INTERVIEW: Africa, Mideast will likely suffer most from reduced grain shipments - WTO director general

Mohamed Elkazaz, Sunday 22 May 2022

For years, global trade has been facing major challenges that were magnified in 2020 due to the onset of the coronavirus pandemic that affected the global economy.

Ngozi Okonjo-Iwela
Ngozi Okonjo-Iwela

 

Amid the severe crisis in global trade came another major catastrophe on both the humanitarian and economic levels — the Russian-Ukrainian War, which continues to rage and shows no signs of ending any time soon.

Are there new and different solutions to mitigate the impact of these tragedies and calamities? Is there a way out for all these crises?

The World Trade Organisation (WTO) has some solutions in response to the need for international cooperation and fruitful coordination between the countries of the world and dealing with export restrictions with some caution in order to alleviate the impact of these crises worldwide.

Recently, Ahram Online interviewed Director General of the World Trade Organisation Ngozi Okonjo-Iwela — who is the first African woman to hold this position in the organisation’s history.

Ahram Online (AO): To what extent has global trade been shaken by the Russian-Ukrainian War? What are the risks of this war?

Ngozi Okonjo-Iwela (NOI): Global trade has been impacted significantly. Supply chain problems have worsened. Our economists have issued their trade forecast for 2022 and 2023, taking into consideration the war in Ukraine. They predict that global trade growth this year could be cut by one third, from the 4.7% the WTO forecast last October to 3%.

Some regions will be more strongly affected by the conflict than others. Europe is the main destination for both Ukrainian and Russian exports and will likely experience the brunt of cuts in supply. 

But it is Africa and the Middle East that will likely suffer the most from reduced shipments of grains and other foodstuffs. This trade disruption will boost prices of agricultural goods and bring negative consequences for food security in poorer regions.

AO: What are the effects of the food security crisis on the Arab world and North Africa? What are its risks?

NOI: The war in Ukraine has created a humanitarian crisis of immense proportions and has also dealt a severe blow to the global economy. The brunt of the suffering and destruction are being felt by the people of Ukraine themselves, but the costs of the war in terms of reduced trade and output are likely to be felt by people around the world through higher food and energy prices and reduced availability of goods exported by Ukraine and Russia.

Poorer countries are at high risk from the conflict, since they tend to spend a larger fraction of their incomes on food compared to richer countries. This could impact political and economic stability in different regions in the world. Food and energy are the two biggest items in the consumption baskets of poor people all over the world.

I know that both Egypt and Tunisia have gone to the IMF for help in offsetting the effect of the war on their economy.

While shares of Russia and Ukraine in world trade and output are relatively small, they are important suppliers of essential products, notably food and energy. Both countries accounted for 2.5% of world merchandise trade and 1.9% of world GDP in 2021.

They also supplied around 25% of the world’s wheat, 15% of its barley, and 73% of its sunflower oil exports in 2019. Russia alone accounted for 9.4% of world trade in fuels, including a 20% share in natural gas exports.

Many countries are highly dependent on food imports from Russia and Ukraine. For example, more than half of wheat imports in Lebanon, Egypt, and Tunisia come from Russia and Ukraine, and food prices have risen considerably in these countries. Other countries are more dependent on fuel imports from Russia, like Finland (63%) and Turkey (35%).

The impact of the conflict goes beyond food security here; Russia and Ukraine are also key providers of inputs into industrial value chains. Russia is one of the main suppliers globally of palladium and rhodium, key inputs to catalytic converters in the automotive sector and to semiconductors.

AO: Before the war, global food security was already tense, as supply chains and weather patterns had already pushed food prices to their highest level in nearly a decade. What role can the WTO play in halting this decline? What is the role of the organisation in limiting the aggravation of food security in Egypt and the Arab world?

NOI: It is very true that even before the Russian-Ukrainian war, the post-pandemic economic recovery had left much of the world behind. Growth in the poorest countries was furthest behind the pre-2020 trend, reflecting their weak fiscal capacity and inequitable access to COVID-19 vaccines.

Nevertheless, the world can mitigate these risks and surpass these difficult times by deploying the right global responses. At the centre of this response should be international cooperation.

Governments should avoid any unnecessary disruption to trade in agricultural products. This means applying few if any export restrictions. Keeping the number of export restrictions on food down is an important role for WTO members to play to keep world food prices from spiralling.

Further studies show that export restrictions in the 2008-2009 food crisis contributed greatly to the escalation of food prices. Those countries that have surplus buffer stocks should make those surpluses available on world markets to help drive down prices.

Experience also shows that international cooperation can help manage the knock-on effects of surging food prices. For a decade, sharing information about food supplies and stockpiles through the Agricultural Market Information System has enabled leading exporters and importers to prevent panics and keep markets functioning smoothly.

With the global trading system already struggling to cope with high transport costs and congested ports, closer coordination could help stabilise international markets for food, energy, and commodities, and minimise additional disruptions to supply chains.

More importantly, the WTO’s monitoring and transparency function can help ensure that food and agriculture supply chains that are not directly affected by sanctions remain open and operate efficiently.

The WTO plays an important role in mitigating the negative effects of the conflict and in rebuilding a post-conflict global economy. Keeping markets open will be critical to ensure that economic opportunities remain open to all countries.

Better visibility regarding market disruption would also enable the international community to identify and mobilise financial and other assistance for poor countries badly affected by rising food prices.

AO: Do you think that the export restrictions imposed by some countries aggravate the global food crisis?

NOI: There is no doubt that export restrictions and hoarding food supplies can have a negative effect on countries that are net food importers. Items such as grains, minerals, and fertilisers are essential for basic food security in the many countries that lack the water, soil, and weather conditions to grow all the food they need.

In my last meeting with all WTO members, I said that this is not the time to retreat inwards, and I called on all countries with buffer stocks that can afford to share to coordinate the release of wheat, barley, other cereals, grains, and oils into international markets, thereby alleviating any supply squeeze prices.

AO: Did the war put pressure on the organisation as a negotiating forum?

NOI: Diplomatic tensions outside the organisation have naturally made their way into the realm of the WTO, given that it is an international meeting and negotiating forum.

WTO members have used the official meetings of the organisation to voice their concern regarding the events in Ukraine and express their support for the Ukrainian people and call for an end to the war.

Nevertheless, work at the WTO continues, as the organisation has many other functions in addition to being a negotiation forum. As you know, the WTO administers the implementation of multilateral trade agreements and also looks into trade frictions between countries. Our economists also just issued a report on the implications of the conflict in Ukraine on trade and global economy.

AO: In October of 2021, a group of developing countries including Egypt, Pakistan, Tunisia, South Africa, Sri Lanka, and Uganda presented a report that sought to disclose many of the concerns of developing countries regarding the management of the shock caused by the pandemic, as developing and least developed countries do not have the tools that might enable them to respond, recover, and maintain resilience to withstand a crisis like this on a global scale.

Hence the need to shift the focus of work within the WTO’s Pandemic Response from liberalisation and regulatory constraints to policy space and enablers of structural transformation and resilience building.

What has been the organisation’s response to this proposal?

NOI: The proposal you referred to was a contribution from several developing countries, including Egypt, to the multilateral process in which WTO members were shaping the trading system’s response to the pandemic and future crises.

This process looked at what WTO members should do as they navigate the pandemic and its negative impact in order not to restrict trade or cause additional supply chain bottlenecks for goods directly related to the combat of COVID-19.

These elements included transparency, export restrictions, trade facilitation and regulatory coherence, food security, and other related topics.

Ahead of our postponed MC12, members were working — and in fact still are — on a ministerial declaration of these elements that could be adopted at our MC12 Ministerial Conference, which is now scheduled for June 2022.

The proposals put forward by members were discussed in various formats, and these discussions were led by one of our many seasoned ambassadors as part of the process to try to define the WTO response to the pandemic.

This work was taking place simultaneously with negotiations on an intellectual property waiver to facilitate the manufacturing and equitable distribution of vaccines. Egypt is one of the proponents of this proposal that was put on the table back in October 2020.

Last month, there was a breakthrough on the compromise text in the high-level discussion involving the EU, US, India, and South Africa, and I sincerely hope that this proposal would get the support from all WTO members as we move forward.

These sorts of efforts are important not only because they help members combat COVID-19, but also because they help bolster the credibility of the organisation as a place where solutions to challenges faced by the global commons can be found.

AO: The crises that the global economy is currently experiencing are related to the environment. The processes of producing and trading goods are an essential part of our globalised economic market, but they have a significant impact on the environment and the climate.  What are the objectives of the WTO and its role in reducing the impact of commercial activities on climate change?

NOI: A growing number of WTO members believe that trade can be used as a tool to address different environmental challenges. For that reason, and in November 2020, 71 WTO members kicked off discussions on how trade-related climate measures and policies can best contribute to climate goals.

This initiative will be looking into issues such as circular economy and environmental goods and services to identify concrete actions that contribute to sustainable trade.

Another group comprising 70 WTO members is focusing on how to reduce the negative impact of plastic pollution on health, the economy, and the environment through sustainable trade policies.

WTO members are also discussing how to reduce carbon emissions from fossil fuels and looking at how to enhance trade in environmentally friendly goods and services.

AO: In 2015, WTO members targeted the reform of high subsidies and trade barriers that distort agricultural trade, and they also agreed to find solutions to the issue of public stocks for food security purposes. Do you not agree that this issue requires new and different attention in the context of the Russian-Ukrainian War?

NOI: Absolutely. The current war and the pandemic and its negative impact has shown that the work of the WTO members and their negotiations matter to the lives of millions of people around the world. The circumstances now have created a sense of urgency to get to agreements on those issues such as agricultural or fishing subsidies that have been ongoing for more than 20 years now and have a direct impact on people’s livelihoods.

However, there are fears, especially among developing countries who are net food-importers, that reducing subsidies and protectionism in agricultural markets will raise the price of these imports.

These are valid concerns, particularly for poorer countries. WTO members are actively using the negotiation forum provided by the WTO to address similar concerns and to arrive at the best policy formulations in relation to trade in agricultural products.

AO: What are your expectations for the impact of this crisis on the participation of SMEs?

NOI: First, let me recognise that even before the war, so many MSMEs were hit hard by the COVID-19 pandemic. The pandemic and subsequent containment measures have affected virtually all companies around the world. The smaller the company, the stronger the harms felt.

The uncertainties and higher transport costs and disruptions in supply chains caused by the war will no doubt further compound the challenges facing MSMEs as they recover from the pandemic and try to remain competitive in a changing economic landscape.

MSMEs are at the heart of discussions at the WTO, particularly at the Working Group on MSMEs. This group has developed a set of recommendations that aims to help international small business trade to run more smoothly.

For instance, the group invites members to include MSMEs in the development of new regulations in order to reduce any regulatory burdens these businesses might face as a result of these regulations.

Another discussion that promises to help small business increase their participation in international trade are the e-commerce negotiations, which aim to set global rules on e-commerce. The Working Group on Trade and Gender gives a special focus to women owned enterprises and female entrepreneurs.

Small businesses in 67 countries will get to benefit from a recently concluded agreement on services domestic regulation, which will be reducing administrative costs and creating a more transparent operating environment for service providers hoping to do business in foreign markets.

This is a much-needed boost, particularly for businesses that were affected by the pandemic.

AO: During the pandemic, it was reported that the WTO would launch commercial dialogues related to food with the aim of encouraging discussion on the role of international trade in food security. How will these dialogues take place with the escalation of the food security crisis in the world?

NOI: As you know, food security is of critical importance to WTO members and is also a central topic in the current negotiations to reform global trade rules.

I am happy to announce that we held a high-level conference on food security on 26 April so that our members could better appreciate trade measures that will help boost global food security.

This conference was chaired by Agriculture Negotiating Group Chair Gloria Abraham Peralta of Costa Rica. It provided an informal space for dialogue on trade and food security and enabled participants to explore the linkages between food security, policy frameworks, trade, and markets, drawing on experience at the national and regional level.

AO: In your campaign speech to run for the presidency of the organisation, you mentioned that in recent years, the multilateral trading system has gone through difficult and challenging times, however, the world — now more than ever — needs a renewed WTO, so what reforms are required for the main functions of the organisation?

NOI: The issue of WTO reform encompasses many areas of the WTO’s work. Members have been thinking about how the WTO could be improved and respond more effectively to the challenges facing the multilateral trading system for a couple of years now.

The main themes of reform involve changes to the core functions of the WTO —0 that is, negotiations, monitoring, and dispute settlement functions. In particular, members would like to see early reform and reinvigorations of the dispute settlement system.

The US has raised objections to the previous system, and these objections have been generally viewed with sympathy by the rest of the membership. The US has also recently begun reaching out to other members to start discussing what reforms of the dispute settlement system could entail.

We hope to agree on a process for WTO reform at our upcoming 12th Ministerial Conference in June. The need to update the WTO’s rule book and be able to conclude outstanding negotiations or new topics is another important aspect of the reform debate.

AO: What is the truth about the appeal submitted by the EU against the Egyptian requirements for import registration last January? What is the role of the organisation in solving these problems?

NOI: The EU has requested the WTO to consult with Egypt concerning certain registration requirements for foreign entities owning trademarks and importing products into Egypt.

The WTO provides a forum where trade concerns or frictions can be addressed. The beauty of the WTO Dispute Settlement Procedure is that it allows members to consult with each other to try to find an amicable solution to their trade friction before the issue turns into a dispute settlement case.

The case you mentioned will have to go through the timelines and procedures administered by the Dispute Settlement Body and it is premature to give any conclusions on this.

AO: Finally, how do you view the path of economic reform that Egypt has been implementing for years?

NOI: Egypt has a strong commitment to transform its economy. We can see that in the various reform initiatives that were launched, which build on its Egypt 2030 Vision for Sustainable Development and the African Union Commission’s 2063 Agenda: The Africa We Want.

The importance Egypt places on its industrial development and the African market are very important to help Egypt prepare and adapt for the future. The African Continental Free Trade Area Agreement (AfCFTA) can be an important tool to support Egypt’s development and industrialisation efforts, I believe.

COVID-19 has imposed additional constraints on many governments as they are trying to increase prosperity for their citizens; I have no doubt that Egypt has the potential to build its economy to become stronger and more resilient through the various reform agendas and policies on the table.

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