Explainer: How veto power works in WTO decision making

Rumour has been spreading fast on social media that Nigeria’s ex-finance minister, Dr Ngozi Okonjo-Iweala, had been elected the Director General of the World Trade Organisation (WTO) on October 28, 2020.

The rumour gained momentum and eventually found its way into the mainstream media in Nigeria as many newspapers, radio, and television stations reported her emergence as the WTO’s Director General the same day.

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However, when details of the sketchy development unfolded the same day, it became apparent that Okonjo-Iweala would have emerged the Director General of the global trade regulatory body if the United States (US) had not vetoed the consensus decision of the 164 member states to pick her for the top job.

But the US, critical of the WTO’s handling of global trade, wanted another woman, South Korea’s Yoo Myung-hee, saying she could reform the body.

So, the US vetoed the choice of Okonjo-Iweala to lead the WTO, being the only country, among 164 members of the WTO, to block her appointment for the job.

How WTO veto power works

Note that consensus-based decision making is a foundational principle of WTO.

The WTO rule confers a veto power on every member of the Organisation and there is a widespread belief that the WTO members would likely oppose any efforts to replace consensus with voting.

In fact, WTO rules provide that decision making based on a majority vote is usually the last resort when consensus fails.

In decision making within WTO, any country can reject a decision by exercising its veto power and this was what played out when the US became the only country to veto the decision to pick Okonjo-Iweala as the consensus WTO’s Director General, according to a Bloomberg reporter, Bryce Baschuk.

Using his twitter handle, @bbaschuk, he tweeted US’ opposition to Okonjo-Iweala’s WTO’s job.

Baschuk’s tweet on US veto

It is interesting to note that even before October 28, 2020 when consensus building for the new WTO Director General failed, the British Parliamentarian and former United Kingdom (UK) trade secretary, Liam Fox, warned that a veto power in WTO is not realistic as in the WTO, the concept of consensus has in effect come to mean unanimity, which is much more difficult to achieve than consensus.

Fox explained that consensus building in WTO causes “a slowdown” in reaching agreements among member states as it requires 100 percent of the members to go forward.

Fox, who was earlier in the race for the WTO’s Director General, said it was not realistic that in WTO, “if any one country does not like something, no one can go ahead with it.”

He recommended that, “Either we move back to the idea of consensus where most countries agree together for permission to move forward or we will have a rise of plurilaterals.

“That’s the choice that we face because unanimity, meaning veto is not realistic in a real economy.”

Why US vetoed Okonjo-Iweala’s consensus

Several reasons have been flying around in the media about why the US backed a Korean, rather than a Nigerian-US citizen to head the WTO.

A US-based Nigerian Associate Professor, Farooq Kperogi, linked the US’ rejection of Okonjo-Iweala to geo-politics and racism.

“Trump’s calculations for rejecting Okonjo-Iweala may be geo-political, but he is also a dyed-in-the-wool negrophobic racist,” Professor Kperogi wrote.

A twitter user, Ben Willaimson, tweeting on his handle, @Tazee_k, believes the US cannot control Okonjo-Iweala as Director General of WTO and that was why the country vetoed her emergence.

“The US is institutionally racist with an actively racist administration. They can’t control her so they don’t want her,” the tweet read.

Conversely, a Facebook user, Ifechukwu Ibeme, believes that the US’ decision not to back Okonjo-Iweala was neither racism nor tribalism.

“Many people can’t see the issues in this matter.

“The point here is trade DEAL not White race.

“Koreans are not Whites. It’s IDEOLOGICAL about Right and Left, not Blacks and Whites.

“Racist critical theorists see everything on the basis of racism or tribalism.

“Thank God it’s all going to be settled after November 3, by then, Ngozi would be more confident which way to go, about Trump’s deal,” Ibeme posted on his Facebook wall.

However, a statement issued by the office of the US trade representative explained that the US rejected Okonjo-Iweala for the job because the WTO is in dire need of reform and must be led by someone with real, hands-on experience in the field.

The statement further explained that the US backed Minister Yoo because she is “a bona fide trade expert who has distinguished herself during a 25-year career as a successful trade negotiator and trade policy maker.

“She has all the skills necessary to be an effective leader of the organization.”

The US has observed: “This is a very difficult time for the WTO and international trade.

“There have been no multilateral tariff negotiations in 25 years, the dispute settlement system has gotten out of control, and too few members fulfill basic transparency obligations.”

On the contrary, Okonjo-Iweala has repeatedly laid claims to being a trade expert and qualified to head the WTO.

For instance, while pitching for the position of the WTO DG in Geneva recently, Okonjo-Iweala said, “Throughout my career as a development economist at the World Bank, I worked on tough economic policy reforms including trade policy in middle and low-income countries.”

She further explained: “As a two time and longest-serving Finance Minister in my country, I had the Customs Service reporting to me, so issues of trade facilitation and trade policy were squarely part of my remit.

“Together with the Trade Minister, I also worked on regional trade issues including the ECOWAS Common External Tariffs.”

How to resolve the leadership impasse

Now that despite Fox warning, US veto power has demolished the consensus for Okonjo-Iweala to be picked as the WTO Director General, what next?

There are four possible options to resolve the impasse created by the US veto in the selection of the next Director General of the WTO: to lobby the US government to rescind its veto, the contender with the least possibility for consensus to withdraw from the race, to hold an election for member countries to resolve impasse through votes or to wait for a future date when the US shifts its position.

Lobbying US government to rescind veto

The WTO consensus building remains open until November 9, 2020 slated for the General Assembly where the development would be revisited.

Before then, international diplomacy and high level lobbying may convince the US to shift grounds.

Already, the Nigeria’s Minister of State for Industry, Trade and Investment, Mariam Katagum, has revealed that the Nigerian Government has been reaching out to all members of the WTO, including the United States of America and South Korea to overcome the current impasse in the selection of a consensus candidate for the position of director general of the organisation.

“The appointment of Dr. Ngozi Okonjo-Iweala is expected to be adopted by consensus of all Members in line with WTO decision making procedure at a Special General Council Meeting scheduled for 9th November, 2020,” she said.

A tweet by Okonjo-Iweala on October 29, 2020, using her verified handle, @NOIweala, indicated that she had not closed the window of lobbying for consensus.

“Happy for the success & continued progress of our @wto DG bid. Very humbled to be declared the candidate with the largest, broadest support among members & most likely to attract consensus. We move on to the next step on Nov 9, despite hiccups. We’re keeping the positivity going!” she tweeted.

An easy, unlikely option

In 1999, two candidates divided WTO members, with a compromise finally found to give each a term.

New rules were then put in place to avoid a repeat.

Reuters reported that candidates least likely to attract a consensus “shall withdraw,” according to the 2003 rules.

A twitter user, Alf, using his twitter handle, @Alfkomb, recommended that the South Korean contender for the WTO post to withdraw as the solution to the impasse.

“An easy way to end this is for the South Korean candidate to step down. Or we basically wait for 5th November and pick it up from there. Opposition from Trump is actually a badge of honor for her and casts aspersions on the character of the South Korean,” tweet read.

However, Reuters reported that Korea’s Yoo could withdraw, but her team did not respond to questions about her future intentions.

Vote may further fragment WTO

Meanwhile, the WTO’s 2003 rules provides that a vote be taken “as a last resort” after consensus building fails and the candidate with the least likelihood to attract a consensus fails to withdraw.

A trade professor at Switzerland’s University of St Gallen, Simon Evenett, said a vote may appear an easy fix, but is more a nuclear option as large WTO members would see this as an unwelcome precedent.

“Big players like subtle vetoes. Publicly losing a vote is humiliating,” he said.

Washington might see recourse to a vote almost as an act of war and an excuse to make good on Trump’s threat to quit the WTO.

It is not even clear how WTO members would decide to hold a vote.

Outcome of US election may change the game

A big game-changer may be the outcome of the ongoing US election.

For instance, a former senior U.S. trade official, who now heads the National Foreign Trade Council, Rufus Yerxa, said the result of the U.S. election would be decisive.

“For the people in Geneva that are trying to make this decision, the election will determine if they’re going to be in another showdown fight… or whether they can afford to wait him out and deal with the Biden administration,” he said.

The permutation is that if Democratic challenger Joe Biden won, WTO members would be well-advised to hold off until he took office as he would be anxious to “get off on the right foot” with the WTO.

In sum, while the opportunity for Okonjo-Iweala to emerge as the Director General of the WTO is still open, the coming days leading to November 9, 2020 are decisive.

The researcher produced this explainer per the Dubawa 2020 Fellowship partnership with Daily Trust to facilitate the ethos of “truth” in journalism and enhance media literacy in the country.