International trade law consists of a series of multilateral treaties administered through the framework of the World Trade Organisation (WTO), which has 164 members. WTO members include the world’s biggest economies, all of which are bound by the treaties. The underlying aim of the WTO system is to promote international trade by removing barriers to trade – such as tariffs, quotas and other import or export restrictions – and to promote equal treatment of members by prohibiting discrimination between and against other countries.
Many of the initial national responses to COVID-19 including restrictions on travel and export prohibitions on essential medical items are prima facie breaches of WTO agreements, such as the General Agreement on Trade and Tariffs (GATT) and the General Agreement on Trade in Services (GATS). However, these treaties also contain exception provisions allowing governments to balance legitimate public policy needs with trade goals. Actions taken during this time that are aimed at preventing the spread of the disease would qualify as those taken to “protect human health or life” as set out in GATT Article XX(b) and GATS Article XIV(b). As long as countries do not unjustifiably or arbitrarily discriminate in how they apply these measures, no GATT or GATS breach would actually occur.
Discrimination in this context includes treating countries with the same conditions differently; or with different conditions the same. Thus, if responses to COVID-19 properly differentiate based on the status of the pandemic in each country, no discrimination takes place even if the measure applies differently to different countries. If, for example, Australia and New Zealand are successful in not just flattening but squashing the curve and chose to lift restrictions vis-à-vis each other – essentially extending the national bubble to a bubble for two countries – the fact such restrictions are not lifted for other countries less successful in containing the pandemic would not be considered discrimination.
However, as global production plummets, countries are now starting to discuss changes to trade policy that will have effects lasting long after the COVID-19 pandemic is over, seeking to bring manufacturing of products back onshore. International trade law rests on the economic assumption that countries should specialise in the industry they are most efficient at and the treaties disincentivise countries from artificially propping up inefficient domestic industries through the use of subsidies, tariffs or other measures. This, combined with the proliferation of free trade agreements, has seen vast shifts in certain industries. For example Australia no longer has a domestic car manufacturing industry, while the now-abandoned North American Free Trade Agreement is often blamed for the shifting of car manufacturing jobs from the US to Mexico. Of those industries that do manufacture onshore, most have deep vertical global supply chains, sourcing composite parts internationally.
Senior Lecturer, ANU College of Law
Wednesday 29 April 2020