While the WTO’s Appellate Body (“AB”) is not presently functioning because of a lack of AB members, the panel process continues to function with reports being issued, albeit long after the intended time frame of the Dispute Settlement Understanding and complicated by the COVID-19 pandemic’s restrictions on in-person meetings.
On September 2, 2021, a WTO panel released its report in United States — Safeguard Measure on Imports of Crystalline Silicon Photovoltaic Products. See WT/DS562/R. The dispute was one brought by China against the U.S. safeguard action on the solar products in question. See USITC, Inv. No. TA-201-75, Crystalline Silicon Photovoltaic Cells (Whether or not Partially or Fully Assembled into Other Products), Publ. 4739 (Nov. 2017); Proclamation 9693 of January 23, 2018 – To Facilitate Positive Adjustment to Competition from Imports of Certain Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled Into Other Products) and for Other Purposes” (83 Fed. Reg. 3541 (25 January 2018).
The safeguard action similarly followed a series of antidumping and countervailing duty actions against China and then China and Taiwan and reflected a huge influx of imports from multiple countries after these multiple trade remedy actions resulted in import relief, with many producers in these other countries being affiliated with operations of Chinese producers or being companies with Chinese operations.
China did not challenge the product definition or the existence of serious injury to the domestic industry but raised a series of challenges based on its views of what is required to demonstrate increased imports from unforeseen developments and WTO obligations/concessions, what is required for the requisite causal link between imports and the serious injury, what obligations the U.S. had to review all raised possible other causes of injury and demonstrate that such causes were not attributable to increased imports and what obligations investigating countries had to supply public summaries of information gathered in a timely manner. The panel laid out the findings requested by China in paragraph 3.1 of its report (WT/DS562/R at 14-15) :
“3.1. China requests the Panel to find that the safeguard measure imposed by the United States is inconsistent with the United States’ obligations under Article XIX:1(a) of the GATT 1994 and Articles 2.1, 3, and 4.2(b) of the Agreement on Safeguards.14 Specifically, China contends that the United States acted inconsistently with:
“a. Article XIX:1(a) of the GATT 1994 and Article 3.1 of the Agreement on Safeguards because the United States failed to establish, prior to the application of the measures, that the increases in imports were the result of “unforeseen developments” and were the “effect of obligations incurred” under the GATT 1994 by the United States15;
“b. Articles 2.1, 3.1, and 4.2(b) of the Agreement on Safeguards because the United States failed to establish the required “causal link” between the increased imports and the serious injury found to exist16;
“c. Articles 2.1, 3.1, and 4.2(b) of the Agreement on Safeguards because the United States failed to ensure that injury caused by other factors was not attributed to increased imports17; and
“d. Articles 3.1 and 3.2 of the Agreement on Safeguards because the United States provided non-confidential summaries to interested parties with such delay that the parties were not provided with an adequate opportunity to exercise their right to present a defence, and because the actual public summaries were not sufficient so as to permit interested parties to reasonably present a defence.18
“14 China’s first written submission, para. 318; second written submission, para. 324.
“15 China’s panel request, pp. 2-3; first written submission, para. 293.
“16 China’s panel request, p. 2; first written submission, heading to section III(A).
“17 China’s panel request, p. 2; first written submission, heading to section III(B)(2).
“18 China’s panel request, p. 2; first written submission, para. 302.”
The panel report rejected each of the findings requested by the China.
Significance of the panel report
The WTO dispute settlement system has historically been a complainant’s forum with violations or non-compliance action found in roughly ninety percent of cases. A disproportionate number of cases have been brought against trade remedy cases. With the exception of a China-specific safeguard action by the U.S. on passenger vehicle and light truck tires, the Appellate Body had found problems with every safeguard case that was brought before it with a variety of constructions or interpretations that make use of the safeguard agreement extremely difficult if the AB’s views on requirements are correct.
While the panel in the recent report, followed the interpretations of Article XIX and the Safeguard Agreement articulated by the Appellate Body in some other cases, the panel limited its role to that envisioned in the DSU and did not substitute its views for those of the investigators where the record supported the findings made. This is as it should be and, some would argue, is a reason to leave the Appellate Body dormant until there has been major reform such that the Appellate Body has the limited role envisioned by the DSB and doesn’t routinely overturn panel findings as it has in the past.
China, just as it did in the China-specific safeguard case, raised arguments that exceeded the bounds of the text involved as the panel found in various areas including on public summaries. China also pushed for a focus on selected record information despite the voluminous information collected by the Commission. Such efforts by China were rejected by the panel.
Novel issues in the case included whether safeguard action could be taken where demand is growing rapidly and where the domestic industry has experienced some increases in capacity, production, shipments and employment. Because the U.S. industry incurred massive losses throughout the period and saw many companies go out of business or declare bankruptcy , lost substantial market share to imports and had falling prices led by falling import prices for products that producers, importers and purchasers all viewed as highly interchangeable, the U.S. International Trade Commission had found the industry seriously injured and that increased imports were a substantial cause of that injury. The panel rejected China’s arguments that some increases in the factual situation investigated meant that there was no causal link. China did not challenge that the U.S. industry was not seriously injured, and so any positive trends were not considered on the issue of whether the domestic industry was seriously injured.
The panel also looked at whether any supplemental report requested by USTR on the issue of unforeseen developments is part of the report that can be referred to understand if findings are supported by the record. The panel found that the supplemental report was part of the materials to be considered by the panel.
Larger reform issues that the panel report reveal
The United States, European Union, Japan and others have articulated reform needs at the WTO including the need to update industrial subsidy disciplines, address meaningfully state-owned and invested enterprises, reaffirm the centrality to the WTO of having all Members operate on market economy principles, and the need to stop the creation of massive global excess capacity through government policies and subsidies. While much of the focus has been on established industries — e.g., steel, aluminum, glass, cement — major problems obviously also exist in high growth sectors like solar and wind energy and are likely in many of the growth sectors of the future.
What the history of cases in the United States on Crystalline Silicon Photovoltaic Cells (Whether or not Partially or Fully Assembled into Other Products) shows is that not only do rules need to be urgently updated to prohibit a range of subsidies and actions by governments and state-owned enterprises, but trade remedies need to be made more effective to give domestic industries the relief envisioned without the need for multiple rounds of cases under different agreements. In rapidly growing demand situations, losing five or six years of effective relief will mean the destruction of the domestic industry as it is unable to invest in expansion and R&D to remain competitive and, as a result rapidly declines in market relevance. This is what happened to the U.S. industry examined. If that destruction is from a range of actions that should be disciplined, the system is not functioning properly.
For all involved representing domestic industries and their workers in the U.S., EU and other markets, it is clear that way too often the system is not functioning properly. Despite the urgent need to improve the system, there is virtually no likelihood of the WTO system being made more effective this decade. Indeed, it will be surprising if there is any agreement at the 12th Ministerial to have work programs on any of the issues of importance reviewed above. Such failure to act will likely result in increased pressure to act unilaterally for those who are able or to simply abandon entire manufacturing sectors based on distortions that can’t be effectively addressed. The WTO and its Members must do better.
The Biden-Harris Administration has said from day one that a priority was to reach out to friends and allies to work together to address global challenges whether that be climate change, the COVID-19 pandemic or disruptive practices of some countries. Before the current U.S. Trade Representative was confirmed, the U.S. had agreed with the EU to suspend tariffs for four months each was imposing on the other following sixteen years of dispute settlement proceedings at the World Trade Organization on large civil aircraft to permit the parties to seek a negotiated solution. In statements before Congress and in press releases from USTR, it is clear that negotiations are underway with the intent of achieving a successful resolution by the July four-month deadline. See, e.g., Testimony of Ambassador Katherine C. Tai, United States Trade Representative, Senate Finance Committee Hearing on the President’s Trade Agenda, May 12, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/may/testimony-ambassador-katherine-tai-senate-finance-committee-hearing-presidents-trade-agenda-0 (“We are also working with the European Union and the United Kingdom to resolve the ongoing Boeing-Airbus dispute and are having constructive discussions to address the real problem of overcapacity in the steel and aluminum sectors coming primarily from China. These talks will take time, but I believe a resolution is possible and worth pursuing.”)
The EU and the U.S. have also been imposing tariffs on each other following the U.S. Section 232 investigation on steel and aluminum with the U.S. imposing tariffs on steel and aluminum products from many countries, including the EU to address national security concerns and the EU imposing duties on a range of products on the theory that the U.S. action was in effect a safeguard measure and the EU could take such action automatically on products where there hadn’t been absolute volume increases to the U.S. with broader tariffs available to it after three years of U.S. tariffs if not removed by then. The EU is among the WTO Members who have challenged the U.S. 232 action, and the U.S. has challenged the tariffs applied by the EU and others as contrary to their WTO obligations. Panel reports in the disputes are expected to be released at the earliest in the second half of 2021. See United States – Certain Measures on Steel and Aluminum Products, WT/DS548/17, 8 February 2021; European Union – Additional Duties on Certain Products from the United States, WT/DS559/5, 16 December 2020
“United States Trade Representative Katherine Tai, U.S. Secretary of Commerce Gina M. Raimondo, and European Commission Executive Vice President Valdis Dombrovskis today announced the start of discussions to address global steel and aluminum excess capacity. During a virtual meeting last week, the leaders acknowledged the need for effective solutions that preserve our critical industries, and agreed to chart a path that ends the WTO disputes following the U.S. application of tariffs on imports from the EU under section 232.
“Ambassador Tai, Secretary Raimondo, and Executive Vice President Dombrovskis acknowledged the impact on their industries stemming from global excess capacity driven largely by third parties. The distortions that result from this excess capacity pose a serious threat to the market-oriented EU and U.S. steel and aluminum industries and the workers in those industries. They agreed that, as the United States and EU Member States are allies and partners, sharing similar national security interests as democratic, market economies, they can partner to promote high standards, address shared concerns, and hold countries like China that support trade-distorting policies to account.
“They agreed to enter into discussions on the mutual resolution of concerns in this area that addresses steel and aluminum excess capacity and the deployment of effective solutions, including appropriate trade measures, to preserve our critical industries. To ensure the most constructive environment for these joint efforts, they agreed to avoid changes on these issues that negatively affect bilateral trade. They committed to engaging in these discussions expeditiously to find solutions before the end of the year that will demonstrate how the U.S. and EU can address excess capacity, ensure the long-term viability of our steel and aluminum industries, and strengthen our democratic alliance.”
One of the consequences of efforts to improve relations is the EU postponing raising tariffs on June 1, 2021. Both the EU and the United States are under internal pressures to either see the 232 tariffs eliminated (EU) or maintained (U.S.). While EC Executive Vice President Valdis Dombrovskis had made a suggestion to suspend tariffs for six months as reported in the press back in April, the outcome of consultations seems to be to maintain but not modify existing tariff rates while the effort to find a resolution to the excess capacity problem is pursued. The problem is a creature largely of Chinese policies and subsidies to the steel and aluminum sectors. See Fastmarkets, EU retaliation may convince Biden to revise Section 232, April 14, 2021, https://www.fastmarkets.com/article/3984128/eu-retaliation-may-convince-biden-to-revise-section-232 (“There is some question, however, about whether the EU’s tariff increase will occur in June after EU trade chief, Valdis Dombrovskis, suggestedthan the blocand the US suspend tariffs for six months.”); Financial Times, EU signals US trade detente by shelving planned tariffs increase, 17 May 2021, https://www.ft.com/content/603c83bc-0c0e-4bd9-9fb3-0f5ea5b264c0. Considering the efforts the United States has been making to reboot the transatlantic relationship, the action by the EU is a practical step that lets parties focus on the underlying concern versus dealing with the political fallout of increased retaliatory tariffs.
Finding a solution to the global excess capacity problem will be challenging. Both the U.S. and EU have attempted to achieve progress through the OECD with little to no meaningful progress. The U.S., EU and Japan have been engaged in trilateral discussions for the last 3 1/2 years following the 11th WTO Ministerial Conference in Buenos Aires about addressing industrial subsidies, state-owned enterprises, forced technology transfer and the creation of global excess capacity but have not yet reached out to the broader WTO membership for a road forward to addressing the trade distorting practices that define too much of international trade today. And, of course, the problem flows from the different economic system used by China and some other countries, an economic system not compatible with WTO norms and not addressed under existing WTO rules. While plurilateral negotiations seem possible, it is hard to imagine modified WTO rules since China can block consensus.
The Biden-Harris Administration has demonstrated to date that it would prefer to negotiate resolution of longstanding issues with allies if possible versus increasing tariffs or maintaining disputes. Both the U.S. and EU seem interested in recalibrating the transatlantic relationship. There is greater alignment on some major issues like climate change and ending the pandemic. Both parties want to see WTO reform, though there are undoubtedly areas of difference as well as areas of agreement. The U.S. and EU will need creativity and sustained good will to resolve the bilateral trade disputes where negotiations are underway or soon will be.
Back in February of this year, Bolivia provided notice that it intended to use the special compulsory licensing system as an importing Member under the Amended TRIPS Agreement. See NOTIFICATION UNDER THE AMENDED TRIPS AGREEMENT, NOTIFICATION OF INTENTION TO USE THE SPECIAL COMPULSORY LICENSING SYSTEM AS AN IMPORTING MEMBER, IP/N/8/BOL/1, 19 February 2021.
On the 10th of May 2021, Bolivia filed a notice with the WTO seeking access to a COVID-19 vaccine through a compulsory license for production in a third country. The notice was posted on the WTO website on November 11 (IP/N/9/BOL/1) and the subject of a WTO news release on the 12th of May. See WTO, Bolivia outlines vaccine import needs in use of WTO flexibilities to tackle pandemic, 12 May 2021, https://www.wto.org/english/news_e/news21_e/dgno_10may21_e.htm. Bolivia’s two notifications are embedded below.
A translation from Google Translate (with a few tweaks) of the May 10 notice is provided below.
NOTIFICATION UNDER THE AMENDED TRIPS AGREEMENT
NOTIFICATION OF THE NEED TO IMPORT PHARMACEUTICAL PRODUCTS UNDER THE SPECIAL COMPULSORY LICENSING SYSTEM
Member(s) who present the notification
Plurinational State of Bolivia
An estimated 15 million doses of COVID-19 vaccines. In particular, it is intended to import the vaccine Ad26.COV2.S, a replication adenovirus type 26 (AD26) vectorized vaccine incompetent that encodes a stabilized variant of protein S of the SARS-Cov-2. The Plurinational State of Bolivia reserves the right to import other vaccines.
Demonstration that the capabilities of manufacturing in the pharmaceutical sector are insufficient or nonexistant
[X] At the moment the Member does not have manufacturing capacity in the pharmaceutical sector.
[ ] The Member has found that its capacity in the pharmaceutical sector to meet the needs regarding the pharmaceutical product needed.
Information about how it has proved the lack of manufacturing capacities (enough) in the pharmaceutical sector
The Plurinational State of Bolivia has verified that it does not have the capacity to manufacture in the pharmaceutical sector vaccines against COVID-19 including the vaccine Ad26.COV2.S.
Is (are) the product(s) necessary (s) protected (s) by patent in the territory?
[ ] No.
[ ] Yes.
[X] To be determined. Insofar as they have been requested or granted patents for the necessary products, the Plurinational State of Bolivia intends to grant compulsory licenses, in accordance with Articles 31 and 31bis of the TRIPS Agreement.
Date of presentation of the notification
10 May 2021
The WTO news release is copied below.
“The government of Bolivia has formally notified the WTO of the country’s need to import COVID-19 vaccines, taking another step towards using flexibilities in WTO intellectual property rules as part of its pandemic response.
“Bolivia notified the WTO it needed to import 15 million doses of a vaccine under the legal system introduced in a 2017 amendment (https://www.wto.org/english/news_e/news17_e/trip_23jan17_e.htm) to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). That amendment, which created Article 31bis of the TRIPS Agreement, provides an additional legal pathway for import-reliant countries to access affordable medicines, vaccines and other pharmaceutical products.
“Bolivia’s submission follows through on its February notification signalling that it intended to exercise the flexibilities under the amendment.
“Bolivia’s notification opens up the possibility of importing the needed vaccines from any one of around 50 WTO members (https://www.wto.org/english/tratop_e/trips_e/par6laws_e.htm) that have put in place domestic laws providing for the production and export of medicines made under compulsory licence through this system.
“’This is an example of a WTO member seeking to make use of available tools under the TRIPS Agreement to respond to the COVID-19 pandemic, even as members seek to expand the range of options through the TRIPS waiver proposal,’ said Antony Taubman, Director of the WTO’s Intellectual Property Division. ‘This step provides one practical component of what could be a wider process of countries signalling urgent and unmet needs and encouraging a combined, coordinated response by international partners.’
“The WTO Secretariat has been encouraged by members in the TRIPS Council to provide any necessary technical assistance to facilitate use of the system to import pharmaceutical products manufactured under compulsory licence.”
The intersection of intellectual property rights and public health has been a topic of great interest and intense feelings at the WTO since its inception and resulted in an amendment to the TRIPS Agreement to address the needs of developing and least developed countries without pharmaceutical manufacturing capacity for certain products during emergencies. As the WTO news release notes, through a long process starting in 2001 and ending with the adoption of Article 31bis to the TRIPS Agreement in 2017, special provisions were added that would permit importing developing or least developed countries to have pharmaceutical products produced under compulsory license in countries adopting procedures to comply with the modified agreement. Today the following countries are on the list of WTO Members willing to produce pharmaceutical products under compulsory license for importing countries where conditions are met:
Albania; Australia; Botswana; Canada; China; Croatia; Cuba; European Union; Hong Kong, China; India; Jordan; Kazakhstan; New Zealand; Norway; Oman; Philippines; Republic of Korea; Singapore; Switzerland; Chinese Taipei; Japan. See Intellectual Property: TRIPS and Health, Members’ laws implementing the ‘Paragraph 6’ system, https://www.wto.org/english/tratop_e/trips_e/par6laws_e.htm.
The Amended TRIPS Agreement at Article 31bis and the Annex and Appendix which lay out requirements for utilization of the compulsory license provisions for importers are copied below. Like other compulsory licensing provisions, compensation to the patent holder is required by the exporter.
1. The obligations of an exporting Member under Article 31(f) shall not apply with respect to the grant by it of a compulsory licence to the extent necessary for the purposes of production of a pharmaceutical product(s) and its export to an eligible importing Member(s) in accordance with the terms set out in paragraph 2 of the Annex to this Agreement.
2. Where a compulsory licence is granted by an exporting Member under the system set out in this Article and the Annex to this Agreement, adequate remuneration pursuant to Article 31(h) shall be paid in that Member taking into account the economic value to the importing Member of the use that has been authorized in the exporting Member. Where a compulsory licence is granted for the same products in the eligible importing Member, the obligation of that Member under Article 31(h) shall not apply in respect of those products for which remuneration in accordance with the first sentence of this paragraph is paid in the exporting Member.
3. With a view to harnessing economies of scale for the purposes of enhancing purchasing power for, and facilitating the local production of, pharmaceutical products: where a developing or least developed country WTO Member is a party to a regional trade agreement within the meaning of Article XXIV of the GATT 1994 and the Decision of 28 November 1979 on Differential and More Favourable Treatment Reciprocity and Fuller Participation of Developing Countries (L/4903), at least half of the current membership of which is made up of countries presently on the United Nations list of least developed countries, the obligation of that Member under Article 31(f) shall not apply to the extent necessary to enable a pharmaceutical product produced or imported under a compulsory licence in that Member to be exported to the markets of those other developing or least developed country parties to the regional trade agreement that share the health problem in question. It is understood that this will not prejudice the territorial nature of the patent rights in question.
4. Members shall not challenge any measures taken in conformity with the provisions of this Article and the Annex to this Agreement under subparagraphs 1(b) and 1(c) of Article XXIII of GATT 1994.
5. This Article and the Annex to this Agreement are without prejudice to the rights, obligations and flexibilities that Members have under the provisions of this Agreement other than paragraphs (f) and (h) of Article 31, including those reaffirmed by the Declaration on the TRIPS Agreement and Public Health (WT/MIN(01)/DEC/2), and to their interpretation. They are also without prejudice to the extent to which pharmaceutical products produced under a compulsory licence can be exported under the provisions of Article 31(f).
ANNEX TO THE TRIPS AGREEMENT
1. For the purposes of Article 31bis and this Annex:
(a) “pharmaceutical product” means any patented product, or product manufactured through a patented process, of the pharmaceutical sector needed to address the public health problems as recognized in paragraph 1 of the Declaration on the TRIPS Agreement and Public Health (WT/MIN(01)/DEC/2). It is understood that active ingredients necessary for its manufacture and diagnostic kits needed for its use would be included(1);
(b) “eligible importing Member” means any least-developed country Member, and any other Member that has made a notification(2) to the Council for TRIPS of its intention to use the system set out in Article 31bis and this Annex (“system”) as an importer, it being understood that a Member may notify at any time that it will use the system in whole or in a limited way, for example only in the case of a national emergency or other circumstances of extreme urgency or in cases of public non-commercial use. It is noted that some Members will not use the system as importing Members(3) and that some other Members have stated that, if they use the system, it would be in no more than situations of national emergency or other circumstances of extreme urgency;
(c) “exporting Member” means a Member using the system to produce pharmaceutical products for, and export them to, an eligible importing Member.
2. The terms referred to in paragraph 1 of Article 31bis are that:
(a) the eligible importing Member(s)(4) has made a notification(2)to the Council for TRIPS, that:
(i) specifies the names and expected quantities of the product(s) needed(5);
(ii) confirms that the eligible importing Member in question, other than a least developed country Member, has established that it has insufficient or no manufacturing capacities in the pharmaceutical sector for the product(s) in question in one of the ways set out in the Appendix to this Annex; and
(iii) confirms that, where a pharmaceutical product is patented in its territory, it has granted or intends to grant a compulsory licence in accordance with Articles 31 and 31bis of this Agreement and the provisions of this Annex(6);
(b) the compulsory licence issued by the exporting Member under the system shall contain the following conditions:
(i) only the amount necessary to meet the needs of the eligible importing Member(s) may be manufactured under the licence and the entirety of this production shall be exported to the Member(s) which has notified its needs to the Council for TRIPS;
(ii) products produced under the licence shall be clearly identified as being produced under the system through specific labelling or marking. Suppliers should distinguish such products through special packaging and/or special colouring/shaping of the products themselves, provided that such distinction is feasible and does not have a significant impact on price; and
(iii) before shipment begins, the licensee shall post on a website(7) the following information:
— the quantities being supplied to each destination as referred to in indent (i) above; and
— the distinguishing features of the product(s) referred to in indent (ii) above;
(c) the exporting Member shall notify(8) the Council for TRIPS of the grant of the licence, including the conditions attached to it.(9) The information provided shall include the name and address of the licensee, the product(s) for which the licence has been granted, the quantity(ies) for which it has been granted, the country(ies) to which the product(s) is (are) to be supplied and the duration of the licence. The notification shall also indicate the address of the website referred to in subparagraph (b)(iii) above.
3. In order to ensure that the products imported under the system are used for the public health purposes underlying their importation, eligible importing Members shall take reasonable measures within their means, proportionate to their administrative capacities and to the risk of trade diversion to prevent re-exportation of the products that have actually been imported into their territories under the system. In the event that an eligible importing Member that is a developing country Member or a least-developed country Member experiences difficulty in implementing this provision, developed country Members shall provide, on request and on mutually agreed terms and conditions, technical and financial cooperation in order to facilitate its implementation.
4. Members shall ensure the availability of effective legal means to prevent the importation into, and sale in, their territories of products produced under the system and diverted to their markets inconsistently with its provisions, using the means already required to be available under this Agreement. If any Member considers that such measures are proving insufficient for this purpose, the matter may be reviewed in the Council for TRIPS at the request of that Member.
5. With a view to harnessing economies of scale for the purposes of enhancing purchasing power for, and facilitating the local production of, pharmaceutical products, it is recognized that the development of systems providing for the grant of regional patents to be applicable in the Members described in paragraph 3 of Article 31bis should be promoted. To this end, developed country Members undertake to provide technical cooperation in accordance with Article 67 of this Agreement, including in conjunction with other relevant intergovernmental organizations.
6. Members recognize the desirability of promoting the transfer of technology and capacity building in the pharmaceutical sector in order to overcome the problem faced by Members with insufficient or no manufacturing capacities in the pharmaceutical sector. To this end, eligible importing Members and exporting Members are encouraged to use the system in a way which would promote this objective. Members undertake to cooperate in paying special attention to the transfer of technology and capacity building in the pharmaceutical sector in the work to be undertaken pursuant to Article 66.2 of this Agreement, paragraph 7 of the Declaration on the TRIPS Agreement and Public Health and any other relevant work of the Council for TRIPS.
7. The Council for TRIPS shall review annually the functioning of the system with a view to ensuring its effective operation and shall annually report on its operation to the General Council.
APPENDIX TO THE ANNEX TO THE TRIPS AGREEMENT
Assessment of Manufacturing Capacities in the Pharmaceutical Sector
Least-developed country Members are deemed to have insufficient or no manufacturing capacities in the pharmaceutical sector.
For other eligible importing Members insufficient or no manufacturing capacities for the product(s) in question may be established in either of the following ways:
(i) the Member in question has established that it has no manufacturing capacity in the pharmaceutical sector;
(ii) where the Member has some manufacturing capacity in this sector, it has examined this capacity and found that, excluding any capacity owned or controlled by the patent owner, it is currently insufficient for the purposes of meeting its needs. When it is established that such capacity has become sufficient to meet the Member’s needs, the system shall no longer apply.
This subparagraph is without prejudice to subparagraph 1(b).
It is understood that this notification does not need to be approved by a WTO body in order to use the system.
Australia, Canada, the European Communities with, for the purposes of Article 31bis and this Annex, its member States, Iceland, Japan, New Zealand, Norway, Switzerland, and the United States.
Joint notifications providing the information required under this subparagraph may be made by the regional organizations referred to in paragraph 3 of Article 31bis on behalf of eligible importing Members using the system that are parties to them, with the agreement of those parties.
The notification will be made available publicly by the WTO Secretariat through a page on the WTO website dedicated to the system.
This subparagraph is without prejudice to Article 66.1 of this Agreement.
The licensee may use for this purpose its own website or, with the assistance of the WTO Secretariat, the page on the WTO website dedicated to the system.
It is understood that this notification does not need to be approved by a WTO body in order to use the system.
The notification will be made available publicly by the WTO Secretariat through a page on the WTO website dedicated to the system.
The COVID-19 vaccine challenge is an interesting one. The WHO, Gavi, CEPI and UNICEF have come together to have a process for both supporting development, procuring and distributing vaccines around the world including to 92 low- and middle-income countries at little or no cost. The COVAX facility is an effort supported by many governments and private sector supporters to improve the equitable access to vaccines. Thus, it is an effort to reduce the need for individual low- and middle-income countries to have to secure supplies on their own. As reviewed in prior posts, while COVAX has been shipping millions of doses to countries (as of May 12, 2021 over 59 million doses to 122 countries), it is far behind its anticipated shipments because of the current challenges in India with the cessation of exports from India in the last several months March to address internal needs. (reduction of some 90 million doses likely)
Bolivia is a recipient of vaccines from COVAX. See Gavi, COVAX vaccine roll-out BOLIVIA, https://www.gavi.org/covax-vaccine-roll-out/bolivia (information from the webpage on 14 May 2021 reports that “First doses received: 22 March 2021Doses received: 228,000 SII-AstraZeneca (COVISHIELD) vaccine*; Doses allocated: 72,000 SII-AstraZeneca (COVISHIELD) vaccine; 92,430 Pfizer-BioNTech (BNT162b2) vaccine.”).
While many countries have arranged for vaccine shipments outside of the COVAX facility process from one or more of the global producers, including some not yet approved by the WHO, and while production levels for many producers have been ramping up month to month and there are a number of additional companies likely to pursue authorization for vaccines in the coming months, access to vaccines is limited for many countries in the first and second quarters of 2021. See Bloomberg, More than 1.38 Billion Shots Given: Covid-19 Tracker, updated May 13, 2021 (6:18 p.m.), https://www.bloomberg.com/graphics/covid-vaccine-tracker-global-distribution/. There are four countries or areas with more than 100 million vaccination shots — China (354.3 million), United States (266.6 million), European Union (186.6 million) and India (179.2 million). There are seventeen countries with between 10 million and 56.4 million vaccination shots, 52 countries with more than 1 million and less than 10 million vaccination shots. There are 101 countries that have fewer than one million vaccination shots. Bolivia has administered 972,846 shots, enough for 4.2% of its population.
At the WTO, India and South Africa, now supported by a large number of other countries, have pursued a waiver from most TRIPS Agreement obligations for medical goods needed to address the COVID-19 pandemic largely on the basis that TRIPS Agreement flexibilities don’t work and the pandemic presents special urgency. Developed pharmaceutical producing countries have opposed a waiver as both unlikely to solve the need for more volume of vaccines and as unnecessary in light of TRIPS flexibilities. Last week the United States indicated it would support a waiver and agreed to engage in textual negotiations, though the position taken by the U.S. has not been supported by the European Union and possibly others.
So the Bolivian notification provides a real time opportunity to see if the flexibilities included in the Amended TRIPS Agreement can be used successfully to permit developing and least developed countries to access needed vaccines in a timely fashion. Coupled with expanded capacity and production and possibly additional licensing arrangements and additional approvals of new vaccines, a successful use of Art. 31bis of the Amended TRIPS Agreement may provide sufficient flexibility to address equity concerns at the WTO.
An update on COVID-19 data
Before closing, it is useful to review updated data from the European Centre for Disease Prevention and Control in yesterday’s COVID-19 situation update worldwide, as of week 18, updated 12 May 2021, https://www.ecdc.europa.eu/en/geographical-distribution-2019-ncov-cases and the data on weekly cases and deaths. The world in week 18 of 2021 saw the number of new recorded infections come down from the peak of the prior week as seen in the ECDC weekly update (chart copied below).
“Distribution of COVID-19 cases worldwide, as of week 18 2021
“Cases reported in accordance with the applied case definition and testing strategies in the affected countries.“
This is true in total and also for India. For the last two weeks, India recorded 5,544,535 new cases — the first time a country has surpassed five million cases in a two week period, although week 18 was slightly lower than week 17 in terms of new cases recorded in India. See ECDC, Data on 14-day notification rate of new COVID-19 cases and deaths, 13 May 2021, https://www.ecdc.europa.eu/en/publications-data/data-national-14-day-notification-rate-covid-19. India accounted for 49.38% of global cases over the last two weeks — the highest percent for a single country during the pandemic — and remains in a state of health care crisis as previously reported, although support from trading partners and lockdowns in a number of the Indian states appear to be reducing the number of cases and helping to some extent address health care needs.
Because of the size of India’s population and despite the recent surge of cases, India’s number of cases and deaths per 100,000 population are lower than many other countries. India has reported infections for 1.64% of its population or 1,642.21 people/100,000 population during the pandemic with 198.33 people/100,000 in the last week. Brazil has reported infections for 7.16% of its population or 7,155.64 people/100,000 population during the pandemic and 202.51 people/100,000 population in the last week. Bolivia has recorded infections in 2.73% of its population or 2,779.45 people/100,000 population and 103.51 people/100,000 population in the last week. The United States has recorded infections for 9.88% of its population or 9,881.43 people/100,000 population during the pandemic with 86.43 people/100,000 population in the last week. And there are many other countries with higher COVID-19 cases than India according to the ECDC data. Similar comparisons can be made on deaths where India has suffered recorded COVID deaths equal to 0.02% of its population during the pandemic compared to 0.20% for Brazil, 0.11% for Bolivia and 0.18% for the United States. Even in the last week, deaths in Brazil per 100,000 were more than three times what was recorded in India (6.87 people vs. 1.968 people). Bolivia was comparable to India during the last week (1.876) while the U.S. death count is declining (1.42 people during the last week per 100,000 population).
All of the above to say, the world’s attention on India is understandable because of the severe challenges the Indian government is facing and the size of its population. However, there are a number of countries experiencing comparable or even greater surges than India. Brazil is one example, but there are others in South America and some in Asia facing alarming increases or levels of infections. Equitable access needs to be tempered by flexibility to address current fires if the global effort is to be successful and reduce global infections and deaths.
On May 3, 2021, the WTO held a Trade Negotiations Committee (“TNC”) session combined with an informal session of the Heads of Delegation in Geneva. Because the WTO over time has eliminated the immediate release of statements of the Chair of the TNC and the Chairs of different negotiating groups who provide updates on the status of negotiations, there is very limited public information on the meeting at the present time. The WTO released a news release on the meeting entitled “Members discuss contours of potential MC12 deliverables”. See TNC and Heads of Delegation Meeting, Members discuss contours of potential MC12 deliverables, May 3, 2021, https://www.wto.org/english/news_e/news21_e/hod_03may21_e.htm. A review of WTO documents listed on the WTO website reveals that Director-General Ngozi Okonjo-Iweala provided a seven page Chair’s statement at the meeting, although the document is not publicly available. See JOB/TNC/91. There was at least one other statement made by chairs of negotiating groups, though the statement is not publicly available. See Council for Trade in Services – Special Session – Report by Ambassador Zhanar Altzhanova, Chair of the CTS Special Session, to the informal TNC and HODs meeting – 3 May 2021, JOB/SERV/307, May 4, 2021. One would assume there were reports on the fisheries subsidies negotiations, on agriculture and on various Joint Statement Initiatives though there is no listing of any such statements.
Copied below is the May 3 WTO news release.
“Heads of WTO member delegations today exchanged views about issues on which they can realistically reach agreements in the run-up to the 12th Ministerial Conference (MC12) later this year, and what needs to happen to make such deals possible. Fisheries subsidies, agriculture and the COVID-19 pandemic featured prominently in the discussions, with several members stressing that delivering concrete negotiated results was critical for the WTO’s credibility. The 3 May gathering was both a formal session of the Trade Negotiations Committee and an informal meeting of Heads of Delegation.
“Summing up members’ interventions at the end of the day, WTO Director-General Ngozi Okonjo-Iweala said what she had heard matched what she had been told in her own consultations: ‘Views are coalescing around the most feasible priorities for delivery between now and MC12 — although of course there are gaps on how we get there and on the content of prospective results.’
“She said three concrete deliverables stood out: an agreement to curb harmful fisheries subsidies; outcomes on agriculture, with a focus on food security; and a framework that would better equip the WTO to support efforts against the COVID-19 pandemic and future health crises.
“Looking to the weeks and months ahead, the Director-General expressed hope that by July members would be able to finalize an agreement on fisheries subsidies and achieve clarity about what can be delivered by MC12, scheduled to run from 30 November to 3 December in Geneva.
“On fisheries subsidies, she urged members to exercise the necessary flexibility to overcome the remaining hurdles. With ministerial involvement likely required to finalize an agreement in July, she called on delegations to work with the chair of the negotiations, Ambassador Santiago Wills of Colombia, to prepare a draft negotiating text with a minimal number of outstanding issues for ministers to resolve. ‘We are almost there, we can see the light at the end of the tunnel,’ she said, stressing she stood ready to help members and the chair translate increased flexibility into an agreement.
“Noting that for many members, meaningful outcomes on agriculture were necessary to make MC12 a success, DG Okonjo-Iweala said that the pandemic, and rising hunger around the world, made a strong case for a WTO ‘food security package’. Elements for a prospective package included public stockholding, the proposed exemption from export restrictions of World Food Programme humanitarian purchases, domestic support and transparency, with some delegations also raising cotton and the special safeguard mechanism.
“The Director-General welcomed the view expressed by many delegations that MC12 can deliver concrete responses on trade and health. The WTO’s spotlight on export restrictions and the need to increase vaccine production volumes was gaining attention and engagement from leaders, she said.
“Reporting on a 14 April event where vaccine manufacturers, international organizations, civil society and members looked at how the WTO could contribute to efforts to combat the global scarcity of COVID-19 vaccines, she said it was clear that underused manufacturing capacity existed in several developing countries.
“DG Okonjo-Iweala praised members’ support to India amid the upsurge in COVID-19 cases there, which followed India’s own exports of a large number of vaccines. ‘That is what the WTO membership should be about — working together, supporting each other,’ she said. She asked members to bring the same sense of common purpose to bear on engaging in text-based negotiations on the TRIPS waiver proposal aimed at finding a pragmatic compromise that works for all.
“With regard to dispute settlement, where many members called for resolution to the impasse over the Appellate Body, the Director-General expressed hope that by MC12 members ‘can reach a shared understanding on the types of reforms needed’.
“The General Council chair, Ambassador Dacio Castillo of Honduras, is consulting on proposals about issues specific to least-developed countries such as the G-90 proposals on special and differential treatment as well as on small economies and areas such as the e-commerce Work Programme, she said.
“She noted that groups of members had signalled a desire to move ahead in areas such as services domestic regulation, e-commerce, investment facilitation, women’s economic empowerment, micro, small, and medium-sized enterprises as well as issues related to trade and climate change.
“For issues not in a position to be concluded this year, the Director-General said members had called for post-MC12 work programmes on multilateral issues relating to agriculture, services, and special and differential treatment as well as in joint statement initiatives in areas including plastics pollution and environmental sustainability.
“DG Okonjo-Iweala said that in the coming days, she would intensify her own outreach with heads of delegation, organizing meetings “in various configurations large and small” to support the chairs of negotiating groups in their efforts to broker compromise among members. She reiterated her commitment to ensuring adequate representation and transparency in these meetings ‘Nothing will be done behind closed doors that people don’t know about,’ she emphasised. She indicated that she would work closely with the General Council chair and the chairs of the negotiating bodies as well as MC12 chair Kazakhstan to conduct these meetings.
“Emphasising the tight timeframe for members to resolve their outstanding differences, the Director-General said the ‘path to July’ would involve a large number of intensive meetings aimed at narrowing gaps. ‘Week in, week out, this is what we will do now.’”
The EU seeks a number of specific outcomes for the 12th Ministerial Conference and emphasizes the need to keep the agenda limited to permit success. The EU’s list starts with the conclusion of the fisheries subsidies agreement negotiations and secondly achieving agreement on trade and health including increasing COVID-19 vaccine production.
“Firstly, on fisheries subsidies; the EU supports the Chair’s efforts to move the negotiations forward and the Director-General’s involvement and intent to achieve an outcome already in July. With this in mind, we need to consider how best to use the short time ahead. These negotiations are a test case of the ability of the WTO to deliver on the Sustainable Development Goals, in this case SDG 14.6. We are already late, well passed the deadline that Heads of State and Government instructed us, here at the WTO, to deliver. We have full confidence that Ambassador Wills will find the best way forward for these negotiations.
“Secondly, on trade and health, we must work towards a Ministerial Declaration that brings together key elements of the Ottawa Group proposal on Trade & Health (export restrictions, transparency, trade facilitation) as well as progress on the expansion of production capacities through voluntary licensing and, where necessary, supporting the use of the available TRIPs flexibilities.”
Beyond these two deliverables, the EU looks for an agreed work program for reform of the WTO’s three core functions — negotiations, transparency/monitoring, and dispute settlement. Restoring a functioning two-tier dispute settlement system is the top priority in this area followed by improved notification practices.
The EU supports the various Joint Statement Initiatives and intends to propose additional ones on industrial subsidies, state-owned enterprises, and trade and environment topics.
The EU’s proposal on agriculture differs in part from the summary of views presented by DG Okonjo-Iweala as addressing export restraints, particularly for World Food Programme purchases is a priority while other issues including public stockholding (and other forms of domestic support) is viewed as more appropriate for a work program outcome from the 12th Ministerial.
What is clear is that the increased attention that will be paid by WTO Members on the waiver proposal within the TRIPS Council will likely suck a lot of oxygen out of the WTO in the coming months for other negotiating issues, many of which remain controversial in their own right. Any text based agreement on a TRIPS waiver is unlikely until close to the 12th Ministerial (and unlikely then if EU opposition remains or the U.S. is unable to achieve acceptable text). Thus, the remaining months before the 12th Ministerial Conference will present some major challenges to the WTO Members in their efforts to come up with achievements to keep the WTO relevant going forward. The U.S. move also creates a division with European allies and appears to have been taken without consultation with those allies ahead of last week’s announcement — a departure from the Biden Administration’s approach to date.
As the COVID-19 pandemic continues to create problems around the world, there has been increased activity in many countries and at multilateral organizations seeking to expand COVID-19 vaccine production and increase access to vaccines for low- and middle-income countries. While a number of vaccines have been approved by one or more countries (usually on an emergency use authorization basis) and a few have been approved the World Health Organization, a number of others are seeking approval or are in final stages of trials.
The European Centre for Disease Prevention and Control now issues a weekly update on the COVID-19 situation worldwide. Today’s release of data for week 17 of 2021 shows global cases since the beginning at 153,220,576 of which the Americas has the largest share with 41.16% (63,068,547 cases; U.S. being 32.4 million; Brazil being 14.8 million; Argentina being 3.0 million; Colombia being 2.9 million and Mexico being 2.3 million). Europe is second with 33.10% of the total cases (50,722,884; France with 5.7 million, Turkey with 4.9 million, Russia with 4.8 million, the U.K. with 4.4 million and Italy with 4.0 million). Asia represents 22.70% of cases (34,785,351 of which India is 19.9 million, Iran is 2.5 million, Indonesia is 1.7 million, Iraq is 1.1 million and the Philippines is 1.1 million). Africa accounts for 2.98% of cases (4,571,789 of which South Africa has reported 1.6 million and no other countries have more than 0.5 million). Oceania accounts for 0.05% of cases (71,300). See European Centre for Disease Prevention and Control, COVID-19 situation update worldwide, as of week 17, updated 6 May 2021, https://www.ecdc.europa.eu/en/geographical-distribution-2019-ncov-cases.
Deaths are similarly distributed globally with the Americas having 47.79% of global deaths (1,533,740 of 3,209,416); Europe having 33.47% (1,074,175), Asia having 14.89% (477,851), Africa having 3.81% (122,304) and Oceania having 0.04% (1,340). Id.
The world has seen increases in new cases for the last ten weeks in a row and has had the highest number of cases per week in the most recent weeks as the copied graphic from today’s ECDC publication shows.
“Distribution of COVID-19 cases worldwide, as of week 17 2021
“Cases reported in accordance with the applied case definition and testing strategies in the affected countries.”
As the news accounts make clear, India is facing major challenges and has accounted for a very large part of new cases in recent weeks. For example, over the last 14 days, India reported 4.86 million new cases. This is the first time any country has amassed more than four million cases in a two week period. India has accounted for 42.61% of the world total of new cases in that two week period. Id.
Press accounts have shown a health care system in India struggling to keep up with shortages of everything from ICU units to PPE to medications to oxygen and with a small part of the population totally vaccinated or having received the first of two shots. BBC News, Coronavirus: How India descended into Covid-19 chaos, 5 May 2021, https://www.bbc.com/news/world-asia-india-56977653.
In response to its internal crisis, India has diverted production of COVID-19 vaccines to domestic use, essentially halting exports, complicating the efforts of the COVAX facility to get vaccines to the 91 low- and middle-income countries (other than India which also is supposed to receive vaccines from COVAX). While COVAX has shipped more than 53 million doses to 121 countries as of May 4, as much as 90 million additional vaccine doses were supposed to be supplied by Indian producers to COVAX during April and May that will not make it into the system. See, e.g., Gavi, COVAX vaccine rollout, https://www.gavi.org/covax-facility; Gavi, COVAX updates participants on delivery delays for vaccines from Serum Institute of India (SII) and AstraZeneca, 25 March 2021, https://www.gavi.org/news/media-room/covax-updates-participants-delivery-delays-vaccines-serum-institute-india-sii-az.
Considering the challenges that India is facing, many nations have been providing assistance in an effort to support India as it attempts to cope with the current surge of cases, hospitalizations and deaths. The U.S. assistance is summarized in a fact sheet from the White House which is embedded below.
A number of countries in South America are also seeing major problems — e.g., Brazil, Argentina, Colombia, Peru — though receiving far less attention than India.
Vaccination development, production and distribution
Efforts have been made over the last decade to develop tools and organizations to develop, produce and distribute vaccines to achieve greater equity in access and affordability of vaccines. The WHO, Gavi, CEPI and UNICEF along with important private sector actors like the Bill and Melinda Gates Foundation have worked hard to both support research of potential vaccines to address the COVID-19 pandemic, worked with companies to arrange purchases of vaccines if approved for use, raised funds from governments and private sector participants to pay for the efforts on research and procurement, and organized distribution to the 92 low- and middle-income countries sufficient to address 20% of the populations as well as for any other countries choosing to work through the COVAX facility.
At the same time, a number of countries have negotiated contracts with companies developing vaccines. Because at the time of contracting, it was not known which vaccines would be effective or achieve approval from which governments, major advanced economies often contracted for quantities far in excess of likely needs (assuming all vaccines were eventually approved).
Because of the unprecedented government funding and industry cooperation, a number of vaccines were developed and approved on at least an emergency use basis and production efforts began in late 2020 and have been ramping up in 2021. This includes vaccines developed in the U.S., the European Union, the United Kingdom, China, India and Russia. While all have not yet been approved by the WHO, all have been approved by at least a number of governments. A number of others are either in the approval process or in final stage trials with vaccine approvals likely in the second half of 2021.
It is expected that capacity to produce more than 10 billion doses of vaccines to fight COVID-19 will be operational by the end of 2021. COVAX contracts and deliveries to economies outside of COVAX have anticipated relatively small volumes in the 1st quarter of 2021, with increases in each of the next three quarters. UNICEF has a “COVID-19 Vaccine Market Dashboard” which it describes as follows (https://www.unicef.org/supply/covid-19-vaccine-market-dashboard):
“The COVID-19 Vaccine Market Dashboard is the go-to public resource for the latest information on the world’s COVID-19 vaccine market and the COVAX Facility’s vaccine deliveries.
“From a global vaccine market perspective, the dashboard gives an overview of:
“- COVID-19 vaccine development and progress towards vaccine approvals
“- Reported global vaccine production capacity
“- Manufacturing agreements
“- Vaccines secured and optioned through bilateral and multilateral supply agreements
“- Reported vaccine prices
“The ‘Delivery’ tab of the dashboard provides daily updates on total COVAX vaccine deliveries, doses allocated, and doses ordered. It also includes country- and economy level data on vaccine deliveries and planned shipments over a seven-day period. This information covers both UNICEF-procured doses and deliveries, as well as other national and institutional buyers participating in the COVAX Facility. It further tracks globally reported vaccine deliveries and vaccine donations outside of COVAX.”
For example, looking at the capacity figures from the dashboard by development stage shows 4 billion dose capacity approved for use in the first half of 2021, growing to 8 billion dose capacity approved for use in the second half of 2021, with 19 billion dose capacity projected for each of 2022 and 2023 as being approved for use.
As of May 5, 3032, Bloomberg reports that more than 1.21 billion COVID-19 doses have been administered. The top six areas for vaccinations are China (284.6 million doses administered), the United States (249.6 million), India (162.4 million), the EU (158.6 million), the U.K. (50.7 million) and Brazil (50.2 million). See Bloomberg, More Than 1.21 Billion Shots Given: Covid-19 Tracker, updated May 5, 2021 at 5:38 p.m. EDT, https://www.bloomberg.com/graphics/covid-vaccine-tracker-global-distribution/. Not surprisingly, with the exception of China which has one of the lowest rates of infection of any country in the world, vaccinations have been concentrated in countries with high rates of infection — both developed and developing.
Because of the disruption in supplies from India because of their current challenges, far fewer doses have been administered in low-income countries as COVAX is behind its schedule for deliveries. There are, of course, other challenges in a number of low-income countries, where poor health care infrastructure has resulted in many of the vaccine doses that have been received not being used. See NPR, They Desperately Need COVID Vaccines. So Why Are Some Countries Throwing Out Doses?, May 5, 2021, https://www.npr.org/sections/goatsandsoda/2021/05/05/991684096/they-desperately-need-covid-vaccines-so-why-are-some-countries-throwing-out-dose (“It seems incredible: At a time when low-income nations are clamoring for vaccines against COVID-19, at least three countries — Democratic Republic of Congo, Malawi and South Sudan — are either discarding doses or giving them to other countries. What’s going on?”).
The Proposal for a TRIPs Waiver from India and South Africa
Back in October 2020, India and South Africa filed a proposal for a waiver from many TRIPS Agreement obligations for all WTO Members for a period of years on vaccines, therapeutics and other medical goods relevant to handling the COVID-19 pandemic. There has not been agreement within the TRIPS Council on approving the proposed waiver with a number of advanced pharmaceutical producing countries (U.S., EU, U.K., Switzerland) opposing the proposal or disagreeing that a waiver would address the current availability challenges. The issue has been discussed on a number of occasions in the TRIPS Council. See, e.g., WTO press release, TRIPS Council to continue to discuss temporary IP waiver, revised proposal expected in May, 30 April 2021, https://www.wto.org/english/news_e/news21_e/trip_30apr21_e.htm. There have also been efforts to identify challenges to increasing capacity and production faster and addressing concerns over equitable access. Those issues have been addressed in prior posts, listed above.
There has been considerable pressure from NGOs and, in the U.S., from Democratic members of Congress to agree to the waiver despite concerns within the Biden Administration on whether agreeing to a waiver would actually improve production or access. The Biden Administration in late April announced its decision to make 60 million doses of AstraZeneca vaccines available for redistribution in the coming months (including 10 million doses in current inventory once FDA approves release). AstraZeneca has not yet applied for authorization for its vaccine in the United States, and the U.S. believes it has sufficient other supplies to permit sharing the 60 million doses expected to be available through June. See Financial Times, U.S. plans to share 60m doses of AstraZeneca’s Covid vaccine, 26 April 2021, https://www.ft.com/content/db461dd7-b132-4f08-a94e-b23a6764bdb3. And as part of the relief the U.S. is providing to India, the U.S. has directed inputs for 20 million doses of the AstraZeneca vaccine to be sent to India instead of to U.S. facilities.
Leading nations through groupings like the G-7, G-20 and others have been looking at the options for further increasing production in the coming months to give greater coverage, as well as looking at sending doses not needed to COVAX or particular countries in need. See, e.g., Gavi, France makes important vaccine dose donation to COVAX, 23 April 2021, https://www.gavi.org/news/media-room/france-makes-important-vaccine-dose-donation-covax.
“Enabling equitable global access to Covid-19 Vaccines, Therapeutics and Diagnostics (VTDs)
“62. We affirm our belief that commitment to an open, transparent and multilateral approach is essential in responding to the global health impacts of Covid-19. A global health emergency on this scale requires co-ordinated action and global solidarity. We reaffirm our support for all existing pillars of Access to Covid-19 Tools Accelerator (ACT-A), including its COVAX facility. We recognise that equipping the ACTAccelerator with adequate funding is central. We support the strengthening of health systems, and affordable and equitable global access to vaccines, therapeutics and diagnostics, and we will further increase our efforts to support affordable and equitable access for people in need, taking approaches consistent with members’ commitments to incentivise innovation. We recall in this regard the Charter for Equitable Access to Covid-19 Tools. We recognise the importance of effective and well-functioning global value chains for VTD supply and will work with industry to encourage and support on a voluntary basis and on mutually agreed terms, including licensing, technology and know-how transfers, contract manufacturing , transparency, and data sharing, public private costs and risk sharing. We recognise the need to enable a sustainable environment for local, regional and global productions, beyond Covid-19 products for long-term impact. We welcome the collective G7 commitments of over $10.7 billion USD to date in funding to these initiatives and encourage all partners to increase their support as the next critical step in controlling the pandemic and strengthening health security. In this context, we look forward to the COVAX Advance Market Commitment (AMC) Summit to be co-hosted by Gavi and Japan following the COVAX AMC One World Protected Event co-hosted by Gavi and US. (Emphasis added)
“63. We commit to the G7 Foreign and Development Ministers’ Equitable Access and Collaboration Statement to help accelerate the end of the acute phase of the Covid19 pandemic. We commit to supporting COVAX financially, including by encouraging pledges to the Facility, including at the COVAX AMC Summit in June, disbursing as soon as possible, providing in-kind contributions, and coordinating with and using COVAX, which is the key mechanism for global sharing of vaccines to supplement its own direct procurement, to enable the rapid equitable deployment of vaccines.
“64. We support the work of G7 Health Ministers and continued G7 efforts to work with partners to improve pandemic preparedness and global health security, with WHO as the leading and co-ordinating authority, to strengthen health systems, develop solutions that embed a One Health approach, tackle antimicrobial resistance, and accelerate progress towards universal health coverage and the health-related Sustainable Development Goals. We welcome the establishment of the One Health High Level Experts Panel supported by WHO, FAO, OIE and UNEP. We are determined to ensure that lessons are learned and applied from the pandemic. We look forward to the forthcoming G20 Global Health Summit in Rome and to its Declaration, and to further close cooperation on strengthening the global health architecture, including longer-term considerations such as exploring the potential value of a global health treaty, to strengthen global pandemic preparedness and response. We will deploy our foreign and development policies and programmes to build a more resilient world that is better protected against health threats, including encouraging new public health guidance in consultation with national and relevant international organisations on international travel by sea or air, including cruise ships, and supporting an expert-driven, transparent, and independent process for the next phase of the WHO-convened Covid-19 origins study, and for expeditiously investigating future outbreaks of unknown origin. Together with G7 Health Ministers, we commit to work in partnership with low- and lower-middle income countries by improving coordination of G7 support for, and collaboration with, public health and health security capacities and their regional bodies in Africa, Asia and other regions, building on the G7 commitment to support implementation of and compliance with the International Health Regulations (IHR) in 76 countries, taking into account the recommendations from the IHR Review Committee. We will align with and support national and regional health priorities and leadership to improve public health. We look forward to the publication of the G7 Carbis Bay Progress Report on global health and what we can learn from its conclusions on G7 commitments to strengthening health systems to advance universal health coverage and global health security.
“65. We note the continuing need to support health systems and health security and secure sustainable financing, together with partner countries’ domestic resources, to help accelerate global vaccine development and deployment, recover and then sustain access to essential health and nutrition services and health commodities, including in humanitarian settings and for sexual and reproductive health and rights, and to bolster the global health architecture for pandemic preparedness, including through stronger rapid response mechanisms. We look forward to working with G7 Finance Ministers to build consensus on practical actions to facilitate access to existing global financing sources to meet demands for access to Covid-19 vaccines, therapeutics and diagnostics, as well as how best to tackle the ACT-A funding gaps, with the aim of shortening the lifespan of the pandemic and with particular focus on the needs of vulnerable countries. In this regard, we look forward to the outcomes of the Independent Panel for Pandemic Preparedness and Response (IPPPR) initiated by the WHO, and the High Level Independent Panel on financing the global commons for pandemic preparedness and response (HLIP) established by the G20.”
At the same time that G-7 foreign ministers were concluding their work in London, the WTO was holding the first of two days of a General Council meeting. The WTO’s Director-General Ngozi Okonjo-Iweala urged the resolution of addressing equitable access to vaccines. The U.S. Trade Representative issued a statement changing the U.S. position (and contradicting what they had agreed with other G-7 foreign ministers hours before) by indicating that the U.S. would support the waiver of TRIPS rights and obligations during the pandemic and would work on text in the TRIPS Council to see if a consensus could be achieved. The Director-General’s statement from May 5, the USTR statement and the Director-General’s comments on the USTR statement are embedded below.
While the pharmaceutical industry in advanced countries is unquestionably shocked by the shift in U.S. position (and stocks of vaccine producers suffered stock market price declines on May 5), the EU President has indicated a willingness to look at the issue and the French President has indicated his support of the U.S. position. See Financial Times, Pharma industry fears Biden’s patent move sets dangerous precedent, 6 May 2021, https://www.ft.com/content/f54bf71b-87be-4290-9c95-4d110eec7a90; The Guardian, EU ‘ready to discuss’ waiver on Covidvaccine patents, 6 May 2021, https://www.theguardian.com/world/2021/may/06/eu-ready-to-discuss-waiver-on-covid-vaccine-patents (“The head of the European Commission, Ursula von der Leyen , has said the bloc is ‘ready to discuss’ a US-backed proposal for a waiver on the patents for Covid-19 vaccines and the French president, Emmanuel Macron, said he was ‘absolutely in favour’ of the plan as pressure built for a move that could boost their production and distribution around the world.”).
The concerns of industry have been identified in prior posts of mine and are summarized in yesterday’s Financial Times article on what if any benefit there will be should a waiver be agreed to. See Financial Times, Will a suspension of Covid vaccine patents lead to more jabs?, 6 May 2021, https://www.ft.com/content/b0f42409-6fdf-43eb-96c7-d166e090ab99 (“[T]he drug makers’ main argument is that waiving intellectual property is not the solution. Vaccine makers have already pulled out all the stops to supply billions of doses at an unprecedented speed, including signing unusual partnerships with rivals to expand production. Moderna put its patents online last summer but they are not useful alone.”).
The Road Forward
It is unclear where the process at the WTO goes from here. The WTO TRIPS Council is expecting a revised document from India and South Africa in May that arguably could become the basis for WTO Members, including the U.S. and EU and others who have been opposed to a waiver, to consider and negotiate from. If a consensus emerges around a text, then it would go to the General Council for a vote/approval. But while the formal process is understood, it is unclear what an agreement would actually look like. It is hard to imagine that the U.S., EU, Switzerland, Japan and possibly others would agree to waive the pharmaceutical companies rights within their own territories. So there is a question whether rights could be waived selectively? If so, what possible liability would exist for governments and/or companies exploiting the IP rights of others? It is unclear if there will be a requirement for some/all countries who engage in use of others intellectual property to provide compensation similar to a compulsory license fee. Will countries that have existing voluntary licensing agreements with producers be able to void those agreements or have the same IP rights used by other companies? Will there be limitations on where goods produced can be shipped (e.g., only to low- and middle-income countries)? What will the basis be for getting IP holders to transfer technology where there is no compensation? There are undoubtedly dozens of other issues that the industry and their lawyers have besides the above. If waiver is the direction the world goes, presumably there needs to be transparency and full opportunity for vetting proposals so that all issues are identified, understood and properly addressed.
In my prior posts, I have argued that to date vaccines have largely gone to the countries with large levels of infections and deaths. Those pushing for greater equity in access based on a simple percent of global population approach abandon those concerns when a large developing country runs into a surge and finds itself in serious difficulty, such as is happening with India. I support targeting relief to address fire situations like India. See April 29, 2021, COVID-19 — Efforts to help India during its current surge of cases, hospitalizations and deaths, https://currentthoughtsontrade.com/2021/04/29/covid-19-efforts-to-help-india-during-its-current-surge-of-cases-hospitalizations-and-deaths/. There are equally important fire situations in other countries that deserve the attention and concern of the world as well.
The WTO has been and should be encouraging Members to eliminate export restrictions as quickly as possible. The new Director-General has used the power of convening to probe what are the barriers to increased production and greater distribution to low- and middle-income countries. Many of the barriers are bottlenecks in supply chains, shortages of various inputs as the industry drastically ramps up production of vaccines, lack of trained personnel in some countries where there may be existing vaccine capacity for other vaccines. Governments can and should be working with industry to address bottlenecks on an expedited basis. Encouraging voluntary licensing is useful and there are some 272 agreements around the world already in place with others being worked on. However, as Johnson & Johnson’s experience (where it talked to 100 companies but only found 10 they could work with) shows, the presence of a facility in a country is not the same as a facility with trained personnel who can actually produce a safe vaccine of the types currently approved for use on COVID-19.
The biggest short term availability of more supplies for low- and middle-income countries is not from the waiver but rather from governments redirecting volumes that are not needed for their own populations. The U.S. and EU are each starting that, but more can and should be done. Such actions have real potential.
Similarly, pursuit of new vaccines, such as one being tested in a number of developing countries that is far lower cost than some currently being used to vaccinate against COVID-19 and which apparently can be easily used in many countries in existing vaccine facilities makes a lot of sense. See New York Times, Researchers Are Hatching a Low-Cost Coronavirus Vaccine, A new formulation entering clinical trials in Brazil, Mexico, Thailand and Vietnam could change how the world fights the pandemic, April 5, 2021, updated April 17, 2021, https://www.nytimes.com/2021/04/05/health/hexapro-mclellan-vaccine.html.
While there are lots of groups and individuals arguing there is a moral imperative to wave the IP rights of pharmaceutical companies during the global pandemic, there is little practical evidence that such an approach will get the world to the place presumably everybody wants — the quickest curtailment of the pandemic for the benefit of all.
Time will tell whether an effort to negotiate a waiver is an aid or a hindrance to actually ending the pandemic.
A little over two months after assuming the position of Director-General (“DG”) of the World Trade Organization, DG Okonjo-Iweala announced her four Deputy Directors-General (“DDGs”). Two of the four DDGs are women, marking the first time that there is gender balance among the DDGs. The press release from the WTO is embedded below.
DG Okonjo-Iweala’s selections follow past practice of picking DDGs from the four regions other than the region of the DG (Africa). The U.S. and the EU (France this time) continue to hold a DDG slot (Angela Ellard and Amb. Jean-Marie Paugam respectively). The Asian slot goes to China (Amb. Xiangchen Zhang) for the second time in a row (potentially indicating that three of the five slots will be going to the US, EU and China going forward). The Latin slot goes to Anabel Gonzalez of Costa Rica. Three of the four have extensive experience in Geneva with Amb. Xiangchen Zhang having recently concluded his role as China’s Permanent Representative to the WTO, with Amb. Jean-Marie Paugam having been France’s Permanent Representative to the WTO and with Ms. Anabel Gonzalez having had many roles both within the WTO Secretariat and with the Government of Costa Rica including Minister of Foreign Trade. All four have extensive experience with trade issues as the short bios included in the press release review. Ms. Angela Ellard from the U.S. has decades of experience in the interaction between the legislative and executive branches in the U.S. in the trade arena having served in a senior staff capacity for the House Ways and Means Republicans.
Today’s press release did not identify areas of responsibility for each of the four DDGs. That information will presumably be released in the coming days.
With much to accomplish to restore credibility for the WTO and its ability to help move global trade forward in a more sustainable and equitable manner, I join all those wishing the new DDGs success in their new positions.
India has been setting daily records for new infections almost every day for the last week or so and reported more than two million infections in the last week. See European Centre for Disease Prevention and Control, COVID-19 situation update worldwide, as of week 16, updated 29 April 2021, https://www.ecdc.europa.eu/en/geographical-distribution-2019-ncov-cases; European Centre for Disease Prevention and Control, Data on 14-day notification rate of new COVID-19 cases and deaths, https://www.ecdc.europa.eu/en/publications-data/data-national-14-day-notification-rate-covid-19 (week 15, 1,534,202 new cases reported; week 16, 2,056,121 new cases reported). Thus, India is the first country to record more than two million cases in a single week and the second to record more than three million in a two week period (the United States exceeded three million during the two weeks 50 and 51 of 2020). With total cases reported by India of 17,118,040, India has the second largest number of cases after the United States (32,125,099) but has a population more than four times that of the United States. However, press reports suggest that information on COVID-19 cases and deaths in India are substantially underreported, perhaps representing only 10-20% of actual cases and deaths. See, e.g., New York Times, As Covid-19 Devastates India, Deaths Go Undercounted, April 24, 2021, https://www.nytimes.com/2021/04/24/world/asia/india-coronavirus-deaths.html.
What is clear is that India is being overwhelmed at the present time with India’s health care system struggling to handle the huge number of people needing assistance, with many hospitals unable to handle the case load, with acute shortages reported on oxygen, ICU beds and much more. See, e.g., The Financial Times, Editorial Board, The tragedy of India’s second wave, April 26, 2021, https://www.ft.com/content/90281790-fb9e-468c-b3fa-c7549bd3bb39 (“The suffering of the Indian people in the country’s second wave of Covid-19 is a human tragedy on a vast scale. It is also a warning, and a danger, for the world. Many nations have been through dark times in the global pandemic; several with smaller populations still have higher death tolls. But with reports of people dying in the streets outside overwhelmed hospitals running short of oxygen, India today perhaps most closely resembles the worst-case scenarios painted when the virus was identified 16 months ago.”); New York Times, ‘This Is a Catastrophe.’ In India, Illness Is Everywhere, April 27, 2021, https://www.nytimes.com/2021/04/27/world/asia/India-delhi-covid-cases.html. The extent of human suffering from people not able to obtain timely care has been described by the Director-General of the World Health Organization as “beyond heartbreaking”. World Health Organization, Director-General’s opening remarks at the media briefing on COVID-19 – 26 April 2021, 26 April 2021, https://www.who.int/director-general/speeches/detail/director-general-s-opening-remarks-at-the-media-briefing-on-covid-19-26-april-2021.
“Reflecting the United States’ solidarity with India as it battles a new wave of COVID-19 cases, the United States is delivering supplies worth more than $100 million in the coming days to provide urgent relief to our partners in India. In addition, U.S. state governments, private companies, non-government organizations, and thousands of Americans from across the country have mobilized to deliver vital oxygen, related equipment, and essential supplies for Indian hospitals to support frontline health care workers and the people of India most affected during the current outbreak. U.S. Government assistance flights will start arriving in India on Thursday, April 29 and will continue into next week.
“Just as India sent assistance to the United States when our hospitals were strained early in the pandemic, the United States is determined to help India in its time of need.
“Immediate U.S. Emergency COVID-19 Assistance
“The United States is providing:
“- Oxygen Support: An initial delivery of 1,100 cylinders will remain in India and can be repeatedly refilled at local supply centers, with more planeloads to come. The U.S. Centers for Disease Control and Prevention has also locally procured oxygen cylinders and will deliver them to support hospital systems in coordination with the Government of India.
“- Oxygen Concentrators: 1700 oxygen concentrators to obtain oxygen from ambient air, these mobile units provide options for flexible patient treatment.
“- Oxygen Generation Units (PSA Systems): Multiple large-scale units to support up to 20 patients each, and additional mobile units will provide an ability to target specific shortages. A team of U.S. experts will support these units, working hand-in-hand on the ground with Indian medical personnel.
“- Personal Protective Equipment: 15 million N95 masks to protect both patients and Indian health care personnel.
“- Vaccine-Manufacturing Supplies: The U.S. has re-directed its own order of Astra Zeneca manufacturing supplies to India. This will allow India to make over 20 million doses of COVID-19 vaccine.
“- Rapid Diagnostic Tests (RDTs): 1 million rapid diagnostic tests – the same type used by the White House — to provide reliable results in less than 15 minutes to help identify and prevent community spread.
“- Therapeutics: The first tranche of a planned 20,000 treatment courses of the antiviral drug remdesivir to help treat hospitalized patients.
“- Public Health Assistance: U.S. CDC experts will work hand-in- hand with India’s experts in the following areas: laboratory, surveillance and epidemiology, bioinformatics for genomic sequencing and modeling, infection prevention and control, vaccine rollout, and risk communication.
“U.S. Support for India from the Outset of the Pandemic
“The United States and India have closely worked together to respond to the COVID-19 pandemic. U.S. COVID-19 assistance has reached more than 9.7 million Indians across more than 20 states and union territories, providing life-saving treatments, disseminating public health messages to local communities; strengthening case-finding and surveillance; and mobilizing innovative financing mechanisms to bolster emergency preparedness:
“- Partnered with more than 1,000 Indian healthcare facilities to strengthen preparedness, including training of over 14,000 people on infection prevention and control.
“- Helped keep more than 213,000 frontline workers safe — including risk mitigation training for doctors, nurses, midwives, community volunteers, sanitation workers, and others who are actively responding to COVID-19 in India.
“- Launched joint public messaging with UNICEF on COVID prevention that has reached more than 84 million people.
“- Provided 200 state-of-the-art ventilators to 29 healthcare facilities in 15 states to care for critically-ill COVID-19 patients.
“U.S.-India Health Partnership: Seven Decades Strong
“- For seventy years, U.S. public health experts from across the government, including USAID, HHS, CDC, FDA, and NIH, have worked in partnership with Indian officials to improve the health of India’s most vulnerable communities and the well-being of its people.
“- Over the last 20 years, U.S. foreign assistance to India has exceeded $2.8 billion, including more than $1.4 billion for health care.
“- The United States, India, and other partners have worked together to reduce new HIV infections by 37 percent between 2010 and 2019.
“- Since 1998, the United States and India have worked together to combat tuberculosis (TB) through improved patient-centered diagnosis, treatment and prevention, helping treat 15 million people with the disease.
“- In the last five years, the United States has helped 40 million pregnant women receive vital health information and services.
“- The United States, in partnership with the Government of India and World Health Organization, has supported initiatives at the District, State and National level to build frontline disease detection capacity.
“- The United States and India are working together to advance global health security and fight outbreaks before they become pandemics.”
India is a critical part of the global effort to vaccinate the world both with vaccines developed within India and with vaccines (e.g., AstraZeneca and Novavax) that are licensed for production in India with large commitments to supply COVAX for distribution to low- and middle-income countries and with other vaccines licensed from other countries (China and Russia). The immediate challenges in India has shifted the focus of the Indian government and its vaccine producers to supply almost exclusively for the Indian market while India struggles through the current surge in new cases and hospitalizations. The focus of the world on the need to help India is an interesting departure from the discussion of vaccine distribution based on population that has dominated focus through March.
Many parts of the world have been able to keep the COVID-19 pandemic under control to a large extent and hence have relatively few COVID-19 cases. Other countries — the U.S., India, Brazil, the EU countries and UK — have had far less success in controlling the spread of COVID-19 and have recorded very large numbers of cases, hospitalizations and deaths.
Looking at current data, China has achieved the largest number of vaccinations — 235,976,000 vaccinations or 21.82% of global totals til April 28, 2021) — but a very low percent of global COVID-19 cases — 102,384 cases or 0.07% of global cases. The U.S. has the largest number of cases and second largest number of vaccinations (21.79% of cases; 21.69% of vaccinations). India has the second largest number of cases and the third largest number of vaccinations (11.61% of cases; 13.86% of vaccinations). The EU (27 countries) has 20.46% of COVID-19 cases (2nd largest if looking at the 27 countries together) and 12.75% of vaccinations. The United Kingdom has 2.99% of cases and 4.39% of vaccinations. Brazil has 9.75% of cases (3rd highest for an individual country) and 4.17% of vaccinations.
Both China and India are major vaccine producers and have comparable populations. But China has had only 0.6% of the COVID-19 cases that India has had, but has 157.45% of the vaccinations that India has accomplished. Vaccination data is from Bloomberg, More than 1.08 Billion Shots Given: Cover-19 Tracker, updated April 28, 2021, https://www.bloomberg.com/graphics/covid-vaccine-tracker-global-distribution/.
The problems India is facing are daunting and emphasize the need for the global community to respond to emergencies as they arise while global production of vaccines continue to ratchet up in the coming months. That doesn’t mean that efforts to roll out vaccines to all countries is not an important initiative (COVAX has now shipped more than 48 million doses to 120 countries and various countries are shipping vaccines to ow- and middle-income countries outside of COVAX). But pandemics do not wreak havoc uniformly across the world. Fires need to be addressed urgently while capacities are increased to deal with all needs. The last several weeks have shown India to be suffering such a “fire”. Diverting resources from other parts of the world to India makes sense at the moment. Brazil’s fire continues as well and undoubtedly needs more attention.
While vaccines will help get the world out of the pandemic, all countries need to be vigilant on the non-vaccine tools available to minimize the spread of the pandemic within markets until there is sufficient vaccine capacity to address all needs — capacity that should be here by the end of 2021.
Ambassador Dennis Shea served as U.S. Permanent Representative to the World Trade Organization during the Trump Administration. He is now an Adjunct Fellow (Non-resident), Scholl Chair in International Business at the Center for Strategic & International Studies (CSIS). Today a commentary of Amb. Shea was posted by CSIS. See CSIS Commentary, Dennis Shea,The WTO Can Help Shine a Spotlight on Forced-Labor Practices in Xinjiang’s Cotton Industry, https://www.csis.org/analysis/wto-can-help-shine-spotlight-forced-labor-practices-xinjiangs-cotton-industry.
Amb. Shea notes that there is an upcoming “dedicated discussion” on trade developments on cotton at the WTO on May 28. His commentary states that
“For next month’s dedicated discussion to have credibility, it must examine the trade impact of the use of forced labor to pick cotton in China’s Xinjiang province. In light of what we have learned about forced-labor practices in Xinjiang, it is inconceivable that the WTO would convene a meeting on cotton and trade and not include these practices as a topic worthy of review. Simply put, ignoring what is happening in Xinjiang would be tantamount to the WTO holding a meeting on global public health and trade without mentioning the Covid-19 pandemic.”
As Amb. Shea points out, WTO Members should present information relevant to trade in cotton including potential subsidies (such as government provision of labor at little or no compensation (forced labor)). His commentary urges the U.S. to bring forward any information it may have on the cotton industry in Xinjiang. He notes that
“The United States should bring the issue of forced labor in Xinjiang directly to the WTO by placing it on the agenda of the upcoming dedicated discussion on cotton and trade. Whatever information the U.S. government has developed about forced labor in the cotton fields of Xinjiang and its impact on trade should be shared with other WTO members. Doing so would be consistent with President Biden’s trade agenda, which makes combating forced labor a priority. It is also consistent with the views of U.S. Trade Representative Katherine Tai, who said during her confirmation hearing that forced labor is ‘the crudest example of the race to the bottom in global trade.’”
While the Director-General of the WTO has been quoted as indicating that China does not respond well to being singled out, the cotton initiative at the WTO is looking at all trade practices that affect trade in cotton. Labor subsidies for a region that produces 85% of China’s cotton and 20% of the world’s is obviously fair game. See RT, Stop targeting China if you want it to support global trade reforms, WTO head tells world powers, April 26, 2021, https://www.rt.com/news/522151-wto-chief-stop-targeting-china-cooperation/ (“World Trade Organization (WTO) chief Ngozi Okonjo-Iweala has called on countries to stop targeting China if they want cooperation on global reforms, claiming that putting pressure on Beijing will only get ‘resistance.’ * * * Speaking to a conference held by the European Commission, Okonjo-Iweala suggested targeting China only alienates it further. He urged nations to just ‘put the facts on the table,’ claiming Beijing is ‘willing’ to consider proposals when they are presented without ‘negative spillovers.’”). While China challenges the claim that it uses forced labor for cotton or any other products, it makes sense for WTO Members to marshall the information available so that the matter can be considered as part of the semiannual dedicated session.
Amb. Shea’s commentary is a useful note on seeing to what extent the WTO’s existing process can address significant trade distortions of China or any other cotton producer. Hopefully, a robust process will occur next month in Geneva.
The U.S. and China are now in the second year of the Phase I Agreement that took effect in mid-February 2020. As reported in prior posts, both China and the U.S. have taken steps to implement parts of the Phase 1 Agreement addressing specific non tariff barriers and intellectual property issues, although the level of actual implementation remains unclear. However, commitments China made to significantly increase imports of goods and services from the United States have generally not been fulfilled as reviewed month by month in prior posts. As China’s economy actually grew in 2020 and is experience very rapid growth in 2021, the failure of the purchase commitments can’t be attributed to any significant extent on China’s economic performance.
This post looks at U.S. export data for January-February 2021 and also looks at U.S. exports to China during the twelve months March 2020-February 2021.
Annex 6.1 of the Phase I Agreement contains commitments for “additional U.S. exports to China on Top of 2017 baseline” for two years, 2020 and 2021. Article 6.3 of the Agreement states that “The Parties project that the trajectory of increases in the amounts of manufactured goods, agricultural goods, energy products, and services purchased and imported into China from the United States will continue in calendar years 2022 through 2025.”
The Agreement lists 18 categories of goods grouped in three broad categories (manufactured goods, agriculture and energy) and five services categories. Chinese imports of goods and services from the United States under the Agreement are supposed to increase by $76.7 billion in the first year over levels achieved in 2017 and in the second year by $123.3 billion over 2017 levels. The categories and tariff items included in the goods categories are reviewed in Annex 6.1 of the Agreement and the attachment to Annex 6.1. In the confidential version of the agreement, growth levels are provided for each of the 23 categories of goods and services.
Article 6.2 of the Agreement defines the time period for the purchase commitments as being January 1, 2020 through December 31, 2021. So the first year by agreement was calendar year 2020. Calendar year 2021 is the second year of the agreement. The level of increases in U.S. exports to China for 2021 is as follows: manufactured goods $44.8 billion on top of 2017 base line of $58.4 billion (2021 total of $103.2 billion or an increase of 76.81% over 2017 actual); agriculture (including seafood) $19.5 billion on top of 2017 base line of $20.85 billion (2021 total of $40.35 billion or an increase of 93.51% over 2017 actual); energy $33.9 billion on top of 2017 base line of $7.6 billion (2021 total of $41.5 billion or an increase of 447.95% over 2017 actual); services $25.1 billion on top of 2017 base line for the selected services of $53.033 billion (2021 total of $78.133 billion or an increase of 47.33% over 2017 actual).
Increases from 2017 for the calendar year 2020 agreed levels were lower than for 2021 (increases over 2017 of $32.9 billion, $12.5 billion, $18.5 billion and $12.8 billion respectively for manufactured goods, agriculture, energy and services).
The breakout of services exports is not available for 2020 or the first two months of 2021. However, U.S. exports of all services to China for 2020 were $37.921 billion vs. $54.981 billion in 2017, a decline of 31% for all services, thus, U.S. services exports covered by the Phase I Agreement declined in 2020. See U.S. Census Bureau and the U.S. Bureau of Economic Analysis, MONTHLY U.S. INTERNATIONAL TRADE IN GOODS AND SERVICES, February 2021, April 7, 2021, page 28, Exhibit 20b, https://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf. While the BEA data don’t show exports of services in January or February by country, January-February 2021 total services exports are down from January-February 2020 (before the pandemic resulted in significant closures) with the largest reductions in travel followed by transport and by maintenance and repair services. Id at Exhibit 3.
In 2017, the selected goods covered by Annex 6.1 were $86.795 billion of total U.S. domestic exports to China of $120.109 billion, meaning non-covered U.S. exports in 2017 were $33.314 billion. On services, the selected services covered by Annex 6.1 were $53.033 billion of total services exports to China of $54.981. So non-covered services were $1.948 billion. For goods, there were sharp declines in 2020 of U.S. exports to China of non-covered products from the levels achieved in 2017 (a decline of $6.6 billion). Non-covered products are also down up in January-February 2021 versus January-February 2017 ($4.378 billion vs. $5.135 billion). While the services break out for 2020 is not yet available by country by type of service, total services exports to China (as reviewed above) were down 31% . The non-covered services are relatively small (just 3.5% of total services exports).
Since the Agreement took effect in mid-February, my analysis in prior posts has focused on the period since the agreement went into effect (for statistics, from March 1, 2020). This is consistent with the position that USTR and USDA took in the Trump Administration in an interim report released on October 23 looking at China’s compliance with its purchase commitments in agriculture. “It is worth noting that the Phase One Agreement did not go into effect until February 14, 2020, and March is the first full month of its effect. That means that we have seen seven months of agreement sales.” U.S. Trade Representative’s Office and U.S. Department of Agriculture, Interim Report on the Economic and Trade Agreement between the United States of America and the People’s Republic of China, AGRICULTURAL TRADE, October 23, 2020, Page 1. Since today’s post covers U.S. exports through February (12 months, if the starting month is March 2020), I include that analysis below. In future posts, I will limit my analysis to calendar 2021 vs. calendar 2017.
March 2020-February 2021 data compared to 2017; January-February 2021 compared to January-February 2017
For purposes of this post, I will look at the March 2020 – February 2021 data compared to calendar year 2017 data, but I will also look at the first two months of 2021 compared to the first two months of 2017. In my post in February, I had reviewed calendar 2020 data compared to 2017 data. Looking at the March 2020-February 2021 period vs. calendar year 2020 results in U.S. domestic exports for Phase I products being $6.4 billion higher, being slightly higher than 2017 (vs. 2020 being slightly lower) but missing the commitment levels of purchases by China by $60.4 billion vs. $66.8 billion for the 2020 calendar year. The data analyzed is limited to goods since the services data is more limited and has been summarized above.
Looking at U.S. domestic exports for the March 2020 – February 2021 period shows China meeting 92.43% of first year agriculture commitments, and U.S. agricultural exports being 47.85% above 2017 actual levels. U.S. domestic exports to China of all Phase 1 products are only 59.91% of first year commitments with manufactured goods at 53.01% and energy at 42.45%. While agriculture products covered by the Phase I commitments exported to China in the March 2020-February 2021 period exceeded 2017 actual by $10 billion and energy exceeded 2017 by $3.5 billion, manufactured goods were $10 billion smaller than 2017 actual. Compared to first year purchase commitments, total U.S. Phase I goods exports were $60.4 billion short of the agreed first year level.
If looking at a calendar year 2021, the data for January-February show increases for agriculture (+39.34%) and energy (+51.21%) but a decline for manufactured goods (-3.81%) compared to January-February 2017 but each category trails the level of increase needed to meet 2021 purchase commitments. Manufactured goods have a commitment level that is 76.81% higher than 2017 actual. Similarly, on agricultural products covered by the Phase I commitments, U.S. exports require a 93.51% increase above 2017 actual levels. On energy, U.S. exports to China need to be 477.93% above 2017 actual. For all Phase I goods, U.S. exports in January-February are up 14.73% but the annual increase to meet the Phase I commitment is 113.14%.
Looking at total U.S. domestic exports of goods to China for the period March 2020 – February 2021., U.S. exports were $117.589 billion ($9.799 billion/month) compared to $120.109 billion in 2017 ($10.009 billion/month). These include both products covered by the Annex 6.1 commitments and other products. For January-February 2021, total U.S. domestic exports to China were $19.530 billion compared to $18.360 billion in January-February 2017.
Total 2017 U.S. domestic exports of goods to China were $120.1 billion. The Phase 1 Agreement calls for increases on a subset of goods of $63.9 billion in the first year. Thus, the target for the first year of the U.S.-China Phase 1 Agreement is U.S. exports to China of $184 billion if non-subject goods are exported at 2017 levels.
Other U.S. domestic exports not covered by the 18 categories in Annex 6.1 were $33.314 billion in 2017. For the period March 2020 – February 2021, non-covered products (which face significant tariffs in China based on retaliation for US 301 duties) have declined 18.01%, and total exports to China are down 2.10%. Looking at January-February 2021, other U.S. domestic exports (i.e., not covered by the Phase I Agreement) were down 15.04% from comparable levels in January-February 2017.
Thus, using the March 2020-February 2021 period since the U.S.-China Phase 1 Agreement went into effect, U.S. domestic exports of the Annex 6 goods were $90.274 billion; non-covered products were $27.315 billion, for total U.S. domestic exports to China of $117.589 billion. This figure is below 2017 and dramatically below the target of $184.0 billion (if noncovered products remain are at 2017 levels; $177.421 billion with noncovered products at March 2020 – February 2021 levels) . The U.S. domestic exports to China were, however, higher than the $109.72 billion in 2018 and the depressed figure of $94.100 billion in 2019.
If one looks at January-February 2021, U.S. domestic exports to China of Annex 6 goods were $15.152 billion, other exports were $4.378 billion, for total domestic exports in January 2021 of $19.530 billion, ahead of January-February 2017 but far behind the level of exports needed to meet the second year purchase commitments by China (Phase I products are up 14.73% vs. full year increase needed of 113.14%).
The 18 product categories included in Annex 6.1 of the Phase 1 Agreement show the following for 2017, March 2020 – February 2021 and rate of growth as well as the dollar shortfall by major category compared to 1st year purchase commitments by China.:
March 2020 – February 2021
% change 12 mos. 2017 vs. 2020/2021
$ shortfall from 1st year commitments
1. industrial machinery
2. electrical equipment and machinery
3. pharmaceutical products
4. aircraft (orders and deliveries)
6. optical and medical instruments
7. iron and steel
8. other manufactured goods
Total for mfg goods
13. other agricultural commodities
Total for agriculture
15. liquefied natural gas
16. crude oil
17. refined products
Total for energy
Total for 1-18
As reviewed in prior posts, the U.S.-China Phase 1 Agreement is a potentially important agreement which attempts to address a range of U.S. concerns with the bilateral relationship and obtain somewhat better reciprocity with the world’s largest exporter. The Phase 1 Agreement has left other challenges to a Phase 2 negotiation which has not yet begun. USTR Tai has indicated that the Biden Administration will monitor compliance by China with the terms of the Phase I Agreement.
While there has been some progress on non-trade volume issues that are included in the Phase 1 Agreement and some significant improvements in exports of U.S. agricultural goods, there has been very little forward movement in expanding total U.S. exports of goods to China in fact and a sharp decline in U.S. exports of services to China.
The differences in economic systems between China and the United States made reliance on WTO rules less relevant to the Trump Administration as those rules presume market-based economies and presently don’t address the myriad distortions that flow from the Chinese state capital system. Thus, the Phase I Agreement was an effort to move the needle in trade relations with China to achieve greater reciprocity. It has had some limited success to date. While the Biden Administration is doing a full review of the challenges posed by China’s trade policies, there remains a lot of work to see that the Phase I Agreement is fulfilled.
“2. Prohibit advisory opinions, and further elaborate the circumstances constituting advisory opinions;
“3. Clarify that DSU Article 3.2 does not justify expanding or narrowing the reach of WTO provisions or filling gaps in WTO coverage;
“4. Clarify that customary rules of interpretation of public international law do not justify gap-filling and expanding or narrowing the reach of WTO provisions;
“5. Affirm that Article 17.6(ii) of the Antidumping Agreement must be given meaning, by clarifying that the provision reflects the principle just described, that WTO adjudicators may not expand or narrow the meaning of broad provisions and general terms; and
“6. Direct the Appellate Body to reject party arguments that expand or narrow the reach of agreement provisions or fill gaps in agreements.”
This year, a former USTR General Counsel, Warren Maruyama had an article published in the Journal of World Trade that again stressed the importance of addressing overreach to be able to resolve the Appellate Body impasse. See Maruyama, Warren H., “Can the Appellate Body Be Saved?”, Journal of World Trade 55, no. 2 (2021, 197-230. Mr. Maruyama notes that the problem of overreach for the United States is most pronounced in the trade remedy sphere and that there have been concerns for two decades or more flowing in large part from the Appellate Body’s creation of obligations on “zeroing”. As Mr. Maruyama states, “The concerns rest on the conviction of U.S. trade officials who participated in the Uruguay Round negotiations and later served in the Bush 43, Obama, and Trump Administrations, that there was never a WTO agreement to abolish ‘zeroing’.” Id at 197. Mr. Maruyama reviews the Uruguay Round antidumping negotiations and GATT disputes on similar language in the Tokyo Round Code to that relied upon by the Appellate Body to support his thesis that many countries knew about “zeroing” (treating sales that were not dumped as having a “0” dumping amount) during the Uruguay Round, and that efforts to have language added to the Agreement to address the issue were rejected. Id at 202-210.
Mr. Maruyama then proceeds to look at the challenges to addressing overreach and has a number of useful proposals — clarifying the standard of review for the Appellate Body, not review finding of facts under DSU Art. 11, giving meaning to ADA Article 17.6(ii) in terms of deference to administering authorities in constructions where more than one meaning is possible, examining negotiating history and ending gap filling. Id at 214 – 225. He also proposes reforming the Appellate Body appointment process (moving away from academics to individuals with WTO negotiating experience), making Appellate Body positions full time, providing a mechanism to disapprove an AB decision where a significant number of Members object, and by modifying the structure and operation of the Appellate Body Secretariat to have Secretariat personnel hired by each AB member to help the AB member during his/her time on the Appellate Body. Id at 226-228.
The importance of Mr. Maruyama’s article lies in his focus on the critical importance of solving the overreach problem if the WTO is to regain a two-tier dispute settlement system. His is another voice providing a clear signal that overreach is the most important issue to be solved and that the Walker paper from late 2019 didn’t really address this core U.S. concern.
As I have written before, addressing overreach requires both fixing the operation of the system going forward and rebalancing rights and obligations by correcting for the overreach decisions Members have flagged to the DSB in the past. The addressing of overreach is of importance to both political parties in the United States and has been on the radar of current and past Administration since at least 2002.
Because restoration of a two-tier dispute settlement system is viewed as important by many Members, it is time for WTO Members to in fact recognize the problems of past decisions and work for meaningful solutions both of the system going forward and to ensure a restoration of the balance and rights and obligations agreed to by Members during the Uruguay Round.
“• Pursuant to Rule 6 of the Rules of Procedure for Meetings of the General Council, as agreed by the Dispute Settlement Body (DSB), the United States proposes an amendment to the proposed agenda. The United States proposes to remove item 4, referred to as ‘Request for the Establishment of a Panel by Venezuela.’
“• Chair, item 4 of the proposed agenda contains an item that was submitted by purported representatives of the government of Venezuela. This is not the case.
“• The purported representatives of the Government of Venezuela attempted to place a similar item on the agenda of the DSB meeting in March 2019. At that time, the United States’ position was that the item was not requested by the legitimate government of Venezuela and therefore could not be placed on the agenda.
“• The basis for the United States’ position was straightforward: the United States—along with more than 50 other WTO Members—did not recognize the Maduro regime as legitimate. Instead, the United States recognized Juan Guaidó as the legitimate President of Venezuela.
“• In the two years since the Maduro regime’s last attempt to add its request to the DSB agenda, the United States’ position has not changed. Today, the United States—as well as many other WTO Members—continues to not recognize the legitimacy of the Maduro regime.
“• For that reason, the United States must object to the adoption of a proposed agenda that includes item 4, because that item was requested, not on behalf of the legitimate government of Venezuela, but by individuals acting on behalf of the illegitimate Maduro regime.
“• These representatives do not have the right to place an item on the agenda of a DSB meeting on behalf of the government of Venezuela.
“• The United States instead proposes that the DSB amend the proposed agenda to remove item 4, such that the agenda would contain only those items properly requested to be included by Members of the WTO.
“• The United States invites all Members to join in adopting an amended agenda.”
The next regularly scheduled Dispute Settlement Body meeting is set for April 28, 2021. Based on the postponement of the March 26th meeting, there shouldn’t be a DSB meeting until there has been a resolution of whether the Venezuelan request for a panel will be on the agenda or not. However, there has been no indication on the WTO website that there has been a resolution of the impasse between the United States and Venezuela. Indeed, the WTO did not post a news release on the events at the March 26 DSB meeting nor has it updated the actual events around WT/DS574 including the U.S. refusal to engage in consultations and requests in 2019 and again in 2021 to remove the request for a panel from the agenda of DSB meetings.
On the WTO website, the DSB meeting on April 28, 2021 continues to be listed on the calendar. Moreover, in a review of online documents under documents for meetings, there is document WTO/AIR/DSB/105 described as “Dispute Settlement Body – Meeting of 28 April 2021”. This document is restricted and so its contents are not known publicly. However, the documents for the meeting includes nine other documents including Venezuela’s same request for a panel. UNITED STATES – MEASURES RELATING TO TRADE IN GOODS AND SERVICES, REQUEST FOR THE ESTABLISHMENT OF A PANEL BY VENEZUELA, WT/DS574/2/Rev.1 (16 March 2021). Absent a resolution of the U.S. request to have agenda item 4 removed, it is assumed that the Secretariat staff have just repeated what was on the agenda for the March 26th DSB meeting and included those documents again. Indeed the other documents shown are all from mid-March either indicating that the postponed DSB meeting will be resumed following a resolution of the U.S. opposition that has not been announced or is a marker should there be a resolution.
An important need for the public interested in the operation of the World Trade Organization is transparency in the WTO’s operation and events that occur. I have reviewed in prior posts the concerns about the increased use of designations on documents to remove larger and larger volumes of documents from public view. See, e.g., November 12, 2019, The Continued Problem of Inconsistent Transparency at the World Trade Organization, https://currentthoughtsontrade.com/2019/11/12/the-continued-problem-of-inconsistent-transparency-at-the-world-trade-organization/. There has been little apparent interest within the WTO or by its Members in correcting these deviations from transparency.
Certainly with regard to which meetings are or are not going to happen at the WTO, the public should expect accuracy and disclosure when impasse issues have been resolved. Next week’s planned DSB meeting is an example of unnecessary confusion. Is there a meeting or not?
WTO’s Director-General Ngozi Okonjo-Iweala had indicated when she took office that she would be gathering industry, multilateral groups, and some governments to look at how vaccine production could be expanded and the role the WTO could play in that effort. At the same time, with the proposal from India and South Africa for waiver from most TRIPS obligations on medical products relevant to addressing the COVID-19 pandemic still under consideration in the TRIPS Council, with opposition from a number of important Members, DG Okonjo-Iweala has been seeking an approach that in fact expands production in developing and least developed countries and greater distribution to low- and middle-income countries. without needing an all or nothing resolution to the proposed waiver.
“COVID-19 and Vaccine Equity: What Can the WTO Contribute?”
While the virtual meeting convened by DG Okonjo-Iweala was conducted under Chatham House rules, a number of participants made their prepared comments public and there was some press coverage.
DG Okonjo-Iweala provided a wrap-up at the end of the session which was posted on the WTO website. See WTO news, DG Okonjo-Iweala calls for follow-up action after WTO vaccine equity event, April 14, 2021, https://www.wto.org/english/news_e/news21_e/dgno_14apr21_e.htm (“Director-General Ngozi Okonjo-Iweala today (14 April) called on WTO members, vaccine manufacturers and international organizations to act to address trade-related obstacles to the scale-up of COVID-19 vaccine production to save lives, hasten the end of the pandemic and accelerate the global economic recovery.”). DG Okonjo-Iweala’s summary comments are copied below. See WTO speeches, Chair Summary following “COVID-19 and Vaccine Equity: What Can the WTO Contribute?”, April 14, 2021, https://www.wto.org/english/news_e/spno_e/spno7_e.htm.
“One thing that came out of today’s discussions is that it was only through working together across borders that scientists developed safe and effective vaccines in record time. And it is only by working together, across borders, that we’ll be able to solve the problems [of vaccine scarcity and equitable access] discussed today. This is a problem of the global commons, and we have to solve it together.
“Our purpose today was to contribute to efforts to increase vaccine production and broaden access, starting with the immediate term.
“Specifically we had three goals:
“The first was to pinpoint the obstacles, particularly the trade-related obstacles, to ramping up production, and to equitably distributing and administering vaccines — and we looked at how the WTO could contribute to these solutions.
“The second was to bring together people who are able to increase and to scale up manufacturing, people in a position to share technology and knowhow, and people willing to finance additional manufacturing capacity.
“And third, to think about the road ahead, including on the TRIPS waiver and incentives for research and development, so that we get the medical technologies we need, and no country is left at the back of the line waiting. If there is one refrain we heard continuously from everyone today it is that no one is safe until everyone is safe.
“We heard first-hand from governments and vaccine manufacturers from developed, developing, and least developed countries, as well as a wide range of other stakeholders from international organizations, civil society and development finance institutions.
“And we heard good news: that supplies are ramping up and companies are learning by doing, that there have been major gains in productivity, and that there is still capacity. We also heard that there is a willingness to finance investment in vaccine manufacturing both in the short- and long-term, and there are ideas and energy to do things differently.
“However, we heard from many that we need to do more. It hasn’t really been business as usual, so we may need to move on to ‘business unusual’ to solve the problems before us.
“In the discussions today we heard a great deal of agreement. We agree that it’s not acceptable for people and countries to have to wait indefinitely for vaccines. We do not want to repeat experiences of the past.
“We heard a consensus on the urgent need to scale up production and vaccinate everyone, because every day the shortage continues, scope for dangerous new variants will increase, and the number of prevent preventable deaths will grow. The economic impact of these delays can and has been quantified by many institutions, including the IMF, the World Bank, and the WTO.
“It was agreed that production capacity needs to be expanded, particularly in developing and least developed countries and emerging markets. And that vaccine distribution needs to be more effective and more equitable.
“We heard that open cross-border trade in raw materials, and other inputs, was essential for maintaining and scaling up production, and that supply chains in these inputs must be maintained.
“Also widely shared was the view that innovation, research and development will be vital for dealing with COVID-19 variants and in other health crises.
“We had useful exchanges on issues where some perspectives were different, such as on the future shape of vaccine supply chains, on the appropriate role for intellectual property protections, on issues of vaccine contract transparency — which was pointed to by many as an important factor in appropriate pricing and distribution and a critical part of access and equity.
“Concerns expressed by some about cross-border supply chain operations, including export restrictions and shortages of skilled personnel reinforced my view, and hopefully that of members, that the WTO must and can play a central part in the response to this crisis.
“Various perspectives about the TRIPS Agreement, and whether the existing flexibilities are enough to address developing country needs were put on the table. These echoed the discussions on the waiver proposal going on in the TRIPS Council, and I want to reiterate that today is a way of contributing to that discussion.
“I agree with the view that the WTO is a logical forum for finding a way forward on these issues, and I hope that the ideas raised here will contribute to convergence in the TRIPS Council on meaningful results that can contribute to the goals that we have.
“I hope that the discussion today, listening to each other, seeing that we all share a common goal, and that we may not be so far apart, will lead to the willingness to come to the middle, and work out something that will be acceptable to all.
“Participants were generally of the view that ramping up vaccine manufacturing capacity is a complex process. It requires large, long-term investment and sustainable business models. It relies on open international supply lines for ingredients and equipment. We heard how shortages of even a single piece of equipment, filters, can halt operations at a production facility. Vaccine manufacturing necessitates collaboration, and the movement of skilled labour, to facilitate transfer of technology and knowhow.
“Safety is a paramount consideration, and quality is the other part of safety. This demands effective regulatory capacity and stringent compliance, down to the factory floor. Indeed we heard this is a big risk companies factor in when making decisions as to where to produce, and how to produce. I hope that they’ve heard sufficient encouragement today, to enable us to move towards leveraging the existing capacities in emerging markets and developing countries mentioned repeatedly today, which could actually help to take care of the shortages talked about.
“Turning capacity around to produce COVID-19 vaccines is not only about the physical space alone. We heard repeatedly that it requires transfer of technology and knowhow, together with investment and support for quality assurance.
“We also learned about how existing licensing arrangements have operated — including an example of how skills transfer was carried out in a few as six months. We also heard calls for support to build human capital, and to help build regulatory cooperation.
“Some participants suggested more active matchmaking to connect companies that have the investment capacity with those that have potential for expanding production capacity, even in the short term.
“We also heard about ongoing efforts to build new manufacturing capacity, and the lessons that can be learned from that.
“We also began to see the aspects of the collaboration we need to make things happen. We had many international organizations show they are willing to work together to bring to fruition things like putting in place technical expertise, helping with capacity building and quality control, and investing directly in production.
“I believe that today’s exchanges have advanced our understanding of the challenges we face for scaling up vaccine production, and that working together is the only way ahead.
“In the coming weeks and months, we expect concrete follow-up action. These issues are not easy, but the political will and engagement from the private sector displayed today, suggests it is possible.
“As we move forward, I expect:
“- From WTO members:
“- Action to further reduce export restrictions and supply chain barriers, and to work with other organizations to facilitate logistics and customs procedures. We are monitoring this as part of our regular work, and we’ll continue doing so to increase supplies and maintain robust supply chains. Trade has been underlined as a critical factor in production; it is incumbent upon WTO members to act.
‘- Advance negotiations in the TRIPS Council on the waiver proposal and incentives for research and innovation. I hope that the ideas and the open dialogue heard will move us closer to agreement.
‘- For vaccine manufacturers:
‘- Concrete moves to scale up vaccine manufacturing, both short-term turnaround of existing capacities, milking whatever productivity gains we can from current facilities, and taking steps to invest.
“- Increased technology and knowhow transfer, which many participants stressed would be necessary to make additional production work.
“- We need transparency in contract agreements and product pricing. We hope to continue this dialogue and to help monitoring steps in that direction.
“- For international organisations and financial institutions:
“- We noted your willingness to finance, both existing and new capacity, your willingness to work on capacity building for regulatory issues, not just for vaccines, but also for therapeutics and diagnostics, which are equally important.
“I trust that we have found a good basis to deliver concrete action, and to continue this discussion that we’ve had today.
“This should not be a one-off, we should continue to talk to each other, and make sure that we can deliver.
“I hope that besides concrete action to increase capacity, this discussion has given us elements of a framework on trade and health that we can put together at the WTO, and that can be put before ministers at the 12th Ministerial Conference in mid-December. Such a framework should provide for trade-related preparedness to handle this pandemic, and the next one.”
The Biden Administration has been meeting with various interest groups on the TRIPS wavier proposal (both pro and con) and is receiving pressure from some Members of Congress and prior government officials to agree to a waiver. Ambassador Tai’s statement stresses the need for equity in vaccine availability. “These losses have been disproportionately borne by vulnerable and economically disadvantaged communities within our countries. And the significant inequities we are seeing in access to vaccines between developed and developing countries are completely unacceptable. Extraordinary times require extraordinary leadership, communication, and creativity. Extraordinary crises challenge all of us to break out of our comfortable molds, our in-the-box thinking, our instinctive habits. This is not just a challenge for governments. This challenge applies equally to the industry responsible for developing and manufacturing the vaccines. The desperate needs that our people face in the current pandemic provide these companies with an opportunity to be the heroes they claim to be – and can be. As governments and leaders of international institutions, the highest standards of courage and sacrifice are demanded of us in times of crisis. The same needs to be demanded of industry.”
The EU statement is consistent with their views that equity is necessary and that the EU has been working to contribute to that result through production ramp up and large exports in fact, including to the COVAX facility. The EU summed up what the WTO should be doing. “To sum up, the WTO can support vaccine equity through five sets of actions: Promoting best practices in terms of trade facilitation and regulatory cooperation to maintain open supply chains; Facilitating cooperation with the private sector, both to ramp up production in the short term, and to enhance manufacturing in global regions with under-capacity, focusing in particular on Africa; Supporting Members’ use of the available TRIPs flexibilities; Continuing to seek joint approaches with the World Health Organisation and the World Intellectual Property Organisation; and Ensuring transparency and effective monitoring of any temporary export restriction, as proposed by the Ottawa Group.”
The World Health Organization also participated and the Director-General’s statement is available from the WHO website. See WHO press release, COVID-19 and vaccine equity panel: what can the World Trade Organization contribute?, 14 April 2021, https://www.who.int/director-general/speeches/detail/covid-19-and-vaccine-equity-panel-what-can-the-world-trade-organization-contribute (“COVAX was created, as you know, almost a year ago to avoid the same thing happening again. And although COVAX has distributed almost 40 million doses of vaccine to 110 countries and economies, vaccine nationalism, vaccine diplomacy and severe supply constraints have so far prevented COVAX from realizing its full potential. Global manufacturing capacity and supply chains have not been sufficient to deliver vaccines quickly and equitably where they are needed most. More funding is needed, but that’s only part of the solution. Money doesn’t help if there are no vaccines to buy. We need to dramatically scale up the number of vaccines being produced. To address this challenge, WHO and our partners have established a COVAX manufacturing task force, to increase supply in the short term, but also to build a platform for sustainable vaccine manufacturing to support regional health security. We need to go beyond the traditional modus operandi to provide sustainable and effective solutions to address this extraordinary crisis. Some manufacturers have begun sharing the know-how and technologies to produce more vaccines, but only under restrictive conditions, on a very limited basis. The current company-controlled production sharing agreements are not coming close to meeting the overwhelming public health and socio-economic needs for effective, affordable and equitable access to vaccines, as well as therapeutics and other critical health technologies. This is an unprecedented emergency that demands unprecedented measures.”).
One of the private sector participants, the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA) included its statement on the IFPMA website. See IFPMA, IFPMA statement at WTO event “COVID-19 and Vaccine Equity: What can the WTO Contribute”, 14 April 2021, https://www.ifpma.org/resource-centre/ifpma-statement-at-wto-event-covid-19-and-vaccine-equity-what-can-the-wto-contribute/. The IFPMA statement is embedded below but highlights the extraordinary effort of the private sector in ramping up production which is expected to be 10 billion doses by the end of 2021 with some 272 partnerships entered into and 200 technology transfer agreements.
Rising Infections; dramatically ramped up production
Last Thursday’s summary from the European Centre for Disease Prevention and Control (ECDC) shows the world going through a massive ramp up of new infections such that week 14 of 2021 is the second highest week during the pandemic of new infections with the vast majority of the cases and increase in Asia, the Americas and Europe. See ECDC, COVID-19 situation update worldwide, as of week 14, updated 15April 2021, https://www.ecdc.europa.eu/en/geographical-distribution-2019-ncov-cases.
“Distribution of COVID-19 cases worldwide, as of week 14 2021
“Cases reported in accordance with the applied case definition and testing strategies in the affected countries.”
The ECDC data show Africa as accounting for 3.18% of total infections during the pandemic, Asia accounting for 19.50% (India is 9.91%; China is 0.07%), the Americas for 43.18% (United States 22.91% and Brazil 9.90%), Europe 34.08% (the Eu is 20.79%, the UK is 3.20%, Russia is 3.4%), and Oceania 0.05%.
While there are countries who have fewer or more vaccinations as a percent of the global total than their share of infections, considering distribution equity from that vantage point has some surprising results.
Country Percent of infections Percent of vaccinations
United States 22.91% 23.16%
European Union 20.79% 12.36%
United Kingdom 3.20% 4.76%
Japan 0.37% 0.21%
Republic of Korea 0.08% 0.17%
India 9.91% 13.85%
China 0.07% 21.18%
South Africa 1.14% 0.33%
Brazil 9.90% 3.92%
The pharmaceutical industry is projecting that 10 billion doses of COVID-19 vaccine will ship in 2021. That means that in the next eight and a half months, some nine billion doses will ship. If 10 billion doses are shipped in 2021, that is sufficient to fully vaccinate 5-6 billion people in 2021 (depending on number of doses that are for single shot vaccines). That is sufficient doses to vaccinate 63.3-75.9% of the current estimate of the global population (7.9 billion). See Worldometer, Current World Population, https://www.worldometers.info/world-population/#:~:text=The%20current%20world%20population%20is,currently%20living)%20of%20the%20world./ With the continued efforts to expand production and approve additional vaccines, 10 billion doses may be exceeded in fact by the end of the year.
This suggests, just as the COVAX and UNICEF distribution plans indicate, that low- and middle-income countries will see a large increase in supplies in the second half of 2021, just as will be true for the rest of the world.
The U.S.-Gavi event on April 15 talked about increasing funding for COVAX to go from 20% to 30% of populations the COVAX facility is serving. See U.S. Department of State, Video Remarks of Secretary of State Antony Blinken, Launch of GAVI’s COVAX Commitment, April 15, 2021, https://www.state.gov/launch-of-gavis-covax-commitment/. Moreover, the World Bank is committing billions to increases purchases of vaccines for low- and middle-income countries. And many countries are executing their own contracts with vaccine producers.
If there are issues besides assistance in resolving bottlenecks that would appear to be important to speeding up distribution and ensuring access by all, it would be to ensure that all countries with vaccine supplies greater than their internal needs, work to get those vaccines distributed to other countries later this year as their internal needs clarify.
Moreover, there are very exciting developments on the vaccine front with the start up of trials in a number of developing countries of a new vaccine where the potential exists for low costs with a vaccine that can be produced locally by many countries based on technology similar to what is already used for other vaccines. See New York Times, Researchers Are Hatching a Low-Cost Coronavirus Vaccine, A new formulation entering clinical trials in Brazil, Mexico, Thailand and Vietnam could change how the world fights the pandemic, April 5, 2021, updated April 17, 2021, https://www.nytimes.com/2021/04/05/health/hexapro-mclellan-vaccine.html.
All to say, there is considerable reason for optimism with the current efforts and progress. Efforts by governments, multilateral institutions, industry and others are helping identify challenges both to production and distribution but also to the needs for a speedy recovery once the pandemic is brought under control. While everyone needs to continue to focus on resolving bottlenecks, securing cooperation to ensure all are reached, and addressing developments as they arise, 2021 is not a repeat of the HIV situation.
The WTO has an important role in monitoring trade restrictions and looking forward to what actions Members are willing to take to advance trade and health needs and help ensure a next pandemic is handled more quickly than the COVID-19 has been. The effort to obtain a waiver from TRIPS obligations is, in this writer’s view, missing where the challenges are and seeking an outcome that will not advance improved vaccinations in 2021. While it is common for countries to continue to fight yesterday’s problems instead of addressing the current challenges, such an approach will not secure equitable and affordable access to vaccines in 2021-2022.
An important part of global efforts to vaccinate the world has been the work of the World Health Organization, Gavi, CEPI and UNICEF to provide an array of vaccines through early support of research and procurement of large quantities of doses for distribution to countries participating in the program including 92 low- and middle-income economies through COVAX. The COVAX objective for 2021 has been distribution of around two billion doses. While a large amount of money has been raised for vaccine purchases, additional needs in 2021 for COVAX are around $2 billion.
“On Thursday, April 15, 2021 at 8:00 a.m. EDT the United States will co-host the launch of the Investment Opportunity for the Gavi COVAX Advance Market Commitment (COVAX AMC), a virtual convening to galvanize additional resources and commitments to support global COVID-19 vaccination.
“Secretary of State Antony Blinken, USAID Acting Administrator Gloria Steele, and Gavi Board Chair José Manuel Barroso will bring together world leaders, the private sector, civil society, and technical experts to advance and accelerate global access to COVID-19 vaccines. Secretary Antony Blinken will offer opening remarks.
“Equitable access to safe and effective COVID-19 vaccines across the globe is critical for reducing the tragic loss of life, ending the pandemic, bolstering the U.S. and global economy, and keeping Americans safe at home and abroad. By pooling donor resources, the COVAX AMC provides access to safe and effective COVID-19 vaccines for 92 low-and middle-income economies, supporting the delivery of quality, lifesaving vaccines to those most in need and helping to contain the spread of COVID-19 and emerging variants.
“Thanks to Congress and the generosity of the American people, the U.S. government has already contributed $2 billion to support the COVAX AMC, out of a total planned $4 billion through 2022. The United States is currently the largest donor to COVAX, making up nearly forty percent of the COVAX AMC funding commitments announced to date.
“Geneva, 29 March 2021 – The United States government announced today that it will host the launch of the Investment Opportunity for the Gavi COVAX Advance Market Commitment (AMC). The virtual event, which will take place in April, will be co-hosted by José Manuel Barroso, Chair of the Gavi Board, and the Secretary of State and USAID Administrator on behalf of the United States. It will bring together world leaders, the private sector, civil society and key technical partners to present the case for additional resources for the Gavi COVAX AMC.
“Country demand for COVID-19 vaccines has increased significantly in light of new COVID-19 variants, and the need for additional financing has become more urgent. In addition to committing US$ 4 billion to support Gavi’s COVID-19 related work, the United States is a long-standing supporter of the Alliance. It was one of Gavi’s original six donors and has contributed more than US$ 2.7 billion to Gavi’s core work since 2000.
“’We welcome U.S. leadership in hosting the launch of the Gavi COVAX AMC Investment Opportunity,’ said José Manuel Barroso, Gavi Board Chair. ‘The United States has been a key Gavi partner for more than two decades, playing a critical role in helping the Alliance expand access to lifesaving immunisations for the most vulnerable around the world. Its recent contribution of $4 billion for procurement and delivery of COVID-19 vaccines for lower-income countries has made the United States Gavi’s top donor and a leader in the global pandemic response. With U.S. financial and diplomatic support, Gavi is very well positioned to mobilize the funds and the doses we need to end the acute phase of the pandemic.’
“The Gavi COVAX AMC is an innovative mechanism that seeks to provide access to up to 1.8 billion donor-funded doses of COVID-19 vaccines for 92 lower-income economies. In order to achieve that goal and build on the contributions made by donors so far, Gavi will be seeking at least US$ 2 billion in additional funding for the AMC in 2021. The Investment Opportunity will outline how Gavi will use this funding to support equitable access around the world, thus helping end the acute stage of this pandemic. The Investment Opportunity also looks ahead to the future, describing how to address the pandemic as it continues to evolve.
“’As the United States has made clear through its Gavi partnership and commitments to global health security, no one is safe until everyone is safe,’ said Dr Seth Berkley, CEO of Gavi. ‘Gavi is thrilled to co-host the launch of the Investment Opportunity with the United States. With new donor funding, we will be able to procure up to 1.8 billion COVID-19 vaccine doses for lower-income countries. Strong U.S. support for the AMC is a reminder that COVAX offers the fastest, most comprehensive way out of the acute phase of the global pandemic.’
“’The emergence of new, more transmissible COVID-19 variants makes fair global access to vaccines more important than ever to protect the most vulnerable, reduce the prevalence of disease and slow down viral mutation.’ said Dr Richard Hatchett, Chief Executive Officer of the Coalition for Epidemic Preparedness Innovations (CEPI), which manages COVAX vaccine research and development. ‘Equitable access to COVID-19 vaccines will benefit the entire world, so I’m delighted that the U.S. will help COVAX to secure additional donor funding for lower-income countries.’
“Hon. Kwaku Agyeman-Manu, Minister of Health of Ghana, which took one the first deliveries of COVAX-supported vaccine doses, remarked that ‘this is about fairness, about justice, and about bringing a swift end to the pandemic. COVID-19 has affected all of us, and we must protect at risk populations everywhere if we are ever going to see a return to normal. We will only recover fully if we recover together and with its support for COVAX, the United States is helping set the course for a safer, more resilient world.’
“The Gavi COVAX AMC is a central part of the COVAX Facility, the global pooled procurement mechanism designed and administered by Gavi. Thanks to the support of COVAX AMC donors, coupled with the demand and resources of 191 participating economies, the Facility has already begun to deliver doses – the majority to lower-income countries – as part of the largest and most rapid global vaccine rollout in history.
“COVAX, the vaccines pillar of the Access to COVID-19 Tools (ACT) Accelerator, is co-convened by Gavi, the Coalition for Epidemic Preparedness Innovations (CEPI), and the World Health Organization (WHO) – working in partnership with UNICEF as a key delivery partner, developed and developing country vaccine manufacturers, the World Bank, and others. It is the only global initiative that is working with governments and manufacturers to ensure COVID-19 vaccines are available worldwide to both higher-income and lower-income countries.”
Challenges to COVID vaccines through COVAXfrom concerns over AstraZeneca and Johnson & Johnson
A large portion of total vaccine doses expected in 2021 through COVAX is from AstraZeneca/Serum Institute of India and from Johnson & Johnson. AstraZeneca has had early production issues and the Serum Institute of India (which licenses the AstraZeneca vaccine for production) has curtailed exports in March and April (and possibly longer) because of the large increases in new COVID-19 infections in India and a redirection of production of vaccine doses for use in India. The AstraZeneca vaccine (from AstraZeneca and from the Serum Institute) constitute the bulk of doses expected in the first half of 2021 by COVAX and the Johnson & Johnson vaccine is expected to be a major supply source in the second half of 2021 as well as Novavax (either produced by Novavax or by license from the Serum Institute. However, both the AstraZeneca vaccine and the Johnson & Johnson vaccine have seen temporary stoppage of use by one or more countries flowing from a number of serious blood cot situations for patients who have taken the vaccine (causation under investigation). The AstraZeneca vaccine, which has been available for longer and under more scrutiny, has been limited in terms of age eligibility in a number of countries at this point. The AstraZeneca vaccine is the lowest priced vaccine (Novavax has an identical price to COVAX of $3.00/dose but is not yet approved). See UNICEF, COVID-19 vaccine market dashboard, https://www.unicef.org/supply/covid-19-vaccine-market-dashboard (prices). COVAX has a $3.00/dose ceiling price, so it is assumed that the Johnson & Johnson vaccine is similarly priced because of the pricing cap used by COVAX. With options, purchase agreements with COVAX have AstraZeneca/Serum Institute supplying some 700 million doses, Johnson & Johnson 500 million doses and Novavax (if approved) 1.1 billion doses. Id (COVID-19 vaccine supply agreements).
The challenge for COVAX and the low- and middle-income countries dependent on supplies from COVAX is the cost and availability of supplies if delays in shipments from the Serum Institute of India are prolonged or if there develops hesitancy in using vaccines which, while approved by many countries, carry some additional risk of serious blood clots. The prices recorded by the UNICEF data base show all other vaccines as significantly higher cost than the three supplying large quantities to COVAX. This suggests much larger financial needs to acquire the doses needed to address the “acute stage” of vaccination — 20% of populations representing health care and those at high risk — if COVAX must change sourcing for the major part of its vaccine doses. It also raises questions about the ability of other vaccines to fill the gap volume-wise in 2021 if major vaccines from AstraZeneca, Johnson & Johnson are not widely accepted or if exports are delayed for months out of India for each of AstraZeneca, Johnson & Johnson and Novavax (if approved).
While the event on Thursday will be focused on raising funds to meet the perceived needs of COVAX at the present time, those needs may be significantly larger in the coming months depending on developments.
Other funding and supply options
While the COVAX effort has been developed to handle the acute phase through contributions, the vaccination needs to get the world fully vaccinated are a multiple of the doses that COVAX is focused on procuring in 2021-2022.
The World Bank has earmarked $12 billion for vaccines and infrastructure for vaccinations for the world’s needy. Many low- and middle-income countries are working with suppliers directly or with Individual countries to obtain doses outside of the volumes expected from COVAX. Suppliers alone or in conjunction with governments have been working to license other producers and to ramp up production so that, depending on approvals of various vaccines, global production by the end of 2021 could be 10-15 billion doses. For example, the Quad countries (United States, Japan, India and Australia) have announced a plan to expand production in India to supply around one billion doses (2021-2022) to countries in the Indo-Pacific region paid for by Quad members and distributed by Australia. The UNICEF vaccine dashboard shows 6.9 billion doses of capacity of all vaccines under development or approved in the first half of 2021 increasing to 14.2 billion doses of capacity in the second half of 2021. See UNICEF, COVID-19 vaccine market dashboard, https://www.unicef.org/supply/covid-19-vaccine-market-dashboard (capacity). Thus, there should be significant additional capacity available later in 2021 for vaccine doses needed for low- and middle-income countries.
Similarly, it is likely that as major countries like the United States, Canada, the European Union, the United Kingdom and others get their populations vaccinated, there will be significant volumes of vaccines that have been bought by these countries that can be distributed to other countries in the last months of 2021 and in 2022.
Some of these efforts may be undertaken in consultation or conjunction with COVAX.
COVAX is an important effort at facilitating vaccinating large parts of the world against the COVID-19 pandemic, including many low- and middle-income countries. Many countries and the EU have led efforts in 2020 to increase funding for the effort. With the Biden Administration rejoining the World Health Organization and reengaging with multilateral organizations, and with the support of the U.S. Congress in funding U.S. contributions to COVAX, this Thursday’s event co-hosted by the United States and Gavi is an important chance to help COVAX receive the additional funding needed for its 2021 objectives.
Because the pandemic continues to be problematic around the world, there are many moving parts to a successful global vaccination effort including availability of vaccines, efficacy of vaccines including against new variants, ability to overcome vaccine hesitancy among portions of the population in many countries and the evolving understanding of human reactions to some of the vaccines available.
Greater cooperation among health administrators and the WHO would seem important to ensure that safe vaccines are not derailed because of discovered risks where the balance of benefits to risks strongly supports continued availability and use of the vaccines (with appropriate warnings). Where restrictions are appropriate, greater cooperation would permit a common approach versus differing restrictions which can only serve to cause confusion to the public and encourage vaccine hesitancy. COVID-19 reported cases globally are presently 137 million with deaths approaching 3 million. Vaccination doses administered globally are 806 million with serious adverse reactions and deaths quite limited (likely in the thousands globally). Serious adverse reactions and deaths if tied to vaccines are obviously a concern that should be addressed appropriately. However, eliminating vaccine availability to large portions of populations where there are not other options available risk far greater damage.
The United States has a long history of promoting expanded agricultural trade. It has been an issue of importance to many countries, though the level of protection in the agricultural space has been and remains very large. The Uruguay Round was an initial effort to tariffy various distortions restricting trade in agriculture, cap and make an initial reduction in tariffs, ensure minimum market access, cap and reduce subsidies and more. Future agricultural negotiations were built into the Uruguay Round’s Agreement on Agriculture. While elements of liberalization have been agreed since 1995(e.g., elimination of agricultural export subsidies), there has not been success on opening up agricultural markets through tariff liberalization.
For the last seven years, the United States has sought better understanding of the challenges to agricultural trade from tariff implementation issues. See Tariff Implementation Issues, Communication from the United States of America, G/AG/W/132, 4 June 2014.
Starting in the Trump Administration, the United States teed up six areas affecting market access from Members’ implementation of tariffs that need discussion and potential action. See Tariff Implementation Issues – June 2018 Update, Communication from the United States, JOB/AG/141, 25 July 2018.
“The United States of America has identified six areas within the area of market access that further analysis of Members’ current implementation of tariffs should be considered and discussed by Members in order to better understand Members’ current tariff regimes. This includes: (i) bound versus applied tariffs, (ii) complex tariffs, (iii) high tariffs (e.g., tariff peaks), (iv) issues with TRQs, (v) agricultural safeguards (SSGs), and (vi) regional/preferential trade agreements.” (page 2).
While the June 2018 submission from the U.S. looked at all six areas listed, the U.S. has since submitted more detailed papers on the first four topics during the remainder of the Trump Administration, and, on March 31, 2021, the Biden Administration submitted a paper on the fifth topic, agricultural safeguards. See Tariff Implementation Issues — Bound versus Applied Tariffs, Communication from the United States, JOB/AG/147, 9 November 2018; Tariff Implementation Issues — Complex Tariffs, Communication from the United States, JOB/AG/164, 31 July 2019; Tariff Implementation Issues — Tariff Peaks, Communication from the United States, JOB/AG/167, 24 October 2019; Tariff Implementation Issues — Issues with Tariff Rate Quotas, Communication from the United States, JOB/AG/169, 22 November 2019; Tariff Implementation Issues — Issues with Special Agricultural Safeguards, Communication from the United States, JOB/AG/192, 6 April 2021.
The 2014 submission by the United States had flagged the first three of the six issues and introduced the need for analysis. See G/AG/W/132 at 1-3.
“1.1. Market access barriers, and namely tariffs, continue to be an important obstacle to realizing the WTO’s objective of promoting trade. However, no multilateral discussions have been undertaken in this area since 2008.
“1.2. Under the various WTO agreements, tariffs are the only permitted import restriction (other than WTO-consistent non-tariff measures)1, and all agriculture tariffs are now bound. The manner in which tariffs are administered, however, can have significant effects on actual market access. In some cases, market access is facilitated, for example through the application of tariffs at levels below bound rates or through preferential access as a result of reciprocal trade agreements. In other cases, market access may be impeded, for example through the administration of complex tariff regimes or through the utilization of high tariffs and peak tariffs.
“1.3. The need for an updated understanding of the current state of Members’ tariff regimes is urgent if Members expect to have productive discussions on a possible market access result as part of the Post-Bali Work Program. In this regard, and as a start, we request that the Secretariat issue, in one compilation for the Membership, the most recent tariff and trade data available, including on Members’ average bound and applied tariff rates in agriculture, the percentage of agricultural tariffs bound at zero by Members, as well as Members’ global share of agricultural imports and exports. We also urge Members to ensure that all WTO notifications relevant to market access are up to date. This includes Integrated Data Base (IDB) notifications, as well as notifications of regional trade agreements.
“1.4. This paper identifies some of the issues associated with tariffs, supported with examples of tariff application and administration from the United States of America and other Members. The United States of America invites other Members to provide similar reports of their current administrative schemes in upcoming meetings of the Committee on Agriculture (CoA).
“2 BOUND VERSUS APPLIED TARIFF RATES (CORRESPONDING WITH EXHIBIT A)
“2.1. Many WTO Members maintain high bound rates in their WTO market access commitments. However, in practice, these Members oftentimes apply significantly lower tariffs allowing a government to modify its rates in response to domestic and international market conditions. As demonstrated in Figure 1, some Members have bindings substantially greater than applied rates, while others apply tariffs at the bound level. To illustrate this situation, it is useful to consider the situation of a diverse group of Members: Brazil, Chile, India, and Indonesia. These countries on average apply less than one-third of their average bound tariff, while Mexico applies on average less than one-half of its average bound commitment. However, a number of other Members, such as China and the United States of America, have lower bindings and tariffs for all agricultural products with tariffs applied at the bound level.
“2.2. The U.S. simple average bound agricultural tariff rate, according WTO tariff profile data, is 5% and applied tariffs also average 5%. The United States of America applies a tariff less than its bound level for three agricultural tariff lines, all of which are wool products2. Exhibit A illustrates bound and applied rates for several WTO Members to demonstrate the gap between bound and applied tariffs.
“3 COMPLEX TARIFFS
“3.1. Another tariff issue concern the use of non-simple (ad valorem or specific) tariffs. These include formulaic measures (e.g. Minimum Import Prices, Price Bands, Variable Levies, Gate Price mechanisms) as well as simple discretionary tariff increases and decreases. These measures are aimed at controlling import competition and limiting competition for domestic producers. Oftentimes, this is accomplished by ensuring imports do not enter the domestic market at prices below domestic market prices. By blocking consumers’ access to price competition, these measures distort trade flows by restricting imports and allowing high-priced domestic products to be competitive. Ultimately, this reduces overall quantities imported.
“3.2. Approximately 30 Members choose to bind some tariffs at non-ad valorem (NAV) terms such as specific (a set value per quantity), compound (e.g. ad valorem and specific in same tariff), or mixed rates (e.g. either ad valorem or applied, whichever is higher). The share of NAV tariffs ranges from as low as 0.2% (Israel and Indonesia) to as high as 77% (Switzerland) of all agricultural lines. Based on the World Tariff Profiles 2013, nine countries including Canada, the European Union, Iceland, Malaysia, Norway, Russia, Switzerland, Thailand, and the United States of America bound a significant share of their agricultural goods in NAV format.
“3.3. The United States of America applies specific duties for some agricultural products, as well as some compound duties. Specific duties have the virtue of predictability and are eroded over time with price inflation.
“4 HIGH TARIFFS (CORRESPONDING WITH EXHIBIT B)
“4.1. An additional tariff issue is the use of high tariffs. High tariffs are a particular problem for trade in agriculture, as some Members that otherwise may have low average tariffs reserve “tariff peaks” for sensitive tariff lines. Tariffs in agriculture can exceed 1,000% and some Members apply tariffs at a very high level across an entire sensitive sector. Examples include: Canadian dairy and poultry tariffs (which exceed 200%); Japanese rice tariffs (which are between 500 and 700%); and most of the India’s agricultural tariff schedule (where tariffs are bound at 300%, 180%, or 100% for nearly all products).
“4.2. As displayed in Figure 2, the average tariff within various categories of agriculture is low. The United States of America has bound approximately 33% of its tariffs on agriculture at zero, approximately 43% at 1-5%, approximately 20% at 6 – 25%. Only a few tariffs exceed these tariff categories, including peanuts and sugar (with maximum rates of over 150%); dairy (140%); and some processed products (at 100%). The highest U.S. tariff is for a tobacco line, which has an ad valorem equivalent of over 400%. See Exhibit B for a summary comparison of average tariff rates by sector compared to the maximum tariff for the sector. Understanding which sectors and which countries have the most protective tariffs in place will help the Committee better understand the application of trade restrictions.
“1 See, e.g. Agreement on Agriculture, Article 4.2.
“2 USHTS 5101.21, 5101.29, and 5101.30. Bound rate of 6.5 cents/kg + 5%, applied tariff of zero.”
The 2018 effort by the United States provided additional rationale for focusing on tariff implementation issues and expanded the list of issues from three to six as noted above. See JOB/AG/141 at 1.
“1.1. In June 2018, the World Trade Organization Agriculture and Commodities Division and the Institute for Training and Technical Cooperation organized the Symposium on the Agriculture Policy Landscape to discuss the relationship between trade and agriculture. All of the various experts from around the world emphasized the need for more trade to improve global welfare, help producers, and address the challenges of sustainably feeding a growing world population. To achieve this, they stressed the importance of market-oriented trade as a means of advancing consumer and farmer welfare in all countries.
“1.2. In the agricultural sector, tariffs remain much higher than for other sectors, but have been reduced by more than one-quarter since 2001.1 Reducing tariffs, as was done through the Uruguay Round, contributes to the welfare gains from trade. However, it is important to have reciprocal reductions in tariffs. Indeed, it was shown that these welfare gains were greatest because of tariff reductions from both developed and developing countries. Reductions by only developed countries or only by developing countries resulted in suboptimal welfare gains.2 Further, locking in tariff reductions by all countries can contribute to substantial gains to global welfare going forward.3
“1.3. In June 2014, the United States of America submitted “Tariff Implementation Issues” (G/AG/W/132) to the Committee on Agriculture. In that communication, the United States of America noted that agricultural tariffs can distort global markets and make it difficult for consumers to have access to producer’s products. However, in some cases, market access is facilitated, for example, through the application of tariffs at levels below bound rates or through preferential access as a result of reciprocal trade agreements.
“1.4. In order for Members to have productive discussions to address the challenges facing agricultural trade today, an understanding of the current state of Members’ tariff regimes, amongst other policy types, is needed. In 2014, the United States of America requested that the Secretariat issue, in one compilation for the Membership, the most recent tariff and trade data available, including on Members’ average bound and applied tariff rates in agriculture, the percentage of agricultural tariffs bound at zero by Members, as well as Members’ global share of agricultural imports and exports. While the United States of America is resubmitting this request to the Secretariat, the United States of America also urges Members to ensure that all WTO notifications relevant to market access are up to date. This includes Integrated Data Base (IDB) notifications, as well as notifications of regional trade agreements.
In the five papers looking at individual tariff implementation issues, the U.S. provides a conclusion based on its analysis.
For “bound versus applied tariffs, the relevant conclusions are:
“1.13. Water is prevalent in all major agricultural product groups. In addition, although differences between bound and applied rates occur for both developed and developing Members and large and small trading economies, the level of water is larger for developing Members and smaller trading economies than it is for most developed Members and large trading economies.
“1.14. The United States also notes the issues of transparency specified in the beginning of the paper. The United States once again, requests the Secretariat to compile information and that Members ensure that all WTO notifications relevant to market access are up to date. The United States further urges Members to consider what other data could improve Members’ knowledge.” JOB/AG/147 at 8.
On the issue of complex tariffs, the relevant conclusions are:
“1.22. This paper constitutes the United States’ attempt to provide a deeper understanding of the tariff treatment faced by Members. In its analysis, the United States has found that complex tariffs are prevalent in all major agricultural product groups (with an exception of cotton). In addition, complex tariffs can be found in both developed and developing Members, large and small trading economies. However, complex tariffs are more prevalent in developed Members and large trading economies than most developing Members and smaller trading economies.
“1.23. Improving access to customers contributes to the likelihood that farmers get better prices for their products and in turn the more production they can undertake. Similarly, expanding access to more producers benefits consumers who have more choice and competition when seeking supplies. More open and transparent markets contribute to greater productive efficiencies, particularly for value chains, and foster competition that spurs investment and technological innovation.
“1.24. The United States again notes the issues of transparency. It requests that the Secretariat continue to compile information and that Members ensure that all WTO notifications relevant to market access are up to date and consider what other data could improve Members’ knowledge.” JOB/AG/164 at 9.
On the issue of high tariffs (tariff peaks), the U.S. conclusions are:
“1.16. In its attempt to provide a deeper understanding of the tariff treatment faced by Members, the United States of America has found that tariff peaks are prevalent in all major agricultural product groups (with an exception of cotton). In addition, tariff peaks can be found in both developed and developing Members, large and small trading economies. The tariff range is larger for developed Members and large trading economies than most developing Members and small trading economies. The same can be said in regards to the frequency of tariffs above 50%. When considering the WTO definition of “tariff peaks” however, developing Members and large agricultural trading economies have higher frequency of tariff peaks than developed Members and small trading economies.
“1.17. Improving access to customers contributes to the likelihood that farmers get better prices for their products and in turn the more production they can undertake. Similarly, expanding access to more producers benefits consumers who have more choice and competition when seeking supplies. More open markets contribute to greater productive efficiencies, particularly for value chains, and foster competition that spurs investment and technological innovation.
“1.18. The United States of America again notes the issues of transparency as specified in the beginning of the paper. It requests the Secretariat to continue compiling information noted in this submission and Members to ensure that all WTO notifications relevant to market access are up to date and consider what other data could improve Members’ knowledge.” JOB/AG/167 at 7-8.
On the question of issues with TRQs (tariff rate quotas), the U.S. conclusions are:
“1.37. The United States aims to deepen Members’ understanding of the prevalence and different methods of administration of tariff rate quotas. In its analysis, the United States has found that TRQs are used by 40 Members, both developing and developed Members alike. TRQs are prevalent in all major agricultural product groups, with dairy, sugar and animal products having a larger share of TRQs than other product groups. However, it is worth mentioning that nearly half of scheduled quotas are administered as applied tariffs.
“1.38. Although TRQs were designed as a tool of access, very high over quota and in-quota tariffs, low fill rates, and confusing operation and administration of TRQs are still prevalent today that can make TRQs a tool of protection rather than liberalization.
“1.39. The United States requests that the Secretariat continue to compile and publish information on TRQ administration, with a focus on deeper analysis of the issues identified in this submission. Likewise, the United States requests that Members ensure that all WTO notifications relevant to TRQs are up to date and incorporate data that could improve other Members’ knowledge.” JOB/AG/169 at 15.
On special agricultural safeguards, the U.S. conclusions are:
“1.27. The United States aims to share this analysis to deepen Members’ understanding of SSG utilization and notification. In its analysis, the United States has found that 33 Members have recourse to the SSG, both developing and developed Members alike, covering on average, 16% of their respective bound tariff schedules. However, less than one-third of the Members have actually taken recourse of SSGs in the last 10 years, applying the safeguard to, on average, 40% of the scheduled SSG lines. Those lines are largely made up of “animal products”, “dairy products” and “cereals and preparations”. Over the last 10 years, developing Members have utilized SSGs to a greater degree than developed Members.
“1.28. In its assessment of Member notifications, the United States has also encountered issues with Members either failing to notify SSG use or non-use, or not notifying within the timeframe specified in G/AG/2. In addition, Members that notify SSG usage lack consistency in reporting the information. These issues may cause confusion for importers and exporters of concerned products and reduces transparency for the WTO Members in reviewing utilization of the SSG in the context of the AoA. Therefore the United States encourages Members to examine these issues and discuss approaches to strengthen compliance with requirements and improve notification practices related to the SSG.
“1.29. The United States also requests that the Secretariat continue to compile and publish information on SSGs, akin to the note from January 2017 (TN/AG/S/29/Rev.1), with a focus on deeper analysis of the issues identified in this submission. Likewise, the United States requests that Members ensure that all WTO notifications relevant to SSGs are up-to-date and notified.” JOB/192 at 12.
There is an effort as part of preparation for the 12th Ministerial Conference to pursue a number of agriculture issues that have been pressed by various Members for a number of years. A number of the issues being pursued are looking at providing greater protections to developing countries. Of interest to many developed and developing countries are market opening measures, although it is unclear if anything will happen in this area with regard to tariffs.
For the United States, agricultural market access is a critical issue to most sectors and has broad Congressional support in both parties. The effort to develop a greater understanding of how tariffs are working in fact started in the Obama Administration following the impasse in the Doha Development Agenda in 2008 including on agricultural market access, was pursued in the Trump Administration and is being continued in the Biden Administration. The U.S. focus is useful to help flag just how distorted agricultural trade remains, the lack of transparency on many issues and the fact that greater market access for all necessarily must involve reduction in tariffs and countries handling all aspects of tariffs (including TRQs and SSGs) in a manner consistent with the obligations undertaken. The U.S. submissions are neutral in coverage and include U.S. actions as well as major agricultural exporters and importers.
What was described by the U.S. in its June 2018 on tariff implementation issues, continues to be true as the world tries to move through the COVID-19 pandemic. As was previously quoted from the U.S. communication, “All of the various experts from around the world emphasized the need for more trade to improve global welfare, help producers, and address the challenges of sustainably feeding a growing world population. To achieve this, they stressed the importance of market-oriented trade as a means of advancing consumer and farmer welfare in all countries.”
The question for the WTO membership and the new WTO Director-General is whether in agriculture the WTO can in fact expand market access for agricultural goods as part of the 12th Ministerial Conference or whether meaningful agricultural liberalization will continue to evade the WTO.
Because of the wealth of analysis contained in the U.S. submissions, the documents referenced in this note are embedded below.
“Global prospects remain highly uncertain one year into the pandemic. New virus mutations and the accumulating human toll raise concerns, even as growing vaccine coverage lifts sentiment. Economic recoveries are diverging across countries and sectors, reflecting variation in pandemic-induced disruptions and the extent of policy support. The outlook depends not just on the outcome of the battle between the virus and vaccines—it also hinges on how effectively economic policies deployed under high uncertainty can limit lasting damage from this unprecedented crisis.
“Global growth is projected at 6 percent in 2021, moderating to 4.4 percent in 2022. The projections for 2021 and 2022 are stronger than in the October 2020 WEO. The upward revision reflects additional fiscal support in a few large economies, the anticipated vaccine-powered recovery in the second half of 2021, and continued adaptation of economic activity to subdued mobility. High uncertainty surrounds this outlook, related to the path of the pandemic, the effectiveness of policy support to provide a bridge to vaccine-powered normalization, and the evolution of financial conditions.”
The following tables from the IMF webpage taken from the new report show first the global, advanced economies and developing economy outlook for 2020, 2021, 2022 and then for various major countries and regions for the same periods.
Much has been written about the need for debt relief and greater access to vaccines for many low-income countries to help them get through the pandemic and back on track for economic expansion. The IMFBlog from April 5, 2021 provides an overview of the serious challenges faced by low income countries and the potential sources of financial support available through the IMF if supported by member countries. See IMFBlog, Funding the Recovery of Low-income Countries After COVID, April 5, 2021, https://blogs.imf.org/2021/04/05/funding-the-recovery-of-low-income-countries-after-covid/.
“Several factors hamper the economic recovery of low-income countries. First, they face uneven access to vaccines. Most of these countries rely almost entirely on the multilateral COVAX facility—a global initiative aimed at equitable access to vaccines led by a consortium of international organizations. COVAX is currently set to procure vaccines for just 20 percent of the population in low-income countries. Second, low-income countries have had limited policy space to respond to the crisis—in particular, they have lacked the means for extra spending * * *.
“Third, pre-existing vulnerabilities, including high levels of public debt in many low-income countries, and weak, sometimes negative, total factor productivity performance in some low-income countries continue to act as a drag on growth.”
The blog post reviews estimated financial needs over the next five years. The estimated needs are $200 billion to respond to the COVID-19 pandemic (including adequate vaccinations), an additional $250 billion to speed convergence with advanced economies, and an additional $100 billion if various risks materialized. Potentially $550 billion — obviously a huge number.
The blog identifies various potential sources of funds to address these needs that can be available through the IMF.
“- Expanding access to concessional resources under the Poverty Reduction and Growth Trust, including extending access to emergency financing. From March 2020 to March 2021, about $13 billion has been approved to more than 50 low-income countries. The IMF is also currently reviewing its lending framework to low-income countries, beyond the temporary increase in access limits.
“- Proposal for a new allocation of Special Drawing Rights . Support is building among the IMF’s membership for a possible SDR allocation of $650 billion. This would help address the long-term global need for reserve assets, and would provide a substantial liquidity boost to all members.
“- Debt service relief through the Catastrophe Containment and Relief Trust to 29 eligible countries. The recently-approved third tranche covering the period April-October 2021 brings total debt service relief up to $740 million since April 2020. Such relief provides space for poor countries to scale up spending on priority areas during the pandemic.
“- Supporting a further extension of the G-20 Debt Service Suspension Initiative (DSSI) until end-December 2021. The DSSI delivered US$5.7 billion in debt service relief for 43 countries in 2020 and is expected to deliver up to US$7.3 billion of additional debt service suspension through June 2021 for 45 countries.
“The needs of the poorest countries over the next five years are acute. But they are not out of reach. A strong, coordinated, comprehensive package is needed. This will secure a rapid recovery and transition to a green, digital, and inclusive growth that will accelerate convergence of low-income countries to their advanced economy counterparts.”
“COVID-19 vaccines, alongside widespread testing, improved treatment and strong health systems are critical to save lives and strengthen the global economic recovery. To provide relief for vulnerable populations, low- and middle-income countries need fair, broad, and fast access to effective and safe vaccines.
“That’s why the World Bank (WB) is building on its initial COVID-19 response with $12 billion to help poor countries purchase and distribute vaccines, tests, and treatments. The first WB-financed operation to support vaccine rollout was approved in January 2021.
“By March 31, 2021, the WB had already committed $1.6 billion in vaccine financing in 10 countries including Afghanistan, Cabo Verde, Bangladesh, Lebanon, Mongolia, Nepal, Philippines, Tajikistan, and Tunisia. More than 40 additional projects are in the pipeline and will be approved in the coming weeks and months.”
The World Banks’s Spring meeting is also occurring this week and addressing the COVID-19 pandemic remains a critical part of the World Bank’s agenda.
U.S. announced larger role in global vaccine rollout
President Biden has had as his first priority to tackle the COVID-19 pandemic in the United States while committing to greater involvement in multilateral organizations. He has rejoined the World Health Organization, contributed $2 billion to the COVAX facility to obtain vaccines for low- and middle-income countries, with an additional $2 billion to be contributed as other countries fulfill their pledges, agreed to a fund raising event for COVAX later in April, loaned four million vaccine doses to Canada (1.5 million) and Mexico (2.5 million) and agreed with Japan, India and Australia to produce one billion doses of a vaccine (2021-2022) in India with funding from the US and Japan and distribution by Australia to countries in the Indo-Pacific region.
On April 5, 2021, U.S. Secretary of State Antony Blinken announced the Biden Administration’s intention to be more actively involved internationally as it gets the U.S. population vaccinated. See U.S. Department of State, Secretary Antony J. Blinken Remarks to the Press on the COVID Response, April 5, 2021, https://www.state.gov/secretary-antony-j-blinken-remarks-to-the-press-on-the-covid-response/. The portion of Secretary Blinken’s remarks dealing with greater international engagement and the appointment of the U.S. coordinator for global COVID response and health security is copied below.
“There’s another major element to stopping COVID, and that’s what we’re here to talk about today.
“This pandemic won’t end at home until it ends worldwide.
“And I want to spend a minute on this, because it’s critical to understand. Even if we vaccinate all 332 million people in the United States tomorrow, we would still not be fully safe from the virus, not while it’s still replicating around the world and turning into new variants that could easily come here and spread across our communities again. And not if we want to fully reopen our economy or start traveling again. Plus, if other countries’ economies aren’t rebounding because they’re still afflicted with COVID, that’ll hurt our recovery too.
“The world has to come together to bring the COVID pandemic to an end everywhere. And for that to happen, the United States must act and we must lead.
“There is no country on Earth that can do what we can do, both in terms of developing breakthrough vaccines and bringing governments, businesses, and international institutions together to organize the massive, sustained public health effort it’ll take to fully end the pandemic. This will be an unprecedented global operation, involving logistics, financing, supply chain management, manufacturing, and coordinating with community health workers who handle the vital last mile of health care delivery. All of that will take intensive diplomacy.
“The world has never done anything quite like this before. This is a moment that calls for American leadership.
“Now, the Biden-Harris administration’s main focus to date has been to vaccinate Americans – to slow and ultimately stop COVID here at home. We at the State Department have been focused on vaccinating our workforce in the United States and in embassies and consulates around the world. That’s been the right call. We serve the American people first and foremost. Plus, we can’t forget that the United States has had the highest number of COVID cases of any country in the world by a significant margin. So stopping the spread here has been urgently needed for our people and for the world. We have a duty to other countries to get the virus under control here in the United States.
“But soon, the United States will need to step up our work and rise to the occasion worldwide, because again, only by stopping COVID globally will Americans be safe for the long term.
“Moreover, we want to rise to the occasion for the world. By helping bring to a close one of the deadliest pandemics in human history, we can show the world once again what American leadership and American ingenuity can do. Let’s make that the story of the end of COVID-19.
“We’ve already taken some important steps.
“On day one of the administration, we rejoined the World Health Organization. By being at the table, we can push for reforms so that we can prevent, detect, and rapidly respond to the next biological threat.
“Congress recently provided more than $11 billion for America’s global COVID response, which we’ll use in several ways, including to save lives by supporting broad and equitable vaccine access; providing aid to mitigate secondary impacts of COVID, like hunger; and helping countries boost their pandemic preparedness.
“I’d note that this builds on a long tradition of American leadership. The United States is the world’s largest donor to global health by far, including through international efforts like the Global Fund and the World Health Organization – and through our own outstanding global health programs, like PEPFAR, which has helped bring the world to the cusp of the first AIDS-free generation.
“We’ve also made a $2 billion donation to the COVAX program, which will supply COVID vaccines to low-income and middle-income countries. We’ve pledged another $2 billion that we’ll provide as other countries fulfill their own pledges.
“We’ve already loaned vaccines to our closest neighbors, Mexico and Canada.
“And we’ll work with global partners on manufacturing and supplies to ensure there will be enough vaccine for everyone, everywhere.
“As we get more confident in our vaccine supply here at home, we are exploring options to share more with other countries going forward.
“We believe that we’ll be in a position to do much more on this front.
“I know that many countries are asking for the United States to do more, some with growing desperation because of the scope and scale of their COVID emergencies. We hear you. And I promise, we’re moving as fast as possible.
“We’ll be guided every step by core values.
“We won’t trade shots in arms for political favors. This is about saving lives.
“We’ll treat our partner countries with respect; we won’t overpromise and underdeliver.
“We’ll maintain high standards for the vaccines that we help to bring to others, only distributing those proven to be safe and effective.
“We’ll insist on an approach built on equity. COVID has already come down hard on vulnerable and marginalized people. We cannot allow our COVID response to end up making racial and gender inequality worse.
“We’ll embrace partnership, sharing the burden and combining strengths. The collaboration we formed a few weeks ago with the Quad countries – India, Japan, Australia – is a good example. Together, we’re increasing the world’s manufacturing capacity so we can get more shots out the door and into people’s arms as fast as possible.
“And by the way, one of the reasons we work through multilateral collaborations where possible is because they often share and defend these same values. For example, the COVAX initiative is designed explicitly to ensure that low- and middle-income countries can also get vaccines, because it’s only through broad and equitable vaccination that we’ll end the pandemic.
“Finally, we’ll address the current emergency while also taking the long view. We can’t just end this pandemic. We must also leave our country and the world better prepared for the next one.
“To do that, we’ll work with partners to reform and strengthen the institutions and systems that safeguard global health security. That will require countries to commit to transparency, information sharing, access for international experts in real time. We’ll need a sustainable approach to financing, surge capacity, and accountability, so all countries can act quickly to stem the next outbreak. And we’ll keep pushing for a complete and transparent investigation into the origins of this epidemic, to learn what happened – so it doesn’t happen again.
“All told, this work is a key piece of President Biden’s ‘Build Back Better’ agenda. We’ve got to make sure that we can better detect, prevent, prepare for, and respond to future pandemics and other biological threats. Otherwise, we’ll be badly letting ourselves and future generations down.
“This is a pivotal moment – a time for us to think big and act boldly. And the United States will rise to the challenge.
“I’m here today with a remarkable leader who will help us do just that.
“Gayle Smith was the administrator of USAID for President Obama, and served on the National Security Council for both President Obama and President Clinton, where we first got to know each other and worked together. She has deep experience in responding to public health threats, having helped lead the U.S. response to the Ebola crisis in 2014, having worked for years on the global fights against malaria, tuberculosis, HIV/AIDS. She is joining us from her most recent role as president and CEO of the ONE Campaign, which fights extreme poverty and preventable disease, primarily in Africa.
“She’s tested. She’s highly respected. She will hit the ground running. And I can say from having worked with Gayle and admired her for years that no one will work harder, faster, or more effectively to get us to the finish line.
I”’m grateful she’s agreed to serve as the coordinator for global COVID response and health security. Gayle Smith, the floor is yours. Thank you for doing this.
“MS SMITH: Thank you, Mr. Secretary. It’s a pleasure to be able to work with you again, and to call you Mr. Secretary.
“I’d also like to thank my friends at the ONE Campaign for making this possible. And I look forward to working with the men and women of the department and across the federal government, including because I know what you can do.
“I want to thank in particular some really smart scientists, President Biden, and the staff and volunteers at Howard University, where tomorrow I will get my second dose of the COVID vaccine.
“That vaccine is good for the body, but it’s also good for the mind and the soul, because it inspires hope in the future. And our job is to shape that future.
“I fought some viruses in the past, and I’ve learned two lessons. The first is that if the virus is moving faster than we are, it’s winning. The second is that with unity of purpose, science, vigilance, and leadership, we can outpace any virus.
“America’s done it before. Eighteen years ago, a Republican president launched a bold initiative to take on the HIV/AIDS epidemic. A Democratic president went on to expand that mission in scope. In 2014, the Obama-Biden administration, with the strong and generous support of Congress, defeated the world’s first Ebola epidemic.
“Our challenges now are two: first, to shorten the lifespan of a borderless pandemic that is destroying lives and livelihoods all over the world, and the second is to ensure that we can prevent, detect, and respond to those future global health threats we know are coming.
“American leadership is desperately needed, and I’m extremely confident we can rise to the occasion. I’m honored to be here, and thank you very, very much.”
This is an important week with both the IMF and World Bank Spring meetings and important agenda items on the continued global response to the pandemic and helping countries build back better. The IMF April World Economic Outlook has good news about the direction of global activity although the pace of recoveries will vary significantly among countries and regions. While global production and distribution of COVID-19 vaccines has ramped up enormously in the few months that vaccines have been approved and while there are many additional potential vaccines under development or in trials, the early months have seen some production challenges and distribution skewed to a handful of countries. Many of those countries with the most vaccine doses (U.S., UK, EU, India) have been countries or regions with many of the largest number of infections and deaths. Even so, the effort at equitable and affordable access to all needs additional work.
An article in the New York Times reviews an exciting potential development of a low-cost, easy to produce vaccine that could dramatically expand the ability of developing countries to produce their own vaccines. See New York Times, Researchers Are Hatching a Low-Cost Coronavirus Vaccine , April 5, 2021, https://www.nytimes.com/2021/04/05/health/hexapro-mclellan-vaccine.html (“A new vaccine for Covid-19 that is entering clinical trials in Brazil, Mexico, Thailand and Vietnam could change how the world fights the pandemic. The vaccine, called NVD-HXP-S, is the first in clinical trials to use a new molecular design that is widely expected to create more potent antibodies than the current generation of vaccines. And the new vaccine could be far easier to make. Existing vaccines from companies like Pfizer and Johnson & Johnson must be produced in specialized factories using hard-to-acquire ingredients. In contrast, the new vaccine can be mass-produced in chicken eggs — the same eggs that produce billions of influenza vaccines every year in factories around the world.”).
Production is ramping up for the various vaccines that have been approved in various countries. Producers continue to explore adding capacity or licensing production to other producers. Governments – like the United States, Japan, India and Australia – are finding creative ways for nations to work together to build up additional capacity to reach countries with needs. COVAX has proven to be an important vehicle for distributing vaccines to low- and middle-income countries. As capacities expand and additional funding is available, COVAX will continue to be a critical part of the solution.
The IMF and World Bank have the ability to address many of the challenges facing developing countries with the support of its member governments. Hopefully, this week’s meetings will make a difference. And individual countries can and are doing more. Secretary Blinken’s remarks show the U.S. will be increasing its role and working with others to ensure global success. For a world fatigued from the pandemic, a path to resolution is needed now. Hopefully, we are close.
The United Kingdom has the presidency of the G7 (Canada, France, Germany, Italy, Japan, United States and United Kingdom, with European Union as a guest) in 2021. On March 31, trade ministers had a virtual meeting which included WTO Director-General Ngozi Okonjo-Iweala. On the U.K. G7 web page, the objectives of the Trade Track of the G7 during the UK Presidency is reviewed. See G7 Trade Ministers, https://www.g7uk.org/trade-ministers/
“The UK’s 2021 G7 Presidency will feature a dedicated Trade Track at the G7 for the first time, led by the Department for International Trade. The Trade Track will be an opportunity for the UK to work with our G7 partners to shape a bold global vision for economic recovery that sees us build back better together – greener, more prosperous, resilient, and fair.
“To do so, the Trade Track will focus on four priority areas:
“- WTO reform
“- trade and health
“- digital trade
“- trade and climate policy”
The Chair of the G7 Trade Track released a statement on March 31. The Chair in 2021 is the U.K. Secretary of State for International Trade and President of the Board of Trade and Minister for Women and Equalities, the Rt Hon Elizabeth Truss MP. See G7 Trade Ministers’ Meeting – Chair’s Statement, https://www.g7uk.org/g7-trade-ministers-meeting-chairs-statement/. The statement is copied below.
“Today, the G7 Trade Ministers held their first meeting under the inaugural G7 Trade Track. Trade Ministers underlined the vital role global trade has played in tackling the impacts of the Covid-19 pandemic, welcomed the contribution trade can make to a strong economic recovery, and emphasised the need to build back better. They reaffirmed the importance of the rules-based multilateral trading system and welcomed Dr Ngozi Okonjo-Iweala, the new WTO Director-General, to their meeting.
“The G7 Trade Track has a bold purpose – to make the case globally for free and fair trade. G7 Trade Ministers are convinced that when the world’s leading democratic trading nations unite behind a shared agenda to make the global trading system fairer, more sustainable, and responsive to the needs of our citizens, this is an agenda that partners across the world will be ready to share in and help shape.
“Free and Fair Trade
“G7 Trade Ministers support a global trading system that is free and fair and works for all countries and peoples. This year represents a clear inflection point for the world and the global economic architecture. G7 Trade Ministers recognised the importance of providing the leadership needed to respond to the challenges faced by the multilateral trading system. Trade Ministers expressed their determination to provide the sustained effort and momentum necessary to ensure progress is made in the reform of the WTO to help secure shared prosperity for all. Therefore, G7 Trade Ministers will use this year’s G7 to advance the agenda of the 12th WTO Ministerial Conference and provide vital political momentum to the WTO reform debate. Trade Ministers will explore reforms that can enhance the WTO as a forum for negotiations, recognising the positive role that the plurilateral initiatives have played in engaging a broad spectrum of WTO members. G7 Trade Ministers also acknowledge that important work on transparency, special and differential treatment, and dispute settlement needs to be undertaken in the WTO.
“The multilateral trading system can be a force for good. It has increased competition and economic growth, helped raise living standards, and lifted millions out of poverty. It must serve the needs of all its members and provide the basis for free and fair trade. G7 Trade Ministers recognised that global trade should work for democratic and open-market systems and that these should not be undermined by unfair trade.
“Yet, not all of our citizens have felt the benefits of trade. Moreover, practices that distort markets and competition lead to decreased efficiency and reduced perceptions of fairness and trust in the system. Echoing the G7 Leaders’ Statement at Charlevoix in 2018, G7 Trade Ministers recalled the importance of fostering a truly level playing field. Trade Ministers will discuss the impact market-distorting practices, such as harmful industrial subsidies, including those causing excess capacity in some sectors, are having on our economies and chart a way to address these collectively.
“G7 Trade Ministers believe that the multilateral trading system is in need of reform to reflect changes in the global economy and environment. As the world transitions to net zero, Trade Ministers acknowledged the risk of carbon leakage to the environment and the potential ways of mitigating this. Acknowledging the role of trade in tackling the accelerating climate and biodiversity crisis, Trade Ministers recognised that 2021 will be a crucial year to drive international efforts to address climate change and protect nature, including at the UNFCCC COP26. Trade Ministers will therefore deepen discussions on the nexus between trade and climate and the environment with a focus on identifying opportunities for collaboration and facilitating sustainable supply chains. Additionally, G7 members are committed to reaching a meaningful conclusion in the WTO negotiations of fisheries subsidies – which have a clear impact on sustainability.
“Stressing that trade has to be at the service of citizens, G7 Trade Ministers underlined the importance of advancing women’s economic empowerment through trade, particularly to support the Covid-19 recovery. They shared the view that greater representation of women in trade as leaders, business owners, and fairly compensated workers will ultimately deliver more and better jobs and more growth in our economies. G7 Members will promote deepened studies and more cross-cutting analyses on trade policy and gender equality by international organisations, such as SheTrades Outlook. Recognising the progress that is being made on trade and gender equality at the WTO, Trade Ministers intend to use their next discussions to explore new opportunities to improve the evidence base to support women in trade and discuss their priorities in this area for the next WTO Ministerial Conference.
“G7 Trade Ministers also agreed to further consider the ways in which trade policy can develop to support trade in health products, and increased supply chain resilience, as we work to build back better from Covid-19. The scale and pace of the spread of the virus, and an uneven global recovery, are challenging all our economies. G7 Members also encourage cooperation among governments, manufacturers, and other industry players to identify policies which support ramped-up production and distribution of vaccines.
“G7 Trade Ministers recognised the importance of digital trade to growth, innovation, productivity, and prosperity. They recalled the immense opportunities that it offers to our people and our businesses, and they underlined the central role that it can play in the economic recovery from the pandemic. G7 Members are united in their support for open digital markets and their opposition to digital protectionism. As a group of market-based economies governed by the rule of law, they believe that digital markets should be competitive, transparent, and accessible to international trade and investment. They agree on the importance of data free flow with trust, safeguards for consumers and businesses, and digital trading systems that allow goods and services to move seamlessly across borders. G7 Trade Ministers resolve to promote digital trade worldwide and to pursue global governance that is fair and inclusive. They agreed to further develop a set of high-level principles during this Presidency that will guide the G7 approach to digital trade.
“Digital trade remains an important area for the creation of new rules at the WTO. The rules governing digital trade should be responsive to innovation and emerging technologies, so that businesses, consumers, and workers can harness their full potential. G7 Trade Ministers committed to redoubling their efforts to advance the Joint Statement Initiative on E-commerce at the World Trade Organization. They aim to achieve substantial progress by the 12th WTO Ministerial Conference.
“G7 Trade Ministers look forward to strengthening their dialogue and further advancing a shared agenda at their next meeting in May.”
The statement from the Chair was not surprising considering the composition of the G7 and the focus of the members on getting the pandemic under control, reviving economic and trade activities (“building back better), restoring relevance to the WTO by achieving positive developments at the 12th Ministerial Conference and pursuing WTO reform on a host of areas including updating rules to address distortions (e.g., industrial subsidies) not adequately addressed in current agreements, operation of special and differential treatment, transparency, and dispute settlement. Most G7 members also support the Joint Statement Initiatives on a range of topics, including digital trade, domestic services regulation, SMSEs, empowerment of women in trade and gender equality, and trade’s role in addressing the climate crisis.
While some G7 members have different views on specific issues, the opening G7 trade ministers meeting lays out a positive broad-based agenda for having trade help get the world through the pandemic, return to greater prosperity, and address longstanding challenges at the WTO both to relevance in the 21st century and to different economic systems rendering current rules only partially relevant.
“WASHINGTON – United States Trade Representative Katherine Tai today virtually participated in the G7 Trade Ministers Meeting hosted by the United Kingdom and chaired by Secretary of State Liz Truss. Ministers were joined in this meeting by WTO Director General Dr. Ngozi Okonjo-Iweala. This was the first meeting of the G7 Trade Ministers. Ambassador Tai and other G7 Ministers discussed the challenges facing the global trading system from non-market forces and the need to work collectively to advance free and fair trade. Dr. Okonjo-Iweala and the Ministers discussed pathways to achieving meaningful outcomes for the 12th WTO Ministerial Conference scheduled later this year. Ministers also discussed their plans for future work on digital trade, women’s economic empowerment, and climate change objectives. Ambassador Tai emphasized the Biden-Harris Administration’s objective to ensure that trade policy focuses on benefitting workers, in addition to businesses and consumers. The Ministers are united in their desire to support policies that will facilitate a rapid end to the pandemic and recognize that trade can contribute to a strong and equitable recovery.”
“As the Government of Canada continues to address the COVID-19 pandemic, collaborating with international partners is essential to fighting the virus and ensuring a sustainable and inclusive global economic recovery from the pandemic.
“Today, the Honourable Mary Ng, Minister of Small Business, Export Promotion and International Trade, participated in the first G7 trade and investment ministers’ meeting, which was hosted by the United Kingdom under its G7 presidency for 2021. The ministers agreed to pursue an ambitious G7 trade and investment agenda that responds to the challenges posed by the pandemic and to support an inclusive and sustainable recovery with the WTO at its core.
“Minister Ng welcomed the discussion with Ngozi Okonjo-Iweala, the new WTO director general, on the future of the WTO. The G7 ministers agreed to work together to advance concrete outcomes in advance of the 12th WTO Ministerial Conference in November.
“Pursuing trade and investment policies that support women and Indigenous and racialized communities is key to ensuring Canada’s economic recovery from COVID-19 is inclusive and meaningful. During a session on women’s economic empowerment, Minister Ng highlighted initiatives that Canada has undertaken to support women’s success in international trade. The Minister encouraged G7 members to participate in the implementation of the WTO trade and gender initiative and, as a specific example, encouraged member countries to use the SheTrades Outlook, an interactive policy tool that helps governments put in place policies to improve women’s participation in international trade.
“During the meeting, Minister Ng also emphasized the importance of digital trade and highlighted Canada’s work on a number of initiatives, such as the ongoing WTO negotiations on e-commerce.
“Minister Ng reiterated Canada’s support for the United Kingdom-led G7 work plan to enhance the capacity of the trading system to respond to public health emergencies. Ministers discussed the Ottawa Group’s Trade and Health Initiative, which seeks to strengthen the resilience of global supply chains and facilitate trade in essential medical supplies and vaccines.
“The trade ministers acknowledged the impacts of unfair trade practices on their economies and agreed to work together to address them. Recognizing the important role that trade has in tackling climate change and ensuring a sustainable environment, the ministers agreed to continue their efforts to take action on climate change through initiatives such as the WTO trade and environment sustainability initiative.”
The Canadian press release also provided a quote from Minister Ng:
“’Canada continues to work closely with our international partners to support Canadian businesses, workers and communities as we fight the pandemic and support an inclusive, sustainable economic recovery through rules-based international trade that works for everyone. We will make sure that the interests of Canadians across the country are at the forefront of our discussions as we work toward ensuring a strong, sustainable, and inclusive economic recovery.’
“- Mary Ng, Minister of Small Business, Export Promotion and International Trade”
The press reported reactions within China to the G7 trade ministers meeting with a focus on G7 concerns with addressing reforms to industrial subsidies. See, e.g., South China Morning Post, G7 pressure on China over subsidies ‘doomed to fail’ even as Biden administration gathers coalition, 1 April 2021, https://www.scmp.com/economy/china-economy/article/3128006/g7-pressure-china-over-subsidies-doomed-fail-even-biden (“Trade ministers from the Group of 7 (G7) – the United States, Germany, Britain, France, Canada, Italy and Japan – on Wednesday pledged collective action against ‘harmful industrial subsidies’ without naming China directly. China responded by saying it ‘won’t accept any accusation’ of its trade practice as it ‘has always honoured its commitments since it joined the World Trade Organization (WTO) at the end of 2001.”).
The G7 is a potentially important grouping, particularly to articulate a vision for the future of the multilateral trading system. While the changes in global trade over the last quarter of a century ensure more voices need to be considered than those in the G7 (or those aligned with them), there is no forward movement without them.
The WTO, if a static organization, will continue its slide into irrelevance. The organization suffers a myriad of structural problems which have reduced the effectiveness of all of its core functions. There is a lack of common purpose among the WTO Members. Its rules reflect the world of the 1980s with no significant update in the rules since then.
The pressing global challenges flowing from the pandemic, from climate change and changing technology need a World Trade Organization that is up to date, nimble and driven by an agreed vision to promote sustainable development and greater equitable participation and benefits.
The initial articulation of G7 objectives from trade ministers is a step in the right direction. Time will tell whether the G7 can internally agree on the details of a trade agenda, can translate that into support among a large group of WTO Members and lead to meaningful agreements and reform. The opposition to meaningful reform from China and others within the WTO and the consensus principle of decision making renders it highly unlikely that the WTO will prove up to the needs of the moment. But efforts of the G7 and other groups is critical if a global trading system is to survive. One can only hope for success from the G7 efforts.
Globally there have been extraordinary developments of vaccines to help against the COVID-19 vaccine. UNICEF has set up a COVID-19 Vaccine Market Dashboard which notes that at present 14 vaccines have been approved by one or more countries, that the companies in production or testing vaccines report existing or intended capacity in 2021 of 21 billion doses (depends on other vaccines being approved and companies overcoming any bottlenecks in supply), indicates that there are 10.4 billion “secured vaccine doses”, that there are 3.56 billion doses “secured and optioned for the COVAX facility” and that prices in the market range from $2.06/dose to $44.00/dose. See UNICEF, COVID-19 Vaccine Market Dashboard, https://www.unicef.org/supply/covid-19-vaccine-market-dashboard (visited April 2, 2021). The dashboard contains a great deal of information looking at information on products, capacity, agreements, price and delivery.
The COVAX facility, administered by Gavi, put out in early March the first round of allocation of vaccine doses procured for low- and middle-income countries and others choosing to participate in acquiring through COVAX to improve equitable and affordable access for all. 142 of the countries participating in the COVAX facility were identified as allocated delivery of specific quantities of vaccine from a total of 237 million doses that were expected to be available to COVAX during the February – May timeline. See The COVAX Facility, First Round of Allocation: Astra Zeneca/Oxford Vaccine (manufactured by Astra Zeneca & licensed and manufactured by Serum Institute of India), https://www.gavi.org/sites/default/files/covid/covax/COVAX-First-round-allocation-of-AZ-and-SII.pdf . 87 of the 92 countries who will receive doses at no cost or reduced cost are included in the first round allocation (“AMC” countries). The March 2, 2021 document is embedded below.
In an April 1, 2021 update, Gavi notes that to date COVAX has shipped more than 33 million doses to 74 country. See GAVI, COVAX vaccine roll-out, https://www.gavi.org/covax-facility (visited April 2, 2021). While the ramp-up of deliveries to COVAX is scheduled to occur over time, COVAX received notice in late March of delays for shipments from India (Serum Institute of India) in both March and April, which COVAX has estimated could be a delay for as much as 90 million doses and indicated the delays were due to internal needs in India for more doses to support their own vaccination program. See UNICEF, COVAX updates participants on delivery delays for vaccines from Serum Institute of India (SII) and AstraZeneca, 25 March 2021,https://www.unicef.org/press-releases/covax-updates-participants-delivery-delays-vaccines-serum-institute-india-sii-and. The bulk of the press release is copied below.
“GENEVA/NEW YORK/OSLO, 25 March 2021 – Deliveries of COVID-19 vaccines produced by the Serum Institute of India (SII) to lower-income economies participating in the COVAX Facility will face delays during March and April as the Government of India battles a new wave of COVID-19 infections. COVAX and the Government of India remain in discussions to ensure some supplies are completed during March and April.
“According to the agreement between Gavi and the Serum Institute of India (SII), which included funding to support an increase in manufacturing capacity, SII is contracted to provide COVAX with the SII-licensed and manufactured AstraZeneca (AZ)-Oxford vaccine (known as COVISHIELD) to 64 lower-income economies participating in the Gavi COVAX AMC (including India), alongside its commitments to the Government of India.
“To date, COVAX has been supplied with 28 million COVISHIELD doses and was expecting an additional 40 million doses to be available in March, and up to 50 million doses in April.
“COVAX has notified all affected economies of potential delays. SII has pledged that, alongside supplying India, it will prioritize the COVAX multilateral solution for equitable distribution.
“Participating economies have also received WHO guidance on optimizing the national deployment doses of the AstraZeneca-Oxford vaccine in a constrained supply environment.
“Separately, the COVAX Facility has informed participants allocated AstraZeneca-manufactured doses of the AstraZeneca-Oxford vaccine that some of the first deliveries due in March are now set to take place in April.
“In this early phase of COVID-19 vaccine roll-out, vaccine manufacturers require time to scale and optimize their production processes. AstraZeneca, which uses a novel supply chain network with sites across multiple continents, is working to enable initial supply to 82 countries through COVAX in the coming weeks.
“COVAX retains its objective of supplying initial doses of vaccines to all participating economies in the first half of the year before ramping up significantly in the second half of 2021. To date, COVAX has shipped vaccines to over 50 countries and economies.”
While there have been various manufacturing challenges in the early months of vaccine roll-outs, the decision by India to slow distribution of vaccine doses purchased by COVAX will clearly slow distribution to many least developed and developing countries dependent on COVAX for their vaccine doses. Since as much as a third of vaccine doses that COVAX has distributed have gone to India, the Indian government has what is at least a public relations challenge at the present time. See India Today, India received one-third of vaccines made for poor countries by India under COVAX programme: Report, 30 March 2021, https://www.indiatoday.in/coronavirus-outbreak/vaccine-updates/story/india-received-one-third-of-vaccines-made-for-poor-countries-by-india-under-covax-programme-report-1785242-2021-03-30. However, with a number of variants of the virus circulating widely and with infections increasing in many countries around the world, the delays are of concern to many governments with anxious populations looking for a path past the pandemic.
In a paper from Airfinity and the St. Gallen Endowment for Prosperity through Trade on March 31, 2021, an effort is made to look at the likely damage to low income countries from the announced delays in shipments to COVAX. See Simon J. Evenett and Matt Linley, Halting India’s Vaccine Exports: The Fallout, 31 March 2021. The paper estimates that the delays in shipments will push back achieving even minimum vaccinations by 60-90 days for many of the COVAX recipient countries. The paper is embedded below.
The WTO Director-General Ngozi Okonjo-Iweala is planning a meeting on vaccines later in April that was described in a WTO press release as follows.
“DG Okonjo-Iweala also said that she plans to convene an event in mid-April to discuss ramping up COVID-19 vaccine production and how the WTO can contribute to a more rapid and equitable distribution of vaccines.
“The event, to be held under Chatham House rules, will include all regional member groups, representatives from vaccine manufacturers from developing and developed countries, civil society groups working on access to medicine, and other relevant stakeholders.
“’The idea is to move us along on our quest to solve this unacceptable inequitable access of poor countries to vaccines,’ she said. ‘At the bottom of this is a very serious scarcity in supply. And how to solve it is to look at how we expand manufacturing in all its ways.’
“She stressed that the event would help advance global discussions on access to vaccines. She expressed hope both for increased vaccine manufacturing in the short- to medium-term, and a longer-term framework agreement that would provide for automatic access to vaccines and other medical products for developing countries in future health crises, including a way forward on the TRIPS waiver proposal many of them support.
“’We also need to look to the future and agree a framework where countries do not need to stand in the queue in order to get access to life-saving vaccines, therapeutics, and diagnostics,’ she said, emphasizing that this can be done while still incentivizing research and development.”
Governments are understandably focused on trying to end the pandemic at home as a first priority. The efforts of the WHO, Gavi, CEPI and UNICEF through the COVAX facility in recent years has provided a welcome source of hope for many nations for greater equity in distribution and in affordability of vaccines, including in the last year addressing the enormous challenge presented by the COVID-19 pandemic. Many countries and private groups have stepped up with major funding contributions to make vaccine available. Individual governments are also working to increase supplies globally. Many bottlenecks have arisen with the large number of inputs and the enormous increase in demand that has arisen over the last year. There is a need for continued efforts by governments and businesses to address the challenges and to see that the needs of the low- and middle-income countries can be met in a timely manner as well. While there will be a lot more production in the second half of 2021, there are and will continue to be challenges in the second quarter. Focus on identifying challenges and global cooperation to solve bottlenecks will do a lot to ensure greater global success in the remainder of 2021.
The Press statement is copied below (emphasis added).
“Over the past year, the People’s Republic of China (PRC) has continued to dismantle Hong Kong’s high degree of autonomy, in violation of its obligations under the Sino-British Joint Declaration and Hong Kong’s Basic Law. In particular, the PRC government’s adoption and the Hong Kong government’s implementation of the National Security Law (NSL) have severely undermined the rights and freedoms of people in Hong Kong.
“Each year, the Department of State submits to Congress the Hong Kong Policy Act Report and accompanying certification. In conjunction with this year’s report, I have certified to Congress that Hong Kong does not warrant differential treatment under U.S. law in the same manner as U.S. laws were applied to Hong Kong before July 1, 1997.
“This report documents many of the actions the PRC and Hong Kong governments have taken against Hong Kong’s promised high degree of autonomy, freedoms, and democratic institutions. These include the arbitrary arrests and politically-motivated prosecutions of opposition politicians, activists, and peaceful protesters under the NSL and other legislation; the postponement of Legislative Council elections; pressure on judicial independence and academic and press freedoms; and a de facto ban on public demonstrations.
“I am committed to continuing to work with Congress and our allies and partners around the world to stand with people in Hong Kong against the PRC’s egregious policies and actions. As demonstrated by the March 16 Hong Kong Autonomy Act update, which listed 24 PRC and Hong Kong officials whose actions reduced Hong Kong’s autonomy, we will impose consequences for these actions. We will continue to call on the PRC to abide by its international obligations and commitments; to cease its dismantlement of Hong Kong’s democratic institutions, autonomy, and rule of law; to release immediately and drop all charges against individuals unjustly detained in Hong Kong; and to respect the human rights of all individuals in Hong Kong.”
The Report covers a range of issues including discussion of:
national security law,
impact on rule of law,
arrests, bail, and investigations proceedings,
impact on democratic institutions,
progress towards universal suffrage and impact on the legislature,
impact on the judiciary,
Impact on Freedom of Assembly,
Impact on Freedoms of Speech and Association,
Impact on Freedom of the Press,
Disinformation/Malign Political Influence Activities,
Impact on Internet Freedoms,
Impact on Freedom of Movement,
Impact on Freedom of Religion or Belief,
Impact on U.S. Citizens,
Impact on Academics and Exchanges,
Areas of Remaining Autonomy,
U.S.-Hong Kong Cooperation and Agreements,
Hong Kong Policy Act Findings
The summary of the report is copied below.
“Consistent with sections 205 and 301 of the United States-Hong Kong Policy Act of 1992 (the “Act”) (22 U.S.C. 5725 and 5731) and section 7043(f)(3)(C) of the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2021 (Div. K, P.L. 116-260), the Department submits this report and the enclosed certification on conditions in Hong Kong from June 2020 through February 2021 (“covered period”).
“The Department of State assesses during the covered period, the central government of the People’s Republic of China (PRC) took new actions directly threatening U.S. interests in Hong Kong and inconsistent with the Basic Law and the PRC’s obligation pursuant to the Sino-British Joint Declaration of 1984 to allow Hong Kong to enjoy a high degree of autonomy. In the Certification of Hong Kong’s Treatment under United States Laws, the Secretary of State certified Hong Kong does not warrant treatment under U.S. law in the same manner as U.S. laws were applied to Hong Kong before July 1, 1997.
“By unilaterally imposing on Hong Kong the Law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative Region (NSL), the PRC dramatically undermined rights and freedoms in Hong Kong, including freedoms protected under the Basic Law and the Sino-British Joint Declaration. Since the imposition of the NSL in June 2020, Hong Kong police arrested at least 99 opposition politicians, activists, and protesters on NSL-related charges including secession, subversion, terrorism, and collusion with a foreign country or external elements. These include 55 people arrested in January for organizing or running in pan-democratic primary elections in July 2020, 47 of whom were formally charged with subversion on February 28. Additionally, the Hong Kong government used COVID-19-related public health restrictions to deny authorizations for public demonstrations and postponed Hong Kong’s Legislative Council (LegCo) elections for at least one year.”
What is clear from yesterday’s Hong Kong Policy Act Report is that the concerns in the United States on the actions by China to restrict Hong Kong’s autonomy have not gone away with the Biden Administration but have increased with the escalating actions by the Chinese government. While Hong Kong will pursue its challenge, one shouldn’t expect a change in U.S. position nor should one expect a resolution in the WTO in the next several years.
The Global Business Dialogue (GBD) publishes periodically “THE TTALK QUOTES”. On March 30, 2021, GBD posted a TTALK Quotes on “CHINA, THE TRADING SYSTEM, AND THE ALTERNATIVES” with a quote from Clyde Prestowitz, ‘[There is] only one alternative – “blowing up the system” or, more politely, creating a new or alternative system.”
The quote is from a Washington Monthly article by Mr. Prestowitz from March 24, 2021 entitled, “Blow Up the Global Trading System, Yes, really. U.S. and international efforts to stop Beijing’s economic onslaught haven’t worked. It’s time for President Biden to go big,” https://washingtonmonthly.com/2021/03/24/blow-up-the-global-trading-system/. Mr. Prestowitz has a new book out, The World Turned Upside Down (Yale University Press, 2021) and some of the recommendations in the Washington Monthly article reflect his thinking from his new book.
Unlike Mr. Carl’s call for market economy countries to withdraw from the WTO and start a new organization, Mr. Prestowitz proposes in the Washington Monthly article “Reinventing the Globalization System” which involves seven action steps.
The first is for the United States “to impose a Market Adjustment Charge (MAC) on all non-direct investment (not in new means of production) into the United States.” The MAC is explained in his new book (pages 276-277) but is a charge that would vary based on the size and trend of the U.S. trade deficit.
The second step “would be for the International Monetary Fund (IMF) to adopt Keynes’ Bretton Woods proposal that all countries should have balanced trade in the medium to long term.” To achieve this result, a duty would be applied on imports from countries that run persistent trade surpluses.
The third step would be for the United States to seek strong enforcement within the IMF and by the U.S. Department of the Treasury.
The fourth step would be forming a supersized FTA including USMCA, CPTPP and the EU, and open to other market economies. Prestowitz calls this grouping the “Free World Free Trade Agreement”.
The firth step addresses the need for market economies to improve their competitiveness against the state directed and massively subsidized world of China. The step calls for the creation of “a free world high technology leadership project”
The sixth step calls on the U.S. to reorganize government and concentrate resources to support the technology leadership initiative.
The final step involves actions the U.S. can take to spur domestic manufacturing (use of Defense Production Act, curbing corporate lobbying, and review corporate overseas investment plans.
In his book, Mr. Prestowitz has a chapter on actions the U.S. should take to regain its leadership position. It starts with a Market Access Charge, calls for the imposition of a value added tax and a host of actions to ensure the U.S. is “the world’s most competitive economy.” Page 278.
U.S. actions are aimed at improving U.S. competitiveness
“While the American Rescue Plan is changing the course of the pandemic and delivering relief for working families, this is no time to build back to the way things were. This is the moment to reimagine and rebuild a new economy. The American Jobs Plan is an investment in America that will create millions of good jobs, rebuild our country’s infrastructure, and position the United States to out-compete China. Public domestic investment as a share of the economy has fallen by more than 40 percent since the 1960s. The American Jobs Plan will invest in America in a way we have not invested since we built the interstate highways and won the Space Race.
“The United States of America is the wealthiest country in the world, yet we rank 13th when it comes to the overall quality of our infrastructure. After decades of disinvestment, our roads, bridges, and water systems are crumbling. Our electric grid is vulnerable to catastrophic outages. Too many lack access to affordable, high-speed Internet and to quality housing. The past year has led to job losses and threatened economic security, eroding more than 30 years of progress in women’s labor force participation. It has unmasked the fragility of our caregiving infrastructure. And, our nation is falling behind its biggest competitors on research and development (R&D), manufacturing, and training. It has never been more important for us to invest in strengthening our infrastructure and competitiveness, and in creating the good-paying, union jobs of the future.
“Like great projects of the past, the President’s plan will unify and mobilize the country to meet the great challenges of our time: the climate crisis and the ambitions of an autocratic China. It will invest in Americans and deliver the jobs and opportunities they deserve. But unlike past major investments, the plan prioritizes addressing long-standing and persistent racial injustice. The plan targets 40 percent of the benefits of climate and clean infrastructure investments to disadvantaged communities. And, the plan invests in rural communities and communities impacted by the market-based transition to clean energy.”
The G7 trade ministers are meeting today. See Reuters, UK trade minister tells G7: We must stop fragmentation of global trade, March 31, 2021, https://www.reuters.com/article/britain-trade-truss-idUSS8N2L708T. The seven G7 countries are Canada, France, Germany, Italy, Japan, the UK and the US (EU participates as a guest). WTO reform is one of the topics being discussed today. The U.S., EU and Japan have been working on potential reforms to the Subsidies Agreement to address the massive industrial subsidies provided by China as well as looking at potential disciplines on state-owned/invested enterprises and forced technology transfer. However, in a consensus system like the WTO, it is hard to imagine meaningful reforms that will address Chinese distortions achieving results within the WTO.
The U.S. is not presently considering a “Free World Free Trade Agreement” as proposed by Mr. Prestowitz. The U.S. is also not proposing pulling out of the WTO as suggested last year by Mogens Peter Carl and entering into a new organization that is limited to market economies. Each of the U.S. and the EU have the ability to act unilaterally if necessary but obviously that is a less desirable approach to global governance.
So it is likely that the U.S., EU, Japan and other leading market economies will continue to seek reform within the WTO but with likely limited results putting pressure on free trade agreements or on plurilateral arrangements to achieve a trade regime acceptable to the major market economies.
Mr. Prestowitz’s article and recent book are well done and raise some interesting ideas for addressing U.S. trade concerns with China. Some of his ideas have been advocated for by others before and have significant potential whether they have much political possibility for adoption. But in a changing global trade environment, his writings are a useful contribution and worth reading by those in trade policy positions.
For the Biden Administration, new trade agreements do not appear to be a short-term objective. Getting control of the pandemic through vaccinations and building back better through the jobs bill are the two major priorities. Trade can contribute to both, but a push for Free World Free Trade Agreement is not likely in the Biden years.
Still China’s economic system and incompatibility with the WTO are major concerns for many countries including the United States. Reform of the WTO would obviously be the best outcome for addressing China’s distortions. While hope spring eternal, the Ministerial Conference in late November 2021 in Geneva will give an idea of whether meaningful WTO reform is likely in the cards in the coming years. Such reform is highly unlikely to happen during the 2020s, if ever.
Mr. Carl’s suggestion of mass withdrawal from the WTO and creation of a new entity of market economies is interesting in addressing the blocking capacity of China but seems improbable because of China’s size and importance. With no major economy having suggested any interest in the idea, it seems implausible in the 2020s, if ever.
Mr. Prestowitz’s idea for a super-FTA of market economies is doable within the WTO and simply depends on majors like the U.S., EU, Japan and others being willing to put in the effort. But the U.S. and EU have not been able to make meaningful progress on an FTA or even harmonization of regulations over recent decades. If past is prologue, it is unlikely that such an undertaking will occur in the 2020s either, if ever.
As British trade minister Liz Truss is reported to have said to her G7 fellow trade ministers, “We need to reverse the fragmentation of global trade and get the global system and WTO working again, otherwise we risk big countries going their own way and operating outside an agreed set of rules, which always spells trouble.” Reuters, UK trade minister tells G7: We must stop fragmentation of global trade, March 31, 2021, https://www.reuters.com/article/britain-trade-truss-idUSS8N2L708T. China has effectively been going its own way even after joining the WTO at the end of 2001. Actions by the U.S., EU and others in recent years have occasionally been outside of the agreed set of rules as well. So a fourth option is that of the collapse of the global trading system (actually or practically) with a law of the jungle reasserting itself.
Time will tell which direction global trade will take.
The three hard truths from his remarks are copied below.
“The first of these hard truths is that China’s economic system – with its unique melding of public, private, and Chinese Communist Party resources, all harnessed to advance industrial policy objectives – is incompatible with the WTO norms of market orientation, transparency, non-discrimination, and reciprocity.”
“The second hard truth is that the WTO has proven itself incapable of restraining the trade disruptive activities of the Chinese non-market economic system.”
“The third hard truth is that China does not want change at the WTO.”
Amb. Shea reviews in some detail the actions of China post-accession to move away from market reforms that trading partners expected from China’s accession to the WTO and why such actions frustrate the proper functioning of the WTO. He also reviews China’s willingness to retaliate against trading partners for their legitimate use of WTO rights and to punish trading partners for comments China views as against their interests. The import bans against Australian products when Australia urged an independent investigation into the source of the COVID-19 virus is one example mentioned. Finally, on the issue of not wanting change at the WTO, Amb. Shea reviews China’s opposition to every reform issue raised by the United States.
“Mr. Carl indicates in the opinion piece that ‘Europe’s trade policy has stagnated for twenty years. It no longer meets the demands of today’s world and the European public attributes the loss of millions of jobs to China.’ (all quotes from the opinion piece are informal translations by Google Translate ). The opinion is remarkable as it comes from a former senior EC trade official.
“‘Our policy is outdated and based on an outdated ideology that is identical to what it was before the arrival of China on the world state, after its accession to the WTO in 2001. Its centralized economy, its powerful industrial policy in all the key sectors, its enormous state subsidies, combined with a government apparatus and a political repression as powerful as those of the ex-USSR, swept large swathes of European and American industry. However, we act as if we were in the heyday of the 1990s, when our main competitors were other market economies, Japan, Korea, the United States. Our inaction resembles the ostrich policy and unilateral pacifism of the 1930s. We know the results. We must therefore protect our liberal economies and our open societies against adversaries. This requires a fundamental review of the trade policy of the European Union and the WTO.’
“Mr. Carl calls for a complete reform of the WTO with the EU teaming up with the U.S. and other like-minded Members but recognizes that meaningful reform will be blocked by China. ‘The solution: withdraw from the WTO and create a new international trade organization without China. Most countries would follow our example. We would return to an open world economic order between market economy countries sharing the same ideas, on the basis of clear and reinforced principles in favor of the free market.’ Mr. Carl advocates for the adoption of rules that would deal with ‘abuses’ of the China model including improved subsidy disciplines and ‘rules against social, environmental dumping and inaction on climate change.’ Such new rules are needed to permit the EU to green its economy.
“Mr. Carl, addressing concerns that his proposal represents a turn to managed trade, says simply that ‘This is what we already have, although only China manages it, and we are suffering the consequences.’
“That Mr. Carl felt the need to publish such a strongly worded opinion shows the underlying and growing tensions felt by major trading partners from a major economic power with a fundamentally different economic system than that pursued by the historic major players in world trade.
“For WTO Members and their businesses and workers, the rising discontent by many with the functioning of the WTO and its ability to achieve meaningful reform should be a wake-up call. The WTO to be relevant must have rules that address the world in the 21st century. The WTO must also be able to have Members assume increased responsibilities as their stage of economic development evolves. Similarly, the WTO must confront whether existing rules can be modified to generate greater coverage of practices by different types of economic systems. If not, the WTO must consider whether it can survive where all Members don’t follow similar economic systems.
“Unfortunately, there appears little likelihood that many of these critical reforms will be addressed in the coming years. China has objected to WTO Members trying to modify existing agreements to address distortions caused by China’s economic system. China has also objected to the U.S. effort to have Members consider whether WTO rules require Members to operate market-economy based systems. China and others have objected to U.S. efforts to define ‘developing country’ and effectively have Members take on obligations commensurate to their stage of economic development. Stated differently, China is working hard to defend the status quo and prevent consideration of reforms that would achieve greater balance among all WTO Members.
“While USTR Lighthizer and others have said that if the WTO didn’t exist, it would have to be created, Mr. Carl’s opinion suggests that one option that may take on greater appeal is the withdrawal from the WTO and the creation of a new international trade regime among countries with similar economic systems. Such a move away from the WTO would certainly involve enormous economic upheaval and political tensions. The more desirable course of action is to achieve timely reform of the WTO so that all Members feel the system achieves reasonable reciprocity.
“Time will tell whether WTO Members find a path forward or whether the WTO becomes less and less relevant and even ceases to function. In a Member driven organization, the answer lies with the membership.”
The WTO now has a new Director-General who is working to see if Members can achieve breakthroughs on the existing fisheries subsidies, make significant progress on Joint Statement Initiatives, while encouraging Members to limit export restraints on medical goods needed to address the COVID-19 pandemic, promote rapid return to trade growth post pandemic, and work on WTO reform.
The Biden Administration has a desire to work with trading partners in multilateral organizations like the WTO and has articulated the need of allies to work together to address problems caused by non-market economies like China. While the Biden Administration will certainly pursue WTO reform, Amb. Shea’s final paragraph of his remarks is on point.
“The Biden Administration has made working with friends and allies a hallmark of its diplomatic approach, particularly when it comes to China. When the Administration brings this approach to the WTO, I sincerely hope our friends and allies will appreciate the gravity of the moment and what’s at stake.”