The Biden administration announced it is officially backing Ngozi Okonjo-Iweala, clearing a path for her confirmation. She’ll be charged with trying to fix a global body with a whole lot of issues.
It’s been a while since we’ve written about the World Trade Organization (WTO), the intergovernmental body charged with regulating international trade between two countries.
So what’s been happening at the WTO? Things are, as the kids say, a hot mess.
The WTO has been leaderless since Aug. 31, 2020, when Roberto Azevêdo of Brazil stepped down before his term officially ended (he’s now a big shot at PepsiCo). Meanwhile, the Trump administration, not exactly a fan of unfettered global trade, took steps to weaken the WTO, including by crippling the agency’s appellate body (Trump’s criticism had merit — but more on that in a bit).
Now, it looks like things may be on the upswing for the WTO! On Friday, the Biden administration announced that it will support Ngozi Okonjo-Iweala, a former Nigerian finance minister, to become the WTO’s new Director-General. Okonjo-Iweala had been facing off against South Korean trade minister Yoo Myung-hee for the role, but the latter announced she would step aside.
Biden’s backing is vital to move the process forward. The WTO requires that none of its 164 members oppose the pick for Director-General. Team Trump opposed Okonjo-Iweala, so Biden’s support clears the path for her to actually be confirmed in the coming weeks.
The Biden administration is certainly striking a new tone with the WTO compared to Trump, who often threatened to pull the U.S. out of the international body altogether. But it’s also worth noting that Biden doesn’t seem to be on board with going back to business as usual, either. At the end of the statement supporting Okonjo-Iweala, Team Biden said it “looks forward to working with a new WTO Director General to find paths forward to achieve necessary substantive and procedural reform of the WTO.”
And oh boy, does the WTO need some reforms.
Let’s start with the Appellate Body. Right now, it’s not functioning at all because the United States, under Trump, blocked the appointment of judges to the body after the terms of previous judges ended. That meant that there are not enough judges to hear an appeal.
Free trade types have spent more than a year freaking out about this. Robert Lighthizer, who served Trump’s entire term as U.S. Trade Representative, downplayed that criticism when he said in December that “no one’s missed it at all.”
What’s important to remember is that the Appellate Body wasn’t functioning properly even before Trump took office – and the United States was often unfairly targeted. As a 2017 report from Terence P. Stewart and Elizabeth J. Drake outlined, the U.S. accounted for just 12.7% of trade remedy measures imposed by WTO members from 1995 to 2015 but was subject to 57.5% of the WTO’s decisions in trade remedy disputes.
And while the U.S. is one of 164 WTO members, it had been the target of 38 separate decisions in trade remedy disputes at the time of the report – five times more than any other member.
Sen. Sherrod Brown (D-Ohio), who helped us unveil the report back in 2017, noted that WTO decisions often hurt U.S. workers, manufacturers, and other companies. For example, the Appellate Body often overreached by ruling against the U.S. in trade enforcement cases, including cases involving government subsidies and the dumping of products into the U.S. market, like steel.
“Rather than providing American steel companies with a way to crack down on Chinese cheating, the WTO has undermined the tools our businesses need to defend themselves and their workers,” Brown said at the time.
The Appellate Body clearly needs to undergo a series of substantial reforms in order to start back up again; something is clearly broken there. But its dysfunction isn’t the only issue facing the WTO – there’s also government procurement.
Sen. Tammy Baldwin (D-Wis.) is among Members of Congress who long have pointed out that under the WTO’s Agreement on Government Procurement, the United States has “opened its doors to foreign firms far more than others have.”
As a report from the Government Accountability Office (GAO) finds, while the United States has allowed foreign companies to bid on government contracts, American companies haven’t received the same sort of reciprocity from U.S. trade partners. That has ultimately hurt American workers, whose employers have to compete against foreign firms for these opportunities here at home but aren’t afforded the same opportunity to compete overseas. (This is also an argument for stronger Buy America provisions.)
And finally, there’s China.
There are obviously A LOT of trade issues with China, far too many to go into in this blog. But there’s one issue at the top when it comes to the WTO: China’s non-market economy status.
When China entered the WTO back in 2001 (which was a bad idea to begin with, but I digress) it did so under terms that it would be classified as “a non-market economy.” That status makes it a bit easier for the U.S., Europe and other market economies to prosecute trade cases against China for unfair trade practices. Of which there are many.
Anyway, the original accession agreement stated that once China had been a WTO member for 15 years, its trade status would be revisited. The hope was that in those 15 years, China would transition to a market economy (spoiler: the opposite happened).
But China read the agreement differently and continued to protest, saying that it deserves market economy status because the 15 years are now over. The U.S. didn’t budge, though… because China is very clearly NOT a market economy. In 2019, China finally conceded on the status issue.
For now, anyway.
Remember: China plays the long game. China’s government is going to continue efforts to gain more power at the WTO – which it will do on its own terms. “For the foreseeable future, China will partake actively in WTO discussions and initiatives, without offering major concessions at the negotiating table,” Harvard University law professor and trade expert Mark Wu told the Wall Street Journal.
So yeah, it’s kind of a mess over at the WTO. But hey, at least the international body is ready to install a new leader! She’s going to have a lot of work to do.