[Ip-health] The Economist: New trade barriers could hamper the supply of masks and medicines

Thiru Balasubramaniam thiru at keionline.org
Sun Mar 15 21:58:26 PDT 2020


Sanitary cordons
New trade barriers could hamper the supply of masks and medicines

Common-sense curbs to deal with covid-19? They may be costly

Finance and economics
Mar 11th 2020

IT IS BAD enough when individuals stockpile pasta and toilet paper. It is
worse when governments put a protective ring around medical equipment. As
the covid-19 pandemic leads to a rush for medical gear, the World Health
Organisation (WHO) has warned that supplies of respirators and medical
masks will not keep up with demand, and soon global stocks of gowns and
goggles will be insufficient too. Some governments are erecting trade
barriers to safeguard their supplies. According to a new report from Global
Trade Alert, a trade-policy monitoring service at the University of St
Gallen in Switzerland, by March 11th 24 countries had restricted exports of
medical equipment, medicines or their ingredients.

The stockpiling started early. The Chinese government bought up masks
produced in the country as the virus raged, leaving foreigners with
unfulfilled orders. On March 3rd France’s president, Emmanuel Macron,
announced that the state would seize all masks, restricting sales abroad.
German companies need their government’s approval to export respirators,
even within the European Union. South Korea has banned the export of masks
and of materials used to make respirators. Countries with few coronavirus
sufferers so far, including Russia (20 cases by March 11th), Bulgaria (six)
and Morocco (five), are applying restrictions too.

The urge to ensure citizens have what they need is understandable. It also
makes sense to give priority to health-care workers who are tending to the
sick. It is possible that a completely free market will not do the trick.
Jens Spahn, Germany’s health minister, told a meeting of his EU colleagues
on March 6th that supplies were not going to where they were most urgently
needed, but to where people were paying the most.

The trade barriers pose serious risks, however. The first is that
stockpiles in one place can stop supplies getting to others. Jennifer
Ehrlich of 3M, a diversified conglomerate that is one of the biggest
manufacturers of respirators, says that the company has increased
production to meet higher demand. However, because manufacturing is
regionalised, trade restrictions stop supplies getting swiftly to where
they are most needed.

The second is that export limits “dilute incentives to ramp up output,”
says Simon Evenett of the University of St Gallen. This could exacerbate
global shortages. He suggests that if governments simply offer to pay more,
rather than erecting barriers, they will secure the supplies they need.

A third risk is that trade restrictions start a vicious cycle and generate
pressure for even more of them. When developing countries used export
restrictions to cope with high food prices in the late 2000s, there was a
cascading effect, as other governments responded with supply restrictions
of their own, further fracturing markets. According to Global Trade Alert,
export curbs have accelerated as the coronavirus has spread. The most
recent came from Ukraine on March 11th “to prohibit export of anti-epidemic
goods” until June 1st. More countries are reportedly considering controls.

Despite calls from the WHO for countries to work together to ease the
problem, this is proving difficult even within a close-knit trading bloc
like the EU. If there is so little solidarity now, what will happen when
poorer countries with weaker health-care systems are hit?
Beggar-thy-neighbour trade policies never end well.

Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International
41 22 791 6727
thiru at keionline.org

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