha issues can only be found, if all of the 159 WTO members agree to the proposals.

In the past, the United States would have resolved outstanding issues by compensating the losers, Kiel Institute's Rolf J. Langhammer told DW. However, Washington does not have the clout it used to have in the talks, he added, which was the "primary reason for the negotiations to have stalled,"

Doha deal vs. free trade agreements

As a result of the Doha stalemate, regional neighbors have begun making deals among themselves. Currently, there are 354 regional free trade agreements in effect with 192 more under negotiation.

In February this year, the United States and the European Union announced they would soon begin talks on a transatlantic free trade zone - an effort that would establish the world's biggest free trading bloc.    

Chinese demonstrators

China is at the center of WTO anti-dumping probes

"As soon as the two parties start their negotiations, the Doha agreement is dead," said Langhammer, adding that the political focus would shift away from efforts to forge a breakthrough on Doha. 

Langhammer also said that regional trade agreements were primarily meant to protect markets rather than open them, and that most of the existing pacts were aimed at keeping especially China out of respective regional trade.

Hollow WTO

WTO advocates claim, however, that the global trade body will remain important, regardless of the outcome of the Doha negotiations. They cite a steep 80 percent rise in the volume of global trade between 1995 and 2008 - the year in which the financial crisis slowed trade - arguing this wouldn't have been possible without the WTO.

Rolf J. Langhammer said he also didn't believe the trade organization would dissolve itself, if Doha fails. Institutions, such as WTO, would rather fall into obscurity, he added - a fact that will give at least the new WTO chief Robert Azevedo a secure job for some time to come.