Andrés Paniagua*
* LLB at Universidad Francisco Marroquín, Legal Specialist at the Legal Affairs Division of the Secretariat for Central American Economic Integration (SIECA) and Administrator of the Dispute Settlement Mechanism for Central American Trade Disputes. Email: andrespaniagua.a@gmail.com / apaniagua@sieca.int.
The Treaty Examiner, Issue 3 (June 2020), pp. 98-105.
The spread of COVID-19 (1) has had significant economic impact. The effects of this global pandemic on human life and health are enough to gravely affect the global economy. Additionally, governments have adopted strict measures to avoid the spread of the disease, some of which are based on include “social distancing” (2). While effective from a public health perspective, these measures may seriously impair economic activity. Certain businesses may not be able to operate, plunging production of goods or supply of services “into a sudden stop” (3).
The World Economic Forum has characterized such scenario as “first and foremost a supply shock” (4). Economic interventions should not only target aggregate demand (5), but should be aimed at ensuring minimal supply chain disruption. Reducing barriers to trade barriers is key to this end (6). Trade procedures may give rise to barriers during a national emergency. Intergovernmental cooperation at the multilateral and regional levels is key to this end. This article addresses how intra-regional and inter-regional cooperation are also relevant to ease the economic impact of the pandemic, and how it may show the way forward in the aftermath of the crisis.
An example of intra-regional cooperation may be found in the Central American Economic Integration Subsystem. Recourse to regional bodies allowed State parties to carry out an assessment of national responses to COVID-19. Some of these measures heavily restricted freedom of transit, and were revised as a consequence of join action. In this case, intergovernmental coordination among the parties to a regional trade agreement (RTA) served to ensure minimum trade disruption.
However, as international supply chains may extend beyond the boundaries of a particular RTA, full policy articulation could also depend on inter-regional cooperation. The term “inter-regional” refers to coordination between the members of multiple RTAs or economic integration arrangements. Non-State actors may be involved in this process, including different types of regional bodies. The interaction between players operating at different levels gives rise to complex legal issues that are worth exploring. For example, the application of non-discrimination provisions to international trade.
Trade facilitation and COVID-19
Trade facilitation is defined as “the systematic rationalization of procedures and documents for international trade” (7). Such procedures, encompass practices and formalities related to collection, communication and processing of data, and should result in “transparent, predictable and straightforward border procedures that expedite the movement of goods across borders” (8). While these efforts are aimed at promoting international trade and economic development in a general sense, they can prove to be essential in the global response to the COVID-91 pandemic.
Governments could ease the economic impact of the pandemic thorough trade facilitation interventions in multiple areas. The OECD has identified three main ways in which implementation of the Agreement on Trade Facilitation (TFA) (9) may provide important guidance for government responses: first, by ensuring that formalities are transparent and accessible to all traders; second, by expediting standard formalities to leave room for necessary additional COVID-19 related controls; third, by digitizing processes to the extent possible, which should speed up processing and reduce physical contact at customs facilities (10).
Particular examples also point to the complementarity of trade and public health responses in the current crisis. The World Health Organization (WHO) and the World Customs Organization (WCO) have developed a list of priority medicines for customs during COVID-19 pandemic (11). At the regional level, the Central American Integration System developed a contingency plan (12) which, inter alia, calls for tariff reductions on essential products, including medical supplies; ensuring the availability of regional, digital platforms essential for trade procedures; and ensuring freedom of transit.
Governments and regional bodies entrusted with decision-making may face a dilemma. On the one hand, they may be tempted to promote the continuity of particular supply chains. For example, medical supplies are exchanged through well-established channels in Central America, and are a significant export for certain countries in the region. Facilitating the trade of these goods could be important both from a public health and an economic perspective during the COVID-19 crisis. Were regional authorities to identify a particular risk to this supply chain, it could seem reasonable to adopt a tailored response, even if it is potentially discriminatory to certain extra-regional traders.
On the other hand, in times of great uncertainty, trade liberalization could be vital in ensuring that goods reach consumers. Instead of targeting a particular supply chain, keeping borders open in a general sense may ensure a dynamic response and allow for adaptation in a constantly evolving scenario. For instance, were a particular supply chain to be gravely affected, other channels of distribution or substitute goods could emerge. It is important, then, that “any new border action is targeted, proportionate, transparent and non-discriminatory” (13).
The articulation of regional responses to global supply shocks
Regional economic cooperation can reach different degrees (free trade areas, customs unions, etc.) and may occur within different institutional frameworks. States or customs territories may enter into traditional, legally-binding RTAs. Deeper integration schemes may introduce additional sources Law (e.g., community Law mechanisms). Less stringent frameworks promote political dialogue and policy articulation, (e.g., the Tuxtla Dialogue and Coordination Mechanism, which gave rise to Meso-America Project), but may face certain legal constraints.
As indicated above, a coherent, comprehensive approach to policy articulation may involve the interaction of actors operating at different levels. National governments may participate in multilateral and regional fora. Regional bodies also play an important role in trade facilitation, and may have specific responsibilities in the implementation of trade facilitation measures and projects.
For example, information gathering and statistical analysis carried out by the Secretariat for Central American Economic Integration, a technical body of the Central American Economic Subsystem, may be of interest for stakeholders beyond such economic arrangement. The Secretariat, which is vested with international legal personality, is also capable of administering funds, develops technological solutions and administers regional platforms. When Central American States participate in the Meso-America Project, the Secretariat may play key roles (communicative, administrative, etc.).
Certain policy goals, such as promoting evidence based rule-making, may be easily achieved through either intra-regional and inter-regional cooperation. Other actions, such as coordinated and simultaneous tariff reductions may require a robust, legally binding framework. An inter-regional tariff reduction (region to region concessions outside the boundaries of an RTA) would potentially breach the most-favored-nation (MFN) clause of the WTO covered agreements.
Thus, inter-regional cooperation faces legal constraints, but is certainly not irrelevant. In certain cases, it may help governments identify broader needs and reach a wider consensus, while implementation could happen through other mechanisms (national, multilateral, intra-regional). It could also minimize the risk of disruption for international supply chains happening in more than one region.
Multilateral challenges to inter-regional cooperation
Trade facilitation was formally introduced to WTO negotiations at the Doha Ministerial Conference” (14), with the goal of clarifying and further developing articles V, VIII and X of the General Agreement on Tariffs and Trade (GATT) (15). These efforts concluded at the Bali Ministerial Conference, with the approval of TFA, which contains a new set of disciplines within the WTO context. Specific matters covered by the TFA include formalities connected with freedom of transit, availability of information, etc (16).
Article 24.5 TFA recognizes the possibility of regional implementation:
Members of a customs union or a regional economic arrangement may adopt regional approaches to assist in the implementation of their obligations under this Agreement including through the establishment and use of regional bodies.
This provision is important in promoting regional cooperation, but only does so at the intra-regional level. According to article 24.6 TFA, the text of the agreement may not be construed as diminishing the obligations of Members under the GATT. Thus, Article I:1 GATT remains applicable, requiring that WTO Members extend the advantages granted to the goods of another Member “immediately and unconditionally” to all WTO Members. While the GATT may exempt RTAs from the MFN rule, such agreements must constitute free trade areas or customs unions as defined by its text (17). It shall be noted that article 24.5 TFA refers to regional implementation of WTO Members’ obligations under the agreement. It was mostly aimed efficient allocation of limited resources in developing countries, but did not constitute an exception to non-discrimination rules (18).
This is generally desirable, in order to avoid fragmentation of the rules governing multilateral trade. However, rapid responses during global crises may require intra-regional and inter-regional cooperation aimed at guaranteeing the continuity of specific supply chains. While non-discriminatory measures are preferable, such scope may not be achievable at all times, and may require further policy articulation.
Moreover, a certain degree of experimentation, both at the intra-regional or at the inter-regional levels may be desirable to test out possible trade facilitation solutions (technology, regulation, infrastructure, etc.). If these solutions are beneficial to trade but cannot be immediately extended to all WTO Members, governments may lose the opportunity to test them. Consider, for example, how the use of RFID technology may require the enrollment of transport service providers. Could a WTO Member outside of the inter-regional cooperation scheme invoke an MFN violation if this technology were to be implemented inter-regionally, with a benefit to certain transportation units?
Closing Thoughts
Multilateral trade rules are aimed at protecting competitive opportunities, not trade flows. This is a basic feature, which makes the WTO Multilateral Trading System beneficial to all of its Members and the international community in general. Such characterization should be preserved. However, greater flexibility may be desired for inter-regional cooperation on trade facilitation issues.
Regardless of the interaction between inter-regional cooperation and multilateral rules, intra-regional and inter-regional cooperation could be key in strengthening supply chain resilience, in developing global crises response protocols, and in driving trade facilitation efforts in the future. Further assessment of inter-regional cooperation may be required in order to develop a framework maximizing its benefits, within or outside the WTO.
PIE DE IMPRENTA: Juan Pablo Hernández (editor-in-chief), Guatemala, 3 July 2020.
Endnotes
1. COVID-19 refers to the coronavirus disease 2019, which is caused by the Severe Acute Respiratory Disease Syndrome Coronavirus 2 (SARS-CoV-2).
2. “Social distancing” measures refer to a set of different public health policy interventions. See Laura Matrajt and Tiffany Leung Evaluating, ‘The Effectiveness of Social Distancing Interventions to Delay or Flatten the Epidemic Curve of Coronavirus Disease’ (2020) 26 Emerging Infectious Diseases <https://wwwnc.cdc.gov/eid/article/26/8/20-1093_article> consulted 13 June 2020.
3. Pierre-Olivier Gourinchas, ‘Flattening the Pandemic and Recession Curves’ (2020) Clausen Centre for International Business and Policy paper <https://clausen.berkeley.edu/wp-content/uploads/2020/03/COVID_2b.pdf> consulted 14 June 2020.
4. See https://www.weforum.org/agenda/2020/03/flattening-the-covid-19-curve-in-developing-countries/.
5. For an example of measures adopted to this end, see: Yi Huang, Chen Lin, Pengfei Wang and Zhiwei Xu ‘Saving China from the coronavirus and economic meltdown: Experiences and lessons ’ in Richard Baldwin and Beatrice Weder di Mauro (editors), Mitigating the COVID Economic Crisis: Act Fast and Do Whatever It Takes (single edition, Centre for Economic Policy Research Press, 2020) 85.
6. Shang-Jin Wei ‘Ten keys to beating back COVID-19 and the associated economic pandemic’ in Richard Baldwin and Beatrice Weder di Mauro (editors), Mitigating the COVID Economic Crisis: Act Fast and Do Whatever It Takes (single edition, Centre for Economic Policy Research Press, 2020) 76.
7. United Nations Conference, on Trade and Development (UNCTAD), Compendium of Trade Facilitation Recommendations (United Nations, 2001) iii.
8. Organization for Economic Cooperation and Development (OECD), Trade facilitation and the global economy (OECD Publishing, 2018) 14.
9. Protocol Amending the Marrakesh Agreement Establishing the World Trade Organization, 27 November 2014, UNTS not yet assigned.
10. Organization for Economic Cooperation and Development (OECD), Trade facilitation and the global economy (OECD Publishing, 2018) 14.
11. Concluded 30 April 2020, available at: <http://www.wcoomd.org/-/media/wco/public/global/pdf/topics/nomenclature/covid_19/prioritization-medicines-list-during-covid_19-_v9_wco_en.pdf?la=en>.
12. Central American Integration System (SICA, for its Spanish Acronym), Plan de contingencia regional, orientado a complementar los esfuerzos nacionales para la prevención, contención y tratamiento del COVID-19, available at: < https://www.sica.int/documentos/plan-de-contingencia-regional-del-sica-frente-al-covid19_1_121512.html>.
13. WCO-WTO Joint Statement on COVID-19 related trade measures, 6 April 2020, available at:
<http://www.wcoomd.org/en/media/newsroom/2020/april/wco-wto-joint-statement-on-covid-19-relatedtrade-measures.aspx>.
14. See paragraph 27 of the Doha Ministerial Declaration, 14 November 2001, WT/MIN(01)/DEC/1 and paragraph 21 of the Singapore Ministerial Declaration, 13 December 1996, WT/MIN(96)/DEC.
15. General Agreement on Tariffs and Trade (GATT), 30 October 1947, 55 UNTS 188.
16. The GATT era refers to the period in which this treaty was subject to provisional application, between 1948 and 1994, before the founding of the WTO. Non-tariff barriers only became a major concern during the Tokyo Round of Negotiations, during the 1970s, but GATT contracting-parties continued to paid little regard to trade facilitation. See Hugh M. Arce et. al., The Impact of Trade Agreements: Effect of the Tokyo Round, U.S.-Israel FTA, U.S.-Canada FTA, NAFTA, and the Uruguay Round on the U.S. Economy (United States International Trade Commission, 2003) 18.
17. Appellate Body Report, Turkey – Textiles, [45-46].
18. Communication from Antigua and Barbuda, Barbados, Dominica, Fiji, Grenada, Papua New Guinea, The Solomon Islands, St. Kitts And Nevis, St. Lucia, and St. Vincent and the Grenadines, 21 July 2006, TN/TF/W/129/Rev.1.
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