The man who built the WTO: an interview with Peter Sutherland

About the author
Peter Sutherland is chairman of Goldman Sachs and chairman of the board of BP. A barrister by profession, he was previously Attorney General for Ireland, and European Commissioner for Competition Policy. He was director-general of GATT (the General Agreement on Tariffs and Trade) and its successor, the WTO (World Trade Organisation).

The Doha round and Cancún

openDemocracy: In the interview we published with you and Shirley Williams in November 2001, you were critical of those you called ‘anti-globalisers’. You said it was rubbish to think that those involved in building the World Trade Organisation (WTO) were not concerned with poverty and inequality. You argued that the important thing is to build a framework for encouraging trade and that greater equality and wealth for everybody would come from this.

In your recent Tacitus lecture you re-emphasised these points and looked back positively over the growth and development that has taken place during the last twenty years. But you also warned that the Doha Development round would be a crucial test for multilateralism. That was in April 2003. How do you feel now after the failure of the round at Cancún?

Peter Sutherland: What happened in Cancún was very unfortunate and a serious setback, but it was not a tragedy. It was the kind of event experienced in virtually every trade round since the beginning of trade rounds. It can be attributed to different factors, none of which in my view are terminal to the round itself, let alone the institution.

I don’t want to indulge in the blame game. Virtually everybody involved carries responsibility for the way the Cancún meeting failed. Few if any come out of it unblemished. There should have been an agreement and it was tantalisingly close. Key participants, on both the north and the south side of the economic divide, probably look back with some regret and believe that Cancún, had it been approached effectively, could have succeeded.

The reality is that, despite significant progress, expectations were too high and both developing and developed countries carry a responsibility for this. But the fundamental rationale for the Doha round is even more apparent today than it was in Cancún. The spectre of alternative scenarios in global trade and trade strategy is opening before our eyes. This must cause considerable concern, particularly, I would say, for developing countries. An ominous post-Cancún rhetoric is emerging from some quarters in the developed world. It proposes alternative strategies to multilateralism in terms of bilateralism, regionalism, and unilateralism.

In the United States, two presidential candidates on the Democratic side, Dick Gephardt and Howard Dean, seem to be taking pretty nakedly protectionist positions. In Europe, the initial European Union position taken by Pascal Lamy was worrying because it seemed to query the decades-old commitment of the EU – at least in principle – to multilateralism. Actually this seems to have been no more than a tactical decision because Pascal Lamy, whom I greatly respect, has just reiterated the EU’s commitment to multilateralism.

Another worrying aspect is a certain fatigue in the quarters which normally support multilateralism, in industry and services whose voices are much less forceful or interested than they were during the latter stages of the Uruguay round in 1986.

There are other dangers as well, such as aspects of the debate in the United States about China, and about the alleged transfer of jobs from rich countries to poor countries more generally. And in Britain there have been voices raised with regard to jobs shifting to call centres in India. These all reflect a failure to recognise that while the great bulk of the effects of globalisation are positive for all concerned, there will be times when there will be transfers of opportunity to developing countries, which is exactly what should happen.

All this may only be a game of brinkmanship with regard to multilateralism, but if so it is peculiarly dangerous at this time. The US trade deficit is especially worrying because it can fuel a negativism towards opening its market. This would be quite contrary to the overall position taken by the US in trade negotiations in the past, whatever the setbacks from time to time.

Another concern is the renewal of proposals for a transatlantic free market, which implies a particularly privileged access between two markets that might be denied to others, breaching the most favoured nation principle, which is fundamental to the multilateral system.

The major players – and I include Brazil, India and China amongst them – must now play a positive and constructive role in getting things going again. In my experience, trade negotiations succeed through a conjuncture of individuals representing particular countries coming together with constructive agendas. Does that combination exist at the moment? Certainly Bob Zoellick and Pascal Lamy are both in my view basically constructive rather than negative on multilateral trade.

Peter Sutherland: architect of globalisation

Peter Sutherland was Ireland’s youngest ever Attorney-General (Senior Legal Officer) from 1981–84. He went on to be the Irish member of the European Commission (EC), the executive of the European Union (EU), from 1985–89, at which he was responsible for competition policy. He was widely praised for his success in carrying out this brief and at the end of his term returned to Ireland to become AIB chairman as well as director of a number of other companies including British Petroleum.

In June 1993 he became Director-General of the General Agreement of Tariffs and Trade (GATT), a body created after the second world war in 1947 along with the World Bank and International Monetary Fund, as a forum for negotiation in international trade. At the time Sutherland became Director General, GATT was close to deadlock in what was known as the Uruguay round.

The European Union and the US, in particular, were at loggerheads with each other and with developing nations over terms of international trade and access to markets. (Many trade theorists believe that, when properly regulated, free trade – that is to say, trade between nations who do not impose charges such as tariffs – can make a decisive contribution to economic development). Peter Sutherland is widely credited with devising compromise acceptable to diverse interests at the final meeting of GATT in Marrakech, Morocco, 1994.

The agreement made possible the creation of the World Trade Organisation (WTO), a new international organisation intended to sit as a permanent body available to adjudicate and settle trade disputes between nations. Sutherland was appointed its first Director General. When he left that position in 1995 he rejoined the board of BP, an oil company based in London, as deputy-director. Later that year he became Chairman and Managing Director of Goldman Sachs International, a financial services firm based in New York. In 1997 he became chairman of BP.

openDemocracy: So you are not saying that the greatest threat to the WTO process comes from the rich countries?

Peter Sutherland: No, I’m not saying that. There is at least as big a threat coming from continued protectionism in the developing world. Yes, some of the positions of some developing countries in the current round have been less than satisfactory. I don’t intend to go into the detail as to who. But there are also developing countries who pound the table with aggravation at alleged protectionism yet remain very much sinners themselves and are holding back their own development. Both are unfortunate. You will only ever get agreement by having a balance.

So, for example, I don’t think a significant part of the so-called Singapore Issues should ever have been included in the round. It was a major mistake which has contaminated debate ever since. We need a separate regime for investment. Developing countries badly need to stimulate more transfer of capital to them.

Even if every rich country in the world was meeting the United Nations target of 0.7-1% of its GDP in aid to the poorest countries, it would still be a small fraction of what is needed to provide the essential tools for economic development. As China demonstrated through its $50 billion-plus investment in 2003, capital can and will come from inward investment and will generate growth.

Agriculture, protectionism, investment: the post-Cancún challenge

openDemocracy: Many critics of the world trade process come back to what they see as the hypocrisy of the European Union and the United States on agriculture.

Peter Sutherland: There are very few saints in world trade, particularly when it comes to agriculture. I have been very critical of the EU’s Common Agricultural Policy (CAP). But I am a pragmatist and I am convinced you have got to look, not at what one party’s position is at any time, but at where they are coming from, and why, and therefore whether there is a positive dynamic you can work with.

Without question, the CAP has significant flaws. It also has had seriously damaging effects on developing countries. None of that can be denied. But one must also recognise that it has been a political cornerstone for a number of countries in the EU which had relatively large peasant farming communities dependent on its support system, and it was a key foundation-stone for the creation of the EU in the first place.

I’m not condoning the length of time the EU is taking to move forward. But let’s be realistic. The reforms adopted by the EU in mid-2003 are a real move towards de-linking subsidy and production. Of course the reforms will have to bite deeper. But there certainly was a more positive environment for CAP reform than many have given credit for.

There are real issues here. It’s not politically achievable just to wipe out the Common Agricultural Policy. I want to repeat that there must be the prospect that those markets currently overwhelmed by EU subsidies on agriculture will allow competitive advantages to poorer farmers. Of course that’s true. But this also points to the need to diminish the high levels of agricultural support outside the European Union – in Japan, India, Norway, Switzerland and the United States. We have to be balanced and we have to be fair. At the same time, we have to be realistic. This is an election year in the US and you won’t roll back the 2002 US Farm Security and Rural Investment Act between now and the presidential election in November.

So while I sympathise with the calls for faster movement, extreme forms of attack don’t get a grip on current realities and won’t help matters.

openDemocracy: But how do you explain what’s gone wrong? You are not suggesting that what’s gone wrong is as a result of the protest movement?

Peter Sutherland: No, although elements of the NGO community have, through excessive criticism, excited some unconstructive positions in the negotiations in Cancún that might not have otherwise been taken. I have great respect for many NGOs. They are a very necessary and important part of this debate. But some of them formed a lunatic fringe that launched the attacks against the WTO as an institution, and contaminated much of the debate. Most of these have recanted now, but not before time.

openDemocracy: Why then has progress towards multilateral agreement been stymied?

Peter Sutherland: I think the negotiation strategies adopted by some countries were a major factor in what went wrong at Cancún. Compromise positions were put forward too late or did not even get onto the table. This is a question of timing. There was a failure to get the movement needed in advance of a meeting of this kind, which is over almost before you realise it.

When I first became director-general of the GATT I made it quite clear that I wouldn’t have any meeting of trade ministers until negotiations were completed and we had everything signed up. I didn’t think there was much point in bringing 100 ministers together in Marrakech to negotiate. They came to sign something that had already been agreed. The actual work had been done beforehand in Geneva.

But, also, at the time, if we had had one senior trade negotiator or ambassador who was determined to obstruct or ruin the Uruguay round, they would have succeeded, irrespective of what I or anybody else did. That’s why I talk about individuals. We were lucky, for example, that we had from India and Brazil two very good negotiators who certainly didn’t give away anything. I think in earlier days there were ambassadors from both of those developing countries who might not have reached agreement, as also past trade negotiators from the European Union or from the United States might not have concluded an agreement. As I am not currently involved in the Doha negotiating process I do not know whether the right constellation of negotiators exist today. I am merely pointing out here that having constructive engagement from all the key negotiators is crucial. Individuals do matter.

Failure at Cancún was not inevitable. People can make mistakes. I think that the whole thing fell apart through miscalculation more really than anything else.

The Free Trade Area of the Americas

openDemocracy: At the Miami summit on the Free Trade Area of the Americas (FTAA) in November 2003, the parties avoided tackling some of the biggest problems and instead agreed to a general statement on matters of principle. Would this be a better approach?

Peter Sutherland: I’m not a believer in seeking ambiguity or avoiding substantive issues with the view to concluding agreements later. It returns to haunt you afterwards. You have to face up to the painstaking work of actually putting together a substantive agreement.

Paradoxically, it’s always more difficult to get an agreement between one major player in a region and a lot of other countries which are much smaller, as in the Free Trade Area of the Americas. There is an imbalance inherent in the dialogue itself. This is why a multilateral forum like the WTO is more likely to achieve a satisfactory conclusion, even though it seems much more complicated.

At the end of the Uruguay round the significant battle was between Europe and the United States. This proved to some, at least, of the developing countries that the WTO wasn’t a display of dominance by the “first world” over the “third world”: Europe and the US were at each other’s throats over agriculture, media and other issues. Here, the EU speaking with a single voice proved to be the most important dimension of all, as it was able to face up to the US; without this, the Uruguay round would never have been concluded.

openDemocracy: Weren’t the group of twenty-two developing countries (G22) at Cancún taking a step towards just this kind of coordination?

Peter Sutherland: In many ways the articulation of joint positions by the developing countries is a very good thing. But let’s not fool ourselves. Within that group there are a number with highly protectionist regimes as well as those who are more liberal on trade. So it’s a mixed group with somewhat different objectives. All want to open up the developed world more. But it’s important to note that the average tariffs and even non-tariff barriers for most products in the developed world are very low indeed compared to where we were before the Uruguay round.

How can the WTO be reformed?

openDemocracy: You’re chairing a committee looking into reform of the WTO. In her interview with openDemocracy, Mary Robinson says she hopes it will make recommendations on how the structure of the WTO can accommodate greater participation by all governments, not just the strong ones, and – crucially, in her view – civil society. Doesn’t this represent a challenge to the way the WTO is organised, not least as a body solely responsible to nation-states?

Peter Sutherland: Our consultative report will, first of all, be for the director-general. We’re just a pro-bono group appointed by the Director General who’re trying to put together some ideas, in a way that may reflect differing views, on the medium to long-term future of the WTO. We’re at a fairly early stage.

I subscribe to Mary’s hope. The WTO as an international organisation has very limited substance. Some member-states have been determined to maintain it as little more than a secretariat. The number of people working in the WTO is probably less than 300. This is a fraction of the number of people working in, for example, the Worldwide Fund for Nature. It’s tiny in comparison to the International Labour Organisation (ILO), the United Nations Conference on Trade and Development (UNCTAD) or virtually any of the other specialised agencies of the United Nations or the international community.

So to suggest that the organisation is not responsive to thousands of NGOs and their constituencies is absolutely true. The organisation cannot do more than a minimal amount in this regard. The key players in negotiations are the member-states. The WTO can try to facilitate their negotiations but it doesn’t even know the real positions of the member-states until they put them publicly on the table. It doesn’t influence enough the way that these develop because currently it often cannot do so.

I would like the WTO to be more proactive, to have a greater capacity for making a contribution. But to suggest that it can be the interlocutor for the NGOs is out of this world. The WTO’s proceedings and decisions are jealously guarded by the member-states. Its councils are generally chaired by the member states. The decisions taken by it are those of the member-states, and there are many different ones with very different views.

openDemocracy: But surely the WTO is also a powerful judicial force?

Peter Sutherland: The greatest achievement in the formation of the WTO was the creation of the adjudication process. I know very few people who have criticised the dispute resolution results – except, of course, those who have lost cases. But anyone who looks objectively at the decision-making processes will generally favour it. I think it’s been an enormous, amazing success in the development of multilateralism.

openDemocracy: But some of its decisions are taken secretly as in a private court.

Peter Sutherland: Sometimes the arguments are held in private. Sometimes there are commercial aspects. But governments that are unwilling to open up to public gaze for one reason or another are prepared to submit to an international judicial authority in the form of the WTO.

I’m not saying that there are no ways that this could or should be improved. That’s something that we will look at in what we’re doing. But you have to balance the argument. Let’s not go so wild in shaking the tree that we cause it to fall over.

openDemocracy: But Mary Robinson is trying to bring the values of human rights into trade negotiations, so that judgments are grounded, and seen to be grounded, in terms of their human impact.

Peter Sutherland: To my mind the development of the poorer countries is very much the concern of the WTO, but it’s a concern which is limited by its remit, which is to facilitate trade. Those of us who believe in global economic integration and the benign effects of trade think a multilateral system can help create equal opportunity and through equal opportunity the development of better conditions for the poor.

Many developing countries are particularly concerned about the protection of their own sovereignty in dealing with the political aspects of development. Workers’ rights or human rights are good examples. There is tremendous disagreement about drawing these directly into trade adjudication, and it’s not going to happen any time soon.

But I do think that Mary is advancing a more sophisticated argument as to how to influence trade liberalisation, and I think it’s a very interesting argument worth exploring.

openDemocracy: So are you against calls for a much more ambitious agenda for the WTO that takes environmental and social considerations into account?

Peter Sutherland: I’m a pragmatist who believes in concluding agreements that actually move us forward. For those who’ve been involved, as I was, in reaching agreements, one has to limit oneself to what is achievable. I’m a person who, in a world of my own making, would do things very differently. I would be in favour of more global governance rather than less so long as it is compatible with democratic legitimacy.

That is where I stand. I’m not in principle against any developments that further those goals. I am in favour, however, of being realistic in setting goals that can be achieved. What they are at any given moment is a product of the history of that time. What may come in the future will, I hope, be something greater.

I do think that the WTO was the greatest advance in multilateral governance since the Bretton Woods institutions were set up. We shouldn’t destroy it by having excessive ambition which cannot be realised.

A new landscape of global power – Brazil, Russia, India, China

openDemocracy: Won’t the WTO’s role and prospects be transformed by the rise of new economies such as China, India, Brazil and Russia?

Peter Sutherland: Absolutely, and I unreservedly welcome the prospect. I think the view held by some in the developed world that competition from these countries is fine as long as they don’t beat us in any area is absolutely contrary to the general good.

One of the greatest and most positive elements in our uncertain global economic climate at the moment is the phenomenal growth of China. I was involved in the negotiations for Chinese accession. At the time many questioned the growth figures coming from China, just as in a different context, they questioned whether we’d ever have a single currency in Europe. I’m sick to death of the naysayers and cynics, the people who constantly take the pessimistic view of the future and indeed of everybody other than themselves. The Chinese have proved that what they’re setting out to achieve has great substance, and it’s one of the bright spots in the global economic environment.

It may seem threatening to some, there are aspects of Chinese society with which one disagrees and there are serious grounds for criticism. That’s not the point. In terms of economic development, the integration of China into the global economy is an unqualified plus.

So also is the growth in India, although it is notable that its foreign direct investment is a fraction of China’s. It’s a country for which I have great fondness but for a time in the past it had an essentially protectionist agenda. India was over-regulated, and is still over-regulated in some respects and it has serious problems which it has to address to open its economy for the inward investment that could galvanise it to even greater growth rates than it has at the moment. It is however moving forward significantly in its liberalisation agenda.

As for Russia, well, look at where Russia was in 1998 with a collapsed economy, and look at it today. Its macroeconomic fundamentals are substantially better than those of many of its more developed western neighbours.

I have just come back from Moscow where I saw President Putin. Of course Russia has the advantage of high oil prices and it has natural resources, but it had a huge mountain to climb from where it was, and it is climbing that mountain rather well. There is a revolution underway in the internal management structures of its government towards a more coherent economic model. I myself would like to see Russia’s entry into the WTO as soon as possible. Currently it is set for the end of 2004. It’s far from clear that this will be achieved, but I think that it’s very important that it is.

openDemocracy: President Lula of Brazil has been going around the world to encourage trade between Brazil and other developing countries, not just in Latin America but in sub-Saharan Africa and most recently the Middle East.

Peter Sutherland: This reflects quite a different attitude to that which once prevailed in Brazil when they were so inward-looking and protectionist in their approach to issues of trade and globalisation, and the last thing they would have wanted was to stimulate this type of activity. Brazil is now essentially a positive and constructive force in trade negotiations.

It is quite startling, some of the growth in trade, for example between Brazil and China at the moment. But I don’t think it will ever be the answer. At the end of the day, it has to be an increase in trade between the developed world and the developing world.

Look at the claims made both for and against the North American Free Trade Agreement (Nafta), for example. In the last decade, there has been more trade between the United States and the Netherlands than between the US and Mexico. The talk about East Asia supplanting Europe as the major trading or investment partner for the US is nonsense. These ten years have seen the greatest transatlantic integration in both trade and investment in history, more than in the preceding hundred years. So no one should think that we’re suddenly moving into a world where this old continent here can be written off.

Incidentally, in terms of productivity Europe achieves more per man hour worked than the United States but Europeans simply don’t work as hard, and a lower proportion are employed. Anybody who writes off the EU, or sees a sort of mystical future where trade between developing countries replaces that of the developed world, is living in cloud-cuckoo land.

The United States: complexity, not caricature

openDemocracy: And how about the American attitude to the rise of these powers? There certainly seems to be a reluctance to accept the rise of serious competitors.

Peter Sutherland: If there is such a mentality, and I’m sure there are some influential people in the United States who possess it, it’s entirely misplaced. It’s contrary to my perception of the development of mankind, and it’s based on a form of nationalism which is contrary to the sort of internationalism which I believe in.

But I don’t agree that it is a prevailing view in the United States. I think one can caricature Americans. The reality, as the recent Pew Research Center analyses of public opinion showed, is that most of them want less independence in foreign policy matters and more dependence on the transatlantic relationship.

There is nothing new about differences within the US on this. Woodrow Wilson conceived the League of Nations and the Americans wouldn’t join. US leaders created the Bretton Woods institutions and yet they caused the collapse of the idea of an International Trade Organisation which would have been the WTO decades earlier than it came into existence. So the United States, like everywhere else, is a mixture of people and attitudes. I don’t think one can caricature the US or accept the simplicities of, say, Robert Kagan’s theory – that Europeans are as from Venus and Americans from Mars. I just don’t see the world that way.

You have political regimes that change because they’re voted out of office or because different players in key positions have divergent ideas. For the moment at least it is true that there is significant unilateralist flavour in US foreign policy than in earlier times. I regret this, for I believe in a multilateral approach and in multilateral institutions. They don’t always work but they are the best thing we’ve got.

The global governance dialogue

openDemocracy: You have helped the development of the World Economic Forum at Davos and attend regularly. Would you ever go to the World Social Forum, meeting this year at Mumbai, if you were asked?

Peter Sutherland: I’ve always believed in dialogue. Forums such as Davos or Mumbai serve a real purpose. Issues such as those we are talking about will be on the agenda of both, and that’s as it should be. But I prefer integrated dialogue which addresses the real problem, to partisan position-taking that fails to recognise both sides of an argument. This is where international institutions come into play and why they’re very important, because they bring, or should bring, a reality to debates that is absent from the self-serving positions of both extremes. Of course I would be just as interested in hearing the views of participants in the World Social Forum as in the WEF.

openDemocracy: The most important of these international institutions, the United Nations, isn’t the most brilliant arena for rational debate which brings both sides to the table.

Peter Sutherland: It has significant failings, but that doesn’t mean you should disregard it – you have to make it work better.

openDemocracy: There are different cultures within the permanent body of the United Nations – for example, a general assembly where people see themselves as representatives of a nation-state, alongside dedicated staff in other areas committed to, say, nation-building or disease control who are international in their attitudes.

Peter Sutherland: I absolutely agree – and from a whole range of my different experiences. The professional international civil servant working to agreed principles and having powers of initiative is the crucial step for international governance.

The greatest example by far of how this can work has been the European Commission. It is the most important element in the development of structures of international governance in Europe because it is given powers under treaties.

Contrary to much media rubbish, the European Commission has democratic legitimacy thanks to the constitutional powers it has been entrusted with. It has powers of initiative and implementation, to propose and to play a role of management and execution. The Commission is the greatest advance in international integration in structural terms that has ever occurred, and the example of the European Union has been a key factor in the development of the ideas that underpin aspects of multilateral trading system such as the WTO.

We borrowed some of its ideas and principles when we built the WTO. We should be borrowing more. Secretariats can provide an objectivity and an acceptability in global terms which transcends anything else. The more power that Kofi Annan and his successors can have to maintain objective positions and speak on behalf of the global community, as defined by the UN charter and the fundamental statutes, the better. That’s exactly the process of global governance I approve of and think we should be moving towards.