USTR Katherine Tai

COVID-19 vaccines — role of WTO and developments at May 5-6, 2021 General Council meeting on TRIPS Waiver

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

Distribution of COVID-19 cases worldwide, as of week 17 2021
“Distribution of cases of COVID-19 by continent (according to the applied case definition and testing strategies in the affected countries)

“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.

FACT-SHEET_-Biden-Harris-Administration-Delivers-Emergency-COVID-19-Assistance-for-India-_-The-White-House

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.

There have been challenges in ramping up production, including manufacturing issues at individual companies, bottlenecks in supply chains for particular inputs, export restrictions in place for some, etc. In prior posts I have reviewed data pulled together by industry and others on the challenges as well as the enormous level of voluntary licensing, and other arrangements to grow capacity and production. Industry estimates have consistently been that capacity will be at 10-15 billion doses by the end of 2021 — an extraordinary accomplishment considering global capacity for vaccines previously (roughly 5 billion doses for all vaccines). See, e.g., April 18, 2021, WTO’s April 14th virtual meeting to review COVID-19 vaccine availability, https://currentthoughtsontrade.com/2021/04/18/wtos-april-14th-virtual-meeting-to-review-covid-19-vaccine-availability/ (” 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.” (emphasis added)); April 13, 2021, April 15, 2021 — U.S and Gavi co-host event for additional funding for COVAX amid concerns about two workhorse vaccines for COVAX, ttps://currentthoughtsontrade.com/2021/04/13/april-15-2021-u-s-and-gavi-co-host-event-for-additional-funding-for-covax-amid-concerns-about-two-workhorse-vaccines-for-covax/; April 8, 2021, COVAX delivers COVID-19 vaccines to 100th country; India surge in infections likely to reduce product availability for COVAX through May and likely longer, https://currentthoughtsontrade.com/2021/04/08/covax-delivers-covid-19-vaccines-to-100th-country-india-surge-in-infections-likely-to-reduce-product-availability-for-covax-through-may-and-likely-longer/; April 2, 2021, Global vaccinations against COVID-19; developments and challenges in the roll-out for many countries, https://currentthoughtsontrade.com/2021/04/02/global-vaccinations-against-covid-19-developments-and-challenges-in-the-roll-out-for-many-countries/; March 25, 2021, Global vaccinations for COVID-19 — continued supply chain and production issues and a new wave of infections in many countries delay greater ramp up for some until late in the second quarter of 2021, https://currentthoughtsontrade.com/2021/03/25/global-vaccinations-for-covid-19-continued-supply-chain-and-production-issues-and-a-new-wave-of-infections-in-many-countries-delay-greater-ramp-up-for-some-until-late-in-the-second-quarter-of-2021/; March 12, 2021, COVID-19 vaccines – U.S., Japan, India and Australia agree to one billion doses for Indo-Pacific countries, https://currentthoughtsontrade.com/2021/03/12/covid-19-vaccines-u-s-japan-india-and-australia-agree-to-one-billion-doses-for-indo-pacific-countries/; March 12, 2021, The 8-9 March  “Global C19 Vaccine Supply Chain and Manufacturing Summit” – efforts to ramp-up production, https://currentthoughtsontrade.com/2021/03/12/the-8-9-march-global-c19-vaccine-supply-chain-and-manufacturing-summit-efforts-to-ramp-up-production/; March 5, 2021, COVID-19 vaccines — France supports Italy’s blockage of a shipment to Australia; while Australia has asked the EU to permit the shipment, Australia will have its own production of AstraZeneca product by the end of March, https://currentthoughtsontrade.com/2021/03/05/covid-19-vaccines-france-supports-italys-blockage-of-a-shipment-to-australia-while-australia-has-asked-the-eu-to-permit-the-shipment-australia-will-have-its-own-production-of-astrazeneca-produc/; March 4, 2021, Italy blocks exports of COVID-19 vaccines to Australia, first blockage of export authorization by the EU or its member states, https://currentthoughtsontrade.com/2021/03/04/italy-blocks-exports-of-covid-19-vaccines-to-australia-first-blockage-of-export-authorization-by-the-eu-or-its-member-states/; March 4, 2021, The EU’s response to challenges to its actions on COVID-19 vaccine exports, https://currentthoughtsontrade.com/2021/03/04/the-eus-response-to-challenges-to-its-actions-on-covid-19-vaccine-exports/; March 3, 2021, WTO Director-General opinion piece in the Financial Times and recent actions by the U.S., https://currentthoughtsontrade.com/2021/03/03/wto-director-general-opinion-piece-in-the-financial-times-and-recent-actions-by-the-u-s/; March 1, 2021, WTO Director-General Ngozi Okonjo-Iweala’s opening statement at the March 1 General Council meeting, https://currentthoughtsontrade.com/2021/03/01/wto-director-general-ngozi-okonjo-iwealas-opening-statement-at-the-march-1-general-council-meeting/.

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.

On May 5, 2021, the G-7 Foreign Ministers completed a meeting in London and issued a communique which included language about access to vaccines. The G-7 consists of Canada, France, Germany, Italy, Japan, the United States and the United Kingdom with the European Union as an observed. The U.K. as host also invited Australia, South Korea, India, South Africa and Brunei (as Chair for the ASEAN group of countries). The communique from the G-7 and the EU can be found here and the section on access to vaccines is copied below. See G7 Foreign and Development Ministers’ Meeting Communiqué, London, May 5, 2021, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/983631/G7-foreign-and-development-ministers-meeting-communique-london-5-may-2021.pdf.

“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.

WTO-_-News-Speech-DG-Ngozi-Okonjo-Iweala-General-Council

Statement-from-Ambassador-Katherine-Tai-on-the-Covid-19-Trips-Waiver-_-United-States-Trade-Representative

WTO-_-2021-News-items-Statement-of-Director-General-Ngozi-Okonjo-Iweala-on-USTR-Tais-statement-on-the-TRIPS-waiver

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.

WTO and forced labor in cotton — Commentary by Amb. Dennis Shea, former Deputy U.S. Trade Representative

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.”

I have in prior posts looked at the issue of forced labor and child labor both broadly and with special focus on cotton. See March 24, 2021, When human rights violations create trade distortions — the case of China’s treatment of the Uyghurs in Xinjiang, https://currentthoughtsontrade.com/2021/03/24/when-human-rights-violations-create-trade-distortions-the-case-of-chinas-treatment-of-the-uyghurs-in-xinjiang/; January 25, 2021, Child labor and forced labor in cotton production — is there a current WTO mandate to identify and quantify the distortive effects?, https://currentthoughtsontrade.com/2021/01/25/child-labor-and-forced-labor-in-cotton-production-is-there-a-current-wto-mandate-to-identify-and-quantify-the-distortive-effects/; January 24, 2021, Forced labor and child labor – a continued major distortion in international trade for some products, https://currentthoughtsontrade.com/2021/01/24/forced-labor-and-child-labor-a-continued-major-distortion-in-international-trade-for-some-products/.

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.

I

President Biden nominates two to be Deputy U.S. Trade Representatives in important step to fill some of the important vacancies at USTR

On April 16, 2021, President Biden put forward the names of eight individuals for senior Administration positions, two of which were Sarah Bianchi and Jayme White each for one of the three openings as a Deputy U.S. Trade Representative. See White House Briefing Room, President Biden Announces His Intent to Nominate Eight Key Administration Leaders, April 16, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/16/president-biden-announces-his-intent-to-nominate-eight-key-administration-leaders/.

Jayme White is the Senate Finance Committee Democratic counterpart to Ambassador Katherine Tai (formerly with the House Ways and Means Committee) with a distinguished career as a Senate staffer. Sarah Bianchi has extensive prior Administration experience in both the Obama/Biden and Clinton/Gore administrations.

The profile of each as included in the White House announcement is copied below.

Sarah Bianchi, Deputy United States Trade Representative

“Sarah Bianchi has spent nearly a decade in government roles in economic and domestic policy including in the Office of the Vice President, the White House Domestic Policy Council, the Office of Management and Budget, and the Senate Health, Education, Labor and Pensions Committee.   In 2011, Ms. Bianchi was appointed by then Vice President Biden as his head of economic and domestic policy in the White House, where she ran the economic and domestic policy team in the Office of the Vice President and coordinated policy initiatives ranging from workforce competitiveness to manufacturing to budget negotiations. She also served as Deputy Assistant to the President for Economic Policy.  Bianchi has also served as a senior advisor to the Biden Institute at the University of Delaware, where she worked on a variety of economic policies and served as Chair of the Institute’s Policy Advisory Board.

“Bianchi has served in a number of private sector roles as well. In 2019, she joined Evercore ISI in the macroeconomic research group where she leads the U.S. public policy research.  She graduated magna cum laude from Harvard University in 1995 and has served on the Senior Advisory Committee at the Institute of Politics at Harvard University since 2004.  Bianchi and her husband live in Arlington, Virginia with their twelve-year-old daughter and ten-year-old son.

“Jayme White, Deputy United States Trade Representative

“Jayme White has spent two decades working to ensure American trade policy empowers American workers and promotes a sustainable environment. Mr. White grew up in Seattle, WA, where his family were union workers for Boeing. He went to Washington, DC to work for his hometown member of Congress in the House of Representatives, Representative Jim McDermott, who served on the Committee on Ways and Means, which has jurisdiction over international trade. Since then, he has played a role in nearly every major trade issue and trade legislation, over the last 20 years.

“Mr. White has served in the U.S. Senate since 2009, including as the chief trade advisor for the Senate Committee on Finance since 2014, under the leadership of Chairman Ron Wyden. During this tenure, White led efforts to level the playing field for American workers, through trade negotiations and agreements, and by reforming US trade laws to better respond to unfair foreign trade practices. In his role on the Finance Committee, he has long represented and advanced bipartisan US views to foreign trade leaders, and the outcomes of those efforts are evident in many trade agreements. Key provisions — especially enforceable measures on labor and the environment — found in the United States-Mexico-Canada Agreement (USMCA) are a result of his efforts.”

Both nominees reflect the focus that the Biden Administration has on making trade work for all, especially workers, and be a tool to build back better and help the U.S. address climate change and other environmental issues.

The Chairman of the Senate Finance Committee, Senator Ron Wyden of Oregon, and the USTR, Ambassador Katherine Tai, issued statements on the 16th strongly supporting the nominations of both and, in Amb. Tai’s case, looking forward to both nominees being part of the USTR team to move the Biden agenda forward. Both nominees have strong policy backgrounds and should be confirmed relatively easily. When these nominees are confirmed, the Biden Administration will be an important step closer to filling out its trade team.

There is a third Deputy USTR slot that remains open as well as the position of Chief Agriculture Negotiator. So more nominations should be forthcoming in the coming weeks or months. It is not clear whether either nominee is being considered for the Geneva slot as Permanent Representative to the World Trade Organization.

The press release from Senator Wyden and Ambassador Tai are embedded below.

Chairmans-News-_-Newsroom-_-The-United-States-Senate-Committee-on-Finance

Statement-from-Ambassador-Tai-on-Bianchi-White-nominations-_-United-States-Trade-Representative

U.S. Department of the Treasury Semi-Annual Report on Trading Partner Currency Practices — a change from the December 2020 Report

Today (April 16, 2021), the U.S. Department of the Treasury released its semi-annual report on trading partner currency practices. See U.S. Department of the Treasury Office of International Affairs, Report to Congress, Macroeconomic and
Foreign Exchange Policies of Major Trading Partners of the United States, April 2021, https://home.treasury.gov/system/files/206/April_2021_FX_Report_FINAL.pdf.

The press release from Treasury found three countries/territories to have problematic currency practices — Switzerland, Vietnam and Taiwan — but didn’t find any them to be currency manipulators. This constituted a change of position on Switzerland and Vietnam which had been found to be currency manipulators in the December 2020 report. All three countries are subject to increased scrutiny and interface with Treasury. A number of other countries remain on the monitoring list for currency practices with Mexico and Ireland being added to that list in this report. China was separately identified for transparency concerns. See U.S. Department of the Treasury Press Release, Treasury Releases Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States, April 16, 2021, https://home.treasury.gov/news/press-releases/jy0131. The press release is copied below and the April 2021 Report is embedded after that.

“WASHINGTON – The U.S. Department of the Treasury today delivered to Congress the semiannual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States. In this Report, Treasury reviewed and assessed the policies of 20 major U.S. trading partners during the four quarters through December 2020.

“The Report concluded that both Vietnam and Switzerland continue to meet all three criteria under the Trade Facilitation and Trade Enforcement Act of 2015 (the 2015 Act) during the period under review.  Additionally, the report finds that Taiwan met all three of the 2015 Act criteria for the period under review.  Treasury has conducted enhanced analysis of Vietnam, Switzerland, and Taiwan’s macroeconomic and foreign exchange policies, as reflected in the Report.  Treasury will continue its enhanced engagement with Vietnam and Switzerland, and Treasury will commence enhanced engagement with Taiwan.  This engagement includes urging the development of a plan with specific actions to address the underlying causes of currency undervaluation and external imbalances.

“Under the Omnibus Trade and Competitiveness Act of 1988 (the 1988 Act), Treasury has determined that there is insufficient evidence to make a finding that Vietnam, Switzerland, or Taiwan manipulates its exchange rate for either of the purposes referenced in the 1988 Act.  Nevertheless, consistent with the 1988 Act, Treasury considers that its continued enhanced engagements with Switzerland and Vietnam, as well as a more thorough assessment of developments in the global economy as a result of the COVID-19 pandemic, will enable Treasury to better determine whether either of these economies intervened in currency markets in 2020 to prevent effective balance of payments adjustment or gain an unfair competitive advantage in trade.  For Taiwan, Treasury will initiate enhanced engagement in accordance with the 2015 Act and expects that engagement will help Treasury to make the determination required under the 1988 Act for the period of review. 

“No other major U.S. trading partner met the relevant 1988 or 2015 legislative criteria for currency manipulation or enhanced analysis during the review period.  Treasury urged China to improve transparency regarding its foreign exchange intervention activities, the policy objectives of its exchange rate management regime, the relationship between the central bank and foreign exchange activities of the state-owned banks, and its activities in the offshore RMB market. 

“’Treasury is working tirelessly to address efforts by foreign economies to artificially manipulate their currency values that put American workers at an unfair disadvantage,’ Secretary of the Treasury Janet L. Yellen said today.

“Treasury found that eleven economies warrant placement on Treasury’s ‘Monitoring List’ of major trading partners that merit close attention to their currency practices: China, Japan, Korea, Germany, Ireland, Italy, India, Malaysia, Singapore, Thailand, and Mexico.  All except Ireland and Mexico were included in the December 2020 Report.

“Today’s Report is submitted to Congress pursuant to the Omnibus Trade and Competitiveness Act of 1988, 22 U.S.C. § 5305, and Section 701 of the Trade Facilitation and Trade Enforcement Act of 2015, 19 U.S.C. § 4421.”

April_2021_FX_Report_FINAL

In prior posts, I have reviewed how Vietnam’s currency practices had resulted in a 301 investigation initiated by USTR (one of two, the other dealing with using illegally harvested timber) with a report issued in mid-January 2021, in the Commerce Department preliminarily finding currency practices of Vietnam were countervailable and in the December 2020 Treasury finding that Vietnam was manipulating its currency. See October 12, 2020, U.S. commences two investigations into Vietnam under Sec. 301 of the Trade Act of 1974, as amended – on currency and on use of illegally harvested timber, https://currentthoughtsontrade.com/2020/10/12/u-s-commences-two-investigations-into-vietnam-under-sec-301-of-the-trade-act-of-1974-as-amended-on-currency-and-on-use-of-illegally-harvested-timber/; December 21, 2020, Vietnam and Switzerland found to be “currency manipulators” in latest U.S. Treasury semiannual report, https://currentthoughtsontrade.com/2020/12/21/vietnam-and-switzerland-found-to-be-currency-manipulators-in-latest-u-s-treasury-semiannual-report/; January 15, 2021, USTR releases report from Section 301 investigation on Vietnam’s currency valuation, https://currentthoughtsontrade.com/2021/01/15/ustr-releases-report-from-section-301-investigation-on-vietnams-currency-valuation/.

The current Treasury report (pages 3-4) flags the elements examined and what is different in this report versus the prior one for Switzerland and Vietnam.

“In this Report, Treasury has reviewed 20 major U.S. trading partners with bilateral goods trade with the United States of at least $40 billion annually against the thresholds Treasury has established for the three criteria in the 2015 Act:

“(1) Persistent, one-sided intervention in the foreign exchange market occurs when net purchases of foreign currency are conducted repeatedly, in at least 6 out of 12 months, and these net purchases total at least 2% of an economy’s gross domestic product (GDP) over a 12-month period.2

“(2) A material current account surplus is one that is at least 2% of GDP over a 12-month period.

“(3) A significant bilateral trade surplus with the United States is one that is at least $20 billion over a 12-month period.3

“In accordance with the 1988 Act, Treasury has also evaluated in this Report whether trading partners have manipulated the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.

“Because the standards and criteria in the 1988 Act and the 2015 Act are distinct, a trading partner could be found to meet the standards identified in one of the statutes without necessarily being found to meet the standards identified in the other. Section 2 provides further discussion of the distinctions between the 1988 Act and the 2015 Act.

Treasury Conclusions Related to the 2015 Act

“Vietnam again exceeded the thresholds for all three criteria under the 2015 Act over the four quarters through December 2020. Treasury has updated its enhanced analysis of Vietnam in this Report. In early 2021, Treasury commenced enhanced bilateral engagement with Vietnam and is working with the Vietnamese authorities to develop a plan with specific actions to address the underlying causes of Vietnam’s currency undervaluation.
Switzerland again exceeded the thresholds for all three criteria under the 2015 Act over the four quarters through December 2020. Treasury has updated its enhanced analysis of Switzerland in this report. In early 2021, Treasury commenced enhanced bilateral engagement with Switzerland and is discussing with the Swiss authorities options to address the underlying causes of Switzerland’s external imbalances.

“Taiwan exceeded the thresholds for all three criteria under the 2015 Act over the four quarters through December 2020. Treasury has conducted enhanced analysis of Taiwan in this Report and will also commence enhanced bilateral engagement with Taiwan in accordance with the 2015 Act. The bilateral engagement will include urging the development of a plan with specific actions to address the underlying causes of Taiwan’s currency undervaluation.

“Taiwan has maintained a tightly managed floating exchange rate regime since the late 1970s. Although Taiwan has liberalized capital controls in recent decades, the central bank continues to actively intervene in the foreign exchange market. Over many years, these practices have resulted in a structurally undervalued exchange rate that has failed to adjust in the face of Taiwan’s persistently large current account surpluses. Although the New Taiwan Dollar (TWD) has appreciated modestly in nominal and real effective exchange rate terms over the past decade, the authorities’ foreign exchange purchases and other, less formal exchange rate management practices have slowed the pace and scale of external adjustment, preventing the TWD from fully reflecting macroeconomic fundamentals.

Treasury Conclusions Related to the 1988 Act

“The 1988 Act requires Treasury to consider whether any economy manipulates the rate of exchange between its currency and the U.S. dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade. In the December 2020 Report, Treasury found that Switzerland and Vietnam each met the standards for currency manipulation for the four quarters through June 2020. For the four quarters ending in 2020, based on initial enhanced engagements with Vietnam and Switzerland under the 2015 Act, further analysis, and data, Treasury has determined that there is insufficient evidence to make a finding that either economy (or any other economy covered in the Report) manipulates its exchange rate for either of the purposes referenced in the 1988 Act. Nevertheless, consistent with the 1988 Act, Treasury considers that its continued enhanced engagements with Switzerland and Vietnam, as well as a more thorough assessment of developments in the global economy as a result of the COVID-19 pandemic, will enable Treasury to better determine whether either of these economies intervened in currency markets in 2020 to prevent effective balance of payments adjustment or gain an unfair competitive advantage in trade. For Taiwan, Treasury will initiate enhanced engagement in accordance with the 2015 Act and expects that engagement will help Treasury to make the determination required under the 1988 Act for the period of review. Meaningful actions to address policy distortions and increase data transparency will be critical for making progress under these engagements. Treasury will also continue to consider whether economies that do not trigger enhanced engagement manipulate their currencies for the purposes referenced in the 1988 Act

“2 The Report covers data from the 12-month period ending in December 2020. These quantitative thresholds for the scale and persistence of intervention are considered sufficient on their own to meet this criterion. Other patterns of intervention, with lesser amounts or less frequent interventions, might also meet this criterion depending on the circumstances of the intervention.

“3 Treasury focuses in this Report on trade in goods only, as it has done in past Reports. The United States has a surplus in services trade with many economies in this Report, including China, Japan, Korea, Singapore, and Switzerland, and to a lesser extent, Taiwan and Vietnam. Taking into account services trade would reduce the bilateral trade surplus of these economies with the United States.”

The Trump Administration did not impose tariffs on Vietnam following the release of the Section 301 report in January leaving the decision on what action to take to the Biden Administration. President Biden’s U.S. Trade Representative, Ambassador Katherine Tai, met virtually with Vietnam Minister of Industry and Trade Tran Tuan Anh on April 1, 2021 and reviewed concerns re China’s currency practice as reviewed in the 301 investigation as well as illegal logging and other issues. See USTR Press Release, Readout of Ambassador Katherine Tai’s virtual meeting with Vietnam Minister of Industry and Trade Tran Tuan Anh. April 1, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/april/readout-ambassador-katherine-tais-virtual-meeting-vietnam-minister-industry-and-trade-tran-tuan-anh (“Ambassador Tai highlighted the Biden Administration’s concerns about currency practices covered in the ongoing Section 301 investigation.  The ministers also discussed U.S. concerns on illegal timber practices, digital trade and agriculture.”). Thus, it is likely that the U.S. and Vietnam will work out bilaterally U.S. concerns on Vietnam’s currency versus imposing additional duties following the Section 301 report, at least at this time.

The first Department of Commerce investigation to look at currency as a countervailable subsidy for Vietnam made a preliminary affirmative determination. The final determination is not due until late May. See Department of Commerce, International Trade Administration, C–552–829, Passenger Vehicle and Light Truck Tires From the Socialist Republic of Vietnam: Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Determination With Final Antidumping Duty Determination, 85 FR 71,607 (Nov. 10, 2020); Department of Commerce, International Trade Administration, A–552–828, Passenger Vehicle and Light Truck Tires From the Socialist Republic of Vietnam: Preliminary Affirmative Determination of Sales at Less Than Fair Value, Postponement of Final Determination, and Extension of Provisional Measures, 86 FR 504 (January 6, 2021)(final due within 135 days of the preliminary Federal Register). It is unclear what, if any, modification will be made to the countervailability of Vietnam’s currency in the context of the ongoing investigation based on the change in view of Vietnam by Treasury.

Conclusion

Currency misalignment whether intentional or not can have significant effects on trade flows. The U.S. has historically been quite concerned about misaligned currencies although Treasury historically preferred to work with other countries than label them currency manipulators. Early signals from the Biden Administration are that Treasury is reverting to a preference to work bilaterally with countries who actively intervene in currency markets and have an undervalued currency and large trade surplus in goods with the U.S. If so, Treasury will, as it did in the current report, find “insufficient evidence” for countries who satisfy the factual criteria under U.S. law to conclude such actions were for the purpose “of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.” While trading partners will undoubtedly prefer the Biden Administration’s apparent approach, the approach will be problematic for many U.S. industries and their workers and remove leverage to get correction of foreign government practices.

USTR speech on trade and the environment

Ambassador Katherine Tai spoke on April 15, 2021 at an event sponsored by the Center for American Progress (“CAP”). Her speech provided a glimpse into the Biden Administration’s expectation for the role trade can play in addressing climate change.

While the speech does not include any reference to a carbon tax or border adjustment mechanism to help address carbon leakage or call for a resumption of the Environmental Goods Agreement negotiations, it nonetheless provides an identification of some of the issues of pressing concern including illegal logging, over fishing (tied in large part to fisheries subsidies), and pollution of oceans (including massive amounts of plastic dumped in the oceans), air and water.

Amb. Tai’s speech also reviews the active engagement by the Biden Administration in pushing for greater ambition among trading partners in reducing emissions, including next weeks Summit on Climate. Special Envoy for Climate John Kerry has been meeting with world leaders ahead of the Summit to seek more aggressive action by major emitters. For the United States, legislation enacted to date and being pursued by the Biden Administration has the ability to make major contributions to reduced emissions by the United States.

Amb. Tai reviews the historic failure to include strong environmental protections in trade agreements and the need to change that going forward as well as reflecting on progress in the United States over the last fifteen years in addressing environmental issues in trade agreements. The world needs to do better. “Going forward, trade has a role to play in discouraging the race to the bottom and incentivizing a race to the top. We must conserve the resources we do have – and work with our trading partners to do the same – to both mitigate and adapt to climate pressures.” See USTR, Remarks from Ambassador Katherine Tai on Trade Policy, the Environment and Climate Change, April 15, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/april/remarks-ambassador-katherine-tai-trade-policy-environment-and-climate-change. Ambassador Tai’s full speech is copied below.

“Thank you, John, for that very kind introduction. You have worked tirelessly to protect the environment and stop climate change throughout your career. 

“Your leadership, and the great work of so many brilliant leaders here at the Center for American Progress, has fundamentally changed how our country, and the world thinks about these issues. 

“We owe you a debt of gratitude, and I know that we can count on your vocal advocacy in the days ahead.

“It’s an honor to join you today and lay out my vision for using trade policy to address one of the biggest challenges we face.  

“The science indicates that, the window of opportunity to prevent a catastrophic environmental chain reaction on our planet is closing fast. And the United States must be a leader in the collective effort to work toward a global solution. 

“From his first days in office, President Biden has taken action to restore American leadership. He and Vice President Harris have made clear that protecting our environment and addressing climate change are core pillars of the Administration’s Build Back Better agenda. 

“The President immediately rejoined the Paris Agreement and signed a sweeping Executive Order to begin tackling the climate crisis. The President made it abundantly clear that we will take a ‘whole-of-government’ approach to address this challenge – and that we’re going to re-engage the world from a position of strength. 

“As we do so, we will be mindful of our commitment to environmental justice in addressing climate change, recognizing that this collective challenge requires a collective solution. What we do here at home must be reflected in what we do abroad. Our domestic efforts cannot lead to the exportation of polluting industries to countries with lower standards.

“The historic investments in the American Rescue Plan are already helping to stabilize the economy and bring the pandemic to an end. The American Jobs Plan is the next step in our effort to reimagine and rebuild a new economy. 

“It will invest in our infrastructure, create good paying jobs, and position the United States to out-compete any other nation.  The President’s plan recognizes the critical nexus between these investments and the climate crisis, and it would support the innovation and technological breakthroughs that will make our country the leader in clean energy technology and jobs.

“These plans are only one part of our strategy. 

“Next week, the President will welcome 40 world leaders to a Summit on Climate to underscore the urgency – and economic benefits – of taking collective action.  The United States will also announce an ambitious 2030 emissions target as our new Nationally Determined Contribution under the Paris Agreement.  

“President Biden has urged leaders to use the Summit as an opportunity to announce even bolder ambitions.  Comprehensive action is the only way forward, and this challenge must be at the center of U.S. foreign policy, national security, and economic policy. 

“USTR sits at the intersection of all three areas, and I am honored to lead this agency and the dedicated public servants who will answer the call.  

“During my confirmation hearing, I made clear that protecting our planet would be a top priority. For too long, we believed that trade liberalization would lead to a gradual improvement in environmental protection as countries grew wealthier from increased trade flows. 

“But the reality is that the system itself creates an incentive to compete by maintaining lower standards. Or worse yet, by lowering those standards even further. 

“Many companies make sourcing decisions based on these artificially low costs, creating pressure on competing countries to ask if they, too, should suppress environmental protection to attract investment. 

“This is what people mean when they say the rules of trade promote a race to the bottom. 

“Fortunately, the investing community is demanding more information about companies’ climate and other environmental risks. CAP knows this issue well, having hosted Acting SEC Chair Allison Herren Lee just last month, as the Commission steps up its work on corporate disclosures around environmental and social governance. 

“Even as investors take a greater interest in companies’ environmental risk exposure, the multilateral trading system has no rules to address the corporate incentive to participate in the race to the bottom. Rather, the environmental protection measures of WTO members are exposed to challenge. 

“While countries can avail themselves of what amounts to an affirmative defense, that defense has proven difficult to invoke successfully. This is part of the reason why, today, the WTO is considered by many as an institution that not only has no solutions to offer on environmental concerns, but is part of the problem. 

“For many decades, efforts to integrate environmental concerns through trade agreements were largely dismissed as wrongheaded, bleeding heart attempts to incorporate “social issues” in the trading system. According to this line of thinking, environmental issues are either irrelevant, or tangentially related, to economics or trade.  

“The view that environmental issues are not an inherent part of trade ignores the reality that the existing rules of globalization incentivize downward pressure on environmental protection. This puts countries with higher environmental standards at a competitive disadvantage. That is not a social issue: it is an economic incentive. 

“It doesn’t have to be this way. 

“For nearly fifteen years, the United States has enjoyed bipartisan support for including basic, enforceable labor and environmental rules in bilateral and regional trade agreements. This bipartisan support exists precisely because these issues are economic, not social. 

“The goal is to ensure that we and our trading partners are engaged in fair competition that does not suppress environmental protection. The United States has been, and remains, the leader in rewriting trade rules so that they move us toward this model of fair competition. 

“USMCA is the most recent example of our own evolution. The updated agreement now includes the most comprehensive environmental standards of any U.S. trade agreement – and, I would argue, any trade agreement. Critical environmental provisions reflected in the USMCA include strong rules to address:

“•    wildlife trafficking, 
“•    illegal logging and fishing, 
“•    fisheries subsidies 
“•    marine litter, and
“•    air and water pollution

“I am all too aware that however laudable the rules, they must actually be enforced. 

“Environmental groups have complained for years that chronic lack of enforcement of these rules fundamentally undermines the effort. They are right. 

“I am committed to enforcing the rules of USMCA and our other agreements to ensure not only that we follow through on our promises to protect the planet, but that we protect workers against this kind of unfair competition. 

“And while I think the United States, Mexico, and Canada should be proud of USMCA’s progress, I know that the agreement does not go nearly far enough in addressing the economic costs of our environmental challenges through trade.  The most glaring omission is the failure to explicitly acknowledge climate change.

“Going forward, trade has a role to play in discouraging the race to the bottom and incentivizing a race to the top. We must conserve the resources we do have – and work with our trading partners to do the same – to both mitigate and adapt to climate pressures. 

“Based on years of experience pushing forward with environment rules in trade, there are two practical issues that immediately come to mind: putting a stop to illegal logging, and addressing overfishing that is destroying the marine ecosystem. 

“We have made some progress on illegal logging and the associated trade in illegally harvested timber products in previous trade agreements and through various regional dialogues. We can do more. 

“The forests are our planet’s lungs, and we should use trade policies and trade enforcement actions to protect them. But we have to be mindful that we will only truly address the global scale of this problem through global rules. 

“We have also started to address fisheries and our oceans in our trade agreements, whether through disciplines on the massive subsidies that promote overfishing, or through provisions that address the millions of tons of plastic and other forms of pollution that are destroying the marine environment. But again, we will only truly address the global scale of the problem through global rules. This is why the fisheries negotiations at the WTO are so critical.

“Beyond disciplines that discourage harmful behaviors, we can also create rules that promote positive ones. 

“For climate mitigation, developing innovative environmental technologies, goods, and services and cultivating strategic international supply chains for trade will be key.  From clean energy, to low-emission vehicles, and other technologies, reliable access to these goods and services will be essential for our transition to net zero by 2050. 

“That’s why I was so committed to helping resolve a big trade dispute between SK Innovation and LG Energy Solutions, two South Korean companies who make electric batteries here in the United States. The settlement, reached last weekend after significant engagement with a range of stakeholders, was a big win for American workers, the environment, and our competitive future.

“We need a strong, diversified, and resilient supply chain of electric vehicle batteries in America to meet the growing global demand and to expand U.S. manufacturing of clean energy vehicles. This settlement puts the country in a stronger position to drive innovation and growth of clean energy technology.
 
“As we consider strategically devised supply chains and trade in environmental goods, we must also be mindful that using clean energy throughout the supply chain is an essential, and perhaps underappreciated, element of delivering on our commitment to address the full range of practices that compromise the climate.

“For too long, the traditional trade community has resisted the view that trade policy is a legitimate tool in helping to solve the climate crisis. As we have so often seen with labor issues, there is a certain refuge in arguing that this is all a question of domestic policy, and that we need not tackle the daunting task of building international consensus around new rules. 

“But that dated line of thinking only perpetuates the chasm that exists between the lived experiences – and expectations – of real people on the one hand, and trade experts on the other. My job is to bridge that chasm and push for trade reforms that translate into meaningful change in the lives of farmers, ranchers, factory workers, parents, children – not just in the United States, but around the world.

“Many of these people – and many of our businesses – realize that tackling climate change and our future prosperity are connected. 

“For example, climate-friendly and sustainable agricultural production is essential to meeting our climate and sustainability goals. Our farmers and ranchers can lead the world with innovative carbon conservation practices. Secretary Vilsack has proposed ambitious ideas, including expanding the use of cover crops and making carbon capture a mainstream conservation practice. I am eager to work with him to help make these practices the new global standard. 

“I am also fortunate to be working with a strong Biden-Harris team of visionary leaders charting this course on climate change. Special Envoy Kerry, Gina McCarthy, the President’s National Climate Advisor, EPA Administrator Regan, Energy Secretary Granholm, Commerce Secretary Raimondo – and many more dedicated public servants across the administration are committed to making a difference. 

“CAP research has highlighted many of the ideas these colleagues have brought to national climate policy from innovative state governments– North Carolina, Michigan, Connecticut, and more.

“But as I close my remarks I cannot forget arguably the most important voice in this effort. You. 

“From day one, I made it clear that we are not going to do business as usual.  I’ve challenged my team to be thoughtful and innovative in building trusted relationships with stakeholders who haven’t had an established seat at the table or been at the table at all.

“We want a robust dialogue.  We expect justice and equity to be on everyone’s agenda, and we welcome creative solutions to the massive challenges we face with the environment, with climate change, and trade as a whole.  

“Your voice, your perspectives, your priorities, and your values matter. We need to hear from you. We need to lean on your expertise, and we want your ideas.  

“By engaging new – and all too frequently silenced – voices and encouraging fresh, collaborative thinking, we can forge consensus and find solutions that we never knew existed.  Together, we can foster U.S. innovation and the production of new technology, while promoting resilient renewable energy supply chains.

“This work has the potential to unlock new opportunities for U.S. companies who can help reduce emissions and adapt to climate change.

“Our bold, collective action can create enormous new economic opportunities and good paying jobs for all Americans while building the industries of the future.  And we will not overlook our obligation to take on centuries of discrimination, oppression and bigotry. Racial justice and equity must be central to the conversation. 

“The intersection of environment, climate change, labor, and trade are key to our collective ability to compete, innovate, and create livable wage jobs that will provide hope and opportunity for future generations and underserved communities.  This is why I believe that trade policy is an essential and strategic part of the solution to these huge challenges.  

“I look forward to working with all of you in the days ahead to meet the moment.  I’m ready, and I hope you are too.

“Thank you.”

Conclusion

The Biden Administration is making a major effort to improve the U.S. environmental performance and help lead the global effort to save the planet from global warming. The Administration approaches major issues from a “whole of government” view point. The U.S. Trade Representative yesterday presented a glimpse of how the U.S. will seek to use trade agreements and trade negotiations to support environmental sustainability.

Having watched GATT Contracting Parties and the business community dismiss the need to address labor and environmental aspects of trade during and after the Uruguay Round, I can only say “it is about time for meaningful action”. Trade can and must be examined through an environmental sustainability lens. The world having let climate change spin out of control has a limited time to make the changes needed to ensure a sustainable environment for future generations. It will take a whole-of-the-world focus and engagement to make a difference.