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Wednesday, May 12, 1999 Published at 15:31 GMT 16:31 UK

Business: The Economy

Free trade in peril

Thailand's Supachai Panitchpakdi and New Zealand's Mike Moore

The international body that sets rules for world trade is facing one of the biggest crises in its history.

World trade wars
At a time when global economic growth is slowing and the World Trade Organisation (WTO) should be focusing on the battle to defend free trade, it is locked in a bitter tussle over who should be its new chief.

The 134 members of the WTO just cannot agree on a candidate to replace Italian diplomat Renato Ruggiero.

[ image:  ]
New Zealander Mike Moore, 50, regarded as the leading contender, has the support of the United States, France and Latin America.

But Thailand's Supachai Panitchpakdi, 52, who has the support of Japan, some European and many Asian countries, is still lobbying hard for the post.

He is seen as representing the hopes of some of the poorer developing countries - although Mr Moore has many supporters in the developing world as well.

The acrimonious leadership row could not have come at a worse time for the WTO, whose image as the warden of global trade has already been badly tarnished.

Its decisions are meant to be absolute - but doubts about the power it wields and the ability of countries to exploit legal loopholes are growing.

The crisis has split the WTO membership down the middle and crippled the body at a time when it faces a host of issues critical to world trade.

Global economy slowing

The volume of global exports rose by just 3.5% last year, a dramatic decline from 1997's record growth of 10.5%.

[ image: The World Trade Organisation has been without a leader since April]
The World Trade Organisation has been without a leader since April
The danger is that when times get tough at home, the level of foreign imports becomes a touchy subject.

Countries want to protect their own and free trade can start to suffer.

There has been a surge in the number of cases brought alleging unfair cheap imports and market access.

However the leaderless WTO appears poorly placed to stamp its authority - at a time when its authority is needed more than ever.

Trade relations between the European Union and America are at a particularly low ebb with the WTO caught in the middle of a tug-of-war between the two sides over beef, bananas and so-called "hush-kits" to cut the noise of ageing US planes travelling transatlantic routes.

America is under pressure from Congress to curtail its burgeoning trade deficit and is waging other trade battles, for example with South Korea over market access and Japan over steel exports.

Trade talks in limbo

However, until the identity of the new WTO chief is decided, preparations for November's crucial WTO summit in Seattle remain in a state of limbo.

[ image: The race is on to replace Renato Ruggiero at the helm of the World Trade Organisation]
The race is on to replace Renato Ruggiero at the helm of the World Trade Organisation
The Seattle summit - at ministerial level - is supposed to be the launchpad for the first global trade negotiations since the marathon eight-year Uruguay round ended in 1994.

The talks - dubbed the millennium round - are expected to last three years.

But divisions are already appearing.

At the recent two-day meeting in Tokyo of trade ministers from Canada, the European Union, Japan and the United States, some of the groundwork for the talks was laid, but many key pillars remain undecided.

There is still no agreement over China's entry into the WTO - although all sides pledged their commitment to overcoming the remaining hurdles.

Ministers also failed to agree whether one single undertaking should be signed at the end of the talks - as the Japanese and EU want - or whether deals should be signed as each dispute is resolved, as the Americans want.

The three trade ministers and the EU's trade representative - who between them look after two-thirds of all world trade - did agree that industrial tariffs should be included in the next round of negotiations.

Until now the agenda for the next round has included only agriculture and services.

They also agreed to work towards the creation of a set of WTO investment rules.

But with so many issues - China, a talks agenda, the WTO leadership - left unresolved, the need for the quick appointment of a new director general to take over the helm at the WTO has never been greater.

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