What is the WTO Doing in Response to the Coronavirus?
Remarks of Alan Wm. Wolff, Deputy Director General World Trade Organization at a virtual meeting
Question: “World trade is obviously in the process of taking a very substantial hit from the Covid-19 pandemic. What is the WTO doing about it?”
The WTO has six current priorities for meeting the current crisis:
The first priority of the WTO as with any government, corporation or organization, is to keep our Members, our staff and the public, all of whom are our stakeholders, safe and to assure continuity of service.
Without this first step, maintaining the ability to function, nothing else that we might think about would matter.
- 16 days ago, on Tuesday, March 10, the WTO suspended all meetings at its building and twelve days ago, on Saturday, March 14, extended the suspension until the end of April.
- 12 days ago, on Saturday, March 14, the WTO informed all staff whose work did not require them to work on-site to work from home.
- The response has been very good. Virtual staff meetings are being held. The IT and administrative staff that have to be onsite have risen to the current challenge. A Health Task Force keeps us informed. And importantly, the WTO Secretariat’s daily work has continued unabated, adapting to remote access to and for colleagues, resources and Members.
- At the same time, the chiefs of mission of the 164 Members of the WTO, correctly gave their first priority to safeguarding their own staffs and making sure that their offices could still function.
The second WTO priority is to provide an international cooperative framework in which Members can consider their individual responses to this crisis.
- The G7 leaders pledged to do all that is necessary to fight the spread of the virus and to deal with its economic consequences, and WTO is pledged to fully support this effort.
- The primary ways in which the WTO can implement this pledge are the following:
- The WTO agreements act as a framework for trade and trade-related policy design.
- The WTO agreements are very flexible in these circumstances, but still have built in best practices. Emergency measures should generally be targeted, temporary, and transparent.
- The WTO also serves as a venue for discussions, cooperation, coordination and negotiation, even if the discussions will for the time being largely not be face-to-face.
- Today, the WTO Director General is participating in the G20 leaders’ virtual meeting. In the coming days, he will be updating the G20 on the trade aspects of the crisis.
- The first priorities of WTO Members have sensibly been to protect the health of their peoples and then of their economies through macroeconomic measures such as fiscal stimulus packages and tax relief, to go along with measures that Central bankers have taken with respect to the money supply and interest rates. Dealing with trade measures is necessarily the next step for WTO Members to consider.
The third priority is to be in a position to inform Members of the effects on world trade of the spread of the virus.
- The WTO set up a cross-divisional task force to gather all possible information on measure taken by countries that have an effect on world trade related to the spread of the virus. This includes measures that facilitate as well as those which restrict international trade.
- The WTO Director General has urged WTO Members to provide notifications of trade measures they have taken in response to the Covid-19 outbreak, and that is happening.
- A Covid-19 web page has been established to make publicly available relevant information including trade measures taken by WTO Members.
- The WTO will in a few weeks issue its Trade Forecast for 2020 which will assess the impact of the sudden and widespread supply and demand shocks to the world economy.
- The central factor to focus on is the figure for the recent increase in trade costs – the costs of moving goods from their point of origin to a market beyond an international border.
- The increase in trade costs due to the coronavirus is substantial. It is a multiple of total current average tariffs worldwide.
- Increased costs of trade:
- It is not just overtly trade restrictive measures and traditional tariffs that affect costs of trade; there is a change for the worse of the conditions for trade since Covid -19 began to spread. Among these —
- Air cargo on passenger planes has been cut back as the number of commercial flights has plummeted;
- The people who conduct trade and whose expenditures constitute trade cannot travel internationally; and
- Uncoordinated and differing national standards for urgently needed emergency medical equipment, supplies and pharmaceuticals can have a serious adverse impact.
The fourth priority is to make it clearly understood that there is wide freedom to take necessary positive actions to meet the crisis.
- Members are completely free to apply lower tariff rates or have no tariffs on any and all products whatsoever.
- Tariff rates in WTO schedules are maximum permissible levels. In the case of WTO Members who have committed to high rates, the applied rates are very often lower. In addition, some 20% of world trade flows outside of WTO notified rates, much of which is subject to duty free treatment under bilateral and regional trade agreements.
- The tariff rates on individual products are all rendered anachronistic by the current crisis. The tariff rates that are contractually bound were for 122 of our 164 Members established in 1993. For the 36 other Members who came into the WTO since then, they are set at the time of entry. For example, for China, the world’s largest trading country, the rates were set in 2001.
- There are two examples of attempted coordinated action at the WTO to meet specific economic objectives through tariff elimination.
- One succeeded, with participants eliminating tariffs on information technology goods under the Information Technology Agreement.
- The other did not succeed, and that was the Environmental Goods Agreement (the EGA), upon which negotiations began in 2014. The fact that 195 nations entered the Paris Agreement on Climate Change in 2015 did not cause the Environmental Goods Agreement to become a reality.
- The WTO Rules permit Members to take actions to protect the health and safety of their citizens. Regrettably export restrictions on medical supplies have in a number of instances been put into place in recent days, without notice or consultation. Emergency actions must not impose unwarranted restrictions on trade.
- Nothing in the WTO rules prevents a roll-back of export restrictions.
- Nothing in the WTO rules prevents subsidies from being granted to increase the global supply of medical products needed to respond to the Covid-19 pandemic.
- Additional flexibility in the WTO’s Agreement on Trade Related Intellectual Property can facilitate countries’ access to affordable life-saving medicines.
THE fifth priority is to facilitate the crafting a coordinated response
- A number of Members have taken steps together to pledge to keep trade flows open, both with respect to imports and exports. Yesterday, on March 25, Canada, Australia, Chile, Brunei, New Zealand, New Zealand and Singapore joined together to make that commitment. A broader conversation among Members on next steps is underway.
- WTO Members are also well aware of the useful suggestions made by trade experts, like the ones suggested by those on this program and are actively discussing appropriate responses.
- The very important questions put by Simon Evenett of St. Gallen University, Wendy Cutler at the Asian Policy Institute, Jennifer Hillman at the Council on Foreign Relations, and Anabel González at the Peterson Institute for International Economics, as well as her colleagues, include:
- whether tariffs can be eliminated on medical supplies,
- whether export restrictions on these products can be lifted if already imposed, and eliminated if already in place, and
- whether subsidies are needed to spur necessary production and economic activity?
The sixth priority is to assure the continuation of ongoing negotiations and work at the WTO
- For the WTO, the next Ministerial meeting is as important as the 2020 Olympics was to Tokyo. It has to be rescheduled.
- The pace of negotiations on key subjects such as E commerce, the moratorium on imposing on electronic commerce and curtailing fisheries subsidies is usually geared to the rhythm of meetings of trade ministers.
- In addition, ideas on WTO reform, environmental issues, empowerment of women, and a host of other useful initiatives are stimulated by the fact of a ministerial being held. Intensive consultations with members as to the timing and venue of the next ministerial meeting and ministerial input are underway.
- The circumstances brought about by the pandemic are unprecedented in our lifetimes and in the history of the multilateral trading system. They call for an unprecedented level of international cooperation.
- The WTO was remarkably successful in avoiding the spread of protection during the Financial Crisis in 2008 and in the years following. There is nothing preventing WTO Members from engaging in a successful coordinated response to the coronavirus pandemic if the will exists to do so.
- There are approximately 500 individuals on this conference call who are a self-selected cohort of those interested in the impact of Covid-19 on trade. Collectively and individually, you can have an impact by making your voices heard and your expertise available to trade policymakers.
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