Ngozi Okonjo-Iweala’s remarkable achievement in being selected as the director-general of the World Trade Organisation (WTO) cannot be understated. She is the first African and first female to head the organisation.
Until the turn of the century, developing countries were barely allowed into the “Green Room” processes where the great powers brokered deals among themselves that were then foisted on the developing world. They were, in the language of economics, “price takers”. Having an African DG was unimaginable.
The director-general of the WTO is not a price-maker for the developing world, but the position carries heightened challenges for an organisation that may see the new DG as a price-broker of another sort – that of revising the organisation and bringing the major powers back to its negotiating rooms.
The WTO has not delivered on its main task, a multilateral trade deal, for nearly two decades, and the US-China trade conflict has brought important adjudicative processes at the WTO to a halt. The US has accused the WTO of unfair decisions and refused to appoint judges to the appellate body, bringing its work to a halt since last year.
Can Ngozi Okonjo-Iweala help revitalise and reform the WTO? The DG comes to the WTO with distinguished credentials and support from important quarters. She was trained as a development economist at Harvard and MIT. She was managing director of the World Bank, economic advisor to the president of Nigeria and, subsequently, the finance minister of Nigeria. Her 2014 book drawing upon lessons from Nigeria was called Reforming the Unreformable. The title also seems apt for a WTO that has been torn apart by trade conflicts.
Here are a few of Okonjo-Iweala’s challenges and the expertise she can bring to address them.
US-China trade conflict
The US-China trade war intensified during the Trump administration and threatens the very existence of the WTO. China’s share of global merchandise exports has more than doubled from 5% 20 years ago to nearly 13.6% in 2019, well ahead of the 9% share from the US. The US-China trade deficit on goods was $310bn in 2020, up from $83bn in 2001 when China joined the WTO.
The US has accused China of not playing by global trade rules and “stealing” its intellectual property. The Trump administration slapped down an escalating series of tariffs on Chinese goods, and China agreed in 2019 to buy $200bn of US goods in 2020 and 2021, and change its intellectual property rights practices. Estimates show that China is behind both commitments.
Okonjo-Iweala was careful not to critique China during her campaign to be DG, but knows that handling the US complaints against China will be the biggest part of her job. Okonjo-Iweala is a dual US-Nigerian citizen and garnered support from around the world, but the Trump administration vetoed her candidacy to favour the South Korean minister of trade Yoo Myung-hee, who was previously the country’s ambassador to China. The WTO delayed the selection process and in early February the Biden administration threw in its support for Okonjo-Iweala.
In many ways the trade war with China is bigger than the WTO, and its parameters shift in places away from Geneva. The end-2020 EU-China Investment Deal, signed just as the Biden administration was coming in, was seen as an acquiescence to China and revealed the EU’s inability to stand up to the emergent power.
But there are many things a rejuvenated WTO can undertake to bring confidence to the world trading system. Reforms of the dispute settlement body, and clarification of many rules that the US alleges unfairly advantage China would be a start. Despite the new EU-China deal, a worldwide coalition against China is not impossible.
To China’s advantage, the Trump administration was incapable of building such a coalition. A few directors-general in the past have moved the organisation to take bold measures. With support from the EU and the US, Okonjo-Iweala could manage the fallout of a global coalition against China, and has room to manoeuvre to bring greater conformity from China at the WTO.
Okonjo-Iweala’s unique strength may be in boosting the morale of the organisation’s highly competent staff who have seen their role reduced from being at the forefront of governance for the global economy to becoming a sideshow. Nevertheless, this staff is uniquely capable of thinking of the future of world trade and its crucial connection to the domestic political economies of its trading partners.
Trained as an economist and having occupied high policy positions, Okonjo-Iweala can lead the WTO out of its policy and intellectual insignificance. While WTO staff regularly note that they act on behalf of member states, the secretariat shapes research and initiatives that help international trade and move member states in key directions.
An example is the recent World Trade Report 2020. Subtitled Government Policies to Promote Innovation in the Digital Age, it takes seriously the challenge to world trade from new technologies and the rebirth of industrial policies.
The outgoing US trade representative Robert Lighthizer, a lawyer by training, remarked that Okonjo-Iweala did not understand world trade. The field is now wide open for Okonjo-Iweala to prove him wrong.
The WTO is about trade deals but has lost its ability to bring them about because of the domestic institutions that must support and ratify them. The director-general of the WTO cannot influence governments and trade bodies, but Okonjo-Iweala understands domestic obstacles both as an economist and a policymaker. Reforming the Unreformable showcases some important macroeconomic achievements but always with parallel adjustments in domestic institutions.
International trade theory no longer rests solely on a country’s unique endowment of resources, skills, and capital. It is about firms and how they gain global advantages. This opens the window to industrial policies that can allow firms to be innovative in the global economy. Lawyers do not understand such equations. Economists do.
Humility and toughness
It remains to be seen if Ngozi Okonjo-Iweala can translate her intellectual and policy acumen into rejuvenating the WTO. But there are three things that Okonjo-Iweala does not have to prove.
First, she brings her considerable moral force to an organisation known for horse-trading tariffs and non-tariff barriers. Along with US vice-president Kamala Harris, the new director-general of the WTO is one of the most powerful women in the world. That both are women of colour is hugely important but secondary to their leadership skills.
Second, Okonjo-Iweala’s commitment to the left-behinds of the developing world can provide the WTO with a sense of purpose. The WTO’s Doha development round – begun in 2001 – died years ago, unable to deliver its promises. Smart directives from the WTO can direct the developing world toward much-needed policy reforms that will encourage innovation and export diversification.
Third, Okonjo-Iweala knows how to build coalitions and may be a tough negotiator. She sits on the board of several international organisations, including the global vaccine alliance GAVI. Her nomination survived the Trump administration’s veto. Okonjo-Iweala has noted that she knows how to sleep on the cold floor. Anyone who grows up in the developing world understands that statement as equal part humility, equal part toughness.
JP Singh is professor of international commerce and policy at the Schar School of Policy and Government, George Mason University, USA, and Richard von Weizsäcker Fellow at the Robert Bosch Academy, Berlin.