COVID teaches hard lessons about trade policy


A long-delayed meeting of World Trade Organization (WTO) ministers scheduled for today has been postponed again due to the omicron variant of COVID-19. However, the need for a trade policy is only growing stronger with the latest development of the pandemic.

When the meeting is postponed, trade ministers will have to deal with the radical change in the political measures taken by member states in response to the existential health and economic crises caused by COVID-19 and the clear need to do more.

Before the latest epidemic, the United States, Europe and other wealthy countries provided billions in subsidies to private companies and launched industrial policies in sectors ranging from medications and semiconductors for electric vehicles. These policies deviated from — and potentially violated — market-oriented free trade and investment rules. At the same time, free trade rules have not prevented countries from export blocking vaccines and other vital products.

So what can the international community learn from this experience as we try to weather a pandemic that still rages across much of the world and try to build more resilient supply chains? Are there lessons for trade policy in the massive government interventions that have been deemed necessary? And have the rules of the WTO and other trade agreements helped or hurt national responses to the pandemic?

To answer these questions, a group of experts from Boston University’s Global Development Policy Center and I searched databases of government policies affecting cross-border trade or investment, focusing on a sample of six major countries: the United States, Germany, France, China. , South Africa and India. In our new reportwe review the measures taken, assess whether they are in line with existing international rules or may be subject to international challenge and assess whether trade rules need to be changed to allow countries policy space to respond to global crises such than pandemics.

To begin with, we found that subsidies were the most common form of intervention, including direct equity investments and a wide range of financial grants and other state aid to support national enterprises in the health sector and the economy in general. All countries in the study have implemented restrictive trade measures, including anti-dumping, export or import restrictions.

The United States has implemented the most measures of all the countries studied, relying mainly on subsidies. India and South Africa relied more on trade constraints, such as tariffs and quantitative restrictions, reflecting their more limited fiscal space. Perhaps a surprising outlier, China implemented the fewest new trade-related policies during the pandemic, which may suggest it had existing measures in place and available to deal with the health and economic effects of crisis. In this sense, Western policies have become more interventionist, like those of China.

Another striking finding is that despite extreme shortages of essential medicines and vaccines during the pandemic, none of the countries studied issued compulsory licenses to allow domestic production when patent holders refused to voluntarily authorize production. . WTO members OK in 2001 to allow compulsory licensing after earlier fights for access to lifesaving drugs and it would seem an obvious first step for a country trying to manage a pandemic. However, the patent landscape makes the process complex and difficultwith many COVID-19 products covered by multiple patents filed in different countries, compounded by frequent opposition from governments where patent-holding companies are based.

Our report outlines the specific trade and investment rules that impose constraints on each type of policy intervention used by the countries in the study and notes that those who take such measures can always be challenged in international courts. by other governments, investors or property rights holders. Indeed, once the pandemic subsides and existing companies seek to consolidate or expand their market share, WTO disputes, domestic investigations and countermeasures are likely. In particular, countries try to build strengthen their long-term resilience by supporting their national and other pharmaceutical industries will find themselves constrained by rules which do not allow them to harm established industries in other countries or give preference to domestic producers. The more successful they are in launching new national industries or expanding them, the more likely they are to become bogged down in lengthy and costly legal disputes.

Shifts in priorities during an acute crisis like a pandemic show that the commitment to the current global trade regime is not set in stone. Lessons learned should be used to change the rules that hinder appropriate responses to the crisis and efforts to build resilient health systems and fairer and safer economies – before the next crisis hits.

When the WTO finally convenes, ministers should consider immediate policy measures to end the pandemic, including adopting a broad waiver WTO intellectual property rules for products related to COVID-19 tests, treatments and vaccines. Along the same lines, high-income countries should leverage their research and financial contributions to vaccine development and high levels of demand to force reluctant pharmaceutical companies to share data and technology with companies in developing countries to ensure sufficient, timely and affordable medical products to end the pandemic everywhere. We also propose actions to remove barriers faced by countries trying to build health resilience, economic development and long-term equity. For example, existing exceptions allowed under WTO trade rules should be broadened to provide explicit exceptions for measures implemented in pursuit of full employment, economic security and social equity.

The experience of the pandemic has made it clear that the existing balance in trade and investment regimes between government policy space and private sector prerogatives has tilted too much towards the latter. To correct this, the constraints on governments should be reduced to enable policies that support public health and greater resilience, equity and sustainability in individual economies and in the global system as a whole. This will require changes both at the global institutional level and in the national policies of each country.

The arrival of omicron delayed the WTO ministerial meeting, but made it overwhelmingly clear that the lessons of COVID-19 must be learned and applied to global trade rules.

Sandra Polaski is a senior fellow at Boston University’s Center for Global Development Policy.


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