America's Refusal to Accept Outcome of WTO Leadership Race Creates New Deadlock

It remains to be seen as to what the US will do at the General Council meeting on November 9, as the American elections would have been completed by then.

Geneva: On October 28, Korean candidate Yoo Myung-hee, who was supported by the United States, lost the race to become the World Trade Organisation’s new director general.

Her rival, Dr Ngozi Okonjo-Iweala from Nigeria, was declared as the winner based on the “largest support” she received from WTO’s 164 members. If the WTO’s General Council adopts the recommendation made by the selection panel on November 9 at a special meeting, Dr Ngozi would become the new DG until August, 2024.

However, indications are that this is unlikely to happen due to the unfounded objections raised by Uncle Sam.

Instead of accepting the recommendation made by the WTO General Council chair Ambassador David Walker (New Zealand) at the informal heads of delegations meeting on October 28, Dennis Shea, the venerable US trade envoy, raised a ruckus.

In particular, Shea chose to cast serious aspersions on the recommendation, maintaining that the selection panel adopted “opaque” and “byzantine” procedures. He challenged the GC chair on how arrived at the decision when the US refused to accept the candidature of Dr Ngozi.

At a time when the WTO is facing the worst existential crisis largely due to the unilateral and hegemonic actions taken by Washington, the latest deadlock created by the US has thrown the appointment of the new DG into uncharted waters.

The US, for example, has paralysed the two-stage dispute settlement body since December 2019 when it blocked the selection for filling the highest adjudicating body or Appellate Body for global trade disputes. Washington has also refused to implement several verdicts against its discriminatory trade measures. The US has loaded the WTO with a divisive trade agenda that includes proposals to deny the special and differential treatment to China, India, South Africa, Indonesia, and Argentina, among others.

It wants to eliminate the consensus principle for taking decisions as per the Marrakesh Agreement that established the WTO in 1995. The US also wants to introduce punitive reforms such as stringent, naming-and-shaming transparency and notification requirements which impose considerable burden and massive administrative costs for developing countries. The US’ proposals are inconsistent with the rules as set out in the Marrakesh Agreement of 1994 that established the WTO.

Selection process

Against this backdrop, the selection of the new director general has assumed considerable importance. The selection process was launched in July this year to replace the vacancy created by the former WTO head Roberto Azevedo.

It is an open secret that Azevedo, during his tenure between 2013-2020, preferred to act as Washington’s voice and deliverer on a number of issues. Before becoming the WTO’s director general, Azevedo was Brazil’s trade envoy in Geneva. He had convinced the developing countries that he would advance their developmental interests as a DG. Contrary to the hopes he raised before his selection as the DG in August 2013, Azevedo ensured that the US along with a group of industrialised and several developing countries secured the trade facilitation agreement in December 2013 on the false promise that the agreement would generate $1 trillion benefits.

Up until now, the Trade Facilitation Agreement, which is aimed at harmonising customs rules and procedures of the US and other industrialised countries in developing countries, failed to generate any measurable gains for developing countries. In the run-up to the WTO’s eleventh ministerial conference in Buenos Aires in December, 2017 Azevedo helped the US and other developed countries to launch their plurilateral initiatives (in which two or more countries could launch negotiations on issues of interest the coalition of willing led by the US) to bypass the Doha Development Agenda multilateral negotiations. He remained utterly silent when the US started undermining the WTO’s Appellate Body in 2016.

So, it is hardly surprising that Azevedo suddenly cut his tenure at the WTO and jumped ship to take the second highest post in a second highest food and sugary drinks company PepsiCo on 1 September. Consequently, the chair for the WTO’s General Council Ambassador David Walker launched the selection process in July this year before the members went into summer recess. The process involves receiving the nominations to be followed by three rounds of scrutinising process based on what are called “confessionals” as per the procedures set out in the General Council decision (WT/L/509).

Accordingly, Ambassador Walker conducted three rounds of consultations beginning from September 6 to narrow the field of eight candidates that filed their nominations to two in the final round.

Also read: As WTO’s Dispute Settlement Body Dies a Dysfunctional Death, What Comes Next?

The elimination process in each round is based on the criterion where the selection panel chaired by Ambassador Walker along with two facilitators – the chair of the dispute settlement body Ambassador Dacio Castill (Honduras) and the chair of the trade policy review body Ambassador Harala Aspelund (Iceland) – would ask each member to indicate their preference for the eight candidates on the slate.

In the first round, each member-country was accorded four preferences, three in the second round, and one in the third and final round. Accordingly, in the first round of the selection process held last month, three candidates – Dr Jesus Seade Kuri from Mexico, Abdulhameed Mamdouh from Egypt and Ambassador Tudor Ulianovschi from Moldova – were eliminated from the race on grounds that they were least likely to attract consensus.

During the second round, three candidates – Amina Mohamed from Kenya, Mohammad Maziad Al-Tuwaijri from Saudi Arabia and Liam Fox from the United Kingdom – were asked to withdraw from the race because of the low level of support received from members.

Thus, two candidates – Nigeria’s Dr Ngozi, who is known for her rich experience in developmental finance and medicines and vaccines, and Korea’s trade minister Ms Yoo Myung-hee were left in the fray for the final round which began on October 19 and lasted till October 27.

Yoo Myung-hee. Photo: Reuters

The US has all along accepted the confessions-based procedures adopted by the selection panel. It had not raised any objections when the modalities were adopted at the GC meeting in July, nor during the second round of selection process early this month.

In the past, sharp concerns were raised about the confessions-led selection process. For example, in 2005, when the Brazilian candidate lost in the first round and in 2013, when Kenya’s former foreign minister Amina Mohamed lost in the first round. Serious questions were also raised about the opacity of the confessions-led process and whether they would involve subjective judgements.

However, the US or no member challenged the modalities as set out in procedures relating to the appointment of the director general in WTO documents WT/L/509, Job/GC/243 and Job/GC/245. Not even the countries of the losing candidates raised any hue and cry. Egypt merely said while it accepts the GC chair’s recommendations, it would seek reform of the procedures for the future selection process.

Dr Ngozi

Coming to the recommendation for appointing Dr Ngozi as the new Director General, the chair provided a brief summary of how the decision was reached by the selection panel at the meeting on October 28. He said “as was the case with the two previous rounds, members were asked “what is your preference” in the third and final round”, suggesting that the panel did not accept any negative preferences.

Quoting several provisions, particularly paragraph 18 and 19 of procedures for appointing the DG in document WT/L/509, Ambassador Walker said that the panel tried “to encourage and facilitate the building of consensus” around one of the two finalists based on the preferences expressed by members. Walker said “our (the panel) assessment of the preferences during the third round of consultations is that the candidate from Nigeria Dr Ngozi Okonjo-Iweala, is the candidate most likely to attract the consensus.”

Further, he clarified that “Dr Ngozi carried clearly the largest support of members in the final round and she clearly enjoyed the broad support of all levels of development and from all geographical regions”.

According to paragraph 19 of the procedures outlined in document WT/L/509, Ambassador Walker said “we are submitting the name of Dr Ngozi Okonjo-Iweal as the candidate most likely to attract consensus and recommending her appointment by the GC as the next DG of the WTO until 31 August 2024.”

Ambassador Walker said he has scheduled a special GC meeting on November 9 for members to formally adopt the recommendation to appoint Ngozi Okonjo-Iweala as the WTO’s next director-general.

Uncle Sam’s rage

In response to the GC chair’s recommendation, the US trade envoy cast aspersions against the manner in which the process was conducted. Ambassador Shea said Washington “strongly supports the candidature of Korean minister Yoo Myung-hee from South Korea”.

“It is our understanding that Yoo enjoys breadth of support across the WTO membership,” he said, maintaining that the Korean candidate Yoo Myung-hee “is a bona fide trade expert and WTO expert and who has distinguished herself over the 25-year career as a successful trade negotiator”.

Arguing that the WTO is in deep crisis, Ambassador Shea said “we need someone at the helm with trade expertise” and “Minister Yoo (the Korean candidate) will not need on-the-job training and will hit the ground running here in Geneva”. In effect, Ambassador Shea implied that Nigeria’s candidate Dr Ngozi would need on-the-job training as she is not a trade expert.

Ambassador Shea reminded members that the WTO is a member-driven organisation, arguing that “it is for us, the members, to decide who the next director-general is going to be” and not “for the three individuals (the GC chair, the DSB chair, and the chair of the TPRB) to decide,” according to several persons, who preferred not to be quoted.

“I would like to assure members that the WTO is a consensus-based organisation and the consensus principle permeates everything we do here, including the DG selection process,” Ambassador Shea said, inveighing the selection process is “opaque” and “byzantine”. He said the US cannot join the consensus.

Even as the meeting was in progress in Geneva, the US Trade Representative Ambassador Robert Lighthizer issued a stern statement on the USTR’s website.

It reads: “The United States supports the selection of Korean Trade Minister Yoo Myung-hee as the next WTO Director- General. Minister Yoo is a bona fide trade expert who has distinguished herself during a 25-year career as a successful trade negotiator and trade policy maker. She has all the skills necessary to be an effective leader of the organisation.

Further, Ambassador Lighthizer cautioned WTO members that “this is a very difficult time for the WTO and international trade. There have been no multilateral tariff negotiations in 25 years, the dispute settlement system has gotten out of control, and too few members fulfill basic transparency obligations. The WTO is badly in need of major reform. It must be led by someone with real, hands-on experience in the field.”

In short, the sudden rage and unfounded criticisms against the DG selection process – just because the US-supported Korean candidate was not declared as the winner – appears to be a little like President Trump’s rant against mail-in-voting in the current American elections.

World Trade Organization (WTO) logo pictured on their headquarters in Geneva, Switzerland. Photo: Reuters

Where to go from here?

It remains to be seen as to what the US will do at the GC meeting on November 9, as the American elections would have been completed by then and with it, it will know whether the Trump administration would continue to be in power. “Either way, the gauntlet thrown (down) by the US about the selection process has created confusion,” said a person familiar with the selection process, who asked not to be named.

By creating confusion in the appointment of the new DG, the US may drag the selection process on for another four months or so, and it could even insist on a “neutral” candidate from the previous round such as Kenya’s Amina Mohamed or Britain’s former trade minister Mr Liam Fox, the person said.

In the past, the US had created similar chaos when Washington insisted that it will not accept the appointment of former Thai Prime Minister Supachai Panitchpakdi as the WTO DG in 1999, demanding that Mike Moore, the former New Zealand prime minister, should be appointed as the WTO DG

Later, as part of a compromise, both Moore and Panitchpakdi were appointed as the DG for a period of three years each starting from December 1999.

Surprisingly, even as the US held its ground in support of the Korean candidate, Korea remained silent at the meeting. and did not make any statement at the HoD meeting. More importantly, not one member supported the US charges against the DG, and several countries.

China, the European Union, South Africa, Barbados, St Lucia, the United Kingdom, and India among others supported the GC chair for navigating the selection process and for recommending Dr Ngozi as the next DG of the WTO.