WTOs Azevdo: US withdrawal is not ‘in the cards’

The head of the world’s largest economic cooperation organization speaks one-on-one withGlobal Financeabout the pace of international trade—and the risks that confront it.

roberto azevedo

After the February 19th ministerial meeting in Sao Paulo—at which little was agreed—World Trade Organization (WTO) director-general Roberto Azevêdo sat down with Global Finance.

Global Finance: Are we living in another difficult period for global trade, with fewer multilateral agreements and more risks of unilateral sanctions, unfair measures and disputes?

Roberto Azevêdo: Trade expansion is actually picking up around the world today and growing at a sustained pace that we have not seen since the global financial crisis. Global trade growth last year was around 3.5%, and early indications are that we will see reasonably strong growth this year as well. Our latest World Trade Outlook Indicator shows that merchandise trade volume, export orders and air- and sea-freight traffic are all above trend, which means that first-quarter 2018 trade growth should continue apace.

Since the crisis of 2008, governments have actually held relatively firm in resisting the temptation to put protectionist measures in place, with less than 5% of global imports impacted by trade restrictions over this period. But, of course, we must remain cautious and watchful that such measures are not introduced, as these actions could very quickly undermine future trade growth and therefore harm economic growth, development and job creation.

GF: Can the US’s new protectionist wave damage its own trade and global trade? Is the risk of a US withdrawal from the WTO real?

Azevêdo: On your second point, I have no indication that this is in the cards. In fact, the US is continuing to engage in the WTO in many ways, including at our ministerial conference in Buenos Aires in December [2017]. Indeed, the administration issued a positive statement after that meeting, listing a number of areas where they want to take work forward in the Organization.

However, like many members, the US has a number of specific concerns about the way that the multilateral trading system works, and wants to work with others to improve the functioning of the WTO. These concerns should be heard, and I look forward to working with all WTO members to ensure that the system continues to respond to their collective needs.

Regarding the ‘new protectionist wave’: Actually, as I said before, there is no such wave at present. I am urging all WTO members to continue showing the restraint that we have seen in recent years.

GF: Do you agree that the WTO Dispute Settlement Mechanism should be strengthened? Is there any risk of the WTO’s Appellate Body being paralyzed this year for issues related to how new memberships are negotiated?

Azevêdo: The situation with the Appellate Body is indeed a serious concern. Members are discussing and considering various ways of breaking the current impasse. We will continue these efforts and I will do everything I can to help members reach a solution.

Actually, the WTO Dispute Settlement System has been working well and continues to serve WTO members in resolving their trade disputes. In fact, it is one of the most respected and active tribunals in international public law. Members who may have specific concerns about the way the system may be functioning are often among its most active users. Like any other system, however, it is not perfect and can certainly be improved and strengthened. It is inevitable that members will have different views on what the priorities for improvements should be. What is important is that members engage on the issues with a view to finding agreement on the way forward.

GF: What are the possible damages caused by the absence of a new multilateral agreement on countries that provide farm subsidies?

Azevêdo: Achieving an agreement on domestic support in agriculture has always been one of the biggest challenges for global trade and for the WTO’s negotiating agenda. The vast majority of WTO members want real reform on farm subsidies, but it is an issue of extreme political sensitivity for many, so finding a solution will not be easy. There is no question that trade-distorting domestic support harms producers in [other member states], particularly in developing countries, and that progress must be made.

Members have worked hard to find creative approaches to untangle the negotiations. Last year, seven domestic support proposals—backed by more than a hundred WTO members—were presented in the negotiating group on agriculture. This engagement and activity are very positive, but I think that the problem is political, and therefore the solution will have to be political as well.

GF: Do you see less inclusive, plurilateral agreements on e-commerce as a positive alternative to the more inclusive, multilateral ones?

Azevêdo: Multilateral outcomes are always the preferred option, but the WTO framework is quite flexible. It allows members to pursue conversations—and potentially agreements—in a variety of different configurations. In recent years, WTO members have struck multilateral agreements, such as the Trade Facilitation Agreement of 2013, and plurilateral agreements, such as the expansion of the Information Technology Agreement in 2015. These are both trillion-dollar deals which promise real benefits to WTO members. So I think progress is welcome in whatever form it takes, and often we see that progress in one area can spark a movement in other areas as well.

On e-commerce, there is clearly demand at the WTO to come to grips with what has become the fastest-growing type of trade. E-commerce activity is exploding, and this growth is going to continue. Between 2013 and 2015, the value of online trade jumped from $16 trillion to $22 trillion. This is of major economic significance to all members and so, of course, it can’t be ignored. Moreover, I think we need to do all we can to ensure that this revolution is truly inclusive so that it can benefit all WTO members.

In [the] Buenos Aires [meeting], subsets of WTO members decided to accelerate their discussions on electronic commerce and a number of other areas, including investment facilitation; assisting micro-, small- and medium-size enterprises to participate more fully in trade; and the role of trade in the economic empowerment of women. The number varies from issue to issue, but more than 70 WTO members—both developed and developing—signed up to participate in each of these discussions, representing more than three-quarters of global exports, so there’s no doubt that this is significant. Importantly, all of these groups are keen to engage the wider membership in their discussions. I have been calling on the proponents to reach out to everyone, and conduct the conversations in a manner that is open to all and that reflects the concerns of all. The WTO should be ready to tackle issues of emerging economic importance, and to do it in a way that benefits all our members.