30 diciembre de 2020

Of international cooperation, trade, COVID-19, and other demons

Of international cooperation, trade, COVID-19, and other demons
The Stonecutter’s Creedo[1], a tenet from the writings of Jacob A. Riis, has been the mantra of the San Antonio Spurs for over 20 years and its 5 National Basketball Association (NBA) championships. The belief that the 100th blow by the stonecutter’s hammer is not the culprit of splitting the rock into two; instead, the rock is split by everything that preceded it—including the previous 99 blows.
Just as the Creedo’s philosophy may explain the origins and crystallization of a basketball dynasty team, it can also prove insightful in understanding what COVID-19 has done to global trade. COVID-19 is not the only reason for the steep decline of 18.5% in trade flows[2] year‑on‑year drop during the second quarter of 2020, as reported by the World Trade Organization (WTO). Of course, COVID-19 had something to do with it. Still, upon closer inspection, it is perhaps more suitable to say that problems and weaknesses had been visible through the cracks of the global trading system for many years and COVID-19 merely exacerbated them.
In the Spurs’ case, the Creedo was used as the path towards building one of the most successful dynasties in modern NBA history. In the case of the global trading system, the Stonecutter’s Creedo can be used to lay bare the system’s glaring frailty that had become increasingly evident throughout the last couple of years; from the impasse of the Appellate Body to the departure of the Director-General amid a troublesome period for the global trade community. Despite all the adversities, there is a glimmer of hope for the Multilateral Trading System (MTS), much in the same way that the season-ending injury of the Spurs’ Hall of Fame centre, David Robinson, served as the starting point of the team’s incredibly successful 20+ year run.
COVID-19, unfortunately, is not the world’s first rodeo; and it will not be the last either. Going back in history, the 1956–1958 influenza pandemic had a reported death toll of over 1.1 million[3] people worldwide, a figure the world is fast approaching with 994.000  COVID-19 deaths as of September 27, 2020. The tragic loss of life in both instances goes well-beyond numbers, with incalculable and long-lasting effects. On the other hand, making sense of the economic consequences is surmountable, and this is where we will focus our attention. In terms of its effect on the global gross domestic product (GDP), the 1956–1958 pandemic’s negative impact hovered around 2%, while the 1918 pandemic slashed the world’s GDP by 4.8%.[4] So far, the economic effects, as reported by the International Monetary Fund (IMF), of COVID-19 seem more akin to the latter, with a projected 4.9% contraction in 2020 and an estimated 6.5% GDP decrease for 2021.[5]
The projections spell bad news for years to come. Still, perhaps the Stonecutter’s Creedo can offer a path for trade to significantly impact splitting the difference between the economic effects of the 1956-1958 pandemic and the 1918 one. This paper provides a few musings on international cooperation, WTO reform and Special & Differential treatment (S&D treatment), transparency, and a few other elements that can build towards the 99th blow in international trade after the advent of COVID-19.
International cooperation
The COVID-19 pandemic has been catastrophic, but there is a silver lining, and that is that it is big enough to hopefully rally the world together around a common cause. The global financial crisis of 2009 was significant, and in many instances, its consequences are still influencing global events and markets directly and indirectly. However, for the international economic order and trade, there was little international cooperation in policy actions and reforms.[6] A significant outcome in international trade stemmed from the Group of Twenty (G20) meeting in London in early 2009, which “mandated the WTO, together with other international bodies, to monitor and report publicly on the Group of 20 (G20) adherence to resisting protectionism and promoting global trade and investment”.[7]
This trade monitoring report has been in place ever since, and it provided useful information on the domestic actions of G20 economies, which “implemented 154 new trade and trade-related measures, 95 of them import-facilitating and 59 import-restrictive. Of these measures, 93 (about 60 per cent) were linked to the COVID-19 pandemic”.[8] The transparency offered by this report was useful in parsing, up to a certain extent, through the measures implemented domestically in response to the COVID-19 pandemic. In limited cases, it might even dissuaded officials from implementing trade-restrictive measures or motivated them to swiftly move these measures towards the trade-facilitation column.
Without diminishing the importance of this report, it is clear that the international response to the financial crisis fell short from the foundational response to the biggest human-made catastrophe of the XXth century, namely, the World War II (WWII). At the time, the internationalist response led to planting the seeds for the creation of IMF, the World Bank Group (formerly World Bank), and the General Agreement on Tariffs and Trade (GATT), which would later become the WTO. On top of that, “the Bretton Woods conference occurred while a war was still raging and helped formed the basis of a postwar social contract”.[9] If there was ever a time for swift, decisive action— that time is now! It happened during WWII, and perhaps it can happen again.
There is a trope used to corral support in the literature and have the protagonists join forces, leaving their differences behind, to fight and defeat a significant enough threat.[10] In Alan Moore’s and Dave Gibbons’ “Watchmen”, Ozymandias, the smartest man alive, designs a plan on the brink of nuclear confrontation to unite the world against supposed alien invaders. At the end of the graphic novel, it appears to have worked, if only temporarily.imagen9-5.JPG
Reality is often stranger than fiction, and we have seen examples of this phenomenon in the case of the Bretton Woods institutions after WWII. Similarly, but to a lesser extent, it was seen with the strengthening of the European Union and its ties post-Brexit. For many, the pathway towards sustained international cooperation was supposed to be climate change. Although there have been essential strides on this front,[11] there is still a long way to go. In the case of COVID-19, the jury is still out, but as the Indian author Arundhati Roy writes, “Historically, pandemics have forced humans to break with the past and imagine their World anew. This one is no different. It is a portal, a gateway between one World and the next”.[12]
It is always dangerous to prophesy, especially, as the Danish proverb says, about the future. Nevertheless, based on the trends during the last few years, there are largely two possible paths as we advance in international trade, with multiple points along the spectrum. One of the options is international cooperation à laWatchmen” to avoid aggravating the already dire economic consequences of COVID-19, not to mention the tragic and ongoing loss of life. The other option is an increase in the nationalistic and protectionist approach, which has sadly proliferated.
Although everyone has their views on this, looking at this entrenched debate from a particular position may do more harm than good; ultimately, what matters is where we stand collectively. In that regard, the existence alone of intergovernmental organizations, such as the WTO, presupposes a predisposition towards international cooperation. This has been further reinforced through various initiatives, with one of the most recent ones being the G20 Trade and Investment Ministerial Meeting on September 22, 2020.[13]
Wherever an individual’s views fall along the spectrum, it is undeniable that some challenges, such as the COVID-19 pandemic, are far too complex to be tackled by one or two countries alone; or, for that matter, even by governments alone without the participation of civil society and the private sector.[14] The threat posed by COVID-19 and its perceived immediacy may ultimately be a test run for the great challenge that has been in place for some time – climate change. Unfortunately, climate change has yet to cross the immediacy threshold for many to warrant decisive international action.
WTO reform and S&D treatment
The WTO needs to be reformed, this has been clear for some time. If anything, COVID-19 has evidenced the urgency of such reform. Of all the areas for possible improvement, one of its priorities should remain S&D treatment. As alluded to earlier, confronting global challenges hinder international cooperation, and international cooperation is largely shaped by how and what is asked from each Member – this is where S&D treatment may come into play.
In international trade, S&D treatment has been part and parcel of the MTS in one form or another since the early days of the GATT. It evolved by establishing the United Nations Conference on Trade and Development (UNCTAD) in 1964.[15] After that, two major phases in its evolution happened; the first being during the Tokyo Round (1973 to 1979) and the second one in the period from the Tokyo Round until the end of the Uruguay Round (1979 to 1995), which concluded with the establishment of the WTO.[16]
The concept of S&D treatment evolved greatly during these phases and was largely shaped by the needs of the time. Since then, however, the concept has evolved very little, with the last significant development being the establishment of a mandate[17] under the Doha Declaration in 2001. Since then, there has been little progress and arguably a stalling in its evolution.
Nevertheless, there is a need for improvement, since it is undeniable that the existing realities in 2001 differ from those in 2020. Adding insult to injury, COVID-19 has brought to the foreground many of these differences. One of the reasons for the little progress is that discussing S&D has always been difficult and dogmatic. During the last few years, it seems that the positions have become more entrenched.
imagen9-5-1.jpgWithout diminishing or sidelining these discussions, it may be useful to step back and view this matter differently. May I propose sports? Beyond the apparent simplicity of kicking a ball, sports can serve as a microcosm of complex social and cultural dynamics, replicating to a certain extent the high-stakes game of international relations. David Sally, a behavioural economist, and Chris Anderson, a politics professor, have looked into what makes teams successful in sports. After studying this matter through statistical analysis[18], they found that team sports can be primarily classified into two camps: strong-link and weak-link.
Soccer[19] is the weak-link strategy sport par excellence. This means that a team can make a more significant upgrade to its competitiveness by improving its worse players – the weak links. Basketball stands on the other side of the scale, where its superstars’ competitiveness is largely defined by its superstars – the strong links. In the S&D treatment debate in international trade, the discussion during the first three periods[20] leading up to the WTO’s creation could arguably be described as being influenced by the weak-link strategy typical of soccer. Since then, the narrative has stalled, and the discussions’ tendency seems to have been moving towards strong-link strategy exhibited mainly in basketball.
Although there may be compelling reasons to fall into either of these two camps, COVID-19 has highlighted the world’s interconnectedness. Events happening in the most remote place in the world can have consequences almost anywhere. The perceived degrees of separation between one Member and the next may not be as stark as once believed. In that sense, helping those in need may ultimately be about helping yourself.[21] S&D treatment is undoubtedly more complex and technical, and it ultimately aims at a level playing field. It cannot effectively do this if it does not evolve according to the changes and the needs like it did in the past. Any consensus view will not be along either extreme, but it will coalesce around a point that considers all its Members’ interconnectedness, which, if it was not clear, has been laid bare by COVID-19. International trade may not be the Los Angeles Lakers or even Real Madrid C.F., but it should be clear that all Members are on the same team.
The need for accurate information has been a concern of the MTS practically since its inception. This has been mainly addressed through the obligation of timely notifications peppered across all WTO agreements. These notifications serve a vital function that allows all other Members to monitor policies, measures, and standards. Similarly, and equally important, it allows access to information to all other stakeholders. The livelihood of students, academics, professional practitioners, individuals, and big corporations –employing hundreds, thousands, or millions of individuals— can depend on having the right information at the right time. This is why it is important to keep revitalizing this function.
In that regard, ways to improve the notification and transparency functions have been at the core of Members and the WTO’s work for a long time. Some of these improvements have already borne fruit, and others require additional work. COVID-19 may have played a key role in accelerating some of these changes, but there is still a long way to go. Areas of improvement can be the streamlining of the notification process and digital tools. This can help present the information without major delays to the stakeholders after being verified by the corresponding WTO Member.[22] However, it would not be of much help on its own, since there need to be open channels and efficient mechanisms to address problems faced whenever trade is affected in contravention of any WTO agreement. Indeed, an area rife for improvements that have been singled out as a priority in the MTS with COVID-19. This also goes hand in hand with transparency across all fronts, including public viewings of dispute settlement hearings (respecting confidentiality needs), initiatives like the Public Forum, or even access to certain parts of the Director-General selection process, which at the moment, is ongoing. The credibility of the WTO and the trust of the public rests in large part on this.
It is not all dire as it may appear. The effects of COVID-19 in the MTS are still being felt and will likely be felt for a long time. It may be too early to tell, but so far, trade has avoided the pessimistic scenario vaticinated in April by the WTO.[23] With a realistic 2.5% growth per quarter in what remains of the year, it might be possible to meet 13%; the WTO’s optimistic projection.[24] It remains true that we are not out of the woods yet, but the MTS’s resilience may prove that the WTO, although damaged, is not broken. So far, the recent trends may have a lot to do with the slow abating of trade restrictions initially applied to medical goods and medicines at a rate of 15%, so far[25]. Additionally, an important role has been played by the resumption of activity in key exporting countries such as Germany and China, as well as a growing list of governments going back to a resemblance of normality living with COVID-19.
Furthermore, the acceleration of e-commerce and overall digital transformation during the lockdown served a vital role in keeping trade afloat during the pandemic. It is expected that digital trade will become an increasingly important component of international trade, for which a group of WTO Members is preparing through the ongoing Joint Statement on Electronic Commerce negotiation. As we are in uncharted waters, a lot could still change, but there are signs that the previously-maligned international trade, which has been blamed for many of the modern world’s woes, may turn out to be one of the engines of growth in the world with COVID-19.
In one of the most poignant passages of J.R.R. Tolkien’s “The Fellowship of the Ring”, Frodo tells Gandalf, “I wish it need not have happened in my time”. Gandalf replies, “So do I, and so do all who live to see such times. But that is not for them to decide. All we have to decide is what to do with the time that is given us.” This feeling has sadly permeated most of society.
However, more often than not, the response we hear is not full of the wisdom we would expect from Gandalf. In the case of the MTS, perhaps we can respond with this type of wisdom – if we manage to collect all the experience, education, and degrees present in any of the WTO’s meeting rooms, it may be possible. There is a lot of accumulated work and wisdom in getting to this point, which can add up as part of the 99 blows, with the 100th one perhaps being COVID-19. We can take COVID-19 as the 100th blow in the MTS demise or the 100th blow to turn the tide for its foundational reform. Trade is down, but just like the Spurs with the drafting of Hall of Famer superstar Tim Duncan, it may not be out. Jacob Riis’s defining work was not the Stonecutter’s Creedo. His life’s defining writing was “How the Other Half Lives: Studies among the Tenements of New York[26] taking the title from François Rabelais: “one half of the world does not know how the other half lives”. Our current discussion could greatly benefit from that work, but we will leave at that for now.
[1]“When nothing seems to help, I go and look at a stonecutter hammering away at his rock perhaps a hundred times without as much as a crack showing in it. Yet at the hundred and first blow, it will split in two, and I know it was not that blow that did it, but all that had gone before." Pounding The Rock. 2018. The Stonecutter’s Creedo. Available at: https://www.poundingtherock.com/pages/the-stonecutters-creedo. [Accessed 25 September 2020].
[2] Wto.org. 2020. Trade Falls Steeply In First Half Of 2020. Available at: https://www.wto.org/english/news_e/pres20_e/pr858_e.htm, [Accessed 26 September 2020].
[3] Cdc.gov. 2020. 1957-1958 Pandemic (H2N2 Virus) | Pandemic Influenza (Flu) | CDC. Available at: https://www.cdc.gov/flu/pandemic-resources/1957-1958-pandemic.html. [Accessed 26 September 2020].
[4] Begley, S., 2013. Flu-Conomics: The Next Pandemic Could Trigger Global Recession. Reuters. Available at: https://www.reuters.com/article/us-reutersmagazine-davos-flu-economy-idUSBRE90K0F820130121. [Accessed 26 September 2020].
[5] International Monetary Fund. 2020. World Economic Outlook Update, June 2020: A Crisis Like No Other, An Uncertain Recovery. Available at: https://www.imf.org/en/Publications/WEO/Issues/2020/06/24/WEOUpdateJune2020 [Accessed 26 September 2020].
[6] There were responses by the International Monetary Fund (IMF), the World Bank (WB) that served to alleviate some of the most immediate consequences stemming from the crisis. Similarly, the G7 pledged to take «all necessary steps» to stem the crisis. Nevertheless, there was no institutional reform nor coordinated policy actions meant to tackle future crises.
[7] Pedersen, P., Diakantoni, A., Perez del Castillo, C. and Mkhitarian, A., 2018. WTO Trade Monitoring Ten Years On Lessons Learned And Challenges Ahead. Wto.org. Available at: https://www.wto.org/english/res_e/reser_e/ersd201807_e.pdf. [Accessed 25 September 2020].
[8] Wto.org. 2020. Report on G20 Trade Measures (Mid-October 2019 to mid-May 2020). Available at: https://www.wto.org/english/news_e/news20_e/report_trdev_jun20_e.pdf. [Accessed 26 September 2020].
[9] Burrow, S., 2020. Life Post–COVID-19 Six Prominent Thinkers Reflect On How The Pandemic Has Changed The World. International Monetary Fund. Available at: https://www.imf.org/external/pubs/ft/fandd/2020/06/how-will-the-world-be-different-after-COVID-19.htm. [Accessed 26 September 2020].
[10] A similar idea is found in «Arthashastra», a Sanskrit treatise on statecraft which has influenced foreign policy for centuries. The proverb goes, «the enemy of my enemy is my friend».
[11] The most impactful International action around climate change is arguably the Paris Agreement – an agreement within the United Nations Framework Convention on Climate Change (UNFCCC), signed in 2016, and dealt with greenhouse-gas-emissions mitigation, adaptation, and finance.
[12] Roy, A., 2020. The Pandemic Is A Portal. Ft.com. Available at: https://www.ft.com/content/10d8f5e8-74eb-11ea-95fe-fcd274e920ca. [Accessed 26 September 2020].
[13] G20.org. 2020. G20 Trade And Investment Ministerial, Meeting Communique. Available at: https://g20.org/en/media/Documents/G20SS_Communique_TIMM_EN.pdf. [Accessed 26 September 2020].
[14] The decision by the National Basketball Association Commissioner, Adam Silver, to suspend the 2019-2020 season after the first case of COVID-19 amongst its players marked a turning point in the United States and began a tidal wave of reactions in response to COVID-19 from civil society to the Government of the US, as well as other countries.
[15] Keck, A. and Low, P., 2004. Special And Differential Treatment In The WTO: Why, When And How?. Wto.org. Available at: https://www.wto.org/english/res_e/reser_e/ersd200403_e.doc. [Accessed 26 September 2020].
[16] Keck, A. and Low, P., 2004. Special And Differential Treatment In The WTO: Why, When And How?. Wto.org. Available at: https://www.wto.org/english/res_e/reser_e/ersd200403_e.doc [Accessed 26 September 2020].
[17] The Doha Declaration, in conjunction with the Decision on Implementation-Related Issues and Concerns, established a mandate to the Committee on Trade and Development (CTD) to identify which of those S&D treatment provisions are mandatory, while considering the legal and practical implications of making mandatory those which are currently non-binding. Additionally, the Committee was set to examine ways in which developing countries, particularly the LDCs, may be assisted in making the best use of S&D treatment. Wto.org. 2020. Development: Special And Differential Treatment Provisions. Available at: https://www.wto.org/english/tratop_e/devel_e/dev_special_differential_provisions_e.htm. [Accessed 26 September 2020].
[18] Anderson, C. and Sally, D., 2014. Why Everything You Know About Football Is Wrong. London: Penguin Books.
[19] Or football, as it is pretty much known everywhere outside of the United States.
[20] Keck, A. and Low, P., 2004. Special And Differential Treatment In The WTO: Why, When And How?. Wto.org. Available at: https://www.wto.org/english/res_e/reser_e/ersd200403_e.doc. [Accessed 26 September 2020].
[21] Philippians 2:4 (ESV). Let each of you look not only to his interests but also to the interests of others.
[22] Wolff, A., 2020. Importance Of Transparency, Cooperation In Dealing With Pandemic Challenges. Wto.org. Available at: https://www.wto.org/english/news_e/news20_e/ddgaw_15sep20_e.htm. [Accessed 26 September 2020].
[23] The optimistic scenario predicted a 13% fall while the pessimistic scenario foretold a dramatic 32% decline. Wto.org. 2020. Trade Set To Plunge As COVID-19 Pandemic Upends Global Economy. Available at: https://www.wto.org/english/news_e/pres20_e/pr855_e.htm. [Accessed 26 September 2020].
[24]WTO.org. 2020. Trade Falls Steeply In First Half Of 2020. Available at: https://www.wto.org/english/news_e/pres20_e/pr858_e.htm. [Accessed 26 September 2020].
[25] The Economist. 2020. How Has Trade Survived Covid-19?. Available at: https://www.economist.com/finance-and-economics/2020/09/12/how-has-trade-survived-covid-19. [Accessed September 26 2020].
[26] Riis, J., 1971. How The Other Half Lives: Studies Among The Tenements Of New York. New York: Dover Publications.