The WTO has served as ‘constructed focal point’ during the pandemic by helping countries coordinate their policy responses.
Commentators and academics have regularly drawn attention to the importance of the World Trade Organisation (WTO) in regulating trade and reducing barriers. However, the role that the institution has played — and continues to play — in reducing the economic shock of the COVID-19 pandemic, and thereby mitigating its adverse impacts, merits more attention. The WTO has helped in absorbing this blow in a three-pronged manner: First, by helping members coordinate their trade policies; second, by ensuring transparency with regard to pandemic-related measures; and lastly, by monitoring members’ trade responses to the pandemic.
The COVID-19 pandemic dealt a paradoxical blow to the global trade regime, by disrupting supply chains and simultaneously generating greater demand for essential products. In response, countries have restricted the exports of commodities including medicines, pharmaceutical products, diagnostics, therapeutics, and food products, to address critical shortages at the national level. By 23 April 2020, 80 countries and separate customs territories had introduced export bans or restrictions, and more countries were following suit. Export restrictions were primarily on personal protective gear, pharmaceuticals, foodstuff, medical devices, and COVID-19 test kits.
While such restrictions are generally not permitted under WTO law, countries may implement them in certain situations. Most WTO members took the defence of Article XI: 2(a) of the General Agreement on Tariffs and Trade 1994 (GATT), which allows members to temporarily apply export restrictions “to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party,” and of Article XX(b) (General Exceptions) of the GATT to “protect human, animal or plant life or health.” Some members also resorted to Article XXI (Security Exceptions) of the GATT.
However, despite their legal validity, these measures, often referred to as ‘beggar-thy-neighbour’ policies, resulted in severe shortages of food and pharmaceuticals in import-dependant countries. The World Health Organisation (WHO) too was quick to point out that shortage of personal protective equipment was endangering health workers worldwide.
As the primary forum for policy coordination and international cooperation on international trade matters, the WTO held a General Council meeting on 15 May 2020, where countries met virtually and discussed their “immediate responses to COVID-19 as well as long-term strategies for addressing the adverse impact of the crisis on national economic and development prospects, and on the global economy as a whole.” Countries noted the importance of keeping markets open in order to “facilitate the flow of essential medical goods as well as agricultural and food products.” While recognising their needs, WTO members highlighted the importance of keeping such measures “temporary, targeted, proportional and transparent” and of keeping supply chains of essential goods open.
The special meeting of the WTO’s Committee on Agriculture also served as a forum for food importing countries to pose questions to food exporting countries about their export restrictions. Food exporting countries, on the other hand, voiced their concerns about farm subsidies granted since the start of the pandemic, which “could prevent their own producers from competing fairly on markets for food and farm goods.” In its report, the WTO too stressed on the need for international cooperation to overcome the challenges of the pandemic. Many WTO members then submitted their proposals and statements to the WTO reiterating their commitment to ensuring the free flow of trade in essential goods, agriculture and food products. Members, including the large exporters of medical goods (India, US, and Germany) subsequently lifted a number of export sanctions to ensure the free flow of essential goods.
Similarly, the WTO also has been serving as a forum for coordinating policies concerning intellectual property rights (IPRs) to enable better access to vaccines, and countries have refrained from unilaterally suspending IP rights in their respective jurisdictions in the meantime. In furtherance of a proposal submitted by India and South Africa, countries are debating the merits of waiving the implementation or application of sections 1 (copyright), 4 (industry designs), 5 (patents) and 7 (undisclosed information) of Part II of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) or the enforcement of these Sections under Part III of the TRIPS Agreement in relation to prevention, containment or treatment of COVID-19, for a specified period.
These meetings at the WTO have helped members come together and discuss their trade responses to the pandemic, and in turn coordinate their policies to provide secure and predictable access to essential goods. Serving as a ‘constructed focal point,’ the WTO continues to facilitate communication among members during this crisis, and “reduces the transaction costs of policy coordination.” Members are thus able to coordinate their trade responses to the pandemic and mitigate the adverse impact of export restrictions and nationalistic policies, especially towards the most vulnerable economies.
Another important function performed by the WTO during the crisis has been that of maintaining transparency. Countries who are members of the WTO are required to immediately notify any quantitative restriction (QRs) like export restrictions implemented by them to the WTO pursuant to the 2012 “Decision on Notification Procedures for Quantitative Restrictions” (QR decision). However, given the extraordinary nature of the pandemic, a large number of countries did not immediately notify their QR measures. By April 2020, only 13 WTO members (39 if EU member states are counted individually) had notified new measures under the QR decision and three had notified export restrictions on foodstuffs pursuant to Article 12 of the Agreement on Agriculture.
To overcome the lack of transparency, the WTO compiled a list of COVID-19 related trade measures concerning goods, services, and IPRs that were implemented by countries, and uploaded it to its website for stakeholders to access. Additionally, the WTO also maintained an informal situation report in order “to provide transparency with respect to support measures taken in the context of the COVID-19 crisis.” It is a list of pandemic-related support measures implemented by members, which include state aid and other forms of government subsidies. The list has over 600 entries and includes measures like the aid scheme to support small and medium-sized enterprises (SMEs) in the agricultural, forestry, fishery and aquaculture sectors (Italy); the Pradhan Mantri Garib Kalyan Yojana (India); a moratorium on default interest on late payments of customs duties (Switzerland), among others.
In light of the highly interdependent nature of global supply chains, the information made available by the institution — especially in the initial stages of the pandemic while procuring essential goods that were scarce — helped members cope with the high degree of uncertainty resulting from constantly fluctuating trade policies of other countries.
Lastly, WTO members are able to collectively monitor the policy responses of countries through the Trade Policy Review (TPR) Mechanism of the WTO. This mechanism is an instrument “affording opportunities for a process of collective evaluation of the trade policies and practices of individual members.” While this is not a pandemic-specific instrument, its objective “is to contribute to improved adherence by all members to rules, disciplines and commitments made under the Multilateral Trade Agreements…” A member’s “weight” in the multilateral trading system “as defined by the member’s share of world trade in goods and services” determines the frequency of such a review. Depending on this “weight,” reviews occur every two years or for years or six years. In addition to its usual utility, this mechanism has also been used to monitor members’ trade responses to the pandemic. Most recently, India had its TPR on the 6 and 8 of January 2021. This review not only discussed India’s policies over the past four years but also India’s pandemic-response policies including the ‘Atmanirbhar Bharat Abhiyan,’ tariff measures, deferred payments in the electricity sector, and deferred the payment of various port charges.
China, Argentina, Singapore, Korea, and Russia, among others, also have their scheduled TPR this year, where other WTO members can pose questions on their trade policies including any pandemic specific relief measures. The TPR mechanism thus helps collectively monitor members’ policies and ensure that the ongoing pandemic is not used as a façade to implement protectionist or trade restrictive measures which would otherwise run afoul of countries’ trade obligations.
The above examples thus show that the WTO has served as ‘constructed focal point’ during the pandemic by helping countries coordinate their policy responses and reducing the transaction cost of such coordination, maintained transparency, and enabled countries to collectively monitor policy responses. While countries can also coordinate their trade policies bilaterally or within smaller groupings such as the G20 or through Free Trade Agreement forums, the large membership of the WTO provides a platform for 164 countries to come together and coordinate their trade policies and discuss their respective responses. It is, therefore, evident that despite the many challenges faced by the WTO, including the absence of a convincing narrative, the organisation has proven to be resilient — tackling unprecedented global challenges even when it faces internal turmoil — and necessary.
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Urvi Tembey is an international trade and investment lawyer.Read More +