Credit: Original article can be found here
Who wants to rule the world, or running the world’s trading system at least? The race is well underway. Of eight original runners and riders for Director General of the World Trade Organisation (WTO), we are now down to five, one of whom is our very own former International Trade Secretary Dr Liam Fox, who stands a very good chance despite Ladbrokes originally giving him the worst odds.
The WTO of course is at pains to make clear it is not a form of world government. Former Director General Mr Mike Moore, a New Zealander, said that “our dream must be a world managed by persuasion, the rule of law and the peaceful settlement of differences” and that without a multinational trading system “it would be a poorer world of competing blocks and power politics – a world of more conflict, uncertainty and marginalisation.”
The WTO in Geneva is a remarkable intergovernmental organisation which respects nation states, cooperates for world advantage, has few officials and is effectively ‘self-governing’. Unlike the transnational EU for example, it has no puffed-up Presidents, no all-powerful unelected Commission dictating policy, but operates apolitically and on consensus, and uses just two languages – English and French. It manages to combine 164 members and 24 observer governments out of the 193 sovereign states that make up the United Nations, with Afghanistan the last to join in 2016.
EU states are members in their own right, though the EU is a member too, and indeed EU member Hungary is reportedly backing Fox. The selection process itself moves by consensus not voting – unless absolutely necessary.
But this noble post-war institution, born as the General Agreement on Trade and Tariffs in October 1947 to drive a better world with less barriers and obstructions to trade such as tariffs and quotas, to seek to avoid disastrous 1930s protectionism. It became the WTO on 1st January 1995, though GATT remains at its core.
Most WTO members trade under WTO Rules, with no more advanced free trade agreements in place. But right now the future of the WTO and its operations hangs by a thread. It cannot function without the ‘appellate body’ – the ‘court’ that overseas the dispute settlement mechanism of the WTO, hearing appeals from the Dispute Settlement System that arbitrates on breaches of WTO trade rules. This body ideally consists of seven ‘judges’ or appellate body members, but it is now down to just one. On 10th December 2019 two members retired, and three was the minimum to function.
The body is now in crisis, and with it the entire world trading system. If you can’t enforce global trade rules, then there is little point in making such laws, and members may start taking liberties on trade matters. The breakdown of the entire system is possible.
What is causing the crisis is particularly the hostility shown by the US administration to the WTO. The US is blocking the appointment of new appellate body members. This is not just the claimed protectionist instincts of President Trump, which are in reality more about fairer and rebalanced trade, but are more of a US approach to American interests in general.
President Obama similarly blocked Jennifer Hillman for a second term as an appellate member in 2011, claiming the WTO failed to protect US interests. With that serious threat in mind, I believe that Liam Fox is the best candidate to guarantee the future of the WTO. He has excellent links and networks in Washington DC, and indeed would be quite at home there with his shared policies and view of the world. He would the most likely candidate to be able to persuade a US administration – especially a re-elected Trump administration if that occurs – to reembrace the WTO, accept that it can work in US interests, and to invest in its future. He could be the WTO’s saviour.
Liam is also an enthusiast for free trade, with a great grasp of its technical complexities from his time as the UK’s International Trade Secretary. He comes from what is now the only G7 economy – the UK – that actively and enthusiastically backs free trade, perhaps fired by Scottish antecedents such as David Ricardo and Adam Smith. Current Trade Secretary Liz Truss is on a positive roll with a host of free trade deals in line, with Japan complete, USA, Australia and New Zealand near complete, and the UK seeking membership of the Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP).
The USA’s free trade mantle has slipped to a more nuanced protectionist and America First stance, whilst China and India remain protectionist on the basis of being developing economies, Japan has opened up a little but is still protectionist in many respects, France is ideologically protectionist and Germany quietly so via EU protectionism. Fox as Trade Secretary was prepared for the UK to universally remove 90 per cent tariffs with no EU deal.
This is not to belittle what the other candidates have to offer in any way. South Korea’s Yoo Myung-hee is a fine Trade Minister with a dedication of 25 years to trade matters, and Korea is a successful manufacturing country that has many impressive trade deals, such as with the EU and Canada. Asia is of course a powerhouse, and Thailand provided a Director General in Supachai Panitchpakdi 2002-2005.
Myung-hee would be the first female Director General if successful. There are two African representatives – and Africa has not had representation and is a rising power base with a forecast population of 3 billion. Ngozi Okonjo-Iweaka is the Nigerian representative, a former Finance Minister and leading economist with World Bank experience, who pitches that she is a ‘fresh pair of ears and eyes for the WTO’, and she has the backing of the ECOWAS trade partners of West Africa and their nascent Parliament.
Deeply impressive, and another strong contender, is Kenya’s Amina Mohamed, lawyer, diplomat and former Foreign Affairs Minister, who is also an ex-Assistant Secretary General of the WTO and was on the International Organisation for Migration. Mohammed Al-Tuwaijri of Saudi Arabia would be the first to represent the Middle East if successful, and has top notch business credentials as a former Minister of the Economy and having headed up HSBC’s MENA operations, and was formerly of JP Morgan.
Latin America and the Americas currently have the Director General Roberto Azevedo from Brazil. But there is an additional factor that now weighs heavily in Fox’s advantage. He is a medical doctor, a practised GP. He is the only candidate to my knowledge that combines such an impressive grasp of international trade and direct understanding of medicine, though Okonjo-Iweala sits on the Global Alliance for Vaccines and Immunization (GAVI).
Given the hit most world economies have taken with Covid, and the importance of trade as an aid to recovery by not resorting to instinctive protectionist walls but to open up trade further. Given his strong US links, trade expertise and real enthusiasm, batting for free trade as part of the UK Government, and medical knowledge, Fox is very well positioned indeed. Perhaps those betting odds on Fox will be changing fast as we reach the final furlong.