The WTO chief warns against the economic cold war: Ngozi Okonjo-Iweala tells POLITICO that now is not the time to withdraw from global trade and warns that the division of supply chains for political reasons would be detrimental to the world economy. A recent study shows that dividing the world into two separate economic blocs could "lead to a 5% decrease in global real GDP in the long term," she said. "This is a really staggering number."
Countries should think twice before they split up economies and supply chains into political blocs, the World Trade Organization’s Director General Ngozi Okonjo-Iweala told POLITICO in an interview, just days before the organization’s ministerial conference.
“We need to think carefully before talking very carelessly about decoupling and deglobalization,” Okonjo-Iweala said, arguing that interdependence — rather than self-sufficiency — keeps peace.
“This multilateral trading system was built up over 75 years. It’s helped to lift over a billion people out of poverty. It’s delivered peace, which … it was intended to do, through interdependence,” the WTO boss added.
Her comments will be seen as a pointed response to U.S. Treasury Secretary Janet Yellen, who has promoted the concept of “friendshoring” value chains to develop economic relations with politically allied nations, as the rivalry between the U.S. and China keeps growing.
There have also been growing calls to rethink supply chains in the wake of disruption to global trade from the COVID-19 pandemic and Russia’s war in Ukraine.
But Okonjo-Iweala — a Nigerian and U.S. national who’s eager to jolt the WTO into action — warned that divvying up supply chains for political reasons would be harmful to the world economy.
A recent study shows that splitting the world into two separate economic blocs could “lead to a 5 percent decrease in real global GDP over the longer term,” she said. “That is quite a stunning number.
“So I just say to the world, talk is cheap, but when you see the actual costs of these actions, I think it leads one to pause and to say, let us invest in this multilateral trading system. This is the time to invest, not to retreat from it,” Okonjo-Iweala said.
