The director-general of the World Trade Organization, Ngozi Okonjo-Iweala, will arrive this weekend in Brasília on her first visit to Latin America. One of her interests is to find out how much Brazil can help prevent an imminent global food crisis.

If Brazil exports additional food, it could help to slow rising global prices, Ms. Ngozo told Valor. The message she is likely to hear from the Brazilian government is that the country is part of the solution, with a surplus of grains and proteins to supply the world.

The WTO director-general does not hide her concern with the economic repercussions of the double shock of the pandemic and now the war in Ukraine on the world economy and trade. The most immediate effect of the war has been a sharp rise in the prices of food, energy, fertilizers and some important minerals, of which Russia and Ukraine are major suppliers to the international market. The outlook is so uncertain that the WTO projection for trade this year ranges from 0.5% to 5.5%.

Ms. Okonjo-Iweala does not rule out risks of even more geopolitical tensions, nationalism, populism and protectionism. But she makes a strong case for the multilateral trading system for the resilience of economies, including in view of the growing dangers related to climate change.

She will arrive in Brasília on Saturday evening. On Sunday, she will attend a barbecue. She says that her children, in the United States, go to a Brazilian restaurant and consider the all-you-can-eat barbecue “marvelous.” On Monday, she will meet with President Jair Bolsonaro, speak at the Foreign Affairs Ministry and meet with ministers. On Tuesday, the National Confederation of Industry (CNI) and the Federation of Industries of the State of São Paulo (Fiesp) will hold a business event with the WTO director-general, in São Paulo, when they will present her with a document with the sector’s priorities, which includes fighting agricultural and industrial subsidies.

Ngozi Okonjo-Iweala took over in March 2021 and became the first woman and the first African to lead this key entity in global governance. She was previously Nigeria’s finance minister (2003-2006 and 2011-2015) and foreign minister in 2006. She spent 25 years at the World Bank, where she reached the second-highest position. She holds a degree from Harvard University and a PhD from the Massachusetts Institute of Technology (MIT).

At the end of the interview, Ms. Okonjo-Iweala commented on Nigeria’s national soccer team. For her, the team has many good players, but needs more teamwork. Nigeria did not qualify for this year’s Fifa World Cup, to be held in November and December in Qatar.

Read below the main excerpts from the interview.

Valor: This is your first time in Latin America and you are visiting Brazil. What do you expect from Brazil?

Ngozi Okonjo-Iweala: Brazil is a very important member of the WTO, very active and very instrumental in a number of the negotiations that we are doing. It is a big country, we are having a ministerial conference (MC 12) in June, and it will be good to talk to colleagues in Brazil, to let them know what the WTO is doing, to hear their perspectives, and to seek Brazil’s support for a strong MC 12.

Valor: The world is heading toward a global food crisis. Who could do more in this backdrop?

Ms. Okonjo-Iweala: I am certainly concerned about the prospect of an impending global food crisis. Ukraine and Russia represent less than 3% of world trade in goods, but they are very, very important in certain sectors, like food. You see, 30% of the world’s wheat and 73% of sunflower oil come from the two countries, and a lot of barley, corn, so many grains and other foods. Several regions of the world are very dependent on the Black Sea region. In Africa, 35 countries import food from Russia and Ukraine, and you can see that Egypt is having problems now because most of its wheat comes from these two countries. So with war in Ukraine, if we don’t take action, it could result in real stress. I think even in Latin America, [with] inflation in many countries, the high cost of food. We have a crisis situation, and if we don’t take care of it, we may continue with it next year, unless we are able to support humanitarian corridors so that Ukraine can harvest this winter crop in July. Brazil is a food exporting powerhouse. It is one of the most important countries in the world when it comes to agriculture and food. And of course, if Brazil is able to release additional food on the market, it can help bring down the price of food around the world. I am interested in how Brazil sees the situation and what it can do. Of course, I know that Brazil depends on the Black Sea region for fertilizer and that is a big concern for what is going to happen. I know that Brazil is trying to make alternative arrangements to get supplies from other places.

Valor: Concretely, what more can Brazil do in this case?

Ms. Okonjo-Iweala: Brazil has the ability to increase [the supply of] all these things. It is one of the largest producers of soybeans in the world, for example. With a shortage of sunflower oil now because of the Ukraine problems, you can imagine that Brazil could replace with another oil. In the corn market, 15% comes from Ukraine. If Brazil could put more corn on the international market, it could help as well.

Valor: What about domestic inflation? Would it increase?

Ms. Okonjo-Iweala: Not exactly. I wouldn’t encourage any country to export unless they were very comfortable with enough supplies for themselves. The first thing you do is make sure you have enough supplies. What I tell WTO members is that if you have extra stocks, and many countries do, especially of grains and oils, they can help.

Valor: How do you see concerns from agricultural exporters that some countries may try to take advantage of using their stocks built up for food security, with subsidies, to grab shares in the global market?

Ms. Okonjo-Iweala: Right now we have shortages of supply of really important products in the world. Wheat is a staple food for many, many, many countries. So what we are focusing on now is not so much the question of who is going to profit but how to respond to the humanitarian consequences of rising food prices. Taking 30% of wheat off the world market is huge. Even those countries that have extra can’t make up for all that. The big concern now is to have the supplies. We must take care of world hunger.

Valor: For world trade, what worries you more in the short term: the war or the lockdowns again in China?

Ms. Okonjo-Iweala: Both situations impact supply chains. Obviously, the lockdowns in China, Shanghai being one of the most important ports in the world, and when Shanghai is shut down, it has a big impact on the trade of goods. But I think the war in Ukraine right now is having more of an impact, simply because you have the fear of what people will do to feed themselves. Why is that so important? Because poor people are hit the hardest. Food and energy prices are going up a lot. Russia also has 10% of the world’s energy exports. So you have high food prices, high energy prices, and many, many poor households spend a large percentage of their budget on these items. I repeat what Antonio Guterres, the UN secretary-general, said. We need to end the deaths, end the famine, not only in Ukraine but also in other parts of the world, and the rising food prices. Energy prices affect almost everyone through transportation.

Valor: With two shocks in a row, is there a risk of global stagflation?

Ms. Okonjo-Iweala: There is a risk certainly and that is why most central banks are now focusing on fighting inflation and trying to balance how to pursue that goal with employment and economic growth targets. I hope that doesn’t materialize globally. If we can take the right measures to ease the food situation, I think it will help. The energy situation is a little more complicated. The United States is releasing its reserves, at the rate of 1 million barrels of oil per day over the next six months. That will help, but it may not solve all the problems. I think that, without Russia, that’s 2 million or 3 million barrels a day taken off the market. So any country that can release its oil reserves will help. As for food, we have the ability to really try to mitigate the situation, because countries can also change their diet, and try to replace items. But it is not so easy to replace gas and oil in the short term. I hope that in the long term this will drive the movement toward renewable energy. Although a difficult situation, it should be seen as an opportunity to start moving faster toward renewables and net-zero emissions by 2050.

Valor: How do you see risks of fragmentation in trade becoming a reality?

Ms. Okonjo-Iweala: Well, it’s very fashionable now to talk about decoupling, fragmentation, a breakdown into two or three spheres of trade. Conversations about deglobalization started even before the Covid-19 pandemic. But now, because of the war, the world has gone through, as you said, several shocks, the pandemic and now the war shock. We also had the climate change shock. Despite these shocks, trade has been relatively resilient, still able to move goods around the world, even with all the supply chain issues. My point is that the multilateral trading system has provided for the world in the past. It has lifted more than 1 billion people out of poverty. It has helped integrate the world and brought peace. I know people are feeling that this principle has been broken now, but we should not draw the wrong conclusions from this. We should not conclude that decoupling or different trade blocs will now carry weight and is the way to go, because the costs to the global economy, in the long run, will be substantial.

Valor: The WTO is talking about a 5% drop in global GDP…

Ms. Okonjo-Iweala: Our economists’ simulations have shown that even with just a portion of these costs, not even taking into account all [the impacts], it could result in a 5% loss in GDP. This is not trivial. And there are many other costs that would result in even something worse than 5%. The loss to the world has many consequences. What we should seek to demonstrate and do is to rebuild and support the multilateral trading system. I know people are talking about “reshoring,” “nearshoring” etc. The evidence on all of this is not very great yet. I’m sure there will be some reshoring, and we’ve seen some nearshoring, okay, like shifting production from China to Vietnam. We can see some of that and it’s actually not bad. This kind of globalization, where you see production in different countries, can be a good thing. I call it reglobalization, and we should consciously use it to bring those countries, which have been marginalized, into integration into global trade.

Valor: But the reality is that we have increasing talk of economic nationalism, strategic autonomy, and a kind of weaponization of trade with countries using their power instead of following rules. International cooperation is in a very bad situation.

Ms. Okonjo-Iweala: Yes, there is absolutely no doubt that multilateralism has been hit. And what you are saying about weaponization, if you want to use that word, of trade as a tool, using the geopolitical tensions, populism and nationalism, tendency to protectionism, all these things, it is true, are happening. And it has a risk that we might see a little bit more. But that’s not the kind of trend that we want to encourage or see in the WTO. Of course, the circumstances now with the war make everybody want to look at their domestic situation. But in the long run, isolation doesn’t pay off for individual countries or for the world. If tomorrow you have climate change events, floods or droughts, that wipe out all your harvest in the country, if you have no trade, what do you do? Do you starve? But if you have trade, you are resilient and you get supplies from other parts of the world.

Valor: Will the trend toward deforestation-free products be a new normal in international trade?

Ms. Okonjo-Iweala: Look, we need to think in terms of incentives, certainly to maintain our forests, because there are some of the largest carbon reservoirs in the world. And we need to think about how to balance this kind of approach. Brazil has already signed at COP 26 [UN Climate Conference in Glasgow] a global public declaration on forests and land use, to decrease the rate of deforestation, and has set some targets. This is a good thing. I think that this way the Brazilian government is doing the right thing.

Valor: The European Union has plans to ban the entry of commodities coming from deforested areas. Is this the kind of proposal that could be copied by other countries?

Ms. Okonjo-Iweala: What I would say is that the world has set targets for carbon emissions to be low and then to reach net zero by 2050. All the countries of the world have engaged, including Brazil, and they are obviously looking for instruments and mechanisms to do that. In the WTO, what we insist is that these instruments must not become an instrument of discrimination in trade. We will look at all proposals with that lens to make sure that they are WTO-compliant, that they do not discriminate against other comparable products from other countries. That is what I can tell you. It is good to look for an instrument that is good for fighting carbon emissions, but it has to be done in a way that is WTO-compliant.

Valor: How do you see the carbon tax plan at the EU border, targeting competitors who are not subject to the same environmental standards?

Ms. Okonjo-Iweala: As I said, the CBAM [carbon border adjustment mechanism] has to be compatible with WTO rules. We have 70 fragmented carbon pricing and taxation systems in the world today. And it is very difficult for businesses to navigate that fragmentation, especially small and medium-sized businesses. And they are the ones that create the most jobs. What we are saying at the WTO is that we should have a global price on carbon. And that the WTO, the IMF, the OECD and the World Bank should work together to come up with a global methodology for a global price on carbon. In fact, we are talking to each other now, trying to work together to do this. That will be the best way for the world to deal with this. It can be done. The leaders of the world should ask these organizations to put together [this carbon price]. I would argue that there should be a big drive from leaders. We cannot continue with fragmented systems in the world. That simply doesn’t work.

Valor: Is there a possibility that Russia will be kicked out of the WTO?

Ms. Okonjo-Iweala: Right now, the WTO does not have an instrument or methodology to expel its members. Trying to do that is going to be extremely difficult. There are some organizations that have an instrument, but we do not.

Valor: But the WTO also has diplomatic tensions about this…

Ms. Okonjo-Iweala: Right now, there are diplomatic tensions. We will see what happens at the ministerial conference in June. That has not stopped us from working. We still find ways to work around the problem and hold our negotiating sessions in small groups in different settings. The tension is there, but we are trying to work with it.

Source: Valor International

https://valorinternational.globo.com