When the World Trade Organization was established in 1995, its architects intended it to become a fundamental pillar of global peace and prosperity.
Yet its current ability to meet those responsibilities has been weakened by a power struggle between China and the United States.
In his speech to the Republican Party convention in August, U.S. President Donald Trump said that China’s entry into the WTO was “one of the greatest economic disasters of all time.” He claimed that the WTO’s repeated failure to hold China to account for breaches of trading rules has forced America into a highly disruptive trade war with its rival.
The United States is the largest financial donor to the WTO, after China. Trump has threatened to block its budget, as well as prevent the appointments of senior staff.
The president even hinted on Twitter that the United States should leave the WTO altogether, even though this would risk the ire of the business sector in the United States, which turns to the body to help resolve disputes in all parts of the world, not just in China.
In the face of such pressure, reforms are high on the agenda of all eight candidates who are bidding to succeed Brazil’s Roberto Azevedo as the new director general of the WTO later this year. Significantly, the list does not include any candidates from China or the United States.
There are three female candidates for the top job, including the South Korean Trade Minister Yoo Myung-hee. Apart from Mohammad Maziad Al-Tuwaijri from Saudi Arabia, she is the only Asian person vying for the role.
Yoo presents herself as a “bridge” candidate, aiming to overcome the divide between the United States and China, and also between rich countries and developing nations.
Her supporters point to her extensive experience in senior diplomatic and political roles within South Korea, a country experienced at balancing its relationship between its crucial ally the United States, and China, which is by far its most important trading partner.
Yoo is also seeking support from representatives of developing countries. She reminds them of South Korea’s economic progress since the 1950s, linked to increased trade. She told a webinar organized by the Chatham House think tank in London that “inclusiveness and sustainability” are important for the WTO because it should “address the concerns of people and countries which have not gained much benefited from trade.”
“Many countries believe that there is a positive role for the multilateral trading system and there are currently 23 aspiring members to the WTO. But the system needs to change, adapt and evolve, in step with changing realities and changing times,” Yoo told Chatham House.
Dr. Rohinton P. Medhora, president of the Centre for International Governance Innovation, a policy research institute based near Toronto, told The Diplomat that Yoo’s South Korea’s nationality could be seen as an advantage, as the country “is usually held up as a successful development model and is admired for its shrewd way of doing capitalism.”
He also notes that WTO rotates its leadership through the regions of the world, including Asia, whereas the IMF and the World Bank are traditionally always led by Europeans or Americans.
“It’s true that the qualifications of the candidates matter – and all of them have the appropriate background – but what really matters is whether they have the backings of their own governments and the right large constituencies. In that sense, the qualifications and even the nationalities of the candidates become secondary to the power play,” notes Medhora.
One of the potential obstacles to Yoo’s candidacy will be resistance from Japan. It is locked in a fractious trade dispute with South Korea, with roots in the period when the Korean peninsula was occupied by the Japanese, more than 75 years ago.
The Supreme Court in Seoul has ruled that Japanese companies such as Nippon Steel should pay compensation money to the families of Koreans forced into labor during Japanese occupation. The government in Tokyo has refused and it has imposed curbs on exports to South Korea of materials used to make semiconductors it what is widely perceived as a response. The disagreement has become emotive and highly politicized. Talks on resolving the matter are deadlocked and do not involve the WTO, although South Korea has filed a dispute complaint there.
However, Yoo has told Japan’s Nikkei newspaper that her candidacy should not be judged on South Korea’s actions in relation to Japan.
“The WTO Director General is not a post for representing a specific country in a specific case. I’d better focus on helping the conflict-resolution process work properly if elected,” said Yoo.
Another obstacle will be the legacy of a trade deal that South Korea reached with the United States in 2007, when Joe Biden, the current front-runner in the coming presidential election, was vice president. In his 2020 convention speech, Trump described the deal as “horrendous” and claimed it had cost many U.S. jobs.
Trump believes South Korea has adopted protectionist behavior, especially toward U.S. automotive companies. Under his administration, the United States brought in heavy tariffs on some Korean goods, including steel.
The initial stage of campaigning for the job of the WTO director general drew to a close on September 7. The organization’s 164 members are now aiming to reach a consensus on their next leader. They will make their choice at a time of huge global disruption to global trading systems.
Yoo acknowledged this in her Chatham House webinar. “The global economy is undergoing profound challenges due to sluggish growth. There is weak demand, together with rising protectionism. And now we have COVID-19. Global trade actually fell last year, for the first time since 2009. And the prospect for this year is expected to be worse,” she said.
According to Medhora, the process to select the new leader of the WTO could be delayed until after the result of the November U.S. election is known. He says that if Trump wins another term and pushes the United States toward more protectionism, America’s support for the WTO is in jeopardy.
However, in the case of a Biden victory, the United States may recommit to the WTO as a signal it wishes to be included in international bodies that take a multilateral and co-operative approach. “One way Joe Biden could reassure East Asia that the U.S. is responding to the power of China would be to back the South Korean candidate,” Medhora said.
Whoever gets the job as the new director general, their greatest challenge will be to restore faith in the WTO, which has only managed to usher in one global trade agreement in the past 25 years. Bringing rival parties to the table to discuss their disputes will be the first crucial step in proving the organization’s relevance.