Wed, Jan 16, 2013 - Page 9 News List

WTO’s next director-general will face a multitude of problems

The world’s trade ‘policeman’ will soon be looking for a new leader, but after the failure of the Doha talks and a boom in bilateral pacts, its relevance is in question

By Heather Stewart  /  The Observer, LONDON

At an elegant 1920s building set in a lush park on the shore of Lake Geneva this month, nine senior global politicians, six men and three women will be attending an extraordinary job interview. The WTO, once the hated target of anarchists and anti-globalization protesters furious about rigged rules and backroom deals that locked poor countries out of the world’s markets, is seeking a new director-general.

Yet few angry campaigners are expected to throng the center of Geneva on Jan. 29 and Jan. 30, as the candidates file into the WTO’s headquarters to set out their vision for the future of the global marketplace. More than five years into the financial and economic crisis, the once-hot topic of “globalization” is no longer where the action is.

“The WTO has lost an incredible amount of sex appeal,” said Ricardo Melendez-Ortiz, chief executive of the Geneva-based think tank International Centre for Trade and Sustainable Development.

In 1999, when a WTO meeting in Seattle was brought to a halt by street riots, it was the focus for protesters’ rising sense of injustice about the impact of globalization on the world’s poor. Yet 14 years later, many of the most fraught issues rocking the world economy — taxes, immigration, exchange rates — are being fought out far from Geneva. And there are signs that aspects of the “globalization” that was the WTO’s raison d’etre are being quietly unpicked.

The WTO, which polices international trade law, as well as being a forum for negotiations, is having to arbitrate a growing number of international disputes, as the temporary truce called for by the G20 countries in the depths of the financial crisis gives way to a more fractious climate.

China and the US, for example, are battling each other over allegations that China unfairly subsidizes its solar power industry. At the same time, multinational firms are beginning to reverse the relentless process of outsourcing, which has seen supply chains stretch out across the globe.

Meanwhile, the increasingly powerful emerging economies, burned by the experience of the financial crisis, are asserting their right to protect themselves against the surges of “hot money” that leave their economies vulnerable. Brazil, for example, has used taxes on foreign exchange — anathema in the days of the so-called Washington consensus — to try and stem the appreciation of its currency.

“The days of expecting a lot out of outsourcing are gone,” said Simon Evenett, a professor of trade and development at St Gallen University in Switzerland.

He says that is for two reasons: first, a jump in the cost of oil.

“These global supply chains were all the rage in the early and mid-1990s, when oil prices were US$20-25 a barrel,” he said.

Higher transport costs mean that each kilometer of a supply chain is a much more significant drain on a firm’s bottom line.

The second reason outsourcing has probably passed its peak is “a realization of the problems involved,” he said.

He cited issues with intellectual property, product quality and the treatment of staff in far-away factories as complications that make the process less of a boon for the bottom line than it once appeared.

Technology giant Apple was recently the focus of a series of negative press stories after problems at the Foxconn (富士康) manufacturing plant in China that produces the iPhone, and has announced that it will be bringing some manufacturing — albeit a small proportion of its total output — back to the US. The US’ growing energy independence is also likely to shift the balance toward more production at home by the country’s industrial giants.

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