India

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

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

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

Continued growth of cases in the developing world

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

Developed country resurgence in new cases

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

Deaths/100,000 population

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

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

Conclusion

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

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

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

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

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

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

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

Continued growth of cases in the developing world

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

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

Deaths/100,000 population

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

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

Race for vaccines

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

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

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

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

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

Conclusion

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Concluding comments

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

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

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

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

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

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

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

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

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

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

“Overview

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“17 Newsrelease, Eurostat, August 14, 2020.

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

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

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

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

The complete CRS report is embedded below.

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

Conclusion

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

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

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

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

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

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

Background

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

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

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

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

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

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

2019_Report_on_Chinas_WTO_Compliance

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

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

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

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

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

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

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

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

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

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

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

Section-301-FINAL

301-Report-Update

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

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

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

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

Proposed General Council decision submitted by the United States

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

WTGCW796

Conclusion

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

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

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

Stay tuned.

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

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

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

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

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

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

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

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

Continued growth of cases in the developing world

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

Deaths/100,000 population

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

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

Conclusion

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

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

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

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

The race to become the next WTO Director-General — where candidates are on important issues: eligibility for Special and Differential Treatment/self-selection as a developing country

[Updated August 27 to incorporate comments by Amb. Tudor Ulianovschi of Moldova at a WITA webinar held on August 26]

During the years of the General Agreement on Tariffs and Trade, countries engaged in a series of rounds of tariff liberalization. The basic principle of Most Favored Nation ensured that any participating country or customs territory would receive the benefits of trade liberalization of others whether or not the individual country made tariff liberalization commitments of its own.

Moreover, the GATT and now the WTO have recognized that countries at different levels of economic development will be able to make different contributions and some may need special and differential treatment to better participate.

Historically, there has been a distinction between developed countries and developing countries, with special and differential (S&D) treatment reserved for the latter. Typically, S&D treatment would permit, inter alia, lesser trade liberalization commitments and longer phase-ins for liberalization undertaken.

During the Uruguay Round, least-developed countries, as defined by the United Nations, were broken out from developing countries to receive lesser obligations than other developing countries. But the categorization as a developing country has always been a matter of self-selection within the GATT and now within the WTO.

Some three quarters of WTO’s current 164 Members have self-declared themselves to be developing countries or are least-developed countries under UN criteria. Thus, only one fourth of WTO Members shoulder full obligations under the current system.

While the Uruguay Round negotiations attempted to deal with “free riders” by requiring all countries and customs territories to bind all or nearly all tariff lines, the results at the creation of the World Trade Organization was a system where the vast majority of Members had relatively high tariff rates in their bindings while developed countries typically have very low tariff rates bound.

After twenty-five years of operation and dramatic economic development by many Members and limited trade liberalization through WTO multilateral negotiations, questions have been raised by the United States and others as to whether the concept of self-selection by countries of developing country status has contributed to the inability of the WTO to achieve further liberalization through negotiations. The U.S. has put forward a definition of who would eligible for developing country status based upon a country not qualifying under any of four criteria. See December 28, 2019, WTO Reform – Will Limits on Who Enjoys Special and Differential Treatment Be Achieved? https://currentthoughtsontrade.com/2019/12/28/wto-reform-will-limits-on-who-enjoys-special-and-differential-treatment-be-achieved/. Countries who would not qualify under the U.S. proposal include:

Member of the OECD or in the accession process:

Chile, South Korea, Mexico, Turkey, Colombia, Costa Rica.

Member of the G-20:

India, South Africa, Turkey, Argentina, Brazil, Mexico, China, Indonesia, South Korea.

Classified by World Banks as “high income” for 2016-2018 (includes):

Antigua and Barbuda, Bahrain, Brunei Darussalam, Chile, Hong Kong, South Korea, Kuwait, Macao, Panama, Qatar, Saudi Arabia, Seychelles, Singapore, St. Kitts and Nevis, Trinidad and Tobago, United Arab Emirates, Uruguay.

0.5% of Merchandise Trade (includes):

China, South Korea, Hong Kong, Mexico, Singapore, United Arab Emirates, Thailand, Malaysia, Vietnam, Brazil, Indonesia, Turkey, South Africa.

For many countries who have self-declared as developing countries, the concept of changing their status, regardless of economic development, is untenable and has been actively opposed at the WTO (including by China, India and South Africa).

Four WTO Members who had self-declared as developing countries — Korea, Singapore, Brazil and Costa Rica — have indicated to the WTO that they will not seek special and differential treatment in ongoing or future negotiations (but maintain such rights for existing agreements). Other countries who are self-declared developing countries have blocked an Ambassador from one of the four who have agreed to accept greater obligations from assuming the Chair post for one of the WTO Committees.

The United States has also raised questions about the imbalance of tariff bindings which have flowed from economic development of some countries without additional liberalization of tariffs by those countries and the lack of progress on negotiations. Thus, for the United States there is also the question of whether tariff bindings should be reexamined in light of economic developments over the last twenty-five years. From the WTO’s World Tariff Profiles 2020 the following simple bound tariff rates for all goods are identified for a number of countries. See https://www.wto.org/english/res_e/booksp_e/tariff_profiles20_e.pdf. While for developing countries, bound rates are often much higher than applied rates, the bound rates give those countries the ability to raise applied tariffs without challenge:

“Developed Countries”

United States: 3.4%

European Union: 5.1%

Japan: 4.7%

Canada: 6.4%

“Developing Countries”

China: 10.0%

Brazil: 31.4%

Chile: 25.2%

Costa Rica: 43.1%

Republic of Korea: 16.5%

India: 50.8%

Indonesia: 37.1%

Singapore: 9.5%

South Africa: 19.2%

Thus, for the eight candidates competing for the position of Director-General of the World Trade Organization, a challenging topic within the WTO for possible reform is whether the issue of Special and Differential treatment needs review to ensure that its provisions apply to those who actually have a need and not to three quarters of the Members simply because they self-selected. While not necessarily encompassed by the S&D question, for the United States, the issue also subsumes whether WTO reform needs to permit a rebalancing of tariff bindings based on changing economic development for WTO Members.

What follows is a review of the prepared statements to the General Council made by each candidate during July 15-17, my notes on candidates’ responses to questions during the press conference immediately following each candidate’s meeting with the General Council, and my notes on candidates’ responses to questions during webinars hosted by the Washington International Trade Association (WITA) and Asia Society Policy Institute (ASPI) (as of August 13, seven of the eight candidates have participated in such webinars; the webinar with the Moldovan candidate is being scheduled).

Dr. Jesus Seade Kuri (Mexico)

Dr. Seade did not take up the question of special and differential treatment directly as part of his prepared statement. One can read part of his statement to indicate that part of the challenges facing the WTO flow from the lack of success of the negotiating function on traditional issues (which would include further tariff liberalization). Also one could construe the need to modernize the organization as including the need to better reflect the need for all Members to carry the extent of liberalization that their stage of economic development permits.

“In the medium and long term, and in order to prevent the Organization from becoming obsolete and obsolete, it is important that mechanisms be
adopted to modernize it. I will seek to establish an informal dialogue on the
weaknesses and challenges of the Organization in the current context, through annual forums or specialized conferences.

“But thinking about long-term expectations, I am convinced that they have been affected by the lack of significant results in the negotiations since the
creation of the WTO. Thus, as results are achieved on 21st century issues, it will be very important to also energetically take up the traditional priority issues on the sustainable development agenda.” (Google translation from French)

During the press conference, Dr. Seade was asked a question on the issue of developed versus developing country designation. My notes on his response are as follows:

On the question of developed vs. developing country, Dr. Seade looks at it from the perspective of special and differential treatment. On the one hand the world keeps changing, so it’s reasonable to ask what a Member can do. The idea of changing classification of countries from developing to developed will take a very long time and so is probably the wrong approach. The question should be what contribution can a particular member make, which may be different in different industries.

WITA had a webinar with Dr. Seade on July 7. https://www.wita.org/event-videos/conversation-with-wto-dg-candidate-seade/. Dr. Seade was asked about the issue of self-selection of developing country status and how he would try to get Members to address. My notes on his response follow:

Dr. Seade had this to say:  he believes countries are looking at the issue the wrong way.  Special and differential treatment is like a discount card which you can use at a store.  Some customers have the discount card; some don’t.  The reality in the WTO is that everything is negotiated.  When you negotiate, you can talk to every Member.  If Members make whether and what type of special and differential treatment a Member needs part of negotiations, the outcome can be tailored so that Members are contributing what they can while still accommodating Members where there is a real need. While seeking to define who is a developing country may be an approach that can be taken, Dr. Seade believes that actually getting Members to agree to changing status is an impossible issue.  In his view, status is “theological” for many Members. 

One can look at the trade facilitation agreement for an example of where Members were asked to take on obligations to the extent they could; there were negotiations if more was felt possible from a Member.  The same type of approach can be taken in ongoing and new negotiations.  He believes this is the way to go.  The key question is not who is eligible, but for what does a Member need S&D.  This will be true at a country level (e.g., in Dr. Seade’s view Mexico and Brazil don’t need the same flexibilities as Angola).  But the need for differentiation in a given country may also differ by sector.  In fact the need for special and differential treatment can vary by product. Dr. Seade mentioned Mexico’s agriculture sector, where corn production is not efficient or modern and hence S&D may be necessary but where that is not the case for fruits and vegetable production.  Thus, Dr. Seade believes that going about it on a more practical way is the right way to make progress in the WTO.  Negotiate by agreement by country, etc.

Dr. Ngozi Okonjo-Iweala (Nigeria)

Dr. Ngozi Okonjo-Iweala’s prepared statement directly notes the differing positions on the issue of special and differential treatment and also mentions concerns of Members in terms of imbalances in rights and obligations and distribution of gains (which presumably includes the U.S. concern about high bound tariff rates of many countries who have gone through significant ecoonomic growth in the last 25 years).

“Members’ views differ on a number of fundamental issues, such as special and differential treatment or the need for the WTO to tackle new issues and develop new or enhanced rules to deal with SOEs and agricultural subsidies, for example.”

“While a key objective of the WTO is the liberalization of trade for the mutual benefit of its Members, it appears that this very concept is now a divisive issue as a result of the perceived imbalances in the rights and obligations of Members and the perceived uneven distribution of the gains from trade. I would constantly remind Members about the value of the MTS and help energize them to work harder to overcome the challenges that have paralyzed the WTO over the years.”

During the press conference on July 15th, Dr. Ngozi Okonjo-Iweala was not a question on S&D treatment, classification of developing countries or on tariff bindings.

WITA had a webinar with Dr. Ngozi Okonjo-Iweala on July 21. https://www.wita.org/event-videos/conversation-with-wto-dg-candidate-dr-ngozi-okonjo-iweala/. Dr. Ngozi Okonjo-Iweala in her opening comments identified the issue of special and differential treatment as an issue that could be considered as part of WTO reform, although it wasn’t in her list of topics for tackling by the next WTO Ministerial Conference. She was asked a question about how to restore trust among Members and used that question to review her thoughts on special and differential treatment and the question of self-selection by Members as developing countries. Below is my summary of Dr. Ngozi Okonjo-Iweala’s discussion of the issue.

One issue being pushed by the United States and others that is very divisive is the issue of special and differential treatment and self-selection of developing country status.  The concern of those wanting a change is that self-selection and the automatic entitlement to S&D treatment shifts the balance of rights and obligations to advanced developing countries.  There is no disagreement that least-developed countries need special and differential treatment. In her view, the real question is whether other countries that view themselves as developing should get special and differential treatment automatically.  Dr. Ngozi Okonjo-Iweala believes the WTO needs a creative approach to resolve the issue.  For example, Members should address the need of individual Members for special and differential treatment on a negotiation by negotiation basis.  Members should, as part of each negotiation, consider what other Members believe their needs are based on level of development.  She references the Trade Facilitation Agreement as an example where Members took on obligations based on their level of development vs. a one size fits all approach.  Dr. Ngozi Okonjo-Iweala believes that if the Members can reach a resolution on this issue, the resolution would help build trust among Members and hence help the WTO move forward.

Mr. Abdel-Hamid Mamdouh (Egypt)

Mr. Mamdouh’s prepared statement did not directly deal with the topic of special and differential treatment or the changing economic competitiveness of Members. There is one statement towards the end of his statement which recognizes the evolving nature of the Membership.

“Since then, global trade has transformed, and trading powers have evolved. The circumstances and dynamics have changed. But the skillset we require of the leadership: imaginative thinking, and the ability to come up with legally sound and enforceable solutions – remain the same.”

During his press conference on July 15, Mr. Mamdouh was not asked a question on S&D treatment or the criteria for being a developing country.

WITA had a webinar with Mr. Mamdouh on June 23. https://www.wita.org/event-videos/conversation-candidate-hamid-mamdouh/. Mr. Mamdough was asked a question during the webinar on whether the large number of WTO Members who have self-declared as developing countries and hence are eligible for special and differential treatment doesn’t undermine the credibility of the organization and what he would do about it if he was Director-General. Below is my summary of Mr. Mamdouh’s response.

Mr. Mamdouh believes that the issue should be addressed in a pragmatic maner. He referred back to the General Agreement on Trade in Services (GATS) negotiated during the Uruguay Round and noted that the GATS contains no special and differential treatment provisions.  Thus, in the GATS, Members moved away from a system of country classifications.  In Mr. Mamdouh’s view, obligations should be customized based on a Member’s needs/abilities through negotiations.  Flexibilities to address particular Member needs can be determined individually.  While this was the approach in GATS, Members can do that on goods on any area that can be scheduled but also rule making areas.  In Mr. Mamdouh’s view for any substantive obligations, there is room to customize obligations through negotiations.  He believes that big developing countries wouldn’t oppose different countries taking on different obligations.  He doesn’t believe that a solution will be in negotiating a different categorization system.  The solution for the WTO is to take a pragmatic approach and customize the outcome based on negotiations.  Mr. Mamdouh referenced fisheries subsidies as an example where that could occur.  He believes customizing obligations based on individual Member needs will be increasingly necessary, citing the 164 current Members.  But he cautions that no “one size fits all”.  Every solution would need to be tailored on the basis of the area being negotiated.

Amb. Tudor Ulianovschi (Moldova)

Amb. Ulianovschi’s prepared statement to the General Council on July 16 covers a wide range of issues that need to be addressed going forward, but, does not mention the issue of special and differential treatment or which Members should not be eligible to be developing countries based on economic developments. Amb. Ulianovschi does have one sentence in his prepared statement which talks generally about addressing global inequalities.

“The WTO is one of the most complex organizations in the world today, and it’s one of the most needed as to ensure open, predictable, inclusive, rule based multilateral trading system, as well as – to address global inequalities and bridge the gap between the least developed, developing and developed countries.”

At the press conference on July 16, Amb. Ulianovschi was asked many questions but none of the developing country/special and differential treatment issue.

WITA held a webinar with Amb. Tudor Ulianovschi on August 26, 2020. https://www.wita.org/event-videos/conversation-with-tudor-ulianovschi/. During the webinar, Amb. Ulianovschi mentioned special and differential treatment both in his opening statement and in answer to a question. My notes on Amb. Ulianovschi’s comments are provided below.

From his opening statement, Amb. Ulianovschi noted that as a member driven organization, the WTO needs Members to negotiate to move forward.  He believes that a diplomatically active Director-General can help the WTO move forward, and he can help address lack of trust which he believes is largely psychological primarily based on unfinished business but also dispute settlement, special and differential treatment and other issues.

Q:  How important is it to have a reform agenda, and how can you convince major Members to agree on a common agenda? A:    Amb. Ulianovschi stated that reform is absolutely necessary.  In his view, cosmetic reform is not sufficient, a fact made clear by major Members.  Amb. Ulianovschi believes that political experience and dialogue by the Director-General will be key to get those who have put forward proposals to get into a discussion that is inclusive and transparent.  There are a large number of issues that are affecting the environment at the WTO.  For example, the WTO needs to address the horizontal issue of Special and Differential Treatment (S&D).  The S&D principle is at the core of the organization, but it is how you apply the principle which determines commitments of Members.  From that point of view, Amb. Ulianovschi sees it as a positive signal that major players are putting forward proposals on this topic.  The proposals should be the starting point for discussions.  Amb. Ulianovschi would invite those who have put forward proposals to start discussions with other Members.  Negotiations need political will to succeed, and Members need to agree on how to proceed.  He believes that if he is Director-General, he can get Members to that point.

H.E. Yoo Myung-hee (Republic of Korea)

Minister Yoo’s prepared statement covers many issues but does not address the issue of special and differential treatment/developing country classification.

In her press conference on July 17 after meeting with the General Council, Minister Yoo was asked a question on developing vs. developed country status. My notes on her response follow:

A question was asked how Minister Yoo viewed the question of the status of Members as developed or developing countries particularly in light of Korea viewing itself as a developing country in the WTO although Korea has indicated it will not seek additional special and differential treatment under future WTO Agreements. Minister Yoo started her response by noting that the Marrakesh Agreement requires that the WTO work to help developing and least developed countries secure their fair share of trade. There are competing issues at the WTO. Should the WTO make special and differential treatment provisions more operational in existing Agreements is one issue. Should the WTO change the classification status of some countries based on economic development is the other issue. For Korea, the. world has changed, and countries have changed in terms of their stage of economic development. Korea decided to take on more responsibility based on its changing level of economic development. But many countries continue to need special and differential treatment. It would be ideal for developing countries to take on more responsibilities as they are able. But this is a sensitive issue on which there is no consensus as yet.

WITA had a webinar with Minister Yoo on August 11.  https://www.wita.org/event-videos/candidate-h-e-yoo-myung-hee/. Below is my summary of the question asked on the issue of special and differential treatment and self-selection of developing country status, and Minister Yoo’s response:

Korea has informed the WTO that Korea will not seek S&D treatment in ongoing or future negotiations.  Many Members thinks the self-selection of developing country status is undermining the system.  How do you evaluate the issue and how important is it to resolve?

Minister Yoo indicated that this is an important issue to resolve to make progress in ongoing and future negotiations.  She believes it is important to reflect on a core principle of the WTO to ensure that developing countries and least-developed countries secure their fair share of global trade.  The question for the WTO is how to effectuate this embedded principle.

Over half of WTO Members are developing countries and 36 others are least developed countries. In total roughly three fourths of all Members get special and differential treatment.  If so many are eligible for special and differential treatment, it likely means that the countries with the greatest needs are not receiving the assistance actually needed to help their development and greater participation in international trade.

In Minister Yoo’s view, the WTO has very divergent views among Members about changing the classification process for Members from self-selection to a set of factual criteria.  US has put forward a proposal to categorize members as developed based on different factual criteria.  However, there is no consensus at the WTO at the moment which means that changing the classification process will not happen until there is consensus.  In light of the lack of consensus, a pragmatic approach may be to have countries who can take on more responsibilities to do so voluntarily.  This will permit those who need assistance to get it.

Looking at the Trade Facilitation Agreement, while the Agreement is not necessarily representative of other areas under negotiation, it shows one way to handle the issue of special and differential treatment in a pragmatic way.  Some developing countries take on more responsibility than others without S&D treatment and without a transition period.  This is an example of how through negotiations, Members can customize obligations to individual Member capabilities.  Such an approach is practical and pragmatic.

In Korea’s case, Korea indicated that they would not seek S&D treatment in ongoing and future negotiations based on Korea’s state of economic development.  It was not an easy decision and required extensive internal consultations.  Korea wants to promote the WTO system.  She believes it is useful for each country to step up and take on more responsibility if they are capable of doing so.  The U.S. proposal has been important in raising the issue.  While no consensus exists at the moment, the U.S. action has gotten Members discussing the matter.  If Minister Yoo is selected to be the next Director-General, she would continue to raise the issue with Members to achieve a good outcome for all. She believes resolution of the issue can help unlock progress in ongoing and future negotiations.

H.E. Amina C. Mohamed (Kenya)

Minister Mohamed’s prepared statement contains a number of statements which recognize the need of Members to contribute according to their ability, although she does not address the classification of developing countries or the need for special and differential treatment specifically.

“Renewal has to start with facing up to the defects that have weakened the system in recent years: the inability to update rules to reflect the changing realities of how trade is conducted; the sterility of ideological standoffs; the retreat into defensiveness; and the sense of the benefits of trade not being equitably shared.”

“All Members should contribute to trade opening and facilitation efforts, especially those most in a position to do so.”

“We need a WTO that is fair and equitable, taking into account the level of economic development of each member. All WTO Members must be prepared to contribute to improving and strengthening the organization, so that it can facilitate trade for the benefit of all, and contribute to economic recovery from the effects of the pandemic.”

During Minister Mohamed’s press conference on July 16, no questions were asked about developing country status or on special and differential treatment.

WITA had a webinar with H.E. Mohamed on August 6. https://www.wita.org/event-videos/ambassador-amina-mohamed/. During the webinar, Minister Mohamed both made several comments on special and differential treatment and self-selection of developing country status, but also answered a question. My notes on her comments and the question asked are summarized below:

One of issues needing to be addressed by the WTO are the current “divisions over developing country status”.

We need a WTO that is fair and equitable considering the level of economic development of each Member.  The WTO should give effect to its development objectives in a practical and enabling way that takes into account needs and results.  All WTO Members must be prepared to contribute to strengthening and improving the WTO system.

Q: The U.S. has raised the issue of self-declaration of developing country status.  How would you handle the issue if you become Director-General?

Minister Mohamed noted that special and differential treatment is an integral part of existing agreements.  However, going forward, the journey to modify the approach to S&D has already begun. ” The train has already left the station.” Minister Mohamed noted that in the Trade Facilitation Agreement, any special treatment was based on the need of the individual Member. Countries assumed obligations they were able to, so different developing countries assumed different levels of obligations with or without transition periods.

Second, self-declaration by certain countries that they would no longer seek special and differential treatment has already occurred (Korea, Brazil, Singapore and Costa Rica).  Minister Mohamed believes the WTO will see more of this going forward by other countries.  If Minister Mohamed is selected to be the next Director-General, she would continue discussions among the Members and have candid discussions with some of the Members.  But she believes moving forward, special and differential treatment will be increasingly based on actual need.

H.E. Mohammed Maziad Al-Tuwaijri (Saudi Arabia)

Minister Al-Tuwaijri in his prepared statement to the General Council on July 17 addressed briefly the proposal from the U.S. on special and differential treatment (classification of developing countries):

“Concerning Special and Differential Treatment, the bottom line is, without negotiations that include incentives for everyone to participate actively, I do not think it will be possible for Members to address the issue of SDT. This is one of the main reasons that the negotiating function needs to start working. Members have various capacities to implement and take advantage of new rules and commitments, so it is clear that each Member must decide for itself what is in its own interest.”

At his press conference on July 17, Minister Al-Tuwaijri was not asked a question on special and differential treatment or of classification of developing countries.

WITA did a webinar with Minister Al-Tuwaijri on August 5. https://www.wita.org/event-videos/director-general-candidate-he-mohammed-al-tuwaijri/. During the webinar Minister Al-Tuwaijri was not asked a question on self-selection of developing country status or on special and differential treatment.

The Rt Hon Dr. Liam Fox MP

Dr. Fox’s prepared statement to the General Council on July 17 did not include any references to special and differential treatment or to the classification of developing countries.

During his press conference on July 17, Dr. Fox was not asked a question dealing with special and differential treatment or the classification of developing countries.

WITA had a webinar with Dr. Fox on July 30, 2020. https://www.wita.org/event-videos/conversation-with-dr-liam-fox/. Dr. Fox was asked about the concerns expressed by the U.S. and others that the process of self-selection of developing country status had resulted in too many Members having special and differential treatment. There was a need to see that S&D is limited to those who actually need help. How would Dr. Fox address this issue if he were selected as the Director-General? What follows reflects my notes on Dr. Fox’s response.

Dr. Fox stated that first, the WTO must reassess that we are all aiming at the same goal.  As the WTO has expanded membership, Members knew that the organization would have countries with vast differences in capabilities and that it would take different countries different amounts of time to get to full implementation.  Thus, special and differential treatment is available. However, Dr. Fox understands that there are some WTO Members who want to be perpetually exempted from undertaking full obligations regardless of the level of economic development they have achieved. Dr. Fox views this approach as unacceptable. Membership in an organization envisions equal rights and obligations, though it may take some members longer to get there.

On the topic of special and differential treatment, Dr. Fox believes that it is important to accelerate the rate of development for countries that are developing or least-developed, so that their improved level of economic development means they don’t need special and differential treatment.  One of the reasons some Members gave Dr. Fox for not wanting to be moved into a different category, was the concern over loss of trade preferences.  Dr. Fox used as an example, small coastal economies who can experience wide swings in per capita GDP based on external events (hurricanes, etc.) which can move them from high income to low income and back in short order.  Dr. Fox believes WTO Members must think creatively on how to address concerns of Members that giving up developing country status will put them in difficulties. On his example, he suggested using multiple year averages.

Conclusion

As the WTO has become a much more universal organization, membership has widely expanded beyond the historical developed country proponents of the GATT. At the same time, in recent decades there has been tremendous economic development by many countries which should mean that the ability of Members to handle full or increased obligations of the WTO has increased for many countries.

Yet, the current system does not provide a means for modifying obligations of Members who joined as developing country members regardless of the level of development achieved after joining. The view of some Members is that this disconnect between actual economic development and level of commitments undertaken has contributed to the inability to conclude negotiations. The issues raised by the United States have resulted in a few countries indicating that they will not seek special and differential treatment in ongoing or future negotiations. In at least one recent agreement, the Trade Facilitation Agreement, countries have assumed obligations based on their perceived need and not as a general right with the result of countries who may have self-selected developing country status taking on more obligations with lower or no delay in implementation than other developing countries.

For the incoming Director-General, finding a solution to this issue acceptable to all Members could be critical to unlocking progress on other negotiations.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Conclusion

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

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

COVID-19 — the United States continues to spin out of control, with increasing shortages of medical goods; sharp increases in developing countries in the Americas and parts of Asia

The last two weeks have seen the case count of new COVID-19 cases in the United States surge out of control across much of the country with a staggering number of new cases reaching 871,922 cases between July 6 and July 19, up from 584,423 cases in the prior two-week period — an increase in new cases of 287,499 or 49.2% in just two weeks. The U.S. accounted for more than half of the global spike in new cases from the last two week period examined (June 22-July 5) from less than 2.5 million new cases for the world to 3,018,993 through July 19. Growth in new cases is occurring in many developing countries as well, but no developed country other than the United States has been unable to cap the level of new cases and, in most instances, bring the number down sharply over time (Russia’s number of new cases has declined but not sharply like other developed countries).

The consequences for the U.S. and the world of the continued rapid growth in new cases are significant. The U.S. is finding many states needing to slow down or reverse the reopening of the economy which will hurt the economic recovery in the United States, result in a continuation of exceptionally high unemployment, threaten hundreds of thousands of businesses with survival, put in jeopardy the ability of schools at all levels to open safely and put downward pressure on global trade based on reduced U.S. demand, restrictions on various major service sectors and production of goods at below optimal levels. Moreover, there are many states facing sharp increases in hospitalizations putting stress on the health care system in many parts of the country and returning states and local communities to scramble for medical goods, including personal protective equipment. There are news articles of some hospital systems facing the same types of shortages that were harming care in the March-April period. Congress is facing the need in the coming days and weeks to provide substantial additional support to the unemployed, to health care systems, to state and local governments, to certain sectors of the economy particularly hard hit. Thus, the U.S. drag on the global economy will likely continue while the U.S. will be chasing medical supplies at a time of growing demand in the developing world, likely making access to many medical goods more expensive and harder to find.

While the Administration has focused on reopening the U.S. economy regardless of the actual situation and has dismissed the increase in new cases as simply the result of increased testing and has claimed that the U.S. has the lowest mortality rate, the facts on the ground indicate the crisis will continue for some time. The United States has just 4.3% of the world’s population but has had 26% of the world’s cases and 23.3% of the world’s deaths from COVID-19. So the bottom line is that the U.S. has a massive and growing health crisis that is far from being under control.

On the question of the death rate and how the U.S. compares to other countries, the table below presents some data which are self-explanatory. Using the daily data from the European Centre for Disease Prevention and Control, I reviewed 42 countries and territories who collectively have accounted for 90.88% of all cases since December 31 and 91.93% of all deaths recorded as due to COVID-19. Through July 19, the U.S. had the sixth highest mortality rate looking at deaths per hundred thousand population (France, Italy, Spain, the United Kingdom and Chile had worse rates ). If one looks at the period since April 11 (three months and eight days, roughly half of the total period), the U.S. had the forth worst mortality rate (deaths per hundred thousand population; Peru, the United Kingdom, and Chile had worse rates). The U.S. death rate is worse than our neighbors, Canada and Mexico. It is worse than that of most European countries, Australia, New Zealand, Japan, South Korea, Singapore and Taiwan. And much worse than China, India, Pakistan, Indonesia, South Africa and many other countries. The U. S. rate of deaths/cases has remained unchanged at 3.78% over the total period and for the period since April 11th. It has been in the more recent period that U.S. testing has expanded significantly, but without any change in rate of death.

While the U.S. ranking of deaths as a percent of total confirmed cases of COVID-19 is better than its ranking based on the number of deaths per 100,000 population, the death rate/100,000 provides the best measure of the relative cost in deaths to each country/territory. Thus, the U.S. death rate is 3.9 times higher than the rate in Germany, 1.8 times the rate in Canada, 54.5 times the rate in Japan, 5 times the rate in Russia, 73.4 times the rate in South Korea, 133.1 times the rate in China, 1419.3 times the rate in Taiwan and 4.5 times the rate of the total of the 42 countries/territories (including the U.S.).

Countrydeaths/100,000 pop.
Dec. 31 – July 19
deaths/100,000 pop.
Aprill 11 – July 19
United Kingdom67.9354.49
Spain60.5526.80
Italy58.0626.82
France44.9925.30
Chile44.0443.70
United States42.5836.87
Peru39.9839.46
Brazil37.3236.82
Mexico30.4830.30
Ecuador30.4028.69
Panama25.2225.08
Canada23.6322.11
Bolivia18.2918.12
Iran16.8611.76
Colombia12.9412.79
Germany10.947.88
Kuwait9.679.65
Iraq9.399.21
Honduras9.148.90
Dominican Republic9.047.87
Russia8.468.40
South Africa8.458.41
Guatemala8.248.22
Saudi Arabia7.187.00
Turkey6.685.45
Oman6.196.13
Qatar5.445.23
Argentina4.924.74
Egypt4.234.10
United Arab Emirates3.463.30
Afghanistan3.063.02
Pakistan2.582.55
India1.961.95
Philippines1.641.45
Bangladesh1.581.57
Indonesia1.481.37
Japan0.780.71
South Korea0.580.17
Singapore0.470.36
Nigeria0.390.38
China0.320.08
Taiwan0.030.01
Total of 42 countries9.517.95

Growth in new cases among developing countries

With the world total confirmed cases of COVID-19 standing at 14.267 million on Sunday, July 19, there were large numbers of new cases over the last two weeks from a large number of countries. Brazil had another 497,856 cases; India had 404,453 new cases; South Africa an additional 162,902 cases; Russia 97,031 new cases; Mexico an additional 86748 cases; Colombia an additional 77,311 cases; Peru 50,420 new cases; Argentina 46,515 new cases; Saudi Arabia an additional 42,487 cases; Bangladesh 42,387 new cases; ten countries each had between 20,000 and 40,000 new cases (Indonesia, Iran, Iraq, Israel, Kazakhstan, Oman, Pakistan, Philippines, Bolivia, Chile); seven countries had between 10,000 and 19,999 new cases (Panama, Kyrgyzstan, Turkey, Guatemala, Ecuador, Dominican Republic, Egypt) with all other countries/territories having less that 10,000 new cases each.

Of the forty-two countries/territories that account for more than 90% of cases and deaths, besides the U.S., there were fourteen where the last two weeks were new highs for the country/territory, that is where the virus is continuing to expand: India, Mexico, South Africa, Argentina, Bolivia, Colombia, Dominican Republic, Ecuador, Guatemala, Panama, Indonesia, Iraq, Oman and the Philippines.

In the last two weeks, the forty-two countries listed in the table above increased their rate of new cases by 22.66%. All other countries increased by 17.46% while the total for all countries increased by 22.22%.

So just as was true in prior posts on the COVID-19 pandemic, the pandemic continues to grow rapidly and is affecting an increasing number of developing and least developed countries. This puts increased pressure on the global supply of medical goods including personal protective equipment. As noted in previous posts and as reviewed on the WTO website, many countries have introduced export restraints particularly for medical goods, but also for some agricultural products. Many have also introduced liberalizing measures to reduce the cost of imports of needed medical goods and to streamline the importing process for such goods.

Vaccines and therapeutics – developments and challenges for access

As reviewed in a prior post, “There have been extraordinary efforts to ramp up research and development around the world to address COVID-19. Through the WHO and other efforts, there have been greater efforts at coordination of R&D and at the identification of gaps in knowledge and research. Large sums are being committed by some countries and NGOs to help ensure that all countries will have access to vaccines and therapeutics that get developed and that such access will be at affordable prices.” July 5, 2020, COVID-19 – the sharp expansion of new cases will put increased pressure on finding vaccines and therapeutics and complicate global economic recovery, https://currentthoughtsontrade.com/2020/07/05/covid-19-the-sharp-expansion-of-new-cases-will-put-increased-pressure-on-finding-vaccines-and-therapeutics-and-complicate-global-economic-recovery/.

A number of vaccines are moving into the stage 3 testing of large numbers of humans in the coming weeks/months. There is hope that one or more products in tests will result in vaccines that get approved for distribution by the end of the year or early in 2021. This week’s Bloomberg Businessweek has a cover article on the University of Oxford COVID-19 vaccine that, if approved, will be distributed by AstraZeneca who has arranged global manufacturing of what could be more than two billion doses. See July 20, 2020, Bloomberg Businessweek, The Front-Runner, pages 42-47. While the University of Oxford has led in the development and testing of the hoped-for vaccine, AstraZeneca has made arrangements with a number of companies around the world to produce the vaccine if approved and has agreements with the United Kingdome for 100 million doses, with the U.S. for 300 million doses and an arrangement with an Indian company to produce 1 billion doses for developing and middle income countries. Id at 46. There are other developmental vaccines that are also making progress through testing stages though their timing for eventual approval (if found efficacious) may be a few months behind the University of Oxford program. The good news, if vaccines get developed quickly which are efficacious, is that the major producers in the west are putting in place plans to provide global production which should go a long way to ensuring equitable access for all at affordable prices. Hopefuly, the University of Oxford/AstraZeneca model will be followed by all. China also has vaccines in test mode, although it is less clear what their approach would be to production and distribution if products are approved.

While the world has seen a very large collective scientific effort to find vaccines and therapeutics, in the last week there have also been claims by three governments (the United Kingdom, Canada and the United States) of cybersecurity attacks from Russia on COVID-19 research programs. See, e.g., CNN, UK, US and Canada alleged Russian cyberattacks on COVID-19 research centers, July 17, 2020, https://www.cnn.com/2020/07/16/politics/russia-cyberattack-covid-vaccine-research/index.html. The link to the UK advisory is here. https://www.ncsc.gov.uk/news/advisory-apt29-targets-covid-19-vaccine-development.

Conclusion

Nearly seven months into the pandemic, the continued growth in the number of new COVID-19 cases is continuing to put pressure on health care systems in many parts of the world and dampen prospects for the global economy’s rapid recovery.

The United States has been unable to get the pandemic under control within its borders and has been leading the growth in new cases. The rapid rate of growth of new cases across much of the United States has led to backtracking by many U.S. states on opening measures taken in the last two months. With the growing challenges in the United States, the U.S. will be a drag on global economic recovery.

While there is more global production of many of the medical goods needed to address COVID-19 ahead of the development of vaccines and therapeutics, the enormous growth in the number of cases and the continued spread in developing and least developing countries along with the United States will continue to test the balance between demand and supply. While the WTO is monitoring developments on export restraints and liberalization measures based on country notifications, large numbers of export restraints on medical goods continue and will likely remain in place for months to come complicating the ability to maximize utilization of scarce supplies.

It has been known that the ultimate return to normal conditions for the world would have to await the development and distribution of vaccines and therapeutics that are efficacious to all peoples on an equitable and affordable basis. But the new “normal” of living with COVID-19 while we await vaccine developments is being frustrated in some countries, like the United States, by an inability to communicate the challenges with a single voice, by the politicizing of basic disease prevention steps like mask wearing and social distancing, by the failure to ramp up testing and tracing sufficiently based on the level of COVID-19 spread and by the lack of support from the body politic (which flows both from the lack of a single message from federal, state and local leaders and from lockdown fatigue). Thus, for the United States and perhaps others, we are seemingly unable to slow the spread through steps many other countries have adopted and that have been known by medical experts for decades if not centuries.

Fortunately, there is positive news coming from the research and development efforts of many companies, universities and research institutes. Let us hope that vaccines and cures are found quickly. The drag on the global economy and the enormous toll on populations will likely continue until then.

COVID-19 — the sharp expansion of new cases will put increased pressure on finding vaccines and therapeutics and complicate global economic recovery

The last two weeks have seen an extraordinary explosion of new cases of COVID-19 in the United States, the rest of the Americas, and in many developing and least developed countries in Asia and Africa. Total infections globally now exceed 11.2 million up close to 2.5 million in the last two weeks (from 8.767 million) and up close to 100% from the two week period ending May 24. All figures are taken from the European Centre for Disease Prevention and Control daily reports.

The top five countries in the world with most cases account for 53.94% of global cases through July 5 and are:

United States 2,839, 542

Brazil 1,577,004

Russia 674,515

India 673,165

Peru 299,080

Three of these countries (the United States, Brazil and India) have not yet reached a peak and had the three largest number of new cases in the last two weeks — 584,423 for the U.S.; 509,425 for Brazil; 262,704 for India. While Russia and Peru appear to have peaked (last two weeks are 28.89% and 37.18% below their respective peak periods), the number of new cases in the last two weeks was the fourth and eight largest of any country (97,563 for Russia; 47,742 for Peru). The top five countries for cases to date also accounted for 60.81% of new cases during the last two weeks.

The U.S. which had seemingly peaked in the two weeks end April 26 at 409,102 and seen declines to 297,391 for the two weeks ending June 7, has seen a resurgence since then (335,058 for two weeks ending June 21) with a staggering growth in the last two weeks to 584,423 new cases. Thus, the U.S. has seen a dramatic growth in cases — up 96.52% from the June 7th two weeks; up 74.42% from the prior two weeks ending June 21; and up 42.86% since the prior peak for the two weeks ending April 26.

The United States has been in the process of opening up over the last two months after lockdowns in most states and has seen dramatic growth in cases in large parts of the country (south, southwest, west coast), with some substantial contraction in areas hardest hit back in March and April (Middle Atlantic states including New York and New Jersey). While other countries that have been opening up have had some resurgence as well (e.g., France, Germany, South Korea, Japan), the growth has been from very low numbers and has typically been relatively small absolute increases.

The United States is the only developed country to be having the challenges it is having getting the COVID-19 pandemic under control. Indeed, no other developed country has not peaked in the number of new cases. All other developed countries have generally seen very large decreases in the number of new cases from their peaks back in March or April. Dr. Anthony S. Fauci, Director, National Institute of Allergy and Infectious Diseases in the U.S., has warned that the United States could reach infection rates of 100,000 cases per day without increased adherence to the straightforward but challenging control criteria of social distancing, wearing masks, handwashing, testing, tracing and isolation.

With mixed messages from government leaders at the federal, state and local levels, with COVID-19 fatigue among many U.S. residents, and with lower rates of infection and generally less severe infections for younger people (leading many to be less concerned about the pandemic), the path forward in the U.S. is unclear particularly prior to the development of effective vaccines and therapeutics.

So large are the increases in new cases from the U.S., Brazil and India in the last two weeks that the U.S. and Brazil’s two week totals exceed the total cases since December 31 for all other countries except Russia and India; India’s new cases over the last two weeks exceed every country’s total number of COVID-19 cases since December 31 except the U.S., Brazil, Russia, Peru, Chile, and the United Kingdom).

The alarming rate of growth in the United States is masking the focus on the rapid growth of the pandemic in many developing and least developed countries. For countries with the largest number of confirmed cases, Brazil, India, Mexico, South Africa, Nigeria, Argentina, Bolivia, Colombia, Dominican Republic, Ecuador, Guatemala, Honduras, Panama, Bangladesh, Indonesia, Iraq, and the Philippines are seeing cases grow in number with no peak as yet. This is also true among many countries in the Middle East where World Bank listings would not have them as lower income countries – Kuwait, Oman, Qatar, and the United Arab Emirates. For the developing and least developed countries who are not among the forty-two countries who account for 90.62% of total cases through July 5, the rate of growth of new cases in the last two weeks is roughly 50% greater than for the 42 countries — 39.59% increase versus 26.87% increase (47.34% greater).

So the pandemic continues to grow rapidly and is affecting an increasing number of developing and least developed countries. The WHO has repeatedly reviewed the steps any country needs to take to bring the COVID-19 pandemic under control. See WHO Director-General’s opening remarks at the media briefing on COVID-19 – 1 July 2020, https://www.who.int/dg/speeches/detail/who-director-general-s-opening-remarks-at-the-media-briefing-on-covid-19—1-july-2020. The world is not adhering to the required steps, at least for many countries including the United States.

Trade implications

Prior posts have reviewed the array of health and economic challenges for governments that are going through increasing cases during the pandemic. The WTO and others have cataloged the number of export restraints on medical goods imposed by certain countries during the pandemic. Because of the huge increase in demand that occurs for many medical goods when the pandemic spreads in a country, the world has been faced with challenges of adequacy of supplies, openness of markets, and ability to ramp up production as needed. While some restraints have been lifted, many continue. There have also been some export restraints on agricultural goods introduced by countries concerned about access to food supplies during the pandemic despite no actual global food shortage for major crops.

There also have been many efforts at liberalization by countries as they attempt to lower the cost of imported medical goods, streamline customs procedures to expedite delivery of goods, maintain open markets and for other reasons.

Groups of countries at the WTO, in the G20 and through other entities have put forward a range of proposals and action steps to ensure that trade plays its part in minimizing the downside to countries from the pandemic both in terms of health consequences and in terms of economic activity.

With rapidly growing numbers of new COVID-19 cases, one can predict that pressures will continue on export restraints and on needed efforts to ramp up production and inventories of key medical goods. As the number of tests, number of hospitalizations and other medical activities increase, governments will be struggling to find supplies. The United States has had significant problems in the past and will likely experience medical goods shortages again if the number of new cases in the U.S. is not brought under control.

For many developing and least developed countries, there are joint efforts by countries through the Supply Chain Task Force (chaired by the World Health Organization and World Food Programme) to identify medical equipment needs and to work to develop contracts to secure needed supplies and get them to the countries in need. See COVID-19 supply chain system, requesting and receiving supplies, https://www.who.int/publications/m/item/covid-19-supply-chain-system-requesting-and-receiving-supplies. The write-up explaining how it operates is embedded below and reflects the global commitment to see that both medical goods and any eventual vaccines and therapeutics and improved diagnostics are equitably available at affordable prices.

covid-19-supply-chain-system-requesting-and-receiving-supplies-2

While the joint efforts of various UN and other organizations are providing assistance to some 130 countries, challenges exist both as to funding and to access to adequate supplies as demand grows. Below are notes for the record from the Supply Chain Task Force meeting of 23 June 2020 followed by the catalogue of products being covered by the Emergency Global Supply Chain System.

supply-chain-taskforce-nfrs-20200623

20200207233119365

Availability of medical goods should improve as many countries who have gone through the worst of the pandemic (at least phase 1) who produce medical goods are increasingly in a position to increase exports. The challenges will be with overall global capacity and whether certain countries tie up global supplies to safeguard against growing demand in the current phase or to develop inventories should there be a second phase.

Vaccines and therapeutics – developments and challenges for access

There have been extraordinary efforts to ramp up research and development around the world to address COVID-19. Through the WHO and other efforts, there have been greater efforts at coordination of R&D and at the identification of gaps in knowledge and research. Large sums are being committed by some countries and NGOs to help ensure that all countries will have access to vaccines and therapeutics that get developed and that such access will be at affordable prices.

On July 1-2, the WHO held a two day virtual conference both to track progress on COVID-19 research and development efforts and to identify new research priorities. See https://www.who.int/news-room/feature-stories/detail/global-scientific-community-unites-to-track-progress-on-covid-19-r-d-identifies-new-research-priorities-and-critical-gaps.

The WHO has a summary table that shows where different vaccine development projects are. The document is embedded below.

novel-coronavirus-landscape-covid-19-1

However, a major challenge for equitable and affordable access to both vaccines and therapeutics involves the needs of major governments to lock- up capacity for potential vaccines and early therapeutics to take care of their own populations regardless of global giving events or commitments of individual countries to the principles of equitable and affordable access for all.

Prior posts have reviewed efforts of the United States, the European Union and others to lock up large quantities of vaccines from particular manufacturers of vaccines in trials should the trials prove successful. Most countries don’t have the financial capabilities to copy that approach. In addition, many vaccine trials are in China by Chinese pharmaceutical companies raising questions as to how vaccines developed by those companies (in which the Chinese government has investments for some or all of the companies) will be handled and made available to other countries with needs.

Developments in the last week show the challenge will apply equally with therapeutics that are viewed as effective in treating COVID-19. For example, there is one treatment which to date has been shown to shorten the recovery time in patients who have COVID-19. The product is remdesivir produced by U.S. company Gilead. A preliminary report on the results of testing of remdesivir was published in May 2020. See The New England Journal of Medicine, Remdesivir for the Treatment of COVID-19 — Preliminary Report, May 22, 2020.

In a July 4 article in The Guardian, entitled, “Trump is scooping up the world’s remdesivir. It’s a sign of things to come,” the author states “Trump boasted this week that the US had bought the world’s entire supply of remdesivir, the antiviral drug produced by the U.S. biotechnology company Gilead. Though low- and middle-income countries can still produce their own generic versions of the drug, European and other high-income countries are not able to buy remdesivir or produce it for three months. Fortunately the UK and Germany have stockpiled enough of the drug to treat all the patients who need it.” https://www.theguardian.com/commentisfree/2020/jul/04/trump-remdesivir-covid-19-drug.

A Reuters article from July 3rd reviews remdesivir getting conditional EU clearance. See Reuters, Gilead’s COVID-19 antiviral remdesivir gets conditional EU clearance, July 3, 2020, https://www.reuters.com/article/us-health-coronavirus-eu-remdesivir/gileads-covid-19-antiviral-remdesivir-gets-conditional-eu-clearance-idUSKBN2441GK. “”The EU’s green light broadens the use of remdesivir around the world – the United States has cleaered it for emergency use and it is also approved as a COVID-19 therapy in Japan, Taiwan, India, Singapore and the United Arab Emirates, Gilead said on Friday.”

It is fair to say that with the huge growth in the number of confirmed cases in the U.S. and with the U.S.’s control of supply for the next three months, remdesivir is likely the poster child of the challenges the global community will face in ensuring equitable and affordable access to vaccines and therapeutics going forward.

Conclusion

More than six months into the COVID-19 pandemic, the world continues on a sharp upward trajectory of new cases with a major shift from developed countries to developing and least developed countries as nearly all developed countries (excluding the United States) have managed to get the pandemic under control. With the United States apparently unable to get its house in order, there will be increased stress on medical goods supplies as demand from the U.S. will certainly continue to grow. Global efforts to arrange supplies for developing and least developed countries are showing some positive results. However, such efforts will become more challenging in the coming months as the number of cases in those countries continue to surge and those countries and buying groups compete with the U.S. for supplies.

It has long been known that the world would not be safe from COVID-19 until there were vaccines and therapeutics equitably available to all. For that to be the case, the vaccines and therapeutics need to be affordable for all.

There has historically been the perceived need for countries with the means to secure supplies for their populations during pandemics before making supplies available to all on an equitable basis and at affordable prices. With the COVID-19 seemingly out of control in the United States, there is little doubt that the United States will be doing its best to lock up supplies of vaccines and therapeutics as it has done and as it apparently will need to do to get to the other side of the pandemic.

Activities by the U.S., the EU and others on arranging commitments for promising vaccines and therapeutics will make the global objective of equitable and affordable access harder to achieve.

The reasons for optimism that a better approach will be followed during this pandemic include commitments made by many countries to ensure equitable access at affordable prices, the existence of multilateral organizations working to get getting vaccines to those in need, and the global footprint of at least some of the major companies and consortia developing vaccines and therapeutics which should provide regional production capabilities better able to service global demand.

Look for a challenging rest of 2020 and first half of 2021.

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

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

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

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

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

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

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

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

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

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

ST_9208_2020_INIT_EN

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

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

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

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

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

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

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

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

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

Some recent developments

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

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

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

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

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

Trade Considerations

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

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

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

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

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

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

Role of WTO during Pandemic

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

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

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

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

COVID-19 – continued global growth of cases; shift continues to Latin America, parts of Asia and the Middle East

Four months after COVID-19 peaked in China, where the virus started, the world continues to stagger under an expanding case load of confirmed COVID-19 cases. Indeed, in the last two weeks new cases around the world have increased by 1.567 million to reach a current global total since the end of December of 6.835 million as of June 7. These number compare to less than 55,000 global cases (nearly all in China) in early February. During the last two weeks, new confirmed cases increased 22.32% from the prior two weeks and continue a chain of unbroken increases since the beginning of March.

As much of the developed world has seen a peak in the number of cases, the continued growth in new cases reflects shifting centers or hot spots generally to developing countries. In looking at 25 countries that have accounted for more than 80% of all cases through June 7, ten of these countries have not yet reached a peak — Brazil, Chile, Egypt, India, Iran, Mexico, Nigeria, Pakistan, Peru, South Africa — while the other fifteen have peaked and seen declines from peak of between 10% and 99%. These fifteen countries are Canada, China, France, Germany, Italy, Japan, Russia, Saudi Arabia, Singapore, South Korea, Spain, Taiwan, Turkey, United Kingdom and the United States. Still these 25 countries saw a combined increase in total new cases of 18.7% in the last fourteen days. All other countries saw a much larger increase in new cases, 39.61% from 220,812 cases the previous 14 days to 308,293. Some countries of note in this “all other” grouping include Cameroon, Central African Republic, Democratic Republic of the Congo, Ethiopia, Kenya, Sudan, Argentina, Bolivia, Colombia, Guatemala, Haiti, Venezuela, Afghanistan, Bangladesh, Iraq, Nepal, Oman, Qatar, Armenia, and Azerbaijan. See https://www.ecdc.europa.eu/en/geographical-distribution-2019-ncov-cases. June 7th report embedded below.

COVID-19-situation-update-worldwide-as-of-7-June-2020

The shifting focus of cases to developing and least developed countries raises increased concerns about access to medical goods, including personal protective equipment, ventilators, and other goods. The WTO’s list of measures applied by Members dealing with COVID-19 either to restrict exports of medical goods or food products or to improve market access , shows dozens of countries applying export restraints on various medical goods (masks, gloves, etc.) including countries where new cases are well past peak (indeed where new cases may be 90% below peak). The WTO information is current as of May 29, 2020. There are also a large number of countries reducing tariffs or streamlining importation of medical goods. https://www.wto.org/english/tratop_e/covid19_e/trade_related_goods_measure_e.htm.

Moreover, health care infrastructure is often weaker in many of these countries facing growing COVID-19 cases, and the structure of their economies may complicate the ability of governments to address the pandemic even if medical goods are available. A recent article reviews the challenges in Latin America. See https://www.cnn.com/2020/06/06/americas/latin-america-coronavirus-intl/index.html.

Some major players like the United States, the European Union and its member states, and China are both investing large amounts in research and development and also securing early access to any vaccines developed through early commitments and other actions. https://www.biospace.com/article/eu-using-2-7-million-emergency-fund-to-buy-promising-covid-19-vaccines/. With the number of R&D projects ongoing around the world and the efforts of companies and governments to get manufacturing geared up early on promising products, the likelihood of earlier availability of large quantities of vaccines should there be breakthroughs has improved.

The question of equitable and affordable availability for all peoples is certainly there for a global pandemic where major players are funding research and have the resources to get early commitments for supplies. But greater manufacturing capacity earlier should improve global availability. So too the efforts of many countries, organizations and businesses to ensure both availability of vaccines and the distribution of such products to those in need is a major factor in ensuring greater access at affordable prices. As the news from the June 4 GAVI conference in London demonstrates, many are uniting to ensure that small children who have been unable to receive various immunizations against other diseases are able to do so yet this year as well as meet the needs of the pandemic for many developing and least developed countries. See https://www.gavi.org/news/media-room/world-leaders-make-historic-commitments-provide-equal-access-vaccines-all.

Conclusion

The pandemic is continuing to worsen on a global basis even as parts of Asia, Western Europe, Oceania, Canada and the United States are post-peak and starting a process of reopening. The tremendous growth in the number of cases is in developing and least developed countries, those least prepared to handle the health and economic fall out.

The trade news is mixed. Many countries are liberalizing imports of medical goods during the pandemic which is obviously a positive. However, dozens of countries have introduced export restrictions in an environment in which global supply has lagged global demand, and countries have scrambled to protect access to what supplies they can. Many of these restrictions should be removed at this point, at least by countries that are well past peak demand situations.

Ramp up in global production of many medical goods has occurred, though it is unclear if demand/supply balance has been achieved or how/if the world will build the necessary national and regional inventories to handle a second wave or future pandemics. Moreover, without knowing how much larger the number of new cases will become before there is a global peak, it is hard to know if expansion of production of medical goods will be adequate to meet demand in the coming months. Efforts by the G-20 in the trade and investment area are a start but limited in terms of likely actual effect.

Factually, there have substantial declines in global trade flowing from the lock down situation in large parts of the world over the last few months. Trade flows should increase in those parts of the world where reopening is occurring but will likely further decrease in countries where the pandemic is picking up its infection rate. The economic toll on many countries who have come through the worst of the pandemic has been unprecedented and will present challenges to their ability to rebound quickly and to their willingness to increase financial assistance to others.

While success in finding vaccines or therapeutics is never guaranteed (indeed no vaccine for HIV has been found despite efforts for 40 years), there has never been the global focus on R&D and the willingness to risk large amounts of capital to be ready to produce large volumes of doses for any products demonstrating effectiveness. While the global community is not unified in its support of the WHO or in cooperating to achieve equitable and affordable access for all, there has been important support for both which should improve achieving a global solution if vaccines are developed that are effective.

Finally, it is hard to imagine significant forward movement at the WTO on its current negotiations or on WTO reform (including of the dispute settlement system) while Members are struggling to address the fallout from the pandemic. And, of course, with the WTO turning its attention to the selection of a new Director-General in light of DG Azevedo’s departure at the end of August, achieving focus on the normal work of the WTO will be that much harder until a new DG has been selected.

Bottom line – a continued difficult 2020 in the second half of the year.

Digital Services Taxes – New U.S. Section 301 Investigations on Nine Countries and the European Union

In 2019, the United States initiated a section 301 investigation on France’s digital services tax (“DST”), made a finding that France’s DST “is unreasonable or discriminatory and burdens or restricts U.S. Commerce.”  84 Fed. Reg. 66956 (Dec. 6, 2019).  Additional duties of up to 100% were proposed on French goods valued at $2.4 billion.  France agreed to hold up application of its tax until the end of 2020 and the U.S. agreed to hold up tariffs to give the Organization for Economic Cooperation and Development time to conclude discussions on a possible agreed international tax structure for digital services.

On June 2, 2020, the U.S. Trade Representative announced the initiation of 301 investigations on nine countries and the European Union who have either implemented DSTs or who have such DSTs under development.  https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/june/ustr-initiates-section-301-investigations-digital-services-taxes.  The countries who are subject to the investigations include Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom.  The notice of initiation of the investigations will appear in the Federal Register on June 5, 2020 but was posted on the USTR website on June 2.  https://ustr.gov/sites/default/files/assets/frn/FRN.pdf.

Because of the COVID-19 situation, written comments are being accepted but it is unclear if there will be a public hearing.  Written comments are due by July 15, 2020.  The Federal Register notice pre-publication is embedded below.

USTR FR notice 301 investigation on digital services

The focus of the investigation will be on the following aspects of DSTs:

“The investigation initially will focus on the following concerns with DSTs: discrimination against U.S. companies; retroactivity; and possibly unreasonable tax policy. With respect to tax policy, the DSTs may diverge from norms reflected in the U.S. tax system and the international tax system in several respects. These departures may include: extraterritoriality; taxing revenue not income; and a purpose of penalizing particular technology companies for their commercial success.”  Page 5.

Based on the prior investigation into the French DST, there is little doubt that all of the programs will be found to violate Section 301 of the Trade Act of 1974, as amended, in some respect.

For example, in the French case, the USTR made five findings relevant to some or all of the current investigations:

‘First, the evidence collected in this investigation indicates that the French DST is
intended to, and by its structure and operation does, discriminate against U.S. digital companies.”

“Second, the evidence collected in this investigation indicates that the French DST’s
retroactive application is unusual and inconsistent with prevailing tax principles and renders the tax particularly burdensome for covered U.S. companies, which will also affect their customers, including U.S. small businesses and consumers.”

“Third, the evidence collected in this investigation indicates that the French DST’s
application to gross revenue rather than income contravenes prevailing tax principles and imposes significant additional burdens on covered U.S. companies.”

“Fourth, the evidence collected in this investigation indicates that the French DST’s
application to revenues unconnected to a presence in France contravenes prevailing international tax principles and is particularly burdensome for covered U.S. companies.”

“Fifth, the evidence collected in this investigation indicates that the French DST’s
application to a small group of digital companies contravenes international tax principles counseling against targeting the digital economy for special, unfavorable tax treatment.”

USTR, Section 301 Investigation, Report on France’s Digital Services Tax, Dec. 2, 2019, pages 1, 3, 4, 5.  https://ustr.gov/sites/default/files/Report_On_France%27s_Digital_Services_Tax.pdf.

The EU and the EU-member states covered have DSTs similar to France’s (without retroactivity) with some DSTs already in effect.  Other countries’ systems appear to be similar as well with many countries already applying their DST.  https://ustr.gov/sites/default/files/assets/frn/FRN.pdf.

The full USTR report on France’s DST is embedded below.

Report_On_France’s_Digital_Services_Tax

Where taxes are already in place, action by USTR will be likely even ahead of the end of the year absent agreement with the trading partner to postpone collection.  The start of investigations at this time will enable the U.S. to complete the investigation this summer or early fall, take public comments on possible tariffs to be added if no resolution with individual countries or the EU is possible.  More specifically, the U.S. will have handled domestic legal requirements to act if other DSTs go into effect without an OECD agreement or where the tax imposed is not consistent with the OECD terms.  As stated in the USTR press release yesterday, “’President Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies,’ said USTR Robert Lighthizer. ‘We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination.’”  https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/june/ustr-initiates-section-301-investigations-digital-services-taxes.

Conclusion

The OECD efforts to develop an agreed model for taxing digital services are supposed to conclude this year.  The U.S. and its leading digital services companies have been very concerned about the efforts of trading partners to impose taxes that will effectively apply only or disproportionately to them.

At the same time, the COVID-19 pandemic has added pressure on governments to find new sources of revenue, and digital services are an inviting target.

Expect this to be a very important issue in the second half of 2020.  Failure to find an acceptable solution to the United States will result in a significant escalation of trade tensions both with the EU and with many other countries going forward.

 

 

 

 

 

COVID-19 Trade and Economic Fallout — Are current projections too optimistic?

The COVID-19 pandemic is not simply a global health crisis but also a global economic crisis of unprecedented proportions.

The WTO has projected that global trade will decline between 13 and 32 percent in 2020 before rebounding in 2021.  https://www.wto.org/english/news_e/pres20_e/pr855_e.htm.

The IMF in its April 2020 update of the global economy modified its projection to show global GDP contraction of 3.0% for 2020 with a 6.1% contraction by advanced economies (U.S., -5.9%; Euro Area, -7.9%; Japan, -5.2) and a 1.0% contraction for emerging markets and developing economies.  https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020.

Developments in global trade and the national economy for the United States and the rising severity of the pandemic in some of the emerging and developing countries will likely cause future downward revisions to the global trade and economic fallout occurring in 2020 and reemphasize the importance of global cooperation both in responding to the pandemic but also in posturing the world for an economic recovery in the second half of 2020 and beyond.

United States data through April as an example

Gross domestic product in the United States declined 5.0% in the first quarter of 2020 based on a May 28, 2020 second estimate provided U.S. Department of Commerce’s Bureau of Economic Analysis.  https://www.bea.gov/sites/default/files/2020-05/gdp1q20_2nd_0.pdf.

With more than 40 million people filing for unemployment benefits between mid-March and the end of May, the projection for second quarter GDP from at least one source on June 1, 2020 is an extraordinary contraction of 52.8%.  See https://www.frbatlanta.org/cqer/research/gdpnow.  This compares to the Congressional Budget Office’s projection of a 39.6% decline in the second quarter.  https://www.cbo.gov/publication/56335.  The CBO estimate uses a 3.5% decline in GDP for the first quarter and an annual projected decline of 5.6% for 2020.

With the current first quarter data GDP contraction in the U.S. at 5.0% and the most recent data from a model similar to that used by the Bureau of Economic Analysis projecting a 52.8% contraction in the second quarter, it is highly likely that the U.S. contraction in 2020 will exceed the 5.9% projected in the April IMF data.

Indeed, with the number of bankruptcies being reported in the U.S. and the large number of small and medium sized companies that may not be able to return to operation as reopening occurs, the economic rebound may not be as strong as current projections estimate either.  The continued large number of new cases in the United States may be a contributing cause as some states either delay the speed of reopening or face larger resurgence of cases once reopening occurs because of the continued high level of COVID-19 in the population.

While the number of cases in the United States has at least stabilized and has been  trending down, the rate of decline is far lower than that experienced in western Europe.  For example, the United States continues to have the largest number of new confirmed cases of any country in the world, many weeks after the U.S. peak.  Indeed in today’s European Centre for Disease Prevention and Control report on the COVID-19 situation update worldwide, as of 2 June 2020, the U.S. has 302,679 cases reported in the last fourteen days of the continuing to grow global total of 1,477,362 new cases in the last fourteen days.  European countries have relatively few (7,973 for Spain; 7,311 for Italy, 9,188 for France and 6,818 for Germany).  https://www.ecdc.europa.eu/en/geographical-distribution-2019-ncov-cases.  In a prior post, data were shown for various countries over the period December 31, 2019 – May 24, 2020.  Most European countries show reductions from their peak two week period of 80-90% while the United States has shown declines of only 23.5% through May 24 (slightly more through June 2, 26.0%).  See COVID-19 – new hot spots amidst continued growing number of confirmed cases,  https://currentthoughtsontrade.com/2020/05/25/covid-19-new-hotspots-amidst-continued-growing-number-of-confirmed-cases/.  To the extent that IMF projections are based on infection rates that decline more rapidly than the actual U.S. experience with COVID-19, that would be another reason to believe the IMF projected contractions for the U.S. are too low. 

On the trade front, the United States was doing well until mid-March.  But the COVID-19 challenges that resulted in government actions led to 1st quarter 2020 exports from the U.S. of goods being down 1.2%, services exports down 21.5% for a total contraction of U.S. exports of 6.7%.  U.S. imports of goods were down 11.5%, led by contraction of imports from China due to various additional duties imposed on Chinese goods.  U.S. imports of services were down 29.9% for total imports being down 15.5%.  See Bureau of Economic Analysis, News Release BEA 20-23, May 28, 2020 at 7, https://www.bea.gov/news/2020/gross-domestic-product-1st-quarter-2020-second-estimate-corporate-profits-1st-quarter.

The U.S. Department of Commerce, U.S. Census Bureau puts out a “Monthly Advance Economic Indicators Report”.  The April 2020 report was released on May 29th and showed estimated data for imports and exports of goods (seasonally adjusted).  April exports for the U.S. were down 29.9% with individual sectors being down 5.3% (food, feeds and beverages) to 70.8% (automotive vehicles).  Similarly, U.S. imports were down 20.6% for April with sectors varying from being down 5.6% (foods, feeds and beverages) to 57.0% (automotive vehicles).  https://www.census.gov/econ/indicators/advance_report.pdf.

Thus, U.S. trade contractions in April suggest that the range put forward by the WTO (13-32% for the year) is probably the correct range. 

Rising Number of COVID-19 cases in South America and in India

The IMF revised 2020 projections from April likely understate the negative effects that emerging and developing countries are experiencing.  Specifically, Latin America and the Caribbean are seeing major outbreaks of COVID-19 cases with the peak not yet reached in a number of important countries like Brazil, Peru, Chile and Colombia and also in Mexico.  Depending on developments in these major countries and the spread in others, the likely economic contraction in the region could be significantly higher than the 5.2% contained in the April 2020 projections by the IMF.  Brazil was estimated to experience a GDP contraction of 5.3% by the IMF, but recent estimates show a steadily growing projected contraction, latest figures showing 6.25%.  See https://www.statista.com/statistics/1105065/impact-coronavirus-gdp-brazil/.  With the COVID-19 cases still growing in Brazil, the contraction in GDP for 2020 will likely continue to worsen.

Similarly, India was projected to have GDP growth of 1.9% in 2020.  The country’s challenges with COVID-19 cases are just starting with the current total number of confirmed cases at just under 200,000 but with nearly half of the cases reported in the last fourteen days (97,567 of 198,706).   Indeed, some recent projections by Oxford Economics now have India’s GDP contracting in 2020.  See https://www.icis.com/explore/resources/news/2020/06/01/10513907/india-gdp-growth-slows-to-4-2-lockdown-stays-at-manufacturing-hubs.

Other countries are also seeing increasing case numbers and the global totals of new cases have not peaked as yet which likely mean greater numbers of cases than most models have anticipated.  If so global contraction could be significantly worse than the April estimates of the IMF.

High national debt levels are growing higher   

The collapse of economic activity even for a few months is reducing tax revenues, increasing government spending in many jurisdictions and worsening national debt levels.  For example, in the United States the Congressional Budget Office blog from April 24 estimated that the U.S. budget deficit in 2020 and 2021 will be $2.7 billion and $1.1 billion higher than earlier estimates and that federal debt held by the public is likely to grow from 79% of GDP in 2019 to 101% of GDP in 2020 and 108% of GDP in 2021.  https://www.cbo.gov/publication/56335.  The actual deficits and federal debt are likely to be significantly higher as the CBO estimates are based on forecasts for GDP contraction that already understates the severity experienced through the first quarter and assumes no further federal assistance will be required to pull the economy out of the steep contraction being experienced in the second quarter.  As governors across the country have made clear, the serious budget shortfalls being experienced by the states because of closed businesses, reduced revenues and increased expenditures are not sustainable.  If these 2020 shortfalls are not addressed through federal legislation, the outcome will be large reductions in state and local services and massive layoffs of state and municipal employees including police, fire, health care and teachers.  So either the budget shortfall of the federal government is understated because of additional stimulus funding needs or the expected recovery of the economy (and hence government revenues) is overstated because of the challenges for many states.

Virtually every country is facing budget challenges as they attempt to address the COVID-19 pandemic and its economic fallout.  See, e.g., articles on growing budget deficits for France, Italy, Brazil and India; https://www.reuters.com/article/us-health-coronavirus-France-budget/france-more-than-doubles-crisis-package-cost-to-100-billion-euros-idUSKCN21R2J2; https://www.nytimes.com/reuters/2020/05/22/world/americas/22reuters-brazil-economy.html; https://www.reuters.com/article/us-health-coronavirus-italy-budget-exclu/exclusive-italy-sees-2020-budget-deficit-near-10-of-gdp-source-idUSKBN21Y2U9; https://economictimes.indiatimes.com/news/economy/indicators/indias-fiscal-deficit-may-shoot-to-6-2-of-gdp-in-fy21-fitch-olutions/articleshow/74928660.cms?from=mdr#:~:text=NEW%20DELHI%3A%20India’s%20fiscal%20deficit,Fitch%20Solutions%20said%20on%20Wednesday.  

Budget shortfalls, the need to borrow more money and the pressure to reduce national, regional and local services all affect the ability of nations to contribute to international institutions, to provide financial assistance to the poorest countries and to facilitate short-, medium- and longer-term growth.

Conclusion

The global COVID-19 pandemic is creating economic havoc in addition to the heavy health toll on countries around the world.  A global challenge of this magnitude hasn’t been faced since World War II.  The projections that have been made by multilateral and national organizations have been for huge contractions in world trade and in global economic growth.  Unfortunately, the estimates at least on global GDP contraction are likely too optimistic both in terms of the severity of the second quarter 2020 contraction and the anticipated level of  second half 2020 recovery.  Moreover, there is likely to be significantly more national stimulus programs needed to help economies recover increasing already huge national debts for many countries and the likely greater need for trade financing and debt support for many developing and least developed countries because of the severity of the global trade and GDP contraction. 

The challenges being faced affect the health and livelihood of billions of people but are occurring at a time of reduced trust in multilateral institutions, increased trade frictions between major nations and groups of nations and a lack of strong leadership within and among nations.  

How severe the damage to the world turns out to be from the pandemic will depend on –

(1) whether countries come together to ensure open markets;

(2) whether countries both coordinate information about and promote expanded production of essential medical goods to ensure adequate and equitable availability to all at affordable prices,

(3) whether countries support efforts of both public and private players on the development of effective vaccines and therapeutics and facilitate the sharing of information while ensuring equitable availability to all at affordable prices where breakthroughs occur,

(4) whether countries support multilateral organizations’ efforts and individually support the bolstering of health care infrastructure of least developed countries and some developing countries where COVID-19 cases could easily overwhelm internal capabilities;

(5) whether countries cooperate for a strong global recovery by pursuing stimulus programs that don’t distort markets and create other challenges to global participation, and by providing multilateral organizations with the resources to address debt and trade financing needs of the poorest among us.

There are some efforts to address each of the five items above although the U.S. announced withdrawal from the World Health Organization handicaps efforts reviewed in (3). 

More needs to be done and could be done with greater cooperation among the top 50 countries in the world.  However, we may be at the maximum of what is the art of the possible at the moment.  For the 7.8 billion people living on earth in 2020, let us hope that more is possible quickly. 

 

 

 

 

 

 

G20 Trade and Investment Ministerial Meeting — Meaningful Help for COVID-19 Response and WTO Reform?

On May 14, 2020, the G20 trade and investment ministers held a virtual meeting to consider proposals for joint action pulled together by the Trade and Investment Working Group (“TIWG”) on the topic of “G20 Actions to Support World Trade and Investment Through the COVID-19 Pandemic”.

The Ministerial statement released on the 14th endorsed the TIWG proposals which were attached to the statement and contain both short-term actions designed to “alleviate the impact of COVID-19” and longer-term actions intended to “support the necessary reform of the WTO and the multilateral trading system, build resilience in global supply chains, and strengthen international investment.” https://g20.org/en/media/Documents/G20SS_Statement_G20%20Second%20Trade%20&%20Investment%20Ministerial%20Meeting_EN.pdf.

The WTO’s Director-General Roberto Azevêdo welcomed the Ministerial statement and provided the following characterization of its content:

“DG Azevêdo hails G20 pledges on trade cooperation in COVID-19 response

“WTO Director-General Roberto Azevêdo welcomed G20 ministers’ endorsement of collective action measures to mitigate the impact of the COVID-19 pandemic on trade and investment and help foster
global economic recovery. The initiatives were endorsed at a virtual meeting of the G20 trade and investment ministers on 14 May.

“The actions include short-term responses designed to prevent trade logjams and facilitate trade in products needed to contain COVID-19, as well as longer-term support to reform the multilateral trading system, build resilience in global supply chains, and strengthen international investment.

“The G20 ministers pledged to promote WTO reform and ‘support the role of the multilateral trading system in promoting stability and predictability of international trade flows’. They agreed to ‘explore COVID-19 related WTO initiatives’ to promote more open and resilient supply chains, and expand production capacity and trade in pharmaceuticals, medical and other health-related products

“’These commitments by G20 ministers represent an important collective response to the trade-related challenges raised by the COVID-19 pandemic,’ said DG Azevêdo. ‘Maintaining stability and predictability in trade relations is critical to ensuring that essential medical supplies are available to save lives, and that global food security and nutrition do not become a casualty of this pandemic.’

“Echoing language from their first crisis meeting in late March, G20 ministers said that any emergency restrictions on trade in vital medical supplies and services should be targeted, proportionate, transparent and temporary, and should not create unnecessary barriers to trade or disrupt global supply chains. They also agreed to strengthen transparency and notify the WTO of any trade-related measures taken. They urged governments to refrain from excessive food stockpiling and export restrictions on agricultural products.

“In addition, the G20 ministers endorsed trade facilitation initiatives, including accelerated implementation of provisions in the WTO’s Trade Facilitation Agreement, such as pre-arrival processing and expedited shipment, which could speed up access to essential goods during the pandemic. They also called for streamlining customs procedures and encouraging greater use of international standards to reduce sanitary and technical barriers to trade.

“Ministers also agreed to work together to identify key areas where investment is needed, in particular for critical medical supplies and sustainable agriculture production, and to encourage
investment in new production capacity for medical supplies.

“The extraordinary meeting of G20 trade and investment ministers was organized by the Kingdom of Saudi Arabia, which currently holds the group’s rotating presidency.”

https://www.wto.org/english/news_e/news20_e/igo_14may20_e.htm.

Because the G20 member countries have differing views on flexibilities needed, already taken, and potential space that may be needed in the future, much of the “actions” agreed to are more aspirational than commitments to avoid trade restrictive actions.

ANNEX to Ministerial Statement of May 14, 2020, G20 Actions to Support World Trade and Investment in Response to COVID-19

The Annex to the Ministerial Statement contains 19 “short-term collective actions” broken into five areas — “trade regulation”; “trade facilitation”; “transparency”; “operation of logistics networks”; and “support for micro, small, and medium-sized enterprises (MSMEs)”.

Trade regulation

On trade regulation, the three specific actions don’t ban export restraints for medical goods or agricultural products but rather provide avenues for such actions to be taken.

On medical goods, the action taken merely repeats the prior statement from the trade and investment ministers that any such actions are “targeted, proportionate, transparent, temporary” and “do not create unnecessary barriers to trade or disruption to global supply chains, and are consistent with WTO rules”. Para. 1.1.1.

Similarly, on agricultural restrictions, G20 countries agree to “refrain from introducing export restrictions” “avoid unnecessary food-stockpiling” but “without prejudice to domestic food security, consistent with national requirements.” Para. 1.1.2.

Finally, there is an aspirational action to “Consider exempting humanitarian aid related to COVID-19 from any export restrictions on exports of essential medical supples, medical equipment and personal protective equipment, consistent with national requirements.” Para. 1.1.3.

Considering the number of G20 countries who have had in place or continue to have in place export restraints on medical goods and the history of export restraints on agricultural goods and/or buildup of food stockpiling by some G20 countries, it is not surprising that more ambitious objectives have not been possible. For example, information compiled by the WTO Secretariat shows that nearly all G20 countries have had or continue to have export restraints on medical goods flowing from the COVID-19 pandemic. Indeed, the US, EU, Argentina, Australia, Brazil, India, Indonesia, Republic of Korea, Russia, Saudi Arabia, South Africa, Turkey and the United Kingdom are in the WTO data. While China is not included, their export restrictions on medical goods likely predated the data collection done by the WTO Secretariat. See https://www.wto.org/english/tratop_e/covid19_e/trade_related_goods_measure_e.htm. Similarly, Russia has agricultural export restraints in place and China, India and Indonesia have used them in the 2007-2008 food shortage challenge.

Trade facilitation

The Annex includes eight agreed “actions” under the heading of trade facilitation. Most of these actions are similarly not binding but are aspirational or encouraged. In fact five of the eight include the word “encourage”. Others include language like “to the extent possible” or “as appropriate and according with applicable national legislation”.

That said, many of the G20 countries and others have been taking actions to streamline the release of imported medical goods and other actions that are consistent with the objectives of the Trade Facilitation Agreement.

Two of the provisions under trade facilitation really go to the issue medical goods capacity, product availability and capacity expansions and are noteworthy as encouraging sharing of information on producers of product and also encouraging expansion of medical goods capacity. Paras. 1.2.4 and 1.2.5. As I have noted in prior posts, there has been and continues to be an imbalance between global capacity to produce the medical goods needed to fight COVID-19 and the demand for countries experiencing outbreaks. See, e.g., Shifting Trade Needs During the COVID-19 Pandemic, https://currentthoughtsontrade.com/2020/04/28/shifting-trade-needs-during-the-covid-19-pandemic/. If the world doesn’t address the supply/demand imbalance, it is highly improbable that most countries won’t enact export restraints to prevent the loss of needed goods that are in country during surging demand. While neither G20 agreed action is binding, both are helpful to improve knowledge of available supplies and hopefully to expand that supply.

The last trade facilitation action merely calls for G20 countries to “Support the efforts of international organizations (WTO, FAO, WFP, etc.) to analyze the impacts of COVID-19 on global agricultural supplies, distribution chains and agri-food production and trade.” Para. 1.2.8. Many of the G20 are signatories to statements indicating they will not impose export restraints on agricultural goods or urge restraint on the use of such restraints. There has not been a food shortage in 2020, and mechanisms put in place after the 2007-2008 food shortages to monitor food supplies have helped to provide governments with better information on likely problems. At the same time, the COVID-19 pandemic has created challenges in getting agricultural products harvested, processed and distributed. If these challenges are not properly handled, the world could find local or regional food shortages not because of lack of product but from an inability to get the product harvested, processed and distributed. With COVID-19 outbreaks in meat processing plants in various countries (United States, Canada, Germany to name just three) and with travel restrictions limiting movement of temporary farm workers, the challenges are real. Work of the international organizations is important for information gathering and dissemination.

Transparency

There are two action items under transparency — to share experiences and best practices; to notify trade-related measures to the WTO as required by obligations to the WTO.

The first should be helpful depending on openness of governments and willingness of governments to share experiences in fact. The latter action reflects the fact that countries (whether G20 or otherwise) have in some cases been slow to provide notifications or have taken limited views of their obligations to report certain trade related activities.

Operation of logistics networks

The four agreed actions under this title all involve trade ministers encouraging G20 Transport Ministers to take actions that will speed the movement of medical goods, increasing air cargo capacity, improve transparency on enforcement measures and “to abide by international practices and guidelines to ensure the movement of goods through maritime channels.” Paras. 1.4.1 – 1.4.4.

Support for micro, small, and medium-sized enterprises (MSMEs)

There are two action items for this topic — calling for reports from international organizations that would look at the “disruption of global value chains caused by the pandemic on MSMEs”; and encouraging enhancement of communication channels and networks for MSMEs, including through deepened collaboration with the private sector.” Paras. 1.5.1 and 1.5.2.

MSMEs are important engines of economic growth for all countries and are significantly adversely affected by the governmental actions needed to address the COVID-19 pandemic. For many countries, the bulk of the response for MSMEs will be through financial support legislation as can be seen by summaries of actions taken compiled by one or more of the international organizations. See, e.g., IMF, Policy Responses to COVID-19, https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19 Thus, the two actions contained in the G20 trade and investment ministers statement are helpful for considering future actions but don’t address the core immediate needs which are handled by other ministers.

Longer-term collective actions

The Annex also contains nineteen specific agreed actions for the longer term. The actions are broken into three topics — supporting the mutilateral trading system; building resilience in global supply chains; and strengthening international investment.

Like the short-term actions, the agreed list reflects the limitations on achieving G20 consensus because of different perspectives of G20 members. Some members like the EU have an interest in pursuing tariff eliminations on medical goods, an issue that the U.S. is not willing to explore until the pandemic has passed. Thus, there is no action item to achieve tariff elimination on such products in the longer-term actions.

Supporting the multilateral trading system

There are seven action items which include WTO reform (para 2.1.1), how the G20 can support work at the WTO (para 2.1.2), strengthening transparency and WTO notifications (para. 2.1.3), working “together to deliver a free, fair, inclusive, non-discriminatory, transparent, predictable and stable trade and investment environment and to keep our markets open” (para. 2.1.4), “work to ensure a level playing field” (para. 2.1.5), importance of interface between trade and digital economy and need for e-commerce agreement (para. 2.1.6), and exploring “COVID-19 related WTO initiative to promote open and more resilient supply chains, and expand production capacity and trade” in medical goods (para. 2.1.7).

These action items will have very different meanings depending on the G20 member who is interpreting them. Thus, the EU, Japan and the U.S. would have very different interpretations of ensuring a level playing field than would China and possibly others. India and South Africa have different views on e-commerce and making permanent no tariffs on digital trade than would the U.S., Japan and others

Still support for WTO reform, global rules on e-commerce, increased transparency and the other issues should help provide some focus in the ongoing efforts at the WTO for a future agenda and reform.

As noted in the short-term actions, greater focus by G20 countries on the supply/demand imbalance in medical goods is critical to avoid many of the same shortage issues in future pandemics or future waves of the COVID-19 pandemic. Thus, the support for para. 2.1.7 is potentially important.

Building resilience in global supply chains

There are five action items included under this topic which are positive. These include sharing best practices, strengthening cooperation on regulation of trade (including customs and electronic document management), ensuring transparency of trade-related information useful to MSMEs, encouraging cooperation between multinationals and MSMEs, and establishing voluntary guidelines that would permit essential cross-border travel during a health crisis. Paras. 2.2.1 – 2.2.5.

While these action items could be useful going forward, there is a major omission in this important category. Does building resilience in global supply chains necessitate building in increased redundancy or for onshoring some products or inputs? This is an important issue that has raised concerns among some G20 members that there is too great dependence on certain countries for input materials and that supply chains don’t have sufficient redundancy or are too “global” and not sufficiently regional or national. The United States, for example, has expressed concerns about over dependence on other countries and has been looking at encouraging domestic production of some key products/inputs. Such an approach is not supported by the EU or China. See statement of Ambassador Lighthizer at the virtual G20 Trade and Investment Ministers meeting of May 14 and the statements of the U.S., EU and Chinese Ambassadors to the WTO’s virtual General Council meeting on COVID-19 responses lays out the different perspective on this and some other issues. See https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/may/second-g20-extraordinary-trade-and-investment-ministers-meeting-remarks-ambassador-robert-e; https://geneva.usmission.gov/2020/05/15/statement-by-ambassador-dennis-shea-at-the-may-15-2020-general-council-meeting/; https://eeas.europa.eu/delegations/world-trade-organization-wto/79401/eu-statement-informal-general-council-meeting-15-may-2020_en; http://wto2.mofcom.gov.cn/article/chinaviewpoins/202005/20200502965217.shtml. While G20 countries generally all agree that it is not possible to be self-sufficient in the medical goods area, that view doesn’t answer the question of whether supply chains should be changed or whether there are certain products where a country or countries could decide self-sufficiency is sufficiently important to take different actions. From the very different views on this topic, it is not surprising that the G20 collective long-term actions were limited in the building resilience group of actions, and such differences also likely influenced the language used in the third section on strengthening international investment.

Strengthening international investment

The last seven long-term collective actions focus on the obvious need for improved investment in medical goods to reduce the stress on the global system that has flowed from the imbalance in supply versus demand and the lack of adequate national, regional and global inventories.

Collective actions include sharing best practices on promoting investments in sectors where there have been shortages (para. 2.3.2), working together to identify key areas where additional investment is needed in both medical goods and agriculture (para. 2.3.3), and four paragraphs (2.3.4 – 2.3.7) encouraging investment in new capacity, working with the private sector to identify opportunities, and other items. The last action item calls on G20 governments to “Encourage cooperation on technical assistance and capacity building provided to developing and least developed countries on investment promotion.” Para. 2.3.7.

Because many countries have been encouraging expanded production of medical goods since the outbreak of the pandemic, there is a great deal of investment that has been happening, including converting (at least short term) production lines to medical goods in short supply. Missing from the collective actions is any encouragement to the Finance Ministers to ensure the international organizations work with developing and least developed countries to ensure adequate regional inventories of medical goods to help such countries address outbreaks of COVID-19.

The G20 Trade and Investment Ministers Statement of May 14 is embedded below.

G20SS_Statement_G20-Second-Trade-Investment-Ministerial-Meeting_EN-1

Conclusion

The COVID-19 pandemic continues to infect millions of people around the world and has resulted in massive economic dislocations and the loss of tens of millions of jobs just in the United States. The G20 has been doing a reasonable job of providing leadership in how to address the pandemic and how to help the world recover as the pandemic recedes. The significant differences between G20 members on some issues have resulted in actions being taken that are either aspirational or simply encouraged, as stronger action was not possible absent consensus. But the May 14 Ministerial Statement is another positive step and provides ongoing recognition of needing to address the supply/demand imbalance to permit all countries to be able to obtain medical goods needed when the pandemic creates hot spots in their countries.

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

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

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

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

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

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

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

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

COVID-19 — US International Trade Commission report on U.S. imports and tariffs on COVID-19 related goods

In a post from April 6th, I reviewed a WTO document on medical goods relevant to COVID-19. https://currentthoughtsontrade.com/2020/04/06/covid-19-wto-report-on-medical-goods-fao-report-on-food-security/. As reviewed in that post, the data compiled by the WTO were useful but both over- and underinclusive. Because tariffs are harmonized for most countries at the 6-digit HS level, comparable data was only available at that level for the WTO’s analysis even though virtually every category included many products that are not relevant to treating COVID-19. The list also doesn’t include input materials as recognized by the WTO. I had suggested that it would be useful to have WTO Members supply information at their most disaggregated level of detail to see if a tighter fit of at least finished products could be identified in terms of trade.

The United States has now provided a report that provides its data at the 10-digit HTS level of detail for imports into the United States. It would be helpful if other major trading nations similarly provided their detail data to the WTO and for public release. Hopefully, the U.S. will provide similar data for its exports in the coming months.

Development of U.S. import data

USTR has been exploring possible elimination of duties on medical goods needed for the U.S. response to COVID-19 and is accepting comments through late June. The U.S. International Trade Commission (“USITC”) was asked by the Chairman of the U.S. House of Representatives Ways and Means Committee and the Chairman of U.S. Senate Committee on Finance to conduct “a factfinding investigation to identify imported goods related to the response to COVID-19, their source countries, tariff classifications, and applicable rates of duty.”. The report from the USITC’s Investigation 332-576 was completed in late April and is now available from the USITC webpage. USITC, COVID-19 Related Goods: U.S. Imports and Tariffs, Publication 5047 (April 2020). Updates to the report may be made through June 2020. See https://www.usitc.gov/press_room/news_release/2020/er0504ll1540.htm

In the report, the USITC compiled data on 112 10-digit HTS categories but noted that many of these categories which are generally more detailed than the 6-digit categories used in the WTO paper still contain large quantities of goods that are not relevant to the COVID-19 response. Thus, the U.S. data, while more refined that the 6-digit data used by the WTO are still overinclusive. To the extent major input data for products needed to address COVID-19 are not included in the USITC investigation, the results are underinclusive as well.

The USITC Executive Summary notes that of the 112 HTS categories:

6 cover COVID-19 test kits/testing instruments,

9 cover disinfectants ad sterilization products,

22 cover medical imagining, diagnostic, oxygen therapy, pulse oximeters, and other equipment,

20 cover medicines (pharmaceuticals),

19 cover non-PPE medical consumables and hospital supplies,

27 cover personal protective equipment, and

9 covered other products.

Looking at what tariffs were applied, the ITC looked both at ordinary customs duties (Column 1 rates) and also whether additional duties on products from China were owed because of the 301 investigation and subsequent actions by the Administration. The USITC indicated that 76 products (68%) were duty-free for ordinary customs purposes and that 36 products (32%) were subject to duties, though one or more countries’ goods entered duty free for each of the 36 products.

For goods from China, 59 categories were not subject to additional 301 duties, 55 products were subject to additional duties (39 products at 25% additional duties; 16 products at 7.5% additional duties) although 28 of the 55 categories were subject to exclusions (total exclusions for 13 product categories; partial exclusions for the remaining 15 categories).

The Commission pulled import data for 2017-2019 (including for several categories which expired before 2020 for completeness of the underlying data). The data show US imports by HTS category and then show the top 5 source countries by HTS and the all other country customs value.

The data from the investigation will be used by USTR and Congress to inform Administration decisions on which products should receive tariff reductions/eliminations.

Using the ITC’s list, the trade data can presently be updated through March 2020 as March 2020 data are now publicly available.. The total for the 112 categories for 2019 was U.S. imports for consumption of $105.3 billion up from $81.3 billion in 2017 and $93.7 billion in 2018. Imports in the first quarter of 2020 were $28.6 billion up from $24.6 billion in the first quarter of 2019.

The top 15 sources of imports into the U.S. in 2019 are the following. Data also show the percentage change in the first quarter of 2020 compared to the first quarter of 2019.

Top sources of imports Customs Value 2019 % change 2019-2020

Ireland $14.173 billion +12.77%

China $12.313 billion -14.13%

Germany $12.228 billion +20.35%

Mexico $ 8.791 billion + 4.44%

Canada $ 6.026 billion +19.57%

Belgium $ 5.952 billion +63.21%

Switzerland $ 5.082 billion +39.80%

Japan $ 4.144 billion +28.38%

United Kingdom $ 3.409 billion +11.42%

India $ 2.816 billion +16.71%

South Korea $ 2.694 billion -30.68%

Netherlands $ 2.545 billion +94.16%

Italy $ 2.177 billion +75.66%

Malaysia $ 2.163 billion + 7.65%

Costa Rica $ 1.693 billion +22.50%

All Other $16.574 billion +15.13%

Total $105.267 billion +16.16%

Different supplying countries focus on different parts of the medical goods needs of the United States. For example, the top four HTS categories imports from Ireland accounted for more than $10 billion of the $14.173 billion from the country in 2019 and all were medicines. In comparison, the top two HTS categories of imports into the U.S. from China were basket categories (other articles of plastic; other made up articles) which are presumably personal protective equipment (“PPE”) products and were $5 billion of the $12.313 billion. While ventilators were also a significant item, most other major items appear to fit within the PPE category.

Conclusion

The purpose of the USITC investigation and report are to provide information to the Congress and Administration to help identify which imported products relevant to the COVID-19 response by the United States are dutiable and which products from China are also subject to additional tariffs from the 301 investigation. The Administration and Congress will use the information as part of the Administration’s review of which imported products should face a reduction or elimination of tariffs at least during the pandemic.

However, the data also provide useful information for broader use in understanding the extent of trade in goods actually relevant to the global response to COVID-19. Hopefully, the U.S. will compile comparable data on the country’s exports and other major trading nations will supply comparable data to the WTO and to the public.

Shifting Trade Needs During the COVID-19 Pandemic

As of April 28, the number of confirmed COVID-19 cases around the world is over three million. The EU/UK and U.S. have dominated the number of cases and number of deaths to the present time after the start of the pandemic in China. The EU and UK have more than one million cases and more than 120,000 deaths. The United States will likely surpass one million cases by the end of April 28th with deaths above 55,000. . Together they accounted for roughly 70% of cases through April 27 and 84% of deaths.

But the rate of growth is expanding in other parts of the world while number of new cases is shrinking in Europe and flatlining in the United States. The data below look at the number of cases on April 27 and the percent growth of new cases measuring a fourteen day period ending on April 27 compared to a fourteen day period ending on April 11. What the table makes clear is that Europe has been going through a period of declining numbers (percentage less than 100%), North America (based on the US) is close to zero growth (though Mexico’s 14 day numbers more than tripled) , while parts of Africa, Central and South America and some countries in Asia are experiencing rapid growth, albeit generally from low levels. China has largely gotten through the first wave and so numbers for both fourteen day periods are quite low even though the ratio is close to 100%.

Country/Area Number of cases April 27 ratio 14 day cases 4-27/4-11

EU27 908,316 59.65%

UK 152,840 123.03%

4 (Switz., Nrwy, Icel, Lich) 38,358 31.70%

United States 965,910 102.89%

Canada 46,884 128.99%

Mexico 14,677 320.31%

Japan 13,385 159.30%

South Korea 10,738 20.68%

Singapore 13,624 942.40%

China 84,199 93.57%

India 27,892 285.06%

Iran 90,481 52.41%

Turkey 110,130 128.65%

Russia 80,949 599.02%

21 African countries 29,479 185.71%

8 South & Central America 146,515 249.48%

World Total 2,914,507 104.44%

Source; European Centre for Disease Prevention and Control, situation update worldwide, as of 27 April 2020 and 11 April 2020.

As the growth in the number of new cases slows in many developed countries while ramping up in other countries, there will be increasing needs for medical supplies (medicines, equipment, personal protective equipment and other supplies) in countries or territories that heretofore have not had large supply needs.

At the same time, needs for some types of equipment may be reduced in countries that have gotten past the worst of the first wave. Ventilators would be a case in point. In the United States, as hard hit areas like New York see lower hospitalization rates, the state has been able to forward some ventilators to other states with growing case loads. Similarly, the United States has moved from a situation of buying ventilators abroad to being able to send ventilators abroad. That ability is presumably increasing as expanded U.S. production of ventilators kicks into higher gear as we get to the end of April.

Countries like China that have largely gotten through the first wave of COVID-19 have moved from being large importers of medical supplies to being able to export significant quantities of various supplies, including personal protective equipment. They have also ramped up production of some medical supplies and so should be able to both handle any internal needs and continue to expand exports to the world.

However, for countries that have gotten into a period of declining new cases or even flat growth, needs for personal protective equipment, disenfectant, testing equipment and supplies will continue to grow as these countries deal with both ongoing needs for hospital care and the significant increase in testing and tracing needed for a safe reopening of countries and the likely change in protective gear needed for citizens freed from stay at home orders.

Prior posts have reviewed efforts by the multilateral organizations like the WHO, IMF, World Bank, FAO, WCO and WTO to facilitate transparency, financial and other needs of the world during the pandemic as well as efforts at coordinated actions by the G20.

Faced with the worst pandemic in more than a century, the world was generally caught flat footed and without adequate supplies to address the needs of individual countries or the world as a whole.

Transparency and efforts to keep markets open are two of the trade focuses of governments and the WTO. However, a health crisis during a time of grossly inadequate medical supplies has resulted in many countries taking at least temporary actions to secure medical supplies needed for domestic demand. This has occurred through export restraints, commandeering domestic production, using laws aimed for national emergencies and other actions which favor the large and wealthy over other parties.

There appears to be little or no international efforts to coordinate expansion of critical supplies or to monitor demand vs. supply availability to maximize utilization of the scarce supplies that are available in areas hardest hit. If in fact, the pandemic is gaining steam in developing and least developed countries, there is an increasing need for coordinated action in supporting these countries in the weeks and months ahead.

In that regard, Deputy Director-General Alan Wolff provided virtual remarks on April 20th to an event hosted by the Center for China and Globalization in Beijing on the role of the WTO in assisting in the response to the COVID-19 pandemic. The link to the presentation is here and the materials off of the WTO webpage are embedded below. https://www.wto.org/english/news_e/news20_e/ddgaw_20apr20_e.htm.

WTO-_-2020-News-items-Speech-DDG-Alan-Wolff-DDG-Wolff_-Policy-coordina

While DDG Wolff recognizes that any action by the WTO is based upon initiatives from Members, he includes a series of “[a]genda items for a WTO COVID 19 Response”. Some of the agenda items have been pursued by individual WTO members as well as being part of an agreement between Singapore and New Zealand. These would include tariff suspensions on relevant medical supplies and enhanced trade facilitation for medical supplies. The WTO membership has already authorized transparency on actions taken, although Members have at best a spotty performance in providing the transparency agreed to.

The proposed agenda includes items that appear to be more aspirational in nature, at least during the current pandemic, including an agreement on codes of conduct on topics such as “guidelines on allocating scarcity”, “an accord on export controls and equivalent measures (including, e.g., pre-emptive purchasing in whatever form)”. Such issues will likely have greater likelihood of success after the pandemic has passed.

Of great interest to me is the last posting under “Codes of conduct, best practices and international understandings resulting in” which is “Coordinated efforts to enhance manufacturing of medical equipment and supplies”. It is possible that there are efforts within the WTO or the OECD or other groups to gather information on current capacities and planned expansions. Such an effort if not currently occurring should be made a priority during the pandemic and going forward. As China’s experience demonstrated (where demand in China for masks exceeded China production by ten-to-one during the peak increase in cases), supply is unlikely to meet demand in individual countries without better coordination amongst countries and without a greater global inventory buffer to address extraordinary demand surges.

The last agenda item proposed by DDG Wolff is the “Formation of a WTO Member Emergency Covid 19 Response Committee (ERC) or Task Force”. One would hope that an ERC could be quickly created within the WTO although many Members have shown reluctance during the pandemic (at least during the time where in-person meetings are not possible) to agree to any substantive decisions, although being open to collect information. It is also unclear how quickly an ERC, if created, would be able to advance proposals of interest to Members. But it could certainly be a group focused on gathering greater information relevant to supplies and demand as well as restrictions and liberalizations.

Finally, DDG Wolff in looking at planning for the future advances the idea of creating a WTO Committee for Policy Planning. “It is necessary to assure that there is dedicated policy planning capacity within the WTO Secretariat and networked with Members, including experts in capitals who would be able to participate remotely.” Such a Committee could hopefully, inter alia, help WTO Members come up with policies and rules that would better prepare the world for any future pandemics. While much of what is required to minimize the effects of future pandemics is not within the WTO’s jurisdiction, there are certainly areas that are. Many of those include the items DDG Wolff has included in his suggested agenda for the WTO in response to COVID-19. Hopefully, if not doable during the pandemic, such agenda items will be addressed aggressively after the pandemic, perhaps through a Committee for Policy Planning.

Conclusion

The current health pandemic is continuing at a high level but with growing infections starting to shift geographical areas of interest. As developing countries and least developed countries become areas of increased cases, the challenges of ensuring adequate medical supplies to those in need will become greater and be complicated by health infrastructure in many countries, financial resources, and continued supply/demand imbalances. The best hope for positive outcomes is greater coordination of activity and expanded financial resources available to those in need. The seemingly largest gap in coordinated activity is in the area of current supply abilities, growth in capacity and shifting demand needs. Hopefully international organizations like the WTO can help fill the gap.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

GRFC_2020_ONLINE_200420

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

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

G20 Agriculture Ministers Communique

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

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

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

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

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

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

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

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

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

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

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

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

Communique from Various WTO Members

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

WTGC208

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

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

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

Conclusion

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