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16 Sep, 2013 08:16

'Russia will never be discriminated against under WTO rules' – Chief

In the stormy ocean of the global economy, the WTO has called to make international trade and communication easier. All-embracing and bulky, is it still fit for the role while more and more regional free trade agreements come into force, bypassing the WTO? Also, as new members grumble about the old rules of the game, how does WTO solve the discrimination - and trade wars - within its ranks? We forward all of these questions and more to Roberto Azevêdo, the director-general of the World Trade Organization.

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Sophie Shevardnadze: Our guest today is Roberto Azevedo, the director-general of the World Trade Organization, who just assumed office at the beginning of September this year.

Mr. Azevedo, it’s great to have you with us on the show. So, in your first address as a director-general you’ve said the WTO and the multilateral trading system are at the important crossroads. In fact, WTO is thought to be going through a major crisis and many even doubt its viability. What can you do to change that, do you have any concrete solutions?

Roberto Azevedo: Well, we have been in that situation for a long time and we have to change it – it is as simple as that – WTO has been in place since 1995 and since then there has never been one single negotiated agreement multilaterally. We have to change that. Now, Bali is an opportunity, we’re going to have the ministerial conference by the end of the year, December, and we are negotiating now a smaller package – it doesn’t mean it’s not significant, in fact it’s a very significant package, but it’s something different from what we were doing before. So, who knows, this next approach will begin to yield some fruits and we can not only to harvest something significant in Bali, but also open the door for future agreements.

Sophie Shevardnadze: In your approach to changing things in WTO what would be different from your predecessor, because he was saying the same thing you were saying, that things have been stagnating and he wanted to change stuff, but he could do anything really…

Roberto Azevedo: This is the first time that we actually try to approach something different from the whole Doha round in the WTO. We have still a few weeks to go, this is an opportunity. I am talking to members, engaging to them, we’re trying to build some trust and confidence in each other. This is a very personal process, whether we believe it or not in such big organization…It’s very personal. We have to understand where each other comes from, and I think we’re in position to do something. It’s going to be extremely difficult, it doesn’t look easy, but it’s possible, it’s doable, I am sure of that.

Sophie Shevardnadze: Well, the Doha round you just brought up, it was global trade negotiations which were supposed to lower trade barriers across the globe. Right now, it is considered as good as dead – are you still going to pursue it?

Roberto Azevedo: I don’t think it’s as good as dead, frankly. What we are going to do in Bali is part of the Doha round, it’s not the whole Doha round, but it’s part of it. Its’ a partial package which is within the Doha round and my hope is that if we can be successful in Bali, we’re going then to unlock the negotiations and maybe, who knows, try to approach the Doha round from different angles, from different perspectives and begin to move in the right direction.

Sophie Shevardnadze: If you look at the WTO today, the way it’s wired, it’s not exactly fair – since, whoever joined later has to follow rules set by the founding members, which puts developing countries who joined later in the underprivileged position. What are you going to do about this inequality?

Roberto Azevedo: The purpose of negotiations is precisely to lower tariffs and to have more disciplines which apply to everyone.I think those who acceded later had to negotiate their terms of accession. But that’s, frankly, are the rules of the game. That’s the way it has always been. Now, once the members are in, they negotiate on a par. They negotiate on a equal basis with all the other members, they have equal rights and they will negotiate condition for the next round, for the next agreements, which will, hopefully, be something that they can accept, and perceive as something balanced.

Sophie Shevardnadze: Many would argue that trade conflicts have been at definite rise in the recent years. Why have they flourished, in your opinion, and what can be done to ease these tensions?

Roberto Azevedo: Trade tensions are nothing new. I mean, they have been there since the beginning of times, since 1947 trade tensions exist. That’s what the system is for. The system is precisely to ease those tensions, to allow members to find solutions, to negotiate outcomes which are acceptable to both of them. I have been negotiating, and I’ve been a participant in WTO since 1997 and over all these years I have never seen a moment, a moment – not a year – a moment when trade tensions were not there.

Sophie Shevardnadze: So you don’t think this is a new thing of present – that tensions are rising?You think it’s always been there?

Roberto Azevedo: Absolutely not. They’ve been there always. And, frankly, they will always be there.

Sophie Shevardnadze: But also there are more and more regional unions being formed around the globe, the likes of the Mercosur, the EU, and the Customs Union of Belarus- Kazakhstan-Russia for instance. Can these grow and develop within the organization; this is a beginning of an end for WTO?

Roberto Azevedo: On the contrary, I think they help; they are building blocs towards trade liberalization. These blocs, these groups, these customs unions, these free trade areas – they don’t come up without disciplines. In order to be set up, they have to follow disciplines and these are multilaterally negotiated disciplines which ensure that these blocs, these free trade areas will not raise barriers, on the contrary, that they are going to lower tariffs and begin to ease countries into a more open environment.

Sophie Shevardnadze: But what about the U.S. and EU agreement that’s probably going to be signed soon – the Free Trade agreement, which is said to be an alternative to WTO just because it will control 30% of global trade. What would you do? What’s with the position of WTO after this agreement will be signed?

Roberto Azevedo: The same as any other, this is an agreement that will help to move forward trade liberalization. I think that these agreements are very important, they complement the multilateral trading system, but they don’t substitute the multilateral trading system, for several reasons: they are more limited in terms of coverage, there are fewer countries that participate in them, and these agreements are limited in terms of disciplines that they can establish. They won’t address subsidies, for example. They will very hardly address the new forms of protectionism which is coming into place. They will never address this kinds of protectionism globally. The WTO would, but these agreements would not. They are welcome, they are important, they are a step in the right direction, but they are not to be considered as substitutes and will never substitutes for the multilateral trading system.

Sophie Shevardnadze: All I am saying is when we are talking about developed countries what we really mean is America and the Western EU countries – if those two blocs merge, wouldn’t there be a threat of them forging a new rules of the game towards everyone else?

Roberto Azevedo: I don’t think so, because these blocs, in the U.S. and the EU – they already are very open economies and the fact that they are having an agreement that allows goods and services to flow freely between them doesn’t change the picture very much. What they are actually going to do is going into the area of disciplines; they are going to negotiate regulations which are more harmonized between those two. And that could be helpful, I think, because it diminishes the number of differences and regulations that members have to face when they try to sell their products and services in one or another country. At the same time, it helps to move the environment of negotiations forward. The more countries are engaged in trade liberalization, in negotiations such as these, the more helpful it is for the multilateral trading system to follow and to act in a similar way.

Sophie Shevardnadze: Russia and Brazil – your home country – are members of both WTO and the BRICS club of emerging economies, also embracing China, India and South Africa.How much do you think BRICS can continue developing into a new driving force in the world?

Roberto Azevedo: For some time, I have no doubts about that. Even now, as the developed world is recovering and beginning to grow more rapidly that it was before, the BRICS are still major elements for growth in the world economy, and I don’t think that’s going to change very soon. One of the reasons is that they are developing economies, they are still growing, they have incorporated large masses of people into the formal economy – so this phenomenon is not going to change very soon, which doesn’t mean that they are necessarily a club apart – they are just becoming part of the more globally integrated world economy.

Sophie Shevardnadze: Since we already are talking about Russia, it has been a member for little over a year now – but has Russia’s membership added on a global level for trade?

Roberto Azevedo: Of course, Russia is a very important economy in the world, and it would be very unusual and unfortunate to have an organization the size of WTO or an organization that is looking for universality, to be operating without Russia in it. So, I think Russia’s accession is a welcome development to the organization, to the world’s economy, because then the rules which apply globally to WTO members will also apply to Russia – that provides predictability, that provides a level playing field for all, so it’s a very welcome development.

Sophie Shevardnadze: Has there been any negative fallout from that?

R) Not really. I think in WTO every time a major economy joins, there’s a period for accommodation, there’s a period for adjustments - that happened, for example, when China joined. The years after China’s accession were years of accommodation, there was better understanding, I think. The parties were testing where each other were; they were talking to each other, they were finding areas of communality but also areas of disagreement, and that’s normal, that’s absolutely normal, it’s going to happen with Russia too, that’s going to happen with other economies that will be significant and will be joining the WTO.

Sophie Shevardnadze: What would you say Russia has gained from joining WTO, taken into consideration both the state of Russian economy and also the way things are looking at WTO at this present moment?

Roberto Azevedo: The biggest gain for Russia is that it will be never subject to discrimination according to WTO rules, so anybody who wants, for example, to impose protectionist measures on something that would impede Russian products on their territory, they would have to follow the rules, and that was not the case before. And you could see unilateral action for example being adopted against Russia – not anymore! Any unilateral action or any discriminatory action against Russia would possibly lead to dispute settlement and eventually to sanctions against country imposing that. So, I believe that Russia has had a lot to gain in joining, and will be one of the major beneficiaries of this system.

Sophie Shevardnadze: There’s a question that has been keeping us scratching our head for a while –Russia soughtWTO membership for nearly 2 decades, and then suddenly took a cooler approach to joining, but – it was then accepted, even though nothing really had changed in Russia’s economy. What exactly made the accession possible; can you explain that for our viewers?

Roberto Azevedo: Well, it’s essentially a negotiation among members, and these negotiations take time. The reasons why one particular accession becomes ripe to be concluded vary from case to case. In the case of Russia it was about lengthy negotiations which were getting mature enough, and the political will on the part of members and on the part of Russia to conclude it. Political will is a very important element in accession negotiations and it was there for Russia. So that, I believe, was the major key component that allowed the accession to be successfully concluded.

Sophie Shevardnadze: There are many requirements from the WTO to impose on Russia in the coming years. What impact will they have on Russia’s economy and its people?

Roberto Azevedo: I can’t really tell, but I’m sure they will be for the better.

Sophie Shevardnadze: What about the economic crisis of 2008 – it really scarred the global economy at just about every level. So, what conclusions have been drawn from this dramatic experience, any precautions have been taken in case the situation repeats itself?

Roberto Azevedo: Well, that’s precisely the reason why the members of the G20 are meeting here in St. Petersburg at the leader’s level. It’s precisely to avoid that kind of situation repeating itself. As far as the multilateral trading system is concerned, I think, it proved that WTO can be effective, for example, in avoiding protectionist trends. After 2008 the fear was that we would have repeat of what happened in 1930s when protectionist measures were put in place and in the end of the day changed the scenery completely, and led to further Depression economically across the globe. And this time around that didn’t happen, and I think one of the reasons why it didn’t happen, was because the WTO disciplines stopped members from introducing overtly protectionist measures.

Sophie Shevardnadze: A recent policy change by the American Federal Reserve saw big currency devaluations in many emerging markets. As you may know, this summer the Brazilian Real went down 20%, as did the Indian rupee, and the Turkish lira. That led to a price hike on imported goods in those countries – where does the WTO stand when problems like this come up?

Roberto Azevedo: These problems are frequently occurring – the issue of valuation of currencies or devaluation of currencies is a permanent issue, and I think, we have rules in WTO, which are not perfect for particularly the issue of currencies, but allow members to take action to ameliorate the situation, or asymmetries that they find from time to time. I think this is normal moment, because this is not the first time that we see currencies shifting from value up or downwards.

Sophie Shevardnadze: But what if policies like Federal Reserves’ lead to unrest in those countries with shaking currencies – similar to what Arab countries witnessed when commodities became too expensive, when America started its “quantitative easing” in 2008, so citizens couldn’t afford basics like food and thought it was their government’s fault and that triggered an Arab spring uprising. What’s the point of WTO if not keep some global balance?

Roberto Azevedo: The WTO does not take action by itself, ever. It is the members that take action, so if members feel that somebody is doing something which affects their economy or their trade capacity, then they are perfectly capable of consulting first, so they can call the other member, explain what the difficulties are, try to find a solution – mutually satisfactory, or they can take the issue to dispute settlement if that is the case, but it’s up to members to decide what course of action they want to take. It’s not for the WTO to do it by itself; the WTO doesn’t have any mandate to act by its own will.

Sophie Shevardnadze: Also, Asia has been playing a crucial role in the world’s economy in the recent years – does it have a similar role within the WTO and can it keep the lead, do you think?

Roberto Azevedo: I think it’s one of the most dynamic areas of the world, the Asian markets in the APEC, for example – it is largely Asian, and it’s one of the most important forums for discussion. I believe that Asia today is one of the main axes of the world economy and one of the major forces in the global governance fora, including WTO.

Sophie Shevardnadze: Africa is also another emerging continent in terms of economy – what do you see happening there, where’s the growth going to be and who’s going to profit from it?

Roberto Azevedo: I think that African continent is very diverse, that’s for sure. There are opportunities for growth, there are opportunities for investment, and there are opportunities for increasing trade across the continent. Most of the time, political stability is also a very important factor, but not only that. It’s about creating the conditions to participate better in the world trade flows, and it varies from country to country. It’s very difficult to talk of Africa without looking at the particular situation of each one of the countries that compose it.

Sophie Shevardnadze: Can you that about Latin America – what are the key issues in your opinion that trouble that continent?

Roberto Azevedo: I think Latin America is well positioned to benefit from world growth. Many key exporters are in Latin America, particularly in terms of commodities, non-oil commodities, but also oil commodities in some cases. Latin America is a very mature continent, countries are following different paths and those that are more integrated in the world economy, those that are more open for participating in global trade flows are doing quite well.

Sophie Shevardnadze: Just to wrap it up – Mr. Azevedo, what would you hope to be your biggest achievement and your legacy after you leave the post of WTO director-general?

Roberto Azevedo: I have been doing trade negotiations for a long time. I started working with the WTO in 1997, so the organization was two years old, and during this time I saw the negotiations facing much better days. I hope, I could leave the office with the WTO as vibrant as it was before, as relevant as it was before, negotiating important deals and once again being the table where the countries come to, to negotiate trade and liberalization.

Sophie Shevardnadze: Thank you very much for the interview, that’s all for today. Our guest was Roberto Azevedo, the head of the World Trade Organisation.