World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala attends the opening of a four-day Building Bridges Summit on sustainable finance, in Geneva, on Oct 2, 2023. (PHOTO / AFP)

GENEVA - The head of the World Trade Organization said on Monday that early signs of global trade fragmentation were appearing, criticizing so-called "reshoring" and "friendshoring" between trade blocs.

"While we don't yet see any large-scale fragmentation we are beginning to see signs," said Ngozi Okonjo-Iweala at an event in Geneva, calling the trend "dangerous".

"If we ... reshore, friendshore we may be leading the world towards fragmentation of trade, which will be very costly," she said. "So we're saying let us not do this. Let us reimagine globalization, and we're calling it re-globalization."

Since late 2019, after the US blocked the appointment of new judges to the WTO's Appellate Body due to complaints over judicial overreach, 29 cases have been left in limbo, delivering a heavy blow to the dispute settlement system

At the WTO, unresolved disputes and the list of what it terms as the "trade concerns" of its members are piling up.

Since late 2019, after the US blocked the appointment of new judges to the WTO's Appellate Body due to complaints over judicial overreach, 29 cases have been left in limbo, delivering a heavy blow to the dispute settlement system.

Those depositing cases include Dominican Republic, India, Indonesia, Morocco, Pakistan, South Korea and the United States.

ALSO READ: Xi stresses WTO reform, opening-up

"No more fraud, no more pretending you're appealing,” former deputy director-general Alan Wolff told a WTO conference last month, urging countries to hold off on fresh appeals from 2024, when WTO members have pledged to address the issue.

The WTO has warned a "polycrisis" of pandemic, the conflict in Ukraine and inflation is sapping faith in globalization. The result is a growing disregard for global trading rules among WTO members.

Last month it warned that a surge of unilateral measures, if unchecked, would fragment the world economy, stripping 5 percent of global income.

Import restrictions have eased since 2018 but export curbs have more than offset their decline. Such curbs averaged 21 per year between 2016 and 2019, but rose to 139 last year.

This has triggered a surge in the number of "concerns" raised at the WTO. These have targeted export restrictions such as for Indian rice and the subsidies the clean tech push has unleashed, such as the US Inflation Reduction Act, with a bias for production in North America.

'Teetering on the abyss of irrelevance'

US local content requirements are also set to be raised under the Buy American Act, while the European Union, which still preaches adherence to WTO rules, has subsidies and targets to boost home supply of critical minerals and green production.

Keith Rockwell, senior fellow at the Hinrich Foundation, says the WTO is "teetering on the abyss of irrelevance".

"People are not feeling in any way constrained by their obligations to the WTO when it comes to policy and that was not the case a decade ago," he said, adding that for Washington, the driving force behind the creation of the rules-based trading system, the WTO was now "not on the radar screen".

The 164 members broadly agree that the WTO, with its 620 staff in an art-deco building on the shores of Lake Geneva, needs reform, although it requires a full consensus to make any change.

ALSO READ: Indonesia launches WTO dispute over EU biodiesel duties

For some, reform centers on restoring the Appellate Body, something the United States will not accept. Reforms could also deal with issues not considered when the WTO was formed, such as climate change, data flows or artificial intelligence.

Reform is set to be a key topic at the WTO's 13th ministerial conference (MC13) in February.

One Geneva-based WTO delegate said it seemed the Biden administration did not believe further trade liberalization was in US interests, a belief that may be solidified in 2024, a presidential election year.

"And if they don't believe that is in their interest it somewhat blunts the role of the WTO," the delegate said. "The same factors that made MC12 difficult will make MC13 difficult, namely Indian obstructionism and US indifference."

READ MORE: WTO warns of global GDP loss through decoupling

The WTO argues the world needs a renewed drive towards integration, what it calls re-globalization, to tackle challenges from climate change to poverty reduction, while noting that 75 percent of goods trade is still based on WTO tariff terms members extend to each other.

"Take that away, and we are left with chaos and what would become a power-based rather than a rules-based system," Okonjo-Iweala said.