There is plenty of symbolism and not a little substance in the selection of Brazil’s Roberto Azevedo as the new head of the World Trade Organisation (WTO). Though not the first from the developing world to occupy the post, he is the first from Latin America and comes from a major emerging market country rapidly growing in stature and ready to demonstrate its clout in the international economic arena. Mr. Azevedo’s diplomatic skills and familiarity with the workings of the WTO will stand him in good stead when he takes over on September 1. The incumbent, Pascal Lamy, a Frenchman and a former European trade commissioner, has been accused of bias towards the West. Although the selection process at the WTO is opaque, it is the near unanimous support of the developing countries that reportedly saw him through, overcoming the tepid response of the U.S. and the European Union. The vote is a pointer to what would happen at the World Bank and International Monetary Fund if those institutions were to ever be democratised.
The problem is that if the developed countries remain lukewarm to his leadership, Mr. Azevedo’s task of reversing the WTO’s declining relevance in the wake of its failure to broker a global trade deal becomes that much more difficult. The Doha round was launched in the Qatari capital nearly 12 years ago to cut tariffs and trade distorting subsidies but is now on life support. Talks broke down in mid-2008 over seemingly irreconcilable differences, between the U.S. and India, and also between other countries and groupings. Of course, the WTO continues to have a trusted role in monitoring trade agreements and umpiring disputes. Its dispute settlement mechanism allows even the smallest of countries to enforce the rule of law against their more powerful trading partners. But deadlock in the multilateral talks has prompted many countries, India included, to go in for bilateral and regional free trade agreements. These are only a second best option as they involve trade displacement from third parties. Besides, as a rule, FTAs make an eventual multilateral trade agreement infinitely more difficult. In a weak global trade environment caused by the failure of important countries to adhere to multilateralism, the threat of protectionism looms large. In 2012, global trade grew by just 2 per cent — a rate lower than global GDP growth — and turned in the second worst performance since records began in 1981. Mr Azevedo will need a successful meeting at Bali later this year to advance the heavily scaled down Doha round. But only diehard optimists can hope for a breakthrough.