Governments all over the world have responded heavily to the COVID-19 pandemic. As highlighted by the International Trade Centre (ITC), the implementation of export-restrictive measures has been on the rise: 92 countries have imposed such measures, with only two countries – Jamaica and Zambia – adopting export-liberalisation measures.[1] Most of these such measures consist of the prohibition of export of medicines and medical devices, although these also affect the exportation of food products – such as rice and fish exports in Cambodia, buckwheat for in the Eurasian Economic Union, general food products in Jordan, etc.

What is the rationale behind such export restrictions? Export restrictions are applied to ensure the local supply of certain locally manufactured goods can be guaranteed. These are normally applied to promote the value addition or the local industry. However, during a crisis or emergency, such measures might be adopted to ensure “that there are sufficient domestic supplies of key products or that these products are available domestically at a lower price than the world price.[2] In the case of the measures adopted in the case of COVID-19, it is worth highlighting that such measures are relevant when the country is an exporter of personal protective equipment (PPE), medicines, or similar. An export restriction by net importers of these products would have limited impact, and the rationale would be limited.

COVID-19 Temporary Export Measures
Source: ITC Macmap. Note: As of May 12, 2020

However, such measures are generally against the rights and obligations of the World Trade Organisation (WTO) Membership. As a general rule, export restrictions are considered unlawful under Article XI of the General Agreement on Tariffs and Trade (GATT 1994), which states that:

No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas […] export licences or other measures […] on the exportation or sale for export of any product.

Are all export restrictions in breach of the WTO Law? No. For an export restriction to be considered inconsistent with WTO Law, it must meet a series of conditions. As highlighted by Pauwelyn (2020), any possible claimants must prove that (1) the measure at hand adopted falls within the scope of “quotas […] export licenses or other measures”; and (2) the measure constitutes a prohibition or restriction on the exportation or sale for export of any product.[3] Additionally, the WTO’s Appellate Body, in the China-Raw Materials case for example, indicated that, for a measure to constitute a prohibition or restriction banned under Article XI, “those prohibitions and restrictions that have a limiting effect on the quantity or amount of a product being imported or exported,[4] a limiting effect that only needs to be demonstrated by “design, architecture, and revealing structure of the measure.[5]

Furthermore, carve-outs exists. One of them is included in paragraph 2(a) of Article XI of the GATT, which states that “[the] provisions of paragraph 1 of this Article shall not extend to the following: (a) Export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party.” An export restriction would then not be considered against the WTO’s rights and obligations if it is:

  • “temporarily applied,”
  • to prevent or relieve “critical shortages”, of
  • foodstuffs or other “essential” products.

The Appellate Body has only reviewed the applicability of this test in the case of China-Raw Materials. It reviewed the concept of “critical shortages” to refer to

deficiencies in quantity that are crucial, that amount to a situation of decisive importance, or that reach a vitally important or decisive stage, or a turning point.”[6]

As in all cases, Members must make a self-assessment to understand whether their own national situation might meet such cases. The terms “critical shortages” and “essential” might have different connotations depending on whether, for example, the country is a small island developing state or a developed country.

Further exceptions exist. Even if a measure is considered to be unjustifiable under Article XI:2(a), resort can be made to Article XX, which includes a set of General Exceptions, which highlight some situations in which WTO Member States can deviate from its rights and obligations. Particularly relevant would be those:

(b) necessary to protect human, animal or plant life or health;[7] […]

(i) involving restrictions on exports of domestic materials necessary to ensure essential quantities of such materials to a domestic processing industry; and

(j) essential to the acquisition or distribution of products in general or local short supply […].[8]

The exception contained in Article XX(b) would be the most relevant for the situation at hand. Alternatively, it could be argued that such export restrictions could also be defended under the GATT’s Article XXI on Security Exceptions. Both Article XI and Article XX – particularly its paragraphs (b), (i) and (j) – provide for exceptions that could be argued to defend the implementation of export-restrictive measures. Ultimately, Member States could resort to Article XXI which enables WTO Member to adopt “any action which it considers necessary for the protection of its essential security interests.

Needless to say that this discussion is relevant only in the case that a WTO Member challenges the measures of another Member, considering that these go against the rights and obligations of the WTO Membership. Members must also meet a series of transparency-related obligations whenever they want to impose this kind of restriction. Article X:1 of the GATT stipulates that measures pertaining to requirements, restrictions or prohibitions on imports or exports shall be published promptly in such a manner as to enable governments and traders to become acquainted with them. Such measures should also be administered “in a uniform, impartial and reasonable manner”, as stated in Article X:3(a). Finally, Members are also required to notify the Secretariat of all quantitative export restrictions imposed.[9]

Will we see a rise in protectionist and restrictive measures affecting the Global Trading System, especially due to the economic crisis provoked by coronavirus? Overall, Member States should be careful when resorting to such measures. In the face of a recession, it is very likely that countries will adopt more protectionist measures. However, it is doubtful that they would adopt in the form of export restrictions, as such measures are very difficult to defend. It is more likely that countries will resort to other mechanisms – such as an increase in applied tariffs, modification of TBT/SPS requirements, conformity assessment procedures, adoption of subsidies and import substitution programmes, etc. to further protect their industries. Changes in custom procedures can also be implemented to slow trade. We have already seen some movement in this area, with the EU raising the tariffs on a range of agricultural products in order to protect its farmers, and some others might follow that example too.

What does it mean for Africa? Trade restrictive measures can have a harmful impact on African countries. Most Sub-Saharan African countries are net importers of medicines and PPE, and therefore will be the most exposed if restrictions to international trade impact their ability to access the necessary goods to tackle the global pandemic. However, this situation can also be a golden opportunity for countries to (1) attract foreign direct investment; and (2) create a local pharma industry to cover the national and regional needs.

How is International Economics helping to tackle the impact of COVID-19? International Economics is working with the Regional Multidisciplinary Centre of Excellence (RMCE) and the World Bank to provide “Targeted Support for COVID-19 Recovery in IOC and APEI Countries.” The aim of the project is to promote regional cooperation solutions from both private and public sector in response to COVID-19. The project will cover three areas: (i) Peer learning and support, (ii) Production and procurement of PPE and other medical supplies; and (iii) Production and procurement of COVID-19 testing.

 

Author: Pablo Quiles

 

[1] Jamaica reduced export-related fees and charges, whilst Zambia removed existing export duties on precious metals and crocodile skins in order to provide relief to businesses. Source: ITC Macmap. Available at: https://www.macmap.org/

[2] WTO (2020). Export Prohibitions and Restrictions. World Trade Organisation (WTO), Geneva. Available from: https://www.wto.org/english/tratop_e/covid19_e/export_prohibitions_report_e.pdf

[3] Pauwelyn, J. (2020). Export restrictions in times of pandemic: Options and limits under international trade agreements. SSRN.

[4] Appellate Body Reports, China – Raw Materials, para. 320.

[5] Appellate Body Reports, Argentina – Import Measures, para. 5.217

[6] Appellate Body Report, China – Raw Materials, para. 324.

[7] For an analysis of the applicability of Article XX of the GATT in COVID-19 related export bans, see Aatreya, S. A. (2020). Are COVID-19 Related Trade Restrictions WTO Consistent? EJIL:Talk!. Available from: https://www.ejiltalk.org/are-covid-19-related-trade-restrictions-wto-consistent/

[8] For further analysis, see Pauwelyn (2020), ibid at 1.

[9] See Decision on Notification Procedures for Quantitative Restrictions, G/L/59/Rev.1, 3 July 2012.

 

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