TWN Info Service on WTO and Trade Issues (Nov20/22)
23 November 2020
Third World Network

Slowdown in G20 trade restrictions due to impact of COVID-19
Published in SUNS #9237 dated 20 November 2020

Geneva, 19 Nov (D. Ravi Kanth) – The trade measures adopted by the G20 group of industrialized and several developing countries during the past five months (mid-May to mid-October) have slowed down due to a sharp decline in overall global trade since the COVID-19 outbreak, according to a report released by the World Trade Organization on 18 November.

Prepared against the backdrop of the ravaging COVID-19 pandemic, the WTO’s latest Trade Monitoring Report on G20 trade measures reveals a mixed picture.

Prior to the COVID-19 pandemic that began in late January, merchandise exports fell by 21% in nominal terms during the second quarter of 2020 as compared to the same period in 2019.

With the COVID-19 having struck a deadly blow to the global services sector, particularly in air travel, and other commercial services among others, the drop in services exports was estimated at 30%.

“The trade coverage of “regular” import-facilitating and import-restrictive measures introduced during the five- month period, that is those unrelated to the COVID-19 pandemic, dropped to USD (US dollars) 36.8 billion (down from USD 735.9 billion in the previous period) and USD 42.9 billion (down from USD 417.5 billion) respectively,” the WTO report suggested.

It attributed the drop to “a function of the sharp decline in overall global trade flows, the diversion of governments’ attention towards pandemic response, and relative stasis in major bilateral trade tensions that had elevated both sets of figures in earlier reporting periods – as well as a general commitment to keep trade flowing.”

According to the report, COVID-19 trade-facilitating measures on goods “implemented since January covered trade worth an estimated USD 155 billion, while pandemic-related trade-restrictive measures – most of which were export controls – covered trade worth USD 111 billion.”

Significantly, most of the pandemic-related trade-restrictive measures were imposed by industrialized countries such as the US and the European Union among others, according to various media reports.

The WTO report suggested that “of the 133 COVID-19 trade and trade-related measures recorded for G20 economies since the outbreak of the pandemic, 63 per cent were of a trade-facilitating nature and 37 per cent were trade-restrictive.”

It observed that “almost three out of every ten COVID-19 restrictive measures on goods taken by G20 economies had been repealed by mid-October,” indicating that these measures fell in the basket of export restrictions.

The report argued that “in the services sectors heavily impacted by the pandemic, most of the 68 COVID-19 related measures adopted by G20 economies appeared to be trade-facilitating.”

Several trade-facilitating measures in goods, according to various media reports, were adopted by China and India among others.

According to the report, “over 400 support measures in direct response to the pandemic and collectively worth several trillion dollars were put in place by G20 economies up until mid-October.”

The report suggested that “these emergency support measures are central to governments’ strategies to address the pandemic-induced economic downturn and lay the groundwork for a swift recovery of output and trade, and appear to be temporary in nature.”

According to the WTO estimates of the accumulated stockpile of import restrictions implemented since 2009, around “10.4 per cent of G20 goods imports (USD 1.5 trillion out of a total USD 14.6 trillion of G20 imports) are affected by import restrictions that are still in force after being put in place by G20 economies.”

“COVID-19 has resulted in an almost unprecedented drop in economic output and trade,” said the WTO’s deputy director-general Yonov Frederick Agah, arguing that “trade will play a fundamental role in making a strong economic recovery possible, so it is encouraging to see the general commitment by G20 countries to keep trade flowing.”

“Along with open markets,” he said, “the fiscal and monetary support put in place by G20 economies will be central to addressing the downturn and laying the foundations for a stronger, more inclusive and sustainable global economy.”

He suggested that G20 members must continue to work together to bring down the accumulated stock of trade restrictions since 2009.

In a separate joint summary on G20 trade and investment measures during mid-May to mid-October 2020, it is suggested that the ongoing COVID-19 pandemic has brought significant changes in the G20 members’ international investment policies.

According to the joint summary issued by the Paris-based Organization for Economic Cooperation and Development (OECD), the WTO, and the United Nations Conference on Trade and Development (UNCTAD), “COVID-19 has accelerated the introduction and strengthening of policies to counter threats to essential security interests that may be associated with foreign investment in the health sector.”

It is suggested in the joint summary that “overall, risk-related investment policy making has reached a historic all-time high in the first nine and a half months of 2020,” as new measures are adopted in health industries.

Instead of narrowly targeting identified areas of risk, governments must “continue creating conditions under which international investment can flourish,” the three organizations said.

Echoing the G20 leaders’ call “that emergency trade and investment measures be targeted, transparent, temporary and proportionate,” the three organizations said that it is critical to ensure that “the large government support programs, which have been at the core of the necessary response to the crisis, do not become a source of distortions and unfair competition in the future.”

In effect, the three organizations seem to be concerned that large subsidy programs being implemented by the United States, the European Union, and other major developed countries could distort competition and lead to other major distortions.

It remains to be seen whether this period of relative calm in global tit-for-tat trade measures continues as the US President-elect Joe Biden begins to formulate his new trade policies and prepares to review the trade measures imposed by his predecessor Donald Trump, said a report in the Wall Street Journal on 19 November.

More importantly, the WTO report acknowledged that the trade-restrictive measures imposed in various services sectors affected “the temporary movement of natural persons.”

In fact, COVID-19 has wreaked havoc on the short-term services providers from developing countries.

The pandemic has severely affected the remittances sent from skilled and unskilled workers from developing countries.

The WTO report appears to remain silent on the demise of the two-stage dispute settlement system at the WTO and whether it has adversely affected the resolution of trade disputes concerning the frequent use of trade remedy measures and SPS (sanitary and phytosanitary) measures as well as technical barriers to trade (TBT).

The report has argued that the trade coverage of COVID-19 related trade-facilitating measures on goods implemented since the beginning of the pandemic was estimated at USD 155 billion, some USD 44 billion more than that of the COVID-19 trade-restrictive measures.

“Of the 133 COVID-19 trade and trade-related measures recorded for G20 economies since the outbreak of the pandemic, 63% were of a trade-facilitating nature and 37% were trade-restrictive”, it indicated.

MAIN FINDINGS OF THE WTO REPORT

Specific findings of the report include:

1. World trade was already slowing before the pandemic and declined sharply in the first half of 2020: Global trade declined precipitously in the first half of 2020 at a time when the human, social and economic toll from the COVID-19 pandemic rose.

2. In volume terms, merchandise trade fell 14.3% quarter-on-quarter in Q2, the largest such decline on record. In nominal USD terms, merchandise exports were down 21% in Q2 compared to the previous year while commercial services exports were down 30%.

3. The slowdown in the number and trade coverage of regular trade-restrictive and trade-facilitating measures on goods between mid-May and mid-October 2020 was significant.

4. The trade coverage of the new import-facilitating measures implemented by G20 economies was estimated at USD 36.8 billion (down from USD 735.9 billion in the previous period). The main sectors affected included electrical machinery and parts thereof, machinery and mechanical appliances and pharmaceutical products.

5. The trade coverage for the new import-restrictive measures implemented by G20 economies was estimated at USD 42.9 billion (down from USD 417.5 billion in the previous period). The main sectors affected included mineral fuels and oils, machinery and mechanical appliances and vehicles and parts.

6. Most of the COVID-19 related measures taken on goods since the outbreak of the pandemic were trade- facilitating. The majority of the 133 COVID-19 trade and trade-related measures were adopted on a temporary basis. Although in the early stages of the pandemic most measures restricted the free flow of trade, as at mid-October 2020, 84 (63%) of all G20 measures taken in response to the pandemic were of a trade-facilitating nature. A total of 49 measures (37%) could be considered trade-restrictive.

7. The gradual phase-out of export restrictions targeting products such as surgical masks, gloves, medicine, and disinfectant continued during the review period together with the roll-back of other trade and trade-related measures taken in the early stages of the pandemic.

8. Around 27% of the COVID-19 restrictive measures implemented by G20 economies had been repealed by mid-October. By then, G20 economies had also eliminated around 21% of COVID-19 trade-facilitating measures. The trade coverage of COVID-19 related trade-facilitating measures implemented since the beginning of the pandemic was estimated at USD 155 billion, while that of the COVID-19 trade-restrictive measures stood at USD 111 billion.

9. G20 economies put in place a large number of COVID-19 related support measures. Since the beginning of the pandemic, 205 COVID-19 support measures have been communicated by G20 economies to the Secretariat and another 206 measures were identified from public sources and governmental websites, i.e. a total of 411 COVID-19 support measures or almost 60 COVID-19 related support measures per month between March and mid-October 2020.

10. The number and variety of G20 support measures implemented in response to the economic and social turmoil caused by COVID-19 is greater than that witnessed during the 2008-09 global financial crisis. These measures target sectors of the economy heavily affected by the crisis, including health, aviation, tourism or catering, and also include monetary, fiscal and financial measures as well as broader stimulus packages.

Governmental measures were complemented with various support programs by international intergovernmental organizations. Most of these measures appeared to be temporary in nature. These emergency support measures are central to governments’ strategies to address the pandemic-induced economic downturn and to prepare the ground for a strong recovery.

11. Services sectors were heavily impacted by the pandemic although the extent varies by sector and mode of supply. Services that rely on physical proximity between suppliers and consumers have been most impacted by mobility restrictions and social distancing measures imposed for public health reasons.

12. Trade in certain modes of supply experienced severe downturns as the pandemic impacted on existing operations in foreign markets and on decisions concerning the set-up of new establishments. On the other hand, the crisis has boosted online supply in sectors such as retail, health, education, telecommunication or computer services. The crisis has accelerated companies’ efforts to expand their online operations. Overall, services measures introduced by G20 economies between mid-May and mid-October 2020, which mainly related to telecommunication services, e-commerce, and services supplied online, were trade-facilitating.

However, several new policies appeared to be trade-restrictive, including bans on certain communication apps imposed on national security grounds. As regards pandemic-related measures adopted in relation to services, most of the 68 adopted by G20 economies appeared to be trade-facilitating, e.g. measures to ease the supply of, and access to, telecommunications services or measures to facilitate the provision of telemedicine services. Other measures were trade-restrictive, such as measures tightening foreign investment regimes, or affecting the temporary movement of natural persons.

13. The significant increase of G20 trade remedy initiations confirm that these measures remain an important trade policy tool for G20 economies. During the review period, 165 initiations of trade remedy investigations and 35 terminations of trade remedy actions were recorded. The monthly average of trade remedy initiations (33) was the highest observed since 2012. Initiations of anti-dumping investigations accounted for around 80% of all trade remedy initiations, which also includes safeguards and countervailing actions.

14. The trade coverage of trade remedy initiations recorded in this Report was estimated at USD 34.1 billion (up from the USD 24.5 billion in the previous period) and that of terminations at USD 2 billion (up from USD 1.9 billion in the previous period). These are developments which warrant further monitoring in the coming months. As at 15 October 2020, two G20 members had notified anti-dumping actions referring to the COVID-19 pandemic.

15. G20 economies continued to use the SPS and TBT Committees transparency mechanisms to notify their SPS measures, accounting for 66% of all regular notifications and 35% of emergency notifications since 1995. Between 1 February and 30 September 2020, a total of 59 COVID-19 related notifications and communications were submitted to the SPS Committee. Of these, 23 were submitted by 12 G20 economies.

The nature of most of these measures has shifted, from initial restrictions on animal imports and/or transit from affected areas, and increased certification requirements to, as of April, facilitating measures allowing temporary flexibility for control authorities to use electronic certificates for checks. Of the 23 G20 notifications and communications, 12 could be considered trade-facilitating.

16. G20 economies remain the most frequent users of the TBT Committee’s transparency mechanisms, having submitted 46% of all TBT notifications since 1995. As at 1 October 2020, 91 TBT notifications/communications on standards and regulations were submitted to the WTO in response to the pandemic. G20 economies accounted for 45 of these.

Around half of the TBT notifications in relation to the COVID-19 pandemic were of a temporary nature, often applying for a period of six months and covering a wide range of products, including personal protection equipment (PPE), medical equipment, medical supplies, medicines and food. Notified measures broadly fell into three main categories, i.e. streamlining certification procedures; ensuring the safety of medical goods; and making food available by relaxing technical regulations. Measures maintained by G20 economies are very often discussed in the SPS and TBT Committees under the heading of Specific Trade Concerns.

17. Many Intellectual Property measures introduced during the review period aimed at facilitating COVID-19- related health technologies. G20 economies continued to fine-tune their domestic intellectual property frameworks, including relaxing procedural requirements and extending deadlines for administrative IP matters in response to the pandemic.

In conclusion, the findings of the WTO report suggest that certain elements of the COVID-19 response had weak responses, while some other elements, including measures in the health sector and short-term movement of services providers, had an adverse effect on developing countries.