UAE

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.

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.