The head of the world’s trade watchdog has delivered an upbeat take on US President Donald Trump’s unilateral tariffs – one of the biggest shocks to the global trading system since its emergence after the Second World War – casting the disruptions as a chance to cut supply imbalances, open new markets and spur “reglobalisation”.
A little over six months since Trump began slapping new levies on America’s trading partners, WTO Director-General Ngozi Okonjo-Iweala said on Wednesday that nearly three-quarters of global commerce remained governed by WTO rules, despite escalating tariff battles and repeated predictions of the body’s demise.
“I don’t know about you, but I’m excited about trade and what’s going on, even the fact that we have these challenges,” she told delegates at the WTO Public Forum, the organisation’s largest annual outreach event.
“The opportunity is knocking at our door to do things differently,” she said.
Okonjo-Iweala acknowledged that the world’s trading system has been “heavily disrupted”, but pushed back against claims that the WTO had outlived its relevance.
“Over the years, the history of WTO negotiations has led many to pronounce its untimely demise,” she said.
“Far from that, the WTO is alive. It is true the world’s trading system has been heavily disrupted, in a way it has not been for the past 80 years. But let’s not minimise the challenge.”
The new tariffs implemented by Trump, a long-standing champion of such measures, have reduced the share of global goods trade conducted under the WTO’s most-favoured nation principle from about 80 per cent before the measures to 72 per cent today, the trade body’s chief estimated.
“The system has been what I call dented,” she said. “But what is amazing is the resilience,” in that nearly three-quarters of world goods trade is still taking place on WTO terms.
Trump has argued that tariffs protect US industries, revive manufacturing jobs, and reduce trade deficits.
He has also criticised the WTO as outdated and unfair, saying it allows countries including China to exploit rules through subsidies and non-market practices, harming American manufacturing.
In April, he imposed a universal 10 per cent tariff on nearly all global imports, complemented by “reciprocal” country-specific duties ranging from 10 to 41 per cent, designed to match or exceed foreign trade barriers.
Despite months-long negotiations and a framework agreement in place, China faces average tariffs of 55 per cent, driven by strategic and economic concerns.
India and Brazil are subject to 50 per cent tariffs. India’s are due to its Russian oil purchases and Brazil’s are tied to political disputes with Sao Paulo.
For nations with smaller trade deficits, such as the UK, Japan, South Korea and Vietnam, Trump has secured bilateral agreements, lowering their reciprocal tariffs around the 10 to 25 per cent range along with billions of dollars’ worth of investment commitments in the US.
Okonjo-Iweala highlighted the resilience of the trading system, calling it a “stable core of trade in a sea of instability and uncertainty”.
While volatility is likely to persist, the WTO chief said the endurance of that core should give members confidence to adapt. A central part of that adaptation, she said, must be reducing overdependence on a narrow set of markets and suppliers.
She described “reglobalisation” as a strategy for strengthening resilience by expanding supply chains into new and often overlooked regions.
Such diversification, she argued, should extend to poorer regions and marginalised economies.
“If you’re forming alliances to decentralise supply chains, what we call re-globalisation, and you’re doing it in countries that were at the margin of trade, you actually have a win-win situation,” she said.
Instead of extracting resources and moving them abroad, Okonjo-Iweala said countries could process them locally and integrate into global supply chains on better terms.
“It’s very smart for businesses and governments to think not just in terms of dependency, but of market access, demographics and planning for the future,” she added, pointing to the opportunities in developing and least developed economies. - SOUTH CHINA MORNING POST
