In the midst of a rapidly evolving geopolitical climate marked by both trade wars and real wars, the World Trade Organization (WTO) faces the daunting task of defining its role. In a time when maintaining the status quo is a considerable challenge, let alone achieving additional trade liberalization, the WTO grapples with the resurgence of export restrictions, bans, controls, and sanctions, which pose a significant threat to the rules-based trading system.
Export restrictions have been making headlines across various contexts, often triggering responses from trading partners in the form of countermeasures, sometimes conflicting with existing WTO rules. This trend threatens to lead to a dangerous downward spiral.
The WTO’s role in addressing this issue should involve encouraging member states to limit their use of export restrictions and, when necessary, ensure they are targeted and temporary. However, the organization should also venture into uncharted territory and take more proactive steps to protect the most vulnerable countries within the trading system.
Examples of Export Restrictions Export restrictions are not new, but there is concern that they may be increasing in severity. Several examples highlight the challenges faced by the WTO:
- Agricultural Export Restrictions: During the 2007–11 period of surging commodity prices, many countries imposed export restrictions on various agricultural products. These restrictions contributed to further price increases, exacerbating food insecurity. However, they also led to positive outcomes, such as the launch of the Agricultural Market Information System (AMIS) by G20 agricultural ministers, improving global food stock monitoring and reducing uncertainty in the face of crises.
- China’s Raw Material Export Controls: Historically, China has employed policies to restrict exports of raw materials and critical inputs, often in response to domestic price pressures. This created an implicit subsidy for China’s downstream industries, giving them a competitive advantage over foreign competitors. Despite WTO commitments against such export restrictions, China persisted until facing disputes and challenges.
- COVID-19 Vaccine Export Ban (India): In April 2021, India banned exports of COVID-19 vaccines due to a sudden surge in infections domestically. This move disrupted COVAX, the multilateral vaccine distribution initiative, and hindered international efforts to combat the pandemic.
- Russia’s Natural Gas Weaponization: In 2022, alongside its invasion of Ukraine, Russia withheld energy shipments to Europe, creating political-economic pressure on gas-dependent countries. In response, some countries sought to reduce their dependence on critical products from “countries of concern,” such as Russia and China.
- Export Controls on High-Technology Products (USA): The United States and other industrialized economies have imposed export controls on high-tech products for national security reasons. These measures have been introduced both proactively and retroactively in response to security concerns, impacting global supply chains.
Weak Regulatory Framework WTO rules limiting the use of export restrictions are relatively weak. Article XI of the General Agreement on Tariffs and Trade (GATT) allows exceptions for export prohibitions or restrictions temporarily applied to prevent critical shortages, without specifying “essential products.” Additionally, Article XXI provides a national security exception that allows countries to justify policies for the protection of essential security interests.
In the realm of national security, the multilateral trading system developed during the Cold War did not face questions involving export controls and related sanctions as it does today. Consequently, the WTO must explore new avenues to address these challenges.
Possible Roles for the WTO
- Enhanced Market Surveillance and Transparency: Beyond national security, export restrictions often result from a lack of information and fear of market shortages. The WTO can encourage market surveillance and transparency initiatives, akin to AMIS, to reduce uncertainty and the emergence of export restrictions driven by information gaps.
- Alternative Dispute Resolution: Instead of traditional litigation, the WTO could promote alternative dispute resolution mechanisms, such as “non-violation” claims. Adversely affected trading partners could swiftly move to arbitration, where concessions might be made to restore trade balance, aligning with the reciprocity principle and preventing escalation.
- Assistance to Vulnerable Countries: In the context of new sanctions and export controls stemming from geopolitical conflicts, the WTO can support capacity-constrained countries. It can help these nations navigate complex issues, ensuring they do not inadvertently violate sanctions and export control regulations.
- Impartial Assistance and Legal Counsel: Drawing from the experience of the Advisory Centre on WTO Law (ACWL), the WTO can provide subsidized legal assistance to countries with limited capacity and resources. This support can help countries understand their rights and obligations regarding sanctions and export controls, preventing unintended violations.
Looking Ahead As the world faces an evolving geopolitical landscape marked by sanctions and export controls, the WTO must play a role in preserving and advancing the gains from globalization. By aiding countries in compliance with export control regulations, enhancing transparency, and providing impartial legal assistance, the WTO can contribute to minimizing the unintended consequences of these policies and helping developing economies navigate this complex terrain.
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