Economy

Why The New Brazilian WTO Head May Be Bad News For Free Trade

Roberto Azevedo comes from an emerging BRICS economy, where there has been more focus on bilateral commerce deals than wider trade agreements favored by the US and Europe.

In the Brazilian port of Itajaí
America Economia

BRASILIA - The election of Brazilian Roberto Azevedo as head of the World Trade Organization (WTO) is another Latin American triumph on the international stage. It also, however, puts Latin America at the helm of a paralyzed organization, opening up the possibility that Azevedo's rise could turn out to be the last nail in the coffin for the WTO.

Responsible for promoting and facilitating trade among countries across the globe, the WTO emerged in 1995, after successfully completing the GATT (General Agreement on Tariffs and Trade), at a time when countries were lowering their customs tariffs and other obstacles to imports. But the 2001 Doha Development Round and its plans of liberating commerce multilaterally limped to life, eventually stalling by 2008 after the global financial crisis.

The WTO hasn’t really done much since, but that doesn’t mean the world of trade hasn’t changed in the meantime. As a matter of fact, there are two big pieces of news in global trade negotiations, although they are not quite worldwide -- and have nothing to do with the WTO.

Wikipedia

The first big change: the Trans-Atlantic Trade and Investment Partnership (TTIP) was created to unite the U.S. and Europe. Still in negotiation stages, this agreement seeks to erase the non-tariff barriers between the two blocs, creating an additional demand that would boost global production in the area by 3%. In Latin America, the natural fit for this would be the countries in Mercosur.

The second initiative is in the Pacific and already includes Chile, Peru, and Mexico as full rights members and is much more ambitious in its reach than the TTIP. The Trans-Pacific Partnership (TPP) aims to unite the countries in the Pacific basin: The U.S., Canada, New Zealand, Australia, Malaysia, Singapore, Brunei, and the aforementioned Latin American countries. Japan has announced its entry in the group and Colombia, Thailand, and the Philippines have also shown interest. The last round of negotiations are currently being held in Lima, scheduled to conclude on May 24.

The BRICS factor

The truth is that countries around the globe are investing more in efforts to boost transatlantic or transpacific free trade, rather than in the framework of worldwide free trade. All of this means that Roberto Azevedo may face the prospect that the WTO slips back to playing the same role it had 10 years ago.

Or maybe, the Brazilian's timing is better than it appears. The very existence of these blocs is proof that trade negotiations have returned to prominence. Azevedo’s recent election arrives at almost the same time Michael Froman was named the United States' new Trade Representative. An expert negotiator, and close to President Barack Obama, Froman will put trade negotiations on the front burner of American economic policy.

Azevedo could do the same thing on a multilateral level, if he wants to resuscitate the Doha Round as he has promised. But he will have to let go of the vision he has defended until today. Azevedo has been the Brazilian representative at the WTO for years, and that gave him an ample range of knowledge of the bureaucracy and administration, which plays in his favor. His diplomatic skills also help.

But the Brazilian position that Azevedo has advocated at the WTO has been more of an obstacle to free trade than a facilitator.

The other Latin American candidate was Mexico's Herminio Blanco -- who was supported by the U.S. and European countries -- and was more of a pure free trade advocate. The architect of NAFTA (North American Free Trade Agreement), he was also America Economia’s favorite. A key man in the commercial “opening” of his country, Blanco participated in 34 free trade agreements that Mexico signed with countries or blocs, turning it into the most commercially open country in the world. As a result Mexico now has almost $1 million worth of exports per day.

Azevedo was chosen with the support of emerging countries, many of which do not have their hearts set on commercial openness. The largest ones being Brazil, Russia, India and China, the so-called BRICS. These countries are visibly missing from the transatlantic and transpacific blocs. As a matter of fact, the two blocs will probably seek to establish rules in the game for free trade without having to negotiate with BRICS, whom haven’t expressed interest in free trade.

There’s no doubt about it: Azevedo’s job is titanic. For the WTO to become relevant again, it must establish a framework that, with support from the US, China and other BRICS, will truly open world trade to emerging nations.

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Society

Why Chinese Cities Waste Millions On Vanity Building Projects

The so-called "White Elephants," or massive building projects that go unused, keep going up across China as local officials mix vanity and a misdirected attempt to attract business and tourists. A perfect example the 58-meter, $230 million statue of Guan Yu, a beloved military figure from the Third Century, that nobody seems interested in visiting.

Statue of Guan Yu in Jingzhou Park, China

Chen Zhe


BEIJING — The Chinese Ministry of Housing and Urban-Rural Development recently ordered the relocation of a giant statue in Jingzhou, in the central province of Hubei. The 58-meter, 1,200-ton statue depicts Guan Yu, a widely worshipped military figure from the Eastern Han Dynasty in the Third century A.D.

The government said it ordered the removal because the towering presence "ruins the character and culture of Jingzhou as a historic city," and is "vain and wasteful." The relocation project wound up costing the taxpayers approximately ¥300 million ($46 million).

Huge monuments as "intellectual property" for a city

In recent years local authorities in China have often raced to create what is euphemistically dubbed IP (intellectual property), in the form of a signature building in their city. But by now, we have often seen negative consequences of such projects, which evolved from luxurious government offices to skyscrapers for businesses and residences. And now, it is the construction of cultural landmarks. Some of these "white elephant" projects, even if they reach the scale of the Guan Yu statue, or do not necessarily violate any regulations, are a real problem for society.

It doesn't take much to be able to differentiate between a project constructed to score political points and a project destined for the people's benefit. You can see right away when construction projects neglect the physical conditions of their location. The over the top government buildings, which for numerous years mushroomed in many corners of China, even in the poorest regional cities, are the most obvious examples.

Homebuyers looking at models of apartment buildings in Shanghai, China — Photo: Imaginechina/ZUMA

Guan Yu transformed into White Elephant

A project truly catering to people's benefit would address their most urgent needs and would be systematically conceived of and designed to play a practical role. Unfortunately, due to a dearth of true creativity, too many cities' expression of their rich cultural heritage is reduced to just building peculiar cultural landmarks. The statue of Guan Yu in Jingzhou is a perfect example.

Long ago Jinzhou was a strategic hub linking the North and the South of China. But its development has lagged behind coastal cities since the launch of economic reform a generation ago.

This is why the city's policymakers came up with the idea of using the place's most popular and glorified personality, Guan Yu (who some refer to as Guan Gong). He is portrayed in the 14th-century Chinese classic "The Romance of the Three Kingdoms" as a righteous and loyal warrior. With the aim of luring tourists, the city leaders decided to use him to create the city's core attraction, their own IP.

Opened in June 2016, the park hosting the statue comprises a surface of 228 acres. In total it cost ¥1.5 billion ($232 million) to build; the statue alone was ¥173 million ($27 million). Alas, since the park opened its doors more than four years ago, the revenue to date is a mere ¥13 million ($2 million). This was definitely not a cost-effective investment and obviously functions neither as a city icon nor a cultural tourism brand as the city authorities had hoped.

China's blind pursuit of skyscrapers

Some may point out the many landmarks hyped on social media precisely because they are peculiar, big or even ugly. However, this kind of attention will not last and is definitely not a responsible or sustainable concept. There is surely no lack of local politicians who will contend for attention by coming up with huge, strange constructions. For those who can't find a representative figure, why not build a 40-meter tall potato in Dingxi, Gansu Province, a 50-meter peony in Luoyang, Shanxi Province, and maybe a 60-meter green onion in Zhangqiu, Shandong Province?

It is to stop this blind pursuit of skyscrapers and useless buildings that, early this month, the Ministry of Housing and Urban-Rural Development issued a new regulation to avoid local authorities' deviation from people's real necessities, ridiculous wasted costs and over-consumption of energy.

I hope those responsible for the creation of a city's attractiveness will not simply go for visual impact, but instead create something that inspires people's intelligence, sustains admiration and keeps them coming back for more.

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