Protectionism in a Pandemic: Does It Make Sense?

The first phase of the COVID-19 pandemic brought a new wave of trade controls, as countries imposed new barriers against trade in vital supplies such as masks and ventilators.  Now as the COVID-19 pandemic enters its next phase – as the disease recedes in some populations, and attacks others with new ferocity – a simple but critical question has come into focus:  do trade barriers make sense in a pandemic?

One striking aspect of the pandemic has been the global supply chain needed for supplies essential to fight the virus.  In an April 2020 report, the World Trade Organization highlighted the global sources for medical supplies, and the World Health Organization and other international organizations have stressed the need for international cooperation in fighting the COVID-19 pandemic.

Zornitsa Kutlina-Dimitrova

Concerns over new protectionism in the United States arose earlier this year, when the Trump administration signaled that the United States might withdraw from the WTO Government Procurement Agreement (GPA) in response to a GAO study which suggested that European exporters enjoy lop-sided access to the federal procurement market.  Lucian Cernat and Zornitsa Kutlina-Dimitrova, trade economists at the European Commission, have responded that the U.S.-EU trade balance in procurement, if read broadly, is actually much more favorable to the United States. 

Robert Anderson

Robert Anderson (previously at the WTO) has pointed out that leaving the GPA could do permanent damage to the postwar trade regime in procurement, and Jean Heilman Grier (a former staffer at the Office of the U.S. Trade Representative who has written extensively on the GPA) has argued that leaving the GPA could severely disadvantage the United States in future trade negotiations.  [Editor’s note: Robert Anderson’s assessment of the flexibilities already available to member parties in times of crisis is available here:  Keeping markets open while ensuring due flexibility for governments in a time of economic and public health crisis: the role of the WTO Agreement on Government Procurement (GPA).] The U.S. business community (including the National Foreign Trade Council) has also lodged strong objections to leaving the GPA. Perhaps as a result of the many voices of opposition, the Trump administration’s initiative to leave the GPA has quieted, at least for now.

Jean Heilman Grier

Another potential Trump administration initiative would impose new trade controls to force pharmaceutical companies to bring their production to the United States.  This initiative, long pressed by senior White House trade advisor Peter Navarro, appears to have faded as well.

The Trump administration instead took a focused approach to trade controls, when on April 10, 2020 the Federal Emergency Management Agency imposed export controls under the Defense Production Act on personal protection equipment, including certain masks and gloves.  At the same time, companies such as 3M were being savaged by President Trump for shipping emergency supplies abroad, even when (as 3M made clear) those shipments might be critical to other countries’ efforts to fight the pandemic.    

Tom McSorley

But even the Trump administration’s most aggressive export controls, such as those aimed at Iran, Cuba, Venezuela and other sanctioned nations, will not necessarily block life-saving supplies.  As Tom McSorley and his colleagues have pointed out, exceptions built into the U.S. export regime will still allow humanitarian supplies to reach Iran and other nations under U.S. sanctions.  The FEMA ban on exports of PPE also allows for exceptions – under FEMA’s approval – for humanitarian purposes, Tom McSorley and his colleagues have noted. [Editor’s update: FEMA’s exceptions to the export ban — including a blanket exception for shipments to Canada and Mexico — are published in draft form here.]

Even more striking was the Trump administration’s decision to waive certain import controls – long the heart of Trump’s “Buy American” rhetoric – on vital items in short supply, from N95 masks to bleach. In normal times, the U.S. General Services Administration, which runs “schedule” contracts used by federal agencies for tens of billions of dollars in annual sales, complies with the Trade Agreements Act (TAA) by banning supplies from countries that have not entered into free trade agreements with the United States (“non-TAA” countries).  Because of acute shortages in fighting the pandemic, however, GSA has temporarily lifted that ban for certain supplies.  [Editor’s note: Jean Grier’s summary of this development is at Perspectives on Trade:  ‘US Temporarily Lifts Procurement Ban’] The Trump administration’s abrupt volte face suggests that trade controls can raise dangerous barriers in times of crisis.

Even more striking was the Trump administration’s decision to waive certain import controls – long the heart of Trump’s “Buy American” rhetoric – on federal procurements of vital items in short supply

Simon Evenett – University of St. Gallen (Switzerland)

U.S. trade controls in the pandemic are part of a broader trend around the world, as nations try to reshape trade flows to husband supplies needed to address the COVID-19 disease.  Those trade controls, which Simon Evenett of the University of St. Gallen calls “sickening-thy-neighbor” measures, raise serious humanitarian and political questions now that some countries no longer need equipment that is desperately sought in other nations.  With the pandemic receding, New York will now share ventilators it no longer needs with Maryland and Ohio; should the United States do the same for Senegal, or for new hotspots such as Sweden?  And what role should international institutions, such as the WTO, the World Bank and the OECD, play in facilitating international cooperation rather than trade barriers – global cooperation, as Laurence Folliot Lalliot has argued, that will be needed to save lives. (An update: EU Commissioner Phil Hogan on April 16, 2020 called for a temporary international ban on tariffs for vitally needed COVID-19 supplies, and made clear that European Union cannot “on-shore” its manufacturing in the long term — it will continue to rely on an international supply chain for key medical supplies.)

Laurence Folliot Lalliot – University of Paris Nanterre

Solving that puzzle – weighing protectionism in the pandemic – may require a new set of policy metrics.  Zornitsa Kutlina-Dimitrova of the European Commission has argued that trade restraints make little sense when weighed against the secondary economic effects (e.g., the industrial atrophy, the isolation from innovation) that trade controls cause.  Her research bears special attention now, when human lives – not just dollars – weigh in the balance.

Editor’s note:  Join a free GW Law webinar on Tuesday, April 21, 2020 at 9:00 ET/14:00 UK/15:00 CET/21:00 CST.  Simon Evenett, Robert Anderson, Jean Heilman Grier, Tom McSorley and Zornitsa Kutlina-Dimitrova (invited) will convene before a worldwide audience to discuss “Protectionism in the Pandemic.”  The program will be moderated by Laurence Folliot Lalliot, Vanessa Sciarra of the NFTC and Christopher Yukins.  Program information and registration.

Fighting Fraud in COVID-19 Sourcing – Webinar – April 9, 2020

A new threat has emerged in the pandemic:  fraud in the supply chain for critical COVID-19 supplies.  Governments the world over are fighting back against price gouging and defective supplies.  What tools are available, and will they work?  Join a free one-hour webinar with GW Law, as experts discuss these critical global developments in anti-corruption and procurement.

April 9, 2020, 9 am ET/15:00 CET/21:00 CST

Presented with the kind cooperation of the International Anti-Corruption Academy (IACA)

Program Recording –Instructions on Using Auto-Captioning in 100+ Languages

Register here

Panelists

Michael Bowsher QC – Monckton Chambers / King’s College, London (London)

Thomas Hendrix – GW Law / Decisive Point (New York)

Aris Georgopoulos — University of Nottingham (United Kingdom)

Rocco Burdo, Head, Analysis and Research Section, Intelligence Office, Anti-Fraud and Controls Department, Customs and Monopolies Agency (Italy)

Jessica Tillipman — GW Law (Washington)

Mihály Fazekas – Central European University (Budapest) DIGIWIST Report

Paul Whittaker – OECD (Paris) OECD – Corruption in Procurement

Moderators:  Christopher Yukins, GW Law School (Washington); Jean-Bernard Auby (Professor emeritus, Sciences Po Law School (Paris)); Gabriella Racca (University of Turin); Laurence Folliot Lalliot (University of Paris Nanterre (joining from Dakar))

Registrants from 40+ Countries and Territories

Resources on COVID-19 and Public Procurement

Previous Webinars

Public Contracts and the Coronavirus – Online Colloquium – March 24, 2020

The international procurement community is grappling with the COVID-19 coronavirus and its effects. To learn from procurement leaders in Europe and the United States how agencies and contractors are responding, GW Law held a free online colloquium (Zoom webinar) on Tuesday, March 24, 2020, at 12 noon ET.  

Click here to register

Session recording available here or by clicking below

Public Contracting and COVID-19 Webinar – Recording

Topics

  • Emergency procurement in Europe
  • U.S. preparation and workforce issues
  • Work stoppages and delays under the Federal Acquisition Regulation
  • Claims and supply chain impacts in the U.S.
  • Healthcare, grants and new contracting opportunities under stimulus legislation

Panelists

Moderators: Professors Christopher Yukins (GW Law) and Gabriella Racca (U. Turin).

Times

  • Pacific US – 9:00
  • Mountain US – 10:00
  • Central US – 11:00
  • Eastern US – 12 noon
  • United Kingdom/Ireland – 16:00
  • Central European – 17:00

Please note that the U.S. had already experienced a seasonal time change; Europe had not.

Resources on COVID-19 and Public Procurement

The program was attended by over 250 people, with registrants from more than 35 countries (identified here) spanning four continents.

European and Australian Defense Procurement — Legal Perspectives

Wednesday, February 19, 2020, 9 am – GWU Law Learning Center – Room LLC006 – 2028 G Street NW

Join Andrea Sundstrand (Stockholm University) and Colette Langos (University of Adelaide) to discuss developments in Europe and Australia in defense procurement. Professor Sundstrand will discuss how defense procurement is treated under European law, including under the leading decisions of the Court of Justice for the European Union. Colette Langos will present a “snapshot” of the law and policy landscape surrounding Australian defense procurement. The session is free, and light refreshments will be served.

Session will be held downstairs at the GWU Law Learning Center, 2028 G Street NW

One Week in March. Two European Conferences on Public Contracts.

London – March 16, 2020

GWU Law is a proud supporter of two international conferences on emerging issues in transatlantic public contract administration, at King’s College, London on March 16 and at the University of Warsaw on March 18. Both conferences are free.

Warsaw – March 18, 2020

ABA Committees To Hold Joint Meeting on Developments in International Debarment – February 13, 2020 – Call in

Jessica Tillipman, GWU Law School – Co-chair, ABA SIL Anti-Corruption Committee

On February 13, 2020, at 12:00 noon ET, the American Bar Association (ABA) Section of International Law (SIL) Anti-Corruption Committee will join with the ABA Public Contract Law Section (PCLS) Suspension and Debarment Committee, for an informal lunchtime session on developments in international debarment. The session will be moderated by Assistant Dean Jessica Tillipman, George Washington University Law School, Washington DC.

Christopher Yukins, George Washington University Law School (who co-teaches courses on anti-corruption with Dean Tillipman), will discuss emerging international models for debarment, and the impact that new electronic marketplaces may have on debarment globally.  With regard to the U.S. experience, he has drafted a book chapter with John Pachter and Jessica Tillipman, for a forthcoming book on compliance by Cambridge University Press.  Professor Yukins has also co-written a piece with Professor Michal Kania (U. Silesia – Katowice), comparing debarment in the United States and the European Union.

Pascal Friton, BLOMSTEIN, Berlin

Pascal Friton, a partner in the BLOMSTEIN firm, Berlin, will discuss how the European Union’s member states are addressing exclusion and debarment, drawing on a piece he presented at the Thomson Reuters Government Contracts Year in Review in February 2019.  He also will be speaking on the afternoon of Tuesday, February 18, 2020 at this year’s Year in Review conference.

Collin Swan, World Bank

Collin Swan, of the World Bank’s Office of Suspension & Debarment, will discuss his office’s debarment survey and the office’s ongoing research into other debarment systems (beyond the United States and the World Bank).  See his FCPA Blog post on the survey.

Additional resources

Grace Sullivan, GWU Law

Grace Sullivan, a third-year student at the George Washington University Law School, recently won first prize in the Public Contract Law Journal annual writing contest for her note (which was also accepted for publication in the Journal). Her note analyzes three case studies of foreign contractors debarred by the U.S. government: Chinese telecommunications giants ZTE and Huawei, and Russian cybersecurity firm Kaspersky.  Ms. Sullivan will be presenting on her note at the March 2020 ABA PCLS Federal Procurement Institute in Annapolis, MD.

Dial-in Information:

If you are calling from the US, here are your instructions:

US Dial-in Number (local toll): (515) 606-5440

Access Code: 509353

If you are calling from outside the US, here are your instructions:

International local-toll dial-in numbers:  https://www.freeconferencecall.com/wall/sil_anticorruption/

Link to connect to call via computer: join.freeconferencecall.com/sil_anticorruption

Colloquium – Transnational Procurement – Turin, Italy – February 5, 2020

Turin colloquium, 5 February 2020

Professor Gabriella Racca hosted a colloquium on transnational procurement at the University of Turin on February 5, 2020. The discussion focused on a new book, Joint Public Procurement and Innovation: Lessons Across Borders (G. Racca & C. Yukins, eds., 2019). Further information is included in the accompanying flyer.

Gian Luigi Albano

Public Contracts in Legal Globalisation — Project on Contract Administration Disputes — Presentation on December 13, 2019

Professor Chris Jansen (VU Amsterdam) and Professor Patricia Valcárcel Fernández (University of Vigo), members of the academic consortium Public Contracts in Legal Globalisation, are undertaking a detailed (and quite interesting) study of contract administration law in the European Union, to assess the relationship between competition and contract administration.  They presented on this project at the consortium’s meeting at the University of Paris – Nanterre (La Defense campus) on December 13, 2019. They describe their project as follows:

Chris Jansen – VU Amsterdam

This project seeks to investigate, problematize, and clarify the possible interaction between the competition interest, as well as its regulation, inherent in competitive tendering on the one hand, and the execution of public contracts and concession contracts on the other. The project is based on the assumption that the particular factual and legal context of competitive tendering must be taken into account by the courts when they apply rules of substantive law in order to resolve issues related to the execution of contracts. If this assumption turns out to be correct, it would further mean that the resolving of issues by the courts could, in its turn, have an impact on the competition interest. If that is indeed proven to be the case, the results of the project could be relevant for the further debate on public procurement regulation. 

Based on the aforesaid assumptions, this project seeks to answer the following three research questions. (1) In the event that a national court of law must resolve issues regarding the execution of a public contract or a concession contract by applying rules of substantive law (general administrative law; general private law; common law, depending on the legal system concerned), will the court take into account the particular factual and legal context of the competitive tendering procedure? If so: how will the court do this? If not: why not? to indicate those rules that relate to the award of public contracts and concession contracts by means of competitive tendering procedures. Another factual difference relates to the bargaining power of the parties involved in the two situations. In the second situation, it is possible – although not necessarily so – that the two private parties will have had equal bargaining power when they negotiated the content of their contract. In the first situation, however, it is inherent in the competitive tendering procedure that the contracting authority will have had the power to dominate the content of the subsequent contract.(2) To what extent is it possible to problematize and/or unify the various approaches that are found in the answers to question (1)? (3) Based on the aforesaid analysis, to what extent is it possible and necessary to give recommendations to national courts, legislators and perhaps even the supranational legislators (e.g. the European Union) as regards the subject matter?  

As the project description suggests, this study relates directly to what may the next wave of reform in procurement in the European Union — a critical reassessment of public contract administration law (and forums), which is also a focus of the upcoming March 16, 2020 symposium at King’s College, London.

The full project description is included below.

Principles of Public Contracts in Europe – Conference at University Paris Est Créteil

On December 12, 2019 the University Paris Est Créteil hosts a conference on principles of public contracts in Europe, coordinated by Professor Stéphane de La Rosa, University Professor and Director of the Research Team MIL (Markets, Institutions and Liberties).

Panel III

Martin Raz – Havel & Partners – Czech Republic

Panel IV

Steven Van Garsse, Professeur à l’Université de Anvers (BE), Professor of Public Law – University of Anvers/Hasselt, on Principles of efficiency and effectiveness

Romélien Colavitti, Senior  Lecturer  in Public  Law – University of Valenciennes,  on The principles  governing  alternate modes of dispute resolution

Carole Cravero, PhD student University of Turin and University of Paris-West Nanterre, on The Principles of Corporate Social Responsibility and Public Contracts

Vincent Bouhier, Senior  Lecturer  and Dean – Evry-Paris Saclay University,  The Principle of Reciprocity 

Lt Col Daniel Schoeni, Judge Advocate, U.S. Air Force; PhD Candidate, University of Nottingham, Is the practice of negotiation in public contracts a common principle?

Christopher Yukins, Lynn David Research Professor of Government Procurement Law, George Washington University Law School; moderator

Tbilisi, Georgia: Impact of Corruption in Public Contracts – an International Dialogue and Exchange of Experiences

Tbilisi, Georgia

On October 28, 2019, a training session was held in Tbilisi, Georgia on anti-corruption efforts. The session was convened by the European Union’s “twinning” project, “Strengthening Public Procurement Practices in Georgia,” and moderated by Ms. Dana Mitae, Legal Advisor and Consultant for the Department for Consulting, e-Procurement and International Affairs, Federal Procurement Agency of Austria, Austria. The session built on Georgia’s Association Agreement with the European Union, which calls in Chapter 8 for Georgia to incorporate important elements of the European Union’s procurement directives into Georgia’s own laws and institutions. The session was opened by Mr. Levan Razmadze – Chairman of State Procurement Agency of Georgia, and outside experts included Prof. Christopher Yukins, George Washington University (USA), Mr. Mihai Dragutescu, President of the Senate for Administrative Cases (Romania), and Ms. Maja Kuhar, President of the State Commission for Supervision of Public Procurement Procedures, Zagreb (Croatia).

Mihai Dragutescu, President of the Senate for Administrative Cases (Romania)

Reference Materials

EU-Georgia Association Agreement