International Cooperation Archives - WITA

Top Ten Ways to Turn Trading Partners Into Trade Best Friends for Ever (Trade BFFs)

Shannon Moloney — Sat, 07 Jan 2023 19:15:34 +0000

Dear Friends:

Our planet’s history tells us that friendship among nations is to be cherished and nurtured. Too often countries have not served as good friends to others, particularly in the area of international trade, when we prioritize competition over friendship. In our view, we should view trade friendships as a means of protecting the future of our children and successive generations, who will inherit our planet and the promise of humanity.

We must act to ensure not only their economic health but their freedom and liberty. If free market liberty-loving countries increasingly isolate themselves from each other via trade barriers, we are hurting our ability to compete both economically and in innovation. Free trade among friends and allies is important as it greatly benefits each nation and gives us the best chance at staying ahead of authoritarian governments.

With these perspectives in mind, we share CTA’s “Top Ten Ways for Turning Trade Friends into Trade Best Friends Forever (Trade BFFs).” We hope these ideas spark a necessary conversation among democratic and liberty-loving nations on leaving the self-serving measures of the 20th century behind and forging a stronger and like-minded free trade future for our children and successive generations. And we welcome ideas from others on what it takes to be a “Trade BFF” in our era of fierce global competition.

Your friends,
Gary Shapiro, President and CEO, Consumer Technology Association (CTA)®

Ed Brzytwa, Vice President of International Trade, Consumer Technology Association (CTA)®

Trade BFFs should:

3. Work together. Friends make each other better and push each other to live up to or surpass expectations. One way to do that is to collaborate on strengthening the World Trade Organization and on multilateral and regional trade and investment efforts.

4. Share common values – and stick to them. We value freedom, democracy, and the power of the free market. We can maintain and promote market economies by avoiding policies that intentionally displace or injure foreign competitors and making any incentives available to their domestic industries also available to industries in their Trade BFFs.

7. Invest in and support each other’s successes. If one friend is an expert or good at something, they use that skill or expertise to help their friends. Trade BFFs invest in and support each other’s successes, avoiding irritating and disruptive investment reviews or other restrictions on investment.

8. Share openly with each other. Trade BFFs take steps to allow data to flow freely across borders. They prioritize transparency and participation by interested persons in policymaking, including in their fellow Trade BFFs.

9. Join forces to fight for their shared futures. All countries sharing the values of democracy and liberty should work together and rip out trade barriers among like-minded friends. They can work together to confront trade bullies and provide more market access to each other in the face of bullying. They avoid policies that bully their fellow Trade BFFs.

TOP TEN WAYS TO TURN TRADING PARTNERS INTO TRADE BEST FRIENDS FOREVER (TRADE BFFS)

Technology is about changing people’s lives for the better. It’s about ideas, large and small, that keep us connected, that help us move, that spark even bigger ideas. The Consumer Technology Association (CTA)® convenes companies of every size and specialty in the technology industry to move us all forward. Our “Top 10 Ways to Turn Trading Partners Into Trade Best Friends Forever” will grow our industry and every industry using technology if governments adopt these principles.

Trade BFFs should:

1. Honor their commitments to each other. Friendships are built on trust, which means Trade BFFs should bind and enforce their commitments to each other (trade pinky promises) through comprehensive, binding, and enforceable free trade agreements (trade friendship bracelets). When Trade BFFs make deep and lasting commitments to each other, they bind them in a durable way and make them public and transparent so all stakeholders can understand and use them. These binding commitments tell the bullies “Don’t even try to harm my Trade BFF!” Comprehensive and enforceable free trade agreements are trade friendship bracelets that lock in the trade pinky promises. And Trade BFFs keep and treasure their bracelets and fellow Trade BFFs.

2. Have each other’s backs. You look out for someone by helping them – not putting up barriers to their success. True friendships embody selflessness – not selfishness. For example, they should promise to spare their Trade BFFs from disruptive and harmful unilateral enforcement actions, including tariffs and import prohibitions, which would in turn spare them from inevitable retaliation. Unilateral trade measures will NOT lead to win-win cooperation. Trade BFFs are honest about their policy goals and problems and demonstrate empathy and support. Trade BFFs are in it together and live up to their sworn oaths to cooperate for the greater good. They do not stab each other in the back!

3. Work together. Friends make each other better and push each other to live up to or surpass expectations. One way to do that is to collaborate on strengthening the World Trade Organization and on multilateral and regional trade and investment efforts. Trade BFFs know that a strong and fully operational WTO is a win-win for the rule of law, reducing and preventing barriers to trade and investment, and amicably resolving disputes without resorting to unilateral trade measures, which erode trust and cause economic and reputational harm. Trade BFFs work side by side to strengthen the WTO, through their own bilateral engagements and as teammates in multilateral and regional fora. Strengthening the WTO requires sweat equity and trust building among Trade BFFs. The world will be a better place for their WTO reform efforts.

4. Share common values – and stick to them. We value freedom, democracy, and the power of the free market. We can maintain and promote market economies by avoiding policies that intentionally displace or injure foreign competitors and making any incentives available to their domestic industries also available to industries in their Trade BFFs. Trade BFFs have dynamic private sectors and limit government intervention in the marketplace. Subsidies, for example, tell the world that your government is selfishly interested in the short-term and uninterested in long-term win-win cooperation. Trading partners often take offense when governments limit tax credits only to companies producing domestically. Such policies send the wrong signal. Trading partners will question whether written or oral words of trade friendship are just talk and whether the trading partner providing those tax credits deserves to be a Trade BFF! Trade BFFs should instead enact policies that give companies in their fellow Trade BFFs the same opportunities as their domestic companies.

5. Compete hard – but fairly. Trade BFFs develop and implement regulations that allow companies located in their fellow Trade BFFs to compete fairly on a level playing field while encouraging a race to the top through high performance. Trade BFFs know that all governments prize the right to regulate as they see fit. They also share common values that regulation should be developed in an open, inclusive, and transparent manner and reflect input from interested persons. Trade BFFs undertake regulatory cooperation, for example on higher labor and environment standards, while preventing barriers to trade and investment. Trade BFFs agree that to meet these goals, they should allow companies to focus on performance over design and drive innovation, helping their fellow Trade BFFs throughout.

6. Be empathetic and open to mutual, voluntary support. Trade BFFs take measures to encourage but not coerce industries located in their fellow Trade BFFs to trade with or invest in their economies. Policies designed to force domestic or foreign companies to move out of their Trade BFFs are not in the Trade BFF playbook. Encouragement of investment is the self-assured and confident play and leads to more optimal use of scarce capital and resources, to the benefit of the economies, companies, and people of Trade BFFs.

7. Invest in and support each other’s successes. If one friend is an expert or good at something, they use that skill or expertise to help their friends. Trade BFFs avoid irritating and disruptive investment reviews or other restrictions on investment when companies in their fellow trade BFFs seek to invest in their markets. Trade BFFs talk to each other regularly about their goals and aspirations. When one succeeds, their fellow Trade BFFs celebrate. And when governments look at possible investments by companies in their Trade BFFs designed to aid those goals, they welcome those companies with open arms. They do not adopt unilateral investment measures that signal “Our Economy is Closed to You!” Trade BFFs think the best of investments from their fellow Trade BFFs and don’t assume that all investments are threats to national and economic security!

8. Share openly with each other. Trade BFFs take steps to allow data to flow freely across borders. They speak candidly about their data policies and leverage data for the greater good of the planet and its people. Policies that restrict data flows and force companies to keep their data local by their nature are adversarial and selfish. Trade BFFs protect personal data and the right to privacy and agree on approaches with their fellow Trade BFFs to enable companies to transfer data across borders. Trade BFFs should be generous with their data, since their people and companies can solve big global problems with it and make their products and programs work even better!

9. Join forces to fight for their shared futures. All countries sharing the values of democracy and liberty should work together and rip out trade barriers among like-minded friends. Trade BFFs know a trade bully when they see one. They can work together to confront trade bullies and do not let them divide and conquer. Instead, they provide more market access to each other in the face of bullying. They avoid policies that bully their fellow Trade BFFs. Trade BFFs are also optimistic and hopeful that with the right mix of policies and actions, the bullies can change for the better and join the Trade BFF Club, no matter how long it takes!

10. Communicate with each other clearly and often. One key to any friendship is an open and honest level of communication. For example, Trade BFFs talk to each other regularly about issues like intellectual property protection and enforcement and new trade rules that benefit our people and planet. Trade BFFs are market economies that abide by the rule of law and know that innovation can come from anywhere and anyone. Their protection and enforcement of intellectual property rights for all industries provide mutual and long-term benefits to their economies, as well as the global economy. When trade bullies steal intellectual property or forcibly transfer technologies, Trade BFFs confront the bullies together and adopt joint policies for changing bully behavior.

Trade BFFs who bind the above commitments lift each other up and have each other’s backs for life! They celebrate their successes and recognize that trade jealousy is corrosive and harmful. And Trade BFFs set the most positive examples for the rest of the world, leading to better, more empathic, and economically beneficial behavior and outcomes for their citizens and companies over time.

tradebff

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Trade and International Trade Cooperation as a Tool For LDCs to Adapt to Climate Change

Yianna Schneckloth — Sat, 29 Oct 2022 20:32:03 +0000

Climate change is one of the major threats to our societies, ecosystems and economies. Increasingly complex social and political challenges will arise as populations are forced to migrate from areas affected by climate change, such as through rising sea levels or droughts. A billion people who currently live no more than ten metres above sea level will be impacted. Human health is also expected to deteriorate since climate change affects the social and environmental determinants of health, such as clean air and water, and secure food and shelter. Vulnerable populations in developing countries, particularly least developed countries (LDCs) and Small Island Developing States (SIDS), will be the most severely hit. UNICEF reports that devastating floods have hit at least 27.7 million children in 27 countries around the world, with the number of children affected by flooding in Chad, Gambia, Pakistan and north-eastern Bangladesh being the largest in over 30 years.

Climate change also impacts trade. Extreme weather events can reduce productivity, increase costs and supply chain disruptions in the short term and alter countries’ comparative advantages and specialization in long term. The WTO World Trade Report 2022 finds that a rise of 1°C has been found to reduce the annual growth of developing countries’ exports by between 2.0 and 5.7 percentage points.

The list of 46 LDCs – home to about 1.1 billion people – is responsible for less than 1% of historical anthropogenic greenhouse gas emissions. While LDCs have the smallest environmental footprints, they are among the most vulnerable to climate change due to their greater exposure to sea-level rise, desertification, fires, floods and droughts. LDCs typically have lower levels of adaptive capacities to overcome such challenges. For most LDCs, climate change has already significantly impacted the lives of people and their long-term prospects of economic development.According to estimates by the World Bank, the effects of climate change will push up to 1.9% of the world population into extreme poverty – most of them concentrated in sub-Saharan Africa and South Asia. Other estimates say that, over the last 50 years, 69% of worldwide deaths caused by climate-related disasters have occurred in LDCs.

Climate change is a multi-sectoral threat for LDCs that poses challenges to agriculture and tourism. Trade infrastructure – such as port facilities, roads, railways, airports and bridges – is dangerously at risk of damage from the consequences of climate change, including rising sea levels and the increased occurrence of extreme weather events. This threatens to further weaken LDCs’ ability to trade competitively. And it is not just the physical climatic disruptions that pose challenges to the most vulnerable countries: governments across the world are considering various mitigation strategies, policies and other measures to combat climate change. Yet, such measures, if not well designed, could additionally hinder LDCs’ trade competitiveness.

Responding to the growing climate crisis effectively and building resilience is – together with climate change mitigation – a critical sustainable development strategy. Trade coupled with efficient trade policies can support the sustainability and the resilience of supply chains and ensure climate adaptation and just transition in several ways.

Trade can support adaptation through economic growth
One of the biggest challenges for LDCs is the lack of finance that can be invested in their climate change strategies. Open trade raises per capita income, thereby boosting public demand for a cleaner environment and directing financial resources towards climate change adaptation. This growth can then boost investment in climate-resilient infrastructure. Economic growth can also help climate change mitigation efforts. A recent report from the World Bank says that investing an average of 1.4% of GDP annually could reduce emissions in developing countries by as much as 70% by 2050 and boost resilience.

Trade can help build economic resilience and facilitate the deployment of climate-friendly solutions
International trade can also help support climate change adaptation by facilitating access to the best, most efficient and environmentally effective solutions. For instance, trade in services such as weather forecasting, telecommunication and transportation can play a key role in preparing businesses and populations for climate shocks. Lowering tariffs and eliminating trade barriers to climate solutions such as stress-tolerant cultivars, early warning systems, irrigation technology and technical services will increase their affordability and dissemination. The use of harmonized and environmentally coherent standards will enable the development of and access to such goods and services needed for countries’ climate change adaptation strategies. The participation of LDCs in standards development should be facilitated, as they are usually the ones facing the most difficulties in complying with international standards due to a lack of infrastructure and human and financial capacity.

Trade can contribute to improving food security
Agriculture and the global food system will also be threatened by climate change in the years ahead with important implications for jobs and food security. New technologies can certainly help tackle the climate-related challenges that producers face. An analysis of household surveys in Ethiopia and Rwanda finds that the use of improved seeds, fertilizer and insecticide, protection against erosion, irrigation, and access to finance can mitigate crop damage. For example, farmers can make use of crop varieties that are more resistant to diverse climate conditions. Governments can help progress in this area by accelerating research and development in engineering improved seeds, which will help farmers boost productivity sustainably while building resilience.

Trade plays an essential role in determining the production, availability, price and quality of food. It can mitigate food insecurity induced by climate shocks by easing the movement of essential goods between surplus and deficit economies. At the same time, international trade helps create jobs and raise incomes, which strengthens households’ resilience and increases their ability to buy food.

Trade drives innovation and more environmentally sustainable production and consumption models
The new climate economy comes with opportunities such as the development of new production and consumption models that can reduce our carbon and environmental footprint. An example of this is the circular economy models: by improving resource efficiency and reducing waste, the circular economy can make a significant contribution to climate change mitigation and reduce the pressure on using new natural resources. At the same time, many parts of the circular economy value chain are powered by services that can represent opportunities for economic diversification for developing countries and LDCs. In addition, as countries transition to low carbon economies, they increasingly explore sustainable substitutes and alternatives to products, such as the use of natural fibres as a substitute for plastics, which can open new trade and economic opportunities for LDCs.

International trade cooperation and policy dialogue can support climate action
The WTO is a global forum for trade cooperation that can enhance the predictability of trade measures related to climate change. Through policy dialogue across its committees and bodies, the WTO can improve the collective understanding of how trade interacts with climate adaptation and mitigation strategies.

The three WTO environmental initiatives – the Trade and Environmental Sustainability Structured Discussions (TESSD), the Dialogue on Plastic Pollution and Environmentally Sustainable Plastic Trade (DDP) and the Fossil Fuel Subsidy Reform (FFSR) – can further support policy dialogue and international cooperation. All three initiatives give a particular focus on the needs of developing countries, particularly LDCs, in the context of these pressing 21st-century environmental challenges. They exemplify the recognition that trade and the WTO have a role to play in addressing climate change. TESSD’s work this year has prioritized several issues including trade-related climate measures and environmental goods and services where efforts are supported by dedicated working groups.

The multilateral trading system promotes the use of international standards, good regulatory practices and international regulatory cooperation to enhance transparency and build trust among regulators regarding climate-related measures. Such cooperation facilitates trade and market access to emerging new green technologies and services.

Conclusion
LDCs need support to tackle the climate crisis to safeguard and further advance the hard-earned improvements in incomes, education and health achieved over the past decades. To successfully mitigate and adapt to climate change, LDCs have to address several challenges and strengthen their policy frameworks. Not only do they need to enhance the climate-resilience of their trade-related infrastructure but also to improve their digital connectivity. The latter will play a key role in addressing information asymmetries and broadening the reach of early warning systems.

International trade cooperation can help materialize just transition and prosperity for all by enhancing the mutual understanding of challenges and opportunities, limiting protectionist policies, and expanding trust to ensure that green technologies and services flow as smoothly and freely as possible. The WTO Aid for Trade Initiative has an important role to play by mobilizing funding for critical supply-side infrastructure for LDCs necessary for the transition to a low-carbon economy and supporting the private sector to adapt to climate change. Aid for Trade needs to be better targeted to address development concerns in line with LDCs’ nationally determined contributions (NDCs).

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The US Did Not Ban Exports of Vaccine Supplies. But More Help is Needed.

Ryan Murphy — Tue, 06 Jul 2021 14:38:20 +0000

Just a few months after India confidently promised to send homegrown COVID-19 vaccines to billions of suffering people around the world, local production sputtered and a new wave of disease spread across the country. Indian vaccine makers were forced to keep their limited supplies at home, prompting them to try to shift the blame away from themselves. The most obvious target has been the United States, which the CEO of the Serum Institute of India, the world’s largest vaccine manufacturer, accused of imposing an “embargo” on vital ingredients needed to make the vaccine.

That would be a scandal if it were true. But it is not. Access to new, firm-level supply-chain data reveals there has never been a US export “embargo” on materials needed to manufacture vaccines. In recent months, in fact, the Serum Institute and other Indian companies have significantly increased imports of vaccine materials from key suppliers in the United States, including Merck Millipore, Thermo Fisher, Cytiva, Pall, ABEC, Sartorius, and more.

On April 16, Adar Poonawalla, CEO of the Serum Institute, brought things to a head with a tweet. “Respected @POTUS, if we are to truly unite in beating this virus, on behalf of the vaccine industry outside the U.S., I humbly request you to lift the embargo of raw material exports out of the U.S. so that vaccine production can ramp up.” He was not alone in accusing the US government of using the Defense Production Act (DPA) to ban exports of supplies. Mahima Datla, the CEO of Biological E, another major Indian vaccine company, made similar public complaints. President Joseph R. Biden Jr.’s national security advisor, Jake Sullivan, responded that the United States would help by immediately sending emergency vaccine-making equipment to India.

There is, of course, enough blame to go around. Vaccines have not been equitably distributed worldwide. Vaccine equipment and materials are in short supply globally, and shortages may even temporarily get worse. The White House was slow to explain that the Defense Production Act was not being used as “an export ban or a de facto ban or an embargo or any restrictions on sales to any other outside clients or customers anywhere. Companies are able to export however they need.”

But there is something to be learned from the misplaced accusations of CEOs, if policymakers can raise their sights and focus on helping India and other countries now struggling to expand their immediate vaccine production capabilities. Policymakers should work to provide more transparency into the vaccine manufacturing supply chain to avoid these sorts of misperceptions. More important, they should use that information to partner with companies globally to identify and mitigate the worst of the input shortages before the shortfalls stop or slow down vaccine production. The supply chain data presented here can help.

What is Known About the Serum Institute, Biological E, and Vaccine Inputs

The Serum Institute has licensed technology to manufacture two vaccines—one from AstraZeneca in June 2020 and one from Novavax in July. The company secured funding from Gavi and the Bill & Melinda Gates Foundation in August and September to begin to scale up manufacturing that was at risk—i.e., before regulatory approval of the vaccines. In exchange, the Serum Institute agreed to supply hundreds of millions of doses to poor countries through the COVAX Facility over 2020 and 2021.

Manufacturing a vaccine is complex but can be separated into two basic stages (figure 1). The first involves making the drug substance and then formulating it into drug product. This requires capital equipment such as bioreactors and filtration pumps but also a continuous supply of “single use” (disposable) materials such as bioreactor bags, filters, and tubing, as well as chemicals and cellular and other raw materials known as “consumables.” Once done, a second facility takes shipments of the drug product and uses its assembly lines to squirt liquid vaccine into millions of tiny vials, adding caps and labels, and then packaging them up for distribution.

To manufacture the Novavax vaccine, for example, the Serum Institute procured massive new pieces of capital equipment in September, buying six 4,000 liter bioreactors that ABEC indicated were the “largest in the industry by a factor of two.” ABEC would manufacture the bioreactors and customized, single-use bioreactor bags “in its US and Ireland facilities to meet Serum Institute’s accelerated schedule.” (Nevertheless, ABEC is currently reporting a 16-18 week lead time for new shipments of its bags.)

The Serum Institute may have also repurposed legacy equipment already on hand, including to manufacture the AstraZeneca vaccine—which it has called Covishield. In the face of Poonawalla’s plea for more equipment, on April 26 the White House announced emergency shipments of “[Merck] Millipore filters that would have been used to manufacture AstraZeneca vaccine that will be used to manufacture the Covishield AstraZeneca vaccine [sic] serum.”

Equipment is likely in short supply globally, but there is no evidence to suggest a US “embargo” on Merck Millipore, ABEC, or any other company sending vaccine supplies to the Serum Institute (figure 2). Using S&P Global Market Intelligence Panjiva’s (Panjiva) data, which is based on Indian customs transactions, the Serum Institute received $25 million of imports from the United States between October 2020 and March 2021. This volume made up 22 percent of the Serum Institute’s imports from the world and was more than 30 percent higher than the prior six months.

A number of American-based vaccine equipment suppliers made shipments to the Serum Institute between October and March. In October and December, those 4,000 liter bioreactors arrived, reflecting $4 million of purchases from ABEC. Merck Millipore also shipped $3.7 million of goods, including filters; Cytiva and Pall sent a combined $3.3 million of exports, including disposable bioreactor bags. Serum also imported $2.1 million from Thermo Fisher and $600,000 from Sartorius.

The Serum Institute was not alone. Biological E has been preparing to manufacture two other vaccines—one from Johnson & Johnson (Janssen) as well as one from Dynavax and the Baylor College of Medicine. While Indian regulators have not yet authorized either for use, Biological E has had a technology agreement for each since August 2020.

Biological E shows similar buying patterns from US suppliers (figure 3). Between October and March, the vaccine manufacturer received $9 million of imports from the United States, 29 percent of its total imports and an increase of 220 percent (from $2.9 million) from the prior six-month period. Thermo Fisher shipped $3.6 million of those goods, including bioreactor bags, and $187,000 of the exports, including filters, were from Merck Millipore.

The existence of these US exports does not mean, of course, that all of the equipment and materials were to be used to make COVID-19 vaccines. (The Serum Institute and Biological E also manufacture other vaccines.) It also does not imply that these Indian manufacturers are still not missing critical parts or that supplies are not running short. Equipment shortages have been a problem throughout the pandemic, even impacting American vaccine companies. At one point Pfizer, for example, had to recycle individual filters two or three times to avoid running out.

American suppliers of vaccine equipment agree. In a Bloomberg interview in January, Chris Ross, CEO of Merck Millipore, indicated the company had been hit with “off-the-charts” demand for filtration devices and the single-use equipment that their clients needed to make COVID-19 vaccines.

Vaccine Manufacturers Globally May All Be Relying on the Same Few Suppliers

There are many causes of the equipment and raw materials shortages. But things may have been made worse because of how the supply chains for some of these vaccine manufacturers developed, creating a demand spike for the same materials from the same few companies at the same time.

Take the AstraZeneca vaccine’s global manufacturing network. The first stage is now being done by at least nine different companies in eight different countries (figure 4). The second stage happens in at least ten different facilities in nine countries.

Pall and Cytiva, a pair of subsidiaries under Danaher, are likely supplying at least some equipment for the AstraZeneca vaccine supply chain network. Pall was part of the original consortium the Oxford vaccine originators convened in early April 2020 that later expanded to include the AstraZeneca partnership. Clive Glover, Pall’s director for cell and gene therapy, described the equipment implications (of figure 3) with, “The need to standardize was a necessity for this project because there are more than 20 different sites manufacturing [the Oxford/AstraZeneca vaccine], each using the 50 or so consumables required for the manufacturing process. If each site had its own customized version, there would need to be more than 1,000 parts!”

Standardizing the AstraZeneca production process would have tradeoffs. A benefit of common equipment and materials would be the speed at which each new facility could scale up production of a consistent drug product. But the downside of standardization is it may concentrate—and lock in—demand for equipment into a limited number of suppliers. That is, the benefit of that speed and drug product consistency can only be realized if there is enough of the standardized equipment to go around.

The Serum Institute may face intense competition for equipment from many other sites in the AstraZeneca COVID-19 vaccine manufacturing network. Two US facilities—for Emergent BioSolutionsand Catalent—have had AstraZeneca production taking place under a DPA priority-rated contract since summer 2020, giving those plants earlier access to any US-based supplies that the Serum Institute might also need. This may explain how the US government was able to find Merck Millipore filters to share with the Serum Institute on April 26. Finally, demand for equipment to make the AstraZeneca vaccine was also likely coming from newly-tasked facilities in the Netherlands, Belgium, Australia, Japan, Argentina, and the two in the United Kingdom (see again figure 3).

A similar uptick in demand for common equipment likely affected the Serum Institute’s ability to scale up production for Novavax. Novavax has contracted at least seven other facilities to manufacture the drug product for its vaccine (figure 5). Two are in the United States, and at least one of them, FUJIFILM Diosynth Biotechnologies (FDB) in Texas, also appears to use equipment from Pall and Cytiva. The other Novavax facilities are in the United Kingdom (also a FDB plant), Czech Republic, Spain, Japan, and South Korea. In April, Novavax CEO Stanley Erck indicated some facilities were threatened by a global shortage of bioreactor bags, but he did not indicate which plants or which supplying companies were behind the shortfall. Finally, note that the Emergent BioSolutions plant also had the ABEC 4,000 literbioreactor in place prior to the pandemic. (Other COVID-19 vaccine efforts were reportedly also using ABEC equipment.) Thus, many facilities were likely competing with the Serum Institute for bags and other materials needed to make the Novavax vaccine.

The shortages were predictable, and under Operation Warp Speed, the US government at least attempted to address the problem. In October, it provided Cytiva $31 million to “expand manufacturing capacity in the company’s Massachusetts facilities and create duplicate capabilities in Cytiva’s Utah facilities to be complete in less than 12 months.” To help it scale up faster, Cytiva was also given priority access to input suppliers through an invocation of the Defense Production Act.

The US government subsidized Cytiva in part because it was “the primary supplier to many of the companies currently working with the U.S. government to develop COVID-19 vaccines” (emphasis added). But even if the subsidies to Cytiva were sufficient to expand the input capacity needed to satisfy American vaccine manufacturers, they were unlikely to have been large enough to satisfy the surge in global demand.

A New and Global COVID-19 Vaccine Supply Chain Policy is Needed

The challenge facing policymakers today is different from what it was six to twelve months ago. Then, US policymakers were focused on securing the American vaccine supply chain. At that point, which vaccines would receive regulatory approval remained unknown. Now, dozens of facilities making vaccines for Pfizer, Moderna, Johnson & Johnson, AstraZeneca (figure 3), Novavax (figure 4), and more have all been established globally. Furthermore, as the Indian trade data confirmed, these facilities have already formed relationships with critical equipment and raw material suppliers around the world.

Today, policymakers need to leverage information about those relationships to identify and resolve potential input shortages before they stop or slow the much needed expansion of COVID-19 vaccine production. Here are five steps explaining how to do so (figure 6).

1. Regularly survey the dozens of now-established COVID-19 vaccine production facilities about their critical inputs.[5] How much do they need, from which companies, from where are those being supplied, and on what time schedule? Furthermore, how customized is each input? (Is it truly unique to that supplier?)

2. Once that information has been collected for each facility, aggregate it up to the level of the input supplier. Determine how many bioreactor bags are needed from Cytiva versus Thermo Fisher. Establish how many filters are needed from Merck Millipore, etc.

3. Separately survey the major input suppliers identified in step 2. Cross-check whether each input supplier’s pending orders match the information from the vaccine facilities. Check other competing claims on that input production (from clients making products aside from COVID-19 vaccines), and establish whether their existing capacity can satisfy orders from COVID-19 vaccine facilities on time. Can Merck Millipore really meet the simultaneous new demand for filters from Serum Institute, the Novavax plant in Texas, and the AstraZeneca facility in the Netherlands? Will Cytiva have enough bioreactor bags to service all of the plants in their order book? If a plant really needed more of this particular piece of equipment or raw material, would Thermo Fisher have any spare capacity to provide it?

4. Identify potential input shortages. Whenever step 3 reveals a supplier as not having sufficient capacity to meet all of the demand on time, some sort of policy intervention is needed.

5. Determine whether the shortage is impacting a customized input, and tailor the policy response accordingly.

For customized inputs that no other equipment supplier can make, there are two possibilities. Policy should first incentivize the company to utilize its existing capacity more intensively, in a wartime-like-effort, running second, third, and weekend shifts.

If that resulting increase in production of equipment and materials remains insufficient, incentivize the capital investment necessary for that company to expand productive capacity to provide more of those customized inputs.

Even with current heightened demand, an input supplier may not have the private incentive to invest in new capacity if it perceives that demand as transitory. For example, a private company may perceive facilities manufacturing pandemic-specific equipment, such as huge bioreactors or their enormous single-use bags, as having limited utility once the health crisis is over and tens of billions of vaccine doses are no longer a global regularity. Society needs companies to make this capacity investment right now to save lives, and governments may have to pay for it with subsidies. The evidence is that the industry is making large capital investments. But without the policy intervention, private firms might not make the rightexpansions into pandemic-level capacity to address the public health crisis.

For inputs that are not customized, use the step 3 information to help find temporary alternative suppliers. Take advantage of the information on spare capacity collected by having surveyed the other input providers.

Even following this checklist, sometimes there will be no immediate way to resolve an input shortage. In this case, policymakers can use the information they have collected on global production to help ration and nudge supplies to where they can do the most public good. Nevertheless, the pace of vaccine production will slow.

Making Operation Warp Speed Global

US policymakers have arguably deployed elements of this five-step process during the pandemic on behalf of American vaccine makers through Operation Warp Speed and the Defense Production Act. And when vaccine facilities in other countries have run into equipment shortages, the US government has sometimes even stepped in to help, as with the Serum Institute in April as well as with CureVac in May. But the Indian experience showcases why the United States cannot and should not attempt to manage this five-step process alone. The worldwide nature of the pandemic, as well as the international supply chains characterizing vaccine production and input-providers, means that the coordinated and informed allocation of scarce supplies must take place through a more global lens.

These are some of the now practical and real-world reasons why Bown and Bollyky (2021) have called for a COVID-19 Vaccine Investment and Trade Agreement (CVITA). Coordinating public investment to expand critical inputs and raw materials is required simply because those vaccine supplies may be produced in one country (such as the United States) even though they are desperately needed by a vaccine manufacturer in another (such as India). In the face of input shortages, policymakers may need to step in and make hard decisions about how to best allocate those supplies on behalf of public health. But the public also needs to see those policymakers as making informed decisions.

Transparency in the global vaccine supply chain will also improve trust. That may heighten cooperation and be a reminder that, in the COVID-19 pandemic, we are all in this together.

Chad P. Bown, Reginald Jones Senior Fellow since March 2018, joined the Peterson Institute for International Economics as a senior fellow in April 2016. His research examines international trade laws and institutions, trade negotiations, and trade disputes. With Soumaya Keynes, he cohosts Trade Talks, a weekly podcast on the economics of international trade policy.

Chris Rogers joined S&P Global as part of the acquisition of Panjiva in 2018. His research covers international trade policy, logistics sector trends and analysis of industrial supply chains. Previously he worked as an international trade analyst at Bloomberg Intelligence after spending nearly 20 years covering the global energy industry as a sell-side analyst at institutions including JPMorgan and UBS.

To read the full commentary from the Peterson Institute for International Political Economy (PIIE), please click here.

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That was then but this is now: Assessing the new Atlantic Charter

Johnny Morris — Fri, 11 Jun 2021 16:42:16 +0000

It is very easy to romanticize the relationship between the United States and the United Kingdom. Easy, but misleading. So when the two countries agree, as they just have, on a new Atlantic Charter, it is worth analyzing what is really at stake and the degree to which the charter represents reality rather than romance.

The original Atlantic Charter was a foundational document in transatlantic relations. It was struck by Franklin Delano Roosevelt and Winston Churchill in 1941 after they met on board the USS Augusta in Placentia Bay, Newfoundland. It was a way of signaling their intention to work together for the same cause in wartime.

The key elements were a preference for an open international system that would allow for self-determination, the removal of trade barriers, freedom of the seas, disarmament, and peace. Neither side was seeking territorial gains (as had happened in the First World War).

The charter aimed to sketch out American and British aims for the Second World War and beyond. And, to a surprising degree, its spirit and intentions prevailed. The results found expression in the United Nations system, in NATO, in post-war decolonialization, in world trade arrangements. The document has come to be recognized not just as a key element in the victorious alliance against Nazi Germany, but also as an expression of a new American vision for the world—one that the United States (largely) shared with the weary titan on the other side of the Atlantic.

This moment—between these two iconic figures, engaged in an epic struggle against the ultimate evil—is magical; it still exerts a pull on the imagination that most diplomacy cannot rival. But that allure shouldn’t distract from the fact that the charter was not merely a vague wish list. It had a concrete function in the very tough relationship between two wartime allies.

The text was idealistic, but also a compromise. The United Kingdom had hoped to draw the United States into the war, but that would take until December 1941 and the attack on Pearl Harbor. The United States was keen to relieve the United Kingdom of its colonial possessions and its protectionist arrangements with its colonies, and only partially succeeded. FDR and Churchill, though they fought side by side against Nazism, could not have been more different in their instincts.

The agreement between Joe Biden and Boris Johnson (two men who are perhaps even more unalike than their wartime counterparts) is in many ways not comparable to the original Atlantic Charter. Neither (with the greatest of respect) are Joe and Boris to the original FDR and Winston. And though this is a dramatic moment in world affairs, it is not 1941.

Nonetheless, the new charter reflects a shared sense of the values that are most vital to champion in the world, including democracy, open societies, and a rules-based world order. The second iteration has also been modernized, with references to cybersecurity, disinformation, and the countries’ nuclear deterrents.

And once again there is a fight underway and a need for solidarity to win it. The idea behind these declarations is to signal—to friends and foes alike—not only a common orientation and direction of travel, but also a common purpose.

The rise of China presents both countries with difficulties that are more complex than those posed by the rise of Russia after the Second World War, in the sense that the United States and United Kingdom will remain very closely entangled with China’s economy even as they clash with its political leaders.

As Washington seeks to build a web of alliances to counter China, it is tapping into long-established cultural and political ties with some countries (Australia, and Canada, for example) while also reaching out to partners that are less certain in the struggle with Beijing and do not wholly share US sentiments about open markets, open societies, or democracy. The United Kingdom falls squarely in the former camp. It is not the decisive ally that it was in 1941, but it remains a hugely valuable one. Though it is far from being an Indo-Pacific power, the United Kingdom still has many diplomatic relationships to complement those of the United States. And while the United States and United Kingdom can’t aspire on their own to set the agenda of the world’s democracies these days, they can show the way and encourage others to come along—a style of leadership more appropriate to 2021.

“Shared values” between the United Kingdom and the United States have, of course, concealed many differences over the years. Neither country was especially keen on democracy for all in 1941. In the United States, racial injustice has persisted for decades after the Atlantic Charter. The United Kingdom may have retreated rapidly from India following World War II, but it remained a colonial power for many years after the conflict. Yet even eighty years ago, both countries had a sense of democracy as an important value and sought more than just the advantages of realpolitik.

The second Atlantic Charter, as with the first, is a moment in time in which the two countries are recommitting themselves to common purpose—a moment when they admit their differences (there are tensions over Northern Ireland, for example), but within the context of one of the closest international relationships in the world. That relationship is ultimately based not just on memories of wartime struggle or the Magna Carta or even the narrow interests of their deeply intertwined banking systems, but on popular solidarity between the two nations and a concrete commitment to work together to shape the better, fairer, and safer world that could lie ahead.

It is important to agree on what one is fighting against, but also on what one is fighting for. About the latter, the United States and the United Kingdom can, largely, agree.

Andrew Marshall is the vice president of communications for the Atlantic Council.

To read the original commentary, please visit here

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The WTO Gets a New Leader, Finally!

Emily Kachinski — Mon, 15 Feb 2021 18:56:50 +0000

World Trade Organization (WTO) members must be breathing a sigh of relief and enjoying a brief celebratory moment with the selection of Dr. Ngozi Okonjo-Iweala as its new director-general. She is the first African, and first woman to lead the 26-year-old organization. She brings strong credentials to the job, having served as Nigeria’s finance minister and as managing director at the World Bank.

In an interview with her this past summer in a joint WITA-ASPI webinar, I was struck by her clear and insightful responses, deep sense of the difficulties facing the WTO, and a strong self-confidence. But, any celebration in Geneva will be short-lived. The challenges facing the WTO membership are formidable, widespread, and growing. They require not only urgent attention but strong actions.

Nothing for the WTO comes easy these days. Roberto Azevedo surprised his colleagues when he announced last May that he would step down as director-general one year before his term officially expired. This set into motion what was to be a five-month process to select his successor, with a slate of excellent candidates emerging. But, this exercise experienced an unexpected jolt when the United States refused to join others in their support for Okonjo-Iweala. As a result, the process was extended several more months, leaving decisions to the incoming Biden Administration.

Okonjo-Iweala must hit the ground running if she is to be successful in reforming the troubled organization and reasserting its relevance. She faces a broken dispute settlement system, which if not fixed will lead to more countries settling differences unilaterally. The failure of the WTO membership to update and strengthen the WTO rule book has resulted in a steadily increasing number of bilateral and regional trade agreements. Moreover, the WTO has been weak in its COVID response, while standing on the sidelines as the United States and China, the two largest economies, have battled it out with WTO-inconsistent tariff escalation.

The new director-general will have a number of important personnel appointments to make, including a chef de cabinet and four deputy director-generals. This group must be sufficiently senior and well-respected to help unlock progress on the reform agenda. In doing so, she can also rely on the capable Secretariat staff who have done an impressive job in keeping the trains running since Azevedo’s departure. Developing the trust of the WTO Ambassadors in Geneva will be important, but not sufficient. She will need to enlist support from capitals as well. Outreach to trade ministers and other decision-makers around the world should be on the top of her inbox.

Setting early priorities will be critical. Taking on too much at the outset can be a recipe for disaster as many leaders through the years have found out the hard way. During our July interview, Okonjo-Iweala said that she would look for some early “wins to celebrate and show that the WTO is back.” Different members undoubtedly will share their own strong views on what must be addressed first. Listening to all perspectives is important. But more critical will be to develop a balanced package of priorities that are impactful, doable, and responsive to the concerns of as many members as possible. At the same time, she could build trust by sharing her plan for taking on those matters that may require more time.

Okonjo-Iweala’s tenure coincides with the start of a new Administration in Washington, which already is providing a boost to her work. In announcing its support for Okonjo-Iweala, the United States expressed its commitment to “positive, constructive and active engagement” with all WTO members, a stark contrast from the last four years. In addition, China has appointed a new WTO Ambassador, Li Chenggang, a trade veteran already well known to many of his colleagues, which may also allow for a fresh look at some of the seemingly intractable issues.

At the end of the day, the organization is only as good as its membership. Even the most qualified and experienced director-general cannot be expected to tackle the negotiation, dispute settlement, and governance challenges without the strong commitment and backing of its members. Okonjo-Iweala’s selection as the new WTO director-general provides an important opportunity to jumpstart discussions, decisions, and actions that can help put the WTO back on the map. Members should seize this opportunity – it may be their last shot.

To read the original blog from the Asia Society Policy Institute, please click here

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How might the United Kingdom once again ‘Rule the waves?’

Anne Allen Hodge — Thu, 14 Jan 2021 20:19:45 +0000

The UK’s dream after Brexit is to become a leader of global free trade and develop an independent foreign policy. How close is Prime Minister Johnson to achieving the launch of a global Britain?

In the first week of February 2020 at the historic Greenwich museum, Prime Minister Boris Johnson prepared a doubtful nation to set sail for global action. “This is the newly forged United Kingdom on the slipway: this is the moment when it all took off.” The Prime Minister (PM) was referring to the early 18th century, when British ships dominated international trade routes, carrying iron rods and porcelain across Pacific, Atlantic and Indian oceans. Now, “If we have the courage to follow the instincts and instructions of the British people, this can be another such moment on the launching pad.” Johnson had recaptured national power, formerly tethered to the European Union and he knew where he wanted to go: “Leaving our chrysalis…. the United Kingdom will go out into the world.”

How close is the Prime Minister to achieving the launch of global Britain one year later? The dream was for Britain to be the leader of global free trade. It would beat back the mercantilists protecting their national or regional markets. It would defeat the tariffs waved around like cudgels in foreign policy debates. It would reverse the trend of anemic trade and increasing global poverty. Poised with top-notch trade experts and economists, the PM said that Britain would engage in “the great multi-dimensional game of chess” in which UK officials would negotiate with several governments at the same time. Westminster would “use nerves and muscles and instincts that this country has not had to use for half a century.” They would negotiate with the Commonwealth, including Africa, Australia, New Zealand and Canada. And, they would “get going with our friends in America.”

Sovereignty is the lode star, guiding prosperity and international negotiations on trade, financial services and security policy. Thus, despite the commitment in the Greenwich speech not to seek lower standards or dump goods in the EU market, Johnson will amend UK standards to suit the role of a ‘global free trader.’ [The December 2020 trade agreement with the EU accepts the role of an independent arbiter to resolve disputes over diverging standards and regulations, but the lengthy process will enable the UK to postpone a settlement for several months and thus stay ahead of Brussels grumblers.] Sovereignty remains key on financial services. London ditched EU regulations and the so-called ‘equivalence’ principle in order to trade freely with international financial markets. Consequently, EU shares, valued at £ 6.5 billion in trades a day, flew out of the City of London in the first week of January. The PM may point to the freedom to trade with the Swiss stock exchange, but his Chancellor of the Exchequer will need more than the anticipated £ 1.2 billion in Swiss trades a day to compensate for the loss of the EU market. In the meantime, financiers who made the City of London an international hub over centuries have moved to Amsterdam, Paris and other European cities.

Principles of independent foreign policy

Sovereignty is more than trade in goods and services, although the latter has held the golden key to the UK’s balance of payments for 100 years. Johnson also sought independence from the EU’s foreign policy, asserting the UK’s right to impose its own sanctions on breakers of international law. But what are the principles that should guide the Foreign and Commonwealth Office (FCO), particularly as the UK assumes the chairmanship of the G7?

The UK is currently living through a ‘pause,’ somewhat similar to the first 6 months of the George H.W. Bush presidency. Consequently, the PM has appeared conspicuously silent on foreign policy issues. He seeks to create original policies that make the UK distinctive from Brussels. But the FCO recognizes that the EU and its member states are the most closely aligned with the UK in defending democratic institutions and human rights, promoting international peace & security, encouraging greater economic prosperity, and protecting intellectual property rights. His predecessor, Prime Minister Teresa May, stated at the Munich Security Conference in 2018 that

“Europe’s security is our security, and the United Kingdom is unconditionally committed to maintaining it. The challenge for all of us today is finding the way to work together through a deep and special partnership between the UK and the EU, to retain the co-operation that we have built and go further in meeting the evolving threats we face together.”

Commitment to Europe’s security

We should hope that this principle still stands, but Johnson’s breach of the Withdrawal Agreement over trade across the Irish Sea showed his willingness to amend accords with Brussels to suit his interests. How will the PM demonstrate his commitment to Europe’s security while insisting on UK independence to advance its own national security interests? At the Greenwich speech in 2020, Boris Johnson promised to continue cooperation with European friends in foreign and defense policy “whenever our interests converge – as they often, if not always, will.”

On Iran, the UK has remained firm in its commitment to respect the EU institutional process and support the JCPOA. In multilateral institutions, Britain and EU members states continue to stand mostly together. The UK remains an active member in the E3 – Germany, France and the UK – upholding the Iran nuclear deal and resisting U.S. pressure to declare the JCPOA dead. The E3 have continued to coordinate on Iranian breaches of human rights and at a political-director level have discussed policy towards Russia. After the poisoning of Alexei Navalny, they coordinated closely over Russian sanctions similar to the response taken when Mr. Skripal was poisoned at Salisbury in 2018.

New partnership with Kyiv, Sanctions against Lukashenko regime

However, the process of coordinating the positions of 27 European governments in developing a common foreign policy has left room for the FCO to act independently of the European External Action Service (EEAS). While Brussels dithered, Foreign Secretary Dominic Raab offered a defense and political partnership with Kyiv, focused on military technical cooperation. Together with Canada, London issued sanctions against Alexsandr Lukashenko’s regime in Belarus. Raab neither protested Turkish breaches of the UN arms embargo against Libya, nor showed willingness to sanction Turkey on its drilling for gas in the eastern Mediterranean. In short, Johnson’s government is determined to demonstrate independence of judgement and ability to act fast in comparison with the cumbersome EU foreign policy process.

The UK has a highly-reputed diplomatic service with the knowledge and expertise to engage intelligently on a global scale. This resource is worth more than the economic budget for international affairs which, by necessity, will be reduced in the post-COVID19 era. The FCO is well placed to work with others to achieve common purposes. It will continue to coordinate with Brussels on policy towards the Middle East and Iran, as well as cybersecurity and the protection of assets in space. Beyond Europe, we should expect London to be more aggressive in seeking advantages in Washington and pursuing alliances with India, Australia, Singapore and other members of the British Commonwealth. Shared language and values make it natural for the UK to further develop those trade and security ties.

Reduced public funds for R&D

The dream of a ‘Singapore-on-Thames’ based upon its talented scientists, engineers, and inventors is an exciting concept. The dreamchild of Dominic Cummings saw the UK take the European lead in quantum computing, artificial intelligence, genome therapy, and machine learning. The reality of a year-long pandemic and rising digital sovereignty may reduce public funds to galvanize these scientific projects, but the private sector remains interested. Furthermore, the 291 projects with the U.S. National Science Foundation in 2019 raise the prospect of continued international collaboration. An increased UK participation in the Event Horizon Telescope that is imaging black holes would be one such example.

We should anticipate serious British efforts to work closely with the incoming Biden administration on a wide range of issues, from scientific research and digital taxation to climate change and trade. On trade, President-elect Biden’s team has expressed a preference to engage with the EU, a market of nearly 448 million people, and it regrets that the UK left the regional body. But we should expect the continuation of close ties on security and intelligence. A free trade agreement may have to wait until Washington completes its agreement with Brussels. In the meantime, the UK assumed chairmanship of the G7 in January 2021 and thus the ability to play a leading role in the drafting of documents for COP26, international debt relief, and the coalition of democracy. In 2021, the opportunities for the UK are plentiful to show that it can be a leader on critical global issues.

To read the original blog post from the Wilson Center, please click here.

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Covid and international economic cooperation: If not now, then when?

Caroline Hillier — Mon, 11 Jan 2021 20:08:52 +0000

The world is living through a truly remarkable, era-defining moment. This short essay is an effort to provoke you a bit, to add some turbulence to your mental tranquillity, and to suggest we need to ‘break the glass’ when it comes to international economic cooperation. My basic theme, or reprise is: “If not now, then when?”

An era-defining crisis

Covid-19 and the seasonal flu are very unalike both medically and economically. The flu causes a severe but short disease. As long as you don’t die, it rapidly fades leaving few traces on the future. Covid-19, by contrast, can have very long-lasting medical effects. The same is true of its economic effects. There’s no going back to ‘normal’.

The Covid-19 vaccines will normalise things a little, but this ‘normalcy’ will be skin-deep. Five years out from now, looking back at the turbulence of 2020, you’ll be able to refer to the ‘before times’ and everyone will know you mean ‘pre-Covid’. This may sound like an exaggeration, but it is not.

There are lessons from the thinking during the last big shock – the 2008 financial crisis. At the time, many pondered how long it would take for normality to return. But it never did. Trends in productivity and trade shifted with the 2008-09 shock and haven’t shifted back fully. Indeed in 2019, you could say ‘before the crisis’ and everyone would know that you meant before the Global Financial Crisis.

In the heat of the current battle, many are seeing the Covid-19 crisis from a similarly simplistic lens – thinking it will pass quickly.¹ It won’t. The Covid crisis is much larger, much deeper, and much broader than the 2008-09 crisis. The shockwaves are much more powerful. They are leaving lasting economic and social ‘craters’ all around the world.

The scar tissue building up

The pandemic has tipped the world into the deepest and broadest recession in living memory. It has killed millions directly and many more indirectly, and it has sickened tens of millions. Both numbers are likely to have an extra zero on them before the disease is vanquished. Companies and countries have piled up debt stocks that will alter their economic and financial prospects for decades.

But these broad statistics – awful as they are – hide the most damaging scar tissue that is building up. Global poverty is rising for the first time in decades. The World Bank estimates that between 80 and 120 million will be pushed back into extreme poverty. The virus has led to millions of people going hungry, with an estimated 12,000 people dying every day from pandemic-related hunger (Oxfam estimates), on top of those who are succumbing to the disease. And this is not just a problem of poor nations. We’re witnessing kilometres-long food lines in Texas.

Children across the planet are losing out on critical early childhood education. The UN found that “the COVID-19 pandemic has created the largest disruption of education systems in history, affecting nearly 1.6 billion learners in more than 190 countries and all continents. Closures of schools and other learning spaces have impacted 94% of the world’s student population, up to 99% in low and lower-middle income countries.”

Reading scores and educational outcomes have suffered. Given the long-lasting impact of early childhood training, the OECD predicts that: “the impact could optimistically be 1.5% lower GDP throughout the remainder of the century and proportionately even lower if education systems are slow to return to prior levels of performance.”

As parents are critical in passing literacy down the generations, today’s learning losses threaten future generations. It could erase “decades of progress, not least in support of girls and young women’s educational access and retention.”

This is why we must think of Covid19 as an era-defining event. The question is: will the pandemic pull humanity pull together or will it tear us apart?

Global cooperation

For the first time since WWII, the entire world is sharing the same experience at the same time – a terrible pandemic that is robbing people of their lives and livelihoods. Not only was the shock sudden, traumatic, and synchronised – it is being televised. Everyone has a front-row seat to the devastation of this deadly virus.

Being an optimist, I choose to think that this trauma could be a catharsis – a spark that brings out our shared humanity. In a sense, we are all on the same wavelength, facing the same challenges. It could be a moment when humans look around themselves and realise that we humans are all in this together. It could create a spirit of solidarity and cohesion, a sense of shared humanity, and shared destiny.

I’m being naïve, of course, but terrible moments have often been moments when bold choices are made. Will we pull together, or will we let the epidemic tear us apart? That’s the choice. Things must move incredibly fast if we are to tackle the two urgent, era-defining challenges:

1) Fighting the Covid-19 pandemic

It will be necessary to produce, distribute, and administer several billion doses of vaccine around the world. National solutions will not suffice given the highly contagious nature of the virus. The disease will not be fully crushed anywhere until it is crushed everywhere.

2) Fighting the global recession

Given the deep economic linkages, full national economic recovery will require global economic recovery. What is needed is global, coordinated, and multilateral cooperation.

This virus has created an historically unprecedented resonance in the human experience. For the first time, we are all in this together, facing the same set of challenges. It is my hope that they will foster a spirit of solidarity and cohesion, a sense of shared humanity and common imperative – that not only do we all have to look after one another, but also the planet we share. If not now, then when?

Endnotes

1 I am guilty of this, as evidenced by the instant eBook I edited with Beatrice Weder de Mauro on 9 March 2020, Economics in the Time of Covid-19. But now I believe that many of the changes will be very long lasting.

To view the original blog post, please click here

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The Road that divided the EU: Italy joins China’s Belt and Road Initiative

Johnny Morris — Tue, 25 Jun 2019 20:38:53 +0000

China’s global influence has grown dramatically in recent years. Its Belt and Road Initiative (BRI) is an important manifestation of this rise. On 23 March 2019 Italy, the first G7 country, formally joined the BRI, which has caused significant tensions within the EU. This was the wake-up call for the EU, which prompted it to reconsider its policies towards the Asian superpower.

To BRI, or not to BRI?

The BRI is a transcontinental endeavour, launched in 2013, which is centred around infrastructure investment and aims at promoting projects that foster regional cooperation, development, and connectivity.

Italian Deputy Prime Minister Luigi Di Maio and Chinese President Xi Jinping signed the Memorandum of Understanding on Italy joining the BRI on 23 March 2019. The Memorandum is a non-binding statement of intent, through which Italy expresses its commitment to the initiative. It does not create rights and obligations under international law as a treaty would do. The Memorandum, however, represents an umbrella deal under which 29 other commercial and institutional agreements amounting to €2.5 billion were made. The deals concern energy, finance, and agricultural produce. It was also agreed that large Italian gas, energy, and engineering firms will obtain access to the Chinese market. At the same time, Chinese communications and construction companies will receive access to the port of Trieste and Genoa. This will open China’s passage into central and eastern Europe.

China portrays the BRI as a win-win relationship aimed at mutual growth and prosperity. Yet skeptics view the BRI as a means by which China strives to further embed its global influence. Moreover, there are concerns that China will use the BRI to export more of its goods to lucrative markets, while the other participants will not benefit to an equivalent degree from the arrangement and even incur debts. For instance, Pakistan and Malaysia have already started cancelling many of their BRI projects, because they are unable to make debt repayments for the Chinese loans for those projects. In this regard, some critics also expressed their concerns claiming that China could use, “debt-trap diplomacy” to obtain strategic concessions, for instance, over territorial disputes in the South China Sea or silence on human rights abuses. These concerns are particularly alarming considering the scale of the initiative. It is linked to two-thirds of the world’s population and already amounts to an investment of more than US $1 trillion.

The Road that divided the EU

Italy joining the BRI has caused discontent within the EU. There are widespread concerns that an influx of Chinese investment can have an adverse effect on the national security of EU Member States. A number of officials voiced concerns that through developing telecommunications networks China could spy and disrupt European communications. These concerns are especially pertinent in the light of the ongoing cybersecurity controversy surrounding Chinese tech giant Huawei. In order to avoid such adverse effects, “[s]ome EU officials advocate the bloc’s right to veto Chinese investments across the region”, pointing out, moreover, that China has a poor reputation regarding transparency and that unfair trade practices will only favour Chinese firms.

These concerns are also reflected in the European Commission Report titled “EU-China – A strategic outlook.” The European Commission criticizes China for preserving domestic markets from the competition by deploying “selective market openings” as well as providing “heavy subsidies to both state-owned and private sector companies etc.” Furthermore, the Commission clearly objects to the fact that the “EU operators have to submit to onerous requirements” to access the Chinese market. The Commission also emphasizes the lack of reciprocal market access. For instance, while Chinese financial services are rapidly expanding into the EU market, European companies are still denied access to the Chinese market. In this light, the Commission calls for developing “a more balanced and reciprocal economic relationship”. In his recent book The Silk Road Trap: How China’s Trade Ambitions Challenge Europe, Jonathan Holslag, a leading expert on Asian affairs, argues that in order to achieve such a relationship “the EU must reduce its reliance on China and work on building a stronger and more sustainable European economic model”.

Nevertheless, many European States continue to benefit from Chinese investments. For example, the Italian government argues that the concerns of France and Germany are hypocritical, considering that French and German trade and investment ties with China greatly overshadow its own. The Italian Government also claims that states with relatively smaller economies are unable to benefit from the EU-China trade policies, which prompted Italy to join the BRI. Moreover, Italy is not the only EU Member state participating in BRI. Already in 2012, the 16+1 framework was created, which brought together China and sixteen countries in Central and Eastern Europe. The framework was created by China in order to intensify and expand cooperation with eleven EU Member States and five Balkan countries in the areas of investments, finance, science, transport, culture, and education. Later the 16+1 became the key platform for promoting the BRI in Europe. Each of the 16+1 framework states was incorporated into the BRI. These states view the BRI and Chinese investment as a largely positive development.

This rift in perspectives causes further disunity within the EU. The Dutch government in its new strategy on China realizes the potential of tensions within the EU due to the differences in perspectives regarding the future of EU-China relations. Hence, the Dutch government emphasized that coherence, unity, and compromise should be the key concepts driving the formulation of the new policy regarding EU-China relations.

BRI and EU law obligations

Moreover, there are certain legal obligations under EU law that Italy must comply with, including the EU’s exclusive competence in trade matters (the “Common Commercial Policy”) and the duty of sincere cooperation (as stipulated in Article 4(3) of the TEU). Italy’s commitment to the BRI through the Memorandum can create tensions with these obligations down the road. While Italy is not the only EU Member State to get involved with the BRI, it is the largest EU economy so far to do so. Therefore, this question of whether the MoU abides by EU law becomes even more pressing.

As established earlier, the Memorandum is a non-binding statement of intent. However, moving forward in implementing these intentions could not only exacerbate political tensions within the EU but also lead to a violation of Italy’s legal obligations as an EU Member State.

A particular aspect of the Memorandum stands out in this context. The second paragraph of the Memorandum concerns areas of cooperation and more specifically the third section herein discusses unimpeded trade and investment. Within this section, the Memorandum discusses the aim of working towards expanding investment and trade, and promoting market cooperation between the two countries. Although this section does not explicitly mention the creation of trade or investment agreements, if steps were made in the direction of creating binding intergovernmental agreements that solidify the commitments set out in the Memorandum without the approval of the EU, that would be at odds with EU law for the following two reasons.

Firstly, trade policy is an exclusive competence of the EU. This means that only the EU can act internationally and not the Member States themselves. The scope of this EU trade policy has been expanded by the Lisbon Treaty and subsequent judgments and opinions of the Court of Justice of the EU, with for example Daiichi Sankyo and Opinion 2/15. It includes today explicitly foreign direct investment.

Secondly, under the duty of sincere cooperation, Member States are to “refrain from any measure which could jeopardize the attainment of the Union’s objectives”. The case law of the CJEU has interpreted this duty widely and according to the Inland Waterways case, this duty includes situations where Member States negotiate agreements with third countries in parallel to the EU and on the same subject matter. Seeing that the EU launched negotiations for an investment agreement with China in 2013, a new bilateral Italy-China investment agreement under this BRI framework would thus amount to Italy violating the duty of sincere cooperation.

Furthermore, modernizing the pre-existing bilateral investment treaty between China and Italy from 1985 would also amount to a violation of EU law without proper coordination with the EU institutions. In addition, the fact that CJEU declared the arbitration clauses in bilateral investment treaties between the EU Member States illegal in the Achmea judgment, strengthens the case that any binding investment agreement with investor-state dispute settlement made between Italy and China in the future under the BRI umbrella could constitute a violation of EU law, if not specifically authorized by the EU.

Looking down the Road

Italy joining the BRI has heightened the tensions regarding a unified EU approach vis-à-vis China. Yet, the Memorandum of Understanding between China and Italy is merely a political commitment, not a legal one. Hence, it does not immediately create a conflict with Italy’s legal obligations under the EU law. Nevertheless, if Italy decides to take further steps in formalizing this Memorandum by launching negotiations of binding international agreements, it may soon find itself at odds with its obligations under EU law, which in turn would further amplify the disunity within the EU. Overall, the need for a coherent European foreign and trade policy towards China continues to become more pressing.

Femke van der Eijk is majoring in International Justice at Leiden University College The Hague, Leiden University’s international honours college. She is part of Dr. Joris Larik’s research clinic on new frontiers in EU foreign relations law.

Angela Pandita Gunavardana is majoring in International Justice at Leiden University College The Hague, Leiden University’s international honours college. She is part of Dr. Joris Larik’s research clinic on new frontiers in EU foreign relations law.

To read the original commentary from the European Law Blog, please visit here

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