“SERVING THE GLOBAL COMMONS: THE ROLE OF TRADE IN POST-COVID RECOVERY AND PRE-PANDEMIC PREPAREDNESS”
Speech delivered by World Trade Organization Director-General Dr. Ngozi Okonjo-Iweala at the award of an honorary doctoral degree in politics by Luiss Guido Carli
Rome, 29 October 2021
President Boccia, Director-General Lo Storto, Rector Prencipe, Professor Christiansen, professors, students, friends.
Thank you for the immense honor you have conferred upon me today.
I did my formal training in economics and pursued a career in economic development at the World Bank, but found myself thrust into politics when I was named finance minister twice by my government. I also served as foreign minister, becoming the first female to serve in both positions.
I spent seven years as finance minister, the longest serving in my country's history. So during that time I became what I term a 'technopol' – a technocrat with political experience.
I learned that to deliver results that improve people's lives and economic prospects, it is essential to navigate delicate political relationships, and to build coalitions of support across them.
This was the case during my first term as Nigeria's finance minister, when our government was restructuring sovereign debt and introducing often-contentious domestic economic reforms.
It was true as well in my second term as finance minister, when we needed to reform the government's financial management system to fight corruption and improve economic governance. There is nothing more political than economic reforms that usually breed winners and losers. The politics of reform dictate that you harness the support of the winners in order to garner the strength needed to contain the losers. A failure to understand and manage these politics dooms reform efforts.
Navigating political relationships was also necessary at the World Bank, a supposedly non-political organization, when we were persuading donor governments to provide more financial support to low-income countries.
Even then I became chair of the Board of Gavi, the Vaccine Alliance. Building alliances across governments, the private sector, and philanthropic agencies had its political moments.
Politics is part of the job description for the Director-General of the World Trade Organization. So I hope this honorary doctorate in politics will help me better support WTO members' efforts to find compromises, deliver results for people and the planet, and reinvigorate the organization for the 21st century.
I have received many honorary degrees, but this one is special, because it comes at a time when I need all the support possible as I work to carry out the necessary reforms to one of the world's most important multilateral institutions – the WTO.
So once again, thank you very much.
Ladies and gentlemen, this university is part of Italy's story of entrepreneurial success. Set up in the 1970s by entrepreneurs and industrialists to train people in the skills demanded by Italy's changing labour market, Luiss has recorded enormous success.
Guido Carli would rightly be proud of what the university has become today. Luiss graduates are now represented at the highest levels of business and public service in Italy and around the world, from the C-suites of Apple and Intesa Sanpaolo, to the Italian and European parliaments.
In fact, I will be going directly from here to a meeting of health and finance ministers, where Italy will be represented by Roberto Speranza – Italy's health minister, and a Luiss alumnus. Even my wonderful young Sherpa for the G-20 meetings Marco told me he is a Luiss University graduate.
Italy is currently engaged in an ambitious attempt to reform and rejuvenate its economy. Led by one of the most respected and astute prime ministers in the world, Italy is reinventing itself – as it has in the past – for the digital economy and the modern-day challenges of the pandemic and climate change. I am sure Luiss students and graduates will figure prominently in this reinvention.
Today, I want to talk about a different reinvention – reinventing the way we think about trade and the role of trade policy in our economies and our societies. Over the years, trade and the WTO have lost their reputation as instruments designed to serve people and planet. Trade has gradually become the poster child of, globalization, blamed for job losses and rising inequality a great deal of which is actually due to changes in technology and the failure of governments to deploy active labor market policies to assist those left behind.
Today, I would like to argue that the multilateral trading system, and the WTO rules that underpin it, have been a force for good in the past, are a force for good in the present, and will remain a positive force in helping find solutions to contemporary problems and future challenges of the global commons.
Adam Smith observed, in The Wealth of Nations, that "the propensity to truck, barter, and exchange one thing for another" is part of human nature. The insights that made him famous were that exchanging one thing for another made the division of labour possible, and that this division of labour could be scaled up, limited only by the extent of the market. The productivity gains that come from specialisation and scale remain at the centre of how trade contributes to people and to the world.
But trade has always served multiple ends – ends that go beyond the goods and services we get in return, and even beyond higher per capita incomes.
The postwar architects of the multilateral trading system deliberately sought to foster peace through economic interdependence. Like their counterparts who were rebuilding Europe, they believed that if goods do not cross borders, soldiers ultimately will.
As the trading system evolved, so did the ends governments pursued. In 1994, the preamble to the Marrakesh agreement establishing the WTO made this explicit: the purpose of the new organization would be to use trade as a means to enhance living standards, create jobs, and support sustainable development. Trade was about improving people's lives.
In the years since then it has sometimes felt as if WTO members lost sight of these goals. Negotiations were allowed to languish amid zero-sum thinking, instead of delivering concrete results for people. I am only half joking when I say that perhaps we left too much to the trade lawyers.
But realities have changed. In this age of 'polycrisis' – intersecting epidemiological, environmental, and economic crises - losing sight of the big picture is, frankly, a luxury we cannot afford.
Today, many of the biggest threats to people's living standards, social stability, and even our physical security come from problems of the global commons: the COVID-19 pandemic is the most obvious example, but also climate change, biodiversity loss, and economic exclusion.
Trade and trade policy can and must help us address these problems, and better prepare ourselves for future risks and shocks. We need to act consciously to put trade policy in the service of the global commons – in the service of health, environmental conservation, and socioeconomic inclusion.
It's worth pointing out that the challenging politics of global trade are, to a significant extent, a product of succes
- For the thirty years prior to the pandemic, the open global economy underpinned by the WTO rules was a key enabler of rapid growth in many developing countries.
- This growth lifted more than a billion people out of poverty. It also reshaped the balance of global economic power, leading to the geopolitical tensions we see today between China and the US, China and the EU, to some extent even between the EU and the US, and between developing and developed countries.
- It is true that there are more big voices at the global table – and these voices resemble each other less than they used to.
- But because getting to agreements is harder, multilateral institutions like the WTO are often less nimble than they should be at responding to people's changing needs. When this combines with public anxiety about technological change and weak domestic social policies to correct economic dislocation, the frustration can degenerate into discontent, anger, and – ironically – populist opposition to global institutions like the WTO.
Insofar as I see a case for optimism about international economic cooperation today, it comes from the fact that challenges like the pandemic and climate change present governments everywhere with crises in which their long-term strategic interests are fundamentally aligned.
If we fail to protect the global commons, the resulting chaos will make people in all countries more vulnerable. To most effectively serve the national interests of each, we need international cooperation among all. After all, strategic cooperation can exist alongside strategic competition and nations need to be cognizant when to deploy one, or the other.
It is my hope that by delivering results together – starting with joint efforts to vaccinate the world and bring this terrible pandemic to an end – we can lay a foundation for renewed cooperation, on trade and other areas.
I will devote my remaining remarks to describing how trade has been playing an important role in the global fight against COVID-19.
I will make the case that trade is an essential part of ending vaccine inequity and achieving the strong, sustainable, and socially inclusive economic recovery we need. And I will point to ways trade can help us better prepare for future health crises.
I will also briefly look at how trade can help respond to other problems of the global commons, from climate change to socioeconomic exclusion.
For all the various warnings that we were overdue for a respiratory virus pandemic, when COVID-19 arrived, it took the world by surprise.
We had not invested the necessary billions in prevention – and we have subsequently paid trillions in the shape of fiscal and monetary policy support, as well as foregone growth - $26 trillion in fact, based on figures from the IMF.
Throughout the COVID shocks, the multilateral trading system has helped keep food and medical supplies moving around the world, despite lockdowns and restrictions on travel and transport.
In 2020, even as the value of global merchandise trade fell by 7.6%, the value of trade in medical products rose by 16%. Despite initial disruptions from export restrictions and other barriers, trade in personal protective equipment grew by nearly 50% - and by 480% for textile face masks.
Backed by collaboration and investment across the private and public sectors – and the cross-border exchange of ideas, data, and technology – scientists developed and tested COVID-19 vaccines at record speed.
As these vaccines proved safe and effective, supply chains came together to provide the specialized inputs and capital goods needed for production at scale. Trade was absolutely critical: Pfizer and BioNTech's vaccine relies on components from 19 countries, as does Moderna's. AstraZeneca's supply chains cut across at least 15 countries, and Johnson & Johnson's across 12 countries.
Purely national supply chains could not have delivered the nearly 7 billion doses the world has administered thus far.
Of course, these doses are still not nearly enough to meet global needs – even more so now with booster shots pushing up global demand, with rich countries once again at the front of the queue.
The inequality in access to COVID-19 vaccines remains a stain on our pandemic response.
Barely 5% of people in Africa, and less than 2% of people in low-income countries, are fully vaccinated – the lowest of all regions and income categories.
This compares to over 63% in developed countries, and 55% in upper-middle-income countries.
Vaccine inequity is not just morally unacceptable, it is a practical and economic threat to people everywhere, even in countries where life seems to be getting back to normal. The longer the virus is allowed to circulate freely in parts of the world, the greater the chance that dangerous new variants will emerge and go global.
Vaccine inequity is also a major factor in the K-shaped recovery we are seeing in global economic output and trade, with advanced and some emerging market economies surging ahead while poorer regions lag behind.
It is the places with abundant vaccine access and a lot of fiscal firepower that are recovering most strongly.
The IMF projects that global GDP will grow by 5.9% this year. But low-income countries will only grow by 3.3%. Sub-Saharan Africa is set to grow by 3.7%, which means it is falling further behind the rest of the world.
The WTO projects similar divergence on trade. Our economists estimate that between the pre-pandemic year of 2019 and the final quarter of 2022, Asia's exports will have grown 18.8%, and North America's and Europe's by around 8%, compared to 4.8% for South America, 2.9% for the Middle East, and 1.9% for Africa.
Trade fits in here because the smooth international movement of vaccines and inputs is important for increasing global COVID-19 vaccine production and deployment.
An IMF study estimates that vaccinating 40% percent of people in all countries this year and 60% by the middle of next year would add as much as $9 trillion to global economic output by 2025. We are not on track to meet that target in many poor countries.
I always say that trade policy is vaccine policy, and vaccine policy is trade and economic policy. We cannot get the vaccine production and deployment we need without cooperative action on trade. And we can only have a sustained and inclusive recovery in trade and economic output when we get our vaccine policy right.
At the WTO, we have focused our pandemic-related work on supply chain issues, since obstacles to their smooth operation can hold back vaccine production and distribution, and deter much-needed investment.
We have worked directly with all leading vaccine manufacturers to identify and address supply chain bottlenecks. We have also encouraged them to invest in increased production, particularly in emerging markets and developing countries.
The WTO Secretariat has been monitoring export restrictions and trade facilitating measures.
Together with my counterparts from the World Health Organization, the International Monetary Fund, and the World Bank, we formed a task force to mobilize financing and action for vaccine access.
I can report some positive steps. The number of pandemic-related export restrictions and prohibitions has come down from 116 to about 50.
The WTO Secretariat has worked with other international organizations and manufacturers themselves to identify key vaccine inputs and raw materials, as well as trade policy and regulatory bottlenecks that can impede the movement of vaccines and inputs around the world. Governments can look at these papers – which are available on our website – and find a road map for how to accelerate trade in vaccines and inputs.
WTO members in the coming weeks have an opportunity to bolster our capacity to respond to this crisis and prepare for future ones at our 12th Ministerial Conference that starts at the end of November. They can agree on a strong ministerial declaration on pandemic response.
Based on various proposals they have tabled over the past year, WTO members are looking at a framework with three main elements:
-
- First is keeping supply chains open – dealing with export restrictions and bottlenecks and facilitating trade, working closely with vaccine manufacturers and other pharmaceutical companies.
- The second is about more cooperation with other international organizations to encourage decentralized vaccine and pharmaceutical manufacturing capacity. I will come back to this in a moment.
- The third potential element relates to technology transfer and intellectual property issues, including a proposal to waive some standard WTO intellectual property protections for COVID-19 vaccines, therapeutics and diagnostics. Though WTO members remain divided on the issue, the past week has seen hints of flexibility. I am confident that with political will, members can find a pragmatic compromise that ensures equitable access to developing countries while preserving incentives for research and innovation.
By reaching a strong decision at our Twelfth Ministerial Conference, members would ensure that when the next pandemic hits, we will have clear guidelines for how the trading system should respond. We will not have to repeat current debates and negotiations. This will save time – and it will save lives.
Coming back to the issue of decentralized pharmaceutical manufacturing, the experience with COVID-19 has made clear that the pre-pandemic status quo – in which the world relied on ten countries for 80% of vaccine exports – is not resilient in a crisis. When the death toll at home is rising, the political pressures to limit exports of inputs and final products become irresistible.
To better prepare for the next pandemic, we need capacity in more places to manufacture medical countermeasures like vaccines, therapeutics, and diagnostics. But these more decentralized production facilities will have to be able to count on swift and open access to inputs from around the world.
The G20 High-Level Independent Panel on Pandemic Preparedness and Response that I co-chaired with Larry Summers and Tharman Shanmugaratnam called for the creation of end-to-end supply ecosystems for medical countermeasures. Underinvestment by governments in manufacturing and procurement ahead of this pandemic severely hampered our ability to respond. We cannot make this mistake again, because more diseases with pandemic potential are inevitable.
We are seeing some moves in the right direction. Efforts are underway to try to build new pharmaceutical capacity in Africa, which imports 99% of vaccines and over 90% of pharmaceutical products. Ditto for Latin America and parts of Asia. It was actually at one of our meetings with industry that Pfizer and BioNTech announced their planned investment to make 100 million COVID-19 vaccine doses in South Africa. And a WHO-backed initiative on vaccine manufacturing hubs is on track to lead to the production of mRNA vaccines in Rwanda and Senegal.
To further bolster preparedness, the G20 High-Level Panel made recommendations about investing in networked global surveillance capacity, strengthened health systems and improved global governance through the creation of a G20-led Global Health Threats Board, composed of health and finance ministers. To make all this work, $75 billion would be needed - $15 billion annually for the next 5 years – which would operate through a Financial Intermediary Fund housed at the World Bank.
The big question today is whether the world's leaders will exercise the foresight to support these recommendations and spend the billions needed now to avoid the loss of millions of lives, and trillions of dollars, in the future. This is a case I shall be making at the G-20 Health and Finance Ministers meeting this afternoon and at the Leaders in the next two days.
In keeping with today's topic, I have focused most of my remarks on how trade and the WTO can contribute to solving this pandemic and preparing for the next one. Before I conclude, let me say a brief word about the role of trade and the WTO on some other global commons issues.
The WTO has been given a unique role by world leaders to deliver SDG 14.6, designed to protect the biodiversity of our oceans and preserve marine fish stocks at sustainable levels. This would be achieved through an agreement to curb $22 billion in harmful fisheries subsidies that lead to overcapacity and overfishing, as well as illegal, unreported, and unregulated fishing in our high seas. Concluding such an agreement, as is targeted by the WTO's Twelfth Ministerial Conference, would help preserve the livelihoods of millions of fisherwomen and men and solve an important problem of the global commons.
On climate change, trade can make it cheaper to decarbonize our economies and adapt to changing weather patterns and rising sea levels.
- International competition has already helped drive down the cost of windmills and solar panels.
- We can go further by lowering trade barriers to environmental goods and services, or curbing subsidies to fossil fuel production and consumption.
- I have been calling for cooperation among international organizations like the WTO, the OECD, the World Bank, and the IMF to develop shared methodologies for carbon pricing, and in particular a global carbon price, to minimize the uncertainty and transaction costs arising from the current fragmented approaches. Failure to do so could result in numerous trade frictions.
- As companies and governments target net zero in sectors like shipping and aviation, where scalable technologies for deep decarbonization do not yet exist, trade policy can help frame a supportive environment for innovation and competition.
As droughts and floods become more frequent and intense, disrupting crop yields, trade will grow in importance as a means of securing access to food.
- While we avoided a food crisis last year, bad harvests due to climate events, supply chain bottlenecks, and rising fuel and transport costs are pushing food prices upwards. This leaves many of the world's poorest people terribly exposed – their meagre incomes are already suffering because of the pandemic.
- The World Food Programme estimates that 270 million people are acutely food insecure or at high risk in 2021 –74% more than in 2020. Net food-importing developing countries are in a vulnerable position.
- Trade can make the difference between whether they go hungry or are able to feed themselves by accessing markets for food in countries less impacted by climate change or economic disruption.
And finally, trade can be more of a force to bring in the socioeconomically marginalized.
- While trade has enabled record poverty reduction, there are poor people in rich countries, and poor countries, that did not share in the gains.
- Making it easier for women and small businesses to connect to regional and global value chains would help make trade more inclusive.
- So would investing in efforts to integrate marginalized economies more fully into global trade and supply chains – a process I like to think of as 're-globalization'. This would be good for growth, trade, and poverty reduction.
Let me conclude on a favorite note. Trade is about people. People's lives and well-being are threatened by problems of the global commons. Trade is part of the solution to these problems. So, let's work together to put trade in the service of people and planet, and trade will help us achieve the ends that really matter. The moment to act is now. To quote on of the world's most revered people Nelson Mandela, "We must use time wisely and forever realize that the time is always ripe to do right."
Thank you once again, to the whole Luiss community. I am truly honored and humbled by your recognition and your generosity.
Watch the ceremony on Luiss social TV