Digest Content
- WTO report shows slowdown in G20 trade restrictions as COVID-19 impacts world economy
- DDG Agah: Trading system has proven resilient during COVID-19 pandemic
- WTO members consider six regional trade agreements
- New Asian trade bloc could help boost post-pandemic investment
- Indonesia launches safeguard investigation on expansible polystyrene
WTO report shows slowdown in G20 trade restrictions as COVID-19 impacts world economy[1]
The WTO’s latest Trade Monitoring Report on G20 trade measures shows a slowdown in the number and coverage of trade-restrictive and trade-facilitating measures on goods implemented by G20 countries between mid-May and mid-October 2020, primarily as a result of the sharp decline in overall global trade since the COVID-19 outbreak. The report also documents numerous trade-facilitating and support measures introduced by G20 economies in response to the economic downturn in order to prepare the ground for a strong economic recovery.
This 24th WTO Trade Monitoring Report on G20 trade measures was prepared against the backdrop of the COVID-19 pandemic and the human, social and economic toll it continues to exact. While the previous report, issued in June 2020, captured only the very early effects of the COVID-19 pandemic, the new report reflects more fully the impact the global health crisis has had on trade and trade policy.
Although world trade had already been slowing before the pandemic, merchandise exports in nominal USD terms was down 21 per cent in the second quarter of 2020 compared to the previous year, while commercial services exports was down 30 per cent.
Over 400 support measures in direct response to the pandemic and collectively worth several trillion dollars were put in place by G20 economies up until mid-October. These emergency support measures are central to governments’ strategies to address the pandemic-induced economic downturn and lay the groundwork for a swift recovery of output and trade, and appear to be temporary in nature.
WTO Secretariat estimates of the accumulated stockpile of import restrictions implemented since 2009 suggest that 10.4 per cent of G20 goods imports (USD 1.5 trillion out of a total USD 14.6 trillion of G20 imports) are affected by import restrictions that are still in force after being put in place by G20 economies.
The report also shows that G20 economies continued to use WTO bodies to address trade concerns. Although fewer meetings took place during the review period as a result of the pandemic, several of these concerns had been raised in the past, appearing to indicate persistent and unresolved issues.
DDG Agah: Trading system has proven resilient during COVID-19 pandemic[2]
The international trading system has proven surprisingly resilient during the COVID-19 pandemic, with global supply chains adapting after initial disruptions and goods continuing to flow across borders, Deputy Director-General Yonov Frederick Agah said on 18 November. In a speech to the Asian Logistics, Maritime and Aviation Conference in Hong Kong, China, DDG Agah said keeping markets open to trade is an essential step to ensure that a strong economic recovery takes hold after the pandemic.
Comments of the Deputy Director-General Yonov Frederick Agah:
Logistics, maritime transport and aviation collectively form the backbone of the physical infrastructure of world trade, delivering goods to consumers around the world while facilitating efficient production through Global Value Chains (GVCs). Businesses in this sector have faced tremendous challenges during the pandemic, but they have also adapted in remarkable ways that promise to make them more productive and profitable in the future. Through their efforts, trade has played a critical role in responding to the pandemic by allowing countries to access vital medical supplies, many of which are produced in Asia. On behalf of the World Trade Organization, I would like to share with you some perspectives on the short-term impact of the crisis for your industry and the wider world, as well as some ideas on how governments, international organizations and the private sector can work together to secure a brighter future over the longer term once COVID has been beaten.
The COVID-19 pandemic delivered a massive shock to global economy, causing an unprecedented public health crisis and triggering the most severe recession in nearly a century. According to WTO statistics, world merchandise trade was down 21% in US dollar terms and 17% in volume terms in the second quarter compared to the same period last year. Services trade was hit even harder, dropping 29% in dollar terms and 23% in volume terms over the same period. This includes transport related services such as aviation, sea shipping and logistics.
The WTO issued an updated forecast for world trade on the 6th of October, predicting a 9.2% decline in merchandise trade for 2020, accompanied by a 4.8% contraction in world GDP. This trade performance would be the worst since the financial crisis over a decade ago, while the GDP decline would be worst since the great depression. Trade is expected to rebound in 2021 with a 7.2% expansion accompanied by 4.9% GDP growth, but this would still leave trade and output well below their pre-pandemic trends.
Although the pandemic reduced trade in all regions, Asia was least affected of all. Exports declined 24% in Europe and 22% in North America in the second quarter, but Asia’s shipments were only down 6%. On the import side, Europe and North America were down 19% and 15%, respectively, but Asia was only fell 7%. The smaller declines reflect the lower incidence of COVID-19 in Asia as well as the resilience of the region’s supply chains.
Given the unusually high level of economic uncertainty at the moment, the WTO considered different trajectories for trade in its latest forecast. Under an optimistic scenario, second waves of COVID would be better managed and vaccines would be available sooner. This could add 3 percentage points to trade growth in the coming year. On the other hand, a pessimistic scenario would see slower GDP growth due to a strong COVID resurgence and limited availability of vaccines. This could slash trade growth by up to 4 percentage points in 2021. Elements of both scenarios appear to be in play at the moment, which suggests that the actual outcome will be somewhere in between.
While the transport and logistics industries may be under less strain now than they were a few months ago, they continue to face huge challenges. To turn these challenges into opportunities requires strategic thinking and a favorable environment for international trade.
WTO members consider six regional trade agreements[3]
WTO members considered six regional trade agreements (RTAs) involving countries and trading blocs from across the world at a meeting of the Committee on RTAs on 18 November.
Economic Partnership Agreement between EU and Cameroon
The Economic Partnership Agreement between the European Union and Cameroon, applied provisionally since 2014, provides for reciprocal liberalization of trade in goods. All but 18 of the EU’s tariff lines are now bound at zero for Cameroon’s exports and Cameroon will liberalize about 77 per cent of its tariff lines by 2029. The Agreement also includes provisions on competition and e-commerce and provides for future gradual, reciprocal and asymmetrical services liberalization.
The EU stressed that it remains Cameroon’s main trading partner, accounting for 47 per cent of Cameroon’s global exports and 28 per cent of its imports in 2019. Cameroon’s main exports to the EU consist of oil, cocoa beans and bananas and its main imports include machineries, medication, clothes, refined oils, cement clinkers and cars. In 2019, total trade between the EU and Cameroon accounted for almost USD 3.5 billion.
Through this Agreement, Cameroon aims to diversify exports and attract further foreign direct investment. Other objectives include infrastructural and rural development, food security, industrial diversification, regional integration and business environment improvement. Cameroon also noted that its banana growers registered EUR 48 million worth of support from the EU over the period 2015-2020.
Economic Partnership Agreement between the EU and the SADC States (Botswana, Eswatini, Lesotho, Mozambique, Namibia and South Africa)
Under the Economic Partnership Agreement between the European Union and the Southern African Development Community (SADC) States (Botswana, Eswatini, Lesotho, Mozambique, Namibia and South Africa), all but 1.3 per cent of the EU’s tariffs will be liberalized for imports from all SADC States except for imports from South Africa for which all but 4.3 per cent of the EU’s tariffs will be liberalized. Liberalization by the SADC States will take place in stages until 2028.
The EU said that it is the SADC States’ main trading partner, accounting for 20 per cent of their exports and 22 per cent of their imports in 2019. Also in 2019, the EU’s exports to SADC amounted to EUR 24.6 billion while its imports were worth EUR 23.1 billion. The SADC States’ exports to the EU have increased by 19 per cent over the period 2015-2019. The trade flows essentially concern industrial products. The SADC States mainly import car parts from the EU and mainly export cars and other vehicles to the EU.
Botswana, on behalf of the SADC States, noted that the Agreement aims to strengthen the States’ regional integration and participation in regional value chains and to support the achievement of their development objectives. While preferential market access is provided by both parties, the SADC States may protect some sensitive sectors through safeguard measures. A bilateral protocol on trade in wine and spirits and on the protection of geographical indications of wine, spirits, beer and some agricultural products is also in place between South Africa and the EU. Other objectives include harmonising customs legislation and procedures and exchanging information on sanitary and phytosanitary measures in agriculture, including food security.
Comprehensive Economic Partnership Agreement between India and Korea
Under the Comprehensive Economic Partnership Agreement between India and Korea, India liberalized 69.5 per cent of its tariffs and Korea 88.6 per cent. Rates were also reduced on around 13.9 per cent of India’s tariffs and 4.4 per cent of Korea’s tariffs. The Agreement’s other provisions include sanitary and phytosanitary measures and technical barriers to trade, safeguards, dispute settlement and customs cooperation.
India said that the Agreement provides for a mutual expansion of job opportunities for computer specialists, engineers, managing consultants and assistant English teachers. Trade between both parties had increased by 70 per cent in ten years, from USD 12 billion in 2009 to USD 21.3 billion in 2018. India’s imports from Korea almost doubled from around USD 8 billion in 2009-2010 to USD 16 billion in 2018-2019 although exports to Korea had increased marginally, thus resulting in an increasing trade imbalance.
Korea said that the Agreement goes beyond each party’s WTO commitments in many areas. Investment flows between both countries have also grown by 124 per cent over the period 2009-2019, from USD 349 million to USD 782 million. The parties are currently negotiating to add to the Agreement provisions on goods, services and investment, with the objective of maximizing benefits for both countries.
Free Trade Agreement between EFTA and the Philippines
Immediate tariff liberalization is foreseen by the European Free Trade Association (EFTA) Stateson goods and services, with some limitations for some agricultural products. By the end of the nine-year transitional period, the Philippines will have progressively eliminated tariffs on almost 90 per cent of its imports from EFTA States.
The Philippines said that the Agreement is progressive in terms of scope and coverage and ranges from investment to intellectual property rights, trade in goods and government procurement. Total trade between both parties increased by 2.4 per cent between 2018 and 2019, from USD 802 million to USD 821 million. The Philippines’ exports to EFTA grew by 17 per cent between 2018 and 2019, from USD 370 million to USD 434 million.
On behalf of EFTA, Switzerland noted an increase in bilateral trade, with the Philippines’ exports to EFTA up from USD 250 million in 2017 to over USD 300 million in 2019. By providing stable and predictable trading conditions, the Agreement provides a significant potential to further boost trade between the two traders.
Free Trade Agreement between Australia and Hong Kong, China
Bilateral trade in goods between Hong Kong, China and Australia is entirely duty free since the entry into force of the Free Trade Agreement in January 2020. Notable market access improvements have also been made by the parties on trade in services, and regulatory cooperation has been strengthened.
Australia said that Hong Kong, China was its 11th largest export market and 15th largest two-way trading partner in 2019. It was also the fifth largest investor in Australia and tenth largest destination for Australian investment overseas. Australia stressed the high quality of the Agreement, which promotes growth in goods and services trade while also addressing non-tariff barriers and ensuring efficient customs settings, particularly for food and beverages.
Hong Kong, China pointed to improved business opportunities and legal certainty for its traders and investors as a result of the Agreement, in addition to simplified customs procedures and enhanced customs cooperation, among other things.
Comprehensive Economic Partnership Agreement between Chile and Indonesia
The Comprehensive Economic Partnership Agreement between Chile and Indonesia is Indonesia’s first free trade agreement with a Latin American country. The Agreement essentially contains provisions on trade in goods and includes a clause for the future incorporation of chapters on trade in services and investment.
Chile said that Indonesia eliminated duties on approximately 55 per cent of its tariff lines and provides for progressive duty-free access to 86 per cent of its tariff lines for Chilean traders. Chile will progressively grant duty-free access to Indonesia on 89.6 per cent of its tariff lines.
Some of the Chilean goods that enjoy duty-free access to Indonesia are: butter, almonds, hazelnuts, fresh fruits such as avocados, oranges, and lemons, honey, grape and apple juice. Indonesia said that it is benefiting from a preferential tariff on its exports of products ranging from footwear, motor vehicles and machinery to textiles, detergent and perfume. Between January and September 2020, the total trade between the two countries accounted for approximately USD 180 million. It is projected to increase by 33 per cent from the date of entry into force in 2019 within the next three years.
New Asian trade bloc could help boost post-pandemic investment[4]
The Regional Comprehensive Economic Partnership agreement (RCEP) comes at a time of major upheaval caused by COVID-19 and could help revive economic growth.
A new mega Asia-Pacific trade bloc has the potential to help fuel investment in the wake of the COVID-19 crisis, especially in poorer economies in the region, according to an UNCTAD report.
Signed on 15 November, the RCEP) unites 15 countries, including China, Japan, Australia, Vietnam and South Korea.
“The agreement comes at a time of major upheaval caused by COVID-19,” says James Zhan, UNCTAD’s investment and enterprise director.
“It could help revive post-pandemic economic growth, boost global foreign investment and provide a framework for further regional cooperation at a time of global trade tensions,” he said.
UNCTAD highlights that there is significant scope for RCEP members to invest more in each other. Investment among the 15 countries sits at about 30% of total FDI, a level that is relatively low compared to other major economic partnerships.
“The ASEAN group, at the heart of the RCEP, will play an important role,” the report says, highlighting that some 40% of investment in the ASEAN already comes from RCEP members.
A key challenge, the report says, will be for the RCEP to follow through on economic integration efforts at a time of geopolitical and trade tensions.
The report highlights that the RCEP could stimulate investment in the group’s least developed countries: Cambodia, Myanmar and Lao People’s Democratic Republic.
These nations already get more than 70% of their FDI from other RCEP members, but the new trade agreement could help them integrate and move up global value chains (GVC) that supply markets around the world.
“Economic cooperation under the partnership could further boost both project finance in infrastructure and industrial investment to increase their GVC participation,” the report said.
After the pandemic, investors will likely be looking for infrastructure, clean energy and healthcare projects.
The RCEP could also encourage firms to start up new projects within the bloc outside of China.
“The need for multinational enterprises to diversify supply sources and strengthen regional value chains should translate not only in shifting FDI patterns within the region but also in renewed overall growth of international investment in industry,” report says.
Indonesia launches safeguard investigation on expansible polystyrene[5]
On 18 November 2020, Indonesia notified the WTO’s Committee on Safeguards that it initiated on 18 November 2020 a safeguard investigation on expansible polystyrene (G/SG/N/6/IDN/38[6]). The notification of Indonesia contains the necessary contact details for interested parties.
Persons interested in this investigation should submit a written request within 15 days from the date of initiation of the investigation to the authorized investigation body. All materials and inquiries made by interested parties must be sent both in writing and in electronic format.
A safeguard investigation seeks to determine whether increased imports of a product are causing, or is threatening to cause, serious injury to a domestic industry.
During a safeguard investigation, importers, exporters and other interested parties may present evidence and views and respond to the presentations of other parties.
A WTO member may take a safeguard action (i.e. restrict imports of a product temporarily) only if the increased imports of the product are found to be causing, or threatening to cause, serious injury.
For reference: For Kazakhstan, this investigation is not of immediate interest at present, since, according to TradeMap[7], over the past three years, Kazakhstan has exported polystyrene and expanded polystyrene in primary forms to Kyrgyzstan, Uzbekistan and the Russian Federation. Indonesia is not among the countries importing polystyrene of Kazakhstani origin. In turn, the five largest countries – exporters of polystyrene to Indonesia are Japan, Taipei (China), China, Korea, Vietnam.
[1] https://www.wto.org/english/news_e/news20_e/trdev_18nov20_e.htm
[2] https://www.wto.org/english/news_e/news20_e/ddgya_18nov20_e.htm
[3] https://www.wto.org/english/news_e/news20_e/rta_18nov20_e.htm
[4] UNCTAD website, https://unctad.org/news/new-asian-trade-bloc-could-help-boost-post-pandemic-investment
[5] https://www.wto.org/english/news_e/news20_e/safe_idn_18nov20_e.htm
[6]https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=@Symbol=%20(g/sg/n/6/idn/38)&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true#
[7] https://www.trademap.org/