Dr Ngozi Okonjo-Iweala, head of the WTO: What is going on in the Middle East will have a significant impact on trade

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Hello, I'm Ben Thompson, BBC business presenter.

And this is the interview from the BBC World Service.

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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.

You're listening to the interview from the BBC World Service.

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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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