WTO head pushes for reform and reglobalization

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The head of the WTO has called for greater efforts to fight deglobalization in world trade at a conference in Switzerland.

The director-general of the World Trade Organization (WTO) has urged countries to reject protectionism and also emphasized the need for the organization to reform in order to support an effective multilateral trading system.

Delivering the keynote address at last week's World Chambers Congress in Geneva, Ngonzi Okonjo-Iweala spoke of the benefits of globalized trade, while acknowledging that recent economic shocks have led to major risks for its future.

One of the biggest threats is the fragmentation of trade systems. Economists at the WTO have warned that the world may split into two rival blocs, with the US and China at the forefront of competing factions. If this happens, it could reduce global GDP by more than five percent in the long run, with the biggest impact being felt by the least developed countries.

Ms Okonjo-Iwaela urged governments and organizations to push back against these risks, which she said would also harm global supply chain resiliency as well as being more costly.

“A better path forward is what we are calling ‘reglobalization’: deeper, more deconcentrated markets, achieved by bringing more people and places from the margins of the global economy to the mainstream.” she continued.

Improved diversification would also make it more difficult for countries to weaponize supply chains and interdependencies. One example given by the director-general was critical minerals, where global trade is currently dominated by a few select players.

She noted that while some minerals themselves are not particularly rare, the technology needed to extract and process them is often costly and out of reach of developing countries, which reduces options for many traders.

While there is a clear need for reform of the WTO, especially in areas such as its dispute resolution mechanisms, Ms Okonjo-Iwaela also highlighted the advantages of the system. For instance, she noted that the organization's Information Technology Agreement has removed tariffs on almost $3 trillion worth of trade, while its Trade Facilitation Agreement has cut red tape and made it cheaper and faster to move goods across borders. 

"The system works. Yes, parts of it need to be fixed. We need to fix what needs fixing. We don't need to throw the baby out with the bathwater," she stated.