WTO sees early signs of global trade fragmentation

WTO sees early signs of global trade fragmentation

WTO Director-General Ngozi Okonjo-Iweala attended the opening of a four-day Building Bridges summit on sustainable finance in Geneva on Oct. 2, 2023.

The World Trade Organization's head said on Monday that early signs of global trade fragmentation were appearing, criticizing so-called'reshoring' and 'friendshoring' between trade blocs.

t yet see any large-scale fragmentation we are beginning to see signs, said Ngozi Okonjo-Iweala at an event in Geneva.

Unresolved disputes and the list of what it terms as the 'trade concerns' of its members are piling up at the WTO.

Since late 2019, after the US blocked the nomination of fresh judges to the WTO's Appellate Body due to criticisms about judicial overreach, 29 cases have been left in limbo, a significant blow to the dispute settlement system.

The depositing cases include Dominican Republic, India, Indonesia, Morocco, Pakistan, South Korea and the United States.

re appealing,' former deputy director-general Alan Wolff said last month at a WTO conference, urging countries to hold off on fresh appeals from 2024 when WTO members have pledged to address the issue.

The WTO has called for a 'polycrisis' of the pandemic, as the conflict in Ukraine and inflation is sapping faith in globalization. The result is an increasing disregard for global trading regulations among WTO members.

Last month, the United Nations warned that a surge of unilateral measures, if unchecked, would fragment the world economy, stripping 5 percent of global income.

Import restrictions have eased since 2018, but export curbs have more than offset their decline. Certain curbs averaged 21 per year between 2016 and 2019, but rose to 139 last year.

This has resulted in a surge in the number of 'concerns' raised at the WTO. These have targeted export restrictions such as for Indian rice and the subsidies for clean tech, such as the US Inflation Reduction Act, with a bias for production in North America.

The Buy American Act will also require local content requirements to be raised, while the European Union, which still subscribes to WTO rules, has subsidies and objectives to boost home supply of critical minerals and green production.

The WTO is 'teetering on the abyss of irrelevance', said Keith Rockwell, a senior fellow at the Hinrich Foundation.

The WTO's drive behind the creation of the rules-based trading system has now been 'not on the radar screen', he said.

The WTO, with 620 staff in an art deco building on the shores of Lake Geneva, needs reform, though it requires a full consensus to make any change.

The reform effort centers on restoring the Appellate Body, something the United States will not accept. reforms could also address issues not considered when the WTO was formed, such as climate change, data flows or artificial intelligence.

Reform is set to be a major topic at the WTO's 13th ministerial conference in February.

In a Geneva-based WTO delegation, a WTO spokesman said the administration did not believe further trade liberalization was in the interests of the United States, a belief that may be solidified in 2024, a presidential election year.

The WTO warns of a global GDP loss through decoupling.

The WTO contends that the world needs a renewed drive towards integration, called re-globalization, to address challenges like climate change and poverty reduction, while noting that 75 percent of goods trade is still based on WTO tariff terms members extend to each other.

In a statement, Okonjo-Iweala said it is up to the government to make any major changes to the constitution.