02 WTO reform and COVID-19
While reduced production and consumption have led to an unprecedented fall in trade, the wider issue is whether the pandemic response will stimulate or constrain a rethink of global trading rules.
The WTO Secretariat has responded to COVID-19 by emphasizing the need to maintain open trade. The secretariat – which supports the WTO member governments and is headed by the director-general – has also issued its trade forecast, estimating that global merchandise trade will fall by between 13 and 32 per cent in 2020 as a result of the pandemic.1 Though more recent forecasts by the organization show that the most pessimistic scenario will likely be avoided, the expected plunge in trade would still exceed that recorded after the 2008–09 global financial crisis.2
The WTO has also focused on providing transparency. The secretariat has gathered information on the trade-related measures taken by individual members in response to the COVID-19 crisis. As of 21 August 2020, WTO members had submitted a total of 225 notifications related to COVID-19.3, 4 However, because notifications rely on official submissions, and thus are often late or incomplete, the actual number of measures introduced in the context of COVID-19 is likely to be higher.5
Many countries – including the US and initially some EU member states – imposed temporary export restrictions on certain medical goods and foods in efforts to prevent domestic shortages. (Measures by the EU states were subsequently replaced by EU-wide steps to protect the integrity of the single market.6) The use of trade-restrictive measures has led to questions about their compatibility with WTO obligations. The WTO rules are, in general, flexible in allowing member countries to introduce trade measures deemed necessary to protect public health, but require that such measures fulfil certain criteria (such as not discriminating between WTO members and not unnecessarily restricting trade). A key question will be how temporary these measures turn out to be. Many – including the EU’s export authorization scheme for personal protective equipment – have been phased out already.7 The issue of export restrictions for goods related to COVID-19 will hopefully not be a long-term structural issue for the WTO and its members.
While trade restrictions have attracted particular attention, in fact most of the measures introduced have been intended to facilitate trade.8 For instance, countries have reduced or eliminated import tariffs on COVID-19-related goods. Other steps have included expediting customs inspections for critical goods.
The WTO serves as a forum for coordinating and sharing proposals for a collective and coherent trade policy response to the pandemic – although most initiatives have taken place among groups of like-minded parties. Some countries are driving forward efforts for a plurilateral agreement on medical goods.9 In April, the governments of New Zealand and Singapore agreed to remove tariffs and not to impose export restrictions on goods essential to the COVID-19 response, and encouraged other countries to join their ‘open plurilateral’ initiative.10 It is also noteworthy that the Canada-led ‘Ottawa Group’11 has set out a list of priority areas for a COVID-19 trade response,12 while also advancing WTO reform.
So where does COVID-19 leave the broader prospects for WTO reform? On the one hand, the COVID-19 crisis could provide the impetus needed for the 164 members of the WTO to modernize the organization and agree on an ambitious reform agenda. In this optimistic scenario, a new leader at the helm of the organization – following the early departure of the director-general, Roberto Azevêdo, at the end of August 2020 – could help to navigate the politically charged landscape around reform. Moreover, the COVID-19-related postponement of the biennial WTO Ministerial Conference, originally scheduled for June 2020 in Kazakhstan and now expected to take place in June 2021, could be a blessing in disguise. While the postponement is a lost opportunity in the short term to make progress on issues such as fisheries subsidies, the conference was never expected to lead to breakthroughs on the most contentious issues, including the crisis of the WTO Appellate Body. Now, with more time to consolidate progress and the prospect of a different US administration taking office following the November 2020 presidential election, the outlook for WTO reform may well be more positive by the time of the next conference.
On the other hand, COVID-19 could further hobble an already-limping WTO. With the pandemic intensifying tensions between the US and China, there are now even higher hurdles to cross in order to reinvigorate the WTO dispute settlement system and strengthen the organization as a negotiation forum. The pandemic is also accelerating pre-existing trends – such as the shift to a digital economy – that WTO members were struggling to handle even before COVID-19.
COVID-19 has also created other complications for trade policy and related areas. Three particular issues stand out. First, as efforts to develop a vaccine continue, questions arise as to whether the intellectual property regime is fit for purpose in terms of dealing with a public health crisis and ensuring that any new drug is widely available and affordable. Second, the use of domestic subsidies to address the economic dimensions of the pandemic could potentially result in a wave of WTO cases centred on trade defence instruments.13, 14 The subsidies in question are more akin to short-term fiscal stimulus and do not constitute industrial policy – for which the policy space is partially constrained by WTO rules. But an asynchronous recovery (with governments reopening markets at different times and asymmetrically removing subsidies) could lead to a flood of disputes as countries consider any remaining subsidies to be trade-distorting. If WTO members do not collectively address the issue in the short to medium term, the additional friction could derail systemic WTO reform efforts. Finally, the pandemic has brought to the forefront the need to rethink (and potentially restructure) global value chains. At a time when many countries are considering subsidies and tax incentives to strengthen domestic production (e.g. US support for the semiconductor industry), efforts to discourage China’s industrial subsidies look increasingly hypocritical.
It is too early to say whether the more optimistic or pessimistic scenario for WTO reform in light of COVID-19 will come to pass. The one thing that is certain is that the stakes for WTO reform have never been higher.
1 World Trade Organization (2020), ‘Trade set to plunge as COVID-19 pandemic upends global economy’,
8 April 2020, https://www.wto.org/english/news_e/pres20_e/pr855_e.htm (accessed 14 Jul. 2020).
2 World Trade Organization (2020), ‘Trade falls steeply in first half of 2020’, 22 June 2020, https://www.wto.org/english/news_e/pres20_e/pr858_e.htm (accessed 14 Jul. 2020).
3 To improve transparency, WTO member governments are obligated to notify the relevant WTO body if any trade measures they are introducing might have an effect on other members.
4 World Trade Organization (2020), ‘WTO members’ notifications on COVID-19’, https://www.wto.org/english/tratop_e/covid19_e/notifications_e.htm (accessed 26 Aug. 2020).
5 A useful reference point for a more accurate estimate of the number of trade and trade-related measures introduced because of COVID-19 is the Global Trade Alert database (https://www.globaltradealert.org). Recent reports also offer useful data. See, for instance, Evenett, S. J. (2020), Tackling COVID-19 Together – The Trade Policy Dimension, 23 March 2020, St Gallen: Global Trade Alert, University of St Gallen, Switzerland, https://www.globaltradealert.org/reports/download/51 (accessed 14 Jul. 2020).
6 European Commission (2020), ‘Commission moves to ensure supply of personal protective equipment in the European Union’, 15 March 2020, https://trade.ec.europa.eu/doclib/press/index.cfm?id=2122 (accessed 14 Jul. 2020).
7 European Commission (2020), ‘Coronavirus: Requirement for export authorisation for personal protective equipment comes to its end’, 26 May 2020, https://trade.ec.europa.eu/doclib/press/index.cfm?id=2147&title=Coronavirus-Requirement-for-export-authorisation-for-personal-protective-equipment-comes-to-its-end (accessed 14 Jul. 2020).
8 World Trade Organization (2020), ‘WTO report on G20 shows moves to facilitate imports even as trade restrictions remain widespread’, 29 June 2020, https://www.wto.org/english/news_e/news20_e/trdev_29jun20_e.htm (accessed 14 Jul. 2020).
9 In the WTO, the term ‘multilateral’ refers to all members while the term ‘plurilateral’ indicates that only some members are involved.
10 New Zealand Government (2020), ‘Covid-19 response: New Zealand and Singapore launch initiative to ensure free flow of essential goods’, 15 April 2020, https://www.beehive.govt.nz/release/covid-19-response-new-zealand-and-singapore-launch-initiative-ensure-free-flow-essential (accessed 14 Jul. 2020).
11 In addition to Canada, the Ottawa Group includes Australia, Brazil, Chile, the EU, Japan, Kenya, Mexico, New Zealand, Norway, Singapore, South Korea and Switzerland.
12 Government of Canada (2020), ‘June 2020 Statement of the Ottawa Group: Focusing Action on Covid-19’, 15 June 2020, https://www.international.gc.ca/world-monde/international_relations-relations_internationales/wto-omc/2019-06-covid-19.aspx?lang=eng (accessed 14 Jul. 2020).
13 Under WTO law, members are permitted to impose trade defence measures (also known as trade remedies) to protect their domestic industries from unfair practices. The three categories of trade defence instruments are: 1) ‘countervailing’ duties in response to subsidies; 2) actions taken against dumping (selling at an unfairly low price); and 3) so-called ‘safeguards’, which are temporary emergency measures to cope with a sudden surge of imports.
14 Bown, C. (2020), ‘COVID-19 Could Bring Down the Trading System’, Foreign Affairs, 28 April 2020,
https://www.foreignaffairs.com/articles/united-states/2020-04-28/covid-19-could-bring-down-trading-system (accessed 14 Jul. 2020).