Mauritius

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

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

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

Virtual Informal WTO Ministerial Gathering, 29 January 2021

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“- facilitate rule-making with wide participation,

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

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

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

“Thank you.”

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

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

U.S. perspective

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

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

Making the WTO relevant to businesses and workers — the example of travel and tourism

Each of the eight candidates to become the next Director-General of the World Trade Organization correctly noted that the WTO’s relevance was at risk without significant reform and the ability to make the three pillars of the multilateral trading system function properly (negotiations, transparency/monitoring, dispute settlement). Some candidates talked about the need for the WTO to take actions that can be clearly seen by businesses, workers and consumers as being relevant to their lives. Most have also talked about the need for the WTO to review how it can provide greater resilience and predictability in the context of a pandemic like COVID-19. Some candidates were also asked questions about how the WTO can be more involved in helping the world achieve the sustainable development goals (SDGs) laid out by the UN in 2015 with a targeted completion date of 2030. Most candidates also commented on the need to improve coordination with other multilateral organizations to see that the capacity needs, financing and other elements often needed for progress on improving integration of smaller and less developed countries into the global trade system are met.

One issue that intersects all of the above needs/concerns is the travel and tourism sector. It is the third largest trade export sector, has been one of the hardest hit sectors globally by the fallout from the COVID-19 pandemic with some 100-120 million jobs at risk this year with the potential closure of hundreds of thousands or millions of businesses – most mciro-, small- and medium enterprises (MSMEs) — and a sector that directly or indirectly is relevant to most of the UN’s SDGs. It is also a sector where there has been a great deal of activity by other multilateral organizations and the U.N.

While travel and tourism is important for nearly all countries, it has an outsized importance for small island developing states (SIDS), least developed countries (LDCs) and many countries in Africa. Thus, an effort by the WTO to prioritize actions that would help restore the international trade dimension of the travel and tourism sector and in a way that is supportive of the actions of other international organizations would have meaningful effects for businesses, workers and consumers globally.

United Nations, Policy Brief: COVID-19 and Transforming Tourism

On August 25, 2020, UN Secretary-General Antonio Guterres released a policy brief entitled COVID-19 and Transforming Tourism. The video of his statement when releasing the study can be found here, https://www.unwto.org/news/un-secretary-general-it-is-imperative-that-we-rebuild-the-tourism-sector (news release with video of statement towards bottom). The press release from the UN World Tourism Organization is copied below (emphasis in original).

UN SECRETARY-GENERAL: ‘IT IS IMPERATIVE THAT WE REBUILD THE TOURISM SECTOR IN A SAFE, EQUITABLE AND CLIMATE FRIENDLY MANNER

“Madrid, Spain, 25 August 2020 – As part of the wider UN response to COVID-19, the UN Secretary-General António Guterres released today a thematic brief on the impact the pandemic has had on tourism. Drawing on the latest data from the World Tourism Organization (UNWTO), the lead author of the publication, it warns that as many as 100 million direct tourism jobs are at risk, and the massive drop in export revenues from tourism could reduce global GDP by as much as 2.8%. The brief stresses that tourism is an essential pillar of the SDGs and the most vulnerable workers and nations at greatest risk.

“Tourism has been among the hardest hit of all sectors by COVID-19 and no country has been unaffected, with restrictions on travel and a sudden drop in consumer demand leading to an unprecedented fall in international tourist numbers.

“The ‘COVID-19 and Transforming Tourism’ Policy Brief from the Secretary-General of the United Nations, António Guterres, makes clear the impact that the pandemic has had on global tourism and how this affects everything from jobs and economies to wildlife conservation and the protection of cultural heritage.

“Mr Guterres said: that ‘It is imperative that we rebuild the tourism sector‘ in a ‘safe, equitable and climate friendly’ manner and so ‘ensure tourism regains its position as a provider of decent jobs, stable incomes and the protection of our cultural and natural heritage’. The UN Secretary-General further underscored that tourism is one of the world’s most important economic sectors, providing ‘livelihoods to hundreds of millions more’, while it’“boosts economies and enables countries to thrive’, and at
the same time allowing ‘people to experience some of the world’s cultural and natural riches and brings people closer to each other, highlighting our common humanity’.

“The Brief warns that the impacts of the pandemic on tourism are already placing conservation efforts in jeopardy. Citing case studies from around the world, it warns that the sudden fall in tourism revenues has cut off funding for biodiversity conservation and, with livelihoods at risk in and around protected areas, cases of poaching and looting are expected to rise. Again, the impact on biodiversity and ecosystems will be particularly critical in SIDS and LDCs. Furthermore, with 90% of World Heritages Sites having closed as a result of the pandemic, both tangible and intangible heritage is at risk in all parts of the world.


Five points priorities moving forward

“UNWTO Secretary-General Zurab Pololikashvili said: ‘Tourism touches on nearly every part of our societies and is a cornerstone of growth and employment, both in developed and developing economies. The United Nations Secretary-General echoes the five key priority areas that UNWTO has identified for tourism to return and drive wider recovery, and both governments and the private sector now have a duty to put this plan into
action.’

“The Policy Brief notes that women, youth and workers in the informal economy are most at risk from job losses and business closures across the tourism sector. At the same time, destinations most reliant on tourism for jobs and economic growth, including SIDS) and Least Developed Countries (LDCs) are likely to be hardest hit, including through an anticipated fall in foreign direct investment (FDI).

“In addition to calling for strong support for the sector in mitigating these massive impacts, the Brief stresses that this crisis represents an opportunity to rethink tourism, including how it contributes to the SDGs. To this end, the Policy Brief provides Five Priorities for the restart of tourism, all aimed at ensuring a more resilient, inclusive and carbon neutral sector. These priorities are:

“1. Mitigate socio-economic impacts on livelihoods, particularly women’s employment and economic security.

“2. Boost competitiveness and build resilience, including through economic
diversification and encouragement of MSMEs.

“3. Advance innovation and digital transformation of tourism

“4. Foster sustainability and green growth

“5. Enhanced focus on coordination, and responsible leadership

“Alongside penholder UNWTO, a further 11 United Nations agencies contributed to the Policy Brief, highlighting the sector’s unique importance and outreach.”

The policy brief is embedded below.

SG-Policy-Brief-on-COVID-and-Tourism

There are a set of slides that lay out what is at stake for the world from the impact of COVID-19 on tourism. International tourist arrivals are down 56% in the January – May time period for the world, with the range by region being between 47% (Americas and Africa) and 60% (Asia and the Pacific). The loss in revenue in five months was US$320 billion with an annual projection of lost revenue from US$910 billion to US$1.2 trillion. The most optimistic projection has international tourism revenues declining to a level last seen in 2003.

The small island developing states (SIDS) and least developed countries (LDCs) most at risk include 21 which have international tourism exports accounting for 50-90% of total exports of goods and services and an additional 20 countries where international tourism exports are between 30 and 50% of total exports of goods and services. Macao (China), Palau, Bahamas, Saint-Lucia, Maldives, Turks and Caicos, and Aruba are all 80% or higher; St. Maarteen and Anguila are 70-79%; Cabo Verde, Antigua & Barbuda, Sao Tome & Principe, Barbados, Vanuatu, and Samoa are all 60-69%; Jamaica, Montenegro, Gambia, Fiji, Comoros, and Dominica are all 50-59%; Tonga, Ethiopa, Belize, Lebanon, Montserrat, Georgia, French Polynesia, and Jordan are all 40-49%; and Mauritus, Seychelles, Haiti, Dominican Republic, Bermuda, Albania, St. Vincent & Grenadines, Croatia, Tanzania, Curacao, Grenada, and St. Kitts and Nevis are all 30-39%.

One of slides shows that women make up 54% of the workforce of accommodation and food services supporting the point that women are among the most vulnerable in terms of job security during the pandemic.

The slides are embedded below.

UN-Tourism-Policy-Brief-Visuals

Conclusion

As WTO Members look at their responses to the COVID-19 pandemic in general with a focus on export restraints and other restrictions, consider how trade can speed economic recovery and consider steps that should be taken to reduce the challenges should there be another health pandemic in the future, it is important that the Members consider the travel and tourism sector with a sense of urgency. Cooperation and coordination among WTO Members on when and how to reopen international travel and other needs of travelers, businesses, workers and host governments is obviously critical. Also coordination with the WHO, UNWTO, IMF, World Bank and regional development banks is critical to see that the special needs of SIDS, LDCs and the MSMEs are identified and addressed.