Roberto Azevêdo Discusses Trade Policies of the United States

Roberto Azevêdo Discusses Trade Policies of the United States

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from The United States and World Trade: Future Directions

This is the final session of the "The United States and World Trade: Future Directions" symposium. 

This symposium brings together distinguished trade leaders and innovative thinkers to address the trade policies of the United States and their international implications in North America and East Asia, as well as the possible effects on the global trade architecture and the World Trade Organization. 

FARRELL: Hello. Good afternoon.

We’re bringing it home now, but I am delighted for just a couple minutes to introduce to you Roberto Azevêdo. You’ve seen his bio. He doesn’t need much introduction, but he’s the director-general of the World Trade Organization—the sixth director, in fact—and he’s been there since 2013. As you’ll see in his bio, he’s had a long and distinguished career as a Brazilian diplomat, certainly the Brazil chief trade negotiator in Doha and many other areas. But I’d like to point out that I think his first diplomatic posting was here in D.C. So welcome back, and we’re delighted to hear you. Thank you for joining us.

AZEVÊDO: Well, thank you very much, Diana.

Good afternoon, everybody.

It was indeed my first posting. It sounds like pre-history now, but—(laughter)—yeah, it’s always nice to be back. It’s a pleasure to be with you on this particular occasion. Let me thank the Council itself, on Foreign Relations—hi, John—for the kind invitation.

This symposium has looked at some pretty interesting issues, like the future directions for trade not only in the U.S., but worldwide. And you had a full program, from what I could gather, touching upon a range of pretty big and sometimes tough issues.

So I suppose it’s about the end of today’s proceedings, so I’d like to step back a little bit an offer you the perspective of the WTO, maybe a broader perspective of where we are. And, frankly, given the tenor of the trade debate at present, I suppose it will be understandable if one were to draw some pretty drastic conclusions. It can sometimes feel as if the global trading architecture, which was so painstakingly constructed over the decades—in reaction, by the way, to the greatest crisis of the 20th century—is now on the verge of collapse. And there are indeed some pretty real challenges before us today, and I will come to them shortly. But I think, in analyzing all this, we should try, at least, to retain some balance on what is happening.

Of course, we cannot at all, nor should we, ignore all of the current risks. But actually, the multilateral trading system is actually stronger than it was before and, frankly, more needed than ever. And while we can certainly try to improve it, I have yet to hear any credible alternative to that particular system. So, without it, I think we would be in a world definitely ruled by unilateral actions, which is basically a euphemism for trade wars. And I think we all would be, without exception, worse off than we are now.

But, concentrating on the positives for a moment, I would invite you to take a look back and bring you just to 2013. At that time, the WTO was 18 years old. And it had never delivered, at that point in time, any major multilateral trade deal. In fact, it hadn’t delivered any multilateral trading deal at all, and it was seen as a place that you could not do business in. On the contrary, it was—in fact, it was facing an existential crisis. And I remember the situation quite well. Every speech you heard, every article that you read said that the situation was critical and that we are on the brink.

But by December of that same year—so end of 2013—we started to change all that. In Bali, at our ministerial conference, we delivered the first multilateral deal in the history of the organization. That was a Trade Facilitation Agreement, and this was a deal of huge economic consequence. Full implementation of this agreement could cut trade costs globally by an average of 14.3 percent. Now, what does that mean? That means that this would be a bigger impact than if we eliminated all tariffs that exist in the world today. So that’s how big this agreement is.

And then, two years later, after that breakthrough, we delivered the biggest farm reform in two decades. So that was the decision to abolish all subsidies of exports of agricultural products.

And in addition to that, a group of members agreed on the expansion of the WTO’s Information Technology Agreement. And this deal eliminates tariffs on a range of new-generation IT products, and the trade of those products today is worth about $1.3 trillion per year. That’s more than the whole of the automotive sector altogether, just to give you an idea of how big that it.

Now, members also agreed on a number of other things—to support the integration of least-developed countries, for example, into the trading system. And these deals that we struck in 2013 and 2015, they did not just stay on paper. In fact, we’re seeing them through into reality. This year, we have already seen the entry into force of the Trade Facilitation Agreement; and also the TRIPS Amendment, which is an instrument which eases the access of essential medicines for the poorest countries.

Besides, however, their economic significance—like I said, these are pretty significant deals—I think that these breakthroughs, they achieved more than the sum of their parts. Why is that? Because they showed that 164 members could, in fact, work together in a meaningful way to solve pretty complex problems that they faced. And they also proved that the WTO can deliver—deliver on pretty significant deals.

Now, at a more fundamental level, I think that we saw the value of that trading system in times of crisis. And I recall that—and I will bring you back a bit further, to 1930, where, after the crisis, the protectionist measures that were introduced after the 1930s crisis, they wiped out two-thirds of global trade in just three years. Two-thirds of global trade was wiped out of the face of the Earth.

Now, in the crisis of 2008, which many compare to the 1930s crisis, we did not see the same escalation, precisely because by then governments knew that they were bound by common rules. They held each other to the agreed standards. And more than that, those standards were clear. Now, in the 1930s, you could or could not like what somebody else did, but there were no clear standards. Today, you do. Today, the red lines are clear. When somebody goes beyond the red line, everybody knows, and they will say, look, you went too far. So those things helped to contain the crisis to a much more moderate level of protectionism, and the system is effectively doing what it was intended to do.

Of course, we are still feeling the impact of the crisis. But, after a long period of very sluggish growth, global trade is beginning to pick up. Last month we issued a strong upward revision to our forecast for trade growth in 2017. We are now forecasting trade growth to be around 3.6 percent, in volume terms of course. All our forecasts are in volume terms. And this represents a substantial improvement on the lackluster 1.3 percent increase of 2016, just last year. And it is, therefore, the first year since 2011 that we are likely to see trade expansion above 3 percent.

So this is positive news. And this is, of course, happy, I suppose, outcomes for many. But let me say this: Growth alone is not enough. Just having the economy picking up doesn’t mean that we will get through or that we will turn the chapter on many of the problems that we see ahead of us.

Clearly, expanding trade have brought important benefits, I think, to the economy overall. They have helped to create new opportunities, to create better jobs, lift people out of poverty. However, despite all this, it’s quite clear that many people still feel disconnected from economic progress. And we cannot simply cross our fingers and hope that with renewed growth all these other structural problems will simply melt away. We need to confront these problems head-on.

Trade is often singled out as a disruptive force in labor markets. And while trade does have that kind of effect, technology is actually the major force driving change and disruption in economies everywhere. Automation, digitization, and new managerial techniques, they’re all revolutionizing the global economy. Productivity gains from new technologies are reducing the demand for labor in several sectors, particularly in agriculture and manufacturing. In some economies, including the U.S., eight out of 10 jobs that are lost in manufacturing are due to higher productivity. They are not because of cheaper imports. But, like technology, trade is also essential for progress.

Now, it’s not about rejecting technology. It’s not about rejecting trade. It’s about embracing them and learning to adapt to them.

Now, having made these points, let’s not ignore that the overall benefits of trade or technology are of no consolation for someone who lost his job. So we must ensure that the global economic system is, in fact, more inclusive, and that it ensures that benefits reach more people—hopefully everyone.

An important element in this equation, of course, is domestic policy. So this includes more active labor market policies, education policies, the provision of support for workers.

The Fourth Industrial Revolution, as many call it, is not going to make all our jobs disappear. But it is going to bring huge changes, and we need to adapt. So there is no one-size-fits-all recipe. But success, I think, will hinge on the ability of economies to adjust to the changes.

Turning against trade alone is not going to help it, is not going to solve it. In fact, it may make things worse. I think the multilateral trading system has a constructive role to play right here. We can do more to address these issues, and ensure that the system can continue to evolve and improve.

Of course, this is ultimately in the hands of members. And we know that some, including the U.S., have concerns about some areas of our work, and I am in close contact with the administration on this point. We’ve had further meetings today. We will continue this dialogue. And I want to work with all members to strengthen and improve the trading system. Now, that is why I took the position of director-general, so this is an ongoing effort.

An important milestone for the organization is going to be, of course, our Ministerial Conference in Buenos Aires in December this year. Members are discussing now how to progress on a number of fronts. Agriculture is quite prominent here, with a strong focus on domestic support and issues related to food security in developing countries. Similarly, there is appetite among some members to take action on services regulations. Some members are also looking—not some—all members are looking at ways to limit subsidies which lead to overfishing. They are discussing measures to help developing and least-developed countries to integrate more. There is an increasing interest among some in discussing other issues, such as e-commerce, investment facilitation, and how to help small and medium-sized enterprises to trade.

Now, all these conversations continue to be very constructive and dynamic in Geneva. I think we are seeing more pragmatism. We are seeing more realism/flexibility in these debates than ever, actually.

So, at present, however, there is no obvious answer or solutions to any of those fronts. And, as you know, we will need all WTO members onboard for many of those. So this will be challenging, and we need to keep working. Buenos Aires is a very important milestone for the organization and for global trade. So I hope that we will keep seeking to deliver everything we can by December.

But that will not be the end of the world. This is also very important. What we cannot do by December, we will continue. So I hope that we will leave Buenos Aires with members committed to strengthening the trading system and also with a clear path forward for our future world.

The global system has been and will remain a work in progress. I think it represents the world’s best efforts to keep economic tensions at bay and to ensure that trade supports growth, supports development for everyone. And those efforts have paid off so far. The system is working. Of course, the work of cooperation is tough. It’s difficult. It is painstaking. But it is essential. So there is no other alternative other than to keep at it.

The best thing we can do to secure the future of the global system, trading system, is to redouble the efforts to improve the system, to reform the system. We have come a long way in recent years. And now I think the only thing we need to do is to go further. We must ensure that trade remains an essential means to support peace and inclusive prosperity around the world.

And with these grandiose words, I finish my presentation. (Chuckles.) Thank you. (Applause.)

FARRELL: You know, we spent all of last week running around between the IMF and World Bank meetings, the investor summits. And on the front burner of at least many of the conversations I attended was NAFTA. I think there’s been—and this morning there was a big discussion on NAFTA here at the CFR—I think one of the questions that has not been explored as much—I wonder if you would comment on it—is what are the implications of a—what do you think are the odds that NAFTA will get dissembled in a meaningful way? And if it were to dissemble, what are the implications for the WTO?

AZEVÊDO: Well, let’s start by hoping that it will not.

FARRELL: I agree with that. But help us understand, what’s the worst that can happen?

AZEVÊDO: Yeah. Well, no, I hope that it will not because of the—not only of the economic impact—and I think the participants of the agreement will be better placed to assess what the economic impact will be for each one of them—but also for the systemic implications.

I have been saying—when I took office, people were saying, aren’t you afraid that, you know, regional initiatives are taking over and that these things are going to supplant the WTO? That never scared me. I thought—and I always said that—I think they complement the system. It’s very important to have these initiatives because they are the groundwork, they are the foundations of the WTO itself. It’s very rare that you see, you know, groundbreaking work at the multilateral level. It’s very difficult. It’s 160 countries. So more often than not, what you see is these regional agreements, these regional understandings making the groundbreaking work amongst themselves, you know, those participants amongst themselves. And if that works, if that’s a positive experience, then you’ll see those things coming to the multilateral system. Those same countries are proponents; they suggest that that is taken aboard. And others see that it worked, and then they may be on board.

So I—my concern with NAFTA is not only about the economic implications. It’s also about the systemic notion that regional agreements, liberalizing agreements are not doing their part. I think they are.

FARRELL: So you create I think a very compelling notion that these regional agreements are the basis on which the broader WTO can build. How does it work the other way, though? When these regional agreements unbundle in certain ways, can the WTO keep the front of the things that were premised on those regional agreements? Or does the WTO itself start losing ground?

AZEVÊDO: Well, the WTO provides the foundation, right? So those regional agreements, they test the limits, they test the frontiers of liberalization. And then you bring it to the WTO. And then in the WTO, if they’re accepted, they begin to strengthen the foundation on everything that happens.

That foundation is very important. In fact, most of the trade that is done by most countries is done on WTO turns, not on preferential terms. And it works. It actually works. It’s not like the WTO is a bad deal. It’s not. It’s just that in these regional agreements, you get—particularly in the area of tariffs—you get preferential agreements. So you have usually duty-free access to those markets. That you cannot replace in the WTO. That kind of market access you cannot—you cannot replace. But I think the WTO is a sound foundation if—in case—you see it in Brexit as well—

FARRELL: Holds the line.

AZEVÊDO: Yeah, or anywhere where the regional or that undertaking falls apart for some reason, you also have the WTO rules and bound tariffs to work with. It’s not as good a deal between the participants because then they would have to pay duties that would otherwise not be paid. Some of the harmonization in terms of regulations may fall apart as well because those agreements are not only about tariffs, they’re also about harmonizing the regulatory framework in many different ways. It’s not the same, but the WTO will help to avoid a situation where you have just unilateral actions taking place because that would be—that will be going back to pre-1947. That’s not a good scenario.

FARRELL: All right. Switching gears, the next big topic of conversation—it was reflected in the agenda here—was China. So between the sort of general rhetoric that we hear, the threatened economic sanctions on Chinese banks, the desire of at least this administration to have China change the game on North Korea, how does the WTO see China now in the context of the global system? Are you more optimistic about their stepping into leadership or more pessimistic about the risks that—

AZEVÊDO: No, I don’t think it’s a matter of optimism or pessimism. China changed. That’s a reality. China acceded in 2001. I remember I—and many of you here maybe—participated as negotiators in the Doha Round at that time. And frankly, until 2008 I think you wouldn’t hear from China in the negotiations. They were very subdued. Of course, they were at the time recently acceded members, so they didn’t have much in terms of commitments to make under that status of recently acceded member. But they were not very active in those negotiations. But by 2008 they began to change. They began to be more active, more central in the conversations. Today it’s just impossible to think of any kind of negotiation or conversation at that level without having China as a participant.

Now, I don’t have to tell you how big a trader they are. And you are that big, you create attrition with others. It’s inevitable. But they participate. They participate in the dispute settlement system. As people challenge Chinese measures all the time, they challenge back on others. That’s part of the game. And that works to some extent.

Now, there are areas that are not covered by the WTO. And there are strategic elements to that conversation which are not necessarily WTO-related. And the WTO imposes limitations on both sides. Limitations are never welcome by anyone, but they do exist.

And I think China has been participating in the system and using the system to its benefit like everybody else now.

FARRELL: Were you surprised when China was the sort of flag holder in Davos at the beginning of the year?

AZEVÊDO: No.

FARRELL: You weren’t surprised.

AZEVÊDO: No.

FARRELL: I was surprised. (Chuckles.)

AZEVÊDO: I could have written that speech myself. (Laughter.)

FARRELL: So we’ve talked about NAFTA. We’ve talked about China. But zoom out a little bit and help us for those of us who are here: Do you think this “America first” strategy of the administration is a paradigm shift for the system or mostly sort of rhetorical noise that the WTO will outlive?

FARRELL: No, look, I don’t believe in rhetoric happening in abstract. If the rhetoric is there, it’s because there is some political pressure behind it. Whether that rhetoric translates into action, that’s a different conversation. But clearly, there are tensions. Clearly, there are forces behind that rhetoric. So I think you cannot discount rhetoric as being, you know, just rhetoric, no. I don’t—I think we must be watchful. I think we must be very careful. Listen to that. Understand the concerns, and to the extent possible, try to address them to maintain this kind of collaborative effort internationally. But I don’t—I don’t think that we can just, you know, discount rhetoric as being, you know, a publicity stunt.

FARRELL: Well, at a minimum, we can feel pretty confident that the U.S. is no longer going to provide the kind of leadership on trade generally, maybe at the WTO, that it has traditionally done. What happens next? Who steps in? What’s the alternative to a U.S. major leadership role in that context?

AZEVÊDO: Well, Geneva is a good example. I think the U.S. has been much more subdued than it was before. I think that’s not—I’m not saying anything that surprises anybody in the room.

FARRELL: No. (Chuckles.)

AZEVÊDO: But the work didn’t stop. Delegations are still making proposals. They are still pushing things forward.

In the area, for example, of e-commerce, which the U.S. I understand has an interest in pursuing, we already have more than seven or eight proposals on the table—from different perspectives, of course. But members are acting. They are negotiating. They are dynamically trying to find solutions and move forward.

Of course, the absence of the United States as a—as a leading force is felt. I’m not saying that it doesn’t matter, no. Yes, it does matter. It does matter a big deal that the U.S. is not one of the driving forces of that process. But the system itself did not stop. I think that’s important to note.

FARRELL: Mmm hmm. Mmm hmm.

You alluded to this in your remarks, and of course we have Ted Alden here, who’s been—wrote a book recently on failure to adjust—he talked about—if you reflect back on lessons learned, what did we learn? Were we inattentive to the noise that had been building up for a long time? I think most people around here are very strong pro-trade advocates. What could have been done differently? If you could write the script of the last 15 years as this noise was getting more traction, is this something that the developed world in particular could have done differently in your mind?

AZEVÊDO: You mean in terms of—

FARRELL: Just not—you said there are forces here that are driving this anti-trade rhetoric, this setback from the U.S. leadership position, and not just the U.S. And I think today most people would say that noise was there, and no one was paying attention.

AZEVÊDO: Yeah, it’s been there for a while. Yeah.

FARRELL: Right.

AZEVÊDO: No, I think—yes. And, you know, we had the public forum, the WTO public forum, in September last month, in Geneva. And one of the panelists was Paul Krugman. And as an economist, I asked him, I said, look, economists are blamed for pretty much everything. Whenever things go wrong, economists are the first ones to be blamed. You didn’t predict that, you didn’t—you know. And I asked him, doing some soul-searching, did we miss something with the sentiment, this anti-globalization?

And he said, yes, yes, we did. And I think all of us did. We never realized how widespread that was. We thought that that was localized sentiment related to a sector that was not doing as well and that jobs were disappearing in that sector but then the economy would absorb those people in other places and things like that. There was a moment when we thought that those sentiments were related to migration flux happening in some places because of displacement of people due to geopolitical tensions and things like that. We never realized that this was really all connected, that this whole thing was connected. There was a big intense feeling of discomfort—and not necessarily on the part of the poor but on the part of the middle class.

And I think the wake-up call began to come really strongly around the time of Brexit and then the U.S. elections, and after the U.S. elections, other elections in Europe as well. So now it’s something that is quite visible and everybody sees that. But the undercurrent had been there for quite some time. And I think we missed it. I think we did miss at least the dimension.

FARRELL: So now it’s there. What are we going to do about it? What can the developed world do to address these having now gotten the shape that they’ve gotten? And do you think that countries other than the U.S. are doing it? Or what more should they be doing?

AZEVÊDO: Well, the first thing to note is exactly what you said, you know, countries other than the U.S. I don’t think this is a U.S. phenomenon. I think this is a global phenomenon.

And I—you know, I have been in meetings sometimes with decision-makers of the highest level from 50 countries or more sometimes. And some of them were saying, well, this is—this is not really a problem for my country. Big mistake. This is a problem for your country. Maybe you don’t realize it yet, but it is coming. If it’s not there already and you’re just missing it, it is coming because this is a structural change. This is not something that has to do with circumstantial moments of a particular economy.

The productive system is changing. The technology fact is going to be there, and it’s going to be there more and more present every day. It’s so much faster than ever before. And that’s a big difference. Somebody said the other day—I don’t remember who—that when men invented the wheel, somebody lost his job. And that’s quite true. However—and then he said, so don’t bother because this has been happening for ages.

The difference now is the speed. The speed that the technology is taking over the cognitive processes, for example, of the human being is unprecedented. And this is not going to go away. We saw a recent evaluation by—a study by the World Bank that two-thirds of the kids who are entering fundamental school were not working jobs that exist at that point in time. So how do you plan for that? What kind of educational system, when you don’t know what you’re educating people for?

But clearly, we’re not going to solve this overnight. There is no readymade solution, a silver bullet that will, you know, solve all of the problems. I think it will take an effort on several different fronts. I think educational systems have to be more nimble, have to be more adapted to today’s realities where students can go in different directions and professionalize even faster.

Constant retraining and reskilling and upskilling, whatever you want to call it, of the workforce. And it’s not—I saw—I remember that sometime back, the debate was something about trade adjustment or something, so how to adjust the labor force to trade—no, it’s not about trade; this is about the structure of productivity. So it is about technology and the changes in the methodology of—in the methods of production. So the labor force.

And also, frankly, people don’t like to hear that, but even the social security structure will have to adapt to that reality as well. You lose a job when you’re 30, 35, maybe 40 years old, you can retrain and adapt and fit in somewhere else. You lose a job when you’re 50-something, it’s a different—it’s a different proposition altogether. So that system, the social security safety net, whatever it is in your country, will have to be adapted to the—to the—to these new circumstances. And some countries have been doing that already successfully, by the way.

FARRELL: So I have many more questions, but I don’t want to be so selfish. I want to open up the floor. If you would, please, wait for the mic. Introduce yourself so we know who’s speaking. And we’ll take a few questions. And then I have one I’d like to wrap up with.

Are you handing out mics? We’ve got mics here and folks back there, please. I think there’s a gentleman back there who had first hand up, and then we’ll come over here.

Q: Thank you. Jim Berger from Washington Trade Daily.

Mr. Director-General, do you think the WTO can survive a Buenos Aires outcome that would be as modest as the Nairobi outcome?

AZEVÊDO: I think the WTO did pretty well in Nairobi, actually. And as far as modesty of results are concerned, I think the last two ministerials were the most successful ministerial conference that we ever had.

I also think we should not hold the organization hostage of success. So it’s not going to be every single ministerial conference that we’re going to deliver a big outcome. That’s just unrealistic. There will be some ministerial conferences that will be ready for some pretty significant outcomes. There will others that will be more kind of housekeeping kind of ministerial conference, which we had for so many years.

So yeah, I think the ministerial conference of Buenos Aires is an opportunity for great—for some important outcomes. But if we don’t get those outcomes there, it’s—

FARRELL: It’s not make or break.

AZEVÊDO: No, by the way—by all means no.

FARRELL: Glen.

Q: I’m Glen Fukushima with the Center for American Progress.

Given the fact that many of those who are against trade are those who are losers or consider themselves to be losers, the winners basically don’t get too involved, I think. And given the necessity for the safety net that you talked about, do you—it seems to me that unless each country undertakes those measures to try to mitigate the negative effects of trade, that the opposition is going to continue. Does the WTO itself consider that it’s part of its responsibility to try to propose or set standards or try to create the environment so that the countries can mitigate the negative effects of trade so that the benefits could be more broadly shared? Otherwise, I’m very pessimistic.

AZEVÊDO: I wish the WTO—yeah, I wish the WTO had that kind of power. (Chuckles.) Unfortunately, we don’t.

I think, first of all, trade, like I said in my presentation, it’s about 20 percent of the problem. So fixing the trade side of the equation is not going to solve this problem at all. You still have 80 percent to take care of. So this is not going to be something that you solve with limited policies focused on trade or trade effects. This has to do—this has to do with the bigger macroeconomic problem. You’re talking about structural changes that are happening now. If you don’t realize that, if you don’t make the right diagnosis, you’re going to get the wrong medicine. And the wrong medicine will be closing up to trade or closing up to technologies. Now, making strong infrastructural reforms, particularly in the area of social security, that’s not an appealing prospect for any country or for any political structure. But that’s a reality. That’s a reality.

And the WTO, the best that we can do—and I acknowledged that to the leaders of the G-20 when I met with them in China, in Hangzhou; I said, look, I will not be doing my job if I don’t give you the elements that you need for—to realize that this is a problem because back then—and we’re talking about a year ago, two years ago—there was not a whole lot of recognition that we had a problem. When I put those numbers out there, they were surprised. And they said, where did those numbers come from? And I said, well, those numbers come from everywhere. Just take a look around. It’s just not on the headlines, but they’re there. And said, well, we need to do more. And then Christine Lagarde, Jim Kim, I myself, we did a joint effort to illustrate and educate people about what was happening. And I’m happy to say that that effort is paying off. People are beginning to pay attention. Not enough, though.

FARRELL: We had a—right behind Glen here

Q: Hi. Brett Fortnam with Inside U.S. Trade.

The U.S. has been complaining about the appellate body. And there are two vacancies now, more soon to come. And the EU trade commissioner, Cecilia Malmstrom, just mentioned that the blocking of the appellate body vacancies—the filling of those vacancies—could get up gutting the WTO from the inside or the appellate body from the inside. What does—if this continues, what do you think that this would do without having a fully functioning appellate body? And do you think that this is any type of systemic plan from the U.S.? We’ve seen at least in the NAFTA negotiations proposals for dispute settlement that would weaken state-to-state, investor-state dispute. Is this in your opinion kind of a way to weaken the WTO?

AZEVÊDO: Well, it’s a big question. (Chuckles.) So let me try to focus a little bit.

First of all, if those three vacancies are not filled—so we have two already. The third one will be coming in December. We’ll be three down. So instead of seven, we’ll have four appellate body members. Of course, it will have an impact. Clearly, there will be an impact. It will slow down the process of evaluation and at a system that is already coping with a lot of work. So yes, it will have an impact. I have no doubts about that.

How to fix it is something that we need to continue to talk. And it’s not talking to the U.S. only. We have to talk to all the other members as well. This is not a solution that one country or two or three can solve for everybody else. We have to sit down everybody and see whether there is a solution and what that solution could be to unclog the process.

Now, what that is, I don’t know. I think we’re still in the process of talking to each other and understanding the concerns and figuring out what to do next.

FARRELL: Next question. Back there.

Q: Hi. I’m Juliano Basile. I'm from Valor Econômico, Brazilian financial newspaper.

It was also mentioned this morning the ongoing negotiations between Mercosur and the European Union. So I would like to know what are your perspectives for an agreement after so many years—I mean, decades—of negotiations. And also, as a Brazilian, can you tell us how badly Brazil really needs a trade agreement nowadays?

AZEVÊDO: You have to ask Brazil. (Laughter.)

FARRELL: Wearing a WTO hat. (Laughter.)

AZEVÊDO: What I can tell you is that, look, I myself negotiated that—was part of that negotiating effort when I was undersecretary for economic affairs of the ministry of foreign relations. And at that time I was doing my very best to make it happen because I thought it would be a win for both sides, for the EU and for Mercosur. Unfortunately, we were not ready at that point in time to make the kind of progress that was needed.

I hope that it will happen because as I said before, I think that these economic, this regional integration liberalizing efforts are important, both for systemic—it’s not only about the impact on those countries, on the participants alone. It’s also the systemic impact and the—and the—and the mood that it creates. I think liberalization is contagious as much as protectionism is also contagious. I hope that the more liberalizing efforts you have in place, the better place we are to continue this process.

FARRELL: Great. We have a question up here, please.

Q: Thank you very much. I’m John Weekes, and I was the ambassador once to the WTO. Hello, Mr. Director-General.

AZEVÊDO: I kind of remember that. You look familiar. (Laughter.)

Q: In your opening remarks, one of the things in talking about the ministerial conference, you said you hope the members would come away with a clear sense of the future work program ahead. Would you like to give us—but you didn’t really elaborate much on that. Could you give us a bit of an indication about what elements you think might appear in that work program?

AZEVÊDO: I’m not sure what would be the situation in each of the issues. But what I felt, for example, when we were in Nairobi—and we did have some pretty significant outcomes in Nairobi—but we took pretty much everything o Nairobi. What happened was that we tried to close the deals on all the different areas in Nairobi. What happened is that in some we were successful; in others we were not. And then in the post-Nairobi, the immediate months, what happened was that in the areas where we did not close the deal, we didn’t have a work—we didn’t have a work plan. We didn’t know what to do. There were no next steps.

What I’m inviting members now to do is if you know—and frankly, by now you already know what has a chance to happen and what does not. So if there is something that you are keen to have, if you’re a proponent and you know that this is something that is extremely difficult to get by Buenos Aires, shift mode. And instead of trying to conclude that, try to plan for the next steps, for the future steps because even negotiating a work program for the future, it’s not an easy proposition. It takes weeks, sometimes months to do that. So if you don’t plan for that scenario where you know it’s not going to happen, so get the others and plan for the future, then that’s the worst-case scenario I think for any issue.

And I think it would depend on the call. In some areas I think—for example, e-commerce, that some members are trying to get e-commerce there—it clearly is not going to be a finalized outcome in Buenos Aires. We’re not even close to that. So, well, talk to others—and there are many different perspectives on what do on e-commerce—and plan for the future. What is that you want to do? How do you approach? Do you have a working group? Do you have a series of seminars? What kind of issues would be in this discussion, in this conversation? Are some issues for later, let’s not give a priority? Do we reprioritize the issues? Do we not prioritize the issues? That kind of structure, that kind of decision and planning I think is important. And it will vary from issue to issue. So it’s difficult to tell you right now what it would happen—what would happen in each of the areas. But I hope that we will have a game plan.

FARRELL: Do you have a couple of areas where you think even in this context, some real traction could get done, something that could get closed that would be some measure of success for the ministerial meeting?

AZEVÊDO: I think there are some areas that are more mature than others. I think one clear area that is a clear possibility is fishery subsidies. I think we are I think in a position to hope for an outcome in Buenos Aires. Whether it will happen or not, I don’t know. That’s impossible to predict. But I think we should be in a position to do that. And maybe services regulations. This is something that also advanced. And maybe that’s something that we can get some kind of outcome.

But not many. Most of the other areas are tough. We have public stockholding for food security purposes, which we have a mandate that was from Bali. So that—also, we have a mandate to conclude the negotiations by ministerial—by the ministerial conference. I hope that we can find an outcome there too. There may be others that are closer to conclusion. But there are many, many, many that are not quite there yet.

FARRELL: But you see at least a few that might make it through which you’re optimistic about.

AZEVÊDO: It’s tough to tell. It’s tough to tell. And if I—and if I do try my hand and say this and that, members are going to kill me, so—(laughter)—

FARRELL: We have a question right here. Thank you. And then that one back there.

Q: Thanks. I’m Shaun Donnelly, from the U.S. Council for International Business.

Does investment fit into that? Do you see the WTO doing something in the investment fields? And on what kind of a timeline? Thanks.

AZEVÊDO: There is a conversation on investment facilitation, which is somewhat different from the previous conversation that we had on investment, which was more about investment protection. That part, investment protection, I don’t see a lot of movement now in the WTO. It doesn’t mean that it will never come. It simply means now this is not the focus.

But there is—it’s funny because this was an area that was quiet—nobody was talking about it for a long time. Then all of a sudden some members began to pick it up. It’s not a multilateral conversation, but a group of members who are pushing for this—most of them developing countries, by the way. And it began to get momentum, momentum, momentum. And now it’s going really fast. And this is one of—maybe one of the most promising areas for some kind of outcome in terms of plurilateral conversations. I think multilaterally, it’s going to be tougher. I’m not saying it’s impossible. I’m just saying it’s going to be more difficult. But they’re trying to do it on a multilateral format.

But again, it’s again about investments facilitation. It’s about how to help the investor to set up shop without too much bureaucracy, with transparency, with predictability. And the developing countries are talking about that.

So that may—you may see something in Buenos Aires, whether finalized outcome or some work program for the future, depending on how much progress they make. But it’s looking I would say fairly positive at this point.

FARRELL: We had a question all the way in the back.

Q: Hi. It’s Shawn Donnan from the Financial Times.

Did you get any clarity from Bob Lighthizer today on just what the U.S. wants to stop blocking the new appellate body members? And secondly, a broader, bigger question: You’ve talked about a lot of smaller deliverables today. Should we take that to mean that the age of the big monster round, the Doha Round, is over for the multilateral trading system?

AZEVÊDO: Well, on the first part, I got more clarity on some of the concerns. I think finding solutions is something that we’ll have to continue to talk. I myself offered my perspective. I hope he has more clarity on my perspective as well. And I think we both agree that we need to continue talking about this. And that’s what we would do.

On the second part, about the, as you called it, monster round, I remember when the WTO was created, so I am that old. (Laughter.) And at the time the—people were selling the WTO as the end of the rounds because it was going to be a permanent forum for negotiations. So you didn’t need a round any longer. It is something, a place, where you would be constantly negotiating. It was—I remember, you can quote, a permanent forum for negotiations. That was what the concept of the WTO was all about. But that lasted, what, five years? And then we had already the launching the Doha Round.

I think that to say that the Doha Round is the end of all rounds, I think it’s too-it’s like saying the end of history. I don’t know whether history will ever end. I don’t know whether the rounds will ever disappear or never come back. I don’t know. I think right now there is a still a number of members in the WTO who place hope in the Doha Round. Others don’t. Others feel that we have to re-engineer everything.

What is clear from that conversation is that there seems to be a consensus that those issues that were under the Doha Round, they didn’t disappear. It’s not because the round did not make progress that all of a sudden, all of the problems in agriculture have been solved. No. The problems are still there. I think they still have to find solutions for those issues. How we do it, it’s something that the members are still discussing.

FARRELL: Well, one of the most important tasks of a moderator is to end the session in time. So I know there were a few more questions; I apologize. But I know you have a very busy schedule here in D.C. And we’re so grateful that you could come and join us and share your perspectives. And thank you very much.

AZEVÊDO: Thank you. Thank you all. Thank you very, very much. Thank you. (Applause.)

(END)

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