Resolving the long list of outstanding World Trade Organization issues will require members to show the sort of flexibility shown by the United States in unblocking the appointment of Ngozi Okonjo-Iweala as the institition’s new Director General.
It was a welcome return for dignified and mature international policy making. First came the news of the withdrawal of the Korean WTO DG candidate Yoo Myung-hee, followed a few hours later by the confirmation from the US of their support for Ngozi Okonjo-Iweala in that role. Compared to the dramas of the last few years in trade policy it was a reminder that it doesn’t have to be like that.
Before we consider the challenges to be faced by the new DG, assuming no further issues, let us pause for a moment and welcome good news. There had been fears that we would need to wait for the ratification of the new US Trade Representative Katherine Tai, or that the appointment would become bound up in yet another deal that failed to come to fruition. In one limited way, the new administration have shown we can do better. It also answers what was identified as the number one priority for the trade community in a previous column.
Very soon we will then be welcoming Dr Okonjo-Iweala formally to her new position. We know that the powers of a Director General are limited in a consensus based membership organisation, but new leadership is always an opportunity. Perhaps there were backroom deals to get us to this point, that would be entirely normal. It doesn’t prevent success in the future, indeed we hope for more deals.
Clearly the challenge for the WTO is significant as world trade politics currently lacks coherent direction. But rather than seek an absolute consensus which seems unlikely, perhaps the key is for members to find ways of disagreeing more constructively.
The WTO to-do list is long and difficult
The new DG inherits a major programme of work to overcome huge challenges across the major functions of the WTO. In each of negotiations, notifications, and dispute settlement there are problems overdue for resolution.
Some of the key negotiations needing to be brought to a conclusion regard fisheries subsidies, outstanding since 2001, the e-commerce plurilateral, to cover up the woeful lack of an international framework in this area, and domestic regulation in services. Concerns about notifications have been expressed for some years by the US, with the EU and others providing more recent support. Meanwhile the long standing US problems with the appellate body culminating in it to cease functioning needs to be urgently addressed. Then there are tensions involving China and state subsidies.
These are issues to be resolved even before any new attempts to liberalise trade. Overall, confidence is low that they can be resolved, for none is straightforward, there are many linkages, and several have been outstanding for many years. From the outside there is often a suggestion of a WTO simply going through the motions, a system too important to ignore, but not important enough to expend political capital fixing.
It is noticeable that in public appearances as a candidate for DG Okonjo-Iweala did not appear to express firm views on how the issues might be resolved. This seems to have been the right approach to being selected, and is probably also the right approach to resolution. For there has never been a shortage of technical ideas, rather it is the politics that has largely been the problem.
The WTO lacks direction
The fundamental problems of the WTO sit outside of Geneva. It has been many years since the WTO has been at the heart of trade policy developments. This arguably started with the rise of Free Trade Agreements from the late 1990s, followed by the growth of protectionist policies in so many countries after 2008, and culminating in the election of President Trump and UK’s decision to leave the EU.
Countries have been choosing their trade priorities and then their partners. Meanwhile actual global trade has evolved into complex value chains and regulatory conflicts that don’t particularly fit with the WTO world of tariffs, modes of service and soft regulatory disciplines. These mismatches need resolution.
Such though are the problems always facing global consensus organisations. There will always be differing priorities, gaps between rules and practice, and clashes between members. To a degree there will always be frustration, and members who distrust each other. The tensions between the US and China are not unprecedented, and of course the EU and US though technically allies have a long list of disagreements. In this sense perhaps the new age of populism nationalism only exacerbates an existing problem of how to find the leadership to achieve multilateral decisions.
Can members disagree and still fix issues?
If we return to the public statements of Okonjo-Iweala we see her attention on the politics and developing areas of agreement. As she said in an open session at Chatham House in London, “that’s my approach to life, focus on the positives.” Her challenge then is to be able to find enough positives to persuade 164 members to agree across a whole range of issues outlined above.
Another way to look at this is that she must stop disagreements from derailing progress. For in the past differing priorities were still overcome with agreements. It is arguable that the WTO now has too many members and too many differences for this to happen, but that is the challenge for the new DG. Can she isolate particular issues in which agreements can be found, and prevent everything from being stuck? Similarly can she ensure that as new challenges arise, not least climate change, that countries can take action while staying true to key principles.
There is never a shortage of proposals for unlocking progress. There are many well-wishers. The politics is intense, but there must be a way in which international agreement can be found. It is now the challenge of Dr Okonjo-Iweala to deliver, one she seems to recognise.
David Henig runs the column ‘Perspectives’ on the politics of global trade for Borderlex. He is also a UK director at the think tank ECIPE.