COVID-19 and Protectionism: The Worst May Be Yet to Come

Just as COVID-19 has spread across the globe, so have protectionist measures. Governments in different continents have enacted a number of measures to allegedly safeguard their economies and health systems from the ravages of the pandemic. 

While some actions are reasonable and legitimate, others are suspect and may respond more to political expedience or the preferences of interest groups, potentially complicating international cooperation to deal with the pandemic and global economic downturn.

COVID-19-related protectionist measures come after economic nationalism has been rising over the past few years.

In a fascinating paper, Monica de Bolle and Jeromin Zettelmeyer analyzed the political platforms of major political parties in G20 countries. They found that “parties in advanced economies have become more nationalist with respect to immigration and trade since the global financial crisis, while parties in emerging-market economies have become more nationalist in industrial policy.”

Writing in the fall of 2019 before the onset of the COVID-19 pandemic, the authors feared that “widespread economic nationalism would pose a significant additional obstacle to policy coordination in the event of a global slowdown.” 

Alas, their concerns have been borne out. In 2020, the global GDP downturn will be -4.9%, more than 60% steeper than the IMF estimated as recently as last April. The policy preferences noted by de Bolle and Zettelmeyer have translated into protectionist measures, and unlike the (imperfectly) coordinated response to the 2008 financial crisis, they have resulted in a haphazard international response and, on occasion, a lack of coordination even with neighboring countries.

Restrictions on Medical Equipment

The World Trade Organization, Organization for Economic Cooperation and Development and the United Nations Conference on Trade and Development reports of G20 trade and investment measures covering mid-October 2019 to mid-May 2020 detail myriad measures affecting trade in goods and services, and investment adopted as a response to COVID-19 by virtually all G20 members.

The most common measures are export licensing requirements or related export restrictions on medical ventilators and/or personal protective equipment (PPE), adopted among others by Argentina, Australia, Brazil, the European Union, India, Indonesia, the Republic of Korea, Russia, Saudi Arabia, Turkey and the United States. 

Several countries suspended import taxes, anti-dumping duties and/or facilitated customs procedures for the importation of those same goods that loom large in export restrictions, likely in many cases to little avail. A disagreement over the export of face masks from the U.S. to Canada was ultimately resolved, but trade tensions between erstwhile trade partners could resurface.

Vaccine Nationalism

A few G20 countries, including France, India and the United Kingdom, further restricted the exports of certain medicines, and France has engaged in what is being labeled vaccine nationalism.

The WTO only registered the Eurasian Economic Union as restricting food exports (mostly grains); more recently, Argentina’s federal government announced its intent to nationalize Vicentín, a major soybean processor and international trader that is undergoing bankruptcy proceedings.

Source: Brink