The weekly trade report with L.C.
The World Trade Organization has been jolted by another Trump administration blow. As the WTO headlined in its report on the October 28 meeting for the next WTO director-general, “Members indicate strong preference for Ngozi Okonjo-Iweala as DG but US objects.”
The “troika” of WTO committee chairmen leading the search for the new DG presented to the meeting their conclusion that Nigeria’s candidate Okonjo-Iweala had the broadest support, edging out South Korea’s Yoo Myung-hee. But the US prefers the latter and now says it won’t accept the former.
This US objection was missed by the troika, the US charges, because in its consultations with members it asked only for an indication of which candidates a country preferred and didn’t ask if there were any that were unacceptable. Since the decision should be made by consensus, a single objection can kill a candidacy. US Trade Representative (USTR) Robert Lighthizer said the US not only objects to the choice but to the selection process.
Consensus or nuclear option?
Failing to find consensus, the WTO could resort to the “nuclear option” of voting, allowed under the rules as a “last resort.” That’s never been done for any important WTO decision. Such decisions are supposed to be taken by consensus. It is not clear what the Trump administration would do if there were a vote and it lost. On the other hand, if Joe Biden becomes president next January, it is likely his administration would go along with the consensus for Okonjo-Iweala.
Lighthizer did get some backing in Washington. Senate Finance Committee Chairman Chuck Grassley (R-IA), not always a supporter of the Trump administration’s protectionist trade policies, said he endorsed the continued US support for Yoo despite the lack of support from other countries. Grassley argued that she would be best for delivering on WTO reform.
The present administration’s protectionist policies and repeated undercutting of the WTO have undercut its standing among member countries it previously counted as trade allies.
The Wall Street Journal reported from sources who were in the room during the closed-door WTO meeting:
The American objection prompted an uproar from the delegates of more than two dozen governments and international organizations seated in the room, with European allies, China, Canada, Latin American and African states all rallying against the US. An EU representative complained that if the US had issues with the process, it could and should have raised them far earlier…. Delegates accused the US of trying to bully them and said that if the US didn’t rescind its objections they would force a vote next month.
Internationalist résumé
Ironically, the person the US is now blocking is an American. Okonjo-Iweala is a Nigerian who obtained dual US citizenship last year. She has lived many years in the US, attended Harvard as a teenager, then received her PhD in economics at MIT. She was twice Nigeria’s finance minister – leading difficult for successful negotiations for debt relief. But most of her professional carrier was spent working for 25 years at the World Bank, where she ultimately became its managing-director for operations. She currently leads the international vaccine alliance GAVI, which many WTO members believe gives her valuable experience for dealing with issues involving trade and the pandemic.
Her lack of direct experience in trade negotiations didn’t stop the almost unanimous endorsement of her by the 164 WTO members. But the 164th country, the US, is wielding the veto available to all members of the WTO under the consensus principle.
Lighthizer: Yoo Myung-hee is better qualified
At the October 28 meeting, the US WTO ambassador declared her unacceptable and USTR Lighthizer released a statement saying, “The US supports the selection of Korean Trade Minister Yoo Myung-hee as the next WTO director-general,” calling her “a bona fide trade expert” with “real, hands-on experience in the field.”
There were reports that the State Department, at USTR urging and late in the game (October 27), sent a cable to its embassies in countries that hadn’t yet declared support for a DG candidate to try to influence them to back Yoo. Until very recently, South Korea’s president, Moon Jae-in, has reportedly been calling other heads of state, including Canada’s Justin Trudeau, to urge support for the Korean candidate. But none of that lobbying appeared successful as the US position got no support at the meeting.
The Zoellick connection
The real reason for the US opposition to the Nigerian, according to most accounts, is that — as Bloomberg News and others have reported — Okonjo-Iweala is regarded as a protégé of Robert Zoellick, an early and very vocal political enemy of President Trump. Zoellick was World Bank president when Dr. Okonjo-Iweala worked there, and both presently sit together on the board of directors of the leading anti-Trump social media company, Twitter. They also sit together on the board of trustees of the Carnegie Endowment for International Peace. A fair presumption is that Zoellick brought Okonjo-Iweala along with him onto both boards.
Zoellick is also a director of the Peterson Institute for International Economics, whose research papers – not without reason – have been highly critical of Trump administration trade policy.
The Trump administration’s biggest objection to Okonjo-Iweala’s Zoellick connections may derive, however, from anger the president’s base harbors against those believed to have played a role in securing China’s December 2001 entry to the WTO. While it is true that Zoellick was President George W. Bush’s US Trade Representative at the time of China’s formal entry, it was his predecessor, Bill Clinton’s USTR Charlene Barshefsky, who did the heavy lifting in negotiating China’s WTO accession.
Multilateralism equated with globalism?
Nevertheless, with twenty-five years at the World Bank, supplemented by tours of duty at other internationalist entities, Okonjo-Iweala’s curriculum vitae is that of a classic globalist bureaucrat not well-regarded by the president and his supporters.
While Okonjo-Iweala is clearly not anti-American, Lighthizer and Trump might object to her for strongly promoting multilateralism and the role of trade in development. She told African reporters she “will have to lead the charge for a revival of multilateralism” at the WTO, “and for a better deal for developing economies, as well as for the practical matter of how reforming trade and patent rules can allow the distribution of life saving vaccines and therapeutics” in light of the pandemic. “Multilateralism has never been needed more than now,” she told them. “There are simply some things in the world that bilateral or even sub-regional solutions cannot solve.”
Yoo’s background
On the other hand, Lighthizer is familiar with South Korea’s Yoo – who is well-respected but considered more of a technocrat than a proactive, dynamic leader. Lighthizer knows her from his negotiations to revise the US-South Korea Free Trade Agreement. That revision made the deal less trade-liberalizing and probably WTO-non-compliant. His support for her as DG could raise concerns that he believes she is someone the US can manipulate. In the revised deal, Korea was forced to accept export quotas on Korean steel and a longer phase-out of certain US vehicle tariffs, both of which breach WTO rules.
Lighthizer would answer that he simply wants a DG who is steeped enough in the details of trade so that she can lead the effort for WTO reform, currently the institution’s top priority. However, Yoo is probably unacceptable to China and Japan — due to their spats with South Korea – though neither has openly opposed her candidacy. It appears that Seoul won’t rescind the Yoo nomination, though Washington has put it in a tough spot where it will anger other WTO members and appear to be doing the Trump administration’s bidding.
The US position not only pits it against Japan and a number of other allies. The EU won agreement from all its members to support Okonjo-Iweala – including those, largely in Eastern Europe, who were pressured by Seoul to support Yoo in light of the massive Korean investment in their countries.
WTO vigil for Biden?
The Trump administration’s reasons for rejecting Okonjo-Iweala are unlikely to carry weight with a Biden administration. Likely realizing this possibility, the DG selection had been put on hold until the General Council meeting set for November 9. This comes conveniently after the US election. If Biden wins, the final WTO decision on its next DG would likely be delayed until he takes office on January 20, 2021.
But the November 9 General Council meeting may not even take place. Bloomberg News reported on November 2 that the Geneva, Switzerland “World Trade Organization’s effort to select a new leader next week could be delayed for at least another month because of the rapid spread of Covid-19 in Switzerland. On [November 1] Geneva’s cantonal authorities announced strict new lockdown measures amid a surge in infections and hospitalizations in the Swiss city. From Nov. 2 until Nov. 29, the area will prohibit public and private events of more than five people.”
The next DG, whomever is selected, will serve until October 31, 2024.
While at the OECD…
Meanwhile, another leadership battle has just begun at the OECD. The OECD, founded in 1961, has less global clout than the WTO. It doesn’t make any rules or require members to join agreements with specific commitments. Nonetheless, it has a staff of over 3,000 at its Paris headquarters, including economists, lawyers, and other experts – dwarfing the WTO.
The OECD works closely with the G20, which also doesn’t have a specific purview or role in setting international rules or standards. Both the OECD and G20 have taken up a Digital Services Tax agenda that is highly unfavorable to the major US digit and social media companies.
L.C. reports on trade matters for business as well as Founders Broadsheet.
Leave a Reply