TWN Info Service on WTO and Trade Issues (May20/21)
20 May 2020
Third World Network

COVID-19: South opposes attempts to foist trade liberalization measures
Published in SUNS #9123 dated 19 May 2020

Geneva, 18 May (D. Ravi Kanth) – A large majority of developing and least-developed countries at the World Trade Organization have opposed attempts to use the Covid-19 pandemic to negotiate far-reaching trade liberalization measures with binding commitments, trade envoys told the SUNS.

At a virtual General Council (GC) meeting on 15 May, India, South Africa, Indonesia, the coordinators of the ACP (Africa, Caribbean, and Pacific) group and the African Group, and many other developing countries warned the developed countries and their allies that it is unethical to use Covid-19 as an opportunity to foist new trade liberalization measures with binding commitments, said trade envoys, who asked not to be quoted.

In sharp contrast, Switzerland, on behalf of many developed and several developing countries, Japan, the European Union, and the United States issued their trade agendas, including proposals to remove export restriction measures on agricultural products.

Significantly, the United States adopted conflicting positions at the meeting. Washington indicated that it intends to diversify “supply chains and increase manufacturing capacity back home” but also pursue, along with other industrialized countries, a “consequential WTO” to deal with “market-oriented conditions” that could include new disciplines for industrial subsidies.

Surprisingly, the US seems to have echoed what Director-General Roberto Azevedo said on 14 May that the WTO requires “consequential” reforms to address the challenges in the 21st century. (See SUNS #9122 dated 18 May).

The US trade envoy, Ambassador Dennis Shea, highlighted the multilateral initiatives that Washington will pursue to address the “existential crisis” at the WTO.

Ambassador Shea particularly emphasized special and differential treatment (S&DT) involving graduation/ differentiation among developing countries for availing S&DT in the current and future trade negotiations, and enhanced “notification compliance” requirements centering on punitive non-compliance measures.

The US, however, seemed to imply that tackling the COVID-19 pandemic was the priority.

But a large majority of developing countries have already opposed the US reform proposals on grounds that they had paid a huge price in the Uruguay Round in order to secure the S&DT flexibilities, said trade envoys who asked not to be quoted.

Switzerland, which coordinates the “Friends of the System” coalition that includes major developed countries except the US and the European Union, presented a long list of liberalizing measures, including the need to avoid export restrictions on products, and agricultural products, said trade envoys, who asked not to be quoted.

The EU, which supported the demands made by the “Friends of the System”, called for accelerating negotiations on fisheries subsidies and on e-commerce.

Japan pressed for resuming work on fisheries subsidies and the plurilateral Joint Statement Initiatives (JSIs) such as on e-commerce, investment facilitation, and new disciplines for MSMEs (micro, small, and medium enterprises), said trade envoys.

In a sharp response to the narratives advanced by the developed countries, India delivered a hard-hitting statement that said that “in formulating a response (to the Covid-19 pandemic), it is critical to bear in mind that the negative effects of this pandemic will be felt unevenly, though widely” and “the strain on economic, food and livelihood security will disproportionately impact developing countries and LDCs with large populations and limited resources.”

India’s trade envoy Ambassador J S Deepak drew five markers for combating the Covid-19 pandemic at the World Trade Organization, pushing back against egregious efforts by major industrialized countries to extract trade-liberalization commitments from India and other developing countries by using the pandemic as a portal.

In a forceful intervention at the virtual General Council meeting on 15 May, Ambassador Deepak said “the economic hardship and other negative repercussions of COVID-19, makes carrying on with negotiations in a business-as-usual format untenable.”

Protecting human lives must remain a top priority for members at the WTO, India said.

“Having agonized in the last few months of the pandemic at how people have been dying, we need to urgently turn our attention to alleviating the terrible conditions in which so many are forced to live, especially in the developing world!”, Ambassador Deepak told his counterparts at the GC meeting.

India has placed five markers for members to consider during the current battle against Covid-19 pandemic at the WTO.

The five markers include:

1. India acknowledges “the importance of coordinating the global response in a way that avoids unnecessary disruption in the flow of vital medical supplies, food and other goods and services across borders.”

2. India remains committed to taking emergency measures for combating Covid-19 on “targeted, proportionate, transparent, and temporary” basis.

“The narrative-push by some WTO Members to seek permanent tariff liberalization on a range of products in response to a temporary crisis, appears to be a thinly-veiled bid to use the crisis as an opportunity to gain market access for their exporters,” he warned.

“Developing countries seeking to shore up manufacturing capacity in medical products will require tariff protection for their nascent domestic industry” and “protection of job losses in many service sectors”, Ambassador Deepak said emphatically.

Attempts to prohibit the use of export restrictions on medical and agricultural products is untenable because “developing countries being unable to match the deep pockets of buyers in developed countries will see these products vanish in times of shortage.”

“Export restrictions are a WTO-consistent policy tool that is important to prevent critical domestic shortages of food, medicine and equipment”, India argued.

3. “If WTO Members are serious about trade-related measures aimed at combating Covid-19, then a useful starting point would be to enable the use of TRIPS (trade-related aspects of intellectual property rights) flexibilities to ensure access to essential medicines, treatments and vaccines at affordable prices,” the Indian envoy argued.

4. “If additional temporary flexibilities are required (in the TRIPS) to guarantee this fundamental objective, so be it,” India said, arguing that “the pandemic has also highlighted the need for ensuring easier cross-border movement of medical professionals and the need for multilateral initiatives in this respect.”

5. Covid-19 underlined “the urgent need to build the capacity of developing countries and LDCs in areas like digital skills and broadband infrastructure, rather than negotiating binding rules on e-commerce, which will freeze the non-level playing field against their interests.”

Speaking after India, Indonesia said that “it is difficult to envisage any enhanced commitments” for pursuing far-reaching trade liberalization measures by developing countries.

South Africa’s trade envoy, Ambassador Xolelwa-Mlumbi Peter, said her country “implemented measures aimed at promoting public health in accordance with the exceptions available in the WTO.”

The measures include “the introduction of an export permit for essential medical products to fight COVID-19” and “trade facilitative measures were also implemented such as submission of electronic SPS certificates.”

The South African envoy argued that her country supports “the multilateral, rules-based system as a means to build more resilient, diversified global supply-chains.”

“We cannot agree to proposals for global rule making that limit our policy options to respond to the crisis, enhance our preparedness for future crises and to pursue our plans for economic recovery,” she said emphatically.

“It is not advisable to make binding decisions in a policy environment that is manifestly uncertain, including on tariffs and export restrictions which are legal in the WTO under Art. XI of GATT and Art. 12 of AoA (Agreement on Agriculture),” South Africa argued.

More importantly, South Africa said categorically that “we need to preserve policy tools, including tariffs to address job losses, revive industries and build new sectors and capabilities,” emphasizing that “one-size-fits-all approaches are not always appropriate.”

Members must adopt measures that are “targeted, temporary, transparent and proportionate and should not create unnecessary barriers to trade,” the South African envoy said.

The Covid-19 health crisis, according to South Africa, “has revealed “strategic vulnerabilities” and we should expect more efforts to diversify supply chains and promote domestic manufacturing at least in some sectors.”

“Some Members are calling for strategic autonomy; this suggests a need for policy flexibility and signals that a re-balancing between global rules and national economic development imperatives is necessary and possible,” she argued.

Also, importantly, the Covid-19 “has highlighted the importance of the role of Governments in the economy, not only to close the gaps and address market failure but to regulate in the public interest.”

South Africa proposed “a temporary umbrella “Peace Clause” on all Government measures implemented in the context of COVID-19.”

“In this present context of global emergency, it is important for WTO Members to work together to ensure that IP rights such as patents, industrial designs, copyright and trade secrets do not create barriers to the scaling-up of research, development, manufacturing and supply of medical products essential to combat Covid-19.”

Given the adverse disproportionate effects on developing countries due to the Covid-19 crisis, especially African countries, South Africa said it is important to “recognize the close inter-relationship between finance, debt and trade.”

“The large gap between the international support currently on offer and financing needs of developing countries will therefore not only weaken the effectiveness of the immediate response to the crisis, but also delay the global economic recovery,” South Africa warned.

South Africa called for “strengthening S&DT (special and differential treatment) provisions which are critical to promote public health, accelerate industrialization, upgrade and modernize manufacturing, promote technology transfer and close the digital divide to promote an inclusive digital economy.”

The South African envoy lamented that while G-90 proposals have articulated “these aspects, yet Members have not been willing to engage us. This pandemic highlights the importance of S&DT for developing countries and this matter should be taken up as a matter of priority.”

On behalf of the ACP (Africa, Caribbean, and Pacific) group, Jamaica said that the “COVID-19 represents an unprecedented health challenge to all Members.”

“For the most vulnerable, that is, developing countries and LDCs which have weaker health systems, access to affordable medicines, vaccines, diagnostics and medical equipment, as well as access to technologies to produce them, are indispensable to the fight against this pandemic,” Jamaica argued, stressing the importance of TRIPS flexibilities.

More importantly, “in order to better facilitate access, it is important that any COVID-19 invention or other technologies, be temporarily treated as global public goods so that they can be manufactured and distributed in the required quantity, but in line with acceptable standards, by multiple producers, including those in developing countries and LDCs,” the ACP group emphasized.

The TRIPS Agreement “should continue to be interpreted and implemented in a manner supportive of WTO members’ right to protect public health and, in particular, to promote access to medicines for all,” Jamaica said.

“The WTO has a vital and ethical role to play in striking an acceptable balance between, on the one hand, preserving the health of our populations and on the other, saving the lives of our people, when looking at the commercial aspects of intellectual property rights,” the ACP group argued, emphasizing that members “must bear in mind that an unhealthy population can neither engage in nor facilitate trade.”

The ACP group said it remains concerned “about the opportunistic narrative that questions the relevance of the WTO.”

Botswana, on behalf of the African Group, said “the WTO could spur global cooperation on a number of fronts” including:

1. Help to ensure that the COVID-19 treatment is accessible and affordable to the world as a public good. The TRIPS Agreement, including its flexibilities, can contribute to this objective;

2. The use of appropriate trade policy tools to ensure that patents and other intellectual property do not create avoidable barriers to facilitate the local manufacturing or import of essential medical supplies, devices, or technologies, including diagnostics, medicines, and vaccines.

3. The strengthening of S&DT provisions to promote inclusive growth and ensure a development-oriented Multilateral Trading System (MTS); and

4. To progress the implementation of the 1998 Work Programme on E-commerce that addresses the developmental aspects of e-commerce.

While COVID-19 has highlighted the importance of digital transformation, it has more importantly brought to light the implications of the digital divide, both within and between countries, particularly infrastructural gaps to enable e-commerce in Africa, and how to develop it.

In conclusion, it is clear that developing countries need to remain vigilant about the open and ambitious trade agenda being advanced by the developed countries, using the Covid-19 as a portal, trade envoys said.

Meanwhile, the GC chair, Ambassador David Walker from New Zealand, informed members that he would hold the next regular GC meeting on a virtual platform on 29 May.