Trade Protectionism Won't Help Fight COVID-19 - Global Trade Magazine
  May 6th, 2020 | Written by

Trade Protectionism Won’t Help Fight COVID-19

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  • Germany, the US, and Switzerland supply 35 percent of medical products sold worldwide.
  • The World Trade Organization (WTO) reports that tariffs remain stubbornly high on protective medical gear.
  • The untold story of China is that it depends on Germany and the United States for nearly 40% of its medical products.

Countries around the world are limiting international trade and turning inward, seeking to produce nearly everything — especially medical supplies — themselves.

The Trump administration, for instance, is considering a “Buy American” executive order that would require federal agencies to purchase domestically made masks, ventilators, and medicines. And over two dozen countries — including France, Germany, South Korea, and Taiwan — have banned domestic companies from exporting medical supplies.

The scramble for self-sufficiency in medical supplies and medicines needed to fight the coronavirus is make-believe. It is neither feasible nor desirable, and will only deepen the pain felt amidst this pandemic.

Governments around the world have responded to COVID-19 by imposing export restrictions on things like ventilators and masks. In mid-April, Syria became the 76th country to follow suit. The import side of things isn’t much better. The World Trade Organization (WTO) reports that tariffs remain stubbornly high on protective medical gear, averaging 11.5 percent across the 164 members of the Geneva-based institution, and peaking at just under 30 percent.

This is no way to fight a pandemic.

It’s not that COVID-19 caused this bout of trade protectionism. It’s just that COVID-19 offers up a useful narrative to promote trade protectionism.

The Trump administration, for instance, has been touting its “Buy American” executive order as a move to spur local manufacturing. Canada has also considered going it alone in ventilators and masks, but recently acknowledged it can’t possibly achieve self-sufficiency in medicines. No one can.

The way many governments see it, the only thing standing in the way of greater self-reliance in medical equipment and medicines is the will to pay for it. The story is that ventilators might be more expensive if made domestically, but that’s the cost of going it alone. It’s only a matter of getting Bauer and Brooks Brothers, for example, to make personal protective equipment, rather than hockey gear and clothing.

But there’s a reason Bauer makes skates instead of surgical masks. It’s better at it, and skates are a much more lucrative business. Bauer didn’t misread the market. It’s heartwarming to hear that Bauer is stepping in to help out, but the company knows that making surgical masks in the US is five times more expensive than making them in China. That’s why 95 percent of the surgical masks in the US are imported.

The absurdity of self-sufficiency in medicines is even more glaring. The US is a major exporter of medicines, but the raw chemicals used to make them are imported. Nearly three-quarters of the facilities that manufacture America’s “active pharmaceutical ingredients” are overseas. To reorient supply chains to produce these ingredients domestically would take up to 10 years and cost $2 billion for each new facility.  Consumers would pay at least 30 percent more at the pharmacy.

The last plug for self-sufficiency in medical equipment and medicines is that it’s not a good idea to depend on adversaries to keep us healthy. We don’t. What’s striking about medicines, medical equipment, and personal protective products is that market share is highly concentrated among allies. For example, Germany, the US, and Switzerland supply 35 percent of medical products sold worldwide. True, China leads the top ten list of personal protective products, at 17 percent market share, but the other nine, including the US at number three, are all longstanding allies. To be sure, the untold story of China is that it depends on Germany and the United States for nearly 40 percent of its medical products.

This past week, the WTO and the International Monetary Fund (IMF) called for an end to the folly of trade restrictions during this pandemic. The communique should have — but obviously couldn’t — call out governments around the world for maintaining, on average, a 17 percent tariff on soap. That tariffs on face masks average nearly 10 percent is baffling. That 20 countries in the WTO have no legal ceiling on the tariffs they impose on medicines is unforgivable.

Self-sufficiency in medical supplies and medicines is a political sop. It’s a narrative that can’t deliver anything but misery. If governments want to fight COVID-19, they should spend more time looking at how they’re denying themselves access to medical necessities, and less time on how to deny others the tools to save lives.

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Marc L. Busch is the Karl F. Landegger professor of international business diplomacy at the Edmund A. Walsh School of Foreign Service at Georgetown University and a nonresident senior fellow in the Atlantic Council.