This is a guest post from Jingyuan "Joey" Zhou, Professor of Practice at University of Arizona Law School
The COVID-19 has become a pandemic and more and more governments worldwide are struggling to contain the virus so as to protect their citizens. Commentators have inter alia recommended policies which would ease trade restrictions on medical goods/devices so that freer trade will better equip health care systems and help them tackle the virus (see C. Bown and S. Evenett). Others have cautioned against restrictions limiting the movement of people and services trade and called for a coordinated approach (see The Economist and my earlier post). Others have gone further, recommending that the tariffs applied to Chinese imports under the ongoing trade war be at least temporarily removed or reduced, as with U.S. “national security” tariffs on imported steel and aluminum (see S. Rodriguez). In times of a Public Health Emergency of International Concern and a global pandemic, rational policy-making that will not only outlast the existence of a global pandemic and PHEIC, but also provide guidance for future policy reform and liberalization, is especially important.
Most policy makers, facing so many unknowns in an emergency and a pandemic, the scope of which is not yet understood, must be mindful of the short-term effects and long-term spillovers generated by their decisions (see A. Swanson). In the short-term, when implemented, policies reducing trade barriers including tariffs on medical goods and non-tariff barriers such as export restrictions/bans and licensing procedures will likely help boost health care systems’ capacity in containing the virus and mitigating its effects. Other policies, such as closing borders (see E. Londoño et al.), may retard the spread of the virus and thus may be welcomed by citizens (see C. Kahn). But the same policies may at the same time cause extreme economic hardship for many.
When governments decide to reduce or remove tariffs on specific products, they are bound to extend any such relief to other World Trade Organization (WTO) Members as required by the most-favored-nation obligation (the MFN obligation), with a few exceptions (see Art. I of GATT and Art. 2 of GATS). And one may argue that by bringing down applied tariffs, at least in the cases of the tariffs imposed by the U.S. against Chinese goods and others against steel and aluminum imports, would actually increase the observance of the United States’ MFN obligation.
However, in the long run, when the pandemic subsides and life comes back to normal, will governments have the political and legal capacity to retract temporary tariff relief and restore tariffs back to the level of commitments in force immediately prior to the pandemic? Doing so does not appear to be that straight-forward as governments will face pushback from stakeholders that have benefitted from the changes and thus will encourage the restoration of earlier high tariffs.
Art. II of GATT permits governments to maintain some leeway in setting applied tariff rates not exceeding the rates to which they committed to be bound. However, raising tariffs, even within the ceiling of a Member’s Schedule, appears to be inconsistent with the WTO’s broad goal in reducing trade barriers. Thus, in theory, other governments may challenge the revocation of the reduced tariff rates under the “nullification or impairment” clause under Article XXIII:1 of GATT 1994. But this argument is a weak one legally in my opinion, and in any event has limited potential utility now that the WTO’s Appellate Body is unable to function.
Alternatively, as I envisioned, governments may justify non-tariff trade barriers, be it export bans/limitations or import restrictions (consider the travel ban now widely imposed aiming at containing the COVID-19 or the decisions of Germany and other EU members to restrict exports of medical supplies), on exceptions such as Art. XXI (national security) or Art. XX(b) (protecting the health and life of citizens) of GATT and their counterparts in GATS, Art. XIV(b) and Art. XIVbis in general. Also, in particular, governments may rely on Arts. 2.2 and 5.7 of the Sanitary and Phytosanitary Agreement (SPS) for imposing trade restrictions on goods, especially medical goods that are in dire need.
But what about the long-term effect brought about by such measures? Could the COVID-19 serve as a catalyst in furthering comprehensive trade policy reform in the multilateral forum in Geneva (see R. Hormats) or one more nail in the coffin of globalization (see A. Roberts and N. Lamp)? It is hard to tell. The current situation certainly exposes the fragility of globalization that we are used to and in many cases have taken for granted for several decades (see H. Farrell and A. Newman). The current crisis appears to be a good time for collaboration in scientific research as such collaboration will likely shorten the time required to develop effective vaccines (see A. Knapp). Given that multilateral trade rules governing services trade are subject to reform (although no significant progress has been made in almost 20 years) and rules governing data protection are missing, it would also be both wise and reassuring for governments to immediately begin negotiating new rules with experiences recently gained world-wide to accommodate the fast-changing circumstances (think about the huge amount of health data that will be or has been collected during this COVID-19 pandemic). But for now, when governments are struggling to contain the pandemic, attention is being diverted away from multilateral rulemaking at the WTO, WHO, the United Nations or elsewhere.
Solidarity and coordination are much needed in emergencies like this one. Carefully thought-through policies, preferably developed on the basis of multilateral discussions rather than unilaterally, would contribute to solving the immediate global pandemic and reducing the widening adverse economic impacts. As of mid-March, 2020, the pandemic has resulted 191,127 confirmed cases, claimed 7,807 lives (WHO), caused an estimated loss in global supply chains of $50 billion (UNCTAD), and is projected to lower the global growth rate by 0.4% (Congressional Research Service) and even drag the whole world into recession in the worst case scenario (McKinsey & Co.). Collaboration and solidarity are thus urgently needed.
