Okonjo-Iweala: We Have Seen Upsurge in Number of Countries Seeking to Join WTO

The Director General of the World Trade Organisation, Dr. Ngozi Okonjo-Iweala, in this interview on the sidelines of the just concluded Public Forum of the global trade body, in Geneva, Switzerland, stressed the urgent need for countries to ratify the fisheries subsidies agreement. Among other issues, she also argued that despite the rise in regional and bilateral trade agreements driven mostly by geo-political tensions, the multilateral trading system is still alive and thriving. Obinna Chima provides the excerpts:

OVERVIEW OF THE GLOBAL TRADING SYSTEM

We hear a lot of discussions on whether globalisation and the multilateral trading system is still working; whether we are now in ‘slowbalisation’ and that globalisation is gone.  Given the geopolitical tension we face; those questions are coming. So, people are also talking about governments making so many regional and bilateral trade agreements and asking if the multilateral trade agreement is still alive and what is the WTO doing. People tend to take the multilateral trading system for granted, but you need to know that 75 per cent of world trade today, takes place on WTO’s Most Favoured Nations (MFN) terms.

That means trade taking place on all the rules of the WTO. So, three quarter of world trade taking place on WTO’s platform. That is why we are not concerned, because the largest chunk of global trade is still taking place on WTO’s terms. The reason people don’t think about this is that they tend to take trade for granted. You know, trade is not something you think about all the time, it just happens. If we were to remove the WTO, then what would you have? There would be no agreements underpinning world trade and that may result to anarchy. So, the multilateral trading system is still strong and is still growing and makes up 75 per cent of world trade. The rest may be trade done under different terms bilateral or regional agreements, but it is a small fraction of global trade. Even the regional or bilateral trades are patterned after the WTO.

However, some of them are quite innovative and have added other chapters that you may not find at the WTO. If there is an agreement that has issues about gender for instance and how micro, small and medium enterprises can benefit them more, climate and the environment, that a little bit more advanced than what we have, then we think it will be exciting. That is because we can learn from that kind of agreements and integrate them. Similarly, those doing bilateral agreement can learn from us. The second point I will like make is that in spite of the challenges due to the war in Ukraine where supply chain looks vulnerable, and we have to admit those vulnerabilities. We saw that some supply chains are so concentrated that the products are produced in only a handful of countries. For instance, pharmaceuticals, vaccines.

We found that only 10 countries export 80 per cent of the vaccines used in the world, and that was why when the crunch came, there were many countries who were not making vaccines, exporting or producing and they had to wait. So, this is a concentrated supply chain. So, is the world really vulnerable with this concentration or should we de-concentrate and diversify supply chains. So, we saw those vulnerabilities, but the point is, at the end of the day, trade proved to be really resilient. The multilateral trading system proved resilient because after the initial hiccups, it was able to deliver vaccines and medicines for places where they were needed. Without the trading system, you could never have this exchange. Even as trade in other good decreased, trade in medical supplies increased during the pandemic. So, it shows that the trading system helps in making supplies to those who don’t have access to. Similarly, with food. The trading system has proven resilient, at a time when food inflation is high in the world.

Everywhere, food prices are volatile. Those countries who have had problems accessing products from places they normally import, let’s just take the war in Ukraine for instance, it meant that the Black Sea region has not been able to export wheat and countries have not been able to buy wheat, fertilizer and other products from that region. But with trade, what does that mean? If you cannot find in that region, you can check in another region. That is what trade is all about. It enables you to diversify supply sources. For instance, Ethiopia can now buy more wheat from the United States that is used to buy, because it couldn’t get from the region it was getting it from.  Europe, when they could not get the supply of energy from Russia, what did they do? They were able to go to other part of the world to get supplies. That is trade! But people don’t think it through, they just take it for granted. I think we need to bear all these in mind as we go into our 13^th Ministerial Conference (MC13). That is because there tend to be pessimism around trade.

EXPECTATIONS AHEAD OF 13^TH MINISTERIAL CONFERENCE (MC13)

I remember when I came, there were a lot of pessimism around MC12 and that it was not going to achieve anything. That was because in the MC11, there was nothing achieved and tracing back, there were many Ministerial Conferences that did not achieve anything. But, we were able to prove that wrong at the MC12. Members and ministers worked hard, negotiating round the clock and we were able to come out with agreements. I just want to say that going into the MC13, there is also an atmosphere of pessimism, the world is fragmenting and we found some evidence of some of that in our Global Trade Report. But, we are not at the point where our trading system is falling. And the point we are trying to make is that for our MC13, let’s concentrate on things that our multilateral trading system can deliver. What are the deliverables? So, going into MC13, we are looking at several things. The first is the entry into force of the first fishery subsidies agreement. Why is this important? It is good to negotiate and agree, but getting it to enter into force is even better and for the fishery subsidies agreement where we are seeing that our oceans are 50 per cent over-fished, there is an urgent need to ratify this agreement because the longer we wait, the more over-fishing there is. So, this is one reason why we are fighting very hard. So, far we have 43 members who have ratified, and we need about 110 members, so we have quite some work to do. But already, it is gathering pace. As you know, I have been going around trying to get this ratification. We all need to take responsibility because this is our ocean that is being depleted and our sustainability being affected. I think the next thing is to complete the second phase of fisheries subsidies negotiation. That part would look at the needs of developing companies for policy space and for special and differential treatment and how do we make sure that the development needs are factored into this second part. So, we hope to complete that. We know it is not going to be easy; it is very tough, but so far we are moving on.

REFORMS AT THE WTO

You must have heard about the reforms going on here, to make committees work better and for the WTO to function better. Those are going on well. We are compiling the reforms and many members and ambassadors made suggestions on things to do. Of course, we have some big reforms, such as the reform of the dispute settlement system, which we are trying to get done. At least, we are aiming to see that we deliver substantial part of that reform at MC13. That is a big deliverable. Again, it is not easy. You know this has been around for few years now, but we are working hard on it. It is being led here by the Deputy Permanent Representative from Guatemala. Agriculture is another one. This is one where we have not had much success in the past. But at the MC12, we were able to do something very exciting on food security, because agriculture has many aspects. We are talking about food security because we have high and volatile food prices in the world. WTO members made several good agreements, including making sure that there are no export restrictions barring the World Food Programme from purchasing food in any country, so that they can help feed hungry people. We did all that before. Now, for this MC13, we are trying to see the breakthrough we can make in our agriculture negotiations because the issues are very tough.

There are some members who want to work on the enormous amount of subsidies – trade distorting subsidies we have in agriculture – which are harmful to competition between countries. There are others who want to work on issues of stockholding – how do we safeguard and much sure we have large stocks, if we have large population for example, like India and under what conditions do we procure the stocks. There are arguments about that. There are others who only want to talk about market access. So, different members have different agenda on agriculture and you know that in agriculture we have very big and powerful farm lobbyists in every country. So, it is very difficult for governments to move because they can find resistance when they take certain moves. That is why agriculture is so intractable. However, its being about 22 years since these negotiations have been on and we have to ask ourselves how do we make progress from these and try to deliver something that would work for the developing world. Agriculture is quite difficult and if we can get some agreement on the food security aspect again and how to make that work better, I think that would also be a good thing.

We also have to deliver on the development agenda. Developing countries are expecting to get some benefits out of the WTO and they have tabled several demands that they would like to see. Also, how do we treat the developing countries that are graduating out of that status? Can we give them a transition period so that that they don’t have to immediately jump from being least developed countries to having to implement all the rules as if they are now one of the middle income or lower middle income countries? Bangladesh is in that status right now of trying to transition. So, we need to agree on that. We need to agree on some other demands they have tabled and look at some past agreements to see if there are provisions that can be more helpful to the developing countries. On e-Commerce moratorium – you know we have this moratorium on not charging Customs duties on electronic transmission.

Now that trade is going digital, this is a very important agreement. We have been able to extend it every year. There are members who want it permanent and there are others who don’t, and we have been able to get around it by approving continuation for a year.  So, we need to decide if we would do it again or we have a permanent agreement. So, those are some of the areas. Now, I want to mention that we have a couple of plurilateral agreements because what I have been talking about are the multilateral agreements. We have great plurilaterals where members of like minds came together to negotiate. One that I want to talk about that is common is the investment facilitation agreement with 100 members, 80 of them from developing countries, trying to sweep away those rules that deter investments in countries. We all want to attract foreign direct investments and even make our countries attractive for our domestic investors, so that we can grow our economy. This agreement is a plurilateral, it would help and we hope to get it penciled down by then. We are also looking at accessions. There are many countries coming to the WTO wanting to accede, who are not members. That is very exciting. People don’t come to join you if they think you are not doing well.

Now, we have seen an upsurge and we may deliver two at the MC13. But we have about six countries that are really working hard to join. The last point I want to make is that we would deliver another product called Deliberative Sessions. We have not really done that before. We have many difficult issues and giving ministers a forum where they can get together and discuss this issues and try to get answers to the questions they have is important. We are going to set this up for the first time and ministers would have the opportunity to discuss issues on trade and climate; carbon taxes and prices being charged by different countries; inclusion and how you deal with MSMEs and women; industrial subsidies. You can see we have an absolute agenda in front of us, and if out of these whole list we can get two or three done, that is a success.

ASSESSMENT OF YOUR 30 MONTHS AS WTO DG

I love my job and I feel very privileged to be here. I think it is one of the most challenging, but one of the most exciting jobs. When I came into this room for this meeting, I was quite tired, but as soon as I started talking about the issues, I just wake up because they are so interesting. So, I feel charged up, ready to go and I try to deliver results for people. That is the bottom-line. What I am interested in at the WTO is if the agreements we are making touching people. I know that when we do the fisheries agreements, 260 million people worldwide depend on fisheries, so getting these agreements and stopping over-fishing touches people. There are 12 million in Africa that depend on fishes. Agriculture also touches people. So, I feel that what we have been doing since I came have been exciting because we are delivering for people. So, I really like it here.

AFCFTA AND WTO’S SUPPORT

The AfCFTA is a very important agreement we have on the continent. It is expected to deliver benefits. What we have tried to do from the WTO is to help build capacity of various countries to implement the agreement. So, some of them have approached us and we are working with them through the African Union (AU). As we speak, we have spent about three million Swiss Francs trying to help countries build capacity upon request. Sometimes, to negotiate the end of those protocols, we worked with some of them. Then, implementing them is another thing. So, that is what we have been doing and we would like to see this thing work, because it would make a huge difference and makes Africa one market of 1.4 billion and gives us the power of India or China. That says a lot. But we have a lot to do. We have the guided trade in eight countries now and we are waiting to see how it will work. We are ready at the WTO to continue supporting the AfCFTA.  

ISSUES ARISING FROM E-Commerce IN GLOBAL TRADE

e-Commerce is also linked to a multilateral issue and I spoke about the e-Commerce moratorium earlier. There is one side of the story. You know that many countries depend a lot on Customs duties and so on for revenue, especially the small poor countries in Africa such as Togo, Benin Republic. As trade becomes more digital and it is not goods anymore, then that source of revenue looks like it is moving away. So, there are concerns and legitimately so. If trade becomes more digital, how do we tax it so that we can get more revenue. So, that is the source of worry and it is genuine. But, it may not be that easy to apply taxes on electronic transactions or trade as people think. We are actually looking at studies now to do that. But, there are other ways of taxing trade, goods and services that can still generate the revenues you need. We are trying to do two things this year in order to help assuage finance ministers who are worried about their source of revenue disappearing, by looking at other types of taxing mechanisms. We are doing a study now with the United Nations Conference on Trade and Development (UNCTAD) and the Organisation for Economic Co-operation and Development (OECD). So, we are working on it and hopefully, before MC13 would have the study ready and members can look at the evidence and it can help them make a decision.