Ngozi Okonjo-Iweala is poised to make history at the WTO – she faces a daunting inbox to deal with

The economist will have to persuade all stakeholders in the World Trade Organisation that it is a force for good, writes Hamish McRae

Ngozi Okonjo-Iweala during a hearing before the World Trade Organisation (AFP via Getty)

First of all a welcome for Dr Ngozi Okonjo-Iweala, who is almost certain to become the new head of the World Trade Organisation. She is a Nigerian economist who has spent most of her career at the World Bank in Washington, though interspersed with serving as the finance minister of Nigeria.

There is an obvious symbolism here, in that she is African (though she has recently also taken US citizenship) – a signal of the changing balance of power in the world, away from developed countries towards emerging ones. She is also the first woman to head the organisation. But it is superficial to focus on her background, or indeed her gender, because what matters to the world is that the WTO should be in good hands. Looking at her solid achievements at the World Bank and in Nigeria, we can be confident that it will be.

The WTO faces a number of interconnected problems, or rather world trade faces many problems and the WTO will play a crucial role in tackling them.

For a start, the WTO has to get the US back on board. It is still technically a member, but has been pushing against the body for several years on the grounds that it has overseen a system that puts the US at a disadvantage vis-à-vis other countries, particularly China. That view is cross-party, for though Donald Trump was particularly vocal in his attacks, Joe Biden believes strongly in the principle of buying American. In his run for president, he declared he would “mobilise the talent, grit, and innovation of the American people and the full power of the federal government to bolster American industrial and technological strength and ensure the future is ‘made in all of America’ by all of America’s workers”.

Next, the WTO has to find ways of re-establishing the principle of multilateral trade. That is it raison d’être – that trade should not be corralled into closed trading blocs as happened in the 1930s, but be open for all. It has proved increasingly hard to sustain this, and the world is sliding into regional trading blocs, of which the EU is the prime example.

This trend to regional blocs includes the new form of NAFTA, the USMCA, the US, Mexican and Canadian bloc that Donald Trump signed last year, the African Continental Free Trade Area and the fledging trade agreement for the Pacific rim countries that the UK has applied to join.

Yes, I know it may seem a bit rum for the UK to get out of the nearest trade bloc only seek to join one on the far side of the globe, but that is a separate issue. The point here is that the world is slithering towards a second-best way of freeing up trade, rather than focusing on improving trade between regions, not simply within them.

An even greater issue for the WTO is that growth in trade has stalled. Obviously last year was a disastrous one for trade, but quite aside of that it is clear that trade as a proportion of GDP had already reached a plateau.

In one sense it may not matter if more goods are produced nearer to where they are consumed or used. Indeed there are a lot of reasons to feel that global supply chains have become too complex and too vulnerable. If businesses willingly chose to make more stuff locally that is great. But if they do so because there are increased bureaucratic blockages to trade, that damages producers and consumers alike.

Finally, there are services. That is the great growth area in international trade but the WTO is not really in the business of trying to find ways of increasing it. It will need a sense of vision and drive to push it in that direction.

So Okonjo-Iweala faces a mammoth task. She will bring a lot of qualities to it. It is impossible not to be impressed by what she achieved as finance minister in Nigeria, in particular her work in rooting out corruption. She wrote a book on it, Fighting Corruption Is Dangerous. Now she will be fighting a different battle, for the problem is not so much corruption as such, but the ability of special interest groups to increase their profits and market share by keeping other producers out.

Okonjo-Iweala has to persuade all the stakeholders in the WTO that it is a force for good in the world. And she has to check countries that abuse the freedom to trade fairly; measures that have been put together, step by step, over the past 75 years. It is a big task. She deserves a following wind, and for all our sakes I hope she gets it.