WTO Report Finds Growing Number of Export
Restrictions in Response to COVID-19 Crisis
Eighty countries and customs territories so far have
introduced export prohibitions or restrictions as a result of the COVID-19 pandemic
according to a new report by the WTO Secretariat issued on 23 April 2020. The
report, which is based on information from official sources and news outlets,
draws attention to the current lack of transparency at the multilateral level
and long-term risks that export restrictions pose to global supply chains and
public welfare.
The
new export prohibitions and restrictions mostly cover medical supplies such as
face masks, pharmaceuticals, ventilators and other medical equipment, the
report finds. Some of the measures have extended the controls to other products
such as food and toilet paper.
However,
only 13 WTO members (or 39 if EU member states are counted individually) have
submitted information on these new measures in line with WTO rules for quantitative
restrictions. Three of them have notified export restrictions on foodstuffs
pursuant to the WTO Agriculture Agreement. The report notes the harms and
delays that insufficient information inflicts on countries seeking to procure
materials to fight against the COVID-19 pandemic and provides guidance on how
WTO members can notify their measures. Only a handful of notifications were
submitted in March 2020 and these have since increased in April.
While
the report acknowledges exceptions in WTO rules for export prohibitions or
restrictions, it also highlights costs that both importing and exporting
economies will face in the long run, particularly in terms of lower supply and
higher prices for much-needed products.
·
The COVID-19 pandemic presents the world with
an unprecedented public health challenge. Measures to curb the spread of the
disease have shut down large swathes of the world economy. Worldwide demand for
medical products to fight the pandemic is unprecedented. All countries depend
on international trade and global value chains to source these products. This
is challenging in light of ongoing disruptions to international transport,
particularly air cargo, which often goes together with passenger travel.
·
An additional complicating factor is the
growing number of export prohibitions and restrictions, which some WTO members
have introduced to mitigate critical shortages at the national level.
Responding to COVID-19 urgently requires sharp increases in global production
of essential medical supplies. Well-functioning value chains can help quickly
ramp up production while containing cost increases. As new production becomes
available, trade will be essential to move supplies from where they are
abundant to where they are lacking, especially as the disease peaks at
different times in different locations. However, a lack of international
cooperation risks hampering the urgently required supply response.
·
The information available thus far suggests
that 80 countries and separate customs territories have introduced export
prohibitions or restrictions as a result of the COVID 19 pandemic, including 46
WTO members (72 if EU member states are counted individually) and eight non-WTO
members. Most of these have been described as temporary measures. At least two
members have already removed some of those restrictions.
·
The products covered by these new export
prohibitions and restrictions vary considerably; most have focused on medical
supplies (e.g. facemasks and shields), pharmaceuticals and medical equipment
(e.g. ventilators), but others have extended the controls to additional
products, such as foodstuffs and toilet paper.
·
While Article XI of the General Agreement on
Tariffs and Trade (GATT) 1994 broadly prohibits export bans and restrictions,
it allows members to apply them temporarily to prevent or relieve critical
shortages of foodstuffs or other essential products. If members move to
restrict exports of foodstuffs temporarily, the Agreement on Agriculture
requires them to give due consideration to the food security needs of others.
WTO rules also contain more general exceptions, which could be used to justify
restrictions provided that they do not constitute a means of arbitrary or
unjustifiable discrimination between countries, or a disguised restriction on
international trade.
·
Export prohibitions and restrictions applied
by large exporters may in the short run lower domestic prices for the goods in
question and increase domestic availability. But the strategy is not costless:
the measures reduce the world's supply of the products concerned and importing
countries without the capacity to manufacture these products suffer. And
exporters also risk losing out in the long run. On the one hand, lower domestic
prices will reduce the incentive to produce the good domestically, and the
higher foreign price creates an incentive to smuggle it out of the country,
both of which may reduce domestic availability of the product. On the other
hand, restrictions initiated by one country may end-up triggering a domino effect.
If trade does not provide secure, predictable access to essential goods,
countries may feel they have to close themselves from imports and pursue
domestic production instead, even at much higher prices. Such a scenario would
likely result in lower supply and higher prices for much-needed merchandise.
The long-term effects could be significant.
·
Transparency at the multilateral level is
lacking. In principle, all these measures should be notified as soon as
possible to the WTO pursuant to the 2012 “Decision on Notification Procedures
for Quantitative Restrictions” (QR Decision), while those relating to
foodstuffs should also be notified to the Committee on Agriculture. However, to
date, 13 WTO members (39 if EU member states are counted individually) have notified
the introduction of new measures under the QR Decision and three have notified
export restrictions on foodstuffs pursuant to Article 12 of the Agreement on
Agriculture.
·
Economic operators and members are having to
cope with a high degree of uncertainty, as it remains unclear what measures
have been adopted by which countries, and new measures are being introduced
regularly. Insufficient information makes it hard for them to efficiently
adjust their purchasing decisions and find new suppliers. This could be
particularly damaging for those seeking to procure materials needed for the
fight against the COVID-19 pandemic.
·
The G20 Ministerial Statement of 30 March
2020 stressed that “emergency measures designed to tackle COVID-19, if deemed
necessary, must be targeted, proportionate, transparent, and temporary, and
that they do not create unnecessary barriers to trade or disruption to global
supply chains, and are consistent with WTO rules.” More recently, the G20
Agriculture Ministers Statement of 21 April 2020 reaffirmed the “agreement not
to impose export restrictions or extraordinary taxes on food and agricultural
products purchased for non-commercial humanitarian purposes by the World Food Programme (WFP) and other humanitarian agencies”.
·
WTO Director-General Roberto Azevêdo has urged members to exercise maximal restraint in
the use of export restrictions and other measures that could disrupt supply
chains. He has also called on WTO members to improve transparency on any new
trade-related measures introduced as a result of the COVID-19 pandemic.
·
Possible actions to improve transparency in
this area include:
o
Ensuring that the new measures are adequately
published at the national level and, when possible, making them available in
the website(s) of the relevant national authorities.
o
Notifying as soon as possible any new export
restriction to the WTO pursuant to the QR Decision; in case these restrictions
affect foodstuffs, notifying them to the Committee on Agriculture as well.
o
Updating as necessary the information under
the “transparency notification” of Article 1.4 of the Agreement on Trade
Facilitation, including the relevant enquiry points.
o
Endeavouring to
provide additional information to other members beyond that required by the
notifications, whenever possible.