By Kingsley Chiedu Moghalu*
"The WTO faces two major crises: an institutional crisis caused by the great-power rivalry between the United States and China, and a crisis of globalization – of which the WTO, as the overseer of global trade rules, is a major symbol."
The selection of the World Trade Organization’s next director-general has entered its final phase, with two candidates left in the running: Ngozi Okonjo-Iweala, a former Nigerian finance and economy minister and a former managing director of the World Bank, and Yoo Myung-hee, South Korea’s trade minister. In view of the WTO’s current challenges, Okonjo-Iweala is the better choice. The WTO faces two major crises: an institutional crisis caused by the great-power rivalry between the United States and China, and a crisis of globalization – of which the WTO, as the overseer of global trade rules, is a major symbol.
Sino-American trade tensions have paralyzed the organization, with the US blocking the appointment of new judges to its appellate body, which rules on trade disputes among member countries. Moreover, the COVID-19 crisis, another source of great-power tension, has prompted many firms to consider reshoring production in order to reduce their reliance on pandemic-hit Chinese suppliers, thus disrupting the global supply chains that are critical to world trade.
If chosen to head the WTO, Okonjo-Iweala has the leadership credentials to restore relevance to a broken organization. The WTO needs a tested global leader who is well-versed in the role of trade in development rather than a trade bureaucrat who might lack the broader view. With her experience at the World Bank (where the US and China are major players) and as a reformist finance minister in Nigeria, the Harvard and MIT-educated Okonjo-Iweala has a rare combination of political leadership skills and proven technocratic competence.
"It is time to make the WTO work for all member countries, not just for the great powers or countries whose global economic success was built on trade protectionism but now seek to "kick away the ladder."
The WTO needs a leader who can build consensus because the organization’s design doesn’t allow for top-down leadership. And Okonjo-Iweala has the gravitas to build bridges between the US and China, on the one hand, and between the WTO and Africa, on the other.
Despite being widely regarded as the world’s next frontier for investment and development, Africa is essentially an onlooker in the world trading system, accounting for a meager 2% of global exports. Although the continent is a growing market for the products of globalization, it does not benefit much from world trade, owing to its limited presence in globalized value chains. Instead, Africa trades mainly in agricultural goods and natural resources, whereas most world trade is in manufacturing and services. Africa needs to trade with the world on the same basis that other regions do, but the global trading system is keeping the continent underdeveloped. In particular, industrialized countries levy low tariffs on imports of African raw commodities but higher ones on finished African goods – higher, in fact, than for similar goods imported from other regions.
Today’s world trade is thus rigged against Africa. To help redress this imbalance, the WTO’s special and differential treatment provisions for least-developed countries should permit African governments to provide temporary tariff protection for infant domestic manufacturers within WTO rules. We could call such necessary and temporary measures “smart protectionism.” More generally, it is time to make the WTO work for all member countries, not just for the great powers or countries whose global economic success was built on trade protectionism but now seek to “kick away the ladder” for developing economies.
This structural rebalancing, which will expand the global sphere of prosperity, is best mediated by a WTO leader who is not from a major trading power. Furthermore, African countries currently do not use the WTO’s dispute-settlement system, because they are too weak to take on donor countries, whether Western powers or China. So, Chinese products, for example, have been “dumped” in African markets with no consequences. Okonjo-Iweala has the skills to build a consensus on giving Africa a fairer shake in the global trading system.
Much will also depend on the outcome of the US presidential election on November 3. President Donald Trump believes that China has gamed global trade to the detriment of US national interests, while China thinks America has rejected the WTO’s rules-based regime. Resolving this tension will require both powers to find the political will to compromise. It will also require a global development leader such as Okonjo-Iweala, who has served on international development commissions with current and former heads of government, to facilitate a rapprochement.
But regardless of who wins on November 3, the COVID-19 pandemic will inexorably weaken globalization as the US and other countries seek to shorten and localize supply chains. Meanwhile, the importance of world trade to human development will again become apparent when billions of doses of COVID-19 vaccines become available, most likely sometime in 2021. As chair of the board of Gavi, the Vaccine Alliance, Okonjo-Iweala has played an important leadership role in negotiations to make vaccines widely available in developing countries.
The WTO’s predecessor, the General Agreement on Tariffs and Trade, was originally conceived as part of the post-World War II Bretton Woods system, but weak domestic political support in the US delayed its establishment. The International Monetary Fund has been headed since its founding by Europeans, and the World Bank by Americans. This realpolitik blocked Okonjo-Iweala’s bid to lead the World Bank nearly a decade ago. It is past time to eliminate such a spoils system, and for the developing world finally to have its chance. And in Okonjo-Iweala, Nigeria, and the world have a highly competent candidate to lead the WTO.
*Kingsley Chiedu Moghalu, a former deputy governor of the Central Bank of Nigeria, is a senior fellow at the Council on Emerging Market Enterprises at The Fletcher School of Law and Diplomacy at Tufts University.