Republic of Korea

USTR 2021 National Trade Estimate Report on Foreign Trade Barriers — areas of concern with a focus on China

Every year for the last 36 years, USTR releases a National Trade Estimate Report on Foreign Trade Barriers. This year’s forward provides a little background on the report. See USTR, 2021 National Trade Estimate Report on Foreign Trade Barriers, page 1, https://ustr.gov/sites/default/files/files/reports/2021/2021NTE.pdf.

“The 2021 National Trade Estimate Report on Foreign Trade Barriers (NTE) is the 36th in an annual series that highlights significant foreign barriers to U.S. exports, U.S. foreign direct investment, and U.S. electronic commerce. This document is a companion piece to the President’s 2021 Trade Policy Agenda and 2020 Annual Report, published by the Office of the United States Trade Representative (USTR) in March.

“In accordance with section 181 of the Trade Act of 1974, as amended by section 303 of the Trade and Tariff Act of 1984 and amended by section 1304 of the Omnibus Trade and Competitiveness Act of 1988, section 311 of the Uruguay Round Trade Agreements Act, and section 1202 of the Internet Tax Freedom Act, USTR is required to submit to the President, the Senate Finance Committee, and appropriate committees in the House of Representatives, an annual report on significant foreign trade barriers. The statute requires an inventory of the most important foreign barriers affecting U.S. exports of goods and services, including agricultural commodities and U.S. intellectual property; foreign direct investment by U.S. persons, especially if such investment has implications for trade in goods or services; and U.S. electronic commerce. Such an inventory enhances awareness of these trade restrictions, facilitates U.S. negotiations aimed at reducing or eliminating these barriers, and is a valuable tool in enforcing U.S. trade laws and strengthening the rules-based system.”

This year’s report covers 65 countries or country groups, so not all trading partners are covered by the annual report. China has the largest section of the report for an individual country (36 pages) while the European Union (covering 27 countries) has the largest section overall (52 pages). Other important trading partners with significant sections in the report include India (24 pages), Russian Federation (20 pages), Japan (18 pages), Indonesia (16 pages), Republic of Korea (14 pages), Brazil (14 pages), Vietnam (14 pages). the USMCA partners had smaller sections — Canada (8 pages) and Mexico (12 pages). the countries covered account for nearly 100 percent of U.S. trade in goods and nearly 90% of U.S. services trade.

The USTR press release from March 31, 2021 (majority of release copied below) provides an outline of some of the major areas of concern. See USTR, Ambassador Tai releases 2021 National Trade Estimate Report, March 31, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/march/ambassador-tai-releases-2021-national-trade-estimate-report.

Significant Barriers to U.S. Exports in 65 Trading Partners Detailed

“WASHINGTON – United States Trade Representative Katherine Tai today released the 2021 National Trade Estimate (NTE) Report, providing a detailed inventory of significant foreign barriers to U.S. exports of goods and services, investment, and electronic commerce.

“’The President’s Trade Agenda released earlier this month outlined a clear vision for supporting America’s working families by promoting a fair international trading system that boosts inclusive economic growth,’” said Ambassador Tai. ‘The 2021 NTE Report identifies a range of important challenges and priorities to guide the Biden Administration’s effort to craft trade policy that reflects America’s values and builds back better.’

“Published annually since 1985, the NTE Report is a comprehensive review of significant foreign trade barriers affecting U.S. exports of goods and services. The 570-page report examines 65 trading partners and country groups, including the U.S.’ largest trading partners, all 20 U.S. FTA partners, and other economies and country groupings of interest such as the Arab League, the United Kingdom (included as a separate entity for the first time in this report), and the European Union. Together, these economies account for 99 percent of U.S. goods trade and 87 percent of U.S. services trade. 

“The NTE Report covers significant trade barriers in 11 areas, including (1) import policies such as tariffs, import licensing and customs barriers; (2) technical barriers to trade; (3) sanitary and phytosanitary measures; (4) subsidies; (5) government procurement; (6) intellectual property protection; (7) services barriers; (8) barriers to digital trade and electronic commerce; (9) investment barriers; (10) competition; and (11) other barriers. 

“Taken as a whole, the NTE Report highlights significant barriers that present major policy challenges with implications for future U.S. growth opportunities, and the fairness of the global economy. Examples of these significant obstacles include: 

Agricultural Trade Barriers:  The NTE Report details an array of tariff and nontariff barriers to U.S. agricultural exports across trading partners and regions, ranging from non-science-based regulatory measures, opaque approval processes for products of agricultural biotechnology, burdensome import licensing and certification requirements, and restrictions on the ability of U.S. producers to use the common names of the products that they produce and export. USTR will continue to engage foreign governments on barriers that hamper the ability of U.S. farmers, ranchers and food processors to access markets worldwide. 

Digital Trade:  The 2021 NTE Report details restrictive data policies in India, China, Korea, Vietnam, and Turkey, among other countries; local software pre-installation requirements in Russia, Indonesian tariffs on digital products, and existing or proposed local content requirements for online streaming services in Australia, Brazil, Canada, China, EU, Mexico, Ukraine, and Vietnam; and discriminatory tax measures in Austria, India, Italy, Spain, Turkey, and the UK. USTR will continue to engage foreign governments on digital policies that threaten the regulatory landscape for U.S. exporters of digital products and services and undermine U.S. manufacturers’ and service suppliers’ ability to move data across borders. 

Excess Capacity:  China’s state-led approach to the economy and trade makes it the world’s leading offender in creating non-economic capacity, as evidenced by the severe and persistent excess capacity situations in several industries, including steel, aluminum, and solar, among others. China also is well on its way to creating severe excess capacity in other industries through its pursuit of industrial plans such as Made in China 2025, pursuant to which the Chinese government is doling out hundreds of billions of dollars to support Chinese companies and requiring them to achieve preset targets for domestic market share–at the expense of imports–and global market share in several advanced manufacturing industries. USTR will continue its bilateral and multilateral efforts to address these harmful trade practices.

Technical Barriers to Trade:   Technical regulations or conformity assessment procedures that unnecessarily restrict trade or curb the movement of innovative products risk lost opportunities to capitalize on America’s leadership in science and high-tech manufacturing, services, and agriculture. The NTE Report’s many examples of this challenge range from non-transparent European Union chemical regulations to Chinese Information Technology cybersecurity and encryption standards, to Indian and Brazilian testing and certification rules for telecommunications equipment, to technology. 

“The United States is taking steps to address these issues, and encourage flexible regulatory approaches and transparent, open processes, with these and many other partners. Within APEC, for example, the United States is engaged in projects on cybersecurity and blockchain to identify key public policy issues, and has projects in development on aerial drones and 3D printing. Another key example is USTR’s bilateral and multilateral work on standards and regulations related to electric cars, to ensure that vehicles from different manufacturers can all be charged reliably.

“The NTE Report details thousands of individual barriers to specific manufactured goods, farm products, and services. Each can reduce U.S. opportunities to export, invent, support jobs, and raise wages and incomes. These range from Argentina’s imposition of quota limits on imported books in September 2020 to India’s 38.8 percent average tariff on agricultural goods; the anomalous technical standards Saudi Arabia applies to shoes and electronic equipment; Ecuador’s mandatory and cumbersome process for allocating import licenses for agriculture products such as meats and dairy products; Indonesian local content requirements across a broad range of sectors; and Russian bans on imported food.”

What the NTE has to say about China 

The United States has for many years raised multiple concerns with China’s practices which the U.S. views as distorting trade flows and impeding market access to China. While the U.S. and China have engaged bilaterally extensively since China’s WTO accession and the U.S. has pursued several dozen disputes against Chinese practices that were clearly contrary to WTO obligations of China, little overall progress has been made in resolving the wide array of Chinese government distortions created and maintained over the years. These distortions contribute to the extraordinary trade deficit the United States has with China. See, e.g., U.S. Department of Commerce, Bureau of Economic Analysis, MONTHLY U.S. INTERNATIONAL TRADE IN GOODS AND SERVICES, FEBRUARY 2021, April 7, 2021, https://www.bea.gov/news/2021/us-international-trade-goods-and-services-february-2021 (U.S. trade deficit in 2020 in goods with China was $310.2 billion; U.S. trade surplus in services was $22.1 billion; U.S. deficit in goods with China increased to $50.9 billion in the January – February 2021 period versus $42.1 billion in the first two months of 2020).

The Trump Administration pursued a 301 investigation on a number of intellectual property concerns with China, conducted Section 232 national security investigations on steel and aluminum — two sectors where Chinese actions have created massive global excess capacity — and negotiated with China the U.S.-China Phase I Agreement which took effect in mid-February 2020. The Agreement both addressed a number of problems in agriculture, intellectual property and services and committed China to expanded purchases of goods and services from the United States in 2021-2022 (and going forward). The NTE reviews where Chinese commitments under the Phase I Agreement apply and what progress is being seen. On the purchase commitments, China has not come close to meeting the commitments in 2021 though there were increased imports from the U.S. of agricultural products and energy products. See, e.g., March 20, 2021, The U.S.-China Phase 1 Trade Agreement under the Biden Administration, https://currentthoughtsontrade.com/2021/03/20/the-u-s-china-phase-1-trade-agreement-under-the-biden-administration/. The U.S. has a long history of China promising reforms that are either not carried out or are undermined by additional restrictions. The list of areas of concern making it into the annual NTE is not exhaustive but illustrative of the challenges to obtaining conditions of fair trade with the world’s most populous nation and second largest economy.

Areas of concern for the United States with China shown in the 2021 NTE include:

Tariffs (there are some high agricultural tariffs, and the large tariffs imposed in retaliation to U.S. Section 232 actions on steel and aluminum and U.S. Section 301 actions for Chinese practices reviewed in the investigation).

Non-tariff barriers include

  • Industrial Policies (such as “Made in China 2025” and described generally as follows, “China continues to pursue a wide array of industrial policies that seek to limit market access for imported goods, foreign manufacturers, and foreign services suppliers, while offering substantial government guidance, resources, and regulatory support to Chinese industries. The beneficiaries of these constantly evolving policies are not only state-owned enterprises (SOEs) but also other domestic companies attempting to move up the economic value chain.),
  • State-Owned Enterprises (a number of concerns are raised including “China has also previously indicated that it would consider adopting the principle of ‘competitive neutrality’ for SOEs. However, China has continued to pursue policies that further enshrine the dominant role of the state and its industrial plans when it comes to the operation of state-owned and state-invested enterprises.”),
  • Industrial Subsidies (massive subsidies to industries creating excess capacity and causing harm to U.S. producers globally; U.S. is working with the EU and Japan on possible amendments to Subsidies Agreement to address certain aspects not effectively handled under existing rules)
  • Fisheries Subsidies (size of subsidies by China to its industry),
  • Excess Capacity (problem created in many sectors including steel, aluminum, solar panels and others through state programs, subsidies, etc.),
  • Indigenous Innovation (including preferences for IP developed in China),
  • Technology Transfer (301 investigation looked at “(1) the use of a variety of tools to require or pressure the transfer of technologies and IP to Chinese companies; (2) depriving U.S. companies of the ability to set market based terms in technology licensing negotiations with Chinese companies; (3) intervention in markets by directing or unfairly facilitating the acquisition of U.S. companies and assets by Chinese companies to obtain cutting-edge technologies and IP; and, (4) conducting or supporting cyber-enabled theft and unauthorized intrusions into U.S. commercial computer networks for commercial gains.”)
  • Investment Restrictions (different systems for domestic and foreign investment; discriminatory treatment),
  • Administrative Licensing (problems continue to be experienced in a wide array of licensing situations)
  • Standards (ability of foreign companies to participate in establishing; development of Chinese standards regardless of international standards),
  • Secure and Controllable ICT Policies (cybersecurity law used to discriminate against foreign ICT prducts),
  • Encryption (“Onerous requirements on the use of encryption, including intrusive approval processes and, in many cases, mandatory use of indigenous encryption algorithms (e.g., for WiFi and 4G cellular products), continue to be cited by stakeholders as a significant trade barrier.”),
  • Competition Policy (“Many U.S. companies have cited selective enforcement of the Anti-monopoly Law against foreign companies seeking to do business in China as a major concern, and they have highlighted the limited enforcement of this law against SOEs.” “Instead, these remedies seem to be designed to further industrial policy goals. Another concern relates to the procedural fairness of Anti-monopoly Law investigations of foreign companies. U.S. industry has expressed concern about insufficient predictability, fairness, and transparency in Antimonopoly Law investigative processes.”),
  • Pharmaceuticals (some long standing issues addressed in U.S.-China Phase I Agreement; others to be addressed in the future),
  • Medical devices (China’s “pricing and tendering procedures for medical devices and its discriminatory treatment of imported medical devices”),
  • Cosmetics (“concerns with China’s regulation of cosmetics.” “Despite years of United States engagement with China via the JCCT, the International Cooperation on Cosmetics Regulation, and other fora to share views and expertise regarding the regulation of cosmetics, as of March 2021 China has not yet addressed key U.S. trade concerns, including basic concerns such as the need to use international standards to facilitate cosmetics conformity assessment, nor has it provided assurances that U.S. intellectual property will be protected.”),
  • Export restraints (need to bring multiple cases at WTO on inputs where violate Protocol of Accession),
  • Value-added Tax Rebates and Related Policies (modifications of rates to change trade flows),
  • Import Ban on Remanufactured Products
  • Import Ban on Recyclable Materials
  • Trade Remedies (problems in transparency and procedural fairness; problems also in apparent use of trade remedies to go after trading partners who use WTO rights against Chinese products),
  • Government Procurement (failure to join the WTO GPA yet),
  • Corporate Social Credit System (“Foreign companies are concerned that the corporate social credit system will also be used by the Chinese Government to pressure them to act in accordance with relevant Chinese industrial policies or otherwise to make investments or conduct their business operations in ways that run counter to market principles or their own business strategies. Foreign companies are also concerned about the opaque nature of the corporate social credit system.”),
  • Other Non-Tariff Measures (“Key areas include China’s labor laws, laws governing land use in China, commercial dispute resolution and the treatment of non-governmental organizations. Corruption among Chinese Government officials, enabled in part by China’s incomplete adoption of the rule of law, is also a key concern.”).

Intellectual Property Protection (many issues were included in the U.S.-China Phase I Agreement, some progress on issues raised).

  • Trade Secrets (major area of concern and theft, some believed from government-supported entities; some improvements from U.S.-China Phase I Agreement),
  • Bad Faith Trademark Registration (a continuing major concern; some progress in U.S.-China Phase I Agreement),
  • Online Infringement (“Online piracy continues on a large scale in China, affecting a wide range of industries, including those involved in distributing legitimate music, motion pictures, books and journals, software, and video games.” Some progress made in the U.S.-China Phase I Agreement),
  • Counterfeit Goods (a major problem. “The Phase One Agreement requires China to take effective enforcement action against counterfeit pharmaceuticals and related products, including active pharmaceutical ingredients, and to significantly increase actions to stop the manufacture and distribution of counterfeits with significant health or safety risks. The Phase One Agreement also requires China to provide that its judicial authorities shall order the forfeiture and destruction of pirated and counterfeit goods, along with the materials and implements predominantly used in their manufacture. In addition, the Agreement requires China to significantly increase the number of enforcement actions at physical markets in China and against goods that are exported or in transit. It further requires China to ensure, through third party audits, that government agencies and SOEs only use licensed software.”).

Agriculture (“China remains a difficult and unpredictable market for U.S. agricultural exporters, largely because of
inconsistent enforcement of regulations and selective intervention in the market by China’s regulatory authorities. The failure of China’s regulators to routinely follow science-based, international standards, and guidelines further complicates and impedes agricultural trade. The Phase One Agreement addresses structural barriers to trade and aims to support a dramatic expansion of U.S. food, agriculture, and seafood product exports, which will increase U.S. farm and fishery income, generate more rural economic activity, and promote job growth. The Phase One Agreement addresses a multitude of non-tariff barriers to U.S. agriculture and seafood products, including for meat and meat
products, poultry, seafood, rice, dairy, infant formula, horticultural products, animal feed and feed additives, pet food, and products of agricultural biotechnology. The Agreement also includes enforceable commitments requiring China to purchase and import on average at least $40 billion of U.S. agricultural and seafood products per year in 2021 and 2022, representing an average annual increase of at least $16 billion over 2017 levels. China also agreed that it will strive to purchase and import an additional $5 billion of U.S. agricultural and seafood products each year.”).

  • Agricultural Domestic Support (China exceeds the limits allowed it; WTO dispute confirms China in violation of WTO obligations; U.S. seeking authorization to retaliate),
  • Tariff-rate Quota Administration (U.S. challenged China’s administration of TRQs on various products and won WTO dispute; U.S.-China Phase I Agreement requires China to comply on the products of concern),
  • Agricultural Biotechnology Approvals (China’s system has been a major problem for U.S. producers. U.S>-China Phase I Agreement includes commitments by China to address the major concerns of the U.S. in this area),
  • Food Safety Law (China’s actions have been quite burdensome and have failed to provide notices to the WTO in many cases. U.S>-China Phase I Agreement addresses the main concerns),
  • Poultry (China restricted U.S. exports after avian influenza in the U.S. and maintained restrictions despite actions by the U.S. that complied with World Organization for Animal Health (OIE) guidelines. U.S.-China Phase I Agreement has China committing to follow OIE guidelines and limiting restrictions to the region where there is a problem in future outbreaks),
  • Beef (“In the Phase One Agreement, China agreed to expand the scope of U.S. beef products allowed to be imported, to eliminate age restrictions on cattle slaughtered for export to China, and to recognize the U.S. beef and beef products’ traceability system. China also agreed to establish MRLs for three synthetic hormones legally used for decades in the United States consistent with Codex standards and guidelines. Where Codex standards and guidelines do not yet exist, China agreed to use MRLs established by other countries that have performed science-based risk assessments.”),
  • Pork (“China bans the use of certain veterinary drugs and growth promotants instead of accepting the MRLs set by Codex.” Some progress on opening the China market to U.S. pork products was made in the U.S.-China Phase I Agreement),
  • Horticultural Products (market access barriers for many U.S. products. U.S.-China Phase I Agreement obtains access for a number of products — fresh potatoes for processing, blueberries, nectarines and avocados from California, and barley, timothy hay and some other products.),
  • Value-added Tax Rebates and Related Policies (practice of varying rates on agricultural commodities).

Services (“In 2020, numerous challenges persisted in a number of services sectors. As in past years, Chinese regulators
continued to use discriminatory regulatory processes, informal bans on entry and expansion, case-by-case approvals in some services sectors, overly burdensome licensing and operating requirements, and other means to frustrate the efforts of U.S. suppliers of services to achieve their full market potential in China. These policies and practices affect U.S. service suppliers across a wide range of sectors, including express delivery, cloud computing, telecommunications, film production and distribution, online video and entertainment software, and legal services. In addition, China’s Cybersecurity Law and related draft and final implementing measures include mandates to purchase domestic ICT products and services, restrictions on cross-border data flows, and requirements to store and process data locally. China’s draft Personal Information Protection Law also includes restrictions on cross-border data flows and requirements to store and process data locally. These types of data restrictions undermine U.S. services suppliers’ ability to take advantage of market access opportunities in China. China also had failed to fully address U.S. concerns in
areas that have been the subject of WTO dispute settlement, including electronic payment services and theatrical film importation and distribution. The Phase One Agreement addresses a number of longstanding trade and investment barriers to U.S. providers of a wide range of financial services, including banking, insurance, securities, asset management, credit rating, and electronic payment services, among others. The barriers addressed in that Agreement
include joint venture requirements, foreign equity limitations, and various discriminatory regulatory requirements. Removal of these barriers should allow U.S. financial service providers to compete on a more level playing field and expand their services export offerings in the China market.”)

  • Banking Services (U.S.-China Phase I Agreement addresses some concerns re access including bank branches and supplying securities investment fund custody services),
  • Securities, Asset Management, and Futures Services (U.S.-China Phase I Agreement resulted in China eliminating limits on equity ownership and commits to nondiscrimination for U.S. suppliers of these services),
  • Insurance Services (despite commitments by China as part of the U.S.-China Phase I Agreement, U.S. participation in China’s insurance market remains very limited),
  • Electronic Payment Services (China has restricted access to foreign electronic payment services providers. U.S. won a WTO dispute and included provisions in U.S.-China Phase I Agreement. So far just one foreign electronic payment services provider has been licensed in China),
  • Internet-enabled Payment Services (major problems for foreign companies to obtain license to provide such services),
  • Telecommunications Services (range of barriers have limited foreign suppliers access to both basic telecom services and to value added services),
  • Internet Regulatory Regime (“China’s Internet regulatory regime is restrictive and non-transparent, affecting a broad range of commercial services activities conducted via the Internet, and is overseen by multiple agencies without clear lines of jurisdiction. China’s Internet economy had boomed over the past decade and is second in size only to that of the United States. Growth in China has been marked in service sectors similar to those found in the United States, including retail websites, search engines, online education, travel, advertising, audio-visual and computer gaming services, electronic mail and text, online job searches, Internet consulting, mapping services, applications, web domain registration, and electronic trading. However, in the Chinese market, Chinese companies dominate due in large part to restrictions imposed on foreign companies by the Chinese Government. At the same time, foreign companies continue to encounter major difficulties in attempting to offer these and other Internet-based services on a cross-border basis. China continues to engage in extensive blocking of legitimate websites and apps, imposing significant costs on both suppliers and users of web-based services and products. According to the latest data, China currently blocks a significant portion of the largest global sites. U.S. industry research has calculated that more than 10,000 foreign sites are blocked, affecting billions of dollars in business, including communications, networking, app stores, news, and other sites. Even when sites are not permanently blocked, the often arbitrary implementation of blocking, and the performance-degrading effect of filtering all traffic into and outside of China, significantly impair the supply of many cross-border services, often to the point of making them unviable.”),
  • Voice-over-Internet Protocol Services (“China’s regulatory authorities have restricted the ability to offer VOIP services interconnected to the public switched telecommunications network (i.e., to call a traditional phone number) to basic telecommunications service licensees.”),
  • Cloud Computing Services (foreign service providers can only operate in China by using a Chinese company and turning over brand, IP and other aspects; serious concern for U.S.),
  • Audio-visual and Related Services (“China prohibits retransmission of foreign TV channels, prohibits foreign investment in TV production, prohibits foreign investment in TV stations and channels in China, and imposes quotas on the amount of foreign programming that can be shown on a Chinese TV channel each day.”),
  • Theatrical Films (despite a WTO dispute and a resulting MOU where China agreed to expand number of U.S. films, China has not fulfilled its commitments)
  • Online Video and Entertainment Software Services (foreign suppliers are severely restricted),
  • Legal Services (very limited ability for foreign firms or foreign lawyers to practice in China)
  • Express Delivery Services (foreign service providers are banned from document delivery and face discriminatory and burdensome actions on package participation),
  • Data Restrictions (activities in China are likely to result in local storage requirements and limits on cross-border transfer; major concern to U.S. and many other countries).

Transparency (much work needed by China to meet obligations)

  • Publication of Trade-related Measures (WTO obligation to publish in one journal; spotty performance and many types of measures not published in the journal),
  • Notice-and-comment Procedures (little progress at sub-central government level; some progress at central government; U.S.-China Phase I Agreement commits China to provide 45 days notice and comment period for matters relating to the Agreement),
  • Translations (WTO commitment to provide translations in one of the three official WTO languages. “China does not publish translations of trade-related laws and administrative regulations in a timely manner (i.e., before implementation), nor does it publish any translations of trade-related measures issued by sub-central governments at all.”).

Conclusion

While the U.S. was the first country to produce a national trade estimate, a number of countries do so today. All trading partners have some practices which concern other trading partners, including the United States.

The length of the entry in the NTE for a give country is a reasonable indication both of the importance of the trade relationship and of the breadth of issues of concern. For the United States, the National Trade Estimate is a useful compilation of many of the major concerns raised by industries about problems in access to markets abroad or distortions created by practices of trading partners. Typically items found in the NTE will be part of USTR’s focus during the year in interactions with particular trading partners.

China is the country with the longest entry in the NTE and has been for many years. Considering the array of distortions and other problems identified in this year’s NTE, the focus on China is not surprising.

Some of the problems identified in this year’s NTE with China could be addressed through WTO reform, though China has indicated opposition to such an approach. On some of the issues, the U.S. has received repeated promises from China to address but without meaningful results to date.

What is clear is that U.S. trade relations with China are not balanced and haven’t been for the entire time of WTO membership for China. The challenge for the U.S. and the world is how to restore balance and save the global trading system. There are no obvious answers.

U.S. files appeal at the WTO from panel report in case brought by the Republic of Korea — United States — Anti-Dumping and Countervailing Duties on Certain Products and the Use of Facts Available (DS539)

In a post from January 29, 2021, I had argued that the United States should appeal from the panel report issued on January 21 in a trade remedies dispute brought by the Republic of Korea against the use of facts available in antidumping and countervailing duty cases. See January 29, 2021, WTO Panel report on UNITED STATES – ANTI-DUMPING AND COUNTERVAILING DUTIES ON CERTAIN PRODUCTS AND THE USE OF FACTS AVAILABLE should be appealed by the United States, https://currentthoughtsontrade.com/2021/01/29/wto-panel-report-on-united-states-anti-dumping-and-countervailing-duties-on-certain-products-and-the-use-of-facts-available-should-be-appealed-by-the-united-states/. As I wrote in that post:

“Antidumping and countervailing duty proceedings in the United States are very transparent with full access to information on the record available to parties under administrative protective order and with many opportunities to submit comments, raise questions, seek clarification or respond to additional inquiries flowing from earlier responses. It is quite common for Commerce to receive requests for more time to respond to the initial questionnaire and to any supplemental requests flowing from developments. Responding parties can determine whether or not to submit all information, partial information or no information. Questionnaire responses are often incomplete or adopt interpretations of what has been requested to provide less than complete information. In antidumping investigations, it is not uncommon for respondent data bases to change during the course of the investigation, sometimes markedly. Briefing after the preliminary determination permits challenges to the preliminary determination by all parties, including challenges to use of facts available. While there are always legal issues that are briefed, facts available issues are fact-based issues flowing from whether parties cooperated, withheld information, failed to supply requested information, etc., and if so, what alternative information is available that can be used.

“The ADA provides special provisions on dispute settlement in Article 17.6. The approach on review of facts is laid out in Article 17.6(i) of the ADA (there is no counterpart in the ASCM for the reason that Art. 17.6 of the ADA was added at the end of the Uruguay Round without chance to consider adopting a parallel provision in the ASCM). Art. 17.6(i) states:

“‘17.6  In examining the matter referred to in paragraph 5:

“‘(i)   in its assessment of the facts of the matter, the panel shall determine whether the authorities’ establishment of the facts was proper and whether their evaluation of those facts was unbiased and objective. If the establishment of the facts was proper and the evaluation was unbiased and objective, even though the panel might have reached a different conclusion, the evaluation shall not be overturned;’

“Article 17.6 was added to the ADA at the end of the Uruguay Round at the insistence of the United States which was interested in seeing that very complicated and detailed administrative proceedings were not second guessed by panels or the Appellate Body which would not have been involved in the proceeding or have access to all materials. Art. 17.6(i) deals with providing deference to administering authorities on facts. Art. 17.6(ii) does the same for legal interpretations for provisions subject to more than one meaning.

“The panel report, following other panel and Appellate Body reports that have been problematic from the U.S. perspective, doesn’t view Art. 17.6(i) as being deferential to an investigating authority as long as the authority hasn’t conducted the investigation in a biased or non-objective manner or somehow established facts improperly. See WT/DS539/R at para. 7.23 – 7.36 (after a review of the meaning of ADA Art. 6.8 and Annex II, the panel sums its view of the panel’s task to be the following: ‘In sum, we consider that the terms of Article 6.8, interpreted in light of their context and object and purpose, require investigating authorities to select – in an unbiased and objective manner – those facts available that constitute reasonable replacements for the missing ‘necessary’ information in the specific facts and circumstances of a given case. In doing so, investigating authorities must take into account all facts that are properly available to them. In selecting the replacement facts, Article 6.8 does not require investigating authorities to select those facts that are most ‘favourable’ to the non-cooperating party. Investigating authorities may take into account the procedural circumstances in which information is missing, but Article 6.8 does not condone the selection of replacement facts for the purpose of punishing interested parties.’).

“In reading the panel report, the Commerce Department is not given deference for its decisions of what facts available should be used. Thus, that violations were found for how Commerce determined facts available in each of the six proceedings reflect the panel reaching a different conclusion than Commerce. But while the panel may have reached a different result than Commerce, that by itself does not constitute a basis under Art. 17.6(i) to find a violation.

Conclusion

“The constant limiting by panel and Appellate Body reports of the ability to utilize trade remedy agreements is, of course, the main substantive concern that the United States has with the operation of the WTO’s Dispute Settlement system, although there are examples of the same problem in other areas covered by panel or AB reports as well. Last week’s panel report on Korea’s challenge to U.S. antidumping and countervailing duty proceedings on the use of facts available continues to undermine the legitimacy of WTO dispute settlement.

“Accordingly, the Biden Administration should file an appeal from last week’s panel decision and ensure that any eventual resolution of the Appellate Body impasse includes a restoration of rights that have narrowed or eliminated under the trade remedy or trade defense agreements (ADA, ASCM and safeguard).”

Today’s appeal

A Dispute Settlement Body meeting was scheduled for today with only one item on its agenda, consideration of the panel report in DS539. The WTO has reported on its website that the United States filed an appeal of the panel report today, March 19, 2021. WT/DS539/9. While the notice of appeal is not yet up on the WTO website, the U.S. has presumably indicated it is challenging the erroneous interpretation of ADA 17.6(i) among other issues.

The U.S. appeal is the ninth such appeal to the Appellate Body after December 10, 2019 when the Appellate Body ceased to have at least three members (and hence is unable to hear new appeals) and the eighteenth appeal that awaits the restoration of an Appellate Body for an appeal to be heard/completed.

WTO Director-General Ngozi Okonjo-Iweala’s first week on the job starts with a two day General Council meeting

While the WTO’s General Council, in special session, appointed Dr. Ngozi Okonjo-Iweala to be the next Director-General on February 15, 2021, her term starts on Monday, March 1. The challenges facing the WTO membership and the incoming Director-General are many and complex. At the same time, there is a lot of useful work that is done within the WTO including efforts of non-members to join the WTO (accessions).

In speaking to an informal Trade Negotiations Committee and Heads of Delegation meeting on February 25, Deputy Director-General Alan Wolff spoke in part on “The Ngozi Okonjo-Iweala Era”. See WTO, DDG Wolff calls on members to work with new Director-General to reform WTO, 25 February 2021, https://www.wto.org/english/news_e/news21_e/ddgaw_25feb21_e.htm. Part of the section of his statement on the new DG’s era is copied below.

“The Ngozi Okonjo-Iweala Era

“The landmark event of the last six months was the appointment of the new Director-General ten days ago after what turned out to be a lengthy process.  91 member delegations spoke last week to congratulate the new Director-General. The DDGs and the Secretariat join you in welcoming Dr Okonjo-Iweala’s appointment with great enthusiasm.

“Of course, member enthusiasm, optimism and hope need to be translated into concrete action.  

“There is much that needs to be done at this critical juncture for the WTO. World trade must contribute to a more effective pandemic response as well as a strong and sustainable economic recovery. Climate issues are demanding more urgent attention. WTO reform is overdue, having been called for repeatedly by you, by your ministers and by many heads of government. 

“The challenges are many but so are the opportunities. Dr Ngozi’s remarks at the Special General Council meeting last Monday, subsequently circulated to delegations in document JOB/GC/250, presented a worthy and ambitious agenda for the members of this organization.

“What did she say?

“To act with a sense of urgency to assist in controlling the COVID-19 pandemic through the nexus of trade and public health:

“First, by playing a more forceful role in exercising the WTO’s monitoring function. Part of this would involve encouraging members to minimise or remove export restrictions that hinder supply chains for medical goods and equipment. WTO monitoring suggests that as of yesterday, 59 members and 7 observers still had pandemic-related export restrictions or licensing requirements in place, mostly for personal protective equipment, disinfectants and to a lesser extent, for medicines and food. This represents a significant level of rollback compared to the 81 members and 10 observers that had implemented such measures over the past year. A welcome development — but there is much room to improve this record.  

“And second, by broadening access to new vaccines, therapeutics, and diagnostics by facilitating technology transfer within the framework of multilateral rules.

“Beyond these immediate responses to the pandemic, Dr Ngozi set out a number of other, also vitally important, challenges:

“To swiftly conclude the fisheries subsidies negotiations, and thus pass a key test of the WTO’s multilateral credibility while contributing to the sustainability of the world’s oceans.

“To build on the new energy in the multilateral trading system from the joint statement initiatives attracting greater support and interest, including from developing countries.

“To address more broadly the nexus between trade and climate change, using trade to create a green and circular economy, to reactivate and broaden negotiations on environmental goods and services, to take the initiative to address the issue of carbon border adjustments as they may affect trade.

“To level the playing field in agricultural trade though improving market access and dealing with trade distorting domestic support, exempting from export restrictions World Food Programme humanitarian purchases.

“To strengthen disciplines on industrial subsidies, including support for state-owned enterprises. 

“To defuse the divisions over Special and Differential Treatment (SDT).

“And to develop a work programme for restoring two-tier dispute resolution, to be agreed no later than MC12.

“I sense from my discussions with members that you chose this leader, Ngozi Okonjo-Iweala, because she has shown herself during her career to be fearless in the face of daunting challenges — and is experienced in knowing how to work with others to make progress toward solutions. 

“Each of the challenges the WTO faces, I am sure, can be met and overcome.  Echoing Dr Ngozi’s words, the trading system that we inherited, now only three-quarters of a century old, is about people.  This is inscribed in the opening section of the Marrakech agreement: ‘to raise living standards, ensure full employment, increase incomes, expand the production of and trade in goods and services, and seek the optimal use of the world’s resources in accordance with the objective of sustainable development.”’

DDG Wolff’s summation correctly lays out many of the issues needing to be addressed by the WTO membership. The vast majority of the issues are highly controversial among at least some Members.

The first major order of business is a two day General Council meeting on March 1-2 which has several agenda items that lay out controversies on important potential deliverables by the WTO in 2021. The agenda for the two day meeting contains sixteen items. See WT/GC/W/820 (26 February 2021) embedded below.

W820

General Council meetings deal with updates on ongoing work at the WTO and address issues teed up by particular Members for consideration at the meeting. This post does not take up all agenda items but highlights a few of possible interest. Because DDG Wolff’s statement on February 25 reviews many of the activities of the WTO in the last six months which shows some of the positive developments, the full statement is embedded below.

WTO-_-2021-News-items-Speech-DDG-Alan-Wolff-DDG-Wolff-calls-on-members-to-work-with-new-Director-General-to-reform-WTO

The 12th WTO Ministerial Conference

Agenda item 4 deals with the 12th WTO Ministerial Conference. It is expected that there will be a decision on the timing and location of the twelfth Ministerial Conference at the General Council session on Monday-Tuesday. The 12th MC was postponed from June 2020 because of the COVID-19 pandemic. With the continued challenges from the pandemic the likely date will be the end of 2021. Kazakhstan which had offered to host the conference in 2020 and again in the summer of 2021 has recently indicated a willingness to host in December of this year as well. The ministerial had originally been scheduled for June because of challenging weather conditions in Kazakhstan in December. See TWELFTH SESSION OF THE MINISTERIAL CONFERENCE, COMMUNICATION FROM KAZAKHSTAN, 8 February 2021, WT/GC/229 (24 February 2021)(embedded below).

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Report on WTO Accessions

Deputy Director-General Wolff will provide a statement on the annual report on WTO accessions. The report is WTO ACCESSIONS, 2020 ANNUAL REPORT BY THE DIRECTOR-GENERAL, WT/ACC/38, WT/GC/228 (18 February 2021). Activity on accessions was challenged by the pandemic and inability to travel/hold in person meetings. More technical assistance and virtual meetings were held. Accessions are important for acceding governments in terms of promoting reforms at home and obtaining increased certainty in their international trade relations. Accessions are also an important benefit of membership for existing Members as acceding Members reduce tariffs and various non-tariff barriers to gain accession. The first eight paragraphs of the report provide an overview of activities in 2020 and are copied below.

Overview of activities in 2020

“1. 2020 was an unprecedented year in recent history due the COVID-19 pandemic outbreak and its consequences which have touched upon every single aspect of our lives in every corner of the world. It was a challenging year for the WTO, not least because the pandemic disrupted its core activities, especially during the first half of the year, and it also disrupted the international trade of Members, except for supplies of essential goods critical to combatting the health crisis as trade in these goods expanded dramatically. The difficulties and challenges arising from the pandemic were particularly pronounced in acceding governments due to the uncertainties of being outside of the multilateral trading system. In fact, the desire and urgency to be part of the WTO was never felt stronger than in the pandemic year. This was reflected in the level of accession activities in 2020, which was sustained vis-à-vis previous years, with a significant increase in technical assistance and outreach activities.

“2. The year for accessions started with the establishment of a new Working Party for the accession of Curaçao, a constituent country within the Kingdom of the Netherlands (WTO Member), following its application for an independent membership as a separate customs territory pursuant to Article XII of the Marrakesh Agreement. This constituted the 59th request by a state or separate customs territory for membership since the establishment of the Organization in 1995. In July, Turkmenistan was granted observer status in the WTO, with the understanding that it would apply for accession no later than in five years. This brought the total number of observer governments with the intention to accede to the WTO to 24, an increase by five since 2016 when Afghanistan and Liberia became the Organization’s most recent Members. The continuing interest to become part of the multilateral trading system is a testament to the attraction and relevance of its values and principles for all economies, regardless of their size or level of development.

“3. The COVID-19 pandemic undoubtedly hampered or delayed the technical work by acceding governments, Members and the Secretariat to prepare for, engage in and follow up on Working Party meetings. However, thanks to the firm commitment of the acceding governments to advance their work, four Working Parties met, including through the use of virtual platforms that connected the acceding governments which were unable to travel to Geneva. One acceding government had to cancel its already scheduled meeting due to the suspension of all WTO meetings in March. Out of the four accession Working Party meetings held in 2020, three were on LDC accessions (Ethiopia, Comoros and Timor-Leste). In two cases – the Working Parties of Ethiopia and Uzbekistan – this also represented the formal resumption of accession processes after several years of inactivity (8 and 15 years, respectively), signalling their desire to use WTO membership negotiations to drive domestic economic reforms, which have broader implications in the regions where they are located.

“4. When the pandemic halted planned missions, technical assistance, and outreach activities which required air travel, the Secretariat rapidly shifted the mode of operation to virtual format and took advantage of the opportunities provided thereby. In addition to the formal accession Working Party meetings which took place via Interprefy, the Accessions Division organised virtual technical meetings and briefing sessions with acceding governments, Working Party Chairpersons and partners in support of accessions. Moreover, the Division delivered a number of technical assistance, training and outreach activities in response to articulated needs of acceding governments, using various virtual platforms, such as MS Teams, Zoom and WebEx. In fact, the number of activities delivered by the Division and of participants who attended or were trained in 2020 exceeded considerably the numbers in previous years.

“5. One of the novel outreach programs developed in 2020 was two week-long activities which consisted of a series of webinars combining lectures, training and panel discussions. The first Accessions Week was organised from 29 June to 3 July, and the first edition of the Trade for Peace Week took place from 30 November to 4 December. These virtual events brought together a large number of resource persons and panellists from around the world and reached out to a larger number of participants, in a highly cost-effective manner, in comparison with traditional in-person activities. While the full values and benefits of in-person interaction cannot be replaced or replicated, the Accessions Week enabled the Secretariat to remain engaged with acceding governments and Members, experts and partners, beyond Geneva and around the world. The Trade for Peace Week provided an effective networking platform to expand the WTO’s partnership with the peace and humanitarian communities in support of fragile and conflict affected (FCA) countries in accession.

“6. The importance of collaboration and cooperation with partners was never felt more strongly than in 2020. The Secretariat made concerted efforts to enhance and expand the “Trade for Peace through WTO Accession” Initiative to support FCA countries in accession and those recently acceded to the WTO. In 2020, nine acceding governments were identified as being in a FCA situation according to the World Bank’s classification1, while conflicts emerged or resurged in some others. The pandemic hit hardest countries which had already been suffering from years of conflict, political crises, drought and other natural disasters, compounded by declines of the price of oil and other commodities. Nonetheless, some FCA acceding LDCs showed remarkable resilience in sustaining their engagement in accession. The Working Party on the Accession of the Union of Comoros resumed its work with determination to finalise the process as soon as possible. The Working Party on the Accession of Timor-Leste activated the Working Party by holding its first meeting nearly four years after its establishment, despite various challenges faced on the domestic front. Moreover, Somalia submitted its Memorandum on the Foreign Trade Regime, the base document to start its accession engagement with Members. Furthermore, the Secretariat continued to provide support to the g7+ WTO Accessions Group, which was coordinated by Afghanistan.

“7. The year 2020 marked the 25th anniversary of the WTO. The Secretariat used its annual flagship event, the China Round Table on WTO Accessions, to review the contributions made by accessions to the multilateral trading system since 1995. The event also provided an opportunity for an exchange of ideas to explore the future expansion of WTO membership towards universality, including through possible improvements in the accession process. The year also marked a significant anniversary milestone for five Article XII Members2 – Albania, Croatia, Georgia, Jordan and Oman which joined the WTO in 2000, the year with the largest number of new members to date. Other anniversary milestones included the fifth anniversaries of Membership of Kazakhstan and Seychelles and the fifteenth anniversary for the Kingdom of Saudi Arabia. In recent years, membership anniversaries have become an important occasion to reflect on the benefits and values of being part of the Organization.

“8. Finally, the thematic focus of the 2020 Annual Report was on the complementarities and synergies in negotiating WTO membership and regional trade agreements. Almost all acceding governments are involved in regional integration initiatives in parallel with their efforts to achieve WTO membership. The highlight of the year was the implementation of the African Continental Free Trade Area (AfCFTA) to which all African WTO applicants are signatories. The Report’s thematic section builds on the rich discussions held on the topic during the 2020 Regional Dialogues on WTO Accessions for Africa and for the Arab Region, as well as other meetings on Central Asia and Eurasia. It aims to explore key opportunities and challenges that may arise in a simultaneous pursuit of regional and global integration efforts and to provide a checklist of issues for trade negotiators to consider in maximising the benefits from the participation in multiple trade arrangements.”

The full report is embedded below.

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Waiver of TRIPS Obligations During COVID-19 Pandemic

The sixth agenda item involves the effort from India and South Africa with a number of other developing or least developed countries to obtain a waiver from most TRIPS obligations on medical goods needed for the COVID-19 pandemic. This has been a very controversial issue with developed countries with pharmaceutical companies involved in the production of vaccines and other items opposing the waiver on the basis of existing flexibilities within the TRIPS Agreement and on the global efforts through the WHO, GAVI and CEPI to provide vaccines to low- and middle-income countries through COVAX with financial contributions from many countries, NGOs and others. See, e.g., February 19, 2021, COVAX’s efforts to distribute COVID-19 vaccines  to low- and middle income countries — additional momentum received from G-7 virtual meeting, https://currentthoughtsontrade.com/2021/02/19/covaxs-efforts-to-distribute-covid-19-vaccines-to-low-and-middle-income-countries-additional-momentum-from-g-7-virtual-meeting/

The TRIPS Council received the proposal back in October but has been unable to provide a recommendation to the General Council. A meeting of the TRIPS Council earlier this month continued the lack of agreement. Thus, the agenda item will simply result in the item being continued on the General Council’s future agendas until resolved or dropped. See WTO, Members discuss TRIPS waiver request, exchange views on IP role amid a pandemic, 23 February 2021, https://www.wto.org/english/news_e/news21_e/trip_23feb21_e.htm (” In this context and given the lack of consensus on the waiver request, members agreed to adopt an oral status report to be presented to the General Council at its next meeting on 1-2 March. The report indicates that the TRIPS Council has not yet completed its consideration of the waiver request and therefore will continue discussions and report back to the General Council.”); December 11, 2020, Council for Trade-Related Aspects of Intellectual Property Rights meeting of December 10, 2020 – no resolution on proposed waiver of TRIPS obligations to address the pandemic, https://currentthoughtsontrade.com/2020/12/11/council-for-trade-related-aspects-of-intellectual-property-rights-meeting-of-december-10-2020-no-resolution-on-proposed-waiver-of-trips-obligations-to-address-the-pandemic/; December 6, 2020, Upcoming December 11th Council for Trade-Related Aspects of Intellectual Property Rights meeting – reaction to proposed waiver from TRIPS obligations to address COVID-19, https://currentthoughtsontrade.com/2020/12/06/upcoming-december-11th-wto-council-for-trade-related-aspects-of-intellectual-property-rights-meeting-reaction-to-proposed-waiver-from-trips-obligations-to-address-covid-19/; November 2, 2020, India and South Africa seek waiver from WTO intellectual property obligations to add COVID-19 – issues presented, https://currentthoughtsontrade.com/2020/11/02/india-and-south-africa-seek-waiver-from-wto-intellectual-property-obligations-to-address-covid-19-issues-presented/.

Fisheries Subsidies negotiations — Draft Ministerial Decision

The WTO has been pursuing negotiations on fisheries subsidies to address sustainable fishing concerns since the end of 2001. Conclusion of the negotiations were supposed to take place in 2020 but WTO Members were unable to get the job completed in part because of disruptions from the COVID-19 pandemic. While completing the negotiations remains a key objective of Members and the incoming Director-General and such completion is needed to fulfill the UN Sustainable Development Goal 14.6, WTO Members continue to face a large number of challenging issues. See, e.g., WTO press release, WTO members hold February cluster of meetings for fisheries subsidies negotiations, 24 February 2021, https://www.wto.org/english/news_e/news21_e/fish_24feb21_e.htm; February 22, 2021, An early test for the incoming WTO Director-General — helping Members get the Fisheries Subsidies negotiations to a conclusion, https://currentthoughtsontrade.com/2021/02/22/an-early-test-for-the-incoming-wto-director-general-helping-members-get-the-fisheries-subsidies-negotiations-to-a-conclusion/.

Agenda item 7 is entitled “Supporting the Conclusion of Fisheries Subsidies Negotiations for the Sustainability of the Ocean and Fishing Communities — Draft Ministerial Decision — Communication from Brazil (WT/GC/W/815. The draft Ministerial Decision is an effort by Brazil to highlight the critical aspect of the negotiations which is to address environmental sustainability and presumably reflects Brazil’s concerns with the efforts of so many Members to protect their subsidies versus ensuring sustainable fishing. The document is embedded below.

WTGCW815

An attack on Joint Statement Initiatives

As reviewed in the incoming Director-General’s statement on February 15 and the summary of her statement by DDG Wolff on February 25, an important aspect of ongoing work at the WTO is a number of Joint Statement Initiatives that were started at the end of the 11th Ministerial Conference in Buenos Aires, including on e-commerce/digital trade.

Agenda item 10 is a frontal attack on such initiatives by India and South Africa through their paper, “Legal Status of Joint Statement Initiatives and Their Negotiated Outcomes”, WT/GC/819. I had reviewed the submission in an earlier post. See February 20, 2021, Will India and South Africa (and others) prevent future relevance of the WTO?, https://currentthoughtsontrade.com/2021/02/20/will-india-and-south-africa-and-others-prevent-future-relevance-of-the-wto/. The agenda item will like see many delegations take the floor to support the use of joint statement initiatives within the WTO or to oppose them. While there won’t be a resolution of the issue, the challenge to the process could significantly handicap some of the efforts envisioned by the incoming Director-General to help developing and least developed countries take advantage of the e-commerce/digital trade world and eventually participate in talks and/or in an agreement. WT/GC/W/819 is embedded below.

WTGCW819-1

Agenda item 8 is viewed as related to agenda item 10. India has been seeking to limit WTO consideration of e-commerce issues to the multilateral efforts over many years within the existing Councils and Committees of the WTO (but where limited progress has been made).

COVID-19 and possible future pandemics — addressing existing trade restrictions and improving the functioning of the WTO to better handle in the future

The incoming Director-General has as a high priority to work with Members to improve monitoring of export restraints on medical goods and agricultural goods during the pandemic and working with Members to see that the WTO helps Members recover and better handle any future pandemics. The Ottawa Group had put forward a trade and health initiative in November 2020. See COVID-19 AND BEYOND: TRADE AND HEALTH, WT/GC/223 (24 November 2020). The communication was made by Australia, Brazil, Canada, Chile, the European Union, Japan, Kenya, Republic of Korea, Mexico, New Zealand, Norway, Singapore and Switzerland. The document contains an annex reviewing the types of actions Members could take to improve the response to the pandemic and improve conditions going forward. Included in the annex to the communication are sections on export restrictions; customs, services and technical regulations; tariffs; transparency and review; cooperation of the WTO with other organizations. Several paragraphs in the communication review the issue of possible export restrictions on vaccines and are copied below.

“9. We realize that the challenges related to the scarcity of essential medical goods, now alleviated to some extent by the response on the supply side, may be repeated at the moment of the development of a vaccine or new medical treatments. In this context, we welcome the COVID-19 Vaccine Global Access Facility (COVAX), a global pooled procurement mechanism for COVID-19 vaccines, managed by Gavi, the Vaccine Alliance, the Coalition for Epidemic Preparedness Innovations (CEPI) and WHO. This mechanism is critical in securing an equitable share of vaccines for all Members of the international community. As we strongly support the objective of this facility, we call on WTO Members to ensure that any export-restricting measures do not pose a barrier to the delivery of necessary supplies under the COVAX facility.

“10. We recognize the collaborative efforts of private and public stakeholders in the research and development of COVID-19 diagnostics, vaccines and treatments. We encourage the industry to take actions to ensure access at affordable prices to COVID-19 diagnostics, vaccines and treatments for vulnerable populations and support voluntary pooling and licensing of IP rights to accelerate the development of such diagnostics, treatments and vaccines and scaling up their production. We recognize the importance of the IP system in promoting R&D and innovation for access to effective treatments. We note that the flexibilities provided by the TRIPS Agreement and reaffirmed in the Doha Declaration on the TRIPS Agreement and Public Health remain available to protect public health and to promote access to medicines for all.”

The full document is embedded below.

WTGC223

Canada will be providing an update on the initiative at the General Council meeting and will likely see many Members provide comments on the agenda item.

Agenda item 9 was added by Colombia, Costa Rica, Ecuador, Panama and Paraguay reflecting concerns by them (and presumably many other trading partners) about actions taken by the European Union to exert control over exports of vaccines from the EU in light of EU concerns about its own access to vaccines from manufacturers. See CALL TO PREVENT EXPORT RESTRICTIONS ON COVID-19 VACCINES, WT/GC/818 (18 February 2021). The document is embedded below.

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Since the EU is one of the Members who has pushed the trade and health initiative, there is concern by some WTO Members that its actions on vaccines run counter to the initiative it is supporting. Presumably the EU will argue that its actions are consistent with its rights under the WTO and is consistent with the language laid out in paragraphs 9 and 10 above.

The two agenda items are likely to show the concerns of many Members on equitable access to medical goods during the pandemic and the reluctance of at least some Members to reduce their flexibilities under the existing WTO rights and obligations.

Conclusion

DDG Wolff indicated that Members selected the incoming Director-General because she is “fearless in the face of daunting challenges”. There is no shortage of daunting challenges facing the WTO and its new Director-General. A few have been reviewed above.

Some good news is that the EU and the United States are supportive of many of the priorities laid out by DG Ngozi Okonjo-Iweala in her February 15 statement to the Special Session of the General Council as seen in the recent EU revised trade policy and the opening statement of USTR nominee Katherine Tai at yesterday’s Senate Finance Committee confirmation hearing See February 18, 2021, The European Commission’s 18 February 2021 Trade Policy Review paper and Annex — WTO reform and much more proposed, https://currentthoughtsontrade.com/2021/02/18/the-european-commissions-18-february-2021-trade-policy-review-paper-wto-reform-and-much-more-proposed/; February 25, 2021, U.S. Trade Representative nominee Katherine Tai confirmation hearing before the U.S. Senate Finance Committee, https://currentthoughtsontrade.com/2021/02/25/u-s-trade-representative-nominee-katherine-tai-confirmation-hearing-before-the-u-s-senate-finance-committee/.

The challenges the new Director-General and the WTO Members face will be made harder by the lack among Members of a common vision and agreed purpose of the WTO, by the current inability of the WTO system to address fundamentally different economic systems, by the structure of decision making, by the failure of obligations to be updated to match level of economic development and role in global trade and by the related issue of how special and differential treatment is used. These challenges have resulted in a negotiating function that is broken, in a dispute settlement system that has no checks on the reviewers for errors or failures to operate within the bounds of authority granted in the Dispute Settlement Understanding and in the underperformance of the monitoring and implementation function.

Hopefully, DG Okonjo-Iweala will develop a strong personal staff and group of DDGs to help her attempt the seemingly impossible — getting meaningful progress and reform from the 164 current WTO Members. See February 13, 2021, Leadership change at the WTO — with Dr. Ngozi Okonjo-Iweala’s arrival next week, what support team and early changes in the role of the Secretariat could help WTO Members move forward?, https://currentthoughtsontrade.com/2021/02/13/leadership-change-at-the-wto-with-dr-ngozi-okonjo-iwealas-arrival-next-week-what-support-team-and-early-changes-in-the-role-of-the-secretariat-could-help-wto-members-move-forward/

Director-General Ngozi Okonjo-Iweala will get her first reality check at the General Council meeting on March 1-2.


Biden Administration throws support behind Dr. Ngozi Okonjo-Iweala for next Director-General of the World Trade Organization

The Office of the United States Trade Represenstative released the following press release on February 5, 2021:

“02/05/2021

“Washington, DC – The United States takes note of today’s decision by the Republic of Korea’s Trade Minister Yoo Myung-hee to withdraw her candidacy for Director General of the World Trade Organization (WTO).

“The Biden-Harris Administration is pleased to express its strong support for the candidacy of Dr. Ngozi Okonjo-Iweala as the next Director General of the WTO.  Dr. Okonjo-Iweala brings a wealth of knowledge in economics and international diplomacy from her 25 years with the World Bank and two terms as Nigerian Finance Minister.  She is widely respected for her effective leadership and has proven experience managing a large international organization with a diverse membership.  

“The Biden-Harris Administration also congratulates Minister Yoo Myung-hee on her strong campaign for this position.  She is a trailblazer as the Republic of Korea’s first female trade minister and the first candidate from Korea to advance this far in the Director General selection process.  The United States respects her decision to withdraw her candidacy from the Director General race to help facilitate a consensus decision at the WTO.

“It is particularly important to underscore that two highly qualified women made it to the final round of consideration for the position of WTO Director General — the first time that any woman has made it to this stage in the history of the institution.  

“The United States stands ready to engage in the next phase of the WTO process for reaching a consensus decision on the WTO Director General.  The Biden-Harris Administration looks forward to working with a new WTO Director General to find paths forward to achieve necessary substantive and procedural reform of the WTO.”

USTR Press Release, Office of the United States Trade Representative Statement on the Director General of the World Trade Organization, February 5, 2021,https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/february/office-united-states-trade-representative-statement-director-general-world-trade-organization.

As reviewed in a post earlier today, the Chair of the WTO’s General Council can call a General Council meeting at any time to consider his recommendation for the next Director-General. See February 5, 2021, WTO Director-General selection process — withdrawal of Korea’s Trade Minister Yoo important step to consensus behind Nigeria’s Dr. Ngozi Okonjo-Iweala, https://currentthoughtsontrade.com/2021/02/05/wto-director-general-selection-process-withdrawal-of-koreas-trade-minister-yoo-important-step-to-consensus-behind-nigerias-dr-ngozi-okonjo-iweala/.

The combination of the Korean withdrawal of Minister Yoo from the selection process and the U.S. indication that it supports Dr. Ngozi Okonjo-Iweala for the position of Director-General should permit the process to come to a conclusion in the coming week or weeks based on any remaining consultations the Chair of the General Council perceives are warranted before placing Dr. Okonjo-Iweala’s name on the General Council agenda for consideration by the membership. There is a regularly scheduled General Council meeting set for March 1-2, 2021. I would expect that a special session of the General Council could be called as early as next week.

The Biden Administration’s action is consistent with the President’s declared intent to be more active within multilateral institutions and will permit the WTO to move past the selection of the next Director-General to the important issues in front of the organization. Today’s action is an important one to help the WTO look at the major pending issues and the need for major reform.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

World Trade Organization involvement in addressing the problem

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

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

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

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

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

Conclusion

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

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


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

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

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

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

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

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

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

“Similarly the European Commission press release stated that –

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

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

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

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

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

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

WTO-_-2020-News-items-Heads-of-WTO-WHO-cite-importance-of-open-trade-in-ensuring-flow-of-vital-medical-supplies

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

Conclusion

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

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

WTO Panel report on UNITED STATES – ANTI-DUMPING AND COUNTERVAILING DUTIES ON CERTAIN PRODUCTS AND THE USE OF FACTS AVAILABLE should be appealed by the United States

On January 21, 2021, the WTO panel that had been composed back on 5 December 2018 issued its report in UNITED STATES – ANTI-DUMPING AND COUNTERVAILING DUTIES ON CERTAIN PRODUCTS AND THE USE OF FACTS AVAILABLE, WT/DS539/R. Korea had requested consultations on a series of antidumping and countervailing investigations and reviews on February 14, 2018 and a panel had been established on May 28, 2018. See WT/DS539/R at para. 1.1, 1.3 and 1.5.

Korea mounted a broad attack on the U.S. Department of Commerce’s use of facts available in a number of antidumping and countervailing duty proceedings largely pertaining to the same major Korean company with a long record of participation in various U.S. trade remedy cases.

For investigating authorities working under a statutory timeline and time limits existing within the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (“ADA”) and the Agreement on Subsidies and Countervailing Measures (“ASCM”), it is important that parties provide complete information in a timely manner. While WTO obligations require administering authorities to flag deficiencies and provide an opportunity to respondents to correct such deficiencies, administering authorities need the ability to cut off submissions and move to decision at a reasonably early period to permit all work to be done in verifying information (investigations), providing other parties a chance to comment and challenge information provided.

Where a party fails to provide information requested, the administering authority is authorized to use facts available. As stated in Article 6.8 of the ADA and Article 12.7 of the ASCM, “In cases in which any interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available.” Art. 6.8 of the ADA then adds, “The provisions of Annex II shall be observed in the application of this paragraph.” Similar language is not in Art. 12.7 of the ASCM (changes to the ADA during the Uruguay Round of negotiations were typically adopted in the ASCM as they related to trade remedy proceedings, although changes made at the end of the negotiations to the ADA were not brought into the ASCM due to timing limitations).

Annex II of the ADA consists of seven paragraphs and is copied below.

“Annex II: Best Information Available in Terms of Paragraph 8 of Article 6

“1.   As soon as possible after the initiation of the investigation, the investigating authorities should specify in detail the information required from any interested party, and the manner in which that information should be structured by the interested party in its response. The authorities should also ensure that the party is aware that if information is not supplied within a reasonable time, the authorities will be free to make determinations on the basis of the facts available, including those contained in the application for the initiation of the investigation by the domestic industry.

“2.   The authorities may also request that an interested party provide its response in a particular medium (e.g. computer tape) or computer language. Where such a request is made, the authorities should consider the reasonable ability of the interested party to respond in the preferred medium or computer language, and should not request the party to use for its response a computer system other than that used by the party. The authority should not maintain a request for a computerized response if the interested party does not maintain computerized accounts and if presenting the response as requested would result in an unreasonable extra burden on the interested party, e.g. it would entail unreasonable additional cost and trouble. The authorities should not maintain a request for a response in a particular medium or computer language if the interested party does not maintain its computerized accounts in such medium or computer language and if presenting the response as requested would result in an unreasonable extra burden on the interested party, e.g. it would entail unreasonable additional cost and trouble.

“3.   All information which is verifiable, which is appropriately submitted so that it can be used in the investigation without undue difficulties, which is supplied in a timely fashion, and, where applicable, which is supplied in a medium or computer language requested by the authorities, should be taken into account when determinations are made. If a party does not respond in the preferred medium or computer language but the authorities find that the circumstances set out in paragraph 2 have been satisfied, the failure to respond in the preferred medium or computer language should not be considered to significantly impede the investigation.

“4.   Where the authorities do not have the ability to process information if provided in a particular medium (e.g. computer tape), the information should be supplied in the form of written material or any other form acceptable to the authorities.

“5.   Even though the information provided may not be ideal in all respects, this should not justify the authorities from disregarding it, provided the interested party has acted to the best of its ability.

“6.   If evidence or information is not accepted, the supplying party should be informed forthwith of the reasons therefor, and should have an opportunity to provide further explanations within a reasonable period, due account being taken of the time-limits of the investigation. If the explanations are considered by the authorities as not being satisfactory, the reasons for the rejection of such evidence or information should be given in any published determinations.

“7.   If the authorities have to base their findings, including those with respect to normal value, on information from a secondary source, including the information supplied in the application for the initiation of the investigation, they should do so with special circumspection. In such cases, the authorities should, where practicable, check the information from other independent sources at their disposal, such as published price lists, official import statistics and customs returns, and from the information obtained from other interested parties during the investigation. It is clear, however, that if an interested party does not cooperate and thus relevant information is being withheld from the authorities, this situation could lead to a result which is less favourable to the party than if the party did cooperate.” (emphasis added).

Antidumping and countervailing duty proceedings in the United States are very transparent with full access to information on the record available to parties under administrative protective order and with many opportunities to submit comments, raise questions, seek clarification or respond to additional inquiries flowing from earlier responses. It is quite common for Commerce to receive requests for more time to respond to the initial questionnaire and to any supplemental requests flowing from developments. Responding parties can determine whether or not to submit all information, partial information or no information. Questionnaire responses are often incomplete or adopt interpretations of what has been requested to provide less than complete information. In antidumping investigations, it is not uncommon for respondent data bases to change during the course of the investigation, sometimes markedly. Briefing after the preliminary determination permits challenges to the preliminary determination by all parties, including challenges to use of facts available. While there are always legal issues that are briefed, facts available issues are fact-based issues flowing from whether parties cooperated, withheld information, failed to supply requested information, etc., and if so, what alternative information is available that can be used.

The ADA provides special provisions on dispute settlement in Article 17.6. The approach on review of facts is laid out in Article 17.6(i) of the ADA (there is no counterpart in the ASCM for the reason that Art. 17.6 of the ADA was added at the end of the Uruguay Round without chance to consider adopting a parallel provision in the ASCM). Art. 17.6(i) states:

“17.6  In examining the matter referred to in paragraph 5:

“(i)   in its assessment of the facts of the matter, the panel shall determine whether the authorities’ establishment of the facts was proper and whether their evaluation of those facts was unbiased and objective. If the establishment of the facts was proper and the evaluation was unbiased and objective, even though the panel might have reached a different conclusion, the evaluation shall not be overturned;”

Article 17.6 was added to the ADA at the end of the Uruguay Round at the insistence of the United States which was interested in seeing that very complicated and detailed administrative proceedings were not second guessed by panels or the Appellate Body which would not have been involved in the proceeding or have access to all materials. Art. 17.6(i) deals with providing deference to administering authorities on facts. Art. 17.6(ii) does the same for legal interpretations for provisions subject to more than one meaning.

The panel report, following other panel and Appellate Body reports that have been problematic from the U.S. perspective, doesn’t view Art. 17.6(i) as being deferential to an investigating authority as long as the authority hasn’t conducted the investigation in a biased or non-objective manner or somehow established facts improperly. See WT/DS539/R at para. 7.23 – 7.36 (after a review of the meaning of ADA Art. 6.8 and Annex II, the panel sums its view of the panel’s task to be the following: “In sum, we consider that the terms of Article 6.8, interpreted in light of their context and object and purpose, require investigating authorities to select – in an unbiased and objective manner – those facts available that constitute reasonable replacements for the missing “necessary” information in the specific facts and circumstances of a given case. In doing so, investigating authorities must take into account all facts that are properly available to them. In selecting the replacement facts, Article 6.8 does not require investigating authorities to select those facts that are most ‘favourable’ to the non-cooperating party. Investigating authorities may take into account the procedural circumstances in which information is missing, but Article 6.8 does not condone the selection of replacement facts for the purpose of punishing interested parties.”).

In reading the panel report, the Commerce Department is not given deference for its decisions of what facts available should be used. Thus, that violations were found for how Commerce determined facts available in each of the six proceedings reflect the panel reaching a different conclusion than Commerce. But while the panel may have reached a different result than Commerce, that by itself does not constitute a basis under Art. 17.6(i) to find a violation.

Conclusion

The constant limiting by panel and Appellate Body reports of the ability to utilize trade remedy agreements is, of course, the main substantive concern that the United States has with the operation of the WTO’s Dispute Settlement system, although there are examples of the same problem in other areas covered by panel or AB reports as well. Last week’s panel report on Korea’s challenge to U.S. antidumping and countervailing duty proceedings on the use of facts available continues to undermine the legitimacy of WTO dispute settlement.

Accordingly, the Biden Administration should file an appeal from last week’s panel decision and ensure that any eventual resolution of the Appellate Body impasse includes a restoration of rights that have narrowed or eliminated under the trade remedy or trade defense agreements (ADA, ASCM and safeguard).

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

With the inauguration of President Joseph R. Biden, Jr. accomplished, a number of former U.S. officials and others — many with roles in U.S. relations with one or more countries in Africa — wrote President Biden urging him to back Dr. Ngozi Okonjo-Iweala for the Director-General post at the WTO. See All Africa, Africa: Former U.S. Officials Call on Biden to Back WTO Selection for Okonjo-Iweala, 22 January 2021, https://allafrica.com/stories/202101220055.html?utm_campaign=allafrica%3Aeditor&utm_medium=social&utm_source=twitter&utm_content=promote%3Aaans%3Aababae.

The Trump Administration had opposed forming a consensus behind Dr. Okonjo-Iweala despite her having received the largest level of support from WTO Members and, pursuant to the procedures being followed (and that were consistent with procedures adopted by the General Council at the end of 2002) was found to be the candidate most likely to command a consensus. According to para. 19 of the 2002 procedures, “At the end of the final stage of the consultative process, the Chair, with the support of the facilitators, shall submit the name of the candidate most likely to attract consensus and recommend his or her appointment by the General Council.” WT/L/509, para. 19. Korea’s candidate, Trade Minister Yoo Myung-hee, did not withdraw as required by the procedures. As noted, the United States indicated it could not join a consensus around Dr. Okonjo-Iweala on the basis of the belief that the WTO needed a Director-General with extensive trade expertise and Dr. Okonjo-Iweala did not possess that background. As a result, the Chair of the General Council has not put forward Dr. Okonjo-Iweala to the General Council for a decision, and the WTO remains without a Director-General.

I have reviewed these developments in prior posts. See, e.g., January 19, 2021,   The next Director-General of the WTO – USTR Lighthizer’s comments to the Financial Times, https://currentthoughtsontrade.com/2021/01/19/the-next-director-general-of-the-wto-ustr-lighthizers-comments-to-the-financial-times/; November 19, 2020, The WTO selection process for the next Director-General – possible steps that can be taken in the coming weeks, https://currentthoughtsontrade.com/2020/11/19/the-wto-selection-process-for-the-next-director-general-possible-steps-that-can-be-taken-in-the-coming-weeks/; November 10, 2020, The values of the WTO – do Members and the final Director-General candidates endorse all of them?, https://currentthoughtsontrade.com/2020/11/10/the-values-of-the-wto-do-members-and-the-final-director-general-candidates-endorse-all-of-them/; November 6, 2020, Postponement of WTO General Council meeting to consider recommendation of Dr. Ngozi Okonjo-Iweala as next Director-General, https://currentthoughtsontrade.com/2020/11/06/postponement-of-wto-general-council-meeting-to-consider-recommendation-of-dr-ngozi-okonjo-iweala-as-next-director-general/; October 29, 2020, WTO press release from informal Heads of Delegation meeting on October 28 and Amb. Walker’s statement to the WTO membership on the outcome of the third round of consultations in the Director-General selection process, https://currentthoughtsontrade.com/2020/10/29/wto-press-release-from-informal-heads-of-delegation-meeting-on-october-28-and-amb-walkers-statement-to-the-wto-membership-on-the-outcome-of-the-third-round-of-consultations-in-the-director-general/; October 29, 2020, October 29th video discussion on WTO Director-General selection process following the announcement of results of third round of consultations and U.S. announcement of not backing the candidate with the greatest support, https://currentthoughtsontrade.com/2020/10/29/october-29th-video-discussion-on-wto-director-general-selection-process-following-the-announcement-of-third-round-of-consultations-and-u-s-aanouncement-of-not-backing-the-candidate-with-the-greatest/; October 29, 2020, U.S. support for Minister Yoo for WTO Director-General premised on need for person with trade expertise, https://currentthoughtsontrade.com/2020/10/29/u-s-support-for-minister-yoo-for-wto-director-general-premised-on-need-for-person-with-trade-expertise/; October 28, 2020:  WTO Director-General selection process doesn’t generate immediate consensus, https://currentthoughtsontrade.com/2020/10/28/wto-director-general-selection-process-doesnt-generate-immediate-consensus/.

The letter sent to President Biden was signed by thirty-seven individuals, many with prior State Department responsibilities (many involving Africa), some from USTR and other government agencies or the White House (some with Africa responsibilities), some from private companies (often working in Africa) or from academia. The list as it appears in the All Africa publication with stated prior and current affiliations is copied below.

The Hon. Mimi Alemayehou
Former Executive Vice President, U.S. Overseas Private Investment Corporation (OPIC)
Former U.S. Executive Director of the African Development Bank

Ambassador Johnnie Carson
Former U.S. Assistant Secretary of State for Africa Affairs
Former U.S. Ambassador to Kenya, Zimbabwe, and Uganda

Teresa Clarke
Chairman and CEO, Africa.com

Ambassador Herman J. “Hank” Cohen
Former U.S. Assistant Secretary of State for African Affairs
President & CEO, Cohen and Woods International

Akunna Cook
Former U.S. Foreign Service Officer
Founder and Principal, Drake Road Strategies

John G. Coumantaros
Chairman of Flour Mills of Nigeria
Chairman CEO of Southern Star Shipping Co Inc (New York)
Founding Member of US Nigeria Council

Ambassador Ruth Davis
Former U.S. Ambassador to the Republic of Benin
Former Director, U.S. Foreign Service Institute
Former Director General, U.S. Foreign Service and Director of Human Resources

The Hon. Vivian Lowery Derryck
Former Deputy Assistant Secretary (EEO and Civil Rights), U.S. Department of State
Founder of the Bridges Institute
Former Assistant Administrator for Africa, USAID

The Hon. Lauri Fitz-Pegado
Former Assistant Secretary
Director General, U.S. Foreign Commercial Service

Melvin Foote
President & CEO, Constituency for Africa

The Hon. Tony Fratto
Former Assistant Secretary, U.S. Treasury
Former White House Deputy Press Secretary
Managing Partner Hamilton Place Strategies

Ambassador Jendayi Frazer
Former U.S. Assistant Secretary of State, Bureau of African Affairs
Former U.S. Ambassador to South Africa
Former Special Assistant to the President & Senior Director for African Affairs, National Security Council
President & CEO, 50 Ventures LLC

Ambassador Michelle D. Gavin
Former U.S. Ambassador to Botswana
Former Senior Director for Africa, National Security Council

Dr. Gloria Herndon
Former Foreign Service Officer, U.S. Department of State
Chair Corporate Board, National Association for Equal Opportunity in Higher Education (NAFEO)
CEO, GB Group

Cameron Hudson
Former Director, African Affairs, National Security Council
Senior Fellow, Atlantic Council Africa Center

Ambassador Makila James (ret.)
Former Deputy Assistant Secretary, East Africa and The Sudans, U.S. Department of State
Former U.S. Ambassador to The Kingdom of Swaziland

Ambassador (ret.) Howard F. Jeter
Former U.S. Ambassador to Nigeria and Botswana
Former Special Presidential Envoy to Liberia

Jeffrey Krilla
Former Deputy Assistant Secretary of State

Florie Liser
Former Assistant U.S. Trade Representative for Africa
President and CEO of Corporate Council on Africa (CCA)

Clay Lowery
Former Assistant Secretary, U.S. Treasury
Former Director, International Finance, National Security Council

Ambassador (ret.) Terence P. McCulley
Former U.S. Ambassador to Mali, Nigeria and Côte d’Ivoire
Chairman, US-Nigeria Council for Food Security, Trade and Investment

Mora McLean
President Emerita, Historian, and Program Strategist, The Africa-America Institute
Former Chair, USTR Trade Advisory Committee on Africa

Cheryl Mills
Former Counselor and Chief of Staff, Office of the Secretary, U.S. Department of State
Former Deputy Counsel to the President, The White House

Todd Moss, PhD
Former U.S. Deputy Assistant Secretary of State

Ambassador John Negroponte
First Director, National Intelligence
Former Ambassador to the United Nations
Former Deputy Secretary of State

The Hon. Constance Berry Newman
Former Assistant Secretary of State for African Affairs
Chair of the African Renaissance and Diaspora Network

Thomas R. Nides
Former Chief of Staff, Office of the United States Trade Representative
Former Deputy Secretary of State for Management and Resources, U.S. Department of State
Vice Chairman, Morgan Stanley

Bernadette Paolo
Former Staff Director, U.S. House of Representatives Subcommittee on Africa
Co-founder & Former CEO, The Africa Society

Bobby J. Pittman
Deputy Assistant Secretary for International Finance and Debt, U.S. Department of Treasury
Special Assistant to the President & Senior Director for African Affairs, National Security Council, White House

Pearl Robinson
Associate Professor, Tufts University
Past President, The African Studies Association

Ambassador Robin Renee Sanders
Former U.S. Ambassador to Nigeria
Former U.S. Ambassador to ECOWAS
Former U.S. Ambassador to Republic of Congo
Former Africa Director, National Security Council
CEO-FEEEDS

Jeannine B. Scott
Chairman, Constituency for Africa (CFA)
Principal, America to Africa Consulting (A2A)
Former Alternate & Advisor to the U.S. ED at the African Development Bank

Timothy Shortley
Former Director, African Affairs, National Security Council
Chief Operating Officer, 50 Ventures, LLC

Ambassador John Simon
Former Senior Director, National Security Council
Former U.S. Ambassador to the African Union
Managing Partner, Total Impact Capital
Member, USTR Trade Advisory Committee for Africa

The Hon. Gayle Smith
Former Administrator, USAID
Former Special Assistant to the President & Senior Director for African Affairs, National Security Council

Joseph E. Stiglitz
Former member and Chair of the Council of Economic Advisers
University Professor, Columbia University
Chief Economist, Roosevelt Institute
Former Chief Economist of the World Bank
Recipient of Nobel Memorial Prize in Economics, 2001

Rosa Whitaker
Former Assistant United States Trade Representative for Africa
President, The Whitaker Group

It is unclear whether the Biden Administration will take trade actions ahead of having the USTR nominee, Katherine Tai, confirmed. In prior posts, I have indicated that I hoped the Biden Administration would quickly alert the WTO to its willingness to join a consensus for Dr. Ngozi Okonjo-Iweala becoming the next Director-General. While there is little doubt that Minister Yoo has a greater trade background that Dr. Okonjo-Iweala, a trade background is not critical to being a successful WTO Director-General. Dr. Okonjo-Iweala has very strong credentials and was supported by the vast majority of the membership. If the U.S. indicates it is willing to join the consensus that action will almost certainly result in Korea withdrawing Minister Yoo as a candidate. These two actions would put the WTO membership back on track to abide by the procedures agreed by the General Council and being used in the 2020 Director-General selection process. Most importantly, it would get the WTO a new Director-General. Such a result is a first step in moving the WTO in the right direction going forward. The letter from former U.S. officials and others is the right message for the Biden Administration to receive. Hopefully, the President will act quickly on this particular issue.

World COVID-19 pandemic peaks on November 26 and starts to slowly recede

The most recent surge in COVID-19 cases (up from 3.57 million cases over a fourteen day period in early August to over 5 million for fourteen days on October 22 to over 8 million new cases for fourteen days on November 17), seems to have peaked on November 26 with 8,296,264 new cases over fourteen days and has been slowly receding for the last three days, down to 8,142,629 new cases during the period November 16-29. Total cases since the end of December 2019 now stand at 62,271,031 as of November 29 according to the European Centre for Disease Prevention and Control (ECDC) publication “COVID-19 situation update worldwide, as of 29 November 2020”.

The World Health Organization puts out a publication that tracks cases and deaths on a weekly basis. COVID-19 Weekly Epidemiological Update (data as of 22 November). While it breaks countries and territories into different configuarations that the ECDC, the publication shows new cases in the period November 16-22 declining 6% in Europe and in South East Asia while increasing 11% in the Americas, 5% in the Eastern Mediterranean, 15% in Africa and 9% in the Western Pacific. Because of the large spike in cases in the September – November period in many parts of the world, deaths in the November 16-22 period increased in all regions — up 10% in Europe, 15% in the Americas, 4% in South-East Asia, 10% in the Eastern Mediterranean, 30% in Africa and 1% in the Western Pacific. The latest report is embedded below.

20201124_Weekly_Epi_Update_15

The graphs in the WHO publication show by region the trajectory of new cases and deaths over time. The chart showing aggregate data show a flattening of total new cases in the last weeks of November while the number of deaths globally are sharply increasing.

The WHO Africa region peaked in the summer and has declined until the last few weeks when there has been some increase in both cases and deaths.

The Americas saw a peak in both new cases and deaths in the July period with some declines in new cases until the second half of September when the current surge started and accelerated in November. Deaths declined until early October before starting to grow again.

The Eastern Mediterranean peaked in May-June for both cases and deaths, declined through August/September and have surged to new heights with continued upward trajectory as of November 22.

The WTO European Region had an early surge of cases and deaths in the March-April period. Deaths receded sharply through August. While new cases have increased since summer, there was a massive increase in the September – end of October period in new cases and rising deaths through November.

The WHO South-East Asia region saw a huge increase in cases and deaths in the May-August period, peaking in early September and declining since then. Much of the data for the region reflect activity in India.

The Western Pacific Region has had several peaks in terms of deaths and in new cases, though the numbers are the lowest of any WHO region. The latest peak in new cases was in early August with some increase in the October-November period. Deaths last peaked in early September and have declined through November.

The United States

Turning back to the ECDC data, the United States continues to have more confirmed cases (13,246,651) than any other nation and more confirmed deaths from COVID-19 (266,063) than any other nation. The United States is also still experiencing a surge in new cases and rising deaths. October 31 was the first day that ECDC data show the U.S. recording 100,000 new cases in a single day. Since November 5, the U.S. has had more than 100,000 new cases every day up to November 29. It is the only country to record one million new cases in a week and the only country to record two million new cases in fourteen days. For the last fourteen days, the U.S. recorded 2,341,760 new cases. The U.S., which accounts for 4.3% of the global population, accounts for 21.27% of all COVID-19 cases that have been reported since December 2019 and accounted for 28.76% of new cases in the last two weeks. The rate of increase remains high for the United States — up 31.67% from the 1,778,530 new cases in the two weeks ending November 15. There are concerns that the number of new cases will continue to increase into the new year based on the high rate of infections in many parts of the country, major potential spreading events around holidays in November (Thanksgiving) and December, and limited compliance with basic requirements for limiting the spread of the virus.

The number of deaths from COVID-19 that the U.S. accounts for has declined from roughly 20% to 18.30% as of November 29. In the last two week, while the U.S. has the largest number of deaths in the two weeks, the percent of total deaths accounted for by the U.S. in the November 16-29 period was 14.65%. However, many cities, communities and even states are at or nearing the limits of the health care capacity with hospitalizations now about 90,000, limits on health care professionals with the surging cases and some challenges on personal protective equipment. Thus, models used by the government projects a continued rise in the number of deaths in the coming months.

While the first vaccine could receive emergency approval for distribution in the U.S. as early as December 10, and the U.S. could have two or three vaccines in distribution in early 2021, the United States will unfortunately likely be a major part of the continued high rate of infections and deaths well into 2021.

Europe

While Europe had faced early challenges in a number of western European countries in February-April and very high death rates in a number of countries, the second wave of cases following the relaxation of restrictions in time for summer vacations accounted for the vast majority of the incrase in new cases during the October and early November time period. In earlier posts, I showed that Europe and the U.S. accounted for nearly all of the increase from 5 million new cases in the two weeks ending October 22 to the more than 8 million new cases in the two weeks ending November 17. See November 17, 2020, New COVID-19 cases over a fourteen day period continue to soar past eight million, up from five million on October 22, https://currentthoughtsontrade.com/2020/11/17/new-covid-19-cases-over-a-fourteen-day-period-continue-to-soar-past-eight-million-up-from-five-million-on-october-22/

While some of the major countries, including France, Italy, Spain, the United Kingdom and others have seen significant reductions in the number of new cases in recent weeks from the extraordinary figures recorded in late October, early November, numbers remain very high for a number of countries including Poland, Portugal, Serbia, Croatia, Hungary, Lithuania and Luxembourg — all of whom had new cases/100,000 population in the last fourteen days that were higher than the United States.

Because deaths lag new cases by a number of weeks, it is perhaps less surprising that much of Europe had deaths/100,000 population in the last fourteen days that were higher than the United States, most at rates that were two-three times the U.S. rate. The rate for the world in total was 1.82 deaths per 100,000 population for the November 16-29 period. The U.S. was 3.38 times the global average at 6.22 deaths per 100,000 population in that two week period. The following 25 European countries exceeded the U.S. rate: France (11.76 deaths/100,000 population); Italy (16.04); Spain (8.31); United Kingdom (9.40); Armenia (12.81); Austria (13.47); Belgium (18.84); Moldova (6.50); Poland (16.65); Portugal (10.30); Romania (11.50); Serbia (7.11); Switzerland (14.98); Bulgaria (23.69); Croatia (15.92); Czechia (18.74); Greece (11.08); Hungary (16.12); Lithuania (8.12); Luxembourg (13.19); Malta (6.79); Slovenia (19.85); Bosnia and Herzegovina (20.75); Georgia (13.19); and North Macedonia (20.12).

With new restrictions in recent weeks bringing new cases down in a number of European countries, death rates should start to decline as well in the coming weeks. Challenges in terms of superspreader events in Europe include holiday travel and events and winter holidays and sports. Germany has proposed placing restrictions on the ski season to try to minimize increased cases from a sport popular across much of Europe. See DW, 26 November 2020, Coronavirus: Germany seeks EU-wide ban on ski trips, https://www.dw.com/en/coronavirus-germany-seeks-eu-wide-ban-on-ski-trips/a-55732273.

The EU has contracts with at least six pharmaceutical companies or groups for vaccines if approved. The EU and United Kingdom will start to see vaccine dosages within weeks assuming approval in their jurisdictions.

Other countries

While much of the rest of the world has not seen great increases in the number of cases that is not true for all countries. For example, Iran which had 136,753 new cases in the November 2-15 period showed 186,274 new cases in the November 16-29 period (+36.21%). Jordan, which has a total number of cases of 210,709 since the end of December has recorded 65.54% of that total in the last four weeks (68,698 new cases during November 2-15; 69,404 new cases during November 16-29). Similarly, Morocco which has a total of 349,688 cases since December 2019 has more than 37% recorded in the last four weeks (69,127 during November 2-15; 61,477 during November 16-29).

In the Americas the following countries in addition to the United States have two week totals to November 29 greater than 100,000 new cases: Argentina (108,531); Brazil (441,313); Colombia (108,609). The following countries besides the United States have more than one million cases since late December 2019: Argentina (1,413,362); Brazil (6,290,272); Colombia (1,299,613), Mexico (1,100,683). Eleven other countries have more than 100,000 cases (with Peru having 960,368). Other than the U.S., countries are facing different trend lines, many down, some showing increases (e.g., Brazil, Canada, Dominican Republic, Paraguay).

In Asia, while India continues to see declines in the number of new cases, Indonesia, Israel, Japan, Kazakhstan, Malaysia, Pakistan, Palestine, South Korea, showed increased in the most recent two weeks, some quite large. This is in addition to Iran reviewed previously.

In Africa, South Africa has the most cases and saw an increase from 23,730 new cases during November 2-15 to 35,967 during November 16-29. Morocco was reviewed above. Most other major countries in Africa saw declines in recent weeks.

Conclusion

The world in the first eleven months of 2020 has struggled to get the COVID-19 pandemic under control with several major surge periods. The global number of new cases seems to have plateaued over the last week or so at extraordinarily high levels and the death rates has been climbing after a long period where deaths appeared to be declining. It is likely that the death rate will continue to increase for the rest of 2020.

After a period during the summer and early fall where restrictions in a number of countries were being relaxed, many countries in the norther hemisphere are reimposing various restrictions in an effort to dampen the spread of the coronavirus. While trade has significantly rebounded from the sharp decline in the second quarter of 2020, services trade remains more than 30% off of 2019 levels driven by the complete collapse of international travel and tourism. Many WTO members have put forward communications on actions that could be considered to speed economic recovery. The most recent was the Ottawa Group’s communication about a possible Trade and Health Initiative. 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/.

The WTO TRIPS Council has a request for a waiver from most TRIPS obligations for all WTO Members on medical goods and medicines relevant to COVID-19 on which a recommendation is supposed to be forwarded to the General Council by the end of 2020 though it is opposed by a number of major Members with pharmaceutical industries. See November 2, 2020, India and South Africa seek waiver from WTO intellectual property obligations to add COVID-19 – issues presented, https://currentthoughtsontrade.com/2020/11/02/india-and-south-africa-seek-waiver-from-wto-intellectual-property-obligations-to-address-covid-19-issues-presented/.

With vaccines very close to approval in major markets like the United States and the European Union, there will be increased focus on efforts to ensure availability of vaccines and therapeutics and diagnostics globally on equitable and affordable terms. GAVI, CEPI and the WHO have been leading this initiative with the support of many governments and private sector players. Pharmaceutical companies also have global distribution plans being pursued in addition to the above efforts.

So there hopefully is light at the end of the tunnel that the COVID-19 pandemic has imposed on the world. But vaccines without vaccinations won’t solve the pandemic’s grip. So communication and outreach globally will be critical to seeing that available vaccines are properly used. And all peoples need to be able to access the vaccines, some of which will be less available simply because of the infrastructure needs to handle the vaccines.

Trade policy options to minimize trade restrictions coupled with global cooperation and coordination should result in the world being able to rebuild in 2021 and beyond as more and more of the world is vaccinated.

Multilateral efforts to help the poorest countries deal with debt, make available trade finance and other actions continue to be a pressing need. Better plans and preparation for pandemics of the future are clearly needed. Reports suggest that many of the poorest countries have experienced loss of a decade or more of economic advancement during the pandemic. Building back greener and in a sustainable manner is critical for all.

The efforts of developed country governments and others to provide the stimulus domestically to reduce the downward spiral of the individual national economies and the global economy has been critical to limiting the damage at home and abroad. But the assumption of large amounts of debt will also pose significant challenges moving forward because of the greatly heightened national debt/GDP ratios that have developed and may restrict options for individual governments moving forward.

What is certain is that 2020 will be remembered as a year in which a virus inflicted enormous damage to the global health and to the global economy. Collectively, the level of spread has been far greater than should have been possible. Many nations were not prepared. Some, like the United States, exacerbated the problems through a lack of national government planning and messaging. Others like many in Europe, having done a good job of controlling the spread in the early months, made major mistakes as they opened up for summer vacations and didn’t deal with the problems that resulted from the reopening and experienced breathtaking surges which roughly doubled the global daily rate of new cases in five-six weeks and have led to the reimposition of a series of restrictions to try to tame the pandemic a second time. We collectively are better than the results achieved to date. The number of deaths in advanced countries is simply disgraceful.

2021 offers the opportunity for the world to come together and put COVID-19 behind us. Whether we will come to the end of 2021 and feel that this global nightmare is behind us and that there are national and global game plans to rebuild in a greener and more sustainable manner with greater opportunities for all is the question. Hopefully, the answer will be yes.

The Ottawa Group’s November 23 Communication and Draft Elements of a “Trade and Health” Initiative

On Monday, Novemer 23, Canada hosted a virtual meeting of the Ottawa Group on WTO reform. The Group includes Australia, Brazil, Canada, Chile, the European Union, Japan, Kenya, Republic of Korea, Mexico, New Zealand, Norway, Singapore and Switzerland. Deputy Director-General Alan Wolff provided comments and urged the Members to “translate their statements about reforms to global trade rules into formal proposals and concrete requests at the WTO.” WTO, 23 November 2020, DDG Wolff calls on Ottawa Group to table formal reform proposals at WTO, https://www.wto.org/english/news_e/news20_e/igo_23nov20_e.htm. DDG Wolff provided seven options for the consideration of the Ottawa Group on WTO reform, the first four of which used trade and health as one example.

“First, an observation: the game must be in play for key players to conclude that they have to join. If negotiations are not under way, there may be a substantial delay in attracting participation.

“Declarations, such as on trade and health, should be turned into formal proposals as soon as possible and should be embraced by all WTO members.

“And if some Members won’t come along or seek to delay — a joint initiative is a practical way to proceed and could then be launched as a priority. The time of testing should not be so long as to make a response to the pandemic arrive too late to be responsive to the current crisis.

“Second, Members can ask the WTO Secretariat for and receive support for evaluations of aspects of WTO reform. For example, on trade and health, Members can —

“Request the Secretariat to upgrade its COVID-19-related trade monitoring activities to collect and publish the best information available, not relying solely on notifications and verification. (This would be a more comprehensive and in-depth activity than that which takes place at present, which in itself was an upgrade from pre-COVID monitoring.)

“Request the Secretariat to work with the WHO, relevant UN agencies and other stakeholders, to highlight trade issues affecting vaccine production and availability, and to propose ways to eliminate obstacles. (This would go beyond existing activities and result in proposals put to the WTO Member- ship).

“Third, Members can

“Propose that the Director General convene a small, representative, ambassador-level group of Friends of Trade and Health to identify how the trading system has performed during the pandemic and to issue preliminary conclusions and recommendations for useful changes in approach within a short, defined timeline.

“Propose that the WTO Secretariat embark now upon the necessary supporting work without delay.

“Propose that the Director General constitute other ‘Friends’ groups to advance consideration of institutional reform and other issues of current importance, and providing possible solutions, such as with respect to the relationship to current and future WTO Agreements of the Paris Accord on Climate Change, the disciplining of fossil fuel subsidies, addressing border adjustments likely with the adoption of carbon taxes, assessing the impact on markets of subsidies and other state interventions, employing trade to reduce income inequality, making the WTO more effective for economic development within and among Member economies, improving the trading system with respect to women in trade, providing WTO support for the African Continental Free Trade Agreement, and more generally strategic foresight.

“G20 Members clearly want to enhance preparedness for future pandemics and other crises. Flexible groups with appropriate balance but able to be nimble and responsive are one way to supplement but not supplant the work of committees and joint statement initiatives (JSIs).

‘Propose that an ad hoc horizontal mechanism be created promptly in the event of crises to address — in real time — trade measures that are of concern. The mechanism, similar to trade policy reviews, but not limited to any single WTO Member’s measures, trade restrictive and trade liberalizing, should be constituted immediately for the current pandemic and economic recovery measures.

“Fourth, Members can

“Propose that the signatories of the Pharmaceutical Agreement providing for duty-free trade be updated (last done in 2010), that major nonsigna- tories join and that essential medical supplies be added to the coverage.

“Propose that the signatories of the Information Technology Agreement review and update its coverage, including adding medical equipment.

“Propose that negotiations on the Environmental Goods Agreement re-start in earnest now, with the addition of services.”

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

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

Similarly the European Commission press release stated that –

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

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

“They also called for further cooperation amongst members, and between the WTO and other international organisations.

“The group also encourages WTO members to refrain from imposing tariffs on essential medical goods during the crisis. Such actions are intended to strengthen the resilience of supply chains and contribute to an effective response to a public health emergency. They can serve as a basis for future permanent commitments on trade in essential medical goods.

“Commission Executive Vice President and Commissioner for Trade Valdis Dombrovskis said: ‘We are proud to promote this trade and health initiative. It aims to encourage stronger global cooperation at WTO level, by facilitating trade in healthcare products. This is critical in the current global health crisis and will also help us in future. But the Ottawa Group trade and health initiative is just the first step. Going forward, the EU will work to promote resilient global healthcare systems, as well as accessible and affordable healthcare products universally.’

“The communication will now be submitted later this week to the WTO secretariat, before being presented to the WTO General Council for discussion. It will be used to prepare the 12th Ministerial Conference of the WTO, due to be held in 2021.”

That same day, November 23, the Ottawa Group submitted to the WTO a communication entitled “COVID-19 and beyond: Trade and Health”. WT/GC/223 (24 November 2020). The document is embedded below.

223

The communication is ten paragraphs plus an Annex which is described as “Draft Elements of a ‘Trade and Health’ Initiative”. The communication reviews the social and economic impact of the COVID-19 pandemic and invites “all WTO Members to start working on a Trade and Health Initiative” referencing the Annex. Paragraph 6 of the communication summarizes the specific actions being proposed.

“6. With this objective in mind, we call on WTO Members to make their utmost efforts to prevent further disruptions in the supply chains of essential medical goods. As set out in the Annex to this Communication, we propose specific actions relating to export restrictions, trade facilitation,
technical regulations, tariffs, transparency and review, and call for the WTO to enhance its cooperation with other relevant international organizations, such as WHO, WCO, OECD as well as G20, given the context of the on-going evaluations of the global response to COVID-19. These proposed actions are not intended to be prescriptive and do not cover the universe of possible
measures that could support trade in essential medical goods. Rather, they reflect emerging best practices and should provide sufficient flexibility to be adapted to differing national circumstances.”

The Ottawa Group is hoping to get the support of all Members on a joint statement early in 2021 on a Trade and Health Initiative which could serve as a starting point for negotiations for new WTO commitments at the 12th Ministerial Conference in the summer of 2021 in Kazakhstan.

On export restrictions, the Annex calls for greater oversight of such restrictions without eliminating them outright.

On customs, services and technical regulations, the Annex calls for Members to share information and experiences on best practices in trade facilitation during a crisis (customs procedures, services (including freight, logistics, distribution and transport)) and on standards and technical requirements looking towards regulatory alignment.

On tariffs, the Annex calls on Members to “make best endeavours to temporarily remove or reduce tariffs on goods that are considered essential to fighting COVID-19 pandemic”.

On transparency and review, the Annex calls on Members to enhance transparency during the pandemic with the aim of identifying supply chain disruptions and avoiding such disruptions.

On the topic of cooperation of the WTO with other organizations, the Annex both encourages the WTO Secretariat to continue it outreach on measures related to COVID-19 and the studies developed by the Secretariat with a focus “on the causes and effects of the disruptions in the supply chains of essential goods and drawing on research of other international organizations.” The WTO Director-General is also encouraged to “intensify cooperation” with other organizations (including the G20) to improve “the analytical capacity of Members to monitor market developments in trade and production of essential medical goods.”

Finally, the Annex asks Members to review the effectiveness of the identified elements at the 12th Ministerial Conference “with a view to adopting possible commitments regarding trade in essential medical goods.”

Conclusion

There have been many communications put forward by different groups of Members at the WTO in the last eight months on actions that would make sense in terms of limiting export restraints on medical goods or avoiding such restraints on agricultural goods, about the need for effective trade facilitation measures to reduce barriers to movement of medical goods, and on other topics related to the COVID-19 pandemic.

The Ottawa Group’s communication from Monday is an effort to come up with an early possible deliverable that could garner broad WTO Member support. As a result it seeks a joint statement with agreement on the statement for early 2021. The Group also provides five draft proposals for such a joint statement. The proposals don’t eliminate existing flexibility (e.g., export restraints) but try to tighten disciplines via increased transparency. The proposals encourage development of best practices on a range of trade facilitation and regulatory alignment issues. The proposals also encourage what is obviously in most Members self-interest — reducing or eliminating tariffs on medical goods during the pandemic. The proposals also call on Members to do a better job on transparency on measure taken during the pandemic with a focus on identifying disruptions to supply chains and addressing the same in short order. Finally, while the WTO already cooperates with other organizations, the proposals point to specific areas where enhanced cooperation would be helpful.

In an organization where Members have a low level of trust in each other, a joint statement on the need for a Trade and Health Initiative such as proposed by the Ottawa Group is probably all that can be achieved in the short term. Something along the lines outlined in the Annex would indeed be a confidence builder if achieved early in 2021. The ability to review developments at the 12th Ministerial and start negotiations on trade in essential medical goods at that time will also be important if accomplished. The more ambitious options presented by DDG Wolff should be considered but realistically are unlikely to either happen or get started ahead of the 12th Ministerial.

Let’s hope that the WTO membership can come together to support the Ottawa Group proposal. The EC has indicated that the Communication will be taken up at the December General Council meeting. That will be an early opportunity to see if there is likely to broad support for the initiative.

The WTO selection process for the next Director-General — possible steps that can be taken in the coming weeks

According to the Procedures adopted by the General Council at the end of 2002 for appointing Directors-General, the current selection process of a new Director-General should have concluded with a General Council meeting that was called for November 9, 2020 but then postponed. See PROCEDURES FOR THE APPOINTMENT OF DIRECTORS-GENERAL, Adopted by the General Council on 10 December 2002, WT/L/509 (20 January 2003), paragraphs 8, 15-19; November 6, 2020, Postponement of WTO General Council meeting to consider recommendation of Dr. Ngozi Okonjo-Iweala as next Director-General, https://currentthoughtsontrade.com/2020/11/06/postponement-of-wto-general-council-meeting-to-consider-recommendation-of-dr-ngozi-okonjo-iweala-as-next-director-general/.

In prior posts, I have reported on the developments in the third and final round of consultations that the troika (Chairs of the General Council, Dispute Settlement Body and Trade Policy Review Body) had with Members between October 19-27 and the informal meetings with Heads of Delegation on October 28. See October 29, 2020, WTO press release from informal Heads of Delegation meeting on October 28 and Amb. Walker’s statement to the WTO membership on the outcome of the third round of consultations in the Director-General selection process, https://currentthoughtsontrade.com/2020/10/29/wto-press-release-from-informal-heads-of-delegation-meeting-on-october-28-and-amb-walkers-statement-to-the-wto-membership-on-the-outcome-of-the-third-round-of-consultations-in-the-director-general/; October 29, 2020, October 29th video discussion on WTO Director-General selection process following the announcement of results of third round of consultations and U.S. announcement of not backing the candidate with the greatest support, https://currentthoughtsontrade.com/2020/10/29/october-29th-video-discussion-on-wto-director-general-selection-process-following-the-announcement-of-third-round-of-consultations-and-u-s-aanouncement-of-not-backing-the-candidate-with-the-greatest/; October 29, 2020, U.S. support for Minister Yoo for WTO Director-General premised on need for person with trade expertise, https://currentthoughtsontrade.com/2020/10/29/u-s-support-for-minister-yoo-for-wto-director-general-premised-on-need-for-person-with-trade-expertise/; October 28, 2020, WTO Director-General selection process doesn’t generate immediate consensus, https://currentthoughtsontrade.com/2020/10/28/wto-director-general-selection-process-doesnt-generate-immediate-consensus/.

There were two strong candidates being considered by Members in the third round of consultations — H.E. Yoo Myung-hee of Korea (Trade Minister) and Dr. Ngozi Okonjo-Iweala of Nigeria (Chair of GAVI, former Finance Minister of Nigeria, and senior official at the World Bank). As reported by the Chairman of the General Council, Amb. David Walker of New Zealand, Dr. Ngozi Okonjo-Iweala was the candidate found based on the preferences of Members to be most likely to attract consensus of the Members and whose name would be put forward to the General Council in a special meeting as recommended by the troika consistent with the procedures (para. 19).

Because the Republic of Korea did not withdraw the Korean candidate and because the U.S. indicated it could not support a consensus for Dr. Okonjo-Iweala, the Chair of the General Council was faced with additional consultations ahead of the planned special General Council meeting that was scheduled for November 9. On November 6, the meeting was postponed for an indefinite period reflecting reimposed restrictions by the Swiss government in light of a second wave of COVID-19 cases in Switzerland, thus permitting the Chair more time to consult and seek a resolution.

We are now 13 days after the postponement was announced. Absent a resolution through consultations, the option exists to move to a vote on who should be the next Director-General. WT/L/509, para. 20. While a possibility, to date at least, there has been no move to shift from a consensus approach to a vote, although that may happen in the coming weeks or months.

Steps that could be taken to help resolve the current situation

  1. Withdrawal of H.E. Yoo Myung-hee as a candidate

Since the procedures were adopted at the end of 2002, all candidates who have been put forward have done so understanding that the procedures envision any candidate who is not moved to the next round or who is not found to be the candidate most likely to attract consensus in the final round will withdraw. WT/L/509, para 18 (“It is understood that the candidate or candidates least likely to attract consensus shall withdraw.”). The withdrawal of candidates not receiving the requisite support was followed by all candidates who didn’t advance in 2005 and in 2013 and in the first two rounds of the 2020 consultation process. So the failure of Korea to withdraw its candidate was surprising and inconsistent with the agreed procedures.

Korea is a strong supporter of the WTO as was recognized by Amb. Walker is his prepared comments at the meeting on October 28 (JOB/GC/247).

” 4 TRIBUTE TO CANDIDATES AND TO MEMBERS

“4.1. Before I conclude, I would like to acknowledge H.E. Yoo Myung-hee for her participation in this selection process.

“4.2. As I said at the start, Members consider her a highly qualified individual. H.E. Yoo Myung-hee has vast experience, which she has acquired in a number of leading positions, and her outstanding
qualifications are highly valued and respected by all Members. In her distinguished career, H.E. Yoo Myung-hee has always been a tireless promoter of the multilateral trading system, and I am certain that the WTO can continue to count on that commitment.

“4.3. We would also like to acknowledge the Government of the Republic of Korea and its Geneva Representative Ambassador PAIK Ji-ah for their commitment to this institution and to the multilateral trading system.”

The government of Korea has indicated that it has not decided a course of action and press accounts suggest that Minister Yoo is still in the fight for the Director-General position. Hopefully, Korea will take the correct action even if belatedly and withdraw its candidate. There is no doubt that Minister Yoo is a qualified individual. But that has been true of many candidates who did not ultimately succeed. The procedures adopted by the General Council obviously don’t work if candidates who do not receive the broadest and largest support don’t withdraw. Korea’s and Minister Yoo’s actions in having Minister Yoo stay in the competition are hurting the organization that both have actively supported. In an organization where Members already have a low level of trust, having important Members disregard procedures all have agreed to simply compounds the challenge of restoring trust and permitting the WTO to get on with the critical work before it.

2. Carry on in the existing configuration until the Biden Administration is in place in late January

While it is unlikely that the incoming Biden Administration will have its full team in place for a number of months after President-elect Biden is sworn in on January 20, my belief is that there will be a reasonably strong likelihood that the new Administration will not prevent a consensus for Dr. Ngozi Okonjo-Iweala to be appointed the next Director-General of the WTO. Thus, holding the special General Council meeting sometime in February would likely permit the recommendation identified by Amb. Walker and his two facilitators at the October 28 informal meeting of Heads of Delegation to proceed unopposed. While a February date drastically reduces the time for an incoming Director-General to help Members prepare for the Ministerial to be held in Kazakhstan midyear 2021, many of the priority short term objectives identified by Dr. Okonjo-Iweala (such as completing the fisheries subsidies negotiations and getting the plurilateral on e-commerce to an advanced state) are being worked by existing groups within the WTO and so hopefully will be positioned for early harvest.

Conclusion

The WTO has many needs for reform going forward. There are issues where drawing a line in the sand may be warranted by Members. I believe that the U.S. has correctly drawn a line in the sand on dispute settlement, an issue of concern to Administrations and Congress for more than 20 years. Hopefully reform of the dispute settlement system can happen in 2021 to restore the balance of rights and obligations that sovereign states negotiated during the Uruguay Round and that will limit the role of panels and the Appellate Body to that which was originally envisioned.

While all decisions by Members are obviously for them to make regardless of outside views, as an outside observer I don’t see the justification for drawing a line in the sand in the selection process for a new Director-General. Both candidates in the final round of consultations were highly qualified and respected. The organization needs a new Director-General. The organization will be well served by either candidate. But only one was found through the 2002 procedures to be the candidate most likely to attract a consensus. With a change in U.S. Administrations a few months away, hopefully the 2002 procedures can be respected again without the need to resort to voting and with Dr. Ngozi Okonjo-Iweala becoming the next Director-General of the WTO.

WTO initiatives on trade and the environment — likely to receive a warm welcome under a Biden Administration

The challenges facing the world from climate change are staggering and getting worse. While the Trump Administration withdrew the United States from the Paris climate agreement, a Biden Administration will have the U.S. rejoin and work with other nations to find solutions to the pressing problems.

Today in Geneva, two initiatives were announced by groups of WTO Members. One addresses trade and environmental sustainability and was presented in a communication from 49 Members. Communication on Trade and Environmental Sustainability, WT/CTE/W/249 (17 November 2020). Neither the U.S., China, India, Brazil nor South Africa are on the communication though most developed countries and other Members are initial sponsors. The communication is embedded below.

W249

The second initiative was the launch of an informal dialogue on plastics pollution and environmentally sustainable plastics trade. Seven Members are launching the informal dialogue. All Members are welcome to participate. The seven Members involved in the launch are Australia, Barbados, Canada, China, Fiji, Jamaica and Morocco. Only Australia, Canada and Fiji are part of both initiatives. The press release from the Secretariat on today’s initiatives included the following discussion of the plastics initiative.

“The dialogue is borne out of the recognition of the need for coordinated action to address the rising environmental, health and economic cost of plastics pollution and the importance of the trade dimension as a solution.

“Proponents aim to circulate their communication soon. * * *

“Ambassador Xiangchen Zhang of China said at the online event that possible subjects for discussion include improving transparency, monitoring trade trends, promoting best practices, strengthening policy coherence, identifying the scope for collective approaches, assessing capacity and technical assistance needs, and cooperating with other international processes and efforts. Ambassador Nazhat Shameem Khan of Fiji said they hope this informal dialogue will encourage discussion and exploratory work on how the WTO can contribute to efforts to reduce plastics pollution and transition to a circular, more environmentally sustainable plastics trade.”

Deputy Director-General Alan Wm Wolff spoke at today’s event and identified a range of initiatives that have been looked at by the Committee on Trade and Environment, or that could be, that could help move forward both initiatives including resuming talks at eliminating tariffs and non-tariff barriers on environmental goods and services, reforming subsidies on fossil fuels, promoting a global circular economy, addressing the carbon content of traded products and other actions.

The press release and DDG Wolff’s remarks are embedded below.

WTO-_-2020-News-items-New-initiatives-launched-to-intensify-WTO-work-on-trade-and-the-environment

WTO-_-2020-News-items-Speech-DDG-Alan-Wolff-DDG-Wolff-remarks-on-the-Structured-Discussions-on-Trade-and-Environmental-Sustainability

Likely U.S. engagement in a Biden Administration

Because addressing the challenges from climate change are a core priority for the incoming Biden Administration, I would expect that once the new trade team is in place, the U.S. will become involved in both of the initiatives and other activities at the WTO on the importance of finding rules and solutions to pressing trade and environment issues.

The Biden team almost certainly supports most if not all of the items identified in paragraph 1 of the Communication (WT/CTE/W/249), including the importance of multilateral environmental agreements, that there is an urgent need for action on climate change, that trade and environmental objectives and policies should be mutually supportive, that trade and trade policy need to support efforts to reach the Sustainable Development Goals, among others. Similarly, the Biden Administration will presumably strongly support the four areas of activity identified in paragraph 2 of the Communication:

“2. Therefore, express our intention to collaborate, prioritize and advance discussions on trade and environmental sustainability, including by:

“intensifying our work to share experiences and best practices; promote transparency, dialogue and information sharing along the full value chain of products and materials;

“strengthening coherence at the national and international level with a view to identifying areas of common interest and for future work within the WTO, in order for WTO to address more effectively sustainable development issues;

“working in cooperation with relevant international organizations and relevant actors, including the private sector, to identify and support technical assistance and capacity building needs of Members, and in particular least-developed countries (LDCs).

“working on possible actions and deliverables of environmental sustainability in the various areas of the WTO.”

Similarly, I would expect the Biden Administration to have an active interest in working with industry and other governments to address the challenges of plastics pollution, although U.S. interests are likely to be more action oriented than the items teed up by China at today’s announcement.

Conclusion

For years, many Members have fought focusing energies at the WTO on issues involving trade and the environment. With the climate change crisis and consequences being felt around the world, it appears that many or most WTO Members are appreciating the need for the WTO to play its role in addressing sustainable development and the climate change challenge.

With a new U.S. Administration, the U.S. should be a very active participant in moving the WTO and its Members forward.

Regional Comprehensive Economic Partnership signed on November 15, 2020

On Sunday, November 15, 2020, fifteen countries signed the Regional Comprehensive Economic Partnership which will “enter into force for those signatory States that have deposited their instrument of ratification, acceptance, or approval, 60 days after the date on which at least six signatory States which are Member States of ASEAN and three signaotry States other than Members States of ASEAN have deposited their instrument of ratification, acceptance, or approval with the Depositary.” RCEP Article 20.6.2.

The fifteen countries signing the RCEP are the ten ASEAN countries — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — and five others (Australia, China, Japan, New Zealand and the Republic of Korea). India had participated in negotiations but withdrew in late 2019. According to a CNN article, “The Regional Comprehensive Economic Partnership spans 15 countries and 2.2 billion people, or nearly 30% of the world’s population, according to a joint statement released by the nations on Sunday, when the deal was signed. Their combined GDP totals roughly $26 trillion and they account for nearly 28% of global trade based on 2019 data.” CNN Business, November 16, 2020, China signs huge Asia Pacific trade deal with 14 countries, https://www.cnn.com/2020/11/16/economy/rcep-trade-agreement-intl-hnk/index.html.

The Joint Statement released on the 15th is copied below.

“Joint Leaders’ Statement on The Regional Comprehensive Economic Partnership (RCEP)

“We, the Heads of State/Government of the Member States of the Association of Southeast Asian Nations (ASEAN) – Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam – Australia, China, Japan, Korea and New Zealand, met virtually on 15 November 2020, on the occasion of the 4th RCEP Summit.

We were pleased to witness the signing of the RCEP Agreement, which comes at a time when the world is confronted with the unprecedented challenge brought about by the Coronavirus Disease 2019 (COVID-19) global pandemic. In light of the adverse impact of the pandemic on our economies, and our people’s livelihood and well-being, the signing of the RCEP Agreement demonstrates our strong commitment to supporting economic recovery, inclusive development, job creation and strengthening regional supply chains as well as our support for an open, inclusive, rules-based trade and investment arrangement. We acknowledge that the RCEP Agreement is critical for our region’s response to the COVID-19 pandemic and will play an important role in building the region’s resilience through inclusive and sustainable post-pandemic economic recovery process.”

https://asean.org/joint-leaders-statement-regional-comprehensive-economic-partnership-rcep-2/

The agreement has twenty chapters some of which have annexes:

  1. Initial Provisions and General Definitions
  2. Trade in Goods
  3. Rules of Origin
  4. Customs Procedures and Trade Facilitation
  5. Sanitary and Phytosanitary Measures
  6. Standards, Technical Regulations, and Conformity Assessment Procedures
  7. Trade Remedies
  8. Trade in Services
  9. Temporary Movement of Natural Persons
  10. Investment
  11. Intellectual Property
  12. Electronic Commerce
  13. Competition
  14. Small and Medium Enterprises
  15. Economic and Technical Cooperation
  16. Government Procurement
  17. General Provisions and Exceptions
  18. Institutional Provisions
  19. Dispute Settlement
  20. Final Provisions

The full RCEP agreement and country schedules of tariff commitments can be found in English at the webpage for RCEP, https://rcepsec.org/legal-text/ as well as on various individual signatory web pages. See, e.g., the Australian Government, Department of Foreign Affairs and Trade, https://www.dfat.gov.au/trade/agreements/not-yet-in-force/rcep/rcep-text-and-associated-documents.

A summary of the agreement from the ASEAN webpage is embedded below. https://asean.org/storage/2020/11/Summary-of-the-RCEP-Agreement.pdf.

Summary-of-the-RCEP-Agreement

From the chapter titles, it is clear that the Agreement does not deal with issues such as labor or environment. While there is a chapter on trade remedies, a review shows no expanded rules on industrial subsidies – a matter of concern for many countries dealing with China. Similarly, under the competition chapter, the only reference (and it is indirect) to state-owned or state-invested enterprises is contained in Article 13.3.5 (“Article 13.3: Appropriate Measures against Anti-Competitive
Activities”). “Each Party shall apply its competition laws and regulations to all entities engaged in commercial activities, regardless of their ownership. Any exclusion or exemption from the application of each Party’s competition laws and regulations, shall be transparent and based on grounds of public policy or public interest.” (Emphasis added).

RCEP Chapter 7, Trade Remedies

While subsequent posts will look at other aspects of the RCEP Agreement, this post looks at Chapter 7, Trade Remedies. For convenience, the chapter is embedded below.

rcep-chapter-7

Safeguard actions

Section A of Chapter 7 deals with RCEP safeguard measures. The RCEP safeguard measure is intended to be available for a transitional period that extends to a period that is eight years after the tariff elimination or reduction on a specific good is scheduled to occur. Relief can be in the form either of stopping tariff reductions or snapping the tariff back to the MFN rate at the lower of the rates applicable at the date of entry into force of the Agreement for the country in question or the MFN rate on the date when the transitional RCEP safeguard measure is put in place. There is a three year limit on relief, with a one year extension in certain circumstances. If relief is for more than a year, the relief provided is to be reduced “at regular intervals”. Relief is not available against imports from a RCEP party whose imports are less than 3% of total imports from the RCEP parties or if the RCEP party is a Least Developed Country. RCEP has three members who are Least Developed Countries (LDCs) according to the UN’s 2020 list – Cambodia, Laos and Myanmar. Compensation is required and if not agreed to, then the party subject to the RCEP safeguard “may suspend the application of substantially equivalent concessions” on goods from the party applying the safeguard. No compensation is required during the first three years of relief if there has been an absolute increase in imports. No compensation will be requested from an LDC.

RCEP countries preserve their rights under the WTO to pursue global safeguard measures. RCEP parties are not to apply both a RCEP safeguard and a global safeguard to the same good at the same time.

Antidumping and Countervailing Duties

Section B of Chapter 7 deals with antidumping and countervailing duties. While the Section starts by noting that parties “retain their rights and obligations under Article VI of GATT 1994, the AD Agreement, and the SCM Agreement,” the section adds clarity to notice and consultation requirements, timing of notice and information required for verification, maintaining a non-confidential file available to all parties and other matters. The biggest addition to parties rights and obligations is the acceptance of a “Prohibition on Zeroing” in dumping investigations and reviews. Article 7.13.

“When margins of dumping are established, assessed, or reviewed under
Article 2, paragraphs 3 and 5 of Article 9, and Article 11 of the AD Agreement, all individual margins, whether positive or negative, shall be
counted for weighted average-to-weighted average and transaction-to- transaction comparison. Nothing in this Article shall prejudice or affect
a Party’s rights and obligations under the second sentence of subparagraph 4.2 of Article 2 of the AD Agreement in relation to weighted average-to-transaction comparison.”

Considering the centrality of the WTO dispute settlement decisions on “zeroing” to the U.S. position on overreach by the Appellate Body, the actions of the RCEP parties to add the obligation contained in RCEP Art. 7.13 to their approach to antidumping investigations will almost certainly complicate the ability of the WTO to move past the impasse on the Appellate Body.

Conclusion

The RCEP Agreement is an important FTA in the huge number of such agreements entered by countries around the world. There will certainly be advantages for the RCEP countries from the regional trade liberalization and the common rules of origin adopted.

Pretty clearly, the RCEP has not dealt with some of the fundamental challenges to the global trading system from the rise of economic systems that are not premised on market-economy principles. While such issues can be addressed in the WTO going forward, the ability of China to get a large number of trading partners to open their markets without the addressing of the underlying core distortions from the state directed economic system that China employs suggests that the road to meaningful reform has gotten longer with the RCEP Agreement.

Nor have the RCEP countries chosen to include within the RCEP action on issues like the environment which are of growing importance to the ability to have sustainable development. Again while such issues can be addressed in the WTO, they are also being addressed in bilateral and plurilateral agreements by other countries and including some of the RCEP countries. Thus, RCEP is a lost opportunity for leadership by China on issues of great importance to its citizens and those of all RCEP parties.

Postponement of WTO General-Council meeting to consider recommendation of Dr. Ngozi Okonjo-Iweala as next Director-General

On November 6, the Chair of the General Council, Amb. David Walker of New Zealand announced that the special General Council meeting scheduled for Monday November 9 was being postponed with a future date to be determined. The communication to the WTO membership is embedded below.

248

Switzerland has reimposed various restrictions in an effort to deal with a second wave of new cases which topped 10,000 in a single day in early November. See CoVID-19 – the situation in Switzerland, https://www.swissinfo.ch/eng/covid-19_coronavirus–the-situation-in-switzerland/45592192. Such restrictions can affect the ability to have in person meetings at the WTO and the willingness of Members to make formal decisions absent in person meetings.

It is also the case that there are external events which are not resolved which could be relevant to the selection process of the next Director-General. One such event is the Presidential election in the United States, where a final resolution is not likely for some time (and certainly not before next Monday).

Similarly, press articles indicate that the Republic of Korea has not resolved internally where it will be on Minister Yoo’s candidacy (withdraw or not withdraw) by the time of the special General Council meeting. See Yonhap News Agency, November 5, 2020, No decision made on S. Korean minister’s WTO chief bid: foreign ministry, https://en.yna.co.kr/view/AEN20201105010900325.

Thus, a postponement provides Amb. Walker and his two facilitators more time to see whether a consensus can be reached on the candidate who received the largest number of preferences in the third round of consultations (Dr. Ngozi Okonjo-Iweala) and who was identified by the troika as the candidate most likely to attract consensus.

No specific date has been selected for when the postponed special General Council meeting will occur. It is possible that there will be slippage until 2021.

WTO Press Release from Informal Heads of Delegation Meeting on October 28 and Amb. Walker’s statement to the WTO Membership on the outcome of the third round of consultations in the Director-General selection process

This afternoon, the WTO released a press release on yesterday’s meeting of the Heads of Delegation reviewing the Director-General selection process and the U.S. opposition to the candidate identified as the most likely to attract consensus. Amb. David Walker, the Chair of the General Council, provided a detailed statement during the meeting reviewing the results of the third round of consultations and also announced the date for the next General Council meeting whose sole issue will be the recommendation that Dr. Ngozi Okonjo-Iweala be appointed the next Director-General of the WTO. How the process will proceed has obviously been complicated by the position of the United States and the failure of the Korean candidate to withdraw as was expected under the procedures being followed in the selection process.

While two prior posts have dealt with the developments and one has provided a discussion organized by WITA, below are the press release and
Amb. Walker’s statement so that readers of the post have both important documents.

WTO-_-2020-News-items-Members-indicate-strong-preference-for-Ngozi-Okonjo-Iweala-as-DG-but-US-objects

247

.

October 29th Video discussion on WTO Director-General selection process following the announcement of the results of the third round of consultations and U.S. announcement of not backing the candidate with the greatest support

On October 29, the Washington International Trade Association (WITA) put together a short video discussion among Rufus Yerxa (current President of the National Foreign Trade Council, former Deputy Director-General of the WTO among other positions), Wendy Cutler (currently Vice President and Managing Director of the Washington, D.C. office of the Asia Society Policy Institute and former senior negotiator at the U.S. Trade Representative’s Office) and me, moderated by Ken Levinson (Executive Director of WITA). The discussion dealt with the challenges to the ongoing WTO Director-General selection process from the U.S. announcement and Korea’s failure to withdraw its candidate following the announcement that Dr. Ngozi Okonjo-Iweala of Nigeria was the candidate most likely to attract consensus based on the third round of consultations (which concluded on October 27). The You Tube link to the discussion is below.

U.S. support for Minister Yoo for WTO Director-General premised on need for person with trade expertise

When the U.S. indicated at the WTO informal meeting of the Heads of Delegation in Geneva on October 28 that it would not join the consensus for Dr. Ngozi Okonjo-Iweala becoming the next Director-General, the position was based on the U.S. view that in the current situation, the WTO needed a Director-General with trade experience. The Chair of the General Council,
Amb. David Walker (NZ), had reviewed with WTO Members that Dr. Okonjo-Iweala had received the largest amount of support in the third round of consultations. Under the 2002 procedures for appointment of Directors-General adopted by the General Council and being followed in this year’s selection process, Amb. Walker and his facilitators, will be putting Dr. Okonjo-Iweala’s name forward at a coming General Council meeting as the recommended choice for Director-General. The U.S. position, if maintained at the General Council meeting would prevent consensus for the Nigerian candidate.

Here is the statement released from the U.S. Trade Representative’s Office yesterday:

“Washington, DC – The Office of the United States Trade Representative issued the following statement today on the selection of the next World Trade Organization Director-General:

“The United States supports the selection of Korean Trade Minister Yoo Myung-hee as the next WTO Director-General.  Minister Yoo is a bona fide trade expert who has distinguished herself during a 25-year career as a successful trade negotiator and trade policy maker.  She has all the skills necessary to be an effective leader of the organization.

“This is a very difficult time for the WTO and international trade.  There have been no multilateral tariff negotiations in 25 years, the dispute settlement system has gotten out of control, and too few members fulfill basic transparency obligations.  The WTO is badly in need of major reform.  It must be led by someone with real, hands-on experience in the field.”

Statement from the Office of the U.S. Trade Representative on the WTO Director-General Selection Process, October 28, 2020, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/october/statement-office-us-trade-representative-wto-director-general-selection-process.

Decisions on whether there is or isn’t consensus on the appointment of a particular candidate are not made at an informal heads of delegation meeting. As required by the appointment procedures being followed this year, the WTO Chairman of the General Council has called a General Council meeting for November 9 at 10 a.m. at which point the Members will either appoint Dr. Okonjo-Iweala by consensus or put the appointment process in unchartered waters. The procedures provide for turning to selection by a vote by Members as a last resort.

To date, Minister Yoo has not withdrawn her candidacy, being the first candidate since the 2002 procedures were adopted by the General Council, not to withdraw after a round of consultations in which her candidacy was not announced as advancing. That situation could, of course, change in the coming days.

The Republic of Korea and the U.S. reportedly consulted by phone on Wednesday ahead of the informal heads of delegation meeting in Geneva. Yonhap News Agency, October 28, 2020, Senior diplomats of S. Korea, U.S. hold phone talks on WTO chief selection, https://en.yna.co.kr/view/AEN20201028006100325. Presumably, the United States and Korea will be discussing the current situation with other Members to see if they can get Members to build consensus around Minister Yoo. See, e.g., Yonhap News Agency, October 28, 2020, S. Korean candidate behind Nigerian rival in global trade-chief race, https://en.yna.co.kr/view/AEN20201028004651320?section=news.

The troika of the Chairs of the General Council, Dispute Settlement Body and Trade Policy Review Body will also be consulting with Members to see if there is a path to consensus behind the candidate with the broadest support.

It promises to be a challenging time for the WTO over the coming days.

WTO Director-General selection process doesn’t generate immediate consensus

The troika of WTO Chairs (of the General Council, Dispute Settlement Body and Trade Policy Review Body) met with the WTO heads of delegation on October 28 to review the results of the third round of consultations with Members as part of the long process of selecting the next Director-General. The meeting which was scheduled for 3 p.m. Geneva time, started after 3:15 p.m. and resulted in at least temporary challenges.

The two remaining candidates for consideration during the third round were Korea’s Minister for Trade, H.E. Yoo Myung-hee and Nigeria’s Dr. Ngozi Okonjo-Iweala. Both are considered highly qualified though with very different backgrounds — trade for Minister Yoo; development economics and finance for Dr. Okonjo-Iweala. Both candidates received strong support from their host governments in terms of politic outreach.

Amb. David Walker, the Chair of the General Council, announced that Dr. Okonjo-Iweala has emerged from the third round as the candidate most likely to attract consensus among the Members, and it is understood that she received broad support. Press articles have indicated support from WTO Members of the African Union, support from the countries part of the European Union and other support in the Americas and Asia, including China and Japan. Thus, Dr. Okonjo-Iweala may have been the preferred candidate for more than 100 of the 164 WTO Members.

Minister Yoo reportedly had the support of the United States, many countries in Asia and other support from the Americas and elsewhere.

The actual support of each candidate is not released by the WTO as consultations are confidential, though individual governments are, of course, free to identify which candidate they preferred.

Importantly, the Republic of Korea did not withdraw Minister Yoo’s candidacy and the U.S. has indicated it continues to support Minister Yoo, which means that at least for the moment there is not a consensus for Dr. Okonjo-Iweala.

Presumably the troika will continue to consult with Korea and the United States to see if they can get those Members to support the potential consensus behind Dr. Okonjo-Iweala. The procedures adopted by the General Council in late 2002 indicate that the troika should be submitting the name of Dr. Okonjo-Iweala to the General Council recommending her appointment by the General Council:

“At the end of the final stage of the consultative process, the Chair, with the support of the facilitators, shall submit the name of the candidate most likely to attract consensus and recommend his or her appointment by the General Council.”

Procedures for the Appointment of Directors-General, Adopted by the General Council on 10 December 2002, WT/L/509 (20 January 2003), para. 19.

Because of the present positions of Korea and the United States, it is likely that Amb. Walker will delay calling a General Council meeting in the hope of obtaining clearance of the current blockage. At some point, Amb. Walker will presumably call the General Council meeting so Members have to be on the record as opposing consensus. As a last resort, Amb. Walker and his facilitators can have the General Council vote to select the next Director-General. Id, para. 20.

Recourse to voting as a last resort

“20. If, after having carried out all the procedures set out above, it has not been possible for the General Council to take a decision by consensus by the deadline provided for the appointment, Members should consider the possibility of recourse to a vote as a last resort by a procedure to be
determined at that time. Recourse to a vote for the appointment of a Director-General shall be understood to be an exceptional departure from the customary practice of decision-making by consensus, and shall not establish any precedent for such recourse in respect of any future decisions in the WTO.”

The deadline for the appointment under existing procedures, is November 7, 2020. Id, para. 15. It is unclear what the objection is for the United States to Dr. Okonjo-Iweala, although press accounts have indicated that the U.S. has concerns about Dr. Okonjo-Iweala based on her work with U.S. officials with significantly different views on trade policy than the current U.S. Administration. It is also not clear why Korea’s candidate would not follow the agreed procedures for appointment of Directors-General and withdraw in light of the preferences expressed to the troika during the third round.

Conclusion

The WTO has been fortunate to have very strong candidates put forward to be considered as the next Director-General. Minister Yoo is highly qualified and had a strong presentation of views and intended approach for leading the WTO forward.

Dr. Okonjo-Iweala with her service as Minister of Finance twice for Nigeria and twenty-five years experience at the World Bank, background in development economics, and service as Chair of GAVI brings a wealth of experience at high levels of government and multilateral organizations. She is also a candidate from Africa, a continent that has not to date had a Director-General of the WTO. As stated in the General Council’s procedures for appointing Directors-General,

Representativeness of candidates

“13. In order to ensure that the best possible candidate is selected to head the WTO at any given time, candidatures representing the diversity of Members across all regions shall be invited in the nominations process. Where Members are faced in the final selection with equally meritorious
candidates, they shall take into consideration as one of the factors the desirability of reflecting the diversity of the WTO’s membership in successive appointments to the post of Director-General.”

There has been a prior WTO Director-General from Asia, which may have been a consideration for some WTO Members in providing their preference for Dr. Okonjo-Iweala instead of Minister Yoo in the third round.

It is obviously unfortunate that a process that has worked smoothly so far in 2020, has developed the current set of challenges from Korea and the U.S. Hopefully, the challenges will be addressed and a consensus reached in the next nine days. The correct outcome at this point is for Dr. Okonjo-Iweala to be the next Director-General, the first female Director-General and the first African Director-General.

If the unexpected holdup in concluding the selection process can be resolved, Dr. Ngozi Okonjo-Iweala will hopefully be up to the daunting task that awaits the next Director-General. Success will depend on the willingness of Members to find common ground and address the need for reform and updating the rule book — clearly a herculean challenge considering the very different views of major Members and different groups of Members. But the WTO needs a leader who can help Members find the path forward, be an honest broker, help Members restore confidence in the organization and ensure trade issues can be effectively addressed within the organization, help ensure engagement by all, and be able to engage with governments at a political level and with other multilateral organizations to achieve meaningful participation by all. The global trading system needs a strong and relevant WTO. Time will tell if Dr. Okonjo-Iweala will be that leader. Let’s hope that the next Director-General will succeed.

WTO Director-General selection — press reports EU, Japan join those supporting Dr. Ngozi Okonjo-Iweala of Nigeria

With the third round of consultations concluding on Tuesday, October 27, press reports indicate that Japan will be supporting the Nigerian canadidate and the EU, after extended internal debate, has apparently agreed to support Dr. Ngozi Okonjo-Iweala of Nigeria as well. See The Japan Times, October 26, 2020, Japan decides against backing South Korean for WTO chief, https://www.japantimes.co.jp/news/2020/10/26/business/japan-south-korea-nominee-wto/; Politico, October 26, 2020, EU backs Nigerian candidate for WTO top job, https://www.politico.eu/article/eu-backs-nigerian-candidate-for-wto-top-job/.

Dr. Okonjo-Iweala has received the backing of the WTO Members of the African Union and reportedly several dozen other Members from the Americas and Asia. See, e.g., RTL Today, October 19, 2020, ‘I feel the wind behind my back’: Nigerian WTO candidate, https://today.rtl.lu/news/business-and-tech/a/1596831.html.

Some press article have suggested that China is also likely to support the Nigerian candidate, although there has not been formal confirmation to date and some articles have suggested China may have problems with each of the two remaining candidates. See, e.g., South China Morning Post, October 8, 2020, China faces ‘difficult trade-off’ as WTO leadership race heads into final round, https://www.scmp.com/economy/china-economy/article/3104712/china-faces-difficult-trade-wto-leadership-race-heads-final.

The United States has been reported in the press as supporting Minister Yoo Myung-hee from the Republic of Korea. Bloomberg (article in Swissinfo.com), October 21, 2020, Global Trade-Chief Race Slows as U.S., EU Split on Finalists, https://www.swissinfo.ch/eng/bloomberg/global-trade-chief-race-slows-as-u-s—eu-split-on-finalists/46110158.

It is also known that the President of Korea and other senior officials within the Korean government have been actively reaching out to WTO Members to encourage support of Minister Yoo in the third round. See, e.g., Yonhap News Agency, October 20, 2020, Moon requests support from 2 nations for S. Korean candidate’s WTO chief bid, https://en.yna.co.kr/view/AEN20201020009151320; The Korea Times, October 20, 2020, Government goes all out for Yoo’s WTO election, https://en.yna.co.kr/view/AEN20201020009151320.

What do the news articles portend?

Assuming the support for Dr. Ngozi Okonjo-Iweala is as broad and deep as is being reported, the Nigerian should be the candidate who is announced by the troika in the WTO (Chairs of the General Council, Dispute Settlement
Body and Trade Policy Review Body) as the candidate most likely to achieve consensus from the membership at an informal heads of delegation. If there is no opposition from a Member or Members suggesting blockage of consensus, the informal heads of delegation meeting could be set for as early as Thursday, October 29, with a General Council meeting to confirm the selection held that afternoon or on the 30th of October. If one or more Members indicates a likelihood of blockage of consensus, it is likely that the informal heads of delegation meeting would not occur on the 29th to give the troika the opportunity to work with those threatening blockage to attempt to achieve consensus. See October 9, 2020:  October 8th video discussion on WTO Director-General selection process following the announcement of two finalists, https://currentthoughtsontrade.com/2020/10/09/october-8th-video-discussion-on-wto-director-general-selection-process-following-the-announcement-of-two-finalists/ (video from WITA; see comments of Amb. Rufus Yerxa, President of the National Foreign Trade Council).

Under the procedures adopted in late 2002 for the selection of a Director-General if there is a failure to achieve consensus, Members could select the Director-General based on a vote. To date, voting has not been required. Hopefully, the same will be true in this selection as well. If so, it appears that Dr. Ngozi Okonjo-Iweala will be the next Director-General of the WTO.

Third Round of Consultations in Selecting new WTO Director-General – eight days to go, political outreach continues at high level

The last WTO Director-General, Roberto Azevedo, departed at the end of August. The existing four Deputy Directors-General are overseeing WTO operations awaiting the outcome of the selection process for a new Director-General. While eight candidates were put forward by early July and had two months to “become known” to WTO Members, the process of winnowing down the candidates started in September and has gone through two rounds where the candidate pool went from eight to five to two. Which brings the WTO to the third and final round of consultations by the troika of Chairs of the General Council, Dispute Settlement Body and Trade Policy Review Body with the WTO Membership to find the one candidate with the broadest support both geographically but also by type of Member (developed, developing, least developed).

The third round started on October 19 and will continue through October 27. While the process is confidential, with each Member meeting individually with the troika and providing the Member’s preference, Members can, of course, release information on the candidate of their preference if they so choose.

The two candidates who remain in contention are Minister Yoo Myung-hee of the Republic of Korea and Dr. Ngozi Okonjo-Iweala of Nigeria. While all eight of the candidates who were put forward in June and July were well qualified, Minister Yoo and Dr. Okonjo-Iweala have received high marks from WTO Members from the very beginning. While Minister Yoo has the advantage in terms of trade background, Dr. Okonjo-Iweala has an impressive background as a former finance minister, 25 years at the World Bank and her current role as Chair of GAVI.

The procedures for selecting a new Director-General which were agreed to in late 2002 by the General Council put a primary focus on qualifications as one would assume. However, where there are equally well qualified candidates then geographical diversity is specifically identified as a a relevant criteria. There has never been a Director-General from Africa and there has only been one Director-General from Asia (although there was also a Director-General from the Pacific area outside of Asia). With the UN Sustainable Development Goals including one on gender equality (SDG #5), many Members have also been interesting in seeing a Director-General picked from the women candidates. Since both of the two remaining candidates are women, geographical diversity will likely have an outsized role in the third round .

Both remaining candidates are receiving strong support from their home governments in terms of outreach to foreign leaders seeking support for their candidate. The candidates, of course, are also extremely busy with ongoing outreach.

Thus, Minister Yoo traveled back to Europe last week and had a meeting with the EC Trade Commissioner Dombrovskis on October 13, among other meetings. See https://ec.europa.eu/commission/presscorner/detail/en/cldr_20_1935; Yonhap News Agency, Seoul’s top trade official to visit Europe to drum up support her WTO chief race, October 12, 2020, https://en.yna.co.kr/view/AEN20201012003300320?section=business/industry;

Similarly, the Korean President Moon Jae-in, Prime Minister Chung Sye-kyun and the ruling Democratic Party (DP) Chairman Lee Nak-yon are engaged in outreach for Minister Yoo’s candidacy. Korea JoongAng Daily, October 12, 2020, Moon, allies intensify campaign for Yoo Myung-hee to head WTO, https://koreajoongangdaily.joins.com/2020/10/12/national/politics/Yoo-Myunghee-WTO-Moon-Jaein/20201012172600409.html. Contacts have been made with heads of state or senior officials in Malaysia, Germany, Brazil, Colombia, Sri Lanka, Guatemala, Japan and the U.S. among others. See The Korea Times, October 20, 2020, Government goes all out for Yoo’s WTO election Government goes all out for Yoo’s WTO election, https://www.koreatimes.co.kr/www/nation/2020/10/120_297887.html. President Moon has also raised the issue of support with new ambassadors to Korea — including the German, Vietnamese, Austrian, Chilean, Pakistani and Omani ambassadors. Yonhap News Agency, October 16, 2020, Moon requests support for S. Korea’s WTO chief bid in meeting with foreign envoys, https://en.yna.co.kr/view/AEN20201016008600315.

Minister Yoo is reported to be having problems in solidifying support from some major Asian Members — including China and Japan — for reasons at least partially separate from her qualifications and is facing what appears to be block support by African WTO Members for Dr. Okonjo-Iweala. Thus, broad outreach in Asia, the Americas and in Europe will be important for Minister Yoo if she is to be the last candidate standing on October 28-29.

Dr. Okonjo-Iweala is similarly receiving strong support from her government where President Muhammadu Buhari indicated full support by the Nigerian government. See The Tide News Online, Ocotber 14, 2020, Buhari Backs Okonjo-Iweala For WTO Job, http://www.thetidenewsonline.com/2020/10/14/buhari-backs-okonjo-iweala-for-wto-job/. Press accounts report that Dr. Okonjo-Iweala has the full backing of the African Union as well as support in both the Americas and Asia. See RTL Today, October 19, 2020, ‘I feel the wind behind my back’: Nigerian WTO candidate, https://today.rtl.lu/news/business-and-tech/a/1596831.html. Many have felt that Dr. Okonjo-Iweala is the candidate to beat, and she is certainly helped by the support of the African Union WTO Members but will also need broad support in the other regions of the world to be the one remaining candidate.

With just eight days to go to the conclusion of the third round of consultations, the remaining two candidates and their governments are turning over every stone in their effort to generate the support needed to come out of the third round as the sole candidate left.

While the candidate announced on October 29 as the remaining candidate still has to be put forward to the General Council for consensus adoption as the new Director-General, it seems unlikely at the moment that either candidate, should she emerge as the preference of the WTO membership, would be blocked by a Member from becoming the next Director-General. While such blockage is always a possibility, the 2002 agreed procedures have prevented such blockage and hopefully will result in a clean conclusion this year as well.

It is certain to be an interesting end of October.