April 21, 2020
WTO: Ministerial Delay, COVID-19, and Ongoing Issues
Overview
Select Ongoing Negotiations of U.S. Interest
Due to the coronavirus pandemic (COVID-19), the World
Fisheries. Members had committed to finish negotiations
Trade Organization (WTO) canceled its 12th Ministerial
on fisheries subsidies at MC12, an achievement many view
Conference (MC12) planned for June 2020. The biennial
as critical to upholding the WTO’s legitimacy. Primarily
meeting, which usually involves active U.S. participation,
seeking to limit subsidies that contribute to overcapacity
was widely anticipated as an action-forcing event for the
and overfishing, negotiations continue in written exchanges,
WTO, amid serious challenges facing the multilateral
and the negotiations chair is working to bridge differences.
trading system. Some members hoped key results for
The U.S. has supported equal obligations across members,
ongoing negotiations could help preserve the WTO’s
with minimal flexibilities for developing countries.
relevance. In addition, a dispute settlement (DS) crisis
E-commerce. Members had extended the moratorium on
continues, with the Appellate Body ceasing to operate in
customs duties on electronic transmissions until MC12, but
December 2019 and no consensus on solutions. Broader
it is unclear if the extension will be sustained, given the
reforms of the institution also remain under active
opposition of some developing countries. Separately, the
discussion, including some U.S. proposals. While MC12
United States and over 75 members are actively negotiating
and other meetings were suspended, members are
a plurilateral initiative on e-commerce. The United States
attempting to continue some WTO operations virtually.
seeks an ambitious, high standard digital trade agreement.
The WTO can play a unique role in coordinating global
The parties had hoped to publish a consolidated text at
trade responses, which could be critical in mitigating the
MC12 to gain momentum and attract new participants.
grim global economic and trade outlook in the wake of
Agriculture. Some observers warned that MC12 would be
COVID-19. The WTO has committed to work with other
deemed a failure without some agreement on agricultural
international organizations to minimize disruptions to cross-
issues. Talks have stalled in recent years, but members
border trade and global supply chains—in particular those
continue to exchange views in writing on issues, including
central to combatting the virus—while safeguarding public
public stockholding and special safeguard mechanisms for
health concerns. It has sought to inform members of the
developing countries. Given renewed attention to lack of
impacts on trade and encouraged them to notify WTO of
compliance with WTO notification requirements (e.g., on
any trade-related measures taken in response to COVID-19.
domestic support and export subsidies), some experts saw a
The number of countries implementing trade restrictions,
transparency agreement as a feasible outcome for MC12.
including curbs on exports, has increased exponentially
since the beginning of 2020, raising debate among analysts
COVID-19 and WTO Reactions
about the economic and policy rationales and impacts, plus
In the wake of COVID-19, the WTO Director-General
questions about consistency with WTO rules. At the same
emphasized, “Maintaining open trade and investment flows
time, other countries have committed to trade openness.
will be critical to protect jobs, prevent supply chain
breakdown, and ensure that vital products do not become
Members of Congress have expressed support for ongoing
unaffordable for consumers.” In early April, the WTO
WTO reform efforts (see H.Res. 746), sought clarification
on the Administration’s positions, and proposed trade
issued its trade forecast, estimating a plunge in global trade
-
in 2020, ranging from 13% to 32%. A recovery is expected
related legislation in response to COVID-19.
in 2021, but the extent depends on the duration of the
MC12 Delay and Implications
pandemic and countries’ policy choices. For the latter, the
After the declaration of COVID-19 as a pandemic,
WTO has emphasized the importance of transparency.
Kazakhstan, the host for the WTO’s MC12, cancelled the
WTO Agreements and Trade in Medical Products
planned June meetings. Following mixed results coming out
Several WTO agreements are relevant to health-related
of the last ministerial in 2017, the United States and other
policies, such as technical barriers to trade, sanitary and
WTO members had hoped MC12 would mark a turning
phytosanitary measures, services, and intellectual property
point to conclude some negotiations. They also hoped to
rights. Others guide implementation of policies, including
announce significant progress on multiple initiatives,
through the WTO’s fundamental principle of
demonstrating the value of the WTO. MC12 was to serve as
nondiscrimination, as well as rules on subsidies. Specific
a critical forum for taking stock of various WTO reform
commitments have contributed to liberalization of trade in
proposals (see below). A new date for MC12 has not been
medical products: (1) tariff negotiations during the Uruguay
set, but will likely occur in 2021. Some negotiations and
Round; (2) a plurilateral Agreement on Pharmaceutical
other WTO activities continue in writing and virtually.
Products, updated in 2011; and (3) the expanded plurilateral
Members are currently evaluating how those negotiations
Information Technology Agreement in 2015.
should proceed and whether these formats can be used to
WTO negotiations and agreements have improved market
yield binding decisions.
access for medical products, but barriers remain. A n April
2020 report by the WTO estimates $597 billion in annual
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WTO: Ministerial Delay, COVID-19, and Ongoing Issues
trade in critical medical products with limited availability
treating prior AB decisions as precedent, and opining on
during the COVID-19 pandemic. For these products, the
unrelated issues in its decisions, among other issues. On
average applied most favored nation tariff is 4.8% (Figure
February 11, 2020, the U.S. Trade Representative issued a
1). But for some, tariffs remain quite high, e.g., the average
174-page report on the main issues. Other members have
tariff on hand soap is 17% and for some countries as high as
attempted to address U.S. concerns with various proposals,
65%. Tariffs on protective medical products range to 27%.
but the Administration has yet to specify the solutions that
Figure 1. Average Applied Tariff on Medical Goods
would resolve its concerns.
With no apparent resolution in sight, other WTO members
have sought an ad hoc appeal process through the WTO
Dispute Settlement Understanding’s Article 25, which
allows for the arbitration of disputes. These efforts
culminated in 16 members agreeing to a “multi-party
interim appellate appeals mechanism” in March 2020 as a
temporary measure to replicate many of the functions and
procedures of the AB. The participants include significant
users of the current system, such as the EU and China. This
mechanism does not apply to cases involving WTO
members who have not joined, including the United States,
the largest complainant and respondent in WTO DS.
Institutional Reforms
Source: WTO, Trade in Medical Goods in the Context of Tackling
Proposals for other reforms of WTO policies and
COVID-19, April 3, 2020.
procedures have garnered intensive debate. Some solutions
appear to be gaining traction, while others remain
Countries have also reacted to the crisis with new trade
controversial among members. Key U.S. priorities include:
measures, tracked by the WTO and others. According to
Global Trade Alert, about 70 countries, including the U.S.,
Reform of special and differential treatment (SDT).
have introduced export restrictions on medical equipment,
The United States seeks to have more advanced
supplies and medicines, as of the end of March. Some have
developing or emerging members forego the use of
imposed restrictions on food exports, despite no shortages.
SDT. Brazil, Singapore and South Korea committed to
Broadly, WTO agreements are flexible in permitting
relinquish SDT; China and India continue to claim it.
emergency measures related to national security or health,
Notification requirements. The United States has
but generally require that they be targeted, temporary, and
proposed that members who do not provide required
transparent, and not “unnecessarily restrict trade.”
transparent notification of key decisions, such as
The G-20 Trade Ministers committed to these same values
subsidies, be subject to punitive measures (e.g.,
in a March 30 statement. A group of seven countries, led by
deeming violators “inactive members”).
New Zealand and Singapore further committed to
Nonmarket economies. Since May 2018, the United
“maintaining open and connected supply chains.” The
States, EU, and Japan have engaged in intermittent
WTO has emphasized the use of WTO-consistent tools to
discussions to push for expanded disciplines on
address critical shortages, such as unilaterally eliminating
subsidies and other practices of nonmarket economies.
tariffs or other taxes, expediting customs procedures, and
In January 2020, the three proposed to prohibit more
using subsidies to generate production. It has urged careful
types of industrial subsidies under the WTO Subsidies
consideration of the ripple effects of policies like export
Agreement and otherwise constrict the use of s ubsidies.
curbs, given most major countries are both exporters and
Recent Congressional Activity
importers of medical supplies. Many analysts point to more
coordination in trade policy as critical. In the near term,
In December 2019, the House Ways and Means Committee
like-minded groups of countries could consider establishing
considered and reported H.Res. 746 (Rep. Kind) for the
principles for a COVID-19 trade response, and over the
House to reaffirm its commitment to the WTO, press for
reforms, and “update the WTO rules to address the n
long term, a plurilateral agreement on medical goods.
eeds of
the United States and other free and open economies in the
Ongoing Developments
21st century.” In addition, the 1994 Uruguay Round
In addition to addressing the current crisis, WTO reform
Agreements Act, allows every five years, any Member to
remains a key issue for the United States and other
introduce a resolution to withdraw from the WTO. Such a
members concerned with its institutional viability.
resolution may be introduced in 2020, although no Member
Appellate Body (AB) Reforms
has done so to date.
On December 10, 2019, the AB lost its quorum to hear new
cases, following the U.S. blocking of new AB members and
For more information, see CRS Report R45417, World
the term expiration of two members, effectively limiting
Trade Organization: Overview and Future Direction.
enforcement of decisions. Successive U.S. administrations
and some Members of Congress have long taken issue with
Cathleen D. Cimino-Isaacs, Analyst in International Trade
AB decisions and practices. This stems from a view that the
and Finance
AB exceeds its mandate by creating new obligations not
Rachel F. Fefer, Analyst in International Trade and
specifically negotiated, ignoring mandatory deadlines for
Finance
disposition of cases, making impermissible findings of fact,
https://crsreports.congress.gov
WTO: Ministerial Delay, COVID-19, and Ongoing Issues
IF11513
Ian F. Fergusson, Specialist in International Trade and
Finance
Disclaimer
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https://crsreports.congress.gov | IF11513 · VERSION 1 · NEW