Cambodia

COVID-19 Omicron variant – hopeful signs of peaking in the U.S. and Europe; supply disruptions continue from zero tolerance policy in China

Terence P. Stewart · January 23, 2022 · Uncategorized · Cambodia, Cameroon, China, Europe, Mongolia, Nigeria, Omicron variant, United States, Zambia · No Comments

In a recent post, I reviewed vaccine equity issues around the COVID-19 pandemic and recent developments including a new low-cost vaccine being produced in India and available to be produced in many countries with no licensing costs. See January 11, 2022: WTO efforts to address the COVID-19 pandemic — the January 10, 2022 General Council meeting and some current developments of interest, https://currentthoughtsontrade.com/2022/01/11/wto-efforts-to-address-the-covid-19-pandemic-the-january-10-2022-general-council-meeting-and-some-current-developments-of-interest/.

The omicron variant has wreaked havoc in Europe and in the U.S., though there are signs of the huge surge in cases starting to ebb. See, e.g., European Centre for Disease Prevention and Control, COVID-19 situation update worldwide, as of week 2, updated 20 January 2022 (data for last two weeks of 2021 not available; huge surge from omicron reflected in curve; dark blue is Europe, light blue is the Americas). The following chart shows new cases worldwide.

COVID-19 situation update worldwide, as of week 2, updated 20 January 2022

Distribution of COVID-19 cases worldwide, as of week 2 2022 — The ECDC data show the U.S. being the first country to record more than 10 million infections in a fourteen day period (10.586 million; weekly data from the ECDC actually show 12.52 million cases reported in the U.S. in the first two weeks of 2022). The huge surge in Europe in the last several months is spread across many countries. France has been particularly hard hit with new cases numbering in the hundreds of thousands per day for nearly every day in January (highest, 464,679 on January 19 with declines since then). *See* ECDC, Data on the daily number of new reported COVID-19 cases and deaths by EU/EEA country 20 January 2022, https://www.ecdc.europa.eu/en/publications-data/data-daily-new-cases-covid-19-eueea-country.

In the United States, there is a note of optimism as the national number appears to be coming down. The decline is significant in some states where omicron was first identified but cases are still increasing in other parts of the country. See, e.g., NBC News, ‘An optimistic trend’: Covid cases are falling, but U.S. isn’t out of the woods yet, January 22, 2022, https://www.nbcnews.com/health/health-news/omicron-wave-covid-cases-finally-peaked-us-rcna13103 (“Cases are already falling in parts of the Northeast, Walensky said. ‘We are starting to see steep declines in areas that were first peaking, so areas of the Northeast — New York, Rhode Island, Connecticut — are really starting to come down.’ Shea said that cases in the rest of the country and deaths, which lag behind cases, are expected to trail shortly after. The big dropoff in cases in large states like New York can make the nationwide average look lower, even though cases are still rising in many states, but she expects all states to hit their peaks soon after Northeastern states.”

Supply chain problems that have plagued the world for many months now and led to both shortages and large inflationary pressures may continue in part because of China’s zero-tolerance COVID policy has resulted in more shutdowns ahead of the approaching winter olympic games. See, e.g., New York Times, Supply Chain Woes Could Worsen as China Imposes New Covid Lockdowns, January 16, 2022, https://www.nytimes.com/2022/01/16/business/economy/china-supply-chain-covid-lockdowns.html (“Companies are bracing for another round of potentially debilitating supply chain disruptions as China, home to about a third of global manufacturing, imposes sweeping lockdowns in an attempt to keep the Omicron variant at bay.”).

Many countries, including the U.S. and EU, are reviewing supply chain issues to improve resiliency and reduce risks. Both the U.S. and EU for example have been looking at legislation to bolster semiconductor chip manufacturing. See, e.g., World Economic Forum, ‘There’s no digital without chips’: New European Chips Act announced, 20 January 2022 (“European Commission President Ursula von der Leyen has announced a new European Chips Act”), https://www.weforum.org/agenda/2022/01/theres-no-digital-without-chips-new-european-chips-act-announced/; Reuters, U.S. House bill on China competitiveness, chip investment, coming soon – Pelosi, January 21, 2022, https://www.reuters.com/world/us/pelosi-says-us-house-will-soon-introduce-competitiveness-bill-2022-01-21/.

While discussions continue around trade and health issues at the WTO including what, if any, temporary waiver from TRIPS obligations or other actions to improve vaccine production may be needed, data available on vaccine production and shipments continue to suggest that the issue is not necessary for a resolution to the COVID-19 pandemic. See, e.g., WTO-IMF COVID-19 Vaccine Trade Tracker, Last updated: 17 January 2021, https://www.wto.org/english/tratop_e/covid19_e/vaccine_trade_tracker_e.htm (showing total supply to the end of December at 11.5 billion doses; exports of 4.4 billion doses, with rapidly increasing shipments to low income and lower-middle income countries in the last few months of 2021). Several tables from the latest WTO-IMF COVID-19 Vaccine Trade Tracker are copied below.

“3. Imports

“Imports are defined as the number of doses received from producing economies, mirroring the information provided in the exports section. This definition does not take into account imports of vaccine substances in bulk form to be used in ‘fill and finish’ sites.”

By income group

Income Group Imports	Number of doses (million)	Doses per 100 people	Population (million)
Low income	234.0	34.5	678.4
Lower middle income	1,482.1	49.5	2,994.7
Upper middle income	1,748.5	59.7	2,930.4
High income	935.6	75.4	1,241.6
Note: as of 31 December 2021

By Continent

Continent	Number of doses (million)	Doses per 100 people	Population (million)
Asia	2,372.5	51.0	4,652.6
South America	682.7	157.3	434.0
Africa	638.5	46.5	1,371.7
North America	460.5	77.7	592.8
Europe	217.8	29.0	750.8
Oceania	28.3	65.5	43.2
Note: as of 31 December 2021

With more vaccines being reviewed by the WHO and individual countries, production of vaccines in 2022 will exceed volumes produced in 2021. Exports will also increase as trends in the second half of 2021 show have been happening.

While different sources look at vaccinations for individual countries and territories, attached is an excel spreadsheet of data from the World Health Organization for data available as of January 20, 2022. There are countries not covered by the WHO data (e.g., Taiwan) and others for which there is no World Bank 2022 income designation. I have added the categories of the World Bank GNI per capita income (low income, lower-middle income, upper-middle income, high income) to the WHO table. At the end of the WHO listing I have broken the data out by income group. For those countries/territories with no World Bank designation, they are listed “na”. For countries or territories in the World Bank list but not shown on the WHO list, I have included the name of the country/territory at the end of the income grouping.

As reviewed in prior posts, for groups and organizations focuses on vaccine equity, it is important to understand the causes of the very large differences in vaccines/100 people shown within at least the low income, lower-middle income and upper-middle income categories. For example, Rwanda (97.195 vaccinations/100 people), Mozambique (54.492 vaccinations/100 people) are low income countries. But their experience in vaccine access is much different than many other low income countries (most under 30 vaccine doses/100 people, many under 20 or 10/100 people, one less than 1/100 people). Medical infrastructure and many other factors are certainly important components in improving vaccine access to many low income countries. See GAVI, World leaders launch call for renewed support for vaccination in 2022 as part of the global fight against COVID-19, https://www.gavi.org/news/media-room/world-leaders-launch-call-renewed-support-vaccination-2022-part-global-fight (” Specifically, COVAX leaders called for at least US$ 5.2bn in new funding: US$ 3.7 billion to fund a 600 million dose Pandemic Vaccine Pool to address uncertainties and related uncovered risks, such as boosters, additional coverage, new variant vaccines if required, and to make sure there is reliable supply for the poorest countries. In addition, catalytic delivery funding of US$ 1 billion is requested to support getting doses into arms rapidly and safely without undermining routine immunization activities. A further US$ 545 million is needed to cover ancillary costs such as syringes, transport and insurance for donations.”).

The same is true for lower-middle income countries with Cambodia and Mongolia recording 189.643 and 164.686 vaccine doses/100 people respectively while Nigeria, Cameroon and and Zambia report just 9.007, 3.859, and 5.665 vaccine doses/100 people respectively. Seventeen countries have reported more than 100 vaccine doses/100 people while 9 have reported 20 vaccine doses/100 people or fewer.

The same is true for upper-middle income countries where the range of vaccine doses/100 people range from 32.258 for Equitorial Guinea to 283.945 for Cuba.

1-21-2022-WHO-COVID-vaccine-data-low-income-countries.xlsx

WTO reduces transparency of Trade Policy Reviews — what is the possible justification?

Terence P. Stewart · October 20, 2021 · Trade Policy Reviews · Argentina, Australia, Brazil, Cambodia, Canada, Chile, China, Colombia, Costa Rica, Dominican Republic, Ecuador, Egypt, El Salvador, European Union, Guatemala, Hong Kong, India, Indonesia, Israel, Japan, Kazakhstan, Kingdom of Saudi Arabia, Lao PDR, Malaysia, Mexico, Mongolia, New Zealand, Nigeria, Norway, Paikistan, Peru, Philippines, Republic of Korea, Republic of Moldova, Russian Federation, Singapore, Switzerland, Taiwan, Thailand, Trinidad and Tobago, Turkey, United States · No Comments

Through September 2021, when a country went through a Trade Policy Review, a large amount of material was made available to the public at the time of the TPR meeting with additional information (minutes, questions and answers, corrections to Secretariat report and/or government report) released a number of months later. The WTO press releases at the time of the TPR meeting were similar. The one for Singapore from 22 and 24 September 2021 is typical.

As can be seen from the press release, the public could access the full report of the Secretariat, the full report of the Government of Singapore, the concluding comments of the Chairperson as well as an Executive Summary of the Secretariat report at the time of the two day meeting to review the reports. Moreover, minutes from the meeting were available to the public typically about six weeks after the meeting as were the written questions and written answers.

Beginning in October, the press release has been modified and far less information is made available immediately to the public. There have been two TPRs so far in October, the Republic of Korea (13 and 15 October) and China (20 and 22 October). A TPR of the Russian Federation is scheduled for next week.

The WTO press release for the Republic of Korea is copied below. The current one for China is similar.

All that is made available to the public at the time of the meeting is a short executive summary of the Secretariat report and the concluding remarks of the Chairperson. No reference is made to how to access the full report of the Secretariat or the Government (here Republic of Korea), nor is there an indication as to when minutes or written questions and written answers will be available.

There is nothing on the WTO webpage which describes why so little information is being provided beginning this month on new Trade Policy Reviews. For the public, the drastic reduction in transparency makes the WTO operations even less understandable.

If the WTO will be releasing all of the documents it has historically but with significant time delays on all documents, what is the justification? For 25 years, TPRs have been conducted with the type of information released that gave the public a good understanding of the Secretariat’s and the government’s review of its trade policy. That understanding has been timely, consistent with the meeting and supplemented within several months with minutes and the written questions and answers.

If the WTO is not intending on releasing all of the documents it has historically released, what is the possible justification?

China, which is going through a Trade Policy Review this week, also went through a TPR in 2018. In 2018, the Secretariat Report released to the public at the time of the TPR meeting was 193 pages (along with a summary of 6 pages). See WT/TPR/S/375. China’s Report on its trade policy was 23 pages. See WT/TPR/G/375. These documents are dated 6 June 2018. A revision to the Secretariat Report is dated 14 September 2018 and was also 193 pages ( WT/TPR/S/375/Rev.1). The Concluding remarks by the Chairperson are contained in a separate press release from the WTO at the time of the TPR meeting but linked from the main notice of the TPR. See WTO news, Trade Policy Review: China, 11 and 13 July 2018, https://www.wto.org/english/tratop_e/tpr_e/tp475_e.htm linking to the concluding remarks of the Chairperson at https://www.wto.org/english/tratop_e/tpr_e/tp475_crc_e.htm. The minutes of the meeting are contained in WT/TPR/M/375, 21 November 20218 and are 98 pages in length with statements from 66 Members (two on behalf of larger groups). The written questions and answers are contained in WT/TPR/M/375/Add.1, dated 1 February 2019 and being 729 pages in length. The WTO Members who submitted questions (including follow-up questions) are shown on pages 2-3 of the document.

Because the current TPR on China (20 and 22 October) does not provide either of the full reports (Secretariat and Government) and because there is no indication of when minutes or written questions and answers will be available, there is certainly delayed access and potentially denial of access of the same type of information on China (or any other country) that was been released in the past. This should be viewed as unacceptable by the WTO Secretariat and WTO Members and certainly should be so viewed by the public.

Conclusion

What is available to the public from a Trade Policy Review is critical for an understanding of concerns raised by WTO Members about any other Member’s trade policy as well as the level and openness of the response from the Member being reviewed. The Secretariat’s report is an important factual analysis of developments in the Member being reviewed. The recent curtailment of access to the full Secretariat Report and the full Government Report greatly harms transparency and the ability of the public to understand developments within WTO Members in a timely manner. Should the WTO cease to release any of the information heretofore available to the public in current and future TPRs, the WTO will be further damaging the public’s perception of the WTO and will be further retreating from openness and transparency towards the public..

Forced labor and child labor — a continued major distortion in international trade for some products

Terence P. Stewart · January 24, 2021 · forced labor and child labor · Afghanistan, Angola, Argentina, Azerbaijan, Bangladesh, Belize, Benin, Bolivia, Brazil, Burkina Faso, Burma, Cambodia, Cameroon, Central African Republic, Chad, China, Colombia, Costa Rica, Cote d'Ivoire, Democratic Republic of the Congo, Dominican Republic, Ecuador, Egypt, El Salvador, Eswatini, Ethiopia, Ghana, Guatemala, Guinea, Honduras, India, Indonesia, International Labour Organization, Iran, Kazakhstan, Kenya, Kyrgyz Republic, Lebanon, Lesotho, Liberia, Madagascar, Malawi, Malaysia, Mali, Mauritania, Mexico, Mongolia, Mozambique, Nepal, Nicaragua, Niger, Nigeria, North Korea, Pakistan, Panama, Paraguay, Peru, Philippines, Russia, Rwanda, Senegal, Sierra Leone, South Sudan, Sudan, Suriname, Taiwan, Tajikistan, Tanzania, Thailand, Turkey, Turkmenistan, U.S. Department of Labor, Uganda, Ukraine, Uyghurs, Uzbekistan, Venezuela, Vietnam, WITA, Xinjiang, Yemen, Zambia, Zimbabwe · No Comments

In recent years, the United States has paid more attention to the trade distortions flowing from forced labor and child labor in other countries, particularly in China. While there has been significant progress in the last twenty years in reducing forced labor and child labor globally according to the International Labor Organization (“ILO”), the COVID-19 pandemic has seen some retrenchment and efforts by China to address minorities in country have created an international backlash and concern.

The ILO webpage on forced labor reflects the global nature of the problem. The webpage states in part,

“Although forced labour is universally condemned, ILO estimates show that 24.9 million people around the world are still subjected toit. Of the total number of victims of forced labour, 20.8 million (83 per cent) are exploited in the private economy, by individuals or enterprises, and the remaining 4.1 million (17 per cent) are in State-imposed forms of forced labour. Among those exploited by private individuals or enterprises, 8 million (29 per cent) are victims of forced sexual exploitation and 12 million (64 per cent) of forced labour exploitation. Forced labour in the private economy generates some US$ 150 billion in illegal profits every year: two thirds of the estimated total (or US$ 99 billion) comes from commercial sexual exploitation, while another US$ 51 billion is a result from forced economic exploitation in domestic work, agriculture and other economic activities (Note 1).

“Vestiges of slavery are still found in some parts of Africa, while forced labour in the form of coercive recruitment is present in many countries of Latin America, in certain areas of the Caribbean and in other parts of the world. In numerous countries, domestic workers are trapped in situations of forced labour, and in many cases they are restrained from leaving the employers’ home through threats or violence. Bonded labour persists in South Asia, where millions of men, women and children are tied to their work through a vicious circle of debt. In Europe and North America, a considerable number of women and children are victims of traffickers, who sell them to networks of forced prostitution or clandestine sweat-shops. Finally, forced labour is still used as a punishment for expressing political views.

“For many governments around the world, the elimination of forced labour remains an important challenge in the 21st century. Not only is forced labour a serious violation of a fundamental human right, it is a leading cause of poverty and a hindrance to economic development. ILO standards on forced labour, associated with well-targeted technical assistance, are the main tools at the international level to combat this scourge.”

ILO, International Labour Standards on Forced labour, https://www.ilo.org/global/standards/subjects-covered-by-international-labour-standards/forced-labour/lang–en/index.htm. See also ILO and Walk Free, 2017, Global Estimates of Modern Slavery, Forced Labor and Forced Marriage, https://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/documents/publication/wcms_575479.pdf.

Child labor involves more people – an estimated 152 million of which 73 million are involved in hazardous work. See ILO, International Programme on the Elimination of Child Labour and Forced Labour (IPEC+), https://www.ilo.org/global/about-the-ilo/how-the-ilo-works/flagships/ipec-plus/lang–en/index.htm.

While the incidence of forced labor and child labor is declining, the COVID-19 pandemic has complicated trends as these populations are most vulnerable. See, e.g., ILO, The International Labour Organization
and the US Department of Labor partnership to eliminate child labour and forced labour, 2019, https://www.ilo.org/wcmsp5/groups/public/@ed_norm/@ipec/documents/publication/wcms_710971.pdf (“The ILO’s most recent global estimates of child labour indicate, however, that significant progress is
being made. From 2000 to 2016, there was a net reduction of 94 million children in child labour and
the number of children in hazardous work was halved. In parallel, the ILO Worst Forms of Child
Labour Convention (No. 182) was ratified by 186 countries, reaching almost universal ratification.
The challenges ahead, however, remain formidable: in 2016, 152 million girls and boys were in child
labour and 25 million men, women and children were trapped in forced labour.”); ILO, COVID-19 impact on
child labour and forced labour: The response of the IPEC+ Flagship Programme, 2020, https://www.ilo.org/wcmsp5/groups/public/—ed_norm/—ipec/documents/publication/wcms_745287.pdf (“COVID-19 has plunged the world into a crisis of unprecedented scope and scale. Undoubtedly, restoring global health remains the first priority, but the strict measures required are resulting in massive economic and social shocks. As lockdown, quarantine, physical distancing and other isolation measures to suppress transmission continue, the global economy has plunged into a recession. The harmful effects of this pandemic will not be distributed equally. They are expected to be most damaging in the poorest countries and in the poorest neighbourhoods, and for those in already disadvantaged or vulnerable situations, such as
children in child labour and victims of forced labour and human trafficking, particularly women and girls.
These vulnerable groups are more affected by income shocks due to the lack of access to social protection,
including health insurance and unemployment benefits. * * * Experience from previous crisis situations, such as the 2014 Ebola epidemic, has shown that these factors play a particularly strong role in exacerbating the risk to child labour and forced labour.”).

In China, the government’s efforts to “reeducate” minority populations (e.g., Uyghurs from the western region of Xinjiang) has led to allegations of forced labor on a range of products and actions by the United States to restrict certain imports from China from the region. The Washington International Trade Association is holding a virtual webinar on January 27 looking at the challenges in China and the forced labor problem of the Xinjiang Uyghur Autonomous Region and the resulting U.S. ban on cotton and tomato products. See WITA, WITA’s Friday Focus on Trade, Vol. 206, January 22, 2021 (containing various articles on the China forced labor issue and referencing the webinar on January 27, WITA Webinar: The U.S. Moves Against Forced Labor in Xinjiang).

The U.S. Department of Labor in September released its 2020 list of products believed to be produced in foreign countries with forced labor or with child labor. See USDOL, 2020 List of Goods Produced by Child Labor or Forced Labor, September 2020, https://www.dol.gov/sites/dolgov/files/ILAB/child_labor_reports/tda2019/2020_TVPRA_List_Online_Final.pdf. The report provides the following statement of purpose:

“The U.S. Department of Labor (USDOL or the Department) has produced this ninth edition of the List of Goods Produced by Child Labor or Forced Labor in accordance with the Trafficking Victims Protection Reauthorization Act (TVPRA), as amended. The TVPRA requires USDOL’s Bureau of International Labor Affairs (ILAB or the Bureau) to “develop and make available to the public a list of goods from countries that
[ILAB] has reason to believe are produced by forced labor or child labor in violation of international standards” (TVPRA List or the List; 22 U.S.C. § 7112(b)(2)(C)). It also requires submission of the TVPRA List to the United States Congress not later than December 1, 2014, and every 2 years thereafter (22 U.S.C. § 7112(b)(3)).

“The Frederick Douglass Trafficking Victims Prevention and Protection Reauthorization Act of 2018 expanded ILAB’s mandate to require the TVPRA List to include, ‘to the extent practicable, goods that are produced with inputs that are produced with forced labor or child labor’” (22 U.S.C. 7112(b)(2)(C)).

“The TVPRA directs ILAB ‘to work with persons who are involved in the production of goods on the list … to create a standard set of practices that will reduce the likelihood that such persons will produce goods using [child labor or forced labor],’ and ‘to consult with other departments and agencies of the United States Government to reduce forced and child labor internationally and ensure that products made by forced labor and child labor in violation of international standards are not imported into the United States’ (22 U.S.C. § 7112(b)(2)(D)–(E)).” (pages 1 and 3).

This year’s publication lists 77 countries that have one or more products believed to be produced with child labor, with forced labor or with both child and forced labor. Fourteen countries are listed as having products believed to be produced with forced labor. Thirty-six countries are listed as believed to produce products with child and forced labor. Sixty-four countries produce some products with child labor. The 77 countries are listed below along with whether products are believed produced with child labor, forced labor, or child labor & forced labor.

Afghanistan — child larbor; child labor & forced labor

Angola — child labor & forced labor

Argentina — child labor; child labor & forced labor

Azerbaijan — child labor

Bangladesh – child labor; child labor & forced labor

Belize — child labor

Benin — child labor; child labor & forced labor

Bolivia — child labor; forced labor; child labor & forced labor

Brazil — child labor; forced labor; child labor & forced labor

Burkina Faso — child labor; child labor & forced labor

Burma — child labor; forced labor; child labor & forced labor

Cambodia — child labor; child labor & forced labor

Cameroon — child labor

Central African Republic — child labor

Chad — child labor

China — forced labor; child labor & forced labor

Colombia — child labor; child labor & forced labor

Costa Rica — child labor

Cote d’Ivoire — child labor & forced labor

Democratic Republic of the Congo — child labor; child labor & forced labor

Dominican Republic — child labor; child labor & forced labor

Ecuador — child labor

Egypt — child labor

El Salvador — child labor

Eswatini — child labor

Ethiopia — child labor; child labor & forced labor

Ghana — child labor; child labor & forced labor

Guatemala — child labor

Guinea — child labor

Honduras — child labor

India — child labor; child labor & forced labor

Indonesia — child labor; child labor & forced labor

Iran — child labor

Kazakhstan — child labor & forced labor

Kenya — child labor

Kyrgyz Republic — child labor

Lebanon — child labor

Lesotho — child labor

Liberia — child labor

Madagascar — child labor

Malawi — child labor; child labor & forced labor

Malaysia — forced labor; child labor & forced labor

Mali — child labor; child labor & forced labor

Mauritania — child labor

Mexico — child labor; child labor & forced labor

Mongolia — child labor

Mozambique — child labor

Nepal — child labor & forced labor

Nicaragua — child labor

Niger — child labor; forced labor

Nigeria — child labor; child labor & forced labor

North Korea — forced labor

Pakistan — child labor; forced labor; child labor & forced labor

Panama — child labor

Paraguay — child labor; child labor & forced labor

Peru — child labor; forced labor; child labor & forced labor

Philippines — child labor

Russia — forced labor; child labor & forced labor

Rwanda — child labor

Senegal — child labor

Sierra Leone –child labor; child labor & forced labor

South Sudan — child labor & forced labor

Sudan — child labor

Suriname — child labor

Taiwan — forced labor

Tajikistan — child labor & forced labor

Tanzania — child labor

Thailand — child labor; forced labor; child labor & forced labor

Turkey — child labor

Turkmenistan — child labor & forced labor

Uganda — child labor

Ukraine — child labor

Uzbekistan — forced labor

Venezuela — forced labor

Vietnam — child labor; child labor & forced labor

Yemen — child labor

Zambia — child labor

Zimbabwe — child labor

While the number of products obviously vary by country and category, the report categorized agriculture as having 68 child labor listings and 29 forced labor listings. This compares to manufacturing with 39 child labor and 20 forced labor listings; mining showed 32 child labor and 13 forced labor listings and pornography showed one each.

Looking at specific products for individual countries provides the most information.

As an example, China is shown as having the following products believed to be produced with forced labor — Artificial Flowers, Christmas Decorations, Coal, Fish, Footwear, Garments, Gloves, Hair Products, Nails, Thread/Yarn, and Tomato Products. China is also shown as having the following products believed to be produced with child labor and forced labor — Bricks, Cotton, Electronics, Fireworks, Textiles, and Toys. As a USDOL separate post notes, gloves, hair products, textiles, thread/yarn and tomato products were added in 2020 because of research on the forced labor situation in Xinjiang. See USDOL, Bureau of International Labor Affairs, Against Their Will: The Situation in Xinjiang, Forced Labor in Xinjiang, 2020, https://www.dol.gov/agencies/ilab/against-their-will-the-situation-in-xinjiang. The document is embedded below.

Against-Their-Will_-The-Situation-in-Xinjiang-_-U.S.-Department-of-Labor

Looking at India, products believed to be produced with child labor include the following — Bidis (hand-rolled
cigarettes), Brassware, Cotton, Fireworks, Footwear, Gems, Glass Bangles, Incense (agarbatti), Leather Goods/
Accessories, Locks, Matches, Mica, Silk Fabric, Silk Thread, Soccer Balls, Sugarcane, Thread/Yarn. Products believed produced with child labor & forced labor include the following — Bricks, Carpets, Cottonseed (hybrid), Embellished Textiles, Garments, Rice, Sandstone, Stones.

While the USDOL reports don’t estimate the portion of exports from any country of individual products that are produced with child and/or forced labor, the trade consequences can be significant as such labor is artificially valued creating distortions in competitiveness and resulting trade flows. For example, the list of products for China are either important export products for China or important inputs into exported products. The same would true for India and for many other of the 77 countries on the list.

Conclusion

The U.S. has in place statutory provisions which permit the exclusion from entry into the United states of products produced with forced labor. The Trump Administration did a somewhat better job enforcing U.S. law on imports of products produced with child or forced labor. Much more can be done and should be done domestically.

Similarly, the ILO is working to eliminate forced labor and child labor consistent with UN Sustainable Development Goals. “The objective of the IPEC+ Global Flagship Programme – in line with Target 8.7 of the 2030 Sustainable Development Agenda, adopted by the United Nations in 2015 – is to provide ILO leadership in global efforts to eradicate all forms of child labour by 2025 and all forms of contemporary slavery and human trafficking by 2030. It also aims to ensure that all people are protected from – and can protect themselves against – these gross human rights violations.” ILO, IPEC+ Global Flagship Programme Implementation, Towards a world free from child labour and forced labour, page 4, 2020, https://respect.international/wp-content/uploads/2020/01/wcms_633435.pdf.

The WTO could play a role in the fight against forced labor and child labor. Such labor practices distort global trade flows in addition to the challenges created for countries engaged in such practices in terms of poverty and human rights abuses. The WTO could gather information from Members on the volume of production and exports of products produced with child and forced labor both as finished products and as inputs into other products. Such an exercise would facilitate an understanding of the extent of global trade represented by such products and help focus attention on trade actions that could be taken to help Members eliminate such harmful practices. While it is unlikely that Members will agree to such a data gathering undertaking, one is surely needed and would add transparency to a source of an important global issue with trade as well as non-trade dimensions.

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

Terence P. Stewart · November 30, 2020 · accessions, Trade for Peace Week · Afghanistan, Albania, Algeria, Andorra, Armenia, Azerbaijan, Bahamas, Belarus, Bhutan, Bosnia and Herzegovina, Bulgaria, Cabo Verde, Cambodia, China, Chinese Taipei, Comoros, Croatia, Curacao, Ecuador, Equatorial Guinea, Estonia, Ethiopia, Georgia, Iran, Iraq, Jordan, Kazakhstan, Kyrgyz Republic, Lao People's Democratic Republic, Latvia, Lebanese Republic, Liberia, Libya, Lithuania, Moldova, Mongolia, Montenegro, Nepal, North Macedonia, Oman, Panama, Russian Federation, Samoa, Sao Tome and Principe, Saudi Arabia, Serbia, Seychelles, Somalia, South Sudan, Sudan, Syrian Arab Republic, Tajikistan, Timor-Leste, Tonga, Ukraine, Uzbekistan, Vanuatu, Vietnam, Yemen · No Comments

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.

Regional Comprehensive Economic Partnership signed on November 15, 2020

Terence P. Stewart · November 16, 2020 · RCEP, Uncategorized · Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Myanmar, New Zealand, Republic of Korea, Singapore, Thailand, the Philippines, Vietnam · No Comments

On Sunday, November 15, 2020, fifteen countries signed the Regional Comprehensive Economic Partnership which will “enter into force for those signatory States that have deposited their instrument of ratification, acceptance, or approval, 60 days after the date on which at least six signatory States which are Member States of ASEAN and three signaotry States other than Members States of ASEAN have deposited their instrument of ratification, acceptance, or approval with the Depositary.” RCEP Article 20.6.2.

The fifteen countries signing the RCEP are the ten ASEAN countries — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — and five others (Australia, China, Japan, New Zealand and the Republic of Korea). India had participated in negotiations but withdrew in late 2019. According to a CNN article, “The Regional Comprehensive Economic Partnership spans 15 countries and 2.2 billion people, or nearly 30% of the world’s population, according to a joint statement released by the nations on Sunday, when the deal was signed. Their combined GDP totals roughly $26 trillion and they account for nearly 28% of global trade based on 2019 data.” CNN Business, November 16, 2020, China signs huge Asia Pacific trade deal with 14 countries, https://www.cnn.com/2020/11/16/economy/rcep-trade-agreement-intl-hnk/index.html.

The Joint Statement released on the 15th is copied below.

“Joint Leaders’ Statement on The Regional Comprehensive Economic Partnership (RCEP)

“We, the Heads of State/Government of the Member States of the Association of Southeast Asian Nations (ASEAN) – Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam – Australia, China, Japan, Korea and New Zealand, met virtually on 15 November 2020, on the occasion of the 4th RCEP Summit.

We were pleased to witness the signing of the RCEP Agreement, which comes at a time when the world is confronted with the unprecedented challenge brought about by the Coronavirus Disease 2019 (COVID-19) global pandemic. In light of the adverse impact of the pandemic on our economies, and our people’s livelihood and well-being, the signing of the RCEP Agreement demonstrates our strong commitment to supporting economic recovery, inclusive development, job creation and strengthening regional supply chains as well as our support for an open, inclusive, rules-based trade and investment arrangement. We acknowledge that the RCEP Agreement is critical for our region’s response to the COVID-19 pandemic and will play an important role in building the region’s resilience through inclusive and sustainable post-pandemic economic recovery process.”

https://asean.org/joint-leaders-statement-regional-comprehensive-economic-partnership-rcep-2/

The agreement has twenty chapters some of which have annexes:

Initial Provisions and General Definitions
Trade in Goods
Rules of Origin
Customs Procedures and Trade Facilitation
Sanitary and Phytosanitary Measures
Standards, Technical Regulations, and Conformity Assessment Procedures
Trade Remedies
Trade in Services
Temporary Movement of Natural Persons
Investment
Intellectual Property
Electronic Commerce
Competition
Small and Medium Enterprises
Economic and Technical Cooperation
Government Procurement
General Provisions and Exceptions
Institutional Provisions
Dispute Settlement
Final Provisions

The full RCEP agreement and country schedules of tariff commitments can be found in English at the webpage for RCEP, https://rcepsec.org/legal-text/ as well as on various individual signatory web pages. See, e.g., the Australian Government, Department of Foreign Affairs and Trade, https://www.dfat.gov.au/trade/agreements/not-yet-in-force/rcep/rcep-text-and-associated-documents.

A summary of the agreement from the ASEAN webpage is embedded below. https://asean.org/storage/2020/11/Summary-of-the-RCEP-Agreement.pdf.

Summary-of-the-RCEP-Agreement

From the chapter titles, it is clear that the Agreement does not deal with issues such as labor or environment. While there is a chapter on trade remedies, a review shows no expanded rules on industrial subsidies – a matter of concern for many countries dealing with China. Similarly, under the competition chapter, the only reference (and it is indirect) to state-owned or state-invested enterprises is contained in Article 13.3.5 (“Article 13.3: Appropriate Measures against Anti-Competitive
Activities”). “Each Party shall apply its competition laws and regulations to all entities engaged in commercial activities, regardless of their ownership. Any exclusion or exemption from the application of each Party’s competition laws and regulations, shall be transparent and based on grounds of public policy or public interest.” (Emphasis added).

RCEP Chapter 7, Trade Remedies

While subsequent posts will look at other aspects of the RCEP Agreement, this post looks at Chapter 7, Trade Remedies. For convenience, the chapter is embedded below.

rcep-chapter-7

Safeguard actions

Section A of Chapter 7 deals with RCEP safeguard measures. The RCEP safeguard measure is intended to be available for a transitional period that extends to a period that is eight years after the tariff elimination or reduction on a specific good is scheduled to occur. Relief can be in the form either of stopping tariff reductions or snapping the tariff back to the MFN rate at the lower of the rates applicable at the date of entry into force of the Agreement for the country in question or the MFN rate on the date when the transitional RCEP safeguard measure is put in place. There is a three year limit on relief, with a one year extension in certain circumstances. If relief is for more than a year, the relief provided is to be reduced “at regular intervals”. Relief is not available against imports from a RCEP party whose imports are less than 3% of total imports from the RCEP parties or if the RCEP party is a Least Developed Country. RCEP has three members who are Least Developed Countries (LDCs) according to the UN’s 2020 list – Cambodia, Laos and Myanmar. Compensation is required and if not agreed to, then the party subject to the RCEP safeguard “may suspend the application of substantially equivalent concessions” on goods from the party applying the safeguard. No compensation is required during the first three years of relief if there has been an absolute increase in imports. No compensation will be requested from an LDC.

RCEP countries preserve their rights under the WTO to pursue global safeguard measures. RCEP parties are not to apply both a RCEP safeguard and a global safeguard to the same good at the same time.

Antidumping and Countervailing Duties

Section B of Chapter 7 deals with antidumping and countervailing duties. While the Section starts by noting that parties “retain their rights and obligations under Article VI of GATT 1994, the AD Agreement, and the SCM Agreement,” the section adds clarity to notice and consultation requirements, timing of notice and information required for verification, maintaining a non-confidential file available to all parties and other matters. The biggest addition to parties rights and obligations is the acceptance of a “Prohibition on Zeroing” in dumping investigations and reviews. Article 7.13.

“When margins of dumping are established, assessed, or reviewed under
Article 2, paragraphs 3 and 5 of Article 9, and Article 11 of the AD Agreement, all individual margins, whether positive or negative, shall be
counted for weighted average-to-weighted average and transaction-to- transaction comparison. Nothing in this Article shall prejudice or affect
a Party’s rights and obligations under the second sentence of subparagraph 4.2 of Article 2 of the AD Agreement in relation to weighted average-to-transaction comparison.”

Considering the centrality of the WTO dispute settlement decisions on “zeroing” to the U.S. position on overreach by the Appellate Body, the actions of the RCEP parties to add the obligation contained in RCEP Art. 7.13 to their approach to antidumping investigations will almost certainly complicate the ability of the WTO to move past the impasse on the Appellate Body.

Conclusion

The RCEP Agreement is an important FTA in the huge number of such agreements entered by countries around the world. There will certainly be advantages for the RCEP countries from the regional trade liberalization and the common rules of origin adopted.

Pretty clearly, the RCEP has not dealt with some of the fundamental challenges to the global trading system from the rise of economic systems that are not premised on market-economy principles. While such issues can be addressed in the WTO going forward, the ability of China to get a large number of trading partners to open their markets without the addressing of the underlying core distortions from the state directed economic system that China employs suggests that the road to meaningful reform has gotten longer with the RCEP Agreement.

Nor have the RCEP countries chosen to include within the RCEP action on issues like the environment which are of growing importance to the ability to have sustainable development. Again while such issues can be addressed in the WTO, they are also being addressed in bilateral and plurilateral agreements by other countries and including some of the RCEP countries. Thus, RCEP is a lost opportunity for leadership by China on issues of great importance to its citizens and those of all RCEP parties.

U.S. commences two investigations into Vietnam under Sec. 301 of the Trade Act of 1974, as amended — on currency and on use of illegally harvested timber

Terence P. Stewart · October 12, 2020 · Uncategorized · Cambodia, Cameroon, Convention on International Trade in Endangered Species of Wild Fauna and Flora, Democratic Republic of Congo, Section 301 of the Trade Act of 1974, State Bank of Vietnam, U.S. Trade Representative Robert Lighthizer, United States, Vietnam · No Comments

On October 2, 2020, the U.S. Trade Representative announced the launch of two investigations on Vietnam’s acts, policies and practices. One involves whether Vietnam through the State Bank of Vietnam has intervened to undervalue the Vietnamese currency. The other investigation looks at whether the timber used by Vietnam to generate furniture and other products is from illegally harvested or trade timber. The USTR statement from October 2 is copied below:

“At the direction of President Donald J. Trump, the Office of the U.S. Trade Representative (USTR) is initiating an investigation addressing two significant issues with respect to Vietnam. USTR will investigate Vietnam’s
acts, policies, and practices related to the import and use of timber that is illegally harvested or traded, and will investigate Vietnam’s acts, policies, and practices that may contribute to the undervaluation of its currency and the resultant harm caused to U.S. commerce. USTR will conduct the investigation under Section 301 of the 1974 Trade Act. As part of its investigation on currency undervaluation, USTR will consult with the Department of the Treasury as to issues of currency valuation and exchange rate policy.

“United States Trade Representative Robert E. Lighthizer said, ‘President Trump is firmly committed to combatting unfair trade practices that harm America’s workers, businesses, farmers, and ranchers. Using illegal timber in wood products exported to the U.S. market harms the environment and is unfair to U.S. workers and businesses who follow the rules by using legally harvested timber. In addition, unfair currency practices can harm U.S. workers and businesses that compete with Vietnamese products that may be artificially lower-priced because of currency undervaluation. We will carefully review the results of the investigation and determine what, if any, actions it may be appropriate to take.’

“USTR will issue two separate Federal Register notices next week that will provide details of the investigation and information on how members of the public can provide their views through written submissions.”

https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/october/ustr-initiates-vietnam-section-301-investigation.

The two Federal Register notices were published on October 8. Initiation of Section 301 Investigation: Vietnam’s Acts, Policies, and Practices Related to Currency Valuation, 85 Fed. Reg. 63637-68 (Oct. 8, 2020); Initiation of Section 301 Investigation : Vietnam’s Acts, Policies, and Practices Related to the Import and Use of Illegal Timber, 85 Fed. Reg. 63,639-70 (Oct. 8, 2020).

In each notice of initiation, USTR reviews the concerns leading to the 301 investigation, indicates that consultations with Vietnam have been requested, provides a timeline for the public to submit written comments and indicates that because of uncertainties from COVID-19, USTR is not scheduling a public hearing but “will provide further information in a subsequent notice if it will hold a hearing”. Public comments in both investigations are due on November 12, 2020.

The currency investigation flows from the following concerns identified in the notice of initiation.

“The Government of Vietnam, through the State Bank of Vietnam (SBV), tightly manages the value of its currency—the dong. The SBV’s management of Vietnam’s currency is closely tied to the U.S. dollar. Available analysis indicates that Vietnam’s currency has been undervalued over the past three years. Specifically, analysis indicates that the dong was undervalued on a real effective basis by approximately 7 percent in 2017 and by approximately 8.4 percent in 2018. Furthermore, analysis indicates that the dong’s real effective exchange rate was undervalued in 2019 as well.

“Available evidence also indicates that the Government of Vietnam, through the SBV, actively intervened in the exchange market, which contributed to
the dong’s undervaluation in 2019. Specifically, the evidence indicates that
in 2019, the SBV undertook net purchases of foreign exchange totaling
approximately $22 billion, which had the effect of undervaluing the dong’s
exchange rate with the U.S. dollar during that year. Analysis suggests that
Vietnam’s action on the exchange rate in 2019 caused the average nominal
bilateral exchange rate against the dollar over the year, 23,224 dong per dollar, to be undervalued by approximately 1,090 dong per dollar relative to the level consistent the equilibrium real effective exchange rate.” 84 FR 63637-38.

The public is asked to provide written comments on six issues:

“• Whether Vietnam’s currency is undervalued, and the level of the
undervaluation.

“• Vietnam’s acts, policies, or practices that contribute to undervaluation of its currency.

“• The extent to which Vietnam’s acts, policies, or practices contribute to the
undervaluation.

“• Whether Vietnam’s acts, policies and practices are unreasonable or discriminatory.

“• The nature and level of burden or restriction on U.S. commerce caused by the undervaluation of Vietnam’s currency.

“• The determinations required under section 304 of the Trade Act, including what action, if any, should be taken.” 85 FR at 63638.

In the timber investigation, the background information which led to the initiation of the investigation is described as follows:

“Vietnam is one of the world’s largest exporters of wood products, including
to the United States. In 2019, Vietnam exported to the United States more than $3.7 billion of wooden furniture. To supply the timber inputs needed for its wood products manufacturing sector, Vietnam relies on imports of timber harvested in other countries. Available evidence suggests that a significant portion of that imported timber was illegally harvested or traded (illegal timber). Some of that timber may be from species listed under the
Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).

“Evidence indicates that much of the timber imported by Vietnam was
harvested against the laws of the source country. Reports indicate that a
significant amount of the timber exported from Cambodia to Vietnam was harvested on protected lands, such as wildlife sanctuaries, or outside of and
therefore in violation of legal timber concessions. Cambodia nevertheless
remains a significant source of Vietnam’s timber imports. Similarly, timber sourced from other countries, such as Cameroon and the Democratic Republic of the Congo (DRC), may have been harvested against those countries’ laws.

“In addition, Vietnamese timber imports may be traded illegally. For
example, it appears that most timber exported from Cambodia to Vietnam crosses the border in violation of Cambodia’s log export ban. In addition, aspects of the importation and processing of this timber also may violate Vietnam’s domestic law and be inconsistent with CITES.” 85 FR 63639.

Public comments are sought on the following six issues:

“• The extent to which Vietnamese producers, including producers of
wooden furniture, use illegal timber.

“• The extent to which products of Vietnam made from illegal timber,
including wooden furniture, are imported into the United States.

“• Vietnam’s acts, policies, or practices relating to the import and use
of illegal timber.

“• The nature and level of the burden or restriction on U.S. commerce caused by Vietnam’s import and use of illegal timber.

“• The determinations required under section 304 of the Trade Act, including what action, if any, should be taken.” 85 FR 63639.

USTR must make a determination within twelve months of the initiation of the two investigations. USTR can seek agreement with Vietnam to address the U.S. concerns.

The investigations are being started roughly one month before the November 3 U.S. elections. Obviously, if President Trump is reelected, the investigations will continue. If former Vice President Biden is elected, it is unclear what his Administration would do with the pending investigations (if USTR has not completed them by January 20, 2021)., although presumably the investigations would be continued and completed.

The two Federal Register notices are embedded below.

2020-22271

2020-22270

COVID-19 – WTO report on medical goods; FAO report on food security

Terence P. Stewart · April 6, 2020 · Uncategorized · Cambodia, COVID-19, export restraints, Food and Agriculture Organization of the United Nations, food security, Indonesia, Kazakhstan, Malaysia, Myanmar, restraints on the movement of persons, Russia, Thailand, the Philippines, trade in medical goods, Ukraine, Vietnam, World Trade Organization · No Comments

The World Trade Organization has a page on its website that is dedicated to COVID-19 including references to statements from various governments, international organizations, business groups, information from the WTO itself including a compilation of notifications by Members of actions (whether trade limiting or trade expanding) taken in response to COVID-19, and links to a range of websites providing important information on the pandemic. Joint statements are also included. See today’s joint statement between the WTO and the World Customs Organization, https://www.wto.org/english/news_e/news20_e/igo_06apr20_e.htm.

Last Friday, April 3rd, the WTO released a sixteen page note entitled “Trade in Medical Goods in the Context of Tackling COVID-19”. https://www.wto.org/english/news_e/news20_e/rese_03apr20_e.pdf. The note is very useful in terms of providing some definition to a range of products relevant to handling the COVID-19 crisis, identifying major importers and exporters of various product types and providing information on tariffs on the product categories for all WTO Members. The note identifies the following “key points”:

“• Germany, the United States (US), and Switzerland supply 35% of medical products;

“• China, Germany and the US export 40% of personal protective products;

“• Imports and exports of medical products totalled about $2 trillion, including intra-EU trade, which represented approximately 5% of total world merchandise trade in 2019;

“• Trade of products described as critical and in severe shortage in COVID-19 crisis totalled about $597 billion, or 1.7% of total world trade in 2019;

“• Tariffs on some products remain very high. For example, the average applied tariff for hand soap is 17% and some WTO Members apply tariffs as high as 65%;

“• Protective supplies used in the fight against COVID-19 attract an average tariff of 11.5% and goes as high as 27% in some countries;

“• The WTO has contributed to the liberalization of trade medical products in three main ways:

“➢ The results of tariff negotiations scheduled at the inception of the WTO in 1995;

“➢ Conclusion of the plurilateral sectoral Agreement on Pharmaceutical Products (“Pharma Agreement”) in the Uruguay Round and its four subsequent reviews;

“➢ The Expansion of the Information Technology Agreement in 2015.”

As is true with any analysis of data, the reader needs to understand what is covered and what is not and how good a fit the data provided have with the topic being discussed.

For example, the note reviews four categories of products relevant to the world addressing the COVID-19 pandemic (page 1):

“medicines (pharmaceuticals) – including both dosified and bulk medicines;
“medical supplies – refers to consumables for hospital and laboratory use (e.g., alcohol, syringes, gauze, reagents, etc.);
“medical equipment and technology; and
“personal protective products -hand soap and sanitizer, face masks, protective spectacles.”

While the four categories are, of course, relevant to addressing the COVID-19 pandemic, the products covered by the tariff schedule categories are both over- and underinclusive if one is trying to understand the size of global trade in medical products directly relevant to the global efforts to address COVID-19.

The report’s data are overinclusive because the Harmonized System of Tariffs used by most nations is only harmonized to the six-digit level of specificity. The categories included in the WTO note cover both COVID-19 related products and many others. Stated differently, nearly all of the product categories identified in Annex 1 to the note include at least some items that are not germane to the current pandemic. This is a limitation on the usefulness of the data flowing from the lack of more specific classifications that all countries adhere to. As the six-digit data are all that are available with a consistent definition around the world, it is not surprising that the WTO relied on the data. Arguably better, but not uniform data could have been derived by reviewing the 8-, 9- or 10-digit statistical data for imports and exports of at least major Members, but that was not done.

Similarly, the product coverage is underinclusive as recognized in the WTO note (page 2). “It should be noted that this note focuses solely on the final form of these products and does not extent to the different intermediate products that are used by global value chains in their production. The protective garments for surgical/medical use are not included in the analysis, because it is impossible to distinguish them from general clothing product in the HS classification.”

As governments and companies have articulated over the last several months, many of the key final products (e.g., ventilators) require a large number of inputs which are often sourced from a variety of suppliers around the globe. For example, one ventilator company which assembles the ventilators in the United States is reliant on circuit boards from its facility in China to maintain or increase production. Other companies bring various inputs in from Canada or Mexico or other countries as well as shipping U.S. components to other countries for final assembly. The same reality is obviously true for producers of medical goods in other countries as well. Thus, an inability to cover inputs significantly understates global trade volumes of products relevant to addressing the COVID-19 pandemic.

Similarly, there are shortages in many countries of the protective garments for which no data are included. These are important products traded that are directly relevant to the world’s ability to respond to COVID-19. The lack of coverage of those products understates the importance of personal protective products to the total and understates global trade.

The above is simply to say, the sections of the WTO note that look at trade patterns (imports, exports, leading players) are helpful in identifying possible breaks between products and possible major players but the data may be significantly off from the actual split among products or role of major players if complete data limited to products relevant for addressing COVID-19 were available. It may also understate the importance of keeping markets open even if there are relatively few imports of finished products.

To explore how overstated data may be, if one looks at the HS categories shown in Annex 1 for personal protective products and looks at the United States U.S. imports for consumption for 2019 at the 10-digit HTS level of detail, the top seven 10-digit categories by customs value accounted for more than 72% of the $17 billion in imports. Yet each of the categories would contain many products not actually relevant to efforts to address COVID-19. In fact five of the seven categories are basket categories.

3926.90.9990	OTHER ARTICLES OF PLASTIC, NESOI
6307.90.9889	OTHER MADE-UP ARTICLES NESOI
3824.99.9297	CHEMICAL PRODUCTS AND PREPARATIONS AND RESIDUAL PRODUCTS OF THE CHEMICAL OR ALLIED INDUSTRIES, NESOI
9004.90.0000	SPECTACLES, GOGGLES AND THE LIKE, CORRECTIVE, PROTECTIVE, NESOI
3926.90.7500	PNEUMATIC MATTRESSES & OTHR INFLATABLE ARTICLES,NESOI
3824.99.3900	MIXTURES OF TWO OR MORE INORGANIC COMPOUNDS
3926.90.4590	OTHER GASKETS AND WASHERS & OTHER SEALS

Similarly, the analysis of applied tariff rates is useful in showing rates for product groupings and the rates for individual countries for those product groupings but may be less useful in identifying the assistance tariff reductions would have in the present time of the pandemic. Obviously, tariff reductions by any Member that imposes them on imported products relevant to the pandemic would reduce the cost for the importing country of the needed materials. But the extent of assistance varies significantly depending on the Member as the data in Annex 2 show.

As the EU/EEA/United Kingdom and the United States account for 73.9% of the confirmed cases in the world as of April 6, 2020, a review of the applied rates for those countries would identify likely benefit from tariff reductions by the countries with the major outbreaks at the moment. The EU has an average applied rate of 1.5%, the U.S. an average applied rate of 0.9%, Norway 0.6% and Switzerland 0.7%. These rates don’t include any special duties, such as US duties on China flowing from the Section 301 investigation (with some products being subject to potential waiver of additional duties). Thus, for the vast majority of current cases, the importing countries’ applied rates are very low and hence not a significant barrier to trade.

https://www.ecdc.europa.eu/en/geographical-distribution-2kistan019-ncov-cases; https://www.ecdc.europa.eu/en/cases-2019-ncov-eueea

Other countries where the reach of the pandemic may intensify typically have much higher applied tariffs. As case loads intensify in other countries or in anticipation of such potential eventualities, countries with higher tariffs should be exploring autonomous duty reductions to make imported products more affordable. India has an average applied tariff of 11.6%; Pakistan an average rate of 10.0% and Malaysia a rate of 11.7% to flag just three Members with rates at or above 10%.

The WTO note is embedded below.

rese_03apr20_e

Food security and the FAO analysis of current agricultural product availability

In a prior post, I reviewed the compounding problems during the COVID-19 pandemic of some countries starting to impost export restraints on selected products (e.g., rice, wheat) to protect food supplies. Countries reported to be imposing export restraints on food had been Russia, Ukraine, Kazakhstan and Vietnam. A series of articles in Asian and European press have noted that Malaysia, the Philippines, Thailand, Indonesia, Myanmar and Cambodia have also introduced various restraints as well. Major agricultural groups in Asia are warning that disrupting movement of food (including movement of workers to help harvest, etc.) could lead to food shortages in Asia and have reviewed that Asian countries import some 220 million tons of agricultural products which underlines the need to keep markets open. See, e.g., https://www.scmp.com/week-asia/politics/article/3078376/coronavirus-food-security-asias-next-battle-post-covid-world; https://www.dairyreporter.com/Article/2020/03/30/Major-food-shortages-possible-in-Asia-says-FIA#.

While fear can lead to panic and various border measures, the actual situation globally as laid out by the Food and Agriculture Organization of the United Nations (“FAO”) in a recent paper is that there are more than sufficient supplies of food. The key is minimizing disruptions to production and distribution. This is not a period where major disruptions from drought or floods have caused shortages of products. Specifically, the FAO’s Chief Economist prepared a document entitled “COVID-19 and the risk to food supply chains: How to respond?” which was released on March 29. http://www.fao.org/3/ca8388en/CA8388EN.pdf. The paper starts with a section entitled “What we know”:

“Countries have shut down the economy to slow the spread of the coronavirus. Supermarket shelves remain stocked for now. But a protracted pandemic crisis could quickly put a strain on the food supply chains, a complex web of interactions involving farmers, agricultural inputs, processing plants, shipping, retailers and more. The shipping industry is already reporting slowdowns because of port closures, and logistics hurdles could disrupt the supply chains in coming weeks.

“In order to avoid food shortages, it is imperative that countries keep the food supply chains going. Unlike the 2007-2008 global food crisis, scarcity is not an issue this time. The supply of staple commodities is functioning well, and the crops need to be transported to where they are needed most. Restricting trade is not only unnecessary, it would hurt producers and consumers and even create panic in the markets. For high-value commodities that require workers (instead of machines) for production, countries must strike a balance between the need to keep production going and the need to protect the workers.

“As countries combat the coronavirus pandemic, they must also make every effort to keep the gears of their food supply chains moving.”

The paper then goes on to identify five actions needed to minimize the likelihood of food shortages arising during the pandemic. These actions are:

“Expand and improve emergency food assistance and social protection programs

“Give smallholder farmers support to both enhance their productivity and market the food they produce, also through e-commerce channels

“Keep the food value chain alive by focusing on key logistics bottlenecks

“Address trade and tax policies to keep the global trade open

“Manage the macroeconomic ramifications”.

With the number of countries already taking actions that are inconsistent with keeping global markets open for the movement of food supplies, the world is at risk of having a major complication added to the extrordinary economic shocks already being felt to address the health needs of the COVID-19 pandemic. Such a major complication would, as it did in 2007-2008, directly harm developing and least developed countries, countries least able to absorb additional shocks.

The report and a powerpoint from FAO are embedded below.

COVID-19-and-the-risk-to-food-supply-chains_-How-to-respond_

ca8308en