COVID teaches tough lessons about trade policy

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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 calculation only grows stronger with the latest development of the pandemic.

When the meeting is rescheduled, trade ministers must deal with the drastic shift in policy actions member states are taking in response to the existential health and economic crises caused by COVID-19 and the obvious need to do more.

Before the last outbreak, the United States, Europe and other wealthy countries provided billions in grants to private companies and launched industrial policies in sectors ranging from medications and semiconductors To electric vehicles. These policies deviated from, and even violated, market-based free trade and investment rules. At the same time, free trade rules have not prevented countries from export blocking vaccines and other life-saving products.

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

To answer these questions, a group of experts from the Boston University Global Development Policy Center and I searched databases on 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 report, we examine 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 room for maneuver to respond to crises. global such as 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 domestic enterprises in the health sector and the economy in general. All of the countries in the study have implemented trade restrictive measures, including anti-dumping, export or import restrictions.

The United States implemented the most measures of all the countries studied, relying mainly on subsidies. India and South Africa have 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 that 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 the extreme shortage of essential drugs and vaccines during the pandemic, none of the countries studied issued compulsory licenses to allow domestic production when patent holders refused to voluntarily allow production. . WTO Members OK in 2001 to allow compulsory licenses after previous battles for access to life-saving medicines and that would seem an obvious first step for a country trying to manage a pandemic. However, the patent landscape makes the process complex and difficult, with many COVID-19 products covered by multiple patents filed in different countries, compounded by frequent opposition from the governments where the patent-holding companies are based.

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

Shifts in priorities during an acute crisis such as a pandemic show that commitment to the current global trade regime is not static. Lessons learned should be used to change the rules that hamper appropriate crisis responses and efforts to build resilient health systems and more equitable and secure economies, before the next crisis strikes.

When the WTO finally meets, ministers are expected to consider immediate policy measures to end the pandemic, including the adoption of a large waiver WTO intellectual property rules for products related to COVID-19 testing, treatment and vaccines. At the same time, 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 technologies with companies in developing countries to ensure sufficient, timely and affordable medical products to end the pandemic everywhere. We are also proposing measures to remove barriers for countries trying to build long-term health resilience, economic development and equity. For example, existing exceptions permitted by WTO trade rules should be broadened to provide explicit exceptions for measures implemented in the pursuit of full employment, economic security and social equity.

The pandemic experience has clearly shown that the existing balance in trade and investment regimes between the political space of government and the prerogatives of the private sector has leaned 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.

Omicron’s arrival delayed the WTO ministerial meeting, but made it clear that lessons from COVID-19 must be learned and applied to global trade rules.

Sandra Polaski is a Senior Fellow at the Center for Global Development Policy at Boston University and is the former Deputy Director General of Policy at the International Labor Organization and the former Assistant US Under Secretary of Labor.


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