DEPUTY DIRECTOR-GENERAL ALAN WM. WOLFF

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International Trade Committee House of Commons
London (virtual meeting)

One aspect of the post-BREXIT era for Britain that is certain is that the United Kingdom still has its original membership in the WTO with all of the consequent rights and obligations. 

The WTO is the only international organization providing enforceable commitments designed to keep markets open to trade and to prevent discrimination.  It is a forum for considering collective trade policy initiatives, for reviewing national measures and for negotiating trade agreements.  It is a place for settling disputes about the consistency of trade measures with the rules of the multilateral trading system. 

What does WTO Membership mean for the UK?  Some key points follow:

Equality.  All 164 Members of the WTO have equal rights.  A difference now for the UK post-BREXIT is that, not being within the EU, the UK again has its own voice.  It can take the floor, it can speak, it can offer proposals.  

The rule of law.  98% of world trade operates within the rules of the WTO.  Nevertheless, there can be and are departures from full application of the rules.  What the press calls a trade war gains headlines, and dispute settlement as of last December no longer has the structure originally contemplated, but that does not mean that the system is in tatters.  It is still functioning well.   That said, it does not necessarily fully cover all contingencies, and this is true of the current pandemic.

Nondiscrimination and national treatment.  Other than in the case of customs unions and regional and bilateral free trade agreements, British goods must be granted treatment no worse than those sourced in any other country at foreign borders.  For purposes of internal taxes and regulations, goods must be accorded national treatment once they enter any other Member’s territory.  

Certainty.  With limited exceptions, maximum tariffs for almost all world trade are contractually bound, standards must conform to international standards, and other trade restrictions are largely regulated.   Businesses can rely on international trade largely remaining open and that most market access commitments on the whole will be lived up to.  That said, the rules have not prevented, in fact they in various circumstances permit, export restrictions being put into place in the face of the pandemic. 

Transparency.  In order for governments and businesses to plan, there needs to be current information on what trade measures have been introduced by any Member.  The WTO has notification requirements.  These notifications have received special emphasis during the pandemic.  Other notifications, such as for national standards, for example, are notified in draft, to allow for comment, and concerns can be voiced. This process continues undeterred by COVID-19.

Balance.  In order to give countries the flexibility to open their economies to international trade, the global trading system is designed to provide Members with the flexibility to invoke temporary remedies against dumping and subsidies.  In instances of large scale injurious imports, broader temporary actions are to be permitted.

Dispute settlement.  The system works because WTO Members very largely choose voluntarily to live within the rules.  If they do not, and will not comply, dispute settlement panels can render an opinion on whether the rules have been broken by any measure complained of.  This process is time-consuming, and despite the fact that currently there is no uniform appellate mechanism in place, it still works but is a last resort.  As noted, as with any system of laws, compliance relies mainly on Members’ choosing to live within the rules.

Sovereignty.  Compliance is voluntary.  The level of compliance is high because countries wish to give their companies certainty with respect to trade.  However, the WTO cannot compel any member to take any action.  A Member may face retaliation for not living up to its obligations, but the WTO is not a supra-national government.  National sovereignty is preserved.

Sustainability.  While the WTO rules leave environmental regulation solely in the hands of Members, this is not to be used as an excuse for granting protection.  Members are increasingly interested in negotiating accords designed to protect the planet.  The first of these potential agreements is the creation of agreed disciplines on fisheries subsidies.

Multilateralism.  The pandemic is not readily susceptible to being dealt with through bilateral agreements.  Nor can economic recovery be pursued effectively in a less than global manner.  There is no alternative to cooperation through the WTO. 

What is the WTO doing in reaction to the pandemic?

  • The WTO has asked Members for notifications of trade measures, both restricting and liberalizing.
  • It is seeking to keep Members and businesses currently informed by publishing what it finds.
  • It has provided a trade forecast for 2020 that predicts that there will be a steep drop-off of trade, with a likely recovery in 2021.

There is, of course, much uncertainty.  There are now and will continue to be second waves of the virus; no one knows what the impact will be.  Not all countries can or will invent or produce vaccines and pharmaceutical remedies.  The problems caused by the absence of a coordinated response to the virus may prove to be a more difficult challenge later this year and next year than even the problems just experienced.

Global value chains are not going to be as robust as they were before the pandemic.  The age of just-in-time delivery from distant places is unlikely to be just the same for a long time to come.  Trade finance will not recover fully for years.

Before the pandemic, it was a selling point of the WTO/GATT that it allowed, for export restrictions, broad policy space for national actions.  However, uncoordinated responses can be particularly damaging to global trade where events cause many countries to take trade-restricting measures on the same range of goods at the same time. 

In response to the crisis, mid-level countries — Singapore, New Zealand, Canada, Switzerland and Korea — have tabled initiatives (copies attached).  They have outlined a policy direction for greater international cooperation and suggested specific actions that WTO Members should consider taking in response to the pandemic.

Members decide what the WTO will take up and how matters will be disposed of.  There is no executive function such as the UK government possesses for organizing its business.  The system relies on COVID-19 related initiatives being proposed by Members for consideration by all Members.  This Committee should examine the initiatives recently tabled by Canada (with respect to maintaining undistorted agricultural trade), Korea (a detailed menu of actions and pledges, including the provision of services), Singapore and New Zealand (with provisions on logistics), and Switzerland (general direction of trade policies during the pandemic).  Each of these initiatives is open for signature by other Members and has a number of signatories.

How healthy is the WTO? 

All, including the G20 leaders, want to see improvements made in the system.  Before mentioning the areas for potential action, it is worth keeping some perspective.  The multilateral trading system has served the world economy remarkably well over its 70-year history, as has the WTO during it 25-year life.  Global incomes have risen dramatically on average and the number of those living in poverty has declined sharply.  More open trade has played a substantial role in this success story.

There is nevertheless much criticism of the WTO.  There has not been a successful comprehensive major round of trade negotiations since the Uruguay Round creating the WTO finished in 1993.  As an imperfect analogy, this is a bit like criticizing the Church of England for not adding a new book to the Bible since the Church’s founding.  The existing rule book deserves credit, without a sole focus on areas for improvement.  Much attention has been given to the fact that the Appellate Body, part of the scheme for WTO dispute settlement, was put out of business this last December.  It was called by too many the “jewel in the crown”, to the exclusion of considering that what was most important was the crown (the WTO), not just the jewel.  That point ought to be well understood in this land.

If Members pull together and respond to the pandemic, much of the criticism will erode.  The challenges are not over.  There are and will be second waves of infection, and we do not yet know their seriousness.  There will be a need for broad availability of vaccines when they are invented, the timing of which is unknown.  Economic recovery may be all too slow.  And after surviving the pandemic, the world will still need to consider improvements to be made in the WTO, as this was identified as a priority by the G20 before COVID-19 struck.

Were the WTO in the care of the National Health Service, the latter would perhaps issue a caution, to keep a watch on the WTO’s health, but our multilateral institution is not ripe for hospitalization, much less intensive care.  A healthy diet and exercise, meeting current challenges, that is the prescription that should be written.

 

What should happen now at the WTO ?

Given the strains on the trading system caused by the pandemic, both with respect to health and national economies everywhere, international cooperative action is necessary.  One way to proceed would be to build on the initiatives that have already been offered and to maximize the scope of consensus with respect to subjects to be covered.

To frame today’s discussion for essential collective actions, the following four questions deserve to be answered:

  • First: in the face of the pandemic, is the current level of policy space — the scope for unconstrained trade-restrictive national actions — appropriate, or should it be modified?

 Possibilities include:

  • considering the effect on others of applying export restrictions, as exists in the WTO Agreement on Agriculture for agricultural products,
  • providing prior notice,
  • engaging in timely consultations,
  • giving guidance as to the use of short supply export restrictions,
  • including in any restrictions a sunset clause and,
  • providing for a roll-back of current trade restrictions.
  • giving multilaterally agreed guidance for the sharing of scarce medical supplies, including vaccines,
  • suspending or eliminating tariffs on pharmaceuticals, medical equipment and medical supplies, and
  • Making sure that regulatory practices, standards and conformity assessments fit exigent needs.
  • Second: Is there anything trade ministers can do acting collectively to aid in the much-needed economic recovery?
    • Could there be a broad tariff reduction and elimination exercise, with international financial institutions and donor countries working to find ways to replace lost customs revenues for the least and lesser developed countries?
    • Can implementation of the Trade Facilitation Agreement be accelerated?
    • Can there be further coordination of efforts to restore trade finance.
  • Third:  Should the current crisis give rise to broader trade initiatives, under the heading of WTO reform?
    • Past crises were harnessed for the creation of impressive global public goods. 
      • The Depression and beggar-thy-neighbor policies of the 1930s gave rise to trade liberalizing agreements, a precursor of the multilateral trading system. 
      • Crises of the international monetary system led to
        • the Tokyo Round of Multilateral Trade Negotiations yielding the first nontariff barrier agreements and
        • the Uruguay Round which enlarged the scope of the multilateral trading system and provided for the creation of the WTO.
    • Can something more ambitious than incremental WTO reforms be contemplated?
  • Fourth:  Are there near-term organizational steps to be taken as a way to regularize discussions? 
    • Two suggestions that have been made: 
    • (1) a Member initiative creating a WTO Pandemic Emergency Response Task Force, open to all but conceptually consisting of a group of like-minded Members, and
    •  (2)  establishing a Multilateral Trading System Policy Planning Network dedicated to assessing future challenges and assuring that WTO is equal to the challenges that will need to be faced.

For the sake of the health of all and the global economy, collective action is now imperative.

The Role of the UK

The United Kingdom was an architect of the multilateral trading system.  It took wisdom and courage, in the face of post-war scarcity, to exercise that leadership.  The UK has cast its lot with having its own voice in global trade councils.  It will not be long before your officials will be conveying to the world again an understanding of what we share in the multilateral trading system, its values and its value.  We are fortunate in some ways to be living in an era of great challenges, which makes all the more necessary and meaningful the leadership and collaboration that must now be made manifest. 

In an article written by Henry Kissinger just a month ago, he urged leaders to “strive to heal the wounds to the world economy” and to “safeguard the principles of the liberal world order”.  It is the mid-sized countries that have responded with concrete ideas for international cooperation at the WTO to respond to `the pandemic.  Now the UK emergent can join in and again take up the mantle of international economic leadership.  

The WTO endures because it is needed.  As a stern critic of it once said: If it did not exist it would have to be created.  Now is the time to make the necessary improvements to the trading system to meet the current and future challenges.


JOINT MINISTERIAL STATEMENT ON COVID-19

The following joint ministerial statement, dated 12 May 2020, is being circulated at the request of the delegation of Korea.

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JOINT MINISTERIAL STATEMENT ON ACTION PLANS TO FACILITATE

THE FLOW OF GOODS AND SERVICES AS WELL AS

THE ESSENTIAL MOVEMENT OF PEOPLE

The COVID-19 outbreak has presented a global challenge that requires a coordinated global response. The G20 Trade and Investment Ministers, along with Ministers of attending guest invitees, in their Extraordinary Meeting held on 30 March 2020, reaffirmed their collective determination to ensure the continued flow of goods, services and personnel as well as maintaining the global supply chains.

Based on the G20 Ministerial Statement, we will identify concrete actions that could help alleviate the impact of COVID-19 and work with other countries to develop these actions as follows:

  • Working to ensure the Flow of Goods in Global Supply Chains
    • Expedite customs procedures with a view to reducing processing times and related administrative burdens in accordance with national laws and regulations.
      • Encourage more use of electronic means for customs processing, which minimize face-to-face interactions without lengthening processing times.
      • Ensure facilitation of transport and customs clearances of essential goods, such as food, critical medical supplies and personal protection equipment.
    • Facilitate the timely flow of goods including essential supplies by ensuring operation of logistics networks via air, sea, and land freight.
      • Work out bilateral and/or multilateral cooperative arrangements to expedite necessary approval procedures for air crew and to utilise additional aircraft for cargo operations.
      • Promote transparency of import and export regulations to facilitate continued movement of goods.
    • Refrain from the introduction of export prohibitions or restrictions, tariffs and non-tariff barriers on essential goods, including food, pharmaceuticals, and critical medical supplies. This underscores the importance of preserving the ability of countries to import essential medical supplies, pharmaceuticals and food to meet their domestic needs.
      • If such measures are instituted,
        • Ensure that measures are targeted, proportionate, transparent, temporary and consistent with WTO rules.
        • Provide advance notification of the measure to the WTO as soon as practicable.
    • Work towards removing such measures when the situation allows for it.
    • Establish a consultation mechanism between the relevant authorities of the signatory countries to identify and address trade disruptions that affect the trade in essential goods.
  • Facilitating the Essential Movement of People
    • Facilitate the resumption of essential cross-border travel, with mutual assurance of health standards, while ensuring the safeguarding of public health in line with our efforts to combat the pandemic as well as to minimize the socio-economic impacts of COVID-19.
    • Establish guidelines to allow, on an exceptional basis, essential cross-border travel for purposes such as maintaining global supply chains, including essential business travel, in accordance with national laws and regulations, without undermining the efforts to prevent the spread of the virus.
  • Minimizing the Negative Impacts on Trade and Investment arising from the Pandemic to facilitate an inclusive and sustainable economic recovery
    • Reiterate and garner strong support for the rules-based international trade system, including WTO rules, and work closely with key multilateral economic institutions.
    • Provide relevant information to affected countries and to the WTO in a timely manner when adopting a measure with a foreseeable impact on international trade and investment.
    • Develop and share best practices including those for ensuring flows of goods and services, minimizing restrictions on people movement, and aiding sectors that are adversely affected by the pandemic.
    • Engage actively with the private sector to design and implement measures in a business-friendly manner and to work together for creative solutions.

MINISTER FOR TRADE, TOURISM AND INVESTMENT, AUSTRALIA, SENATOR THE HON SIMON BIRMINGHAM

MINISTER OF SMALL BUSINESS, EXPORT PROMOTION AND INTERNATIONAL TRADE, CANADA, HON MARY NG

MINISTER FOR TRADE AND EXPORT GROWTH, NEW ZEALAND, HON DAVID PARKER

MINISTER FOR TRADE, REPUBLIC OF KOREA, HON YOO MYUNG-HEE

MINISTER FOR TRADE AND INDUSTRY, SINGAPORE, HON CHAN CHUN SING

1 May 2020

__________

 RESPONDING TO THE COVID-19 PANDEMIC WITH OPEN AND PREDICTABLE TRADE

IN AGRICULTURAL AND FOOD PRODUCTS

STATEMENT FROM: AUSTRALIA; BRAZIL; CANADA; CHILE; COLOMBIA; COSTA RICA;

EUROPEAN UNION; HONG KONG, CHINA; JAPAN; REPUBLIC OF KOREA; MALAWI;

MEXICO; NEW ZEALAND; PARAGUAY; PERU; QATAR; SINGAPORE; SWITZERLAND;

THE SEPARATE CUSTOMS TERRITORY OF TAIWAN, PENGHU, KINMEN AND MATSU;

UKRAINE; UNITED KINGDOM; UNITED STATES; AND URUGUAY

The following joint statement, dated 22 April 2020, is being circulated at the request of the delegation of Canada.

_______________

1.1.  The COVID-19 pandemic is a global issue that requires a coordinated global response. We recognize that first and foremost the world is facing a global health crisis and the immediate focus of Members should be on efforts to ensure the health and safety of their citizens while laying the groundwork for a strong economic recovery. As many global leaders have indicated international cooperation across different fields is crucial to weathering the COVID-19 pandemic. As Members take measures to address the pandemic, it is imperative that these measures do not adversely affect trade in agriculture and agri-food products which would ultimately have negative impacts on the food security, nutrition and health of Members and their populations. We support the call to mitigate the impact of COVID-19 on agriculture trade and food security made on 31 March by the Director Generals of the WTO, FAO, and WHO.

1.2.  Collectively, we account for 63% of global exports of agriculture and agri-food products and 55% of global imports of agriculture and agri-food products. We underscore the importance of maintaining agriculture supply chains and preserving the ability of Members to import agriculture and agri-food products to meet their domestic needs. Maintaining effective transport and logistical services will be crucial to the proper functioning of the food supply chain. We encourage Members to implement temporary working solutions to facilitate trade, such as allowing scanned copies or electronic copies of original certificates whenever it is not possible to present the original paper certificate, provided the authenticity of these certificates can be validated by competent authorities.

1.3.  The application of export restrictions and similar trade restrictive measures on agriculture and agri-food products create an unpredictable trading environment that would adversely affect food availability and result in price spikes, increased price volatility, and leads to shortages of important food products. The adoption by many Members of successive export restrictive measures to secure their own food security would lead to a widespread food insecurity crisis due to the disruption in global agricultural trade supply chains. It is also important to avoid food loss and waste caused by supply chain disruptions, which could exacerbate food security risks and economic loss. In addition, supply chains for key agriculture inputs must remain open to help ensure existing production levels are maintained.

1.4.  Global commodity markets are in a strong position to respond to the crisis. The Agriculture Market Information System (AMIS)1 Market Monitoring report from April 2020 found that global food markets remain well balanced and noted that cereal stocks are expected to reach their third highest level on record this season and export availabilities for wheat, maize, rice, and soybeans are more than adequate to meet the anticipated demand. Regardless, we are seeing countries reassess their own food security in response to COVID-19 with some countries imposing export restrictions. Lessons from previous crises have taught us that export restrictions increase food insecurity for vulnerable populations. The world’s poor, including agricultural workers, would bear the brunt of increased export restrictions. We recall the G20 Leaders agreement to not impose food export restrictions or extraordinary taxes on food purchased for non-commercial humanitarian purposes by the World Food Programme (WFP), and encourage all WTO Members to do the same.

1.5.  The timely and accurate provision of information on agriculture and agri-food-related trade measures, levels of production, consumption and stocks, as well as prices, reduces uncertainty and allows governments, traders, consumers, producers to make informed decisions.

1.6.  To help ensure well-functioning global agriculture and agri-food supply chains in response to this crisis we therefore are committed:

a.  To ensure that supply chains remain open and connected so that international markets can continue to function in supporting the movement of agricultural products and agriculture inputs, which plays an instrumental role in avoiding food shortages and ensuring global food security.

b.  To exercise restraint in establishing domestic food stocks of agricultural products that are traditionally exported so as to avoid disruptions or distortions in international trade.

c.  Not to impose agriculture export restrictions and refrain from implementing unjustified trade barriers on agriculture and agri-food products and key agricultural production inputs.

d.  That emergency measures related to agriculture and agri-food products designed to tackle COVID-19 must be targeted, proportionate, transparent, and temporary, and not create unnecessary barriers to trade or disruption to global supply chains for agriculture and agri-food products. Any such measures are to be consistent with WTO rules.

e.  To inform the WTO as soon as practicable of any trade related COVID-19 measures affecting agriculture and agri-food products, including providing scientific evidence in accordance with WTO agreements if necessary, to ensure transparency and predictability. Members should be given opportunities to review new measures.

f.  To ensure that updated and accurate information on levels of food production, consumption and stocks, as well as on food prices is widely available, including through existing international mechanisms.

g.  To support the efforts of the WTO and other international organizations in analysing the impacts of COVID-19 on global agriculture and agri-food trade and production.

h.  To engage in a dialogue to improve our preparedness and responsiveness to regional or international pandemics, including multilateral coordination to limit unjustified agriculture export restrictions, in particular at the WTO.

Annex

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