The Challenges That Lie Ahead of the WTO and Its New Chief
On March 1, Ngozi Okonjo-Iweala took office as the Director-General of the World Trade Organization. What are the challenges that lie ahead as she rolls her sleeves up to revive the damaged institution?
Dr. Ngozi Okonjo-Iweala during the selection process for the Director-General of the WTO. Photo: WTO/Jay Louvion.
By: Hye Jin Lee, Staff Member
On March 1, Ngozi Okonjo-Iweala, a Nigerian-American economist and the former Finance Minister of Nigeria, took office as the Director-General of the World Trade Organization (WTO). This is a hopeful development for an organization that had been left leaderless since its former Director-General Roberto Azevedo stepped down in August 2020. In fact, the leadership vacuum is only one of several crises the WTO has been faced recently. During her four-year term, Okonjo-Iweala faces the difficult task of revitalizing the crippled institution and showing to the world that a fair and functioning WTO is not only possible but also necessary and beneficial for everyone. Major challenges lie ahead.
First, the WTO system cannot operate without the cooperation and support of the United States, one of the world’s biggest players in trade. Earlier this year, the Biden administration took swift action to support Okonjo-Iweala’s candidacy, ending the impasse created by the Trump administration and allowing the WTO’s nomination process to move forward. However, this does not mean that the United States is ready to cooperate with the WTO.
On the contrary, the Biden administration has said that it would not agree to appoint new members to the Appellate Body, the WTO’s final court of appeal, thus extending the paralysis of WTO’s dispute-settlement mechanism. Biden echoed the concerns with the functioning of the Appellate Body detailed in a report issued by the Trump administration. The chief concerns are that the Appellate Body has consistently failed to interpret WTO agreements as written and has strayed far from its limited mandate, increasing its own power at the expense of the authority of the United States and other WTO members.
The Biden administration’s criticisms are not surprising: these concerns were raised well before Trump came to power and adopted a hardline approach toward the WTO. In fact, the Obama administration had rejected the appointment of a new member to the Appellate Body citing the same concerns. Biden is likely to use the appointment issue as leverage to push for the reforms that the United States has demanded from the WTO for a long time.
Biden also reaffirmed Trump’s stance that it is inappropriate for national security disputes to be adjudicated in the WTO dispute-settlement system. The WTO is set to establish a panel to hear Hong Kong’s challenge against the new U.S. rule that all goods imported from Hong Kong must be labeled “Made in China” rather than “Made in Hong Kong.” The United States will put forth the legal defense using Article XXI of the General Agreement on Tariffs and Trade that this measure was taken to protect its “essential security interests,” which the WTO has no right to review. A proliferation of claims and measures based on security exceptions would reduce the role of the WTO and potentially foment trade wars.
The U.S. invocation of national security interests against China is also linked to its long-time frustration with the WTO for its failure to police China for its intellectual property offenses and industrial subsidies. The Office of the U.S. Trade Representative has documented that China’s record of compliance with WTO obligations has been poor. Skepticism that the WTO can resolve the China problem is growing, as is evident from a Hill opinion column by Dennis Shea, a former U.S. ambassador to the WTO articulating the need for a new platform other than the WTO to address the issue. If the China problem continues to be left unresolved by the WTO, frustration will build up and countries could increasingly resort to measures beyond the WTO rules and justifying them under the pretext of national security.
Frustration at the WTO comes not only from the bigger players in global trade but also from the smaller ones that have long been alienated by the WTO system. As the pandemic wreaked havoc on the global economy and triggered protectionist policies, these smaller countries face greater perils with little recourse.
Okonjo-Iweala said earlier that the WTO can and must play a more forceful role in exercising its monitoring function and encouraging members to minimize or remove export restrictions and prohibitions that hinder supply chains for medical goods and equipment. She spoke of a “third way” to broaden access by “facilitating technology transfer within the framework of multilateral rules, so as to encourage research and innovation while at the same time allowing licensing agreements that help scale up manufacturing of medical products.”
So far there have been a lot of talks about a temporary intellectual property waiver but no concrete action or proposal has been put forward so far. Having the WTO involved in facilitating the vaccine trade, in the short term, would help developing countries to battle the pandemic. In the long run, it could be an important step in pushing forward new rule-making reforms in the WTO that are more inclusive and beneficial to developing countries.
Now is the critical moment for the WTO to show that it exists not just for the most powerful players in global trade but for all its participants.
Hye Jin Lee is a second-year student at Columbia Law School and a Staff member of the Columbia Journal of Transnational Law. She graduated from Columbia University and Sciences Po in 2018.