The Office of the United States Trade Represenstative released the following press release on February 5, 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.”
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.
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.”).
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.’”
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.
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.
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).
“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.
“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.
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.
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.
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/.
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.
On February 1, 2021, President Biden revoked an action by the Trump Administration on aluminum products from the United Arab Emirates (UAE). The UAE’s exports of aluminum had been subject to additional duties as a result of an investigation of global imports of aluminum under Section 232 of the Trade Expansion Act of 1962, as amended, where the Secretary of Commerce found that imports were a threat to national security and President Trump had imposed additional duties of 10%. Countries with security relationships with the United States were able to seek alternative approaches to addressing U.S. concerns.
The United States and the UAE have a security relationship of importance to the U.S. Specifically, the United States had worked with the UAE in its efforts to secure greater recognition for the state of Israel. The Abraham Accords Peace Agreement: Treaty of Peace, Diplomatic Relations and Full Normalization Between the United Arab Emirates and the State of Israel was agreed by the UAE and Israel on August 13, 2020, signed at the White House on September 15, 2020 and ratified by the two governments in mid-October 2020.
Shortly before leaving office, on January 19, 2021, President Trump through Proclamation 10139 indicated that tariffs would be lifted on imports of aluminum from the UAE with an effective date of 12:01 a.m. on February 3, 2021. In their place, quotas at “historic levels” were agreed to on aluminum exports to the U.S. from the UAE. The Trump Proclamation is found at 86 FR 6,825-31 (January 25, 2021) and is embedded below.
By proclamation on February 1, 2021, President Biden revoked President Trump’s Proclamation 10139. The discussion contained in President Biden’s Proclamation indicates that his Administration views Section 232 as an important tool, that the aluminum industry is critical to U.S. national security and that the tariffs that were imposed on aluminum were having the desired effect prior to the pandemic and were worth maintaining. The Biden Proclamation is reproduced below. While it is not yet published in the Federal Register, the Proclamation can be found on the White House website in the briefing room. See A Proclamation on Adjusting Imports of Aluminum Into the United States, February 1, 2021, https://www.whitehouse.gov/briefing-room/presidential-actions/2021/02/01/a-proclamation-on-adjusting-imports-of-aluminum-into-the-united-states/.
ADJUSTING IMPORTS OF ALUMINUM INTO THE UNITED STATES
BY THE PRESIDENT OF THE UNITED STATES OF AMERICA
Proclamation 10139 of January 19, 2021 (Adjusting Imports of Aluminum Into the United States), amended Proclamation 9704 (Adjusting Imports of Aluminum Into the United States), as amended, with respect to tariffs on certain imports of aluminum articles proclaimed under section 232 of the Trade Expansion Act, as amended (19 U.S.C. 1862). Proclamation 10139 provides that those amendments will not take effect until 12:01 a.m. on February 3, 2021.
I consider it is necessary and appropriate in light of our national security interests to maintain, at this time, the tariff treatment applied to aluminum article imports from the United Arab Emirates (UAE) under Proclamation 9704, as amended, as they are currently in effect as of this date. Accordingly, and as provided for in clause (6) of Proclamation 10139, I am terminating the modifications contained in that proclamation before they take effect.
Proclamation 9704 applied tariffs to help ensure the economic viability of the domestic aluminum industry — an industry that the Secretary of Commerce had previously identified as essential to our critical industries and national defense. Because robust domestic aluminum production capacity is essential to meet our current and future national security needs, Proclamation 9704 aimed to revive idled aluminum facilities, open closed smelters and mills, preserve necessary skills, and maintain or increase domestic production by reducing United States reliance on foreign producers.
In my view, the available evidence indicates that imports from the UAE may still displace domestic production, and thereby threaten to impair our national security. Proclamation 9704 authorized the Secretary of Commerce to grant exclusions from the aluminum tariffs based on specific national security considerations or if specific imported aluminum articles were determined not to be produced sufficiently in the United States, such that the imports would not diminish domestic production. Tellingly, there have been 33 such exclusion requests for aluminum imported from the UAE, covering 587,007 metric tons of articles, and the Secretary of Commerce has denied 32 of those requests, covering 582,007 metric tons. This indicates the large degree of overlap between imports from the UAE and what our domestic industry is capable of producing.
Since the tariff on aluminum imports was imposed, such imports substantially decreased, including a 25 percent reduction from the UAE, and domestic aluminum production increased by 22 percent through 2019, before the coronavirus pandemic began. In light of that history, I believe that maintaining the tariff is likely to be more effective in protecting our national security than the untested quota described in Proclamation 10139.
Section 232 of the Trade Expansion Act of 1962, as amended, authorizes the President to adjust the imports of an article and its derivatives that are being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.
Section 604 of the Trade Act of 1974, as amended (19 U.S.C. 2483), authorizes the President to embody in the Harmonized Tariff Schedule of the United States the substance of statutes affecting import treatment, and actions thereunder, including the removal, modification, continuance, or imposition of any rate of duty or other import restriction. Now, Therefore, I, Joseph R. Biden Jr., President of the United States of America, by the authority vested in me by the Constitution and the laws of the United States of America, including section 232 of the Trade Expansion Act of 1962, as amended, section 301 of title 3, United States Code, and section 604 of the Trade Act of 1974, as amended, do hereby proclaim that Proclamation 10139, including the Annex, is revoked. IN WITNESS WHEREOF, I have hereunto set my hand this first day of February, in the year of our Lord two thousand twenty-one, and of the Independence of the United States of America the two hundred and forty-fifth.
Pending WTO disputes; UAE does not have a pending dispute with the U.S.
While China, India, the European Union, Norway, the Russian Federation, Switzerland and Turkey all have ongoing panel proceedings at the WTO challenging the U.S. imposition of duties on steel and aluminum pursuant to Section 232 investigations, the UAE is not a country that has filed a request for consultations on the additional duties on aluminum on its exports to the United States. See WT/DSB 544 (China), WT/DSB547 (India), WT/DSB/548 (European Union), WT/DSB/552 (Norway), WT/DS554 (Russian Federation), WT/DS556 (Switzerland) and WT/DS564 (Turkey); challenges by Canada and Mexico were withdrawn after agreement with the United States (WT/DS550 (Canada) and WT/DS551 (Mexico). The panel reports were to go to parties in the fall of 2020 and released to the public once translations into the official languages was accomplished. But no report has been released to date. With the impasse on the Appellate Body, it is unclear if the Biden Administration will opt to file appeals should the panel reports not recognize the U.S. national security concerns. Thus, absent a decision by the Biden team, should it lose the WTO cases and not appeal, to eliminate the additional duties on imports from all countries, the UAE’s exports will continue to face the additional 10% duties for the foreseeable future.
Broader interest in Biden Administration approach to Section 232
A recent article in Politico reviews contact by the EU with the Biden team last week seeking an immediate end to tariffs on imports from the EU of both steel and aluminum with a corresponding withdrawal of EU retaliatory tariffs if accomplished. As noted in the Politico article, the tariffs are supported by steel producers, unions (e.g., the USW has many workers in both the steel and aluminum industries) and the primary aluminum producers. Politico, Biden, in first trade move, reimposes a Trump tariff, February 1, 2021, https://www.politico.com/news/2021/02/01/biden-aluminum-tariff-uae-464794.
It is unlikely that the U.S. will agree to withdraw the 232 duties at the present time. The Biden team doesn’t have its trade people in place; there are pending WTO disputes; the underlying problems of global excess capacity in both steel and aluminum continue on with no resolution in sight. The main driver of the excess capacity has been China (though others have contributed). There are no WTO rules that permit effective addressing of such problems, and China has largely ignored calls by its trading partners to address the problem in a meaningful manner.
Still the reversal of President Trump’s January 19, 2021 Proclamation is an interesting first step in the trade arena by the Biden Administration to emphasize that restoring economic health to the U.S. economy is an important component of his starting game plan (along with meaningfully addressing the pandemic). Trade issues will likely be seen through that prism even as the U.S. works within multilateral organizations and with allies on a host of issues of common interest and concern.
If one ever needed confirmation that WTO Members can easily fall out of supporting open markets and working together during a global crisis, the European Union’s actions over the last week to come up with an implementing regulation “making the exportation of certain products subject to the production of an export authorization” provide a glaring example.
The response was to resort to a form of export restraints on vaccines and inputs for vaccines where the European Union and its member states would decide whether shipments to certain third countries (largely wealthier countries around the world) would be allowed. Some statements made by the European Commission and the implementing regulation are embedded below.
“The Canadian press release states in part, ‘As countries face a rise in COVID-19 cases, it is essential that governments minimize disruptions to trade flows in essential medical supplies. Today, members of the Ottawa Group took important steps toward a proposed WTO Trade and Health Initiative, which identifies short-term actions to strenghten supply chains and ensure the free flow of medicines and medical supplies.’
“Similarly the European Commission press release stated that –
“‘Today the Ottawa Group, a group of 13 like-minded World Trade Organisation (WTO) partners including the EU, agreed today on an initiative, calling on the WTO members to increase their cooperation and work toward enhanced global rules to facilitate trade in essential medical goods. The agreement took place as an outcome of the Ottawa Group Ministerial meeting, hosted virtually by Minister Mary Ng of Canada.
“‘The Ottawa Group members called for immediate actions in response to the coronavirus crisis such as exercising a restraint in using any export restrictions, implementing trade-facilitating measures in the area of customs and services, as well as improving transparency.'”
Needless to say, the reaction from trading partners to the imposition of export controls on vaccines was swift and negative. See, e.g., Financial Times, EU faces global criticism over curbs on vaccine exports, 31 January 2021, https://www.ft.com/content/5c15d7ea-aaf6-46f4-924e-30f168dd14dd (“Brussels faces an international backlash over its new controls on vaccine exports as European Commission president Ursula von der Leyen struggles to quell a firestorm over the EU’s handling of vaccine shortages. Canada and Japan raised concerns over export rules requiring manufacturers to obtain permission before shipping Covid-19 jabs outside the EU. South Korea also warned governments against a grab for more vaccines than they need.”); BBC News, Coronavirus: WHO criticises EU over vaccine export controls, 30 January 2021, https://www.bbc.com/news/world-europe-55860540. Because the EU action seemed largely aimed at discontent with news from the British-Swedish company AstraZeneca’s announcement of a sharp contraction in likely shipments to the EU in the first quarter, the Commission’s initial draft of the implementing regulation had the EU creating problems for the Brexit agreement in terms of inspecting goods flowing from Ireland and Northern Ireland to prevent circumvention of products to the U.K. The EC retreated almost immediately on that front. See, e.g., NPR, EU Reverses Move To Restrict Export Of COVID-19 Vaccines To Northern Ireland, January 30, 2021, https://www.npr.org/sections/coronavirus-live-updates/2021/01/30/962454276/eu-reverses-move-to-restrict-export-of-covid-19-vaccines-to-northern-ireland (“The European Union reversed a brief decision to try to restrict the export of COVID-19 vaccines across the border from Ireland into Northern Ireland. European vaccination campaigns have been struggling as supplies of vaccines on the continent have run low. The decision to invoke an emergency protocol of the Brexit deal was seen as an effort to keep supplies from going from the EU to Britain. But within hours of the decision, which could have put checks on the border between the EU member the Republic of Ireland and British-controlled Northern Ireland, Irish and British officials condemned the move.”).
One concern for the global trading system from the EU action, of course, is retaliatory or mirror actions by trading partners. Such concerns are real. See, e.g., Politico, UK weighs vaccine export restrictions, January 29, 2021, https://www.politico.eu/article/uk-weighs-coronavirus-vaccine-export-restrictions/ (“The U.K. government has sought legal advice on preventing coronavirus vaccines or their ingredients being exported, suggesting that ministers are actively considering countermeasures they could deploy if other countries start restricting cross-border movements of vaccines.”).
The worrying actions by the European Union and the continued struggle to get vaccines to the world’s poorest countries led to a joint statement today by the WTO’s four Deputy Directors-General calling for heightened cooperation to get vaccines to all peoples of the world. WTO press release, WTO DDGs call for heightened cooperation on vaccine availability, 1 February 2021, https://www.wto.org/english/news_e/news21_e/ddgra_01feb21_e.htm. (“‘The pandemic is a global problem. This challenge calls for heightened international cooperation, including ensuring the global availability of vaccines. Recalling the joint statement by the Directors-General of the WHO and WTO on 20 April 2020, we call upon Members to work together towards making vaccines available to all. Moreover, the war against the pandemic can only be won when universal coverage in vaccination is achieved.’”). The press release includes a link to the 20 April 2020 joint statement by the Directors-General of the WHO and WTO (embedded below).
As the world enters the month of February, there are 69 countries that report vaccinating at least some people by the end of January. The list, number of vaccinations and number of vaccinations per 100 people are tracked by the Financial Times in its “Covid-19 vaccine tracker: the global race to vaccinate” last updated on February 1, 2021. https://ig.ft.com/coronavirus-vaccine-tracker/. While there are many vaccines in late stage of trials or going through approval processes by the WTO or individual countries, the world is a long way from ensuring equitable access to vaccines at affordable prices at the beginning of February. Hopefully, with production ramp up and more vaccines approved in the coming months, that situation will change by the second quarter of 2021.
While export restraints are not prohibited by the WTO, the world has struggled during the COVID-19 pandemic to keep markets open and ensure availability of medical products to all nations. The EU had early challenges with export restraints that member states were imposing on medical goods including personal protective equipment. However, the EU has attempted to provide leadership in limiting those restraints and supporting the COVAX mechanism for getting vaccines to the poorest countries as well as others participating in the COVAX approach.
The combination of a greater than expected second surge of COVID-19 cases in the fall and the rapid spread of more contagious variants in the last several months has posed significant challenges to many countries but including those within the EU. Some internal challenges and different approaches to vaccine contracting led the EU to sign contracts later and to approve vaccines for use later than some other countries. With manufacturing challenges for a number of suppliers, the EU has found itself in a situation where member states were extremely unhappy with the inability to get more people vaccinated sooner. The European Commission’s efforts to improve its vaccine situation has generated a great deal of negative press, led to the imposition of export restraints that could lead to a significant breakdown in supply chains and potential retaliation by trading partners adversely affected and harms the EU’s efforts to be a leader for global unity in addressing the pandemic.
“Virtual Informal WTO Ministerial Gathering, 29 January 2021
“Personal Concluding Remarks by the Chair, President of the Swiss Confederation and Head of the Federal Department for Economic Affairs, Education and Research, Guy Parmelin, Switzerland
“29 Ministers and high officials representing a broad spectrum of the WTO membership attended this year’s Informal World Trade Organization (WTO) Ministerial Gathering in virtual format. In concluding and with warm thanks to all participants for their contributions, I would like to summarise the main points from our discussions as follows:
“• Ministers stressed the urgency of the swift appointment of a new WTO Director-General as well as the confirmation of the date and venue of the 12th Ministerial Conference (MC12).
“• Ministers reiterated their determination to maintain a credible multilateral trading system and to restore a climate of mutual trust.
“• Ministers expressed their concerns about the enormous social and economic impact of the COVID-19 crisis. They highlighted the relevance of trade and the role of the WTO in containing the pandemic and promoting recovery. Many Ministers underlined the importance of ensuring the development of as well as an equitable and affordable access to medical goods, including vaccines. They addressed ways and means to achieve these goals, including the implementation of measures facilitating trade, the role of intellectual property and transparency.
“• Ministers regretted that the negotiations on fisheries subsidies could not be completed in accordance with the end-2020 deadline foreseen in SDG 14.6. In light of the significance of this process for the sustainability of global fisheries, Ministers concurred that a comprehensive and effective agreement on fisheries subsidies should be concluded as soon as possible. Ministers agreed to step up efforts with a view to finding mutually acceptable solutions consistent with all the elements of the negotiating mandate.
“• Ministers highlighted the importance of restoring a fully functional WTO dispute settlement system, which is a key pillar of the rules-based multilateral trading system.
“• Many participants argued for further progress in agricultural trade policy reform at MC12 and asked for an outcome on domestic support and other issues. The issues of public stockholding and the special safeguard mechanism were highlighted by several Ministers.
“• Many Ministers called for tangible outcomes, by MC12, on the Joint Statement Initiatives. Inter alia finalizing the process on Services Domestic Regulation and making substantial progress on E-commerce and Investment Facilitation as well as on Trade and Women’s Economic Empowerment.
“• The need to reform the WTO was widely acknowledged. A number of Ministers insisted on advancing diverse issues related to the special and differential treatment of developing and least developed countries. Some participants proposed to adjust WTO rules to present-day economic and competitive conditions.
“• Several Ministers supported new initiatives launched in response to global challenges such as the structured discussions on Trade and Environmental Sustainability.
“• Ministers reaffirmed their commitment to engage in the preparations for MC12 in order to advance key issues.”
The participants at this year’s informal ministerial included officials from Argentina, Australia, Brazil, Canada, Chad (coordinator for LDC Group), Chile, China, Egypt, European Union, India, Indonesia, Jamaica (Coordinator ACP Group), Japan, Kazakhstan, Kenya, Korea, Mauritius (Coordinator African Group), Mexico, New Zealand, Norway, Russian Federation, Saudi Arabia, Singapore, South Africa, Switzerland (Chair), Thailand, Turkey, United Kingdom, United States and three officials with WTO roles — H.E. Mr. David Walker (New Zealand), WTO General Council Chair; H.E. Mr. Santiago Wills (Colombia), WTO Chair of the Negotiating Group on Rules, H.E. Mr. Alan Wolff, WTO Deputy Director-General. The full list with titles is embedded below.
It was also reported that the United States, consistent with the Biden Administration’s focus on the COVID-19 pandemic and climate change, expressed interest in promoting recovery from the COVID-19 pandemic and concluding an ambitious fisheries subsidies agreement. See Inside U.S. Trade’s World Trade Online, Biden administration strikes ‘constructive’ tone in first word on WTO approach, January 29, 2021, https://insidetrade.com/daily-news/biden-administration-strikes-%E2%80%98constructive%E2%80%99-tone-first-word-wto-approach. Fisheries subsidies negotiations have been going on for some twenty years, and many Members have remained more concerned with keeping their subsidies in place than agreeing to disciplines that would create conditions for sustainable fishing going forward. The Interest in the Biden Administration in working within the WTO on joint steps to promote recovery from the pandemic is different from the approach pursued by the Trump Administration which didn’t want to look at actions possible within the WTO (other than limits on export restraints on agricultural goods) while the world was dealing with the pandemic. The U.S. statement should mean more interest in exploring issues like those raised by the Ottawa Group. See 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/.
Other issues flagged in the Swiss President’s concluding remarks are issues of particular interest to some or many countries but not topics of clear agreement. For example, while it is likely that the United States will look for ways to resolve its concerns about longstanding problems in the WTO’s dispute settlement system, particularly around the Appellate Body, it is unlikely that there will be a swift resolution of the U.S. concerns, and hence there will likely be a continued impasse for at least much of 2021 on the return of a functioning two-stage dispute settlement system.
Progress is being made on Joint Statement Initiatives including e-commerce, services domestic regulation, investment facilitation and women’s empowerment. An open issue for these and topics in the sphere of trade and the environment (e.g., environmental goods agreement) is whether benefits provided by participants will be made available on an MFN basis or limited to participants, with the option of other Members to join in the future. See 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/. For many Members liberalization could be speeded up if benefits in sectoral agreements go to those participating only while leaving the door open for other Members to join later when they see the value for them.
And on the important topic of WTO reform beyond the items listed above, there is little current agreement on how to deal with industrial subsidies and other practices that lead to massive global excess capacity, or on how to address access to special and differential treatment and many other areas of importance to some or many WTO Members.
Deputy Director-General Alan Wolff provided a statement during the virtual informal ministerial urging WTO Members to make 2021 a year of accomplishments. The WTO press release can be found here. WTO News, DDG Wolff urges WTO ministers to address the pandemic and make 2021 a year of action, 29 January 2021, https://www.wto.org/english/news_e/news21_e/igo_29jan21_e.htm. DDG Wolff’s statement is copied below.
“My thanks to our Swiss hosts and to President Parmelin both for his remarks today and for his very thoughtful address on the occasion of the 25th anniversary celebration of the WTO last November.
“Ministers, you can make 2021 a year of substantial accomplishments at the WTO.
“There has already been a beginning. In the first action of the year, Members accounting for most of the world’s agricultural exports committed to refrain from imposing export restrictions on purchases made by the World Food Program.
“The anticipated appointment of a new Director-General will bring needed leadership in moving toward concrete results. But she can succeed only with your active engagement.
“I urge you not to wait for the Twelfth Ministerial Conference, delayed by the pandemic, to move negotiations forward to positive outcomes.
“There is no reason why the twenty-year negotiation on fisheries subsidies cannot be concluded successfully — without a sacrifice of ambition — in the next few months. Success hinges on Members’ willingness to accept a significant level of discipline on their own subsidies. Political decisions and your active engagement will be required to bring about success.
“I urge you to address ‘trade and health’ forcefully and immediately. Last year, trade made a vitally important contribution in supplying needed medical supplies to deal with COVID-19. Proposals as to what more can be done must be deliberated now. Cooperation on trade can accelerate access to vaccines. There can be no higher priority.
“Consider how the WTO can further contribute to the economic recovery. Members can take steps to ensure enhanced transparency, work to eliminate unnecessary barriers and agree that new restrictions will not be imposed. Trade finance must be restored. The WTO convened the major international financial organizations and banks to address this need in the aftermath of the financial crisis and it can do so now again.
“’Trade and climate’ must be on the WTO agenda. Carbon border adjustment measures will likely result in conflicts unless Members engage in joint efforts to find mutually beneficial solutions. The heightened interest of Members in a broad range of other environmental issues such as plastics pollution and the circular economy can be reflected in new agreements. The WTO can be more visible as a steward of the planet by reviving and concluding the Environmental Goods Agreement.
“The Joint Statement Initiatives on e-commerce, investment facilitation, and services domestic regulation can bear fruit this year, building on what was achieved with respect to small businesses last year. In addition, more progress can be made on the economic empowerment of women through international trade.
“Concerns over income inequality have been growing. The WTO’s rules-based system needs to be seen not only among countries but also within countries, as responsive to the needs of workers, farmers and all who wish to engage in international trade. But international trade rules cannot substitute for domestic policy actions to make growth more inclusive. When large numbers of people are unhappy with how the economy is working for them, trade will often receive undeserved blame. The WTO is about fairness. Its work will never be done in pursuit of that objective, but further progress can be made this year.
“There can be an outcome on agriculture — at least a down-payment and a defined work program going forward.
“During 2021, the WTO can likely welcome new WTO Members, as it continues to move towards universal coverage. Comoros and Bosnia-Herzegovina may be ready, and over a dozen others are making progress.
“Last but not least, ‘WTO reform’ can become a reality, with actions taken to —
“- facilitate rule-making with wide participation,
“- achieve heightened enforcement through binding dispute settlement in a manner agreed by all, and
“- provide a strong mandate for a Secretariat to deliver all needed support to Members and to achieving the mission of the WTO.
“We should greet this year with optimism and re-dedication. With your strong engagement, 2021 can be a year to remember for what is achieved.
The challenge for the WTO in 2021 will be whether Members can come together in fact to achieve many of the important opportunities and needs in front of the Membership. While the history of the WTO since 1995 and the major divisions among Members at the present time would strongly suggest that 2021 will not achieve many of the things that are needed and possible, hope springs eternal.
The Trump Administration did an excellent job of identifying problems with the operation of the WTO whether from the longstanding failures of the dispute settlement system, to the existential challenges to the viability of the WTO from major Members whose economies have not converged to a full market orientation, to the out-of-date rules around special and differential treatment to all who claim developing country status regardless of economic development of individual members, to the need for greater transparency in many areas, including importantly subsidies, to the failure of the WTO to update rules to address changing technology and trade issues.
The Biden Administration has indicated its intention to work within multilateral institutions, including the WTO. Early action by the United States on the Director-General selection issue could provide positive energy to WTO Members in the coming months. There are topics where success can be made in 2021 either multilaterally or plurilaterally. But a lot of what is needed for meaningful WTO reform will be difficult, if not impossible, to achieve in the short term. Hopefully, the Biden team will stay the course to achieve reform that both returns the WTO playing field to the level agreed at the time of concluding the Uruguay Round, finds ways to deal with the massive distortions not presently covered by WTO rules, works with others to bring the WTO into the 21st century and addresses the critical issues for global prosperity and sustainable development.
On January 21, 2021, the WTO panel that had been composed back on 5 December 2018 issued its report in UNITED STATES – ANTI-DUMPING AND COUNTERVAILING DUTIES ON CERTAIN PRODUCTS AND THE USE OF FACTS AVAILABLE, WT/DS539/R. Korea had requested consultations on a series of antidumping and countervailing investigations and reviews on February 14, 2018 and a panel had been established on May 28, 2018. See WT/DS539/R at para. 1.1, 1.3 and 1.5.
Korea mounted a broad attack on the U.S. Department of Commerce’s use of facts available in a number of antidumping and countervailing duty proceedings largely pertaining to the same major Korean company with a long record of participation in various U.S. trade remedy cases.
For investigating authorities working under a statutory timeline and time limits existing within the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (“ADA”) and the Agreement on Subsidies and Countervailing Measures (“ASCM”), it is important that parties provide complete information in a timely manner. While WTO obligations require administering authorities to flag deficiencies and provide an opportunity to respondents to correct such deficiencies, administering authorities need the ability to cut off submissions and move to decision at a reasonably early period to permit all work to be done in verifying information (investigations), providing other parties a chance to comment and challenge information provided.
Where a party fails to provide information requested, the administering authority is authorized to use facts available. As stated in Article 6.8 of the ADA and Article 12.7 of the ASCM, “In cases in which any interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available.” Art. 6.8 of the ADA then adds, “The provisions of Annex II shall be observed in the application of this paragraph.” Similar language is not in Art. 12.7 of the ASCM (changes to the ADA during the Uruguay Round of negotiations were typically adopted in the ASCM as they related to trade remedy proceedings, although changes made at the end of the negotiations to the ADA were not brought into the ASCM due to timing limitations).
Annex II of the ADA consists of seven paragraphs and is copied below.
“Annex II: Best Information Available in Terms of Paragraph 8 of Article 6
“1. As soon as possible after the initiation of the investigation, the investigating authorities should specify in detail the information required from any interested party, and the manner in which that information should be structured by the interested party in its response. The authorities should also ensure that the party is aware that if information is not supplied within a reasonable time, the authorities will be free to make determinations on the basis of the facts available, including those contained in the application for the initiation of the investigation by the domestic industry.
“2. The authorities may also request that an interested party provide its response in a particular medium (e.g. computer tape) or computer language. Where such a request is made, the authorities should consider the reasonable ability of the interested party to respond in the preferred medium or computer language, and should not request the party to use for its response a computer system other than that used by the party. The authority should not maintain a request for a computerized response if the interested party does not maintain computerized accounts and if presenting the response as requested would result in an unreasonable extra burden on the interested party, e.g. it would entail unreasonable additional cost and trouble. The authorities should not maintain a request for a response in a particular medium or computer language if the interested party does not maintain its computerized accounts in such medium or computer language and if presenting the response as requested would result in an unreasonable extra burden on the interested party, e.g. it would entail unreasonable additional cost and trouble.
“3. All information which is verifiable, which is appropriately submitted so that it can be used in the investigation without undue difficulties, which is supplied in a timely fashion, and, where applicable, which is supplied in a medium or computer language requested by the authorities, should be taken into account when determinations are made. If a party does not respond in the preferred medium or computer language but the authorities find that the circumstances set out in paragraph 2 have been satisfied, the failure to respond in the preferred medium or computer language should not be considered to significantly impede the investigation.
“4. Where the authorities do not have the ability to process information if provided in a particular medium (e.g. computer tape), the information should be supplied in the form of written material or any other form acceptable to the authorities.
“5. Even though the information provided may not be ideal in all respects, this should not justify the authorities from disregarding it, provided the interested party has acted to the best of its ability.
“6. If evidence or information is not accepted, the supplying party should be informed forthwith of the reasons therefor, and should have an opportunity to provide further explanations within a reasonable period, due account being taken of the time-limits of the investigation. If the explanations are considered by the authorities as not being satisfactory, the reasons for the rejection of such evidence or information should be given in any published determinations.
“7. If the authorities have to base their findings, including those with respect to normal value, on information from a secondary source, including the information supplied in the application for the initiation of the investigation, they should do so with special circumspection. In such cases, the authorities should, where practicable, check the information from other independent sources at their disposal, such as published price lists, official import statistics and customs returns, and from the information obtained from other interested parties during the investigation. It is clear, however, that if an interested party does not cooperate and thus relevant information is being withheld from the authorities, this situation could lead to a result which is less favourable to the party than if the party did cooperate.” (emphasis added).
Antidumping and countervailing duty proceedings in the United States are very transparent with full access to information on the record available to parties under administrative protective order and with many opportunities to submit comments, raise questions, seek clarification or respond to additional inquiries flowing from earlier responses. It is quite common for Commerce to receive requests for more time to respond to the initial questionnaire and to any supplemental requests flowing from developments. Responding parties can determine whether or not to submit all information, partial information or no information. Questionnaire responses are often incomplete or adopt interpretations of what has been requested to provide less than complete information. In antidumping investigations, it is not uncommon for respondent data bases to change during the course of the investigation, sometimes markedly. Briefing after the preliminary determination permits challenges to the preliminary determination by all parties, including challenges to use of facts available. While there are always legal issues that are briefed, facts available issues are fact-based issues flowing from whether parties cooperated, withheld information, failed to supply requested information, etc., and if so, what alternative information is available that can be used.
The ADA provides special provisions on dispute settlement in Article 17.6. The approach on review of facts is laid out in Article 17.6(i) of the ADA (there is no counterpart in the ASCM for the reason that Art. 17.6 of the ADA was added at the end of the Uruguay Round without chance to consider adopting a parallel provision in the ASCM). Art. 17.6(i) states:
“17.6 In examining the matter referred to in paragraph 5:
“(i) in its assessment of the facts of the matter, the panel shall determine whether the authorities’ establishment of the facts was proper and whether their evaluation of those facts was unbiased and objective. If the establishment of the facts was proper and the evaluation was unbiased and objective, even though the panel might have reached a different conclusion, the evaluation shall not be overturned;”
Article 17.6 was added to the ADA at the end of the Uruguay Round at the insistence of the United States which was interested in seeing that very complicated and detailed administrative proceedings were not second guessed by panels or the Appellate Body which would not have been involved in the proceeding or have access to all materials. Art. 17.6(i) deals with providing deference to administering authorities on facts. Art. 17.6(ii) does the same for legal interpretations for provisions subject to more than one meaning.
The panel report, following other panel and Appellate Body reports that have been problematic from the U.S. perspective, doesn’t view Art. 17.6(i) as being deferential to an investigating authority as long as the authority hasn’t conducted the investigation in a biased or non-objective manner or somehow established facts improperly. See WT/DS539/R at para. 7.23 – 7.36 (after a review of the meaning of ADA Art. 6.8 and Annex II, the panel sums its view of the panel’s task to be the following: “In sum, we consider that the terms of Article 6.8, interpreted in light of their context and object and purpose, require investigating authorities to select – in an unbiased and objective manner – those facts available that constitute reasonable replacements for the missing “necessary” information in the specific facts and circumstances of a given case. In doing so, investigating authorities must take into account all facts that are properly available to them. In selecting the replacement facts, Article 6.8 does not require investigating authorities to select those facts that are most ‘favourable’ to the non-cooperating party. Investigating authorities may take into account the procedural circumstances in which information is missing, but Article 6.8 does not condone the selection of replacement facts for the purpose of punishing interested parties.”).
In reading the panel report, the Commerce Department is not given deference for its decisions of what facts available should be used. Thus, that violations were found for how Commerce determined facts available in each of the six proceedings reflect the panel reaching a different conclusion than Commerce. But while the panel may have reached a different result than Commerce, that by itself does not constitute a basis under Art. 17.6(i) to find a violation.
The constant limiting by panel and Appellate Body reports of the ability to utilize trade remedy agreements is, of course, the main substantive concern that the United States has with the operation of the WTO’s Dispute Settlement system, although there are examples of the same problem in other areas covered by panel or AB reports as well. Last week’s panel report on Korea’s challenge to U.S. antidumping and countervailing duty proceedings on the use of facts available continues to undermine the legitimacy of WTO dispute settlement.
Accordingly, the Biden Administration should file an appeal from last week’s panel decision and ensure that any eventual resolution of the Appellate Body impasse includes a restoration of rights that have narrowed or eliminated under the trade remedy or trade defense agreements (ADA, ASCM and safeguard).
“Global services trade in the third quarter of 2020 fell 24% compared to the same period in 2019, according to statistics released by the WTO on 26 January. This represents only a small uptick from the 30% year-on-year decline registered in the second quarter, in marked contrast to the much stronger rebound in goods trade.
“Preliminary data further suggest that, in November, services trade was still 16% below 2019 levels. Prospects for recovery remain poor since a second wave of COVID-19 infections necessitated new, stricter lockdown measures in many countries, with tightened restrictions on travel and related services extending into the first quarter of 2021.
“The latest statistics confirm earlier expectations that services trade would be harder hit by the pandemic than goods trade, which was only down 5% year-on-year in the third quarter. Foregone expenditures on tradeable services could be directed elsewhere, with consumers shifting to goods instead.”
Travel services in the third quarter were down 68% from the third quarter of 2019, a slight improvement from the 2nd quarter (down more than 80%). Transport services were down 24% in the third quarter while other services were down 2%.
With new lockdowns and travel restrictions occurring in the first quarter of 2021, the travel and tourism sector (including air, hotel, restaurant, entertainment sectors) is in for a continued difficult 2021 (at least the first half for some developed countries depending on vaccination staging).
In an update to its World Economic Outlook released earlier this week, the IMF noted that while global economic growth in 2021 and 2022 is expected to be somewhat stronger than previously projected, the level of growth is dependent on vaccine availability and vaccinations and whether there is widespread availability to peoples of the world. See IMF, World Economic Outlook Update, January 2021, https://www.imf.org/en/Publications/WEO/Issues/2021/01/26/2021-world-economic-outlook-update. The header and first three paragraphs of the update are copied below.
“Policy Support and Vaccines Expected to Lift Activity
“Although recent vaccine approvals have raised hopes of a turnaround in the pandemic later this year, renewed waves and new variants of the virus pose concerns for the outlook. Amid exceptional uncertainty, the global economy is projected to grow 5.5 percent in 2021 and 4.2 percent in 2022. The 2021 forecast is revised up 0.3 percentage point relative to the previous forecast, reflecting expectations of a vaccine-powered strengthening of activity later in the year and additional policy support in a few large economies.
“The projected growth recovery this year follows a severe collapse in 2020 that has had acute adverse impacts on women, youth, the poor, the informally employed, and those who work in contact-intensive sectors. The global growth contraction for 2020 is estimated at -3.5 percent, 0.9 percentage point higher than projected in the previous forecast (reflecting stronger-than-expected momentum in the second half of 2020).
“The strength of the recovery is projected to vary significantly across countries, depending on access to medical interventions, effectiveness of policy support, exposure to cross-country spillovers, and structural characteristics entering the crisis.”
On the IMF webpage for the update there is a colored chart showing projected growth for certain groupings of countries. The Chart is embedded below.
At the same time, Africa which had recorded relatively few cases and deaths from COVID-19 for much of 2020 is now experiencing significant increases in both which is overwhelming health systems in some areas. Financial Times, Coronavirus second wave surges across Africa, Mildly hit the first time round, the continent’s death rate has now overtaken the global average, 17 January 2021, https://www.ft.com/content/3d000093-87a3-48f3-8bb5-4ad9a8316aa1
The COVAX facility designed to help many countries (including many poor countries) access vaccines has a significant funding shortfall at present despite the U.S. rescinding its notice of withdrawal from the WHO and its agreement to participate in COVAX. Reuters, U.S. alone won’t fill COVAX funding gap, lead official says, January 22, 2021,https://news.trust.org/item/20210122130041-jr1j3. The Secretary-General of the World Health Organization has expressed concern that the world will fail to make vaccines available to all at affordable prices in a timely manner. WHO Director-General, Dr Tedros Adhanom Ghebreyesus, Debate on the report “COVID-19 vaccines: ethical, legal and practical considerations,” 27 January 2021, https://www.who.int/director-general/speeches/detail/debate-on-the-report-covid-19-vaccines-ethical-legal-and-practical-considerations. The WHO Director-General’s speech is embedded below.
“A study commissioned by the International Chamber of Commerce (ICC) Research Foundation has found that the global economy stands to lose as much as US$9.2 trillion if governments fail to ensure developing economy access to COVID-19 vaccines
“The COVID-19 pandemic had a devastating effect on both lives and livelihoods in 2020. The arrival of effective vaccines can be a major game changer in mitigating the economic, social and health consequences of the virus in the year ahead.
“However, evidence to date suggests that access to these vaccines is likely to be highly uneven across countries. Advanced economies have in recent months pursued a policy of securing the global supply of frontrunner vaccines – as a result severely limiting their availability in emerging markets. Moreover, the Access to COVID-19 Tools (ACT) Accelerator – the proven global platform to enable equitable access to COVID-19 test, treatments and vaccines – remains underfunded by the world’s largest economies, constraining its ability to procure vaccines at scale for the developing world.
“A new study highlights the major risks to the global economy inherent in this uncoordinated approach to vaccine access. Using a sophisticated model – that builds upon an earlier NBER and IMF Working Paper – to properly the assess the economic toll of a prolonged pandemic, the research shows that no economy can recover fully from the COVID-19 pandemic until vaccines are equally accessible in all countries.
“In short, advanced economies that can vaccinate all of their citizens are shown to remain at risk of a sluggish recovery with a drag on GDP if infection continues to spread unabated in emerging markets. These losses dwarf the donor finance needed to enable vaccines to be procured for everyone, everywhere – making a clear ‘investment case’ for full capitalization of the ACT Accelerator and a coordinated global approach to distribution.”
While the recent releases from the WTO and IMF show somewhat better rebounds from the effects of the pandemic in the third quarter of 2020 (WTO) and into 2021 and 2022 (IMF), the key to global recovery lies in the approval of effective vaccines and the equitable and affordable distribution and vaccinations of populations around the world. Major advanced economies, many suffering from high infection and death rates in 2020, are using their financial muscle to secure contracts to deal with getting the pandemic under control within their borders. While there has been extensive work to create a mechanism to get vaccines to other countries in 2021 and 2022, there remain funding needs and questions about whether vaccines will in fact be available for use for these other countries. A lot depends on the efforts to ensure equitable distribution of vaccines to all those in need. There is a large opportunity for governments, businesses, and private organizations and citizens to help fill the gap. Because the failure to do so carries a likely huge cost, making sure funds are available to get the world vaccinated is in everyone’s interest. The outcome will determine global growth rates and trade flows for the coming years.
The Trump Administration had opposed forming a consensus behind Dr. Okonjo-Iweala despite her having received the largest level of support from WTO Members and, pursuant to the procedures being followed (and that were consistent with procedures adopted by the General Council at the end of 2002) was found to be the candidate most likely to command a consensus. According to para. 19 of the 2002 procedures, “At the end of the final stage of the consultative process, the Chair, with the support of the facilitators, shall submit the name of the candidate most likely to attract consensus and recommend his or her appointment by the General Council.” WT/L/509, para. 19. Korea’s candidate, Trade Minister Yoo Myung-hee, did not withdraw as required by the procedures. As noted, the United States indicated it could not join a consensus around Dr. Okonjo-Iweala on the basis of the belief that the WTO needed a Director-General with extensive trade expertise and Dr. Okonjo-Iweala did not possess that background. As a result, the Chair of the General Council has not put forward Dr. Okonjo-Iweala to the General Council for a decision, and the WTO remains without a Director-General.
The letter sent to President Biden was signed by thirty-seven individuals, many with prior State Department responsibilities (many involving Africa), some from USTR and other government agencies or the White House (some with Africa responsibilities), some from private companies (often working in Africa) or from academia. The list as it appears in the All Africa publication with stated prior and current affiliations is copied below.
The Hon. Mimi Alemayehou Former Executive Vice President, U.S. Overseas Private Investment Corporation (OPIC) Former U.S. Executive Director of the African Development Bank
Ambassador Johnnie Carson Former U.S. Assistant Secretary of State for Africa Affairs Former U.S. Ambassador to Kenya, Zimbabwe, and Uganda
Teresa Clarke Chairman and CEO, Africa.com
Ambassador Herman J. “Hank” Cohen Former U.S. Assistant Secretary of State for African Affairs President & CEO, Cohen and Woods International
Akunna Cook Former U.S. Foreign Service Officer Founder and Principal, Drake Road Strategies
John G. Coumantaros Chairman of Flour Mills of Nigeria Chairman CEO of Southern Star Shipping Co Inc (New York) Founding Member of US Nigeria Council
Ambassador Ruth Davis Former U.S. Ambassador to the Republic of Benin Former Director, U.S. Foreign Service Institute Former Director General, U.S. Foreign Service and Director of Human Resources
The Hon. Vivian Lowery Derryck Former Deputy Assistant Secretary (EEO and Civil Rights), U.S. Department of State Founder of the Bridges Institute Former Assistant Administrator for Africa, USAID
The Hon. Lauri Fitz-Pegado Former Assistant Secretary Director General, U.S. Foreign Commercial Service
Melvin Foote President & CEO, Constituency for Africa
The Hon. Tony Fratto Former Assistant Secretary, U.S. Treasury Former White House Deputy Press Secretary Managing Partner Hamilton Place Strategies
Ambassador Jendayi Frazer Former U.S. Assistant Secretary of State, Bureau of African Affairs Former U.S. Ambassador to South Africa Former Special Assistant to the President & Senior Director for African Affairs, National Security Council President & CEO, 50 Ventures LLC
Ambassador Michelle D. Gavin Former U.S. Ambassador to Botswana Former Senior Director for Africa, National Security Council
Dr. Gloria Herndon Former Foreign Service Officer, U.S. Department of State Chair Corporate Board, National Association for Equal Opportunity in Higher Education (NAFEO) CEO, GB Group
Cameron Hudson Former Director, African Affairs, National Security Council Senior Fellow, Atlantic Council Africa Center
Ambassador Makila James (ret.) Former Deputy Assistant Secretary, East Africa and The Sudans, U.S. Department of State Former U.S. Ambassador to The Kingdom of Swaziland
Ambassador (ret.) Howard F. Jeter Former U.S. Ambassador to Nigeria and Botswana Former Special Presidential Envoy to Liberia
Jeffrey Krilla Former Deputy Assistant Secretary of State
Florie Liser Former Assistant U.S. Trade Representative for Africa President and CEO of Corporate Council on Africa (CCA)
Clay Lowery Former Assistant Secretary, U.S. Treasury Former Director, International Finance, National Security Council
Ambassador (ret.) Terence P. McCulley Former U.S. Ambassador to Mali, Nigeria and Côte d’Ivoire Chairman, US-Nigeria Council for Food Security, Trade and Investment
Mora McLean President Emerita, Historian, and Program Strategist, The Africa-America Institute Former Chair, USTR Trade Advisory Committee on Africa
Cheryl Mills Former Counselor and Chief of Staff, Office of the Secretary, U.S. Department of State Former Deputy Counsel to the President, The White House
Todd Moss, PhD Former U.S. Deputy Assistant Secretary of State
Ambassador John Negroponte First Director, National Intelligence Former Ambassador to the United Nations Former Deputy Secretary of State
The Hon. Constance Berry Newman Former Assistant Secretary of State for African Affairs Chair of the African Renaissance and Diaspora Network
Thomas R. Nides Former Chief of Staff, Office of the United States Trade Representative Former Deputy Secretary of State for Management and Resources, U.S. Department of State Vice Chairman, Morgan Stanley
Bernadette Paolo Former Staff Director, U.S. House of Representatives Subcommittee on Africa Co-founder & Former CEO, The Africa Society
Bobby J. Pittman Deputy Assistant Secretary for International Finance and Debt, U.S. Department of Treasury Special Assistant to the President & Senior Director for African Affairs, National Security Council, White House
Pearl Robinson Associate Professor, Tufts University Past President, The African Studies Association
Ambassador Robin Renee Sanders Former U.S. Ambassador to Nigeria Former U.S. Ambassador to ECOWAS Former U.S. Ambassador to Republic of Congo Former Africa Director, National Security Council CEO-FEEEDS
Jeannine B. Scott Chairman, Constituency for Africa (CFA) Principal, America to Africa Consulting (A2A) Former Alternate & Advisor to the U.S. ED at the African Development Bank
Timothy Shortley Former Director, African Affairs, National Security Council Chief Operating Officer, 50 Ventures, LLC
Ambassador John Simon Former Senior Director, National Security Council Former U.S. Ambassador to the African Union Managing Partner, Total Impact Capital Member, USTR Trade Advisory Committee for Africa
The Hon. Gayle Smith Former Administrator, USAID Former Special Assistant to the President & Senior Director for African Affairs, National Security Council
Joseph E. Stiglitz Former member and Chair of the Council of Economic Advisers University Professor, Columbia University Chief Economist, Roosevelt Institute Former Chief Economist of the World Bank Recipient of Nobel Memorial Prize in Economics, 2001
Rosa Whitaker Former Assistant United States Trade Representative for Africa President, The Whitaker Group
It is unclear whether the Biden Administration will take trade actions ahead of having the USTR nominee, Katherine Tai, confirmed. In prior posts, I have indicated that I hoped the Biden Administration would quickly alert the WTO to its willingness to join a consensus for Dr. Ngozi Okonjo-Iweala becoming the next Director-General. While there is little doubt that Minister Yoo has a greater trade background that Dr. Okonjo-Iweala, a trade background is not critical to being a successful WTO Director-General. Dr. Okonjo-Iweala has very strong credentials and was supported by the vast majority of the membership. If the U.S. indicates it is willing to join the consensus that action will almost certainly result in Korea withdrawing Minister Yoo as a candidate. These two actions would put the WTO membership back on track to abide by the procedures agreed by the General Council and being used in the 2020 Director-General selection process. Most importantly, it would get the WTO a new Director-General. Such a result is a first step in moving the WTO in the right direction going forward. The letter from former U.S. officials and others is the right message for the Biden Administration to receive. Hopefully, the President will act quickly on this particular issue.
In yesterday’s post (January 24), I reviewed the continued widespread human rights issue of child labor and forced labor in the production of a wide range of products (agricultural, manufactured, mined products) in many countries around the world. Such actions raise trade concerns by distorting the costs of production of products made with such labor and hence potentially skewing trade flows towards producers “benefitting” from the use of such labor. See January 24, 2021: Forced labor and child labor – a continued major distortion in international trade for some products, https://currentthoughtsontrade.com/2021/01/24/forced-labor-and-child-labor-a-continued-major-distortion-in-international-trade-for-some-products/. In the United States, imports of products made with such labor are supposed to be banned. I had concluded by arguing that the WTO should develop information that would help Members understand the quantity of products that are made with child or forced labor and permit Members to then decide what actions were needed to eliminate or offset such practices.
I received a comment on yesterday’s post from Amb. Dennis Shea, the Former Deputy United States Trade Representative and Chief of Mission on international trade issues in Geneva and the Permanent Representative of the U.S. to the WTO (2017-January 2021). Amb. Shea’s comment focused on cotton. He said, “The WTO’s Committee on Agriculture in Special Session (COA-SS) and its Cotton Subcommittee are charged with examining all trade-distorting policies affecting the cotton sector in order to discharge its mandate properly. It seems to me that the COA-SS and Cotton Subcommittee should examine recent reports of widespread forced labor in the picking of cotton in the Xinjiang Province of China. It is my understanding that Xinjiang accounts for nearly 20 percent of global cotton exports, so it’s probably not a stretch to say that forced labor practices there (horrific from a human rights standpoint) are also distorting global cotton prices.”
While cotton is but one of many products believed to be produced by child and/or forced labor, it is an important product globally. The fact that there may be an existing WTO mechanism for developing the relevant information is potentially important.
In yesterday’s post, I had referenced an upcoming WITA virtual webinar, The U.S. Moves Against Forced Labor in Xinjiang, being held this Wednesday, January 27. One of the speakers at the event is Dr. Adrian Zenz, Senior Fellow in China Studies, Victims of Communism Memorial Foundation, Washington, D.C. One of the papers referenced in a recent WITA note is by Dr. Zenz for the Center for Global Policy entitled “Coercive Labor in Xinjiang: Labor Transfer and the Mobilization of Ethnic Minorities to Pick Cotton” (December 2020), https://cgpolicy.org/wp-content/uploads/2020/12/20201214-PB-China-Zenz-1-3.pdf. The paper confirms that Xinjiang produces 20% of global cotton and nearly 84.9% of all cotton produced in China. Id. at 3. The Executive Summary of the paper states in part (page 3) —
“The evidence shows that in 2018, three Uyghur regions alone mobilized at least 570,000 persons into cotton-picking operations through the government’s coercive labor training and transfer scheme. Xinjiang’s total labor transfer of ethnic minorities into cotton picking likely exceeds that figure by several hundred thousand.
“Despite increased mechanization, cotton picking in Xinjiang continues to rely strongly on manual labor. In 2019, about 70 percent of the region’s cotton fields had to be picked by hand – especially the high-quality long-staple cotton predominantly grown in southern Xinjiang’s Uyghur regions, where mechanized picking shares are low. State policies have greatly increased the numbers of local ethnic minority pickers, reducing reliance on outside Han Chinese migrant laborers. The intensive two- to three-month period of cotton picking represents a strategic opportunity to boost rural incomes, and therefore plays a key role in achieving the state’s poverty alleviation targets. These targets are mainly achieved through coercive labor transfers.
“Cotton picking is grueling and typically poorly paid work. Labor transfers involve coercive mobilization through local work teams, transfers of pickers in tightly supervised groups, and intrusive on-site surveillance by government officials and (in at least some cases) police officers. Government supervision teams monitor pickers, checking that they have a “stable” state of mind, and administer political indoctrination sessions. Some regions put Uyghur children and elderly persons into centralized care while working-age adults are away on state-assigned cotton-picking work assignments. While not directly related to the campaign of mass internment, these labor transfers can include persons who have been released from internment camps.
“The data presented in this report provides strong evidence that the production of the majority of Xinjiang’s cotton involves a coercive, state-run program targeting ethnic minority groups.”
China is not the only country where the U.S. Department of Labor has identified production of cotton is likely done with child labor, forced labor or child labor and forced labor. See USDOL, 2020 List of Goods Produced by Child Labor or Forced Labor, September 2020, https://www.dol.gov/sites/dolgov/files/ILAB/child_labor_reports/tda2019/2020_TVPRA_List_Online_Final.pdf. Indeed many of the world’s largest cotton producers are listed in the report as likely producing cotton with child labor, forced labor or both child labor and forced labor:
Child labor and forced labor: China, India (cottonseed), Turkmenistan.
In the past there has been one WTO dispute on subsidies to cotton producers in the United States. See UNITED STATES – SUBSIDIES ON UPLAND COTTON, WT/DS267 (case brought by Brazil). I have been unable to find information on the WTO webpage that indicates the question of child or forced labor as a subsidy or other form of nontariff barrier has ever been examined at the WTO whether on cotton or more broadly.
For the last seventeen years, there has been concern about distortions to the cotton trade and the harm to countries for which cotton is a major export product. The breakout of cotton occurred at the request of the so-called Cotton Four — Benin, Burkina Faso, Chad and Mali. See Cotton, https://www.wto.org/english/tratop_e/agric_e/cotton_e.htm.
“Cotton is discussed at the WTO on two tracks: 1) the trade reforms needed to address subsidies and high trade barriers for cotton, and 2) the assistance provided to the cotton sector in developing countries.
“The trade aspects of cotton are handled by the Committee on Agriculture in Special Session including through dedicated discussions on trade in cotton. The development assistance aspects of cotton are discussed in the meetings of the ‘Director-General’s Consultative Framework Mechanism on Cotton’.
“These various tracks of discussion have been developed over the years as a response to a series of proposals to address the sector tabled by four African countries — Benin, Burkina Faso, Chad and Mali — known as the Cotton Four or C4.”
While WTO Members are supposed to be reporting information on various categories of data (including domestic support) on cotton and on non-tariff barriers affecting trade in cotton, the latest WTO Secretariat compilation of information does not indicate that Members were asked about or provided information on the benefits to domestic cotton production from child labor and/or forced labor. See COTTON — BACKGROUND PAPER BY THE SECRETARIAT, TN/AG/GEN/34/Rev.13, TN/AG/SCC/GEN/13/Rev.13, 2 November 2020 (and Add.1 and Add.2); COTTON — MINISTERIAL DECISION OF 7 DECEMBER 2013, WT/MIN(13)/41, WT/L/916, 11 December 2013 (“3. In this context, we therefore undertake to enhance transparency and monitoring in relation to the trade-related aspects of cotton. To this end, we agree to hold a dedicated discussion on a biannual basis in the context of the Committee on Agriculture in Special Session to examine relevant trade-related developments across the three pillars of Market Access, Domestic Support and Export Competition in relation to cotton. 4. The dedicated discussions shall be undertaken on the basis of factual information and data compiled by the WTO Secretariat from Members’ notifications, complemented, as appropriate, by relevant information provided by Members to the WTO Secretariat. 5. The dedicated discussions shall in particular consider all forms of export subsidies for cotton and all export measures with equivalent effect, domestic support for cotton and tariff measures and non-tariff measures applied to cotton exports from LDCs in markets of interest to them.”); COTTON — MINISTERIAL DECISION OF 19 DECEMBER 2015, WT/MIN(15)/46, WT/L/981, 21 December 2015. The background paper (without addenda) is embedded below.
Thus, there is an existing forum for developing information on all distortions to the cotton market. Yet, to date, the WTO subcommittee on Cotton is not examining the widespread issue of child labor and forced labor as part of its information gathering. This is unfortunate but could be addressed if there is a will to in fact flag all distortions.
There can be arguments pro and con on whether all child labor and forced labor constitutes actionable subsidies under the Agreement on Subsidies and Countervailing Measures. While I believe that the practices identified as being used in Xinjiang constitute actionable subsidies (government action which provides inputs (labor) at rates lower than market), there can be no doubt that the failure of governments to eliminate child labor and forced labor distorts competition between those obtaining products through the use of such labor and others who are not using such labor. The use of child labor and forced labor are universally condemned and supposed to be eliminated by 2025 (child labor) or 2030 (forced labor) pursuant to the UN Sustainable Development Goals.
The WTO can and should develop the factual basis for an understanding of the trade distortions flowing from child labor and forced labor. The existence of a current program at the WTO on cotton to develop information on all forms of subsidies and all forms of non-tariff barriers is a good place to start the exercise. My thanks to Amb. Shea for flagging the potential existing vehicles within the WTO to address at least cotton.
In recent years, the United States has paid more attention to the trade distortions flowing from forced labor and child labor in other countries, particularly in China. While there has been significant progress in the last twenty years in reducing forced labor and child labor globally according to the International Labor Organization (“ILO”), the COVID-19 pandemic has seen some retrenchment and efforts by China to address minorities in country have created an international backlash and concern.
The ILO webpage on forced labor reflects the global nature of the problem. The webpage states in part,
“Although forced labour is universally condemned, ILO estimates show that 24.9 million people around the world are still subjected toit. Of the total number of victims of forced labour, 20.8 million (83 per cent) are exploited in the private economy, by individuals or enterprises, and the remaining 4.1 million (17 per cent) are in State-imposed forms of forced labour. Among those exploited by private individuals or enterprises, 8 million (29 per cent) are victims of forced sexual exploitation and 12 million (64 per cent) of forced labour exploitation. Forced labour in the private economy generates some US$ 150 billion in illegal profits every year: two thirds of the estimated total (or US$ 99 billion) comes from commercial sexual exploitation, while another US$ 51 billion is a result from forced economic exploitation in domestic work, agriculture and other economic activities (Note 1).
“Vestiges of slavery are still found in some parts of Africa, while forced labour in the form of coercive recruitment is present in many countries of Latin America, in certain areas of the Caribbean and in other parts of the world. In numerous countries, domestic workers are trapped in situations of forced labour, and in many cases they are restrained from leaving the employers’ home through threats or violence. Bonded labour persists in South Asia, where millions of men, women and children are tied to their work through a vicious circle of debt. In Europe and North America, a considerable number of women and children are victims of traffickers, who sell them to networks of forced prostitution or clandestine sweat-shops. Finally, forced labour is still used as a punishment for expressing political views.
“For many governments around the world, the elimination of forced labour remains an important challenge in the 21st century. Not only is forced labour a serious violation of a fundamental human right, it is a leading cause of poverty and a hindrance to economic development. ILO standards on forced labour, associated with well-targeted technical assistance, are the main tools at the international level to combat this scourge.”
While the incidence of forced labor and child labor is declining, the COVID-19 pandemic has complicated trends as these populations are most vulnerable. See, e.g., ILO, The International Labour Organization and the US Department of Labor partnership to eliminate child labour and forced labour, 2019, https://www.ilo.org/wcmsp5/groups/public/@ed_norm/@ipec/documents/publication/wcms_710971.pdf (“The ILO’s most recent global estimates of child labour indicate, however, that significant progress is being made. From 2000 to 2016, there was a net reduction of 94 million children in child labour and the number of children in hazardous work was halved. In parallel, the ILO Worst Forms of Child Labour Convention (No. 182) was ratified by 186 countries, reaching almost universal ratification. The challenges ahead, however, remain formidable: in 2016, 152 million girls and boys were in child labour and 25 million men, women and children were trapped in forced labour.”); ILO, COVID-19 impact on child labour and forced labour: The response of the IPEC+ Flagship Programme, 2020, https://www.ilo.org/wcmsp5/groups/public/—ed_norm/—ipec/documents/publication/wcms_745287.pdf (“COVID-19 has plunged the world into a crisis of unprecedented scope and scale. Undoubtedly, restoring global health remains the first priority, but the strict measures required are resulting in massive economic and social shocks. As lockdown, quarantine, physical distancing and other isolation measures to suppress transmission continue, the global economy has plunged into a recession. The harmful effects of this pandemic will not be distributed equally. They are expected to be most damaging in the poorest countries and in the poorest neighbourhoods, and for those in already disadvantaged or vulnerable situations, such as children in child labour and victims of forced labour and human trafficking, particularly women and girls. These vulnerable groups are more affected by income shocks due to the lack of access to social protection, including health insurance and unemployment benefits. * * * Experience from previous crisis situations, such as the 2014 Ebola epidemic, has shown that these factors play a particularly strong role in exacerbating the risk to child labour and forced labour.”).
In China, the government’s efforts to “reeducate” minority populations (e.g., Uyghurs from the western region of Xinjiang) has led to allegations of forced labor on a range of products and actions by the United States to restrict certain imports from China from the region. The Washington International Trade Association is holding a virtual webinar on January 27 looking at the challenges in China and the forced labor problem of the Xinjiang Uyghur Autonomous Region and the resulting U.S. ban on cotton and tomato products. See WITA, WITA’s Friday Focus on Trade, Vol. 206, January 22, 2021 (containing various articles on the China forced labor issue and referencing the webinar on January 27, WITA Webinar: The U.S. Moves Against Forced Labor in Xinjiang).
“The U.S. Department of Labor (USDOL or the Department) has produced this ninth edition of the List of Goods Produced by Child Labor or Forced Labor in accordance with the Trafficking Victims Protection Reauthorization Act (TVPRA), as amended. The TVPRA requires USDOL’s Bureau of International Labor Affairs (ILAB or the Bureau) to “develop and make available to the public a list of goods from countries that [ILAB] has reason to believe are produced by forced labor or child labor in violation of international standards” (TVPRA List or the List; 22 U.S.C. § 7112(b)(2)(C)). It also requires submission of the TVPRA List to the United States Congress not later than December 1, 2014, and every 2 years thereafter (22 U.S.C. § 7112(b)(3)).
“The Frederick Douglass Trafficking Victims Prevention and Protection Reauthorization Act of 2018 expanded ILAB’s mandate to require the TVPRA List to include, ‘to the extent practicable, goods that are produced with inputs that are produced with forced labor or child labor’” (22 U.S.C. 7112(b)(2)(C)).
“The TVPRA directs ILAB ‘to work with persons who are involved in the production of goods on the list … to create a standard set of practices that will reduce the likelihood that such persons will produce goods using [child labor or forced labor],’ and ‘to consult with other departments and agencies of the United States Government to reduce forced and child labor internationally and ensure that products made by forced labor and child labor in violation of international standards are not imported into the United States’ (22 U.S.C. § 7112(b)(2)(D)–(E)).” (pages 1 and 3).
This year’s publication lists 77 countries that have one or more products believed to be produced with child labor, with forced labor or with both child and forced labor. Fourteen countries are listed as having products believed to be produced with forced labor. Thirty-six countries are listed as believed to produce products with child and forced labor. Sixty-four countries produce some products with child labor. The 77 countries are listed below along with whether products are believed produced with child labor, forced labor, or child labor & forced labor.
While the number of products obviously vary by country and category, the report categorized agriculture as having 68 child labor listings and 29 forced labor listings. This compares to manufacturing with 39 child labor and 20 forced labor listings; mining showed 32 child labor and 13 forced labor listings and pornography showed one each.
Looking at specific products for individual countries provides the most information.
As an example, China is shown as having the following products believed to be produced with forced labor — Artificial Flowers, Christmas Decorations, Coal, Fish, Footwear, Garments, Gloves, Hair Products, Nails, Thread/Yarn, and Tomato Products. China is also shown as having the following products believed to be produced with child labor and forced labor — Bricks, Cotton, Electronics, Fireworks, Textiles, and Toys. As a USDOL separate post notes, gloves, hair products, textiles, thread/yarn and tomato products were added in 2020 because of research on the forced labor situation in Xinjiang. See USDOL, Bureau of International Labor Affairs, Against Their Will: The Situation in Xinjiang, Forced Labor in Xinjiang, 2020, https://www.dol.gov/agencies/ilab/against-their-will-the-situation-in-xinjiang. The document is embedded below.
Looking at India, products believed to be produced with child labor include the following — Bidis (hand-rolled cigarettes), Brassware, Cotton, Fireworks, Footwear, Gems, Glass Bangles, Incense (agarbatti), Leather Goods/ Accessories, Locks, Matches, Mica, Silk Fabric, Silk Thread, Soccer Balls, Sugarcane, Thread/Yarn. Products believed produced with child labor & forced labor include the following — Bricks, Carpets, Cottonseed (hybrid), Embellished Textiles, Garments, Rice, Sandstone, Stones.
While the USDOL reports don’t estimate the portion of exports from any country of individual products that are produced with child and/or forced labor, the trade consequences can be significant as such labor is artificially valued creating distortions in competitiveness and resulting trade flows. For example, the list of products for China are either important export products for China or important inputs into exported products. The same would true for India and for many other of the 77 countries on the list.
The U.S. has in place statutory provisions which permit the exclusion from entry into the United states of products produced with forced labor. The Trump Administration did a somewhat better job enforcing U.S. law on imports of products produced with child or forced labor. Much more can be done and should be done domestically.
Similarly, the ILO is working to eliminate forced labor and child labor consistent with UN Sustainable Development Goals. “The objective of the IPEC+ Global Flagship Programme – in line with Target 8.7 of the 2030 Sustainable Development Agenda, adopted by the United Nations in 2015 – is to provide ILO leadership in global efforts to eradicate all forms of child labour by 2025 and all forms of contemporary slavery and human trafficking by 2030. It also aims to ensure that all people are protected from – and can protect themselves against – these gross human rights violations.” ILO, IPEC+ Global Flagship Programme Implementation, Towards a world free from child labour and forced labour, page 4, 2020, https://respect.international/wp-content/uploads/2020/01/wcms_633435.pdf.
The WTO could play a role in the fight against forced labor and child labor. Such labor practices distort global trade flows in addition to the challenges created for countries engaged in such practices in terms of poverty and human rights abuses. The WTO could gather information from Members on the volume of production and exports of products produced with child and forced labor both as finished products and as inputs into other products. Such an exercise would facilitate an understanding of the extent of global trade represented by such products and help focus attention on trade actions that could be taken to help Members eliminate such harmful practices. While it is unlikely that Members will agree to such a data gathering undertaking, one is surely needed and would add transparency to a source of an important global issue with trade as well as non-trade dimensions.
“A group of nearly 80 WTO members issued a joint statement on 21 January pledging not to impose export restrictions on foodstuffs purchased by the UN’s World Food Programme (WFP) for humanitarian aid.
“’We recognize the critical humanitarian support provided by the World Food Programme, made more urgent in light of the COVID-19 pandemic and other crises,’ the group said in their statement, available here. ‘We therefore commit to not impose export prohibitions or restrictions on foodstuffs purchased for non-commercial humanitarian purposes by the World Food Programme.’
“Discussions regarding export restrictions on food purchases by the WFP have been taking place in the WTO’s Committee on Agriculture in Special Session as well as the General Council.
“The WFP is the United Nations agency charged with delivering food assistance in emergencies and combatting hunger.”
The submission by the 79 WTO Members is embedded below (WT/L/1109).
While the pledge by the 79 WTO Members is a significant event, the fact that the full WTO membership was not willing at the December 2020 General Council meeting to commit to such action is problematic and a reflection of the inability of WTO Members to come together on a broad array of issues. This has reduced the relevance of the WTO as a negotiating forum and prevented the updating of multilateral rules. It has led to a proliferation of free trade agreements and actions outside of the WTO. Considering the role that the World Food Programme plays and the list of beneficiaries, it is also quite extraordinary that there wasn’t an agreed General Council Decision adopted in December.
The UN World Food Programme
The UN’s World Food Programme (“WFP”) has for fifty years supplied food to those in need around the world. Consider the overview from the WFP’s webpage, https://www.wfp.org/overview (emphasis in original).
“The World Food Programme (WFP) is the leading humanitarian organization saving lives and changing lives, delivering food assistance in emergencies and working with communities to improve nutrition and build resilience.
“For its efforts to combat hunger, for its contribution to bettering conditions for peace in conflict-affected areas and for acting as a driving force in efforts to prevent the use of hunger as a weapon of war and conflict, WFP was awarded the Nobel Peace Prize in 2020.
“In 2019, WFP assisted 97 million people – the largest number since 2012 – in 88 countries.
“On any given day, WFP has 5,600 trucks, 30 ships and nearly 100 planes on the move, delivering food and other assistance to those in most need. Every year, we distribute more than 15 billion rations at an estimated average cost per ration of US$ 0.61. These numbers lie at the roots of WFP’s unparalleled reputation as an emergency responder, one that gets the job done quickly at scale in the most difficult environments.
“WFP’s efforts focus on emergency assistance, relief and rehabilitation, development aid and special operations. Two-thirds of our work is in conflict-affected countries where people are three times more likely to be undernourished than those living in countries without conflict.
“In emergencies, WFP is often first on the scene, providing food assistance to the victims of war, civil conflict, drought, floods, earthquakes, hurricanes, crop failures and natural disasters. When the emergency subsides, WFP helps communities rebuild shattered lives and livelihoods. We also work to strengthen the resilience of people and communities affected by protracted crises by applying a development lens in our humanitarian response.
“WFP development projects focus on nutrition, especially for mothers and children, addressing malnutrition from the earliest stages through programmes targeting the first 1,000 days from conception to a child’s second birthday, and later through school meals.
“WFP is the largest humanitarian organisation implementing school feeding programmes worldwide and has been doing so for over 50 years. In 2019, WFP provided school meals to more than 17.3 million children in 50 countries, often in the hardest-to-reach areas.
“In 2019, WFP provided 4,2 million metric tons of food and US$2.1 billion of cash and vouchers. By buying food as close as possible to where it is needed, we can save time and money on transport costs, and help sustain local economies. Increasingly, WFP meets people’s food needs through cash-based transfers that allow the people we serve to choose and shop for their own food locally.
“Funded entirely by voluntary donations, WFP raised a record-breaking US$8 billion in 2019. WFP has 20,000 staff worldwide of whom over 90 percent are based in the countries where the agency provides assistance.
The countries in which WFP provides assistance are shown in the list from the WFP webpage, https://www.wfp.org/countries, and include many important trading countries like China, India, Indonesia, Pakistan and many more in Africa, the Middle East, Asia, Central and South America. Beneficiary countries include the following:
The December 2020 General Council meeting and proposed General Council Decision
During the December 2020 General Council meeting, there was an effort to adopt a General Council Decision entitled “PROPOSAL ON AGRICULTURE EXPORT PROHIBITIONS OR RESTRICTIONS RELATING TO THE WORLD FOOD PROGRAMME DRAFT GENERAL COUNCIL DECISION,” WT/GC/W/810, TN/AG/46 (4 December 2020). The draft document was modified three times to add cosponsors. WT/GC/W/810/Rev.1, Rev.2, Rev.3. Concerns were raised by India, Pakistan and some African countries (from the above list, at least India and Pakistan and most, if not all others, were beneficiaries of assistance from the the WFP). Hence there was no agreement on adopting the draft General Council Decision. See Washington Trade Daily, December 16, 2020, pages 3-4, WTO Members Talk Food Procurement, https://files.constantcontact.com/ef5f8ffe501/1b51b4fa-b0a3-4a60-9165-8c5f6d7977a4.pdf; Washington Trade Daily, December 18, 2020, pages 5-6, India Questions WFP Exemption, https://files.constantcontact.com/ef5f8ffe501/ec47c599-5c0c-47fd-80cf-a46244c5af8b.pdf.
While WTO Members always have multiple concerns and agenda items being pursued, the failure of the membership as a whole to agree to something so limited in nature and so critical for addressing global hunger was disappointing to many and reflects the seeming inability of the WTO Membership to move forward as one on the vast majority of issues before the WTO.
In a post earlier this month, I argued for the need for the WTO to move to liberalization by the willing without benefits for non-participants but with agreements open to all to join. See 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/. While the MFN issue doesn’t come into play for the 79 Member pledge not to restrict exports to the WFP, the failure of the full WTO membership to agree to the draft General Council Decision is a further manifestation of the need for new approaches to promote expanded trade liberalization.
In recent speeches, Deputy Director-General Alan Wolff has expressed both the lack of unity at the WTO on an issue of importance like the draft General Council Decision and also welcomed the joint pledge by the 79 WTO Members not to impose restrictions on exports to the WFP. See WTO press release, DDG Wolff outlines possible responses to calls for WTO reform, 13 January 2020, https://www.wto.org/english/news_e/news21_e/ddgaw_13jan21_e.htm (“Less than a month ago, a General Council meeting took place which lasted over 15 hours (over two and a half days), a recent record for length. It had only one substantive trade policy item on its agenda for decision, the consideration of which produced no agreement. The issue was whether Members would agree to forego a modicum of the policy space they now have by agreeing not to impair procurements by the Nobel-Prize-winning World Food Program. A witness to the proceeding could be forgiven for perceiving drift of the organization in its not living up to its potential. Viewed through a different lens, this was no more than sovereigns reaffirming that they could not be bound without their consent.”); WTO press release, DDG Wolff stresses need to make progress in WTO negotiations to enhance resilience of farm sector, 22 January 2021, https://www.wto.org/english/news_e/news21_e/ddgaw_22jan21_e.htm (“I welcome the pledge this week of WTO members accounting for most of world agricultural exports to refrain from imposing export restrictions on foodstuffs purchased by the World Food Programme for non-commercial humanitarian purposes.”).
If there is to be a WTO capable of reform, the Members will need to reconfirm core principles and find ways to agree instead of searching for excuses to oppose. The membership seems far from sharing a common vision or accepting core principles. Too often, Members are engaged in a search for blocking progress. While all Members undoubtedly share blame for the current challenges, on the topic of blocking the minor proposal to ensure the workings of the WFP, one can look to the Members who remain non-participants in the joint pledge as the problem on this particular issue.
Specifically, the list of those WTO Members pledging not to impose export restrictions on foodstuffs to the WFP is made up of 79 WTO Members, meaning 85 Members did not join the pledge (at least not yet). Some of the major Members who are not participating in the pledge include the following — Argentina, China, India, Indonesia, Pakistan, South Africa, the Philippines, Malaysia. the Russian Federation, Hong Kong (China), Turkey. In the WTO’s World Trade Statistical Review 2020, China, Indonesia, Argentina and India are among the top 10 exporters of agricultural products and of food in 2019; China, the Russian Federation and Hong Kong (China) are among the top ten importers in 2019. WTO, World Trade Statistical Review 2020, Tables A-13 and A-14, https://www.wto.org/english/res_e/statis_e/wts2020_e/wts2020_e.pdf. China, India, Indonesia, Pakistan, the Philippines and Turkey are all beneficiaries of assistance from the WFP.
While there is much that needs to be done for the restoration of the WTO’s relevance, the pledge by 79 Members suggests that liberalization by the willing may be the only road forward.
January 20, 2021 saw the inauguration of Joseph R. Biden, Jr. as the 46th President of the United States and Kamala D. Harris as the new Vice President. The top priority for the new Administration is addressing the COVID-19 pandemic with a focus on ramping up vaccinations across the country with a goal of 100 million additional vaccination shots in the first 100 days of the new Administration. The new Administration comes into office as the global pandemic records its worst two weeks and records more than ten million confirmed new cases in the last fourteen days (through January 16). See European Centre for Disease Prevention and Control, COVID-19 situation update worldwide, as of week 2 2021, https://www.ecdc.europa.eu/en/geographical-distribution-2019-ncov-cases (total global cases 94.6 million, total deaths 2.037 million, new cases last 14 days 10.052 million). Deaths in the U.S. by January 21st have topped 416,000 and total new cases in the U.S. are over 25 million. https://www.worldometers.info/coronavirus/country/us/. The number of doses of vaccines distributed in the U.S. was 35.99 million on January 20 with 16.524 million vaccinations provided. https://www.cdc.gov/coronavirus/2019-ncov/vaccines/index.html
“Section 1. Purpose. The Federal Government must act swiftly and aggressively to combat coronavirus disease 2019 (COVID-19). To that end, this order creates the position of Coordinator of the COVID-19 Response and Counselor to the President and takes other steps to organize the White House and activities of the Federal Government to combat COVID-19 and prepare for future biological and pandemic threats. “
The other four sections of the Executive Order deal with “Organizing the White House to Combat COVID-19” (Section 2), “United States Leadership on Global Health and Security and the Global Health and Security and the Global COVID-19 Response” (Section 3), “Prompt Resolution of Issues Related to the United States COVID-19 Response” (Section 4) and general provisions (Section 5). Section 2 includes efforts by the Federal Government to beef up production and distribution of “personal protective equipment, vaccines, tests and other supplies” including through use of the Defense Production Act. Section 3 includes efforts to engage with and strengthen the World Health Organization.
The text of the Executive Order is reproduced below (quotation marks are not added).
Executive Order on Organizing and Mobilizing the United States Government to Provide a Unified and Effective Response to Combat COVID-19 and to Provide United States Leadership on Global Health and Security
January 20, 2021
By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered as follows:
Section 1. Purpose. The Federal Government must act swiftly and aggressively to combat coronavirus disease 2019 (COVID-19). To that end, this order creates the position of Coordinator of the COVID-19 Response and Counselor to the President and takes other steps to organize the White House and activities of the Federal Government to combat COVID-19 and prepare for future biological and pandemic threats.
Sec. 2. Organizing the White House to Combat COVID-19. (a) In order to effectively, fully, and immediately respond to COVID-19, there is established within the Executive Office of the President the position of Coordinator of the COVID-19 Response and Counselor to the President (COVID-19 Response Coordinator) and the position of Deputy Coordinator of the COVID-19 Response. The COVID-19 Response Coordinator shall report directly to the President; advise and assist the President and executive departments and agencies (agencies) in responding to the COVID-19 pandemic; coordinate all elements of the COVID-19 response; and perform such duties as the President may otherwise direct. These duties shall include:
(i) coordinating a Government-wide effort to reduce disparities in the response, care, and treatment of COVID-19, including racial and ethnic disparities;
(ii) coordinating the Federal Government’s efforts to produce, supply, and distribute personal protective equipment, vaccines, tests, and other supplies for the Nation’s COVID-19 response, including through the use of the Defense Production Act, as amended (50 U.S.C. 4501 et seq.);
(iii) coordinating the Federal Government’s efforts to expand COVID-19 testing and the use of testing as an effective public health response;
(iv) coordinating the Federal Government’s efforts to support the timely, safe, and effective delivery of COVID-19 vaccines to the United States population;
(v) coordinating the Federal Government’s efforts to support the safe reopening and operation of schools, child care providers, and Head Start programs, and to help ensure the continuity of educational and other services for young children and elementary and secondary students during the COVID-19 pandemic; and
(vi) coordinating, as appropriate, with State, local, Tribal, and territorial authorities.
(b) The COVID-19 Response Coordinator shall have the authority to convene principals from relevant agencies, in consultation with the Assistant to the President for Domestic Policy (APDP) on matters involving the domestic COVID-19 response, and in consultation with the Assistant to the President for National Security Affairs (APNSA) on matters involving the global COVID-19 response. The COVID-19 Response Coordinator shall also coordinate any corresponding deputies and interagency processes.
(c) The COVID-19 Response Coordinator may act through designees in performing these or any other duties.
Sec. 3. United States Leadership on Global Health and Security and the Global COVID-19 Response. (a) Preparing to Respond to Biological Threats and Pandemics. To identify, monitor, prepare for, and, if necessary, respond to emerging biological and pandemic threats:
(i) The APNSA shall convene the National Security Council (NSC) Principals Committee as necessary to coordinate the Federal Government’s efforts to address such threats and to advise the President on the global response to and recovery from COVID-19, including matters regarding: the intersection of the COVID-19 response and other national security equities; global health security; engaging with and strengthening the World Health Organization; public health, access to healthcare, and the secondary impacts of COVID-19; and emerging biological risks and threats, whether naturally occurring, deliberate, or accidental.
(ii) Within 180 days of the date of this order, the APNSA shall, in coordination with relevant agencies, the COVID-19 Response Coordinator, and the APDP, complete a review of and recommend actions to the President concerning emerging domestic and global biological risks and national biopreparedness policies. The review and recommended actions shall incorporate lessons from the COVID-19 pandemic and, among other things, address: the readiness of the pandemic supply chain, healthcare workforce, and hospitals; the development of a framework of pandemic readiness with specific triggers for when agencies should take action in response to large-scale biological events; pandemic border readiness; the development and distribution of medical countermeasures; epidemic forecasting and modeling; public health data modernization; bio-related intelligence; bioeconomic investments; biotechnology risks; the development of a framework for coordinating with and distributing responsibilities as between the Federal Government and State, local, Tribal, and territorial authorities; and State, local, Tribal, and territorial preparedness for biological events.
(b) NSC Directorate on Global Health Security and Biodefense. There shall be an NSC Directorate on Global Health Security and Biodefense, which shall be headed by a Senior Director for Global Health Security and Biodefense. The Senior Director shall be responsible for monitoring current and emerging biological threats, and shall report concurrently to the APNSA and to the COVID-19 Response Coordinator on matters relating to COVID-19. The Senior Director shall oversee the Global Health Security Agenda Interagency Review Council, which was established pursuant to Executive Order 13747 of November 4, 2016 (Advancing the Global Health Security Agenda To Achieve a World Safe and Secure From Infectious Disease Threats), and is hereby reconvened as described in that order.
(c) Responsibility for National Biodefense Preparedness. Notwithstanding any statements in the National Security Presidential Memorandum-14 of September 18, 2018 (Support for National Biodefense), the APNSA shall be responsible for coordinating the Nation’s biodefense preparedness efforts, and, as stated in sections 1 and 2 of this order, the COVID-19 Response Coordinator shall be responsible for coordinating the Federal Government’s response to the COVID‑19 pandemic.
Sec. 4. Prompt Resolution of Issues Related to the United States COVID-19 Response. The heads of agencies shall, as soon as practicable, bring any procedural, departmental, legal, or funding obstacle to the COVID-19 response to the attention of the COVID-19 Response Coordinator. The COVID-19 Response Coordinator shall, in coordination with relevant agencies, the APDP, and the APNSA, as appropriate, immediately bring to the President’s attention any issues that require Presidential guidance or decision-making.
Sec. 5. General Provisions. (a) Nothing in this order shall be construed to impair or otherwise affect:
(i) the authority granted by law to an executive department or agency, or the head thereof; or
(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.
(b) This order shall be implemented consistent with applicable law and subject to availability of appropriations.
(c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
JOSEPH R. BIDEN JR.
On the White House webpage, there is a section on the Biden Administration’s priorities. The section on COVID-19 provides explanation of the actions perceived to be needed, including increased production of personal protective equipment and additional funding to help with vaccinations, keeping schools open and help state and local governments cope with the revenue shortfalls from the pandemic. See White House Priorities,COVID-19, The Biden-Harris plan to beat COVID-19, https://www.whitehouse.gov/priorities/covid-19//. The COVID-19 priority description is copied below.
“The American people deserve an urgent, robust, and professional response to the growing public health and economic crisis caused by the coronavirus (COVID-19) outbreak. President Biden believes that the federal government must act swiftly and aggressively to help protect and support our families, small businesses, first responders, and caregivers essential to help us face this challenge, those who are most vulnerable to health and economic impacts, and our broader communities – not to blame others or bail out corporations.
“The Biden-Harris administration will always:
“Listen to science
“Ensure public health decisions are informed by public health professionals
“Promote trust, transparency, common purpose, and accountability in our government
“President Biden and Vice President Harris have a seven-point plan to beat COVID-19.
“Ensure all Americans have access to regular, reliable, and free testing.
“Double the number of drive-through testing sites.
“Invest in next-generation testing, including at home tests and instant tests, so we can scale up our testing capacity by orders of magnitude.
“Stand up a Pandemic Testing Board like Roosevelt’s War Production Board. It’s how we produced tanks, planes, uniforms, and supplies in record time, and it’s how we will produce and distribute tens of millions of tests.
“Establish a U.S. Public Health Jobs Corps to mobilize at least 100,000 Americans across the country with support from trusted local organizations in communities most at risk to perform culturally competent approaches to contact tracing and protecting at-risk populations.
“Fix personal protective equipment (PPE) problems for good.
“President Biden is taking responsibility and giving states, cities, tribes, and territories the critical supplies they need.
“Fully use the Defense Production Act to ramp up production of masks, face shields, and other PPE so that the national supply of personal protective equipment exceeds demand and our stores and stockpiles — especially in hard-hit areas that serve disproportionately vulnerable populations — are fully replenished.
“Build immediately toward a future, flexible American-sourced and manufactured capability to ensure we are not dependent on other countries in a crisis.
“Provide clear, consistent, evidence-based guidance for how communities should navigate the pandemic – and the resources for schools, small businesses, and families to make it through.
“Social distancing is not a light switch. It is a dial. President Biden will direct the CDC to provide specific evidence-based guidance for how to turn the dial up or down relative to the level of risk and degree of viral spread in a community, including when to open or close certain businesses, bars, restaurants, and other spaces; when to open or close schools, and what steps they need to take to make classrooms and facilities safe; appropriate restrictions on size of gatherings; when to issue stay-at-home restrictions.
“Establish a renewable fund for state and local governments to help prevent budget shortfalls, which may cause states to face steep cuts to teachers and first responders.
“Call on Congress to pass an emergency package to ensure schools have the additional resources they need to adapt effectively to COVID-19.
“Provide a ‘restart package’ that helps small businesses cover the costs of operating safely, including things like plexiglass and PPE.
“’THIS ISN’T ABOUT POLITICS. IT’S ABOUT SAVING LIVES.’
“PRESIDENT BIDEN, SEPTEMBER 16, 2020
“Plan for the effective, equitable distribution of treatments and vaccines — because development isn’t enough if they aren’t effectively distributed.
“Invest $25 billion in a vaccine manufacturing and distribution plan that will guarantee it gets to every American, cost-free.
“Ensure that politics plays no role in determining the safety and efficacy of any vaccine. The following 3 principles will guide the Biden-Harris administration: Put scientists in charge of all decisions on safety and efficacy; publicly release clinical data for any vaccine the FDA approves; and authorize career staff to write a written report for public review and permit them to appear before Congress and speak publicly uncensored.
“Ensure everyone — not just the wealthy and well-connected — in America receives the protection and care they deserve, and consumers are not price gouged as new drugs and therapies come to market.
“Protect older Americans and others at high risk.
“President Biden understands that older Americans and others at high-risk are most vulnerable to COVID-19.
“Establish a COVID-19 Racial and Ethnic Disparities Task Force, as proposed by Vice President Harris, to provide recommendations and oversight on disparities in the public health and economic response. At the end of this health crisis, it will transition to a permanent Infectious Disease Racial Disparities Task Force.
“Create the Nationwide Pandemic Dashboard that Americans can check in real-time to help them gauge whether local transmission is actively occurring in their zip codes. This information is critical to helping all individuals, but especially older Americans and others at high risk, understand what level of precaution to take.
“Rebuild and expand defenses to predict, prevent, and mitigate pandemic threats, including those coming from China.
“Immediately restore the White House National Security Council Directorate for Global Health Security and Biodefense, originally established by the Obama-Biden administration.
“Immediately restore our relationship with the World Health Organization, which — while not perfect — is essential to coordinating a global response during a pandemic.
“Re-launch and strengthen U.S. Agency for International Development’s pathogen-tracking program called PREDICT.
“Expand the number of CDC’s deployed disease detectives so we have eyes and ears on the ground, including rebuilding the office in Beijing.
“Implement mask mandates nationwide by working with governors and mayors and by asking the American people to do what they do best: step up in a time of crisis.
“Experts agree that tens of thousands of lives can be saved if Americans wear masks. President Biden will continue to call on:
“Every American to wear a mask when they are around people outside their household.
“Every Governor to make that mandatory in their state.
“Local authorities to also make it mandatory to buttress their state orders.
“Once we succeed in getting beyond this pandemic, we must ensure that the millions of Americans who suffer long-term side effects from COVID don’t face higher premiums or denial of health insurance because of this new pre-existing condition. The Biden-Harris Administration will work to ensure that the protections for those with pre-existing conditions that were won with Obamacare are protected. And, they will work to lower health care costs and expand access to quality, affordable health care through a Medicare-like public option.”
While significant parts of the full-throated Biden plan to address the COVID-19 pandemic will require Congressional action on a stimulus package ($1.9 trillion is what is being sought by the Biden team), there are clear areas of action that will take place including increased use of the Defense Production Act to ensure adequate supplies of PPEs to address the needs of all communities in the United States. The U.S. will now have a national plan for both reducing the spread of the virus and for expanding the ability to achieve the desired level of vaccinations. The U.S. will work with the WHO and other members to make the WHO more effective and will participate in COVAX to help ensure vaccine availability for all peoples. The U.S. will also reinstate the efforts to improve detecting and tracking viruses around the world and developing a better prevention and response effort.
Without Congressional action on a significant stimulus package in the coming weeks, the U.S. economy will likely suffer significant contraction as employment levels, already at levels depressed from those when President Trump took office in 2017, will continue to worsen, millions of Americans will be forced from homes and apartments, and tens of thousands of additional business will fold. The Biden plan offers hope that a national plan with cooperation from the states will lead to a curbing of the pandemic and hopefully by the third or fourth quarter of 2021, a return to a more normal state of life for Americans. With the tremendous contraction in some sectors of the U.S. and global economies (e.g., tourism), the Biden plan offers hope of revival as the year progresses.
U.S. engagement with the WHO and participation in COVAX will help improve the global ability to respond to the pandemic in particular by improving the likelihood that vaccines will be available to peoples in all countries as the year progresses.
While economists generally don’t support the concept of onshoring production of particular products, the use of the Defense Production Act to expand production of PPEs that are or are likely to be in short supply will expand global supplies which should be of assistance to other countries as well as the U.S. as the global surge of cases continues.
Nothing in the first day’s activities by the Biden Administration was directly aimed at the World Trade Organization or trade relations. However, the intent of the Biden Administration to work with allies and within multilateral organizations and treaties — as seen in the rejoining of the Paris Climate Agreements and retraction of the notice of withdrawal from the WHO — suggest that the Biden team will be looking for ways to strengthen the WTO while addressing core U.S. concerns.
Malaysia filed the second request for consultations of 2021 on January 15, 2021. The request for consultations addresses the European Union, France and Lithuania and certain enumerated measures pertaining to palm oil and oil palm crop-based biofuels. See WT/DS600/1 (15 January 2021). France and Lithuania have already adopted laws and regulations implementing and EU provision which Malaysia views as violating a wide range of WTO obligations. As other EU members are working on possible implementing laws and regulations, Malaysia is keeping open the possibility of raising issues with additional EU members.
Because the dispute involves the interface of EU efforts to reduce greenhouse gases and trade restricting effects on certain biofuels that the EU views as not sufficiently promoting the reduction greenhouse gases, it will likely draw a lot of attention. The background part of the request for consultations lays out the Malaysian concerns.
“1. Malaysia is the world’s second largest producer of palm oil. In 2019, Malaysia produced around 19.86 million metric tonnes of crude palm oil, accounting for 28% of world palm oil production and 33% of world palm oil exports.1 In 2019, Malaysia exported around 1.9 million metric tonnes of palm oil to the EU. The palm oil industry directly employs more than one million Malaysians and 40% of all palm oil plantations in Malaysia are owned or farmed by smallholder farmers, who have benefited from oil palm cultivation.2 Palm oil production and export has been a major factor in Malaysia reducing poverty from 50% in the 1960s, down to less than 5% today.
“2. As one of the biggest producers and exporters of palm oil and palm oil products, Malaysia recognises that it has an important role to play in fulfilling the growing global need for oils and fats in a sustainable manner. Malaysia is a responsible producer of palm oil and has long taken the lead in the continuous process of making palm oil production more sustainable and environmentally friendly. As of December 2020, nearly 90% of Malaysia’s total oil palm cultivation has obtained Malaysian Sustainable Palm Oil (MSPO) certification. Additionally, as at that date, 428 of Malaysia’s 452 oil palm mills, corresponding to around 95% of total milling capacity, received the MSPO certification. Most recently, on 1 January 2020, Malaysia made the MSPO certification mandatory.
“3. It is important to recall Malaysia’s commitment at the 1992 Rio Earth Summit, where it pledged to maintain at least 50% of the country’s landmass under forest cover. On the basis of data from 2018, about 55.3% of Malaysia’s 33 million hectares (ha) land areas are under forest cover, exceeding the country’s pledge made at the Rio Earth Summit.
“4. In the context of addressing the environmental risks posed by the extensive use of fossil fuels, the EU and its Member States have, since 2009, adopted a policy of promoting the use of biofuels by setting national targets for the use of renewable energy in various sectors, including the transport sector. This policy led to a rapid increase in the EU consumption of biofuels, produced mainly from food crops.
“5. While the measures taken by the EU and EU Member States under this policy pursue the reduction of greenhouse gas (‘GHG’) emissions and the achievement of commitments under international climate agreements, some of these measures contravene their WTO obligations. In 2018 and 2019, the EU adopted legislative measures that, in simple terms, define palm oil as an unsustainable feedstock for the production of biofuel. The EU further argues that only palm oil production entails a high risk of indirect land-use change (‘ILUC’). On that basis, oil palm crop-based biofuels cannot be counted towards EU renewable energy targets.3
“6. Generally speaking, the measures adopted by the EU, as well as the related measures adopted by EU Member States, confer unfair benefits to EU domestic producers of certain biofuel feedstocks, such as rapeseed oil and soy, and the biofuels produced therefrom, at the expense of palm oil and oil palm crop-based biofuels from Malaysia. These measures may also discriminate against Malaysian palm oil and oil palm crop-based biofuels in favour of ‘like products’ from third countries.
“7. Malaysia submits that the measures adopted by the EU and its Member States currently already limit and will increasingly limit the volume of Malaysian palm oil and oil palm crop-based biofuels that can be counted towards reaching EU renewable energy targets and, consequently, that will be sold in the EU market.
The Malaysian request for consultations raises similar allegations of WTO violations by the EU and member states as a case filed by Indonesia in late 2019 where a panel was finally composed on November 12, 2020. See European Union — Certain measures concerning palm oil and oil palm crop-based biofuels, WT/DS593/10 (composition of panel). Malaysia and many other countries are third parties in that dispute.
The WTO alleged violations in Malaysia’s request for consultations are the following for the EU, France, Lithuania and other EU members.
“C. Legal basis for the complaint in respect of the EU measures
“31. With regard to the EU measures, as embodied and developed in the respective legal instruments as specified in para. 22 herein and as applied by the relevant authorities, Malaysia considers that these measures are inconsistent with the EU’s obligations under the GATT 1994 and the TBT Agreement. In particular, the measures are inconsistent with:
“i. Article I:1 of the GATT 1994, because the measures at issue, which limit and will progressively phase out oil palm crop-based biofuels from being counted towards reaching EU renewable energy targets and which provide criteria for certifying low ILUC-risk biofuels, discriminate among ‘like’ feedstocks and derived biofuels originating in third countries;
“ii. Article III:4 of the GATT 1994, because the measures at issue, which limit and will progressively phase out oil palm crop-based biofuels from being counted towards reaching EU renewable energy targets and which provide criteria for certifying low ILUC-risk biofuels, accord less favourable treatment to imported palm oil and oil palm crop-based biofuels than they do to ‘like’ domestic feedstocks and derived biofuels, thereby modifying the conditions of competition to the detriment of the imported palm oil and oil palm crop-based biofuels, in particular from Malaysia;
“iii. Article X:3(a) of the GATT 1994, because the measures at issue, which limit and will progressively phase out oil palm crop-based biofuels from being counted towards reaching EU renewable energy targets and which provide criteria for certifying low ILUC-risk biofuels, are administered in a manner that is not uniform, impartial and/or reasonable; and
“iv. Article XI:1 of the GATT 1994, because the measures at issue, which limit and will progressively phase out oil palm crop-based biofuels from being counted towards reaching EU renewable energy targets, and which provide criteria for certifying low ILUC-risk biofuels, restrict the importation of palm oil and oil palm crop-based biofuels.
“v. Article 2.1 of the TBT Agreement, because the measures at issue, which limit and will progressively phase out oil palm crop-based biofuels from being counted towards reaching EU renewable energy targets, being technical regulations within the meaning of Annex 1.1 of the TBT Agreement, have a detrimental impact on the competitive conditions in the EU market of Malaysia’s imports of oil palm crop-based biofuels compared with ‘like products’ imported into the EU from other countries and compared with ‘like’ domestic products; vi. Article 2.2 of the TBT Agreement, because the measures at issue, which limit and will progressively phase out oil palm crop-based biofuels from being counted towards reaching EU renewable energy targets, being technical regulations within the meaning of Annex 1.1 of the TBT Agreement, are more trade-restrictive than necessary to achieve the objectives pursued by the measures;
“vii. Article 2.4 of the TBT Agreement, because the measures at issue, which limit and will progressively phase out oil palm crop-based biofuels from being counted towards reaching EU renewable energy targets, being technical regulations within the meaning of Annex 1.1 of the TBT Agreement, are not based on the relevant international standards;
“viii. Article 2.5 of the TBT Agreement, because the EU, in preparing, adopting or applying the measures at issue, which limit and will progressively phase out oil palm crop-based biofuels from being counted towards reaching EU renewable energy targets, being technical regulations within the meaning of Annex 1.1 of the TBT Agreement, has failed, upon the request of Malaysia, to explain the justification for those measures in terms of Articles 2.2 to 2.4 of the TBT Agreement;
“ix. Article 2.8 of the TBT Agreement, because the measures at issue, which limit and will progressively phase out oil palm crop-based biofuels from being counted towards reaching EU renewable energy targets, being technical regulations within the meaning of Annex 1.1 of the TBT Agreement, are based on an abstract and unsubstantiated high-ILUC risk concept instead of the performance of such biofuels;
“x. Article 2.9 of the TBT Agreement, because the measures at issue, which limit and will progressively phase out oil palm crop-based biofuels from being counted towards reaching EU renewable energy targets, being technical regulations within the meaning of Annex 1.1 of the TBT Agreement, were adopted without the required timely publication and notification of these measures and organising an adequate process for commenting;
“xi. Article 5.1.1 of the TBT Agreement, because the EU, by preparing, adopting or applying the measures at issue, which provide criteria for certifying low ILUC-risk biofuels, being conformity assessment procedures within the meaning of Annex 1.3 of the TBT Agreement, treats suppliers of oil palm crop-based biofuels from Malaysia less favourably than domestic suppliers of ‘like’ biofuels or suppliers from other WTO Members in a comparable situation;
“xii. Article 5.1.2 of the TBT Agreement, because the EU, by preparing, adopting or applying the measures at issue, which provide criteria for certifying low ILUC-risk biofuels, being conformity assessment procedures within the meaning of Annex 1.3 of the TBT Agreement, creates unnecessary obstacles to international trade; xiii. Article 5.2 of the TBT Agreement, because the EU failed to make available the conformity assessment procedures to certify low ILUC-risk;
“xiv. Article 5.6 of the TBT Agreement, because the EU, with regards to the measures at issue, which provide criteria for certifying low ILUC-risk, being conformity assessment procedures within the meaning of Annex 1.3 of the TBT Agreement, neither notified nor enter into meaningful consultations, or allowed for comments on such conformity assessment procedures;
“xv. Article 5.8 of the TBT Agreement, because the EU neither promptly published nor otherwise made available the measures at issue, which provide criteria for certifying low ILUC-risk biofuels, being conformity assessment procedures within the meaning of Annex 1.3 of the TBT Agreement; and
“xvi. Articles 12.1 and 12.3 of the TBT Agreement, because the EU, in the preparation and application of the measures at issue referred to above, failed to take into account the circumstances specific to developing countries, in particular Malaysia, where palm oil and oil palm crop-based biofuels are produced.
“D. Legal basis for the complaint in respect of the EU Member States’ measures
“32. The set of advantages granted by France for oil crop-based biofuels, as embodied and developed in the respective legal instruments, as specified in paragraphs 24 to 27 herein, and as applied by the relevant authorities, are inconsistent with the obligations of France under the GATT 1994 and the SCM Agreement. In particular, the set of advantages described above, as contained in the mentioned legal instruments, are inconsistent with:
“i. Article I:1 of the GATT 1994, because the measures at issue, under which the tax on petrol and diesel is only reduced when they contain biofuels other than oil palm crop-based biofuels, discriminates against ‘like’ biofuels by granting an advantage, in the form of a tax reduction, to biofuels of some countries, that is not granted to all WTO Members, and in particular not to Malaysia, and
“ii. Article III:2 of the GATT 1994, because the measures at issue, under which the tax on petrol and diesel is only reduced when they contain biofuels other than oil palm crop-based biofuels, indirectly applies a tax on imported oil palm crop-based biofuels: (1) in excess to ‘like’ domestic biofuels; or (2) which is not similar to the tax on ‘directly competitive and substitutable’ domestic biofuels, and affords protection to the production of these domestic biofuels.
“iii. Articles 3 and 5 of the SCM Agreement, because the measures at issue, under which the French Government reduces the tax on petrol and diesel containing crop-based biofuel other than oil palm crop-based biofuels and excludes petrol and diesel containing oil palm crop-based biofuels from this tax reduction, amount to a subsidy within the meaning of Article 1 of the SCM Agreement which is: (1) a prohibited import substitution subsidy within the meaning of Article 3.1(b); and/or (2) an actionable subsidy causing an adverse effect on the interests of Malaysia within the meaning of Article 5(c) of the SCM Agreement.
“33. Concerning Lithuania’s measures (including any annexes thereto, amendments, supplements, replacements, renewals, extensions, implementing measures or any other related measures, and any exemptions applied), as implemented and/or applied by the latter in line with its obligations as a EU Member State regarding the transposition of the RED II, Malaysia claims that those measures are inconsistent with the same WTO obligations as provided for in paragraph 31 and/or 32 herein.
“c. Other EU Member States
“34. Malaysia contends that to the extent that any other EU Member State transposes the RED II and further implement and/or apply any measure(s) according to its obligations as regards the limitation and/or phasing out of oil palm crop-based biofuels from being counted towards reaching renewable energy targets, regardless of whether the said measures are explicit or implicit in their treatment of oil palm crop-based biofuels, such measure(s) shall be inconsistent with the same WTO obligations as provided for in paragraph 31 and/or 32 herein.”
With the Indonesian case now in the briefing stage, a panel report could be available in late 2021 or in the front half of 2022 depending on delays flowing from the continued limitations imposed by the pandemic. The Malaysian case will likely trail the Indonesian case by six months or more.
Neither Indonesia nor Malaysia are signatories to the Multi-Party Interim Appeal Arbitration Arrangement Pursuant To Article 25 Of The DSU. The EU has in at least one case where the party challenging EU actions was not a signatory opted to file an appeal into the void when it was dissatisfied with the panel report. See 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). Thus, whether reform of the Appellate Body moves forward in the next year to address U.S. concerns may be important to a final resolution of the two cases. The WTO is a long distance from resolving the current impasse on the Appellate Body, but perhaps there will be reengagement during the second half of 2021.
It is surprising that with the pressing importance of working to address climate change and the EU efforts at leadership that the EU appears not to have found a way to work with trading partners like Malaysia or achieve a common science-based understanding as to which biofuels help reduce greenhouse gases. For trade and environment issues to gain a greater role within the WTO (as Members need them to do), all Members working to achieve sustainable development objectives have to feel that the rules of trade will support their effort, provide guidance as to what more is needed and not close those Members out of the market of a trading partner.
In an article in today’s Financial Times, Ambassador Robert Lighthizer, the outgoing U.S. Trade Representative, is reported as panning Dr. Ngozi Okonjo-Iweala for the position of Director-General of the World Trade Organization on the basis that she has no trade experience. Financial Times, Outgoing US trade chief says leading WTO candidate lacks experience, January 19, 2021, https://www.ft.com/content/baca66bb-5987-47e1-861d-3375a6f6d01b. The key quotes from Amb. Lighthizer in the article are copied below.
“’We need a person who actually knows trade, not somebody from the World Bank who does development,’ said Mr Lighthizer, referring to Ms Okonjo-Iweala’s credentials.
“”We need a trade person with real trade experience,’ he added. “’And there are very few areas where you would say, ‘here’s an organisation in very bad shape, let’s get someone who knows nothing about its core mission’.’”
An early issue for the Biden Administration in its trade agenda will be whether the U.S. withdraws its refusal to join the consensus to appoint Dr. Okonjo-Iweala of Nigeria as the next Director-General. In an earlier post, I have indicated that such an action by the Biden Administration early in its term would be desirable. Without a Director-General, it is hard to imagine the WTO making progress on WTO reform. 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/ (“On the World Trade Organization, the Biden Administration will have a potentially full docket but some important issues for early consideration. The first issue where an early action is important is who should be the next Director-General. The Trump Administration has indicated it did not agree to join a consensus on the candidate for the Director-General position who is the candidate with broadest and deepest support, Dr. Ngozi Okonjo-Iweala of Nigeria. Procedures adopted by the General Council in 2002 for selecting Directors-General was followed this year. The Chair of the General Council indicated he was prepared to recommend Dr. Okonjo to the General Council back in early November but has not done so in light of the U.S. position. Both Dr. Okonjo and Minister Yoo of Korea are well qualified candidates. While the Trump Administration may prefer Minister Yoo, in this writer’s view, either candidate will do an excellent job. U.S. refusal to join a consensus is contrary to procedures the U.S. and others agreed to. Because of the U.S. position and the failure of the Korean candidate to withdraw from the process, the WTO continues to operate without a new Director-General. The incoming Biden Administration should communicate with Korea that it intends to indicate the U.S. will join the consensus and then notify the Chair of the General Council. This can and should be done as quickly as possible by the Biden Administration to permit the WTO to get a new Director-General in place early in 2021.”).
While Dr. Okonjo-Iweala has argued that she has some trade experience, referring to the Nigerian customs service being under her jurisdiction when she was Finance Minister and having had some role apparently in Nigeria’s Trade Facilitation Agreement activities, there is little doubt that her background at the World Bank and in the Nigerian government were largely non-trade in nature. In comparison the Korea Trade Minister’s entire career in government has been in trade. So if deep trade experience is critical to performing the function of Director-General at the WTO, then someone other than Dr. Okonjo-Iweala would have been the logical choice for the membership. With the exception of the U.S. under Trump, Members do not have that concern about the qualifications of the next Director-General.
Indeed, deep trade experience has not been a requirement of former Directors-General nor of former senior trade officials in major countries. Peter Sutherland, who was brought in to complete the Uruguay Round in 1993, was not a trade person but rather had a background in banking and had been a prior EC Commissioner of Competition Policy. See Peter Sutherland, GATT and WTO Director-General, 1993 to 1995, https://www.wto.org/english/thewto_e/dg_e/ps_e.htm. Other Directors-General of the GATT and WTO had limited trade backgrounds. See, e.g., Supachai Panitchpakdi, WTO Director-General, 2002-2005, https://www.wto.org/english/thewto_e/dg_e/sp_e.htm. The view that individuals with political, diplomatic and other skills can step into an important trade function is not unique to the WTO. National governments, including the United States, often have trade ministries headed by people with little or no trade background prior to the individual’s appointment. Prior U.S. Trade Representatives Robert Strauss (1977-79), Michael Kantor (1993-96) and Ronald Kirk (2009-2013) would be examples. And at least some former U.S. Trade Representatives don’t view prior trade experience as critical to being an effective Director-General. See WITA, WITA Webinar: Three Former USTRs on the WTO in a Time of Change, 07/16/2020, https://www.wita.org/event-videos/wita-webinar-three-former-ustrs-on-the-wto-in-a-time-of-change (former USTRs Froman and Schwab). Dr. Ngozi Okonjo-Iweala has political and diplomatic stature and significant career accomplishments that make her an extremely well qualified candidate to be the next Director-General of the WTO regardless of the depth of her trade background.
Thus, while it has obviously been the Trump Administration’s view that a trade background is critical for the next Director-General, it is to be hoped that the incoming Biden Administration will take a different view, permit a consensus to be formed and let the WTO get back to having a Director-General and move towards much needed WTO reform on issues that the Trump Administration ably laid out as critical (dispute settlement, convergence vs. coexistence of different economic systems (and reforms of rules to address distortions flowing from non-market economic systems), role of Special and Differential Treatment, transparency, and addressing of critical issues like e-commerce, fisheries subsidies, etc.
While most-favored-nation treatment is a cornerstone of the WTO, there is little doubt that trade liberalization is impeded in many situations because of the inability to get important trading nations to participate in liberalizing when those nations do not have an interest in liberalizing trade in a particular sector. MFN treatment to nonparticipants has long been viewed as a free-rider problem. Permitting non-MFN application of sectoral agreements but having agreements open to all who wish to join has been a topic of growing interest to some Members of the WTO as it would free Members to engage in tariff liberalization, subject to others joining when they were willing to assume comparable obligations, without being restrained by concerns over free riders. The change could help in many areas, including the currently being pursued Joint Statement Initiatives but also other areas that have been stalled for a period of years, such as the Environmental Goods Agreement talks.
I came across a piece I had posted on my firm website back in 2015 that dealt with this issue at a time that both the Information Technology Agreement II and the Environmental Goods Agreement were being negotiated. The ITA II concluded while the EGA did not. The number of FTAs has increased since my post and the problems of liberalization within the WTO continues to be bogged down by the lack of common interests among large parts of the Membership. Hence a new approach to encourage liberalization is needed. I copy my prior post from 2015 below.
Should WTO Members Consider Permitting Sectoral FTAs That Are Open to Membership? April 16, 2015 Terence P. Stewart
One of the cornerstone principles of the World Trade Organization (“WTO”) (and the General Agreement on Tariffs and Trade (“GATT”) before it) is application of tariff bindings on a most-favored nation (“MFN”) basis. Indeed, while the WTO permits modifications to most provisions of the WTO agreements by three-fourths of the membership, to change national treatment requires the consent of all Members.
While MFN is an important rule (as is national treatment), the reality is that in 2015 the vast majority of trade for many nations is handled through bilateral or plurilateral free trade agreements or through preferential trade agreements. While there were only a relatively small number of regional trade agreements (“RTAs”) during most of the GATT years, the number of agreements has exploded in the last twenty years. The WTO’s page on RTAs states that “Regional trade agreements (RTAs) have become increasingly prevalent since the early 1990s. As of 7 April 2015, some 612 notifications of RTAs (counting goods, services and accessions separately) had been received by the GATT/WTO. Of these, 406 were in force. These WTO figures correspond to 449 physical RTAs (counting goods, services and accessions together), of which 262 are currently in force.”
A WTO staff working paper from 31 October 2012, “Market Access Provisions on Trade in Goods in Regional Trade Agreements,” by Jo-Ann Crawford, reviews data for the year 2008 and finds rates of trade with RTA partners for many countries and regions running between 20% and 70% of imports or exports (for some countries as high as the low 90s%). The EU (27) showed 23.2% of imports and 27.1% of exports; Canada was 60% of imports and 80.1% of exports; Mexico was 72.4% of imports and 91.5% of exports; the United States was 29.8% of imports and 40.5% of exports; and China was 24.8% of imports and 30.5% of exports. Those percentages are likely much higher in 2015 and will only grow as some of the recently concluded agreements (e.g., Canada-EU) and ongoing negotiations (e.g., TPP and T-TIP) conclude and go into effect.
So the question isn’t really whether the WTO functions with a large portion of trade done on some sort of preferential basis in fact (obviously large parts of global trade are so conducted today), but whether a change to the rules to provide for an additional exception to MFN could help global economic growth by permitting trade liberalizing agreements that deal with a particular segment of production (or services) even if the current rules and conditions of GATT 1994 Article XXIV or GATS Article V are not satisfied.
At present, there are two sectoral negotiations that are ongoing – the second Information Technology Agreement (“ITA II”) negotiations and negotiations for an Environmental Goods Agreement (“EGA”). Both of these agreements are intended to comply with existing MFN rules by applying to all countries, but require buy-in from nearly all producers/trading nations for the products in question (typically a 90% coverage). ITA II holds the promise to liberalize trade in technology goods that are of a value equal to the fully implemented Trade Facilitation Agreement, which is in the process of undergoing adoption by the WTO membership.
However, ITA II has drifted now for more than a year and a half, first awaiting an improved offer position from China and now because of lack of agreement between Korea and China. Obviously having both China and Korea in ITA II is the desired result and would permit agreement on the package and application of the agreement’s duty reductions to all WTO Members. But if a sectoral agreement that doesn’t have 90% coverage of trade in the products could be adopted by those willing to adopt it, with the benefits flowing only to signatories, with an open admission policy for other countries at such time as they are willing to accept the full package, with special consideration for least-developed countries (“LDCs”) (i.e., application to them even ahead of 90% coverage), and with an automatic conversion to all WTO Members at such time as 90% coverage is attained, wouldn’t the world trading system be benefitted? The answer would seem to be necessarily “yes”. So too, with the challenges the world faces environmentally, cooperation amongst the willing to liberalize trade in goods (and possibly services) sooner rather than later has enormous potential upsides. While there is agreement among the participants on a group of 54 product categories, a significantly larger group of products is being considered. It may be that the EGA is adopted and implemented in the next year or so. However, if ITA II is any indicator of things to come, significant delays may be the actual outcome before we achieve progress. A simpler approach to achieve meaningful liberalization in real time (not over decades) seems to be a potential answer for these and other product sectors that may be of interest to significant trading countries or groups.
While the WTO membership is working to see if they can develop a work program by the end of July to complete the Doha Development Agenda (“DDA”), if such a work program and final package cannot be accomplished quickly, the WTO will once again be adrift in terms of its core negotiating function. Even if there is success on the DDA, deeper liberalization may be possible in particular sectors by the willing.
At a time when the WTO has just downgraded growth projections for 2015 and 2016, the WTO needs tools that will permit it to continue to contribute to expanded global trade and prosperity regardless of the internal challenges due to its growing membership and changing power structure. Adopting a provision to the GATT 1994 that would provide an exception (temporary in design and intent) to encourage sectoral liberalization could be an important tool for achieving improved results for the WTO membership.
 Marrakesh Agreement Establishing the World Trade Organization, Art. X:1.
As WTO Members consider needed reforms to the organization, finding ways to permit liberalization to proceed among the willing on products or service sectors without the impediment of MFN benefits flowing to those unwilling to participate in the liberalization should be an important priority.
The Office of the United States Trade Representative last Thursday, January 14, 2021, released its 2020 Report to Congress on China’s WTO Compliance. As the report notes, it is the 19th report to Congress following China’s accession to the WTO. It is also the last report prepared under the Trump Administration. The report is significantly shorter than prior Trump Administration reports (70 pages vs. 192 pages for 2019 report, 183 pages for 2018 report, and 161 pages for 2017 report) while referencing details on specific U.S. concerns with China from the 2019 report appendix. The link to the report is as follows: https://ustr.gov/sites/default/files/files/reports/2020/2020USTRReportCongressChinaWTOCompliance.pdf.
The report provides an Executive Summary, a section entitled U.S. ASSESSMENT OF CHINA’S WTO MEMBERSHIP with four subsections (China’s WTO Accession, Expectations of WTO Membership, China’s Record in Terms of Complying With WTO Rules, and China’s Record in Terms of Transitioning to a Market Economy), a section entitled U.S. STRATEGY FOR ADDRESSING TRADE DISTORTIONS CAUSED BY CHINA, a section entitled REVIEW OF TRADE MECHANISMS USED TO ENGAGE CHINA (with subsections on bilateral dialogues, multilateral fora, and enforcement (both U.S. laws and WTO litigation)) and the final section looking at KEY U.S. CONCERNS (five subsections — non-tariff barriers (24 topics), intellectual property rights (5 topics), agriculture (10 topics), services (16 topics) and transparency (4 topics)).
While the Key U.S. Concerns section provides the detail on U.S. concerns on specific topics on goods and services sectors, the section on U.S. Assessment of China’s WTO’s Membership provides a good overview of the fundamental concerns the U.S. has with the compatibility of China’s economic system with the WTO objective of market driven economic outcomes. The section on U.S. strategy for addressing trade distortions caused by China provides a review of the Trump Administration’s efforts in the 2017-2020 period for addressing concerns with the bilateral relationship and China’s practices. The Executive Summary (pages 2-3) gives a reasonable picture of what the problems with China are and the Trump Administration’s response.
“In prior reports, we provided this Administration’s assessment of China’s WTO membership, the unique and very serious challenges that China’s non-market policies and practices pose for the multilateral trading system and the effectiveness of the strategies that had been pursued to address the China problem over the years. We identified the critical need for new and more effective strategies – including taking actions outside the WTO where necessary – to address the challenges presented by China’s state-led, mercantilist approach to the economy and trade. We also described the positive outcomes to date of the Administration’s strategy for engaging China, which led to the signing of an historic trade agreement with China in January 2020. In this year’s report, we review and assess China’s progress in implementing that agreement to date, and we highlight the important issues that remain to be addressed in our trade relationship with China.
“As we previously documented, and as remains true today, China’s record of compliance with the terms of its WTO membership has been poor. China has continued to embrace a state-led, non-market and mercantilist approach to the economy and trade, despite WTO members’ expectations – and China’s own representations – that China would transform its economy and pursue the open, market-oriented policies endorsed by the WTO.
“At the same time, China’s non-market approach has imposed, and continues to impose, substantial costs on WTO members. In our prior reports, we identified and explained the numerous policies and practices pursued by China that harm and disadvantage U.S. companies and workers, often severely. It is clear that the costs associated with China’s unfair and distortive policies and practices have been substantial. For example, China’s non-market economic system and the industrial policies that flow from it have systematically distorted critical sectors of the global economy such as steel, aluminum, solar and fisheries, devastating markets in the United States and other countries. China also continues to block valuable sectors of its economy from foreign competition, particularly services sectors. At the same time, China’s industrial policies are increasingly responsible for displacing companies in new, emerging sectors of the global economy, as the Chinese government and the Chinese Communist Party powerfully intervene on behalf of China’s domestic industries. Companies in economies disciplined by the market cannot effectively compete with both Chinese companies and the Chinese state.
“For nearly two decades, a variety of bilateral and multilateral efforts were pursued by the United States and other WTO members to address the unique challenges presented by China’s WTO membership. However, even though these efforts were persistent, they did not result in meaningful changes in China’s approach to the economy and trade. We previously catalogued the United States’ persistent yet unsuccessful efforts to resolve the many concerns that have arisen in our trade relationship with China. We found that a consistent pattern existed where the United States raised a particular concern, China specifically promised to address that concern, and China’s promise was not fulfilled.
“Faced with these realities, in the 2017 USTR Report to Congress on China’s WTO Compliance, this Administration announced that it would be pursuing a new, more aggressive approach to the United States’ engagement of China. We explained that the Administration would defend U.S. companies and workers from China’s unfair trading practices and would seek to restore balance to the trade relationship between the United States and China. As part of these efforts, the United States would take all appropriate actions to ensure that the costs of China’s non-market economic system are borne by China, not by the United States. The United States also would continue to encourage China to make fundamental structural changes to its approach to the economy and trade consistent with the open, market-oriented approach pursued by other WTO members, which is rooted in the principles of non-discrimination, market access, reciprocity, fairness and transparency. If undertaken by China, these changes would do more than simply ease the growing trade tensions with its trading partners. These changes would also benefit China, by placing its economy on a more sustainable path, and would contribute to the growth of the U.S. economy and the global economy.
“The Administration based this new approach on several assessments. First, WTO membership comes with expectations that an acceding member not only will strictly adhere to WTO rules, but also will support and pursue open, market-oriented policies. Second, China has failed to comply with these expectations. Third, in recent years, China has moved further away from open, market-oriented policies and has more fully embraced a state-led, mercantilist approach to the economy and trade. Finally, China’s market-distorting policies and practices harm and disadvantage its fellow WTO members, even as China reaps enormous benefits from its WTO membership.
“Consistent with this Administration’s more aggressive approach to China, we have been using all available tools – including domestic trade remedies, bilateral negotiations, WTO litigation, and strategic engagement with like-minded trading partners – to respond to the unique and very serious challenges presented by China. But, the goal for the United States remains the same. The United States seeks a trade relationship with China that is fair, reciprocal and balanced.”
“Beginning in January 2020, the United States’ new approach to China began to demonstrate key progress with the signing of an historic trade agreement, known as the Phase One Agreement. This agreement requires structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange. The agreement also includes a commitment by China that it will make substantial additional purchases of U.S. goods and services in the coming years. Importantly, the agreement establishes a strong dispute resolution system that ensures prompt and effective implementation and enforcement.
“The United States has been closely monitoring China’s progress in implementing its numerous commitments under the Phase One Agreement and has regularly engaged China using the extensive consultation processes established by the agreement to discuss China’s implementation progress and any concerns as they arise. Currently, the evidence indicates that China has been moving forward in good faith with the implementation of its commitments, making substantial progress in many areas.
“Because the Phase One Agreement does not cover all of the United States’ concerns, the United States will need to turn to Phase Two of its trade negotiations with China in order to secure resolutions to important outstanding issues. These discussions should focus on critical issues in areas such as subsidies, excess capacity, state-owned enterprises, state-sponsored cyber-enabled theft of intellectual property, standards, cybersecurity, data localization requirements, restrictions on cross-border data transfers, competition policy and regulatory transparency as well as certain issues in the areas of intellectual property, technology transfer and services market access that were not addressed in the Phase One Agreement.
“Going forward, it is the Administration’s hope that China will continue to take the United States’ concerns seriously and engage with the United States on a productive basis. If China does so and the two sides are able to finalize and implement a comprehensive Phase Two Agreement, it will benefit not only the United States, but also China itself and the rest of the WTO membership. It may also generate a willingness on the part of China to take on similar new disciplines at the WTO.”
For the incoming Biden Administration, there are many important issues relating to China in the trade arena that will be front and center. With an announced intention by the President-elect to have greater cooperation with trading partners, one can expect (a) greater focus on the U.S.-EU-Japan efforts at WTO reform on subsidies, state-owned enterprises and forced technology transfer (with outreach to other Members), (b) outreach to WTO Members to develop approaches to deal with other Chinese distortions, (c) continued efforts to achieve a meaningful e-commerce plurilateral agreement in the ongoing Joint Statement Initiative, and (d) a fisheries subsidies agreement by the time of the 12th Ministerial meeting later this year. On the bilateral front, continued monitoring (and where necessary enforcement) of the Phase 1 Agreement with China should be a priority as well as the start to a Phase 2 negotiation. The USTR under the Trump Administration has devoted significant resources to laying out the challenges posed by the differences in economic systems and pursuing actions to address some of the major distortions. Whether the Biden Administration agrees with all of the individual actions taken in the last four years, it is important that the problems flowing from different economic systems be addressed with all tools that are available and be an important topic in WTO reform talks.
While the Free Trade Agreements that China is party to do not address the problems of differing economic systems (market-oriented vs. state-directed), this issue is fundamental to the U.S. view of making the WTO system function moving forward. Deputy Director-General Alan Wolff has identified in a number of speeches what he believes are key principles undergirding the WTO. Convergence vs. coexistence is how he articulates a core challenge for the organization, and has listed convergence as a core principle. In his recent speech at the January 13 virtual meeting put on by Chatham House on possible issues for reform at the WTO, DDG Wolff said “WTO Members and their Secretariat will have to deal with a number of external problems because there is no choice. Do differing economic systems affect the bargained for conditions for trade? Is the WTO of the future to be about convergence more than coexistence?” WTO, DDG Wolff outlines possible responses to calls for WTO reform, January 13, 2021, https://www.wto.org/english/news_e/news21_e/ddgaw_13jan21_e.htm. China has taken the position that coexistence is all that can be expected, that the WTO is not the forum to look at different economic systems, and has opposed efforts to address the fundamental issue at the WTO. The U.S. has laid out the case for why convergence is a critical aspect of the WTO. While China was moving towards convergence in the early years after its accession to the WTO at the end of 2001, its path for the last decade has been away from convergence. The future of the WTO may very well depend on whether this core divide can be addressed in a manner that permits distortions of any economic system to be addressed and ensures results are based on market conditions and not government fiat.
A third action has occurred, a request from Hong Kong, China, for the establishment of a panel contesting the United States origin marking requirements. The request was also filed on January 14 and was posted on the WTO website on January 15. See WT/DS567/5 (15 January 2021). The request for establishment of a panel is embedded below.
The origin of the dispute is the actions of China in imposing national security legislation on Hong Kong that was viewed by the United States as rendering Hong Kong not sufficiently autonomous to justify it not being treated as part of China and posing national security concerns for the United States. The part of the request for establishment of a panel titled “Background” provides Hong Kong, China’s description of the developments leading to the dispute.
“On 11 August 2020, the United States Customs and Border Protection (USCBP) published a notice that, after 25 September 2020, goods produced in Hong Kong must be marked to indicate that their origin is ‘China’ for the purposes of the origin marking requirement set forth at Section 304 of the Tariff Act of 1930, 19 U.S.C. § 1304. By subsequent notice, the USCBP extended the date for compliance with this requirement to 10 November 2020.
“Section 304 of the Tariff Act of 1930 requires articles of non-United States origin imported into the United States to be marked ‘in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article’. Prior to the imposition of the revised origin marking requirement as announced in the notice published on 11 August 2020, the United States has required, and therefore permitted, goods produced in Hong Kong, China to be marked to indicate that their origin is ‘Hong Kong’. The United States’ prior treatment of goods of Hong Kong, China origin was consistent with the fact that the United States generally permits goods originating within the territory of other WTO Members, including separate customs territory Members, to be marked with the English name of that territory.
“The USCBP published the notice on 11 August 2020 pursuant to the ‘Executive Order on Hong Kong Normalization’ signed by the President of the United States Donald J. Trump on 14 July 2020. The Executive Order suspends the application of Section 201(a) of the United States-Hong Kong Policy Act of 1992, 22 U.S.C. § 5721(a), to a variety of United States statutes, including Section 304 of the Tariff Act of 1930.
“Under Section 201(a) of the United States-Hong Kong Policy Act of 1992, the laws of the United States apply to Hong Kong, China in the same manner as those laws applied to Hong Kong prior to the resumption of the exercise of sovereignty by the People’s Republic of China on 1 July 1997, unless the President of the United States determines and issues an Executive Order that Hong Kong, China ‘is not sufficiently autonomous to justify treatment under a particular law of the United States … different from that accorded the People’s Republic of China’. The suspension of Section 201(a) of the United States-Hong Kong Policy Act of 1992 as it applies to Section 304 of the Tariff Act of 1930 is the legal basis upon which the USCBP ordered that goods produced in Hong Kong ‘may no longer be marked to indicate ‘Hong Kong’ as their origin, but must be marked to indicate ‘China’.”
The Executive Order and U.S. Customs and Border Protection notices are embedded below.
The Executive Order articulates the concerns of the U.S. Administration with the actions taken by China.
“In late May 2020, the National People’s Congress of China announced its intention to unilaterally and arbitrarily impose national security legislation on Hong Kong. This announcement was merely China’s latest salvo in a series of actions that have increasingly denied autonomy and freedoms that China promised to the people of Hong Kong under the 1984 Joint Declaration of the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the People’s Republic of China on the Question of Hong Kong (Joint Declaration). As a result, on May 27, 2020, the Secretary of State announced that the PRC had fundamentally undermined Hong Kong’s autonomy and certified and reported to the Congress, pursuant to sections 205 and 301 of the United States-Hong Kong Policy Act of 1992, as amended, respectively, that Hong Kong no longer warrants treatment under United States law in the same manner as United States laws were applied to Hong Kong before July 1, 1997. On May 29, 2020, I directed the heads of executive departments and agencies (agencies) to begin the process of eliminating policy exemptions under United States law that give Hong Kong differential treatment in relation to China.
“China has since followed through on its threat to impose national security legislation on Hong Kong. Under this law, the people of Hong Kong may face life in prison for what China considers to be acts of secession or subversion of state power—which may include acts like last year’s widespread anti-government protests. The right to trial by jury may be suspended. Proceedings may be conducted in secret. China has given itself broad power to initiate and control the prosecutions of the people of Hong Kong through the new Office for Safeguarding National Security. At the same time, the law allows foreigners to be expelled if China merely suspects them of violating the law, potentially making it harder for journalists, human rights organizations, and other outside groups to hold the PRC accountable for its treatment of the people of Hong Kong.
“I therefore determine that the situation with respect to Hong Kong, including recent actions taken by the PRC to fundamentally undermine Hong Kong’s autonomy, constitutes an unusual and extraordinary threat, which has its source in substantial part outside the United States, to the national security, foreign policy, and economy of the United States. I hereby declare a national emergency with respect to that threat.”
Hong Kong, China lists seven claims of violation of WTO obligations by the United States requiring goods from Hong Kong, China to be marked as goods of China. These include:
“1. Article I:1 of the GATT 1994, because in respect of the rules and formalities of importation pertaining to marks of origin, the United States does not extend to products of Hong Kong, China origin immediately and unconditionally the same advantages, favours, privileges, or immunities that the United States extends to like products originating in the territory of other countries;
“2. Article IX:1 of the GATT 1994, because the United States does not accord to the products of Hong Kong, China treatment with regard to marking requirements no less favourable than the treatment that the United States accords to like products of other countries;
“3. Article X:3(a) of the GATT 1994, because the United States does not administer its origin marking requirements in a uniform, impartial, and reasonable manner;
“4. Article 2(c) of the Agreement on Rules of Origin, because in respect of products produced in Hong Kong, the United States requires the fulfilment of a certain condition not related to manufacturing or processing, as a prerequisite for the determination of the country of origin;
“5. Article 2(d) of the Agreement on Rules of Origin, because the United States discriminates between Hong Kong, China and other Members in respect of the rules of origin that it applies to imports;
“6. Article 2(e) of the Agreement on Rules of Origin, because the United States does not administer its rules of origin in a consistent, uniform, impartial, and reasonable manner;
“Article 2.1 of the Agreement on Technical Barriers to Trade, because the origin marking requirements that the United States applies to imports are technical regulations and, in respect of those technical regulations, the United States does not accord to products imported from Hong Kong treatment no less favourable than the treatment that it accords to like products originating in other countries.
“In addition, and as a consequence of the foregoing, the measures at issue appear to nullify or impair the benefits accruing to Hong Kong, China directly or indirectly under the cited agreements.”
The United States position on the various claims is not known as yet. Presumably, the United States will raise as a defense national security claims as it has in a host of other cases.
The dispute will presumably take years to move to a conclusion, and absent a resolution of the Appellate Body impasse could result in the matter being appealed into the existing void.
USTR started two 301 investigations on actions by Vietnam, one of which dealt with Vietnam’s currency valuation and whether Vietnam’s actions violate Section 301. On January 15, 2021, USTR released a press release announcing the results of the investigation.
“The U.S. Trade Representative has issued findings in the Section 301 investigation of Vietnam’s acts, policies, and practices related to currency valuation, concluding that Vietnam ’s acts, policies, and practices including excessive foreign exchange market interventions and other related actions, taken in their totality, are unreasonable and burden or restrict U.S. commerce. In making these findings, USTR has consulted with the Department of the Treasury as to matters of currency valuation and Vietnam’s exchange rate policy. The findings in this investigation are supported by a comprehensive report, which is being published today on USTR’s website.
“‘Unfair acts, policies and practices that contribute to currency undervaluation harm U.S. workers and businesses, and need to be addressed,’ stated U.S. Trade Representative Robert E. Lighthizer. ‘I hope that the United States and Vietnam can find a path for addressing our concerns.’”
Vietnam has had rapid export growth to the United States and through 11 months of 2020 had the third largest trade surplus with the U.S. at $63.68 billion, trailing only China and Mexico. The U.S. trade deficit with Vietnam has surged from a 2017 deficit of $38.34 billion (full year). Thus, problems of currency valuation to the extent it supports an artificially undervalued currency encourages exports to the U.S. and limits U.S. exports to Vietnam. U.S. imports for consumption for the first eleven months of 2020 from Vietnam were $71.21 billion, with sixteen 4-digit HS categories showing imports from Vietnam of more than $1 billion in 2020 (the largest being over $11 billion). Failure to resolve the matter bilaterally to the satisfaction of the U.S. could result in additional duties being applied to all imported goods from Vietnam.
While U.S. importers who have shifted supply from China to Vietnam for products are assuming additional duties will be imposed, the current USTR is taking no action, meaning whatever action occurs will be left to the incoming Biden team. Unlike many press releases, USTR Lighthizer has indicated that he hopes “that the United States and Vietnam can find a path for addressing our concerns.’” Considering the stakes, look for a resolution without additional duties during the first quarter of 2021.
The latest data from the European Centre for Disease Prevention and Control (ECDC) show the global growth in new cases and deaths accelerating in many parts of the world with resulting extensions of restrictions on activities which harms international trade and global economic growth prospects. The control of the outbreak of new cases is being complicated by new strains in the U.K., South Africa and elsewhere that are proving to be more easily spread than initial strains and rapidly spreading around the world.
Specifically, the ECDC in a report released on January 14 covering data through the first week of 2021 (assumed to be through January 6), shows the last two weeks as generating 9,487,913 new reported cases of COVID-19 — the first time, more than nine million new cases has been found in a two week period. Data on global cases to this morning (January 15) show total global cases at 93.2 million with deaths at 2 million. These are up from the 89.8 million cases through the first week of 2021 and 1.94 million deaths. The world is likely to top 100 million COVID cases by the end of January.
The United States had its worst two weeks — 3,271,355 new cases (34.48% of global new cases) and 41,116 deaths (24.07% of last week global) — and its totals since the beginning of 2020 at 22.4 million cases and 374,442 deaths (24.97% and 19.30% of global totals) dwarf its 4.3% of global population.
Many countries in Europe are continuing to struggle with new cases and deaths and hence have extended restrictions. So, for example, the United Kingdom, has had the largest number of new cases in the last two weeks(742,619) it has ever recorded and the highest number of deaths since spring in the last two weeks (10,322). The result has been continued tightening of restrictions within the United Kingdom. See, e.g., BBC, Covid-19: UK daily deaths at record high and Scotland rules tightened, January 14, 2021, https://www.bbc.com/news/uk-55652431; BBC, Covid: What are the lockdown rules across the UK?, January 13, 2021, https://www.bbc.com/news/explainers-52530518.
Some governments have reduced economic recovery projections for 2021 because of the second wave of cases in the fall of 2020. See, e.g., Euronews, What does 2021 hold for jobs and businesses in Europe?, December 16, 2020, https://www.euronews.com/2020/12/16/what-does-2021-hold-for-jobs-and-businesses-in-europe (“The second wave of lockdowns devastated businesses across Europe and led the European Commission to downgrade its economic growth forecast for 2021 for the Eurozone from 6.1% down to 4.2%. It’s expected to be two years until the European economy comes close to its pre-pandemic level.”).
While other government 2021 projections show greater growth than was projected in the fall of 2020, the rebound is built on assumptions about stimulus funding, timing and effectiveness of vaccines and other elements. See, e.g., CNBC, Fed raises its economic outlook slightly, sees 4.2% growth next year and 5% unemployment rate, December 16, 2020, https://www.cnbc.com/2020/12/16/fed-raises-its-economic-outlook-slightly-sees-4point2percent-growth-next-year-and-5percent-unemployment-rate.html#:~:text=The%20Federal%20Reserve%20expects%20real,to%204.2%25%20from%204.0%25; The Conference Board, The Conference Board Economic Forecast for the US Economy, January 13, 2021, https://www.conference-board.org/research/us-forecast (“Our base case forecast yields 1Q21 real GDP growth of 2.0 percent* (annualized rate), and an annual expansion of 4.1 percent for 2021, following an annual contraction of 3.5 percent for 2020. We view this scenario as the most probable. It assumes: a) new cases of COVID-19 peak in early 1Q21 but no widespread lockdowns are implemented, b) vaccines are deployed gradually in 1Q21 but volumes accelerate into 2Q21, c) the December 2020 stimulus package is fully deployed in 1Q21 and an additional stimulus package is deployed in 2Q21, d) labor markets and consumption weaken slightly in 1Q21 but rebound in 2Q21 and 3Q21, and e) the political transition does not result in a hit to consumer or business confidence. These assumptions yield a lull in the recovery in 4Q20 and early 1Q21, but a steady acceleration of economic activity that peaks in the summer months as consumers eagerly spend on services and goods that they had forgone in 2020. In this scenario US monthly economic output returns to pre-pandemic levels in August 2021.”).
Growing concern over new strains of the COVID-19 and mounting new cases will be putting strain on many governments and keeping downward pressure on trade in services which the WTO has estimated as being down 30% globally in 2020. Travel and tourism have been decimated in 2020 and will continue to face major hurdles for at least the first half of 2021. International arrivals are down 70% for the year and more than 90% for the period since April 2020. See UNWTO, TOURISM BACK TO 1990 LEVELS AS ARRIVALS FALL BY MORE THAN 70%, 17 December 2020, https://www.unwto.org/news/tourism-back-to-1990-levels-as-arrivals-fall-by-more-than-70.
In the United States, the recent $900 billion stimulus package was viewed as a temporary measure that would need to be supplemented in 2021. President-elect Biden announced on January 14, 2021 that he will be seeking a $1.9 trillion additional stimulus package to address the human costs of the pandemic, provide funding for people and businesses, strengthen efforts at vaccine distribution and vaccinations and other purposes. See, e.g., New York Times, Biden Outlines $1.9 Trillion Spending Package to Combat Virus and Downturn, January 14, 2021 (updated January 15), https://www.nytimes.com/2021/01/14/business/economy/biden-economy.html.
The stimulus packages by the EU (and member governments) and U.S. and other countries have kept demand higher than would otherwise have been possible but at the cost of significant increases in national debt which will reduce national flexibilities in later years.
Finally, while 49 countries have started to vaccinate their populations according to a recent article from Politico, the largest number of countries continue to wait for vaccines which will be helped when more vaccines are approved. See, e.g., Politico, Coronavirus vaccination in Europe — by the numbers, January 11, 2021, https://www.politico.eu/article/coronavirus-vaccination-europe-by-the-numbers/.
The COVID-19 pandemic continues to rage globally and is becoming more concerning because of faster spreading variants that are showing up around the world. Since many western countries continue to have very high numbers of new cases, hospitalizations and deaths, enormous pressure is on governments to get effective vaccines in large quantities as quickly as possible and get their populations vaccinated. Many countries with access to vaccines are having early problems in ramping up vaccinations. Some of the approved vaccinations are struggling with the production ramp up and being pressed to provide more volumes of vaccines in the absence of alternative vaccines from other producers. The main vaccines intended for broad distribution to many developing and least developed countries are either just starting to receive approvals for distribution or are still working through final trials. In a world quickly approaching 100 million reported cases and more than 2 million deaths and having suffered significant economic dislocations with services trade down an estimated 30 percent, with as many as 100 million people pushed into poverty, and 100-120 million people in the tourism sector having lost jobs, a global solution cannot occur soon enough. While 2021 will show significant improvements for many countries, the continuing challenges from COVID-19 will be with the world community for the foreseeable future.