Ireland

U.S. Department of the Treasury Semi-Annual Report on Trading Partner Currency Practices — a change from the December 2020 Report

· April 16, 2021 · currency manipulators · , , , , , , , , , , , , , , , , · No Comments

Today (April 16, 2021), the U.S. Department of the Treasury released its semi-annual report on trading partner currency practices. See U.S. Department of the Treasury Office of International Affairs, Report to Congress, Macroeconomic and
Foreign Exchange Policies of Major Trading Partners of the United States, April 2021, https://home.treasury.gov/system/files/206/April_2021_FX_Report_FINAL.pdf.

The press release from Treasury found three countries/territories to have problematic currency practices — Switzerland, Vietnam and Taiwan — but didn’t find any them to be currency manipulators. This constituted a change of position on Switzerland and Vietnam which had been found to be currency manipulators in the December 2020 report. All three countries are subject to increased scrutiny and interface with Treasury. A number of other countries remain on the monitoring list for currency practices with Mexico and Ireland being added to that list in this report. China was separately identified for transparency concerns. See U.S. Department of the Treasury Press Release, Treasury Releases Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States, April 16, 2021, https://home.treasury.gov/news/press-releases/jy0131. The press release is copied below and the April 2021 Report is embedded after that.

“WASHINGTON – The U.S. Department of the Treasury today delivered to Congress the semiannual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States. In this Report, Treasury reviewed and assessed the policies of 20 major U.S. trading partners during the four quarters through December 2020.

“The Report concluded that both Vietnam and Switzerland continue to meet all three criteria under the Trade Facilitation and Trade Enforcement Act of 2015 (the 2015 Act) during the period under review.  Additionally, the report finds that Taiwan met all three of the 2015 Act criteria for the period under review.  Treasury has conducted enhanced analysis of Vietnam, Switzerland, and Taiwan’s macroeconomic and foreign exchange policies, as reflected in the Report.  Treasury will continue its enhanced engagement with Vietnam and Switzerland, and Treasury will commence enhanced engagement with Taiwan.  This engagement includes urging the development of a plan with specific actions to address the underlying causes of currency undervaluation and external imbalances.

“Under the Omnibus Trade and Competitiveness Act of 1988 (the 1988 Act), Treasury has determined that there is insufficient evidence to make a finding that Vietnam, Switzerland, or Taiwan manipulates its exchange rate for either of the purposes referenced in the 1988 Act.  Nevertheless, consistent with the 1988 Act, Treasury considers that its continued enhanced engagements with Switzerland and Vietnam, as well as a more thorough assessment of developments in the global economy as a result of the COVID-19 pandemic, will enable Treasury to better determine whether either of these economies intervened in currency markets in 2020 to prevent effective balance of payments adjustment or gain an unfair competitive advantage in trade.  For Taiwan, Treasury will initiate enhanced engagement in accordance with the 2015 Act and expects that engagement will help Treasury to make the determination required under the 1988 Act for the period of review. 

“No other major U.S. trading partner met the relevant 1988 or 2015 legislative criteria for currency manipulation or enhanced analysis during the review period.  Treasury urged China to improve transparency regarding its foreign exchange intervention activities, the policy objectives of its exchange rate management regime, the relationship between the central bank and foreign exchange activities of the state-owned banks, and its activities in the offshore RMB market. 

“’Treasury is working tirelessly to address efforts by foreign economies to artificially manipulate their currency values that put American workers at an unfair disadvantage,’ Secretary of the Treasury Janet L. Yellen said today.

“Treasury found that eleven economies warrant placement on Treasury’s ‘Monitoring List’ of major trading partners that merit close attention to their currency practices: China, Japan, Korea, Germany, Ireland, Italy, India, Malaysia, Singapore, Thailand, and Mexico.  All except Ireland and Mexico were included in the December 2020 Report.

“Today’s Report is submitted to Congress pursuant to the Omnibus Trade and Competitiveness Act of 1988, 22 U.S.C. § 5305, and Section 701 of the Trade Facilitation and Trade Enforcement Act of 2015, 19 U.S.C. § 4421.”

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In prior posts, I have reviewed how Vietnam’s currency practices had resulted in a 301 investigation initiated by USTR (one of two, the other dealing with using illegally harvested timber) with a report issued in mid-January 2021, in the Commerce Department preliminarily finding currency practices of Vietnam were countervailable and in the December 2020 Treasury finding that Vietnam was manipulating its currency. See October 12, 2020, U.S. commences two investigations into Vietnam under Sec. 301 of the Trade Act of 1974, as amended – on currency and on use of illegally harvested timber, https://currentthoughtsontrade.com/2020/10/12/u-s-commences-two-investigations-into-vietnam-under-sec-301-of-the-trade-act-of-1974-as-amended-on-currency-and-on-use-of-illegally-harvested-timber/; December 21, 2020, Vietnam and Switzerland found to be “currency manipulators” in latest U.S. Treasury semiannual report, https://currentthoughtsontrade.com/2020/12/21/vietnam-and-switzerland-found-to-be-currency-manipulators-in-latest-u-s-treasury-semiannual-report/; January 15, 2021, USTR releases report from Section 301 investigation on Vietnam’s currency valuation, https://currentthoughtsontrade.com/2021/01/15/ustr-releases-report-from-section-301-investigation-on-vietnams-currency-valuation/.

The current Treasury report (pages 3-4) flags the elements examined and what is different in this report versus the prior one for Switzerland and Vietnam.

“In this Report, Treasury has reviewed 20 major U.S. trading partners with bilateral goods trade with the United States of at least $40 billion annually against the thresholds Treasury has established for the three criteria in the 2015 Act:

“(1) Persistent, one-sided intervention in the foreign exchange market occurs when net purchases of foreign currency are conducted repeatedly, in at least 6 out of 12 months, and these net purchases total at least 2% of an economy’s gross domestic product (GDP) over a 12-month period.2

“(2) A material current account surplus is one that is at least 2% of GDP over a 12-month period.

“(3) A significant bilateral trade surplus with the United States is one that is at least $20 billion over a 12-month period.3

“In accordance with the 1988 Act, Treasury has also evaluated in this Report whether trading partners have manipulated the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.

“Because the standards and criteria in the 1988 Act and the 2015 Act are distinct, a trading partner could be found to meet the standards identified in one of the statutes without necessarily being found to meet the standards identified in the other. Section 2 provides further discussion of the distinctions between the 1988 Act and the 2015 Act.

“Treasury Conclusions Related to the 2015 Act

“Vietnam again exceeded the thresholds for all three criteria under the 2015 Act over the four quarters through December 2020. Treasury has updated its enhanced analysis of Vietnam in this Report. In early 2021, Treasury commenced enhanced bilateral engagement with Vietnam and is working with the Vietnamese authorities to develop a plan with specific actions to address the underlying causes of Vietnam’s currency undervaluation.
Switzerland again exceeded the thresholds for all three criteria under the 2015 Act over the four quarters through December 2020. Treasury has updated its enhanced analysis of Switzerland in this report. In early 2021, Treasury commenced enhanced bilateral engagement with Switzerland and is discussing with the Swiss authorities options to address the underlying causes of Switzerland’s external imbalances.

“Taiwan exceeded the thresholds for all three criteria under the 2015 Act over the four quarters through December 2020. Treasury has conducted enhanced analysis of Taiwan in this Report and will also commence enhanced bilateral engagement with Taiwan in accordance with the 2015 Act. The bilateral engagement will include urging the development of a plan with specific actions to address the underlying causes of Taiwan’s currency undervaluation.

“Taiwan has maintained a tightly managed floating exchange rate regime since the late 1970s. Although Taiwan has liberalized capital controls in recent decades, the central bank continues to actively intervene in the foreign exchange market. Over many years, these practices have resulted in a structurally undervalued exchange rate that has failed to adjust in the face of Taiwan’s persistently large current account surpluses. Although the New Taiwan Dollar (TWD) has appreciated modestly in nominal and real effective exchange rate terms over the past decade, the authorities’ foreign exchange purchases and other, less formal exchange rate management practices have slowed the pace and scale of external adjustment, preventing the TWD from fully reflecting macroeconomic fundamentals.

“Treasury Conclusions Related to the 1988 Act

“The 1988 Act requires Treasury to consider whether any economy manipulates the rate of exchange between its currency and the U.S. dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade. In the December 2020 Report, Treasury found that Switzerland and Vietnam each met the standards for currency manipulation for the four quarters through June 2020. For the four quarters ending in 2020, based on initial enhanced engagements with Vietnam and Switzerland under the 2015 Act, further analysis, and data, Treasury has determined that there is insufficient evidence to make a finding that either economy (or any other economy covered in the Report) manipulates its exchange rate for either of the purposes referenced in the 1988 Act. Nevertheless, consistent with the 1988 Act, Treasury considers that its continued enhanced engagements with Switzerland and Vietnam, as well as a more thorough assessment of developments in the global economy as a result of the COVID-19 pandemic, will enable Treasury to better determine whether either of these economies intervened in currency markets in 2020 to prevent effective balance of payments adjustment or gain an unfair competitive advantage in trade. For Taiwan, Treasury will initiate enhanced engagement in accordance with the 2015 Act and expects that engagement will help Treasury to make the determination required under the 1988 Act for the period of review. Meaningful actions to address policy distortions and increase data transparency will be critical for making progress under these engagements. Treasury will also continue to consider whether economies that do not trigger enhanced engagement manipulate their currencies for the purposes referenced in the 1988 Act

“2 The Report covers data from the 12-month period ending in December 2020. These quantitative thresholds for the scale and persistence of intervention are considered sufficient on their own to meet this criterion. Other patterns of intervention, with lesser amounts or less frequent interventions, might also meet this criterion depending on the circumstances of the intervention.

“3 Treasury focuses in this Report on trade in goods only, as it has done in past Reports. The United States has a surplus in services trade with many economies in this Report, including China, Japan, Korea, Singapore, and Switzerland, and to a lesser extent, Taiwan and Vietnam. Taking into account services trade would reduce the bilateral trade surplus of these economies with the United States.”

The Trump Administration did not impose tariffs on Vietnam following the release of the Section 301 report in January leaving the decision on what action to take to the Biden Administration. President Biden’s U.S. Trade Representative, Ambassador Katherine Tai, met virtually with Vietnam Minister of Industry and Trade Tran Tuan Anh on April 1, 2021 and reviewed concerns re China’s currency practice as reviewed in the 301 investigation as well as illegal logging and other issues. See USTR Press Release, Readout of Ambassador Katherine Tai’s virtual meeting with Vietnam Minister of Industry and Trade Tran Tuan Anh. April 1, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/april/readout-ambassador-katherine-tais-virtual-meeting-vietnam-minister-industry-and-trade-tran-tuan-anh (“Ambassador Tai highlighted the Biden Administration’s concerns about currency practices covered in the ongoing Section 301 investigation.  The ministers also discussed U.S. concerns on illegal timber practices, digital trade and agriculture.”). Thus, it is likely that the U.S. and Vietnam will work out bilaterally U.S. concerns on Vietnam’s currency versus imposing additional duties following the Section 301 report, at least at this time.

The first Department of Commerce investigation to look at currency as a countervailable subsidy for Vietnam made a preliminary affirmative determination. The final determination is not due until late May. See Department of Commerce, International Trade Administration, C–552–829, Passenger Vehicle and Light Truck Tires From the Socialist Republic of Vietnam: Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Determination With Final Antidumping Duty Determination, 85 FR 71,607 (Nov. 10, 2020); Department of Commerce, International Trade Administration, A–552–828, Passenger Vehicle and Light Truck Tires From the Socialist Republic of Vietnam: Preliminary Affirmative Determination of Sales at Less Than Fair Value, Postponement of Final Determination, and Extension of Provisional Measures, 86 FR 504 (January 6, 2021)(final due within 135 days of the preliminary Federal Register). It is unclear what, if any, modification will be made to the countervailability of Vietnam’s currency in the context of the ongoing investigation based on the change in view of Vietnam by Treasury.

Conclusion

Currency misalignment whether intentional or not can have significant effects on trade flows. The U.S. has historically been quite concerned about misaligned currencies although Treasury historically preferred to work with other countries than label them currency manipulators. Early signals from the Biden Administration are that Treasury is reverting to a preference to work bilaterally with countries who actively intervene in currency markets and have an undervalued currency and large trade surplus in goods with the U.S. If so, Treasury will, as it did in the current report, find “insufficient evidence” for countries who satisfy the factual criteria under U.S. law to conclude such actions were for the purpose “of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.” While trading partners will undoubtedly prefer the Biden Administration’s apparent approach, the approach will be problematic for many U.S. industries and their workers and remove leverage to get correction of foreign government practices.

The EU’s export authorization requirement for COVID-19 vaccines — contrary to their oft repeated position of maintaining open markets during the pandemic

· February 1, 2021 · COVID-19 · , , , , , , , , · No Comments

If one ever needed confirmation that WTO Members can easily fall out of supporting open markets and working together during a global crisis, the European Union’s actions over the last week to come up with an implementing regulation “making the exportation of certain products subject to the production of an export authorization” provide a glaring example.

Faced with the receipt of fewer doses of vaccines by the three manufacturers approved (with one only approved last week) for distribution within the EU, the EU faced harsh criticism from member states over the inadequate supplies of vaccines in the December – February period to vaccinate their populations. Harsh criticism was also reflected in press coverage. See, e.g., New York Times, Vaccine Shortages Hit E.U. in a Setback for Its Immunization Race, January 27, 2021, https://www.nytimes.com/2021/01/27/world/europe/europe-covid-vaccinations.html; Der Spiegel, Europe’s Vaccine Disaster, Commission President Ursula von der Leyen Seeking to Duck Responsibility, 29 January 2021, https://www.spiegel.de/international/europe/europe-s-vaccine-disaster-commission-president-ursula-von-der-leyen-seeking-to-duck-responsibility-a-1197547d-6219-4438-9d69-b76e64701802; Financial Times, Shortage of coronavirus shots heaps pressure on European leaders, 29 January 2021, https://www.ft.com/content/fe851440-abcb-43e0-a7c9-a86a05d275db.

The response was to resort to a form of export restraints on vaccines and inputs for vaccines where the European Union and its member states would decide whether shipments to certain third countries (largely wealthier countries around the world) would be allowed. Some statements made by the European Commission and the implementing regulation are embedded below.

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The action of the European Union last week is in sharp contrast to the joint initiative from the Ottawa Group, of which the EU is a member. In a post last November, I reviewed a text put forward by the Ottawa Group which called for limiting the use of export restraints during the pandemic. See November 27, 2020, The Ottawa Group’s November 23 communication and draft elements of a trade and health initiative, https://currentthoughtsontrade.com/2020/11/27/the-ottawa-groups-november-23-communication-and-draft-elements-of-a-trade-and-health-initiative/. Several excerpts from the earlier post are provided below.

“The Ottawa Group agreed to put forward a communication seeking action by WTO Members. Each of Canada and the EU (and likely other members) put out press releases. See, e.g., Government of Canada, November 23, 2020, Minister Ng hosts successful ministerial meeting of the Ottawa Group on WTO reform, https://www.canada.ca/en/global-affairs/news/2020/11/minister-ng-hosts-successful-ministerial-meeting-of-the-ottawa-group-on-wto-reform.html; European Commission, Directorate-General for Trade, 23 November 2020, Ottawa Group proposes a global Trade and Health Initiative, https://trade.ec.europa.eu/doclib/press/index.cfm?id=2215&title=Ottawa-Group-proposes-a-global-Trade-and-Health-Initiative.

“The Canadian press release states in part, ‘As countries face a rise in COVID-19 cases, it is essential that governments minimize disruptions to trade flows in essential medical supplies. Today, members of the Ottawa Group took important steps toward a proposed WTO Trade and Health Initiative, which identifies short-term actions to strenghten supply chains and ensure the free flow of medicines and medical supplies.’

“Similarly the European Commission press release stated that –

“‘Today the Ottawa Group, a group of 13 like-minded World Trade Organisation (WTO) partners including the EU, agreed today on an initiative, calling on the WTO members to increase their cooperation and work toward enhanced global rules to facilitate trade in essential medical goods. The agreement took place as an outcome of the Ottawa Group Ministerial meeting, hosted virtually by Minister Mary Ng of Canada.

“‘The Ottawa Group members called for immediate actions in response to the coronavirus crisis such as exercising a restraint in using any export restrictions, implementing trade-facilitating measures in the area of customs and services, as well as improving transparency.'”

Needless to say, the reaction from trading partners to the imposition of export controls on vaccines was swift and negative. See, e.g., Financial Times, EU faces global criticism over curbs on vaccine exports, 31 January 2021, https://www.ft.com/content/5c15d7ea-aaf6-46f4-924e-30f168dd14dd (“Brussels faces an international backlash over its new controls on vaccine exports as European Commission president Ursula von der Leyen struggles to quell a firestorm over the EU’s handling of vaccine shortages. Canada and Japan raised concerns over export rules requiring manufacturers to obtain permission before shipping Covid-19 jabs outside the EU. South Korea also warned governments against a grab for more vaccines than they need.”); BBC News, Coronavirus: WHO criticises EU over vaccine export controls, 30 January 2021, https://www.bbc.com/news/world-europe-55860540. Because the EU action seemed largely aimed at discontent with news from the British-Swedish company AstraZeneca’s announcement of a sharp contraction in likely shipments to the EU in the first quarter, the Commission’s initial draft of the implementing regulation had the EU creating problems for the Brexit agreement in terms of inspecting goods flowing from Ireland and Northern Ireland to prevent circumvention of products to the U.K. The EC retreated almost immediately on that front. See, e.g., NPR, EU Reverses Move To Restrict Export Of COVID-19 Vaccines To Northern Ireland, January 30, 2021, https://www.npr.org/sections/coronavirus-live-updates/2021/01/30/962454276/eu-reverses-move-to-restrict-export-of-covid-19-vaccines-to-northern-ireland (“The European Union reversed a brief decision to try to restrict the export of COVID-19 vaccines across the border from Ireland into Northern Ireland. European vaccination campaigns have been struggling as supplies of vaccines on the continent have run low. The decision to invoke an emergency protocol of the Brexit deal was seen as an effort to keep supplies from going from the EU to Britain. But within hours of the decision, which could have put checks on the border between the EU member the Republic of Ireland and British-controlled Northern Ireland, Irish and British officials condemned the move.”).

One concern for the global trading system from the EU action, of course, is retaliatory or mirror actions by trading partners. Such concerns are real. See, e.g., Politico, UK weighs vaccine export restrictions, January 29, 2021, https://www.politico.eu/article/uk-weighs-coronavirus-vaccine-export-restrictions/ (“The U.K. government has sought legal advice on preventing coronavirus vaccines or their ingredients being exported, suggesting that ministers are actively considering countermeasures they could deploy if other countries start restricting cross-border movements of vaccines.”).

The WHO and WTO have been advocating for cooperation among nations and businesses to ensure that all peoples are able to be vaccinated in a timely and cost affordable way. The phrase, “no one is safe until all are safe” typifies the call and is supported by research that indicates global GDP will be seriously restricted if that approach is not followed. See January 27, 2021, Recent WTO report on services trade and January 2021 International Monetary Fund World Economic Outlook Update — the future growth depends on vaccinations of peoples around the world, https://currentthoughtsontrade.com/2021/01/27/recent-wto-report-on-services-trade-and-january-2021-international-monetary-fund-world-economic-outlook-update-the-future-growth-depends-on-vaccinations-of-peoples-around-the-world/ (“The WHO’s Director-General references a report from the International Chamber of Commerce Research Foundation. The report and a press release can be accessed here: ICC, The Economic Case for Global Vaccinations, https://iccwbo.org/publication/the-economic-case-for-global-vaccinations/. The press release from the ICC describes the report as follows. ‘A study commissioned by the International Chamber of Commerce (ICC) Research Foundation has found that the global economy stands to lose as much as US$9.2 trillion if governments fail to ensure developing economy access to COVID-19 vaccines.'”).

The worrying actions by the European Union and the continued struggle to get vaccines to the world’s poorest countries led to a joint statement today by the WTO’s four Deputy Directors-General calling for heightened cooperation to get vaccines to all peoples of the world. WTO press release, WTO DDGs call for heightened cooperation on vaccine availability, 1 February 2021, https://www.wto.org/english/news_e/news21_e/ddgra_01feb21_e.htm. (“‘The pandemic is a global problem. This challenge calls for heightened international cooperation, including ensuring the global availability of vaccines. Recalling the joint statement by the Directors-General of the WHO and WTO on 20 April 2020, we call upon Members to work together towards making vaccines available to all. Moreover, the war against the pandemic can only be won when universal coverage in vaccination is achieved.’”). The press release includes a link to the 20 April 2020 joint statement by the Directors-General of the WHO and WTO (embedded below).

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As the world enters the month of February, there are 69 countries that report vaccinating at least some people by the end of January. The list, number of vaccinations and number of vaccinations per 100 people are tracked by the Financial Times in its “Covid-19 vaccine tracker: the global race to vaccinate” last updated on February 1, 2021. https://ig.ft.com/coronavirus-vaccine-tracker/. While there are many vaccines in late stage of trials or going through approval processes by the WTO or individual countries, the world is a long way from ensuring equitable access to vaccines at affordable prices at the beginning of February. Hopefully, with production ramp up and more vaccines approved in the coming months, that situation will change by the second quarter of 2021.

Conclusion

While export restraints are not prohibited by the WTO, the world has struggled during the COVID-19 pandemic to keep markets open and ensure availability of medical products to all nations. The EU had early challenges with export restraints that member states were imposing on medical goods including personal protective equipment. However, the EU has attempted to provide leadership in limiting those restraints and supporting the COVAX mechanism for getting vaccines to the poorest countries as well as others participating in the COVAX approach.

The combination of a greater than expected second surge of COVID-19 cases in the fall and the rapid spread of more contagious variants in the last several months has posed significant challenges to many countries but including those within the EU. Some internal challenges and different approaches to vaccine contracting led the EU to sign contracts later and to approve vaccines for use later than some other countries. With manufacturing challenges for a number of suppliers, the EU has found itself in a situation where member states were extremely unhappy with the inability to get more people vaccinated sooner. The European Commission’s efforts to improve its vaccine situation has generated a great deal of negative press, led to the imposition of export restraints that could lead to a significant breakdown in supply chains and potential retaliation by trading partners adversely affected and harms the EU’s efforts to be a leader for global unity in addressing the pandemic.

WTO remaining candidates for the Director-General position — Questions and Answers from the July 15 and 16 meetings with the General Council

· October 15, 2020 · Selection of WTO Director-General · , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , · No Comments

The third round of consultations with WTO Members on which of the two remaining candidates is preferred and hence may be the most likely to obtain consensus to become the next Director-General gets started next Monday, October 19 and ends on October 27.

Both Minister Yoo of Korea and Dr. Okonjo-Iweala of Nigeria are in the process of seeking support from WTO Members and have the full support of their governments which are making calls and sending letters to government officials in many of the WTO Members.

Minister Yoo is back in Europe seeking support in this third round (she and Dr. Okonjo-Iweala both received preferences from the EU in the second round). Press reports indicate that China is believed to be supporting Dr. Okonjo-Iweala, and Japan is understood to have concerns with both candidates. Thus, Minister Yoo is working to bolster support in other regions of the world to supplement what is assumed to be only partial support within Asia.

Dr. Okonjo-Iweala has received the support from Kenya after Kenya’s candidate did not advance to the third round. It is not clear whether she will receive support from all African Members of the WTO, although Kenya’s action is obviously an imortant positive for her.

So the next eleven days will be an active time as each of the remaining candidates seeks support in the final round of consultations from Members in different geographical areas as well as in different categories (developed, developing and least developed countries).

One source of information about the candidates that hasn’t been available to the public but is now available is the questions and answers provided to the General Council meetings with each candidate on July 15 (Dr. Okonjo-Iweala) and July16 (Minister Yoo). While there were three days of meetings with the General Council to accommodate the eight candidates, the two remaining candidates appeared during the first two days. The Minutes of the Meeting of the General Council, 15-17 July 2020 are contained in WT/GC/M/185 (31 August 2020). The procedures for each candidate were reviewed by the General Council Chairman David Walker (New Zealand).

“Each candidate would be invited to make a brief presentation lasting no more than fifteen minutes. That would be followed by a question-and-answer period of no more than one hour and fifteen minutes. During the last five minutes of the question-and-answer period, each candidate would have the opportunity to make a concluding statement if she or he so wished.” (page 1, para. 1.5).

Dr. Ngozi Okonjo-Iweala’s statement, questions asked, answers given and closing statement are in Annex 2 on pages 16-26. Minister Yoo Myung-hee’s statement, questions asked, answers given and closing statement are in Annex 5 on pages 51-60. The statements have previously been reviewed in my posts and are available on the WTO webpage.

Questions are picked randomly from Members who indicated an interest in asking questions. Dr. Okonjo-Iweala received questions during the meeting from nineteen Members with another thirty-nine Members having submitted their names to ask questions of her. Minister Yoo received questions during her meeting from seventeen Members with another forty-four Members having submitted their names to ask questions of her.

Dr. Okonjo-Iweala’s questions came from Afghanistan, Ireland, Kazakhstan, Ukraine, Norway, New Zealand, South Africa, European Union, Paraguay, Estonia, Australia, Latvia, Guatemala, Japan, Mongolia, Brazil, and Malaysia. The questions dealt with a range of issues including the following sample:

  • The negative impact of the COVID-19 pandemic on developing countries, LDCs and small vulnerable economies (SVEs).
  • How to ensure the benefits of open trade are distributed equitably?
  • What steps will you undertake to ensure a multilateral outcome at the next Ministerial?
  • Role of the Director-General (DG) in addressing lack of trust among Members.
  • Role of the DG in facilitating economic recovery and resilience.
  • What is necessary to restore functioning of a binding, two-step dispute settlement system in the WTO?
  • Do transparency and notification obligations need to be strengthened?
  • Focus in the first 100 days.
  • Your initial approach to the reform of the WTO.
  • What kind of approach and efforts would you like to make to advance the subject of e-commerce?
  • Role of plurilaterals in the WTO.
  • How to deal with the different views on special and differential treatment?
  • What are your plans relating to empowering women in the future WTO agenda?

Minister Yoo’s questions came from Guatemala, Belgium, United States, India, Germany, El Salvador, Chinese Taipei, Sri Lanka, Spain, Qatar, Lithuania, Gabon, Botswana, China, Barbados, Malaysia, and Zimbabwe. The questions dealt with a range of issues including the following sample:

  • Do you have any proposal on how to overcome the current crisis?
  • How do you plan to include measures to respect sustainable trade in an agenda focused on free trade and trade liberalization?
  • In looking at interim arbitration agreement of EU and other countries, is it appropriate for WTO resources to be used for activities that go beyond what is contemplated by the DSU?
  • How to convince Members that the multilateral trading system is still best way forward over bilateral and plurilateral trading arrangements?
  • Is there a gap in the WTO rulebook with regard to level playing field issues such as subsidies, economic action by the State and competition?
  • Do you have a multilateral solution to issues like e-commerce which are being tackled in the Joint Statement Initiatives that would be of interest to a large number of Members?
  • WTO is lagging behind in pursuing the development dimension; what is the path forward?
  • Role of DG re fighting protectionism and unilateral measures.
  • How to strike a balance between public stockholding and food security and the avoidance of unnecessary trade restrictions?
  • What is your view on the Doha Development Agenda?
  • What role the WTO can play to help drive Africa’s integration agenda?
  • What is the most important issue to achieve results?

Both candidates gave extensive answers to the questions posed while avoiding staking out a position on any issue that is highly controversial within the WTO. The answers are worth reading in their entirety. As a result the minutes of the meeting are embedded below.

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Each candidate in their summing up at the end of her meeting with the General Council circled back to their prepared statement. Their short summing up statements are copied below.

Dr. Ngozi Okonjo-Iweala (page 26):

“The nature of the questions that I have heard and the nature of the discussions give me hope. Members are clearly interested in a WTO that works, in a WTO that is different from what we have now, in a WTO that shows a different face to the world. I can see it and I can feel it. And if ever I am selected as Director-General, that gives me hope that there is a foundation to work on. Before coming in here, I have spoken to several Members, but I did not really know that. From listening to all of you and fielding your questions, I now know that there is a basis to work on. And I want to thank you for it.

“And I really want to end where I began. Trade is very important for a prosperous and a recovered world in the 21st century. The WTO is at the centre of this. A renewed WTO is a mission that we must all undertake, and we need every Member, regardless of economic size, to participate in this. If we want the world to know who we are as the WTO, we have to commit. Having listened to you, I hear the commitment and I want to thank you sincerely for that.”

Minister Yoo Myung-hee (page 60):

“I spent the past few days meeting with Ambassadors and delegates in Geneva. When I listen to your views, together with the questions today, it seems that there are diverse views and priorities of Members – whether it concerns the negotiations, how to pursue development objectives and special and differential treatment, the plurilaterals or restoring the Appellate Body function. So, how can we, a dynamic group of 164 Members with different social and economic environments, come to an agreement? This brings me back to my original message. We need to rebuild trust in the WTO. How? Amid these divergent and different views of Members, I would share the commitment and hope to restoring and revitalizing the WTO.

“This pandemic has forced us to reflect upon what is needed from the multilateral trading system. Despite the current challenges, I have a firm belief in the multilateral trading system and what we can actually achieve in the future if we put our heads together and also our hearts into it. We are embarking on a new journey towards a new chapter for the WTO. Building on the past twenty-five years, when we embark on the new journey for the next twenty-five years, I am ready to provide a new leadership that will harness all the frustrations but most importantly all the hopes from Members to make the WTO more relevant, resilient and responsive for the next twenty-five years and beyond.”

Conclusion

The process that WTO Members agreed on in 2002 to promote a process for finding a candidate for a new Director-General is cumbersome, time consuming and burdensome for candidates brave enough to put their hat in the ring. To date, the 2002 process has resulted in Members agreeing by consensus on a new Director-General (2005 and 2013). The process in 2020 has worked remarkably smoothly as well despite the deep divisions in the membership and the multiple-pronged crisis facing the organization.

The two finalists bring different backgrounds and skill sets to be considered by Members. Each started strong in the General Council meetings in mid-July as can be seen from their answers to questions posed, and each has continued to impress many Members in the subsequent months. There are political considerations in the selection process of the Director-General (just as in any major leadership position of an international organization). Both candidates are getting active support of their home governments. Fortunately, the membership has two qualified and very interesting candidates to consider. Whoever emerges as the candidate most likely to achieve consensus among the Members will still face the hurdle of whether any Member (or group of Members) will block the consensus. While that seems unlikely at the present time, one never knows.

Whoever becomes the next Director-General will face the daunting challenges of an organization with all three major functions not operating as needed, deep divisions among major players and among major groups. The lack of forward movement and the lack of trust among Members will weigh heavily on the new Director-General with a narrow window before the next Ministerial Conference likely to take place next June. It is remarkable that talented individuals with long histories of accomplishments would be willing to take on the problems the WTO is weighed down with at the present time. Hopefully, the next Director-General will be known in the next three weeks.

Will the EC Trade Commissioner Phil Hogan be nominated by Ireland for the WTO Director-General position?

· June 25, 2020 · Selection of WTO Director-General · , , · No Comments

There have been many news articles over the last few weeks on the possibility of Phil Hogan being nominated by Ireland as a candidate for the Director-General position at the World Trade Organization (“WTO”). See, e.g., Politico, May 30, 2020, European trade chief mulls bid for WTO top job, https://www.politico.com/news/2020/05/30/phil-hogan-wto-european-union-290660. The WTO is in the middle of the period for receiving nominations, a period which began on June 8 and will end on July 8. To date five candidates have been put forward from Mexico (Jesus Seade Kuri), Nigeria (Dr. Ngozi Okonjo-Iweala), Egypt (Abdel-Hamid Mamdouh), Moldova (Tudor Ulianovschi) and the Republic of Korea (Yoo Myung-hee).

Commissioner Hogan has indicated he has been thinking about the possibility. See, e.g., Irish Times, June 9, 2020, Phil Hogan confirms he is weighing bid to become WTO chief, https://www.irishtimes.com/news/politics/phil-hogan-confirms-he-is-weighing-bid-to-become-wto-chief-1.4274865. There have been articles about the European Union seeking a candidate all EU countries would support and certain ethical limitations on a sitting Commissioner seeking another position. See, e.g., Reuters, June 9, 2020, EU weights single bid for WTO job, trade chief Hogan confirms interest, https://www.reuters.com/article/us-health-coronavirus-eu-trade/eu-weighs-single-bid-for-wto-job-trade-chief-hogan-confirms-interest-idUSKBN23G1RE; Financial Times, June 16, 2020, https://www.ft.com/content/c45a56ab-5b2d-4a8c-af83-6aedec645bff.

A Bloomberg report on June 23 indicated that Ireland would be submitting his nomination and that Commissioner Hogan would announce his candidacy on Thursday (today), though delays for unspecified reasons have apparently occurred. Bloomberg, June 23, 2020, Ireland to nominate EU Trade Chief Hogan for Top WTO post, https://www.bloomberg.com/news/articles/2020-06-23/ireland-to-nominate-eu-trade-chief-hogan-for-top-wto-post. As of 5 p.m. Geneva time, no nomination has been received and there are no updates on Commissioner Hogan making an announcement.

The EU webpage for Commissioner Hogan provides the following shorthand biography of positions held over the last thirty-three years:

Biography

  • European Commissioner for Trade2019 – present
  • European Commissioner for Agriculture and Rural Development2014-2019
  • Minister for Environment, Community and Local Government, Ireland2011-2014
  • President of the Council of EU Environment Ministers2013
  • Minister of State at the Department of Finance, Ireland1994-1995
  • Member of Dáil Éireann (Lower House of Parliament)1989
  • Member of Seanad Éreann (Upper House of Parliament)1987-89

If Commissioner Hogan is nominated in the coming days, he will be the first candidate from a country that is a “developed” country Member of the WTO. To the extent WTO Members look at having the Director-General from a developed country versus a developing country following DG Azevedo’s departure on the thought that there should be rotation between developed-developing country leadership, then Commissioner Hogan would be the first (and to date, only) developed country candidate. The candidate from the Republic of Korea may view herself as from a developed country, though Korea has self-declared itself a developing country at the WTO though has agreed not to seek special and differential treatment in future agreements.

Other possible positives for Members will be his experience in trade (first agriculture and now trade overall), his political and his technical competence, his support of the WTO overall, his support for reform at the WTO.

Challenges for Commissioner Hogan’s candidacy may include the number of European Directors-General there have been at the WTO (and at the GATT before then) suggesting those wanting geographical diversity of leaders may be less interested in another European. Commissioner Hogan will also have potential challenges based on positions he has taken on behalf of the European Union on important issues before the WTO (e.g., United States on dispute settlement and whether convergence or coexistence is a key need for WTO Members). Candidates are obviously expected if selected to be the next Director-General to be honest brokers and facilitators and not to be representing the views of the Member who nominated them. But in an environment in which there are fundamental differences in views of existing rights and obligations and the needs of the WTO, it is possible that Commissioner Hogan will have a special challenge in demonstrating his neutrality and openness to all issues and views.

Conclusion

With thirteen days left in the WTO DG nomination process, there are five candidates who have been put forward. It is likely that several more will be put forward before the close of the process on July 8. It appears that the European Commissioner Phil Hogan will be nominated in the coming days by Ireland which would expand the field of candidates to six. It is unclear if the delay in the announcement of his nomination that was apparently originally scheduled for today, June 25, flows from internal EU or Irish logistics, from a lack of consensus within the EU member countries to support Commissioner Hogan or reflects some other issue that simply delays the timing and not the likelihood of his nomination.

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

· June 22, 2020 · Selection of WTO Director-General · , , , , , , , , , , , , , , , , , , , , · No Comments

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

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

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

Possible Developed Country Candidate(s)?

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

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

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

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

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

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

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

Outreach by existing candidates and legal wrangling between African countries

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

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

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

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

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

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

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

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

Conclusion

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

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

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

Selecting a new WTO Director-General — “the game is afoot”; Mexico’s Jesus Seade Kuri is the first nominee

· June 8, 2020 · Selection of WTO Director-General · , , , , , , , , , , , , · No Comments

June 8, 2020 is the start of the one month process for WTO Members to put forward a nomination of a national to be considered for the position of the next Director-General. All nominations must be submitted to the Chair of the General Council by the close of business (Geneva time) on July 8. Using a term first expressed by Shakespeare in King Henry IV Part I but probably better known as uttered by Sir Arthur Conan Doyle’s Sherlock Holmes, “the game is afoot”.

There is little doubt that the selection of the next Director-General of the WTO will be important for an organization struggling from major divisions within its membership on direction, need for reform, and ensuring continued relevance while looking for collective action during the COVID-19 pandemic to facilitate trade and minimize the damage to Member and global economies.

In prior posts, I reviewed the general procedures that the WTO will follow in conducting the selection process and thoughts on how to expedite the selection process if WTO Members want to find a replacement before the current Director-General departs at the end of August. See World Trade Organization – Search for a new Director-General, https://currentthoughtsontrade.com/2020/05/15/world-trade-organization-search-for-a-new-director-general/; WTO selection of a new Director-General – one individual from a developed country previously reviewed could shorten the process, https://currentthoughtsontrade.com/2020/05/19/wto-selection-of-a-new-director-general-one-individual-from-a-developed-country-previously-reviewed-could-shorten-the-process/.

Potential nominees

The WTO Secretariat will be posting the names of nominees and their CVs as they are received. As of 5:15 p.m. Geneva time on June 8th, the WTO had listed the first nomination to be received, Jesus Seade Kuri nominated by Mexico. https://www.wto.org/english/news_e/news20_e/dgsel_mex_08jun20_e.htm.

Jesus Seade is a former Ambassador to the GATT, a former Deputy Director-General at the WTO and recently involved in concluding the U.S.-Mexico-Canada Agreement as Deputy Secretary for North America. Press from earlier today noted his nomination.https://www.bloomberg.com/news/articles/2020-06-08/mexico-to-nominate-seade-as-its-wto-candidate-el-universal; https://business.financialpost.com/pmn/business-pmn/mexico-to-nominate-seade-as-its-wto-candidate-el-universal. The WTO news contains his CV which is embedded below.

bio_mex_e

Information on other potential nominees is from press or other sources and doesn’t reflect information on actual nominations received by the WTO by the afternoon of June 8.

Press accounts over the weekend indicate that Nigeria has changed their desired candidate from Yonov Frederick Agah (currently one of the WTO’s Deputy Director-Generals) to Ngozi Okonjo-Iweala, a former Nigerian finance minister and former World Bank official. https://www.bloomberg.com/news/articles/2020-06-05/nigeria-nominates-okonjo-iweala-as-wto-director-general.

At least two other African officials are being considered by the African Union, a candidate from Egypt, Hamid Mamdouh, and a candidate from Benin, Eloi Laourou. Mr. Mamdouh is a former WTO Secretariat Director of the Trade in Services and Investment Division and now working for a law firm. https://www.kslaw.com/people/abdelhamid-mamdouh. He also has a webpage being developed for any run for Director-General with a media kit. https://hamid-mamdouh.com/. H.E. Mr. Eloi Laourou is the current Benin Ambassador and Permanent Representative to the WTO (and to UN entities in Geneva).

It appears that the African Union will be holding a meeting by video- conference this week in an effort to see if there is agreement on one candidate for the African Union countries.

European countries are also considering potential candidates including possibly European Commissioner for Trade Phil Hogan (Ireland) and Spain’s Foreign Minister Arancha Gonzalez (she previously served as Chef de Cabinet for Director-General Pascal Lamy). See, e.g., https://www.irishtimes.com/news/politics/phil-hogan-exploring-idea-of-wto-director-general-role-1.4266073; https://www.bloomberg.com/news/articles/2020-05-23/spain-foreign-minister-gonzalez-favorite-to-lead-wto-wiwo-says.

And there will undoubtedly be more Members considering whether to nominate an individual to be considered in the selection process.

The process is intended to focus first on qualifications, and then if there are equally qualified individuals, “Members … shall take into consideration as one of the factors the desirability of reflecting the diversity of the WTO’s membership in successive appointments to the post of Director-General”. WT/L/509 para. 13. For example, no individual from Africa has previously served as the Director-General (“DG”) of the WTO.

Other factors besides geographical location of the nominee could be whether the nominee is from a developed or developing country and whether the candidate is male or female.

Press has indicated that the EU is seeking a developed country DG in light of the fact that the last DG is from a developing country (Brazil). Indeed, the last four DGs have rotated between developed and developing country nominees. Other developed countries (besides EU members) would include the United Kingdom, Norway, Switzerland, Iceland, Canada, United States, Japan, Australia, New Zealand and possibly a few others. The United States has never put up a candidate and is unlikely to do so this time either, but has apparently communicated with Australia a desire to broaden the group of candidates.

As all WTO DGs up to the present have been male, if there are equally qualified male and female candidates, this may be a factor considered by Members.

Expediting the process?

Press accounts indicate an expressed desire to find a replacement for DG Azevedo by the end of August. This seems a nearly impossible objective in light of travel limitations from efforts to control the pandemic, the likely number of candidates and the normal closure of the WTO to most business during the month of August.

But the agreed procedures do permit expedition of the process if agreed by the Members. WT/L/509 para. 23.

It is understood that the General Council meeting with all candidates may be held the week immediately after the close of the receipt of nominations, i.e., the week of July 13. If correct, this approach would have this step occur three weeks earlier than the comparable timing during the 2012-2013 DG selection process when the General Council meeting happened January 29-31 after the nomination process concluded on December 31.

Whether other steps to expedite the process are possible will depend on the will of the Members, limited by the obligation “to be guided by the best interests of the Organization, respect for the dignity of the candidates and the Members nominating them, and by full transparency and inclusiveness at all stages.” Appointment of the Next Director-General, Communication from the Chairman of the General Council to Members, JOB/GC/230 (20 May 2020).

An obvious area where time could be saved would be the three month time frame that candidates have to get themselves known to Members. With travel limitations, meetings with Members in Geneva and in capitals will presumably have to happen virtually. It is possible that governments could agree to a one month period for such outreach by candidates but would require availability of Missions and of officials in capitals with an interest to meet the candidates. If handled during the first month of the post-nomination process, this would suggest conclusion by August 8 (with possible frontloading of meetings for Members who will not extend general operations into August).

If handled on such an expedited basis, the Chairman of the General Council and his two facilitators could do “confessionals” during August to reduce the field of candidates to the one deemed most likely to achieve consensus by the end of the month with a General Council meeting set for Friday, August 28 to permit confirmation of the candidate (if consensus is achieved). Such an timeline would permit a new DG to be confirmed one business day before the departure of DG Azevedo.

To achieve such an outcome, either WTO Members would need to remain in Geneva during August or permanent representatives would need to be reachable and able to provide input during the month and all would need to be amenable to participating in the GC meeting (possibly remotely for some) at the end of August.

If such expedition is not possible, then Para. 23 of the procedures (WT/L/509) calls for the selection by consensus of an acting Director-General from among the four current Deputy Directors-General.

If the full six months to a decision are needed, this would suggest the General Counsel meeting in early December to meet the December 8 timeline. Nothing in the procedures requires a new Director-General to wait three months after confirmation before taking up the position when there is a vacancy/use of an Acting Director-General.

Of course, the objective for the selection process is consensus. While voting is an option, if there were failure to achieve a consensus through the procedures agreed to in 2002, Members could continue to meet with the Chairman of the General Counsel and his facilitators to attempt to achieve consenus. They could also take the extraordinary step of voting although such an approach on a new Director-General would likely have significant negative effects from the imposition of a DG opposed by some significant part of the membership.

Conclusion

As the game is now afoot for the selection of a new Director-General, one can expect a lot of energy of trade officials to be diverted in coming weeks to examining the candidates and choosing preferred candidates. It is clear that there will be a significant number of candidates put forward in the coming weeks which will complicate the ability to expedite the selection process. WTO Members could significantly expedite the process if willing to telescope meetings with candidates virtually and remaining available for decisions and confessionals during August.

We should know in a few weeks whether Members have agreed to a process to find a new DG before DG Azevedo departs or whether there will be some period of time where an acting DG is needed.

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

· May 7, 2020 · COVID-19 · , , , , , , , , , , , , , , , , , , · No Comments

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.