On Monday, the World Trade Organization (WTO) got a new lease on life. Its 164 members elected former Nigerian Finance Minister Ngozi Okonjo-Iweala as director-general, filling a slot that had been vacant for half a year. Okonjo-Iweala has her work cut out for her: The WTO has struggled with drift and flirted with irrelevance, both of which were compounded by the open hostility of the Trump administration.
Trump’s departure from the White House allowed a new leader to take office in Geneva, but that is only a first step. Structural change is needed if the WTO is to work as intended — and that requires its members to get serious about reform, not only of the organization but of their own trade policies.
A world trade body was supposed to have been set up with other international economic organizations after World War II but it never happened. A broad framework, the General Agreement on Tariff and Trade (GATT), instead set rules for engagement. In 1994, consensus was reached on the need for a trade organization and the WTO commenced operations the next year. It had successes, in particular its dispute resolution mechanism which adjudicated trade fights between members.
The overall verdict is likely to be negative, however. For two decades, the WTO has labored — and failed — to conclude a round of global trade talks. There is a persistent and corrosive challenge to trade rules from digitalization and state capitalism, the most effective — and troubling — practitioner of which is China. And under Trump, the United States refused to agree to any nominees to fill vacancies on the appellate body, which crippled the dispute resolution mechanism.
Those failures prompted the previous director-general, Roberto Azevedo, to announce that he would resign a year early. A selection process identified Okonjo-Iweala as his successor; 163 WTO member governments agreed, and with good reason: She graduated from Harvard and got a doctorate in economics from the Massachusetts Institute of Technology (MIT); worked at the World Bank for 25 years, rising to managing director (the No. 2 position); served twice as Nigeria’s minister of finance and once as foreign minister; and is on the boards of Twitter, Standard Chartered Bank and the Global Alliance for Vaccines and Immunization (GAVI).
That resume wasn’t good enough for one member — the United States — and since the WTO operates by consensus, that was enough to block her selection. Former U.S. Trade Representative Robert Lighthizer objected because Okonjo-Iweala had “no experience in trade at all.” Instead, she was someone “from the World Bank who does development.”
Reportedly, the United States worried that she was a trade policy traditionalist who would not stand up to China. That she came from Africa was also seen as a liability because of a perception that African governments are increasingly beholden to Beijing as a result of its economic assistance. Apparently, a U.S. passport — she has dual citizenship — didn’t count for much.
That all changed last week when U.S. President Joe Biden announced his support for Okonjo-Iweala’s candidacy. His shift reflected a belief that the United States must be more engaged with multilateral institutions, that it needs to cooperate with allies and that Washington should be working with, rather than antagonizing, African governments. (This is another sign that Biden will take a new approach to Africa, following the president’s video appearance at the African Union meeting last week.)
The job won’t be all limousines and canapes. The head of the WTO, like counterparts at other international organizations, must balance two competing roles: serving its members and leading them. Those are especially hard to reconcile when changes needed to ensure the WTO’s effectiveness (and survival) threaten members’ prerogatives. For example, a dispute settlement mechanism can only work if members agree to be bound by its rulings, effectively ceding some of their sovereignty.
Okonjo-Iweala is no stranger to tough assignments. She fought entrenched interests while serving as Nigeria’s finance minister, managed to negotiate an $18 billion debt writeoff (which helped the country get its first sovereign debt rating) and tackled endemic corruption.
And while the stakes are high — some call the threat to the world trade body “existential” — leading the WTO is not likely to result in physical danger. That is unlike the fight against corruption in Nigeria, during which her mother was kidnapped (and subsequently released).
Throughout her career, she has been a trailblazer, often the first woman in her post. That will be the case at the WTO. Not surprisingly, Okonjo-Iweala wants the WTO to be “facilitating the greater participation of women in international trade, particularly in developing countries.”
She has two immediate tasks. One is getting the appellate body back up and running, which means the United States must end its obstructionism. That shouldn’t be too hard. The Trump administration complained that the board was unfair to the United States, but the record is otherwise.
According to one analysis, the United States has a higher win rate than any other major user of the WTO system, claiming victory in 78% of the complaints it files, compared to 69% for other members. At the Appellate Body, the U.S. gets rulings overturned in its favor 35% of the time, while other members only overturn 30% of decisions against the U.S. The U.S. should be backing that board, not shutting it down.
The second task is halting and rolling back the tide of protectionism that followed the COVID-19 outbreak. Okonjo-Iweala identified her first priority as restoring trade in goods needed to fight the pandemic. More than 100 governments have imposed export restrictions on essential equipment. “Global recovery cannot take place without trade,” she explained. “That is my number one.” As she rightly added, “no one is safe until everyone is safe.”
This is part of the effort to lower trade barriers in ways that benefit the world’s poorest citizens. WTO negotiations have tended to reflect developed country priorities. The Doha Development Round was launched in 2001 to remedy that tendency, but that emphasis quickly proved unsustainable. It will be a struggle, but Okonjo-Iweala must restore that orientation and rebuild momentum to ensure that trade enriches all the world’s citizens, especially the least advantaged.
Japan should be delighted by the change in the U.S. position. Japan’s reliance on trade and its support for a rules-based order make it an obvious beneficiary of a well-functioning WTO. Former Prime Minister Shinzo Abe championed the Data Free Flow with Trust, which could provide a framework for regulating data, the oil of the digital economy.
In corners of Tokyo’s central government district Kasumigaseki, there is relief that the U.S. ended its support for South Korean Trade Minister Yoo Myung-hee as WTO head, given the disputes between this country and South Korea that are being discussed at the WTO.
Tokyo has for the last decade pursued regional trade initiatives. With new leadership — and partners — at the WTO and in Washington, Japanese trade diplomats can shift their focus from regional trade initiatives to global reform. Japan’s experience along with its deep economic integration with China could allow it to help find the common ground that is essential for any substantive reform of WTO rules about state capitalism, one of the organization’s most vexing issues. Ultimately, however, success depends not on leadership at the WTO but that in national capitals.
Brad Glosserman is deputy director of and visiting professor at the Center for Rule-Making Strategies at Tama University as well as senior advisor (nonresident) at Pacific Forum. He is the author of “Peak Japan: The End of Great Ambitions” (Georgetown University Press, 2019).
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