Leadership Struggle Reflects Growing Schism in WTO

From the moment of its birth, the World Trade Organization was touted as the referee for a globalized economy, empowered to manage the myriad frictions between nations rich and poor, industrial and rustic, advanced and emerging.

Instead, the gulf between the world’s haves and have-nots at the Geneva-based body is growing ever wider, complicating efforts to strike new accords in such areas as international investment, intellectual property, services and agriculture.

On Tuesday, WTO officials in effect tossed up their hands and said they could not settle on a single individual to take the group’s top job. Instead, they patched together a deal in which the U.S.-backed candidate--former New Zealand Prime Minister Mike Moore--will become director general later this week. Under the compromise, he will be replaced in three years by a bitter rival who enjoys strong support in the emerging nations of Asia, Thailand’s Deputy Prime Minister Supachai Panitchpakdi.

Far more than a tiff between two bureaucrats, the eight-month standoff and its peculiar resolution raise questions about prospects for new global trade negotiations to be launched in Seattle in November.

“The first candidate will be a lame duck from the moment he starts, and the second candidate won’t have the ability to advance the [Seattle] talks until things are very far along,” said Jeffrey J. Schott, a research fellow for the Institute for International Economics, a think tank in Washington.

He added, “It’s a terrible diplomatic solution if you’re concerned about the long-term strength of the institution.”

Nonetheless, said Rita Hayes, U.S. ambassador to the WTO: “We accept this knowing that we have to move forward with the trade agenda. These are two very qualified individuals.”

The protracted struggle also underscores the changing nature of global competition, a free-for-all in which nations of North America and Europe continue to stand out as the winners.

Increasingly, trade rulings determine national policies governing the environment, food safety and other matters that are viewed with profound differences in countries at different heights on the economic ladder.

Noted Greg Mastel, a trade expert with the Center for National Policy in Washington: “One of the reasons this [leadership fight] has gotten so intense is that we’re entering an era in which a lot of the issues will be conflicts between the developed and undeveloped countries.”

Those issues continue to spill over into the United States, which in May recorded the highest trade deficit ever, according to Commerce Department figures released Tuesday.

The trade gap, driven in large part by a flood of imports from emerging nations to the fabulously wealthy U.S. market, is fueling growing demands for protectionism on Capitol Hill and becoming an embarrassment to the White House. It is now running at an annual rate in excess of $200 billion and is on track for an all-time high.

The Clinton administration maintains that U.S. exports will increase as trade barriers fall, and it has strongly supported the WTO as global arbiter of the often-adversarial process.

In the struggle to succeed outgoing WTO Director General Renato Ruggiero of Italy, the United States, France, Germany and most of Latin America backed Moore, while developing countries in Asia and Africa supported Supachai. Standing apart from other wealthy countries, Japan has displayed Asian regional solidarity with Supachai.

Both candidates have proclaimed themselves stout champions of the developing world and downplayed talk that the bitter race underscored the rich-poor schism within the 4-year-old WTO. Yet, issues rising to the top of the WTO agenda bristle with rich-poor implications that will test the new leaders and affect the Seattle round of trade talks.

Advanced nations in North America and Europe are enthusiastic about market-opening deals on international investment and financial services, for example, while poor nations are wary about losing wealth to outside speculators and investors.

The haves also seek expanded foreign access for their services and other industries, while the have-nots wish to nurture new industries of their own. Poor nations target the rich U.S. market for their exports, whereas U.S. officials face growing public pressure to protect older American industries such as steel. Similarly, companies in advanced nations demand protections for their intellectual property, from pharmaceutical formulas to software, while emerging countries may place a lower priority on that goal.

The United States and France, which have advocated a greater consideration of labor issues in trade deals, were pleased by Moore’s background in the labor movement, yet emerging nations have vigorously opposed introducing such considerations in trade talks.

On top of all that, China’s ultimate accession to the WTO--viewed as nearly inevitable despite current U.S.-Chinese frictions--will add a powerful new voice for the emerging nations and a formidable critic of the wealthy nations’ agenda. Unlike the International Monetary Fund or United Nations, where certain countries have extra power, the WTO runs on consensus among its 134 member nations, further complicating its ability to resolve internal disputes.

“You’ve got a fraying of the international consensus in trade,” said Daniel A. Seligman, who follows global policy issues for the Sierra Club in Washington. “I think the fight over director general in the WTO bodes ill for the next round of trade talks.”