No BAU at the WTO

The World Trade Organisation has unanimously selected Dr Ngozi Okonjo-Iweala as its new Director-General, after months of uncertainty following a veto from the now-departed Trump Administration.  The appointment of Dr Okonjo-Iweala, as the first woman and first African in the role, represents a new era at the WTO – but comes at a time when the organisation is struggling with COVID challenges, geopolitical tensions and its very credibility.

The foundation and beating heart of the global trade rules system, the WTO has helped reduce poverty, create prosperity and put in place a more fair and level playing field for all, including small states such as New Zealand.  However the 164-strong membership has faced a series of significant political and economic challenges in recent years, including their collective failure to progress the core negotiating agenda in the ‘Doha Round’, challenges to the integrity of global trade rules through the turmoil of the Trade War, and the slow strangulation of the WTO ‘Appellate Body’, akin to the supreme court for trade disputes, by the US.

New DG: crucial to finding common ground

It is accordingly very welcome news that WTO members have final been able to reach consensus on a new Director-General – an outcome unlocked by the new Biden Administration, which has pledged its full support.  The DG position has limited powers when it comes to substance, but plays a crucial role in helping to create the right enabling environment for progress and ultimately agreement on common ground among the membership.   New Zealand Ambassador David Walker, who serves as Chair of the WTO’s General Council, led the selection process and affirmed Dr Okonjo-Iweala in the role at the General Council on 16 February, ahead of her tenure commencing on 1 March.

“Dr Okonjo-Iweala’s appointment is historic.  It marks the first time that the WTO has had a woman at the helm, and the first time it has had an African leader: this is not business as usual – in more ways than one.”

The new DG has a CV tailor-made for the current challenges of the job, including training as an economist, two terms as Nigeria’s Finance Minister, 25 years at the World Bank, and most recently Chair of the Global Alliance for Vaccines and Immunization.    She has an impressive track-record on navigating difficult waters.  She will need it.

Making history …and facing some mighty challenges

Dr Okonjo-Iweala’s appointment is historic.  It marks the first time that the WTO has had a woman at the helm, and the first time it has had an African leader: this is not business as usual – in more ways than one.  The new DG faces a multi-pronged challenge.  First order of business is to help rebuild confidence and trust among the membership, and find a way to re-establish the organisation’s credibility, as well as shoring up the broader ‘social licence’ for progressing the multilateral trade agenda.  These are not small tasks.

Trade is part of the COVID solution; let’s not make it the problem

An equally challenging but imperative early priority will be getting WTO members and the system match-fit for the COVID landscape.  Over the last year, the membership has indulged in a swathe of new export restrictions on essential medical equipment, pharmaceuticals, personal protective gear, and even food supplies; some have been removed, but the temptation for intervention remains. 

It will be crucial to avoid a repeat of such policies when it comes to vaccines: cooperation, collaboration and trade can and must play a key role in vaccine production and distribution around the world.  Putting in place “export authorisation requirements”, such as those recently introduced by the European Commission, send entirely the wrong signal.  To put it another way, He waka eke noa – we are all in this together, speed is of the essence, and none of us will be free of COVID-19 until we all are.

Encouraging WTO members to keep supply chains and trade flowing, and to avoid reaching for trade-distorting subsidies, will also be important: recent data shows that although there was a modest rebound in goods trade towards the end of last year, services trade is still deep in the doldrums (albeit with honourable mention going to computer services, romping in at a 9% growth rate in Q3 last year).  Protectionism and economic nationalism work against reviving economic growth.

The rest of the to-do list: revitalising structures, modernising, reforming

Another critical early step will be getting the Appellate Body back up and running; as we have written before, a functioning, fair dispute settlement system is critical for the small and developing players in the global economy, and will continue to be an important safeguard in the global trade architecture as countries look to rebuild their economies post-pandemic.

As to other early priorities, modernising the trade rules for the digital economy will help not only with the WTO’s credibility as a negotiating forum, but also in the achievement of inclusive and dynamic economic recovery; outcomes on fish subsidies and fossil fuel subsidy reform can likewise demonstrate that the WTO system is relevant and fit for purpose by delivering win/win solutions for trade and the environment.  

More broadly, there is strong pressure for a fresh look at subsidy rules and a host of other contentious issues potentially on the agenda, along with unfinished business from the Doha Round, notably deep cuts to distorting agriculture subsidies (not a theoretical concern, given that US farm subsidies are now at their highest level for 20 years).

Getting to yes at MC12

The new DG will need to bring together a package of the topics above for the membership to consider at the WTO Ministerial Meeting tentatively scheduled for the end of the year.   This is a steep challenge, and ultimately, success rests in the hands of the WTO members themselves.  But getting to yes would unquestionably be harder without the new DG in place.

This post was prepared by Stephanie Honey, Associate Director of the NZ International Business Forum.