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.
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. Seehttps://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.
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. Seehttp://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.
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.
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.
cases through 5-11
14 days to 4-11
14 days to 4-27
14 days to 5-11
EU27 + UK
D.R. of the Congo
U.R. of Tanzania
All Other Countries
Total of all countries
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.
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.
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.
The World Trade Organization has a page on its website that is dedicated to COVID-19 including references to statements from various governments, international organizations, business groups, information from the WTO itself including a compilation of notifications by Members of actions (whether trade limiting or trade expanding) taken in response to COVID-19, and links to a range of websites providing important information on the pandemic. Joint statements are also included. See today’s joint statement between the WTO and the World Customs Organization, https://www.wto.org/english/news_e/news20_e/igo_06apr20_e.htm.
Last Friday, April 3rd, the WTO released a sixteen page note entitled “Trade in Medical Goods in the Context of Tackling COVID-19”. https://www.wto.org/english/news_e/news20_e/rese_03apr20_e.pdf. The note is very useful in terms of providing some definition to a range of products relevant to handling the COVID-19 crisis, identifying major importers and exporters of various product types and providing information on tariffs on the product categories for all WTO Members. The note identifies the following “key points”:
“• Germany, the United States (US), and Switzerland supply 35% of medical products;
“• China, Germany and the US export 40% of personal protective products;
“• Imports and exports of medical products totalled about $2 trillion, including intra-EU trade, which represented approximately 5% of total world merchandise trade in 2019;
“• Trade of products described as critical and in severe shortage in COVID-19 crisis totalled about $597 billion, or 1.7% of total world trade in 2019;
“• Tariffs on some products remain very high. For example, the average applied tariff for hand soap is 17% and some WTO Members apply tariffs as high as 65%;
“• Protective supplies used in the fight against COVID-19 attract an average tariff of 11.5% and goes as high as 27% in some countries;
“• The WTO has contributed to the liberalization of trade medical products in three main ways:
“➢ The results of tariff negotiations scheduled at the inception of the WTO in 1995;
“➢ Conclusion of the plurilateral sectoral Agreement on Pharmaceutical Products (“Pharma Agreement”) in the Uruguay Round and its four subsequent reviews;
“➢ The Expansion of the Information Technology Agreement in 2015.”
As is true with any analysis of data, the reader needs to understand what is covered and what is not and how good a fit the data provided have with the topic being discussed.
For example, the note reviews four categories of products relevant to the world addressing the COVID-19 pandemic (page 1):
“medicines (pharmaceuticals) – including both dosified and bulk medicines;
“medical supplies – refers to consumables for hospital and laboratory use (e.g., alcohol, syringes, gauze, reagents, etc.);
“medical equipment and technology; and
“personal protective products -hand soap and sanitizer, face masks, protective spectacles.”
While the four categories are, of course, relevant to addressing the COVID-19 pandemic, the products covered by the tariff schedule categories are both over- and underinclusive if one is trying to understand the size of global trade in medical products directly relevant to the global efforts to address COVID-19.
The report’s data are overinclusive because the Harmonized System of Tariffs used by most nations is only harmonized to the six-digit level of specificity. The categories included in the WTO note cover both COVID-19 related products and many others. Stated differently, nearly all of the product categories identified in Annex 1 to the note include at least some items that are not germane to the current pandemic. This is a limitation on the usefulness of the data flowing from the lack of more specific classifications that all countries adhere to. As the six-digit data are all that are available with a consistent definition around the world, it is not surprising that the WTO relied on the data. Arguably better, but not uniform data could have been derived by reviewing the 8-, 9- or 10-digit statistical data for imports and exports of at least major Members, but that was not done.
Similarly, the product coverage is underinclusive as recognized in the WTO note (page 2). “It should be noted that this note focuses solely on the final form of these products and does not extent to the different intermediate products that are used by global value chains in their production. The protective garments for surgical/medical use are not included in the analysis, because it is impossible to distinguish them from general clothing product in the HS classification.”
As governments and companies have articulated over the last several months, many of the key final products (e.g., ventilators) require a large number of inputs which are often sourced from a variety of suppliers around the globe. For example, one ventilator company which assembles the ventilators in the United States is reliant on circuit boards from its facility in China to maintain or increase production. Other companies bring various inputs in from Canada or Mexico or other countries as well as shipping U.S. components to other countries for final assembly. The same reality is obviously true for producers of medical goods in other countries as well. Thus, an inability to cover inputs significantly understates global trade volumes of products relevant to addressing the COVID-19 pandemic.
Similarly, there are shortages in many countries of the protective garments for which no data are included. These are important products traded that are directly relevant to the world’s ability to respond to COVID-19. The lack of coverage of those products understates the importance of personal protective products to the total and understates global trade.
The above is simply to say, the sections of the WTO note that look at trade patterns (imports, exports, leading players) are helpful in identifying possible breaks between products and possible major players but the data may be significantly off from the actual split among products or role of major players if complete data limited to products relevant for addressing COVID-19 were available. It may also understate the importance of keeping markets open even if there are relatively few imports of finished products.
To explore how overstated data may be, if one looks at the HS categories shown in Annex 1 for personal protective products and looks at the United States U.S. imports for consumption for 2019 at the 10-digit HTS level of detail, the top seven 10-digit categories by customs value accounted for more than 72% of the $17 billion in imports. Yet each of the categories would contain many products not actually relevant to efforts to address COVID-19. In fact five of the seven categories are basket categories.
OTHER ARTICLES OF PLASTIC, NESOI
OTHER MADE-UP ARTICLES NESOI
CHEMICAL PRODUCTS AND PREPARATIONS AND RESIDUAL PRODUCTS OF THE CHEMICAL OR ALLIED INDUSTRIES, NESOI
SPECTACLES, GOGGLES AND THE LIKE, CORRECTIVE, PROTECTIVE, NESOI
Similarly, the analysis of applied tariff rates is useful in showing rates for product groupings and the rates for individual countries for those product groupings but may be less useful in identifying the assistance tariff reductions would have in the present time of the pandemic. Obviously, tariff reductions by any Member that imposes them on imported products relevant to the pandemic would reduce the cost for the importing country of the needed materials. But the extent of assistance varies significantly depending on the Member as the data in Annex 2 show.
As the EU/EEA/United Kingdom and the United States account for 73.9% of the confirmed cases in the world as of April 6, 2020, a review of the applied rates for those countries would identify likely benefit from tariff reductions by the countries with the major outbreaks at the moment. The EU has an average applied rate of 1.5%, the U.S. an average applied rate of 0.9%, Norway 0.6% and Switzerland 0.7%. These rates don’t include any special duties, such as US duties on China flowing from the Section 301 investigation (with some products being subject to potential waiver of additional duties). Thus, for the vast majority of current cases, the importing countries’ applied rates are very low and hence not a significant barrier to trade.
Other countries where the reach of the pandemic may intensify typically have much higher applied tariffs. As case loads intensify in other countries or in anticipation of such potential eventualities, countries with higher tariffs should be exploring autonomous duty reductions to make imported products more affordable. India has an average applied tariff of 11.6%; Pakistan an average rate of 10.0% and Malaysia a rate of 11.7% to flag just three Members with rates at or above 10%.
While fear can lead to panic and various border measures, the actual situation globally as laid out by the Food and Agriculture Organization of the United Nations (“FAO”) in a recent paper is that there are more than sufficient supplies of food. The key is minimizing disruptions to production and distribution. This is not a period where major disruptions from drought or floods have caused shortages of products. Specifically, the FAO’s Chief Economist prepared a document entitled “COVID-19 and the risk to food supply chains: How to respond?” which was released on March 29. http://www.fao.org/3/ca8388en/CA8388EN.pdf. The paper starts with a section entitled “What we know”:
“Countries have shut down the economy to slow the spread of the coronavirus. Supermarket shelves remain stocked for now. But a protracted pandemic crisis could quickly put a strain on the food supply chains, a complex web of interactions involving farmers, agricultural inputs, processing plants, shipping, retailers and more. The shipping industry is already reporting slowdowns because of port closures, and logistics hurdles could disrupt the supply chains in coming weeks.
“In order to avoid food shortages, it is imperative that countries keep the food supply chains going. Unlike the 2007-2008 global food crisis, scarcity is not an issue this time. The supply of staple commodities is functioning well, and the crops need to be transported to where they are needed most. Restricting trade is not only unnecessary, it would hurt producers and consumers and even create panic in the markets. For high-value commodities that require workers (instead of machines) for production, countries must strike a balance between the need to keep production going and the need to protect the workers.
“As countries combat the coronavirus pandemic, they must also make every effort to keep the gears of their food supply chains moving.”
The paper then goes on to identify five actions needed to minimize the likelihood of food shortages arising during the pandemic. These actions are:
“Expand and improve emergency food assistance and social protection programs
“Give smallholder farmers support to both enhance their productivity and market the food they produce, also through e-commerce channels
“Keep the food value chain alive by focusing on key logistics bottlenecks
“Address trade and tax policies to keep the global trade open
“Manage the macroeconomic ramifications”.
With the number of countries already taking actions that are inconsistent with keeping global markets open for the movement of food supplies, the world is at risk of having a major complication added to the extrordinary economic shocks already being felt to address the health needs of the COVID-19 pandemic. Such a major complication would, as it did in 2007-2008, directly harm developing and least developed countries, countries least able to absorb additional shocks.
The report and a powerpoint from FAO are embedded below.
During the Uruguay Round, various special and differential treatment provisions were included in the agreements being negotiated. The Agreement on Subsidies and Countervailing Measures (“ASCM”) included provisions that would give developing countries and least developed countries higher subsidy de minimis levels and higher negligibility levels. See ASCM Art. 11.9 (de minimis level of subsidies is 1%; negligible imports not subject to orders), Art. 27.10 (de minimis level of subsidies is 2% for developing countries; negligibility is 4% of total imports for developing countries or 9% for multiple developing countries).
The Uruguay Round Agreements Act implemented these requirements within U.S. law. Negligible imports from any country are 3% of total imports (7% for multiple countries each less than 3%) and 4% and 9% for developing/least developed countries. De minimis subsidy levels are 1% generally but 2% for developing and least developed countries. See 19 U.S.C. 1671b(b)(4) and 19 U.S.C. 1677(24)(A) and (B).
Under U.S. law, the U.S. Trade Representative is charged with developing a list of developing and least developed countries for purposes of U.S. countervailing duty law. Such a list should be published and should be updated as necessary. 19 U.S.C. 1677(36). While some criteria are listed in the statute, USTR is given discretion on what other criteria to consider.
The New List Brings Forward the U.S. Position at the WTO on Need for Differentiation Among Countries
The Federal Register notice of February 10, while not referencing the U.S. position at the WTO on the need for differentiation for purposes of which WTO Members take advantage of special and differential treatment, largely uses the same factors proposed at the WTO for determining which countries should not be afforded developing country/least developed country status for purposes of U.S. countervailing duty law.
Specifically, USTR for its new list looked to (1) per capita GNI excluding any country listed as a high income country by the World Bank, (2) share of world trade (reduced from 2% in 1998 to 0.5% in 2020), (3) membership or application for membership in the OECD, (4) G20 membership, (5)(not in the WTO differentiation proposal) membership in the EU and (6) any WTO members who did not declared itself a developing country during accession to the WTO where its per capita GNI is lower than high income. A country that satisfied any of the five criteria are excluded from the higher de minimis and higher negligibility standards
High income countries based on World Bank June 2019 data
Various countries or territories like Korea, Taiwan, Saudi Arabia, UAE, Qatar, Hong Kong, Macao, Singapore, Oman, Chile are listed as high income and would not be eligible for increased de minimis or higher negligibility standards under U.S. countervailing duty law based on this criteria.
Share of world trade (0.5% or greater)
Besides Korea, Hong Kong and Singapore which had been excluded from the 1998 list based on their share of global trade, the new list excludes Brazil, India, Indonesia, Malaysia, Thailand and Viet Nam based on share of world trade figures. 85 FR at 7615.
Membership in or application to the OECD
Colombia and Costa Rica are excluded from higher de minimis and negligibility levels under U.S. countervailing duty law based on their application for membership to the OECD. 85 FR at 7615.
Membership in the G20
The G20 came into existence in 1999, thus after the 1998 list was published by USTR. China has not been treated as eligibile for higher de minimis or higher negligibility levels and continues not to be considered for eligibility. Other G20 countries (besides China) who are not eligible despite per capita GNI levels below high income are Argentina, Brazil, India, Indonesia, and South Africa. 85 FR at 7615.
Membership in the EU
Several EU member countries are not high income countries on the World Bank list but are excluded from higher de minimis and negligibility levels on the new list — Bulgaria and Romania. 85 FR at 7615.
WTO Members who have not claimed developing country status at accession
While the U.S. would not have flagged countries who did not claim developing country status at accession but whose per capita GNI was below high income as needing to be addressed in its differentiation papers at the WTO, such countries are not included in the list of countries eligible for higher de minimis and negligibility levels under U.S. countervailing duty law. This list includes Albania, Armenia, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, Montenegro, North Macedonia and Ukraine.
Likely Importance of the Changes in the USTR List
Data compiled by the WTO from country notifications of investigations brought under national countervailing duty laws, shows that between January 1, 1995 and June 30, 2019 (latest data presently available), the U.S. initiated 254 countervailing duty investigations. One or more investigations were brought against imports of products from 37 countries. See the WTO chart below.
While there have been no countervailing duty cases in the United States against the vast majority of WTO Members during the first twenty-five years of the WTO, the changes in the list could be relevant for some countries where there have been CVD cases in the past — Argentina, Brazil, India, Indonesia, Malaysia, South Africa, Vietnam being the most likely countries affected. Any changes in results would depend on the underlying facts and may be relevant in only some cases or for one or more producers in a given case.
Monday’s Federal Register notice from the U.S. Trade Representative will not result generally in significant changes in how U.S. countervailing duty law operates. It could be important in particular cases or against particular exporters.
The real importance would appear to be the Administration’s taking its views on differentiation and applying them to an important U.S. trade remedy as a sign of the seriousness of the need to obtain a modification to who is eligible for special and differential treatment. The larger issue is viewed by the United States as critical to restoring the negotiating function at the WTO.
When WTO Members launched the Doha Development Agenda in November 2001, one of the topics to be explored was fisheries subsidies as outlined as part of the Rules paragraph 28:
“In the context of these negotiations, participants shall also aim to clarify and improve WTO disciplines on fisheries subsidies, taking into account the importance of this sector to developing countries.” Ministerial Declaration, para. 28, WT/MIN(01)/Dec/1.
Fisheries subsidies were also mentioned in paragraph 31 of the Declaration dealing with topics within trade and environment that would be explored.
More than 18 years later, WTO members are pushing to reach agreement on new disciplines on fisheries subsidies by the time of the 12th Ministerial Conference to be held in Nur-Sultan, Kazakhstan in early June 2020.
The push is related to the 2020 deadline included in the September 2015 UN Sustainable Development Goals (“SDG”) 14.6: “by 2020, prohibit certain forms of fisheries subsidies which contribute to overcapacity and overfishing, and eliminate subsidies that contribute to IUU fishing, and refrain from introducing new such subsidies, recognizing that appropriate and effective special and differential treatment for developing and least developed countries should be an integral part of the WTO fisheries subsidies negotiation.” The term “IUU” refers to “illegal, unreported, and unregulated” fishing.
At the 11th WTO Ministerial Conference, WTO members adopted a decision to complete fisheries subsidies negotiations by the next Ministerial Conference. See WT/MIN(17)/64; WT/L/1031:
“MINISTERIAL DECISION OF 13 DECEMBER 2017
“The Ministerial Conference
“Decides as follows:
“1. Building on the progress made since the 10th Ministerial Conference as reflected in documents TN/RL/W/274/Rev.2, RD/TN/RL/29/Rev.3, Members agree to continue to engage constructively in the fisheries subsidies negotiations, with a view to adopting, by the Ministerial Conference in 2019, an agreement on comprehensive and effective disciplines that prohibit certain forms of fisheries subsidies that contribute to overcapacity and overfishing, and eliminate subsidies that contribute to IUU-fishing recognizing that appropriate and effective special and differential treatment for developing country Members and least developed country Members should be an integral part of these negotiations.
“2. Members re-commit to implementation of existing notification obligations under Article 25.3 of the Agreement on Subsidies and Countervailing Measures thus strengthening transparency with respect to fisheries subsidies.”
Why the interest in fisheries subsidies?
For decades, the world has been experiencing overfishing of various species of fish in different parts of the world. The U.N.Food and Agriculture Organization (FAO) reports that between 1974 and 2015 fish stocks that are not within biologically sustainable levels increased from 10% in 1974 to 33.1% in 2015. FAO, The State of World Fisheries and Aquaculture 2018 (“2018 Report) at 6. This decline has occurred despite efforts made by various countries to regulate capture/production.
“Despite the continuous increase in the percentage of stocks fished at biologically unsustainable levels, progress has been made in some regions. For example, the proportion of stocks fished within biologically sustainable levels increased from 53 percent in 2005 to 74 percent in 2016 in the United States of America, and from 27 percent in 2004 to 69 percent in 2015 in Australia.” 2018 Report at 6.
Because of, inter alia, the importance of the fishing industry to many countries and fish to the diets of many peoples, there has been concern for many years with actions needed by nations to ensure the sustainability of fish captures.
The FAO’s 2018 Report provides a great deal of information on the importance of fish to developing and least developed countries and the various actions being taken to address meeting the Sustainable Development Goals (“SDGs”) pertaining to fish and the oceans.
The WTO’s negotiations on fisheries subsidies are just one part of the much larger group of SDGs being pursued by countries as part of the UN targets and only deals with ocean/sea wild caught fish, not with aquaculture and not with inland caught fish. The FAO’s 2018 Report is attached below.
As Table 1 in the 2018 Report shows, there has been a rapid growth in aquaculture so that by 2016, there was greater volume from aquaculture than there was from “marine caught”. Specifically, in 2016 aquaculture accounted fro 80.0 million metric tons (46.8%) of the total production/ capture, marine capture was 79.3 million metric tons (46.4%) and inland capture was 11.6 million metric tons (6.8%) – for a total of 170.9 million metric tons. Data do not include information on aquatic mammals, crocodiles, alligators, caimans, seaweeds and other aquatic plants. 2018 Report, Table 1, page 4.
While aquaculture has grown, marine capture has declined or stagnated over time and with growing levels of overfishing, longer term decline will occur in this sector absent concerted steps to manage the volume pursued at sea. Overfishing is believed due to overbuilding of fishing fleets and the level of fishing that contravenes national laws, is unrecorded and/or unregulated. Thus, the efforts within the WTO to impose disciplines on subsidies benefiting IUU fishing and/or contributing to overfishing are an important element in achieving catch rates that are sustainable versus unsustainable and declining.
Importance of marine fishing to developed, developing and least developed countries
The FAO gathers information on the amount of marine capture (as well as inland capture and aquaculture) annually. The latest data available from FAO are for 2017. FAO, Fishery and Aquaculture Statistical Yearbook 2017, http://www.fao.org/fishery/static/Yearbook/YB2017_USBcard/index.htm. The average marine caught volumes for the years 2015-2017 from the FAO data base were summarized for WTO Members in a July 11, 2019 submission to the WTO rules negotiations addressing fisheries subsidies. The submission was made by Argentina, Australia, the United States and Uruguay. Top marine caught Members are presented below in millions of metric tons and percent of world production:
Production (mm tonnes)
% of World Production
Republic of Korea
TN/RL/GEN/197/Rev.2, pages 4-7, Annex I (11 July 2019). Data for the EU and the US contain data from various islands referenced on page 4 in fotnotes a and b. The Annex lists 136 of the 164 WTO members and their production/volumes although no data are available for 28 WTO members (some of which are landlocked and hence may have no marine caught fish). The full listing is attached below.
As reviewed in the 2018 Report (page 2), fish make up an increasing share of animal protein for humans, with 100% of the increase being accounted for by expanding aquaculture:
“The expansion in consumption has been driven not only by increased production, but also by other factors, including reduced wastage. In 2015, fish accounted for about 17 percent of animal protein consumed by the global population. Moreover, fish provided about 3.2 billion people with almost 20 percent of their average per capita intake of animal protein. Despite their relatively low levels of fish consumption, people in developing countries have a higher share of fish protein in their diets than those in developed countries. The highest per capita fish consumption, over 50 kg, is found in several small island developing States (SIDS), particularly in Oceania, while the lowest levels, just above 2 kg, are in Central Asia and some landlocked countries.”
Fishing/fisheries are an important source of employment for many countries, with the vast majority of such employment being in countries in Asia, Latin America and Africa. Specifically in 2016 worldwide fisheries employment was estimated at 40.338 million people (no breakout between marine and inland caught). Of this number, 31.990 million were in Asia ((79.3%), 5.367 million were in Africa (13.3%) and 2.085 million were in Latin America and the Caribbean (5.2%) , with just 896,000 jobs in North America, Europe and Oceania. Several important individual countries are shown in the 2018 Report — China with 14.5 million jobs in fisheries in 2016 (36% of global) and Indonesia with 2.7 million folks employed in fisheries (6.7% of global employment in the sector). 2018 Report at 32-33. Much of the employment in fisheries around the world is from family run operations, often subsistence in nature, and mainly using small boats (less than 12 meters in length and a large portion of which are not motorized).
The 2018 Report indicates that in 2016 the number of fishing vessels in the world were 4.6 million, 2.8 million of which were motorized. Of the 4.6 million vessels, 75.4% were in Asia, 14.0% in Africa, 6.4% in Latin America and the Caribbean, 2.1% in Europe, 1.8% in North America and 0.3% in Oceania. 100% of Europe’s vessels were motorized, more than 90% of those in North America, but only some 25% in Africa. See pages 36-38 of the 2018 Report.
WTO Efforts at Increasing Disciplineson Marine Fisheries Subsidies
The negotiations have been complicated by many issues that are not typical for trade negotiations. Here are a few of the perceived problem issues:
(a) problem being addressed relates to depletion of scarce global resources through overfishing flowing from subsidies that create excess capacity;
(b) production occurs not only in national waters but in the open seas and through contracts to capture fish in third countries’ waters;
(c) concerns about effect of negotiations on outstanding territorial disputes/claims;
(d) the challenge of disciplining subsidies provided by one country on fishing vessels which are flagged in a different country;
(e) the lack of meaningful data from many developing and least developed countries which complicates understanding the level of marine capture;
(f) for many developing and least developed countries, the large part of fishing fleets which are subsistence or artisanal in nature;
(g) the large portion of global capture which is developing and least developed country in origin vs. desire for special and differential treatment for such countries;
(h) challenge of whether traditional S&D provisions (exclusion from disciplines, lesser reductions, longer implementation periods) are actually harmful to developing and least developed countries where continued erosion of marine catch from overfishing will actually hurt the fishermen and fisherwomen of the countries receiving S&D consideration;
(i) whether dispute settlement as applicable to other WTO agreements (whether SCMA or other) will serve the underlying objectives of any negotiated agreement or needs to be modified to reflect the unique objectives of the agreement.
On the question of level of subsidization, there are the usual questions of what, if any, subsidies will be allowed as not causing concerns re growing capacity or overfishing and whether there is some level of acceptable subsidies even if adding to capacity.
While the set of public documents from the negotiations are reasonable through much of 2018, the resort to Room Documents (which are not made public) and other classification of documents, means that much of the current drafts of sections of a possible agreement are not publicly available. For example, there were ten documents identified as made available to WTO Members for the May 8, 2019 Informal Open-ended Negotiating Group on Rules (Fisheries Subsidies). Seven of the ten documents are not available to the public as “Room Documents” even if the documents were generated weeks or months before the meeting. See, e.g., RD/TN/RL/72 (17/12/2018); RD/TN/RL/81 (21/03/2019); RD/TN/RL/77/Rev.1 (21/03/2019); RD/TN/RL/82 (08/04/2019); RD/TN/RL/79/Rev.1 (18/04/2019); RD/TN/RL/83 (02/05/2019); RD/TN/RL/84 (06/05/2019).
Similarly, WTO Members have done a relatively poor job of notifying the subsidies provided to marine fisheries. Even with improvements in notifications in 2019, as late as November 2019, nine of the 26 largest providers of fisheries subsidies had not provided notifications and some who had done so in 2019 submitted the first notifications of such programs in 20 years. Members welcome progress in notification of fisheries subsidies, https://www.wto.org/english/news_e/news19_e/scm_19nov19_e.htm.
There is a draft document from the Chair of the negotiations from 14 November 2018, TN/RL/W/274/Rev.6 which lays out the Chair’s understanding of negotiations as of that date. The document is attached below and is heavily bracketed meaning that at the time of the draft there was not agreement on the bracketed text or options were shown.
Some public submissions show that countries or groups of countries are still putting forward approaches on topics of importance. For example there are 2019 submissions on the following topics: fishing vessels not flying the member’s flag (e.g., TN/RL/GEN/201/Rev.1 (proposed prohibiting subsidies to such vessels)(Argentina, Australia, Indonesia, Japan, New Zealand, the United States, and Uruguay), on a cap-based approach to addressing certain fisheries subsidies [(TN/RL/GEN/197/Rev.2) and TN/RL/GEN/203)(Argentina, Australia, the United States, and Uruguay) vs. different approach put forward by China (TN/RL/199)], on whether different dispute settlement principles need to be considered (TN/RL/GEN/198, Canadian discussion paper), the breadth of special and differential treatment for developing and least developed countries (TN/RL/200, submission from India).
Interestingly, a submission from New Zealand and Iceland in 2018 warned other WTO members that a focus on fishing in international waters vs. marine catch in national waters would result in any agreement addressing very little of the marine catch volume as would other overly narrow scope approaches:
‘6.SDG Target 14.6 is clear that subsidies that contribute to both overcapacity and overfishing must be prohibited. An outcome which excluded the most harmful types of subsidies which contribute to overcapacity and overfishing would therefore not satisfy SDG Target 14.6. An outcome that addressed capacity or overfishing in just a hortatory way or in a manner that applied disciplines only to a small subset of subsidies or the world’s fishing fleet would similarly fail to meet the requirements of SDG Target 14.6.
“7. For example, the current emphasis on subsidies to fishing beyond national jurisdiction is warranted given the weaker governance and resource and development impacts of such fishing. This however must not be at the exclusion of waters under national jurisdiction where the vast majority of global catch – 88% – is taken.1 Similarly, the emphasis on overfished stocks should not equate to an exception for other stocks as doing so would exclude nearly 70% of the world’s fisheries.2 Taken together, these two approaches alone would result in barely 8% of the world’s fisheries being subject to subsidy prohibitions.3 “2 FAO. 2016. The State of World Fisheries and Aquaculture 2016. “3 Two thirds of fish stocks managed by RFMOs are overfished or depleted: Cullis-Suzuki, S. & Pauly, D. (2010). Failing the high seas: a global evaluation of regional fisheries management organization. Marine Policy 34: 1036–1042.”
Advancing Fisheries Subsidies Prohibitions on Subsidies Contributing to Overcapacity and Overfishing, TN/RL/W/275 at 2 (8 May 2018)(New Zealand and Iceland).
Will WTO Members Deliver Meaningful Fisheries Subsidies Reform
The fact that the negotiations have taken more tan 18 years and that major countries appear to remain widely apart on many key issues suggests that the road to success will be challenging.
For example, India’s proposal for S&D would result in large amounts of fisheries subsidies not being addressed by the agreement (whatever the scope of subsidies addressed) rendering any agreement of minimal assistance in fact if adopted following that approach.
There are significant differences in approaches to limiting subsidies as can be seen in the different cap approaches presented by China and a group of other countries (Argentina, Australia, the United States and Uruguay).
Similarly, there is a disconnect between the problems being addressed (overcapacity and overfishing) and the traditional role of S&D to eliminate, reduce and/or delay obligations. For the fisheries subsidies negotiations to achieve a meaningful result, the WTO Members need to revisit what the role of special and differential needs to be to achieve better marine catch for developing and least developed countries. The focus needs to be on helping LDCs and developing countries develop accurate data on marine catch, developing the capacity to participate in regional management programs, finding assistance to fishermen and fisherwomen affected by depleted marine catches to survive/choose alternative work until such time as sustainable levels of wild caught fish are again available. But all countries need to contribute to limiting fisheries subsidies where excess capacity or overfishing are the likely result.
And there is the U.S. position that S&D will only be approved in any new agreement if it is limited to those countries with an actual need (i.e., certain countries would not take such benefits). Considering the role of major countries like China and India in marine catch, one can expect challenges in having those countries (and possibly others) agree to forego S&D provisions.
Net/net – as most Members seem to be focused on the wrong questions, there is a reasonable probability that the Kazakhstan Ministerial will not see a meaningful set of disciplines adopted on fisheries subsidies to address the challenges to marine catch from overcapacity and overfishing.
The GATT had and now the WTO has a system of self-declared status as a developing country. The vast majority of WTO members have declared themselves to be developing countries. Some WTO members are categorized by the United Nations as Least Developed Countries (“LDCs”). Indeed the WTO webpage indicates that 36 of 47 LDCs are currently WTO members and that another eight countries who are listed as LDCs by the UN are in the process of negotiating accession to the WTO. “There are no WTO definitions of ‘developed’ or ‘developing’ countries. Developing countries in the WTO are designated on the basis of self-selection although this is not necessarily automatically accepted in all WTO bodies.” https://www.wto.org/english/thewto_e/whatis_e/tif_e/org7_e.htm.
The relevance of a WTO member declaring themselves to be a developing country has to do with access to special and differential treatment provisions in virtually every agreement and the likelihood of reduced trade liberalization obligations on the member and in any ongoing negotiations. Thus, in the Uruguay Round, developing countries typically faced lower percent reductions on tariffs and were given longer time periods to implement such reductions than were true for developed countries. A report by the WTO Secretariat reviews Special and Differential Treatment (“S&D”) by agreement and categorizes the S&D provisions under one of the following six groupings (WT/COMTD/W/239 at 4) which are quoted as presented:
provisions aimed at increasing the trade opportunities of developing country Members;
provisions under which WTO Members should safeguard the itnerests of developing country Members;
flexibility of commitments, of action, and use of policy instruments;
provisions relating to LDC members.
The listing of S&D provisions in the Secretariat document is provided as an attachment below along with a correction.
With the progress many countries or customs territories have made during their GATT and/or WTO membership, the self-selection designation process has raised concerns by other members about whether certain Members are carrying their weight in terms of market liberalization. Indeed, some have attributed the failure of the Doha Agenda to conclude in 2008 to what certain Members who have declared themselves to be developing countries were willing to do in terms of liberalization versus other major Members who are not “developing”. The issue of who should benefit from Special and Differential treatment takes as a given that all LDCs should receive such benefits. The issue is about whether those non-LDCs who have experienced strong growth and significant economic advancement since the start of the WTO should continue to enjoy those benefits in new agreements.
The United States at the beginning of 2019 made a major submission entitled “An Undifferentiated WTO: Self-Declared Development Status Risks Institutional Irrelevance”. WT/GC/W/757, 16 January 2019. A revision was submitted in February and was followed by a draft General Council Decision to limit who can claim S&D benefits in future negotiations and agreements. WT/GC/W/747/Rev.1; WT/GC/W/764. The U.S. proposal in February was as follows:
“The General Council,
“Acknowledging that full implementation of WTO rules as negotiated by Members can contribute to economic growth and development and the need to take steps to facilitate full implementation;
“Recognizing the great strides made by several WTO Members since the establishment of the WTO in accomplishing the goals set out in the Marrakesh Agreement Establishing the World Trade Organization, of ‘raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development…;’
“Recognizing that not all WTO Members have enjoyed equal rates of economic growth and development since the establishment of the WTO;
“Recognizing the plight of the least-developed countries and the need to ensure their effective participation in the world trading system, and to take further measures to improve their trading opportunities;
“Recognizing that reserving flexibilities for those WTO Members with the greatest difficulty integrating into the multilateral trading system can open new export opportunities for such countries; and
“Desiring to strengthen the negotiating function of the WTO to produce high-standard, reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations;
“Agrees as follows:
“To facilitate the full implementation of future WTO agreements and to ensure that the maximum benefits of trade accrue to those Members with the greatest difficulty integrating into the multilateral trading system, the following categories of Members will not avail themselves of special and differential treatment in current and future WTO negotiations:
“i. A WTO Member that is a Member of the Organization for Economic Cooperation and Development (OECD), or a WTO Member that has begun the accession process to the OECD;
“ii. A WTO Member that is a member of the Group of 20 (G20);
“iii. A WTO Member that is classified as a “high income” country by the World Bank; or
“iv. A WTO Member that accounts for no less than 0.5 per cent of global merchandise trade (imports and exports).
“Nothing in this Decision precludes reaching agreement that in sector-specific negotiations other Members are also ineligible for special and differential treatment.”
The self-designation of developing country within the GATT and the WTO has generally been seen by Members and outside observers as a “third rail” that could not be modified because of the certain opposition from those enjoying S&D benefits. Not surprisingly, the U.S. proposal has met with opposition from some important WTO Members who have declared themselves to be developing countries, including China, India, South Africa, Venezuela, Bolivia, Kenya and Cuba. See, e.g., WT/GC/W/765 and 765/Rev.1 (it does not appear that the U.S. proposal would affect the last four Members listed).
The U.S. has included the topic in each General Council meeting since its submissions, has engaged in discussions with many WTO members, and submitted a revised proposal in November 2019, WT/GC/W/764/Rev.1, which incorporated language reflecting its arguments throughout the year that
(1) the proposal would not require any country to declare itself not a developing country, just limit whether they received blanket S&D coverage in new agreements;
(2) the change would affect new agreements/negotiations and not affect S&D from existing arrangements;
(3) Members had the right to seek special accommodations on issues of particular importance to them.
There was also clarification of the third and fourth criteria for non-eligibility to reflect a three year period of meeting the criteria.
A few WTO Members who would be subject to the elimination of automatic entitlement to new S&D provisions if the U.S. proposal were adopted by the General Council have indicated that they will forego automatic S&D from future negotiations/agreements. These Members to date are Korea, Singapore and Brazil.
While the strong opposition from major WTO Members such as China, India and South Africa would indicate the U.S. proposal is not likely to be adopted in the foreseeable future, the U.S. has also indicate that it will oppose S&D provisions in future agreements if they are applicable to certain Members.
Indeed, President Trump on July 26, 2019 issued a Memorandum on Reforming Developing-Country Status in the World Trade Organization. https://www.whitehouse.gov/presidential-actions/memorandum-reforming-developing-country-status-world-trade-organization/. The Memo notes that many WTO members who have declared themselves developing countries are “patently unsupportable in light of current economic circumstances. For example, 7 out of the 10 wealthiest economies in the world as measured by Gross Domestic Product per capita on a purchasing-power parity basis – Brunei, Hong Kong, Kuwait, Macao, Qatar, Singapore, and the United Arab Emirates – currently claim developing country status. Mexico, South Korea, and Turkey – members of both the G20 and the Organization for Economic Cooperation and Development (OECD) – also claim that status.” “China most dramatically illustrates the point.”
The memo goes on to instruct USTR to use all available means to secure changes at the WTO to prevent unwarranted use of S&D provisions and authorizes USTR to take action after 90 days if substantial progress is not made to no longer treat certain WTO members as developing countries and to not support any such country’s efforts to join the OECD.
USTR Robert Lighthizer issued a statement the day of the President’s Memo that reflected the position of the Administration:
Obviously trading partners have had an ongoing interest in the President’s Memo and how it is being implemented by the USTR. At the December 9, 2019 General Council meeting, as part of the U.S. discussion of its proposal, Ambassador Dennis Shea (Deputy USTR) stated as follows:
“Finally, I’d like to provide an update on the memorandum to USTR from the President of the United States in July.
“The President instructed USTR to no longer treat as a developing country for the purposes of the WTO any self-declared developing country that, in the USTR’s judgment, can inappropriately seek S&D in current and future WTO negotiations. Some Members have asked how the USTR will carry this out.
“USTR consulted with the interagency Trade Policy Staff Committee on this issue. The interagency agreed that if a S&D provision is introduced in a WTO negotiation, the United States will indicate that it will not agree to that provision unless certain Members forego use of that provision. The United States will also use the TPR process to continue to press countries that we believe should not be claiming blanket S&D in future agreements. In addition, USTR is continuing to review additional steps that can be taken.
“The President issued two other instructions to the USTR.
“The USTR will not support the application for OECD membership of any self-declared developing country that, in the USTR’s judgment, can inappropriately seek S&D in current and future WTO negotiations.
“Also, USTR shall publish on its website a list of all self-declared developing countries that the USTR believes can inappropriately seek S&D in WTO negotiations.
“Members have asked when USTR will publish the list. USTR is consulting on this issue. The memo did not require USTR to publish the list by a specic date.
“I’d like to emphasize two important aspects about the memo and the U.S. proposal that we would like Members to keep in mind.
“First, the President’s memo did not instruct USTR to ask any Member to change its self-declared development status. The U.S. proposal does not ask this of any Member, either.
“Second, the President’s memo did not instruct USTR to ask any Member to forego S&D in existing WTO agreements. The U.S. proposal does not ask this of any Member, either.”
As S&D provisions are part of every negotiation, the U.S. position obviously creates challenges to completing ongoing negotiations in any area, such as negotiations on fish subsidies, agriculture, digital trade without more countries agreeing not to seek S&D privileges or at least foregoing such privileges in certain agreements where there is U.S. opposition.
A quick look at some of the countries whom the U.S. proposal would remove from automatic S&D eligibility for new negotiations include the following:
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, 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.
In light of the experience of the last two years on the need to reform the WTO Appellate Body, there should be little doubt that the United States will continue to push hard to achieve a more rational approach to the assumption of obligations at the WTO in terms of who should be eligible for S&D benefits in new agreements. Without movement by some major countries who currently enjoy S&D benefits to forego automatic eligibility in new agreements, the challenging negotiating environment at the WTO that has prevailed for many years now will become more challenging in 2020.