Geopolitical tensions pose risk of global trading system fragmentation: WTO Director-General at Astana International Forum

Astana [Kazakhstan], June 13 : World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala has stressed that one of the biggest challenges is geopolitical tensions leading to decoupling, deglobalization and the risk of fragmentation of the global trading system, The Astana Times reported.

She noted that all this arises from the severe vulnerabilities in supply chains and the trading system due to the COVID-19 pandemic and the Russia-Ukraine conflict, The Astana Times reported.

"Let's be cautious, because if the world trading system fragments, that could be very costly for the entire global economy," she warned.

The WTO Director-General spoke about the challenges facing the global trading system and proposed solutions during a high-level special session on the second day of the Astana International Forum (AIF) on June 9.

The session was moderated by Timur Suleimenov, First Deputy Chief of Staff of the President of Kazakhstan.

According to the WTO's estimates, if the world was to break up into two trading blocs, it would mean a 5 per cent loss in real global GDP in the longer term, which is bigger than the 3.5 per cent loss that the countries of the Organisation for Economic Co-operation and Development (OECD) faced during the financial crisis of 2008-2009.

Dr. Okonjo-Iweala said it was a good sign that the G7 countries stated in May that they are not decoupling but that economic resilience requires de-risking and diversification, The Astana Times reported.

The Astana Times is an English-language news outlet covering Kazakhstan and Central Asia

Touching on protectionism, the Director-General said the WTO urges countries not to retreat from trade, look inwards and become more protectionist but to maintain the stability and openness of the global trading system. She emphasized that such an approach has delivered benefits for the past 75 years, lifting one billion people out of poverty.

Focusing on opportunities, Dr. Okonjo-Iweala named services as the fastest trade segment. Within it, digitally delivered services are growing at 8 per cent per year compared to goods trade, which is growing at 5.6 per cent annually.

"It is clear that the future of trade is services. It is digital, it is green, and it should be inclusive. That is my mantra," she said.

The Director-General underscored the need to reach a plurilateral agreement involving all WTO member countries, particularly on e-commerce, to set the rules underpinning digital trade to assure stability, fairness, and competition within the digital trading arena.

The parties discussed critical outcomes of the WTO's 12th Ministerial Conference (MC-12) chaired by Suleimenov from Kazakhstan's side in June 2022. They highlighted the top priorities ahead of the 13th Ministerial Conference (MC-13) scheduled for February next year in the United Arab Emirates, the report said.

One of the conference's vital outcomes was a landmark agreement on doing away with $22 billion in harmful fishery subsidies aiding and abetting illegal, unreported, and unregulated fishing, which was under negotiations for over two decades.

Dr. Okonjo-Iweala stated that 260 million people depending on fisheries worldwide risk having their livelihood jeopardized by overfishing, whose scale in the oceans ranges from 38 per cent to 50 per cent now. She said the objective is to ratify the Fisheries Subsidies Agreement in 18 months.

She referred to the latest statistics showing that Kazakhstan spent USD 100 million importing fish for consumption in the country, expressing hope that the landlocked state will be able to ratify the agreement.

The Director-General mentioned a declaration on food security adopted at the MC-12 responding to the United Nations World Food Program's request to remove export restrictions, which might contain high food prices and price volatility, as well as world trade in food, heat, and fertilizers.

Regarding the WTO reform, a long-awaited process of immense significance, Dr. Okonjo-Iweala outlined negotiating, monitoring and transparency, and dispute settlement functions.

"We would like to see all those functions strengthened so that the community can be responsive to challenges of the 21st century," she stated, noting the WTO pledge to complete the reform by 2024.

She underlined how important it has been for Kazakhstan to join the WTO, adding that the country can encourage and work with other states in Central Asia, including Uzbekistan and Turkmenistan, on their accession.

"This is a part of the world that is very critical to the global economy," she said, stressing that access to the WTO enables the countries to do fundamental reforms that accelerate economic growth and development, bringing them into global and regional value chains.

Other noteworthy accomplishments of the WTO are the extension of the moratorium on customs duties on electronic transmissions and the MC-12 TRIPS Decision to COVID-19 therapeutics and diagnostics, a massive push on the accessibility of vaccines, The Astana Times reported.

Dr Okonjo-Iweala expressed concern about harmful trade-distorting subsidies that could lead to a situation where smaller countries may not be able to compete in producing and exporting agricultural products, mainly cotton. She mentioned the impact of climate change, which should be addressed at the MC-13.

"Areas that used to be breadbaskets in the past, producing certain foods and crops, may no longer be [viable] because of droughts and floods," she said.

According to the Director-General, the WTO should make deliverables on the graduation of least-developed countries (LDC) from LDC status to allow them to industrialize, expand their economies, manufacture and create jobs.

She also mentioned the investment facilitation agreement that WTO member states are negotiating to eliminate all barriers of bureaucracy to make investment in countries easier.