International Economic Law and Policy Blog

The ITC Report on the Economic Impact of Trade Agreements

In response to a request from Congress (via statute), the U.S. International Trade Commission has issued its second report on the Economic Impact of Trade Agreements Implemented Under Trade Authorities Procedures (the previous report is here). The request covered "all trade agreements with respect to which Congress has enacted an implementing bill under trade authorities procedures since January 1, 1984." Here are the agreements they looked at:

The trade agreements covered in this report include the multilateral Uruguay Round Agreements as well as 16 U.S. bilateral and regional trade agreements. In chronological order, this group of agreements encompasses U.S. bilateral trade agreements with Israel and Canada; the North American Free Trade Agreement (NAFTA) with Canada and Mexico; the multilateral Uruguay Round Agreements; U.S. bilateral agreements with Jordan, Singapore, Chile, Australia, Morocco, and Bahrain; a U.S. regional trade agreement with the Dominican Republic and five Central American countries (CAFTA-DR), including El Salvador, Honduras, Nicaragua, Guatemala, and Costa Rica; five more U.S. bilateral agreements with Oman, Peru (PTPA), Korea (KORUS), Colombia, and Panama; and the United States-Mexico-Canada Agreement (USMCA) with Canada and Mexico.

The ITC hedges a bit on what it is able to accomplish with this type of analysis:

The Commission’s quantitative estimates encompass many U.S. trade agreements and different types of economic outcomes, but they are not comprehensive. Due to limits on available data and analytic techniques, these estimates do not capture all of the economic costs or benefits of U.S. trade agreements.

With that caveat in mind, the ITC offers the following conclusions:

The Commission estimates that, to the extent quantifiable, the agreements have had a small but positive effect on the U.S. economy. In 2017 (the base year), they led to an estimated increase in U.S. real GDP of $88.8 billion (0.5 percent) and in aggregate U.S. employment of 485,000 full-time equivalent (FTE) jobs (0.3 percent), based on a model that assumes the economy is at its long-run full employment level. U.S. trade agreements have also had a positive effect on U.S. imports and exports as well, especially with U.S. FTA partners. The Commission also finds, however, that the gains in jobs were not distributed evenly, with the biggest gains in employment estimated for college-educated male workers.4 Table ES.1 summarizes the key findings from the Commission’s economy-wide analysis.

Table ES.1 Estimates from the Commission’s economic modeling of the economy-wide effects of U.S. trade agreements
The Commission’s estimates for the U.S. economy are reported using 2017 as the base year. FTE = full-time equivalent

 

Beyond these figures, the report also provides some useful case studies and other very helpful analysis of trade agreements.

The "additional views" of Jason Kearns, the current Chair of the ITC, are interesting as well:

Additional Views of Chair Jason E. Kearns

In my view, this report provides many valuable insights into the impact of U.S. trade agreements, and my hope is that it gains a wide audience. However, the techniques used to evaluate such agreements are still evolving, and I believe the trade community needs to fundamentally rethink how to assess the impact of trade agreements on U.S. workers, businesses, and farmers. We need to ask more and different questions, question our assumptions, and dig deeper into the substantive terms of our trade agreements.

In this report, the quantitative economy-wide model focuses mainly on the long-run efficiency gains resulting from lower prices of imported goods, and relies on unrealistic assumptions about the economy, such as the assumptions of full employment (which implies that all workers seeking jobs are employed and that trade agreements cannot cause unemployment) and costless switching (that workers have the ability to freely move across industries and occupations). This contrasts with some recent academic studies that highlight how significant the transition costs are for U.S. workers and how long the transition can be after a wave of import competition. It is critical to see how our conclusions would change with a shorter-term analysis that incorporates these features. Supporters of trade agreements argue they create jobs; opponents argue they cost jobs. That has been the key issue in the debate over trade agreements for decades. Economic models cannot simply assume away the issue; more needs to be done to shed light on that debate.984

Furthermore, our modeling approach has been adapted from a time when removing or reducing tariffs and nontariff barriers was the focus of trade agreements. But trade agreements today do not simply reduce or eliminate (“liberalize”) trade barriers and expand trade, and not every domestic rule or regulation should be viewed as an “unnecessary obstacle to trade.” Trade policymakers today are often just as interested in negotiating provisions that require trading partners to adopt and implement rules and regulations concerning, for example, intellectual property rights, consumer protections on the internet, labor standards, and environmental protections.985

All of these rules can create winners and losers in our economy. But the distributional effects of trade agreements are not fully accounted for in most models,986 particularly when economies are not fully employed (and economies are rarely fully employed). I am encouraged that we are beginning to tackle the unequal economic outcomes of trade agreements across gender and other dimensions in this study. But as a result of the unrealistic assumptions in the economy-wide modeling, this report improbably concludes that all demographic subgroups (“labor types”) analyzed gained from trade agreements. 

Economists’ default perceptions about what trade agreements actually do (and do not do) has likely slowed the development of alternative tools. Though this is changing, the broader profession has been slow to realize, for example, that not all labor or environmental provisions are created equal. The absence of strong and enforceable provisions in these areas has a significant impact on trade and can impact the U.S. economy in other ways. Under NAFTA, the ever-present threat of offshoring production to Mexico in the absence of enforceable labor provisions combined with tariff reductions on Mexican imports likely weakened U.S. manufacturing workers’ ability to bargain for higher wages; but standard models cannot account for that. As labor and environmental provisions themselves evolve, it will be increasingly untenable to ignore what these provisions actually obligate FTA members to do, in addition to how well these provisions are enforced.

Finally, too often, economic analysis of provisions in our trade agreements focuses too narrowly on the quantifiable expansion in trade, as if trade expansion is an end in itself, rather than a means to achieve the broader objectives articulated in our trade agreements, such as higher standards of living. While the impacts of trade agreements on things like living standards are harder to measure, doing so should be our goal.

The Commission is working to address these gaps, especially by incorporating standalone models, including “partial equilibrium” models, which speak to the relevant industry- and provision-specific questions that policymakers may have, as well as through qualitative analysis. I believe this report contributes meaningfully to the ongoing conversation about the impact of trade and trade agreements and positions the Commission to continue to innovate to address those questions. 

As a general matter, I am sympathetic to critiques of the existing approach to economic modeling of trade agreements. And I worry that people make too much of the statistics generated by these studies, as the estimates are much rougher than the precision of the numbers suggests. 

However, I would raise different concerns about these sorts of studies and make different suggestions for how to rethink the approach (this is more about the Congressional request than it is about the ITC's report). For example, it seems like these studies take existing tariffs as the natural state of things, and then put any deviation from that norm via trade liberalization on trial, by measuring the costs and the benefits from the liberalization that occurs through a trade agreement. Even if the benefits outweigh the costs overall, critics will then point to the costs and highlight that impact.

But I would frame the analysis differently. I would first look at the tariffs themselves and consider their impact (including distributional consequences, racial and gender impact, and the effect on our political system). Then I would consider the impact of how trade agreements alter the status quo. Basically, we should be looking at U.S. trade policy more broadly, rather than just offering a verdict on trade agreements. It's important to consider the impact of trade agreements, of course, but we shouldn't be looking at them without the proper context. Trade agreements have become such a focus of the trade policy debate that I think people have, to some extent, forgotten why we started doing trade agreements in the first place, which was to rein in the harm of tariffs -- which has both an economic and a political component -- and other forms of protectionism. Trump reminded us of that a bit, but there is still too little attention paid to the core problem of protectionism in U.S. trade policy.

Beyond tariffs, it's difficult to quantify any of the issues covered by trade agreements. I've seen people try, and I appreciate their hard work, but I think we have a long way to go. Buy America procurement and local content requirements are pretty tough to model; and provisions dealing with domestic regulation, such as IP, digital trade, or the environment, are probably close to impossible to model in an effective way. I mentioned the case studies, though, and perhaps that's a better approach to these issues. Maybe do more of that and less modelling. When I read the ITC report, I focused on the KORUS auto safety standards case study, because it's something I've written about, and this conclusion struck me as a sensible one: "The more recent renegotiation in 2018 increased this vehicle allowance to 50,000 vehicles per company, but the impact of that is unclear." With many of the issues covered by trade agreements, "the impact is unclear" is probably a safe assessment. It's still worth trying to do that assessment, but qualitative analysis may be all that we can really do here. By doing this analysis, we will, over time, understand more about the impact of specific provisions, and can learn from that experience.

Decision & Democracy at the WTO: An Insightful New Study Offers a Genealogy of the Consensus Norm

After Trump, multilateralism is supposedly back.  According to US Secretary of State Antony Blinken, it is "still our best tool for tackling big global challenges."  In the case of trade, of course, multilateralism means, primarily the WTO.  The Organization's approach to decisionmaking-"consensus"-allows a single holdout state to block progress, or indeed, as Claerwen O'Hara notes in a must-read new article, it can paralyze the existing institutional functions of the WTO-the example of the US blocking new Appellate Body appointments.  Even in the case of the Appellate Body, despite the tempation of some Members to do so and the proposals of some academic commentators, there was little appetite for invoking the formal decisionmaking rules of the WTO, which permit on most matters decisions to be taken by majority or supermajority approval. Pascal Lamy (prior to becoming WTO DG) criticized the WTO's decisionmaking procedures as "medieval."  However easy it is to laud consensus decisionmaking as respectful of sovereign equality of states, or an embodiment of the principle of pure democracy, the fact remains that the framers of GATT devised voting rules and made them legally effective; indeed, while with the creation of the WTO consensus practice was codified, it still coexisted in tandem with re-affirmed voting rules, which could be resorted to if consensus failed.  The gap between positive law and pervasive practice requires some explanation.    This is where O'Hara's work if especially valuable.

By the 1950s, she suggests, consensus operated as a substitute for weighted voting: " The 'sense of the meeting' or 'consensus' procedure can have a weighted effect on decision-making because, in the absence of formal voting rules, powerful states have more opportunity to use their market size and/or geopolitcal power to influence the decision-making process." It is the consensus practice that in fact underpins institutions such as the notorious Green Room, which allow compromises to be forged that then smaller, less powerful states can be pressured to accept.   As O'Hara observes, "By the 1960s, the Contracting Parties had dispensed with voting entirely for all decisions other than those relating to waivers or accession." When the global North, in the wake of decolonization, now found itself in the numerical minority in multilateral institutions there was a push for consensus decision-making in a variety of fora, including UNCTAD.  Challenging the status quo in international trade relations reflected in the GATT were the elements of the New International Economic Order that had been enacted in UN institutions by majority vote.   Rather than seeking to transform the GATT through reanimating the voting rules, developing countries accepted concessions to the NIEO in the form of "special and differential treatment" and tariff preferences. 

But, as O'Hara notes, in the Uruguay Round, "the Southern states felt the full weighted natue of consensus decision-making come down upon them."  As she puts it, "When states like India and Brazil formed coalitions to resist their proposals, the US and other Northern states broke them up, buying some off with 'carrots and sticks' and isolating others. [Footnote omitted] As Cold War tensions thawed, states in the North also bcame less heistant about resorting to an 'overt use of power' [footnote omitted] to achieve their trade policy objectives."    

Post-Uruguay Round, the South has seemingly found ways of using the WTO procedure to resist the North when it is the demandeur-hence, the failure of Seattle and Cancun Ministerials, and ultimately the abandonment of the Doha Round.  The plurlilateral negotiations that have emerged now, on matters such as investment facilitation, E-Commerce, and trade in services (TISA), cannot disguise the fact that the South will not accept to be pressured into a consensus based on the demands of the global North-and most of these demands have been, in one way or another, in the direction of more neoliberalism, more 'deep integration' that constrains policy space and experimentation for development in order to achieve the market access goals of the developed countries, above all.  O'Hara notes: "'emerging powers' such as China and India...have each accquired the economic clout to use the consensus procedure as a 'veto' power." 

I would add that it is this last reality that makes the TRIPs Waiver such a heartwrenching dilemma.  Given the global COVID emergency, there would be a natural case for reactivating the voting rules to overcome holdouts such as the European Union, the UK, and Switzerland, perhaps even justified as an emergency exception, a last resort.  But after suffering defeat in the Uruguay Round, developing nations, at least the most powerful among them,  have now finally mobilized the consensus practice as a shield against the neoliberal efforts of WTO "reformers" from the North. Hazarding an experiment with voting is hardly-risk free.         

Here, a recent book by the well-known WTO scholar Amrita Narlikar may be helpful.  Narlikar explores the ways in which decisionmaking procedures and power relations in and around the WTO have led to wins, as well as losses, for Southern interests.  Her important work will be the subject of my next blog post on this theme.  

SIEL 2021 Conference

This is from SIEL:

SIEL is pleased to invite you to its seventh online Biennial Conference. 

SIEL’s 2021 Biennial, will take place July 7-9. Registration is now open, please secure your place here https://siel2021.mticket.it/eng/.

The 2021 Biennial Global Conference will link international economic law experts from around the world, providing opportunities to:
– Attend 3 keynotes, 5 roundtable events and 28  panel sessions;
– Hear from nearly 200 speakers from around the globe;
– Contact speakers after each session to continue the conversation one-to-one;
– Engage in private text and video conversations with fellow attendees;
– Visit sponsor and exhibitor stands and schedule one-to-one meetings.

With registration rates as low as possible to allow participants from around the world to experience the conference, SIEL is looking forward to welcoming its most global audience ever. SIEL members can attend the conference free of charge. 

For full program details, visit: 

https://www.dropbox.com/s/lvsjnarhhc8ni11/SIEL%202021%20program%20public.pdf?dl=0

Lots of great panels, papers, and presentations, as always!

 

 

The Latest U.S. Statement on WTO Dispute Settlement

In a statement at the Informal TNC and Heads of Delegation Meeting today, the United States said this about WTO dispute settlement:

On dispute settlement, the United States believes that Members must undertake fundamental reform if the system is to remain viable and credible.

The dispute settlement system can and should better support the WTO’s negotiating and monitoring functions.

To achieve real, meaningful reform, we cannot allow process to take precedence over substance.  The United States does not believe it would be productive at this juncture to begin discussions on process before Members have an opportunity to engage with the United States and others on key fundamental, substantive issues.

We recognize that this is a priority for many Members.  The United States will engage constructively with Members at the appropriate time.  Our focus for the July Ministerial must remain on the fisheries subsidies negotiations.

I'm not exactly sure what the U.S. means by "we cannot allow process to take precedence over substance," but perhaps that just means no appointing of Appellate Body Members ("process") until the substance of this disagreement is resolved. In terms of the substance, what I think we need is for the U.S. to make some proposals. Will that happen? Based on the statement above, I'm feeling a bit optimistic and I'm going to predict that it will, but it may take a little while ("The United States will engage constructively with Members at the appropriate time" sounds more positive than some things that were said during the Trump administration.) 

The U.S. also said this:

Regarding domestic support, the major obstacle in our view is that Members do not agree on the types of support to cut or who should cut. 

Unfortunately, I think this explanation could be applied more broadly to many other areas of WTO negotiations.

ADDED:

The U.S. statement makes more sense now that I see the EU statement at the same meeting:

Finally, a top priority remains to find a lasting solution to the current Appellate Body situation that would restore a fully functioning dispute settlement in the WTO. WTO Members have a shared responsibility to resolve this issue as soon as possible. A fully functioning WTO dispute settlement system is critical for rules-based trade.

It is clear that  important reforms will be needed. It is clear also that it would not be realistic to expect concrete outcomes or solutions by MC12.

However, a lack of any progress concerning one of the core functions of the WTO would cast doubt on the credibility of the reform agenda and of the WTO itself.

Our expectation would therefore be that we would converge by MC12 on a time-limited work programme to agree on a package of reforms of the WTO dispute settlement system. This process would focus on issues that need to be resolved to overcome the impasse over Appellate Body appointments. The objective would be to have a fully functioning Appellate Body within a defined time period (and in any event no later than by MC13).

Now it becomes more clear, I think, that the U.S. focus on "substance" over "process" is a reference to the EU's proposal for a "time-limited work programme." I'm not sure a time limited process would be that crucial here, although I do understand that negotiators see these as a way to make sure a negotiation gets wrapped up rather than dragging on forever. But in this situation, I think the key is for the U.S. to figure out a position and make a proposal. At that point, we'll have a better sense of when and whether a resolution is possible.

Workshop: Understanding the EU as a Good Global Governance Actor

Workshop: Understanding the EU as a Good Global Governance Actor

 

Thursday, 1 July 2021

 

08:15 – 12:45 BST

 

The event is jointly organised by the City Law School Institute for the Study of European Law & the H2020 EUTIP network. 

 

This work-in-progress symposium brings together the contributors for the forthcoming edited collection with Edward Elgar Press due to be published in 2022, tentatively entitled “Understanding the EU as a Good Global Governance Actor” edited by Elaine Fahey and Isabella Mancini, at The City Law School.

 

For more information and to register https://www.city.ac.uk/news-and-events/events/2021/07/understanding-the-eu-as-a-good-global-governance-actor-workshop#

 

 

The workshop is organised as follows:

1. Opening reflection papers 

Ignacio Garcia-Bercero (European Commission) & Kalypso Nicolaïdis (University of Oxford/ EUI, Florence), Brussels Calling: The paradoxes of power and the trade/regulatory nexus

 

Ramses Wessel (University of Groningen), The Role of Values in EU External Relations: A Legal Assessment of the EU as a Good Global Actor

 

2.  On ‘Good’ Data Governance: the emerging ambitions and values in data flows

Xuechen Chen (New College of the Humanities) & Xinchuchu Gao (Kings College London), EU-China Digital Connectivity: on power and regulatory capture

 

Jorg Polakiewicz (Council of Europe), The Emperor’s New Clothes – Data Privacy and Cybersecurity from a European Perspective

 

Thomas Streinz (New York University, NYU), The Limits of the Brussels Effect in the Digital Domain

 

Svetlana Yakovleva (University of Amsterdam), EU’s policy on cross-border data flows: navigating the thin line between liberalizing digital trade, promoting rules-based multilateralism and safeguarding fundamental rights and values

 

3. On ‘Good’ Trade Governance: the emerging ambitions and values of a deeper trade agenda

Jean-Baptiste Velut (Université Paris III - Sorbonne Nouvelle), Environmental allies and trade competitors: a comparative analysis of US and EU governance models for trade and climate action

 

Martin Trybus (University of Birmingham), The EU acting through Free Trade Agreements: The case of sustainability and public procurement

 

Tonia Novitz (University of Bristol), The role of the EU in developing ’sustainable’ labour linkages in contemporary trade

 

Eva Pander Maat (City Law School, City, University of London), The EU Carbon Border Adjustment Mechanism - merging ‘good’ global leadership on climate and trade?’

 

Clair Gammage (University of Bristol), The Next Normative Frontier: The EU as a Feminist Trade Actor?

 

4. The EU Institutional dimension of ‘Good’ Trade Governance

Maria Garcia (University of Bath), EU as trade negotiator in the international order- Limits of the EU’s normative linkages in trade negotiations

 

Wolfgang Weiss (University of Speyer), Democratisation of good global governance: The EU’s role in the Parliamentarisation of trade policy

 

Ewa Zelazna (University of Leicester), The EU as a Good Global Actor in International Economic Relations The Role of Parliaments

 

Eva Kassoti (TMC Asser Institute) and Graham Butler (Aarhus University), The EU Courts Approach to International Law: Towards a Conceptual Framework

 

Gesa Kubek (University of Leuphana), Dispute Settlement under EU FTAs: The Role of Sustainable Development Chapters

The Possibility of a U.S.-EU Resolution on the Section 232 Steel and Aluminum Tariffs

In an article from last week, Politico Pro had some interesting quotes from U.S. Trade Representative Katherine Tai on the issue of the Section 232 steel and aluminum tariffs. I wish I had the full transcript on this, but I don't, so I'll have to make do with the excerpts in the article. Here are the key points:

U.S. Trade Representative Katherine Tai on Tuesday called on the EU to join America in tackling what she said was a national security threat stemming from global steel overcapacity — suggesting that both the EU and the U.S. should work together in restricting imports of Chinese steel.

... While Tai indicated America was in no mood to totally reverse Trump’s measures because of the risks posed by Chinese overcapacity, she hinted that there could be room to go easier on Europe if it joined forces on confronting China’s state-backed mills.

“We’re really committed to figuring out how we can work with Europe on a national security threat that we think that Europe faces as well, in terms of the impact of overcapacity in steel and aluminum on the EU market and the EU’s ability to produce.”

Speaking to a a small group of reporters, Tai defended the way Washington cited national security to tax steel and aluminum imports, arguing that under U.S. law, that exemption was meant to protect critical industries.

“This action really wasn’t about declaring that Europe is a national security threat. It’s declaring that the impact of global overcapacity driving down prices, distorting markets, undermining the ability of U.S. producers in steel and aluminum to produce — that is a national security threat,” she said, adding that the EU faced the same concern.

...

“Steel and aluminum as basic industrial inputs are critical to a country’s national security. I think on that we probably don’t disagree,” Tai argued. “These are industrial products that really are the base for a country’s ability to defend itself, but also to keep its economy going and to build its infrastructure.”

...

Tai said she would seek to apply the Airbus-Boeing playbook — pausing transatlantic tariffs to jointly tackle China — to end the transatlantic trade dispute that has resulted in both sides slapping tariffs on steel. ...

“I want to emphasize that the Section 232 [national security] conversation that we’re going to have, and we’ve actually started with the European Union, that conversation shares the basic fundamentals of the one around large-scale aircraft,” Tai said.

“First of all, it is taking tension right now between the U.S. and the EU, which are these tariffs on both sides of the Atlantic, converting that into collaboration on a shared challenge that we have, which is global overcapacity that is driven primarily by China.”

One of the options discussed by the former Trump administration was to exempt allies such as the EU from tariffs and instead impose quotas. Tai did not directly comment on that approach, but admitted it was a “contradiction” that Washington was taxing EU imports.

“I think that the consternation that we encounter, which is completely understandable, is that in imposing the tariffs at the border, that those tariffs have gone on in a global nature, so that they’ve affected imports that come from everywhere, including from countries that we consider to be strong allies and good friends and that’s the contradiction,” Tai said.

...

“There are hard questions that we have to face,” Tai said. “There are feelings, deep feelings that we’re going to have to address. And it’s serious. It’s really serious.”

I have a few comments here.

First, the underlying issue seems to be this:  What can be done about Chinese overcapacity? I don't know that I've ever seen the problem fleshed out in detail, but I assume it arises from some combination of SOE behavior and government subsidies, with the Chinese government using these actions to maintain production at higher than market levels in order to keep employment up. It is these industrial policy-type actions by the Chinese government or related entities that create the overcapacity problem.

It's not clear to me why people think existing WTO rules in this area are insufficient, and I would start by filing more complaints and seeing how they go. China's accession protocol/working party report have rules on SOE behavior and the SCM Agreement has rules on subsidies, and those provide a good start. An alternative approach that has been tried here is to file domestic AD/CVD complaints, but those just offer protection to the domestic industry and are unlikely to change a foreign government's behavior (that's my sense anyway). If the goal is to change foreign government behavior, I would pursue multilateral remedies rather than unilateral ones.

Second, in terms of working with allies, the longstanding EU view here has been that the right approach to challenging Chinese trade practices is to use a combination of WTO litigation and negotiations. At this point, it's not clear to me how the Biden administration would want to approach things differently. Do they have some alternative in mind? If so, what is it? How do they envision having the U.S. and EU work together on this?

And finally, what is the scope of "national security"? If steel and aluminum are included, what else is in there? Lumber? Food? Data? I certainly understand how, say, fighter jets are part of the concept of national security, but for those pushing the envelope, it's worth thinking about how other countries might push it too, so as to cover various products that might be considered sensitive or important to them at a particular moment.

Will the Biden Administration Add the Paris Agreement to the USMCA List of Environmental Agreements?

I've complained before about the lack of transparency in bilateral and regional trade agreements, so I appreciate the public virtual session of the Inaugural Meeting of the Environment Committee of the USMCA/CUSMA/T-MEC. And I appreciate our excellent Cato Trade Policy Center RA Alfredo Carrillo Obregon for putting together a transcript of the event, which you can find here.

In addition to prepared statements by government officials, the session also offered the opportunity for the public to ask questions, and some of them were interesting. Here's one about the possibility of bringing the Paris Agreement into the USMCA:

Q: Will the parties act to include the Paris Climate Agreement within the CUSMA, including prioritizing climate obligations over conflicting trade rules in the agreement? Is that something that is being planned at all?

Kelly Milton (USTR)

I would just note that our administration and our agency leadership in particular has really emphasized the fact that the United States is committed to considering a range of trade tools to contribute to our whole of government approach to combat climate change. With respect to this specific question about the Paris Agreement, we are certainly continuing to analyze whether adding the Paris Agreement to the list of multilateral environmental agreements in USMCA would in fact make a positive contribution to addressing the climate crisis.

Doug Forsyth (CAN)

Taking action to protect the environment and combat climate change are top priorities for the Canadian government. To this end, we recently announced a new commitment to enhance our emissions reduction target under the Paris Agreement by 40 to 45% below our 2005 levels, and to do so by 2030. Although, as rightly noted climate change isn't explicitly referenced in the CUSMA, climate change remains a priority for Canada, we will continue to advance trilateral cooperation with our close partners through the ongoing work of the Commission for Environmental Cooperation as well as throughout this chapter to work under this chapter. We also look forward to working with US and Mexico in other fora, such as the WTO, to advance collaboration on trade related climate action.

In some ways, it may seem like a no-brainer for the Biden administration to push for the inclusion of the Paris Agreement in the USMCA list of multilateral environmental agreements. They want to engage on climate change issues, and they want to show the value of the USMCA, for which U.S. Trade Representative Katherine Tai was a key player in the negotiations.

And it may be worth noting that the question was asked in somewhat of a general manner, but the USTR official brought up the specific issue of adding the Paris Agreement to the USMCA list. (See Article 24.8, paras. 4 and 5 for the relevant provisions. For more background, see this post from Risa Schwartz).

However, I can imagine the USTR folks would see a problem with an approach that only makes the Paris Agreement enforceable among three of its parties. Perhaps they would prefer to start with an effort to make the Paris agreement enforceable for all its signatories.

My own view on these sorts of issues is that the best approach is to include an enforcement mechanism in the non-trade agreement itself, rather than making it enforceable through a trade agreement. If governments want the Paris Agreement to be enforceable, they could do that directly in the Paris Agreement. Having trade agreements acts as general global governance agreements is likely to cause controversy (and has done so in the past), and it would be a mistake to go further with such efforts. There may be short term political "wins" from doing this, but in the long term it makes the trade and global governance regimes more fragile.

The G7 on Trade: Some Hope for US Return to Binding Multilateral Dispute Settlement?

Judged by the recent past, the G7 meeting in the UK (with key US allies) was a resounding success. But then again, the Trump administration created a low bar. In 2019, there was no G7 communiqué for the first time—because of divisions on trade. And in 2020 there was no meeting—the US host “postponed” it until the year ran out.

Yet this year, there was a long communiqué, and it had a full section even entitled “Free and Fair Trade.” Once more, the G7 committed to championing “the rules-based multilateral system” that the previous US President so disparaged.

The G7 statement now calls “for the world’s leading democratic nations to unite behind a shared vision.” That vision is “to ensure the multilateral trading system is reformed, with a modernised rulebook and a reformed World Trade Organization (WTO) at its centre.”

This general commitment is followed by specific ones. The first stresses the need to make “progress” for the WTO’s next Ministerial Conference in November, with the hope of “a meaningful conclusion” of negotiations on fisheries subsidies. Meanwhile, subsidized fleets deplete the oceans of fish. The baseline for progress may be low, but engagement is critical.

The second expresses concern about “forced labour in global supply chains.” The statement does not call out China by name, possibly because of pushback from other G7 members, but it specifically mentions “the agricultural, solar, and garment sectors,” all of which involve production in Xinjiang.

The final paragraph commits to working together and “with the wider WTO membership” to address major issues that implicate China. Once more, China is not mentioned expressly, but the US clearly has China in its scope on “forced technology transfer, intellectual property theft, lowering of labour and environmental standards to gain competitive advantage, market-distorting actions of state owned enterprises, and harmful industrial subsidies,” and “transparency.” As I have argued elsewhere, singling out China by a so-called “alliance of democracies” is not just risky, but a mistake. The issues, however, are real.

Perhaps most interesting is the G7’s commitment to advance the “proper functioning of the WTO’s negotiating function and dispute settlement system” (emphasis added). This could have been worded more elegantly (“functioning” of a “function”?), but it is an advance.

Unstated is that there is tension—if not outright contradiction—between the G7 commitment to a “rules-based multilateral system” and the US neutering of WTO dispute settlement. Here the US remains alone among the G7 and the “broader membership.” The communiqué nonetheless offers hope here, signaling that the G7 aims to see WTO dispute settlement “function properly.”

On this front, the Biden administration’s strategy, it seems, is first to resolve disputes over the Trump tariffs imposed on G7 and other US allies, against which the allies retaliated. Resolving this dispute is politically tricky. The tariffs provide protection to the US steel industry, and that industry is in swing states that are critical for the 2022 election. The control of the US Senate and House are at stake. The Biden administration will thus proceed carefully, biding its time, consulting with labor union constituencies. Still, the two sides are making progress, agreeing to suspend new tariffs while they negotiate.

If the Biden administration can settle tariff disputes with its G7 allies, then maybe, just maybe, the US will be in a cleaner position to make concrete proposals to return to binding multilateral trade dispute settlement. Then the system might be “rule-based” once more.

Gregory Shaffer is Chancellor’s Professor at the University of California, Irvine and author of Emerging Powers in the World Trading System: The Past and Future of International Economic Law, Cambridge University Press, July 2021.

The Airbus-Boeing Truce: What Exactly was Agreed?

Today the U.S. and EU announced a 5 year suspension of the tariffs that were in place after the WTO dispute settlement rulings in the Airbus-Boeing subsidy dispute. Lifting the tariffs is good news (although the U.S. made it clear that if the EU violates any "red lines" in terms of the provision of subsidies, the tariffs can be reimposed), but it's hard to get a sense of the details of the agreement. The EU press release explains that:

Under the Understanding on a cooperative framework for Large Civil Aircraft, the two sides expressed their intention to:

• establish a Working Group on Large Civil Aircraft led by each side's respective Minister responsible for Trade,
• provide financing to large civil aircraft producers on market terms,
• provide R&D funding through an open and transparent process and make the results of fully government funded R&D widely available, to the extent permitted by law,
• not to provide R&D funding as well as specific support (such as specific tax breaks) to their own producers that would harm the other side,
• collaborate on addressing non-market practices of third parties that may harm their respective large civil aircraft industries,
• continue to suspend application of their countermeasures, for a period of 5 years, avoiding billions of euros in duties for importers on both sides of the Atlantic.

And the White House fact sheet says the following:

Both sides agreed to the following general principles to guide their future cooperation:

Suspend the tariffs related to this dispute for five years. This signals a mutual determination to embark on a fresh start in the relationship. The agreement also retains flexibility for the United States to reapply tariffs if we’re no longer competing on a level playing field. 

Establish a Working Group to analyze and overcome any disagreements that may arise between the sides. The Working Group will collaborate on and continue discussing and developing these principles and appropriate actions. The Trade Ministers leading the Working Group will consult at least yearly. The Working Group will meet on request or at least every 6months.

Ensure that our workers and industries can compete on a level playing field. The U.S. and EU agreed to clear statements on acceptable support for large civil aircraft producers that affirm the outcomes of the disputes and the intention of the parties to ensure that our workers and industries can compete on a level playing field.

Confront the threat we face from China’s ambitions to build a sector upon non-market practices, including:

• Meaningful cooperation on countering (1) investments in the EU and the United States by non-market actors, which can lead to the appropriation of technology; and (2) outward investments into China that are influenced by non-market forces. 
• Identifying where joint work is needed to take parallel action against non-market practices.
• Sharing information regarding these and other areas to forge a common approach in the large civil aircraft sector.

What I'm still not sure of is whether, practically speaking, the US/EU:

1) have agreed to make changes to their subsidy programs;

2) have agreed not to worry about each other's subsidy programs; or

3) just agreed to keep negotiating.

Here is a question by Jim Brunsden of the Financial Times at a joint press conference, which tries to get some answers:

on the agreement that's been reached on Airbus Boeing, to follow up really on the previous question, how confident are you both that this is really the end in terms of the disputes, given that there's still obviously work to do. And how do you plan to navigate the fact that the US and EU approaches to subsidizing commercial aircraft are so different, with launch aid in the European Union being a bone of contention for a very long time, and with, for example, Defense Department funding and other forms of R&D funding in the US. How do you plan to navigate that? Thank you very much.

European Commission Executive Vice-President Valdis Dombrovskis and U.S. Trade Rep Katherine Tai responded as follows:

Dombrovskis

on the first question, I think today, one can say we are grounding this Airbus Boeing dispute. And I think it's a major step towards really putting this dispute completely to the end. So we agree, a cooperative framework, and within five years of this cooperation, I think we'll be definitely able to put this, these principles to the rest. In a sense, what took so long, exactly, one of the difficulties is that we have very different approaches, how our large civil aircraft manufacturers are functioning, what kind of support is being provided. So, therefore, we were able to agree on a general principles on how this support is going to be provided, not on every possible detail, but then we are establishing Working Group which will continue to work on all sorts of topics, and make sure that what we do, we do in a cooperative spirit.

Tai

Well I'd like to say a couple of words here too. Again, I cannot underscore enough how this process has built my trust, and also my hope, in the partnership with EVP Dombrovskis, his team, and the European Union. In terms of my confidence level, it is very high, as of today. And again, I think I want to address the question of what does this agreement mean. And I noticed a theme in the questions as you're all grappling with it, which is ... my confidence level is high that we have resolved these disputes, because we are putting away our litigation briefcases and we have committed to each other, to sit down at the table, and to discuss pragmatically what is going to be best for competition between us, in the context of a world where our industries, and workers, will be facing competition like we've never seen before. So, again, my confidence level is high with respect to this industry, this dispute, but also the larger issue of US/EU collaboration and what democracies can accomplish when we work together in a spirit of pragmatism and effectiveness.

And here's a question from a separate press briefing by Tai:

Q Good morning. Yes, can you say — will Airbus have to repay the subsidies? Will Airbus have to pay back those subsidies? ...

AMBASSADOR TAI: ... Now there are a number of subsidies, but, again, I’ll interpret your question related to ones that are outstanding. And the answer there is that the agreement provides for continued discussion between the parties on outstanding and current subsidies to Airbus for the existing aircraft, which remain a concern for the United States.

We’ll continue to confer to address these outstanding support measures.

Based on this, I'm not totally sure what has been agreed to, and to what extent any differences of view here have been resolved. It is certainly clear that the U.S. and EU are going to cooperate with each other in relation to addressing China's subsidies in this sector, but what exactly they agreed to with regard to each other's subsidies is difficult to understand at this point. Ending the litigation is good in a number of respects, but if it just takes us back to the original pre-2004 negotiating positions, I'm not sure how much has been gained. On the other hand, now the negotiations will be taking place when there is greater concern about Chinese competition in this sector (and other sectors), so perhaps that will light a fire under the negotiators and both sides will be more willing to make concessions.

ADDED: The full text of the Understanding is here. To illustrate my points above, take a look at this sentence:

Each side intends to provide any financing to its LCA producer for the production or development of large civil aircraft on market terms.  

I can imagine there will be some disagreement on the scope of this sentence, and I'm not sure what the parties' expectations are here.

Katherine Tai on Labor Issues in the USMCA and at the WTO

In a speech today to the AFL-CIO, U.S. Trade Rep. Katherine Tai said the following:

The USMCA agreement is a good example of what can happen when labor is at the table.  It’s not perfect, but because we collaborated closely with President Trumka and many of the union leaders here today, we negotiated a better deal for American workers.  

Because of our partnership, the USMCA now includes:
- The strongest labor and environmental standards in any agreement ever;
- A new rapid response mechanism that allows us to quickly take action at a specific factory where workers are being denied their rights to freedom of association and collective bargaining; and
- Critical changes to the intellectual property provisions designed to increase access to affordable medicine for regular people.

Unlike previous trade agreements, USMCA passed with overwhelming, bipartisan support.  It is proof that consulting – really listening and working with workers, the labor movement, and a broad range of stakeholders – leads to more pro-worker, more meaningful, and more popular policy.  

Less than a year after USMCA went into effect, we’re already using its labor enforcement tools. Last month, we asked Mexico to investigate whether workers at a GM facility in Silao were denied their rights during a contract ratification.   

This was the first time that the new rapid response tool was used by the U.S. government.  It was also the first time in history that the United States proactively initiated labor enforcement in a trade agreement.  

The AFL-CIO recently filed a Rapid Response petition alleging workers’ rights had been violated at an auto parts manufacturer.  Yesterday, we asked Mexico to review the allegations – the second time we’ve taken this step in the last month.

Under previous agreements, labor petitions could – and did – languish for years without a response from the Administration.  But we have acted quickly.  

These enforcement actions matter.  The Rapid Response Mechanism will help to protect the rights of workers, particularly those in low-wage industries who are vulnerable to exploitation.  Because when we fight for workers overseas, we are fighting for workers here at home.

And we’ll do that across the board.  Enforcing all of our trade rules is a priority for the Biden-Harris Administration.  Those who work hard and play by the rules, you deserve to have the government on your side when faced with illegal and unfair trade practices. 

We must apply the same principles at the WTO.  Despite a preamble that says “trade…should be done with a commitment to raising living standards and ensuring full employment,” the WTO’s rules actually don’t include any labor standards, and workers are often an afterthought.  This needs to change.

The United States recently submitted a proposal to ensure that fighting forced labor is included in any agreement the WTO reaches to prohibit harmful fisheries subsidies.  We know that forced labor is a serious problem in the fisheries sector, particularly on distant water fishing vessels.  I hope WTO Members will commit to a high-standards, meaningful agreement that includes our common-sense provision and that will contribute to tackling this problem.  

This is not just an economic issue.  This is a moral imperative, and I ask all of you to help us to build support for our effort.  The WTO must show in these negotiations that it can improve the lives of regular people and that it is capable of responding to crises and tackling difficult matters, particularly when it comes to worker abuse.

If the WTO is to be relevant and a force for good, it must be revitalized and modernized.  We must take bold steps to fix its negotiating function, commit to greater transparency, and reform the dispute settlement process.  

Under the Biden-Harris Administration, we will bring dignity of work – and the empowerment of workers – to the WTO.  

Let me offer a few comments on all this.

First, the USMCA was something that succeeded in the politics of a particular moment. President Trump was leading an extremely economic nationalist administration; the free market-oriented Republicans in Congress were afraid to stand up to him and afraid of losing NAFTA; and many Democrats saw an opportunity to expand the scope of issues such as labor rights in trade agreements. But that moment has passed, and I think it's pretty clear that it would be difficult to replicate this kind of agreement in U.S. politics today. If President Biden proposed something that was substantively along the lines of USMCA, I would expect just about every Republican to oppose it.

As to the WTO, while Tai clearly wants to ratchet up the role of labor rights there a bit, she probably doesn't expect those rules to go as far as USMCA labor rules do. Is even a small ratcheting possible? Will India and other countries who usually object to the inclusion of labor rights be willing to go along with any of this? That may depend in part on how the Biden administration approaches this and other WTO issues. For example, Tai said that "[w]e must take bold steps to ... reform the dispute settlement process." If these bold steps include a reasonable U.S. proposal on resolving the Appellate Body crisis, maybe there is scope for some grand compromise. But I have doubts that anything significant on labor rights is possible at the WTO (forced labor in fisheries is narrow enough that perhaps something could be done there), and it's also not clear to me why the focus is on pushing these issues at the WTO as opposed to the ILO.

And finally, there has been a lot of talk from the Biden administration about workers. But one thing missing from the conversation is how the tariffs they have carried over from the Trump administration harm workers (they may help specific industries and workers in those industries, but they harm workers more generally). Tai said this in her speech: "The WTO must show in these negotiations that it can improve the lives of regular people ... ." I've always seen this as the core mission of the WTO's rules that constrain tariffs and tax/regulatory protectionism: Protectionist domestic policy is something demanded by special interests that harms regular people, and through the WTO governments have agreed to engage in less protectionism. For me, the big question about the Biden administration on trade policy is whether they are willing to stand up to interest groups and, in doing so, to promote the interests of regular people. Arguably they have been doing this in the area of intellectual property (although I know that some people disagree with this assessment), but with certain influential industries it seems like they are reluctant.

Cato Online Event (June 21): Can International Rules Improve Domestic Regulation of Digital Trade?

I was a little late to the party on digital trade agreements, so I'm trying to play catch-up. In order to educate myself, I decided to put together a Cato panel on the issues. Here's the description:

Can International Rules Improve Domestic Regulation of Digital Trade?

National debates over policies that affect the flow of digital information are heating up as censorship, surveillance, control over personal data, and requirements to store data locally have emerged as contentious political issues. At the same time, governments are negotiating international agreements that constrain their ability to regulate domestically. What exactly are the problems that have been caused by domestic regulation of the flow of digital information? And can international agreements help solve them? Please join us for a discussion of these timely issues.

The panelists will be three people who know these issues well and can explain both the basics and the nuances: David Weller, Director of Economic and Trade Policy, Google; Neha Mishra, Lecturer, Australia National University College of Law; and Henry Gao, Associate Professor of Law, Singapore Management University.

Because the panelists are scattered around the world, we ended up settling on a time that perhaps only a small number of people will like: June 21, 2021, at 9 - 10 PM EDT. If that time doesn't work for you, you can always watch the event later at your leisure. Of course, it would be great to have people there live and asking probing questions, so please join us if you can! The registration link is here.

The Biden Administration's Possible Use of Section 232

When the Biden administration took office, many of us hoped they would undo the domestic policy and international relations damage caused by the Trump administration's use of Section 232 and Section 301 to impose tariffs. In at least some cases, there were real underlying problems of various sorts that needed to be addressed, but Section 232 and Section 301 did not seem like good ways to deal with those problems.

At the same time, we are all aware of how politics can get in the way of good policy, and the Biden administration's reluctance to withdraw measures taken by the Trump administration under both statutes was at least understandable, although I wouldn't necessarily have made the same political calculations myself.

What is less understandable, however, is the use of these same statutes by the Biden administration in new investigations. And yet a new White House report suggests the Biden administration is considering initiating a Section 232 investigation of its own:

[Recommendation 4:]

4. Strengthen international trade rules, including trade enforcement mechanisms

While the Administration welcomes fair competition from abroad, in too many circumstances unfair foreign subsidies and other trade practices have adversely impacted U.S. manufacturing and more broadly, U.S. competitiveness. The practice of “pumping and dumping,” in which countries heavily subsidize an industry, gain market share and then flood the market with cheaper products to wipe out competition, has been documented in a number of industries including pharmaceuticals and clean energy. The U.S. government must implement a comprehensive strategy to push back on unfair foreign competition that erodes the resilience of U.S. critical supply chains and industries more broadly

...

• Evaluate whether to initiate a Section 232 investigation on imports of neodymium magnets: Neodymium (NdFeB) permanent magnets play a key role in motors and other devices, and are important to both defense and civilian industrial uses. Yet the U.S. is heavily dependent on imports for this critical product. We recommend that the Department of Commerce evaluate whether to initiate an investigation into neodymium permanent magnets under Section 232 of the Trade Expansion Act of 1962.

I'm skeptical that tariffs are needed here, but even if the Biden administration is determined to impose tariffs on neodymium magnets, there are ways to get them that respect the rule of law. For example, a GATT Article XXVIII renegotiation is a perfectly legal way for a government to raise tariffs on particular products. Invoking national security, by contrast, can threaten the entire trading system if the concept is abused. When countries stretch the boundaries of the definition, there is a risk that the system will unravel: If every country does this, the rules start to become meaningless.

With the Trump administration, it was obvious how little some of the key players respected the system, so there wasn't much that could be done. If other countries copied the Trump administration's tactics, it would probably have made some of the Trump folks happy, by hastening the demise of the system. People were just trying to wait things out until Trump left office. As a result, we didn't see a spiral of invocations of security as a basis to impose tariffs because people hoped things would eventually get back to normal and wanted to preserve some degree of trade peace in the meantime.

But if normal U.S. administrations are going to invoke Section 232 like this, then I'm not sure others will continue to hold back. Thus, using Section 232 in this way is a dangerous road for the Biden administration to go down.

One caveat is that if these particular magnets are all or mostly about China, which I think they are, then this action could be seen as just part of the U.S.-China relationship, which is already operating outside of trade norms. That could keep this particular Section 232 action from causing more general damage to the trading system. But there would still be a big risk to doing this.

Note from Tom Prusa on World Bank’s Temporary Trade Barriers Database

This is from econ prof Tom Prusa:

World Bank’s Temporary Trade Barriers Database Updated

After at least 5 years without an update I recently discovered that the World Bank’s Temporary Trade Barriers Database was updated in March 2021.  This database collects information on the use of temporary trade barriers in the form of antidumping, countervailing, and safeguard measures across over 30 countries since the 1980s through 2019.  It is the most reliable and complete accounting of these type of trade barriers. 

The World Bank seems to have taken a low key approach with respect to this update.  Either I missed the announcement of the new release or the perhaps the World Bank did not announce the update.  Additional confusion is created by the fact that the earlier World Bank pages linking to the database still link to the 2015 version of the database and the World Bank pages state that the project was discontinued.  If you google “TTTB world bank” or “GAD world bank”  you are given links to the outdated database.  It was a total fluke that I stumbled upon the updated data.    

I emailed the World Bank team leader on the project (Jose Signoret) and he asked the database be cited as

Jose Signoret, Chad Bown, Milla Cieszkowsky, and Aksel Erbahar (2021) "Temporary Trade Barriers Database, available at https://www.worldbank.org/en/data/interactive/2021/03/02/temporary-trade-barriers-database"

Tom Prusa

--

Thomas J. Prusa                
Professor
Dept of Economics / Rutgers University
http://econweb.rutgers.edu/prusa/

Commentary on the World Ecolonomy

This global forum of ideas has been quiet in recent days, so I can inject a dozen of my recent tweets on the global ecolonomy.  @SteveCharnovitz

"#Globalsecurity" should be the new lens for analyzing global threats such as lab-created viruses and cyberterrorism. A "national security" lens has been ineffective.  9:34 AM · Jun 7, 2021

It's not often that the EU is on the correct side of a politically fraught international economic issue. But here they are, and so I commend them for standing up to the anti-IP foolishness in US trade policy.   9:30 PM · Jun 3, 2021

Tariffs are a lot like carbon emissions. A minimal goal is net zero. But for tariffs, a better goal is gross zero. And for climate, perhaps the goal should be Net Negative rather than Net Zero.  5:09 PM · Jun 1, 2021

The US emerges from Covid-19 with enhanced power relative to other countries, yet with diluted moral authority for its lack of commitment to the global community.  9:01 AM · May 30, 2021

Paying any ransom in the #ecolonomy has negative externalities and therefore international regulation is needed. The optimal approach would be a uniform national law applying to any means of financial payment including Improved US law could be a model.  8:13 AM · May 29, 2021

The draft Trade Act of 2021 (housed in a Senate vehicle?!) features a mix of market opening and market closing measures. The most important element needed — extending fast track — was omitted.  12:37 PM · May 28, 2021·

Although Trump pushed the envelope in deploying US foreign policy to suppress free trade, contemporary US trade policy is dependably protectionist in a bipartisan way.  6:50 PM · May 27, 2021

The WHO has bungled Covid-19 efforts from Dec. 2019 forward. Internal reform seems unlikely. As part of International Pandemic Law (#IPaL), governments should set up a new transnational agency focused on pandemic prevention and mitigation.  7:48 AM · May 27, 2021

A government that is hyper-printing fiat currency (like the US) should be the last to violate world trade rules that do not recognize current depreciation as a subsidy. https://insidetrade.com/daily-news/commerce-finalizes-first-ever-currency-cvds-vietnamese-tire-case…  4:09 PM · May 26, 2021

To improve US competitiveness, Congress should eliminate all sector-specific industrial policy such as steel tariffs. Also Congress should not initiate WTO-illegal subsidies for semiconductors.  5:26 PM · May 25, 2021·

If patents on Covid-19 vaccines are restricting output, then the Biden Administration should buy up the worldwide patent rights for those drugs and then grant a universal vaccine production license. Of course, the government should pay “just compensation” to the innovators.  8:33 AM · May 25, 2021

#Blockchain may be increasingly used to document the provenance of goods and services, that is how and where they are produced. This will improve the tracking of labor and environmental conditions for products in international (or domestic) trade. Perhaps PPM NFTs.  6:20 PM · May 24, 2021·

The EU's Counterproposal on COVID-19 Vaccines and Treatments

After the surprise of the United States coming out in support of a TRIPS waiver for COVID-19 vaccines and related products, everyone has been looking to the EU and other wealthy countries to see if they would come around and support the general idea of a waiver. Negotiating a waiver will be a challenge even if every WTO Member supports it, because agreeing on specific language will be difficult. But support in principle is a necessary step.

From what the EU just announced today, it is clear they do not support a waiver at the moment. Here are some documents that describe the EU position: Questions and answers; EU communication to the WTO General Council; EU communication to the WTO TRIPS Council. The three key components of the EU's proposals are:

1. limit export restrictions and facilitate trade;
2. encourage the expansion of vaccine and treatment production, in collaboration with industry; and
3. address intellectual property issues.

Here are a few quick thoughts on each.

On the issue of export restrictions, the EU says:

All WTO members should be ready to subscribe to the G20 commitment to ensure that any export restrictive measures relating to health products are targeted, transparent, proportionate, and temporary, and consistent with WTO obligations. Such principles have been incorporated into a draft Declaration on the Trade and Health Initiative (‘Covid-19 and Beyond: Trade and Health (JOB/GC/251/Rev.2’) that the EU along with 12 other WTO members put forward back in December 2020. It is encouraging that 50 WTO members (including 27 EU Member States) have signed up to this initiative but the involvement of the whole WTO membership is required for it to have a significant effect. This initiative constitutes a basis that WTO membership should build on not only in a response to the current crisis but also in anticipation of any future emergency.

The draft Declaration develops further the concept of temporariness, and strengthens Members commitments regarding transparency and proportionality.

I have a sense the EU is trying to play up its differences with the U.S. in this area. Back in April, someone in the White House put out a long Twitter thread trying to defend the U.S. position, but in the process seemed to confirm that the U.S. measures were a de facto export restriction. One of the tweets in the thread stated:

To make vaccine here in the US we have used the DPA to ensure we have access to all needed supplies with many US companies. DPA in these cases just means U.S. companies must prioritize their government contracts ahead of other orders, it doesn’t mean an export ban

This seems to refer to vaccine inputs as opposed to vaccines themselves, but the same principle applies in that context. Maybe there's no export "ban," but if the DPA has signed purchase contracts with pharmaceutical companies that require prioritizing sales to the U.S. government, practically speaking this means the U.S. is restricting exports. The Biden administration has tried hard not to acknowledge any of this, but from what I can tell it's a real problem in terms of getting vaccines to the rest of the world. The Biden folks do seem to be looking for workarounds, but it's difficult when this is the starting point. Just today, the Washington Post reported: "Responding to criticism that the United States has hoarded lifesaving coronavirus vaccines, the Biden administration on Thursday announced a plan to share 25 million doses globally in what officials described as a down payment on tens of millions more doses to come." This is good, although it doesn't really deal with the underlying problem.

Next we get to the point about encouraging production. Here the EU says:

Governments should strongly encourage vaccine and therapeutics manufacturers and developers to contribute towards the objective of expanding production and ensuring affordable supply of vaccines and therapeutics to low- and middle-income countries during the pandemic. Such actions could include licensing agreements, providing for the sharing of knowhow, tiered pricing which involves a non-profit sale to the low-income countries, contract manufacturing and new investments in manufacturing facilities in developing countries.

This could mean a number of things. It could mean strongly worded requests by governments for manufacturers to agree to licensing agreements; it could mean government payments to the manufacturers to do so; or it could mean laws or regulations that require the manufacturers to do so. Here, I think it's worth noting that some day it might become clear that the U.S. support for a TRIPS waiver may have been designed as the "strong encouragement" the EU mentions.

Finally, on intellectual property, the EU seems to be pushing for an easier use of compulsory licensing:

In the absence of voluntary licences, compulsory licences are a legitimate tool to ensure that intellectual property rights do not hinder the expansion of production during the pandemic. The EU therefore calls on WTO members to agree that:

1. the pandemic is a circumstance of national emergency, and therefore the requirement to negotiate with the rights holder may be renounced;
2. we need to support manufacturers who are ready to produce vaccines or treatments at affordable prices under a compulsory licence, and that the level of remuneration paid by that manufacturer to the patent holder should reflect such affordable prices;
3. the compulsory licence could cover any exports to countries that lack manufacturing capacity, including via COVAX.

The EU also sets out the following view of intellectual property in this context:

6. The rapid development of several safe and effective COVID-19 vaccines has shown the value of intellectual property, in terms of the necessary incentives and rewards to research and innovation. With the support of public financing, pharmaceutical and biotechnology companies throughout the globe have built on their expertise and invested resources to find solutions against COVID-19. ...

Maybe some day we'll have a debate on the extent to which 20 year patent terms contribution to innovation. Is 20 years the right number? Would prizes work better? It's hard to get governments to think about these things. Anyway, it's great that the pharmaceutical companies came up with the vaccines, but I think the TRIPS waiver is not quite what some people are making it out to be. As I read the various exceptions and flexibilities in the TRIPS Agreement, there are pretty strong arguments that governments can do all the things they want to do (e.g., issue compulsory licenses) under the existing rules. The TRIPS waiver just gives them a little additional certainty that they won't be challenged at the WTO (and possibly in domestic courts as well, although it's hard to get a handle on how that would play out). I'm not sure why the EU is drawing the line where they are, but they seem determined not to budge and support anything called a "waiver."

Job Posting: Research Associate/Research Assistant in the Centre for International Law, National University of Singapore

The Centre for International Law, National University of Singapore invites applications for a Research Associate/Research Assistant.

The job description and information for how to apply can be accessed here. The closing date for applications is 30 June 2021.