“Blowing up the trading system” — Clyde Prestowitz’s suggested way for the world to move forward in light of China’s economic system

The Global Business Dialogue (GBD) publishes periodically “THE TTALK QUOTES”. On March 30, 2021, GBD posted a TTALK Quotes on “CHINA, THE TRADING SYSTEM, AND THE ALTERNATIVES” with a quote from Clyde Prestowitz, ‘[There is] only one alternative – “blowing up the system” or, more politely, creating a new or alternative system.”

The quote is from a Washington Monthly article by Mr. Prestowitz from March 24, 2021 entitled, “Blow Up the Global Trading System, Yes, really. U.S. and international efforts to stop Beijing’s economic onslaught haven’t worked. It’s time for President Biden to go big,” https://washingtonmonthly.com/2021/03/24/blow-up-the-global-trading-system/. Mr. Prestowitz has a new book out, The World Turned Upside Down (Yale University Press, 2021) and some of the recommendations in the Washington Monthly article reflect his thinking from his new book.

While the title is provocative, the concerns expressed are similar to the ones reviewed in Amb. Dennis Shea’s remarks to the Coalition for a Prosperous America and those expressed last year by Mogens Peter Carl that China’s economic system isn’t consistent with the WTO rules and China has no intention of modifying its approach to global trade. See March 29, 2021:  China and the WTO – remarks by Dennis C. Shea to the Coalition for a Prosperous America, https://currentthoughtsontrade.com/2021/03/29/china-and-the-wto-remarks-by-dennis-c-shea-to-the-coalition-for-a-prosperous-america/.

Unlike Mr. Carl’s call for market economy countries to withdraw from the WTO and start a new organization, Mr. Prestowitz proposes in the Washington Monthly article “Reinventing the Globalization System” which involves seven action steps.

The first is for the United States “to impose a Market Adjustment Charge (MAC) on all non-direct investment (not in new means of production) into the United States.” The MAC is explained in his new book (pages 276-277) but is a charge that would vary based on the size and trend of the U.S. trade deficit.

The second step “would be for the International Monetary Fund (IMF) to adopt Keynes’ Bretton Woods proposal that all countries should have balanced trade in the medium to long term.” To achieve this result, a duty would be applied on imports from countries that run persistent trade surpluses.

The third step would be for the United States to seek strong enforcement within the IMF and by the U.S. Department of the Treasury.

The fourth step would be forming a supersized FTA including USMCA, CPTPP and the EU, and open to other market economies. Prestowitz calls this grouping the “Free World Free Trade Agreement”.

The firth step addresses the need for market economies to improve their competitiveness against the state directed and massively subsidized world of China. The step calls for the creation of “a free world high technology leadership project”

The sixth step calls on the U.S. to reorganize government and concentrate resources to support the technology leadership initiative.

The final step involves actions the U.S. can take to spur domestic manufacturing (use of Defense Production Act, curbing corporate lobbying, and review corporate overseas investment plans.

In his book, Mr. Prestowitz has a chapter on actions the U.S. should take to regain its leadership position. It starts with a Market Access Charge, calls for the imposition of a value added tax and a host of actions to ensure the U.S. is “the world’s most competitive economy.” Page 278.

U.S. actions are aimed at improving U.S. competitiveness

A number of the actions Mr. Prestowitz calls for on U.S. competitiveness are similar to actions being introduced today in part 1 of President Biden’s American Jobs Plan (est. cost of $2.5 trillion). See White House Briefing Room, FACT SHEET: The American Jobs Plan, March 31, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/31/fact-sheet-the-american-jobs-plan/. Excerpts are copied below. The full fact sheet is then embedded.

“While the American Rescue Plan is changing the course of the pandemic and delivering relief for working families, this is no time to build back to the way things were. This is the moment to reimagine and rebuild a new economy. The American Jobs Plan is an investment in America that will create millions of good jobs, rebuild our country’s infrastructure, and position the United States to out-compete China. Public domestic investment as a share of the economy has fallen by more than 40 percent since the 1960s. The American Jobs Plan will invest in America in a way we have not invested since we built the interstate highways and won the Space Race.

“The United States of America is the wealthiest country in the world, yet we rank 13th when it comes to the overall quality of our infrastructure. After decades of disinvestment, our roads, bridges, and water systems are crumbling. Our electric grid is vulnerable to catastrophic outages. Too many lack access to affordable, high-speed Internet and to quality housing. The past year has led to job losses and threatened economic security, eroding more than 30 years of progress in women’s labor force participation. It has unmasked the fragility of our caregiving infrastructure. And, our nation is falling behind its biggest competitors on research and development (R&D), manufacturing, and training. It has never been more important for us to invest in strengthening our infrastructure and competitiveness, and in creating the good-paying, union jobs of the future.

“Like great projects of the past, the President’s plan will unify and mobilize the country to meet the great challenges of our time: the climate crisis and the ambitions of an autocratic China. It will invest in Americans and deliver the jobs and opportunities they deserve. But unlike past major investments, the plan prioritizes addressing long-standing and persistent racial injustice. The plan targets 40 percent of the benefits of climate and clean infrastructure investments to disadvantaged communities. And, the plan invests in rural communities and communities impacted by the market-based transition to clean energy.”

FACT-SHEET_-The-American-Jobs-Plan-_-The-White-House

Reform of the WTO or a different approach?

The U.S. is looking to push WTO reform and work with trading partners to address challenges posed by China’s economic model. The EU and Japan are similarly looking at WTO reform as a way forward. See, e.g., February 18, 2021, The European Commission’s 18 February 2021 Trade Policy Review paper and Annex — WTO reform and much more proposed, https://currentthoughtsontrade.com/2021/02/18/the-european-commissions-18-february-2021-trade-policy-review-paper-wto-reform-and-much-more-proposed/.

The G7 trade ministers are meeting today. See Reuters, UK trade minister tells G7: We must stop fragmentation of global trade, March 31, 2021, https://www.reuters.com/article/britain-trade-truss-idUSS8N2L708T. The seven G7 countries are Canada, France, Germany, Italy, Japan, the UK and the US (EU participates as a guest). WTO reform is one of the topics being discussed today. The U.S., EU and Japan have been working on potential reforms to the Subsidies Agreement to address the massive industrial subsidies provided by China as well as looking at potential disciplines on state-owned/invested enterprises and forced technology transfer. However, in a consensus system like the WTO, it is hard to imagine meaningful reforms that will address Chinese distortions achieving results within the WTO.

The U.S. is not presently considering a “Free World Free Trade Agreement” as proposed by Mr. Prestowitz. The U.S. is also not proposing pulling out of the WTO as suggested last year by Mogens Peter Carl and entering into a new organization that is limited to market economies. Each of the U.S. and the EU have the ability to act unilaterally if necessary but obviously that is a less desirable approach to global governance.

So it is likely that the U.S., EU, Japan and other leading market economies will continue to seek reform within the WTO but with likely limited results putting pressure on free trade agreements or on plurilateral arrangements to achieve a trade regime acceptable to the major market economies.

Mr. Prestowitz’s article and recent book are well done and raise some interesting ideas for addressing U.S. trade concerns with China. Some of his ideas have been advocated for by others before and have significant potential whether they have much political possibility for adoption. But in a changing global trade environment, his writings are a useful contribution and worth reading by those in trade policy positions.

For the Biden Administration, new trade agreements do not appear to be a short-term objective. Getting control of the pandemic through vaccinations and building back better through the jobs bill are the two major priorities. Trade can contribute to both, but a push for Free World Free Trade Agreement is not likely in the Biden years.

Still China’s economic system and incompatibility with the WTO are major concerns for many countries including the United States. Reform of the WTO would obviously be the best outcome for addressing China’s distortions. While hope spring eternal, the Ministerial Conference in late November 2021 in Geneva will give an idea of whether meaningful WTO reform is likely in the cards in the coming years. Such reform is highly unlikely to happen during the 2020s, if ever.

Mr. Carl’s suggestion of mass withdrawal from the WTO and creation of a new entity of market economies is interesting in addressing the blocking capacity of China but seems improbable because of China’s size and importance. With no major economy having suggested any interest in the idea, it seems implausible in the 2020s, if ever.

Mr. Prestowitz’s idea for a super-FTA of market economies is doable within the WTO and simply depends on majors like the U.S., EU, Japan and others being willing to put in the effort. But the U.S. and EU have not been able to make meaningful progress on an FTA or even harmonization of regulations over recent decades. If past is prologue, it is unlikely that such an undertaking will occur in the 2020s either, if ever.

 As British trade minister Liz Truss is reported to have said to her G7 fellow trade ministers, “We need to reverse the fragmentation of global trade and get the global system and WTO working again, otherwise we risk big countries going their own way and operating outside an agreed set of rules, which always spells trouble.” Reuters, UK trade minister tells G7: We must stop fragmentation of global trade, March 31, 2021, https://www.reuters.com/article/britain-trade-truss-idUSS8N2L708T. China has effectively been going its own way even after joining the WTO at the end of 2001. Actions by the U.S., EU and others in recent years have occasionally been outside of the agreed set of rules as well. So a fourth option is that of the collapse of the global trading system (actually or practically) with a law of the jungle reasserting itself.

Time will tell which direction global trade will take.

China and the WTO – remarks by Dennis C. Shea to the Coalition for a Prosperous America

On March 26, 2021, the former Deputy USTR in Geneva during the Trump Administration, Amb. Dennis C. Shea, spoke to the Coalition for a Prosperous America. While the remarks were made in his individual capacity, the remarks reviewed the challenges for the World Trade Organization remaining relevant with the current activities of the People’s Republic of China. His remarks, entitled “Three hard truths” can be found on his linkedin page. See Remarks to CPA, 3.26.2021, https://www.linkedin.com/feed/update/urn:li:activity:6781608096750956544/?updateEntityUrn=urn%3Ali%3Afs_feedUpdate%3A%28V2%2Curn%3Ali%3Aactivity%3A6781608096750956544%29.

The three hard truths from his remarks are copied below.

“The first of these hard truths is that China’s economic system – with its unique melding of public, private, and Chinese Communist Party resources, all harnessed to advance industrial policy objectives – is incompatible with the WTO norms of market orientation, transparency, non-discrimination, and reciprocity.”

“The second hard truth is that the WTO has proven itself incapable of restraining the trade disruptive activities of the Chinese non-market economic system.”

“The third hard truth is that China does not want change at the WTO.”

Amb. Shea reviews in some detail the actions of China post-accession to move away from market reforms that trading partners expected from China’s accession to the WTO and why such actions frustrate the proper functioning of the WTO. He also reviews China’s willingness to retaliate against trading partners for their legitimate use of WTO rights and to punish trading partners for comments China views as against their interests. The import bans against Australian products when Australia urged an independent investigation into the source of the COVID-19 virus is one example mentioned. Finally, on the issue of not wanting change at the WTO, Amb. Shea reviews China’s opposition to every reform issue raised by the United States.

Amb. Shea’s remarks are worth a close read. While he doesn’t address a road forward, his well founded concerns about China’s role in the trading system and its incompatible economic system with WTO rules bring to mind a piece by a former EC Director General for Trade, Mogens Peter Carl which I reviewed in an earlier post. See July 25, 2020, A new WTO without China?  The July 20, 2020 Les Echos opinion piece by Mogens Peter Carl, a former EC Director General for Trade and then Environment, https://currentthoughtsontrade.com/2020/07/25/a-new-wto-without-china-the-july-20-2020-les-echos-opinion-piece-by-mogens-peter-carl-a-former-ec-director-general-for-trade-and-then-environment/ . I reproduce much of that post below.

“Earlier this week (July 20), a former EC Director General for Trade, Peter Carl, penned an opinion piece in Les Echos with the provocative title, “A new WTO is needed without China” (literally A new WTO must see the day without China). https://www.lesechos.fr/idees-debats/cercle/opinion-une-nouvelle-omc-doit-voir-le-jour-sans-la-chine-1224748.

“Mr. Carl indicates in the opinion piece that ‘Europe’s trade policy has stagnated for twenty years. It no longer meets the demands of today’s world and the European public attributes the loss of millions of jobs to China.’ (all quotes from the opinion piece are informal translations by Google Translate ). The opinion is remarkable as it comes from a former senior EC trade official.

“‘Our policy is outdated and based on an outdated ideology that is identical to what it was before the arrival of China on the world state, after its accession to the WTO in 2001. Its centralized economy, its powerful industrial policy in all the key sectors, its enormous state subsidies, combined with a government apparatus and a political repression as powerful as those of the ex-USSR, swept large swathes of European and American industry. However, we act as if we were in the heyday of the 1990s, when our main competitors were other market economies, Japan, Korea, the United States. Our inaction resembles the ostrich policy and unilateral pacifism of the 1930s. We know the results. We must therefore protect our liberal economies and our open societies against adversaries. This requires a fundamental review of the trade policy of the European Union and the WTO.’

“Mr. Carl calls for a complete reform of the WTO with the EU teaming up with the U.S. and other like-minded Members but recognizes that meaningful reform will be blocked by China. ‘The solution: withdraw from the WTO and create a new international trade organization without China. Most countries would follow our example. We would return to an open world economic order between market economy countries sharing the same ideas, on the basis of clear and reinforced principles in favor of the free market.’ Mr. Carl advocates for the adoption of rules that would deal with ‘abuses’ of the China model including improved subsidy disciplines and ‘rules against social, environmental dumping and inaction on climate change.’ Such new rules are needed to permit the EU to green its economy.

“Mr. Carl, addressing concerns that his proposal represents a turn to managed trade, says simply that ‘This is what we already have, although only China manages it, and we are suffering the consequences.’

“That Mr. Carl felt the need to publish such a strongly worded opinion shows the underlying and growing tensions felt by major trading partners from a major economic power with a fundamentally different economic system than that pursued by the historic major players in world trade.

“For WTO Members and their businesses and workers, the rising discontent by many with the functioning of the WTO and its ability to achieve meaningful reform should be a wake-up call. The WTO to be relevant must have rules that address the world in the 21st century. The WTO must also be able to have Members assume increased responsibilities as their stage of economic development evolves. Similarly, the WTO must confront whether existing rules can be modified to generate greater coverage of practices by different types of economic systems. If not, the WTO must consider whether it can survive where all Members don’t follow similar economic systems.

“Unfortunately, there appears little likelihood that many of these critical reforms will be addressed in the coming years. China has objected to WTO Members trying to modify existing agreements to address distortions caused by China’s economic system. China has also objected to the U.S. effort to have Members consider whether WTO rules require Members to operate market-economy based systems. China and others have objected to U.S. efforts to define ‘developing country’ and effectively have Members take on obligations commensurate to their stage of economic development. Stated differently, China is working hard to defend the status quo and prevent consideration of reforms that would achieve greater balance among all WTO Members.

“While USTR Lighthizer and others have said that if the WTO didn’t exist, it would have to be created, Mr. Carl’s opinion suggests that one option that may take on greater appeal is the withdrawal from the WTO and the creation of a new international trade regime among countries with similar economic systems. Such a move away from the WTO would certainly involve enormous economic upheaval and political tensions. The more desirable course of action is to achieve timely reform of the WTO so that all Members feel the system achieves reasonable reciprocity.

“Time will tell whether WTO Members find a path forward or whether the WTO becomes less and less relevant and even ceases to function. In a Member driven organization, the answer lies with the membership.”

The WTO now has a new Director-General who is working to see if Members can achieve breakthroughs on the existing fisheries subsidies, make significant progress on Joint Statement Initiatives, while encouraging Members to limit export restraints on medical goods needed to address the COVID-19 pandemic, promote rapid return to trade growth post pandemic, and work on WTO reform.

The Biden Administration has a desire to work with trading partners in multilateral organizations like the WTO and has articulated the need of allies to work together to address problems caused by non-market economies like China. While the Biden Administration will certainly pursue WTO reform, Amb. Shea’s final paragraph of his remarks is on point.

“The Biden Administration has made working with friends and allies a hallmark of its diplomatic approach, particularly when it comes to China. When the Administration brings this approach to the WTO, I sincerely hope our friends and allies will appreciate the gravity of the moment and what’s at stake.”

U.S. blocks inclusion of Venezuelan request for panel on U.S. sanctions at WTO, Dispute Settlement Body meeting of March 26, 2021 postponed

The monthly regular meeting of the WTO Dispute Settlement Body was scheduled for March 26, 2021. The proposed agenda was circulated earlier and contained as item 4, “United States – Measures Relating to Trade in Goods and Services, A. Request for the Establishment of a Panel by Venezuela (WT/DS54/2/Rev.1)”. See Dispute Settlement Body, 26 March 2021, Proposed Agenda, WT/DSB/W/679 (24 March 2021). For background, the Venezuelan request for a panel is embedded below.

WTDS574-2R1

The United States objected to the inclusion of agenda item 4. USTR released a short statement on March 26. “The United States will reject any effort by Maduro to misuse the WTO to attack U.S. sanctions aimed at restoring human rights and democracy to Venezuela. The United States exercised its rights as a WTO Member to object to this illegitimate panel request because representatives of the Maduro regime do not speak on behalf of the Venezuelan people.” See USTR, Statement from USTR Spokesperson Adam Hodge on U.S. Action to Prevent Maduro Regime’s Attempt to Undermine U.S. Sanctions, March 26, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/march/statement-ustr-spokesperson-adam-hodge-us-action-prevent-maduro-regimes-attempt-undermine-us.

Venezuela did not agree to withdraw its request for a panel from the agenda with the result that Dispute Settlement Body meetings cannot proceed until there is a resolution. See Blomberg, U.S. Disrupts WTO Dispute Meeting Over Venezuela Sanctions Fight, March 26, 2021, https://www.bloomberg.com/news/articles/2021-03-26/u-s-disrupts-wto-dispute-meeting-over-venezuela-sanctions-fight (“The meeting ended prematurely after Venezuela refused Washington’s demand that the WTO remove Venezuela’s dispute request from the meeting agenda, according to the official attending the meeting. The impasse means that the WTO can’t hold any regular dispute settlement meetings unless and until the U.S. or Venezuela back down.”); Inside U.S. Trade’s World Trade Online, WTO: DSB meeting postponed over U.S. objection to Venezuela panel request, March 26, 2021, https://insidetrade.com/daily-news/wto-dsb-meeting-postponed-over-us-objection-venezuela-panel-request; Reuters, U.S. blocks Venezuela bid to seek WTO review of sanctions, March 26, 2021, https://www.reuters.com/article/us-trade-wto-usa-venezuela/u-s-blocks-venezuela-bid-to-seek-wto-review-of-sanctions-idUSKBN2BI1ZT (“Were the United States and other members to allow representatives of the illegitimate Maduro regime to exercise rights at the WTO on behalf of Venezuela, it would be tantamount to recognizing the Maduro regime itself,” the official said. “This would be contrary to the Biden-Harris administration’s firm policy supporting the people of Venezuela.”).

Background

The Maduro government in Venezuela is viewed as illegitimate by the United States and dozens of other governments based on the 2013 election. The U.S. has recognized Juan Guaido as the interim President and has imposed a series of sanctions on Venezuela and the Maduro government. While the sanctions were imposed during the Trump Administration, no changes have yet occurred in the Biden Administration. A 2020 write-up from the State Department describes the problems and justifications for the sanctions. See U.S. Department of State, U.S. Relations With Venezuela, Bilateral Relations Fact Sheet, Bureau of Western Hemisphere Affairs, July 6, 2020, https://www.state.gov/u-s-relations-with-venezuela/. Much of the fact sheet is copied below.

U.S.-VENEZUELA RELATIONS

“The United States recognizes Interim President Juan Guaido and considers the Venezuelan National Assembly, which he currently leads, to be the only legitimate federal institution, according to the Venezuelan Constitution. Nearly sixty other countries have joined in this recognition.

“The United States works with Interim President Juan Guaido and his team on a number of areas of mutual concern, including humanitarian and migration issues, health issues, security, anti-narcotrafficking initiatives, and reestablishment of the rule of law. The United States proposed a Democratic Transition Framework in 2020 as a guide to help Venezuelan society achieve a peaceful, democratic transition. Venezuela’s previous presidents, the late Hugo Chavez (1999-2013) and Nicolas Maduro (2013-2019), defined themselves in large part through their opposition to the United States, regularly criticizing and sowing disinformation about the U.S. government, its policies, and its relations with Latin America. Maduro, who was not reelected via free and fair elections, clings to power through the use of force. His policies are marked by authoritarianism, intolerance for dissent, and violent and systematic repression of human rights and fundamental freedoms – including the use of torture, arbitrary detentions, extrajudicial killings, and the holding of more than 400 prisoners of conscience. Maduro has been sanctioned by the Office of Foreign Assets Control, and in 2020 the Department of Justice charged him with offenses related to narco-terrorism and drug trafficking The U.S. Department of State’s Bureau of International Narcotics and Law Enforcement (INL) posted a $15-million reward for information to bring him to justice. The Maduro regime’s irresponsible intervention in the economy has facilitated widespread corruption and stoked hyperinflation leading to negative economic growth and a humanitarian crisis, including food, energy, and water shortages, in a country with the world’s largest proven oil reserves.

“U.S. Assistance to Venezuela

“Through its assistance to the legitimate Guaido Interim Government and democratic organizations within and outside Venezuela, the United States supports the protection of human rights, the promotion of civil society, the strengthening of democratic institutions, and transparency and accountability in the country. From Fiscal Year (FY) 2014 to 2019, the United States has committed approximately $58.6million in bilateral democracy assistance to Venezuela. Assistance to Venezuela is subject to a number of restrictions, including those under Section 706(1) of the Foreign Relations Authorization Act, Fiscal Year 2003 (P.L. 107-228) (the so-called Drug Majors restriction), the Trafficking Victims Protection Act, and restrictions contained in the annual appropriations laws

“Since 2005, the President has determined annually that Venezuela, and more recently the illegitimate Maduro regime, has “failed demonstrably” to adhere to its drug control obligations under international counternarcotics agreements. The President has issued a national interest waiver to enable certain assistance programs vital to the national interests of the United States, such as human rights and civil society programs, to continue.

“Pursuant to Section 40A of the AECA, since 2006 the Department of State has determined annually that Venezuela was “not cooperating fully” with U.S. counterterrorism efforts. Under this provision, defense articles and services may not be sold or licensed for export to Venezuela during the relevant fiscal year.

“U.S. Assistance in Response to the Venezuela Regional Crisis

“The United States is answering Interim President Guaido’s call to help the people of Venezuela cope with severe food, water, energy, and medicine shortages. Since FY 2017, the United States has provided more than $856 million in assistance to support the response to the crisis inside Venezuela and the region, which includes $611 million in humanitarian assistance and $245 million in economic and development assistance. The United States is the single largest donor to the combat the crisis, and supports sixteen countries hosting Venezuelan refugees. USG-provided humanitarian assistance addresses critical life-saving needs, including food and nutrition, water, sanitation, hygiene and health, and temporary shelter. Our development assistance is helping countries throughout Latin America and the Caribbean meet longer term needs, such as education deficits, caused by the man-made regional crisis.

“Bilateral Economic Relations

“Before the United States suspended diplomatic operations in Venezuela, the United States was Venezuela’s largest trading partner. Bilateral trade in goods between both countries reached $3.2 billion in 2019. U.S. goods exports to Venezuela totaled $1.2 billion in 2019. U.S. imports from Venezuela totaled $1.9 billion. U.S. exports to Venezuela have historically included petroleum and refined petroleum products, machinery, organic chemicals, and agricultural products. Crude oil dominated U.S. imports from Venezuela, which was one of the top five suppliers of foreign oil to the United States. In early 2019, imports of Venezuelan crude oil averaged roughly 500,000 barrels per day, but sanctions imposed by the United States have now cut this to zero. Previously, U.S. foreign direct investment in Venezuela was concentrated largely in the petroleum sector, but sanctions, coupled with the poor business environment, have significantly reduced these investment.

“Hyperinflation, state intervention in the economy including expropriations, macroeconomic distortions, physical insecurity, corruption, violations of labor rights, and a volatile regulatory framework make Venezuela an extremely challenging climate for U.S. and multinational companies. A complex foreign exchange system, capital controls, and the lack of dollars, coupled with increasing sanctions from the United States and other countries, have prevented firms from repatriating their earnings out of Venezuela and importing industrial inputs and finished goods into Venezuela. Lack of access to dollars, price controls, and rigid labor regulations have compelled many U.S. and multinational firms to reduce or shut down their Venezuelan operations.

“Since 2017, the United States has made over 300 Venezuelan-related designations, pursuant to various Executive Orders (E.O.), including under the International Emergency Economic Powers Act, and the Foreign Narcotics Kingpin Designation Act. Designations include former President

“Maduro and those involved in public corruption and undermining democracy under E.O. 13692 (Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Venezuela) issued by the President in March 2015 and E.O. 13850 (Blocking Property of Additional Persons Contributing to the Situation in Venezuela) issued by the President in November 2018, each as amended. Since 2017, the Department of Treasury has designated two individuals for involvement in narcotrafficking under the Kingpin Act, including former Vice President (and nominal Minister of Oil) Tareck El Aissami.

“Additionally, E.O. 13850, in conjunction with determinations made by the Secretary of the Treasury, authorizes sanctions against persons determined to be operating in the gold, oil, financial, and defense and security sectors of the Venezuelan economy and was the basis for the January 2019 designation of Venezuelan national oil company Petreoleos de Venezuela, S.A. (PdVSA). The Central Bank of Venezuela is also designated under E.O. 13850.

“On August 5, 2019, the President signed E.O. 13884 which blocks all property and interests in property of the Government of Venezuela that are in the United States or that are within the possession or control of any United States person. In conjunction with E.O. 13884, Treasury also issued or , including those that authorize, among other things, transactions with Guaido and the National Assembly, activities for the official business of certain international organizations, and activities NGOs undertake to support humanitarian projects to meet basic human needs in Venezuela.

“For additional information about the Venezuela sanctions program, please visit the Treasury Department’s Office of Foreign Assets Control (OFAC) website.

“On March 26, 2020, the Department of Justice charged former President Maduro and 14 other current and former Venezuelan officials, including his vice president for the economy, his Minister of Defense, and the Chief Supreme Court Justice with offenses related to narco-terrorism, corruption, and drug trafficking, and other criminal charges.

“Venezuela’s Membership in International Organizations

“Venezuela and the United States belong to a number of the same international organizations, including the United Nations, Organization of American States, International Atomic Energy Agency, International Civil Aviation Organization, International Monetary Fund, Interpol, World Bank, World Trade Organization and Inter-American Development Bank (IDB).

“Venezuela is a founding member of the Organization of the Petroleum Exporting Countries (OPEC), the Bolivarian Alliance for the Peoples of Our America (ALBA), the Community of Latin American and Caribbean States (CELAC), and PetroCaribe. Venezuela is also a member of the Non-Aligned Movement, , the G-15, the G-24, and the G-77. On August 5, 2017 Venezuela was indefinitely suspended from Southern Common Market (Mercosur).

“With the recognition of Juan Guaido as interim President by 57 countries, Venezuela’s participation or representation in some of these organizations has come under debate.

“On April 26, 2017, Maduro announced Venezuela would withdraw from the Organization of American States (OAS), a process that requires two years. This decision was reversed by Interim President Guaido and the National Assembly. On January 10, 2019, the OAS Permanent Council voted not to recognize the second term of former President Nicolas Maduro and on April 9, 2019 the OAS Permanent Council approved a resolution to accept interim President Guaido’s nominee Gustavo Tarre as Venezuela’s representative to the Permanent Council on April 9.

“The interim Guaido government is also an active member of the Lima Group, an important group of likeminded nations founded in 2017 to facilitate regional coordination in the pursuit of a democratic resolution to the Venezuela crisis.

“On March 15, 2019, the IDB approved a resolution recognizing Guaido’s representative, Ricardo Hausmann. The current representative is Alejandro Plaz.

“Bilateral Representation

“On March 12, 2019, the United States suspended embassy operations in Caracas. The United States maintains formal diplomatic relations with Venezuela and the Guaido interim government through its accredited Ambassador to the United States.

“On August 28, 2019, the Department of State announced the opening of the Venezuela Affairs Unit (VAU). The VAU is the interim diplomatic office of the U.S. Government to Venezuela, located at the U.S. Embassy in Bogota, Colombia. It continues the U.S. mission to the legitimate Government of Venezuela and to the Venezuelan people.”

While the Biden Administration is reviewing its approach to Venezuela and some in the Democratic party have questioned the sanction program in terms of effectiveness, the sanctions remain in place as of March 28, 2021. See, e.g., White House Briefing Room, Background Press Call by Senior Administration Officials on Venezuela, March 08, 2021,https://www.whitehouse.gov/briefing-room/press-briefings/2021/03/08/background-press-call-by-senior-administration-officials-on-venezuela/; PBS News Hour, Democrats pressure Biden to review U.S. sanctions on Venezuela, March 23, 2021, https://www.pbs.org/newshour/politics/democrats-pressure-biden-to-review-u-s-sanctions-on-venezuela.

WTO history of the dispute

Venezuela requested consultations with the United States in late December 2018. See UNITED STATES – MEASURES RELATING TO TRADE IN GOODS AND SERVICES, REQUEST FOR CONSULTATIONS BY VENEZUELA (28 December 2018), WT/DS574/1, G/L/1289, S/L/420, 8 January 2019.

The United States refused the request for consultations. Venezuela requested a panel on 14 March 2019. See UNITED STATES – MEASURES RELATING TO TRADE IN GOODS AND SERVICES REQUEST FOR THE ESTABLISHMENT OF A PANEL BY VENEZUELA, WT/DS574/2, 15 March 2019.

The request was included in the draft agenda for the DSB meeting of March 26, 2019. See Dispute Settlement Body, 26 March 2019, Proposed Agenda, WT/DSB/W/641, 22 March 2019 (agenda item 6, “UNITED STATES – MEASURES RELATING TO TRADE IN GOODS AND SERVICES, A. REQUEST FOR THE ESTABLISHMENT OF A PANEL BY VENEZUELA (WT/DS574/2)”).

The U.S. objected to the inclusion of the Venezuelan request on the agenda. No DSB meeting was held on March 26, 2019. Venezuela agreed to withdraw its request, and the DSB meeting was rescheduled for April 26, 2019. See Dispute Settlement Body, 26 April 2019, Proposed Agenda, WT/DSB/W/643, 24 April 2019.

The minutes of the April 26, 2019 DSB meeting included the following statement ahead of the adoption of the agenda.

“Prior to the adoption of the Agenda, the representative of the Bolivarian Republic of Venezuela said that his delegation wished to make a short statement for the record to the effect that Venezuela was not asking to modify the proposed Agenda of the present meeting to request an inclusion of an item. However, Venezuela wished to reserve its right to do so at any future DSB meeting. Subsequently, Japan said that it wished to include on the proposed Agenda an item under “Other Business” regarding its communication contained in Job/DSB/3. The Agenda was adopted as amended. Following the adoption of the Agenda, the representative of Peru, speaking on behalf of Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Honduras, Panama and Paraguay said that the members of the Lima Group supported the functioning of the DSB at the present meeting.
However, their Governments wished to indicate that they did not recognize the legitimacy of Nicolás Maduro’s regime nor that of its representatives. The representative of Venezuela said that the DSB was not the appropriate forum to discuss this matter. The representative of the Russian Federation said that her country supported the legitimate government of Nicolás Maduro and underlined that the WTO was not the appropriate international forum vested with the authority to discuss issues raised by the members of the Lima Group.” Dispute Settlement Body, 26 April 2019, MINUTES OF MEETING HELD, WT/DSB/M/428
25 June 2019, page 1.

March 26, 2021 DSB Meeting

Thus, based on the history of U.S. concerns with the Maduro government in Venezuela, it was hardly surprising that the United States would block inclusion of the request for a panel from the agenda this past Friday. Press accounts report that Peru, Brazil and Colombia supported the U.S. position and that the Russian Federation and Cuba supported Venezuela. See, e.g., Reuters, U.S. blocks Venezuela bid to seek WTO review of sanctions, March 26, 2021, https://www.reuters.com/article/us-trade-wto-usa-venezuela/u-s-blocks-venezuela-bid-to-seek-wto-review-of-sanctions-idUSKBN2BI1ZT.

The EU made a statement at the truncated meeting which is copied below. See Permanent Mission of the European Union to the World Trade Organization (WTO), EU Statement at the Regular meeting of the Dispute Settlement Body (DSB), 26 March 2021, https://eeas.europa.eu/delegations/world-trade-organization-wto/95717/eu-statement-regular-meeting-dispute-settlement-body-dsb-26-march-2021_en.

ADOPTION OF THE AGENDA:

“If the EU understands correctly, the US is not ready to accept this panel request by Venezuela as being valid, as it was submitted by a government which the US no longer recognises as the legitimate government representing Venezuela.

“In fact, in this case, the EU would have expected the US to rely on the security exceptions in Article XXI of the GATT and Article XIVbis of the GATS for justifying any departures from basic GATT and GATS provisions that may lie in the measures taken against Venezuela. 

Indeed, we note that the United States measures at issue appear justified by the security exceptions, so the challenge at issue cannot in any event succeed.

“All this being said, the EU has to react for systemic reasons and express its concern at the prospect of the DSB being prevented from holding its meeting on all items of today’s agenda simply because that agenda is not adopted. 

“There is a longstanding and widely recognised principle that DSB agendas cannot be blocked to the extent that they include items governed by negative consensus. This includes first panel requests (governed by consensus), since they are a necessary pre-condition to a second panel request. This principle is of utmost importance because the binding nature of WTO dispute settlement rests on it. 

“That said, the EU expects this meeting to be suspended now, as a result of the US objection to the agenda adoption. This should allow the Chairperson and the WTO Members most involved to consult in search of a solution. The EU hopes that these efforts will rapidly yield a solution, so that this meeting can continue and the DSB discharge the important duties with which it is entrusted.”

Conclusion

Friday’s events at the Dispute Settlement Body meeting were not surprising once the request for a panel had been filed by Venezuela. What is surprising is the Maduro government’s effort to re-raise a matter that had no possibility of being considered in light of the well understood U.S. position (a position agreed to by many WTO Members).

WTO Members have historically shown an inability to evaluate disputes they pursue from the vantage point of whether the result desired is at all politically possible for the Member whose action is being challenged. Yet pursuing disputes that cannot be resolved through the dispute settlement system is a disservice to the WTO and to the proper functioning of the Dispute Settlement Body. The Maduro government dispute with the United States first and foremost is a question of the legitimacy of the Maduro government and its refusal to transfer power to the interim President. No WTO dispute will help resolve the underlying dispute. Besides the question raised by the United States (blocking requests from entities which are not the true representatives of the people), getting rid of the request properly reflects the political realities of the underlying dispute.

U.S. Section 301 investigations on digital services taxes by trading partners — USTR seeks public comment on proposed tariffs in six of ten investigations and terminates investigations on Brazil, the Czech Republic, the European Union and Indonesia

While the Biden Administration is looking to develop agreed international taxation rules for digital services through the OECD/G20 Integrated Framework process, on Friday, March 26, 2021, USTR Katherine Tai announced next steps to maintain options while negotiations at the OECD continue. See USTR, USTR Announces Next Steps of Section 301 Digital Services Taxes Investigations, March 26, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/march/ustr-announces-next-steps-section-301-digital-services-taxes-investigations. Part of the press release is copied below.

Six countries remain subject to potential action while broader international tax negotiations continue

“WASHINGTON – The United States Trade Representative (USTR) today announced the next steps in its Section 301 investigations of Digital Service Taxes (DSTs) adopted or under consideration by ten U.S. trading partners.  In January, USTR found that the DSTs adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom were subject to action under Section 301 because they discriminated against U.S. digital companies, were inconsistent with principles of international taxation, and burdened U.S. companies.  USTR is proceeding with the public notice and comment process on possible trade actions to preserve procedural options before the conclusion of the statutory one-year time period for completing the investigations.
  
“’The United States is committed to working with its trading partners to resolve its concerns with digital services taxes, and to addressing broader issues of international taxation,’ said Ambassador Katherine Tai.  ‘The United States remains committed to reaching an international consensus through the OECD process on international tax issues.  However, until such a consensus is reached, we will maintain our options under the Section 301 process, including, if necessary, the imposition of tariffs.’

“The remaining four jurisdictions – Brazil, the Czech Republic, the European Union, and Indonesia – have not adopted or not implemented the DSTs under consideration when the investigations were initiated.  Accordingly, USTR is terminating these four investigations without further proceedings.  If any of these jurisdictions proceeds to adopt or implement a DST, USTR may initiate new investigations.” 

In prior posts, I have reviewed the investigations and reports released on the six investigations and on the French investigation which was completed earlier but where tariffs were postponed in mid-January 2021. See January 15, 2021, U.S. Section 301 investigations on digital services taxes by trading partners – USTR releases additional reports on January 14, 2021, https://currentthoughtsontrade.com/2021/01/15/u-s-section-301-investigations-on-digital-service-taxes-by-trading-partners-ustr-releases-additional-reports-on-january-14-2021/ (release of reports on Austria, Spain and the United Kingdom); January 8, 2021, U.S. Section 301 investigations on digital service taxes by trading partners – an update, https://currentthoughtsontrade.com/2021/01/08/u-s-section-301-investigations-on-digital-service-taxes-by-trading-partners-an-update/ (release of reports on India, Italy and Turkey); June 3, 2020, Digital Services Taxes – New U.S. Section 301 Investigations on Nine Countries and the European Union, https://currentthoughtsontrade.com/2020/06/03/digital-services-taxes-new-u-s-section-301-investigations-on-nine-countries-and-the-european-union/

Yesterday’s USTR press release included links to the Federal Register notices that will appear presumably next week. Each notice provides a timeline for written comments and a virtual hearing as well as the proposed list of products that could be imposed.

For example, the Federal Register notice on Austria states that “In particular, USTR proposes to impose additional tariffs of up to 25 percent ad valorem on an aggregate level of trade that would collect duties on goods of Austria in the range of the amount of the DST that Austria is expected to collect from U.S. companies. Initial estimates indicate that the value of the DST payable by U.S.-based company groups to Austria will be up to approximately $45 million per year. USTR further proposes that the goods of Austria subject to additional tariffs would be drawn from the preliminary list of products in the Annex to this notice, as
specified by the listed eight-digit tariff subheadings.” Similar language appears in each of the notices with the estimated taxes on U.S. digital services estimated at $55 million per year for India, $140 million for Italy, $155 million for Spain, $160 million for Turkey, $325 million for the United Kingdom. At an ad valorem additional duty of 25%, this means that if there is not a resolution to the issues at the OECD, duties could be applied by the U.S. on $180 million of goods from Austria, $220 million from India, $560 million from Italy, $620 million from Spain, $640 million from Turkey and $1.3 billion from the United Kingdom. Products listed in the Annex are the products from which USTR is proposing the U.S. would choose for additional duties.

All Federal Register notices seek comments on a range of issues. The language from the Turkey notice is copied below and is similar to that in each of the other five Federal Register notices.

III. Request for Public Comments

“In accordance with section 304(b) of the Trade Act (19 U.S.C. 2414(b)), USTR invites comments from interested persons with respect to whether action is appropriate, and if so, the appropriate action to be taken.

“USTR requests comments with respect to any issue related to the action to be taken in this investigation. With respect to the proposed tariff action outline above, USTR specifically invites comments regarding:

“• The level of the burden or restriction on U.S. commerce resulting from Turkey’s DST, including the amount of DST payments owed by U.S. companies, the annual growth rate of such payments, and other effects, such as compliance costs.

“• The appropriate aggregate level of trade to be covered by additional duties.

“• The level of the increase, if any, in the rate of duty.

“• The specific products to be subject to increased duties, including whether the tariff subheadings listed in the Annex should be retained or removed, or whether tariff subheadings not currently on the list should be added.

“In commenting on the inclusion or removal of particular products on the preliminary list of products subject to the proposed additional duties, USTR requests that commenters address specifically whether imposing increased duties on a particular product would be practicable or effective to obtain the elimination of Turkey’s acts, policies, and practices, and whether imposing additional duties on a particular product would cause disproportionate economic harm to U.S. interests, including small- or medium-size businesses and consumers.

“Simultaneously with this notice, USTR also is requesting public comments on proposed trade actions in five other DST investigations initiated at the same time as the Turkey DST investigation. Certain interested persons may wish to provide written comments or oral testimony on multi-jurisdictional issues common to two or more investigations. To avoid duplication, the USTR portal will have a separate docket for multi-jurisdictional submissions, and USTR will hold a separate multi-jurisdictional hearing.

“To be assured of consideration, you must submit written comments on the proposed action by April 30, 2021, and post-hearing rebuttal comments by May 10, 2021 for the multi-jurisdictional hearing, and by May 14, 2021 for the Turkey DST hearing.”

All six notices provide the dates for requesting to appear, for submitting comments and for the hearing. The dates from the notices are copied below.

Austria notice

DATES:
April 21, 2021: To be assured of consideration, submit requests to appear at a hearing, along with a summary of the testimony, by this date.

April 30, 2021: To be assured of consideration, submit written comments by this date.

May 3, 2021: Multi-jurisdictional virtual hearing on proposed actions.

May 10, 2021: To be assured of consideration, submit multi-jurisdictional hearing rebuttal comments by this date.

May 11, 2021 at 9:30 am: Virtual hearing on Austria DST proposed action.

May 18, 2021: To be assured of consideration, submit Austria DST hearing rebuttal comments by this date.

India notice

DATES:
April 21, 2021: To be assured of consideration, submit requests to appear at a hearing, along with a summary of the testimony, by this date.

April 30, 2021: To be assured of consideration, submit written comments by this date.

May 3, 2021: Multi-jurisdictional virtual hearing on proposed actions.

May 10, 2021: To be assured of consideration, submit multi-jurisdictional hearing rebuttal comments by this date.

May 10, 2021 at 9:30 am: Virtual hearing on India DST proposed action.

May 17, 2021: To be assured of consideration, submit India DST hearing rebuttal comments by this date.

Italy notice

DATES:
April 21, 2021: To be assured of consideration, submit requests to appear at a hearing, along with a summary of the testimony, by this date.

April 30, 2021: To be assured of consideration, submit written comments by this date.

May 3, 2021: Multi-jurisdictional virtual hearing on proposed actions.

May 5, 2021 at 9:30 am: Virtual hearing on Italy DST proposed action.

May 10, 2021: To be assured of consideration, submit multi-jurisdictional hearing rebuttal comments by this date.

May 12, 2021: To be assured of consideration, submit Italy DST hearing rebuttal comments by this date.

Spain notice

DATES:
April 21, 2021: To be assured of consideration, submit requests to appear at a hearing, along with a summary of the testimony, by this date.

April 30, 2021: To be assured of consideration, submit written comments by this date.

May 3, 2021: Multi-jurisdictional virtual hearing on proposed actions.

May 6, 2021 at 9:30 a.: Virtual hearing on Spain DST proposed action.

May 10, 2021: To be assured of consideration, submit multi-jurisdictional hearing rebuttal comments by this date.

May 13, 2021: To be assured of consideration, submit Spain DST hearing rebuttal comments by this date.

Turkey notice

DATES:
April 21, 2021: To be assured of consideration, submit requests to appear at a hearing, along with a summary of the testimony, by this date.

April 30, 2021: To be assured of consideration, submit written comments by this date.

May 3, 2021: Multi-jurisdictional virtual hearing on proposed actions.

May 7, 2021 at 9:30 am: Virtual hearing on Turkey DST proposed action.

May 10, 2021: To be assured of consideration, submit multi-jurisdictional hearing rebuttal comments by this date.

May 14, 2021: To be assured of consideration, submit Turkey DST hearing rebuttal comments by this date.

United Kingdom notice

DATES:
April 21, 2021: To be assured of consideration, submit requests to appear at a hearing, along with a summary of the testimony, by this date.

April 30, 2021: To be assured of consideration, submit written comments by this date.

May 3, 2021: Multi-jurisdictional virtual hearing on proposed actions.

May 4, 2021 at 9:30 a.m.: Virtual hearing on the United Kingdom DST proposed action.

May 10, 2021: To be assured of consideration, submit multi-jurisdictional hearing rebuttal comments by this date.

May 11, 2021: To be assured of consideration, submit the United Kingdom DST hearing rebuttal comments by this date.

The Federal Register notices issued by USTR on the six countries and the notice on terminating 301 investigations on Brazil, Czech Republic, European Union and Indonesia are embedded below and will appear in the Federal Register in the next week or so.

FRNAustria

FRNIndia

FRNItaly

FRNSpain

FRNTurkey

FRNUK

FRNDSTterminations

Conclusion

The Biden Administration has rejoined the effort to find an acceptable solution to the digital services tax issue within the OECD/G20 Integrated Framework and has reportedly made a major concession to facilitate movement in the talks. See Wall Street Journal, Yellen Removes Obstacle to Global Corporate-Tax Deal, February 26, 2021, https://www.wsj.com/articles/yellen-removes-obstacle-to-global-corporate-tax-deal-11614363591 (“Treasury Secretary Janet Yellen said Friday that the U.S. would no longer insist on a “safe harbor” under which some elements of the tax rules would be optional. The idea, proposed in late 2019 by her predecessor, Steven Mnuchin, drew objections from European counterparts, though talks on how it would work never advanced very far.”).

At the same time, the U.S. has been and remains concerned about what it views as efforts by major trading partners to impose discriminatory taxes on major U.S. digital services companies. There were many U.S. Senators who expresssed deep concerns with the practices of trading partners in this area during Ambassador Tai’s confirmation hearing to become USTR. The action taken yesterday by USTR reflects the willingness of the Biden Administration to be prepared to impose tariffs on products from selected countries where investigations have resulted in previously released reports that identified significant problems under U.S. law. At the same time, USTR has made clear that the Administration’s preferred approach is through the OECD/G20 Integrated Framework process. And USTR has terminated the remaining four investigations where reports were not released.

All of the above indicate that the U.S. will put primary focus on the ongoing OECD negotiations while preserving options under U.S. law on investigations that had proceeded to a determination by holding public hearings and considering potential products on which to impose additional tariffs. USTR’s actions should generally be acceptable to the U.S. Congress while also letting the OECD negotiations play out in the coming months while preserving options if a negotiated outcome proves illusive.

Global vaccinations for COVID-19 — continued supply chain and production issues and a new wave of infections in many countries delay greater ramp up for some until late in the second quarter of 2021

The world has witnessed the unprecedented development of a number of vaccines in record time to deal with the COVID-19 pandemic. The development has been the result of widespread cooperation in sharing information and the funding in part by governments and early orders for hundreds of millions of doses if vaccines proved efficacious and safe. In roughly one year since the virus was declared a pandemic by the WHO, individual vaccines have been produced and authorized by one or more governments (some by as many as 70 along with WHO approval).

According to the Financial Times COVID-19 vaccine tracker, as of March 25, nearly 490 million vaccine shots have been administered around the world (based on data from 166 locations). See Financial Times, Covid-19 vaccine tracker: the global race to vaccinate, 25 March 2021, https://ig.ft.com/coronavirus-vaccine-tracker/?areas=gbr&areas=isr&areas=usa&areas=eue&cumulative=1&populationAdjusted=1. The companies with approved vaccines have been ramping up production at their own and at licensed facilities in other countries. Because companies are racing to put in place 3-4 times the global capacity for all vaccines (3.5 billion doses) to produce COVID-19 vaccines (10-14 billion doses by the end of 2021) and because there are complex supply chains and production processes for the new vaccines, there have been various delays which have occurred both at manufacturers and at suppliers. This has been true in the U.S., in the EU, in India and other producing countries. While countries and producers are working on solutions, shortages of certain materials exist and can reduce production of finished vaccines globally.

While the WHO, GAVI, CEPI and UNICEF have set up COVAX to get vaccines to a total of 192 countries, including 92 low- and middle-income countries where materials will be supplied at discounted prices or for free and have a target of two billion doses to participating countries in 2021, there is an early reliance on AstraZeneca’s vaccine whether produced by AstraZeneca or through license by the Serum Institute (SII) in India, the world’s largest vaccine producer.

Unfortunately, many countries are going through a new wave of COVID-19 infections which puts pressure on governments to secure sufficient supplies to address domestic demand. See, e.g., European Centre for Disease Prevention and Control, COVID-19 situation update worldwide, as of week 11, updated 25 March 2021, https://www.ecdc.europa.eu/en/geographical-distribution-2019-ncov-cases (shows total new reported infections going up globally for the fourth week after a sharp decline after New Year’s). Countries showing large numbers of cases over the last two weeks (whether increases or decreases) include Ethiopia (21,227), Kenya (12,083), Libya (12,852), South Africa (17,646), Argentina (91,023), Brazil (995,861), Canada (48,021), Chile (77,561), Colombia (63,417), Ecuador (18,223), Mexico (66,683), Paraguay (26,252), Peru (98,323), United States (830,346), Uruguay (19,512), Bangladesh (19,938), India (416,683), Indonesia (80,522), Iran (119,383), Iraq (67,344), Jordan (109,594), Lebanon (43,964), Pakistan (38,371), Philippines 969,382), United Arab Emirates (29,506), Austria (39,842), Belgium (50,670), Bulgaria (43,115), Czechia (142,042), Estonia (20211), France (378,370), Germany (162,032), Greece (32,005), Hungary (111,929), Italy (308,890), Moldova (19,82), Netherlands (83,797), Poland (272,046), Romania (70,295), Russian Federation (133,24), Serbia (65,689), Spain (67,833), Sweden (61,666), Turkey (232,705), Ukraine (147,456), United Kingdom (78,063). While many countries do not produce COVID-19 vaccines, the list of countries includes many in the EU as well as Brazil, the United States and India. Brazil’s production of COVID-19 vaccines is not expected to start until May. Below I review developments on vaccination roll-outs in the United States, the European Union and India.

Vaccination roll-out in the U.S., EU and India — three important COVID-19 vaccination production areas

Under the Biden Administration, the United States has drastically improved its performance on COVID-19 vaccinations with 129.3 million vaccinations given by March 24 and with the President announcing his Administration’s revised goal of 200 million shots in arms in his first 100 days in office (April 29). See Financial Times, Biden doubles vaccine goal to 200m in first 100 days, 25 March 2021, https://www.ft.com/content/a1accbdf-0010-426c-9442-feb73b5c8a1d. While the U.S. focus is on getting the U.S. population vaccinated as the first priority, the U.S. has agreed to “loan” 1.5 million doses of AstraZeneca’s vaccine to Canada and 2.5 million doses to Mexico. The U.S., following a leader’s remote meeting of the Quad (U.S., Japan, India, Australia), agreed to work with the other Quad partners to produce one billion doses in India of a vaccine by the end of 2022 from a U.S. company that would be paid for by Japan and the U.S. and would receive distribution support from Australia for countries in the Indo-Pacific region. See March 12, 2021, COVID-19 vaccines – U.S., Japan, India and Australia agree to one billion doses for Indo-Pacific countries, https://currentthoughtsontrade.com/2021/03/12/covid-19-vaccines-u-s-japan-india-and-australia-agree-to-one-billion-doses-for-indo-pacific-countries/.

The European Union, a major producing location for COVID-19 vaccines and various inputs and a major exporter, has had rollout problems flowing from production problems at AstraZeneca’s EU facilities, concerns by many EU members on whether the vaccine from AstraZeneca was safe (small number of blot clot problems in those vaccinated) and other issues. See New York Times, Where Europe Went Wrong in Its Vaccine Rollout, and Why, March 20, 2021, https://www.nytimes.com/2021/03/20/world/europe/europe-vaccine-rollout-astrazeneca.html; Financial Times, Nordic nations hold off on AstraZeneca jab as scientists probe safety, 21 March 2021, https://www.ft.com/content/0ef3a623-f3a2-4e76-afbd-94a915b24ad5. With vaccination rates in the EU far behind the U.K. and the U.S. and a number of other countries, this has led to significant internal pressures to ensure that manufacturers were honoring contracts with the EU and has led to two temporary regulations (and an extension) giving EU members authority to stop exports outside of the EU (and excluding the shipments to COVAX low-and middle-income countries). See March 5, 2021, COVID-19 vaccines — France supports Italy’s blockage of a shipment to Australia; while Australia has asked the EU to permit the shipment, Australia will have its own production of AstraZeneca product by the end of March, https://currentthoughtsontrade.com/2021/03/05/covid-19-vaccines-france-supports-italys-blockage-of-a-shipment-to-australia-while-australia-has-asked-the-eu-to-permit-the-shipment-australia-will-have-its-own-production-of-astrazeneca-produc/; European Commission, Commission strengthens transparency and authorisation mechanism for exports of COVID-19 vaccines, 24 March 2021, https://ec.europa.eu/commission/presscorner/detail/en/ip_21_1352; European Commission, 24.3.2021 C(2021) 2081 final COMMISSION IMPLEMENTING REGULATION (EU) …/… of 24.3.2021, https://ec.europa.eu/commission/presscorner/detail/en/ip_21_1352; European Commission, Commission extends transparency and authorisation mechanism for exports of COVID-19 vaccines, 11 March 2021, https://ec.europa.eu/commission/presscorner/detail/en/IP_21_1121. Australia had a shipment stopped by Italy and the EC has been raising concerns in the United Kingdom.

In recent days, Indian producer Serum Institute has notified a number of customers that their orders would be delayed several months. GAVI COVAX has been notified as well, with 40 million doses in April and 50 million in May apparently unlikely to ship. Press articles attribute the delays to the needs within India, though SII has suggested delays are also due to availability issues on certain inputs. The Indian government claims it is simply adjusting schedules in light of internal needs and is not imposing an export ban per se. See, e.g., BBC News, India coronavirus: Why have vaccine exports been suspended?, 25 March 2021, https://www.bbc.com/news/world-asia-india-55571793; Wall Street Journal, India Suspends Covid-19 Vaccine Exports to Focus on Domestic Immunization, March 25, 2021, https://www.wsj.com/articles/india-suspends-covid-19-vaccine-exports-to-focus-on-domestic-immunization-11616690859#:~:text=An%20Indian%20government%20official%20said,of%20the%20government’s%20vaccine%20program.&text=On%20Tuesday%2C%20the%20government%20said,to%20those%20older%20than%2045; Times of India, India has not banned Covid-19 vaccine exports, 25 March 2021, https://timesofindia.indiatimes.com/india/india-has-not-banned-covid-19-vaccine-exports-sources/articleshow/81693010.cms.

Conclusion

Much of the anticipated ramp up of COVID-19 vaccine production will be happening over the coming months, such that there should be dramatically greater vaccine availability in the coming months. That doesn’t help governments or populations waiting for vaccines. or that are going through a significant ramp up in infections. The pharmaceutical industry and major groups got together earlier this month to explore where the bottlenecks are in ramping up production. See March 12, 2021, The 8-9 March  “Global C19 Vaccine Supply Chain and Manufacturing Summit”, https://currentthoughtsontrade.com/2021/03/12/the-8-9-march-global-c19-vaccine-supply-chain-and-manufacturing-summit-efforts-to-ramp-up-production/ It is unclear the extent to which governments and industry are working together to solve bottlenecks in supply, to facilitate production ramp up, share experiences in reusing safely some critical materials that are in short supply, etc. During these critical months, greater cooperation in solving problems and facilitating expansion of production is needed and hopefully is occurring. Export restrictions have and will occur under various guises, reflecting internal political pressures. In the coming months and certainly by the third quarter of 2021, there should be large volumes of vaccine doses above and beyond what has been contracted by COVAX that will be available for use around the world. Time is obviously of the essence. Cooperation to solve supply chain bottlenecks and speed ramp-ups is the best short term option for speeding getting past the pandemic globally.

.

When human rights violations create trade distortions — the case of China’s treatment of the Uyghurs in Xinjiang

Earlier this week, the EU added a series of individuals and companies to its sanctions list including Chinese officials and entities involved in the alleged extreme human rights abuses of Uyghurs in Xinjiang, as well as others in Russia, Libya and the Democratic People’s Republic of Korea. See European Council, EU imposes further sanctions over serious violations of human rights around the world, 22 March 2021, https://www.consilium.europa.eu/en/press/press-releases/2021/03/22/eu-imposes-further-sanctions-over-serious-violations-of-human-rights-around-the-world/; Official Journal of the European Union, L 99 I, Council Implementing Regulation (EU) 2021/478 of 22 March 2021 implementing Regulation (EU) 2020/1998 concerning restrictive measures against serious human rights violations and abuses, Vol. 64, pages 1-12, 22 March 2021, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2021:099I:FULL&from=EN. The Official Journal regulation has as one of the bases of concern for a number of countries where individuals or entities are included on the sanctions list the following, “The Union remains deeply concerned about serious human rights violations and abuses in different parts of the world, such as torture, extrajudicial killings, enforced disappearances or systematic use of forced labour committed by individuals and entities in China, the Democratic People’s Republic of Korea (DPRK), Libya, Eritrea, South Sudan and Russia.” The regulation includes a page per person/entity being added. Some of the description of why WANG Junzheng has been added to the list is copied below.

“As Party Secretary and Political commissar of the XPCC since 2020, Wang Junzheng is involved in overseeing all policies implemented by the XPCC. In this position, he is responsible for serious human rights violations in China, in particular large-scale arbitrary detentions and degrading treatment inflicted upon Uyghurs and people from other Muslim ethnic minorities, as well as systematic violations of their freedom of religion or belief, linked, inter alia, to the XPCC’s implementation of a large-scale surveillance, detention and indoctrination programme targeting Uyghurs and people from other Muslim ethnic minorities.

“He is also responsible for the XPCC’s systematic use of Uyghurs and people from other Muslim ethnic minorities as a forced workforce, in particular in cotton fields. As Deputy Secretary of the Party Committee of the XUAR since 2020, Wang Junzheng is involved in overseeing all the security policies implemented in Xinjiang, including the aforementioned programme targeting Uyghurs and people from other Muslim ethnic minorities. As Secretary of the Political and Legal Affairs Committee of the XUAR (February 2019 to September 2020), Wang Junzheng was responsible for maintaining internal security and law enforcement in the XUAR. As such, he held a key political position in charge of overseeing and implementing the aforementioned programme.”

On the same day, the United States, United Kingdom and Canada issued a joint statement announcing sanctions on individuals and/or an entity in China involved with the alleged human rights abuses of Uyghurs in Xinjiang. See U.S. Department of State press release, Joint Statement on Xinjiang, March 22, 2021, https://www.state.gov/joint-statement-on-xinjiang/. The body of the joint message is copied below.

“We, the Foreign Ministers of Canada and the United Kingdom, and the United States Secretary of State, are united in our deep and ongoing concern regarding China’s human rights violations and abuses in Xinjiang. The evidence, including from the Chinese Government’s own documents, satellite imagery, and eyewitness testimony is overwhelming. China’s extensive program of repression includes severe restrictions on religious freedoms, the use of forced labour, mass detention in internment camps, forced sterilisations, and the concerted destruction of Uyghur heritage.

“Today, we have taken coordinated action on measures, in parallel to measures by the European Union, that send a clear message about the human rights violations and abuses in Xinjiang. We are united in calling for China to end its repressive practices against Uyghur Muslims and members of other ethnic and religious minority groups in Xinjiang, and to release those arbitrarily detained.

“We underline the importance of transparency and accountability and call on China to grant the international community, including independent investigators from the United Nations, journalists, and foreign diplomats, unhindered access to Xinjiang.

“We will continue to stand together to shine a spotlight on China’s human rights violations. We stand united and call for justice for those suffering in Xinjiang.”

Australia and New Zealand, while not imposing sanctions themselves, added their voices of concern over the alleged human rights abuses in Xinjiang of the Uyghurs. See Minister of Foreign Affairs Australia, Joint statement on Human Rights Abuses in Xinjiang, 23 March 2021, https://www.foreignminister.gov.au/minister/marise-payne/media-release/joint-statement-human-rights-abuses-xinjiang. The Joint Statement is copied below.

“The Australian and New Zealand Governments today reiterate their grave concerns about the growing number of credible reports of severe human rights abuses against ethnic Uighurs and other Muslim minorities in Xinjiang.

“In particular, there is clear evidence of severe human rights abuses that include restrictions on freedom of religion, mass surveillance, large-scale extra-judicial detentions, as well as forced labour and forced birth control, including sterilisation.

“Australia and New Zealand welcome the measures announced overnight by Canada, the European Union, the United Kingdom and the United States. We share these countries’ deep concerns, which are held across the Australian and New Zealand communities.

“Since 2018, when reports began to emerge about the detention camps in Xinjiang, Australia and New Zealand have consistently called on China in the United Nations to respect the human rights of the Uighur people, and other religious and ethnic minorities.

“Today, we underscore the importance of transparency and accountability, and reiterate our call on China to grant meaningful and unfettered access to Xinjiang for United Nations experts, and other independent observers.”

While China argues that their treatment of the Uyghurs is an internal matter, the allegations of serious human rights abuses have raised widespread international condemnation and increasing use of sanctions. The sanctions, however, typically are limited to freezing assets (if any) of individuals or entities in the sanctioning country, banning travel to the country imposing the sanctioning, etc.

Trade Implications

While allegations of human rights violations do not necessarily carry trade distortion implications, the case of the forced labor of Uighurs in Xinjiang clearly does. Xinjiang produces some 80% of the cotton grown in China, much of it produced by forced labor according to reports. As China is a major producer of textile and apparel products and a major exporter of the same, the distortions in trade flows should be obvious. Foreign cotton will have trouble competing in China with cotton produced with forced labor. Garment producers who don’t use the Chinese cotton will face distortions as competing against garments where a significant input has been obtained at artificially low prices. Some countries (e.g., the United States and Canada) have laws which permit them to prevent imports of products made with forced labor, although the breadth of the actions taken to date are typically quite limited.

In prior posts, I looked at the large number of products produced around the world with forced labor or with child labor and also looked specifically at the Chinese treatment of the Uyghurs reviewing a number of publications and reports. See Child labor and forced labor in cotton production — is there a current WTO mandate to identify and quantify the distortive effects?, January 25, 2021, ttps://currentthoughtsontrade.com/2021/01/25/child-labor-and-forced-labor-in-cotton-production-is-there-a-current-wto-mandate-to-identify-and-quantify-the-distortive-effects/ ; Forced labor and child labor — a continued major distortion in international trade for some products, January 24, 2021, https://currentthoughtsontrade.com/2021/01/24/forced-labor-and-child-labor-a-continued-major-distortion-in-international-trade-for-some-products/.

To ramp up pressure on China to reform its treatment of the Uyghurs, the United States, European Union, United Kingdom, Canada, Australia, New Zealand and all other countries concerned about the human rights should coordinate a broad-based denial of imports from China or from other countries where cotton from Xinjiang is part of the product until such time as the treatment of the Uyghurs has been corrected.

Seafood obtained from illegal, unreported, and unregulated fishing — U.S. International Trade Commission report on estimated imports into the U.S.

For twenty years, Members of the World Trade Organization have been negotiating disciplines on fisheries subsidies to help curb illegal, unreported and unregulated fishing (IUU fishing). Achieving an agreement is critical to meeting the United Nations Sustainable Development Goal 14.6. See, e.g., WTO, WTO members hold February cluster of meetings for fisheries subsidies negotiations, 24 February 2021, https://www.wto.org/english/news_e/news21_e/fish_24feb21_e.htm. The WTO Members had hoped to conclude negotiations in 2020 and are working to conclude the negotiations by the 12th Ministerial Conference, now scheduled for the week of November 29, 2021 in Geneva. See WTO, Twelfth Ministerial Conference to take place in Geneva in late 2021, 1 March 2021, https://www.wto.org/english/news_e/news21_e/minis_01mar21_e.htm.

On December 19, 2019, the Chairman of the U.S. House of Representatives Committee on Ways and Means and the Chairman of the Trade Subcommittee of Ways and Means submitted a letter to the U.S. International Trade Commission requesting an investigation into IUU fishing and its effects on the U.S. industry. The text of the request is copied below.

“We are writing today to request that the U.S. International Trade Commission (USITC) conduct an investigation of the potential economic effects on U.S. fishermen of competition with illegal, unreported, and unregulated (IUU) seafood imports. IUU seafood includes products obtained in contravention of fisheries management regulations or in violation of labor laws. Trade in IUU seafood products includes not only IUU catch that is sent directly to end markets, but also IUU raw material inputs that are further processed into aquaculture feed or seafood products for human consumption.

“Up to 31 percent of the global catch of fish reportedly comes from IUU fishing, at an estimated value of more than $23 billion per year. IUU fishing contributes to the overexploitation of fish stocks, threatens the livelihoods of coastal communities, jeopardizes food security, and harms marine ecosystems. IUU fishing also creates unfair competition for U.S. fishermen as imports account for 90 percent of U.S. seafood consumption. China plays an enormous role in the global production and trade of seafood and is the largest seafood trade partner of the United States. China also has been ranked as worst among 152 coastal countries based on the prevalence of IUU fishing and the country’s response to it.

“To better understand the size, scope, supply chains, pricing pressures, and potential economic effects of this problem, we request that the US ITC conduct an investigation, and prepare a report, pursuant to section 332(g) of the Tariff Act of 1930. Based on available information, we request that the Commission’s report provide, to the extent practicable:

“• A review of the existing data and literature on the prevalence of IUU products in the U.S. import market, and an overview of international mechanisms for monitoring and enforcement to address IUU fishing;

“• A description of the size and structure of the U.S. commercial fishing industry;

“A description of major global producers of IUU products, including but not limited to China, and country practices related to IUU production and exports.

“• An analysis of the extent to which IUU product is imported into the United States, as well as major U.S. import sources and global supply chains of such products; and

“• A quantitative analysis of the economic impact of IUU imports on U.S. commercial fishermen and U.S. commercial fishing production, trade, and prices.

“We request that the Commission deliver the report by 12 months from the date of this letter. As we intend to make the report available to the public, we request that confidential business information not be included in the report. Your assistance in this matter is greatly appreciated.

“Sincerely,

“Richard E. Neal, Chairman
“Earl Blumenauer, Chairman, Trade Subcommittee”

The U.S. International Trade Commission released its report,which is dated February 2021, last week. See USITC, Seafood Obtained via Illegal, Unreported, and Unregulated Fishing: U.S. Imports and Economic Impact on U.S. Commercial Fisheries, Inv. 332-575, Publ. 5168 (February 2021). The request letter is included in the report at Annex A.

On March 18, 2021 Chairmen Neal and Blumenauer released a statement including statements from Oceana and from the World Wide Fund for Nature (WWF). See U.S. House of Representatives Committee on Ways and Means, NEAL, BLUMENAUER STATEMENT ON THE U.S. INTERNATIONAL TRADE COMMISSION’S REPORT “SEAFOOD OBTAINED VIA ILLEGAL, UNREPORTED, AND UNREGULATED FISHING: U.S. IMPORTS AND ECONOMIC IMPACT ON U.S. COMMERCIAL FISHERIES”, March 18, 2021, https://waysandmeans.house.gov/media-center/press-releases/neal-blumenauer-statement-us-international-trade-commission-s-report. The press release is copied below.

WASHINGTON, DC—Today, the U.S. International Trade Commission released their findings pursuant to a Tariff Act of 1930 section 332 investigation requested by Chairman Richard E. Neal (D-MA) and Trade Subcommittee Chairman Earl Blumenauer (D-OR) on the economic impact of illegal, unreported, and unregulated (IUU) seafood, including the use of forced labor, on the U.S. fishing industry.  The report found that the U.S. imported $2.4 billion worth of illegal seafood in 2019 and that addressing the illegal imports would create U.S. jobs, protect U.S. consumers and benefit U.S. fishers by an estimated $60.8 million.

“’Far too much illegal seafood is making its way onto our dinner plates and more must be done,’ said Chairman Neal. ‘By building on what we fought to include in USMCA, enhancing the tracing of our seafood supply chains, and cracking down on IUU fishing practices, we can better protect our oceans and ultimately give Americans the peace of mind that they are eating safe, legal seafood.’

“’When people go to the grocery store, they want to know that the seafood is safe and legally caught, responsibly sourced, and honestly labeled. Unfortunately, too much illegal seafood is currently making its way into the country, undermining our hardworking U.S. fishing industry and putting consumers at risk,’ Blumenauer said. ‘It’s clear that we need stronger enforcement standards to protect individuals, workers, and fishing habitats.’

“Chairman Neal and Trade Subcommittee Chairman Blumenauer are joined by Oceana and WWF in recognizing the study.

“’Illegal, unreported and unregulated fishing not only wreaks havoc on fisheries and ocean wildlife, but also undermines domestic fishers and seafood consumers. The United States has advanced programs to combat IUU fishing and seafood fraud, but it’s clear that more needs to be done. The U.S. must expand Seafood Import Monitoring Program to all seafood, trace fish from boat to plate and expand transparency of fishing to help stop IUU products from entering the U.S. and competing with legally sourced seafood,’ said Beth Lowell, Deputy Vice President of U.S. Campaigns at Oceana.

Michele Kuruc, Vice President of Ocean Policy at WWF noted that, ‘this report reminds us that the ramifications of illegal fishing go far beyond the health of our oceans. It depletes our oceans, fuels labor and human rights abuses, and leaves our domestic producers at an economic disadvantage. People are harmed, economies are hurt, and our oceans and planet are in peril.   Eradicating illegal fishing requires a whole of government approach, as our current definitions, processes and efforts have far-reaching limitations. The good news is we have the tools, but they need to be strengthened to get the job done.  The U.S. needs to expand the species covered by our current monitoring program. We need to track all imported species, not just a small group, to truly tackle this issue and protect our oceans, foster economic growth and empower people who rely on oceans for food and income.’”

Thus, the U.S., despite having some provisions to address IUU fishing, still accounts via imports for an estimated 10% of global IUU fishing ($2.4 billion of an estimated $23 billion global total).

The USITC Report

The U.S. International Trade Commission report is 468 pages including Annexes. The report is embedded below.

ITC-report-on-illegal-fishing

While many countries have some part of their marine capture or imports from other countries that are IUU, the USITC report focuses on certain countries and identifies the types of practices that are considered to result in marine capture being considered IUU.

“There are many fishing practices that can constitute an IUU violation. Often, a vessel may fish in an area where it is not authorized. Vessels may also fish during seasons in which particular fishing grounds are closed. IUU fishing also includes harvesting in excess of quotas set by fishery management authorities or misreporting the volume of landings to those authorities. Fishing with disallowed gear types or methods, or in violation of environmental restrictions such as those concerning bycatch, also constitute IUU fishing. Labor violations that have been widely documented in segments of the fishing industry include forced labor, human trafficking, child labor, and physical abuse of workers on board fishing vessels.” USITC Publ. 5168 at 11-12.

Below are some tables from the report which show the estimated volume of IUU imports from major sources of seafood imports into the United States and then some detail on the basis of IUU fishing from a subset of those countries. The tables are taken from pages 114, 115, 463, 14 and 15 of the USITC report respectively.

The USITC report covers a lot of ground and reviews existing literature and studies and provides its methodology for both estimating the share of imports that are IUU as well as the modeling used to estimate economic effects on domestic industry. It is clear that many countries contribute to the IUU problem. Some countries including the U.S. and the EU have tools available to deal with IUU imports and that such tools are viewed as helpful but not totally fit for purpose based on limited scope, at least in the United States.

Interest in the issue from the U.S. Congress and a focus of the Biden Administration on addressing both environmental- and labor- related issues implies that the U.S. will likely be looking for ways to beef up enforcement of the import monitoring program on seafood.

While the report doesn’t address fisheries subsidies, the report should nonetheless be helpful to WTO Members engaged in the fisheries subsidies negotiations. The report adds dimension to the importance of WTO Members reaching an ambitious agreement on fisheries subsidies as the challenges of IUU fishing are not only environmental in nature but also go to fairness in competition.

The U.S.-China Phase 1 Trade Agreement under the Biden Administration

The Biden Administration’s U.S. Trade Representative Katherine Tai during her confirmation hearing before the U.S. Senate Finance Committee and in written answers to questions from Senators was asked many questions about the China trade relationship and the myriad problems U.S. companies have faced in dealing with China or with Chinese imports into the U.S.. Ms. Tai noted in many answers that the “Biden-Harris Administration is engaged in a review of the policies in place to respond to China’s coercive and unfair trade practices * * *. I understand that a comprehensive strategy to confront the China challenge will be formulated based on that review.” Answer to Question 15 from Ranking Member Crapo (page 8).

Among the dozens of questions she received on China, Ms. Tai received a number that involved the U.S.-China Phase One Trade Agreement. For example, in response to a question from Senator Thune, Ms. Tai indicated that she would “assess China’s compliance with the Phase One deal to ensure it is living up to its commitments.” See Senate Finance Committee, Hearing to Consider the Nomination of Katherine C. Tai, of the District of Columbia, to be United States Trade Representative, with the rank of Ambassador Extraordinary and Plenipotentiary, Hearing Date: February 25, 2021, Questions for the Record, page 41, Senator Thune, Question 2, answer, https://www.finance.senate.gov/imo/media/doc/Katherine%20Tai%20Senate%20Finance%20Committee%20QFRs%202.28.2021.pdf. The full question and answer are copied below.

“Question 2:

“As a result of the U.S.-China Phase One trade deal, the U.S. has seen export gains to China across many agricultural sectors including soybeans, corn, beef, and pork.

If confirmed, how would you ensure that China follows through on its Phase One commitments, particularly for U.S. agriculture? What steps would you take to build upon these successes and ensure that U.S. farm and ranch exports to China are not unfairly restricted by tariff and nontariff barriers?

Answer: The Biden-Harris Administration is engaged in a review of the policies in place to respond to China’s coercive and unfair trade practices, including with respect to agricultural products. I understand that a comprehensive strategy to confront the China challenge will be formulated based on that review. If confirmed, as part of that comprehensive review, I will assess China’s compliance with the Phase One deal to ensure it is living up to its commitments.

Thus, one can expect that USTR under Amb. Tai will be continuing to monitor China’s implementation and enforcement of a wide range of changes to regulations an d practices intended to remove non-tariff barriers as well as tracking Chinese purchases of U.S. goods against the Annex 6.1 commitments made by China in the Phase I Agreement.

As reported in prior posts, both China and the U.S. have taken steps to implement parts of the Phase 1 Agreement that took effect on February 14, 2020, although the level of actual implementation remains unclear.

Prior posts on the U.S.-China Phase 1 Agreement can be found here: February 6, 2021, U.S.-China Phase I Trade Agreement – data through December 2020; China has increased purchases of agricultural and energy products above 2017 levels but did not reach first year agreed purchases in 2020 and won’t reached the agreed level even if measured from March 2020-February 2021, https://currentthoughtsontrade.com/2021/02/06/u-s-china-phase-1-trade-agreement-data-through-december-2020-china-has-increased-purchases-of-agricultural-and-energy-products-above-2017-levels-but-did-not-reach-first-year-agreed-purchases-in/; January 9, 2021, U.S.-China Phase 1 Trade Agreement — Data through November 2020; China has increased purchases of agricultural and energy products above 2017 levels but will not reach first year agreed purchases in 2020 whether measured on a calendar basis or on a March 2020-February 2021 basis, https://currentthoughtsontrade.com/2021/01/09/u-s-china-phase-1-trade-agreement-data-through-november-2020-china-has-increased-purchases-of-agricultural-and-energy-products-above-2017-levels-but-will-not-reach-first-year-agreed-purchases-in/; December 10, 2020, U.S.-China Phase I Trade Agreement – data through October 2020; while China has increased purchases of agricultural and some other products, China remains far behind on the agreed purchases in 2020 whether measured on a calendar basis or on a March 2020-February 2021 basis, https://currentthoughtsontrade.com/2020/12/10/u-s-china-phase-1-trade-agreement-data-through-october-2020-while-china-has-increased-purchases-of-agricultural-and-some-other-products-china-remains-far-behind-on-the-agreed-purchases-in-2020-w/; November 13, 2020, U.S.-China Phase 1 trade agreement – Data through September 2020; USDA and USTR report on agriculture portion, https://currentthoughtsontrade.com/2020/11/13/u-s-china-phase-1-trade-agreement-data-through-september-2020-usda-and-ustr-report-on-agriculture-portion/; October 10, 2020,  U.S.-China Phase I Trade Agreement – first six months data on U.S. exports (March-August 2020) covered by the purchase commitments show China needing to triple purchases in next five months to meet first year commitments, https://currentthoughtsontrade.com/2020/10/10/u-s-china-phase-1-trade-agreement-first-six-months-data-on-u-s-exports-march-august-2020-covered-by-the-purchase-commitments-show-china-needing-to-triple-purchases-in-next-six-months-to-meet-fi/; September 12, 2020, U.S.-China Phase I Trade Agreement – How is China Doing to Meet Purchase Commitments for the First Year; a Review of U.S. Domestic Exports through July 2020, https://currentthoughtsontrade.com/2020/09/12/u-s-china-phase-1-trade-agreement-how-is-china-doing-to-meet-purchase-commitments-for-the-first-year-a-review-of-u-s-domestic-exports-through-july-2020/; August 8, 2020, U.S.-China Phase 1 trade agreement – review of U.S. domestic exports through June 2020, https://currentthoughtsontrade.com/2020/08/08/u-s-china-phase-1-trade-agreement-review-of-u-s-domestic-exports-through-june-2020/; July 10, 2020, U.S.-China Phase 1 Trade Agreement – limited progress on increased U.S. exports to China (through May), https://currentthoughtsontrade.com/2020/07/10/u-s-china-phase-1-trade-agreement-limited-progress-on-increased-u-s-exports-to-china-through-may/; June 5, 2020, U.S.-China Phase I Deal is Failing Expanded U.S. Exports Even Before Recent Efforts by China to Limit Certain U.S. Agriculture Exports as Retaliation for U.S. Position on Hong Kong, https://currentthoughtsontrade.com/2020/06/05/u-s-china-phase-i-deal-is-failing-expanded-u-s-exports-even-before-recent-efforts-by-china-to-limit-certain-u-s-agriculture-exports-as-retaliation-for-u-s-position-on-hong-kong/; May 12, 2020, U.S.-China Phase I Agreement – some progress on structural changes; far behind on trade in goods and services, https://currentthoughtsontrade.com/2020/05/12/u-s-china-phase-i-agreement-some-progress-on-structural-changes-far-behind-on-trade-in-goods-and-services/; January 19, 2020, U.S.-China Phase 1 Agreement – Details on the Expanding Trade Chapter, https://currentthoughtsontrade.com/2020/01/19/u-s-china-phase-1-agreement-details-on-the-expanding-trade-chapter/; January 15, 2020, U.S.-China Phase 1 Trade Agreement Signed on January 15 – An Impressive Agreement if Enforced, https://currentthoughtsontrade.com/2020/01/15/u-s-china-phase-1-trade-agreement-signed-on-january-15-an-impressive-agreement-if-enforced/.

This post looks at U.S. export data for January 2021, a month whose data reflects basically business in the last month of the Trump Administration.

Purchase Commitments

Annex 6.1 of the Phase I Agreement contains commitments for “additional U.S. exports to China on Top of 2017 baseline” for two years, 2020 and 2021. Article 6.3 of the Agreement states that “The Parties project that the trajectory of increases in the amounts of manufactured goods, agricultural goods, energy products, and services purchased and imported into China from the United States will continue in calendar years 2022 through 2025.

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

Article 6.2 of the Agreement defines the time period for the purchase commitments as being January 1, 2020 through December 31, 2021. So the first year by agreement was calendar year 2020. Calendar year 2021 is the second year of the agreement. The level of increases in U.S. exports to China for 2021 is as follows: manufactured goods $44.8 billion on top of 2017 base line of $58.4 billion (2021 total of $103.2 billion or an increase of 76.81% over 2017 actual); agriculture (including seafood) $19.5 billion on top of 2017 base line of $20.85 billion (2021 total of $40.35 billion or an increase of 93.51% over 2017 actual); energy $33.9 billion on top of 2017 base line of $7.6 billion (2021 total of $41.5 billion or an increase of 447.95% over 2017 actual); services $25.1 billion on top of 2017 base line for the selected services of $53.033 billion (2021 total of $78.133 billion or an increase of 47.33% over 2017 actual). Increases from 2017 for the calendar year 2020 agreed levels were lower than for 2021 (increases over 2017 of $32.9 billion, $12.5 billion, $18.5 billion and $12.8 billion respectively for manufactured goods, agriculture, energy and services). The breakout of services exports is not available for 2020 or January 2021. However, U.S. exports of all services to China for 2020 were $37.921 billion vs. $54.981 billion in 2017, a decline of 31% for all services, thus, U.S. services exports covered by the Phase I Agreement declined in 2020. See U.S. Census Bureau and the U.S. Bureau of Economic Analysis, MONTHLY U.S. INTERNATIONAL TRADE IN GOODS AND SERVICES, JANUARY 2021, March 5, 2021, page 28, Exhibit 20b, https://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf. While the BEA data don’t show exports of services in January by country, January 2021 total services exports are down from January 2020 (before the pandemic resulted in significant closures) with the largest reductions in travel followed by transport and by maintenance and repair services.

In 2017, the selected goods covered by Annex 6.1 were $86.795 billion of total U.S. domestic exports to China of $120.109 billion, meaning non-covered U.S. exports in 2017 were $33.314 billion. On services, the selected services covered by Annex 6.1 were $53.033 billion of total services exports to China of $54.981. So non-covered services were $1.948 billion. For goods, there were sharp declines in 2020 of U.S. exports to China of non-covered products from the levels achieved in 2017 (roughly $6.6 billion). Non-covered products are slightly up in January 2021 versus January 2017. While the services break out for 2020 is not yet available by country by type of service, total services exports to China (as reviewed above) were down 31% . The non-covered services are relatively small (just 3.5% of total services exports).

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

March 2020-January 2021 data compared to 2017 (other than February); January 2021 compared to January 2017

For purposes of this post, I will look at the March 2020 – January 2021 data compared to January and March-December 2017 data, but I will also look at the first month of 2021 compared to January 2017. In my last post in February, I had reviewed calendar 2020 data compared to 2017 data. The data analyzed is limited to goods since the services data is more limited and has been summarized above.

Looking at U.S. domestic exports for the March 2020 – January 2021 period and projecting for a full twelve months (March 2020-February 2021) shows China meeting 94.64% of first year agriculture commitments, and 51.06% above 2017 actual levels for all months other than February. Total Phase 1 products are projected at only 61.01% of first year commitments with manufactured goods at 52.78% and energy at 44.47%. While agriculture products are projected to exceed 2017 actual by $10.7 billion and energy is projected to exceed 2017 by $4.0 billion, manufactured goods are projected to be $10.2 billion smaller than 2017 actual. Compared to first year purchase commitments, total U.S. Phase I goods exports are projected to be $59.4 billion short of the agreed first year level.

If looking at a calendar year 2021, the data for January show increases for each of the three goods categories over January 201 but each category trails the level of increase needed to meet 2021 purchase commitments. Manufactured goods are up 4.39%, but the commitment levels are 76.81% higher than 2017 actual. Similarly, on agricultural products covered by the Phase I commitments, U.S. exports are up 58.51% from 2017 compared to the 2021 increase of 98.51% over 2017 needed to meet the commitments for 2021. On energy, U.S. exports are up 150.56% over January 2017 but far below the 447.99% increase needed to meet the Phase I commitments for 2021. For all Phase I goods, U.S. exports in January are up 33.34% but the annual increase to meet the Phase I commitment is 113.14%.

To meet first year commitments on a March 2020-February 2021 basis , China would have to import monthly 7.71 times the product from the United States as was done in the first eleven months in the next month (February). On a calendar basis, U.S. domestic exports in January 2021 missed the agreed level on goods by $5.375 billion (or an amount equal to 59.49% of January 2021 actual).

Looking at total U.S. domestic exports of goods to China for the period March 2020 – January 2021., U.S. exports were $109.313 billion ($9.938 billion/month) compared to $111.099 billion in 2017 for the eleven months (all other than February)($10.100 billion/month). These include both products covered by the Annex 6.1 commitments and other products. For January 2021, total U.S. domestic exports to China were $11.254 billion compared to $9.350 billion in January 2017.

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

Other U.S. domestic exports not covered by the 18 categories in Annex 6.1 were $33.314 billion in 2017 (full year) and $30.806 billion for 2017 excluding February. For the period March 2020 – January 2021, non-covered products (which face significant tariffs in China based on retaliation for US 301 duties) have declined 18.86%, and total exports to China are down 1.61%. Looking at January 2021, other U.S. domestic exports (i.e., not covered by the Phase I Agreement) were down 13.05% from comparable levels in January 2017.

Thus, the first eleven months since the U.S.-China Phase 1 Agreement went into effect suggest that U.S. domestic exports of the Annex 6 goods will be $91.334 billion if the full year shows the same level of increase over 2017 for each of the 18 categories of goods; non-covered products would be $26.845 billion, for total U.S. domestic exports to China of $118.179 billion. This figure would be below 2017 and dramatically below the target of $184.0 billion (if noncovered products remain are at 2017 levels; $176.938 billion with noncovered products at estimated March 2020 – February 2021 levels) . The projected U.S. domestic exports to China would, however, be higher than the $109.72 billion in 2018 and the depressed figure of $94.100 billion in 2019.

If one looks at January 2021, U.S. domestic exports to China of Annex 6 goods were $8.981 billion, other exports of $2.274 billion, for total domestic exports in January 2021 of $11.254 billion, ahead of January 2017 but $5.375 billion behind the 2021 rate of increase over 2017 of 113.14%.

The 18 product categories included in Annex 6.1 of the Phase 1 Agreement show the following for January, March-December 2017, March 2020 – January 2021 and rate of growth for the first year of the Agreement (figures in $ million):

Product categoryJanuary, March-December 2017March 2020 -January 2021% change 11 mos. 2017 2020/2021$ Value needed in next month to reach 1st year of Agreement vs. projected 1st year
manufactured goods
1. industrial machinery $10,013.7          
$11,612.1

+15.96%
2. electrical equipment and machinery $3,966.0
$4,460.9
+12.48%
3. pharma- ceutical products $1,939.6 $3,017.0
+55.54%
4. aircraft (orders and deliveries) $15,212.8 $3,682.4 -75.79%
5. vehicles $9,132.1
$5,659.5
-38.03%
6. optical and medical instruments $2,901.3
$3,317.9
+14.36%
7. iron and steel
$1,093.3
$454.4
-58.44%
8. other manufactured goods $10,092.7 $12,654.8 +25.39%
Total for mfg goods
$54,351.7
$44,858.9
-17.47%
$43,094.5
Agriculture
9. oilseeds $11,171.5 $15,785.7 +41.30%
10. meat $511.7 $2,968.5 +480.16%
11. cereals $1,276.5 $3,384.2 +165.13%
12. cotton $828.1 $1,855.8 +124.11%
13. other agricultural commodities $4,148.3
$4,219.4
+1.71%
14. seafood $1,173.6 $653.7 -44.30%
Total for agriculture $19,109.7 $28,867.4 +51.06% $1,788.7
Energy
15. liquefied natural gas $365.8 $1,597.2 +336.6%
16. crude oil $3,865.3 $6,881.4 +78.03%
17. refined products $2,197.4
$1,655.9
-24.64%
18. coal $403.4 $242.3 -39.94%
Total for energy $6,831.9 $10,376.9 +51.89% $14,477.9
Total for 1-18 $80,293.3 $84,103.2 +4.75% $59,361.0

Conclusion

As reviewed in prior posts, the U.S.-China Phase 1 Agreement is a potentially important agreement which attempts to address a range of U.S. concerns with the bilateral relationship and obtain somewhat better reciprocity with the world’s largest exporter. The Phase 1 Agreement has left other challenges to a Phase 2 negotiation which has not yet begun. USTR Tai has indicated that the Biden Administration will monitor compliance by China with the terms of the Phase I Agreement.

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

The differences in economic systems between China and the United States have made reliance on WTO rules less relevant to the Trump Administration as those rules presume market-based economies and presently don’t address the myriad distortions that flow from the Chinese state capital system. Thus, the Phase I Agreement was an effort to move the needle in trade relations with China to achieve greater reciprocity. It has had some limited success to date. While the Biden Administration is doing a full review of the challenges posed by China’s trade policies, it is good news that they will be working to see that the Phase I Agreement is fulfilled.

U.S. files appeal at the WTO from panel report in case brought by the Republic of Korea — United States — Anti-Dumping and Countervailing Duties on Certain Products and the Use of Facts Available (DS539)

In a post from January 29, 2021, I had argued that the United States should appeal from the panel report issued on January 21 in a trade remedies dispute brought by the Republic of Korea against the use of facts available in antidumping and countervailing duty cases. See January 29, 2021, WTO Panel report on UNITED STATES – ANTI-DUMPING AND COUNTERVAILING DUTIES ON CERTAIN PRODUCTS AND THE USE OF FACTS AVAILABLE should be appealed by the United States, https://currentthoughtsontrade.com/2021/01/29/wto-panel-report-on-united-states-anti-dumping-and-countervailing-duties-on-certain-products-and-the-use-of-facts-available-should-be-appealed-by-the-united-states/. As I wrote in that post:

“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.

Conclusion

“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).”

Today’s appeal

A Dispute Settlement Body meeting was scheduled for today with only one item on its agenda, consideration of the panel report in DS539. The WTO has reported on its website that the United States filed an appeal of the panel report today, March 19, 2021. WT/DS539/9. While the notice of appeal is not yet up on the WTO website, the U.S. has presumably indicated it is challenging the erroneous interpretation of ADA 17.6(i) among other issues.

The U.S. appeal is the ninth such appeal to the Appellate Body after December 10, 2019 when the Appellate Body ceased to have at least three members (and hence is unable to hear new appeals) and the eighteenth appeal that awaits the restoration of an Appellate Body for an appeal to be heard/completed.

WTO reform — trade and environment issues to be examined should include addressing ocean/sea trawling effects on carbon capture/release

While the WTO has had a Trade and Environment Committee since 1995 and interest on the intersection between trade and environment predates the formation of the WTO (i.e., back in the GATT), there has been renewed calls by many Members for increased activity in the WTO on trade and environment issue as part of the future agenda. The WTO provides a short history of WTO involvement in the area. See WTO, Trade and Environment, https://www.wto.org/english/tratop_e/envir_e/envir_e.htm.

Ongoing talks on fisheries subsidies are aimed at helping make fishing sustainable and meeting one of the UN Sustainable Development Goals (SDG 14.6). See, e.g., WTO, Civil society call for fishing subsidies deal welcomed by Dr Ngozi and negotiations chair, 3 March 2021, https://www.wto.org/english/news_e/news21_e/fish_01mar21_e.htm. There is interest in addressing plastics in the oceans (circular economy issues) and for some, an interest in restarting the Environmental Goods Agreement negotiations. See WTO, Role of trade in promoting circular economy highlighted at WTO Environment Week, 27 November 2019, https://www.wto.org/english/news_e/news19_e/envir_03dec19_e.htm; WTO, Plastic waste, ‘blue economy’ among issues taken up at trade and environment committee, 28 November 2018, https://www.wto.org/english/news_e/news18_e/envir_30nov18_e.htm.

In a New York Times article from Wednesday, there is interesting information on the effects of fish trawling on carbon release. See New York Times, Trawling for Fish May Unleash as Much Carbon as Air Travel, Study Says, March 1, 2021, https://www.nytimes.com/2021/03/17/climate/climate-change-oceans.html. The opening sentences of the article reads, “For the first time, scientists have calculated how much planet-warming carbon dioxide is released into the ocean by bottom trawling, the practice of dragging enormous nets along the ocean floor to catch shrimp, whiting, cod and other fish. The answer: As much as global aviation releases into the air.” The study referenced is an article that was published online by Nature on 17 March 2021 by 26 authors entitled “Protecting the global ocean for biodiversity, food and climate.” https://www.nature.com/articles/s41586-021-03371-z. The New York Times article notes that the study estimated that 1.9 million square miles of the sea floor is scraped every year which can release the carbon that is stored in the sea floor and that would remain captured for thousands of years if left undisturbed. The NYT article continues, “The carbon released from the sea floor leads to more acidified water, threatening marine life, and reduces the oceans’ capacity to absorb atmospheric carbon dioxide. China, Russia, Italy, the United Kingdom and Denmark lead the world in such trawling emissions.”

While carbon release from fish trawling is not presently part of the ongoing negotiations on fisheries subsidies nor a topic being discussed within the Committee on Trade and Environment (at least that I have seen), it would seem to be a topic that could meaningfully be examined within the WTO in an effort to have trade be sustainable and contribute to reducing carbon emissions. Some possible approaches within the WTO or by individual WTO Members could include identifying less environmentally damaging approaches (sharing experiences, best practices), potential negotiations to terminate or phase out such practices, review of such practices in trade policy reviews, inclusion within any carbon border adjustment plan adopted by Members.

Addressing the topic would appear to be an important opportunity to promote sustainable development as the world deals with and comes out of the pandemic. Let’s hope Members take an ambitious approach to the role the WTO can play on sustainable development.

Katherine Tai confirmed by Senate as United States Trade Representative

As reviewed in prior posts, Katherine Tai is President Biden’s nominee to be his U.S. Trade Representative and faces a full agenda when confirmed. See 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/; February 25, 2021, U.S. Trade Representative nominee Katherine Tai confirmation hearing before the U.S. Senate Finance Committee, https://currentthoughtsontrade.com/2021/02/25/u-s-trade-representative-nominee-katherine-tai-confirmation-hearing-before-the-u-s-senate-finance-committee/; March 2, 2021:  Katherine Tai, USTR designate, on addressing WTO reform including dispute settlement if confirmed; the USTR 2021 Trade Policy Agenda; https://currentthoughtsontrade.com/2021/03/02/katherine-tai-ustr-designate-on-addressing-wto-reform-including-dispute-settlement-if-confirmed-the-ustr-2021-trade-policy-agenda/.

The Senate Finance Committee voted her out of Committee by voice vote on March 3, 2021. She cleared a procedural vote in the full Senate unanimously on March 16th after being introduced by Senate Finance Committee Chairman Wyden. His comments are copied below. See Wyden Statement on Senate Floor on Nomination of Katherine Tai to be USTR, March 161, 2021, https://www.finance.senate.gov/chairmans-news/wyden-statement-on-senate-floor-on-nomination-of-katherine-tai-to-be-ustr.

“Madam President, the Senate will shortly take a procedural vote on the nomination of Katherine Tai to serve as the next U.S. Trade Representative. If you watched any of Ms. Tai’s nomination hearing before the Finance Committee, you know she’s got a lot of fans on both sides of the Senate. I expect my colleagues will vote overwhelmingly, on a bipartisan basis, to confirm Ms. Tai, and I only regret that the other side didn’t allow this vote to happen sooner. So I want to take just a few minutes to discuss some of the reasons why she’s the right choice for this important job.

“First, she knows that the name of the game when it comes to this country’s trade policy is protecting and creating high-skill, high-wage jobs in America. Our country saw for the past four years that a strategy of sending mean tweets and acting on chaos does not create jobs. Under President Biden, and with Katherine Tai leading USTR, I’m confident our approach is going to be a lot more effective.

“Ms. Tai’s got exactly the right experience for this job. She led crackdowns against China’s trade cheating and job rip-offs. As the top trade staffer on the Ways and Means Committee, she was at the forefront of the effort to improve the New NAFTA, when the Trump administration handed the Congress a deal that wasn’t strong enough for America’s workers. She’s already got a long track record of achieving wins for America’s workers, businesses, farmers and ranchers.

“Second, Ms. Tai has committed to the Finance Committee that she’ll work with us on the issue of transparency. Bringing more sunlight to this country’s trade agreements has long been one of my top priorities for trade.

“That’s why I’m glad that President Biden has chosen someone with Congressional experience for the role of USTR. The Constitution gives the Congress authority over international trade, and Congress has delegated some of its power to the Executive Branch. That means all sides need to work together as partners, with open channels of communication, accountability and transparency. It also means transparency with the public.

“I know that Ms. Tai will continue to raise the bar for transparency and communications with Congress because she’s been on our side of policymaking, and she’s proven that transparency is one of her priorities.

“With a former senator in the White House and a former House staffer at USTR, I believe there’s a recipe for a productive partnership with Congress that will help get trade done right and create more high-skill, high-wage jobs in America.

“There’s one other Finance Committee priority I want to mention. On Thursday, the committee will hold a hearing on the subject of stamping out forced labor around the world.

“It is evil. It is morally repugnant. And it’s a direct attack on workers in this country, because when American workers have to compete against slave labor, everybody loses. It’s a race to absolute rock bottom for labor rights.

“Ms. Tai is committed to President Biden’s Build Back Better agenda. A key part of that agenda is ensuring that our workers are competing on a level playing field with the rest of the world. It’s not a level playing field when other countries are producing goods with slave labor. 

“Our government has laws on the books that can crack down on countries using slave labor and keep those products out of our market, but it will require an unwavering commitment to tough trade enforcement. This is going to be an area of special focus for the Finance Committee. Senator Brown and I have worked on this issue for a long time. I know Ms. Tai is committed to working with us on it. It’s an opportunity to stand up for what’s right around the world and protect American jobs and wages at the same time.

“I’ll wrap up on this. Katherine Tai is going to make a great U.S. Trade representative. She’s got the right diversity of experience. She’s focused on protecting American workers and creating new high-skill, high-wage jobs in this country. She’s ready to work with us on transparency.

“I believe she’s going to have strong bipartisan support from the Senate. I’m with her 100 percent and I urge all my colleagues to support her nomination as well.”

Today, the U.S. Senate voted to confirm Katherine Tai as U.S. Trade Representative. The vote was unanimous (98-0). The new USTR has a full plate in terms of pressing matters, including the resolution of the Airbus-Boeing dispute during the four month pause on application of retaliatory tariffs by both the EU, U.K. and U.S., WTO reform and ongoing negotiations, U.S.-China trade relations and retaliatory tariffs in light of Chinese practices, negotiations started during the Trump Administration (U.S. China Phase I completed, U.S.-Japan Phase 1 completed, U.S.-U.K., U.S.-Kenya), review of the 301 exclusion process, 301 investigations on digital services taxes, and much more. There are many issues of importance to members of Congress that will be on USTR Tai’s agenda. Certainly improved communications with Congress, greater transparency and heightened activity on stopping imports made from forced labor — issues raised by Senate Finance Chairman Wyden and other Senate Finance members — will be among them.

In two prior posts, I looked at the forced and child labor issues. See January 25, 2021, Child labor and forced labor in cotton production — is there a current WTO mandate to identify and quantify the distortive effects?, https://currentthoughtsontrade.com/2021/01/25/child-labor-and-forced-labor-in-cotton-production-is-there-a-current-wto-mandate-to-identify-and-quantify-the-distortive-effects/; 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/. While the Trump Administration had taken some actions on forced labor, it is clear that the Biden Administration and at least many members of Congress will be looking for greater efforts to stop such practices and any imports that result from such practices in trading partners.

With the new USTR confirmed (presumably to be sworn in today or tomorrow), it will be of interest who and when the other high level USTR officials needed to round out the team will be nominated and confirmed. Best wishes to the new U.S. Trade Representative in the many tasks in front of the country in the trade sphere.

Trade actions in the United States under Section 232 of the Trade Expansion Act of 1962 (national security) — Congressional efforts to amend U.S. law

The Trump Administration used existing U.S. laws aggressively to address trade problems in a wide range of products. Some laws had previously been rarely used or had been used in a relatively narrow fashion. This is true of Section 232 of the Trade Expansion Act of 1962 which was a law put on the books in 1955 and modified in 1962 as an outgrowth of the Korean War and challenges the U.S. had faced in ramping up for the conflict. When the Trump Administration initiated two investigations on steel and aluminum in 2017, I had prepared write-ups for my firm’s webpage looking at the law and its prior application. As noted in my first trade flow on the 232 investigation on steel from April 2017, the law deals with threats from imports to national security, including effects of imports on domestic industries. See Terence P. Stewart, Imports of Steel into the United States and their Effect on National Security (Updated), April 20, 2017 (no longer available online). The trade flow is reprinted below as it reviews the relevant language from the statute.

Imports of Steel into the United States and their Effect on National Security (Updated)

April 20, 2017 Terence P. Stewart

(Updated 4-20-2017 afternoon)

The U.S. steel industry has been hard pressed by dumped and subsidized imports for many decades causing the closure of many plants and the loss of thousands of good paying jobs.  While the industry has filed literally hundreds of cases to address unfair trade practices, the industry continues to face large structural problems from China and others.  And steel is a fundamental building block of a strong national defense.

On April 19, 2017, Secretary of Commerce Ross initiated a Section 232 investigation into whether imports of steel mill products threaten national security.[1]  On April 20, 2017, President Trump signed a Presidential Memorandum for the Secretary of Commerce directing Commerce to prioritize the investigation and to “proceed expeditiously.”[2]  How quickly the investigation will proceed is unclear, but, in remarks upon signing the Memorandum, President Trump said “we’ll be back over a period of the next 30 to 50 days, …, and maybe sooner than that.  But statutorily, we probably want to take a very good, strong, hard study.”[3] 

The Commerce Secretary has initiated an investigation under a long extant but relatively seldom used US law.  Specifically, Section 232(b) of the Trade Expansion Act of 1962, as amended, requires the Secretary of Commerce on his own motion or upon the request from the head of any department or agency, to initiate an investigation “to determine the effects on the national security of imports of the article” of interest.  19 U.S.C. 1862(b)(1)(A).

Commerce has up to 270 days to conduct such an investigation, is required to consult with the Secretary of Defense “regarding the methodological and policy questions raised” by the investigation, seek information from other agencies and where appropriate hold public hearings and give interested parties an opportunity to present information.  19 U.S.C. 1862(b)(2)(A).  Commerce can also ask Defense for an assessment of the defense requirements of the article being investigated.  Id. at (b)(2)(B).

At the end of the investigation, the Secretary of Commerce submits a report containing the findings and recommendations of action or inaction and will publish the public portions in the Federal Register.  19 U.S.C. 1862(b)(3)(A) and (B).

The President has 90 days to determine what, if any, action to take if Commerce has found that importations “threaten to impair the national security” and has an additional 15 days to implement the action determined to be necessary to eliminate the threat.  19 U.S.C. 1862(c).  The President must submit to the Congress a written statement of the reasons to take action or to take no action.

Subsection (d) of 232 (19 U.S.C. 1862(d)) reviews elements that should be considered by the Commerce Secretary and the President:

For purposes of this section, the Secretary and the President shall, in the light of the requirements of national security and without excluding other relevant factors, give consideration to domestic production needed for projected national defense requirements, the capacity of domestic industries to meet such requirements existing and anticipated availabilities of the human resources, products, raw materials, and other supplies and services essential to the national defense, the requirements of growth of such industries and such supplies and services including the investment, exploration, and development necessary to assure such growth, and the importation of goods in terms of their quantities, availabilities, character, and use as those affect such industries and the capacity of the United States to meet national security requirements.  In the administration of this section, the Secretary and the President shall further recognize the close relation of the economic welfare of the Nation to our national security, and shall take into consideration the impact of foreign competition on the economic welfare of individual domestic industries; and any substantial unemployment, decrease in revenues of government, loss of skills or investment, or other serious effects resulting from the displacement of any domestic products by excessive imports shall be considered, without excluding other factors, in determining whether such weakening of our internal economy may impair our national security.

Commerce regulations are found at 15 C.F.R. 705 et seq.

Since the law took effect, there have been twenty-six 232 investigations, nine since 1988:  three on crude oil and refined petroleum products, and cases on iron ore and semi-finished steel, ceramic semiconductor packages, gears and gearing products, plastic injection molding machines, uranium, and antifriction bearings.  https://www.bis.doc.gov/index.php/other-areas/office-of-technology-evaluation-ote/section-232-investigations.  Typically import relief has not been provided (crude oil from individual countries embargoed on two occasions, one involving Libya and one involving Iran) but that has depended on both the facts of the individual investigations and the construction of the statutory terms by the Administration in power.  VRAs were used on machine tools; use of national stockpile and the denial of GSP benefits were used on chromium, manganese and silicon ferroalloys; several crude oil cases, President authorized additional fees. 

The Commerce Department has an online pamphlet from June 2007 entitled, Section 232 Investigations Program Guide:  The Effect of Imports on the National Security (Bureau of Industry and Security Office of Technology Evaluation)(includes the statute, regulations and list of prior cases and their disposition).  https://www.bis.doc.gov/index.php/forms-documents/section-232-investigations/86-section-232-booklet/file.

While the investigation and Presidential review could take a year, it could be, and is likely to be, completed much more quickly, especially given the President’s direction that Commerce prioritize and expedite the 232 investigation.  Look for the Trump Administration to view national security needs more broadly than has been done in the past and to construe the statutory considerations in a manner that will support ensuring a viable industry in many sectors going forward.


[1] See Section 232 Notification Letter to Secretary of Defense James Mattis (2017-04-19) at https://www.commerce.gov/sites/commerce.gov/files/media/files/2017/2017-04-19_2.pdf.

[2] See the Memorandum at https://www.whitehouse.gov/the-press-office/2017/04/20/presidential-memorandum-secretary-commerce.  The Department of Commerce’s press release and fact sheets are available at https://www.commerce.gov/news/press-releases/2017/04/presidential-memorandum-prioritizes-commerce-steel-investigation; https://www.commerce.gov/news/fact-sheets/2017/04/president-trump-standing-unfair-steel-trade-practices; https://www.commerce.gov/news/fact-sheets/2017/04/fact-sheet-section-232-investigations-effect-imports-national-security.

[3] See https://www.whitehouse.gov/the-press-office/2017/04/20/remarks-president-trump-signing-memorandum-regarding-investigation.

Use under the Trump Administration

The Trump Administration used the law aggressively in 2017-2018 to provide relief on steel and aluminum. For many trading partners, there was concern about the claim of a national security threat from neighbors and allies as well as other countries. A number of countries filed challenges at the WTO and also retaliated against U.S. exports, most on the bogus theory that section 232 was a safeguard action. The U.S. filed disputes against the countries who retaliated. All these disputes remain unresolved at the WTO awaiting panel reports in the second half of 2021.

The Commerce Department also initiated a 232 investigation on automobiles and auto parts and received petitions seeking investigations on a number of other products (e.g., uranium, titanium sponge, mobile cranes, vanadium, electrical steel components for electrical transformers used in power grids). While the 232 investigation on automobiles and auto parts resulted in a report going from Commerce to the President, no action was ever taken and the report was never released publicly or forwarded to the Congress.

The actions by the Trump Administration raised concerns with Congress on whether the law needed to be updated and whether it was being used properly, at least as far as automobiles went. While there has been significant court litigation in the U.S. on steel tariffs that resulted from the 232 investigation, these challenges have been largely rejected by the courts. As noted above, disputes at the WTO continue on the WTO consistency of U.S. actions.

Congressional actions

Both the U.S. House of Representatives and the U.S. Senate saw legislative proposals put forward in 2019 to modify section 232 usually to give the Defense Department a greater role in determining if there is a national security threat and also to ensure the Congress a role in reviewing any proposal before actions were taken. See, e.g., H.R. 1008 (Feb. 6, 2019) and S.365 (Feb. 6, 2019)(identical bills).

During the Senate Finance Hearing considering the nomination of President Biden’s USTR nominee Katherine Tai, a number of Senators raised concerns about greater coordination with Congress by the Administration in the trade law arena generally and a need to review and possibly update certain trade laws.

On March 15, 2021, Senator Rob Portman (R-OH) introduced S.746, the Trade Security Act of 2021, essentially a repeat of the legislation he introduced in 2019. He had six cosponsors — Dianne Feinstein (D-CA), Joni Ernst (R-IA), Kyrsten Sinema (D-AZ), Deb Fischer (R-NE), Roger Wicker (R-MS), and Todd Young (R-IN). The press release explains the purpose of the bill. See Press Release, Portman, Sinema, Ernst, Feinstein, Fischer, Wicker & Young Introduce Trade Security Act to Reform National Security Tariff Process, March 15, 2021, https://www.portman.senate.gov/newsroom/press-releases/portman-sinema-ernst-feinstein-fischer-wicker-young-introduce-trade. The press release is copied below and is follow by the bill which is embedded.

WASHINGTON, D.C. – U.S. Senators Rob Portman (R-OH), Dianne Feinstein (D-CA), Joni Ernst (R-IA), Kyrsten Sinema (D-AZ), Deb Fischer (R-NE), Roger Wicker (R-MS), and Todd Young (R-IN) today introduced the Trade Security Act, legislation that will reform Section 232 of the Trade Expansion Act of 1962 to better align the statute with its original intent as a trade remedy tool for the president and Congress to respond to genuine threats to national security. In keeping with the original intent of Section 232, this bill makes common-sense reforms that require the Department of Defense to justify the national security basis for new tariffs under Section 232 and increase congressional oversight of this process. The text of the bill is here and a brief summary is below. 

“’We must hold countries that violate our trade laws accountable, but we must do so in a way that protects American jobs and strengthens the U.S. economy,’ said Senator Portman.  ‘I originally introduced this bill over concerns regarding the previous administration’s intent to misuse Section 232 statute to impose tariffs on automobiles and auto parts, which would have a devastating impact on Ohio jobs and the U.S. economy as a whole. This bipartisan legislation preserves this trade tool while properly placing the national security designation at the Department of Defense and expanding the role of Congress in the process. As a former U.S. Trade Representative, I know that misusing our trade tools not only hurts our exports and our manufacturers, but also our consumers, so I urge my colleagues to support this bipartisan legislation.’ 

“’Preventing harmful tariffs caused by unnecessary trade wars will save Arizona jobs and protect Arizona families and businesses from higher prices,’ said Senator Sinema.

“’When bad actors abuse and take advantage of our trade policies in a way that threatens our national security, we need to hold these countries accountable,’ said Senator Ernst. ‘The Department of Defense, not the Department of Commerce, should evaluate and verify the national security basis for Section 232 tariffs. This bipartisan legislation will increase congressional oversight, and in turn, help the president make decisions that support American jobs while protecting our national security.’

“’This bipartisan legislation would restore Congress’ trade oversight role and ensure that the Department of Defense justifies the national security needs of tariffs imposed under Section 232,’ said Senator Fischer.

“’Indiana is the most manufacturing-intensive state in the country, and tariffs can detrimentally impact Hoosier farmers and manufacturers if wrongly utilized. During this pandemic that has disrupted our domestic supply chains, we need to be especially vigilant about how Section 232 is used. I’ll continue working to ensure Hoosiers have a seat at the table for future trade discussions,’ said Senator Young.

“NOTE: The Trade Security Act reforms the Section 232 statute to ensure that (1) any Section 232 actions are based on a national security determination by the Department of Defense; and (2) Congress has a larger role to play in 232 actions. Specifically, this bill will:

Bifurcate the existing Section 232 process into an investigation phase, led by the Department of Defense, and a remedy phase, led by the Department of Commerce. Splitting these responsibilities, while guaranteeing consultation between the two departments at all stages of the process, plays to each department’s strengths to ensure that the statute is used for genuine national security purposes.

Require the Department of Defense – instead of the Department of Commerce – to justify the national security basis for new tariffs under Section 232 and make the determination about the national security threat posed by imports of certain products. If a threat is found, the Department of Defense would send its report to the president. In the event that the president desires to take action based on the finding of a national security threat, the president would then direct the Secretary of Commerce, in consultation with the Secretary of Defense and the U.S. Trade Representative, to develop recommendations for how to respond to the threat. After receiving the recommendations of the Secretary of Commerce, the president would decide whether to take action.

Increase the role of Congress in the Section 232 process by expanding the process whereby Congress can disapprove of a Section 232 action by passing a joint resolution of disapproval. Currently, Section 232 contains a disapproval resolution process limited only to the disapproval of actions on oil imports, which was inserted into Section 232 in 1980 by Congress in response to concerns about the misuse of the statute. This bill would expand the use of that disapproval resolution process to all types of products. The reformed disapproval process will only apply to future Section 232 actions.

“Require consultation with Congress throughout the Section 232 process. “

Trade-Security-Act-of-2021

Conclusion

In the United States, Congress and the Administration both have roles in international trade. Over the years, large amounts of responsibility for trade policy has been delegated by Congress to the President. The Trump Administration was aggressive in using all U.S. laws on the books to address trade areas of concern. When laws have not been reviewed in decades for fitness for purpose, an aggressive use of provisions, even if authorized by statute, will result in efforts to reconsider the scope of legislation by Congress.

Obviously, the introduction of a bill does not guarantee movement or modification of existing U.S. law. But there have been massive changes to the global economy and what may constitute a threat over the last nearly sixty years. There are also the questions of WTO compatibility and any WTO reform that may be appropriate based on the outcome of pending disputes and prior disputes on the use of GATT Art. XXI. Only a careful review of the existing law, current challenges, and WTO implications and potential modifications will lead to an appropriate review and possible modification of Section 232.

Senator Portman and the six co-sponsors have introduced a bill that if adopted would shift the roles of Commerce and Defense in the current legislation and would add a greater role for Congress in considering recommended actions. The bill certainly reflects concerns that have been expressed by many Senators and House members in the last few years on the proper role of Section 232 investigations.

The myriad problems facing U.S. companies from actions by some governments that are not addressed under the WTO, and the challenges to the national ability to safeguard health during the pandemic raise important red flags. Any legislative review of one statute should be undertaken in the context of a review of the array of tools available to the government and to the private sector and whether those tools are adequate to the needs of the present reality.

Climate change and a border tax — will the U.S. and EU have a unified position at the WTO in 2021?

The European Union has been working on reducing its carbon footprint consistent with the Paris Agreement commitments and its updated 2030 reduction levels. Part of its effort has been to impose costs on carbon content of certain high energy-consuming industries. To avoid carbon leakage, the EU has been looking at the possibility of imposing a carbon border adjustment mechanism. The European Commission’s work program has the EC presenting a draft proposal of such a mechanism in the second quarter of 2021. See EU Green Deal (carbon border adjustment mechanism), https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12228-Carbon-Border-Adjustment-Mechanism. The Inception impact assessment released by the European Commission is embedded below.

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The EU has indicated that whatever action it takes in its carbon border adjustment mechanism will be consistent with WTO obligations.

The Biden Administration, in the President’s 2021 Trade Policy Agenda, has indicated an openness to considering a carbon border adjustment. See 2021 Trade Policy Agenda and 2020 Annual Report of the President of the United States on the Trade Agreements Program, March 2021, page 3, https://ustr.gov/sites/default/files/files/reports/2021/2021%20Trade%20Agenda/Online%20PDF%202021%20Trade%20Policy%20Agenda%20and%202020%20Annual%20Report.pdf. The section on “Putting the World on a Sustainable Environment and Climate Path” is copied below (emphasis added).

“The United States and the global community face a profound climate crisis, and the Biden Administration is committed to pursuing action at home and abroad to avoid the increasingly disruptive and potentially catastrophic impact of climate change. The United States will work with other countries, both bilaterally and multilaterally, toward environmental sustainability.

“As part of this whole-of-government effort, the trade agenda will include the negotiation and implementation of strong environmental standards that are also critical to a sustainable climate pathway. These standards will include promoting sustainable stewardship of natural resources, such as sustainable fisheries management, and preventing harmful environmental practices, such as illegal logging and wildlife trafficking. This comprehensive approach may also entail leveraging our strong bilateral and multilateral trade relationships to raise global climate ambition.

“The Biden Administration will work with allies and partners that are committed to fighting climate change. This will include exploring and developing market and regulatory approaches to address greenhouse gas emissions in the global trading system. As appropriate, and consistent with domestic approaches to reduce U.S. greenhouse gas emissions, this includes consideration of carbon border adjustments. Additionally, the Biden Administration will work with allies as they develop their own approaches and act against trading partners that fail to meet their environmental obligations under existing trade agreements.

“The trade agenda will support the Biden Administration’s comprehensive vision of reducing greenhouse gas emissions and achieving net-zero global emissions by 2050, or before, by fostering U.S. innovation and production of climate-related technology and promoting resilient renewable energy supply chains.”

President Biden’s Special Envoy on Climate traveled to the United Kingdom and to the European Union the week of March 8. See U.S. Department of State, Special Presidential Envoy for Climate John Kerry Engages European Allies on Climate Ambition, March 6, 2021, https://www.state.gov/special-presidential-envoy-for-climate-john-kerry-engages-european-allies-on-climate-ambition/ (traveling to London, Brussels and Paris March 8-10). A Financial Times article indicated that Special Envoy Kerry was pushing the European Commission to hold up any announcement on a carbon border adjustment mechanism until after the November 2021 meeting of parties to the Paris Agreement in Glasgow (COP26) to see if sufficient commitments were made to make such a mechanism unnecessary. The article indicated that a draft proposal was expected from the EC in June. See Financial Times, John Kerry warns EU against carbon border tax, March 12, 2021, https://www.ft.com/content/3d00d3c8-202d-4765-b0ae-e2b212bbca98 (“The former secretary of state told the Financial Times he was ‘concerned’ about Brussels’ forthcoming plans for a carbon border adjustment mechanism and urged the EU to wait until after the COP26 climate change conference in Glasgow to move forward.”).

Obviously, Special Envoy Kerry’s comments prioritize diplomacy over development of a mechanism to deal with countries who are slow to address the pressing climate challenges. The EU system, of course, has a process for approving proposals like the carbon border adjustment mechanism which if followed as presently planned presumably would not result in adoption in 2021. It is not clear from the press article if the U.S. concern is with the planned June proposal or with ensuring that no adoption happens until after the Glasgow meeting in November. If the latter, there should be little problem for the EU to ensure no adoption in 2021, and the EC proposal could include language about the COP 26 meeting. If the former, postponing action by the EC would push back adoption by at least six months which may or may not be acceptable to the EU.

With USTR nominee Katherine Tai expected to be confirmed by the U.S. Senate later this week, it is unclear based on the press article of the meeting between the EC and Special Envoy Kerry if USTR would hold up efforts to find common ground with the EU on the trade approach on climate change, including on what a carbon border adjustment mechanism would look like so that there is a united front between the U.S. and the EU whenever the mechanism is presented (or at least adopted).

With China, the largest emitter, having announced that it will continue to increase it emissions until 2030, the efforts of the EU and U.S. to speed up the global reductions in emissions will face insurmountable obstacles if there isn’t greater efforts by all, including China. See Politico, US and EU search for a China climate doctrine that works, The first European trip by US climate envoy John Kerry sparks a joint effort to get China to cut its emissions, March 9, 2021, https://www.politico.eu/article/u-s-and-eu-search-for-a-china-climate-strategy-after-snub/.

There is little doubt that if all major emitters are not in solidarity on the need to increase the depth of carbon reductions quickly, there will be carbon border adjustment mechanisms put in place by the EU and likely by the U.S. to ensure actions taken in countries working hard toward major reductions in emissions by 2030 are not undermined by less ambitious objectives. A joint effort by the U.S. and EU would be more effective than the EU going it alone. Let’s hope common ground is found on how to proceed.

COVID-19 vaccines — U.S., Japan, India and Australia agree to one billion doses for Indo-Pacific countries

In a post earlier today, I reviewed a Chatham House event which looked at issues surrounding ramping-up production, dealing with supply chain issues and other matters affecting production and distribution of COVID-19 vaccines. See March 12, 2021, The 8-9 March  “Global C19 Vaccine Supply Chain and Manufacturing Summit” – efforts to ramp-up production, https://currentthoughtsontrade.com/2021/03/12/the-8-9-march-global-c19-vaccine-supply-chain-and-manufacturing-summit-efforts-to-ramp-up-production/

Today, the U.S., Japan, India and Australia held a head of government remote Quad meeting. One of the outcomes being reported in the press was agreement that the United States and Japan would pay for, India would produce and Australia would distribute one billion doses of COVID vaccine for the Indo-Pacific region. See Financial Times, US and Asia allies launch major vaccine drive to counter China, The 1bn Covid jabs will be funded by US and Japan, made in India and distributed by Australia, March 12, 2021, https://www.ft.com/content/bcf5ff42-ac7f-4533-8fc2-b3e50a5e13ba.

The White House fact sheet on the quad meeting is available on the White House webpage. The portion dealing with the COVID-19 vaccines is copied below. See White House, Fact Sheet: Quad Summit, March 12, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/12/fact-sheet-quad-summit/. The one billion doses will be made available in 2021 and will be done in consultation with WHO, COVAX and others.

The Quad Vaccine Partnership

“While ensuring that vaccines have been made available to our people, “Quad” partners will launch a landmark partnership to further accelerate the end of the COVID-19 pandemic. Together, Quad leaders are taking shared action necessary to expand safe and effective COVID-19 vaccine manufacturing in 2021, and will work together to strengthen and assist countries in the Indo-Pacific with vaccination, in close coordination with the existing relevant multilateral mechanisms including WHO and COVAX.

“o Drawing on each of our strengths, we will tackle this complex issue with multi-sectoral cooperation across many stages of action, starting with ensuring global availability of safe and effective vaccines.

“o Quad partners are working collaboratively to achieve expanded manufacturing of safe and effective COVID-19 vaccines at facilities in India, prioritizing increased capacity for vaccines authorized by Stringent Regulatory Authorities (SRA). Quad partners will address financing and logistical demands for production, procurement, and delivery of safe and effective vaccines. Quad partners will work to use our shared tools and expertise, through mechanisms at institutions including the United States Development Finance Corporation (DFC), Japan International Cooperation Agency (JICA), and, as appropriate, Japan Bank of International Cooperation (JBIC), as well as others.

“o The United States, through the DFC, will work with Biological E Ltd., to finance increased capacity to support Biological E’s effort to produce at least 1 billion doses of COVID-19 vaccines by the end of 2022 with Stringent Regulatory Authorization (SRA) and/or World Health Organization (WHO) Emergency Use Listing (EUL), including the Johnson & Johnson vaccine.

“o Japan, through JICA, is in discussions to provide concessional yen loans for the Government of India to expand manufacturing for COVID-19 vaccines for export, with a priority on producing vaccines that have received authorization from WHO Emergency Use Listing (EUL) or Stringent Regulatory Authorities.

“o Quad partners will ensure expanded manufacturing will be exported for global benefit, to be procured through key multilateral initiatives, such as COVAX, that provide life-saving vaccines for low-income countries, and by countries in need.

“o Quad partners will also cooperate to strengthen ‘last-mile’ vaccination, building on existing health-security and development programs, and across our governments to coordinate and strengthen our programs in the Indo-Pacific.

“o This includes supporting countries with vaccine readiness and delivery, vaccine procurement, health workforce preparedness, responses to vaccine misinformation, community engagement, immunization capacity, and more.

“o Australia will contribute US$77 million for the provision of vaccines and “last-mile” delivery support with a focus on Southeast Asia, in addition to its existing commitment of US$407 million for regional vaccine access and health security which will provide full vaccine coverage to nine Pacific Island countries and Timor-Leste, and support procurement, prepare for vaccine delivery, and strengthen health systems in Southeast Asia.

“o Japan will assist vaccination programs of developing countries such as the purchase of vaccines and cold-chain support including through provision of grant aid of $41 million and new concessional yen loans, ensuring alignment with and support of COVAX.

“o The United States will leverage existing programs to further boost vaccination capability, drawing on at least $100 million in regional efforts focused on immunization.”

Conclusion

The solution to the COVID-19 pandemic involves greater cooperation among governments, international organizations, manufacturers, suppliers and others. The Quad’s announcement today is an important step in helping bring the pandemic to a close.

The 8-9 March “Global C19 Vaccine Supply Chain and Manufacturing Summit” — Efforts to Ramp-Up Production

On Monday and Tuesday of this week, the Chatham House hosted an event that was”sponsored by COVAX (the COVID-19 vaccine initiative led by the World Health Organization, the Coalition for Epidemic Preparedness Innovations and Gavi, the Vaccine Alliance), together with the Developing Countries Vaccine Manufacturers Network (DCVMN), the Biotechnology Innovation Organization (BIO), and the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA).” WTO, DG calls on COVID-19 vaccine manufacturers to increase production in developing countries, March 9, 2021, https://www.wto.org/english/news_e/news21_e/dgno_09mar21_e.htm. Because the event was conducted under Chatham House rules, the information available is from the participants’ releases.

The participants had a document and apendix to provide some factual background to help the discussion. “Towards Vaccinating the World: Landscape of Current COVID-19 Supply Chain and Manufacturing Capacity, Potential Challenges. Initial Responses, and Possible “Solution Space” — a Discussion Document” is the 28 page background document. It is accompanied by a 12 page Appendix. The introduction provides a useful overview of efforts to address the COVID-19 pandemic and the areas for discussion at the meeting. The introduction is copied below and is followed by both the background document and appendix being embedded.

Introduction

“I feel like I didn’t just get a vaccine, I got a shot of hope. It’s hope that this is the beginning of the end of this terrible pandemic.” – Dr Hagan, Frontline Worker1

“With over 2.6 million deaths as of 3rd March 2021,2 and economic cost estimated at 5-14 trillion USD per year3 due to COVID-19, mitigating the pandemic is a paramount global priority and vaccines are a critical part of the solution.

“Since the start of the COVID-19 pandemic, the world has seen unprecedented progress in vaccine development, manufacturing ramp-up, and deployment. Within a record time of less than a year, 11 vaccines are already in clinical use in the countries where they obtained approval (often with emergency/limited authorisation), more than 80 additional candidates are in clinical trials, and hundreds of candidates are in the pre-clinical phase. At the same time, vaccine manufacturers and suppliers of vaccine components are scaling up for COVID-19 vaccine production from zero to billions of doses, with an announced cumulative supply target of up to 14 billion doses by the end of 2021. This represents three to four times the pre-COVID-19 annual global demand for all vaccines of 3.5-5.5 billion.4 The impact of these efforts is starting to be seen, with over 270 million people globally vaccinated as of 3rd March 2021.5

“The increase in capacity is remarkable because of the complexity of vaccine manufacturing processes that require specific know-how and equipment. It usually takes more than five years to build manufacturing capacity and 18-30 months to transfer production to other sites or manufacturers.6 The use of new technologies such as mRNA in response to COVID-19 poses additional challenges because no large-scale manufacturing capacity nor specific raw materials existed at the outset of the pandemic. COVID-19 vaccine manufacturers ramped up their own manufacturing in parallel to clinical development (“scale-up”) in response to this challenge. They also formed more than 150 partnerships7 with contract development and manufacturing organisations (CDMOs) and other multinational biopharmaceutical companies to transfer their technology and increase their overall production (“scale-out”). Notwithstanding these efforts, the strain on manufacturing capacities and capabilities is very high, in light of the immediacy and scale of the demand, which may be exacerbated further if a broader coverage of the population is needed and if boosters are needed due to waning efficacy and need to protect from new variants.

“However, it has become apparent that many COVID-19 vaccine input supplies of raw and packaging materials, consumables and equipment are in short supply which may result in several COVID-19 vaccine manufactures not being able to meet their current vaccine manufacturing commitments. Such shortages will also impact the ability to manufacture other lifesaving vaccines and biologics. Mechanisms to ensure input supplies for current and increased manufacturing capacity intent need to be put in place with short, medium and long-term solutions.

“Supply of COVID-19 vaccines will more than double the annual volume of vaccines procured via UNICEF. These additional COVID-19 vaccine needs from manufacturers of routine vaccines and other essential supplies is of concern to UNICEF. There is a need for expanded manufacturing capacity while building on existing mechanisms to sustain and scale current investments that the Vaccine Alliance has achieved thus far.

“The summit will evaluate all potential bottlenecks of supply chain for input supplies, from manufacturing, through procurement, export, delivery and use of the materials for COVID-19 vaccine manufacture. It is of paramount importance to anticipate, understand, and establish an open dialogue with all stakeholders to find and implement additional short-term and sustainable solutions to the inevitable supply chain challenges.

“For this reason, Chatham House – with co-sponsorship from COVAX (CEPI, Gavi, WHO, UNICEF), IFPMA, BIO, and DCVMN – has convened the COVID-19 Vaccine Manufacturing and Supply Chain Summit with key public, private, and other vaccine stakeholders on 8th and 9th March 2021, to explore the emerging input supply challenges in depth and to start to work towards strategies to avoid or mitigate them. The main goals of the Summit are:

“▪ Help to identify and define the most critical bottlenecks across the supply network for a diverse array of COVID-19 vaccines with an emphasis on input supply

“▪ Provide a platform to explore a range of solutions to address bottlenecks.

“▪ Lead to a series of recommendations, and ideally commitments, on the priority areas for monitoring and/or action.

“Today, the only element that can be predicted about the future is its high degree of uncertainty. The objective of this document is to provide a structured fact base to serve as background for participants, not to attempt to predict any aspect of the future course of this pandemic. This fact base builds on perspectives and information developed and provided by Summit conveners and participants. Given the rapid pace of events in this space, it should be considered as a ‘best effort’ guide towards a high-level analysis and assessment of the state of play today but it is unlikely to be complete and may have omissions. Any estimates should be validated before being used for decision-making. The discussion document should be viewed as a discussion guide for participants and is structured into the following sections:

“1. Introduction to Vaccine Manufacturing and Supply Chain

“2. COVID-19 Vaccine Supply and Demand Overview

“3. Input Supply Challenges

“4. Manufacturing Capacity and Interdependencies beyond COVID-19 Vaccine

“5. Overview of Potential Solutions for Discussion

“6. Moving to Action

In parallel to the Chatham House Summit, many discussions are ongoing on how further to increase available manufacturing capacity of vaccine drug substance/drug product and accelerate technology transfer.

The purpose of this Summit, and this discussion document, is not aimed to identify or assign responsibility. COVID-19 is an exceptional crisis with unforeseen and shifting challenges. The aim is to bring stakeholders together to understand and align on how to move forward together leveraging their combined capabilities to optimise access to vaccines against COVID-19 for good of the world.

“1 New York Times, ‘A Shot of Hope’: What the Vaccine Is Like for Frontline Doctors and Nurses. 2020. https://www.nytimes.com/2020/12/14/us/coronavirus-vaccine-doctors-nurses.html

“2 WHO; Economist

“3 Airfinity; IMF

“4 WHO Global Vaccine Market Report 2019, 2020. http://who.int/immunization/programmes_systems/procurement/mi4a/platform/module2/2019_ Global_Vaccine_Market_Report.pdf?ua=1#:~:text=Global%20market%20volumes%20increased%20approximately,large-scale%20campaigns%20in%20India.

“5 WHO, WHO Coronavirus Disease (COVID-19) Dashboard. https://covid19.who.int/; Bloomberg, COVID-19 Vaccine tracker. https://www.bloomberg.com/graphics/covid-vaccine-tracker-global-distribution/

“6 McKinsey & Company, Why tech transfer may be critical to beating COVID-19. 2020. https://www.mckinsey.com/industries/pharmaceuticals-and-medical-products/our-insights/why-tech-transfer-may-be-critical-to-beating-covid-19

“7 Airfinity”

Summit_Landscape_Discussion_Document

Summit_Landscape_Discussion_Document_Appendix

The background paper is useful by pulling together information on demand, likely production, a review of the challenges in supply chains, and the fact that globally only 3% of likely 2021 vaccines had been manufactured by March 3, 2021, meaning there are huge production increases coming in the remaining ten months driven by more vaccines being approved for use by countries and the WTO. Several exhibits from the report are copied below (Exhibit 2, page 7; Exhibit 5, page 12; Exhibit 6, page 14; Exhibit 7, page 16) and show the distribution of manufacturers with approved vaccines or vaccines in third stage trials, projected supply under three scenarios, input supply bottleneck issues, and a “summary of major supply challenges and drivers”.

There was a joint press release which is embedded below. See Global C19 Vaccine Supply Chain and Manufacturing Summit Press Release, March 9, 2021, https://www.dcvmn.org/IMG/pdf/global_covid-19_vaccine_supply_chain_manufacturing_summit_press_release_1_.pdf.

global_covid-19_vaccine_supply_chain_manufacturing_summit_press_release_1_

Several paragraphs on the first page review the supply chain issues and then review areas for potential additional work. Because of their importance, they are copied below (emphasis added).

“Vaccine manufacturers and upstream suppliers are increasingly reporting shortages of raw and packaging materials, critical consumables, and equipment. Over time such shortages, if left unaddressed, will lead to shortages of vaccines and impact delivery commitments. Such shortages will also impact the ability to manufacture other lifesaving vaccines and biologics. Preventing bottlenecks in the system requires among others: addressing export restrictions, immediate easing and facilitation of access to raw materials and upstream supplies; regulatory prioritization of validation of supply, batch release and achieving greater visibility on vaccines demand forecasts to enable upstream suppliers to do better supply planning.

“All stakeholders agreed there is a need to expand capacity and in a way that promotes equitable access and leaves no one behind. Other approaches were discussed including:

“1. Free flow of goods and workforce;

“2. Continue technology transfer and manufacturing partnerships between innovators and manufacturers to scale up and scale out COVID19 vaccine capacity;

“3. Better demand forecasting and inventory management of raw materials and critical consumables;

“4. Support from the highest political level is needed;

“5. Value of regulatory harmonization and streamlining to accelerate manufacturing capacity and supply;

“6. Better production, demand and supply, forecast and visibility;

“7. Give consideration to the potential impacts of COVID-19 production on non-COVID products

The quotes from the six organizations participating fell along predictable lines — CEPI’s CEO focused on the need to address bottlenecks to ensure delivery of supplies; IFPMA’s DG reviewed the huge build up of capabilities and need to address bottlenecks while recognizing the need to continue to expand capacity; the CEO of GAVI viewed the event as “an important step in building the global consensus needed to solve the bottlenecks and supply constraints”; the WHO’s chief scientist focused on equitable distribution and in the “longer term more sustainable approach will be to enable technology transfer to manufacturing sites in LMICs that have the capacity”; the President and CEO of BIO noted that “We must invest across all of the ecosystem to ensure that there is not only manufacturing capacity but also increasing amounts of the vital production supplies needed for that capacity”; the President of the DCVMN focused on expanding production in developing countries, “Global products, local manufacturing, and leave no one behind.”

The WTO’s Director-General Ngozi Okonjo-Iweala who is a former Chair of GAVI, spoke to the participants on March 9 urging licensing and partnerships with vaccine manufacturers in developing countries and repeating her themes of recent days of focusing on ending or phasing out export restrictions. See WTO, DG calls on COVID-19 vaccine manufacturers to increase production in developing countries, March 9, 2021, https://www.wto.org/english/news_e/news21_e/dgno_09mar21_e.htm. The press release is copied below.

“Director-General Ngozi Okonjo-Iweala on 9 March called on COVID-19 vaccine manufacturers to do more to ramp up production in developing countries to combat the vaccine supply shortage that is excluding many lower-income nations from access. In remarks to an event hosted by the UK think tank Chatham House, she said cooperation on trade, and action at the WTO, would help accelerate vaccine scale-up.

The scarcity of COVID-19 vaccine supplies had led to a situation in which around 75 countries are able to move ahead with vaccination while 115 countries wait as people die, DG Okonjo-Iweala told the Global C19 Vaccine Supply Chain and Manufacturing Summit.

Not only was this morally “unconscionable,” she said, it would prolong the pandemic and cause economic harm to all countries. Instead of restricting exports and bidding up prices, she argued, “it is in all of our self-interest to cooperate in dealing with this problem of the global commons.”

The Director-General saw cause for hope in the first vaccine deliveries to developing countries by the COVAX facility, the global mechanism for procuring and equitably distributing COVID-19 vaccines. Nevertheless, production and delivery volumes remained too low.

“We have to scale up and scale out COVID-19 vaccine production, particularly in emerging markets and developing countries,” she said. Given the years required to build new manufacturing facilities from scratch, increasing production in the short-term means “making the most of existing manufacturing capacity — finding existing sites and turning them around.” Recent experience suggests that repurposing facilities and vetting them for safety and quality can happen in six or seven months, less than half as long as previously thought.

“By bringing more production online around the world, she said, vaccine manufacturers would send a signal that they are taking action, and ‘that people and governments in low- and middle-income countries can expect to get access to affordable vaccines within a reasonable timeframe.’

“DG Okonjo-Iweala observed that companies in India and elsewhere were already manufacturing COVID-19 vaccines under licence but said that more such arrangements are necessary.

“Discussions during the conference had highlighted three constraints to ramping up production, the Director-General noted: scarcity of raw materials, shortages of qualified and experienced personnel, and supply chain problems linked to export restrictions and prohibitions as well as excessive bureaucracy. The WTO’s mandate on trade facilitation, quantitative trade restrictions, and trade policy monitoring were relevant to the latter challenges in particular.

“Because vaccine production relies on sourcing components and ingredients from multiple countries, she said, trade restrictions would slow down production, and make it more expensive.

“Nevertheless, DG Okonjo-Iweala noted, WTO rules do allow for export restrictions or prohibitions to be ‘temporarily applied to prevent or relieve critical shortages’ of essential products. That said, such restrictions must be notified to all members. Restrictions should be transparent, proportionate to the problem at hand, and members should provide timelines for when they will be phased out, she said.

“She reported that WTO monitoring indicates that 59 members and 7 observers still had some pandemic-related export restrictions or licensing requirements in place at the end of February, primarily for personal protective equipment. It was welcome that these figures were lower than the 91 countries that had brought in such measures over the past year. However, ‘not all pandemic-related export restrictions have been notified,’ she said. ‘Not all of them appear to be temporary. Not all of them are proportionate.’

“’We must strengthen our monitoring and reporting function,’ DG Okonjo-Iweala said, explaining that her objective would be to encourage members to drop or reduce export restrictions, or set timelines for phaseout, to help minimize problems in the vaccine supply chain.

“With regard to trade-related bureaucracy, she invited manufacturers to tell the WTO about the problems they are encountering in real time, ‘so we can put them before our membership and find ways they can be minimized and if possible solved.’ She said a little-appreciated fact about trade policy during the pandemic is that members’ trade-facilitating measures, such as electronic customs procedures and simplified paperwork requirements, have far outnumbered trade-restricting policies, and covered a higher value of merchandise.

“On both export restrictions and trade facilitation, DG Okonjo-Iweala noted, prospects for action at the WTO would improve as businesses are seen to step up efforts on vaccine production.

“The Director-General referred to the ongoing debate at the WTO on a proposal to waive standard WTO intellectual property rules for COVID-related vaccines, therapeutics, and diagnostics.

“’Many of the proposal’s supporters are developing and least developed countries, deeply marked by the memory of unaffordable HIV/AIDS drugs,’ she told conference participants. ‘Many, many people died who should not have. More recently, they remember being left at the back of the queue for H1N1 vaccines as richer countries bought up available supplies, which in the end were not used.’ Critics of the proposed waiver, she noted, say it could threaten investment and innovation, and other members have asked for more evidence that intellectual property protections are an inhibiting factor in vaccine scale-up.

“While these ‘vitally important discussions are intensifying here in Geneva,’ she said, ‘the fact is that each additional day the vaccine shortage continues, people will pay with their lives.’ She argued that it was possible to ‘walk and chew gum at the same time,’ continuing the search for solutions in the TRIPS debate, while simultaneously taking action to increase production, ‘especially in emerging markets and developing countries where such possibilities exist.’

“She expressed hope that it would be possible for manufacturers from developed and developing countries to come together with civil society groups, organizations such as the World Health Organization, Gavi, and the Coalition for Epidemic Preparedness (which together run the COVAX facility), and business associations including the International Chamber of Commerce to find ways to increase vaccine production.

“’We must make sure that in the end we deliver so that the millions of people who are waiting for us with bated breath know that we are working on concrete solutions,’ she said.

“The 8-9 March ‘Global C19 Vaccine Supply Chain and Manufacturing Summit’ was convened by Chatham House and sponsored by COVAX (the COVID-19 vaccine initiative led by the World Health Organization, the Coalition for Epidemic Preparedness Innovations and Gavi, the Vaccine Alliance), together with the Developing Countries Vaccine Manufacturers Network (DCVMN), the Biotechnology Innovation Organization (BIO), and the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA). The meeting was held under the Chatham House rule, so the above report on the Director-General’s speech does not reflect views attributed to other participants.”

Conclusion

Countries around the world are starting the process of vaccinating their populations. The COVAX vaccine roll-out, which includes efforts to get doses to low- and middle-income countries, appears to be on target for its goal of two billion shots in 2021. While vaccine doses from COVAX started at the very end of February, by March 11, COVAX was reporting 28.5 million doses had been shipped to 37 countries. See Gavi, COVAX has so far shipped over 28.5 million COVID-19 vaccines to 37 countries, March 11, 2021, https://www.gavi.org/covax-vaccine-roll-out.

All countries working with vaccine producers have encountered some delays as manufacturers are having both start-up challenges at their own facilities and supply chain issues as reviewed in the background paper used by participants at this week’s Chatham House event. There are clearly supply chain issues that pose risks to current manufacturing efforts and already scheduled ramp ups of capacity. The major pharmaceutical groups have worked hard to develop capacity and upgrade supply chains. They all appreciate that more can and will be done.

There are a host of issues on COVID vaccines that need to be addressed that fall within the WTO’s wheelhouse — control of export restraints, easing and access to raw materials and upstream supplies to name two. As DG Okonjo-Iweala noted, the WTO TRIPS Council is considering whether to recommend a waiver of TRIPS obligations for medical products for COVID-19 use during the pandemic. Indeed another meeting of the TRIPS Council was held on March 10-11. See WTO, Members discuss TRIPS waiver, LDC transition period and green tech role for small business, March 11, 2021, https://www.wto.org/english/news_e/news21_e/trip_11mar21_e.htm. However, not only is the requested waiver opposed by major developed countries and at least one developing country (and hence unlikely to obtain consensus to forward to the General Council), but also a review of the background document shows the complexity of technology transfer in the best of situations. Pharmaceutical and biotech companies are opposed to the waiver and view such action as almost certain to slow the ramp up of production. See, e.g., IFPMA, Pharma delivers COVID-19 solutions, but calls for the dilution of intellectual property rights are counterproductive, 20 December 2020, https://www.ifpma.org/resource-centre/pharma-innovation-delivers-covid-19-solutions-beyond-expectations-but-calls-for-the-dilution-of-intellectual-property-rights-are-counteproductive/; Bio, Letter to President Biden, March 5, 2021, https://www.bio.org/letters-testimony-comments/bio-sends-letter-president-biden-discussing-collaboration-ensure-patient; PhRMA, letter to President Biden, March 5, 2021, https://phrma.org/Public-Communication/Letter-to-President-Biden-from-31-PhRMA-Board-Members.

The Chatham House event was a timely and practical effort to have the major participants review challenges currently being faced and to exchange ideas on how to move forward. Efforts such as we have seen under the Biden Administration to help address bottlenecks through the use of the Defense Production Act should be undertaken by other governments to help streamline the ramp up process for both vaccines and the key inputs and other materials needed for expanded production. The seven “other approaches” identified in the joint press release are sound and ambitious but will require not only government involvement (regulatory harmonization; support at the highest level of government) but also improved data gathering and dissemination (supply and demand forecasts). The size of the planned ramp up of production (assuming vaccines that are in stage three end up being approved and supply chain issues can be handled) as shown in Exhibit 5 of the background document is truly impressive. The addition of more capacity through additional licensing or partnership arrangements will further improve the outlook for 2021 for the world.

While COVAX was set up with the ambitious objective of 2 billion doses to the 192 countries (including 92 low- and middle-income countries were vaccines will be provided without charge) COVAX is serving in 2021, most scenarios in the background paper show the likelihood of additional billions of doses available by the end of the year. This suggests that the challenge may not be production but rather securing funding for the additional doses that will be available and/or movement of additional unneeded supplies from developed countries in the latter part of 2021. The G20 and others should be able to help with the financing. It is likely that doses may be available for transfer from at least some developed countries by the fourth quarter.

So there is a lot that is happening and lots that needs to be done to see that the COVID-19 pandemic is fully addressed. Waiving TRIPS obligations is not one of them.

“No Quick Fixes for WTO Dispute Settlement Reform” — a skeptical view by the former Deputy USTR of the EU’s willingness to address core U.S. concerns

In yesterday’s post, I reviewed a program hosted by Georgetown Law’s Institute for International Economic Law that looked at opportunities for transatlantic cooperation in WTO reform. See March 10, 2021, Today’s webinar hosted by Georgetown Law’s Institute for International Economic Law “Rethinking the WTO:  Opportunity for Transatlantic Cooperation” — many areas for likely cooperation; some important challenges, https://currentthoughtsontrade.com/2021/03/10/todays-webinar-hosted-by-georgetown-laws-institute-for-international-economic-law-rethinking-the-wto-opportunity-for-transatlantic-cooperation-many-areas-for-likely-cooperation-some-impo/. The focus of the program was the mid-February EC Trade Policy Review paper and Annex on WTO Reform. While there was agreement that there were many areas of possible U.S.-EC cooperation in pursuing WTO reform, Thomas Graham, a former Appellate Body Member and Chair, raised a caution about how quickly meaningful reform of the WTO dispute settlement system could be achieved. He referenced a commentary published by CSIS from Amb. Dennis Shea, the former U.S. Ambassador and Permanent Representative to the WTO during the Trump Administration. See Amb. Dennis Shea, No Quick Fixes for WTO Dispute Settlement Reform, March 9, 2021, https://www.csis.org/analysis/no-quick-fixes-wto-dispute-settlement-reform.

Ambassador Shea’s commentary is worth separate review. Amb. Shea starts by sharing his experience in 2018 as the new U.S. ambassador to the WTO in pressing the EU on whether they shared U.S. concerns about overreach and other problems in the Appellate Body’s functioning and being told that the EU shared none of the U.S. concerns. He then contrasts that position with the position staked out in the EC’s Trade Policy Review paper where there is a recognition that the U.S. “has raised ‘a number of valid concerns'”. The point of Amb. Shea’s initial comments is both to show skepticism as to whether the EU change of position is real and to point out comments by the EU which suggests a lack of understanding of the U.S. concerns or which indicate needed reversal by the EU of a number of positions taken in the past. Amb. Shea urges the Biden Administration not to take up negotiations before the U.S. is able to explore with the EU and others “why the Appellate Body felt free to overreach and why the WTO membership allowed it to occur for so long. A shared diagnosis of the problem will help lead to more durable solutions, including a possible rethinking of the dispute settlement system itself.” This is, of course, the position that Amb. Shea,for the Trump Administration, took consistently at the WTO during his tenure there.

There is little doubt that many WTO Members have been looking at very limited modifications to the WTO dispute settlement system as being adequate to address longstanding U.S. concerns — an approach repeatedly rejected by the prior Administration and unlikely to result in forward progress with the Biden Administration.

The Appellate Body was a new concept added at the end of the Uruguay Round. The binding nature of dispute settlement with an Appellate Body was premised on a limited role for the Appellate Body and assumed an ability of WTO Members to correct erroneous decisions through either negotiations or through interpretations adopted by the Ministerial Conference or the General Council. After 25 years, it is clear that the checks on the dispute settlement system that are included in the WTO Agreements have not functioned as intended or functioned at all. Coupled with the collapse of the negotiating function more broadly, the reality has been a dispute settlement system that has often made up rights and obligations on the fly. Why WTO Members have been ok with that usurpation of sovereign states’ right to limit obligations to those negotiated and agreed to is the fundamental question. It is at the heart of Amb. Shea’s commentary.

From some thirty years of traveling to Geneva, I have heard from nearly every major Member using the dispute settlement system that based on how the Appellate Body was operating, the Member believed it could obtain results through disputes that should be the subject of negotiations and that the Member knew had not been agreed by trading partners. Thus, obtaining rights without negotiations is certainly one of the reasons that many Members have accepted the actions of the Appellate Body that have exceeded its limited authority over time. There are undoubtedly other reasons. Understanding the reasons for Member acceptance of a dispute settlement system operating outside of its limited mandate presumably would be relevant to identifying solutions that would put dispute settlement back into its proper role and ensure errors can be addressed in fact, not just in theory.

Amb. Shea presents eight questions for European trade officials that raise some of the concerns the U.S. has and highlight where there have been significant differences in the positions staked out by the EU in prior cases from the statements in the EC Trade Policy Review paper.

The first question goes to the lack of precedent in WTO dispute settlement and whether the EU thus now recognizes that the Appellate Body erred when it mandated that panels follow Appellate Body reports “absent cogent reasons”. He also asks if the EU rejects “the view that the Appellate Body was vested with broad authority to develop ‘a coherent and predictable body of jurisprudence?'” The U.S. position has been that the dispute settlement process is intended to help the Members find a solution to a problem raised, and that the power to establish rights and obligations lies with the Members through negotiations.

The second question goes to the proper role of the Appellate Body — whether the role is limited to questions of law raised on appeal or extends to whether panels made an objective assessment of the facts under DSU Art. 11. The EU has supported the latter position in prior disputes which has often meant a relitigation of cases at the Appellate Body level.

The EU in its Trade Policy Review paper states that the 90-day deadline for Appellate Body reports should be “strictlly respected”. Because this is different than the position the EU exhibited during the first 25 years when the Appellate Body far exceeded 90 days on a regular basis, Amb. Shea in his third question asks “What has changed?” Problems with timeliness of reports exist both for the Appellate Body and for panels. The problem at the Appellate Body has been noteworthy because of early year compliance with the requirements and early outreach to disputants where 90 days couldn’t be met but an evolution of the Appellate Body’s approach to where extensions were taken without consultations with the disputants.

On the topic of “overreach” by the Appellate Body, Amb. Shea asks whether the EU agrees with the U.S. on cases other than the Appellate Body’s interpretation of “public body’ and if yes, how would the EU propose correcting these other prior rulings? (Question 4). Questions 5 and 6 address particular areas of concern (additional requirements in safeguard cases; the prohibition created by the Appellate Body on “zeroing” in antidumping duty investigations). As I have raised in prior posts, there will not be a resolution of the impasse on the Appellate Body until the problem of overreach is addressed and correction of past overreach has been achieved. While there has been overreach in areas besides trade defense agreements, the three examples raised in Questions 4-6 deal with major overreach problems in the subsidy/countervailing duty, safeguard and antidumping agreements.

Question 7 asks the EU if it agrees with the problems identified by former Appellate Body member Thomas Graham “including a ‘prevailing ethos’ to act like a court that was unaccountable to WTO members, an unjustified sense of infallibility, and an excessive degree of control exercised by its staff”. Mr. Graham at yesterday’s IIEL program argued for the need for greater accountability and the need for reexamining the structure of the dispute settlement — presumably addressing his prior observations on the problems of the Appellate Body. See March 10, 2021, Today’s webinar hosted by Georgetown Law’s Institute for International Economic Law “Rethinking the WTO:  Opportunity for Transatlantic Cooperation” — many areas for likely cooperation; some important challenges, https://currentthoughtsontrade.com/2021/03/10/todays-webinar-hosted-by-georgetown-laws-institute-for-international-economic-law-rethinking-the-wto-opportunity-for-transatlantic-cooperation-many-areas-for-likely-cooperation-some-impo/. The U.S.’s position has been that the Appellate Body is not a court. Indeed, the EU has agreed that the Appellate Body is not a court. See October 1, 2020:  Thoughts on the Geneva Trade Week session entitled “WTO Dispute Settlement – Where Do We Stand?”, https://currentthoughtsontrade.com/2020/10/01/thoughts-on-the-geneva-trade-week-session-entitled-wto-dispute-settlement-where-do-we-stand/ (EU Amb. Machado’s summary (as compiled by me) included that “The EU agrees that panels and the Appellate Body are not courts and that panelists and AB members are not judges. It is the role of WTO Members, not adjudicators, to establish new rules.”). The question in essence goes to how does reform of the dispute settlement system restore the very limited role panels and any second tier review have in helping parties find a solution to a dispute between Members.

Amb. Shea’s last question acknowledges two of the demands of the EU — binding decisions independently reached. But he questions the value of a two-tier system noting that over 25 years it has often been the U.S. view that panels reached the correct result and the Appellate Body the incorrect result. “Shouldn’t the focus be on reforming the WTO dispute settlement system (perhaps with an updated appellate review mechanism) rather than ‘reconstituting’ the Appellate Body?” Amb. Shea’s question seems to stress the institutional problems that the Appellate Body has developed over 25 years and the potential challenges to actually reforming the Appellate Body. But Amb. Shea doesn’t say a second-tier couldn’t work, just that Members should not be locked into restoring the Appellate Body as such.

Conclusions

USTR under the Trump Administration did an exceptional job of laying out U.S. concerns with the WTO Appellate Body over a 2-3 year period. Amb. Shea’s commentary reflects the fact that during the Trump Administration (and before), the EU’s positions on a host of issues important to the proper functioning of the dispute settlement system differed from those of the United States.

The EC’s Trade Policy Review paper and Annex on WTO Reform is an important document, including by showing movement by the EU on some issues of concern to the U.S. in the dispute settlement arena. Amb. Shea’s commentary highlights some of the issues that need to be resolved if there is to be a meeting of the minds between the U.S. and EU on Appellate Body reform, including addressing overreach including on past Appellate Body reports. As Mr. Graham reviewed yesterday and as Amb. Shea reviews in his question 7, reform includes the need for greater accountability of those involved. It also involves a significant contraction in the role any second-tier review handles.

While the approach advocated by Amb. Shea certainly has merit (gain an understanding of “why” the Appellate Body exceeded its authority and Members accepted such action before starting negotiations), it also is possible for the U.S. to start laying out reform needs realizing that some such reforms may go beyond the DSU and operating procedures of the Appellate Body to ensure meaningful checks and balances through the Members (currently hypothetically through Ministerial Conferences or the General Council) or through creating a different appeal mechanism for legal questions. But as Mr. Graham indicated yesterday, dispute settlement will not happen quickly and will be challenging based on the depth of the problems and the need for structural changes and changes in operating procedures as well as addressing the substantive needs.

While there seemed to be different views within the Trump Administration on whether dispute settlement should be binding, that is not the view of Amb. Shea in his commentary nor is it historically the view of the U.S. Congress (as long as Members have the authority to not implement an adverse decision and rather pay compensation or suffer retaliation) or prior Administrations (including the Trump Administration in its handling of disputes). While it is not known as yet the position of the Biden Administration, it is likely that a system that is binding and independent should be acceptable if properly limited and with meaningful crosschecks. I don’t know that there will be objections to a two-tier process, although the reforms needed may make the resulting second-tier look very different from the Appellate Body.

Reform of the dispute settlement system and restoration of a two-tier review is important to most WTO Members. Having focused Members attention on the importance of reform, the Trump Administration has handed off dispute settlement reform to the Biden Administration with WTO Members finally understanding that the longstanding concerns of the United States need to be addressed. The EC Trade Policy Review paper and Annex on WTO Reform shows movement by the EU on some issues of importance to the U.S. While the road forward is likely to be complicated and long, hopefully the Biden Administration will help the process move forward by identifying the array of changes that are needed in the coming months.

Today’s webinar hosted by Georgetown Law’s Institute for International Economic Law “Rethinking the WTO: Opportunity for Transatlantic Cooperation” — many areas for likely cooperation; some important challenges

On March 10, 2021 Georgetown Law’s Institute for International Economic Law (IIEL) held the second in a series of events on “Rethinking the WTO”, this time on “Opportunity for Transatlantic Cooperation”. See Georgetown Law, Rethinking the WTO: Opportunity for Transatlantic Cooperation, March 8, 2021, https://www.law.georgetown.edu/news/rethinking-the-wto-opportunities-for-transatlantic-cooperation/. The program was introduced by David Kleimann, Senior Visiting Research Fellow, IIEL. The program was moderated by Joost Pauwelyn, Murase Visiting Professor of Law, Georgetown Law and also a professor at the Graduate Institute of Geneva. The four panelists included Sabine Weyand, Director General, Directorate General for External Trade, European Commission; Jennifer Hillman, Professor from Practice, Georgetown Law, Senior Fellow, Council on Foreign Relations and a former member of the WTO Appellate Body; Thomas Graham, partner at Cassidy Levy Kent and former member and Chair of the WTO Appellate Body; and Henry Gao, Associate Professor of Law, Singapore Management University, Dongfang Scholar Chair Professor, Shanghai Institute of Foreign Trade and Advisory Board Member of the WTO Chairs Program.

Ms. Weyand provided an overview of the European Commission’s revised trade policy paper, focusing on the Annex dealing with WTO reform. I had reviewed the revised policy paper in a prior post. See February 18, 2021, The European Commission’s 18 February 2021 Trade Policy Review paper and Annex — WTO reform and much more proposed, https://currentthoughtsontrade.com/2021/02/18/the-european-commissions-18-february-2021-trade-policy-review-paper-wto-reform-and-much-more-proposed/. Ms. Weyand’s comments expressed hope that early statements by the Biden Administration meant that there were many areas for possible cooperation, although she started with reviving the Appellate Body — an area where cooperation is more challenging. She articulated that the EU was looking for an early commitment by the Biden team that the U.S. supported a two-tiered, binding, independent dispute settlement system — that which was promised in the Dispute Settlement Understanding. She acknowledged that the U.S. had valid concerns including on overreach on some cases.

Ms. Weyand reviewed areas where collaboration had occurred during the Trump Administration — the joint consultations on subsidies, SOEs, forced technology transfer — and opined that the process should be taken back up. She also mentioned new areas where rules were needed, including Joint Statement Initiatives (electronic commerce where the U.S. is active and others where the U.S. is not) where there should be opportunities for collaboration. She viewed that open plurilaterals were the likely necessary option for reform with benefits limited to those participating. She acknowledged that WTO Members need to address how to make folding plurilaterals into the WTO easier to do. The EU supports the U.S. view that the Special and Differential Treatment provisions and approach don’t make sense in 2021 though the revised policy.

Jennifer Hillman, after the disclaimer that she is not part of the Biden Administration and hence doesn’t speak for them, agreed that the early pronouncements by the Biden team showed significant areas of likely cooperation on WTO reform between the U.S. and the EU based on its revised trade policy paper. She believed that the period of time for getting collaboration started and showing early results was short and that many of the topics for collaboration would require time, hence raising concerns about the ability to actually see forward movement. During her direct comments, Ms. Hillman focused on areas other than dispute settlement. She noted that the concept of sustainable development appeared to have different meanings depending on whom one was talking to. For Europe, it seemed to focus on environment whereas for the Biden Administration there is a heavier focus on labor rights whereas for many WTO Members (developing and least developed countries), the focus would be development. She viewed it as important for the EU to realize focus on labor by U.S. in seeking and obtaining collaboration on sustainable development. She agreed on areas of cooperation on gender equality and empowerment of women and girls, on having the WTO contribute to addressing climate change, including on border taxes that are WTO consistent, on plurilaterals and the need for change to how Special and Differential Treatment is addressed, and on the need for new (e-commerce) or revised rules (industrial subsidies).

Thomas Graham, as a former Appelate Body who had left after eight years at the end of 2019 (his and a colleague’s departure reduced the number of Appellate Body Member below the number needed to hear an appeal), believed that the problems with the dispute settlement system could not be easily addressed and would take significant time to resolve in a way that would address the underlying problems. He urged greater accountability by Appellate Body members. He noted in particular the tension between the second and third sentences of DSU 3.2 (as referenced as well in 19.2) where the bar to creating rights and obligations (important to the U.S.) was neutered by actions of the Appellate Body in clarifying existing provisions (historically the focus of the EU). Mr. Graham did not see an easy resolution to this problem without changing the language itself. He also reviewed the Appellate Body’s elimination in effect of Art. 17.6(ii) of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Antidumping Agreement or ADA), a provision intended to grant discretion to administering authorities in interpreting provisions of the Agreement which were capable of more than one interpretation. Mr. Graham noted that members of the Appellate Body viewed there being either no or very few situations where the Antidumping Agreement provisions would be capable of more than one interpretation. He also raised the question of how Members would deal with past decisions made by and principles adopted by the Appellate Body. He referenced a commentary by Amb. Dennis Shea (the Trump Administration Deputy U.S. Trade Representative in Geneva) posted on the CSIS website on March 9, 2021, “No Quick Fixes for WTO Dispute Settlement Reform” and indicated the questions raised in the paper needed to be addressed. See Center for Strategic & International Studies, No Quick Fixes for WTO Dispute Settlement Reform, March 9, 2021, https://www.csis.org/analysis/no-quick-fixes-wto-dispute-settlement-reform (article includes eight questions Amb. Shea believes the EU needs to answer as it thinks about WTO Dispute Settlement reform).

Mr. Gao provided his perspective on how the types of reform issues identified in the EC revised trade policy paper would be viewed by China, among others. Mr. Gao indicated that China has been unwilling to consider reforms which it views as discriminating against China. Thus, initiatives like the EU’s to start a plurilateral on competitive neutrality (SOEs, heavy subsidization, etc.) is viewed by China as aimed at them and hence will never be supported by China. China’s response has been to assert that there should be ownership neutrality (no special rules for SOEs or for differences in economic systems). China has participated in Joint Statement Initiatives where it does not view itself as targeted including e-commerce, domestic services regulation, investment for development, SMSEs, etc. China is supportive of restoration of the Appellate Body. On S&DT, China does not agree to a change in classification of Members but has agreed to take on responsibilities that it views as consistent with its level of development.

Observations

The above review is undoubtedly incomplete and doesn’t include the discussion during the question and answer portion., but hopefully provides enough of a summary to show large areas of agreement and some of caution between the U.S. and the EU. Both the EU and the US (under the Biden Administration) are putting a lot of focus on recovery from the COVID-19 pandemic and both are interested in supporting global distribution of vaccines, therapeutics and diagnostics through COVAX, though there are short term issues in terms of supplies for national needs for both the U.S. and EU.

In general, the two U.S. panelists agreed with Ms. Weyand that there are areas where cooperation between the U.S. and the EU is possible and viewed the revised EC trade policy paper as helpful, particularly in terms of perceived movement by the EU on dispute settlement. Mr. Gao’s comments show that any reform will not likely be easy or quick because of the large differences in views of existing Members and the challenges posed by China’s economic system to global commerce since consensus decision making permits China to effectively derail multilateral solutions and it can opt not to participate in plurilaterals that it views as not in its interests.

While the U.S. and EU have each articulated the need to have unilateral response capabilities if solutions can’t be found through the WTO or bilaterally, the EU position (and likely Biden Administration position) is that cooperation should be sought between the U.S., EU and possibly others before unilateral actions are taken to permit coordination.

Much of the forward movement at the WTO on new rules is likely to be through plurilateral deals. The JSIs are generating most of the energy at the moment. India and South Africa have submitted a paper arguing that such plurilaterals area not proper under the WTO or require consensus (which doesn’t exist) to be included within the WTO. See February 20, 2021, Will India and South Africa (and others) prevent future relevance of the WTO?, https://currentthoughtsontrade.com/2021/02/20/will-india-and-south-africa-and-others-prevent-future-relevance-of-the-wto/. Ms. Weyand’s position was that the WTO will need to find ways to incorporate the plurilaterals into the WTO or action will happen outside of the WTO which cannot be beneficial to the WTO. In a post in recent days, I have argued that the U.S. should joint the JSIs that it is not a party to. See March 9, 2021, The Biden Administration should join the Joint Statement Initiatives that it is not presently party to, https://currentthoughtsontrade.com/2021/03/09/biden-administration-should-join-the-joint-statement-initiatives-that-it-is-not-presently-part-to/. The new Director-General has also put significant emphasis for obtaining forward movement in the JSIs. So despite the current importance of the JSIs, there are challenges to how much the U.S. and EU can achieve through plurilaterals within the WTO without changes to the Marrakesh Agreement Establishing the WTO, and Members will be divided on having WTO plurilaterals where benefits are limited to the parties vs. all Members (i.e., non-MFN, but open for later membership of non-participants).

On Dispute Settlement, the EU has stated that it understands the long-standing U.S. concerns that are bipartisan and reflected both in the Biden Administration and in Congress. While Ms. Weyand’s view is that the U.S. must signal that it accepts a two-tier, binding, independent dispute settlement system early for negotiations to move forward, the comments of Thomas Graham and the paper by Amb. Shea suggest that such an early commitment may be inappropriate. This would be true if the underlying problems laid out over the last years by the U.S. cannot be rectified satisfactorily under such a system — currently unknown as negotiations haven’t taken place.

Since the problems for the U.S. and others with the Appellate Body flow in part from an ineffective mechanism for Members to correct Appellate Body errors (i.e., the negotiating a clarification and/or Ministerial Conference/General Council adoption of an interpretation (Marrakesh Agreement Establishing the WTO Art. IX:2)), reform of the dispute settlement will likely exceed review of the Dispute Settlement Understanding and procedures.

Ms. Hillman has suggested and Mr. Graham has supported Ms. Hillman’s proposal for a separate process for trade remedy or trade defense cases in light of the large number of cases in the area where there has been longstanding disagreement on Appellate Body decisions and because of the failure of the Appellate Body to respect Art. 17.6(ii) of the Antidumping Agreement.

In earlier posts, I had suggested some modifications to Amb. Walker’s 2019 draft General Council Decision that (1) would interpret both DSU Art. 3.2 and 19.2 and possibly deal with the tension Mr. Graham reviewed in his comment and that have led to much of the overreach problem; (2) would address ADA Art. 17.6(ii); and (3) would deal with past erroneous decisions. See July 12, 2020, WTO Appellate Body reform – revisiting thoughts on how to address U.S. concerns, https://currentthoughtsontrade.com/2020/07/12/wtos-appellate-body-reform-revisiting-thoughts-on-how-to-address-u-s-concerns/ (relevant section copied below; modifications are in bold and underlined).

‘Overreach’

As provided in Articles 3.2 and 19.2 of the DSU, findings and recommendations of Panels and the Appellate Body and recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements.   In a large number of Panel and Appellate Body reports, one or more parties and/or third parties have raised concerns about the Panel or Appellate Body adding to or diminishing the rights and obligations contrary to Articles 3.2 or 19.2 of the DSU.

To clarify situations where rights and obligations are being added to or diminished, Panels and the Appellate Body will not fill gaps in agreements, construe silence to indicate obligations or construe ambiguities in language of existing agreements to require a particular construction.  Any such actions by a Panel or by the Appellate Body is inconsistent with Articles 3.2 and 19.2 of the DSU.

Any party to an Appellate Body report that raised at the DSB meeting considering adoption of the Appellate Body report concerns about the creation of rights or obligations inconsistent with Articles 3.2 or 19.2, will have 90 days from the adoption of this General Council decision to request a review of the Appellate Body decision.  Such request will be for the limited purpose of having the Appellate Body determine whether on the specific issues raised where the party complained of creating rights or obligations the clarification of meaning provided in this General Council decision would result in a changed decision on the particular issue.  The Appellate Body will render decisions on all such requests within 90 days and will accept no additional briefing or argument from parties.  Where the report would have been different on one or more particular issues, it is sufficient for the Appellate Body to so indicate.  Where the same decision on an issue would have been made, the Appellate Body shall provide a detailed explanation.      

Panels and the Appellate Body shall interpret provisions of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (“antidumping agreement”) in accordance with Article 17.6(ii) of that Agreement.  Any party to an Appellate Body report that raised at the DSB meeting considering adoption of the Appellate Body report that Article 17.6(ii) was not applied in interpreting the antidumping agreement, will have 90 days from the adoption of this General Council decision to request a review of the Appellate Body decision.  Such a request will be for the limited purpose of having the Appellate Body determine whether a different outcome on one or more issues would have resulted had the Appellate Body applied Article 17.6(ii)  of the antidumping agreement.  The Appellate Body will render decisions on all such requests within 90 days and will accept no additional briefing or argument from parties.  Where the report would have been different on one or more particular issues, it is sufficient for the Appellate Body to so indicate.  Where the same decision on an issue would have been made, the Appellate Body shall provide a detailed explanation.       

There presumably are many other ways (and perhaps better ways) to deal with these issues, but the above suggests that solutions could be found that would support a two-tiered system. Perhaps, the EU proposal for what it needs from the U.S. early should be supplemented by an understanding that any such commitment assumes ability to address U.S. concerns meaningfully with a two-tier, binding, independent dispute settlement system.

Conclusion

Ms. Weyand’s statement was that cooperation between the U.S. and the EU was a necessary but not sufficient condition to a successful effort at WTO reform. The European Commission in its revised trade policy paper demonstrated some movement from prior positions that had made resolution of matters such as the impasse on the Appellate Body unlikely. Similarly, the Biden Administration has been indicating on a range of issues including environmental sustainability movement that makes a united front between the U.S. and EU more likely. Actions reported in the press in recent weeks show movement by both the U.S. and the EU to improve bilateral relations in the trade sphere. All are very promising signals.

But the path forward is complicated by a lack of common objectives with many third countries, including China. Hence, the correctness of the observation that U.S.-EU cooperation is necessary but not sufficient.

Programs like today’s IIEL program provide a useful opportunity for large numbers of members of the public to gain a better understanding of the possible road forward and challenges to be faced. All of the panelists (and moderator) did an excellent job. It will be interesting to see how the WTO responds in the coming months if the U.S. and EU can in fact mount a united front on reform.

WTO Director-General Okonjo-Iweala’s statement on International Women’s Day, a broader read on gender equality; U.S., EU and New Zealand actions and statements

In my post yesterday, I pulled some information from a short video put together by the WTO, UNCTAD and ITC that dealt with the issue of priorities for the three organizations in terms of recovering from the pandemic. I also reviewed some actions President Biden was taking in the United States. See March 8, 2011, March 8, 2021, International Women’s Day — statements of UN Women Executive Director,  heads of WTO, UNCTAD and International Trade Centre, and U.S. Executive Orders and Statement by President Biden, https://currentthoughtsontrade.com/2021/03/08/march-8-2021-international-womens-day-statements-of-un-women-executive-director-heads-of-wto-unctad-and-international-trade-centre-and-u-s-executive-orders-and-statement-by-president-biden/.

WTO Director-General Ngozi Okonjo-Iweala

Yesterday the WTO hosted a virtual event entitled “Women in leadership: Achieving an equal future in a COVID-19 world,” Director-General Okonjo-Iweala gave an opening statement which chronicles both the disproportionate harm women have encountered during the COVID-19 pandemic but also some of the actions some governments are taking to address the challenges facing women. See WTO, International Women’s Day: Focus on women for a stronger recovery, March 8, 2021, https://www.wto.org/english/news_e/news21_e/women_08mar21_e.htm. While the two priorities of the Director-General (DG) reviewed in yesterday’s post are also present in her statement at yesterday’s event (equitable and affordable access to vaccines, therapeutics and diagnostics; eliminating or phasing out export restraints), there is a lot more ground covered in the statement. The women and trade agenda at the WTO is relatively limited at the present time. Having a woman as Director-General can lead to changes in the organization and structure of the Secretariat — which is identified as a topic DG Okonjo-Iweala will be addressing — and can help ensure that women are at the table for all negotiations so that trade policy and negotiations include an understanding of the implications for gender equality and empowerment of women and girls. DG Okonjo-Iweala reviews the reasons women have been disproportionately affected — including being overrepresented in sectors heavily impacted by the pandemic (textile and apparel manufacturing, tourism), being heavily concentrated in the informal economy of countries with limited or no safety net if jobs are lost, for entrepreneurs, being in small businesses with limited financial resources making surviving a pandemic more challenging, shouldering heavy loads at home in terms of child care, and facing great health care risks because of the concentration in medical and essential services jobs, The text of DG Okonjo-Iweala’s statement, which ls linked to the press release is copied below. See Speeches — DG Ngozi Okonjo-Iweala, 2021 WTO International Women’s Day: “Women in Leadership: Achieving an Equal Future in a COVID-19 World”, March 8, 2021, https://www.wto.org/english/news_e/spno_e/spno2_e.htm.

“Ladies and gentlemen,

“Today is my first International Woman’s Day as the WTO Director-General. Given the particular challenges the pandemic has brought to women globally, I wish to focus my opening remarks today on what the WTO can do to help address these challenges. But I am keenly aware that achieving gender equality is also one of the top priorities for the Secretariat itself, and we will find an occasion soon to have a focused discussion on gender issues for the Secretariat.

“The COVID-19 pandemic has deepened inequalities of every kind. Between countries with money to spend on vaccines and economic relief, and those that cannot. Between workers who must risk their health every day, and those who can safely work from home. Between big firms and small businesses.

“But perhaps no divide has deepened more than that between men and women.

“In both paid and unpaid work, women bore the brunt of the pandemic’s social and economic impact.

“Globally, 5% of women lost jobs in 2020.  The employment loss of men was 3.8%. Women have also been much more likely than men to drop out of the labour market and become inactive.

“In low-income countries without the means to offer economic support during lockdowns, many women lost their only source of income. As family incomes fell, many girls stayed home when schools reopened, or went to work.

“Why has the recession caused by the pandemic had such a disproportionate impact on women?

“First, women are overrepresented in sectors that have been more negatively affected than others.

“This includes jobs requiring in-person contact, such as food service and retail — sectors that either shut down or became much riskier. Women also account for a large share of workers in services such as tourism — sectors directly affected by travel restrictions.

“Women also outnumber men in the manufacturing sectors hardest hit by the pandemic, such as textiles and apparel, where factories shut down early in the pandemic in response to plummeting export demand. In Bangladesh, for example, female employees represent 80 per cent of the workforce in ready-made garment production. Industry orders declined by 45.8 per cent over the first quarter of 2020 — by 81 per cent in April 2020 alone.

Second, more women work in informal sectors than men. Women make up 58% of employment in informal sectors, and the numbers are higher in developing and least-developed economies. In Africa, for example, almost 90% of employed women work in the informal sector.​ These women workers are hurt the most because they are likely to have lost their only source of income and been left with no social and legal protection. 

“Third, many women entrepreneurs own or manage small businesses that already struggle with limited financial resources and borrowing capacity. The pandemic worsened these pressures.

“And within families, women continue to shoulder a heavier burden than men. Temporary school closures made fathers step up a little, but mothers stepped up much more. Working mothers changed work schedules, reduced hours or took unpaid leave far more frequently than working fathers. In Germany, 6% of fathers but 62% of mothers indicate they have taken on the primary responsibility for their children during school closures.

“Finally, women face greater health risks as they work more in areas such as health and social care, sales of food and other necessary goods. In many countries, women comprise over 75% of the healthcare workforce. In certain countries (Italy, Spain, and the US), a higher proportion of women healthcare workers (69%, 75.5%, and 73% respectively) were found infected with COVID-19: although work is still ongoing to understand the reasons for this, one possible reason is that personal protection equipment has been designed to fit for men and even the smallest size is too big for some women.

“Even before COVID-19, progress towards gender parity had been too slow, too uneven. Now, unless we act quickly, the pandemic’s disproportionate impact on women could last for decades. This would be a moral failure — and an economic disaster.

“The biggest thing the WTO can do right now is to work with Members to keep trade open.

“As the economic data shows, trade has proven crucial in the global fight against the pandemic.

“While too many export restrictions remain in place, trade helped improve access to key medical products over the past year. In the first half of 2020, while global trade contracted by 14% compared to the year before, total imports of personal protective equipment and other COVID-related products rose by 29%. The value of trade in textile face masks grew six-fold. PPE trade grew by 50%. Trade thus enhanced supply resilience, particularly for those countries without manufacturing capacity.

“The pandemic has also highlighted how the temporary movement of healthcare workers, of whom many are women, has particularly helped the most affected countries to deal with the crisis. Open trade will continue to be key to building faster and more inclusive growth.

“Second, WTO Members must minimize or remove existing export restrictions that are impeding access to essential medical supplies and disrupting supply chains. Transparency on any export trade restrictions should also be improved through prompt notifications.

“In all these efforts, our priority should be to contribute to making vaccines, therapeutics and diagnostics available and affordable in all countries. Until we have successfully tackled health challenges for everyone, we cannot tackle economic ones.

“Third, trade can be a source of more and better jobs, and increased purchasing power for women. Overall, countries that are more open to trade, as measured by the ratio of trade to gross domestic product, have higher levels of gender equality.

“For one, women are more likely to be in formal jobs if they work in trade-integrated sectors with higher levels of exports, thereby giving them opportunities for benefits, training, and job security. A recent World Bank survey shows that, for women, the probability of being informal declines from 20% in sectors with low levels of exports to 13% in sectors with high levels of exports. 

“Digital technologies can also help women overcome gender-based barriers to trade, reach broader markets, and weather the impact of crises better. Women facemasks producers in Kenya, for example, found ways to develop and even expand their businesses during lockdowns using growing e-commerce opportunities. Rwandan women coffee producers were able to export their products directly to China. Let’s close the existing gender digital divide and help all women benefit from the opportunities created by digital technologies.

“Finally, all these efforts must be supported by targeted support measures for women.

“Women could be left behind in the recovery unless adequate measures are put in place to address the uneven impact of the pandemic on them. Let me give you one example of how targeted intervention can make a difference: in Zambia, the Enhanced Integrated Framework (EIF) and the International Trade Centre (ITC) helped women-owned businesses selling textiles, leather, and honey to attend trade fairs and other B2B activities. The result: they were able to break into 10 new international markets, and generate hundreds of thousands of dollars worth of new sales. They also expanded their supplier networks, and many of those new suppliers were also run by women.

“Governments need to prioritize women in the labour force and in the home through financial, legal, and educational measures. Fiscal support for women will be particularly crucial. Yet currently less than 40 per cent of all measures taken globally for the recovery are gender sensitive, with only 7 per cent containing measures supporting women’s economic security.

“This is a crude reminder for all of us that women must be at all decision-making tables equally as men. As Dame Graça Machel once said, “…socio-economic transformation will only be realized once we aggressively address gender-specific challenges, prioritize gender equality and women’s participation, and firmly entrench women in leadership positions at all levels in society.”

“The cost of gender inequality is enormous. A few years ago McKinsey estimated that if women played a fully equal role to men in the labour market, global economic output could increase by as much as $28 trillion per year. To put it in perspective, this pandemic reduced global output last year by between $3 and 4 trillion.

“The COVID-19 pandemic is setting women back in all domains of society.

“At the same time, it has reminded everyone of the enormous value of care and other kinds of work traditionally associated with women. And it has highlighted the power and effectiveness of women’s leadership. Although no analytical study has been conducted yet, anecdotal examples show that economies led by woman leaders (e.g. New Zealand, Denmark, Chinese Taipei, Iceland, Finland, and Norway) have outperformed their peers in terms of management of this pandemic.

“We cannot expect to make good policy for all members of society if half of the population is not properly and equally represented at the table.

“Gender equality is a fundamental human rights issue and also an economic empowerment issue. We should all work harder in our respective roles to achieve complete gender equality.

“I wish you all a happy International Women’s Day!”

Additional actions by President Biden

In yesterday’s post, I also reviewed actions President Biden was taking in the form of two Executive Orders (one Executive Order on Establishment of the White House Gender Policy Council, a second Executive Order on Guaranteeing an Educational Environment Free from Discrimination on the Basis of Sex, Including Sexual Orientation or Gender Identity). But President Biden on March 8th reviewed additional actions he has taken including nominating two women to hold command positions in the U.S. Military and putting forward to Congress the Violence Against Women Reauthorization Act of 2021. See Statement by President Biden on the Introduction of the Violence Against Women Reauthorization Act of 2021 and Remarks by President Biden on International Women’s Day (“On Friday, I submitted to the Senate for confirmation my first slate of nominations for four-star command positions in our Armed Forces — among them, two outstanding and eminently qualified warriors and patriots.  General Jacqueline Van Ovost in the United States Air Force is currently the only female four-star officer serving in our military.  I nominated her as Commander of the United States Transportation Command.  And when confirmed, the Lieutenant General Laura Richardson, of the United States Army, will be promoted in rank and join General Van Ovost as the only four-star — as another four-star general.  I nominated her as Commander in the United States Southern Command.  And, when confirmed, they will become the second and third women in the history of the United States Armed Forces to lead combatant commands.”). The Biden Administration also had a press briefing with the two co-chairs of the Gender Policy Council. See Press Briefing by Press Secretary Jen Psaki, Co-Chair of the Gender Policy Council and Chief of Staff to the First Lady Julissa Reynoso, and Co-Chair and Executive Director of the Gender Policy Council Jennifer Klein, March 8, 2021. And Vice President Kamala Harris reported participated in a discussion with an EU Parliamentary Committee. See eudebates.tv, We are all in this together! Jacinda Ardern on International Women’s Day, March 8, 2021, https://www.eudebates.tv/debates/world-debates/australia/we-are-all-in-this-together-jacinda-ardern-on-international-womens-day/ (“.During the plenary session of the European Parliament in Brussels, Jacinda Ardern, Prime Minister of New Zealand joined MEPs to celebrate the International Women’s Day during a debate. Prime Minister Jacinda was one of a number of high-profile guests, including US Vice President Kamala Harris, to address the European Union Parliament for International Women’s Day.”)..

So the Biden Administration has been taking actions to bring women into positions of power in a unprecedented manner in the United States and to embark on reviews to ensure problems to achieving gender equality are identified and addressed.

European Commission President Ursula von der Leyen

The EU has had relatively strong programs promoting gender equality over time. Like the United States, the EU is looking to do more. European Commission President Ursula von der Leyen made a statement yesterday at the EP FEMM Interparliamentary Committee meeting reviewing the important contributions of women to the development of COVID-19 vaccines and the actions the EU will be taking to improve gender equality. Like President Biden’s cabinet, EC President von der Leyen has much greater balance in the Commission composition in terms gender representation. See Opening speech by President von der Leyen at the EP FEMM Interparliamentary Committee meeting, on the occasion of the International Women’s Day 2021, March 8, 2021, https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_21_1017. Her speech is copied below.

“Thank you very much Evelyn Regner,

“Presidents and Honourable Members,

“It is an honour to be with you today, in the company of so many amazing women. And allow me to begin by mentioning three women who are not with us today. Doctor Özlem Türeci. Professor Sarah Gilbert. Doctor Kizzmekia Corbett. Some of you may have never heard their names before. But we owe them a lot. They are three scientists from Germany, the UK and the U.S. And these three extraordinary women lead the teams that developed the first three vaccines against coronavirus. BioNTech, Moderna and AstraZeneca.

“And I am sure that they, like many of us, have fought against all sorts of stereotypes. But this is how women respond to stereotypes: By going their way, showing leadership and excelling in their field. And today the whole world can see that we are all better off when women get the opportunities they deserve. Of course, women are made for science. Of course, women are fit to lead. Of course, career and motherhood can go together. It is obvious, but unfortunately it still needs to be said.

“This year’s International Women’s Day is for women like these three scientists. This Women’s Day is for women on the front-line, and for women in the back-office. It is for the health workers, who have been our guardian angels, and it is for our sales assistants, who have kept our supermarkets open. And indeed, let us never forget that almost 80% of them are women.

“Women’s Day is also for all the mothers who have taken care of their children during the lockdowns, while also working from home. But this Women’s Day is also for the women who lost their job during the crisis. And Women’s Day is for those who no longer want to settle for discriminations, insecurity and unfairness. As a female leader, I would like 2021 to bring good news to all of them, to all European women. And this is what we are working on: Putting women at the centre of all our policies.

“And let me start with the basics. Later this year we will propose new legislation to fight violence against women. This has become even more urgent because of the lockdowns. Living free from fear and violence is a basic human right. And we must ensure adequate protection for all women, in all European countries, online and offline, and especially at home.

“Second, women must be at the centre of the recovery. This is a clear requirement for all national recovery plans. NextGenerationEU will finance good jobs for women and men alike. It will invest in quality education for girls and women, including scientific education. NextGenerationEU will be for all Europeans, women and men.

“Third, today indeed we are presenting our new Action Plan to implement the European Pillar of Social Rights. We have set ambitious targets on jobs, skills, and poverty reduction. These are clear and measurable goals to drive our work.

“And let me take one of them: By 2030, at least 78% of European adults should be employed. And this can only be achieved by having more women in the labour market. But to do this we need to make progress on work-life balance. Ensuring parental leave for mothers and fathers. Investing in childcare and good schools. And indeed creating a child guarantee, so that all parents, from all social backgrounds, can send their kids to childcare and school. And this is what empowerment means. Freedom to be a mother and to have a career, for all women.

“And this adds up to the fourth point, today we are also proposing a Directive for pay transparency. It builds on a very simple idea: Equal work deserves equal pay. And for equal pay, you need transparency. Women must know whether their employers treat them fairly. And when this is not the case, they must have the power to fight back and get what they deserve.

“And finally, women should always be able to reach for the top, including in private companies. I fought for this when I was a Minister in Germany. And I will not stop pushing for gender quotas on boards until we get a fair system for all European countries. We simply cannot exclude half of our talents from leadership positions.

“Having women in leadership position should become the norm, not the exception. And slowly but steadily, Europe is changing. Five EU governments are now led by women. For the first time, an EU country, Estonia, is led by two women, as President and Prime Minister. And you, President Sakellaropoulou, are the first woman to be elected as Greek President.

“For the first time in our history, not only the European Commission is led by a woman, but we have also achieved gender-balance in the College of Commissioners. As you know, this is something I promised on my nomination. I asked every European country to present a man and a woman as candidates for each post. It was not always easy. But we made it. And it shows that everything can change, with tireless perseverance.

“All of this matters. It matters to the quality of our decision-making. And it matters to our daughters. It tells them that they can reach for the top. It tells them that hard work pays off. That they will be judged on their ideas, their dedication and their talent, not for their chromosomes. A gender-balanced Europe is a better Europe. Not just for women, but for all of us.

“And in this spirit: Long live Europe, and happy Women’s Day!”

New Zealand Prime Minister Jacinda Arden

New Zealand’s Prime Minister Jacinda Arden also spoke to the European Parliament yesterday. Her speech can be found here. eudebates.tv, We are all in this together! Jacinda Ardern on International Women’s Day, March 8, 2021, https://www.eudebates.tv/debates/world-debates/australia/we-are-all-in-this-together-jacinda-ardern-on-international-womens-day/. New Zealand has done a lot to promote gender equality and has leadership in government that is roughly in number equal between women and men. But challenges remain as the Prime Minister notes in her speech including women being “overrepresented in job loss and low paid work and domestic violence statistics.” The Prime Minister’s speech is copied below (headers are from the webpage).

“Jacinda Ardern European Parliament speech on International Women’s Day 

“I’m honoured to see this kind invitation to speak with you and I bring warm greetings from New Zealand. President Sassoli, thank you for convening this session and for the focus on women’s empowerment and leadership during the covid crisis. To say this is a challenging time would be, of course, a monumental understatement. The world is reeling from the effects of the covid-19 pandemic.

“It has had far reaching consequences that have affected every one of us. This is a critical time for us as leaders and representatives to come together, even if it is by video in these constrained times. Covid-19 highlights how truly interdependent we all are, how reliant we are on cooperation, communication and compassion to successfully combat the virus.

“Jacinda Ardern puts people at the centre

“It highlights how important it is that we work together for a sustainable recovery that delivers for our economies and our planet. But it also puts people at the centre of our decision making. In New Zealand our approach in battling covid-19 has been one of inclusivity. The idea that everyone needs to do their bit to protect one another, especially our most vulnerable.

“I want to talk about our population as the team of five million, and we may be a small team, but one that nonetheless has proven the power and importance of the collective. And now that’s exactly what we need from the world. It’s a haunting legacy if the virus drags on around the globe. It has become clear no country is safe until every country is safe. As we move to a phase of vaccination we are not a team of five million, but we are a team of seven point eight billion

“The success of individual countries or regions means little unless we are all successful. In New Zealand‘s indigenous language Te Reo Maori, we say “we are all in this together”. But some have felt the effects of covid-19 even more acutely than others. Covid-19 has ravaged our health systems, our economies, our livelihoods. But it is also exacerbated structural inequalities that disproportionately impact women and girls.

“Women are at the forefront

“Women are at the forefront of fighting the covid crisis. Amongst the doctors, nurses, scientists, communicators, caregivers and frontline and essential workers who face the devastations and challenges of this virus every day. Along with being directly affected by the virus itself and its immediate impacts on our livelihoods, we’re also the subjects of intensified domestic violence.

“Now this is being reported as the shadow pandemic in all corners of the world. Not only by fully and meaningfully including women and girls in leadership and decision making at all levels can we ensure that our responses to the pandemic meet the needs of everyone. As prime minister of a small country on the far side of the world, I’m proud of what our team of five million in New Zealand has been able to achieve over the last year.

“We have a proud history of championing gender rights since we became the first country in the world to give all women the right to vote in 1893. I’m part of the most diverse and inclusive parliament New Zealanders have ever elected, with women making up forty eight per cent of our parliament and fifty five per cent of my party in government.

“Women hold top positions

“Women also hold the post of Governor-General, Prime Minister, Leader of the Opposition and Chief Justice, and increasingly holding senior roles in our public service and business sector. And now, for the first time and long overdue, I might add, New Zealand‘s Minister of Foreign Affairs is a woman. She is a skilled, values driven indigenous woman with a contemporary worldview.

“And yet for all of that, we have so much more to do because it doesn’t matter how many women are in leadership, so long as we have women overrepresented in job loss and low paid work and domestic violence statistics. In my mind, that is the true measure of whether we have made progress and whether we have equality.

“As we look towards the year ahead we all know it will be tough. There will be big challenges and demands made of all of us as leaders. We will be tested. We must all do more to support women lead business, including small enterprises, to be part of the covid-19 economic recovery so they can more readily experience the benefits of trade.

“The European Union and New Zealand. We are Like-Minded Partners with so many values and interests in common, we both desire the stability and freedom afforded us all by global rules and institutions, free and open markets and a world where human rights are valued and prioritised.

“As we all turn towards creating a sustainable global economic recovery, my message to you is simple. We need to stick together because we are all in this together. I wish your Parliament and all our people the very best for the challenges that lie ahead. Stay safe. Stay well.”

Conclusion

Gender equality is an issue that needs a permanent place on agendas of organizations and governments to ensure progress is made for half the world’s people. Progress has been too slow in too much of the world and discrimination or unequal treatment can be found in various forms in nearly all countries. It is unimaginable that the world has not progressed more. We can and must do better.

Biden Administration should join the Joint Statement Initiatives that it is not presently party to

President Biden has made it clear that his Administration will work within multilateral organizations to the extent possible to move the U.S. agenda forward. During the Trump Administration, the U.S. participated actively in the World Trade Organization but was active in only one of the Joint Statement Initiatives that were initiated at the end of the Buenos Aires Ministerial Conference in late 2017.

Thus, the United States is an active participant in the ongoing negotiations following the Joint Statement on Electronic Commerce (WT/MIN(17)/60, 13 December 2017), but is not a party to the other Joint Statement Initiatives. See Joint Ministerial Statement on Services Domestic Regulation (WT/MIN(17)/61, 13 December 2017); Joint Ministerial Statement on Investment Facilitation for Development (WT/MIN(17)/59, 13 December 2017); Joint Ministerial Statement, Declaration on the Establishment of a WTO Informal Work Programme for MSMEs (WT/MIN(17)/58, 13 December 2017); Joint Declaration on Trade and Women’s Economic Empowerment on the Occasion of the WTO Ministerial Conference in Buenos Aires in December 2017.

While India and South Africa have challenged the legitimacy of the Joint Statement Initiatives (JSIs), a great deal of the energy in the WTO in the last several years has been put into the JSIs. See, e.g., February 20, 2021, Will India and South Africa (and others) prevent future relevance of the WTO?, https://currentthoughtsontrade.com/2021/02/20/will-india-and-south-africa-and-others-prevent-future-relevance-of-the-wto/; WTO, Coordinators of joint initiatives cite substantial progress in discussions, 18 December 2020, https://www.wto.org/english/news_e/news20_e/jsec_18dec20_e.htm. The WTO press release is copied below.

“The coordinators of the joint initiatives on e-commerce, investment facilitation, services domestic regulation and micro, small and medium-sized enterprises (MSMEs) said on 18 December that substantial progress has been achieved in their respective discussions and that they are on track to deliver concrete results or additional progress at the WTO’s 12th Ministerial Conference (MC12) scheduled for next year.

“In their communication, the coordinators noted that they have delivered summary statements to WTO members outlining how far the four initiatives have advanced since they were launched three years ago, where they stand today, and what their next steps in the discussions will be.

“’What these statements clearly show is the substantial progress [of the initiatives] in a short period of time, that they are on track to delivering concrete results or progress at MC12, and that they are contributing to building a more responsive, relevant and modern WTO — which will be critical to restoring global trade and economic growth in the wake of the COVID-19 crisis.’

“’These initiatives have grown into an increasingly important part of the agenda of the WTO, with an expanding number of participants from both the developed and developing worlds that account for a significant part of the WTO’s membership, and based on the principles of openness, transparency and inclusiveness,’ the coordinators added.

“The new joint initiatives were launched at the WTO’s 11th Ministerial Conference in Buenos Aires in December 2017 with the aim of commencing negotiations or discussions on issues of increasing relevance to the world trading system.

“The joint initiative coordinators are Ambassador José Luis Cancela Gómez (Uruguay) for the Informal Working Group on MSMEs; Ambassadors George Mina (Australia), Yamazaki Kazuyuki (Japan) and Tan Hung Seng (Singapore) for the Joint Statement Initiative on E-Commerce; Deputy Permanent Representative Jaime Coghi Arias (Costa Rica) for the Joint Statement Initiative on Services Domestic Regulation; and Ambassador-designate Mathias Francke (Chile) for the Structured Discussions on Investment Facilitation for Development.

“The coordinators noted that the consolidated negotiating text on e-commerce will provide a foundation for intensified negotiations in 2021. They highlighted that the negotiations on services domestic regulation are at a ‘mature stage’, with a genuine potential for an outcome by MC12.

“The coordinators also said that substantive provisions of an investment facilitation agreement are being negotiated by the participating members in this initiative. In addition, they noted the recent announcement by the Informal Working Group on MSMEs of a package of declarations and recommendations to help small business trade internationally.

“The coordinators underscored that the shared and ultimate goal of these initiatives is to strengthen and reinforce the multilateral trading system, that they are open to all WTO members, and that they seek the participation of as many members as possible.

“The coordinators stated: ‘The initiatives on e-commerce, investment facilitation, services domestic regulation, and MSMEs clearly demonstrate that the WTO can respond to new economic and technological challenges in a flexible, pragmatic, and timely way. These initiatives — and their innovative approach to cooperation and negotiation — can provide a valuable illustration of WTO reform in action.’”

While the Joint Declaration Trade and Women’s Economic Empowerment on the Occasion of the WTO Ministerial Conference in Buenos Aires in December 2017 is not treated as a JSI, it does have many Members supporting the Declaration and engaging in the informal work programme.

Some of the other countries participating in all of the JSIs and Joint Declaration

While the number of WTO Members participating in the JSIs and supporting the Joint Declaration vary, the following is a partial list of Members who are signatories to all of the JSIs and the Joint Declaration. Other than the Electronic Commerce initiative, the U.S. is presently not a signatory or participant in any of the other JSIs or Joint Declaration.

Argentina, Australia, Brazil, Canada, Chile, China, Colombia, European Union, Japan, Korea, Mexico, New Zealand, Russian Federation, Switzerland are participants in all of the JSIs and supportive of the Joint Declaration. Dozens of other Members are participating in some or many of the JSI’s that the U.S. is not presently supporting or active in.

Conclusion

While the United States has a large agenda of issues it wishes to address at the WTO (including trade and the environment, WTO reform, industrial subsidies), it makes no sense that the United States would not actively participate in work programs where most of the major economies are active and where new rules will be relevant to areas of significance for the United States as well as for trading partners. While the work program on women and trade is in an informal working group, President Biden has made empowerment of women an important priority for his Administration as a range of actions during International Women’s Day made clear. See, e.g., March 8, 2011, March 8, 2021, International Women’s Day — statements of UN Women Executive Director,  heads of WTO, UNCTAD and International Trade Centre, and U.S. Executive Orders and Statement by President Biden, https://currentthoughtsontrade.com/2021/03/08/march-8-2021-international-womens-day-statements-of-un-women-executive-director-heads-of-wto-unctad-and-international-trade-centre-and-u-s-executive-orders-and-statement-by-president-biden/. Similarly, MSMEs are an important part of the U.S. economy and a major driver of economic growth. The U.S. has a very strong services sector which has an interest in domestic regulatory issues both in the U.S. and as addressed overseas. Finally, the U.S. is both a major investor in foreign countries and a recipient of large amounts of foreign investment and has a significant interest in helping the global community address issues involved in investment in developing and least developed countries on a more predictable basis.

Hopefully, the Biden Administration when its USTR nominee is confirmed in the coming days, will opt to engage in all of the JSIs. It is time.

March 8, 2021, International Women’s Day — statements of UN Women Executive Director, heads of WTO, UNCTAD and International Trade Centre, and U.S. Executive Orders and Statement by President Biden

Today is International Women’s Day. With the pandemic still occupying center stage in global affairs, the UN effort on its Sustainable Development Goal 5 to “achieve gender equality and empower all women and girls” is in trouble. Women have been disproportionately adversely affected by the pandemic, tens millions leaving the workforce to take care of children, tens of millions losing jobs and having no safety net. Various reports have reviewed the disparities and the loss of progress towards achieving gender equality and empowering all women and girls. See, e.g., UN Women, From Insights To Action, Gender Equality in the Wake of COVID-19 (September 2020); (“The pandemic has widened gender and economic inequalities.” “COVID-19 is exposing vulnerabilities in social, political and economic systems. It is forcing a shift in priorities and funding across public and private sectors, with far-reaching effects on the well-being of women and girls. Action must be taken now to stop this backsliding.”); UN Women, SPOTLIGHT ON GENDER, COVID-19 AND THE SDGS, WILL THE PANDEMIC DERAIL HARD-WON PROGRESS ON GENDER EQUALITY?, https://www.unwomen.org/-/media/headquarters/attachments/sections/library/publications/2020/spotlight-on-gender-covid-19-and-the-sdgs-en.pdf?la=en&vs=5013.

It is against this backdrop that statements and actions today on the importance of Women to the achievement of sustainable development goals should be seen. Below are materials from the UN Women’s Executive Director, the heads of the three Geneva organizations with a trade mission or function that are headed by women, and the announced actions today by President Biden in the United States.

UN Women Executive Director Statement

The following statement was made today by the UN Women Executive Director. See International Women’s Day Statement by Phumzile Mlambo-Ngcuka, UN Women Executive Director, on International Women’s Day 2021, Change up the pace: women at the table, March 8, 2021, https://www.unwomen.org/en/news/stories/2021/3/statement-ed-phumzile-international-womens-day-2021. The statement is copied below in its entirety.

“International Women’s Day this year comes at a difficult time for the world and for gender equality, but at a perfect moment to fight for transformative action and to salute women and young people for their relentless drive for gender equality and human rights. Our focus is on women’s leadership and on ramping up representation in all the areas where decisions are made – currently mainly by men – about the issues that affect women’s lives. The universal and catastrophic lack of representation of women’s interests has gone on too long.

“As we address the extraordinary hardship that COVID-19 has brought to millions of women and girls and their communities, we also look ahead to the solid opportunities of the Generation Equality Forum and Action Coalitions to bring change.

“During the pandemic, we have seen increased violence against women and girls and lost learning for girls as school drop-out rates, care responsibilities and child marriages rise. We are seeing tens of millions more women plunge into extreme poverty, as they lose their jobs at a higher rate than men, and pay the price for a lack of digital access and skills. These and many other problems cannot be left to men alone to solve. Yet, while there are notable exceptions, in most countries there is simply not the critical mass of women in decision-making and leadership positions to ensure that these issues are tabled and dealt with effectively and this has affected the pace of change for women overall.

“There are breakthroughs to celebrate, where women have taken the helm of organizations such as the World Trade Organization, the International Monetary Fund and the European Central Bank and we look forward to more such appointments that help to change the picture of what a leader looks like. Yet this is not the norm. In2020, as a global average, women were 4.4 per cent of CEOs, occupied just 16.9 per cent of board seats, made up only 25 per cent of national parliamentarians, and just 13 per cent of peace negotiators. Only 22 countries currently have a woman as Head of State or Government and 119 have never experienced this – something that has important consequences for the aspirations of girls growing up. On the current trajectory, we won’t see gender parity in the highest office before 2150.

“This can and must change. What is needed is the political will to actively and intentionally support women’s representation. Leaders can set and meet parity targets, including through appointments for all executive positions at all levels of government, as has occurred in the few countries with gender equal cabinets. Special measures can work; where countries have put in place and enforced quotas, they have made real progress on women’s leadership, as have those that have policies to address representation. Where these measures do not exist, progress is slower or even nonexistent and easily reversed.

“No country prospers without the engagement of women. We need women’s representation that reflects all women and girls in all their diversity and abilities, and across all cultural, social, economic and political situations. This is the only way we will get real societal change that incorporates women in decision-making as equals and benefits us all.

‘This is the vision of the 2030 Agenda and the Sustainable Development Goals and the vision of the Beijing Declaration and Platform for Action. It is the vision of civil society and multitudes of young people who are already leading the way and of all those who will join us in the Generation Equality Action Coalitions. We need bold decisive action across the world to bring women into the heart of the decision-making spaces in large numbers and as full partners, so that we can make immediate progress on a greener, equitable and inclusive world.”

Video of Director-General Ngozi Okonjo-Iweala of the WTO, Acting Secretary-General Isabelle Durant of UNCTAD, and Executive Director Pamela Coke-Hamilton of the International Trade Centre

For International Women’s Day, the three heads of multilateral organizations in Geneva involved in trade put out a video entitled, International Women’s Day — Leading global trade: Three women, three organizations. The note accompanying the video states “For the first time, all three major global trade organizations have women leaders: Ngozi Okonjo-Iweala at the WTO, Isabelle Durant at UNCTAD and Pamela Coke-Hamilton at ITC. On International Women’s Day, they talk about the importance of looking at trade through a gender lens, and how trade can help tackle the challenges related to the COVID-19 pandemic.” https://www.wto.org/english/news_e/news_e.htm.

Top priorities to boost recovery outlined by the three leaders include the following. For Director-General Okonjo-Iweala, her first priority to boost economic recovery, is the health aspect. “It is absolutely a top priority for me that we should look at how to make equitable and affordable access to vaccines, therapeutics and diagnostics happen. It is unconscionable that any countries or peoples should be waiting for any of these medical products. And we know that until we tackle the health challenges, we will not be able to really get a handle on the economic challenges and return to a sustainable growth path that would spell recovery from the pandemic. So that’s a really important priority. Second is what can trade do to boost the economic recovery? How can we liberalize trade in certain sectors to make sure that supply chains stay open and work and that countries can produce more and sell more? So what can trade contribute to that? It’s a priority for me that export restrictions and prohibitions that have been put by countries during this time of the pandemic be dropped or minimized or phased out very quickly so that we can have a freer flow of goods and intermediate inputs. So those are two top priorities that I think we need to focus on to boost economic recovery.”

For Acting Secretary-General Durant, her first priority is “to ensure that our institutions contribute to making trade a real tool for recovery, especially for those countries, groups and sectors that have paid a high price due to the pandemic. My priority is that everything we provide them in terms of analysis, data, technical and intergovernmental support helps them steer their recovery towards more inclusive and greener sectors and strategies. Climate change is indeed the greatest threat to current and future generations. Countries need urgently to start planning and implementing actions to adapt their production and trade to the ruthless effects of climate change: what does this imply for better production methods; new comparative advantages; investments; diversification of their economies; and regional integration and value chains? I have the same concern for fairness in the digital revolution. How can developing countries derive the greatest benefit for their development, and become players in it, when digital technology has become the driving force of the economy? COVID has shown the importance of digital infrastructure, policies and skills. More than ever, we need the cooperation, expertise and experience of all to build the road to recovery, because we all know that countries we are far from being equal when it comes to these issues.” (English translation from French as provided in the video).

For Executive Director Pamela Coke-Hamilton, her first priorities are “empowerment and equality — empowerment by building resiliency for MSMEs through partnership; empowerment for recovery by moving towards greener trade. ITC is starting a new initiative to support MSMEs and green trade, helping MSMEs adopt more sustainable practices, pursue opportunities in the circular economy and participate in greener supply chains. Empowerment through digital inclusion by promoting greater integration of MSMEs in digital economies and facilitate digital access for all. Empowerment of women and youths. A dedicated program at ITC will lead the way to women’s economic empowerment, and we will continue to work with governments to build an eco-system of new and innovative jobs for youths. And secondly, equality. Ultimately we want to make sure that no one is left behind as we seek paths for recovery, and build resilience against future shocks. COVID-19 has loaid bare the depths of inequality still prevailing from the global economic system. We must choose to challenge the status quo, and as women we will.”

Action by President Biden

President Biden provided a statement on International Women’s Day and issued two Executive Orders. See Statement by President Biden on International Women’s Day, March 8, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/08/statement-by-president-biden-on-international-womens-day/; Executive Order on Establishment of the White House Gender Policy Council, March 8, 2021, https://www.whitehouse.gov/briefing-room/presidential-actions/2021/03/08/executive-order-on-establishment-of-the-white-house-gender-policy-council/; Executive Order on Guaranteeing an Educational Environment Free from Discrimination on the Basis of Sex, Including Sexual Orientation or Gender Identity, March 8, 2021, https://www.whitehouse.gov/briefing-room/presidential-actions/2021/03/08/executive-order-on-guaranteeing-an-educational-environment-free-from-discrimination-on-the-basis-of-sex-including-sexual-orientation-or-gender-identity/; Fact Sheet: President Biden to Sign Executive Orders Establishing the White House Gender Policy Council and Ensuring Education Free from Sexual Violence, March 8, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/08/fact-sheet-president-biden-to-sign-executive-orders-establishing-the-white-house-gender-policy-council-and-ensuring-education-free-from-sexual-violence/. The President’s statement is copied below as is the fact sheet on the two Executive Orders.

“Women’s history is American history — and world history. On International Women’s Day, we celebrate the achievements, contributions, and progress of women and girls in the United States and around the globe.
 
“My Administration is committed to honoring women by investing in their opportunity, security, and wellbeing. I was proud to issue an Executive Order today establishing the White House Gender Policy Council, to ensure that every domestic and foreign policy we pursue rests on a foundation of dignity and equity for women. My Administration is also committed to ensuring that women are represented equally at all levels of the federal government. That starts with Vice President Harris, who broke through a barrier that stood for more than two centuries. And it includes a record number of diverse women whom I’ve nominated to serve in Cabinet-level roles and appointed to senior-level positions.
 
“In our nation, as in all nations, women have fought for justice, shattered barriers, built and sustained economies, carried communities through times of crisis, and served with dignity and resolve. Too often, they have done so while being denied the freedom, full participation, and equal opportunity all women are due. Their contributions have been downplayed. Their stories have been neglected. That is why International Women’s Day is also a time for us to recommit ourselves to the cause of equity and equality for women the world over, and to shine a light on the systemic obstacles that fuel gender disparities and undermine women’s potential.
 
“Despite persistent obstacles, women are leading every day. Over the past year, women have played a critical, often outsized role in responding to the global coronavirus pandemic. They are our vaccine researchers and public health officials. They are our doctors and nurses. They are our essential workers — so many of whom are women of color — in fire stations and nursing homes, on farms and in grocery stores, in schools and in shelters.
 
“Around the world, we are seeing decades of women’s economic gains erased by this pandemic. It’s forcing millions more girls out of school, which could impact economic growth for decades to come. Incidents of violence against women in their homes and communities have spiked. And, as is so often the case, COVID-19 is hitting the poorest and most marginalized women the hardest. These global trends damage all of us, because we know that governments, economies, and communities are stronger when they include the full participation of women — no country can recover from this pandemic if it leaves half of its population behind.
 
“Elevating the status of women and girls globally is the right thing to do — it is a matter of justice, fairness, and decency, and it will lead to a better, more secure, and more prosperous world for us all.  On International Women’s Day, let us recommit to the principle that our nation, and the world, is at its best when the possibilities for all of our women and girls are limitless.”

Fact Sheet

Biden-Harris Administration establishes a government-wide focus on uplifting the rights of women and girls in the United States and around the world

“The full participation of all people – including women and girls – across all aspects of our society is essential to the economic well-being, health, and security of our nation and of the world. This is a matter of human rights, justice and fairness. It is also critically important to reducing poverty and promoting economic growth, increasing access to education, improving health outcomes, advancing political stability, and fostering democracy.

“Today, President Biden will sign two Executive Orders. The first establishes the White House Gender Policy Council to ensure that the Biden-Harris Administration advances gender equity and equal rights and opportunity for women and girls. The second directs the Department of Education (ED) to review all of its existing regulations, orders, guidance, and policies for consistency with the Administration’s policy to guarantee education free from sexual violence.

“A year into COVID-19, women are still contending with the public health crisis, an ensuing economic crisis, and on top of those challenges, a caregiving crisis. The pandemic has exacerbated barriers that have held back women, especially women of color, forcing many to leave the workforce, manage virtual schooling, and absorb additional caregiving responsibilities. Many women are also on the frontlines of the response to COVID-19 – as essential workers keeping our economy, communities and families going. As the country continues to grapple with the pandemic and reckons with the scourge of systemic racism, President Biden knows that we need a government-wide focus on uplifting the rights of women and girls in the United States and around the world, restoring America as a champion for gender equity and equality.

“Today’s actions will:

“Establish the Gender Policy Council. The first Executive Order formally establishes the Gender Policy Council within the Executive Office of the President, with a role in both domestic and foreign policy development. The Council will work in coordination with the existing policy councils to advance gender equity and equality, including by:

“Combatting systemic bias and discrimination, including sexual harassment;

“Increasing economic security and opportunity by addressing the structural barriers to women’s participation in the labor force, decreasing wage and wealth gaps, and addressing the caregiving needs of American families and supporting care workers, predominantly low-paid women of color;

“Ensuring access to comprehensive health care and preventing and responding to gender-based violence;

“Promoting equity and opportunity in education and leadership; and

“Advancing gender equality globally through diplomacy, development, trade, and defense, and by recognizing the needs and roles of women and girls in conflict prevention, peacebuilding, democratic rights-respecting governance, global health and humanitarian crises and development assistance.

“The White House Gender Policy Council will be an essential part of the Biden-Harris Administration’s plan to ensure we build a more equal and just society – by aggressively protecting the rights and unique needs of those who experience multiple and intersecting forms of discrimination, including individuals who are Black, Latina, Native, Asian American and Pacific Islander, people with disabilities, and LGBTQI+.

“The Executive Order requires the Co-Chairs of the Council to submit to the President a Government-wide strategy to address gender in policies, programs and budgets, and an annual report to measure progress on implementing the strategy. To prevent and respond to gender-based violence, wherever it occurs, there will be a Special Assistant to the President and Senior Advisor on Gender-Based Violence on the Council staff. The Executive Order also requires engagement with non-profit and community-based organizations, state and local government officials, Tribal Nations, foreign government officials and multilateral organizations.

Ensure education free from sexual violence. President Biden will sign an Executive Order that will direct the Department of Education (ED) to review all of its existing regulations, orders, guidance, and policies to ensure consistency with the Biden-Harris Administration’s policy that students be guaranteed education free from sexual violence. It also directs ED to specifically evaluate the Title IX regulation issued under the previous administration and agency action taken pursuant to that regulation, to determine whether the regulation and agency action are consistent with the policies of the Biden-Harris Administration.”

Conclusion

The WTO at its 2017 Ministerial Conference held in Buenos Aires saw a joint declaration on women and trade released. There are currently 127 WTO Members who support the declaration. There was an interim report released in 2019 and an informal working group on trade and gender working on a voluntary basis to share information and best practices in ways to increase women’s role in global trade. Such activities are a start for the WTO, but much more could be done if there was greater support by the Members. The 2020-21 selection of Dr. Ngozi Okonjo-Iweala was an important action and will likely presage change at the Secretariat. Her priorities as reviewed in today’s video address trade issues that are important to economic recovery which may facilitate greater movement towards gender equality.

The challenges women face globally during the pandemic are significantly greater than those faced by men both in terms of lost employment, withdrawal from the workforce to deal with child care and much more. The UN Sustainable Development Goal of gender equality and empowerment of all women and girls is important for many reasons. In trade, gender equality will promote growth and innovation. This is true in all societies regardless of level of economic development.

The pandemic has pushed back progress in economic development for much of the world as has been often reported and has slowed or reversed the drive for gender equality and empowerment of half the world’s population.. More focus and efforts are needed to ensure achieving the UN SDG 5 by 2030. Trade is but one aspect of the challenge.

Today’s speeches by the three leaders of multilateral organizations handling trade show some of the broader issues facing global trade to recover from the pandemic and highlight the capabilities of women leading important organizations. The UN Women’s Executive Director highlighted the deep societal challenges that continue to retard gender equality in fact in many parts of the world.

Finally, the actions by President Biden and his Administration are the types of actions needed by countries who have not achieved gender equality to date. More can and must be done by nations around the world. International Women’s Day is a reminder of the enormous global opportunities that exist if gender equality and empowerment of women and girls is achieved.