With a New Chief, the WTO Aims for a Return to Relevance

World Politics Review, 09.03.2021
Kimberly Ann Elliott, académica (George Washington University-Institute for International Economic Policy y Center for Global Development

The new director-general of the World Trade Organization, Ngozi Okonjo-Iweala. (Keystone/Fabrice Coffrini/AP)

The World Trade Organization made history last month when its members chose Ngozi Okonjo-Iweala as director-general, the first woman and first African to hold that position. A former Nigerian finance minister and senior World Bank official, Okonjo-Iweala enjoyed near-unanimous support, but her candidacy had been stalled by opposition from the Trump administration. One of President Joe Biden’s early actions after taking office in January, however, was to reverse Donald Trump’s veto and join the consensus behind her appointment. That, along with Biden’s overall preference for multilateral cooperation over unilateralism, opens space for the WTO to get out of the cul de sac that Trump had pushed it into.

For her part, Okonjo-Iweala has signaled a willingness to break the mold. “It cannot be business as usual,” she declared on her first day in office last week. “We have to change our approach from debate and rounds of questions to delivering results.” But big challenges remain for the WTO, and the road to renewed relevance will not be smooth.

The organization’s problems have been building for years. For starters, many analysts have pointed out that WTO rules are ill-equipped to address China’s state-led industrial policies, which helped it to become the world’s top exporter of goods while maintaining a highly uneven playing field for foreign firms in its domestic markets. Yet negotiations to update international trade rules have been paralyzed by sharp disagreements between industrialized and developing countries over how much the latter should open their markets.

On top of that acrimonious debate came Trump’s aggressively unilateral approach to trade, which might have broken the organization completely had he been reelected. His administration imposed a range of tariffs on Chinese and other imports without waiting for WTO authorization and blocked appointments to the WTO appellate body that resolves trade disputes. The latter move eventually brought the one part of the WTO that had been working relatively well to a grinding halt. Trump’s trade representative, Robert Lighthizer, shared the president’s skepticism of the WTO; in an exit interview with the Financial Times in January, he urged the Biden administration to continue to block Okonjo-Iweala’s appointment, arguing she had “no experience in trade at all.”

By quickly reversing the Trump administration’s veto, the Biden administration sent a strong signal of its commitment to a more multilateral approach to trade. Okonjo-Iweala is also getting some early help from the European Union, which recently released a new trade strategy paper with proposals to reform the WTO’s appellate body and address long-standing frictions over the “special and differential treatment” that the rules grant to self-declared “developing countries”—even large ones like China and India, and relatively rich ones like South Korea. That gives her something to build on in addressing those issues.

But Okonjo-Iweala—who has extensive experience grappling with powerful competing interests during her combined seven years as finance minister in Nigeria—faces a gargantuan task in navigating the implications of the growing U.S.-China rivalry and in trying to balance the competing demands of 164 member countries that are at vastly different levels of development. The lengthy statement she released in mid-February after being appointed to the top job underscores the breadth and complexity of the challenges she will have to manage: addressing the COVID-19 pandemic while avoiding protectionism and “vaccine nationalism”; concluding the WTO’s long-running negotiations over fisheries subsidies; reforming the dispute settlement system; and updating the rules in new areas, such as e-commerce and the digital economy, which didn’t exist when the last round of multilateral trade negotiations concluded in the early 1990s. She also faces a range of old and still divisive issues where the existing rules continue to be inadequate, most notably agricultural and industrial subsidies, as well as the role of state-owned enterprises.

While the Biden administration will clearly be more supportive of the WTO and of multilateralism than the Trump administration, trade is not going to be a priority while the United States—and the world—remains in the throes of the pandemic and economic recovery remains fragile. Nor is the Biden administration’s support for the WTO unconditional. Like his predecessors, including his former boss Barack Obama, Biden has concerns about overreach by the WTO appellate body. There is also strong bipartisan support in Congress for WTO reform.

Indeed, the new administration’s early statements suggest a cautious approach to trade. The focus has been primarily on strengthening supply chain resilience, including by expanding the use of “Buy American” policies to bolster domestic production of critical items. And in response to a statement from the EU’s top trade official urging Biden to move quickly on restarting the process of appointing judges to the appellate body, a U.S. Trade Representative spokesperson made clear that the administration would take its time to address the “long-standing, bipartisan concerns” around the WTO’s dispute settlement process.

As global trade policy eventually moves beyond pressing issues related to the pandemic response and supply chains, the focus will likely return to China, where Biden has been clear that he thinks Trump’s go-it-alone tactics failed. But the signals so far from Biden and his aides suggest that while their approach will be more multilateral, it will also be primarily ad hoc, joining with like-minded countries to confront China—and not relying on the WTO, where gaps in the rules leave many Chinese industrial policies untouched. Katherine Tai, Biden’s nominee for U.S. trade representative, was asked about the administration’s plans for China policy at her Senate confirmation hearing, but she notably did not mention the WTO in her response.

It also remains unclear when or even if the new administration will lift Trump’s tariffs on steel and aluminum imports, as well as those on a wide array of Chinese products. That is a problem for American importers and consumers, as well as exporters subject to retaliatory tariffs in affected countries. As long as the tariffs remain in place, they are also violations of America’s commitments under WTO rules, and thus a continuing challenge to the organization’s credibility.

The challenges facing Okonjo-Iweala don’t end in Washington, as U.S. support and leadership are necessary, but not sufficient, conditions for the WTO to move forward. In trying to broker compromises on fisheries subsidies, agricultural subsidies and e-commerce, Okonjo-Iweala will have to get India and other developing countries on board in accepting meaningful rules. Moreover, the worldwide backlash against globalization predates Trump, and the coronavirus pandemic has only made it worse.

A major immediate issue facing the new director-general is how to respond to demands from India, South Africa and a number of other developing countries to waive rules protecting intellectual property and, supposedly, make it easier for member countries to impose compulsory licensing for vaccines and other drugs to treat COVID-19. That proposal has encountered strong resistance from pharmaceutical companies, as well as the U.S., U.K. and Swiss governments, which argue that a waiver would undermine incentives for innovation in the face of a future pandemic. It is also not clear that intellectual property protection is the primary barrier to vaccine access in developing countries.

In her statement after being appointed, Okonjo-Iweala tried to straddle the divide over intellectual property and vaccines access. “There should be a ‘third way’ to broaden access through facilitating technology transfer within the framework of multilateral rules,” she wrote. That would “encourage research and innovation while at the same time allowing licensing agreements that help scale up manufacturing of medical products.” She also noted that AstraZeneca has already licensed production of its COVID-19 vaccines in several countries, and that Johnson & Johnson may do the same.

Okonjo-Iweala is a prominent economist who demonstrated remarkable political skills overseeing economic policy in Nigeria, and who rose to the No. 2 position at the World Bank. She may not have direct trade experience, as Lighthizer insisted the director-general should, but she is as qualified as any leader the WTO has had. Still, whether she—or anyone—can “save” the WTO is ultimately up to its members.

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