The new head of the World Trade Organization, Ngozi Okonjo-Iweala, starts work this week. Hopefully she likes a challenge.
She takes charge of an institution once seen as vital for global prosperity but now widely regarded as moribund, and she'll need to contend with a new climate of opinion that seems to regard free trade as passe and measures to build domestic economic resilience as paramount. The future of the liberal trading order is under threat. It may be decided, one way or the other, on her watch.
Okonjo-Iweala is eminently qualified. Her experience in development (she was Nigeria's finance minister and the No. 2 official at the World Bank) has acquainted her with the centrality of trade in promoting prosperity. But her task is enormous — and, no matter how competent or energetic, she can't do it alone. It took U.S. leadership to build the WTO, and it will take U.S. leadership to revive it.
The body has three indispensable functions. It facilitates negotiations to promote free and fair global trade. It provides transparency by monitoring countries' trade policies. And it serves as a forum for settling disputes. Each mandate is on the point of collapse. WTO negotiations have achieved nothing for years. Monitoring is failing because many governments prefer not to comply. And the dispute-settlement process has been effectively shut down by the U.S. refusal (beginning under President Barack Obama) to appoint judges to its appellate body.
This breakdown, it must be emphasized, is not the fault of the WTO and its officials. In the end, the body can only do what its member governments ask and empower it to do. At the moment, they're content to let it slide into irrelevance.
For now, you might think, this doesn't matter. Maybe the post-pandemic preference for shorter supply chains and adequate domestic capacity makes renewing the WTO less important. Just the opposite. A global emergency such as COVID-19 increases the need for cooperation, in particular for stable trade relations.
A retreat to protectionism will only heighten vulnerability and worsen the damage. Nor is the pandemic the only such threat. Policies to address climate change also have enormous implications for trade. A body capable of maintaining cooperation under stress — founded on the truth that liberal trade is positive-sum, not zero-sum — is essential for managing these risks.
FROM AN EDITORIAL IN BLOOMBERG OPINION
