While economies around the world continue to suffer from the coronavirus pandemic, the World Trade Organization faces the added difficult of replacing its director-general Roberto Azevêdo. He resigned on Thursday in a shock move. Azevêdo’s resignation will be effective Aug. 31, over a year before his second term was set to expire.
Azevêdo said his decision was based on personal reasons and not the result of any particular trouble within the WTO, the New York Times reported. He also said he would step down early to provide the organization more time time to hunt for a successor, but admitted the process of replacing him would most likely last into next year.
“The selection process would be a distraction from — or worse, a disruption to — our desired outcomes (rebuilding global markets),” he said during a virtual WTO meeting. “We would be spending valuable time on a politically charged process that has proved divisive in the past.”
Azevêdo, the former lead trade negotiator for Brazil, has been in Geneva since 1997, but recent years have brought increased pressure to his duties as head of the WTO. Specifically, US President Donald Trump’s trade war with China and general policy of applying tariffs on a number of states, created turmoil that rippled across industries worldwide.
Under Azevêdo, the WTO has been a bastion for free trade and liberal international economic policies. That mentality clashed with Trump, who decided to portray the WTO as an adversary that needed to go, much like the North Atlantic Treaty Organization.
China’s Status Questioned
The American president said he was “OK with” Azevêdo’s departure and took another chance to attack the organization.
“We’ve been treated very badly… They treat China as a developing nation. Therefore China gets a lot of the benefits that the US doesn’t get,” Trump said.
He also blamed the WTO’s admittance of China in 2001 as a contributor to job losses in the US.
“The WTO is BROKEN when the world’s RICHEST countries claim to be developing countries to avoid WTO rules and get special treatment,” Trump said in July 2019. “NO more!!! Today I directed the U.S. Trade Representative to take action so that countries stop CHEATING the system at the expense of the USA!”
In retaliation, the Trump administration has refused to confirm appointments to the WTO’s Appellate Body — its supreme court — for two years. With only one member left since December, it is unable to rule on international disputes, as Reuters reported.
In lieu of judicial appointments, several members of the WTO including the EU and China were forced to hobble together a temporary dispute resolution body.
The US isn’t alone in criticizing the WTO; Japan and the EU have both urged for reforms, especially concerning the way the organisation treats China. Azevêdo’s early departure will give the body ample time to deliberate on whether to pursue a candidate who can introduce change at the global level.
A Tunnel with No Light at the End
First, it must continue to navigate the COVID-19 crisis, however and Azevêdo has taken umbrage with states refusing to cooperate. As economic leaders, the US, China, and European states should work together to combat the emergency. Instead, the world has divided, mostly against China.
“Either we shape up and begin to talk to each other and find common solutions or we are going to pay a heavy price,” Mr. Azevêdo said in April.
The outlook for 2020 remains grim according to WTO projections. On the lower end of the scale, merchandise trade could plummet 13% with gross domestic product sliding 2.5%, Bloomberg reported. The worst case scenario foretells a 32% drop in trade and GDP fallout of 8.8%.
“These numbers are ugly — there is no getting around that,” Azevêdo said. “But a rapid, vigorous rebound is possible. Decisions taken now will determine the future shape of the recovery and global growth prospects.”
Leaderless at the Worst Possible Time
Without Azevêdo, a WTO veteran at the helm, the organisation’s effectiveness will be limited at best. Prior to his announcement, the WTO was already managing conflict between the world’s largest economies, navigating criticism from Trump, and trying to develop a strategy to rebound from the coronavirus pandemic. Now it has to somehow accomplish these goals without its leader, and perhaps any leader, until the pandemic relents.
In leaving the WTO before his scheduled September 2021 exit date, Azevêdo has further crippled the organisation at the absolute worst possible time. The WTO warned the global economic collapse may be the worst in a generation and states look to it for answers.
“To lose the leader of the WTO is a serious blow. There is a broken global trading system, and it needs leadership to fix it,” remarked Josh Lipsky, director of the global business and economic program at the Washington-based Atlantic Council.
On a positive note, Azevêdo’s departure may allow a more progressive candidate to assume the mantle, which could satisfy criticisms from Trump, the EU, and Japan. How the WTO decides to handle China going forward will quite possibly determine the organization’s future. As the tide turns against Beijing over lack of COVID-19 cooperation and transparency, it is foreseeable that WTO members change their tune on China and begin to advocate for real changes, including some reforms Trump has pushed for.