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“The global economy is full of uncertainty… business doesn't do that well with uncertainty. So with respect to trade… what is going on in the Middle East will have a significant impact on trade” Ben Thompson speaks to Dr Ngozi Okonjo-Iweala Director General of the World Trade Organisation. The global trade system - embodied by the WTO - is supposed to bring countries together by setting and enforcing the rules for them to sell goods and services to each other as well as resolve trade disputes. This week in Cameroon a WTO ministerial Conference is taking place against the backdrop of war in the Middle East and unprecedented challenges to the established world trading system. The war, President Trump's tariffs and a growing urge for independence are all impacting the way goods and services flow across borders. In this interview Dr Okonjo-Iweala discusses the restrictions coming into force and their impact on global trade. She also talks about the need to reform the trading system so it works better for all parties. The Interview brings you conversations with people shaping our world, from all over the world. The best interviews from the BBC, including episodes with Samantha Power, former US ambassador to the UN and Dame Sarah Mullally, the archbishop of Canterbury. You can listen on the BBC World Service on Mondays, Wednesdays and Fridays at 0800 GMT. Or you can listen to The Interview as a podcast, out three times a week on BBC Sounds or wherever you get your podcasts. Presenter: Ben Thompson Producers: Jonathan Josephs, Clare Williamson Editor: Damon Rose Get in touch with us on email [email protected] and use the hashtag #TheInterviewBBC on social media.
(Image: Dr Ngozi Okonjo-Iweala Credit: PIERRE ALBOUY/AFP via Getty Images)
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Hello, I'm Ben Thompson, BBC business presenter.
And this is the interview from the BBC World Service.
The best conversations coming out of the BBC.
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For this interview, I met Dr. Angosi Akonjo, a wailer
of the World Trade Organization.
On the line from its headquarters,
overlooking the waters of Lake Geneva.
The global trade system, embodied by the WTO,
is supposed to bring countries together
by setting and enforcing the rules for them
to sell goods and services to each other
as well as to resolve trade disputes.
But its powers have been challenged in recent years
and there are huge differences between nations on trade.
The tariffs and bilateral deals pursued by the US administration
have shaken the global economy and the structure
of the trade body itself.
China's huge trade surplus,
exporting way more than it imports
and a rise in economic nationalism
have led many to question the benefits of the organization
whilst others want to see reform.
The European Union is also often adults with the US and China.
These difficulties for global trade
were causing enough problems before the latest war in the Middle East
spread even more uncertainty through the global economy.
Forkast for the year, a for slower growth.
So as the WTO goes into a major gathering
of the World Trade Ministers in Cameroon this week,
the stakes are high and the Director General,
Dr. Ingozi Akonjo, a wailer, must try to find consensus.
So the first thing is to remind everyone
not to throw the baby out with the bad water,
to take the parts of the system that work
and then to look at those that don't work.
And I think it's very convincing
when you show them that
not having a tit for that trade war with each other
has resulted in almost three quarters of good trade going on
on the rules of the WTO.
The next part is to convince them that status quo
cannot be an option in global trade.
We have to look at our rules
and we all have to work at it together
and how to solve it.
Welcome to the interview from the BBC World Service
with Dr. Ingozi Akonjo, a wailer.
The global economy is full of uncertainty
at this point in time.
I think that's the biggest issue
and of course there's disruption and turbulence
given what is going on in the Middle East
and with the rest of the world.
So yes, business doesn't do that well with uncertainty.
So with respect to trade,
we also think that what is going on in the Middle East
will have a significant impact on trade
and it depends partly on how long it goes on.
And there are so many different forecasts
and expectations about what impact this war in the Middle East
will have on global trade.
It's hard to say, of course,
we don't know how long this war will last.
We don't know how long the spread of hummus will remain closed.
What is maybe the best case scenario here?
The best case scenario, of course,
is if the conflict could be over, but we just don't know.
And that uncertainty is certainly feeding into the forecasts.
And if you look everywhere,
you will see that the levels of uncertainty
really affect the forecasting of what's going to happen
with the global economy, including trade.
And of course, when you have these higher energy prices,
they feed through the prices of other goods,
they impact global demand.
And therefore you have sort of a pass through
that impacts GDP growth and trade growth.
And that partly explains what we said that
if we factor in the impact of the war,
we could achieve 0.5 percentage points of our 1.9% forecast
for global goods trade this year.
I also want to mention that services trade.
We forecast also what happens to services trade.
And there we're expecting more robust growth
at about 4.8%, almost 5%.
And services trade serves as a sort of shock absorber.
When goods trade is not doing so well,
many countries do well in services.
And that can help countries absorb some of the shock.
And quite clearly, though, that will depend on the nature
of those businesses and the economies that are able to support
more service jobs, maybe than goods trade jobs.
I mean, there are so many repercussions of this.
One would assume we've not really felt the full impact of it
because we talk about things like insurance rates
going through the roof, all the knock on effects
from disruptions to oil supply and all the associated products
that go with that.
We know too, so many implications of things like
longer shipping routes that will add not only costs,
but time to how quickly things can get around the world.
You're absolutely right, Ben.
I just want to mention that we forecast a lot on oil
and gas, but you know, there's also the impact on fertilizer.
There are many countries that depend on the Gulf region
for Eurea.
For their fertilizer, Thailand, I think,
is about 70% of their Eurea comes from that region.
You have India about 40% Brazil, about 35%.
If we can't get fertilizer through,
in time for the planting season,
it could really impact agricultural yields
and also then food availability and the price of food
going down the line.
Secondly, as you're talking about the impact,
I just want to say that we should remember two things
about the Gulf region.
One, it's highly dependent on services.
They've really worked out to diversify the economies.
And so services trade is being impacted in that region.
And the second point is that they are net food importers.
They depend on food imports
for about 75% of their rice.
And up to 90% of other things like oil, vegetable, oil,
maize and soybeans and so on.
So really, if we could end up, if this voice prolonged
with a very big impact on certain parts of the world.
We know that economies can be resilient.
What feels different perhaps about this time is that the global economy
was already in a pretty difficult position.
We look at things like tariffs and as by the White House,
we've seen increasing protectionism.
We've seen more restrictions put on trade over the last year.
What is the solution here?
Because it's not that this can't be taken in isolation, can it?
I think this time feels different because already
there was a lot of uncertainty in the global economy.
As you mentioned, that tariffs situation costs uncertainty
and then you layer onto that.
What is happening with different conflicts around the world
and just that feeling of not knowing what's going to happen next.
And of course, businesses need some certainty to plan.
So I think that getting to a world where there's more room
to plan ahead, that would really help.
And now do you get there?
The geopolitical and geostrategic tension in the world
I think has to diminish.
But let me mention one thing that is good in the midst of all this
having some rules that give predictability and stability
to businesses also helps.
So that's part of the solution.
And that's what the WTO does.
And let's talk about that because one of your remits
is to grease the wheels of global trade to make it easier
to reduce some of the friction, to reduce some of the tension
to set the rules that allow the global economy to operate.
How difficult is it to do that right now?
Well, it's been very difficult.
I mean, you mentioned protectionism and undermining of the rules
before and it is true that global trade is facing
the largest disruption it has faced in 80 years.
So it's not been easy.
But I think that one of the most interesting things we are discovering
is that some of the basic rules for trade
that guarantee, as I said before, predictability and stability
of the trading system are holding up well.
So in spite of the disruptions,
businesses have continued to be able to trade on the basis of
these rules that may ensure that when they land their goods,
the goods are valued in a transparent manner with a methodology
that is well known, that has not changed.
You know, the basic things that make the system work
are still there at the WTO.
And because members have not engaged in a fit for tax,
most of them have decided to continue trading with each other
based on these rules so that their businesses can have more certainty.
We have this resilience that you observe in the global trading system.
But if we look at some of the restrictions that have been enacted this year,
already this year, where above the number of restrictions
and force last year, what has gone wrong?
Why does it feel that counter to that idea of free trade and global
economic growth?
We're finding countries putting limits on some of that,
protecting their own economy and not working in the best interest of the global economy.
Well, Ben, I think that we have to also admit that much
as the global trading system has been provided a very good basis
and stability for the world economy to grow and has contributed to global growth,
that the system has not been perfect.
And this is where we need to really look at what is working
and have set some of what is working and what's not working.
So many of our members began to feel over time that maybe some
aspects of the rules and the system is not working as well
for them as they would like.
Some of them are finding that they're losing competitive advantage in
manufacturing, for instance, in certain sectors where they would like to keep
make sure they keep an edge.
Others are finding that look, they're not getting well integrated
into the global trading system in the way they want.
And this goes for many of the developing countries.
And I can tell you the least developed countries of the world
only have a share of 1% of global trade.
And that has stagnated for a long time.
Africa, Africa share has stagnated around 3% of global trade.
So there are members who feel look,
this system needs to work better for me.
Both countries that are not so rich and those that are rich.
So that's what is important to look at.
To ask yourself the question, alright, some things work.
But what does not work and how do we fix it?
I think it's because of that that many of our members
were beginning to take measures that were protectionist
because they felt the system needs to improve to work better for them.
And we know that in a trade war there are few if any winners.
But given what you've said,
how do you convince governments, countries
to not adopt protectionist policies
when they feel that they are vulnerable to losing competitive advantage
to being taken advantage of by other countries?
How do you convince them that actually free trade open trade
is in their interest still?
Well, the first is to remind them that over 80 years this system
largely delivered.
The system was created because of the disarray in trade,
prior to the first world war.
And then nations were having a trade war with each other
tit for tit raising tariffs and protectionist measures on each other.
And they found they didn't work. That took everybody down.
So the question was,
what do we do now in order to avoid this?
The system was created that we have today which has largely
and I say largely worked because it has guaranteed
that transparency, openness and predictability.
So the first thing is to remind everyone not to throw the baby out
with the bath water,
to take the parts of the system that work
and then to look at those that don't work.
And I think it's very convincing when you show them
that not having a tit for that trade war with each other
has resulted in almost three quarters of good trade going on
on the rules of the WTO.
The next part is to convince them that status quo
cannot be an option in global trade.
We have to look at our rules and we all have to work at it together
and how to solve it.
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I spoke to Dr. O'Connor, a wailer on the line from Geneva
in the run up to the four day gathering of WTO trade
ministers in the Cameroon Capitol, Yawnday.
The WTO and its predecessor,
the general agreement on tariffs and trade was launched
after World War II, the govern world trade after a period
of extreme economic nationalism and protectionism.
The world is arguably at another significant moment
of change and turmoil and multilateral organizations
like the UN and WTO are facing an existential crisis.
So as the director general and government leaders
meet in Cameroon, the stakes are high.
Okay, let's return to my conversation with Dr. O'Connor,
a wailer.
But when you look at what's been enacted by the Trump
White House, the world's biggest economy imposing
restrictions, protectionism, putting America first
in its global trade ambitions.
When you've got a country the size and scale and power
of the United States doing something like that,
how do you convince smaller countries that,
well, actually, you shouldn't be doing the same.
I think smaller countries can look at themselves
and look at their trade to GDP ratio.
And I don't mean to sound wonky,
but it's just another way of saying they can look at just
what's the important trading externally matters
to their economy.
And many countries find that trade matters so much
for the U.S.
and a lot of their economy runs on homegrown consumption,
domestic consumption.
So they are not as dependent on the external sector
as many of the other members of the WTO are.
So when they look, then they say,
look, I really need the system.
And that means I really have to look up what we can do
to make it work better.
Not I don't have to try and emulate what I've seen
because my economy is not configured in the same way as the U.S.
Do you think that message is being heard though?
When we have three of the biggest trading blocks,
be it China, the European Union, or the United States,
log ahead over trying to ratify trade deals,
trying to approve how the terms by which they will do business.
When you've got those three with such tensions between East and West,
what hope is there for everybody else caught in between?
When you're absolutely right, you know,
it's not easy when the three big trading blocks have tensions.
But I tell you, even the event tensions with some of the smaller countries
and members that I spoke about, so there's tension everywhere.
And there are other big emerging markets that are also important
as India, there's Brazil.
So there's no shortage of tension.
But what we are succeeding in doing is showing that
everyone will be better off if we try to solve the problems in the system.
If we deny they exist and we don't come together to try and find solutions,
everyone will be worse off.
So I think there's a mountain recognition of this.
It hasn't come easily. It's not coming easily.
Members have been having very, very difficult discussions here in Geneva
as to what is it that doesn't work?
And how do we go about solving it?
And I think this will now culminate in a very good interaction.
I hope by ministers when we get to Cameroon for a ministerial meeting.
But there's an emerging convergence, an emerging acceptance
that if we want to be better off, we have to work at these problems.
It strikes me too that what's happening right now is whilst
there's all this tension around global trade.
The nature of trade is changing too.
You look at somewhere like China that previously was exporting so much
to the rest of the world now starting to look at its domestic consumption,
providing for its own people.
That is happening hand in hand with all of these changes
and the nature of trade.
And I wonder whether it's time to rewrite the rules of global trade
that the old rules no longer are fit for purpose.
Well, Ben, you have a point. The nature of trade is changing.
The direction of trade is changing as well.
With the tariff situation,
U.S. imports from China, for instance,
have diminished or decreased by about 29 percent last year.
And trade is being redirected from China to other parts of the world.
Supply chains are reconfiguring because of the nature of the tariffs.
Some of that we have to look at the impact to make sure it's happening in a way
that will allow the countries receiving this trade to also benefit and be competitive.
But the one thing I want to point out,
some of the reconfiguration of supply chains,
particularly when it comes to producing goods,
may not be a bad thing. We need diversification in our supply and value chains
so that they can produce in those parts of the world
where they have the resources, where they are competitive,
but they've not been as well integrated into the trading system.
Do you also think there's maybe too much focus on what the U.S. is doing right now
when it comes to tariffs and restrictions?
Because if you look at China,
it's restrictions on things like rare earth minerals.
We look at India and its protectionism for its own domestic industry.
Are you having conversations with those countries too?
Given that the focus is often on what President Trump is doing
and saying, well, you've got to play by the rules as well.
Definitely. I remember that stop to each other.
And we have conversations with them.
You mentioned China, for instance.
I think there's a recognition in China
that they have to stimulate more domestic demand for their goods.
That the strategy, export led strategy
that has driven the Chinese economy for the past 40 years
may not be the one that can drive it for the next 40.
Simply because China is very large and absorbing the exported goods.
They had a trade surplus of 1.2 trillion last year.
That may not be so possible for all countries around the world.
So China is certainly looking at how to stimulate domestic demand.
Other countries are also looking at how to diversify their dependence on China
for inputs and supplies.
Similarly for the U.S., the U.S. feels that other countries are too dependent on it for demand.
And so it is important for other trading countries to look at other sources of demand.
So some of that is happening and I think it's not a bad thing.
The trading system was built for interdependence,
not overdependence on any one member or any one country or sector.
We've talked about a lot of the problems and the challenges that you face as the WTO.
What are the answers? What are the solutions here?
To get at a solution for a renewed reposition trading system.
First, we have to determine what works and we talked about some of that.
Next is to determine what doesn't work and I've talked about some of that.
I think the third aspect is to remember that not all is doom and gloomy trade.
There are actually some aspects of trade that are pretty exciting if I may say so.
I mentioned to use services trade,
which is growing at about 4.8% is our forecast this year and last year it was just over 5%.
So that's a good pointer.
And I want to mention that within services trade a very exciting development
is the growth of what we call digitally delivered services trade.
That is all trade via computer networks, financial services, business services.
These are all growing at phenomenal rates.
We also have entertainment services delivered over computer networks.
Green trade is also growing.
So I think the third part of the solution is to say,
how do we make rules that will help countries benefit from the new exciting sources of growth?
How do we look at our old rules to make sure they are fit for purpose to serve a new world
where technology is moving very, very fast?
Those are the questions we're asking ourselves at the WTO
and members are going to try to look for the answers to these.
Thank you for listening to the interview.
You'll find more in-depth conversations on the interview,
wherever you get your BBC podcasts,
including episodes with Samantha Power,
former US ambassador to the UN
and Dame Sarah Malali, the Archbishop of Canterbury.
Until next time, bye for now.
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The Interview

The Interview

The Interview