Ineffectiveness of WTO Law in Addressing Challenges of the Covid-19 Pandemic

The Covid-19 pandemic is what can be described as a ‘black swan’ event that has had implications for the world in different ways, including in the area of international trade and commerce. It is in this context that the role of the World Trade Organisation (WTO) becomes relevant because it is the global body that has the functions of developing new trade rules, monitoring trade policies, and resolving trade related disputes among its 164 members. During the Covid-19 pandemic, consumption and production has been reduced, which has led to disruption to the global economy and world trade and the WTO is the body that could have responded to the challenges to the global economy at this time. However, it may be argued that the WTO has not responded to these challenges and that it has been resolutely ineffective at tackling the challenges. This essay discusses whether it would be appropriate to state that the law of the World Trade Organisation (WTO) has proven ineffective at tackling the challenges posed by the Covid-19 pandemic.

The WTO is the cornerstone of the multilateral trading system and it was established to provide stability to the trading system. The WTO makes rules and norms that are aimed at reduction of barriers and improves the cross border facilitation of trade amongst the members. The three primary functions of the WTO are to negotiate new rules for trade, monitor their implementation and settle disputes that arise between the members of the WTO. It has been argued that one of the reasons why the WTO failed to respond to the challenges posed by the pandemic is related to lack of communication. For WTO to perform its functions effectively, it should be able to facilitate its members to talk to each other. However, the pandemic and the worldwide lockdowns starting March 2020, meant that the WTO meetings were cancelled and their staff was sent home so that the organisation could no longer facilitate talks between the members of the WTO. Because WTO was not able to adapt to a situation where meetings could not happen in physical sense, it was not able to effectively meet the challenges posed by the pandemic.

It is noteworthy that while the inefficiencies and gaps within the WTO system has been considered to be an important area of reform in literature, the Covid-19 pandemic has gone on to reveal how ineffective the WTO law has been for addressing the challenges posed by the pandemic. The Covid-19 pandemic has had severe effects for world trade because there is a deep disruption of world trade. As a consequence of the pandemic, governments around the world ordered temporary closure of non-essential manufacturing facilities, corporations decreased production, and sectors like international tourism, passenger air travel and container shipping came to a standstill for many months of 2020. The effects of all these factors were felt in the decrease in global financial transactions and decline in information and communications technology services. Trade agreements and WTO rules are meant to constrain preventative regulation of supply chain. However, the question is whether the WTO rules and law was effective in constraining such preventative action on the part of the member states.

1. Chios Charmody, ‘Obligations versus Rights: Substantive Difference between WTO and International Investment Law’ (2017) 12 Asian J. WTO & Int'l Health L & Pol'y 75.
2. Daniel CK Chow and Thomas J. Schoenbaum, International Trade Law: Problems, Cases and Materials (Wolters Kluwer Law & Business 2017).
3. Patrick Low and Robert Wolfe, ‘How the WTO kept talking: Lessons from the COVID-19 crisis’ in Simon J. Evenett and Richard Baldwin (eds), Revitalising Multilateralism Pragmatic Ideas for the New WTO Director-General (CEPR 2020).
4. Ibid
5. Ibid
6. Ibid
7. Ibid
8. Lukasz Gruszczynski, ‘The COVID-19 pandemic and international trade: Temporary turbulence or paradigm shift?’ (2020) 11(2) European Journal of Risk Regulation 337.
9. Ibid

The response of the countries to the pandemic can be explained as follows:

“Trade policy has played an important part in this global response, as countries lower entry barriers for medical products, put up export restrictions to keep scarce supplies at home, and look for ways to increase the production of medicines and medical devices and ensure affordable access for their populations.”

The WTO law mandates that countries agree to certain limits on their freedom to implement trade-related policies so that they can remove unnecessary barriers to trade, avoid discrimination against products and services from other members, avoid certain subsidies, to name a few. The WTO law, particularly, the GATT, and rules formulated by the WTO provide such obligations of the member states. Article XI(1) of GATT prohibits quantitative restrictions, which are measures such as bans and quotas on exports of goods. Save for four exceptions, member states may not prohibit or limit exports; in the context of Covid-19, it may be said that such prohibitions may be engaged by Article XI(1). Even where some exceptional situations allow countries to impose restrictions, they are meant to be temporary in nature, which has been interpreted to mean only for the period that is necessary. Nevertheless, the Covid-19 pandemic saw countries impose quantitative restrictions, with some countries even hoarding medical supplies. Thus, it could be argued that the WTO law was not able to prevent countries from making quantitative restrictions. There are several factors that can be attributed to for these failures of the organisation.

WTO’s inability to respond to the challenges posed by the Covid-19 pandemic is demonstrated by the uncoordinated recourse to trade policy instruments by member states during the pandemic. It has been argued that although the WTO has been successful in resolving disputes and supporting negotiations its inability to “bread and butter” trade issues led to problems with coordinating recourse to trade policy instruments. Bread and butter trade issues are related to policies preventing discriminatory trade policies. Due to the failure of the WTO to negotiate on anti discriminatory trade policies, there were a number of repercussions of this failure that were apparent during the pandemic. One of the repercussions of this failure was that the WTO has not been able to play a role in defusing trade conflicts between the US and other members of the WTO, and defusing trade tensions related to the growth in exports and outward investment of Chinese companies in other member states. A significant problem during the COVID-19 pandemic related to members resorting to unilateral imposition of export restrictions for medical supplies and personal protective equipment and the WTO was unable to play an effective role in this context.

1. Ibid
2. Timothy Meyer, ‘Trade Law and Supply Chain Regulation in a Post-COVID-19 World’ (2020) 114(4) American Journal of International Law 637.
3. Jessica Lawrence, ‘Covid-19, Export Restrictions, and the WTO: Magnifying Global Divisions in a Time of Crisis’ (2020) accessed < https://repository.essex.ac.uk/28029/1/015.pdf> p. 107.
4. Ibid
5. General Agreement on Tariffs and Trade, LT/UR/A-1A/1, 14 April 1994 (GATT).
6. China Measures Related to the Exportation of Certain Raw Materials, WT/DS394/AB/R, 30 January 2012, [323] [331].
7. Sidhartha Aatreya, ‘Are Covid-19 Related Trade Restrictions WTO-Consisent?’ (2020) EJIL:Talk.
8. Bernard Hoekman, ‘WTO reform priorities post-COVID-19’ (2020) 24(4) East Asian economic review 337.
9. Ibid
10. Ibid

The Covid-19 pandemic exposed the weaknesses in the plurilateral cooperation approach of the WTO because the initiatives taken by countries in the Asia-Pacific region for the purpose of supporting supply responses through trade facilitation and abstaining from export restrictions were resisted by the EU and the US. The latter imposed export controls on COVID-19-relevant medical products, while the countries in the Asia-Pacific region tried to work through trade facilitation. The failure of the WTO to help facilitate a dialogue and consensus between these countries has been one of the most significant reflections on the problems with the way WTO is structured and how it functions.

It can be said that the WTO itself is not structured in a way to engender efficacy in responding to crises as revealed by its failures during the pandemic. During the present crisis itself, more than 100 countries imposed export restrictions on goods that are essential for response to the pandemic, including PPE, pharmaceutical ingredients, vaccines, diagnostic kits, and medicines without the WTO being able to play a role in preventing or negotiating such outcomes that would have helped the world to deal with the pandemic in a more collective way. There have been other areas where WTO has failed to broker solutions by building consensus; for example, the proposal made by India and South Africa for temporary WTO waiver from certain obligations of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement was resisted by the EU and the US because the latter do not want to waive patents on vaccines for COVID-19 even when the proposal met with approval from the WHO. The proposal was premised on the need to increase and localise vaccine production for Covid-19 so that the pandemic could be responded to more effectively, but the European Union and the US have not agreed to these proposals despite WTO’s efforts at brokering an agreement on this issue. The inability of the WTO to help members talk and negotiate and build consensus on such issues reveals the internal defects of the WTO itself.

Hoekman argues that one of the reasons why the WTO has not been able to effectively respond to crises in the past is that the working practices of the WTO involve consensus decision-making, which takes time to build and also sees deadlocks when members have substantive differences on issues. Hoekman also makes a point about the limitation of the ability of the WTO Secretariat to provide information and analysis on its own initiative because the model of the WTO is based on “member-driven” governance. This has the impact of impeding engagement by actors with the expertise, and resources to assist WTO members arrive at a common understanding of new issues. The WTO also has lesser transparency; this is most apparent in the area of cross border effects of national policies that are to be notified by the member states but where even in the pre Covid-19 era, there have been lapses on the part of the members. The WTO member states have not been honouring their notification obligations even in the period before the pandemic. During the pandemic, the members have not been notifying the trade measures implemented by them in response to Covid-19. The WTO was not able to ensure that the member states notified their trade responses. Finally, the failures of the WTO to respond to the challenges posed by the pandemic have led to renewed debate on the viability of the ‘one size fits all’ neoliberal trade policies that have been the cornerstone of the WTO. This means that unless reforms in the organisation are carried through, there will be continued debate on the WTO law.

1. John Zarocostas, ‘New WTO leader faces COVID-19 challenges’ (2021) 397 (10276) The Lancet 782.
2. Ibid
3. Ibid
4. B Hoekman, ‘Urgent and Important: Improving WTO Performance by Revisiting Working Practices’ (2019) 53(3) Journal of World Trade 373.
5. Ibid
6. Ibid
7. Hoekman, ‘WTO reform priorities post-COVID-19’, supra n 17.
8. Ibid

To conclude, the WTO has not effectively responded to the challenges posed by the pandemic. In particular, countries have put in quantitative restrictions on medical supplies thereby restricting exports of important supplies like medicine ingredients and vaccines. Despite WTO law as contained in GATT restricting countries’ ability to impose such quantitative restrictions, members have imposed them. The problems lie with the structuring of the WTO and its consensus building approach which leads to deadlocks. Furthermore, WTO was not able to foster communication between the member states and was unable to get the member states to agree on measures to respond to the pandemic. Therefore, there is a need for reforms within the WTO system so that crises can be managed more efficiently.

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Books

Chow DSK and Thomas J. Schoenbaum, International Trade Law: Problems, Cases and Materials (Wolters Kluwer Law & Business 2017).

Low P and Robert Wolfe, ‘How the WTO kept talking: Lessons from the COVID-19 crisis’ in Simon J. Evenett and Richard Baldwin (eds), Revitalising Multilateralism Pragmatic Ideas for the New WTO Director-General (CEPR 2020).

Journals

Aatreya S, ‘Are Covid-19 Related Trade Restrictions WTO-Consisent?’ (2020) EJIL:Talk.

Charmody C, ‘Obligations versus Rights: Substantive Difference between WTO and International Investment Law’ (2017) 12 Asian J. WTO & Int'l Health L & Pol'y 75.

Gruszczynski L, ‘The COVID-19 pandemic and international trade: Temporary turbulence or paradigm shift?’ (2020) 11(2) European Journal of Risk Regulation 337.

Hoekman B, ‘Urgent and Important: Improving WTO Performance by Revisiting Working Practices’ (2019) 53(3) Journal of World Trade 373.

Hoekman B, ‘WTO reform priorities post-COVID-19’ (2020) 24(4) East Asian economic review 337.

Meyer T, ‘Trade Law and Supply Chain Regulation in a Post-COVID-19 World’ (2020) 114(4) American Journal of International Law 637.

Ranald P, ‘COVID-19 pandemic slows global trade and exposes flaws in neoliberal trade policy’ (2020) 85 Journal of Australian Political Economy 108.

Zarocostas J, ‘New WTO leader faces COVID-19 challenges’ (2021) 397 (10276) The Lancet 782.

Websites

Lawrence J, ‘Covid-19, Export Restrictions, and the WTO: Magnifying Global Divisions in a Time of Crisis’ (2020) accessed < https://repository.essex.ac.uk/28029/1/015.pdf> p. 107.