Lamy has wider support, tougher task

EXIM MATTERS

On Thursday, 148 member countries of the World Trade Organisation (WTO) unanimously elected Pascal Lamy, the former Trade Commissioner of European Union, as the next director-general of the WTO.

It was a formality as other aspirants for the coveted post had withdrawn from the race two weeks earlier. Lamy will take over from Supatchi Panitchpakdi on September 1 for a six-year term.

The smooth triumph of Lamy was in sharp contrast to the acrimony and distrust that typified the election of the WTO director-general six years back.

Unable to find a consensus, the WTO members had worked out a compromise formula whereby Mike Moore, supported by the rich countries, held office for the first three years followed by Supatchi Panitchpakdi, candidate of the poorer countries, who took over for the next three years.

Lamy, renowned as a master negotiator, didn't have to work too hard to win the race. The reign of Mike Moore and Supatchi Panitchpakdi had convinced the WTO members that nationality of the director-general need not necessarily be a consideration for the top post. Moore, impartial and untiring in his efforts to put the agenda of the poorer countries on top, was hardly a stooge of the rich countries.

Lamy enjoys broader support than his predecessors but he still needs to demonstrate his credentials as an honest mediator. His challenge is to get the moribund Doha Development Round moving again and find a consensus on critical issues before the WTO trade ministers meet at Hong Kong this November.

The urgency is dictated by the fact that the hard-won, fast-track authority of US President George W Bush, a stronger believer in free trade, is set to expire next year. Lamy takes over at a time when the global economy is growing rapidly but erratically. It is dependent on US consumer demand, which in turn is dependent on heavy borrowings.

The US economy is set to grow at 3.6 per cent but it seems to be a jobless growth. The latest report from OECD, a group of rich countries, slashed the growth estimates for EU to 1.5 per cent (from 2.1 per cent) and Japan to 1.2 per cent (from 1.9 per cent). Italy, in fact, has slipped into recession.

Consequently, cries for protection are on the rise in the EU and the US, especially against cheap imports from China. The developing countries are strident in their demand for reform of agriculture subsidies in rich countries.

Luckily for Lamy, the US, the EU, India and Brazil agreed on a formula three weeks back to convert agriculture tariffs to ad valorem duties, signaling an important breakthrough. Yet, Lamy will have to use all his insider knowledge to persuade EU to reform its farm subsidies regime in a manner that will reduce distortions in world trade in agriculture goods.

The failure of trade talks at the last WTO ministerial conference at Cancun swayed many countries towards regional or bilateral trade deals.

An important task for Lamy will be to bring them back to multilateral negotiations. As EU trade commissioner, Lamy pushed strongly for negotiations on Singapore issues, that is, competition, environment, government procurement and trade facilitation.

Lamy will have to be more sensitive to the concerns of developing countries so that he can win their confidence and push the stalled WTO talks towards success at Hong Kong this year end.

tncr@sify.com