Nigeria

WTO Director-General selection process doesn’t generate immediate consensus

The troika of WTO Chairs (of the General Council, Dispute Settlement Body and Trade Policy Review Body) met with the WTO heads of delegation on October 28 to review the results of the third round of consultations with Members as part of the long process of selecting the next Director-General. The meeting which was scheduled for 3 p.m. Geneva time, started after 3:15 p.m. and resulted in at least temporary challenges.

The two remaining candidates for consideration during the third round were Korea’s Minister for Trade, H.E. Yoo Myung-hee and Nigeria’s Dr. Ngozi Okonjo-Iweala. Both are considered highly qualified though with very different backgrounds — trade for Minister Yoo; development economics and finance for Dr. Okonjo-Iweala. Both candidates received strong support from their host governments in terms of politic outreach.

Amb. David Walker, the Chair of the General Council, announced that Dr. Okonjo-Iweala has emerged from the third round as the candidate most likely to attract consensus among the Members, and it is understood that she received broad support. Press articles have indicated support from WTO Members of the African Union, support from the countries part of the European Union and other support in the Americas and Asia, including China and Japan. Thus, Dr. Okonjo-Iweala may have been the preferred candidate for more than 100 of the 164 WTO Members.

Minister Yoo reportedly had the support of the United States, many countries in Asia and other support from the Americas and elsewhere.

The actual support of each candidate is not released by the WTO as consultations are confidential, though individual governments are, of course, free to identify which candidate they preferred.

Importantly, the Republic of Korea did not withdraw Minister Yoo’s candidacy and the U.S. has indicated it continues to support Minister Yoo, which means that at least for the moment there is not a consensus for Dr. Okonjo-Iweala.

Presumably the troika will continue to consult with Korea and the United States to see if they can get those Members to support the potential consensus behind Dr. Okonjo-Iweala. The procedures adopted by the General Council in late 2002 indicate that the troika should be submitting the name of Dr. Okonjo-Iweala to the General Council recommending her appointment by the General Council:

“At the end of the final stage of the consultative process, the Chair, with the support of the facilitators, shall submit the name of the candidate most likely to attract consensus and recommend his or her appointment by the General Council.”

Procedures for the Appointment of Directors-General, Adopted by the General Council on 10 December 2002, WT/L/509 (20 January 2003), para. 19.

Because of the present positions of Korea and the United States, it is likely that Amb. Walker will delay calling a General Council meeting in the hope of obtaining clearance of the current blockage. At some point, Amb. Walker will presumably call the General Council meeting so Members have to be on the record as opposing consensus. As a last resort, Amb. Walker and his facilitators can have the General Council vote to select the next Director-General. Id, para. 20.

Recourse to voting as a last resort

“20. If, after having carried out all the procedures set out above, it has not been possible for the General Council to take a decision by consensus by the deadline provided for the appointment, Members should consider the possibility of recourse to a vote as a last resort by a procedure to be
determined at that time. Recourse to a vote for the appointment of a Director-General shall be understood to be an exceptional departure from the customary practice of decision-making by consensus, and shall not establish any precedent for such recourse in respect of any future decisions in the WTO.”

The deadline for the appointment under existing procedures, is November 7, 2020. Id, para. 15. It is unclear what the objection is for the United States to Dr. Okonjo-Iweala, although press accounts have indicated that the U.S. has concerns about Dr. Okonjo-Iweala based on her work with U.S. officials with significantly different views on trade policy than the current U.S. Administration. It is also not clear why Korea’s candidate would not follow the agreed procedures for appointment of Directors-General and withdraw in light of the preferences expressed to the troika during the third round.

Conclusion

The WTO has been fortunate to have very strong candidates put forward to be considered as the next Director-General. Minister Yoo is highly qualified and had a strong presentation of views and intended approach for leading the WTO forward.

Dr. Okonjo-Iweala with her service as Minister of Finance twice for Nigeria and twenty-five years experience at the World Bank, background in development economics, and service as Chair of GAVI brings a wealth of experience at high levels of government and multilateral organizations. She is also a candidate from Africa, a continent that has not to date had a Director-General of the WTO. As stated in the General Council’s procedures for appointing Directors-General,

Representativeness of candidates

“13. In order to ensure that the best possible candidate is selected to head the WTO at any given time, candidatures representing the diversity of Members across all regions shall be invited in the nominations process. Where Members are faced in the final selection with equally meritorious
candidates, they shall take into consideration as one of the factors the desirability of reflecting the diversity of the WTO’s membership in successive appointments to the post of Director-General.”

There has been a prior WTO Director-General from Asia, which may have been a consideration for some WTO Members in providing their preference for Dr. Okonjo-Iweala instead of Minister Yoo in the third round.

It is obviously unfortunate that a process that has worked smoothly so far in 2020, has developed the current set of challenges from Korea and the U.S. Hopefully, the challenges will be addressed and a consensus reached in the next nine days. The correct outcome at this point is for Dr. Okonjo-Iweala to be the next Director-General, the first female Director-General and the first African Director-General.

If the unexpected holdup in concluding the selection process can be resolved, Dr. Ngozi Okonjo-Iweala will hopefully be up to the daunting task that awaits the next Director-General. Success will depend on the willingness of Members to find common ground and address the need for reform and updating the rule book — clearly a herculean challenge considering the very different views of major Members and different groups of Members. But the WTO needs a leader who can help Members find the path forward, be an honest broker, help Members restore confidence in the organization and ensure trade issues can be effectively addressed within the organization, help ensure engagement by all, and be able to engage with governments at a political level and with other multilateral organizations to achieve meaningful participation by all. The global trading system needs a strong and relevant WTO. Time will tell if Dr. Okonjo-Iweala will be that leader. Let’s hope that the next Director-General will succeed.

WTO Director-General selection — press reports EU, Japan join those supporting Dr. Ngozi Okonjo-Iweala of Nigeria

With the third round of consultations concluding on Tuesday, October 27, press reports indicate that Japan will be supporting the Nigerian canadidate and the EU, after extended internal debate, has apparently agreed to support Dr. Ngozi Okonjo-Iweala of Nigeria as well. See The Japan Times, October 26, 2020, Japan decides against backing South Korean for WTO chief, https://www.japantimes.co.jp/news/2020/10/26/business/japan-south-korea-nominee-wto/; Politico, October 26, 2020, EU backs Nigerian candidate for WTO top job, https://www.politico.eu/article/eu-backs-nigerian-candidate-for-wto-top-job/.

Dr. Okonjo-Iweala has received the backing of the WTO Members of the African Union and reportedly several dozen other Members from the Americas and Asia. See, e.g., RTL Today, October 19, 2020, ‘I feel the wind behind my back’: Nigerian WTO candidate, https://today.rtl.lu/news/business-and-tech/a/1596831.html.

Some press article have suggested that China is also likely to support the Nigerian candidate, although there has not been formal confirmation to date and some articles have suggested China may have problems with each of the two remaining candidates. See, e.g., South China Morning Post, October 8, 2020, China faces ‘difficult trade-off’ as WTO leadership race heads into final round, https://www.scmp.com/economy/china-economy/article/3104712/china-faces-difficult-trade-wto-leadership-race-heads-final.

The United States has been reported in the press as supporting Minister Yoo Myung-hee from the Republic of Korea. Bloomberg (article in Swissinfo.com), October 21, 2020, Global Trade-Chief Race Slows as U.S., EU Split on Finalists, https://www.swissinfo.ch/eng/bloomberg/global-trade-chief-race-slows-as-u-s—eu-split-on-finalists/46110158.

It is also known that the President of Korea and other senior officials within the Korean government have been actively reaching out to WTO Members to encourage support of Minister Yoo in the third round. See, e.g., Yonhap News Agency, October 20, 2020, Moon requests support from 2 nations for S. Korean candidate’s WTO chief bid, https://en.yna.co.kr/view/AEN20201020009151320; The Korea Times, October 20, 2020, Government goes all out for Yoo’s WTO election, https://en.yna.co.kr/view/AEN20201020009151320.

What do the news articles portend?

Assuming the support for Dr. Ngozi Okonjo-Iweala is as broad and deep as is being reported, the Nigerian should be the candidate who is announced by the troika in the WTO (Chairs of the General Council, Dispute Settlement
Body and Trade Policy Review Body) as the candidate most likely to achieve consensus from the membership at an informal heads of delegation. If there is no opposition from a Member or Members suggesting blockage of consensus, the informal heads of delegation meeting could be set for as early as Thursday, October 29, with a General Council meeting to confirm the selection held that afternoon or on the 30th of October. If one or more Members indicates a likelihood of blockage of consensus, it is likely that the informal heads of delegation meeting would not occur on the 29th to give the troika the opportunity to work with those threatening blockage to attempt to achieve consensus. See October 9, 2020:  October 8th video discussion on WTO Director-General selection process following the announcement of two finalists, https://currentthoughtsontrade.com/2020/10/09/october-8th-video-discussion-on-wto-director-general-selection-process-following-the-announcement-of-two-finalists/ (video from WITA; see comments of Amb. Rufus Yerxa, President of the National Foreign Trade Council).

Under the procedures adopted in late 2002 for the selection of a Director-General if there is a failure to achieve consensus, Members could select the Director-General based on a vote. To date, voting has not been required. Hopefully, the same will be true in this selection as well. If so, it appears that Dr. Ngozi Okonjo-Iweala will be the next Director-General of the WTO.

Third Round of Consultations in Selecting new WTO Director-General – eight days to go, political outreach continues at high level

The last WTO Director-General, Roberto Azevedo, departed at the end of August. The existing four Deputy Directors-General are overseeing WTO operations awaiting the outcome of the selection process for a new Director-General. While eight candidates were put forward by early July and had two months to “become known” to WTO Members, the process of winnowing down the candidates started in September and has gone through two rounds where the candidate pool went from eight to five to two. Which brings the WTO to the third and final round of consultations by the troika of Chairs of the General Council, Dispute Settlement Body and Trade Policy Review Body with the WTO Membership to find the one candidate with the broadest support both geographically but also by type of Member (developed, developing, least developed).

The third round started on October 19 and will continue through October 27. While the process is confidential, with each Member meeting individually with the troika and providing the Member’s preference, Members can, of course, release information on the candidate of their preference if they so choose.

The two candidates who remain in contention are Minister Yoo Myung-hee of the Republic of Korea and Dr. Ngozi Okonjo-Iweala of Nigeria. While all eight of the candidates who were put forward in June and July were well qualified, Minister Yoo and Dr. Okonjo-Iweala have received high marks from WTO Members from the very beginning. While Minister Yoo has the advantage in terms of trade background, Dr. Okonjo-Iweala has an impressive background as a former finance minister, 25 years at the World Bank and her current role as Chair of GAVI.

The procedures for selecting a new Director-General which were agreed to in late 2002 by the General Council put a primary focus on qualifications as one would assume. However, where there are equally well qualified candidates then geographical diversity is specifically identified as a a relevant criteria. There has never been a Director-General from Africa and there has only been one Director-General from Asia (although there was also a Director-General from the Pacific area outside of Asia). With the UN Sustainable Development Goals including one on gender equality (SDG #5), many Members have also been interesting in seeing a Director-General picked from the women candidates. Since both of the two remaining candidates are women, geographical diversity will likely have an outsized role in the third round .

Both remaining candidates are receiving strong support from their home governments in terms of outreach to foreign leaders seeking support for their candidate. The candidates, of course, are also extremely busy with ongoing outreach.

Thus, Minister Yoo traveled back to Europe last week and had a meeting with the EC Trade Commissioner Dombrovskis on October 13, among other meetings. See https://ec.europa.eu/commission/presscorner/detail/en/cldr_20_1935; Yonhap News Agency, Seoul’s top trade official to visit Europe to drum up support her WTO chief race, October 12, 2020, https://en.yna.co.kr/view/AEN20201012003300320?section=business/industry;

Similarly, the Korean President Moon Jae-in, Prime Minister Chung Sye-kyun and the ruling Democratic Party (DP) Chairman Lee Nak-yon are engaged in outreach for Minister Yoo’s candidacy. Korea JoongAng Daily, October 12, 2020, Moon, allies intensify campaign for Yoo Myung-hee to head WTO, https://koreajoongangdaily.joins.com/2020/10/12/national/politics/Yoo-Myunghee-WTO-Moon-Jaein/20201012172600409.html. Contacts have been made with heads of state or senior officials in Malaysia, Germany, Brazil, Colombia, Sri Lanka, Guatemala, Japan and the U.S. among others. See The Korea Times, October 20, 2020, Government goes all out for Yoo’s WTO election Government goes all out for Yoo’s WTO election, https://www.koreatimes.co.kr/www/nation/2020/10/120_297887.html. President Moon has also raised the issue of support with new ambassadors to Korea — including the German, Vietnamese, Austrian, Chilean, Pakistani and Omani ambassadors. Yonhap News Agency, October 16, 2020, Moon requests support for S. Korea’s WTO chief bid in meeting with foreign envoys, https://en.yna.co.kr/view/AEN20201016008600315.

Minister Yoo is reported to be having problems in solidifying support from some major Asian Members — including China and Japan — for reasons at least partially separate from her qualifications and is facing what appears to be block support by African WTO Members for Dr. Okonjo-Iweala. Thus, broad outreach in Asia, the Americas and in Europe will be important for Minister Yoo if she is to be the last candidate standing on October 28-29.

Dr. Okonjo-Iweala is similarly receiving strong support from her government where President Muhammadu Buhari indicated full support by the Nigerian government. See The Tide News Online, Ocotber 14, 2020, Buhari Backs Okonjo-Iweala For WTO Job, http://www.thetidenewsonline.com/2020/10/14/buhari-backs-okonjo-iweala-for-wto-job/. Press accounts report that Dr. Okonjo-Iweala has the full backing of the African Union as well as support in both the Americas and Asia. See RTL Today, October 19, 2020, ‘I feel the wind behind my back’: Nigerian WTO candidate, https://today.rtl.lu/news/business-and-tech/a/1596831.html. Many have felt that Dr. Okonjo-Iweala is the candidate to beat, and she is certainly helped by the support of the African Union WTO Members but will also need broad support in the other regions of the world to be the one remaining candidate.

With just eight days to go to the conclusion of the third round of consultations, the remaining two candidates and their governments are turning over every stone in their effort to generate the support needed to come out of the third round as the sole candidate left.

While the candidate announced on October 29 as the remaining candidate still has to be put forward to the General Council for consensus adoption as the new Director-General, it seems unlikely at the moment that either candidate, should she emerge as the preference of the WTO membership, would be blocked by a Member from becoming the next Director-General. While such blockage is always a possibility, the 2002 agreed procedures have prevented such blockage and hopefully will result in a clean conclusion this year as well.

It is certain to be an interesting end of October.

WTO remaining candidates for the Director-General position — Questions and Answers from the July 15 and 16 meetings with the General Council

The third round of consultations with WTO Members on which of the two remaining candidates is preferred and hence may be the most likely to obtain consensus to become the next Director-General gets started next Monday, October 19 and ends on October 27.

Both Minister Yoo of Korea and Dr. Okonjo-Iweala of Nigeria are in the process of seeking support from WTO Members and have the full support of their governments which are making calls and sending letters to government officials in many of the WTO Members.

Minister Yoo is back in Europe seeking support in this third round (she and Dr. Okonjo-Iweala both received preferences from the EU in the second round). Press reports indicate that China is believed to be supporting Dr. Okonjo-Iweala, and Japan is understood to have concerns with both candidates. Thus, Minister Yoo is working to bolster support in other regions of the world to supplement what is assumed to be only partial support within Asia.

Dr. Okonjo-Iweala has received the support from Kenya after Kenya’s candidate did not advance to the third round. It is not clear whether she will receive support from all African Members of the WTO, although Kenya’s action is obviously an imortant positive for her.

So the next eleven days will be an active time as each of the remaining candidates seeks support in the final round of consultations from Members in different geographical areas as well as in different categories (developed, developing and least developed countries).

One source of information about the candidates that hasn’t been available to the public but is now available is the questions and answers provided to the General Council meetings with each candidate on July 15 (Dr. Okonjo-Iweala) and July16 (Minister Yoo). While there were three days of meetings with the General Council to accommodate the eight candidates, the two remaining candidates appeared during the first two days. The Minutes of the Meeting of the General Council, 15-17 July 2020 are contained in WT/GC/M/185 (31 August 2020). The procedures for each candidate were reviewed by the General Council Chairman David Walker (New Zealand).

“Each candidate would be invited to make a brief presentation lasting no more than fifteen minutes. That would be followed by a question-and-answer period of no more than one hour and fifteen minutes. During the last five minutes of the question-and-answer period, each candidate would have the opportunity to make a concluding statement if she or he so wished.” (page 1, para. 1.5).

Dr. Ngozi Okonjo-Iweala’s statement, questions asked, answers given and closing statement are in Annex 2 on pages 16-26. Minister Yoo Myung-hee’s statement, questions asked, answers given and closing statement are in Annex 5 on pages 51-60. The statements have previously been reviewed in my posts and are available on the WTO webpage.

Questions are picked randomly from Members who indicated an interest in asking questions. Dr. Okonjo-Iweala received questions during the meeting from nineteen Members with another thirty-nine Members having submitted their names to ask questions of her. Minister Yoo received questions during her meeting from seventeen Members with another forty-four Members having submitted their names to ask questions of her.

Dr. Okonjo-Iweala’s questions came from Afghanistan, Ireland, Kazakhstan, Ukraine, Norway, New Zealand, South Africa, European Union, Paraguay, Estonia, Australia, Latvia, Guatemala, Japan, Mongolia, Brazil, and Malaysia. The questions dealt with a range of issues including the following sample:

  • The negative impact of the COVID-19 pandemic on developing countries, LDCs and small vulnerable economies (SVEs).
  • How to ensure the benefits of open trade are distributed equitably?
  • What steps will you undertake to ensure a multilateral outcome at the next Ministerial?
  • Role of the Director-General (DG) in addressing lack of trust among Members.
  • Role of the DG in facilitating economic recovery and resilience.
  • What is necessary to restore functioning of a binding, two-step dispute settlement system in the WTO?
  • Do transparency and notification obligations need to be strengthened?
  • Focus in the first 100 days.
  • Your initial approach to the reform of the WTO.
  • What kind of approach and efforts would you like to make to advance the subject of e-commerce?
  • Role of plurilaterals in the WTO.
  • How to deal with the different views on special and differential treatment?
  • What are your plans relating to empowering women in the future WTO agenda?

Minister Yoo’s questions came from Guatemala, Belgium, United States, India, Germany, El Salvador, Chinese Taipei, Sri Lanka, Spain, Qatar, Lithuania, Gabon, Botswana, China, Barbados, Malaysia, and Zimbabwe. The questions dealt with a range of issues including the following sample:

  • Do you have any proposal on how to overcome the current crisis?
  • How do you plan to include measures to respect sustainable trade in an agenda focused on free trade and trade liberalization?
  • In looking at interim arbitration agreement of EU and other countries, is it appropriate for WTO resources to be used for activities that go beyond what is contemplated by the DSU?
  • How to convince Members that the multilateral trading system is still best way forward over bilateral and plurilateral trading arrangements?
  • Is there a gap in the WTO rulebook with regard to level playing field issues such as subsidies, economic action by the State and competition?
  • Do you have a multilateral solution to issues like e-commerce which are being tackled in the Joint Statement Initiatives that would be of interest to a large number of Members?
  • WTO is lagging behind in pursuing the development dimension; what is the path forward?
  • Role of DG re fighting protectionism and unilateral measures.
  • How to strike a balance between public stockholding and food security and the avoidance of unnecessary trade restrictions?
  • What is your view on the Doha Development Agenda?
  • What role the WTO can play to help drive Africa’s integration agenda?
  • What is the most important issue to achieve results?

Both candidates gave extensive answers to the questions posed while avoiding staking out a position on any issue that is highly controversial within the WTO. The answers are worth reading in their entirety. As a result the minutes of the meeting are embedded below.

WTGCM185

Each candidate in their summing up at the end of her meeting with the General Council circled back to their prepared statement. Their short summing up statements are copied below.

Dr. Ngozi Okonjo-Iweala (page 26):

“The nature of the questions that I have heard and the nature of the discussions give me hope. Members are clearly interested in a WTO that works, in a WTO that is different from what we have now, in a WTO that shows a different face to the world. I can see it and I can feel it. And if ever I am selected as Director-General, that gives me hope that there is a foundation to work on. Before coming in here, I have spoken to several Members, but I did not really know that. From listening to all of you and fielding your questions, I now know that there is a basis to work on. And I want to thank you for it.

“And I really want to end where I began. Trade is very important for a prosperous and a recovered world in the 21st century. The WTO is at the centre of this. A renewed WTO is a mission that we must all undertake, and we need every Member, regardless of economic size, to participate in this. If we want the world to know who we are as the WTO, we have to commit. Having listened to you, I hear the commitment and I want to thank you sincerely for that.”

Minister Yoo Myung-hee (page 60):

“I spent the past few days meeting with Ambassadors and delegates in Geneva. When I listen to your views, together with the questions today, it seems that there are diverse views and priorities of Members – whether it concerns the negotiations, how to pursue development objectives and special and differential treatment, the plurilaterals or restoring the Appellate Body function. So, how can we, a dynamic group of 164 Members with different social and economic environments, come to an agreement? This brings me back to my original message. We need to rebuild trust in the WTO. How? Amid these divergent and different views of Members, I would share the commitment and hope to restoring and revitalizing the WTO.

“This pandemic has forced us to reflect upon what is needed from the multilateral trading system. Despite the current challenges, I have a firm belief in the multilateral trading system and what we can actually achieve in the future if we put our heads together and also our hearts into it. We are embarking on a new journey towards a new chapter for the WTO. Building on the past twenty-five years, when we embark on the new journey for the next twenty-five years, I am ready to provide a new leadership that will harness all the frustrations but most importantly all the hopes from Members to make the WTO more relevant, resilient and responsive for the next twenty-five years and beyond.”

Conclusion

The process that WTO Members agreed on in 2002 to promote a process for finding a candidate for a new Director-General is cumbersome, time consuming and burdensome for candidates brave enough to put their hat in the ring. To date, the 2002 process has resulted in Members agreeing by consensus on a new Director-General (2005 and 2013). The process in 2020 has worked remarkably smoothly as well despite the deep divisions in the membership and the multiple-pronged crisis facing the organization.

The two finalists bring different backgrounds and skill sets to be considered by Members. Each started strong in the General Council meetings in mid-July as can be seen from their answers to questions posed, and each has continued to impress many Members in the subsequent months. There are political considerations in the selection process of the Director-General (just as in any major leadership position of an international organization). Both candidates are getting active support of their home governments. Fortunately, the membership has two qualified and very interesting candidates to consider. Whoever emerges as the candidate most likely to achieve consensus among the Members will still face the hurdle of whether any Member (or group of Members) will block the consensus. While that seems unlikely at the present time, one never knows.

Whoever becomes the next Director-General will face the daunting challenges of an organization with all three major functions not operating as needed, deep divisions among major players and among major groups. The lack of forward movement and the lack of trust among Members will weigh heavily on the new Director-General with a narrow window before the next Ministerial Conference likely to take place next June. It is remarkable that talented individuals with long histories of accomplishments would be willing to take on the problems the WTO is weighed down with at the present time. Hopefully, the next Director-General will be known in the next three weeks.

The effect of COVID-19 on the operation of WTO dispute settlement panels — Australia and others raise at the September 28 Dispute Settlement Body meeting

While most attention on the WTO’s dispute settlement system has focused on the operation of the Appellate Body, the timeliness of disputes is often driven by the actions of the panel. Under Article 12 of the Dispute Settlement Understanding (DSU), panels are to render their reports within six months (3 months in urgent matters) and no longer than nine months after the panel is composed. Few if any panels in recent years have remotely come close to meeting a nine month report deadline.

With the COVID-19 pandemic and the resulting limitations on in person meetings at the WTO and travel restrictions, the panel process has been further complicated. At the recent Dispute Settlement Body (DSB) meeting of September 28, Australia had put on the agenda the issue of “COVID-19 and dispute settlement”. Agenda item 9 of Proposed Agenda for the 28 September 2020 Dispute Settlement Body meeting, WT/DSB/W/670.

The subsequent press release on the DSB meeting contained the following description of the discussion of Australia’s issue on COVID-19 and dispute settlement.

Statement by Australia on COVID-19 and dispute settlement

“On behalf of 14 members (Australia; Brazil; Canada; Ecuador; Guatemala; Hong Kong, China; Mexico; New Zealand; Norway; Peru; Singapore; Switzerland; Ukraine; and the United Kingdom), Australia made a statement expressing concern about delays in dispute settlement proceedings resulting from the COVID-19 pandemic.

“While it is encouraging that DSB meetings have been able to resume at the WTO, ongoing restrictions affecting international travel and immigration place in question the feasibility of physical participation of panelists and capital-based delegates at meetings in Geneva into the future, Australia noted. During 2020, various governments, private sector organizations, and domestic and international adjudicative bodies worldwide have adapted their usual ways of working to continue operating in these difficult conditions; WTO members must ensure the dispute settlement system does the same.

“Australia urged panels to consider, in consultation with parties, flexible, alternative arrangements to ensure dispute proceedings can continue to progress in a timely manner despite the challenge of current restrictions. Australia recalled that Article 12.1 of the WTO’s Dispute Settlement Understanding (DSU) affords panels discretion in the working procedures they adopt in individual disputes, and that panels, after consulting in parties, may determine alternative arrangements that would best serve the satisfactory settlement of the matters. Some panels have already adjusted their procedures to hold substantive meetings virtually through video conferencing technology; Australia welcomed these developments but, to ensure the equitable operation of the dispute settlement system, WTO members must find solutions to enable all current and future matters to move forward in one way or another.

“Several delegations took the floor to comment. Japan said that while virtual meetings are an option, face to face meetings were preferable, and that each panel should consult with parties on how to proceed in order to strike an appropriate balance between prompt settlement of disputes and protection of due process. India said oral hearings were an intrinsic aspect of due process rights guaranteed by the DSU and that panels cannot truncate these rights without the agreement of the parties in a dispute.

“The United States encouraged each panel to consult with the parties on how to proceed, bearing in mind the views of the parties and the relevant provisions of the DSU. China said it was fundamental to provide certainty in dispute settlement in order to avoid any undue delay; it noted some panels have adopted flexible procedures as a response. The EU said that the discretion of panels is not completely unfettered and that they must ensure the prompt settlement of disputes, a principle that was valid for all disputes. Both South Africa and Nigeria (for the African Group) noted the asymmetrical impact of the COVID-19 pandemic on developing country members.”

WTO Dispute Settlement, 28 September 2020, Panel established to review China’s compliance with farm subsidy ruling, https://www.wto.org/english/news_e/news20_e/dsb_28sep20_e.htm.

The fact that Australia and others raised the issue at the DSB is certainly welcome, although the comments of Members at the DSB meeting indicates that there are both an array of problems facing different Members and arguably mixed motives for some in concerns about alternative approaches to in person meetings.

First, panels have regularly used the existence of the pandemic as a justification for a lengthy delay in the likely release of a panel report. See, e.g., India – Additional Duties on Certain Products from the United States, WT/DS585/4 (4 June 2020)(panel composed on 7 January 2020, because of pandemic, report to parties not before the second quarter of 2021); India – Measures Concerning Sugar and Sugarcane, WT/DS579/9; WT/DS580/9; WT/DS581/10 (29 April 2020)(complainants are Guatemala, Australia and Brazil)(panels composed on 28 October 2019, report to the parties not before the second quarter of 2021).

Thus, the issue of delay caused by the pandemic is an important one to address to maintain the timely operation of panels. While many developing countries may have greater challenges in terms of internal infrastructure for alternative means of handling disputes remotely, the claim of due process concerns at least for some Members is suspect particularly if the functioning of administrative and judicial activities in-country are being handled remotely/virtually as is true in many countries. For example, in the United States, arguments at federal courts are handled remotely, including at the highest court in the land. No Member should be allowed to delay panel proceedings on due process grounds where their own administrative and court proceedings are handled remotely during the pandemic. The Secretariat should seek transparency from Members on how their agencies and courts are handling matters during the pandemic.

Certainly, WTO Members should identify challenges they face to being able to engage in remote/virtual hearings if in person events are not possible. Where problems exist, the WTO Secretariat in conjunction with other organizations should look to see what technical assistance can be provided to permit active participation. Similarly, if issues affect the ability of panelists to handle matters remotely, there should be a review of options that may exist to facilitate panelists ability to participate. Again, the Secretariat should seek information from Members on challenges they face in participating in dispute proceedings and should have information on potential panelists on the same types of issues.

While the basic premises that panels should consult with parties is clearly the correct path to follow (contrary to the current practice of many panels and that reviewed in detail about the Appellate Body), there is the question of what happens when there is a difference among the parties as to how to proceed. The good offices of the Director-General can be used to possibly bridge the differences. Delay should only be permitted when the concerns of the party objecting to proceeding cannot be reasonably overcome.

It will be interesting to see if Members press for a prompt resolution to the concerns raised at the last DSB meeting, or if they simply let the problems continue to fester and delay the proper operation of panels.

October 8th Video discussion on WTO Director-General selection process following the announcement of two finalists

On October 8, the Washington International Trade Association (WITA) put together a short video discussion among Rufus Yerxa (current President of the National Foreign Trade Council, former Deputy Director-General of the WTO among other positions), Wendy Cutler (currently Vice President and Managing Director of the Washington, D.C. office of the Asia Society Policy Institute and former senior negotiator at the U.S. Trade Representative’s Office) and me, moderated by Ken Levinson (Executive Director of WITA). The discussion dealt with the ongoing WTO Director-General selection process, what the results of the second round of consultations with Members suggest is important for the WTO Members in the next Director-General. The You Tube link to the discussion is below.

Informal Heads of Delegation Meeting at WTO confirms Nigerian and Korean candidates advance to third (final) round of consultations in selection of next Director-General

This morning’s 11 a.m. informal heads of delegation meeting in Geneva saw Ambassadors David Walker (New Zealand), Dacio Castillo (Honduras) and Harald Aspelund (Iceland) communicate the results of the second round of consultations with WTO Members to the membership. Pursuant to the procedures adopted in 2002 for the selection of the Director-General, the Chair of the General Council together with the Chairs of the Dispute Settlement Body and Trade Policy Review Body (the “troika”) consult with each Member of the WTO to receive their preferences in successive rounds of consultations. In the second round, each Member was asked to provide two of five remaining candidates as the Member’s preferences.

As leaked yesterday, the two candidates who advance to the third round of consultations are Dr. Ngozi Okonjo-Iweala of Nigeria and Minister Yoo Myung-hee of the Republic of Korea. The selection of these two candidates was based “on the depth and breadth of preferences articulated” by Members to the troika. “The result creates an historic precedent for the WTO in that it assures that the 7th Director-General will become the first woman to lead the organization.”

The WTO press release from today (October 8) from which all quotes are taken, “WTO members narrow field of DG candidates,” can be found here, https://www.wto.org/english/news_e/news20_e/dgsel_08oct20_e.htm.

“During the DG selection processes of 2005 and 2013, breadth of support was defined as ‘the distribution of preferences across geographic regions and among the categories of members generally recognized in WTO provisions: that is (least developed countries), developing countries and developed countries.’ The Chair said he and his colleagues were guided by the practices established in these General Council proceedings and he further explained that the decisions made clear that ‘breadth of support means the larger membership’.”

The three candidates not advancing are Amb. Amina C. Mohamed of Kenya, Mr. Mohammed Moziad Al-Tuwaijri of Saudi Arabia and Dr. Liam Fox of the United Kingdom. Amb. Walker (Chair of the General Council) said “On behalf of the entire membership, I would like to express deep gratitude for their participation in this selection process. It was clear that members consider them individuals of outstanding qualifications. I am sure you will all agree with us that in participating in the selection process, the candidates have all made a significant contribution to the standing and image of the WTO.”

The third round of consultations will start October 19 and end on October 27. There will be another informal heads of delegation meeting so that Amb. Walker and his facilitators can present the results of the third round of consultations, probably on Thursday, October 29.

The Chair of the General Council will then call a General Council meeting before November 7 to present their recommendation of the candidate most likely to obtain consensus. If Members agree, that candidate becomes the next Director-General. If there is a lack of consensus, the 2002 procedures provide for the possibility of a vote.

As reviewed in my post yesterday, the two candidates who are advancing have significantly different backgrounds presenting Members with an interesting choice. See October 7, 2020, Nigerian and Korean candidates advance to final round of consultations to become next WTO Director-General, https://currentthoughtsontrade.com/2020/10/07/nigerian-and-korean-candidates-advance-to-final-round-of-consultations-to-become-next-wto-director-general/.

While politics obviously has a role in the selection process, both candidates bring high-level government experience and an ability to work with various levels of government officials from many countries. Minister Yoo touted the fact that Korea has gone through significant economic development during her lifetime and so she has seen the needs of her country at various stages of economic development which would help her understand the needs of all WTO Members. She has also engaged in negotiations with many of the major WTO Members, including the U.S. and China. Dr. Okonjo-Iweala is a development economist and has expressed an interest in various issues where working with other international organizations would be important to ensure participation by all WTO members in WTO issues (e.g., addressing the digital divide which prevents many developing and least developed countries from engaging on e-commerce; ensuring access by all Members to vaccines and therapeutics to address the COVID-19 pandemic).

While the process of selecting a new Director-General is cumbersome, it was developed after the challenges in 1999 when no consensus was reached on a single candidate to give a greater likelihood of Members reaching a consensus on candidates put forward. The procedures worked in 2005 and in 2013 and appear to be working this year.

Nigerian and Korean Candidates Advance to Final Round of Consultations to Become Next WTO Director-General

The informal Heads of Delegation meeting at which Amb. David Walker (new Zealand),who is the Chairman of the General Council and his facilitators (Chairs of the Dispute Settlement Body and of the Trade Policy Review Body), will announce to the WTO membership which two of the five remaining candidates have advanced to the final round of consultations in the search for a new Director-General is scheduled for 11 a.m. Thursday morning (October 8). However, just as after the first round of consultations, the results have been leaked to the press by one or more Members.

Based on news stories this afternoon, Dr. Ngozi Okonjo-Iweala of Nigeria and Minister Yoo Myung-hee of the Republic of Korea are the two candidates who will advance to the third and final round of consultations. Minister Amina C. Mohamed of Kenya, Minister Mohammad Moziad Al-Tuwaijri of Saudi Arabia and the Rt Hon Dr. Liam Fox MP of the United Kingdom will not advance and are expected to withdraw.

As reviewed in prior posts, Minister Yoo has had active support in her candidacy from the Korean administration and had achieved success in being one of two preferences put forward by a united European Union earlier this week. Minister Yoo’s career has been in trade throughout and she is the first woman Minister for Trade in Korea. Dr. Okonjo-Iweala has been finance minister of Nigeria twice, served 25 years at the World Bank rising to the number two position and has had an important position with GAVI in recent years.

There has been much discussion of whether this selection of a Director-General would result in a woman being selected — which appears to now be a certainty — and which would be a first for the WTO. Similarly, African Members have been arguing that the position should go to an African candidate since Africa has never had a Director-General from the continent. Asia has had one Director-General in the WTO previously, but never a Korean. Minister Yoo is the third Korean trade minister to run for the Director-General post in the WTO’s short history.

It is unclear if WTO Members from Africa put forward their preferences in a uniform manner to support both African candidates who were part of the round two consultations. Some press articles have suggested that other candidates received at least some support from individual African Members. It is known that Dr. Okonjo-Iweala and Minister Mohamed had support from different groups of African countries — ECOWAS and EAC respectively.

The third round of consultations will have WTO Members looking at very different candidates in terms of backgrounds and perceived strengths. Minister Yoo’s background is entirely in trade and she is from an important trading nation and has negotiating history with many of the major WTO Members. Dr. Okonjo-Iweala is highly regarded, has limited trade experience (as Minister of Finance she had responsibility for Nigeria’s customs service), has deep experience in development economics and with efforts to respond to the needs of developing and least developed countries in terms of access to medical goods, including vaccines and therapeutics. While Nigeria is a large country, it is a significantly smaller trading nation than Korea. Korea is the 7th largest exporter of goods in 2019 ($542 billion) and 9th largest importer while Nigeria was 48th largest exporter ($62 billion) and was not in the top 50 importers.

Both remaining candidates are very talented and would make an interesting choice for the next Director-General. Block voting by the EU certainly was a help to Minister Yoo in her quest to advance to the third round. It will be interesting to see if the EU, the African Members or other groups vote in blocks in the third round.

The three candidates who will not move to the third round were also all very talented individuals who would have brought different skills and perspectives to the job if they had ultimately been selected.

We will learn tomorrow the timing of the third round of consultations.

Selection of WTO Director-General — Second Round of Consultations Ends Today, October 6

October 6 marks the last day of the second round of consultations by the Chairman of the General Counsel and his facilitators (Chairs of the Dispute Settlement Body and Trade Policy Review Body) with the WTO Members. Each WTO Member has been providing the troika of Chairs with the names of two of the five remaining candidates that constitute the Member’s preference in the second round. While the date of the Heads of Delegation meeting has not yet been announced, it will likely be Thursday morning. At that time, the two candidates advancing to the final third round of consultations will be identified.

In a prior post, I had noted press articles that indicated EU members were looking to back the candidacies of the Nigerian and Korean candidates — Dr. Ngozi Okonjo-Iweala and Minister Yoo Myung-hee. An article from Bloomberg yesterday confirmed that at yesterday’s meeting in Brussels, EU countries had agreed to back the two candidates. See Blomberg, October 5, 2020, EU Throws Its Weight Behind Nigerian, Korean WTO-Head Contenders, https://eur04.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2020-10-05%2Feu-throws-its-weight-behind-nigerian-korean-wto-head-contenders&data=02%7C01%7C%7Cc25bd1089e95463bd6e108d8699846db%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C637375450027528387&sdata=Lbn5YOaH6ZIm9m4b1ES91psH6rUAMz2PyfO7GomVre8%3D&reserved=0.

Hungary, which had earlier indicated it would back Minister Amina C. Mohamed of Kenya and Dr. Liam Fox of the United Kingdom, reportedly agreed to join with the other EU members. Thus, the EU is understood to have expressed preferences as a block for the Nigerian and Korean candidates.

While Africa has two candidates among the five in the second round, African nations are split on support. The six members of the East Africa Community support Kenya’s Minister Amina Mohamed while countries in west Africa (Economic Community of West African States (ECOWAS)) support Nigeria’s Dr. Ngozi Okonjo-Iweala.

It is unclear if African Members of the WTO will list their two preferences as Okonjo-Iweala and Mohamed or will split their preferences by including one of the three other candidates along with one of the African candidates. With the EU 27 supporting the Korean candidate, lack of solidarity in Africa for its two candidates would increase the challenges for Minister Mohamed to be one of the two finalists making the third round of consultations.

There are, of course, large numbers of WTO Mrmbers in the Americas and in Asia and the Pacific, and there are European countries besides the EU’s 27. It has been assumed that each of the five remaining candidates would garner some support in each of these other areas. Block voting can deny some candidates geographical coverage in some parts of the world which can be a factor the troika consider in reducing the field from five to two.

it is nail biting time for the candidates.

An environmental read on the five candidates for the WTO Director-General slot

A British-based press publication on climate change released a story today looking at the position on climate change of the five candidates being considered in the second round of consultations at the WTO to become the next WTO Director-General. The publication, Climate House News says this about themselves, “Climate Home News is an independent news site specialising in the international politics of the climate crisis. Our London-based editorial team coordinates deep reporting from around the world on the political, economic, social and natural impacts of climate change. Our coverage of UN climate talks is essential reading.”

Today’s article can be found here: Climate Home News, 29 September 2020, African green reformer tipped to win UN trade leadership race, https://www.climatechangenews.com/2020/09/29/african-green-reformer-tipped-win-un-trade-leadership-race/.

While crediting H.E. Yoo Myung-hee of the Republic of Korea and the Rt Hon Dr. Liam Fox MP of the United Kingdom for speaking out on the need for fisheries subsidies reform, the article singles out H.E. Amina C. Mohamed of Kenya and Dr. Ngozi Okonjo-Iweala of Nigeria as the two candidates who appear committed to raise the profile of climate change within the WTO if selected as the Director-General. The fifth candidate, H.E. Mohammad Moziad Al-Tuwaijri of Saudi Arabia, was noted as having made no statements on climate change.

“Both women used their written candidate statements to call for environmental reform of the WTO’s trade rules, while their three opponents from Korea, the UK and Saudi Arabia, have said little about climate change.”

“Mohamed, who has held cabinet roles including foreign affairs in the Kenyan government since 2013, said the economic recovery must ‘take account’ of issues like climate change. The WTO should be reformed to ‘support our shared environmental objectives’ and encourage diffusion of clean technologies, she said.”

“Okonjo-Iweala, former finance minister for Nigeria, said that ‘the WTO appears paralysed at a time when its rule book would greatly benefit from an update to 21st century issues such as ecommerce and the digital economy, the green and circular economies’. She said she wants to reach ‘optimal complementarity between trade and the environment’.”

The article spends a fair amount of space on carbon pricing as an important initiative and notes Minister Mohamed’s comments that “the WTO could replicate carbon pricing initiatives like the EU’s ‘on a grander scale.”

Whether increasing the role of the WTO in addressing climate change is an issue of concern to many WTO Members, it certainly is to some and should be to many. Because trade and the environment is not a prominent area of ongoing WTO negotiations (other than fisheries subsidies), it is not surprising that all of the candidates seeking the Director-General position have not spoken extensively on the issue. Thus, one cannot necessarily draw the conclusions that the article suggests about three of the candidates. Being a member-driven organization, a candidate to become the next Director-General can not be faulted for focusing on the issues of stated concern by Members. Under the current WTO structure, it is not clear what influence a Director-General can have on subjects that Members will focus on.

Nonetheless, ensuring sustainable development (including how trade can help achieve global needs to address climate change) is important to businesses, workers, consumers, NGOs, and the global population. It can and should be a factor that Members of the WTO consider in who gets selected as the next Director-General — i.e., commitment to sustainable development and passion for making trade a positive contributor to solving climate change. More importantly, it must be a factor that Members consider in deciding on areas of negotiation and reform of the WTO in the months ahead.

Korean Trade Minister Travels to Europe to push her WTO candidacy; Moldovan candidate endorses Kenyan candidate

In a prior post, I had reviewed that the EU had backed all three women candidates in the first round of consultations at the WTO on who should be the next Director-General — H.E. Yoo Myung-hee of Korea; H.E. Amina C. Mohamed of Kenya; Dr. Ngozi Okonjo-Iweala of Nigeria — but had not backed either of the two men who advanced. See September 24, 2020, WTO Director-General selection – block voting likely to ensure next Director-General is a female, https://currentthoughtsontrade.com/2020/09/24/wto-director-general-selection-block-voting-likely-to-ensure-next-director-general-is-a-female/. All three women moved onto the second round of consultations along with H.E. Mohammad Moziad Al-Tuwaijri of Saudi Arabia and The Rt Hon Dr. Liam Fox MP of the United Kingdom.

With the other two women candidates likely to secure most or all of the second round votes from African WTO Members, it is obviously important for Minister Yoo to continue to receive support from at least some portion of European Members as well as geographical support from Asia and the Pacific and the Americas. With Africa and the Middle East having their own candidates, it is presumably her hope to also secure some support from those areas as well. While it is understood that the EU presented their preferences in the first round of consultations on a consolidated basis, that may not be the case in the second round where at least one EU member (Hungary) has indicated they will vote independent of the EU preferences. Thus, it is not surprising that Minister Yoo and the Korean government are putting focus this week on European Members of the WTO and other missions in Geneva As reviewed in the Korea Times, “‘Minister Yoo is visiting Geneva and Sweden from Sept. 27 until Oct. 2 to seek support of WTO member states with regard to the election of the next WTO director-general,’ the ministry said in a statement, Sept. 25.” The Korea Times, September 27, 2020, Trade minister Yoo Myung-hee kicks off Europe campaign for WTO race, https://www.koreatimes.co.kr/www/nation/2020/09/113_296737.html.

The other piece of news reported today relevant to the WTO Director-General campaign is the endorsement of the Kenyan candidate, H.E. Amina C. Mohamed, by one of the three candidates who did not advance at the end of the first round of consultations, Moldova’s Amb. Tudor Ulianovschi. The Standard, September 27, 2020, Moldovan Candidate Tudor Ulianovschi endorses Amina Mohamed for top WTO job, https://www.standardmedia.co.ke/branding-voice/article/2001387896/tudor-ulianovschi-endorses-amina-mohamed-for-top-wto-job. “He announced on twitter, ‘For the final round of @wto DG selection, two candidates will compete against each other to the benefit of the multilateral trade system. I am pleased to support my friend @AMB_A_Mohammed for the role of DG @wto. We have a similar experience (Ambassador&Minister), diplomacy, and character.'”

The second round of consultations with WTO Members to decide which two of the remaining five candidates will advance to the third round of consultations started on September 24 and will end on October 6. All five candidates and their governments are engaged in shoring up support for their candidacy, with the identification of the two remaining candidates likely to be announced on October 7 or 8.

The third round of consultations, when the candidate viewed as most likely to achieve consensus among the WTO Members, will get started later in October with a hoped for selection of the next Director-General completed by November 7.. Should there be a lack of consensus for the candidate emerging from the third round of consultations, the procedures for selecting Directors-General agreed to at the end of 2002 permits resort to voting if consensus cannot be achieved.

Additional Materials on Three of the Remaining Five Candidates for WTO Director-General post

While WTO Members are engaged in the second round of consultations with the Chairman of the General Council and his facilitators on which two of the remaining five candidates receive each Member’s preference, the candidates continue to reach out to Members and make media contacts. The second round of consultations started on September 24 and will continue until October 6 with a Heads of Delegation meeting likely held one or two days later to announce the two finalists and the timing of the third round of consultations.

The links below are for selected articles or news clips for three of the five remaining candidate and include news interviews.

The Bloomberg piece for Dr. Okonjo-Iweala in not directly WTO related though the WTO Director-General selection process is mentioned. The interview is a joint discussion with Australia’s former Prime Minister Julia Gillard looking at the opportunities for women in leadership in times of crisis.

In Bloomberg’s interview of Minister Yoo, Minister Yoo goes through a number of challenges facing the WTO and answers questions on U.S.-China tensions and responds to a question on whether Japan will oppose her nomination.

Dr. Fox’s interview with the Global Trade Review addresses his interest in the Director-General position, responds to a question about whether his candidacy is serious and answers a question on the relevance of Brexit. His interview with CNBC Africa was wide ranging and he stressed the need for a recommitment by Members to a common enterprise, the need to get the dispute settlement system functioning again. Dr. Fox talked about the needs for Micro-, Small and Medium businesses for all Members, and reviewed the actions he would take to improve the focus on these commercial operators. He also talked about the need for verification of information notified by parties, citing subsidy notifications. He discussed the need to obtain greater liberalization in trade in services and spent some time on e-commerce/digital trade and reviewed how online trade can be helpful to better integrating women into trade. He also talked about the regional trade agreement among African countries and the use of plurilaterals where multilaterals are not presently doable.

Dr. Ngozi Okonjo-Iweala (Nigeria):

Bloomberg, Australia’s Gillard, Nigeria’s Okonjo-Iweala on Women in Leadership, https://www.bloomberg.com/news/videos/2020-09-24/gillard-okonjo-iweala-on-women-in-leadership-video.

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

Bloomberg, Korean Minister Vows to Revitalize WTO if Elected as Chief, https://www.bloomberg.com/news/videos/2020-09-25/korean-minister-vows-to-revitalize-wto-if-elected-as-chief-video.

The Rt Hon Dr. Liam Fox MP (United Kingdom):

Global Trade Review, September 24, Exclusive interview: Liam Fox talks WTO bid, calls his backing of Brexit a ‘red herring’, https://www.gtreview.com/news/global/exclusive-interview-liam-fox-talks-wto-bid-calls-his-backing-for-brexit-a-red-herring/.

CNBC Africa, September 25, 2020, UK’s Liam Fox Shares His Vision for Global Trade, https://www.cnbcafrica.com/videos/2020/09/25/in-conversation-with-liam-fox-on-his-vision-for-global-trade/.

WTO Director-General selection — block voting likely to ensure next Director-General is a female

As the World Trade Organization starts the second round of consultations with Members today to continue to winnow down the list of candidates to move forward to the third round in mid-October, the likelihood of block preferences by countries within the EU and from Africa would seem to guarantee that the two candidates remaining at the end of the second round of consultations are two of the three women candidates — Dr. Ngozi Okonjo-Iweala of Nigeria, H.E. Yoo Myung-hee of the Republic of Korea and H.E. Amina C. Mohamed of Kenya.

First, African Members of the WTO have been arguing since before the start of the selection process that it was time for a Director-General to be from Africa. With two of the five remaining candidates being from Africa, if African Members provide as their preferences the two remaining African candidates, those two candidate will have a large support base before one looks at the rest of the world. There are currently some 45 WTO Members from Africa. While it is always possible for Members from Africa to support only one of the two African candidates and to pick a second preference from outside of the continent, it is likely that most Members will provide both African candidates as preferences to improve the chances of an African candidate in fact being selected as the next Director-General.

Second, press articles in recent days have indicated that the 27 European Union countries had given their preferences for the same candidates in round one of the consultations and that had led to three of the four candidates they supported advancing — the three women candidates from Nigeria, Kenya and the Republic of Korea. They had not expressed preferences for either of the two male candidates who advanced, H.E. Mohammad Moziad Al-Tuwaijri of Saudi Arabia and the Rt Hon Dr. Liam Fox MP of the United Kingdom. While WTO Members are obviously not limited to prefer in later rounds individuals they expressed preferences for in earlier rounds, it is expected that the EU countries (with limited exceptions) will agree on two of the three women candidates for Round 2. This would be consistent with their apparent desire to see a candidate from a different geographical area than recent DGs and for a candiate who is female supporting gender equality objectives of the UN Sustainable Development Goals. There is one known likely exception to the EU expressing preferences as a block approach. Specifically, the press has indicated that Hungary intends to identify its preferences as H.E. Mohamed of Kenya and Dr. Fox of the United Kingdom.

It is expected that each of the women candidates will have reasonable support in other parts of the world as well. With Dr. Seade out of the running, the Americas has no geographic candidate and will certainly provide a fair portion of their preferences to one or two of the women candidates. Similarly, Asia and the Pacific will split preferences among the five remaining candidates ensuring some additional support for each of the women.

While H.E. Al-Tuwaijri and Dr. Fox will certainly receive support in round two of the consultations from a significant number of Members, if the EU and Africa vote largely in blocks, it is hard to imagine how either of them advances to the final round of consultations.

Depending on the block preference approach of Africa and the EU, the two candidates who advance will either be the two African candidates or one of the African candidates and the Korean trade minister.

My assumption is that the third round will be a face off between H.E. Mohamed and Dr. Okonjo-Iweala. We will know in early October.

WTO Director-General selection process — what do results from first round of consultations suggest are key criteria for WTO Members in next Director-General?

Last week, five of eight candidates advanced to the second round of consultations when the WTO’s Chairman of the General Council reviewed with the membership the results of the first round of consultations. The second round of consultations starts this week. WTO Members’ preferences in the second round will result in the field being reduced from five to two candidates before the third round selects the candidate viewed as most likely to achieve consensus among the WTO Members. The selection process should end by November 7, 2020

Can anything be gleaned from the results of the first round results?

  1. The three candidates who did not advance

The three candidates eliminated were Dr. Jesus Seade Kuri of Mexico, Mr. Abdel-Hamid Mamdouh of Egypt and Amb. Tudor Ulianovschi of Moldova.

Dr. Seade has had personal involvement with the GATT during the Uruguay Round and was not only Mexico’s Ambassador to the GATT but then a Deputy Director-General of the GATT at the end of the Uruguay Round and one of the original Deputy Directors-General when the WTO was set up in 1995.

Mr. Mamdouh similarly has had a long and distinguished history with the GATT and WTO that stretches back to the Uruguay Round and continued in various capacities within the Secretariat ending with a sixteen year stint as Director of the Trade in Services and Investment Division.

Thus, if one was putting primacy on technical expertise or a deep understanding of the origins of the WTO (arguably relevant to current crisis issues like the impasse over the Appellate Body), then one would have expected both of these individuals to get past the round one consultations. As they didn’t, it follows that depth of technical capability was not a driving consideration for Members in the first round of consultations.

Although Dr. Seade has held various government positions including Under Secretary for North America and chief negotiator for the US-Mexico-Canada Agreement), he has never served as a Minister (Secretary) in the Mexican government. Moreover, Mexico, while part of North America, is typically referred to as part of Latin America. Since the last Director-General was from Brazil (also included in “Latin America”), this fact could have been viewed as a negative for Dr. Seade.

For the enormous history that Mr. Mamdouh has had with the WTO, he never served as either an Ambassador or took the position of Minister for the Egyptian government. Thus, to the extent Members were putting primacy on candidates who had served in a high political position for their host government, Mr. Mamdouh would have been viewed as not meeting that criteria.

Amb. Ulianovschi served both as Moldova’s Ambassador to Switzerland and Liechtenstein (including being Ambassador/Permanent Representative to the WTO) and later served as a Minister of Foreign Affairs. Thus, he has both familiarity with WTO issues and had a prior senior political position. Since Moldova is part of Europe and most Directors-General of the GATT and WTO have been from Europe, this could have been viewed as a negative for Amb. Ulianovschi (though the same was also true for Dr. Liam Fox of the United Kingdom who has advanced to the second round of consultations).

2. The five candidates who have advanced to round two

Of the five candidates who have advanced, all have served as a Minister in their home government with four — Dr. Ngozi Okonjo-Iweala of Nigeria, H.E. Amina C. Mohamed of Kenya, H.E. Mohammad Moziad Al-Tuwaijri of Saudi Arabia and the Rt Hon Dr. Liam Fox MP of the United Kingdom having served two terms or in two different Minister positions. The fifth, H.E. Yoo Myung-hee of the Republic of Korea is the current Minister for Trade in Korea.

The differentiation between those who advanced and those who didn’t thus seems to hinge in significant part of the perception of political weight a candidate would bring based in part on the senior government role each has played. While Amb. Ulianovschi of Moldova did not advance and yet was a Minister, his being from a European country may have been the distinguishing factor. He was also the youngest candidate by more than a decade which may have been another factor for some.

Moving into the second round of consultations, what considerations may influence who makes the next cut?

The Chairman of the General Council indicated that WTO Members viewed all eight candidates as highly qualified and respected. This means for many Members the important factors may be less about the qualifications but more about geographical diversity of the membership. The Procedures adopted at the end of 2002 for the selection of Directors-General has a paragraph dealing with the representativeness of candidates (WT/L/509 at para. 13):

“Where Members are faced in the final selection with equally meritorious
candidates, they shall take into consideration as one of the factors the desirability of reflecting the diversity of the WTO’s membership in successive appointments to the post of Director-General.”

As there has not been a Director-General from Africa or from the Middle East and only one from Asia, geographical diversity could have aided four of the five candidates who advanced to the second round of consultations.

In addition, no GATT or WTO Director-General has been a woman to date. One of the UN Sustainable Development Goals (SDGs) is gender equality (SDG 5). Three of the candidates who have advanced are female. A fourth, Dr. Liam Fox, committed to ensuring that half of the senior WTO Secretariat would be women if he were selected as the next Director-General.

While all eight candidates indicated their preference for the selection to be of the best qualified candidate, it is certainly likely that other criteria will weigh in the second and third round consultation process which leads to the selection of a single candidate.

The three women candidates

Among the three women candidates, H.E. Mohamed has a proven track record on trade within the WTO and as Chair of the 2015 Nairobi Ministerial. H.E. Yoo’s career has been entirely in trade, and she has dealt with each of the U.S., China and the EU in her trade capacity for Korea. Dr. Okonjo-Iweala has never been Minister of Trade though her role (twice) as Minister of Finance for Nigeria included some trade-related areas (customs, trade facilitation) and she had a distinguished career at the World Bank and is now active in various organization relevant to the recovery from COVID-19 such as GAVI (focused on getting vaccines to countries in need).

Obviously two of the three women candidates have serious trade/WTO backgrounds. The third is often viewed as having the largest political profile. Depending on how large the preference is for a strong leader with significant political experience or a strong leader with significant understanding of the trade problems before the WTO, this could lead to Dr. Okonjo-Iweala and H.E. Mohamed as being the top two women candidates or H.E. Mohamed and H.E. Yoo filling that role.

Possible wild cards that could hurt one or two of the women candidates are (1) the ongoing Japan-South Korea conflict that H.E. Yoo has been involved in; (2) China’s view towards H.E. Yoo if concerned about whether China will maintain a Deputy-Director General slot going forward if an Asian candidate is selected as the next Director-General; (3) the late disclosure that Dr. Okonjo-Iweala is a dual Nigerian-U.S. citizen and whether that is problematic for China or other Members.

The two remaining male candidates

It is unlikely that Dr. Fox makes it to the third round based simply on the Paragraph 13 indication of importance of geographical diversity and the long history of European Directors-General. He would bring a unique viewpoint to the Director-General position being the only candidate who has repeatedly stood for election in his country. His commitment to ensure half of the senior WTO Secretariat are women may also be a plus for him if only one of the women candidates advances.

Similarly, unless the membership decides that what they want as a Director-General is someone who will move the organization to a more business-like functioning approach, it is unlikely that H.E. Al-Tuwaijri makes it past round two. He has the advantage of being from an area (Middle East) that has not had a Director-General. Moreover, he has worked closely with G20 countries which could be a plus if only one of the women candidates advances to round three.

Likely outcome of Round Two Consultations

The second round of consultations starts on September 24 and concludes on October 6. At the meeting of the Heads of Delegation that follows the close of the consultations (probably October 8), it is likely that H.E. Amina C. Mohamed and Dr. Ngozi Okonjo-Iweala advance to the third round of consultations.

Who will likely emerge as the sole remaining candidate after Round Three?

If H.E. Mohamed and Dr. Okonjo-Iweala advance beyond round two, the selection of a candidate most likely to achieve consensus among the WTO Members in round three will depend on whether Members prefer a candidate who has a record of achieving results in the WTO or prefer a candidate with a large record of in-country reform and of achievement within the World Bank and ability to focus Members on post COVID-19 recovery needs.

Either would be an interesting choice and would bring great energy to what will be a very challenging job at a time of multiple crises for the WTO and concerns about its continued relevance. Based on what seems to have mattered in Round One of the consultations, I would predict that Dr. Ngozi Okonjo-Iweala will be the next Director-General with the one caveat of whether her dual citizenship with the U.S. in addition to her home country of Nigeria becomes problematic in fact. If the caveat applies, then look for H.E. Amina C. Mohamed to be the next Director-General.

Race for becoming the next Director-General of the WTO — five candidates advance; three are asked to withdraw

At a Heads of Delegation meeting held at the World Trade Organization this morning (11:00 a.m. Geneva time), the Chairman of the General Council, Amb. David Walker, and his facilitators, Amb. Dacio Castillo of Honduras (Chairman of the Dispute Settlement Body) and Amb. Harald Aspelund of Iceland (Chairman of the Trade Policy Review Body) informed the WTO Members that their consultations with Members had identified the five candidates (of eight total) who had received the broadest and deepest support and hence would be moving on to round two of the consultation process.

The five candidates who move to the second round of consultations include (in order that they were put forward as a candidate by their government):

Dr. Ngozi Okonjo-Iweala of Nigeria;

H.E. Yoo Myung-hee of the Republic of Korea;

H.E. Amina C. Mohamed, of Kenya;

H.E. Mohammed Moziad Al-Tuwaijri of Saudi Arabia;

The Rt Hon Dr. Liam Fox MP of the United Kingdom.

The three candidates who have been asked to withdraw based on the results of the first round of consultations include:

Dr. Jesus Seade Kuri of Mexico;

Mr. Abdel-Hamid Mamdouh of Egypt;

Amb. Tudor Ulianovschi of Moldova.

The WTO press release can be found here, WTO members narrow field of DG candidates, https://www.wto.org/english/news_e/news20_e/hod_18sep20_e.htm

A field that had originally consisted of five men and three women with two being Europeans, three being Africans, one being from the Middle East, one being Asian, and one being North American (Latin) is now a field of three women and two men with one from Europe, two from Africa, one from the Middle East and one from Asia.

As the biographies posted on the WTO webpage and the candidates prepared statement to the General Council, subsequent press conference, and interviews, webinars and other press report make clear, the eight candidates were all highly qualified individuals with a good grasp of issues currently facing the WTO and the challenges of reform. This fact and that all eight candidates were respected by the Membership was confirmed by Amb. Walker at today’s Heads of Delegation meeting.

The elimination of the three candidates removes two with the longest engagement with the GATT/WTO — Dr. Jesus Seade and Mr. Abdel-Hamid Mamdouh and the youngest candidate, Amb. Tudor Ulianovschi.

Of the five remaining, only two have extensive WTO/trade experience — H.E. Amina C. Mohamed, H.E. Yoo Myung-hee, although Dr. Liam Fox served as the U.K. Secretary of State for trade for a period of time as well and H.E. Al-Tuwaijri has a broad portfolio with trade issues included. Dr. Ngozi Okonjo-Iweala has extensive experience as Nigeria’s Finance Minister (with customs responsibilities) and as a senior official at the World Bank.

Second Round of Consultations

During the Heads of Delegation meeting, Amb. Walker announced that the second round of consultations would start on September 24 and run until October 6 after which there will be another Heads of Delegation meeting to review which two candidates advance to the third and final round of consultations.

During the first round, each Member was asked to identify four candidates as preferences. During the second round, each Member will be asked to identify two candidates as preferences. The three Ambassadors who are conducting the consultations with Members will then announce the results further narrowing the field from the current five to just two candidates.

Third Round of Consultations

The timing of the third round of consultations will be announced at the next Heads of Delegation meeting when the second round is completed. It is anticipated that the third round and its results will be completed ahead of November 7 consistent with the procedures adopted by the General Council back in December 2002. Procedures for the Appointment of Directors-General, WT/L/509. The results of the third round of consultations will be the candidate that is viewed as most likely to achieve consensus from the Membership. If consensus is likely, a General Council meeting will be called to confirm the selection. If consensus is not achieved, the process forward is unclear but can include taking a vote instead of pursuing consensus.

Conclusion

The selection process to date is running smoothly. The WTO was fortunate that so many talented individuals were willing to step forward to seek to become the next Director-General of the WTO and go through the grueling process that has characterized the first three months. Congratulations to the five candidates who advance. Heartfelt thanks go out to the talented candidates whose run is now ended.

The procedures adopted in 2002 seem overly complicated and time consuming to many who look in from the outside. Complicated and time consuming the procedures certainly are. However, the procedures were adopted in an effort to have Members focus on the positive question – who is your preference — and avoid Members politically committing to who was unacceptable as had happened in 1999.

Let’s hope that the remainder of the selection process proceeds smoothly and without incident.

WTO Director-General candidates — Nigeria’s Dr. Ngozi Okonjo-Iweala and the United Kingdom’s Dr. Liam Fox generate potential controversy

Dr. Ngozi Okonjo-Iweala (Nigeria)

Dr. Ngozi Okonjo-Iweala is Nigeria’s candidate to become the next Director-General. When she was put forward by the Nigerian government her biographical sketch submitted did not contain information on her having also become a citizen of the United States in 2019. Her biography as available from the WTO webpage is embedded below.

bio_nga_e

In the highly politicized atmosphere that characterizes the current dysfunction at the WTO, omitting her U.S. citizenship may become a liability to Dr. Okonjo-Iweala’s chances of becoming the next Director-General. Chinese and other news reports raise that very issue. See, e.g., South China Morning Post, September 4, 2020, Ngozi Okonjo-Iweala’s US passport will not help her chances in WTO leadership race, Chinese trade experts say, https://www.scmp.com/economy/global-economy/article/3100280/ngozi-okonjo-iwealas-us-passport-will-not-help-her-chances; Naija247News, September 2, 2020 (posting a Bloomberg News piece), WTO Hopeful Economist Okonjo-Iweala Balances Nigeria, U.S. Citizenships, https://naija247news.com/2020/09/02/wto-hopeful-economist-okonjo-iweala-balances-nigeria-u-s-citizenships/#.X1OeZ5PsZ9A.

The Rt Hon Dr. Liam Fox MP (United Kingdom)

In an article earlier this week, Inside U.S. Trade reported that Dr. Fox had indicated that the next Director-General should prioritize the U.S. Congress over the U.S. Administration (President and USTR) to seek a resolution of the WTO’s Appellate Body impasse, seeking Congress to mandate a resolution as part of its consideration of renewal of Trade Promotion Authority. See Inside U.S. Trade’s World Trade Online, September 2, 2020, Fox: Congress should leverage TPSA renewal to resolve WTO appellate impasse, https://insidetrade.com/trade/fox-congress-should-leverage-tpa-renewal-resolve-wto-appellate-impasse.

Congress may well have an interest in the topic as part of trade promotion authority. However, for a candidate seeking to be selected as the next Director-General of the World Trade Organization to suggest the path to progress is by circumventing the U.S. Administration seems likely to raise concerns about his objectivity. Circumventing the U.S. Administration essentially indicates Dr. Fox’s belief that the problem at the WTO on the issue is U.S. intransigence. While that may be the European Union view, articulating such a position is unlikely to win friends at USTR. While Dr. Fox apparently believes he has the U.S. support, his statement on the approach he would take as Director-General may result in the U.S. supporting others. The Inside U.S. Trade piece quotes Dr. Fox as saying that when he is being frank, it usually gets him in trouble. Time will tell whether his recent comments repeat that self appraisal.

Race for WTO Director-General — additional material on Dr. Ngozi Okonjo-Iweala (Nigeria)

Today I review some other press articles about the candidates to provide additional perspective on important issues or the candidate’s approach to the position of Director-General if selected. Yesterday, I posted material about Dr. Jesus Seade Kuri. See August 31, 2020, Race for WTO Director-General – additional material on Dr. Jesus Seade Kuri (Mexico), https://currentthoughtsontrade.com/2020/08/31/race-for-wto-director-general-additional-material-on-dr-jesus-seade-kuri-mexico/.

There is no intention on my part to be exhaustive and the research has been limited to press pieces in English. Rather the intention is to identify information not addressed in my earlier posts that may be of interest to readers.

Today’s post looks at a few articles featuring Dr. Ngozi Okonjo-Iweala from Nigeria, the second candidate nominated.

  1. The Australian, August 17, 2020, Should WT address antai-dumping measures?, https://www.theaustralian.com.au/subscribe/news/1/?sourceCode=TAWEB_WRE170_a_GGL&dest=https%3A%2F%2Fwww.theaustralian.com.au%2Fbusiness%2Fleadership%2Fshould-wto-address-antidumping-measures%2Fnews-story%2F995b960b1de450c1d983f4aabeca2351&memtype=anonymous&mode=premium&nk=1fc9f182863545ef2c82ab30edd82766-1598966889

The summary of the article states that “Ngozi Okonjo-Iweala says the WTO should investigate whether Australia was inappropriately using anti-dumping provisions to keep out foreign steel.” I am not a subscriber to the Australian and so the information provided above is limited.

2. Nikkei Asian Review, July 13, 2020, 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.

Ngozi Okonjo-Iweala

* * *

Q: How would you go about navigating reforms at the WTO amid a rise of unilateralism and U.S.-China trade clashes?

A: This is the topical question of the hour, the growing nationalism, the divide. But if you listen carefully, you find that there’s some intersecting interests. After all, the same big powers that seem to have a big divide are sitting across each other at the table and negotiating some deals. 

“The WTO should work with all members including the big ones to find out what are those intersecting areas — however small they may be — how do we begin to deliver to make the two sides see their common interests that we can work on and build trust.

“It will take time, it will be challenging, there’s no magic wand to it, but you need someone with the energy, the passion, who is not a quitter, and who can deliver and work with these powers and listen — listen to them, because sometimes they feel they’re not even listening to the big powers.

Q: Could you talk about your visions for reforms?

A: First, updating WTO rules to the 21st century to take account of 21st-century issues, such as e-commerce and the digital economy, such as climate change, the green economy and biodiversity and circular economy … the issue of women and trade and micro-, medium and small enterprise. Even technology, what technology is doing to supply chains.

“Then you’ve got to look at existing rules and see whether they are serving the purpose. There are some members who feel that some rules may be leading to circumvention and disturbing the balance of rights and obligations of members. Issues like special and differentiated treatment, which developing countries feel very strongly about [but] developed countries have a different view.

“The dispute settlement system is paralyzed. You cannot have a rules-based organization, which is the sole place where people can take their grievances and complaints, but rules are not being followed. 

“A third area I would mention is transparency and notification. Transparency is so vital to the multilateral trading system, and notification for businesses. If something is going to be done in a country,  businesses  need to know that you’re willing to take one action or another, otherwise they can’t function.

“The WTO has to start achieving more outcomes. If it doesn’t do that then people continue to see it as irrelevant. 

Q: How should the WTO address Washington’s complaint about China’s state capitalism and developing country designation?

A: Those are some critical issues that members will need to discuss and debate on. But let’s put it this way, we must make sure that all members of the WTO feel that the balance of rights and obligations for all members of the WTO is about a fair system. So, that’s why it’s important to listen to who feels it’s not fair and then restore that balance of rights and obligations that members need to undertake.”

3. Nairametrics, August 12, 2020, WTO Job: Okonjo-Iweala reveals how to resolve rift between US and China, https://nairametrics.com/2020/08/12/wto-job-okonjo-iweala-reveals-how-to-resolve-the-rift-between-us-and-china/.

“On healing the rift between the US and China, Okonjo-Iweala admitted that it is going to be challenging and not be easy. She said:

“‘Well this is not going to be easy, if it was easy, it could have been done a long time since. So it would be very challenging but it is not an impossible job. It is very clear that both the US and China have been helped and benefitted from the multilateral trading system in the past. Hundreds of millions have been lifted out of poverty. They have experienced shared prosperity in the economies and their countries.’

“The Nigerian candidate pointed out that it is important to remind the US and China of this shared prosperity. She then disclosed that she would listen to both countries to find out what really are the issues causing distrust among them. She said that she will not want to be involved in the larger political problems, but will rather separate the trade issues and focus on them and build this trust.

“Going further on how to settle their rift, Okonjo-Iweala said, ‘You need to begin to find areas where there can be confidence-building and trade. Building trust is not talking about it, you have to have areas where both can work together and agree and we have a golden opportunity in the fisheries subsidies negotiations that are going on now because the US is a party to it, China is a party, the EU, all other members.’

“‘It is a multilateral negotiation, so if they can sit around the table with others to negotiate this and have a successful outcome, that is one thing that will be shared in common between the 2. So that will begin to build confidence. Then reaching out both in the US and in China to talk to the policymakers, go where the decisions are made, talk to congress also in the US and begin to show the benefits of the system again.’

“She also said they will look at reasons why they need to work together because their rift may be causing negative externalities for other members. She is of the opinion that exposing all of these, working with them, and listening carefully will begin to build confidence.

“She believes that while achieving this will be difficult, focusing seriously on trade issues can create room for a breakthrough.”

4. P.M. News, August 4, 2020, Okonjo-Iweala: My priorities as WTO chief, https://www.pmnewsnigeria.com/2020/08/04/okonjo-iweala-my-priorities-as-wto-chief/.

“’I would be focusing, if I get the job, on the dispute settlement system. Because this is the fundamental pillar of the WTO,’ Okonjo-Iweala said.

”If you have a rules-based organisation, you must have a place where rules are arbitrated and that’s what happens with the dispute settlement system. So restoring that will be a top priority as well.’

* * *

“The candidate showed her confidence to ‘find a way to unlock the seeming division’ on the trade side, between China and the United States, underlining that finding areas of mutual interest and to build trust within the WTO trading system would be important.

“’Actually, if you listen to the two members, they have some things in common,’ Okonjo-Iweala added.

“’The dispute settlement system of the WTO is valued by both, they want it to reform, they don’t want it to disappear.’

“Okonjo-Iweala also noted that she hopes China will play the role of an economic growth engine in the current COVID-19 pandemic as it did during the 2008 global financial crisis.

“’I think the best thing China can do is to recover quickly. Because it’s one of the engines of growth in the world and it’s almost a quarter of world trade,’ she told Xinhua.

“’So if it recovers quickly, it means that it can help the rest of the world recover. So that’s the role I would see for China.’”

5. Financial Times, August 4, 2020, Leading WTO candidates back US bid for system reform, Amina Mohamed and Ngozi Okonjo-Iweala say American criticisms of over-reach are valid, https://www.ft.com/content/f4830e2b-df7b-474a-8104-6336992ca193.

Article also reviews Dr. Okonjo-Iweala’s view that the WTO should be taking a lead on COVID-19 and should take steps to see that the early introduction of export restraints on medical goods and medicines is not repeated.

6. Inside U.S. Trade’s World Trade Online, July 22, 2020, Nigeria’s candidate: Technical skill won’t solve WTO problems, https://insidetrade.com/daily-news/nigeria%E2%80%99s-candidate-technical-skill-won%E2%80%99t-solve-wto-problems.

Inside U.S. Trade has conducted interviews with each of the eight candidates. In its July 22 write-up of Dr. Okonjo-Iweala’s interview, the publication noted that Dr. Okonjo-Iweala would see who is behind on notifications and see if the problem is due to a lack of technical capability which is a real but solvable problem for many developing countries. For those with the ability to provide notifications but who haven’t, she would see what could be done including some proposals where “sticks” have been suggested to address non-compliance.

On U.S. concerns about China’s state-run economy, Dr. Okonjo-Iweala noted that the WTO doesn’t comment on Member’s economic systems but should address the consequences to the global trading system of different economic systems. She believes the WTO should start by establishing a definition of “public body” and look at improving rules on industrial subsidies and would urge the U.S., EU and Japan to table their proposal in that regard.

Conclusion

Each candidate has been very busy these last several months meeting with WTO Members both in Geneva and in capital (whether in person or virtually), talking to the media, doing events with academia and think tanks and others. The above additional materials on Dr. Okonjo-Iweala are a small sample of what is available online. The excerpts or summaries from the various publications have largely been limited to some of the key issues my previous posts have examined (appellate body reform, industrial subsidies, etc.).

Future posts will look at additional materials for other candidates.

The race to become the next WTO Director-General — where the candidates stand on important issues: fisheries subsidies and e-commerce/digital trade

[Updated on August 27 to incorporate comments by Amb. Tudor Ulianovschi of Moldova at a WITA webinar held on August 26.]

The eight candidates for the position of Director-General of the World Trade Organization, in looking at what topics should be moved forward or completed in negotiations were uniformly in support of an early conclusion to the negotiations on fisheries subsidies and on updating the rule book by moving the plurilateral negotiations on e-commerce/digital trade forward to at least a draft document by the twelfth WTO Ministerial Conference in 2021.

Background on fisheries subsidies

Fisheries subsidies have been subject to negotiation within the WTO since the launch of the Doha Development Agenda in December 2001 with limited forward movement in recent years. With the world’s wild caught supply of fish under severe pressure from overfishing, curbing illegal fishing and overfishing through subsidy disciplines became part of the UN’s Sustainable Development Goals in 2015 (Goal 14.6)(SDG). This led WTO Members at the eleventh Ministerial Conference in Buenos Aires to commit to completing the negotiations on fisheries subsidies by the twelfth Ministerial Conference which was scheduled for early June 2020 to permit completion within the time frame laid out in the UN SDG. With the COVID-19 pandemic and the lockdown in Geneva and in many countries, the time frame for completing the fisheries subsidies has slipped, although in late June, the Chair of the Rules Negotiating Group released a draft consolidated text to permit Members to see if a final push to complete negotiations could be made possibly yet in 2020. I have reviewed the fisheries subsidies in a number of prior posts. See, e.g., June 29, 2020, Update on fisheries subsidies draft consolidated text from June 25, https://currentthoughtsontrade.com/2020/06/29/update-on-fisheries-subsidies-draft-consolidated-text-from-june-25/; June 27, 2020, Chair of Rules Negotiating Group releases draft consolidated fisheries subsidies text at informal meeting on June 25, https://currentthoughtsontrade.com/2020/06/27/chair-of-rules-negotiating-group-releases-draft-consolidated-fisheries-subsidies-text-at-informal-meeting-on-june-25/; January 13, 2020, Fisheries Subsidies – Will the WTO Members Reach Agreement Before June 2020? https://currentthoughtsontrade.com/2020/01/13/fisheries-subsidies-will-the-wto-members-reach-agreement-before-june-2020/.

Background on electronic commerce/digit trade

The agenda for the Uruguay Round was established in 1986 with negotiations completed in 1993 and the agreements that created the WTO signed in 1994. At that time, there was little electronic commerce. The driver of world economic growth over the last twenty-five years has increasingly been the rapidly developing technology that permits large amounts of communication and business activity to occur electronically. Music, movies, television, books, magazines have largely gone digital. Consumer purchases of goods and services have increasingly been done digitally. During the COVID-19 pandemic much of the world has depended on electronic communications to buy groceries, handle some medical needs, eliminate in person meetings replaced by virtual meetings and much more.

While the WTO as early as the second Ministerial Conference in 1998 agreed to study issues surrounding electronic commerce to develop rules that might be necessary, the WTO’s efforts have struggled for more than twenty years with periodic agreement to continue the review and extend a moratorium on customs duties on electronic commerce. See, e.g., Work Programme on Electronic Commerce, adopted by the General Council on 25 September 1998, WT/L/274 (30 Sept. 1998); Work Programme on Electronic Commerce, Ministerial Decision of 13 December 2017, WT/Min(17)/65, WT/L/1032 (18 December 2017). These two documents are embedded below.

274

65

At the eleventh Ministerial Conference in Buenos Aires, WTO Members with an interest in particular issues issued Joint Statement Initiatives basically indicating that the group of listed Members were going to move forward developing potential rules on the subject matter of interest, keeping the process open to any Member wishing to participate. One of the Joint Statements was on Electronic Commerce. See JOINT STATEMENT ON ELECTRONIC COMMERCE, WT/MIN(17)/60 (13 December 2017). The statement is embedded below.

60

The JSI on e-commerce has been making good progress under the leadership of Australia, Japan and Singapore. A review of progress from the March 5 General Council meeting minutes is copied below (WT/GC/M/182 at 117):

“47. Australia (Joint Statement Initiative on Electronic Commerce)

“I will first provide a report on negotiations under the Joint Statement Initiative on Electronic Commerce on behalf of the co-convenors: Australia, Japan and Singapore.

“I will start with a short summary of the informal meeting of Ministers on the Ecommerce JSI held in Davos on 24 January.

“At this meeting, Ministers underscored the importance of this initiative both commercially and systemically for the WTO and affirmed their commitment to a high standard outcome, with the participation of as many WTO members as possible.

“Ministers welcomed the good progress achieved over the first year of negotiations, including the range of proposals received, the diversity and growing number of participants, and the strong levels of engagement in negotiating rounds.

“Ministers emphasized the need to keep working hard to ensure substantial progress by MC12 and agreed to develop a consolidated negotiating text by MC12 and a pathway for the future conclusion of the negotiations.

“The Philippines also announced it would join the JSI, bringing the number of signatories to 83, representing over 90% of global trade.

“Since our last report at the December HODS/TNC, we have held an organisational meeting, on 16 December, that set a work plan leading up to MC12.

“We also convened a negotiating round from 11-14 February, which covered electronic transactions, non-discrimination and liability, consumer protection, transparency, domestic regulation, cooperation and telecommunications. These negotiations were structured around revised streamlined texts drawn from proposals made by Members, and made further progress on streamlining text.

“Two more rounds are scheduled before MC12: 17-20 March and 28 April-1 May.

“We look forward to a continuation of the constructive engagement and momentum demonstrated in February with the aim of developing a consolidated negotiating text by MC12.

“The co-convenors continue to ensure this JSI is transparent and inclusive: meetings are open to all WTO Members; and all proposals and reports are available on the WTO’s web portal.”

The JSI group had hoped to have a consolidated draft text by the 12th Ministerial Conference in June this year before the Ministerial Conference was cancelled because of the pandemic. While the COVID-19 pandemic has slowed down progress for a few months, the joint convenors (Australia, Japan and Singapore) remain confident that a draft agreement can be achieved with a roadmap for completion by the 2021 Ministerial. Most documents generated by the JSI group are not publicly available. However, the titles of documents are available publicly. As of August 21, 70 documents are listed as having been submitted by Members on the JSI on electronic commerce. The most recent document is dated August 19 and is titled a “Stocktake text” (INF/ECOM/57). A July 23 document is titled “Facilitator’s note – Services Market Access — List of Proponents’ sectors of interest”).

Statements by the eight candidates seeking to become the next WTO Director-General

What follows are excerpts from candidates’ prepared statements to the General Council, my notes of their responses to questions at their press conferences following meeting with the General Council, and my notes on their comments at webinars hosted by the Washington International Trade Association (WITA) and the Asia Society Policy Institute.

Dr. Jesus Seade Kuri (Mexico)

In his prepared statement to the General Council on July 15, Dr. Seade listed completion of the fisheries subsidies negotiations as an issue to be resolved in the first 100 days of his becoming Director-General. The Joint Statement Initiative (JSI) on E-commerce was one of a number of JSIs announced at the 11th Ministerial Confernce in Buenos Aires in 2017. Dr. Seade included all JSIs as areas where he would be expecting concrete results by June 2021.

“1. Within the first hundred days: I will work closely with
members in seeking to i. reach agreement on fisheries subsidies.” (Google translation from French).

“2. Second horizon, towards our MC12 conference, and aware of the fact that its date is not yet fixed, it is important that we look for concrete results
by June 2.021, both in joint initiatives and in issues that aim to give us a more transparent and effective WTO.” (Google translation from French).

At his press conference on July 15 after his meeting with the General Council, Dr. Seade was not asked any questions about the fisheries subsidies negotiations or about the e-commerce JSI.

WITA had a webinar with Dr. Seade on July 7. https://www.wita.org/event-videos/conversation-with-wto-dg-candidate-seade/. During the webinar, Dr. Seade was not asked specifically about either the fisheries subsidies negotiations or about the Joint Statement Initiative on E-commerce. However, he was asked a question on whether, if he was selected as the next Director-General, he would encourage plurilateral negotiations. All of the JSIs are plurilateral negotiations open to any Member who wishes to join. Below are my notes on the question asked and Dr. Seade’s response on plurilaterals.

Q: On the role of plurilaterals in the WTO, would you encourage their use if you are selected as the next Director-eneral?

A:  On plurilaterals, Dr. Seade tries to take a pragmatic and historic approach.  Looking at the history of the multilateral trading system, the Tokyo Round created a host of plurilaterals which were powerful to create rules that were accepted by many of the most important countries on a range of subjects (AD, Subsidies) — the so-called Tokyo Round Codes.  It was a great way to move the process of liberalization forward.  In Dr. Seade’s view, the great achievement in the Uruguay Round was to move to substantively universal rules (agriculture and textiles which had previously been outside of GATT rules were brought inside; the Tokyo Round Codes moved to Agreements applicable to all).  The Uruguay Round was possible because there were huge inducements for developing countries to accept services, TRIPs in exchange for textiles and agriculture liberalization.  However, the negotiating environment has changed. It is no longer possible to get liberalization through negotiations just betweenthe U.S. and the EU where the results are then accepted by others (e.g., agriculture). Now negotiations need to include China, India and others who need to be part and where large differences in objectives may make multilateral negotiations more difficult.  Therefore the WTO needs plurilaterals to permit forward movement.  However, the WTO and its Members need to work largely on the basis that any benefits from plurilaterals will be provided to all Members and that the agreement is open to any Member to join later if desired.  In Dr. Seade’s view, if the WTO doesn’t allow use of plurilaterals, progress at the WTO will stop.

Dr. Ngozi Okonjo-Iweala (Nigeria)

Dr. Okonjo-Iweala mentions both concluding the fisheries subsidies negotiations and updating the WTO rules to include rules on e-commerce. She adds the need to bridge the digital divide so that any such rules will have broader application and broader input.

“The WTO appears paralysed 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 important to ensure greater inclusion. Bridging the digital divide to enable Least Developed Countries and other developing countries to participate will be key.”

“My vision is also of a rejuvenated and strengthened WTO that will be confident to tackle effectively ongoing issues such as the fisheries negotiations. With political will, outstanding issues of subsidies that lead to overfishing and unsustainable fishing can be concluded.”

“A rejuvenated WTO must also take on fresh challenges, such as ensuring optimal complementarity between trade and the environment and ensuring that WTO rules best respond to the realities of e-commerce and the opportunities and challenges of the digital economy.”

“Should I be elected, I would work with Members to prioritize delivering a successful MC12 with good outcomes on fisheries, agriculture and other areas. I would also prioritize updating the rulebook * * *.”

During the press conference on July 15 after her meeting with the General Council, Dr. Okonjo-Iweala was asked a question on what progress in negotiations was achievable by the next Ministerial Conference and was also asked a question on how she would work towards ensuring a successful outcome on e-commerce negotiations. My notes on her responses to those questions follow.

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.

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.

WITA had a webinar with Dr. Ngozi Okonjo-Iweala on July 21. https://www.wita.org/event-videos/conversation-with-wto-dg-candidate-dr-ngozi-okonjo-iweala/. During the webinar, Dr. Okonjo-Iweala made an opening statement in which she reviewed the need to generate some early wins for the WTO at the 12th Ministerial Conference including both fisheries subsidies and e-commerce. Dr. Okonjo-Iweala was also asked speciically about e-commerce and digital trade and how to move those talks forward. Below are my notes on those portions of the webinar.

Dr. Okonjo-Iweala stated that the WTO is really at a critical moment, an existential crisis.  She believes that something needs to be done to give a lift to the organization.  Dr. Okonjo-Iweala would focus as Director-General on the next Ministerial Conference and what wins could be obtained at the Conference.  She believes that concluding the fisheries subsidies negotiations with its issues of overcapacity and overfishing should be pursued and could be concluded even before the Ministerial Conference.

Dr. Okonjo-Iweala also believes that the WTO must update the rule book to cover 21st century issues.  As she has noted, the digital economy is driving the world during the COVID-19 pandemic and is of great importance to many Members.  Dr. Okonjo-Iweala believes that the WTO needs to develop rules for e-commerce as e-commerce is the future of much of trade. At the same time, the WTO must address the digital divide so participation and benefits are available to all.

Q: On e-commerce and digital trade, how do you see rules being developed? Should the rules be based on the historic principles of the WTO?

A:  Dr. Okonjo-Iweala believes that ecommerce and digital trade are very important topics. The WTO must ensure two things. First, traditional WTO principles should apply (non-discrimination, etc.).  She believes that it would be important to get many more countries to join the talks. Stated differently, Dr. Okonjo-Iweala believes the WTO should always prefer a multilateral negotiation and agreement. However, sometimes plurilaterals are needed to make progress.  Second, the WTO working with other organizations needs to address the digital divide. In Dr. Okonjo-Iweala’s view, the fact that many developing countries are not participating flows from the fact that they don’t have the infrastructure to engage in e-commerce to a significant extent and hence neither participate in the talks nor gain benefits.  This is the digital divide.  WTO is not a financial institution, so the WTO needs to team with other organizations to help developing countries overcome the digital divide which will permit these Members to then participate in the negotiations.  Dr. Okonjo-Iweala also believes that the level of commitments under an e-commerce agreement will need to vary based on the ability of Members to accept obligations and to contribute.

Mr. Abdel-Hamid Mamdouh (Egypt)

Mr. Mamdouh’s prepared statement to the General Council on July 15 identified both fisheries subsidies and the various Joint Statement Initiatives, including e-commerce, as priorities for movement by the 12th Ministerial Conference (MC12).

“For the immediate future, we need to set clear priorities. MC12 is around the corner and it needs to be a turning point in the direction of the WTO and take it on a different path towards ‘positive territory’. I believe we need to do two things: 1) agree on a reform agenda and 2) achieve concrete progress on issues currently under negotiation.

“On current negotiating subjects, fisheries subsidies come first as the one item expected to be concluded by the end of 2020. It is crucial for our future to have a successful conclusion of the fisheries subsidies negotiations.

“There are also the Joint Statement Initiatives on e-commerce, domestic regulation in services, MSMEs and investment facilitation. These initiatives address pressing issues of importance to many Members and pause new challenges.”

During Mr. Mamdouh’s press conference after his meeting with the General Council, he was asked one question about the agenda for the twelfth Ministerial Conference which resulted in an answer that included pursuing completion of the fisheries subsidies agreement and work on the Joint Statement Initiatives. My notes on Mr. Mamdouh’s response is provided below.

Mr. Mamdouh was asked if there will be enough time to prepare for the next Ministerial to have a 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 are the likely areas for success.

WITA had a webinar with Mr. Mamdouh on June 23. https://www.wita.org/event-videos/conversation-candidate-hamid-mamdouh/. During the webinar, Mr. Mamdouh was asked a question about e-commerce and was also asked his views on plurilaterals and whether he would support their use if he becomes the next Director-General. As all of the Joint Statement Initiatives involve plurilateral negotiations, the question applies to e-commerce along with the other JSIs. Below are my notes on the questions and Mr. Mamdouh’s responses.

Q: U.S. has raised various issues of importance to them. How do you see elements of a reform agenda getting U.S. support if U.S. concerns are not addressed or included in the agenda?

A: Mr. Mamdouh indicated that U.S. concerns were being examined at the WTO. He took e-commerce as an example. Looking at the e-commerce agenda at the WTO, Mr. Mamdouh is of the view that there needs to be discussions that haven’t taken place at the WTO in a very long time.  Trade issues today are of increased complexity where issues of increased trade liberalization are juxtaposed with regulatory interests. E-commerce/digital trade has a slew of legitimate regulatory issues where Members can have very different perspectives. Examples would include privacy policies, cyber security, localization among others.  In Mr. Mamdouh’s view, these regulatory policy issues are both legitimate and of different importance to different Members.  So the question arises as to how new rules deal with these diversities of Member needs while ensuring rules that respect different needs while ensuring actions by Members are the least trade restrictive  While the Sanitary and Phytosanitary Agreement and Technical Barriers to Trade Agreement are examples of issues with similar types of competing regulatory needs, many of the new issues are as or more complex. These new complex areas are not seeing discussions to date between trade folks, regulators and lawyers to help clarify the needs, challenges and options that may be available to permit WTO progress on fashioning new rules. In Mr. Mamdouh’s view, WTO Members must do a much better job of discussing issues and clarifying them so the options can be taken back home and reviewed to permit Members to get into real negotiations.

Q: Plurilaterals can be defined as agreements by like minded countries on topics.  How do you view plurilaterals and would you support them if you were selected as the next Director-General?  Should most favored nation treatment be eliminated for plurilaterals, so the benefits of plurilateral liberalization only goes to those who are participating?

A:  In Mr. Mamdouh’s view, one needs to clarify what is meant by plurilaterals.  Are we talking about plurilateral processes or outcomes?  Mr. Mamdouh views that there are two types of plurilaterals that have been pursued over time. The first is a plurilateral process that produces plurilateral outcomes — that is where the Agreement applies only to the signatories to that agreement. These are like the agreements in Annex 4 to the WTO (civil aircraft, government procurement, dairy and bovine meat). While these can be pursued they are less likely as they require the consent of all Members.  There are also plurilateral negotiations that produce multilateral outcomes. That is, the resulting agreement provides benefits to all even though the agreement was among some of the Members.  These are quite normal and are clearly within the spirit of the WTO.  Practically, Members engaged in plurilaterals will want there to be a critical mass of Members engaged for these types of plurilateral agreements to move forward. Moreover, Mr. Mamdouh noted that there is no requirement that all Members agree to the launch of plurilateral negotiations. That is not a requirement of the WTO and should not be assumed.  On the question of whether plurilateral agreements will opt increasingly to limit benefits to members, Mr. Mamdouh believes that the concept of most favored nation treatment in plurilaterals will undergo a stress test in the coming years as there are issues re reciprocity.    

Amb. Tudor Ulianovschi (Moldova)

On July 16, Amb. Ulianovschi was the first candidate to meet with the General Council. In his prepared statement when Amb. Ulianovschi got to what he thought the immediate priorities for the new Director-General should be, completing the fisheries subsidies negotiations and making progress on Joint Statement Initiatives were two of the priorities listed.

“In terms of immediate priorities for the future Director General of the WTO, the following should be considered (including in the preparation process for MC12):

“2. Build upon the progress achieved already on the fisheries subsidies negotiations and strongly support Members to achieve a negotiated text by MC12;

* * *

“4. Further encouraging and supporting discussions on new and existing Joint Initiatives, particularly: on Elecronic Commerce, Investment Facilitation for Development, Domestic Services Regulation, as well as the dialogs of the informal group on MSMES and SMEs and others.

“5. Promoting negotiations of new commercial disciplines and address issues of the digital environment and new areas of intellectual property.”

During Amb. Ulianovschi’s press conference after his meeting with the General Council, the last question he was asked had Amb. Ulianovschi point to the Joint Statement Initiatives (which include electronic commerce) as a sign Members could make progress on reform issues. Amb. Ulianovschi was not asked specifically about either fisheries subsidies or electronic commerce. My notes on the question asked and Amb. Ulianovschi’s answer are provided below.

Q: 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.

A: Mr. Ulianovschi answered that this is an existential question for the WTO. The 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 feelings 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.

WITA held a webinar with Amb. Tudor Ulianovschi on August 26, 2020.  https://www.wita.org/event-videos/conversation-with-tudor-ulianovschi/. During the webinar, Amb. Ulianovschi was asked two questions where his response included views on the fisheries subsidies negotiations and/or on e-commerce/digital trade. My notes on the questions asked and on Amb. Ulianovschi’s responses are provided below.

Q:  If you are the next Director-General, what would be your priorities for the 2021 Ministerial Conference and how would you define success?

A:  In Amb. Ulianovschi’s view, the next Ministerial must show some results.  He believes the top priority would be completing the ongoing negotiations on fisheries subsidies, which is important to fulfill U.N. Sustainable Development Goal 14.6.  He believes that the Members are close to getting language agreed to.  Completing the fisheries subsidies agreement Is just the first step, but it is an important one.  He would also focus on ongoing Joint Statement Initiatives (JSI) such as on  digital trade/e-commerce.   JSIs are plurilateral negotiations as opposed to multilateral ones.  As seen by Members during the COVID-19 pandemic, digital trade is of growing importance.  A key question is how to help least developed countries get involved and get help building the infrastructure so such Members can participate.  Also Members will need to deal with a range of issues surround digital trade such as cybersecurity, privacy, etc.  Amb. Ulianovschi stated that a Ministerial declaration would be expected at the 2021 Ministerial on e-commerce.  He also noted that there are other JSIs as well that are being discussed.  He believes that at the next Ministerial Members should have a clear message of support for small, medium and micro enterprises.  Such enterprises are a huge issue for most Members.  Many of these businesses are being severely challenged by the COVID-19 pandemic and many will likely go bankrupt.  WTO Members need to help identify how the WTO and other organizations can work with them (financial institutions and ICC). 

Q:  You say that business as usual isn’t viable anymore.  What has changed?  If plurilateral work is where we are headed,  do we need to rethink the most favored nation principle?

A:  Amb. Ulianovschi stated that when one looks at the WTO, one sees that there is a lack of trust which in turn has meant there is lack of forward movement on negotiations.  Thus, it is clear that  business as usual isn’t working.  But that recognition doesn’t mean that the organization starts from zero.  What is clear is that things need to change.  The WTO is not responding to 21st century issues which cannot continue if the organization is to maintain relevance.  On the issue of multilateral vs. plurilateral negotiations, the only multilateral negotiation that is proceeding is on fisheries subsidies.  As noted, Amb. Ulianovschi hopes that the fisheries subsidies negotiations will be completed by the next Ministerial in 2021.  Where trust is lacking, he belives Members need to seek progress from the bottom up – finding like-minded Members who are concerned about an issue and willing to negotiate rules on the issue.  Plurilaterals are going on (JSIs are an example).  This is a good sign as plurilaterals show that a number of members are concerned with a topic.  Any plurilateral negotiation must be done in a transparent and inclusive manner.  Based on his discussions with Members, Amb. Ulianovschi knows that there is a large support for keeping MFN applicable to benefits from plurilaterals.

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

Minister Yoo in her prepared statement to the General Council identified both fisheries subsidies and the JSI on electronic commerce as priorities for the 12th Ministerial.

“MC12 will be a critical milestone of Members’ ability to deliver results and set the agenda for the future. The new Director-General must help make it a success in order to build trust in the WTO.

“A successful outcome on fisheries subsidies will demonstrate the credibility of the WTO and its ability to contribute to global objectives on sustainable development. It will also provide the world with the benefits for
trade and environmental sustainability. I will do everything I can to support these negotiations and bring them swiftly to a successful conclusion, for endorsement by Ministers at MC12.

“Electronic commerce is also an area in which we should work towards tangible outcomes. The COVID-19 pandemic has highlighted the importance of this issue. A comprehensive agreement by next summer may be ambitious, but I think we can take some concrete steps and lay out the path forward for post-MC12 work.”

During Minister Yoo’s press conference after her meeting with the General Council, she was asked questions on how she would restore trust if selected the next Director-General and how she would bring major Members onto issues being considered. Fisheries subsidies and e-commerce are mentioned in one or the other answers. My notes on the questions and answers provided are presented below.

Q: A question was asked as to how Minister Yoo would restore trust if selected as the next Director-General.

A: 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 the world that progress can happen at the WTO.

Q: 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?

A: Minister Yoo stated that the WTO needs to revitalize its negotiating function and must be able to enforce its rules (by restoring the Appellate Body). Given 21st century realities, the WTO needs to update its rule book and to achieve agreement on issues that have real global effects such as the 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.

WITA had a webinar with Minister Yoo on August 11.  https://www.wita.org/event-videos/candidate-h-e-yoo-myung-hee/. During the webinar, Minister Yoo was asked both about the e-commerce negotiations and about the ongoing fisheries subsidies negotiations. My notes on the questions and her responses are provided below.

Q: How important is it to move forward with a WTO reform agenda? In particular digital trade and e-commerce have become much more important to global trade during the pandemic.  How important is it for the WTO to address the lack of rules on digital trade and e-commerce?

A:  Minister Yoo indicated that the negotiations on e-commerce were important before the pandemic and are even more important now. Thus, it is critical to have successful negotiations.  WTO reform is very important generally.  All three pillars of the WTO — negotiations, dispute settlement and notifications and monitoring — need to be strengthened.  The WTO rule book was largely created 25 years ago.  Minister Yoo noted that the world didn’t have the smart phone or even much e-commerce back then.  So the existing WTO rules are limited in their ability to deal with current commercial reality.  It is important that the WTO achieve an agreement on e-commerce to show that the WTO can adapt to 21st century needs.  That said, Minister Yoo cautioned that Members have different views on various aspects of e-commerce.  She believes there are some low hanging fruit — e-signature and trade facilitation issues — that Members could be able to agree on relatively quickly.   However, Minister Yoo also noted that there are difficult issues in e-commerce tied to other government policy objectives — e.g., data transfer, localization — that may take longer to reach agreement on.  In tackling the more difficult set of issues, WTO Members need to look to see if the proposed rule serves a legitimate policy objective of Members.  If yes, then Members need to see if there is a way to achieve the objective in the least trade restrictive manner while facilitating e-commerce.  Considering the full set of issues that are present in the e-commerce talks, it may be too ambitious to achieve an agreement by the 12th Ministerial Conference in 2021.  Hopefully, WTO Members engaged in the talks can achieve a consolidated text by the Ministerial.  And then hopefully Members could agree on a path forward.  Minister Yoo is optimistic that Members will be able to come up with an ambitious agreement.

Q: Fisheries subsidies negotiations were hopefully going to conclude by this summer before the COVID-19 pandemic delayed negotiations. What are your thoughts on how talks can be brought to a successful conclusion?

A:  Minister Yoo stated that the fisheries subsidies negotiations are important to conclude to show the continued relevance of the WTO. The fisheries subsidies negotiations are the only multilateral talks at the WTO that are active (most others are plurilateral).  Achieving agreement on fisheries subsidies can also contribute to the UN’s sustainable development goals.  For both reasons, concluding the negotiations is very important.  Minister Yoo believes that Members should focus their energies on completing the negotiations by the end of this year so that the agreement can be endorsed by Ministers at the next Ministerial Conference in 2021.  For the next Director-General, the most urgent agenda item is to help facilitate the conclusion of the fisheries subsidies talks by the end of this year or at the very latest by the next Ministerial Conference in 2021.

H.E. Amina C. Mohamed (Kenya)

Minister Mohamed was the last candidate to appear before the General Council on July 16. Minister Mohamed did not address specifically either fisheries subsidies or the Joint Statement Initiative on e-commerce in her prepared statement to the General Council.

Similarly, during Minister Mohamed’s press conference after her meeting with the General Council, she was not asked a question dealing specifically with fisheries subsidies or the Joint Statement Initiative on e-commerce, nor did she include mention of either in answer to any of the questions asked.

WITA had a webinar with H.E. Mohamed on August 6. https://www.wita.org/event-videos/ambassador-amina-mohamed/. During the webinar, Minister Mohamed referenced digital trade in her opening comments and was asked a question about plurilateral negotiations. As noted before all of the Joint Statement Initiatives (including e-commerce) are plurilateral negotiations . My notes on her comments on these issues are provided below.

Opening statement:  Once the world recovers from the pandemic, the WTO will still face challenges of renewal and updating the rules to address global issues such as climate change, the digital revolution, and sustainable development.

Q: on developing new rules at the WTO, it has proven difficult to get agreement among all Members.  This has led to many Members turning to plurilaterals to achieve progress.  What are your views on plurilaterals?  Should MFN treatment of benefits be reconsidered where plurilateral agreements are the basis for liberalization or new rules?

A:  Minister Mohamed noted that plurilateral agreements are not new in the WTO; there were plurilateral agreements in the GATT.  She believes that plurilateral agreements will continue to be pursued and be part of the trading system.  Indeed, Minister Mohamed stated that the completion and/or start of plurilateral negotiations was a “good” that came out of the Nairobi and the Buenos Aires Ministerial Conferences in 2015 and 2017 respectively.  Countries that want to take on additional obligations will come together to negotiate new obligations for themselves.  In this way, plurilaterals complement the multilateral system.  Minister Mohamed stated that once there is a plurilateral agreement, it is important to share the benefits on an MFN basis if you want broad acceptance by Members.  Minister Mohamed had been the chair of the Nairobi Ministerial at which an update to the Information Technology Agreement (ITA2) was agreed to. Before the Ministerial, Minister Mohamed had had to travel to a number of capitals to get agreement to apply benefits on an MFN basis. At the end, the benefits of ITA2 are shared on an MFN basis and the agreement is open to all Members who want to join at a later date.  This led to unanimous acceptance of the ITA2 at Nairobi in 2015.  Minister Mohamed believes that it is important for ongoing plurilateral negotiations to ensure that the benefits are applied on MFN basis and that the agreement is open to all Members.

H.E. Mohammed Al-Tuwaijri (Saudi Arabia)

Minister Al-Tuwaijri was the first candidate to meet with the General Council on July 17. In his prepared statement, Minister Al-Tuwaijri identifies fisheries subsidies and e-commerce as two early deliverables for the WTO at the 12th Ministerial Conference in 2021.

“And finally, concerning the first question on what opportunities and solutions will emerge from current challenges, the existing delay in convening Ministers for the 12th Ministerial Conference may be a blessing in disguise. If we move quickly to take advantage of the opportunity of having an additional year to prepare, we could find and deliver solutions at MC12, particularly on fishery subsidies and electronic commerce and digital trade, which would demonstrate that the WTO can address issues in the public good – that would deliver on your goal of ‘optimal use of the world’s resources in accordance with the objective of sustainable development’ – while recognizing the contribution of e-commerce to economic growth in all markets, which has been emphatically affirmed during the COVID-19 pandemic.

“Although concluding the fishery subsidies negotiations would be a welcome sign that WTO Members can agree on something, we should not exaggerate the impression that this small step will make on our constituents. We need to aim higher, and the DG must work overtime to support a more complete agenda for the future of the WTO by MC12.”

During Minister Al-Tuwaijri’s press conference after meeting with the General Council, one question asked about WTO reform resulted in an answer by the Minister which provided both fisheries subsidies and e-commerce as issues where results by the 12th Ministerial Conference were possible. My notes on the question and Minister Al-Tuwaijri’s answer are provided below.

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 post-pandemic 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 should the WTO proceed to eliminate the gaps? From his business and government experience, Minister Al-Tuwaijri knows that this type of transformation of the WTO to a more goal-oriented organization is possible.

WITA held a webinar with Minister Al-Tuwaijri on August 5, https://www.wita.org/event-videos/director-general-candidate-he-mohammed-al-tuwaijri/. During the webinar, Minister Al-Tuwaijri was asked his views on plurilateral agreements, which include the Joint Statement Initiatives such as the one on e-commerce. My notes on the question and Minister Al-Tuwaijri’s response follows.

Q: Do you see plurilateral negotiations as a good alternative to the lack of progress in multilateral talkes?

A:  Minister Al-Tuwaijri responded that his short answer would be Yes.  Members need to be able to move on where multilateral talks are blocked or not occurring.  So in Minister Al-Tuwaijri’s view plurilateral negotiations and agreements are part of the answer.  Because plurilateral agreements have existed for some time, Minister Al-Tuwaijri is interested in why some Members don’t join the agreement over time if the agreement is open to all and provides MFN benefits.  The answer to the “why” question is important if plurilaterals are to be more effective and lead to the agreements becoming multilateral over time.

The Rt Hon Dr. Liam Fox MP (United Kingdom)

Dr. Fox was the last candidate to appear before the General Council. His prepared statement has a section which reviews what Dr. Fox considers one of the new Director-General’s first tasks, delivering a successful 12th Ministerial Conference in 2021. Among the issues to be addressed are completion of the fisheries subsidies negotiations and progress on the Joint Statement Initiatives, including on e-commerce.

“Now, one of the first tasks for a new DG will be to deliver a successful 12th Ministerial Conference. The contents are, of course, for the members to agree but it is essential that the DG works with members to produce ideas and an agenda that, yes, excites us here at the WTO but is also seen as relevant outside. It must focus on outcomes, not process, helping the real businesses – large, medium, small and micro – upon which real prosperity depends.

“So what are some of our specific challenges?

“Well, despite remaining gaps, members are perhaps closer than they have been in the past to agreeing new rules to discipline harmful fisheries subsidies, and we must push for an outcome as soon as possible to meet the SDG goal set by Leaders. But, this is not just about fish, but about showing that the WTO can take steps on sustainability more generally – an area where members are rightly bringing forward other ideas, and where the public attach great importance.

“I know many members are also keen to make progress on Joint Initiatives on e-commerce, services, MSMEs and investment – these will be an important part of the discussions in the coming months.”

During Dr. Fox’s press conference after his July 17th meeting with the General Council he was asked one question on the types of reform needed. In his answer Dr. Fox mentioned fisheries subsidies as one topic. My notes on the question and his answer are provided below.

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 and not for a technocrat at this time.

WITA had a webinar with Dr. Fox on July 30, 2020. https://www.wita.org/event-videos/conversation-with-dr-liam-fox/. During the webinar, Dr. Fox referenced each of the fisheries subsidies negotiations and updating the rules to cover e-commerce briefly. My notes on his comments are provided below.

Dr. Fox opined that the fisheries subsidies negotiations and around that the broader question of sustainability are issues which are not being addressed in the best way by the WTO Members.  The WTO and its Members don’t seem interested in using NGOs and young people who have a deep interest in the oceans by including them in the communication process so that there is better understanding that what the WTO is concerned about are issues of interest to the people of the world.  In Dr. Fox’s view, there is a disconnect between what the WTO is doing and what the general public is concerned about that has undermined the sense of joint endeavor that was important in the Uruguay Round.

Dr. Fox reviewed the importance of taking forward issues on e-commerce and trade in services. For Dr. Fox, the key question is how does the WTO bring its rule book up to date particularly on the changes in technology. Once the rule book is brought up to date, then the key is ensuring that all Members comply with the rules.

Conclusion

All eight of the candidates to become the next Director-General of the WTO view the completion of the fisheries subsidies as an important early objective and deliverable to demonstrate the WTO’s continued relevance. An agreement on fisheries subsidies would also help support the UN’s sustainable development goals.

All candidates also understand that there is an urgent need to update the WTO’s rule book with the most obvious example being the lack of agreed rules on electronic commerce and digital trade. All recognize that the role of digital trade has been critical to help countries during the COVID-19 pandemic and will be a critical aspect of global trade in goods and services going forward. The Joint Statement Initiative on e-commerce announced at the 2017 Buenos Aires Ministerial Conference currently has more than 80 WTO Members participating in the negotiations. Those Members account for more than 90% of global e-commerce. Reports from the co-convenors indicate the likelihood that there will be at least a consolidated text available by the next Ministerial Conference to be held in 2021. However, because the JSI is a plurilateral negotiation and not a multilateral one, it is envisioned that benefits will be available on an MFN basis (i.e., to all Members of the WTO whether part of the negotiations or not) and that the agreement will be open to all Members to join as desired.

The race to become the next WTO Director-General – where the candidates stand on important issues: convergence vs. coexistence of different economic systems; possible reform of rules to address distortions from such economic systems – Part 2, comments by the candidates

[Updated on August 27 to incorporate comments by Amb. Tudor Ulianovschi of Moldova at a WITA webinar held on August 26.]

In a post on August 17, I provided background on a group of issues that are important to various Members though opposed by some that for shorthand will simply be referred to issues surrounding WTO rules’ applicability to economies operating differently than market economies. See August 17, 2020, The race to become the next WTO Director-General – where the candidates stand on important issues:  convergence vs. coexistence of different economic systems; possible reform of rules to address distortions from such economic systems – Part 1, background on issues, https://currentthoughtsontrade.com/2020/08/17/the-race-to-become-the-next-wto-director-general-where-the-candidates-stand-on-important-issues-convergence-vs-coexistence-of-different-economic-systems-possible-reform-of-rules-to-address-dist/.

What follows is a review by candidate of his/her prepared statement to the General Council (Juy 15-17, 2020), my notes from the press conference for each candidate which followed immediately after his or her meeting with the General Council and my notes on each candidate’s webinar organized by the Washington International Trade Association (WITA) and generally also by the Asia Society Policy Institute (ASPI).

Dr. Jesus Seade Kuri (Mexico)

Dr. Seade did not in his prepared comments address directly any of the issues surrounding the question of compatibility of different economic systems with the WTO rules, or whether changes in rules to address some of the distortions perceived to be caused by economic systems which vary widely from market-economy structures are needed. Dr. Seade did include at the end of his prepared statement an indication of neutrality to all Members.

“All along my career I have worked with Ministers and legislators, often Heads of State. I present myself to you with my fullest energy, passion and experience, at a difficult time for the WTO. My commitment is to achieve with you the reform and restoration of a WTO back at the center of global governance for the benefit of world economic growth. My solemn commitment to you is to be an effective DG and interlocutor, close to all members north and south, east and west, and indeed fully equidistant from you all.”

During the press conference held after his meeting on July 15 with the General Counsel, Dr. Seade was not asked a question dealing with any of the issues surrounding different economic systems.

WITA had a webinar with Dr. Seade on July 7. https://www.wita.org/event-videos/conversation-with-wto-dg-candidate-seade/. During the webinar, Dr. Seade was asked several questions that dealt with U.S.-China tensions. My notes on Dr. Seade’s responses (and on at least one of the questions) follow.

The animosity between the United States and China in a way is understandable.  The hardest part of negotiations during the Uruguay Round for GATT Contracting Parties to conclude was not the agriculture negotiations or the negotiations on intellectual property but rather the negotiations on antidumping.  To simplify, the antidumping negotiations pitted the U.S. and EU against the Asian tigers who were excessively competitive and creating problems in world markets.  But the Asian tigers were much smaller in size than China is today and were much more market oriented than China is today.  So the chasm in the system was much smaller than what exists today   So it is not surprising that there is a big challenge today.  But challenges are there to be met and solutions found. Dr. Seade is convinced that China will want to respond to avoid chaos in the system.  Once they view the U.S. as serious about engaging, China will want to know what they need to do to get the WTO functioning again.  The same question should apply to the U.S. and the EU.  So we should be able to save the system.

Question on the U.S.-China dynamic: USTR Lighthizer has indicated he has three criteria for next DG – he or she must support a robust reform agenda; he or she must acknowledge that the current system doesn’t adequately deal with China’s economy and state trading practices; he or she can’t have a “wiff” of anti-Americanism.  China may have a different set of priorities.  How do you get US and China to do business in the WTO? 

Dr. Seade response:  on the US-China conflict, how do you handle China?  One way is through dispute settlement.  To date there have been 44 cases brought by WTO Members against China.  This is a good way to address problems a Member has with another Member, and it has worked.  We have to resolve the problems with the dispute settlement system and make it work better. At the same time, there are initiatives that have been begun by the US (e.g., EU, Japan and US) on industrial subsidies.  Dr. Seade believes that it is really for US to work out with China how to incorporate more disciplines on industrial subsidies or other issues. This will likely require the U.S. and others to add items of interest to China to make negotiations more acceptable to China.  While China is a tough negotiator, China will not risk bringing down the WTO.  In Dr. Seade’s view, the most important thing China has done in last fifty years other than the start of the reform process back in 1978 was joining the WTO.  So we need to amend the dispute settlement system which would be a good starting point to helping address existing problems.  Dr. Seade agrees with the U.S. that there have not been real negotiations on most agreement areas in the last 25 years. As China was not part of WTO in the 1990s, there can be little question that rules need to be updated both to reflect changing trade realities and to incorporate China in the process and resulting rules.   

Dr. Ngozi Okonjo-Iweala (Nigeria)

Dr. Okonjo-Iweala in her prepared statement reflected that Members have differenting views on “new or enhanced rules” identifying state-owned enterprises (SOEs) but by implication including industrial subsidies.

“Members’ views differ on a number of fundamental issues, such as special and differential treatment or the need for the WTO to tackle new issues and develop new or enhanced rules to deal with SOEs and agricultural subsidies, for example. Trade tensions among the membership have flared up, threatening the fundamental architecture of the MTS. With all these, the WTO, unfortunately, is now perceived by some as an inefficient organization that has failed to keep abreast of developments in the global economy.”

Her prepared statement goes through a range of issues that need to be addressed by the WTO but does not include in that list any of the issues flowing from different economic systems. Dr. Okonjo-Iweala does link being able to renew the WTO to getting Members to recall core objectives and principles. The objectives and principles to many would be understood to require updating rules so that different economic systems are subject to effective rules to eliminate or minimize distortions.

“Renewing and improving the organization will require recalling the core objectives and principles on which the MTS was built – the value of open trade, competition and non-discrimination, security and predictability of market access, and transparency. These principles have contributed to economic growth and development and will continue to do so if Members renew their commitment to them.”

During the press conference on July 15th after Dr. Okonjo-Iweala had met with the General Council, she was asked one question about what she would say to the U.S. about staying in the WTO. The question doesn’t directly address different economic systems, but concerns about U.S. staying in the WTO are generally understood to reflect U.S. problems with many aspects of the WTO including rules which do not effectively address distortions created by non-market economies. My notes on Dr. Okonjo-Iweala’s answer to the question are provided below.

On the question of why the U.S. should stay in the WTO, Dr. Okonjo-Iweala indicated she would communicate to the U.S. that the WTO delivers for all Members. The GATT and WTO have provided shared prosperity which has lifted millions of people 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.

WITA had a webinar with Dr. Ngozi Okonjo-Iweala on July 21. https://www.wita.org/event-videos/conversation-with-wto-dg-candidate-dr-ngozi-okonjo-iweala/. During the webinar, Dr. Okonjo-Iweala was asked a number of questions that resulted in answers that touched on tension between the U.S. and China, industrial subsidies and more. My notes on Dr. Okonjo-Iweala’s responses and to some of the questions follows:

Q: On the important issue of building trust between Members, there are major differences between the U.S. and China, including (for the U.S.) whether existing WTO rules adequately discipline Chinese policies and (for China) whether US is abiding by the rules.  What do you see to be the main challenges to building trust among Members to permit a reform agenda to move forward?

A:  Dr. Okonjo-Iweala noted that building trust between the Members is critical.  When developed countries bring an agenda item to the WTO, developing countries may view the issue as not in their interest (and vice versa) because of a lack of trust.  On the conflicts between the U.S. and China, we need to find areas of common interest for the two Members. We are used to looking at what are the differences between the Members, but we should be looking for common interests among Members. If we can use those common interests to accomplish incremental progress, that will help build trust..  You build trust negotiation by negotiation (using the issue of special and differential treatment as example).  If we can solve any problem, it helps build trust.  Another way to build trust between developed and developing Members is to conclude the fisheries subsidies negotiations taking into account the needs of individual Members.  If the WTO Members can wrap up those negotiations, the success will start to build trust. 

Q: On resetting of tariff commitments (comment from USTR Lighthizer as a problem within the WTO based on changing economic development of many countries), would this be in the best interest of the system? 

A:  This is a critical question and issue.  Renegotiating any agreement would require consensus building that would be very difficult to achieve.  That would certainly be true on bound tariffs. The balance of rights and obligations raised by the United States flows from the concerns about state-led economies and state-owned enterprises and whether such economies belong in the system.  Dr. Okonjo-Iweala stated that the WTO is not there to comment on the economy of any Member.  In her view, the key question is what disciplines does the WTO have around any issue that arises.  Are the disciplines sufficient to address the imbalances in rights and obligations that may arise?  We need to start there.  What are the fundamental issues —  state-owned enterprises (SOEs), public body.  Can we come to agreement on the meaning of the term public body?  Can we tighten subsidy disciplines that already exist or can we negotiate new subsidy or other disciplines to address the concerns that arise from these types of economies? That is the approach all Members should be pursuing. 

Q: On industrial subsidies, China has signaled that they will oppose tightening disciplines.  The U.S., EU and Japan have been working on a proposal and discussing with some Members.  How can the Director-General help the membership navigate these issues? 

A:  If Dr. Okonjo-Iweala becomes the next Director-General, she would encourage that proposals from the U.S., EU and Japan be tabled so all Members can see what they are and how acceptable they are to other Members (including China).  Let’s start to work with an actual proposal.  Sometimes countries are not as far away as one might think.  Members need to work on a specific proposal and see what happens.

Mr. Abdel-Hamid Mamdouh (Egypt)

Mr. Mamdouh in his prepared statement to the General Council on July 15 made only one reference to the issues pertaining to differences in economic systems when he acknowledged that addressing industrial subsidies should be a priority.

“Reviving the built-in agenda of agriculture and services must be a priority because WTO Members agreed on this, and it has not happened. Trade distorting subsidies, both agricultural and industrial, will also be a priority.”

During Mr. Mamdouh’s press conference on July 15 after his meeting with the General Council, Mr. Mamdouh was asked one question about the U.S.-China conflicts. My notes on his response to the question are provided below.

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, Members must keep in mind that bilateral disputes and solutions have effects on other Members. Moreover, bilateral solutions are less likely to be effective and are likely to be short lived.

WITA had a webinar with Mr. Mamdouh on June 23. https://www.wita.org/event-videos/conversation-candidate-hamid-mamdouh/. During the webinar, Mr. Mamdouh was asked various questions that dealt with the U.S.-China conflicts, need for better rules on industrial subsidies, state-owned enterprises and more. My notes on Mr. Mamdouh’s response and to some of the questions follows.

Q:  Why are you well suited to deal with the deep and potentially ruinous conflicts between US, China, EU?  How would you get these big powers to do business with each other?

A:   Mr. Mamdouh responded that this issue is the first frontier for a new Director-General.  The key is to have the right attitude toward the conversation (less political).  The types of problems that Members face deal with noncompliance and with inadequacy of rules.  Both need to be handled. The issues must be addressed in an intellectually honest and politically courageous way if there is to be progress.  In the past, reform occurred at the GATT when there was a perceived threat to the survival of the system.  Mr. Mamdouh believes that the WTO is facing such a threat now.  Do WTO Members have a common purpose?  Do Members need a WTO?  If the answer to the latter question is no, the conversation among Members has nowhere to go.  It is in everybody’s interest to have the answer to the question be “yes”.  For progress, the Director-General needs to bring the players to the table to identify problems with the current system.  The system needs more transparency.  For progress, it is important to keep the conversation at the level of looking at the contract and whether the contract adequately addresses the problems identified.  If the contract is not adequate to the current needs, then WTO Members must modify the contract.

Q:  is the near death experience the WTO is experiencing now an opportunity to move to a meaningful reform agenda?

A:  Mr. Mamdouh responded that yes the current crisis can lead to a meaningful reform agenda, if there is the political will of the Members.  But political will can only be generated if there is a common purpose. 

The WTO needs to address issues of interest to Members, including those raised by the US (e.g., e-commerce, SOEs, forced technology transfer).  Increasingly, the WTO is facing complex issues that go beyond simple trade liberalization but also deal with regulatory objectives. In these complex areas, such as e-commerce, the WTO Members need to find ways to accomplish differing regulatory objectives in a least trade restrictive manner. That can only be accomplished if there is a thorough discussion of the regulatory needs and development of factual information on possible trade options that can be taken back to capitals for review and for negotiation.  Unfortunately, the deliberative function has nearly died at the WTO. To address the increasingly complex issues of importance to Members, the WTO needs to restore the deliberative function.

Amb. Tudor Ulianovschi (Moldova)

Amb. Ulianovschi’s prepared statement that he provided to the General Council on July 16 doesn’t contain direct reference to any of the issues dealing with different economic systems. Amb. Ulianovschi does indirectly reference the need to address other important issues through negotiations.

“In terms of immediate priorities for the future Director General of the WTO, the following should be considered (including in the preparation process for MC12): * * *

“3. Facilitating dialogue with Members regarding on-going negotiations on the remaining and other important issues.”

During the July 16th press conference following Amb. Ulianovschi’s General Council meeting, Amb. Ulianovschi was asked a question about U.S.-China conflict and how he, as Director-General, would be able to reduce tensions. My notes on his response to the question are provided below.

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 the same time, the Director-General is not there to impose a 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.

WITA held a webinar with Amb. Tudor Ulianovschi on August 26, 2020, https://www.wita.org/event-videos/conversation-with-tudor-ulianovschi/. During the webinar, Amb. Ulianovschi was asked several questions where answers dealt with some aspect of the U.S.-China conflict, differences in economic system, need for improved rules, etc. My notes on the questions and responses from Amb. Ulianovschi follow.

Q:  How important is it to have a reform agenda, and how can you convince the major Members to agree on a common agenda?

A:    Amb. Ulianovschi stated that reform is absolutely necessary.  In his view, cosmetic reform is not sufficient, a fact made clear by major Members.  Amb. Ulianovschi believes that political experience and dialogue by the Director-General will be key to get those who have put forward proposals to get into a discussion that is inclusive and transparent.  There are a large number of issues that are affecting the environment at the WTO.  For example, the current situation between the U.S. and China is affecting the system. 

Q:  US-China relations and how it affects the WTO.  Amb. Lighthizer says he is looking for a Director-General who recognizes that the current system doesn’t address Chinese trade practices and that changes need to be made.  Do you agree?  There has been some work done by the U.S., EU and Japan on industrial subsidies and other topics.  Would you support improving industrial subsidies?

A:  Amb. Ulianovschi believes that the topic has to be of priority for the next Director-General.  The Director-General can provide his/her good offices to the U.S. and China to take up any issue, but such discussions must be consensual.  Based on Amb. Ulianovschi’s conversations with the broader membership, he knows that there is interest by many on the spillover effects on other economies from the US-China conflict.  Having said that, Amb. Ulianovschi reiterated the need for the organization to have a Director-General with political experience not to politicize the organization but to reach out to the decision makers and raise awareness of the concerns of the larger membership and encourage the two Members to sit down and discuss issues they consider appropriate.  On industrial subsidies and other issues, we need to have more indepth discussions at the WTO to have a better understanding of the issues, coverage of the current rules and the existing situation.  As a member driven organization, the incoming Director-General will have to see whether the membership is willing to move to more discipline on industrial subsidies.  Amb. Ulianovschi also believes  that a review of transparency and notifications could be useful.  An open, sincere dialogue based on timely and full information would lead to a better understanding of the issues of concern and then lead to a better decision making process to address the issues.

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

Minister Yoo included a general reference in her July 16 prepared statement to the General Council to “sensitive” proposals for reform which presumably include the U.S. proposal on non-market economies and the efforts by the European Union, Japan and United States to tighten disciplines on industrial subsidies.

“I am well aware of the proposals that Members have put forward on WTO reform. I also know how sensitive these issues can be to individual Members. A high degree of trust among Members must be the starting point in exploring cooperative solutions.”

Minister Yoo was not asked a question during her press conference that dealt with different economic systems or distortions flowing therefrom.

WITA had a webinar with Minister Yoo on August 11.  https://www.wita.org/event-videos/candidate-h-e-yoo-myung-hee/. Minister Yoo was asked some questions on how she would address the U.S.-China conflicts and the U.S. view that the current WTO rules don’t adequately address the market distortions caused by the Chinese economic model. Below I provide my notes on the questions and Minister Yoo’s responses.

Q: In prepared statement you mention you can serve as a bridge between US and China.  Please elaborate.  Second, Amb. Lighthizer is looking for a Director-General who recognizes that current rules don’t adequately discipline China. Do you agree there is a problem in terms of adequacy of WTO rules for China’s policies?

A:  On the first issue of serving as a bridge, Minister Yoo believes that the WTO can provide a good place for US-China issues to be addressed if the negotiating function is working.  In her view, part of the problem which has led to actions outside of the WTO has been the lack of progress on negotiations.  Thus, Minister Yoo believes WTO Members need to revitalize the negotiating function, so Members will use the WTO to ensure adequacy of rules in an evolving world.  Minister Yoo believes the next Director-General needs to engage in dialogue with the U.S. and China to find and understand the real issues between them.  Minister Yoo reviewed that she has done negotiations with both the United States and China.  She believes that she can use that experience to engage in dialogue with each country and find commonalities between them among the real issues.  By focusing on commonalities, Minister Yoo believes that one can find a path forward to achieve a negotiated success, even if small, and build trust.  After finding small successes, the Members then move forward to address the more challenging issues.

On the second question relating to Amb. Lighthizer’s concern that current rules are not sufficient to discipline China’s practices, Minister Yoo believes one needs to look at the rule book.  In her view, all policies adopted by governments can have spillover effects on trade.  If policies do have such spillover effects and are not covered by existing WTO rules, one needs to evaluate whether the policies are consistent with WTO principles (fair competition, nondiscrimination, etc.).  If a policy is not consistent with WTO principles and has spillover effects on trade, one must determine if current rules can be used to address the policy. If not, then the WTO needs to look at whether modifications to existing rules or the addition of new rules are needed.  Minister Yoo believes Members will need to be willing to engage in this type of process.

H.E. Amina C. Mohamed (Kenya)

Like other candidates, Minister Mohamed didn’t directly address the issue of different economic models reflecting the conflicting positions of some major Members. Rather, Minister Mohamed acknowledged that there were different reform priorities for different Members and that Members needed to get past the challenges in current negotiating approaches. The following four paragraphs from Minister Mohamed’s prepared statement to the General Council on July 16 provides some general comments on the road forward which can be viewed as applicable to differing economic models and many other contentious issues.

“12. You do not all share the same reform priorities. This makes it essential to work together for convergence around elements that all can support. We need to break the cycle of despair and enter into a new phase of hope and realism.

“13. 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.

“14. The WTO has to engage again in good faith negotiations, and this means openness to change and to new ideas, within a culture of inclusiveness and transparency.

’15. 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.”

During Minister Mohamed’s press conference on July 16 after her meeting with the General Council, she received two general questions about how she would work with major players to resolve trade tensions. Below is my summary of the questions asked and her response.

Q: If selected as the next Director-Generaly, will you be more engaged in resolving trade tensions between major players? If yes, what tactics would you use?

A: 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, to use the good offices of the Director-General. So while the Director-General has only limited powers, those powers ca be used effectively by a Director-General to help Members to use the WTO system to resolve differences.

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.

WITA had a webinar with H.E. Mohamed on August 6. https://www.wita.org/event-videos/ambassador-amina-mohamed/. During the webinar, Minister Mohamed addressed briefly the rise of China as a major trading nation and was asked about whether current WTO rules adequately address distortions that flow from China’s policies. My notes from Minister Mohamed’s comments follow.

Minister Mohamed stated that since the WTO was set up in 1995, new and powerful players have emerged onto the trade scene, in particular China.  The resulting tensions with the United States have fed the dysfunction within the WTO.  Minister Mohamed believes that to address the tensions, the WTO needs to pursue reform.  However, governments don’t share the same reform priorities.  The WTO needs to identify issues all can support if reform is to move forward. 

Q: Amb. Lighthizer has raised his concern that the current WTO rules are not capable of disciplining conduct of non-market economies, particularly China.  Do you agree?  How would you go about finding common ground?

A:  Minister Mohamed’s response was that one needs to start by looking at the existing rule book.  The rule book is outdated in some cases.  Moreover, some rules are weak and are being circumvented.  If you have candid discussions with WTO Members, you will find the problems are with the adequacy of the rules.  If the rules are inadequate, WTO Members need to address them to achieve modifications or new rules.  For example, the U.S.-EU-Japan effort on industrial subsidies is potentially important.  If Minister Mohamed becomes the next Director-General she would urge the U.S., EU and Japan to table their proposal, so all WTO Members can discuss what are being raised as the real issues.  It is important to understand what conduct is driving up the tension between Members.

H.E. Mohammad Al-Tuwaijri (Saudi Arabia)

Minister Al-Tuwaijri was the first candidate the General Council met with on July 17. In his prepared statement, Minister Al-Tuwaijri did not directly address the issue of different economic systems and the potential distortions created by non-market economies. Rather he indicated that any negotiating agenda would work only where all Members view the agenda as including items of interest to them. Applied to different economic systems, this would suggest that for negotiations to occur on the topic it would have to be part of a larger package of issues of interest to those Members (like China) who would potentially perceive themselves the target of the industrial subsidies issue or the differing economic systems issue.

“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.”

At the press conference after his meeting with the General Council, Minister Al-Tuwaijri was not asked any questions dealing with the issue of differing economic systems or on industrial subsidies.

WITA had a webinar with H.E. Al-Tuwaijri on August 5. https://www.wita.org/event-videos/director-general-candidate-he-mohammed-al-tuwaijri/. During the webinar, Minister Al-Tuwaijri was asked several questions dealing with the relationship between some of the major trading Members (U.S., China, EU) and specifically whether he supported negotiations on industrial subsidies to address U.S. concerns that existing rules don’t discipline the policies of China. Below are my notes on the questions asked and answers provided.

Q: Can you have a successful launch of a reform agenda if the leaders in key Members (China, US, EU) aren’t committed to help you make it work?  In the first six months as the new Director-General if selected, how would you get these Members to buy into a reform ageanda?

A:  Minister Al-Tuwaijri started his response by noting his involvement in working with G20 countries where the major WTO Members are involved. He noted that one of the issues G20 countries have supported is engaging in reform at the WTO.  Individual countries may have different views on reform — how, when, and what — but all agree reform is needed.  Minister Al-Tuwaijri believes that six-months is too long a period to determine if there is support among the major Members for a reform initiative.  He believes that within the first two – three months of becoming the next Director-General he should know if the intent of the major Members is to support reform or not.  He would reach out with a specific set of questions (e.g., here are top five issues for reform discussions) and seek input on where Members are on a willingness to address the issues.  Minister Al-Tuwaijri has the ability to reach out to the major Members and be viewed as an honest broker.  Saudi Arabia has always been a neutral country and has been serving as President this year in the G20. 

Q:  On China, Amb. Lighthizer is looking for a candidate to be the next Director-General who understands that the current WTO rules don’t discipline China.  Do you agree that the current rules don’t adequately discipline China?  Would you support efforts to improve disciplines on industrial subsidies?

A:  Minister Al-Tuwaijri supports all efforts of WTO Members to engage in negotiations.  China is a major country and major trading nation.  He believes that the more that is done to promote negotiations and promote timely resolution of issues, the better it is for restoring the negotiation function.  He believes that the U.S. and China should bring all of their issues with each other to the table.  He knows that there are many.  But WTO Members need to move the negotiating process forward to ensure rules are adequate.

The Rt Hon Dr. Liam Fox MP (United Kingdom)

Dr. Fox was the last of the candidates to meet with the General Council and the second candidate who met on July 17. His prepared statement talks about the array of issues likely to be addressed heading into the twelfth Ministerial Conference in 2021 and the agreed need for broader reform. However, he does not mention in his prepared statement the issues surrounding different economic systems or the need for revised rules on industrial subsidies.

During Dr. Fox’s press conference on July 17, he was asked one question that was broad but fairly did include the U.S. effort to address non-market economies (how would you deal with the broad U.S. concerns with the WTO). Dr. Fox viewed the main U.S. concerns as being with the Appellate Body and limited his remarks to that issue.

He was asked a different question on why the multilateral trading system is important to large parties. My notes on his response are provided below.

Q: Why is the multilateral trading system important to the large parties?

A: 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 what currently exists, what is the credibility of new rules signed onto later? He stated that all Members have benefited 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.

WITA had a webinar with Dr. Fox on July 30, 2020. https://www.wita.org/event-videos/conversation-with-dr-liam-fox/. During the webinar, Dr. Fox was asked several questions about China, including whether existing rules adequately discipline China’s policies and whether new negotiations on industrial subsidies are needed. My notes on the questions asked and Dr. Fox’s responses are provided below.

Q:  USTR Lighthizer has indicated there are three factors he is looking for in considering candidates for the Director-General post: (1) no anti-Americanism; (2) a belief that there is a need for broad reform at the WTO; and (3) someone who understands that the current WTO rules don’t adequately discipline China’s policies.  Do you agree with Amb. Lighthizer’s last point on the need for new rules to address Chinese policies?

A:  Dr. Fox’s answer dealt with all three factors including that he is not anti-America. He also believes there is a need broad-based reform.  In Dr. Fox’s view, the reform needed is both internal at the Secretariat as well as in changing the rule book.  For example, Dr. Fox had had dozens of meetings by the time of the webinar with WTO Members. Many countries felt that if you weren’t a large Member or a squeeky wheel, your voices were not heard.  In Dr. Fox’s view, the next Director-General needs to review the operation of WTO Secretariat to be sure all Members can be heard and improve the outreach to all Members and listening to their views and concerns.   Dr. Fox believes that there is also a need to reform how the WTO operates during negotiations.  He used the example of the fisheries subsidies negotiations. He opined that better outreach to NGOs and other groups about the negotiations and encouraging their engagement with Members would help constituencies better understand that the WTO is engaged in issues that are importance to them. The failure to have such engagement can undermine the concept of shared endeavor which is important to forward movement at the WTO.  So different forms of reform are needed at the WTO.

On the question about whether rules adequately discipline the policies of China, Dr. Fox stated that reform is not about focusing on any one country.  He stated that, of course, all Members must comply with the existing rules.  In his view, Members need an effective dispute resolution system to ensure such compliance.  Beyond that, the question is how do WTO Members take forward and address common challenges (e.g., e-commerce).  The key for the WTO is to bring the rule book up to date with the changing commercial realities.  Up-to-date rules and getting all Members to comply are the main objectives of reform.

Q:  what about industrial subsidies.  Is this an area that needs to be updated.

A:  Dr. Fox indicated that WTO Members have a lack of trust in each other.  One way to improve trust is to improve transparency.  Dr. Fox used as an example, efforts by the OECD to quantify subsidies to aluminum producers around the world. He had visited the OECD recently and heard from them about the extraordinary efforts they went to to make up for a lack of available data on items like production capacity and production. The efforts undertaken were both expensive and time consuming.  The example of aluminum indicates that it is important to improve objective data that are provided by Members to the WTO.  If WTO Members want improved transparency and improved accuracy of information provided, the WTO also will need to find better ways to verify data submitted.

Conclusion

The question of whether non-market economies or state-directed economies or state-capitalist economies properly fit within the WTO Agreements was not addressed by any candidate, though Dr. Okonjo-Iweala took the position that the nature of the economic system of any Member was not an issue for the WTO to consider.

On whether the current rules of the WTO adequately discipline the policies of China (and more broadly other non-market economies), candidates generally were of the view that the reform process should permit an evaluation of the changing global landscape and developments and where issues were not addressed or inadequately addressed by current rules, Members should consider what changes would be appropriate. Dr. Seade noted that since China was not part of the GATT in the 1990s during the Uruguay Round negotiations, with all the change that has occurred in the first 25 years of the WTO and limited update of rules, there is little doubt that rules need to be updated both to address practices of new Members and to incorporate their views on needed updates. Minister Yoo suggested a somewhat similar approach.

On the question of the need for an update to the rules on industrial subsidies, Minister Mohamed and Dr. Okonjo-Iweala were of the view that the proposal being worked on by the U.S., EU and Japan should be tabled in Geneva so all Members could start the process of understanding the concerns and appropriateness of the approaches recommended to address. Mr. Mamdouh included updating industrial subsidies rules as one of the priority issues to be addressed by the WTO.

The race to become the next WTO Director-General — where the candidates stand on important issues: convergence vs. coexistence of different economic systems; possible reform of rules to address distortions from such economic systems – Part 1, Background on issues

Background

When China acceded to the World Trade Organization in 2001, it had had a long working party process as WTO Members focused on the wide array of changes to laws, regulations and practices that China would need to undertake to have an economic system and policies that were consistent with WTO norms. China made many changes to its policies ahead of accession. However, the extent of modifications needed to the Chinese system that were still not accomplished by 2001 meant that the Protocol of Accession and the Working Party Report that China and WTO Members agreed to were unprecedented in terms of the number of additional changes that needed to be made for China’s system to be compatible with WTO norms. Indeed, periodic reviews over a decade were included of China’s actions to permit other WTO Members to understand the extent of compliance with the wide ranging modifications still needed. As China was moving from a state-controlled economy towards a market economy, WTO Members insisted on special rules to address some of the likely distortions a large economy like China with significant state controls was anticipated to create. A country-specific safeguard and special recognition of nonmarket economy provisions in trade remedies were included in the Protocol of Accession. While China accepted all three provisions to obtain membership in the WTO, China always expressed its views that these additional provisions were discriminatory and an effort to hold China back in terms of economic growth.

While China continued to make progress in its reform program for a number of years after acceding to the WTO, beginning with the financial crisis of 2008-2009 China reversed direction and increased the importance of state-owned and state-invested enterprises, state planning and state control of a wide array of factors of production. A former Director-General of the WTO and former EC Trade Commissioner reviewed the challenges for market economy countries in dealing with a country with a large share of its economy controlled by the state. See July 27, 2020, Pascal Lamy’s recent comments on the challenges facing the WTO, https://currentthoughtsontrade.com/2020/07/27/pascal-lamys-recent-comments-on-the-challenges-facing-the-wto/.

Many major trading partners have worked with China since its WTO accession to address perceived distortions flowing from its economic system and to help China handle the obligations it had undertaken upon joining the WTO. Many commitments for change were made by China with limited actual forward movement achieved in the views of at least some trading partners. Members like the United States undertake their own annual review of China’s compliance with WTO obligations in an effort to chronicle China’s changing economic system and whether there are distortions of concern to China’s trading partners. See, e.g., U.S. Trade Representative, 2019 Report to Congress on China’s WTO Compliance (March 2020)(embedded below). As stated on page 4:

“Over the past nearly two decades, a variety of bilateral and multilateral efforts were pursued by the United States and other WTO members to address the unique challenges presented by China’s WTO membership. However, even though these efforts were persistent, they did not result in meaningful changes in China’s approach to the economy and trade.

“In our past reports, we identified and explained the numerous policies and practices pursued by China that harm and disadvantage U.S. companies and workers, often severely. We also catalogued the United States’ persistent yet unsuccessful efforts to resolve the many concerns that have arisen in our trade relationship with China. We found that a consistent pattern existed where the United States raised a particular concern, China specifically promised to address that concern, and China’s promise was not fulfilled.

“The costs associated with China’s unfair and distortive policies and practices have been substantial. For example, China’s non-market economic system and the industrial policies that flow from it have systematically distorted critical sectors of the global economy such as steel and aluminum, devastating markets in the United States and other industrialized countries. China also continues to block valuable sectors of its economy from foreign competition, particularly services sectors. At the same time, China’s industrial policies are increasingly responsible for displacing companies in new, emerging sectors of the global economy, as the Chinese government and the Chinese Communist Party powerfully intervene on behalf of China’s domestic industries. Companies in economies disciplined by the market cannot effectively compete with both Chinese companies and the Chinese state.”

2019_Report_on_Chinas_WTO_Compliance

The 11th Ministerial Conference and a Joint Statement by EU, Japan and the United States

The challenges of China’s economic system have been felt in many global industries in a number of ways. There has been massive excess capacity created by China’s policies (and those of some other countries). Efforts to address excess capacity in steel proved unsuccessful. But literally dozens of industries faced excess capacity in China which has resulted in flooded global markets and harm to competing producers in other countries.

At the same time there have been major concerns about forced technology transfers for companies wanting to operate in China, a myriad and changing set of barriers (formal and informal) discriminating against imports and foreign owned enterprises in certain sectors.

By the 11th WTO Ministerial Conference, the United States, European Union and Japan had decided more formal action was needed to address the ongoing distortions being created by China and other countries emulating the Chinese model of economic system. At the end of the Conference, the three WTO Members issued a joint statement which stated in large part,

“We shared the view that severe excess capacity in key sectors exacerbated by government-financed and supported capacity expansion, unfair competitive conditions caused by large market-distorting subsidies and state owned enterprises, forced technology transfer, and local content requirements and preferences are serious concerns for the proper functioning of international trade, the creation of innovative technologies and the sustainable growth of the global economy.

“We, to address this critical concern, agreed to enhance trilateral cooperation in the WTO and in other forums, as appropriate, to eliminate these and other unfair market distorting and protectionist practices by third countries.”

https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/december/joint-statement-united-states

There have been a series of meetings of the three trade ministers since then providing an update on their joint efforts. A joint statement in January 2020 outlined the types of industrial subsidies where the three major WTO Members believed greater disciplines were needed and outlined other areas where joint efforts were underway. The 2018, 2019 and 2020 joint statements can be found here, with the 2020 statement embedded after the links. See Joint Statement on Trilateral Meeting of the Trade Ministers of the United States, Japan, and the European Union, 09/25/2018, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/august/statement-meetings-between-united; Joint Statement of the Trilateral Meeting of the Trade Ministers of the United States, European Union, and Japan, 05/23/2019, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/may/joint-statement-trilateral-meeting; Joint Statement of the Trilateral Meeting of the Trade Ministers of Japan, the United States, and the European Union, 01/14/2020, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/january/joint-statement-trilateral-meeting-trade-ministers-japan-united-states-and-european-union.

1-14-2020-Joint-Statement-of-the-Trilateral-Meeting-of-the-Trade-Ministers-of-Japan-the-United-States-and-the-European-Union-_-United-States-Trade-Representative

U.S. Section 301 Investigation of Certain Chinese Policies, U.S. imposition of tariffs and Chinese retaliation

In August 2017, the U.S. Trade Representative initiated an investigation on certain of China’s Acts, Policies and Practices Related to Technology Transfer, Intellectual Property, and Innovation. 82 Fed. Reg. 40,213-40,215 (Aug. 24, 2017). The investigation resulted in a determination by USTR on March 22, 2018 that various Chinese acts, policies and practices violated Section 301 of the Trade Act of 194, as amended. The President authorized the imposition of additional duties to encourage China to address the problems raised. China retaliated and through a series of further escalations, the U.S. has imposed additional duties on some $350 billion of imports from China and China has imposed additional duties on the vast majority of U.S. exports to China. The 301 report and supplement are embedded below.

Section-301-FINAL

301-Report-Update

The United States viewed the Section 301 investigation as necessary to address practices of China not addressed by WTO rules or not adequately addressed. China viewed the investigation as not permitted under WTO rules. The trade conflict and efforts to find a solution, resulted in a Phase 1 Agreement between the United States and China with most additional duties remaining in place, some substantive changes made on some issues of concern to the United States and a Phase 2 negotiation to resolve outstanding issues which has not begun as of mid-August 2020.

China’s effort to be treated as a market economy under trade remedies

China has long felt that nonmarket economy methodology employed by trading partners discriminated against China and was unjustified. On December 12 2016, the day after certain language in China’s Protocol of Accession became ineffective, China filed requests for consultations with each of the European Union (WT/DS/516) and the United States (WT/DS/515). China has not actively pursued the action against the United States. On the action against the European Union, after the matter was fully briefed at the panel stage and it was understood that an interim panel report was released to the parties, China requested on 7 May 2019 the panel to suspend its proceedings in accordance with Article 12.12 of the DSU. The panel proceeding was suspended on 14 June 2019. On 15 June 2020, the Secretariat released a note indicating that the panel’s authority in the dispute had lapsed since China had not requested the resumption of work within one year.

Thus, China remains subject to nonmarket economy methodologies by certain of its trading partners.

Proposed General Council decision submitted by the United States

The United States has raised an issue for WTO Member consideration in the form of a proposed General Council decision. The issue goes to whether the WTO is predicated on market-oriented economic principles and rests on the concern that some large WTO Members (including China) have economic systems that are characterized as non-market and that create various distortions in the global marketplace including creating massive excess capacity and other issues. While the issue has been raised by the United States for the last several years within the WTO, the U.S. permanent representative to the WTO made a strong case at the General Council meeting (Dec. 9, 2019), raised the matter again along with the draft General Council decision at the March 3, 2020 General Council meeting and raised it again at the July 22-23, 2020 General Council meeting. The proposal was opposed by China at each General Council meeting. Many Members provided comments either supporting, opposing, raising questions with the proposal or indicating the matter was being considered in capital (minutes for the July General Council meeting are not yet available). Members besides the U.S. and China who spoke include the European Union, Japan, Canada, Australia, United Kingdom, Switzerland, Norway, Mexico, Brazil, Colombia, Chinese Taipei, Uruguay, Indonesia, Nigeria, South Africa, India, Pakistan, Russian Federation, and Sri Lanka. See, e.g., Minutes of General Council Meeting, 9-10 December, 2019, WT/GC/M/181 at 59-64 (24 February 2020); The Importance of Market-Oriented Conditions to the World Trading System, Draft General Council Decision, Communication from the United States, WT/GC/W/796 (20 February 2020)(embedded below); Minutes of General Council Meeting, 3 March 2020, WT/GC/M/182 at 35-44 (16 April 2020); General Council Meeting of 22-23 July 2020, Proposed Agenda, WT/GC/W/802 (item 11)(20 July 2020).

WTGCW796

Conclusion

The crisis at the WTO has many elements but a central concern of many is whether the current WTO can be effective in ensure competitive markets when one or more major Members have an economic system largely at odds with that of most Members. The tensions created by the distortions caused by different systems has led both to increasing use of trade remedies, efforts to identify changes or additions to rules needed if convergence is not required of Members, and actions outside of the WTO where long term discussions have not resulted in the level of changes needed by countries working from market-oriented economies.

While the U.S. has reviewed provisions of the WTO that indicate the system is premised on market economy principles, a number of Members disagree that the WTO can address different economic systems. One of the Deputy-Directors General has identified core principles of the WTO and opined that the system supports convergence not coexistence. See Remarks before the Korean International Trade Association. 27 May 2020, https://www.wto.org/english/news_e/news20_e/ddgaw_27may20_e.htm back to text

It is against this complex background that candidates for the Director-General post of the WTO will be evaluated by many Members. In the next post, I turn to how the eight candidates have addressed these complex issues in terms of their prepared statements to the General Council, press conference after the General Council meeting and in the WITA webinars.

Stay tuned.