By Kimberly Ann Elliott
Trade is way down on the list of priorities in a public health crisis, but it is still important to make sure that policies don’t actually make the situation worse. In the case of the coronavirus pandemic, a number of governments are, unfortunately, doing just that.
Many countries, for example, are shortsightedly enacting export bans on critical medical supplies and worsening shortages in places that may have the greatest need, like Italy. In the United States, President Donald Trump’s trade policies seem to be on autopilot, with tariffs continuing more or less as before, even though those tariffs are complicating the response to the pandemic and threatening to undermine a future economic recovery. The export bans are dangerous, if understandable in the current environment. But the Trump administration’s actions are difficult to fathom on even narrow political grounds.
As COVID-19 has spread around the world and the number of new infections has outpaced the capacity of health systems to respond, roughly two dozen countries—including China, Russia and Turkey, plus the members of the European Union—restricted exports of protective gear such as masks, gloves and goggles. Although the EU is supposed to be a single market with no internal barriers to trade, the Czech Republic, France and Germany took steps in early March to restrict exports of certain medical supplies, including to other EU member states. To mitigate the pressures for intra-bloc trade restrictions, EU authorities eventually authorized member states to restrict exports to the rest of the world. Germany responded by lifting a new requirement for government approval of exports of protective gear for fellow EU members, but not for the rest of the world.
But few if any countries manufacture all the supplies they need. And producers of some more sophisticated equipment, such as ventilators, often rely on supply chains where intermediate goods cross borders multiple times and inputs originate in multiple countries. Export restrictions, especially if they keep spreading, could easily backfire by disrupting supply chains and making everyone worse off. Many of the world’s poorest and most vulnerable countries depend on imports of medical equipment from the EU.
Some countries have justified their export restrictions as necessary to address price gouging, but export bans can’t effectively address that problem. In addition to going after price gougers directly, governments would be far better off finding ways to stimulate increased production and coordinating with other governments to ensure that supplies get to those that need them most. Such explicit coordination would also help to reassure governments allowing exports when they have relatively less need for supplies that they will be able to import them later, when the need is greater. Coordination and cooperation are especially critical in the face of a pandemic because no one is safe until everyone is safe.
In the U.S., Trump seems to have realized only last week that COVID-19 is a serious threat that requires a serious response. But he still doesn’t seem to get that an “all hands on deck” strategy means that all arms of the U.S. government need to be working together—and with the private sector and civil society—to tackle the dual health and economic crises now assaulting the country. When it comes to trade, despite a national emergency, the president and his advisers are acting as though nothing at all has changed.
The White House has quietly reduced tariffs on some medical imports from China, but it did so well after the pandemic was under way, and well after it should have been clear that demand for those products was going to surge. It all raises the question: How does it possibly make sense to increase tariffs on medical supplies at any time?
Last year, the Trump administration imposed new 25 percent tariffs on medical imports that included hand sanitizer, thermometers and oxygen concentrators. The Trump administration also hit many of the personal protective gear items that are now in desperately short supply, like masks and gowns, with a 15 percent tariff, though that was lowered earlier this year to 7.5 percent as part of the “phase one” trade deal with China. Over several days in mid-March, the administration finally suspended some of those tariffs for a year. By then, however, China had shifted sales of those products to other markets, and the EU and other potential suppliers were restricting exports, making supplies even more difficult and expensive to find.
Meanwhile, Trump still shows no signs of understanding how tariffs work or how they hurt the American economy. In his March 18 press briefing, Trump was asked about a letter from a coalition called Americans for Free Trade requesting the suspension of the tariffs on $350 billion in imports from China to mitigate the economic impact of the pandemic. Trump wrongly insisted, as he has for months, that China is paying the U.S. billions of dollars because of the tariffs and said, “I can’t imagine Americans asking for that”—despite the fact that numerous businesses and trade associations have been calling for tariff relief since Trump’s trade wars began. Trump went on to question whether this particular trade group might be headed by foreigners rather than Americans.
Trump’s chief trade advisers also continue to act as though the global economic situation has not fundamentally changed. Robert Lighthizer, the U.S. trade representative, allowed a previously planned increase in the tariffs on imports of Airbus planes—imposed in a dispute over European subsidies to the company—to go into effect on March 18. That won’t have much effect now, with air travel falling off a cliff. But it will add to the difficulties that airlines face when they eventually resume normal operations. It further undermined opportunities for cooperation with Europe, which had already been badly damaged by the White House’s failure to consult EU officials before imposing its ban on travel from European countries earlier this month.
U.S. trade officials also recently announced a June 1 date for bringing the U.S.-Mexico-Canada Agreement into effect, after the Canadian Parliament ratified it earlier this month. Even before they had to temporarily suspend production because of the coronavirus, America’s three major automobile producers—General Motors, Ford and Fiat Chrysler—had requested more time to implement the deal’s new rules of origin to avoid disruptions to their supply chains. So far, there has been no response from Lighthizer’s office.
Leadership means putting the public interest over one’s own narrow political interests and priorities. Sadly, that seems to be in short supply in all too many places at a time when it is desperately needed to deal with this pandemic.
Kimberly Ann Elliott is a visiting scholar at the George Washington University Institute for International Economic Policy, and a visiting fellow with the Center for Global Development.
Source: World Politics Review
