The novel coronavirus has rapidly gone from a local Chinese matter, to a massive global challenge. It has already dealt a huge blow to the global economy, as well as to the livelihoods of our citizens. Global production and trade in goods and services have seen a vast decrease as demand quickly has turned south. Curfews, restrictions on freedom and lockdowns of entire societies have created uncertainty in many sectors of the economy. Worldwide, stock markets are in a slump, and many jobs have already been lost. All of this while the virus is having a detrimental impact on the health of people in risk categories.
It is impossible to say what the consequences of this pandemic will be. The only thing that seems to be certain is that the virus will have a big negative impact on our societies for a foreseeable future. Politicians will face tough decisions at every level of government. Since the spread of the disease is still very much a moving target, we should be sure to follow the advice of responsible authorities — at local, national and global levels. We need to base our decisions on scientific evidence and refrain from policy making driven by panic or fear.
At the same time, it is clear that political action is needed urgently to stymie the crisis as best as possible. This is true also for trade policy. Unfortunately, current trade policies adopted in response to the Corona virus are deteriorating rather than improving the situation, by governments adopting beggar-thy-neighbor-policies.
Since the crisis erupted on a global scale, 24 countries have introduced export bans on medicines and medical equipment. Many countries already prior to the outbreak exercise import tariffs on these goods, as well as on soap, hand sanitizer and other goods urgently needed to tackle the virus. There seems to be little appetite yet for lifting these trade barriers — rather the opposite. Even within the EU, the free movement of goods is challenged by national travel bans. At the Polish border, controls are so lengthy that trucks are reported to be standing at the border for three days. Among those, trucks carrying necessary medical equipment.
This is not the way forward. We need more exchange of these products, not less. The worst thing we can do right now is to block or tax products that can contribute to solving this crisis. We need to stimulate production and distribution of goods necessary to handle the situation. Export restrictions, tariffs and closed borders have the opposite effect. It disincentives production and creates distrust between trading partners. This is especially true on the EU single market. Internal trade barriers undermine the solidarity and cooperation that has made the EU strong. That solidarity will be crucial when we put this behind us, and start working on rebuilding our economy.
Trade should be seen as a tool to stop the spread of the disease, by allowing for medical equipment to be shipped to where it is most needed. If one country manages to control the spread of the virus, it is a win for the entire world. The EU should therefore lift their tariff and non-tariff barriers on products such as medicines, medical equipment, soap and hand sanitizer.
Ironically, these measures have been put in place where one might expect it the very least. For the past year, the US administration has ramped up the trade war with China, imposing high tariffs on a number of goods. Economists all over the world warned that the cost of these tariffs were to be borne by American companies and consumers.
Among the goods that faced higher tariffs was medical equipment. Products that the US today, much like the rest of the world, is in desperate need of. In light of this, the US administration last week decided to temporarily lift tariffs on a range of medical supplies coming in from China, such as masks, examination gloves and sanitized napkins.
The fact that these tariffs were lifted without a big statement on how the administration is putting America First, bears witness of the populist nature of protectionism. Lifting these tariffs are as close to an admission of the flaws of protectionism as we are likely to ever get from the current US administration.
For once, the EU should follow the example of the US. Even if our trade barriers on these goods are much lower than those of the US, we should take all necessary action to make it cheaper for our governments to stop the spread of the virus. We should resist the temptation of raising barriers to trade in these difficult times, especially within the EU.
“What protectionism teaches us, is to do to ourselves in times of peace, what we do to our enemies in times of war”, wrote the economist Henry George already in 1886. As President Macron made clear in his speech to the nation recently, we are currently facing a “sanitary war”. Nations around the world would do good to remember that we are in this war together, not against each other.
Karin Karlsbro, INTA Coordinator
Samira Rafaela, INTA Vice-Coordinator
Barry Andrews, INTA Member
Jordi Canas, INTA Member
Svenja Hahn, INTA Substitute
Urmas Paet, INTA Substitute