ACCELERATING POST-PANDEMIC RECOVERY THROUGH INTERNATIONAL TRADE LAW AND GLOBAL CO-OPERATION

Prasanth Kapilan and Michelle Benington

April 14th, 2021

With more than 136 million cases and 2.9 million deaths, COVID-19 has caused waves of disruption within the fabric of society.[1] As trade is generally dictated by supply and demand, facemasks, hand sanitiser, and vaccines are some of the products that are currently being employed as safeguards against the infectious pandemic. Unsurprisingly, countries (and the relevant private companies) who have mass exported these safeguards have experienced considerable trade growth.[2]

However, many countries that are either (1) classified as ‘developing’ (eg; third world countries) or (2) a specialist in a declined industry (such as transportation manufacturers) have experienced a severe slowdown within their economies.[3] Consequently, negatively impacted nations are working to protect their internal economies, at the detriment of other nations, and without considering the benefits of co-operating on a global scale to accelerate trade recovery. Extraneous events such as the recent blockage of the Suez Canal have only compounded some of these issues.  

Whilst the WTO’s projected forecast of a gradual recovery seems promising,[4] it is ultimately reliant on a combination of international co-operation between each nation and the flexibility of relevant international trade laws. 

 

What is international trade law and how does it impact you?

The exchange of goods and services amongst different nations has been prevalent since ancient times.[5] Through specific rules and customs, international trade law seeks to govern trade across international borders. 

You may be wondering how international trade laws impact you. On a daily basis you may wear clothes produced in Italy, ride on a bus manufactured in Germany, and communicate with your friends on a laptop or phone designed in China. As such, changes in international trade (and its relevant regulations) can cause unfavourable changes in your country’s economy. This may invariably impact your purchase decisions or your ability to acquire certain goods and services, including vaccines. The recovery of international trade is therefore likely to be in your interests.

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Important context and key aspects of international trade law:

Before delving into the pathways for reaching trade recovery within a post COVID-19 world, a brief rundown of the relevant regulatory framework is necessary.

Per the Marrakesh Agreement, the World Trade Organisation (‘WTO’) was formally established as an intergovernmental organisation tasked with facilitating and regulating trade between each nation.[6] Nations that are considered ‘members’ of the WTO have successfully completed the accession process.[7] Nations currently negotiating membership are considered ‘observers’. 

Through its regulatory framework, members are provided the following:

1)     A forum for settling trade-related disputes.

2)     A platform for nations to engage in trade negotiations.

3)     Other developmental advantages for nations looking to expand trade capacity.

4)     Consistent dialogue with non-governmental organisations (NGOs), governments, and the general public.

Notably, Australia has been a member since 1 January 1995.

Figure 1: Key elements of WTO’s regulatory framework (Created via Visual Paradigm)

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In summary, the WTO regulatory framework includes a series of agreements which stipulate rules (and exceptions where applicable) that members must abide by. The flexibility of the regulations allows members to balance its obligations to the WTO with the interests and wellbeing of its own citizens. Amongst others, the GATT stands as an essential regulatory pillar which predates the existence of the WTO itself and forms the underlying principle basis of the GATS.[8]

How can the regulatory framework assist in post-pandemic recovery?

Compliance with the regulatory framework is critical for post-pandemic recovery. The composition of the regulatory framework (eg; GATT; GATS; DSU) can be broken down into the following five inherent factors:

1)     Non-discriminatory trading;

2)     Lowered trade barriers;

3)     Predictable and transparent global trade rules;

4)     Healthy competition between members (and the discouragement of ‘unfair’ trade practices); and

5)     Environmental protection.

In an ideal world, every nation would embody these factors in the actions it undertakes within the international trade realm. These five factors are borne from international co-operation and are critical to trade recovery.  However, as mentioned previously, certain industries have taken a drastic hit during this unprecedented period.  For countries which specialise in the production of goods and services within impacted industries, they may take certain measures to protect the interests and wellbeing of its citizens and economies that do not conform with these stated principles.  

The tables below illustrate two potential scenarios where a nation acts contrary to the five factors above.

Figure 2: Hypothetical Australian scenario (Analogous to WTO’s Australia-China Barley dispute).

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Figure 3: Hypothetical Japanese Scenario 

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Whilst the potential action may be resolved by the WTO via consultation,[9] the precious time taken to do so may create a barrier to trade recovery. Aside from being counter-productive towards achieving appropriate post-pandemic recovery levels, it damages the long-term relationship between nations. These relationships are crucial to be able to take the steps outlined below which places international cooperation at the centre of international recovery.

The way forward:

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1) Initiating a global vaccine roll-out:

To return international trade to levels prior to the pandemic, the WTO and its members should work together to rapidly rollout vaccines globally. These vaccines must be produced at scale, priced affordably, and allocated globally so that they remain available within each nation.[10]  Upon vaccination of the world’s population, nations may freely trade without the fear of the pandemic, thereby accelerating trade activity.

2) Provide ‘developing’ countries the support they need:

To provide support to ‘developing countries’, a humanitarian easing of trade sanctions would ensure financial aid (amongst other forms of aid) would reach ‘at-risk’ populations.[11]

3) Avoid providing government subsidies unless necessary:

To assist vulnerable local industries, governments have either handed out direct grants or subsidies. This may result in the flooding of the relevant international market with inexpensive products which undercut regional prices of the importing country. In response to this, the importing country may impose duties on imports which have benefited from these ‘actionable’ subsidies.[12] This may give rise to a dispute within the WTO’s DSU platform.  As mentioned previously in this blog, avoiding disputes is key to minimising a slowdown in post-pandemic recovery.

Key takeaway:

Essentially, nations should not forgo their relationships for the sake of short-term economic activity. Operating within the parameters of the WTO’s international trade law framework is key for avoiding disputes which may ultimately damage relationships in the long-term. By focusing on recovering trade activity to pre-pandemic levels (or even greater), we can move towards a more resilient multilateral trading system.