The rules of the game

Sixth general director of the World Trade Organization (WTO), the diplomat and electrical engineer born in the state of Bahia Roberto Azevêdo accompanies with magnifying glasses, since the beginning of his first term as head of the institution, in 2013, the advances and setbacks of trade policy in the world and in Brazil. In his opinion, the “political determination” is the main ingredient to intensify multilateral negotiations and promote economy competitiveness – including the Brazilian economy. However, although Brazil has already achieved important commercial victories in sectors such as cotton, sugar, aircraft and steel, to participate in the economic game, according to Azevêdo, may be more important than eventually winning or losing.

To develop the global trade and prevent the escalation of litigations in the disputes among the 164 member countries is the “reason to be” of WTO, whose General Council, in February 2017, has re-elected Azevêdo as general director for a second term, until 2021. On the occasion, the Brazilian has defined his mission as “to ensure that trade negotiations are more inclusive so that the benefits are widely shared”.

In his first four years in the organization leadership, Azevêdo could close the only multilateral deal negotiated within WTO since its creation in 1995 – the Agreement on Trade Facilitation (ATF), which entered force last February 22, removing bureaucratic barriers to trade, with a potential to increase international transactions by US$ 1 trillion. In addition, he obtained an agreement to end export subsidies for agricultural products at the Ministerial Conference in Nairobi in 2015, and an update to the Agreement on Trade-Related Aspects of Intellectual Property Rights (Trips), which facilitates the access of developing countries to essential medicines.

In interviews, lectures and press releases, the Brazilian diplomat has been expressing concern about the impacts of the growing anti-globalization movement on trade, which “may be associated to intolerance and xenophobia”. In the interview below, exclusive to Mundo Corporativo, the WTO director explains what is at stake.

A recent World Bank report (Global Economic Prospects, 2017) indicates that the pace of global trade growth has been falling for years. To what do you attribute the poor performance in 2016?

In fact, 2016 was a year of modest world trade expansion. If our numbers are confirmed, 2016 has been the year of lower trade growth since the beginning of the 2009 crisis. This result is connected especially to the global economy’s slow growth pace. The trade slowdown in countries like China, Brazil and the United States also contributed to this result. For the next few years, for now, we are projecting an improvement of international trade. Our estimate, in September 2016, pointed to a trade growth between 1.8% and 3.1% in 2017.

One factor that has been indicated as a determinant one for the slowdown is the increase of uncertainties, boosted by the North American election and the exit of the United Kingdom from the European Union. How do you evaluate this scenario and projections for the coming years?

Of course, political uncertainties, even when they are not directly connected to trade, can affect these projections. Looking a little further ahead, I believe that, in general, we will not see so early the high trade growth rates from the period that preceded the 2009 crisis. The trend is of slower international trade growth.

Since 1995, WTO has received 500 complaints and made more than 350 decisions to resolve trade disputes. What are the main challenges for business leaders in an environment of global transition?

In the face of the international scenario’s current circumstances, I see that a great challenge for business leaders is to deal, pragmatically, with the risks posed by uncertainty, and even of unpredictability, associated to the markets where they operate. Your question begins by referring to the WTO dispute settlement system. This is a good example of how countries can resolve their disputes in an objective and depoliticized manner. The high number of disputes is a sign of confidence in the system; it is proof that the countries see value in using this mechanism to resolve their differences. The opposite would be worrying.

There is, today, a concern about the risk that some countries, including the United States, may start to ignore WTO and the decisions of its court. How do you see this possibility?

Unilateral actions to solve business problems usually have a response. There is in general a domino effect and, in the end, everyone loses. I have no doubt that WTO has a central role in today’s world by providing rules – and even a “court” – that help to give certainty and predictability to WTO members and to the economic agents themselves.

The Nafta renegotiation can open new perspectives for integration between Mexico and Brazil? Despite the uncertainty, the time is ripe for Brazil to close the Mercosur negotiation with European Union and seek bilateral agreements with North America and Asia?

With so many changes in the trade board, it is natural that the countries rethink their strategies. Of course, negotiations are complex, they take time. I have followed with interest the discussion on trade policy in Brazil. I think that this is an extremely healthy endeavor. I think that there is margin for Brazil to advance in its trade negotiations agenda and to use trade and international integration as elements to promote the Brazilian economy’s competitiveness. The main ingredient for success in trade negotiations is the parties’ political determination.

After questionings from the European Union and Japan, the WTO has challenged several Brazilian industrial programs, such as the Information Technology Law, the policy of incentives for chips production (Padis), the policies for digital TV, and the incentives for local car manufacture (Inovar Auto). Do you believe that these industrial policy instruments should be adjusted by Congress, which approved them?

As the WTO general director, I do not comment on ongoing disputes. I can say, however, that in most cases, the countries comply with the decisions of WTO’s dispute settlement body. This means that, if the country loses a dispute, it adjusts the questioned measures following the rules of the Organization, which, it is worth remembering, were agreed upon by all WTO members. If this does not happen, the rules provide that, in the worst-case scenario, there is even what is called a trade sanction, authorized by WTO and applied by the complaining party in the dispute. But, as I said, it is very rare for a dispute to reach this point. Specifically, about Brazil, it is worth remembering that the country is very active in the disputes area of WTO and have won major victories over the years, benefiting several sectors such as, for example, the cotton, sugar, aircraft, chicken, steel and orange juice sectors. It is part of the game to sometimes attack and sometimes to defend.