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WTO Director-General opinion piece in the Financial Times and recent actions by the U.S.

WTO Director-General Ngozi Okonjo-Iweala on her second day on the job in Geneva had an opinion piece in the Financial Times taking to the public her message to the WTO membership that “WTO members must intensify co-operation”. Financial Times, Opinion, Ngozi Okonjo-Iweala: WTO members must intensify co-operation, March 2, 2021, https://www.ft.com/content/0654600f-92cc-47ad-bfe6-561db88f7019. To a large extent, the opinion piece reflects her opening statement to the General Council on March 1st. See March 1, 2021, WTO Director-General Ngozi Okonjo-Iweala’s opening statement at the March 1 General Council meeting, https://currentthoughtsontrade.com/2021/03/01/wto-director-general-ngozi-okonjo-iwealas-opening-statement-at-the-march-1-general-council-meeting/. The opinion piece starts with the challenges posed by the COVID-19 pandemic and the need for equitable and affordable access to vaccines and other medical goods. The Director-General (DG) then goes through the reforms and ongoing negotiations that need to be addressed. The topics include completion of the fisheries subsidies negotiations, dispute settlement reform, updating the rule book to include topics like digital trade and other Joint Statement initiatives, restarting negotiations on environmental goods and services, various topics in agriculture (market access, domestic subsidies, removal of export restrictions on farm products purchased for humanitarian purposes by the World Food Programme) and rules to address distortions flowing from industrial subsidies to state-owned enterprises.

For this post, I will focus on the access to vaccines issue and recent actions by the United States (but also others) on this topic.

Two paragraphs from the opinion piece lay out the views of the Director-General on access to vaccines. They are copied below.

“However, for the global economy to return to sustained growth, we must intensify co-operation to ensure equitable and affordable access to vaccines, therapetics and diagnostics. The WTO can and must play a more forceful role in encouraging members to minimise or remove export restrictions and prohibitions that hinder supply chains for medical goods and equipment.

WTO members have a further responsibility to reject vaccine nationalism and protectionism while co-operating on promising new treatments and vaccines. We must find a ‘third way’ on intellectual property that preserves the multilateral rules that encourage research and innovation while promoting licensing agreements to help scale-up manufacturing of medical products. Some pharmaceutical companies such as AstraZeneca, Johnson & Johnson, and the Serum Institute of India are already doing this.”

While India and South Africa have sought a waiver for all WTO Members from most TRIPS Agreement obligations during the pandemic, that proposal has not received the backing from various developed countries with pharmaceutical industries, a fact the new DG saw first hand during the General Council meeting of March 1-2 where the TRIPS Council reported that there was not yet agreement on what to recommend on the proposal. Rather through the WHO, GAVI and CEPI and the creation of COVAX to buy vaccines for low- and middle-income countries and others wishing to participate, the expectation has been that some 2 billion doses would be available through COVAX in 2021 starting in February and ramping up, with 1.3 billion doses going to 92 countries needing assistance.

In her opening statement to the General Council, DG Ngozi Okonjo-Iweala indicated that COVAX would not be enough even though shipments had started. The latest COVAX interim distribution forecast is embedded below and dates from February 3 and shows the number of doses from the AstraZeneca/Serum Institute, from AstraZeneca’s own facilities and from Pfizer/BioNTech.

COVAX-Interim-Distribution-Forecast

Press accounts identify Ghana as the first recipient from COVAX, but other countries have already received the vaccines as well. See, e.g., World health Organization, First COVID-19 COVAX vaccine doses administered in Africa, March 1, 2021,https://www.who.int/news/item/01-03-2021-first-covid-19-covax-vaccine-doses-administered-in-africa; Pan American Health Organization, Colombia receives the first vaccines arriving in the Americas through COVAX, March 1, 2021, https://www.paho.org/en/news/1-3-2021-colombia-receives-first-vaccines-arriving-americas-through-covax. The Financial Times vaccine tracker shows that by March 3, 2021, 268.6 million doses had been administered in 128 locations/countries. Financial Times, Covid-19 vaccine tracker: the global race to vaccinate, March 3, 2021, https://ig.ft.com/coronavirus-vaccine-tracker/?areas=gbr&areas=isr&areas=usa&areas=eue&cumulative=1&populationAdjusted=1.

In recent weeks, the United States confirmed it was contributing $4 billion to COVAX ($2 billion immediately and $2 billion over the rest of 2021 and 2022). Other countries and the EU increased contributions as well and some countries have agreed to send some vaccine doses as well. See February 19, 2021, COVAX’s efforts to distribute COVID-19 vaccines  to low- and middle income countries — additional momentum received from G-7 virtual meeting, https://currentthoughtsontrade.com/2021/02/19/covaxs-efforts-to-distribute-covid-19-vaccines-to-low-and-middle-income-countries-additional-momentum-from-g-7-virtual-meeting/

From a recent WHO release it is clear that GAVI and the other COVAX partners are working at expanding available vaccines and seeking additional funding beyond what has already been provided or promised. Vaccines from Johnson & Johnson and potentially from Novavax were identified. See UN News, Equitable vaccine delivery plan needs more support to succeed: COVAX partners, March 2, 2021, https://news.un.org/en/story/2021/03/1086142. The release is embedded below.

Equitable-vaccine-delivery-plan-needs-more-support-to-succeed_-COVAX-partners-_-_-UN-News

“intensify co-operation”

There have been efforts at co-operation from the beginning as AstraZeneca’s licensing of its product to India’s Serum Institute demonstrated.

In the United States, President Biden on March 2 announced co-operation between Merck and Johnson & Johnson where Merck will convert two facilities to help in the production of the Johnson & Johnson vaccine. This has been supported by the United States through use of the Defense Production Act to speed access to equipment needed for the conversion. Merck is a major vaccine producer but doesn’t have a viable COVID-19 vaccine of its own. See NPR, How The White House Got 2 Pharma Rivals To Work Together On COVID-19 Vaccine, March 3, 2021, https://www.npr.org/2021/03/03/973117712/how-the-white-house-got-2-pharma-foes-to-work-together-on-covid-19-vaccine. This is the type of co-operation that DG Okonjo-Iweala referenced in her opinion piece yesterday.

Johnson & Johnson in late February had struck an arrangement with Sanofi in France for similar cooperation at one of Sanofi’s facilities in France. Similarly, Sanofi had earlier struck a deal with Pfizer-BioNTech. See Sanofi, Sanofi to provide manufacturing support to Johnson & Johnson for their COVID-19 vaccine to help address global supply demands, February 22, 2021, https://www.sanofi.com/-/media/Project/One-Sanofi-Web/Websites/Global/Sanofi-COM/Home/media-room/press-releases/2021/20200222-Sanofi-statement-EN.pdf.

The world’s largest vaccine producer, GlaxoSmithKline, has entered an agreement to help produce CureVac produce some of CureVac’s first generation COVID-19 vaccine in 2021 and “to jointly develop next generation mRNA vaccines for COVID-19 with the potential for a multi-valent approach to address multiple emerging variants in one vaccine.” See GSK, GSK and CureVac to develop next generation mRNA COVID-19vaccines, 3 February 2021, https://www.gsk.com/en-gb/media/press-releases/gsk-and-curevac-to-develop-next-generation-mrna-covid-19-vaccines/.

There are, of course, other vaccine producers — China has multiple vaccines developed, Russia, India, Cuba has two in development — including companies who do not have a COVID-19 vaccine in development. Thus, additional opportunities for co-operation should exist for those producers as well.

Conclusion

There is understandably great focus within the WTO and its Members in getting past the COVID-19 pandemic and getting economies back on growth paths. The rapid development of vaccines has been critical and has seen extraordinary success in the 15 months since COVID-19 was first identified. The R&D efforts globally have been stunning and have received some government support which has undoubtedly been important particularly in giving pharmaceutical companies an assist in early efforts to ramp up production. There is no question that the R&D efforts would not have occurred at the level that has taken place without strong intellectual property protections.

There has been great efforts by the WHO along with GAVI and CEPI to prepare to be able to get large quantities of vaccines to low- and middle-income countries when vaccines are available including by contracting with multiple companies pursuing a vaccine, reserving capacity, etc. There have been efforts by many countries to help build support for the COVAX approach and to provide funding for the purchase of vaccines for those in need. The effort is having success and can be more successful as 2021 moves into the second quarter and as countries, NGOs, businesses and individuals contribute to see that there is adequate funding for the effort being undertaken.

In addition to COVAX, a number of countries have been sending some of their production of vaccines to other countries. These include China, Russia and India. The U.S. has been in discussions with Japan, Australia and India for helping in getting vaccines to some countries as well. See Financial Times, US and Asia allies plan Covid vaccine strategy to counter China, March 3, 2021, https://www.ft.com/content/1dc04520-c2fb-4859-9821-c405f51f8586. These efforts are likely to accelerate as 2021 moves into the 3rd and 4th quarters.

Moreover, many of the major Western pharmaceutical companies engaged in vaccine production have partnered with other companies around the world to expand capacity and production of vaccines that have proven successful. So cooperation is already occurring. The Biden Administration’s efforts in recent weeks with Johnson & Johnson and Merck show that government involvement to encourage cooperation for expanding capacity and production and providing assistance in terms of availability of supplies can be an important assist to ramping up production.

Thus, the track record to date does not support a waiver of most TRIPS obligations as has been requested by the world’s largest producer of vaccines (India) and South Africa. Private companies have worked with partners on developments and in a number of cases on producing vaccines. Early success vaccines like Pfizer/BioNTech and Moderna have led to significant increases in plans for production by those companies through their own operations or through partnering with others. A number of other vaccines are now approved in major markets or are close to being approved. Significant funding has been provided or promised to make vaccines available to those in need at no cost.

All of the above is “the third way” sought by the new Director-General. It is already working. The WTO should focus its efforts on export restraints on medical goods and collaborate with other multilateral organizations to understand bottlenecks in capacity expansions, supply chain issues, distribution challenges and other aspects to determine if there are matters requiring WTO attention.

INTELLECTUAL PROPERTY AND INNOVATION: MAKING MSMES COMPETITIVE IN GREEN TECH

Climate change is a major global concern. Indeed, the UN has indicated there is less than a year for countries to get serious about saving the planet by getting their updated national climate action plans (NDCs) submitted. See Time, ‘If This Task Was Urgent Before, It’s Crucial Now.’ U.N. Says World Has 10 Months to Get Serious on Climate Goals, February 26, 2021,https://time.com/5942546/un-emissions-targets-climate-change/; UN Climate Change, Greater Climate Ambition Urged as Initial NDC Synthesis Report Is Published, 26 February 2021, https://unfccc.int/news/greater-climate-ambition-urged-as-initial-ndc-synthesis-report-is-published (“’2021 is a make or break year to confront the global climate emergency. The science is clear, to limit global temperature rise to 1.5C, we must cut global emissions by 45% by 2030 from 2010 levels.  Today’s interim report from the UNFCCC is a red alert for our planet. It shows governments are nowhere close to the level of ambition needed to limit climate change to 1.5 degrees and meet the goals of the Paris Agreement. The major emitters must step up with much more ambitious emissions reductions targets for 2030 in their Nationally Determined Contributions well before the November UN Climate Conference in Glasgow,’ said UN Secretary-General António Guterres.”).

While the largest polluters — China and the United States — haven’t submitted updated NDCs, the Biden Administration is planning on hosting a climate summit in the summer and plans on having more ambitious plans for the U.S. prepared by that time. See Roadmap for a Renewed U.S.-Canada Partnership, February 23, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/02/23/roadmap-for-a-renewed-u-s-canada-partnership/ (“The Prime Minister and the President expressed their commitment to have their two countries work together on cooperative action ahead of the US-hosted Leaders’ Climate Summit that will allow both countries to increase their climate ambition. The President, in addition to acknowledging Canada’s new strengthened national climate plan and its globally ambitious price on pollution, reiterated his aim to have ready the US nationally determined contribution (NDC) in advance of the Summit and welcomed the Prime Minister’s aim to announce the enhanced 2030 emissions target for its NDC by the Summit as well.”).

At the World Trade Organization, many countries are anxious to explore ways that trade can facilitate addressing the challenges from climate change. Because of the large share of employment around the world by micro-, small- and medium’sized businesses (MSMEs), such businesses are playing and will have to play a critical role in adopting technologies to permit reduction of pollutions threatening the planet.

On February 25, 2021 a group of WTO Members (largely developed countries) submitted a communication to the WTO membership outlining ways that MSMEs can use intellectual property to green their businesses. See INTELLECTUAL PROPERTY AND INNOVATION: MAKING MSMES COMPETITIVE IN GREEN TECH, COMMUNICATION FROM AUSTRALIA, CANADA, CHILE, THE EUROPEAN UNION, JAPAN, SINGAPORE, SWITZERLAND, THE SEPARATE CUSTOMS TERRITORY OF TAIWAN, PENGHU, KINMEN AND MATSU, THE UNITED KINGDOM AND THE UNITED STATES, IP/C/W/675 (26 February 2021). The paper lays out the purpose of the communication in its introduction copied below.

“1. Some of today’s critical global challenges include climate change, biodiversity loss, environmental degradation and food security. As an example, climate change matters to our health and increases the risk of infections and pandemics.1

“2. Several international efforts such as the Sustainable Development Goals (SDGs), the Convention on Biological Diversity, the UN Framework Convention on Climate Change and the Paris Agreement are designed to address these challenges. In this context, the role of Green Technology2 is important to provide new alternatives to address these challenges and create opportunities that have economic, social, and environmental benefits, as underscored by the framework of the SDGs. Of these, several underline the importance of Environmentally Sound Technologies (ESTs) for the accomplishment of the above objectives.

“3. Micro-, Small and Medium-sized Enterprises (MSMEs) can play a pivotal role in this change towards more sustainability. As they provide for more than 50 percent of employment (G20/OECD, 2015), they can constitute core engines of innovation and growth. MSMEs working in the green tech sector represent key economic actors in the effort towards finding solutions to address the abovementioned global challenges. The role of intellectual property rights (IPRs) to enhance the competitiveness of MSMEs should be looked at closely. IPRs enhance the dissemination and protection of innovations – which is key for MSMEs, including those in the green tech sector (Friesike, Jamali, Bader et al, 2009). This submission presents IPR approaches for making MSMEs more competitive in green tech.

“1 Harvard T.H Chan School of Public Health: https://www.hsph.harvard.edu/cchange/subtopics/coronavirus-and-climate-change/ (last consulted: 09.01.2021).”

The communication then provides information on international and national approaches to helping SMSEs obtain IP protection and/or obtain through license or otherwise existing IP technologies to address greening their businesses. For example, on international approaches, the communication reviews the role WIPO and WTO play in providing easy access to lots of information on intellectual property systems of many countries. WIPO has set up support through WIPO Green to facilitate collaboration on environmentally sound technologies (ESTs) including what technologies are available for licensing, etc.

“5. One important initiative to accelerate the development and dissemination of ESTs is WIPO GREEN, a marketplace designed to connect providers and seekers of ESTs. All technologies listed in the online database of WIPO GREEN are available for license, collaboration, joint ventures, and sale. In addition to establishing a network of various partners, WIPO GREEN contains a database of IP experts, supports acceleration projects in different countries and produces briefs and seminars for various green tech areas. It is thus particularly valuable for MSMEs, given that it facilitates the diffusion of their technologies and provides information to technology providers and seekers in all countries.”

The communication from the WTO Members also includes information on the Technology Mechanism provided by the United Nations Framework Convention on Climate Change and provides information on classification of green technology patents by WIPO, the European Patent Office (EPO) and US Patent and Trademark Office (USPTO).

On national approaches Members can take, the communication focuses on actions the national patent office can take.

“12. There are several ways for IP offices to assist MSMEs in making the best use of IPRs.

“• IP offices can provide basic guidance and assistance on various IPR aspects. By preparing reader-friendly IP material, including patent and trademark basics, examination overviews, information on patent searching and resources on legal assistance that could be used by inventors and businesses in the green tech sector, individual questions and needs may be met.

“• IP offices may provide support in the form of assisting applicants with patent searches, landscape analyses and also facilitate free legal assistance.

“• Specifically with a view to promoting ESTs, IP offices could consider accelerated patent examination procedures for such green tech patent applications. This process shortens the time between application and grant, enabling MSMEs to attain financial support more quickly.

“• Customized workshops, seminars, or awards for the best green tech inventions may also help to make MSMEs that are involved in the green tech sector more aware of the benefits that the IP system may hold for them.”

The complete communication is embedded below.

W675-1

Conclusion

While there are presently limited environmental negotiations going on at the WTO (fisheries subsidies), the global race to address a warming world requires greater focus by WTO Members on the role trade can play to improve the global response. Restarting the environmental goods negotiations is one obvious area for negotiations. Addressing carbon leakage through national laws and international negotiations is another. Encouraging collaboration to spread green technology requires no negotiations but is a potentially important component in the global response. Hence the February 25 communication is a valuable contribution to increasing the global focus on how to address the challenges of a warming planet.

Roadmap for a Renewed U.S.-Canada Partnership — Implications for WTO initiatives

On February 23, 2021 President Biden and Prime Minister Trudeau had a virtual meeting to review a wide range of topics and released an agreed “Roadmap for a Renewed U.S.-Canada Partnership”. Major topics addressed included (1) combating COVID-19, (2) building back better (i.e., economic recovery after the pandemic), (3) accelerating climate ambitions, (4) advancing diversity and inclusion, (5) bolstering security and defense and (6) building global alliances. A number of these topics are relevant to the work of the World Trade Organization (ongoing or possible). See Roadmap for a Renewed U.S. Canada Partnership, February 23, 2021,https://www.whitehouse.gov/briefing-room/statements-releases/2021/02/23/roadmap-for-a-renewed-u-s-canada-partnership/. This post reviews briefly some of the issues in the roadmap that resonate more broadly in a global trade context.

Combating COVID-19

For example, on combating COVID-19, several of the paragraphs in the roadmap review working together to help ensure equitable access to vaccines through COVAX. Whether sufficient vaccines can be made available to low- and middle-income countries is a matter of concern to many WTO Members including some who have been pushing for waiving TRIPS Agreement obligations during the pandemic. Many developed countries have viewed there being adequate flexibility within the TRIPS Agreement to address the present pandemic and have pointed to the collective efforts of the WHO, GAVI and CEPI in setting up COVAX to procure billions of doses of vaccines both for countries needing assistance and for other countries wanting to acquire vaccines through COVAX. The big issue for COVAX has been adequate funding. The U.S. is donating $2 billion in the near term and another $2 billion over the rest of 2021 and 2022. Canada has also made pledges of support to COVAX. Thus, the roadmap is both supportive of global efforts to get vaccines to countries in need and likely supportive of opposing efforts to waive TRIPS rights and obligations during the pandemic. Some excerpts from the combating COVID-19 section are copied below.

“The top priority of the President and the Prime Minister is to end the COVID-19 pandemic. They agreed to strengthen comprehensive and cross-sectoral efforts to control the pandemic, collaborate on public health responses, and build resilience against future outbreaks.

‘The Prime Minister and the President committed to working closely together to defeat the virus, including by surging the health and humanitarian response to the global pandemic, responding to new variants, following expert advice, and supporting global affordable access to and delivery of COVID-19 vaccines, including through the COVAX Facility.

“The leaders emphasized their strong support for the multilateral institutions that are on the front lines of COVID-19 response, including the World Health Organization (WHO) and UN development agencies, and committed to rapidly fulfilling national pledges to COVAX.”

While not addressed in the roadmap document, both Canada and the U.S. at the WTO have been supportive of not imposing restrictions on agricultural exports and through the G-20 have been supportive of limiting the role of export restraints on medical goods. There is discussion in the building back better section of strengthening “Canada-U.S. supply chain security” which may have implications for whether some actions relevant to medical goods are adopted that will diversify supply or encourage more production within the U.S. and Canada.

The interest by the United States under the Biden Administration in supporting multilateral organizations like the WTO may also suggest that the U.S. will now be more amenable to working with the Ottawa Group (of which Canada is a member) on the Trade and Health Initiative that was introduced last December. See Government of Canada, Minister Ng announces tabling of Ottawa Group’s Trade and Health Initiative at WTO General Council, December 17, 2020, https://www.canada.ca/en/global-affairs/news/2020/12/minister-ng-announces-tabling-of-ottawa-groups-trade-and-health-initiative-at-wto-general-council.html (“Through this Trade and Health Initiative, Canada and the other 12 Ottawa Group member nations are calling for further cooperation among all WTO members to strengthen global supply chains and facilitate the flow of essential medicines and medical supplies, including vaccines, amid the current crisis. The Trade and Health Initiative identifies a range of actions that members are encouraged to adopt. These include implementing trade-facilitating measures in the areas of customs and services, limiting export restrictions, temporarily removing or reducing tariffs on essential medical goods, and improving transparency overall.”); December 18, 2020, The WTO ends the year with General Council and Dispute Settlement Body meetings, https://currentthoughtsontrade.com/2020/12/18/the-wto-ends-the-year-with-general-council-and-dispute-settlement-body-meetings/; November 27, 2020, The Ottawa Group’s November 23 communication and draft elements of a trade and health initiative, https://currentthoughtsontrade.com/2020/11/27/the-ottawa-groups-november-23-communication-and-draft-elements-of-a-trade-and-health-initiative/.

Building back better (recovery from the pandemic)

Much of the section on building back better addresses the collective needs to support groups that have been disproportionately affected by the pandemic including “women, youth, underrepresented groups and indigenous peoples.” Assistance to such groups and to small and medium-sized enterprises is an important component of building back better. It also reflects present WTO focus on helping women and micro-, small- and medium-sized businesses better participate in the global economy and in international trade in particular. Actions by Canada and the U.S. will be pursued in part under existing commitments within the USMCA but also will be supportive of WTO initiatives and UN Sustainable Development Goals.

Other agreed steps by Canada and the U.S. in this section deal with building supply chain for battery development and production which is consistent with the leaders’ objective of advancing reductions in greenhouse gases. The U.S. and Canada also encourage “international regulatory cooperation” to enhance “economic competitiveness” “while maintaining high standards of public health, safety, labor, and environmental protection.” As reviewed below, trade and climate change/environment are likely to be of greater interest within the WTO moving forward. The WTO SPS and TBT Agreements also encourage international regulatory cooperation to facilitate trade. Thus, U.S.-Canada actions are supportive of existing rights and obligations and leading the way on future needs.

Accelerating Climate Ambitions

With the U.S. having rejoined the Paris Agreement since President Biden took office, the U.S. position is now more aligned with Canada and with that of the European Union in terms of needing “to increase the scale and speed of action to address the climate crisis and better protect nature.” Of particular interest is the commitment to action against countries who don’t take adequate action to reduce greenhouse gases .

“The President also restated his commitment to holding polluters accountable for their actions. Both the President and the Prime Minister agreed to work together to protect businesses, workers and communities in both countries from unfair trade by countries failing to take strong climate action.”

The language in the roadmap suggests that the U.S. and Canada will be interested in exploring options similar to those being prepared by the European Union on a duty or tax on imported products produced with higher levels of greenhouse gases to prevent leakage. The incoming Director-General has acknowledged that Members are looking at how to make trade help address the climate crisis. See APPOINTMENT OF THE NEXT DIRECTOR-GENERAL, STATEMENT OF THE DIRECTOR-GENERAL ELECT DR. NGOZI OKONJO-IWEALA TO THE SPECIAL SESSION OF THE WTO GENERAL COUNCIL, 15 February 2021, JOB/GC/250 (16 February 2021)(para. 1.14, “1.14. We should also work to ensure that the WTO best supports the green and circular economy and addresses more broadly the nexus between trade and climate change. Trade and environmental protection can be mutually reinforcing, both contributing to sustainable development. It will be important for Members to reactivate and broaden the negotiations on environmental goods and services. This would help promote trust and encourage Members to explore further ways in which trade can contribute positively to an improved climate. Care must, however, be taken to ensure that any disciplines are not used arbitrarily or as a disguised restriction on trade, and that they take into account the need for developing countries to be assisted to transition to the use of greener and more environmentally friendly technologies.”); February 16, 2021, Special Session of the General Council at WTO appoints Dr. Ngozi Okonjo-Iweala as the seventh Director-General, https://currentthoughtsontrade.com/2021/02/16/special-session-of-the-general-council-at-wto-appoints-dr-ngozi-okonjo-iweala-as-the-seventh-director-general/.

Building Global Alliances

While much broader than just trade, the commitment to multilateralism announced by President Biden and Prime Minister Trudeau included “firm commitment to the United Nations, G7 and G20, as well as NATO, the WTO, and the Five Eyes community.” Both Canada and the United States support significant reform at the WTO. One can expect closer collaboration between the U.S. and Canada on many reform initiatives at the WTO.

This section of the roadmap also addresses the need to jointly address China. “They also discussed ways to more closely align our
approaches to China, including to address the challenges it presents to our collective interest and to the international rules-based order. This includes dealing with its coercive and unfair economic practices, national security challenges, and human rights abuses, while cooperating with China on areas where it is in our interest, such as climate change.” WTO reform to be meaningful will have to have elements that will address the noncoverage of various actions by state-capital countries like China that distort global trade flows, create massive excess capacity, force technology transfer, limit transparency and market access in fact. While some efforts can be through consultations by the U.S. with other trading partners like Canada and the EU, multilateral reform is also critical for the functioning of the global trading system.

Conclusion

President Biden’s efforts are restoring strong relationships with our neighbors and renewed engagement with multilateral organizations has been apparent during the first five weeks of his Presidency. Yesterday’s virtual meeting between President Biden and Prime Minister Trudeau reflects the strong bonds between the U.S. and Canada. The roadmap presents areas of joint interest and future activity to deepen our close partnership. The roadmap also has a number of signals of likely U.S.-Canada cooperation in global trade and on WTO reform which should attract support from a number of other major trading partners at the WTO.

The roadmap and joint press statements are embedded below.

Roadmap-for-a-Renewed-U.S.-Canada-Partnership-_-The-White-House

Remarks-by-President-Biden-and-Prime-Minister-Trudeau-of-Canada-in-Joint-Press-Statements-_-The-White-House

COVAX’s efforts to distribute COVID-19 vaccines to low- and middle income countries — additional momentum from G-7 virtual meeting

With the COVID-19 pandemic affecting populations around the world with more than 110 million people having been infected and with more than 2.4 million deaths, the world is anxiously awaiting vaccines to permit vaccinations for vulnerable populations. The Coalition for Epidemic Preparedness Innovations (CEPI), Gavi, the Vaccine Alliance (Gavi) and the World Health Organization (WHO) are co-leads of the COVAX initiative which seeks to provide equitable global access to COVID-19 vaccines. More than 2 billion vaccine doses have been or are being contracted to supply to 92 low- and middle-income countries as well as other countries who have agreed to buy vaccines through COVAX.

The World Health Organization’s Director-General Dr Tedros Adhanom Ghebreyesus has expressed concern about “vaccine nationalism” as large and wealthier countries have contracted for large amounts of vaccines. In a joint statement with the UNICEF Executive Director on February 10, the WHO DG laid out what is needed in 2021 to achieve vaccine equitable distribution. See In the COVID-19 vaccine race, we either win together or lose together, Joint statement by UNICEF Executive Director Henrietta Fore and WHO Director-General Dr. Tedros Adhanom Ghebreyesus, 10 February 2021, https://www.who.int/news/item/10-02-2021-in-the-covid-19-vaccine-race-we-either-win-together-or-lose-together. The joint statement is embedded below.

In-the-COVID-19-vaccine-race-we-either-win-together-or-lose-together

The problem of vaccine availability can be traced to a number of sources including the inability to predict which development efforts would succeed, efforts by governments to support development through funding and advance contracts which do not always support the early vaccine successes, challenges of approval processes in different countries and more. However, it is clear that in the early days of the vaccine rollout, a handful of countries have been able to obtain the largest amount of vaccine doses and to provide vaccinations to citizens. For example, the Financial Times has an update of its “Covid-19 vaccine tracker: the global race to vaccinate” published today (February 19) that looks at data for 99 countries or territories where vaccinations are reported through mid-February. Of a global total of 194.4 million vaccinations, 91.6% are reported by the following 10 countries or groups of countries: United States, 57.2 million; China 40.5 million; European Union, 24.7 million; United Kingdom, 17.0 million; India, 10.2 million; Israel, 7.1 million; Brazil 6.2 million; Turkey, 5.9 million; United Arab Emirates, 5.4 million; Russian Federation, 3.9 million. Of the 99 countries or territories, 24 reported vaccinations of at least 10/100 residents, an additional 30 reported vaccinations of at least 5.0-9.9/100 residents and an additional 10 reported vaccinations of at least 3.0-4.9/100. Gavi views 3% as the percent of population needed to be vaccinated to address health care workers. See Financial Times, Covid-19 vaccine tracker: the global race to vaccinate, February 19, 2021, https://ig.ft.com/coronavirus-vaccine-tracker/?areas=gbr&areas=usa&areas=eue&areas=ind&cumulative=1&populationAdjusted=0

At today’s G-7 virtual meeting, there were new pledges from G-7 countries to contribute to COVAX to permit the purchase of vaccine doses contracted and with some countries agreeing to share surplus vaccine doses with the world’s poorest countries. The Gavi press release of today is embedded below.

G7-backs-Gavis-COVAX-Advance-Market-Commitment-to-boost-COVID-19-vaccines-in-worlds-poorest-countries-_-Gavi-the-Vaccine-Alliance

In the December 2020 stimulus package, Congress authorized some funding for COVAX. President Biden outlined the U.S. contributions in a Fact Sheet posted on the White House webpage yesterday and at the G-7 virtual meeting today. See White House, Fact Sheet: President Biden to Take Action on Global health through Support of COVAX and Calling for Health Security Financing, February 18, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/02/18/fact-sheet-president-biden-to-take-action-on-global-health-through-support-of-covax-and-calling-for-health-security-financing/; New York Times, Biden Declares ‘America is Back’ on International Stage: Live Updates, February 19, 2021, https://www.nytimes.com/live/2021/02/19/world/g7-meeting-munich-security-conference#global-leaders-chart-a-new-course-in-post-trump-era. The fact sheet is embedded below and reports the U.S. will be contributing $2.0 billion quickly and $2.0 billion more over the remainder of 2021 and 2022.

Fact-Sheet_-President-Biden-to-Take-Action-on-Global-Health-through-Support-of-COVAX-and-Calling-for-Health-Security-Financing-_-The-White-House

Conclusion

Much of the activity at the WTO over the last year has focused on the trade challenges flowing from the COVID-19 pandemic. Trade restrictions on exports of medical goods and agricultural goods have been tracked with various efforts to minimize scope and duration. Efforts at expediting the movement of medical goods and agricultural products have also been pursued, and debates have occurred on whether TRIPS rights should be waived during the pandemic to improve access to medical goods during the pandemic. Most advanced countries with pharmaceutical producers have argued that there are sufficient flexibilities within the WTO TRIPS Agreement to handle the current challenges. At the same time over recent years there have been efforts through the WHO, CEPI and GAVI and with the assistance of UNICEF to provide the infrastructure to permit collective purchasing of vaccines and other medical goods and the collection of funds to permit assisting low- and middle-income countries in terms of vaccine availability. COVID-19 is a truly global pandemic. The pressure on governments to find solutions is obviously enormous. Actions like those by the G-7 today and by other governments, NGOs and others to address the COVID-19 challenge are along the lines of what is needed to have more equitable distribution of vaccines. As the UN and WHO keep saying, no one is safe until all are safe.

The challenges for COVAX are huge and the goal for 2021 is to get 20% of the populations part of the program vaccinated. Developed countries and others able to do so need to continue to cooperate to see that these goals for 2021 are met and that further help is available moving into 2022. A study commissioned by the ICC estimates the global costs of not moving quickly to get all people in the world vaccinated at being more than $8 trillion — a figure that dwarfs the costs to get the vaccines produced, distributed and shots given. Hopefully, the world will cooperate and do what is needed to see that all countries can recover from the current pandemic in a timely manner.

U.S.-China Phase 1 Trade Agreement — Data through December 2020; China has increased purchases of agricultural and energy products above 2017 levels but did not reach first year agreed purchases in 2020 and won’t reach the agreed level even if measured from March 2020-February 2021

U.S. December export data were released earlier this week. While there are some improvements in some categories of merchandise exports in December (particularly in major agricultural categories, liquefied natural gas and crude oil), China remains far behind its overall commitments in the U.S.-China Phase I Trade Agreement for first year purchases of U.S. goods. As reported in prior posts, both China and the U.S. have taken steps to implement parts of the Phase 1 Agreement that took effect on February 14, 2020, although the level of actual implementation remains unclear. With a change of U.S. Administrations on January 20, 2021, it is unclear what the Biden Administration’s approach will be to China and its myriad trade practices that have been of concern to businesses, workers, Congress and the prior Administration.

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

An unusual aspect of the Phase 1 Agreement is agreement by China to increase imports from the United States of various categories of goods and services during the first two years of the Agreement with 18 categories of goods grouped in three broad categories (manufactured goods, agriculture and energy) and five services categories. Chinese imports of goods and services from the United States under the Agreement are supposed to increase by $76.7 billion in the first year over levels achieved in 2017 and in the second year by $123.3 billion over 2017 levels. The categories and tariff items included in the goods categories are reviewed in Annex 6.1 of the Agreement and the attachment to Annex 6.1. In the confidential version of the agreement, growth levels are provided for each of the 23 categories of goods and services.

While the COVID-19 pandemic has affected trade flows for most countries including both China and the United States and while bilateral relations between the U.S. and China have deteriorated since the signing of the Phase 1 Agreement, China continues to indicate its intention to honor the Phase I Agreement. Article 6.2 of the Agreement defines the time period for the purchase commitments as being January 1, 2020 through December 31, 2021. So the first year by agreement is calendar year 2020.

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

For purposes of this post, I will look at the March-December data, but I will also reference calendar 2020 data.

Looking at U.S. domestic exports for the March – December period and projecting for a full twelve months (March 2020-February 2021) shows China meeting 94.31% of first year agriculture commitments, and significantly above 2017 actual levels. Total Phase 1 products are projected at only 59.81% of first year commitments with manufactured goods at 52.37% and energy at 41.70%. While agriculture products are projected to exceed 2017 actual by $10.6 billion and energy is projected to exceed 2017 by $3.3 billion, manufactured goods are projected to be $10.5 billion smaller than 2017 actual. Compared to first year purchase commitments, total U.S. Phase I goods exports are projected to be $60.5 billion short of the agreed first year level.

If calendar year 2020 is examined, then U.S. domestic exports of all Phase 1 goods met only 55.64% of the agreed levels with manufactured goods at 51.80%, agricultural products at 81.58% and energy goods at 35.92%.

Under either first year period examined, agricultural and energy product have exceeded what was achieved in 2017 during the first year, though that will not be the case for manufactured goods. Under neither scenario do any of the three goods groupings meeting the first year agreed commitments.

To meet first year commitments, China would have to import monthly 5.03 times the product from the United States as was done in the first ten months in the next two months (January – February). On a calendar basis, U.S. domestic exports missed the agreed level on goods by $66.8 billion

Under the March-February analysis using data through December, the U.S. domestic exports of goods covered by Phase I to China for the first ten months were slightly ahead of 2017 levels ($75.1 billion vs. $73.6 billion) and are projected to exceed the actual 2017 U.S. exports ($90.125 billion projected vs. $86.795 billion 2017 actual). The calendar year 2020 missed the 2017 actual by almost $3 billion ($83.849 billion vs. the 2017 actiual of $86.795 billion). Moreover, since non-covered U.S. exports have declined in 2020 versus 2017, under neither scenario do total U.S. domestic exports reach the 2017 level of $120 billion ($117.258 billion projected for the March-February period; $110.576 billion actual for calendar 2020).

U.S. export data on services are available quarterly for some of the relevant categories and annually for certain information. Total U.S. services exports to all countries are down 20.40% for calendar year 2020. Services trade data with China for 2020 is available for the first nine months of 2020 and shows U.S. exports of services down 34.08% in the first three quarters of 2020 versus 2019. 2019 US exports of services to China were $56.537 billion, slightly higher than 2017 US exports of services to China of $54.981 billion. See U.S. Department of Commerce, U.S. Bureau of the Census, Bureau of Economic Analysis, U.S. International Trade in Goods and Services, November 2020 (January 7, 2021) and December 2020 (February 5, 2021). The Phase 1 Agreement with China has large increases in U.S. services exports in the first year of the agreement ($12.8 billion over 2017 levels). Thus, the limited data available indicate that U.S. services exports to China will likely miss 2017 levels by more than 32% and will obviously not show any gain above 2017.

Looking at total U.S. domestic exports of goods to China for the period March-December 2020, U.S. exports were $98.059 billion ($9.806 billion/month) compared to $101.749 billion in 2017 ($10.175 billion/month). These include both products covered by the Annex 6.1 commitments and other products. For calendar year 2020 total U.S. domestic exports to China were $110.576 billion ($9.215 billion/month) compared to $120.109 billion in 2017 ($10.009 billion/month).

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

Other U.S. domestic exports not covered by the 18 categories in Annex 6.1 were $33.314 billion in 2017 (full year). For the period March – December, non-covered products (which face significant tariffs in China based on retaliation for US 301 duties) have declined 18.55%, and total exports to China are down 3.63%. Looking at 2020 calendar figures show other U.S. domestic exports (i.e., not covered by the Phase I Agreement) were down 19.78% from comparable levels in 2017.

Thus, the first ten months since the U.S.-China Phase 1 Agreement went into effect suggest that U.S. domestic exports of the Annex 6 goods will be $90.125 billion if the full year shows the same level of increase over 2017 for each of the 18 categories of goods; non-covered products would be $27.133 billion, for total U.S. domestic exports to China of $117.259 billion. This figure would be below 2017 and dramatically below the target of $184.0 billion (if noncovered products remain are at 2017 levels; $177.421 billion with noncovered products at estimated 2020 levels) . The projected U.S. domestic exports to China would, however, be higher than the $109.72 billion in 2018 and the depresssed figure of $94.100 billion in 2019.

If one looks at calendar year 2020 actual data, U.S. domestic exports to China of Annex 6 goods were $83.849 billion, other exports of $26.726 billion, for total domestic exports in 2020 of $110.576 billion even further behind 2017.

To achieve the target level of U.S. exports in the January-February 2021 period, U.S. domestic exports of the 18 categories of goods in Annex 6.1 would have to be $75.573 billion ($37.786 billion/month) an amount that is 5.02 times the monthly rate of exports of the 18 categories to China in the March – December 2020 period ($7.512 billion/month).

As noted earlier, if one uses the 2020 calendar period, U.S. domestic exports of goods in Annex 6.1 fell $66.846 billion short of the first year agreed amounts.

Chinese data on total imports from all countries (in U.S. dollars) for calendar year 2020 show a decline of 1.1% from 2019. http://english.customs.gov.cn/statics/report/monthly.html. General Administrator of Customs of the People’s Republic of China, China’s Total Export & Import Values, December 2020 (in USD). China’s imports from the U.S. were up 9.8% during the same time period, but show imports from the U.S. substantially larger than U.S. domestic exports ($134.907 billion vs. $110.576 billion, though Chinese imports would be CIF value vs. FAS value for U.S. exports and may include U.S. exports to third countries or territories that end up in China).

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

Product categoryMarch-December 2017March-December 2020% change 2017-2020 March-December$ Value needed in next two months to reach 1st year of Agreement vs. projected 1st year
manufactured goods
1. industrial machinery $8,241.5
$10,380.4

+11.78%
2. electrical equipment and machinery $3,628.4
$4,050.7
+11.64%
3. pharma- ceutical products $1,833.2 $2,708.2
+48.68%
4. aircraft (orders and deliveries) $14,287.1 $3,405.9 -76.16%
5. vehicles $8,591.0
$5,339.5
-37.85%
6. optical and medical instruments $2,708.7
$3,024.1
+11.64%
7. iron and steel
$1,000.0
$428.2
–57.19%
8. other manufactured goods $9,233.2 $11,531.5 +24.89%
Total for mfg goods
$50,152.2
$40,819.5
-19.19%
$50,449.9
Agriculture
9. oilseeds $9,412.8 $13,249.3 +40.76%
10. meat $474.1 $2,692.4 +467.93%
11. cereals $1,110.1 $2,881.0 +159.53%
12. cotton $699.6 $1,638.9 +134.27%
13. other agricultural commodities $3,852.4
$3,920.0
+1.75%
14. seafood $1,128.0 $629.8 -44.18%
Total for agriculture $16,676.9 $25,011.4 +49.98% $ 8,340.3
Energy
15. liquefied natural gas
$365.8

$1,295.2

+254.05%
16. crude oil $3,726.8 $6,388.7 +71.43%
17. refined products $1,953.0
$1,447.9
-25.80%
18. coal $353.1 $159.7 -54.78%
Total for energy $6,398.7 $9,291.5 +45.21% $16,782.5
Total for 1-18 $73,587.8 $75,122.4 +2.09% $75,572.7

China has recovered more quickly from COVID-19 economic challenges than has the U.S. However, as reviewed above, their total imports from all countries are down 1.1% in calendar year 2020 while up 9.8% from the United States. Thus, the Phase 1 Agreement appeaers to have contributed to some improved U.S. export performance to China even if China is far away from meeting the year one commitments.

Conclusion

As reviewed in prior posts, the U.S.-China Phase 1 Agreement is a potentially important agreement which attempts to address a range of U.S. concerns with the bilateral relationship and obtain somewhat better reciprocity with the world’s largest exporter. The Phase 1 Agreement has left other challenges to a Phase 2 negotiation which has not yet begun. It is unclear what the Biden Administration approach will be.

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

The differences in economic systems between China and the United States have made reliance on WTO rules less relevant to the Trump Administration as those rules presume market-based economies and presently don’t address the myriad distortions that flow from the Chinese state capital system. Thus, the Phase I Agreement was an effort to move the needle in trade relations with China to achieve greater reciprocity. It has had some limited success to date. It will be interesting to see the approach on trade with China taken by the Biden Administration when its trade team is onboard.

COVID-19 agricultural fall out — higher prices for many consumers and greater food insecurity

The World Bank’s President David Malpass in a February 1st posting on Voices flagged the challenges for many of the world’s poorest people flowing from the COVID-19 pandemic — higher food prices, greater hunger, more people pushed into extreme poverty. See World Bank blog,COVID crisis is fueling food price rises for world’s poorest, February 1, 2021, https://blogs.worldbank.org/voices/covid-crisis-fueling-food-price-rises-worlds-poorest. The post was originally published in the Guardian. The post is copied in its entirety below (emphasis in the original webpost).

“Over the last year, COVID-19 has undone the economic, health and food security of millions, pushing as many as 150 million people into extreme poverty. While the health and economic impacts of the pandemic have been devastating, the rise in hunger has been one of its most tangible symptoms. 

Income losses have translated into less money in people’s pockets to buy food while market and supply disruptions due to movement restrictions have created local shortages and higher prices, especially for perishable food.  This reduced access to nutritious food will have negative impacts on the health and cognitive development of COVID-era children for years to come.

“Global food prices, as measured by a World Bank food price index, rose 14% last year. Phone surveys conducted periodically by the World Bank in 45 countries show significant percentages of people running out of food or reducing their consumption. With the situation increasingly dire, the international community can take three key actions in 2021 to increase food security and help prevent a larger toll on human capital.

“The first priority is enabling the free flow of food. To avoid artificial shortages and price spikes, food and other essential goods must flow as freely as possible across borders.  Early in the pandemic, when perceived shortages and panic generated threats of export bans, the international community helped keep food trade flows open. Credible and transparent information about the state of global food inventories – which were at comfortable levels pre-COVID – along with unequivocal free-trade statements from the G20, World Trade Organization, and regional cooperation bodies helped reassure traders, and led to helpful policy responses. Special rules for agriculture, food workers and transport corridors restored supply chains that had been briefly disrupted within countries.

“We need to remain vigilant and avoid backsliding into export restrictions and hardened borders that make food – and other essentials – scarce or more costly.

“The second priority is bolstering social safety nets. Short-term social safety nets offer a vital cushion for families hit by the health and economic crises. In Ethiopia, for example, households that experienced problems in satisfying their food needs initially increased by 11.7 percentage points during the pandemic, but participants in our long-running Productive Safety Net program were shielded from most of the negative effects.

“The world has mounted an unprecedented social protection response to COVID-19. Cash transfers are now reaching 1.1 billion people, and innovative delivery mechanisms are rapidly identifying and reaching new groups, such as informal urban workers. But ‘large scale’ is not synonymous with ‘adequate’. In a review of COVID-19 social response programs, cash transfer programs were found to be:

“–Short-term in their duration – lasting just over three months on average

“–Small in value – an average of $6 (£4.30) per capita in low-income countries

“–Limited in scope – with many in need remaining uncovered

“The pandemic has reinforced the vital imperative of increasing the world’s investments in social protection systems. Additional measures to expedite cash transfers, particularly via digital means, would also play an important role in reducing malnutrition.

“The third priority is enhancing prevention and preparedness. The world’s food systems endured numerous shocks in 2020, from economic impacts on producers and consumers to desert locust swarms and erratic weather.  All indicators suggest that this may be the new normal. The ecosystems we rely on for water, air and food supply are under threat. Zoonotic diseases are on the rise owing to growing demographic and economic pressures on land, animals and wildlife.

“A warming planet is contributing to costlier and more frequent extreme weather events. And as people pack into low-quality housing in urban slums or vulnerable coastal areas, more are living in the path of disease and climate disaster.

“Development gains can be wiped out in the blink of an eye. Our experience with hurricanes or seismic events shows that it is more effective to invest in prevention, before a catastrophe strikes. That’s why countries need adaptive social protection programs – programs that are connected to food security early warning systems and can be scaled up in anticipation of shocks.

“The time is long overdue to shift to practices that safeguard and increase food and nutrition security in ways that will endure. The to-do list is long and urgent. We need sustained financing for approaches that prioritize human, animal and planetary health; restore landscapes and diversify crops to improve nutrition; reduce food loss and waste; strengthen agricultural value chains to create jobs and recover lost incomes; and deploy effective climate-smart agriculture techniques on a much greater scale.

“The World Bank Group and partners are ready to help countries reform their agriculture and food policies and redeploy public finance to foster a green, inclusive, and resilient recovery.

Focusing on food security would address a basic injustice: almost one in 10 people live in chronic hunger in an age of food waste and plenty.  This focus would also strengthen our collective ability to weather the next storm, flood, drought, or pandemic – with safe and nutritious food for all.”

Food insecurity is an issue for all countries although most pressing for the poorest countries

The challenges noted by the World Bank President also face most other countries. For example, in the United States, there has been a massive increase in the number of people getting food from food banks and estimates are that one in seven Americans needs food assistance. Feeding America, The Impact of Coronavirus on Food Insecurity, October 2020, https://www.feedingamerica.org/research/coronavirus-hunger-research (“Combining analyses at the national, state, county, and congressional district levels, we show how the number of people who are food insecure in 2020 could rise to more than 50 million, including 17 million children.”) The challenges for schools not being able to have in school education has complicated the challenge in the United States as millions of children receive food from their schools but need alternative sources when schools are not able to provide in school classes. See, e.g., Brookings Institution, Hungry at Thanksgiving: A Fall 2020 update on food insecurity in the U.S., November 23, 2020, https://www.brookings.edu/blog/up-front/2020/11/23/hungry-at-thanksgiving-a-fall-2020-update-on-food-insecurity-in-the-u-s/ (reviews the increase in food insecurity and the various safety net programs in the U.S. attempting to address).

World Trade Organization involvement in addressing the problem

The World Trade Organization is directly involved in addressing the first priority identified by World Bank President Malpass — enabling the free flow of food. However, the WTO also monitors government support efforts and has the ability to be tackling trade and environment issues which could affect the third priority by reducing climate change.

WTO Members under WTO rules can impose export restraints under certain circumstances and in the first half of 2020, a number of members imposed export restraints on particular agricultural products and many imposed export restraints on certain medical goods. At the same time, the lockdown of countries had significant effects on the movement of goods and people. Many WTO Members have urged limiting such restraints and the WTO Secretariat has monitored both restraints imposed, when such restraints have been lifted (if they have), and trade liberalization efforts to speed the movement of important goods. See, e.g., WTO, COVID-19 and world trade, https://www.wto.org/english/tratop_e/covid19_e/covid19_e.htm; WTO, COVID-19 AND AGRICULTURE: A STORY OF RESILIENCE, INFORMATION NOTE, 26 August 2020, https://www.wto.org/english/tratop_e/covid19_e/agric_report_e.pdf; WTO, COVID-19: Measures affecting trade in goods, updated as of 1 February 2021, https://www.wto.org/english/tratop_e/covid19_e/trade_related_goods_measure_e.htm. The August paper on COVIDE-19 and Agriculture is embedded below.

agric_report_e

There have been a number of proposals by certain WTO Members to forego export restraints on agricultural products during the pandemic. None have been acted upon by the membership as a whole, but the communications often reflect commitments of certain Members to keep agricultural markets open during the pandemic. See, e.g., RESPONDING TO THE COVID-19 PANDEMIC WITH OPEN AND PREDICTABLE TRADE IN AGRICULTURAL AND FOOD PRODUCTS, STATEMENT FROM: AUSTRALIA; BRAZIL; CANADA; CHILE; COLOMBIA; COSTA RICA; ECUADOR; EUROPEAN UNION; GEORGIA; HONG KONG, CHINA; JAPAN; REPUBLIC OF KOREA; MALAWI; MALAYSIA; MEXICO; NEW ZEALAND; NICARAGUA; PARAGUAY; PERU; QATAR; KINGDOM OF SAUDI ARABIA; SINGAPORE; SWITZERLAND; THE SEPARATE CUSTOMS TERRITORY OF TAIWAN, PENGHU, KINMEN AND MATSU; UKRAINE; UNITED ARAB EMIRATES; UNITED KINGDOM; UNITED STATES; AND URUGUAY, WT/GC/208/Rev.2, G/AG/30/Rev.2, 29 May 2020. The document is embedded below.

208R2-3

More can and should be done, including a WTO-wide agreement to forego agricultural export restraints during the current pandemic or future pandemics. However, there are strong objections to any such limits from a number of WTO Members including large and important countries like China, India and South Africa.

Indeed, efforts to get agreement at the December 2020 General Council meeting that countries would not block agricultural exports to the UN’s World Food Programme for humanitarian purposes was blocked by a number of countries. While 79 WTO Members in January 2021 provided a joint pledge not to prevent agricultural exports to the UN World Food Programme, it is a sign of the sensitivity of food security to many countries that a very limited humanitarian proposal could not obtain the agreement of all WTO Members in a period of hightened need by many of the world’s poorest countries. See January 23, 2021, WTO and the World Food Programme – action by 79 Members after a failed December effort at the General Council, https://currentthoughtsontrade.com/2021/01/23/wto-and-the-world-food-programme-action-by-79-members-after-a-failed-december-effort-at-the-general-council/.

Conclusion

The COVID-19 pandemic has extracted a huge cost from the world economy, has pushed tens of millions of people into extreme poverty, has cost hundreds of millions people employment (full or partial), is complicating the education of the world’s children with likely long lasting effects, has exposed potential challenges to achieving global cooperation on a range of matters including the desirability of limiting or not imposing export restraints on agricultural and medical goods.

While the focus of countries and the media in the last several months has shifted to access to vaccines and ensuring greater equitable distribution of such vaccines at affordable prices, there remains much that needs to be done to better address food insecurity during the pandemic. International organizations like the World Bank, IMF and WTO, countries, businesses and NGOs need to se that both core issues are addressed in the coming months.


Early trade action by Biden Administration — reinstating aluminum duties on imports from the United Arab Emirates

On February 1, 2021, President Biden revoked an action by the Trump Administration on aluminum products from the United Arab Emirates (UAE). The UAE’s exports of aluminum had been subject to additional duties as a result of an investigation of global imports of aluminum under Section 232 of the Trade Expansion Act of 1962, as amended, where the Secretary of Commerce found that imports were a threat to national security and President Trump had imposed additional duties of 10%. Countries with security relationships with the United States were able to seek alternative approaches to addressing U.S. concerns.

The United States and the UAE have a security relationship of importance to the U.S. Specifically, the United States had worked with the UAE in its efforts to secure greater recognition for the state of Israel. The Abraham Accords Peace Agreement: Treaty of Peace, Diplomatic Relations and Full Normalization Between the United Arab Emirates and the State of Israel was agreed by the UAE and Israel on August 13, 2020, signed at the White House on September 15, 2020 and ratified by the two governments in mid-October 2020.

Shortly before leaving office, on January 19, 2021, President Trump through Proclamation 10139 indicated that tariffs would be lifted on imports of aluminum from the UAE with an effective date of 12:01 a.m. on February 3, 2021. In their place, quotas at “historic levels” were agreed to on aluminum exports to the U.S. from the UAE. The Trump Proclamation is found at 86 FR 6,825-31 (January 25, 2021) and is embedded below.

2021-01711

By proclamation on February 1, 2021, President Biden revoked President Trump’s Proclamation 10139. The discussion contained in President Biden’s Proclamation indicates that his Administration views Section 232 as an important tool, that the aluminum industry is critical to U.S. national security and that the tariffs that were imposed on aluminum were having the desired effect prior to the pandemic and were worth maintaining. The Biden Proclamation is reproduced below. While it is not yet published in the Federal Register, the Proclamation can be found on the White House website in the briefing room. See A Proclamation on Adjusting Imports of Aluminum Into the United States, February 1, 2021, https://www.whitehouse.gov/briefing-room/presidential-actions/2021/02/01/a-proclamation-on-adjusting-imports-of-aluminum-into-the-united-states/.

BRIEFING ROOM

A Proclamation on Adjusting Imports of Aluminum Into the United States

FEBRUARY 01, 2021 • PRESIDENTIAL ACTIONS

ADJUSTING IMPORTS OF ALUMINUM INTO THE UNITED STATES

BY THE PRESIDENT OF THE UNITED STATES OF AMERICA

A PROCLAMATION

  1. Proclamation 10139 of January 19, 2021 (Adjusting Imports of Aluminum Into the United States), amended Proclamation 9704 (Adjusting Imports of Aluminum Into the United States), as amended, with respect to tariffs on certain imports of aluminum articles proclaimed under section 232 of the Trade Expansion Act, as amended (19 U.S.C. 1862). Proclamation 10139 provides that those amendments will not take effect until 12:01 a.m. on February 3, 2021.
  2. I consider it is necessary and appropriate in light of our national security interests to maintain, at this time, the tariff treatment applied to aluminum article imports from the United Arab Emirates (UAE) under Proclamation 9704, as amended, as they are currently in effect as of this date. Accordingly, and as provided for in clause (6) of Proclamation 10139, I am terminating the modifications contained in that proclamation before they take effect.
  3. Proclamation 9704 applied tariffs to help ensure the economic viability of the domestic aluminum industry — an industry that the Secretary of Commerce had previously identified as essential to our critical industries and national defense. Because robust domestic aluminum production capacity is essential to meet our current and future national security needs, Proclamation 9704 aimed to revive idled aluminum facilities, open closed smelters and mills, preserve necessary skills, and maintain or increase domestic production by reducing United States reliance on foreign producers.
  4. In my view, the available evidence indicates that imports from the UAE may still displace domestic production, and thereby threaten to impair our national security. Proclamation 9704 authorized the Secretary of Commerce to grant exclusions from the aluminum tariffs based on specific national security considerations or if specific imported aluminum articles were determined not to be produced sufficiently in the United States, such that the imports would not diminish domestic production. Tellingly, there have been 33 such exclusion requests for aluminum imported from the UAE, covering 587,007 metric tons of articles, and the Secretary of Commerce has denied 32 of those requests, covering 582,007 metric tons. This indicates the large degree of overlap between imports from the UAE and what our domestic industry is capable of producing.
  5. Since the tariff on aluminum imports was imposed, such imports substantially decreased, including a 25 percent reduction from the UAE, and domestic aluminum production increased by 22 percent through 2019, before the coronavirus pandemic began. In light of that history, I believe that maintaining the tariff is likely to be more effective in protecting our national security than the untested quota described in Proclamation 10139.
  6. Section 232 of the Trade Expansion Act of 1962, as amended, authorizes the President to adjust the imports of an article and its derivatives that are being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.
  7. Section 604 of the Trade Act of 1974, as amended (19 U.S.C. 2483), authorizes the President to embody in the Harmonized Tariff Schedule of the United States the substance of statutes affecting import treatment, and actions thereunder, including the removal, modification, continuance, or imposition of any rate of duty or other import restriction.
    Now, Therefore, I, Joseph R. Biden Jr., President of the United States of America, by the authority vested in me by the Constitution and the laws of the United States of America, including section 232 of the Trade Expansion Act of 1962, as amended, section 301 of title 3, United States Code, and section 604 of the Trade Act of 1974, as amended, do hereby proclaim that Proclamation 10139, including the Annex, is revoked.
    IN WITNESS WHEREOF, I have hereunto set my hand this
    first day of February, in the year of our Lord two thousand twenty-one, and of the Independence of the United States of America the two hundred and forty-fifth.

JOSEPH R. BIDEN JR.

___________________________________________________________

Pending WTO disputes; UAE does not have a pending dispute with the U.S.

While China, India, the European Union, Norway, the Russian Federation, Switzerland and Turkey all have ongoing panel proceedings at the WTO challenging the U.S. imposition of duties on steel and aluminum pursuant to Section 232 investigations, the UAE is not a country that has filed a request for consultations on the additional duties on aluminum on its exports to the United States. See WT/DSB 544 (China), WT/DSB547 (India), WT/DSB/548 (European Union), WT/DSB/552 (Norway), WT/DS554 (Russian Federation), WT/DS556 (Switzerland) and WT/DS564 (Turkey); challenges by Canada and Mexico were withdrawn after agreement with the United States (WT/DS550 (Canada) and WT/DS551 (Mexico). The panel reports were to go to parties in the fall of 2020 and released to the public once translations into the official languages was accomplished. But no report has been released to date. With the impasse on the Appellate Body, it is unclear if the Biden Administration will opt to file appeals should the panel reports not recognize the U.S. national security concerns. Thus, absent a decision by the Biden team, should it lose the WTO cases and not appeal, to eliminate the additional duties on imports from all countries, the UAE’s exports will continue to face the additional 10% duties for the foreseeable future.

Broader interest in Biden Administration approach to Section 232

A recent article in Politico reviews contact by the EU with the Biden team last week seeking an immediate end to tariffs on imports from the EU of both steel and aluminum with a corresponding withdrawal of EU retaliatory tariffs if accomplished. As noted in the Politico article, the tariffs are supported by steel producers, unions (e.g., the USW has many workers in both the steel and aluminum industries) and the primary aluminum producers. Politico, Biden, in first trade move, reimposes a Trump tariff, February 1, 2021, https://www.politico.com/news/2021/02/01/biden-aluminum-tariff-uae-464794.

Conclusion

It is unlikely that the U.S. will agree to withdraw the 232 duties at the present time. The Biden team doesn’t have its trade people in place; there are pending WTO disputes; the underlying problems of global excess capacity in both steel and aluminum continue on with no resolution in sight. The main driver of the excess capacity has been China (though others have contributed). There are no WTO rules that permit effective addressing of such problems, and China has largely ignored calls by its trading partners to address the problem in a meaningful manner.

Still the reversal of President Trump’s January 19, 2021 Proclamation is an interesting first step in the trade arena by the Biden Administration to emphasize that restoring economic health to the U.S. economy is an important component of his starting game plan (along with meaningfully addressing the pandemic). Trade issues will likely be seen through that prism even as the U.S. works within multilateral organizations and with allies on a host of issues of common interest and concern.

The WTO Informal Ministerial of January 29, 2021 — hope for progress at the WTO in 2021

Switzerland typically hosts an informal ministerial meeting of WTO trade ministers on the sidelines of the World Economic Forum’s January Davos event. This year both were handled remotely.

The informal ministerial was summarized in ten points by the Swiss Confederation President Guy Parmelin at the end of the event. President Parmelin’s statement is available here, https://www.newsd.admin.ch/newsd/message/attachments/65098.pdf, and is copied below.

Virtual Informal WTO Ministerial Gathering, 29 January 2021

Personal Concluding Remarks by the Chair, President of the Swiss Confederation and Head of the Federal Department for Economic Affairs, Education and Research, Guy Parmelin, Switzerland

“29 Ministers and high officials representing a broad spectrum of the WTO membership attended this year’s Informal World Trade Organization (WTO) Ministerial Gathering in virtual format. In concluding and with warm thanks to all participants for their contributions, I would like to summarise the main points from our discussions as follows:

“• Ministers stressed the urgency of the swift appointment of a new WTO Director-General as well as the confirmation of the date and venue of the 12th Ministerial Conference (MC12).

“• Ministers reiterated their determination to maintain a credible multilateral trading system and to restore a climate of mutual trust.

“• Ministers expressed their concerns about the enormous social and economic impact of the COVID-19 crisis. They highlighted the relevance of trade and the role of the WTO in containing the pandemic and promoting recovery. Many Ministers underlined the importance of ensuring the development of as well as an equitable and affordable access to medical goods, including vaccines. They addressed ways and means to achieve these goals, including the implementation of measures facilitating trade, the role of intellectual property and transparency.

“• Ministers regretted that the negotiations on fisheries subsidies could not be completed in accordance with the end-2020 deadline foreseen in SDG 14.6. In light of the significance of this process for the sustainability of global fisheries, Ministers concurred that a comprehensive and effective agreement on fisheries subsidies should be concluded as soon as possible. Ministers agreed to step up efforts with a view to finding mutually acceptable solutions consistent with all the elements of the negotiating mandate.

“• Ministers highlighted the importance of restoring a fully functional WTO dispute settlement system, which is a key pillar of the rules-based multilateral trading system.

“• Many participants argued for further progress in agricultural trade policy reform at MC12 and asked for an outcome on domestic support and other issues. The issues of public stockholding and the special safeguard mechanism were highlighted by several Ministers.

“• Many Ministers called for tangible outcomes, by MC12, on the Joint Statement Initiatives. Inter alia finalizing the process on Services Domestic Regulation and making substantial progress on E-commerce and Investment Facilitation as well as on Trade and Women’s Economic Empowerment.

“• The need to reform the WTO was widely acknowledged. A number of Ministers insisted on advancing diverse issues related to the special and differential treatment of developing and least developed countries. Some participants proposed to adjust WTO rules to present-day economic and competitive conditions.

“• Several Ministers supported new initiatives launched in response to global challenges such as the structured discussions on Trade and Environmental Sustainability.

“• Ministers reaffirmed their commitment to engage in the preparations for MC12 in order to advance key issues.”


The participants at this year’s informal ministerial included officials from Argentina, Australia, Brazil, Canada, Chad (coordinator for LDC Group), Chile, China, Egypt, European Union, India, Indonesia, Jamaica (Coordinator ACP Group), Japan, Kazakhstan, Kenya, Korea, Mauritius (Coordinator African Group), Mexico, New Zealand, Norway, Russian Federation, Saudi Arabia, Singapore, South Africa, Switzerland (Chair), Thailand, Turkey, United Kingdom, United States and three officials with WTO roles — H.E. Mr. David Walker (New Zealand), WTO General Council Chair; H.E. Mr. Santiago Wills (Colombia), WTO Chair of the Negotiating Group on Rules, H.E. Mr. Alan Wolff, WTO Deputy Director-General. The full list with titles is embedded below.

List-of-participants-at-virtual-informal-ministerial-1-29-2021-65099

The good news for the informal ministerial was the position taken by the United States representative who reportedly indicated that the United States was actively reviewing the issue of the next Director-General and was intent on actively working on WTO reform. See, e.g., Inside U.S. Trade’s World Trade Online, Biden administration strikes ‘constructive’ tone in first word on WTO approach, January 29, 2021, https://insidetrade.com/daily-news/biden-administration-strikes-%E2%80%98constructive%E2%80%99-tone-first-word-wto-approach; Politico, Biden administration joins call for ‘swift appointment’ of new WTO head, January 29, 2021, https://www.politico.com/news/2021/01/29/biden-world-trade-organization-463820. Under the Trump Administration, the United States had blocked the formation of consensus around Dr. Ngozi Okonjo-Iweala based on the U.S. view that Dr. Okonjo-Iweala did not have a sufficient trade background. See, e.g., January 26, 2021, Letter from variety of former U.S. officials to President Biden urges U.S. support for Dr. Ngozi Okonjo-Iweala as next WTO Director General, https://currentthoughtsontrade.com/2021/01/26/letter-from-variety-of-former-u-s-officials-to-president-biden-urges-u-s-support-for-dr-ngozi-okonjo-iweala-as-next-wto-director-general/. Hopefully, the current review of the issue by the Biden Administration, even ahead of President Biden’s trade team being confirmed by the U.S. Senate, will result in the U.S. joining the support for Dr. Okonjo-Iweala, permitting the WTO to approve a next Director-General.

It was also reported that the United States, consistent with the Biden Administration’s focus on the COVID-19 pandemic and climate change, expressed interest in promoting recovery from the COVID-19 pandemic and concluding an ambitious fisheries subsidies agreement. See Inside U.S. Trade’s World Trade Online, Biden administration strikes ‘constructive’ tone in first word on WTO approach, January 29, 2021, https://insidetrade.com/daily-news/biden-administration-strikes-%E2%80%98constructive%E2%80%99-tone-first-word-wto-approach. Fisheries subsidies negotiations have been going on for some twenty years, and many Members have remained more concerned with keeping their subsidies in place than agreeing to disciplines that would create conditions for sustainable fishing going forward. The Interest in the Biden Administration in working within the WTO on joint steps to promote recovery from the pandemic is different from the approach pursued by the Trump Administration which didn’t want to look at actions possible within the WTO (other than limits on export restraints on agricultural goods) while the world was dealing with the pandemic. The U.S. statement should mean more interest in exploring issues like those raised by the Ottawa Group. See November 27, 2020, The Ottawa Group’s November 23 communication and draft elements of a trade and health initiative, https://currentthoughtsontrade.com/2020/11/27/the-ottawa-groups-november-23-communication-and-draft-elements-of-a-trade-and-health-initiative/.

Other issues flagged in the Swiss President’s concluding remarks are issues of particular interest to some or many countries but not topics of clear agreement. For example, while it is likely that the United States will look for ways to resolve its concerns about longstanding problems in the WTO’s dispute settlement system, particularly around the Appellate Body, it is unlikely that there will be a swift resolution of the U.S. concerns, and hence there will likely be a continued impasse for at least much of 2021 on the return of a functioning two-stage dispute settlement system.

Similarly on domestic support in agriculture and other agriculture issues flagged, certain WTO Members have not supported further liberalization in agriculture while pushing for limits on domestic subsidies and rollback of liberalization commitments undertaken in the Uruguay Round. It is unlikely that there will be forward movement on these issues without greater balance in terms of tariff reductions on major agricultural products. Moreover, as noted in a recent post, other major distortions in agriculture that are not presently identified as domestic subsidies include widespread use of child and forced labor on many agricultural products. See January 25, 2021, Child labor and forced labor in cotton production — is there a current WTO mandate to identify and quantify the distortive effects?, https://currentthoughtsontrade.com/2021/01/25/child-labor-and-forced-labor-in-cotton-production-is-there-a-current-wto-mandate-to-identify-and-quantify-the-distortive-effects/; January 24, 2021, Forced labor and child labor – a continued major distortion in international trade for some products, https://currentthoughtsontrade.com/2021/01/24/forced-labor-and-child-labor-a-continued-major-distortion-in-international-trade-for-some-products/. Such practices should be quantified and the level of potential distortion identified so WTO Members can decide how to address them in ongoing agriculture negotiations.

Progress is being made on Joint Statement Initiatives including e-commerce, services domestic regulation, investment facilitation and women’s empowerment. An open issue for these and topics in the sphere of trade and the environment (e.g., environmental goods agreement) is whether benefits provided by participants will be made available on an MFN basis or limited to participants, with the option of other Members to join in the future. See January 18, 2021, Revisiting the need for MFN treatment for sectoral agreements among the willing, https://currentthoughtsontrade.com/2021/01/18/revisiting-the-need-for-mfn-treatment-for-sectoral-agreements-among-the-willing/. For many Members liberalization could be speeded up if benefits in sectoral agreements go to those participating only while leaving the door open for other Members to join later when they see the value for them.

And on the important topic of WTO reform beyond the items listed above, there is little current agreement on how to deal with industrial subsidies and other practices that lead to massive global excess capacity, or on how to address access to special and differential treatment and many other areas of importance to some or many WTO Members.

Deputy Director-General Alan Wolff provided a statement during the virtual informal ministerial urging WTO Members to make 2021 a year of accomplishments. The WTO press release can be found here. WTO News, DDG Wolff urges WTO ministers to address the pandemic and make 2021 a year of action, 29 January 2021, https://www.wto.org/english/news_e/news21_e/igo_29jan21_e.htm. DDG Wolff’s statement is copied below.

“My thanks to our Swiss hosts and to President Parmelin both for his remarks today and for his very thoughtful address on the occasion of the 25th anniversary celebration of the WTO last November.

“Ministers, you can make 2021 a year of substantial accomplishments at the WTO.

“There has already been a beginning.  In the first action of the year, Members accounting for most of the world’s agricultural exports committed to refrain from imposing export restrictions on purchases made by the World Food Program.

“The anticipated appointment of a new Director-General will bring needed leadership in moving toward concrete results.  But she can succeed only with your active engagement.

“I urge you not to wait for the Twelfth Ministerial Conference, delayed by the pandemic, to move negotiations forward to positive outcomes. 

“There is no reason why the twenty-year negotiation on fisheries subsidies cannot be concluded successfully — without a sacrifice of ambition — in the next few months.  Success hinges on Members’ willingness to accept a significant level of discipline on their own subsidies.  Political decisions and your active engagement will be required to bring about success.

“I urge you to address ‘trade and health’ forcefully and immediately.  Last year, trade made a vitally important contribution in supplying needed medical supplies to deal with COVID-19.  Proposals as to what more can be done must be deliberated now.  Cooperation on trade can accelerate access to vaccines.  There can be no higher priority.

“Consider how the WTO can further contribute to the economic recovery.  Members can take steps to ensure enhanced transparency, work to eliminate unnecessary barriers and agree that new restrictions will not be imposed.  Trade finance must be restored.  The WTO convened the major international financial organizations and banks to address this need in the aftermath of the financial crisis and it can do so now again.

“’Trade and climate’ must be on the WTO agenda.  Carbon border adjustment measures will likely result in conflicts unless Members engage in joint efforts to find mutually beneficial solutions.  The heightened interest of Members in a broad range of other environmental issues such as plastics pollution and the circular economy can be reflected in new agreements.   The WTO can be more visible as a steward of the planet by reviving and concluding the Environmental Goods Agreement

“The Joint Statement Initiatives on e-commerce, investment facilitation, and services domestic regulation can bear fruit this year, building on what was achieved with respect to small businesses last year.  In addition, more progress can be made on the economic empowerment of women through international trade.  

“Concerns over income inequality have been growing.  The WTO’s rules-based system needs to be seen not only among countries but also within countries, as responsive to the needs of workers, farmers and all who wish to engage in international trade.  But international trade rules cannot substitute for domestic policy actions to make growth more inclusive.  When large numbers of people are unhappy with how the economy is working for them, trade will often receive undeserved blame.  The WTO is about fairness.  Its work will never be done in pursuit of that objective, but further progress can be made this year.

“There can be an outcome on agriculture — at least a down-payment and a defined work program going forward.

“During 2021, the WTO can likely welcome new WTO Members, as it continues to move towards universal coverage.  Comoros and Bosnia-Herzegovina may be ready, and over a dozen others are making progress.

“Last but not least, ‘WTO reform’ can become a reality, with actions taken to —

“- facilitate rule-making with wide participation,

“- achieve heightened enforcement through binding dispute settlement in a manner agreed by all, and

“- provide a strong mandate for a Secretariat to deliver all needed support to Members and to achieving the mission of the WTO. 

“We should greet this year with optimism and re-dedication.  With your strong engagement, 2021 can be a year to remember for what is achieved.

“Thank you.”

A presentation from the WTO Secretariat to Ministers needs to be positive, forward looking, aspirational and inspirational. DDG Wolff’s statement yesterday provides all of that. The first item mentioned, the joint pledge from 79 WTO Members not to restrict agricultural exports to the UN World Food Programme for humanitarian purposes is a positive for the world but follows the December failure of the WTO General Council to agree to the same by all WTO Members. See January 23, 2021, WTO and the World Food Programme – action by 79 Members after a failed December effort at the General Council, https://currentthoughtsontrade.com/2021/01/23/wto-and-the-world-food-programme-action-by-79-members-after-a-failed-december-effort-at-the-general-council/.

The challenge for the WTO in 2021 will be whether Members can come together in fact to achieve many of the important opportunities and needs in front of the Membership. While the history of the WTO since 1995 and the major divisions among Members at the present time would strongly suggest that 2021 will not achieve many of the things that are needed and possible, hope springs eternal.

U.S. perspective

The Trump Administration did an excellent job of identifying problems with the operation of the WTO whether from the longstanding failures of the dispute settlement system, to the existential challenges to the viability of the WTO from major Members whose economies have not converged to a full market orientation, to the out-of-date rules around special and differential treatment to all who claim developing country status regardless of economic development of individual members, to the need for greater transparency in many areas, including importantly subsidies, to the failure of the WTO to update rules to address changing technology and trade issues.

The Biden Administration has indicated its intention to work within multilateral institutions, including the WTO. Early action by the United States on the Director-General selection issue could provide positive energy to WTO Members in the coming months. There are topics where success can be made in 2021 either multilaterally or plurilaterally. But a lot of what is needed for meaningful WTO reform will be difficult, if not impossible, to achieve in the short term. Hopefully, the Biden team will stay the course to achieve reform that both returns the WTO playing field to the level agreed at the time of concluding the Uruguay Round, finds ways to deal with the massive distortions not presently covered by WTO rules, works with others to bring the WTO into the 21st century and addresses the critical issues for global prosperity and sustainable development.

Child labor and forced labor in cotton production — is there a current WTO mandate to identify and quantify the distortive effects?

In yesterday’s post (January 24), I reviewed the continued widespread human rights issue of child labor and forced labor in the production of a wide range of products (agricultural, manufactured, mined products) in many countries around the world. Such actions raise trade concerns by distorting the costs of production of products made with such labor and hence potentially skewing trade flows towards producers “benefitting” from the use of such labor. See January 24, 2021:  Forced labor and child labor – a continued major distortion in international trade for some products, https://currentthoughtsontrade.com/2021/01/24/forced-labor-and-child-labor-a-continued-major-distortion-in-international-trade-for-some-products/. In the United States, imports of products made with such labor are supposed to be banned. I had concluded by arguing that the WTO should develop information that would help Members understand the quantity of products that are made with child or forced labor and permit Members to then decide what actions were needed to eliminate or offset such practices.

I received a comment on yesterday’s post from Amb. Dennis Shea, the Former Deputy United States Trade Representative and Chief of Mission on international trade issues in Geneva and the Permanent Representative of the U.S. to the WTO (2017-January 2021). Amb. Shea’s comment focused on cotton. He said, “The WTO’s Committee on Agriculture in Special Session (COA-SS) and its Cotton Subcommittee are charged with examining all trade-distorting policies affecting the cotton sector in order to discharge its mandate properly. It seems to me that the COA-SS and Cotton Subcommittee should examine recent reports of widespread forced labor in the picking of cotton in the Xinjiang Province of China. It is my understanding that Xinjiang accounts for nearly 20 percent of global cotton exports, so it’s probably not a stretch to say that forced labor practices there (horrific from a human rights standpoint) are also distorting global cotton prices.”

While cotton is but one of many products believed to be produced by child and/or forced labor, it is an important product globally. The fact that there may be an existing WTO mechanism for developing the relevant information is potentially important.

In yesterday’s post, I had referenced an upcoming WITA virtual webinar, The U.S. Moves Against Forced Labor in Xinjiang, being held this Wednesday, January 27. One of the speakers at the event is Dr. Adrian Zenz, Senior Fellow in China Studies, Victims of Communism Memorial Foundation, Washington, D.C. One of the papers referenced in a recent WITA note is by Dr. Zenz for the Center for Global Policy entitled “Coercive Labor in Xinjiang: Labor Transfer and the Mobilization of Ethnic Minorities to Pick Cotton” (December 2020), https://cgpolicy.org/wp-content/uploads/2020/12/20201214-PB-China-Zenz-1-3.pdf. The paper confirms that Xinjiang produces 20% of global cotton and nearly 84.9% of all cotton produced in China. Id. at 3. The Executive Summary of the paper states in part (page 3) —

“The evidence shows that in 2018, three Uyghur regions alone mobilized at least 570,000 persons into cotton-picking operations through the government’s coercive labor training and transfer scheme. Xinjiang’s total labor transfer of ethnic minorities into cotton picking likely exceeds that figure by several hundred thousand.

“Despite increased mechanization, cotton picking in Xinjiang continues to rely strongly on manual labor. In 2019, about 70 percent of the region’s cotton fields had to be picked by hand – especially the high-quality
long-staple cotton predominantly grown in southern Xinjiang’s Uyghur regions, where mechanized picking shares are low. State policies have greatly increased the numbers of local ethnic minority pickers, reducing
reliance on outside Han Chinese migrant laborers. The intensive two- to three-month period of cotton picking represents a strategic opportunity to boost rural incomes, and therefore plays a key role in achieving the state’s poverty alleviation targets. These targets are mainly achieved through coercive labor transfers.

“Cotton picking is grueling and typically poorly paid work. Labor transfers involve coercive mobilization
through local work teams, transfers of pickers in tightly supervised groups, and intrusive on-site surveillance by government officials and (in at least some cases) police officers. Government supervision teams monitor pickers, checking that they have a “stable” state of mind, and administer political indoctrination sessions. Some regions put Uyghur children and elderly persons into centralized care while working-age adults
are away on state-assigned cotton-picking work assignments. While not directly related to the campaign of mass internment, these labor transfers can include persons who have been released from internment camps.

“The data presented in this report provides strong evidence that the production of the majority of Xinjiang’s cotton involves a coercive, state-run program targeting ethnic minority groups.”

China is not the only country where the U.S. Department of Labor has identified production of cotton is likely done with child labor, forced labor or child labor and forced labor. See USDOL, 2020 List of Goods Produced by Child Labor or Forced Labor, September 2020, https://www.dol.gov/sites/dolgov/files/ILAB/child_labor_reports/tda2019/2020_TVPRA_List_Online_Final.pdf. Indeed many of the world’s largest cotton producers are listed in the report as likely producing cotton with child labor, forced labor or both child labor and forced labor:

Child labor: Argentina, Azerbaizan, Brazil, Egypt, India, Kyrgyz Republic, Mali, Turkey, Zambia.

Forced labor: Pakistan, Uzbekistan

Child labor and forced labor: China, India (cottonseed), Turkmenistan.

In the past there has been one WTO dispute on subsidies to cotton producers in the United States. See UNITED STATES – SUBSIDIES ON UPLAND COTTON, WT/DS267 (case brought by Brazil). I have been unable to find information on the WTO webpage that indicates the question of child or forced labor as a subsidy or other form of nontariff barrier has ever been examined at the WTO whether on cotton or more broadly.

For the last seventeen years, there has been concern about distortions to the cotton trade and the harm to countries for which cotton is a major export product. The breakout of cotton occurred at the request of the so-called Cotton Four — Benin, Burkina Faso, Chad and Mali. See Cotton, https://www.wto.org/english/tratop_e/agric_e/cotton_e.htm.

“Cotton is discussed at the WTO on two tracks: 1) the trade reforms needed to address subsidies and high trade barriers for cotton, and 2) the assistance provided to the cotton sector in developing countries.

“The trade aspects of cotton are handled by the Committee on Agriculture in Special Session including through dedicated discussions on trade in cotton. The development assistance aspects of cotton are discussed in the meetings of the ‘Director-General’s Consultative Framework Mechanism on Cotton’.

“These various tracks of discussion have been developed over the years as a response to a series of proposals to address the sector tabled by four African countries — Benin, Burkina Faso, Chad and Mali — known as the Cotton Four or C4.”

While WTO Members are supposed to be reporting information on various categories of data (including domestic support) on cotton and on non-tariff barriers affecting trade in cotton, the latest WTO Secretariat compilation of information does not indicate that Members were asked about or provided information on the benefits to domestic cotton production from child labor and/or forced labor. See COTTON — BACKGROUND PAPER BY THE SECRETARIAT, TN/AG/GEN/34/Rev.13, TN/AG/SCC/GEN/13/Rev.13, 2 November 2020 (and Add.1 and Add.2); COTTON — MINISTERIAL DECISION OF 7 DECEMBER 2013, WT/MIN(13)/41, WT/L/916, 11 December 2013 (“3. In this context, we therefore undertake to enhance transparency and monitoring in relation to the trade-related aspects of cotton. To this end, we agree to hold a dedicated discussion on a biannual basis in the context of the Committee on Agriculture in Special Session to examine relevant trade-related developments across the three pillars of Market Access, Domestic Support and Export Competition in relation to cotton. 4. The dedicated discussions shall be undertaken on the basis of factual information and data compiled by the WTO Secretariat from Members’ notifications, complemented, as appropriate, by relevant information provided by Members to the WTO Secretariat. 5. The dedicated discussions shall in particular consider all forms of export subsidies for cotton and all export measures with equivalent effect, domestic support for cotton and tariff measures and non-tariff measures applied to cotton exports from LDCs in markets of interest to them.”); COTTON — MINISTERIAL DECISION OF 19 DECEMBER 2015, WT/MIN(15)/46, WT/L/981, 21 December 2015. The background paper (without addenda) is embedded below.

TNAGGEN34R13

Thus, there is an existing forum for developing information on all distortions to the cotton market. Yet, to date, the WTO subcommittee on Cotton is not examining the widespread issue of child labor and forced labor as part of its information gathering. This is unfortunate but could be addressed if there is a will to in fact flag all distortions.

There can be arguments pro and con on whether all child labor and forced labor constitutes actionable subsidies under the Agreement on Subsidies and Countervailing Measures. While I believe that the practices identified as being used in Xinjiang constitute actionable subsidies (government action which provides inputs (labor) at rates lower than market), there can be no doubt that the failure of governments to eliminate child labor and forced labor distorts competition between those obtaining products through the use of such labor and others who are not using such labor. The use of child labor and forced labor are universally condemned and supposed to be eliminated by 2025 (child labor) or 2030 (forced labor) pursuant to the UN Sustainable Development Goals.

The WTO can and should develop the factual basis for an understanding of the trade distortions flowing from child labor and forced labor. The existence of a current program at the WTO on cotton to develop information on all forms of subsidies and all forms of non-tariff barriers is a good place to start the exercise. My thanks to Amb. Shea for flagging the potential existing vehicles within the WTO to address at least cotton.

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

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 and the World Food Programme — action by 79 Members after a failed December effort at the General Council

The WTO issued a press release on Jnauary 21, 2021 entitled “Group of members issue joint pledge on humanitarian food purchases”. https://www.wto.org/english/news_e/news21_e/agri_21jan21_e.htm. As the press release notes,

“A group of nearly 80 WTO members issued a joint statement on 21 January pledging not to impose export restrictions on foodstuffs purchased by the UN’s World Food Programme (WFP) for humanitarian aid.

“’We recognize the critical humanitarian support provided by the World Food Programme, made more urgent in light of the COVID-19 pandemic and other crises,’ the group said in their statement, available here. ‘We therefore commit to not impose export prohibitions or restrictions on foodstuffs purchased for non-commercial humanitarian purposes by the World Food Programme.’

“Discussions regarding export restrictions on food purchases by the WFP have been taking place in the WTO’s Committee on Agriculture in Special Session as well as the General Council.

“The WFP is the United Nations agency charged with delivering food assistance in emergencies and combatting hunger.”

The submission by the 79 WTO Members is embedded below (WT/L/1109).

1109-1

While the pledge by the 79 WTO Members is a significant event, the fact that the full WTO membership was not willing at the December 2020 General Council meeting to commit to such action is problematic and a reflection of the inability of WTO Members to come together on a broad array of issues. This has reduced the relevance of the WTO as a negotiating forum and prevented the updating of multilateral rules. It has led to a proliferation of free trade agreements and actions outside of the WTO. Considering the role that the World Food Programme plays and the list of beneficiaries, it is also quite extraordinary that there wasn’t an agreed General Council Decision adopted in December.

The UN World Food Programme

The UN’s World Food Programme (“WFP”) has for fifty years supplied food to those in need around the world. Consider the overview from the WFP’s webpage, https://www.wfp.org/overview (emphasis in original).

“The World Food Programme (WFP) is the leading humanitarian organization saving lives and changing lives, delivering food assistance in emergencies and working with communities to improve nutrition and build resilience

“As the international community has committed to end hunger, achieve food security and improved nutrition by 2030one in nine people worldwide still do not have enough to eat. Food and food-related assistance lie at the heart of the struggle to break the cycle of hunger and poverty. 

“For its efforts to combat hunger, for its contribution to bettering conditions for peace in conflict-affected areas and for acting as a driving force in efforts to prevent the use of hunger as a weapon of war and conflict, WFP was awarded the Nobel Peace Prize in 2020

“In 2019, WFP assisted 97 million people – the largest number since 2012 –  in 88 countries. 

“On any given day, WFP has 5,600 trucks, 30 ships and nearly 100 planes on the move, delivering food and other assistance to those in most need. Every year, we distribute more than 15 billion rations at an estimated average cost per ration of US$ 0.61. These numbers lie at the roots of WFP’s unparalleled reputation as an emergency responder, one that gets the job done quickly at scale in the most difficult environments.

“WFP’s efforts focus on emergency assistancerelief and rehabilitationdevelopment aid and special operationsTwo-thirds of our work is in conflict-affected countries where people are three times more likely to be undernourished than those living in countries without conflict. 

“In emergencies, WFP is often first on the scene, providing food assistance to the victims of war, civil conflict, drought, floods, earthquakes, hurricanes, crop failures and natural disasters. When the emergency subsides, WFP helps communities rebuild shattered lives and livelihoods. We also work to strengthen the resilience of people and communities affected by protracted crises by applying a development lens in our humanitarian response.

“WFP development projects focus on nutrition, especially for mothers and children, addressing malnutrition from the earliest stages through programmes targeting the first 1,000 days from conception to a child’s second birthday, and later through school meals.

“WFP is the largest humanitarian organisation implementing school feeding programmes worldwide and has been doing so for over 50 years. In 2019, WFP provided school meals to more than 17.3 million children in 50 countries, often in the hardest-to-reach areas.

“In 2019, WFP provided 4,2 million metric tons of food and US$2.1 billion of cash and vouchers. By buying food as close as possible to where it is needed, we can save time and money on transport costs, and help sustain local economies. Increasingly, WFP meets people’s food needs through cash-based transfers that allow the people we serve to choose and shop for their own food locally.

“WFP also provides services to the entire humanitarian community, including passenger air transportation through the UN Humanitarian Air Service, which flies to more than 280 locations worldwide.

Funded entirely by voluntary donations, WFP raised a record-breaking US$8 billion in 2019. WFP has 20,000 staff worldwide of whom over 90 percent are based in the countries where the agency provides assistance.

“WFP is governed by a 36-member Executive Board. It works closely with its two Rome-based sister organizations, the Food and Agriculture Organization of the United Nations and the International Fund for Agricultural Development. WFP partners with more than 1,000 national and international NGOs to provide food assistance and tackle the underlying causes of hunger.”

The countries in which WFP provides assistance are shown in the list from the WFP webpage, https://www.wfp.org/countries, and include many important trading countries like China, India, Indonesia, Pakistan and many more in Africa, the Middle East, Asia, Central and South America. Beneficiary countries include the following:

Afghanistan, Algeria, Angola, Armenia, Bangladesh, Benin, Bhutan, Bolivia (Plurinational State of), Burkina Faso, Burundi, Cambodia, Cameroon, Central African Republic, Chad, China, Colombia, Congo, Côte d’Ivoire, Cuba, Democratic People’s Republic of Korea, Democratic Republic of the Congo, Djibouti, Dominican Republic, Ecuador, Egypt, El Salvador, Eswatini, Ethiopia, Gambia, Ghana, Guatemala, Guinea, Guinea-Bissau, Haiti, Honduras, India, Indonesia, Iran (Islamic Republic of), Iraq, Jordan, Kenya, Kyrgyzstan, Lao People’s Democratic Republic, Lebanon, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Namibia, Nepal, Nicaragua, Niger, Nigeria, Pakistan, Palestine, Peru, Philippines, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, South Sudan, Sri Lanka, Sudan, Syrian Arab Republic, Tajikistan, Tanzania, The Caribbean, The Pacific, Timor-Leste, Togo, Tunisia, Turkey, Uganda, Yemen, Zambia, Zimbabwe.

The December 2020 General Council meeting and proposed General Council Decision

During the December 2020 General Council meeting, there was an effort to adopt a General Council Decision entitled “PROPOSAL ON AGRICULTURE EXPORT PROHIBITIONS OR RESTRICTIONS RELATING TO THE WORLD FOOD PROGRAMME DRAFT GENERAL COUNCIL DECISION,” WT/GC/W/810, TN/AG/46 (4 December 2020). The draft document was modified three times to add cosponsors. WT/GC/W/810/Rev.1, Rev.2, Rev.3. Concerns were raised by India, Pakistan and some African countries (from the above list, at least India and Pakistan and most, if not all others, were beneficiaries of assistance from the the WFP). Hence there was no agreement on adopting the draft General Council Decision. See Washington Trade Daily, December 16, 2020, pages 3-4, WTO Members Talk Food Procurement, https://files.constantcontact.com/ef5f8ffe501/1b51b4fa-b0a3-4a60-9165-8c5f6d7977a4.pdf; Washington Trade Daily, December 18, 2020, pages 5-6, India Questions WFP Exemption, https://files.constantcontact.com/ef5f8ffe501/ec47c599-5c0c-47fd-80cf-a46244c5af8b.pdf.

While WTO Members always have multiple concerns and agenda items being pursued, the failure of the membership as a whole to agree to something so limited in nature and so critical for addressing global hunger was disappointing to many and reflects the seeming inability of the WTO Membership to move forward as one on the vast majority of issues before the WTO.

Conclusion

In a post earlier this month, I argued for the need for the WTO to move to liberalization by the willing without benefits for non-participants but with agreements open to all to join. See January 18, 2021, Revisiting the need for MFN treatment for sectoral agreements among the willing, https://currentthoughtsontrade.com/2021/01/18/revisiting-the-need-for-mfn-treatment-for-sectoral-agreements-among-the-willing/. While the MFN issue doesn’t come into play for the 79 Member pledge not to restrict exports to the WFP, the failure of the full WTO membership to agree to the draft General Council Decision is a further manifestation of the need for new approaches to promote expanded trade liberalization.

In recent speeches, Deputy Director-General Alan Wolff has expressed both the lack of unity at the WTO on an issue of importance like the draft General Council Decision and also welcomed the joint pledge by the 79 WTO Members not to impose restrictions on exports to the WFP. See WTO press release, DDG Wolff outlines possible responses to calls for WTO reform, 13 January 2020, https://www.wto.org/english/news_e/news21_e/ddgaw_13jan21_e.htm (“Less than a month ago, a General Council meeting took place which lasted over 15 hours (over two and a half days), a recent record for length. It had only one substantive trade policy item on its agenda for decision, the consideration of which produced no agreement. The issue was whether Members would agree to forego a modicum of the policy space they now have by agreeing not to impair procurements by the Nobel-Prize-winning World Food Program. A witness to the proceeding could be forgiven for perceiving drift of the organization in its not living up to its potential. Viewed through a different lens, this was no more than sovereigns reaffirming that they could not be bound without their consent.”); WTO press release, DDG Wolff stresses need to make progress in WTO negotiations to enhance resilience of farm sector, 22 January 2021, https://www.wto.org/english/news_e/news21_e/ddgaw_22jan21_e.htm (“I welcome the pledge this week of WTO members accounting for most of world agricultural exports to refrain from imposing export restrictions on foodstuffs purchased by the World Food Programme for non-commercial humanitarian purposes.”).

If there is to be a WTO capable of reform, the Members will need to reconfirm core principles and find ways to agree instead of searching for excuses to oppose. The membership seems far from sharing a common vision or accepting core principles. Too often, Members are engaged in a search for blocking progress. While all Members undoubtedly share blame for the current challenges, on the topic of blocking the minor proposal to ensure the workings of the WFP, one can look to the Members who remain non-participants in the joint pledge as the problem on this particular issue.

Specifically, the list of those WTO Members pledging not to impose export restrictions on foodstuffs to the WFP is made up of 79 WTO Members, meaning 85 Members did not join the pledge (at least not yet). Some of the major Members who are not participating in the pledge include the following — Argentina, China, India, Indonesia, Pakistan, South Africa, the Philippines, Malaysia. the Russian Federation, Hong Kong (China), Turkey. In the WTO’s World Trade Statistical Review 2020, China, Indonesia, Argentina and India are among the top 10 exporters of agricultural products and of food in 2019; China, the Russian Federation and Hong Kong (China) are among the top ten importers in 2019. WTO, World Trade Statistical Review 2020, Tables A-13 and A-14, https://www.wto.org/english/res_e/statis_e/wts2020_e/wts2020_e.pdf. China, India, Indonesia, Pakistan, the Philippines and Turkey are all beneficiaries of assistance from the WFP.

While there is much that needs to be done for the restoration of the WTO’s relevance, the pledge by 79 Members suggests that liberalization by the willing may be the only road forward.

USTR on January 14, 2021 released its 2020 report to Congress on China’s WTO compliance

The Office of the United States Trade Representative last Thursday, January 14, 2021, released its 2020 Report to Congress on China’s WTO Compliance. As the report notes, it is the 19th report to Congress following China’s accession to the WTO. It is also the last report prepared under the Trump Administration. The report is significantly shorter than prior Trump Administration reports (70 pages vs. 192 pages for 2019 report, 183 pages for 2018 report, and 161 pages for 2017 report) while referencing details on specific U.S. concerns with China from the 2019 report appendix. The link to the report is as follows: https://ustr.gov/sites/default/files/files/reports/2020/2020USTRReportCongressChinaWTOCompliance.pdf.

The report provides an Executive Summary, a section entitled U.S. ASSESSMENT OF CHINA’S WTO MEMBERSHIP with four subsections (China’s WTO Accession, Expectations of WTO Membership,
China’s Record in Terms of Complying With WTO Rules, and China’s Record in Terms of Transitioning to a Market Economy), a section entitled U.S. STRATEGY FOR ADDRESSING TRADE DISTORTIONS CAUSED BY CHINA, a section entitled REVIEW OF TRADE MECHANISMS USED TO ENGAGE CHINA (with subsections on bilateral dialogues, multilateral fora, and enforcement (both U.S. laws and WTO litigation)) and the final section looking at KEY U.S. CONCERNS (five subsections — non-tariff barriers (24 topics), intellectual property rights (5 topics), agriculture (10 topics), services (16 topics) and transparency (4 topics)).

While the Key U.S. Concerns section provides the detail on U.S. concerns on specific topics on goods and services sectors, the section on U.S. Assessment of China’s WTO’s Membership provides a good overview of the fundamental concerns the U.S. has with the compatibility of China’s economic system with the WTO objective of market driven economic outcomes. The section on U.S. strategy for addressing trade distortions caused by China provides a review of the Trump Administration’s efforts in the 2017-2020 period for addressing concerns with the bilateral relationship and China’s practices. The Executive Summary (pages 2-3) gives a reasonable picture of what the problems with China are and the Trump Administration’s response.

“In prior reports, we provided this Administration’s assessment of China’s WTO membership, the unique and very serious challenges that China’s non-market policies and practices pose for the multilateral trading system and the effectiveness of the strategies that had been pursued to address the China problem over the years. We identified the critical need for new and more effective strategies – including taking actions outside the WTO where necessary – to address the challenges presented by China’s state-led, mercantilist approach to the economy and trade. We also described the positive outcomes to date of the Administration’s strategy for engaging China, which led to the signing of an historic trade agreement with China in January 2020. In this year’s report, we review and assess China’s progress in implementing that agreement to date, and we highlight the important issues that remain to be addressed in our trade relationship with China.

“As we previously documented, and as remains true today, China’s record of compliance with the terms of its WTO membership has been poor. China has continued to embrace a state-led, non-market and mercantilist approach to the economy and trade, despite WTO members’ expectations – and China’s own representations – that China would transform its economy and pursue the open, market-oriented policies endorsed by the WTO.

“At the same time, China’s non-market approach has imposed, and continues to impose, substantial costs on WTO members. In our prior reports, we identified and explained the numerous policies and practices pursued by China that harm and disadvantage U.S. companies and workers, often severely. It is clear that the costs associated with China’s unfair and distortive policies and practices have been substantial. For example, China’s non-market economic system and the industrial policies that flow from it have systematically distorted critical sectors of the global economy such as steel, aluminum, solar and fisheries, devastating markets in the United States and other countries. China also continues to block valuable sectors of its economy from foreign competition, particularly services sectors. At the same time, China’s industrial policies are increasingly responsible for displacing companies in new, emerging sectors of the global economy, as the Chinese government and the Chinese Communist Party powerfully intervene on behalf of China’s domestic industries. Companies in economies disciplined by the market cannot effectively compete with both Chinese companies and the Chinese state.

“For nearly two decades, a variety of bilateral and multilateral efforts were pursued by the United States and other WTO members to address the unique challenges presented by China’s WTO membership. However, even though these efforts were persistent, they did not result in meaningful changes in China’s approach to the economy and trade. We previously catalogued the United States’ persistent yet unsuccessful efforts to resolve the many concerns that have arisen in our trade relationship with China. We found that a consistent pattern existed where the United States raised a particular concern, China specifically promised to address that concern, and China’s promise was not fulfilled.

“Faced with these realities, in the 2017 USTR Report to Congress on China’s WTO Compliance, this Administration announced that it would be pursuing a new, more aggressive approach to the United States’ engagement of China. We explained that the Administration would defend U.S. companies and workers from China’s unfair trading practices and would seek to restore balance to the trade relationship between the United States and China. As part of these efforts, the United States would take all appropriate actions to ensure that the costs of China’s non-market economic system are borne by China, not by the United States. The United States also would continue to encourage China to make fundamental structural changes to its approach to the economy and trade consistent with the open, market-oriented approach pursued by other WTO members, which is rooted in the principles of non-discrimination, market access, reciprocity, fairness and transparency. If undertaken by China, these changes would do more than simply ease the growing trade tensions with its trading partners. These changes would also benefit China, by placing its economy on a more sustainable path, and would contribute to the growth of the U.S. economy and the global economy.

“The Administration based this new approach on several assessments. First, WTO membership comes with expectations that an acceding member not only will strictly adhere to WTO rules, but also will support and pursue open, market-oriented policies. Second, China has failed to comply with these expectations. Third, in recent years, China has moved further away from open, market-oriented policies and has more fully embraced a state-led, mercantilist approach to the economy and trade. Finally, China’s market-distorting policies and practices harm and disadvantage its fellow WTO members, even as China reaps enormous benefits from its WTO membership.

“Consistent with this Administration’s more aggressive approach to China, we have been using all available tools – including domestic trade remedies, bilateral negotiations, WTO litigation, and strategic engagement with like-minded trading partners – to respond to the unique and very serious challenges presented by China. But, the goal for the United States remains the same. The United States seeks a trade relationship with China that is fair, reciprocal and balanced.”

“Beginning in January 2020, the United States’ new approach to China began to demonstrate key progress with the signing of an historic trade agreement, known as the Phase One Agreement. This agreement requires structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange. The agreement also includes a commitment by China that it will make substantial additional purchases of U.S. goods and services in the coming years. Importantly, the agreement establishes a strong dispute resolution system that ensures prompt and effective implementation and enforcement.

“The United States has been closely monitoring China’s progress in implementing its numerous commitments under the Phase One Agreement and has regularly engaged China using the extensive consultation processes established by the agreement to discuss China’s implementation progress and any concerns as they arise. Currently, the evidence indicates that China has been moving forward in good faith with the implementation of its commitments, making substantial progress in many areas.

“Because the Phase One Agreement does not cover all of the United States’ concerns, the United States will need to turn to Phase Two of its trade negotiations with China in order to secure resolutions to important outstanding issues. These discussions should focus on critical issues in areas such as subsidies, excess capacity, state-owned enterprises, state-sponsored cyber-enabled theft of intellectual property, standards, cybersecurity, data localization requirements, restrictions on cross-border data transfers, competition policy and regulatory transparency as well as certain issues in the areas of intellectual property, technology transfer and services market access that were not addressed in the Phase One Agreement.

“Going forward, it is the Administration’s hope that China will continue to take the United States’ concerns seriously and engage with the United States on a productive basis. If China does so and the two sides are able to finalize and implement a comprehensive Phase Two Agreement, it will benefit not only the United States, but also China itself and the rest of the WTO membership. It may also generate a willingness on the part of China to take on similar new disciplines at the WTO.”

The report is embedded below.

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For the incoming Biden Administration, there are many important issues relating to China in the trade arena that will be front and center. With an announced intention by the President-elect to have greater cooperation with trading partners, one can expect (a) greater focus on the U.S.-EU-Japan efforts at WTO reform on subsidies, state-owned enterprises and forced technology transfer (with outreach to other Members), (b) outreach to WTO Members to develop approaches to deal with other Chinese distortions, (c) continued efforts to achieve a meaningful e-commerce plurilateral agreement in the ongoing Joint Statement Initiative, and (d) a fisheries subsidies agreement by the time of the 12th Ministerial meeting later this year. On the bilateral front, continued monitoring (and where necessary enforcement) of the Phase 1 Agreement with China should be a priority as well as the start to a Phase 2 negotiation. The USTR under the Trump Administration has devoted significant resources to laying out the challenges posed by the differences in economic systems and pursuing actions to address some of the major distortions. Whether the Biden Administration agrees with all of the individual actions taken in the last four years, it is important that the problems flowing from different economic systems be addressed with all tools that are available and be an important topic in WTO reform talks.

While the Free Trade Agreements that China is party to do not address the problems of differing economic systems (market-oriented vs. state-directed), this issue is fundamental to the U.S. view of making the WTO system function moving forward. Deputy Director-General Alan Wolff has identified in a number of speeches what he believes are key principles undergirding the WTO. Convergence vs. coexistence is how he articulates a core challenge for the organization, and has listed convergence as a core principle. In his recent speech at the January 13 virtual meeting put on by Chatham House on possible issues for reform at the WTO, DDG Wolff said “WTO Members and their Secretariat will have to deal with a number of external problems because there is no choice. Do differing economic systems affect the bargained for conditions for trade? Is the WTO of the future to be about convergence more than coexistence?” WTO, DDG Wolff outlines possible responses to calls for WTO reform, January 13, 2021, https://www.wto.org/english/news_e/news21_e/ddgaw_13jan21_e.htm. China has taken the position that coexistence is all that can be expected, that the WTO is not the forum to look at different economic systems, and has opposed efforts to address the fundamental issue at the WTO. The U.S. has laid out the case for why convergence is a critical aspect of the WTO. While China was moving towards convergence in the early years after its accession to the WTO at the end of 2001, its path for the last decade has been away from convergence. The future of the WTO may very well depend on whether this core divide can be addressed in a manner that permits distortions of any economic system to be addressed and ensures results are based on market conditions and not government fiat.

Request for the establishment of a WTO panel by Hong Kong, China contesting the U.S. origin marking requirement

In a post on January 14, I noted that the first actions in the WTO dispute settlement system included Costa Rica’s request for consultations with Panama on various import restraints on agricultural products and the EU’s request for the establishment of a panel to examine its concerns with Indonesia’s export restraints on various raw materials used in stainless steel production. See January 14, 2021, First dispute settlement cases of 2021 at the WTO — Costa Rica requests consultations with Panama for various restrictions on agricultural products viewed as violating SPS obligations and more; EU requests establishment of a panel to address its concerns with Indonesia’s export restrictions on inputs for stainless steel, https://currentthoughtsontrade.com/2021/01/14/first-dispute-settlement-cases-of-2021-at-the-wto-costa-rica-requests-consultations-with-panama-for-various-restrictions-on-agricultural-products-viewed-as-violating-sps-obligations-and-more-eu-re/.

A third action has occurred, a request from Hong Kong, China, for the establishment of a panel contesting the United States origin marking requirements. The request was also filed on January 14 and was posted on the WTO website on January 15. See WT/DS567/5 (15 January 2021). The request for establishment of a panel is embedded below.

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The origin of the dispute is the actions of China in imposing national security legislation on Hong Kong that was viewed by the United States as rendering Hong Kong not sufficiently autonomous to justify it not being treated as part of China and posing national security concerns for the United States. The part of the request for establishment of a panel titled “Background” provides Hong Kong, China’s description of the developments leading to the dispute.

“On 11 August 2020, the United States Customs and Border Protection (USCBP) published a notice that, after 25 September 2020, goods produced in Hong Kong must be marked to indicate that their origin is ‘China’ for the purposes of the origin marking requirement set forth at Section 304 of the Tariff Act of 1930, 19 U.S.C. § 1304. By subsequent notice, the USCBP extended the date for compliance with this requirement to 10 November 2020.

“Section 304 of the Tariff Act of 1930 requires articles of non-United States origin imported into the United States to be marked ‘in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article’. Prior to the imposition of the revised origin marking requirement as announced in the notice published on 11 August 2020, the United States has required, and therefore permitted, goods produced in Hong Kong, China to be marked to indicate that their origin is ‘Hong Kong’. The United States’ prior treatment of goods of Hong Kong, China origin was consistent with the fact that the United States generally permits goods originating within the territory of other WTO Members, including separate customs territory Members, to be marked with the English name of that territory.

“The USCBP published the notice on 11 August 2020 pursuant to the ‘Executive Order on Hong Kong Normalization’ signed by the President of the United States Donald J. Trump on 14 July 2020. The Executive Order suspends the application of Section 201(a) of the United States-Hong Kong Policy Act of 1992, 22 U.S.C. § 5721(a), to a variety of United States statutes, including Section 304 of the Tariff Act of 1930.

“Under Section 201(a) of the United States-Hong Kong Policy Act of 1992, the laws of the United States apply to Hong Kong, China in the same manner as those laws applied to Hong Kong prior to the resumption of the exercise of sovereignty by the People’s Republic of China on 1 July 1997, unless the President of the United States determines and issues an Executive Order that Hong Kong, China ‘is not sufficiently autonomous to justify treatment under a particular law of the United States … different from that accorded the People’s Republic of China’. The suspension of Section 201(a) of the United States-Hong Kong Policy Act of 1992 as it applies to Section 304 of the Tariff Act of 1930 is the legal basis upon which the USCBP ordered that goods produced in Hong Kong ‘may no longer be marked to indicate ‘Hong Kong’ as their origin, but must be marked to indicate ‘China’.”

The Executive Order and U.S. Customs and Border Protection notices are embedded below.

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The Executive Order articulates the concerns of the U.S. Administration with the actions taken by China.

“In late May 2020, the National People’s Congress of China announced its intention to unilaterally and arbitrarily impose national security legislation on Hong Kong. This announcement was merely China’s latest salvo in a series of actions that have increasingly denied autonomy and freedoms that China promised to the people of Hong Kong under the 1984 Joint Declaration of the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the People’s Republic of China on the Question
of Hong Kong (Joint Declaration). As a result, on May 27, 2020, the Secretary of State announced that the PRC had fundamentally undermined Hong Kong’s autonomy and certified and reported to the Congress, pursuant
to sections 205 and 301 of the United States-Hong Kong Policy Act of 1992, as amended, respectively, that Hong Kong no longer warrants treatment under United States law in the same manner as United States laws were
applied to Hong Kong before July 1, 1997. On May 29, 2020, I directed the heads of executive departments and agencies (agencies) to begin the process of eliminating policy exemptions under United States law that give
Hong Kong differential treatment in relation to China.

“China has since followed through on its threat to impose national security legislation on Hong Kong. Under this law, the people of Hong Kong may face life in prison for what China considers to be acts of secession or
subversion of state power—which may include acts like last year’s widespread anti-government protests. The right to trial by jury may be suspended. Proceedings may be conducted in secret. China has given itself broad power to initiate and control the prosecutions of the people of Hong Kong through the new Office for Safeguarding National Security. At the same time, the law allows foreigners to be expelled if China merely suspects them of violating the law, potentially making it harder for journalists, human rights organizations, and other outside groups to hold the PRC accountable for its treatment of the people of Hong Kong.

“I therefore determine that the situation with respect to Hong Kong, including recent actions taken by the PRC to fundamentally undermine Hong Kong’s autonomy, constitutes an unusual and extraordinary threat, which has its source in substantial part outside the United States, to the national security, foreign policy, and economy of the United States. I hereby declare a national emergency with respect to that threat.”

Certainly the actions of the Chinese government in organizing mass arrests in Hong Kong undermine the concept that Hong Kong is autonomous. See, e.g., Washington Post, ‘Total submission,’ With mass arrests, China neutralizes Hong Kong democracy movement, January 6, 2021, https://www.washingtonpost.com/world/asia_pacific/hong-kong-arrests-national-security-law/2021/01/06/c3ccc248-4fbe-11eb-a1f5-fdaf28cfca90_story.html; New York Times, With Mass Arrests, Beijing Exerts an Increasingly Heavy Hand in Hong Kong, January 8, 2021, https://www.nytimes.com/2021/01/06/world/asia/china-hong-kong-arrests.html (“The central Chinese government, which once wielded its power over Hong Kong with a degree of discretion, has signaled its determination to openly impose its will on the city.”); BBC News, National security law: Hong Kong rounds up 53 pro-democracy activists, 6 January 2021, https://www.bbc.com/news/world-asia-china-55555299.

Hong Kong, China lists seven claims of violation of WTO obligations by the United States requiring goods from Hong Kong, China to be marked as goods of China. These include:

“1. Article I:1 of the GATT 1994, because in respect of the rules and formalities of importation pertaining to marks of origin, the United States does not extend to products of Hong Kong, China origin immediately and unconditionally the same advantages, favours, privileges, or immunities that the United States extends to like products originating in the territory of other countries;

“2. Article IX:1 of the GATT 1994, because the United States does not accord to the products of Hong Kong, China treatment with regard to marking requirements no less favourable than the treatment that the United States accords to like products of other countries;

“3. Article X:3(a) of the GATT 1994, because the United States does not administer its origin marking requirements in a uniform, impartial, and reasonable manner;

“4. Article 2(c) of the Agreement on Rules of Origin, because in respect of products produced in Hong Kong, the United States requires the fulfilment of a certain condition not related to manufacturing or processing, as a prerequisite for the determination of the country of origin;

“5. Article 2(d) of the Agreement on Rules of Origin, because the United States discriminates between Hong Kong, China and other Members in respect of the rules of origin that it applies to imports;

“6. Article 2(e) of the Agreement on Rules of Origin, because the United States does not administer its rules of origin in a consistent, uniform, impartial, and reasonable manner;

“Article 2.1 of the Agreement on Technical Barriers to Trade, because the origin marking requirements that the United States applies to imports are technical regulations and, in respect of those technical regulations, the United States does not accord to products imported from Hong Kong treatment no less favourable than the treatment that it accords to like products originating in other countries.

“In addition, and as a consequence of the foregoing, the measures at issue appear to nullify or impair the benefits accruing to Hong Kong, China directly or indirectly under the cited agreements.”

The United States position on the various claims is not known as yet. Presumably, the United States will raise as a defense national security claims as it has in a host of other cases.

The dispute will presumably take years to move to a conclusion, and absent a resolution of the Appellate Body impasse could result in the matter being appealed into the existing void.

Continued surge of COVID-19 cases results in extended restrictions in many countries affecting trade and economic growth

The latest data from the European Centre for Disease Prevention and Control (ECDC) show the global growth in new cases and deaths accelerating in many parts of the world with resulting extensions of restrictions on activities which harms international trade and global economic growth prospects. The control of the outbreak of new cases is being complicated by new strains in the U.K., South Africa and elsewhere that are proving to be more easily spread than initial strains and rapidly spreading around the world.

Specifically, the ECDC in a report released on January 14 covering data through the first week of 2021 (assumed to be through January 6), shows the last two weeks as generating 9,487,913 new reported cases of COVID-19 — the first time, more than nine million new cases has been found in a two week period. Data on global cases to this morning (January 15) show total global cases at 93.2 million with deaths at 2 million. These are up from the 89.8 million cases through the first week of 2021 and 1.94 million deaths. The world is likely to top 100 million COVID cases by the end of January.

The United States had its worst two weeks — 3,271,355 new cases (34.48% of global new cases) and 41,116 deaths (24.07% of last week global) — and its totals since the beginning of 2020 at 22.4 million cases and 374,442 deaths (24.97% and 19.30% of global totals) dwarf its 4.3% of global population.

Many countries in Europe are continuing to struggle with new cases and deaths and hence have extended restrictions. So, for example, the United Kingdom, has had the largest number of new cases in the last two weeks(742,619) it has ever recorded and the highest number of deaths since spring in the last two weeks (10,322). The result has been continued tightening of restrictions within the United Kingdom. See, e.g., BBC, Covid-19: UK daily deaths at record high and Scotland rules tightened, January 14, 2021, https://www.bbc.com/news/uk-55652431; BBC, Covid: What are the lockdown rules across the UK?, January 13, 2021, https://www.bbc.com/news/explainers-52530518.

In Italy, following a second surge in the fall, restrictions helped lower the number of new cases and deaths but there have been upward trends in new cases in recent weeks with potential increases in deaths likely, leading to the introduction of some new restrictions. See, e.g., The Local, Italy declares three regions red zones as restrictions tighten, January 15, 2021, https://www.thelocal.it/20210115/italy-declares-three-regions-red-zones-as-restrictions-tighten.

Other countries in Europe are also seeing rising cases after drops in cases and deaths following introduction of restrictions and are often imposing or maintaining restrictions to address recent increases. See, e.g., The Local, French government extends 6pm curfew to whole country as Covid cases rise, January 14, 2021 (updated January 15), https://www.thelocal.fr/20210114/latest-french-government-to-announce-extra-restrictions-as-covid-cases-rise; France 24, France introduces tougher Covid-19 restrictions for non-EU travellers, January 15, 2021, https://www.france24.com/en/france/20210115-france-introduces-tougher-covid-19-restrictions-for-non-eu-travellers; DW, Coronavirus: German Chancellor Angela Merkel urges ‘significantly’ tougher curbs — reports, January 15, 2021, https://www.dw.com/en/coronavirus-german-chancellor-angela-merkel-urges-significantly-tougher-curbs-reports/a-56230751; El Pais, Spain reports 35,878 new coronavirus infections and 201 deaths, as third wave progresses, January 15, 2021, https://english.elpais.com/society/2021-01-15/spain-reports-35878-new-coronavirus-infections-and-201-deaths-as-third-wave-progresses.html (“Simón is taking for granted that the epidemiological curve will continue to rise for several more days, but he is hoping that the more restrictive measures that have been put in place after the Christmas holidays will put the brakes on the rhythm of infections.”).

Even in parts of Asia where there have been relatively few COVID-19 cases, recent increases have led to restrictions imposed in particular areas. See, e.g., NPR, Millions In China Under New Restrictions Amid COVID-19 Spike Near Beijing, January 9, 2021, https://www.npr.org/sections/coronavirus-live-updates/2021/01/09/955298826/millions-in-china-under-new-restrictions-amid-covid-19-spike-near-beijing; the Japan Times, Japan bars entry for new arrivals and business travelers due to new COVID-19 strains, January 14, 2021, https://www.japantimes.co.jp/news/2021/01/14/national/japan-bars-new-arrivals-business-travelers/; japan-guide.com, Travel Alerts and Disaster Updates, updated January 15, 2021, https://www.japan-guide.com/news/alerts.html (“Domestic Situation Although the virus has not spread in Japan at a rate seen in Europe and North America, infection numbers have increased considerably in recent weeks, and a state of
emergency was declared in 11 of Japan’s 47 prefectures, including in the greater Tokyo, Osaka, Nagoya and Fukuoka regions, to last until February 7.”); NPR, South Korea Tightens Restrictions During Holiday Period, December 22, 2020, https://www.npr.org/sections/coronavirus-live-updates/2020/12/22/949155094/south-korea-tightens-restrictions-during-holiday-period (“The new measures, which will be in effect through Jan. 3, follow the capital Seoul’s ban earlier in the week on private assembly of five or more people. The capital area, which accounts for more than 70% of last week’s new infections in South Korea, upped the regional alert level three times in the past month. But case numbers have yet to demonstrate a downward trend.”).

In India, where the government has worked hard to bring down the number of new cases in recent months and has had some significant success, many restrictions remain in place. See GardaWorld, India: Authorities extend domestic coronavirus disease controls through Jan. 31, 2021; international travel restrictions continue, December 29, 2020, https://www.garda.com/crisis24/news-alerts/422756/india-authorities-extend-domestic-coronavirus-disease-controls-through-jan-31-2021-international-travel-restrictions-continue-update-33.

Some governments have reduced economic recovery projections for 2021 because of the second wave of cases in the fall of 2020. See, e.g., Euronews, What does 2021 hold for jobs and businesses in Europe?, December 16, 2020, https://www.euronews.com/2020/12/16/what-does-2021-hold-for-jobs-and-businesses-in-europe (“The second wave of lockdowns devastated businesses across Europe and led the European Commission to downgrade its economic growth forecast for 2021 for the Eurozone from 6.1% down to 4.2%. It’s expected to be two years until the European economy comes close to its pre-pandemic level.”).

While other government 2021 projections show greater growth than was projected in the fall of 2020, the rebound is built on assumptions about stimulus funding, timing and effectiveness of vaccines and other elements. See, e.g., CNBC, Fed raises its economic outlook slightly, sees 4.2% growth next year and 5% unemployment rate, December 16, 2020, https://www.cnbc.com/2020/12/16/fed-raises-its-economic-outlook-slightly-sees-4point2percent-growth-next-year-and-5percent-unemployment-rate.html#:~:text=The%20Federal%20Reserve%20expects%20real,to%204.2%25%20from%204.0%25; The Conference Board, The Conference Board Economic Forecast for the US Economy, January 13, 2021, https://www.conference-board.org/research/us-forecast (“Our base case forecast yields 1Q21 real GDP growth of 2.0 percent* (annualized rate), and an annual expansion of 4.1 percent for 2021, following an annual contraction of 3.5 percent for 2020. We view this scenario as the most probable. It assumes: a) new cases of COVID-19 peak in early 1Q21 but no widespread lockdowns are implemented, b) vaccines are deployed gradually in 1Q21 but volumes accelerate into 2Q21, c) the December 2020 stimulus package is fully deployed in 1Q21 and an additional stimulus package is deployed in 2Q21, d) labor markets and consumption weaken slightly in 1Q21 but rebound in 2Q21 and 3Q21, and e) the political transition does not result in a hit to consumer or business confidence. These assumptions yield a lull in the recovery in 4Q20 and early 1Q21, but a steady acceleration of economic activity that peaks in the summer months as consumers eagerly spend on services and goods that they had forgone in 2020. In this scenario US monthly economic output returns to pre-pandemic levels in August 2021.”).

Growing concern over new strains of the COVID-19 and mounting new cases will be putting strain on many governments and keeping downward pressure on trade in services which the WTO has estimated as being down 30% globally in 2020. Travel and tourism have been decimated in 2020 and will continue to face major hurdles for at least the first half of 2021. International arrivals are down 70% for the year and more than 90% for the period since April 2020. See UNWTO, TOURISM BACK TO 1990 LEVELS AS ARRIVALS FALL BY MORE THAN 70%, 17 December 2020, https://www.unwto.org/news/tourism-back-to-1990-levels-as-arrivals-fall-by-more-than-70.

In the EU, a $2.1 trillion budget and coronavirus recovery package has been approved. See KFF, E.U. Leaders Agree To $2.1T Budget, Pandemic Recovery Fund; Main Science Research Program Receives Less Than Expected, Jul 21, 2020, https://www.kff.org/news-summary/e-u-leaders-agree-to-2-1t-budget-pandemic-recovery-fund-main-science-research-program-receives-less-than-expected/; Politico, EU leaders back deal to end budget blockade by Hungary and Poland, December 10, 2020, https://www.politico.eu/article/deal-reached-to-unblock-eu-budget-and-recovery-fund/.

In the United States, the recent $900 billion stimulus package was viewed as a temporary measure that would need to be supplemented in 2021. President-elect Biden announced on January 14, 2021 that he will be seeking a $1.9 trillion additional stimulus package to address the human costs of the pandemic, provide funding for people and businesses, strengthen efforts at vaccine distribution and vaccinations and other purposes. See, e.g., New York Times, Biden Outlines $1.9 Trillion Spending Package to Combat Virus and Downturn, January 14, 2021 (updated January 15), https://www.nytimes.com/2021/01/14/business/economy/biden-economy.html.

The stimulus packages by the EU (and member governments) and U.S. and other countries have kept demand higher than would otherwise have been possible but at the cost of significant increases in national debt which will reduce national flexibilities in later years.

In prior posts, I pointed out that the vaccine rollout, while promising, was facing a series of problems both at producers and in the ability of many governments to ramp up vaccinations. Moreover, the rapidity of the global economic rebound would depend on the speed of global vaccinations. See January 3, 2021, 2021 – how quickly will COVID-19 vaccines bring the pandemic under control?, https://currentthoughtsontrade.com/2021/01/03/2021-how-quickly-will-covid-19-vaccines-bring-the-pandemic-under-control/; January 5, 2021,  Global economic rebound in 2021 will be affected by rate of vaccinations against COVID-19 – World Bank’s January 5, 2021 release of its World Economic Prospects report, https://currentthoughtsontrade.com/2021/01/05/global-economic-rebound-in-2021-will-be-affected-by-rate-of-vaccinations-against-covid-19-world-banks-january-5-2021-release-of-its-world-economic-prospects-report/.

There is also the question of whether variants of COVID-19 will be treatable as effectively by the currently approved vaccines. See, e.g., National Geographic, Existing vaccines should work against new coronavirus variants for now, January 15, 2021, https://www.nationalgeographic.com/science/2021/01/existing-vaccines-should-work-against-new-coronavirus-variants-for-now/; VOX, How the new Covid-19 variants could pose a threat to vaccination, January 7, 2021, https://www.vox.com/22213033/covid-19-mutation-variant-vaccine-uk-south-africa.

There continue to be problems with the rate of vaccinations in many countries who have access to vaccines although all governments area working on ways to speed up the vaccination process. There are also problems in terms of the ramp up of production and the slower than expected approval of some vaccines. See, e.g., Politico, Germans vexed as coronavirus vaccine rollout lags, January 12, 2021, https://www.politico.eu/article/coronavirus-story-kiel/; Politico, France rejects criticism of EU coronavirus vaccine procurement, January 10, 2021, ; Financial Times, Pfizer to limit vaccine deliveries temporarily to Europe, January 15, 2021,https://www.ft.com/content/e8177df6-04ae-4d20-8e62-ca76589c7653?desktop=true&segmentId=d8d3e364-5197-20eb-17cf-2437841d178a; BBC News, Coronavirus: Dutch shocked to be EU vaccination stragglers, January 6, 2021, https://www.bbc.com/news/world-europe-55549656; USA Today, Tracking COVID-19 vaccine distribution by state: How many people in the US have received a shot?, January 14, 2021, https://www.usatoday.com/in-depth/graphics/2021/01/14/covid-vaccine-distribution-by-state-how-many-covid-vaccines-have-been-given-in-us-how-many-people/6599531002/ (“About 63.6% of the vaccines distributed haven’t been used yet.”).

Finally, while 49 countries have started to vaccinate their populations according to a recent article from Politico, the largest number of countries continue to wait for vaccines which will be helped when more vaccines are approved. See, e.g., Politico, Coronavirus vaccination in Europe — by the numbers, January 11, 2021, https://www.politico.eu/article/coronavirus-vaccination-europe-by-the-numbers/.

Conclusion

The COVID-19 pandemic continues to rage globally and is becoming more concerning because of faster spreading variants that are showing up around the world. Since many western countries continue to have very high numbers of new cases, hospitalizations and deaths, enormous pressure is on governments to get effective vaccines in large quantities as quickly as possible and get their populations vaccinated. Many countries with access to vaccines are having early problems in ramping up vaccinations. Some of the approved vaccinations are struggling with the production ramp up and being pressed to provide more volumes of vaccines in the absence of alternative vaccines from other producers. The main vaccines intended for broad distribution to many developing and least developed countries are either just starting to receive approvals for distribution or are still working through final trials. In a world quickly approaching 100 million reported cases and more than 2 million deaths and having suffered significant economic dislocations with services trade down an estimated 30 percent, with as many as 100 million people pushed into poverty, and 100-120 million people in the tourism sector having lost jobs, a global solution cannot occur soon enough. While 2021 will show significant improvements for many countries, the continuing challenges from COVID-19 will be with the world community for the foreseeable future.

U.S. trade policy under a Biden Administration and a Democratically-controlled Congress — how will a search for social justice and more equitable distribution of benefits affect trade laws and negotiations?

President-elect Biden’s pick for U.S. Trade Representative, Katherine Tai, spoke at a National Foreign Trade Council virtual conference yesterday and various press reports indicate that she identified two primary areas of focus of the incoming Administration in trade as being China and the USMCA. Ms. Tai is quoted as stating that the Biden Administration “will pursue trade policies that place the humanity and dignity of every American and all people at the heart of our approach” and will use trade policy “to create a more inclusive prosperity for Americans”. Inside U.S. Trade’s World Trade Online, Tai calls for more trade collaboration ‘across the entire spectrum,’ January 12, 2021,https://insidetrade.com/daily-news/tai-calls-more-trade-collaboration-%E2%80%98across-entire-spectrum%E2%80%99. See also Financial Times, What maiden speech of USTR-elect says about Biden’s trade policy, January 13, 2021, https://www.ft.com/content/f57fc73f-276f-470f-bffe-ab348fb13f16; Washington Trade Daily, January 13, 2021, Biden’s Worker-Centered Trade Policy, https://files.constantcontact.com/ef5f8ffe501/cfb23ebb-cdc6-4b55-adb5-3a5cbd7cfce6.pdf, (“’The President-Elect’s vision is to implement a worker-centered trade policy,’ Ms. Tai continued. ‘What this means in practice is that US trade policy must benefit regular Americans, communities, and workers. And that starts with recognizing that people are not just consumers – they are also workers, and wage earners.’”).

In an earlier post, I had reviewed the range of issues that an incoming U.S. Trade Representative will be facing. See December 12, 2020, The Incoming Biden Administration and International Trade – Katherine Tai, nominee for U.S. Trade Representative, https://currentthoughtsontrade.com/2020/12/12/the-incoming-biden-administration-and-international-trade-katherine-tai-nominee-for-u-s-trade-representative/.

In the area of trade negotiations, the USMCA reflects a greater focus on workers and has been cited by Democrats as having moved in the right direction to address the needs of working families. Enforcement is a major element of the new agreement on labor rights and how well the new agreement works in the labor enforcement area will be tested shortly after President-elect Biden is sworn is as the AFL-CIO will be filing a complaint on Mexico’s implementation then. Inside U.S. Trade’s World Trade Online, Trumka: AFL-CIO to launch labor case against Mexico soon after Biden takes office, January 12, 2021, https://insidetrade.com/daily-news/trumka-afl-cio-launch-labor-case-against-mexico-soon-after-biden-takes-office.

But there are many areas of trade law where a more worker-inclusive approach to trade policy could lead to significant changes in the approach pursued. For example, on the pending issue of renewal of the Generalized system of preferences (GSP expired on Dec. 31, 2020), Democrats in 2020 were looking for modifications to eligibility criteria to address issues like human rights, anti-corruption and the environment. See Inside U.S. Trade’s World Trade Online, Wyden: GSP changes needed to ‘raise the bar’ for U.S. trading partners, December 2, 2020, https://insidetrade.com/daily-news/wyden-gsp-changes-needed-%E2%80%98raise-bar%E2%80%99-us-trading-partners. These types of changes are likely to be pursued in 2021. But there are others that may be equally important to working men and women in the manufacturing sector. For many products produced in various GSP countries, the primary beneficiary is a local subsidiary of a major multinational company — companies that very likely don’t need the tariff advantage to be competitive against imports from other countries. Congress and a Biden Administration could examine whether eligibility within an eligible country would not apply to goods from subsidiaries of multinational companies. Such an approach would reduce the likely loss of jobs in the United States or encourage reshoring where the advantage is a tariff-based incentive.

Similarly, Congress has often considered miscellaneous tariff bills (MTBs) to provide waiver of duties on imports reportedly not produced in the United States. Many businesses are pushing for adoption of MTBs early in the Biden Administration. There can be literally thousands of such requests received and handled. There is no present process to review which products are simply inputs being shipped between subsidiaries of the same company, for which products maintaining the duty could lead to production starting in the United States, etc. A Biden Administration, if interested in ensuring that trade policy works for all Americans might view changes to the MTB process to be relevant.

In trade remedies, while U.S. law has permitted workers to bring petitions, the Biden Administration and Congress could look at self-initiation of cases of interest to workers where major producers in the U.S. are conflicted because of foreign operations and could seek funding (based on use of a small portion of trade remedy duties collected from other cases) for workers to be able to hire private counsel to pursue cases.

While the Trump Administration has bolstered action on imports made from forced labor, the Biden Administration has the ability to significantly increase the use of existing U.S. law against such imports and should explore additional documentation required for any goods from an area where forced labor is suspected to be used.

While one is not expecting significant new FTA negotiations by the Biden team in 2021, there are negotiations underway where labor, environment and other priorities for the Biden team could be addressed. The U.S.-U.K. negotiations would be one obvious one. If there is to be a comprehensive U.S.-Japan agreement, that would be a second one where achieving meaningful results on labor and environment should be doable. U.S.-Kenya would be more challenging but would be important. While a significant part of the business community is hopeful that the U.S. will reengage with the now CPTPP countries, it is unlikely that such an undertaking will be pushed in 2021.

While the U.S. will be reengaging with the EU and while the U.S. and EU should have broad areas of common interest on labor and environment in a Biden Administration, the immediate issues before both the U.S. and EU are resolution of the Airbus/Boeing disputes and retaliations, what path forward there is on global excess capacity in various sectors (including steel and aluminum where the U.S. has 232 tariffs in place and the EU has retaliated and also has safeguard duties in place on steel), the 301 investigations into the EU and various EU Members on digital service taxes and the ongoing OECD/G20 efforts to adopt broadbased agreed rules for taxation of the digital economy, and collaboration on efforts to deal with distortions caused by China’s policies.

On the important U.S.-China relationship, the U.S. should start a phase 2 negotiations with China. In addition to the remaining issues from the U.S. 301 investigation of China that remain unresolved, successes in the EU-China Comprehensive Agreement on Investments on services and selected goods areas where various issues were addressed on sustainability, transparency, subsidies, etc. could be useful as precedents for any phase 2 talks on similar issues.

On the WTO, reform is a key priority for the Members and may provide the U.S. with an opportunity to make trade rules work better for working men and women. There is considerable interest among many WTO Members on the effects of climate change and what role the WTO can play to address. Indeed, there is generally reasonable interest in a range of the UN Sustainable Development Goals, a number of which should be of interest to the Biden team and the Democratically led Congress. Historically, labor issues have been unwelcome by many developing and least developed countries at the WTo, and it is unclear that there has been any significant change, meaning such issues will likely be more fruitfully addressed in FTAs or in other venues (e.g., GSP legislation).

House Ways and Means Committee Democratic Policy Pillars and Priorities on Health and Economic Equity while generally not trade focused are consistent with likely direction of the Biden Administration

A recent document released by the House Ways and Means Committee Chairman Richard Neal entitled Policy Pillars and Priorities: A Bold Vision for a Legislative Pathway Toward Health and Economic Equity deals with the broad issue of changes needed to laws that are within the Ways and Means jurisdiction to address the challenges of unequal access to health care and economic opportunities experienced by many members of minority groups in the United States. The document is embedded below. Generally trade is not the primary focus of the different topics although there is reference to trade in a number of the sections.

HWMC-Pillars-and-Priorities-Pathway-toward-Health-and-Economic-Equity

Specifically, the paper identifies nine policy pillars, four that are part of the section on health equity pillars and five that are part of the economic equity pillars. Trade is not addressed in any of the health pillars as policy approaches but is included as one of the policy approaches for each of the economic equity pillars. Below is the pillar and the listed trade policy approach cited for each.

“ECONOMIC EQUITY POLICY PRIORITIES

“Economic Justice for Workers

“Ensure trade policies support and do not undermine economic justice for workers in the
United States and in trading partner countries

“Economic Justice for Children and Families

“Assess the impacts that trade policies have on the ability of families from marginalized
communities and children of color to access needed resources

“Retirement Security

“Assess the impacts that trade policies have on the ability of American families to plan for and
enjoy a secure and dignified retirement

“Investment in Communities from the Ground Up

“Assess the impacts trade policies have on communities and their access to economic
opportunity and justice

“Environmental Justice

“Promote environmental justice through U.S. trade policies, including trade agreements and
programs”.

The paper from Chairman Neal was accompanied by a majority staff report which is embedded below and from which the section on trade (pages 20-24) is copied after. What is clear from the report and the economic equity pillars is that Democrats will be looking for trade policies to support efforts to make global trade more beneficial to working people and less discriminatory in effect on minorities. While the bulk of the tools to achieve greater equity will be domestic laws and policies (e.g., substantial infrastructure projects could be of significant help both short-term and longer-term), trade policy that includes the concerns of labor and the environment will likely differ significantly from policy that is simply business-owner focused.

HWMC-Majority-Staff-Report

“Access to the Benefits of Trade for Individuals and Communities

“Commonplace discussions about the objectives of international trade policy generally identify and promote the interests of economic sectors – industrial, agricultural, and services, for example. Seldom have trade’s effects on individuals or communities been considered, much less prioritized as such, beyond in any but the most abstract terms. When trade policymakers have taken the time to make the interests of individuals and communities a priority, however, their efforts have generated substantial political support for those policies. 106 Consequential developments in recent years – and in 2020 in particular – are challenging policymakers to
investigate further the role that trade policy has played in either perpetuating or exacerbating unequal access to the benefits of trade for certain individuals and communities – both in the U.S. and worldwide. In 2020, the COVID-19 pandemic has highlighted the fact that these disparities in outcomes among different communities result from structural and systemic inequities U.S. laws and policies create – inequities that emerged as far back as some of the first U.S. international economic policies involving the exchange of goods and people.107

“Globally, the pandemic has also revealed the fragility of our international supply chains and the inequity in the treatment of workers in low-cost labor countries where manufacturing has become concentrated. Predominantly non-White workers from developing countries and former colonies across the world suffer compromised labor conditions while producing goods for U.S. and global consumers. Unequal contracting and employer relationships that have developed from the arbitrage that conventional trade policies enable have encouraged a spectrum of exploitative practices, including the prevalence of forced labor in certain regions.108 In their attempts to minimize financial losses related to COVID-19, U.S.- and European-based multinational companies have left already low-wage workers in developing countries – also struggling to survive the pandemic – without pay.109 In this way, COVID-19 revealed how globalization has incentivized supply chain models that depend on finding the lowest cost workforce for production, regardless of living or working conditions, with dire consequences for public health, supply chain resilience, and a disparate impact on those already bearing the heaviest burdens in the existing global economic order.110 Indeed, some have called on brands and global retailers to remedy inequitable purchasing practices and commit to support millions of garment workers of color around the world who have enabled substantial industry profits, particularly in light of recent corporate public actions to promote racial justice.111

“For the last 50 years, the U.S. has pursued a policy of aggressive trade liberalization and experienced
a painful decline in manufacturing and redistribution of jobs to the services sector. The loss of manufacturing jobs and the increase in service sector work has exacerbated income inequality more broadly because those manufacturing jobs often had union benefits and wages that supported middle- and working-class families, whereas service sector jobs generally did not.112 In recent years, U.S. service sector jobs have also faced the
pressures of globalization and losses to lower-labor-cost countries.113 Trade policies favoring financial and corporate interests over those of individuals and their communities have yielded lowered labor conditions and standards for American workers in the form of decades-long wage stagnation, weaker labor protections, limited options for quality jobs, and increased unemployment.114

“Black workers have faced even harsher obstacles to recover from globalization-related job losses due to systemic and pervasive racial disparities across the labor market and in accessing public services.115 The loss in manufacturing jobs disproportionately impacted Black workers in a multitude of ways, including negatively affecting their wages, employment, marriage rates, house values, poverty rates, death rates, single parenthood, teen motherhood, child poverty, and child mortality.116 In addition to increases in precarious work, the decline in union jobs has also been cited as a contributing factor to growing inequality. In fact, union jobs help reduce disparities Black workers suffer by enabling more equitable labor conditions that
help protect them from discriminatory practices.117 At the same time, trade liberalization has impacted immigrant and Latino workers in the U.S. who have also suffered job losses and wage stagnation.118, 119

“An examination of U.S. policies affecting agricultural production and trade, as well as the historical realities that helped shape them, reveals racial inequities in both their development and impacts. The production of
certain commodities in the U.S. can be traced back to the founding of the original colonies as part of trans-Atlantic trade when forced labor powered production and comprised a key element of the triangular trade flow. Those commodities continue to enjoy robust support through U.S. government policies – support that is often strategically sheltered from strict multilateral trade disciplines. U.S. policies and systemic inequities have over time restricted the rights and ability of Black Americans to acquire or retain land for farming; Black farmers currently make up less than two percent of all U.S. farmers.120 Furthermore, policies and practices have been documented that further restricted the ability of Black farmers to access the government support that other farmers receive.121 Taken together, it appears that benefits and prosperity that U.S. farmers and agricultural producers enjoy from trade and attendant policies lack inclusivity and reflect significant disparities between communities. Thus, such factors must be revisited to promote economic equity.

“Some have criticized the globalization resulting in large part from U.S. trade policies of the past decades for a redistribution of wealth that places costs disproportionately on those that are socially and economically disadvantaged in other countries as well.122 The current application of U.S. trade policies has contributed to imbalanced economic benefits in developing countries and broader unrealized development goals. The disproportionate benefits for corporate entities over individuals and local communities have dramatically impacted the economies and demographics of some developing countries. The resulting job losses in those foreign nations have in many cases spurred mass forced migration.123 Similarly, U.S. preference programs have historically benefitted a small set of developing countries and have largely left the least developed countries behind.124 A thoughtful, probing re-examination of the modes and objectives of U.S. trade policy in light of their domestic and international effects is necessary now more than ever before. Only then can reforms and new approaches be adopted to produce a sustainable and inclusive prosperity that prioritizes meaningful economic benefits for individuals and communities, and others who have been left out, overlooked, and exploited. also

“106 Guided by a focus on the effect of the trade agreement on individuals, in 2019, House Democrats engaged in a direct negotiation with the Trump Administration to correct serious deficiencies in the Administration’s attempted renegotiation of the North American Free Trade Agreement (NAFTA). House Democrats required significant changes to strengthen the standards and enforceability of worker rights and environmental protections, and to ensure people’s timely access to affordable medicines. The changes secured a level of bipartisan, bicameral support that U.S. trade policy had not seen in nearly 40 years.

“107 Danyelle Solomon et al., Systematic Inequality and Economic Opportunity, CTR. FOR AM. PROGRESS (Aug. 7, 2019), https://www.americanprogress.org/issues/race/reports/2019/08/07/472910/systematic-inequality-economicopportunity/.

“108 Elizabeth Paton and Austin Ramzy, Coalition Brings Pressure to End Forced Uighur Labor, N.Y TIMES (July 23, 2020), https://www.nytimes.com/2020/07/23/fashion/uighur-forced-labor-cotton-fashion.html; see also Vicky Xiuzhong Xu et al, Uyghurs for Sale, AUSTRALIAN STRATEGIC POLICY INST. (Mar. 1, 2020),
https://www.aspi.org.au/report/uyghurs-sale.

“109 Mark Anner, Abandoned? The Impact of Covid-19 on Workers and Businesses at the Bottom of Global Garment Supply Chains, PENNSTATE CENTER FOR GLOBAL WORKERS’ RIGHTS (Mar. 27, 2020),
https://www.workersrights.org/wp-content/uploads/2020/03/Abandoned-Penn-State-WRC-Report-March-27-
2020.pdf; see also Who Will Bail Out the Workers That Make Our Clothes?, WORKER RIGHTS CONSORTIUM (Mar. 2020), https://www.workersrights.org/wp-content/uploads/2020/03/Who-Will-Bail-Out-the-Workers-March-2020.pdf.

“110 Traditional payment structures for apparel orders heavily favor global brands and retailers over suppliers and workers in developing countries. See, Garment Workers on Poverty Pay are left without Billions of Their Wages During Pandemic, CLEAN CLOTHES CAMPAIGN (Aug. 8, 2020), https://cleanclothes.org/news/2020/garmentworkers-on-poverty-pay-are-left-without-billions-of-their-wages-during-pandemic; My Children Don’t Have Food: What the Crisis Means for the People Who Make Collegiate Apparel , WORKER RIGHTS CONSORTIUM (June, 2020), https://www.workersrights.org/wp-content/uploads/2020/06/My-children-dont-have-food_June-2020.pdf.

“111 Kalkidan Legesse, Racism is at the Heart of Fast Fashion—It’s Time for Change, THE GUARDIAN (June 11,
2020), https://www.theguardian.com/global-development/2020/jun/11/racism-is-at-the-heart-of-fast-fashion-itstime-for-change.

“112 Robert E. Scott, Trading Away the Manufacturing Advantage, ECONOMIC POLICY INST. (Sep. 30, 2013),
https://files.epi.org/2013/trading-manufacturing-advantage-china-trade.pdf; Daniella Zessoules, Trade and Race: Effects of NAFTA 2.0 and Other Low-Road Approaches to Trade on Black Communities, CTR. FOR AM. PROGRESS (June 18, 2019), https://www.americanprogress.org/issues/economy/reports/2019/07/18/471198/trade-and-race/;
Gerald D. Taylor, Unmade In America: Industrial Flight and the Decline of Black Communities, ALLIANCE FOR AM. MANUFACTURING (October 2016), https://s3-us-west-2.amazonaws.com/aamweb/uploads/researchpdf/
UnmadeInAmerica.pdf.

“113 Offshoring Security: How Overseas Call Centers Threaten U.S. Jobs, Consumer Privacy, and Data Security,
COMMUNICATIONS WORKERS OF AM. (Oct. 2013), https://files.cwa-union.org/national/offshoring-security.pdf.

“114 Sandra Polaski et al., How Trade Policy Failed U.S. Workers—and How to Fix It, BOSTON UNIV. GLOBAL
DEVELOPMENT POLICY CTR. (Sep. 14, 2020), http://www.bu.edu/gdp/files/2020/09/How-Trade-Policy-Failed-USWorkers-and-How-to-Fix-it-FIN.pdf; David H. Autor, The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade, NAT’L BUREAU OF ECONOMIC RESEARCH (2016), https://www.nber.org/papers/w21906.pdf.

“115 Robert E. Scott, Trading Away the Manufacturing Advantage, ECONOMIC POLICY INST. (Sep. 30, 2013),
https://files.epi.org/2013/trading-manufacturing-advantage-china-trade.pdf; Daniella Zessoules, Trade and Race: Effects of NAFTA 2.0 and Other Low-Road Approaches to Trade on Black Communities, CTR. FOR AM. PROGRESS (June 18, 2019), https://www.americanprogress.org/issues/economy/reports/2019/07/18/471198/trade-and-race/.

“116 Eric D. Gould, Torn Apart? The Impact of Manufacturing Employment Decline on Black and White Americans, THE MIT PRESS J. (Mar. 6, 2020), https://www.mitpressjournals.org/doi/pdf/10.1162/rest_a_00918. See also Sandra Polaski et al., How Trade Policy Failed U.S. Workers—and How to Fix It, BOSTON UNIV. GLOBAL DEVELOPMENT POLICY CTR. (Sep. 14, 2020), http://www.bu.edu/gdp/files/2020/09/How-Trade-Policy-Failed-US-Workers-and-How-to-Fix-it-FIN.pdf.

“117 Id.; see also Andrea Flynn et al, Rewrite the Racial Rules: Building an Inclusive American Economy, ROOSEVELT INST. (June 2016), https://rooseveltinstitute.org/wp-content/uploads/2016/06/RI-RRT-Race-201606.pdf; Natalie Spievack, Can labor unions help close the black-white wage gap?, URBAN INST. (Feb. 1, 2019), https://www.urban.org/urban-wire/can-labor-unions-help-close-black-white-wage-gap.

“118 Fracaso: NAFTA’s Disproportionate Damage to U.S. Latino and Mexican Working People , PUBLIC CITIZEN
(Dec. 3, 2018), https://www.citizen.org/article/fracaso-naftas-disproportionate-damage-to-u-s-latino-and-mexicanworking-people/.

“119 Trade Discrimination: The Disproportionate, Underreported Damage to U.S. Black and Latino Workers from U.S. Trade Policies, PUBLIC CITIZEN (Jan. 7, 2021), https://www.citizen.org/wp-content/uploads/PC_Trade-
Discrimination-Report_1124.pdf.

“120 Khalil G. Muhammad, The Sugar that Saturates the American Diet has a barbaric history and as the White Gold that Fueled Slavery, NY. TIMES (Aug. 14, 2019), https://www.nytimes.com/interactive/2019/08/14/magazine/sugarslave-trade-slavery.html.

“121 Nathan Rosenberg, USDA Gave Almost 100 Perfect of Trump’s Trade War Bailout to White Farmers, THE
COUNTER (July 29, 2019), https://thecounter.org/usda-trump-trade-war-bailout-white-farmers-race/ ; Paola Rosa-Aquino, Nearly 100 Percent of Trump Funds Designed to Help Farmers Went to White Farmers, GRIST (Aug. 1, 2019), https://grist.org/article/trump-trade-war-usda-farmer-subsidy-race-disparity/; and Chantal Thomas, Income Inequality and International Economic Law: From Flint, Michigan to the Doha Round, and Back, CORNELL LEGAL STUDIES RESEARCH (2019).

“122 Chantal Thomas, Income Inequality and International Economic Law: From Flint, Michigan to the Doha Round, and Back, CORNELL LEGAL STUDIES RESEARCH (2019).

“123 Both NAFTA and the U.S. Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) have
been criticized for contributing to increased migration of Mexican and Central American workers, respectively, into the U.S. See Andrew Chatzky, et. al., NAFTA and the USCMA: Weighing the Impact of North American Trade, COUNCIL ON FOREIGN RELATIONS (July 1, 2020), https://www.cfr.org/backgrounder/naftas-economic-impact; see also Mark Weisbrot et. al., Did NAFTA Help Mexico? An Assessment After 20 Years, CTR. FOR ECONOMIC & POLICY RESEARCH (Feb. 2014), https://cepr.net/report/nafta-20-years/; NAFTA at 20, AFL-CIO (Mar. 27, 2014), https://aflcio.org/reports/nafta-20.

“124 Generalized System of Preferences (GSP): Overview and Issues for Congress RL33663, CONG. RESEARCH SERV. (2019).”

Inserted material in boxes in report:

“We should be asking: why are Black and Latino people less likely to be working from home; less likely to be insured; less likely to live in unpolluted neighborhoods? The answer is racist policy… Will policymakers turn away as people of color suffer in their bedrooms, suffer on their hospital beds, suffer watching their loved ones lowered into their graves –all the while blaming them for their own suffering –all the while adding to the racist history of their suffering? Or will policymakers be antiracist? Meaning no longer blaming people of color for disparities. And focused on pushing policy that leads to equity and justice for all. Testimony of Dr. Ibram X Kendi, Hearing on The Disproportionate Impact of COVID-19 on Communities of Color, May 2020.”

“So climate change will lead to increased droughts, more frequent droughts. But, at the same time, it will also change precipitation patterns and lead to heavier downpours. The Great Plains, which are the breadbasket of America, are projected to experience drought conditions unprecedented in the last millennium. We expect to see the ranges of certain pests expanding, and changes in the growing seasons. And all of these things could have implications for agriculture and our food security. Testimony of Dr. Katherine Marvel, Hearing on The Economic and Health Consequences of Climate Change, May 2019.”

Conclusion

The United States is eight days from a new Administration. While trade is not the topic of first importance to the incoming Biden team, the desire to build back better and more equitably will have effects on Executive actions in all areas, including trade, and will over the next two years at least with the Democrats in charge of both the House and the Senate include legislative discussions of issues of health and economic equity that may have important trade policy implications as well.


U.S. Senate Finance Committee Chairman requests an investigation into foreign government censorship and how such censorship may adversely impact U.S. businesses and citizens — a focus on China but broader in reach

In 2020 the United States Senate Committee on Finance’s Subcommittee on Trade held a hearing on “Censorship as a Non-tariff Barrier” and received testimony from four witnesses. The main focus of the prepared testimony was on the actions of China, but the issue is broader than that. Some of the concerns of U.S. businesses are presumably being teed up by the United States and others in the plurilateral talks on e-commerce that are ongoing among more than 80 WTO Members. Since the draft text of the Joint Statement Initiative talks on e-commerce is not public, it is not clear what, if any, current draft provisions deal with the concerns of the U.S. business community. See December 14, 2020 listing of a consolidated negotiating text on e-commerce of 90 pages in INF/ECOM/62/Rev.1 on the WTO webpage (documents online)(document is restricted and hence not publicly available).

On January 4, 2021, the Chairman of the Senate Finance Committee, Senator Chuck Grassley, forwarded a request to the United States International Trade Commission for a fact finding investigation. The letter is embedded below but references the June 30, 2020 hearing and makes specific requests for the type of information to be provided in a report to be provided within 18 months:

“The report should provide detailed information on this important matter, including the following:

“1. Identification and descriptions of various foreign censorship practices, in particular any examples that U.S. businesses consider to impede trade or investment in key foreign markets. The description should include to the extent practicable:

“a. the evolution of censorship policies and practices over the past 5 years in key foreign markets;

“b. any elements that entail extraterritorial censorship; and

“c. the roles of governmental and non-governmental actors in implementation and enforcement of the practices.

“2. To the extent practicable, including through the use of survey data, an analysis of the trade and economic effects of such policies and practices on affected businesses in the United States and their global operations. The analysis should include to the extent practicable, quantitative and qualitative impacts of the identified policies, including by reference, where identifiable, to:

“a. impact on employment;

“b. direct costs (e.g., compliance and entry costs);

“c. foregone revenue and sales;

“d. self-censorship; and

“e. other effects the Commission considers relevant for the Committee to know.”

Jan.-4-2021-letter-from-SFC-Chairman-Grassley-to-USITC-re-332-investigation-on-censorship-as-a-non-tariff-barrier

While the letter from Senator Grassley does not limit the request to a review of practices of China, the testimony during the June 30, 2020 hearing at the Senate Finance Committee was tightly focused on the serious problems caused by China’s aggressive censorship practices and the resulting harm to U.S. businesses. While all of the prepared testimonies from the hearing are interesting, the most comprehensive in terms of actual negative effects experienced by U.S. businesses was the prepared statement of Nigel Cory, Associate Director, Trade Policy, Information Technology and Innovation Foundation. Mr. Cory had as one of his suggestions having the Senate Finance Committee request a Section 332 fact finding investigation by the U.S. International Trade Commission, which is what has happened. Mr. Cory’s prepared statement is embedded below.

ITIF-30JUN2020CORYSTMNT

A former Trump Administration official, Clete Willems, speaking in his personal capacity, reviewed the extensive censorship practiced by China and reviewed various reports by the U.S. Trade Representative’s Office or by the U.S.-China Economic and Security Review Commission on the extent of the problem for U.S. businesses.

“According to USTR’s 2019 Report to Congress on China’s WTO Compliance, ‘China currently blocks most of the largest global sites… and more than 10,000 sites are blocked, affecting billions of dollars in business, including communications, networking, app stores, news and other sites.’1 The report goes on to state that ‘[e]ven when sites are not permanently blocked, the often arbitrary implementation of blocking, and the performance-degrading effect of filtering all traffic into and outside of China, significantly impair the supply of many cross-border services, often to the point of making them unviable.’2

“Additionally, China controls the major press instruments in China – both on- and off-line – and suppresses views inconsistent with the Party’s objectives. The leading news agencies in China are unambiguous instruments of the government. As a result, the U.S. State Department’s recent decision to treat these agencies as foreign government functionaries, subject to similar rules as diplomats stationed in the United States, is entirely appropriate.3 Predictably, China’s response was not to provide the news agencies with more freedom, but to expel journalists from the Washington Post, New York Times, and Wall Street Journal from China, thereby further limiting the number of free voices in the country.

“This is just one recent example of China’s decision to double down on policies of suppression and control. The latest U.S. – China Economic and Security Review Commission Report highlighted China’s growing censorship of economic news, noting that ‘[i]n the past year, Beijing has directed media outlets to avoid stories on declining consumer confidence, local government debt risks, and other unwelcome economic news.’4 In December, China promulgated a new internet censorship law prohibiting online content providers from making, reproducing, or publishing information that could harm the nation’s honor and interests, disseminate rumors, or insult others, among other vaguely defined terms.5 And of course, too many sources to count have highlighted China’s suppression of information related to the coronavirus.6” [footnotes omitted]

30JUN2020WILLEMSSTMNT1

A number of the prepared statements reviewed whether the World Trade Organization provides a remedy for censorship under the GATS and the breadth of possible exceptions. The Cory and Willems prepared statements are embedded above. A third paper by Beth Baltzan is embedded below. See also Wu, Tim (2006) “The World Trade Law of Censorship and Internet Filtering,” Chicago Journal of International Law: Vol. 7: No. 1, Article 12, .https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=1243&context=cjil.

30JUN2020BALTZANSTMNT

Conclusion

The U.S. International Trade Commission will likely start the Section 332 investigation in the coming week or two but will not likely conclude the investigation and generate its report until mid-2022. The investigation should generate useful information for Congress to consider in future trade promotion authority legislation (post 2021) and for the Administration in terms of future trade negotiations. However, the report will come too late to be relevant to the ongoing plurilateral talks on an e-commerce agreement where 2021 is the likely year for an agreed text.

With a change of Administrations and change of control of the Senate in the United States in less than two weeks, it is likely but not certain that the Biden Administration will place a priority on ensuring that the ongoing plurilateral negotiations for rules on e-commerce address the major concerns on censorship, although China’s participation in those talks will make achieving meaningful results more challenging.

I assume that Senator Wyden, when he becomes Chairman of the Senate Finance Committee, will want to see the 332 investigation requested by Senator Grassley completed, though it is possible he could add to or modify the requested scope of the investigation.

It is also possible that the Biden Administration will decide to pursue China’s censorship practices in the context of a WTO dispute and/or will attempt to address the censorship concerns in a phase 2 negotiation with China.

What is not in doubt is that the issue of censorship as a non-tariff barrier will continue to be an important one for U.S. businesses and citizens, just as it is for businesses and members of the public around the world.

U.S.-China Phase 1 Trade Agreement — Data through November 2020; China has increased purchases of agricultural and energy products above 2017 levels but will not reach first year agreed purchases in 2020 whether measured on a calendar basis or on a March 2020-February 2021 basis

U.S. November export data were released earlier this week. While there are some improvements in some categories of merchandise exports in Nvember (particularly in major agricultural categories, liquefied natural gas and crude oil), China remains far behind its overall commitments in the U.S.-China Phase I Trade Agreement for first year purchases of U.S. goods. As reported in prior posts, both China and the U.S. have taken steps to implement parts of the Phase 1 Agreement that took effect on February 14, 2020, although recent comments from the Trump Administration indicate there are challenges in confirming changes in Chinese policy have been implemented in fact.

Prior posts on the U.S.-China Phase 1 Agreement can be found here: December 10, 2020, U.S.-China Phase I Trade Agreement – data through October 2020; while China has increased purchases of agricultural and some other products, China remains far behind on the agreed purchases in 2020 whether measured on a calendar basis or on a March 2020-February 2021 basis, https://currentthoughtsontrade.com/2020/12/10/u-s-china-phase-1-trade-agreement-data-through-october-2020-while-china-has-increased-purchases-of-agricultural-and-some-other-products-china-remains-far-behind-on-the-agreed-purchases-in-2020-w/; November 13, 2020, U.S.-China Phase 1 trade agreement – Data through September 2020; USDA and USTR report on agriculture portion, https://currentthoughtsontrade.com/2020/11/13/u-s-china-phase-1-trade-agreement-data-through-september-2020-usda-and-ustr-report-on-agriculture-portion/; October 10, 2020,  U.S.-China Phase I Trade Agreement – first six months data on U.S. exports (March-August 2020) covered by the purchase commitments show China needing to triple purchases in next five months to meet first year commitments, https://currentthoughtsontrade.com/2020/10/10/u-s-china-phase-1-trade-agreement-first-six-months-data-on-u-s-exports-march-august-2020-covered-by-the-purchase-commitments-show-china-needing-to-triple-purchases-in-next-six-months-to-meet-fi/; September 12, 2020, U.S.-China Phase I Trade Agreement – How is China Doing to Meet Purchase Commitments for the First Year; a Review of U.S. Domestic Exports through July 2020, https://currentthoughtsontrade.com/2020/09/12/u-s-china-phase-1-trade-agreement-how-is-china-doing-to-meet-purchase-commitments-for-the-first-year-a-review-of-u-s-domestic-exports-through-july-2020/; August 8, 2020, U.S.-China Phase 1 trade agreement – review of U.S. domestic exports through June 2020, https://currentthoughtsontrade.com/2020/08/08/u-s-china-phase-1-trade-agreement-review-of-u-s-domestic-exports-through-june-2020/; July 10, 2020, U.S.-China Phase 1 Trade Agreement – limited progress on increased U.S. exports to China (through May), https://currentthoughtsontrade.com/2020/07/10/u-s-china-phase-1-trade-agreement-limited-progress-on-increased-u-s-exports-to-china-through-may/; June 5, 2020, U.S.-China Phase I Deal is Failing Expanded U.S. Exports Even Before Recent Efforts by China to Limit Certain U.S. Agriculture Exports as Retaliation for U.S. Position on Hong Kong, https://currentthoughtsontrade.com/2020/06/05/u-s-china-phase-i-deal-is-failing-expanded-u-s-exports-even-before-recent-efforts-by-china-to-limit-certain-u-s-agriculture-exports-as-retaliation-for-u-s-position-on-hong-kong/; May 12, 2020, U.S.-China Phase I Agreement – some progress on structural changes; far behind on trade in goods and services, https://currentthoughtsontrade.com/2020/05/12/u-s-china-phase-i-agreement-some-progress-on-structural-changes-far-behind-on-trade-in-goods-and-services/; January 19, 2020, U.S.-China Phase 1 Agreement – Details on the Expanding Trade Chapter, https://currentthoughtsontrade.com/2020/01/19/u-s-china-phase-1-agreement-details-on-the-expanding-trade-chapter/; January 15, 2020, U.S.-China Phase 1 Trade Agreement Signed on January 15 – An Impressive Agreement if Enforced, https://currentthoughtsontrade.com/2020/01/15/u-s-china-phase-1-trade-agreement-signed-on-january-15-an-impressive-agreement-if-enforced/.

An unusual aspect of the Phase 1 Agreement is agreement by China to increase imports from the United States of various categories of goods and services during the first two years of the Agreement with 18 categories of goods grouped in three broad categories (manufactured goods, agriculture and energy) and five services categories. Chinese imports of goods and services from the United States under the Agreement are supposed to increase by $76.7 billion in the first year over levels achieved in 2017 and in the second year by $123.3 billion over 2017 levels. The categories and tariff items included in the goods categories are reviewed in Annex 6.1 of the Agreement and the attachment to Annex 6.1. In the confidential version of the agreement, growth levels are provided for each of the 23 categories of goods and services.

While the COVID-19 pandemic has affected trade flows for most countries including both China and the United States and while bilateral relations between the U.S. and China have deteriorated since the signing of the Phase 1 Agreement, China continues to indicate its intention to honor the Phase I Agreement. Article 6.2 of the Agreement defines the time period for the purchase commitments as being January 1, 2020 through December 31, 2021. So the first year by agreement is calendar year 2020.

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

For purposes of this post, I will look at the March-November data, but I will also reference January – November data.

Looking at U.S. domestic exports for the March – November period and projecting for full year 2020 shows China meeting 88.68% of first year agriculture commitments if the first year is measured from March 2020-February 2021 (a decrease from 91.57% when March-October data were examined last month). Total Phase 1 products are projected at only 58.60% (down from 59.83% through October) of first year commitments for the March-February year with manufactured goods at 52.65% (down slightly from 52.85% through October) and energy at 40.94% (down from 43.68% through October).

If calendar year 2020 is examined, then total Phase 1 goods are projected to meet 54.17% (up from 53.19% through October) with manufactured goods at 52.01% (down slightly from 52.10% through October), agricultural products at 75.59% (up from 69.97% through October) and energy goods at 34.36% (down from 35.51% through October).

Under either scenario, agricultural and energy product will exceed what was achieved in 2017 during the first year, though that will not be the case for manufactured goods. Under neither scenario do any of the three goods groupings meeting the first year agreed commitments.

To meet first year commitments, China would have to import monthly 3.743 times the product from the United States as was done in the first nine months in the next three months (December – February)(up from 3.55 times for data through October). If measured on a calendar basis, imports in December would need to exceed Phase 1 imports from the U.S. for the January-November period in total (i.e., December would need to be 11.67 times the monthly average for January – November.

Under the March-February analysis using data through November, the U.S. domestic exports of goods covered by Phase I to China would potentially exceed the actual 2017 U.S. exports ($88.301 billion projected vs. $86.795 billion 2017 actual). The calendar year projection is slightly below the 2017 actual at $86.795 billion. Moreover, since non-covered U.S. exports have declined in 2020 versus 2017, under neither scenario do total U.S. domestic exports reach the 2017 level of $120 billion ($115.601 for the March-February period; $108.458 for the calendar period).

U.S. export data on services are available quarterly for some of the relevant categories and annually for certain information. Total U.S. services exports to all countries are down 20.08% for the first eleven months of 2020. Services trade data with China for 2020 is available for the first nine months of 2020 and shows U.S. exports of services down 34.08% in the first three quarters of 2020 versus 2019. 2019 US exports of services to China were $56.537 billion, slightly higher than 2017 US exports of services to China of $54.981 billion. See U.S. Department of Commerce, U.S. Bureau of the Census, Bureau of Economic Analysis, U.S. International Trade in Goods and Services, November 2020 (January 7, 2021). The Phase 1 Agreement with China has large increases in U.S. services exports in the first year of the agreement ($12.8 billion over 2017 levels). Thus, the limited data available indicate that U.S. services exports to China will likely miss 2017 levels by more than 32% and will obviously not show any gain above 2017.

Looking at total U.S. domestic exports of goods to China for the period March-November 2020, U.S. exports were $84.859 billion ($9.429 billion/month) compared to $89.039 billion in 2017 ($9.893 billion/month). These include both products covered by the Annex 6.1 commitments and other products. For the January-November 2020 period total U.S. exports were $97.376 billion ($8.852 billion/month) compared to $107.399 billion in 2017 ($9.764 billion/month).

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

Other U.S. domestic exports not covered by the 18 categories in Annex 6.1 were $33.314 billion in 2017 (full year). For the period March – November, non-covered products (which face significant tariffs in China based on retaliation for US 301 duties) have declined 18.05%, and total exports to China are down 4.69%. Looking at January – November figures show other U.S. domestic exports (i.e., not covered by the Phase I Agreement) were down 19.49% from comparable levels in 2017.

Thus, the first nine months since the U.S.-China Phase 1 Agreement went into effect suggest that U.S. domestic exports of the Annex 6 goods will be $88.302 billion if the full year shows the same level of increase over 2017 for each of the 18 categories of goods; non-covered products would be $27.300 billion, for total U.S. domestic exports to China of $115.602 billion. This figure would be below 2017 and dramatically below the target of $184.0 billion (if noncovered products remain are at 2017 levels; $177.516 billion with noncovered products at estimated 2020 levels) . The projected U.S. domestic exports to China would, however, be higher than the $109.72 billion in 2018 and the depresssed figure of $94.100 billion in 2019.

If one looks at January-November 2020, full year projections for 2020 exports of Annex 6 goods of $81.638 billion, other exports of $26.821 billion, for total domestic exports in 2020 of $108.459 billion even further behind 2017 and the year 1 target and also below 2018.

To achieve the target level of U.S. exports in the December 2020-February 2021 period, U.S. domestic exports of the 18 categories of goods in Annex 6.1 would have to be $86.317 billion ($26.772 billion/month) an amount that is 3.743 times the monthly rate of exports of the 18 categories to China in the March – November 2020 period ($7.153 billion/month).

If one uses January-November for comparison and for other US exports, with only one month’s data remaining in 2020, U.S. exports of goods covered by Annex 6.1 would have to be $77.590 billion more than the total amount of domestic exports to China in the first eleven months of 2020.

Chinese data on total imports from all countries (in U.S. dollars) for January-November 2020 show a decline of 1.6% from the first eleven months of 2019. http://english.customs.gov.cn/statics/report/monthly.html. General Administrator of Customs of the People’s Republic of China, China’s Total Export & Import Values, November 2020 (in USD). China’s imports from the U.S. were up 6.1% during the same time period, but show imports from the U.S. substantially larger than U.S. domestic exports ($118.462 billion vs. $97.376 billion, though Chinese imports would be CIF value vs. FAS value for U.S. exports and may include U.S. exports to third countries or territories that end up in China).

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

Product categoryMarch-November 2017March-November 2020% change 2017-2020 March-November$ Value needed in next three months to reach 1st year of Agreement vs. projected 1st year
manufactured goods
1. industrial machinery $8,115.7
$9,320.8

+14.85%
2. electrical equipment and machinery $3,211.2
$3,591.7
+11.85%
3. pharma- ceutical products $1,649.6 $2,395.3
+45.21%
4. aircraft (orders and deliveries) $11,789.6 $3,057.8 -74.06%
5. vehicles $7877.2
$4735.7
-39.88%
6. optical and medical instruments $2388.0
$2656.5
+11.24%
7. iron and steel
$910.9
$395.5
-56.57%
8. other manufactured goods $8,312.1 $10,275.7 +23.62%
Total for mfg goods
$44,254.2

$36,429.1

-17.68%
$54,840.3
Agriculture
9. oilseeds $7,908.8$10,185.8 +28.80%
10. meat $425.64 $2,384.2 +460.19%
11. cereals $1021.8 $2,283.4 +123.46%
12. cotton $555.4 $1379.7 +148.40%
13. other agricultural commodities $3,372.5
$3,417.0
+1.32%
14. seafood $1,028.6 $573.5 -44.24%
Total for agriculture$14,312.2 $20,223.6 +41.30% $13,128.1
Energy
15. liquefied natural gas
$276.6

$928.2

+235.53%
16. crude oil $3,221.7 $5430.2 +68.55%
17. refined products $1,657.4
$1291.2
-22.09%
18. coal $323.7 $37.6 -88.39%
Total for energy $5,479.4 $7,725.2 +40.99% $18,348.7
Total for 1-18 $64,045.8 $64,378.0 +053% $86,317.0

China has recovered more quickly from COVID-19 economic challenges than has the U.S. However, as reviewed above, their total imports from all countries are down 1.5% in the first eleven months of 2020 while up 6.1% from the United States. Thus, the Phase 1 Agreement may have contributed to some improved U.S. export performance to China even if China is far away from meeting the year one commitments.

Conclusion

As reviewed in prior posts, the U.S.-China Phase 1 Agreement is a potentially important agreement which attempts to address a range of U.S. concerns with the bilateral relationship and obtain somewhat better reciprocity with the world’s largest exporter. The Phase 1 Agreement has left other challenges to a Phase 2 negotiation which has not yet begun. It is unclear when/if it will occur under the incoming Biden Administration.

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

The differences in economic systems between China and the United States have made reliance on WTO rules less relevant to the Trump Administration as those rules presume market-based economies and presently don’t address the myriad distortions that flow from the Chinese state capital system. Thus, the Phase I Agreement was an effort to move the needle in trade relations with China to achieve greater reciprocity. It has had some limited success to date. It will be interesting to see the approach on trade with China taken by the incoming Biden Administration.

2021 – how quickly will COVID-19 vaccines bring the pandemic under control?

News accounts report many countries starting to receive at least some doses of vaccines. In the United States, two vaccines have received emergency use authorization (“EUA”)(the Pfizer/BioNTech and the Moderna vaccines). The Pfizer/BioNTech vaccine has received approval (emergency use or other) in a number of countries (EU, Canada, United Kingdom, Bahrain) and was the first vaccine to receive an EUA from the World Health Organization. See WHO press release, WHO issues its first emergency use validation for a COVID-19 vaccine and emphasizes need for equitable global access, December 31, 2020, https://www.who.int/news/item/31-12-2020-who-issues-its-first-emergency-use-validation-for-a-covid-19-vaccine-and-emphasizes-need-for-equitable-global-access. As the WHO press releases indicates, “The WHO’s Emergency Use Listing (EUL) opens the door for countries to expedite their own regulatory approval processes to import and administer the vaccine. It also enables UNICEF and the Pan-American Health Organization to procure the vaccine for distribution to countries in need.”

AstraZeneca will likely seek emergency use authorization in the United States in January and Johnson & Johnson in February. AstraZeneca has received an emergency use authorization in the United Kingdom. It has also been given EUA by India (along with a vaccine from Bharat Biotech). See New York Times, India Approves Oxford-AstraZeneca Covid-19 Vaccine and 1 other, January 3, 2021, https://www.nytimes.com/2021/01/03/world/asia/india-covid-19-vaccine.html.

A recent Financial Times article includes a graph showing the number of citizens in various countries who have received a first vaccination shot. See Financial Times, European leaders under pressure to speed up mass vaccination, January 1, 2021, https://www.ft.com/content/c45e5d1c-a9ea-4838-824c-413236190e7e. The countries shown as having started vaccinations include China, the U.S., the U.K., Kuwait, Mexico, Canada, Chile, Russia, Argentina, Iceland, Bahrain, Oman, Israel, and fourteen of the 27 members of the EU).

Similarly an article from CGTN on January 1, 2021 shows a number of countries who are buying COVID-19 vaccines from China including Hungary and a number of others while vaccines from China are in stage 3 trials in a number of countries. CGTN, 1 January 2021, Hungary to focus on EU, Chinese coronavirus vaccine purchases, https://news.cgtn.com/news/2021-01-01/Hungary-to-focus-on-EU-Chinese-coronavirus-vaccine-purchases-WHm11NYjni/index.html. “By the end of 2020, UAE became the first country to roll out a Chinese vaccine to the public. Pakistan also announced on Thursday that they will purchase 1.2 million COVID-19 vaccine doses from China’s Sinopharm after China officially approved the vaccine for general public use. Sinovac’s CoronaVac shot, another candidate vaccine in China, has been signed up for purchase deals with Brazil, Indonesia, Turkey, Chile, and Singapore. The company is also in supply talks with Malaysia and the Philippines.”

So the good news at the beginning of 2021 is that effective vaccines are starting to be distributed. Many others are in late stages of trials, giving hope to a significant number of vaccines approved for use in the coming months. The WHO’s list of vaccines in development and their status can be found on the WHO website at this cite. https://www.who.int/publications/m/item/draft-landscape-of-covid-19-candidate-vaccines. How quickly approved vaccines can be produced, distributed and vaccinations given globally will determine when the pandemic will be brought under control. There are many challenges that the world faces in getting to the hoped for situation of a pandemic that is in the past.

For example, even in developed countries, governments are finding that there are significant hurdles in getting production volumes up to promised levels, and much greater challenges in going from production to distribution to vaccinations. In the United States, the Trump Administration had aimed at having 20 million vaccinations accomplished by the end of 2020. Only 13.071 million doses were distributed by the end of the year according to the US CDC and only 4.2 million vaccinations (first shot of two shots) occurred. See Center for Disease Prevention and Control, COVID-19 Vaccinations in the United States, https://covid.cdc.gov/covid-data-tracker/#vaccinations (viewed Jan. 3, 2021). President-elect Biden is talking about an aggressive program to get 100 million vaccinations (as the current vaccines require 2 shots, this means 50 million people) vaccinated in the first 100 days of his Administration (by the end of April). To achieve this objective will require cooperation from Congress in providing sufficient funding to build up the capabilities at the state and local levels. Health care infrastructure has been reduced over the last dozen years with a reduction of some 50,000 health care workers in the U.S. The huge COVID-19 case load in the United States and record hospitalizations also have health care operations across the United States overextended. So despite having sufficient vaccines on order from four companies where EUAs have been or will likely be granted in the near future to permit vaccination of all Americans by fall, there are enormous practical challenges to making the vaccinations happen in fact. And that is before the challenges of convincing portions of the population of the safety of the vaccines and the need for the vast majority of people to be vaccinated to achieve herd immunity.

Similar challenges exist in many other parts of the world as well. For example, in both the EU and India the roll out of vaccines is proceeding slower than desired. See, e.g., The Guardian, BioNTech criticises EU failure to order enough Covid vaccine, January 1, 2021, https://www.theguardian.com/world/2021/jan/01/france-to-step-up-covid-jabs-after-claims-of-bowing-to-anti-vaxxers; Politico, France under pressure to speed up coronavirus vaccine rollout, January 3, 2021, https://www.politico.eu/article/france-under-pressure-to-speed-up-coronavirus-vaccine-rollout/; New York Times, India Approves Oxford-AstraZeneca Covid-19 Vaccine and 1 other, January 3, 2021, https://www.nytimes.com/2021/01/03/world/asia/india-covid-19-vaccine.html (“The Serum Institute, an Indian drug maker that struck a deal to produce the Oxford vaccine even before its effectiveness had been proven, has managed to make only about one-tenth of the 400 million doses it had committed to manufacturing before the end of the year.”).

The WHO/GAVI/CEPI effort to get vaccines to the world on a equitable basis has much of its vaccine commitments in products still in the testing stage although roughly one billion doses can be available for a vaccine currently approved on an emergency use basis in the U.K. and India (the AstraZeneca vaccine) through COVAX agreements with AstraZeneca directly and with an Indian producer who can be asked to produce one of two potential vaccines, including the AstraZeneca one. See WHO, COVAX Announces additional deals to access promising COVID-19 vaccine candidates; plans global rollout starting Q1 2021, 18 December 2020, https://www.who.int/news/item/18-12-2020-covax-announces-additional-deals-to-access-promising-covid-19-vaccine-candidates-plans-global-rollout-starting-q1-2021.

“Geneva/Oslo, 18 December 2020

“COVAX, the global initiative to ensure rapid and equitable access to COVID-19 vaccines for all countries, regardless of income level, today announced that it had arrangements in place to access nearly two billion doses of COVID-19 vaccine candidates, on behalf of 190 participating economies. For the vast majority of these deals, COVAX has guaranteed access to a portion of the first wave of production, followed by volume scales as further supply becomes available. The arrangements announced today will enable all participating economies to have access to doses in the first half of 2021, with first deliveries anticipated to begin in the first quarter of 2021 – contingent upon regulatory approvals and countries’ readiness for delivery.

“Given these are arrangements for 2 billion doses of vaccine candidates which are still under development, COVAX will continue developing its portfolio: this will be critical to achieve its goal of securing access to 2 billion doses of safe and effective, approved vaccines that are suitable for all participants’ contexts, and available by the end of 2021. However, today’s announcements offer the clearest pathway yet to end the acute phase of the pandemic by protecting the most vulnerable populations around the world. This includes delivering at least 1.3 billion donor-funded doses of approved vaccines in 2021 to the 92 low- and middle-income economies eligible for the COVAX AMC.

“The new deals announced today include the signing of an advance purchase agreement with AstraZeneca for 170 million doses of the AstraZeneca/Oxford candidate, and a memorandum of understanding (MoU) with Johnson & Johnson for 500 million doses of the Janssen candidate, which is currently being investigated as a single dose vaccine.. These deals are in addition to existing agreements COVAX has with the Serum Institute of India (SII) for 200 million doses – with options for up to 900 million doses more – of either the AstraZeneca/Oxford or Novavax candidates, as well as a statement of intent for 200million doses of the Sanofi/GSK vaccine candidate.

“In addition to this, COVAX also has – through R&D partnership agreements – first right of refusal in 2021 to access potentially more than one billion doses (based on current estimates from the manufacturing processes under development) that will be produced, subject to technical success and regulatory approval, by candidates in the COVAX R&D Portfolio.”

* * *

“The COVAX Facility currently has 190 participating economies. This includes 98 higher-income economies and 92 low- and middle-income economies eligible to have their participation in the Facility supported via the financing mechanism known as the Gavi COVAX AMC. Of the 92 economies eligible to be supported by the COVAX AMC, 86 have now submitted detailed vaccine requests, offering the clearest picture yet on actual global demand for COVID-19 vaccines.

“In addition to gathering detailed information on participating economies’ vaccine requests, COVAX, through Gavi, UNICEF,WHO, the World Bank, and other partners has been working closely with all countries in the Facility, particularly AMC-eligible participants, to help plan and prepare for the widespread roll out of vaccines. Conditions that determine country readiness include regulatory preparedness as well as the availability of infrastructure, appropriate legal frameworks, training, and capacity, among other factors.

“’Securing access to doses of a new vaccine for both higher-income and lower-income countries, at roughly the same time and during a pandemic, is a feat the world has never achieved before – let alone at such unprecedented speed and scale,’ said Dr. Seth Berkley, CEO of Gavi, the Vaccine Alliance, which leads on procurement and delivery for COVAX. ‘COVAX has now built a platform that offers the world the prospect, for the first time, of being able to defeat the pandemic on a global basis, but the work is not done: it’s critical that both governments and industry continue to support our efforts to achieve this goal’.

Early pledges towards 2021 fundraising targets

“To achieve this ambitious goal, COVAX currently estimates it needs to raise an additional US$ 6.8 billion in 2021 – US$ 800 million for research and development, at least US$ 4.6 billion for the COVAX AMC and US$ 1.4 billion for delivery support.

“Support for the COVAX AMC will be critical to ensuring ability to pay is not a barrier to access. Thanks to the generous support of sovereign, private sector, and philanthropic donors, the AMC has met its urgent 2020 fundraising target of US$ 2 billion, but at least US$ 4.6 billion more is needed in 2021 to procure doses of successful candidates as they come through the portfolio.”

In the United States and in the EU, governments are looking to expand volumes of proven vaccines while awaiting approval of other vaccine candidates. See Pfizer press release, PFIZER AND BIONTECH TO SUPPLY THE U.S. WITH100 MILLION ADDITIONAL DOSES OF COVID-19VACCINE, December 23, 2020, https://www.pfizer.com/news/press-release/press-release-detail/pfizer-and-biontech-supply-us-100-million-additional-doses; Pfizer press release, PFIZER AND BIONTECH TO SUPPLY THEEUROPEAN UNION WITH 100 MILLIONADDITIONAL DOSES OF COMIRNATY®, December 29, 2020, https://www.pfizer.com/news/press-release/press-release-detail/pfizer-and-biontech-supply-european-union-100-million; HHS, Trump Administration purchases additional 100 million doses of COVID-19 investigational vaccine from Moderna, December 11, 2020, https://www.hhs.gov/about/news/2020/12/11/trump-administration-purchases-additional-100-million-doses-covid-19-investigational-vaccine-moderna.html.

Conclusion

The world is anxiously awaiting the resolution of the pandemic through the approval and distribution of effective vaccines on a global basis in 2021. The good news is that a number of vaccines have been approved in one or more countries and billions of doses of approved vaccines will likely be produced in 2021. The efforts of the WHO, GAVI and CEPI and the generosity of many nations, private and philanthropic organizations will mean people in nearly all countries will receive at least some significant volume of vaccines in 2021. As most vaccines require two shots, the number of people vaccinated in 2021 in an optimistic scenario is probably less than two billion. The world population at the beginning of 2021 is 7.8 billion people. Thus, 2021, even under an optimistic scenario, will not likely result in the eradication of the pandemic around the world.

Even in countries like the United States, the United Kingdom and the 27 members of the European Union where advance purchases should result in sufficient doses being available to vaccinate all eligible members of society, there are massive challenges in terms of distribution and vaccinating the numbers of people involved and educating the populations on the safety and benefits of the vaccines. Thus, even in wealthier countries it will be optimistic to achieve the desired levels of vaccination by the end of 2021.

The Director-General of the WHO in his year-end message laid out the likely situation for the world in 2021, the availability of vaccines but the continued need to be vigilant and adhere to preventive measures to control the pandemic and the need to work collectively to ensure equitable and affordable access to vaccines for all. See WHO,COVID-19: One year later – WHO, Director-General’s new year message, December 30, 2020, https://www.who.int/news/item/30-12-2020-covid-19-anniversary-and-looking-forward-to-2021 (Dr Tedros Adhanom Ghebreyesus, WHO Director-General)

“As people around the world celebrated New Year’s Eve 12 months ago, a new global threat emerged.

“Since that moment, the COVID-19 pandemic has taken so many lives and caused massive disruption to families, societies and economies all over the world.

“But it also triggered the fastest and most wide-reaching response to a global health emergency in human history.

“The hallmarks of this response have been an unparalleled mobilization of science, a search for solutions and a commitment to global solidarity.

“Acts of generosity, large and small, equipped hospitals with the tools that health workers needed to stay safe and care for their patients.

“Outpourings of kindness have helped society’s most vulnerable through troubled times.

“Vaccines, therapeutics and diagnostics have been developed and rolled out, at record speed, thanks to collaborations including the Access to COVID-19 Tools Accelerator.

“Equity is the essence of the ACT Accelerator, and its vaccine arm, COVAX, which has secured access to 2 billion doses of promising vaccine candidates.

“Vaccines offer great hope to turn the tide of the pandemic.

“But to protect the world, we must ensure that all people at risk everywhere – not just in countries who can afford vaccines –are immunized.

“To do this, COVAX needs just over 4 billion US dollars urgently to buy vaccines for low- and lower-middle income countries.

“This is the challenge we must rise to in the new year.

“My brothers and sisters, the events of 2020 have provided telling lessons, and reminders, for us all to take into 2021.

“First and foremost, 2020 has shown that governments must increase investment in public health, from funding access to COVID vaccines for all people, to making our systems better prepared to prevent and respond to the next, inevitable, pandemic.

“At the heart of this is investing in universal health coverage to make health for all a reality.

“Second, as it will take time to vaccinate everyone against COVID, we must keep adhering to tried and tested measures that keep each and all of us safe.

“This means maintaining physical distance, wearing face masks, practicing hand and respiratory hygiene, avoiding crowded indoor places and meeting people outside.

“These simple, yet effective measures will save lives and reduce the suffering that so many people encountered in 2020.

“Third, and above all, we must commit to working together in solidarity, as a global community, to promote and protect health today, and in the future.

“We have seen how divisions in politics and communities feed the virus and foment the crisis.

“But collaboration and partnership save lives and safeguard societies.

“In 2020, a health crisis of historic proportions showed us just how closely connected we all are.

“We saw how acts of kindness and care helped neighbors through times of great struggle.

“But we also witnessed how acts of malice, and misinformation, caused avoidable harm.

“Going into 2021, we have a simple, yet profound, choice to make:

“Do we ignore the lessons of 2020 and allow insular, partisan approaches, conspiracy theories and attacks on science to prevail, resulting in unnecessary suffering to people’s health and society at large?

“Or do we walk the last miles of this crisis together, helping each other along the way, from sharing vaccines fairly, to offering accurate advice, compassion and care to all who need, as one global family.

“The choice is easy.

“There is light at the end of the tunnel, and we will get there by taking the path together.

“WHO stands with you – We Are Family and we are In This Together.

“I wish you and your loved ones a peaceful, safe and healthy new year.”

We all want to have the COVID-19 pandemic in the rearview mirror as 2021 progresses. There is hope for significant progress this year. How much progress will depend on the will of governments and peoples to focus on the eradication of the pandemic and to support the dramatic ramp up of production, distribution and vaccination of the world’s people.

China’s trade war with Australia — unwarranted and at odds with China’s portrayal of itself as a strong supporter of the WTO

China has imposed antidumping and countervailing duties on Australian barley and wine and has imposed import restrictions on a host of products from Australia including coal, lobsters, timber, red meat and cotton. While the first two products are allegedly pursuant to investigations conducted in a manner consistent with WTO Agreements, the other import restrictions are being done through verbal direction or under claims of labeling, pest or other bases. CNBC reported on December 17th the products restricted and the alleged justifications for import restrictions imposed by China on Australian goods. See CNBC, Here’s a list of the Australian exports hit by restrictions in China, December 17, 2020, https://www.cnbc.com/2020/12/18/australia-china-trade-disputes-in-2020.html. As CNBC reported,

“The relationship between the two countries has deteriorated since Australia supported a call for an international inquiry into China’s handling of the coronavirus, which was first reported in the Chinese city of Wuhan. Last month, Australian news outlets reported that the Chinese embassy there had threatened the
Australian government and handed over a list of alleged grievances toward Canberra.

“China has taken several measures this year that impede Australian imports, ranging from levying tariffs to imposing bans and restrictions.”

A press account in the Sydney Morning Herald on November 18, 2020, reviewed developments from an Australian perspective and included the “list of grievances” reportedly sent from China to Australia. See Sydney Morning Herald, ‘If you make China the enemy, China will be the enemy’: Beijing’s fresh threat to Australia, November 18, 2020, https://www.smh.com.au/world/asia/if-you-make-china-the-enemy-china-will-be-the-enemy-beijing-s-fresh-threat-to-australia-20201118-p56fqs.html. The “list of grievances” China claimed it had with Australia, copied in the article, is reproduced below:

The list of grievances from the Chinese embassy.

In a South China Morning Post article from December 20, experts in Australia and China indicate that China’s actions are intended to both punish Australia and dissuade other countries from taking similar actions that displease China that Australia has taken. See South China Morning Post, China-Australia relations: Beijing’s trade restrictions are meant as a warning to Canberra, but will they work?, December 20, 2020, https://www.scmp.com/news/china/diplomacy/article/3114635/china-australia-relations-beijings-trade-restrictions-are.

It is clear that the import restrictions, if taken for the reasons identified in the list of grievances above, are unjustified and violations of China’s WTO obligations.

WTO challenge filed by Australia on China’s antidumping and countervailing duties imposed on Australian barley

While Australia has been attempting to deal with China’s unilateral actions diplomatically, on December 16th, it filed a request for consultations with China at the WTO on the antidumping and countervailing duties being imposed on Australian barley. The request for consultations was circulated to WTO Members on December 21. See CHINA – ANTI-DUMPING AND COUNTERVAILING DUTY MEASURES ON BARLEY FROM AUSTRALIA, REQUEST FOR CONSULTATIONS BY AUSTRALIA, WT/DS598/1, G/L/1382, G/ADP/D135/1, G/SCM/D130/1, 21 December 2020; WTO press release, Dispute Settlement, Australia initiates WTO dispute complaint against Chinese barley duties, 21 December 2020, https://www.wto.org/english/news_e/news_e.htm. While some press accounts have characterized the WTO challenge as increasing the tensions between the two countries, the reality is that the request for consultations is a proper response by Australia to an action by China that it perceives violates China’s WTO obligations. See The Guardian, Australia escalates China trade dispute with WTO action, December 15, 2020, https://www.theguardian.com/australia-news/2020/dec/16/australia-escalates-china-trade-dispute-with-wto-action.

The U.S. and other WTO Members have been concerned for years that China uses trade remedy cases as a means not of pursuing bona fide industry concerns but rather as a means of retaliating against trading partners who take actions, even if WTO authorized, that are against Chinese products. Looking at the breadth of the request for consultations filed by Australia, it would appear that Australia views the investigations as similarly suspect. The request for consultations is embedded below and contains 26 alleged violations of WTO obligations by China in the barley investigations.

598-1

If there is a failure by China to conform to WTO obligations and end the unilateral and unauthorized actions against Australia, one should expect to see additional cases filed at the WTO by Australia to defend its rights.

Comments

China has been a major beneficiary of the multilateral trading system since joining the WTO at the end of 2001. While China has implemented many of the obligations it took on to join the WTO, there has long been concern that China’s implementation is subject to unilateral action against other Members where China is unhappy with positions taken by other Members. At the WTO, in arguing against taking up issues like the need for Members to converge to market-based conditions, China has argued that others (in particular the U.S.) are ignoring core principles of the WTO, such as most favored nation treatment. When one considers the range of actions China has taken against Australia in 2020, it is clear that they view most favored nation treatment obligations to WTO Members as subject to China’s political whims. China’s actions are unwarranted. For a nation wanting to be a leader in developing the trading system, its actions send the wrong signals to its trading partners.

The WTO ends the year with General Council and Dispute Settlement Body meetings

The last meetings at the WTO for 2020 are the General Council meeting (originally set for Dec. 16-17) and Dispute Settlement Body meeting on December 18. The meetings take place against a background of limited progress at the WTO across a broad array of issues of interest to Members. Certainly, there have been challenges to the functioning of the WTO flowing from the COVID-19 pandemic, particularly as the pandemic has affected the ability to hold in person meetings and stretched capabilities of many Members (particularly developing and least developed countries) to participate or coordinate with capitals. But the problems for the WTO run much deeper and have been building over time.

Specifically, 2020 has not been a particularly successful year for the WTO and its effort to remain relevant. The Director-General Roberto Azevedo stepped down a year early reportedly to permit a new Director-General to be selected and help guide the process for the COVID-19 delayed Ministerial Conference to be held in 2021. The selection process for a new Director-General (“DG”) has been blocked from recommending a new DG by the United States refusal to join a consensus and the failure of Korea to withdraw its candidate after the conclusion of the third round of consultations. The delay in appointing a new DG has resulted in calls for a further delay in the next Ministerial Conference from summer to December 2021.

The Appellate Body, which lost its quorum after December 10, had its last member’s term expire earlier this year. No progress has been made on reforming the Appellate Body process. While a number of Members created an interim arbitration process (“MPIA”), it doesn’t apply to all Members and a number of panel decisions have been appealed (with no Appellate Body, such “appeals” put the case in limbo where WTO authorized retaliation for failure to comply is not possible). Such appeals have been taken by a number of Members, including at least one who is a member of the MPIA against a non-MPIA member.

On the negotiations front, there has been some forward movement on plurilateral talks (negotiations among the willing) but limited progress on multilateral talks or on agreeing on a reform agenda. Thus, there appears to be progress in a number of Joint Statement Initiatives that were launched at the end of 2017 at the WTO Ministerial in Buenos Aires. However, as reviewed in prior posts, there has been a failure to conclude the multilateral negotiations on fisheries subsidies despite a UN Sustainable Development Goals timeline objective of the end of 2020 and despite 19 years of negotiations. Similarly, while many Members have teed up proposals for topics to be addressed by the membership either to address the pandemic or recovery from the pandemic or on WTO reform and while there are remaining items from prior Ministerials, Members have largely been talking past each other or unable to agree on taking items up.

The December General Council meeting covers many topics not all of which are controversial. The Agenda is embedded below. While the meeting was originally scheduled for December 16-17, it was apparently extended to today.

W813

WTO Members can provide comments on most agenda items if they choose. I review two of the agenda items and provide the U.S., EU and China interventions, to the extent they provided interventions (based on statements released on the webpages of the US, EU and China Permanent Missions to the WTO). The two agenda items are typical of many topics presented where major Members take very different views of proposed initiatives that others have teed up and characterize the general lack of progress at the WTO in addressing new or longstanding issues.

Item 8. COVID-19 and Beyond: Trade and Health — Statement by Cosponsors of WT/GC?223

The Ottawa Group of Members had submitted a proposal for a trade and health initiative. The proposal is embedded below.

223

I have previously reviewed the proposal/communication from the Ottawa Group. See November 27, 2020,  The Ottawa Group’s November 23 communication and draft elements of a trade and health initiative, https://currentthoughtsontrade.com/2020/11/27/the-ottawa-groups-november-23-communication-and-draft-elements-of-a-trade-and-health-initiative/. Considering the severity of the COVID-19 pandemic and the relatively limited objectives of the proposed initiative, one wouldn’t have expected opposition from any major player. The European Union, being part of the Ottawa Group, was among the Members who addressed this agenda item.

“Item 8 – COVID-19 AND BEYOND: TRADE AND HEALTH – STATEMENT BY COSPONSORS OF WT/GC/223

“The COVID-19 pandemic has had a devastating impact on people’s health, well-being and economic prosperity. It has created unprecedented challenges for governments across the world. Most of us – and this includes the EU – have taken a range of trade-related actions with a view to ensuring that essential goods are available to our populations. It goes without saying that safeguarding the lives and health of their people is at the core of every government’s section.

“But the crisis has also exposed the fragility or even a potential negative fallout of unilateral, uncoordinated trade-related actions. If every current exporter were to ban shipments of essential goods, a large portion of the world population would be denied access to the necessary life-saving supplies.

“A global crisis requires global cooperation. With that in mind, the EU fully supports innovative cooperation developed under the Access to Covid Tools Accelerator, and the Covax Facility.  

“Although the response to the pandemic is primarily in the sphere of health policy, trade policy can also contribute to this fight. With the long-awaited discovery of vaccines, we are beginning to see the light at the end of the tunnel, but the operational and logistical challenges ahead of us will still be enormous.

“To succeed in this fight, global cooperation is fundamental. The WTO has a valuable role to play, in particular to ensure that supply chains of essential products remain open, that goods can cross borders quickly, and that the trade environment is stable and transparent.

“The time for WTO Members to take action is now. Through the Communication Covid19 and beyond, 13 Members, including the EU, invite all WTO Members to engage in a Trade and Health Initiative. At the heart of this Initiative lies the belief that each Member should be free at domestic level to take the trade policy actions needed to fight the pandemic in accordance with the WTO framework. But we are also convinced that in the interest of the common public good such actions should be coordinated and transparent. Ultimately, the objective is to create conditions for a more stable and predictable trade environment, which in turn would help to mitigate the impact of the pandemic.

“Therefore we invite Members to proceed in two steps.

“In the first step, we call on WTO Members to take immediate actions to address the current COVID-19 crisis.

“These actions are detailed in the Annex to the Communication and would consist in particular in:

“1) exercising restraint when applying export restrictions on essential goods, ensuring that measures are targeted, transparent, proportionate, temporary and consistent with WTO obligations;

“2) sharing experience and best practices in trade facilitating measures, including on services facilitating the frictionless movement of essential goods as well as in the area of technical regulations;

“3) considering removing or reducing -tariffs on essential goods;

“4) promoting transparency, including by engaging fully in the trade monitoring exercises;

“5) encouraging the WTO Secretariat to cooperate with other international organisations in order to respond more effectively to the current and future pandemics.

“We call on WTO Members to capture these actions in a declaration that should be issued as early as possible and, ideally, by the time of the next General Council Meeting. The agreement on the declaration would be without prejudice to the commitments, if any, that Members might take in the second step.

“The second step is aimed at increasing our global preparedness for any future health emergencies. We propose to explore possible future commitments on the basis of the actions taken as a first step. Ideally, we should seek to achieve progress on this strand of work by the 12th Ministerial Conference.

“We invite all WTO Members to join us in this endeavour and look forward to our successful cooperation.”

EU Statements at the WTO General Council, on 16 and 17 December 2020, https://eeas.europa.eu/delegations/world-trade-organization-wto/90831/eu-statements-wto-general-council-16-and-17-december-2020_en.

The United States has taken the position at the WTO that it does not view pursuing negotiations on trade liberalization of medical goods during the pandemic as appropriate. Thus, the U.S. did not support the call for a trade and health initiative and instead highlighted its own proposal for Members to step up trade facilitation efforts. Meeting of the WTO General Council, December 16-17, 2020, U.S. Statements delivered by Ambassador Dennis Shea, https://geneva.usmission.gov/wp-content/uploads/sites/290/GeneralCouncilStatementsDecember2020.pdf.

“COVID-19 AND BEYOND: TRADE AND HEALTH – STATEMENT BY COSPONSORS OF WT/GC/223

“The United States takes note of the communication in WT/GC/223 and thanks the co-sponsors for their statement. We have some initial observations to share today.

“Some context might be helpful. The most recent Trade Monitoring Report by the Secretariat, which was discussed in the TPRB last week, included these assessments:

“o ‘Members have generally expressed and followed a commitment to ensure that trade could flow freely during the pandemic.’

“o ‘Most of the COVID-19 related measures taken on goods since the outbreak of the pandemic were trade-facilitating.’

“o ‘In the services sectors heavily impacted by the pandemic, most of the 124 COVID-19 related measures adopted by WTO Members appeared to be trade facilitating.’

“Against this backdrop, it’s not clear what problem the cosponsors aim to solve, nor how the proposed measures would solve that problem.

“We would encourage deeper reflection. For example, supply chain resiliency doesn’t seem to be about lowering tariffs, or increasing Secretariat monitoring, or encouraging vague cooperation between the WTO and other IOs. It’s about how to prevent disruption when production somewhere beyond your shores is shut down due to an unexpected shock, or when a supplier beyond your shores is suddenly unreliable.

“A second observation also requires some context. The world has been grappling with a pandemic for nearly a year. The public health situation remains very difficult and has been worsening. As of today, more than 1.6 million people have died around the world, including more than 300,000 in the United States.

“Against this backdrop, we question the prudence of asking Members to put new constraints on their rights under the WTO Agreement—not to mention on their duty—to undertake measures to protect human health and life. For example, the idea that such measures might be granted a period of validity of three months seems to misunderstand the moment.

“We take a different view. WTO rules may not have been drafted with a pandemic at front of mind, but our initial observation is that the WTO Agreement seems fit for purpose. Its balance of rights and obligations, if adhered to by Members, will continue to provide stability and predictability as we navigate this very difficult period and, finally, recover.

“We would also like to take this opportunity to highlight an initiative launched in the Trade Facilitation Committee, sponsored by the United States and eight other WTO Members, found it G/TFA/W/25/Rev.1 entitled ‘Supporting the Timely and Efficient Release of Global Goods through Accelerated Implementation of the WTO Trade Facilitation Agreement.’

“This initiative puts a focus on tangible actions WTO Members can take to contribute to timely and efficient movement of health and medical products.

“We encourage all WTO Members to join us in this initiative.”

China did not provide an intervention on agenda item 8.

Item 10, Importance of Market-Oriented Conditions to the World Trading System — Joint Statement by Brazil, Japan and the United States

Over the last several years, the United States has highlighted the inability of the current WTO rules to address the distortions caused by the economic systems of countries like China (“state capitalism” or “non-market economies”). The U.S. has cited decisions by the WTO dispute settlement system that don’t permit Members to address distortions caused by China’s system as proof of the problem. U.S. actions under various U.S. statutes including Section 232 of the Trade Expansion Act of 1962, as amended, and section 301 of the Trade Act of 1974, as amended, are intended to address problems caused by Chinese actions which are not clearly covered by existing WTO rules.

The United States and others view the WTO as premised on competition between enterprises operating in economies that are market economies or operating under “market-oriented conditions”. In the view of the U.S., the WTO system requires Members’ economic systems to converge around market principles. To the U.S., coexistence of different types of economic systems within the WTO is not a long-term viable approach for the WTO. The U.S. view is similarly supported by Deputy Director-General Alan Wolff who in several speeches this year has outlined core principles of the WTO and has opined that the system is premised on convergence not coexistence.

At the same time, the prior Director General, Roberto Azevedo, took the position that it was not for the WTO to take up differences in economic systems in Members.

The EU has taken the view that market-oriented conditions are critical, and the WTO rules need to be updated to ensure that distortions created by different systems are addressable within the WTO. Thus, the EU, U.S. and Japan agreed at the Buenos Aires Ministerial to look at issues like industrial subsidies and other topics to see what modifications were needed to address some of the distortions caused by the Chinese-type system.

Not surprisingly, China has led the opposition to any efforts at either mandatory convergence or efforts to address distortions caused by the state-capitalist system.

The Brazil, Japan and U.S. paper lays out the thinking behind the need for convergence. It is embedded below.

W803R1

U.S. Amb. Shea provided the U.S. and other Members logic in continuing to push this item at the General Council yesterday.

“IMPORTANCE OF MARKET-ORIENTED CONDITIONS TO THE WORLD TRADING SYSTEM – JOINT STATEMENT BY BRAZIL, JAPAN, AND THE UNITED STATES (WT/GC/W/803/REV.1)

“The United States, Brazil, and Japan have requested this agenda item to continue highlighting the importance of market-oriented conditions to the global trading system.

“As a result of our work together, Brazil, Japan, and the United States have released a joint statement (WT/GC/W/803/Rev.1). The joint statement reflects our shared belief in one of the core principles of the WTO: that market-oriented conditions are fundamental to a free, fair, and mutually advantageous world trading system.

“To that end, the Brazil-Japan-U.S. joint statement affirms that Members’ enterprises should operate under market-oriented conditions and notes the elements that indicate and ensure those conditions for market participants. These criteria reflect the market-oriented conditions and disciplines to which our own enterprises are subject.

“At the last General Council meeting in October, we encouraged Members to review these elements in detail to facilitate more robust engagement on this important issue.

“”It is notable that both in the General Council and informal meetings, we have considerable agreement from Members that these criteria do promote fair trade and have not heard any Member assert that trade is fair if market-oriented conditions are denied by a Member.

“We have heard statements from one Member dismissing market-oriented conditions as academic, questioning whether these concepts can ever be defined, and asking why we should bother to engage on this topic at the WTO.

“We would like to address these criticisms directly: these concepts are not new; they are not academic; and they have been recognized by others as critical to our efforts to ensure the proper functioning of international trade.

“To give one, prominent example: steel is an area where Members have focused significant attention on the problems caused by non-market policies and practices. Let us consider what the G20 and interested OECD members said in the Global Forum on Steel Excess Capacity, in particular in their 2017 report approved under the German presidency of the G20.

“In examining the conditions leading to excess capacity and recommending an effective response, these countries considered that steel excess capacity ‘is a global issue which requires . . . effective policy solutions to enhance the market function.’1 They considered that ‘the enhancement of market function is essential to ensure that exchanges at the national and international level are based on genuine competitive advantages.’2

“They considered that ‘[o]pen and competitive markets and a market-driven approach to resource allocation based on the competitive positions of steel enterprises should be the driving forces of the steel sector. New investment, production and trade flows should reflect market-based supply and demand conditions.’3

“Among their ‘Key recommendations,’ these countries concluded that ‘Members should consider the extent to which their framework conditions and institutional settings ensure proper market functioning.’4

“They emphasized that ‘[p]articular attention should be given to ensure that,’ inter alia, ‘competition law, trade and investment policies . . . foster a level playing field for competition among companies irrespective of ownership, both domestically and internationally;’ that ‘bankruptcy legislation is effective and procedures are expedited efficiently;’ and that ‘the internal financial market is able to price risk and deal with non-performing loans.’5

“These countries concluded, among their key recommendations, that ‘[a] level playing field should be ensured among steel enterprises of all types of ownership’ and that ‘[a]ll enterprises acting in a country’s steel market should follow the same rules and regulations with economic implications, including bankruptcy procedures.’6

They emphasized that ‘[i]n order to ensure fair competition and a level playing field in the steel industry, it is important that all steel enterprises follow the same rules and reporting requirements.’7

“These conclusions and others agreed by numerous Members under the German G20 presidency confirm a wide recognition that market-oriented conditions are essential to solving the problems we face.

“As we see it, the WTO is an appropriate place for Members to work to address these problems of non-market conditions that undermine fair trade. To say that the WTO is not the place to discuss these concerns is really to assert that the WTO is and should be irrelevant – and we respectfully disagree.

“The elements and criteria identified in our joint statement with Brazil and Japan are essential to ensuring that market-oriented conditions exist across sectors – not just in steel – so that all market participants compete on a level playing field.

“We disagree with those who would say that the importance of these conditions is only academic. The example of the conclusions reached by G20 and interested OECD members on the need for market-oriented conditions in the steel sector demonstrate vividly that this discussion is not academic but is rather at the heart of some of the most significant stresses in the international trading system.

“When a Member takes the position that market-oriented conditions are not worth the time or concern of WTO Members, it sounds as if they do not want to provide a level playing field for other Members. If that is the case, then this discussion is even more important to have. A Member who would dismiss these concerns should explain how we can have a level playing field if some Members offer market-oriented conditions but others do not.

“If one examines the market-oriented conditions criteria, it is clear how each contributes to conditions of fair competition and trade. A review of these criteria also helps to illustrate how a failure to meet these criteria is unfair.

“Take, for example, a business that may try selling into a market, only to find that its competitor is directed to sell at non-market or unprofitable prices.

“Or, for example, consider a business that would like to expand and seeks financing at a market rate, only to find that its state-backed competitor can obtain financing from another State Enterprise at a non-market rate.

“Or, for example, consider a firm that seeks financing from the market at a rate to make its business case, only to be denied because competitors have access to non-market financing that results in over-investing and excess capacity.

“Likewise, it is well known that forced technology transfer remains a large and growing concern. These policies and practices also reflect a failure to respect market-oriented conditions because a forced transfer – or an outright theft – is not voluntary. Forced technology transfer unfairly deprives one actor of its intellectual property, trade secrets, ‘know-how,’ or other valuable knowledge, and gives them to another on non-market terms. We do not think any Member would try to defend cyber hacking or cyber theft to transfer technology to a domestic commercial actor as fair.

“In each of these examples, the failure to ensure market-oriented conditions generates a result that
is fundamentally unfair.

“And we have not heard any Member argue for a different position. Do any Members really believe that fair trade can result when special advantages are given to domestic entities under these conditions?

“Ensuring that market-oriented conditions exist for market participants is critical to realizing the benefits of the international trading system that come from our mutual commitment to these rules. This common foundation is necessary to ensure a level playing field for all Members.

“As we see it, the continued relevance of the WTO will depend on whether it can deliver on the promises of a world trading system based on open, market-oriented policies. The success of our reform efforts will depend on our ability to ensure the fundamental premise of free, fair, and mutually advantageous trade remains intact.

“As we keep in mind the imperative to reform the WTO, we will continue to welcome engagement with Members who seek to strengthen our collective commitment to open, market-oriented policies, to move closer toward these market-oriented conditions, and to ensure a level playing field that benefits us all.

“1 Global Forum on Steel Excess Capacity Report, 30 November 2017, p. 8.

“2 Global Forum on Steel Excess Capacity Report, 30 November 2017, p. 8.

“3 Global Forum on Steel Excess Capacity Report, 30 November 2017, p. 9.

“4 Global Forum on Steel Excess Capacity Report, 30 November 2017, p. 11.

“5 Global Forum on Steel Excess Capacity Report, 30 November 2017, p. 11.

“6 Global Forum on Steel Excess Capacity Report, 30 November 2017, pp. 13-14.

“7 Global Forum on Steel Excess Capacity Report, 30 November 2017, pp. 13-14.”

The European Union comments reflect their longstanding position that market-conditions are important and that is why the WTO rule book needs to be updated to ensure that distortions are addressed. Below the EU’s comments yesterday. The EU position essentially accepts coexistence but tries to address the myriad distortions of non market-oriented economies by adding rules that will hopefully address the distortions and hence permit a form of rational trade on reasonably comparable terms. As noted, the U.S. and Japan are working with the EU on this approach as well and will be supported by many other Members when formal proposals are presented to the WTO.

“Item 10 – IMPORTANCE OF MARKET-ORIENTED CONDITIONS TO THE WORLD TRADING SYSTEM – JOINT STATEMENT BY BRAZIL, JAPAN, AND THE UNITED STATES (WT/GC/W/803/REV.1)

“As the EU stated at the previous meeting of General Council, market-oriented conditions are central to allowing a level-playing field. The EU has repeatedly expressed its concerns with non-market-oriented policies and practices that have resulted in distortions to the world trading system.

“The role of the WTO – and therefore the role of all of us, as its Membership – is to ensure that there are effective rules in place to eliminate these distortions and to ensure a level-playing field. There are clearly gaps in the WTO rulebook that do not enable us to do so. These gaps must be addressed through the negotiation of new or updated rules to address the issues raised in the statement of the US and its co-sponsors. We look forward to discussing, in the coming months, how the rule-book can be supplemented and to work towards a negotiation of new rules to fill the gaps.”

China does not view it as the WTO’s role to seek convergence among different economic systems. China has always been sensitive about what it perceives are actions by other WTO Members to impose China-specific rules or otherwise discriminate against China’s system or interests. In prior General Council meetings, China has presented more detailed arguments on why they don’t view the topic raised by the United States to be an appropriate one for the WTO to take up. In a consensus-based organization, China obviously believes that it can prevent this issue being taken up for formal discussions. China’s Ambassador Zhang Xiangchen delivered the Chinese intervention on December 17 on the agenda item. Like U.S. Amb. Dennis Shea, Amb. Zhang Xiangchen’s time in Geneva is ending. His comments reflect his long history with the Chinese government and its accession process. See Statements by H.E. Ambassador Zhang Xiangchen of China at the WTO General Council Meeting, December 16-17, 2020, Agenda Item 10: Market-Oriented Conditions, http://wto2.mofcom.gov.cn/article/chinaviewpoins/202012/20201203024189.shtml.

Agenda Item 10: Market-Oriented Conditions

“Mr. Chair, as a Chinese saying goes: ‘Not even mountains can stop the river from flowing into the sea’. In the relationship between market and government, market obviously has the decisive power. This is a common sense. What we need to discuss here is- in today’s world, who is actually going against this common sense? Who is undermining the common rules of the international market, such as the ‘Most-Favoured-Nation’ principle? Who is artificially altering and impeding the international flow of production factors? And who is bringing WTO back to the ages of ‘might is right’? Dennis mentioned recommendations contained in the Report of Global Forum on Steel Excess Capacity this morning, the question immediately comes to my mind is who is taking measures in the name of national security to distort normal trade in steel sector? If we cannot have a clear answer to these questions, and if we, as WTO members, cannot take effective measures to undo the damages and prevent future disruptions to the system, empty talks about market orientation is nothing but a quixotic quest that leads us to nowhere.

“Ambassador Shea said in the July General Council meeting: ‘what we’re concerned with is ensuring fair competition and a level playing field; not interfering with the ability to govern’. I have to say that I have serious doubts about this statement.

“The ‘market-oriented conditions’ in the US proposal is nothing new. From my perspective, it is an extension of the ‘non-market economy’ standard in countervailing investigations under the US domestic law. In fact, through these domestic standards, the US has high-handedly judged the economies of other countries, and the extensive application of this standard led to arbitrary decision on using the ‘surrogate countries’ data. These unilateral actions have made a lot of companies both from China and other developing members suffer from unjust duties, affecting millions of jobs. From our experiences, these standards are utterly incompatible with the non-discrimination principle of the multilateral trade system.

“The same is in the countervailing investigations. Let me give you an example. A small company in a remote village of Shanxi province produces cast iron sewage pipes. They had completely no idea why in July 2018, their company was placed on the list of countervailing investigation by the US. The determined countervailing rate amounted to 34.87%.

“We had a look at how the investigation arrived to such an erroneous conclusion. First, it was determined that since there’re state-owned enterprises in China, there must be a market distortion in production factors in China. Second, based on the first assumption, the countervailing rate was calculated using the prices in the third country market, while completely ignoring the real market prices in China. According to this reasoning, the company received various kinds of subsidies, including on purchases of iron ore, scrap iron, coke, electricity and even on interest rates of loans. In fact, the company received none of these so-called subsidies. The support it received from the government, if any, is only 0.12%. There’re many more examples of such distortions of using the US’s own standards to inflate the subsidies of other countries, which can be found in the studies by professor Simon Evenett from St. Gallen University.

“The term ‘market-oriented conditions’ may sound completely harmless. However, not all that is wrapped in gold paper is a chocolate. My chef likes to pick mushrooms on his weekends walks and has developed quite a bit of knowledge of mushrooms. He tells me: beware of the brightly coloured ones, they’re most likely to be poisonous.

“Thank you.”

From the above, it is clear that the WTO Members are not finding multilateral solutions or agreeing on issues of great immediate importance to address. This inability to reach agreement on matters that need to be addressed has been true for years and will likely continue to be true in the coming years and will delay meaningful movement on WTO reform that is desperately needed to restore relevance to the WTO.

That has put a lot of pressure on countries to do plurilateral deals or to focus on free trade agreements. At the WTO in Buenos Aires at the Ministerial Conference in 2017 a series of Joint Statement Initiatives were started by “the willing”. Initiatives have been started on e-commerce, services domestic regulation, investment facilitation, MSMEs, among others, and a progress report was provided on December 18 which suggests good progress and the possible announcement of plurilateral agreements by the next Ministerial Conference, with MSMEs having announced some preliminary results. See WTO, Coordinators f joint initiatives cite substantial progress in discussions, 18 December 2020, https://www.wto.org/english/news_e/news20_e/jsec_18dec20_e.htm; Progress on the JSIs: Communication by the Co-coordinators of the JSIs, December 18, 2020, https://www.wto.org/english/news_e/news20_e/jsec_18dec20_e.pdf. The communication is embedded below.

jsec_18dec20_e

Since 2008 when the Doha Development Agenda negotiations didn’t achieve a breakthrough in the summer negotiations, the United States and many other countries have pursued bilateral and plurilateral FTAs and plurilateral agreements on subject matter topics in an effort to achieve forward movement on trade liberalization and updating rules to address current commercial realities. The latter, if open to others to join and if benefits are provided on an MFN basis, can be a stepping stone to multilateral agreements over time. The JSIs begun at the end of the Buenos Aires Ministerial in 2017 are examples of plurilateral negotiations that could be multilateralized over time. All of the JSIs are important. Obviously a multilateral trading system in 2020 without rules on e-commerce is not covering a critical issue of growing importance to international trade. So the JSIs hold out some hope for a trading system whose Members have lost a sense of common purpose and forgotten or disagree on core principles.

December 18 Dispute Settlement Body meeting

The last Dispute Settlement Body meeting of the year at the WTO had an agenda similar to most DSB meetings this past year. While for Members each item on the agenda may be relevant or important, for purposes of this post, I will be limiting myself to a review of agenda item 9, Appellate Body Appointments. A large portion of the WTO membership has month after month put forward a proposal to get the process for selecting new Appellate Body members started. Today’s meeting included the issue and the underlying document, WT/DSB/W/609/Rev.19 which is embedded below.

W609R19

The efforts to appoint new Appellate Body members has been being blocked by the United States. The United States blocked starting the process once more today. See Statements by the United States at the Meeting of the WTO Dispute Settlement Body, Geneva, December 18, 2020, pages 14-17, https://geneva.usmission.gov/wp-content/uploads/sites/290/Dec18.DSB_.Stmt_.as_.deliv_.fin_.public.pdf.

Below is the United States statement on agenda item 9, Appellate Body Appointments: Proposal by Some WTO Members (WT/DSB/W/609/Rev.19). As it is the last Trump Administration handling of the Dispute Settlement Body and the reasons for the inability to move forward on reconstituting the Appellate Body or the needed Appellate Body Reform, the entirety of the U.S. intervention is provided below. The U.S. provides both its evaluation of the divisions within the Members on whether there is a significant problem with the actions of the Appellate Body, its view of the refusal of Appellate Body members in general to recognize the problems they were creating, and its identification of the multiple possible reasons why Members have permitted the Appellate Body to stray so far from the agreed limited role of the second tier review in disputes.

“• As the United States has explained in prior meetings, we are not in a position to support the proposed decision. The systemic concerns that we have identified for more than 16 years and across multiple U.S. Administrations, remain unaddressed.

“• Over the past three years, we have engaged in many discussions with Members – on a bilateral basis, in small groups, and in large settings. After three years of effort, what have we learned?

“• First, we have learned that the Appellate Body thinks it did no wrong. We know this because, despite U.S. action on appointments under both the Obama Administration and the Trump Administration, the Appellate Body did not change its approach. In fact, it expanded and deepened its WTO-inconsistent practices and interpretations. This reflects an institution that came to view itself as more important than the rules – and the Members – that created it.

“• We have learned that the Appellate Body turned out to be less expert than panelists in adjudicating disputes under the DSU. We know this because the United States catalogued numerous substantive interpretive errors by the Appellate Body.1 In most cases, a panel reached a correct interpretation, and the Appellate Body got it wrong. And so, while some Members may think the Appellate Body did a better job than panels – we think the record shows the opposite: panels generally respected WTO rules, and the Appellate Body far too often did not.

“• We have learned that some Members think the Appellate Body did no wrong. This is regrettable because we have not heard any convincing defense of the Appellate Body’s errors in interpreting the DSU or substantive WTO rules. The ongoing denial by some of any AB errors reflects, in part, a fundamental divide among Members on the proper role of the Appellate Body in the WTO and the global trading system more generally.

“• We have learned that some other Members may think the Appellate Body did wrong, but are content to maintain the status quo. We do not understand how a Membership that proclaims its support for a rules-based trading system can nonetheless accept persistent rule-breaking by its dispute settlement system. This unwillingness on the part of some Members may unfortunately reflect a Membership incapable of holding WTO institutions, including the Appellate Body, accountable. Experience shows, however, that without accountability, there can be no reform.

“• And we have learned that some reform-minded Members think the Appellate Body did commit serious errors, and bravely see a need for real, fundamental reform – reform so that the WTO dispute settlement system supports the WTO as a venue for discussion and negotiation between Members, rather than undermining the WTO and converting it into a mere litigation forum.

“• So I think it is fair to say that we have learned a considerable amount. Members have deepened their understanding of the issues and, in some cases, sincerely wrestled with the challenge before us.

“• But of course, many questions remain.

“• There is the question that everyone here knows well – the ‘why’ question. Some Members may be tired of hearing it, and we could similarly tire of having to ask it – but the question is too important to the future of the WTO to ignore it.

“• Despite best efforts by the United States to push the conversation forward, we have heard very little from other Members on their views of how we arrived to this situation – where the Appellate Body had ignored the clear limits placed on it under the DSU and rewrote the substantive rules set out in the WTO agreements.

“• In meeting after meeting, we posed this question to the Members. We explained why the ‘why question’ was so important. But most Members did not want to undertake this critical, reflective exercise.

“• In the absence of engagement from Members, we offered several potential explanations based on conversations and on our own reflections. For example, we noted:

“o One cause could be the ongoing challenges facing the WTO negotiating function and its oversight function, leading to unchecked ‘institutional creep’ by the Appellate Body.

“o Another cause could be that some WTO Members believe that the Appellate Body is an independent ‘international court’ and its members are like ‘judges’ who have more authority to make rules than the focused review provided in the DSU.

“o Relatedly, some Appellate Body members viewed themselves as ‘appellate judges’ serving on a ‘World Trade Court’ that is the ‘centerpiece’ of the WTO dispute settlement system. Of course, such an expansive vision of the Appellate Body is not reflected in the DSU.

“o Finally, we also noted that the compensation arrangements for AB members rewarded their delays and staying on beyond the end of their terms, and we learned that there was very little transparency and accountability for the compensation claimed.

“• Besides these, we also heard from a former member of the Appellate Body, Mr. Graham, who was willing to speak out candidly on these issues.2 He put forward a number of reasons ‘why’ the Appellate Body erred and was unwilling to correct those errors – and these remarks deserve attention from all WTO Members. Among his observations on why the Appellate Body behaved as it did:

“o (1) A ‘prevailing ethos’ to act like a court, and not be accountable to WTO Members,

“o (2) the degree of control by Appellate Body staff,

“o (3) an over-emphasis on ‘collegiality’ that created ‘peer pressure to conform’,

“o (4) an ‘excessive striving for consensus’ that ‘led to excessively long and unclear compromise reports’ and ‘encouraged over-reach, gap filling, and advisory opinions’,

“o (5) ‘a sense of infallibility and of entitlement, to stretch the words of agreed texts, and to stretch decisions beyond merely resolving a particular dispute, so as to create a body of jurisprudence’, and, finally,

“o an ‘undue adherence to precedent’, ‘not only as to outcomes, but also as to reasoning, definitions, and obiter dicta’, which ‘made it more important to know the past’ than to ‘openly consider[] whether the past should be reconsidered.’

“• None of these potential reasons ‘why’ are addressed in the decision before the DSB today. Starting a selection process would therefore simply revive the interpretations and practices that the United States has, for years, explained as contrary to the WTO agreement and unacceptable to us.

“• Nor do these potential reasons ‘why’ suggest a problem that can be resolved by simply agreeing on words that repeat, with feeling, existing WTO principles. Many Members have been unwilling to confront this difficult reality.

“• Looking ahead, we must find ways to ensure that the limitations we Members imposed on all WTO adjudicators in the DSU are respected. We have to consider and grapple with the damage to the WTO, as a forum for discussion and negotiation, and as a rules-based system, for continued failure to adhere to those limitations.

“• While there are many problems in international trade that require discussion of new norms and rules, the United States considers that the rules that we were able to agree in 1995 represent some important progress in bringing greater fairness and market-orientation to international trade.

“• As we see it, the Appellate Body has effectively written a new, less-market-oriented, less reciprocal, and less mutually beneficial WTO agreement, which we never agreed to, and which I believe no U.S. Government would agree to. The United States will continue – as it always has – to engage with Members on these important issues.

“1 See United States Trade Representative Report on the Appellate Body of the World Trade Organization, February 2020, pp. 81-119, available at https://ustr.gov/sites/default/files/Report_on_the_Appellate_Body_of_the_World_Trade_Organization.pdf; see also, e.g., Dispute Settlement Body, Minutes of the Meetings WT/DSB/M/294, paras. 103-127 (statement of the United States concerning the Appellate Body report in US – Anti-Dumping and Countervailing Duties (China) (AB)); WT/DSB/M/346, para. 7.7 (statement of the United States concerning the Appellate Body report in EC – Seal Products (AB)); WT/DSB/M/211, paras. 37-40 (expressing concerns with the Appellate Body’s interpretation of Article 2.4.2 of the Antidumping Agreement); WT/DSB/M/225, paras. 73-76 (expressing concerns with the Appellate Body’s interpretation of the Antidumping Agreement with regard to zeroing); WT/DSB/M/250, paras. 47-55 (expressing concerns that the Appellate Body wrongly claims that its reports are entitled to be treated as precedent and must be followed by panels absent “cogent reasons”); WT/DSB/265, paras. 75-81 (expressing concern that the Appellate Body’s findings incorrectly expanded the scope of the proceedings, concern with the Appellate Body’s interpretation of the Antidumping Agreement with regard to zeroing, and concern that the Appellate Body had failed to apply the special standard of review under the Anti-Dumping Agreement); WT/DSB/M/385, paras. 8.8-8.19; WT/DSB/M/73 (expressing concerns with the Appellate Body’s interpretation of the Safeguards Agreement).

“2 Farewell speech of Appellate Body member Thomas R. Graham, available at https://www.wto.org/english/tratop_e/dispu_e/farwellspeechtgaham_e.htm.”

Current U.S. Trade Representative Robert Lighthizer is quoted as saying to the BBC in an interview this week, “What you had really was an organisation that migrated from a negotiating organisation into a litigation organisation. And that was not healthy. Now we have a situation where we’re trying to create a new organisation, we have to massively reform the appellate body * * *.” BBC News, December 17, 2020, We’re proud of what we’ve done, says Trump’s trade chief, https://www.bbc.com/news/business-55345826. The U.S. has viewed the Appellate Body as simply one part of dispute settlement, and the core WTO function to be to permit Members to negotiate updated and new agreements. The WTO Members also meet to understand actions Members are taking (requiring an understanding of actions taken to implement obligations and transparency in national actions). While a dispute settlement system is important, it was never intended to be the dominant piece of the organization. The EU and Canada in conferences in Geneva this year have each agreed through their panel participants that WTO panels and the Appellate Body are not courts and panelists and Appellate Body members are not judges. But the membership is a long way from getting back to the original purpose and limited role of the dispute settlement system. As long as that is the case, it is likely that there will be limited progress on restoring the Appellate Body and making the reforms critical to ensuring it limits its role to that envisioned by the DSU. I don’t believe that the problems of the WTO’s dispute settlement system will disappear when the Trump Administration’s term ends next month. U.S. concerns go back to the late 1990s and have grown over time for both political parties. Thus, while the Biden Administration may over time put forward what it believes is necessary to achieve necessary DSU reform, there is unlikely to be a resolution and a restoration of the Appellate Body until there is a greater agreement on the underlying problems and purpose of the dispute settlement system. If the U.S. appraisal of the current positions of Members is correct, the road to resolution will be long indeed.