COVID-19 Symposium: Thinking Creatively and Learning from COVID-19– How the WTO can Maintain Open Trade on Critical Supplies

COVID-19 Symposium: Thinking Creatively and Learning from COVID-19– How the WTO can Maintain Open Trade on Critical Supplies

[Dr. Mona Pinchis-Paulsen is a Teaching Fellow in the LLM Program in International Economic Law, Business and Policy at Stanford Law School.]

Over a matter of days, governments became reflexively nationalist in responding to COVID-19. Several emergency powers and orders were ignited. Global Trade Alert found that, as of 21 March 2020, 54 governments had introduced export restrictions on medical supplies. Chad Bown et al of the Peterson Institute for International Economics reported here, here, and here on the ‘self-defeating’ export restrictions by the European Union and richer countries, including the dire impact upon poorer countries and risks for unleashing a downward spiral of beggar-thy-neighbour policies. On 26 March 2020, The Economist reported on the coming ‘brutal’ shock to global trade: aside from the rise in trade barriers, factories around the world are struggling with uncertain supplies and sick workers, not to mention regional and national ‘shelter-in-place’ orders.

These developments present a fresh threat to the world trading system. Was any of this legal?

The World Trade Organization (WTO) trade rules contain exceptions, whereby members may cite health or national security concerns to justify WTO-illegal measures. Article XX of the General Agreement on Tariffs and Trade (GATT) provides for exceptions for measures ‘necessary to protect human animal or plant life or health’. Further, GATT Article XXI(b)(iii) confirms the GATT shall not ‘be construed to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests […] taken in time of war or other emergency in international relations’. As a result, there is at least an argument that such measures are justified.

But perhaps that was the wrong question to be asking. It may be legal, but that doesn’t make it the right response. In a pandemic, maybe the rules should push in the opposite direction. What if instead of an exception that permits discrete trade barriers, there was a universal exception to the negotiated balance that allows WTO Members to engage in protection? What if there was a provision that required all Members to make trade completely open to address the pandemic?

Maintaining open trade is crucial to ensuring necessary supplies can go where needed. Returning to Chad Bown’s work, the EU’s export restrictions threaten to cut off many countries from vital medical supplies when they need it the most. Moreover, in a report entitled Tackling COVID-19 Together, Simon Evenett at Global Trade Alert cautioned against ‘fear-driven’ and ‘counterproductive’ export limits. For example, while the aim of export restrictions is to increase supply to local hospitals and doctors, they can also create higher costs for the implementing country, as ‘the loss of future export sales will discourage local firms from ramping up production and investing in new capacity’ (Evenett at 6). Further, trade restrictions can jeopardize international cooperation, which is why WTO Director-General Roberto Azevêdo welcomed a pledge by the Group of 20 major economies to work together to ‘ensure the flow of vital medical supplies, critical agricultural products, and other goods and services across borders’.

The idea of an inverse of the GATT exceptions (‘Inverse-Exceptions’) acknowledges the global nature of COVID-19. There are not multiple crises occurring right now. There is one. To avoid international trade slowing to a standstill due to a rapid rise in trade barriers, invocation of Inverse-Exceptions would still come from a single WTO Member. However, it would require all Members to acknowledge that there is a need for immediate trade liberalization due to an overwhelming global concern. That is, it is not just a national security or health concern: it is a concern of humanity.

How would such a provision work? The WTO is an intergovernmental organization where each Member retains the right to pursue its domestic agenda while committing to international cooperation through its dispute settlement, monitoring, and transparency mechanisms. There are no WTO police to enforce its rules. In this sense, invoking a global exception such as the one proposed seems improbable.

Inverse-Exceptions could look like Article XXI of the GATT, with pre-defined criteria as to what actions fall under its umbrella. Such circumstances could, for example, include language related to a pandemic. Once a pandemic is declared, an institutional body would immediately be convened to evaluate invocation of Inverse-Exceptions and, subsequently, to effect coordination with all Members to remove trade barriers on certain designated products in a targeted, temporary, and transparent manner. Here I have in mind medical equipment and supplies. As Deputy Director-General Alan Wolff recently observed, ‘Nothing in the WTO rules prevents a roll-back of export restrictions’.

In designing Inverse-Exceptions, Members must determine what sort of body works best in these circumstances, e.g. an ad hoc committee or emergency ministerial. Working in coordination with relevant international organizations and UN bodies, this new WTO body would maintain the procedural norm of multilateralism, acknowledging Members’ cultural and economic differences (the dynamics of how this could work are well theorized by Mary Footer, here at §§3.3, 3.4). Possible precedents may be found in the ‘Heads of Delegations’ of the GATT Contracting Parties that ‘sometimes meet in private, constituting a special high level body whose actions are then ratified by the CONTRACTING PARTIES’ (Jackson at 158). Another possible frame of reference is Jutta Brunnée’s elaboration of the ‘continuous interactional processes’ of the Conference of the Parties, or COPs, common in multilateral environmental agreements.

Thinking about Inverse-Exceptions complements recent scholarship seeking to consider deliberative mechanisms for security policies, such as Simon Lester and Inu Manak’s recently proposed WTO Committee on National Security (forthcoming Duke Journal of Comparative and International Law), or Ben Heath’s normative consideration of fora for ‘institutionalized shadow politics’. Other recent work by Manak demonstrates that WTO committees are valuable for many strategic and political reasons beyond the goal of dispute avoidance. I do not envision Inverse-Exceptions as a forum for disputes, but have in mind a specialized body to map out cooperation and oversee transparent procedures for liberalization of certain goods and services following invocation of the Inverse-Exceptions. Prior to COVID-19 we may not have had a counter-factual, but recent events demonstrate what happens without ex ante guidance.

Inverse-Exceptions is not meant to sustain the global economy, nor would it ward off financial crises. Invocation could only occur for urgent global concerns. It accepts that in an increasingly interconnected world, there are some challenges that require global action, even if on a select and temporary basis.

The author wishes to thank Simon Lester, Harlan Cohen, and Inu Manak for thoughtful edits.

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