Russian Federation

The Russian Federation’s compliance with WTO obligations — the recent USTR Report

The Russian Federation became the 156th Member of the WTO on August 22, 2012. Since the accession of the Russian Federation, eight other countries have acceded, the last on July 29, 2016 with 23 additional countries in the queue at the WTO. Like other WTO Members, the Russian Federation goes through periodic Trade Policy Reviews (“TPR”) as part of the WTO’s effort to ensure transparency in Member policies and to permit Members to raise questions on policies and practices of each other. The first TPR for the Russian Federation was conducted in 2016. See TRADE POLICY REVIEW, REPORT BY THE SECRETARIAT, RUSSIAN FEDERATION, 24 August 2016, WT/TPR/S/345; TRADE POLICY REVIEW, REPORT BY
RUSSIAN FEDERATION, 24 August 2016, WT/TPR/G/345; TRADE POLICY REVIEW, REPORT BY THE SECRETARIAT, RUSSIAN FEDERATION Revision, 6 December 2016, WT/TPR/S/345/Rev.1; TRADE POLICY REVIEW, RUSSIAN FEDERATION, MINUTES OF THE MEETING, 25 November 2016, WT/TPR/M/345; TRADE POLICY REVIEW, RUSSIAN FEDERATION, MINUTES OF THE MEETING, Addendum (written questions and replies), 19 December 2016, WT/TPR/M/345/Add.1; TRADE POLICY REVIEW: RUSSIAN FEDERATION, 28 AND 30 SEPTEMBER 2016, Concluding remarks by the Chairperson, https://www.wto.org/english/tratop_e/tpr_e/tp445_crc_e.htm.

The second TPR was conducted in 2021 with the two day meeting with Members happening on October 27 and 29, 2021. See TRADE POLICY REVIEW, REPORT BY THE SECRETARIAT, RUSSIAN FEDERATION, 22 September 2021, WT/TPR/S/416; TRADE POLICY REVIEW, REPORT BY RUSSIAN FEDERATION, 22 September 2021, WT/TPR/G/416; TRADE POLICY REVIEW MECHANISM, COMMUNICATION FROM THE CHAIRPERSON OF THE TRADE POLICY REVIEW BODY, RUSSIAN FEDERATION, Arrangements for Review Meeting, 6 October 2021, WT/TPR/466; TRADE POLICY REVIEW: RUSSIAN FEDERATION, Concluding remarks by the Chairperson, 27 and 29 October 2021, https://www.wto.org/english/tratop_e/tpr_e/tp516_crc_e.htm; EU Statement at the Trade Policy Review of the Russian Federation, 27 October 2021, https://eeas.europa.eu/delegations/world-trade-organization-wto/106279/eu-statement-trade-policy-review-russian-federation-27-october-2021_en; Statement by H.E. Ambassador LI Chenggang at the 2nd Trade Policy Review of Russia, http://wto.mofcom.gov.cn/article/meetingsandstatements/202111/20211103214021.shtml.

While the Russian Federation is not an important trading partner of the United States, because of the geopolitical relationship for the last many decades, the U.S. Congress has required an annual report on the Russian Federation’s compliance with WTO obligations since Russia’s accession in 2012. The ninth such report was released by the Office of the U.S. Trade Representative on December 21, 2021. See USTR Press Release, USTR Announces 2021 Report on the Implementation and Enforcement of Russia’s WTO Commitments, December 21, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/december/ustr-announces-2021-report-implementation-and-enforcement-russias-wto-commitments; United States Trade Representative, 2021 Report on the Implementation and Enforcement of Russia’s WTO Commitments, December 2021, https://ustr.gov/sites/default/files/enforcement/WTO/2021%20Report%20on%20Russia’s%20WTO%20Compliance.pdf.

Today’s post reviews some of the USTR findings but starts with some background information on the Russian Federation and a look at the recent Trade Policy Review for the country.

Background information on the Russian Federation

The CIA World Factbook provides a lot of information on countries. The entry for the Russian Federation was last updated on December 17, 2021. See CIA, World Factbook, Russia, https://www.cia.gov/the-world-factbook/countries/russia/. According to the CIA World Factbook, the Russian Federation:

o is the largest country by land area (and roughly 1.8 times as large as the USA);

o has borders with fourteen countries (Azerbaijan, Belarus, China, Estonia, Finland, Georgia, Kazakhstan, North Korea, Latvia, Lithuania, Mongolia, Norway, Poland and Ukraine);

o has a coastline of 3,653 km;

o has the ninth largest population in the world (142,320,790 as of July 2021 est.);

o had a negative population growth rate in 2021 (-0.2%, placing it 207th on population growth);

o has a low birth rate (9.71 births per 1000 population, or 193rd in the world)

o has a high literacy rate (99.7% of those 15 years of age or older);

o had relatively low GDP growth in 2017-2019 (1.34% – 2.54%) or 160th in the world

o has low public debt (15.5% of GDP in 2017);

o has large foreign exchange reserves and gold (6th largest);

o is the world’s second largest producer and exporter of crude oil;

o is the world’s 3rd largest producer of refined petroleum products and 2nd largest exporter;

o is the world’s 2nd largest natural gas producer and largest exporter.

The CIA World Factbook has a great deal more information but the above are some examples of data on the Russian Federation.

Despite the Russian Federation’s high levels of education and abundant natural resources, the country in 2022 is rated by the World Bank as only an upper middle-income country (2020 GNI per capita of between $4,096 and $12,695). See World Bank Country and Lending Groups, Country Classification, July 1, 2021, https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups. Russia in 2020 had a per capita GNI in current U.S. dollars of $10,690 which ranked the Russian Federation 74th. See World Bank, GNI per capita, Atlas method (current US$) – Russian Federation, https://data.worldbank.org/indicator/NY.GNP.PCAP.CD?locations=RU

Because so much of the economy is driven by the gas and oil sectors, increasing prices for both in 2021 led to strong growth in GDP in the Russian Federation, although growth is expected to moderate in 2022 and 2023. See World Bank, Amidst Strong Economic Rebound in Russia, Risks Stemming from COVID-19 and Inflation Build, Says World Bank Report, December 1, 2021,https://www.worldbank.org/en/news/press-release/2021/12/01/amidst-strong-economic-rebound-in-russia-risks-stemming-from-covid-19-and-inflation-build-says-world-bank-report.

The World Trade Organization provides useful information on each Member in various publications including its annual Trade Profiles. The 2021 publication shows that in 2020, the Russian Federation accounted for 1.89% of world merchandise exports and 1.35% of world merchandise imports. Total Russian Federation exports were $332.227 billion and its total imports were $240.380 billion. Its five largest export markets were the European Union (41.3%), China (13.4%), Belarus (5.1%), Turkey (5%) and the Republic of Korea (3.8%). The Russian Federation’s five largest trading partners for imports into the Russian Federation were the European Union (34.2%), China (21.9%), Belarus (5.5%), the United States (5.4%) and Japan (3.6%).

As noted, fuels and mining products are the largest exports — 59.1% of total Russian exports in 2020 with petoleum oils (crude and refined) accounting for$189.176 billion (49.49%). Coal ($15.987 billion) and natural gas ($9.501 billion) are the next largest export products.

The Russian Federation accounts for a smaller shares of the export trade in commercial services — 0.95% of global exports and a slightly larger share of imports of commercial services, 1.38%. The European Union accounts for the largest share of commercial service exports from the Russian Federation (35.9%) and 47.5% of the Russian Federation’s imports of commercial services. The U.S. accounts for 6.5% of Russia’s exports of commercial services and 4% of imports of such services into the Russian Federation. China is the third largest importer of Russian commercial services (6.2% of Russia’s exports) and 3.7% of Russia’s imports.

See World Trade Organization Trade Profiles 2021 at 298-299, October 2021,https://www.wto.org/english/res_e/booksp_e/trade_profiles21_e.pdf.

WTO Trade Policy Review of the Russian Federation in 2021

While the minutes to the 2021 TPR of the Russian Federation and the written questions and replies are not yet available, the Secretariat review along with the Russian Federation write-up are available as is the concluding statement of the chairman of the review on the Russian Federation. Both the EU and China’s statements on October 27 at the review are also available.

For brevity, the Chair’s concluding comments and the statement of the European Union (as the largest trading partner for the Russian Federation) are copied below. Both follow norms for the WTO by identifying areas where the Member being reviewed has made contributions to the system and then follows with particular concerns of some other Members. First the concluding remarks by the Chairperson on 29 October 2021. TRADE POLICY REVIEW: RUSSIAN FEDERATION, Concluding remarks by the Chairperson, 27 and 29 October 2021, https://www.wto.org/english/tratop_e/tpr_e/tp516_crc_e.htm

“Concluding remarks by the Chairperson

“The second Trade Policy Review of the Russian Federation has allowed us to better understand and discuss recent developments regarding trade, economic, and investment policies in the Russian Federation. 57 delegations took the floor, which demonstrates the importance Members attach to the review of the policies and practices of the Russian Federation. 1,017 advance written questions were submitted by Members, with additional questions submitted during and following the first day of our meeting.

“I would like to thank the delegation of the Russian Federation, headed by Ms Ekaterina MAYOROVA, Director of the Department of Trade Negotiations, Ministry of Economic Development, for their constructive participation in this exercise.

“I would like to express my gratitude to our discussant, His Excellency Ambassador Didier CHAMBOVEY of Switzerland, for his insightful remarks touching on macroeconomic and other developments, remaining trade and trade-related challenges, and the role the TPRM can play in overcoming these.

“I would like to thank the delegations that took the floor for their valuable contributions to this Review. Members commended the Russian Federation for its stable and resilient economic performance since the previous Review in 2016, including measures taken to stabilize the banking sector. They particularly stressed the effective macroeconomic and monetary policies undertaken, and the demonstrated resilience to the economic consequences of the COVID-19 pandemic, as well as to volatile energy markets. Some Members commented on policies aimed at diversifying the economy and addressing structural impediments to economic growth.

“Members also positively noted a number of policy reforms undertaken by the Russian Federation affecting, among others, trade facilitation, import tariffs and export duties, competition policy, protection of IPRs, and supporting MSMEs. Regarding trade facilitation, Members highlighted reforms to improve customs procedures and requirements in areas such as risk management, automation, electronic documents, and reducing clearance times.

“While Members appreciated the overall reduction in MFN tariffs, they nevertheless encouraged the Russian Federation to further simplify the tariff structure. Members expressed the hope that the Russian Federation would continue to deepen the reforms and to ensure that any new policies, regulations, and reforms would be in line with its WTO commitments.

“Many Members stressed the Russian Federation’s strong involvement in, and support of, the multilateral trading system. They highlighted the constructive engagement of the Russian Federation in the discussions around WTO reform, preparations for MC12, fisheries subsidies negotiations, the four Joint Statement Initiatives, and trade and gender.

“Regarding the JSI on Services Domestic Regulations, some Members encouraged the Russian Federation to swiftly submit its draft schedule of commitments. Members also encouraged the Russian Federation to complete its process of accession to the Agreement on Government Procurement in the near future.

“Members expressed their desire for the Russian Federation to continue its leadership role at the WTO. In this regard, they welcomed the stated commitment by the Russian Federation to the rules-based multilateral trading system with the WTO at its core.

“Some Members also commended the Russian Federation for its support to developing countries, for example, through the delivery of COVID-19 vaccines. In this regard, Members also emphasized the importance of trade preferences under the Generalized System of Preferences.

“Import substitution, localization policies, and local content requirements, especially in the context of public procurement, were issues raised by many Members. They were particularly interested in the impact such policies can have on trade, FDI, productivity, and the integration of the Russian Federation into global value chains. Members encouraged the Russian Federation to review such policies in light of WTO principles and the process of its accession to the Agreement on Government Procurement. For some Members, these policies were representative of a broader set of policies that they perceived as discriminatory and reducing predictability, transparency, and competition.

“Members commended the Russian Federation for the reforms undertaken to improve the business and investment environment, for example, the introduction of a “regulatory guillotine” mechanism, and the establishment of key conditions for electronic commerce. Members also expressed concerns regarding the remaining challenges in this area.

“Thus, in addition to the recent increase in restrictions on FDI, Members identified several factors as potentially having a negative effect on the conditions of doing business in the Russian Federation. These include governance and other rule-of-law issues, the dominant position of the State in key sectors of the economy and the lack of transparency regarding state-owned enterprises, the existence of a high degree of concentration in certain sectors, and the use of various subsidies in favour of domestic firms. Concerns were voiced in relation to developments in specific services sectors, including financial services and maritime transport.

“While many Members expressed appreciation for the numerous notifications submitted, they nevertheless encouraged the Russian Federation to further improve the timeliness and completeness of its notification record, mentioning in particular notifications related to state trading enterprises, licensing procedures, agriculture, and technical regulations applied at the national level.

“Sanitary and phytosanitary measures and technical regulations have also received much attention in this Review. Thus, for example, several Members raised issues regarding inspection procedures for meat imports and the ‘Track and Trace’ regime. Some Members expressed concerns regarding the application of measures that they consider were not based on international standards, unsupported by scientific evidence, and without adequate transparency. Some Members stressed the need for more clarity regarding the relationship between EAEU rules and rules applied at the national level.

“Other issues of interest for some Members included the introduction of export bans on agricultural and wood products, the imposition of temporary export restrictions and the increased use of export tariff rate quotas since the beginning of the pandemic, and measures relating to transit.

“This Trade Policy Review was characterized by open and constructive discussions around the Russian Federation’s trade and trade-related policies. As highlighted by the Russian Head of Delegation, the discussant, and many Members, the TPRM represents an opportunity to improve policies going forward.

“I therefore hope that the authorities will find the questions, comments, and experiences shared during this Review useful in their efforts to review and design their policies. Members look forward to receiving the answers to outstanding questions from the Russian Federation within one month, at which point the Review will be successfully concluded.”

A number of the concerns raised were also raised in the 2016 review, indicating limited if any improvement on important issues (e.g., import substitution, localization policies, and local content requirements). Others reflect actions by the Russian Federation following the start of the pandemic (“the introduction of export bans on agricultural and wood products, the imposition of temporary export restrictions and the increased use of export tariff rate quotas since the beginning of the pandemic, and measures relating to transit.”).

The European Union raised many of these same issues in its statement at the TPR meeting on October 27, 2021. As the largest trading partner of the Russian Federation, the concerns raised likely reflect the broadest understanding of problems with the Russian Federation’s compliance with WTO obligations. EU Statement at the Trade Policy Review of the Russian Federation, 27 October 2021, https://eeas.europa.eu/delegations/world-trade-organization-wto/106279/eu-statement-trade-policy-review-russian-federation-27-october-2021_en

“Statement delivered by Ambassador João Aguiar Machado

“The EU welcomes this second Trade Policy Review of the Russian Federation, almost a decade since itsaccession to the WTO. We welcome the delegation of Russia, led by Ms. Ekaterina Mayorova (Director of theDepartment of trade negotiations, Ministry of Economic Development) and thank the Discussant, Ambassadorof Switzerland H.E. Didier Chambovey, for his remarks.

“The EU is the main trade partner of the Russian Federation, both for goods and for services, and its main source of foreign direct investment, with some 75% of total inward FDI. Bilateral trade in 2020 represented some 4.8%of EU foreign trade in goods, down from 6% at the time of the previous TPR.

“Back in 2016, at its first Trade Policy Review, the EU had emphasized that Russia’s WTO accession represented an opportunity for its modernisation. A chance to diversify its economy and reduce its reliance on raw materials and commodities, but equally to adjust its judicial and legal framework to bring in a more dynamic and responsive market. The European Union continues to hold that belief.

“Over the last few years, Russia’s efforts to play a constructive role in various areas in the WTO have not gone unnoticed – be it in its involvement in the Joint Statement Initiatives, or in its general support to achieve a meaningful MC12 including through its openness towards WTO reform in order for the organization to remain strong and credible. The EU looks forward in making progress in the different Joint Statement Initiatives, and in particular concluding the Domestic Regulation JSI in the margins of MC12. We hope that Russia will be in the position to submit their schedule of specific commitments as soon as possible, noting that the schedules of all participants are an essential component for a successful conclusion of this negotiation.

“However, the Russian Federation needs to redouble its commitment to the WTO. Today, we regret to
note that since its accession the Russian authorities have expanded, rather than reduced, the scope of its import substitution policy without any realistic furthering their pretended aim of localisation. This not only has a negative effect on trade with the EU but is done in most cases to the direct detriment of Russian consumers.

“In addition, the arguments used by the Russian authorities to justify protectionist policies namely that they are a direct consequence of the sanctions of individual economies on the Russian Federation – are questionable in our view. These Russian policies started immediately after Russia’s WTO accession and predate the political tensions that Russia highlights.

“Some of the specific questions tabled by the EU better explain the underlying concerns that we have. Allow me to highlight some:

“Several questions target the contradiction between the aspiration of the Russian Federation to become a member of the Government Procurement Agreement, and the reality of its practice. The ability of foreign bidders to participate in government procurement has been obstructed or effectively denied through
a growing body of regulations granting advantages to domestic products via price preferences, quotas, or exclusion of foreign goods and services.

“A large part of the Russian state’s presence in the economy – up to 20% of Russian GDP — corresponds to state-owned enterprises providing products and services in a commercial context. Despite the applicable WTO rules in this area, the Russian Federation has introduced such a growing body of restrictions as to make the participation of foreign bidders in tenders uneconomic, or a practical impossibility.

“As to export restrictions – under the rationale of preventing illegal logging and supporting domestic forest-based industries – the Russian Federation has announced a ban on the export of unprocessed wood from 2022. It remains unclear how the Russian Federation intends to reconcile these measures
with the schedule of its concessions, which include export tariff-rate quotas in some of the categories of wood covered by the announced ban.

“One primary mission of the WTO is to facilitate transparency. For this, a reliable notification practice is
imperative. The Russian Federation’s performance in this area leaves much to be desired. For example,
Russian Federation notifications in the area of technical barriers to trade have concerned only
Eurasian Economic Union-level measures. A number of Russian Federation national measures falling within the scope of the TBT Agreement entered into force without any notification whatsoever to the WTO, including those regarding the wines and spirits sector. Not a single measure adopted at the national level has been notified to the WTO.

“The same can be said about the exclusive rights in the area of foreign trade granted to certain entities
in the Russian Federation including, for example, for the export of natural gas. The Russian Federation
has failed, since its accession, to notify a single state-trading enterprise to the WTO. At the same time, around 50% of the EU’s imports from the Russian Federation are sold by a single export monopoly of natural gas. Let me also remark that, beyond its non-notification, this fact sits uneasily with the overall principles of the WTO, and in our view also with the long-term interests of Russia.

“To conclude, the EU welcomes the Russian Federation’s commitment in its report to an open, non-discriminatory and transparent multilateral trading system, and for a reform aimed at preserving the WTO’s role in maintaining and developing new trade rules. We commend this as a good foundation for the necessary efforts that Russia should undertake to abide by the spirit and the letter of its WTO commitments, and to build a more open, transparent and non-discriminatory business environment.

“Thank you.”

USTR’s 9th Report to Congress on the Russian Federation’s Compliance with WTO obligations

USTR Katherine Tai’s press release on the latest USTR report on the Russian Federation’s compliance with WTO obligations summarizes concerns that the U.S. has more than nine years after the Russian Federation became a WTO Member.

“USTR Announces 2021 Report on the Implementation and Enforcement of Russia’s WTO Commitments

“December 21, 2021

“WASHINGTON – The Office of the United States Trade Representative today released its ‘2021 Report on the Implementation and Enforcement of Russia’s World Trade Organization (WTO) Commitments.’

“‘This Report provides an overview of Russia’s continued departure from the guiding principles of the World Trade Organization, such as non-discriminatory practices, more open trade, predictability, transparency, and fair competition,’ said Ambassador Katherine Tai. ‘Failure to follow WTO norms, rules, and commitments puts American workers and businesses at an economic disadvantage and prevents them from competing on a level playing field. USTR will continue to work with like-minded partners and use the tools of the WTO to hold Russia accountable for its behavior in the multilateral trading system.’

“The Report highlights areas in which USTR has raised concerns about Russia’s compliance with its WTO
commitments, including:

“‘Russia continues to adopt and implement localization measures to provide preferential treatment to both domestically produced goods and services.’

“‘In the agriculture sector, Russia maintains non-science-based import restrictions and refuses to recognize other countries’ guarantees on exporting facilities.’

“‘Russia’s import substitution strategies for the IT sector, such as the ‘Digital Economy of the Russian Federation,’ also raise additional national treatment and import substitution concerns.’

“‘As economies around the world were forced to retract and retrench in response to the COVID-19 pandemic, the government of Russia exacerbated those trends by extending its control over the Russian economy and tightening restrictions on trade.’

“Background

“This report was prepared pursuant to section 201 of the Russia and Moldova Jackson-Vanik Repeal and Sergei Magnitsky Rule of Law Accountability Act of 2012 (P.L. 112-208), which requires the U.S. Trade Representative to submit a report to the Committee on Finance of the U.S. Senate and the Committee on Ways and Means of the U.S. House of Representatives describing the commitments that Russia made upon entering the World Trade Organization on August 12, 2012, and assessing the extent to which Russia has implemented those commitments after 9 years of WTO membership.”

The USTR report is 62 pages in length and reviews an array of areas where the Russian Federation undertook commitments on acceding to the WTO and provides the USTR evaluation of whether there has been implementation to date. See 2021 Report on the Implementation and Enforcement of Russia’s WTO Commitments, December 2021, https://ustr.gov/sites/default/files/enforcement/WTO/2021%20Report%20on%20Russia’s%20WTO%20Compliance.pdf. The table of contents (pages i-ii) reviews the topics reviewed and is copied below.

Implementation and Enforcement of Russia’s WTO Commitments
Contents
I. Introduction ………………………………………………………………………………………………………….. 1
II. Executive Summary ………………………………………………………………………………………………. 2
III. Russia and the Customs Union/Eurasian Economic Union ………………………………… . 5
IV. Russia in the World Trade Organization ………………………………………………………………. 6
V. Import Regulation ………………………………………………………………………………………………… 7
A. Tariffs and Border Fees ………………………………………………………………………………………. 7
B. Customs Fees…………………………………………………………………………………………………….. 9
C. Customs Valuation …………………………………………………………………………………………….. 9
D. Trade Facilitation …………………………………………………………………………………………….. 10
E. Trading Rights …………………………………………………………………………………………………. 11
F. Quantitative Restrictions …………………………………………………………………………………… 12
G. Import Licensing ……………………………………………………………………………………………… 13
H. Trade Remedies ……………………………………………………………………………………………….. 15
VI. Export Regulation ……………………………………………………………………………………………….. 16
VII. Agriculture …………………………………………………………………………………………………………. 18
A. Sanitary and Phytosanitary Measures …………………………………………………………………. 18
B. Domestic Supports and Export Subsidies ……………………………………………………………. 24
VIII. Internal Policies Affecting Trade ……………………………………………………………………….. 26
A. Non-Discrimination ………………………………………………………………………………………….. 26
B. Industrial Policy, Including Subsidies …………………………………………………………………. 29
C. State-Owned, -Controlled, and -Trading Enterprises …………………………………………….. 31
D. Pricing Policies ………………………………………………………………………………………………… 33
E. Standards, Technical Regulations and Conformity Assessments ……………………………. 34
F. Government Procurement ………………………………………………………………………………….. 37
IX. Services ……………………………………………………………………………………………………………… 39
A. Financial Services ……………………………………………………………………………………………. 40
B. Telecommunications ………………………………………………………………………………………… 41
C. Computer and Related Services …………………………………………………………………………. 41
D. Distribution Services ………………………………………………………………………………………… 43
E. Audio-Visual and Media Services ………………………………………………………………………. 43
X. Intellectual Property Rights ………………………………………………………………………………….. 44
A. Legal Framework …………………………………………………………………………………………….. 44
B. Enforcement ……………………………………………………………………………………………………. 47
XI. Investment ………………………………………………………………………………………………………….. 50
A. Trade-Related Investment Measures …………………………………………………………………… 50
B. Special Economic Zones …………………………………………………………………………………… 53
XII. Rule of Law………………………………………………………………………………………………………… 53
A. Eurasian Economic Union …………………………………………………………………………………. 53
B. Transparency …………………………………………………………………………………………………… 54
C. Judicial Review ……………………………………………………………………………………………….. 56
XIII. Conclusion ………………………………………………………………………………………………………… 57

A portion of the Executive Summary section reveals U.S. concerns with Russia’s implementation of obligations. The excerpt (from pages 3-5) is copied below.

” Over the past year, Russia has continued its trajectory of an economy moving away from the guiding principles of the WTO: non-discrimination, freer trade, predictability, transparency, and fair competition. Rather, Russia maintains restrictive at-the-border measures, institutes behind-the-border measures to inhibit trade, and implements an industrial policy seemingly driven by the guiding principles of import substitution and forced localization.

“Russia maintains tariffs ranging from 25 percent to 40 percent on various industrial products imported from the United States in retaliation against tariffs imposed on U.S. imports of steel and aluminum articles under Section 232 of the Trade Expansion Act of 1962, as amended. Russia also maintains a near complete ban on imports of agricultural goods from the United States and other WTO Members. Russia also continues to apply quantitative restrictions or outright bans on certain agricultural exports.

“In addition to these border measures, Russia maintains various behind-the-border measures that interrupt the smooth flow of global trade, such as outmoded import licensing requirements and a mandatory labeling regime. In 2021, Russia introduced yet another regime to monitor products, a traceability regime, that requires tracking consignments of goods (as opposed to individual goods subject to the mandatory labeling regime) through the chain of commerce in Russia. In the agriculture sector, Russia maintains non-science-based import restrictions and refuses to recognize other countries’ guarantees on exporting facilities.

“Compounding these at-the-border and behind-the-border restrictions, Russia continues to adopt and implement localization measures to provide preferential treatment to both domestically produced goods and services. In response, the United States, often working with other WTO Members, has raised concerns about Russia’s import substitution plans, subsidies (including those contingent on use of domestic over imported content), preferential taxes, preferential pricing mandates, prohibitions on purchasing imported goods and services, and domestic purchasing requirements, among others.

“The United States has also continued to raise concerns about Russia’s lack of transparency, manifested, for example, in its refusal to notify a single state trading enterprise and its delay (or complete refusal) to provide written answers to questions about its import substitution policies. The United States, joined by other WTO Members, will continue to remind Russia of its transparency obligations.

“The United States has urged Russia to meet its commitments with regard to the protection and enforcement of intellectual property rights. In particular, the United States has reviewed Russia’s implementation of WTO commitments on data exclusivity, pharmaceutical patent protection, and collective management organizations. Moreover, Russia’s record on enforcement remains weak.

“Since early 2014, the U.S. Government has curtailed its bilateral engagement with Russia in response to Russia’s actions in Ukraine, limiting USTR’s ability to raise directly with Russia our concerns about the trajectory of its trade policies. The sequestration resulting from the COVID-19 pandemic further limited engagement with Russian officials. Nevertheless, the interagency team of Russia specialists in the U.S. Government continued to monitor and evaluate Russia’s trade and investment policies and practices, and where and when possible, USTR continues to raise concerns in WTO meetings and on the margins of committee and council meetings to hold Russia accountable for its actions. As it has to date, if the United States finds that Russia’s actions appear to be inconsistent with its WTO commitments. The United States will investigate and use all appropriate means to resolve the matter and keep Russia’s markets open to U.S. exports.”

The Russian Federation’s reaction to U.S. report

The Russian Federation has rejected U.S. claims of non-implementation and calls attention to sanctions imposed on the Russian Federation by the U.S. and EU. See Tass Russian News Agency, ‘Beyond absurdity’: Diplomat slams US claims about Russia’s import substitution, December 24, 2021, https://tass.com/economy/1380631.

The Road Forward

Most of the concerns raised by the United States in its latest report on the Russian Federation’s implementation of WTO commitments mirror concerns that have been raised by the European Union and presumably others in the latest TPR of the Russian Federation. Moreover, some of the concerns have persisted since the Russian Federation first joined the WTO in 2012 as reflected in the first TPR from 2016 and earlier USTR reports to Congress on the Russian Federation’s implementation of WTO commitments. It is unclear whether the Russian Federation has any intention of addressing these longstanding and more current concerns.

The Chairman of the TPR for the Russian Federation in his concluding remarks and the EU Ambassador in his statement during the TPR highlighted areas where the Russian Federation has made positive contributions to the WTO such as in the fisheries negotiations and a number of the Joint Statement Initiatives and in supporting WTO reform. Thus, the Russian Federation has the potential to make some meaningful contributions in the areas where it is contributing. Such contributions will hopefully continue in 2022.

While Russia is treated as a market economy by the U.S. and the EU in trade remedy cases, the reality is that a large portion of Russia’s economy remains state owned or state directed. Such state ownership and direction are fundamentally at odds with the multilateral trading system and the concept of a level playing field. WTO reform is likely critical to address distortions caused by state ownership and control. While the Russian Federation is supportive of reform, it is unlikely to support meaningful reform on the state-owned/directed sector.

In addition, the many behind the border restrictions reviewed above simply contribute to the lack of meaningful access to the market of the Russian Federation for many WTO Members and have led to the size of the Russian Federation’s trade surplus. There does not appear any likelihood that the Russian Federation will meaningfully address these issues.

Perhaps the biggest unknown in 2022 is whether potential actions by the Russian Federation vis-a-vis one of its neighbors (Ukraine) will be implemented. The U.S., EU and others will certainly impose expanded sanctions against the Russian Federation if there is further encroachment by the Russian Federation into Ukraine. A souring of political relations would also likely cause a broader fallout for the trading system.

Whether the Russian Federation will be a meaningful contributor to supporting the global trading system is solely in the hands of the Russian Federation. 2022 is likely to be a year where the Russian Federation has some positive contributions but fails to address the longstanding concerns.

Conclusion of Joint Statement Initiative on Services Domestic Regulation — a win for the WTO and services trade

For an organization seeking to regain relevance and facing continued delays in holding its 12th Ministerial Conference because of restrictions on travel from increased COVID-19 cases, the conclusion of the Joint Statement Initiative (JSI) on Services Domestic Regulation through the issuance of a declaration on December 2 was an important accomplishment. Sixty-seven WTO Members agreed to a reference paper and a process for amending services schedules for the participants over the next months with benefits accruing to all WTO Members and with transition periods for developing and least developed countries. See Declaration on the Conclusion of Negotiations on Services Domestic Regulation, 2 Deember 2021,WT/L/1129 (includes Annex 1, Reference Paper on Services Domestic Regulation, 26 November 2021, INF/SDR/2 and Annex 2S, Schedules of Specific Commitments, 2 December 2021, INF/SDR/3/Rev.1). The 67 WTO Members participating the JSI reportedly account for 90% of services trade. The 67 countries are Albania, Argentina, Australia, Kingdom of Bahrain, Brazil, Canada, Chile, China, Colombia, Costa Rica, El Salvador, European Union (and member states), Hong Kong, Iceland, Israel, Japan, Kazakhstan, Republic of Korea, Liechtenstein, Mauritius, Mexico, Republic of Moldova, Montenegro, New Zealand, Nigeria, North Macedonia, Norway, Paraguay, Peru, Philippines, Russian Federation, Kingdom of Saudi Arabia, Singapore, Switzerland, Taiwan, Thailand, Turkey, Ukraine, United Kingdom, United States and Uruguay.

According to the WTO press release on the completion of negotiations, the aim of the JSI was “slashing administrative costs and creating a more transparent operating environment for service providers hoping to do business in foreign markets.” WTO Press Release, Negotiations on services domestic regulation conclude successfully in Geneva, 2 December 2021, https://www.wto.org/english/news_e/news21_e/jssdr_02dec21_e.htm.

It is the first agreement at the WTO barring discrimination between men and women. WT/L/1129 at 10 (Annex I, para. 22(d), development of measures — “such measures do not discriminate between men and women.”).

The WTO and OECD released a short paper looking at the benefits to global services trade through a successful conclusion to the JSI on services domestic regulation. The study estimated that savings to service providers and their customers would be around $150 billion/year. See World Trade Organization and OECD, Services Domestic Regulation in the WTO: Cutting Red Tape, Slashing Trade Costs and Facilitating Services Trade, 19 November 2021, https://www.wto.org/english/news_e/news21_e/jssdr_26nov21_e.pdf. The four “key messages” in the study (page 1) are copied below.

“Key messages

“• Improving business climate: At the 12th WTO Ministerial Conference, the Joint Initiative on Services
Domestic Regulation will conclude negotiations on a set of good regulatory practices with a focus on procedural aspects of licensing and authorization procedures for services suppliers. By enhancing the transparency, efficiency, and predictability of regulatory systems, the disciplines on services domestic regulation that the Joint Initiative has negotiated will address the practical challenges that affect the ability of businesses and suppliers to operate.

“• Facilitating services trade: Building on efforts to identify and disseminate good regulatory practice, an
increasing number of “new generation” trade agreements have moved beyond the removal of quantitative restrictions and discriminatory measures to include a comprehensive set of disciplines largely equivalent to those developed by the Joint Initiative. At the same time, economies at all levels of income have also implemented reforms with a view to making their regulatory environment more trade facilitative for services businesses.

“• Lowering trade costs and generating broader trade benefits: Through the full implementation of the
disciplines on services domestic regulation, economies can lower trade costs and reap substantial trade
benefits: annual trade cost savings could be in the range of USD 150 billion, with important gains in financial services, business services, communications and transport services. Moreover, a positive correlation between the implementation of services domestic regulation measures and services trade by all four modes of supply, as well as a more active engagement of economies in global value chains, hints to even broader economic benefits.

“• Widespread gains beyond participants: Exporters from all WTO members will benefit from the improved regulatory conditions when they trade with participants of the Joint Initiative. However, significantly larger benefits will accrue to WTO members that are implementing the disciplines themselves in their internal regulatory frameworks.”

The study provides a summary of improved disciplines the 67 WTO Members have identified in the reference paper. The improved disciplines are grouped under transparency, legal certainty and predictability, regulatory quality and facilitation. See id at 2.

While the estimated savings once fully implemented is small in comparison to global services trade ($150 billion of 2019 estimated trade of $6.1 trillion (2.6%)(UNCTAD, 2020 Handbook of Statistics, page 33, data for 2019, https://unctad.org/system/files/official-document/tdstat45_en.pdf) as noted in the WTO press release, it is the first update of WTO rules on services in more than a quarter century. The negotiations had three co-chairs — Costa Rica, Australia and the European Union. Part of the EU’s statement by Ambassador Aguiar Machado from the December 2 meeting and announcement of the declaration is provided below. See Services Domestic Regulation Joint Initiative Meeting to conclude the negotiations (co-hosted by Costa Rica, the European Union and Australia), 2 December 2021, Geneva, https://eeas.europa.eu/delegations/brazil/108266/services-domestic-regulation-joint-initiative-meeting-conclude-negotiations-co-hosted-costa_en.

“Today, we are following up on a joint commitment we collectively took two years ago in Paris to finalize the negotiations that had started with the Joint Statement of Buenos Aires in 2017. Since then, several new Members have joined the group and a tremendous amount of work has been done by our negotiators under the valued Chairmanship of Costa Rica. In particular, warm welcome to the Philippines and Bahrain who joined our negotiations most recently.

“We are here today to conclude our negotiations in this JSI and on the Reference Paper with domestic regulation disciplines. This step will allow us to commence our respective domestic procedures required for the certification of our improved schedules of commitments, which will give legal effect to the negotiated disciplines.

“The work on services domestic regulation is of critical importance. It is the first WTO deliverable in the area of trade in services since a very long time. Our additional commitments for domestic regulation will benefit all other WTO Members by giving them the reassurance that we will apply good regulatory and administrative practices also to their service suppliers. 

“Good regulatory practices are crucial for the well-functioning of today’s economy. I believe that the clear rules on transparency and authorisation in the area of services – that were agreed as part of this initiative – will facilitate trade in services significantly. Especially for micro, small and medium-sized enterprises who do not have the same resources and experience to cope with complex processes as their larger competitors.

“The services sector has been hit hard by the pandemic – as other parts of our economy. The adoption and implementation of the disciplines of the reference paper will reduce trade costs for service suppliers substantially and thus help the sector in its recovery. It is a sector where women entrepreneurs often play an important role. The reference paper recognises this role by ensuring non-discrimination between men and women in authorisation processes. This is the first rule of this kind in the WTO.

“Delivering on the WTO services agenda is a long overdue objective we all have. Since Buenos Aires, we have collectively developed a pragmatic approach to negotiations. We have allowed groups of interested Members to advance negotiations on some important issues – through open, inclusive and transparent processes.

“Today, we prove that this plurilateral approach can lead to tangible results. This demonstrates that the Joint Initiative model is a viable one. A large and diverse group of WTO Members can work together towards a common objective, overcome their differences, show flexibility and agree on tangible results that are important for businesses and consumers.

“I believe that this Joint Initiative can be a source of inspiration for work in other areas, allowing interested Members to move ahead while ensuring that the outcome, in its substance and its form, remains supportive of and strengthens the multilateral trading system.”

Since the collapse of the Doha Development talks in 2008, the reality has been that most progress on trade talks have taken place in bilateral, and plurilateral settings. The sole meaningful exception was the completion of the Trade Facilitation Agreement which hopefully will be supplemented by a completion to the Fisheries Subsidies negotiations in the near future. Stating at the WTO’s 11th Ministerial, many WTO Members have started Joint Statement Initiatives to seek progress on important issues facing the trading system.

As noted in earlier posts, India and South Africa (WTO Members who are not participating in any of the Joint Statement Initiatives) have raised objections to the use of JSIs to update rules claiming such approaches are inconsistent with existing WTO requirements. See, e.g., November 17, 2021:  The role of plurilaterals in the WTO’s future, https://currentthoughtsontrade.com/2021/11/17/the-role-of-plurilaterals-in-the-wtos-future/.

The view of the participants in the services domestic regulation JSI is that existing WTO provisions permit the updating of service schedules by Members. The reference paper will apply to those who have participated or who later accept the reference paper. New obligations taken on by the 67 Members are applied by them on an MFN basis to all WTO trading partners.

The Declaration on Services Domestic Regulation and actions to implement it will be an early test of whether the WTO can proceed to update rules through open plurilaterals. While one can expect continued objections from India and South Africa, the path to renewed relevancy for the WTO will almost certainly run through finding room for open plurilaterals.

WTO-IMF COVID-19 Vaccine Trade Tracker provides useful information in analyzing vaccine equity

On November 22, 2021, the WTO and IMF announced and released their COVID-19 Vaccine Trade Tracker. See WTO News Release, WTO, IMF launch Vaccine Trade Tracker, 22 November 2021, https://www.wto.org/english/news_e/news21_e/covid_22nov21_e.htm. While the data on access to vaccines is not as granular as the UNICEF COVID Vaccine Dashboard, the new tracker provides data under six topics: summary, exports (options being by producing economy or by supply arrangement type), imports (options being by income group or by continent), total supply (options being by producing economy or by vaccine type), supply to continents (Africa, Asia, Europe, North America, Oceania, South America) and vaccination status (options being by income group and by continent). Data in the initial release are through October 31, 2021. Income groups are the World Bank’s groupings — Low income, lower-middle income, upper middle income and high income.

In recent posts I have noted that much of the discussion on vaccine equity focuses on access and affordability but doesn’t necessarily help understand widely different outcomes for countries or territories that are at the same stage of economic development. See November 22, 2021:  Trade and Health at the WTO’s 12th Ministerial Conference, https://currentthoughtsontrade.com/2021/11/22/trade-and-health-at-the-wtos-12th-ministerial-conference/. The WTO-IMF Tracker doesn’t include the identification of countries/territories within income groups but rather reports on the entire grouping. The World Bank’s 2020 listing is the most recent. See World Bank, GNI per capita, Atlas method (current US$), https://data.worldbank.org/indicator/NY.GNP.PCAP.CD; November 15, 2021:  The folly of self-selection as a developing country at the WTO, https://currentthoughtsontrade.com/2021/11/15/the-folly-of-self-selection-as-a-developing-country-at-the-wto/.

Of the listed producing countries involved in exports of COVID-19 vaccines all are WTO Members. The EU, USA, Japan and Republic of Korea are listed as high income countries by the World Bank though Korea has treated itself as a developing country at the WTO. China, the Russian Federation and South Africa are included as upper middle income countries by the World Bank based on per capita GNI, though both China and South Africa claim developing country status at the WTO. India is listed as a lower-middle income country by the World Bank and claims developing country status at the WTO. There is a small amount of exports from other countries not broken out by individual country n the WTO-IMF tracker.

On total supply (“Total supply contains both exported and domestically delivered doses), China is the largest producing country with a total supply of 4.0811 billion doses of which 1.3294 billion doses have been exported. The European Union is the second largest producer with a total supply of 1.7077 billion doses producers of which 876.5 million have been exported. India is the third largest producers with total supply of 1.3608 billion doses of which just 66.0 million doses have been exported. The United States is fourth with total supply of 941.1 million doses and exports of 300.8 million doses. Others have much smaller total supplies and exports.

The vast majority of exports have been through bilateral deals (77.5%). The second largest source of exports has been doses contracted via COVAX (8.1%). Because of several major problems COVAX experienced from suppliers — the largest being the shut down of exports from India for much of 2021 — COVAX has been unable to supply the large volume of vaccine doses in 2021 to low income and lower middle income countries that had been planned on. The third largest source of exports was donations via COVAX (7.5%), followed by direct donations from producing countries to receiving countries (6.1%) and supply via the African Vaccine Acquisition Trust (“AVAT”)(0.8%).

The vaccination status data (item six in the Tracker) is helpful in identifying regions with the greatest needs as well as the breakout by World Bank income level. However, because of the lack of granularity to the individual country or territory, the data don’t help understand the large differences between members in the same continent or in the same income grouping.

By continent, all continents except Africa have received more than 50 courses of doses per 100 people (with North America the highest at 81.4 and Europe at 76.2). Africa was just 11.2 courses per 100 people. All but Africa have more than 50% of the population with at least one dose administered. Africa was just 8.7%. And all but Africa have more than 40% of the population fully vaccinated. Africa was only 5.8%. Thus, there is a need to expand availability of vaccine doses to most African countries

When vaccination status is examined by income level, high income and upper middle income countries and territories have much larger vaccination rates than lower middle income and low income. On courses of vaccines per 100 people, high income countries were at 89.5, upper middle income countries averaged 74.8, lower middle income countries were at just 34.8 and low income countries were at just 7.0. Similar discrepancies exist on percent with at least one dose administered and percent fully vaccinated. The inability of COVAX to receive the volumes of doses contracted for in 2021 and the slowness of donations for richer countries are certainly core reasons for the differences in doses for lower middle income and low income countries.

Yet there are major discrepancies among countries or territories in the same continent or same income grouping. I identified a few in yesterday’s post. See November 22, 2021:  Trade and Health at the WTO’s 12th Ministerial Conference, https://currentthoughtsontrade.com/2021/11/22/trade-and-health-at-the-wtos-12th-ministerial-conference/. For example, Morocco is classified as a lower middle income country by the WTO but had the highest level of administered vaccines/100 people in Africa (136.5 (assumed to be 68.25 courses of doses/100 people)) while South Africa, classified as an upper middle income country had a rate of administered vaccine doses less than 1/3 that of Morocco (41.4 (assumed to be 20.7 courses of doses/100 people). Similarly, two low income countries as classified by the World Bank have drastically different administered doses despite nearly identical per capita GNIs and both being countries in Africa. Specifically, Zimbabwe’s per capital GNI in 2020 was $1,090 and yet they had administered 42.3 COVID vaccine doses/100 people. Cameroon, with a per capita GNI in 2020 of $1,100, had COVID vaccines administered of only 2.4/100 people.

Conclusion

The WTO-IMF COVID-19 Vaccine Trade Tracker provides very useful information, although much is at a continent or income group level. It appears likely that the tracker will be updated only monthly. If not being considered, the designers of the new tracker should provide a link to a data base that provides the type of data shown in the aggregate for each country or territory. Such data would permit a better understanding of differences within continents and within income groups and potentially improve the ability to improve vaccine equity moving forward. It is also possible to update the tracker more frequently than once a month, though some charts, etc. are fine with monthly updates. .

Will there be another extension of the WTO Moratorium on customs duties on e-commerce — expanding global trade or creating additional barriers

WTO Members have engaged for years in debate over the wisdom of extending the temporary moratorium on customs duties on e-commerce. Each Ministerial Conference has resulted in Members agreeing to an extension of the moratorium until the next Ministerial Conference along with an extension of a moratorium on non-violation TRIPs disputes. While Members have agreed to a draft extension of the moratorium on non-violation TRIPs disputes for the upcoming 12th WTO Ministerial, there is no agreement as yet on extending the moratorium on customs duties on e-commerce. See WTO News Release, Members agree on recommendation to extend moratorium on IP “non-violation” cases, 5 November 2021, https://www.wto.org/english/news_e/news21_e/trip_05nov21a_e.htm; Inside U.S. Trade’s World Trade Online, India, South Africa question WTO e-commerce moratorium ahead of MC12, November 9, 2021, https://insidetrade.com/daily-news/india-south-africa-question-wto-e-commerce-moratorium-ahead-mc12.

In recent years, India and South Africa have cited to information from UNCTAD to support their concern that the moratorium is costing developing countries tax revenues as well as their concern that the moratorium is limited to transmission and not content and doesn’t apply to services. See WORK PROGRAMME ON ELECTRONIC COMMERCE, THE MORATORIUM ON CUSTOMS DUTIES ON ELECTRONIC TRANSMISSIONS: NEED FOR CLARITY ON ITS SCOPE AND IMPACT, 8 November 2021, WT/GC/W/833 (communication from India and South Africa); WORK PROGRAMME ON ELECTRONIC COMMERCE, THE E-COMMERCE MORATORIUM: SCOPE AND IMPACT, Communication from India and South Africa, 11 March 2020, WT/GC/W/798; UNCTAD, RISING PRODUCT DIGITALISATION AND LOSING TRADE COMPETITIVENESS, 2017, https://unctad.org/system/files/official-document/gdsecidc2017d3_en.pdf; UNCTAD Research Paper No. 29, UNCTAD/SER.RP/2019/1, Rashmi Banga, Growing Trade in Electronic Transmissions: Implications for the South, February 2019, https://unctad.org/system/files/official-document/ser-rp-2019d1_en.pdf.

Some of the concerns expressed by India and South Africa and their rebuttal of OECD and other papers which look at upside benefits from the moratorium are captured in the following excerpt from the recent submission (WT/GC?W/833, pages 2-3).

2.2 Tariff Revenue Loss

“2.4. In our previous submission, WT/GC/W/798, we highlighted that based on the identification of a small number of digitizable goods in five areas, namely, printed matter, music and video downloads, software and video games, UNCTAD estimated a loss in tariff revenue of more than US$10 billion per annum globally because of the moratorium, 95% of which is borne by
developing countries.

“2.5. These submissions attempt to make the revenue foregone on account of the e-commerce moratorium seem insignificant by showcasing this revenue loss in terms of its share in customs revenue and total government revenue. However, even compared in this manner, it is evident that the percentage of government revenue lost for developing countries is higher than that for the
developed countries. The percentage of customs revenue lost for developing countries is 4.35% while that for the developed countries is a mere 0.24%. It is evident that the cost of the moratorium is almost completely borne by the developing countries for extending duty free quota free market access, largely for the developed countries.

“2.6. These submissions conclude that the amount of physical trade replaced by 3D printing is expected to be limited. UNCTAD (2019) provides a deeper analysis on the status of 3D printing though. It indicates that while 3D printing is currently at a nascent stage in developing countries, its market has grown annually by 22% in the period 2014-2018 and it is estimated that if investment
in 3D printing is doubled, it could potentially replace almost 40% of cross-border physical global trade by 20407. Such a growth is expected to significantly increase the potential tariff revenue loss.

2.3 Impact on SMEs and Digital Industrialization

“2.7. Interestingly, when assessing the total trade of electronic transmissions, these submissions consider only digitizable goods and conclude that these remain modest but when estimating the impact of the moratorium on exports, especially of SMEs, these submissions considers the extended scope of the moratorium by including services8 and find the impact to be huge. Defining the scope of the moratorium is therefore important in order to estimate its impact.

“2.8. These submissions state that the use of 3D printing is growing slowly since the opportunities for mass production and economies of scale are limited and the inputs, materials and time required for 3D printing further constrain its use for manufacturing complex items. In this context, it is highlighted that with recent technological advances, namely high-speed sintering, mass production is becoming possible with 3D printers, where mass-producing up to 100,000 (smaller) components
in a day will be possible at a speed which is 100 times faster9. According to D’Aveni (2015)10, the advent of additive manufacturing in the US hearing aid industry meant that, in less than 500 days, 100% of the industry was transformed and not one company stuck to the traditional mode of manufacturing.

“2.9. These submissions do not reflect the impact that new technologies such as 3D printing can have on domestic industries especially MSMEs in developing countries. As outlined before, while 3D printing is currently at a nascent stage in developing countries, its market is expected to grow at a rapid pace. The most affected sectors could include sectors such as textiles and clothing, footwear, auto-components, toys, mechanical appliances, and hand tools, etc. which generate large scale employment for low skilled workers and are sectors in which most MSMEs operate. This could have a catastrophic effect on the ability of developing countries to protect their nascent domestic industries including MSMEs11.

“2.10. If, ‘customs duties on electronic transmissions’ cover not only digitised and digitizable goods but also digitally transmitted services, as asserted by a couple of institutions recently, then the negative impact of continuing with the moratorium on developing countries would be even greater. Effectively, this implies that the economy of the future (the digital economy) is totally liberalised. History has shown that trade policies are integral to successful economies’ development trajectory and are critical in advancing industrial policy.

“7 UNCTAD Research Paper No 47 (2020).
“8 UNCTAD Research Paper No 58 (2021).
“9 Ibid.
“10 Richard D’Aveni, ‘The 3-D Printing Revolution’ (2015) Harvard Business Review
https://hbr.org/2015/05/the-3-d-printing-revolution accessed 1 June 2021.
“11 UNCTAD Research Paper No 58 (2021).”

There are many WTO Members who support the continuation of the moratorium on customs duties on e-commerce, and there have been studies by the OECD taking a position opposite that of UNCTAD. See, e.g., WORK PROGRAMME ON ELECTRONIC COMMERCE BROADENING AND DEEPENING THE DISCUSSIONS ON THE MORATORIUM ON IMPOSING CUSTOMS DUTIES ON ELECTRONIC TRANSMISSIONS, Communication from Australia; Canada; Chile; Colombia; Hong Kong, China;
Iceland; Republic of Korea; New Zealand; Norway; Singapore; Switzerland; Thailand and Uruguay, 29 June 2020, WT/GC/W/799/Rev.1; Andrenelli, A. and J. López González (2019-11-13), “Electronic transmissions and international trade – shedding new light on the moratorium debate”, OECD Trade Policy Papers, No. 233, OECD Publishing, Paris. http://dx.doi.org/10.1787/57b50a4b-en. An excerpt from the submission of various WTO Members in WT/GC/W/799/Rev.1 is presented below characterizing some of the OECD analysis (pages 2-3).

“3 AN INSIGHTFUL WELFARE ANALYSIS OF ELECTRONIC TRANSMISSIONS

“3.1. Members have been referring to many different estimates in past discussions on this matter, which did not take into consideration the benefits associated with relevant reductions of trade costs, potential gains in productivity and increased consumer welfare. The welfare analysis in the study provides a clear illustration of what is induced by the absence of duties on electronic transmissions in terms of both revenue loss and the welfare surplus for consumers. Taking into consideration consumer welfare would bring depth to the discussion and could help move them forward.

“3.2. The welfare analysis outlines that the reduction in production and transportation costs associated with digital deliveries, as well as the removal of the tariff, can lead to a reduction in price. In consequence, the increase in demand leads to a rise in imports and an increase in consumer surplus, part of which is associated with redistribution from the domestic producer and part of which is from government revenue to the consumer. The study is unambiguous: the overall impact to the economy is ‘positive and large’.

“3.3. The study finds that the imposition of equivalent duties on electronic transmissions could negate those positive effects by increasing the price of the digital delivery, which shifts some of the consumer welfare back to the domestic producers and the government. Governments and producers would recover some of the revenue foregone but the amount recovered would depend on the elasticity of demand. The study also highlights that this would occur at the expense of consumer surplus. The positive welfare impact would decrease as the price of the digital product increases. Consequently, by introducing equivalent duties on electronic transmissions, governments would create a “deadweight loss” to the economy. The overall benefits associated with digitization
(i.e. lower trade costs) would be reduced and weaker economies would miss an opportunity to overcome their trade cost disadvantages.

“4 THE APPLICATION OF INTERNAL NON-DISCRIMINATORY TAXES AS AN ALTERNATIVE TO TARIFFS

“4.1. The study not only provides important elements regarding who bears the burden of tariffs, but also regarding the potential alternative sources of government revenue which would be better suited to the digital economy. The study notes that tariffs increase the price of a product to the domestic consumer. The extent to which the domestic price increases is dependent on the tariff pass-through, which ranges from full pass-through to none. If there is no pass-through, then the foreign company fully absorbs the tariff through reduced revenue. If there is full pass-through, then the domestic price increases in proportion to the tariff. Recent work quoted by the study notes that quasi complete-pass tends to be the most common – that is, foreign companies fully pass-on the price increase to domestic consumers. Moreover, recent work conveyed in the study has also demonstrated that tariff increases, in the medium-term, negatively affect domestic output and productivity, employment and lead to higher inequality and real exchange rate appreciation.

“4.2. The study highlights other means for governments to generate revenue. The use of consumption taxes, such as value added taxes (VAT) or goods and services taxes (GST) could represent a better alternative. Examples of VAT/GST applied to digital services and intangibles are provided and point out that internal non-discriminatory taxes provide a broader tax base, and thus more stable. According to the study, evidence indicates developing countries that adopt indirect taxes such as VAT experience 40 to 50% less tax revenue instability than countries that do not use indirect taxes. The OECD study suggests that consumption taxes are a feasible alternative to customs duties for generating revenue.

“4.3. In this respect, it should be noted that the OECD International VAT/GST Guidelines have been adopted by the G20 leaders and endorsed by more than 100 jurisdictions and organisations. Furthermore, the OECD has produced a report on best practices to implement international VAT/GST collection schemes.2

“2 Mechanisms for the Effective Collection of VAT/GST, OECD, 2017 http://www.oecd.org/tax/consumption/mechanisms-for-the-effective-collection-of-vat-gst.htm.”

A recent report by Prof. Simon J. Evenett

On November 12, 2021, Prof. Simon Evenett (founder of the St. Gallen Endowment for Prosperity Through Trade) released a paper looking at the question, “Is the WTO Moratorium on customs duties on e-commerce depriving developing countries of much needed revenue?”. The abstract for the paper states –

Abstract  This note vitiates assertions by UNCTAD staff that developing countries have lost significant government revenues as products previously delivered physically are supplied digitally. Taking for the sake of argument UNCTAD’s revenue loss estimates, this note shows that they represent small shares of tax revenues from sources other than customs duties. Forgone revenues would have financed less than 5 days of government spending in the Least Developed Countries and Sub-Saharan African nations. Moreover, domestic tax takes needed only to grow marginally faster to offset UNCTAD’s estimates of forgone customs duties. Low per-capita income status is not a barrier to successful national tax reform, calling in question the relevance of public finance objections to participation in multilateral trade initiatives to integrate economies.”

 The paper from Prof. Evenett is embedded below.

S.-Evenett_-WTO-Moratorium-12-Nov-2021_-finalised

Conclusion

There are obviously large differences in view on the costs and benefits of a moratorium on customs duties on e-commerce between India and South Africa on the one hand (and others supporting their view) and the group of WTO Members supporting the continuation of the moratorium.

A problem with the UNCTAD studies and papers is the definition of developing countries used. As is clear from the 2017 UNCTAD report, the largest cross border e-commerce sales for any country by far is China with 40% of such sales in 2015 (UNCTAD, Rising Product Digitalisation and Losing Trade Competitiveness, 2017 at 12) and largest customs revenue loss from the moratorium (id at 16). China should not be viewed as a developing country as reviewed in a recent post. See November 15, 2021:  The folly of self-selection as a developing country at the WTO, https://currentthoughtsontrade.com/2021/11/15/the-folly-of-self-selection-as-a-developing-country-at-the-wto/. Moreover, China is not understood to be opposing the continuation of the moratorium.

The UNCTAD report also lists as developing countries a number which clearly aren’t classified as such or that shouldn’t be, including — Saudi Arabia, Greece, Egypt, Israel, Romania, Russian Federation, Iceland, Bulgaria, Mexico, Norway, Thailand, Turkey, Portugal (see id, Table 2, Net Exports of Developing Countries of ET Products, pages 13-14; November 15, 2021:  The folly of self-selection as a developing country at the WTO, https://currentthoughtsontrade.com/2021/11/15/the-folly-of-self-selection-as-a-developing-country-at-the-wto/).

While WTO Members should be concerned about the digital divide that exists for some Members, the answer to addressing the divide is not to erect barriers to e-commerce. Rather Members should focus on technical assistance and other actions to help least developed countries and some developing countries who are behind develop the infrastructure and technical skills to actively participate in e-commerce.

Extending the moratorium on customs duties on e-commerce is one more hurdle in front of WTO Members as they get ready for the 12th Ministerial Conference which starts in 12 days.

The role of plurilaterals in the WTO’s future

As the WTO is less than two weeks from the start of its 12th Ministerial Conference, an important question for the WTO Membership is whether or not the WTO will incorporate results from plurilaterals started at and after the 11th Ministerial (the so-called Joint Statement Initiatives) into the WTO or will rather limit the role of plurilaterals and effectively further reduce the relevance of the WTO going forward.

As reviewed in prior posts, India and South Africa have challenged the role of plurilaterals where WTO requirements are not followed to make it part of the WTO acquis. See, e.g., 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 paper from India and South Africa, THE LEGAL STATUS OF ‘JOINT STATEMENT INITIATIVES’ AND THEIR NEGOTIATED OUTCOMES, 19 February 2021, WT/GC/W/819 and one revision (WT/GC/W/819/Rev.1) was the subject of discussions at the March 1-2 and 4, 2021 General Council meeting and has been raised in subsequent General Council meetings as well. See GENERAL COUNCIL, MINUTES OF MEETING HELD IN VIRTUAL FORMAT ON 1-2 AND 4 MARCH 2021, WT/GC/M/190 (23 April 2021), pages 65-78; GENERAL COUNCIL, 7-8 October 2021 PROPOSED AGENDA, WT/GC/W/828 (5 October 2021), agenda item 11 (PAPER TITLED “THE LEGAL STATUS OF ‘JOINT STATEMENT INITIATIVES’ AND THEIR NEGOTIATED OUTCOMES” BY INDIA, SOUTH AFRICA AND NAMIBIA (WT/GC/W/819/REV.1)). Neither India nor South Africa are participating in any of the Joint Statement Initiatives (“JSIs”) at the present time.

Below are some excerpts from the March 2021 General Council meeting which lays out the views of a few of the WTO Members on the topic. The excerpts start with the views of India and South Africa as the sponsors of the paper and then follows with the reaction of a number of Members who support the JSI process. Many more Members expressed views. The controversy basically revolves around whether WTO Members will pursue initiatives among those with an interest with all Members being able to monitor, participate and join when desired or be limited by a system which has proven largely unable to address new issues in a timely manner.

India (pages 65-67 of WT/GC/M/190)

“10.2. The representative of India recalled that India and South Africa had submitted the paper in document WT/GC/W/819 dated 19 February 2021 on the “The Legal Status of ‘Joint Statement Initiatives’ and their Negotiated Outcomes”. As a co-sponsor, India was not questioning the right of Members to meet and discuss any issue. However, when such discussions turned into negotiations
and their outcomes were to be brought into the WTO, the fundamental rules of the WTO should be followed. The WTO had been established as a forum concerning multilateral trade relations in matters dealt with under the agreements in the Annexes to the Marrakesh Agreement and for further negotiations among its Members concerning their multilateral trade relations and to provide a framework for the implementation of results of such negotiations.

“10.3. The Marrakesh Agreement defined ‘Plurilateral Agreements’ as the agreements and associated legal instruments that were included in Annex 4 to the Agreement. The Ministerial Conference, upon the request of the Members party to a trade agreement, decided exclusively by consensus to add that agreement to the said Annex 4. Procedures for amending rules were enshrined in Article X of the Marrakesh Agreement. On the other hand, the GATT and GATS contained specific provisions for modifications of Schedules containing specific commitments of Members.

“10.4. Amendments or additions to the rules were governed by multilateral consensus based decision-making or voting – right from the outset when a new proposal for an amendment was made. On the other hand, negotiations on modifications or improvements to Schedules could arise either as the outcomes of consensual multilateral negotiations pursuant to Article XXVIII of GATT or Article XXI of GATS or be reached through a bilateral request and offer process or as a result of a dispute. In fact, even changes to Schedules could not be made unilaterally as other Members had the right to protect the existing balance of rights and obligations.

“10.5. The GATS read in concert with the Marrakesh Agreement provided for different rules and procedures for amendment of rules and modification of schedules. While the GATS rules were governed by the GATS Part II, “General Obligations and Disciplines”, Part III of the GATS contained provisions concerning Members individual “Specific Commitments” pertaining to distinctly identified services sectors which were inscribed in Members’ Schedules. In case of conflict in interpretation, Article XVI.3 of the Marrakesh Agreement provided that in the event of a conflict between a provision of the Marrakesh Agreement and a provision of any of the Multilateral Trade Agreements, the provisions of the Marrakesh Agreement should prevail.

“10.6. Each of the JSIs was likely to pose different legal challenges to the existing WTO rules and mandates given the differences in the nature and scope of issues covered under each of those initiatives. However, any attempt to bring in the negotiated outcomes of the JSIs into the WTO by appending them to Members’ Schedules, even on MFN basis, following modification of Schedules
procedures, bypassing multilateral consensus would be contrary to the provisions of the Marrakesh Agreement.”10.7. Any attempt to introduce new rules, resulting from JSI negotiations, into the WTO without fulfilling the requirements of Articles IX and X of the Marrakesh Agreement would be detrimental to the functioning of the rules-based multilateral trading system. Among others, it would erode the integrity of the rules-based multilateral trading system, create a precedent for any group of Members to bring any issue into the WTO without the required mandate. bypass the collective oversight of Members for bringing in any new rules or amendments to existing rules in the WTO, usurp limited WTO resources available for multilateral negotiations, result in Members disregarding existing multilateral mandates arrived at through consensus in favour of matters without multilateral mandates, lead to the marginalization or exclusion of issues which were difficult but which remained critical for the multilateral trading system such as agriculture and development thereby undermining balance in agenda setting, negotiating processes and outcomes and fragment the multilateral trading system and undermine the multilateral character of the WTO.

“10.8. The document listed various options to move ahead. As per the provisions of the Marrakesh Agreement, for bringing in their negotiated outcomes in the WTO, the JSI Members could seek consensus among the whole WTO Membership, followed by acceptance by the required proportion of Members according to Article X of the Marrakesh Agreement. Alternatively, they could get the new agreements included in Annex 4 following Article X.9 of the Marrakesh Agreement. They also had option to pursue agreements outside the WTO Framework, as had been envisaged in the Trade in Services Agreement (TISA) or as had been done in multiple bilateral or plurilateral FTAs or RTAs. The proponents of a “flexible multilateral trading system” could even seek amendment to Article X of the Marrakesh Agreement following procedures enshrined therein to provide for such an approach.

“10.9. Through the paper WT/GC/W/819, India and South Africa reiterated that basic fundamental principles and rules of the rules-based multilateral trading system as enshrined in the Marrakesh Agreement should be followed by all Members including the participants of various JSIs. Negating the decisions of past Ministerial Conferences by decisions taken by a group of Ministers on the sidelines of a Ministerial Conference or the side-lines of any other event would be detrimental to the existence of the rules-based multilateral trading system under the WTO.”

South Africa (pages 67-68 of WT/GC/M/190)

“10.10. The representative of South Africa said that the WTO had been established as a forum concerning multilateral trade relations. South Africa’s interest in submitting the paper was to remind Members of the legal architecture that governed the functioning of the WTO which was critical to preserve its multilateral character. The pandemic was a sharp reminder of the importance of global cooperation in dealing with global challenges. The challenges facing humanity were not limited to
the pandemic but included rising inequality both within and between countries, poverty and food insecurity, among others. Those necessitated that Members avoided measures that undermined or fragmented the trading system.

“10.11. Any group of Members could discuss any issue informally. However, when discussions turned into negotiations, and their outcomes were sought to be formalized into the WTO framework, it could only be done in accordance with the rules of procedure for amendments as well as decision-making as set out in the Marrakesh Agreement. The plurilaterals were provided for in the Marrakesh Agreement and were included in Annex 4 to the Agreement – and there were specific rules to be followed to integrate those into the WTO framework. It was however important to note that the Ministerial Conference, upon the request of the Members party to a trade agreement, decided exclusively by consensus to add that agreement to the said Annex 4.

“10.12. The provisions in the Marrakesh Agreement had been carefully negotiated and were a result of the experience acquired in the GATT which had been characterized especially after the Tokyo Round by agreement on a number of plurilateral codes. There had been recognition that those plurilateral codes had created a fragmented system of rules. In respect of some Contracting Parties,
the GATT rules had been applicable, while in respect of the rest, both the GATT rules and the rules of plurilateral codes had been applicable. That created considerable complexity in determining what obligations had been applicable in respect of which Contracting Party.

“10.13. The Preamble to the Marrakesh Agreement clearly articulated Members’ vision for the WTO and it was to develop an integrated, more viable and durable multilateral trading system. Article II.1 stated that “The WTO shall provide the common institutional framework for the conduct of trade relations among its Members.” Article III.2 stated that “The WTO shall provide the forum for negotiations among its Members concerning their multilateral trade relations”. It provided for consensus-based decision-making as enshrined in Articles III.2, IX, X and also X.9 as well as procedures for the amendments of rules as articulated in Article X.

“10.14. The Marrakesh Agreement did not make provision for the so-called open plurilaterals and flexible multilateralism. Therefore, any suggestion that when offered on MFN basis, no consensus was required for bringing new rules into the WTO was legally inconsistent with the fundamental principles and procedures of the Marrakesh Agreement. Importantly, new rules could not be brought into the WTO through amendment of Members’ Schedules. It had also been suggested that the Telecommunications Reference Paper justified why the consensus principle could be bypassed. However, as part of the package of the Uruguay Round outcome, there had been a multilateral consensus and a formal mandate for the negotiations, including agreement on inscribing outcomes into Schedules without an amendment procedure.

“10.15. There were systemic and developmental implications inherent in plurilaterals especially if they attempted to subvert established rules and foundational principles of the Marrakesh Agreement. They risked eroding the integrity of the rules-based multilateral trading system, creating a precedent for any group of Members to bring any issue into the WTO without the required consensus, including disregard of existing multilateral mandates, marginalizing issues which were difficult but yet critical
for the multilateral trading system such as agriculture and development thereby undermining balance in agenda setting, negotiating processes and outcomes, fragmenting the system and undermining the multilateral character of the WTO which Members had sought to resolve by creating the WTO following the GATT experience.

“10.16. The legal framework of the WTO provided clear options for Members who were part of JSIs as outlined in the paper. South Africa was therefore calling on Members to respect the rules which continued to underpin the functioning of the WTO.

Australia (page 69 of WT/GC/M/190)

“10.24. The representative of Australia noted Members’ commitment to improving the effectiveness of the WTO’s rulemaking function. Australia was a participant in all the current JSI negotiations under way and strongly supported that important work at the WTO. Plurilateral initiatives were neither novel nor revolutionary in the multilateral trading system. They had always been a part of the WTO architecture had constituted the predominant form of rulemaking in the multilateral trading system for decades. WTO-consistent plurilateral trade agreements with wide participation played an important role in complementing global liberalization efforts. The current JSIs had the potential to deliver vital outcomes that strengthened the WTO’s rulemaking function and its health more generally. More than 110 Members were participating in one or more of the current JSI negotiations – demonstrating the wide acknowledgement from across the Membership that that was a legitimate and useful form of rulemaking. They had and continued to be inclusive, open and transparent.

“10.25. Australia did not agree with the legal analysis in India and South Africa’s paper. For instance, the suggestion that Members could not improve their GATT or GATS Schedules without consensus agreement was not accurate. Members could always incorporate improvements to their Schedules whether unilaterally or as a group of Members. That was the legal architecture which participants had agreed to use in the services domestic regulation JSI. Australia had full confidence in the WTO consistency of that approach. In the case of the e-commerce JSI, its participants were still exploring the legal structure options they could best use to incorporate eventual outcomes into the WTO legal framework but were confident that those pathways could be found. Australia encouraged all Members to participate in or at least keep an open mind on those plurilateral discussions to pursue
outcomes that modernized and enhanced WTO rules for the whole Membership.”

Costa Rica (pages 69-70 of WT/GC/M/190)

“10.26. The representative of Costa Rica was focused on ensuring that the WTO operated within the legal framework agreed by the Members. Costa Rica would reject any attempt to force Members to abide by new obligations without their consent. Costa Rica was a participant in the Joint Statement Initiatives on Electronic Commerce, Investment Facilitation for Development, MSMEs and Services Domestic Regulation. The reason for that was simple. Costa Rica was recognizing the need to adapt to the trade policy challenges of the 21st century. But that did not mean that any Member who chose to remain outside those discussions would be forced to adhere to any new obligations.

“10.27. Costa Rica focused its remarks that day on the negotiations on services domestic regulation as that was the initiative that it had the pleasure of coordinating. Those negotiations and the outcome they would produce were firmly within the rules of the WTO. 59 proponents of services domestic regulation had established the initiative at the end of 2017 after they had to accept with
great regret that no further progress had been possible in the Working Party on Domestic Regulation. Each and every proposal submitted had been rejected in its entirety by South Africa and other Members. Proponents of domestic regulation had no choice but to accept that position.

“10.28. Since that time, work on the subject had so far advanced in the Joint Statement Initiative on Services Domestic Regulation. To the extent that participants considered it to be a viable prospect for an outcome to be delivered that year, Costa Rica clarified that the outcome would consist of a set of disciplines on licensing, qualification and standards which would bind only participating
Members but would benefit services suppliers from all Members who traded with the participating Members which currently represented more than 70% of world services trade.

“10.29. The outcome that was envisaged would be incorporated into participating Members’ GATS schedules of specific commitments. In substance, it covered precisely those types of measures that were listed in the GATS as areas for additional commitments, namely, qualification standards and licensing matters That was important because the paper introduced by India and South Africa suggested that the disciplines developed by the initiative constituted some form of not further specified rules which did not fit under the architecture of services schedules. That was quite untrue. Rather, the disciplines constituted improvements of participating Members’ existing commitments.

“10.30. Participating Members would give legal effect to the outcome by inscribing the disciplines as additional commitments in the respective GATS schedules. That would not be done by seeking to add a new agreement to the WTO architecture but by applying well established multilateral WTO procedures to improve Members’ schedules of specific commitments. Concerns about the work of the JSI had been raised already at the end of 2019. At that time, India had argued that some of the disciplines could be of a GATS minus nature and the GATS Article VI.4 mandate could be affected by the work of the initiative. As the Coordinator of the initiative, Costa Rica had had the pleasure of discussing those concerns with India in more detail and to report back to the group. While participants in the initiative did not agree that the disciplines in question could be understood to undercut existing GATS obligations, they agreed wholeheartedly with India that the disciplines should not be understood to weaken any provision contained in the GATS.

“10.31. Indeed, participants had recently incorporated in the negotiating text language expressing clearly that the disciplines should not be constructed to diminish any obligations under the GATS. The GATS Article VI.4 mandate to develop any necessary domestic regulation disciplines was not, would not and could not be affected by the fact that Members participating in the JSI would undertake additional commitments on domestic regulation. Costa Rica was therefore disappointed to see that India currently appeared to question the right of any WTO Member to improve its services commitments. The JSI on Services Domestic Regulation remained open and transparent and all Members were welcome to join the meetings and to constructively engage ensuring that the outcome benefited service suppliers across the world and included as many Members as possible.”

Chinese Taipei (page 70 of WT/GC/M/190)

“10.32. The representative of Chinese Taipei noted that the plurilateral approach had contributed to global trade in the past. The ITA was an example. Certain limited use of the plurilateral approach could support and supplement the multilateral trading system by facilitating international trade. The discussions under JSIs had given the WTO new momentum which was necessary and healthy for the multilateral system. It was an unavoidable trend that more and more trade issues were emerging that urgently needed Members to establish new disciplines for them. It was highly important to update WTO rules and to make the WTO a living organization and not be left behind by the world.

“10.33. Through Joint Statement Initiatives, Members had developed a creative way to address the trend so that the WTO’s legislative function could be improved for it to maintain its relevancy given new developments in the world – with Members still maintaining the flexibility not to opt in. Chinese Taipei called on Members to jointly think about how plurilateral agreements could be integrated into the multilateral trading system while considering Members’ needs for their respective development stages and maintaining the existing rights and obligations of non-participating Members.”

Colombia (page 70 of WT/GC/M/190)

“10.34. The representative of Colombia believed that that was an important discussion for the future of the organization as those initiatives covered the interests of many Members to move forward on crucial issues in global trade relations. Colombia appreciated the interest the Director-General had expressed on JSIs. That was a necessary step for the strengthening of the WTO. Colombia was happy to see how the path that had begun with previous processes such as the ITA was currently joined by many Members who were involved in the JSIs – an important space to resolve pending priorities.

“10.35. Such perspective had led Colombia to actively and formally participate in the JSIs on ecommerce, investment facilitation for development, services domestic regulation, MSMEs and trade and gender. Colombia also expressed its interest in other nascent initiatives which would likewise have an important impact on the WTO’s future as a driver of development for Members. With regard to the document being reviewed that day, Colombia did not share the legal analysis that the paper had set out but remained ready to continue that discussion in the appropriate forum. Colombia reiterated its commitment to the JSIs and its support for any work that could be done in that area.”

Mexico (page 70 of WT/GC/M/190)

“10.36. The representative of Mexico said that JSIs provided an excellent opportunity to furnish the WTO with tools that would allow it to face the current challenges in global trade. Members were in a situation where some of them believed that they were still not in a position to fully integrate themselves into the work under way. The JSI participants had never foreclosed the possibility for more Members to join those initiatives when they deemed it appropriate to do so nor did those initiatives diminish the rights and obligations of non-participating Members. Rather, the JSIs offered a possibility to move forward and help the WTO become more relevant by promoting trade as a vehicle for development. Mexico had been a strong proponent of the JSIs as the work had taken place openly, inclusively and transparently with voluntary participation at its core.”

Russian Federation (page 71 of WT/GC/M/190)

“10.37. The representative of the Russian Federation found the paper by India and South Africa upsetting. There was no doubt that Members should respect the right of any of them to express its attitude towards current developments within the multilateral legal system and to point out issues which it could see as contradictory to the system’s rules. The paper was however not about that but
dealt with the issue of whether the WTO should move forward and regain its relevancy amid the changing global economic environment or should it be further bogged down by disagreements among Members and lack of consensus eventually turning into an archaic and useless institution.

“10.38. The multilateral outcomes at MC11 had clearly been quite poor. The decision to promote and accelerate fisheries subsidies negotiations – the only multilateral and negotiation-related result achieved in Buenos Aires – was evidently not enough to chart a way forward for the WTO. The JSIs in which Russia was proud to participate in had been considered globally as a signal of Members’ ability and readiness to explore possible formats to move ahead. The progress achieved in all JSIs since then demonstrated the effectiveness of that approach. For example, the JSI on Services Domestic Regulation was an attempt to deliver on a long standing commitment of all Members to develop the respective disciplines as set out in GATS Article VI.4.

“10.39. As for the incorporation of new plurilateral initiatives into the WTO Agreements, Russia agreed with suggestion of India and South Africa that it should be done in accordance with the relevant provisions of the Marrakesh Agreement. However, the final goal of the JSIs was not to create a set of isolated rules among like-minded Members but rather to update the multilateral legal
system as a whole. That was why the JSIs remained open to all Members at any stage.

“10.40. The most disappointing fact about the submission was that while attacking JSIs, it did not provide any way forward essentially keeping the WTO to languish in the current limbo. No Member had taken the position to leave behind the core WTO mandated issues like agriculture or ‘horizontal’ S&DT. However, if the needs of the businesses and the people worldwide including in developing countries required Members to agree on adequate and up-to-date rules on other important issues, they had no right to keep those requests as hostages of their inability to reach progress on all fronts.”

Japan (page 71 of WT/GC/M/190)

“10.41. The representative of Japan appreciated the Joint Statement Initiatives as an essential framework to allow the WTO to address in a flexible and realistic manner the changing global economic needs of the 21st century. The JSIs responded to calls from a broad range of stakeholders by discussing key economic issues and would contribute to updating the WTO rulebook and to
ensuring the relevance of the WTO in today’s world. Without the JSIs, the WTO risked becoming less relevant and even losing its raison d’être as a cornerstone of the multilateral trading system. The JSI meetings were organized in an open, transparent and inclusive manner.

“10.42. While taking into account the convenience of respective Members including the size of their delegations in organizing the process, the fact that many of them were participating in the JSIs and actively engaging in negotiations in a creative and innovative way clearly showed the JSI’s importance. A number of achievements made in the GATT and the WTO had initially been taken up
or discussed in plurilateral initiatives which were later merged in the system. Japan believed that the JSIs were consistent with the WTO and had high hopes that they would be a key part of the MC12 outcomes. Japan would continue to work with other Members to deliver substantial outcomes in the JSIs as a positive achievement of the WTO.”

Republic of Korea (page 71 of WT/GC/M/190)

“10.43. The representative of the Republic of Korea, as a staunch supporter of the multilateral trading system, was disappointed to see the WTO in limbo in particular its failure to function as a forum for multilateral trade negotiations in response to the diverse needs and interests of Members. Upon such impasse and trade liberalization shifting weight to regional agreements outside the WTO, plurilateral negotiations could be a meaningful stepping-stone for multilateral agreement. It also served as a test pad for pioneering new trade rules as demonstrated by the GPA and the ITA. The JSIs which were held parallel with multilateral negotiations were essential to maintain the WTO’s relevance in the changing trade environment. Those negotiations were responsive to the demands of diverse stakeholders which would help rebuild trust in the multilateral trading system. Korea
therefore expressed its concern on the communication submitted by India and South Africa which raised questions on the concerted endeavours for revitalizing the WTO’s negotiating function.”

United States (pages 71-72 of WT/GC/M/190)

“10.44. The representative of the United States believed that plurilateral negotiations at the WTO could be a useful means to advance issues of interest to Members and to keep the WTO relevant. It did not view plurilateral negotiations and outcomes as undermining multilateral ones. In fact, plurilateral initiatives could foster new ideas and approaches and build momentum toward
multilateral outcomes. The various rigid positions expressed in the paper would seem to foreclose Members’ ability to pursue creative and flexible approaches at the WTO to the challenges of today and tomorrow.”

Possible JSI outcomes at the WTO’s 12th Ministerial Conference

The WTO is hoping that the 12th Ministerial Conference will finally deliver a fisheries subsidies agreement after 20 years of negotiations. It would be a multilateral agreement and only the second such agreement (the other being Trade Facilitation) concluded since the creation of the WTO in 1995. There are hopes for collective action on trade and health and some other issues. But many of the likely deliverables will involve Joint Statement Initiatives. Hence the position of India and South Africa may muddy the outlook for whether such initiatives when concluded will be incorporated into the WTO acquis.

Press accounts of a recent Chatham House event noted the view of the European Union that the WTO needs to be able to bring these initiatives into the WTO. See Inside U.S. Trade’s World Trade Online, Weyand: WTO reform should include easier’ path for plurilateral deals, November 15, 2021, https://insidetrade.com/daily-news/weyand-wto-reform-should-include-easier-path-plurilateral-deals (“World Trade Organization members need an ‘easier’ way to integrate plurilateral agreements into the organization’s rulebook, European Commission Director-General for Trade Sabine Weyand said on Friday, calling for the idea to be a part of broader WTO reform discussions.”). The EU, like most other WTO Members, has been an active participant in various JSIs.

A former Deputy Director-General of the WTO, Alan Wolff, presented views in Singapore earlier this week on the subject of the role of plurilaterals in the WTO. See Peterson Institute for International Economics, Alan Wm. Wolff, Plurilateral Agreements and the Future of the WTO, November 16, 2021, Remarks delivered at the Nanyang Technological University, Singapore, https://www.piie.com/commentary/speeches-papers/plurilateral-agreements-and-future-wto. His speech is worth reading in its entirety. A few excerpts are provided below and highlight the critical importance of plurilaterals going forward. Whether plurilaterals are within the WTO or outside will basically determine whether the WTO can maintain relevance in the future.

“Plurilateral agreements have become and will remain the primary path forward for improving the conditions for international trade.

“Insofar as the future health of the multilateral trading system is concerned, there are three alternatives:

“(1) coalitions of the like-minded will be able to conclude open plurilateral agreements within the WTO,

“(2) forward-leaning agreements are negotiated outside the WTO but become templates for the multilateral rules, or

“(3) the WTO becomes increasingly irrelevant to new global challenges and there is a consequent fragmentation of the world trading system.”

After reviewing the JSIs and other initiatives on climate change, trade and health and other matters, Amb. Wolff notes that

“Global problems need global solutions.

“The only practical way forward for the WTO is through open plurilateral agreements. Otherwise, Members who are looking for solutions will view the WTO as being increasingly irrelevant. The WTO to thrive needs to become more flexible.

“Notionally, various subjects can be negotiated on their own, in disparate venues, each unrelated to the other, without full transparency, without interested countries having a say. That is a recipe for global incoherence. It is the opposite of what is needed.

“Where trade is a vitally important aspect of meeting a global challenge – such as a pandemic or climate change, there is no clear alternative venue for addressing fully countries’ needs. The WTO must be pressed into service.

“It is time for the WTO’s Members to take the next step and embrace the open plurilateral agreements being negotiated now and those that are going to be launched to meet their needs for the 21st century.”

The 12th Ministerial Conference is the opportunity for WTO Members to embrace the future or commit the WTO to reduced relevancy. By early December, we should understand the likely direction of the WTO.

The APEC 2021 Ministerial Meeting Joint Statement — portion relevant to WTO 12th Ministerial Meeting

The APEC 2021 Ministerial meeting was held remotely on November 8-9 and resulted in a joint statement which included ambitions of APECs 21 members for the upcoming 12th WTO Ministerial Conference which starts in Geneva at the end of November (November 30-December 3). New Zealand has chaired APEC in 2021. Because the APEC countries include members accounting for 38% of the world’s population, 62% of the world’s GDP and 48% of global trade in 2020 and includes both the United States and China among the 21 territories, what APEC members support for the upcoming WTO ministerial may offer a glimpse of what may be possible in Geneva in the coming weeks. The APEC Ministerial Meeting Joint Statement and a publication on APEC in Numbers can be found here. See 2021 APEC Ministerial Meeting Joint Statement, Wellington, New Zealand, 09 November 2021, https://www.apec.org/meeting-papers/annual-ministerial-meetings/2021/2021-apec-ministerial-meeting; APEC in Charts 2021, https://www.apec.org/docs/default-source/publications/2021/11/apec-in-charts-2021/221_psu_apec-in-charts-2021.pdf?sfvrsn=50537c36_2. APEC members include Australia, Brunei Darussalam, Canada, China, Hong Kong (China), Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russian Federation, Singapore, Chinese Taipei, Thailand, United States, and Viet Nam.

While the Declaration contains coverage of a number of issues, it has a separate section on the World Trade Organization (pages 4-5, paras. 17-22). The six paragraphs from the Joint Statement are copied below.

“World Trade Organization

“17. APEC takes pride in its long history of active support for the rules-based multilateral trading system (MTS), with the WTO at its core. The MTS has been a catalyst for our region’s extraordinary growth and we will work together to improve it. We seek a responsive, relevant, and revitalised WTO. We must support the WTO and its membership to modernise trade rules for the twenty-first century. Together, we will engage constructively and cooperate to ensure the 12th WTO Ministerial Conference (MC12) is a success and delivers concrete results.

“18. As a priority for MC12, we see an opportunity for the WTO to demonstrate that the MTS can continue to help address the human catastrophe of the COVID-19 pandemic and facilitate recovery. We call for pragmatic and effective ministerial outcomes that makes it easier to respond swiftly and effectively to the COVID-19 pandemic and accelerate the recovery. Our priorities include supporting the facilitation of manufacturing, distribution, and supply chains of essential medical goods, including vaccines. We will work proactively and urgently in Geneva to support text-based discussions, including on a temporary waiver of certain intellectual property protections on COVID-19 vaccines.

“19. We reiterate our determination to negotiate effective disciplines on harmful fisheries subsidies in line with SDG 14.6, and call for agreement to a comprehensive and meaningful outcome by MC12 in a few weeks’ time.

“20. Despite its importance for ensuring global food security and sustainable economic development, agriculture is one of the most protected sectors in global trade. We recognise the need for a meaningful outcome on agriculture at MC12, reflecting our collective interests and sensitivities, with a view towards achieving substantial progressive reductions in support and protection, as envisaged in the continuation of the reform process provided in Article 20 of the WTO Agreement on Agriculture and existing mandates.

“21. We recognise the positive role that existing plurilateral negotiations and discussions are playing in progressing outcomes. APEC member participants in the relevant Joint Statement Initiatives (JSIs) call for conclusion of negotiations on services domestic regulation by MC12; and substantial progress by MC12 in the JSIs on e-commerce; micro, small and medium-sized enterprises; and investment facilitation for development. We take note of the efforts by the APEC economies who endorsed the Joint Declaration on Trade and Women’s Economic Empowerment to deliver an ambitious outcome at MC12 that supports the advancement of trade and gender equality.

“22, We continued our frank and constructive discussions regarding improvement to the WTO’s monitoring, negotiating and dispute settlement functions. We continue to support the ongoing and necessary reform work to improve the WTO’s functioning, including the importance of making progress on enhancing transparency to support its monitoring and negotiating functions. We will work together at the WTO and with the wider WTO membership to advance the proper functioning of the WTO’s negotiation and dispute settlement functions, which require addressing longstanding issues. We urge WTO members to seek a shared understanding of the types of reform needed.”

The Joint Statement has some specific items where outcomes are pursued — conclusion of the fisheries subsidies negotiations, some outcomes in the Joint Statement Initiatives (services domestic regulation should be completed; micro, small and medium-sized enterprises is completed; progress on others). As reviewed in yesterday’s post, WTO Members still have a challenging road to achieve a completed fisheries subsidies agreement at the 12th Ministerial. See November 9, 2021:  WTO Fisheries Subsidies Negotiations — a second revised text from November 8 holds out hope for a deal by MC12; how realistic is the hope?, https://currentthoughtsontrade.com/2021/11/09/wto-fisheries-subsidies-negotiations-a-second-revised-text-from-november-8-holds-out-hope-for-a-deal-by-mc12-how-realistic-is-the-hope/. Moreover, India, South Africa and others are raising objections to having any plurilaterals being negotiated included in the WTO which will complicate what comes out of the 12th Ministerial Conference (as opposed to encouraging Members to pursue plurilaterals outside of the WTO). 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/; September 18, 2021: The WTO’s 12th Ministerial Conference in Late November – early December 2021 — the struggle for relevance, https://currentthoughtsontrade.com/2021/09/18/the-wtos-12th-ministerial-conference-in-late-november-early-december-2021-the-struggle-for-relevance/.

The Joint Statement also seeks “pragmatic and effective” outcomes in the health and trade space to address responding to the COVID pandemic. Specifics are lacking although there is support to expanding production and access to vaccines and other medical goods. While supporting text based negotiations in the area, including on a possible temporary waiver of some TRIPS provisions on COVID vaccines, the lack of greater specificity reflects differences in positions of APEC members.

Similarly, while supporting WTO reform in all three areas of WTO activity (monitoring, negotiating and dispute settlement), APEC members have significantly different views on what is needed in these areas. Hence only general language is included in the Joint Statement.

In a prior post, I have opined that recent actions by the U.S. and EU to find ways around the civil aircaraft and steel and aluminum frictions suggests that the U.S. may agree to the start of a process to review the dispute settlement system issues raised by it as part of the 12th Ministerial (a high EU priority) and that the U.S. and EU could coalesce around an outcome acceptable to both in the TRIPS waiver dispute. See November 2, 2021:  What does the U.S.-EU Agreement on steel and aluminum imply for the upcoming 12th WTO Ministerial Conference?, https://currentthoughtsontrade.com/2021/11/02/what-does-the-u-s-eu-agreement-on-steel-and-aluminum-imply-for-the-upcoming-12th-wto-ministerial-conference/.

China has opposed greater transparency obligations and has tied reform of industrial subsidies to looking at agricultural subsidies as well. A recent post of mine reviews the need for better information on subsidies. See October 30, 2021:  WTO reform — distortions to market access and the need for better information, https://currentthoughtsontrade.com/2021/10/30/wto-reform-distortions-to-market-access-and-the-need-for-better-information/. Despite differences of view on some issues among major Members, it is not out of the question that a reform program will cover an examination of all three functions going forward.

On agriculture, there is a shared view for a need for results at the WTO 12th Ministerial and reflects on the fact that Article 20 of the WTO Agreement on Agriculture calls for periodic rounds of liberalization. However, the language of the Joint Statement doesn’t specify the areas where agreement is possible by the 12th Ministerial, reflecting different views among APEC members.

Nothing in the APEC Joint Statement addressed what, if anything should be agreed at the 12th WTO Ministerial on the climate crisis and what role trade can play in addressing the crisis. This omission is unfortunate but likely reflects large differences in views within APEC members on the topic. As I reviewed in a recent post, much more is needed but unlikely to come from the WTO and its members. See November 4, 2021:  The WTO and the environment — will the 2020s be different in terms of trade policies that are environmentally supportive?, https://currentthoughtsontrade.com/2021/11/04/the-wto-and-the-environment-will-the-2020s-be-different-in-terms-of-trade-policies-that-are-environmentally-supportive/.

Conclusion

The APEC 2021 Ministerial Meeting Joint Statement, being released three weeks before the start of the WTO’s 12th Ministerial Conference is a positive statement of support for the multilateral trading system. Coming from a group of WTO Members accounting for nearly 50% of global trade, it is a useful guide for topics these countries and territories will be pursuing in Geneva. Other group statements have been released as well as individual country or group objectives. But even within the APEC group of countries, large differences exist on outcomes of interest. With the exception of a possible conclusion to the fisheries subsidies negotiations and conclusions on several Joint Statement Initiatives, there may be only limited positive outcomes. There may be some limited agreement on the broad topic of health and trade and some agreement on topics for future negotiation. There may also be at least some provisions in a declaration dealing with the climate crisis and the important role trade can play in addressing the crisis.

Such a limited set of outcomes will likely be viewed as a success for an organization hamstrung by Members with no common vision for the role of the organization, with large differences in development levels, a cumbersome governance system and growing divergence on whether the organization can support global trade where market rules are not the required framework. More is needed for a truly relevant WTO and for a sustainable global trading system. The world is unlikely to achieve meaningful reform at the WTO in the coming decade. Progress, if any, will likely be slow and piecemeal.

WTO reduces transparency of Trade Policy Reviews — what is the possible justification?

Through September 2021, when a country went through a Trade Policy Review, a large amount of material was made available to the public at the time of the TPR meeting with additional information (minutes, questions and answers, corrections to Secretariat report and/or government report) released a number of months later. The WTO press releases at the time of the TPR meeting were similar. The one for Singapore from 22 and 24 September 2021 is typical.

As can be seen from the press release, the public could access the full report of the Secretariat, the full report of the Government of Singapore, the concluding comments of the Chairperson as well as an Executive Summary of the Secretariat report at the time of the two day meeting to review the reports. Moreover, minutes from the meeting were available to the public typically about six weeks after the meeting as were the written questions and written answers.

Beginning in October, the press release has been modified and far less information is made available immediately to the public. There have been two TPRs so far in October, the Republic of Korea (13 and 15 October) and China (20 and 22 October). A TPR of the Russian Federation is scheduled for next week.

The WTO press release for the Republic of Korea is copied below. The current one for China is similar.

All that is made available to the public at the time of the meeting is a short executive summary of the Secretariat report and the concluding remarks of the Chairperson. No reference is made to how to access the full report of the Secretariat or the Government (here Republic of Korea), nor is there an indication as to when minutes or written questions and written answers will be available.

There is nothing on the WTO webpage which describes why so little information is being provided beginning this month on new Trade Policy Reviews. For the public, the drastic reduction in transparency makes the WTO operations even less understandable.

If the WTO will be releasing all of the documents it has historically but with significant time delays on all documents, what is the justification? For 25 years, TPRs have been conducted with the type of information released that gave the public a good understanding of the Secretariat’s and the government’s review of its trade policy. That understanding has been timely, consistent with the meeting and supplemented within several months with minutes and the written questions and answers.

If the WTO is not intending on releasing all of the documents it has historically released, what is the possible justification?

China, which is going through a Trade Policy Review this week, also went through a TPR in 2018. In 2018, the Secretariat Report released to the public at the time of the TPR meeting was 193 pages (along with a summary of 6 pages). See WT/TPR/S/375. China’s Report on its trade policy was 23 pages. See WT/TPR/G/375. These documents are dated 6 June 2018. A revision to the Secretariat Report is dated 14 September 2018 and was also 193 pages ( WT/TPR/S/375/Rev.1). The Concluding remarks by the Chairperson are contained in a separate press release from the WTO at the time of the TPR meeting but linked from the main notice of the TPR. See WTO news, Trade Policy Review: China, 11 and 13 July 2018, https://www.wto.org/english/tratop_e/tpr_e/tp475_e.htm linking to the concluding remarks of the Chairperson at https://www.wto.org/english/tratop_e/tpr_e/tp475_crc_e.htm. The minutes of the meeting are contained in WT/TPR/M/375, 21 November 20218 and are 98 pages in length with statements from 66 Members (two on behalf of larger groups). The written questions and answers are contained in WT/TPR/M/375/Add.1, dated 1 February 2019 and being 729 pages in length. The WTO Members who submitted questions (including follow-up questions) are shown on pages 2-3 of the document.

Because the current TPR on China (20 and 22 October) does not provide either of the full reports (Secretariat and Government) and because there is no indication of when minutes or written questions and answers will be available, there is certainly delayed access and potentially denial of access of the same type of information on China (or any other country) that was been released in the past. This should be viewed as unacceptable by the WTO Secretariat and WTO Members and certainly should be so viewed by the public.

Conclusion

What is available to the public from a Trade Policy Review is critical for an understanding of concerns raised by WTO Members about any other Member’s trade policy as well as the level and openness of the response from the Member being reviewed. The Secretariat’s report is an important factual analysis of developments in the Member being reviewed. The recent curtailment of access to the full Secretariat Report and the full Government Report greatly harms transparency and the ability of the public to understand developments within WTO Members in a timely manner. Should the WTO cease to release any of the information heretofore available to the public in current and future TPRs, the WTO will be further damaging the public’s perception of the WTO and will be further retreating from openness and transparency towards the public..

WTO Information Notes on COVID-19 Vaccine Production and Potential Bottlenecks

On October 8, 2021, the WTO released the latest in a series of Information Notes pertaining to the COVID-19 pandemic. The first one is entitled “COVID-19 Vaccine Production and Tariffs on Vaccine Inputs”. The purpose of the information note was to examine public information to see if import tariffs in any of the 27 major vaccine manufacturing countries could pose challenges or create “choke” points in vaccine production. The second Information Note is entitled “Indicative List of Trade-Related Bottlenecks and Trade-Facilitating Measures on Critical Products to Combat COVID-19” and is an update on an earlier version released 20 July 2020. Both Information Notes are linked to a WTO press release from 8 October. See WTO news, WTO issues papers on vaccine inputs tariffs and bottlenecks on critical COVID-19 products, 8 October 2021, https://www.wto.org/english/news_e/news21_e/covid_08oct21_e.htm

The second Information Note is the more important of the two papers as it identifies a range of challenges to the expedited movement of vaccines and inputs. However, the first paper is interesting in terms of identifying tariffs on critical materials in major producing countries. However, as the paper acknowledges, the analysis has its limitations.

” 2. TECHNICAL DETAILS
“The MFN applied tariffs were based on the dataset used for World Tariff Profiles 2021, and 2020
imports were based on the TDM dataset3. Even if the national tariff line data (i.e. eight-digit tariff
line codes) were available, beyond the standard HS six-digit level there is no uniformity of codes
across national tariff nomenclatures. Thus, even if only a portion of the HS six-digit code pertains to
the COVID-19 vaccine input, the data used in the analysis both for tariffs and imports were the
six-digit MFN tariff average and the total six-digit imports from the world. Preferential tariffs were
not taken into consideration and thus intra-EU imports, imports from partners of free trade
agreements (FTAs) or any other preferential imports were treated as if MFN tariffs were levied.
Furthermore, there was definitely an over-estimation of the import value of the inputs, since
identification of the national breakdown pertaining to the actual product used in vaccine
manufacturing cannot be easily done. Sometimes even within the most detailed national tariff line
(or specific product) code available (eight digits or longer), the product coverage does not
necessarily refer only to the specific vaccine input and includes non-vaccine-related inputs. While
tariff estimates can be arguably good enough,4 the same cannot be said of the estimated imports
value.” (footnotes omitted)

Certainly for the EU, U.S. and some others, many of the potentially dutiable imports will have been duty free from FTAs or other preferential partners. But the Information is nonetheless useful in flagging general categories of products important to vaccine production that have bound tariffs at 5% or greater. While neither the U.S. nor Japan have any such categories, many other vaccine producing countries have one, several or many product categories where bound tariffs are 5% or higher. Table 4 of the Information Note provides a useful summary of the findings made.

Table 2 of the Information Note presents a summary of the weighted average MFN tariff rate by country.
Thus, from a bound tariff perspective, some countries, particularly developing countries are assessing ordinary customs duties on materials needed for the production of COVIDE-19 vaccines at relatively high rates that at a minimum increase costs, making it more expensive to provide vaccines to the domestic population or export populations.

A detailed review of each of the 27 countries is provided in the WTO’s Vaccine Production and Tariffs on Vaccine Inputs which is attached to the first Information Note.

The second note is the more interesting as it reflects issues and suggestions from various stakeholders on how to expand production and access to vaccines, therapeutics and medical devices needed to combat COVID-19. The introduction to the Information note provides useful background.

“1. INTRODUCTION
“This information note seeks to facilitate access to information on possible trade-related bottlenecks and trade-facilitating measures on critical products to combat COVID-19, including inputs used in vaccine manufacturing, vaccine distribution and approval, therapeutics and pharmaceuticals, diagnostics and medical devices. It is not meant to be an exhaustive list of all specific trade measures, nor does it make any judgement on the effect or significance of the reported bottlenecks, nor on the desirability of implementing any of the suggestions on trade-facilitating measures.3

“The indicative list is based on issues identified and suggestions made by stakeholders at various events and consultations convened by the WTO, as well as with vaccine manufacturers in the context of meetings organized by the Multilateral Leaders Task Force on COVID-19,4 which includes the heads of the International Monetary Fund (IMF), the World Bank Group, the World Health Organization (WHO) and the WTO.5 This revision includes information as of 4 October 2021. Entries under each subheading are presented in no particular order. One common theme that emerges is that essential goods and inputs need to flow efficiently and expeditiously to support the rapid scaling up of COVID-19 production capacity worldwide. As manufacturers scale up production and establish new sites in different countries, the production network is not only becoming larger but also increasingly complex and international. The delay of a single component may significantly slow down or even bring vaccine manufacturing to a halt, so it follows that inputs need to flow expeditiously, and each node within the supply chain network needs to operate seamlessly with the others.” (footnotes omitted)

There are a large number of potential trade-related bottlenecks including export restrictions (13 WTO Members are reported to have one or more), such restrictions as applied by manufacturers to “fill and finish” sites, effect of such restrictions on clinical trials, high applied tariffs, customs administration challenges (no green channels for expedited clearance, limited hours of customs operation, treatment of non-commercial samples sent for testing ad quality control, import barriers/delays on manufacturing equipment), challenges in completing consular transactions.

There are also many bottlenecks identified from vaccine regulatory approval including when looking at WHO Emergency Use Listing, requirements for application/registration and authorization, inspection, release, post-approval changes, donations, EUA and regular approval, scaling up production and other issues.

The paper also identifies bottlenecks in the distribution of finished vaccines and immunization supplies, bottlenecks in trade in pharmaceuticals, bottlenecks in trade in diagnostics and other medical devices.

All in all, a daunting list of challenges the vast majority of which involve the importing country and the complexity of systems for approval of medical goods and vaccines.

The last four pages of the Information Note then identify “possible trade-facilitating measures” that could be taken to improve movement of goods. Because the information note is providing a summary of proposals put forward by stakeholders and is not an agreed set of steps by WTO Members, the note states that “no judgement is made on the desirability of implementing any of these suggestions.” Page 7. That said, many of the suggestions relate to streamlining import operations, e.g., through implementation of the Trade Facilitation Agreement, seeing that customs operates 24 hours/7 days a week, exemptions from export restrictions, harmonization of regulatory approaches and many more.

Conclusion

The Information Notes developed by the WTO provide useful information either from public sources, such as the bound tariff rates of COVID-19 vaccine input materials or summaries of information gathered from stakeholders at events looking at how to ramp up production and distribution of vaccines. It is clear that the challenges for all WTO Members in addressing the global pandemic are many and not easily addressed. The Information Notes provide a data base that can be used by WTO Members to see that the current pandemic is fully addressed in fact in the coming months, and that Members consider ways to prepare for a better outcome to future pandemics.

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. blocks inclusion of Venezuelan request for panel on U.S. sanctions at WTO, Dispute Settlement Body meeting of March 26, 2021 postponed

The monthly regular meeting of the WTO Dispute Settlement Body was scheduled for March 26, 2021. The proposed agenda was circulated earlier and contained as item 4, “United States – Measures Relating to Trade in Goods and Services, A. Request for the Establishment of a Panel by Venezuela (WT/DS54/2/Rev.1)”. See Dispute Settlement Body, 26 March 2021, Proposed Agenda, WT/DSB/W/679 (24 March 2021). For background, the Venezuelan request for a panel is embedded below.

WTDS574-2R1

The United States objected to the inclusion of agenda item 4. USTR released a short statement on March 26. “The United States will reject any effort by Maduro to misuse the WTO to attack U.S. sanctions aimed at restoring human rights and democracy to Venezuela. The United States exercised its rights as a WTO Member to object to this illegitimate panel request because representatives of the Maduro regime do not speak on behalf of the Venezuelan people.” See USTR, Statement from USTR Spokesperson Adam Hodge on U.S. Action to Prevent Maduro Regime’s Attempt to Undermine U.S. Sanctions, March 26, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/march/statement-ustr-spokesperson-adam-hodge-us-action-prevent-maduro-regimes-attempt-undermine-us.

Venezuela did not agree to withdraw its request for a panel from the agenda with the result that Dispute Settlement Body meetings cannot proceed until there is a resolution. See Blomberg, U.S. Disrupts WTO Dispute Meeting Over Venezuela Sanctions Fight, March 26, 2021, https://www.bloomberg.com/news/articles/2021-03-26/u-s-disrupts-wto-dispute-meeting-over-venezuela-sanctions-fight (“The meeting ended prematurely after Venezuela refused Washington’s demand that the WTO remove Venezuela’s dispute request from the meeting agenda, according to the official attending the meeting. The impasse means that the WTO can’t hold any regular dispute settlement meetings unless and until the U.S. or Venezuela back down.”); Inside U.S. Trade’s World Trade Online, WTO: DSB meeting postponed over U.S. objection to Venezuela panel request, March 26, 2021, https://insidetrade.com/daily-news/wto-dsb-meeting-postponed-over-us-objection-venezuela-panel-request; Reuters, U.S. blocks Venezuela bid to seek WTO review of sanctions, March 26, 2021, https://www.reuters.com/article/us-trade-wto-usa-venezuela/u-s-blocks-venezuela-bid-to-seek-wto-review-of-sanctions-idUSKBN2BI1ZT (“Were the United States and other members to allow representatives of the illegitimate Maduro regime to exercise rights at the WTO on behalf of Venezuela, it would be tantamount to recognizing the Maduro regime itself,” the official said. “This would be contrary to the Biden-Harris administration’s firm policy supporting the people of Venezuela.”).

Background

The Maduro government in Venezuela is viewed as illegitimate by the United States and dozens of other governments based on the 2013 election. The U.S. has recognized Juan Guaido as the interim President and has imposed a series of sanctions on Venezuela and the Maduro government. While the sanctions were imposed during the Trump Administration, no changes have yet occurred in the Biden Administration. A 2020 write-up from the State Department describes the problems and justifications for the sanctions. See U.S. Department of State, U.S. Relations With Venezuela, Bilateral Relations Fact Sheet, Bureau of Western Hemisphere Affairs, July 6, 2020, https://www.state.gov/u-s-relations-with-venezuela/. Much of the fact sheet is copied below.

U.S.-VENEZUELA RELATIONS

“The United States recognizes Interim President Juan Guaido and considers the Venezuelan National Assembly, which he currently leads, to be the only legitimate federal institution, according to the Venezuelan Constitution. Nearly sixty other countries have joined in this recognition.

“The United States works with Interim President Juan Guaido and his team on a number of areas of mutual concern, including humanitarian and migration issues, health issues, security, anti-narcotrafficking initiatives, and reestablishment of the rule of law. The United States proposed a Democratic Transition Framework in 2020 as a guide to help Venezuelan society achieve a peaceful, democratic transition. Venezuela’s previous presidents, the late Hugo Chavez (1999-2013) and Nicolas Maduro (2013-2019), defined themselves in large part through their opposition to the United States, regularly criticizing and sowing disinformation about the U.S. government, its policies, and its relations with Latin America. Maduro, who was not reelected via free and fair elections, clings to power through the use of force. His policies are marked by authoritarianism, intolerance for dissent, and violent and systematic repression of human rights and fundamental freedoms – including the use of torture, arbitrary detentions, extrajudicial killings, and the holding of more than 400 prisoners of conscience. Maduro has been sanctioned by the Office of Foreign Assets Control, and in 2020 the Department of Justice charged him with offenses related to narco-terrorism and drug trafficking The U.S. Department of State’s Bureau of International Narcotics and Law Enforcement (INL) posted a $15-million reward for information to bring him to justice. The Maduro regime’s irresponsible intervention in the economy has facilitated widespread corruption and stoked hyperinflation leading to negative economic growth and a humanitarian crisis, including food, energy, and water shortages, in a country with the world’s largest proven oil reserves.

“U.S. Assistance to Venezuela

“Through its assistance to the legitimate Guaido Interim Government and democratic organizations within and outside Venezuela, the United States supports the protection of human rights, the promotion of civil society, the strengthening of democratic institutions, and transparency and accountability in the country. From Fiscal Year (FY) 2014 to 2019, the United States has committed approximately $58.6million in bilateral democracy assistance to Venezuela. Assistance to Venezuela is subject to a number of restrictions, including those under Section 706(1) of the Foreign Relations Authorization Act, Fiscal Year 2003 (P.L. 107-228) (the so-called Drug Majors restriction), the Trafficking Victims Protection Act, and restrictions contained in the annual appropriations laws

“Since 2005, the President has determined annually that Venezuela, and more recently the illegitimate Maduro regime, has “failed demonstrably” to adhere to its drug control obligations under international counternarcotics agreements. The President has issued a national interest waiver to enable certain assistance programs vital to the national interests of the United States, such as human rights and civil society programs, to continue.

“Pursuant to Section 40A of the AECA, since 2006 the Department of State has determined annually that Venezuela was “not cooperating fully” with U.S. counterterrorism efforts. Under this provision, defense articles and services may not be sold or licensed for export to Venezuela during the relevant fiscal year.

“U.S. Assistance in Response to the Venezuela Regional Crisis

“The United States is answering Interim President Guaido’s call to help the people of Venezuela cope with severe food, water, energy, and medicine shortages. Since FY 2017, the United States has provided more than $856 million in assistance to support the response to the crisis inside Venezuela and the region, which includes $611 million in humanitarian assistance and $245 million in economic and development assistance. The United States is the single largest donor to the combat the crisis, and supports sixteen countries hosting Venezuelan refugees. USG-provided humanitarian assistance addresses critical life-saving needs, including food and nutrition, water, sanitation, hygiene and health, and temporary shelter. Our development assistance is helping countries throughout Latin America and the Caribbean meet longer term needs, such as education deficits, caused by the man-made regional crisis.

“Bilateral Economic Relations

“Before the United States suspended diplomatic operations in Venezuela, the United States was Venezuela’s largest trading partner. Bilateral trade in goods between both countries reached $3.2 billion in 2019. U.S. goods exports to Venezuela totaled $1.2 billion in 2019. U.S. imports from Venezuela totaled $1.9 billion. U.S. exports to Venezuela have historically included petroleum and refined petroleum products, machinery, organic chemicals, and agricultural products. Crude oil dominated U.S. imports from Venezuela, which was one of the top five suppliers of foreign oil to the United States. In early 2019, imports of Venezuelan crude oil averaged roughly 500,000 barrels per day, but sanctions imposed by the United States have now cut this to zero. Previously, U.S. foreign direct investment in Venezuela was concentrated largely in the petroleum sector, but sanctions, coupled with the poor business environment, have significantly reduced these investment.

“Hyperinflation, state intervention in the economy including expropriations, macroeconomic distortions, physical insecurity, corruption, violations of labor rights, and a volatile regulatory framework make Venezuela an extremely challenging climate for U.S. and multinational companies. A complex foreign exchange system, capital controls, and the lack of dollars, coupled with increasing sanctions from the United States and other countries, have prevented firms from repatriating their earnings out of Venezuela and importing industrial inputs and finished goods into Venezuela. Lack of access to dollars, price controls, and rigid labor regulations have compelled many U.S. and multinational firms to reduce or shut down their Venezuelan operations.

“Since 2017, the United States has made over 300 Venezuelan-related designations, pursuant to various Executive Orders (E.O.), including under the International Emergency Economic Powers Act, and the Foreign Narcotics Kingpin Designation Act. Designations include former President

“Maduro and those involved in public corruption and undermining democracy under E.O. 13692 (Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Venezuela) issued by the President in March 2015 and E.O. 13850 (Blocking Property of Additional Persons Contributing to the Situation in Venezuela) issued by the President in November 2018, each as amended. Since 2017, the Department of Treasury has designated two individuals for involvement in narcotrafficking under the Kingpin Act, including former Vice President (and nominal Minister of Oil) Tareck El Aissami.

“Additionally, E.O. 13850, in conjunction with determinations made by the Secretary of the Treasury, authorizes sanctions against persons determined to be operating in the gold, oil, financial, and defense and security sectors of the Venezuelan economy and was the basis for the January 2019 designation of Venezuelan national oil company Petreoleos de Venezuela, S.A. (PdVSA). The Central Bank of Venezuela is also designated under E.O. 13850.

“On August 5, 2019, the President signed E.O. 13884 which blocks all property and interests in property of the Government of Venezuela that are in the United States or that are within the possession or control of any United States person. In conjunction with E.O. 13884, Treasury also issued or , including those that authorize, among other things, transactions with Guaido and the National Assembly, activities for the official business of certain international organizations, and activities NGOs undertake to support humanitarian projects to meet basic human needs in Venezuela.

“For additional information about the Venezuela sanctions program, please visit the Treasury Department’s Office of Foreign Assets Control (OFAC) website.

“On March 26, 2020, the Department of Justice charged former President Maduro and 14 other current and former Venezuelan officials, including his vice president for the economy, his Minister of Defense, and the Chief Supreme Court Justice with offenses related to narco-terrorism, corruption, and drug trafficking, and other criminal charges.

“Venezuela’s Membership in International Organizations

“Venezuela and the United States belong to a number of the same international organizations, including the United Nations, Organization of American States, International Atomic Energy Agency, International Civil Aviation Organization, International Monetary Fund, Interpol, World Bank, World Trade Organization and Inter-American Development Bank (IDB).

“Venezuela is a founding member of the Organization of the Petroleum Exporting Countries (OPEC), the Bolivarian Alliance for the Peoples of Our America (ALBA), the Community of Latin American and Caribbean States (CELAC), and PetroCaribe. Venezuela is also a member of the Non-Aligned Movement, , the G-15, the G-24, and the G-77. On August 5, 2017 Venezuela was indefinitely suspended from Southern Common Market (Mercosur).

“With the recognition of Juan Guaido as interim President by 57 countries, Venezuela’s participation or representation in some of these organizations has come under debate.

“On April 26, 2017, Maduro announced Venezuela would withdraw from the Organization of American States (OAS), a process that requires two years. This decision was reversed by Interim President Guaido and the National Assembly. On January 10, 2019, the OAS Permanent Council voted not to recognize the second term of former President Nicolas Maduro and on April 9, 2019 the OAS Permanent Council approved a resolution to accept interim President Guaido’s nominee Gustavo Tarre as Venezuela’s representative to the Permanent Council on April 9.

“The interim Guaido government is also an active member of the Lima Group, an important group of likeminded nations founded in 2017 to facilitate regional coordination in the pursuit of a democratic resolution to the Venezuela crisis.

“On March 15, 2019, the IDB approved a resolution recognizing Guaido’s representative, Ricardo Hausmann. The current representative is Alejandro Plaz.

“Bilateral Representation

“On March 12, 2019, the United States suspended embassy operations in Caracas. The United States maintains formal diplomatic relations with Venezuela and the Guaido interim government through its accredited Ambassador to the United States.

“On August 28, 2019, the Department of State announced the opening of the Venezuela Affairs Unit (VAU). The VAU is the interim diplomatic office of the U.S. Government to Venezuela, located at the U.S. Embassy in Bogota, Colombia. It continues the U.S. mission to the legitimate Government of Venezuela and to the Venezuelan people.”

While the Biden Administration is reviewing its approach to Venezuela and some in the Democratic party have questioned the sanction program in terms of effectiveness, the sanctions remain in place as of March 28, 2021. See, e.g., White House Briefing Room, Background Press Call by Senior Administration Officials on Venezuela, March 08, 2021,https://www.whitehouse.gov/briefing-room/press-briefings/2021/03/08/background-press-call-by-senior-administration-officials-on-venezuela/; PBS News Hour, Democrats pressure Biden to review U.S. sanctions on Venezuela, March 23, 2021, https://www.pbs.org/newshour/politics/democrats-pressure-biden-to-review-u-s-sanctions-on-venezuela.

WTO history of the dispute

Venezuela requested consultations with the United States in late December 2018. See UNITED STATES – MEASURES RELATING TO TRADE IN GOODS AND SERVICES, REQUEST FOR CONSULTATIONS BY VENEZUELA (28 December 2018), WT/DS574/1, G/L/1289, S/L/420, 8 January 2019.

The United States refused the request for consultations. Venezuela requested a panel on 14 March 2019. See UNITED STATES – MEASURES RELATING TO TRADE IN GOODS AND SERVICES REQUEST FOR THE ESTABLISHMENT OF A PANEL BY VENEZUELA, WT/DS574/2, 15 March 2019.

The request was included in the draft agenda for the DSB meeting of March 26, 2019. See Dispute Settlement Body, 26 March 2019, Proposed Agenda, WT/DSB/W/641, 22 March 2019 (agenda item 6, “UNITED STATES – MEASURES RELATING TO TRADE IN GOODS AND SERVICES, A. REQUEST FOR THE ESTABLISHMENT OF A PANEL BY VENEZUELA (WT/DS574/2)”).

The U.S. objected to the inclusion of the Venezuelan request on the agenda. No DSB meeting was held on March 26, 2019. Venezuela agreed to withdraw its request, and the DSB meeting was rescheduled for April 26, 2019. See Dispute Settlement Body, 26 April 2019, Proposed Agenda, WT/DSB/W/643, 24 April 2019.

The minutes of the April 26, 2019 DSB meeting included the following statement ahead of the adoption of the agenda.

“Prior to the adoption of the Agenda, the representative of the Bolivarian Republic of Venezuela said that his delegation wished to make a short statement for the record to the effect that Venezuela was not asking to modify the proposed Agenda of the present meeting to request an inclusion of an item. However, Venezuela wished to reserve its right to do so at any future DSB meeting. Subsequently, Japan said that it wished to include on the proposed Agenda an item under “Other Business” regarding its communication contained in Job/DSB/3. The Agenda was adopted as amended. Following the adoption of the Agenda, the representative of Peru, speaking on behalf of Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Honduras, Panama and Paraguay said that the members of the Lima Group supported the functioning of the DSB at the present meeting.
However, their Governments wished to indicate that they did not recognize the legitimacy of Nicolás Maduro’s regime nor that of its representatives. The representative of Venezuela said that the DSB was not the appropriate forum to discuss this matter. The representative of the Russian Federation said that her country supported the legitimate government of Nicolás Maduro and underlined that the WTO was not the appropriate international forum vested with the authority to discuss issues raised by the members of the Lima Group.” Dispute Settlement Body, 26 April 2019, MINUTES OF MEETING HELD, WT/DSB/M/428
25 June 2019, page 1.

March 26, 2021 DSB Meeting

Thus, based on the history of U.S. concerns with the Maduro government in Venezuela, it was hardly surprising that the United States would block inclusion of the request for a panel from the agenda this past Friday. Press accounts report that Peru, Brazil and Colombia supported the U.S. position and that the Russian Federation and Cuba supported Venezuela. See, e.g., Reuters, U.S. blocks Venezuela bid to seek WTO review of sanctions, March 26, 2021, https://www.reuters.com/article/us-trade-wto-usa-venezuela/u-s-blocks-venezuela-bid-to-seek-wto-review-of-sanctions-idUSKBN2BI1ZT.

The EU made a statement at the truncated meeting which is copied below. See Permanent Mission of the European Union to the World Trade Organization (WTO), EU Statement at the Regular meeting of the Dispute Settlement Body (DSB), 26 March 2021, https://eeas.europa.eu/delegations/world-trade-organization-wto/95717/eu-statement-regular-meeting-dispute-settlement-body-dsb-26-march-2021_en.

ADOPTION OF THE AGENDA:

“If the EU understands correctly, the US is not ready to accept this panel request by Venezuela as being valid, as it was submitted by a government which the US no longer recognises as the legitimate government representing Venezuela.

“In fact, in this case, the EU would have expected the US to rely on the security exceptions in Article XXI of the GATT and Article XIVbis of the GATS for justifying any departures from basic GATT and GATS provisions that may lie in the measures taken against Venezuela. 

Indeed, we note that the United States measures at issue appear justified by the security exceptions, so the challenge at issue cannot in any event succeed.

“All this being said, the EU has to react for systemic reasons and express its concern at the prospect of the DSB being prevented from holding its meeting on all items of today’s agenda simply because that agenda is not adopted. 

“There is a longstanding and widely recognised principle that DSB agendas cannot be blocked to the extent that they include items governed by negative consensus. This includes first panel requests (governed by consensus), since they are a necessary pre-condition to a second panel request. This principle is of utmost importance because the binding nature of WTO dispute settlement rests on it. 

“That said, the EU expects this meeting to be suspended now, as a result of the US objection to the agenda adoption. This should allow the Chairperson and the WTO Members most involved to consult in search of a solution. The EU hopes that these efforts will rapidly yield a solution, so that this meeting can continue and the DSB discharge the important duties with which it is entrusted.”

Conclusion

Friday’s events at the Dispute Settlement Body meeting were not surprising once the request for a panel had been filed by Venezuela. What is surprising is the Maduro government’s effort to re-raise a matter that had no possibility of being considered in light of the well understood U.S. position (a position agreed to by many WTO Members).

WTO Members have historically shown an inability to evaluate disputes they pursue from the vantage point of whether the result desired is at all politically possible for the Member whose action is being challenged. Yet pursuing disputes that cannot be resolved through the dispute settlement system is a disservice to the WTO and to the proper functioning of the Dispute Settlement Body. The Maduro government dispute with the United States first and foremost is a question of the legitimacy of the Maduro government and its refusal to transfer power to the interim President. No WTO dispute will help resolve the underlying dispute. Besides the question raised by the United States (blocking requests from entities which are not the true representatives of the people), getting rid of the request properly reflects the political realities of the underlying dispute.

Global vaccinations for COVID-19 — continued supply chain and production issues and a new wave of infections in many countries delay greater ramp up for some until late in the second quarter of 2021

The world has witnessed the unprecedented development of a number of vaccines in record time to deal with the COVID-19 pandemic. The development has been the result of widespread cooperation in sharing information and the funding in part by governments and early orders for hundreds of millions of doses if vaccines proved efficacious and safe. In roughly one year since the virus was declared a pandemic by the WHO, individual vaccines have been produced and authorized by one or more governments (some by as many as 70 along with WHO approval).

According to the Financial Times COVID-19 vaccine tracker, as of March 25, nearly 490 million vaccine shots have been administered around the world (based on data from 166 locations). See Financial Times, Covid-19 vaccine tracker: the global race to vaccinate, 25 March 2021, https://ig.ft.com/coronavirus-vaccine-tracker/?areas=gbr&areas=isr&areas=usa&areas=eue&cumulative=1&populationAdjusted=1. The companies with approved vaccines have been ramping up production at their own and at licensed facilities in other countries. Because companies are racing to put in place 3-4 times the global capacity for all vaccines (3.5 billion doses) to produce COVID-19 vaccines (10-14 billion doses by the end of 2021) and because there are complex supply chains and production processes for the new vaccines, there have been various delays which have occurred both at manufacturers and at suppliers. This has been true in the U.S., in the EU, in India and other producing countries. While countries and producers are working on solutions, shortages of certain materials exist and can reduce production of finished vaccines globally.

While the WHO, GAVI, CEPI and UNICEF have set up COVAX to get vaccines to a total of 192 countries, including 92 low- and middle-income countries where materials will be supplied at discounted prices or for free and have a target of two billion doses to participating countries in 2021, there is an early reliance on AstraZeneca’s vaccine whether produced by AstraZeneca or through license by the Serum Institute (SII) in India, the world’s largest vaccine producer.

Unfortunately, many countries are going through a new wave of COVID-19 infections which puts pressure on governments to secure sufficient supplies to address domestic demand. See, e.g., European Centre for Disease Prevention and Control, COVID-19 situation update worldwide, as of week 11, updated 25 March 2021, https://www.ecdc.europa.eu/en/geographical-distribution-2019-ncov-cases (shows total new reported infections going up globally for the fourth week after a sharp decline after New Year’s). Countries showing large numbers of cases over the last two weeks (whether increases or decreases) include Ethiopia (21,227), Kenya (12,083), Libya (12,852), South Africa (17,646), Argentina (91,023), Brazil (995,861), Canada (48,021), Chile (77,561), Colombia (63,417), Ecuador (18,223), Mexico (66,683), Paraguay (26,252), Peru (98,323), United States (830,346), Uruguay (19,512), Bangladesh (19,938), India (416,683), Indonesia (80,522), Iran (119,383), Iraq (67,344), Jordan (109,594), Lebanon (43,964), Pakistan (38,371), Philippines 969,382), United Arab Emirates (29,506), Austria (39,842), Belgium (50,670), Bulgaria (43,115), Czechia (142,042), Estonia (20211), France (378,370), Germany (162,032), Greece (32,005), Hungary (111,929), Italy (308,890), Moldova (19,82), Netherlands (83,797), Poland (272,046), Romania (70,295), Russian Federation (133,24), Serbia (65,689), Spain (67,833), Sweden (61,666), Turkey (232,705), Ukraine (147,456), United Kingdom (78,063). While many countries do not produce COVID-19 vaccines, the list of countries includes many in the EU as well as Brazil, the United States and India. Brazil’s production of COVID-19 vaccines is not expected to start until May. Below I review developments on vaccination roll-outs in the United States, the European Union and India.

Vaccination roll-out in the U.S., EU and India — three important COVID-19 vaccination production areas

Under the Biden Administration, the United States has drastically improved its performance on COVID-19 vaccinations with 129.3 million vaccinations given by March 24 and with the President announcing his Administration’s revised goal of 200 million shots in arms in his first 100 days in office (April 29). See Financial Times, Biden doubles vaccine goal to 200m in first 100 days, 25 March 2021, https://www.ft.com/content/a1accbdf-0010-426c-9442-feb73b5c8a1d. While the U.S. focus is on getting the U.S. population vaccinated as the first priority, the U.S. has agreed to “loan” 1.5 million doses of AstraZeneca’s vaccine to Canada and 2.5 million doses to Mexico. The U.S., following a leader’s remote meeting of the Quad (U.S., Japan, India, Australia), agreed to work with the other Quad partners to produce one billion doses in India of a vaccine by the end of 2022 from a U.S. company that would be paid for by Japan and the U.S. and would receive distribution support from Australia for countries in the Indo-Pacific region. See March 12, 2021, COVID-19 vaccines – U.S., Japan, India and Australia agree to one billion doses for Indo-Pacific countries, https://currentthoughtsontrade.com/2021/03/12/covid-19-vaccines-u-s-japan-india-and-australia-agree-to-one-billion-doses-for-indo-pacific-countries/.

The European Union, a major producing location for COVID-19 vaccines and various inputs and a major exporter, has had rollout problems flowing from production problems at AstraZeneca’s EU facilities, concerns by many EU members on whether the vaccine from AstraZeneca was safe (small number of blot clot problems in those vaccinated) and other issues. See New York Times, Where Europe Went Wrong in Its Vaccine Rollout, and Why, March 20, 2021, https://www.nytimes.com/2021/03/20/world/europe/europe-vaccine-rollout-astrazeneca.html; Financial Times, Nordic nations hold off on AstraZeneca jab as scientists probe safety, 21 March 2021, https://www.ft.com/content/0ef3a623-f3a2-4e76-afbd-94a915b24ad5. With vaccination rates in the EU far behind the U.K. and the U.S. and a number of other countries, this has led to significant internal pressures to ensure that manufacturers were honoring contracts with the EU and has led to two temporary regulations (and an extension) giving EU members authority to stop exports outside of the EU (and excluding the shipments to COVAX low-and middle-income countries). See March 5, 2021, COVID-19 vaccines — France supports Italy’s blockage of a shipment to Australia; while Australia has asked the EU to permit the shipment, Australia will have its own production of AstraZeneca product by the end of March, https://currentthoughtsontrade.com/2021/03/05/covid-19-vaccines-france-supports-italys-blockage-of-a-shipment-to-australia-while-australia-has-asked-the-eu-to-permit-the-shipment-australia-will-have-its-own-production-of-astrazeneca-produc/; European Commission, Commission strengthens transparency and authorisation mechanism for exports of COVID-19 vaccines, 24 March 2021, https://ec.europa.eu/commission/presscorner/detail/en/ip_21_1352; European Commission, 24.3.2021 C(2021) 2081 final COMMISSION IMPLEMENTING REGULATION (EU) …/… of 24.3.2021, https://ec.europa.eu/commission/presscorner/detail/en/ip_21_1352; European Commission, Commission extends transparency and authorisation mechanism for exports of COVID-19 vaccines, 11 March 2021, https://ec.europa.eu/commission/presscorner/detail/en/IP_21_1121. Australia had a shipment stopped by Italy and the EC has been raising concerns in the United Kingdom.

In recent days, Indian producer Serum Institute has notified a number of customers that their orders would be delayed several months. GAVI COVAX has been notified as well, with 40 million doses in April and 50 million in May apparently unlikely to ship. Press articles attribute the delays to the needs within India, though SII has suggested delays are also due to availability issues on certain inputs. The Indian government claims it is simply adjusting schedules in light of internal needs and is not imposing an export ban per se. See, e.g., BBC News, India coronavirus: Why have vaccine exports been suspended?, 25 March 2021, https://www.bbc.com/news/world-asia-india-55571793; Wall Street Journal, India Suspends Covid-19 Vaccine Exports to Focus on Domestic Immunization, March 25, 2021, https://www.wsj.com/articles/india-suspends-covid-19-vaccine-exports-to-focus-on-domestic-immunization-11616690859#:~:text=An%20Indian%20government%20official%20said,of%20the%20government’s%20vaccine%20program.&text=On%20Tuesday%2C%20the%20government%20said,to%20those%20older%20than%2045; Times of India, India has not banned Covid-19 vaccine exports, 25 March 2021, https://timesofindia.indiatimes.com/india/india-has-not-banned-covid-19-vaccine-exports-sources/articleshow/81693010.cms.

Conclusion

Much of the anticipated ramp up of COVID-19 vaccine production will be happening over the coming months, such that there should be dramatically greater vaccine availability in the coming months. That doesn’t help governments or populations waiting for vaccines. or that are going through a significant ramp up in infections. The pharmaceutical industry and major groups got together earlier this month to explore where the bottlenecks are in ramping up production. See March 12, 2021, The 8-9 March  “Global C19 Vaccine Supply Chain and Manufacturing Summit”, https://currentthoughtsontrade.com/2021/03/12/the-8-9-march-global-c19-vaccine-supply-chain-and-manufacturing-summit-efforts-to-ramp-up-production/ It is unclear the extent to which governments and industry are working together to solve bottlenecks in supply, to facilitate production ramp up, share experiences in reusing safely some critical materials that are in short supply, etc. During these critical months, greater cooperation in solving problems and facilitating expansion of production is needed and hopefully is occurring. Export restrictions have and will occur under various guises, reflecting internal political pressures. In the coming months and certainly by the third quarter of 2021, there should be large volumes of vaccine doses above and beyond what has been contracted by COVAX that will be available for use around the world. Time is obviously of the essence. Cooperation to solve supply chain bottlenecks and speed ramp-ups is the best short term option for speeding getting past the pandemic globally.

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WTO reform — trade and environment issues to be examined should include addressing ocean/sea trawling effects on carbon capture/release

While the WTO has had a Trade and Environment Committee since 1995 and interest on the intersection between trade and environment predates the formation of the WTO (i.e., back in the GATT), there has been renewed calls by many Members for increased activity in the WTO on trade and environment issue as part of the future agenda. The WTO provides a short history of WTO involvement in the area. See WTO, Trade and Environment, https://www.wto.org/english/tratop_e/envir_e/envir_e.htm.

Ongoing talks on fisheries subsidies are aimed at helping make fishing sustainable and meeting one of the UN Sustainable Development Goals (SDG 14.6). See, e.g., WTO, Civil society call for fishing subsidies deal welcomed by Dr Ngozi and negotiations chair, 3 March 2021, https://www.wto.org/english/news_e/news21_e/fish_01mar21_e.htm. There is interest in addressing plastics in the oceans (circular economy issues) and for some, an interest in restarting the Environmental Goods Agreement negotiations. See WTO, Role of trade in promoting circular economy highlighted at WTO Environment Week, 27 November 2019, https://www.wto.org/english/news_e/news19_e/envir_03dec19_e.htm; WTO, Plastic waste, ‘blue economy’ among issues taken up at trade and environment committee, 28 November 2018, https://www.wto.org/english/news_e/news18_e/envir_30nov18_e.htm.

In a New York Times article from Wednesday, there is interesting information on the effects of fish trawling on carbon release. See New York Times, Trawling for Fish May Unleash as Much Carbon as Air Travel, Study Says, March 1, 2021, https://www.nytimes.com/2021/03/17/climate/climate-change-oceans.html. The opening sentences of the article reads, “For the first time, scientists have calculated how much planet-warming carbon dioxide is released into the ocean by bottom trawling, the practice of dragging enormous nets along the ocean floor to catch shrimp, whiting, cod and other fish. The answer: As much as global aviation releases into the air.” The study referenced is an article that was published online by Nature on 17 March 2021 by 26 authors entitled “Protecting the global ocean for biodiversity, food and climate.” https://www.nature.com/articles/s41586-021-03371-z. The New York Times article notes that the study estimated that 1.9 million square miles of the sea floor is scraped every year which can release the carbon that is stored in the sea floor and that would remain captured for thousands of years if left undisturbed. The NYT article continues, “The carbon released from the sea floor leads to more acidified water, threatening marine life, and reduces the oceans’ capacity to absorb atmospheric carbon dioxide. China, Russia, Italy, the United Kingdom and Denmark lead the world in such trawling emissions.”

While carbon release from fish trawling is not presently part of the ongoing negotiations on fisheries subsidies nor a topic being discussed within the Committee on Trade and Environment (at least that I have seen), it would seem to be a topic that could meaningfully be examined within the WTO in an effort to have trade be sustainable and contribute to reducing carbon emissions. Some possible approaches within the WTO or by individual WTO Members could include identifying less environmentally damaging approaches (sharing experiences, best practices), potential negotiations to terminate or phase out such practices, review of such practices in trade policy reviews, inclusion within any carbon border adjustment plan adopted by Members.

Addressing the topic would appear to be an important opportunity to promote sustainable development as the world deals with and comes out of the pandemic. Let’s hope Members take an ambitious approach to the role the WTO can play on sustainable development.

Biden Administration should join the Joint Statement Initiatives that it is not presently party to

President Biden has made it clear that his Administration will work within multilateral organizations to the extent possible to move the U.S. agenda forward. During the Trump Administration, the U.S. participated actively in the World Trade Organization but was active in only one of the Joint Statement Initiatives that were initiated at the end of the Buenos Aires Ministerial Conference in late 2017.

Thus, the United States is an active participant in the ongoing negotiations following the Joint Statement on Electronic Commerce (WT/MIN(17)/60, 13 December 2017), but is not a party to the other Joint Statement Initiatives. See Joint Ministerial Statement on Services Domestic Regulation (WT/MIN(17)/61, 13 December 2017); Joint Ministerial Statement on Investment Facilitation for Development (WT/MIN(17)/59, 13 December 2017); Joint Ministerial Statement, Declaration on the Establishment of a WTO Informal Work Programme for MSMEs (WT/MIN(17)/58, 13 December 2017); Joint Declaration on Trade and Women’s Economic Empowerment on the Occasion of the WTO Ministerial Conference in Buenos Aires in December 2017.

While India and South Africa have challenged the legitimacy of the Joint Statement Initiatives (JSIs), a great deal of the energy in the WTO in the last several years has been put into the JSIs. See, e.g., 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/; WTO, Coordinators of joint initiatives cite substantial progress in discussions, 18 December 2020, https://www.wto.org/english/news_e/news20_e/jsec_18dec20_e.htm. The WTO press release is copied below.

“The coordinators of the joint initiatives on e-commerce, investment facilitation, services domestic regulation and micro, small and medium-sized enterprises (MSMEs) said on 18 December that substantial progress has been achieved in their respective discussions and that they are on track to deliver concrete results or additional progress at the WTO’s 12th Ministerial Conference (MC12) scheduled for next year.

“In their communication, the coordinators noted that they have delivered summary statements to WTO members outlining how far the four initiatives have advanced since they were launched three years ago, where they stand today, and what their next steps in the discussions will be.

“’What these statements clearly show is the substantial progress [of the initiatives] in a short period of time, that they are on track to delivering concrete results or progress at MC12, and that they are contributing to building a more responsive, relevant and modern WTO — which will be critical to restoring global trade and economic growth in the wake of the COVID-19 crisis.’

“’These initiatives have grown into an increasingly important part of the agenda of the WTO, with an expanding number of participants from both the developed and developing worlds that account for a significant part of the WTO’s membership, and based on the principles of openness, transparency and inclusiveness,’ the coordinators added.

“The new joint initiatives were launched at the WTO’s 11th Ministerial Conference in Buenos Aires in December 2017 with the aim of commencing negotiations or discussions on issues of increasing relevance to the world trading system.

“The joint initiative coordinators are Ambassador José Luis Cancela Gómez (Uruguay) for the Informal Working Group on MSMEs; Ambassadors George Mina (Australia), Yamazaki Kazuyuki (Japan) and Tan Hung Seng (Singapore) for the Joint Statement Initiative on E-Commerce; Deputy Permanent Representative Jaime Coghi Arias (Costa Rica) for the Joint Statement Initiative on Services Domestic Regulation; and Ambassador-designate Mathias Francke (Chile) for the Structured Discussions on Investment Facilitation for Development.

“The coordinators noted that the consolidated negotiating text on e-commerce will provide a foundation for intensified negotiations in 2021. They highlighted that the negotiations on services domestic regulation are at a ‘mature stage’, with a genuine potential for an outcome by MC12.

“The coordinators also said that substantive provisions of an investment facilitation agreement are being negotiated by the participating members in this initiative. In addition, they noted the recent announcement by the Informal Working Group on MSMEs of a package of declarations and recommendations to help small business trade internationally.

“The coordinators underscored that the shared and ultimate goal of these initiatives is to strengthen and reinforce the multilateral trading system, that they are open to all WTO members, and that they seek the participation of as many members as possible.

“The coordinators stated: ‘The initiatives on e-commerce, investment facilitation, services domestic regulation, and MSMEs clearly demonstrate that the WTO can respond to new economic and technological challenges in a flexible, pragmatic, and timely way. These initiatives — and their innovative approach to cooperation and negotiation — can provide a valuable illustration of WTO reform in action.’”

While the Joint Declaration Trade and Women’s Economic Empowerment on the Occasion of the WTO Ministerial Conference in Buenos Aires in December 2017 is not treated as a JSI, it does have many Members supporting the Declaration and engaging in the informal work programme.

Some of the other countries participating in all of the JSIs and Joint Declaration

While the number of WTO Members participating in the JSIs and supporting the Joint Declaration vary, the following is a partial list of Members who are signatories to all of the JSIs and the Joint Declaration. Other than the Electronic Commerce initiative, the U.S. is presently not a signatory or participant in any of the other JSIs or Joint Declaration.

Argentina, Australia, Brazil, Canada, Chile, China, Colombia, European Union, Japan, Korea, Mexico, New Zealand, Russian Federation, Switzerland are participants in all of the JSIs and supportive of the Joint Declaration. Dozens of other Members are participating in some or many of the JSI’s that the U.S. is not presently supporting or active in.

Conclusion

While the United States has a large agenda of issues it wishes to address at the WTO (including trade and the environment, WTO reform, industrial subsidies), it makes no sense that the United States would not actively participate in work programs where most of the major economies are active and where new rules will be relevant to areas of significance for the United States as well as for trading partners. While the work program on women and trade is in an informal working group, President Biden has made empowerment of women an important priority for his Administration as a range of actions during International Women’s Day made clear. See, e.g., March 8, 2011, March 8, 2021, International Women’s Day — statements of UN Women Executive Director,  heads of WTO, UNCTAD and International Trade Centre, and U.S. Executive Orders and Statement by President Biden, https://currentthoughtsontrade.com/2021/03/08/march-8-2021-international-womens-day-statements-of-un-women-executive-director-heads-of-wto-unctad-and-international-trade-centre-and-u-s-executive-orders-and-statement-by-president-biden/. Similarly, MSMEs are an important part of the U.S. economy and a major driver of economic growth. The U.S. has a very strong services sector which has an interest in domestic regulatory issues both in the U.S. and as addressed overseas. Finally, the U.S. is both a major investor in foreign countries and a recipient of large amounts of foreign investment and has a significant interest in helping the global community address issues involved in investment in developing and least developed countries on a more predictable basis.

Hopefully, the Biden Administration when its USTR nominee is confirmed in the coming days, will opt to engage in all of the JSIs. It is time.

COVAX’s efforts to distribute COVID-19 vaccines to low- and middle income countries — additional momentum from G-7 virtual meeting

With the COVID-19 pandemic affecting populations around the world with more than 110 million people having been infected and with more than 2.4 million deaths, the world is anxiously awaiting vaccines to permit vaccinations for vulnerable populations. The Coalition for Epidemic Preparedness Innovations (CEPI), Gavi, the Vaccine Alliance (Gavi) and the World Health Organization (WHO) are co-leads of the COVAX initiative which seeks to provide equitable global access to COVID-19 vaccines. More than 2 billion vaccine doses have been or are being contracted to supply to 92 low- and middle-income countries as well as other countries who have agreed to buy vaccines through COVAX.

The World Health Organization’s Director-General Dr Tedros Adhanom Ghebreyesus has expressed concern about “vaccine nationalism” as large and wealthier countries have contracted for large amounts of vaccines. In a joint statement with the UNICEF Executive Director on February 10, the WHO DG laid out what is needed in 2021 to achieve vaccine equitable distribution. See In the COVID-19 vaccine race, we either win together or lose together, Joint statement by UNICEF Executive Director Henrietta Fore and WHO Director-General Dr. Tedros Adhanom Ghebreyesus, 10 February 2021, https://www.who.int/news/item/10-02-2021-in-the-covid-19-vaccine-race-we-either-win-together-or-lose-together. The joint statement is embedded below.

In-the-COVID-19-vaccine-race-we-either-win-together-or-lose-together

The problem of vaccine availability can be traced to a number of sources including the inability to predict which development efforts would succeed, efforts by governments to support development through funding and advance contracts which do not always support the early vaccine successes, challenges of approval processes in different countries and more. However, it is clear that in the early days of the vaccine rollout, a handful of countries have been able to obtain the largest amount of vaccine doses and to provide vaccinations to citizens. For example, the Financial Times has an update of its “Covid-19 vaccine tracker: the global race to vaccinate” published today (February 19) that looks at data for 99 countries or territories where vaccinations are reported through mid-February. Of a global total of 194.4 million vaccinations, 91.6% are reported by the following 10 countries or groups of countries: United States, 57.2 million; China 40.5 million; European Union, 24.7 million; United Kingdom, 17.0 million; India, 10.2 million; Israel, 7.1 million; Brazil 6.2 million; Turkey, 5.9 million; United Arab Emirates, 5.4 million; Russian Federation, 3.9 million. Of the 99 countries or territories, 24 reported vaccinations of at least 10/100 residents, an additional 30 reported vaccinations of at least 5.0-9.9/100 residents and an additional 10 reported vaccinations of at least 3.0-4.9/100. Gavi views 3% as the percent of population needed to be vaccinated to address health care workers. See Financial Times, Covid-19 vaccine tracker: the global race to vaccinate, February 19, 2021, https://ig.ft.com/coronavirus-vaccine-tracker/?areas=gbr&areas=usa&areas=eue&areas=ind&cumulative=1&populationAdjusted=0

At today’s G-7 virtual meeting, there were new pledges from G-7 countries to contribute to COVAX to permit the purchase of vaccine doses contracted and with some countries agreeing to share surplus vaccine doses with the world’s poorest countries. The Gavi press release of today is embedded below.

G7-backs-Gavis-COVAX-Advance-Market-Commitment-to-boost-COVID-19-vaccines-in-worlds-poorest-countries-_-Gavi-the-Vaccine-Alliance

In the December 2020 stimulus package, Congress authorized some funding for COVAX. President Biden outlined the U.S. contributions in a Fact Sheet posted on the White House webpage yesterday and at the G-7 virtual meeting today. See White House, Fact Sheet: President Biden to Take Action on Global health through Support of COVAX and Calling for Health Security Financing, February 18, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/02/18/fact-sheet-president-biden-to-take-action-on-global-health-through-support-of-covax-and-calling-for-health-security-financing/; New York Times, Biden Declares ‘America is Back’ on International Stage: Live Updates, February 19, 2021, https://www.nytimes.com/live/2021/02/19/world/g7-meeting-munich-security-conference#global-leaders-chart-a-new-course-in-post-trump-era. The fact sheet is embedded below and reports the U.S. will be contributing $2.0 billion quickly and $2.0 billion more over the remainder of 2021 and 2022.

Fact-Sheet_-President-Biden-to-Take-Action-on-Global-Health-through-Support-of-COVAX-and-Calling-for-Health-Security-Financing-_-The-White-House

Conclusion

Much of the activity at the WTO over the last year has focused on the trade challenges flowing from the COVID-19 pandemic. Trade restrictions on exports of medical goods and agricultural goods have been tracked with various efforts to minimize scope and duration. Efforts at expediting the movement of medical goods and agricultural products have also been pursued, and debates have occurred on whether TRIPS rights should be waived during the pandemic to improve access to medical goods during the pandemic. Most advanced countries with pharmaceutical producers have argued that there are sufficient flexibilities within the WTO TRIPS Agreement to handle the current challenges. At the same time over recent years there have been efforts through the WHO, CEPI and GAVI and with the assistance of UNICEF to provide the infrastructure to permit collective purchasing of vaccines and other medical goods and the collection of funds to permit assisting low- and middle-income countries in terms of vaccine availability. COVID-19 is a truly global pandemic. The pressure on governments to find solutions is obviously enormous. Actions like those by the G-7 today and by other governments, NGOs and others to address the COVID-19 challenge are along the lines of what is needed to have more equitable distribution of vaccines. As the UN and WHO keep saying, no one is safe until all are safe.

The challenges for COVAX are huge and the goal for 2021 is to get 20% of the populations part of the program vaccinated. Developed countries and others able to do so need to continue to cooperate to see that these goals for 2021 are met and that further help is available moving into 2022. A study commissioned by the ICC estimates the global costs of not moving quickly to get all people in the world vaccinated at being more than $8 trillion — a figure that dwarfs the costs to get the vaccines produced, distributed and shots given. Hopefully, the world will cooperate and do what is needed to see that all countries can recover from the current pandemic in a timely manner.

Early trade action by Biden Administration — reinstating aluminum duties on imports from the United Arab Emirates

On February 1, 2021, President Biden revoked an action by the Trump Administration on aluminum products from the United Arab Emirates (UAE). The UAE’s exports of aluminum had been subject to additional duties as a result of an investigation of global imports of aluminum under Section 232 of the Trade Expansion Act of 1962, as amended, where the Secretary of Commerce found that imports were a threat to national security and President Trump had imposed additional duties of 10%. Countries with security relationships with the United States were able to seek alternative approaches to addressing U.S. concerns.

The United States and the UAE have a security relationship of importance to the U.S. Specifically, the United States had worked with the UAE in its efforts to secure greater recognition for the state of Israel. The Abraham Accords Peace Agreement: Treaty of Peace, Diplomatic Relations and Full Normalization Between the United Arab Emirates and the State of Israel was agreed by the UAE and Israel on August 13, 2020, signed at the White House on September 15, 2020 and ratified by the two governments in mid-October 2020.

Shortly before leaving office, on January 19, 2021, President Trump through Proclamation 10139 indicated that tariffs would be lifted on imports of aluminum from the UAE with an effective date of 12:01 a.m. on February 3, 2021. In their place, quotas at “historic levels” were agreed to on aluminum exports to the U.S. from the UAE. The Trump Proclamation is found at 86 FR 6,825-31 (January 25, 2021) and is embedded below.

2021-01711

By proclamation on February 1, 2021, President Biden revoked President Trump’s Proclamation 10139. The discussion contained in President Biden’s Proclamation indicates that his Administration views Section 232 as an important tool, that the aluminum industry is critical to U.S. national security and that the tariffs that were imposed on aluminum were having the desired effect prior to the pandemic and were worth maintaining. The Biden Proclamation is reproduced below. While it is not yet published in the Federal Register, the Proclamation can be found on the White House website in the briefing room. See A Proclamation on Adjusting Imports of Aluminum Into the United States, February 1, 2021, https://www.whitehouse.gov/briefing-room/presidential-actions/2021/02/01/a-proclamation-on-adjusting-imports-of-aluminum-into-the-united-states/.

BRIEFING ROOM

A Proclamation on Adjusting Imports of Aluminum Into the United States

FEBRUARY 01, 2021 • PRESIDENTIAL ACTIONS

ADJUSTING IMPORTS OF ALUMINUM INTO THE UNITED STATES

BY THE PRESIDENT OF THE UNITED STATES OF AMERICA

A PROCLAMATION

  1. Proclamation 10139 of January 19, 2021 (Adjusting Imports of Aluminum Into the United States), amended Proclamation 9704 (Adjusting Imports of Aluminum Into the United States), as amended, with respect to tariffs on certain imports of aluminum articles proclaimed under section 232 of the Trade Expansion Act, as amended (19 U.S.C. 1862). Proclamation 10139 provides that those amendments will not take effect until 12:01 a.m. on February 3, 2021.
  2. I consider it is necessary and appropriate in light of our national security interests to maintain, at this time, the tariff treatment applied to aluminum article imports from the United Arab Emirates (UAE) under Proclamation 9704, as amended, as they are currently in effect as of this date. Accordingly, and as provided for in clause (6) of Proclamation 10139, I am terminating the modifications contained in that proclamation before they take effect.
  3. Proclamation 9704 applied tariffs to help ensure the economic viability of the domestic aluminum industry — an industry that the Secretary of Commerce had previously identified as essential to our critical industries and national defense. Because robust domestic aluminum production capacity is essential to meet our current and future national security needs, Proclamation 9704 aimed to revive idled aluminum facilities, open closed smelters and mills, preserve necessary skills, and maintain or increase domestic production by reducing United States reliance on foreign producers.
  4. In my view, the available evidence indicates that imports from the UAE may still displace domestic production, and thereby threaten to impair our national security. Proclamation 9704 authorized the Secretary of Commerce to grant exclusions from the aluminum tariffs based on specific national security considerations or if specific imported aluminum articles were determined not to be produced sufficiently in the United States, such that the imports would not diminish domestic production. Tellingly, there have been 33 such exclusion requests for aluminum imported from the UAE, covering 587,007 metric tons of articles, and the Secretary of Commerce has denied 32 of those requests, covering 582,007 metric tons. This indicates the large degree of overlap between imports from the UAE and what our domestic industry is capable of producing.
  5. Since the tariff on aluminum imports was imposed, such imports substantially decreased, including a 25 percent reduction from the UAE, and domestic aluminum production increased by 22 percent through 2019, before the coronavirus pandemic began. In light of that history, I believe that maintaining the tariff is likely to be more effective in protecting our national security than the untested quota described in Proclamation 10139.
  6. Section 232 of the Trade Expansion Act of 1962, as amended, authorizes the President to adjust the imports of an article and its derivatives that are being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.
  7. Section 604 of the Trade Act of 1974, as amended (19 U.S.C. 2483), authorizes the President to embody in the Harmonized Tariff Schedule of the United States the substance of statutes affecting import treatment, and actions thereunder, including the removal, modification, continuance, or imposition of any rate of duty or other import restriction.
    Now, Therefore, I, Joseph R. Biden Jr., President of the United States of America, by the authority vested in me by the Constitution and the laws of the United States of America, including section 232 of the Trade Expansion Act of 1962, as amended, section 301 of title 3, United States Code, and section 604 of the Trade Act of 1974, as amended, do hereby proclaim that Proclamation 10139, including the Annex, is revoked.
    IN WITNESS WHEREOF, I have hereunto set my hand this
    first day of February, in the year of our Lord two thousand twenty-one, and of the Independence of the United States of America the two hundred and forty-fifth.

JOSEPH R. BIDEN JR.

___________________________________________________________

Pending WTO disputes; UAE does not have a pending dispute with the U.S.

While China, India, the European Union, Norway, the Russian Federation, Switzerland and Turkey all have ongoing panel proceedings at the WTO challenging the U.S. imposition of duties on steel and aluminum pursuant to Section 232 investigations, the UAE is not a country that has filed a request for consultations on the additional duties on aluminum on its exports to the United States. See WT/DSB 544 (China), WT/DSB547 (India), WT/DSB/548 (European Union), WT/DSB/552 (Norway), WT/DS554 (Russian Federation), WT/DS556 (Switzerland) and WT/DS564 (Turkey); challenges by Canada and Mexico were withdrawn after agreement with the United States (WT/DS550 (Canada) and WT/DS551 (Mexico). The panel reports were to go to parties in the fall of 2020 and released to the public once translations into the official languages was accomplished. But no report has been released to date. With the impasse on the Appellate Body, it is unclear if the Biden Administration will opt to file appeals should the panel reports not recognize the U.S. national security concerns. Thus, absent a decision by the Biden team, should it lose the WTO cases and not appeal, to eliminate the additional duties on imports from all countries, the UAE’s exports will continue to face the additional 10% duties for the foreseeable future.

Broader interest in Biden Administration approach to Section 232

A recent article in Politico reviews contact by the EU with the Biden team last week seeking an immediate end to tariffs on imports from the EU of both steel and aluminum with a corresponding withdrawal of EU retaliatory tariffs if accomplished. As noted in the Politico article, the tariffs are supported by steel producers, unions (e.g., the USW has many workers in both the steel and aluminum industries) and the primary aluminum producers. Politico, Biden, in first trade move, reimposes a Trump tariff, February 1, 2021, https://www.politico.com/news/2021/02/01/biden-aluminum-tariff-uae-464794.

Conclusion

It is unlikely that the U.S. will agree to withdraw the 232 duties at the present time. The Biden team doesn’t have its trade people in place; there are pending WTO disputes; the underlying problems of global excess capacity in both steel and aluminum continue on with no resolution in sight. The main driver of the excess capacity has been China (though others have contributed). There are no WTO rules that permit effective addressing of such problems, and China has largely ignored calls by its trading partners to address the problem in a meaningful manner.

Still the reversal of President Trump’s January 19, 2021 Proclamation is an interesting first step in the trade arena by the Biden Administration to emphasize that restoring economic health to the U.S. economy is an important component of his starting game plan (along with meaningfully addressing the pandemic). Trade issues will likely be seen through that prism even as the U.S. works within multilateral organizations and with allies on a host of issues of common interest and concern.

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

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

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

Virtual Informal WTO Ministerial Gathering, 29 January 2021

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“- facilitate rule-making with wide participation,

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

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

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

“Thank you.”

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

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

U.S. perspective

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

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

WTO and the World Food Programme — action by 79 Members after a failed December effort at the General Council

The WTO issued a press release on Jnauary 21, 2021 entitled “Group of members issue joint pledge on humanitarian food purchases”. https://www.wto.org/english/news_e/news21_e/agri_21jan21_e.htm. As the press release notes,

“A group of nearly 80 WTO members issued a joint statement on 21 January pledging not to impose export restrictions on foodstuffs purchased by the UN’s World Food Programme (WFP) for humanitarian aid.

“’We recognize the critical humanitarian support provided by the World Food Programme, made more urgent in light of the COVID-19 pandemic and other crises,’ the group said in their statement, available here. ‘We therefore commit to not impose export prohibitions or restrictions on foodstuffs purchased for non-commercial humanitarian purposes by the World Food Programme.’

“Discussions regarding export restrictions on food purchases by the WFP have been taking place in the WTO’s Committee on Agriculture in Special Session as well as the General Council.

“The WFP is the United Nations agency charged with delivering food assistance in emergencies and combatting hunger.”

The submission by the 79 WTO Members is embedded below (WT/L/1109).

1109-1

While the pledge by the 79 WTO Members is a significant event, the fact that the full WTO membership was not willing at the December 2020 General Council meeting to commit to such action is problematic and a reflection of the inability of WTO Members to come together on a broad array of issues. This has reduced the relevance of the WTO as a negotiating forum and prevented the updating of multilateral rules. It has led to a proliferation of free trade agreements and actions outside of the WTO. Considering the role that the World Food Programme plays and the list of beneficiaries, it is also quite extraordinary that there wasn’t an agreed General Council Decision adopted in December.

The UN World Food Programme

The UN’s World Food Programme (“WFP”) has for fifty years supplied food to those in need around the world. Consider the overview from the WFP’s webpage, https://www.wfp.org/overview (emphasis in original).

“The World Food Programme (WFP) is the leading humanitarian organization saving lives and changing lives, delivering food assistance in emergencies and working with communities to improve nutrition and build resilience

“As the international community has committed to end hunger, achieve food security and improved nutrition by 2030one in nine people worldwide still do not have enough to eat. Food and food-related assistance lie at the heart of the struggle to break the cycle of hunger and poverty. 

“For its efforts to combat hunger, for its contribution to bettering conditions for peace in conflict-affected areas and for acting as a driving force in efforts to prevent the use of hunger as a weapon of war and conflict, WFP was awarded the Nobel Peace Prize in 2020

“In 2019, WFP assisted 97 million people – the largest number since 2012 –  in 88 countries. 

“On any given day, WFP has 5,600 trucks, 30 ships and nearly 100 planes on the move, delivering food and other assistance to those in most need. Every year, we distribute more than 15 billion rations at an estimated average cost per ration of US$ 0.61. These numbers lie at the roots of WFP’s unparalleled reputation as an emergency responder, one that gets the job done quickly at scale in the most difficult environments.

“WFP’s efforts focus on emergency assistancerelief and rehabilitationdevelopment aid and special operationsTwo-thirds of our work is in conflict-affected countries where people are three times more likely to be undernourished than those living in countries without conflict. 

“In emergencies, WFP is often first on the scene, providing food assistance to the victims of war, civil conflict, drought, floods, earthquakes, hurricanes, crop failures and natural disasters. When the emergency subsides, WFP helps communities rebuild shattered lives and livelihoods. We also work to strengthen the resilience of people and communities affected by protracted crises by applying a development lens in our humanitarian response.

“WFP development projects focus on nutrition, especially for mothers and children, addressing malnutrition from the earliest stages through programmes targeting the first 1,000 days from conception to a child’s second birthday, and later through school meals.

“WFP is the largest humanitarian organisation implementing school feeding programmes worldwide and has been doing so for over 50 years. In 2019, WFP provided school meals to more than 17.3 million children in 50 countries, often in the hardest-to-reach areas.

“In 2019, WFP provided 4,2 million metric tons of food and US$2.1 billion of cash and vouchers. By buying food as close as possible to where it is needed, we can save time and money on transport costs, and help sustain local economies. Increasingly, WFP meets people’s food needs through cash-based transfers that allow the people we serve to choose and shop for their own food locally.

“WFP also provides services to the entire humanitarian community, including passenger air transportation through the UN Humanitarian Air Service, which flies to more than 280 locations worldwide.

Funded entirely by voluntary donations, WFP raised a record-breaking US$8 billion in 2019. WFP has 20,000 staff worldwide of whom over 90 percent are based in the countries where the agency provides assistance.

“WFP is governed by a 36-member Executive Board. It works closely with its two Rome-based sister organizations, the Food and Agriculture Organization of the United Nations and the International Fund for Agricultural Development. WFP partners with more than 1,000 national and international NGOs to provide food assistance and tackle the underlying causes of hunger.”

The countries in which WFP provides assistance are shown in the list from the WFP webpage, https://www.wfp.org/countries, and include many important trading countries like China, India, Indonesia, Pakistan and many more in Africa, the Middle East, Asia, Central and South America. Beneficiary countries include the following:

Afghanistan, Algeria, Angola, Armenia, Bangladesh, Benin, Bhutan, Bolivia (Plurinational State of), Burkina Faso, Burundi, Cambodia, Cameroon, Central African Republic, Chad, China, Colombia, Congo, Côte d’Ivoire, Cuba, Democratic People’s Republic of Korea, Democratic Republic of the Congo, Djibouti, Dominican Republic, Ecuador, Egypt, El Salvador, Eswatini, Ethiopia, Gambia, Ghana, Guatemala, Guinea, Guinea-Bissau, Haiti, Honduras, India, Indonesia, Iran (Islamic Republic of), Iraq, Jordan, Kenya, Kyrgyzstan, Lao People’s Democratic Republic, Lebanon, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Namibia, Nepal, Nicaragua, Niger, Nigeria, Pakistan, Palestine, Peru, Philippines, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, South Sudan, Sri Lanka, Sudan, Syrian Arab Republic, Tajikistan, Tanzania, The Caribbean, The Pacific, Timor-Leste, Togo, Tunisia, Turkey, Uganda, Yemen, Zambia, Zimbabwe.

The December 2020 General Council meeting and proposed General Council Decision

During the December 2020 General Council meeting, there was an effort to adopt a General Council Decision entitled “PROPOSAL ON AGRICULTURE EXPORT PROHIBITIONS OR RESTRICTIONS RELATING TO THE WORLD FOOD PROGRAMME DRAFT GENERAL COUNCIL DECISION,” WT/GC/W/810, TN/AG/46 (4 December 2020). The draft document was modified three times to add cosponsors. WT/GC/W/810/Rev.1, Rev.2, Rev.3. Concerns were raised by India, Pakistan and some African countries (from the above list, at least India and Pakistan and most, if not all others, were beneficiaries of assistance from the the WFP). Hence there was no agreement on adopting the draft General Council Decision. See Washington Trade Daily, December 16, 2020, pages 3-4, WTO Members Talk Food Procurement, https://files.constantcontact.com/ef5f8ffe501/1b51b4fa-b0a3-4a60-9165-8c5f6d7977a4.pdf; Washington Trade Daily, December 18, 2020, pages 5-6, India Questions WFP Exemption, https://files.constantcontact.com/ef5f8ffe501/ec47c599-5c0c-47fd-80cf-a46244c5af8b.pdf.

While WTO Members always have multiple concerns and agenda items being pursued, the failure of the membership as a whole to agree to something so limited in nature and so critical for addressing global hunger was disappointing to many and reflects the seeming inability of the WTO Membership to move forward as one on the vast majority of issues before the WTO.

Conclusion

In a post earlier this month, I argued for the need for the WTO to move to liberalization by the willing without benefits for non-participants but with agreements open to all to join. See January 18, 2021, Revisiting the need for MFN treatment for sectoral agreements among the willing, https://currentthoughtsontrade.com/2021/01/18/revisiting-the-need-for-mfn-treatment-for-sectoral-agreements-among-the-willing/. While the MFN issue doesn’t come into play for the 79 Member pledge not to restrict exports to the WFP, the failure of the full WTO membership to agree to the draft General Council Decision is a further manifestation of the need for new approaches to promote expanded trade liberalization.

In recent speeches, Deputy Director-General Alan Wolff has expressed both the lack of unity at the WTO on an issue of importance like the draft General Council Decision and also welcomed the joint pledge by the 79 WTO Members not to impose restrictions on exports to the WFP. See WTO press release, DDG Wolff outlines possible responses to calls for WTO reform, 13 January 2020, https://www.wto.org/english/news_e/news21_e/ddgaw_13jan21_e.htm (“Less than a month ago, a General Council meeting took place which lasted over 15 hours (over two and a half days), a recent record for length. It had only one substantive trade policy item on its agenda for decision, the consideration of which produced no agreement. The issue was whether Members would agree to forego a modicum of the policy space they now have by agreeing not to impair procurements by the Nobel-Prize-winning World Food Program. A witness to the proceeding could be forgiven for perceiving drift of the organization in its not living up to its potential. Viewed through a different lens, this was no more than sovereigns reaffirming that they could not be bound without their consent.”); WTO press release, DDG Wolff stresses need to make progress in WTO negotiations to enhance resilience of farm sector, 22 January 2021, https://www.wto.org/english/news_e/news21_e/ddgaw_22jan21_e.htm (“I welcome the pledge this week of WTO members accounting for most of world agricultural exports to refrain from imposing export restrictions on foodstuffs purchased by the World Food Programme for non-commercial humanitarian purposes.”).

If there is to be a WTO capable of reform, the Members will need to reconfirm core principles and find ways to agree instead of searching for excuses to oppose. The membership seems far from sharing a common vision or accepting core principles. Too often, Members are engaged in a search for blocking progress. While all Members undoubtedly share blame for the current challenges, on the topic of blocking the minor proposal to ensure the workings of the WFP, one can look to the Members who remain non-participants in the joint pledge as the problem on this particular issue.

Specifically, the list of those WTO Members pledging not to impose export restrictions on foodstuffs to the WFP is made up of 79 WTO Members, meaning 85 Members did not join the pledge (at least not yet). Some of the major Members who are not participating in the pledge include the following — Argentina, China, India, Indonesia, Pakistan, South Africa, the Philippines, Malaysia. the Russian Federation, Hong Kong (China), Turkey. In the WTO’s World Trade Statistical Review 2020, China, Indonesia, Argentina and India are among the top 10 exporters of agricultural products and of food in 2019; China, the Russian Federation and Hong Kong (China) are among the top ten importers in 2019. WTO, World Trade Statistical Review 2020, Tables A-13 and A-14, https://www.wto.org/english/res_e/statis_e/wts2020_e/wts2020_e.pdf. China, India, Indonesia, Pakistan, the Philippines and Turkey are all beneficiaries of assistance from the WFP.

While there is much that needs to be done for the restoration of the WTO’s relevance, the pledge by 79 Members suggests that liberalization by the willing may be the only road forward.

WTO Accessions — perhaps the most valuable benefit for Members in the first 25 years of the WTO’s existence

Much has been written about the challenges facing the World Trade Organization twenty-five years after its birth at the beginning of 1995.

The Appellate Body (“AB”) has ceased functioning with the United States blocking the appointment of new AB members based on longstanding problems with the Dispute Settlement system that have not been addressed. There are fundamental differences among major Members in what the proper role of the dispute settlement system is. Because the AB’s view of its role has differed from that of at least some of the Members, many delegations have opted to litigate instead of negotiate on issues which are not covered by the actual language of existing agreements.

The negotiating function of the WTO has had limited success in the first 25 years of the WTO reflecting deep differences among Members in priorities and the core function of the WTO. The inability to update rules or develop new rules to address 21st century commercial realities has called into question the ongoing relevance of the organization Members have failed to honor agreement directions for periodic liberalization updates in agriculture and services trade. Members have also taken decades to tackle issues of pressing time sensitivity, such as fisheries subsidies.

And there are problems in the timeliness and completeness of notifications required by many agreements and the quality of the work of many of the Committees.

A bright spot for an organization in trouble has been the success of bringing additional countries and territories into the organization. Of the 164 members at present, 36 have joined since the WTO opened in 1995 and some 23 countries or territories are in the accession process at the moment. Some 98% of global trade is now covered by WTO Members. While there are many reasons for countries or territories to join the WTO, including integrating into the global economy and improving the competitiveness of the economy (Deputy Director-General Alan Wolff describes the benefits of accession as being a catalyst for domestic reform and economic growth), there is no doubt that accessions are of benefit to the global trading system and bring the benefits of liberalization in the acceding country or territory to the existing WTO membership. Indeed, commitments of acceding Members in terms of tariff liberalization and other obligations typically are far higher than the commitments of existing Members at the same economic stage of development. Yet, accession is of great benefit to acceding countries. See WTO press release, 8 November 2020, DDG Wolff: WTO accession is a catalyst for domestic reform and economic growth, https://www.wto.org/english/news_e/news20_e/ddgaw_06nov20_e.htm. DDG Wolff, in speaking to Arab countries in the accession process made the following comments:

“Furthermore, during the last eight months, the world has experienced unprecedented levels of disruptions in people’s daily lives and their economic activities due to Covid-19. The world is not near the end of this crisis. Despite these challenging times, trade has played a key role in addressing local shortages of food, medical supplies and other essentials during the pandemic.

“Trade will have to play an even greater role in supporting recovery of the global economy going forward. In this context, we should recognise the important role played by Saudi Arabia in steering the G20 during this difficult year, urging collective and multilateral cooperation. The Riyadh Initiative is a praiseworthy effort endorsed by the G20 nations.

“The Arab region has not escaped the dire economic consequences of this pandemic. For some, the steep fall in oil prices has aggravated existing problems. A crisis, however, also presents opportunities for closer international cooperation to limit the harm from the pandemic and to spur the recovery.

“These issues demonstrate that more, not less, global and regional trade integration is required. Integration into the world economy goes hand in hand with necessary domestic reforms. This is where WTO accession makes particularly valuable contributions. Those engaged in the reform-driven accession process are likely to experience a quicker recovery and greater resilience in the future.

“Based on evidence from the 36 accessions which have been successfully completed, the WTO accession process has served as an effective external anchor for domestic reforms, acting as a catalyst in realizing the potential of their economies. According to the last WTO Director-General’s Annual Report on WTO Accessions, Article XII Members have registered higher growth rates of GDP and trade (exports and imports), as well as increased flows of inward FDI stocks, in the years following their accession compared to the rest of the world. These results indicate that integrated, open economies tend to grow faster. In addition, by signalling a government’s commitment to international rules, WTO membership appears to also encourage the inflow of foreign investment.

“The accession process has been used by resource-based countries to diversify their economies. Economic diversification is one of the major priorities for the governments in the Arab region. Our 2016 study examined whether countries’ export structures became more diversified after gaining WTO membership. This was true for about half of the recently acceded
Members, which increased the number of exported products, measured in HS chapters, accounting for more than 60% of their exports after accession. This was achieved often through rebranding their economies with WTO membership and attracting increased FDI.”

From 1995-2016, the thirty-six countries or territories that joined the WTO included many of the major economies that were not original Members of the WTO. These included China, Chinese Taipei, Saudi Arabia, Vietnam, Ukraine, and the Russian Federation. The other countries or territories who have joined represent a wide cross-section of geographic regions and levels of development: Ecuador, Bulgaria, Mongolia, Panama, Kyrgyz Republic, Latvia, Estonia, Jordan, Georgia, Albania, Oman, Croatia, Lithuania, Moldova, Armenia, North Macedonia, Nepal, Cambodia, Tonga, Cabo Verde, Montenegro, Samoa, Vanuatu, Lao People’s Democratic Republic, Tajikistan, Yemen, Seychelles, Kazakhstan, Liberia, and Afghanistan. No accessions have been completed since 2016.

The twenty-three countries and territories that are in the process of accession often are countries or territories that have suffered from years of conflict. This has led the WTO to host the first “Trade for Peace Week” from November 30-December 4, 2020. See WTO press release, 25 November 2020, WTO to host first Trade for Peace Week, https://www.wto.org/english/news_e/news20_e/acc_25nov20_e.htm.

“In announcing the Trade for Peace Week, Deputy Director-General Alan Wolff noted: ‘The 2030 Agenda for Sustainable Development recognizes international trade as an engine for inclusive economic growth and poverty reduction that contributes to the promotion of sustainable development. This in turn can facilitate building and maintaining peace. The connection between trade and peace is the raison d’être for the creation of the rules-based multilateral trading system that led to economic recovery and prosperity after the devastation from World War II.’

“Currently, 23 countries are in the process of joining the WTO, and over a half of them suffer from a fragile situation from years of conflicts. Launched in 2017, the Trade for Peace initiative aims to assist fragile and conflict-affected (FCA) countries through WTO accession, with the emphasis on institution building based on the principles of non-discrimination, predictability, transparency and the rule of law. Based on experiences of former FAC countries, WTO accession can help set the conditions to move out of a state of fragility or conflict into a state of stability, economic well-being and peace.”

There are ten events this week. The public can register to participate in the virtual panels. See WTO Accessions, Trade for Peace Week, https://www.wto.org/english/thewto_e/acc_e/t4peace2020_e.htm.

DDG Wolff spoke at one of today’s event and his comments are embedded below. See WTO press release, November 30, 2020, DDG Alan Wolff – DDG Wolff calls for more structured WTO cooperation with humanitarian and peace communities, https://www.wto.org/english/news_e/news20_e/ddgaw_30nov20_e.htm.

WTO-_-2020-News-items-Speech-DDG-Alan-Wolff-DDG-Wolff-calls-for-more-s

The twenty-three countries and territories in the process of accession include: Algeria, Andorra, Azerbaijan, Bahamas, Belarus, Bhutan, Bosnia and Herzegovina, Comoros, Curacao, Equatorial Guinea, Ethiopia, Iran, Iraq, Lebanese Republic, Libya, Sao Tome and Principe, Serbia, Somalia, South Sudan, Sudan, Syrian Arab Republic, Timor-Leste, and Uzbekistan.

Conclusion

The genesis for the GATT and the other Bretton Woods institutions was a desire to provide an infrastructure and global rules to minimize the likelihood of future world wars. Cooperation, collaboration and integration would all reduce the likelihood of global conflict.

The WTO provides the opportunity for countries or territories struggling to escape violence to embark on a path of hope. That is a core mission of the WTO today just as it was for the GATT in the late 1940s.

Moreover, the record over the first twenty-five years of the WTO’s existence has been that those countries and territories who take the challenging steps to become Members of the WTO improve their economies and speed growth, development and foreign direct investment. Accessions also offer real improvements in market access for existing WTO Members. A true win-win situation.

For an organization struggling to maintain relevance amidst deep divisions among Members who seem to have lost the consensus on the core purpose of the organization, the pilgrimage of non-member countries and territories to join the organization is a beacon of hope. Serious reforms and updating of the rule book are desperately needed for a better functioning system where outcomes are based on underlying economic strengths and not the interference of governments. A willingness of Members to refocus on what the purpose of the WTO is in fact and to be supporters of contributing to the maximum of one’s ability will be key to forward movement. Inspiration can be drawn from the efforts of non-members to join.

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.

New COVID-19 cases over a fourteen day period continue to soar past eight million, up from five million on October 22

The COVID-19 pandemic continues to see an upward spiral in terms of the number of new infections although there has been a recent slowdown in new cases in Europe. Europe and the United States continue to constitute the bulk of the increase over the last 26 days as the following graph taken from the European Centre for Disease Prevention and Control’s COVID-19 situation update world wide, as of 17 November 2020 shows.

Distribution of COVID-19 cases worldwide, as of 17 November 2020

Distribution of COVID-19 cases worldwide, as of 17 November 2020


More specifically, in the last twenty-six days, the number of new COVID-19 cases globally over the last fourteen days has shot from five million to over eight million — a near sixty percent increase in a little over three and a half weeks. The total new cases identified since late December 2019 globally are now 55.15 million as of November 17.

On October 22, the European Centre for Disease Prevention and Control (ECDC) recorded the first day where the number of new COVID-19 cases over a fourteen day period globally surpassed five million (5,042,415). In just eight days, on October 30, the ECDC reports the fourteen day total shooting past six million new cases (6,093,987), an increase of 1,051,572 or 20.85% in eight days. The report for November 7 shows the total new cases in the last fourteen days crossing the seven million mark — 7,044,267 — or 15.59% over October 30 and 39.70% over October 22. And today, November 17, the ECDC report shows new cases in the last fourteen days as passing eight million (8,031,073) — 14.01% above November 7, 31.79% above October 30 and 59.27% above October 22. As reviewed in three prior posts (October 22 and October 30), the U.S. and Europe were major factors in hitting five million, six million and seven million daily cases and today’s data show them to continue to be the major causes of the continued rapid escalation in global cases. See October 22, 2020, COVID-19 new cases over last 14 days pass 5,000,000 for first time on October 22, https://currentthoughtsontrade.com/2020/10/22/covid-19-new-cases-over-last-14-days-pass-5000000-for-first-time-on-october-22/; October 30, 2020,  In last eight days, the number of global new COVID-19 cases over past fourteen days has grown from five to six million, https://currentthoughtsontrade.com/2020/10/30/in-last-eight-days-the-number-of-global-new-covid-19-cases-over-past-fourteen-days-has-grown-from-five-to-six-million/; November 7, 2020:  New COVID-19 cases over a fourteen day period continue to soar from five million on October 22 to six million on October 30 to seven million on November 7, https://currentthoughtsontrade.com/2020/11/07/new-covid-19-cases-over-a-fourteen-day-period-continue-to-soar-from-five-million-on-october-22-to-six-million-on-october-30-to-seven-million-on-november-7/

The table below shows the fourteen day totals for selected countries as of October 22, October 30, November 7 and November 17, and the change in new cases from October 22 – November 17. These twenty countries show an increase in the twenty-six days from October 22 – November 17 of 2,772,211 additional new cases while the increase from all countries was 2,988,658. So the 20 countries account for 92.76% of the total growth. In the prior periods (October 30 and November 7), the 20 countries had accounted for more than 100% of the increase in new cases. The 20 countries accounted for 2,558,802 new cases for the fourteen days ending October 22 or 50.75% of the global total at that time. For the fourteen days ending October 30, the 20 countries accounted for 3,584,674 new cases or 58.82% of the global total. For the fourteen days ending November 7, the 20 countries accounted for 4,568,491 new cases or 64.85% of the global total. And for the fourteen days ending November 17, the 20 countries accounted for 5,331,013 new cases or 66.38% of new cases. The table below shows that eight European countries — France, Spain, Belgium, Czechia, the Netherlands, Switzerland, Slovakia and Slovenia — showed significant new case reductions in the November 17 period compared to the November 7 period.

Country10-22-202010-30-202011-7-202011-17-2020Change
United States786,488966,2691,245,8761,914,2411,127,753
France303,912473,085620,778524,800220,888
United Kingdom244,954291,718315,486336,817 91,863
Spain169,394238,709282,700256,167 86,773
Italy115,708234,993377,812474,293358,585
Russia198,716227,530252,794315,975117,259
Belgium100,119171,522152,663 72,643 -27,476
Poland95,260169,302265,447338,308243,048
Czechia113,555161,058165,174114,627 1,072
Germany81,905151,137224,483255,367173,462
Netherlands103,024126,543125,163 84,442 -18,582
Ukraine76,48989,178109,792143,495 67,006
Switzerland35,26173,418107,837 93,395 58,134
Romania48,53260,55086,030114,508 65,976
Hungary18,16628,38848,845 65,890 47,724
Austria19,38735,43661,823 93,528 74,141
Bulgaria10,59220,64335,665 45,274 34,682
Slovakia18,91327,50333,177 25,447 6,534
Slovenia8,85920,02123,345 19,338 10,479
Sweden9,56817,67133,601 42,458 32,890
Total2,558,8023,584,6744,568,4915,331,0132,772,211

While the United States has the largest absolute increase in the last twenty-five days for a single country and accounted for 40.68% of the increase recorded by the twenty countries for the October 22-November 17 period, the U.S. accounted for 87.65% of the increase of the twenty countries for the November 7-November 17 period. While Europe has been the largest part of the increase in October and November, the rate of increase has slowed or declined for many European countries in the last fourteen days.

Europe led the U.S. in the dramatic increase in new cases in October and in the reintroduction of restrictions in many countries to attempt to bring the coronavirus back under control. Actions in Europe appear to be working at least in a large number of countries as the number of new cases is declining in some countries as can be seen in the table above. The United States is continuing with huge increases in new cases, in hospitalizations and is seeing a growing number of deaths. Many U.S. states are putting in place at least some restrictions to try to slow the growth of new cases and reduce the strain on the health care system. The next week or two will help understand whether the actions being taken in the U.S. are sufficient to reduce the growth in new cases.

Other parts of the world are not experiencing a second wave to the same extent as Europe or the United States, although much of the Americas remain at very high levels of new cases. Some major countries who have been seriously hit in recent months are seeing substantial reductions in new cases. India is one example — on October 22, the last 14 days showed 871,291 new cases; on October 30, for the last 14 days new cases were down to 718,383; on November 7 were down to 647,398 for the 14 days ; and for the fourteen days ending on November 1, India’s new cases were down to 606,667.

The EU and the US face problems on additional aid packages

The EU has at least a temporary crisis as Hungary and Poland have blocked adoption of the aid package that had been agreed to. See, e.g., Euronews, 16 November 2020, Hungary and Poland block EU’s COVID-19 recovery package over new rule of law drive, https://www.euronews.com/2020/11/16/hungary-and-poland-threaten-coronavirus-recovery-package.

The U.S. Congress and Administration have been unable to agree to additional stimulus funds to help the U.S. economy and citizens deal with the continued COVID-19 pandemic. The U.S. has more than 22 million Americans still out of work and with government assistance having terminated or to terminate shortly. Aid for small businesses and for sectors particularly hard hit by the pandemic is desperately needed as is funding for state and local governments and much more. While President Trump has urged Congress to pass an additional stimulus package, it is unlikely that action will be taken before the next Congress convenes and the new Administration is sworn in on January 20.

Progress on vaccine development

Two vaccines have completed phase 3 testing — one from Pfizer/BioNTech and one from Moderna — and information from the companies suggests efficacy rates of 90-94.5%. Thus, it is possible that these two vaccines will be approved for use in the coming weeks and will see large scale availability in the first half of 2021. Many other vaccines are in various phases of testing. So 2021 will hopefully see the roll out of various vaccines with significant availability around the world due to efforts of the companies and the efforts of the WHO/GAVI/CEPI to ensure availability to developing and least developed countries as well.

Conclusion

The top priority for many countries around the world remains getting the COVID-19 pandemic under control. The costs in terms of human life and serious health problems are enormous. So too the costs to the global economy from taking the steps necessary to address the pandemic are enormous.

How to address the pandemic and how to work internationally to secure a return to normalcy and a return to sustainable economic growth are the challenges for all governments and international organizations.

The fact that the number of new cases is continuing to surge globally ten and a half months after the start of global surveillance is obviously troubling and delays the return to normalcy. While some individual countries have gained control of the pandemic and others are making significant strides to reduce the number of new cases, “no one is safe until all are safe”. We have a long road to travel, and the western developed world is currently the major hot spot, struggling with the current extraordinary surge, although there are positive signs in Europe that at least many countries are slowing the spread after a very challenging September and October. We still are not in sight of a global peak although the rate of growth is slowing for the world as a whole though not for countries like the United States.

There is obviously some light at the end of the tunnel as vaccines and therapeutics get closer to public release. With more than 55 million infections recorded to date around the world and with more than 1.3 million deaths globally, the pressing question is how much worse will the situation become before the world gets back to normal with the pandemic controlled. The world is in for a challenging time til at least next summer and more realistically to the end of 2021 and the start of 2022.