Trade-restrictive measures and COVID-19: Are WTO Agreements proving to be pandemic proof?
Ariane Yvon is an Associate at White & Case LLP in Geneva, Switzerland. (All views in this post are personal.)
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As the COVID-19 outbreak rapidly expanded and continues, government officials around the world have adopted a vast number of restrictions on exports and imports of key products needed to address the pandemic. These measures include import or export prohibitions, tariffs and special import and/or export procedures. While the growth in these measures have been perceived by some as throwing a discredit on the international trade regime, in fact, the flexibility provided by trade rules has given countries the space to respond to the pandemic in the short-term, and limited controversy amongst countries.
The vast majority of trade-restrictive measures adopted so far concern products directly related to addressing the crisis such as personal protective equipment, medical devices and pharmaceuticals. For example, Canada adopted measures to facilitate the importation of vital medical supplies and provide cash flow and liquidity support to importers; Brazilestablished a requirement of previous authorization for the export of chloroquine, hydroxychloroquine, and azithromycin and its salts devoted to the efforts against COVID-19; Ukraine temporarily implements export licensing requirements on anti-epidemic goods due to the COVID-19 pandemic.
Some countries have also temporarily restricted the exportation of certain essential foodstuffs to ensure sufficiency of food supply, as they fear food shortages resulting from disruptions in the supply chain and possible production and transportation issues. For example, Thailand notified a temporary prohibition on the export of bird eggs to prevent the critical shortage of this food item. Similarly, North Macedonia notified a prohibition on exports of wheat and meslin, as well as wheat flour, allegedly “to prevent critical shortage of essential products … in the emergency situation due to the COVID-19.”
Finally, a few countries temporarily restricted imports of certain wild animals from China. For example, Indonesiarequires that any importation and/or movement of mammals and pets from Hong Kong, China be accompanied with laboratory test results for COVID-19; Kazakhstan temporarily restricts import and transit of live fish and fish products from China; and Russia had temporarily restricted import of exotic and decorative animals, including insects, arthropods, amphibians, reptiles and other, live fish and hydrobionts from China.
At first sight these restrictions might give the impression that countries around the world have simply foregone their international trade obligations in these exceptional circumstances. But actually, most of these measures were notified in a timely manner to the Secretariat of the World Trade Organization (WTO) and the WTO Agreements appear to contain adequate carve outs to allow proportionate trade response to the COVID-19 pandemic.
As a matter of principle, the obligation of WTO Members under the General Agreement on Tariff and Trade (GATT) 1994 is clear: Members will be acting inconsistently with their international trade obligations if they prohibit or restrict in any way the importation of any product of another Member into their markets or the exportation of their domestic products to other markets (Article XI:1 of the GATT 1994). There is no need to demonstrate that the measure has had certain trade effects, nor does the regulatory intent matter.
However, important exceptions exist to this general principle of prohibition of imports and export restrictions, which are relevant in the context of trade-related measures adopted to mitigate the risk and consequences of the COVID-19 pandemic.
First, under the GATT 1994 Article XI:2(a), WTO Members are allowed to impose export prohibitions or restrictions to temporarily prevent or relieve critical shortages of foodstuffs or other products essential to the exporting Member. Members, such as Thailand and North Macedonia referred to above, have relied on this exception in adopting export restrictions to address the risk of food shortages resulting from the measures taken to combat the COVID-19 outbreak.As long as there is a sufficient link between a given food product and a risk of critical shortage of foodstuff, there are few chances that the WTO-consistency of these measures will be challenged.
Second, import and export restrictions adopted to tackle the COVID-19 health crisis may potentially be saved by invoking the so-called “General Exceptions,” or Article XX of the GATT 1994. Pursuant to this provision, WTO Members may adopt policy measures that are inconsistent with GATT disciplines, if, for example, they are “necessary to protect human, animal or plant life or health.” Any trade restrictive measure on products directly related to the resolution of the current sanitary crisis such as personal protective equipment, medical devices and drugs would likely easily qualify as a “measure necessary to protect human life or health.”
Finally, the WTO Agreement on Sanitary and Phytosanitary Measures authorizes WTO Members to adopt measures “to protect human life or health . . . from risks arising from diseases carried by animals, plants or products thereof.” While the Agreement foresees that any such regulations must be based on sufficient scientific evidence, it permits the precautionary taking of measures when sufficient scientific evidence does not yet exist but a government considers that immediate measures must be taken in emergency situations. The temporary restrictions on imports of wild animal related to COVID-19 from China, referred to above, have been notified to the WTO at the same time they were being implemented as emergency sanitary and phytosanitary measures relying on the precautionary principle.
Overall, it appears WTO Agreements have proved to contain enough flexibility to give countries the legitimate policy space they needed to react to the pandemic in the short term. While allowing countries to take measures they deem appropriate without creating international discord and controversy, WTO Agreements have revealed to be pandemic-proof.
Yet, moving forward in a world facing the unprecedented economic spillovers of this modern-day health crisis, the legitimacy of WTO Agreements may not remain unquestioned. While government across the world will soon come under pressure to protect their domestic industries in various sectors as industrial production restarts, international trade obligations under the WTO may be perceived as more burdensome than ever. Whether governments will chose to act within the strict boundaries of their obligations remains to be seen. They could employ disguised protectionist measures that fit the authorized exceptions on paper, or even publicly disregard their WTO obligations. Whatever the case may be, it is expected that countries will closely examine each other’s moves going ahead.