A NEW DIRECTOR-GENERAL...back to basics!

In a remarkably calm and dignified manner, the World Trade Organisation has chosen a new Director-General, Pascal Lamby, a former European Trade Commissioner. There’s no better free trader than an ex-socialist banker. The decision was made ahead of schedule. The last two Director-General selections were bitter and divisive. Despite my winning on the three accepted criteria, my nomination was blocked until I cheerfully did a slightly sordid deal to split the term. This time a clean decision has put the new Director-General in a good start.

The main goal of the next Director-General of the World Trade Organization will be to make the multilateral system worth working for. Results are always the best answer to criticism. To do this, leaders must now assert leadership and cut through the detail and get to the core principles of the matter and conclude the Doha Development round.

Perhaps it’s time to remind ourselves why open trade is a good idea, why it works. Sadly, trade liberalization is too often seen as a trade-off, something you do if you get something back. It’s economic sense to do it anyway. This has been proven in country after country. That’s why agreements that postpone reform for years are doing poor countries no favours. It’s called ‘special and deferential’ treatment. It’s fair and good to allow space and to ensure the sequence of reform works. Governments that rely on tariffs for Government income need assistance to put in place new more efficient tax regimes. But to ignore economic reality, reject good governance principles is a bit like the overweight chain-smoker saying, “I’ll give up, go on a diet in 5 years.” The new Director-General needs to remind Governments why our parents created an open world rules-based trading system. Immanuel Kant, in his essay in ‘Perpetual Peace’, suggested “Durable peace could be built upon the tripod of representative democracy, international organization and economic dependence.” By ‘dependence’ he means economic integration. President Wilson gave the same speech when the world failed to create a durable international architecture after the First World War. Mill, Hume and Adam Smith all argued that expanded commerce produced good government, reduced the propensity for conflict enhanced individual liberty and security, and promoted equality by lessening the servile dependence of individuals on their superiors. The effect of increased commerce on individual freedom was, according to Smith, the least observed advantage of commerce.

Trade exchange of services creates friends, it is control that breeds enemies. That’s why new trade opportunities between India and Pakistan, China and Taiwan offer hope. Let trade and people be free and the international frontiers will cease to be such a problem. Every time we trade, we are making an agreement with somebody and, in the absence of coercion, both parties walk away better off. Huge amalgamations of states offer tempting targets for the wrong type of politics. It should never be forgotten that one reason the multilateral system was established was the fear of the rise of rival competitive trading blocks which did so much damage in the 1930’s.

In the old days, they said if trade did not move, armies would. Now it’s armies of desperate migrants who will move from oppressive, closed economies to the magnets of success, those economies that are free, open and growing. These desperate people are the weapons of mass migration, just another issue leaders should consider when they consider whether or not they will co-operate and assist the new Director-General to conclude the Doha Development round. Because that agenda, if implemented, will mean the greatest redistribution of opportunity and then wealth in history. It will give real meaning to the speeches so often given about how poverty, despair and humiliation are a breeding ground for desperate extremism.

Boldness is the best friend of change. Half-hearted changes will give further strength to bilateral and regional deals, disputes between states will grow. Ministers must be kept busy with the big picture. Trade negotiations are like riding a bike, you must go forward or fall over. Trade rounds have never failed, they just never fail to disappoint by not going far enough. The stakes are highest for the poorest. Africa would get 5 times more from the agriculture deal on the table than all the aid put together. I’m optimistic, we have an excellent Director-General – let’s hope Governments give him the support he deserves.