A Global Effort to Win the War Against COVID-19

We are at war. But this war is different. There is no visible enemy, no border, no ideological divide. And yet, as in the past century’s conflicts, our lifestyle changed, our habits are hit by curfews and restrictions, and our capacity to mass-produce essential goods has become a matter of life and death.

To beat COVID-19 we need, first and foremost, to support our health systems. Governments have mobilised all human and financial resources to provide every hospital with the necessary medical equipment. In some cases, EU countries have appealed to local manufacturing companies to produce key medical goods such as masks, hand sanitisers and protective clothing.

Beyond national borders, the crisis fuelled uncertainty and fear. At the EU level, such an apprehension translated into wartime measures. Recently, for example, to ensure adequacy of supply of key medical goods, the European Commission adopted a regulation requiring an explicit authorisation by the EU member states before these goods can leave the EU.

Yet, as the situation evolves beyond the emergency of these days, keeping trade flows of medical equipment alive is crucial. Going forward, and especially if this crisis continues, governments should match their domestic effort to increase production with free exchange of medical equipment. In this blog post, we argue in favour of open markets as the means to support countries in their fight against COVID-19. Trade is not the problem but part of the solution to this crisis.

To produce as much medical equipment as necessary, a global effort to ramp up production will lead to a larger and more efficient increase in production than what any country could manage on their own. Italy is the second largest manufacturer in the EU of many of these products, according to the data. Yet, it could not withstand the rapid surge in demand of medical equipment, a scenario likely to happen in other EU countries.^[1] The data shows that even industrialised regions like the EU depend on other nations for these goods. For instance, in 2018 (Figure 1), EU countries sourced 32% of their imports of medical supplies which are now needed to fight Covid-19, including facemasks, gloves, disinfectants and ventilators, from outside the EU.

This is not a weakness but a strength. A system that is made of multiple firms in different locations is more resilient and agile than one based on far fewer producers. To reinforce this framework, governments should lift tariffs and non-tariff barriers on the medical goods for which there are shortages (See our previous blog). Some countries, like Spain, Brazil and Panama, are already implementing measures in this direction. At the EU level, there have been calls to abolish all tariffs on these critical medical goods.

Figure 1: Share of EU Imports of COVID-19 medical supplies from outside and inside the EU

Note: The medical products included in the list of COVID-19 medical supplies were sourced by the World Customs Organization and can be accessed here. The list includes a total of 34 HS codes at six-digits. Data on the EU intra and extra – EU imports of these products is retrieved from Eurostat Comext database.

Moreover, as COVID-19 has spread with a certain delay across countries, trade has become a precious ally in the battle against the virus. At the start, the EU delivered medical equipment to China when the country was facing the toughest months of the pandemic. Now, foreign suppliers in nations where the worst seems behind can support EU member states that are yet to experience the peak of infections.

Finally, many of these products – like hand sanitiser, whose ingredients are running low in Europe ‑ require inputs from other countries. For countries curbing exports, the risk is to cause retaliation from other nations, which will weaken any domestic effort to produce medical equipment. And even when some industrialised countries may have enough manufacturing capacity to produce most of the required medical goods domestically, a protectionist response would hit disproportionately on the poorest countries.

To win the war against Covid-19 we need a huge increase in production of key medical goods and equipment. Free trade of medical equipment and open markets will help us mobilise the resources we need to boost production faster and to a greater scale than what each country could do alone.

The data on the EU imports of medical supplies essencial to combat COVID-19 can be downloaded as an excel file here.

^[1] Italy was the second largest EU producer after Germany of many medical goods that are necessary for the treatment of COVID-19 such as disinfectants, sterilisers, protective glasses. Source: Prodcom. NACE codes 20201490, 32501200, 32502180, 32504290, 32504350, 32504400.