Ben Muse

Economics and Alaska

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What Are the Implications of a Lamy WTO Victory?

As part of a gloomy review of trade developments, Irwin M. Stelzer describes the implications of a Pascal Lamy victory in the WTO Director-General race: "Free Trade?" (Truth about Trade & Technology, April 6):
    "The Europeans and the developing nations profess horror at the appointment of Paul Wolfowitz to head the World Bank. They say he doesn't know anything about development, but really worry that he knows too much: that loans to undemocratic kleptocracies might fatten Swiss bank accounts, but do little to fatten starving citizens of so-called developing countries.

    But Gerhard Schröder and his friends were reluctant to oppose the Wolfowitz appointment, lest they appear to be snubbing President Bush's recent friendly overtures. So they approved the appointment, and will seek a quid pro quo--the appointment of France's Pascal Lamy to fill the vacancy at the head of the World Trade Organization. Lamy is dedicated to the maintenance of the European Union's protectionist agricultural policy, which further enriches well-off French farmers at the expense of poor farmers in developing nations. If he is appointed, and spurns Bush's proposal to end both E.U. and U.S. export-inducing farm subsidies, the Doha round is doomed."

Cuttaree to speak in DC

Mauritian Foreign Minister Jaya Krishna Cuttaree will speak at the National Press Club on April 20: Jaya Krishna Cuttaree to Discuss 'Trade and Development: A Vision for a Better WTO' (U.S. Newswire, April 7)

Offshore Outsourcing of Medical Services to India

This sounds like a good thing: "Low Costs Lure Foreigners to India for Medical Care" (New York Times, Saritha Rai, April 7).
    "BANGALORE, India, April 6 - Until recently, Robert Beeney, a 64-year-old real estate consultant from San Francisco, lived in pain. But when he finally decided to do something about the discomfort, he spurned all the usual choices.

    His doctors advised that he get his hip joint replaced, which his insurer would pay for, but after doing some research on the Internet, he decided to get a different procedure - joint resurfacing - not covered by his insurance. And instead of going to a nearby hospital, he chose to go to India and paid $6,600, a fraction of the $25,000 he would have paid at home for the surgery..."
Offshore outsourcing of medical services could play an important role in helping us cope with rising medical costs.

UK Congestion Pricing

John Palmer, at The Eclectic Econoclast, provides an update on London's program of using prices to address congestion externalities: "Congestion and Price Elasticity of Demand" .

Here are links to earlier posts: "The London Congestion Charge is Working".

Two good reads

Two years ago, Kevin Brancato of Truck and Barter scanned and posted a 1948 essay on rent control, by Milton Friedman and George Stigler. Brad Delong found it and linked to it: "Roofs or Ceilings?"

More recently, Ben Bernanke (late of the Federal Reserve Board, recently appointed Chairman of the Council of Economic Advisors), explained "how monetary policy is actually conducted." Brad linked to it: "Implementing Monetary Policy".

Medieval public choice theory

Alex Tabarrok (at Marginal Revolution) points to a paper on "Voting in Medieval Universities and Religious Orders" by Iain McLean and Haidee Lorrey :"Electing a Pope".

The abstract:
    "We report work in progress, not polished findings. As is now popular in political science, we wish to take institutions seriously as both a rational response to dilemmas in which rational agents found themselves and a frame to which later rational agents adapted their behaviour in turn. Medieval corporate agents knew that they needed choice procedures. Although the social choice advances of ancient Greece and Rome were not rediscovered until the high middle ages, the rational design of choice institutions predated their rediscovery and took some new paths. Both Ramon Lull (ca 1232-1316) and Nicholas of Cusa (a.k.a Cusanus; 1401-64) made contributions which, until we rediscovered their work in social choice, were believed to be centuries more recent. Lull promoted the method of pairwise comparison, and proposes the Copeland rule to select a winner. Cusanus proposes the Borda rule, which should properly be renamed the Cusanus rule.
    Voting might be needed in any institution ruled by more than one person, where decisions could not simply be handed down from above. Medieval theologians no doubt believed that God’s word was handed down from above; but they well knew that they often had to decide among rival human interpretations of it. Even if the western Catholic Church be regarded as a single authoritative institution, in which rules were handed down from on high, it faced its own decision problem every time a new Pope needed to be elected. Bodies not directly in the hierarchy of the Church had to evolve their own decision procedures. The chief such bodies were commercial and urban corporations; religious orders; and universities."

What Does Jaya Krishna Cuttaree Think?

Jaya Krishna Cuttaree, the Foreign and Trade Minister of Mauritius, is one of the four candidates for Director-General of the World Trade Organization (WTO).

Here is a favorable profile from the Inter Press Service of Johannesburg, March 10, by Stefania Bianchi, "Trade: Poor Countries' Man Makes a Strong Case", and here is his biography from the WTO web site: "Jaya Krishna Cuttaree".

Mauritius is a small island country in the Indian Ocean. A well governed democracy, it's had a remarkably good growth record. For some background, look at this article by Arvind Subramanian from the IMF magazine, Finance & Development: "Mauritius: A Case Study".

Cuttaree's candidacy has been endorsed by the African-Caribbean-Pacific (ACP) grouping of countries. This is a group of smaller developing countries with historical colonial ties to Europe; they benefit from European tariff preferences (tariff breaks).

In this post I've culled selections from a few of Cuttaree's speeches, to get a better idea of some of the things he stands for. The starting point for this post is a speech he gave to the Mauritius Chamber of Commerce and Industry this past March.

In this speech, he points to the importance of trade to developing countries, points to the problems many of these countries may have in taking advantage of trading opportunities that may open up to them, and argues for the importance of various measures to help them out. I've used other speeches to flesh out some of his points, and to shed light on his negotiating philosophy.

Trade is important to developing countries

In the Chamber speech, he explained the importance of trade to developing country growth.

He argues that trade isn't an end in itself, but promotes the underlying objective of better living conditions. From the point of view of the developing world, trade is one of several factors, which also include aid and debt-relief, for achieving sustainable development.

However, trade is the most important of these factors: "Trade can be a catalyst in developing a country's productive capacity and growth and lift millions out of poverty and the shackles of marginalisation."

So trade is extremely important to developing countries. The development of a rules-based trading system through the WTO may be more important to smaller developing countries, than to developed countries, or larger developing countries,
    "“an effective and equitable multilateral trading system is in the general interest of every Member. But it is even more vital for us, weak and vulnerable developing countries which have very little economic clout in the world economy. The major players have the option of negotiating bilateral FTA’s and choose those with whom they want to deepen integration. We do not have such options. Only a rule-based trading system will offer the best protection to the rights of small players” (quoting himself from an earlier speech)
Developing countries may need special help to take advantage of trade opportunities

In the same speech, he pointed out that more liberal trading rules will only help countries that have something to trade. Many developing countries, especially small ones, need help here. They can't "produce competitively"; they face "supply side constraints."

On January 26, after addressing the WTO General Council, he participated in a question and answer session sponsored by a group of NGOs. One of his answers, summarized by session organizers ("Minutes of Civil Society Hearing for WTO Director-General Candidates"), gives a better sense of the "supply constraint" issue. It also indicates that some developing countries have more difficulty with supply contraints than others:
    "However one also has to be extremely careful about proposing liberalization of agriculture trade. Because when people talk of developing countries producing more agriculture products if trade liberalized we make a fundamental mistake because developing countries are not a homogenous group. You take a country like Brazil and Mali, both developing countries, however capacity to produce to take account of increased market access are completely different. Africa lives off agriculture. Mostly peasant farmers, and those proponents of liberalized agricultural trade use Africa as an example of a continent which can benefit from increased market access. He says there is a big flaw in that statement because of the capacity to produce competitively in Africa. No roads, ports, refrigeration, SPS problems. Unless these supply side constraints are actually addressed the liberalization of markets in agricultural products is going to benefit a certain number of countries and certainly not the majority of people who we think are going to benefit from that liberalisation...He can see very easily in the case of poultry some large developing countries killing the poultry industry in many parts of Africa."
While small developing countries may need help with supply constraints, he says in his Chamber speech that, " is not WTO's role to address supply side constraints." The WTO does have a "duty to raise awareness of the problem..." and it is "imperative" to encourage meetings between the heads of WTO, the World Bank (WB), and the IMF, to encourage "collaboration" and program coherence. In the NGO session described above, he went on to discuss the role of the WTO, and that of other multilateral organizations, in addressing these supply constraints. From the minutes:
    "This is why he says that if you are looking at the liberalization of agriculture trade you must have a coherence between market access and capacity to produce, to have coherence between the WTO and institutions like the WB and development partners like the EU to ensure that the resources are there to build the capacity of these countries in Africa to be able to take account of this access..."
Special and differential treatment for developing countries

In the Chamber speech, he notes that countries differ, and the WTO should address the distinctive needs of developing countries. These countries need special and differential (S&D) treatment within multilateral WTO trade treaties.

S&D means more than "a system where developing countries were simply given more time to adapt to negotiated trade rules through temporary exceptions and exemptions." "Temporary exceptions and exemptions" could be things like slower implementation of tariff reductions.

Affirmative and longer term action is necessary. Measures are needed, "to establish rules that can foster development and to come up with measures that will enable developing countries to implement these rules and to reap the benefits of further trade liberalisation."

Examples of of these additional measures may be inferred from these Cuttaree remarks, from 2002, ("Rules Issues and Special and Differential Treatment"):
    "There are several instances where the WTO Agreements impose onerous obligations upon developing countries and restrict them from taking initiatives and measures to achieve industrial development (e.g. Subsidies, TRIMs and TRIPS).

    The Agreement on Subsidies curtails the right of developing countries to extend assistance and support for industrialization. It eliminates the acceptability of subsidies as a tool for economic development programmes, which however has been agreed to during the Tokyo Round.

    The Agreement on trade-Related Investment Measures (TRIMs) imposes an obligation on developing countries to eliminate the type of investment promotion policies that developing countries could use to promote domestic industry (i.e. obligation on foreign investors to indigenize part of domestic production)..."
Small developing countries need tariff preferences

Many of the least developed countries depend on exemptions or partial exemptions from normal developed country tariffs (tariff preferences) to give them a competitive boost. Negotiations that reduce normal developed country tariffs, erode the effective size of these preferences, and the competitive advantages they provide ("preference erosion").

An IMF publication titled, "Who Can Explain the Mauritian Miracle: Meade, Romer, Sachs, or Rodrik?" suggests that there is disagreement on the sources of Mauritian growth. However, this Cuttaree speech from the WTO Minister's meeting at Cancun in 2003, leaves no doubt that he attributes a lot of this growth to trade preferences granted to Mauritius: "Statement Circulated by the Honourable Jaya Krishna Cuttaree Minister of Industry and International Trade":
    "The positive economic development of Mauritius during the past three decades has been mainly due to a combination of factors, including a stable and democratic political system, good governance but above all due to the preferential market access that we have been enjoying on the EU and the United States markets both for agricultural and non-agricultural products. This access is absolutely essential to countries like mine which do not have the capacity to compete with larger, more resource-based countries.
    This preferential access has been instrumental in ensuring the economic development of Mauritius...

    From the Mauritian experience, it can be safely assumed that through the extension of preferential access, even the most vulnerable of countries can pursue a successful development and export oriented policy..."
Helpful as preferences are, in March he told the Mauritian Chamber of Commerce,
    "We have consistently explained that preferences cannot permanently be part of a trading system which will ultimately lead to free flow of goods and services across national borders. However, given the disparity among levels of development of WTO members and the importance of preferences to weak and vulnerable economies, preference erosion needs to be carefully sequenced so that it does not signal the end of these economies..."
If one point of the trade negotiations is to lower tariff levels, and if the preferences derive their value from the height of the tariffs, there is a problem. A 2003 Mauritian paper on preferences, submitted to the WTO, (TN/MA/W/21), suggests some ways out:
    "4. When examining the problem of preference erosion, it is essential to keep in view that, from the perspective of the exporting country, preference erosion would be particularly serious where exports are concentrated in a limited number of products on very few export markets. As a matter of fact, this is the most important feature characterising exports under preferences. While preference schemes, in principle, could cover most, if not all the chapters and tariff lines..., in practice, however, exports are limited to very few products and a limited number of tariff lines.

    5. Consequently, addressing preference erosion would effectively mean maintaining tariffs over a certain level for a very narrow range of products, especially since the export basket of the preference beneficiary countries is almost the same...

    6. ... products which are of specific interest to the preference beneficiary countries, in particular textiles and clothing, leather products, footwear and fish and fish products. ..only a limited number of specific tariff lines within these broad product categories are of direct concern to these countries. It is proposed that these tariff lines be identified by the countries concerned and a list compiled by the WTO Secretariat. It is further proposed that such tariff lines be either excluded from tariff reduction or that a maximum tariff reduction of 10% on each tariff line so identified be staggered over 10 annual instalments on developed country markets...

    8. Necessary technical assistance should urgently be provided, particularly in regard to the identification of the tariff lines referred to...

    9. We are further reiterating our proposal for the setting up of a competitiveness fund in the context of global coherence policy making by international financial institutions in order to assist the industrial restructuring and adjustment of countries most affected by the reductions/phasing out of tariffs."
One advantage of this approach is that, "the momentum of tariff liberalisation would not be disturbed since only a very narrow range of products would be excluded from the process..."

Approach to negotiations

I thought these remarks to the ACP country trade ministers, shortly before the July 2004 Geneva meetings suggested an attractive combination of principle, pragmatism, and respect for other parties to the negotiations. They're not connected to the Chamber speech, but I'll pass them along: "Speech at the Opening Ceremony of the 8th Africa-Carribbean-Pacific Trade Ministers’ Meeting, 11 July 2004":
    "A negotiation has two dimensions – it involves a process and it has a substance...As regards our negotiating substance, I shall refrain from making any elaborate comment at this stage...

    ...I would like to make a few comments on the process, a consideration that is often neglected although the process may have a significant bearing on the substance. First, at our own level, it is important that we understand that a negotiation is a dynamic process and in a multilateral setting, it will demand constant adjustment and trade-offs. It is therefore important that we transcend our declaratory postures to move into a negotiating mode. It is important that we learn from the lessons of Cancun so as not to be pinned down in the blame game once again. We have the numbers but this is not enough. We must know how we utilise our strength and how we might bargain and persuade and avoid being only negative. We must also learn to seek and broaden our alliances at the WTO so as not to remain isolated.

    It is therefore important that we infuse in our stance the right measure of tactical flexibility that will avoid us becoming prisoners of our strategy thus preventing us from participating meaningfully in the negotiations. Of course we must define the red lines below which we are not prepared to cross. But at the same time we must be aware that our partners have their compulsions as well. It is therefore important that we adopt a problem-solving approach as a negotiation cannot be a one track affair nor can there be a winner-takes-all outcome.

    Another important aspect is how we focalise on our core issues and prioritise our concerns. In this regard we must put to profit our meeting here to-day. We know what our concerns are and as I said earlier, we have spelt them out in several declarations. As we move towards the writing of the Framework Agreement, it is important that we prioritise those issues, prepare fallback positions and trade-offs and most importantly request our trade experts to develop the sort of language that we would like to see on our concerns in the framework text. It is important that in so doing, we do not open the pandora’s box. Whatever be our convictions, the point of departure of these negotiations remains the Doha mandate to which we have all subscribed. It is important for us to be credible and not to seek to unravel a document which is a delicate compromise and to which we were a party. Success for us will depend on the perception that we are not a Group that just has the numbers to block consensus but, on the contrary, that we have in us the capacity for constructive engagement to put forward ideas and solutions.

    As we engage in our deliberations at the level of the ACP, we must be conscious how our meeting dovetails with other processes in which we will be involved. In two days time, we shall move into the larger G-90 Group and from there on we must interface with the larger process on-going in Geneva. In both these instances, we shall have to integrate the concerns of other negotiating groups which may have the same defensive interests as ours but also certain offensive interests which may not be quite ours. We must be able to reconcile those contradictions in a creative manner so that we ensure a balanced outcome with no losers.

    In the final analysis, however, I would also like to make one thing clear. In as much as we would like to be constructive and show the required flexibility, we cannot be flexible or be constructive in a process if it is not transparent. We can only do so if the bigger process at the WTO is an inclusive one and we are allowed to participate."

More coverage of Zoellick remarks on Lamy

U.S. Deputy Secretary of State Robert Zoellick has been in Europe for several days. On Monday and Tuesday (April 4 and 5) he answered interview questions about the WTO DG race. I've posted transcripts of his answers here and here.

The posts above link to early coverage of the story. Here's some links to additional coverage. The Calcutta Telegraph headlined a Reuters story, "US to back Lamy as next WTO chief". MSNBC's headline on an AP story read, "U.S. supports EU's pick to head WTO". "US supports Lamy for head of WTO". The National Business Review of New Zealand: "World Trade: Lobbying starts for next leader". The stories themselves show that Zoellick stopped just short of a formal endorsement of Lamy over the other candidates.

Bloomberg News (via India's Financial Express, April 6): Lamy is `Strong Candidate' for Top WTO Job: Zoellick supplemented the story with two paragraphs on potential congressional opposition to Lamy:
    "The Bureau of National Affairs last month reported that Lamy faces ``substantial opposition on Capitol Hill'' for his decision during his final days as European Union trade commissioner in November to take the U.S. to the WTO over tax legislation...

    Citing unidentified staffers for Senate Finance Committee Chairman Charles Grassley of Iowa and House Ways and Means Committee Chairman William Thomas of California, BNA said the two legislators ``are angry with Lamy over his decision'' to challenge the U.S. over a tax law that replaced earlier legislation that had been deemed illegal by the WTO. "
Revised 4-6-05

Transcript of Zoellick's April 5 remarks on Pascal Lamy's WTO DG candidacy - transcript

Deputy Secretary of State (and former US Trade Representative) Robert Zoellick is traveling through Europe this week.

Today, in a press conference with Elmar Brok, the Chairman of the European Parliament's Foreign Affairs Committee, he was asked about Pascal Lamy's candidacy for WTO Director-General.

Here are the question and the answer (from "Press Availability With Elmar Brok, Chairman, European Parliament Foreign Affairs Committee. Deputy Secretary Robert B. Zoellick. European Parliament. Brussels, Belgium. April 5, 2005" ):
    "Question: ...And my second question to you as well: The European Union has nominated Pascal Lamy as a good chief of the WTO. With your personal experience of dealing with Mr. Lamy, do you think he’s a candidate that the United States could back as well, and what do you think the developing world will think about that?

    Deputy Secretary Zoellick: ...As for your comment about Commissioner Lamy, I obviously consider Commissioner Lamy both a friend but more importantly a very accomplished trade leader. And so I have said all along, and the United States has said, that we believe that he would be a very strong candidate for that position.

    The process for the WTO selection is different than some other processes. What is happening is that the chairman of the general council, who is actually a chairwoman – she’s ambassador from Kenya -- is undertaking consultations with the help of a Canadian official and one other with all of the member states. Now the United States is a big player in the WTO process. Sometimes our support helps; sometimes it doesn’t help. In this case we’re just one vote of many. But we’ve made very clear that we’d be very comfortable with Commissioner Lamy and that I think that he could play a strong role. There are other good candidates as well.

    Now, I spoke with Commissioner Lamy shortly before I took this trip, and I know he’s also planning to visit the United States, which I encouraged him to do. The other candidates have done that, and this would give him an opportunity to talk to members of our Congress, meet some of the officials in the executive branch and others. But I think the WTO would be very well served by his candidacy, but there are some other good candidates as well."
Zoellick was also asked about Lamy's candidacy on April 4, in Portugal. This post has a transcript of his comments there:"Zoellick remarks on Lamy".

Zoellick remarks on Lamy

Deputy U.S. Secretary of State (and former U.S. Trade Representative) Robert Zoellick commented on Pascal Lamy's candidacy earlier today. Aine Gallagher and Marie-Louise Moller report in this story:"U.S. says Lamy 'strong candidate' for WTO top post" (Reuters, April 5).
    "Former EU trade chief Pascal Lamy is a strong candidate to head the World Trade Organisation but there are also other good candidates, the United States said on Tuesday..."
Among other things, Zoellick told a news conference that Lamy would be a "strong candidate," that "The WTO would be very well served by his candidacy but there are other candidates as well," and that "we have made very clear that we'd be very comfortable with (former) Commissioner Lamy and that I think he could play a strong role."

The day before, on April 4, Zoellick was interviewed by the Portuguese newspaper Público ("Zoellick, in Portugal, Discusses Mideast, Russia, Airbus, China"). Here are related remarks on this issue:
    "PÚBLICO: Last questions. Is the Administration prepared to support the European candidate to WTO Pascal Lamy? To kind of reciprocate the European support of Wolfowitz?DEPUTY

    SECRETARY ZOELLICK: There's no reciprocity on Wolfowitz. Now Commissioner Lamy and I work very closely together. I consider him a personal friend. And, you know, we have, you know, interviewed all four candidates. But in the discussions, I've emphasized how I think Commissioner Lamy would be a very strong candidate, and I have no doubt that he would be able to rise above the European perspective and serve the overall WTO. Now there are other good candidates as well. The way that process is working, is, in Geneva, in the WTO, countries are having consultations with the Chair of the General Council from Kenya and expressing their preferences. But you know, we made very clear that we'd be very comfortable with Commissioner Lamy, or Pascal Lamy as the WTO Director General. And in part, I think whoever the WTO chooses, we need to have somebody who is strong, intelligent, can work with diverse groups to help get the Doha round done. That's the key objective here as we go forward."

Not all developing countries are alike

Alan Beattie and Frances Williams look at key differences between developing countries, and the implications of these for the WTO Director-General race, and the Doha Round trade negotiations: "Who's for the WTO?" (Financial Times, April 4)

Many of the least developed countries depend on tariff breaks or preferences from more developed countries, to give them a competitive boost. Trade negotiations that reduce normal developed country tariff barriers will reduce the effective size of these preferences, and the benefits they provide ("preference erosion").

Beattie and Williams point out that:
    "...those developing countries that benefit from special preferences allowing them easier access to rich markets are concerned that a general liberalisation deal - even one in which they were asked to cut their tariffs by less than rich countries - would see the value of those preferences fall. This would hand export gains to other countries, particularly G20 developing nations such as Brazil, South Africa and Argentina that have relatively efficient and competitive agricultural exporters.

    Such "preference erosion", which sets developing countries against each other, has become a large issue in the Doha round. Some aspects of the issue have been around for years - the most obvious one being the Caribbean banana-producing nations that have privileged access to the EU market at the expense of mainland Latin American growers and are seeing the value of those preferences reduced by a reform programme. But a swath of poor nations, in other groupings such as the G33, which brings together countries wanting to protect particular agricultural products, or the G90, which includes the world's poorest countries, share similar concerns about protecting their farmers from the onslaught of low-cost competition...

    There is a sense among some other nations that countries such as Brazil and India that dominate the G20, although they are frequently regarded as bellwethers for the developing world, also have their own sectional interests. Together with Australia, the EU and the US, Brazil and India made up an ad-hoc grouping of "five interested parties" that was instrumental in pushing through the agricultural part of last August's framework agreement. But Mr Meléndez says other nations, particularly those that are net importers of food, were resentful at the lack of communication and consultation from that small group...

    These tensions spill over into the race for the director-general position. Any candidate wishing to be seen as the champion of the developing world has to make clear that he can bridge the divisions. Mr Cuttaree, whose country
    [Cuttaree is the Foreign Minister of Mauritius - Ben] is one of the most prominent beneficiaries of preferences and whose core support comes from mostly very poor African, Caribbean and Pacific (ACP) nations, has argued for preference-dependent countries to be given more time to adjust. He complains that this has led to him being caricatured as a defender of special treatment...

    ...He sees no contradiction between his position and support for more open global trade, saying his commitment to the Doha round was amply demonstrated by his role in bringing the G90 developing countries back to the negotiations after the collapse in Cancún.

    From the other side of the divide, Mr Seixas Corrêa denies developing countries are split into irrevocably warring camps. Brazil and other competitive exporters recognise the concerns of preference-receiving countries, he says. "We have stated clearly that this is a problem that has to be resolved."

    Mr Pérez del Castillo's home country, Uruguay, is in a similar position to Brazil, having recently joined the G20 and also belonging to the "Cairns Group" of farm exporters, which favours agricultural liberalisation. Several such nations, including Australia and New Zealand, have declared their support for his candidacy. But Mr Pérez del Castillo stresses the breadth of his support from developing countries in order to insist that he will not be beholden to any single group. "I also have Indonesia on board, which is a net food importing country, and Singapore, which doesn't have any agriculture," he says...
    Countering the factors dividing the developing world, there are some that bring them together. Developing countries generally maintain a public stance of solidarity against rich countries in the WTO, for example..."

The WTO Race - Who's Ahead, and the Wolfowitz Factor

Patrick Baert of Agence France-Presse reports on the state of the WTO Director-General race, a day or so into the consultations process: "Shadow of Wolfowitz hangs over WTO amid US-EU bargain fears" (via, April 4).

Consultations began Monday. Baert passes on one diplomat's conjecture that Lamy and Perez del Castillo are the frontrunners, but that a lot will depend on fluctuations in support as Seixas Correa and Cuttaree withdraw.

Baert's assessment the sources of support for the different candidates:
    "Lamy formally has the backing of the 25 EU member states, which traditionally tries to perform in unison at the WTO.

    Perez del Castillo, a former Uruguayan diplomat, has support from some Latin American countries -- with the notable exception of Brazil, Cuba and Venezuela -- and major farm exporters like Australia and New Zealand.

    Cuttaree has official support from the 56 countries in the African, Caribbean and Pacific (ACP) grouping, but Paris has pressed francophone African countries to swing behind Lamy, according to a European diplomat.

    Seixas Correa has received the support of China, a fellow heavyweight in the G20 group of developing countries that opposes farm subisdies."
The nomination of Paul Wolfowitz continues to loom in the background as a potential source of resentment and contention:
    "Developing countries have raised concerns about the United States and European Union tacitly sharing out the top posts at the major international financial institutions, including the WTO...
    Media reports have suggested that the appointment of Wolfowitz... was backed by the Europeans in exchange for US support for Lamy at the WTO.

    "I hope there is no truth in this story of an understanding: if everything is shared between a few players, it means there is no space for other people," an ambassador for an Asian country at the WTO commented..."

Do 60 countries support Perez del Castillo?

The Chinese news service Xinhua passes on Uruguayan press reports that the Foreign Minister is claiming that 60 countries support Perez del Castillo for WTO Director-General: "60 countries back Uruguayan candidate for WTO head" (dated April 2).
    "Some 60 countries support the Uruguayan candidate Carlos Perez del Castillo to be the next general director of the World Trade Organization (WTO), local press quoted Uruguayan Foreign Minister Reinaldo Gargano as saying on Saturday."
The story also indicates that Uruguay's new left-wing government continues to support Perez del Castillo, a candidate originally put forward by a government to its right:
    " "Uruguay keeps on supporting Perez del Castillo. This has been said before, by the president (Tabare Vazquez) to his Brazilian counterpart, Luis Inacio Lula da Silva, and in a very clear form we keep that position," Gargano told a press conference Friday evening upon his return to Montevideo from Brazil, where he accompanied the president on a visit."

Crowell and Moring's "Doha Developments Update"

The Crowell and Moring law firm publishes a weekly web newsletter on the Doha Round negotiations, the: "Doha Development Update"

Recent issues have been carrying short updates on the week's events in the WTO Director-General race. The most recent issue (March 25) talks about the lobbying efforts of the Brazilian candidate, Luiz Felipe da Seixas Correa, at this month's meeting of the G-20 developing countries in New Delhi: "Seixas Correa Garners Support at New Delhi Meeting"
    "Indian trade minister Kamal Nath indicated to Brazil's Amorim during the G-20 conclave in New Delhi that India planned to support the candidacy of Brazil's nominee, Luiz Felipe da Seixas Correa for the WTO's Director General post. China and South Africa also indicated support for Seixas Correa, although Pakistan was more guarded (and may throw its support, at least initially, to Pascal Lamy). Mauritius candidate Jaya Krishna Cuttarree also attended the New Delhi meeting and sought support from attendees for his bid. The four candidates have about another week to firm up support from Members before the General Council chair Amina Chawahir Mohamed (Kenya) begins her canvassing of delegations for their formal positions in the winnowing-down process that is set to begin in April."

Getting down to business in the WTO DG race

Several news stories marked the start of the WTO's two month consultation process, meant to lead to a consensus among member nations on the choice of a new Director-General.

The stories
  • point to the failure of the last selection process in 1998-1999 (The WTO failed to reach a consensus on a candidate, the process was controverial and caused a lot of hard feelings, and a preoccupation with it prevented adequate preparation for the Seattle Ministers' meetings later in the year, contributing to the failure to lauch a new trade round there.),
  • give some details about this year's selection process,
  • talk about the sources of each candidate's support,
  • and notice the lack of a frontrunner.
Allen Beattie reports, in the Financial Times that "Selection of new world trade chief too close to call".

Beattie briefly describes the process,
    "Rather than a formal election, the selection process, which is due to finish by the end of May, involves repeated consultations among WTO members to try to reach a consensus. In a first stage, the chair of the WTO's general council, Kenyan ambassador Amina Mohamed, will consult members of the Geneva-based trade body over the next couple of weeks, after which at least one of the candidates is likely to drop out..."
and then quotes John Weekes, a former Canadian ambassador to the WTO, and the Chair of the General Council at the start of the last selection process, on possible process dynamics:
    “Quite a few countries have been hanging back and will only reveal their preference to the general council chair at this stage,” said John Weekes, a former Canadian WTO ambassador who is now senior policy adviser at the international law firm Sidley Austin Brown & Wood in Geneva. “There may well be some who support one candidate in one round of selection and another in the next one.” "
Tom Wright reports in the International Herald Tribune, that "For WTO members, it's 'confession' time".
    "Countries are saying little for now, but most are expected to broadly back candidates from their own regions in the first round...

    As candidates drop out, things could get more complex, said Sergio Marchi, a former Canadian trade minister and chairman of the WTO General Council in 2002. "Some candidates may be short of votes today, but on a subsequent ballot be more acceptable," he said...

    Next week, the ambassadors are supposed to winnow out one candidate, who should in theory gracefully bow out, and this process is meant to continue until a winner emerges before May 31.

    In case no consensus is reached by then, the organization has put in place a voting system to ensure that there is no repeat of last time. But it has not yet been decided how to weight the voting. Industrialized countries are uncomfortable about a one-ballot-per-member system, in which they would be outnumbered by developing countries, Marchi said."
Member countries could have voted last time, it was discussed.

During the consultations, Amina Mohamed will likely be polling delegations on their first and second choices. Keep an eye on the second choices. As candidates drop out, their supporters have to go somewhere. In 1999, Mike Moore of New Zealand was in last place in mid-January, but was one of the two finishers in July.

Chakravarthi Raghavan describes the January results ("Trade: Another term for Ruggiero?" ):
    "The new head count made public in press briefings by the WTO, (and the detailed statement of Rossier that was made available to the members, but withheld from the media, unlike the earlier two reports by Celso Lafer and Rossier Celso Lafer and Rossier conducted the consultations - Ben) brought out:

    * the Thai Deputy Prime Minister, Supachai leading with 40 first preferences, followed by 23 for Abouyoub of Morocco, 15 for MacLaren of Canada and 13 for Mike Moore of New Zealand;

    * on basis of second preferences, Moore edged forward to the top of the list with 26 votes, Supachai with 19, Abouyoub with eight and Maclaren with five.

    * while the great majority were willing to join the consensus whatever the final choice, a "not negligible number" said they would not be in a position to join automatically in a consensus if it formed around a candidate other than those for whom they have indicated a first or second preference.

    Of the 133 members, 28 (12 with offices in Geneva, and others outside) did not respond to contacts by Rossier."
At Reuters India, Robert Evans ("Haunted WTO aims to name new leader by end of May" ) briefly describes the process:
    "...three envoys will begin consulting the 148 WTO member countries on which of four candidates they would prefer as the next director general.

    The leader of the team, Kenya's ambassador Amina Mohamed who chairs the WTO's ruling General Council, told delegations on Thursday that the three aim to find a consensus around one figure in the hope of having him approved by the end of May..."
and speculates about a Lamy for Wolfowitz deal:

    "The United States -- which like all other WTO members could block any candidate by refusing consensus -- has yet to indicate which of the four it will support.

    This has led to speculation in some capitals -- but muted in Geneva where the changing dynamics of the 10-year-old WTO are better understood -- that Washington and Brussels may have done a deal involving the WTO and the World Bank.

    The speculation intensified on Wednesday when the EU gave the green light for controversial U.S. nominee Paul Wolfowitz to take over as head of the World Bank, sparking suggestions that Lamy would now get U.S. support for the WTO.

    But diplomats in Geneva said that even if the United States did back the Frenchman, a socialist committed to a liberalised global trading system, that was far from meaning he was certain to get the job.

    Some envoys suggest that any such railroading by the two top trading powers would lead developing countries, now better organised to promote their own interests than some years ago, to dig in their heels and insist on one of their candidates."
P.S. (April 1) Add these two AP stories (via BusinessWeek): "WTO leadership race enters final stretch" and "Bios of WTO leadership candidates".

The Making of the WTO Director-General, 2005, #3

With the WTO Director-General (DG) selection process about to move into a new, "consultation and consensus phase", its time to pull together the posts of the last few months. This post updates a February 15 collection of links on the WTO DG selection process: "The Making of the WTO Director-General, 2005, #2".

What does it matter

I'll accumulate "So what, why does this race matter?" posts here. Why does free trade matter? Why does the WTO matter to free trade? Why does the DG matter to the WTO? What about the General Council Chair?

The WTO is a "member-driven" organization, and, according to John Jackson, member of a recent commission on the future of the WTO, the DG position is institutionally weak: "The Director-General in a Member Driven WTO".

What does the WTO Director-General do? Here's Candidate Pascal Lamy's articulate explanation: "What does the Director-General of the WTO do?".

How are Directors-General chosen?

This post links to the WTO DG selection rules, and to a newspaper article providing a summary description of the process: "The Rules for Choosing a Director-General of the WTO".

Miles Kahler critiques the methods used to choose leaders at the World Bank, IMF, and the WTO in the Institute for International Economics book, Leadership Selection in the Major Multilaterals. The chapters can be read online (but cannot be downloaded). I learned about this from Daniel Drezner.

There have been two WTO DG contests before this one. Renato Ruggiero was selected as the first WTO DG in 1995: "How Renato Ruggiero Became the First Director General of the WTO".

A Claude Barfield Financial Times column, arguing that a WTO DG should have considerable political stature (selected from among former heads-of-state), was the subject of this post: "What Should We Look For In a WTO DG?".

Early Maneuvering

Nominations had to be made by December 31. But the race began before then. Who might have been in? Why did some drop out while other stayed in?

Early on, Jagdish Bhagwati suggested, in the Jan/Feb 2004 Foreign Affairs, that the South African Trade Minister Alex Erwin was considered a leading contender. Bhagwati's article was titled : "Don't Cry for Cancún". "...Alec Erwin, South Africa's trade minister and a favorite to become the next director-general of the WTO..." This was quickly denied.

A lot of people thought about running for DG: "People who might have run for WTO Director-General, but did not". In October, Brazilian and Uruguayan representatives met in Montevideo, without reaching joint agreement on a Latin American candidate: "Why are there two Latin Americans in the WTO race?". In December, Kenyan Trade Minister Mukhisa Kituyi almost entered the race: "There was another candidate".

And then there were four

When the sun came up on January 1, there were four candidates. Felipe Seixas Corrêa of Brazil, Carlos Pérez del Castillo of Uruguay, Pascal Lamy of France, and Jaya Krishna Cuttaree of Mauritius. Who are these men? What strengths and weaknesses do they bring to this office?

This Jan 2 survey post linked to pages with biographical information on each candidate: "Race for WTO Director-General". The Economist also surveyed the four candidates on January 7: "The Race for WTO Director-General".

Here is a report of an interview with Mauritius Foreign Minister Jayakrishna Cuttaree: "Jayakrishna Cuttaree". Here is a post on a Financial Times column that discussed Pascal Lamy: "The pros and cons of Pascal Lamy".

Alan Oxley, former Australian Ambassador to the GATT explains: "What's Wrong With Pascal Lamy". Peter Gallagher, an Australian trade consultant, discussed Pérez del Castillo and Lamy: "Advice on who to pick as the next WTO Director-General". Both Oxley's column and Gallagher's post offer much more.

Michael C. Boyer, James G. Forsyth, Jai Singh survey the four candidates, and their chances, in the February 2005 issue of Foreign Policy, "Who Gets to Run the WTO?". Very good. I learned about this from Daniel Drezner. Here's a February 19 survey of the four candidates from the International Herald Tribune: "The WTO Director-General Race Candidates".

The race itself

How do you campaign to be Director-General of the WTO? Mike Moore, a former Prime Minister of New Zealand, was DG from 1999 to 2002. He described his race for DG in his 2003 book on the WTO, A World Without Walls. This post has an extract from the book, describing the race: "What's it like to run for WTO Director-General".

The selection rules call for the presentation of the candidates to the General Council soon after the nominations end. In 2005, this presentation took place on Wednesday, January 26: "This Wednesday’s WTO General Council meeting" and "The next step in the WTO race". A group of NGOs took advantage of the General Council meeting to schedule its own "public hearing" with the candidates on the evening of January 26: "Public Hearing for WTO Candidates". And another post: "Meet the WTO Candidates".

Once the presentations were completed, the texts were posted to the WTO website, and there was a spate of stories: "WTO DG Candidates Address the General Council". In a first, three of the candidates answered questions at an NGO sponsored "public hearing" on January 26. Here is a transcript: "Minutes of Civil Society Hearing for WTO Director-General Candidates". The NGO "public hearing" was a new element in a WTO DG race; the article highlighted in this post points to it as an example of the increasing influence of NGOs: "The NGOs' New Influence".

The candidates have been running hard. Brazilian Felipe Seixas Corrêa traveled to South Africa – another G-20 member: "The Brazilian visits South Africa". South African news reports suggested that South Africa was torn between its ties with Brazil and its connections with other African countries. Its choice is described in the post "Seixas Corrêa, or Cuttaree?". In early March, he took his campaign to Washington: "Seixas Corrêa Visits Washington". In late March, China endorsed him: "China Endorses Seixas Correa".

Newsweek interviewed Pascal Lamy in late January: "Newsweek Interviews Pascal Lamy". Here's another interview from the Financial Express: "Interview with Pascal Lamy". Here is a February article on Lamy based on German sources: "Does Pascal Lamy have a good chance?". In February, Brazil became indignant about Lamy remarks about the public international public good nature of rain forests: "The Brazilians Are Not Happy With Pascal Lamy". In late-February, Lamy took his campaign to India: "Pascal Lamy Turns Up In India". In March there was a strange story about Nigerian support for Lamy "Nigeria's Position on the WTO Director-General Race".

In mid-March, the Bush Administration proposed Deputy Defense Secretary Paul Wolfowitz as the U.S. candidate for the next President of the World Bank. From that point on, there was persistent speculation about a deal between the U.S. and Europe: the U.S. would support Pascal Lamy in exchange for European support for Wolfowitz at the World Bank: "Wolfowitz for Lamy?"; "Persistent speculation on Lamy for Wolfowitz deal"; "Wolfowitz/Lamy Gossip". The blog "World Bank President" has been covering the World Bank race. It's a potentially useful reference on the inter-relationship between the two races.

Early on, Uruguayan Pérez del Castillo traveled to Australia to meet with the trade minister there: "What will Australia do?”. In early February, the Australians endrosed him. Stories about that time tied Australia's selection decision (which was said to be between Pérez del Castillo and EU candidate Lamy) to recent EU decisions on wheat subsidies "Which Candidate Will the Australian's Choose?"; "The Australians Opt for Pérez del Castillo". This post links to a set of stories on Pérez del Castillo's claims about the division of Latin American support between himself and Seixas Corrêa: "Latins for Pérez del Castillo". In mid-February Pérez del Castillo campaigned in Washington: "Perez del Castillo in Washington in February", and in mid-March, in Brussels: "Pérez del Castillo goes to Brussels". In late March, he was endorsed by New Zealand: "New Zealand Endorses Perez del Castillo". Pérez del Castillo was nominated by a moderate government; in the Spring, a government of the left came to power. Would it continue to support him: "Will Uruguay's New Socialist Government Continue to Back Pérez del Castillo?"?

Mauritius Foreign and Trade Minister Jaya Krishna Cuttaree sought support among the Indian diaspora: "Cuttaree plays the ethnic card". The Cuttaree campaign has a web site: "Jaya Krishna Cuttaree" (I learned about this from Daniel Drezner). Cuttaree got the endorsement of the Southern Africa Development Community (SADC): "Endorsements for Jaya Krishna Cuttaree". In early March, Cuttaree was in Brussels: "Jaya Krishna Cuttaree Visits Brussels". In mid-March he attended the G-20 developing country meetings in New Delhi ("Cuttaree goes to New Delhi"), where he thought he found Indian support: "Cuttaree and India". However, this later story from Mauritian sources expresses frustration over India's failure to back him: "India, Mauritius, and the WTO Director-General contest". Here is an early post linking to, and quoting from, an Indian column surveying the candidate-set from the Indian point-of-view: "An Indian View of the WTO-DG Candidates".

The Choice

At the end of March, start of April, the selection process changed. Candidates were no longer just making themselves known, now the General Council would begin a process of consultation, meant to lead to consensus around a single candidate: "Change of Pace Coming in the WTO Director-General Race".

On March 30, on the eve of this process, the odds on the candidates were available from the bookmaker, Ladbrokes: "Here are the odds on the WTO DG candidates:".

The Transition

What is involved in settling in to the office? Mike Moore of New Zealand, was selected for DG in 1999. His book on the WTO, A World Without Walls, sheds light on some of the problems he faced: "You Win the WTO DG Race. What Do You Do First?".

Last updated March 30, 2005

Here are the odds on the WTO DG candidates:

For what its worth, from the bookmaker Ladbrokes (via this March 30 story in - "Uruguay's Castillo Is Top Contender for WTO Job, Ladbrokes Says" ):
    " ``Castillo looks like the compromise candidate, but I expect the odds on Lamy to shorten,'' said Warren Lush, a spokesman for Ladbrokes in London. ``We're expecting to take some more money soon, but they're the only two to have had much backing so far.''

    Four candidates are competing for the four-year job that starts Sept. 1. Perez del Castillo, 60, a former ambassador to the WTO, is quoted at 5/4 odds, meaning a $5 wager would yield a profit of $4. Lamy's odds are 5/2, with Brazilian ambassador Luiz Felipe de Seixas Correa and Mauritian Foreign Minister Jaya Cuttaree both at 4/1. .."
The story also notes that the WTO ambassadors (the General Council) "meet tomorrow in Geneva to discuss the selection process."

Cuttaree and India

Mauritian WTO candidate, Jaya Krishna Cuttaree, has angled for India's backing, as a representative of another developing country, as a citizen of nearby country with economic connections to India, and on the grounds of ethnic ties ("Cuttaree plays the ethnic card").

He was present at the G-20 meeting of developing countries in New Delhi in mid-March, where he lobbied for support (The Financial Express, March 19, "Race for WTO D-G post hots up" )
    "NEW DELHI, MARCH 18: Competition for the post of the World Trade Organisation (WTO) director general is intensifying with Mauritius claiming India’s support for the coveted chair. Speaking to mediapersons on the sidelines of the G-20 ministerial meeting in New Delhi on Friday, Mauritian candidate Jayen Cuttaree said that top leaders of the ruling United Progressive Alliance (UPA) have promised to support his candidature.

    Commerce ministry officials, however, said that India was yet undecided on whether it should support Mauritius or Brazil. “We want to support Mauritius as we are politically close. At the same time we are also keen on Brazil as it has emerged as a sharp negotiator forwarding the cause of developing countries,” an official said.

    Former EU trade commissioner Pascal Lamy, who is the EU candidate for the DG’s post, too, was in New Delhi last month to lobby for India’s support. Giving his arguement on why developing countries should support him, Mr Cuttaree said that there was an increasing feeling among developing countries that their concerns have not been taken on board at the WTO.

    At the same time, developed countries too were showing political will to take care of devepment issues along with trade, he said. “My job would be to act as a bridge between developed and developing countries,” he said.

    On the issue of attempts made by some developed countries to divide developing countries on the basis of their level of developement, the Mauritian minister said that he did not believe in such categorisation. “If India and China become stronger it is good for us as they will pull other developing countries with them,” he said."
(l' of Mauritius, March 22, "Successful Lobbying for WTO Directorship"):
    Jayen Cuttaree’s campaign to become the new director of the World Trade Organisation (WTO) seems to be going well. Last week, he paid a visit to the president of the Indian Congress Party, Sonia Gandhi, who gave the guarantee that she supports his application for the post. In about a week, the WTO general council will start its first consultations with the member states. Jayen Cuttaree appears to be among the favourites though former EU commissioner Pascal Lamy is a serious contender."

New Zealand Endorses Perez del Castillo reports (March 29) that New Zealand has endorsed Uruguayan Carlos Perez del Castillo for WTO Director-General: " NZ backs Castillo for WTO post".

The Director-General in a Member Driven WTO

The WTO is a member driven organization - decision making authority is vested in its General Council of national ambassadors, and is jealously guarded. The Director-General position is not clearly defined in the treaties setting up the WTO, and is not, institutionally, very powerful.

The relationship between the Director-General and the General Council came up in a recent American Enterprise Institute discussion on the WTO:
    "WTO Director-General Dr. Supachai Panitchpakdi's three-year term will be coming to an end this year amid serious institutional structure problems, according to the board. With a new director-general to be chosen by the members of the WTO in the coming months, the board asserts that it is important and timely to address these challenges.

    "The way the system treats its officials, its secretariat, and its director-general is nothing short of disgraceful," Jackson
    [John Jackson, a Georgetown University law professor] said.

    Jackson explained that the mantra of the organization, that it is "member-driven," tends to be an excuse for ambassadors to "flex their power muscles and to prevent adequate operation of the secretariat and the director-general." "
Future challenges for WTO" (UPI via the Washington Times)

The panel's topic was the January "Sutherland Report" on the future of the WTO. Jackson was one of the co-authors of the report. The report devotes a chapter to the role of the Director-General and the Secretariat. Here are some extracts:
    "...for some years, the mutual confidence between delegations and WTO staff has been less obvious than in the past...The deeper problem appears to be a view that, in a "Member-driven organization", the Secretariat's role must be solely one of support, not of initiative or even of institutional defense of the WTO system...
    The role of the Director-General is not defined in the Marrakesh Agreemetn. Article VI(2) calls on the Ministerial Conference to appoint the Director-General and "adopt regulations setting out powers, duties, conditions of service and term of office...". aside from determining conditiosn of service, this mandate has never been fulfullied...
    There is the question of the Director-General's duty to manage the Secretariat. In recent years, there has been a tendency towards micro-management by Members, particularly through the Budget Committee..."

Wolfowitz/Lamy Gossip

Speculation about a Wolfowitz for Lamy trade abounds: Here's a UPI item via the March 28 Washington Times "UPI Hears..."
    "...The only person outside his immediate Washington circle with whom Bush shared his plan to appoint Deputy Defense Secretary Paul Wolfowitz to run the World Bank was his closest ally, Tony Blair. Bush consulted Blair a month before the Wolfowitz name first surfaced -- but Blair kept the secret from his own Cabinet... Above all it has infuriated Gordon Brown, the powerful Chancellor of the Exchequer and Blair's most jealous and most dangerous rival. Brown... takes the way Blair kept Bush's little secret as a personal slight... Brown also thinks Blair was very dumb not to hold out for a big fat favor in exchange for his support for Wolfowitz. After all, the French and Germans have told Bush that they will swallow Wolfowitz -- but only if Bush accepts former European Union trade commissioner Pascal Lamy as the next head of the World Trade Organization. Funny, but Bush doesn't yet seem to have shared the news of this bargain with his own Cabinet, nor with Congress. Will the deal hold?"
Developing countries are a majority of WTO nations, they have a lot at stake in trade negotiations, they think fairness requires that the Director-General be from a developed country, and they think they were denied their opportunity in 1999. A developing country coalition could prevent consensus around a given candidate.

I'd guess that many developing countries would react badly to an apparent backroom North Atlantic deal, with U.S. support for Pascal Lamy exchanged for European support for Wolfowitz.

In 1998-1999, a deadlock between developed and developing country candidates for Director-General led to a prolonged contest, a failure to reach consensus around any candidate, and a lot of anger. The preoccupation with the race interfered with the preparations for the meeting of WTO member country trade ministers in Seattle, and contributed to the failure of those meetings. The start of the current round of trade negotiations was delayed for two years.

Another bad outcome may be possible if the speculation about a Wolfowitz/Lamy deal turns out to be right. I'm not sure the speculation is right. But, if Pascal Lamy is going to win, and his tenure is going to be productive, it will help if he can win in a way that minimizes the antagonism of developing countries. I don't think that road runs through Washington first. If there is a deal, it would help if implementation were contingent on Lamy's demonstrated ability to attract significant developing country support.

Minor revisions 3-29-05

Perez del Castillo in Washington in February

I didn't catch it at the time, but Uruguayan candidate for WTO Director-General, Carlos Perez del Castillo campaigned in Washington in February: "Benefits of Market Access Should Guide Trade Negotiators in 2005, Not Specifics, Top Trade Official Says"

Old Testament Outsourcing

"Moses and Outsourcing" via "Newmark's Door" and ultimately Mikhail S. Kouliavtsev.

India, Mauritius, and the WTO Director-General contest

Mauritian's are perplexed about India's failure to endorse Mauritian Foreign Affairs and Trade Minister Jaya Krishna Cuttaree for the WTO Director-General position.

It comes out in this March 24 report on a visit by the Indian Prime Minister to Mauritius: "Agreement to expand air services during PM's visit to Mauritius" In among the descriptions of various economic agreements under discussion during the visit, there's this
    "Mauritius, however, is peeved at India cold-shouldering its candidature for the WTO Director General's post. Despite its close political links and common kinship and its open support to India at all international fora, New Delhi has not given any commitment so far to the candidature of its Foreign Minister Jaya Krishna Cuttaree for the top WTO post. "We have always vociferously supported India, by name," lamented the official."

Change of Pace Coming in the WTO Director-General Race

The pace of the WTO Director-General selection process should change next week.

The WTO adopted procedures for selecting Directors-General in 2002: "Procedures For The Appointment of Directors-General".

Following the procedures, the candidates were nominated in December, given an opportunity to make a presentation to the WTO General Council in January, and spent the last two months campaigning for office.

The final decision has to be made three months before the term of the current Director-General ends. Since his term ends at the end of August, the decision has to be made by the end of May.

During the last two months, the procedures require consultations among the members of the General Council (the Council of the ambassadors to the WTO), facilitated by the Council's Chair (and selected assistants), aimed at bringing about a consensus decision in favor of one of the candidates.

The procedures describe how it should work:
    "17. The Chair, with the assistance of the facilitators, shall consult all Members, including non-resident Members, in order to assess their preferences and the breadth of support for each candidate. The ultimate aim of the consultation process shall be to identify the candidate around whom consensus can be built. In order to do this, it may be necessary to conduct successive consultations to identify the candidate or candidates least likely to attract such a consensus.

    18. The outcome of the consultations shall be reported to the membership at each stage. It is understood that the candidate or candidates least likely to attract consensus shall withdraw. The number of candidates expected to withdraw at each stage shall be determined according to the initial number of candidates, and made known in advance. This process shall be repeated in successive stages on the basis of a revised slate of candidates each time, with the aim of establishing consensus around one candidate.

    19. 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."

We'll see. This is delicate work for the Chair. The Council has to be brought to settle on one of the four candidates by consensus. The Chair can't be unduly assertive in eliciting this choice, and can't be seen as pushing any candidate.

The last time the WTO tried this (under somewhat different procedures) things went wildly awry. The Council failed to reach a consensus, split the term between two candidates, angered many members, and contributed to the wreck of the WTO Ministers' meeting in Seattle.

The winnowing process begins next week.

The WTO web page on the race is here: "WTO Director-General selection process".

Persistent speculation on Lamy for Wolfowitz deal

Since the Bush Administration selected Paul Wolfowitz as its choice for the President of the World Bank, there has been persistent speculation that the Administration would support Pascal Lamy as Director-General of the World Bank in exchange for European support for Wolfowitz.

Here are a couple of stories that mention this in passing. Marie-Louise Moeller reports for SwissInfo, "EU seeks talks with Wolfowitz" and Aine Gallagher reports for Reuters, "Europe Buries Qualms Over Wolfowitz".
    ""...The realpolitik of the situation is that in all likelihood Mr Wolfowitz will be appointed as chairman of the bank," Irish Finance Minister Brian Cowen told a news conference after a summit of European Union leaders in Brussels on Wednesday...

    Others at the summit indicated there would be no objections to Wolfowitz's nomination, which comes at a time when Europe is seeking to heal rifts with the Bush administration and wants U.S. backing for former EU Trade Commissioner Pascal Lamy's bid to head the World Trade Organisation..."
The Reuters story points to another potential tradeoff: "Few obstacles for Wolfowitz in World Bank campaign".
    "Many European officials are fuming privately, diplomatic sources say. The sources said European angst has remained unexpressed in large part because many countries have candidates in the running for top international posts.

    Britain, Norway and the Netherlands are vying for the helm of the U.N. Development Program, which has an annual budget of nearly $3 billion. Meanwhile, the European Union has nominated former EU trade chief Pascal Lamy of France for the top job at the World Trade Organization, which comes open in August."
There has been a fair amount of speculation that the U.S. may back Pascal Lamy. Much of it has centered around the close working relationship Lamy had with former US Trade Representative (USTR) Robert Zoellick. More recently a possible Wolfowitz/Lamy exchange has been bruited. Lamy is certainly extremely capable, and has the necessary WTO background.

But here are some counterarguments:
  • The articles cited above suggest that many European states will already back Wolfowitz. Unless this is due to US commitments already privately made, to back Lamy as a quid pro quo, it doesn't sound like the US will have to back Lamy to get Wolfowitz.

  • Lamy and Zoellick worked well together. But Zoellick isn't USTR anymore. As Deputy Secretary of State he has a much wider range of issues, and won't be the lead on US trade negotiations.

  • Lamy is a French Socialist. There may be ideological objections within the Administration.

  • An apparent Lamy for Wolfowitz exchange, placing a European as Director-General of the WTO, would create enormous antagonism among the developing countries that have been pressing more and more insistently for a leadership position at the WTO.

  • The US has traditionally objected to WTO Directors-General from large European nations. Under the GATT, most DGs were from smaller European states. In the 1994 selection campaign, the US backed Mexican President Carlos Salinas, and did not agree to the selection of an Italian candidate until there was no alternative - and even then, not readily. There were no European candidates in 1998-99.

China Endorses Seixas Correa

Taiwan's The China Post reports that China has endorsed Brazilian Luiz Felipe de Seixas Correa in the WTO Director-General race: "China supports Brazilian candidate to lead WTO? "
    " China on Wednesday threw its support behind Brazil's candidate to lead the World Trade Organization....

    "China supports Brazil's ambassador to the World Trade Organization Luiz Felipe Seixas Correa to run for the post of WTO's director-general," the government's Xinhua News Agency said, citing Commerce Ministry spokesman Chong Quan."
Here's a report from Xinhuanet, "China supports Brazilian candidate to run for the WTO chief"
    "...It is the first time that China expresses its support to a candidate for WTO director-general.

    According to Chong, China has informed the decision when Commerce Minister Bo Xilai's met with visiting Brazilian Vice Foreign Minister Clodovaldo Hugueney Monday in Beijing..."
and the Associated Press, via BusinessWeek, "China supports Brazilian candidate for WTO".

Revised March 23, 2005

Cuttaree goes to New Delhi

Jaya Krishna Cuttaree took his campaign for WTO Director-General to New Delhi this week: WTO offers best protection for developing countries: Mauritius FM"

He talked about the importance of multilateral trade negotiations to developing countries:
    "Mauritius says only a rule-based trading system like the World Trade Organisation (WTO) would offer the best protection to the rights of developing and poor countries.

    Mauritius Foreign Affairs Minister Jaya Krishna Cuttaree said trade liberatlisation with sustainable development in focus would be able to bridge the divide between the developed and the developing nations.

    "The major players have the option of negotiating bilateral free trade areas and choose with whom they want to deepen integration. We do not have such options," said Cuttaree in an interview to ANI."
India still hasn't chosen its candidate:
    "India has not so far opened its cards openly in favour of Mauritius in the world trading body. New Delhi is weighing the options of its cultural and political relations with Port Luis and economic advantages of supporting EU's former trade commissioner Pascal Lamy. Cuttaree however, is hopeful that New Delhi will go with Port Luis. "
Cuttaree is campaigning hard:
    "Cuttaree, who arrived in New Delhi after a brief visit to Bangladesh to seek Dhaka's support to his candidature, is leaving to Colombo tomorrow."

Wolfowitz for Lamy?

Bush wants to Paul Wolfowitz to be President of the World Bank. The Europeans are unenthusiastic, but one of the experts quoted in this Bloomberg story ("Wolfowitz Nominated to Be Next World Bank President") suggests the French may go along if the US accepts Pascal Lamy as head of the WTO.
    " ``The French will accept the candidacy of Wolfowitz without enthusiasm,'' said Dominique Moisi, deputy director of the French Institute for International Relations in Paris. ``They will ask something in return,'' such as the appointment of Pascal Lamy at the head of the World trade Organization."

Pérez del Castillo goes to Brussels

Uruguayan WTO Director-General candidate, Carlos Pérez del Castillo, was in Brussels Tuesday (3-15) addressing the European Parliament's Trade Committee.

The EU is committed to Pascal Lamy of France, but the Trade Committee has invited the other three candidates to state their cases. This may matter because, during the consultation process by which the candidates are selected, second choices are often important.

The southern South American press service, MercoPress, reports:"WTO leadership candidate makes case to EU"
    "...He said the next WTO chief should be able to guide current world trade talks to get a deal that ‘‘reflects the interests of all members,’’ implying that former EU Trade Commissioner Lamy would not do so.

    He added that the other two candidates — Jaya Krishna Cuttaree, the foreign affairs and trade minister of Mauritius, and Luiz Felipe de Seixas Correa, Brazil’s ambassador to the WTO — did not have broad enough backing.

    Pérez del Castillo said he would ensure poorer countries get more flexibility in delaying implementation of trade rules, which he said often did not take into account the needs of developing economies.
    Pérez del Castillo said last November the top job should go to either a Latin American or an African.

    He said neither continent had been given a chance since the creation of the WTO a decade ago — or since its predecessor, the General Agreement on Tariffs and Trade, began in 1948.

    He said he was in favor of ensuring a drop in tariffs and duties in all areas of trade, leaving no room for protected sectors like services or agriculture, which have been sensitive points of contention in the current trade round..."
Here's another report from "MEPs to hear all WTO Candidates, despite backing Lamy".
    "...The Uruguayan candidate urged the EU to "harness all efforts" to ensure a successful conclusion to Doha round - opened in 2001 - in Hong Kong this year, but warned that expectations should be lowered.

    "I wouldn't call it a development round", he said...

    If victorious, Mr Castillo said he would not carry out thorough reforms in the organization, which Mr Lamy criticized as being "medieval". "There are things the WTO can do and there are things the WTO cannot do and should not do", he stated, advocating instead for more work to be carried out in the Geneva headquarters instead of high-profile ministerial summits.

    Drawing attention to the "need to improve the WTO's image before the public view in general", he assured that, if victorious, his door "will always be open" to NGOs..."

Light blogging

I apologize for the light posting recently. A busy period at work won't leave much time for blogging for a few more days.