WTO members are considering ways to make global trade rules more suitable to deal with any future pandemics, including improved information-sharing on measures taken, promoting open dialogue on common problems faced, and limiting the duration of trade-restrictive measures, Deputy Director-General Alan Wolff said in remarks broadcast on 15 September. Speaking to a virtual meeting of the World Free Zones Organization in Dubai, DDG Wolff said world trade is changing rapidly and the trading system must be designed to benefit all, while being fit for purpose. His remarks are below:
1. How have government positions on cross-border trade shifted during this crisis?
The immediate responses to the crisis were unilateral. Countries acted individually. There had been no preparation for a pandemic.
Some epidemiologists had predicted that there would be a pandemic at some point. But they did not predict the timing and nature, just the inevitability. A pandemic was not a concern of trade policy prior to this year.
Governments had other trade concerns leading up to the pandemic. They saw that trade was slowing, but it was still growing. They were worried about a brewing trade war between the two largest trading countries. They were worried about the transatlantic trading relationship.
But suddenly the first dominant issue was the availability of scarce supplies of medicines, personal protective equipment, and medical equipment.
The second and larger concern was the negative effects on the global economy caused not by the Coronavirus but by the negative economic impact of the measures taken to deal with the health concerns generated by the pandemic.
First, transparency was needed. The WTO urged its 164 Members to notify their trade measures immediately. The Members’ response to the WTO request for notifications was very good. The measures taken consisted variously of export restrictions and trade liberalization.
Secondly the WTO estimated the range of the negative impact on global trade of the pandemic.
Both of these responses were designed to inform WTO Members so that they could make their policy decisions based on as much reliable data as possible. Fortunately, in the light of more information on the course of the disease and the impact on trade, about one-third of the initial trade measures were removed.
Third, groups of Members began to craft actual and potential responses to the pandemic. Detailed proposals were put forward, for example, by Singapore, New Zealand, the Ottawa group led by Canada, by Korea, and by Canada on agriculture its own behalf and a variety of co-sponsors. Discussions to broaden and deepen these initiatives are continuing. In the meantime, in several cases, individual proponents have already enacted reforms designed to ease trade in line with the proposals they tabled.
2. How have national trade policies impacted supplier dynamics internationally, particularly between developing and developed countries?
The impact of the trade restrictions and trade facilitating measures has been confined to the specific products that governments felt were needed to deal with COVID-19, such as masks, other personal protective equipment, pharmaceuticals seen as potentially useful for treatment, and ventilators. Besides export restrictions, there have been instances of strategic government investments, pre-emptive procurement and even, reportedly, seizures of goods in transit in these categories.
There has been bidding for needed supplies not just among countries but among political subdivisions of countries. Prices rose, scarce supplies became scarcer.
There was a call from domestic politicians to have more on-shoring and near-shoring, for diversifying sources of supply. This shrinking back from world trade however has limits. It is one thing to convert factories from making sportswear or fashion clothes to making masks and other personal protective gear. It is another to try to replicate at home the 600 parts sourced globally to make a ventilator. And when it comes to global supply chains, the economics of running businesses often provides effective limits to government policies favouring self-sufficiency.
In the course of the pandemic and its economic consequences, developing countries tend to suffer more. While they received support from multilateral development banks, foreign exchange reserves would be depleted as the effects of global reductions in all trade and economic activity quickly reached their borders. No country was immune. For pharmaceuticals and medical equipment, onshoring was not a real option, even if collapsing domestic economies still managed to provide the financial means to support it. Whether the allocation of needed supplies was determined as a result of producer government fiat or by market forces, developing countries, and particularly the least developed could be expected to be worse off s compared with wealthier countries.
3. What kind of policies can make a positive difference for different types of countries (developing vs developed, industry vs service focused, etc…)
We are not done with the pandemic. It is at a current peak and can return in subsequent waves. In the short term, agricultural exporting countries which are obligated to take into account the needs of foreign markets can demonstrate clearly that they are doing so. They can apply the same practice voluntarily to proposed export restrictions on industrial goods. They can continue to be transparent as to what trade measures they are considering. They can avoid excessive standards that interfere with trade.
Developing countries can be very specific as to their needs. This is a time for an outbreak of practicality on the part of all. U.S. President Franklin Roosevelt at the beginning of the Second World War famously said that if your neighbor’s house catches fire, you do not hesitate to lend him your garden hose to help put the fire out. The multilateral institutions have to continue to work together to make sure that trade finance for the developing and least developed does not dry up further. Trade finance never recovered fully from the 2008 Financial Crisis, so every effort must be made to keep trade flowing.
Excessive stocking of food should be avoided. Transparency must be as complete and current as possible so that well-informed national decisions can be made. Enhanced dialogue is needed so that WTO Members’ interests are widely known.
The record has been largely good with respect to the availability of food. Supplies are plentiful on a global basis. Stocks are high and crops are generally strong. Global agriculture must remain agile to deal with the extraordinary difficulties caused by supply channels being disrupted by the disease and the sharp economic downturn.
Besides trade policies, positive domestic fiscal and monetary policies will play an essential role in restoring world trade to prior levels.
4. What WTO tools can most help exporters and importers survive in the short term?
Stay currently informed as to the latest changes in trade measures and standards. The WTO website – WTO.org — has a COVID-19 section. It also has a number of important resources to learn about standards.
A tariff increase can slow trade, depending on its size and the nature of the goods. An export ban or a change in a standard or import requirement may stop trade.
An excellent source for information on product standards is the online notification alert system, called ePing. It is possible to sign up for e-mailed notices of standards and sanitary and phytosanitary restrictions of direct interest to any individual or business.
Many WTO Members have simplified their border procedures and requirements to ensure smooth trade in essential products, including food and medical goods. Standards and regulatory measures (SPS and TBT) make up two-thirds of notifications submitted by WTO Members in response to COVID-19. Information about all of these changes, whether trade-restricting or trade-facilitating, can easily be obtained through ePing by using a newly created “COVID-19” keyword.
5. How could the WTO be transformed to incorporate pandemic risk into its operations and regulations?
Members and commentators have made a number of useful suggestions. The first thing to do for any organization is to assure that it can keep operating. The WTO, its Members and its Secretariat, were not used to having online meetings as a regular form of conducting business. They are now. The WTO had never had to operate with fewer persons on-site, and with sanitary precautions. That is not a worry going forward.
There are a lot of specific ideas that have been tabled by Members that can make the rules more suitable to deal with any future pandemic. Here are a few examples:
- The first need is transparency. The notification process can be streamlined further using digital tools. The resulting information can then be promptly made available to the public and it will be reliable and verified by the country imposing the measure.
- Standards of conduct or best practices can be specified for export controls, such as adopting for industrial export restrictions a requirement that now exists for agricultural products, namely, to take into account the effects of proposed measures on others.
- Elements of a response can include an open dialogue on common problems faced, with consultation with countries whose trade is affected.
- Agreed guidance can be formulated on how to use flexible government regulation to assist in streamlining logistics, such as customs clearances, in emergencies.
- Tariff suspensions can become a general practice when issues of short supply arise.
- Trade-restrictive measures can contain a sunset clause, or at least provide for internal review by the authorities imposing the measure, so that the measures do not remain in effect beyond the period for which they are needed.
6. How will governments seek to regulate trade differently after this crisis in the medium to long term?
This is a story yet to be written. One can assume that there will at least be an analysis by governments and public authorities of adequacy of supplies to meet a future health crisis. Some products can be stockpiled. Identifying and arranging for more diverse sources of supply is likely. It would be sensible to consider how to maintain express delivery when commercial passenger traffic is cut off. Criteria for easing standards, and protocols for facilitating cross border freight and data flows can be established.
The digital economy provides a wider range of options than those previously available. Means should be found to reduce the gap — the digital divide — among nations. The E-Commerce negotiations at the WTO hold the promise of greatly improving the global trade rules for digital economy with benefits for all.
A close analysis of ways to enhance the implementation of the Trade Facilitation Agreement is also likely.
Future demands on the multilateral trading system may be all too near. Pandemics always have a second wave, and sometime more than one recurrence. Individual governments need to consider what worked and what did not in their current regulation of trade. They need to assess what can be done in the near, medium and long term that can be learned from their 2020 experience. Not all the lessons may be apparent, but some will be.
One example, commodities which deteriorate in the open, such as cotton, need to have contingency plans for storage.
The issues raised go beyond supply of essential products, but also to services. Some services can be supplied remotely. Others will require personnel moving across borders. Thought should be given as to how to facilitate supply of in-person services with adequate health safeguards.
Trade takes place only where production and consumption can be maintained. This is largely a domestic matter, through the provision of economic stimulus packages. Beyond macroeconomic measures, a lot of practical steps have been taken and knowledge gained about how to keep factories running and providing goods including food to consumers while maintaining sanitary standards.
Changes in trade regimes are unlikely to be sweeping, as the number of products of concern for fighting COVID-19 is limited.
7. What new opportunities will this create for public sector stakeholders — government entities that support cross-border trade (such as customs, ministries of trade, of industry, and of foreign relations) and more specifically, free zone authorities and operators that host private companies within their perimeter.
Those with hands-on experience should help shape the rules and practices of the international trading system. Their input is vitally important. They should consider holding discussions with other stakeholders similarly situated, other free zone operators, and formulating proposals for the authorities in WTO Members’ capitals.
The WTO is international not super-national. It largely consists of what its Members bring to the table and what they are able to resolve amongst themselves. The results need not always be a change in the rules, which requires consensus of all 164 WTO Members. Stakeholders should first seek to have domestic regimes favorable to their trade interests. They should then support their officials who in turn will consult with other governmental authorities. Through your association or through direct contacts where you operate in another country, you can carry an important message as to what is needed.
Trade is going to grow; the question is how quickly. The pace may be largely due to domestic measures to stimulate demand as well as production in the coming phase of economic recovery. Global trade rules will play a role, however. Your members will see possibilities for improvements from direct experience. The opportunities are great. Policy-makers can be better informed if you take an active role in sharing your insights.
8. How will these changes transform global trade relationships, particularly between developing and developed countries?
Demographics and technology are going to change the face of trade. Markets are going to continue to grow, but more so in countries that have expanding populations. Just as giant container ships, refrigeration and other transportation innovations revolutionized trade, continued innovations in the digital sphere will increasingly ease the flow of goods and services. The Green Revolution for the production of wheat and rice changed trade flows. Crop insurance is now being administered with the use of earth satellites. We will find out how Artificial Intelligence, drones, 3D printing, and biochemical breakthroughs, will change trade in ways we may not currently anticipate.
At the same time, challenges will appear. Science tells us that this is not the last pandemic. Severe weather events are becoming more common. Any system of international trade has to be flexible — it must accommodate innovation. But there must be management as well.
No country is too remote to remain untouched by change. The trading system must be designed to be beneficial for all, while being fit for purpose. The opportunities for developed and developing countries to work together for their mutual benefit will only increase, but to realize benefits the opportunities must be taken advantage of. Free zone operators can be on the leading edge of much positive change. They should be sure to share what they learn so that the global trading system can be continuously improved. Telecommunications, the internet, transportation are shrinking the world in many respects. It is up to those engaged in trade to make every effort to ensure that maximum benefits are available for all.
The multilateral trading system exists for those engaged in commerce. Without it, the world would be a poorer place. The WTO rules underpins nearly all of world trade, including bilateral and regional trade agreements. It needs your support. It needs to be continuously improved. In that work you have an active part to play. I hope that you will do so.
Ambassador Alan Wolff is the Deputy Director General of the WTO.
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