WTO: Emerging markets get the nod

It did not happen when the top job opened up at the International Monetary Fund: Christine Lagarde of France won out over candidates such as Mexico’s Central Bank Governor Agustin Carstens, who put up a good fight.

It did not happen at the World Bank either: Washington leaned on the members of the developed world to back their man Jim Yong Kim, the former president of Dartmouth College.

But the third time was the charm for those in emerging markets to finally run a post-World War II institution in modern times. Brazil’s Roberto Azevedo took the flag after voting from the 159 members of the World Trade Organisation, becoming its first ever Director General from South America. He outpolled Herminio Blanco of Mexico – another highly experienced trade veteran – who had the backing of other NAFTA members the United States and Canada.

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As the new DG, Azevedo did not overplay the significance of what his backing meant. But in his first television interview since securing the job he acknowledged the shift to the emerging markets.

“It is important to have the developing world and the emerging economies being participants, active participants even in a leadership role as well,” he said.

Not surprisingly he came out of the starting gate in the role saying that resuscitating the Doha Round of free trade talks is priority number one.

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“We have a very large trade agenda to push forward, but we can’t because we are paralyzed,” said the veteran trade negotiator, who noted that the rules governing the WTO are outdated.

The job will not be easy. For his predecessor, Pascal Lamy, the term was a frustrating one. In the midst of the worst financial crisis in a generation, free trade slipped right off the global agenda. Some would contend the crisis reignited protectionist tendencies, especially in emerging markets.

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According to the World Bank, Argentina topped the list of countries that filed the most measures to guard certain sectors and products from competition. It was joined by the BRIC countries and the U.S., rounding out the top six places.

Azevedo will have to take a nuanced approach to navigate demands at home in Brazil and at the same time chart a new course to build a consensus. Brazil’s President Dilma Rousseff raised the tenor of the protectionist debate when she accused Washington of driving down the value of the U.S. dollar to the detriment of developing countries.

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The new Director General suggested in our interview that the topic of currency fluctuations could also be included in the WTO’s agenda, even if other institutions such as the IMF keep it on theirs as well.

“I am optimistic that the organisation can look at these very important issues that are a big part of today’s business world,” he said, adding that the WTO needs to avoid a “disconnect” between business and the multi-lateral trading system.

To get the Doha Round moving forward as opposed to sitting in neutral where it has been for years, top trade officials told me emerging economies need to embrace market opening measures. Their resistance to change is what allowed them to stumble badly in the past two years.

Azevedo said it is important to move forward: “We cannot look backwards. What we have to do is raise our heads, look forward, roll up our sleeves and work.”

Brazil is a prime example of how a lack of reforms has undermined the economy. After growing seven and a half percent in 2010, the vast emerging market just managed to grow less than one percent last year. That may be Roberto Azevedo’s prime argument to revive free trade. Now he has to get at home and in other emerging markets to embrace that concept as well.