Dr. Ngozi Okonjo-Iweala recently made history when WTO members officially selected her as the seventh Director-General. When she takes office at the beginning of March, Dr Okonjo-Iweala will become the first woman and the first African to be chosen as Director-General in the 25-year history of the WTO.
Given the numerous challenges the WTO is facing, a primer will help us better understand where we’ve come and where we’re going with an institution that is critical for the rules-based global trading system.
WTO quick facts
The WTO was officially established in 1995 and currently has over 160 member states.
Members include United States, the UK, Germany, Brazil, South Korea, Japan, Canada and Mexico.
China has been a member since 2001. Russia officially became a member in 2012.
Headquartered in Geneva, Switzerland, the WTO’s stated goal is to “help producers of goods and services, exporters and importers conduct their business.”
The WTO facilitates trade in goods and services between its members, encourages the removal of trade barriers and enforces the agreed-upon rules of the global trading system.
Problems in recent years
Many WTO members have long complained the organization is unaccountable to its members and that it is ineffective in its core functions. Efforts to reform and modernize the WTO have been underway for years.
Former U.S. President Donald Trump had little time for the WTO stating it had been “disaster” for the United States. In fact, he directly blamed the organization for the unfair trading practices that had led to China’s boom saying “It has been great for China and terrible for the United States, and great for other countries.”
3 key challenges
1. Even supporters of the WTO acknowledge it has not made any headway on advancing a global free trade agenda in decades. This has directly led many countries around the world to pursue their own bilateral and plurilateral trade agreements. A trade-supporting organization that can’t get its members to agree on free trade is a challenge that must be addressed soon.
2. In the absence of a free trade agenda, one of the core functions of the WTO has been to hear trade disputes and essentially be the referee of the global trading system. Yet lately it isn’t even doing that as the Appellate Body that is the final arbiter of trade disputes hasn’t been functioning for over a year. While much of this is due to the Trump administration’s refusal to appoint new panel judges, this needs to be fixed ASAP.
3. Perhaps most worrisome is that over the past several years we’ve seen trade wars in every corner of the globe, the rules of trade openly ignored and protectionism on the rise. Through it all, the WTO has been largely silent and critics say outright ineffective. If the players are openly ignoring the referee the entire game is in trouble. And that game is the global trading system itself. This too must change.
What’s next?
For the ‘glass half full’ types, the arrival of Dr. Okonjo-Iweala is a breath of fresh air and she’s stated bluntly that it won’t be business as usual. However, the WTO operates by consensus which doesn’t bode well for reformists that want major modernization to take place .Nevertheless, the role the WTO plays still matters, and as post-pandemic recovery becomes the dominant focus of governments everywhere, global trade can be a key driver of growth if it’s done properly. We’ll continue to watch closely.