Fractured world trade awaits Okonjo-Iweala as WTO DG
A fractured world trade, dangling at historical lows on account of the coronavirus pandemic, awaits Ngozi Okonjo-Iweala, who is now on the verge of becoming the next director general of the World Trade Organisation (WTO) following the decision of US President Joe Biden’s administration to back her bid.
As director-general of WTO, Okonjo-Iweala will be getting a chance to enact an equivalent of the Midas touch in improving global trade.
In 2020, world output shrank by 4.3 percent, over three times more than during the global financial crisis of 2009. The modest recovery of 4.7 percent, which is expected in 2021, would barely offset the losses sustained in 2020, according to the UN’s World Economic Situation and Prospects published this month.
The September edition of the same UN report had noted that “trade fell sharply in developing countries though with some heterogeneity”.
Developing countries’ exports in the first quarter of 2020 fell 7 percent, while imports fell 2 percent and South-South trade (i.e., trade between developing countries) decreased 2 percent. The decline in trade in Q1 2020 was followed by a deeper decline in April: exports contracted 18 percent and imports dropped 19 percent, while South-South trade fell 14 percent, the report said.
All regions in the world observed declines in international trade in Q1 2020 and April 2020.
The WTO itself, in an August 2020 report, said “high levels of uncertainty magnify the impact of trade costs on international trade”.
In the first quarter of 2020, for instance, a widely used measure for the global level of uncertainty was 60 percent higher than the levels triggered by the Iraq War and the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003. Uncertainty reduces the appetite of firms to invest into new trading relationships, and the increase in uncertainty may also result in trade finance contraction that is likely to take a particularly heavy toll on emerging and developing economies.
Okonjo-Iweala will be coming on board at a time the world will be making more demands of the WTO in bringing global trade back to pre-pandemic levels and even do better.