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balancer of trade

his name may not be familiar to most egyptians, but in a month’s time pascal lamy may be poised to exert a significant influence over egypt’s economy, and the economies of 147 other countries. business monthly caught up with the eu’s candidate for wto director-general during his recent visit to cairo.

by rehab el-bakry

an articulate career politician, 58-year-old pascal lamy has navigated international trade for over 14 years. the former european union trade commissioner has earned a reputation for his level-headed and straightforward approach to problem solving. his tendency to strike a balance between the eu’s needs and the interests of developing countries has at times made him unpopular on the home front, but he insists ethics should play a role in policy-making.

“formulating policies for the eu as part of the wto is about trying to meet as much of the eu’s needs as possible – ultimately that is the role of any eu politician,” he says, “so, [it’s fair to say that] there’s a bit of a mercantilist approach in our trade policies but they are also based on more noble principles including the necessity of helping – through trade policies – developing countries to develop.”

lamy is france’s candidate to replace wto director-general supachai panitchpakdi, whose three-year term expires on august 31, 2005. but lamy faces stiff competition from three other contenders, carlos perez del castillo of uruguay, jaya krishna cuttaree of mauritius and luiz felipe de seixas correa of brazil.

traditionally, the wto director-general is selected for a four-year term through a consensus of all members during an extraordinary general council meeting. this year’s meeting must be held before may 31. during the last selection process in 1999, wto members were unable to agree on a single candidate so it was decided to let two candidates share the position, each for a period of three years. australia’s mike moore held the post from 1999 until 2002, followed by thailand’s supachai from 2002 until august 31, 2005.

brazil’s correa is favored to succeed supachai in the forthcoming selection, but uruguay’s insistence to field a candidate could further split the votes of developing countries, particularly among latin american countries. this could give lamy – the sole candidate to hail from the developed world – an edge in the selection process.

but lamy insists it’s not a popularity contest. “it’s a selection process, not an election process,” he says, shrugging off suggestions in the media that nationality will play a critical role in the wto general council’s selection. instead, he says the next director-general will be chosen according to experience and qualification.

lamy’s strength is his ample dose of both. a graduate of the ecole des hautes etudes commerciales, a leading french business school, he also studied at the paris institute of political studies and the civil service college, the ecole nationale d’administration. after working as a civil servant in the french finance ministry, lamy spent 10 years as chief of staff of eu commission president jacques delors. in 1999, he was appointed eu trade commissioner, a position that gave him first-hand experience on the back-to-forth negotiations needed to forge a consensus among some of the world’s toughest negotiators. he resigned his eu post late last year upon his nomination as the eu’s candidate for wto director-general.

despite spending much of his professional life promoting the interests of the eu, lamy insists he’s very familiar with the challenges and grievances the developing world faces as it tries to integrate with the global economy. he says the eu is very aware that its own prosperity lies in supporting developing countries. “since the eu advocates the policy of trade opening, it will have to pay in order to get trade opening elsewhere by opening their markets to developing countries first. the priority should be about helping developing countries because this is our most urgent challenge. this is the basic framework through which i have been working and i think that at the end of the day, it’s a win-win game. if the eu opens more, they get more development in developing countries, which is good news for the eu economy because it’s an export-based economy.”

lamy says there is a belief among the countries of the south that the wto needs to shift its balance towards the needs of developing countries. “this perception is only partially grounded, because if you look at the numbers and the way that trade patterns have changed, trade flows and exports from developing countries have been rising more rapidly than exports from developed countries,” he says. “in terms of rate of growth, there’s a huge difference.”

but not all developing countries have experienced this rapid growth. china, for instance, has experienced an average of 9 percent economic growth every year for the past five years, while many african nations are struggling to find a niche for their agricultural products in the highly competitive global market.

“some [developing countries] have been doing better than others, which is why i said that the perception of the wto favoring developed over developing countries is only somewhat correct. although globally some developing countries have benefited, others have not and they have the feeling – and not unjustified – that the system still needs to be rebalanced in their direction,” he says.

lamy cites the debate over access to medicine as an example. the implementation of the 1994 trade-related aspects of intellectual property rights (trips) agreement has often times pitted poorer countries seeking access to low-cost medicine against developed countries seeking to protect the intellectual property of r&d pharmaceutical companies. lamy feels developing countries have every right to demand a change to trips regulations that make it difficult for countries without local pharmaceutical production facilities to import generic drugs. his decision to side with developing countries on the issue came as a shock to eu pharmaceutical firms, which had expected their trade commissioner to play favorites at the wto.

“developing countries had a point,” he says. “that’s the reason why i took the position that we had to go in their direction and this was not that easy for the eu pharmaceutical industry to accept. the same thing applies to agriculture. developing countries were right to say that export subsidies some developed countries provide to their agricultural sector were damaging them, which is why i took the position of zeroing export subsidies in this particular sector. so, there is some truth in the fact that the system needs rebalancing in the direction [of developing countries.]”

it’s a belief that could win lamy support from developing countries, but is not likely to carry much currency given that his three competitors are bona fide representatives of developing countries. still, lamy appears to have the firm backing of eu member states and, despite ongoing differences over many trade issues, the us.

in fact, lamy insists press reports of bitter rivalry between the eu and us at the wto are exaggerated. he says of the some 15 issues currently being debated in the wto, the eu and us agree on about two-thirds of them. the other issues are what lamy terms “a reflection of the nature of trade negotiations,” which are ultimately about each side securing its interest, not ideological divides.

“there’s no way that you can trade a lot like the us and the eu without some frictions here and there. there are different issues at stake,” says lamy. “if you look at trade flow between the us and the eu, trade disputes have never [represented] more than about 1 percent of the total. so 99 percent is fine.”

furthermore, lamy insists the wto’s dispute settlement mechanism serves as an insurance policy that these disputes do not spoil otherwise healthy trade and investment relations. “the media sometimes writes about trade wars. but this is not the case. there is a system and rules in the wto – if one believes the other isn’t playing by the rules, they go to the wto and the wto makes a determination and then everyone complies.”

the eu-us dispute over genetically modified (gm) food, however, has arguably gone beyond mere trade. some might call it an ideological row. lamy admits gm food is a more difficult issue to address than, say, steel tariffs, because each side has its own ideological conviction. “the reason why the europeans are not that keen on gm food [has nothing] to do with protection, [but] of course the us believes that it has everything to do with protection,” he says. “and the reason why the us likes gm food [has nothing] to do with trade, although the europeans would like to believe that it’s only about that.”

he says gm food is a complex issue that requires more than just a dispute settlement mechanism. “it needs negotiations, understanding, advice and realizing what you need to do in order to get an agreement, which is more than a legal system can provide.”

the gm food issue has become a divisive issue among all wto member states, in part because the eu refuses to import agricultural products from any country where gm foods are grown. it’s a policy that’s placed developing countries in the awkward position of having to choose between one giant market or the other. egypt found itself in the middle of the dispute when in 2003 the us lodged a complaint at the wto against the eu’s gm food ban, enlisting the support of egypt, canada and argentina. egypt’s eleventh-hour decision to back down infuriated the us and reportedly caused then us trade representative robert zoellick to freeze negotiations for an egypt-us free trade agreement.

“egypt has always been a big actor in the wto,” says lamy, diplomatically avoiding comment on whether egypt’s decision was the right one. “since it joined, egypt has always punched above its economic weight.” elaborating, lamy likens the wto to orwell’s animal farm, where all animals are equal, but some are more equal than others. “egypt is among those that are more equal. this relates to its position and the stance internationally to egyptian diplomacy and to the way egyptian authorities and people see what’s beneficial for egypt.”

he predicts that egypt will play an even more prominent role in the near future in light of decisions the country has taken over the past seven or eight months to open its economy. reforms will also give egypt more weight when it negotiates for concessions from other countries. “when what you do [domestically] is in line with what you ask others to do, it’s always simpler to make a convincing argument,” says lamy. “there’s better coherence, which in many ways makes the argument you’re making more convincing.”

lamy hopes his arguments will convince wto members that he is the most qualified nominee to lead the international trade body. by the end of this month, he will see if his efforts have paid off.

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