“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 upon receiving an honorary doctoral degree in politics from Luiss Guido Carli

 

Rome, October 29, 2021

 

President Boccia, Director-General Lo Storto, Rector Prencipe, Professor Christiansen, professors, students, and friends. 

Thank you for the immense honor you have bestowed upon me today.

I completed my formal training in economics and pursued a career in economic development at the World Bank, but found myself thrust into politics when my government appointed me finance minister twice. I also served as foreign minister, becoming the first woman to hold both positions.

I served as finance minister for seven years, the longest tenure in my country's history. So during that time, I became what I call 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 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.

This was also true during 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, which typically create winners and losers. The politics of reform dictate that you harness the support of the winners to gather the strength needed to contain the losers. 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. Established in the 1970s by entrepreneurs and industrialists to train people in the skills demanded by Italy's changing labor market, Luiss has achieved tremendous 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 undertaking an ambitious effort to reform and revitalize 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 posed by the pandemic and climate change. I am certain that Luiss students and graduates will play a prominent role in this reinvention.

Today, I want to talk about a different kind of 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 meant to serve people and the planet. Trade has gradually become the poster child of globalization, blamed for job losses and rising inequality, much 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 noted 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 labor possible, and that this division of labor could be scaled up, limited only by the extent of the market. The productivity gains that come from specialization and scale remain at the center of how trade contributes to people and to the world.

But trade has always served multiple purposes – purposes that go beyond the goods and services we receive 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 don't cross borders, soldiers ultimately will.

As the trading system evolved, so did the goals 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'm only half joking when I say that perhaps we left too much to the trade lawyers.

But the reality has 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 so are climate change, biodiversity loss, and economic exclusion.

Trade and trade policy can—and must—help us tackle these problems and better prepare for future risks and shocks. We need to act consciously to put trade policy at the service of the global commons – at the service of health, environmental conservation, and socioeconomic inclusion.

<p > It's worth pointing out that the challenging politics of global trade are, to a significant extent, a product of success

• For the thirty years prior to the pandemic, the open global economy, underpinned by 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, and to some extent even between the EU and the US, as well as between developing and developed countries.
• It is true that there are more prominent voices at the global table – and these voices differ more from one another than they used to.
• But because reaching agreements is harder, multilateral institutions like the WTO are often less nimble than they should be in responding to people's changing needs. When this is coupled with public anxiety about technological change and weak domestic social policies to address economic dislocation, frustration can escalate 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 every country more vulnerable. To best serve each nation's interests, we need international cooperation among all. After all, strategic cooperation can coexist with strategic competition, and nations need to be aware of when to employ 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, in 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 argue that trade is essential to ending vaccine inequity and achieving the strong, sustainable, and socially inclusive economic recovery we need. And I will highlight ways in which trade can help us better prepare for future health crises.

I will also briefly look at how trade can help address other issues concerning the global commons, from climate change to socioeconomic exclusion.

Despite 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 form 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 transportation.

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 large-scale production. Trade was absolutely critical: Pfizer and BioNTech's vaccine relies on components from 19 countries, as does Moderna's. AstraZeneca's supply chains span at least 15 countries, and Johnson & Johnson's, 12.

Purely national supply chains could not have delivered the nearly 7 billion doses the world has administered so far.

Of course, these doses are still nowhere near enough to meet global needs – even more so now with booster shots driving up global demand, with rich countries once again at the front of the line.

The unequal 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 figures among all regions and income categories.

This compares to over 63% in developed countries and 55% in upper-middle-income countries.

Vaccine inequity isn't just morally unacceptable; it's 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 spread globally.

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.

The places with ample vaccine access and significant fiscal resources are recovering most strongly.

The IMF projects global GDP growth of 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 a similar divergence in 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 plays a role 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% 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. Many poor countries are not on track to meet that target.

I always say that trade policy is vaccine policy, and vaccine policy is trade and economic policy. We cannot achieve the vaccine production and deployment we need without collaborative action on trade. And we can only achieve 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, as 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 facilitation 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 to ensure vaccine access.

I can report some positive developments. The number of pandemic-related export restrictions and prohibitions has dropped 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 review these papers, which are available on our website, to find a roadmap for accelerating trade in vaccines and vaccine inputs.

<p > In the coming weeks, WTO members have the opportunity to strengthen our capacity to respond to this crisis and prepare for future ones at our 12th Ministerial Conference, which begins at the end of November. They can agree on a strong ministerial declaration regarding pandemic response.

Based on various proposals they have tabled over the past year, WTO members are considering a framework with three main elements:

• • First, keeping supply chains open – addressing export restrictions and bottlenecks, facilitating trade, and working closely with vaccine manufacturers and other pharmaceutical companies.
  • The second is about enhancing cooperation with other international organizations to encourage decentralized vaccine and pharmaceutical manufacturing capacity. I'll come back to this in a moment.
  • The third potential element concerns technology transfer and intellectual property issues, including a proposal to waive some standard WTO intellectual property protections for COVID-19 vaccines, therapeutics, and diagnostics. Although 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 for 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 strikes, we will have clear guidelines on how the trading system should respond. We won't have to repeat the current debates and negotiations. This will save time—and it will save lives.

Returning to the issue of decentralized pharmaceutical manufacturing, the experience with COVID-19 has made it 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, political pressure to limit exports of inputs and final products becomes irresistible.

To better prepare for the next pandemic, we need manufacturing capacity in more places for medical countermeasures like vaccines, therapeutics, and diagnostics. But these more decentralized production facilities will need 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, which I co-chaired with Larry Summers and Tharman Shanmugaratnam, called for the creation of end-to-end supply ecosystems for medical countermeasures. Government underinvestment in manufacturing and procurement prior to this pandemic severely hampered our ability to respond. We cannot make this mistake again, as more diseases with pandemic potential are inevitable.

We are seeing some progress 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. The same goes for Latin America and parts of Asia.  It was actually during one of our meetings with industry that Pfizer and BioNTech announced their planned investment to produce 100 million doses of the COVID-19 vaccine 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. I will be making this case at the G-20 Health and Finance Ministers meeting this afternoon and at the Leaders meeting over 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 briefly touch on the role of trade and the WTO in some other global commons issues.

World leaders have entrusted the WTO with a unique role: to achieve SDG 14.6, which aims to protect the biodiversity of our oceans and maintain 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 on the high seas. Reaching such an agreement, as targeted by the WTO's Twelfth Ministerial Conference, would help preserve the livelihoods of millions of fishermen and fisherwomen and solve a significant global commons issue.

Regarding climate change, trade can reduce the cost of decarbonizing our economies and adapting to changing weather patterns and rising sea levels.

• International competition has already helped lower the cost of wind turbines and solar panels.
• We can go further by lowering trade barriers on environmental goods and services, or by curbing subsidies for the production and consumption of fossil fuels.
• 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 stemming from the current fragmented approaches. Failure to do so could lead to numerous trade frictions.
• As companies and governments aim for net zero in sectors like shipping and aviation, where scalable technologies for deep decarbonization do not yet exist, trade policy can help create 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, poor 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 meager 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 – a 74% increase from 2020. Developing countries that are net food importers are in a vulnerable position.
• Trade can make the difference between going hungry or being able to feed oneself by accessing food markets in countries less affected by climate change or economic disruption.

 

Finally, trade can be a greater force for bringing in those who are socioeconomically marginalized.

• While trade has enabled record poverty reduction, there are poor people in rich countries, and in poor countries, who 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 benefit 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 at the service of people and the planet, and trade will help us achieve the goals that truly matter. Now is the time to act. To quote one of the world's most revered figures, 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 entire Luiss community. I am truly honored and humbled by your recognition and generosity.

 

Watch the ceremony on Luiss Social TV