World trade politics and the WTO: What does the future hold?
By Siyabonga Hadebe
PRETORIA – International media last week reported that former Nigerian finance minister Ngozi Okonjo-Iweala is in line to become the first African and first woman to lead the World Trade Organization (WTO). The reports further added that her rise to the top could be stunted by the United States. Apparently, Washington favours the appointment of South Korea's trade minister Yoo Myung-hee.
For starters, the WTO is “the only global international organization dealing with the rules of trade between nations.” At its heart are the WTO agreements, negotiated and signed by the bulk of the world's trading nations and ratified in their parliaments, and these include the General Agreement on Tariffs and Trade (GATT), General Agreement on Trade in Services (GATS), and Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
Fortunately for Okonjo-Iweala, the US opposition could have no bearing on the outcome since it has only one vote in the WTO unlike in the case of World Bank or IMF, where it has overbearing influence. But this is not the end of the story.
Besides the reality that the US rejection “could extend the selection process for some additional weeks or even longer,” the WTO could be headed towards an uncharted territory where one of the biggest and leading economies is likely to refuse to play ball. Some people believe that this imminent crisis could be avoided through the US presidential election, where recent polls show that the current incumbent Donald Trump could possibly lose to his opponent Joe Biden.
This false hope could be seriously misplaced because the US is likely to vigorously pursue its national interests and challenge China irrespective of who occupies the oval office in the White House.
Nonetheless, the developments at the WTO brings back the organization and its role in international trade back into the spotlight. After many years of peace and tranquillity, the WTO could become a battleground where serious battles for global control and influence could be fought in the coming years.
In ‘The political economy of the world trading system: The WTO and beyond’ (2009), Bernard Hoekman and Michel Kostecki highlight that in the 1990s the WTO faced stern opposition and protests from different groups spanning the NGOs, farmers and labour unions “seeking to limit or to expand the reach of multilateral disciples.”
The protests reached their peak in Cancun around 2003 when “a South Korean farmer committed suicide in front of TV cameras for the world to see.”
This article, however, argues that the WTO will face new challenges that will be different from those of the 1990s. As stated earlier, it is going to become a stage that could be used by prominent economies for the control and influence of global trade and commerce. If the US versus China trade wars is anything to be taken seriously, then the future promises an even bigger tussle that could easily split the world along the lines of the US-USSR rivalry for global dominance.
The article does not delve into whether Ngozi Okonjo-Iweala if appointed, will be successful or not. However, it explores whether the purported crisis in multilateralism and the WTO real as well as looks at broader challenges facing the WTO itself.
Is there a multilateral trade in crisis?
First and foremost, the views on the global governance and multilateralism would differ from each person depending on our backgrounds and understanding of what needs to happen in a world that is characterised by ongoing chaos due to the absence of a global government. The divisions in opinions are unlikely to change for some time to come.
The voice of the developing countries in matters of global governance continues to absent and the larger, wealthier economies tend to dominate multilateral discussions from security/ politics and climate change to labour market governance and economics. Economic multilateralism has been useful for developed countries and their multinational enterprises (MNEs) to dictate terms for global trade and commerce.
Global economic institutions such as WTO, UNCTAD, IMF, World Bank, et al consistently show weaknesses that are found in all multilateralism. They are not about the changing the post-1945 agenda but they seek to retain the status quo which places developed economies at the top of the food chain and leaving the rest of the world to share the crumbs. Developed countries, now including China, dominate international trade volumes, capital, and technologies.
Thus, from a perspective of developed countries, multilateralism has never been without controversy and some crisis for several reasons. These include the following:
⦁One, economic multilateralism (WTO) has not transformed the structure of global trade.
⦁Two, in spite of baby steps towards some change like having most favoured nation (MFN) clause and people from the developing world (Brazil and possibly Nigeria), developing countries have generally been spectators in the football game between the dominant players in international trade since the start of GATT in 1947.
⦁Three, the WTO has not limited or transformed global trade to assist developing countries. These are producers of primary inputs (natural resources) that support global production of goods (and sometimes services) that continuously give developed economies an upper hand in global economics.
The end result is those trade agreements like GATT, GATS and TRIPS reflect the lop-sidedness of the international economy which favours the developed north plus China. Economic multilateralism including the WTO has never been without a crisis.
WTO challenges and possible solutions
Unfortunately, the WTO as it is the case with other multilateral institutions faces one biggest challenge in that it seeks to regulate powerful states with narrowly defined interests and extremely wealthy MNEs. Multilateralism can only function with the utmost cooperation of leading world nations. After all, multilateralism is a tool that strong nations deploy to further their interests through cooperation from all sundry.
However, any disagreement between large states throws multilateralism into a crisis mode, see US suspension of WHO membership fees/ contribution and the US withdrawal from the Paris Agreement on Climate Change.
What about the position of the WTO on the US versus China trade war, and other trade wars in other jurisdictions? It looks like the WTO has no solutions, and that is its biggest challenge besides its inability to transform global trade to be inclusive and fair to small, poorer nations which are exploited by rich nations and MNEs for their natural resource wealth, in-built fragilities and weaknesses as well as cheap labour.
As a result of the US-China rivalry in recent years, as the institution, the WTO could be feeling the strain and its internal mechanisms could be ill-suited for the present global trade war between the world’s foremost leaders in global trade. This institutional challenge means the WTO cannot optimally function, the election of the next director-general could shed some light on whether the organisation would sail the storm unscathed.
The solutions to the current impasse, however, could not be in the hands of the WTO as such, but it needs to rely on political processes at both bilateral and multilateral levels. WHO’s Tedros Adhanom Ghebreyesus would attest that it is almost impossible for any international organisation to operate without the backing of world powers since they have resources, and tools of diplomacy (or the ‘stick and carrot diplomacy’)to make the majority of states to move in unison in the international system.
On transforming global trade, the WTO should formulate clear targets on how it intends to raise the percentage share of developing nations in global trade. It should work closely with the UNCTAD and other multilateral economic and development institutions to facilitate some form of “backward integration” that will help less-developed nations to build their economies. One intervention could be urging MNEs (and developed economies) to open up their value chains to players from developing countries.
At its present form, the WTO functions under a false pretext that all countries are at the same level of development and therefore they all have something to trade. This perpetually keeps developing nations right at the base of international trade and without any hope that they would ever move up to tertiary economic activities.
There must be something to trade for all countries before such things as fair trade and trade barriers can be considered. This observation is likely to emerge as soon as the continent-wide African Continental Free Trade Agreement matures.
Si ya yi banga le economy!
Based in Pretoria, Siyabonga Hadebe is an independent commentator on socio-economics, politics and global matters.