Appointment Of New WTO Chief Unlikely To Resolve Crisis Due To Limited Job Powers

The appointment of a new director-general of the World Trade Organization (WTO) following the abrupt departure of outgoing chief Robert Azevedo will unlikely result in the resolution of the systemic issues troubling the international organization, analysts told Sputnik

MOSCOW (UrduPoint News / Sputnik - 28th May, 2020) The appointment of a new director-general of the World Trade Organization (WTO) following the abrupt departure of outgoing chief Robert Azevedo will unlikely result in the resolution of the systemic issues troubling the international organization, analysts told Sputnik.

Earlier in the month, Azevedo - a Brazilian diplomat - has announced his plans to step down a year earlier than his second four-year term ends. He said that the departure would be best for him and for WTO, which in his opinion needs a more energetic leader. The outgoing director-general has admitted that the organization suffers from internal problems and is basically "stuck." He will leave his post this August.

Azevedo's resignation comes as the WTO is suffering from a crisis over its mechanism for resolving disputes between members after Washington paralyzed it by blocking new appointments to the Appellate Body last year. US President Donald Trump said that the WTO needed a major reform and suggested that Washington might withdraw from the organization.

CHANGE IN WTO LEADERSHIP NOT ENOUGH TO RESOLVE LINGERING ISSUES

The problems that the WTO has been experiencing over the years do not stem from the figure of the organization's director-general, David Collins, professor of International Economic Law at the City Law School of the University of London, told Sputnik.

"Azevedo is a very well-respected leader and it will be difficult to replace him with someone as effective ... It's important to remember that the Director General of the WTO has limited capacity to effect change in member's policies. Ultimately what the WTO 'does' depends on the will of its members. The DG can do little more than public engagement and diplomacy. A new appointment won't reverse the tide of global protectionism, nor will improve what the WTO can achieve, at least not on its own," Collins said.

Daniel Crosby, a partner specializing in international with the US corporate law firm King and Spalding, agrees with Collins that the WTO chief does not have enough powers to resolve a crisis, however, noted that a strong WTO leader might contribute to speeding up the reform process.

"We need a new leader and it is good development in that sense if Azevedo passes leadership to someone else, so it's done before next summer. But that does not necessarily going to solve the problems because the head of the WTO has actually a pretty small role. The policy of the WTO is not determined by the director-general, it is determined by the members, so the members have to come up with the reform and the director-general implements or tries to organize negotiations, but doesn't come up with idea necessarily," Crosby told Sputnik.

WTO needs to undergo substantial reforms and that was expected to be addressed at the ministerial conference this summer, however, the event has been rescheduled to 2021 due to the pandemic, the expert noted.

EXPANSION OF WTO CATEGORIES MIGHT HELP

One of the most pressing issues within WTO has been China's designation as a "developing country" even though it is one of the world's largest economies. As a "developing" country, Beijing is able to claim some special privileges in WTO and that irritates the United States and other members, while also eroding the aims of the organization, according to the experts.

Currently WTO has only two categories, namely a "developed" and a "developing" country, which many argue is not fair as it fails to reflect the current state of affairs in global trade. A debate has been ongoing in media that the list of categories should be expanded.

"I think that there may be some merit in having three or four categories, including perhaps Emerging, or Transitional.

China, for example, should not benefit from the status of developing country. This would need to be done in a very nuanced way. More broadly it may be time, as US Senator [Josh] Hawley has suggested, to consider having a truncated Most Favoured Nation status, meaning that MFN only applies to countries which have certain characteristics, perhaps by reference to GDP per capita or market economy status," Professor Collins said.

King and Spalding's Crosby agrees with Collins that the list of categories should be updated by the WTO.

"You either have to add categories or remove countries from the developing list. It mostly applies to China as it is number one exporter in the world. And for them to argue that they are a developing country definitely causes lots of problems," the lawyer said.

Apart from China, South Korea, Hong Kong and Singapore should also be removed from the developing category even though they do not request special derogations from the WTO rules, he added.

"There has to be a compromise and part of that compromise has been met already when China acceded to the WTO they gave up many aspects of usual treatment of developing countries. The only issue with going forward what status will China claim in new negotiations and whether it will seek special treatment because it is not developed. What the countries want to know is that in the future negotiations, China will not claim the benefit of special rules," Crosby underlined.

One of the viable proposals has been put forward by Washington, which offered to sort out WTO member states into categories based on their share in the global trade (at least 0.5 percent); membership in G20, and if it has been identified as high-income by the World Bank, according to the lawyer.

"I actually think especially African countries, small island countries, all those different categories of countries, would welcome that because in order for those other countries to benefit from the developing incentives, the big countries should give up their special treatment, because when everyone gets special treatment, it is diluted from the ones that really need it. I think there is going to be a lot of pressure, especially on China, but other big countries as well, from the countries that really need this assistance," Crosby noted.

WTO MEMBERS MAY FAIL TO AGREE ON CONSENSUS WHILE TRUMP IN OFFICE

Even though the negotiation of WTO reforms is itself a challenging process, it might further be complicated by the approach of the Trump administration towards foreign trade and international organizations.

"The United States' kind of 'America First' policy and its treatment of even friendly countries has created a difficult negotiating atmosphere in all international organizations including the WTO. However, those issues that it is raising are more of a style of negotiating issue, because the issue of developing country status certainly has everything to do with China and it will not go away, and it's not the Trump issue," the King and Spalding expert said.

Even if a new US president assumes the office following the upcoming election, the WTO would still struggle to reach consensus, but "the dynamics and the negotiations will be different," according to Crosby.

As of now, the WTO needs to select a new leader. An appointment process for the next director-general will formally start on June 8. The member countries can nominate their nationals until July 8. After that, the WTO General Council has to select the most suited candidate and reach a consensus on the appointment.