Review of the COVID-19 pandemic — continued overall growth in cases and deaths, resurgence in some countries where COVID-19 had receded

This past week saw the release of information on GDP contraction in the U.S. in the second quarter of 2020 (9.5% (annualized at 32.9%)) and in the European Union (11.9%). See U.S. Department of Commerce Bureau of Economic Analysis, News Release BEA 20-37, Gross Domestic Product, Second Quarter 2020 (Advance Estimate) and Annual Update, https://www.bea.gov/sites/default/files/2020-07/gdp2q20_adv_0.pdf; Eurostat newsrelease 121/2020 – 31 July 2020, Preliminary flash estimate for the second quarter of 2020, GD down by 12.1% in the euro area and by 11.9% in the EU, https://ec.europa.eu/eurostat/documents/2995521/11156775/2-31072020-BP-EN.pdf/cbe7522c-ebfa-ef08-be60-b1c9d1bd385b#:~:text=The%20next%20estimates%20for%20the,released%20on%2014%20August%202020.&text=Compared%20with%20the%20same%20quarter,respectively%20in%20the%20previous%20quarter. Japan has similarly suffered substantial contraction in its GDP through the second quarter. See https://asia.nikkei.com/Economy/Japan-GDP-to-shrink-22-in-Q2-in-biggest-postwar-drop-forecast.

These sharp contractions in U.S. and EU GDP reflect the effects of the actions by governments in the U.S. and in the EU to shut down parts of their economies in an effort to control the spread of the COVID-19 pandemic. The sharp contractions would have been far worse but for government efforts to provide emergency funding to support companies, workers and local governments. While the COVID-19 pandemic has been far less severe in terms of cases and deaths in Japan and in other countries in Asia, contraction in GDP reflects both declining consumer spending and global effects of trade contraction that are occurring.

China, where COVID-19 infections were first discovered, saw a decline in GDP in the 1st quarter of 2020 with a rebound in the second quarter to a 3.2% increase. See CNBC, China says its economy grew 3.2% in the second quarter this year, rebounding from coronavirus, July 15, 2020, https://www.cnbc.com/2020/07/16/china-economy-beijing-reports-q2-2020-gdp.html.

The sharp contractions in GDP from much of the developed world is consistent with projections by the IMF from June 2020. A summary table from the World Economic Outlook Update is copied below.

The hope was that after a sharp contraction in the second quarter, the world would experience a v-shaped recovery once the pandemic was brought under control in much of the world.

As we start August 2020, expectations are turning to a longer and shallower rebound in the third and fourth quarters of 2020 which will negatively affect billions of people. The world has not yet crested in terms of new COVID-19 cases and countries that had gotten the virus seemingly under control are seeing various levels of resurgence. The United States which never got the virus under control has seen a second surge that has reached levels at least twice as high as earlier levels of new cases and has seen a resurgence in hospitalizations and deaths.

There are a few bright spots. Some countries have managed to drastically reduce the spread of the virus and have been reopening in phases with limited recurrence. Moreover, a number of pharmaceutical companies have entered phase three trials of vaccines, and governments have fronted billions of dollars to build capacity for vaccines should they prove safe and effective. While major countries like the U.S. and the EU block have secured access to potentially hundreds of millions of doses from various companies should vaccines in trial receive approval for distribution, at least a number of these pharmaceutical companies (or consortia) have arrangements for massive production around the world including billions of doses for developing and least developed countries which should enable a more equitable and affordable distribution than may have been true in the past.

COVID-19, the number of new cases in the last fourteen days

Looking at the daily reports put out by the European Centre for Disease Prevention and Control, the world saw an additional 3,568,162 cases in the fourteen days ending August 2nd. This was an increase of some 550,000 from the previous fourteen days ending July 19 where new cases were 3,018,993. The July 19 two week figures were again up close to 550,000 from the period ending July 5 when there were 2,469,859 cases. The period ending June 21 has 1,932,024 new cases; the period ending June 7 had seen an additional 1,567,983 new cases. Thus, in less than two months the global number of new cases in a fourteen-day time period increased by 127.56 percent. The COVID-19 situation update worldwide, as of 2 August 2020 is embedded below.

COVID-19-situation-update-worldwide-as-of-2-August-2020

Fourteen of the forty-two countries or customs territories that I have been tracking who account for more than 90% of total cases and total deaths from the pandemic continue to not have peaked in terms of two week number of new cases. See July 21, 2020, COVID-19 – the United States continues to spin out of control with increasing shortages of medical goods; sharp increases in developing countries in the Americas and parts of Asia, https://currentthoughtsontrade.com/2020/07/21/covid-19-the-united-states-continues-to-spin-out-of-control-with-increasing-shortages-of-medical-goods-sharp-increases-in-developing-countries-in-the-americas-and-parts-of-asia/. Japan, which had peaked a number of months ago, has a resurgence of cases, so much so that the last two weeks (11,439 new cases) exceed any other two week period for the country. Other countries which have not peaked include the United States (908,980 new cases), India (673,105 new cases) Brazil (633,017 new cases), Colombia (115,481 new cases), Mexico (95,280 new cases), Argentina (72,001 new cases) and these additional countries — Bolivia, Dominican Republic, Ecuador, Honduras, Indonesia, Iraq, and the Philippines). South Africa peaked in the prior two week period but still had an additional 152,411 new cases (93.56% of its peak).

Many developed countries have seen sharp increases in the last two weeks, albeit from much lower levels than in the spring. These include Spain, France, Germany, Italy, Canada, Australia and Japan.

Many developing and least-developed countries in Central and South America, Africa and parts of Asia are seeing growing numbers of cases. While some of these countries have seen a peak in the number of new cases, for others that is not true. India and Brazil are continuing to struggle to contain the spread as are the Latin and Asian countries reviewed above.

In the last two weeks, the United States had more new cases per 100,000 population than all of the other 41 countries being monitored other than Brazil and Panama. The U.S. number of new cases per 100,000 population was 5.88 times the number for all countries (including the U.S) and 4-50 times as high as major EU countries. And on deaths in the last fourteen days, the U.S. has more deaths per 100,000 population than all of the other 41 countries other than Brazil, Mexico, Peru, South Africa, Chile, Bolivia, Colombia and Panama. The U.S. death rate in the last fourteen days is 3.95 times the rate/100,000 population for the entire world and 25-87 times the rate for major EU countries (France, Germany, Italy, Spain).

WTO Members have the opportunity to adopt rules to minimize trade disruptions and expedite economic recovery

Many Members of the WTO have submitted proposals for action by the Membership to minimize the harm to global economies and trade flows from addressing trade restrictions, trade liberalization possibilities and other matters within the WTO’s wheelhouse.

In a previous post, I reviewed the July 25 APEC trade ministers joint statement and annex which in my view could provide the platform for WTO Members coming together to adopt a group of principles that have been endorsed not only by the APEC countries but also by G-20 members (in various G-20 releases). See July 28, 2020, APEC trade ministers’ virtual meeting on July 25 – Declaration on Facilitating the Movement of Essential Goods during COVID-19, https://currentthoughtsontrade.com/2020/07/28/apec-trade-ministers-virtual-meeting-on-july-25-declaration-on-facilitating-the-movement-of-essential-goods-during-covid-19/.

The WTO, being a member-driven organization, requires the WTO Members to come together for the common good if progress is to be made. While recent actions on seemingly non-substantive issues, like selecting an acting Director-General (largely an administrative function pending selection of a new Director-General), lay bare the lack of trust and widely divergent views among WTO Members, adopting basic principles for getting through the pandemic should be a win-win for all Members.

Conclusion

The COVID-19 pandemic is continuing to wreak havoc across the globe with new cases and new deaths continuing to mount. The health consequences are severe and are increasingly shifting to developing and least-developed countries. However, some developed countries, like the U.S., have not gotten the virus under control. Moreover, a number of countries who have had success controlling the spread of COVID-19 are seeing a resurgence as reopening of economies continues. This has led some countries to slow or even reverse some of the reopening steps.

As the sharp economic contractions in major developed economies attests, there are huge economic costs to dealing with the pandemic. The economic rebound is unlikely to be as strong or as quick as many have hoped. While much of what is needed is focus by each country and its citizenry to follow the science and get the pandemic under control, there is also an important role for multilateral organizations to play in keeping markets open, providing financing for those in need and more. The WTO has a potentially important role on the trade front. It is unclear that WTO Members will embrace the opportunities presented, but if Members would it would reduce the depth of the trade contraction and help speed economic recovery.

WTO selection of next Director-General — phase three process; no acting Director-General chosen

Today’s informal Heads of Delegations meeting at the World Trade Organization has ended. It had two agenda items — finalizing the phase three procedures in the selection process of the next Director-General and seeing if agreement was possible on which of the four Deputy Directors-General should serve as acting Director-General beginning September 1 until a new Director-General is selected (probably by November 7). The current Director-General is stepping down on August 31, 2020, a year early.

No acting Director-General yet

Press reports indicate that WTO Members were not able to agree on an acting Director-General based on differences between the US and EU and opposition to Alan Wolff by three Members — China, Venezuela and Cuba. See Bryce Baschuk, July 31, 2020, Dysfunction Deepens at the WTO, https://www.bloomberg.com/news/articles/2020-07-31/wto-dysfunction-deepens-as-members-fail-to-pick-an-interim-chief. Instead the existing four Deputy Directors-General will continue on until a new Director-General is selected and will continue to handle their current portfolios.

Procedures for the final phase of the section process for a new Director-General

Phase three of the selection process will start on September 8 after candidates have had their two months to make themselves known to the membership. Chairman of the General Council, David Walker (NZ) confirmed the procedures for the third (final) phase as they were discussed at the Tuesday informal Heads of Delegations meeting. There will be three rounds of consultations, in the confessional format, where each Member identifies first four, then two and finally the one candidate the Member views as most likely to achieve consensus among the Members (i.e., the Member’s preference(s)). Members are not permitted to express negative preferences nor provide a ranking when giving their preferences.

Amb. Walker with two facilitators (the Chairs of the Dispute Settlement Body and of the Trade Policy Review Body) will then determine the three candidates having the least support in round one; those three candidates will be expected to withdraw. In round two, three more candidates from the remaining five candidates will be expected to withdraw based on results of the confessionals. The third round will have just two candidates remaining, with the candidate receiving the lesser support expected to withdraw. In each round, the Chair of the General Council and his facilitators will also consider breadth of support among Members (both geographic and type of Member (developed, developing, least developed). The three rounds of consultations are viewed as helping build a consensus among the membership. At the end of the third round, there will be one candidate remaining who will be presented by the Chair of the General Council to the General Council as the candidate most likely to obtain consensus. If the Members agree by consensus on the candidate, that candidate becomes the next Director-General. If not, taking a vote by Members is a possibility under the 2002 procedures adopted by the General Council on selecting Directors-General.

It is understood that Amb. Walker has indicated that there will a short period for each round of confessionals (six working days), consistent with prior selections. Members who have put forward candidates are informed of results first, and then results are reported to the Heads of Delegations. Confidentiality by the Chair of the General Council and his facilitators is obviously critical and historically has not been a problem.

Conclusion

It is obviously disappointing that the divisions in the WTO membership are so deep that something as simple as agreeing on which of the four Deputy Directors-General should be the acting Director-General (a role which is essentially just administrative) could not be accomplished before the August break. It seems highly unlikely that there will be a resolution of differences that would permit the selection of an acting Director-General before September 1. Thus, the WTO will likely proceed with the current Deputy Directors-General and no acting Director-General until a new Director-General is selected.

The third and final phase of the selection process will start in early September and be concluded within two months. The procedures adopted in 2002 and followed in 2005 and in 2013 were successful in helping Members build consensus behind a single candidate. The Chairman of the General Council has announced procedures which appear to be identical to what was used successfully in the past. The open question is whether the current conflict among Members will frustrate obtaining consensus by early November. Let’s hope a consensus is possible.

Selecting an acting Director-General for the World Trade Organization — the road forward

At tomorrow’s informal meeting of the Heads of Delegation in Geneva, the hoped for agenda would include both finalizing the process for phase three of selecting a new Director-General and, if progress were made in consultations with Members, reviewing selection of an acting Director-General to serve after current Director-General Roberto Azevedo steps down on August 31 until a new Director-General is in place (likely November 7 or later). If the issue of the acting Director-General is resolved at the informal Heads of Delegation meeting, then a General Council meeting would be called, presumably tomorrow afternoon, to formally select the acting Director-General by consensus.

News articles indicate that the consultation process appears at an impasse with the United States wanting Deputy Director-General Alan Wolff to serve as the acting Director-General but facing opposition from both the EU and China. Mr. Wolff is from the United States. Apparently the other Deputy Director-General being actively considered is Karl Brauner who is from Germany. See, e.g., Reuters, July 29, 2020, Exclusive: WTO unlikely to get interim leader as U.S. insists on its candidate, causes impasse, https://www.reuters.com/article/us-trade-wto-usa-exclusive/exclusive-wto-unlikely-to-get-interim-leader-as-us-insists-on-its-candidate-causes-impasse-idUSKCN24U2P2. The article suggests that Members may be considering simply leaving the WTO organization without a Director-General until the selection process is completed. But the end game won’t be known until the meeting tomorrow morning.

Efforts by WTO Members to avoid blockage of selection process

The WTO Members agreed to a process for selecting a new Director-General at the end of 2002 to try to avoid the deep divisions and chaos that had characterized the 1999 selection process where there was a deadlock over two candidates, a delay in picking a Director-General and ultimately a decision to give the Director-General to each of the two candidates but at reduced time periods of three years each. In 1998-1999 there were no agreed procedures for either the selection of the next Director-General or for choosing an acting Director-General.

The 2002 procedures adopted by the General Council were intended to address both issues, although the vast majority of the procedures pertain to the selection of the Director-General while only one sentence of one paragraph addresses the selection of an acting Director-General. See Procedures for the Selection of Directors-General, adopted by the General Council on 10 December 2002, WT/L/509 (20 January 2003), para. 23 (“In the event of a vacancy in the post of Director-General, the General Council shall designate one of the existing Deputy Directors-General to serve as Acting Director-General until the appointment of a new Director-General.”). The 2002 procedures are embedded below.

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The lack of leadership by the U.S., EU and China

If the news articles are correct that the impasse flows from the views of the United States, the EU and China, then one can only shake one’s head in disappointment at each of the three for lack of leadership. In a prior post, I reviewed that the selection of an acting Director-General should be an easy job for the WTO membership. Each of the four Deputy Directors-General are well known to the Members and each is obviously qualified. The job of acting is temporary and has been described as administrative in nature. See July 24, 2020, WTO Director-General’s farewell address to the General Council while Members can’t agree on an acting Director-General, https://currentthoughtsontrade.com/2020/07/24/wto-director-generals-farewell-address-to-the-general-council-while-members-cant-agree-on-an-acting-director-general/.

Alan Wm. Wolff is an exceptionally talented individual who has probably had the largest public presence of any Deputy Director-General in the history of the WTO. His speeches which are available from the WTO news archives should be collected and released as a book by the Secretariat. They reflect Mr. Wolff’s deep commitment to the multilateral trading system, his deep knowledge of history and cover a broad array of topics. For example, he speaks eloquently on the role of the World Trade Organization in maintaining peace and stability, the history of the WTO, the values undergirding the organization, the hope that the WTO provides to countries seeking accession and the work ahead to keep the organization serving its core purposes. He would be a very interesting candidate for Director-General if the United States had put him forward He certainly would be a competent acting Director-General.

But the same can be said for each of the other Deputy Directors-General. Each will be able to handle the interim task of being the acting Director-General pending the selection of a new Director-General.

So it is obviously disappointing to see the impasse which reflects poorly on each of the major players involved.

A possible solution

While the WTO Members can obviously ignore the procedures they adopted in 2002 for selecting an acting Director-General and proceed without a Director-General, there are different paths that can be taken.

Obviously, Members could opt to overcome the impasse and get behind one of the four Deputy Directors-General. That is the best possible outcome.

Absent the Members fulfilling their role and finding consensus, the Deputy Directors-General who are under active consideration could withdraw their names from consideration by indicating that they would not serve if selected. While WTO Members may be unable to look out for the best interest of the organization, there is little doubt that each of the Deputy Directors-General has the best interests of the WTO at heart.

While the impasse could be solved by just Alan Wolff withdrawing, it would be a stronger message if both Messrs. Wolff and Brauner withdrew. There would still be two individuals to choose from. And a needless problem for the organization would be solved by the Secretariat leadership despite the narrow thinking of some of its Members.

The above suggestion is just a thought for the good of the WTO and its Members.

Selecting the next WTO Director-General — process for phase three and selection of acting Director-General may be decided on July 31

On Tuesday, July 28, the WTO held an informal meeting of the Heads of Delegation. Reportedly, the meeting was spent discussing the process for the third phase of the selection process for a new Director-General for the WTO.

The current Director-General of the World Trade Organization is stepping down one year early on August 31st. The first phase of the selection process for a replacement ended on July 8 (nominations by Members of candidates). The second phase, which is to permit candidates to become known to Members ends on September 7 and has already had each of the eight candidates meet with the Members in a General Council meeting (July 15-17). The third phase involves the Chair of the General Council supported by the Chairs of the Dispute Settlement Body and the Trade Policy Review Body consulting with Members, typically in a process referred to as “confessionals” in which each Member is asked to identify either the candidates the Member believes is most likely to achieve consensus or the candidates least likely to achieve consensus. Those candidates who are not viewed as being in the top number of candidates likely to receive consensus (or most likely not to achieve consensus if questions are styled that way) are expected to withdraw.

In 2013, there were three rounds of consultations to go from nine candidates to five candidates to two candidates with one candidate then put forward by the Chair of the General Council to the membership for a consensus decision. By procedures adopted at the end of 2002, this third phase is intended to be completed in two months, with provisions for possible voting if a consensus is not possible.

On the WTO webpage this morning, an additional informal meeting of the Heads of Delegation has been added and is scheduled for this Friday at 10 a.m. July 31st is the last day before the WTO’s August recess. A press article yesterday indicated that the informal meeting on Friday would take back up the issue of process for the third phase of the selection process, that discussions had been about having three rounds of consultations to take the candidates from eight to five to two to one. It was also reported that the informal meeting of Heads of Delegation on Friday would take up the question of who would serve as the acting Director-General between September 1 and whenever the selection process for a new Director-General concludes (likely around November 7). See Inside U.S. Trade’s World Trade Online, WTO members to meet again this week on selection process, acting DG, July 28, 2020, https://insidetrade.com/trade/wto-members-meet-again-week-selection-process-acting-dg.

Should the informal meeting of Heads of Delegation reach agreement on an acting Director-General, a special General Council meeting would be called so the decision could formally be taken by consensus. By procedures adopted at the end of 2002, the acting Director-General is to be selected from the four Deputy Directors-General. All four of the Deputy Directors-General (DDGs) have indicated their willingness to serve as acting DG if selected. Yonov Frederick Agah (Nigeria), Karl Brauner (Germany), Alan Wm. Wolff (United States) and Yi Xiazhum (China) are the four DDGs.

Possible scenario for the phase 3 selection process

In a prior post, I provided a summary of statements made by each candidate to the General Council and a summary of press conference questions and answers. See July 19, 2020, The eight candidates for WTO Director-General meet the General Council – recap of prepared statements and press conferences, https://currentthoughtsontrade.com/2020/07/19/the-eight-candidates-for-wto-director-general-meet-the-general-council-recap-of-prepared-statements-and-press-conferences/. As reviewed therein each candidate has his or her own story for why he/she would be the right person to become the next Director-General. There are also issues of whether the candidate (1) is from a geographical area not previously having a Director-General of the WTO, (2) has WTO/Geneva experience, (3) has served as a Trade Minister, (4) has served in other high-level government positions, (5) has been an official of a multilateral organization, (6) is from a developed or developing country. There are also potential political issues reflecting any ongoing conflicts the candidate’s country has with other WTO Members. Depending on how WTO Members actually weigh the candidates’ credentials and the other issues will resolve which candidates are viewed as most likely or least likely to receive consensus from the WTO membership.

WTO Members obviously have much greater information on each candidate and will have the opportunity to talk privately with each candidate if so inclined. What follows is simply an outside observer’s thoughts on how the consultations could proceed. I provide my assumptions as I proceed. As any of the eight could be the candidate selected as the next Director-General, my views on who may drop out in each of the rounds should not be taken as any comment on the capabilities of the individual candidates but simply an assessment from the private sector of how factors could combine to narrow the field.

Round 1 of consultations, going from eight to five candidates

While some former U.S. Trade Representatives have stated that technical expertise is not needed to be an effective Director-General (and indeed there have been both WTO Directors-General and USTRs who came to the position without extensive trade backgrounds), considering the challenges facing the WTO at the present time, I believe many Members will view having a trade background and a good familiarity with current WTO issues as a plus for any candidate.

As Director-General Azevedo demonstrated, a candidate doesn’t need to have a prior high political office (e.g., Minister of Trade or head of other ministry) to be able to effectively work with and communicate with senior government officials of Members in capitals. That view is supported by comments by former U.S. Trade Representatives as well. See WITA’s July 16, 2020 webinar, Three former USTRs on the WTO in a time of change, https://www.wita.org/event-videos/wita-webinar-three-former-ustrs-on-the-wto-in-a-time-of-change/ (former USTRs Froman, Schwab, and Hills). Even though that is true, I believe many Members will view prior senior government experience as important in any candidate.

While serving in other multilateral organizations will likely be viewed as a plus for any candidate, it is not likely in my view by itself to override the other elements.

Geographical diversity will be a plus for the three African candidates. Depending on whether Mexico is viewed as North American or Latin, Dr. Seade may be helped (if viewed as North American) or hurt (if viewed as Latin since the current DG is from Brazil). The Saudi Arabian candidate similarly would be helped if viewed as a Middle East candidate or possibly hurt if viewed as an Asian candidate (since Thailand’s candidate in the past was selected as Director-General). The other three candidates come from regions that have had prior DGs. While all candidates have stated that the best candidate should be selected and not be a candidate from a particular geographical area, the factor of geographical diversity will likely be significant in weeding out at least some of the candidates.

If being from a developed country is helpful (since the current DG is from a developing country), then the Moldovan and UK candidates would be viewed as helped as they are the only developed country candidates. While the EC Trade Commissioner had early on indicated he thought the next DG should be from a developed country, the U.S. did not support that position. I assume it will not be a relevant factor for most Members.

The WTO, and the GATT before it, have never had a female Director-General. Considering UN Sustainable Development Goals, for many Members whether the candidate is female may be an important factor.

While the selection process in phase three is set up to try to prevent Members from preventing a consensus from forming, it is unclear how the process will work if one or more major players will not accept a candidate for political or other reasons. During the press conferences, questions were raised about (1) ongoing political tensions between Korea and Japan and between Saudi Arabia and Qatar, (2) tensions between the United Kingdom and the European Union from Brexit, and (3) concerns China might have if an Asian candidate were selected in terms of its ability to maintain a Deputy Director-General position. It would seem likely that if the EU chose to defeat the U.K. candidate, between their member states and friends in the WTO, they would be able to block Dr. Fox. It is unclear if the same is true for the Korean candidate should Japan alone oppose, but it is more likely that the Korean candidate would be blocked if China also worked to defeat the candidate. I don’t believe that sufficient Members would oppose Saudi Arabia’s candidate on the basis of Saudi Arabia’s conflict with Qatar.

Based on the above assumptions, I believe that the first round of consultations will likely result in the following three candidates being viewed as least likely to obtain a consensus and hence withdrawing:

Tudor Ulianovschi (Moldova) – I believe many Members will view other candidates as having similar or greater strengths; he is from Europe which has dominated past DG selections.

H.E. Mohammad MazaidAl-Tuwaijiri (Saudi Arabia) – I believe his message of bringing strong business management skills to the job will not attract a large part of the WTO Members.

Dr. Liam Fox (United Kingdom) — while having strong free trade credentials, he has limited WTO experience; being from Europe will be a negative if Members get past credentials.

Round 2 of consultations, going from five candidates to two candidates

It is not surprising that even in the first round, it is possible that other candidates could be the ones who withdraw versus the three listed. That caveat is even stronger in round two. That said, here are two of the three whom I believe will drop out after Round 2:

Abdel-Hamid Mamdouh (Egypt) — while Mr. Mamdouh has a wealth of WTO experience and is well known to many if not all of the WTO Members, I believe he will not make it to the final round based on what many Members may view as lack of political experience not having served as a Minister or other high level government position.

H.E. Yoo Myung-hee (Korea) — Minister Yoo has an impressive resume and her arguments for why she would be a good Director-General resonated with me. Because other candidates have similar or more extensive backgrounds in trade, I believe Minister Yoo will drop out after the second round.

I consider the other three candidates to be the most likely to achieve consensus. Which of the three drops out after Round 2 will, in my view, depend on the weight members give to Dr. Seade being from a Latin American Member vs. the weight given to a strong reputation for reform and political capabilities vs. trade background and track record of accomplishments within the WTO.

If the Latin American label (versus Mexico being part of North America which has never had a Director-General) generates significant negatives, then I believe Dr. Jesus Seade (Mexico) will drop out at the end of round two. This would be unfortunate in my view because his understanding of pending challenges at the WTO and suggested approaches to addressing them sounded the most developed and most likely to achieve results of any of the candidates.

If Dr. Seade is not eliminated at the end of the second round of consultations, the choice for the third candidate eliminated comes down to H.E. Amina C. Mohamed (Kenya) or Dr. Ngozi Okonjo-Iweala (Nigeria). Minister Mohamed has a strong record of accomplishments at the WTO including at the 2015 WTO Ministerial Conference in Nairobi. She checks all of the boxes of factors listed and hence is likely to be one of the last candidates standing. Dr. Ngozi Okonjo-Iweala has a large reform reputation with a strong record at both the World Bank and as Finance Minister in Nigeria but has no WTO experience, and the trade experience that flows from her finance role or her role as a development economist.

Round 3 of consultations, from two candidates to the one candidate viewed as most likely to achieve consensus from the WTO Members

While any of the three reviewed above could be the one standing at the end of the process and all are obviously qualified to lead, I believe that Minister Mohamed of Kenya will be selected as the next Director-General.

Dr. Ngozi Okonjo-Iweala would be my guess at who emerges as DG if Members don’t select Minister Mohamed.

While I believe that Dr. Jesus Seade may be the best candidate in fact, the current Director-General being from Brazil will likely move enough Members to vote for one of the two women candidates from African countries so that Dr. Seade will not make the final cut (if he gets to round 3).

Conclusion

With the hour glass running, the eight candidates for the WTO Director-General post are fully engaged in reaching out to WTO Members to get themselves known. From social media to webinars to press interviews to virtual and actual meetings with individual Members and groups of Members, each candidate and his/her host government are pulling out all the stops to help Members understand why the particular candidate is the right person to lead the WTO at the end of 2020.

Who Members decide is the best person to achieve consensus and become the next Director-General will unfold over the period September 8-November 7. The WTO is fortunate to have so many candidates come forward. There are lots of factors that can be considered by Members. Time will tell who emerges.

APEC Trade Ministers’ Virtual Meeting on July 25 — Declaration on Facilitating the Movement of Essential Goods during COVID-19

The Asia-Pacific Economic Cooperation (APEC) has twenty-one members whose territories borders the Pacific Ocean. The twenty-one members include Australia; Brunei Darussalem; Canada; Chile; China; Hong Kong, China; Indonesia; Japan; Malaysia; Mexico; New Zealand; Papua New Guinea; Peru; the Philippines; Republic of Korea; Russia; Singapore; Chinese Taipei; Thailand; United States; and Viet Nam. According to a 2019 USTR note on U.S.-APEC Trade Facts, APEC countries account for 38% of the world’s population, 60% of the world’s GDP and 47% of world trade. See https://ustr.gov/trade-agreements/other-initiatives/asia-pacific-economic-cooperation-apec/us-apec-trade-facts#:~:text=APEC%20has%2021%20members%2C%20referred,percent%20of%20the%20world’s%20trade.

In May 2019, APEC Ministers Responsible for Trade (“MRTs”) issued a statement on COVID-19 recognizing both the centrality for all members in halting the spread of the pandemic and the need for members to also focus on remedying the economic challenges flowing from the pandemic. Like the G20 and other groups, APEC MRTs recognized the importance of keeping markets open, of limiting emergency restrictive measures and ensuring such measures are “targeted, proportionate, transparent, temporary and should not create unnecessary barriers to trade, and are consistent with WTO rules.” APEC MRTs encouraged cooperation and the sharing of information and more. See Statement on COVID-19 by APEC Ministers Responsible for Trade, 5 May 2020, WT/GC/213. The May 2019 statement is embedded below.

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At the July 25, 2020 virtual meeting of MRTs, the ministers issued a joint statement and included as Annex A the Declaration on Facilitating the Movement of Essential Goods. See MRTs joint statement, https://www.apec.org/Meeting-Papers/Sectoral-Ministerial-Meetings/Trade/2020_MRT; Annex A,https://www.apec.org/Meeting-Papers/Sectoral-Ministerial-Meetings/Trade/2020_MRT/Annex-A. Both are embedded below.

Ministers-Responsible-for-Trade-Virtual-Meeting-Joint-Statement-2020

Declaration-on-Facilitating-the-Movement-of-Essential-Goods-by-the-APEC-Ministers-Responsible-for-Trade-MRT

The joint statement reiterates the May 2019 key points and incorporates the Declaration on Facilitating the Movement of Essential Goods “which is a clear indication of the region’s continued support for WTO work.” The MRTs “recognize the need for discussions to reduce non-tariff barriers which restrict trade in essential goods.” There are other supportive statements about the importance of WTO work. “We encourage continued constructive engagement on WTO issues, including in the lead-up to the 12th WTO Ministerial Conference.” At the same time, the MRTs are looking to the development of a “post-2020 Vision” which they are hopeful leaders can launch at the end of 2020. Presumably, such a vision will include trade- related components which may include reforms at the WTO or simply be regional cooperation on certain important topics (supply chain issues on adequacy of supplies, e-commerce, movement of people as region recovers from COVID-19, etc.).

The Declaration on Facilitating the Movement of Essential Goods has ten specific actions that are declared.

The first two deal with export restrictions and prohibitions. The first is that each APEC member will ensure that any emergency trade measures introduced to address COVID-19 are consistent with WTO rules. The second commits APEC members to notify all such measures in accordance with WTO obligations.

The third declared action addresses non-tariff barriers. Specifically APEC members “are encouraged to work together to identify and resolve any unnecessary barriers to trade in essential goods.”

The next five declared actions pertain to trade facilitation — to expedite and facilitate the flow and transit of essential goods; to enhance coordination, efficiency and transparency of border clearance of essential goods; expediting the release of essential goods upon arrival; facilitating the entry, transit and departure of air cargo dealing with essential medical goods; abiding by the International Health Regulations of 2005.

The ninth declared action deals with tariffs and while not committing APEC members to liberalize tariffs for essential medical supplies, notes that some economies have taken such liberalizing actions and notes that the business community supports such action.

The last statement deals with reviewing progress on the APEC initiatives annually until COVID-19 is no longer a public health emergency.

Conclusion

Many countries and customs territories around the world have expressed objectives which are generally not significantly different than those put forward by APEC members.

With the large share of global trade accounted for by APEC members and with similar-type commitments by the G20 (which includes major members of the EU and has the EU participating), one would think it should be possible to obtain WTO commitments along similar lines to the APEC Declaration. The Declaration would need to have added some of the developing country and least developed country needs that have been already presented to the WTO so that the concerns of all are addressed.

While the WTO is doing an excellent job of providing information about the pandemic and trade measures taken by Members (at least those notified), the WTO Members have yet to get behind a set of principles that all Members can sign off on. Perhaps the APEC MRT joint statement and Declaration on Facilitating the Movement of Essential Goods provides a good starting point for the full WTO membership. While some WTO Members have not wanted to address COVID-19 issues during the pandemic, obviously collective action during the pandemic would be most effective. The post-pandemic needs also should be addressed but can await individual and group developments of views.

Pascal Lamy’s recent comments on the challenges facing the WTO

Pascal Lamy is a former Director-General of the WTO (2005-2013) and former European Commission Trade Commissioner (1999-2004). He is President emeritus of the Jacques Delors Institute. As one would expect, he is a frequent speaker on trade matters. Two events in the last several months presented some thoughts on the challenges for the WTO moving forward.

Mr. Lamy was interviewed by the Lowy Institute in Australia in early July on their COVIDcast addressing the future of globalisation. See The Interpreter, July 3, 2020, COVIDcast: The future of globalisation, https://www.lowyinstitute.org/the-interpreter/covidcast-future-globalisation. Similarly, on June 17, 2020, he and Robert Zoellick (former President of the World Bank and former U.S. Trade Representative) participated in a Peterson Institute for International Economics Trade Winds program, What future for the global trading system?, https://www.piie.com/events/what-future-global-trading-system.

Below are some of my notes on points made by Mr. Lamy I thought were of interest along with my commentary.

globalization vs. deglobalization

On the future of gobalization, Mr. Lamy is of the view that the next few years will be a period of more obstacles for trade and investment. These obstacles will change the speed of globalization but won’t lead to broad scale deglobalization. There will be some onshoring to address fragility of supply chains. However, the clamor for onshoring will be “more bark than bite”.

In the United States both the Administration and parts of the Congress have called for onshoring production of medical equipment. There has been some utilization of the Defense Production Act by the Trump Administration to get producers to use facilities to produce needed equipment. Many U.S. industries and unions have urged the government to take action to permanently reshore production of various medical equipment. See Joint Statement on Policy Objectives for Reshoring and Safeguarding Domestic PPE Manufacturing (embedded below).

joint-statement-of-reshoring-of-PPE-production

However, the U.S. has not entered into long-term contracts to support significant reshoring efforts, possibly supporting Mr. Lamy’s prediction of “more bark than bite”.

precautionism

Efforts by countries to recover from the economic damage caused by COVID-19 will be complicated by what Mr. Lamy called “precautionism” (governments protecting people from risk) and which he distinguished from protectionism (protecting producers from international competition). In Mr. Lamy’s view, protectionism can be addressed by eliminating restrictions or other obstacles. Precautionism involves risk profiles which will differ among Members and possibly may differ among issues being considered and hence will be much more difficult to address to achieve a level playing field. Mr. Lamy in the Trade Winds program used the example of the tourism sector which has been devastated by governments’ efforts to control the spread of COVID-19 and noted that there are a number of different initiatives by countries to get some reopening of tourism (e.g., nonessential air travel) between particular countries, but that there isn’t a common approach which in his view reflects differing risk profiles of countries.

I would note that precautionism is not limited to the response to the COVID-19 pandemic. The WTO’s Sanitary and Phytosanitary Agreement and the Technical Barriers to Trade Agreement both recognize the right of Members to take measures to protect their populations at such level as is deemed appropriate by the Member although encouraging use of international standards.

To the extent the aftermath of the COVID-19 pandemic is a more cautious risk profile for major trading nations, recovery will likely be slower and more fragmented.

Borrowings during the pandemic to lessen the economic collapse

Mr. Lamy made several points on the massive amounts of stimulus funds being provided by certain governments to limit the economic challenges being faced from efforts to slow the spread of COVID-19.

His first point is that the size of the government programs will necessarily distort trade and create a playing field that is not level. Rescue plans for companies or industries, subsidies provided, increased state ownership are all elements of the distortions that he sees occurring. He believes countries will have to come to grips with the emergency needs and see that markets return to their proper role with reduced government involvement.

The second point is that only a few countries are positioned to provide this type of financial assistance because of the inability for most countries to borrow huge amounts of money for such stimulus activities. Hence the north-south divide is growing according to Mr. Lamy. While this point is certainly true, multilateral organizations like the IMF and World Bank and regional development banks are working to provide debt forgiveness and other financial assistance to some developing and to least developed countries to provide some greater flexibilities.

WTO reform — U.S.-China tensions

Mr. Lamy views the WTO as weaker today than it was ten years ago. He attributes the main source of the weakened situation of the WTO to the growing divergence between the United States and China. In his view, the tension between the two has prevented convergence on a range of issues.

Because the world has changed so much over the years, the WTO rulebook must be updated. China’s state capitalism economic system is creating significant problems for the world trading system. China’s trading partners are concerned about the high level of state ownership (30% for China) and the government support to the state-owned sectors. These facts lead to conflict with partners both in terms of market access in China and in terms of Chinese competition in other markets. Mr. Lamy notes that the WTO’s rules on state aid are weak. He doesn’t believe one can coexist with China in the WTO if rules on state aid are not toughened (what he describes as achieving “competitive neutrality”). Even with new rules, the geopolitical rivalry between the U.S. and China will remain.

Mr. Lamy agrees with the United States that the current WTO rules do not constrain China’s state capitalism practices which distort competition. He believes that China was making good progress on moving towards a market economy until the 2008-2009 financial crisis. China had lowered state ownership to 15% of the economy. With the financial crisis, China poured huge sums into the economy, including through state-owned enterprises. With the change in political leadership, the country shifted away from a convergence model and has continued to bolster its state capitalism model, now 30% of the economy. For the foreseeable future, the WTO will not be able to achieve convergence by China to a market-economy model, but will have to work on whether coexistence can be made to handle at least many of the distortions.

The Untied States has been pushing the WTO to come to grips with the fact that the WTO set of rules was created for market economies, and to recognize that such rules don’t work for large state capitalism economies. One of the WTO’s Deputy Directors-General, Alan Wolff, in a speech earlier this year, in reviewing principles that undergird the WTO identified convergence, not coexistence, as one of the core principles. See DDG Wolff: “There can be no permanent retreat from what has been created,” 10 June 2020, https://www.wto.org/english/news_e/news20_e/ddgaw_11jun20_e.htm (“Of necessity, the WTO is about convergence, not coexistence”)

In his comments during the Peterson Institute’s Trade Winds webinar, Mr. Lamy indicated that coexistence is possible if there are strong state-aid rules and reviewed the ability of Germany and France to work together in the EC despite France having had relatively high state ownership (around 15%) in the early years. The ability to work with a country with significant state-control was due to stringent state aide rules. The U.S., Japan and EU have been working to pull together improved disciplines on industrial subsidies, action that China has already indicated it will not accept. Mr. Lamy is of the view that China can be brought to the table by parties seeking “competitive neutrality” and by indicating to China that China will not gain additional market access without agreeing to new rules on state aid.

In a post last week, I reviewed an opinion piece by Peter Carl, a former EC Director General for Trade. His take on the same situation was that the EU, US and others should pursue improved disciplines on state aid but when such efforts are rejected by China, the EU and others should leave the WTO and start a new organization without China where convergence would be possible. See July 25, 2020, A new WTO without China?  The July 20, 2020 Les Echos opinion piece by Mogens Peter Carl, a former EC Director General for Trade and then Environment, https://currentthoughtsontrade.com/2020/07/25/a-new-wto-without-china-the-july-20-2020-les-echos-opinion-piece-by-mogens-peter-carl-a-former-ec-director-general-for-trade-and-then-environment/.

Mr. Lamy also reviewed how a functioning WTO is very important for developing and least developed countries. Trade and investment is a big lever for such countries in their development efforts. Thus, if the WTO continues to weaken, it is these countries that will be most hurt. Similarly, these same countries are likely most adversely affected by the trade and economic fallout from the COVID-19 pandemic.

WTO agenda

During the Peterson Institute’s Trade Winds program in June, Mr. Lamy indicated that proponents of open trade were in for a difficult time. He listed five issues of concern. Three were dealt with above (precautionism, government infusions to address COVID-19 pandemic, deglobalization/onshoring). He also reviewed the weaponization of trade, citing both the Trump Administration’s actions and the dispute between Japan and the Republic of Korea, and new forms of protectionism citing investment controls and new instruments.

Mr. Lamy believes that the WTO agenda needs to be looked at in two stages. The first or short term involves finding a new Director-General, and needs to include a cooling down period. My understanding of the cooling down period is to have governments who have poured trillions of dollars into their economies back out of such increased state involvement and permit reestablishment of a level playing field. This period will be a few years and will permit some increase in trust through small steps. He believes there will be a coalition for open trade and that the EU will be the leader depending on the outcome of the upcoming Presidential election in the U.S.

Longer term, Mr. Lamy believes that the WTO must go back to dealing with the big problems:

coexistence with China as long as China has 30% of its economy state-controlled; will require improved rules on state aid;

dealing with the trade and environment nexus; issue keeps rising on the global agenda; EU planned global carbon tax will be important issue;

around the challenge of precautionism, the world will need a new effort to level the playing field possibly similar to prudential rules in the finance system.

EU role in the WTO during the US-China tensions

The EU is serving as a stabilizing force in the WTO. Indeed, the more U.S.-China tensions increase, the more the EU will step in to provide stability. Mr. Lamy states that many WTO members want the EU to be a shield to protect them from having to pick sides with either the U.S. or China. This is a big role for the EU. If EU comes out of the COVID-19 pandemic stronger, it will bolster the role that the EU can play in the WTO to maintain stability.

Mr. Lamy cited the Appellate Body crisis as one where the EU by creating the multi-party interim arbitration agreement took the lead to maintain stability in the organization and got many countries to follow.

Conclusion

Mr. Lamy paints a picture of a challenging time for the world trading system in the coming years. He agrees that the WTO rules do not adequately address distortions that flow from China’s state capitalism economic system. His proposed solution is to coexist but work on obtaining stronger rules on state aid. While the U.S., Japan and the EU agree such improved rules are needed, there is a certain irony in his recognizing the need for stronger rules on state aid, as it was the EU, among others, who pushed for weaker subsidies disciplines during the Uruguay Round.

Mr. Lamy also paints a bleak picture of distortions created by countries’ efforts to stem off economic collapse as countries impose shutdowns to try to control the COVID-19 spread. His argument is from 30,000 feet and is conclusory – the introduction of such huge amounts of money necessarily distorts competition. My own view is that while the question of whether there are distortions is an important one, large parts of the funding don’t increase manufacturing or production but rather form a safety net under employers, employees and state and local governments dealing with an extraordinary situation that doesn’t reflect market forces. Of more use would be agreeing on identification of outcomes that are viewed as distortive versus those outcomes which simply offset the economic fallout from the pandemic. Many industries will end up much smaller after the pandemic than before and any rescue funds provided will reflect an effort to address the extraordinary event of governments mandating closure of markets. Presumably such funding should be agreed to be nonobjectionable. Whereas if an industry in a country expands with government assistance to take advantage of the closure of competitors because of restrictions flowing from efforts to address the pandemic, presumably such subsidies would be problematic.

The longer term issues Mr. Lamy raises will certainly take center stage at some point, but his list does not include any of the large number of pending issues before the WTO where progress will hopefully be made in the coming next year or so – fisheries subsidies, electronic commerce, etc.

What is clear is that the next Director-General will face a very challenging landscape with fundamental differences among many Members that will make forward movement by the WTO and its Members a challenging undertaking.

A new WTO without China? The July 20, 2020 Les Echos opinion piece by Mogens Peter Carl, a former EC Director General for Trade and then Environment

The WTO is an organization in crisis in part because of a system of rules created by market economy countries that doesn’t adequately deal with large economies with different economic systems. China is the largest and most obvious example but by no means the only WTO Member operating economic systems that are not consistent with market economy principles. While China engaged in significant changes to its system in its efforts to join the WTO and had undertaken commitments for further changes that would move China towards a market economy, changes in political leadership led to a reversal in direction, with emphasis on state planning, state-owned and state-invested enterprises to pursue the government’s objectives and massive government subsidies to take over global economic sectors. While China views opposition to its system as a means of trying to hold China back from achieving the economic growth it pursues, many trading partners view China’s approach to global trade and investment as highly disruptive and inconsistent with basic principles of reciprocity and the disciplines of the WTO on market economies.

The Trump Administration has changed the U.S. approach for trying to deal with China by its pursuit of a section 301 investigation and resulting tariffs when it could not get China to change its policies and actions. The U.S.-China Phase 1 Agreement was an effort to find a way to address at least some of the challenging practices and address resulting trade distortions through purchase objectives. Many trading partners have been concerned that the U.S. approach, at least as it involves purchasing objectives, constituted managed trade. A phase two U.S.-China negotiation to deal with remaining major concerns has not started and apparently won’t before the November 2020 U.S. elections.

The European Union and Japan have been working with the United States to put together proposed modifications to existing WTO agreements to deal with some of the aspects of the Chinese economic system (but also relevant to other Members) that cause massive distortions — industrial subsidies, excess capacity, state-owned and state-invested enterprises. China has repeatedly indicated that any efforts to address these issues at the WTO will be blocked by China as such efforts are viewed as aimed at restricting China’s rise.

Earlier this week (July 20), a former EC Director General for Trade, Peter Carl, penned an opinion piece in Les Echos with the provocative title, “A new WTO is needed without China” (literally A new WTO must see the day without China). https://www.lesechos.fr/idees-debats/cercle/opinion-une-nouvelle-omc-doit-voir-le-jour-sans-la-chine-1224748.

Mr. Carl indicates in the opinion piece that “Europe’s trade policy has stagnated for twenty years. It no longer meets the demands of today’s world and the European public attributes the loss of millions of jobs to China.” (all quotes from the opinion piece are informal translations by Google Translate ). The opinion is remarkable as it comes from a former senior EC trade official.

“Our policy is outdated and based on an outdated ideology that is identical to what it was before the arrival of China on the world state, after its accession to the WTO in 2001. Its centralized economy, its powerful industrial policy in all the key sectors, its enormous state subsidies, combined with a government apparatus and a political repression as powerful as those of the ex-USSR, swept large swathes of European and American industry. However, we act as if we were in the heyday of the 1990s, when our main competitors were other market economies, Japan, Korea, the United States. Our inaction resembles the ostrich policy and unilateral pacifism of the 1930s. We know the results. We must therefore protect our liberal economies and our open societies against adversaries. This requires a fundamental review of the trade policy of the European Union and the WTO.”

Mr. Carl calls for a complete reform of the WTO with the EU teaming up with the U.S. and other like-minded Members but recognizes that meaningful reform will be blocked by China. “The solution: withdraw from the WTO and create a new international trade organization without China. Most countries would follow our example. We would return to an open world economic order between market economy countries sharing the same ideas, on the basis of clear and reinforced principles in favor of the free market.” Mr. Carl advocates for the adoption of rules that would deal with “abuses” of the China model including improved subsidy disciplines and “rules against social, environmental dumping and inaction on climate change.” Such new rules are needed to permit the EU to green its economy.

Mr. Carl, addressing concerns that his proposal represents a turn to managed trade, says simply that “This is what we already have, although only China manages it, and we are suffering the consequences.”

That Mr. Carl felt the need to publish such a strongly worded opinion shows the underlying and growing tensions felt by major trading partners from a major economic power with a fundamentally different economic system than that pursued by the historic major players in world trade.

For WTO Members and their businesses and workers, the rising discontent by many with the functioning of the WTO and its ability to achieve meaningful reform should be a wake-up call. The WTO to be relevant must have rules that address the world in the 21st century. The WTO must also be able to have Members assume increased responsibilities as their stage of economic development evolves. Similarly, the WTO must confront whether existing rules can be modified to generate greater coverage of practices by different types of economic systems. If not, the WTO must consider whether it can survive where all Members don’t follow similar economic systems.

Unfortunately, there appears little likelihood that many of these critical reforms will be addressed in the coming years. China has objected to WTO Members trying to modify existing agreements to address distortions caused by China’s economic system. China has also objected to the U.S. effort to have Members consider whether WTO rules require Members to operate market-economy based systems. China and others have objected to U.S. efforts to define “developing country” and effectively have Members take on obligations commensurate to their stage of economic development. Stated differently, China is working hard to defend the status quo and prevent consideration of reforms that would achieve greater balance among all WTO Members.

While USTR Lighthizer and others have said that if the WTO didn’t exist, it would have to be created, Mr. Carl’s opinion suggests that one option that may take on greater appeal is the withdrawal from the WTO and the creation of a new international trade regime among countries with similar economic systems. Such a move away from the WTO would certainly involve enormous economic upheaval and political tensions. The more desirable course of action is to achieve timely reform of the WTO so that all Members feel the system achieves reasonable reciprocity.

Time will tell whether WTO Members find a path forward or whether the WTO becomes less and less relevant and even ceases to function. In a Member driven organization, the answer lies with the membership.

WTO Director-General’s farewell address to the General Council while Members can’t agree on an acting Director-General

The WTO held its last regularly scheduled General Council meeting before the August recess on July 22 and 23. While the meeting had a full agenda, it was also the scene for the current Director-General Roberto Azevedo to give his farewell address to the membership. Director-General Azevedo steps down at the end of August. Before getting to the irector-General’s farewell speech, I review several agenda items and activities at the General Council meeting that show the ongoing impasse among the membership.

Agenda item 4, Twelfth Session of the Ministerial Conference — date and venue

Because of the COVID-19 pandemic, the WTO postponed the 12th Ministerial Conference originally agreed to be held in Kazakhstan this past June until a future date in 2021. Kazakhstan has offered to host the conference in 2021. Moreover, the WTO has been able to advance in its use of virtual meetings and is now back with face-to-face meetings in Geneva as well. While the COVID-19 pandemic continues to be a global challenge, selecting a venue and time of meeting is obviously critical to permit the logistical planning involved for the next ministerial conference. Unfortunately, Members were unable to reach agreement on the venue or the date. Since it would always have been possible for Members to agree to Kazakhstan for June 2021, with a fallback venue of Geneva in December 2021 if by April Kazakhstan did not believe it could safely host the event, the lack of consensus on venue and timing is disappointing. This was agenda item 4. See WT/GC/W/802, 20 July 2020 (Proposed Agenda for General Council meeting on 22-23 July 2020).

Agenda item 6, Designation of acting Director-General

The Chairman of the General Council postponed consideration of the issue of the appointment of an acting Director-General during the General Council meeting, despite the issue being an important agenda item, as Members had been unable to agree on which of the four Deputy Directors-General should serve in this temporary caretaker position while a new Director-General is selected. Since the selection process for a new Director-General could extend until early November, the role of acting Director-General is limited in time (probably just two months and a week). Moreover, by agreement of the General Council in late 2002, the acting Director-General is to be chosen from the four Deputy Directors-General. Members have been able to interact with each of the Deputy Directors-General for years (seven years for three of them; three years for Alan Wolff). So how hard could selecting an acting Director-General possibly be? Press reports have indicated that the Chairman of the General Council, Amb. David Walker of New Zealand, has heard from Members general support for either Alan Wolff of the United States or Karl Brauner of Germany, but no consensus for either and opposition to each from some Members. The other Deputy Directors-General (DDGs), Yonov Frederick Agah of Nigeria and Yi Xiaozhun of China have each served seven years (as has Karl Brauner) and Nigeria had been thinking about putting Mr. Agah forward as a candidate for the Director-General position before choosing Dr. Ngozi Okonjo-Iweala. Thus, any of the four DDGs would be competent to handle the position for the two plus months needed. Why politicize the selection of an acting Director-General? What about a coin flip to resolve this impasse? The inability of Members to agree on an acting Director-General needlessly delays the process of filling the post and exemplifies the breakdown of trust and agreement on a common purpose that has increasingly characterized the activities of WTO Members. Roberto Azevedo must look at the continued lack of willingness by Members to pull together for the common good as confirmation that he has made the right decision to step down early. What a nightmare for those trying to serve Members and move the organization forward must be the posturing done by Members on issue after issue. The Chair of the General Council will continue to consult with Members in the hope of achieving consensus on an acting DG and then will call another General Council meeting to obtain formal consensus.

Agenda item 8, Covide-19 intiative: Protecting Global Food Security Through Open Trade – Statement by Co-sponsors of WT/GC/218/Rev.1

Many WTO Members have put forward proposals for addressing the COVID-19 pandemic, but there has been no Member-accepted proposal to date. While the pandemic is a health crisis with large numbers of export restraints having been introduced by Members on medical goods, some countries have also introduced restraints on the export of agricultural goods. The agricultural restraints have been particularly concerning as there haven’t been shortages of production globally of core agricultural products.

The Cairns group of Members (Argentina, Australia, Brazil, Canada, Chile, Costa Rica, Indonesia, Malaysia, New Zealand, Paraguay, Peru and Uruguay) has put forward a proposal to protect global food security through open trade in response to the COVID-19 pandemic. See WT/GC/218/Rev.1. The proposal is embedded below but basically calls for WTO Members (1) to exercise restraint in imposing export restraints on agricultural products, (2) to roll back restraints “in a timely and effective manner”, (3) not to impose export restraints “purchased for non-commercial humanitarian purposes by the World Food Programme (WFP) and other humanitarian agencies and fulfill other commitments made in earlier ministerial conferences; (4) to continue submitting notifications and to improve transparency on actions taken; and (5) to continue the reform process in agriculture. The proposal hardly restricts WTO Members from using existing flexibilities consistent with WTO rules. While questions and the raising of issues for additional consideration would be understandable, considering the severity of the pandemic on global trade, it is hard to understand the response of many countries that reportedly occurred.

WTGC218R1

Specifically press reports indicate that the proposal was attacked by a number of major countries – China, India and South Africa — as well as other developing countries. See, e.g., Washington Trade Daily, July 23, 2020 at 2.

Director-General Azevedo’s farewell address — “We’ve achieved a lot, but much remains to be done”

The current Director-General has generally received high marks for his efforts over the last seven years to move the organization forward and for achieving some successes along the way. He has always come across as a decent person working hard to be an honest broker and finding possible approaches to seemingly intractable differences.

That said, the last seven years have also been a challenging time with the inability to conclude the Doha Development Agenda (which in fairness had stalled back in 2008), a growing membership with radically different views of the needs and objectives of the organization, the economic shocks from the COVID-19 pandemic, the growing trade disputes among major players and unilateral actions taken outside of the system, the collapse of the Appellate Body, the limited functioning of the negotiating pillar of the WTO and so much more.

Being a former Ambassador to the WTO for Brazil, the current Director-General seems to have had better rapport with the Geneva Missions than his predecessor had, and at the same time DG Azevedo was able to have access at the political levels in capitals as needed. But for whatever successes DG Azevedo has had, there have been many frustrations as trust and willingness to work together have often been lacking from the Members on a wide range of issues.

His farewell address is a positive statement that reviews the logic of his early departure, reviews successes and the work left to be done. It is the type of farewell address that has Director-General Azevedo leaving on a high note and reflects positively on the character of the departing Director-General. The link to his address follows and the text is reproduced below. See https://www.wto.org/english/news_e/spra_e/spra304_e.htm.

The Members owe Roberto Azevedo their sincere thanks for his unflagging efforts over seven years to help Members keep the organization relevant. That the WTO has lost some of its relevance and been unable to deliver on a range of important issues over the last seven years is attributable to the divides among the Members. DG Azevedo has been there for the membership. They just haven’t been there for themselves.

Godspeed Roberto Azevedo.

Statement by DG Azevedo on July 23, 2020 at the General Council meeting:

“Thank you, Mr Chairman.

“In preparing for today, I found myself looking back seven years to when I first addressed you as Director-General. And I can now tell you from experience, the last speech is much harder than the first.

“The first is about goals, and a game plan to tackle the future.

“The last one is about what has been achieved; how much is left to do; and saying farewell to people we really cherish. This final part is the toughest of all.

“Back in September 2013, I said that the WTO was at a crossroads. It’s still at a crossroads — and will continue to be for some time yet. This is not surprising, because this Organization is too important to have it easy.

“Each word, each comma that we negotiate here has a direct and measurable impact on public policies and business realities — and consequently, on people’s lives.

“Our agreements are subject to dispute settlement procedures that are automatic and consequential — and I’ll come back to this point.

“This means that negotiated outcomes here are always the product of truly complex, long and painful diplomacy.

“It was clear then, when I made that first speech to you, that we needed to deliver agreements to bring this Organization closer to the changing realities of the 21st century.

“And together, we did. The Trade Facilitation Agreement, in Bali, put the Organization back on the map as a venue for global trade rule-making. It gave us confidence that the multilateral track was viable, and that with enough political will and pragmatism, we could strike deals of great value for trade, growth and development.

“After that, we tried to advance the remaining Doha Round issues. It was, quite frankly, a tall order. We confronted the gateway issues head-on, and tested a large number of potential approaches. But despite intense efforts, including daily meetings and consultations with permanent representatives, it became apparent that positions in many areas were further apart than ever, with gaps widening instead of closing.

“Still, in Nairobi in 2015 we managed to harvest some important multilateral outcomes. Eliminating agricultural export subsidies and the trade distortions they create had been a longstanding goal for many members. We expanded the Information Technology Agreement, reducing and eliminating tariffs on $1.3 trillion of new-generation tech products.

“Not long after Nairobi, and like all multilateral institutions, the WTO was engulfed by strong political headwinds. These headwinds, and the associated tensions around trade, owe much to dramatic advances in technology, and the changes they have provoked in labour markets and in societies as a whole. It is also true, I have to say, that domestic social and economic policies have not done all they could have to contain inequalities of income and opportunity, and to ensure that the benefits from trade are more widespread.

“Despite these very challenging circumstances, standing still, for this organization, was not an option. We needed to find ways to move forward.

“It was clear that Doha issues could not simply be abandoned. We needed to find new, creative ways of pressing on in areas of fundamental importance to a sizeable portion of the membership. And indeed, we have been able to make progress in the ongoing negotiations on fisheries subsidies as well as in discussions on agriculture and other important issues.

“At the same time, it was an inescapable reality that there were other, very real issues that needed to be addressed within the WTO. To take one example, it was simply not acceptable for the WTO to be in the 21st century, decades into a profound digital revolution, with no truly consequential discussions on digital trade.

“We therefore began to test other approaches available in the WTO toolbox. Groups of members started to explore innovative ways of advancing issues of interest. You know them all: e-commerce; the facilitation of investments for development; micro, small and medium sized enterprises; the domestic regulation of services; and trade and the economic empowerment of women.

“This second track of work received an important boost at MC11 in Buenos Aires in 2017. Those initiatives have since become an important part of work here in Geneva, with a growing number of participants from both the developed and developing worlds, and a welcome spirit of transparency and inclusivity from the proponents.

“Delivering on both the multilateral front and the joint initiatives will be vital for the future of the system. For the road ahead, MC12 will be a key landmark. It must deliver credible agreements and map the way for further reforms.

“I had hoped to work with you to deliver precisely such outcomes this past June. But the postponement of the ministerial to next year, because of the pandemic, brought me to the conclusion that I needed to step down this summer.

“Had I stayed on for the remaining year in my term, the DG succession process and the MC12 preparatory process would have overlapped. My decades of experience working with this Organization left me firmly convinced that this would have irremediably compromised prospects for success at the ministerial.

“In light of the COVID-19 crisis, MC12 has become even more important: it will be a key decision point for you to shape the direction of the post-COVID global economy.

“The date of the ministerial, which now seems likely to be held next June, was beyond my control. The timing of my succession, however, was within my power to change. My early departure allows you to decouple the two processes. This was best for the system, making my choice a no-brainer.

“It’s a no-brainer because the WTO is much more than just a job to me. My first posting in Geneva was in 1997. We lived almost five years in this building. Even after going back to Brasília in 2001, my kids used to tease me that I hadn’t actually left Geneva. I was still spending a big portion of my time here, first as a litigator, then as a negotiator.

“In 2008, I came back as Brazil’s Ambassador to the WTO. Five years later you appointed me Director General.

“Twenty-three years of my professional life have been intrinsically linked to this Organization. I have had many happy moments, but also — like most of us — my share of disappointments.

“But even at the lowest points, not once in these 23 years did I ever doubt the role that this system plays in improving people’s lives around the world. We will be worse off if the system’s relevance and effectiveness are allowed to erode.

“When I announced my decision to step down back in May, I said that MC12 would be a stepping-stone to the future of the WTO.

“But what should the future of the WTO look like? That’s the question. Of course, it will be shaped by you, the members. But I want to take this moment to share with you my own views on the subject.

“And let me start with a warning: don’t assume that the WTO has a future irrespective of what you do here.

“To assure the future of the WTO, it is fundamental that members truly believe in the need to update the system. Some may still believe that the pressures afflicting the WTO are localised, and therefore temporary. I want to assure you that they are not.

“The pressures on trade, and on the WTO, derive from fundamental structural changes in the global economy. Changes in technology, groundbreaking business models, and shifts in the balance of economic power — they all have fundamentally altered the way countries and companies interact, not to mention the ways we go about our daily lives.

“The rules we negotiated back in the 1980s and signed into force in 1994 are still very relevant and much-needed. They are, in fact, the last bastion preserving some degree of order and predictability in global trade and economic relations. Lose this, and we lose fundamental pillars of peace and prosperity.

“Yet lose them we may — if the WTO does not evolve.

“In substantive terms, there is a wide range of issues that are before you right now. Each of them would offer a meaningful contribution to WTO reform.

“But at least as important as the ‘what’ of reform is the ‘how’.

“The WTO is now driven by 164 members. I don’t have to tell you how different they are, and how differently they think. A one-size-fits-all recipe will not work.

“We should remember that agreements at the WTO have always sought to accommodate the diversity of our members with flexibilities of different kinds.

“Special and differential treatment (S&D) was one way.

“Member-specific flexibilities was another: subsidy caps, quotas, higher tariffs on certain products, and individual services commitments that open some areas — but not others.

“In short, our agreements always had a way of accepting different contributions from members.

“Our Trade Facilitation Agreement offers a new framework altogether for accommodating diversity among members. It allowed each country to specify the flexibilities and the time they needed to implement the Agreement. And it did so without compromising the high level of ambition that was the final destination.

“An open-minded approach to flexibilities would open up a new era of fruitful work for the organization. And when exploring potential areas for such work, unanimous agreement cannot be a prerequisite for starting conversations at the WTO. It’s as simple as that.

“Not all members will necessarily be ready for a particular conversation or a particular step. That is okay, and absolutely natural. But if full consensus is required to even begin to discuss any issue, this Organization will not survive. I’m glad that this is not where we are today.

“The joint statement initiatives potentially represent one path to a more nimble, flexible WTO. No member is compelled to participate, yet the doors are open to any member willing to join — or willing to leave.

“Plurilateral agreements have been with us since day one. But the fact is that any new flexible non-multilateral arrangement — whether it is the JSIs or something similar — will inevitably raise important practical and systemic questions.

“Multilateralising their results may not always be possible. But limiting their application to signatories leads us to many grey areas. There will be many systemic questions, and the answers will differ, I suppose, from case to case. I’m sure you will be able to find them.

“But even before you get to that point, you will need to get past the most common question I hear in discussions about such arrangements. And that question is: “Won’t this approach compromise multilateralism?”

“That’s a big question. But my answer would be: “This approach is the only way we can save trade multilateralism.”

“And in this Brave New World of ours, predictable and updated rules are of enormous value. They will be pursued, believe me. If not in the WTO, then in other less representative forums. And if governments are unwilling or unable to define the rules of the game, then these rules will be set by private parties — even less representative, and even less likely to deliver gains for everyone. We would all be better served if these rules, if these parameters, are negotiated at the WTO’s large table.

“Then again, we know that agreements reached at the WTO have historically been valued for their enforceability through the dispute settlement mechanism. And here, too, we have a problem.

“We all know where we are with the appeals stage of that mechanism. Finding a solution is not particularly hard, if you all truly want a solution. And in this regard, I’m not sure this is where things stand.

“There are stop-gap solutions out there. Some of you are moving in that direction already. Nevertheless, the fact that we are not in a position to agree on the means of enforcing our agreements speaks volumes.

“Whatever decision you take on this, I would argue that a dysfunctional dispute settlement mechanism introduces an unacceptable asymmetry in the system. This asymmetry is to the particular detriment of the smaller and more vulnerable parties to any dispute. I don’t think we can simply sweep this under the rug, and it must remain a priority for WTO members to address.

“I’m sure that much of what I’ve said today is not news to you. I have made many of these points on previous occasions. Nonetheless, I thought I should clearly spell out what I think the most critical challenges and the more promising avenues are. And to the extent I have been able to facilitate and encourage some of this new thinking during my tenure as Director-General, I have been happy to do so.

“All these innovative approaches are just a start, I would say, but a very promising start. Members now have a foundation on which to build new rules and standards, without ever forgetting the multilateral track and the fundamental issues that must still be addressed more fully.

“We’ve achieved a lot and we must be proud of that. But much remains to be done.

“I wish the next Director-General every success in addressing these and other challenges. I will certainly be supportive of your efforts and will be a passionate advocate for the system wherever the future takes me.

“As I said earlier, the WTO has been an integral part of my life. Over the past 23 years, I have made life-long friends among delegates, peers — including you yourself, Mr Chairman — and the Secretariat.

“Speaking of the Secretariat, I want you to know that we have within these premises nearly 700 souls who dedicate their careers to serving you, members, with commitment, professionalism, and a degree of excellence that you will not find anywhere else. I knew that before, and my time as DG confirmed everything I said. I am privileged to have worked with them and you are fortunate to be supported by people of such calibre.

“I would like to extend special thanks to my deputies — Alan, Fred, Karl and Xiaozhun — for their wise counsel and active engagement with members and the wider trade community. And I want to thank each and every member of the Secretariat, both those who worked closely with me, including past and present members of my office, and those that I unfortunately didn’t get to see as much. Without you, we would not be the organization we are.

“On the subject of support, I must find a very special place for my family — which is growing by the minute. In both the good moments and the difficult ones, they have all been great enthusiasts for the WTO project. Our fantastic daughters, Paula and Luisa, who with their dear husbands, Andre and Thiago, have given us five beautiful granddaughters: Alice, Olivia, Eva, and the twins Catarina and Isabela. My mom, Normisa, with her unconditional love and advocacy. My equally loving “other” mom, Maria, who raised me as surely as my blood relatives. My father and brother, Renato and Claudio, who are no longer here, but who are always here. And my wife, Lelé, without whom none of this would have happened, who has always been there to help me reach higher and catch me when I fall.

“Regardless of what has or has not been achieved over the years, this human connection with all of you is what I prize the most. These deep and fundamental connections never disappear. So I’m sure that this is not a farewell. This is, as we say in Brazil, just a “tchau”.

“Thank you all for your strength, your companionship, your solidarity, your support and your friendship. Come visit!

“Thank you all once again, and like I said before: Tchau!”

Trade’s role in achieving the UN Sustainable Development Goals

In 2015 all UN members agreed to pursue 17 broad sustainable development goals (“SDGs”) by 2030. As stated on the UNDP webpage talking about SDGs,

“The Sustainable Development Goals (SDGs), also known as the Global Goals, were adopted by all United Nations Member States in 2015 as a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030.

“The 17 SDGs are integrated—that is, they recognize that action in one area will affect outcomes in others, and that development must balance social, economic and environmental sustainability.” https://www.undp.org/content/undp/en/home/sustainable-development-goals.html.

The seventeen goals include:

  1. End poverty in all its forms everywhere;
  2. end hunger, achieve food security and improved nutrition and promote sustainable agriculture;
  3. ensure healthy lives and promote well-being for all at all ages;
  4. ensure inclusive and equitable quality education and promote lifelong opportunities for all;
  5. achieve gender equality and empower all women and girls;
  6. ensure availability and sustainable management of water and sanitation for all;
  7. ensure access to affordable, reliable, sustainable and modern energy for all;
  8. promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all;
  9. build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation;
  10. reduce inequality within and among countries;
  11. make cities and human settlements inclusive, safe, resilient and sustainable;
  12. ensure sustainable consumption and production patterns;
  13. take urgent action to combat climate change and its impacts;
  14. conserve and sustainably use the oceans, seas, and marine resources for sustainable development;
  15. protect, restore, and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degredation and halt biodiversity loss;
  16. promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels;
  17. strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development.

Trade has been and continues to be an important tool to achieve many of the SDGs. For example, expanded world trade has helped lift hundreds of millions of people out of poverty over recent decades and so can play an important role in achieving SDG #1.

Similarly, trade can benefit efforts to reduce hunger and improve food security (SDG#2), though restrictions on trade can complicate efforts to address hunger and food security.

As is obvious in the current COVID-19 pandemic with the large number of export restraints imposed by countries, keeping trade of medical goods flowing can be critical to ensuring healthy lives for all at all ages (SDG#3).

Thus, trade is an important element as countries, the UN and other multilateral organizations and the private sector work together to achieve the ambitious set of sustainable development goals.

Each year the UN holds a High Level Political Forum (“HLPF”) which reviews progress to date and what needs to be done to get all countries to the sustainable development goals by 2030. This year’s HLPF was held from July 7-16 under a theme reflecting the great distance that yet remains to achieve the SDGs. The theme was “Accelerated action and transformative pathways: Realizing the decade of action and delivery for sustainable development.” The theme reflects the fact that the world is a significant distance from achieving many of the goals and in fact will like suffer movement in the wrong direction during the COVID-19 pandemic. Thus, there is a need for accelerated action if the goals are to be achieved by 2030.

A chart prepared by the UN showing progress on each of the seventeen broad goals (but only for certain specific goals within the broader category) for the world and for various geographical areas is embedded below. The data reflect progress only through 2019 or 2018.

26727SDG_Chart_2020

Many UN and other multilateral organizations provide input to the HLPF each year. The World Trade Organization is one such entity. As noted above, trade plays an important role in achieving many of the SDGs though there is only one part of one of the SDGs where the WTO has a specific mandate — 14.6, eliminating overfishing and subsidies that contribute to the same.

On July 13, the WTO issued a press release on the WTO’s 2020 report to the HLPF. The press release reviews the sustainable development goals on which trade activities are having a direct effect and what actions are occurring within the WTO on them. The link to the press release follows and the text is reproduced below. The actual 2020 WTO report to the UN HLPF is embedded after the press release. See Keeping trade open amid COVID-19 crisis central to achieving SDGs and economic recovery, 13 July 2020, https://www.wto.org/english/news_e/news20_e/sdgs_13jul20_e.htm.

“In a report to the United Nations High-level Political Forum (HLPF) taking place from 7 to 16 July, the WTO Secretariat highlights that trade, fiscal and monetary policies are key to supporting global sustainable development and achieving the UN Sustainable Development Goals (SDGs). Amid the COVID-19 crisis, keeping trade open and fostering a favourable business environment will be critical to spur the renewed investment needed to meet the SDGs, the report says.

“The theme of the 2020 HLPF — to be held under the auspices of the United Nations Economic and Social Council — will be “Accelerated action and transformative pathways: Realizing the decade of action and delivery for sustainable development”. Participants will review progress on the SDGs in light of the impact of the COVID-19 pandemic. They will also reflect on how the international community can respond to the crisis in a way that will accelerate progress towards meeting the SDGs.

The WTO reports annually to the HLPF on WTO efforts to achieve trade-specific targets in the SDGs. The HLPF is the United Nations’ main forum for reviewing the 2030 Agenda for Sustainable Development, providing the opportunity for all UN members and specialised agencies to meet annually to evaluate progress on achieving the SDGs.

“The WTO report to this year’s HLPF highlights that the multilateral trading system has contributed significantly to unprecedented economic development over the last few decades. Greater certainty over trade policies has created predictability, creating the conditions for long-term business planning and investment.

“However, a rise in trade-restrictive measures since 2019 — especially between major economies — and the suspension of activities of the WTO’s Appellate Body have created new challenges for the multilateral trading system. In addition, the COVID-19 crisis is having a major impact on global supply and demand, leading to disruptions in global supply chains for both goods and services.

“At this time of crisis, the multilateral trading system becomes all the more important, providing a forum for a coordinated response to the COVID-19 pandemic, the report says.

“The report summarises the latest progress in the WTO’s multilateral trade negotiations, highlighting that talks on reducing harmful fisheries subsidies are playing an important role in advancing developing countries’ sustainable development objectives and meeting a key target in SDG 14.

“Other WTO work contributing to meeting the SDGs includes discussions within the Committee on Trade and Environment on issues such as the circular economy, domestic initiatives on waste and chemicals management and recycling; and through the Aid for Trade initiative, which supports the achievement of SDG 8a.

“The report also highlights the importance of improving transparency in WTO members’ trade policies, particularly those taken in response to the COVID-19 crisis.

“Another issue covered by the report is the role of gender-responsive trade policies as a means of increasing women’s participation in global trade and contributing to economic growth. These efforts were catalysed by the signing of the Buenos Aires Declaration on Trade and Women’s Economic Empowerment in December 2017 and the implementation of the WTO’s Trade and Gender Action Plan for 2017-19.

“The WTO’s work with other international agencies on increasing access to trade finance is also outlined by the report. Trade finance can help facilitate international trade, helping small businesses in particular play a more active role in the global economy.

“Mainstreaming trade into national development plans is cited as an important means of helping governments meet the SDGs. This includes integrating trade into sector strategies, defining a clear national trade policy and ensuring effective institutional coordination. The contribution of the multi-agency Enhanced Integrated Framework in this area is underscored by the report.

“Finally, the report underlines the need for governments to implement measures that address the challenges faced by least-developed countries in international trade to ensure a more equitable distribution of the gains from trade and support the achievement of SDG 17.11, which calls for doubling LDCs’ share in global trade by 2020. The report also points to the importance of open trade policy and responsive fiscal policy to bring about a sustained and socially inclusive recovery from the COVID-19 crisis.”

26126WTO_HLPF_Input_2020

The 2020 WTO report is interesting on several fronts. First, it articulates in general the benefits of trade and the value of stability in the trading system while recognizing that trade is suffering from increased conflicts and from the economic effects of COVID-19 and WTO Member responses to the pandemic. The benefits of countries working together to permit global economic recovery are reviewed, essentially a call to the WTO Members to step up and in fact maximize cooperation to maximize the upside economic potential post pandemic. Trade has been and can be important to achieving SDGs.

Second, the report identifies a wide array of SDGs that the WTO has activities ongoing to support achieving. For the public, it is quite useful to see the range of activities that are ongoing at the WTO relevant to the SDGs even during a period of seeming stagnation and impasse at the WTO. While many important issues, such as progress on achieving a fisheries subsidies agreement, depend on WTO Members’ ability to reach agreement in ongoing negotiations, there are issues where ongoing activities like Aid-for-Trade or joint activities with other multilateral organizations are making progress on achieving SDGs, even if the ongoing work is technical in nature in some cases.

While the WTO report is just one of many reports and other input provided by various groups and organizations, trade, investment and financing will all play important roles in the coming decade if the sustainable development goals are to be achieved. Embedded below is the draft ministerial declaration from this year’s HLPF event which was held virtually. The draft is dated July 17 and was subject to review by delegates until July 22 (silent approval process). It is unclear if the draft was approved or not as of posting this piece, but the draft lays out the direction needed whether or not the exact language used in the draft ends up in the final declaration. Trade issues are identified in paragraph 17 which states,

“17. We remain determined to end hunger and achieve food security and improved nutrition for all as a matter of priority and to end all forms of malnutrition, while ensuring sustainable and resilient food systems, promoting sustainable agriculture, including smallholder and family farming, that increases productivity and production, and preventing food loss and waste. Recognizing that COVID-19 has exacerbated food insecurity, and also recognizing that international trade is an engine for development, we will work to ensure the flow of vital medical supplies, food and agricultural products and inputs, and other goods and services across borders, and work to resolve disruptions to the global supply chains to support the health and well-being of all people. We reiterate our goal to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment and to keep our markets open. We look forward to the 2021 Food Systems Summit to be convened by the Secretary-General.”

The full draft declaration is embedded below.

26780MD_2020_HLPF_HLS

Conclusion

There is much that needs to happen for the WTO to be fully functional and responsive to the changing global trade environment. WTO Members are the masters of what the WTO does or doesn’t do. But the WTO and its Members are also part of the collective effort to achieve the historic sustainable development goals set out by the UN in 2015 which are to be achieved, if possible, by 2030.

The 2020 WTO report to the HLPF is a useful reminder of the many ways in which trade can promote the UN’s SDGs and how at least some progress can be made even where there is gridlock generally within the WTO. This year’s HLPF meeting underlines the urgency of action by all countries, multilateral organizations and others to ensure a better world for all. Time will tell whether the governments of the world can in fact pull together to achieve the important global goals in the coming decade.

COVID-19 — the United States continues to spin out of control, with increasing shortages of medical goods; sharp increases in developing countries in the Americas and parts of Asia

The last two weeks have seen the case count of new COVID-19 cases in the United States surge out of control across much of the country with a staggering number of new cases reaching 871,922 cases between July 6 and July 19, up from 584,423 cases in the prior two-week period — an increase in new cases of 287,499 or 49.2% in just two weeks. The U.S. accounted for more than half of the global spike in new cases from the last two week period examined (June 22-July 5) from less than 2.5 million new cases for the world to 3,018,993 through July 19. Growth in new cases is occurring in many developing countries as well, but no developed country other than the United States has been unable to cap the level of new cases and, in most instances, bring the number down sharply over time (Russia’s number of new cases has declined but not sharply like other developed countries).

The consequences for the U.S. and the world of the continued rapid growth in new cases are significant. The U.S. is finding many states needing to slow down or reverse the reopening of the economy which will hurt the economic recovery in the United States, result in a continuation of exceptionally high unemployment, threaten hundreds of thousands of businesses with survival, put in jeopardy the ability of schools at all levels to open safely and put downward pressure on global trade based on reduced U.S. demand, restrictions on various major service sectors and production of goods at below optimal levels. Moreover, there are many states facing sharp increases in hospitalizations putting stress on the health care system in many parts of the country and returning states and local communities to scramble for medical goods, including personal protective equipment. There are news articles of some hospital systems facing the same types of shortages that were harming care in the March-April period. Congress is facing the need in the coming days and weeks to provide substantial additional support to the unemployed, to health care systems, to state and local governments, to certain sectors of the economy particularly hard hit. Thus, the U.S. drag on the global economy will likely continue while the U.S. will be chasing medical supplies at a time of growing demand in the developing world, likely making access to many medical goods more expensive and harder to find.

While the Administration has focused on reopening the U.S. economy regardless of the actual situation and has dismissed the increase in new cases as simply the result of increased testing and has claimed that the U.S. has the lowest mortality rate, the facts on the ground indicate the crisis will continue for some time. The United States has just 4.3% of the world’s population but has had 26% of the world’s cases and 23.3% of the world’s deaths from COVID-19. So the bottom line is that the U.S. has a massive and growing health crisis that is far from being under control.

On the question of the death rate and how the U.S. compares to other countries, the table below presents some data which are self-explanatory. Using the daily data from the European Centre for Disease Prevention and Control, I reviewed 42 countries and territories who collectively have accounted for 90.88% of all cases since December 31 and 91.93% of all deaths recorded as due to COVID-19. Through July 19, the U.S. had the sixth highest mortality rate looking at deaths per hundred thousand population (France, Italy, Spain, the United Kingdom and Chile had worse rates ). If one looks at the period since April 11 (three months and eight days, roughly half of the total period), the U.S. had the forth worst mortality rate (deaths per hundred thousand population; Peru, the United Kingdom, and Chile had worse rates). The U.S. death rate is worse than our neighbors, Canada and Mexico. It is worse than that of most European countries, Australia, New Zealand, Japan, South Korea, Singapore and Taiwan. And much worse than China, India, Pakistan, Indonesia, South Africa and many other countries. The U. S. rate of deaths/cases has remained unchanged at 3.78% over the total period and for the period since April 11th. It has been in the more recent period that U.S. testing has expanded significantly, but without any change in rate of death.

While the U.S. ranking of deaths as a percent of total confirmed cases of COVID-19 is better than its ranking based on the number of deaths per 100,000 population, the death rate/100,000 provides the best measure of the relative cost in deaths to each country/territory. Thus, the U.S. death rate is 3.9 times higher than the rate in Germany, 1.8 times the rate in Canada, 54.5 times the rate in Japan, 5 times the rate in Russia, 73.4 times the rate in South Korea, 133.1 times the rate in China, 1419.3 times the rate in Taiwan and 4.5 times the rate of the total of the 42 countries/territories (including the U.S.).

Countrydeaths/100,000 pop.
Dec. 31 – July 19
deaths/100,000 pop.
Aprill 11 – July 19
United Kingdom67.9354.49
Spain60.5526.80
Italy58.0626.82
France44.9925.30
Chile44.0443.70
United States42.5836.87
Peru39.9839.46
Brazil37.3236.82
Mexico30.4830.30
Ecuador30.4028.69
Panama25.2225.08
Canada23.6322.11
Bolivia18.2918.12
Iran16.8611.76
Colombia12.9412.79
Germany10.947.88
Kuwait9.679.65
Iraq9.399.21
Honduras9.148.90
Dominican Republic9.047.87
Russia8.468.40
South Africa8.458.41
Guatemala8.248.22
Saudi Arabia7.187.00
Turkey6.685.45
Oman6.196.13
Qatar5.445.23
Argentina4.924.74
Egypt4.234.10
United Arab Emirates3.463.30
Afghanistan3.063.02
Pakistan2.582.55
India1.961.95
Philippines1.641.45
Bangladesh1.581.57
Indonesia1.481.37
Japan0.780.71
South Korea0.580.17
Singapore0.470.36
Nigeria0.390.38
China0.320.08
Taiwan0.030.01
Total of 42 countries9.517.95

Growth in new cases among developing countries

With the world total confirmed cases of COVID-19 standing at 14.267 million on Sunday, July 19, there were large numbers of new cases over the last two weeks from a large number of countries. Brazil had another 497,856 cases; India had 404,453 new cases; South Africa an additional 162,902 cases; Russia 97,031 new cases; Mexico an additional 86748 cases; Colombia an additional 77,311 cases; Peru 50,420 new cases; Argentina 46,515 new cases; Saudi Arabia an additional 42,487 cases; Bangladesh 42,387 new cases; ten countries each had between 20,000 and 40,000 new cases (Indonesia, Iran, Iraq, Israel, Kazakhstan, Oman, Pakistan, Philippines, Bolivia, Chile); seven countries had between 10,000 and 19,999 new cases (Panama, Kyrgyzstan, Turkey, Guatemala, Ecuador, Dominican Republic, Egypt) with all other countries/territories having less that 10,000 new cases each.

Of the forty-two countries/territories that account for more than 90% of cases and deaths, besides the U.S., there were fourteen where the last two weeks were new highs for the country/territory, that is where the virus is continuing to expand: India, Mexico, South Africa, Argentina, Bolivia, Colombia, Dominican Republic, Ecuador, Guatemala, Panama, Indonesia, Iraq, Oman and the Philippines.

In the last two weeks, the forty-two countries listed in the table above increased their rate of new cases by 22.66%. All other countries increased by 17.46% while the total for all countries increased by 22.22%.

So just as was true in prior posts on the COVID-19 pandemic, the pandemic continues to grow rapidly and is affecting an increasing number of developing and least developed countries. This puts increased pressure on the global supply of medical goods including personal protective equipment. As noted in previous posts and as reviewed on the WTO website, many countries have introduced export restraints particularly for medical goods, but also for some agricultural products. Many have also introduced liberalizing measures to reduce the cost of imports of needed medical goods and to streamline the importing process for such goods.

Vaccines and therapeutics – developments and challenges for access

As reviewed in a prior post, “There have been extraordinary efforts to ramp up research and development around the world to address COVID-19. Through the WHO and other efforts, there have been greater efforts at coordination of R&D and at the identification of gaps in knowledge and research. Large sums are being committed by some countries and NGOs to help ensure that all countries will have access to vaccines and therapeutics that get developed and that such access will be at affordable prices.” July 5, 2020, COVID-19 – the sharp expansion of new cases will put increased pressure on finding vaccines and therapeutics and complicate global economic recovery, https://currentthoughtsontrade.com/2020/07/05/covid-19-the-sharp-expansion-of-new-cases-will-put-increased-pressure-on-finding-vaccines-and-therapeutics-and-complicate-global-economic-recovery/.

A number of vaccines are moving into the stage 3 testing of large numbers of humans in the coming weeks/months. There is hope that one or more products in tests will result in vaccines that get approved for distribution by the end of the year or early in 2021. This week’s Bloomberg Businessweek has a cover article on the University of Oxford COVID-19 vaccine that, if approved, will be distributed by AstraZeneca who has arranged global manufacturing of what could be more than two billion doses. See July 20, 2020, Bloomberg Businessweek, The Front-Runner, pages 42-47. While the University of Oxford has led in the development and testing of the hoped-for vaccine, AstraZeneca has made arrangements with a number of companies around the world to produce the vaccine if approved and has agreements with the United Kingdome for 100 million doses, with the U.S. for 300 million doses and an arrangement with an Indian company to produce 1 billion doses for developing and middle income countries. Id at 46. There are other developmental vaccines that are also making progress through testing stages though their timing for eventual approval (if found efficacious) may be a few months behind the University of Oxford program. The good news, if vaccines get developed quickly which are efficacious, is that the major producers in the west are putting in place plans to provide global production which should go a long way to ensuring equitable access for all at affordable prices. Hopefuly, the University of Oxford/AstraZeneca model will be followed by all. China also has vaccines in test mode, although it is less clear what their approach would be to production and distribution if products are approved.

While the world has seen a very large collective scientific effort to find vaccines and therapeutics, in the last week there have also been claims by three governments (the United Kingdom, Canada and the United States) of cybersecurity attacks from Russia on COVID-19 research programs. See, e.g., CNN, UK, US and Canada alleged Russian cyberattacks on COVID-19 research centers, July 17, 2020, https://www.cnn.com/2020/07/16/politics/russia-cyberattack-covid-vaccine-research/index.html. The link to the UK advisory is here. https://www.ncsc.gov.uk/news/advisory-apt29-targets-covid-19-vaccine-development.

Conclusion

Nearly seven months into the pandemic, the continued growth in the number of new COVID-19 cases is continuing to put pressure on health care systems in many parts of the world and dampen prospects for the global economy’s rapid recovery.

The United States has been unable to get the pandemic under control within its borders and has been leading the growth in new cases. The rapid rate of growth of new cases across much of the United States has led to backtracking by many U.S. states on opening measures taken in the last two months. With the growing challenges in the United States, the U.S. will be a drag on global economic recovery.

While there is more global production of many of the medical goods needed to address COVID-19 ahead of the development of vaccines and therapeutics, the enormous growth in the number of cases and the continued spread in developing and least developing countries along with the United States will continue to test the balance between demand and supply. While the WTO is monitoring developments on export restraints and liberalization measures based on country notifications, large numbers of export restraints on medical goods continue and will likely remain in place for months to come complicating the ability to maximize utilization of scarce supplies.

It has been known that the ultimate return to normal conditions for the world would have to await the development and distribution of vaccines and therapeutics that are efficacious to all peoples on an equitable and affordable basis. But the new “normal” of living with COVID-19 while we await vaccine developments is being frustrated in some countries, like the United States, by an inability to communicate the challenges with a single voice, by the politicizing of basic disease prevention steps like mask wearing and social distancing, by the failure to ramp up testing and tracing sufficiently based on the level of COVID-19 spread and by the lack of support from the body politic (which flows both from the lack of a single message from federal, state and local leaders and from lockdown fatigue). Thus, for the United States and perhaps others, we are seemingly unable to slow the spread through steps many other countries have adopted and that have been known by medical experts for decades if not centuries.

Fortunately, there is positive news coming from the research and development efforts of many companies, universities and research institutes. Let us hope that vaccines and cures are found quickly. The drag on the global economy and the enormous toll on populations will likely continue until then.

The eight candidates for WTO Director-General meet the General Council – recap of prepared statements and press conferences

On Friday, July 17th, the General Council of the World Trade Organization concluded three days of meetings with the eight candidates for the post of Director-General. With the current Director-General, Roberto Azevedo, stepping down on August 31st, the WTO is engaged in a somewhat truncated process for selecting a new Director-General, though it is likely that the selection will not conclude until early November of this year.

Each candidate had ninety minutes with the General Council and then were given a press conference for thirty minutes. At the press conference, the candidate would provide a short opening statement and then answer questions from journalists. The order of candidates meeting with the General Council followed the order of receipt of the candidate’s nomination from their government. Thus, Dr. Jesus Seade Kuri (Mexico), Dr. Ngozi Okonjo-Iweala (Nigeria) and Mr. Abdel-Hamid Mamdouh (Egypt), the first three nominations received by the WTO, met with the General Council on July 15. On July 16, the General Council met with Mr. Tudor Ulianovschi (Rep. of Moldova), H.E. Yoo Myung-hee (Rep. of Korea) and Amb. Amina C. Mohamed (Rep. of Kenya). On July 17, the General Council held meetings with H.E. Mohammad Al-Tuwaijri (Saudi Arabia) and Dr. Liam Fox (United Kingdom). The week also provided candidates with the opportunity to meet with individual WTO Members or groups of WTO Members based on availability, etc.

While the meetings with the General Council are simply an early part of the two month outreach by candidates to Members to become better known, the meetings are nonetheless important as they provide WTO Members the opportunity to hear from and to ask questions of each candidate under comparable circumstances. While the minutes of the General Council meetings will be generated by the WTO Secretariat in the coming months and made public some time after that, the General Council meetings are not open to the public. Hence the material available to evaluate the three days of meetings is limited to prepared statements made to the General Council and the press conferences for each candidate held after the candidate had met with the General Council. Those materials can be accessed from the WTO website. See Candidates for DG selection process 2020, https://www.wto.org/english/thewto_e/dg_e/dgsel20_e/dgsel20_e.htm (shows biography, statement to General Council, photo gallery and video press conference for each candidate); WTO members meet the candidates for Director-General, https://www.wto.org/english/news_e/news20_e/dgsel_17jul20_e.htm.

What follows are first my summary impressions from the public information of the candidates. Those are followed by my summaries of each candidate’s presentation and answers to questions.

Summary Impressions of the Candidates

In the challenging environment that confronts the world at the present time, one has to marvel that eight individuals were willing to be put forward by their governments to pursue heading the World Trade Organization. Despite some successes in its first twenty-five years, the WTO is viewed as being severely challenged. Its negotiating function, historically the most important function of the GATT and presumed to be critical in the WTO, has been at least seriously challenged, unable to deliver on many of the subjects that have been considered. This has led the WTO rules to be both outdated and not dealing with current issues of great importance. The dispute settlement system has seen the shutdown of the second-tier review (the Appellate Body) as a variety of longstanding concerns of the United States have not been addressed leading the U.S. to block appointing new members of the Appellate Body. Standing Committees that monitor notifications and discuss topics within the Committee’s jurisdiction have been less robust than historically was the case. Notifications are problematic for many Members in terms of completeness and timeliness of notifications. The lack of successful negotiations has raised concerns on obligations of members as economic development changes the relative ability of Members to contribute. Also the growth of Members operating on economic systems different than market economy models has created challenges as to practices that may not be addressed by WTO rules. And the COVID-19 pandemic has resulted in many export restraints to address concerns about adequacy of medical supplies or agricultural goods.

So it is encouraging that there are eight individuals willing to be considered to head the WTO going forward in such circumstances.

Each candidate has different backgrounds and experiences which may appeal to some WTO Members but not others. For example, Minister Mohammmad Al-Tuwaijri has an extensive business background as well as four years in a Minister position for Saudi Arabia and has focused on his management experience and his desire to develop goals and performance metrics to measure progress if selected the next Director-General.

That is a very different profile than that of Dr. Ngozi Okonjo-Iweala of Nigeria. While Dr. Okonjo-Iweala has some private sector experience, she is a development economist with deep experience at the World Bank and as Finance Minister for Nigeria who focuses on her political experience, ability to work with various multilateral and UN organizations to achieve coordinated actions for developing and least-developed countries and being able to bring “fresh eyes” to the problems of the WTO. She has a reputation as a reformer.

A number of the candidates have depth of GATT/WTO experience and/or trade ministry work. Dr. Jesus Seade Kuri was Mexico’s Ambassador to the GATT, went inside the GATT Secretariat to help conclude the Uruguay Round and was one of the first Deputy Directors-General of the WTO and has recent experiences with the Mexican government concluding the USMCA talks with the United States and Canada. His presentation had a very aggressive and active agenda presented with approaches on the Appellate Body and other issues that indicate he would be active as a Director-General in helping Members find solutions through his understanding of the Agreements, their history, and an ability to devise possible alternative approaches to resolve impasses. He is obviously fluent in all three official languages which is an aid in dealing with senior Mission officials and officials in capitals for many countries.

Mr. Abdel-Hamid Mamdouh similarly has very long experience at the GATT and WTO, first as a negotiator for Egypt and then as part of the WTO Secretariat where he served as Director of Services and Investment. He has significant technical expertise and views himself as having a history of being a trusted advisor to all WTO Members which is different from others who have more government specific experience. While he hasn’t filled senior political positions in the Egyptian government, he notes that political leadership, which is important for the Director-General position, is not the same as ministerial leadership experience.

Minister Amina C. Mohamed of Kenya touted her extensive experience both at the WTO where she was Ambassador for Kenya to the WTO including chairing the three major bodies (General Council, Dispute Settlement Body and Trade Policy Review Body) and her role as Foreign Affairs and International Trade Minister which included her chairing the 10th WTO Ministerial in Nairobi and achieving a series of breakthroughs on negotiations including an amendment to the TRIPS Agreement, expansion of the Information Technology Agreement and delivering an agreement on agriculture export subsidies to highlight her ability to build consensus should she be selected as the next Director-General.

Mr. Tudor Ulianovschi from Moldova similarly had served both as his country’s Ambassador to the WTO and Minister of Foreign Affairs. He presented himself as having political leadership experience and an understanding of current WTO challenges and having interfaced with governments around the world. As Moldova is neutral on many issues before major trading partners, Mr. Ulianovschi views he can be the honest broker and viewed as such by Members. He can handle the political and technical elements of the job and references his sixteen years of experience with Moldova’s government.

H.E. Yoo Myung-hee of Korea has spent twenty-five years in international trade for her government and is the first female Minister for Trade. While she has not served in Geneva in her country’s mission, she has engaged extensively in trade negotiations with countries at all levels of economic development and knows what is needed to conclude negotiations. The fact that she has experienced Korea’s change in economic status over the years helps her understand issues and needs of WTO Members at different economic levels of development.

Finally, Dr. Liam Fox of the United Kingdom believes the next Director-General needs to have political skills, not be a technocrat. He has been in the UK Parliament for several decades and has served in two different administrations (Secretary of State for Defence; Secretary of State for Trade). While he hasn’t served at the WTO, he is a strong supporter of free trade. He believes the WTO needs to recommit to the fundamental principles of most favoured nation, national treatment and transparency of commitment as part of the next Ministerial Conference in 2021. He also cautions that now is not the time for an incoming Director-General to overcommit on anticipated results.

There are factors that may influence some Members — geographical diversity, gender of candidate, whether the candidate is from a developed or developing country. In my last post, I provided a chart that graphed these and some other factors. See WTO Director-General selection process – this week candidates meet WTO Members in a General Council Meeting, https://currentthoughtsontrade.com/2020/07/14/wto-director-general-selection-process-the-week-candidates-meet-wto-members-in-a-general-council-meeting/.

On geographical diversity, there has never been a Director-General from an African country (three candidates – Nigeria, Egypt and Kenya), from an Arab country (Saudi Arabia, Egypt), from North America (Mexico).

On gender, there has never been a Director-General who was female. There are three candidates who are female in this selection process (Nigeria, Korea, Kenya).

On developed vs. developing country, there are two countries that are “developed” at the WTO (United Kingdom, Moldova). In my prior chart, Moldova had been listed as developing, flowing from the fact that in their trade policy review, it was indicated that Moldova is eligible for generalized system of preference benefits from a number of countries (GSP is intended to benefit developing countries). See Trade Policy Review, Report by the Secretariat, Republic of Moldova, WT/TPR/S/323 (14 September 2015) at 31, para. 3.24, https://www.wto.org/english/tratop_e/tpr_e/s323_e.pdf. Saudi Arabia was included in the chart as a developing country, despite being a high income country in the World Bank’s terminology, because the Saudi Arabia trade policy review indicates Saudi Arabia is a member of the Informal Group of Developing Countries. See Trade Policy Review, Report by the Secretariat, The Kingdom of Saudi Arabia, WT/TPR/S/333 (29 Feb. 2016) at 22, para. 2.20, https://www.wto.org/english/tratop_e/tpr_e/s333_e.pdf.

If WTO Members are looking for positions of candidates on particular issues, candidates were typically careful not to go in one direction or another where there are known differences in the position of Members. For example, on the question of the Appellate Body reform, candidates recognized the need to address both the concerns of the United States and the concerns of other Members to have the WTO Appellate Body reinstated in their prepared statements and were certainly asked questions both by the General Council and during the press conferences. Some, like Dr. Jesus Seade, had some broader ideas on how to resolve the Appellate Body issue without indicating what the resolution would look like. Others like Mr. Abdel-Hamid Mamdouh believed it would be possible to move forward from the work already done. Some like Dr. Liam Fox suggested that without resolution there was no dispute settlement, which is a sentiment that at least the United States would disagree with. Several were asked about the interim arrangement entered into by the EU, China, Canada and some 19 others. All who addressed the issue accepted the arrangement as interim only and not intended to replace the Appellate Body and focused on obtaining a solution to the impasse on the Appellate Body.

Similarly, many candidates were asked about the question of classification of countries as developing for special and differential treatment. Minister Yoo of Korea noted that Korea had decided that its economic development permitted it to accept higher levels of commitments and thought that was useful for countries who felt they could do so. But she recognized that it was a sensitive issue on which there was no consensus. Dr. Seade felt a more productive approach to the issue would be to look at whether any given country needed special and differential treatment on a product or sector basis in new agreements versus tackling what he viewed was a theological issue – country classification. Others deferred to what Members thought or wanted to pursue.

While all candidates talked extensively about reform, none can fairly be said to have embraced the U.S. call for broad-ranging reform of the existing organization and agreements. Nor did any candidate publicly indicate that the WTO did not address many of the practices of China which operates under a different economic system than most of WTO members, another issue viewed as important by USTR Lighthizer for candidates to recognize.

To sum up, the candidates are in the early days of their outreach to get better known by Members. The appearances before the General Council and the press conferences afterward provide a better understanding of their visions for the WTO and what the candidates believe they bring to the table. The next 51 days til September 8 will undoubtedly be an exhausting time for each candidate as outreach continues around the world. We wish all of the candidates success in their outreach efforts these next fifty-one days.

The immediate task for the General Council will be selecting an acting Director-General from the four existing Deputy Directors-General. It is not clear if this will be accomplished at this week’s General Council meeting on July 22 and 23, or if this week’s meeting will simply represent the start of the process.

What follows are summaries of prepared statements and of the press conferences held July 15-17, 2020

Dr. Jesus Seade Kuri (Mexico)

Dr. Seade was the first candidate nominated and so was the first before the General Council and the first to have a press conference after the meeting with the General Council. His statement to the General Council was the only one presented in all three of the official languages of the WTO with the first part in Spanish, the middle section in French and the last part in English.

Dr. Seade reviews his unique history with the GATT and WTO, having been Mexico’s Ambassador to the GATT during the Uruguay Round, part of the GATT Secretariat during the period that Peter Sutherland was Director-General working to conclude the Uruguay Round, and his role as one of the first Deputy Directors-General of the WTO when the WTO launched in 1995. The GATT and WTO have accomplished a lot in terms of expanding global trade and economic development over roughly three quarters of a century. The WTO provided needed stability during the 2008 financial crisis and is continuing to do so now during the COVID-19 pandemic. And the WTO has had some recent successes in terms of completing the trade facilitation agreement and agreeing to the elimination of agricultural export subsidies by some countries. Nonetheless, the WTO’s performance has not lived up to the initial high expectations of Members.

The WTO has the twin problems of limited results from negotiations and the paralysis of the Appellate Body. These problems are being exacerbated by the enormous negative effects of COVID-19 on trade. Key to restoring the role of the organization is to restore the negotiating function, restore a two stage dispute settlement system and start discussions to make the WTO more efficient, transparent and inclusive. On negotiations, the WTO needs to address issues currently being addressed, issues relevant to 21st century trade, and traditional issues where progress has not been made.

Dr. Seade presented a three-stage program for action:

  1. In the first 100 days, work with Members to (a) complete a fisheries subsidies agreement, (b) restore the Appellate Body, (c) work to reverse negative views of WTO and its ability to fulfill its mandate and (d) work with Members on the COVID-19 crisis both to increase transparency and address trade restrictions introduced.
  2. By the Ministerial Conference to be held in 2021, help Members achieve results (a) in joint initiatives and (b) on issues that will make WTO more transparent and effective, and establish a work program on issues where negotiations have been suspended.
  3. In the medium and longer term, work with Members to identify weaknesses in the organization and pursue modifications to strengthen the organization, take up traditional priority issues on the sustainable development agenda. Also ensure a high quality and effective Secretariat. Finally, address issues important to society, including those related to the environment, gender, MSMEs, etc.

Dr. Seade indicated that he possesses not only vision, leadership and political capacity but also an understanding of the trade agreements and the sensitivities behind the agreements. These are qualities he believes the next Director-General will need.

During the press conference, Dr. Seade provided a short opening statement which basically reviewed his special role in the creation of the WTO and his other positions. He noted that trade is very transformative for countries to help development and lift people out of poverty. He then reviewed the serious crisis at the WTO and why he has been put forward as a candidate.

Dr. Seade was asked many questions some of which sought information that is reflected in his prepared statement. Dr. Seade was asked why Members should choose him, how he would help Members address the Appellate Body impasse, what did he think of the interim arbitration arrangement entered into by a number of Members while the Appellate Body is not functioning, what is the most pressing challenge at the WTO, which Members were supporting his candidacy, what will the effect of the U.S. election be on the Director-General selection process and what Dr. Seade thinks of the issue of classification of Members as developed or developing. He was also asked questions about regional diversity and gender for the next Director-General noting Mexico is part of Latin America, the area where the current Director-General is also from, versus candidates from Africa or the Middle East which have never had a Director-General. Similarly, the GATT and WTO have had Directors-General all of whom have been male. The current field of eight candidates includes three women; isn’t it time for a woman to be Director-General?

Dr. Seade reviewed the capabilities he believes the next Director-General needs. While he wouldn’t make a comparison to other candidates, he felt that he had the capabilities in fact needed. His job as Director-General would be to come up with alternative ideas to help Members find solutions. He has that ability.

On the question of the Appellate Body impasse, Dr. Seade noted that none of the Members were denouncing any provision within the Dispute Settlement Understanding. Rather concerns had been voiced on how DSU provisions had been applied. Dr. Seade believes that what is missing is the way to operationalize the role of the Dispute Settlement Body (all WTO Members sitting as the DSB) which is organizationally above the Appellate Body but for which there are currently no procedures for communications from the DSB to the Appellate Body to address issues generally (vs. in specific disputes). Such procedures were needed. He also had other ideas for how to resolve the impasse that he was interested in reviewing with Members to see if there could be movement. On the question of the interim arbitration arrangement, Dr. Seade thought a temporary arrangement made sense as it provided Members a second stage to dispute settlement as provided in the DSU. Key is finding a solution to the impasse so the two-tier dispute settlement system is restored for all.

On the question of the major problem with the WTO, Dr. Seade identified two problems — the inability to negotiate and dispute settlement, although dispute settlement largely flows from the inability to negotiate. Because the nature of the world has changed so profoundly over the years, there are new issues and new actors. Where Members can’t negotiate new issues, there is enormous pressure put on the dispute settlement system to find solutions. The inability to negotiate is spurred on by an enormous lack of trust between Members. The issue of lack of trust needs to be addressed.

On the issue of support, he noted that obviously many Members want to meet all candidates as they consider who they will support. He has done extensive outreach already to many Members and believes those outreach efforts have generally been well received. While he has some Members who have indicated they will support his candidacy (about a half dozen), only two are public — Argentina and Bolivia. He did not view it as appropriate to mention other Members where support was not public. He was hopeful of obtaining support from all parts of the world including in North America.

On the question of the effect of the U.S. Presidential election in November on the Director-General selection process, Dr. Seade said that both parties in the United States have been critical of the WTO in various respects. So regardless of the election outcome, the WTO will need to address U.S. concerns. The key is to make the Director-General selection as soon as possible. This is because of the need to get working ahead of the Ministerial Conference which will be next year, but there is pent-up demand on issues since the last Ministerial was four years ago. While the schedule for the selection of the next Director-General could run to early November, he hopes it will be handled more quickly by Members.

On the question of developed vs. developing country, Dr. Seade looks at it from the perspective of special and differential treatment. On the one hand the world keeps changing, so it’s reasonable to ask what a Member can do. The idea of changing classification of countries from developing to developed will take a very long time and so is probably the wrong approach. The question should be what contribution can a particular member make, which may be different in different industries.

On the questions of geographical diversity and gender, Dr. Seade reviewed that Members will be making the selection. He believes the correct course is for Members to pick the individual best qualified for this particular time. He believes that he is that person.

Dr. Ngozi Okonjo Iweala (Nigeria)

Dr. Ngozi Okonjo-Iweala in her prepared statement includes sincere condolences for all who have lost a family member from COVID-19 in French. Later in her statement, Dr. Okonjo-Iweala includes a phrase from her native igbo language, and she gives thank yous in six languages. The main part of her statement is in English. Her statement reviews her record at the World Bank, her time as Finance Minister in Nigeria and her role as Chair of Gavi to stress her ability to achieve reform and to work with other multilateral organizations and her focus on the needs of development and the role trade plays in development.

Looking at the challenges confronting the WTO, Dr. Okonjo-Iweala flags a negotiating function that is underperforming “at a time when its rule book would greatly benefit from an update to 21st century issues such as e-commerce and the digital economy, the green and circular economies. Issues of women and trade and Micro Small and Medium Enterprises (MSMEs) are import to ensure greater inclusion.” (pages 2-3). Other challenges include improving transparency and notifications, improving the functioning of the regular WTO bodies and strengthening the Secretariat. There are important differences on issues such as SOEs and agricultural subsidies amongst Members and increased trade tensions.

These problems are exacerbated by the COVID-19 crisis which have resulted in export restraints by some and stimulus packages which may “undermine WTO commitments by distorting production and trade.” (page 4).

Dr. Okonjo-Iweala reviewed why she believes she is the person to be the next Director-General:

  1. She is a strong believer in the role of trade and of the multilateral trading system to bring shared prosperity. She brings a “fresh pair of eyes to the WTO’s challenges.”
  2. Need to build trust. Not a question of technical expertise but rather political will/solutions.
  3. She has a proven track record in carrying out successful reforms which is what will be needed at the WTO going forward.

After reviewing the range of pending issues before the WTO that need to be completed or addressed, Dr. Okonjo-Iweala reviews the need to work closely with other multilateral organizations and the UN and her ability to improve cooperation with these other entities.

“The rules-based MTS is a public good that underpins peace, security, stability and a chance for prosperity in the world. Every effort should therefore be made to safeguard, improve and renew it to enable it effectively address the challenges of the 21st century.” (Page 11)

During the press conference, Dr. Okonjo-Iweala provided her short statement and then received a large number of questions. Her short statement was that trade is important for the 21st century, for prosperity, resilience and growth. The WTO is at the center of global trade.

She was asked about whether three candidates from Africa hurt her chances to be selected, what she views as the role of the Director-General, how she views the question of fair trade particularly between north and south, what she believes is achievable in terms of deliverables by the next WTO Ministerial Conference in 2021, what she would say to the U.S. President on why the U.S. should stay in the WTO, what the WTO can do to ensure that small and micro-businesses survive the economic fallout from the COVID-19 pandemic, what her selection as the next Director-General would mean for women in Nigeria, if selected the next Director-General what would she do to ensure availability of medical supplies to all countries, and whether her perceived lack of a trade background was a handicap in the competition to become the next Director-General.

Her response on the question about multiple candidates from Africa was that Dr. Okonjo-Iweala viewed that it was a positive that there were three qualified candidates from Africa and not a problem. It is up to the Members to select from all of the candidates, a process which should focus on who is the best candidate. If from Africa, great.

On the question of the role of the Director-General, Dr. Okonjo-Iweala views the role to be working with Members to help them reach consensus. It is important that starting with the next Ministerial, the WTO show movement to achieve results.

On the question of fair trade, particularly between north and south, Dr. Okonjo-Iweala noted that the WTO’s role is to support all members to take advantage of fair and open trade. Where the South is getting fewer benefits from global trade, Dr. Okonjo-Iweala would use the instruments available to the WTO Director-General (e.g., Aid for Trade, working with other multilateral organizations) to get resources to South Members to improve their position in international trade.

On the question of what is achievable by the next Ministerial in 2021 and whether it is best to go after issues one at a time or in a larger grouping, Dr. Okonjo-Iweala indicated that she hoped the WTO Membership would make a decision soon on who should be Director-General so whoever is selected has more time before the next Ministerial. But even if a decision is not made until November 2020, there are some areas that could be ready by the next Ministerial. For example, a fisheries subsidies agreement should be achievable. There was a lot of discussion in the General Council on trust and building trust to move negotiations along. Trust is obviously an important issue. So the WTO may need to sequence issues to build trust by achieving a win or two. Once there are some successes, it should be possible to handle more issues in parallel.

On the question of why the U.S. should stay in the WTO, Dr. Okonjo-Iweala would communicate that the WTO delivers for all Members. The GATT and WTO have provided shared prosperity which has lifted millions out of poverty. Where the trading system is not working, Members need to fix the problems. Peace, security and stability are needed now just as they have been over the last decades. These are what the WTO rules-based system provides. If we didn’t have the WTO, we would need to invent it.

On the question of MSMEs, Dr. Okonjo-Iweala noted that they are very important globally but are being harmed by COVID-19 fallout. How to ensure MSMEs survive and get such entities better included in the global trading system is a matter of great interest to Dr. Okonjo-Iweala. There is a great need to facilitate provision of additional resources to help these entities. Dr. Okonjo-Iweala would work with other multilateral organizations to help facilitate assistance.

On the question of what will her getting selected Director-General of the WTO would mean for women in Nigeria, Dr. Okonjo-Iweala noted that women not just in Nigeria but around the world are ready for greater roles. But Dr. Okonjo-Iweala reiterated that selection of the WTO Director-General should be based on merit–if a woman, great; if from Africa, great.

On the question of what she would do as Director-General to ensure smooth trade of medical goods including therapeutics and vaccines, Dr. Okonjo-Iweala indicated that she would use the knowledge she has from the chair of GAVI and working with other groups and organizations to ensure that the WTO did its part to ensure equitable and afforadable access to any vaccines developed to address COVID-19. There should be no barriers to access to the medicines/vaccines while honoring intellectual property rights. It is critical that everyone have access to lifesaving medicines at the same time and at affordable prices.

On the question of whether the consensus rule at the WTO should be gotten rid of to overcome gridlock, Dr. Okonjo-Iweala responded that part of the strength of WTO is that agreements are reached by consensus. Where all sovereign states agree to a text, they are more likely to implement the provisions. The real question is how to make consensus better. In Dr. Okonjo-Iweala’s view, the underlying problem with the current consensus system is the lack of trust among the Members. Thus, there is an urgent need to rebuild trust. To rebuild trust, the WTO needs confidence building measures, i.e., obtaining wins in achieving new agreements. That will show that consensus can and does work.

The question on what Dr. Okonjo-Iweala would do as Director-General to see that an agreement on e-commerce was pursued was answered by noting that there was extensive work being done plurilaterally by many Members as one of a number of joint statement initiatives. Dr. Okonjo-Iweala agrees that an agreement on e-commerce is very important, but she notes that there is a digital divide where many poorer countries don’t have the infrastructure to take advantage of e-commerce. The WTO, working with other multilateral organizations, needs to see that resources are put together to help countries address the digital divide. Once the digital divide is addressed, all Members should want to and be able to participate in the e-commerce negotiations, so that the agreement becomes a multilateral one.

On the question of whether her career in finance is a handicap for a trade position, Dr. Okonjo-Iweala disagrees with the premise as her career has always involved trade as a development economist and also as finance minister where Customs was part of her responsibilities.

Abdel-Hamid Mamdouh (Egypt)

Mr. Abdel-Hamid Mamdouh is the one candidate with extensive WTO Secretariat experience (27 years), junior negotiating experience for Egypt during the Uruguay Round, but no Minister or Ambassador experience on his biography. His prepared statement concurs that the WTO needs reform, an updated rulebook for the 21st century and a Director-General with political leadership though he indicates political leadership doesn’t require or mean ministerial leadership. That said, Mr. Mamdouh indicates that a core problem is that the consensus or common purpose of the WTO has faded for many and to get that common purpose back, the WTO needs a different type of leadership, one that he is positioned to provide.

“In my view, over the past quarter of a century, the WTO has suffered from a chronic imbalance across all its vital functions. That is, dispute settlement, negotiation, and the transparency/deliberative functions

“In any legal system, there needs to be a balance between the ‘legislative’ and the ‘judicial’ functions. For the WTO, these are the negotiating and the dispute settlement functions. While dispute settlement gained strength due to the inherent automaticity of procedures, the negotiating function has broken down. This created an unsustainable imbalance.” (Page 3)

As international trade has evolved, the rules of trade have not done so which has added to imbalance through use of dispute settlement to address matters where no rules exist. Similarly, where transparency and notifications are not robust, Members don’t have the necessary information to confirm compliance, and that can lead to additional disputes.

“A deeper look into the root causes of this imbalance would reveal that there are three cross-cutting phenomena that hinder the functioning of the WTO: leadership deficit, increasing complexity of trade policy and negotiating issues, and a fading vision of the common purpose behind the system. Over time, these phenomena lead to the unsustainable imbalance across the vital functions.” (Page 4)

Reform of the WTO can only occur through negotiations. For the 12th Ministerial Conference to be held in 2021, the WTO needs to agree on a reform agenda and to “achieve concrete progress on issues currently under negotiation”. (Page 5) Fisheries subsidies, Joint Statement Initiatives on e-commerce, domestic regulation in services, MSMEs and investment facilitation along with backlog issues all need to be considered.

The next DG needs “authoritative knowledge of the system and long experience with its functioning” and “trust of Members in his or her impartiality”. (page 7). Mr. Mamdouh believes he is the best candidate to be the next Director-General.

During the press conference, Mr. Mamdouh responded to a wide range of questions (see below) following his opening statement. In his opening statement, Mr. Mamdouh indicated that he had reviewed with the General Council why he was running as a candidate and what he would do as Director-General. He touted his 35 years of experience and participation in the Uruguay Round. He reviewed why he perceives the organization in crisis, the root cause being the imbalance among the three legs of the system — negotiations, dispute settlement, transparency/notifications. He also talked about how to fix the problems and the differences between other organizations’ reform and that of the WTO where reform involves modifying the agreements.

On the question of whether the General Council had concerns with Mr. Mamdouh’s background (no position as minister or ambassador) and role of the Director-General, Mr. Mamdouh indicated that he hadn’t sensed any concern among the Members. In his view, ministers take national perspective, while the role of the Director-General is to be a facilitator and honest broker which requires independence. His background is exactly that. While Mr. Mamdouh agreed that political leadership is required for the next Director-General, political leadership is not synoamous with ministerial leadership.

On the question of his vision for fixing the WTO and his strategy for doing so, Mr. Mamdouh indicated that he believed the WTO Members needed to develop a sense of common purpose. His strategy would begin with reviving the negotiation function. The Director-General will need fact- based knowledge to help Members find solutions.

On the question of running against two other African candidates and whether it will make it harder to win, Mr. Mamdouh answered that it was the position of the Egyptian government that the Egyptian candidate is the only candidate who has been endorsed by the African Union through its process. Candidates from Nigeria and Kenya have not passed through the process established by the African Union.

Mr. Mamdouh was asked about whether changes were needed in the interaction between the WTO Secretariat and Members. Mr. Mamdouh responded that the WTO has a body of great expertise within the Secretariat that could be better utilized. The expertise needs to be put at the disposal of the membership; information from the Secretariat staff is provided to Members in negotiations, to panels in dispute settlement and in committees. Mr. Mamdouh wants to bring the role of the Secretariat back to where it was in the past.

Mr. Mamdouh was asked if there is an Egyptian vision that makes him unique as a candidate. He was also asked if he didn’t think it was time for a woman to lead the WTO. Mr. Mamdouh stated that his Egyptian perspective is that of a Egyptian negotiator struggling to navigate the challenges within the GATT and then deal with the new issues within the Uruguay Round (services, IP). Thus, he understands what negotiators from developing and LDCs face to effectively participate with new issues. On the question of when it is time for a woman to lead the WTO, Mr. Mamdouh indicated that any time is the right time. He believes in gender equality. But gender shouldn’t be the primary criteria in selecting a Director-General.

Mr. Mamdouh was asked a question based on his role in the GATS negotiations as to what is key to building consensus. Mr. Mamdouh believes that the key to building consensus is to mobilize support for the common purpose. Conversely, while consensus is the golden rule in how the WTO functions, Members shouldn’t impose a requirement of consensus where it is not required. If one follow these two approaches, one facilitates achieving consensus.

A question was asked on what should be the role of the US and China in the new WTO. Mr. Mamdouh responded that the role of these two Members is to engage in the WTO. Start from the point that bilateral disputes should be resolved in the WTO. Since we all believe in the multilateral process, must keep in mind that bilateral disputes and solutions have effects on others. Moreover, bilateral solutions are less likely to be disciplined and are likely to be short lived.

Asked what he would do to revive the Appellate Body, Mr. Mamdouh responded that he would build off of the work already done. Most logical and productive first step is to build on that work and see what else is needed. And there is a need to look deeper into causes which he believes are rooted in differences in legal and regulatory systems. Mr. Mamdouh has not heard any suggestions that rules within the Dispute Settlement Understanding need to be changed. He concluded by saying that the size of the problem needs to be put into perspective and one needs to remember that on this issue, the WTO Members are not starting from zero.

A question was asked on globalization, whether the golden age of globalization had passed, the challenges of new protectionism and what he would do to restore the golden age of globalization. Mr. Mamdouh indicated that he believes globalization has been in transition for a while. The challenges from the COVID-19 pandemic merely highlight some challenges and possible changes. Globalization won’t go away. Problems seen during COVID-19 relate to medical products and agricultural products. Problems with supply chains have to do with disruption. If trying to deal with resilience, solution may lie with diversification of supply vs. onshoring. Globalization is restructuring but not going away (supply closer to demand). Will continue to evolve but won’t disappear.

On the question of what is the top challenge facing the WTO and his priority actions to address, Mr. Mamdouh indicated that the top challenge is the failing sense of purpose within the membership. What he would prioritize would be working to revive the sense of common purpose.

Mr. Mamdouh was asked if there will be enough time to prepare for the next Ministerial to have positive agenda/outcome. He answered that if the selection process concludes before November, there should be sufficient time. In his view, the next Ministerial needs to be a turning point for the WTO. At MC12, the WTO must have a clear agenda for reform. There is not currently a mainstream focus on reform; issues are being raised ad hoc. Second, the WTO needs to score successes – fisheries subsidies and progress on joint statement initiatives.

Tudor Ulianovschi (Republic of Moldova)

Mr. Ulianovschi was the first candidate who met with the General Council on Thursday, July 16. He reviewed his time as the Moldovan Ambassador to the WTO and as Moldova’s Foreign Minister and his overall diplomatic and political career that spanned more than sixteen years.

He articulated his vision for the WTO if selected as the next Director-General as being

“a 3D vision and approach:

First D is Direct Access to Ministers and political decision makers — in my capacity as a recent Minister dealing with Ministers.

Second D is Dialogue and discussions with Geneva based Ambassadors — in my capacity as former Ambassador to the WTO — I was in your shoes and fully understand the process of work, its challenges and the potential efficient and effective solutions.

Third D is Driving the work of the WTO Management and Secretariat, so it can better and more efficiently serve Members’ needs and continue bringing its contribution to a better system for all Members.” (Pages 2-3)

There is a need to strengthen the system by reinvigorating the negotiation function, safeguarding and improving the WTO’s two-tiered dispute settlement system, and improving compliance with notification obligations. (Pages 2-3). Incremental progress on negotiations is what is achievable.

Immediate priorities for the next Director-General include eight items, the first four of which are getting the Appellate Body reactivated, achieving resolution to the fisheries subsidies negotiations, addressing joint initiative issue (e-commerce, investment facilitation for development, domestic services regulations, MSMEs), and facilitating dialogue on other ongoing issues.

Mr.Ulianovschi provided separate discussions on dispute settlement and on COVID-19. On the latter issue, transparency of government action is crucial for traders. Members should limit export restraints and remove as soon as the situation permits. The WTO needs to continue working with other international organizations to analyze the effect of COVID-19 on agricultural supplies, supply chains as well as how to help economic recovery, particularly for developing and least developed countries.

During the press conference, Mr. Ulianovschi provided a short introductory statement and then responded to a variety of questions. His short statement reviewed his presentation to the General Council. He believes that the WTO must show its relevance, and that the WTO needs reform to restore relevance. The WTO’s negotiating function is key to achieving this and helping restore the negotiating function would be his top priority as Director-General. The second priority is to reactive the Appellate Body. Third, is improving transparency and the monitoring function of the WTO. Mr. Ulianovschi brings to the table as a candidate his experience as a former Ambassador to the WTO and as a former Minister.

On the question of how he would use the role of Director-General to ease tensions between U.S. and China, Mr. Ulianovschi responded that this topic had been discussed with Members during his meeting with the General Council. In his view, the role of the Director-General is to be an honest broker between WTO Members. The Director-General must be able to listen to concerns with a view to using his offices to engage Members involved in a dialogue process. At same time, the Director-General is not there to impose solution but to listen and raise awareness of the impact of actions on the larger organization and to mitigate harm to others. The next Director-General needs to engage in talks both in Geneva and in capitals and see that any outreach is transparent and inclusive.

There were several questions on the Appellate Body including how Mr. Ulianovschi would reactivate the Appellate Body and whether reform of the dispute settlement system should be broader than getting the Appellate Body back functioning. Mr. Ulianovschi indicated that on the provisions of the Dispute Settlement Understanding, all Members agree on the provisions as written. With the application of the DSU by the AB, there are concerns raised by the U.S. and others. The Director-General can provide a process to help Member’s discuss. Solutions to the concerns raised need to be found, but the parameters of the solutions need to be found by members themselves. In his view, the Director-General’s role is to help Members identify how to move forward on the Appellate Body impasse with resolution by the next Ministerial Conference. On the question of breadth of action on the dispute settlement system, Mr. Ulianovschi stated that Members are not looking for a complete redrafting of the Dispute Settlement Understanding. What is needed is a targeted approach to address issues raised by certain members on the operation of the Appellate Body.

Mr. Ulianovschi was asked a question of how he, if selected as the next Director-General, would withstand the political pressure being young and from a very small country. Mr. Ulianovschi noted that as a candidate he speaks in his individual capacity not in his country’s capacity. Key criteria should be competence, experience and political profile, not age or size of country the candidate is from. He has the relevant experiences to be the next Director-General. The WTO needs a person who understands the issues but also has the political experience and networking to help members to get things done. As to age, Mr. Ulianovschi has plenty of experience negotiating agreements. He has the right resilience, tenacity, ability to listen and political will to get things done.

A question was asked of what sets Mr. Ulianovschi apart from other candidates. His response was that at the end of the day, it is for Members to decide which candidate best meets their needs. All of the eight candidates have extensive backgrounds. Believes he has a good 3-D approach which will benefit members.

On the COVID-19 crisis, Mr. Ulianovschi was asked how the pandemic will impact the WTO. His response was that COVID-19 is a wakeup call to WTO and its Members. The pandemic is having major negative effects on trade and economic growth around the world. Some WTO Members have imposed export restraints and pursuant to WTO requirements have generally notified such restraints. While all Members are affected by the pandemic, there have been significant effects on those least able to handle the negative effects, particularly LDCs. There is a need to expand capacity to help such Members. As Director-General he would work with other organizations to have a unified approach on how to address COVID-19 challenges through trade to the benefit of all people.

Mr. Ulianovschi was asked whether considering that Moldova was a small country that is not a powerhouse in trade, there were experiences from his country in post-Soviet times that would inform his handling the role of Director-General. Mr. Ulianovschi answered that when Moldova joined the WTO in 2001, it joined as a developed country and made the commitments expected of a developed member. Trade is important for Moldova and is for all WTO Members. Moldova has had a neutral role in many of the issues at the WTO. Thus, coming from Moldova enhances Mr. Ulianovschi’s background for being an honest broker if selected as the next Director-General. On size of country, Members should be evaluating the experience of the candidate versus the size of the country.

A question was asked whether the consensus rule at the WTO should be changed to reduce the paralysis. Mr. Ulianovschi responded that the consensus rule was decided by Members. Consensus decision making is one of the elements of the WTO that helps members remember the greater goods and need to consider partners’ needs. Process doesn’t work well all the time. The Director-General can help facilitate Members moving forward and achieving consensus. While there are different formats at the WTO (multilateral and plurilateral), at the end, it is important that basic principles are respected. Consensus is a cornerstone of the WTO.

The last question asked was about getting the WTO out of crisis; in particular, what is the core factor causing the crisis and how would Mr. Ulianovschi address the factor if he was selected as Director-General. Mr. Ulianovschi answered that this is an existential question for the WTO. First priority, in his view, to get out of the crisis is for there to be trust among Members. The role of the Director-General is to enhance feeling of trust through confidence building steps. Many issues which have been unresolved for a long time have undermined trust. Joint initiative statement issues are advancing and give hope that the organization is relevant and can deliver. This is a good sign that there is a common purpose among the Members.

H.E. Yoo Myung-hee (Republic of Korea)

The Korean candidate has spent twenty-five years in international trade and presently serves as Korea’s Minister for Trade.

“My 25 year career in international trade has taught me that solid ground- work is the basis of an agreement, and political will is what closes the deal. I have dealt with both the technical details of agreements, as well as engaged in finalizing major trade agreements as Trade Minister. I believe my extensive experience and expertise will enable me to offer insights and creative solutions to restore and revitalize the WTO.” Page 1

Minister Yoo reviewed the nature of the challenges facing the WTO at the present time:

“We are now witnessing the threat of growing protectionism, and heightened trade tensions. Technological advances are transforming the way we produce, deliver, and consume goods and services in ways never imagined when the WTO was created. The global crisis induced by the pandemic is challenging the WTO’s purpose of ensuring the smooth flow of goods and services.

“The WTO, which was intended to provide predictability and stability in these times of turbulence, is now facing a trust deficit with all three pillars under stress.

“Despite much good will and hard work, the record of negotiations in the WTO leaves much room to be desired. There has been progress, such as the adoption of the Bali and the Nairobi packages including the Trade Facilitation Agreement, but we need to do much more to meet the challenges and realities of the 21st century. The stagnant negotiations have had negative consequences for all of the WTO’s functions, and, to some extent, contributed to the current problems facing the dispute settlement system.” (page 2)

Minister Yoo’s vision for the WTO “is to make the WTO more relevant, resilient and responsive.” (Page 2)

“The WTO needs to keep evolving to become more relevant to changing economic circumstance and realities. The WTO needs to enhance sustainability and inclusiveness to remain resilient as a champion of open trade for the next 25 years and beyond. And the WTO needs to be more responsive to global challenges and contingencies for the benefit of all of its Members.” (Page 2)

In terms of tasks should she become the next Director-General, Minister Yoo lists the first priority as the next Ministerial Conference (MC12). The second priority is WTO reform and the third is inclusive trade and sustainable development.

For the MC12, achieving an agreement on fisheries subsidies by the conference is critical. Significant progress towards a plurilateral electronic commerce agreement is another achievable objective by MC12. Progress on development issues is also critical, particularly on issues important to developing and least developed countries to help survive and come back from the COVID-19 pandemic.

On the issue of WTO reform, Minister Yoo separates the topic into three areas – updating “the rule-books and delivering agreements with real economic impact”; “restoring the dispute settlement system”; and “implementation of agreements and increased transparency.” (Page 3)

The third area, inclusive trade and sustainable development is described as follows by Minister Yoo:

“WTO reform should not be a goal in and of itself, but an instrument to promote economic prosperity and better living standards for all of its Members. To this end, the WTO should pursue inclusive trade initiatives encompassing overall development issues, as well as specific, cross-cutting issues such as MSMEs, women’s economic empowerment, and environment.

“Among others, we should deepen our efforts to help developing countries, especially LDCs, secure a larger share in the growth in international trade. We should fully implement what has been agreed for LDCs and strengthen our technical assistance and capacity building programs. Further, while maintaining a central role for the WTO in seeking these important values, I will support cooperation with other international organizations in a proactive and forthcoming manner. This will help broaden the available resources and multilateral commitment to achieving Members’ goals.” (pages 3-4)

Minister Yoo’s prepared statement to the General Council concludes with a section on how she sees the role of the Director-General — bringing optimism, having a vision based on realism, helping rebuild trust in the Organization. “[T]he Director-General has to be an effective, trusted, and informed facilitator and a person who knows how and when to act to help achieve consensus and agreement.” (Page 4)

At the press conference, Minister Yoo provided a short statement which was followed by a range of questions. In her short statement, Minister Yoo stated that the WTO is at a crossroads. Her vision is to make the WTO more relevant, resilient and responsive (as reviewed in her prepared statement). She brings her 25 years experience to the job.

The first question asked that since Korea was one of the countries who agreed to export limits to avoid steel and aluminum tariffs imposed by the U.S., what thoughts did Minister Yoo have on voluntary export restraints (VERs) under the WTO. Minister Yoo responded that VERs are banned by the WTO. But the current situation is different as US has taken action pursuant to national security provisions, and Korea was addressing intended actions by U.S. under that law. Cases are before panels challenging U.S. national security action as inconsistent with WTO, so Minister Yoo would not comment on the merits of the cases at this time. While aware of different views on whether national security issues can be challenged at the WTO, since the issue is in front of panels, she would not comment further.

On the issue of The Appellate Bidy impasse, Minister Yoo was asked how she would solve the impasse. She indicated that Members have very divergent views on the role of the Appellate Body. All members understand the need for a two-tier dispute settlement system. If selected as the next Director-General, Minister Yoo would accelerate members’ consultations to resolve the issue.

Minister Yoo was asked how hard it would be to move from Korea’s Minister for Trade to the WTO’s Director-General and whether she would have problems living in Geneva or working for an international organization. Minister Yoo indicated that she believes she is in best position to understand all Members views at the WTO. During her lifetime, Korea has gone through many stages of development, and she has seen trade issues through her country’s experience at different levels of economic development. Because of her diverse experiences at Korea’s different stages of developments, she is in a good position to understand concerns of all countries if selected as the next Director-General. As for living abroad, Minister Yoo was stationed Beijing for 3 years and Singapore for 3 1/2 years. She would have no problem living abroad or working for an international organization.

On the interim arbitration mechanism adopted by the EU, China and about 20 other Members, Korea is not a party. Does Minister Yoo have any concerns that the interim arrangement (MPIA) might become permanent? Minister Yoo responded that the MPIA was being used by some Members to overcome the current vacuum with the Appellate Bid shut down. The key for the WTO is to focus on finding a permanent solution, and she would do that if selected as the next Director-General.

A question was asked how Minister Yoo viewed the question of the status of Members as developed or developing countries particularly in light of Korea viewing itself as a developing country in the WTO although Korea has indicated it will not seek additional special and differential treatment under future WTO Agreements. Minister Yoo started her response by noting that the Marrakesh Agreement requires that the WTO work to help developing and least developed countries LDC countries secure their fair share of trade. There are competing issues at the WTO. Should the WTO make special and differential treatment provisions more operational in existing Agreements is one issue. Should the WTO change the classification status of some countries based on economic development is the other issue. For Korea, the. world has changed, and countries have changed in terms of their stage of economic development. Korea decided to take on more responsibility based on its changing level of economic development. But many countries continue to need special and differential treatment. It would be ideal for developing countries to take on more responsibilities as they are able. But this a sensitive issue on which there is no consensus as yet.

A question was asked as to how Minister Yoo would restore trust if selected as the next Director-General. Minister Yoo noted her experience in negotiating trade deals with all level of countries around the world. She knows what it takes to negotiate and what it takes to bring negotiations to a close. She is confident that she can earn confidence from Members and achieve tangible outcomes. The key is to obtain even a small success at the MC12 (e.g., fisheries subsidies agreement by then) which would help build trust and convince world that progress can happen at the WTO.

Minister Yoo was asked if in a consensus system, she could gain the support of Japan for her candidacy considering she had led Korea’s dispute with Japan on semiconductor materials. Minister Yoo remarked that she is here as a candidate in her own capacity and not as part of the Korean government. She would not comment on the ongoing dispute between Japan and Korea. She did note that Japan and Korea work closely on many issues at the WTO, and both are strong supporters of the multilateral trading system. Therefore, she is confident that Japan will look at all candidates and decide which has the best qualifications to move the WTO forward.

One questionner indicated he had heard from an analyst that there is some concern that China might block Korea’s candidacy as China might otherwise have to give up its Deputy Director-General slot. Minister Yoo was also asked if it was time for a woman to lead the WTO. Minister Yoo felt it would be inappropriate to comment on the position of other countries, each of whom must make their own decision as to whom to support for the next Director-General. She hadn’t heard about the rumor mentioned. She added that China and Korea have worked closely on many matters. She was in China for three years and has negotiated with China. She would be doing outreach to China and other Members to see how she could work with them if selected as the next Director-General. On gender, for the last 25 years, she has been a pioneer in the Korean government, the first woman to hold her position in trade. Promotion has been based on merit not on gender. The WTO Members should pick the right person to help WTO move forward. All of the women candidates are well qualified. She knows she is well qualified based on her experience.

What does it mean for the WTO to be relevant, and how would you bring on major members who may not agree with the issue being considered? Minister Yoo stated that the WTO needs to revitalize its negotiating function and must be able to enforce its rules (restore AB). Given 21st century realities, WTO needs to update its rule book and to achieve things that can have real global effect such as joint initiative efforts on e-commerce, MSMEs, investments, and other issues. That said, there are open issues from The Doha Development Agenda that are not moving because there are different views on how to move forward. In terms of how you bring members to the negotiating table, part of the answer is to obtain small successes to build trust and momentum.

Amb. Amina C. Mohamed (Republic of Kenya)

Ministrr Mohamed was the last candidate who met with the General Council on Thursday, July 16. She started by outlining what she referred to as “the three main themes of my vision for the WTO: Reform, Recover, Renewal.”

“The WTO needs urgent reforms so it can once again play its full part as an engine of growth, development and stability. Reform is all the more urgent because an effective WTO is needed to help create the conditions for a sustainable recovery from the economic fallout of the COVID-19 pandemic. And looking further ahead, the WTO needs to renew its capacity to negotiate and to develop new trade rules and disciplines for the challenges of the very near future.” (Pages 2-3)

Minister Mohamed reviewed that the WTO was challenged before COVId-19 with few new agreements since its creation, with increased trade tensions, and with a dispute settlement system that has lost at least temporarily its Appellate Body. The COVID-19 adds huge complications being the largest economic contraction since the Great Depression. Recovery will be a challenge, and there is an urgent need to update the trading system to address the issues of today including “climate change, the digital revolution, poverty and sustainable development.” (page 5)

On the topic of renewal, Minister Mohamed noted that

“Renewal has to start with facing up to the defects that have weakened the system in recent years: the inability to update rules to reflect the changing realities of how trade is conducted; the sterility of ideological standoffs; the retreat into defensiveness; and the sense of the benefits of trade not being equitably shared.” (Page 7)

“Renewal should also build upon the WTO’s core values and achievements. Trade has been transformational. It has helped to lift close to 1 billion people out of poverty and facilitated the attainment of higher living standards in countries at all levels of development. These successes were possible because Members did not see trade as a zero-sum game. They understood that trade-offs were needed to produce outcomes. All Members should contribute to trade opening and facilitation efforts, especially those most in a position to do so.” (Page 7)

While supporting bilateral and regional trade agreements, Minister Mohamed, noted that such agreements are not a substitute for multilateral agreements.

She reviewed the importance of dispute settlement to the system and the need to resolve the existing impasse on the Appellate Body.

“The WTO should give effect to its development objectives in a practical and enabling way, not forgetting its special responsibility towards its most vulnerable Members, particularly least-developed countries. It also needs to play its part in the important task of advancing the economic empower- ment of women through trade.”

Minister Mohamed ended her prepared statement to the General Council by reviewing her qualifications for the job, including her time in Geneva as Ambassador from Kenya, her chairing the top WTO bodies (General Council, Dispute Settlement Body, Trade Policy Review Body), her time as Minister of Foreign Affairs and International Trade and heading the 10th Ministerial Conference and her role as a facilitator in helping Members achieve agreements on “the TRIPS amendment, the Expanded Information Technology Agreement and the Nairobi Decision on Export Competition”. (Page 12)

At the press conference, Minister Mohamed made a brief opening statement and was followed by questions. In her opening statement, Minister Mohamed stated that the WTO is being challenged like never before referring to the changing world trade order, limited negotiating success, and breakdown of the appellate body, and the outbreak of the COVID-19 pandemic. She then reviewed her vision, the three “r’s” — reform, recovery and renewal. She concluded by reviewing her qualifications for the Director-General.

The first questioner asked what lessons Minister Mohamed had learned from her 2013 run and why she thought that countries that hadn’t supported her then would do so now. Minister Mohamed responded that 2020 is a different time with a different group of candidates. Since 2013, she has had many additional experiences that add to her qualifications and hence help her candidacy. She mentioned in particular her role in chairing the 10th Ministerial and the successes that were achieved including the agriculture export subsidy agreement, expansion of the Information Technology Agreement and amending the TRIPS Agreement. So 2020 is the right time for her candidacy.

One questioner asserted that the agreement on export subsidies was negotiated with a small group and given to the full membership on a take it or leave it basis and asked if this was a correct way to conduct inclusive negotiations. Minister Mohamed stated that the questioner was incorrect in the process used. Negotiations were conducted in different configurations but always went back to the full Membership. If anyone felt left out, they had the ability to block the agreement. That didn’t happen. Nairobi worked extremely well, and is an example of how the negotiations should proceed.

One questioner inquired whether the ongoing FTA negotiations between the US and Kenya was an advantage or disadvantage in her candidacy. Minister Mohamed responded that she didn’t consider it relevant. Obviously, the FTA negotiations are just one of many happening around the world. She is hopeful that the negotiations and eventual agreement will be a model for her region and open to other countries. It should be viewed as very positive.

What would you do differently if you become the next DG? Minister Mohamed responded that she would do a lot differently. She indicated that her experiences are different and her skills are different. With the WTO at a crossroads, there is a great need for an experienced negotiator to come in and lead. The agenda would be established through consultations with Members. She would also hope to focus on the gender issue.

if selected as DG, will you be more engaged in resolving trade tensions between major players? If yes, what tactics would you use? Minister Mohamed reviewed the types of powers that a Director-General has to work with Members. For example, the Director-General has engagement powers and can encourage members to consult, use of good offices of the Director-General. So while the Director-General has only limited powers, they can be used effectively to help members to use the system to resolve differences.

The next questioner inquired as to what the Minister’s views were on whether it is time for an African or a woman to lead WTO. The Minister was also asked about the reform proposal from the U.S. to clarify who qualified as a developing country (versus current system where developing country status is a matter of self-selection). On the issue of gender or regional preferences to become the next Director-General, Minister Mohamed believed that the key consideration is whether a particular candidate is best qualified to handle the job. If a female has the qualities, obviously great. Members shouldn’t select a woman just to have a woman; they should pick the best candidate. On the issue of development, this is an issue for the members. Only category of members defined in the WTO is least developed countries where the United Nations listing is used. For all other Members, there are no definitions. It will be up to Members to decide if the issue is ripe for discussion.

One questioner wanted to know if Minister Mohamed has had solutions for the WTO reform needs why she hadn’t pursued them before now. Minister Mohamed indicated that it was up to Members to decide what issues to pursue. WTO is at a crossroads. Membership needs to agree on what to consider in any reform effort, what sequence of issues may make sense and so on. Questions of reform have been floated here in Geneva for many years. When she was Kenyan Ambassador to the WTO, the WTO was beehive of activity. In her prior roles both as Anbassador and as Minister and chair of the 10th Ministerial, she had in fact achieved with the membership significant reforms including managing to amend the TRIPS Agreement, achieving an agreement in agricultural export subsidies and more.

When asked what her approach would be to deal with trade tensions between US and China, Minister Mohamed stated that she would encourage all members to resolve their trade differences within the WTO rules.

On the issue of how to remove the impasse on the Appellate Body, Minister Mohamed indicated that Members need to consult and negotiate. The WTO needs members to find solutions to permit the second-tier of dispute settlement to be restored. A Director-General DG can offer technical assistance and process to help Members find the solutions.

A series of questions on reform were asked by a questioner – what would Minister Mohamed do to move reform forward? Should reform be incremental or broader based? How does MC12 factor into this? Minister Mohamed indicated that she would help members identify what they want and encourage dialogue. By the time of the next ministerial in 2021, she hoped there would be some clarity as to types of reforms needed and supported —restoring the Dispute Settlement system, updating rule book. There are lots of potential issues, but it is up to the Membership on what gets examined.

Is it Africa’s turn to lead? Why couldn’t Africa come together around one candidate? Minister Mohamed responded that Africa takes the WTO very seriously. That’s why there are three candidates. There is no reason to penalize Africa for having three candidates. Each of the three candidates is very accomplished. Africa should be commended for putting them forward.

H.E. Mohammad Mazaid Al-Tuwaijri (Kingdom of Saudi Arabia)

Minister Al-Tuwaijri was the first candidate to meet with the General Council on Friday, July 17. His background is largely in business with the last four years serving Saudi Arabia as the Minister of the Economy and Planing. He started his prepared comments by expressing support all those affected by COVID-19, and noted his involvement for Saudi Arabia in addressing the pandemic in his country and the important role the WTO plays in keeping trade flowing.

Minister Al-Tuwaijri stated that his family had a long history of trading which involved traveling and following the North star. Like his family, the WTO Members must establish goals, set a course (their North star) to follow to accomplish the goals. The role of the Director-General is like a compass to help Members stay on the course towards achieving their goals. The WTO’s “challenging situation has become even more difficult with the pandemic; it will likely get worse; and, we know that trade policy is an essential part of the response to the pandemic itself, and will be key to our collective recovery.” (Pages 1-2)

Minister Al-Tuwaijri identified three questions to consider:

“First, what opportunities and solutions will emerge from current challenges?

“Second, how can Members work together to leverage new ideas, new rules and new technologies to solve the emerging problems that we face today, and the issues that will arise tomorrow?

“And, third, * * *, what kind of leadership is required to ensure that the
multilateral trading system delivers on the vision and objectives set by Members?” (Page 2)

Minister Al-Tuwaijri then indicates that the Membership needs to ensure “steady progress is made on delivering the goals and objectives set by Members.” (Page 2) Because the WTO is not performing, there is a need for a performance assessment to determine why. Based on his business background and government experience, if Minister Al-Tuwaijri is selected as the next Director-General, he would implement critical success factors from the goals and objectives of the Members, establish key performance indicators, and collect evidence and data to determine progress in meeting objectives.

“As part of this effort, feedback loops of constructive suggestions will be encouraged to deliver continuous improvement.

“If we do not respond to shortcomings, the system will not run smoothly,
stakeholders will become dissatisfied, and alternative means will be found outside the WTO to achieve your goals and objectives.” (page 4)

Minister Al-Tuwaijri noted that in its first twenty-five years, the WTO had maintained the status quo, but hadn’t adapted to the changing trade environment.

“Concerning working together through negotiations, I believe that Members will participate in negotiations when they are convinced that the agenda includes an incentive for them to participate. Therefore, in order to have a successful multilateral negotiation, the agenda needs to be balanced – it needs to include something for everyone. I support plurilateral negotiations as long as they are open to all Members, their outcome is applied to all on a most-favored nation basis, and they do not create rules that prejudice the interests of non-participants.” (PAGE 5) Minister Al-Tuwaijri indicated that the work of Members could be bolstered by WTO Secretariat research and interaction with the business communities of Members.

On the issue of opportunities from the current challenges, Minister Al-Tuwaijri expressed that the delay in the next Ministerial Conference (MC12) should permit completing of the fisheries subsidies negotiations and the plurilateral talks on e-commerce both important “issues in the public good”. (Page 6). He also suggested increasing the frequency of Ministerial meetings to annually. On the issue of special and differential treatment, “without negotiations that include incentives for everyone to participate actively, I do not think it will be possible for Members to address the issue of SDT.” (Page 6)

During the press conference, Minister Al-Tuwaijri provided a short opening statement and then answered questions. In his opening statement, Minister Al-Tuwaijri reviewed the current situation facing the WTO and the need for the next Director-General to have a strong reform agenda. COVID-19 will make the global trade situation more uncertain.

The first questioner asked how Minister Al-Tuwaijri could obtain regional support with the current conflict between Saudi Arabia and Qatar. Minister Al-Tuwaijri indicated that he would not comment on the dispute between Members. He noted that Qatar is a member of the WTO and believed the next Director-General should focus on what the goals of members are, how to achieve the goals and address the uncertainty created by the pandemic.

What is the greatest problem facing the WTO, and what is your plan to fix it? Minister Al-Tuwaijri noted that in the first twenty-five years of the WTO history, there have been some successes in terms of new agreements. However, the world has changed significantly in terms of trade. He sees the biggest issue facing the WTO as being the process of negotiations. In Minister Al-Tuwaijri’s view there is no process for negotiations. This results in countries going outside of WTO to find solutions in some circumstances. Thus, in his view, process enhancement is needed. Minister Al-Tuwaijri’s strengths are in management and leadership. These two characteristics are key to leading the WTO forward. The next Director-General should focus on process enhancement, design metrics so members can see progress. Moreover, whenever there is a dispute, the WTO should be looking for the root cause as well as resolving the particular dispute. If don’t get to root causes, disputes will recur. Minister Al-Tuwaijri approaches the challenges facing the WTO from a management perspective.

The next question reviewed interest by some Members in having a Director-General from an African country but noted that there has never been a Diirector-General from an Arab country either and sought the Minister’s comments. Minster Al-Tuwaijri noted that WTO Members need to think about what they need in the next Director-General . If management and leadership are the important characteristics that the next Director-General should have (which is the Minister’s view), he has those characteristics. First, he has twenty-five years management experience in the private sector where trade was important and multifaceted (trade finance, logistics, insurance, manufacturing, energy). He would bring that experience to the WTO Director-General position. Secondly, he has been the Minister of Economy and Planning, involved in major transformation (diversification) for the last four years, including policy making. He developed a delivery unit which measures performance and helps fill gaps. He would bring that experience to the WTO Director-General position as well.

On the issue of WTO reform, Minister AlTuwaijri recognized that the WTO is a member driven organization. Second, the Director-General has a function to facilitate and to assess, but there is also room to improve the Director-General’s role. For example, the next ministerial (MC12) has been delayed til 2021. The delay provides an opportunity to improve the discussion at MC 12 and the outcomes that are possible. Bringing management and leadership skills to the Director-General position will permit setting goals, metrics for measuring progress in achieving those goals and providing a feedback loop on gaps that need to be addressed. Certain current issues should be achievable, such as fisheries subsidies and e-commerce. In the Minister’s view, COVID-19 and postpandemic recovery provide the WTO an opportunity to address core needs of Members by doing a performance assessment. Where are the gaps in performance; why did those gaps develop; how to proceed? From his business and government experience, Minister Al-Tuwaijri knows that this type of transformation for the WTO to a more goal-oriented organization is possible.

Is it time for a woman to lead the WTO and what sets you apart from the other candidates. Minister Al-Tuwaijri stated that on women empowerment, he has a good track record in terms of working on woman empowerment in business and government As to what distinguishes him from other candidate, Minister Al-Tuwaijri reflected on his long business career and the need for specific goals and targets. He also reviewed his experience as a minister involved in the transformation of Saudi Arabia which is getting results. He brings those experiences to the WTO.

Why don’t Arab countries unite around one candidate where there are two candidates and does that hurt your chances? Minister Al-Tuwaijri remarked that the WTO is a member driven organization. Hence all WTO members can nominate candidates. All candidates have different experiences which provides much for Members to consider and choose from. For himself, the Minister noted that Saudi Arabia is presently president of G20 and has initiated its own reform program a few years back. Thus, Saudi Arabia has had the political will for reform. Coming from that culture can be useful to his candidacy.

Longterm observers view issues as revolving around political will versus being caused by a lack of management skills. Minister Al-Tuwaijri stated that while both technical and political elements exist, he believes that management and leadership would permit improvements in the process of negotiations which in turn would permit both the technical and political elements to have a better chance to work. How to improve the negotiation process is a management issue. Of course, there are political elements, and he has political background and strengths as well.

On the question about the future of the WTO, Minister Al-Tuwaijri noted that the future of the WTO is a member choice — the WTO is about their goals, their choices. The Director-General is a facilitator. But the organization is drifting away from its core objectives. Thus, there is a need to review root causes of this drift. He believes the WTO can create key performance indicators to prevent future drift and monitor early warning signs to catch major disputes early. The Minister wants the debate to shift from political will to how the Members can go back to the organization’s original goals and deliver on them.

On the Appellate Body, what is your plan to addressing U.S. concerns and do you plan to get it back functioning? Minister Al-Tuwaijri’s approach is the same as reviewed elsewhere. Determine what is root cause of AB not functioning. He believes it is because negotiations are not functioning well. Therefore, he wants to get the negotiating process to improve and to gain data to improve the system. For example, he believes it is important to be able to quantify the effect of delay of even one month in resolution of disputes.

Dr. Liam Fox (United Kingdom)

Dr. Fox was the last candidate to meet with the General Council. He has served in Parliament for many years and was Secretary of State for Defence and Secretary of State for International Trade under different UK administrations.

Dr. Fox started his prepared statement “by acknowledging the scale of the challenge the world currently faces in the COVID pandemic.” (Page 1). He commented that the WTO was facing problems before the pandemic., meaning to progress, it cannot be business as usual.

“But I know from talking to many of you, including in this last week, that
there is a widespread feeling that things are not as they should be. Yes,
there are technical issues to be overcome but the real problems of the
WTO are not technical. Our problem is the lack of political momentum.
There is too little political will to make the compromises needed for the
multilateral trading system to evolve and too little vision to make those
compromises easier. We must rediscover that political will and find the
right language to express our vision about the opportunities that trade
can bring to a new generation.” (Pages 2-3)

On the question of what qualifications the next Director-General should have, Dr. Fox stated that “it is not where the new DG comes from that matters but the skills and experience, especially the political experience, that they are able to bring to the organisation for the benefit of each and every one of our members. I believe that my 28 years in politics, and my years serving in senior cabinet posts such as trade and representing the UK at the top table on global issues give me the right experience to bring the renewed momentum, commitment and compromise, which will allow us to return this institution to greater global relevance.” (Page 3)

Dr. Fox expressed his strong support for open trade in a rules-based international trade system. He expressed concern for the trading system under current conditions and urged Members to recommit to the core principles of most-favoured nation, national treatment and transparency of commitments.

On the issue of challenges ahead for the new Director-General, Dr. Fox indicated that one of the first tasks would be to help Members achieve a successful Ministerial Conference (MC12 ) in 2021. A fisheries subsidies agreement needs to be completed as quickly as possible. Similarly progress on Joint Initiative issues like “e-commerce, services, MSMEs and investment” would be a priority. (Page 7) Outstanding issues on agriculture (subsidies, public stockholding for food security, cotton, and others) and WTO reform are other important issues to be addressed.

Dr. Fox reviewed concerns about increasing trade restrictive measures in the last decade and flowing from the pandemic and how they undermine other activities such as Aid for Trade.

On the topic of women and trade, Dr. Fox reviewed the importance of the issue and his own history of working to improve business opportunities for women and roles in government including the U.K. trade ministry. Dr. Fox committed that if he was selected as the next Director-General, he would “ensure that at least half of the WTO’s most senior leadership team are women.” (Page 9)

“[T]rade is not an end in itself. It is a means to an end. It is a
means by which we create and share prosperity. That prosperity
underpins social cohesion and that social cohesion in turn underpins
political stability. That political stability is the bedrock of our collective
security.

“And I say this because we must understand protectionism does not
come without a price tag. If we deny people access to prosperity and
opportunity through trade then we should not be surprised if the
outcomes, whether mass migration, political radicalisation or failing
states, come back to bite us.

“As an organisation we all need to recapture that optimism that comes
from committing to shared values. Yes, we’ve taken a billion people out
of extreme poverty but that cannot remotely be the end of our ambitions.

“We need the political momentum to take us forward. It is only with vision,
and shared purpose, that we can find the compromises required to meet
the challenges I’ve set out — reversing the rise in trade restrictive measures, recommitting ourselves to the founding principles to which we have all
agreed, while updating and strengthening this institution so it’s fit to tackle the challenges of the 21st Century.

“I believe I have the skills and experience to deliver that political
momentum.” (pages 10-11)

During the press conference, Dr. Fox provided a short opening statement which was followed by press questions. Dr. Fox’s opening statement reviewed some key points. This is not going to be business as usual. COVID-19 will affect the global economy and world trade. WTO is a great organization that has helped move 1 billion people out of poverty. There is a feeling in Geneva that the WTO has lost some of the political momentum. Negotiators can’t make compromises if don’t have common goals. The WTO can’t just focus on legacy issues (agriculture) but must address changed trading environment and also recommit to the principles of a multilateral trading system. Negative consequences of alternative outcome are too dark.

Why is the multilateral trading system important to the large parties? Dr. Fox indicated that he viewed the Director-General position to not be one of taking sides in bilateral disputes but to maintain the international trading system. If Members don’t enforce of what currently exists, what is the credibility of new rules signed onto later? He stated that all Members have benefitted from the multilateral trading system. The alternative to a rules- based system is not acceptable. That is true for most countries, not just smaller countries. He used the examples of the 4th and 5th largest economies, Germany and UK, for whom global trade is a major component of their economies.

On Brexit, is it an advantage or disadvantage for Dr. Fox’s candidacy with the EU? Dr. Fox stated that it was good that not everyone in the world sees all issues through the Brexit prism. If he becomes the next Director-General, he would be available to all Members on the same basis. While not directly relevant to the Director-General selection process, he hopes the UK and EU will reach a good trade agreement and believes it will be important for COVID recovery. On who the EU chooses, Dr. Fox believes the EU will likely pick a candidate who is most in line with their views on the characteristics and experiences needed for the job.

Is there a British perspective? Dr. Fox noted that he believes so in how he sees the role of the Director-General, which he analogizes to that of the British Prime Minister. In Britain, the Prime Minister is first among equals. Dr. Fox envisions the same concept applying to the WTO’s Director-General. On the question of whether Britain has a strong commitment to free trade, Dr. Fox noted that Britain has a very strong commitment to free trade. He is worried about threats to free trade today. He was surprised that in the General Council meeting he received very few questions about what free trade brings to consumers. Most of the questions were from a producer perspective. Trade liberalization is obviously very important to consumers. He would like to see the WTO unleash consumer interests more.

Dr. Fox received a question on whether it was premature for the U.K. to put forward a candidate since it has only recently obtained trade policy freedom from the EU. Dr. Fox’s answer was it was not too early. He noted the U.K.’s long history of promoting free trade. Currently besides negotiations with the EU, they are engaged in various other FTA negotiations and looking to adopt or further liberalize their participation in various FTAs between the EU and other countries.

There was a question on geographical diversity and his being European when most prior Director-Generals have been European. Dr. Fox stated that he understands the idea of diversity in personnel which he generally supports. What he is hearing from Members is that this organization has great personnel, but the organization is not where it should be. In Dr. Fox’s view, problems at the WTO are not technical but rather political. Whoever is the next Director-General will have to have difficult conversations with major members. He has met those leaders. Key is what the Director-General brings to the organization in skills and experience. Other aspect mentioned by some is gender diversity. Dr. Fox has been committed to gender diversity in his positions in the U.K. He has committed to having at least half of senior WTO officials be women if he is selected as the next Director-General.

One questioner asked if Dr. Fox had any Member is mind when he raised the need to support a rules-based system. Dr. Fox replied that he did not. He stated that at the end of World War II, nations set out principles in the GATT that have stood the test of time. Problem today is that various members have taken exception to particular rules. While exceptions or waivers are needed for some developing and least developed countries, it was not possible to have Members decide which rules applied to them. If Members don’t comply with existing agreements, what value do future agreements have? Countries at different stages of development access benefits of free trade under the current system by committing to basic principles.

A question was asked about the deficit of trust among Members of the WTO, and why Dr. Fox would be the right person to lead the organization and restore trust. Dr. Fox noted that a similar question had been asked during the General Council meeting. Important to know what is meat by trust. On the issue of how do parties get to trust, it is by the experience of behavior over time. Transparency and the sharing of information are big elements to enabling trust. In the current environment, the next Director-General will need a willingness to have conversations that are uncomfortable but necessary. The role of a Director-General is not to take sides but to understand both sides of a dispute between Members. In Dr. Fox’s view a political figure is better able to bring qualities to the role of the Director-General needed to build confidence. Separately, Dr. Fox stressed the importance in the present circumstances of being optimistic but also realistic. He believes that it would be a mistake for the Director-General to overpromise likely outcomes in the current circumstances.

As the only candidate from a developed country, does this give you an advantage? Dr. Fox noted that each candidate has different background and so could be viewed by some as advantaged or disadvantaged on the basis of geographic origin, gender and other factors. Dr. Fox does believe coming from a G20 country may be an advantage in the current cirumstances because of the substantial contraction in openness amongst G20 countries. He stated that the world is in a more difficult position re trade now than we were during the financial crisis. In 2009 only 0.7% of G20 import trade was covered by restrictive measures. By 2019 fully 10.3% of G20 imports were covered by restrictive measures. To come out of the economic challenges presented by the pandemic, all WTO Members have to abide by WTO commitments. That message may be easier to be delivered by a G20 country Director-General. Dr. Fox indicated he would have no problem delivering the message.

A question was asked of how Dr. Fox would address the broad concerns of U.S. with the WTO. Dr. Fox noted that the U.S. has some very specific concerns with the WTO, particularly with regards to the Appellate Body. Dr. Fox stated that the WTO has the Appellate Body because countries felt panels in GATT disputes went too wide. The Appellate Body was set up with a limited mandate. He is aware that there are different views of the role of Appellate Body and whether it has engaged in mission creep or handled incomplete texts by filling them out. If WTO Members are able to get back to a more narrow definition of the function of the Appellate Body, there may be some concept of precedent being set. Dr. Fox asks the question, does everyone want the AB to be functioning properly or not. If not, the multilateral trading system is under threat as obligations can’t be enforced. Believe there is room for compromise.

The last question inquired into what reform is needed. Dr. Fox articulated that reform should be viewed in three buckets. The first is conceptual reform. By this he means, Members recommitting to the basic principles of the WTO (most favoured nation, national treatment and transparency of commitments). He believes this is what MC 12 needs to focus on. The second is organizational reform. By this Dr. Fox means what does the team look like, the Director-General being first among equals; selecting Secretariat staff that are the most talented and challenging group. The third is policy reform. By that, Dr. Fox means what issues will be addressed — legacy issues and issues to update organization such as fisheries subsidies; resolution of the Appellate Body impasse. Dr. Fox concluded by saying that the Director-General position is a job for a politician not for a technocrat at this time.

WTO Director-General Selection Process — this week candidates meet WTO Members in a General Council meeting

As reviewed in a post last week, this Wednesday-Friday (July 15-17) the eight candidates for the Director-General position have their meetings with WTO Members in a General Council meeting. Each candidate has 90 minutes before the General Council and will meet the press immediately afterwards. See WTO Director-General selection process – next steps, https://currentthoughtsontrade.com/2020/07/11/wto-director-general-selection-process-next-steps/. After the meeting with the General Council this week, candidates and their goverments will have until September 8 to do outreach to WTO members in their efforts to get candidates known and build support for the particular candidate.

Not surprisingly, a lot is being written about the candidates. Candidates who were nominated early have already done press interviews or been interviewed on webinars by different organizations. See, e.g., Nikkei Asian Review, Good listener or strong negotiator? WTO candidates make case for top job, https://asia.nikkei.com/Editor-s-Picks/Interview/Good-listener-or-strong-negotiator-WTO-candidates-make-case-for-top-job; Inside U.S. Trade’s World Trade Online, Egyptian DG candidate: WTO approaching point of no return, June 24, 2020, https://insidetrade.com/trade/egyptian-dg-candidate-wto-approaching-point-no-return; Inside U.S. Trade’s World Trade Online, Seade: WTO needs ‘respectful’ but ‘assertive’ leader, July 7, 2020, https://insidetrade.com/daily-news/seade-wto-needs-%E2%80%98respectful%E2%80%99-%E2%80%98assertive%E2%80%99-leader; Yonhap News Agency, Seoul’s trade minister vows to make WTO more responsive if elected head, July 13, 2020, https://en.yna.co.kr/view/AEN20200713001800320. The interest from the media and various trade groups will only grow over the next two months.

Each candidate and his/her nominating government are already doing outreach to other WTO Members seeking to build a base of support for the candidate. Moreover, in the case of Mexico’s Jesus Seade, Mexico has signaled that it will not seek another term for Angel Gurria heading the OECD to bolster the chances of Jesus Seade to head the WTO. Yahoo News, Mexico gives up OECD in campaign to head World Trade Organization, https://news.yahoo.com/mexico-gives-oecd-campaign-head-184513923.html.

And, of course, WTO Members without candidates of their own will be evaluating all candidates against what they perceive to be the best qualities for the next Director-General. Various articles have both described possible characteristics of importance and challenges for candidates from regional rivalries and possible proxy wars. See, e.g., The Wire, In WTO’s Search for its Next Director-General, a Tale of Proxy Wars and Regional Rivalries, July 11, 2020, https://thewire.in/economy/wto-next-director-general; Washington Post, Who Will Lead the WTO and Help It Avoid Collapse?, July 11, https://www.washingtonpost.com/business/who-will-lead-the-wto-and-help-it-avoid-collapse/2020/07/10/c2676476-c2d3-11ea-8908-68a2b9eae9e0_story.html.

The European University Institute recently released a working paper reviewing Stakeholder Preferences and Priorities for the Next WTO Director-General based on a survey of academics, government officials, private sector (companies and business associations), staff of international organizations and NGOs, labor unions, think tanks. https://cadmus.eui.eu//handle/1814/67635. Those who responded to the survey ranked preferred characteristics of the next Director-General with experience in managing organizations receiving the highest ranking followed by political experience, economic training and Experienced WTO negotiator. Of far less significance were whether the candidate was from a developing or developed country, from a region that had not yet had a Director-General and the gender of the candidate, although some of the latter characteristics were more important to those responding from certain areas (e.g., Africa). Id at 2-4. Of course, it is the characteristics of importance to WTO Members that matters, not what academics or others would find of value. While Geneva Missions obviously have input in the process and will be handling this week’s General Council meetings, for many Members, the decision will come from the capital.

As an aid to those monitoring the selection process, I have put together a chart (see below) which presents a number of characteristics that may be relevant to WTO Members.

Dr. Jesus Seade has deep WTO and trade experience, has worked at high levels in all three Bretton Woods organizations, and has working relationship with both the U.S. and China. He is an economist by education and training. North America has never had a Director-General at the WTO, although Mexico is a Latin American country, a group within which Brazil (current Director-General’s country) is part.

Dr. Ngozi Okonjo-Iweala, while not having a trade background has extensive managerial experience from her time at the World Bank and political experience from her time as Minister of Finance in Nigeria. She has a PhD in Economics. She is one of three candidates from Africa, a continent that has never had a candidate selected as Director-General of the WTO.

Mr. Abdel-Hamid Mamdouh has extensive experience with the WTO based on his time within the Secretariat. Egypt is a country in Africa and also part of the Middle East. There has not been a WTO Director-General from either area.

Mr. Tudor Ulianovschi was Moldova’s Ambassador to Switzerland and Lichtenstein and Permanent Representative to the WTO. He has also served as Moldova’s Minister of Foreign Affairs.

Minister Yoo Myung-hee has been very active in trade and other issues for her government in Korea. Asia has had one Director-General (Thailand), though Korea has not had a candidate serve as the Director-General.

Amb. Amina C. Mohamed has a very extensive trade background for Kenya both in Geneva at Kenya’s Mission to the WTO and back in country as Minister of Foreign Affairs and International Trade and chaired the WTO’s 10 Ministerial Conference in Nairobi. She has had other government posts in Kenya and some experience in one of the UN organizations, UNEP. She is the third candidate from Africa.

Mr. Mohammad Maziad Al-Tuwaijri is a candidate from Saudi Arabia and is its current Minister of Economy and Planning. Saudi Arabia is in western Asia but also part of the Middle East. There has never been a Director-General selected from the Middle East, with just one from Asia.

Dr. Liam Fox from the United Kingdom has a long and distinguished political career and has served in a number of high political offices in different UK Administrations including Secretary of State for Defence and Secretary of State for International Trade.

A very important opportunity for all eight candidates will be their 90 minutes before the General Council as each candidate will not only be able to provide an overview of their vision on leading the WTO but also be able to respond to a broad cross-section of questions from Members. For WTO Members, the General Council meetings provide the Geneva Missions with their only opportunity to evaluate candidates against each other in a common setting, even if the candidates meet individually with some or many of the Geneva Missions before or afterwards.

Conclusion

We are six days into the two-month Phase 2 of the WTO Director-General selection process. The next three days are a very important period for each candidate to articulate his or her vision for the WTO going forward and provide information to WTO Members’ Geneva Missions that will help the Missions understand why the particular candidate is the best fit for the Organization for the next four years.

The eight candidates make for an interesting group with differing experiences and presumably different visions for moving the WTO forward. The road from eight candidates to the new Director-General continues tomorrow as the General Council hears from each candidate.

The WTO is in crisis on various fronts. With the current Director-General stepping down in 48 days, who emerges as the next Director-General may have an important role in whether the WTO can regain its importance for global trade. Good luck to all of the candidates.

WTO Appellate Body Reform – Revisiting Thoughts on How to Address U.S. Concerns

In a November 4, 2019 post, I reviewed a draft General Council Decision that had been presented by Amb. David Walker to the General Council on addressing some of the concerns presented over the last several years by the United States with the functioning of the WTO’s Appellate Body. The United States has been blocking the process for selecting new Appellate Body members until its longstanding concerns are addressed. See WTO’s Appellate Body Reform – The Draft General Council Decision on Functioning of the Appellate Body, https://currentthoughtsontrade.com/2019/11/04/wtos-appellate-body-reform-the-draft-general-council-decision-on-functioning-of-the-appellate-body/.

The Appellate Body ceased to have at least three members on December 11, 2019 at which point it could not hear new appeals. Moreover, only appeals that had gone through hearings were handled after December 10, with the last report released last month.

The United States released in February a lengthy Report on the Appellate Body of the World Trade Organization which provides a detailed review of the purpose of dispute settlement in the WTO and the development of major departures from the agreed language of the Dispute Settlement Understanding by the Appellate Body over the first twenty-five years of the WTO’s existence. The report was reviewed in an earlier post. See https://ustr.gov/sites/default/files/Report_on_the_Appellate_Body_of_the_World_Trade_Organization.pdf; USTR’s Report on the WTO Appellate Body – An Impressive Critique of the Appellate Body’s Deviation from Its Proper Role, https://currentthoughtsontrade.com/2020/02/14/ustrs-report-on-the-wto-appellate-body-an-impressive-critique-of-the-appellate-bodys-deviation-from-its-proper-role/.

While a number of WTO Members have joined together in supporting an interim arbitration approach, there has been no apparent ongoing effort to find a resolution to the continuing impasse. Indeed, the interim arbitration approach adopted by the EU, Canada, China and others in the view of the U.S. extends and in some cases exacerbates the longstanding concerns the U.S. has had with the Appellate Body and exceeds the proper role of arbitration.

There have been any number of proposals by academics, former government employees and others on what is needed to reform the Appellate Body to deal with U.S. concerns. The National Foreign Trade Council commissioned a multi-part report on Resolving the WTO Appellate Body Crisis from Bruce Hirsch, a former USTR official with significant responsibilities for dispute settlement matters. See Resolving the WTO Appellate Body Crisis, Proposals on Overreach (December 2019), http://www.nftc.org/default/trade/WTO/Resolving%20the%20WTO%20Appellate%20Body%20Crisis_Proposals%20on%20Overreach.pdf; Resolving the WTO Appellate Body Crisis Volume 2, Proposals on Precedent, Appellate Body Secretariat and the Role of Adjudicators (June 2020), http://www.nftc.org/default/Trade%20Policy/WTO_Issues/Resolving%20the%20WTO%20AB%20Crisis%20vol2%2006042020.pdf. His two papers make an important contribution to those interested in finding a forward path on restoring a second stage to the WTO’s dispute settlement system.

Specifically, Mr. Hirsch’s two papers address a number of important issues with suggestions presented for possible approaches to help move the WTO dispute settlement system back to what was agreed to in the Dispute Settlement Understanding which became operative in 1995 when the WTO was created.

The NFTC press releases on the two papers provides the following summary of proposals in each paper. From the December 17, 2019 press release:

The paper includes six key proposals:

  1. Enforce the 90-day time frame for appeals;
  2. Prohibit advisory opinions, and further elaborate the circumstances constituting advisory opinions;
  3. Clarify that DSU Article 3.2 does not justify expanding or narrowing the reach of WTO provisions or filling gaps in WTO coverage;
  4. Clarify that customary rules of interpretation of public international law do not justify gap-filling and expanding or narrowing the reach of WTO provisions;
  5. Affirm that Article 17.6(ii) of the Antidumping Agreement must be given meaning, by clarifying that the provision reflects the principle just described, that WTO adjudicators may not expand or narrow the meaning of broad provisions and general terms; and
  6. Direct the Appellate Body to reject party arguments that expand or narrow the reach of agreement provisions or fill gaps in agreements.

From the June 5, 2020 press release:

Specifically, the paper outlines 3 proposals that will help “reflect the goal of making the Appellate Body operate as Members expected in 1995:”

  1. Clarify that Appellate Body reports do not create binding precedent;
  2. Replace the Appellate Body secretariat with clerks seconded from the WTO secretariat; and
  3. Guidance on the Role of Adjudicators.

The two papers are an effort to help WTO Members focus on moving forward on bringing the Appellate Body’s role in the Dispute Settlement system back to its intended limited function.

The first paper which deals with the critical issue of overreach also takes in issues such as advisory opinions and adherence to the timeline for completing appeals (absent party consent) which Mr. Hirsch views as often interrelated. If there is a problem with the first paper it is in not addressing how to restore balance to WTO Members by correcting prior cases where overreach occurred. This has been an issue of some importance to the United States and is critical in a number of agreements where there has been a pattern of decisions changing rights and obligations.

In a prior post from November 12, I reviewed the large number of WTO Members who have expressed concern about the Appellate Body creating rights or obligations not contained in the WTO Agreements. See Background Materials on WTO Appellate Body Reform Challenges – The Critical Issue of “Overreach,” https://currentthoughtsontrade.com/2019/11/12/background-materials-on-wto-appellate-body-reform-challenges-the-critical-issue-of-overreach/

The second paper by Mr. Hirsch addresses a number of important issues although only the issue of precedent is on the list of concerns raised by the United States. However, Mr. Hirsch makes a strong case that the structure of the Appellate Body Secretariat has likely contributed to the development of problematic issues such as precedent, and his recommendations make a lot of sense and would return control of the Appellate Body process to Appellate Body members.

Mr. Hirsch notes that there is a lack of trust amongst WTO Members, which certainly reflects the current environment. His proposals are all focused on what he perceives to be a view with which all Members should be able to agree — reform the Appellate Body to ensure it performs the limited role articulated in the Dispute Settlement Understanding. I agree with both his observation on the lack of trust (and the need to develop trust through actions) and what the objective of reform can and should be. I differ only in what type of actions Members can take to ensure compliance by the Appellate Body with the limited role it is to play in dispute settlement.

His two papers do not suggest that all issues raised by the U.S. have been addressed in his papers (not clear if there are additional papers yet to be released). Nor is it the intention of his papers to suggest language amendments to the draft General Council Decision put forward by the then facilitator to the General Council, Amb. David Walker (NZ).

As an aid to readers, I have copied my November 4, 2019 recommended modifications to the draft General Council Decision below. The intention of my edits to the draft Decision was to provide changes reflecting the underlying purpose of the DSU that would be enforceable by the parties to disputes and to suggest an approach to deal with overreach that would deal with the past cases and not simply the future disputes. As one of the objectives of the U.S. is restoring the balance that was agreed to in the negotiated texts, I believe any resolution of the Appellate Body impasse has to identify a path forward on past decisions. The next paragraph and the modified draft General Council Decision are copied verbatim from my November 4th post. There are obviously many excellent ideas in papers from experts like Mr. Hirsch. My suggestions may add some flavor or different options on a number of issues that need to be addressed.

Excerpt from November 4, 2019 Post

What follows is my personal effort to identify some consequences of actions that have long concerned the United States.  Obviously, only the U.S. can determine what will address its concerns.  But possibly some of the following suggestions, if part of any final package, could address some of the ongoing and longstanding U.S. concerns.  The text, other than what is both in bold and underlined, is the draft General Council Decision that is contained as an Annex to Amb. Walker’s October 15, 2019 report to the General Council.  Job/GC/222.  Only one number has been deleted – “6” (60 days has been changed to 90 days under the first topic).

DRAFT GENERAL COUNCIL DECISION ON FUNCTIONING OF THE APPELLATE BODY

The General Council,

Conducting the function of the Ministerial Conference in the interval between meetings pursuant to paragraph 2 of Article IV of the Marrakesh Agreement Establishing the World Trade Organization (the “WTO Agreement”);

Having regard to paragraph 1 of Article IX of the WTO Agreement;

Mindful of the work undertaken in the Informal Process of Solution-Focused Discussion on Matters Related to the Functioning of the Appellate Body, under the auspices of the General Council;

Recognizing the central importance of a properly functioning dispute settlement system in the rules-based multilateral trading system, which serves to preserve the rights and obligations of Members under the WTO Agreement and ensures that rules are enforceable;

Desiring to enhance the functioning of that system consistent with the Understanding on Rules and Procedures Governing the Settlement of Disputes (the “DSU”);

Decides as follows:

Transitional rules for outgoing Appellate Body members

Only WTO Members may appoint members of the Appellate Body.  

The Dispute Settlement Body (the “DSB”) has the explicit authority, and responsibility, to determine membership of the Appellate Body and is obligated to fill vacancies as they arise.

To assist Members in discharging this responsibility, the selection process to replace outgoing Appellate Body members shall be automatically launched 180 days before the expiry of their term in office. Such selection process shall follow past practice.

If a vacancy arises before the regular expiry of an Appellate Body member’s mandate, or as a result of any other situation, the Chair of the DSB shall immediately launch the selection process with a view to filling that vacancy as soon as possible.

Appellate Body members nearing the end of their terms may be assigned to a new division up until 90 days before the expiry of their term.

An Appellate Body member so assigned may complete an appeal process in which the oral hearing has been held prior to the normal expiry of their term if completing such appeal is consistent with Article 17.5 of the DSU or any mutually agreed extension by the parties.

90 Days

Consistent with Article 17.5 of the DSU, the Appellate Body is obligated to issue its report no later than 90 days from the date a party to the dispute notifies its intention to appeal.

In cases of unusual complexity or periods of numerous appeals, the parties may agree with the Appellate Body to extend the time-frame for issuance of the Appellate Body report beyond 90 days.1 Any such agreement will be notified to the DSB by the parties and the Chair of the Appellate Body.

Failure to complete the appeal within 90 days of the notification of intent to appeal, or such other time as the parties agree to, shall result in the appeal terminating with no decision.  In such situations the Dispute Settlement Body will consider adoption of the panel report but rights of the complaining party under Articles 21.6 and 22 of the DSU shall not apply.

The Appellate Body will supply the Dispute Settlement Body with a description of steps taken by the Division to complete any such appeal within 90 days and any modifications to Appellate Body procedures and practice that will be pursued by the Appellate Body to ensure such failure to comply with the 90 day rule is not repeated.   

1 Such agreement may also be made in instances of force majeure.

Municipal Law

The ‘meaning of municipal law’ is to be treated as a matter of fact and therefore is not subject to appeal.  Where the Appellate Body nonetheless addresses the meaning of municipal law in an Appellate Body report, either party may request that the paragraphs of the Appellate Body report dealing with such issue or issues and any conclusions drawn therefrom  be striken, and the Appellate Body will reissue the decision without such paragraphs forthwith.  Compliance with the 90 day requirement will be measured from the date of the revised decision.

The DSU does not permit the Appellate Body to engage in a ‘de novo’ review or to ‘complete the analysis’ of the facts of a dispute. 

Consistent with Article 17.6 of the DSU, it is incumbent upon Members engaged in appellate proceedings to refrain from advancing extensive and unnecessary arguments in an attempt to have factual findings overturned on appeal, under DSU Article 11, in a de facto ‘de novo review’.   Where Article 11 is invoked by a Member seeking review on appeal of whether the panel failed to make an objective assessment, any other party may file an objection.  The Appellate Body will consider the claim only in extraordinary circumstances of facial bias in the assessment by the panel.  A Member raising such a claim that is dismissed will be assessed costs to the Member who filed an objection.

Advisory Opinions and Appellate Body Economy in Decisions

Issues that have not been raised by either party may not be ruled or decided upon by the Appellate Body.   Where issues not raised by either party are addressed in the Appellate Body report, the addressing of such issues constitutes the provision of an advisory opinion and is inconsistent with DSU Article 17.12 .  Either party may request that the paragraphs of the Appellate Body report dealing with such issue or issues and any conclusion based thereon be striken, and the Appellate Body will reissue the decision without such paragraphs forthwith.  Compliance with the 90 day requirement will be measured from the date of the revised decision.

Consistent with Article 3.4 of the DSU, the Appellate Body shall address issues raised by parties in accordance with DSU Article 17.6 only to the extent necessary to assist the DSB in making the recommendations or in giving the ruling provided for in the covered agreements in order to resolve the dispute.  The Appellate Body’s indicating that other issues raised need not be addressed to resolve the dispute satisfies the requirements of DSU Article 17.12.

Precedent

Precedent is not created through WTO dispute settlement proceedings.

Consistency and predictability in the interpretation of rights and obligations under the covered agreements is of significant value to Members.

Panels and the Appellate Body should take previous Panel/Appellate Body reports into account to the extent they find them relevant in the dispute they have before them.  The Appellate Body shall not reverse a panel decision on any issue solely on the basis of the panel not conforming to a prior Appellate Body report where the panel has identified different factual and/or legal issues.  

‘Overreach’

As provided in Articles 3.2 and 19.2 of the DSU, findings and recommendations of Panels and the Appellate Body and recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements.   In a large number of Panel and Appellate Body reports, one or more parties and/or third parties have raised concerns about the Panel or Appellate Body adding to or diminishing the rights and obligations contrary to Articles 3.2 or 19.2 of the DSU.

To clarify situations where rights and obligations are being added to or diminished, Panels and the Appellate Body will not fill gaps in agreements, construe silence to indicate obligations or construe ambiguities in language of existing agreements to require a particular construction.  Any such actions by a Panel or by the Appellate Body is inconsistent with Articles 3.2 and 19.2 of the DSU.

Any party to an Appellate Body report that raised at the DSB meeting considering adoption of the Appellate Body report concerns about the creation of rights or obligations inconsistent with Articles 3.2 or 19.2, will have 90 days from the adoption of this General Council decision to request a review of the Appellate Body decision.  Such request will be for the limited purpose of having the Appellate Body determine whether on the specific issues raised where the party complained of creating rights or obligations the clarification of meaning provided in this General Council decision would result in a changed decision on the particular issue.  The Appellate Body will render decisions on all such requests within 90 days and will accept no additional briefing or argument from parties.  Where the report would have been different on one or more particular issues, it is sufficient for the Appellate Body to so indicate.  Where the same decision on an issue would have been made, the Appellate Body shall provide a detailed explanation.      

Panels and the Appellate Body shall interpret provisions of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (“antidumping agreement”) in accordance with Article 17.6(ii) of that Agreement.  Any party to an Appellate Body report that raised at the DSB meeting considering adoption of the Appellate Body report that Article 17.6(ii) was not applied in interpreting the antidumping agreement, will have 90 days from the adoption of this General Council decision to request a review of the Appellate Body decision.  Such a request will be for the limited purpose of having the Appellate Body determine whether a different outcome on one or more issues would have resulted had the Appellate Body applied Article 17.6(ii)  of the antidumping agreement.  The Appellate Body will render decisions on all such requests within 90 days and will accept no additional briefing or argument from parties.  Where the report would have been different on one or more particular issues, it is sufficient for the Appellate Body to so indicate.  Where the same decision on an issue would have been made, the Appellate Body shall provide a detailed explanation.       

Regular dialogue between the DSB and the Appellate Body

The DSB, in consultation with the Appellate Body, will establish a mechanism for regular dialogue between WTO Members and the Appellate Body where Members can express their views on issues, including in relation to implementation of this Decision, in a manner unrelated to the adoption of particular reports.  Such mechanism will be in the form of an informal meeting, at least once a year, hosted by the Chair of the DSB.

The Appellate Body Secretariat will prepare and circulate to the DSB at least 60 days in advance of such a meeting a document which reviews:

(a) for any Appellate Body member whose term is or has expired in the last 12 months, assignments to appeals within 90 days of the end of the term and any appeals on which the AB member continued to work after his term expired and whether such continuation was authorized by the parties to the appeal;

(b) the time from notification of intent to file an appeal to the AB decision in each case filed in the last twelve months (and for the first such report and any subsequent reports where appeals are not current with the 90 day requirement) to an AB report (or revised report where paragraphs are requested to be deleted as addressing issues not raised by any party) and copies of any write-ups filed where reports were not filed within 90 days;

(c) a list of AB reports where paragraphs were requested striken and time from request to rerelease of AB report;

(d) a list of requests for review in appeals pursuant to Article 11 of the DSU of panel decisions as not being an objective assessment, how each request was resolved, and for such claims that were not properly filed whether costs were paid by the party raising the issue;

(e) the number of AB reports where parties requested review based on statements made at prior DSB meetings that rights or obligations were being added to or diminished and/or that Article 17.6(ii) of the antidumping agreement was not applied or was applied inappropriately, timing of resolution by the Appellate Body and the number of issues where a different decision was rendered.

Where the Appellate Body has been unable to comply with the requirements of the DSU as clarified by this General Council Decision, it is expected that the Appellate Body Chairman will present at the informal meeting the action plan being pursued by the Appellate Body to achieve full compliance with the terms of the DSU and this Decision. 

To safeguard the independence and impartiality of the Appellate Body, clear ground rules will be provided to ensure that at no point should there be any discussion of ongoing disputes or any member of the Appellate Body other than as it relates to compliance with this General Council Decision. 

WTO Director-General Selection Process — Next Steps

With the current WTO Director-General, Robert Azevedo, stepping down at the end of August, the WTO is a little more than one month into the selection process for a new Director-General. The process is envisioned normally to take nine months of which six months deal with nominations, candidate outreach to WTO Members, and consultations by the WTO’s Chair of the General Council (with the assistance of the Chairs of the Dispute Settlement Body and the Trade Policy Review Body) with WTO Members to find a candidate for whom consensus is possible and a General Council meeting to confirm the selection of a new Director-General. Because of the approaching departure of the current Director-General, the WTO is examining whether the process of selecting a new Director-General (“DG”) can be accelerated. To the extent the process is not concluded before DG Azevedo departs, the WTO will select an acting Director-General from among the four Deputy Directors-General.

Phase 1, Nominations

Phase 1 of the WTO Director-General selection process came to an end on July 8, one month after the process started on June 8 as the window for WTO Members to nominate candidates from their country/territory came to an end at the close of business on July 8th. Eight WTO Members provided nominations to the WTO. The Member and candidate in the order of nomination at the WTO are reviewed below along with the date that the WTO posted a press release on the nomination (with official bio submitted).

The Chair of the General Council released a consolidated list of candidates whose nominations had been received by the WTO on July 9, embedded below. WT/GC/INF/30.

WTGCINF30

Phase 2, Candidates Making Themselves Known to the WTO Members

After the close of the nomination window, normal procedures provide three months for candidates to “make themselves known to Members”. This phase 2 of the selection process starts with a WTO General Council meeting at which each candidate is given time to make an opening statement and for Members to ask questions and receive answers. The General Council meeting is followed and preceded by candidates and their nominating governments doing outreach to WTO Members in Geneva and in capitals around the world.

A. General Council meeting

In the 2012-2013 selection process, the General Council meeting took three days and occurred 29-31 days after the close of the nomination phase. Each candidate had 15 minutes for an opening statement followed by 75 minutes of questions and answers with the last five minutes of the 75 minutes reserved to the candidate to make a summing up if desired. Members wishing to ask a question notified the WTO in advance for each candidate for which they wished to be considered to ask a question and their names were included in a box from which names were drawn. Questions were limited to one minute maximum, with no follow-up questions allowed. Each candidate was offered the opportunity to meet with the media immediately after the meeting with the General Council.

In the current selection process, the WTO is proceeding in the same manner with the same time allocations and same opportunity to meet press, though the timing of the General Council meeting has been moved up as part of a process to expedite the overall selection process. The General Council will meet 7-9 days after the close of the nominating period, the meetings being over three days, July 15-17.

On Friday, the specific schedule was announced. Candidates are heard in the order in which their nominations were received by the WTO. Below is the schedule of meetings for candidates with the General Council (each meeting is 90 minutes) followed by a press conference, assumed to occur within 15 minutes of the close of the meeting with the General Council. The press conferences will be webcast live on the WTO website and will be archieved, as they were in 2013.

CandidateDate at GCTimePress Conference
Dr. Jesus Seade Kuri (Mexico)July 1511:15 13:00 (est.)
Dr. Ngozi Okonjo-Iweala (Nigeria)July 1515:0016.45 (est.)
Mr. Abdel-Hamid Mumdouh (Egypt)July 1516:3018:15 (est.)
Amb. Tudor Ulianovschi (Rep. of Moldova)July 1611:0012:45 (est.)
H.E. Yoo Myung-ee (Rep. of Korea) July 1615:0016:45 (est.)
Amb. Amina C. Mohamed (Rep. of Kenya)July 1616:3018:15 (est.)
Mr. Mohammad Maziad Al-Tuwaijri (Kingdom of Saudi Arabia)July 1710:0011:45 (est.)
Dr. Liam Fox (United Kingdom)July 1711:3013:15 (est.)

B. Length of period of outreach by candidates

The Chair of the WTO’s General Council on the 10th of July announced that Members had agreed to truncate the phase 2 outreach by candidates from three months to two months, ending September 7. See General Council Chair Walker announces timelines for next stages of DG selection process, https://www.wto.org/english/news_e/news20_e/dgsel_10jul20_e.htm.

Phase 3, Consultations with WTO Members on Candidate Best Placed to Attract Consensus

The final phase of the selection process is one in which the WTO’s Chair of the General Council along with the Chairs of the Dispute Settlement Body and the Trade Policy Review Body consult with all WTO Members “to assess preferences and seek to determine which candidate is best placed to attract consensus support.” Id. This phase is to be completed within two months with a General Council meeting to consider and (hopefully) adopt the recommendation of the candidate put forward by the General Council Chair (by November 7 in the current selection process).

In 2013, when there were nine candidates, the consultation process involved three rounds of consultations, with those candidates with the least likelihood of generating consensus being asked to withdraw after each round so a recommendation could be made.

With eight candidates in the current selection process, multiple rounds of consultations will almost certainly be needed. It is unlikely that the process will be completed significantly in advance of the two month deadline.

The procedures adopted in 2002 provide for the option, if needed, to go to voting, though that is a last resort and has not been used to date.

Hopefully, resolution of the selection of the next Director-General will happen by early November. While the procedures for selection envision a three month period after selection before the new Director-General assumes his/her position at the WTO, the three months is premised on there being a Director-General whose term ends in three months. In the current situation where the Director-General departs at the end of August, the new Director-General will presumably take office immediately and General Council adoption of his/her nomination.

Need for an Acting Director-General for the Period September 1 – early November

According to the Procedures for the Appointment of Directors-General adopted by the General Council on 10 December 2002 (WT/L/509, para. 23),

“In the event of a vacancy in the post of Director-General, the General Council shall designate one of the existing Deputy Directors-General to serve as Acting Director-General until the appointment of a new Director-General.”

As this post is being written, there are just 51 days until there is a vacancy in the post of Director-General. Since the timing for completion of the selection process will run several months past the departure of Director-General Azevedo, the General Council has in front of it the additional need to designate one of the existing Deputy Directors-General to serve as the Acting Director-General.

The four existing Deputy Directors-General are Yonov Frederick Agah (Nigeria), Karl Brauner (Germany), Alan Wm. Wolff (United States) and Yi Xiaozhun. Information on the four Deputy Directors-General is contained in various WTO website listings. See The Deputy Directors-General, https://www.wto.org/english/thewto_e/dg_e/ddg_ra_e.htm; Understanding the WTO The Organization, the Secretariat, https://www.wto.org/english/thewto_e/whatis_e/tif_e/org4_e.htm#agah. Embedded below is the page on the Deputy Directors-General.

WTO-_-Deputy-Directors-General

While the 2002 procedures for designating an acting Director-General have not been used before now, it is understood that the Chair of the General Council is consulting with Members now on the issue and will likly include the topic in the agenda for the General Council meeting scheduled for July 22-23. Selection of an acting Director-General is presumably done by consensus as well.

While the role of an acting Director-General is understood to be largely administrative (being available to pay bills, manage Secretariat issues, keep the organization functioning while awaiting the completion of the selection process) and even though Deputy Directors-General act independent of their national origin, it is unclear how political considerations will be at play in the designation of an acting Director-General. For example, with three candidates from African countries for the post of Director-General (including one from Nigeria) would the designation of Yonov Frederic Agah (a Nigerian) as acting Director-General be viewed as harmful or helpful to the chances of the one or more of the African candidates since an African would be serving in the acting position? Similarly, with the differences in views of the WTO’s path forward between the U.S., China and Europe, will one ore more of the three other Deputy Directors-General be viewed as unacceptable to one or more of the majors? If there are political complications affecting the designation of an acting Director-General, what spillover effects will such tensions on the acting designation have in achieving a smooth resolution on the selection process of a new Director-General? We will likely find out whether the designation process is smooth or complicated in the next several weeks.

Conclusion

The selection process for the next WTO Director-General is in a very active stage. The Chair of the General Council has worked with the WTO Members to expedite the process to the extent acceptable to Members. Such expedition will result in at least one month cut off of the six month period from the start of nominations to the selection of a new Director-General, with resolution due by November 7 at the latest.

All of the eight candidates will be in Geneva next week for their meetings with the General Council during July 15-17. There is a shortened period for candidates to do outreach to WTO members so the rest of July, all of August and the first week of September will be hectic for the candidates and their governments with some in person meetings and many virtual meetings during this time.

When Phase 3 kicks in in early September, the General Council’s Chair along with the Chairs of the Dispute Settlement Body and the Trade Policy Review Body will be involved in the time-consuming task of consultations with Members as they work to find a consensus candidate for the Director-General post. In 2013, those efforts took three rounds of consultations to go from nine candidates to one who was recommended to the General Council and accepted by consensus. It is assumed this year, the challenges will be comparable and will likely take three rounds (8 candidates to 4 to 2 to recommendation may be the path consultations take).

Because the current Director-General, Roberto Azevedo, will be stepping down on August 31, the WTO, for the first time since the General Council adopted procedures for selecting new Directors-General at the end of 2002, will need to designate an acting Director-General from the four existing Deputy Directors-General. While the designation process may prove to be uneventful, in a time of significant dysfunction within the WTO because of dramatically different views of the operation of the WTO and reform needs by many Members, there is at least the chance for the designation process to become complicated and to make more difficult the ability to reach consensus on a new Director-General.

Considering the severe challenges facing the WTO and the complications flowing from the COVID-19 pandemic, selecting a strong Director-General in a process that flows without major incident is an important hoped-for outcome in the remainder of 2020.

U.S.-China Phase 1 Trade Agreement — Limited Progress on Increased U.S. Exports to China (through May)

While both China and the U.S. have taken steps to implement parts of the Phase 1 Agreement that took effect on February 14, 2020, the track record through May 2020 doesn’t show significant growth in U.S. exports to China overall (in fact the opposite) or in the 18 goods categories identified in Annex 6.1. Services exports are believed to be down significantly because of the large share of total U.S. services exports to China that have been in travel and tourism and the sharp contraction in 2020 due to efforts to deal with the COVID-19 pandemic.

Looking at total U.S. domestic exports to China for the period March-May 2020, U.S. exports were $22.9 billion ($7.638 billion/month) compared to $27.1 billion in 2017 ($.9.034 billion/month) and were $24.2 billion in 2019 ($8.071 billion/month). Total 2017 U.S. domestic exports of goods to China were $119.9 billion. The Phase 1 Agreement calls for increases on a subset of goods of $63.9 billion in the first year. Even if all other exports (other than the 18 subcategories specified in the annex) were simply equal to 2017, this would be an increase in the first year of 53.9%. By contrast, in the first three full months after the agreement, U.S. domestic exports are down 15.5%. However, there have been increases from the January-February 2020 period as shown below:

January 2020 $6,488,386,365

February 2020 $6,028,423,474

March 2020 $6,960,879,230

April 2020 $7,381,615,579

May 2020 $8,571,128,814

Thus, U.S. exports in May were close to the monthly average from 2017 for March – May and were 94% of May 2017 in May 2020.

Chinese data on total imports from all countries (in U.S. dollars) for January-May show a decline of 8.2% from the first five months of 2019. General Administrator of Customs of the People’s Republic of China, China’s Total Export & Import Values, May 2020 (in USD). Total U.S. domestic exports to China are down slightly less for the first five months vs. 2019, -6.8%.

The 18 product categories included in Annex 6.1 of the Phase 1 Agreement show the following for March-May 2017, March-May 2020 and rate of growth for the first year of the Agreement versus full year 2017 (figures in $ million):

Product categoryMarch-May 2017March-May 2020% change 2017-2020 March-MayGrowth for 1st year of Agreement
manufactured goods
1. industrial machinery $2,807.5 $3,147.2 +12.1%
2. electrical equipment and machinery $1,056.6 $1,259.3 +19.2%
3. pharmaceutical products $734.1 $729.3 -0.7%
4. aircraft (orders and deliveries)* NA NA NA
5. vehicles $2,679.4 $788.7 -70.6%
6. optical and medical instruments $787.8 $868.0 +10.2%
7. iron and steel $329.5 $128.4 -61.1%
8. other manufactured goods $2,614.7 $3,509.8 +34.2%
Total for mfg goods$11,009.6$10,430.7 -5.3% +77.5%**
Agriculture
9. oilseeds $898.2 $292.0 -69.5%
10. meat $163.2 $918.6+463.2%
11. cereals $384.6 $421.0 +9.5%
12. cotton $278.7 $311.5 +11.8%
13. other agricultural commodities $1,239.2 $996.0 -19.6%
14. seafood $291,0 $229.9 -21.0%
Total for agriculture $3,254.9 $3,169.0 -2.6% +59.9%
Energy
15. liquefied natural gas $42.2 $259.8+515.6%
16. crude oil $944.9 $1,148.2 +26.9%
17. refined products $520.9 $274.7 -47.3%
18. coal $134.3 $25.5 -81.0%
Total for energy $1,642.3 $1,708.2 +4.0% +144.3%
Total for 1-18$15,906.8$15,307.9 -3.8% +90.1%**
  • HS 8802 for aircraft shows no U.S. domestic exports to China for any month in the 2017-May 2020 period based on U.S. Census data as compiled by the U.S. International Trade Commission’s data web. U.S. export data don’t show orders just shipments.
  • The Phase 1 increase for manufactured goods and for all goods is overstated to the extent that the dollar value of increased purchases include aircraft, since U.S. domestic export data are not showing any shipments to China.

The U.S. Trade Representative, Ambassador Robert Lighthizer, in testimony to the House Ways and Means Committee and the Senate Finance Committee in June when asked about the U.S.-China Phase 1 Agreement and whether he expected China to fulfill its purchase commitments, focused on agricultural exports and indicated that for major export categories, like soybeans, there were large orders in the pipeline and shipments were heavily weighted to the end of the year. Thus, the early months of actual exports for at least some agricultural categories were not viewed as representative of the level of purchases from the U.S. by China that are ongoing. Soybeans were the most important U.S. export of agricultural products in 2017 with exports of more than $12 billion. Thus, how well U.S. agricultural interests do in the remainder of 2020 depend heavily on how large the purchases of soybeans that get shipped actually will be.

China has recovered more quickly from COVID-19 economic challenges than has the U.S. However, as reviewed above, their total imports from all countries (and from the United States) are down in the first five months of 2020. Thus, whether China will or can expand imports from the U.S. to the extent envisioned by the U.S.-China Phase 1 Agreement in the first year of its implementation is yet to be seen.

There is, of course, wide variability in U.S. export performance by product category and within product category by individual products. Some categories of U.S. exports have seen large rates of growth. Meat is one such category. Liquefied natural gas is another. With the huge consumption of pork in China and in light of the challenges China has faced with the health of its own pigs, there has been a very large increase in pork exports to China during 2020 for the U.S. On beef, where China had largely stopped importing most types of U.S. beef after an animal was diagnosed withbovine spongiform encephalopathy (BSE) in Washington many years ago, there are some exports from the U.S. starting to show up in the March-May time period.

But there are also large declines on categories of importance to the U.S., such as motor vehicles, though much of the decline is presumably due to the sharp contraction in purchases in China during the early months of 2020 and to the additional duties imposed by China.

For categories where there are increases in U.S. domestic exports over 2017, it may also be the case that there has been an acceleration of U.S. domestic exports to China since the Agreement went into effect. For example, the category of industrial machinery which has March-May US exports up 12.1% saw a much larger increase from the levels of exports in January-February 2020. Specifically, the US exports under the category had averaged $745.6 million each month in the first two months and then increased 40.7% in the next three months, averaging $1.049 billion each month. Thus, large increases are certainly possible in many categories and many individual products based on Chinese demand and past experience.

Some sectors where China purchases via state-owned or state-invested entities can see both sharp declines in purchases and, when China chooses to, sharp increases in purchases. Thus, on liquefied natural gas, US domestic exports to China were $0 for both January and February 2020 but then ramped up to $58.7 million in March and roughly $100 million in each of April and May. Similarly, crude oil exports from the U.S. were $0 in both January and February but jumped to just under $1 billion in May.

Considering importance of the Agreement, Administration could improve transparency through periodic update reports

It would be useful if the U.S. government provided monthly data reviewing progress under the Phase 1 Agreement which would permit an understanding of future purchases and of orders of aircraft so complete data are available. The Peterson Institute for International Economics has a U.S.-China Phase One Tracker which looks at data on a more aggregate data level and looks at the full year 2020, even though the Agreement did not kick in until February 14, 2020. See https://www.piie.com/research/piie-charts/us-china-phase-one-tracker-chinas-purchases-us-goods. Thus, a monthly report that provides the Administration’s understanding of shipments and purchases would fill existing gaps in data and improve the public’s understanding of whether the Agreement is fulfilling the purchase commitments. It would also be helpful if the Administration provided an overview of all provisions contained in the Agreement and if changes have been made to laws, regulations or otherwise, and, if made, whether the market barriers of concern to U.S. companies are in fact now removed.

Conclusion

The U.S.-China Phase 1 Agreement is a potentially important agreement which attempts to address a range of U.S. concerns with the bilateral relationship and obtain somewhat better reciprocity with the world’s largest exporter. The Phase 1 Agreement has left other challenges to a Phase 2 negotiation which has not yet begun. With the complexities in the bilateral relationship flowing from a wide range of trade and non-trade events, it is hard to know whether China will fully implement the bilateral agreement or be willing to move forward on a Phase 2 negotiation. Similarly, it is hard to know if the U.S. will view the agreement as being implemented by China sufficiently to move to the next stage. A more sustainable trade relationship should be in both countries’ interest. But trade is, of course, just one important topic in a series of topics where the U.S. and China have very different views which can complicate forward movement on trade.

For the public, the Administration could improve an understanding of how the Agreement is being implemented by providing periodic updates of how all elements in the agreement are being implemented, how U.S. companies are viewing the changes on the ground in China, and how the Administration sees the U.S. export data that comports with the Annex 6.1 objectives.

Saudi Arabia nominates Mohammad Maziad Al-Tuwaijri as candidate for WTO Director-General

Saudi Arabia has made its nomination of a candidate for the Director-General position at the World Trade Organization. Mohammad Maziad Al-Tuwaijri is the candidate and his bio, embedded below, indicates he is currently the Minister of Economy and Planning, a position he has held since 2016.

Because the Saudi Arabia papers were received on July 8 before those from the United Kingdom for Liam Fox, Mr. Al-Tuwaijri will be the 7th nomination received and Mr. Fox will presumably be the 8th. The meetings of candidates with the General Council next week on July 15-17 occur in the order in which candidate nominations are received at the WTO.

bio_sau_e

The nomination process comes to a close today.

United Kingdom press release on Liam Fox’s nomination as candidate for WTO Director-General

Below is the text of the United Kingdom press release on the UK’s nomination of Liam Fox, https://www.gov.uk/government/news/uk-nominates-liam-fox-as-next-director-general-of-the-wto:

“UK nominates Liam Fox as next Director General of the WTO

“UK nominates former International Trade Secretary, Dr Liam Fox as next Director-General of the World Trade Organization.

“Published 8 July 2020

“From:

“Department for International Trade (https://www.gov.uk/government/organisations/department-for-international-trade) and The Rt Hon Elizabeth Truss MP (https://www.gov.uk/government/people/elizabeth-truss)

“The UK will today nominate former International Trade Secretary Dr Liam Fox as the next Director-General of the World Trade Organization.

“The Government believes he is the ideal candidate for the following reasons:

“He is a passionate advocate of multilateralism, and fully committed to advancing the WTO and rules-based trading system.

“Dr Fox brings decades of experience in global politics, as well as first-hand experience of running a trade ministry.

“He believes that rules based free trade underpins global prosperity and security and that the benefits must be widely shared for all citizens and countries.

“Writing to the WTO today, the Prime Minister will say:

“As the world seeks to recover from the shared challenge of the COVID-19 pandemic, the role of free and fair trade has never been more crucial.

“Dr Fox is a passionate advocate of multilateralism, who brings detailed knowledge of the global trading system from his years as a UK Cabinet Minister and Secretary of State for International Trade. He has firsthand
experience of the political and technical challenges of negotiating trade agreements, and the reforms that are needed to ensure the global trading system truly delivers for all WTO members.

“Liz Truss, International Trade Secretary, said:

“The new WTO Director General needs to be a fierce champion of free and fair trade, an advocate of multilateralism, and be able to get things done and increase the pace of reform. Dr Liam Fox brings all those
things to the table.

“He has experience making tough political decisions as a former UK Trade Secretary, is committed to the fundamental principle of free and fair trade and has excellent relationships with WTO members around the
world. He is the ideal candidate to lead the WTO into a new era and help push forward much-needed modernisation of the organisation.

“The Rt Hon Dr Liam Fox MP said:

“I am honoured to have been nominated by the Prime Minister to be a candidate to lead the World Trade Organization. I believe that if we want to keep the WTO relevant and vibrant our task is clear: Update.
Strengthen and Reform. We must ensure that global trade works for everyone.

“Trade is a way in which we spread prosperity more widely. That prosperity underpins social cohesion, that social cohesion in turns underpins political stability and that political stability is the building block of our
collective security.

“The WTO announced earlier this year that its current Director-General, Roberto Azevedo would step down from his post in August, following 7 years in charge.

“The formal selection process for the new Director-General is run by the three most senior chairs of the WTO, the General Council, Trade Policy Review and the Dispute Settlement body.

“The successful candidate must attract a consensus from all member states and once appointed will serve a four-year term.

“Published 8 July 2020”

Liam Fox of the United Kingdom to be Nominated by UK for post of WTO Director-General

The Financial Times has reported that Liam Fox, a former UK trade secretary and a former defence secretary, will be put forward yet today by the United Kingdom as a candidate for the Director-General post of the World Trade Organization. See Financial Times, July 8, 2020, UK set to nominate Liam Fox for top WTO job, https://www.ft.com/content/5f5d1d87-afc3-419f-b8fb-7dbd038c3163; see also New York Times, July 8, 2020, UK to Nominate Ex-Minister Liam Fox as WTO Boss: Spectator, https://www.nytimes.com/reuters/2020/07/08/world/europe/08reuters-britain-wto-fox.html.

Mr. Fox will be the seventh candidate when his nomination is received and will be the first nomination from a developed country. He will join Jesus Seade (Mexico), Dr. Ngozi Okonjo-Iweala (Nigeria), Abdel-Hamid Mamdouh (Egypt), Tudor Ulianovschi (Moldova), Yoo Myung-hhe (Republic of Korea), and Amb. Amina C. Mohamed (Kenya). The nominating period at the WTO for the Director-General comes to a close at the end of July 8.

Mr. Fox has spent a lot of time with both the United States and China according to press reports which presumably will be part of his message to WTO Members on why he could be an effective Director-General (in helping bridge differences between the two large WTO Members).

Mr. Fox is a Member of Parliament of the United Kingdom, served as Secretary of State for International Trade from 2016-2019 and Secretary of State for Defence from 2010 to 2011. He is a member of the Conservative Party and voted for Brexit. Mr. Fox’s Wikipedia entry provides a listing of prior positions, his education, etc. https://en.wikipedia.org/wiki/Liam_Fox.

His biography as forwarded to the World Trade Organization was not yet posted as of 2:15 p.m. (Geneva time) on July 8.

WTO Director-General nominations — Kenya puts forward Amb. Amina C. Mohamed as a candidate

It is understood that the Republic of Kenya forwarded to the WTO on July 7 its nomination of Amb. Amina C. Mohamed as a candidate for the Director-General position of the World Trade Organization. It is understood that Amb. Mohamed’s nomination will be reflected in a press release tomorrow, July 8.

There had been early speculation that Amb. Mohamed would be nominated. She has served as Kenya’s Foreign Affairs and International Trade Minister for the period 2013-2018 and chaired the 2015 WTO Ministerial Conference in Nairobi. Amb. Mohamed also served as Kenya’s Permanent Representative and Ambassador to the WTO during the period 2000-2006. While serving as Kenya’s Ambassador to the WTO, she served as Chairperson to the General Council (2005), the Dispute Settlement Body (2004) and the Trade Policy Review Body (2004). She also had been a candidate in 2012-2013 for the Director-General position, a position that ultimately went to Roberto Azevedo of Brazil. In a thumbnail evaluation, Amb. Mohamed is a candidate from an African country (Africa has never had a Director-General at the WTO), one with significant trade, WTO and high political office experience. She is reportedly well respected by WTO Members for her efforts over the last two decades.

With the submission by Kenya of Amb. Mohamed’s nomination, there are now six candidates who have been put forward. She is the third candidate from Africa. The other candidates are Jesus Seade Kuri (Mexico), Dr. Ngozi Okonjo-Iweala (Nigeria), Abdel-Hamid Mamdouh (Egypt), Tudor Ulianovschi (Moldova) and Yoo Myung-hee (Republic of Korea).

Below is the current biography of Amb. Mohamed.

The concern amongst some WTO watchers has been that too many candidates from Africa would result in divided loyalties of WTO African Members during the DG selection process which would harm the likelihood of any of the African candidates being selected as the consensus choice for Director-General. Time will tell whether the nomination of three candidates from African countries has the effect of reducing support for any of the three or results in the Director-General not being chosen from one of the three African country nominations.

Who will be the next WTO Director-General? Nominating Period Closes in One Day

With the WTO’s Director-General Roberto Azevedo stepping down at the end of August, the World Trade Organization’s efforts to select a replacement heat up this week as the one month nominating period comes to an end at the close of business on July 8 in Geneva. The roster of candidates is presently five. While one or more additional candidates could be put forward on July 8th, the most likely scenario is that the five candidates put forward to date will be the slate for evaluation.

When the window for nominations closes tomorrow, the Chair of the General Council, Amb. David Walker (NZ), will transmit a consolidated list of nominees to the WTO membership. The CVs of the five candidates became available on the WTO website under news releases as WTO Members nominated individuals. Thus, Mexico’s Jesus Seade was first to be nominated on June 8 and news of the nomination and his bio are available in the press release that day. https://www.wto.org/english/news_e/news20_e/dgsel_mex_08jun20_e.htm.

Nigeria’s Dr. Ngozi Okonjo-Iweala was the second candidate put forward and was reported on June 9. https://www.wto.org/english/news_e/news20_e/dgsel_nga_09jun20_e.htm.

Egypt’s Abdel-Hamid Mamdouh was also nominated on June 9th and was so reported that same day as the third candidate. https://www.wto.org/english/news_e/news20_e/dgsel_egy_09jun20_e.htm.

Moldova submitted the name of Tudor Ulianovschi on June 16th as the fourth candidate for the Director-General slot. https://www.wto.org/english/news_e/news20_e/dgsel_egy_09jun20_e.htm.

And then the Republic of Korea nominated Yoo Myung-hee on June 24 as the fifth candidate. https://www.wto.org/english/news_e/news20_e/dgsel_kor_24jun20_e.htm.

The biographies and cover letters from the individual governments are available to WTO Members in a series not available to the public, WT/GC/INF/23-26.

Next steps

The Chairman of the General Council has set meetings with the candidates for the Director-General position next week, starting on July 15 and continuing on July 16 and 17 as needed. In a communication to delegations on July 1, the Chairman of the General Council outline procedures and time limits for the GC meetings that mirror activities undertaken in the 2013 process. Specifically, each candidate will have 15 minutes to make an opening statement and the WTO Members will have up to 75 minutes to ask questions and receive answers (with the last five minutes to be used by the candidate to provide final comments if he/she so wishes). Members are limited to one question of no more than sixty seconds. Members wishing to ask questions need to notify the WTO and then during the meeting names will be pulled from a box so all delegations have a chance to ask questions. In 2013, generally about 20-25 Members asked questions of any candidate.

In a communication on July 3, the Chair reviewed the timing reviewed above and noted that delegations would be limited to one person each at the meetings for social distancing purposes, though delegations could participate virtually for additional members or for the delegation as a whole if so desired.

If there are just five candidates, then the General Council meetings will likely be limited to July 15 and 16. Nothing will obviously be decided until the nomination window closes. But if there are only five candidates a likely schedule would be to have two candidates interviewed the afternoon of July 15 and three candidates considered on July 16 (one morning, two afternoon).

The timing of the GC meetings with candidates is much quicker than what happened in 2013 when the meetings were 29-31 days after the nomination period closed. This year, the GC meetings will be just 7-9 days after the nomination period closes.

What isn’t known about next steps is how much time candidates will be given to interface with WTO Members not just in Geneva but also in capitals. The procedures adopted back in 2002 for finding a new Director-General envisioned three months after the closing of the nomination process for candidates to engage in outreach to WTO Members. That was to be followed by a two month period for the Chair of the General Council and his/her facilitators to meet with Members to work towards finding a candidate that can achieve consensus support. Stated differently, the procedures adopted in 2002 envisioned the period from the close of nominations to the selection of a new Director-General to be five months or roughly 150 days.

Since the WTO will lose its existing Director-General 54 days after the close of the nominating period, the WTO will either need to shorten both the period for outreach and the period for reaching consensus considerably (by close to 100 days) or will have to also gear up for selecting an Acting Director-General from among the four Deputy Directors-General. It is understood that the Chair of the General Council desires to expedite the remaining process, but it is unclear where the Members will be on a serious reduction in time lines. Factors that are out there will be travel limitations and communication challenges for WTO delegations during the COVID-19 pandemic and the normal August break in activity at the WTO (more specifically, whether Members will agree to work through August on the Director-General issue). Hopefully, there will be clarification on the process agreed to and whether Members need to address selecting an acting Director-General in the next several weeks.

Boxes that different candidates fill

The search for a new Director-General is presumably a search for the most qualified person to take on the task at the given point in time. But there are many qualifications/characteristics that get talked about as potentially relevant or that Members may focus on in deciding which candidate is preferred.

There is in the procedures the characteristic of geographical diversity where candidates are equally qualified. Two candidates are from Africa which has not had a Director-General of the WTO (or of the GATT before it). There has not been a Director-General from North America (though some may view the Mexican candidate from the characteristic of Mexico being a Latin country following the current DG from Brazil). Europe has had many DGs in the WTO and GATT (including Pascal Lamy from France before the current DG); while Moldova has never presented a candidate for DG before, being European could be viewed as a negative by those focused on geographical diversity. There has been one Asian DG, though no one from Korea.

All DGs to date have been men. Two candidates (Nigeria and Korea) are women. The desire to have a woman Director-General at this time could be a consideration for some Members in the DG selection process.

All candidates except the Nigerian candidate have extensive trade backgrounds. While there have been DGs where the DG had no significant trade background, the lack of trade background could be viewed by some Members as a negative for the Nigerian candidate if depth of knowledge of the WTO is considered important at this juncture with the various crises engulfing the WTO.

All candidates except the Egyptian candidate have held high political positions (e.g., ambassador, minister, etc.) in their governments (whether trade or non-trade). For those Members viewing political experience as relevant, this could be a negative for the Egyptian candidate.

Two candidates (Mexico and Nigeria) have extensive experience with other multilateral organizations as well as experience with their home governments. For those who view trade as importantly being interrelated with finances and investment, such experiences could be viewed as a plus for these candidates.

The characteristic of whether a country is a developed or developing country, which has been viewed as relevant by some Members in the past, would seem to be irrelevant if the number of candidates remains at five as all of the candidates are from developing countries based on WTO self-selection (although both Mexico and Korea are OECD members and Moldova is an Eastern European country that has been negotiating with the EU).

Conclusion

Each of the five candidates (and more if additional candidates are put forward tomorrow) will have the chance to present their thoughts on leading the WTO next week to the General Council and to answer questions posed by Members. The WTO Members have important decisions to make on whether to truncate the time for outreach by candidates and the time for consultations with the Chair of the General Council and his facilitators on the selection of a new Director-General. Depending on the timeline agreed to, there may also be the need for WTO Members to select an acting Director-General from the four Deputy Directors-General. Members will likely need to include some engagement during August even if wishing a longer period for selecting the new DG to engage in the selection of an acting DG. Look for a busy summer and possibly rest of 2020 before a new Director-General is in place.