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WTO

Selection of new WTO chief will not be a panacea


Published 09 February 2021

The anticipated official appointment of Dr. Okonjo-Iweala as the new Director-General (DG) of the World Trade Organization (WTO) will likely rekindle hope that the institution might finally begin the process of addressing the daunting challenges it faces. But heightened hopes for a rapid turnaround are destined to be dashed.

The impasse over the appointment of the next Director General (DG) of the World Trade Organization appears to have been broken. The Biden administration’s strong endorsement of Ngozi Okonjo-Iweala of Nigeria and the withdrawal of the only other remaining candidate, Yoo Myung-hee of South Korea clears the way for Dr. Okonjo-Iweala to step into the vacant DG position.

Previous DG Roberto Azevedo resigned last August and US opposition to the Nigerian candidate during the Trump administration had caused the consensus-based selection process to deadlock. 

The official appointment of Dr. Okonjo-Iweala – expected at a soon to be convened meeting of the WTO General Council – will likely rekindle hope that the organization might finally get itself back on track and at least begin the process of addressing the daunting challenges it faces. Its multilateral trade liberalization agenda is dead in the water, its dispute settlement system has been incapacitated, and the organization – envisioned as something akin to a global trade referee – has been sidelined during the most significant trade war in roughly 90 years. 

Reality-checking high hopes 

New leadership at any institution typically raises expectations for renewal. In the case of the WTO unfortunately, heightened hopes for a rapid turnaround under Dr. Okonjo-Iweala are destined to be dashed.

This is not – to be clear – a negative commentary on the incoming Director General herself. Her credentials, expertise, and talents are self-evident, and she will undoubtedly acquit her responsibilities with a high degree of competence. The problem lies not with Dr. Okonjo-Iweala, but rather with the limitations she will face in heading a riven global organization which relies on its fractious membership to make any decision of consequence on the basis of 100% consensus and vests virtually no real authority in its chief executive.   

Consensus in short supply 

Almost since its inception in 1995, consensus at the WTO has been difficult if not impossible to achieve. There are various causes. Rapidly rising developing countries are no longer willing to be bullied into agreement by the “big boys” (traditionally the US and Western Europe), as frequently had been the case in previous decades. China’s success in pursuing a model of state-directed capitalism has strained a rulebook predicated on the assumption that all major trading nations would embrace free market economics. The resulting systemic frictions have defied resolution. And technological advances in the way value is created and trade is conducted have introduced complexities that our existing approaches to trade are ill-equipped to handle. In many instances, WTO members hold diametrically opposed views on how to resolve these issues, and the divisions are often hardened by developmental differences and geopolitical calculations. 

A position with little power 

Faced with these challenges, the WTO DG has very little concrete power. The WTO governance structure relegates the Director General primarily to the roles of administrator, facilitator, and cheerleader. Once appointed, Dr. Okonjo-Iweala can act as an honest broker and good-faith emissary between different factions. She can pontificate on the centrality of trade and the urgency of the moment. She can suggest and opine. She can encourage and cajole. She can ensure the full institutional support of the organization and its hardworking professional staff. 

In short, the DG can ensure that the WTO trains run on time. She will not however determine where they go, what freight they will carry, or indeed if they will ever leave the station. Those decisions lie with the 164 members and their ability to achieve consensus at a time when differences in viewpoints are becoming more deeply entrenched. 

Challenges and limitations 

The honest broker role is perhaps the most important role the DG can play. When factions are at the doorstep of agreement but remain divided on a narrow issue, a neutral third party can sometimes help to bridge a small gap. But the role is not determinative and is certainly less relevant when the divides are deep and fundamental.   

In terms of the most important challenges currently facing the WTO, the list of things the DG cannot do is substantial. 

The DG cannot commence a new round of multilateral trade negotiations – or even more narrowly focused sectoral negotiations (only the members can do that). And more to the point, if such negotiations were launched, she could do little to erase the very significant differences that have frustrated the successful conclusion of comprehensive rounds such as Doha and even far less ambitious sectoral negotiations.

The DG cannot resolve the impasse over Appellate Body (AB) judges, which has incapacitated the dispute settlement system. This issue turns on US concerns over putative judicial overreach of AB judges – a consequence of the inability of the organization to comprehensively update its rule book. Gaps in WTO rules have been “filled in” by AB judges exceeding their mandate, at least in the view of the US.

The DG cannot play any meaningful role in resolving the US-China trade war. Many of the most contentious issues between the US and China are in areas that are not covered, or not adequately covered, by WTO rules, thereby leaving the WTO largely out of the mix. 

It is perhaps not a surprise that in explaining his decision to resign one year ahead of schedule, previous DG Azevedo characterized the WTO as “doing nothing now”. 

Best wishes, realistic expectations 

Anyone with a strong belief in the value of trade should wish Dr. Okonjo-Iweala well as she takes up her new post. The credentials and experience she will bring to the job are beyond reproach. Her appointment will not however paper over the operational cracks in the way the organization functions or magically galvanize a convergence of viewpoints on topics where the membership holds widely divergent views.   

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Author

Stephen Olson

Stephen Olson is a Research Fellow at the Hinrich Foundation with over 30 years of international trade experience. Previously, he was an international trade negotiator in Washington DC and served on the US negotiating team for NAFTA negotiations.

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