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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
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.

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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