How does an import-driven economy work

Blockage by the big blocks

(This text is taken from "nd.DerTag"

By Hermannus Pfeiffer

With the election of Joe Biden as President of the United States, the way was clear for them. Late on Monday afternoon, the governing body of the World Trade Organization (WTO) confirmed that Ngozi Okonjo-Iweala will become the new General Director. This ends months of lack of leadership. In May 2020, her predecessor Roberto Azevedo surprisingly announced that he would be stepping down early at the end of August. But the then US administration under President Donald Trump thwarted the appointment of the post, among other things by constantly pulling new candidates out of the hat.

And not only that: Trump's protectionist policy under the motto "America first" prevented the refilling of vacant judges' positions in the appellate body of the WTO dispute settlement body, which was thereby incapable of acting. The most important institution of the UN specialized agency plays an important role in the ongoing dispute over state subsidies for the aircraft manufacturers Airbus (EU) and Boeing (USA). "The WTO cannot function properly without a system that guarantees compliance with trade rules," criticized Okonjo-Iweala in an interview with a German newspaper in August. However, the judges were also criticized in Japan and the EU for actually setting the law on trade issues and not just interpreting existing rules.

But even before Trump's blockade, the World Trade Organization was on the decline. It was founded 25 years ago to re-regulate international trade and economic relations in the emerging globalization. Alongside the International Monetary Fund and the World Bank, the WTO became the most important institution in the world economy. However, it did not want to create justice in trade, and left economists, parties and non-governmental organizations have criticized it since it was founded. “Rather,” says the World Economy, Ecology & Development (WEED) association, “it was about the global enforcement of property rights and the expansion of markets.” Critics also accused the WTO of being close to the corporate group, lacking transparency and discriminating against the global South . Others saw and still see an opportunity in the World Trade Organization to curb capitalism to a certain extent by means of global rules.

The Western model of market economy and "post-democracy," as the British political scientist Colin Crouch calls it, seemed to become an export hit after the fall of real socialism. But the unprecedented rise of China changed the global balance of power, including in the WTO. "Northern" multilateralism fell on the defensive. In addition, the different interests of rich and desperately poor countries, export- and import-driven economies with very different political systems ultimately made the WTO a lame duck.

Instead of multilateral treaties, bilateral and regional agreements are increasingly determining what happens. No more groundbreaking WTO agreements were concluded under Director General Azevedo. On the other hand, from the point of view of the export industry, the number of trade-restricting measures has quintupled in the past ten years. The rise of Trump and then also the corona pandemic intensified the protectionist tendencies. In the past twelve months alone, the WTO member states have issued 114 pandemic-related trade restrictions.

The new general manager Okonjo-Iweala will start a complicated job on March 1st. And the expectations of them are great. Developing countries expect the West African woman to have her interests heard more. This also applies to business associations from the global north. The replacement of the WTO head post is a “liberation” that offers the opportunity “to demand clear competition rules from the members again and to defuse the trade tensions that have increased in recent years,” reported the Federation of German Industry. Economists put a brake on expectations: In view of the conflicting interests between the 164 member states, "at best minimalist agreements are conceivable," said the President of the Kiel Institute for the World Economy, Gabriel Felbermayr. This is also due to the ongoing tensions between the US, China and EU blocs. Whether the new US president will defuse the conflict is controversial. Joe Biden also seems to be following an "America-first" agenda.

Okonjo-Iweala initially sees other priorities than a fundamental reform of their organization. First of all, the WTO must achieve “successes and results” in combating the economic and health consequences of the corona pandemic. It is also new notes from the WTO when Okonjo-Iweala describes trade as the engine for "sustainable" growth. The WTO will also deal with issues such as a possible revocation of patent protection for corona vaccines or the cross-border trade in climate protection certificates. Of course, the same applies to the new Director-General: Her room for maneuver is limited by the interests of the most powerful member states.