Regulatory cooperation to handle the pandemic

The world is experiencing an unprecedented interruption in the global supply chain during the Covid-19. The challenge gets aggravated during emergencies when there is a need to maintain speedy and seamless flows of essential goods across borders. During such an emergency, a neighbouring country can come forward first to meet the emergency demands of a country in trouble. 

Many countries often take temporary, sometimes drastic emergency trade-related measures such as export restrictions. While seemingly necessary to protect public health, such restrictions can be counterproductive, depriving the most vulnerable countries of access to essential products. Unfortunately, around 80 countries worldwide have shut down their borders with neighbouring countries, causing immense suffering.

During normal situations, imported goods undergo multiple inspections to verify conformity with the destination country's standards and regulatory requirements. When standards and regulations in the destination country differ from those in the home country, a situation commonly referred to as "regulatory divergence," there could be high-cost implications for businesses, with a significant slowdown in trade. 

This has prompted different organisations to come up with some suggestions to face the challenge of a pandemic like the ongoing Covid-19. United Nations Conference on Trade and Development (UNCTAD) calls for new and innovative approaches to bridge the divergence of regulatory practices. Increasing "regulatory cooperation" among countries could be an efficient way to achieve it.

Regulatory cooperation can be achieved through multiple actions, such as enhancing better information exchange and creating a joint committee to implement chapters on sanitary and phytosanitary measures and technical trade barriers. It may also entail aligning with international standards, treating other parties' standards as equivalent, among others.

UNCTAD has suggested regulatory cooperation for smooth delivery and reduction of trade costs, particularly through cutting high information costs and shortening the lengthy process of conformity assessment. But they haven't undermined policy objectives such as protecting health, safety and the environment.

According to UNCTAD estimates, such cooperation provides countries with an opportunity to minimise the negative impact of national regulatory measures on trade, particularly in times of emergencies. It can reduce trade costs by over 25%.

The different organs of the UN are also considering a permanent option to face disruption of supply of essential goods and medical supplies for such recurring pandemic situations. A Regional Trade Agreement (RTA) is the best option to address such a crisis. 

The UN Economic and Social Commission for Asia and the Pacific (ESCAP) secretariat conducted a rapid review of bilateral and RTA texts.  The study found that RTAs include clauses to permit exceptions to the agreements in time of emergencies, but for the most part, they do not feature provisions that could help deal with trade disruption in emergencies or crises. To address this gap, an initiative aims to develop model provisions to promote more trade cooperation and predictability in times of crisis and pandemic – and speed up recovery.

RTA can enhance regulatory cooperation through simple efforts such as increasing transparency and enhancing consultations among cross-border regulatory agencies. Also, more complex undertakings such as mutual recognition and harmonisation of standards and conformity assessment procedures can enable countries to trade better during emergencies. RTA may include specific provisions such as emergency provisions to expedite trade in pandemic and ensure disharmonised standards and regulatory requirements do not hinder trade. 

UNCTAD studied 107 RTAs and their application during Covid-19. They also examined the efforts of nine countries to reduce regulatory divergence to facilitate trade in medical goods during the pandemic. 

A large proportion of existing RTAs put forward provisions for mutual recognition, equivalence, and/or harmonisation with the other parties' or international standards, including conformity assessment procedures. These RTAs have a good base to build upon. 

Unfortunately, many of these provisions are vaguely worded. There also lacks provisions promoting regulatory cooperation specifically for medical goods or "emergency-specific" situations.

Caption: Disruptions in global trade caused shortages in the supply of essential goods during recurring phases of the pandemic. PHOTO: REUTERS

UNCTAD studies point towards the need to incorporate specific, temporary, or emergency provisions into RTAs that can facilitate regulatory cooperation and ensure that trade in medical goods flows unhindered during crises. Such ready-to-apply regulations and action plans would reduce uncertainty during the already difficult times.

The study makes some proposals to overcome the shortcomings. The RTAs should clearly define a situation of "public health emergency" or a "shortage" of essential goods. This is essential to classify, at a tariff line level, "essential" goods that could be critical during an emergency; to agree to adopt international standards as a basis for regulatory cooperation; to treat as equivalent standards of jurisdictions with similar regulatory frameworks, among others. Specifying a start and an end date of such temporary measures would help provide more legitimacy to the provisions.

The state parties to RTA have another obligation to other member countries. They should be consistent with their obligations under the World Trade Organization Trade Facilitation Agreement, expedite and facilitate the flow and transit of all products listed in Annex I and Annex II through their respective sea and airports. 

Also, they should eliminate all customs duties and all other duties and charges of any kind, within the meaning of Article II and clause 1(b) of the General Agreement on Tariffs and Trade 1994 ("GATT 1994"), for all products listed in Annex I. And the countries should endeavour to expedite the release of such products upon arrival, including adopting or maintaining procedures allowing for submission of import documentation and other required information. 

RTA should make an option to abide by the WHO's International Health Regulations (IHR) to allow free pratique to cargo ships – i.e., the permission to enter a port, discharge or load cargo or stores.

RTA may also incorporate a clause to uphold the declaration facilitating the emergency delivery of medical and essential products of the Council of the International Civil Aviation Organization (ICAO), at its Fourth meeting of the 219th session held on 9 March 2020. 

Members of RTA should cooperate with each other by granting free pratique to inspection, and, if a source of infection or contamination found on board, the carrying out of necessary disinfection, decontamination or other measures necessary to prevent spread of the infection or contamination, pursuant to the IHR.

Trade policies reform will therefore be an essential instrument in the management of the crisis. Trade in both goods and services will play a key role in overcoming the pandemic and limiting its impact by providing access to essential medical goods. Smooth trade can ensure access to food throughout the world. It can provide farmers with necessary inputs such as seeds, fertilisers, pesticides, equipment, veterinary products for the next harvest. 

Trade reforms, such as tariff reductions, can reduce the cost and improve the availability of Covid-19 goods and services. The reduced tax and administrative burdens on importers and exporters shall reduce the cost of food and other products. This will contribute to the macro-economic measures introduced to limit the negative economic and social impact of the Covid-19 related downturn. Trade reform can support the eventual economic recovery and build resilience to future crises. 

Bangladesh may pursue SAPTA and APTA members to incorporate different provisions to ensure a smooth supply of essential products and medical supplies to meet the future pandemic crisis. 

The author is a legal economist and can be reached at e-mail: [email protected].

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.