The Trader Letter, October 30/10/2020
Drama at the WTO
It has been a week full of drama and uncertainty as the WTO is down to two candidates for the Director General position. Former Nigerian Finance Minister Ngozi Okonjo-Iweala and South Korean Trade Minister Yoo Myung-hee are the two finalists which means a woman will head the WTO for the first time ever. However, the attempt to arrive at a consensus is proving difficult as most members are backing Okonjo-Iweala while the U.S. has thrown its support behind Myung-hee.
The stand-off is on as the EU, Japan, China and Canada back Okonjo-Iweala yet the U.S. has taken the extraordinary step of moving away from many of its key allies by going all in for Myung-hee. On Wednesday, the Office of the U.S. Trade Representative issued a statement of support for Myung-hee calling her a “bona fide trade expert (with) all the skills necessary to be an effective leader of the organization.”
The statement complains that the WTO is broken and is “badly in need of major reform” and that it “must be led by someone with real, hands-on experience in the field.”
None of this is wrong; in fact, all of it is true. However, the EU and others are digging in their heels and next steps are now being pushed until after the U.S. election as many believe a Joe Biden victory will pave the way for Okonjo-Iweala’s approval. Regardless of who wins, WTO reform is inevitable.
The future of free trade
A few short years ago, countries around the world were clamoring to put together bilateral and plurilateral trade deals that were called “gold standard” and bragged of how they were the most ambitious in scope ever negotiated. The Canada-EU Comprehensive Economic and Trade Agreement (CETA) and the Comprehensive Progressive Trans-Pacific Partnership (CPTPP) are clear examples.
Fast forward to today and free trade’s future seems less certain. The Canada-EU pact is now three years old yet only half of EU members have fully ratified the pact and Cyprus has become the first country to outright reject it. Meanwhile, some groups are complaining that the deal itself is not living up to expectations.
Global trade obviously isn’t going to cease. However, how free and open and by what rules, remain key unknowns, especially after this week — we’ll be watching the US election. We’ll continue to track these issues closely.
