Brazil WTO Chief Has Leverage on BRICS in World Trade Talks

The selection of Brazil’s Roberto Azevedo as the next head of the World Trade Organization may help ease emerging markets’ resistance to removing barriers as part of global trade talks.

Azevedo, who is now Brazil’s ambassador to the Geneva-based WTO, defeated former Mexican Trade Minister Herminio Blanco in the final round of closed-door consultations among the WTO’s 159 members, putting him in line to become the first director-general from Latin America. Members of the organization’s general council will meet May 14 to formally appoint the new director, the WTO said in a statement today.

“Mexico may be the darling of the West but it lacks widespread support across the developing world” and is seen as too close to the U.S., said Kevin Gallagher, a Boston University professor of international relations who researches issues of global economic governance. “A deal endorsed by Brazil would trigger support from emerging markets” including peers China and India in the increasingly assertive BRICS group.

As Brazil’s envoy to the WTO since 2008, Azevedo attacked farm subsidies in Europe and the U.S. on behalf of developing nations while defending Brazil’s use of higher tariffs to aid manufacturers hurt by the global financial crisis. In his new post, he’ll have to distance himself from those policies while engaging his doubters among rich nations, said Felipe Berer, a trade lawyer who has known Azevedo for almost a decade.

Representing Everyone

“He will have to show very quickly that he is there to represent everyone, and doesn’t only represent Brazil or the developing world,” said Berer in a phone interview from Miami, where he’s an attorney at the firm Akerman Senterfitt.

The 55-year-old Azevedo, in an interview last week, cited his insider’s experience trying to forge global trade deals for the past 15 years as a difference from Blanco, who negotiated the North American Free Trade Agreement with Canada and the U.S. two decades ago. He vowed to be an “honest broker” among WTO members, who reach most decisions by consensus.

“Either you can be perceived like that by the membership, or you’re not going to be effective,” he said by telephone from Geneva on May 4. “We have to be looking at how to make the organization move forward, and that has nothing to do with the particular policies of one country or another.”

‘Victory for Brazil’

Azevedo on Sept. 1 will succeed France’s Pascal Lamy, who as director-general since 2005 failed to overcome differences on agricultural, antitrust and intellectual property issues needed to conclude the decade-old Doha Round. Policy makers are trying to strike a less ambitious, partial deal at a conference scheduled to take place in December on the island of Bali.

The Brazilian candidate had the most support from WTO members in every round of voting and received backing in all geographic regions, according to today’s WTO statement published on its website.

Azevedo’s selection was celebrated by Brazil’s government, which lobbied on his behalf in Africa -- which has the most members by continent -- and was also backed by the BRICS, who’ve been fighting at the International Monetary Fund and elsewhere for a bigger say in how the global economy is run.

“Today is a victory for Brazil,” Foreign Minister Antonio Patriota said at a news conference yesterday. “It reflects the transformation underway in the global order.”

While Brazil’s diplomatic clout has been rising in recent years in tandem with the strength of its economy, now the world’s sixth largest, its trade policies have come under attack since the global financial crisis.

Protectionism Allegations

The U.S. Trade Representative’s office last year threatened to retaliate against what it called “protectionist” push by Brazil that led to tariff increases on more than 100 manufactured goods.

At the WTO, Brazilian President Dilma Rousseff’s government has also been fighting charges by a group of nations including South Korea, Japan and Australia that its 2011 decision to raise taxes on imported cars violates trade rules requiring equal treatment for foreign and domestic producers. Patriota yesterday dismissed the accusations as unproven.

In line with Brazilian policy against what it calls a “currency war” being waged by rich nations, Azevedo has also tried to initiate debate at the WTO over what it sees as unfair trade advantages created by aggressive monetary easing.

As director-general, he’ll be able to bring that issue front and center, though consensus is likely to remain elusive with the U.S., Japan and the euro zone committed to keeping interest rates near-zero to prop up economic growth, said Barbara Kotschwar, a trade specialist at the Peterson Institute for International Economics in Washington.

U.S. Stance

Most European Union nations had agreed to support Blanco, Bloomberg BNA reported, while the U.S. didn’t announce which of the initial nine candidates or two finalists it would back.

The U.S.’s failure to endorse Blanco suggests that it may have realized that further trade liberalization requires someone with more traction among free-trade skeptics than a candidate from Nafta partner Mexico, said Kotschwar.

“From a U.S. perspective, it might make sense to have a WTO chief not so traditionally tied to its trade agenda,” Kotschwar said in a phone interview from Washington.

Before it's here, it's on the Bloomberg Terminal.