Ngozi Okonjo-Iweala

03 Apr 2024
Jide Akintunde


The trade czar and recent progress in the global trade system.

Director-General of World Trade Organisation Ngozi Okonjo-Iweala

After hosting a successful 13th Ministerial Conference (MC13) of the World Trade Organisation (WTO), which held on 26 February – 2 March 2024, in Abu Dhabi, United Arab Emirates, the Director-General of the multilateral trade establishment, Dr. Ngozi Okonjo-Iweala, remained tireless. By the 12th of March, she was in Nigeria, her country of birth, to launch the WTO-International Trade Centre’s Capacity Support Programme (CSP) in Abuja to improve the quality and certification of Nigerian cowpeas and sesame for export.

Amongst other engagements within the space of four days, she met with the donor community for the CSP, engaged with women entrepreneurs at the Nigerian Export Promotion Council (NEPC), graced the opening ceremony of a pharmaceutical manufacturing supply chain in Kaduna, and held a couple of media interviews before hosting a private ceremony to mark the 94th birthday of her mother.

It was hard for me to tell if her passion or energy is more creditable for her hard work in promoting the global trade agenda internationally – and locally in the member countries of the WTO – as she has been doing in the past three years. During my interview of her to discuss the outcomes of MC13, I confirmed another of her driving force. NOI, as the Director-General is known in close circuits, remains as sharp as a tack. After successful careers, twice at the World Bank where she became managing director, twice as Nigeria’s finance minister, and a short spell as the country’s foreign affairs minister, Dr. Okonjo-Iweala is now a trade czar who is focused on steadying progress in the global trade system.

As she told me, a lot of work is done in Geneva – at the headquarters of the WTO – by the ambassadors, who are empowered to negotiate and close deals that are then brought to the ministers during the ministerial conferences. This enables the ministers of the member states to focus on fewer, knotty issues in the few days of the conferences. Based on this approach that frontloads the work of the ministerial conference, more than six multilateral agreements were sealed at MC12, which held in Geneva in 2022. But there was another critical factor to this success. The Covid-19 pandemic had caused the ministerial conference to be postponed twice. When it finally held, against the backdrop of the acute disruption of global supply chains by the pandemic, the enthusiasm to strengthen the frameworks underpinning global trade was quite strong.

One of the works that were done beforehand in Geneva ahead of the MC13, which became a major outcome of the ministerial conference in Abu Dhabi, was the agreement on the transition period for countries graduated from the least developed countries (LDCs) category. During the transition period, the countries will enjoy support measures that preserve the preferential treatments afforded them under their previous status, which are crucial for economic growth and poverty alleviation in the countries concerned. The negotiations for this agreement had been on for almost 10 years until the breakthrough that was achieved ahead of the Ministerial Decision last month in Abu Dhabi. African countries that stand to benefit from this initiative are Angola, Djibouti, Senegal, and Zambia.

Other successes at the meeting include the extension of the moratorium on duty payment for digital trade or e-commerce. The duty waiver had been polarising. Some developing countries wanted to end the revenue loss from the waiver, while a study by the Organisation for Economic Co-operation and Development (OECD) found that the costs of imposing duties would outweigh their benefits. In the meantime, the moratorium will continue to prove quite significant for encouraging startups, young people, and women engaged in digitally-delivered professional services, such as video streaming, online entertainment, online provision of accounting services, and even telemedicine. The world economy will also benefit as these sectors are among the fastest-growing globally, including in developing countries.

The conflicting dispositions towards the duty waiver programme reflect the policy dilemma whereby the prioritisation of government revenue in the short-term tends to compete against incentives for businesses, which in the long-term would raise not just public revenue when the moratorium has expired but would have also created jobs. But whereas the realisation of the long-term benefits of duty waiver is not automatic, exporters of the services covered under the programme are able to further strengthen their international competitiveness as their services are exempt from tariffs in the destination countries. This exemplifies the difficulties in reaching agreements on trade negotiations at the WTO.

As Okonjo-Iweala asserts, the WTO works to make global trade “open”, “free”, “fair”, “transparent”, “stable”, and “predictable”. This is onerous in the hyper-competitive world of today, and the WTO has often been accused of not meeting its set goals. With the multilateral trade body, much like the World Bank and International Monetary Fund (IMF), the rich countries tend to get what they want and obstruct what does not serve their interests. For instance, the United States has exercised veto power over appointments to the WTO’s Appellate Body, ostensibly because of procedural flaws and overreach by the body, when its decisions are perceived to be unfavourable to the US. This is despite the common understanding on the importance of the dispute settlement mechanism of the organisation.

The WTO’s decision-making itself is labyrinthine as a consensus and membership organisation. At MC13, the membership of the organisation increased to 166 countries with the accession of Comoros and Timor-Leste. The rigorous requirements of accession took Comoros 17 years to meet. And, though far less, it nevertheless took Timor-Leste seven years to gain approval for WTO membership. Rightly so, the memberships of these countries were celebrated at Abu Dhabi. However, 22 other countries, including Ethiopia, Uzbekistan, Turkmenistan, and Bosnia and Herzegovina, remain on the queue.

Membership of WTO delivers immediate and important benefits to member countries. WTO’s binding tariffs enable exporters from member countries to know what they would have to pay for their goods to be cleared at destination ports. The opposite of predictable tariffs is the potential reality faced by exporters from non-member countries. They might have to deal with rapid changes in tariffs for their merchandise at the point of custom clearance based, quite likely, on whimsical determinations of the fees. Such high costs are passed on to the consumers in the form of higher prices for the goods. Thus, WTO helps to lower the cost of goods for consumers. Producers are also protected from trade policies that weaponise tariffs to gain unfair advantage.

Approximately 98% of global trade is by WTO members, and 75% of world trade is carried out on WTO rules. Non-members are obviously the poorer countries contributing about 2% of global trade. This means some of the countries in most need of the positive impact of access to international markets on more favourable terms are still not in the membership of WTO. The bigger gap is in having as much as one quarter of global trade outside the multilateral trading system.

Access to external markets matters for attracting foreign direct investment (FDI), too. WTO rules try to streamline bureaucratic bottlenecks and remove other barriers to foreign trade. This saves exporters billions of dollars annually. The theme and discussion at MC13 were focused on making global trade more inclusive, deliver benefits for developing countries, and advance the agenda for sustainable development. These goals were advanced during the conference.

One of the obstacles to levelling the playing fields for global trade is the use of subsidies to boost the capacities of producers in some countries, thereby stifling the ability of others that are unable to afford such production incentives to compete. Such inequity has been present in fishing for decades. However, an agreement that will eliminate $23 billion in fisheries subsidies that encourage illegal, unreported, and unregulated (IUU) fishing was reached at MC12. This first stage of a two-phase agreement stands to benefit Africa, as poor countries are the most vulnerable to the malpractices. At MC13, the second phase of the negotiations, which will prohibit subsidies that encourage overfishing that is legal, reported, and regulated, held. According to Tralac, a trade law organisation, this category of subsidies covers shipbuilding, equipment, labour, and fuel related to the fishing industry.     

Meanwhile, in Africa, 12 million people depend on fishing, but they are losing $5 billion annually to illegal fishing and overfishing in the continent’s waters. The WTO Agreement on Fisheries Subsidies, phase 1, which was re-certified during the trade negotiations at MC13, is quite important. But the work of the fisheries agreement is not accomplished yet. While the number of countries that have ratified it increased to 71 in Abu Dhabi, 110 member-countries of WTO are required to ratify the agreement for it to enter into force. Dr. Okonjo-Iweala was optimistic that the requirement of an additional 39 countries to ratify the agreement, in order for it to be fully delivered, would be met this year.

Approximately 7% of the world’s oceans were over-fished in 1970. But according to the Food and Agriculture Organisation of the United Nations (FAO), the number had increased to 38% by last year. Certainly, there is the need to reverse the negative momentum.

But while the work that WTO is doing in integrating developing countries into the global trade system is important, Africa’s share of global trade had stagnated at 3% for years. More recently, it has even declined to 2.4%. Additional work needs to be done to boost the continent’s trade, not just at the global level, but also at the intra-continental and national levels. According to Okonjo-Iweala, there are two other ways to address the meagre contribution of Africa to global trade.

The first is trade diversification. Many African countries trade in few export goods. For Nigeria, it is mainly crude oil, which accounts for over 90% of government’s foreign exchange revenue. Many African countries similarly focus on a single or a handful of mineral or agricultural commodities. Expanding the continent’s exports base is critical for increasing the share of Africa in global trade.

New opportunities have emerged in the minerals sector to boost Nigeria’s exports. For instance, lithium, which is needed for batteries for electric cars, has been found in Nigeria. The indication is also that we can produce green hydrogen in the country. These two commodities are needed in the production of clean energy and demand for them in export markets are growing because of the energy transition. These should serve as complements to the country’s agricultural exports, oil and gas, entertainment, and financial services.

The second requirement for the continent’s external trade growth is value addition to commodities before export. Instead of exporting cocoa beans, we can process it into chocolate. Some progress is already being made in this regard. Domestic value addition will raise the value of our exports, generate industrial jobs, and deepen local know-how.

The African continent is endowed with abundant reserves of raw materials like silica sand, quartz, and other rare earth minerals that are crucial for manufacturing semiconductors. With strategic investment to extract and add value to these raw materials, the continent could play a big role in the global semiconductor industry, which was valued at $527 billion in 2022, and is estimated by McKinsey to become a trillion-dollar industry by 2030. Semiconductors are vitally essential components in microchips and electronic devices and applications, ranging from mobile phones to laptops and solar panels.

According to the WTO DG, if we commit to increasing Africa’s trade two-folds in the next decade, we can achieve it. Therefore, setting ambitious targets and showing seriousness in pursuing them will make the targets achievable for a continent that is one of the most naturally endowed in the world, with a growing population, and a young workforce.

For Africa’s trade, unfortunately, the more things change the more they stay the same, proving the saying by the 19th century French writer, Jean-Baptiste Alphonse Karr, right. Three years after the operational launch of the African Continental Free Trade Area (AfCFTA), the hope that it will catalyse a momentous increase in intra-African trade, which is key to raising the continent’s share of global trade, is dimming. The continent, especially the West African sub-region where Nigeria – Africa’s largest market and biggest economy – is located, has been in political and economic quandaries. Internal instability has made external growth a deferred hope. Many African countries are also overburdened by high debt-service costs.

I asked Dr. Okonjo-Iweala what her outlook of global trade was, especially the negotiations that have stalled at the WTO for more than two decades. She was cautiously optimistic. She was hopeful that the first part of the fisheries subsidies agreement will be ratified this year. But she was less assured on agriculture. “Agriculture is much more difficult; it was one of those agreements we were unable to get done at MC12, also at MC13,” she told me.

Yet, she revealed a glimmer of hope. At MC12, members could not agree on the text of an agreement as a basis of negotiations on agriculture. However, at the ministerial conference this year, an acceptable text for negotiations was agreed. But it is difficult to predict what more may be achieved with the negotiations at the next biennial ministerial conference, MC14. Elections are coming up in many countries, there are domestic policy issues around the world, and farmers unrest are being reported.

These challenges regardless, Okonjo-Iweala’s capable hands can be instrumental for progress in reforming the global trading system.

Jide Akintunde is Managing Editor, Financial Nigeria publications, and Director, Nigeria Development and Finance Forum, with NDFF 2024 Conference coming up on 8-9 May 2024, in Abuja, to provide a strong backing for reform for long-term performance of the Nigerian economy.