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WTO Information Notes on COVID-19 Vaccine Production and Potential Bottlenecks

On October 8, 2021, the WTO released the latest in a series of Information Notes pertaining to the COVID-19 pandemic. The first one is entitled “COVID-19 Vaccine Production and Tariffs on Vaccine Inputs”. The purpose of the information note was to examine public information to see if import tariffs in any of the 27 major vaccine manufacturing countries could pose challenges or create “choke” points in vaccine production. The second Information Note is entitled “Indicative List of Trade-Related Bottlenecks and Trade-Facilitating Measures on Critical Products to Combat COVID-19” and is an update on an earlier version released 20 July 2020. Both Information Notes are linked to a WTO press release from 8 October. See WTO news, WTO issues papers on vaccine inputs tariffs and bottlenecks on critical COVID-19 products, 8 October 2021, https://www.wto.org/english/news_e/news21_e/covid_08oct21_e.htm

The second Information Note is the more important of the two papers as it identifies a range of challenges to the expedited movement of vaccines and inputs. However, the first paper is interesting in terms of identifying tariffs on critical materials in major producing countries. However, as the paper acknowledges, the analysis has its limitations.

” 2. TECHNICAL DETAILS
“The MFN applied tariffs were based on the dataset used for World Tariff Profiles 2021, and 2020
imports were based on the TDM dataset3. Even if the national tariff line data (i.e. eight-digit tariff
line codes) were available, beyond the standard HS six-digit level there is no uniformity of codes
across national tariff nomenclatures. Thus, even if only a portion of the HS six-digit code pertains to
the COVID-19 vaccine input, the data used in the analysis both for tariffs and imports were the
six-digit MFN tariff average and the total six-digit imports from the world. Preferential tariffs were
not taken into consideration and thus intra-EU imports, imports from partners of free trade
agreements (FTAs) or any other preferential imports were treated as if MFN tariffs were levied.
Furthermore, there was definitely an over-estimation of the import value of the inputs, since
identification of the national breakdown pertaining to the actual product used in vaccine
manufacturing cannot be easily done. Sometimes even within the most detailed national tariff line
(or specific product) code available (eight digits or longer), the product coverage does not
necessarily refer only to the specific vaccine input and includes non-vaccine-related inputs. While
tariff estimates can be arguably good enough,4 the same cannot be said of the estimated imports
value.” (footnotes omitted)

Certainly for the EU, U.S. and some others, many of the potentially dutiable imports will have been duty free from FTAs or other preferential partners. But the Information is nonetheless useful in flagging general categories of products important to vaccine production that have bound tariffs at 5% or greater. While neither the U.S. nor Japan have any such categories, many other vaccine producing countries have one, several or many product categories where bound tariffs are 5% or higher. Table 4 of the Information Note provides a useful summary of the findings made.

Table 2 of the Information Note presents a summary of the weighted average MFN tariff rate by country.
Thus, from a bound tariff perspective, some countries, particularly developing countries are assessing ordinary customs duties on materials needed for the production of COVIDE-19 vaccines at relatively high rates that at a minimum increase costs, making it more expensive to provide vaccines to the domestic population or export populations.

A detailed review of each of the 27 countries is provided in the WTO’s Vaccine Production and Tariffs on Vaccine Inputs which is attached to the first Information Note.

The second note is the more interesting as it reflects issues and suggestions from various stakeholders on how to expand production and access to vaccines, therapeutics and medical devices needed to combat COVID-19. The introduction to the Information note provides useful background.

“1. INTRODUCTION
“This information note seeks to facilitate access to information on possible trade-related bottlenecks and trade-facilitating measures on critical products to combat COVID-19, including inputs used in vaccine manufacturing, vaccine distribution and approval, therapeutics and pharmaceuticals, diagnostics and medical devices. It is not meant to be an exhaustive list of all specific trade measures, nor does it make any judgement on the effect or significance of the reported bottlenecks, nor on the desirability of implementing any of the suggestions on trade-facilitating measures.3

“The indicative list is based on issues identified and suggestions made by stakeholders at various events and consultations convened by the WTO, as well as with vaccine manufacturers in the context of meetings organized by the Multilateral Leaders Task Force on COVID-19,4 which includes the heads of the International Monetary Fund (IMF), the World Bank Group, the World Health Organization (WHO) and the WTO.5 This revision includes information as of 4 October 2021. Entries under each subheading are presented in no particular order. One common theme that emerges is that essential goods and inputs need to flow efficiently and expeditiously to support the rapid scaling up of COVID-19 production capacity worldwide. As manufacturers scale up production and establish new sites in different countries, the production network is not only becoming larger but also increasingly complex and international. The delay of a single component may significantly slow down or even bring vaccine manufacturing to a halt, so it follows that inputs need to flow expeditiously, and each node within the supply chain network needs to operate seamlessly with the others.” (footnotes omitted)

There are a large number of potential trade-related bottlenecks including export restrictions (13 WTO Members are reported to have one or more), such restrictions as applied by manufacturers to “fill and finish” sites, effect of such restrictions on clinical trials, high applied tariffs, customs administration challenges (no green channels for expedited clearance, limited hours of customs operation, treatment of non-commercial samples sent for testing ad quality control, import barriers/delays on manufacturing equipment), challenges in completing consular transactions.

There are also many bottlenecks identified from vaccine regulatory approval including when looking at WHO Emergency Use Listing, requirements for application/registration and authorization, inspection, release, post-approval changes, donations, EUA and regular approval, scaling up production and other issues.

The paper also identifies bottlenecks in the distribution of finished vaccines and immunization supplies, bottlenecks in trade in pharmaceuticals, bottlenecks in trade in diagnostics and other medical devices.

All in all, a daunting list of challenges the vast majority of which involve the importing country and the complexity of systems for approval of medical goods and vaccines.

The last four pages of the Information Note then identify “possible trade-facilitating measures” that could be taken to improve movement of goods. Because the information note is providing a summary of proposals put forward by stakeholders and is not an agreed set of steps by WTO Members, the note states that “no judgement is made on the desirability of implementing any of these suggestions.” Page 7. That said, many of the suggestions relate to streamlining import operations, e.g., through implementation of the Trade Facilitation Agreement, seeing that customs operates 24 hours/7 days a week, exemptions from export restrictions, harmonization of regulatory approaches and many more.

Conclusion

The Information Notes developed by the WTO provide useful information either from public sources, such as the bound tariff rates of COVID-19 vaccine input materials or summaries of information gathered from stakeholders at events looking at how to ramp up production and distribution of vaccines. It is clear that the challenges for all WTO Members in addressing the global pandemic are many and not easily addressed. The Information Notes provide a data base that can be used by WTO Members to see that the current pandemic is fully addressed in fact in the coming months, and that Members consider ways to prepare for a better outcome to future pandemics.

WTO Accessions — perhaps the most valuable benefit for Members in the first 25 years of the WTO’s existence

Much has been written about the challenges facing the World Trade Organization twenty-five years after its birth at the beginning of 1995.

The Appellate Body (“AB”) has ceased functioning with the United States blocking the appointment of new AB members based on longstanding problems with the Dispute Settlement system that have not been addressed. There are fundamental differences among major Members in what the proper role of the dispute settlement system is. Because the AB’s view of its role has differed from that of at least some of the Members, many delegations have opted to litigate instead of negotiate on issues which are not covered by the actual language of existing agreements.

The negotiating function of the WTO has had limited success in the first 25 years of the WTO reflecting deep differences among Members in priorities and the core function of the WTO. The inability to update rules or develop new rules to address 21st century commercial realities has called into question the ongoing relevance of the organization Members have failed to honor agreement directions for periodic liberalization updates in agriculture and services trade. Members have also taken decades to tackle issues of pressing time sensitivity, such as fisheries subsidies.

And there are problems in the timeliness and completeness of notifications required by many agreements and the quality of the work of many of the Committees.

A bright spot for an organization in trouble has been the success of bringing additional countries and territories into the organization. Of the 164 members at present, 36 have joined since the WTO opened in 1995 and some 23 countries or territories are in the accession process at the moment. Some 98% of global trade is now covered by WTO Members. While there are many reasons for countries or territories to join the WTO, including integrating into the global economy and improving the competitiveness of the economy (Deputy Director-General Alan Wolff describes the benefits of accession as being a catalyst for domestic reform and economic growth), there is no doubt that accessions are of benefit to the global trading system and bring the benefits of liberalization in the acceding country or territory to the existing WTO membership. Indeed, commitments of acceding Members in terms of tariff liberalization and other obligations typically are far higher than the commitments of existing Members at the same economic stage of development. Yet, accession is of great benefit to acceding countries. See WTO press release, 8 November 2020, DDG Wolff: WTO accession is a catalyst for domestic reform and economic growth, https://www.wto.org/english/news_e/news20_e/ddgaw_06nov20_e.htm. DDG Wolff, in speaking to Arab countries in the accession process made the following comments:

“Furthermore, during the last eight months, the world has experienced unprecedented levels of disruptions in people’s daily lives and their economic activities due to Covid-19. The world is not near the end of this crisis. Despite these challenging times, trade has played a key role in addressing local shortages of food, medical supplies and other essentials during the pandemic.

“Trade will have to play an even greater role in supporting recovery of the global economy going forward. In this context, we should recognise the important role played by Saudi Arabia in steering the G20 during this difficult year, urging collective and multilateral cooperation. The Riyadh Initiative is a praiseworthy effort endorsed by the G20 nations.

“The Arab region has not escaped the dire economic consequences of this pandemic. For some, the steep fall in oil prices has aggravated existing problems. A crisis, however, also presents opportunities for closer international cooperation to limit the harm from the pandemic and to spur the recovery.

“These issues demonstrate that more, not less, global and regional trade integration is required. Integration into the world economy goes hand in hand with necessary domestic reforms. This is where WTO accession makes particularly valuable contributions. Those engaged in the reform-driven accession process are likely to experience a quicker recovery and greater resilience in the future.

“Based on evidence from the 36 accessions which have been successfully completed, the WTO accession process has served as an effective external anchor for domestic reforms, acting as a catalyst in realizing the potential of their economies. According to the last WTO Director-General’s Annual Report on WTO Accessions, Article XII Members have registered higher growth rates of GDP and trade (exports and imports), as well as increased flows of inward FDI stocks, in the years following their accession compared to the rest of the world. These results indicate that integrated, open economies tend to grow faster. In addition, by signalling a government’s commitment to international rules, WTO membership appears to also encourage the inflow of foreign investment.

“The accession process has been used by resource-based countries to diversify their economies. Economic diversification is one of the major priorities for the governments in the Arab region. Our 2016 study examined whether countries’ export structures became more diversified after gaining WTO membership. This was true for about half of the recently acceded
Members, which increased the number of exported products, measured in HS chapters, accounting for more than 60% of their exports after accession. This was achieved often through rebranding their economies with WTO membership and attracting increased FDI.”

From 1995-2016, the thirty-six countries or territories that joined the WTO included many of the major economies that were not original Members of the WTO. These included China, Chinese Taipei, Saudi Arabia, Vietnam, Ukraine, and the Russian Federation. The other countries or territories who have joined represent a wide cross-section of geographic regions and levels of development: Ecuador, Bulgaria, Mongolia, Panama, Kyrgyz Republic, Latvia, Estonia, Jordan, Georgia, Albania, Oman, Croatia, Lithuania, Moldova, Armenia, North Macedonia, Nepal, Cambodia, Tonga, Cabo Verde, Montenegro, Samoa, Vanuatu, Lao People’s Democratic Republic, Tajikistan, Yemen, Seychelles, Kazakhstan, Liberia, and Afghanistan. No accessions have been completed since 2016.

The twenty-three countries and territories that are in the process of accession often are countries or territories that have suffered from years of conflict. This has led the WTO to host the first “Trade for Peace Week” from November 30-December 4, 2020. See WTO press release, 25 November 2020, WTO to host first Trade for Peace Week, https://www.wto.org/english/news_e/news20_e/acc_25nov20_e.htm.

“In announcing the Trade for Peace Week, Deputy Director-General Alan Wolff noted: ‘The 2030 Agenda for Sustainable Development recognizes international trade as an engine for inclusive economic growth and poverty reduction that contributes to the promotion of sustainable development. This in turn can facilitate building and maintaining peace. The connection between trade and peace is the raison d’être for the creation of the rules-based multilateral trading system that led to economic recovery and prosperity after the devastation from World War II.’

“Currently, 23 countries are in the process of joining the WTO, and over a half of them suffer from a fragile situation from years of conflicts. Launched in 2017, the Trade for Peace initiative aims to assist fragile and conflict-affected (FCA) countries through WTO accession, with the emphasis on institution building based on the principles of non-discrimination, predictability, transparency and the rule of law. Based on experiences of former FAC countries, WTO accession can help set the conditions to move out of a state of fragility or conflict into a state of stability, economic well-being and peace.”

There are ten events this week. The public can register to participate in the virtual panels. See WTO Accessions, Trade for Peace Week, https://www.wto.org/english/thewto_e/acc_e/t4peace2020_e.htm.

DDG Wolff spoke at one of today’s event and his comments are embedded below. See WTO press release, November 30, 2020, DDG Alan Wolff – DDG Wolff calls for more structured WTO cooperation with humanitarian and peace communities, https://www.wto.org/english/news_e/news20_e/ddgaw_30nov20_e.htm.

WTO-_-2020-News-items-Speech-DDG-Alan-Wolff-DDG-Wolff-calls-for-more-s

The twenty-three countries and territories in the process of accession include: Algeria, Andorra, Azerbaijan, Bahamas, Belarus, Bhutan, Bosnia and Herzegovina, Comoros, Curacao, Equatorial Guinea, Ethiopia, Iran, Iraq, Lebanese Republic, Libya, Sao Tome and Principe, Serbia, Somalia, South Sudan, Sudan, Syrian Arab Republic, Timor-Leste, and Uzbekistan.

Conclusion

The genesis for the GATT and the other Bretton Woods institutions was a desire to provide an infrastructure and global rules to minimize the likelihood of future world wars. Cooperation, collaboration and integration would all reduce the likelihood of global conflict.

The WTO provides the opportunity for countries or territories struggling to escape violence to embark on a path of hope. That is a core mission of the WTO today just as it was for the GATT in the late 1940s.

Moreover, the record over the first twenty-five years of the WTO’s existence has been that those countries and territories who take the challenging steps to become Members of the WTO improve their economies and speed growth, development and foreign direct investment. Accessions also offer real improvements in market access for existing WTO Members. A true win-win situation.

For an organization struggling to maintain relevance amidst deep divisions among Members who seem to have lost the consensus on the core purpose of the organization, the pilgrimage of non-member countries and territories to join the organization is a beacon of hope. Serious reforms and updating of the rule book are desperately needed for a better functioning system where outcomes are based on underlying economic strengths and not the interference of governments. A willingness of Members to refocus on what the purpose of the WTO is in fact and to be supporters of contributing to the maximum of one’s ability will be key to forward movement. Inspiration can be drawn from the efforts of non-members to join.

The COVID-19 Pandemic – An Update on Shifting Patterns of Infections and Implications for Medical Goods Needs

Since late March there have been significant shifts in the number of COVID-19 cases being reported by countries and within countries. Many countries where the virus hit hardest in the first months of the year have been seeing steady progress in the reduction of cases. Some in Asia, Oceania and in Europe are close to no new cases. Others in Europe and some in Asia have seen significant contractions in the number of new cases. Other countries have seen a flattening of new cases and the beginnings of reductions (e.g., the U.S. and Canada). And, of course, other countries are caught up in a rapid increase of cases (e.g., Russia, Brazil, Ghana, Nigeria, India, Pakistan, Saudi Arabia).

As reviewed in a prior post, the shifting pattern of infections has implications for the needs for medical goods and open trade on those products. https://currentthoughtsontrade.com/2020/04/28/shifting-trade-needs-during-the-covid-19-pandemic/. As the growth in number of cases is seen in developing and least developed countries, it is important that countries who have gotten past the worst part of Phase 1 of the pandemic eliminate or reduce export restraints, if any, that were imposed to address medical needs in country during the crush of the pandemic in country. It is also critical that the global efforts to increase production of medical goods including test kits and personal protective equipment continue to eliminate the imbalance between global demand and global supply and to permit the restoration and/or creation of national and regional buffer stocks needed now and to address any second phase to the pandemic. And as tests for therapeutics and vaccines advance, it is critical that there be coordinated efforts to see that products are available to all populations with needs at affordable prices.

While there is some effort at greater coordination on research and development as reviewed in a post last week (https://currentthoughtsontrade.com/2020/05/06/covid-19-the-race-for-diagnostics-therapeutics-and-vaccines-and-availability-for-all/), concerns exist that as nations get past the first phase of the pandemic, countries will turn their focus to other needs and not in fact address the severe gaps between pandemic supply needs and existing capacity and inventories. Such an outcome would exacerbate the challenges the world is facing from the current pandemic and its likely phase 2 later this year.

The following table shows total cases as of May 11 and the number of cases over fourteen day periods ending April 11, April 27 and May 11 as reported by the European Center for Disease Prevention and Control. The data are self-explanatory but show generally sharply reduced rates of new infections in Europe and in a number of Asian countries, though there are increases in a few, including in India and Pakistan and in a number of countries in the Middle East, such as Saudi Arabia. North America has seen a flattening of the number of new infections in the U.S. and Canada with some small reductions in numbers while Mexico is seeing growth from currently relatively low levels. Central and South America have some countries with rapid increases (e.g., Brazil, Chile, Peru). The Russian Federation is going through a period of huge increases. While there are still relatively few cases in Africa, there are countries who are showing significant increases, albeit from small bases.

Countrycases
through 5-11
14 days
to 4-11
14 days
to 4-27
14 days
to 5-11
Austria15,7875,8631,252598
Belgium53,08119,38316,4876,947
Bulgaria1,965342625665
Croatia2,187909430157
Cyprus89843318481
Czechia8,1233,4531,413719
Denmark10,4293,7732,4011,854
Estonia1,73968333496
Finland5,9621,7441,6021,386
France139,06357,71229,17214,488
Germany169,57569,07632,17714,382
Greece2,7161,045392210
Hungary3,2849671,125701
Ireland22,9965,9689,6073,734
Italy219,07061,07941,31221,395
Latvia939332161127
Lithuania1,47964138730
Luxembourg3,8861,618442163
Malta4962117048
Netherlands42,62714,49412,2584,782
Poland15,9964,5664,9434,379
Portugal27,58111,2047,2793,717
Romania15,3624,1754,7364,326
Slovakia1,45742063778
Slovenia1,45752820250
Spain224,39092,96343,04516,756
Sweden26,3226,6398,1577,682
EU271,018,867370,221220,830109,551
United Kingdom219,18355,72968,56166,343
EU27 + UK1,238,050425,950289,391175,894
United States1,329,799396,874408,339363,889
Canada68,84817,45822,51921,964
Mexico35,0223,12710,01620,345
North America1,433,669417,459440,874406,198
Japan15,7983,8486,1302,413
South Korea10,909972201171
Singapore23,3361,17711,0929,712
Australia6,9412,860391228
New Zealand 1,1476195825
Subtotal58,1319,47617,87212,549
China84,0101,058990-189
India67,1526,57418,74039,260
Indonesia14,0322,4664,6415,150
Iran107,60335,86018,79517,122
Turkey138,65741,33153,17428,527
Israel16,4777,3734,2531,079
Bangladesh14,6573764,7959,241
Kazakhstan5,1266471,7562,409
Krygyzstan1,016281276321
Malaysia6,6562,1851,097876
Pakistan30,9413,5917,95417,613
Saudi Arabia39,0482,54713,06021,526
Taiwan4401134111
Thailand3,0151,38234393
Vietnam2888660
Sri Lanka86391313340
Subtotal529,981105,961130,234143,397
Russian Federation209,68810,88165,179128,739
Ukraine15,2321,9856,2326,223
Belarus22,9731,8877,88512,510
Georgia635153229149
Subtotal248,52814,90679,525147,621
South Africa10,0158332,3735,469
Egypt9,4001,2992,2545,081
Morocco6,0631,1032,4041,998
Algeria5,7231,4561,4682,341
Burkina Faso751302135119
Cameroon2,579715801958
Cote d’Ivoire1,700379576550
D.R. of the Congo1,024165225565
Djibouti1,280137809187
Ghana4,2632419842,713
Guinea2,1462078441,052
Kenya672158158317
Mali70483273315
Mauritius33222480
Niger821428167125
Nigeria4,3992249503,126
Senegal1,7091463911,038
Somalia1,05418411618
Sudan1,363122181,126
Tunisia1,03244424283
U.R. of Tanzania50919268209
subtotal57,4698,59315,95927,990
Switzerland30,22212,1243,7581,244
Liechtenstein832030
Norway8,0992,6631,090594
Iceland1,801785919
Subtotal40,20515,5924,9421,847
Argentina5,7761,2851,5642,009
Brazil162,69916,22139,719100,811
Chile28,8661,9346,11815,535
Colombia11,0631,9342,6035,684
Dominican Republic10,3472,0393,1684,212
Ecuador29,5595,53415,2536,840
Panama8,4482,1882,3792,669
Peru67,3075,26219,99839,790
Costa Rica79229510097
El Salvador958105173660
Subtotal325,81536,79791,075178,307
All Other Countries131,67726,78038,80955,215
Total of all countries4,063,5251,061,5141,108,6811,149,018

The WTO maintains a data base of actions by WTO members in response to the COVID-19 pandemic which either restrict medical goods exports or which liberalize and expedite imports of such products. As of May 8, the WTO showed 173 measures that the WTO Secretariat had been able to confirm, with many countries having temporary export restrictions on medical goods, some restraints on exports of food products, and a variety of measures to reduce tariffs on imported medical goods or expedite their entry. https://www.wto.org/english/tratop_e/covid19_e/trade_related_goods_measure_e.htm. Some WTO Members other than those included in the list have had and may still have informal restrictions.

The EU and its member states are presumably in a position now or should be soon to eliminate any export restrictions based on the sharp contraction of cases in the EU as a whole over the last six weeks – last 14 days are roughly 59% lower than the 14 days ending on April 11. Similarly, countries with small numbers of cases and rates of growth which seem small may be candidates for eliminating export restrictions. Costa Rica, Kyrgyzstan, Taiwan, Thailand, Vietnam, Malaysia, Georgia, Norway and Switzerland would appear to fit into this latter category. Most other countries with restrictions notified to the WTO appear to be either in stages where cases continue at very high levels (e.g., United States) or where the number of cases is growing rapidly (e.g., Russia, Belarus, Saudi Arabia, Ecuador, Bangladesh, India, Pakistan). Time will tell whether the WTO obligation of such measures being “temporary” is honored by those who have imposed restrictions. Failure to do so will complicate the efforts to see that medical goods including medicines are available to all on an equitable basis and at affordable prices.