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Ngozi Okonjo-Iweala on Ending Poverty

W.T.O Director-General Ngozi Okonjo-Iweala On Ending Poverty
On March 1, 2021, Ngozi Okonjo-Iweala took office as the director-general of the World Trade Organization (WTO). She is the first woman and the first African to hold this office. After experiencing the Nigerian Civil War, she came to the U.S. and studied development economics at Harvard University. She also received her doctorate in regional economics and development from the Massachusetts Institute of Technology. In 2003, she served as Nigeria’s finance minister. After a second appointment ending in 2015, she also served as a foreign minister and worked for the World Bank for 25 years, overseeing an $81 billion portfolio. In her newly appointed role, Okonjo-Iweala promises to influence and implement policy in order to restore the global economy.

What is the World Trade Organization?

The World Trade Organization is an international organization that deals with the “rules of trade between nations.” Member governments negotiate trade agreements that are then ratified in their own parliaments. All major decisions are made by the membership as a whole, either by ministers, their ambassadors or delegates.

The WTO plays an important role in reducing global poverty. Studies show that free trade helps impoverished countries “catch up with” developed nations. More than three-quarters of WTO members are developing countries. Every WTO agreement holds particular provisions for these countries, including longer time spans to carry out agreed-upon policies, “measures to increase their trading opportunities” and assistance to support these countries in building the necessary infrastructure to improve their economies. Least-developed countries are often exempt from many provisions.

The WTO also aims to reduce living costs and improve living standards by mitigating the effect of protectionism on consumer costs. This means that products are more affordable for those with a lower income. In addition, lowering such trade barriers stimulates economic growth and employment, creating opportunities for the impoverished to increase their incomes.

Okonjo-Iweala and Poverty

Okonjo-Iweala’s long list of achievements includes many in the realm of poverty reduction. As the minister of finance in Nigeria, she helped Africa’s largest economy “grow an average of 6% a year over three years.” She also helped create “reform programs that improved governmental transparency and stabilizing the economy.”

As the board chair of Gavi, the Vaccine Alliance, she contributed to ensuring vaccine equity. During her 25-year career at the World Bank, she rose to the second-most prominent position of managing director. Okonjo-Iweala ran for the office of director-general of the WTO with the strong belief that trade has the power to lift people out of poverty.

Okonjo-Iweala is also a supporter of COVAX, aiming to resolve vaccine nationalism. During the COVID-19 pandemic, vaccine nationalism is a problem that disproportionately affects impoverished countries. COVAX is a global vaccination effort launched by Gavi and leading partners to ensure vaccine equity.

In a January 2021 article, Okonjo-Iweala writes that “All manufacturers must step up and make their vaccines available and affordable to COVAX,” in order to ensure equitable and timely vaccine distribution to low-income countries. She also warned against repeating history.

In 2009, a small number of high-income countries bought up most of the global supply of the H1N1 flu vaccine, which left the rest of the world lacking. If history were to repeat itself during the COVID-19 pandemic, the impact on impoverished countries, and the world at large, would be devastating.

Okonjo-Iweala’s Plan

As director-general of the WTO, Okonjo-Iweala’s immediate plans focus on ending the COVID-19 pandemic with vaccines for all. In a statement outlining her vision for the future of the WTO, she says “the WTO can and must play a more forceful role in exercising its monitoring function and encouraging Members to minimize or remove export restrictions and prohibition that hinder supply chains for medical goods and equipment.”

She also says that member nations of the WTO need to adopt a stronger stance in preventing vaccine nationalism and protectionism. International cooperation, in her opinion, is the only way to come up with the vaccines, therapeutics and diagnostics needed to put an end to the COVID-19 pandemic.

Okonjo-Iweala has promised to face the economic and health challenges presented by the novel coronavirus head-on. Importantly, she notes that “a strong WTO is vital if we are to recover fully and rapidly from the devastation wrought by the COVID-19 pandemic.” Okonjo-Iweala promises to work in a collaborative effort to “shape and implement the policy responses” necessary to restore the global economy.

– Brooklyn Quallen
Photo: Flickr

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How the WTO Fights Poverty

WTO Fights Poverty
The World Trade Organization (WTO) is one of the youngest, international economic organizations in the world. However, it plays an important role in the international economy and the global fight against poverty. Originating from the Uruguay Round negotiations which took place from 1986 to 1994, the WTO took over the functions of the General Agreement on Tariffs and Trade (GATT) in 1995. Since then, it has been the setting for global trade negotiations. The main role of the WTO is to assess trade barriers between countries and solve them through diplomatic negotiation. The goal of the WTO is to achieve full, fair trade and a fully globalized economy. In doing so, the WTO fights poverty around the world.

Global Trade and Global Poverty Reduction

As global trade profits continue to rise, the need for a powerful and well-directed WTO is strong. According to the WTO, merchandise exports have increased by an average of 6% every year since the 1950s. Furthermore, global trade has grown 50% more than the global economy outputs every year and “total exports in 2016 were 250 times the level of 1948.” Global poverty reduction and global trade can play hand-in-hand. The WTO ensures that the two are harmonious as possible. By focusing on developing countries, protecting the most vulnerable populations and giving less powerful countries voices on the international stage, the WTO fights poverty in unique and effective ways.

Building Trade Capacity in Developing Countries

One way in which the WTO fights poverty is through global development. Also, the inclusion of low income in the global trade market. The WTO has a powerful commitment to assist developing countries in maximizing their trade potential. This, in an effort to achieve stable footing on the world stage. The WTO allows developing countries more time to meet certain commitments. Moreover, it plays an active role in building trade infrastructure across the developing world. One of the WTO’s most powerful policies is the Aid for Trade initiative launched in 2005. The initiative works to build developing countries’ trade capacity through investments in infrastructure. More than $340 billion supports growing economies through this initiative.

Creating Jobs and Meeting International Standards

Another key WTO program fighting poverty is the Enhanced Integrated Framework (EIF). The mission of the program is to assist developing nations “in their use of trade as an engine for growth, sustainable development, and poverty reduction.” EIF has worked in 51 countries, ensuring country ownership of trading ports. Moreover, EIF acts as an “honest broker” in trade negotiations and helps countries fight poverty by creating new trade-related jobs. EIF has invested more than $220 million into supporting the world’s poorest countries, through trade.

The WTO is also working to ensure that developing countries interested in entering into global trade can meet “international standards for food safety, plant and animal health”. This way, they can effectively access global markets. The program is called the Standards and Trade Development Facility (STDF) and it works to ensure that developing economies are prepared for the demands and standards of the global economy.

Increased Participation in Global Trade Leads to Poverty Reduction

The statistics speak for themselves as to how the WTO fights poverty. According to the World Bank, developing countries make nearly 50% of all global trade, an increase “from 33% in 2000.” Coinciding with the increase in developing countries’ role in global trade is a sharp decline in global poverty. Nearly 1 billion people have risen out of extreme poverty since 1990, underscoring the clear linkage between increased trade capacity and poverty reduction. The WTO is ensuring that citizens of all nations can participate in and benefit from global trade by providing a new road, source of employment or new exported goods.

The WTO indirectly affects poverty by facilitating the growth in trade that has brought about significant decreases in poverty. Increased trade brings employment and infrastructure to communities that never would have seen them without their nations’ entry into the global economy. Through its programs, the WTO affects poverty on a large scale by ensuring that the global trade market is just that, truly global.

– Garrett O’Brien
Photo: Flickr

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The Impact of US Food Policy

U.S. Food Policy
The U.S. produces around 38.7 percent of all corn grown globally and around 35 percent of all soybeans. With such a large stake in global markets, it is not surprising that when U.S. food policy changes occur, many and often poorer places feel their effects throughout the globe.

Over 1 billion people work in world agriculture, and in poorer regions, a majority of the workforce population works in agriculture. In Sub-Saharan Africa, for example, over 60 percent of the workforce is involved in agriculture. With such a dependence on agriculture, changes in global markets and farming policies can severely affect these poorer populations. U.S. food policy may impact foreign farmers negatively in four principal ways: restricting imports in which developing countries have a comparative advantage; stimulating an overproduction of commodities in the U.S., that when the U.S. exports lowers the international price of goods from which low-income country farmers derive their income; distorting food markets in developing countries by the provision of in-kind food aid; and reducing official development assistance for agricultural and rural development.

Subsidies

Subsidies are a long-standing agricultural policy in the United States. Originating during the Great Depression, farming subsidies are payments and other support that the U.S. federal government gives to certain farmers. Today, the U.S. distributes around $20 billion to farming businesses annually. In 1930, when the stock market crashed, around 25 percent of Americans lived on farms and ranches and the government intended subsidies to help support these smaller family-run farms. Today, the largest 15 percent of farm businesses receive 85 percent of government subsidies that protect them from price fluctuations and unexpected decreased crop production.

Because of the U.S. subsidy system, it is cheaper for U.S. farmers to produce certain crops and thus it is cheaper for many poor nations to import crops such as wheat, barley and corn, instead of buying and growing locally. As one of the world’s largest cotton producers, subsidies can cause severe global price depression. In 2004, Brazil challenged the U.S. cotton subsidies with the support of the World Trade Organization (WTO). The WTO found that U.S. cotton subsidies were responsible for distorted international markets. In winning the dispute, Brazil could impose $830 million in product sanctions and the U.S. paid $300 million to the Brazil Cotton Institute as reparations.

Subsidies are also the main cause of more market distortion for corn, one of the U.S.’s most lucrative crops. Under the North American Free Trade Agreement (NAFTA), the U.S. exports highly subsidized crops that compete with Mexican products. The exported corn contributed to a 413 percent increase in U.S. exports and a 66 percent decline in Mexican producer prices from the 1990s to 2005.

Cargo Preference

Cargo preference is another policy interfering in international relations between the U.S. and its beneficiaries. The Cargo Preference Act of 1954 ensures that ships operated by U.S.-based companies must transport at least 50 percent of overseas-bound food aid. Because of this regulation, 35-40 cents of each dollar spent on food aid goes toward transportation rather than the food itself.

The United States established Cargo Preference to protect U.S.-flag maritime companies and unions from competing for foreign cargo ships. These companies may increase or decrease the cost of transportation. The disparity between foreign-flag and U.S.-flag ships is very costly to the food aid effort. U.S.-flag ships can cost around $100-135 per metric ton while foreign-flag ships cost around $65 per metric ton. By matching foreign pricing, the country could use the $23.8 million that the country that it would have spent on shipping towards feeding the poor.

If the U.S. were to eradicate cargo preference, there would be an additional $300 million to feed another 9.5 million people each year.

Biofuel Mandates

The Renewable Fuel Standard (RFS) emerged with the Energy Policy Act of 2005. This federal policy requires transportation fuel to contain a minimum volume of renewable fuel, namely ethanol from corn or soybeans. This policy was to help American farmers and decrease dependency on foreign oil.

The policy has, however, had a negative effect on global food prices. According to the Resources for the Future, estimates determine that the RFS in the U.S. and the E.U.’s own biofuel mandate will increase global food prices by 15 percent by 2022. Because the RFS demands more corn for ethanol production and because the U.S. produces 40 percent of the world’s corn crops, the policy has had a critical impact on global corn markets. An Iowa State University study estimates that the RFS has diverted a third of U.S. corn crops (10.8 percent of the global corn market) towards production of ethanol and biofuel and has caused an increase in global corn prices from 8-34 percent.

Proactive Policy

The U.S. government has taken major steps toward improving the food security of poor nations. While many food policies focus on farmers and exporting goods, the Global Food Security Reauthorization Act (GSRA) targets farmers in developing countries. Signed into law in 2018, the GSRA ensures funding and support for the Feed the Future initiative. Feed the Future works with local agriculture sectors in developing countries to help build up strong farming techniques and give them the tools to ensure their food security. Thanks to Feed the Future, estimates state that 23.4 million people now live above the poverty line and that farmers have generated $12 billion in new agricultural sales from 2011 to 2017.

Due to the size and volume of exported crops and resources, the U.S. food policy has a strong pull on global markets. Developing and poor nations can feel the effects of rising and falling global food prices most keenly. Therefore, it is important for U.S. policymakers to assess the impact of these policies and others like them. Luckily, initiatives like Feed the Future are working hard to help build stable agricultural communities in developing countries. With such size and resources, the U.S. has the power to create positive change in global markets.

– Maya Watanabe
Photo: Flickr