Economic research and trade policy analysis

The COVID-19 (coronavirus) pandemic has exposed the upsides and downsides of international trade in medical goods and services. Open trade can increase access to medical services and goods—and the critical inputs needed to manufacture them—improve quality and variety and reduce costs. However excessive concentration of production restrictive trade policies supply chain disruptions and regulatory divergence can jeopardize the ability of public health systems to respond to pandemics and other health crises. Trade Therapy: Deepening Cooperation to Strengthen Pandemic Defenses coordinated by Nadia Rocha and Michele Ruta at the World Bank and Marc Bacchetta and Joscelyn Magdeleine at the World Trade Organization provides new data on trade in medical goods and services and medical value chains surveys the evolving policy landscape before and during the pandemic and proposes an action plan to improve trade policies and deepen international cooperation to deal with future pandemics. As the COVID-19 pandemic lingers the focus of policy action is on the response which includes actions aimed at removing bottlenecks and providing government support to promote equitable access to vaccines. As the emergency subsides the focus should shift to prevention and preparedness. Steps to close information gaps—building on the Multilateral Leaders Task Force on COVID-19 the ACT-Accelerator and the open markets for example—by negotiating tariff reductions on medical goods and greater market access in services should take priority. Also important are measures to improve the efficiency of markets which include harmonizing regulation through mutual recognition or equivalence of standards and creating international standards for essential medical goods inputs and production processes. Agreement on a crisis rulebook to be deployed during an emergency—including clear and agreed limits on export policy flexibility and shared rules on intellectual property flexibilities—would provide a more solid policy foundation to address future challenges.

COVID-19 is a forerunner of more and possibly worse pandemics to come. Scientists have repeatedly warned that without greatly strengthened proactive strategies global health threats will emerge more often spread more rapidly and take more lives. Together with the world’s dwindling biodiversity and climate crisis to which they are inextricably linked infectious disease threats represent the primary international challenge of our times. Recognizing this new reality of a pandemic era is not fearmongering but rather prudent public policy and responsible politics. We must organize ourselves on a whole-of-society basis within nations and rethink how we collaborate internationally to mitigate its profound consequences for livelihoods social cohesion and global order.

The COVID-19 pandemic has exposed the upsides and downsides of international trade in medical goods and services. Open trade can increase global access to medical services and goods (and to the critical inputs needed to manufacture them) improve quality and reduce costs. Better global access to medical goods and services in turn contributes to global health security which the World Health Organization (WHO) defines as “the activities required both proactive and reactive to minimize the danger and impact of acute public health events that endanger people’s health across geographical regions and international boundaries.” But excessive concentration of production restrictive trade policies supply chain disruptions and regulatory divergence can jeopardize the ability of public health systems to prepare for and respond to pandemics and other health crises—for instance by limiting universal access to essential goods and services.

This chapter has two goals: (a) it looks at the main demand and supply charac‑​teristics of markets for medical goods and services and how they shape gains and risks from trade in these products; and (b) it provides stylized facts on trends in international trade in medical goods and services including the functioning of medical supply chains before and during the COVID-19 pandemic.

First the war in Ukraine is impacting the whole world. As such it is not a local war with local effects only. It therefore needs to be viewed and treated in the context of global trade and development. This is likely to result in a move for reshoring near-shoring and for ‘friend-shoring’ – either making strategically important goods at home or procuring them from allies. This will have implications for global trade and development.

This note examines the implications of the crisis in Ukraine for global trade and development. It highlights the importance of the supplies of food energy and certain industrial inputs from Russia and Ukraine and explores how the war is causing severe risks to food and energy security as well as exacerbating supply chain difficulties. Simulations from the WTO Global Trade Model indicate that global GDP and trade growth could be reduced by up to 1.3 and 2.2 percentage points respectively with effects concentrated in Europe and Africa. This note further shows that if the war were to cause a disintegration of the global economy into separate blocs the income losses would be severe especially for emerging and developing economies. This highlights the importance of the rules-based multilateral trading system not least because the WTO provides functions that can help to cushion the impact of the crisis.