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Global supply chains are key to the COVID-19 battle

For developing countries, especially the poorest among them, trade—both imports and exports—is a powerful, cost-effective tool to mitigate the potentially devastating effects of COVID-19. G20 countries should, therefore, quickly implement trade policies that can protect lives across the world by improving access to affordable medical supplies. Policies that put this access at risk should be restrained. Global cooperation is critical to meeting this challenge.

Trade can also play a key role in the recovery. As COVID-19 wreaks havoc across industries worldwide, G20 countries need to keep supply chains functioning. They should also begin preparing the groundwork for a revitalized global trade framework to help rebuild the world economy.

Adopt trade measures to support health systems

Tariff rates on pharmaceuticals and medical equipment are relatively low, but disinfectants and other personal protective products needed to fight the pandemic still face high tariffs and non-tariff barriers in many countries. Soap, the first line of protection against COVID-19, is subject to a global average tariff of 17 percent, with 72 countries applying import duties in excess of 15 percent. Tariffs on health and hygiene products are a regressive form of taxation that targets the sick.

Eliminating such protectionist measures could also lower the cost of inputs like active ingredients and other chemical products, encouraging domestic investment and production. A starting point is the indicative list of essential COVID-19 medical supplies published by the World Customs Organization. A number of countries have already announced tariff reductions in certain categories of critical medical supplies, albeit temporarily. US tariffs on imports from China risk shortages of ventilators and other medical products.

Facilitate trade in health-related products

Cross-border movement of health-related goods and imported inputs to manufacture these products can be disrupted by lengthy and inefficient customs and border procedures, as well as by logistical obstacles, preventing timely access to critical products. Vaccines, for example, require careful and rapid handling from port or factory to their destination.

China and the European Union have established “green lanes” to expedite inspection and release of goods to avoid such delays, which other countries could also replicate. Building on a five-country initiative led by Singapore and New Zealand, G20 should also keep air and sea freight lines open. To support trade, governments should also keep trade finance flowing and maintain liquidity, as called upon by the private sector.

Expand access to technical standards

Medical gear is typically subject to stringent standards on design, manufacturing, and market placement to protect consumer safety and public health. These rules, however, may unintentionally limit production and access. To overcome this problem, the European Union made freely available its basic standards for certain personal protective equipment and medical devices, lifting the requirement that firms purchase and use European standards according to intellectual property rules.

This step will allow factories to convert their production lines quickly. The European Commission has recommended speedier conformity assessment procedures and market surveillance of these products. Other countries, with limited conformity assessment capabilities, should consider automatic registration of supplies that have met standards in advanced economies.

Allow health professionals to cross borders

In February 2020, two nurses in Wuhan pleaded for health workers from around the world to come to China. China later sent 300 intensive care doctors to Italy. In the United States, New Jersey has authorized the temporary practice of foreign doctors licensed and in good standing in another country.

More such movement of physicians, nurses, and health professionals is needed, especially in poorer countries. Flexible regulatory measures, special visas, and work permits can help. A common international framework to support the temporary movement of health professionals across countries, as called for by India, would facilitate the response to the crisis.

Share knowledge via digital interactions

In the United States, authorities have moved to facilitate telemedicine to screen high-risk patients, communicate and track COVID-19, and manage health care systems. The global health community is turning to digital technologies, data, and cross-border e-health interactions to share evidence and experience. Common rules to support cross-border digital services trade, in particular to provide a trusted environment for digital exchanges in the health sector, could support rapid knowledge sharing and case management.

Do not hinder access to new technologies

Companies across the world are racing to develop diagnostic methods, vaccines, and antivirals for the prevention and treatment of COVID-19, while governments are working to expedite approvals. New technologies—such as 3D-printing respirator parts developed by Italian engineers—can address shortages.

But protection under intellectual property regimes must be balanced against the global significance of the pandemic. New issues will need to be sorted out. Collective action could bring greater certainty to safeguard access by all.

Avoid trade measures that put lives at risk

As of April 4, 2020, 69 governments, including India and the European Union, had banned or limited exports of face masks, personal protective equipment, medicines, and other medical goods. These practices hurt not only importers but also exporters as they raise prices, discourage investment, and provoke retaliation. Some countries have also restricted exports of certain foodstuffs. In the past, similar actions have aggravated food insecurity and increased prices.

The world’s poorest countries are extremely vulnerable to such protectionist policies. Ten exporting countries account for almost three-quarters of world exports of medical goods and nearly two-thirds of world exports of protective gear.

The top three countries exporting medical products critical to fight the pandemic supply 65 to 80 percent of total world imports of those products (see figure). Any restrictions on exports risk leaving most of the world without access to vital supplies, with catastrophic consequences.

Many companies are utilizing global supply chains to increase production of some medical products, but governments could provide subsidies or encourage compacts among companies along the supply route to stimulate production.

International organizations like the World Bank can also facilitate access to supplies for poor countries. Governments should refrain from adopting “Buy National” policies as they are counterproductive and prevent companies from accessing vast foreign supplies.

Keep supply chains moving

A collective G20 response, with regular follow-up mechanisms, is critical to avoid politically appealing but self-defeating trade policies. If global cooperation is impossible, willing countries should step up. The World Trade Organization (WTO), hobbled as it has been lately, provides a forum for countries to agree to refrain from export bans. It can also facilitate an agreement to eliminate tariffs and nontariff barriers on health-related products, expanding on the scope and membership of the WTO initiative on trade in pharmaceuticals.

The WTO could also encourage progress on the other steps mentioned above, including a common framework on cross-border movement of health professionals and a collective understanding that the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights does not limit governments’ actions to safeguard affordable access for new vaccines and drugs.

The post-COVID-19 world economy will require more, not less, global trade cooperation. Global trade rules will be needed to foster investment and trade.

Reforming the WTO has become more pressing than ever to help update rules in line with the dramatic changes brought about by the COVID-19 pandemic. The G20 countries have allowed international collaboration on trade to unravel. They now have a chance to seize on the crisis to sow the seeds for renewed global trade cooperation.

  • Anabel González is Non-Resident Senior Fellow, Peterson Institute for International Economics. This article is part of a series of proposals for the G20’s agenda on the COVID-19 pandemic and first appeared on the Institute’s website.
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Anabel González
Anabel González
Anabel González is Non-Resident Senior Fellow, Peterson Institute for International Economics.

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