Season’s greetings! It is that time of the year when we on the CTLD blog do our annual Global Trade Policy Year in Review! And wow, has it been a year! In the Caribbean, we saw the renewal by the United States (US) of the Caribbean Basin Trade Partnership Act (CBTPA) extending preferential access to the US market for qualifying goods from beneficiary Caribbean countries up until 2030. We also saw a formalisation of greater collaboration between the Caribbean Community (CARICOM) and the regional private sector. But what about the global stage?
In our final blog article for the year, we will look at some of the top trade policy developments globally which impact on the Caribbean and on which we will be keeping an eye in 2021.
- COVID-19 impact on global trade and FDI
This time last year we heard rumblings of a new virus which had broken out in Wuhan province in China. However, most of us did not foresee that a year later the world would be in the grip of a full-blown pandemic which has, at the time of writing, killed 1.69 million people globally.
Globally, the pandemic has had a significant impact on global supply chains and global travel trade. In its October 2020 forecast, the WTO predicts a 9.2% decline in the volume of world merchandise trade for 2020, followed by a 7.2% rise in 2021. According to UNCTAD’s October forecast, global FDI flows contracted 49% in the first half of 2020 due to the COVID-19 outbreak.
While the COVID-19 death toll in the Caribbean still compares ‘favourably’ to other regions internationally, the economic toll on the region, especially its tourist-dependent economies, has been less forgiving. The region’s tourism-based economies are predicted by the IMF to contract significantly (-9.9%) in 2020.
The good news is that there are now two promising vaccines which have already gotten approval by the UK and US governments so far. However, with on-going spikes, the news of a new variant of the virus affecting the UK and uncertainty over how soon poorer countries will have access to a vaccine, the COVID-19 pandemic and its fall-out will be with us well into 2021 with implications for both policy makers and businesses engaging in cross-border trade.
2. WTO at a cross-roads
With the WTO celebrating its 25th anniversary of existence this year, one would be forgiven for having some optimism that there would be some progress on the myriad of issues facing the organization, of which the Appellate Body crisis is among the most dire. However, many of the problems plaguing the guardian of the rules-based multilateral system have spilled over into this year, while some new problems have cropped up.
Perhaps, most frontally is that the WTO now faces a ‘leadership void’ following the surprise resignation by then Director-General Roberto Azevedo in May 2020 and the US’ blocking of the appointment of Dr. Ngozi Okonjo-Iweala who beat out seven other candidates to be deemed the candidate most likely to achieve consensus. A highly qualified development economist, Dr. Iweala’s appointment would have been historic for being not only the WTO’s first female DG, but its first from Africa. The question of the DG selection has been postponed to next year, another item on the WTO’s growing list of unfinished business.
Negotiations on eliminating harmful fisheries subsidies will continue next year as the much hoped for breakthrough on an agreement did not materialise. WTO Members also failed to agree on a proposed waiver to the Trade-related Intellectual Property Rights (TRIPS) Agreement to temporarily exempt COVID-19 drugs, vaccines etc from intellectual property rights to assist developing countries’ ability to access to these drugs. The WTO Twelfth Ministerial Conference due this year had to be postponed owing to the COVID-19 pandemic. According to Bloomberg’s reporting, a special General Council meeting will be held early next year to decide on the location and date.
That is not to say that there has not been some progress, however. Joint Statement Initiative negotiations have begun with the hope of an agreement on investment facilitation for development, for example. Some WTO members, spearheaded by the EU, were able to agree on a workaround to the Appellate Body crisis by creating the Multi-Party Interim Arbitration Appeal (MPIA) mechanism but this is only a temporary solution and still has not received significant uptake by the WTO membership as yet.
Without doubt, the WTO remains at a cross-roads which puts the efficacy and future of the rules-based multilateral trading system at stake. What direction the WTO will take hinges a lot on what will be the incoming Biden/Harris administration’s approach to these issues.
3. US Election – A reverse course in US trade policy?
Come January 20, 2021, President-elect Joseph R. Biden will be the new President of the US and Vice President-elect Kamala Harris, the daughter of Indian and Jamaican parentage, will be the VP. President-elect Biden has openly embraced a return to multilateralism, a stark departure from the ‘America-first’ policies pursued by his predecessor.
On China, however, there might not be much policy divergence between the Biden and Trump administrations, at least not initially. The nomination of Taiwanese-American attorney and chief trade counsel for the United States House Committee on Ways and Means, Katherine Tai, as the next US Trade Representative (USTR) demonstrates that China will be an important policy issue for the incoming Biden/Harris administration. Ms. Tai was formerly the USTR’s chief counsel for China trade enforcement, signaling a possible continued hard-lined stance towards China under the administration.
Importantly, as noted previously, it remains to be seen what will be the incoming Biden/Harris administration’s approach to the current crises facing the WTO, including the WTO DG and Appellate Body issues.
4. RCEP Signed
China, Japan and South Korea – three of the countries in Asia with which the Caribbean has the most trade with that region – were among the signatories on November 15, 2020 to the long-awaited Regional Comprehensive Economic Partnership (RCEP) agreement on the sidelines of the virtually held 37th Association of South East Asian Nations (ASEAN) summit. RCEP is the first mega-regional trade agreement (MRTA) to be concluded since the Trans-Pacific Partnership (TPP) was signed in 2016. The benefits of RCEP to the parties extend beyond merely lowering tariffs. Although, some parties to the RCEP agreement already have FTAs with each other, RCEP will streamline customs procedures, converge rules of origin requirements and promote regulatory harmony across the fifteen parties. India, notably, has not signed on to the agreement, having pulled out of the negotiations last year. As Caribbean countries seek to expand and diversify their trade with non-traditional partners, such as with those in the Asia-Pacific region, the region should consider what possible opportunities RCEP might pose for Caribbean-Asia/Pacific relations.
5. Post- Brexit Negotiations: Still no deal
The UK’s departure from the EU on January 31 this year triggered an eleven month transition period due to end December 31 and during which time the UK remains in the EU customs union and single market and is bound by EU rules as if it were still an EU member.
As at the time of writing this article, the UK and EU are still in the throes of negotiations to conclude a trade agreement which would ensure a smooth transition, especially for UK and EU businesses reliant on EU-UK trade. The negotiations will continue this Monday after another deadline (Sunday) was missed. The talks are reportedly hung up on three main issues: fishing, ‘leveling the playing field’ and governance. Both the EU and UK have announced contingency measures in the event of a ‘no deal’ scenario.
From January 1, 2021, the UK will no longer benefit from EU third country agreements. In order to maintain preferential access to those markets, the UK has been signing roll-over agreements, largely replicating the provisions of the existing EU agreement with that third State. The UK signed a similar agreement with CARIFORUM countries – the UK-CARIFORUM EPA – which rolls over the provisions of the EU-CARIFORUM EPA (which remains in force for CARIFORUM and the EU-27 countries) to ensure that CARIFORUM firms and traders would have continued preferential access to the UK market and vice versa.
6. UNCTAD XV postponed to April 2021
UNCTAD XV, which was due to be hosted this year in Barbados, has been postponed to October 2021 due to uncertainty surrounding the COVID-19 pandemic. Barbados would be the first small State to host an UNCTAD quadrennial. Hosting and chairing the UNCTAD XV will give Barbados the opportunity to influence UNCTAD’s global trade and development agenda for the next four years and will definitely be a space to watch in 2021.
7. Post-Cotonou agreement reached between EU and ACP
On December 3, negotiators from the European Union (EU) and the Organisation of African, Caribbean and Pacific States (OACPS) (formerly known as the ACP) finally reached a twenty-year post-Cotonou partnership agreement. Though the post-Cotonou Partnership Agreement is not a trade agreement, it is an overarching framework for the relationship between the EU-27 and the 79 members of the OACPS and covers issues such as human rights, sustainable development, the environment, among other things. The agreement will be signed later in 2021. The OACPS, whose name was changed and a revised Georgetown Agreement adopted at its December 2019 meeting, is currently embarking on a restructuring to make the organisation ‘fit for purpose’.
We look forward to monitoring these developments in 2021.
Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. All views herein expressed are her personal views and should not be attributed to any institution with which she may from time to time be affiliated. You can read more of her commentaries and follow her on Twitter @LicyLaw.