Unblocking US veto on next WTO chief 'an easy short-term win' for Biden, economists say

President-elect Joe Biden has pledged to waste no time on his first day in office, with a raft of executive orders planned on issues ranging from Covid-19 to climate to immigration.  He has also vowed to restore America’s leadership role in the world by replacing President Trump’s go-it-alone vision in favour of a more cooperative approach to trade and diplomacy. Top economists argue that unblocking the WTO chief appointment should be top of the agenda.

“I think it's an easy short-term win for the Biden administration to accept Dr Ngozi as the next director-general,” Simon Evenett, professor of international trade at the University of St. Gallen said during a webinar organised by the European Centre for International Political Economy.

“This is a low-hanging fruit and a very easy way in which the [Biden] administration could signal that they are interested in seeing the WTO getting back on its feet.”

The global trade body has been without a leader since August last year when former director-general Roberto Azevedo stepped down. Its efforts to select a candidate came to an unexpected standstill in November after the US blocked the appointment of  Okonjo-Iweala, despite broad support from other member countries.

Biden has not given any public indication yet as to whether he will endorse Okonjo-Iweala, a dual Nigerian and American citizen who spent much of her career at the World Bank in Washington DC. But expectations are high that the new administration would drop the US’ previous veto.

“It's possible that on day one, [Biden] unblocks the director-general appointment because it's costless...and it shows that America is restoring belief that multilateral cooperation can work for America,” said Richard Baldwin, professor of international economics at the Graduate Institute Geneva at a separate webinar hosted by the Asia-Pacific Research and Training Network on Trade (ARTNeT) and the Geneva Trade Platform.

Revitalising the WTO under Biden administration. Beyond the immediate boost the Biden administration could give to the WTO chief appointment, it’s unclear how far the new administration is willing to take the lead on driving other much-needed WTO reforms and addressing the paralysis of its dispute settlement body.

“The WTO is near, if not irrelevant in terms of international trade policy from a US perspective,” said Kelly Ann Shaw, a partner at Hogan Lovells and a former top White House trade and economic adviser.

Speaking at an online panel co-hosted by the law firm on 11 January, she said she did not foresee any change taking place at the WTO in the short term.  “We have not negotiated meaningful rules in decades, countries don’t seem to comply with the terms of the agreements, and the idea of bringing in modern challenges related to China, the digital economy, or even issues like climate, seem far-fetched and really only a negotiators dream at the moment.”

Though no quick fix, Baldwin believes WTO reforms  could be part of Biden’s trade policy as long as it’s about restarting existing processes rather than instigating new ones. In a paper entitled “Getting America back in the game: a multilateral perspective” published by the Geneva Trade Platform, a group of economists including Baldwin write:

“With US support, a group of like-minded WTO members could reinvigorate a deliberative process aimed at identifying the necessary reforms. This demarche would go a long way to restoring trust in the multilateral, rules-based trade system, and in America’s interest in the system – a system that it led from 1947 until recently.”

Biden vs Trump on trade: what to expect. During his four years in power, Trump has used trade policy as his primary tool to carve out his “American First” approach, as he tore up trade agreements, launched damaging trade wars and imposed tariffs on US rivals.

Although Biden has made no promises to end Trump's tariffs on EU products or China, his handling of trade policy will take a different and more and more collaborative approach as he seeks to mend ties with key US allies.

"Trade is going to be a component part of the Biden administration's broader foreign policy and broader domestic policy, unlike [during] the Trump administration, where it was one of the top three issues and in many ways stood in and of itself,”  said Kelly Ann Shaw.

In her first speech since being nominated as US trade representative, Katherine Tai, last week said Joe Biden’s trade policy will focus on helping American workers by ensuring trade agreements protect and enhance US jobs.

As a result, free trade agreements or further liberalisation of trade will be off the table as Biden focuses on his “foreign policy for the middle class” and fixing domestic problems first.

Still, Baldwin argues Biden will deal with trade if he wants to repair the damage Trump did to America’s reputation and in undermining multilateral cooperation:

“If Biden is going to get back in this game, trade is going to have to be a “track” in foreign policy or a trade track and climate policy... And the idea that there's going to be a forceful, and influential US trade representative that's going to lead these things, I don’t think that’s on. If this is going to get Oval office attention it is going to have to come through foreign policy.”