South Africa

Review of the COVID-19 pandemic — continued overall growth in cases and deaths, resurgence in some countries where COVID-19 had receded

This past week saw the release of information on GDP contraction in the U.S. in the second quarter of 2020 (9.5% (annualized at 32.9%)) and in the European Union (11.9%). See U.S. Department of Commerce Bureau of Economic Analysis, News Release BEA 20-37, Gross Domestic Product, Second Quarter 2020 (Advance Estimate) and Annual Update, https://www.bea.gov/sites/default/files/2020-07/gdp2q20_adv_0.pdf; Eurostat newsrelease 121/2020 – 31 July 2020, Preliminary flash estimate for the second quarter of 2020, GD down by 12.1% in the euro area and by 11.9% in the EU, https://ec.europa.eu/eurostat/documents/2995521/11156775/2-31072020-BP-EN.pdf/cbe7522c-ebfa-ef08-be60-b1c9d1bd385b#:~:text=The%20next%20estimates%20for%20the,released%20on%2014%20August%202020.&text=Compared%20with%20the%20same%20quarter,respectively%20in%20the%20previous%20quarter. Japan has similarly suffered substantial contraction in its GDP through the second quarter. See https://asia.nikkei.com/Economy/Japan-GDP-to-shrink-22-in-Q2-in-biggest-postwar-drop-forecast.

These sharp contractions in U.S. and EU GDP reflect the effects of the actions by governments in the U.S. and in the EU to shut down parts of their economies in an effort to control the spread of the COVID-19 pandemic. The sharp contractions would have been far worse but for government efforts to provide emergency funding to support companies, workers and local governments. While the COVID-19 pandemic has been far less severe in terms of cases and deaths in Japan and in other countries in Asia, contraction in GDP reflects both declining consumer spending and global effects of trade contraction that are occurring.

China, where COVID-19 infections were first discovered, saw a decline in GDP in the 1st quarter of 2020 with a rebound in the second quarter to a 3.2% increase. See CNBC, China says its economy grew 3.2% in the second quarter this year, rebounding from coronavirus, July 15, 2020, https://www.cnbc.com/2020/07/16/china-economy-beijing-reports-q2-2020-gdp.html.

The sharp contractions in GDP from much of the developed world is consistent with projections by the IMF from June 2020. A summary table from the World Economic Outlook Update is copied below.

The hope was that after a sharp contraction in the second quarter, the world would experience a v-shaped recovery once the pandemic was brought under control in much of the world.

As we start August 2020, expectations are turning to a longer and shallower rebound in the third and fourth quarters of 2020 which will negatively affect billions of people. The world has not yet crested in terms of new COVID-19 cases and countries that had gotten the virus seemingly under control are seeing various levels of resurgence. The United States which never got the virus under control has seen a second surge that has reached levels at least twice as high as earlier levels of new cases and has seen a resurgence in hospitalizations and deaths.

There are a few bright spots. Some countries have managed to drastically reduce the spread of the virus and have been reopening in phases with limited recurrence. Moreover, a number of pharmaceutical companies have entered phase three trials of vaccines, and governments have fronted billions of dollars to build capacity for vaccines should they prove safe and effective. While major countries like the U.S. and the EU block have secured access to potentially hundreds of millions of doses from various companies should vaccines in trial receive approval for distribution, at least a number of these pharmaceutical companies (or consortia) have arrangements for massive production around the world including billions of doses for developing and least developed countries which should enable a more equitable and affordable distribution than may have been true in the past.

COVID-19, the number of new cases in the last fourteen days

Looking at the daily reports put out by the European Centre for Disease Prevention and Control, the world saw an additional 3,568,162 cases in the fourteen days ending August 2nd. This was an increase of some 550,000 from the previous fourteen days ending July 19 where new cases were 3,018,993. The July 19 two week figures were again up close to 550,000 from the period ending July 5 when there were 2,469,859 cases. The period ending June 21 has 1,932,024 new cases; the period ending June 7 had seen an additional 1,567,983 new cases. Thus, in less than two months the global number of new cases in a fourteen-day time period increased by 127.56 percent. The COVID-19 situation update worldwide, as of 2 August 2020 is embedded below.

COVID-19-situation-update-worldwide-as-of-2-August-2020

Fourteen of the forty-two countries or customs territories that I have been tracking who account for more than 90% of total cases and total deaths from the pandemic continue to not have peaked in terms of two week number of new cases. See July 21, 2020, COVID-19 – the United States continues to spin out of control with increasing shortages of medical goods; sharp increases in developing countries in the Americas and parts of Asia, https://currentthoughtsontrade.com/2020/07/21/covid-19-the-united-states-continues-to-spin-out-of-control-with-increasing-shortages-of-medical-goods-sharp-increases-in-developing-countries-in-the-americas-and-parts-of-asia/. Japan, which had peaked a number of months ago, has a resurgence of cases, so much so that the last two weeks (11,439 new cases) exceed any other two week period for the country. Other countries which have not peaked include the United States (908,980 new cases), India (673,105 new cases) Brazil (633,017 new cases), Colombia (115,481 new cases), Mexico (95,280 new cases), Argentina (72,001 new cases) and these additional countries — Bolivia, Dominican Republic, Ecuador, Honduras, Indonesia, Iraq, and the Philippines). South Africa peaked in the prior two week period but still had an additional 152,411 new cases (93.56% of its peak).

Many developed countries have seen sharp increases in the last two weeks, albeit from much lower levels than in the spring. These include Spain, France, Germany, Italy, Canada, Australia and Japan.

Many developing and least-developed countries in Central and South America, Africa and parts of Asia are seeing growing numbers of cases. While some of these countries have seen a peak in the number of new cases, for others that is not true. India and Brazil are continuing to struggle to contain the spread as are the Latin and Asian countries reviewed above.

In the last two weeks, the United States had more new cases per 100,000 population than all of the other 41 countries being monitored other than Brazil and Panama. The U.S. number of new cases per 100,000 population was 5.88 times the number for all countries (including the U.S) and 4-50 times as high as major EU countries. And on deaths in the last fourteen days, the U.S. has more deaths per 100,000 population than all of the other 41 countries other than Brazil, Mexico, Peru, South Africa, Chile, Bolivia, Colombia and Panama. The U.S. death rate in the last fourteen days is 3.95 times the rate/100,000 population for the entire world and 25-87 times the rate for major EU countries (France, Germany, Italy, Spain).

WTO Members have the opportunity to adopt rules to minimize trade disruptions and expedite economic recovery

Many Members of the WTO have submitted proposals for action by the Membership to minimize the harm to global economies and trade flows from addressing trade restrictions, trade liberalization possibilities and other matters within the WTO’s wheelhouse.

In a previous post, I reviewed the July 25 APEC trade ministers joint statement and annex which in my view could provide the platform for WTO Members coming together to adopt a group of principles that have been endorsed not only by the APEC countries but also by G-20 members (in various G-20 releases). See July 28, 2020, APEC trade ministers’ virtual meeting on July 25 – Declaration on Facilitating the Movement of Essential Goods during COVID-19, https://currentthoughtsontrade.com/2020/07/28/apec-trade-ministers-virtual-meeting-on-july-25-declaration-on-facilitating-the-movement-of-essential-goods-during-covid-19/.

The WTO, being a member-driven organization, requires the WTO Members to come together for the common good if progress is to be made. While recent actions on seemingly non-substantive issues, like selecting an acting Director-General (largely an administrative function pending selection of a new Director-General), lay bare the lack of trust and widely divergent views among WTO Members, adopting basic principles for getting through the pandemic should be a win-win for all Members.

Conclusion

The COVID-19 pandemic is continuing to wreak havoc across the globe with new cases and new deaths continuing to mount. The health consequences are severe and are increasingly shifting to developing and least-developed countries. However, some developed countries, like the U.S., have not gotten the virus under control. Moreover, a number of countries who have had success controlling the spread of COVID-19 are seeing a resurgence as reopening of economies continues. This has led some countries to slow or even reverse some of the reopening steps.

As the sharp economic contractions in major developed economies attest, there are huge economic costs to dealing with the pandemic. The economic rebound is unlikely to be as strong or as quick as many have hoped. While much of what is needed is focus by each country and its citizenry to follow the science and get the pandemic under control, there is also an important role for multilateral organizations to play in keeping markets open, providing financing for those in need and more. The WTO has a potentially important role on the trade front. It is unclear that WTO Members will embrace the opportunities presented, but if Members would it would reduce the depth of the trade contraction and help speed economic recovery.

COVID-19 — the United States continues to spin out of control, with increasing shortages of medical goods; sharp increases in developing countries in the Americas and parts of Asia

The last two weeks have seen the case count of new COVID-19 cases in the United States surge out of control across much of the country with a staggering number of new cases reaching 871,922 cases between July 6 and July 19, up from 584,423 cases in the prior two-week period — an increase in new cases of 287,499 or 49.2% in just two weeks. The U.S. accounted for more than half of the global spike in new cases from the last two week period examined (June 22-July 5) from less than 2.5 million new cases for the world to 3,018,993 through July 19. Growth in new cases is occurring in many developing countries as well, but no developed country other than the United States has been unable to cap the level of new cases and, in most instances, bring the number down sharply over time (Russia’s number of new cases has declined but not sharply like other developed countries).

The consequences for the U.S. and the world of the continued rapid growth in new cases are significant. The U.S. is finding many states needing to slow down or reverse the reopening of the economy which will hurt the economic recovery in the United States, result in a continuation of exceptionally high unemployment, threaten hundreds of thousands of businesses with survival, put in jeopardy the ability of schools at all levels to open safely and put downward pressure on global trade based on reduced U.S. demand, restrictions on various major service sectors and production of goods at below optimal levels. Moreover, there are many states facing sharp increases in hospitalizations putting stress on the health care system in many parts of the country and returning states and local communities to scramble for medical goods, including personal protective equipment. There are news articles of some hospital systems facing the same types of shortages that were harming care in the March-April period. Congress is facing the need in the coming days and weeks to provide substantial additional support to the unemployed, to health care systems, to state and local governments, to certain sectors of the economy particularly hard hit. Thus, the U.S. drag on the global economy will likely continue while the U.S. will be chasing medical supplies at a time of growing demand in the developing world, likely making access to many medical goods more expensive and harder to find.

While the Administration has focused on reopening the U.S. economy regardless of the actual situation and has dismissed the increase in new cases as simply the result of increased testing and has claimed that the U.S. has the lowest mortality rate, the facts on the ground indicate the crisis will continue for some time. The United States has just 4.3% of the world’s population but has had 26% of the world’s cases and 23.3% of the world’s deaths from COVID-19. So the bottom line is that the U.S. has a massive and growing health crisis that is far from being under control.

On the question of the death rate and how the U.S. compares to other countries, the table below presents some data which are self-explanatory. Using the daily data from the European Centre for Disease Prevention and Control, I reviewed 42 countries and territories who collectively have accounted for 90.88% of all cases since December 31 and 91.93% of all deaths recorded as due to COVID-19. Through July 19, the U.S. had the sixth highest mortality rate looking at deaths per hundred thousand population (France, Italy, Spain, the United Kingdom and Chile had worse rates ). If one looks at the period since April 11 (three months and eight days, roughly half of the total period), the U.S. had the forth worst mortality rate (deaths per hundred thousand population; Peru, the United Kingdom, and Chile had worse rates). The U.S. death rate is worse than our neighbors, Canada and Mexico. It is worse than that of most European countries, Australia, New Zealand, Japan, South Korea, Singapore and Taiwan. And much worse than China, India, Pakistan, Indonesia, South Africa and many other countries. The U. S. rate of deaths/cases has remained unchanged at 3.78% over the total period and for the period since April 11th. It has been in the more recent period that U.S. testing has expanded significantly, but without any change in rate of death.

While the U.S. ranking of deaths as a percent of total confirmed cases of COVID-19 is better than its ranking based on the number of deaths per 100,000 population, the death rate/100,000 provides the best measure of the relative cost in deaths to each country/territory. Thus, the U.S. death rate is 3.9 times higher than the rate in Germany, 1.8 times the rate in Canada, 54.5 times the rate in Japan, 5 times the rate in Russia, 73.4 times the rate in South Korea, 133.1 times the rate in China, 1419.3 times the rate in Taiwan and 4.5 times the rate of the total of the 42 countries/territories (including the U.S.).

Countrydeaths/100,000 pop.
Dec. 31 – July 19
deaths/100,000 pop.
Aprill 11 – July 19
United Kingdom67.9354.49
Spain60.5526.80
Italy58.0626.82
France44.9925.30
Chile44.0443.70
United States42.5836.87
Peru39.9839.46
Brazil37.3236.82
Mexico30.4830.30
Ecuador30.4028.69
Panama25.2225.08
Canada23.6322.11
Bolivia18.2918.12
Iran16.8611.76
Colombia12.9412.79
Germany10.947.88
Kuwait9.679.65
Iraq9.399.21
Honduras9.148.90
Dominican Republic9.047.87
Russia8.468.40
South Africa8.458.41
Guatemala8.248.22
Saudi Arabia7.187.00
Turkey6.685.45
Oman6.196.13
Qatar5.445.23
Argentina4.924.74
Egypt4.234.10
United Arab Emirates3.463.30
Afghanistan3.063.02
Pakistan2.582.55
India1.961.95
Philippines1.641.45
Bangladesh1.581.57
Indonesia1.481.37
Japan0.780.71
South Korea0.580.17
Singapore0.470.36
Nigeria0.390.38
China0.320.08
Taiwan0.030.01
Total of 42 countries9.517.95

Growth in new cases among developing countries

With the world total confirmed cases of COVID-19 standing at 14.267 million on Sunday, July 19, there were large numbers of new cases over the last two weeks from a large number of countries. Brazil had another 497,856 cases; India had 404,453 new cases; South Africa an additional 162,902 cases; Russia 97,031 new cases; Mexico an additional 86748 cases; Colombia an additional 77,311 cases; Peru 50,420 new cases; Argentina 46,515 new cases; Saudi Arabia an additional 42,487 cases; Bangladesh 42,387 new cases; ten countries each had between 20,000 and 40,000 new cases (Indonesia, Iran, Iraq, Israel, Kazakhstan, Oman, Pakistan, Philippines, Bolivia, Chile); seven countries had between 10,000 and 19,999 new cases (Panama, Kyrgyzstan, Turkey, Guatemala, Ecuador, Dominican Republic, Egypt) with all other countries/territories having less that 10,000 new cases each.

Of the forty-two countries/territories that account for more than 90% of cases and deaths, besides the U.S., there were fourteen where the last two weeks were new highs for the country/territory, that is where the virus is continuing to expand: India, Mexico, South Africa, Argentina, Bolivia, Colombia, Dominican Republic, Ecuador, Guatemala, Panama, Indonesia, Iraq, Oman and the Philippines.

In the last two weeks, the forty-two countries listed in the table above increased their rate of new cases by 22.66%. All other countries increased by 17.46% while the total for all countries increased by 22.22%.

So just as was true in prior posts on the COVID-19 pandemic, the pandemic continues to grow rapidly and is affecting an increasing number of developing and least developed countries. This puts increased pressure on the global supply of medical goods including personal protective equipment. As noted in previous posts and as reviewed on the WTO website, many countries have introduced export restraints particularly for medical goods, but also for some agricultural products. Many have also introduced liberalizing measures to reduce the cost of imports of needed medical goods and to streamline the importing process for such goods.

Vaccines and therapeutics – developments and challenges for access

As reviewed in a prior post, “There have been extraordinary efforts to ramp up research and development around the world to address COVID-19. Through the WHO and other efforts, there have been greater efforts at coordination of R&D and at the identification of gaps in knowledge and research. Large sums are being committed by some countries and NGOs to help ensure that all countries will have access to vaccines and therapeutics that get developed and that such access will be at affordable prices.” July 5, 2020, COVID-19 – the sharp expansion of new cases will put increased pressure on finding vaccines and therapeutics and complicate global economic recovery, https://currentthoughtsontrade.com/2020/07/05/covid-19-the-sharp-expansion-of-new-cases-will-put-increased-pressure-on-finding-vaccines-and-therapeutics-and-complicate-global-economic-recovery/.

A number of vaccines are moving into the stage 3 testing of large numbers of humans in the coming weeks/months. There is hope that one or more products in tests will result in vaccines that get approved for distribution by the end of the year or early in 2021. This week’s Bloomberg Businessweek has a cover article on the University of Oxford COVID-19 vaccine that, if approved, will be distributed by AstraZeneca who has arranged global manufacturing of what could be more than two billion doses. See July 20, 2020, Bloomberg Businessweek, The Front-Runner, pages 42-47. While the University of Oxford has led in the development and testing of the hoped-for vaccine, AstraZeneca has made arrangements with a number of companies around the world to produce the vaccine if approved and has agreements with the United Kingdome for 100 million doses, with the U.S. for 300 million doses and an arrangement with an Indian company to produce 1 billion doses for developing and middle income countries. Id at 46. There are other developmental vaccines that are also making progress through testing stages though their timing for eventual approval (if found efficacious) may be a few months behind the University of Oxford program. The good news, if vaccines get developed quickly which are efficacious, is that the major producers in the west are putting in place plans to provide global production which should go a long way to ensuring equitable access for all at affordable prices. Hopefuly, the University of Oxford/AstraZeneca model will be followed by all. China also has vaccines in test mode, although it is less clear what their approach would be to production and distribution if products are approved.

While the world has seen a very large collective scientific effort to find vaccines and therapeutics, in the last week there have also been claims by three governments (the United Kingdom, Canada and the United States) of cybersecurity attacks from Russia on COVID-19 research programs. See, e.g., CNN, UK, US and Canada alleged Russian cyberattacks on COVID-19 research centers, July 17, 2020, https://www.cnn.com/2020/07/16/politics/russia-cyberattack-covid-vaccine-research/index.html. The link to the UK advisory is here. https://www.ncsc.gov.uk/news/advisory-apt29-targets-covid-19-vaccine-development.

Conclusion

Nearly seven months into the pandemic, the continued growth in the number of new COVID-19 cases is continuing to put pressure on health care systems in many parts of the world and dampen prospects for the global economy’s rapid recovery.

The United States has been unable to get the pandemic under control within its borders and has been leading the growth in new cases. The rapid rate of growth of new cases across much of the United States has led to backtracking by many U.S. states on opening measures taken in the last two months. With the growing challenges in the United States, the U.S. will be a drag on global economic recovery.

While there is more global production of many of the medical goods needed to address COVID-19 ahead of the development of vaccines and therapeutics, the enormous growth in the number of cases and the continued spread in developing and least developing countries along with the United States will continue to test the balance between demand and supply. While the WTO is monitoring developments on export restraints and liberalization measures based on country notifications, large numbers of export restraints on medical goods continue and will likely remain in place for months to come complicating the ability to maximize utilization of scarce supplies.

It has been known that the ultimate return to normal conditions for the world would have to await the development and distribution of vaccines and therapeutics that are efficacious to all peoples on an equitable and affordable basis. But the new “normal” of living with COVID-19 while we await vaccine developments is being frustrated in some countries, like the United States, by an inability to communicate the challenges with a single voice, by the politicizing of basic disease prevention steps like mask wearing and social distancing, by the failure to ramp up testing and tracing sufficiently based on the level of COVID-19 spread and by the lack of support from the body politic (which flows both from the lack of a single message from federal, state and local leaders and from lockdown fatigue). Thus, for the United States and perhaps others, we are seemingly unable to slow the spread through steps many other countries have adopted and that have been known by medical experts for decades if not centuries.

Fortunately, there is positive news coming from the research and development efforts of many companies, universities and research institutes. Let us hope that vaccines and cures are found quickly. The drag on the global economy and the enormous toll on populations will likely continue until then.

COVID-19 — the sharp expansion of new cases will put increased pressure on finding vaccines and therapeutics and complicate global economic recovery

The last two weeks have seen an extraordinary explosion of new cases of COVID-19 in the United States, the rest of the Americas, and in many developing and least developed countries in Asia and Africa. Total infections globally now exceed 11.2 million up close to 2.5 million in the last two weeks (from 8.767 million) and up close to 100% from the two week period ending May 24. All figures are taken from the European Centre for Disease Prevention and Control daily reports.

The top five countries in the world with most cases account for 53.94% of global cases through July 5 and are:

United States 2,839, 542

Brazil 1,577,004

Russia 674,515

India 673,165

Peru 299,080

Three of these countries (the United States, Brazil and India) have not yet reached a peak and had the three largest number of new cases in the last two weeks — 584,423 for the U.S.; 509,425 for Brazil; 262,704 for India. While Russia and Peru appear to have peaked (last two weeks are 28.89% and 37.18% below their respective peak periods), the number of new cases in the last two weeks was the fourth and eight largest of any country (97,563 for Russia; 47,742 for Peru). The top five countries for cases to date also accounted for 60.81% of new cases during the last two weeks.

The U.S. which had seemingly peaked in the two weeks end April 26 at 409,102 and seen declines to 297,391 for the two weeks ending June 7, has seen a resurgence since then (335,058 for two weeks ending June 21) with a staggering growth in the last two weeks to 584,423 new cases. Thus, the U.S. has seen a dramatic growth in cases — up 96.52% from the June 7th two weeks; up 74.42% from the prior two weeks ending June 21; and up 42.86% since the prior peak for the two weeks ending April 26.

The United States has been in the process of opening up over the last two months after lockdowns in most states and has seen dramatic growth in cases in large parts of the country (south, southwest, west coast), with some substantial contraction in areas hardest hit back in March and April (Middle Atlantic states including New York and New Jersey). While other countries that have been opening up have had some resurgence as well (e.g., France, Germany, South Korea, Japan), the growth has been from very low numbers and has typically been relatively small absolute increases.

The United States is the only developed country to be having the challenges it is having getting the COVID-19 pandemic under control. Indeed, no other developed country has not peaked in the number of new cases. All other developed countries have generally seen very large decreases in the number of new cases from their peaks back in March or April. Dr. Anthony S. Fauci, Director, National Institute of Allergy and Infectious Diseases in the U.S., has warned that the United States could reach infection rates of 100,000 cases per day without increased adherence to the straightforward but challenging control criteria of social distancing, wearing masks, handwashing, testing, tracing and isolation.

With mixed messages from government leaders at the federal, state and local levels, with COVID-19 fatigue among many U.S. residents, and with lower rates of infection and generally less severe infections for younger people (leading many to be less concerned about the pandemic), the path forward in the U.S. is unclear particularly prior to the development of effective vaccines and therapeutics.

So large are the increases in new cases from the U.S., Brazil and India in the last two weeks that the U.S. and Brazil’s two week totals exceed the total cases since December 31 for all other countries except Russia and India; India’s new cases over the last two weeks exceed every country’s total number of COVID-19 cases since December 31 except the U.S., Brazil, Russia, Peru, Chile, and the United Kingdom).

The alarming rate of growth in the United States is masking the focus on the rapid growth of the pandemic in many developing and least developed countries. For countries with the largest number of confirmed cases, Brazil, India, Mexico, South Africa, Nigeria, Argentina, Bolivia, Colombia, Dominican Republic, Ecuador, Guatemala, Honduras, Panama, Bangladesh, Indonesia, Iraq, and the Philippines are seeing cases grow in number with no peak as yet. This is also true among many countries in the Middle East where World Bank listings would not have them as lower income countries – Kuwait, Oman, Qatar, and the United Arab Emirates. For the developing and least developed countries who are not among the forty-two countries who account for 90.62% of total cases through July 5, the rate of growth of new cases in the last two weeks is roughly 50% greater than for the 42 countries — 39.59% increase versus 26.87% increase (47.34% greater).

So the pandemic continues to grow rapidly and is affecting an increasing number of developing and least developed countries. The WHO has repeatedly reviewed the steps any country needs to take to bring the COVID-19 pandemic under control. See WHO Director-General’s opening remarks at the media briefing on COVID-19 – 1 July 2020, https://www.who.int/dg/speeches/detail/who-director-general-s-opening-remarks-at-the-media-briefing-on-covid-19—1-july-2020. The world is not adhering to the required steps, at least for many countries including the United States.

Trade implications

Prior posts have reviewed the array of health and economic challenges for governments that are going through increasing cases during the pandemic. The WTO and others have cataloged the number of export restraints on medical goods imposed by certain countries during the pandemic. Because of the huge increase in demand that occurs for many medical goods when the pandemic spreads in a country, the world has been faced with challenges of adequacy of supplies, openness of markets, and ability to ramp up production as needed. While some restraints have been lifted, many continue. There have also been some export restraints on agricultural goods introduced by countries concerned about access to food supplies during the pandemic despite no actual global food shortage for major crops.

There also have been many efforts at liberalization by countries as they attempt to lower the cost of imported medical goods, streamline customs procedures to expedite delivery of goods, maintain open markets and for other reasons.

Groups of countries at the WTO, in the G20 and through other entities have put forward a range of proposals and action steps to ensure that trade plays its part in minimizing the downside to countries from the pandemic both in terms of health consequences and in terms of economic activity.

With rapidly growing numbers of new COVID-19 cases, one can predict that pressures will continue on export restraints and on needed efforts to ramp up production and inventories of key medical goods. As the number of tests, number of hospitalizations and other medical activities increase, governments will be struggling to find supplies. The United States has had significant problems in the past and will likely experience medical goods shortages again if the number of new cases in the U.S. is not brought under control.

For many developing and least developed countries, there are joint efforts by countries through the Supply Chain Task Force (chaired by the World Health Organization and World Food Programme) to identify medical equipment needs and to work to develop contracts to secure needed supplies and get them to the countries in need. See COVID-19 supply chain system, requesting and receiving supplies, https://www.who.int/publications/m/item/covid-19-supply-chain-system-requesting-and-receiving-supplies. The write-up explaining how it operates is embedded below and reflects the global commitment to see that both medical goods and any eventual vaccines and therapeutics and improved diagnostics are equitably available at affordable prices.

covid-19-supply-chain-system-requesting-and-receiving-supplies-2

While the joint efforts of various UN and other organizations are providing assistance to some 130 countries, challenges exist both as to funding and to access to adequate supplies as demand grows. Below are notes for the record from the Supply Chain Task Force meeting of 23 June 2020 followed by the catalogue of products being covered by the Emergency Global Supply Chain System.

supply-chain-taskforce-nfrs-20200623

20200207233119365

Availability of medical goods should improve as many countries who have gone through the worst of the pandemic (at least phase 1) who produce medical goods are increasingly in a position to increase exports. The challenges will be with overall global capacity and whether certain countries tie up global supplies to safeguard against growing demand in the current phase or to develop inventories should there be a second phase.

Vaccines and therapeutics – developments and challenges for access

There have been extraordinary efforts to ramp up research and development around the world to address COVID-19. Through the WHO and other efforts, there have been greater efforts at coordination of R&D and at the identification of gaps in knowledge and research. Large sums are being committed by some countries and NGOs to help ensure that all countries will have access to vaccines and therapeutics that get developed and that such access will be at affordable prices.

On July 1-2, the WHO held a two day virtual conference both to track progress on COVID-19 research and development efforts and to identify new research priorities. See https://www.who.int/news-room/feature-stories/detail/global-scientific-community-unites-to-track-progress-on-covid-19-r-d-identifies-new-research-priorities-and-critical-gaps.

The WHO has a summary table that shows where different vaccine development projects are. The document is embedded below.

novel-coronavirus-landscape-covid-19-1

However, a major challenge for equitable and affordable access to both vaccines and therapeutics involves the needs of major governments to lock- up capacity for potential vaccines and early therapeutics to take care of their own populations regardless of global giving events or commitments of individual countries to the principles of equitable and affordable access for all.

Prior posts have reviewed efforts of the United States, the European Union and others to lock up large quantities of vaccines from particular manufacturers of vaccines in trials should the trials prove successful. Most countries don’t have the financial capabilities to copy that approach. In addition, many vaccine trials are in China by Chinese pharmaceutical companies raising questions as to how vaccines developed by those companies (in which the Chinese government has investments for some or all of the companies) will be handled and made available to other countries with needs.

Developments in the last week show the challenge will apply equally with therapeutics that are viewed as effective in treating COVID-19. For example, there is one treatment which to date has been shown to shorten the recovery time in patients who have COVID-19. The product is remdesivir produced by U.S. company Gilead. A preliminary report on the results of testing of remdesivir was published in May 2020. See The New England Journal of Medicine, Remdesivir for the Treatment of COVID-19 — Preliminary Report, May 22, 2020.

In a July 4 article in The Guardian, entitled, “Trump is scooping up the world’s remdesivir. It’s a sign of things to come,” the author states “Trump boasted this week that the US had bought the world’s entire supply of remdesivir, the antiviral drug produced by the U.S. biotechnology company Gilead. Though low- and middle-income countries can still produce their own generic versions of the drug, European and other high-income countries are not able to buy remdesivir or produce it for three months. Fortunately the UK and Germany have stockpiled enough of the drug to treat all the patients who need it.” https://www.theguardian.com/commentisfree/2020/jul/04/trump-remdesivir-covid-19-drug.

A Reuters article from July 3rd reviews remdesivir getting conditional EU clearance. See Reuters, Gilead’s COVID-19 antiviral remdesivir gets conditional EU clearance, July 3, 2020, https://www.reuters.com/article/us-health-coronavirus-eu-remdesivir/gileads-covid-19-antiviral-remdesivir-gets-conditional-eu-clearance-idUSKBN2441GK. “”The EU’s green light broadens the use of remdesivir around the world – the United States has cleaered it for emergency use and it is also approved as a COVID-19 therapy in Japan, Taiwan, India, Singapore and the United Arab Emirates, Gilead said on Friday.”

It is fair to say that with the huge growth in the number of confirmed cases in the U.S. and with the U.S.’s control of supply for the next three months, remdesivir is likely the poster child of the challenges the global community will face in ensuring equitable and affordable access to vaccines and therapeutics going forward.

Conclusion

More than six months into the COVID-19 pandemic, the world continues on a sharp upward trajectory of new cases with a major shift from developed countries to developing and least developed countries as nearly all developed countries (excluding the United States) have managed to get the pandemic under control. With the United States apparently unable to get its house in order, there will be increased stress on medical goods supplies as demand from the U.S. will certainly continue to grow. Global efforts to arrange supplies for developing and least developed countries are showing some positive results. However, such efforts will become more challenging in the coming months as the number of cases in those countries continue to surge and those countries and buying groups compete with the U.S. for supplies.

It has long been known that the world would not be safe from COVID-19 until there were vaccines and therapeutics equitably available to all. For that to be the case, the vaccines and therapeutics need to be affordable for all.

There has historically been the perceived need for countries with the means to secure supplies for their populations during pandemics before making supplies available to all on an equitable basis and at affordable prices. With the COVID-19 seemingly out of control in the United States, there is little doubt that the United States will be doing its best to lock up supplies of vaccines and therapeutics as it has done and as it apparently will need to do to get to the other side of the pandemic.

Activities by the U.S., the EU and others on arranging commitments for promising vaccines and therapeutics will make the global objective of equitable and affordable access harder to achieve.

The reasons for optimism that a better approach will be followed during this pandemic include commitments made by many countries to ensure equitable access at affordable prices, the existence of multilateral organizations working to get getting vaccines to those in need, and the global footprint of at least some of the major companies and consortia developing vaccines and therapeutics which should provide regional production capabilities better able to service global demand.

Look for a challenging rest of 2020 and first half of 2021.

COVID-19, EU move to permit some international travel in addition to intra-EU travel, effects on tourism

Many countries have imposed travel restrictions on visitors from other countries during the COVID-19 pandemic. The International Air Transport Association (“IATA”) reports that there are 163 countries that have some travel restrictions and that 96 countries impose quarantine requirements. See IATA, COVID-19 Government Public Health Mitigation Measures, https://www.iata.org/en/programs/covid-19-resources-guidelines/covid-gov-mitigation/.

Travel and tourism is one of the most seriously harmed economic sectors from the global COVID-19 pandemic for many countries. The UN World Tourism Organization has created “the first global dashboard for tourism insights”. https://www.unwto.org/unwto-tourism-dashboard. The dashboard indicates that COVID-19 will result in the reduction of some 850 million to 1.1 billion tourists with a loss of US$ 910 billion to US $ 1.2 trillion in revenues from tourists with the potential loss of as many as 100-120 million jobs in the sector. These are obviously staggering figures for a sector that has contributed to global economic growth over recent decades. The dashboard has ten slides which shows data for tourism through April 2020 with some projected figures for full year 2020 under various assumptions. Data are presented both globally and for some slides by regions and in a few within regions by country. Thus, in slide 2, global tourism grew 2% in January 2020, declined 12% in February, declined 55% in March and declined 97% in April for a January-April total decline of 43.8%. By region, Europe declined 44%, Asia and the Pacific declined 51%, the Americas declined 36%, Africa declined 35%, and the Middle East declined 40%. While data for May and June are not yet available and may be less severe in terms of contraction than April, the decline in global tourism through June will likely exceed 50% and possibly be even more severe. For data through April 2020 see the link, https://www.unwto.org/international-tourism-and-covid-19.

In prior posts, I have provided background on the sector and the likely toll from the COVID-19 pandemic. See April 30, 2020, The collapse of tourism during the COVID-19 pandemic, https://currentthoughtsontrade.com/2020/04/30/the-collapse-of-tourism-during-the-covid-19-pandemic/; May 3, 2020, Update on the collapse of travel and tourism in response to COVID-19, https://currentthoughtsontrade.com/2020/05/03/update-on-the-collapse-of-travel-and-tourism-in-response-to-covid-19/.

As many countries in parts of Asia, Oceania, Europe and a few other countries have seen significant declines following first wave peaks of COVID-19 cases, restrictions within countries and increasingly on international travel are starting to be relaxed.

The European Union is a large tourist destination and on June 30 announced recommendations for member states to consider in opening up for tourists from both other EU countries and for travelers from outside of the area for nonessential travel. Specifically, the Council of the European Union adopted Council Recommendations on the temporary restriction on non-essential travel into the EU and the possible lifting of such restriction on 30 June 2020. See https://data.consilium.europa.eu/doc/document/ST-9208-2020-INIT/en/pdf. Intra EU travel, travel from Norway, Iceland, Switzerland, Liechtenstein and certain other countries is not part of the third country nonessential travel affected by the recommendations (to the extent adopted by EU members).

The EU Council selected third countries whom the Council recommended have access based on criteria which “relate to the epidemiological situation and containment measures, including physical distancing, as well as economic and social considerations, and are applied cumulatively.” Page 6. The Council lists three critieria: (1) whether the number of new cases over the last 14 days per 100,000 inhabitants is close to or below the EU average (15 June 2020); (2) whether the trend of new cases over the prior 14 day period is stable or decreasing; and (3) considering “the overall response to COVID-19 taking into account available information aspects such as testing, surveillance, contact tracing, containment, treatment and reporting as well as the reliability of available information and data sources and, if needed, the total average score across all dimensions for International Health Regulations (IHR).” Page 6.

Based on these criteria, the EU Council recommends that 15 countries (with China being subject to confirmation of reciprocity by China to EU travelers) “whose residents should not be affected by temporary external borders restriction on non-essential travel into the EU” (Annex I, page 9): Algeria, Australia, Canada, Georgia, Japan, Montenegro, Morocco, New Zealand, Rwanda, Serbia, South Korea, Thailand, Tunisia, Uruguay and China. The Council may review every two weeks whether the list should be modified.

Annex II to the Council recommendations provides an identification of travelers with essential functions for whom the restrictions should not apply. These include healthcare professionals, health researchers, and elderly care professionals, frontier workers, seasonal workers in agriculture, transport personnel, diplomatic personnel, passengers in transit, passengers traveling for “imperative family reasons,” seafarers, third-country nationals traveling for the purpose of study and a few others. Annex II, page 10.

The EU Council Recommendations are embedded below as is a Council press release on the recommendations.

ST_9208_2020_INIT_EN

Council-agrees-to-start-lifting-travel-restrictions-for-residents-of-some-third-countries-Consilium

Obviously many countries are not included on the list of third countries where loosening of restrictions on travel is recommended. The United States, Argentina, Brazil, India, Indonesia, Malaysia, Nigeria, Russia, Saudi Arabia and South Africa are just a few for whom nonessential travel restrictions are not recommended to be lifted. For most of these countries, either the number of new cases has not peaked or has not receded significantly.

For the EU, getting agreement among its members to lift travel restrictions for other EU countries and to start lifting restrictions for travelers from thrid countries has been important as the summer holiday season of July-August arrives. Data from EU tourism statistics showed 710 million international visitors in 2018 (when there were 28 EU members, including the UK). 81% or 575 million visitors were intra-EU, that is traveling from one EU country to another. Thus, for the EU, the biggest return of tourism business involves reopening to travelers from other EU countries. By contrast, visitors from third countries in total were some 19% of the total or 135 million visitors. The US accounted for 11.6% of third country visitors in 2017, some 15.7 million in number. While an important source of third country tourists, The U.S. was just a little over 2.2 percent of total EU global visitors. See http://www.condorferries.co.uk (tourism in Europe statistics). Thus, for tourism, the EU’s reopening recommendations will not return travel and tourism to pre-COVID-19 levels. But the partial reopening could result in a significant rebound in its tourism sector which will be good news for EU businesses involved in the travel and tourism space. Time will tell just how much of a rebound actually occurs.

For other nations, the more countries who get COVID-19 under control and are thus able to open international travel and tourism responsibly, the greater the likely rebound in global travel and tourism will be. However, because many businesses in the travel and tourism space in any country are small businesses, the risk for many countries (whether in the EU or elsewhere) is that the rebound whenever it occurs will happen with a much smaller business base to serve customers. While governments can provide targeted assistance through legislative initiatives, operating conditions for many such businesses post opening do not permit profitable operation where social distancing and other important steps remain critical to safe functioning. So unlike other global crises in the past, there may be large and permanent job losses in the travel and tourism sector flowing from COVID-19.

COVID-19 — the global rate of increase of confirmed cases is surging

By the close of business on June 22, there will be more than 9 million confirmed cases of COVID-19 with the rate of growth exploding more than six months after the first cases were reported in China, with deaths approaching a half million. For the two weeks ending June 21, the number of new cases approached 2 million (1,932,024), up 24.0% from the two weeks ending June 7 (1,557,983) which in turn were up 21.5% from the two weeks ending May 24 (1,281,916). Thus, the last six weeks have seen the rate of new cases grow by 50.7%. Indeed, the last six weeks account for 54.25% of total cases since the end of 2019 (roughly 25 weeks).

As the worst of the pandemic has passed (at least the first wave) for most of the developed world (other than the United States and countries in the Middle East), the sharp growth in cases is mostly due to the spread of the virus in the developing world where healthcare infrastructure and ability to handle the challenges of the pandemic are likely less than for the developed world.

Central and South America, parts of Asia and the Middle East are the current hot spots of infections with growth in a number of African countries as well. The United States which peaked during the two week period ending April 26, has by the far the largest number of total cases (more than 2.2 million) and is seeing the number of cases rise again in the most recent two weeks.

Afghanistan, Argentina, Bangladesh, Bolivia, Brazil, Chile, Colombia, the Dominican Republic, Ecuador, Egypt, Guatemala, Honduras, India, Indonesia, Iraq, Kuwait, Mexico, Nigeria, Oman, Pakistan, Panama, the Philippines, Qatar, Saudi Arabia, South Africa and the United Arab Republic all have significant numbers of cases and all but Kuwait, Qatar and the UAE are still growing rapidly in terms of new cases where peaks have not been reached. Thus, the likelihood of even greater number of new cases is a near certainty for the coming weeks.

Some recent developments

Most of western Europe has been engaged in reopening in recent weeks as the rates of infection are dramatically lower than in the March-April period. Indeed, travel within the EU and some neighboring countries is opening up in time for the July-August vacation season. Time will tell if the steps being taken to test, trace and quarantine any cases found going forward will minimize any upward movement in cases.

China and parts of Asia with low rates of infections where economic interruption has been less (e.g., Taiwan, the Republic of Korea, Singapore and Japan), are seeing low numbers of new cases. China has taken strong measures to address a new outbreak in Beijing (numbers are a few hundred cases).

Australia and New Zealand have few if any new cases and the numbers for Canada are also way down with reopening occurring as would be expected.

The U.S. and Canada and the U.S. and Mexico are maintaining travel restrictions between themselves (though excluding movement of goods and services).

In the United States, the story on the control of the pandemic is very mixed as individual states have been engaged in reopening at different rates in part reflecting different infection rates and growth rates. However, reopening in some states is occurring despite conditions in the state not being consistent with the Administration’s guidelines from the Center for Disease Control ad Prevention (“CDC”) on when reopening should occur. Thus, there are states seeing large increases in recent days and weeks while many other states are seeing significant declines or at least stable rates of infection. It is unclear how the infection rate in the U.S. will progress in the coming weeks and months.

Trade Considerations

As my post from last week on the Ottawa Group communication reviewed, there are lots of proposals that have been teed up by WTO Members to keep trade flowing during the pandemic and to potentially reduce the likelihood of such trade disruptions as are being experienced at present in future pandemics.

But large numbers of export restraints remain in place, transparency is better than it was in the first quarter but still not what is needed. However, import liberalization/expedition is occurring in many countries to facilitate obtaining medical goods needed at the lowest price.

The toll flowing from the pandemic and the closing of economies to control the pandemic is enormous despite efforts of governments to provide funding to reduce the damage. This has led the WTO to project 2020 trade flows to decline between 13 and 32% from 2019 levels. As data are available for the March-June period, the severity of the decline for various markets is being fleshed out and resulting in lower global GDP growth projections.

Because the COVID-19 pandemic hit many developed countries hard before spreading to most of the developing world, developing countries have seen economic effects from the pandemic preceding the health effects in their countries. Reduced export opportunities, declining commodity prices (many developing countries are dependent on one or a few commodities for foreign exchange), reduced foreign investment (and some capital flight), higher import prices for critical goods due to scarcity (medical goods) and logistics complications flowing from countries efforts to address the spread of the pandemic are a few examples of the economic harm occurring to many developing countries.

The needs of developing countries for debt forgiveness/postponement appears much larger than projected although multilateral organizations, regional development banks and the G20 have all been working to provide at least some significant assistance to many individual countries. Trade financing will continue to be a major challenge for many developing countries during the pandemic. Harm to small businesses is staggering and will set many countries back years if not decades in their development efforts when the pandemic is past.

As can be seen in developed countries, sectors like travel and tourism (including airlines, hotels, restaurants, entertainment venues) are extraordinarily hard hit and may not recover for the foreseeable future. The need for social distancing makes many business models (e.g., most restaurants, movie theaters, bars, etc.) unworkable and will result in the loss of large portions of small businesses in those sectors in the coming months. For many developing countries, travel and tourism are a major source of employment and income. Losses in employment will likely be in the tens of millions of jobs, many of which may not return for years if at all.

Role of WTO during Pandemic

The WTO views itself as performing the useful functions of (1) gathering through notifications information from Members on their actions responding to the pandemic and getting that information out to Members and the public, (2) providing forecasts of the trade flows during the pandemic, and (3) providing a forum for Members to bring forward proposals on what action the WTO as a whole should consider. Obviously the success of all three functions depends on the openness and engagement of the Members.

WTO agreements don’t really have comprehensive rules for addressing pandemics or for the policy space governments are likely to need to respond to the economic tsunami that may unfold (and will unfold with different intensities for different Members). Some recent proposals would try to address some of the potential needs for the trading system to better respond to pandemics. However, most proposals seem to suggest narrowing the policy space. Last week’s Committee on Agriculture was reported to have had many Members challenging other Members actions in the agriculture space responding to the extraordinary challenges flowing from the pandemic. While Committee activity is designed to permit Members the opportunity to better understand the policies of trading partners, a process in Committee which focuses simply on conformance to existing rules without consideration of what, if any, flexibilities are needed in extraordinary circumstances seems certain to result in less relevance of the WTO going forward.

Most countries have recognized that the depth of the economic collapse being cased by the global efforts to respond to COVID-19 will require Members to take extraordinary steps to keep economies from collapsing. Looking at the huge stimulus programs put in place and efforts to prevent entire sectors of economies from collapsing, efforts to date by major developed countries are some $10 trillion. Concerns expressed by the EU and others have generally not been the need for such programs, but rather have been on ensuring any departures from WTO norms are minimized in time and permit a return to the functioning of market economies as quickly as possible.

Members have not to date proposed, but should agree, that the WTO undertake an evaluation of programs pursued by Members and how existing rules do or do not address the needs of Members in these extraordinary times.

COVID-19 – continued global growth of cases; shift continues to Latin America, parts of Asia and the Middle East

Four months after COVID-19 peaked in China, where the virus started, the world continues to stagger under an expanding case load of confirmed COVID-19 cases. Indeed, in the last two weeks new cases around the world have increased by 1.567 million to reach a current global total since the end of December of 6.835 million as of June 7. These number compare to less than 55,000 global cases (nearly all in China) in early February. During the last two weeks, new confirmed cases increased 22.32% from the prior two weeks and continue a chain of unbroken increases since the beginning of March.

As much of the developed world has seen a peak in the number of cases, the continued growth in new cases reflects shifting centers or hot spots generally to developing countries. In looking at 25 countries that have accounted for more than 80% of all cases through June 7, ten of these countries have not yet reached a peak — Brazil, Chile, Egypt, India, Iran, Mexico, Nigeria, Pakistan, Peru, South Africa — while the other fifteen have peaked and seen declines from peak of between 10% and 99%. These fifteen countries are Canada, China, France, Germany, Italy, Japan, Russia, Saudi Arabia, Singapore, South Korea, Spain, Taiwan, Turkey, United Kingdom and the United States. Still these 25 countries saw a combined increase in total new cases of 18.7% in the last fourteen days. All other countries saw a much larger increase in new cases, 39.61% from 220,812 cases the previous 14 days to 308,293. Some countries of note in this “all other” grouping include Cameroon, Central African Republic, Democratic Republic of the Congo, Ethiopia, Kenya, Sudan, Argentina, Bolivia, Colombia, Guatemala, Haiti, Venezuela, Afghanistan, Bangladesh, Iraq, Nepal, Oman, Qatar, Armenia, and Azerbaijan. See https://www.ecdc.europa.eu/en/geographical-distribution-2019-ncov-cases. June 7th report embedded below.

COVID-19-situation-update-worldwide-as-of-7-June-2020

The shifting focus of cases to developing and least developed countries raises increased concerns about access to medical goods, including personal protective equipment, ventilators, and other goods. The WTO’s list of measures applied by Members dealing with COVID-19 either to restrict exports of medical goods or food products or to improve market access , shows dozens of countries applying export restraints on various medical goods (masks, gloves, etc.) including countries where new cases are well past peak (indeed where new cases may be 90% below peak). The WTO information is current as of May 29, 2020. There are also a large number of countries reducing tariffs or streamlining importation of medical goods. https://www.wto.org/english/tratop_e/covid19_e/trade_related_goods_measure_e.htm.

Moreover, health care infrastructure is often weaker in many of these countries facing growing COVID-19 cases, and the structure of their economies may complicate the ability of governments to address the pandemic even if medical goods are available. A recent article reviews the challenges in Latin America. See https://www.cnn.com/2020/06/06/americas/latin-america-coronavirus-intl/index.html.

Some major players like the United States, the European Union and its member states, and China are both investing large amounts in research and development and also securing early access to any vaccines developed through early commitments and other actions. https://www.biospace.com/article/eu-using-2-7-million-emergency-fund-to-buy-promising-covid-19-vaccines/. With the number of R&D projects ongoing around the world and the efforts of companies and governments to get manufacturing geared up early on promising products, the likelihood of earlier availability of large quantities of vaccines should there be breakthroughs has improved.

The question of equitable and affordable availability for all peoples is certainly there for a global pandemic where major players are funding research and have the resources to get early commitments for supplies. But greater manufacturing capacity earlier should improve global availability. So too the efforts of many countries, organizations and businesses to ensure both availability of vaccines and the distribution of such products to those in need is a major factor in ensuring greater access at affordable prices. As the news from the June 4 GAVI conference in London demonstrates, many are uniting to ensure that small children who have been unable to receive various immunizations against other diseases are able to do so yet this year as well as meet the needs of the pandemic for many developing and least developed countries. See https://www.gavi.org/news/media-room/world-leaders-make-historic-commitments-provide-equal-access-vaccines-all.

Conclusion

The pandemic is continuing to worsen on a global basis even as parts of Asia, Western Europe, Oceania, Canada and the United States are post-peak and starting a process of reopening. The tremendous growth in the number of cases is in developing and least developed countries, those least prepared to handle the health and economic fall out.

The trade news is mixed. Many countries are liberalizing imports of medical goods during the pandemic which is obviously a positive. However, dozens of countries have introduced export restrictions in an environment in which global supply has lagged global demand, and countries have scrambled to protect access to what supplies they can. Many of these restrictions should be removed at this point, at least by countries that are well past peak demand situations.

Ramp up in global production of many medical goods has occurred, though it is unclear if demand/supply balance has been achieved or how/if the world will build the necessary national and regional inventories to handle a second wave or future pandemics. Moreover, without knowing how much larger the number of new cases will become before there is a global peak, it is hard to know if expansion of production of medical goods will be adequate to meet demand in the coming months. Efforts by the G-20 in the trade and investment area are a start but limited in terms of likely actual effect.

Factually, there have substantial declines in global trade flowing from the lock down situation in large parts of the world over the last few months. Trade flows should increase in those parts of the world where reopening is occurring but will likely further decrease in countries where the pandemic is picking up its infection rate. The economic toll on many countries who have come through the worst of the pandemic has been unprecedented and will present challenges to their ability to rebound quickly and to their willingness to increase financial assistance to others.

While success in finding vaccines or therapeutics is never guaranteed (indeed no vaccine for HIV has been found despite efforts for 40 years), there has never been the global focus on R&D and the willingness to risk large amounts of capital to be ready to produce large volumes of doses for any products demonstrating effectiveness. While the global community is not unified in its support of the WHO or in cooperating to achieve equitable and affordable access for all, there has been important support for both which should improve achieving a global solution if vaccines are developed that are effective.

Finally, it is hard to imagine significant forward movement at the WTO on its current negotiations or on WTO reform (including of the dispute settlement system) while Members are struggling to address the fallout from the pandemic. And, of course, with the WTO turning its attention to the selection of a new Director-General in light of DG Azevedo’s departure at the end of August, achieving focus on the normal work of the WTO will be that much harder until a new DG has been selected.

Bottom line – a continued difficult 2020 in the second half of the year.

COVID-19 — new hotspots amidst continued growing number of confirmed cases

On May 25th, there is continued global growth in the number of COVID-19 cases despite apparent control of the virus in its origin, China, and in a number of Asian countries that had early case loads. There also has been a sharp contraction in western Europe which had been a major hot spot for March and April and some decline in the United States, the country with the largest number of cases. Despite the positive news from some parts of the world, there have been sharp upticks in South America, in Russia, in various countries in the Middle East and in parts of Asia. While the numbers remain relatively low in Africa, there are also countries in Africa going through significant growth in the number of cases.

The European Centre for Disease Prevention and Control puts out a daily compilation of the global situation and includes epidemiological curves for the world broken by continents (as they have characterized countries and continents). The link to today’s issue is here and shows the bulk of the volume of new confirmed cases continuing to be from the Americas, with increasing volumes of new cases also coming from Asia. The data show reduced volumes of new cases from Europe and growing volumes of new cases (though still quite small) from Africa. https://www.ecdc.europa.eu/en/geographical-distribution-2019-ncov-cases.

In South America, Brazil’s case load is skyrocketing, and the country now has the second most cases after the United States. Peru, Chile, Colombia, Argentina, and Bolivia are other countries in South America going through rapid growth rates in the number of new COVID-19 cases in the last two weeks.

In North America, Mexico’s cases are increasing rapidly, and the U.S., while having apparently peaked and started a decline, still shows the largest number of new cases of any country in the last two weeks.

In Europe, Russia, while appearing to have peaked, still has very large numbers of new cases and has the third largest number of cases of any country.

In the Middle East, a number of countries have large increases in the number of new cases, including Saudi Arabia, Kuwait, Qatar and the UAE.

In Asia, India and Pakistan are seeing large increases in the number of new cases.

In Africa, just two countries have as many as 10,000 confirmed cases — South Africa with 21,343 cases and Egypt with 16,613. Both countries have seen large increases in the last two weeks.

So the bottom line is that five months since data started to be collected on COVID-19 cases, the world is seeing continued growth in the number of new cases reported daily with a significant shift in the number of cases from China, Western Europe and parts of Asia to new hot spots in Russia, South America, the Middle East, certain large countries in Asia and in Africa.

Looking at twenty-two countries who were either early countries with COVID-19 confirmed cases or countries who have seen large increases in the first five months, there are other take-aways. The table in the embedded document below was compiled from the ECDC data base through May 24 (with updates for the U.K. and Spain for 5/24 since the 5-24 publication stopped at 5-23 for those two countries). The table has eleven columns of fourteen day periods from Jan. 6, 2020 through May 24, 2020 and a twelfth column showing data for the six day period Dec. 31, 2019 – January 5. The twenty-two countries shown accounted for 4,289,037 confirmed cases of the 5,273,572 global total cases shown in the May 24th publication (81.33% of all cases). Yet despite the presence of China, Japan, South Korea, Singapore, Taiwan, France, Germany, Italy and Spain among the 22 (all of whom show sharp declines in new cases in the last month or so), the number of new cases from the 22 countries collectively continues to increase each two weeks.

COVID-19-geographic-disbtribution-worldwide-2020-05-24

Countries who have dealt with COVID-19 most successfully had relatively short periods of peak numbers of new cases and sharp contractions of new cases within a month of the peak. The United States has had a relatively longer-term plateau of high infection rates and more limited reductions after the peak. Some of the new hot spots are still growing and so haven’t even peaked. If their internal efforts to control the spread of COVID are not more successful than the experience of the United States, the world is likely to continue in a period of upward growth of global cases which will keep extreme pressure on the global supply of medical goods needed by first responders and the public more generally. New hot spots will also necessarily mean a shifting of where health care systems are overwhelmed by rising numbers of cases.

In a prior post, I reviewed the recent G20 Trade and Investment Ministers statement and agreed program to support keeping trade flowing during the COVID-19 pandemic and addressing longer term needs, including increased capacity for medical goods. See G20 Trade and Investment Ministerial Meeting – Meaningful Help for COVID-19 Response and WTO Reform? https://currentthoughtsontrade.com/2020/05/17/g20-trade-and-investment-ministerial-meeting-meaningful-help-for-covid-19-response-and-wto-reform/.

There have been various articles reviewing some of the increased production occurring in China, in the EU and in the United States, among other countries. Such increased production provides the hope that the gap between supply and demand has been reduced or eliminated for some products. Declining number of new cases for many countries also means that their internal needs have decreased, which should permit redirecting supplies to countries in need.

For example, with the expansion of U.S. production of ventilators and the peaking of new cases about a month ago in the U.S., the U.S. has shifted from searching the world for ventilators to indicating it will export ventilators to countries in need (including the recent export of 50 U.S.-made ventilators to the Russian Federation). The level of increased production in the United States, an increase of more than 100,000 units, should significantly reduce any global supply deficiency for ventilators going forward. See https://www.npr.org/sections/coronavirus-live-updates/2020/05/21/860143691/u-s-sends-ventilators-to-russia-in-5-6-million-coronavirus-aid-package; https://www.politico.com/news/2020/04/21/trump-ventilators-africa-aid-199006.

One risk that remains is whether any increased production will be maintained over time or permitted to atrophy once the pandemic’s first phase has run its course.

Another risk goes to whether countries will address whatever barriers or disincentives exist to develop the needed capacity, increase the reliability of supply chains (with the possibility of some reshoring or building in greater redundancies in supply chain capabilities), or develop the inventories of medical supplies needed for addressing a phase 2 or some subsequent pandemic.

Finally, dozens of countries have imposed export restraints on medical goods to address domestic demand needs as the number of cases were increasing in the individual country. While the WTO provides flexibilities for countries to impose such restraints, the flexibilities are intended to be used only for temporary purposes. Many of the restraints imposed have not been removed by countries even if their current situation should permit the reduction or elimination of the restrictions. Hopefully the WTO review process and agreements by G20 and other groups will facilitate a rapid elimination of such restraints when no longer needed or justified.

Conclusion

Most of the developed world has come through the first phase of the COVID-19 pandemic in terms of controlling the spread and reducing the number of new confirmed cases. Countries who have gotten past their peak infection rates are now starting to reopen their economies to reduce the economic damage that has already been extraordinary for many countries.

Unfortunately, other countries, who have not been the hot spots for COVID-19, see increases in cases that surpass the declines in those who have gotten through the peaks of infections in their countries. Thus, total new cases continue to increase even after five months since data were first collected.

The growing number of confirmed cases make collective efforts to keep markets open and any export restraints imposed temporary in fact, to expand production of medical supplies, to share best practices, to ensure adequate financial resources for the world’s poorest countries and to expedite development of vaccines and therapeutics critical if the extent of the economic and human damage from this pandemic is to be capped and reduced going forward in the second half of 2020.

G20 Trade and Investment Ministerial Meeting — Meaningful Help for COVID-19 Response and WTO Reform?

On May 14, 2020, the G20 trade and investment ministers held a virtual meeting to consider proposals for joint action pulled together by the Trade and Investment Working Group (“TIWG”) on the topic of “G20 Actions to Support World Trade and Investment Through the COVID-19 Pandemic”.

The Ministerial statement released on the 14th endorsed the TIWG proposals which were attached to the statement and contain both short-term actions designed to “alleviate the impact of COVID-19” and longer-term actions intended to “support the necessary reform of the WTO and the multilateral trading system, build resilience in global supply chains, and strengthen international investment.” https://g20.org/en/media/Documents/G20SS_Statement_G20%20Second%20Trade%20&%20Investment%20Ministerial%20Meeting_EN.pdf.

The WTO’s Director-General Roberto Azevêdo welcomed the Ministerial statement and provided the following characterization of its content:

“DG Azevêdo hails G20 pledges on trade cooperation in COVID-19 response

“WTO Director-General Roberto Azevêdo welcomed G20 ministers’ endorsement of collective action measures to mitigate the impact of the COVID-19 pandemic on trade and investment and help foster
global economic recovery. The initiatives were endorsed at a virtual meeting of the G20 trade and investment ministers on 14 May.

“The actions include short-term responses designed to prevent trade logjams and facilitate trade in products needed to contain COVID-19, as well as longer-term support to reform the multilateral trading system, build resilience in global supply chains, and strengthen international investment.

“The G20 ministers pledged to promote WTO reform and ‘support the role of the multilateral trading system in promoting stability and predictability of international trade flows’. They agreed to ‘explore COVID-19 related WTO initiatives’ to promote more open and resilient supply chains, and expand production capacity and trade in pharmaceuticals, medical and other health-related products

“’These commitments by G20 ministers represent an important collective response to the trade-related challenges raised by the COVID-19 pandemic,’ said DG Azevêdo. ‘Maintaining stability and predictability in trade relations is critical to ensuring that essential medical supplies are available to save lives, and that global food security and nutrition do not become a casualty of this pandemic.’

“Echoing language from their first crisis meeting in late March, G20 ministers said that any emergency restrictions on trade in vital medical supplies and services should be targeted, proportionate, transparent and temporary, and should not create unnecessary barriers to trade or disrupt global supply chains. They also agreed to strengthen transparency and notify the WTO of any trade-related measures taken. They urged governments to refrain from excessive food stockpiling and export restrictions on agricultural products.

“In addition, the G20 ministers endorsed trade facilitation initiatives, including accelerated implementation of provisions in the WTO’s Trade Facilitation Agreement, such as pre-arrival processing and expedited shipment, which could speed up access to essential goods during the pandemic. They also called for streamlining customs procedures and encouraging greater use of international standards to reduce sanitary and technical barriers to trade.

“Ministers also agreed to work together to identify key areas where investment is needed, in particular for critical medical supplies and sustainable agriculture production, and to encourage
investment in new production capacity for medical supplies.

“The extraordinary meeting of G20 trade and investment ministers was organized by the Kingdom of Saudi Arabia, which currently holds the group’s rotating presidency.”

https://www.wto.org/english/news_e/news20_e/igo_14may20_e.htm.

Because the G20 member countries have differing views on flexibilities needed, already taken, and potential space that may be needed in the future, much of the “actions” agreed to are more aspirational than commitments to avoid trade restrictive actions.

ANNEX to Ministerial Statement of May 14, 2020, G20 Actions to Support World Trade and Investment in Response to COVID-19

The Annex to the Ministerial Statement contains 19 “short-term collective actions” broken into five areas — “trade regulation”; “trade facilitation”; “transparency”; “operation of logistics networks”; and “support for micro, small, and medium-sized enterprises (MSMEs)”.

Trade regulation

On trade regulation, the three specific actions don’t ban export restraints for medical goods or agricultural products but rather provide avenues for such actions to be taken.

On medical goods, the action taken merely repeats the prior statement from the trade and investment ministers that any such actions are “targeted, proportionate, transparent, temporary” and “do not create unnecessary barriers to trade or disruption to global supply chains, and are consistent with WTO rules”. Para. 1.1.1.

Similarly, on agricultural restrictions, G20 countries agree to “refrain from introducing export restrictions” “avoid unnecessary food-stockpiling” but “without prejudice to domestic food security, consistent with national requirements.” Para. 1.1.2.

Finally, there is an aspirational action to “Consider exempting humanitarian aid related to COVID-19 from any export restrictions on exports of essential medical supples, medical equipment and personal protective equipment, consistent with national requirements.” Para. 1.1.3.

Considering the number of G20 countries who have had in place or continue to have in place export restraints on medical goods and the history of export restraints on agricultural goods and/or buildup of food stockpiling by some G20 countries, it is not surprising that more ambitious objectives have not been possible. For example, information compiled by the WTO Secretariat shows that nearly all G20 countries have had or continue to have export restraints on medical goods flowing from the COVID-19 pandemic. Indeed, the US, EU, Argentina, Australia, Brazil, India, Indonesia, Republic of Korea, Russia, Saudi Arabia, South Africa, Turkey and the United Kingdom are in the WTO data. While China is not included, their export restrictions on medical goods likely predated the data collection done by the WTO Secretariat. See https://www.wto.org/english/tratop_e/covid19_e/trade_related_goods_measure_e.htm. Similarly, Russia has agricultural export restraints in place and China, India and Indonesia have used them in the 2007-2008 food shortage challenge.

Trade facilitation

The Annex includes eight agreed “actions” under the heading of trade facilitation. Most of these actions are similarly not binding but are aspirational or encouraged. In fact five of the eight include the word “encourage”. Others include language like “to the extent possible” or “as appropriate and according with applicable national legislation”.

That said, many of the G20 countries and others have been taking actions to streamline the release of imported medical goods and other actions that are consistent with the objectives of the Trade Facilitation Agreement.

Two of the provisions under trade facilitation really go to the issue medical goods capacity, product availability and capacity expansions and are noteworthy as encouraging sharing of information on producers of product and also encouraging expansion of medical goods capacity. Paras. 1.2.4 and 1.2.5. As I have noted in prior posts, there has been and continues to be an imbalance between global capacity to produce the medical goods needed to fight COVID-19 and the demand for countries experiencing outbreaks. See, e.g., Shifting Trade Needs During the COVID-19 Pandemic, https://currentthoughtsontrade.com/2020/04/28/shifting-trade-needs-during-the-covid-19-pandemic/. If the world doesn’t address the supply/demand imbalance, it is highly improbable that most countries won’t enact export restraints to prevent the loss of needed goods that are in country during surging demand. While neither G20 agreed action is binding, both are helpful to improve knowledge of available supplies and hopefully to expand that supply.

The last trade facilitation action merely calls for G20 countries to “Support the efforts of international organizations (WTO, FAO, WFP, etc.) to analyze the impacts of COVID-19 on global agricultural supplies, distribution chains and agri-food production and trade.” Para. 1.2.8. Many of the G20 are signatories to statements indicating they will not impose export restraints on agricultural goods or urge restraint on the use of such restraints. There has not been a food shortage in 2020, and mechanisms put in place after the 2007-2008 food shortages to monitor food supplies have helped to provide governments with better information on likely problems. At the same time, the COVID-19 pandemic has created challenges in getting agricultural products harvested, processed and distributed. If these challenges are not properly handled, the world could find local or regional food shortages not because of lack of product but from an inability to get the product harvested, processed and distributed. With COVID-19 outbreaks in meat processing plants in various countries (United States, Canada, Germany to name just three) and with travel restrictions limiting movement of temporary farm workers, the challenges are real. Work of the international organizations is important for information gathering and dissemination.

Transparency

There are two action items under transparency — to share experiences and best practices; to notify trade-related measures to the WTO as required by obligations to the WTO.

The first should be helpful depending on openness of governments and willingness of governments to share experiences in fact. The latter action reflects the fact that countries (whether G20 or otherwise) have in some cases been slow to provide notifications or have taken limited views of their obligations to report certain trade related activities.

Operation of logistics networks

The four agreed actions under this title all involve trade ministers encouraging G20 Transport Ministers to take actions that will speed the movement of medical goods, increasing air cargo capacity, improve transparency on enforcement measures and “to abide by international practices and guidelines to ensure the movement of goods through maritime channels.” Paras. 1.4.1 – 1.4.4.

Support for micro, small, and medium-sized enterprises (MSMEs)

There are two action items for this topic — calling for reports from international organizations that would look at the “disruption of global value chains caused by the pandemic on MSMEs”; and encouraging enhancement of communication channels and networks for MSMEs, including through deepened collaboration with the private sector.” Paras. 1.5.1 and 1.5.2.

MSMEs are important engines of economic growth for all countries and are significantly adversely affected by the governmental actions needed to address the COVID-19 pandemic. For many countries, the bulk of the response for MSMEs will be through financial support legislation as can be seen by summaries of actions taken compiled by one or more of the international organizations. See, e.g., IMF, Policy Responses to COVID-19, https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19 Thus, the two actions contained in the G20 trade and investment ministers statement are helpful for considering future actions but don’t address the core immediate needs which are handled by other ministers.

Longer-term collective actions

The Annex also contains nineteen specific agreed actions for the longer term. The actions are broken into three topics — supporting the mutilateral trading system; building resilience in global supply chains; and strengthening international investment.

Like the short-term actions, the agreed list reflects the limitations on achieving G20 consensus because of different perspectives of G20 members. Some members like the EU have an interest in pursuing tariff eliminations on medical goods, an issue that the U.S. is not willing to explore until the pandemic has passed. Thus, there is no action item to achieve tariff elimination on such products in the longer-term actions.

Supporting the multilateral trading system

There are seven action items which include WTO reform (para 2.1.1), how the G20 can support work at the WTO (para 2.1.2), strengthening transparency and WTO notifications (para. 2.1.3), working “together to deliver a free, fair, inclusive, non-discriminatory, transparent, predictable and stable trade and investment environment and to keep our markets open” (para. 2.1.4), “work to ensure a level playing field” (para. 2.1.5), importance of interface between trade and digital economy and need for e-commerce agreement (para. 2.1.6), and exploring “COVID-19 related WTO initiative to promote open and more resilient supply chains, and expand production capacity and trade” in medical goods (para. 2.1.7).

These action items will have very different meanings depending on the G20 member who is interpreting them. Thus, the EU, Japan and the U.S. would have very different interpretations of ensuring a level playing field than would China and possibly others. India and South Africa have different views on e-commerce and making permanent no tariffs on digital trade than would the U.S., Japan and others

Still support for WTO reform, global rules on e-commerce, increased transparency and the other issues should help provide some focus in the ongoing efforts at the WTO for a future agenda and reform.

As noted in the short-term actions, greater focus by G20 countries on the supply/demand imbalance in medical goods is critical to avoid many of the same shortage issues in future pandemics or future waves of the COVID-19 pandemic. Thus, the support for para. 2.1.7 is potentially important.

Building resilience in global supply chains

There are five action items included under this topic which are positive. These include sharing best practices, strengthening cooperation on regulation of trade (including customs and electronic document management), ensuring transparency of trade-related information useful to MSMEs, encouraging cooperation between multinationals and MSMEs, and establishing voluntary guidelines that would permit essential cross-border travel during a health crisis. Paras. 2.2.1 – 2.2.5.

While these action items could be useful going forward, there is a major omission in this important category. Does building resilience in global supply chains necessitate building in increased redundancy or for onshoring some products or inputs? This is an important issue that has raised concerns among some G20 members that there is too great dependence on certain countries for input materials and that supply chains don’t have sufficient redundancy or are too “global” and not sufficiently regional or national. The United States, for example, has expressed concerns about over dependence on other countries and has been looking at encouraging domestic production of some key products/inputs. Such an approach is not supported by the EU or China. See statement of Ambassador Lighthizer at the virtual G20 Trade and Investment Ministers meeting of May 14 and the statements of the U.S., EU and Chinese Ambassadors to the WTO’s virtual General Council meeting on COVID-19 responses lays out the different perspective on this and some other issues. See https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/may/second-g20-extraordinary-trade-and-investment-ministers-meeting-remarks-ambassador-robert-e; https://geneva.usmission.gov/2020/05/15/statement-by-ambassador-dennis-shea-at-the-may-15-2020-general-council-meeting/; https://eeas.europa.eu/delegations/world-trade-organization-wto/79401/eu-statement-informal-general-council-meeting-15-may-2020_en; http://wto2.mofcom.gov.cn/article/chinaviewpoins/202005/20200502965217.shtml. While G20 countries generally all agree that it is not possible to be self-sufficient in the medical goods area, that view doesn’t answer the question of whether supply chains should be changed or whether there are certain products where a country or countries could decide self-sufficiency is sufficiently important to take different actions. From the very different views on this topic, it is not surprising that the G20 collective long-term actions were limited in the building resilience group of actions, and such differences also likely influenced the language used in the third section on strengthening international investment.

Strengthening international investment

The last seven long-term collective actions focus on the obvious need for improved investment in medical goods to reduce the stress on the global system that has flowed from the imbalance in supply versus demand and the lack of adequate national, regional and global inventories.

Collective actions include sharing best practices on promoting investments in sectors where there have been shortages (para. 2.3.2), working together to identify key areas where additional investment is needed in both medical goods and agriculture (para. 2.3.3), and four paragraphs (2.3.4 – 2.3.7) encouraging investment in new capacity, working with the private sector to identify opportunities, and other items. The last action item calls on G20 governments to “Encourage cooperation on technical assistance and capacity building provided to developing and least developed countries on investment promotion.” Para. 2.3.7.

Because many countries have been encouraging expanded production of medical goods since the outbreak of the pandemic, there is a great deal of investment that has been happening, including converting (at least short term) production lines to medical goods in short supply. Missing from the collective actions is any encouragement to the Finance Ministers to ensure the international organizations work with developing and least developed countries to ensure adequate regional inventories of medical goods to help such countries address outbreaks of COVID-19.

The G20 Trade and Investment Ministers Statement of May 14 is embedded below.

G20SS_Statement_G20-Second-Trade-Investment-Ministerial-Meeting_EN-1

Conclusion

The COVID-19 pandemic continues to infect millions of people around the world and has resulted in massive economic dislocations and the loss of tens of millions of jobs just in the United States. The G20 has been doing a reasonable job of providing leadership in how to address the pandemic and how to help the world recover as the pandemic recedes. The significant differences between G20 members on some issues have resulted in actions being taken that are either aspirational or simply encouraged, as stronger action was not possible absent consensus. But the May 14 Ministerial Statement is another positive step and provides ongoing recognition of needing to address the supply/demand imbalance to permit all countries to be able to obtain medical goods needed when the pandemic creates hot spots in their countries.

The U.S. Modifies the List of Developing and Least Developed Countries Under U.S. Countervailing Duty Law

During the Uruguay Round, various special and differential treatment provisions were included in the agreements being negotiated. The Agreement on Subsidies and Countervailing Measures (“ASCM”) included provisions that would give developing countries and least developed countries higher subsidy de minimis levels and higher negligibility levels. See ASCM Art. 11.9 (de minimis level of subsidies is 1%; negligible imports not subject to orders), Art. 27.10 (de minimis level of subsidies is 2% for developing countries; negligibility is 4% of total imports for developing countries or 9% for multiple developing countries).

The Uruguay Round Agreements Act implemented these requirements within U.S. law. Negligible imports from any country are 3% of total imports (7% for multiple countries each less than 3%) and 4% and 9% for developing/least developed countries. De minimis subsidy levels are 1% generally but 2% for developing and least developed countries. See 19 U.S.C. 1671b(b)(4) and 19 U.S.C. 1677(24)(A) and (B).

Under U.S. law, the U.S. Trade Representative is charged with developing a list of developing and least developed countries for purposes of U.S. countervailing duty law. Such a list should be published and should be updated as necessary. 19 U.S.C. 1677(36). While some criteria are listed in the statute, USTR is given discretion on what other criteria to consider.

The first list was published in 1998 on June 2, 63 FR 29945-29948. https://www.govinfo.gov/content/pkg/FR-1998-06-02/pdf/98-14737.pdf. A revised list was published on February 10, 2020, 85 FR 7613-7616. https://www.govinfo.gov/content/pkg/FR-2020-02-10/pdf/2020-02524.pdf.

The New List Brings Forward the U.S. Position at the WTO on Need for Differentiation Among Countries

The Federal Register notice of February 10, while not referencing the U.S. position at the WTO on the need for differentiation for purposes of which WTO Members take advantage of special and differential treatment, largely uses the same factors proposed at the WTO for determining which countries should not be afforded developing country/least developed country status for purposes of U.S. countervailing duty law.

Specifically, USTR for its new list looked to (1) per capita GNI excluding any country listed as a high income country by the World Bank, (2) share of world trade (reduced from 2% in 1998 to 0.5% in 2020), (3) membership or application for membership in the OECD, (4) G20 membership, (5)(not in the WTO differentiation proposal) membership in the EU and (6) any WTO members who did not declared itself a developing country during accession to the WTO where its per capita GNI is lower than high income. A country that satisfied any of the five criteria are excluded from the higher de minimis and higher negligibility standards

High income countries based on World Bank June 2019 data

The World Bank list shows 218 countries/territories and identifies whether they are high income or lower income countries on a per capita GNI. The last data for June 2019 shows 80 of 218 countries being high income. See https://blogs.worldbank.org/opendata/new-country-classifications-income-level-2019-2020.

Various countries or territories like Korea, Taiwan, Saudi Arabia, UAE, Qatar, Hong Kong, Macao, Singapore, Oman, Chile are listed as high income and would not be eligible for increased de minimis or higher negligibility standards under U.S. countervailing duty law based on this criteria.

Share of world trade (0.5% or greater)

Besides Korea, Hong Kong and Singapore which had been excluded from the 1998 list based on their share of global trade, the new list excludes Brazil, India, Indonesia, Malaysia, Thailand and Viet Nam based on share of world trade figures. 85 FR at 7615.

Membership in or application to the OECD

Colombia and Costa Rica are excluded from higher de minimis and negligibility levels under U.S. countervailing duty law based on their application for membership to the OECD. 85 FR at 7615.

Membership in the G20

The G20 came into existence in 1999, thus after the 1998 list was published by USTR. China has not been treated as eligibile for higher de minimis or higher negligibility levels and continues not to be considered for eligibility. Other G20 countries (besides China) who are not eligible despite per capita GNI levels below high income are Argentina, Brazil, India, Indonesia, and South Africa. 85 FR at 7615.

Membership in the EU

Several EU member countries are not high income countries on the World Bank list but are excluded from higher de minimis and negligibility levels on the new list — Bulgaria and Romania. 85 FR at 7615.

WTO Members who have not claimed developing country status at accession

While the U.S. would not have flagged countries who did not claim developing country status at accession but whose per capita GNI was below high income as needing to be addressed in its differentiation papers at the WTO, such countries are not included in the list of countries eligible for higher de minimis and negligibility levels under U.S. countervailing duty law. This list includes Albania, Armenia, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, Montenegro, North Macedonia and Ukraine.

Likely Importance of the Changes in the USTR List

Data compiled by the WTO from country notifications of investigations brought under national countervailing duty laws, shows that between January 1, 1995 and June 30, 2019 (latest data presently available), the U.S. initiated 254 countervailing duty investigations. One or more investigations were brought against imports of products from 37 countries. See the WTO chart below.

CV_InitiationsRepMemVsExpCty

While there have been no countervailing duty cases in the United States against the vast majority of WTO Members during the first twenty-five years of the WTO, the changes in the list could be relevant for some countries where there have been CVD cases in the past — Argentina, Brazil, India, Indonesia, Malaysia, South Africa, Vietnam being the most likely countries affected. Any changes in results would depend on the underlying facts and may be relevant in only some cases or for one or more producers in a given case.

Conclusion

Monday’s Federal Register notice from the U.S. Trade Representative will not result generally in significant changes in how U.S. countervailing duty law operates. It could be important in particular cases or against particular exporters.

The real importance would appear to be the Administration’s taking its views on differentiation and applying them to an important U.S. trade remedy as a sign of the seriousness of the need to obtain a modification to who is eligible for special and differential treatment. The larger issue is viewed by the United States as critical to restoring the negotiating function at the WTO.

U.S. Additional Tariffs on Imports of Steel and Aluminum “Derivative” Products — Presidential Proclamation 9980

The United States conducted two investigations under Section 232 of the Trade Expansion Act of 1962, as modified, in 2017 with findings that imports of steel and aluminum products were a threat to U.S. national security. Import relief (25% on covered steel products and 10% on covered aluminum products) was imposed by mid-2018. Retaliation by many trading partners followed without resort to WTO dispute settlement. Dispute settlement cases were also filed by a number of countries. The U.S. also filed disputes against those countries who had retaliated without obtaining final reports or decisions from the WTO panels or Appellate Body and authorization if the U.S. did not comply with any loss that might have happened. All the disputes that are ongoing are at the panel stage at the WTO.

A number of countries agreed to other arrangements with the U.S. or were excluded from coverage. These included Argentina, Australia, Canada and Mexico for aluminum products and those countries plus Brazil and South Korea for steel products.

On January 24, 2020, President Trump issued a Presidential Proclamation “on Adjusting Imports of Derivative Aluminum Articles and Derivative Steel Articles into the United States”. https://www.whitehouse.gov/presidential-actions/proclamation-adjusting-imports-derivative-aluminum-articles-derivative-steel-articles-united-states/. The Proclamation (No. 9980) will be published in the Federal Register on January 29, 2020 and will apply to imports from subject countries beginning on February 8 (25% on steel derivative products and 10% on aluminum derivative products listed in Annexes II and I respectively). The inspection version of the Federal Register for January 29 is available today and the document is attached below. In the Proclamation, the President lays out the history of the 232 investigations and actions previously taken as well as the President’s intention to have Commerce monitor developments in case other actions were warranted. The action laid out in Proclamation 9980 is responsive to information reportedly provided by Commerce of possible evasion/circumvention of the duties. Countries who are excluded or who have arrangements with the U.S. on the original 232 actions are also excluded subject to certain conditions being present suggesting a need to address imports from those countries as well.

1-29-2020-FR-of-presidential-proclamation-on-steel-and-aluminum-derivatives

The purpose of this note is not to review the legal basis for the U.S. action (there have been a number of judicial actions in the United States challenging various aspects of the steel and aluminum national security case), but rather to examine the U.S. trade data to understand the breadth of the term “derivatives” and which countries appear to be the main targets of the additional duties.

Prior Proclamations Sought Review by Commerce and Others of Developments in Case Additional Action Was Deemed Necessary

The President in Proclamation 9980 references the fact that the Secretary of Commerce was directed to monitor imports of aluminum and steel and identify any circumstances which might warrant additional action. For example, paragraph 5(b) of the Steel Proclamation (No. 9705) of March 8, 2018 contained the following language:

“(b)  The Secretary shall continue to monitor imports of steel articles and shall, from time to time, in consultation with the Secretary of State, the Secretary of the Treasury, the Secretary of Defense, the USTR, the Assistant to the President for National Security Affairs, the Assistant to the President for Economic Policy, the Director of the Office of Management and Budget, and such other senior Executive Branch officials as the Secretary deems appropriate, review the status of such imports with respect to the national security.  The Secretary shall inform the President of any circumstances that in the Secretary’s opinion might indicate the need for further action by the President under section 232 of the Trade Expansion Act of 1962, as amended.  The Secretary shall also inform the President of any circumstance that in the Secretary’s opinion might indicate that the increase in duty rate provided for in this proclamation is no longer necessary.”

https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-steel-united-states/.

Similar language was in the aluminum proclamation.

How Broad is the Term Derivative Aluminum or Derivative Steel Product?

The aim of the Proclamation is to deal with products that undermine the purpose of the earlier proclamations. Proclamation 9980 reviews (paragraph 6) how the term “derivative” is used for purposes of the proclamation:

“For purposes of this proclamation, the Secretary determined that an article is ‘derivative’ of an aluminum article or steel article if all of the following conditions are present: (a) the aluminum article or steel article represents,
on average, two-thirds or more of the total cost of materials of the derivative article; (b) import volumes of such derivative article increased year-to-year since June 1, 2018, following the imposition of the tariffs in Proclamation 9704 and Proclamation 9705, as amended by Proclamation 9739 and Proclamation 9740, respectively, in comparison to import volumes of such derivative article during the 2 preceding years; and (c) import volumes of such derivative article following the imposition of the tariffs
exceeded the 4 percent average increase in the total volume of goods imported into the United States during the same period since June 1, 2018.”

What is the Volume of Imports Covered and Which are the Major Exporting Countries?

When one looks at the products that are covered by the two Annexes, one will see relatively few tariff categories covered by the new Proclamation. There are two HS categories that contain products that may be either steel or aluminum – bumper stampings and body stampings. There are significant imports of bumper stampings (though the data are not broken between steel, aluminum and other material). Imports from all counttries of bumper stampings in the first eleven months of 2019 were $394.3 million (of which $199.6 million are from countries not excluded for aluminum; $198.4 million if steel). Body stamps were significantly smaller, $5.2 million from all countries in Jan.-Nov. 2019 ($2.4 million covered if all are aluminum; $2.3 million covered if all are steel). The 8708 categories may have met the Commerce criteria but show a decline in 2019 vs. 2018 of 8.63% for the covered products/countries.

The other aluminum products identified — stranded wire, cables, plaited bands and the like (HS 7614.10.50, 7614.90.20, 7614.90.40, 7614.90.50) are relatively small in value – $43 million for all countries in 2019 (11 months)($26.9 million for countries subject to the additional 10% duties). The products/countries covered increased over the first 11 months of 2018 by 41.45%.

The other steel products identified – nails, tacks (other than thumb tacks), drawing pins, corrugated nails, staples and similar articles (HTS 7317.00.30.00, 7317.00.5503, 7317.005505, 7317.00.5507, 7317.00.5560, 7317.00.5580, 7317.00.6560) were $331.8 million in the first eleven months of 2019 for all countries ($276.9 million for countries covered by the new 25% duty). However, the rate of increase for covered products/countries was only 7.03% in 2019 versus 2018 (but had large increases vs. 2016 and 2017).

Countries with large exports in 2019 of the aluminum products (other than bumpers and body stampings) include Turkey at $7.4 million, India at $7 million, China at $5.0 million, Indonesia at $1.6 million, Italy at $1.35 million.

Countries with large exports in 2019 of the steel derivative products (other than bumpers and body stampings) include Oman at $59.5 million, Taiwan at $31 million, Turkey at $28.4 million, Thailand at $26.0 million, India at $25.3 million, Sri Lanka at $22.2 million, China at $20.4 million, Liechtenstein at $13.0 million, Malaysia at $12.5 million, Austria at $9.9 million and Saudi Arabia at $9.4 million.

On bumpers and body stampings, a number of the excluded countries are major suppliers — imports from Canada were $151.9 million in the first eleven months of 2019. Imports from Mexico were $44.6 million. For countries facing higher tariffs of 10% or 25% depending on whether the exported bumper stamping or body stamping is steel or aluminum, some of the large suppliers in 2019 were Taiwan at $87.4 million, Japan at $41.4 million, China at $39.4 million, Germany at $12.1 million, South Africa at $4.5 million, Italy at $3.8 million and Thailand at $3.6 million.

Conclusion

While any import measure by the President should be periodically reviewed for effectiveness and the need to maintain, the current action by the President in essence is a minor tweak with only $504 million of imports covered by the modified coverage of the Section 232 Proclamations — likely less than 1% of imports of steel and aluminum covered by the original proclamations.

It is true that the domestic steel and aluminum industries are not operating at the levels viewed as optimal and the problem of massive excess capacity in China and other countries is little changed in fact. But if a revision were needed, the level of ambition reflected in the Proclamation seems inadequate to the task.

So perhaps the way to read the proclamation is a recognition by the Administration that the existing relief hasn’t achieved the full measure of relief intended and to give trading partners warning that more is possible if the underlying problems aren’t addressed.

The Proclamation will certainly engender more disputes and increased tension with many of our trading partners. It is hard to understand the calculus (divorced from 2020 election posturing) of taking such a modest step, but time will tell if this is simply a prelude to a larger action in the coming months.

WTO Reform – Will Limits on Who Enjoys Special and Differential Treatment Be Achieved?

The GATT had and now the WTO has a system of self-declared status as a developing country. The vast majority of WTO members have declared themselves to be developing countries. Some WTO members are categorized by the United Nations as Least Developed Countries (“LDCs”). Indeed the WTO webpage indicates that 36 of 47 LDCs are currently WTO members and that another eight countries who are listed as LDCs by the UN are in the process of negotiating accession to the WTO. “There are no WTO definitions of ‘developed’ or ‘developing’ countries. Developing countries in the WTO are designated on the basis of self-selection although this is not necessarily automatically accepted in all WTO bodies.” https://www.wto.org/english/thewto_e/whatis_e/tif_e/org7_e.htm.

The relevance of a WTO member declaring themselves to be a developing country has to do with access to special and differential treatment provisions in virtually every agreement and the likelihood of reduced trade liberalization obligations on the member and in any ongoing negotiations. Thus, in the Uruguay Round, developing countries typically faced lower percent reductions on tariffs and were given longer time periods to implement such reductions than were true for developed countries. A report by the WTO Secretariat reviews Special and Differential Treatment (“S&D”) by agreement and categorizes the S&D provisions under one of the following six groupings (WT/COMTD/W/239 at 4) which are quoted as presented:

  1. provisions aimed at increasing the trade opportunities of developing country Members;
  2. provisions under which WTO Members should safeguard the itnerests of developing country Members;
  3. flexibility of commitments, of action, and use of policy instruments;
  4. transitional time-periods;
  5. technical assistance;
  6. provisions relating to LDC members.

The listing of S&D provisions in the Secretariat document is provided as an attachment below along with a correction.

WTCOMTDW239

WTCOMTDW239C1

With the progress many countries or customs territories have made during their GATT and/or WTO membership, the self-selection designation process has raised concerns by other members about whether certain Members are carrying their weight in terms of market liberalization. Indeed, some have attributed the failure of the Doha Agenda to conclude in 2008 to what certain Members who have declared themselves to be developing countries were willing to do in terms of liberalization versus other major Members who are not “developing”. The issue of who should benefit from Special and Differential treatment takes as a given that all LDCs should receive such benefits. The issue is about whether those non-LDCs who have experienced strong growth and significant economic advancement since the start of the WTO should continue to enjoy those benefits in new agreements.

The United States at the beginning of 2019 made a major submission entitled “An Undifferentiated WTO: Self-Declared Development Status Risks Institutional Irrelevance”. WT/GC/W/757, 16 January 2019. A revision was submitted in February and was followed by a draft General Council Decision to limit who can claim S&D benefits in future negotiations and agreements. WT/GC/W/747/Rev.1; WT/GC/W/764. The U.S. proposal in February was as follows:

“The General Council,

Acknowledging that full implementation of WTO rules as negotiated by Members can contribute to economic growth and development and the need to take steps to facilitate full implementation;

Recognizing the great strides made by several WTO Members since the establishment of the WTO in accomplishing the goals set out in the Marrakesh Agreement Establishing the World Trade Organization, of ‘raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with
the objective of sustainable development…;’

Recognizing that not all WTO Members have enjoyed equal rates of economic growth and development since the establishment of the WTO;

Recognizing the plight of the least-developed countries and the need to ensure their effective participation in the world trading system, and to take further measures to improve their trading opportunities;

Recognizing that reserving flexibilities for those WTO Members with the greatest difficulty integrating into the multilateral trading system can open new export opportunities for such countries; and

Desiring to strengthen the negotiating function of the WTO to produce high-standard, reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations;

Agrees as follows:

“To facilitate the full implementation of future WTO agreements and to ensure that the maximum benefits of trade accrue to those Members with the greatest difficulty integrating into the multilateral trading system, the following categories of Members will not avail themselves of special and
differential treatment in current and future WTO negotiations:

“i. A WTO Member that is a Member of the Organization for Economic Cooperation and Development (OECD), or a WTO Member that has begun the accession process to the OECD;

“ii. A WTO Member that is a member of the Group of 20 (G20);

“iii. A WTO Member that is classified as a “high income” country by the World Bank; or

“iv. A WTO Member that accounts for no less than 0.5 per cent of global merchandise trade (imports and exports).

“Nothing in this Decision precludes reaching agreement that in sector-specific negotiations other Members are also ineligible for special and differential treatment.”

The self-designation of developing country within the GATT and the WTO has generally been seen by Members and outside observers as a “third rail” that could not be modified because of the certain opposition from those enjoying S&D benefits. Not surprisingly, the U.S. proposal has met with opposition from some important WTO Members who have declared themselves to be developing countries, including China, India, South Africa, Venezuela, Bolivia, Kenya and Cuba. See, e.g., WT/GC/W/765 and 765/Rev.1 (it does not appear that the U.S. proposal would affect the last four Members listed).

The U.S. has included the topic in each General Council meeting since its submissions, has engaged in discussions with many WTO members, and submitted a revised proposal in November 2019, WT/GC/W/764/Rev.1, which incorporated language reflecting its arguments throughout the year that

(1) the proposal would not require any country to declare itself not a developing country, just limit whether they received blanket S&D coverage in new agreements;

(2) the change would affect new agreements/negotiations and not affect S&D from existing arrangements;

(3) Members had the right to seek special accommodations on issues of particular importance to them.

There was also clarification of the third and fourth criteria for non-eligibility to reflect a three year period of meeting the criteria.

A few WTO Members who would be subject to the elimination of automatic entitlement to new S&D provisions if the U.S. proposal were adopted by the General Council have indicated that they will forego automatic S&D from future negotiations/agreements. These Members to date are Korea, Singapore and Brazil.

While the strong opposition from major WTO Members such as China, India and South Africa would indicate the U.S. proposal is not likely to be adopted in the foreseeable future, the U.S. has also indicate that it will oppose S&D provisions in future agreements if they are applicable to certain Members.

Indeed, President Trump on July 26, 2019 issued a Memorandum on Reforming Developing-Country Status in the World Trade Organization. https://www.whitehouse.gov/presidential-actions/memorandum-reforming-developing-country-status-world-trade-organization/. The Memo notes that many WTO members who have declared themselves developing countries are “patently unsupportable in light of current economic circumstances. For example, 7 out of the 10 wealthiest economies in the world as measured by Gross Domestic Product per capita on a purchasing-power parity basis – Brunei, Hong Kong, Kuwait, Macao, Qatar, Singapore, and the United Arab Emirates – currently claim developing country status. Mexico, South Korea, and Turkey – members of both the G20 and the Organization for Economic Cooperation and Development (OECD) – also claim that status.” “China most dramatically illustrates the point.”

The memo goes on to instruct USTR to use all available means to secure changes at the WTO to prevent unwarranted use of S&D provisions and authorizes USTR to take action after 90 days if substantial progress is not made to no longer treat certain WTO members as developing countries and to not support any such country’s efforts to join the OECD.

USTR Robert Lighthizer issued a statement the day of the President’s Memo that reflected the position of the Administration:

“For far too long, wealthy countries have abused the WTO by exempting themselves from its rules through the use of special and differential treatment. This unfairness disadvantages Americans who ply by the rules, undermines negotiations at the WTO, and creates an unlevel playing field. I applaud the President’s leadership in demanding fairness and accountability at the WTO, and I look forward to implementing the President’s directive.” https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/july/ustr-robert-lighthizer-statement

Obviously trading partners have had an ongoing interest in the President’s Memo and how it is being implemented by the USTR. At the December 9, 2019 General Council meeting, as part of the U.S. discussion of its proposal, Ambassador Dennis Shea (Deputy USTR) stated as follows:

“Finally, I’d like to provide an update on the memorandum to USTR from the President of the United States in July.

“The President instructed USTR to no longer treat as a developing country for the purposes of the WTO any self-declared developing country that, in the USTR’s judgment, can inappropriately seek S&D in current and
future WTO negotiations. Some Members have asked how the USTR will carry this out.

“USTR consulted with the interagency Trade Policy Staff Committee on this issue. The interagency agreed that if a S&D provision is introduced in a WTO negotiation, the United States will indicate that it will not agree to that provision unless certain Members forego use of that provision. The United States will also use the TPR process to continue to press countries that we believe should not be claiming blanket S&D in future agreements. In addition, USTR is continuing to review additional steps that can be taken.

“The President issued two other instructions to the USTR.

“The USTR will not support the application for OECD membership of any self-declared developing country that, in the USTR’s judgment, can inappropriately seek S&D in current and future WTO negotiations.

“Also, USTR shall publish on its website a list of all self-declared developing countries that the USTR believes can inappropriately seek S&D in WTO negotiations.

“Members have asked when USTR will publish the list. USTR is consulting on this issue. The memo did not require USTR to publish the list by a speci􀃌c date.

“I’d like to emphasize two important aspects about the memo and the U.S. proposal that we would like Members to keep in mind.

“First, the President’s memo did not instruct USTR to ask any Member to change its self-declared development status. The U.S. proposal does not ask this of any Member, either.

“Second, the President’s memo did not instruct USTR to ask any Member to forego S&D in existing WTO agreements. The U.S. proposal does not ask this of any Member, either.”

https://geneva.usmission.gov/2019/12/09/ambassador-shea-procedures-to-strengthen-the-negotiating-function-of-the-wto/

As S&D provisions are part of every negotiation, the U.S. position obviously creates challenges to completing ongoing negotiations in any area, such as negotiations on fish subsidies, agriculture, digital trade without more countries agreeing not to seek S&D privileges or at least foregoing such privileges in certain agreements where there is U.S. opposition.

A quick look at some of the countries whom the U.S. proposal would remove from automatic S&D eligibility for new negotiations include the following:

Member of the OECD or in the accession process:

Chile, South Korea, Mexico, Turkey, Colombia, Costa Rica.

Member of the G-20:

India, South Africa, Turkey, Argentina, Brazil, Mexico, China, Indonesia, South Korea.

Classified by World Banks as “high income” for 2016-2018 (includes):

Antigua and Barbuda, Bahrain, Brunei Darussalam, Chile, Hong Kong, South Korea, Kuwait, Macao, Panama, Qatar, Seychelles, Singapore, St. Kitts and Nevis, Trinidad and Tobago, United Arab Emirates, Uruguay.

0.5% of Merchandise Trade (includes):

China, South Korea, Hong Kong, Mexico, Singapore, United Arab Emirates, Thailand, Malaysia, Vietnam, Brazil, Indonesia, Turkey, South Africa.

In light of the experience of the last two years on the need to reform the WTO Appellate Body, there should be little doubt that the United States will continue to push hard to achieve a more rational approach to the assumption of obligations at the WTO in terms of who should be eligible for S&D benefits in new agreements. Without movement by some major countries who currently enjoy S&D benefits to forego automatic eligibility in new agreements, the challenging negotiating environment at the WTO that has prevailed for many years now will become more challenging in 2020.