Australia

COVID-19 cases increase in last two weeks, setting new global record for new cases in fourteen day period.

In my last two posts of August 30 and August 16, I suggested that it appeared that the global spread of COVID-19 may have peaked or plateauted. See August 30, 2020, The global number of confirmed COVID-19 cases passes 25 million with more than 843,000 deaths – increased race to lock-up vaccine supplies, https://currentthoughtsontrade.com/2020/08/30/the-global-number-of-confirmed-covid-19-cases-passes-25-million-with-more-than-843000-deaths-increased-race-to-lock-up-vaccine-supplies/; August 16, 2020, Is the world at the peak of the COVID-19 pandemic?  Last two weeks suggest a peaking of the growth of global infections may be at hand, https://currentthoughtsontrade.com/2020/08/16/is-the-world-at-the-peak-of-the-covid-19-pandemic-last-two-weeks-suggest-a-peaking-of-the-growth-of-global-infections-may-be-at-hand/. However, data compiled by the European Centre for Disease Prevention and Control for the August 31-September 13 period shows a return to growth in new cases. The latest two weeks show total new cases of 3,780,469. This compares to the total new cases for the August 17-30 time period of 3,558,360, 3,624,548 for August 3-16 and 3,568,162 for the July 20-August 2 period. Total cases since the end of December 2019 are now just shy of 29 million.

The United States which has more confirmed cases (6,486,108) than any other nation and more confirmed deaths from COVID-19 (193,701), had a third two-week decline in new cases. The U.S. recorded the extraordinary number of 908,980 new cases during the fourteen day period July 20-August 2. That number declined to 740,721 during August 3-16 and further declined to 600,417 new cases in the August 17-30 period and was further reduced to 524,526 new cases in the August 31-September 13 period. The most recent period is still 28.21% higher than what had been the prior peak during April 13-26 of 409,102 new cases. Even with the significant reduction in new cases in the August 31-September 13 period, the United States had the second largest number of new cases, following only India whose number of new cases is continuing to rapidly increase, and were 1,211,623 in the last two weeks (the first country to have more than one million cases in a two week period). Brazil maintains its hold on third place though its new cases are also falling since July 20-August 2 (633,017 new cases) to 609,219 new cases during August 3-16, 529,057 new cases during August 17-30 and 469,534 new cases during August 31-September 13. India, the United States and Brazil accounted for an extraordinary 58.34% of the new global cases during the last two weeks and account for 54.01% of all cases confirmed since late December 2019. The United States with 4.3% of global population has accounted for 22.52% of total confirmed cases since December 2019. With the continued declining numbers in the last two weeks while the overall total of new cases grew, the U.S. was still 13.87% of new cases during August 17-30 or roughly three times the U.S. share of global population.

Continued growth of cases in the developing world

With the number of new cases in the United States declining, the trend to new cases being focused on the developing world continues although there has been some significant resurgence of new cases in a number of developed countries during the summer vacation period with a renewal of at least some international travel. While India and Brazil had by far the largest number of new cases from developing countries, they were followed by Argentina (143,681), Colombia (109,050), Peru (83,397), Mexico (72,261), Iraq (59,332), Indonesia (45,562), the Philippines (44,732), South Africa (25,663) and then dozens of other countries with smaller numbers of new cases.

Developed country resurgence in new cases

With the reopening of some international travel and with the end of the summer holiday season, there has been a noticeable surge of new cases in a number of developed countries, particularly in Western Europe. Spain showed the largest increase of a developed country that had gotten the COVID-19 spread under control until recently. For August 17-30, Spain saw an additional 96,473 new cases. The August 31-September 13 period saw a further large increase for Spain to 127,040 cases. France nearly doubled the large number it had experienced in the August 17-30 period (57,009 new cases) in the latest two weeks, with new cases reaching 101,381. Germany was up slightly from the prior two weeks (17,538 new cases) at 17,657 new cases. Italy added 19,444; Romania added 16,553; the United Kingdom added 32,422; the Netherlands increased by 11,374; Czechia increased by 11,307. Other countries in Europe (Russia and Ukraine) as well as Israel also saw significant additional new cases.

Deaths/100,000 population

The United States has the largest number of deaths of any country to date (193,701) and had the second largest number of deaths in the last two weeks (10,922) behind only India (15,088), though the U.S. number of new deaths declined from the prior two weeks while India’s number of new deaths continued to climb. The countries with the highest number of deaths per 100,000 population for the last two weeks were the following: Ecuador (24.91), Bolivia (20.49), Colombia (7.29), Argentina (6.48), Peru (6.11), Mexico (5.32), Brazil (5.09), Panama (4.05), Chile (3.77), Puerto Rico (3.65), Costa Rica (3.41) and the United States (3.32). All other countries (including all other developed countries) had lower rates of death per 100,000 population. For all countries, the death rate over the last two weeks was 1.02 deaths/100,000 population in the last two weeks.

If looking at the entire period since the end of December 2019 through September 13, the average number of deaths for all countries per 100,000 of population has been 12.13 deaths. The ten countries (of 71 which account for 98% of total deaths) with the highest death rates/100,000 for the full period are: Peru (94.10), Belgium (86.59), Bolivia (63.38), Spain (63.38), Chile (62.76), Ecuador (62.53), United Kingdom (62.45), Brazil (62.17), Italy (58.98), the United States (58.86). With the exception of Bolivia, Brazil, Chile, Ecuador, Peru and the United States, each of the other top countries overall has shown a drastic reduction since their peaks in April and as reflected in the experience in the last two weeks (the European countries were typically less than 1 death per 100,000).

Conclusion

The world in the first eight months of 2020 has struggled to get the COVID-19 pandemic under control. While many countries in Europe and some in Asia and the major countries in Oceania have greatly reduced the number of new cases over time, there has been some resurgence in many of these countries as their economies reopen, travel restrictions are eased and as schools reopen in many countries. But the number of new cases continues to rage in much of the Americas (other than Canada), in parts of Asia (in particular India) and in parts of Africa. Since most new cases are now in developing countries, it is unclear how many of these countries will be able to handle a significant number of cases, whether their healthcare infrastructure will be overwhelmed and whether they will have the medical goods needed to handle the cases safely.

The August 31-September 13 period has seen the global number of new cases growing after six weeks of what appeared to be a peak or plateau. That is not good news for the world as in many parts of the world schools are reopening and fall and winter will bring greater time indoors likely resulting in continued growth in new cases.

The progress on developing safe and effective vaccines is encouraging and has been sped by the willingness of major economies like the U.S. and the EU to fund manufacturing ahead of actual approval of the promising vaccines. Still the results of the phase three trials are not yet in and as a temporary delay by AstraZeneca with its phase three trial shows, the timing of outcomes remains unknown though anticipated by the end of 2020 and first part of 2021. Still the rollout of vaccines if approved will take time to get large parts of the global population vaccinated. This will likely place a large cloud over much if not all of 2021 even in an optimistic scenario.

Whether the world will rise to the challenges in terms of improving access to medical goods, to maintaining an open trading system, to aiding not only national populations but ensuring assistance to the most vulnerable, and when vaccines are approved to ensuring an equitable and affordable access by all are open questions. If the world is not able to collaborate on these issues, the 2020s will be a lost decade and will threaten global security.

The global number of confirmed COVID-19 cases passes 25 million with more than 843,000 deaths — increased race to lock up vaccine supplies

In my post of August 16, I suggested that it appeared that the global spread of COVID-19 may have peaked in the August 3-16 period. See August 16, 2020, Is the world at the peak of the COVID-19 pandemic?  Last two weeks suggest a peaking of the growth of global infections may be at hand, https://currentthoughtsontrade.com/2020/08/16/is-the-world-at-the-peak-of-the-covid-19-pandemic-last-two-weeks-suggest-a-peaking-of-the-growth-of-global-infections-may-be-at-hand/. Data compiled by the European Centre for Disease Prevention and Control show total new cases for the August 17-30 time period to be 3,558,360 compared to 3,624,548 for August 3-16 and 3,568,162 for the July 20-August 2 period. Thus, global new cases seem to have peaked or to have reached a plateau.

The United States which has more confirmed cases than any other nation and more confirmed deaths from COVID-19, had a second two-week decline in new cases. The U.S. recorded the extraordinary number of 908,980 new cases during the fourteen day period July 20-August 2. That number declined to 740,721 during August 3-16 and further declined to 600,417 new cases in the August 17-30 period. The most recent period is still 46.76% higher than what had been the prior peak during April 13-26 of 409,102 new cases. Even with the significant reduction in new cases in the August 17-30 period, the United States had the second largest number of new cases, following only India whose number of new cases is continuing to rise and were 953,051 in the last two weeks. Brazil maintains its hold on third place though its new cases are also falling since July 20-August 2 (633,017 new cases) to 609,219 new cases during August 3-16 and to 529,057 new cases during August 17-30. India, the United States and Brazil accounted for an extraordinary 58.5% of the new global cases during the last two weeks and account for 53.39% of all cases confirmed since late December 2019. The United States with 4.3% of global population has accounted for 23.82% of total confirmed cases since December 2019. With the declining numbers in the last two weeks, the U.S. was still 16.87% of new cases during August 17-30 or roughly four times the U.S. share of global population.

Continued growth of cases in the developing world

With the number of new cases in the United States declining, the trend to new cases being focused on the developing world continues although there has been some significant resurgence of new cases in a number of developed countries during the summer vacation period with a renewal of at least some international travel. While India and Brazil had by far the largest number of new cases from developing countries, they were followed by Colombia (143,225), Peru (113,632), Argentina (109,585), Mexico (73,998), Iraq (54,863), the Philippines (55,213), South Africa (38,898) and then dozens of other countries with smaller numbers of new cases.

Spain showed the largest increase of a developed country that had gotten the COVID-19 spread under control until recently. For August 17-30, Spain saw an additional 96,473 new cases. France added 57,009 new cases; Germany saw 17,538 new cases. Other countries in Europe as well as Japan and Korea also saw significant additional new cases.

Deaths/100,000 population

The United States has the largest number of deaths of any country to date (182,779) and had the second largest number of deaths in the last two weeks (13,298) behind only India (13,518). The countries with the highest number of deaths per 100,000 population were the following: Colombia (8.45), Bolivia (8.12), Peru (7.79), Brazil (6.27), Argentina (6.12), Mexico (5.70), Panama (5.58),Chile (4.15), United States (4.04). All other countries (including all other developed countries) had lower rates of death per 100,000 population. For all countries, the death rate over the last two weeks was 1.01 deaths/100,000 population.

If looking at the entire period since the end of December 2019 through August 30, the average number of deaths for all countries per 100,000 of population has been 11.10 deaths. The nine countries (of 71 which account for 98% of total deaths) with the highest death rates/100,000 for the full period are: Belgium (86.34), Peru (87.99), United Kingdom (62.27), Spain (61.81), Chile (59.00), Italy (58.77), Brazil (57.08), Sweden (which did not impose any restrictions)(56.90), the United States (55.54). With the exception of Brazil, Chile, Peru and the United States, each of the other top countries overall has shown a drastic reduction since their peaks in April and as reflected in the experience in the last two weeks (all the European countries were less than 1 death per 100,000).

Race for vaccines

There have been many press articles looking at efforts by the United States, by the EU and by others to lock up large quantities of vaccines from companies whose vaccines are in third phase trials for early availability to their populations. See, e.g., European Commission, 14 August 2020, Coronavirus: Commission reaches first agreement on a potential vaccine, https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1438. The Russian Federation has released a vaccine that did not go through a third phase trial and has received interest from some developing countries. After international criticism, the Russian Federation is now pursuing Phase 3 trials. AP, Putin touts Russia’s COVID-19 vaccine as effective and safe, August 27, 2020, https://apnews.com/f505b2fe730b56b558b8f76bf1932af0.

China has been promising some trading partners preferential access to its vaccines. See, e.g., Wall Street Journal, August 17, 2020, China Seeks to Use Access to COVID-19 Vaccines for Diplomacy, https://www.wsj.com/articles/china-seeks-to-use-access-to-covid-19-vaccines-for-diplomacy-11597690215

For the Philippines, their President has been shopping with the U.S., Russia and China for early access. See, e.g., Nikkei Asia, August 11, 2020, Duterte takes Russia’s offer of COVID vaccine after asking China, https://asia.nikkei.com/Politics/International-relations/Duterte-takes-Russia-s-offer-of-COVID-vaccine-after-asking-China.

Beyond the national or regional efforts to secure priority for vaccines when developed, joint efforts continue as part of the WHO effort to ensure that vaccines and other medical goods relevant to addressing COVID-19 are available equitably to all people and at affordable prices. See, e.g., European Union, Coronavirus Global Response, https://global-response.europa.eu/index_en.

So while it may not be surprising to see countries looking first and foremost about the health of their own citizens, the World Health Organization has warned that no one is safe until all are safe from the COVID-19. The next six months to a year will be a test of whether the efforts of many to provide funding and other resources to ensure greater equitable access to vaccines at affordable prices can coexist with national efforts to prioritize their own citizens.

Conclusion

The world in the first eight months of 2020 is struggling to get the COVID-19 pandemic under control. While many countries in Europe and some in Asia and the major countries in Oceania have greatly reduced the number of new cases over time, there has been some resurgence in many of these countries as their economies reopen, travel restrictions are eased and as schools reopen in many countries. But the number of new cases continues to rage in much of the Americas (other than Canada), in parts of Asia (in particular India) and in parts of Africa. Since most new cases are now in developing countries, it is unclear how many of these countries will be able to handle a significant number of cases, whether their healthcare infrastructure will be overwhelmed and whether they will have the medical goods needed to handle the cases safely.

August has seen the global number of new cases peak and possibly start to decline. That is some good news although the number of new cases on a daily basis continues to strain the global supply system.

The progress on developing safe and effective vaccines is encouraging and has been sped by the willingness of major economies like the U.S. and the EU to fund manufacturing ahead of actual approval of the promising vaccines. While this puts a lot of money at risk should one or more of the vaccines in trials not prove safe or effective, it saves a great deal of time in getting product to market if approved. In a global economy in which least developed countries, small and vulnerable economies and other developing countries are experiencing significant economic challenges because of travel restrictions and trade contractions flowing from efforts to address the pandemic, achieving equitable and affordabale access to vaccines when available is a global imperative. Time will tell if the imperative is achieved or not.

WTO Dispute Settlement Body Meeting of August 28, 2020 — How disputes are being handled in the absence of reform of the Appellate Body

No forward movement has been made on resolving the impasse of the WTO’s Appellate Body which effectively ceased to operate for new appeals after December 10, 2019 when the number of active Appellate Body members fell below the minimum of three needed to hear appeals. At every monthly Dispute Settlement Body meeting, one of the Members presents the proposal to start the process of selecting new Appellate Body members and the U.S. indicates it is not in a position to agree to that action.

While the impasse continues, Members are dealing with how to proceed on specific disputes that have been filed and how to deal with panel decisions that get issued. For the EU and 22 other Members who are parties to the multi-party interim appeal arrangement (MPIA), disputes involving two members of the MPIA are handled through the MPIA after a panel decision if one or both parties are dissatisifed with the panel decision. Current members of the MPIA are Australia, Benin, Brazil, Canada, China, Chile, Colombia, Costa Rica, Ecuador, the European Union, Guatemala, Hong Kong (China), Iceland, Mexico, Montenegro, New Zealand, Nicaragua, Norway, Pakistan, Singapore, Switzerland, Ukraine and Uruguay. This means that more than 110 WTO Members are not parties to the MPIA including the United States, Japan, Korea, India, Indonesia, Malaysia, Argentina, Peru, Egypt, South Africa, Saudi Arabia, the Russian Federation and many others.

Disputes between all other WTO Members or between other Members and one of the MPIA members require the parties to the dispute either before the panel decision or afterwards to decide how they will proceed. Concerns of many WTO Members is that a party dissatisfied with a panel decision will take an appeal which will effectively stop resolution of the matter as an appeal cannot be heard while there is no functioning Appellate Body.

MPIA members can take appeals where they are in a dispute with a non-MPIA member instead of seeking resolution through other means. For example, the Russian Federation is not a member of the MPIA. Their dispute with the EU on its antidumping methodology resulted in a panel decision that the EU found problematic. The EU filed an appeal on August 28, 2020. See WTO, Dispute Settlement, EU appeals panel report on EU dumping methodologies, duties on Russian imports, https://www.wto.org/english/news_e/news20_e/ds494apl_28aug20_e.htm. When raised at the August 28 dispute settlement body (DSB) meeting, Russia provided the following comment:

“The Russian Federation made a statement regarding the European Union’s appeal of the panel ruling in in DS494 (https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds494_e.htm) (EU —
Cost Adjustment Methodologies and Certain Anti-Dumping Measures on Imports from Russia). Russia said it was disappointed with the EU’s decision and that that the EU’s action, in the absence of a functioning Appellate Body, essentially meant that the matter was being appealed “into the void.” The EU was seeking to escape its obligations by not trying to resolve the dispute,
Russia said.” https://www.wto.org/english/news_e/news20_e/dsb_28aug20_e.htm.

Interestingly, the EU has been working to be able to retaliate on any WTO Member who is not a party to the MPIA who appeals from a panel decision where the EU is a party. Presumably they understand that their action will encourage countries like the Russian Federation to take unilateral action against the EU where the EU appeals a panel decision instead of seeking a mutually agreeable solution.

The United States has reviewed at prior DSB meetings that there are many ways for Members to resolve disputes between themselves. At the recent DSB meeting, the U.S. in its prepared statement, after reviewing its ongoing concerns with the Appellate Body and the need to understand why the Appellate Body ignored the clear limits on its authority under the Dispute Settlement Understanding, provided examples of how Members are resolving disputes since December 10, 2019:

“ As discussions among Members continue, the dispute settlement system continues to function.

“ The central objective of that system remains unchanged: to assist the parties to find a solution to their dispute. As before, Members have many methods to resolve a dispute, including through bilateral engagement, alternative dispute procedures, and third-party adjudication.

“ As noted at prior meetings of the DSB, Members are experimenting and deciding what makes the most sense for their own disputes.

“ For instance, in Indonesia – Safeguard on Certain Iron or Steel Products (DS490/DS496), Chinese Taipei, Indonesia, and Vietnam reached procedural understandings that included an agreement not to appeal any compliance panel report.3

“ Similarly, in the dispute United States – Anti-Dumping Measures on Certain Oil Country Tubular Goods from Korea (DS488), Korea and the United States agreed not to appeal the report of any compliance panel.4

“ Australia and Indonesia have agreed not to appeal the panel report in the dispute Australia – Anti-Dumping Measures on A4 Copy Paper (DS529).5

“ Parties should make efforts to find a positive solution to their dispute, consistent with the aim of the WTO dispute settlement system.

“ The United States will continue to insist that WTO rules be followed by the WTO dispute settlement system. We will continue our efforts and our discussions with Members and with the Chair to seek a solution on these important issues.

“3 ‘Understanding between Indonesia and Chinese Taipei regarding Procedures under Articles 21 and 22 of the DSU’, (WT/DS490/3) (April 11, 2019), para. 7 (‘The parties agree that if, on the date of the circulation of the panel report under Article 21.5 of the DSU, the Appellate Body is composed of fewer than three Members available to serve on a division in an appeal in these proceedings, they will not appeal that report under Articles 16.4 and 17 of the DSU.’) and ‘Understanding between Indonesia and Viet Nam regarding Procedures under Articles 21 and 22 of the DSU’, WT/DS496/14 (March 22, 2019), para. 7 (‘The parties agree that if, on the date of the circulation of the panel report under Article 21.5 of the DSU, the Appellate Body is composed of fewer than three Members available to serve on a division in an appeal in these proceedings, they will not appeal that report under Articles 16.4 and 17 of the DSU.’).

“4 ‘Understanding between the Republic of Korea and the United States regarding Procedures under Articles 21 and 22 of the DSU’, (WT/DS488/16) (February 6, 2020), para. 4 (‘Following circulation of the report of the Article 21.5 panel, either party may request adoption of the Article 21.5 panel report at a meeting of the DSB within 60 days of circulation of the report. Each party to the dispute agrees not to appeal the report of the Article 21.5 panel pursuant to Article 16.4 of the DSU.’).

“5 Minutes of the Meeting of the Dispute Settlement Body on January 27, 2020 (WT/DSB/M/440), paras. 4.2 (‘Indonesia also wished to thank Australia for working together with Indonesia in a spirit of cooperation in order to reach an agreement not to appeal the Panel Report’ and 4.3 (‘Australia and Indonesia had agreed not to appeal the Panel Report and to engage in good faith negotiations of a reasonable period of time for Australia to bring its measures into conformity with the DSB’s recommendations and rulings, in accordance with Article 21.3(b) of the DSU.’).”

Statements by the United States at the Meeting of the WTO Dispute Settle- ment Body, Geneva, August 28, 2020 at 14, https://geneva.usmission.gov/wp-content/uploads/sites/290/Aug28.DSB_.Stmt_.as-deliv.fin_.public.pdf.

Thus, there are ways for WTO Members to resolve disputes between themselves even with the Appellate Body inoperative. Some countries, like Australia, have sought positive resolutions where the other disputing party is not a member of MPIA. To date, the European Union has not sought resolution with members who are not party to the MPIA but have rather filed appeals so cases will sit in limbo until such time as the impasse is resolved.

Concluding comments

While each of the eight candidates to become the next Director-General of the WTO believe resolution of the dispute settlement system impasse is an important priority for the WTO, they differ in how quickly they believe Members will be able to overcome the impasse — Dr. Jesus Seade (Mexico) believes it can be resolved in the first 100 days. Amb. Tudor Ulianovschi believes that the challenges presented will not be resolved ahead of the 12th Ministerial Conference in 2021 but will be resolved sometime thereafter. Most other candidates hold out hope that the impasse can be resolved by the next Ministerial in 2021. Thus, the current situation of no functioning Appellate Body may continue for some time.

The U.S. Trade Representative Robert Lighthizer in an Op Ed last week in the Wall Street Journal suggested that reform of the dispute settlement system is critical but may involve changing the system from its existing two-tiered configuration under the DSU to a one-tier process more like commercial arbitration. If that is the path that the United States pursues, resolution of the current situation will take years. See August 24, 2020,  USTR Lighthizer’s Op Ed in the Wall Street Journal – How to Set World Trade Straight, https://currentthoughtsontrade.com/2020/08/24/ustr-lighthizers-op-ed-in-the-wall-street-journal-how-to-set-world-trade-straight/.

Similarly, if dispute settlement reform is lumped into the broader WTO reform being discussed, the timing will be significantly delayed if reform of the WTO is to be meaningful and return the organization to a place of relevance in the 21st century.

With the queue of panel decisions that are yet due this year involving some high profile issues (e.g., national security actions by the United States on steel and aluminum and retaliation taken by many trading partners) and with the recent panel report on the U.S. countervailing duty order on Canadian softwood lumber, pressure will likely build on WTO Members to find a lasting solution to the current impasse. Increased pressure suggests heightened tensions in an organization already suffering from distrust among Members and, as a result, largely nonfunctioning pillars of negotiation, notification/monitoring, dispute settlement. In short, 2021 promises to be a challenging environment for the WTO Members and the incoming Director-General.

Recent Congressional Research Service report, Global Economic Effects of COVID-19

Governments around the world have been struggling with the health and economic costs of the COVID-19 pandemic. Multilateral institutions generate a great deal of information on the pandemic and its effects and many countries do as well.

On August 21, 2020, the Congressional Research Service released an updated report on Global Economic Effects of COVID-19, Report No. R46270, https://crsreports.congress.gov/product/pdf/R/R46270.

While the United States went through a huge resurgence of COVID-19 cases, hospitalizations and deaths in the June-August 2020 time period, there have been smaller resurgences in a number of other developed countries in the July – August time frame including Australia, Japan, Korea, France, Germany, Spain and others. At the same time, the pandemic is raging in much of the Americas (other than Canada), in India, in some parts of Asia and increasingly in a number of African countries. While it is likely that the world total on new cases peaked in the two weeks ending August 16, the two weeks that end on August 30 will be very close to those numbers (3.6 million cases),

Most global economic outlook projections have been premised on the pandemic’s worst economic effects being in the 2nd quarter of 2020 with a strong recovery in the third quarter and a continued rebound through 2021. Those projections are increasingly at risk as major economies struggle to return to normal without the need for further economic restrictions to address new surges of the pandemic. In the United States, despite efforts by the House of Representatives to pass legislation several months ago to continue the stimulus to the economy to help those unemployed and avoid massive evictions, help schools prepare for the fall season and state and local governments deal with the massive shortfall in revenue among other matters, the Senate didn’t take up legislation until late July and had trouble agreeing on any additional funding. The impasse between the Democrats and the Republicans and White House has led to limited if any support in August and heading into the fall with the potential for millions of additional job losses and reopenings that are not adequately prepared. The opening of schools in recent weeks has had a number of challenges and many schools are proceeding virtually in an effort to remain safe but putting downward pressure on the economy. Thus, the global challenges are likely to worsen in the remaining months of 2020 making the global economic recovery slower and later than has been hoped.

The first pages of the CRS report (pages 5-8, Overview (excluding Table 1)) do an excellent job of reviewing the challenges for the United States and the world and re copied below.

“Overview

“The World Health Organization (WHO) first declared COVID-19 a world health emergency in January 2020. Since then, the emergency has evolved into a global public health and economic crisis that has affected the $90 trillion global economy beyond anything experienced in nearly a century. Governments are attempting to balance often-competing policy objectives between addressing the public health crisis and economic considerations that include, but are not limited to these:

“ Confronting ballooning budget deficits weighed against increasing spending to support unemployed workers and social safety nets.

“ Providing financial support for national health systems that are under pressure to develop vaccines while also funding efforts to care for and safeguard citizens.

“ Implementing monetary and fiscal policies that support credit markets and sustain economic activity, while also assisting businesses under financial distress.

“ Implementing fiscal policies to stimulate economic activity, while consumers in developed economies sharply increase their savings as households face limited spending opportunities, or a form of involuntary saving, and concerns over their jobs, incomes, and the course of their economies, or precautionary saving.

“ Intervention by central banks and monetary authorities generally in sovereign debt and corporate bond markets to stabilize markets and insure liquidity are raising concerns among some analysts that this activity is compromising the ability of the markets to perform their traditional functions of pricing risk and allocating capital.

“ Fiscal and monetary policies that have been adopted to date to address the immediate impact of the health crisis compared with the mix of such policies between assisting households, firms, or state and local governments that may be needed going forward should the health and economic crises persist.

“Policymakers and financial and commodity market participants generally have been hopeful of a global economic recovery starting in the third quarter of 2020, assuming there is not a second wave of infections. Some forecasts, however, raise the prospects that the pandemic could negatively affect global economic growth more extensively and for a longer period of time with a slow, drawn-out recovery. Without a quick resolution of the health crisis, the economic crisis may persist longer than most forecasters have assumed and require policymakers to weigh the most effective mix of additional fiscal and monetary policies that may be required without the benefit of a relevant precedent to follow. Additional measures may have to balance the competing requirements of households, firms, and state and local governments. Various U.S. States reversed course in late June to impose or reimpose social distancing guidelines and close down businesses that had begun opening as a result of a rise in new confirmed cases of COVID-19, raising the prospect of a delayed recovery.

“In its July 29 policy statement and subsequent press conference, the U.S. Federal Open Market Committee (FOMC) indicated that the rise in COVID-19 cases in the United States since mid-June was weighing down economic growth and that, ‘The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.’

“Differences in policy approaches between countries are threatening to inflict longer-term damage to the global economy by impairing international political, trade, and economic relations, particularly between countries that promote nationalism and those that argue for a coordinated international response to the pandemic. Policy differences are also straining relations between developed and developing economies and between northern and southern members of the Eurozone, challenging alliances and conventional concepts of national security, and raising questions about the future of global leadership.

“In some countries, the pandemic has elevated the importance of public health as a national security issue and as a national economic priority on a par with traditional national security concerns such as terrorism, cyberattacks, and proliferation of weapons of mass destruction.1 The pandemic-related economic and human costs could have long-term repercussions for economies through the tragic loss of life and job losses that derail careers and permanently shutter businesses. Fiscal and monetary measures implemented to prevent a financial crisis and sustain economic activity may also inadvertently be adding to income and wealth disparities. Within some countries, the economic fallout may be adding to widening racial and socio-economic cleavages and increasing social unrest. In speaking about these costs for Americans, Federal Reserve Chairman Powell said on May 19, 2020,

“‘Since the pandemic arrived in force just two months ago, more than 20 million people have lost their jobs, reversing nearly 10 years of job gains. This precipitous drop in economic activity has caused a level of pain that is hard to capture in words, as lives are upended amid great uncertainty about the future.2’

“The virus was first diagnosed in Wuhan, China, but has been detected in over 200 countries and all U.S. states.3 In early March 2020, the focal point of infections shifted from China to Europe, especially Italy, but by April, the focus had shifted to the United States, where the number of infections was accelerating. The infection has sickened more than 20.2 million people, about one-fourth in the United States, with over 800,000 fatalities. At one point, more than 80 countries had closed their borders to arrivals from countries with infections, ordered businesses to close, instructed their populations to self-quarantine, and closed schools to an estimated 1.5 billion children.4

“Over the 22-week period from mid-March to mid-August 2020, 56.3 million Americans filed for unemployment insurance.5 On a seasonally adjusted basis, the number of insured unemployed workers was 14.8 million in mid-August, down from a peak of 25 million in mid-May, as indicated in Table 1. The total number of people claiming benefits in all programs in the week


1 Harris, Shane and Missy Ryan, To Prepare for the Next Pandemic, the U.S. Needs to Change its National Security Priorities, Experts Say, The Washington Post, June 16, 2020. https://www.washingtonpost.com/national-security/to-prepare-for-the-next-pandemic-the-us-needs-to-change-its-national-security-priorities-experts-say/2020/06/16/b99807c0-aa9a-11ea-9063-e69bd6520940_story.html.
2 Powell, Jerome H. Coronavirus and CARES Act, Testimony before the Committee on Banking, Housing and Urban Affairs, U.S. Senate, May 19, 2020.
3 “Mapping the Spread of the COVID-19 in the U.S. and Worldwide,” Washington Post Staff, Washington Post, March 4, 2020. https://www.washingtonpost.com/world/2020/01/22/mapping-spread-new-COVID-19/?arc404=true.
4 “The Day the World Stopped: How Governments Are Still Struggling to Get Ahead of the COVID-19,” The Economist, March 17, 2020. https://www.economist.com/international/2020/03/17/governments-are-still-struggling-to-get-ahead-of-the-COVID-19.
5 Unemployment Insurance Weekly Claims, Department of Labor, August 20, 2020. https://www.dol.gov/; Romm, Tony and Jeff Stein, 2.4 Million Americans Filed Jobless Claims Last Week, Bringing Nine Week Total to 38.6 Million, The Washington Post, May 21, 2020. https://www.washingtonpost.com/business/2020/05/21/unemployment-claims-coronavirus/

ending August 1, totaled 28 million, up from 1.7 million in the comparable week in 2019. The insured unemployment rate was 10.2%, also down from the peak reached in early May. On May 8, 2020, the Bureau of Labor Statistics (BLS) reported that 20 million Americans lost their jobs in April 2020, pushing the total number of unemployed Americans to 23 million,6 out of a total civilian labor force of 158 million. The increase pushed the national unemployment rate to 14.7% (with some caveats), the highest since the Great Depression of the 1930s.7 On June 6, BLS reported that nonfarm employment increased by 2.5 million in May, reducing the total number of unemployed Americans to 21 million8 and pushing the unemployment rate down to 13.5%, again with some caveats.9 On July 2, the BLS also released data on the employment situation in June, indicating that nonfarm payroll rose by 4.8 million, lowering the unemployment rate to 11.5%; on August 7, the BLS reported that nonfarm payrolls rose by 1.8 Million in July, lowering the number of unemployed individuals to 16.4 million and the unemployment rate to 10.2%.10

“Preliminary data also indicate that U.S. GDP fell by 9.5% in the second quarter of 2020 from the previous quarter, but at an annualized rate of 33%, the largest quarterly decline in U.S. GDP recorded over the past 70 years.11 In its May 27 Beige Book analysis, the Federal Reserve (Fed) reported that economic activity had fallen sharply in each of the 12 Federal Reserve districts.12

“In Europe, governments have attempted a phased reopening of businesses.13 After several months of data indicating an economic rebound had begun in the Eurozone, surveys of business activity in August reportedly indicated that the recovery was slowing amid a rise in new COVID-19 cases and countries reimposing new quarantines and lockdowns in various parts of the Euro area.14 Industrial production across the Eurozone as a whole fell by 17% in April, raising the annual decline to 28%, surpassing the contraction experienced during the global financial crisis.15 The European Commission’s July 8, 2020, forecast projected that EU economic growth in 2020 could contract by 8.3% and only partially recover in 2021.16 In addition, a July forecast by the European Commission forecasts a larger drop in gross domestic product (GDP) in 2020 among European economies than it had forecasted in its spring report, with a less vibrant recovery in 2021. Second quarter data indicate that economic growth in the EU contracted by 11.7% from the first quarter and by 14.1% compared with the same quarter in 2019.17 Second quarter data indicate the UK economy contracted by 20.4%, the largest quarterly decline on record.

“After protracted talks, European leaders agreed on July 21 to a new €750 billion (about $859 billion) pandemic economic assistance package to support European economies. Second quarter data also indicated that employment among the EU countries fell by 2.6%, or 5.5 million jobs. The jobs data, however, does not include roughly 45 million people, or a third of the workforce in Germany, France, Britain, Italy, and Spain, currently covered by employment protection programs.18 Similarly, Japan reported on August 17 that its economy contracted by 7.8% in the second quarter of 2020, compared with the previous quarter, or at an annual rate of 27.8%.19

“On May 27, 2020, European Central Bank (ECB) President Christine Lagarde warned that the Eurozone economy could contact by 8% to 12% in 2020, a level of damage to the Eurozone economy that Lagarde characterized as being unsurpassed in peacetime.20 Foreign investors have pulled an estimated $26 billion out of developing Asian economies not including more than $16 billion out of India, increasing concerns about a major economic recession in Asia. Some estimates indicate that 29 million people in Latin America could fall into poverty, reversing a decade of efforts to narrow income inequality. Some analysts are also concerned that Africa, after escaping the initial spread of infections, is now facing a sharp increase in rates of infection outside South Africa, Egypt, Nigeria, Algeria, and Ghana, where most of the infections have occurred to date.21

“1 Harris, Shane and Missy Ryan, To Prepare for the Next Pandemic, the U.S. Needs to Change its National Security Priorities, Experts Say, The Washington Post, June 16, 2020. https://www.washingtonpost.com/national-security/to-prepare-for-the-next-pandemic-the-us-needs-to-change-its-national-security-priorities-experts-say/2020/06/16/b99807c0-aa9a-11ea-9063-e69bd6520940_story.html.

“2 Powell, Jerome H. Coronavirus and CARES Act, Testimony before the Committee on Banking, Housing and Urban Affairs, U.S. Senate, May 19, 2020.

“3 ‘Mapping the Spread of the COVID-19 in the U.S. and Worldwide,’ Washington Post Staff, Washington Post, March 4, 2020. https://www.washingtonpost.com/world/2020/01/22/mapping-spread-new-COVID-19/?arc404=true.

“4 ‘The Day the World Stopped: How Governments Are Still Struggling to Get Ahead of the COVID-19,’ The Economist, March 17, 2020. https://www.economist.com/international/2020/03/17/governments-are-still-struggling-to-get-ahead-of-the-COVID-19.

“5 Unemployment Insurance Weekly Claims, Department of Labor, August 20, 2020. https://www.dol.gov/; Romm, Tony and Jeff Stein, 2.4 Million Americans Filed Jobless Claims Last Week, Bringing Nine Week Total to 38.6 Million, The Washington Post, May 21, 2020. https://www.washingtonpost.com/business/2020/05/21/unemployment-claims-coronavirus/.

“6 This total does not include 10.9 million workers who were working part time not by choice and 9.9 million individuals who were seeking employment.

“7 The Employment Situation-April 2020, Bureau of Labor Statistics, May 8, 2020. https://www.bls.gov/.

“8 This total does not include 10.6 million workers who were working part time not by choice and 9.4 million individuals who were seeking employment.

“9 The Employment Situation-May 2020, Bureau of Labor Statistics, June 5, 2020, https://www.bls.gov/. BLS indicated that some individuals were misclassified in April and May. Instead of being classified as unemployed, they were misclassified as employed, but absent from work due to coronavirus-related business closures. If such individuals had been classified as unemployed, the unemployment rate would have been 5 percentage points higher in April.

“10 The Employment Situation-July 2020, Bureau of Labor Statistics, August 7, 2020. https://www.bls.gov/. The unemployment number does not include 8.4 million workers who were working part time not by choice and 7.7 million individuals seeking employment. In addition, BLS indicated that some workers had been misclassified as employed, but should have been classified as unemployed, which would have raised the rate of unemployment by one percentage point.

“11 Gross Domestic Product, 2nd Quarter 2020 (Advance Estimate) and Annual Update, Bureau of Economic Analysis, July 30, 2020. https://www.bea.gov/news/2020/gross-domestic-product-2nd-quarter-2020-advance-estimate-and-annual-update.

“12 The Beige Book, Federal Reserve System, May 27, 2020. https://www.federalreserve.gov/monetarypolicy/beige-book-default.htm.

“13 Stott, Michael, Coronavirus Set to Push 29m Latin Americans Into Poverty, Financial Times, April 24, 2020. https://www.ft.com/content/3bf48b80-8fba-410c-9bb8-31e33fffc3b8; Hall, Benjamin, Coronavirus Pandemic Threatens Livelihoods of 59m European Workers, Financial Times, April 19, 2020, https://www.ft.com/content/36239c82-84ae-4cc9-89bc-8e71e53d6649, Romei, Valentina and Martin Arnold, Eurozone Economy Shrinks by Fastest Rate on Record, Financial Times, April 30, 2020, https://www.ft.com/content/dd6cfafa-a56d-48f3-a9fd-aa71d17d49a8.

“14 Arnold, Martin, Eurozone Economic Rebound is Losing Steam, Surveys Suggest, Financial Times, August 21, 2020. https://www.ft.com/content/cc4fa3df-40e7-4e19-be9f-9d01efb74f69. Chazan, Guy and Anna Gross, Europe Battles to Contain Surge in Coronavirus Cases. Financial Times, July 29, 2020. https://www.ft.com/content/bcddc297-b7f2-444d-908f-54e8ce6f4f98.

“15 Arnold, Martin, Eurozone Industrial Production Falls by Record 17.1% in April, Financial Times, June 12, 2020. https://www.ft.com/content/e3301cd6-27ce-35f0-829a-c6613849b378.

“16 European Economic Forecast Summer 2020, European Commission, July 8, 2020.

“17 Newsrelease, Eurostat, August 14, 2020.

“18 Ben Hall, Ben, Delphine Strauss, and Daniel Dombey, Millions of European Jobs at Risk When Furlough Support Ends, Financial Times, August 14, 2020. https://www.ft.com/content/0f01a9ed-5b15-4e2d-921c-6eed7a80d0bd.

“19 Quarterly Estimates of GDP for April – June 2020 (First Preliminary Estimates), Cabinet Office, August 17, 2020.

“20 Arnold, Martin, Coronavirus Hit to Eurozone Economy Set to Dwarf Financial Crisis, Financial Times, May 27, 2020. https://www.ft.com/content/a01424e8-089d-4618-babe-72f88184ac57.

“21 Pilling, David, The Pandemic is Getting Worse: Africa Prepares for Surge in Infections, Financial Times, July 20, 2020.” https://www.ft.com/content/1b3274ce-de3b-411d-8544-a024e64c3542.

The complete CRS report is embedded below.

CRS-8-21-2020-Global-Economic-Effects-of-COVID-19

Conclusion

The world is going through the worst economic contraction since World War II. The pandemic has affected the health of people around the world, with close to 24 million confirmed cases and likely a multiple of that considering the extent of infections in people without symptoms. More than 800,000 people have died, a number which is also likely to be low based on the number of people who die but never are hospitalized and thus not likely reported as COVID-19 related in many countries.

Most developed countries have followed the tried and true methodology of aggressive testing, tracing, and quarantining to slow the spread of the pandemic and then drastically reduce the number of new cases. For most developed countries this included some form of stay at home orders, social distancing, mask wearing with severe negative effects on many economic sectors. The United States has largely been alone among developed countries in having a generally poor, unorganized and mixed message response to the spread of the coronavirus. Yet other developed countries, as they have reopened, have experienced some of the rebound in cases that the United States experienced on steroids these last three months. The result has been deep economic contraction in the second quarter of 2020 and slower economic recovery likely in the third and fourth quarters of 2020.

At the same time, developing countries have become the center of the pandemic in recent months and may face greater health care challenges because of their infrastructure. These countries are facing severe economic contractions as well both from internal demand declines and from international market contractions.

While the billions being poured into development of vaccines and therapeutics will hopefully result in tools to reduce and then stop the spread of the pandemic, 2021 is the early side of likely massive amounts of vaccines and therapeutics being available.

With the ongoing economic challenges, worsening debt structure of nearly all countries and the collapse of many businesses and employment (e.g., travel and tourism employment is projected to drop by 100-120 million jobs in 2020), the world needs greater coordination of recovery strategies, increased attention on keeping global markets open (and limiting export restraints) and renewed attention to see that vaccines and therapeutics are equitably available to all at affordable prices as new products become available.

The race to become the next WTO Director-General — where the candidates stand on important issues: convergence vs. coexistence of different economic systems; possible reform of rules to address distortions from such economic systems – Part 1, Background on issues

Background

When China acceded to the World Trade Organization in 2001, it had had a long working party process as WTO Members focused on the wide array of changes to laws, regulations and practices that China would need to undertake to have an economic system and policies that were consistent with WTO norms. China made many changes to its policies ahead of accession. However, the extent of modifications needed to the Chinese system that were still not accomplished by 2001 meant that the Protocol of Accession and the Working Party Report that China and WTO Members agreed to were unprecedented in terms of the number of additional changes that needed to be made for China’s system to be compatible with WTO norms. Indeed, periodic reviews over a decade were included of China’s actions to permit other WTO Members to understand the extent of compliance with the wide ranging modifications still needed. As China was moving from a state-controlled economy towards a market economy, WTO Members insisted on special rules to address some of the likely distortions a large economy like China with significant state controls was anticipated to create. A country-specific safeguard and special recognition of nonmarket economy provisions in trade remedies were included in the Protocol of Accession. While China accepted all three provisions to obtain membership in the WTO, China always expressed its views that these additional provisions were discriminatory and an effort to hold China back in terms of economic growth.

While China continued to make progress in its reform program for a number of years after acceding to the WTO, beginning with the financial crisis of 2008-2009 China reversed direction and increased the importance of state-owned and state-invested enterprises, state planning and state control of a wide array of factors of production. A former Director-General of the WTO and former EC Trade Commissioner reviewed the challenges for market economy countries in dealing with a country with a large share of its economy controlled by the state. See July 27, 2020, Pascal Lamy’s recent comments on the challenges facing the WTO, https://currentthoughtsontrade.com/2020/07/27/pascal-lamys-recent-comments-on-the-challenges-facing-the-wto/.

Many major trading partners have worked with China since its WTO accession to address perceived distortions flowing from its economic system and to help China handle the obligations it had undertaken upon joining the WTO. Many commitments for change were made by China with limited actual forward movement achieved in the views of at least some trading partners. Members like the United States undertake their own annual review of China’s compliance with WTO obligations in an effort to chronicle China’s changing economic system and whether there are distortions of concern to China’s trading partners. See, e.g., U.S. Trade Representative, 2019 Report to Congress on China’s WTO Compliance (March 2020)(embedded below). As stated on page 4:

“Over the past nearly two decades, a variety of bilateral and multilateral efforts were pursued by the United States and other WTO members to address the unique challenges presented by China’s WTO membership. However, even though these efforts were persistent, they did not result in meaningful changes in China’s approach to the economy and trade.

“In our past reports, we identified and explained the numerous policies and practices pursued by China that harm and disadvantage U.S. companies and workers, often severely. We also catalogued the United States’ persistent yet unsuccessful efforts to resolve the many concerns that have arisen in our trade relationship with China. We found that a consistent pattern existed where the United States raised a particular concern, China specifically promised to address that concern, and China’s promise was not fulfilled.

“The costs associated with China’s unfair and distortive policies and practices have been substantial. For example, China’s non-market economic system and the industrial policies that flow from it have systematically distorted critical sectors of the global economy such as steel and aluminum, devastating markets in the United States and other industrialized countries. China also continues to block valuable sectors of its economy from foreign competition, particularly services sectors. At the same time, China’s industrial policies are increasingly responsible for displacing companies in new, emerging sectors of the global economy, as the Chinese government and the Chinese Communist Party powerfully intervene on behalf of China’s domestic industries. Companies in economies disciplined by the market cannot effectively compete with both Chinese companies and the Chinese state.”

2019_Report_on_Chinas_WTO_Compliance

The 11th Ministerial Conference and a Joint Statement by EU, Japan and the United States

The challenges of China’s economic system have been felt in many global industries in a number of ways. There has been massive excess capacity created by China’s policies (and those of some other countries). Efforts to address excess capacity in steel proved unsuccessful. But literally dozens of industries faced excess capacity in China which has resulted in flooded global markets and harm to competing producers in other countries.

At the same time there have been major concerns about forced technology transfers for companies wanting to operate in China, a myriad and changing set of barriers (formal and informal) discriminating against imports and foreign owned enterprises in certain sectors.

By the 11th WTO Ministerial Conference, the United States, European Union and Japan had decided more formal action was needed to address the ongoing distortions being created by China and other countries emulating the Chinese model of economic system. At the end of the Conference, the three WTO Members issued a joint statement which stated in large part,

“We shared the view that severe excess capacity in key sectors exacerbated by government-financed and supported capacity expansion, unfair competitive conditions caused by large market-distorting subsidies and state owned enterprises, forced technology transfer, and local content requirements and preferences are serious concerns for the proper functioning of international trade, the creation of innovative technologies and the sustainable growth of the global economy.

“We, to address this critical concern, agreed to enhance trilateral cooperation in the WTO and in other forums, as appropriate, to eliminate these and other unfair market distorting and protectionist practices by third countries.”

https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/december/joint-statement-united-states

There have been a series of meetings of the three trade ministers since then providing an update on their joint efforts. A joint statement in January 2020 outlined the types of industrial subsidies where the three major WTO Members believed greater disciplines were needed and outlined other areas where joint efforts were underway. The 2018, 2019 and 2020 joint statements can be found here, with the 2020 statement embedded after the links. See Joint Statement on Trilateral Meeting of the Trade Ministers of the United States, Japan, and the European Union, 09/25/2018, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/august/statement-meetings-between-united; Joint Statement of the Trilateral Meeting of the Trade Ministers of the United States, European Union, and Japan, 05/23/2019, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/may/joint-statement-trilateral-meeting; Joint Statement of the Trilateral Meeting of the Trade Ministers of Japan, the United States, and the European Union, 01/14/2020, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/january/joint-statement-trilateral-meeting-trade-ministers-japan-united-states-and-european-union.

1-14-2020-Joint-Statement-of-the-Trilateral-Meeting-of-the-Trade-Ministers-of-Japan-the-United-States-and-the-European-Union-_-United-States-Trade-Representative

U.S. Section 301 Investigation of Certain Chinese Policies, U.S. imposition of tariffs and Chinese retaliation

In August 2017, the U.S. Trade Representative initiated an investigation on certain of China’s Acts, Policies and Practices Related to Technology Transfer, Intellectual Property, and Innovation. 82 Fed. Reg. 40,213-40,215 (Aug. 24, 2017). The investigation resulted in a determination by USTR on March 22, 2018 that various Chinese acts, policies and practices violated Section 301 of the Trade Act of 194, as amended. The President authorized the imposition of additional duties to encourage China to address the problems raised. China retaliated and through a series of further escalations, the U.S. has imposed additional duties on some $350 billion of imports from China and China has imposed additional duties on the vast majority of U.S. exports to China. The 301 report and supplement are embedded below.

Section-301-FINAL

301-Report-Update

The United States viewed the Section 301 investigation as necessary to address practices of China not addressed by WTO rules or not adequately addressed. China viewed the investigation as not permitted under WTO rules. The trade conflict and efforts to find a solution, resulted in a Phase 1 Agreement between the United States and China with most additional duties remaining in place, some substantive changes made on some issues of concern to the United States and a Phase 2 negotiation to resolve outstanding issues which has not begun as of mid-August 2020.

China’s effort to be treated as a market economy under trade remedies

China has long felt that nonmarket economy methodology employed by trading partners discriminated against China and was unjustified. On December 12 2016, the day after certain language in China’s Protocol of Accession became ineffective, China filed requests for consultations with each of the European Union (WT/DS/516) and the United States (WT/DS/515). China has not actively pursued the action against the United States. On the action against the European Union, after the matter was fully briefed at the panel stage and it was understood that an interim panel report was released to the parties, China requested on 7 May 2019 the panel to suspend its proceedings in accordance with Article 12.12 of the DSU. The panel proceeding was suspended on 14 June 2019. On 15 June 2020, the Secretariat released a note indicating that the panel’s authority in the dispute had lapsed since China had not requested the resumption of work within one year.

Thus, China remains subject to nonmarket economy methodologies by certain of its trading partners.

Proposed General Council decision submitted by the United States

The United States has raised an issue for WTO Member consideration in the form of a proposed General Council decision. The issue goes to whether the WTO is predicated on market-oriented economic principles and rests on the concern that some large WTO Members (including China) have economic systems that are characterized as non-market and that create various distortions in the global marketplace including creating massive excess capacity and other issues. While the issue has been raised by the United States for the last several years within the WTO, the U.S. permanent representative to the WTO made a strong case at the General Council meeting (Dec. 9, 2019), raised the matter again along with the draft General Council decision at the March 3, 2020 General Council meeting and raised it again at the July 22-23, 2020 General Council meeting. The proposal was opposed by China at each General Council meeting. Many Members provided comments either supporting, opposing, raising questions with the proposal or indicating the matter was being considered in capital (minutes for the July General Council meeting are not yet available). Members besides the U.S. and China who spoke include the European Union, Japan, Canada, Australia, United Kingdom, Switzerland, Norway, Mexico, Brazil, Colombia, Chinese Taipei, Uruguay, Indonesia, Nigeria, South Africa, India, Pakistan, Russian Federation, and Sri Lanka. See, e.g., Minutes of General Council Meeting, 9-10 December, 2019, WT/GC/M/181 at 59-64 (24 February 2020); The Importance of Market-Oriented Conditions to the World Trading System, Draft General Council Decision, Communication from the United States, WT/GC/W/796 (20 February 2020)(embedded below); Minutes of General Council Meeting, 3 March 2020, WT/GC/M/182 at 35-44 (16 April 2020); General Council Meeting of 22-23 July 2020, Proposed Agenda, WT/GC/W/802 (item 11)(20 July 2020).

WTGCW796

Conclusion

The crisis at the WTO has many elements but a central concern of many is whether the current WTO can be effective in ensure competitive markets when one or more major Members have an economic system largely at odds with that of most Members. The tensions created by the distortions caused by different systems has led both to increasing use of trade remedies, efforts to identify changes or additions to rules needed if convergence is not required of Members, and actions outside of the WTO where long term discussions have not resulted in the level of changes needed by countries working from market-oriented economies.

While the U.S. has reviewed provisions of the WTO that indicate the system is premised on market economy principles, a number of Members disagree that the WTO can address different economic systems. One of the Deputy-Directors General has identified core principles of the WTO and opined that the system supports convergence not coexistence. See Remarks before the Korean International Trade Association. 27 May 2020, https://www.wto.org/english/news_e/news20_e/ddgaw_27may20_e.htm back to text

It is against this complex background that candidates for the Director-General post of the WTO will be evaluated by many Members. In the next post, I turn to how the eight candidates have addressed these complex issues in terms of their prepared statements to the General Council, press conference after the General Council meeting and in the WITA webinars.

Stay tuned.

Is the world at the peak of the COVID-19 pandemic? Last two weeks suggest a peaking of the growth of global infections may be at hand

Much of the world recorded sharp contractions in GDP during the second quarter as countries restricted travel, issued mandatory stay at home orders and took other steps to try to control the spread of the COVID-19 pandemic. Many countries have been easing restrictions in the last several months that were imposed typically in March. The hoped for revival of the global economy is being slowed by the continued high incidence of new COVID-19 cases, the resurgence of cases (albeit so far at low levels) following reopening actions in many of the countries who had gotten control of the virus. In a number of countries, schools are reopening presenting additional challenges for governments in trying to control the spread of the COVID-19 virus. News reports continue to be promising that one or more vaccines may be approved by the end of 2020 or early 2021, and the Russian Federation has gone into production of a vaccine which reportedly has not undergone a phase three trial.

One question of potential importance in mid-August is has the world gotten to the peak of the number of new cases during the last two weeks or will the number of new cases resume an upward trajectory in the coming weeks?

The world has seen a rapid growth of new cases during the March – July period. As recently as the two week period of May 11-May 24, the total new cases globally in the two week period was 1.28 million. The next two weeks (May 25-June 7) showed new cases of 1.57 million. June 8-June 21 recorded 1.93 million new cases; June 22 – July 5 added 2.46 million. July 6-July 19 added 3.02 million new cases. July 20-August 2 added 3.57 million new cases. The data for the last two weeks, August 3-16 added 3.62 million new cases. So the rate of growth is slowing. While the number of new cases in the most recent two weeks was nearly three times as many as recorded in mid-May, in the last two weeks, the growth was only 1.4%.

The United States for the first time since early June has seen the number of new cases fall from the prior two weeks, although the new cases in August 3-16 were still the second largest (740,721) after only India (838,959) and remain two and a half times as high as the May 25-June 7 period (297, 391) and were 81.5% higher than the original peak figure (409,102) in the latter part of April. Complicating the picture going forward for the United States are the early problems with school reopenings in certain states with most school districts working to open in person, remotely or in some combination in the coming weeks. The U.S. also has a very high incidence of affirmative tests in large parts of the country which is problematic particularly as testing (while large in number) continues to have problems in timeliness of results. Despite the need for even larger numbers of tests (that are timely), the number of tests has been declining in the U.S. despite the continued high level of new cases on a daily basis. In addition, the U.S. continues to suffer from mixed messages from government officials on actions needed to control the virus, and from a general fatigue by large parts of the public with the efforts to minimize the spread. This past week’s Sturgis motorcycle rally, where some 250,000 bikers from around the country were expected to attend, is an example of a huge social gathering where limited safety precautions have been seen at least at some events with unknown consequences for the spread of the virus not just in South Dakota (Sturgis is a small town in South Dakota) but across the United States.

Brazil was also slightly lower in the last two weeks (609,219) than the preceding two-week period (633,017) but remains a major source of new cases. South Africa showed a significant decline from 152,411 new cases in the July 20-August 2 period to 80,363 new cases in the last two weeks.

India has taken over the top spot for most new cases in the last two weeks, 838,959, more than 160,000 higher than the prior two weeks (673,108).

There have been upticks in the number of new cases in a number of developed countries reflecting presumably the effects of reopening the economy — Germany, France, Spain, Poland, Australia, New Zealand, Japan. The spike of cases (though still small compared to prior volumes) has led for some tightening up on the economic restrictions in particular cities or more broadly.

Continued growth of cases in the developing world

With the number of new cases in the United States declining, the trend to new cases being focused on the developing world continues. While India and Brazil had by far the largest number of new cases from developing countries, they were followed by Colombia (150,508), Peru (103,620), Argentina (91,135), Mexico (83,521), South Africa (80,363) and then dozens of other countries with smaller numbers of new cases.

Deaths/100,000 population

The United States has the largest number of deaths of any country to date and in the last two weeks. If one looks at deaths/100,000 population, in the lats two weeks, the countries with the highest number of deaths per 100,000 population were the following: Peru (20.91), Colombia (8.90), Bolivia (8.16), Mexico (7.11), Panama (6.99), Brazil (6.48), South Africa (6.02), United States (4.57). All other countries (including all other developed countries) had lower rates of death per 100,000 population. For all countries, the death rate over the last two weeks was 1.06 deaths/100,000 population.

If looking at the entire period since the end of December 2019 through August 16, the average number of deaths for all countries per 100,000 of population has been 10.09 deaths. The seven countries (of 71 which account for 98% of total deaths) with the highest death rates/100,000 for the full period are: Belgium (86.73), Peru (80.20), United Kingdom (62.06), Spain (60.97), Italy (58.54), Sweden (which did not impose any restrictions)(56.53), the United States (51.50). With the exception of Peru and the United States, each of the other top countries overall has shown a drastic reduction since their peaks in April and as reflected in the experience in the last two weeks (all the European countries were less than 1 death per 100,000).

Conclusion

The world in the first seven and a half months of 2020 has not managed to get the COVID-19 pandemic under control. While many countries in Europe and some in Asia and the major countries in Oceania have greatly reduced the number of new cases over time, that has not been true for the Americas (other than Canada), for parts of Asia and for parts of Africa where the pandemic has turned its attention or where the pandemic has not been brought under control.

That said, the last two weeks suggest the global total of new cases in a two week period may have just peaked in August. There are major challenges ahead as reopening of economies gets tested against possible resurgence of cases, schools reopen in many countries, and greater indoor months approach. So there are potentially unwelcome scenarios that could see the huge number of new cases resume an upward trend. But with effort, the world may see the backside of the growth curve.

With the sharpest global economic contraction since World War II, with slumping global trade, with even the wealthier countries struggling to maintain the needed stimulus to reduce the severity of the economic contraction and with potentially hundreds of millions of people around the world losing their jobs, and food insecurity rising with increasing poverty, the world needs to see the pandemic receding and needs breakthroughs in both vaccines and therapeutics, although realistically, 2021 is more likely than the rest of 2020 for the medicaL breakthroughs.

The WTO webpage has a page dedicated to COVID-19, and the WTO Secretariat has generated a host of information notes reviewing the range of challenges that the pandemic is presenting to nations. The most recent looks at the increased costs of trade that flow from the travel and other restrictions. My post from yesterday, looked at the rising food insecurity for dozens of countries facing rising extreme poverty because of the economic contraction being experienced around the world. Stated differently, the trade, economic, health and humanitarian challenges flowing from the COVID-19 pandemic are extraordinary. Stemming the number of new cases is an important step to reduce the pressures on governments, companies and citizens.

Review of the COVID-19 pandemic — continued overall growth in cases and deaths, resurgence in some countries where COVID-19 had receded

This past week saw the release of information on GDP contraction in the U.S. in the second quarter of 2020 (9.5% (annualized at 32.9%)) and in the European Union (11.9%). See U.S. Department of Commerce Bureau of Economic Analysis, News Release BEA 20-37, Gross Domestic Product, Second Quarter 2020 (Advance Estimate) and Annual Update, https://www.bea.gov/sites/default/files/2020-07/gdp2q20_adv_0.pdf; Eurostat newsrelease 121/2020 – 31 July 2020, Preliminary flash estimate for the second quarter of 2020, GD down by 12.1% in the euro area and by 11.9% in the EU, https://ec.europa.eu/eurostat/documents/2995521/11156775/2-31072020-BP-EN.pdf/cbe7522c-ebfa-ef08-be60-b1c9d1bd385b#:~:text=The%20next%20estimates%20for%20the,released%20on%2014%20August%202020.&text=Compared%20with%20the%20same%20quarter,respectively%20in%20the%20previous%20quarter. Japan has similarly suffered substantial contraction in its GDP through the second quarter. See https://asia.nikkei.com/Economy/Japan-GDP-to-shrink-22-in-Q2-in-biggest-postwar-drop-forecast.

These sharp contractions in U.S. and EU GDP reflect the effects of the actions by governments in the U.S. and in the EU to shut down parts of their economies in an effort to control the spread of the COVID-19 pandemic. The sharp contractions would have been far worse but for government efforts to provide emergency funding to support companies, workers and local governments. While the COVID-19 pandemic has been far less severe in terms of cases and deaths in Japan and in other countries in Asia, contraction in GDP reflects both declining consumer spending and global effects of trade contraction that are occurring.

China, where COVID-19 infections were first discovered, saw a decline in GDP in the 1st quarter of 2020 with a rebound in the second quarter to a 3.2% increase. See CNBC, China says its economy grew 3.2% in the second quarter this year, rebounding from coronavirus, July 15, 2020, https://www.cnbc.com/2020/07/16/china-economy-beijing-reports-q2-2020-gdp.html.

The sharp contractions in GDP from much of the developed world is consistent with projections by the IMF from June 2020. A summary table from the World Economic Outlook Update is copied below.

The hope was that after a sharp contraction in the second quarter, the world would experience a v-shaped recovery once the pandemic was brought under control in much of the world.

As we start August 2020, expectations are turning to a longer and shallower rebound in the third and fourth quarters of 2020 which will negatively affect billions of people. The world has not yet crested in terms of new COVID-19 cases and countries that had gotten the virus seemingly under control are seeing various levels of resurgence. The United States which never got the virus under control has seen a second surge that has reached levels at least twice as high as earlier levels of new cases and has seen a resurgence in hospitalizations and deaths.

There are a few bright spots. Some countries have managed to drastically reduce the spread of the virus and have been reopening in phases with limited recurrence. Moreover, a number of pharmaceutical companies have entered phase three trials of vaccines, and governments have fronted billions of dollars to build capacity for vaccines should they prove safe and effective. While major countries like the U.S. and the EU block have secured access to potentially hundreds of millions of doses from various companies should vaccines in trial receive approval for distribution, at least a number of these pharmaceutical companies (or consortia) have arrangements for massive production around the world including billions of doses for developing and least developed countries which should enable a more equitable and affordable distribution than may have been true in the past.

COVID-19, the number of new cases in the last fourteen days

Looking at the daily reports put out by the European Centre for Disease Prevention and Control, the world saw an additional 3,568,162 cases in the fourteen days ending August 2nd. This was an increase of some 550,000 from the previous fourteen days ending July 19 where new cases were 3,018,993. The July 19 two week figures were again up close to 550,000 from the period ending July 5 when there were 2,469,859 cases. The period ending June 21 has 1,932,024 new cases; the period ending June 7 had seen an additional 1,567,983 new cases. Thus, in less than two months the global number of new cases in a fourteen-day time period increased by 127.56 percent. The COVID-19 situation update worldwide, as of 2 August 2020 is embedded below.

COVID-19-situation-update-worldwide-as-of-2-August-2020

Fourteen of the forty-two countries or customs territories that I have been tracking who account for more than 90% of total cases and total deaths from the pandemic continue to not have peaked in terms of two week number of new cases. See July 21, 2020, COVID-19 – the United States continues to spin out of control with increasing shortages of medical goods; sharp increases in developing countries in the Americas and parts of Asia, https://currentthoughtsontrade.com/2020/07/21/covid-19-the-united-states-continues-to-spin-out-of-control-with-increasing-shortages-of-medical-goods-sharp-increases-in-developing-countries-in-the-americas-and-parts-of-asia/. Japan, which had peaked a number of months ago, has a resurgence of cases, so much so that the last two weeks (11,439 new cases) exceed any other two week period for the country. Other countries which have not peaked include the United States (908,980 new cases), India (673,105 new cases) Brazil (633,017 new cases), Colombia (115,481 new cases), Mexico (95,280 new cases), Argentina (72,001 new cases) and these additional countries — Bolivia, Dominican Republic, Ecuador, Honduras, Indonesia, Iraq, and the Philippines). South Africa peaked in the prior two week period but still had an additional 152,411 new cases (93.56% of its peak).

Many developed countries have seen sharp increases in the last two weeks, albeit from much lower levels than in the spring. These include Spain, France, Germany, Italy, Canada, Australia and Japan.

Many developing and least-developed countries in Central and South America, Africa and parts of Asia are seeing growing numbers of cases. While some of these countries have seen a peak in the number of new cases, for others that is not true. India and Brazil are continuing to struggle to contain the spread as are the Latin and Asian countries reviewed above.

In the last two weeks, the United States had more new cases per 100,000 population than all of the other 41 countries being monitored other than Brazil and Panama. The U.S. number of new cases per 100,000 population was 5.88 times the number for all countries (including the U.S) and 4-50 times as high as major EU countries. And on deaths in the last fourteen days, the U.S. has more deaths per 100,000 population than all of the other 41 countries other than Brazil, Mexico, Peru, South Africa, Chile, Bolivia, Colombia and Panama. The U.S. death rate in the last fourteen days is 3.95 times the rate/100,000 population for the entire world and 25-87 times the rate for major EU countries (France, Germany, Italy, Spain).

WTO Members have the opportunity to adopt rules to minimize trade disruptions and expedite economic recovery

Many Members of the WTO have submitted proposals for action by the Membership to minimize the harm to global economies and trade flows from addressing trade restrictions, trade liberalization possibilities and other matters within the WTO’s wheelhouse.

In a previous post, I reviewed the July 25 APEC trade ministers joint statement and annex which in my view could provide the platform for WTO Members coming together to adopt a group of principles that have been endorsed not only by the APEC countries but also by G-20 members (in various G-20 releases). See July 28, 2020, APEC trade ministers’ virtual meeting on July 25 – Declaration on Facilitating the Movement of Essential Goods during COVID-19, https://currentthoughtsontrade.com/2020/07/28/apec-trade-ministers-virtual-meeting-on-july-25-declaration-on-facilitating-the-movement-of-essential-goods-during-covid-19/.

The WTO, being a member-driven organization, requires the WTO Members to come together for the common good if progress is to be made. While recent actions on seemingly non-substantive issues, like selecting an acting Director-General (largely an administrative function pending selection of a new Director-General), lay bare the lack of trust and widely divergent views among WTO Members, adopting basic principles for getting through the pandemic should be a win-win for all Members.

Conclusion

The COVID-19 pandemic is continuing to wreak havoc across the globe with new cases and new deaths continuing to mount. The health consequences are severe and are increasingly shifting to developing and least-developed countries. However, some developed countries, like the U.S., have not gotten the virus under control. Moreover, a number of countries who have had success controlling the spread of COVID-19 are seeing a resurgence as reopening of economies continues. This has led some countries to slow or even reverse some of the reopening steps.

As the sharp economic contractions in major developed economies attest, there are huge economic costs to dealing with the pandemic. The economic rebound is unlikely to be as strong or as quick as many have hoped. While much of what is needed is focus by each country and its citizenry to follow the science and get the pandemic under control, there is also an important role for multilateral organizations to play in keeping markets open, providing financing for those in need and more. The WTO has a potentially important role on the trade front. It is unclear that WTO Members will embrace the opportunities presented, but if Members would it would reduce the depth of the trade contraction and help speed economic recovery.

APEC Trade Ministers’ Virtual Meeting on July 25 — Declaration on Facilitating the Movement of Essential Goods during COVID-19

The Asia-Pacific Economic Cooperation (APEC) has twenty-one members whose territories borders the Pacific Ocean. The twenty-one members include Australia; Brunei Darussalem; Canada; Chile; China; Hong Kong, China; Indonesia; Japan; Malaysia; Mexico; New Zealand; Papua New Guinea; Peru; the Philippines; Republic of Korea; Russia; Singapore; Chinese Taipei; Thailand; United States; and Viet Nam. According to a 2019 USTR note on U.S.-APEC Trade Facts, APEC countries account for 38% of the world’s population, 60% of the world’s GDP and 47% of world trade. See https://ustr.gov/trade-agreements/other-initiatives/asia-pacific-economic-cooperation-apec/us-apec-trade-facts#:~:text=APEC%20has%2021%20members%2C%20referred,percent%20of%20the%20world’s%20trade.

In May 2019, APEC Ministers Responsible for Trade (“MRTs”) issued a statement on COVID-19 recognizing both the centrality for all members in halting the spread of the pandemic and the need for members to also focus on remedying the economic challenges flowing from the pandemic. Like the G20 and other groups, APEC MRTs recognized the importance of keeping markets open, of limiting emergency restrictive measures and ensuring such measures are “targeted, proportionate, transparent, temporary and should not create unnecessary barriers to trade, and are consistent with WTO rules.” APEC MRTs encouraged cooperation and the sharing of information and more. See Statement on COVID-19 by APEC Ministers Responsible for Trade, 5 May 2020, WT/GC/213. The May 2019 statement is embedded below.

213

At the July 25, 2020 virtual meeting of MRTs, the ministers issued a joint statement and included as Annex A the Declaration on Facilitating the Movement of Essential Goods. See MRTs joint statement, https://www.apec.org/Meeting-Papers/Sectoral-Ministerial-Meetings/Trade/2020_MRT; Annex A,https://www.apec.org/Meeting-Papers/Sectoral-Ministerial-Meetings/Trade/2020_MRT/Annex-A. Both are embedded below.

Ministers-Responsible-for-Trade-Virtual-Meeting-Joint-Statement-2020

Declaration-on-Facilitating-the-Movement-of-Essential-Goods-by-the-APEC-Ministers-Responsible-for-Trade-MRT

The joint statement reiterates the May 2019 key points and incorporates the Declaration on Facilitating the Movement of Essential Goods “which is a clear indication of the region’s continued support for WTO work.” The MRTs “recognize the need for discussions to reduce non-tariff barriers which restrict trade in essential goods.” There are other supportive statements about the importance of WTO work. “We encourage continued constructive engagement on WTO issues, including in the lead-up to the 12th WTO Ministerial Conference.” At the same time, the MRTs are looking to the development of a “post-2020 Vision” which they are hopeful leaders can launch at the end of 2020. Presumably, such a vision will include trade- related components which may include reforms at the WTO or simply be regional cooperation on certain important topics (supply chain issues on adequacy of supplies, e-commerce, movement of people as region recovers from COVID-19, etc.).

The Declaration on Facilitating the Movement of Essential Goods has ten specific actions that are declared.

The first two deal with export restrictions and prohibitions. The first is that each APEC member will ensure that any emergency trade measures introduced to address COVID-19 are consistent with WTO rules. The second commits APEC members to notify all such measures in accordance with WTO obligations.

The third declared action addresses non-tariff barriers. Specifically APEC members “are encouraged to work together to identify and resolve any unnecessary barriers to trade in essential goods.”

The next five declared actions pertain to trade facilitation — to expedite and facilitate the flow and transit of essential goods; to enhance coordination, efficiency and transparency of border clearance of essential goods; expediting the release of essential goods upon arrival; facilitating the entry, transit and departure of air cargo dealing with essential medical goods; abiding by the International Health Regulations of 2005.

The ninth declared action deals with tariffs and while not committing APEC members to liberalize tariffs for essential medical supplies, notes that some economies have taken such liberalizing actions and notes that the business community supports such action.

The last statement deals with reviewing progress on the APEC initiatives annually until COVID-19 is no longer a public health emergency.

Conclusion

Many countries and customs territories around the world have expressed objectives which are generally not significantly different than those put forward by APEC members.

With the large share of global trade accounted for by APEC members and with similar-type commitments by the G20 (which includes major members of the EU and has the EU participating), one would think it should be possible to obtain WTO commitments along similar lines to the APEC Declaration. The Declaration would need to have added some of the developing country and least developed country needs that have been already presented to the WTO so that the concerns of all are addressed.

While the WTO is doing an excellent job of providing information about the pandemic and trade measures taken by Members (at least those notified), the WTO Members have yet to get behind a set of principles that all Members can sign off on. Perhaps the APEC MRT joint statement and Declaration on Facilitating the Movement of Essential Goods provides a good starting point for the full WTO membership. While some WTO Members have not wanted to address COVID-19 issues during the pandemic, obviously collective action during the pandemic would be most effective. The post-pandemic needs also should be addressed but can await individual and group developments of views.

COVID-19, EU move to permit some international travel in addition to intra-EU travel, effects on tourism

Many countries have imposed travel restrictions on visitors from other countries during the COVID-19 pandemic. The International Air Transport Association (“IATA”) reports that there are 163 countries that have some travel restrictions and that 96 countries impose quarantine requirements. See IATA, COVID-19 Government Public Health Mitigation Measures, https://www.iata.org/en/programs/covid-19-resources-guidelines/covid-gov-mitigation/.

Travel and tourism is one of the most seriously harmed economic sectors from the global COVID-19 pandemic for many countries. The UN World Tourism Organization has created “the first global dashboard for tourism insights”. https://www.unwto.org/unwto-tourism-dashboard. The dashboard indicates that COVID-19 will result in the reduction of some 850 million to 1.1 billion tourists with a loss of US$ 910 billion to US $ 1.2 trillion in revenues from tourists with the potential loss of as many as 100-120 million jobs in the sector. These are obviously staggering figures for a sector that has contributed to global economic growth over recent decades. The dashboard has ten slides which shows data for tourism through April 2020 with some projected figures for full year 2020 under various assumptions. Data are presented both globally and for some slides by regions and in a few within regions by country. Thus, in slide 2, global tourism grew 2% in January 2020, declined 12% in February, declined 55% in March and declined 97% in April for a January-April total decline of 43.8%. By region, Europe declined 44%, Asia and the Pacific declined 51%, the Americas declined 36%, Africa declined 35%, and the Middle East declined 40%. While data for May and June are not yet available and may be less severe in terms of contraction than April, the decline in global tourism through June will likely exceed 50% and possibly be even more severe. For data through April 2020 see the link, https://www.unwto.org/international-tourism-and-covid-19.

In prior posts, I have provided background on the sector and the likely toll from the COVID-19 pandemic. See April 30, 2020, The collapse of tourism during the COVID-19 pandemic, https://currentthoughtsontrade.com/2020/04/30/the-collapse-of-tourism-during-the-covid-19-pandemic/; May 3, 2020, Update on the collapse of travel and tourism in response to COVID-19, https://currentthoughtsontrade.com/2020/05/03/update-on-the-collapse-of-travel-and-tourism-in-response-to-covid-19/.

As many countries in parts of Asia, Oceania, Europe and a few other countries have seen significant declines following first wave peaks of COVID-19 cases, restrictions within countries and increasingly on international travel are starting to be relaxed.

The European Union is a large tourist destination and on June 30 announced recommendations for member states to consider in opening up for tourists from both other EU countries and for travelers from outside of the area for nonessential travel. Specifically, the Council of the European Union adopted Council Recommendations on the temporary restriction on non-essential travel into the EU and the possible lifting of such restriction on 30 June 2020. See https://data.consilium.europa.eu/doc/document/ST-9208-2020-INIT/en/pdf. Intra EU travel, travel from Norway, Iceland, Switzerland, Liechtenstein and certain other countries is not part of the third country nonessential travel affected by the recommendations (to the extent adopted by EU members).

The EU Council selected third countries whom the Council recommended have access based on criteria which “relate to the epidemiological situation and containment measures, including physical distancing, as well as economic and social considerations, and are applied cumulatively.” Page 6. The Council lists three critieria: (1) whether the number of new cases over the last 14 days per 100,000 inhabitants is close to or below the EU average (15 June 2020); (2) whether the trend of new cases over the prior 14 day period is stable or decreasing; and (3) considering “the overall response to COVID-19 taking into account available information aspects such as testing, surveillance, contact tracing, containment, treatment and reporting as well as the reliability of available information and data sources and, if needed, the total average score across all dimensions for International Health Regulations (IHR).” Page 6.

Based on these criteria, the EU Council recommends that 15 countries (with China being subject to confirmation of reciprocity by China to EU travelers) “whose residents should not be affected by temporary external borders restriction on non-essential travel into the EU” (Annex I, page 9): Algeria, Australia, Canada, Georgia, Japan, Montenegro, Morocco, New Zealand, Rwanda, Serbia, South Korea, Thailand, Tunisia, Uruguay and China. The Council may review every two weeks whether the list should be modified.

Annex II to the Council recommendations provides an identification of travelers with essential functions for whom the restrictions should not apply. These include healthcare professionals, health researchers, and elderly care professionals, frontier workers, seasonal workers in agriculture, transport personnel, diplomatic personnel, passengers in transit, passengers traveling for “imperative family reasons,” seafarers, third-country nationals traveling for the purpose of study and a few others. Annex II, page 10.

The EU Council Recommendations are embedded below as is a Council press release on the recommendations.

ST_9208_2020_INIT_EN

Council-agrees-to-start-lifting-travel-restrictions-for-residents-of-some-third-countries-Consilium

Obviously many countries are not included on the list of third countries where loosening of restrictions on travel is recommended. The United States, Argentina, Brazil, India, Indonesia, Malaysia, Nigeria, Russia, Saudi Arabia and South Africa are just a few for whom nonessential travel restrictions are not recommended to be lifted. For most of these countries, either the number of new cases has not peaked or has not receded significantly.

For the EU, getting agreement among its members to lift travel restrictions for other EU countries and to start lifting restrictions for travelers from thrid countries has been important as the summer holiday season of July-August arrives. Data from EU tourism statistics showed 710 million international visitors in 2018 (when there were 28 EU members, including the UK). 81% or 575 million visitors were intra-EU, that is traveling from one EU country to another. Thus, for the EU, the biggest return of tourism business involves reopening to travelers from other EU countries. By contrast, visitors from third countries in total were some 19% of the total or 135 million visitors. The US accounted for 11.6% of third country visitors in 2017, some 15.7 million in number. While an important source of third country tourists, The U.S. was just a little over 2.2 percent of total EU global visitors. See http://www.condorferries.co.uk (tourism in Europe statistics). Thus, for tourism, the EU’s reopening recommendations will not return travel and tourism to pre-COVID-19 levels. But the partial reopening could result in a significant rebound in its tourism sector which will be good news for EU businesses involved in the travel and tourism space. Time will tell just how much of a rebound actually occurs.

For other nations, the more countries who get COVID-19 under control and are thus able to open international travel and tourism responsibly, the greater the likely rebound in global travel and tourism will be. However, because many businesses in the travel and tourism space in any country are small businesses, the risk for many countries (whether in the EU or elsewhere) is that the rebound whenever it occurs will happen with a much smaller business base to serve customers. While governments can provide targeted assistance through legislative initiatives, operating conditions for many such businesses post opening do not permit profitable operation where social distancing and other important steps remain critical to safe functioning. So unlike other global crises in the past, there may be large and permanent job losses in the travel and tourism sector flowing from COVID-19.

Candidates for the Next Director-General of the WTO — four and counting, an update

Two weeks after the WTO opened the nomination process for candidates to fill the Director-General post which becomes vacant on September 1, 2020, four countries have put forward candidates — Mexico, Nigeria, Egypt and Moldova. The period for nominations will come to a close on July 8 (COB Geneva time), so there are still sixteen days for additional candidates to be put forward.

There are many rumors and a few facts on possible candidates not yet announced. Press have indicated that Benin, which had had a candidate identified for consideration by the African Union, has withdrawn H.E. Mr. Eloi Laourou (Benin’s current Ambassador and Permanent Representative to the WTO) from consideration and will be supporting Nigeria’s candidate, Dr. Ngozi Okonjo-Iweala. See The Africa Report, Benin drops its WTO candidate in support of Nigeria’s Okonjo-Iweala (15 June 2020), https://www.theafricareport.com/29941/benin-drops-its-wto-candidate-in-support-of-nigerias-okonjo-iweala/.

The other African name floated as a possible candidate has been Kenya’s Amina Mohamed, current sport and culture minister and former Kenyan Ambassador to the WTO who was the first woman to chair the WTO’s General Counsel. She was also a candidate for the Director-General position in 2012-2103 when Roberto Azevedo of Brazil was selected. While mentioned early, there has been little in the press indicating Kenya will be nominating her, but there is obviously still time if Kenya so chooses. See Financial Times, Contenders Set Out Stalls to Succeed Azevedo at Helm of WTO, May 17, 2020, https://www.ft.com/content/fc5fda8e-56cb-4866-b477-f4c3af603b5c.

Possible Developed Country Candidate(s)?

It has been rumored that there would be one or more developed country candidates and some WTO Members or their trade ministers, like the EU, have articulated a belief that the next Director-General should be from a developed country, consistent with the recent rotation between developed and developing country having the post of Director-General. Since DG Azevedo is from Brazil, a developing country, developed countries should take the next turn, according to this logic.

An article in the New York Times indicates that the European Trade Commissioner, Phil Hogan (Ireland) has confirmed he is considering a bid. See New York Times, Who’s Bidding to Be Next World Trade Organization Chief?, June 22, 2020, https://www.nytimes.com/reuters/2020/06/22/business/22reuters-trade-wto-factbox.html.

Spain’s Foreign Minister Arancha Gonzalez Laya has also been repeatedly identified as a potential candidate. She was chef de cabinet for Director-General Pascal Lamy who served from 2005-2013.

Other developed countries could decide to nominate one or more candidates, though press accounts indicate that Australia is not planning on submitting a candidate (at least not at present) and the U.S. has historically not put forward a candidate from the U.S. See Financial Review, No Australian candidate for WTO boss, Birmingham says, June 22, 2020, https://www.afr.com/world/europe/no-australian-candidate-for-wto-boss-birmingham-says-20200619-p554gf

Rumors have suggested that the Republic of Korea may submit a candidate. Japan has been very active in recent years through their ambassadors to the WTO but is not believed to be likely to put forward a candidate.

New Zealand had a Director-General two decades ago, Michael Moore, and its Trade Minister and former Ambassador to the WTO, Tim Groser, ran in 2012-2013. It is unclear whether New Zealand will put forward a candidate, whether former Minister Groser or someone else.

There is a rumor in Geneva that more nominations are likely and that at least one more may materialize later this week. If such an event materializes, I would suspect someone from an EU country or from Korea will become the fifth candidate.

Outreach by existing candidates and legal wrangling between African countries

The advantage of being an early announced candidate in the current process is that candidates can get their views out through the media ahead of the General Council meeting, and there is more time for their governments to court support from other WTO Members. Particularly when there is interest in expediting the selection process because of the near-term departure of existing Director-General Azevedo, such opportunities for pre-General Council wooing of other Members and media outreach will be more limited for candidates joining closer to the end of the nominating time period. The General Council meeting to meet and hear from the candidates is understood to likely be sometime in the week of July 12. If there is actually an effort to expedite the selection process after July 8, time will be very limited for candidates after the General Council meeting.

It is clear that at least the first three candidates are taking advantage of media to articulate their vision for the WTO and their role if selected as the next DG. Nominating governments are also doing outreach to trading partners seeking to build up support for their candidate.

For example, Jesus Seade Kuri, the Mexican candidate, provided an interview to the South China Morning Post which was published on June 18, 2020, Mexico’s nominee for top WTO job, Jesus Seade, vows to ‘bring US and China back to the table’, https://www.scmp.com/economy/china-economy/article/3089452/mexicos-nominee-top-wto-job-jesus-seade-vows-bring-us-and.

Similarly, Dr. Ngozi Okonjo-Iweala had her views on the WTO DG job published in various publications including the Pulse, ‘I’m a strong negotiator, reformer,’ Okonjo-Iweala makes her case for ‘challenging’ WTO job, June 17, 2020, https://www.pulse.ng/business/okonjo-iweala-former-minister-makes-case-for-wto-job/y123dsb.

Outreach has also been made by Egypt’s Abdel Hamid Mamdouh as he laid out what he considered to be important aspects of his candidacy in an article that appeared in The Africa Report on June 11. See Egypt’s Abdel Hamid Mamdouh bid for the WTO – Five things to know, June 11, 2020, https://www.theafricareport.com/29730/egypts-abdel-hamid-mamdouh-bid-for-the-wto-five-things-to-know/.

All candidates have recognized the challenges with the tensions between the United States and China, the need to be an honest broker, how their background gives them strengths needed to address the role of Director-General amidst the COVID-19 pandemic and need for reform at the WTO.

While Mexico is working on shoring up support for Mr. Seade amongst WTO Members in the Americas (and elsewhere), the two African candidates are working to gain support from their African colleagues (and others). Little has been in the press as yet as to what actions Moldova or its candidate are taking in the early days after Tudor Ulianovschi’s nomination.

Egypt has attempted to have Nigeria’s candidate disqualified on the grounds that Nigeria had another proposed candidate submitted to the African Union but withdrew that candidate and put forward Dr. Ngozi Okonjo-Iweala past the deadline for such nominations. The African Union’s counsel concurred but that position has been challenged by Nigeria. In any event, WTO procedures limit who may nominate candidates to WTO Members. Nigeria is a member while the African Union is not. Therefore, whatever is relevant for African Union member consideration, it is not relevant to whether Nigeria or any other AU member can propose a candidate to the WTO by July 8. See The Cable, Okonjo-Iweala still eligible to run for office of DG, says, WTO, June 20, 2020, https://www.thecable.ng/exclusive-okonjo-iweala-still-eligible-to-run-for-office-of-dg-says-wto. This type of public discord will not be helpful to obtaining solidarity around a single African candidate which has been the presumed purpose of the African Union’s process.

Conclusion

With roughly half of the nomination time period having run, it is clear that there will be a significant number of candidates. It is unclear how many developed country candidates will end up running and to what extent members will focus more on geographical area, development status, or gender of the candidates in their considerations.

With the U.S., the EU and China having very different views of what needs to be done to return the WTO to relevance and with the recent USTR statement that any candidate to receive U.S. backing must “understand the need for reform and the problems of free economies in dealing with China” (New York Times, U.S. Wants WTO Head Who Understands Problems Dealing with China: Lighthizer, June 17, 2020, https://www.nytimes.com/reuters/2020/06/17/world/asia/17reuters-usa-trade-wto.html), the road ahead will be challenging for all candidates with no guarantee that the process will succeed in either an expedited or normal time period.

Hopefully, the Chairman of the General Council (Amb. David Walker) and the WTO Secretariat have the four Deputy Directors-General warming up in case one of them is needed to serve as the Acting Director-General beginning September 1st.

COVID-19 — the global rate of increase of confirmed cases is surging

By the close of business on June 22, there will be more than 9 million confirmed cases of COVID-19 with the rate of growth exploding more than six months after the first cases were reported in China, with deaths approaching a half million. For the two weeks ending June 21, the number of new cases approached 2 million (1,932,024), up 24.0% from the two weeks ending June 7 (1,557,983) which in turn were up 21.5% from the two weeks ending May 24 (1,281,916). Thus, the last six weeks have seen the rate of new cases grow by 50.7%. Indeed, the last six weeks account for 54.25% of total cases since the end of 2019 (roughly 25 weeks).

As the worst of the pandemic has passed (at least the first wave) for most of the developed world (other than the United States and countries in the Middle East), the sharp growth in cases is mostly due to the spread of the virus in the developing world where healthcare infrastructure and ability to handle the challenges of the pandemic are likely less than for the developed world.

Central and South America, parts of Asia and the Middle East are the current hot spots of infections with growth in a number of African countries as well. The United States which peaked during the two week period ending April 26, has by the far the largest number of total cases (more than 2.2 million) and is seeing the number of cases rise again in the most recent two weeks.

Afghanistan, Argentina, Bangladesh, Bolivia, Brazil, Chile, Colombia, the Dominican Republic, Ecuador, Egypt, Guatemala, Honduras, India, Indonesia, Iraq, Kuwait, Mexico, Nigeria, Oman, Pakistan, Panama, the Philippines, Qatar, Saudi Arabia, South Africa and the United Arab Republic all have significant numbers of cases and all but Kuwait, Qatar and the UAE are still growing rapidly in terms of new cases where peaks have not been reached. Thus, the likelihood of even greater number of new cases is a near certainty for the coming weeks.

Some recent developments

Most of western Europe has been engaged in reopening in recent weeks as the rates of infection are dramatically lower than in the March-April period. Indeed, travel within the EU and some neighboring countries is opening up in time for the July-August vacation season. Time will tell if the steps being taken to test, trace and quarantine any cases found going forward will minimize any upward movement in cases.

China and parts of Asia with low rates of infections where economic interruption has been less (e.g., Taiwan, the Republic of Korea, Singapore and Japan), are seeing low numbers of new cases. China has taken strong measures to address a new outbreak in Beijing (numbers are a few hundred cases).

Australia and New Zealand have few if any new cases and the numbers for Canada are also way down with reopening occurring as would be expected.

The U.S. and Canada and the U.S. and Mexico are maintaining travel restrictions between themselves (though excluding movement of goods and services).

In the United States, the story on the control of the pandemic is very mixed as individual states have been engaged in reopening at different rates in part reflecting different infection rates and growth rates. However, reopening in some states is occurring despite conditions in the state not being consistent with the Administration’s guidelines from the Center for Disease Control ad Prevention (“CDC”) on when reopening should occur. Thus, there are states seeing large increases in recent days and weeks while many other states are seeing significant declines or at least stable rates of infection. It is unclear how the infection rate in the U.S. will progress in the coming weeks and months.

Trade Considerations

As my post from last week on the Ottawa Group communication reviewed, there are lots of proposals that have been teed up by WTO Members to keep trade flowing during the pandemic and to potentially reduce the likelihood of such trade disruptions as are being experienced at present in future pandemics.

But large numbers of export restraints remain in place, transparency is better than it was in the first quarter but still not what is needed. However, import liberalization/expedition is occurring in many countries to facilitate obtaining medical goods needed at the lowest price.

The toll flowing from the pandemic and the closing of economies to control the pandemic is enormous despite efforts of governments to provide funding to reduce the damage. This has led the WTO to project 2020 trade flows to decline between 13 and 32% from 2019 levels. As data are available for the March-June period, the severity of the decline for various markets is being fleshed out and resulting in lower global GDP growth projections.

Because the COVID-19 pandemic hit many developed countries hard before spreading to most of the developing world, developing countries have seen economic effects from the pandemic preceding the health effects in their countries. Reduced export opportunities, declining commodity prices (many developing countries are dependent on one or a few commodities for foreign exchange), reduced foreign investment (and some capital flight), higher import prices for critical goods due to scarcity (medical goods) and logistics complications flowing from countries efforts to address the spread of the pandemic are a few examples of the economic harm occurring to many developing countries.

The needs of developing countries for debt forgiveness/postponement appears much larger than projected although multilateral organizations, regional development banks and the G20 have all been working to provide at least some significant assistance to many individual countries. Trade financing will continue to be a major challenge for many developing countries during the pandemic. Harm to small businesses is staggering and will set many countries back years if not decades in their development efforts when the pandemic is past.

As can be seen in developed countries, sectors like travel and tourism (including airlines, hotels, restaurants, entertainment venues) are extraordinarily hard hit and may not recover for the foreseeable future. The need for social distancing makes many business models (e.g., most restaurants, movie theaters, bars, etc.) unworkable and will result in the loss of large portions of small businesses in those sectors in the coming months. For many developing countries, travel and tourism are a major source of employment and income. Losses in employment will likely be in the tens of millions of jobs, many of which may not return for years if at all.

Role of WTO during Pandemic

The WTO views itself as performing the useful functions of (1) gathering through notifications information from Members on their actions responding to the pandemic and getting that information out to Members and the public, (2) providing forecasts of the trade flows during the pandemic, and (3) providing a forum for Members to bring forward proposals on what action the WTO as a whole should consider. Obviously the success of all three functions depends on the openness and engagement of the Members.

WTO agreements don’t really have comprehensive rules for addressing pandemics or for the policy space governments are likely to need to respond to the economic tsunami that may unfold (and will unfold with different intensities for different Members). Some recent proposals would try to address some of the potential needs for the trading system to better respond to pandemics. However, most proposals seem to suggest narrowing the policy space. Last week’s Committee on Agriculture was reported to have had many Members challenging other Members actions in the agriculture space responding to the extraordinary challenges flowing from the pandemic. While Committee activity is designed to permit Members the opportunity to better understand the policies of trading partners, a process in Committee which focuses simply on conformance to existing rules without consideration of what, if any, flexibilities are needed in extraordinary circumstances seems certain to result in less relevance of the WTO going forward.

Most countries have recognized that the depth of the economic collapse being cased by the global efforts to respond to COVID-19 will require Members to take extraordinary steps to keep economies from collapsing. Looking at the huge stimulus programs put in place and efforts to prevent entire sectors of economies from collapsing, efforts to date by major developed countries are some $10 trillion. Concerns expressed by the EU and others have generally not been the need for such programs, but rather have been on ensuring any departures from WTO norms are minimized in time and permit a return to the functioning of market economies as quickly as possible.

Members have not to date proposed, but should agree, that the WTO undertake an evaluation of programs pursued by Members and how existing rules do or do not address the needs of Members in these extraordinary times.

WTO possible actions to facilitate recovery from COVID-19, the Ottawa Group’s June 16 Communication

A number of WTO Members have submitted proposals for action by the WTO Membership to address the global trade challenges flowing from the COVID-19 pandemic including speeding recovery and minimizing future disruptions from later health challenges. Most proposals address what to do about export restrictions, simplifying import procedures and/or reducing import duties, and improved transparency of actions taken.

The Ottawa Group June 2020 Statement: Focusing Action on COVID-19

The latest contribution comes from the “Ottawa Group” and was submitted on June 16, 2020. June 2020 Statement of the Ottawa Group: Focusing Action on COVID-19, WT/GC/217. The Ottawa Group is a group of WTO Members who describe themselves as “champions of WTO reform”. The group consists of the following WTO Members — Australia, Brazil, Canada, Chile, European Union, Japan, Kenya, Republic of Korea, Mexico, New Zealand, Norway, Singapore and Switzerland.

The Ottawa Group statement provides the following introduction followed by six areas for potential WTO action:

“The world continues to grapple with the profound human health and economic impacts of the COVID-19 pandemic. In response to these challenges, thinking has begun on trade policy actions that would support an inclusive, sustainable, and resilient recovery as well as what trade rules should be adapted or developed to guide collaborative policy responses to future global crises. In this context, the WTO must play an important role in helping ensure coordination and coherence between actions its members take. This will require initiative and engagement by WTO Members in order to be successful.

“In this environment, there is an opportunity for the Ottawa Group to provide leadership, critical thinking and analysis, as well as ideas and proposals on potential actions that the broader WTO membership could take. In order to make best use of resources, this paper sets out six areas where concrete actions could be taken.” Page 1

The six action items are identified with a discussion of why the area is important and what steps the Group views as important to take. The Ottawa Group recommendations are summarized at the end of the communication (pages 4-5):

Summary:

Action Item 1: Transparency and Withdrawal of Trade-Restrictive Measures

Action Point: Ministers instruct officials to: 1) ensure any measures introduced in response to COVID-19 are promptly notified in accordance with relevant WTO requirements; 2) support efforts by the WTO Secretariat to collect and share information and best practices on trade-related measures taken in response to COVID-19 5/; 3) discuss the principle of ‘targeted, proportionate, transparent, temporary and consistent with WTO rules’; and 4) lead by example and withdraw or end any trade restrictive measures introduced in response to COVID-19 as quickly as possible.

“5/ Including by: (a) returning to the quarterly cycle of trade monitoring reports as during the financial crisis; and (b) including trade-related economic support measures in the trade monitoring reports and (c) and to the extent possible, making a technical assessment of members’ trade-related economic support measures in reaction to COVID-19.

Action Item 2: Keeping Open and Predictable Trade in Agricultural and Agri-Food Products

Action Point: Ministers instruct officials to: 1) engage in ongoing discussions on the fulfilment of joint declarations on maintaining predictable and open agriculture trade; 2) lead by example, and withdraw or end any emergency measures introduced in response to COVID-19 that may adversely affect trade in agriculture as quickly as possible; and 3) advance analysis and consideration on what steps WTO Members could take to continue improving agriculture trade based on the lessons learned from COVID-19 to ensure that future crises will not undermine trade, food security, and the stability of agricultural markets in the long-term.

Action Item 3: E-commerce

Action Point: Ministers instruct officials to prioritize and accelerate work on the Joint Statement Initiative on E-commerce, including through informal and virtual discussions, ahead of the rescheduled MC12 in 2021, including by the development of a consolidated negotiating text by the end of 2020 at the latest. In this regard, we will support the efforts of the co-convenors.

Action Item 4: Trade Facilitation – Use of Information Technology and Streamlined Procedures

Action Point: Ministers instruct officials to identify ways to take full advantage of the opportunities for trade facilitation in the Trade Facilitation Agreement (TFA) and to promote best practices for the implementation of the TFA. This includes how the adoption of digital solutions can support the movement of essential goods across borders as smoothly as possible.

Action Item 5: Initiative on Medical Supplies

Action Point: Ministers instruct officials to advance analysis and consideration in order to identify what steps WTO Members could take to facilitate trade in medical supplies to help ensure that the world is better positioned to deal with future health emergencies and to help ensure that versatile, diversified and resilient supply chains exist that allow all members access to vital medical supplies. This work should include analysis of the objectives and effects of policies affecting trade of medical supplies in response to the current pandemic and support for international organizations, including the WTO, in analyzing the potential impacts and outcomes of measures and recommending policies.

Action Item 6: Deepen Engagement with Stakeholders

Action Point: Ministers instruct officials to explore how best to pursue intensified engagement with stakeholders in order to better inform policymaking.”

The Ottawa Group proposals include topics not addressed in other proposals, such as the importance of prioritizing conclusion of the e-commerce joint statement initiative. During the pandemic, the critical importance of e-commerce to and expanded use by many businesses and consumers has reduced the damage to economies and to global trade. All Ottawa Group members are participating in the ongoing e-commerce talks, talks involving 84 countries or territories.

On issues like export restraints, the Ottawa Group has some positive ideas while reflecting the reality that some Ottawa Group members have used export restraints on medical goods during the pandemic. The idea of giving definition to the terms “targeted, proportionate, transparent, temporary and consistent with WTO rules” could be useful for administrations to be able to evaluate intended actions. However, the spread of a pandemic such as COVID-19 and internal political pressures to help one’s own population will render any such clarifications of marginal actual assistance if the underlying challenge of global supply/demand imbalance is not addressed on an ongoing basis.

As has been seen in agricultural goods, increasing information on global supplies both reduces the likelihood of countries imposing export restraints and gives trading partners greater leverage in pushing for roll backs of export restraints imposed by individual countries where there is no actual shortage. The Ottawa Group’s recommendations on agricultural goods reflects that the ability to disarm restrictions where shortages do not in fact exist.

The Ottawa Group submission from June 16 is embedded below.

WTGC217

EU’s June 11, 2020 Concept Paper, Trade in Healthcare Products

Some WTO Members, including Ottawa Group member countries, have taken unilateral action to liberalize trade in medical goods by reducing tariffs (at least temporarily) and by streamlining entry of medical goods needed for handling the pandemic. Some members, like the EU, have suggested creating an expanded medical goods duty-free agreement to go beyond the 1995 pharmaceutical agreement. For example, in a concept paper of 11 June 2020 entitled Trade in Healthcare Products, the EU, inter alia, provides in the Annex (pages 9-14) a list of goods that WTO Members could consider for total duty elimination. https://trade.ec.europa.eu/doclib/docs/2020/june/tradoc_158776.pdf The EU notes in a footnote that its concept paper “is meant to contribute to an exploratory discussion on a possible initiative to facilitate trade in healthcare products and is without prejudice to the EU’s position in potential negotiations.” Page 1 footnote 1.

The EU concept paper covers a number of other areas besides tariff eliminations, but for purposes of this note, the discussion will be limited to the product coverage for possible duty elimination. The EU provides a list of 152 6-digit HS categories in its Annex. At the six-digit level, import categories may cover many products not relevant to a particular pandemic, but the six-digit HS level is the most fragmented level of harmonization provided by the Harmonized Commodity Description and Coding Systems. Interestingly the EU Annex does not cover all products identified by the World Customs Organization and World Health Organization as relevant to fighting the COVID-19 pandemic. Specifically, there are thirty products (with accompanying HS numbers that are in the WCO list that are not in the EU proposed Annex. See World Customs Organization Prepared jointly with the World Health Organization, HS classification reference for Covid-19 medical supplies, 2.1 Edition, http://www.wcoomd.org/-/media/wco/public/global/pdf/topics/nomenclature/covid_19/hs-classification-reference_2_1-24_4_20_en.pdf?la=en.

Specifically, under the WCO’s Section II dealing with face and eye protection, there are two face and eye protection products which are not part of the EU list (HS 9004.90 and 3926.90); four of five glove categories are not in the EU list (HS 3926.20, 4015.19, 6116.10, 6216.00); and eight of nine of the other products are not in the EU list (HS 6505.00, 3926.20, 4015.90 and 4818.50, 6210.40, 6210.40, 6210.50, 6210.50).

Similarly, in Section III, disinfectants and sterilisation products, two products in the WCO list are not covered by the EU (HS 2207.10, 2208.90).

In Section IV, oxygen therapy equipment and pulse oximeters, there is one product in the WCO list not covered by the EU Annex (HS 9026.80).

In Section V, other medical devices and equipment, the EU Annex doesn’t cover three products covered by the WCO list (HS 8413.19, 9028.20, 7324.90).

In Section VI, other medical consumables, there are four products shown in the WCO list that are not part of the EU Annex (HS 2804.40, 3923.29, 3926.90, 3926.90).

Section VII of the WCO list covers vehicles; with the exception of wheelchairs (which are covered by the EU Annex), the other three WCO products are not covered — ambulances, mobile clinic vehicles, mobile radiological vehicles (HS 8703, 8705.90, 8705.90).

Finally, in the WCO’s Section VIII, other products, three of four products in the WCO list are not covered by the EU Annex (HS 8421.39, 7311.00, 7613.00).

Because the WCO/WHO list reflects items needed by countries dealing with the COVID-19 pandemic, it is unclear what the logic is of not including such items in a proposed duty-free list compiled by the EU. Many of the items not included in the EU Annex (e.g., gloves, face shields, etc.) would be needed in addressing the current as well as future pandemics. If there is an effort to seek a duty-free agreement on medical goods, presumably the list will change from that put forward by the EU to be more comprehensive.

While the United States under the Trump Administration is not likely to enter into an agreement to eliminate tariffs on medical goods while the pandemic is afoot (as indicated by Amb. Lighthizer), the reality is that nearly all of the goods in the EU Annex are already duty free in the United States. Specifcally, 135 of the 152 6-digit HS items are duty free (Column 1 rate) in the U.S. in 2020. That is 88.8% of the HS categories. On a dollar value basis, 98.4% of imports into the U.S. during 2019 of products in the EU Annex are under HS numbers that are duty free. Of the remaining 1.6% of imports, a large part of the imports would be duty free under an FTA or GSP or other preferential program. Imports from China, some of which may be subject to supplemental duties flowing from the Section 301 investigation and resulting additional tariffs on Chinese goods, are 6.2% of total imports and some of those goods, if covered by additional duties, are subject to existing or potential exclusions.

Stated differently, should there be an effort to do a sectoral duty free agreement, in considering whether there is a critical mass, sponsors should be evaluating the existing tariff structures of non-participants.

The EU Concept Paper and the WCO list are embedded below.

tradoc_158776

hs-classification-reference_2_1-24_4_20_en-1

Deputy Director-General Alan Wolff’s Jun 17 speech, Pandemic underlines need to improve trading system’s relevance and resilience

This past week, Deputy Director-General Wolff spoke at a Think20 virtual panel on Policy Recommendations for a Post-COVID 19 World. DDG Wolff reviewed both actions that the WTO has taken (transparency on actions taken by Members; developing a trade forecast; providing a forum for members to share proposals and consider collective action) and proposals that had been put forward by Members. See https://www.wto.org/english/news_e/news20_e/ddgaw_18jun20_e.htm.

DDG Wolff identified two imperatives — “where the current rules are least prescriptive, they should be strengthened”; “where collective action would be helpful it should occur.” He then reviews WTO Members who have put forward proposals (Korea, Canada, Singapore, New Zealand, Switzerland, the Ottawa Group, the Cairns Group) and provided his summary of some of the suggestions made:

“Some specific suggestions that have been made include the following:

” A major effort can be undertaken to increase transparency. Member notifications can be supplemented by enhanced monitoring and reporting of measures by the Secretariat.

“There is little guidance in the WTO rules as to the appropriate use of export controls where it is felt that there exists short supply. Further guidance could be crafted. Sometimes the existence of extensive policy space is contrary to the common interests of all.

“Government interventions to procure needed supplies reduce the scope for market forces to determine competitive outcomes. A number of the practices witnessed in the last three months in response to the pandemic are not explicitly regulated by the current WTO rules. Included under this heading would be subsidization conditioned on supplying the domestic market, and pre-emptive government purchasing and investment. Additional disciplines could be considered.

“Leaving the allocation of scarce necessities solely to market forces may also not be a completely satisfactory alternative if the poorest countries are priced out of participation.

“Consideration can be given to agreeing, as in the WTO Agreement on Agriculture, to require that a country planning to impose an export restriction consider the effect on others of applying the measure.

“Additional provisions could provide for prior notice before export restrictions are put into place and a commitment to engage in timely consultations.

“Consideration can be given to including in any restrictions a sunset clause and providing for a roll-back of current trade restrictions.

“Multilaterally-agreed guidance could be given for the sharing of scarce medical supplies, including vaccines.

“Concerted efforts could be made to have relevant tariff liberalization, not just for medical goods, equipment and pharmaceuticals, but more broadly.

“Consideration can be given to creating, a Members’ Emergency Task Force or other mechanism to flesh out options for consideration by Members.

“Where options are devised by groups of Members, an effort and process are needed to gain broader Member support for their recommendations and to assure implementation of concrete steps forward.

“A Long-Range Policy Planning Network for the Multilateral Trading System could be created. There is insufficient attention paid to assessing the future needs of the multilateral trading system, in part due to the daily need to deal with current challenges.

“For the recovery, there are at least three immediately identifiable ways
in which the multilateral trading system can contribute. Consideration
can be given to:

“Lowering the costs of trade by lowering tariffs and other impediments to trade broadly;

“Engaging in a collective effort to accelerate the implementation of
the Trade Facilitation Agreement, and

“Working with international financial institutions and banks to
foster the restoration of trade finance.”

A broad array of suggestions have been made at the WTO as can be seen. The challenge, of course, is in generating momentum for group action. If the major players are not pulling in the same direction, it is hard to see how that momentum will be generated. Typically times of crisis create opportunities for bold action. Is today’s crisis such an opportunity considering the significantly different perspectives of China, the EU and the U.S.?

Many developing countries (and those who claim developing status at the WTO) typically have the highest tariffs and can be motivated for short-term tariff action on specific goods (as this pandemic has demonstrated), but have not shown a willingness to lead on tariff liberalization when developed countries typically have very low tariff levels already. Is the pandemic a reason for such countries to rethink their contribution to the global trading system?

A number of the proposals go to the functioning of the WTO and its governance. Considering the desire by many for broader reform but with significant differences in what type of reforms are appropriate, can the proposals identified generate consensus support in the coming months?

With the economic damage to the world’s economies much larger than originally projected, certainly there has never been a greater need for collective action to minimize human health and economic costs from the pandemic and to speed economic recovery. The coming months will show whether the great divides among the majors can be bridged for the good of all.

WTO Search for a New Director-General – Moldova’s Tudor Ulianovschi is the Fourth Candidate Put Forward

The Republic of Moldova has forwarded to the World Trade Organization the name of Tudor Ulianovschi as a candidate for the Director-General post. Mr. Ulianovschi is a former Minister of Foreign Affairs, a former Moldovan Ambassador to Switzerland and Liechtenstein and a former Permanent Representative to the WTO.

Moldova, a land-locked country in Eastern Europe between Romania and Ukraine, became a Member of the WTO on July 26, 2001. The bulk of its trade is with the Russian Federation, other parts of the former Soviet Union and the European Union. Moldova has been working to become part of the European Union and has an Association Agreement with the EU that was fully implemented on July 1, 2016.

Mr. Ulianovschi joins Jesus Seade (Mexico), Dr. Ngozi Okonjo-Iweala (Nigeria) and Abdel-Hamid Mamdouh (Egypt) who previously were nominated by their governments. WTO Members have until July 8 to put forward nominations.

Moldova is a lower middle-income country as classified by the World Bank with a small population (2.7 million) and small total GNI ($11.44 billion). It is unclear whether the addition of Mr. Ulianovschi will affect whether one or more candidates from existing EU countries or from the United Kingdom are put forward or whether Mr. Ulianovschi will be the sole European candidate. It is assumed one or more EU-country candidates will in fact be forwarded in the next several weeks.

Similarly, there is speculation that candidates from Asia (Japan, Republic of Korea) and/or Oceania (Australia, New Zealand) may be put forward. So the total number of candidates is likely to continue to grow in the coming days making the completion of a selection process before the end of August less and less likely.

Mr. Ulianovschi’s biography as forwarded to the WTO is embedded below.

bio_mda_e

In other news about the first three candidates, a subscription service, Inside U.S. Trade has published articles based on interviews with Jesus Seade and with Abdel-Hamid Mamdouh. Inside U.S. Trade’s World Trade Online, June 10, 2020, “Seade says he can be an effective, creative facilitator as director-general”; June 15, 2020, “Egypt’s Mamdouh: WTO needs to find its ‘common purpose’ again”. Foreign Affairs on April 30, 2020 published an article by Dr. Ngozi Okonjo-Iweala addressing the COVID-19 pandemic, “Finding a Vaccine Is Only the First Step, No One Will Be Safe Until the Whole World Is Safe,” https://www.foreignaffairs.com/articles/world/2020-04-30/finding-vaccine-only-first-step.

WTO Appellate Body Reports on Australia’s Plain Packaging of Tobacco Products — Separate Views of One Division Member Merit Close Review

In a post from yesterday, I reviewed the Appellate Body (“AB”) reports released on June 9 in the appeals by Honduras and the Dominican Republic on the panel reports on Australia’s plain packaging regime on tobacco products. As noted, the AB upheld the panel reports that Australia’s regime did not violate any WTO Agreements as alleged by the Appellants. See WTO Appellate Issues Reports on Australia’s Plain Packaging Requirements on Tobacco Products – Last Reports Until WTO Appellate Body Reform Occurs, https://currentthoughtsontrade.com/2020/06/09/wto-appellate-body-issues-reports-on-australias-plain-packaging-requirements-on-tobacco-products-last-reports-until-wto-appellate-body-reform-occurs/

There are important “separate views” contained in the AB reports that while agreeing with the final conclusion that there was no violation disagree with the searching review of the underlying record on the claim that the panels had not made an objective assessment of the facts pursuant to DSU Art. 11. The separate views also disagreed with the finding of the other two Division members that appellants’ due process rights were violated based on use of information in the interim panel reports that had not previously been available to the parties.

As WTO disputes have become ever more litigious, lawyers used by Members to handle appeals have increased the frequency of seeking a review of the factual record on the claim that panels have not made an objective assessment of the record. Instead of parties limiting appeals of such claims to extraordinary situations, increasing numbers of appeals have focused on these appeal issues. The result has been greatly complicated appeals, much longer AB reports and an inability for AB Divisions to render decisions in 60-90 days of the filing of an appeal.

The Australia plain packaging appeals were filed by Honduras on 17 July 2018 and by the Dominican Republic on 23 August 2018. Thus, the AB reports released on 9 June 2020 were 693 days and 656 days after the appeals were filed. While certainly part of the delay flows from the inability to fill the AB member vacancies since 2018, a significant part flows from the failure of the AB Divisions to limit review of claims under DSU Art. 11 to situations that plausibly create the extraordinary circumstances required for its invocation.

The AB reports in these appeals are 232 pages in length. The concept that a Division of the AB will draft reports in 60-90 days that are 232 pages in length is obviously implausiible. Eliminating the DSU Art. 11 claims would have reduced the length of the reports by roughly 100 pages and would have permitted the AB to focus on the legal issues and legal interpretations of the panel appealed by the parties. As clear from the Dispute Settlement Understanding, the AB isn’t to review factual issues. Rather DSU Art. 17.6 limits the AB to reviewing legal issues and legal interpretations of the panel.

The proper role of the AB and the need to clarify the limited circumstances when a challenge to facts found by the panel by claims of panel bias or failure to make an objective evaluation of the record (DSU Art. 11) have been some of the ongoing concerns of the United States in looking at the functioning of the AB. The latest AB reports demonstrate the importance of addressing the U.S. concerns. The separate views included in the report are important in articulating how the DSU Art. 11 claims in these appeals should have been handled.

The separate views are copied below and eloquently lay out the correct approach in these appeals. WT/DS435/AB/R at 179 – 183 and WT/DS441/AB/R at 179 – 183

6.2 Separate opinion of one Division Member regarding Article 2.2 of the TBT Agreement

6.2.1 Introduction

“6.523. It is well settled that not every error by a panel rises to the level of a breach of Article 11 of the DSU. Under the DSU, panels enjoy considerable discretion with respect to fact-finding and the evaluation of facts. This is underscored by the language of Article 11 that ‘a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case’, read in conjunction with Article 17.6 of the DSU, which says that ‘[a]n appeal shall be limited to issues of law covered in the panel report and legal interpretations developed by the panel.’ In other words, Article 11 claims on appeal should be reserved – and entertained – only for rare instances of ‘egregious’ errors by panels, which call into question the good faith of the panel.1433

“6.524. With respect to the appellants’ claims regarding the Panel’s analysis under Article 2.2 of the TBT Agreement, I concur with the majority’s ultimate findings and conclusions. However, I disagree on two points: (i) that it was necessary to examine in detail the appellants’ claims that the Panel erred in determining the degree of contribution of the TPP measures to Australia’s objective; and (ii) that the Panel’s treatment of and reliance on multicollinearity and non-stationarity constituted an error under Article 11 of the DSU.

6.2.2 Addressing the appellants’ claims regarding the contribution of the TPP measures was not necessary to resolve the dispute

“6.525. The complainants’ main argument before the Panel was that the TPP measures are more trade-restrictive than necessary because: (i) they are trade-restrictive; and (ii) they are not apt to, and do not, contribute to Australia’s legitimate public health objective.1434 In the alternative, the complainants argued that, even assuming that the TPP measures contribute to Australia’s legitimate public health objective, they are still ‘more trade-restrictive than necessary’ because there are alternative measures that are reasonably available to Australia and that would be less trade-restrictive while making an equivalent contribution to the objective.1435

“6.526. The Panel rejected those arguments by the complainants, while noting that the TPP measures are necessarily trade-restrictive because all tobacco products are imported into Australia, and that the TPP measures contribute to Australia’s public health objective by reducing consumption of tobacco products. The appellants challenge the Panel’s rejection of their arguments. My discussion of that challenge centres on the two sentences in paragraph 7.1025 of the Panel Report.

“6.527. In the first of these sentences, the Panel found that the complainants failed to demonstrate that the TPP measures ‘are not apt to make a contribution to Australia’s objective’.1436 In the second sentence, the Panel found that, ‘[r]ather, … the evidence … , taken in its totality, supports the view that the TPP measures … are apt to, and do in fact, contribute to Australia’s objective.’1437

“6.528. The appellants’ appeals were silent regarding the first sentence. They addressed only the second sentence. In doing that, the appellants have not explained how any errors undermining the Panel’s finding in the second sentence of paragraph 7.1025 would suffice to demonstrate that the Panel erred in forming the conclusion in the first sentence of that paragraph.

“6.529. In response to questioning at the second hearing, the appellants stated that it was unnecessary to raise any independent appeal or challenge of the Panel’s finding in the first sentence, because the Panel’s finding in that sentence is integrally linked to the Panel’s finding in the second sentence. The appellants underscored that the Panel conducted an integrated analysis of the degree of contribution based on the evidence as a whole.1438

“6.530. I read these two sentences as saying different things. The first sentence says that the appellants failed to demonstrate that the TPP measures are not apt to make a contribution; the second sentence says that the totality of evidence supports the view that the TPP measures are apt to, and do in fact, make a contribution.

“6.531. Even assuming, arguendo, that the appellants are correct that the Panel relied on the totality of the evidence in forming both conclusions in these two sentences of paragraph 7.1025, I do not see how the errors alleged by the appellants pertaining to the Panel’s second-sentence finding would vitiate the Panel’s finding in the first sentence. The mere fact that the Panel may have relied on the same evidence for both findings does not mean that any errors in the Panel’s second determination – that the evidence supports the view that the TPP measures ‘are apt to, and do in fact’ make a contribution – also would undermine the Panel’s conclusion that the complainants failed to substantiate their burden of demonstrating that the TPP measures are not apt to contribute. Those are two different conclusions.

“6.532. Consequently, in order for us to overturn the Panel’s conclusion that the complainants failed to demonstrate that the TPP measures are not apt to contribute to Australia’s objective – expressed in the first sentence of paragraph 7.1025 – the appellants were required to demonstrate that the Panel’s errors in its examination of the evidence vitiated that conclusion, and did so in a manner so egregious as to constitute a violation of Article 11 of the DSU.

“6.533. As noted, the appellants did not appeal the Panel’s finding in the first sentence of paragraph 7.1025. They also did not otherwise address the question of whether any errors in the Panel’s evaluation of the second sentence in that paragraph would vitiate the first sentence, except to argue that the two sentences ‘are linked’ and that the Panel’s evaluation of them was based on the same evidence.

“6.534. As a result, I consider that the Panel’s determination that the complainants failed to demonstrate that the TPP measures are not apt to contribute to Australia’s objective is undisturbed on appeal. Since measures are presumed to be WTO-consistent until shown otherwise, it follows that the TPP measures are presumed to be at least capable of making a contribution to Australia’s objective1439, whether or not the Panel might have erred in determining that the totality of evidence supports the view that the TPP measures are apt to, and do in fact, make a contribution to Australia’s objective.

“6.535. It follows that the Panel’s finding, in the first sentence of paragraph 7.1025 of the Panel Report, stands. Since the TPP measures are therefore presumed to be capable of contributing to Australia’s objective, it further follows that: (i) the appellants have failed to demonstrate that the Panel erred in rejecting their principal argument; and (ii) with respect to their alternative argument, whether or not the proposed alternatives make an equivalent contribution to the TPP measures, the appellants did not present an alternative that is less trade-restrictive than the TPP measures1440, and consequently there is no basis for us to overturn the Panel’s overall conclusion that the appellants failed to demonstrate that the TPP measures are inconsistent with Article 2.2.

“6.536. Thus, I believe it was unnecessary, for purposes of resolving these disputes, for the majority to consider in detail the appellants’ claims regarding the Panel’s assessment of the TPP measures’ contribution to Australia’s objective. For that reason, I also believe that it was inadvisable for the majority to consider in detail the appellants’ contribution claims. This could have been a much shorter report, I believe, based on the findings that the first sentence of paragraph 7.1025, regarding aptness, stands, that the appellants’ proposed alternatives would not be less trade-restrictive than the TPP measures, and therefore that the appellants failed to demonstrate that the TPP measures are inconsistent with Article 2.2.

6.2.3 Due process and Article 11 of the DSU

“6.537. I disagree with the majority’s intermediate finding that, by introducing in its Interim Report econometric analyses that had not been tested with the parties, the Panel failed to observe due process in a way that constitutes a violation of Article 11 of the DSU.

“6.538. In my view, the Panel’s reliance on multicollinearity and non-stationarity to test the robustness of the parties’ evidence was part of the Panel’s reasoning, with respect to which a panel enjoys considerable discretion. The parties to this case submitted to the Panel a large amount of econometric evidence. It was appropriate for the Panel to assess the probative value of that evidence. The Panel tested the robustness of the econometric studies submitted by the parties by taking into account, inter alia, whether the models suffered from multicollinearity and non-stationarity. The mere fact that these two so-called ‘criteria’ were not specifically mentioned by the parties is not sufficient to warrant a different scrutiny of the Panel’s reliance on them, as compared to the Panel’s reliance on other econometric concepts (e.g. overfitting and endogeneity) that the parties had identified. I therefore consider that the Panel acted within the bounds of its discretion as a trier of facts by not only examining the parameters used by each party, but also by going further in its evaluation and testing the robustness of the parties’ econometric evidence for multicollinearity and non-stationarity.

“6.539. With regard to the issue of due process, Australia argues that the complainants could have used the interim review stage to request the Panel to review the relevant parts of the Panel Report pursuant to Article 15 of the DSU but chose not to do so.1441 The appellants submit that interim review would not have provided them with a ‘meaningful opportunity’ to comment on the Panel’s concerns regarding multicollinearity and non-stationarity.1442

“6.540. Article 15.2 of the DSU says, in relevant part, that: Within a period of time set by the panel, a party may submit a written request for the panel to review precise aspects of the interim report prior to circulation of the final report to the Members. At the request of a party, the panel shall hold a further meeting with the parties on the issues identified in the written comments. If no comments are received from any party within the comment period, the interim report shall be considered the final panel report and circulated promptly to the Members.

“6.541. The complainants became aware of the Panel’s analysis of multicollinearity and non-stationarity when they received the Panel’s Interim Report on 2 May 2017. However, the complainants did not raise any substantive concerns with respect to these aspects of the Panel’s analysis in their comments on the Interim Report, nor did they request an interim review meeting. It is reasonable to read Article 15.2 as placing responsibility on the complainants to have raised the Panel’s reliance on multicollinearity and non-stationarity at the interim review stage, especially given the importance that the appellants attribute to these issues on appeal. In my view, the complainants’ failure to raise these issues at the interim review stage undermines the appellants’ claim regarding due process.

“6.542. Thus, since the complainants had an opportunity to raise these issues and did not do so, I do not agree with their claim that the Panel denied them due process by not ‘giving the parties any opportunity whatsoever to comment’.1443 Since the complainants did not attempt to raise their concerns regarding the Panel’s reliance on multicollinearity and non-stationarity at the interim review stage, it is unnecessary to speculate about whether the alleged limited nature of the interim review process, which I do not find to be expressed in the text of Article 15.2, would have been sufficient. Consequently, I disagree with the majority’s interim conclusion on this point.

“6.543. In light of the above, I consider that the appellants have not demonstrated that the Panel failed to make an objective assessment of the facts of the case as required under Article 11 of the DSU by denying the parties an opportunity to comment on the Panel’s reliance on multicollinearity and non-stationarity.

“1428 Panel Report, paras. 7.1025 and 7.1043.

“1429 Panel Report, para. 7.1255.

“1430 Panel Report, paras. 7.1464 and 7.1531.

“1431 Panel Report, paras. 7.1417 and 7.1495.

“1432 See also Panel Report (DS435), para. 8.1.a; Panel Report (DS441), para. 8.1.b.i.

“1433 Appellate Body Report, EC – Hormones, para. 133. See also Appellate Body Reports, Japan – Agricultural Products II, para. 141; Korea – Alcoholic Beverages, para. 164; EC – Bed Linen (Article 21.5 – India), para. 177.

“1434 See Panel Report, paras. 7.426, 7.437, 7.485 and 7.520; Honduras’ and the Dominican Republic’s responses to questioning at the second hearing.

“1435 See Honduras’ first written submission to the Panel, paras. 853 and 911; Dominican Republic’s first written submission to the Panel, paras. 737-739, 980, and 1019.

“1436 Panel Report, para. 7.1025.

“1437 Panel Report, para. 7.1025.

“1438 Honduras’ and the Dominican Republic’s responses to questioning at the second hearing (referring to Panel Report, paras. 7.495-7.497).

“1439 Where a panel finds that the parties’ evidence reveals that a measure is capable of contributing, or the evidence is unclear or mixed as to whether the measure is capable of contributing, a panel should find that the complainant has failed to demonstrate that the measure is incapable of contributing to the objective. This would at the same time mean that, to the extent that the complainant also argues that the measure is inconsistent with Article 2.2 on the basis that there are reasonably available less trade-restrictive alternative measures capable of making an equivalent contribution, the presumption of WTO-consistency requires that a panel presume that the measure is at least capable of making some contribution to the legitimate objective and, on that basis, proceed to examine the remaining factors for determining ‘necessity’, such as the degree of the measure’s trade restrictiveness and the availability of less trade-restrictive alternative measures.

“1440 For the reasons set forth in sections 6.1.3-6.1.4 we have upheld the Panel’s findings that the alternative measures proposed by the complainants would not be less trade-restrictive than the TPP measures.

“1441 Australia’s appellee’s submission, para. 464.

“1442 Honduras’ responses to questioning at the second hearing. In addition, the Dominican Republic noted that, at the interim review stage, it could pose only ‘rhetorical questions’ to the Panel. (Dominican Republic’s responses to questioning at the second hearing).

“1443 Dominican Republic’s appellant’s submission, para. 42. (emphasis omitted).”

WTO Appellate Body Issues Reports on Australia’s Plain Packaging Requirements on Tobacco Products — Last Reports Until WTO Appellate Body Reform Occurs

On June 9th, the long awaited WTO Appellate Body (“AB”) reports on the two challenges to Australia’s plain packaging requirements on tobacco products were released. AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING, WT/DS435/AB/R and WT/DS441/AB/R (9 June 2020). The appellants were Honduras and the Dominican Republic. The Appellate Body essentially upheld the panel reports not finding violations of WTO Agreements by Australia’s actions. The decisions are important for governments and citizens concerned with the need to limit the reach of health harmful products like cigarettes. With plain packaging laws now prevalent in a number of countries, one can expect today’s AB decision to encourage more countries to emulate the approach taken by Australia (in part or in whole).

The WTO Secretariat prepares summaries of findings on cases. Below is the link to the summary followed by the summary of findings from the AB decisions provided on the WTO webpage, https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds435_e.htm#bkmk435abr:

“Honduras (DS435) and the Dominican Republic (DS441) (together referred to as the appellants) requested the Appellate Body to reverse the Panel’s conclusions under Article 2.2 of the TBT Agreement, and Articles 16.1 and 20 of the TRIPS Agreement.

  • “1. With respect to Article 2.2 of the TBT Agreement:
    • With respect to the contribution of the TPP measures to Australia’s objective, the Appellate Body found that Honduras had not substantiated its claim that the Panel erred in its application of Article 2.2 to the facts of the case. Ultimately, the Appellate Body found that the appellants had not demonstrated that the Panel failed to make an objective assessment of the facts under Article 11 of the DSU. In particular, the Appellate Body found that, although the Panel erred by disregarding certain evidence adduced by the Dominican Republic, and acted inconsistently with Article 11 of the DSU by compromising the complainants’ due process rights with respect to the Panel’s reliance on multicollinearity and non‑stationarity when reviewing the parties’ econometric evidence, such errors were not sufficiently material to vitiate the Panel’s findings regarding the contribution of the TPP measures to Australia’s objective, namely improving public health by reducing the use of, and exposure to, tobacco products.
    • The Appellate Body found that the appellants had not demonstrated that the Panel erred in its intermediate conclusions pertaining to the trade restrictiveness of the TPP measures. In particular, the Appellate Body upheld the Panel’s finding that the impact of the TPP measures on reducing the opportunity for producers to differentiate between different products on the basis of brands did not in itself necessarily amount to a limiting effect on international trade. The Appellate Body also upheld the Panel’s finding that the complainants failed to demonstrate that the TPP measures would necessarily lead to a decline in the value of imported tobacco products as a consequence of consumers shifting from premium to non-premium products in response to the TPP measures (downtrading).
    • With respect to the alternative measures, the Appellate Body found that the Panel erred in finding that the complainants had failed to demonstrate that each of the two alternative measures (the increase in the MLPA and an increase in taxation) would be apt to make a contribution equivalent to that of the TPP measures. However, the Appellate Body found that the Panel did not err in finding that the complainants had failed to demonstrate that these two alternative measures are less trade restrictive than the TPP measures. Consequently, the Panel’s finding that the complainants had not demonstrated that the increase in the MLPA and the increase in taxation would each “be a less trade restrictive alternative to the TPP measures that would make an equivalent contribution to Australia’s objective”, stands.
    • Consequently, the Appellate Body upheld the Panel’s conclusion that the complainants had not demonstrated that the TPP measures are more trade restrictive than necessary to fulfil a legitimate objective, within the meaning of Article 2.2 of the TBT Agreement.
  • “2. With respect to Article 16.1 of the TRIPS Agreement:
    • The Appellate Body found that the Panel did not err in its interpretation of Article 16.1. The Appellate Body agreed with the Panel that Article 16.1 of the TRIPS Agreement grants a trademark owner the exclusive right to preclude unauthorized use of the trademark by third parties. However, Article 16.1 does not confer upon a trademark owner a positive right to use its trademark or a right to protect the distinctiveness of that trademark through use.
    • Having found no error in the Panel’s interpretation, the Appellate Body agreed with the Panel that there was no need to examine further the complainants’ factual allegation that the TPP measures’ prohibition on the use of certain tobacco related trademarks would in fact reduce the distinctiveness of such trademarks, and lead to a situation where a “likelihood of confusion” with respect to these trademarks is less likely to arise in the market.
    • Consequently, the Appellate Body upheld the Panel’s conclusion that the complainants have not demonstrated that the TPP measures are inconsistent with Article 16.1 of the TRIPS Agreement.
  • “3. With respect to Article 20 of the TRIPS Agreement
    • The Appellate Body found that the Panel did not err in its interpretation and application of Article 20 of the TRIPS Agreement. In particular, the Appellate Body considered that the Panel did not err in its interpretation of the term ‘unjustifiably’ in Article 20 and in its application of this interpretation to the facts of the case. The Appellate Body thus agreed with the Panel that the complainants had not demonstrated that trademark-related requirements of the TPP measures unjustifiably encumbered the use of trademarks in the course of trade within the meaning of Article 20.
    • Consequently, the Appellate Body upheld the Panel’s conclusion that the complainants had not demonstrated that the TPP measures are inconsistent with Article 20 of the TRIPS Agreement.

“The Appellate Body recalled that, having rejected all of the complainants’ claims, the Panel had declined Honduras’ and the Dominican Republic’s requests that the Panel recommend, in accordance with Article 19.1 of the DSU, that the DSB request Australia to bring the measures at issue into conformity with the TRIPS Agreement and the TBT Agreement.

“Having upheld the Panel’s findings under Article 2.2 of the TBT Agreement and Articles 16.1 and 20 of the TRIPS Agreement, it followed that the Appellate Body also agreed with the Panel that Honduras and the Dominican Republic had not succeeded in establishing that Australia’s TPP measures are inconsistent with the provisions of the covered agreements at issue. Accordingly, the Appellate Body made no recommendation to the DSB, pursuant to Article 19.1 of the DSU.”

While the Reports are Not Surprising in Outcome, They Show Many of the Concerns that U.S. has Raised about the AB Over Time

These are the last reports of the Appellate Body until the impasse on the appointment of new Appellate Body members is solved, which will require the United States achieving reforms in the operation of the Appellate Body and the AB’s actual adherence to the Dispute Settlement Understanding as negotiated.

Many of the concerns that the U.S. has long raised are present in the current decisions. For example, the reports were not prepared in 90 days from the date of appeal, nor were the delays in completion of the appeals specifically authorized by the parties. The decisions were prepared by non-current members of the Appellate Body (although Members had agreed to permit conclusion of appeals where hearings had already occurred). The vast majority of the issues in the appeals were challenges to findings of fact by the panels under the guise of DSU Article 11 challenges that the panels failed to make an objective assessment of the facts. While the Appellate Body decisions attempt to limit what the AB should be reviewing where DSU Art. 11 is the basis for the claim, the bulk of the decisions still involve discussions of at least some of the DSU Art. 11 claims made by the appellants. See WT/DS435/AB/R at 38-135 and WT/DS441/AB/R at 38-135.

The United States was a third party to the cases but limited its written comments to a few issues, the most important of which was the need for the Appellate Body not to permit Art. 11 to be used for a review of factual findings, which by DSU are issues for the panel. See WT/DS435/AB/R/Add.1, Annex C-16 at 92-93; WT/DS441/AB/R/Add.1, Annex C-16 at 92-93:

“III. COMPLAINANTS’ CLAIMS OF ERROR UNDER THE DSU

“7. Honduras and the Dominican Republic both appeal dozens of factual findings under DSU Article 11. Both appeals by Honduras and the Dominican Republic to the Appellate Body make numerous claims under Article 11 of the DSU of what clearly are alleged factual errors by the Panel. By agreement of all WTO Members, the DSU expressly limits the scope of an appeal to alleged legal errors by a panel, not factual errors.6 The United States disagrees with these attempts to re-litigate dozens of unfavorable factual determinations by the Panel through claims of breach of Article 11 of the DSU.

“8. The Appellate Body has an opportunity in this appeal to reconsider how its originally limited approach to review the “objective assessment” of a panel has been seized by appellants to cover practically all factual determinations by a panel. Given the lack of textual basis in the DSU for
appellate review of panel fact-finding, the Appellate Body could instead reassert that the proper issues for appeal are issues of law and legal interpretations covered by a panel report.7

“6 See DSU Article 17.6.

“7 Id. (“An appeal shall be limited to issues of law covered in the panel report and legal interpretations developed by the panel.”).”

Conclusion

The plain packaging decisions by the Appellate Body are the last AB decisions until the impasse over AB member selection is resolved which means that the U.S. concerns of the operation of the AB must be resolved.

While the decisions are important in themselves, they also demonstrate the types of problems which have made Appellate Body decisions untimely and problematic to the United States and other Members.

While some Members are now proceeding with arbitration type actions to maintain a second-level review of disputes, the need for collective action to return the Appellate Body to its proper and limited role continues. With the COVID-19 pandemic and now the Director-General selection process taking up much of the trade oxygen for many WTO Members, the need for Appellate Body reform is likely to slip to 2021 or later before being focused on again.

World Trade Organization — Search for a new Director-General

On May 14, 2020, the WTO’s Director-General Roberto Azevedo announced during a virtual meeting of all WTO Members that he would be stepping down from his position on August 31st, one year ahead of the end of his second four year term which ends August 31, 2021. His message to the membership was that the decision was personal and was intended to permit the WTO to choose a new Director-General hopefully before his departure and to avoid a dilution of effort needed for the next Ministerial Conference which has been postponed from June 2020 to either summer or winter of 2021. The current Chair of the WTO General Council, Ambassador David Walker of New Zealand, indicated that he would be notifying Members shortly of the start of the selection process and would be consulting to see if the process could be expedited in light of DG Azevedo’s departure in three and a half months. Both statements are linked here and reproduced below. https://www.wto.org/english/news_e/news20_e/dgra_14may20_e.htm.

WTO-_-2020-News-items-DG-Azevêdo-announces-he-will-step-down-on-31-August

Procedures for the Appointment of Directors-General

Since 2003, there have been procedures for the appointment of directors-general adopted by the General Council of the WTO (10 December 2002), The procedures are included in WT/L/509.

The timeline laid out in the procedures calls for the process to start nine months prior to the “expiry of the term of an incumbent Director-General.” WT/L/509, para. 7. So the current situation will either run over beyond DG Azevedo’s departure (indeed potentially to as late as sometime in February 2021) or will have to be seriously expedited (as potentially permitted under para. 23).

While expediting the process is possible, the various steps required by the process suggest that it is highly unlikely a new WTO Director-General will have been agreed to by the time DG Azevedo steps down. Thus, the WTO will likely face a vacancy for some period of time. Para. 23 of the procedures agreed to would then require the General Council to designate one of the four Deputy Directors-General to serve as Acting Director-General until the selection process for a new Director-General is completed. Thus, if there is a vacancy beginning September 1st, the General Council will be selecting an Acting Director-General from among these individuals — Yonov Frederick Agah (Nigeria), Karl Brauner (Germany), Alan Wolff (US) and Yi Xiaozhun (China).

Timing of Steps Absent Expedition

The procedures (WT/L/509) provide for the following timeline if a selection process occurs within the nine months outlined:

  1. “Members shall have one month after the start of the appointment process to nominate candidates. Nominations shall be submitted by Members only, and in respect of their own nationals.” Para. 8.
  2. Chair of the General Council has materials distributed to members as received and sends a consolidated list of candidates after the close of the one month period. Para. 10.
  3. “The candidates nominated shall then have three months to make themselves known to Members and to engage in discussions on the pertinent issues facing the Organization.” Para. 8.
  4. “As early as possible after the close of the one-month nomination period, candidates shall be invited to meet with Members at a formal General Council meeting. Candidates will be invited to make a brief presentation, including their vision for the WTO, to be followed by a question- and-answer period.” Para. 14.
  5. Months 5 and 6 after initiation, “the General Council shall proceed, through a process of consultations, to narrow the field of candidates and ultimately to arrive at its choice for appointment.” Para. 15.
  6. The process which is led by the Chair of the General Council and several facilitators, looks to find the candidate “around whom consensus can be built.” Para. 17. Depending on the number of candidates, there can be successive rounds to find candidates least likely to attract consensus who are then expected to withdraw. Para. 18.
  7. If successful, the Chair of the General Council with the support of the facilitators will “submit the name of the candidate most likely to attract consensus and recommend his or her appointment by the General Council.” Para. 19.
  8. “The process shall conclude with a meeting of the General Council convened not later than three months prior to the expiry of an incumbent’s term, at which a decision to appoint a new Director-General shall be taken.” Para. 7
  9. If General Council can’t take a decision by consensus, Members can “consider the possibility of recourse to a vote as a last resort.” Para. 20.

The full list of procedures is embedded below (WT/L/509).

WTL509

Assuming Amb. Walker sends out a notification in the next day or so, a normal process would result in a General Council decision in the second half of November. If there is a vacancy, the new Director-General should be able to assume responsibilities as soon thereafter as his/her schedule permits, even if not three months after the decision.

Process in 2012-2013

The selection process in 2012 started in December with nine applications received by December 31. The WTO press release showing the candidates and linking to their statements, CVs and other materials is linked here. https://www.wto.org/english/news_e/news13_e/dgsel_03jan13_e.htm. There was interest by many developing countries in seeing that the selection process kept in mind paragraph 13 of the procedures dealing with representativeness of candidates which states,

“13. In order to ensure that the best possible candidate is selected to head the WTO at any given time, candidatures representing the diversity of Members across all regions shall be invited in the nominations process. Where Members are faced in the final selection with equally meritorious candidates, they shall take into consideration as one of the factors the desirability of reflecting the diversity of the WTO’s membership in successive appointments to the post of Director-General.”

Because the DG slot at the WTO had been filled by three Europeans, one New Zealander and one from Thailand (with Pascal Lamy of France the last DG), many developing countries sought a developing country candidate assuming there were well qualified candidates from many countries. See WT/GC/M/139 at 13-15 (paras. 50 – 60).

Of the nine candidates, eight were from countries that classify themselves as developing countries within the WTO (Ghana, Costa Rica, Indonesia, Kenya, Jordan, Mexico, the Republic of Korea and Brazil). The sole developed country candidate was from New Zealand. All candidates had solid credentials.

Meetings with the candidates by the General Council occurred in late January (29-31) where each candidate was given 15 minutes for an opening statement and then participated in a question and answer session of an hour and fifteen minutes. See, e.g., WT/GC/M/142 (minutes of meeting held on Jan. 29-31) posted 16 May 2013.

Three rounds of consultations were held beginning in early April, with the result that at a General Council meeting on May 14, the Chair of the General Council put forward Roberto Azevedo from Brazil as the candidate most likely to achieve consensus and the General Council agreed. WT/GC/M/144 (minutes of meeting held on May 14) posted 4 July 2013.

Mr. Azevedo then assumed the role of Director-General as of September 1, 2013 and was reappointed for a second four years in 2017.

Prognosis for 2020

One would expect that there will be a number of developed country Members who put forward candidates in the next thirty days on the assumption that the pattern will be developed, developing, developed, developing and Brazil has just completed seven years with their candidate as DG.

Canada, Australia, New Zealand, Japan, Switzerland, Norway, the United Kingdom and one or more member countries from the EU would seem to be possibilities. The U.S. is not included in the list simply because of its prior lack of putting forward candidates and current Administration and Congressional concerns with the WTO, although the U.S. concern with the need for reforms could result in a surprise. The Republic of Korea is not included as it has considered itself a developing country, though it may still put forward a candidate and note that it is not seeking special and differential treatment on current or future negotiations in light of its development. I would be surprised if the United Kingdom puts forward a candidate just based on the serious trade negotiations that the U.K. is engaged in with the EU and the United States and their recent resumption of trade policy responsibilities following Brexit.

Developing countries are not prevented from putting forward candidates, and I assume that there will be some candidates put forward. Singapore would fit a profile similar to Korea in that it has indicated it will not seek special and differential treatment on current or future negotiations. Africa has not had a Director-General selected from among its candidates, and there has been only one Asian candidate selected previously.

What isn’t known is the willingness of the Members to streamline the nomination and selection process to permit a resolution while DG Azevedo is still active. If there are very few candidates, it may be easier for Members to agree to expedited procedures.

With the serious issues facing the world economy and the global trading system, maximum cooperation in selecting a new Director-General would be very important to helping focus a global response and updating of the WTO. Let’s hope that this is an issue on which the membership can agree to act quickly.

Food security – how will COVID-19 infections at meat processing plants affect?

COVID-19 is a health pandemic. However, because of the various restrictions placed on movement of people within countries and internationally, there have been concerns that there could be disruptions in food supplies and the possibility of a food crisis. With travel curtailed and many restaurants closed, there has been a sudden shift in demand patterns as demand in food service (restaurants, caterers) has largely dried up and demand in grocery stores has sharply increased. This has led to problems in processing and distribution and a sharp contraction in the demand for some food products where demand was concentrated in food service.

The concerns about a possible food crisis have been amplified by the actions of some countries or territories to impose export restrictions on certain agricultural products and the actions of some other countries to increase tariffs on certain imported agricultural products to protect domestic producers amidst falling food prices. The concerns arise during a period (2020) when there is ample food production globally, and hence a food crisis should be avoidable.

For the WTO, FAO and most governments, the actions of dozens of countries in 2007-2008 who imposed export restraints on certain food products remain fresh of mind. The vast majority of trade restrictions then were on rice and wheat, two staples for populations around the world. The introduction of export restraints by one or more countries led to similar actions by others. The result was serious shortages of products for import dependent countries and highly volatile prices which affected most countries.

In an earlier post I reviewed actions taken by the G20 agriculture ministers and a group of WTO Members to pledge to work to keep markets open for food products during the COVID-19 pandemic. Deputy Director-General Alan Wolff provided a virtual statement yesterday looking at food security and the increased reliance on international trade in food for many WTO Members. Similarly, different groups monitor countries who are imposing export restraints on food. See DDG Wolff, “Reliance on international trade for food security likely to grow,” https://www.wto.org/english/news_e/news20_e/ddgaw_30apr20_e.htm; https://public.tableau.com/profile/laborde6680#!/vizhome/ExportRestrictionsTracker/FoodExportRestrictionsTracker?publish=yes.

Today’s post looks at the challenges being experienced in North America, Europe and globally from the high level of infections of COVID-19 at meat and poultry processing plants. These infections have resulted in thousands of workers testing positive, many being very ill, some dying and many plants closing for some period of time to achieve a safer working environment. In the U.S. and Canada, a large number of facilities that handle a significant part of total U.S. and Canadian production have been affected. Workers are understandably concerned about returning to work when the facilities reopen despite an Executive Order by President Trump invoking the Defense Production Act to mandate the continued functioning of the meat and poultry processing facilities. See https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-taking-action-ensure-safety-nations-food-supply-chain/;https://www.whitehouse.gov/presidential-actions/executive-order-delegating-authority-dpa-respect-food-supply-chain-resources-national-emergency-caused-outbreak-covid-19/

But the consequences of the large number of infections in meat and poultry processing plants have been a reduction in operating capacity, reduced supply to domestic markets, possible reductions in export supplies and massive waste of cattle, pigs and chickens which are being killed and not processed because of the challenges and with downward prices to farmers and ranchers.

While it is not known if the problem will be very short term, a sudden reduction in capacity or production can lead to imbalances in the supply/demand ratio which could result in higher prices, reduced supplies and possible actions to satisfy domestic demand needs, including export restraints.

Because to date there has been no evidence that COVID-19 is transmitted from food or food packaging, there should not be any reason for food embargoes of meat and poultry imported from countries where facilities have closed temporarily due to COVID-19 worker infections. See https://www.who.int/images/default-source/health-topics/coronavirus/eng-mythbusting-ncov-(19).tmb-1920v.png; https://www.fda.gov/food/food-safety-during-emergencies/food-safety-and-coronavirus-disease-2019-covid-19; https://ec.europa.eu/food/sites/food/files/safety/docs/biosafety_crisis_covid19_qandas_en.pdf

Problems in meat processing plants in the U.S. and Canada

There have been a host of articles in the press in recent weeks in both the U.S. and Canada reviewing the huge number of plants that have had COVID-19 confirmed cases. As many as 30 plants in the U.S. and Canada are involved with more than 3,000 workers testing positive. More than 70% of beef processing in Canada has been affected and some 25% in the United States. See, e.g., https://time.com/5830178/meat-shortages-coronavirus/; https://www.ctvnews.ca/health/coronavirus/these-are-the-meat-plants-in-canada-affected-by-the-coronavirus-outbreak-1.4916957; https://globalnews.ca/news/6857867/alberta-covid-19-meat-processing-beef-production/; https://nevalleynews.org/13141/news/meat-processing-plants-close-in-u-s-and-canada-as-covid-19-spreads-through-work-force/.

Not surprisingly, the eruption of COVID-19 cases in processing plants and the resulting need to close facilities at least temporarily has led to concern about worker safety as well as the economic effects of a sudden reduction in meat supplies. The Center for Disease Control issued guidelines for meat processing plants to permit improved safety for workers. See CDC, Guidance for Meat and Poultry Workers and Employers, https://www.cdc.gov/coronavirus/2019-ncov/community/organizations/meat-poultry-processing-workers-employers.html. The guidance is embedded below.

Guidance-for-Meat-and-Poultry-Processing-Workers-and-Employers-_-CDC

It has also led to reductions in production of processed meats and poultry and the wasting of cattle, pigs and chickens unable to be processed in recent weeks. USDA reports on beef and pork in the last week show sharp contractions in production. For beef, the USDA data show collapsing production and falling prices for cattle and rising prices for beef.

4-27-2020-USDA-data-on-beef

For pork, hog slaughter which had been up significantly through March has seen sharp declines in April with prices for pork products falling til April and then increasing rapidly.

4-30-pork-production-USDA

For poultry, USDA data through April 24, show relatively steady production volumes although press reports have reviewed millions of chickens being killed because of lack of access to processing facilities.

4-24-2020-USDA-poultry-data

Challenges in Canada would be similar or greater since a larger part of their beef processing facilities has been affected.

Meat Production Outside of the U.S. and Canada

An article by IHS Markit from March 31, 2020, reviews challenges of COVID-19 in meat processing facilities around the world as well as other challenges flowing from COVID-19 (shift in mix as restaurants shut down; export challenges with transportation limitations). “Meat industry on a knife-edge as COVID-19 disruption deepens,” https://ihsmarkit.com/research-analysis/analysis-meat-industry-covid19-disruption.html. The challenges differ in terms of pressures on meat supplies and prices as transportation problems would reduce the ability to export and thus reduce prices in exporting countries while presumably increasing prices in importing countries. By contrast, plant closures and/or reduced operating levels will reduce supply and hence increase prices of meat products in the producing country and in any export markets. There are reported issues in the EU, in Australia and potentially in Brazil.

The last forecast from USDA on U.S. exports of meats and poultry continues to show generally growing U.S. exports around the world, but the report predates some of the COVID-19 outbreaks in meat processing plants in the U.S. and the resulting concerns from communities and workers. https://apps.fas.usda.gov/psdonline/circulars/livestock_poultry.pdf

Conclusion

It is likely that over the next several months, there will be a temporary shortage of meat and poultry products in at least several important consuming and producing nations. Reduced supplies could lead to reduced exports and concerns about food security in importing countries. Reduced supplies could also lead to higher prices and internal political pressure to increase domestic availability. One such approach to increase supplies for domestic consumption for exporting countries is to restrict exports.

Fortunately, most of the major producing nations of beef and pork and at least some of the major poultry producing nations are parties to the joint statement to the WTO of April 22 2020 indicating their commitment to keeping trade flows open for agricultural products. Many are also part of the G20 and hence similarly supporting the need to keep agricultural trade open. See my prior post on the G20 agriculture ministers and the statement of Members to the WTO, https://currentthoughtsontrade.com/2020/04/23/food-security-complications-from-covid-19-recent-un-information-and-g20-and-wto-member-statements/.

In the United States, the Executive Order of President Trump can send a signal to meat and poultry processors to work to keep facilities open, but the Executive Order can’t force workers to return to working environments which workers see as unsafe. The CDC’s guidance to workers and employers should be helpful but both increase costs for employers and likely reduce productivity of facilities. The increased costs are necessary for worker safety as may be reduced productivity. Both, however, will likely result in higher prices to consumers and lower prices to farmers and ranchers.

The bigger question will be whether more countries who currently don’t have export restraints on food products introduce such restraints on non-meat and poultry products from fear of spreading food security issues.

Hopefully, the world will not find itself with dual pandemics – COVID-19 and food security. Stay tuned.

Food Security Complications from COVID-19 – Recent UN Information and G20 and WTO Member Statements

With the global health crisis flowing from the COVID-19 pandemic ongoing, the world is also facing the specter of mass starvation flowing from a combination of ongoing armed conflicts, weather events, export restraints on food and potential disruptions in food supply. Export restraints and disruptions in food supply are increasing based on actions to address the COVID-19 pandemic.

Governments of the world are understandably focused on the health pandemic where known deaths since December are approaching 200,000 with confirmed cases over 2.5 million and continuing to increase. To date Europe and the United States and a few other countries account for the vast majority of confirmed cases and deaths from COVID-19, though nearly all countries have some cases and many other countries could see rapidly growing cases in the weeks and months ahead.

In contrast, the number of people in the world facing acute hunger and possible starvation is staggering with death projections for 2020 in key months of likely shortage as high as 300,000/day or more without concerted efforts to prevent! On April 21, David Beasley, the UN World Food Programme Executive Director made a virtual presentation to the UN Security Council. https://www.wfp.org/news/wfp-chief-warns-hunger-pandemic-covid-19-spreads-statement-un-security-council. His statement is reproduced below.

Forgive me for speaking bluntly, but I’d like to lay out for you very clearly what the world is facing at this very moment. At the same time while dealing with a COVID-19 pandemic, we are also on the brink of a hunger
pandemic.

“In my conversations with world leaders over the past many months, before the Coronavirus even became an issue, I was saying that 2020 would be facing the worst humanitarian crisis since World War II for a number of reasons.

“Such as the wars in Syria and Yemen. The deepening crises in places like South Sudan and, as Jan Egeland will no doubt set out, Burkina Faso and the Central Sahel region. The desert locust swarms in Africa, as Director General Qu highlighted in his remarks. And more frequent natural disasters and changing weather patterns. The economic crisis in Lebanon affecting millions of Syrian refugees. DRC, Sudan, Ethiopia. And the list goes on. We’re already facing a perfect storm.

“So today, with COVID-19, I want to stress that we are not only facing a global health pandemic but also a global humanitarian catastrophe. Millions of civilians living in conflict-scarred nations, including many women and children, face being pushed to the brink of starvation, with the spectre of famine a very real and dangerous possibility.

“This sounds truly shocking but let me give you the numbers: 821 million people go to bed hungry every night all over the world, chronically hungry, and as the new Global Report on Food Crises published today shows, there are a further 135 million people facing crisis levels of hunger or worse. That means 135 million people on earth are marching towards the brink of starvation. But now the World Food Programme analysis shows that, due to the Coronavirus, an additional 130 million people could be pushed to the brink of starvation by the end of 2020. That’s a total of 265 million people.

“On any given day now, WFP offers a lifeline to nearly 100 million people, up from about 80 million just a few years ago. This includes about 30 million people who literally depend on us to stay alive. If we can’t reach these people with the life-saving assistance they need, our analysis shows that 300,000 people could starve to death every single day over a three-month period. This does not include the increase of starvation due to COVID-19.

“In a worst-case scenario, we could be looking at famine in about three dozen countries, and in fact, in 10 of these countries we already have more than one million people per country who are on the verge of starvation. In many places, this human suffering is the heavy price of conflict.

“At WFP, we are proud that this Council made the historic decision to pass Resolution 2417 in May 2018. It was amazing to see the council come together. Now we have to live up to our pledge to protect the most vulnerable and act immediately to save lives.

“But this is only in my opinion only the first part of the strategy needed to protect conflict-riven countries from a hunger pandemic caused by the Coronavirus. There is also a real danger that more people could potentially die from the economic impact of COVID-19 than from the virus itself.

“This is why I am talking about a hunger pandemic. It is critical we come together as one united global community to defeat this disease, and protect the most vulnerable nations and communities from its potentially devastating effects.”

Lockdowns and economic recession are expected to lead to a major loss of income among the working poor. Overseas remittances will also drop sharply – this will hurt countries such as Haiti, Nepal, and Somalia just a name a couple. The loss of tourism receipts will damage countries such as Ethiopia, where it accounts for 47% of total exports. The collapsing oil prices in lower-income countries like South Sudan will have an impact significantly, where oil accounts for 98.8% of total exports. And, of course, when donor countries’ revenues are down, how much impact will this have on life saving foreign aid.

The economic and health impacts of COVID-19 are most worrisome for communities in countries across Africa as well as the Middle East, because the virus threatens further damage to the lives and livelihoods of people already put at risk by conflict.

“WFP and our partners are going all-out to help them we’ll do everything we possibly can. For example, we know that children are particularly vulnerable to hunger and malnutrition, so we are prioritizing assistance to them.

“Right now, as you may now 1.6 billion children and young people are currently out of school due to lockdown closures. Nearly 370 million children are missing out on nutritious school meals – you can only imagine when children don’t get the nutrition they need their immunity goes down. Where nutritious school meals have been suspended by school closures, we are working to replace them with take-home rations, wherever possible.

“As you know, WFP is the logistics backbone for the humanitarian world and even more so now for the global effort to beat this pandemic. We have delivered millions upon millions of personal protective equipment, testing kits and face masks to 78 countries on behalf of the World Health Organization. We are also running humanitarian air services to get frontline health professionals doctors, nurses, and humanitarian staff into countries that need help, especially while passenger air industry is basically about shut down.

“But we need to do so much more, and I urge this Council to lead the way. First and foremost, we need peace. As the Secretary-General recently said very clearly, a global ceasefire is essential.

Second, we need all parties involved in conflicts to give us swift and unimpeded humanitarian access to all vulnerable communities, so they can get the assistance to them that they need, regardless of who they are or where they are. We also need in a very general sense humanitarian goods and commercial trade to continue flowing across borders, because they are the lifeline of global food systems as well as the global economy. Supply chains have to keep moving if we are going to overcome this pandemic and get food from where it is produced to where it is needed. It also means resisting the temptation to introduce export bans or import subsidies, which can lead to price hikes and almost always backfire.

“WFP is working hand in glove with governments to build and strengthen national safety nets. This is critical right now to ensure fair access to assistance and help maintain peace and prevent rising tensions among communities.

Third, we need coordinated action to support life-saving humanitarian assistance. For example, WFP is implementing plans to preposition three months’ worth of food and cash to serve country operations identified as priorities. We are asking donors to accelerate the (US) $1.9 billion in funding that has already been pledged, so we can build stockpiles and create these life-saving buffers, and protect the most vulnerable from the effects of supply chain disruptions, commodity shortages, economic damage and lockdowns. You understand exactly what I’m talking about.

“We are also requesting a further USD350 million to set up a network of logistics hubs and transport systems to keep humanitarian supply chains moving around the world. They will also provide field hospitals and medical evacuations to the frontline humanitarian and health workers, as needed and strategically.

“Excellencies, two years ago the Security Council took a landmark step when it recognized, and condemned, the devastating human toll of conflict paid in poverty and hunger. Resolution 2417 also highlighted the need for early warning systems, and today I am here to raise that alarm.

“There are no famines yet. But I must warn you that if we don’t prepare and act now – to secure access, avoid funding shortfalls and disruptions to trade – we could be facing multiple famines of biblical proportions within a short few months.

“The actions we take will determine our success, or failure, in building sustainable food systems as the basis of stable and peaceful societies. The truth is, we do not have time on our side, so let’s act wisely – and let’s act fast. I do believe that with our expertise and partnerships, we can bring together the teams and the programs necessary to make certain the COVID-19 pandemic does not become a humanitarian and food crisis catastrophe. So Mr. President, thank you, thank you very much.

Emphasis added. See also https://news.un.org/en/story/2020/04/1062272.

The 2020 Global Report on Food Crises mentioned in Mr. Beasley’s statement can be found here and is embedded below. https://docs.wfp.org/api/documents/WFP-0000114546/download/?_ga=2.200353390.1965067900.1587648297-1190105299.1587648297.

GRFC_2020_ONLINE_200420

Fifty-six countries or territories are listed as at various levels of concern for hunger in 2019 and potentially for 2020 and are summarized on pages 214-215 of the report. Eleven of the fifty-six countries or territories are categorized as at a phase 4 level (emergency) for the country as a whole or for particular parts. These include Afghanistan, Angola, the Central African Republic, the Democratic Republic of Congo, Haiti, Nigeria, South Sudan, Sudan, Yemen, Zambia, and Zimbabwe. Twenty-one others are categorized as phase 3 (crisis). These include Burkino Faso, Cameron, Chad, Eswatini, Ethiopia, Guatemala, Honduras, Lesotho, Madagascar, Malawi, Mali, Mauritania, Mozambique, Namibia, Niger, Pakistan, Senegal, Sierra Leone, Somalia, Uganada, and the United Republic of Tanzania. Eight countries or territories were ranked phase 2 (stressed). These included Cabo Verde, Cote d’Ivoire, El Salvador, Gambia, Guinea, Guinea-Bissau, Kenya and Nicaragua. Two countries or territories were listed as phase 1 (minimal)(Burundi and Rwanda). The remaining fourteen countries or territories had not been given a specific phase, some because the problem related to the presence of large numbers of refugees and what might happen during the year; for others the descriptions of the hunger challenges would suggest serious problems. These countries or territories include Bangladesh, Colombia, Djibouti, Ecuador, Iraq, Lebanon, Liberia, Libya, Myanmar, Palestine, Syrian Arab Republic, Turkey, Ukraine, and Venezuela.

While the bulk of the concerns raised in the report go to ongoing conflicts and weather problems, trade restrictions are potentially important contributors. As reviewed in an earlier post, a number of countries have imposed export restraints on certain agricultural goods. With the exception of Myanmar and Ukraine who are listed in the 2020 Global Report on Food Crises, the other countries reviewed in my earlier post are not included in the report. These countries include Russia, Kazakhstan, Vietnam, Malaysia, the Philippines, Thailand, Indonsia and Cambodia. The earlier post is linked below.

G20 Agriculture Ministers Communique

Following a virtual meeting on April 21, G20 Agriculture Ministers released a Ministerial Statement that reaffirmed “the importance of working to ensure the continued flow of food, products and inputs essential for agircultural and food production”. The Statement can be found here. https://g20.org/en/media/Documents/G20_Agriculture%20Ministers%20Meeting_Statement_EN.pdf. The statement covers a fair amount of ground but doesn’t prohibit export restraints per se in agriculture but rather repeats the limitations (reflecting existing WTO flexibilities) that trade ministers articulated for medical supplies – any restraints should be targeted, proportionate, transparent, and temporary. The full statement is reproduced below.

“We, the G20 Agriculture Ministers, are deeply saddened by the devastating human losses and suffering caused by the spread of COVID-19. We commit to cooperating closely and taking concrete actions to safeguard global food security and nutrition.

‘We reaffirm the importance of working to ensure the continued flow of food, products, and inputs essential for agricultural and food production across borders in line with our Leaders’ Statement on COVID-19 of March 26, 2020. We acknowledge the challenges of minimizing the risk of COVID-19 while keeping food supply chains functioning. We will continue to work to ensure the health, safety, welfare, and mobility of workers in agriculture and throughout the food supply chain.

We will guard against any unjustified restrictive measures that could lead to excessive food price volatility in international markets and threaten the food security and nutrition of large proportions of the world population, especially the most vulnerable living in environments of low food security. We agree that emergency measures in the context of the COVID-19 pandemic must be targeted, proportionate, transparent, and temporary, and that they do not create unnecessary barriers to trade or disruption to global food supply chains, and are consistent with World Trade Organization (WTO) rules. We recognise the importance of transparency and commend the Trade and Investment Ministers’ commitment to notify the WTO of any trade-related measures taken, including those related to agriculture and essential foodstuffs. We reaffirm our agreement not to impose export restrictions or extraordinary taxes on food and agricultural products purchased for non-commercial humanitarian purposes by the World Food Programme (WFP) and other humanitarian agencies.

“We emphasize the work of the G20 Agricultural Market Information System (AMIS) and take note of AMIS’ assessment that at present global food supplies are adequate and food markets remain well balanced. As members, we commit and call on other members to continue providing timely and reliable information on global food market fundamentals to help markets, countries, and consumers make informed choices. Where appropriate, we will coordinate policy responses, supported by the AMIS Global Food Market Information Group and the AMIS Rapid Response Forum. We call for continued support for AMIS, including through voluntary financial contributions.

“We will work together to help ensure that sufficient, safe, affordable, and nutritious food continues to be available and accessible to all people, including the poorest, the most vulnerable, and displaced people in a timely, safe, and organized manner, consistent with national requirements. Acknowledging the critical role of the private sector in food systems, we call for enhanced cooperation between the public and private sectors to help mobilize rapid and innovative responses to impacts of this pandemic on the agriculture and food sectors.

“Under the current challenging circumstances, we stress the importance of avoiding food losses and waste caused by disruptions throughout food supply chains, which could exacerbate food insecurity and nutrition risks and economic loss. We stress the need to strengthen the sustainability and resilience of food systems globally, including to future shocks from disease and pest outbreaks, and to the global challenges that drive these shocks. In line with the One Health approach, we call for strengthened mechanisms for monitoring, early warning, preparedness, prevention, detection, response, and control of zoonotic diseases, and developing science-based international guidelines on stricter safety and hygienic measures for zoonosis control.

“We deeply thank farmers and workers, and small, medium and large scale agri-food businesses for their continuous efforts to ensure our food supply. We will intensify our efforts, in line with WTO rules and the 2030 Agenda for Sustainable Development, to support them to sustain their activities and livelihoods during the crisis and to assist their recovery afterwards. Our efforts will support rural communities, especially small-scale farmers and family farms, to be more economically prosperous, resilient and sustainable, and to have improved food security and nutrition, giving special attention to the needs of developing and low-income countries.
We will continue our cooperation with relevant international organizations and within their mandates work to: reinforce international cooperation; identify additional actions to alleviate the impacts of COVID-19 on food security and nutrition; share best practices and lessons learned, such as addressing barriers to supply chains; promote evidence and science-based information and combat misinformation; provide capacity building and technical assistance; and promote research, responsible investments, innovations and reforms that will improve the sustainability and resilience of agriculture and food systems. This work could build on the Food and Agriculture Organization’s (FAO’s) evolving response to COVID-19, the International Fund for Agricultural Development’s (IFAD’s) evolving efforts to support a strong recovery from the effects of COVID-19, policy monitoring and analysis by the OECD, and other relevant initiatives, such as the preparation for the 2021 UN Food Systems Summit.

“We will continue our close cooperation and as necessary update our response to the COVID-19 pandemic and our broader G20 agriculture and food agenda. We stand ready to reconvene as required.” (Emphasis added)

The virtual meeting of G20 Agriculture Ministers included information received from the various UN organizations with expertise. See http://www.fao.org/news/story/en/item/1272058/icode/

The Ministerial Statement is helpful in encouraging nations to maintain open markets, to not tax humanitarian food aid and to provide transparency in actions taken. But the Ministerial Statement does not commit the G20 members to avoid trade restrictions where such restrictions are temporary, targeted, transparent and proportionate. Based on actions taken by China and India during the 2007-2008 food crisis, it is not surprising that the G20 could not get hard commitments to avoid agriculture export restrictions from all G20 members.

As international organizations are serving as transparency fora and are encouraging joint action, it is not surprising that the Ministerial Statement was warmly received by the WTO as the statement supports transparency and WTO consistency of any actions taken.. https://www.wto.org/english/news_e/news20_e/dgra_21apr20_e.htm.

Communique from Various WTO Members

On July 22, twenty-three WTO Members (including the EU) submitted a joint statement to the WTO entitled RESPONDING TO THE COVID-19 PANDEMIC WITH OPEN AND PREDICTABLE TRADE IN AGRICULTURAL AND FOOD PRODUCTS, WT/GC/208, G/AG/30. The statement is embedded below.

WTGC208

The statement cautions countries to avoid actions to address the COVID-19 pandemic that would adversely affect trade in agricultural goods. Absent from the joint statement are important Members who have in the past used or who at present are using export restraints on certain agricultural products including China and India (past export restraints) and Russia, Kazakhstan, Vietnam, Malaysia, the Philippines, Thailand, Indonesia, Myanmar and Cambodia (current export restraints).

The joint statement has strong language on keeping markets open (including the negative effects of export restrictions on agriculture and agri-food products), avoiding waste, maintaining effective transport and logistical services, the importance of transparency in actions taken as well as food production and stocks. Nonetheless, because of existing WTO flexibilities provided to Members, the commitments made by the 23 Members include one which maintains the right to emergency measures that are “targeted, proportionate, transparent and temporary, and not create unnecessary barriers to trade or disruption to global supply chains”.

The joint statement is certainly a positive step with eight specific commitments taken by WTO Members who account for 63% of global agricultural exports and 55% of global agricultural imports. Time will tell if the list of supporters of the commitments expands to other major Members.

Conclusion

Based on current and projected food supplies, there should be no crisis in food supplies to the world if there is collective efforts to keep markets open, provide food aid for populations experiencing severe shortages due to conflict, adverse weather events and any adverse effects from the COVID-19 pandemic. Much of what the UN and its World Food Programme seek (cease fires; access to people regardless of conflicts or sanctions) is not likely to happen based on actions by certain major countries. But keeping world markets open and food aid funded hopefully will occur. The consequences of failure in this regard would greatly exacerbate the health and economic costs already experienced from COVID-19.

March 27, 2020 Agreement on Interim Arbitration Process by EU and 15 other WTO Members to Handle Appeals While Appellate Body is Not Operational

With the reduction in members of the Appellate Body from three to one after December 10, 2019, the WTO’s Appellate Body has not been in a position to handle new appeals nor to complete a range of other appeals that were pending where no hearing had occurred. The United States has blocked consideration of replacements while solutions to its substantive and procedural concerns with the actions of the Appellate Body are developed. As it is unlikely that U.S. concerns will be resolved in the near term, a number of WTO Members have been searching for alternative approaches to maintain a second stage review in disputes where one or more parties desires that second stage review.

Specifically, a number of WTO Members have wanted to establish an arbitration framework for disputes between Members willing to abide by such a framework. The European Union has been one of the most outspoken on the topic and had completed agreements with Canada and Norway ahead of Davos this year.

On the sidelines of Davos, a significant number of countries indicated a desire to find a common approach on arbitration to address the lack of Appellate Body review until such time as the operation of the Appellate Body was restored.

On March 27, 2020, a Multi-Party Interim Appeal Arbitration Arrangement Pursuant to Article 25 of the DSU was agreed to by to the following WTO Members — Australia, Brazil, Canada, China, Chile, Colombia, Costa Rica, the European Union, Guatemala, Hong Kong, Mexico, New Zealand, Norway, Singapore, Switzerland and Uruguay. The text of the arrangement is here, https://trade.ec.europa.eu/doclib/docs/2020/march/tradoc_158685.pdf. The arrangement is open to other Members should they opt to join at a future date.

As stated in the Ministerial Statement released yesterday, https://trade.ec.europa.eu/doclib/docs/2020/march/tradoc_158684.pdf

“Further to the Davos statement of 24 January 2020, we, the Ministers of Australia; Brazil; Canada; China; Chile; Colombia; Costa Rica; European Union; Guatemala; Hong Kong, China; Mexico; New Zealand; Norway; Singapore; Switzerland; and Uruguay, have decided [1] to put in place a Multi-party Interim Appeal Arbitration Arrangement (MPIA) on the basis of the attached document. This arrangement ensures, pursuant to Article 25 of the WTO Dispute Settlement Understanding, that any disputes among us will continue benefitting from a functioning dispute settlement system at the WTO, including the availability of an independent and impartial appeal stage.

“We believe that such WTO dispute settlement system is of the utmost importance for a rules-based trading system. The arrangement is open to any WTO Member, and we welcome any WTO Member to join.

“We wish to underscore the interim nature of this arrangement. We remain firmly and actively committed to resolving the impasse of the Appellate Body appointments as a matter of priority and urgency, including through necessary reforms. The arrangement therefore will remain in effect only until the Appellate Body is again fully functional.

“We intend for the arrangement to be officially communicated to the WTO in the coming weeks.

“1/ Subject to the completion of respective domestic procedures, where applicable.”

The European Commission reviewed the significance of yesterday’s group decision in a press release:

“The EU and 15 other members of the WTO today decided on an arrangement that will allow them to bring appeals and solve trade disputes among them despite the current paralysis of the WTO Appellate Body. Given its strong and unwavering support for a rules-based trading system, the EU has been a leading force in the process to establish this contingency measure in the WTO.

“Commissioner for Trade Phil Hogan said: ‘ Today’s agreement delivers on the political commitment taken at ministerial level in Davos in January. This is a stop-gap measure to reflect the temporary paralysis of the WTO’s appeal function for trade disputes. This agreement bears testimony to the conviction held by the EU and many other countries that in times of crisis working together is the best option. We will continue our efforts to restore the appeal function of the WTO dispute settlement system as a matter of priority. In the meantime, I invite other WTO Members to join this open
arrangement, crucial for the respect and enforcement of international trade rules.’

“The Multiparty Interim Appeal Arbitration Arrangement mirrors the usual WTO appeal rules and can be used between any members of the Organisation willing to join, as long as the WTO Appellate Body is not fully functional.

“Today’s agreement underscores the importance that the participating WTO members – Australia; Brazil; Canada; China; Chile; Colombia; Costa Rica; the European Union; Guatemala; Hong Kong, China; Mexico; New Zealand; Norway; Singapore; Switzerland; and Uruguay – attach to a functioning two-step dispute settlement system at the WTO. Such a system guarantees that trade disputes can be resolved through an impartial and independent adjudication, which is essential for the multilateral trading system based on rules.

“We expect the Multiparty Interim Appeal Arbitration Arrangement to be officially notified to the WTO in the coming weeks, once the respective WTO Members complete their internal procedures, after which it will become operational.”

https://ec.europa.eu/commission/presscorner/detail/en/IP_20_538.

The Interim Appeal Arrangement

Led by the European Union, the interim appeal arrangement looks a lot like an appeal to the Appellate Body and that is by design. As stated in paragraph 3 of the arrangement, “3. The appeal arbitration procedure will be based on the substantive and procedural aspects of Appellate Review pursuant to Article 17 of the DSU, in order to keep its core features, including independence and impartiality, while enhancing the procedural efficiency of appeal proceedings.” Many parts of practice and procedure of the Appellate Body are incorporated into the appeal arbitration procedures (Annex 1) and included in the text of the arrangement itself.

Arbitrations will be heard by three members of a standing pool of 10 appeal arbitrators who may be current or former Appellate Body members or other qualified individuals. See Annex 2. Such current and former AB members are not subject to any additional vetting if nominated by one of the signatories. Selection for serving on an appeal arbitration, similar to the Appellate Body, will be subject to rotation.

The participating Members are looking to the WTO Secretariat to provide “appropriate administrative and legal support”, that such support “will be entirely separate from the WTO Secretariat staff”. Stated differently, the participating Members are seeking the maintenance of something like the Appellate Body Secretariat but as an interim appellate arbitration group or secretariat.

The participating Members are permitting arbitration to be completed in 90 days (subject to extension approved by the parties) and give arbitrators authority to streamline proceedings to accomplish the 90 day timeline (page limits, time limits, etc.).

The full text of the interim arrangement and two appendices is embedded below.

3-27-2020-multi-party-interim-appeal-arbitration-arrangement-pursuant-to-Article-25-of-the-DSU

Approach of Other WTO Members

Time will tell the success of the interim appeal arbitration arrangement both among the existing participants and on any future participants.

The United States and many other Members are not presently participants in the interim agreement though that could, of course change as the arrangement is open to additional Members joining. Existing Members not participating in the arrangement include Japan, South Korea, India, Indonesia, Thailand, Malaysia, Argentina, South Africa, Saudi Arabia, Russia, Ukraine and many others.

Where a Member does not participate in the interim agreement, there are a wide range of options for the resolution of disputes including a bilateral agreement between the parties either during consultations or during the panel process, agreement to adopt the panel report without appeal or separate arbitration procedures agreed by the parties to a dispute. The U.S. and India in a pending dispute have also simply agreed to hold up any appellate review until such time as the Appellate Body is functioning again. Time will also reveal how well alternative dispute resolution approaches work for WTO Members.

What is certain is that absent a resolution of the underlying concerns raised by the United States over the last several years, the WTO dispute settlement system will be in a period of uncertainty with various approaches possible to resolve disputes but no clarification of the proper role of dispute settlement within the WTO.

Will the Interim Arrangement Promote Resolution of Long-Standing Problems with WTO Dispute Settlement?

While the participating Members to the interim agreement all state a commitment to pursue the prompt resolution to the WTO dispute settlement system challenges, the reality on the ground does not appear to match the rhetoric. While the U.S. has presented detailed information on its concerns and asked for engagement by Members to understand the “why” of the current situation, many Members have limited their engagement to suggesting modifications of the existing Dispute Settlement Understanding that do little more than repeat existing requirements – requirements which have been routinely flouted by the Appellate Body. Nor have Members advanced either an understanding or approaches for resolving the large number of instances where the Appellate Body has created rights or obligations not agreed to by Members. Thus, there has not been meaningful forward movement in recent months on the long-standing problems identified with the WTO dispute settlement system. Nothing in the interim arrangement augurs for an improved likelihood of resolution.

Moreover, the adoption of an interim arrangement that cloaks itself in much of the Appellate Body rules and procedures and is likely to have a number of former Appellate Body members in its pool of arbitrators is likely to create additional challenges as time goes by particularly in terms of the relevance of arbitral awards other than to the parties to the arbitration, whether existing problems are perpetuated through the interim appeal arbitration process, etc. There may also be short term challenges to the propriety of arbitrators being supported by a separate group of staff and who will pay for such services.

Conclusion

For WTO Members liking the past operation of the Appellate Body and wanting a second phase review of disputes that approximates the Appellate Body approach under the DSU, the interim appeal arbitration agreement will provide an approach while the Appellate Body itself is not functional. The WTO Members who are participating are significant users of the WTO dispute settlement system. More may join in the months ahead.

At the same time, other approaches to resolving disputes continue to be available to WTO Members and used by various Members.

There is nothing wrong with multiple approaches for handling resolution of disputes.

At the same time, nothing in the interim agreement or the actions of the participants to that agreement in the first quarter of 2020 provides any reason to believe the participants are working any harder to reach a resolution on the longstanding concerns of the United States on the actual operation of the Appellate Body.

Rule of law issues include seeing that the dispute settlement system operates within the confines of the authority defined by the Dispute Settlement Understanding. That has not been the case for many actions by the Appellate Body as well documented by the United States.

There won’t be meaningful forward movement in WTO reform or restoration of the two-step dispute settlement system until Members are able to both understand why the Appellate Body has deviated so widely from its limited role and fashion solutions that will ensure a properly functioning dispute settlement system that supports the other functions of the WTO and doesn’t replace or handicap them. Yesterday’s announcement of the interim agreement does nothing to advance those underlying needs.

Export restraints vs. trade liberalization during a global pandemic — the reality so far with COVID-19

The number of confirmed coronavirus cases (COVID-19) as of March 26, 2020 was approaching 500,000 globally, with the rate of increase in cases continuing to surge in a number of important countries or regions (e.g., Europe and the United States) with the locations facing the greatest strains shifting over time.

In an era of global supply chains, few countries are self-sufficient in all medical supplies and equipment needed to address a pandemic. Capacity constraints can occur in a variety of ways, including from overall demand exceeding the supply (production and inventories), from an inability or unwillingness to manage supplies on a national or global basis in an efficient and time responsive manner, by the reduction of production of components in one or more countries reducing the ability of downstream producers to complete products, by restrictions on modes of transport to move goods internationally or nationally, from the lack of availability of sufficient medical personnel or physical facilities to handle the increased work load and lack of facilities.

The reality of exponential growth of COVID-19 cases over weeks within a given country or region can overwhelm the ability of the local health care system to handle the skyrocketing demand. When that happens, it is a nightmare for all involved as patients can’t be handled properly or at all in some instances, death rates will increase, and health care providers and others are put at risk from a lack of adequate supplies and protective gear. Not surprisingly, shortages of supplies and equipment have been identified in a number of countries over the last three months where the growth in cases has been large. While it is understandable for national governments to seek to safeguard supplies of medical goods and equipment to care for their citizens, studies over time have shown that such inward looking actions can be short sighted, reduce the global ability to handle the crisis, increase the number of deaths and prevent the level of private sector response that open markets would support.

As we approach the end of March, the global community receives mixed grades on their efforts to work jointly and to avoid beggar-thy-neighbor policies. Many countries have imposed one or more restraints on exports of medical supplies and equipment with the number growing rapidly as the spread of COVID-19 outside of China has escalated particularly in March. Indeed, when one or more countries impose export restraints, it often creates a domino effect as countries who may depend in part on supplies from one or more of those countries, decides to impose restraints as well to limit shortages in country.

At the same time, the G-7, G-20 and others have issued statements or other documents indicating their political desire to minimize export restraints and keep trade moving. The WTO is collecting information from Members on actions that have been taken in response to COVID-19 to improve transparency and to enable WTO Members to identify actions where self-restraint or roll back would be useful. And some countries have engaged in unilateral tariff reductions on critical medical supplies and equipment.

Imposition of Export Restraints

The World Customs Organization has developed a list of countries that have imposed some form of export restraint in 2020 on critical medical supplies. In reviewing the WCO website today, the following countries were listed: Argentina, Bulgaria, Brazil, Colombia, Ecuador, European Union, India, Kazakhstan, Kyrgyzstan, Russia, Serbia, Thailand, Ukraine and Vietnam. Today’s listing is copied below.

List-of-Countries-having-adopted-temporary-export-control-measures-Worl.._

While China is not listed on the WCO webpage, it is understood that they have had some restrictions in fact at least during the January-February period of rapid spread of COVID-19 in China.

While it is surprising to see the European Union on the list, the Official Journal notice of the action indicates that the action is both temprary (six weeks – will end around the end of April) and flows in part from the fact that sources of product used by the EU had been restricting exports. The March 15, 2020 Official Journal notice is attached below.

EC-Implementing-Regulation-EU-2020-402-of-14-March-2020-making-the-exportation-of-certain-products-subject-to-the-production-of-an-export-authorisation

Professor Simon Evenett, in a March 19, 2020 posting on VOX, “Sickening thy neighbor: Export restraints on medical supplies during a pandemic,” https://voxeu.org/article/export-restraints-medical-supplies-during-pandemic, reviews the challenges posed and provides examples of European countries preventing exports to neighbors — Germany preventing a shipment of masks to Switzerland and France preventing a shipment to the U.K.

In a webinar today hosted by the Washington International Trade Association and the Asia Society Policy Institute entitled “COVID-19 and Trade – A WTO Agenda,” Prof. Evenett reviewed his analysis and noted that the rate of increase for export restraints was growing with 48 of 63 actions occurring in March and 8 of those occurring in the last forty-eight hours. A total of 57 countries are apparently involved in one or more restraints. And restraints have started to expand from medical supplies and equipment to food with four countries mentioned by Prof. Evenett – Kazakhstan, Ukraine, Russia and Vietnam.

Efforts to keep markets open and liberalize critical medical supplies

Some countries have reduced tariffs on critical medical goods during the pandemic and some countries have also implemented green lane approaches for customs clearance on medical supplies and goods. Such actions are clearly permissible under the WTO, can be undertaken unilaterally and obviously reduce the cost of medical supplies and speed up the delivery of goods that enter from offshore. So it is surprising that more countries don’t help themselves by reducing tariffs temporarily (or permanently) on critical medical supplies and equipment during a pandemic.

Papers generated by others show that there are a large number of countries that apply customs duties on medical supplies, equipment and soaps and disinfectants. See, e.g., Jennifer Hillman, Six Proactive Steps in a Smart Trade Approach to Fighting COVID-19 (graphic from paper reproduced below), https://www.thinkglobalhealth.org/article/six-proactive-steps-smart-trade-approach-fighting-covid-19

Groups of countries have staked out positions of agreeing to work together to handle the pandemic and to keep trade open. For example, the G20 countries had a virtual emergency meeting today to explore the growing pandemic. Their joint statement can be found here and is embedded below, https://www.wto.org/english/news_e/news20_e/dgra_26mar20_e.pdf.

dgra_26mar20_e

There is one section of the joint statement that specifically addresses international trade disruptions during the pandemic. That language is repeated below:

“Addressing International Trade Disruptions

“Consistent with the needs of our citizens, we will work to ensure the flow of vital medical supplies, critical agricultural products, and other goods and services across borders, and work to resolve disruptions to the global supply chains, to support the health and well-being of all people.

“We commit to continue working together to facilitate international trade and coordinate responses in ways that avoid unnecessary interference with international traffic and trade. Emergency measures aimed at protecting health will be targeted, proportionate, transparent, and temporary. We task our Trade Ministers to assess the impact of the pandemic on trade.

“We reiterate our goal to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open.”

The WTO Director General Roberto Azevedo participated in the virtual meeting with the G20 leaders and expressed strong support for the commitment of the G20 to working on the trade related aspects of the pandemic. https://www.wto.org/english/news_e/news20_e/dgra_26mar20_e.htm.

Separately, New Zealand and Singapore on March 21st issued a Joint Ministerial Statement which stated in part,

“The Covid-19 pandemic is a serious global crisis.

“As part of our collective response to combat the virus, Singapore and New Zealand are committed to maintaining open and connected supply chains. We will also work closely to identify and address trade disruptions with ramifications on the flow of necessities,”

https://www.thestar.com.my/news/regional/2020/03/21/new-zealand-works-closely-with-singapore-to-maintain-key-supply.

The Joint Ministerial Statement was expanded to seven countries (Australia, Brunei Darussalam, Canada, Chile, Myanmar, New Zealand and Singapore), on March 25th and is reportedly open to additional countries joining. See https://www.mti.gov.sg/-/media/MTI/Newsroom/Press-Releases/2020/03/updated-joint-ministerial-statement-25-mar.pdf

Conclusion

When a pandemic strikes, many countries have trouble maintaining open trade policies on critical materials in short supply and/or in working collaboratively to address important supply chain challenges or in taking unilateral actions to make critical supplies available more efficiently and at lower costs.

The current global response to COVID-19 presents the challenges one would expect to see – many countries imposing temporary restrictions on exports — while positive actions in the trade arena are more limited to date with some hopeful signs of a potential effort to act collectively going forward.

Time will tell whether governments handling of the trade dimension of the pandemic contributes to the equitable solution of the pandemic or exacerbates the challenges and harm happening to countries around the world.