Speaking at an event hosted by the think tank Peterson Institute in Washington, the World Trade Organization’s director-general Ngozi Okonjo Iweala called on members of the institution to make efforts to agree on how to handle national security in a time of growing geopolitical frictions.
The leader of the WTO secretariat also warned against planned US tariffs proposed by current presidential candidate Donald Trump.
Trade and finance ministers are in Washington this week for the annual meetings of the International Monetary Fund and the World Bank.
The meeting comes as the World Trade Organization turns thirty and the system it is managing also in a deep crisis. The organisation is a belated creation of the Bretton Woods system of which the IMF and World Bank are pillars created in 1944.
“We just have to be careful that we don’t use this national security exception in such a way that any member can do the same and it could become a race to the bottom – everything can be made into a national security exception,” the director-general warned of the system that was founded by the 1994 Marrakesh Agreement.
The WTO has come under strain for a variety of reasons. Its dispute settlement system is in crisis due to the fact that appointments of members of its appellate body are blocked by a United States veto.
Discussions on reforming the WTO are partly stuck over the question of how to handle justifications of discriminatory treatment of imports on national security grounds.
Several WTO panels have recently ruled US measures taken under this justification as illegal – be they steel and aluminium tariffs under its cold-war era Section 232 legislation – or new labelling requirements on products from Hong Kong.
“One of the things we have to grapple with as we reform our dispute settlement system is the national security exception,” said the former World Bank managing director who is a dual Nigerian and US citizen.
“Of course countries and members know best what their national security situation is and the WTO cannot pretend to be able to tell them,” the former Nigerian finance minister said.
“What, when should it be used? What form should it take? That has to be negotiated at the WTO, not a dictat,” said Okonjo-Iweala.
The head of the Geneva organisation also warned against the United States potentially applying new import duties if the current Republican candidate to the presidency wins the coming elections in November.
Donald Trump’s programme foresees the introduction of an all-round 10% duty on all incoming products and a 60% duty rate on imports from China.
“Obviously, it’s not helpful to the WTO its rules,” said Okonjo-Iweala. “I think it will result most likely in tit -for-tat approach: other members will also look to levy these kinds of charges in return.”
The director-general said there is a risk of “a free -for -all”.
“I hope sincerely that that will not happen. And that if something happens that other members will keep a cool head and not retaliate so we can preserve the world trading system.”
