As the coronavirus (COVID-19) pandemic continues, government officials around the world have raised questions and concerns about how to ensure that their countries have adequate access to, and supplies of, medical goods, including personal protective equipment (e.g., masks, gloves, garments), medical equipment (e.g., ventilators), and pharmaceuticals.
This Sidebar presents an overview of some of the trade-related measures taken by the United States and its trading partners in their efforts to address these concerns, including: (1) introducing export restrictions; (2) reducing or eliminating tariffs; (3) revising import procedures; and (4) prioritizing domestic production. It then discusses possible legal challenges to each of these measures, as well as avenues for congressional action or oversight.
Method One: Introducing Export Restrictions
Several of the United States’ trading partners have imposed export restrictions on certain medical goods to meet their domestic supply needs. For example, the European Union (EU) introduced export authorization measures that prohibit the export of personal protective equipment (e.g., masks, protective glasses, and garments) from the EU without prior regulatory approval.
India restricted exports of twenty- six pharmaceutical components, as well as medicines and vitamins made from them, accounting for approximately ten percent of India’s pharmaceutical exports. To date, the United States has not supported its trading partners’ use of export restrictions to address potential supply shortages.
The World Trade Organization’s (WTO’s) international trade regime generally prohibits quantitative restrictions on the export of goods, whether in the form of export bans, licensing requirements, or other measures having similar restrictive effects. In light of this general rule, the export restrictions described above may arguably cause some to raise concerns.
At the same time, however, three exceptions may apply. First, the general prohibition does not cover export restrictions “temporarily applied to prevent or relieve critical shortages of … products essential to the exporting contracting party.” Second, the WTO regime permits its Members to implement measures contrary to their general obligations if the measures are “necessary to protect human, animal or plant life or health” or “essential to the acquisition or distribution of products in general or local short supply.”
Any potentially WTO-inconsistent measures must also meet other conditions, including that their application not create “arbitrary or unjustifiable discrimination between countries where the same conditions prevail.”
Measures taken to address the acquisition or distribution of products in short supply must also be time-limited and conform to the principle that all WTO Members “are entitled to an equitable share of the international supply of such products.” Third, the WTO does not prevent any Member from implementing measures “that it considers necessary for the protection of its essential security interests . . . in time of war or other emergency in international relations.”
It is uncertain whether the export restrictions imposed by WTO Members (or any future restrictions that may be imposed by other WTO Members, including the United States) to address concerns about shortages of medical supplies are WTO-inconsistent and, if so, fall within one of the exceptions, as this precise issue has not yet been litigated before the WTO’s Dispute Settlement Body.
However, in a joint study, the WTO and World Health Organization (WHO) indicated that some trade-restrictive measures used to address widespread infectious diseases are “unlikely to conflict with WTO rules,” provided that they are time-limited and crafted to minimize trade disruptions.
Nonetheless, the WHO has advised against export restrictions to address COVID-19, instead recommending that countries incentivize increased domestic production of the needed products (discussed below).
The WTO Director-General has also stressed that “maintaining open trade and investment flows will be critical to protect jobs, prevent supply chain breakdown, and ensure that vital products do not become unaffordable for consumers.”
Method Two: Reducing or Eliminating Tariffs
Since the onset of the COVID-19 pandemic, the cost of a number of medical goods has increased dramatically. For example, the cost of surgical masks has increased 600% and the cost of medical gowns has doubled.
To alleviate the financial pressure on firms and other entities that must buy these products, the United States has removed some tariffs on certain medical goods from China imposed under Section 301 of the Trade Act of 1974.
However, some commentators remain concerned that the remaining Section 301 tariffs imposed by the Trump Administration may impair the United States’ ability to respond to COVID-19. Some Members of Congress have urged the Administration to remove or suspend tariffs on a number of products from China to alleviate the economic impact from COVID-19, including by reducing the cost for firms to purchase medical supplies.
Congress could potentially remove or eliminate tariffs, as it possesses constitutional authority to “lay and collect . . . Duties” (i.e., tariffs). Alternatively, the President could “authorize the Secretary of the Treasury to permit . . . the importation free of duty of food, clothing, and medical, surgical, and other supplies for use in emergency relief work” under Section 318 of the Tariff Act of 1930, after a declaration that “an emergency . . . exist[s] by reason of a state of war, or otherwise.”
The scope of Section 318 may raise the question of whether its broad delegation of authority may violate the non-delegation doctrine, which prohibits the transfer of legislative functions to the Executive without an “intelligible principle” to limit the Executive’s discretion when implementing such functions. However, a recent challenge to another trade statute that grants the President broad authority to restrict imports may suggest otherwise.
Specifically, the U.S. Court of Appeals for the Federal Circuit upheld the constitutionality of Section 232 of the Trade Expansion Act of 1962, which permits the President to restrict imports if he determines they are entering the United States “in such quantities or under such circumstances as to threaten the national security.” As of the time of writing, no court has considered the legality of Section 318.
The impact of tariffs on access to medical goods has long been of interest to WTO Members, even in the absence of immediate public health crises. In 2006, they committed to negotiating the elimination of tariffs and non-tariff barriers on a number of healthcare-related goods. These negotiations remain ongoing.
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