INTELLECTUAL PROPERTY AND INNOVATION: MAKING MSMES COMPETITIVE IN GREEN TECH

Climate change is a major global concern. Indeed, the UN has indicated there is less than a year for countries to get serious about saving the planet by getting their updated national climate action plans (NDCs) submitted. See Time, ‘If This Task Was Urgent Before, It’s Crucial Now.’ U.N. Says World Has 10 Months to Get Serious on Climate Goals, February 26, 2021,https://time.com/5942546/un-emissions-targets-climate-change/; UN Climate Change, Greater Climate Ambition Urged as Initial NDC Synthesis Report Is Published, 26 February 2021, https://unfccc.int/news/greater-climate-ambition-urged-as-initial-ndc-synthesis-report-is-published (“’2021 is a make or break year to confront the global climate emergency. The science is clear, to limit global temperature rise to 1.5C, we must cut global emissions by 45% by 2030 from 2010 levels.  Today’s interim report from the UNFCCC is a red alert for our planet. It shows governments are nowhere close to the level of ambition needed to limit climate change to 1.5 degrees and meet the goals of the Paris Agreement. The major emitters must step up with much more ambitious emissions reductions targets for 2030 in their Nationally Determined Contributions well before the November UN Climate Conference in Glasgow,’ said UN Secretary-General António Guterres.”).

While the largest polluters — China and the United States — haven’t submitted updated NDCs, the Biden Administration is planning on hosting a climate summit in the summer and plans on having more ambitious plans for the U.S. prepared by that time. See Roadmap for a Renewed U.S.-Canada Partnership, February 23, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/02/23/roadmap-for-a-renewed-u-s-canada-partnership/ (“The Prime Minister and the President expressed their commitment to have their two countries work together on cooperative action ahead of the US-hosted Leaders’ Climate Summit that will allow both countries to increase their climate ambition. The President, in addition to acknowledging Canada’s new strengthened national climate plan and its globally ambitious price on pollution, reiterated his aim to have ready the US nationally determined contribution (NDC) in advance of the Summit and welcomed the Prime Minister’s aim to announce the enhanced 2030 emissions target for its NDC by the Summit as well.”).

At the World Trade Organization, many countries are anxious to explore ways that trade can facilitate addressing the challenges from climate change. Because of the large share of employment around the world by micro-, small- and medium’sized businesses (MSMEs), such businesses are playing and will have to play a critical role in adopting technologies to permit reduction of pollutions threatening the planet.

On February 25, 2021 a group of WTO Members (largely developed countries) submitted a communication to the WTO membership outlining ways that MSMEs can use intellectual property to green their businesses. See INTELLECTUAL PROPERTY AND INNOVATION: MAKING MSMES COMPETITIVE IN GREEN TECH, COMMUNICATION FROM AUSTRALIA, CANADA, CHILE, THE EUROPEAN UNION, JAPAN, SINGAPORE, SWITZERLAND, THE SEPARATE CUSTOMS TERRITORY OF TAIWAN, PENGHU, KINMEN AND MATSU, THE UNITED KINGDOM AND THE UNITED STATES, IP/C/W/675 (26 February 2021). The paper lays out the purpose of the communication in its introduction copied below.

“1. Some of today’s critical global challenges include climate change, biodiversity loss, environmental degradation and food security. As an example, climate change matters to our health and increases the risk of infections and pandemics.1

“2. Several international efforts such as the Sustainable Development Goals (SDGs), the Convention on Biological Diversity, the UN Framework Convention on Climate Change and the Paris Agreement are designed to address these challenges. In this context, the role of Green Technology2 is important to provide new alternatives to address these challenges and create opportunities that have economic, social, and environmental benefits, as underscored by the framework of the SDGs. Of these, several underline the importance of Environmentally Sound Technologies (ESTs) for the accomplishment of the above objectives.

“3. Micro-, Small and Medium-sized Enterprises (MSMEs) can play a pivotal role in this change towards more sustainability. As they provide for more than 50 percent of employment (G20/OECD, 2015), they can constitute core engines of innovation and growth. MSMEs working in the green tech sector represent key economic actors in the effort towards finding solutions to address the abovementioned global challenges. The role of intellectual property rights (IPRs) to enhance the competitiveness of MSMEs should be looked at closely. IPRs enhance the dissemination and protection of innovations – which is key for MSMEs, including those in the green tech sector (Friesike, Jamali, Bader et al, 2009). This submission presents IPR approaches for making MSMEs more competitive in green tech.

“1 Harvard T.H Chan School of Public Health: https://www.hsph.harvard.edu/cchange/subtopics/coronavirus-and-climate-change/ (last consulted: 09.01.2021).”

The communication then provides information on international and national approaches to helping SMSEs obtain IP protection and/or obtain through license or otherwise existing IP technologies to address greening their businesses. For example, on international approaches, the communication reviews the role WIPO and WTO play in providing easy access to lots of information on intellectual property systems of many countries. WIPO has set up support through WIPO Green to facilitate collaboration on environmentally sound technologies (ESTs) including what technologies are available for licensing, etc.

“5. One important initiative to accelerate the development and dissemination of ESTs is WIPO GREEN, a marketplace designed to connect providers and seekers of ESTs. All technologies listed in the online database of WIPO GREEN are available for license, collaboration, joint ventures, and sale. In addition to establishing a network of various partners, WIPO GREEN contains a database of IP experts, supports acceleration projects in different countries and produces briefs and seminars for various green tech areas. It is thus particularly valuable for MSMEs, given that it facilitates the diffusion of their technologies and provides information to technology providers and seekers in all countries.”

The communication from the WTO Members also includes information on the Technology Mechanism provided by the United Nations Framework Convention on Climate Change and provides information on classification of green technology patents by WIPO, the European Patent Office (EPO) and US Patent and Trademark Office (USPTO).

On national approaches Members can take, the communication focuses on actions the national patent office can take.

“12. There are several ways for IP offices to assist MSMEs in making the best use of IPRs.

“• IP offices can provide basic guidance and assistance on various IPR aspects. By preparing reader-friendly IP material, including patent and trademark basics, examination overviews, information on patent searching and resources on legal assistance that could be used by inventors and businesses in the green tech sector, individual questions and needs may be met.

“• IP offices may provide support in the form of assisting applicants with patent searches, landscape analyses and also facilitate free legal assistance.

“• Specifically with a view to promoting ESTs, IP offices could consider accelerated patent examination procedures for such green tech patent applications. This process shortens the time between application and grant, enabling MSMEs to attain financial support more quickly.

“• Customized workshops, seminars, or awards for the best green tech inventions may also help to make MSMEs that are involved in the green tech sector more aware of the benefits that the IP system may hold for them.”

The complete communication is embedded below.

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Conclusion

While there are presently limited environmental negotiations going on at the WTO (fisheries subsidies), the global race to address a warming world requires greater focus by WTO Members on the role trade can play to improve the global response. Restarting the environmental goods negotiations is one obvious area for negotiations. Addressing carbon leakage through national laws and international negotiations is another. Encouraging collaboration to spread green technology requires no negotiations but is a potentially important component in the global response. Hence the February 25 communication is a valuable contribution to increasing the global focus on how to address the challenges of a warming planet.

WTO Director-General Ngozi Okonjo-Iweala’s first week on the job starts with a two day General Council meeting

While the WTO’s General Council, in special session, appointed Dr. Ngozi Okonjo-Iweala to be the next Director-General on February 15, 2021, her term starts on Monday, March 1. The challenges facing the WTO membership and the incoming Director-General are many and complex. At the same time, there is a lot of useful work that is done within the WTO including efforts of non-members to join the WTO (accessions).

In speaking to an informal Trade Negotiations Committee and Heads of Delegation meeting on February 25, Deputy Director-General Alan Wolff spoke in part on “The Ngozi Okonjo-Iweala Era”. See WTO, DDG Wolff calls on members to work with new Director-General to reform WTO, 25 February 2021, https://www.wto.org/english/news_e/news21_e/ddgaw_25feb21_e.htm. Part of the section of his statement on the new DG’s era is copied below.

“The Ngozi Okonjo-Iweala Era

“The landmark event of the last six months was the appointment of the new Director-General ten days ago after what turned out to be a lengthy process.  91 member delegations spoke last week to congratulate the new Director-General. The DDGs and the Secretariat join you in welcoming Dr Okonjo-Iweala’s appointment with great enthusiasm.

“Of course, member enthusiasm, optimism and hope need to be translated into concrete action.  

“There is much that needs to be done at this critical juncture for the WTO. World trade must contribute to a more effective pandemic response as well as a strong and sustainable economic recovery. Climate issues are demanding more urgent attention. WTO reform is overdue, having been called for repeatedly by you, by your ministers and by many heads of government. 

“The challenges are many but so are the opportunities. Dr Ngozi’s remarks at the Special General Council meeting last Monday, subsequently circulated to delegations in document JOB/GC/250, presented a worthy and ambitious agenda for the members of this organization.

“What did she say?

“To act with a sense of urgency to assist in controlling the COVID-19 pandemic through the nexus of trade and public health:

“First, by playing a more forceful role in exercising the WTO’s monitoring function. Part of this would involve encouraging members to minimise or remove export restrictions that hinder supply chains for medical goods and equipment. WTO monitoring suggests that as of yesterday, 59 members and 7 observers still had pandemic-related export restrictions or licensing requirements in place, mostly for personal protective equipment, disinfectants and to a lesser extent, for medicines and food. This represents a significant level of rollback compared to the 81 members and 10 observers that had implemented such measures over the past year. A welcome development — but there is much room to improve this record.  

“And second, by broadening access to new vaccines, therapeutics, and diagnostics by facilitating technology transfer within the framework of multilateral rules.

“Beyond these immediate responses to the pandemic, Dr Ngozi set out a number of other, also vitally important, challenges:

“To swiftly conclude the fisheries subsidies negotiations, and thus pass a key test of the WTO’s multilateral credibility while contributing to the sustainability of the world’s oceans.

“To build on the new energy in the multilateral trading system from the joint statement initiatives attracting greater support and interest, including from developing countries.

“To address more broadly the nexus between trade and climate change, using trade to create a green and circular economy, to reactivate and broaden negotiations on environmental goods and services, to take the initiative to address the issue of carbon border adjustments as they may affect trade.

“To level the playing field in agricultural trade though improving market access and dealing with trade distorting domestic support, exempting from export restrictions World Food Programme humanitarian purchases.

“To strengthen disciplines on industrial subsidies, including support for state-owned enterprises. 

“To defuse the divisions over Special and Differential Treatment (SDT).

“And to develop a work programme for restoring two-tier dispute resolution, to be agreed no later than MC12.

“I sense from my discussions with members that you chose this leader, Ngozi Okonjo-Iweala, because she has shown herself during her career to be fearless in the face of daunting challenges — and is experienced in knowing how to work with others to make progress toward solutions. 

“Each of the challenges the WTO faces, I am sure, can be met and overcome.  Echoing Dr Ngozi’s words, the trading system that we inherited, now only three-quarters of a century old, is about people.  This is inscribed in the opening section of the Marrakech agreement: ‘to raise living standards, ensure full employment, increase incomes, expand the production of and trade in goods and services, and seek the optimal use of the world’s resources in accordance with the objective of sustainable development.”’

DDG Wolff’s summation correctly lays out many of the issues needing to be addressed by the WTO membership. The vast majority of the issues are highly controversial among at least some Members.

The first major order of business is a two day General Council meeting on March 1-2 which has several agenda items that lay out controversies on important potential deliverables by the WTO in 2021. The agenda for the two day meeting contains sixteen items. See WT/GC/W/820 (26 February 2021) embedded below.

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General Council meetings deal with updates on ongoing work at the WTO and address issues teed up by particular Members for consideration at the meeting. This post does not take up all agenda items but highlights a few of possible interest. Because DDG Wolff’s statement on February 25 reviews many of the activities of the WTO in the last six months which shows some of the positive developments, the full statement is embedded below.

WTO-_-2021-News-items-Speech-DDG-Alan-Wolff-DDG-Wolff-calls-on-members-to-work-with-new-Director-General-to-reform-WTO

The 12th WTO Ministerial Conference

Agenda item 4 deals with the 12th WTO Ministerial Conference. It is expected that there will be a decision on the timing and location of the twelfth Ministerial Conference at the General Council session on Monday-Tuesday. The 12th MC was postponed from June 2020 because of the COVID-19 pandemic. With the continued challenges from the pandemic the likely date will be the end of 2021. Kazakhstan which had offered to host the conference in 2020 and again in the summer of 2021 has recently indicated a willingness to host in December of this year as well. The ministerial had originally been scheduled for June because of challenging weather conditions in Kazakhstan in December. See TWELFTH SESSION OF THE MINISTERIAL CONFERENCE, COMMUNICATION FROM KAZAKHSTAN, 8 February 2021, WT/GC/229 (24 February 2021)(embedded below).

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Report on WTO Accessions

Deputy Director-General Wolff will provide a statement on the annual report on WTO accessions. The report is WTO ACCESSIONS, 2020 ANNUAL REPORT BY THE DIRECTOR-GENERAL, WT/ACC/38, WT/GC/228 (18 February 2021). Activity on accessions was challenged by the pandemic and inability to travel/hold in person meetings. More technical assistance and virtual meetings were held. Accessions are important for acceding governments in terms of promoting reforms at home and obtaining increased certainty in their international trade relations. Accessions are also an important benefit of membership for existing Members as acceding Members reduce tariffs and various non-tariff barriers to gain accession. The first eight paragraphs of the report provide an overview of activities in 2020 and are copied below.

Overview of activities in 2020

“1. 2020 was an unprecedented year in recent history due the COVID-19 pandemic outbreak and its consequences which have touched upon every single aspect of our lives in every corner of the world. It was a challenging year for the WTO, not least because the pandemic disrupted its core activities, especially during the first half of the year, and it also disrupted the international trade of Members, except for supplies of essential goods critical to combatting the health crisis as trade in these goods expanded dramatically. The difficulties and challenges arising from the pandemic were particularly pronounced in acceding governments due to the uncertainties of being outside of the multilateral trading system. In fact, the desire and urgency to be part of the WTO was never felt stronger than in the pandemic year. This was reflected in the level of accession activities in 2020, which was sustained vis-à-vis previous years, with a significant increase in technical assistance and outreach activities.

“2. The year for accessions started with the establishment of a new Working Party for the accession of Curaçao, a constituent country within the Kingdom of the Netherlands (WTO Member), following its application for an independent membership as a separate customs territory pursuant to Article XII of the Marrakesh Agreement. This constituted the 59th request by a state or separate customs territory for membership since the establishment of the Organization in 1995. In July, Turkmenistan was granted observer status in the WTO, with the understanding that it would apply for accession no later than in five years. This brought the total number of observer governments with the intention to accede to the WTO to 24, an increase by five since 2016 when Afghanistan and Liberia became the Organization’s most recent Members. The continuing interest to become part of the multilateral trading system is a testament to the attraction and relevance of its values and principles for all economies, regardless of their size or level of development.

“3. The COVID-19 pandemic undoubtedly hampered or delayed the technical work by acceding governments, Members and the Secretariat to prepare for, engage in and follow up on Working Party meetings. However, thanks to the firm commitment of the acceding governments to advance their work, four Working Parties met, including through the use of virtual platforms that connected the acceding governments which were unable to travel to Geneva. One acceding government had to cancel its already scheduled meeting due to the suspension of all WTO meetings in March. Out of the four accession Working Party meetings held in 2020, three were on LDC accessions (Ethiopia, Comoros and Timor-Leste). In two cases – the Working Parties of Ethiopia and Uzbekistan – this also represented the formal resumption of accession processes after several years of inactivity (8 and 15 years, respectively), signalling their desire to use WTO membership negotiations to drive domestic economic reforms, which have broader implications in the regions where they are located.

“4. When the pandemic halted planned missions, technical assistance, and outreach activities which required air travel, the Secretariat rapidly shifted the mode of operation to virtual format and took advantage of the opportunities provided thereby. In addition to the formal accession Working Party meetings which took place via Interprefy, the Accessions Division organised virtual technical meetings and briefing sessions with acceding governments, Working Party Chairpersons and partners in support of accessions. Moreover, the Division delivered a number of technical assistance, training and outreach activities in response to articulated needs of acceding governments, using various virtual platforms, such as MS Teams, Zoom and WebEx. In fact, the number of activities delivered by the Division and of participants who attended or were trained in 2020 exceeded considerably the numbers in previous years.

“5. One of the novel outreach programs developed in 2020 was two week-long activities which consisted of a series of webinars combining lectures, training and panel discussions. The first Accessions Week was organised from 29 June to 3 July, and the first edition of the Trade for Peace Week took place from 30 November to 4 December. These virtual events brought together a large number of resource persons and panellists from around the world and reached out to a larger number of participants, in a highly cost-effective manner, in comparison with traditional in-person activities. While the full values and benefits of in-person interaction cannot be replaced or replicated, the Accessions Week enabled the Secretariat to remain engaged with acceding governments and Members, experts and partners, beyond Geneva and around the world. The Trade for Peace Week provided an effective networking platform to expand the WTO’s partnership with the peace and humanitarian communities in support of fragile and conflict affected (FCA) countries in accession.

“6. The importance of collaboration and cooperation with partners was never felt more strongly than in 2020. The Secretariat made concerted efforts to enhance and expand the “Trade for Peace through WTO Accession” Initiative to support FCA countries in accession and those recently acceded to the WTO. In 2020, nine acceding governments were identified as being in a FCA situation according to the World Bank’s classification1, while conflicts emerged or resurged in some others. The pandemic hit hardest countries which had already been suffering from years of conflict, political crises, drought and other natural disasters, compounded by declines of the price of oil and other commodities. Nonetheless, some FCA acceding LDCs showed remarkable resilience in sustaining their engagement in accession. The Working Party on the Accession of the Union of Comoros resumed its work with determination to finalise the process as soon as possible. The Working Party on the Accession of Timor-Leste activated the Working Party by holding its first meeting nearly four years after its establishment, despite various challenges faced on the domestic front. Moreover, Somalia submitted its Memorandum on the Foreign Trade Regime, the base document to start its accession engagement with Members. Furthermore, the Secretariat continued to provide support to the g7+ WTO Accessions Group, which was coordinated by Afghanistan.

“7. The year 2020 marked the 25th anniversary of the WTO. The Secretariat used its annual flagship event, the China Round Table on WTO Accessions, to review the contributions made by accessions to the multilateral trading system since 1995. The event also provided an opportunity for an exchange of ideas to explore the future expansion of WTO membership towards universality, including through possible improvements in the accession process. The year also marked a significant anniversary milestone for five Article XII Members2 – Albania, Croatia, Georgia, Jordan and Oman which joined the WTO in 2000, the year with the largest number of new members to date. Other anniversary milestones included the fifth anniversaries of Membership of Kazakhstan and Seychelles and the fifteenth anniversary for the Kingdom of Saudi Arabia. In recent years, membership anniversaries have become an important occasion to reflect on the benefits and values of being part of the Organization.

“8. Finally, the thematic focus of the 2020 Annual Report was on the complementarities and synergies in negotiating WTO membership and regional trade agreements. Almost all acceding governments are involved in regional integration initiatives in parallel with their efforts to achieve WTO membership. The highlight of the year was the implementation of the African Continental Free Trade Area (AfCFTA) to which all African WTO applicants are signatories. The Report’s thematic section builds on the rich discussions held on the topic during the 2020 Regional Dialogues on WTO Accessions for Africa and for the Arab Region, as well as other meetings on Central Asia and Eurasia. It aims to explore key opportunities and challenges that may arise in a simultaneous pursuit of regional and global integration efforts and to provide a checklist of issues for trade negotiators to consider in maximising the benefits from the participation in multiple trade arrangements.”

The full report is embedded below.

WTACC38

Waiver of TRIPS Obligations During COVID-19 Pandemic

The sixth agenda item involves the effort from India and South Africa with a number of other developing or least developed countries to obtain a waiver from most TRIPS obligations on medical goods needed for the COVID-19 pandemic. This has been a very controversial issue with developed countries with pharmaceutical companies involved in the production of vaccines and other items opposing the waiver on the basis of existing flexibilities within the TRIPS Agreement and on the global efforts through the WHO, GAVI and CEPI to provide vaccines to low- and middle-income countries through COVAX with financial contributions from many countries, NGOs and others. See, e.g., February 19, 2021, COVAX’s efforts to distribute COVID-19 vaccines  to low- and middle income countries — additional momentum received from G-7 virtual meeting, https://currentthoughtsontrade.com/2021/02/19/covaxs-efforts-to-distribute-covid-19-vaccines-to-low-and-middle-income-countries-additional-momentum-from-g-7-virtual-meeting/

The TRIPS Council received the proposal back in October but has been unable to provide a recommendation to the General Council. A meeting of the TRIPS Council earlier this month continued the lack of agreement. Thus, the agenda item will simply result in the item being continued on the General Council’s future agendas until resolved or dropped. See WTO, Members discuss TRIPS waiver request, exchange views on IP role amid a pandemic, 23 February 2021, https://www.wto.org/english/news_e/news21_e/trip_23feb21_e.htm (” In this context and given the lack of consensus on the waiver request, members agreed to adopt an oral status report to be presented to the General Council at its next meeting on 1-2 March. The report indicates that the TRIPS Council has not yet completed its consideration of the waiver request and therefore will continue discussions and report back to the General Council.”); December 11, 2020, Council for Trade-Related Aspects of Intellectual Property Rights meeting of December 10, 2020 – no resolution on proposed waiver of TRIPS obligations to address the pandemic, https://currentthoughtsontrade.com/2020/12/11/council-for-trade-related-aspects-of-intellectual-property-rights-meeting-of-december-10-2020-no-resolution-on-proposed-waiver-of-trips-obligations-to-address-the-pandemic/; December 6, 2020, Upcoming December 11th Council for Trade-Related Aspects of Intellectual Property Rights meeting – reaction to proposed waiver from TRIPS obligations to address COVID-19, https://currentthoughtsontrade.com/2020/12/06/upcoming-december-11th-wto-council-for-trade-related-aspects-of-intellectual-property-rights-meeting-reaction-to-proposed-waiver-from-trips-obligations-to-address-covid-19/; November 2, 2020, India and South Africa seek waiver from WTO intellectual property obligations to add COVID-19 – issues presented, https://currentthoughtsontrade.com/2020/11/02/india-and-south-africa-seek-waiver-from-wto-intellectual-property-obligations-to-address-covid-19-issues-presented/.

Fisheries Subsidies negotiations — Draft Ministerial Decision

The WTO has been pursuing negotiations on fisheries subsidies to address sustainable fishing concerns since the end of 2001. Conclusion of the negotiations were supposed to take place in 2020 but WTO Members were unable to get the job completed in part because of disruptions from the COVID-19 pandemic. While completing the negotiations remains a key objective of Members and the incoming Director-General and such completion is needed to fulfill the UN Sustainable Development Goal 14.6, WTO Members continue to face a large number of challenging issues. See, e.g., WTO press release, WTO members hold February cluster of meetings for fisheries subsidies negotiations, 24 February 2021, https://www.wto.org/english/news_e/news21_e/fish_24feb21_e.htm; February 22, 2021, An early test for the incoming WTO Director-General — helping Members get the Fisheries Subsidies negotiations to a conclusion, https://currentthoughtsontrade.com/2021/02/22/an-early-test-for-the-incoming-wto-director-general-helping-members-get-the-fisheries-subsidies-negotiations-to-a-conclusion/.

Agenda item 7 is entitled “Supporting the Conclusion of Fisheries Subsidies Negotiations for the Sustainability of the Ocean and Fishing Communities — Draft Ministerial Decision — Communication from Brazil (WT/GC/W/815. The draft Ministerial Decision is an effort by Brazil to highlight the critical aspect of the negotiations which is to address environmental sustainability and presumably reflects Brazil’s concerns with the efforts of so many Members to protect their subsidies versus ensuring sustainable fishing. The document is embedded below.

WTGCW815

An attack on Joint Statement Initiatives

As reviewed in the incoming Director-General’s statement on February 15 and the summary of her statement by DDG Wolff on February 25, an important aspect of ongoing work at the WTO is a number of Joint Statement Initiatives that were started at the end of the 11th Ministerial Conference in Buenos Aires, including on e-commerce/digital trade.

Agenda item 10 is a frontal attack on such initiatives by India and South Africa through their paper, “Legal Status of Joint Statement Initiatives and Their Negotiated Outcomes”, WT/GC/819. I had reviewed the submission in an earlier post. See February 20, 2021, Will India and South Africa (and others) prevent future relevance of the WTO?, https://currentthoughtsontrade.com/2021/02/20/will-india-and-south-africa-and-others-prevent-future-relevance-of-the-wto/. The agenda item will like see many delegations take the floor to support the use of joint statement initiatives within the WTO or to oppose them. While there won’t be a resolution of the issue, the challenge to the process could significantly handicap some of the efforts envisioned by the incoming Director-General to help developing and least developed countries take advantage of the e-commerce/digital trade world and eventually participate in talks and/or in an agreement. WT/GC/W/819 is embedded below.

WTGCW819-1

Agenda item 8 is viewed as related to agenda item 10. India has been seeking to limit WTO consideration of e-commerce issues to the multilateral efforts over many years within the existing Councils and Committees of the WTO (but where limited progress has been made).

COVID-19 and possible future pandemics — addressing existing trade restrictions and improving the functioning of the WTO to better handle in the future

The incoming Director-General has as a high priority to work with Members to improve monitoring of export restraints on medical goods and agricultural goods during the pandemic and working with Members to see that the WTO helps Members recover and better handle any future pandemics. The Ottawa Group had put forward a trade and health initiative in November 2020. See COVID-19 AND BEYOND: TRADE AND HEALTH, WT/GC/223 (24 November 2020). The communication was made by Australia, Brazil, Canada, Chile, the European Union, Japan, Kenya, Republic of Korea, Mexico, New Zealand, Norway, Singapore and Switzerland. The document contains an annex reviewing the types of actions Members could take to improve the response to the pandemic and improve conditions going forward. Included in the annex to the communication are sections on export restrictions; customs, services and technical regulations; tariffs; transparency and review; cooperation of the WTO with other organizations. Several paragraphs in the communication review the issue of possible export restrictions on vaccines and are copied below.

“9. We realize that the challenges related to the scarcity of essential medical goods, now alleviated to some extent by the response on the supply side, may be repeated at the moment of the development of a vaccine or new medical treatments. In this context, we welcome the COVID-19 Vaccine Global Access Facility (COVAX), a global pooled procurement mechanism for COVID-19 vaccines, managed by Gavi, the Vaccine Alliance, the Coalition for Epidemic Preparedness Innovations (CEPI) and WHO. This mechanism is critical in securing an equitable share of vaccines for all Members of the international community. As we strongly support the objective of this facility, we call on WTO Members to ensure that any export-restricting measures do not pose a barrier to the delivery of necessary supplies under the COVAX facility.

“10. We recognize the collaborative efforts of private and public stakeholders in the research and development of COVID-19 diagnostics, vaccines and treatments. We encourage the industry to take actions to ensure access at affordable prices to COVID-19 diagnostics, vaccines and treatments for vulnerable populations and support voluntary pooling and licensing of IP rights to accelerate the development of such diagnostics, treatments and vaccines and scaling up their production. We recognize the importance of the IP system in promoting R&D and innovation for access to effective treatments. We note that the flexibilities provided by the TRIPS Agreement and reaffirmed in the Doha Declaration on the TRIPS Agreement and Public Health remain available to protect public health and to promote access to medicines for all.”

The full document is embedded below.

WTGC223

Canada will be providing an update on the initiative at the General Council meeting and will likely see many Members provide comments on the agenda item.

Agenda item 9 was added by Colombia, Costa Rica, Ecuador, Panama and Paraguay reflecting concerns by them (and presumably many other trading partners) about actions taken by the European Union to exert control over exports of vaccines from the EU in light of EU concerns about its own access to vaccines from manufacturers. See CALL TO PREVENT EXPORT RESTRICTIONS ON COVID-19 VACCINES, WT/GC/818 (18 February 2021). The document is embedded below.

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Since the EU is one of the Members who has pushed the trade and health initiative, there is concern by some WTO Members that its actions on vaccines run counter to the initiative it is supporting. Presumably the EU will argue that its actions are consistent with its rights under the WTO and is consistent with the language laid out in paragraphs 9 and 10 above.

The two agenda items are likely to show the concerns of many Members on equitable access to medical goods during the pandemic and the reluctance of at least some Members to reduce their flexibilities under the existing WTO rights and obligations.

Conclusion

DDG Wolff indicated that Members selected the incoming Director-General because she is “fearless in the face of daunting challenges”. There is no shortage of daunting challenges facing the WTO and its new Director-General. A few have been reviewed above.

Some good news is that the EU and the United States are supportive of many of the priorities laid out by DG Ngozi Okonjo-Iweala in her February 15 statement to the Special Session of the General Council as seen in the recent EU revised trade policy and the opening statement of USTR nominee Katherine Tai at yesterday’s Senate Finance Committee confirmation hearing See February 18, 2021, The European Commission’s 18 February 2021 Trade Policy Review paper and Annex — WTO reform and much more proposed, https://currentthoughtsontrade.com/2021/02/18/the-european-commissions-18-february-2021-trade-policy-review-paper-wto-reform-and-much-more-proposed/; February 25, 2021, U.S. Trade Representative nominee Katherine Tai confirmation hearing before the U.S. Senate Finance Committee, https://currentthoughtsontrade.com/2021/02/25/u-s-trade-representative-nominee-katherine-tai-confirmation-hearing-before-the-u-s-senate-finance-committee/.

The challenges the new Director-General and the WTO Members face will be made harder by the lack among Members of a common vision and agreed purpose of the WTO, by the current inability of the WTO system to address fundamentally different economic systems, by the structure of decision making, by the failure of obligations to be updated to match level of economic development and role in global trade and by the related issue of how special and differential treatment is used. These challenges have resulted in a negotiating function that is broken, in a dispute settlement system that has no checks on the reviewers for errors or failures to operate within the bounds of authority granted in the Dispute Settlement Understanding and in the underperformance of the monitoring and implementation function.

Hopefully, DG Okonjo-Iweala will develop a strong personal staff and group of DDGs to help her attempt the seemingly impossible — getting meaningful progress and reform from the 164 current WTO Members. See February 13, 2021, Leadership change at the WTO — with Dr. Ngozi Okonjo-Iweala’s arrival next week, what support team and early changes in the role of the Secretariat could help WTO Members move forward?, https://currentthoughtsontrade.com/2021/02/13/leadership-change-at-the-wto-with-dr-ngozi-okonjo-iwealas-arrival-next-week-what-support-team-and-early-changes-in-the-role-of-the-secretariat-could-help-wto-members-move-forward/

Director-General Ngozi Okonjo-Iweala will get her first reality check at the General Council meeting on March 1-2.


U.S. Trade Representative nominee Katherine Tai — confirmation hearing before the U.S. Senate Finance Committee

President Biden’s nominee to become the U.S. Trade Representative, Katherine Tai, has received broad support from business, labor, agriculture and NGOs since her nomination. For example, the U.S. Chamber of Commerce submitted a letter of support to the Senate Finance Committee on February 23, 2021. The letter from the U.S. Chamber and several other endorsements are embedded below.

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Today at the U.S. Senate Finance Committee Katherine Tai’s nomination is considered. While it is widely expected that Ms. Tai will be easily confirmed by the full Senate if/when she is reported out by the Finance Committee, the hearing today identified not only Ms. Tai’s views of the Administration’s priorities but also the issues of greatest interest to one of the Congressional Committees with jurisdiction over trade. For example, Chairman Wyden (D-Oregon) and Ranking Member Crapo (R-Idaho), Ms. Tai’s opening statement in their opening statements focused on very different issues viewed as important to them. Forced labor and concerns over efforts by trading partners to tax digital trade in a manner harmful to U.S. companies were issues raised by Chairman Wyden while the need to pursue more trade agreements (such as with the United Kingdom) was of great importance to Ranking Member Crapo. Ms. Tai was introduced by Chairman Neal and Ranking Member Brady of the U.S. House of Representatives Committee on Ways and Means in a sign of bipartisanship for a former Chief Trade Counsel for the Committee.Democrats.

Ms. Tai’s opening statement repeated themes she had articulated when she was nominated by then President-elect Biden focusing on helping the country recover from the pandemic, enforcement of the USMCA, dealing with China, and engaging with multilateral fora. Her opening statement is copied below and can be found at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/february/opening-statement-ambassador-designate-katherine-tai-senate-finance-committee.

“Mr. Chairman, Ranking Member Crapo, and members of the Committee — thank you for the opportunity to appear before you today.

“The chance to serve the American people, fight on their behalf, and represent them on the world stage once again will be the greatest honor of my life. It’s a privilege I’ve experienced before at the Office of the United States Trade Representative — and a responsibility that, if confirmed, I look forward to embracing once again. I thank President Biden for providing me with this opportunity.

“Serving as the top U.S. trade representative around the globe holds special resonance for me as the daughter of immigrants.

“My parents were born in mainland China, and grew up in Taiwan. The immigration reforms set in motion by President Kennedy opened a path for them to come here as graduate students in the sciences. And they made the most of their American opportunity.

“My dad became a researcher at the Walter Reed Army Institute of Research. He helped the Army develop treatments for illnesses that had debilitated GIs during the Vietnam War – the war in which my father-in-law fought bravely as a young man.

“My mom still works at the National Institutes of Health. She heads a clinical trials network, developing treatments for opioid addiction that will help to stem an epidemic causing so much suffering in our communities.

“I am proud of their service to the nation that welcomed them. And I am proud to live in a country where, in just one generation, their daughter could grow up to represent the United States and our interests around the globe.

“That sense of pride and patriotism will ground me every day if I have the honor to be confirmed as United States Trade Representative.

“I know that the challenges ahead are significant.

“Our first priority will be to help American communities emerge from the pandemic and economic crisis. USTR has an important role to play in that effort. Working with Congress, the entire Biden-Harris administration, and other countries and trusted partners, USTR will help to build out strong supply chains that will get our economy back on track.

“In the longer term, we must pursue trade policies that advance the interests of all Americans — policies that recognize that people are workers and wage earners, not just consumers; policies that promote broad, equitable growth here at home; policies that support American innovation and enhance our competitive edge.

“That’s why I will make it a priority to implement and enforce the renewed terms of our trade relationship with Canada and Mexico. Too often in the past, Congress and the administration came together to finalize and pass a trade agreement. But then other urgent matters arose and we all moved on. The United States-Mexico-Canada Agreement (USMCA) is a uniquely bipartisan accomplishment that must break that trend. It represents an important step in reforming our approach to trade. We must all continue to prioritize its implementation and success. We must continue to pursue trade policies that are ambitious in achieving robust, bipartisan support.

“I will also prioritize rebuilding our international alliances and partnerships, and re-engaging with international institutions. We must do the hard work, and secure the necessary reforms that allow the world to come together and address common threats like climate change, the COVID pandemic, and a global economic downturn.

“That duty of leadership extends, of course, to addressing the challenges posed by China.

“I previously served as America’s chief enforcer against China’s unfair trade practices. I know firsthand how critically important it is that we have a strategic and coherent plan for holding China accountable to its promises and effectively competing with its model of state-directed economics. I know the opportunities and limitations in our existing toolbox. And I know how important it is to build what the President has termed ‘a united front of U.S. allies.’

“We must recommit to working relentlessly with others to promote and defend our shared values of freedom, democracy, truth, and opportunity in a just society.

“China is simultaneously a rival, a trade partner, and an outsized player whose cooperation we’ll also need to address certain global challenges. We must remember how to walk, chew gum and play chess at the same time. That means here at home, we must prioritize resilience and make the investments in our people and our infrastructure to harness our potential, boost our competitiveness, and build a more inclusive prosperity. We must also impart the values and rules that guide global commerce — and we must enforce those terms vigorously.

“This is work I am eager to take on once more.

“Having spent my career fighting for American workers, I am honored by the opportunity to work alongside the bright and dedicated public servants at USTR, with our partners and allies, and with each of you. Having served nearly seven years in the House of Representatives, I know that U.S. trade policy is most successful when it is conducted through a healthy partnership between the administration and the Congress.

“I look forward to bringing our trade relationships to bear helping American communities emerge out of crisis and into greater prosperity.

“And I look forward to answering your questions.

“Thank you.”

Topics covered during the question and answer period were broad ranging and included questions on: USMCA enforcement looking both at Mexico (agriculture and energy) and Canada (dairy); 232 tariffs on steel and aluminum; protecting U.S. lumber interest from long running disputes with Canada on softwood lumber; taxes being imposed by trading partners on digital services; importance of intellectual property and the Special 301 report; shortage of semiconductors needed for the auto industry (supply chain vulnerability) and working with Taiwan (sole source for many semiconductors); renewing and expanding trade adjustment assistance; creating a consultation forum for the auto sector with Canada and Mexico; US-UK FTA negotiations (Ms. Tai would want to review progress and developments since 2018 USTR notice to Congress on negotiations); ethanol tariffs of 20% in Brazil and whether negotiations will continue to reduce; the U.S.-China Phase I deal (purchases and changes to laws); possibility of rejoining TPP and possibility of including India; utilization of tools for environmental part of USMCA; trade and environment/ climate issues (including adding to GSP climate change); need to open up new markets (India re apples vs. elimination of GSP for India; China, Vietnam re wheat); resolution of European Airbus dispute; need for inspector general for USTR (including costs to importers of food and beverage products U.S. has retaliated against); update review of China for the Committee; addressing industrial subsidies in China, particularly to state-owned enterprises and predatory mercantilist practices; WTO broken system is broken, activism by Appellate Body, WTO reform (focus should be on what is value of WTO to its Members; is it accomplishing the goals Members expected; how does it address current issues); country of origin labeling, important to cattle producers, need path forward in a WTO-compliant manner; expand ag market access in Southeast Asia and in Africa; compliance by China on US-China Phase I ; purchases (e.g., failure to open up polysilicon); anticorruption in trade agreements; what priorities will small businesses see in US trade negotiations (voices of small business need to be heard); UK 25% tariffs on rice from 232 retaliation; shrimp redirected from countries where rejected for phytosanitary measures; interest on new tools to supplement existing tools to address trade problems; counterfeit goods, what can be done to address rising tide of such goods; how failure of China to honor its labor obligations hurts U.S. and U.S. trading partners; dignity of work agenda; need to increase crackdown on banning imports from forced labor, particularly China treatment of Uighars; 301 exclusion process, need to be run efficiently (transparency, predictability, due process, speed of decision); China’s actions on critical minerals (e.g., rare earth)(trade plays a role but supply chain resilience is key); access to India’s pulse crops (peas) market where there are high tariffs; women’s empowerment; reshoring; tariffs on solar equipment; soda ash trade barriers in trading partners; growing energy exports; problems for seasonal agricultural producers since trade remedies don’t presently address seasonality; critical infrastructure and reliability of vendors (e.g., Huawei); process under Trade Promotion Authority – lack of consultation and lack of mock mark-up in past.

As is always the case in confirmation hearings, Senators raise issues important to their constituents or their broader interests. Some of the topics raised involve agencies other than USTR (or for which USTR has some role). Because trade is an issue where Congress has a constitutional role, an important issue where USTR nominees are being considered is the ability/willingness of the nominee to work with the Congressional Committees of jurisdiction on trade issues. Ms. Tai, having served as staff for the House Ways and Means Committee Democrats, is expected to work closely with the Congressional Committees including the Senate Finance Committee.

What is clear from the Finance Committee hearing today is that the Committee (1) is deeply concerned with the U.S. relationship with China and how to address the range of distortions and obtain compliance with agreements in place, (2) has a strong interest in ensuring enforcement of existing agreements, with a focus being the U.S.-Mexico-Canada Agreement; (3) wants expanded market access abroad (particularly around agricultural products) including through new free trade agreements and tackling retaliatory tariffs or high tariffs used by trading partners; (4) views the WTO as needing meaningful reform including the long-standing U.S. concerns with the Appellate Body; (5) supports strong intellectual property protections in trade agreements, (6) supports resolution of the US-EU disputes on large civilian aircraft; (7) wants the Biden Administration in building strong supply chains on critical products (critial minerals, semiconductors). The Committee asked questions on a broad range of issues including tariffs imposed under section 232of the Trade Expansion Act of 1962, as amended (national security determinations on steel and aluminum), section 301 of the Trade Act of 1974, as amended (various practices by China which resulted in tariffs), and Section 201 of the Trade Act of 1974, as amended ( safeguard tariffs on solar products). Members also asked about U.S. laws dealing with preferences for developing countries (the Generalized System of Preferences expired in 2020) and adjustment assistance which expires in 2021. Many Finance Committee members are from states with large agricultural sectors, and so there were many questions that went to particular agricultural products and market access challenges faced. There were questions about the climate crisis and the role trade can play in addressing the concerns including addressing plastics in the oceans.

There were also questions asked by Senator Warren of Massachusetts about the trade negotiation process. Questions went to composition of advisory committees (85% are corporate representatives) and lack of transparency in drafts of agreements. Sen. Warren asked for release of drafts 60 days before agreement goes to Congress and wants all advisory committees to have more representatives from labor, consumer and environmental groups are larger than corporate representatives. Senator Warren believes these process changes are needed to make U.S. trade policy more worker friendly and more representative of U.S. interests.

The hearing ended after three hours and fiifteen minutes at 1:15 p.m. Chairman Wyden emphasized the need to expand the “winner’s circle” as the U.S. trade policy. Transparency is important to open the process up for the public. Sen. Wyden asks for Ms. Tai to supply views within 30 days of confirmation on what needs to be done to expand transparency.

Written questions are due by 5:00 p.m. on February 26. Once answers are provided, the Chairman will arrange for a Committee vote. If affirmative, Ms. Tai’s nomination will go to the full Senate. Based on today’s hearing, it is likely that the Committee will vote her nomination out either unanimously or nearly unanimously and that she will receive confirmation by the full Senate in the coming weeks.

Roadmap for a Renewed U.S.-Canada Partnership — Implications for WTO initiatives

On February 23, 2021 President Biden and Prime Minister Trudeau had a virtual meeting to review a wide range of topics and released an agreed “Roadmap for a Renewed U.S.-Canada Partnership”. Major topics addressed included (1) combating COVID-19, (2) building back better (i.e., economic recovery after the pandemic), (3) accelerating climate ambitions, (4) advancing diversity and inclusion, (5) bolstering security and defense and (6) building global alliances. A number of these topics are relevant to the work of the World Trade Organization (ongoing or possible). See Roadmap for a Renewed U.S. Canada Partnership, February 23, 2021,https://www.whitehouse.gov/briefing-room/statements-releases/2021/02/23/roadmap-for-a-renewed-u-s-canada-partnership/. This post reviews briefly some of the issues in the roadmap that resonate more broadly in a global trade context.

Combating COVID-19

For example, on combating COVID-19, several of the paragraphs in the roadmap review working together to help ensure equitable access to vaccines through COVAX. Whether sufficient vaccines can be made available to low- and middle-income countries is a matter of concern to many WTO Members including some who have been pushing for waiving TRIPS Agreement obligations during the pandemic. Many developed countries have viewed there being adequate flexibility within the TRIPS Agreement to address the present pandemic and have pointed to the collective efforts of the WHO, GAVI and CEPI in setting up COVAX to procure billions of doses of vaccines both for countries needing assistance and for other countries wanting to acquire vaccines through COVAX. The big issue for COVAX has been adequate funding. The U.S. is donating $2 billion in the near term and another $2 billion over the rest of 2021 and 2022. Canada has also made pledges of support to COVAX. Thus, the roadmap is both supportive of global efforts to get vaccines to countries in need and likely supportive of opposing efforts to waive TRIPS rights and obligations during the pandemic. Some excerpts from the combating COVID-19 section are copied below.

“The top priority of the President and the Prime Minister is to end the COVID-19 pandemic. They agreed to strengthen comprehensive and cross-sectoral efforts to control the pandemic, collaborate on public health responses, and build resilience against future outbreaks.

‘The Prime Minister and the President committed to working closely together to defeat the virus, including by surging the health and humanitarian response to the global pandemic, responding to new variants, following expert advice, and supporting global affordable access to and delivery of COVID-19 vaccines, including through the COVAX Facility.

“The leaders emphasized their strong support for the multilateral institutions that are on the front lines of COVID-19 response, including the World Health Organization (WHO) and UN development agencies, and committed to rapidly fulfilling national pledges to COVAX.”

While not addressed in the roadmap document, both Canada and the U.S. at the WTO have been supportive of not imposing restrictions on agricultural exports and through the G-20 have been supportive of limiting the role of export restraints on medical goods. There is discussion in the building back better section of strengthening “Canada-U.S. supply chain security” which may have implications for whether some actions relevant to medical goods are adopted that will diversify supply or encourage more production within the U.S. and Canada.

The interest by the United States under the Biden Administration in supporting multilateral organizations like the WTO may also suggest that the U.S. will now be more amenable to working with the Ottawa Group (of which Canada is a member) on the Trade and Health Initiative that was introduced last December. See Government of Canada, Minister Ng announces tabling of Ottawa Group’s Trade and Health Initiative at WTO General Council, December 17, 2020, https://www.canada.ca/en/global-affairs/news/2020/12/minister-ng-announces-tabling-of-ottawa-groups-trade-and-health-initiative-at-wto-general-council.html (“Through this Trade and Health Initiative, Canada and the other 12 Ottawa Group member nations are calling for further cooperation among all WTO members to strengthen global supply chains and facilitate the flow of essential medicines and medical supplies, including vaccines, amid the current crisis. The Trade and Health Initiative identifies a range of actions that members are encouraged to adopt. These include implementing trade-facilitating measures in the areas of customs and services, limiting export restrictions, temporarily removing or reducing tariffs on essential medical goods, and improving transparency overall.”); December 18, 2020, The WTO ends the year with General Council and Dispute Settlement Body meetings, https://currentthoughtsontrade.com/2020/12/18/the-wto-ends-the-year-with-general-council-and-dispute-settlement-body-meetings/; November 27, 2020, The Ottawa Group’s November 23 communication and draft elements of a trade and health initiative, https://currentthoughtsontrade.com/2020/11/27/the-ottawa-groups-november-23-communication-and-draft-elements-of-a-trade-and-health-initiative/.

Building back better (recovery from the pandemic)

Much of the section on building back better addresses the collective needs to support groups that have been disproportionately affected by the pandemic including “women, youth, underrepresented groups and indigenous peoples.” Assistance to such groups and to small and medium-sized enterprises is an important component of building back better. It also reflects present WTO focus on helping women and micro-, small- and medium-sized businesses better participate in the global economy and in international trade in particular. Actions by Canada and the U.S. will be pursued in part under existing commitments within the USMCA but also will be supportive of WTO initiatives and UN Sustainable Development Goals.

Other agreed steps by Canada and the U.S. in this section deal with building supply chain for battery development and production which is consistent with the leaders’ objective of advancing reductions in greenhouse gases. The U.S. and Canada also encourage “international regulatory cooperation” to enhance “economic competitiveness” “while maintaining high standards of public health, safety, labor, and environmental protection.” As reviewed below, trade and climate change/environment are likely to be of greater interest within the WTO moving forward. The WTO SPS and TBT Agreements also encourage international regulatory cooperation to facilitate trade. Thus, U.S.-Canada actions are supportive of existing rights and obligations and leading the way on future needs.

Accelerating Climate Ambitions

With the U.S. having rejoined the Paris Agreement since President Biden took office, the U.S. position is now more aligned with Canada and with that of the European Union in terms of needing “to increase the scale and speed of action to address the climate crisis and better protect nature.” Of particular interest is the commitment to action against countries who don’t take adequate action to reduce greenhouse gases .

“The President also restated his commitment to holding polluters accountable for their actions. Both the President and the Prime Minister agreed to work together to protect businesses, workers and communities in both countries from unfair trade by countries failing to take strong climate action.”

The language in the roadmap suggests that the U.S. and Canada will be interested in exploring options similar to those being prepared by the European Union on a duty or tax on imported products produced with higher levels of greenhouse gases to prevent leakage. The incoming Director-General has acknowledged that Members are looking at how to make trade help address the climate crisis. See APPOINTMENT OF THE NEXT DIRECTOR-GENERAL, STATEMENT OF THE DIRECTOR-GENERAL ELECT DR. NGOZI OKONJO-IWEALA TO THE SPECIAL SESSION OF THE WTO GENERAL COUNCIL, 15 February 2021, JOB/GC/250 (16 February 2021)(para. 1.14, “1.14. We should also work to ensure that the WTO best supports the green and circular economy and addresses more broadly the nexus between trade and climate change. Trade and environmental protection can be mutually reinforcing, both contributing to sustainable development. It will be important for Members to reactivate and broaden the negotiations on environmental goods and services. This would help promote trust and encourage Members to explore further ways in which trade can contribute positively to an improved climate. Care must, however, be taken to ensure that any disciplines are not used arbitrarily or as a disguised restriction on trade, and that they take into account the need for developing countries to be assisted to transition to the use of greener and more environmentally friendly technologies.”); February 16, 2021, Special Session of the General Council at WTO appoints Dr. Ngozi Okonjo-Iweala as the seventh Director-General, https://currentthoughtsontrade.com/2021/02/16/special-session-of-the-general-council-at-wto-appoints-dr-ngozi-okonjo-iweala-as-the-seventh-director-general/.

Building Global Alliances

While much broader than just trade, the commitment to multilateralism announced by President Biden and Prime Minister Trudeau included “firm commitment to the United Nations, G7 and G20, as well as NATO, the WTO, and the Five Eyes community.” Both Canada and the United States support significant reform at the WTO. One can expect closer collaboration between the U.S. and Canada on many reform initiatives at the WTO.

This section of the roadmap also addresses the need to jointly address China. “They also discussed ways to more closely align our
approaches to China, including to address the challenges it presents to our collective interest and to the international rules-based order. This includes dealing with its coercive and unfair economic practices, national security challenges, and human rights abuses, while cooperating with China on areas where it is in our interest, such as climate change.” WTO reform to be meaningful will have to have elements that will address the noncoverage of various actions by state-capital countries like China that distort global trade flows, create massive excess capacity, force technology transfer, limit transparency and market access in fact. While some efforts can be through consultations by the U.S. with other trading partners like Canada and the EU, multilateral reform is also critical for the functioning of the global trading system.

Conclusion

President Biden’s efforts are restoring strong relationships with our neighbors and renewed engagement with multilateral organizations has been apparent during the first five weeks of his Presidency. Yesterday’s virtual meeting between President Biden and Prime Minister Trudeau reflects the strong bonds between the U.S. and Canada. The roadmap presents areas of joint interest and future activity to deepen our close partnership. The roadmap also has a number of signals of likely U.S.-Canada cooperation in global trade and on WTO reform which should attract support from a number of other major trading partners at the WTO.

The roadmap and joint press statements are embedded below.

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Launch of the Silverado Policy Accelerator

Today, February 24, 2021, marks the launch of a nonprofit organization, the Silverado Policy Accelerator, which describes its “Mission Imperative” as “Forging a path toward American prosperity and global competitiveness by accelerating bipartisan economic, strategic, and technological policy solutions” in three areas — cybersecurity, trade and industrial security and what they call “Eco2Sec (“foregrounding the nexus of economic and ecological risk and opportunity to meet the 21st-centruy climate imperative”). The Silverado Policy Accelerator’s webpage is https://silverado.org. Its co-founders are Dmitri Alperovitch and Maureen Hinman. Sarah Stewart is the Executive Director. Mr. Alperovitch is a cybersecurity expert and co-founder of CrowdStrike, Inc. Ms. Hinman’s background is in trade and environment within the U.S. government. Write-ups on all Silverado Policy Accelerator personnel can be found at https://silverado.org/about/. The Honorary Chairs of the Strategic Council of the Sivlerado Policy Accelerators are Gen. David Petraeus (Army, Ret.) and The Honorable Malcolm Turnbull (Former Prime Minister of Australia). There are currently thirty Strategic Advisers to the Silverado Policy Accelerator. The Advisers have backgrounds in one or more of the three topics and/or expertise on China and/or Russia. I am fortunate to be among a distinguished group serving as Strategic Advisers.

The webpage addresses the question what is the Silverado Policy Accelerator. “Silverado is a new addition to Washington’s policy development ecosystem. Unlike a conventional policy institute, we use a novel accelerator model that combines the expertise of a traditional think tank with the dynamism of a venture approach. The three stages of our accelerator model—Cultivating, Incubating, and Accelerating—are designed to transform fresh policy ideas into actionable policy initiatives, nurturing a new strategic and economic vision from the ground up.” https://silverado.org/.

Hearty congratulations to Dmitri, Maureen and Sarah on today’s launch. Hopefully, the Silverado Policy Accelerator will be an important source for the policy options and implementation game plans needed to ensure U.S. global leadership for decades to come.

WTO Dispute Settlement Body meeting of February 22, 2021 — panels authorized in two matters; impasse on Appellate Body remains

The Appellate Body Impasse

With the Biden Administration not having its trade team in place, there was no realistic possibility that the United States at yesterday’s Dispute Settlement Body (DSB) meeting would modify its position on the WTO Appellate Body and its unwillingness to have new members of the Appellate Body appointed prior to the resolution of its longstanding concerns. Thus, it was not surprising that the U.S. again held firm. The issue was the last specified item on the agenda for the meeting as can be seen from the airgram embedded below.

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The U.S. intervention on item 8 of the agenda was brief and to the point and is copied below. See Statements by the United States at the Meeting of the WTO Dispute Settlement Body, Geneva, February 22, 2021, https://geneva.usmission.gov/wp-content/uploads/sites/290/Feb22.DSB_.Stmt_.as_.deliv_.fin_.public.pdf.

“8. APPELLATE BODY APPOINTMENTS: PROPOSAL BY SOME WTO MEMBERS (WT/DSB/W/609/REV.19)

“• The United States is not in a position to support the proposed decision.

“• The United States continues to have systemic concerns with the Appellate Body. As Members know, the United States has raised and explained its systemic concerns for more than 16 years and across multiple U.S. Administrations.

“• We look forward to further discussions with Members on those concerns.”

The incoming Director-General Ngozi Okonjo-Iweala has identified addressing the problems surrounding the Appellate Body and the Dispute Settlement System as a high priority when she starts her term on March 1 and is hopeful of having a work program for moving forward by the 12th Ministerial likely to be held at the end of 2021. See February 16, 2021, Special Session of the General Council at WTO appoints Dr. Ngozi Okonjo-Iweala as the seventh Director-General, https://currentthoughtsontrade.com/2021/02/16/special-session-of-the-general-council-at-wto-appoints-dr-ngozi-okonjo-iweala-as-the-seventh-director-general/ (quotes certain portions of Dr. Ngozi’s statement including para. 1.12, “1.12. Reform of the dispute settlement system, which has been a central element in guaranteeing security and predictability of the multilateral trading system, is of utmost importance to the membership. Some Members have criticised the way it functions and demanded reforms. It will be important to agree on the nature of these reforms, flesh them out, and develop a work programme for implementation that can be advanced at MC12. I believe that the set of recommendations proposed by Ambassador Walker could provide Members with a platform upon which to build so as to restore confidence in the dispute settlement system. A strengthened and robust system is in the interest of all Members, and as such, every effort should be made to improve it. We need a system that can garner the confidence of all, including small developing and least developed countries who have found it challenging to utilize.”).

Thus, absent a significant shift in position by the Biden Administration, it is likely that the impasse will continue through 2021. What is likely is that the Biden Administration will start once the trade team is in place to flesh out changes needed to the dispute settlement system to permit reform and the restart of the Appellate Body. In prior posts I have suggested some possible approaches to moving reform forward to address underlying U.S. concerns. See, e.g., July 12, 2020, WTO Appellate Body reform – revisiting thoughts on how to address U.S. concerns, https://currentthoughtsontrade.com/2020/07/12/wtos-appellate-body-reform-revisiting-thoughts-on-how-to-address-u-s-concerns/. The EU has indicated some willingness to address U.S. concerns about an Appellate Body not adhering to the limited role envisioned in the DSU. A major open question will be rebalancing rights and obligations through the correction of prior Appellate Body reports that impermissibly created rights and obligations never agreed to by Members.

While the impasse continues, WTO Members are either seeking alternative approaches to resolve disputes after a panel report (e.g., 25 Members are participating in a multiparty appellate arbitration process, others are agreeing not to appeal panel reports, others are resolving differences through consultations) or are taking appeals which essentially puts the matter on hold pending resolution of the impasse. On February 22nd, Pakistan became the latest to appeal a panel report where there is no functioning Appellate Body. See Pakistan – Anti-Dumping Measures on Biaxially Oriented Polypropylene Film from the United Arab Emirates, WT/DS538/5. The EU raised the Pakistan appeal in its comments at the DSB meeting. See EU Statements at the Regular Dispute Settlement Body(DSB), 22 February 2021, https://eeas.europa.eu/delegations/world-trade-organization-wto/93629/eu-statements-regular-dispute-settlement-body-dsb-22-february-2021_en.

“AGENDA POINT: ANY OTHER BUSINESS

“Pakistan – Anti-Dumping Measures on Biaxially Oriented Polypropylene Film from the United Arab Emirates (DS538)
This is yet another dispute that illustrates the grave consequences of the blockage of Appellate Body appointments since 2017. That blockage frustrates the essential rights of WTO Members that were agreed multilaterally in the DSU.

“We refer to EU’s intervention under item 7 of the DSB meeting on 28 September 2020, where we elaborated on these consequences and on the possibility of appeals being adjudicated upon through appeal arbitration based on Article 25 of the DSU, consistently with the principles of the DSU. We will not repeat these points today.”

With Pakistan’s appeal yesterday, there are now 18 panel reports that have been appealed but where the appeal is not proceeding due to the impasse on the Appellate Body. So the concerns by many Members about needing a resolution will continue to increase. See WTO Appellate Body, https://www.wto.org/english/tratop_e/dispu_e/appellate_body_e.htm; February 17, 2021, The amended European Union enforcement regulation — hypocrisy or a reasonable move?, https://currentthoughtsontrade.com/2021/02/17/the-amended-european-unions-enforcement-regulation-hypocrisy-or-a-reasonable-move/(lists the 17 cases before the Pakistan appeal).

With USTR nominee Katherine Tai having her confirmation hearing by the Senate Finance Committee on Feburary 25, it is likely that the U.S. Trade Representative will be in place by March 1. No Deputy USTR’s have been nominated as yet. So the U.S. is still some time from having its full team in place. Thus, I wouldn’t expect movement by the U.S. for a few more months at a minimum.

Two requests for panels agreed to during the DSB meeting .

There was agreement at yesterday’s DSB meeting for the formation of two panels to hear disputes brought by Hong Kong against the U.S. and by the European Union against Indonesia. See items 4 and 5 on the DSB agenda.

  1. INDONESIA – MEASURES RELATING TO RAW MATERIALS
    A. REQUEST FOR THE ESTABLISHMENT OF A PANEL BY THE EUROPEAN UNION (WT/DS592/3)
  2. UNITED STATES – ORIGIN MARKING REQUIREMENT
    A. REQUEST FOR THE ESTABLISHMENT OF A PANEL BY HONG KONG, CHINA (WT/DS597/5)

The following comments are limited to the Hong Kong case as it raises national security defense issues by the U.S.

In prior posts, I had reviewed Hong Kong’s concerns with the United States action requiring goods from Hong Kong to be marked as made in China following the crackdown by China on Hong Kong. See January 16, 2020, Request for the establishment of a WTO panel by Hong Kong, China contesting the U.S. origin marking requirement, https://currentthoughtsontrade.com/2021/01/16/request-for-the-establishment-of-a-wto-panel-by-hong-kong-china-contesting-the-u-s-origin-marking-requirement/; November 3, 2020, Hong Kong requests consultations with the United States on the change in origin marking requirements for goods from Hong Kong, https://currentthoughtsontrade.com/2020/11/03/hong-kong-requests-consultations-with-the-united-states-on-the-change-in-origin-marking-requirements-for-goods-from-hong-kong/.

As expected, the U.S. defense is based on U.S. national security concerns and that is how it was described by the U.S. at yesterday’s DSB meeting.

“5. UNITED STATES – ORIGIN MARKING REQUIREMENTS

“A. REQUEST FOR THE ESTABLISHMENT OF A PANEL BY HONG KONG, CHINA (WT/DS597/5)

“• The United States regrets that Hong Kong, China, has chosen to move forward with a request for panel establishment.

“• In the U.S. reply to Hong Kong, China’s consultation request, the United States made clear that the Executive Order identified by Hong Kong, China, suspended the application of section 201(a) of the United States-Hong Kong Policy Act of 1992 to section 1304 of title 19 of the United States Code. The Executive Order further determined that the situation with respect to Hong Kong, China, constitutes a threat to the national security of the United States.

“• The clear and unequivocal U.S. position, for over 70 years, is that issues of national security are not matters appropriate for adjudication in the WTO dispute settlement system. We therefore do not understand the purpose of this request for panel establishment, seeking WTO findings that the United States has breached certain WTO provisions. The WTO cannot, consistent with Article XXI of the General Agreement on Tariffs and Trade 1994, consider those claims or make the requested findings.

“• No WTO Member can be surprised by this view. For decades, the United States has consistently held the position that actions taken pursuant to Article XXI are not subject to review in GATT or WTO dispute settlement. Each sovereign has the power to decide, for itself, what actions are essential to its security, as is reflected in the text of GATT 1994 Article XXI.1

“• Infringing on a Member’s right to determine, for itself, what is in its own essential security interests would run exactly contrary to the efforts to revitalize and reform the WTO that are necessary to ensure that it lives up to its potential.

“• There is no basis for a WTO panel to review the claims of breach raised by Hong Kong, China. Nor is there any basis for a WTO panel to review the invocation of Article XXI by the United States. We therefore do not see any reason for this matter to proceed further.

“1 GATT 1994 Article XXI(b) (“Nothing in this Agreement shall be construed … (b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests … (italics added).”

The U.S. position of matters not being subject to dispute settlement where one party claims national security has not been accepted in several earlier panel reports although national security exceptions have been found where certain conditions are met. The U.S. is involved in some major disputes on the use of Section 232 of the Trade Expansion Act of 1962, as amended, on steel and aluminum where panel reports are presently expected in the second half of 2021. The Hong Kong case presents a different factual situation and will have different analysis if the U.S. position is not accepted by the panel. As has been true for most disputes in recent years, the dispute is unlikely to get to a panel report for several years — i.e., 2023 at the earliest.

Conclusion

The work of the WTO in general and the Dispute Settlement Body in particular do not pause because of elections or changes of administrations in one or more major Members. Nevertheless, with the heart of the challenges to the functioning of the Dispute Settlement System involving U.S. long-term concerns with the Appellate Body, practically there will be no movement until the new Biden Administration has time to get its team in place and review its priorities and game plan for WTO reform. Whatever else happens at the WTO, one should not expect movement by the U.S. on reform to the dispute settlement system before summer at the earliest.

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An early test for the incoming WTO Director-General — helping Members get the Fisheries Subsidies negotiations to a conclusion

Dr. Ngozi Okonjo-Iweala in her statement to the WTO membership during the virtual Special Session of the General Council on February 15 after the Members appointed her the next Director-General made clear that an early deliverable for the WTO was completion of the Fisheries Subsidies negotiations which have been going on since the end of 2001 and were due to have been completed in 2020. See February 16, 2021, Special Session of the General Council at WTO appoints Dr. Ngozi Okonjo-Iweala as the seventh Director-General, https://currentthoughtsontrade.com/2021/02/16/special-session-of-the-general-council-at-wto-appoints-dr-ngozi-okonjo-iweala-as-the-seventh-director-general/.

The Chair of the Negotiating Group on Rules, Amb. Santiago Wills of Colombia, has held two sets of meetings so far in 2021, one in January and one just last week. See WTO Negotiations on Fisheries Subsidies, WTO members resume work on fisheries subsidies negotiations using latest revised text, 22 January 2021, https://www.wto.org/english/news_e/news21_e/fish_22jan21_e.htm; Inside U.S. Trade’s World Trade Online, Fisheries talks chair: Divides remain, but members have what they need for a deal, February 19, 2021, https://insidetrade.com/daily-news/fisheries-talks-chair-divides-remain-members-have-what-they-need-deal. The press releases following the meetings indicate that there has been little movement in fact in 2021 on the host of major issues that remain for Members to resolve. A review of the second revision of the draft text that was released on December 18, 2020 and the Chair’s explanatory note that accompanied the second draft make clear that Members remain divided on a huge array of issues. See RD/TN/RL/126/Rev.2 and RD/TN/RL/126/Rev.2/Add.1.

For example, there is still no agreement on whether the scope of the agreement will cover fuel subsidies (Article 1.2).

Similarly there is not currently agreement on whether the definition of “fishing related activities” in Article 2(c) include coverage of provisions “of personnel, fuel, gear and other supplies at sea”.

Article 3 which deals with the “prohibition on subsidies to illegal, unreported and unregulated fishing” (IUU) consists of nine sub-articles, many of which remain bracketed whether it revolves around which entity can make a finding of IUU activity, whether leniency will be provided for non-serious violations and which violations will always be addressed, the length of sanctions, the level of transparency and obligations of Members, and whether there are exceptions (special and differential treatment (S&DT)) from the prohibitions on IUU. As is true throughout the revised draft, there are deep divides on the special and differential treatment provisions reflecting the concerns expressed by Members like the U.S. and EU on the overbreadth of Members seeking such treatment and the views of Members like India who view such S&DT as applicable to all who claim developing country status.

Article 4 addresses prohibition on subsidies concerning overfished stocks, there continues to be disagreement, inter alia, on when a fish stock is overfished (two alternatives provided) and on what S&DT will be provided.

Article 5 addresses the prohibition on subsidies concerning overcapacity and overfishing contains. Article 5 contains seven sub-articles, a number of which maintain brackets including on “non-recovery of payments under government-to-government access agreements” (Art. 5.3.2), for subsidies provided to a vessel “not flying the flag of the subsidizing member” (Art. 5.4) on whether there will be a provision for “capping” (Art. 5.5) or a “list of non-harmful subsidies” (Art. 5.6) or for S&DT language (Art. 5.7). Art. 5.3 also deals in part with subsidies for fishing or fishing activities outside of a Member’s territory, obviously a very important and contentious issue.

Article 6 dealing with “specific provisions for LDC Members” has not been discussed and remains in brackets but reflects the proposal put forward by LDC Members.

Article 7 is for technical assistance and capacity building. While bracketed, the proposal has not received significant opposition at this point and appears to be largely non-controversial.

On Articles 8-10 (notification and transparency, institutional arrangements, dispute settlement), discussions are ongoing as to what needs to be notified and ability of Members to request additional information. Articles 9 and 10 depend on whether the fisheries subsidies agreement is treated as a stand-alone Agreement or is treated as an Annex to the Subsidies and Countervailing Measures Agreement. If an Annex, dispute settlement is already provided for; if treated as a stand alone Agreement, then there will need to be an article providing for dispute settlement.

Article 11 covers final provisions and addresses issues such as whether Members will “exercise due restraint” when providing subsidies to fishing or fishing related activities for stocks where the status of the stock (overfished or not) is unknown (Art. 11.2). It also lays out possible exceptions for responding to disasters (and what limits such response shall have)(Art. 11.3) The article also makes clear that the Agreement (or Annex) is not germane to issues of “territoriality or delimitation of maritime jurisdiction” (Art. 11.4).

While the revised draft consolidated text could result in meaningful reform and limitations on harmful subsidies, much of the ongoing debate amongst Members seems to be about how to create exceptions that will permit continued subsidy practices for many Members both within territorial waters and outside of them. The perennial problem within the WTO that reform should be undertaken by others, not by me, is present in the fisheries subsidies negotiations. Can Members demonstrate the ability to come together for the common good? Hard to know as WTO Members have been negotiating for twenty years on fisheries subsidies reform. The Sustainable Development Agenda item 14.6 is designed to help save fishing for all peoples for generations to come. The WTO and the incoming Director-General have an important opportunity to show that global trade can promote sustainability. Let’s hope that a meaningful agreement is yet achievable.

Afterthought

While the revised draft consolidated text provided to Members on December 18, 2020 is clearly a Chairman’s draft, like many drafts in other areas that have routinely be released publicly, the WTO has been slipping into an increased pretense that such texts are “unofficial room documents” and hence not released publicly. While both documents (RD/TN/RL/126/Rev.2 and RD/TN/RL/126/Rev.2/Add. 1) can be found on the internet for those trying to understand the ongoing negotiations, the WTO does not promote transparency and public understanding by pretending that core negotiating documents or draft texts are “unofficial room documents”. Hopefully, the chairs of Committees and leadership within the WTO will correct course and improve transparency in fact and end the misuse of room documents, job documents and other “unofficial” documents which often are the core documents in a negotiation or Committee work.

Will India and South Africa (and others) prevent future relevance of the WTO?

The WTO has struggled to remain relevant as global technology and trade issues evolve from where they were in the 1980s. Part of the challenge flows from the widely divergent interests of a growing membership (currently 164 countries) which coupled with the consensus principle for decision making means any Member can shut down or prevent progress. Part flows from the failure/inability to update commitments based on changing stages of economic development and share of global trade. Part flows from the increased importance of Members whose economic systems are not market-premised under rules which assume such a market orientation. Part flows from the effort of some to seek new rights through dispute settlement and by ineffective controls to prevent excesses by the panels and Appellate Body system adopted in 1994. Part flows from the crises of the COVID-19 pandemic and climate change and the glacier pace of deliberations within the WTO.

All of these forces have led WTO Members to focus energies on bilateral and plurilateral trade agreements and to start a process of so-called Joint Statement Initiatives to let countries desiring to address new or uncovered issues do so.

With the WTO finally having appointed a new Director-General whose priorities include addressing longstanding issues, but also achieving progress on the Joint Statement Initiatives — including digital trade/e-commerce and others — and with the European Union’s 18 February trade policy paper and Annex dealing with WTO reform and indicating the importance of flexibility for bringing open plurilaterals into the WTO, India and South Africa have filed a communication for discussion at the March 1-2, 2021 General Council meeting challenging the “legal status of Joint Statement Initiatives and their negotiated outcomes”. See WT/GC/W/819, 19 February 2021. The Indian and South African paper is embedded below.

WTGCW819

The paper from India and South Africa raises interesting points about existing WTO provisions for modifications of existing agreements and for adding plurilateral agreements and other issues. But the real question for the WTO is whether updating of rules and coverage of technological change and global developments will happen within or outside of the WTO. No issue describes this better than digital trade. Existing WTO rules don’t really address digital trade which has become increasingly important for all countries. While the WTO has had digital trade on its radar since 1998, there has been no meaningful progress within the WTO on multilateral rules. See WTO, Electronic commerce, https://www.wto.org/english/tratop_e/ecom_e/ecom_e.htm. The Joint Statement Initiative on digital trade started in Buenos Aires in late 2017 is an effort by some WTO Members to develop rules for those willing to participate that address important issues affecting digital trade today. See WTO Ministerial Conference, New initiatives on electronic commerce, investment facilitation and MSMEs, https://www.wto.org/english/news_e/news17_e/minis_13dec17_e.htm; JOINT STATEMENT ON ELECTRONIC COMMERCE,WT/MIN(17)/60, 13 December 2017, https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN17/60.pdf&Open=True. The JSI on e-commerce presently has 86 WTO Members participating in the negotiations and is making progress towards potential results as early as the 12th WTO Ministerial Conference in late 2021. See, e.g., Joint Statement on E-Commerce, 18 December 2020, Coordinators of joint initiatives cite substantial progress in discussions, https://www.wto.org/english/news_e/news20_e/jsec_18dec20_e.htm. Embedded below is the 2017 Joint Statement Initiative, the December 2020 Joint Statement on E-Commerce and the December draft text.

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jsec_18dec20_e

wto_plurilateral_ecommerce_draft_consolidated_text

Conclusion

The paper from India and South Africa may reflect a desire to have an early discussion of what additional flexibilities are needed in the WTO to permit easier inclusion of plurilateral agreements within the WTO. The paper could also be an effort to add leverage to obtaining focus on issues of importance to India and South Africa. It could also be a signal that two Members who historically have had problems with many liberalization efforts are simply looking to lock the WTO down from timely reform and rule updates at least among the willing. If so, the WTO’s drift to irrelevance will continue and solutions outside of the WTO will become the main focus of global trade rules.

COVAX’s efforts to distribute COVID-19 vaccines to low- and middle income countries — additional momentum from G-7 virtual meeting

With the COVID-19 pandemic affecting populations around the world with more than 110 million people having been infected and with more than 2.4 million deaths, the world is anxiously awaiting vaccines to permit vaccinations for vulnerable populations. The Coalition for Epidemic Preparedness Innovations (CEPI), Gavi, the Vaccine Alliance (Gavi) and the World Health Organization (WHO) are co-leads of the COVAX initiative which seeks to provide equitable global access to COVID-19 vaccines. More than 2 billion vaccine doses have been or are being contracted to supply to 92 low- and middle-income countries as well as other countries who have agreed to buy vaccines through COVAX.

The World Health Organization’s Director-General Dr Tedros Adhanom Ghebreyesus has expressed concern about “vaccine nationalism” as large and wealthier countries have contracted for large amounts of vaccines. In a joint statement with the UNICEF Executive Director on February 10, the WHO DG laid out what is needed in 2021 to achieve vaccine equitable distribution. See In the COVID-19 vaccine race, we either win together or lose together, Joint statement by UNICEF Executive Director Henrietta Fore and WHO Director-General Dr. Tedros Adhanom Ghebreyesus, 10 February 2021, https://www.who.int/news/item/10-02-2021-in-the-covid-19-vaccine-race-we-either-win-together-or-lose-together. The joint statement is embedded below.

In-the-COVID-19-vaccine-race-we-either-win-together-or-lose-together

The problem of vaccine availability can be traced to a number of sources including the inability to predict which development efforts would succeed, efforts by governments to support development through funding and advance contracts which do not always support the early vaccine successes, challenges of approval processes in different countries and more. However, it is clear that in the early days of the vaccine rollout, a handful of countries have been able to obtain the largest amount of vaccine doses and to provide vaccinations to citizens. For example, the Financial Times has an update of its “Covid-19 vaccine tracker: the global race to vaccinate” published today (February 19) that looks at data for 99 countries or territories where vaccinations are reported through mid-February. Of a global total of 194.4 million vaccinations, 91.6% are reported by the following 10 countries or groups of countries: United States, 57.2 million; China 40.5 million; European Union, 24.7 million; United Kingdom, 17.0 million; India, 10.2 million; Israel, 7.1 million; Brazil 6.2 million; Turkey, 5.9 million; United Arab Emirates, 5.4 million; Russian Federation, 3.9 million. Of the 99 countries or territories, 24 reported vaccinations of at least 10/100 residents, an additional 30 reported vaccinations of at least 5.0-9.9/100 residents and an additional 10 reported vaccinations of at least 3.0-4.9/100. Gavi views 3% as the percent of population needed to be vaccinated to address health care workers. See Financial Times, Covid-19 vaccine tracker: the global race to vaccinate, February 19, 2021, https://ig.ft.com/coronavirus-vaccine-tracker/?areas=gbr&areas=usa&areas=eue&areas=ind&cumulative=1&populationAdjusted=0

At today’s G-7 virtual meeting, there were new pledges from G-7 countries to contribute to COVAX to permit the purchase of vaccine doses contracted and with some countries agreeing to share surplus vaccine doses with the world’s poorest countries. The Gavi press release of today is embedded below.

G7-backs-Gavis-COVAX-Advance-Market-Commitment-to-boost-COVID-19-vaccines-in-worlds-poorest-countries-_-Gavi-the-Vaccine-Alliance

In the December 2020 stimulus package, Congress authorized some funding for COVAX. President Biden outlined the U.S. contributions in a Fact Sheet posted on the White House webpage yesterday and at the G-7 virtual meeting today. See White House, Fact Sheet: President Biden to Take Action on Global health through Support of COVAX and Calling for Health Security Financing, February 18, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/02/18/fact-sheet-president-biden-to-take-action-on-global-health-through-support-of-covax-and-calling-for-health-security-financing/; New York Times, Biden Declares ‘America is Back’ on International Stage: Live Updates, February 19, 2021, https://www.nytimes.com/live/2021/02/19/world/g7-meeting-munich-security-conference#global-leaders-chart-a-new-course-in-post-trump-era. The fact sheet is embedded below and reports the U.S. will be contributing $2.0 billion quickly and $2.0 billion more over the remainder of 2021 and 2022.

Fact-Sheet_-President-Biden-to-Take-Action-on-Global-Health-through-Support-of-COVAX-and-Calling-for-Health-Security-Financing-_-The-White-House

Conclusion

Much of the activity at the WTO over the last year has focused on the trade challenges flowing from the COVID-19 pandemic. Trade restrictions on exports of medical goods and agricultural goods have been tracked with various efforts to minimize scope and duration. Efforts at expediting the movement of medical goods and agricultural products have also been pursued, and debates have occurred on whether TRIPS rights should be waived during the pandemic to improve access to medical goods during the pandemic. Most advanced countries with pharmaceutical producers have argued that there are sufficient flexibilities within the WTO TRIPS Agreement to handle the current challenges. At the same time over recent years there have been efforts through the WHO, CEPI and GAVI and with the assistance of UNICEF to provide the infrastructure to permit collective purchasing of vaccines and other medical goods and the collection of funds to permit assisting low- and middle-income countries in terms of vaccine availability. COVID-19 is a truly global pandemic. The pressure on governments to find solutions is obviously enormous. Actions like those by the G-7 today and by other governments, NGOs and others to address the COVID-19 challenge are along the lines of what is needed to have more equitable distribution of vaccines. As the UN and WHO keep saying, no one is safe until all are safe.

The challenges for COVAX are huge and the goal for 2021 is to get 20% of the populations part of the program vaccinated. Developed countries and others able to do so need to continue to cooperate to see that these goals for 2021 are met and that further help is available moving into 2022. A study commissioned by the ICC estimates the global costs of not moving quickly to get all people in the world vaccinated at being more than $8 trillion — a figure that dwarfs the costs to get the vaccines produced, distributed and shots given. Hopefully, the world will cooperate and do what is needed to see that all countries can recover from the current pandemic in a timely manner.

The European Commission’s 18 February 2021 Trade Policy Review paper — WTO reform and much more proposed

In a 23 page communication from the European Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions dated 18 February 2021 [COM(2021)66 final] with an accompanying 19 page Annex that looks at WTO reform, the European Commission lays out its vision for EU trade policy moving forward. The communication, at pages 1-3 lays out the background and global trends leading to the trade policy proposals presented. The discussion is copied below (any emphasis in quotes is from the original text unless otherwise noted).

“Trade is one of the EU’s most powerful tools. It is at the centre of Europe’s economic prosperity and competitiveness, supporting a vibrant internal market and assertive external action. As a result of the openness of our trade regime, the EU is the world’s largest trader of agricultural and manufactured goods and services and ranks first in both inbound and outbound international investments. Thanks to the common commercial policy, the EU speaks with one voice on the global scene. This is a unique lever.

“With new internal and external challenges and more particularly a new, more sustainable growth model as defined by the European Green Deal and the European Digital Strategy, the EU needs a new trade policy strategy – one that will support achieving its domestic and external policy objectives and promote greater sustainability in line with its commitment of fully implementing the UN Sustainable Development Goals. Trade policy must play its full role in the recovery from the COVID-19 pandemic and in the green and digital transformations of the economy and towards building a more resilient Europe in the world.
Making the right policy choices in designing a trade policy for the world of 2030 means taking into account recent political, economic technological, environmental and social shifts and the global trends emerging from them1.

Global uncertainty is on the rise fuelled by political and geo-economic tensions. Instead of international cooperation and multilateral governance, there is growing unilateralism, with the consequent disruption or bypassing of multilateral institutions. These trends have their roots in several developments.

“First, globalisation, technological evolutions and the build-up of global value chains have had a dichotomous impact on economies and societies. On the one hand, they have created massive efficiency gains, fuelling sustained, trade-led economic growth in many parts of the world. This has helped to lift millions of people out of poverty. On the other hand, these developments sometimes have had a strong disruptive effect leading to growing inequalities and leaving some individuals and communities behind. What were expected to be transitory adjustment costs have sometimes turned into permanent losses in living standards, employment opportunities or wages and other working conditions. In many cases, governments are perceived to have been insufficiently responsive to economic adjustments and mitigating their negative impacts2. This has led to calls for de-globalisation and to the rise of inward-looking and isolationist reactions.

“Second, the rapid rise of China, demonstrating global ambitions and pursuing a distinct state-capitalist model, has fundamentally changed the global economic and political order. This poses increasing challenges for the established global economic governance system and affects a level playing field for European companies competing globally and at home.3

“Third, the acceleration of climate change, together with biodiversity loss and environmental degradation, paired with tangible examples of their devastating effects have led to the recognition of the green transition as the defining objective of our time.

“The European Green Deal is the EU’s new growth strategy which facilitates resetting our economic policy to better correspond to the challenges of the 21st century. Its overarching objective is the transition towards a climate neutral, environmentally sustainable, resource efficient and resilient economy by 2050, with the ambition to reduce GHG emissions by at least 55% by 2030 as well as the protection, conservation and enhancement of the EU’s natural capital. As such, it will be the driving force behind our competitiveness and will lead to a progressive but profound transformation of our economies, which in turn will have a strong bearing on trade patterns.

“The green transition needs to go together with social equity. A serious decent work deficit persists in global supply chains in many parts of the world4, from serious violations of freedom of association to poor working conditions5. Depriving workers of their fundamental rights puts downward pressure on social conditions globally and fuels people’s disenchantment with globalisation and open trade.

“Fourth, the digital transformation is another key enabler of sustainable development, but also a space of competition and inadequate multilateral governance. As it embarks on its Digital Decade, supporting Europe’s digital transformation is a priority both in internal and external policies including trade policy and instruments. At the same time, the nature of trade will continue to evolve. It will become more innovation-driven, supported by intellectual property (IP) protection, with an increasing role of services trade compared to goods.6 Services not only contribute directly to the value chain (financial services, telecommunication, IT, transport and logistics) but – often even more importantly – they contribute by being incorporated in manufacturing products. The servicification of the economy and the rise of digital technologies have created well-paid and high quality jobs and have fuelled economic growth.

“The COVID-19 pandemic has accelerated and focused attention on these shifts, while creating challenges of its own. It has highlighted the interconnected nature of economies, which rely on stable and predictable international rules and resilient transportation channels. It has exposed the risk of a breakdown of global cooperation and trust. It has also raised questions regarding the right policy mix in terms of diversification of domestic and external sources of supply and the build-up of strategic production capacities and reserves. It has also shown the importance of expanding production of health products in a crisis situation and the need for cooperation to ensure equitable access for the more vulnerable populations. Moreover, it has led to a significant increase in government support and involvement in the economy, which is necessary to rescue healthy companies and protect jobs, but may not be sustainable in the long-run and may generate tensions.

“Finally, the economic outlook across the globe needs to be factored in. The EU will remain a global economic power and a leader on sustainable growth. The latest OECD long-term forecasts indicate that real GDP in the euro area will increase by 1.4% annually (compounded annual growth rate) over the next 10 years7. Nevertheless, these growth prospects will be eclipsed by developments in other regions, and Europe’s relative position in the international economy will change. Already in 2024, 85% of the world’s GDP growth is expected to come from outside the EU. The continued rise of China will impact heavily on global economic developments over the next 10 years – the OECD predicts Chinese GDP will grow by 4.7% annually.

“EU trade policy has to take into account these global trends and challenges to reflect the political ambition of ‘a stronger Europe in the world’8. It should also respond to the expectations of stakeholders as signalled in discussion with Member States, the resolution adopted by the European Parliament9 and the views expressed in the public consultation10.

“1 The Commission’s 2020 Strategic Foresight report analyses the impact of the COVID-19 pandemic on the dynamics of some relevant megatrends, COM(2020) 493 final. The Commission’s 2021 Strategic Foresight Report will focus on open strategic autonomy.

“2 At the EU level, the European Globalisation Fund aims at making a contribution to deal with such adjustment costs; cf Regulation (EU) No 1309/2013 of the European Parliament and of the Council of 17 December 2013 on the European Globalisation Adjustment Fund (2014-2020) and repealing Regulation (EC) No 1927/2006. A new regulation is being adopted, allowing the Fund to continue supporting workers and self-employed persons whose activity has been lost.

“3 This challenge is particularly visible in the area of energy intensive industries and notably the steel sector, where global solutions are needed to address the immense imbalances on the world market negatively affecting European companies and undermining the successful green transition of this ecosystem.

“4 According to the International Labour Organization (ILO), an estimated 25 million people remain in forced labour, 152 million are victims of child labour and 2.78 million workers around the world die from work-related accidents or diseases every year; Sources: Global estimates of modern slavery: forced labour and forced marriage, ILO (2017); Global Estimates of Child Labour, ILO (2017) and ILO website.

“5 Commission Staff Working Document: Promote decent work worldwide, SWD(2020) 235 final.

“6 In 2016, taking both goods and services into account, 80% of EU imports and 82% of EU exports were generated by the IP-intensive industries. IPR-intensive Industries and Economic Performance in the European Union, Industry-Level Analysis Report, joint EPO/EUIPO study, 3nd edition, September 2019.

“7 OECD (2020), Real GDP long-term forecast (indicator).

“8 Political guidelines for the next European Commission 2019-2024.

“9 European Parliament resolution on the EU Trade Policy Review (2020/2761(RSP).

“10 https://trade.ec.europa.eu/consultations/index.cfm?consul_id=266&utm_source=dlvr.it&utm_”

The European Commission then lays out its vision of how the proposed trade policy supports the EU’s open strategic autonomy, identifies “[t]hree core objectives for trade policy for the medium term” which are (1) “supporting the recovery and fundamental transformation of the EU economy in line with its green and digital objectives,” “shaping global rules for a more sustainable and fairer globalisation,” and “increasing the EU’s capacity to pursue its interests and enforce its rights, including autonomously where needed”. Communication at 9-10. The communication then lays out “six areas that are critical to achieving the EU’s objectives in the medium term”, Id. at 10. The six areas are listed on page 11 and then described in significant detail in the remainder of the communication:

  1. “Reform the WTO
  2. “Support the green transition and promote responsible and sustainable value chains
  3. “Support the digital transition and trade in services
  4. “Strengthen the EU’s regulatory impact
  5. “Strengthen the EU’s partnerships with neighbouring, enlargement countries and Africa
  6. “Strengthen the EU’s focus on implementation and enforcement of trade agreements, and ensure a level playing field”.

The communication is embedded below.

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The Annex provides a detailed explanation of what the European Commission intends to pursue as part of the WTO reform area but lists two “Headline actions” in the communication (id at 11).

“The Commission will:

“1. Seek the adoption of a first set of reforms of the WTO focusing on enhancing the WTO’s contribution to sustainable development, and launch negotiations on reinforced rules to avoid distortions of competition due to state intervention. It will
give priority to enhancing transatlantic cooperation on WTO reform.

“2. Work to restore a fully-functioning WTO dispute settlement with a reformed Appellate Body.”

For the other five actions listed above, the European Commission outlines areas for focus. Several include actions to be pursued at the WTO — including environment, sustainable development and digital trade (actions 2, 3 above).

On the action of strengthening the EU’s focus on implementation and enforcement, The European Commission reviews a range of action steps dealing with enforcing existing agreements, also reviews the FDI screening regulation, a modernized export control regulation and then identifies some new tools that need to be developed “to confront new challenges” and lists four such potential new tools (id. at 20-21):

“Nevertheless, the EU needs to develop its tools to confront new challenges and protect European companies and citizens from unfair trading practices, both internally and externally.

“ The Commission will propose a new legal instrument in the area of trade policy, to protect the EU from potential coercive actions of third countries.

“ The Commission will propose a legal instrument to address distortions caused by foreign subsidies on the EU’s internal market.

“ To enhance reciprocal access for EU operators in public procurement the Commission will seek to advance the International Procurement Instrument and calls on the Council to finalise its work as a matter of urgency.

“ Finally, to ensure a better level playing field for EU businesses on third country markets, in which they increasingly have to compete with the financial support foreign competitors receive from their governments, the Commission will explore options for an EU strategy for export credits. This will include an EU export credit facility and enhanced coordination of EU financial tools. In line with the Green Deal objective to phase out fossil fuel subsidies, it will also incentivise climate friendly technology projects and propose to immediately end support for the coal-fired power sector, and to discourage all further investments into fossil fuel-based energy infrastructure projects in third countries, unless they are fully consistent with an ambitious, clearly defined pathway towards climate neutrality in line with the long-term objectives of the Paris Agreement and best available science.”

These issues will generate significant interest among trading partners (either supportive, such as the U.S. for tools to deal with coercive actions and possibly ability to address distortions on the domestic market by foreign subsidies to U.S. businesses, or in opposition, such as China on the same two items).

Annex

The Annex is entitled “Reforming the WTO: Towards a Sustainable and Effective Multilateral Trading System” and reviews the challenges in all three pillars of the WTO (negotiations, dispute settlement and monitoring of trade policies) as well as the U.S.-China trade conflict. The European Commission reviews the lack of a common purpose among the WTO Members and the multiple challenges posed by multiple crises including the pandemic, climate change, increased unilateralism and more. The EC’s view on how to restore trust and a sense of common purpose is presented in part 2 of the Annex (portion copied below from pages 3-4).

2. Restoring trust and a sense of common purpose: the WTO’s contribution to sustainable development

“The collapse of the Doha Development Agenda in 2008 exemplified the lack of common purpose of the WTO membership. Despite the success in concluding the Trade Facilitation Agreement at the 9th WTO Ministerial Conference in Bali and the Decision on agricultural export competition at the 10th WTO Ministerial Conference in Nairobi, the WTO membership has become increasingly divided as to what it expects from the WTO. While part of the membership has argued that the ‘centrality of development’ in the WTO means that there should be a focus on exceptions and flexibilities from agreed and future commitments, another part has grown increasingly frustrated at the failure of progress in WTO negotiations and shifted its attention to bilateral trade agreements. Without a sense of common purpose, it has been extremely difficult to find a way forward for any initiative and to ensure that the WTO evolves in line with the changes in global trade.

“However, the vast majority of the membership remains committed to the idea of multilateralism, fully cognizant of the benefits of a rules-based system for global trade and development. The instability of the last few years, the climate and environmental crisis, the increased use of unilateral measures and now the COVID-19 pandemic have led to a clear realisation that the WTO is a vital component of healthy global economic governance but that reform is necessary. The G20 Leaders’ statement4 in Riyadh contains the strongest commitment to reform yet, at the highest political level.

“As global challenges proliferate, WTO members should be able to coalesce around the objective of addressing the most pressing problems they face: economic recovery and development, free from competitive distortions, as well as environmental and social sustainability as part of the green transition of economies. Addressing these problems would be in line with the objectives of the UN Sustainable Development Goals (the ‘SDGs’), to which all WTO members have committed. Such a focus could offer the sense of common purpose that the WTO has lacked in recent decades and rebuild trust among the membership. It could generate the confidence needed to modernise the WTO rulebook in a manner that isresponsive to the challenges of digitalisation and greening, as well as preventing and defusing conflicts caused by trade-distorting state intervention in the economy.

“4 Leaders’ Declaration G20 Riyadh Summit November 21 – 22, 2020.”

The EC mentions completing the fisheries subsidies negotiations, taking action on the trade and health initiative put forward by the Ottawa Group and developing a trade and environment work program. The EC also addresses issues of importance to many countries including the United States, such as revising how special and differential treatment (S&DT) is handled, and developing new rules to address distortions to competition from state intervention. However, the EC’s approach calls for a case by case approach on S&DT though recognizes that various countries should not be eligible for S&DT including many of the groups identified by the Untied States and doesn’t seek a convergence approach for non-market economic systems but rather seeks an approach to address distortions flowing from the different systems.

Not surprisingly, the EC places a high priority on restoring the full functioning of the WTO dispute settlement system. Throughout the communication and Annex, the EC calls for increased outreach to the United States and finding common approaches. On dispute settlement, the EC is waiting for a signal from the U.S. that it will address its concerns and seek solutions. In other communications, the EC has seemed to acknowledge that U.S. concerns on overreach and a need to limit the Appellate Body to the parameters of the Dispute Settlement Understanding could be addressed by the EU. I have previously posted my belief that with the extensive record compiled by the prior Administration, it would be appropriate for the U.S. to pursue modifications to the WTO dispute settlement system under the Biden Administration. See, e.g., December 12, 2020, The Incoming Biden Administration and International Trade – Katherine Tai, nominee for U.S. Trade Representative, https://currentthoughtsontrade.com/2020/12/12/the-incoming-biden-administration-and-international-trade-katherine-tai-nominee-for-u-s-trade-representative/ (“The U.S. has been correct in my view in insisting that the problems flagged with the WTO Appellate Body’s operation need to be fixed before the U.S. releases its blockage of appointment of new members. What has been lacking to date has been a specific set of proposals from the U.S. that would address their concerns and rebalance rights and obligations. While it will likely take the Biden Administration time to determine how to proceed on the Appellate Body issue, the U.S. can and should indicate that it will be providing its proposals for reform of the Appellate Body hopefully during the first half of 2021.”). Hopefully the U.S. will engage on reform needs later this year after the full trade team is in place for the new U.S. Administration.

The EC also identifies modernizing WTO rules to cover digital trade, services and investment, “addressing imbalances between members’ market access commitments,” and moving forward at least selected agricultural issues (domestic support reform).

The EC also makes a push for “integrating open plurilateral agreements in the WTO” by making it easier to add such agreements without needing consensus and avoiding free-ridership. In previous posts, I have argued for permitting plurilaterals that are open to all but where benefits are limited to the signatories. See, e.g., January 18, 2021, Revisiting the need for MFN treatment for sectoral agreements among the willing, https://currentthoughtsontrade.com/2021/01/18/revisiting-the-need-for-mfn-treatment-for-sectoral-agreements-among-the-willing/ Section 4.2 of the Annex (pages 11-12) is copied below.

“Although the WTO cannot regain its credibility and effectiveness without modernising its rules, it is abundantly clear after 25 years that such modernisation cannot be achieved through multilateral agreements based on a single undertaking. In parallel, a great number of bilateral or regional trade agreements are being negotiated, including on issues for which the WTO has so far failed to produce multilateral outcomes, for example on digital trade or on state-owned enterprises. The most positive development in recent years has been the interest of a growing number of countries to develop such rules in the WTO framework through open, plurilateral negotiations. If no effective formula is found to integrate plurilateral agreements in the WTO, there would be no other option than developing such rules outside the WTO framework.

“The WTO Agreement provides for plurilateral agreements to be incorporated into the legal architecture of the WTO in Article X:9, whereby the Ministerial Conference may decide by consensus to add trade agreements concluded by a group of WTO members to the list of WTO plurilateral agreements in Annex 4. However, Article X:9 has not been used since the WTO’s establishment. Reaching consensus on adding a plurilateral initiative to Annex 4 has been perceived to be an insurmountable difficulty, even if the rights of non-participants were not diminished by the plurilateral commitments taken by a group of WTO members. The methodology used to integrate plurilateral agreements in the WTO architecture so far has been for every participant to incorporate the additional commitments unilaterally into their schedule of commitments, as was done for the Understanding in Financial Services Commitments and the Reference Paper on Telecommunications. However, this has its drawbacks. Not every additional commitment fits neatly into a schedule of commitments. In addition, non-participants could bring dispute settlement proceedings against a participant for breach of these additional commitments, even if they, as non-participants, are not bound by such commitments.

“Meaningful WTO reform will have to recognise this reality and the Commission will call for a reflection on how to create an easier path for plurilateral agreements to be integrated in the multilateral architecture. The EU would favour an inclusive approach to open, plurilateral agreements that facilitates participation by developing countries and allows them to decide whether they wish to join the agreement, leaving the door open for them to join in the future. That is not to say that the WTO should accommodate all plurilaterals. Discussions could identify certain principles that plurilaterals should comply with in order to be incorporated into the WTO framework. These principles could relate to openness to participation and future accession by any WTO member, facilitation of the participation of developing countries, transparency of the negotiating process, as well as means of protecting the existing rights of non-participants while avoiding free-riding.”

The EC makes various proposals for the improvement of the functioning of the WTO system including “Reinforcing the monitoring and deliberative functions of the WTO” (an issue with strong support from the U.S. and others), “The role of the Director-General and the WTO Secretariat,” and “More effective stakeholder engagement: Business and civil society.”

The EC recognizes that reform at the WTO requires alliance building and that objectives for the next Ministerial Conference (likely in December 2021) have to be realistic. Section 6.2 of the Annex lays out the EC’s views on what can be achieved by the next Ministerial (MC12)(pages 17-18). The section is copied below (emphasis is in original).

6.2 What can be achieved by MC12 – the next steps

“The agenda for WTO reform must be ambitious, but it must also be realistic. The different work strands of WTO reform need to be properly sequenced. Not all elements can or should be deployed simultaneously, but rather different components will follow different processes and be brought forward in different configurations – be it multilateral or plurilateral – and with different groups of members. The next WTO Ministerial Conference will be key for the WTO reform process, both in terms of delivering a potential package of outcomes and in launching new processes and areas of work that can serve as a springboard for the reform agenda.

“Three areas where work should intensify prior to MC12 are trade and health, fisheries subsidies and the reform of the dispute settlement system.

“In addition, the following outcomes could be achieved by MC12:

“1. An agreement should be reached to reinvigorate WTO work on trade and environment in view of mainstreaming sustainability issues in the WTO’s work. Ideally, this should be done multilaterally, although certain elements may only be pursued by subgroups of interested WTO members, such as the liberalisation of selected climate-mitigating goods and environmental services.

“2. Work should be launched amongst interested countries on the development of rules on competitive neutrality, including modernised rules on industrial subsidies.

“3. Substantial progress should be recorded on the plurilateral initiatives on e-commerce and investment facilitation. The Joint Statement Initiative on services domestic regulation could be concluded at MC12.

“4. The renewal of the multilateral e-commerce and TRIPS moratoria should be ensured at MC12.

“5. Improvements to the WTO’s regular work function, through agreements on the horizontal transparency in notifications and trade concerns proposals.

“6. On agriculture, a package of transparency improvements across the board and on export restrictions could be agreed at MC12. The initiative on the exemption of the World Food Programme humanitarian purchases from export restrictions could also be part of such an outcome. The EU is open to discuss how to progress after MC12 on the main aspects of the negotiations, in particular on trade distorting domestic support.

“Beyond these outcomes, a Ministerial Declaration articulating a political commitment to reform would be a significant additional element to support future work. This Declaration could focus on issues such as improvements of the negotiating, monitoring and deliberating functions of the WTO; and look into institutional improvements in the functioning of the Organization. The Ministerial Declaration could establish a Working Group on WTO Reform to consider these issues and guide the membership towards delivering outcomes. MC12 should thus set the agenda for further work on the medium to long-term areas of reform, some of which should be completed before the subsequent Ministerial Conference (MC13).”

The text of the Annex is embedded below.

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Conclusion

The European Commission’s communication and Annex lay out a thoughtful and interrelated set of objectives and action steps to try to achieve EU objectives. The Annex is an excellent document in laying out EC’s objectives for WTO reform and articulating priorities for the rest of 2021.

The Biden Administration in its first month in office has indicated support for many of the areas of interest contained in the European Commission’s trade policy, including addressing climate change, working to help the world come through the pandemic and restore economic growth. Many of the WTO reforms identified by the European Commission are consistent with where the U.S. and many other countries would like to see reform occur, although some take a more practical (and more limited) approach than the approach teed up by the Trump Administration (S&DT, need for convergence by state capitalist economies). While dispute settlement reform will be complicated, hopefully the WTO membership can coalesce around modifications that address the full array of U.S. concerns including the failure of the Appellate Body in fact to respect its limited role, the creation of rights and obligations through disputes contrary to the express limitations which of necessity upset the balance of rights and obligations agreed to during the Uruguay Round, and will address correcting major overreach situations from the first 25 years. While one would expect much greater cooperation between the U.S., the EU and other countries in the coming months ahead of MC12, meaningful progress at the WTO is far from certain. A number of the issues raised by the EU (and supported by others) are controversial and actively opposed by some Members. However, the proposals reflect the reality of a changed global economy from 1995 when the WTO commenced operations.

The incoming Director-General should find the EC’s Annex a useful document for understanding EU priorities and objectives. It should also help many other Members decide to compile their own lists to help move the WTO reform process forward.

The amended European Union enforcement regulation — hypocrisy or a reasonable move?

The amended EU enforcement regulation took effect on February 13, 2021. The amendment was pursued within the EU following the collapse of the Appellate Body at the WTO and is designed to give the EU the ability to impose retaliation whenever it perceives it has won some part of a panel proceeding at the WTO but the other party has filed an appeal where the Appellate Body is not functioning. The amended regulation also permits such action against trading partners under other agreements where dispute settlement is blocked or there is no dispute settlement. The announcement by the European Commission is embedded below and is followed by the amended regulation..

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The EU presents itself as simply ensuring that it receives the benefits of the agreements it is a party to. The challenge of disputes at the WTO being appealed to a non-functioning WTO Appellate Body is a real one as reviewed in a prior post and as can be seen from the WTO webcite. See January 14, 2021, First dispute settlement cases of 2021 at the WTO — Costa Rica requests consultations with Panama for various restrictions on agricultural products viewed as violating SPS obligations and more; EU requests establishment of a panel to address its concerns with Indonesia’s export restrictions on inputs for stainless steel, https://currentthoughtsontrade.com/2021/01/14/first-dispute-settlement-cases-of-2021-at-the-wto-costa-rica-requests-consultations-with-panama-for-various-restrictions-on-agricultural-products-viewed-as-violating-sps-obligations-and-more-eu-re/; WTO, Dispute Settlement, Appellate Body, https://www.wto.org/english/tratop_e/dispu_e/appellate_body_e.htm. The following cases have been appealed to the WTO Appellate Body but are not currently being heard because of the lack of any Appellate Body members:

Current Notified Appeals 

  • 22 January 2021:  Notification of Appeal by Korea in DS553: Korea — Sunset Review of Anti-Dumping Duties on Stainless Steel Bars (WT/DS553/6)
     
  • 17 December 2020:  Notification of Appeal by Indonesia in DS484: Indonesia — Measures Concerning the Importation of Chicken Meat and Chicken Products (Article 21.5 — Brazil) (WT/DS484/25)
     
  • 26 October 2020:  Notification of Appeal by United States in DS543: United States — Tariff Measures on Certain Goods from China (WT/DS543/10)
     
  •  28 September 2020: Notification of Appeal by United States in DS533: United States — Countervailing Measures on Softwood Lumber from Canada (WT/DS533/5)
     
  •  28 August 2020:  Notification of Appeal  by the European Union in  DS494: European Union — Cost Adjustment Methodologies and Certain Anti-Dumping Measures on Imports from Russia (Second Complaint) (WT/DS494/7)
     
  •  28 July 2020: Notification of Appeal by Saudi Arabia in DS567: Saudi Arabia — Measures Concerning the Protection of Intellectual Property Rights (WT/DS567/7)
     
  •  18 December 2019: Notification of Appeal by the United States in DS436: United States — Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India (Article 21.5 — India) (WT/DS436/21)
     
  • 6 December 2019: Notification of Appeal by the European Union in DS316: EC and certain member States — Large Civil Aircraft (Article 21.5 — EU) (WT/DS316/43)
     
  • 19 November 2019: Notification of Appeal by India in DS541: India — Export Measures (WT/DS541/7)
     
  • 9 September 2019: Notification of Appeal by Thailand in DS371: Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines (Article 21.5 — Philippines II) (WT/DS371/30)
     
  • 15 August 2019: Notification of Appeal by the United States in DS510: United States — Certain Measures Relating to the Renewable Energy Sector (WT/DS510/5)
     
  • 4 June 2019: Notification of Appeal by Canada in DS534: United States — Anti-Dumping Measures Applying Differential Pricing Methodology to Softwood Lumber from Canada (WT/DS534/5)
     
  • 25 January 2019: Notification of Appeal by the United States in DS523: United States — Countervailing Duty Measures on Certain Pipe and Tube Products from Turkey (WT/DS523/5)
     
  • 9 January 2019: Notification of Appeal by Thailand in DS371: Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines (Article 21.5 — Philippines) (WT/DS371/27)
     
  • 14 December 2018: Notification of Appeal by India in DS518: India — Certain Measures on Imports of Iron and Steel Products (WT/DS518/8)
     
  • 20 November 2018: Notification of Appeal by Panama in DS461: Colombia — Measures Relating to the Importation of Textiles, Apparel and Footwear (Article 21.5 — Colombia)(Article 21.5 — Panama) (WT/DS461/28)
     
  • 21 September 2018: Notification of Appeal by the European Union in DS476: European Union and its member States — Certain measures Relating to the Energy Sector (WT/DS476/6)

Hypocrisy or a reasonable measure

The action of the European Union can be viewed as “reasonable” as an effort to maintain a right to binding dispute settlement. However, the unilateral action by the EU obviously invites mirror actions by trading partners which could quickly spiral out of control.

Moreover, the amended regulation looks only at actions by trading partners and fails to recognize similar actions by the EU that are identical to those they are objecting to by others. In fact, three of the seventeen cases listed above where appeals have been filed but are not presently being heard were filed by the European Union including two when the Appellate Body had either ceased to have at least three members and hence could not handle the appeal or was just four days from that situation. As there are many ways to resolve a dispute besides taking an appeal, what is the justification for the EU filing appeals into the void where they are on the losing side of a dispute at the panel report stage but complaining about trading partners doing the same? Is the EU position not hypocritical?

In addition, the dispute settlement system of the WTO is premised on Members awaiting a final dispute settlement decision and providing a trading partner a reasonable period of time to come into compliance before retaliation is permitted (and is then limited by arbitration if, as is almost always the case, the party seeking retaliation puts forward retaliation far out of line with actual harm — e.g., EU’s $12 billion requested retaliation on Boeing dispute compared to $4 billion authorized (WT/DSB353/ARB, 13 October 2020)). But the EU has at least in one case opted to retaliate before a panel case had been completed (EU challenge of US Section 232 national security action on steel and aluminum). The U.S. has not retaliated against the unilateral EU retaliatory action but rather pursued consultations and panel proceedings at the WTO. See WT.DS559: European Union — Additional Duties on Certain Products from the United States, https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds559_e.htm. Retaliating by creating a self-serving description of the action of a trading partner (safeguard vs. national security) is hardly faithful adherence to the obligations the EU has undertaken with trading partners in the WTO. Is the amended enforcement regulation in light of such flouting of agreed obligations not a sign of hypocrisy by the EU?

Reform of the WTO Dispute Settlement System, particularly the Appellate Body, is a high priority for Members and for the incoming Director-General. As reviewed in a prior post, the EU is finally making sounds like it will address U.S. concerns about overreaching by the Appellate Body (exceeding its limited mandate). Hopefully, the Biden Administration will be working within the WTO for meaningful reform of the Appellate Body to limit the Appellate Body to its originally envisioned limited role. The EU amended regulation will not contribute to an early resolution of the impasse and could make resolution more difficult depending on how it is used.

Special Session of the General Council at WTO appoints Dr. Ngozi Okonjo-Iweala as the seventh Director-General

The Special Session of the WTO General Council yesterday, February 15, 2021, which was called for the sole purpose of appointing the next Director-General, ran especially long, some four hours, as many WTO Members took to the floor (virtually) to congratulate Dr. Ngozi Okonjo-Iweala on her appointment as the next WTO Director-General. The appointment marks the first time the WTO or its predecessor the GATT has been headed by a woman, and the first time it has been headed by an African. At the end of the special meeting of the General Council, the next Director-General held a press conference for about an hour. During the press conference, Dr. Ngozi Okonjo-Iweala was asked how reporters should address her. Her answer was as Dr. Ngozi (Director-General Ngozi after February 28). I use “Dr. Ngozi” in the rest of this post.

While a normal term for the Director-General is four years, the WTO Members could have appointed Dr. Ngozi for the remainder of the four years from September 1, 2020-August 31, 2024 (i.e., the period from when Roberto Azevedo stepped down at the end of August), a four year period from March 1, 2021 – February 28, 2025 (i.e., the four year period from when she starts as Director-General), or could have brought the first period back in line with the four year cycles that would have prevailed if Roberto Azevedo had stayed til August 31, 2021. The WTO membership has set Dr. Ngozi’s first term at the longer option, March 1, 2021 – August 31, 2025.

The special meeting was not open to the public, and minutes from the meeting are not yet available. As the only agenda item was the appointment of the next Director-General, the process presumably consisted of the Chairman of the General Council, Amb. David Walker (New Zealand), with the concurrence of his facilitators in the selection process Amb. Dacio Castillo of Honduras (Chairman of the Dispute Settlement Body) and Amb. Harald Aspelund of Iceland (Chairman of the Trade Policy Review Body), putting forward the recommendation that Dr. Ngozi be appointed as the next Director-General. Without objection, Dr. Ngozi received the consensus support of the Members. Following that Dr. Ngozi provided a statement which both thanks the “troika” for their efforts during the selection process and reviewed her vision of the priorities for the WTO. Her full statement is embedded below (JOB/GC/250).

JobsGC250

Some excerpts lay out the major priorities and shows the daunting challenges facing WTO Members and the new Director-General:

“1.9 * * * For the global economy to return to sustained growth, the global community will need to get a tight grip on the pandemic by intensifying cooperation to make equitable and affordable access to vaccines, therapeutics, and diagnostics a key plank of the recovery. With new COVID variants spreading rapidly all over, we must have a sense of urgency to getting control of the pandemic. The WTO can and must play a more forceful role in exercising its monitoring function and encouraging Members to minimise or remove export restrictions and prohibitions that hinder supply chains for medical goods and equipment. The International Trade Centre recently reported that up to 100 countries still maintain export restrictions and prohibitions.” (emphasis added)

“1.10. WTO Members have a further responsibility to reject vaccine nationalism and protectionism. They should rather intensify cooperation on promising new vaccines, therapeutics, and diagnostics. There should be a ‘third way’ to broaden access through facilitating technology transfer within the framework of multilateral rules, so as to encourage research and innovation while at the same time allowing licensing agreements that help scale up manufacturing of medical products.”

“1.11 * * * At MC12, the success of which is a top priority for us all, we must reach agreement on some pressing issues and elaborate on work programmes for others. Apart from the issues related to the pandemic, I hope that we would have finalised the fisheries subsidies negotiations, leaving MC12 as the venue to conclude on modalities for implementation.”

“1.12. Reform of the dispute settlement system, which has been a central element in guaranteeing security and predictability of the multilateral trading system, is of utmost importance to the membership. Some Members have criticised the way it functions and demanded reforms. It will be important to agree on the nature of these reforms, flesh them out, and develop a work programme for implementation that can be advanced at MC12. I believe that the set of recommendations proposed by Ambassador Walker could provide Members with a platform upon which to build so as to restore confidence in the dispute settlement system. A strengthened and robust system is in the interest of all Members, and as such, every effort should be made to improve it. We need a system that can garner the confidence of all, including small developing and least developed countries who have found it challenging to utilize.”

“1.13. The WTO rule book is outdated, and its rules lag behind those of several regional and bilateral trade agreements which are incorporating a lot of innovations. The rulebook must be updated to take account of 21st century realities such as e-commerce and the digital economy. The pandemic has heightened the importance and accelerated the role of e-commerce, which is expected to grow significantly in the coming years. E-commerce offers important opportunities for inclusivity of MSMEs and women in international trade, especially in developing countries. To make it possible for some developing and least developed countries to participate in the e-commerce negotiations, we must partner with governments and other organizations to bridge the digital divide. Success in the e-commerce negotiations could provide an impetus for reviving more broadly the negotiations on Trade in Services, a sector of increasing importance in the economy of most Members. Plurilateral initiatives have brought new energy in the Multilateral Trading System. Negotiating work on other joint statement initiatives – domestic regulation and investment facilitation – has continued fairly intensively despite the pandemic. Participants need to pursue their efforts to build support and attract interest from a significant part of the WTO membership, including from developing countries with a view to concluding at least the domestic regulation by MC12.”

“1.14. We should also work to ensure that the WTO best supports the green and circular economy and addresses more broadly the nexus between trade and climate change.”

“1.15. The WTO’s work in new or innovative areas does not mean that traditional topics such as agriculture are forgotten. Agriculture is particularly important for many developing and least developing countries. Improving market access for export products of interest to these countries is of paramount importance, as is dealing with trade distorting domestic support. The growing domestic support entitlements of Members must be addressed to level the playing field, so as to provide opportunities for small scale farmers. In addition, it is possible for an early agreement on removal of export restrictions including favorable consideration of the exemption of WFP humanitarian purchases. Likewise, we must also strengthen disciplines on industrial subsidies. In that regard, it would be important to ensure that subsidies granted by Members to their state-owned enterprises in certain situations do not distort the conditions of competition. The issue of Special and Differential Treatment (SDT) is a divisive one that undermines trust. However, the voluntary action of some developing country Members to not avail themselves of SDT in the future points a way forward, so does the Trade Facilitation Agreement which allowed for taking into account each Member’s particular development status.”

“1.16 * * * Transparency is the lifeblood of the system and every effort should be made to assist Members to meet their notification and transparency obligations. The development and streamlining of online tools, including the introduction of E-agendas is a step in the right direction. Some WTO rules and procedures also need to be revisited, including the procedures for appointing DGs. Regarding Ministerials, Article IV of the Marrakesh Agreement provides that ‘there shall be an MC composed of representatives of all Members which shall meet at least once every two years.’ In today’s fast changing, fast paced, but uncertain world, it may be opportune for members to review the frequency of Ministerials to assess whether yearly meetings would allow Members to better appraise the health of the MTS, surface problems, and together advance timely solutions. Furthermore, Members take decisions on the basis of consensus, and rightly so, since Article IX:1 of the Marrakesh Agreement provides that ‘the WTO shall continue the practice of decision-making by consensus followed under the GATT’ but Members must be vigilant that the quest for consensus does not create situations in which welfare enhancing innovations or approaches of benefit to the membership are frustrated.”

“1.17. The WTO Secretariat should be strengthened to enable it to provide cutting edge services to the membership in all relevant areas of WTO’s work, including implementation, monitoring, dispute settlement and negotiations. An important change will be to move away from the current siloed way of working to a more team and task-based approach. The Secretariat has to be fit for purpose to take account of the changing dynamics of the global economy and priorities of Members.”

During the press conference, Dr. Ngozi reviewed many of the above priorities but emphasized the critical importance of focusing first on the pandemic which means getting better control over export restraints and addressing the role the WTO can play in ensuring access to vaccines and other medical goods. Preparation for the 12th Ministerial Conference likely to take place near the end of 2021 is next and includes concluding the fisheries subsidies, progress on Joint Statement Initiatives (e.g., e-commerce, domestic regulations, etc.) and agreeing to a process for addressing the impasse on dispute settlement.

While yesterday’s Special Session was a time of celebration and expressions of support for the incoming Director-General, the ultimate success of the WTO under Dr. Ngozi’s leadership will depend on the ability of Members with very different interests to reach agreement on the road forward. Dr. Ngozi was selected in part for her promise to bring a fresh pair of eyes and push for a change in how the organization operates (“not business as usual”). But success is anything but assured. While Dr. Ngozi has focused on a lack of trust among Members, some have argued that it is really a lack of common purpose/objective among the membership that has resulted in an inability to move the organization forward. The move to bilateral and plurilateral agreements and Joint Statement Initiatives over the last dozen years is a reflection of the inability to get all Members on board initiatives to keep the organization moving forward. The twenty years that the fisheries subsidies negotiations have been dragging on and the inability of Members to focus on the objective of preserving fishing for future generations vs. minimizing the disciplines they accept reinforces the concern that the deep divisions among the membership doom multilateralism.

In a post from Saturday, I had urged Dr. Ngozi to think big in terms of her inner team and the four Deputies Director-General that will help her. See February 13, 2021, Leadership change at the WTO — with Dr. Ngozi Okonjo-Iweala’s arrival next week, what support team and early changes in the role of the Secretariat could help WTO Members move forward?, https://currentthoughtsontrade.com/2021/02/13/leadership-change-at-the-wto-with-dr-ngozi-okonjo-iwealas-arrival-next-week-what-support-team-and-early-changes-in-the-role-of-the-secretariat-could-help-wto-members-move-forward/. With all of the critical issues before the WTO, Dr. Ngozi will need as deep and talented a team as she can assemble to permit extension of her reach to avoid the stagnation that has characterized the organization, assuming common ground can be found among the Members.

Dr. Ngozi’s appointment has given the WTO a shot in the arm and given many hope that a brighter future lies ahead. The WTO clearly needs major reforms to recapture the role envisioned in the 1980s and early 1990s when it was being negotiated and created. Let’s hope that Dr. Ngozi will help find the path that Members will agree to pursue to return the WTO to relevance.

Below are embedded a few of the statements from yesterday of Members (U.S., EU, China, India).

U.S.-Statement-on-the-Appointment-of-New-Director-General-Dr.-Ngozi-Okonjo-Iweala-_-U.S.-Mission-to-International-Organizations-in-Geneva

EU-Statement-at-the-General-Council-Special-Session-Appointment-of-the-next-Director-General-15-February-2021-European-External-Action-Service

Statement-by-H.E.-Ambassador-Li-Chenggang-at-the-Special-Meeting-of-the-General-Council

Welcome-to-Permanent-Mission-of-India-in-Geneva

Leadership change at the WTO — with Dr. Ngozi Okonjo-Iweala’s arrival next week, what support team and early changes in the role of the Secretariat could help WTO Members move forward?

The special meeting of the General Council at the WTO to appoint the next Director-General is set for February 15, 2021 at 3:00 p.m. The meeting will be conducted virtually. With the actions of South Korea in withdrawing its candidate, Trade Minister Yoo Myung-hee, and of the United States in indicating its strong support for Dr. Ngozi Okonjo-Iweala, the General Council meeting will result in the appointment by consensus of Dr. Okonjo-Iweala as the next Director-General. Because of the premature departure of the prior Director-General, Roberto Azevedo, and the delay in concluding the selection process started last year, it is unclear what the duration of Dr. Okonjo-Iweala’s first term as Director-General will be. Presumably there will be some clarification at the General Council meeting on that and any other technical issues.

A lot has been published in recent days on Dr. Okonjo-Iweala and her priorities for working with Members of the WTO to address the many challenges facing the organization. See, e.g., Time, Ngozi Okonjo-Iweala Believes the WTO Can Change the World. But First It Needs Reform, February 12, 2021, https://time.com/5938816/ngozi-okonjo-iweala-wto-climate-change/; Financial Times, Ngozi Okonjo-Iweala: Nigerian powerhouse to head the WTO, February 12, 2021, https://www.ft.com/content/95d66614-d8e0-4e0b-82c1-417153e2942f; Thompson Reuters Foundation News, First woman, first African: Nigeria’s ‘troublemaker’ on track to run WTO, February 12, 2021, https://news.trust.org/item/20210212184008-z02wa; Washington Post, Trump tried to block her. Now Ngozi Okonjo-Iweala is about to make history, February 10, 2021, https://www.washingtonpost.com/world/africa/ngozi-okonjo-iweala-wto/2021/02/09/99e3b028-67eb-11eb-bab8-707f8769d785_story.html; France 24, Ngozi Okonjo-Iweala set to make history as first woman and African to head WTO, 8 February 2021, https://www.france24.com/en/tv-shows/business-daily/20210208-ngozi-okonjo-iweala-set-to-make-history-as-first-woman-and-african-to-head-wto; New York Times, Ngozi Okonjo-Iweala Set to Become W.T.O.’s First Female Leader, February 5, 2021, https://www.nytimes.com/2021/02/05/business/ngozi-okonjo-iweala-world-trade-organization.html.

There are many pressing issues, including how WTO Members respond to the COVID-19 pandemic to keep markets open for medical goods and food, completing ongoing multilateral negotiations (fisheries subsidies) and plurilateral initiatives (e.g., e-commerce/digital trade, domestic regulation, etc.), a range of issues from the Doha Development Agenda that remain open, dispute settlement reform to permit the restart of the Appellate Body, broader WTO reform to name just some of the topics needing action.

An early issue for the incoming Director-General will be the composition of her immediate staff and the group of Deputies Director-General (DDGs) that will support her time as Director-General. The DG’s immediate staff will likely reflect personal choices of individuals known and/or trusted by the incoming Director-General. The process of selecting DDGs is understood to involve regional diversity (with Asia/Pacific, North America, Latin America, Europe and Africa/Middle East understood to be the five groups) and consultations with Members. Historically, the Director-General and four DDGs have come, one each from each of the five regions. The U.S. and EU have historically had one slot. With China’s rise in importance in global trade, China presumably intends for one of the positions to be reserved for a Chinese candidate. With Dr. Ngozi Okonjo-Iweala being the first African to become Director-General, absent a change in approach, the selection of DDGs will likely result in one European, one American (USA), one Asian (probably Chinese) and one Latin American. It is anticipated that Dr. Okonjo-Iweala will work to increase the representation of women in the senior ranks of the WTO Secretariat. That could start obviously with her own staff and with the Deputy Director-General appointments.

With the challenges facing the WTO, it is my view that the incoming Director-General should shoot high for senior current or former government officials who can facilitate the efforts at moving WTO Members towards finding solutions to pressing issues. In that regard, selecting some of the prior candidates for Director-General, if willing to be part of the Secretariat, could provide depth of political contacts and knowledge of WTO Members. With that in mind, my suggested dream team would include the following, which respect geographical regions but give the Asia/Pacific slot to a Korean national:

Minister Amina C. Mohamed of Kenya as Chef de Cabinet. Minister Mohamed was an early favorite in the 2020 Director-General race, served as Kenya’s Ambassador to the WTO and headed the major bodies of the WTO as well as chairing the successful Nairobi Ministerial. While being from Africa would presumably prevent her from being one of the DDGs, she would make an excellent chief of staff for Dr. Okonjo-Iweala.

Minister Yoo Myung-hee of the Republic of Korea. Minister Yoo was an extremely impressive candidate for Director-General as reflected in her being a finalist. Her past success in working with large trading partners (China, EU, US) and smaller partners and the evolution of Korea as an increasingly important trading nation as it has rapidly gone up the development path would provide the new Director-General with a very strong Deputy Director-General to help accomplish the reforms needed to return the WTO to its proper role in global trade.

Anabel Gonzalez, a Nonresident Senior Fellow at the Peterson Institute for International Economics, has a rich history in trade for Costa Rica, the WTO, World Bank and Inter-American Development Bank. Her write-up on the Peterson Institute website states, “Anabel González, nonresident senior fellow since October 2018, is host of the Institute’s virtual event series. She was senior director of the World Bank’s Trade and Competitiveness Global Practice (2014–18), where she led the Bank’s agenda on trade, investment climate, competitiveness, innovation, and entrepreneurship. She previously served as minister of trade of Costa Rica (2010–14), where she headed the strategy to join the Organization for Economic Cooperation and Development, negotiated and implemented six free trade agreements, and contributed to attract over 140 foreign direct investment projects. She also had a lead role in Costa Rica’s Competitiveness and Innovation Council and was president of the Export Promotion Board. In her more than 15 years of service at the Ministry of Foreign Trade, she held several positions, including ambassador and chief negotiator of the free trade agreement between Central America and the United States (2003–04). She has also worked as director of the Agriculture Division of the World Trade Organization (2006–09); senior consultant on trade and investment, Inter-American Development Bank (2009–10);and director-general, Costa Rican Investment Promotion Agency (2001–02).” Ms. Gonzalez’s impressive background would make her an ideal DDG for a Secretariat looking to help Members find a path forward on so many pressing issues.

Amb. Alan Wolff (current DDG). Few DDGs have brought the depth of understanding of the global trading system or the ability to articulate a vision for the future or the approaches to potentially resolving challenges that DDG Wolff brings. Keeping him on as a DDG would be a major plus for the incoming Director-General.

Phil Hogan, served as European Commissioner for Trade between 2019 and 2020, and previously European Commissioner for Agriculture and Rural Development between 2014 and 2019. He would be an excellent DDG to round out the team.

Reform of the Secretariat

One of the topics that candidates for the Director-General discussed during the 2020 selection process was whether the WTO membership needed to give the Secretariat some additional authority to facilitate forward movement in an organization that now has 164 Members with more in the accession process.

In the Washington International Trade Association annual event earlier this week, DDG Wolff provided his thoughts on what those reforms might include. See WTO press release, DDG Wolff — WTO must demonstrate soon it can deliver, 9 February 2021, https://www.wto.org/english/news_e/news21_e/ddgaw_09feb21_e.htm. His comments provided ten important actions WTO Members need to take to restore relevance. The tenth dealt with WTO governance, and the past few paragraphs are copied below.

The WTO Director-General and the professional proactive secretariat that she leads must be given a clear mandate to serve as an effective executive for the Members

The WTO Secretariat should assure transparency and become the primary source of trade data that Members need in order to make better-informed policy

It should engage in active monitoring of trade policies and measures, informing Members of potential problems with current practices and anticipating future challenges

The Director-General should use the convening power of her office to bridge differences, making proposals where needed and driving toward positive agreed outcomes

The Secretariat should dedicate resources to strategic foresight and have a policy planning office.  It must be prepared to meet challenges seen and not yet seen.”. 

The new Director-General should work with Members quickly to see if the above governance modifications can be agreed to either on a trial basis or on a permanent basis. The existing structure needs reform to facilitate Member movement on a host of important issues.

.

U.S. decides not to modify retaliation list of goods from WTO dispute with EU on Airbus subsidies

The Biden Administration has continued its efforts at greater international outreach and collaboration by deciding, in consultation with the U.S. civil aircraft industry, not to modify the retaliation list of EU goods as the U.S. and the EU look to find a resolution to the long-running Airbus-Boeing dispute hopefully by mid-year. The Federal Register notice of today is copied below. See USTR, Notice Regarding Periodic Revision of Section 301 Action: Enforcement of U.S. WTO Rights in Large Civil Aircraft Dispute, 86 FR 9420 -9421(February 12, 2021).

SUMMARY: The U.S. Trade Representative together with the affected United States industry have agreed that it is unnecessary at this time to revise the action in the Section 301 investigation involving the enforcement of U.S. rights in the World Trade Organization (WTO) dispute involving Large Civil Aircraft subsidies provided by certain current or former member States of the European Union. The U.S. Trade Representative will continue to consider the action taken in the investigation.

DATES: This exception to periodic revisions is applicable as of February 8, 2021.

FOR FURTHER INFORMATION CONTACT: For questions about the investigation or this notice, contact Associate General Counsel Megan Grimball, at (202) 395– 5725, or Director for Europe Michael Rogers, at (202) 395–3320.

SUPPLEMENTARY INFORMATION

“A. Proceedings in the Investigation

“For background on the proceedings in this investigation, please see the prior notices issued in the investigation, including: Notice of initiation (84 FR 15028 (April 12, 2019)); notice of determination and action (84 FR 54245 (October 9, 2019)); and notices of revision of action (85 FR 10204 (February 21, 2020), 85 FR 50866 (August 18, 2020), and 86 FR 674 (January 6, 2021)).

B. Periodic Revisions and Exceptions Thereto

“Section 306(b)(2)(B)–(F) of the Trade Act of 1974, as amended, provides for periodic revisions of the list of goods subject to additional duties imposed in response to the failure of a U.S. trading partner to implement a WTO Dispute Settlement Body (DSB) recommendation. The statute includes exceptions to the periodic revisions. As relevant here, section 306(b)(2)(B)(ii)(II) provides that no revision is required if the U.S. Trade Representative and the U.S. industry affected by the noncompliance with the DSB recommendation agree that a revision of the list is unnecessary.

“The most recent revision to the list of goods subject to additional duties was effective on January 12, 2021. See 86 FR 674 (January 6, 2021). In light of the recent revision, the U.S. Trade Representative has agreed with the affected U.S. industry that it is unnecessary at this time to revise the action. The U.S. Trade Representative will continue to consider the action taken in this investigation.

William Busis,

“Deputy Assistant USTR for Monitoring and Enforcement and Chair, Section 301 Committee, Office of the United States Trade Representative

Both the U.S. and EU have been interested in finding a resolution to the seventeen year dispute on subsidies to Airbus and Boeing. See, e.g., Bloomberg, EU Looks Past Trump to Defuse Transatlantic Trade Conflict, January 11, 2021, https://www.bloomberg.com/news/articles/2021-01-11/eu-looks-past-trump-to-defuse-transatlantic-trade-conflict; Reuters, EU trade official wants swift engagement with Biden on aircraft, digital taxes, WTO, January 15, 2021, https://www.reuters.com/article/us-usa-trade-eu/eu-trade-official-wants-swift-engagement-with-biden-on-aircraft-digital-taxes-wto-idUSKBN29K1X5. The action by the United States is one of a series of actions demonstrating an interest by the Biden Administration in finding resolutions to transatlantic issues and reengaging in multilateral organizations.

On his first day as President, President Biden sent notices of the U.S. rejoining the Paris Climate Agreement and of its revoking its withdrawal from the World Health Organization. These actions were obviously positive steps by the U.S. in the eyes of many countries including the European Union member states. See White House, January 20, 2021, Paris Climate Agreement, https://www.whitehouse.gov/briefing-room/statements-releases/2021/01/20/paris-climate-agreement/; President Biden, Letter to His Excellency António Guterres, January 20, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/01/20/letter-his-excellency-antonio-guterres/.

Similarly Treasury Secretary Janet Yellen in communications with some of her European counterpart has indicated the U.S. interest in finding a resolution within the OECD/G-20 process to the issue of digital services taxes, an issue where 301 investigations under the Trump Administration found various EU member state actions as unfair to U.S. interests. Yellen has indicated that resort to 301 duties remain on the table if there isn’t a resolution. Obtaining an international agreement on taxes has been an objective of many countries, including the European Union. International Tax Review, Yellen picks notable experts to join the US Treasury’s digital tax talks, February 5, 2021, https://www.internationaltaxreview.com/article/b1qfh1hw0xy7z2/yellen-picks-notable-experts-to-join-the-us-treasurys-digital-tax-talks. Resolution by the end of June 2021 is the current timeline being pursued by parties.

Similarly, while the Biden Administration doesn’t have its full trade team in place as yet, USTR issued a release last Friday that, following the announcement that the South Korean Trade Minister Yoo Myung-hee was withdrawing from the contest for the Director-General of the WTO position, the U.S. was throwing its support behind Dr. Ngozi Okonjo-Iweala. Dr. Okonjo-Iweala is the candidate that pursuant to the procedures being followed in the selection process had been identified as the candidate most likely to attract a consensus back in October before the U.S. had indicated its unwillingness to join a consensus behind her. With the special General Council meeting scheduled for February 15 at 3 p.m., the WTO will have a new Director-General in a matter of days. Nearly all WTO Members, including the EU and its member states, have been anxious for a resolution to the selection of the next Director-General.

And as the Reuters article cited above reviews, the European Union has been looking at WTO reform including the possibility of agreeing to a limiting of the role of dispute settlement and is looking to engage with the U.S. on solving the longstanding U.S. concerns of the WTO dispute settlement system, particularly the operation of the Appellate Body. Assuming the Biden Administration will move in the coming months once its trade team is in place to identify modification in the DSU or needed elements of a General Council decision, the EU has been sending signals that it may be willing to address core U.S. concerns which could lead to the resolution of a core WTO Member concern — the existing impasse on getting the Appellate Body refunctioning.

There is an additional major trade dispute between the U.S. and the EU dealing with the application of additional tariffs on steel and aluminum products following Commerce investigations under Section 232 of the Trade Expansion Act of 1962, as amended, and action by President Trump. It is less clear what the off ramp for the parties is here. The EU and a number of other WTO Members have WTO disputes pending panel reports that will be released at the earliest in the second half of 2021. Similarly, the U.S. has disputes with the EU and others who imposed duties on U.S. exports allegedly because countries were treating the national security law used by the Trump Administration as essentially a safeguard law. Decisions in those cases are now due in the second half of 2021. The EU would like the U.S. to simply terminate the duties. There are steel using industries that support such possible action. However, the global excess capacity problems created by China and others in steel and aluminum remain and have no obvious solution particularly in light of China’s refusal to address the massive capacity increases in the sectors which has destabilized global markets. U.S. steel companies, primary aluminum producers and workers support maintaining the duties.

But all in all, the United States in the first weeks of the Biden Administration is working to reengage multilaterally and to see if there are solutions available to resolve a range of long standing conflicts. USTR during the Trump Administration did an admirable job in identifying and documenting problems with WTO dispute settlement and providing approaches under U.S. law to deal with vexing problems where multilateral approaches were not progressing or were inadequate. The Biden Administration has the opportunity now to hopefully find solutions that work for America and restores greater cooperation in Transatlantic relations. With the efforts being made by the Biden Administration, one is seeing interest within the EU to resolve all or many of the major disputes with the U.S. and work on pressing issues of interest to the EU and the U.S. including.recovery from the pandemic, climate change, WTO reform and more.

Better transatlantic relations is an important element in moving the global economy forward in ways that reflect democratic and market-based principles. Let’s hope that win-win solutions are possible on the existing challenges so long delayed momentum on existential issues can be generated.

WTO Special General Council meeting called for 3 p.m. on February 15, 2021 to consider appointment of a Director-General

Via communications sent out to the WTO membership on Tuesday, February 9, 2021, there will be a special General Council meeting next Monday, February 15, to consider the recommendation by the Chairman of the General Council, Amb. David Walker (NZ) that Members appoint Dr. Ngozi Okonjo-Iweala as Director-General of the WTO. the notices follow the withdrawal of the South Korean candidate, Trade Minister Yoo Myung-hee last Friday and the press release from the United States Trade Representative’s Office last Friday that the U.S. strongly supported the candidacy of Dr. Okonjo-Iweala. As other Members appeared to be on board with a consensus behind Dr. Okonjo-Iweala following the third round of consultations last October, movement by the Republic of Korea and the United States were the remaining steps for the Chairman of the General Council to be able to move forward with making his recommendation (supported by his facilitators) to the membership in a special General Council meeting. It is believed that Amb. Walker has been doing outreach to other Members since those announcements to confirm consensus and address any other issues relevant to the appointment of the next Director-General. So after the General-Council meeting next Monday, the WTO should finally have a new Director-General. The four Deputies Director-General have been jointly carrying on since the last Director-General departed at the end of August last year.

The two documents sent out today are embedded below.

Document-1

Document

Dr. Ngozi Okonjo-Iweala — a review of her statements on important issues before the WTO ahead of her being confirmed as the Director-General

With the events of last Friday (Korean Trade Minister Yoo Myung-hee announcement of her withdrawal from consideration for the WTO Director-General position and the U.S. announcement of support for Dr. Ngozi Okonjo-Iweala to be the next Director-General), it is assumed that Dr. Okonjo-Iweala will be confirmed as the new Director-General by the General Council in the next week or so. See February 5, 2021, Biden Administration throws support behind Dr. Ngozi Okonjo-Iweala for next Director-General of the World Trade Organization, https://currentthoughtsontrade.com/2021/02/05/biden-administration-throws-support-behind-dr-ngozi-okonjo-iweala-for-next-director-general-of-the-world-trade-organization/; February 5, 2021, WTO Director-General selection process — withdrawal of Korea’s Trade Minister Yoo important step to consensus behind Nigeria’s Dr. Ngozi Okonjo-Iweala, https://currentthoughtsontrade.com/2021/02/05/wto-director-general-selection-process-withdrawal-of-koreas-trade-minister-yoo-important-step-to-consensus-behind-nigerias-dr-ngozi-okonjo-iweala/.

During the summer and fall, I posted various reviews of positions being taken by candidates for the Director-General post. Below is information on a range of issues that Dr. Okonjo-Iweala spoke too during that period of time. There are, of course, dozens of issues of interest/importance to various WTO Members. The list below starts with some of the major concerns for countries like the United States. Later entries cover a much broader array of issues. Throughout the summer and fall, helping WTO Members get past the COVID-19 pandemic and obtain economic recovery were constant themes of importance both to Members and to all candidates for the WTO Director-General slot, including Dr. Okonjo-Iweala. Discussion of those themes can be seen in later entries on this post.

  1. Convergence of economic systems vs. coexistence of such systems within the WTO

I start with a post I did on November 10, 2020 examining “values” core to the WTO and reviewing Dr. Okonjo-Iweala’s expressed approach to one of those values — convergence vs. coexistence. The post is copied below and is separately found at November 10, 2020, The values of the WTO – do Members and the final Director-General candidates endorse all of them?, https://currentthoughtsontrade.com/2020/11/10/the-values-of-the-wto-do-members-and-the-final-director-general-candidates-endorse-all-of-them/.

“The values of the WTO” — do Members and the final Director-General candidates endorse all of them?

On November 6, Deputy Director-General Alan Wolff presented comments to the UN Chief Executives Board. In a press release, entitled “DDG Wolff shares views with international agency heads on future of multilateral cooperation,” the Secretariat provides a short introduction and then includes DDG Wolff’s comments including an Annex. See WTO, WTO and Other Organizations, DDG Wolff shares views with international agency heads on future of multilateral cooperation, 6 November 2020, https://www.wto.org/english/news_e/news20_e/igo_06nov20_e.htm. The statement by DDG Wolff is worth reading in its entirety and presents information on the effects of the pandemic and the future of multilateralism including reforms needed for the WTO. However, for purposes of this post, I will focus on Annex 1 to his statement, entitled “The Values of the World Trade Organization. The Annex is copied below and generally reflects views DDG Wolff has presented in the past.

Annex I

The Values of the World Trade Organization

“In the current upsurge in criticism of the inadequacies of the collective responses to the pandemic, the WTO is receiving heightened scrutiny, and more urgent calls for WTO reform. It is necessary to understand the values that the multilateral trading system is designed to promote before it can be reformed.

“A serious inquiry into this subject would serve three purposes:

“to know the value of what we have in the current system,

“to determine if the values of the current system enjoy the support of all WTO members, and

“to address the degree to which the WTO is of sufficient continuing relevance as it is at present or whether it needs fundamental change.

“WTO members can make progress toward improving the organization to help it to create a better world through building on the values that are inherent in the system. These include –

Stability and peace — The original mission of the multilateral trading system was to enhance economic growth to achieve stability and support peace; today the WTO fosters integration of conflicted countries into the world economy.

Well-being — At its core, the organization is about the economic advancement of the people whom its members represent. Well-being is defined to include creating jobs and, as we are finding out, it also includes health;

Rule of law — The enforceability of obligations is a key distinguishing feature of the WTO as compared with most other international endeavours;

Openness – The multilateral trading system rests upon the principle that to the extent provided within the bounds of the WTO agreements, markets will be open to international trade and trade is to be as free from distortions as possible;

Equality — Equality among members provides the opportunity for each member to participate in the organization, and its rights and obligations, to the extent of its capabilities;

Sovereignty — Sovereignty is preserved — no decision taken within the WTO is to have an automatic effect on the laws or actions of any member;

Development — Fostering development to allow all members to benefit equally from the rights and undertake equally the obligations of the WTO.

International cooperation — Cooperation is a shared responsibility of membership to enable the organization to function.

Sustainability — There is increasingly an attitude of care among members for stewardship of the planet and its inhabitants.

The primacy of market forces — Commercial considerations are to determine competitive outcomes.

Convergence —The WTO is not simply about coexistence; differences among members affecting trade which deviate from the principles governing the WTO, its core values, are to be progressively overcome.

Reciprocity — Broadly defined reciprocity is required for negotiations to succeed.

Balance — is provided:

“Through each member’s judgment of the costs and benefits of the rights it enjoys and the obligations it has undertaken;

“Through its view of how its costs and benefits compare with those of other members;

“Through a member’s view of its freedom of action in relation to the freedom of action for others, and

“Specifically, through its judgment of whether it has sufficient freedom to act to temper its commitments for trade liberalization (openness) with measures designed to deal with any harms thereby caused.

Trust — International trade would largely cease if trade-restrictive measures that were inconsistent with the rules were as a regular matter put into place and only removed prospectively through lengthy litigation.

Morality — in its absence, it would be hard to fully explain the provision addressing pharmaceutical availability in health emergencies. The 1994 Marrakech Declaration states that the WTO was being created to reflect the widespread desire to operate in a fairer and more open multilateral trading system.

Universality — Membership is open to all who are willing to negotiate entry.”

Many of these “values of the WTO” are not controversial. Two are critical to the direction of the WTO moving forward — the primacy of market forces and convergence. These values are viewed as critical by the United States and as central by the EU, Japan, Brazil and others. China’s economic system is viewed as inconsistent with these values. See, e.g., February 22, 2020, WTO Reform – Addressing The Disconnect Between Market and Non-Market Economies, https://currentthoughtsontrade.com/2020/02/22/wto-reform-addressing-the-disconnect-between-market-and-non-market-economies/; Statement from Brazil, Japan and the United States, Importance of Market-Oriented Conditions to the World Trading System, WT/GC/W/803/Rev. 1 (2 October 2020); CHINA’S TRADE-DISRUPTIVE ECONOMIC MODEL,
COMMUNICATION FROM THE UNITED STATES, 16 July 2018, WT/GC/W/745.

China rejects the claim that its economic system is properly the subject of WTO scrutiny or that it hasn’t engaged in “reform”. Coexistence, not convergence is China’s view of the appropriate value within the WTO. See, e.g., Statement of H.E. Ambassador Zhang Xiangchen of China at the General Council Meeting (Item 7), October 13, 2020, http://wto2.mofcom.gov.cn/article/chinaviewpoins/202010/20201003007644.shtml; CHINA AND THE WORLD TRADE ORGANIZATION, COMMUNICATION FROM CHINA, 19 July 2018, WT/GC/749; General Council, MINUTES OF THE MEETING, 26 July 2018, WT/GC/M/173 (5 October 2018)(pages 29-41). And, of course, while China is the largest economy with an economic system at odds with market-economy conditions, it is not the only one.

Importantly, the candidate found through consultations with the WTO membership to be most likely to attract consensus and hence be recommended by the Chair of the General Council and his facilitators to become the next Director-General of the WTO, Dr. Ngozi Oknojo-Iweala of Nigeria, has taken the view that the WTO’s role is not to exclude any economic system but is rather to determine if different economic systems create distortions in trade that need to be addressed through modifications to the rules. See, e.g., August 19, 2020 [updated August 27], The race to become the next WTO Director-General – where the candidates stand on important issues:  convergence vs. coexistence of different economic systems; possible reform of rules to address distortions from such economic systems – Part 2, comments by the candidates, https://currentthoughtsontrade.com/2020/08/19/the-race-to-become-the-next-wto-director-general-where-the-candidates-stand-on-important-issues-convergence-vs-coexistence-of-different-economic-systems-possible-reform-of-rules-to-addre/; August 17, 2020, The race to become the next WTO Director-General – where the candidates stand on important issues:  convergence vs. coexistence of different economic systems; possible reform of rules to address distortions from such economic systems – Part 1, background on issues, https://currentthoughtsontrade.com/2020/08/17/the-race-to-become-the-next-wto-director-general-where-the-candidates-stand-on-important-issues-convergence-vs-coexistence-of-different-economic-systems-possible-reform-of-rules-to-address-dist/.

Here is what I had written up based on Dr. Okonjo-Iweala’s participation in a WITA webinar on July 21 and her answer to specific questions. The webinar can be found at https://www.wita.org/event-videos/conversation-with-wto-dg-candidate-dr-ngozi-okonjo-iweala/.

“Q: On resetting of tariff commitments (comment from USTR Lighthizer as a problem within the WTO based on changing economic development of many countries), would this be in the best interest of the system? 

“A:  This is a critical question and issue.  Renegotiating any agreement would require consensus building that would be very difficult to achieve.  That would certainly be true on bound tariffs. The balance of rights and obligations raised by the United States flows from the concerns about state-led economies and state-owned enterprises and whether such economies belong in the system.  Dr. Okonjo-Iweala stated that the WTO is not there to comment on the economy of any Member.  In her view, the key question is what disciplines does the WTO have around any issue that arises.  Are the disciplines sufficient to address the imbalances in rights and obligations that may arise?  We need to start there.  What are the fundamental issues —  state-owned enterprises (SOEs), public body.  Can we come to agreement on the meaning of the term public body?  Can we tighten subsidy disciplines that already exist or can we negotiate new subsidy or other disciplines to address the concerns that arise from these types of economies? That is the approach all Members should be pursuing. 

“Q: On industrial subsidies, China has signaled that they will oppose tightening disciplines.  The U.S., EU and Japan have been working on a proposal and discussing with some Members.  How can the Director-General help the membership navigate these issues? 

“A:  If Dr. Okonjo-Iweala becomes the next Director-General, she would encourage that proposals from the U.S., EU and Japan be tabled so all Members can see what they are and how acceptable they are to other Members (including China).  Let’s start to work with an actual proposal.  Sometimes countries are not as far away as one might think.  Members need to work on a specific proposal and see what happens.”

Conclusion

The WTO is a different organization in 2020 than it was when it started in 1995 or when its basic structure and agreements were being negotiated during 1986-1994. Major economies have joined and some have economic systems that are significantly different than the traditional economies who led the GATT. The question of how to deal with different economic systems within the global trading system has not been addressed directly although some would argue that the U.S., EU and others have worked hard during accession negotiations to get commitments from acceding countries to engage in reform if the economy is based on state-control or other deviations from a market economy. For an economy like China’s, there were early reforms, some of which have been reversed over time and others which were never in fact implemented.

While evaluation of distortions caused by different economic systems is certainly an approach that can be pursued, it starts from a premise of coexistence of economic systems within the WTO and assumes rules can be formed that will adequately address all distortions created by non-market factors in a given economy. But the “convergence” value and the “primacy of market forces” value are fundametal to a system where the results of competition will be viewed as acceptable by all Members. In a consensus system, the refusal of a major player like China to agree to these values limits the likely options to other Members but clearly endangers the ability of the WTO to fulfil its core functions in ways that are acceptable to all.

That the likely next Director-General has taken a position that is at odds with the two WTO values identified in Annex 1 of DDG Wolff’s presentation from November 6 is understandable in a consensus system where there is obvious disagreement among WTO Members on the particular values. However, if moving forward with reform, the WTO membership and its Director-General fail to get Members to agree on the core values, such failure will ensure the WTO will not be the sole arbitrator of trade matters going forward.

2. Reform of the Appellate Body

Below are excerpts from my August 10 post looking at the candidates’ views on reform of the Appellate Body. See August 10, 2020 [updated August 27], The race to become the next WTO Director-General – where candidates are on important issues:  reform of the Appellate Body, https://currentthoughtsontrade.com/2020/08/10/the-race-to-become-the-next-wto-director-general-where-candidates-are-on-important-issues-reform-of-the-appellate-body/

Dr. Ngozi Okonjo-Iweala (Nigeria):

From her prepared statement, Dr. Ngozi Okonjo-Iweala had relatively short statements about the Appellate Body: “A refreshed WTO must find solutions to the stalemate over dispute settlement. It is clear that a rules-based system without a forum in which a breach of the rules can be effectively arbitrated loses credibility over time.” “I would also prioritize updating the rulebook, unlocking the dispute settlement system, working on transparency and notification, enhancing the work of regular bodies, and strengthen the Secretariat.”

While Dr. Ngozi Okonjo-Iweala was asked many questions at the press conference, none dealt with the Appellate Body.

WITA had a webinar with Dr. Ngozi Okonjo-Iweala on July 21. https://www.wita.org/event-videos/conversation-with-wto-dg-candidate-dr-ngozi-okonjo-iweala/

Dr. Ngozi Okonjo-Iweala noted that addressing the Appellate Body impasse was a priority for the next Ministerial and repeated her view that a WTO without effective dispute settlement would lose its legitimacy over time.

In response to a question on how she would restore dispute settlement, Dr. Ngozi Okonjo-Iweala noted that there is a common desire among WTO Members to have the dispute settlement system work and function. The question is how. There is a common belief that the panel process has been working well, so that places the focus on the Appellate Body. To address the various issues that have been raised by the United States, the WTO has the work product of the Walker process (note: Amb. Walker (NZ) was a facilitator to the General Council in 2019 to see if he could work with Members to find a solution to issues raised by the U.S.). Some of the proposals made by Amb. Walker can be used to move the process forward. The U.S. is seeking to go back to what the existing Dispute Settlement Understanding requires — 90 days for decisions, not creating rights or obligations (“overreach”), Appellate Body members working on appeals after their terms have expired, etc. We should take them up one at a time and find solutions that work. Can Members agree that appeals should be resolved in 90 days? Very likely. Can Members agree that the Appellate Body is limited to reviewing issues of law and not reviewing fact finding by panels? Very likely.

3. Eligibility for special and differential treatment (self selection as developing country)

In my August 13, 2020 post, I looked at the candidates’ views on the issue of whether change was needed for who qualified for special and differential treatment. See August 13, 2020 [updated August 27], The race to become the next WTO Director-General – where candidates are on important issues:  eligibility for special and differential treatment/self selection as a developing country, https://currentthoughtsontrade.com/2020/08/13/the-race-to-become-the-next-wto-director-general-where-candidates-are-on-important-issues-eligibility-for-special-and-differential-treatment-self-selection-as-a-developing-country/. Excerpts of what was written on Dr. Okonjo-Iweala are copied below.

Dr. Ngozi Okonjo-Iweala (Nigeria)

Dr. Ngozi Okonjo-Iweala’s prepared statement directly notes the differing positions on the issue of special and differential treatment and also mentions concerns of Members in terms of imbalances in rights and obligations and distribution of gains (which presumably includes the U.S. concern about high bound tariff rates of many countries who have gone through significant ecoonomic growth in the last 25 years).

“Members’ views differ on a number of fundamental issues, such as special and differential treatment or the need for the WTO to tackle new issues and develop new or enhanced rules to deal with SOEs and agricultural subsidies, for example.”

“While a key objective of the WTO is the liberalization of trade for the mutual benefit of its Members, it appears that this very concept is now a divisive issue as a result of the perceived imbalances in the rights and obligations of Members and the perceived uneven distribution of the gains from trade. I would constantly remind Members about the value of the MTS and help energize them to work harder to overcome the challenges that have paralyzed the WTO over the years.”

During the press conference on July 15th, Dr. Ngozi Okonjo-Iweala was not a question on S&D treatment, classification of developing countries or on tariff bindings.

WITA had a webinar with Dr. Ngozi Okonjo-Iweala on July 21. https://www.wita.org/event-videos/conversation-with-wto-dg-candidate-dr-ngozi-okonjo-iweala/. Dr. Ngozi Okonjo-Iweala in her opening comments identified the issue of special and differential treatment as an issue that could be considered as part of WTO reform, although it wasn’t in her list of topics for tackling by the next WTO Ministerial Conference. She was asked a question about how to restore trust among Members and used that question to review her thoughts on special and differential treatment and the question of self-selection by Members as developing countries. Below is my summary of Dr. Ngozi Okonjo-Iweala’s discussion of the issue.

One issue being pushed by the United States and others that is very divisive is the issue of special and differential treatment and self-selection of developing country status.  The concern of those wanting a change is that self-selection and the automatic entitlement to S&D treatment shifts the balance of rights and obligations to advanced developing countries.  There is no disagreement that least-developed countries need special and differential treatment. In her view, the real question is whether other countries that view themselves as developing should get special and differential treatment automatically.  Dr. Ngozi Okonjo-Iweala believes the WTO needs a creative approach to resolve the issue.  For example, Members should address the need of individual Members for special and differential treatment on a negotiation by negotiation basis.  Members should, as part of each negotiation, consider what other Members believe their needs are based on level of development.  She references the Trade Facilitation Agreement as an example where Members took on obligations based on their level of development vs. a one size fits all approach.  Dr. Ngozi Okonjo-Iweala believes that if the Members can reach a resolution on this issue, the resolution would help build trust among Members and hence help the WTO move forward.

4. Multilateral fisheries subsidies negotiations and Joint Statement Initiative on e-commerce/digital trade

In my post of August 23, I reviewed two important negotiations that were ongoing then and are still ongoing at the present time — the multilateral talks on fisheries subsidies and the Joint Statement Initiative of e-commerce/digital trade. See August 23, 2020 [updated August 27], The race to become the next WTO Director-General – where the candidates stand on important issues:  fisheries subsidies and e-commerce/digital trade, https://currentthoughtsontrade.com/2020/08/23/the-race-to-become-the-next-wto-director-general-where-the-candidates-stand-on-important-issues-fisheries-subsidies-and-e-commerce-digital-trade/. Excerpts of what was written on Dr. Okonjo-Iweala are copied below.

Dr. Ngozi Okonjo-Iweala (Nigeria)

Dr. Okonjo-Iweala mentions both concluding the fisheries subsidies negotiations and updating the WTO rules to include rules on e-commerce. She adds the need to bridge the digital divide so that any such rules will have broader application and broader input.

“The WTO appears paralysed at a time when its rule book would greatly benefit from an update to 21st century issues such as e-commerce and the digital economy, the green and circular economies. Issues of women and trade and Micro Small and Medium Enterprises (MSMEs) are important to ensure greater inclusion. Bridging the digital divide to enable Least Developed Countries and other developing countries to participate will be key.”

“My vision is also of a rejuvenated and strengthened WTO that will be confident to tackle effectively ongoing issues such as the fisheries negotiations. With political will, outstanding issues of subsidies that lead to overfishing and unsustainable fishing can be concluded.”

“A rejuvenated WTO must also take on fresh challenges, such as ensuring optimal complementarity between trade and the environment and ensuring that WTO rules best respond to the realities of e-commerce and the opportunities and challenges of the digital economy.”

“Should I be elected, I would work with Members to prioritize delivering a successful MC12 with good outcomes on fisheries, agriculture and other areas. I would also prioritize updating the rulebook * * *.”

During the press conference on July 15 after her meeting with the General Council, Dr. Okonjo-Iweala was asked a question on what progress in negotiations was achievable by the next Ministerial Conference and was also asked a question on how she would work towards ensuring a successful outcome on e-commerce negotiations. My notes on her responses to those questions follow.

On the question of what is achievable by the next Ministerial in 2021 and whether it is best to go after issues one at a time or in a larger grouping, Dr. Okonjo-Iweala indicated that she hoped the WTO Membership would make a decision soon on who should be Director-General so whoever is selected has more time before the next Ministerial. But even if a decision is not made until November 2020, there are some areas that could be ready by the next Ministerial. For example, a fisheries subsidies agreement should be achievable. There was a lot of discussion in the General Council on trust and building trust to move negotiations along. Trust is obviously an important issue. So the WTO may need to sequence issues to build trust by achieving a win or two. Once there are some successes, it should be possible to handle more issues in parallel.

The question on what Dr. Okonjo-Iweala would do as Director-General to see that an agreement on e-commerce was pursued was answered by noting that there was extensive work being done plurilaterally by many Members as one of a number of joint statement initiatives. Dr. Okonjo-Iweala agrees that an agreement on e-commerce is very important, but she notes that there is a digital divide where many poorer countries don’t have the infrastructure to take advantage of e-commerce. The WTO, working with other multilateral organizations, needs to see that resources are put together to help countries address the digital divide. Once the digital divide is addressed, all Members should want to and be able to participate in the e-commerce negotiations, so that the agreement becomes a multilateral one.

WITA had a webinar with Dr. Ngozi Okonjo-Iweala on July 21. https://www.wita.org/event-videos/conversation-with-wto-dg-candidate-dr-ngozi-okonjo-iweala/. During the webinar, Dr. Okonjo-Iweala made an opening statement in which she reviewed the need to generate some early wins for the WTO at the 12th Ministerial Conference including both fisheries subsidies and e-commerce. Dr. Okonjo-Iweala was also asked speciically about e-commerce and digital trade and how to move those talks forward. Below are my notes on those portions of the webinar.

Dr. Okonjo-Iweala stated that the WTO is really at a critical moment, an existential crisis.  She believes that something needs to be done to give a lift to the organization.  Dr. Okonjo-Iweala would focus as Director-General on the next Ministerial Conference and what wins could be obtained at the Conference.  She believes that concluding the fisheries subsidies negotiations with its issues of overcapacity and overfishing should be pursued and could be concluded even before the Ministerial Conference.

Dr. Okonjo-Iweala also believes that the WTO must update the rule book to cover 21st century issues.  As she has noted, the digital economy is driving the world during the COVID-19 pandemic and is of great importance to many Members.  Dr. Okonjo-Iweala believes that the WTO needs to develop rules for e-commerce as e-commerce is the future of much of trade. At the same time, the WTO must address the digital divide so participation and benefits are available to all.

Q: On e-commerce and digital trade, how do you see rules being developed? Should the rules be based on the historic principles of the WTO?

A:  Dr. Okonjo-Iweala believes that ecommerce and digital trade are very important topics. The WTO must ensure two things. First, traditional WTO principles should apply (non-discrimination, etc.).  She believes that it would be important to get many more countries to join the talks. Stated differently, Dr. Okonjo-Iweala believes the WTO should always prefer a multilateral negotiation and agreement. However, sometimes plurilaterals are needed to make progress.  Second, the WTO working with other organizations needs to address the digital divide. In Dr. Okonjo-Iweala’s view, the fact that many developing countries are not participating flows from the fact that they don’t have the infrastructure to engage in e-commerce to a significant extent and hence neither participate in the talks nor gain benefits.  This is the digital divide.  WTO is not a financial institution, so the WTO needs to team with other organizations to help developing countries overcome the digital divide which will permit these Members to then participate in the negotiations.  Dr. Okonjo-Iweala also believes that the level of commitments under an e-commerce agreement will need to vary based on the ability of Members to accept obligations and to contribute.

5. Summary of Prepared Statement to the General Council in July and the press conference immediately thereafter

On July 19, 2020, I posted my summary of the prepared statement of each candidate and the answers to questions posed at the press conference immediately thereafter. The summary provides a fuller picture of Dr. Okonjo-Iweala’s views on a range of issues important to the functioning of the WTO moving forward. See July 19, 2020, The eight candidates for WTO Director-General meet the General Council – recap of prepared statements and press conferences, https://currentthoughtsontrade.com/2020/07/19/the-eight-candidates-for-wto-director-general-meet-the-general-council-recap-of-prepared-statements-and-press-conferences/. I copy below what I had included on Dr. Okonjo-Iweala.

Dr. Ngozi Okonjo Iweala (Nigeria)

Dr. Ngozi Okonjo-Iweala in her prepared statement includes sincere condolences for all who have lost a family member from COVID-19 in French. Later in her statement, Dr. Okonjo-Iweala includes a phrase from her native igbo language, and she gives thank yous in six languages. The main part of her statement is in English. Her statement reviews her record at the World Bank, her time as Finance Minister in Nigeria and her role as Chair of Gavi to stress her ability to achieve reform and to work with other multilateral organizations and her focus on the needs of development and the role trade plays in development.

Looking at the challenges confronting the WTO, Dr. Okonjo-Iweala flags a negotiating function that is underperforming “at a time when its rule book would greatly benefit from an update to 21st century issues such as e-commerce and the digital economy, the green and circular economies. Issues of women and trade and Micro Small and Medium Enterprises (MSMEs) are import to ensure greater inclusion.” (pages 2-3). Other challenges include improving transparency and notifications, improving the functioning of the regular WTO bodies and strengthening the Secretariat. There are important differences on issues such as SOEs and agricultural subsidies amongst Members and increased trade tensions.

These problems are exacerbated by the COVID-19 crisis which have resulted in export restraints by some and stimulus packages which may “undermine WTO commitments by distorting production and trade.” (page 4).

Dr. Okonjo-Iweala reviewed why she believes she is the person to be the next Director-General:

  1. She is a strong believer in the role of trade and of the multilateral trading system to bring shared prosperity. She brings a “fresh pair of eyes to the WTO’s challenges.”
  2. Need to build trust. Not a question of technical expertise but rather political will/solutions.
  3. She has a proven track record in carrying out successful reforms which is what will be needed at the WTO going forward.

After reviewing the range of pending issues before the WTO that need to be completed or addressed, Dr. Okonjo-Iweala reviews the need to work closely with other multilateral organizations and the UN and her ability to improve cooperation with these other entities.

“The rules-based MTS is a public good that underpins peace, security, stability and a chance for prosperity in the world. Every effort should therefore be made to safeguard, improve and renew it to enable it effectively address the challenges of the 21st century.” (Page 11)

During the press conference, Dr. Okonjo-Iweala provided her short statement and then received a large number of questions. Her short statement was that trade is important for the 21st century, for prosperity, resilience and growth. The WTO is at the center of global trade.

She was asked about whether three candidates from Africa hurt her chances to be selected, what she views as the role of the Director-General, how she views the question of fair trade particularly between north and south, what she believes is achievable in terms of deliverables by the next WTO Ministerial Conference in 2021, what she would say to the U.S. President on why the U.S. should stay in the WTO, what the WTO can do to ensure that small and micro-businesses survive the economic fallout from the COVID-19 pandemic, what her selection as the next Director-General would mean for women in Nigeria, if selected the next Director-General what would she do to ensure availability of medical supplies to all countries, and whether her perceived lack of a trade background was a handicap in the competition to become the next Director-General.

Her response on the question about multiple candidates from Africa was that Dr. Okonjo-Iweala viewed that it was a positive that there were three qualified candidates from Africa and not a problem. It is up to the Members to select from all of the candidates, a process which should focus on who is the best candidate. If from Africa, great.

On the question of the role of the Director-General, Dr. Okonjo-Iweala views the role to be working with Members to help them reach consensus. It is important that starting with the next Ministerial, the WTO show movement to achieve results.

On the question of fair trade, particularly between north and south, Dr. Okonjo-Iweala noted that the WTO’s role is to support all members to take advantage of fair and open trade. Where the South is getting fewer benefits from global trade, Dr. Okonjo-Iweala would use the instruments available to the WTO Director-General (e.g., Aid for Trade, working with other multilateral organizations) to get resources to South Members to improve their position in international trade.

On the question of what is achievable by the next Ministerial in 2021 and whether it is best to go after issues one at a time or in a larger grouping, Dr. Okonjo-Iweala indicated that she hoped the WTO Membership would make a decision soon on who should be Director-General so whoever is selected has more time before the next Ministerial. But even if a decision is not made until November 2020, there are some areas that could be ready by the next Ministerial. For example, a fisheries subsidies agreement should be achievable. There was a lot of discussion in the General Council on trust and building trust to move negotiations along. Trust is obviously an important issue. So the WTO may need to sequence issues to build trust by achieving a win or two. Once there are some successes, it should be possible to handle more issues in parallel.

On the question of why the U.S. should stay in the WTO, Dr. Okonjo-Iweala would communicate that the WTO delivers for all Members. The GATT and WTO have provided shared prosperity which has lifted millions out of poverty. Where the trading system is not working, Members need to fix the problems. Peace, security and stability are needed now just as they have been over the last decades. These are what the WTO rules-based system provides. If we didn’t have the WTO, we would need to invent it.

On the question of MSMEs, Dr. Okonjo-Iweala noted that they are very important globally but are being harmed by COVID-19 fallout. How to ensure MSMEs survive and get such entities better included in the global trading system is a matter of great interest to Dr. Okonjo-Iweala. There is a great need to facilitate provision of additional resources to help these entities. Dr. Okonjo-Iweala would work with other multilateral organizations to help facilitate assistance.

On the question of what will her getting selected Director-General of the WTO would mean for women in Nigeria, Dr. Okonjo-Iweala noted that women not just in Nigeria but around the world are ready for greater roles. But Dr. Okonjo-Iweala reiterated that selection of the WTO Director-General should be based on merit–if a woman, great; if from Africa, great.

On the question of what she would do as Director-General to ensure smooth trade of medical goods including therapeutics and vaccines, Dr. Okonjo-Iweala indicated that she would use the knowledge she has from the chair of GAVI and working with other groups and organizations to ensure that the WTO did its part to ensure equitable and afforadable access to any vaccines developed to address COVID-19. There should be no barriers to access to the medicines/vaccines while honoring intellectual property rights. It is critical that everyone have access to lifesaving medicines at the same time and at affordable prices.

On the question of whether the consensus rule at the WTO should be gotten rid of to overcome gridlock, Dr. Okonjo-Iweala responded that part of the strength of WTO is that agreements are reached by consensus. Where all sovereign states agree to a text, they are more likely to implement the provisions. The real question is how to make consensus better. In Dr. Okonjo-Iweala’s view, the underlying problem with the current consensus system is the lack of trust among the Members. Thus, there is an urgent need to rebuild trust. To rebuild trust, the WTO needs confidence building measures, i.e., obtaining wins in achieving new agreements. That will show that consensus can and does work.

The question on what Dr. Okonjo-Iweala would do as Director-General to see that an agreement on e-commerce was pursued was answered by noting that there was extensive work being done plurilaterally by many Members as one of a number of joint statement initiatives. Dr. Okonjo-Iweala agrees that an agreement on e-commerce is very important, but she notes that there is a digital divide where many poorer countries don’t have the infrastructure to take advantage of e-commerce. The WTO, working with other multilateral organizations, needs to see that resources are put together to help countries address the digital divide. Once the digital divide is addressed, all Members should want to and be able to participate in the e-commerce negotiations, so that the agreement becomes a multilateral one.

On the question of whether her career in finance is a handicap for a trade position, Dr. Okonjo-Iweala disagrees with the premise as her career has always involved trade as a development economist and also as finance minister where Customs was part of her responsibilities.

6. Minutes of meeting with the General Council

The WTO minutes from the meeting each candidate had with the General Council during July was published in October. My post of October 15, 2020 provides a summary of questions posed to each candidate and embedded the full General Council minutes of the meeting. See October 15, 2020, WTO remaining candidates for the Director-General position – questions and answers from the July 15 and 16 meetings with the General Council, https://currentthoughtsontrade.com/2020/10/15/wto-remaining-candidates-for-the-director-general-questions-and-answers-from-the-july-15-and-16-meetings-with-the-general-council/. The portion of my summary on Dr. Okonjo-Iweala is copied below.

Dr. Okonjo-Iweala’s questions came from Afghanistan, Ireland, Kazakhstan, Ukraine, Norway, New Zealand, South Africa, European Union, Paraguay, Estonia, Australia, Latvia, Guatemala, Japan, Mongolia, Brazil, and Malaysia. The questions dealt with a range of issues including the following sample:

  • The negative impact of the COVID-19 pandemic on developing countries, LDCs and small vulnerable economies (SVEs).
  • How to ensure the benefits of open trade are distributed equitably?
  • What steps will you undertake to ensure a multilateral outcome at the next Ministerial?
  • Role of the Director-General (DG) in addressing lack of trust among Members.
  • Role of the DG in facilitating economic recovery and resilience.
  • What is necessary to restore functioning of a binding, two-step dispute settlement system in the WTO?
  • Do transparency and notification obligations need to be strengthened?
  • Focus in the first 100 days.
  • Your initial approach to the reform of the WTO.
  • What kind of approach and efforts would you like to make to advance the subject of e-commerce?
  • Role of plurilaterals in the WTO.
  • How to deal with the different views on special and differential treatment?
  • What are your plans relating to empowering women in the future WTO agenda?

Each candidate in their summing up at the end of her meeting with the General Council circled back to their prepared statement. Their short summing up statements are copied below.

Dr. Ngozi Okonjo-Iweala (page 26):

“The nature of the questions that I have heard and the nature of the discussions give me hope. Members are clearly interested in a WTO that works, in a WTO that is different from what we have now, in a WTO that shows a different face to the world. I can see it and I can feel it. And if ever I am selected as Director-General, that gives me hope that there is a foundation to work on. Before coming in here, I have spoken to several Members, but I did not really know that. From listening to all of you and fielding your questions, I now know that there is a basis to work on. And I want to thank you for it.

“And I really want to end where I began. Trade is very important for a prosperous and a recovered world in the 21st century. The WTO is at the centre of this. A renewed WTO is a mission that we must all undertake, and we need every Member, regardless of economic size, to participate in this. If we want the world to know who we are as the WTO, we have to commit. Having listened to you, I hear the commitment and I want to thank you sincerely for that.”

The questions and answers are contained on pages 19-26 of WT/GC/M/185 and are copied below.

  • Questions and Answers2
    Q: You mentioned that you have been a Board Chair of GAVI. The COVID-19 pandemic has had a very significant negative impact on trade and economies of all countries especially in the case of developing countries, LDCs and SVEs. What do you think should be done to ensure that these countries can rely on the multilateral trading system to help them move out of this crisis? (Afghanistan)
    A: Probably the COVID-19 pandemic is one the most serious issues of our time. To answer your question, I think we have to look at it both from the short-term and the longer-term perspective. To aid the developing countries, the vulnerable economies and the world, we need to look at the short term responses that have happened with COVID-19. Some export restrictions have been put by some on the export of medical supplies and even of food. So, first, it would be good to look at those in the short term if they are temporary, proportionate and transparent and if Members are fading them out as promised. Otherwise, we have to work to unlock such measures in order to make sure that medical supplies and food are available, especially to the food import dependent countries that will need access to them. This is also an issue in the longer term to ensure that while we make efforts to keep trade open for those countries that cannot manufacture their own medical supplies or equipment or their own food for them to be able to import essential items, we should balance it with the consideration of enabling those countries who want the ability to manufacture some of these things to do so. That is something we need to watch. But from where I sit, the issue of vaccines and making sure that that is available when a vaccine is proven and of quality, is critically important, especially for developing countries and vulnerable economies. So, in the longer term, we have to ensure that we have an open, flexible trading system that allows imports or exports of these
    medicines and medical supplies and vaccines to countries that cannot manufacture them. A second aspect of the impact of COVID-19 has to do with the world economy recovering from the deep recession that the world is going into. The IMF has forecasted that the world economy is going to contract by about 5%-6% and some of the vulnerable and small economies may contract even more. So, finding a means for trade to play the role it should to continue with its recovery efforts in these economies and the world will be vital. Making trade an instrument of economic recovery will be of great assistance, not only to developing countries and small and vulnerable economies, but to the world as a whole. It should be an instrument to help the world recover.
    Q: The world economy has changed quite significantly in recent decades. The question is the challenge to the WTO in responding to the changed nature of the world economy. How do we ensure that the benefits of open trade are distributed equitably, particularly to meet the needs of developing countries, and how can we guarantee that that happens through negotiations in the period ahead? (Ireland)
    A: The world economy has indeed changed and continues to change. If you look at the data, you will find that trade in goods have been declining in terms of its rate of growth, while that of services and data flow across borders have been growing exponentially. Digital trade and e-commerce have also become important. So, to respond to these challenges, I talked about the need to update the rulebook of the WTO to take account of these challenges of the world, be it for e-commerce and the digital economy, environment and climate change, women and MSMEs. We need to update the rulebook and facilitate the discussions to meet these challenges. In terms of LDCs, we need to make sure that the changing trading environment benefits them. Some of the provisions for LDCs in terms of Aid for Trade and EIF would, for example, be a means of supporting them to be able to strengthen their participation in the multilateral trading system, so that they could benefit from it. We need to pay particular attention to the needs of the LDCs – the most closely identified group of the WTO, in which there are 47 Members. The policy space for them to develop is particularly important, and strengthening them through Aid for Trade and technical assistance to be able to benefit from world trade is also very important and should enable them to increase their gains from trade. In addition to that, we should also look at issues of MSMEs that are quite common in these countries and try to see how we can support these and strengthen them both with policies behind the border, as well as outside to enable them to participate and benefit more from the world trade system. This would also
    help the LDCs.
  • [2 The following delegations also[ submitted their names to ask a question to the candidate: Barbados,
    Bulgaria, Canada, China, Colombia, Costa Rica, Czech Republic, Denmark, El Salvador, Finland, France, Gabon, The Gambia, Germany, Ghana, India, Indonesia, Italy, Jamaica, Lithuania, Luxembourg, Mali, Nepal, The Netherlands, Panama, Philippines, Romania, Russian Federation, Singapore, Spain, Sweden, Sri Lanka,
    Switzerland, Chinese Taipei, Thailand, Turkey, United States, Uruguay and Zimbabwe.]
    Q: In your presentation, you touched upon your priority issues for MC12. If elected, what concrete steps will you undertake to ensure a multilateral outcome at MC12? (Kazakhstan)
    A: MC12 is probably one of the most important things facing the WTO. From that perspective, it would be very important to have good outcomes from MC12 in order to show the world that the WTO is back, the WTO is rejuvenated, the WTO is relevant. I am afraid that if we do not have those kinds of outcomes from MC12, we will continue to have a view of the WTO, of an organization that is fleeting in relevance. I do not think that that is right because I strongly believe that the WTO is needed. So, I will be looking for issues where we could have successful outcomes where Members working together could agree. For instance, the fisheries negotiations have been ongoing and I hope that they will be concluded perhaps even before the end of the year or before MC12. It would be my hope and expectation that the remaining issues about subsidies, if you want to call them bad subsidies, that lead to overcapacity and overfishing would be agreed especially on how to deal with them, including what disciplines to put around them – and the issue of supporting small scale fisheries would also be agreed. With political will, I know we can do it. So, this will be a top priority. With respect to agriculture, if there cannot be agreement reached, I would hope that the discussions and conversations will at least move along. I know the issues of domestic support, PSH, SSM and other issues are topical, and I would hope that we will be able to move along on those and other
    areas, including market access. As I said, if not for an outcome, we must at least advance those discussions. I would also hope that we would be able to advance discussions on issues like MSMEs and women and trade. There are also some plurilateral negotiations that more than a hundred Members are participating in, like investment facilitation. I would hope that we could also advance on those negotiations. These are my priorities for MC12. If we could get those kinds of outcomes on fisheries, movement on agriculture, movement on women and trade, movement on MSMEs, that would be something that would show the world something new and something successful for the WTO.
    Q: Could you briefly describe the WTO within four words during the four years of your leadership? (Ukraine)
    A: I can only think of one word that reflects what I would want the WTO to be and look like within four years of my leadership – and that is “great”.
    Q: Many point to the lack of trust between, in particular, major players as one of the main reasons why it is difficult to create progress, in particular in the negotiating pillar, but also in the reform agenda in general. Do you see a role for the Director-General in addressing the trust issue between the major players? And if you see a role, how would you then approach that issue? What would be your contribution, and do you have experience in your long career that can be relevant to that task? (Norway)
    A: I mentioned in my speech that the issues and challenges confronting the WTO are not purely of a technical nature because they would have already been solved if such was the case. So, the question about the political context is absolutely right. There has been a background from what I understand or can see of, maybe, lack of trust between major Members, but also, maybe sometimes, between developing and developed Members. I think the only way that I know to build trust is to find areas of common interest where there is interconnection that you can begin to build and bring the parties together. This is where the Director-General of the WTO, who has no direct power and can only work through influence with Members, can contribute. Influence can be proactive. You need an energetic, committed and proactive DG who can help do this and find those interconnections. Sometimes, when people seem to have disagreements, if you listen carefully, there are areas where they actually agree. And if you can begin to build on those areas and have some win-win results, that would begin to build trust. Talking about building trust, talking alone does not bring it. It helps but it does not bring it. You build trust only with action. So, we must find those actions that will help build trust. And it will take time, but we can do it. So, that is what I will do. With respect to the major powers, this is a very challenging issue because it is very political. But as DG, I would do my best. One of the things that I would try to convey to the major powers is that I think both are interested in a multilateral trading system that also helps developing countries and vulnerable economies that function for the whole world. I would seek to remind them that they had benefited from this in developing their economies and can still benefit again. I would look for those intersections where again one can begin to bring them together around common or shared interests because I think there are some. Every Member is interested in a dispute settlement system that works, for instance. We must think of ways on how we can begin to build confidence and trust in some small actions leading to big ones between Members that can lead them again to begin to work together for the WTO. As I said, I had a long career at the World Bank as Minister of Finance. Using that, I have been able to establish bridges and contacts where I can reach levels where policy decisions are being made. If you need to solve this, you have to first work with the Ambassadors but you also have to reach those people who are making the decisions and be able to talk and to listen to them to understand what their issues are. That is the way you can see the interconnections that you can use to build bridges and then actually begin to build them. I believe I have the contacts in both powers to be able to do this. And this is what I would bring if I am elected to be the next WTO Director-General. There is no easy way in building trust, but I think it can be done. And the DG
    should actively and proactively work with Members to do this.
    Q: Why do you think the WTO has struggled so much over the past decade to conclude substantive multilateral outcomes and what will you do as DG to change that? (New Zealand)
    A: Some of what I said before lies at the crux of the struggle with negotiations. The issue of lack of trust among Members that has diminished over time has made it more difficult. When one side brings an issue, sometimes the other side thinks there is nothing in it for them. When that side brings an issue, the other side thinks they are doing this to stop my interests from being realised. It is a fundamental lack of trust that has led to struggles to complete or conclude negotiations. This is where one has to work really hard. As I said before, the only way to build trust is to find some common areas where Members agree. In the multilateral negotiations that is ongoing for fisheries, this has been progressing relatively well and I believe that it is possible to come to an outcome. I am hopeful that a successful outcome to this would then lead Members again to believe they can work together, that they can tackle some of the difficult issues, and that they can again reinstate their ability to negotiate. I think this is part of the issue. Perhaps in the past, there were some negotiations that did not go so well and trust was broken. That has fundamentally been the problem. There are issues under the Doha Development Agenda where Members did not agree and since then it has been quite difficult. Much as we talk of difficulty, I see light at the end of the tunnel. I am
    really hopeful that we are going to have those outcomes. With that, trust will begin to come back. As DG, I would actively, off the bat, start working hard with Members to make sure that we have such an outcome because it will be a bridge to better work together for negotiations.
    Q: The world is facing the depressed recession likely to dwarf the 2008 and 2009 financial crisis. How do you see your role in facilitating a multilateral trading system that contributes to economic recovery and resilience? (South Africa)
    A: This is the critical question of our time. How do we get the multilateral trading system to play the role it should play to aid economic recovery in the world? As I have said, there are short-term aspects of it and longer-time ones. In the short term, we must remove those restrictions that impede trade, so that countries will be able to have access to the supplies and goods they need to be able to recover. In the longer term, I believe that liberalization of trade is also important if trade is to contribute to lifting the world out of recession. As we see it, the world economy focused to contract by 5%, while trade, according to the statistics, I saw would contract probably by 18%. And this is deep, so we have to work hard to find those levels that will enable trade to contribute. Removing the restrictions and making sure they do not reappear in the longer term, liberalizing trade, working on new issues, energizing new issues that could lead to more trade in the world, being inclusive and working on MSMEs and ensuring that there are no unduly high tariffs against goods and services that will allow us to trade more in those items, would be positive contributions of the multilateral trading system. In addition, for LDCs and SVEs, we must also see how to support them with behind the-border issues like investment in their economies, for them to be able to participate more and better to the multilateral trading system, because that is how they will come out of their current challenges. We must also look at the massive amount of stimulus liquidity that have been put in the economies for recovery. The stimulus packages are quite rightly done because we need that for the
    world economy to recover. But we have to make sure that they do not result in trade-distorting measures that can inhibit trade, that should help the world recover and that we phase out this liquidity and the stimulus in a good way that promotes trade and does not inhibit it. So, it is a basket of measures. Some of them are trade related while others are behind the borders to help countries because they need additional help and assistance for them to participate. If I were DG, I would do this by working very closely with some other multilateral organizations. I will work closely with the World Bank and IMF to look for resources, including the regional development banks, so that if we want to increase and if we want trade to assist, we need to also look at what countries need for investment and for strengthening their ability to trade behind the borders. So, getting resources and working in a policy-coherent fashion with these organizations to help Members to better trade would be the kinds of issues that I would look at as the Director-General.
    Q: In your view, what would be necessary to restore the functioning of a binding, twostep dispute settlement system in the WTO? (European Union)
    A: The restoration of a binding, two-step dispute settlement system is one of the most fundamental issues that have to be tackled if the WTO is to be seen as continuing to function. You cannot have a rules-based organization without a forum in which disputes can be brought and settled. Otherwise, as I said in my speech, it loses credibility over time. So, it is absolutely essential that we work to restore this two-step system. I would look at some of the issues that different Members have with the dispute settlement system – be it the issue of the length of time it takes for the Appellate Body to come to some answer to, or resolution of, the cases before it, or the 90-day limitation, be it looking at mandates whether it is making judgments or reaching conclusions beyond the covered agreements that Members have reached. These are some of the issues that are being questioned. There are also some Members that feel that there are structural issues that inhibit them from participating in the two-step system. These are all the thing that I will look at. There have been some arrangements like the MPIA that about 19 countries, including the EU, have come together to propose as an interim measure. There was also the Walker Process that has been undertaken and there are some elements and suggestions in there that we could build on to restore the two-tier dispute settlement system. Whatever we do about it, it has to come out as a system that is
    independent, impartial and that works within a specified mandate. It has to be a system that all Members can have confidence and trust in.
    Q: In the context of the pandemic and the tensions between Members, what additional role do you think that the organization could play in the growing uncertainty in trade to show the added value of keeping a multilateral trading system? (Paraguay)
    A: In the context of this pandemic, with all the uncertainty that it brings to the global economy and to the world, and in the context of the tensions between Members, I really do think that the organization, in order to show that it is relevant and that it can add value, has to have some wins that can demonstrate that the multilateral trading system is functioning, alive and well. There are two parts in this regard. If in the first part it would be necessary to have a good outcome on an area of negotiations that would materially improve trade for Members, such as in fisheries, and we can see that spur in trade. If we can support small scale fisheries within that which is important to many countries, Members and people around the world, including the common woman and man, will begin to see that the WTO is about people and it is for people. Therefore, they will begin to know the value that the multilateral trading system will have if we can have agreements that can lead us to increase trade in the world and use the multilateral trading system as an instrument to recover from this recession and this crisis. The WTO can be a part of that in spurring this and making sure that we come to either new agreements that can spur or liberalize trade or existing agreements that we can move in order for Members to be able to trade more. I think that will bring confidence. We need to take actions that will make the world and Members see that the WTO is alive, well and functioning – a rejuvenated WTO that is adding value to the multilateral trading system.
    Q: Do you think that transparency and notification obligations concerning trade measures need to be strengthened? How can this be done? (Estonia)
    A: This is an important question. Transparency and notification need to be strengthened. Transparency is one key factor that is essential in the multilateral trading system. If there is no transparency and Members are not notified ahead of time of actions in the trading system of Members, then this brings uncertainty. And uncertainty for business is not a good thing. As I mentioned, it makes transactions cost higher not only for Members but also for their businesses. I believe that this is a very important thing. But sometimes, Members do not notify, not because of lack of political will, but because they do not have the resources and the capacity to deal with notifications. So, we really have to look at it and understand why this is not happening in a Member’s context. And if it is a question of that capacity, we build it. This will contribute to them being able to notify and will in turn strengthen the multilateral trading system and be encouraging to
    businesses. Currently, we are all looking at how to come out of this recession. So, WTO Members need to do all those things that are helpful for this. For instance, when it came to the issue of export restrictions on food and medical supplies, notifications of a certain number of days to Members would have helped because one way that the WTO can contribute to economic recovery and to the multilateral trading system is to make sure that any restrictions on the supplies of medical equipment, vaccines included, and of food are removed. If there are going to be restrictions, those should be notified ahead of time and done in a transparent, proportionate and temporary manner, so that Members who need to get access to these can do so. They are all linked together: transparency, notifications, ability to generate trust that Members are acting according to the WTO Agreements and ability to increase world trade by doing all of these.
    Q: What would you focus upon in your first 100 days as WTO Director-General? (Australia)
    A: In my first 100 days, should I be selected as Director-General, I would be very keen to get off the mark very quickly because there are a lot of things to focus on. Firstly, I would focus on how to deliver a successful MC12. That would be my topmost priority because it is linked to changing the image of the WTO and letting the world know that things can be accomplished. And then I would focus on those areas that are likely to be a win at the negotiations, like the fisheries coming to some conclusion on that. Other areas where we can move along such as agriculture, given its complexity might not lead us to an outcome, but we can advance on those issues. Another issue that I would also be keen to discuss at MC12 would be those linked to COVID-19. We have had a lot of questions on that. What does this mean for world trade? What does this mean for rules? How should we look at this for the future? This is not only going to be the first pandemic. There will be others. MC12 should focus squarely on how we do that and prepare the world the next time to tackle such an issue. I would listen carefully to Members. That is a priority for me. In order to understand what you need to do, you have to listen. What do Members want? And then, based on that, after MC12, I would prioritize renewing the negotiations and updating the rulebook along the lines that I mentioned in my speech, which include those issues for the 21st century that matter so much. I am also
    passionate about issues related to women and trade. I would like to see some movement on that, even if it is just discussions. We should also look at issues on MSMEs because they are the enterprises that create most jobs. I would also be very keen to work on the dispute settlement system. I would work with Members to see what we can do. We had a question from the EU about the two-tier system and how we would restore that. So, that would be a priority. What can we build on? What can get Members to work on this? If we are able to restore the two-tier dispute settlement system, it will send such a sharp signal to the world that the WTO is back and that is what I would like to see. On transparency and notifications, I really think it is important because it is what underlies the multilateral trading system. So, I would like to work on that. I have named three. I can round it up by saying that I would like to see how to strengthen the Secretariat to support the new rules and the way that the world is going to see if it is fit for purpose. That would be very important to me to see also if the Secretariat looks like all its Members, and if not, how do we make it so.
    Q: How do you intend to balance the Director-General’s different roles: the managerial role, the role of negotiation facilitator and the advocacy role? (Latvia)
    A: This is what makes the job of the Director-General of the WTO very interesting because you have to learn how to balance those roles, but you have to play all of them. We have a very good Secretariat with very experienced staff. So, I would hope to be able to lean on them as well to help us see how we can facilitate and move along negotiations looking at areas where Members need more support, including analysis. So, I would depend on some of the resources that I have to some extent, because it is teamwork. I would do that in facilitating negotiations. On the managerial role, I would draw my experience as a Number 2 at the World Bank managing a very big staff. The World Bank has at least 12,000 staff. Since I was a Managing Director in charge of operations in several of the regions with a USD 1 billion portfolio, I would try to apply that experience to help me with the managerial tasks. On advocacy, I will be very keen. The WTO needs to change its image. I will also try to spend quite a bit of time on advocacy by talking about the values of the WTO and its purpose, about what the WTO can bring to the world, about the new ways the WTO is working, about the fact that it is tackling topical issues. I would be very keen to advocate that because this is an organization that matters. During my time at the World Bank, the WTO mattered and still matters. So, advocacy for it would be one of the things I would be keen on. I have been balancing these things in my career most of my life and I think it would be an honour and privilege to try to balance them for the WTO.
  • Q: In different fora for some time now, we have been discussing the reform of the organization, particularly given the challenges of the 21st century and now with the global pandemic. What would be your initial approach to the reform of the organization? How would it take place and how would you implement it? (Guatemala)
    A: On the reform of the organization, there has been lots of discussions among Members from what I can see. When I spoke to Members, practically every Member talked about the need for reform. But what was not so clear was which reforms and their approach to the reforms. There are some differences in views among Members about which reforms and how to approach the reforms. Some Members feel that they may not even be participating in the discussions of these reforms, that they are marginalized. Given that situation, I would want to spend some time to really talk and listen to Members to understand what they believe about these reforms – which reforms they would like to see and how. And then I would try to be proactive in pulling that together to be sure that Members are on the same wavelength about which are the critical reforms and the sequencing of the reforms, because we cannot do everything at once. So, sequencing is important. From where I sit, I would think that there would be one or two that would be critically important to embark on as quickly as possible, and that would mean getting Members’ views on those such as the dispute settlement system, which is where the world comes to have its disputes on trade arbitrated. When I speak to business people, this is one of the things they find so important in the WTO. So, I would be keen to know if all Members consider this as a priority, and then I would set about working with
    Members to see the shape of what the reforms to the dispute settlement system could be and how we would build on some of the issues or the processes, understand the disagreements that some Members have with the way it is functioning at the moment and see if we can build some agreement on how to proceed to reform it and to see that it is implemented. Again, the rulemaking system that I have talked about before is an important reform – making sure that the rulebook of the WTO is updated to reflect the way the world is going be it on e-commerce. In this regard, I would want to make sure that we bridge the digital divide for those Members that do not have that ability. In a nutshell, I will try to put together what I hear from Members on what they understand of reforms. I would then try to organize this in a sequenced fashion, giving priority to the top ones that I think are achievable and those that would also make the WTO looks like it is really producing results. And then I would try to work with the staff to facilitate the implementation of these reforms.
    Q: The COVID-19 crisis has demonstrated the importance of e-commerce. As you have touched upon on your initial remarks, the WTO has been engaged in the negotiations in a plurilateral way with this subject. As you know, there are some difficult challenges we are facing. What kind of approach and efforts would you like to make for advancing this subject? (Japan)
    A: The issue of e-commerce and the digital economy, as you rightly observed, has been demonstrated by the way the world has gone online during this COVID-19 crisis, be it for the purchase of goods and services, be it for education, among others. This is an area is here to stay in the world and I think will continue to be very important. But in trying to advance the negotiations, I would be very mindful of the concerns of some Members who feel that, in order to participate in discussions on e-commerce and the digital economy, they need to be able to do so. Perhaps this is one reason why some Members are not part of the plurilaterals. So, one way to advance that and make sure that these important negotiations move towards a multilateral track that can involve all Members, that can have MFN characteristics and that can allow Members to join when they can, would be to move it along in a direction that would be more comprehensive by looking at what are these challenges that some Members face and what their hesitations are in order to tackle those.
    There are Members who feel that they are not yet ready to participate, so they are hesitant about the gains they would derive from participating. Attending to those issues with Aid for Trade and technical assistance to get the digital infrastructure to these Members that would be required for their businesses and MSMEs to participate in e-commerce would be critically important. A few weeks ago, a friend of mine was in Rwanda and saw e-commerce in action with women in their cooperative who were able to sell 30 tons of coffee and make USD 4 a ton more than they would ordinarily have made, because there was no intermediary. And they did this online. So, this is the shape of the future. It is critically important that for e-commerce, we make sure the infrastructure is there, we make sure there is agreement to update the rules, so that this can become something that every Member can benefit from.
  • Q: As you know, the WTO is a Member-driven organization. You said that you would like to advance negotiations and be a very proactive Director-General. Do you think that proactivity is enough to advance the negotiations and resolve the problems that the WTO is currently facing? Do you have any other particular ideas as Director-General to bring those negotiations forward? (Mongolia)
    A: That is a very critical question. The WTO is a Member-driven organization. It is the Members who decide how to move issues along. The Director-General does not have the direct power to do this and can only succeed through working with Members and helping to build consensus. I have been thinking about it. When you build consensus, that means that every Member is part of it. Every Member will have the incentive to implement it. So, we need to work harder to make sure that that consensus-building takes place. When I say “proactive”, I do not mean that the Director-General takes over. No. I read somewhere that the Director-General is more like a butler who is there to make sure that Members are happy. Even a butler can be proactive. My proactivity relates to the fact that I would work hard with Members to overcome the difficulties that have lain in the way of consensus-building to advance negotiations. And we have talked about some of these before, including the fact that there is lack of trust. The Director-General can be proactive in trying to bridge these lines and help build and restore that trust. This is one way you can help Members to understand each other better, to be the one that runs between and carries the views and messages, to be the one that ensures that the appropriate analysis is done that can move negotiations along and to be the one that supports and bridges the gap. That would be my answer to your question – a proactive supporter to make consensus-building quicker, faster and with more deliverables.
    Q: You have used more than once the expression “update the rulebook”. One of those updates seem to be in the more permanent role of plurilaterals. How do you see that? What space you think they should have in the future reform process of the WTO? (Brazil)
    A: This issue of the nature of negotiations, whether plurilateral or multilateral, is one of the difficult ones among Members. Multilateral negotiations are always preferable because they involve all Members and reduce transaction costs. However, under certain circumstances, if there is a need to move an agenda along, one could look at plurilateral negotiations as a means of doing that. But it would be in the hope that the plurilateral negotiations could move in a direction that would become multilateral, by ensuring Members can join when they are able to do so, and by ensuring there are MFN characteristics to it. That would be the way I would see it. Plurilaterals can help us not be stuck and move along on some important issues, but the objective is always to get to multilateral negotiations, or, if we cannot, to make sure all Members can benefit by being able to join and have the benefits of it when they can.
    Q: In your presentation, you have addressed the issue of special and differential treatment. We know that there are different views on this issue. While some would argue that it is a treaty-embedded right, others view that such flexibilities should be given on a needs basis. How would you use your office as Director-General to reconcile these different interpretations of the S&DT principle and to ensure that some Members are not unduly penalized? (Mauritius)
    A: The question of S&DT is probably one of the most difficult and divisive issues within the WTO. One has to tread with caution. There are three categories of Members within the WTO: developed, developing and LDCs. The 47 LDCs are clearly identified according to the UN criteria. There would not be much debate on S&DT for LDCs to enable them to strengthen their economies and advance. The debate comes when it comes to the category of developing country Members. As Director General, to help move this along, I would work with Members to be very creative. I would look at building on agreements such as the TFA which found a solution where Members can decide how they would implement agreements, the pace at which they can do it and the capacity building and technical assistance that they would need to implement those provisions. A creative solution along those lines might be one way to begin to deal with this difficulty. There are other solutions. I am not saying that it is the only one. But that is the way my mind is working – a solution that allows Members in a creative fashion to deliver their commitments without the issue of categorization.
    Q: As Director-General, what are your plans relating to empowering women in the future WTO agenda? (Malaysia)
    A: Now you have touched on a subject that I am quite passionate about. As part of the WTO agenda, I was very excited when I saw the Buenos Aires Declaration on Trade and Women’s Economic Empowerment. As WTO Director-General, I would seek to work with Members to advance those discussions and I would seek to mainstream the issue of women and trade across the work done at the Secretariat. In all the negotiations we do, we should look at whether we are empowering women and whether we are supporting them to participate better. There is the “She Trades” initiative. We should think how we can use that as a means of advancing this objective. This is an agenda that would be exciting to move along and mainstream it in the work of the Secretariat and the negotiations, because women own 50% or more of MSMEs. Helping them to trade more will create more jobs and spur economic growth and sustainable development in our economies.

7. Other materials on Dr. Ngozi Okonjo-Iweala

In a post from September 1, 2020, I reviewed and summarized comments of Dr. Okonjo-Iweala as reported in various press and other sources. See September 1, 2020, Race for WTO Director-General – additional material on Dr. Ngozi Okonjo-Iweala (Nigeria), https://currentthoughtsontrade.com/2020/09/01/race-for-wto-director-general-additional-material-on-dr-ngozi-okonjo-iweala-nigeria/. The bulk of the post is copied below.

Race for WTO Director-General — additional material on Dr. Ngozi Okonjo-Iweala (Nigeria)

Today I review some other press articles about the candidates to provide additional perspective on important issues or the candidate’s approach to the position of Director-General if selected. Yesterday, I posted material about Dr. Jesus Seade Kuri. See August 31, 2020, Race for WTO Director-General – additional material on Dr. Jesus Seade Kuri (Mexico), https://currentthoughtsontrade.com/2020/08/31/race-for-wto-director-general-additional-material-on-dr-jesus-seade-kuri-mexico/.

There is no intention on my part to be exhaustive and the research has been limited to press pieces in English. Rather the intention is to identify information not addressed in my earlier posts that may be of interest to readers.

Today’s post looks at a few articles featuring Dr. Ngozi Okonjo-Iweala from Nigeria, the second candidate nominated.

  1. The Australian, August 17, 2020, Should WT address antai-dumping measures?, https://www.theaustralian.com.au/subscribe/news/1/?sourceCode=TAWEB_WRE170_a_GGL&dest=https%3A%2F%2Fwww.theaustralian.com.au%2Fbusiness%2Fleadership%2Fshould-wto-address-antidumping-measures%2Fnews-story%2F995b960b1de450c1d983f4aabeca2351&memtype=anonymous&mode=premium&nk=1fc9f182863545ef2c82ab30edd82766-1598966889

The summary of the article states that “Ngozi Okonjo-Iweala says the WTO should investigate whether Australia was inappropriately using anti-dumping provisions to keep out foreign steel.” I am not a subscriber to the Australian and so the information provided above is limited.

2. Nikkei Asian Review, July 13, 2020, Good listener or strong negotiator? WTO candidates make case for top job, https://asia.nikkei.com/Editor-s-Picks/Interview/Good-listener-or-strong-negotiator-WTO-candidates-make-case-for-top-job.

Ngozi Okonjo-Iweala

* * *

Q: How would you go about navigating reforms at the WTO amid a rise of unilateralism and U.S.-China trade clashes?

A: This is the topical question of the hour, the growing nationalism, the divide. But if you listen carefully, you find that there’s some intersecting interests. After all, the same big powers that seem to have a big divide are sitting across each other at the table and negotiating some deals. 

“The WTO should work with all members including the big ones to find out what are those intersecting areas — however small they may be — how do we begin to deliver to make the two sides see their common interests that we can work on and build trust.

“It will take time, it will be challenging, there’s no magic wand to it, but you need someone with the energy, the passion, who is not a quitter, and who can deliver and work with these powers and listen — listen to them, because sometimes they feel they’re not even listening to the big powers.

Q: Could you talk about your visions for reforms?

A: First, updating WTO rules to the 21st century to take account of 21st-century issues, such as e-commerce and the digital economy, such as climate change, the green economy and biodiversity and circular economy … the issue of women and trade and micro-, medium and small enterprise. Even technology, what technology is doing to supply chains.

“Then you’ve got to look at existing rules and see whether they are serving the purpose. There are some members who feel that some rules may be leading to circumvention and disturbing the balance of rights and obligations of members. Issues like special and differentiated treatment, which developing countries feel very strongly about [but] developed countries have a different view.

“The dispute settlement system is paralyzed. You cannot have a rules-based organization, which is the sole place where people can take their grievances and complaints, but rules are not being followed. 

“A third area I would mention is transparency and notification. Transparency is so vital to the multilateral trading system, and notification for businesses. If something is going to be done in a country,  businesses  need to know that you’re willing to take one action or another, otherwise they can’t function.

“The WTO has to start achieving more outcomes. If it doesn’t do that then people continue to see it as irrelevant. 

Q: How should the WTO address Washington’s complaint about China’s state capitalism and developing country designation?

A: Those are some critical issues that members will need to discuss and debate on. But let’s put it this way, we must make sure that all members of the WTO feel that the balance of rights and obligations for all members of the WTO is about a fair system. So, that’s why it’s important to listen to who feels it’s not fair and then restore that balance of rights and obligations that members need to undertake.”

3. Nairametrics, August 12, 2020, WTO Job: Okonjo-Iweala reveals how to resolve rift between US and China, https://nairametrics.com/2020/08/12/wto-job-okonjo-iweala-reveals-how-to-resolve-the-rift-between-us-and-china/.

“On healing the rift between the US and China, Okonjo-Iweala admitted that it is going to be challenging and not be easy. She said:

“‘Well this is not going to be easy, if it was easy, it could have been done a long time since. So it would be very challenging but it is not an impossible job. It is very clear that both the US and China have been helped and benefitted from the multilateral trading system in the past. Hundreds of millions have been lifted out of poverty. They have experienced shared prosperity in the economies and their countries.’

“The Nigerian candidate pointed out that it is important to remind the US and China of this shared prosperity. She then disclosed that she would listen to both countries to find out what really are the issues causing distrust among them. She said that she will not want to be involved in the larger political problems, but will rather separate the trade issues and focus on them and build this trust.

“Going further on how to settle their rift, Okonjo-Iweala said, ‘You need to begin to find areas where there can be confidence-building and trade. Building trust is not talking about it, you have to have areas where both can work together and agree and we have a golden opportunity in the fisheries subsidies negotiations that are going on now because the US is a party to it, China is a party, the EU, all other members.’

“‘It is a multilateral negotiation, so if they can sit around the table with others to negotiate this and have a successful outcome, that is one thing that will be shared in common between the 2. So that will begin to build confidence. Then reaching out both in the US and in China to talk to the policymakers, go where the decisions are made, talk to congress also in the US and begin to show the benefits of the system again.’

“She also said they will look at reasons why they need to work together because their rift may be causing negative externalities for other members. She is of the opinion that exposing all of these, working with them, and listening carefully will begin to build confidence.

“She believes that while achieving this will be difficult, focusing seriously on trade issues can create room for a breakthrough.”

4. P.M. News, August 4, 2020, Okonjo-Iweala: My priorities as WTO chief, https://www.pmnewsnigeria.com/2020/08/04/okonjo-iweala-my-priorities-as-wto-chief/.

“’I would be focusing, if I get the job, on the dispute settlement system. Because this is the fundamental pillar of the WTO,’ Okonjo-Iweala said.

”If you have a rules-based organisation, you must have a place where rules are arbitrated and that’s what happens with the dispute settlement system. So restoring that will be a top priority as well.’

* * *

“The candidate showed her confidence to ‘find a way to unlock the seeming division’ on the trade side, between China and the United States, underlining that finding areas of mutual interest and to build trust within the WTO trading system would be important.

“’Actually, if you listen to the two members, they have some things in common,’ Okonjo-Iweala added.

“’The dispute settlement system of the WTO is valued by both, they want it to reform, they don’t want it to disappear.’

“Okonjo-Iweala also noted that she hopes China will play the role of an economic growth engine in the current COVID-19 pandemic as it did during the 2008 global financial crisis.

“’I think the best thing China can do is to recover quickly. Because it’s one of the engines of growth in the world and it’s almost a quarter of world trade,’ she told Xinhua.

“’So if it recovers quickly, it means that it can help the rest of the world recover. So that’s the role I would see for China.’”

5. Financial Times, August 4, 2020, Leading WTO candidates back US bid for system reform, Amina Mohamed and Ngozi Okonjo-Iweala say American criticisms of over-reach are valid, https://www.ft.com/content/f4830e2b-df7b-474a-8104-6336992ca193.

Article also reviews Dr. Okonjo-Iweala’s view that the WTO should be taking a lead on COVID-19 and should take steps to see that the early introduction of export restraints on medical goods and medicines is not repeated.

6. Inside U.S. Trade’s World Trade Online, July 22, 2020, Nigeria’s candidate: Technical skill won’t solve WTO problems, https://insidetrade.com/daily-news/nigeria%E2%80%99s-candidate-technical-skill-won%E2%80%99t-solve-wto-problems.

Inside U.S. Trade has conducted interviews with each of the eight candidates. In its July 22 write-up of Dr. Okonjo-Iweala’s interview, the publication noted that Dr. Okonjo-Iweala would see who is behind on notifications and see if the problem is due to a lack of technical capability which is a real but solvable problem for many developing countries. For those with the ability to provide notifications but who haven’t, she would see what could be done including some proposals where “sticks” have been suggested to address non-compliance.

On U.S. concerns about China’s state-run economy, Dr. Okonjo-Iweala noted that the WTO doesn’t comment on Member’s economic systems but should address the consequences to the global trading system of different economic systems. She believes the WTO should start by establishing a definition of “public body” and look at improving rules on industrial subsidies and would urge the U.S., EU and Japan to table their proposal in that regard.

Conclusion

The above review of comments made by Dr. Ngozi Okonjo-Iweala are taken from various public documents and press articles and conferences or webinars held during the summer and early fall of 2020. The materials used are obviously not exhaustive as Dr. Okonjo-Iweala has appeared at many events that are not covered here. However, the materials provide a glimpse into how the likely next Director-General perceives the path forward on a host of issues important to WTO Members.

The WTO is an important organization facing multiple crises and a challenge to its continuing relevance. Getting a new Director-General is an important step for the organization but much will depend on the willingness of the Members to pull together to make the organization fit for purpose in the 21st century and capable of responding to rapidly evolving global issues. It is unclear that WTO Members are willing to embrace a common vision or make the changes needed to achieve the reforms and updates critical to continued relevance.

The WTO was fortunate to have so many qualified candidates come forward last year. The selection of Dr. Ngozi Okonjo-Iweala is important both for the skills that she brings to the organization and for the signal that it sends on global inclusiveness. Let’s hope that her tenure will be a successful one.

U.S.-China Phase 1 Trade Agreement — Data through December 2020; China has increased purchases of agricultural and energy products above 2017 levels but did not reach first year agreed purchases in 2020 and won’t reach the agreed level even if measured from March 2020-February 2021

U.S. December export data were released earlier this week. While there are some improvements in some categories of merchandise exports in December (particularly in major agricultural categories, liquefied natural gas and crude oil), China remains far behind its overall commitments in the U.S.-China Phase I Trade Agreement for first year purchases of U.S. goods. As reported in prior posts, both China and the U.S. have taken steps to implement parts of the Phase 1 Agreement that took effect on February 14, 2020, although the level of actual implementation remains unclear. With a change of U.S. Administrations on January 20, 2021, it is unclear what the Biden Administration’s approach will be to China and its myriad trade practices that have been of concern to businesses, workers, Congress and the prior Administration.

Prior posts on the U.S.-China Phase 1 Agreement can be found here: January 9, 2021, U.S.-China Phase 1 Trade Agreement — Data through November 2020; China has increased purchases of agricultural and energy products above 2017 levels but will not reach first year agreed purchases in 2020 whether measured on a calendar basis or on a March 2020-February 2021 basis, https://currentthoughtsontrade.com/2021/01/09/u-s-china-phase-1-trade-agreement-data-through-november-2020-china-has-increased-purchases-of-agricultural-and-energy-products-above-2017-levels-but-will-not-reach-first-year-agreed-purchases-in/; December 10, 2020, U.S.-China Phase I Trade Agreement – data through October 2020; while China has increased purchases of agricultural and some other products, China remains far behind on the agreed purchases in 2020 whether measured on a calendar basis or on a March 2020-February 2021 basis, https://currentthoughtsontrade.com/2020/12/10/u-s-china-phase-1-trade-agreement-data-through-october-2020-while-china-has-increased-purchases-of-agricultural-and-some-other-products-china-remains-far-behind-on-the-agreed-purchases-in-2020-w/; November 13, 2020, U.S.-China Phase 1 trade agreement – Data through September 2020; USDA and USTR report on agriculture portion, https://currentthoughtsontrade.com/2020/11/13/u-s-china-phase-1-trade-agreement-data-through-september-2020-usda-and-ustr-report-on-agriculture-portion/; October 10, 2020,  U.S.-China Phase I Trade Agreement – first six months data on U.S. exports (March-August 2020) covered by the purchase commitments show China needing to triple purchases in next five months to meet first year commitments, https://currentthoughtsontrade.com/2020/10/10/u-s-china-phase-1-trade-agreement-first-six-months-data-on-u-s-exports-march-august-2020-covered-by-the-purchase-commitments-show-china-needing-to-triple-purchases-in-next-six-months-to-meet-fi/; September 12, 2020, U.S.-China Phase I Trade Agreement – How is China Doing to Meet Purchase Commitments for the First Year; a Review of U.S. Domestic Exports through July 2020, https://currentthoughtsontrade.com/2020/09/12/u-s-china-phase-1-trade-agreement-how-is-china-doing-to-meet-purchase-commitments-for-the-first-year-a-review-of-u-s-domestic-exports-through-july-2020/; August 8, 2020, U.S.-China Phase 1 trade agreement – review of U.S. domestic exports through June 2020, https://currentthoughtsontrade.com/2020/08/08/u-s-china-phase-1-trade-agreement-review-of-u-s-domestic-exports-through-june-2020/; July 10, 2020, U.S.-China Phase 1 Trade Agreement – limited progress on increased U.S. exports to China (through May), https://currentthoughtsontrade.com/2020/07/10/u-s-china-phase-1-trade-agreement-limited-progress-on-increased-u-s-exports-to-china-through-may/; June 5, 2020, U.S.-China Phase I Deal is Failing Expanded U.S. Exports Even Before Recent Efforts by China to Limit Certain U.S. Agriculture Exports as Retaliation for U.S. Position on Hong Kong, https://currentthoughtsontrade.com/2020/06/05/u-s-china-phase-i-deal-is-failing-expanded-u-s-exports-even-before-recent-efforts-by-china-to-limit-certain-u-s-agriculture-exports-as-retaliation-for-u-s-position-on-hong-kong/; May 12, 2020, U.S.-China Phase I Agreement – some progress on structural changes; far behind on trade in goods and services, https://currentthoughtsontrade.com/2020/05/12/u-s-china-phase-i-agreement-some-progress-on-structural-changes-far-behind-on-trade-in-goods-and-services/; January 19, 2020, U.S.-China Phase 1 Agreement – Details on the Expanding Trade Chapter, https://currentthoughtsontrade.com/2020/01/19/u-s-china-phase-1-agreement-details-on-the-expanding-trade-chapter/; January 15, 2020, U.S.-China Phase 1 Trade Agreement Signed on January 15 – An Impressive Agreement if Enforced, https://currentthoughtsontrade.com/2020/01/15/u-s-china-phase-1-trade-agreement-signed-on-january-15-an-impressive-agreement-if-enforced/.

An unusual aspect of the Phase 1 Agreement is agreement by China to increase imports from the United States of various categories of goods and services during the first two years of the Agreement with 18 categories of goods grouped in three broad categories (manufactured goods, agriculture and energy) and five services categories. Chinese imports of goods and services from the United States under the Agreement are supposed to increase by $76.7 billion in the first year over levels achieved in 2017 and in the second year by $123.3 billion over 2017 levels. The categories and tariff items included in the goods categories are reviewed in Annex 6.1 of the Agreement and the attachment to Annex 6.1. In the confidential version of the agreement, growth levels are provided for each of the 23 categories of goods and services.

While the COVID-19 pandemic has affected trade flows for most countries including both China and the United States and while bilateral relations between the U.S. and China have deteriorated since the signing of the Phase 1 Agreement, China continues to indicate its intention to honor the Phase I Agreement. Article 6.2 of the Agreement defines the time period for the purchase commitments as being January 1, 2020 through December 31, 2021. So the first year by agreement is calendar year 2020.

However, since the Agreement took effect in mid-February, my analysis has focused on the period since the agreement went into effect (for statistics, from March 1, 2020). This is consistent with the position that USTR and USDA took in an interim report released on October 23 looking at China’s compliance with its purchase commitments in agriculture. “It is worth noting that the Phase One Agreement did not go into effect until February 14, 2020, and March is the first full month of its effect. That means that we have seen seven months of agreement sales.” U.S. Trade Representative’s Office and U.S. Department of Agriculture, Interim Report on the Economic and Trade Agreement between the United States of America and the People’s Republic of China, AGRICULTURAL TRADE, October 23, 2020, Page 1.

For purposes of this post, I will look at the March-December data, but I will also reference calendar 2020 data.

Looking at U.S. domestic exports for the March – December period and projecting for a full twelve months (March 2020-February 2021) shows China meeting 94.31% of first year agriculture commitments, and significantly above 2017 actual levels. Total Phase 1 products are projected at only 59.81% of first year commitments with manufactured goods at 52.37% and energy at 41.70%. While agriculture products are projected to exceed 2017 actual by $10.6 billion and energy is projected to exceed 2017 by $3.3 billion, manufactured goods are projected to be $10.5 billion smaller than 2017 actual. Compared to first year purchase commitments, total U.S. Phase I goods exports are projected to be $60.5 billion short of the agreed first year level.

If calendar year 2020 is examined, then U.S. domestic exports of all Phase 1 goods met only 55.64% of the agreed levels with manufactured goods at 51.80%, agricultural products at 81.58% and energy goods at 35.92%.

Under either first year period examined, agricultural and energy product have exceeded what was achieved in 2017 during the first year, though that will not be the case for manufactured goods. Under neither scenario do any of the three goods groupings meeting the first year agreed commitments.

To meet first year commitments, China would have to import monthly 5.03 times the product from the United States as was done in the first ten months in the next two months (January – February). On a calendar basis, U.S. domestic exports missed the agreed level on goods by $66.8 billion

Under the March-February analysis using data through December, the U.S. domestic exports of goods covered by Phase I to China for the first ten months were slightly ahead of 2017 levels ($75.1 billion vs. $73.6 billion) and are projected to exceed the actual 2017 U.S. exports ($90.125 billion projected vs. $86.795 billion 2017 actual). The calendar year 2020 missed the 2017 actual by almost $3 billion ($83.849 billion vs. the 2017 actiual of $86.795 billion). Moreover, since non-covered U.S. exports have declined in 2020 versus 2017, under neither scenario do total U.S. domestic exports reach the 2017 level of $120 billion ($117.258 billion projected for the March-February period; $110.576 billion actual for calendar 2020).

U.S. export data on services are available quarterly for some of the relevant categories and annually for certain information. Total U.S. services exports to all countries are down 20.40% for calendar year 2020. Services trade data with China for 2020 is available for the first nine months of 2020 and shows U.S. exports of services down 34.08% in the first three quarters of 2020 versus 2019. 2019 US exports of services to China were $56.537 billion, slightly higher than 2017 US exports of services to China of $54.981 billion. See U.S. Department of Commerce, U.S. Bureau of the Census, Bureau of Economic Analysis, U.S. International Trade in Goods and Services, November 2020 (January 7, 2021) and December 2020 (February 5, 2021). The Phase 1 Agreement with China has large increases in U.S. services exports in the first year of the agreement ($12.8 billion over 2017 levels). Thus, the limited data available indicate that U.S. services exports to China will likely miss 2017 levels by more than 32% and will obviously not show any gain above 2017.

Looking at total U.S. domestic exports of goods to China for the period March-December 2020, U.S. exports were $98.059 billion ($9.806 billion/month) compared to $101.749 billion in 2017 ($10.175 billion/month). These include both products covered by the Annex 6.1 commitments and other products. For calendar year 2020 total U.S. domestic exports to China were $110.576 billion ($9.215 billion/month) compared to $120.109 billion in 2017 ($10.009 billion/month).

Total 2017 U.S. domestic exports of goods to China were $120.1 billion. The Phase 1 Agreement calls for increases on a subset of goods of $63.9 billion in the first year. Thus, the target for the first year of the U.S.-China Phase 1 Agreement is U.S. exports to China of $184 billion if non-subject goods are exported at 2017 levels.

Other U.S. domestic exports not covered by the 18 categories in Annex 6.1 were $33.314 billion in 2017 (full year). For the period March – December, non-covered products (which face significant tariffs in China based on retaliation for US 301 duties) have declined 18.55%, and total exports to China are down 3.63%. Looking at 2020 calendar figures show other U.S. domestic exports (i.e., not covered by the Phase I Agreement) were down 19.78% from comparable levels in 2017.

Thus, the first ten months since the U.S.-China Phase 1 Agreement went into effect suggest that U.S. domestic exports of the Annex 6 goods will be $90.125 billion if the full year shows the same level of increase over 2017 for each of the 18 categories of goods; non-covered products would be $27.133 billion, for total U.S. domestic exports to China of $117.259 billion. This figure would be below 2017 and dramatically below the target of $184.0 billion (if noncovered products remain are at 2017 levels; $177.421 billion with noncovered products at estimated 2020 levels) . The projected U.S. domestic exports to China would, however, be higher than the $109.72 billion in 2018 and the depresssed figure of $94.100 billion in 2019.

If one looks at calendar year 2020 actual data, U.S. domestic exports to China of Annex 6 goods were $83.849 billion, other exports of $26.726 billion, for total domestic exports in 2020 of $110.576 billion even further behind 2017.

To achieve the target level of U.S. exports in the January-February 2021 period, U.S. domestic exports of the 18 categories of goods in Annex 6.1 would have to be $75.573 billion ($37.786 billion/month) an amount that is 5.02 times the monthly rate of exports of the 18 categories to China in the March – December 2020 period ($7.512 billion/month).

As noted earlier, if one uses the 2020 calendar period, U.S. domestic exports of goods in Annex 6.1 fell $66.846 billion short of the first year agreed amounts.

Chinese data on total imports from all countries (in U.S. dollars) for calendar year 2020 show a decline of 1.1% from 2019. http://english.customs.gov.cn/statics/report/monthly.html. General Administrator of Customs of the People’s Republic of China, China’s Total Export & Import Values, December 2020 (in USD). China’s imports from the U.S. were up 9.8% during the same time period, but show imports from the U.S. substantially larger than U.S. domestic exports ($134.907 billion vs. $110.576 billion, though Chinese imports would be CIF value vs. FAS value for U.S. exports and may include U.S. exports to third countries or territories that end up in China).

The 18 product categories included in Annex 6.1 of the Phase 1 Agreement show the following for March-December 2017, March-December 2020 and rate of growth for the first year of the Agreement (figures in $ million):

Product categoryMarch-December 2017March-December 2020% change 2017-2020 March-December$ Value needed in next two months to reach 1st year of Agreement vs. projected 1st year
manufactured goods
1. industrial machinery $8,241.5
$10,380.4

+11.78%
2. electrical equipment and machinery $3,628.4
$4,050.7
+11.64%
3. pharma- ceutical products $1,833.2 $2,708.2
+48.68%
4. aircraft (orders and deliveries) $14,287.1 $3,405.9 -76.16%
5. vehicles $8,591.0
$5,339.5
-37.85%
6. optical and medical instruments $2,708.7
$3,024.1
+11.64%
7. iron and steel
$1,000.0
$428.2
–57.19%
8. other manufactured goods $9,233.2 $11,531.5 +24.89%
Total for mfg goods
$50,152.2
$40,819.5
-19.19%
$50,449.9
Agriculture
9. oilseeds $9,412.8 $13,249.3 +40.76%
10. meat $474.1 $2,692.4 +467.93%
11. cereals $1,110.1 $2,881.0 +159.53%
12. cotton $699.6 $1,638.9 +134.27%
13. other agricultural commodities $3,852.4
$3,920.0
+1.75%
14. seafood $1,128.0 $629.8 -44.18%
Total for agriculture $16,676.9 $25,011.4 +49.98% $ 8,340.3
Energy
15. liquefied natural gas
$365.8

$1,295.2

+254.05%
16. crude oil $3,726.8 $6,388.7 +71.43%
17. refined products $1,953.0
$1,447.9
-25.80%
18. coal $353.1 $159.7 -54.78%
Total for energy $6,398.7 $9,291.5 +45.21% $16,782.5
Total for 1-18 $73,587.8 $75,122.4 +2.09% $75,572.7

China has recovered more quickly from COVID-19 economic challenges than has the U.S. However, as reviewed above, their total imports from all countries are down 1.1% in calendar year 2020 while up 9.8% from the United States. Thus, the Phase 1 Agreement appeaers to have contributed to some improved U.S. export performance to China even if China is far away from meeting the year one commitments.

Conclusion

As reviewed in prior posts, the U.S.-China Phase 1 Agreement is a potentially important agreement which attempts to address a range of U.S. concerns with the bilateral relationship and obtain somewhat better reciprocity with the world’s largest exporter. The Phase 1 Agreement has left other challenges to a Phase 2 negotiation which has not yet begun. It is unclear what the Biden Administration approach will be.

While there has been some progress on non-trade volume issues that are included in the Phase 1 Agreement and some significant improvements in exports of U.S. agricultural goods, there has been very little forward movement in expanding total U.S. exports of goods to China in fact and a sharp decline in U.S. exports of services to China.

The differences in economic systems between China and the United States have made reliance on WTO rules less relevant to the Trump Administration as those rules presume market-based economies and presently don’t address the myriad distortions that flow from the Chinese state capital system. Thus, the Phase I Agreement was an effort to move the needle in trade relations with China to achieve greater reciprocity. It has had some limited success to date. It will be interesting to see the approach on trade with China taken by the Biden Administration when its trade team is onboard.

Biden Administration throws support behind Dr. Ngozi Okonjo-Iweala for next Director-General of the World Trade Organization

The Office of the United States Trade Represenstative released the following press release on February 5, 2021:

“02/05/2021

“Washington, DC – The United States takes note of today’s decision by the Republic of Korea’s Trade Minister Yoo Myung-hee to withdraw her candidacy for Director General of the World Trade Organization (WTO).

“The Biden-Harris Administration is pleased to express its strong support for the candidacy of Dr. Ngozi Okonjo-Iweala as the next Director General of the WTO.  Dr. Okonjo-Iweala brings a wealth of knowledge in economics and international diplomacy from her 25 years with the World Bank and two terms as Nigerian Finance Minister.  She is widely respected for her effective leadership and has proven experience managing a large international organization with a diverse membership.  

“The Biden-Harris Administration also congratulates Minister Yoo Myung-hee on her strong campaign for this position.  She is a trailblazer as the Republic of Korea’s first female trade minister and the first candidate from Korea to advance this far in the Director General selection process.  The United States respects her decision to withdraw her candidacy from the Director General race to help facilitate a consensus decision at the WTO.

“It is particularly important to underscore that two highly qualified women made it to the final round of consideration for the position of WTO Director General — the first time that any woman has made it to this stage in the history of the institution.  

“The United States stands ready to engage in the next phase of the WTO process for reaching a consensus decision on the WTO Director General.  The Biden-Harris Administration looks forward to working with a new WTO Director General to find paths forward to achieve necessary substantive and procedural reform of the WTO.”

USTR Press Release, Office of the United States Trade Representative Statement on the Director General of the World Trade Organization, February 5, 2021,https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/february/office-united-states-trade-representative-statement-director-general-world-trade-organization.

As reviewed in a post earlier today, the Chair of the WTO’s General Council can call a General Council meeting at any time to consider his recommendation for the next Director-General. See February 5, 2021, WTO Director-General selection process — withdrawal of Korea’s Trade Minister Yoo important step to consensus behind Nigeria’s Dr. Ngozi Okonjo-Iweala, https://currentthoughtsontrade.com/2021/02/05/wto-director-general-selection-process-withdrawal-of-koreas-trade-minister-yoo-important-step-to-consensus-behind-nigerias-dr-ngozi-okonjo-iweala/.

The combination of the Korean withdrawal of Minister Yoo from the selection process and the U.S. indication that it supports Dr. Ngozi Okonjo-Iweala for the position of Director-General should permit the process to come to a conclusion in the coming week or weeks based on any remaining consultations the Chair of the General Council perceives are warranted before placing Dr. Okonjo-Iweala’s name on the General Council agenda for consideration by the membership. There is a regularly scheduled General Council meeting set for March 1-2, 2021. I would expect that a special session of the General Council could be called as early as next week.

The Biden Administration’s action is consistent with the President’s declared intent to be more active within multilateral institutions and will permit the WTO to move past the selection of the next Director-General to the important issues in front of the organization. Today’s action is an important one to help the WTO look at the major pending issues and the need for major reform.

WTO Director-General selection process — withdrawal of Korea’s Trade Minister Yoo important step to consensus behind Nigeria’s Dr. Ngozi Okonjo-Iweala

Press accounts report that Korea’s Trade Minister Yoo Myung-hee announced today that she would be withdrawing as a candidate to become the next Director-General of the WTO. See, e.g., Kyodo News, South Korea’s trade minister withdraws from race for next WTO head, February 5, 2021, https://english.kyodonews.net/news/2021/02/0ddc7c65b2cb-s-koreas-trade-minister-withdraws-from-race-for-next-wto-head.html#:~:text=South%20Korea’s%20minister%20for%20trade,of%20the%20World%20Trade%20Organization.&text=The%20career%20bureaucrat%20had%20been,Ngozi%20Okonjo%2DIweala%20of%20Nigeria; South China Morning Post, WTO: South Korea’s Yoo Myung-hee withdraws from director general race, clearing path for Nigeria’s Ngozi Okonjo-Iweala, February 5, 2021, https://www.scmp.com/economy/china-economy/article/3120709/wto-south-koreas-yoo-myung-hee-withdraws-director-general; Bloomberg, Okonjo-Iweala’s Path to WTO Clears Hurdle as Korean Quits Race, February 5, 2021, https://www.bloomberg.com/news/articles/2021-02-05/korean-minister-drops-wto-bid-clears-way-for-nigerian-candidate.

Minister Yoo and Dr. Okonjo-Iweala had been the two remaining candidates entering the third round of consultations in October 2020, and Dr. Okonjo-Iweala had been announced by the Chairman of the General Council as the candidate most likely to attract consensus following the third round. The United States and Korea had spoken before the informal heads of delegation meeting where the WTO Members were provided the results of the consultations. While the procedures being followed were those agreed to by the General Council in late 2002 and followed in earlier selections of the Director-General, Korea failed to withdraw its candidate as required by the procedures and the United States indicated it would not agree to a consensus behind Dr. Okonjo-Iweala, also contrary to the intended spirit of the procedures and prior actions of Members in the 2005 and 2013 selection processes. See WT/L/509, para. 18 (“The outcome of the consultations shall be reported to the membership at each stage. It is understood that the candidate or candidates least likely to attract consensus shall withdraw. The number of candidates expected to withdraw at each stage shall be determined according to the initial number of candidates, and made known in advance. This process shall be repeated in successive stages on the basis of a revised slate of candidates each time, with the aim of establishing consensus around one candidate.”).

I have provided a lot of coverage of the 2020-21 slection process and details of prior actions can be found by reference to those earlier posts. See, e.g., January 26, 2021, Letter from variety of former U.S. officials to President Biden urges U.S. support for Dr. Ngozi Okonjo-Iweala as next WTO Director General, https://currentthoughtsontrade.com/2021/01/26/letter-from-variety-of-former-u-s-officials-to-president-biden-urges-u-s-support-for-dr-ngozi-okonjo-iweala-as-next-wto-director-general/; January 19, 2021,   The next Director-General of the WTO – USTR Lighthizer’s comments to the Financial Times, https://currentthoughtsontrade.com/2021/01/19/the-next-director-general-of-the-wto-ustr-lighthizers-comments-to-the-financial-times/; November 19, 2020, The WTO selection process for the next Director-General – possible steps that can be taken in the coming weeks, https://currentthoughtsontrade.com/2020/11/19/the-wto-selection-process-for-the-next-director-general-possible-steps-that-can-be-taken-in-the-coming-weeks/; November 10, 2020, The values of the WTO – do Members and the final Director-General candidates endorse all of them?, https://currentthoughtsontrade.com/2020/11/10/the-values-of-the-wto-do-members-and-the-final-director-general-candidates-endorse-all-of-them/; November 6, 2020, Postponement of WTO General Council meeting to consider recommendation of Dr. Ngozi Okonjo-Iweala as next Director-General, https://currentthoughtsontrade.com/2020/11/06/postponement-of-wto-general-council-meeting-to-consider-recommendation-of-dr-ngozi-okonjo-iweala-as-next-director-general/; October 29, 2020, WTO press release from informal Heads of Delegation meeting on October 28 and Amb. Walker’s statement to the WTO membership on the outcome of the third round of consultations in the Director-General selection process, https://currentthoughtsontrade.com/2020/10/29/wto-press-release-from-informal-heads-of-delegation-meeting-on-october-28-and-amb-walkers-statement-to-the-wto-membership-on-the-outcome-of-the-third-round-of-consultations-in-the-director-general/; October 29, 2020, October 29th video discussion on WTO Director-General selection process following the announcement of results of third round of consultations and U.S. announcement of not backing the candidate with the greatest support, https://currentthoughtsontrade.com/2020/10/29/october-29th-video-discussion-on-wto-director-general-selection-process-following-the-announcement-of-third-round-of-consultations-and-u-s-aanouncement-of-not-backing-the-candidate-with-the-greatest/; October 29, 2020, U.S. support for Minister Yoo for WTO Director-General premised on need for person with trade expertise, https://currentthoughtsontrade.com/2020/10/29/u-s-support-for-minister-yoo-for-wto-director-general-premised-on-need-for-person-with-trade-expertise/; October 28, 2020:  WTO Director-General selection process doesn’t generate immediate consensus, https://currentthoughtsontrade.com/2020/10/28/wto-director-general-selection-process-doesnt-generate-immediate-consensus/.

What press articles are reporting Minister Yoo said on announcing her withdrawal

The Kyodo News article quotes the Minister as saying, “‘With the vacancy state of the WTO head being prolonged, the future of the WTO is also getting unclear,’ Yoo told a press conference. ‘I therefore have decided to withdraw from candidacy following close arbitration and agreement with the United States, our strong ally.'” The article also indicates that the Ministry had indicated that Minister Yoo would soon “notify the WTO of her decision.”

The South China Morning Post article indicates that the WTO had not as yet received formal notification of Minister Yoo’s withdrawal, and there is nothing on the WTO webpage as of this writing that indicates such a notification has been received.

The Bloomberg article states in part that –

“Yoo decided after discussions with the U.S. and other major nations, and took various issues into account including the need to revitalize the multilateral organization, according to a statement from Korea’s trade ministry on Friday.

“’There was no consensus,’ Yoo said. ‘So we needed enough time for in-depth consultations with important members, including the U.S.’”

Next steps

One would expect that the formal notification of withdrawal from Korea to the WTO will be received in the next week or so. The focus then shifts to the United States and whether the U.S. will indicate it is willing to be part of the consensus behind Dr. Ngozi Okonjo-Iweala or not. Many have urged the Biden Administration to join the consensus. The comments of Minister Yoo indicating consultations with various trading partners, including the United States, suggests that the U.S. is comfortable with her withdrawal. Obviously with the withdrawal of Minister Yoo, there is only one candidate from the 2020 process remaining. So unless the United States opts to fight on for the consideration of alternative individuals (including restarting or redoing the selection process), the likely question is simply one of timing.

Timing for the U.S. making a change in position of Dr. Ngozi Okonjo-Iweala for WTO Director-General likely, but not necessarily, will relate to when President Biden’s nominee for U.S. Trade Representative is confirmed by the Senate and sworn in. The confirmation hearing has not yet been set. Moreover, the Senate moves to the impeachment trial of former President Trump next week which could take up several weeks. It is understood that Senate Committees can hold hearings but can’t refer nominations to the full Senate for approval during the trial. Thus, it is unlikely that the new USTR will be confirmed in the next few weeks.

The President has taken other actions involving international agreements or organizations without waiting for Senate confirmation of cabinet or other senior officials (e.g., rejoining the Paris Climate Agreement and revoking withdrawal from the World Health Organization. So it is possible that the President and his current senior team will decide on the WTO DG without waiting for Katherine Tai to be confirmed.

The Chair of the General Council can call a special meeting of the General Council at any time for the purpose of considering the recommendation he and his facilitators make on the selection of the next Director-General. That said, the next regularly scheduled General Council meeting is set for March 1-2.

Conclusion

Since late October 2020, there were always going to be two actions needed to resolve the Director-General selection process. The first has now been announced but not yet notified, the withdrawal of Minister Yoo from the process. The second, and remaining issue, is the change of position by the United States to be willing to join the consensus behind Dr. Okonjo-Iweala. If Minister Yoo has been in contact with the U.S., as reported in the press articles, it is likely that the U.S. is both supportive of her withdrawal and seriously considering joining the consensus behind the remaining candidate. Hopefully, by early to mid-March that second step will occur, and the WTO can appoint Dr. Ngozi Okonjo-Iweala as the next Director-General.

COVID-19 agricultural fall out — higher prices for many consumers and greater food insecurity

The World Bank’s President David Malpass in a February 1st posting on Voices flagged the challenges for many of the world’s poorest people flowing from the COVID-19 pandemic — higher food prices, greater hunger, more people pushed into extreme poverty. See World Bank blog,COVID crisis is fueling food price rises for world’s poorest, February 1, 2021, https://blogs.worldbank.org/voices/covid-crisis-fueling-food-price-rises-worlds-poorest. The post was originally published in the Guardian. The post is copied in its entirety below (emphasis in the original webpost).

“Over the last year, COVID-19 has undone the economic, health and food security of millions, pushing as many as 150 million people into extreme poverty. While the health and economic impacts of the pandemic have been devastating, the rise in hunger has been one of its most tangible symptoms. 

Income losses have translated into less money in people’s pockets to buy food while market and supply disruptions due to movement restrictions have created local shortages and higher prices, especially for perishable food.  This reduced access to nutritious food will have negative impacts on the health and cognitive development of COVID-era children for years to come.

“Global food prices, as measured by a World Bank food price index, rose 14% last year. Phone surveys conducted periodically by the World Bank in 45 countries show significant percentages of people running out of food or reducing their consumption. With the situation increasingly dire, the international community can take three key actions in 2021 to increase food security and help prevent a larger toll on human capital.

“The first priority is enabling the free flow of food. To avoid artificial shortages and price spikes, food and other essential goods must flow as freely as possible across borders.  Early in the pandemic, when perceived shortages and panic generated threats of export bans, the international community helped keep food trade flows open. Credible and transparent information about the state of global food inventories – which were at comfortable levels pre-COVID – along with unequivocal free-trade statements from the G20, World Trade Organization, and regional cooperation bodies helped reassure traders, and led to helpful policy responses. Special rules for agriculture, food workers and transport corridors restored supply chains that had been briefly disrupted within countries.

“We need to remain vigilant and avoid backsliding into export restrictions and hardened borders that make food – and other essentials – scarce or more costly.

“The second priority is bolstering social safety nets. Short-term social safety nets offer a vital cushion for families hit by the health and economic crises. In Ethiopia, for example, households that experienced problems in satisfying their food needs initially increased by 11.7 percentage points during the pandemic, but participants in our long-running Productive Safety Net program were shielded from most of the negative effects.

“The world has mounted an unprecedented social protection response to COVID-19. Cash transfers are now reaching 1.1 billion people, and innovative delivery mechanisms are rapidly identifying and reaching new groups, such as informal urban workers. But ‘large scale’ is not synonymous with ‘adequate’. In a review of COVID-19 social response programs, cash transfer programs were found to be:

“–Short-term in their duration – lasting just over three months on average

“–Small in value – an average of $6 (£4.30) per capita in low-income countries

“–Limited in scope – with many in need remaining uncovered

“The pandemic has reinforced the vital imperative of increasing the world’s investments in social protection systems. Additional measures to expedite cash transfers, particularly via digital means, would also play an important role in reducing malnutrition.

“The third priority is enhancing prevention and preparedness. The world’s food systems endured numerous shocks in 2020, from economic impacts on producers and consumers to desert locust swarms and erratic weather.  All indicators suggest that this may be the new normal. The ecosystems we rely on for water, air and food supply are under threat. Zoonotic diseases are on the rise owing to growing demographic and economic pressures on land, animals and wildlife.

“A warming planet is contributing to costlier and more frequent extreme weather events. And as people pack into low-quality housing in urban slums or vulnerable coastal areas, more are living in the path of disease and climate disaster.

“Development gains can be wiped out in the blink of an eye. Our experience with hurricanes or seismic events shows that it is more effective to invest in prevention, before a catastrophe strikes. That’s why countries need adaptive social protection programs – programs that are connected to food security early warning systems and can be scaled up in anticipation of shocks.

“The time is long overdue to shift to practices that safeguard and increase food and nutrition security in ways that will endure. The to-do list is long and urgent. We need sustained financing for approaches that prioritize human, animal and planetary health; restore landscapes and diversify crops to improve nutrition; reduce food loss and waste; strengthen agricultural value chains to create jobs and recover lost incomes; and deploy effective climate-smart agriculture techniques on a much greater scale.

“The World Bank Group and partners are ready to help countries reform their agriculture and food policies and redeploy public finance to foster a green, inclusive, and resilient recovery.

Focusing on food security would address a basic injustice: almost one in 10 people live in chronic hunger in an age of food waste and plenty.  This focus would also strengthen our collective ability to weather the next storm, flood, drought, or pandemic – with safe and nutritious food for all.”

Food insecurity is an issue for all countries although most pressing for the poorest countries

The challenges noted by the World Bank President also face most other countries. For example, in the United States, there has been a massive increase in the number of people getting food from food banks and estimates are that one in seven Americans needs food assistance. Feeding America, The Impact of Coronavirus on Food Insecurity, October 2020, https://www.feedingamerica.org/research/coronavirus-hunger-research (“Combining analyses at the national, state, county, and congressional district levels, we show how the number of people who are food insecure in 2020 could rise to more than 50 million, including 17 million children.”) The challenges for schools not being able to have in school education has complicated the challenge in the United States as millions of children receive food from their schools but need alternative sources when schools are not able to provide in school classes. See, e.g., Brookings Institution, Hungry at Thanksgiving: A Fall 2020 update on food insecurity in the U.S., November 23, 2020, https://www.brookings.edu/blog/up-front/2020/11/23/hungry-at-thanksgiving-a-fall-2020-update-on-food-insecurity-in-the-u-s/ (reviews the increase in food insecurity and the various safety net programs in the U.S. attempting to address).

World Trade Organization involvement in addressing the problem

The World Trade Organization is directly involved in addressing the first priority identified by World Bank President Malpass — enabling the free flow of food. However, the WTO also monitors government support efforts and has the ability to be tackling trade and environment issues which could affect the third priority by reducing climate change.

WTO Members under WTO rules can impose export restraints under certain circumstances and in the first half of 2020, a number of members imposed export restraints on particular agricultural products and many imposed export restraints on certain medical goods. At the same time, the lockdown of countries had significant effects on the movement of goods and people. Many WTO Members have urged limiting such restraints and the WTO Secretariat has monitored both restraints imposed, when such restraints have been lifted (if they have), and trade liberalization efforts to speed the movement of important goods. See, e.g., WTO, COVID-19 and world trade, https://www.wto.org/english/tratop_e/covid19_e/covid19_e.htm; WTO, COVID-19 AND AGRICULTURE: A STORY OF RESILIENCE, INFORMATION NOTE, 26 August 2020, https://www.wto.org/english/tratop_e/covid19_e/agric_report_e.pdf; WTO, COVID-19: Measures affecting trade in goods, updated as of 1 February 2021, https://www.wto.org/english/tratop_e/covid19_e/trade_related_goods_measure_e.htm. The August paper on COVIDE-19 and Agriculture is embedded below.

agric_report_e

There have been a number of proposals by certain WTO Members to forego export restraints on agricultural products during the pandemic. None have been acted upon by the membership as a whole, but the communications often reflect commitments of certain Members to keep agricultural markets open during the pandemic. See, e.g., RESPONDING TO THE COVID-19 PANDEMIC WITH OPEN AND PREDICTABLE TRADE IN AGRICULTURAL AND FOOD PRODUCTS, STATEMENT FROM: AUSTRALIA; BRAZIL; CANADA; CHILE; COLOMBIA; COSTA RICA; ECUADOR; EUROPEAN UNION; GEORGIA; HONG KONG, CHINA; JAPAN; REPUBLIC OF KOREA; MALAWI; MALAYSIA; MEXICO; NEW ZEALAND; NICARAGUA; PARAGUAY; PERU; QATAR; KINGDOM OF SAUDI ARABIA; SINGAPORE; SWITZERLAND; THE SEPARATE CUSTOMS TERRITORY OF TAIWAN, PENGHU, KINMEN AND MATSU; UKRAINE; UNITED ARAB EMIRATES; UNITED KINGDOM; UNITED STATES; AND URUGUAY, WT/GC/208/Rev.2, G/AG/30/Rev.2, 29 May 2020. The document is embedded below.

208R2-3

More can and should be done, including a WTO-wide agreement to forego agricultural export restraints during the current pandemic or future pandemics. However, there are strong objections to any such limits from a number of WTO Members including large and important countries like China, India and South Africa.

Indeed, efforts to get agreement at the December 2020 General Council meeting that countries would not block agricultural exports to the UN’s World Food Programme for humanitarian purposes was blocked by a number of countries. While 79 WTO Members in January 2021 provided a joint pledge not to prevent agricultural exports to the UN World Food Programme, it is a sign of the sensitivity of food security to many countries that a very limited humanitarian proposal could not obtain the agreement of all WTO Members in a period of hightened need by many of the world’s poorest countries. See January 23, 2021, WTO and the World Food Programme – action by 79 Members after a failed December effort at the General Council, https://currentthoughtsontrade.com/2021/01/23/wto-and-the-world-food-programme-action-by-79-members-after-a-failed-december-effort-at-the-general-council/.

Conclusion

The COVID-19 pandemic has extracted a huge cost from the world economy, has pushed tens of millions of people into extreme poverty, has cost hundreds of millions people employment (full or partial), is complicating the education of the world’s children with likely long lasting effects, has exposed potential challenges to achieving global cooperation on a range of matters including the desirability of limiting or not imposing export restraints on agricultural and medical goods.

While the focus of countries and the media in the last several months has shifted to access to vaccines and ensuring greater equitable distribution of such vaccines at affordable prices, there remains much that needs to be done to better address food insecurity during the pandemic. International organizations like the World Bank, IMF and WTO, countries, businesses and NGOs need to se that both core issues are addressed in the coming months.