By Peter Ungphakorn
POSTED JUNE 8, 2020 | UPDATED AUGUST 26, 2020
Nominations closed on July 8, 2020 after one month (from June 8) for governments to propose candidates for the new director-general of the World Trade Organization (WTO). The organisation is in deep trouble and the timing looks bad although there are some pluses. But are the 164 member governments going to choose someone to rescue the WTO? Or does that overstate the powers of a person who might be better described as the WTO’s butler?
Dmitry Grozoubinski has already outlined the significance of Roberto Azevêdo’s decision to leave a year before his second term expires. On August 19, Pepsico announced Azevêdo was to be its new Executive Vice President and Chief Corporate Affairs Officer.
The campaign from July to September or October is likely, at least partly, to be about geopolitical rotation — is it the “turn” of an African, or a North American, or someone from a developed country? It is also likely to be about gender, and personal ability. The choice will be made by consensus, not voting.
The qualities needed in a WTO director-general include the ability to manage the Secretariat — some would say to give it more support and recognition of its skills and professionalism than it has received in recent years — and an ability to communicate, to encourage public support for the trading system, or at least to understand it.
The director-general also has to be able to bridge highly technical aspects of WTO work with the bigger-picture politics. Both are essential, sometimes working in parallel, sometimes alternating.
And politically, that includes having enough clout for world leaders to answer the phone when the director-general calls.
In reality, the focus of the campaign will be on finding someone to lead a WTO facing the worst critical challenges in its history on many fronts.
And yet a WTO director-general actually has no power at all. None. It’s all about authority and influence. If the members don’t want to listen to the director-general they won’t. They will just go their own way in the WTO, or go elsewhere.
This article looks at the record of power and influence of directors-general over the past 40 years. What can we learn from the experience of Azevêdo and his predecessors?
The WTO is not the same as the WTO Secretariat. This is an important distinction and a cause of confusion.
Legally, the director-general is the head of the Secretariat.
Article 6 of the agreement setting up the WTO deals with the Secretariat. The first paragraphs says: “There shall be a Secretariat of the WTO (hereinafter referred to as ‘the Secretariat’) headed by a Director-General.”
The whole of article 6 is remarkably brief on the Secretariat and the director-general’s role. It contains less than 170 words. Basically, the Secretariat is there to support members technically, with their work in the full range of WTO activities.
Some of the other agreements assign tasks. For example, the Secretariat is asked to write reports on countries’ trade policies for use in peer reviews among the membership. The director-general appoints panels to hear legal disputes when the countries involved cannot agree on who the panellists should be. And so on.
The WTO, on the other hand, is its 164 member governments. It is driven by its members. All WTO decisions come from the members, not the director-general — except on managing the Secretariat, and even that is under the oversight of the members through the Budget, Finance and Administration Committee and the General Council. The WTO’s organigram consists entirely of meetings of the members.
So, as head of the Secretariat, the director-general is a servant of the members.
But in practice members expect more. This is partly reflected in the fact that they have assigned the director-general an additional task: to chair the Trade Negotiations Committee, which oversees the talks on all the individual subjects handled by negotiating groups, during negotiations such as the Uruguay and Doha rounds.
Even that role is somewhat limited, since most of the nitty-gritty is done in the negotiating groups. Here, it’s the technically expert professionals in the underrated Secretariat who help the delegates and the chairs (who come from the delegations) to navigate the issues. The director-general is therefore important indirectly in sustaining respect and trust in the Secretariat. Some have done this better than others.
Only a few major political obstacles — with the possibility of resolving them through trade-offs across subjects — reach the Trade Negotiations Committee.
But the WTO is also an international organisation, and in practice the director-general represents the organisation internationally.
The heads of the General Agreement on Tariffs and Trade (GATT) — the ad hoc organisation (1948–94) that preceded the WTO and administered the treaty of the same name — were all technocrats. They were senior civil servants who reinforced the impression that this was a body run by faceless bureaucrats. In the early decades, there was some merit in being low-key.
2013–20 Roberto Azevêdo (Brazil)
2005–13 Pascal Lamy (Europe, France)*
2002–05 Supachai Panitchpakdi (Thailand)
1999–2002 Mike Moore (NZ)
1995–99 Renato Ruggiero (Europe, Italy)**.
1993–95 Peter Sutherland (Europe, Ireland)*.
1980–93 Arthur Dunkel (Europe, Switzerland)
1968–80 Olivier Long (Europe, Switzerland)
1948–68 Eric Wyndham White (Europe, UK).
* Former EU Commissioner. ** Former EU Commission senior official
Until, that is, the end of the GATT era, when governments felt the organisation needed someone with political clout to push the Uruguay Round trade negotiations (1986–94) along the final stretch.
In 1993, they chose Peter Sutherland, a former EU Commissioner, who could lobby world leaders and is said to have arm-twisted ambassadors so that the round could be concluded. As a result, the multilateral trading system was given its most extensive reform to date, and the WTO was created to replace GATT institutionally.
Since then, WTO members have chosen one more former EU commissioner, a former trade minister who had a senior position in the Commission (Ruggiero), a former prime minister (Moore) and an ex-deputy prime minister (Supachai). (Azevêdo is the exception. He came directly from the civil service.)
They wouldn’t have done that if they wanted someone subservient. They wanted experienced politicians who could call up world leaders as their equal, and inspire the membership to strike difficult deals.
That makes the WTO director-general’s job a difficult balancing act. He or she cannot do anything that the members don’t want to do. The members have to take the lead. Push too hard and they will resent the director-general. Don’t push at all and little gets done.
Among the many possible analogies here are two.
The director-general as Jeeves the butler or valet. Members may not take kindly to being compared to Bertie Wooster. And yet a common joke is that the WTO could achieve much more if it didn’t have members. But it does, and they run the show. They also rely on their servant. A clever one can persuade the master to avoid disaster and do the sensible thing while appearing to leave the initiative totally with the master. It takes intelligence, skill, tact and timing.
The director-general as team manager. The cliché says coaches don’t win matches. The players do. But the coach can help them win, through strategy, inspiration, and empathy with their individual problems (for the WTO that means the domestic politics of each member). One big difference. In the WTO the players pick the coach, not the other way round, and they decide what game to play.
So what have previous WTO directors-general achieved? Here’s a brief look, starting with the 1986–94 Uruguay Round negotiations under GATT.
Dunkel was the last of the GATT technocrats. He presided over almost the entire Uruguay Round negotiations. But before that, he was in charge during the deadlocked 1982 ministerial meeting when the new round was mooted, and the bitter wrangles over launching the talks in 1985–86.
His under-appreciated achievement was a technical feat. As chair of the Trade Negotiations Committee, he pulled together sets of evolving draft agreements, which became known as the Dunkel texts.
According to some accounts, members resented this initiative, even though the drafts came from the members via the chairs of the negotiations on each subject. Dunkel and the chairs did assess where consensus might be found, and this might have been tough for some members to accept.
Members may also have felt that he did not have enough clout to help them make the final and most difficult breakthroughs.
Nevertheless, the biggest deadlocks were broken by the members themselves.
One was needed right at the start of the Uruguay Round in 1986. It was a set of compromises from a growing alliance of middle-sized countries, which eventually persuaded the major players to be more flexible and settled their bitter differences.
The other was a deal on agriculture between the US and EU in November 1992, followed by further progress among trade ministers who met on the sidelines of G7 summit in Tokyo in 1993, leading to the round’s conclusion.
By 1993, Dunkel had gone. But most of his last text remained intact in the final Uruguay Round agreements.
Sutherland will always be remembered as the man who successfully concluded the Uruguay Round. He was chosen to give the talks political impetus. But he took over at a time when the talks’ prospects were already looking brighter.
People still tell stories of how he cornered an ambassador right at the end and challenged him to continue to block consensus and risk his country being blamed for the failure of the whole round. When decision-time came, that country raised no objections and consensus was achieved. (See below.)
Sutherland certainly had an important part to play, but the big deadlocks had to be broken by the members, which is what the EU and US did in November 1992, before he replaced Dunkel.
Ruggiero probably had the easiest job of all the WTO directors-general.
He arrived at a time of optimism. The Uruguay Round had been successful. The system had been modernised — it now included services and intellectual property alongside new agreements a range of areas of trade in goods, including an Agriculture Agreement.
So had the institution, with a fully legal WTO replacing the ad hoc GATT.
The task was to get all of this up and running. But Ruggiero did more than that. He pressed hard and successfully to conclude new agreements on financial and telecommunications services, and on duty-free trade in information technology products. Some describe his achievements as unmatched by any other director-general.
Ruggiero is remembered as a good manager, who defended the Secretariat and its staff more than any other (including during a strike), and a leader the membership were largely comfortable to work with.
He left as members were about to embark on more unfinished business from the Uruguay Round, including resuming negotiations on agriculture and services.
Moore’s arrival was completely different. The membership was seriously split over the selection of the new director-general, only resolved by giving Moore and Supachai 3 years each. The personal antagonism that had developed between the key supporters of either side never really went away until the ambassadors moved on to new posts elsewhere.
This bad feeling contributed to the failure to launch a new round of negotiations at the infamous 1999 Seattle Ministerial conference, but it was not the only reason. The membership was still too far away from consensus on the subjects to be negotiated.
By then Moore’s sole ambition was to launch the new round. He achieved it in Doha in 2001, with a large dose of help from the new-found international togetherness in reaction to the 9/11 attacks two months earlier in the US. On substance, pressure from key members, with Moore adding his voice, persuaded reluctant developing countries such as India to sign on. Job done.
But in any case, the fate of the talks was not in his hands since they were in their early stages, meaning a focus on technical issues — which would not exercise a director-general — rather than political.
The agenda set in Doha in 2001 had been far too ambitious. It aimed to conclude the negotiations in 2005, with the 2003 ministerial conference in Cancún — essentially a political event — intended to review progress half-way through the talks. Cancún was a failure. Members were too far apart and could not compromise where it mattered.
In early 2004 a compromise arrived when the EU dropped three unpopular issues it had previously insisted should be included in the talks. The negotiations now started to progress at a technical level.
The main achievement during Supachai’s tenure was an agreement on patents and access to medicine, but the success was really down to the members and the activists driving the issue.
Lamy was the EU trade commissioner who had produced the 2004 compromise, jointly with his fellow-commissioner for agriculture. A year later he was WTO director-general. In picking a third former EU commissioner, members may have been looking for another Peter Sutherland to lift the talks.
The Doha Round was now freed from its false deadlines and Lamy arrived when the talks began to pick up technically.
As chair of the Trade Negotiations Committee, he presided over the most productive period of the negotiations, particularly 2006–08. Much of what was achieved was down to the members and in some cases the chairs of the negotiating groups (generally members’ ambassadors).
Lamy seemed close to pulling off a breakthrough when he convened a meeting of key ministers in Geneva in July 2008. Some gaps were narrowed and he claimed that only a handful of hurdles remained — he said that out of 20 crucial topics, 17 had seen convergence, but the 18th had proved insurmountable. Opinions differ on how close it really was. In any case, important members were not playing ball. The gaps were still too wide for India, the US, China and others. The talks collapsed and the momentum was lost.
Lamy was certainly not a passive director-general. His activism reportedly alienated some ambassadors. His demands on the Secretariat created some internal tension.
By then the world was also preoccupied with a financial crisis. Budgets tightened and morale in the WTO weakened.
Picking Azevêdo seemed like a rebound. A former ambassador and senior official, he would be able to grasp the technicalities of WTO issues and the sensitivities of the Geneva trade-diplomatic corps.
Azevêdo arrived at a time of low morale in the Secretariat and in the WTO as a whole. By the time he announced his departure, morale was worse than at any other time in the organisation’s history.
He had one major achievement. As chair of the Trade Negotiations Committee, he presided over the final stages of the negotiations over streamlining border procedures and significantly cutting many trading costs particularly for developing countries — “trade facilitation”.
He understood delegations’ distrust of meetings of smaller groups, no matter how representative of the whole membership the participants might be. So those final meetings consisted of heads of delegations from the entire membership, crammed into a largish meeting room, reading a text projected on to a screen, and going through it paragraph by paragraph, line by line, comma by comma.
It was successful. The deal was struck at the Bali Ministerial Conference at the end of 2013. Even then, the agreement was held up for another year because India and some other countries wanted to alter another deal they had agreed in Bali.
At the time, in 2013, the approach was hailed as a breakthrough in negotiating procedure. No more small groups, no more “green room” meetings of a select few, we were told.
It turned out to be a one-off. The technique has not been used since.
Azevêdo had arrived at a time when members were already close to agreement in the trade facilitation talks, so the line-by-line plenary sessions worked. Since then, the return to more manageable small group consultations has been unavoidable.
The WTO has now been hit by a series of crises. Azevêdo’s critics say he should have been more outspoken about the damage being caused by the crisis in dispute settlement, the increase in protectionism, much of it (but not all) coming from the US, and to challenge Donald Trump’s more outrageous claims, for example that WTO disputes always go against the US.
Some speculate that Azevêdo decided to leave a year early because he felt he was powerless to achieve anything more. What he said officially was only that it was for family reasons. Then came Pepsico’s announcement on August 19.
The WTO director-general’s authority comes from influence rather than power, particularly to help nudge members along a road they have already chosen. The past four decades show that sometimes it works, and sometimes it doesn’t. It all depends on the situation, on the members themselves and on the individual director-general.
Azevêdo’s successor faces unprecedented challenges. Morale in the Secretariat and the membership is at its lowest since the WTO was created 25 years ago.
On the plus side, the WTO is still working well on low-profile but important technical tasks which still help international trade flow smoothly with little or no hitches — $20 trillion in goods and services each year in normal times.
By and large countries comply with WTO rules. The WTO is still used to discuss and resolve the small number of measures that cause problems. As a result, only a miniscule number of these end up as WTO legal disputes. This is an unglamorous achievement that never hits the headlines. It should receive more attention.
During the COVID-19 pandemic, the Secretariat has also increased its monitoring role, compiling a large amount of useful information on the governments’ responses that affect trade, with briefing papers on specific topics.
But the problems are serious. Appeals are no longer possible in dispute settlement. Negotiations are stuck even on issues such as fisheries subsidies which are crying out for a solution. Controversies rage over the status of more advanced developing countries, including China (see this proposal, and this). Members are searching for a response to the large setbacks caused by COVID-19. Even the good work on transparency and peer review needs strengthening.
The chances of updating the agreements to cover climate change and modern trading practices look bleak. Individual members increasingly wrangle outside the WTO over issues that WTO agreements struggle to handle, such as between the US and China and other countries.
The solutions do not lie with the new director-general. They lie with the members themselves. But if there is any chance that the members are willing to move, then the WTO needs a director-general who can inspire them and help them find inventive solutions.
One of the advantages of choosing a new director-general now rather than later is the timing of the next ministerial conference. It could be next June (2021) in Kazakhstan. That’s the next opportunity for major decisions, which need months of preparation. As Azevêdo pointed out, his successor would be involved in the preparation, the ministerial conference itself, and afterwards implementing whatever is agreed.
Assuming, of course, that the members are ready to move on anything. The worst possible outcome would be if they were split over selecting the next director-general and the bad feeling among the delegations in Geneva were to be a repeat of 1999. This would simply compound the WTO’s problems.
It might seem odd to argue that the atmosphere in Geneva could worsen the search for a solution when the real problems are caused by major geopolitical rifts. But the truth is the WTO has to operate at a technical level as well as a political one.
Resolving the trade conflict between Washington, Beijing, Brussels, New Delhi and elsewhere is needed to deal with the big problems of the WTO. But it’s the delegations in Geneva who have to sort out the technical details between them, to liaise with their capitals, and ultimately to produce the legal texts that will enjoy consensus support. Ill-feeling in Geneva can hinder that.
To be successful, the new director-general needs to be on top of all of those levels, from the technical to the political, while having the tact and wisdom of Jeeves.
Endnote: Peter Sutherland and the Japanese ambassador
This is how one author described the incident as told by Sutherland himself:
One episode at the very end of the Uruguay Round illustrates the approach that Mr Sutherland took. Ambassador Minoru Endo of Japan approached Mr Sutherland to tell him that he could not give his consent to the anti-dumping language that had been gavelled the night before in the green room. Mr Endo’s earlier approval was based on acceptance of the language by one of the interested Japanese ministries, but now another ministry was raising objections. Mr Sutherland decided to play the capital card, asking the ambassador to give him the prime minister’s telephone number. The ambassador said that he did not have the number, “so I was stumped for a second,” the director-general later recalled. With that manoeuvre blocked, he fell back instead on a Geneva gambit. “Do you know what I’m going to do now?” he asked the ambassador:
“I’m going to go into the Trade Negotiations Committee, and I’m going to say that last night at three in the morning we agreed the anti-dumping text. And I’m going to say, ‘Does anybody want to raise their hand and object to it?’ And if anybody raises their hand and objects to it, I’m going to say, ‘Well that does it, we can’t conclude the round.’”
Mr Sutherland did as he said he would, although he could not be certain just how the ambassador would respond. “And I looked straight down at him, and he didn’t move.” Bang! went Mr Sutherland’s gavel, who “knew we had it then,” and that the round was over.
— Craig VanGrasstek, The History and Future of the World Trade Organization,
WTO, 2013, pages 528–529
Thanks: for some private comments on the first draft. The responsibility for any errors and the tone of the article are, of course, mine
August 26, 2020 — adding the full story of “Peter Sutherland and the Japanese ambassador”, and Pepsico announcing Azevêdo’s appointment
July 23, 2020 — adding links to the candidates and their presentations, and David Walker’s timetable; clarifying the distinction between the WTO and its Secretariat; various other updates
June 12, 2020 — correcting the background of Ruggiero (he was spokesman for EU Commission president Roy Jenkins and a few years later Italian foreign trade minister, never an EU commissioner)
June 9, 2020 — adding link to the selection procedure, reference to world leaders picking up the phone, tasks assigned to the Secretariat and director-general, other minor edits
Strand Magazine illustration by Alfred Leete of the Jeeves short story “Jeeves and the Hard-boiled Egg” by PG Wodehouse. New caption by the author. Original caption “Jeeves, Mr. Bickersteth is still up the pole. Any ideas?” From Wikimedia Commons and this page. Public domain