WTO chief pushes reglobalized supply chains to cut down bottlenecks

World Trade Organization Director-General Ngozi Okonjo-Iweala has urged diversification of global supply chains, amid ongoing efforts to advance the body’s reforms.

“There is a problem of excessive concentration of manufacturing in certain sectors in certain countries,” she told CNBC’s Martin Song on the sidelines of the latest weekend summit of the Group of Seven (G7) major economic powers in Hiroshima, Japan. “I agree that we need to build resilience, the world cannot depend on a handful of countries for some key products.”

She cited the lack of available Covid-19 vaccines for some medicines and certain importing regions as manufacturers have introduced export restrictions during the pandemic. She also cited a worldwide shortage of critical semiconductor chips, which has created manufacturing bottlenecks in the technology and auto industries.

The WTO chief cited the dual benefits of developing countries pursuing diversification, which can simultaneously boost economic growth and meet global supply needs.

“Let’s re-globalize by putting our diverse industries in these countries. We kill two birds with one stone. One is that we build global resilience, not just our neighbors and our friends, because You never know who your friend is. Your friend today may not be your friend tomorrow,” she argued.

“Let’s find those areas where we have the right environment, diversify and use them to bring them from the fringes into the global system. This will re-stimulate growth in these countries and the world.”

The emphasis on “re-globalization” comes as geopolitical tensions and recent U.S. legislation have raised concerns about a potential fragmentation of global trade.

The US Lower Inflation Act – a sweeping green tax, health and climate legislation signed by President Joe Biden last August – introduced subsidies to stimulate domestic production of electric vehicles while allaying “serious concerns” within Europe “The Union’s prospects for exporting its own goods.

The fate of the west’s trade with China, a major manufacturing hub, is also in doubt, despite G7 leaders categorically reiterating that they will not pursue a policy of economic decoupling from Beijing In their latest communiqué on Saturday.

“Our policy approach is not designed to harm China, nor to hinder China’s economic progress and development. A growing China that plays by international rules is in the global interest. We are not decoupling or turning inward. At the same time, we recognize that economic Resilience requires de-risking and diversification,” they said, but pointed to the need for collective and individual steps to invest in their own “economic vitality” and reduce “overreliance on our critical supply chains.”

The WTO faces a more domestic struggle in the process of overhauling the first-tier appellate body of its global trade dispute settlement system, where the U.S. Trade Representative’s office Charged in February 2020 “continued to cross the line” and expand its own power “at the expense of the authority of the United States and other WTO members.”

The Appellate Body has effectively been paralyzed after the United States blocked the appointment of adjudicators in recent years.

“Our goal is to have a fully operational (dispute resolution system) by 2024,” Deputy U.S. Trade Representative Maria Pagan told Reuters in January. The WTO’s Okonjo-Iweala said Washington and other countries had been in talks to overhaul the appellate body, stressing that she wanted to “go beyond discussions and make concrete recommendations”.

Asked about reports of proposed reforms in the United States, where plaintiffs and defendants must agree to bring disputes to the attention of the Appellate Body, the director-general said such proposals had not yet become formal proposals.

“I think these are some of the ideas that people might have heard about, the US is talking about and so on. But we don’t have a written proposal yet.”

The WTO is scheduled to hold its next ministerial meeting – the so-called MC13 – in February 2024.

“We may not be done reforming by then,” she noted, but added, “I hope and expect that we will have done a great deal to show that the organization is purposefully moving in the direction of reforming the system.”