kf lecture series 2020€¦ · end of april, disrupting the negotiations. ... >> wto 2.0. the role...

KF LECTURE SERIES 2020

DIVIDED WE STAND ON WTO REFORM IN THE TIME OF

COVID-19

Kiichiro FUKASAKU Ph.D. International Economist

For JSIE Kanto Teleconference, 18 July 2020

K. FUKASAKU – SHORT BIO

• Previous professional posts GATT Secretariat (1983-1990) OECD (1990-2012) Keio University (2012-20)

• Areas of research interest International trade theory and policy; Political

economy of regional integration; Comparative economic development

• Educational background B.A. and M.A. from Keio University, and M.A.

and D.Phil. (Economics, 1991) from University of Sussex, U.K.

https://weekly-economist.mainichi.jp/articles/20191217/se1/00

m/020/057000c

https://weekly-economist.mainichi.jp/articles/20191217/se1/00m/020/057000c

Japan SPOTLIGHT July 10, 2020https://www.jef.or.jp/

p // j jp/j p g / /

https://www.jef.or.jp/https://www.jef.or.jp/jspotlight/latestissue/

ORGANIZATION

① Introduction: An Application of the Political Economy of Trade Policy

② The WTO at 25: Where do We Stand?③ America, China and the WTO’s Future④ The Covid-19 Pandemic: Implications for

WTO Reform④ Concluding Remarks: The Role of Japan

ORGANIZATION



WTO Reform⑤ Concluding Remarks: The Role of Japan

THE POLITICAL ECONOMY OF TRADE POLICY

• There are two main approaches to examining the political factors that influence the conduct of influential members’ policies toward the WTO: The self-interest approach (superiority of

national sovereignty, concerns over national election, the influence of local constituencies, etc.)

The social-objectives approach (respect for global commons, inclusiveness, the importance of a rules-based system, etc.)

SF 000 % OttawaG20 Group

All WTO Members (164) 195,500 100.0001 European Union (27) 58,953 30.155 Y Y2 United States of America 22,856 11.691 Y3 China 20,142 10.303 Y

Germany 13,976 7.149 Y4 Japan 7,673 3.925 Y Y

France 7,466 3.819 Y5 United Kingdom 7,400 3.785 Y

Netherlands 5,732 2.9326 Korea, Republic of 5,670 2.900 Y Y7 Hong Kong, China 5,548 2.838

Italy 5,075 2.596 Y8 Canada 4,839 2.475 Y Y9 Singapore 4,745 2.427 Y

10 India 4,455 2.279 Y11 Mexico 3,802 1.945 Y Y

Spain 3,715 1.90012 Switzerland 3,687 1.886 Y

Belgium 3,664 1.87413 Russian Federation 3,658 1.871 Y14 Chinese Taipei 3,286 1.68115 United Arab Emirates 3,103 1.587

Ireland 2,620 1.34016 Australia 2,553 1.306 Y Y17 Thailand 2,405 1.23018 Brazil 2,287 1.170 Y Y

Poland 2,229 1.14019 Saudi Arabia, Kingdom of 2,162 1.106 Y

Sweden 2,057 1.052

MembershipContributions

2020

Member

Big 3

Source: WTO Annual Report 2020 (pp.178-181)

Note 1: The 2020 WTO budget is set at SF197.2 million.Note 2: The Ottawa Group (13) includes NZ and Kenya as well.

20 Turkey 2,010 1.028 Y21 Malaysia 1,924 0.984

Austria 1,918 0.98122 Indonesia 1,673 0.856 Y23 Viet Nam 1,584 0.810

Denmark 1,515 0.775Czech Republic 1,406 0.719

24 Norway 1,349 0.690 YHungary 1,009 0.516Luxembourg 999 0.511

25 South Africa 936 0.479 YFinland 862 0.441

26 Israel 856 0.438Portugal 788 0.403Slovak Republic 780 0.399

27 Philippines 768 0.39328 Qatar 747 0.382

Romania 725 0.37129 Argentina 719 0.368 Y30 Chile 704 0.360 Y

CONCERNS OVER THE FUNCTIONING OF THE WTO TRADING SYSTEM

• The appellate review procedure has ceased to function since late 2019.

• The 12th Ministerial Conference (MC12) scheduled for June 8 – 11 in Nur-Sultan, the capital of Kazakhstan, was postponed.

• The WTO suspended all meetings until the end of April, disrupting the negotiations.

• DG Azevêdo will step down on August 31.• Economic nationalism is flaring up in the

time of Covid-19 pandemic.

7 QUESTIONS ON THE FUTURE OF THE WTO TRADING SYSTEM

1. Decision-Making and Procedural Guidelines2. Transparency and Notification3. Fairness 4. Electronic Commerce and Digital Trade5. Development and Differentiation6. Global Commons (Fisheries Subsidies)7. Dispute Settlement and Appellate Review

Source: See Fukasaku (2020), Japan SPOTLIGHT, July 10.

ORGANIZATION




THE WTO: WHY IS IT UNIQUE?

• Compared with the IMF, the World Bank or the OECD, all WTO members are placed under contractual obligations.“WTO is a sui generis international

organization…” (The Sutherland Report, WTO 2004: 79)

The IMF/ WB may be called “best endeavors organizations” (Blackhurst 1998: 32)

THE GATT VS. THE WTO

• The GATT Secretariat was officially called “the Interim Commission for the International Trade Organization (ITO)” – not a fully-fledged international organization.

• The Agreement Establishing the World Trade Organization (alias, the Marrakech Agreement, 1994) states that “the WTO shall have legal personality” (Article VIII: para 1) Hereafter referred to as The WTO Agreement

WTO

Implementation and operation of

the WTO Agreements

The forum for negotiations among WTO

Members

The Settlement of

Disputes

The Trade Policy Review Mechanism

Greater coherence in global policy-

making

The WTO’s Five Functions (Ibid. Article III)

THE WTO TRADING SYSTEM

AN OPEN AND RULES-BASED MULTILATERAL TRADING SYSTEM

EMBODIED IN THE WTO AGREEMENTS

Bilateral or Plurilateral Preferential Agreements

(FTAs, EPAs)

The WTO Trading System (164)

Umbrella

Goods ServicesIntellectualPropertyb

Basic principles GATT GATS TRIPS

Additional details13 Agreements(plus annexes)c

5 Annexesd2005 Protocol

amending TRIPSe

Market accesscommitments

Members'schedules ofcommitments

Members'schedules ofcommitments

and MFNexemptions

Agreement onTrade in Civil

Aircraft

Disputesettlement

Transparency

Understanding on Rules and Procedures Governingthe Settlement of Disputes (DSU)

Agreement Establishing the WTOa

The WTO in a Nutshell

Agreement on GovernmentProcurement

Plurilateralagreementsf

Trade Policy Review Mechanism (TPRM)

概要日本語

WTO協定の概要キョウテイガイヨウ

包括的協定ホウカツテキキョウテイWTO設立協定（通称、マラケシュ協定）セツリツキョウテイツウショウキョウテイ

物品ブッピンサービス知的財産ｃチテキザイサン

基本原則キホンゲンソクGATT1994GATSTRIPS

追加的及び修正項目ツイカテキオヨシュウセイコウモク追加的な13の協定a ツイカテキキョウテイ5つの付属書b フゾクショ協定修正のための議定書ｄキョウテイシュウセイギテイショ

市場アクセス・コミットメントシジョウ加盟国の自由化表カメイコクジユウカヒョウ加盟国の自由化表（及びMFN例外措置）カメイコクジユウカヒョウオヨレイガイソチ

複数国間協定e フクスウコクカンキョウテイ政府調達に関する協定セイフチョウタツカンキョウテイ

民間航空機貿易に関する協定ミンカンコウクウキボウエキカンキョウテイ

紛争解決フンソウカイケツ紛争解決に係る規則及び手続に関する了解（DSU) フンソウカイケツカカワキソクオヨテツヅキカンリョウカイ

透明性トウメイセイ貿易政策検討制度（TPRM) ボウエキセイサクケントウセイド

a. 物品の貿易に関する追加的な13の協定とは、（１）農業（２）衛生と植物防疫のための措置（３）繊維・衣服（４）貿易の技術的障害（５）貿易関連の投資措置（６）反ダンピング措置（７）関税評価（８）出荷前検査（９）原産地規則（10）輸入許可（11）補助金・相殺関税（１２）緊急輸入制限（セーフガード）（１３）貿易円滑化である。なお、貿易円滑化協定は2013年12月に交渉が妥結し、マラケシュ協定の付属書に挿入する議定書は2014年11月に一般理事会で採択され、全加盟国の2/3の批准をもって2017年2月22日に発効。

ｂ. サービス貿易に関する5つの付属書とは、（１）自然人の移動（２）航空輸送（３）金融（４）海運（５）電気通信である。ボウエキカンフゾクショシゼンジンイドウコウクウユソウキンユウカイウンデンキツウシン

c. 知的財産とは、（1）著作権（2）商標（3）地理的表示（4）工業デザイン（意匠）（5）特許（６）集積回路の配置設計（7）企業秘密を含む未公開情報の７タイプを含む。　チテキザイサンチョサクケンショウヒョウチリテキヒョウジコウギョウイショウトッキョシュウセキカイロハイチセッケイキギョウヒミツフクミコウカイジョウホウフク

d. 公衆衛生に関するTRIPS協定を修正するための議定書（2005年12月の第6回閣僚会議において妥結）は、全加盟国の2/3の批准をもって2017年1月23日に発効。コウシュウエイセイカンキョウテイシュウセイギテイショネンガツダイカイカクリョウカイギダケツゼンカメイコクヒジュンネンガツニチハッコウ

e. 東京ラウンド・コードとして締結された４つの複数国間協定うち国際酪農品協定と国際牛肉協定は、共に1997年末に終了した。コクサイラクノウヒンキョウテイコクサイギュウニクキョウテイトモネンスエシュウリョウ

出典：WTO(2011、23－24ページの図）及びWTOウエブサイト（2017年2月22日にアクセス）に基づき筆者作成。シュッテンズオヨネンガツニチモトヒッシャサクセイ

英語

The WTO in a Nutshell

UmbrellaAgreement Establishing the WTOa

GoodsServicesIntellectual Propertyb

Basic principlesGATTGATSTRIPS

Additional details13 Agreements (plus annexes)c5 Annexesd2005 Protocol amending TRIPSe

Market access commitmentsMembers' schedules of commitmentsMembers' schedules of commitments and MFN exemptions

Plurilateral agreementsfAgreement on Government Procurement

Agreement on Trade in Civil Aircraft

Dispute settlementUnderstanding on Rules and Procedures Governing the Settlement of Disputes (DSU)

TransparencyTrade Policy Review Mechanism (TPRM)

a. This is also known as the Marrakesh Agreement.

b. The areas covered are (1) copyright, (2) trade marks, (3) geographical indicators, (4) industrial designs, (5) patents, (6) layout-designs of integrated circuits, and (7) undisclosed information, including trade secrets.

c. These agreements are (1) agriculture, (2) health regulations for farm products (SPS), (3) textiles and clothing, (4) product standards (TBT), (5) trade-related investment measures (TRIMs), (6) anti-dumping measures, (7) customs variation methods, (8) preshipment inspection, (9) Rules of origin, (10) import licensing, (11) subsidies and counter-measures, (12) safeguards, and (13) trade facilitation (in force since February 22nd, 2017).

d. These annexes are (1) movement of natural persons, (2) air transport, (3) financial services, (4) shipping and (5) telecommunications.

e. The 2005 Protocol amending TRIPS on public health has been put in force since January 23rd, 2017.

f. Two of the four plurilateral agreements, originally negotiated in the Tokyo Round (1973-79), i.e. dairy products and bovine meat, were terminated in 1997.

Source: Prepared and updated by the author, based on WTO (2011: 23-24) and WTO website: https://www.wto.org/index.htm

a. This is also known as the Marrakech Agreement.

b. The areas covered are (1) copyright, (2) trademarks, (3) geographical indicators, (4) industrial designs, (5) patents, (6) layout-designs of integrated circuits, and (7) undisclosed information, including trade secrets.

c. These agreements are (1) agriculture, (2) health regulations for farm products (SPS), (3) textiles and clothing, (4) product standards (TBT), (5) trade-related investment measures (TRIMs), (6) anti-dumping measures, (7) customs variation methods, (8) pre-shipment inspection, (9) Rules of origin, (10) import licensing, (11) subsidies and countervailing measures, (12) safeguards, and (13) trade facilitation (in force since February 22nd, 2017).

d. These annexes are (1) movement of natural persons, (2) air transport, (3) financial services, (4) shipping and (5) telecommunications.

e. The 2005 Protocol amending TRIPS on public health has been put in force since January 23rd, 2017.

f. Two of the four plurilateral agreements, originally negotiated in the Tokyo Round (1973-79), i.e. dairy products and bovine meat, were terminated in 1997.

Source: Prepared and updated by the author, based on WTO (2011: 23-24) and WTO website: https://www.wto.org/index.htm

Source: WTO Annual Report 2020 (p.182)

WTO Negotiations

Doha Development Agenda（DDA)

Work programs under the General Council

Plurilateral negotiations outside the Doha round

The Doha Work

Program

EIGHT AREAS OF DDA NEGOTIATIONS

AgricultureBuilt-in agenda under AoA (Article 20), Market access, Export subsidies, Trade-distorting domestic support, S&D, Non-trade concerns (e.g. food security and rural development) (para 13-14）plus cotton (> the Nairobi package on export competition and cotton)

Services Built-in agenda under GATS (Article 19), horizontal issues, sectoral negotiations (para 15）(> TiSA negotiations)

NAMA Tariffs (tariff peaks, high tariffs, and tariff escalation), NTBs, S&D (para 16）(> ITA 1.0 and 2.0 in force)

TRIPSPublic health (> TRIPS amendment in force), Geographical indicators other than wines and spirits, the relationship between TRIPS and the Convention on Biological Diversity, etc(para 17-19)

Trade FacilitationImproved transparency in trade regulations (GATT 1994 Articles 5, 8 and 10) , Further expedition of customs procedures, technical assistance and capacity building (para 27) (> the Trade Facilitation Agreement in force)

WTO Rules Anti-dumping measures, Subsidies (including fisheries subsidies) and countervailing measures, Existing WTO provisions and their application to RTAs (para 28-29)

Trade and Environment

The relationship between existing WTO rules and specific trade obligations set out in MEAs, Reductions in tariffs and NTBs in environmental goods and services (> EGA negotiations), Labelling requirements for environmental purposes, technical assistance and capacity building (para 31-33）

Development & LDcs

WTO technical assistance, with ITC, OECD/DAC, bilateral and multilateral donors, enhancement and rationalization in the Integrated Framework for Trade-related TA to LDCs and JITAP (para 38-41) (> Aid for Trade in force)

Integration of LDCs into the multilateral trading system, Duty-free, quota-free market access for LDC products, etc (para 42-43) (> Preferential rules of origin for LDCs, preferential trade in services for LDCs)S&D review of WTO Agreements (para 44)

1996 Dec 1st WTO Ministerial Conference in Singapore

Singapore issues (Investment, competition, government procurement and trade facilitation) + Trade in information technology products (ITA)

1998 May 2nd WTO Ministerial Conference in Geneva 50th anniversary of the GATT

1999 Nov-Dec 3rd WTO Ministerial Conference in Seattle Some 30,000 demonstrators disrupted the WTO Ministerial Conferernce.

2001 Nov 4th WTO Ministerial Conference in Doha Agreed on the Doha Development AgendaDec China joined the WTO Chinese Taipei was admitted a week later.

2003 Sep 5th WTO Ministerial Conference in Cancún Conference ended without consensus.

2005 Dec 6th WTO Ministerial Conference in Hong KongCotton, trade rules, LDCs, trade facilitation, technical co-operation and capacity building, special and differential treatment

2009 Nov-Dec 7th WTO Ministerial Conference in Geneva Enhanced integrated framework, LDCs, etc.

2011 Dec 8th WTO Ministerial Conference in Geneva

Three topics: “Importance of the Multilateral Trading System and the WTO”, “Trade and Development” and “Doha Development Agenda”. The Conference approved the accessions of Russia, Samoa and Montenegro. WTO membership reached 157 in August 2012.

2013 Dec 9th WTO Ministerial Conference in Bali The Bali Package was adopted.

2015 Dec 10th WTO Ministerial Conference in Nairobi The Nairobi Package was adopted.

2017 Dec 11th WTO Ministerial Conference in Buenos

AiresConference ended without ministerial declaration

Sources: Compiled from the WTO website.

WTO: A Chronology of Key Events

THE ROOT CAUSES OF THE DOHA ROUND STALEMATE

1. Lack of political support: A victim of past successes in tariff cutting

under the GATT (> no more “low-hanging fruit” is left for picking)

BRICS and LDCs want to retain the “policy space” behind their protective walls (> a further market opening in major developing countries is contentious)

Special and differential treatment (SDT) for large developing countries?

THE ROOT CAUSES OF THE DOHAROUND STALEMATE (CONT.)

2. Conflict between different priorities: Further liberalization of trade barriers or

adoption of new rules on behind-the-border issues

3. Institutional or procedural rigidities: The single undertaking (> does promoting

multi-issue trade-offs tend to impede or facilitate progress in trade negotiations?)

The increased number of major “players” from 10 to 25.


4. Two critical developments that undercut progress in trade negotiations: The low profile of services negotiations (>

sidelining pro-trade constituencies in Washington and Brussels)

A strong case of “Sinophobia” (> There is widely shared concern that a further liberalization of nonagricultural market access (NAMA) would lead China to dominate global manufacturing trade)


5. At the same time, the EU and the U.S. have turned to bilateral and regional trade agendas after the 2003 debacle in the WTO Ministerial meetings in Cancún: EU Enlargement and EU-MENA Partnership; U.S.-Central America+Dominican Republic FTA (U.S.-

CAFTA-DR), Trans-Pacific Partnership (TPP), and Trans-Atlantic Trade and Investment Partnership (TTIP); and

Other major players have followed suit.

THE 8TH WTO MINISTERIAL CONFERENCE (DECEMBER 2011, GENEVA)

• 154 member countries agreed that they would need “new ideas” to break the stalemate:

“Ministers deeply regret that … the negotiations are at an impasse.”“… there are significantly different perspectives on the possible results that Members can achieve in certain areas of the single undertaking. In this context, it is unlikely that all elements of the Doha Development Round could be concluded simultaneously in the near future.”“… Ministers recognize that Members need to more fully explore different negotiating approaches while respecting the principles of transparency and inclusiveness”(WT/MIN(11)/11, page 3, underlines added by the author)

MULTILATERAL TRADE NEGOTIATION UNDER THE WTO

Member-Driven

Consensus Principle

Single Undertaking

Lack of enthusiasm

Low AmbitionLack of

Legitimacy

Source: Drawn by the author based on Elsig and Cottier (2011, Fig 13.1)

MOVING FROM MC 8 (2011) TO MC 9 (2013)

• The political calendar of 2012 highlighted U.S. presidential election and China’s leadership changes so that 2013 was considered as a good year to put “new ideas” into action.

• The success of MC 9 in Bali in December 2013 was critical both for saving the WTO and for ensuring the leadership of WTO’s new director-general (Roberto Azevêdo).

THE WTO AT 25

• WTO success stories: Information Technology Agreement (MC1,

Singapore) and its Extension Agreement (MC10, Nairobi)

Trade Facilitation Agreement (MC9, Bali) Decisions on Export Competition in

Agriculture and on Cotton (MC10, Nairobi)

THE WTO AT 25 (2)

• No ministerial declaration adopted at MC11, Buenos Aires

• A multilateral agreement on fisheries subsidies currently under negotiation

• Joint Ministerial Statement Initiatives (plurilateral), including E-commerce Investment facilitation

• Trilateral cooperation in the WTO by the EU, Japan and the U.S.

WTO REFORM:IS THIS TIME DIFFERENT?

Modernize the WTO to make it

more fair as soon as possible.

Reduce tariff barriers, non-tariff

barriers and subsidies.

Call for the start of negotiations – this year – to develop stronger

international rules on market-distorting subsidies and trade-

distorting actions by state-owned enterprises .

WHAT G20 CAN DO TO SAVE THE WTO

• On Sep. 14, 2018, G20 Trade and Investment Ministers met at Mar del Plata in Argentina in order to:

① Bring the U.S. back into the fold,

② Call upon China to walk the talk, and

③ Consolidate an agenda for modernizing and reforming the WTO

Source: WEF/ICTSD

WTO MODERNIZATION : THE EU CONCEPT PAPER*

• Three pillars of the EU proposal on WTO 2.0, touching upon: Rulemaking Regular work and transparency Dispute settlement

* Issued on July 5, 2018 and presented to the WTO on September 18, 2018.

The Rulemaking Aspect of WTO Modernization: EU's Concept Paper*

Section I: Priority areas for rulemaking activities

Section II: A new approach to flexibilities in the context of

development objectives

Section III: Procedural aspects of the WTO rulemaking activities

A. Create rules that rebalance the system and level the playing field A. Graduation A. Multilateral negotiations

i. Improve transparency and subsidy notifications B. Special and differential treatment (SDT) in future agreementsB. Plurilateral negotiations

ii. Better capture SOEs C. Strengthen the role of the secretariat

iii. Capture more effectively the most trade-distortive types of subsidies C. Additional SDT in existing agreements D.The frequency of Ministerial Conferences

B.Establish new rules to address barriers to services and investment, including forced technology transfer

E. Ways of intensifying Senior Officials processes

i. Multilateral rules on investment, including forced techonology transfer

ii. Multilateral rules on digital trade

C.Address the sustainability objectives of the global community (e.g. harmful fisheries subsidies)

* Issued on July 5, 2018 and presented to the WTO on September 18, 2017.

ORGANIZATION




U.S. INTERESTS IN GATT AND WTO

Sources: Drawn by the author based on Chung (2006) and https://www.govtrack.us/congress/bills/114/s995

Authorized the President to participate in the first five

rounds of GATT Negotiations

Participation in the Kennedy Round

(1962-67)

Participation in the Tokyo Round

(1973-79)

Implemented the results of the Tokyo Round negotiations

Authorized the President to negotiate multilaterally, regionally and bilaterally

Trade Promotion Authority for TPP, T-TIP, TISA, EGA and other trade negotiations

“TRUMP – XI BUSINESS DEALS PROBABLY WON’T BE ENOUGH TO STOP A TRADE FIGHT”*

• U.S. Secretary of Commerce announced the signing of $250 billion in business deals between U.S. businesses and Chinese entities (DOC’s Press Release, Nov. 9, 2017).

• However, the agreements this time included cases in which both sides signed letters of intent – notcontracts – for developing joint projects, as in the case of the Alaska LNG project between the Alaska Gasline Development Corporation and the China Petrochemical Corp (Sinopec) and two others (see DOC, “U.S. – China Business Exchange”, Nov. 8-9, 2017)

*See the New York Times, Nov. 9, 2017: https://www.nytimes.com/2017/11/09/business/donald-trump-china-trade-xi-jinping.html

WHAT HAS BEGUN AS A TRADE SKIRMISH IS NOW SLIDING INTO AN

ECONOMIC COLD WAR

Sources: the above pictures are taken from the Washington Post and the Financial Times, respectively.

“US trade policy and national security policy should no longer be separated”

(Rana Foroofar/the Financial Times, Sep. 23, 2018)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

1 Hong Zhao (Chair) China

2 Ujal S. Bhatia India

3 Thomas R. Graham U.S.

4 S.B.C. Servansing Mauritius

5 P. Van den Bossche Belgium

6 Hyun Chong Kim Korea

7 R. R. Hernández Mexico

Name and Nationality

[08/01]

　　　　　 [06/30-05/15]

Note： Blue (1st 4 years), Orange (2nd 4 years) and Yellow (Extension of appointment)

Source： WTO website.

The Appellate Body's Existential Crisis

[12/01]

　　　　　　　　　　［12/11〕 [12/10]

　　　　　　　　［12/11〕 [12/10]

[10/01]　　　　　　　　　　　　　　　　　　［9/30]

[ 12/11-12/24]

MULTI-PARTY INTERIM APPEAL ARBITRATION ARRANGEMENT (MPIA)

(APRIL 30, 2020)

• The EU and other 18 participating members* have made an official statement on MPIA pursuant to Article 25 of the DSU (Dispute Settlement Understanding).

• At the same time, these participating members also wish to “preserve the possibility of a binding resolution of disputes at panel stage, if no party chooses to appeal under this arrangement, through the adoption of panel reports by the DSB by negative consensus” (JOB/DSB/1/Add.12)

• “The United States does not object to WTO Members utilizing Article 25 or other informal procedures to help resolve disputes” (U.S. Statement at the June 29, 2020, DSB Meeting)

• Yet, the United States has made it clear to continue its opposition to appellate body appointments.

* Australia, Brazil, Canada, China, Chile, Colombia, Costa Rica, the EU, Guatemala,Hong Kong, Iceland, Mexico, New Zealand, Norway, Pakistan, Singapore, Switzerland,Ukraine, and Uruguay.

US CONGRESS HEARING ON TRADE POLICYUSTR LIGHTHIZER TESTIMONY

(JUNE 17, 2020)

The 2020 Trade Policy Agenda (House Ways & Means Committee and Senate Finance Committee)

1. Phase One Agreement with China (Ag purchase, structural issues)2. Implementation issues of USMCA (labor and environmental standards)3. How to secure the access to personal protection equipment (PPE) 4. Trade policy toward the EU and Japan (food security, market access)5. Promoting high-tech industries (semiconductors, 5G)6. Digital tax (US preparedness for possible 301 actions)7. Trade, employment and equity (TAA programs, training policy, gender) 8. US-India trade negotiations (India’s high tariff structure)9. WTO reform issues (Appellate review, US preference for a new DG)

Sources: https://www.c-span.org/video/?473090-1/us-trade-representative-2020-trade-policy-agenda; and https://www.c-span.org/video/?473040-1/house-ways-means-committee-hearing-trade-policy

https://www.c-span.org/video/?473090-1/us-trade-representative-2020-trade-policy-agendahttps://www.c-span.org/video/?473040-1/house-ways-means-committee-hearing-trade-policy

ORGANIZATION




WORLD MERCHANDISE TRADE DURING PUBLIC HEALTH CRISES

• Import tariffs on medical supplies and protective equipment remain high (Table 1).

• Trade locomotives were broken during the first quarter of 2020 (Table 2).

• Global supply chains got clogged, which was most visible for essential medical supplies.

WORLD MERCHANDISE TRADE DURING PUBLIC HEALTH CRISES

• Import tariffs on medical supplies and protective equipment remain high (Table 1).

• Trade locomotives were broken during the first quarter of 2020 (Table 2).

• Global supply chains got clogged, which was most visible for medical supplies.

HOW TO DEAL WITH ACUTE SHORTAGES OF MEDICAL SUPPLIES

SURGICAL FACE MASKSARE PRIVATE GOODS, BUT…

Source: Modified by the author based on https://courses.lumenlearning.com/boundless-economics/chapter/public-goods/

Public Health

https://courses.lumenlearning.com/boundless-economics/chapter/public-goods/

SURGICAL FACE MASKS ARE SCARCE COMMODITIES EVERYWHERE DUE TO EXPORT BAN, HOARDING AND PRICE

GOUGING IN A CRISIS

KEY CHARACTERISTICS OF SURGICAL MEDICAL SUPPLIES IN

A CRISIS

• They are private goods, as you can buy them freely in a normal time.

• Yet, they become scarce commodities everywhere in a crisis like the Covid-19 pandemic.

• Why is that? Because if the market for “essential goods” is left unchecked in a crisis, it follows the law of jungle!

WHAT HAPPENED TO TRADE IN MEDICAL SUPPLIES? (1)

• Governments responded to public health crises by enforcing export restrictions on medical supplies, while at the same time amassing them for domestic use.

• A global shortage of 3M N-95 face masks, for instance, is a telling episode: a combination of export ban, hoarding and price gouging by some powerful countries made it difficult to others to import such essential products at affordable prices.

Source: See the following articles: https://www.nytimes.com/2020/03/13/business/masks-china-coronavirus.html?searchResultPosition=8 ; https://www.nytimes.com/2020/04/03/us/politics/coronavirus-trump-3m-masks.html?searchResultPosition=6 ; https://www.ft.com/content/03e45e35-ab09-4892-899d-

a86db08a935c ; https://www.vox.com/2020/4/4/21208250/coronavirus-trump-canada-germany-spain-brazil

https://www.nytimes.com/2020/03/13/business/masks-china-coronavirus.html?searchResultPosition=8https://www.nytimes.com/2020/04/03/us/politics/coronavirus-trump-3m-masks.html?searchResultPosition=6https://www.ft.com/content/03e45e35-ab09-4892-899d-a86db08a935chttps://www.vox.com/2020/4/4/21208250/coronavirus-trump-canada-germany-spain-brazil

WHAT HAPPENED TO TRADE IN MEDICAL SUPPLIES? (2)

A Global Trade Alert report concludes that “the incoherence between national trade policies and medical response threatens the lives of people at home and abroad,

including those of front-line health professionals.”

Source: Simon Evenett (2020), “Tackling COVID-19 Together: The Trade Dimension”, University of St. Gallen, March 23:

https://www.globaltradealert.org/reports

https://www.globaltradealert.org/reports

PRICES OF MEDICAL SUPPLIES

The Initiative on Global Markets (IGM) Forum run by the University of Chicago Booth School of Business, asked 3 questions to its Economic

Experts Panel:• Question A: Clearing the market for surgical face masks

using prices is detrimental to the public good. • Question B: Laws to prevent high prices for essential

goods in short supply in a crisis would raise social welfare. • Question C: Governments should buy essential medical

supplies at what would have been the market price and redistribute according to need rather than ability to pay.

Source: the results dated May 26, 2020 available from http://www.igmchicago.org/

http://www.igmchicago.org/

QUESTION A: CLEARING THE MARKET FOR SURGICAL FACE MASKS USING PRICES IS DETRIMENTAL TO THE

PUBLIC GOOD.

QUESTION B: LAWS TO PREVENT HIGH PRICES FOR ESSENTIAL GOODS IN SHORT SUPPLY IN A CRISIS

WOULD RAISE SOCIAL WELFARE.

QUESTION C: GOVERNMENTS SHOULD BUY ESSENTIAL MEDICAL SUPPLIES AT WHAT WOULD HAVE BEEN THE

MARKET PRICE AND REDISTRIBUTE ACCORDING TO NEED RATHER THAN ABILITY TO PAY.

Concerns over government

failure?

WHAT CURRENT WTO RULES TELL US (1)

• GATT Article 11.1 (General Elimination of Quantitative Restrictions) stipulates prohibitions or restrictions other than duties, taxes or other charges on both import and export sides.

• But there are exceptions, such as “Export prohibitions or restrictions

temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party” (Article 11.2.(a))

WHAT CURRENT WTO RULES TELL US (2)

• GATT Article 20 (General Exceptions) provides broad space for governments to adopt trade-restrictive measures necessary to protect public health within their jurisdictions. However, export restrictions and aggressive procurement practices are counterproductive to the global fight against the coronavirus pandemic, and contrary to the spirit of solidarity proclaimed by G20 Leaders.

THE QUESTION OF FAIRNESS COMES TO THE FORE IN A POST-PANDEMIC TRADE

ENVIRONMENT

• Current WTO rules allow member governments to apply temporarily export restrictions on essential medical supplies under GATT Articles 11 or 20 or even under 21 (security exceptions). How temporary are they? Should WTO members consider rules for

fair competition of international transactions based on the Covid-19 experience?

TWO WAYS FOR FACILITATING TRADE IN ESSENTIAL MEDICAL PRODUCTS

A) Use of regulatory measures available under national competition law: Initiative by the International Competition Network

B) A possible WTO agreement on trade in healthcare products: “Initiative on Medical Supplies” by the Ottawa Group

(June 15, 2020) The EU’s Concept Paper on “Trade in Healthcare

Products” (June 11, 2020)

THE STEERING GROUP OF THE INTERNATIONAL COMPETITION NETWORK (ICN) ISSUED IN APRIL THE STATEMENT:

“The COVID-19 pandemic has prompted that, while most businesses will act responsibly, some businesses might

respond with anti-competitive conduct, e.g., by cartelizing or abusing a dominant position. It is of utmost importance to

ensure that products and services remain available at competitive prices, especially those that are essential to urgent public health needs in the current situation, like medical supplies and equipment. Competition agencies

intend to remain vigilant against anti-competitive mergers or conduct during this crisis.” (the 3rd paragraph)

Source: https://www.internationalcompetitionnetwork.org/featured/statement-competition-and-covid19/

https://www.internationalcompetitionnetwork.org/featured/statement-competition-and-covid19/

A POSSIBLE WTO AGREEMENT ON TRADE IN HEALTHCARE PRODUCTS

• This initiative aims to facilitate trade in healthcare products and contribute to stronger global preparedness for future coronavirus outbreaks: Abolish tariffs on pharmaceutical and medical

goods; Establish a scheme of global cooperation in

times of health crisis, covering issues such as import and export restrictions, customs and transit, public procurement and transparency; and

Improve current WTO rules applicable to trade in essential goods.

Source: See the EU’s Concept Paper on Trade in Healthcare Products: https://trade.ec.europa.eu/doclib/docs/2020/june/tradoc_158776.pdf

https://trade.ec.europa.eu/doclib/docs/2020/june/tradoc_158776.pdf

THE QUESTION OF FAIRNESS ALSO COMES TO THE FOLLOWING CASES

• More frequent use of contingency protection (e.g. industrial subsidies) is envisaged in a post-pandemic environment. GATT Article 16 and Agreement on Subsidies and

Countervailing Measures (ASCM)

• How to deal with “non-market practices” in the WTO? Issues concerning state-owned enterprises and

forced technology transfer Many WTO members, including all BRICS and other

developing members, have national competition laws. So it may be the time for considering what the WTO can do in this area.

ORGANIZATION




CONCLUDING REMARKS

• The Covid-19 Crisis poses formidable challenges to G20 Leaders in restoring global trade health: Rebuilding trust in the WTO trading

system Preparing for the next crisis: A crisis of

climate change Selecting a new DG (plus new AB

members) >> WTO 2.0

THE ROLE OF JAPAN

• Japan, a leading middle player in the WTO trading system, can make a critical contribution to designing and implementing prospective WTO reforms by: Bridging Big 3 through G20 and the trilateral cooperation

processes, as well as at informal WTO mini-ministerial meetings, including the Ottawa Group;

Building a coalition with small player groups, including ACP, LDCs, and the like.

Helping a new DG and her/his management team to put the WTO reform process in motion in 2021.

MEMBERSHIP AND GROUPS IN THE WTO

Japan

China

EUUS

G20

Trilateral

Ottawa Group (13)

ACP (56)

Africa Group (42)

LDC Group (32)

RCEP

= FTA/EPA

CPTPP

Our lives with the coronavirus

are different from what we knew before

that.

Stay safe when you go out.

THANK YOU !

KF lecture series 2020K. Fukasaku – Short Bioスライド番号 3スライド番号 4スライド番号 5OrganizationOrganizationThe political economy of trade policyスライド番号 9スライド番号 10concerns over the functioning of the WTO trading system7 questions on the future of the WTO trading systemOrganizationTHE WTO: WHY IS IT UNIQUE?THE GATT VS. THE WTOスライド番号 16The WTO trading systemスライド番号 18スライド番号 19スライド番号 20スライド番号 21EIGHT AREAS OF DDA NEGOTIATIONSスライド番号 23The root causes of the doha round stalemateThe root causes of the doha round stalemate (cont.)The root causes of the doha round stalemate (cont.)The root causes of the doha round stalemate (cont.)The 8th WTO Ministerial Conference (December 2011, Geneva)Multilateral trade negotiation under the WTOMoving From MC 8 (2011) to MC 9 (2013)The WTO at 25The WTO at 25 (2)WTO Reform:�IS THIS TIME DIFFERENT? What g20 can do to save the WTOWTO modernization : the eu concept paper*スライド番号 36OrganizationU.S. Interests in GATT and WTO“Trump – Xi business deals probably won’t be enough to stop a trade fight”*what has begun as a trade skirmish is now sliding into an economic cold warスライド番号 41Multi-party interim appeal arbitration arrangement (MPIA)�(April 30, 2020)US Congress Hearing on Trade Policy�USTR Lighthizer Testimony�(June 17, 2020)OrganizationWorld merchandise trade during public health crisesスライド番号 46World merchandise trade during public health crisesスライド番号 48World merchandise trade during public health crisesHow to deal with acute shortages of medical supplies surgical face masks�are private goods, but…Surgical Face masks are scarce commodities everywhere due to export ban, hoarding and price gouging in a crisisKey Characteristics of surgical medical supplies in a crisisWhat happened to trade in medical supplies? (1)What happened to trade in medical supplies? (2)Prices of medical suppliesQuestion A: Clearing the market for surgical face masks using prices is detrimental to the public good. Question B: Laws to prevent high prices for essential goods in short supply in a crisis would raise social welfare. Question C: Governments should buy essential medical supplies at what would have been the market price and redistribute according to need rather than ability to pay.What current WTO rules tell us (1)What current WTO rules tell us (2)The question of Fairness comes to the fore in a post-pandemic trade environmentTwo ways for facilitating trade in essential medical productsthe Steering Group of the International Competition Network (ICN) issued in April the statement:A possible WTO Agreement on trade in healthcare products The question of Fairness also comes to the following casesOrganizationConcluding remarksThe role of japanMembership and groups in the WTOスライド番号 71

kf lecture series 2020€¦ · end of april, disrupting the negotiations. ... >> wto 2.0. the role...

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