With many countries breaking WTO rules in banning the export of face masks and other medical supplies, the future of the global trade regulator is in doubt, says Tony Watima
This article was first published in the June 2020 International edition of Accounting and Business magazine.
For the past three decades, the world has steadily deepened integration, with previously self-contained economies creating interdependencies with globalised economies. This has not been done without a multilateral architecture of institutions protecting the system from the rising risks and challenges. One of those institutions is the World Trade Organization (WTO), which is facing a trade facilitation challenge when crossborder trade should be one of the global mitigation measures in the fight against the pandemic.
Today, as the world battles the pandemic, the WTO underbelly is exposed after some countries imposed export restrictions on medical supplies. In February, as Italy was heading into a health crisis arising from Covid-19, France, Germany and the Czech Republic – the countries with the highest concentration of medical equipment production – restricted the export of respiratory masks. The bans led to Italy’s hospital system finding itself overstretched because of insufficient medical supplies. France has subsequently added to the list of drugs on which it has placed export restrictions, ignoring EU guidelines issued in March that encourage the free circulation of goods, especially medical equipment, within the single market. The US is also asking China to remove export restrictions on protective medical gear.
This trend has spelt out two growing concerns. The first is the WTO’s legitimacy in the eyes of its member states. Before the pandemic erupted, 50 WTO members did not levy any taxes on medical equipment, another 23 charged duty at less than 3% of shipment value, and 76 nations did not tax imported medicines. Today, more than 80 countries and customs territories (including 72 WTO members) have banned or limited exports of face masks, protective gear, gloves and other goods. While WTO rules allow for temporary export bans and restrictions to address critical shortages, only 13 WTO members among those 80 countries have so far met the requirement that they notify the organisation of any ban.
The second issue is that the WTO is usurping the sovereignty of member states. The US, for example, claims that the WTO dispute settlement system, seen as the organisation’s crown jewels, has usurped the powers of member states by issuing rulings on trading regulations and agreement without member consensus.
The Covid-19 pandemic export restrictions will heighten this concern, because countries that have imposed export restrictions have done so as a matter of national security to relieve actual or potential local shortages. The restrictions are expected to be in place only for the short and medium term, but the possibility of their being contested at the WTO dispute settlement tribunal is presumably high.
In the event that these restrictions do end up at the dispute tribunal, many countries may well see the WTO as compromising their national security and threatening their sovereignty.
Tony Watima is an economist based in Kenya.
"The WTO is facing a trade facilitation challenge at a time when crossborder trade should be a key measure in the fight against the pandemic"