Europe: Will the UK pick the free-trade winner?
If the PM's referendum pledge damages links with the EU, he will need the World Trade Organisation's new head onside
Mark Leftly is political correspondent at The Independent on Sunday and associate business editor across the Independent titles. He writes a weekly column, Parliamentary Business, published on a Wednesday, that covers politics and the City. He is a multi-award winning reporter and was named Press Gazette's business magazine journalist of the year prior to joining The Independent on Sunday.
Sunday 03 February 2013
Laos, the small land-locked communist nation in south-east Asia, this weekend joined the World Trade Organisation (WTO) just as the UK, the birthplace of Adam Smith, appears to be on the verge of exiting arguably the greatest free-market structure ever formed. Laos is waking up to the need for foreign investment, while the UK move is upsetting some of its most important trading partners.
David Cameron's announcement last month that he will hold a referendum on Britain's membership of the European Union towards the end of 2017, should he be re-elected, was met with concern from the WTO.
The confused reaction of the director-general, Pascal Lamy, was instructive. He seemed uncertain about the consequences of Cameron's announcement: critics argue that the near five-year lead time to a vote will mean that nations and companies will question whether or not the UK is a good place to trade.
Lamy said: "Whether a change in the relationship between the UK and Europe would change the trade relationship remains to be seen. I'm not saying I don't think so [that the relationship will change], but I know countries – like Norway or Switzerland – who are not members of the EU and whose trade relationships with the EU are very open."
Cameron has shown a clear interest in developing trade links with emerging economies through regular trade missions from Latin America to Asia. The WTO supervises and regulates trade between its 158 members, meaning the UK wants a director-general who will back the country as it looks to open up fast-growing economies that are rich in minerals, oil and labour.
Lamy, a former politician, has led the WTO since 2005, but comes to the end of his second term this summer. There were seemingly well-sourced reports last year that the former business secretary Lord Mandelson was in the frame to replace the Frenchman, but instead a crowded field of nine candidates, none of whom is from Europe, are in the running (see above).
The first candidate presentations to the WTO's membership took place behind closed doors last week, but a new boss doesn't have to be named until the end of May. That's a long time to wait for a job, but gives the UK, Europe and the US less than four months to identify the candidate who will best represent their interests from what is a fairly obscure field of diplomats, academics and trade experts.
Shortly after the deadline for all potential candidates to throw their hats into the ring passed at the turn of the year, Ladbrokes installed the Scotland-born New Zealand trade minister Tim Groser as 3-1 joint favourite (with Costa Rica's Anabel Gonzalez) to succeed Lamy.
Groser is thought to be favoured by Western nations, though the New Zealand foreign minister, Murray McCully, insists the campaign is built around the "personal attributes" of his experienced colleague rather than any geographical bias.
That might well prove to be the undoing of Groser's pitch, as the man himself acknowledged after his Q&A with organisation members. "If it is a foreign policy question that we are trying to address in the choice of a director-general, then I'm not the answer," he said.
There is a sense within the WTO that the new head needs to be someone from an emerging economy to reflect new centres of growth. This could favour Ghana's Alan Kyerematen, a trade adviser at the UN Commission for Africa – should his core support not divide between him and the continent's other candidate, Kenya's Amina Mohamed, who is also one of three women in the running.
Mohamed was not afraid to play the gender card, arguing that it would "send a very, very powerful signal" if a woman got the role. Not wanting to lose any advantage over the Latin American Gonzalez or Indonesia's Mari Pangestu, Mohamed also argued that the woman would be best off coming from Africa.
Where all the candidates seem to agree is that the WTO risks losing is relevance if it fails to reignite the Doha trading talks that started way before even Lamy's leadership, in 2001. "The reality is that the round at this point in time is paralysing the system and we have to solve it," argued the Brazilian candidate, Roberto Azevedo, who is currently the fast-growing economic powerhouse's envoy to the WTO.
The next Doha-round talks, rather confusingly, take place in Bali at the end of the year. The ambition is to lower trade barriers, but there have been many causes of fierce debate, particularly around agriculture, that have largely divided mature Western economies and those that are just finding their feet on the world stage.
Last year, the WTO warned that there was a global trend towards protectionism, citing 182 measures introduced to restrict or potentially restrict trade over a nine-month period as evidence. Although the new WTO head can expect some significant progress at the December talks, it seems as if the plan to get a single agreement across so many national interests – in markets as broad as agriculture, goods and services – was simply too ambitious.
The danger for the WTO is that it continues to be ignored by major economies that instead sign bilateral or multilateral trade agreements. Indeed, these will be the sort of negotiations that the UK would possibly have to conduct with the EU if the country should exit the bloc.
However, if the new WTO DG can succeed in getting through some sort of watered-down pact in Bali, as many believe is possible, he or she would be lauded for cutting through international red tape, which could boost the world economy by an estimated $1trn (£635bn). Immediately, they would be feted as a major figure on the world stage.
As a result, the British government must ensure that it picks the winner in this closely fought race, the field for which will soon narrow down to a handful of candidates.
If the new head of the WTO can finally come up with a successful conclusion to some of the most protracted trade talks in history, then the UK cannot afford for this person to be as unclear as Lamy on the country's trading future.
Doubts from someone with that kind of political and economic weight could lead to potential trading partners looking away from the UK.
1 Alan John Kwadwo Kyerematen (Ghana)
A former ambassador to the US, Mr Kyerematen is supported by the African Union bloc
2 Anabel GonzAlez (Costa Rica)
Ms Gonzalez knows the WTO well, having headed up its agriculture and commodities division from 2006 to 2009
3 Mari Elka Pangestu (Indonesia)
The 56-year-old has been Indonesia's minister for tourism and creative economy since October 2011
4 Tim Groser (New Zealand)
Born in Scotland in 1950, the Kiwi politician was New Zealand's ambassador to the WTO from 2002 to 2005
5 Amina C Mohamed (Kenya)
This lawyer could spoil Mr Kyerematen's candidacy should some African states back the east over the west coast
6 Ahmad Thougan Hindawi (Jordan)
This 47-year-old Birmingham University post-graduate helped lead Jordan's economic liberalisation
7 Herminio Blanco (Mexico)
This economist was in the Mexican government for 15 years to 2000, but has since worked in the private sector
8 Taeho Bark (Republic of Korea)
South Korea's trade minister has published numerous books and papers on economics and trade policy
9 Roberto Carvalho de Azevedo (Brazil)
This 55-year-old career diplomat was the last of the nine nominated as a candidate last month
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