Simon J. Evenett and Richard Baldwin Revitalising Multilateralism Pragmatic Ideas for the New WTO Director-General Revitalising Multilateralism Pragmatic Ideas for the New WTO Director-General CEPR PRESS Centre for Economic Policy Research 33 Great Sutton Street London, EC1V 0DX UK Tel: +44 (0)20 7183 8801 Email: [email protected] Web: www.cepr.org ISBN: 978-1-912179-38-1 Copyright © CEPR Press, 2020. Revitalising Multilateralism Pragmatic Ideas for the New WTO Director-General Edited by Simon J. Evenett and Richard E. Baldwin CEPR, which takes no institutional positions on economic policy matters, is delighted to provide a platform for an exchange of views on this topic which is extremely important for the future success of the discipline of economics. The views expressed in this eBook are those of the authors and should not be taken to represent any of the institutions with which they are or have been affiliated. CENTRE FOR ECONOMIC POLICY RESEARCH (CEPR) The Centre for Economic Policy Research (CEPR) is a network of over 1,500 research economists based mostly in European universities. The Centre’s goal is twofold: to promote world-class research, and to get the policy-relevant results into the hands of key decision-makers. CEPR’s guiding principle is ‘Research excellence with policy relevance’. A registered charity since it was founded in 1983, CEPR is independent of all public and private interest groups. It takes no institutional stand on economic policy matters and its core funding comes from its Institutional Members and sales of publications. Because it draws on such a large network of researchers, its output reflects a broad spectrum of individual viewpoints as well as perspectives drawn from civil society. CEPR research may include views on policy, but the Trustees of the Centre do not give prior review to its publications. The opinions expressed in this report are those of the authors and not those of CEPR. Chair of the Board Sir Charlie Bean Founder and Honorary President Richard Portes President Beatrice Weder di Mauro Vice Presidents Maristella Botticini Ugo Panizza Philippe Martin Hélène Rey Chief Executive Officer Tessa Ogden Contents Revitalising multilateral trade cooperation: Why? Why Now? And How? 9 Simon J. Evenett and Richard Baldwin Section 1: Enhancing the crisis management capabilities of the WTO 1 Against the clock: Eight steps to improve WTO crisis management 57 Alejandro Jara 2 COVID-19 trade policy measures, G20 declarations and WTO reform 63 Bernard Hoekman 3 How the WTO kept talking: Lessons from the COVID-19 crisis 71 Patrick Low and Robert Wolfe 4 Role of trade ministers at the WTO during crises: Activating global cooperation to overcome COVID-19 79 Anabel González 5 COVID-19 and beyond: What the WTO can do 93 Ujal Singh Bhatia 6 A crisis-era moratorium on tariff increases 101 Alessandro Nicita and Marcelo Olarreaga Section 2: Reassessing the WTO’s place in the world trading system: The pandemic and beyond 7 Cumulative COVID-19 restrictions and the global maritime network 109 Inga Heiland and Karen Helene Ulltveit-Moe 8 Reviving air transportation and global commerce 119 Camilla B. Bosanquet and Kenneth J. Button 9 Lessons from the pandemic for trade facilitation and the WTO 129 Yann Duval 10 Lessons from the pandemic for trade cooperation on cross-border supply chains 141 Sébastien Miroudot 11 Three steps to facilitate global distribution of a COVID-19 vaccine 155 Caroline Freund and Christine McDaniel 12 Lessons from the pandemic for FDI screening practices 165 Xinquan Tu and Siqi Li 13 Feminising WTO 2.0 171 Mia Mikic and Vanika Sharma Section 3: Revamping the WTO rule book in light of the pandemic 14 A pandemic trade deal: Trade and policy cooperation on medical goods 189 Alvaro Espitia, Nadia Rocha and Michele Ruta 15 Lessons from the pandemic for future WTO subsidy rules 203 Dessie Ambaw, Peter Draper and Henry Gao 16 State ownership stakes before and during the COVID-19 corporate support measures: Implications for future international cooperation 213 Przemyslaw Kowalski 17 COVID-19 as a catalyst for another bout of export mercantilism 229 Simon J. Evenett 18 Lessons from the pandemic for trade cooperation in digital services 237 Erik van der Marel 19 The temporary movement of natural persons (Mode 4): The need for a long view 249 L Alan Winters 20 Lessons from the pandemic for WTO work on agricultural trade and support 257 Peter Ungphakorn 21 Technical regulations in the WTO: The need to improve transparency 275 Biswajit Dhar INTRODUCTION Revitalising multilateral trade 9 cooperation: Why? Why Now? And How? Simon J. Evenett and Richard Baldwin University of St. Gallen and CEPR; Graduate Institute, Geneva and CEPR Trade has been a human imperative for millennia. The association between trade, peace, and war have long been acknowledged, even if their salience had waxed and waned over EVENETT AND BALDWIN the years (Irwin 2008). Given trade’s importance, norms governing its conduct can be traced back 3,800 years to the Code of the Babylonian King Hammurabi.1 Yet, in the midst of profound contemporary shifts and shocks facing humankind, a quarter of a century after its creation, the World Trade Organization (WTO) is evidently not where pressing trade problems are being solved.2 All too often, the mindset and rhetoric are shackled to the past. As the standing of WTO has diminished in the highest circles of government, accepted international norms for trade relations have given way more and more to the law of the jungle. Faltering US commitment to multilateralism descended in recent years to brazen unilateralism in the conduct of trade policy (Blustein, 2019, Davis and Wei 2020, Irwin 2017, van Grasstek 2019, Zeollick 2020). The sense of disarray and the lack of trust are palpable. Yet, it would be wrong to overdo the pessimism. None of the 164 members of the WTO has decided to leave, which in recent years cannot be said of other multilateral organisations and leading regional integration initiatives. To the contrary, 23 nations are seeking to join the WTO. Moreover, there is widespread acceptance that the WTO needs to be reformed. “Mend it, don’t end it”, as the saying goes. However, if statements of support for the WTO and calls for its reform were enough – the latest high-profile declaration being the Riyadh Initiative on the Future of the WTO issued on 22 September 20203 – this eBook wouldn’t be necessary. Words are not being translated into deeds. The deeds witnessed in recent years have largely been incremental, largely reflecting thinking in silos – and their limits have been cruelly exposed by events. REVITALISING TRADE MULTILATERAL COOPERATION: WHY? WHY NOW? AND HOW? | 1 This and other historical gems can be found in Wolff (2019). The Code is reproduced at https://avalon.law.yale.edu/ ancient/hamframe.asp. 2 The shifts and shocks dichotomy has been usefully developed by Irwin and O’Rourke (2011) in their assessment of the historical evolution of the world trading system. As will become evident, we extend their dichotomy to include a further “s” namely shackles, to capture the legacy of outdated or over-emphasised ways of thinking about how to tackle the challenges facing governments in their commercial relations. 3 http://www.g20.utoronto.ca/2020/G20SS_Communique_TIMM_EN.pdf Perhaps the time has come to stop papering over the cracks and take the time to reflect on what really are, or could become, areas of agreement among WTO members. The appointment of a new WTO Director-General affords an excellent opportunity to revisit the tenets of multilateral trade cooperation – four aspects of which we turn to now. 10 Fundamentally, our assessment is that WTO members are not aligned on the purpose of the organisation. Is the pursuit of integration into the world economy still a shared goal? It may be not be only goal. Perhaps more controversially, is the pursuit of reforms that give market forces a growing role over time a common goal? Recently, a Deputy Director- General of the WTO, Mr. Alan Wolff, identified 18 values or principles of the WTO.4 It would be useful to know which of these values are shared by which WTO members – and whether the list is complete or needs pruning?5 What common denominator can support a revived multilateral core? What other widely shared principles could form the basis of extensions from that core? Purpose must also map into a notion of success. What constitutes a legitimate balance of obligations across a diverse WTO membership? In addition to disagreements about ends, there is discord over means – in particular as it relates to the extant trade rules. As one speaker at the 11th Ministerial Conference of the WTO put it: “If in the opinion of a vast majority of Members playing by current WTO rules makes it harder to achieve economic growth, then clearly serious reflection is needed”.6 If enough governments wish to pursue markedly different strategies for social, environmental, and economic development, then what role can trade norms play in limiting cross-border commercial frictions? A revival of discussions about the ‘interface problem’ between different forms of capitalism would seem to be in order. NEVER LET A CRISIS GO TO WASTE Compounding this is the sense that current global trade arrangements, and the levels of trade cooperation that they induce, don’t offer national policymakers much as they tackle climate change and the associated energy transition, shape strategies towards the digital economy and, in the near-to-medium term, beard the COVID-19 pandemic. Expectations of the multilateral trading system are much greater these days it seems, at least when compared to the context in which the Uruguay Round was concluded in 1993.