Ngozi Okonjo-Iweala is the director-general and first African head of the World Trade Organization (WTO). In this interview, she tells the FT Africa Summit that she expects global supply chain difficulties to last several months. She also said that the rhetoric about the decoupling of the US and Chinese economies is not matched by reality on the ground, and blames the lack of global leadership for Covid-19 vaccines not ending up where they are needed the most. Amaka Anagor-Ewuzie monitored the interview. Excerpts:
If you look at what is happening objectively, you see that the supply chain has been resilient. Indeed, they were during the pandemic but as the Covid-19 crisis has acceded, we have bottlenecks everywhere. We have problems at ports and ships are stuck. So, what is going on?
I think the issue is a supply-demand mismatch. It looks like from the demand side, the appropriate stimulus in trillions of dollars that was implemented by many developing countries, putting cash into the hands of households and businesses, led to increasing demand by consumers as the Covid-19 pandemic abated and several countries have opened up.
At the same time, I think there is an increase in demand by businesses for inventory accumulation. When I speak to some business people, there is a bit of panic and fear that the supply chain is going to be impacted in the future. So, they are buying more and accumulating inventory as a risk management technique.
And that is exacerbating the problem?
It is exacerbating the problem and if you put that against the fact that at the beginning of the pandemic, the shipping lines felt there would be lower demand, and they cut down on voyage, and containers were left in the wrong places. So, now there is a container shortage. All of these supply issues with the demand increase are resulting in what we see now.
How long do you think that these bottlenecks and shortages in supply chain problems will last?
It is very difficult to say, but it looks like it is going to go on for several months. We are going into the holiday season in many countries with very high demand and the container mismatch is not yet solved. We expect at the WTO that this will continue for several months. Perhaps, sometime next year, we will see this made much better or solved. But, I am afraid that we are in for several months of difficulties
Let me ask you about the state of the world today especially where we are in the face of decoupling between the US and China on the political reality and a new cold war. Do you think that the difference between the US and China can be bridged? And to what extent do you worry that they are going to endanger global recovery?
When you listen to the rhetoric from both countries and all the big powers, you start thinking of this decoupling but the evidence we see on the ground with regards to trade does not support this decoupling theory.
Trade between the EU and China, for instance, is at its highest and US is trending in the same direction. We thought of this demand push in the supply chain. So, the statistics of merchandise trade between the big powers is very robust. When people talk about decoupling, we need to look at the numbers. That is the first thing. But you know that rhetoric is really hot and moving away from the realities on the ground.
Secondly, it is not so easy to unwind the supply chain. They are very complicated for many products. If you take vaccines, for example, so many components, manufacturing that crosses multiple countries, and unwinding and decoupling that will not be easy. Now, on the issue of the roles and what is happening, I will say that vaccine is a critical factor in different growth patterns or recovery patterns that we see now in the world.
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The rich countries that have access to vaccines have vaccinated more than 50 percent of their population and have implemented very strong physical stimulus in trillions of dollars, are in a better recovery path than the poorer countries, which have no physical space and very little access to the vaccine. The fact that 60 percent or more people in many rich countries have been vaccinated versus slightly below two percent in poor countries just gives you the right sense of the divergence.
My dream is that we can have for instance, for pharmaceutical, a whole eco-system of production on the continent where some countries can be making some inputs while others will be finishing the products
Very relevant to Africa and despite a lot of calls by politicians, and we have published so many articles in FT calling for more equality in vaccines but that seems not to be happening. Is this for you a failure in global leadership?
For me, it is really difficult to see that we have the technology to save lives and yet we can’t seem to get that to where it is needed. Many rich countries have pledged 100s of millions of doses of vaccines. The US Biden recently pledged another 500 million. The EU President Von der Leyen just pledged another 500 million. We have all these pledges but they are not translating into distribution in the countries where they are needed.
So, that is what we really need to look at. We need to look at more transparency for the contracting of these vaccines from the producers. How do we get them into the arms of people in developing countries? And I have to say that in this regard that I am proud of some of the works that we are doing at WTO where we are working directly with the manufacturers to look at their supply chain issues and at the same time, trying to get from them, some of these numbers on transparency of what is being done so that we can see why do we have these problems?
Do you think that inducing support waiver on intellectual property will make a big difference?
As DG of WTO, I have members on both sides of these issues, so I cannot take sides. My job is to bring them together but what I do want to make clear is easier access for developing countries to vaccines and to manufacture. It is something that we just need to support now because it is part of building resilience for the future. At the same time we do not want to disincentivize research and innovation. So, we are looking for a happy middle ground in the arrangement where we can have a pragmatic approach that meets all these objectives and I think that it can be done.
Members are trying to reach such a pragmatic conclusion. It is easy. Actually, formal negotiations on this are stuck, but there are informal discussions going on, which I hope can help unlock some of the difficulties.
How important is the African Continental Free Trade Area and how can it be implemented successfully because manufacturing has gone backward in most of the African countries in recent decades?
There has been deindustrialization on the continent in recent decades and we need to bring this back, making up the old type of manufacturing so that we can have decent jobs for our youths. I think that African Continental Free Trade Area is absolutely critical. It is so attractive. Imagine being in a market of 1.3 billion consumers where you can cross borders.
To make this work, I am very proud that rectifications by different countries have gone on and beginning digitalization. WTO is trying to work with secretaries of various countries to try and help with capacity building and regulatory frameworks.
But we also need infrastructure between the countries to improve because one of the ways to have smooth functioning of markets is to have borders that are very easy to cross. That needs a lot of investments but we have to start somewhere.
My dream is that we can have for instance, for pharmaceutical, a whole eco-system of production on the continent where some countries can be making some inputs while others will be finishing the products if you have this kind of large market.
Do you think that Nigeria is committed to the African Continental Free Trade Area it has signed? There is a suspicion that it has reluctant participation?
I think not. But in the beginning yes because I think the manufacturing association was trying to see what does it really mean for Nigeria. Is it really going to be a case where goods are being manufactured on the continent? Issues of rule of origin (doubts of) are we are going to have products brought into the continent and built as being manufactured there with little finishing and little value-added. And how will that unwind competition?
So, you can see how manufacturers were worried that some of these issues need to be sorted out. But I think when sorted out, they see the advantage of the vast market because Nigeria has the ability to produce its products and should be looking at this as a good thing, not a bad thing.
