World Trade Organization Faces Leadership Battle In Shadow Of Crisis Over Organization’s Future
Roberto Azevêdo (left) meets with the United States President, Donald Trump, at the World Economic Forum Annual Meeting in Davos, Switzerland.

The early resignation of Roberto Azevedo from the post of Director General (DG) of the World Trade Organization (WTO), sets the stage for a highly politicized competition over his successor – who will face a major challenge in demands to reshape the WTO in the wake of repeated US complaints about its trade dispute rulings and policies with an alleged pro-China tilt.

Azevedo announced in May that he would be resigning from the position as of 31 August 2020, a year before his term formally ends. Azevedo, a seasoned and well-regarded member of Brazil’s diplomatic corps before taking on the role of WTO DG, presided over a period when the WTO’s effectiveness as a negotiating forum was eroded. Political conflict between economically powerful Members, most recently precipitated by the United States, brought its highly regarded dispute settlement system to a standstill. Now, as the COVID-19 crisis has sent global trade into a tailspin, the question is who – if anyone – can revitalize the Organization and reassert its preeminence in trade governance.

The new Director General will face a range of sharp debates around trade issues that are critical to health – including the need to ensure wide global access to new COVID-19 medicines and vaccines. But beyond the current pandemic, the WTO may also play a lead role on other critical  policies that affect health as well as broader economic well-being, including: import and export barriers affecting fragile economies; policies around trade in agriculture and food products; and ever more urgent questions surrounding trade, climate and sustainability.

The Candidates
(left-right) formally nominated WTO DG candidates; Jesús Seade Kuri, Ngozi Okonjo-Iweala, Abdel-Hamid Mamdouh

So far, four candidates have been formally nominated: Jesús Seade Kuri, Mexico’s chief negotiator for the ‘New NAFTA’; Abdel-Hamid Mamdouh, former director of the Trade in Services Division of the WTO; and Ngozi Okonjo-Iweala, board chair of Gavi, the Vaccine Alliance and former Nigerian Finance Minister, who also spent 25 years in Washington, DC with the World Bank. The Republic of Moldova’s Minister of Foreign Affairs, Tudor Ulianovschi, also had his name thrown in the ring on June 16.

On Tuesday, June 9, European Trade Commissioner Phil Hogan told reporters that he was also considering a bid to become WTO Director General. At a meeting with European Union trade ministers he identified trade and health issues, and the urgency of addressing the COVID-19 crisis, as priorities. Hogan also suggested that the European Union should put forward a single candidate, saying: “The EU has very strong multilateral credentials and is recognized as a force that could shore up the WTO and protect the multilateral trading system. This puts the EU in a legitimate position to offer a Director General to the WTO.” The Croatian Foreign Minister confirmed that EU members would discuss whether to unify around a single EU candidate during the next month.

The fact that Phil Hogan has put his name forward does not assure his position as the EU nominee. Other Europeans also reported to have expressed interest include: Arancha González-Laya, Spain’s Minister of Foreign Affairs and a former WTO Chief of Staff; and; Sigrid Kaag of The Netherlands, currently Dutch Trade Minister, formerly UN Under-Secretary-General, with experience at UNICEF and UNDP. (An interesting – if perhaps academic – question: The EU has exclusive authority over trade matters for its member states, while the EU and each of its member states are Members of the WTO, with a unique voting arrangement. If the EU nominates a DG candidate, does that preclude individual member states from nominating their own candidates?) Peter Mandelson, of the United Kingdom (now no longer EU!), but a former EU Trade Commissioner and UK Secretary of State for Trade and Treasury, has signaled interest too. While there is a long history of European heads of the WTO antecedent, the General Agreement on Tariffs and Trade, whether this argues for or against a new DG from Europe is not clear.

Jockeying between the power blocs
Two workers pin rolls of fabric in a large clothing factory in Cape Town, South Africa.

Appointments to leadership posts at multilateral organizations take account of the merits of the candidates, but realistically they must be viewed through the lens of political gaming and the exercise of power. Neither China nor the United States have as yet nominated a candidate, and perhaps neither country will because of the almost-certain divisiveness this would evoke. But it would be a mistake to think that either Beijing or Washington view this appointment exercise as one of identifying the smartest trade expert in the room. The recent battle over the appointment of a Director General for the World Intellectual Property Organization (WIPO) was hard-fought between US and China-sponsored candidates. With the US having prevailed, China will be looking again to assert its growing power. And, we have not yet heard from India.

Also, tradition holds that the leading positions in the United Nations and other multilateral organizations are divided up between regions – and that balance will play a role in the debate over whether a candidate from Asia, Africa, Europe or the Americas will succeed.

A candidate from Africa, such as Ngozi Okonjo-Iweala, might seem a “neutral” prospect as compared to candidates from one of the major trading powers. Okonjo-Iweala, who studied at Harvard and earned a PhD from MIT, might also be someone who the Americans would support. Kenya’s Amina Mohamed, former Ambassador and Permanent Representative for Kenya in Geneva, served as the first woman to chair the WTO General Council and as chair of the 10th WTO Ministerial Conference in Nairobi, and is certainly qualified, as is Abdel-Hamid Mamdouh of Egypt. Yonov Fredrick Agah, of Nigeria, currently a WTO Deputy Director-General, and previously Nigeria’s Ambassador to the WTO is said to have expressed interest, along with Eloi Laourou, of Benin, currently Ambassador and Permanent Representative of Benin to the UN in Geneva.

In terms of UN agency heads, Dr. Tedros Adhanom Ghebreyesus of Ethiopia is currently leading the WHO and Mukhis Kituyi of Kenya is leading UN Conference on Trade and Development (UNCTAD). Viewed through the lens of regional diversity, this might seem an obstacle to appointment of another Geneva DG from Africa. (Asia is poised at the top of WIPO, with Daren Tang of Singapore elected to succeed Francis Gurry.) Through a wider UN and global lens, however, the UN (António Guterres) and the International Monetary Fund (Kristalina Georgieva) Secretariats are headed by Europeans, and an American (David Malpass) is leading the World Bank. Seen from that perspective, the prospects for a third African Geneva leader may look brighter.

In years past, despite their differences, the United States and European Union were allies with shared trading system interests that would ultimately cooperate over the selection of a WTO (or former GATT) Director General, even if each had a candidate in the running. However, the Trump Administration has done everything it can to blow up the US relationship with the EU, so a prospective alliance over the choice of a candidate for WTO right now is in doubt.

As if to illustrate that doubt, following a recent statement by EU Trade Commissioner Phil Hogan that the US trade representative (USTR) Robert Lighthizer supported a WTO DG candidate from a developed country, USTR Lighthizer’s office responded saying, “Ambassador Lighthizer does not support any candidate at this time, nor does he feel that a candidate must necessarily be from a developed country.”

The Selection Process
Pepper farming in India

This is not the best time to be “counting chickens” as we still are at relatively early days in the nominating process – which is scheduled to run until 8 July 2020.

Following that, candidates “will have a period of time to make themselves known to members,” according to the process outlined by WTO. That is to include a special meeting of the WTO’s General Council, which includes all WTO member states, “where the candidates will be invited to make presentations, followed by the consensus-building phase devoted to selecting and appointing one of the candidates.”

However, the final appointment date remains unclear. General Council Chair, Ambassador David Walker (New Zealand) has said only that he will be “will be consulting with members in order to establish expedited deadlines for the post-nomination phases so that members may have clarity on the timeline for the appointment process by the end of the nomination period.”

In theory, then, the DG appointment could also be delayed beyond the US Presidential elections scheduled for November.

Public Health and the WTO

The choice of WTO DG is important to the future of public health. Through the implementation of the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS Agreement”), the WTO sets the ground rules for the granting and use of intellectual property rights, including patents, for  diagnostics, medicines, treatments and vaccines. The TRIPS Agreement embodies important “flexibilities” that allow governments to take measures to promote and protect public health, including to grant compulsory patent and government use licenses for the generic production or import of patented drugs, and to make use of other exceptions to IP rights. Historically, the exercise of these flexibilities has provoked controversy. The COVID-19 crisis, whereby hundreds of existing and new drug formulations, as well as vaccines, are currently being trialed in combat against the virus, is expected to further test those WTO TRIPS flexibilities – and the ability of WTO to support comprehensive and equitable distribution of health products.

The new WTO Director General will thus be called upon to reassure member states that they can provide for vital national health needs – without facing undue pressure over Intellectual property interests or issues.

COVID-19 In the shadow of the HIV Legacy 
fixed-dose, antiretroviral HIV treatment

The new WTO director will be confronting COVID-19 in the shadow of the historic dispute over access to medicine that raged while the HIV-AIDS epidemic grew unchecked in the mid- and late-1990s. At that time, the government of South Africa came under intense pressure from the United States, the European Union and the innovator pharmaceutical industry based on unsupported allegations that South Africa’s 1997 health legislation amendments, permitting measures such as the parallel import of patented HIV/AIDS drugs, violated the TRIPS Agreement. Collapse of the industry case was followed by adoption of the WTO Doha Declaration on the TRIPS and Public Health along with the TRIPS Article 31bis amendment on compulsory patent licensing predominantly for export. This further clarified the rights of countries to produce or import generics of vitally needed health products in times of need.

Throughout the saga, either one of the two successive WTO Director General’s, including Renato Ruggiero (to September 1999) or Mike Moore (to September 2002), could have issued a clear public statement that the South African legislation did not violate the TRIPS Agreement, a fact which no serious trade and IP expert doubted (and which has been confirmed not only by the Doha Declaration, but even by the US Supreme Court).

Had they done so, the pharmaceutical industry would have had a very difficult time justifying its litigation, and the EU would also have been under considerable pressure to withdraw its trade threats (which the US did earlier on). But neither Director General spoke out. Not only did the failure to support  South African prolong insecurity in South Africa’s health system, but it damaged the public perception of the WTO as an institution, because the basic charge of the pharmaceutical industry was “we have these patent rights given to us by the WTO that are under threat”, while in fact WTO rules allocated no such rights.

Pandemic Will Test Mettle of WTO Flexibilities

In case you were on the recent space shuttle mission, and missed entirely the start of the COVID-19 pandemic, international interest in the legal mechanisms that will be used to develop and distribute vaccines, treatments, diagnostics and medical devices to address the pandemic is at a historic high – and WTO once again has an important role to play.

In fact, several governments, several governments – including France and Germany — already have modified their legislation to facilitate the compulsory licensing of patented health products to address the pandemic.  Israel has issued a compulsory license.

Along with the much-touted WHO-supported voluntary COVID-19 patent pool launched two weeks ago, proposals for compulsory patent pools are in the works, as are suggestions for taking advantage of the TRIPS Article 31bis provision allowing compulsory licensing predominantly for export. So, the mettle of WTO rules regarding intellectual property are likely to be tested again, perhaps even more severely than before, as the current pandemic has touched rich and poor countries alike in the greatest global public health crisis of a century. The new WTO DG will thus be called upon to provide leadership in assuring that TRIPS Agreement and other WTO flexibilities are respected.

In addition, there are critical health-related issues involving export restrictions on critical health products, subsidies to the pharmaceutical sector, and others that involve complex questions of WTO law and will need to be addressed. Again, a strong DG voice at the WTO may be important.

Economic well-being is also a health issue
Restaurants, bars and shopping centers reopen in Geneva, Switzerland after two months of lockdown

Finally, economic well-being is a major determinant of health, and the WTO has an important role to play in assuring that its Members are able to continue to export and import to support their fragile economies. The new DG will confront serious obstacles as he or she seeks to counterbalance the current trend towards higher national barriers in international trade.

The COVID-19 pandemic has had devastating economic consequences everywhere; but developing countries have been hit particularly hard because of the inherent vulnerability of their economies, and jobs dependent on international trade.

The consequences of sharply falling income, particularly among economically vulnerable groups, can be as severe as a deadly virus.

The fact that some middle- and high-income countries have started to “pull up the drawbridges” and to re-shore production will have significant consequences for developing countries. One task of the WTO DG will be to help remind and persuade developed country political constituencies that trade is not a zero-sum game, in which export success by one country means that other countries are losing. At the same time, the WTO DG must help address unfair trading practices, that damage the system and consequently hurt all participants in the long run.

Trade and Sustainability
Commercial fishing boat

And at the same time, in an era when climate has been described as the next global health crisis, the WTO and its Director General may be asked to re-examine longstanding WTO rules and frameworks that ignore the oft-heavy carbon costs of international trade, and thereby hinder the development of sustainable, local industries.

For example, the WTO Appellate Body ruled that India’s legislative preference for locally-produced solar panels was inconsistent with WTO national treatment rules. The Appellate Body correctly interpreted existing WTO law. But from a policy standpoint telling India to buy its solar panels from China (or the United States) when India faces tremendous requirements for new energy supplies, as well as wide underemployment, was not good climate or development policy. Particularly in light of the fact that the main alternative to solar power is massive new coal power plant construction. The WTO needs to adjust its rules to accommodate the large-scale changes in energy supply needed to reduce carbon output and promote development.

WTO negotiations on fisheries subsidies which are critical to reducing overfishing of depleted fish stocks are stalled. This represent another important area where leadership of the new WTO DG may be important.

Changes to government policies that encourage transition to sustainable agricultural practices, that facilitate the development of industries transitioning away from reliance on fossil fuels, and that recognize the damage done by industries employing outsize carbon intensity should be pursued under the direction of new WTO leadership.

Does it Really Matter? The Director General’s Authority
World Trade Organization building in Geneva, Switzerland

As the electioneering commences, the WTO is at a critical, nearly life-or-death, juncture.

Yet in the final analysis, the WTO Director General has rather limited “actual authority” – rather like the head of the World Health Organization. The constitutional document of the WTO,  the 1995 Agreement Establishing the World Trade Organization, provides that the WTO Secretariat will be headed by a Director General, appointed by the Ministerial Conference (of member states), which will also “adopt regulations setting out the powers, duties, conditions of service and term of office”.

Significantly, WTO members never adopted the called-for regulations setting out the powers and duties of the DG, although they have established the term of office and conditions of employment.

Even so, along with staff appointments and budget management, a recurring and significant role of the Director General involves the appointment of expert panelists at the first level of WTO dispute settlement proceedings, should disputing parties fail to agree.

The Director General traditionally has also played a major role in the negotiation of new WTO (and former GATT) agreements. The DG has acted as Chair of the Trade Negotiations Committee that coordinates the proposals and drafts of the agreements that are ultimately presented to the Members for adoption, and through that function, past Director Generals have played a critical role in facilitating compromise texts and solutions to disagreements between member states. The DG brings interested groups of WTO delegates together for face-to-face discussions as they address issues in various negotiating contexts.

Yet with these things said, the WTO DG is mainly a political figure at the head of the institution who gives the appearance of “leading”. The extent to which that leadership is taken seriously by WTO Members or the wider public may also depend on the personal character and charisma of the individual. He or she – bearing in mind there has never been a female Director General at the WTO – can only persuade. The DG does not issue orders, other than to the Secretariat staff.

Efforts to accommodate what may be some legitimate US concerns are problematic because President Trump appears to have no real interest in “solving” the technical problems with the way the WTO works. He requires some grand gesture for which he can claim victory — or to use his current jargon “total domination”.

Grand gestures are all the more important to Trump as the DG appointment process coincides with the lead-up to the US presidential elections in November.  While a new DG should, in theory, be put into place by 1 September, it’s not at all clear that will happen in the current environment.

Selection of a strong and charismatic figure to “right the ship” of the WTO is thus important for many reasons, including for public health. Developing economies remain dependent on an open international trading system, and the health of people around the world is certainly affected by their economic conditions. As discussed, there are specific WTO rules that may have a significant impact on health affairs, and how the WTO manages its rule system makes a difference. But multilateral cooperation in economic affairs, as in other spheres, is important not only for the particular end that an institution seeks to achieve, but also to avoid devolution of international relations that ultimately might come to a bad end.

It is far from clear that any single individual will be able to pull the WTO out of its current difficulties. But the right appointment is likely to have meaningful consequences in terms of giving the organization a fighting chance. And the next WTO DG must be committed to improving standards of living, including standards of healthcare, for all. The world could use a WTO DG who can actually help make that happen.

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Frederick Abbott, Professor of International Law at Florida State University College.

Frederick M. Abbott is Edward Ball Eminent Scholar Professor of International Law at Florida State University College of Law, USA. He has served as expert consultant and legal representative for numerous international organizations, governments and NGOs, mainly in the fields of trade, intellectual property, public health, technology transfer, and sustainable development. He served as Rapporteur for the International Trade Law Committee of the International Law Association (ILA) (1993-2014) and presently is Co-Chair of the ILA Committee on Global Health Law. He has served as counsel in dispute settlement at the WTO, and has advised governments on TRIPS-related negotiations and implementation. He is on the Board of Editors of the Journal of International Economic Law (Oxford), and of the WIPO-WTO Colloquium Series. http://frederickabbott.com

Image Credits: World Trade Organization, WTO, King & Spalding Law, World Trade Organization, Bread for the World, Government ZA/GCIS, S. Lustig Vijay/HP-Watch, World Trade Organization, World Trade Organization.