Will Dr Ngozi Okonjo’s stint at WTO be as historic as her appointment?

While the leadership change in the US may be a shot in the arm for new WTO Chief Dr Ngozi Okonjo, she has to walk a tightrope on a number of urgent issues. Arguably, the priority for her would be to ensure widespread access to COVID-19 vaccination, revive the Dispute Settlement Mechanism and build consensus on reversing the tide of protectionism across member countries.

• Dr. Ngozi Okonjo will be creating history, as it will be for the first time that an African origin national and a female will be taking charge as Director General of WTO. We will highlight few challenges at WTO, which Dr. Okonjo will have to tackle during her term.
• Going by her views and opinion on bolstering international trade, it seems that she will play a vital role in further liberating the global trade and ostracizing the protectionist approach. She has urged developed nations to withdraw the trade restricted policies which are currently hurting the global trade flows.
• WTO is under considerable pressure of revamping its image as an unbiased trade regulator body. Negotiations on a comprehensive development agenda have foundered on disagreements over many attributes like protectionism, food security, imports substitution, global ecommerce policy, agricultural subsidies, fisheries subsidies and intellectual property rights.
• These are just few of the dreadlocks which has been addressed many a times but yet not concluded with any mutual agreement between economies. Others include standardization of Non-tariff measures based on CODEX Alimentarius recommendations. Henceforth, these remain the central point of discussion whose dreadlocks needs to be untangled. 

Source: WTO

After a devastating 2020, the year 2021 is bringing in new rays of hope, starting with the introduction of the COVID-19 vaccine. Furthermore, a new administration has taken up office in the US as well as the WTO recently. This has raised expectations that the multilateral trade body will now be able to move forward with a novel and more inclusive approach. Over the past couple of years, analysts had expressed concerns that the WTO had started losing its sanctity as an apex body for setting the rules of international trade and regulating them unbiasedly. 

It is true that over the past two & half decades of its existence, the WTO has facilitated in reducing barriers to trade in both goods and services and created a Dispute Resolution System, which cohorts say, has reduced the threat of trade wars. However, the institution is under considerable pressure to revamp its image as an unbiased trade regulator.

Negotiations on a comprehensive development agenda have floundered on disagreements over many attributes like protectionism, food security, imports substitution, global e-commerce policy, agricultural subsidies, fisheries subsidies and intellectual property rights, while members have increasingly turned to separate bilateral and regional free trade agreements to advance their trade interests; empirically challenging multilateral trade policy instruments like MFN principle and reciprocity.

New leadership, new outcomes?

Last week, Dr. Ngozi Okonjo Iweala, a Nigerian-American economist, was formally selected as the WTO chief and will resume officially from the first of March. Dr. Ngozi Okonjo will be creating history, as it will be for the first time that an African origin national and a female will be taking charge as Director General of WTO. However, will this lead to a fresh lease of life for the WTO.

In an interaction with India Business & Trade, Prof Manoj Pant, Director, Indian Institute of Foreign Trade, predicts that the Joe Biden administration could steer the world back towards climate protection. Also, he argues that since the US under Biden may not be too keen on bilateral agreements. Instead, it may show a preference for negotiating its trade interests via the WTO. He also sees Biden possibly reviving the TPP, which was a cherished project of former President Barack Obama.

While this may be a shot in the arm for Dr Okonjo, she would be well aware of the tough balancing act she has to achieve going forward, given the deepening divide across countries when it comes to trade liberalisation. As the head of a beleaguered trade body that is looking to revive its legitimacy in the post-WTO era, Dr Okonjo’s perspective and approach to global trade issues will be critical to the trajectory of post-COVID trade revival. Following are some of the key issues that she will have to address during her term.

Protectionism and Nationalist Approach

Going by her views and opinion on bolstering international trade, it seems that she will play a vital role in further liberalising global trade and ostracizing the protectionist approach. She has urged developed nations to withdraw the trade restrictive policies, which are currently hurting the global trade flows. We are familiar that the WTO’s trade indicators for 2020 revealed a secular weakening of world trade volumes for both merchandise and services in the aggregate.

It is inefficient enough from the trade point of view, that “social distancing” has shut down several of economies around the world as populations had to isolate themselves in their homes. That has resulted not only in a global recession and reduction of incomes because of sharp falloffs of both demand and supply, but also a decline in global trade flows across developed and developing economies. 

Added to this is the threat of growing protectionism. Compared to earlier years, there had been an increase in protectionism worldwide in the aftermath of the last G20 Leaders’ Summit. The WTO noted last year that global trade is continuing to face strong headwinds in 2020 after already growing more slowly than expected in 2018 and 2019. This was estimated before the existence of COVID 19.

In 2019, the volume of global trade of goods and services grew at its slowest pace in a decade, by just 1.5%. Global trade went into a recession by end-2018, exiting negative territory only in the fall of 2019. This means that, if not corrected with requisite trade policies, there will be a further decline. 

Food Security

The second issue which needs to be on the priority list is ensuring consensus on food security. Since 2013, WTO members have agreed to negotiate and find a permanent solution to the issue of public stockholding programmes for food security purposes, but nothing has been finalized yet. The last two WTO ministerial conference was unable to turn out a fruitful outcome. Under these programmes, developing countries purchase and stockpile food, and distribute it to people in need.

However, some of these programmes involve support to farmers and are therefore considered to distort trade. India and other developing nations seek amendment of laws on unilateral action by members on trade issues and resolution of the WTO’s dispute settlement system. This discussion will offer an opportunity to involve in a free and candid debate, with the expectation that it will lead to policy guidance on food security & subsidies in near future. If the situation of LDCs and developing countries is not ameliorated, ceteris paribus, all these jargons, convoluted WTO negotiations and heavy dictums becomes trivial at present and even in future.  

Fisheries Subsidies

Over the years, the marine products and resources have been over-exploited, leading to germane questions about fish trade, ecological sustainability and consumption patterns. Actually, there is a conflict of interest between top subsidy provider economies and other developing nations. China, the European Union (EU), USA, South Korea, and Japan are the five WTO members which account for 58% of all global fisheries subsidies. China is trying to modify its category of subsidies but not immediately ready to give it up. Basically, China is not obstructing the negotiation progress, but has made proposals that essentially would allow to them to keep all their subsidies or re-classify them under green box subsidy. The other big subsidizers too have made similar proposals that would essentially do the same thing but not prevent the subsidies. On the other hand, WTO is keen to bring binary policy, which will be different for developed and developing nations, but this approach of WTO is not supported by developed economies, as these developed economies demand the abeyance of marine subsidies for all economies without any differential treatment. So, this becomes a daunting task for newly selected WTO chief to resolve and bring consensus on policy discussion table. 

Keeping Appellate Body for Unbiased Trade Regulation

There is an urgent need to engage constructively to preserve the system and come up with constructive solutions, as last year Appellate Body of WTO got dysfunctional. The permanent arrangements to as an alternate to Appellate Body is needed which can continue the dispute resolving activities. Technical and legal know how is must for the representatives of developing countries and LDCs which will make their arguments and cases competitive. There has to be a mass scale capacity building in the said direction. Also, unbiasedly there can be equal nominees from developing countries and LDCs in the panels of ad hoc entity so that these members should not feel biased and sceptical. We expect, that this will be prioritized by WTO now because there is a signal of eschewing the protectionism sentiments from the first lady chief of WTO. 

These are just few of the dreadlocks which has been addressed many a times but yet not concluded with any mutual agreement between economies. Others include as mentioned above is global ecommerce policy, standardization of Non-tariff measures based on CODEX Alimentarius recommendations. Henceforth, these remain the central point of discussion were Dr Ngozi Okonjo needs to focus her energies. Arguably, though, her immediate priorities would be to ensure widespread access to COVID-19 vaccination, rebuild trust and curb the rise of protectionism, and revive the Dispute Settlement Mechanism that is at the core of WTO’s very relevance.