Dr Ngozi Okonjo-Iweala, the former finance minister of Nigeria, is the consensus choice to be the new director-general of the World Trade Organization. Her selection is a landmark. She would be the first woman, and the first African to assume office since the WTO came into existence 25 years ago. Despite the Trump administration’s hostility to the WTO, her appointment is a welcome acknowledgement that mutual trust and inclusive partnerships are critical to advancing an inclusive trading system.
This is a pivotal moment. The world is at risk of reversing hard-won progress on development goals. It is imperative that the new WTO leader defends multilateralism with fresh thinking. At the same time, actions are needed to address the challenges posed by the Covid-19 pandemic. Longer-term trade commitments will be critical for poverty, inequality, climate change and other urgent global priorities.
The WTO has a critical role in providing reliable and enforceable rules for international trade. However, while trade generates growth, inequality has risen within many countries, reflecting some of the challenges faced by the WTO when it comes to implementation of policy.
The WTO cannot intervene within the domestic economies but, like the Queen of England, the Director General can “advise, encourage and warn” member governments to pay greater attention to such distributive consequences of trade. The WTO chief candidate asserts this very need for an inclusive trading system – “The benefits of trade must be brought home and made real to the ordinary woman and man on the street.”
So, what should the key priorities for the incoming new chief of the WTO be? First, the new director-general needs to ensure that basic WTO reforms cover two main pillars: reviving negotiations and the dispute settlement (DS) mechanism. This includes rethinking whether all WTO agreements need to be approved by all members. Re-establishing the DS Body is an essential precursor to getting any other action agreed.
Unfortunately, both the EU and China, as well as the US have issues with the WTO’s Appellate Body. The US sees too much erosion of its sovereignty and not enough limits on China. The EU also wants to constrain China but places a high value on keeping a rule-based system, also China’s stated aim. On balance, emerging and less developed countries benefit more from WTO restraints placed on the big players than they lose from having to play by the rules too. They also have considerable leverage on the central principles where consensus will always be needed.
The second priority is to lead a broader charge for reviving inclusive and effective multilateralism. There have been high levels of dissatisfaction with the current multilateral trading system, but there is little to gain by either a collapse of the rules or an alternate system where the rules are set by small groups of hegemonic players.
The US has been falling out of love with pure multilateralism for many years and a new administration would still have to put America first, though the hope is that it would not see things in such a zero-sum way, and instead align with development issues at national and international policy levels. There can be no doubt that a further Trump term would kill the WTO.
In the absence of multilateral progress, it is important for the new Director-General to help members achieve a supportive balance between the WTO and regional initiatives. Africa, Asia, and Latin America are all exploring new steps outside the WTO. Plurilateral agreements between “likeminded” partners come under the auspices of the WTO and the new Director-General will have to consider a diplomatic strategy.
Developing countries may have to make difficult trade-offs between the constraints they would have by joining, e.g. the Trade in Services Agreement (TISA) against the ability to influence the outcome by taking part. Some analysts believe that the WTO Membership will have no appetite for new negotiations but there are many issues which necessitate the development of a new set of rules, notably for dealing with digital trade and e-commerce. There is also much unfinished business left over from the Doha Round.
The third priority area must be health, sustainability, and environmental matters. The practical matter of what/where the reforms in global intellectual property rules should be, and oversight of their implementation may be needed to allow the distribution of life saving vaccines with the coronavirus pandemic. An important debate is taking place on whether the current Covid-19 crisis means on the one hand a need to increase self-reliance or on the other hand a need to keep open routes to allow multiple sources of supply available.
Whatever is the outcome, this crisis should not lead to neglect of climate change and other environmental challenges. There is a consensus that trade rules to control Carbon Emissions are in principle consistent with the WTO system, but there are important issues about exactly how compatibility can be ensured without member states resorting to protectionism that could hurt less developed economies via spurious health or sustainability measures.
Finally, even where the WTO is not able to host negotiations, the Director-General can facilitate countries to understand different policy choices. WTO’s trade dialogues and technical assistance can be used as an important platform to inform and promote coherent policy responses to common challenges. Far sighted countries, poorer as well as richer, are promoting robust impact assessments of trade policy interventions to identify, monitor and mitigate risk and unintended consequences for women and excluded groups. Development programmes, based on South-South and triangular partnerships are also filling gaps, helping spur trade and tackle economic issues that have become more daunting due to the COVID-19 pandemic. These are having an impact, although data availability continues to constrain such assessments, especially for more comprehensive understanding of effects for minorities.
In summary, the new WTO Director-General will have a tough job at hand. She has no power to give orders to member states and instead must play the role of an honest broker. By acting as a dealmaker, the new chief of the WTO can help the members themselves save the WTO and, most importantly, lead the charge to realising a globally inclusive trading system.
Peter Holmes is a Fellow at the UKTPO (University of Sussex), and InterAnalysis
This blog is part of our blog series ‘Voices on Inclusive Trade’. Other blogs in this series:
- Can inclusive trade policy tackle multiple global challenges?
- Pathway to UK-India Free Trade Agreement: call for focused advocacy
- The future of UK-India trade and development – part one
- The future of UK-India trade and development – part two
- Trade, human rights and EU-India negotiations
- Can the RCEP strengthen global cooperation for trade, investment and sustainable development?
- Two developments for South-South trade and investments post Covid-19
- Amid shifting global trade dependencies, can the South provide greater certainty?
- Designing for Impact: South-South Trade and Investment
- Reflections on South-South co-operation on trade and investment ahead of BAPA40
For more on inclusive trade and development, Watch our Inclusive Trade event series.
