The state of Trade in Food and Medical Supplies

“Trade is a social act” – John Stuart Mill

[Durban, 2 April 2020]

In light of the current COVID-19 outbreak, trade is seeing a sudden change from the norm. Director-General of the World Trade Organization (WTO), Roberto Azevêdo, remarked that the outbreak has caused “dramatic supply and demand shocks in the world economy, and that these shocks are inevitably causing major disruptions to trade”[1].

The need to put the health of the people before the interests of imposing high tariffs and sanctions is at its peak however, are governments really going to consider this need and does international trade policy cater for this?

The World Trade Organization (WTO) has already started the move to ensure that fair trade occurs within the realm of ensuring the health and well-being of people. Before we look at the steps that the WTO has taken, we need to look at the policy provisions that the WTO allows.

What the WTO promulgates:[2]

WTO agreements offer governments the freedom to restrict trade in order to protect the health of the people and national policy aims.[3] It is important to note that such freedom must be exercised as a matter of principle (no discrimination should be sought, between WTO members, and a disguised restriction on international trade is disallowed[4]). Furthermore, trade officials, who make and negotiate trade decisions and agreements respectively, need to be aware of the severity of health risks.

The rules of the WTO require that measures, implemented by governments, must be properly balanced between the importance of the protection of health interests and the feasibility of trade. The compromising of health objectives, through the impact of laws imposed with regard to import and export efficiency measures, is not favoured.

Trade restrictions should only be imposed in exceptional circumstances of infectious disease and such restrictions should have a time limit as well as an intention to minimise disruption of international trade. Trade embargoes are associated with significant economic loss and can be disputed unless they are undeniably justified by the gravity of the health risks.

Now that we know that governments have the flexibility to make trade decisions based on the severity of the viral crisis balanced with the reasonable efficiency of trade, we can turn to look at the current state of trade in food and medical supplies since these goods are essential for the survival of people amid the COVID-19 pandemic.

Trade in Medical Supplies:[5]

There is no country that is entirely equipped with medical supplies and at a time like this, international trade in medical products and medicine is essential. The WTO has liberalised the trade in medical products in the following ways:

• The results of tariff negotiations scheduled at the inception of the WTO in 1995;
• Conclusion of the plurilateral sectoral Agreement on Pharmaceutical Products ("Pharma Agreement") in the Uruguay Round and its four subsequent reviews;
• The Expansion of the Information Technology Agreement in 2015;
• The Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS): “Governments can use WTO-compliant compulsory licensing procedures in cases where patented drugs have been unaffordable or not widely available. Voluntary licensing of patents and pooling of intellectual property for different drugs or medical technologies are additional options within the scope of WTO rules.”[6]

Statistics show that tariffs on medical products, medicine and medical equipment are reasonably low with some countries imposing no tariffs. However, high tariff rates are seen with hospital and laboratory inputs and materials as well as protective medical

supplies (example hand sanitisers, soaps, gloves, face-masks), which are more than five times higher than tariff rates for medicines.

Deputy Director-General of the WTO, Alan Wolff, said that removing all duties on health-related goods (such as the ones above) should be politically feasible.[7] The parallel commitment to not impose export limitations, was cited by him to be a consideration however he cautioned that such could prove more challenging as it would involve politics.[8]

Trade in Food:

The international trade of food is essential as it is a point of people’s dependence. The main aim that needs to be fulfilled during this viral pandemic is to ensure that the food supply chain is not hindered. Therefore, policy and decision makers need to be cognisant when imposing trade measures (be it, inter alia, the increasing or decreasing of tariffs, sanctions and imposing embargoes). According to Alan Wolff, it is vital that the pandemic be dealt with in the least trade-restrictive way possible so that food security prevails.[9]

In order to mitigate the restrictive effects that may occur with the international trade, the following need to me prevented:[10]

• The hampering of the movement of agricultural and food industry workers;
• The extension of border delays for food containers;
• The uncertainty of food availability (as it can affect the balance between supply and demand, creating increased prices).

The dissemination of information related to the “food-related trade measures, levels of food production, consumption and stocks, as well as on food price,” must be made available to all in real time.[11] This will reduce uncertainty and allows producers, consumers (to contain panic buying and the hoarding of food and other essential items) and traders to make informed decisions.[12]

The social act of trade:[13]

It would seem that a true balancing act needs to be followed, by the world today, with regard to trade and health. When policy-makers and leaders make such ‘balanced’ decisions, the need for consultation is essential. Anabel González, Senior Staff Research Member of the Peterson Institute for International Economics, recommended that collective trade action be taken, whereby governments enhance and not restrict global trade cooperation.[14] She further recommends that governments should agree to “a freeze on export bans, ease recent restrictions, and exercise self-restraint when the impact is devastating”.[15]

Therefore, it would seem that the act of balanced decision making along with informed collective action is the way forward in order to ensure that trade is reasonably sustained and health and food needs are adequately met. A social act of working together, and considering the scales of ethics and economic interest, is needed.

[1] ‘COVID-19 and world trade’ World Trade Organization, available at https://www.wto.org/english/tratop_e/covid19_e/covid19_e.htm, accessed on 2 April 2020.

[2] ‘WTO Agreements and Public Health’ World Trade Organization, available at https://www.wto.org/english/res_e/booksp_e/who_wto_e.pdf, accessed on 2 April 2020.

[3] The Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) “establishes that members have the right to restrict trade by taking SPS measures necessary for the protection of human, animal or plant life or health. These measures should only be applied to the extent necessary to achieve their objectives, be based on scientific principles and be supported by scientific evidence. In situations where relevant scientific evidence is insufficient, members may provisionally adopt SPS measures on the basis of available pertinent information.”

The Agreement on Technical Barriers to Trade (TBT Agreement) “aims to ensure that technical regulations, standards and conformity assessment procedures are non-discriminatory and do not create unnecessary obstacles to trade. At the same time, it recognises WTO members' right to implement measures to achieve legitimate policy objectives, such as the protection of human health and safety.” ‘COVID-19 and world trade’ World Trade Organization, available at https://www.wto.org/english/tratop_e/covid19_e/covid19_e.htm, accessed on 2 April 2020.

[4] ‘COVID-19 and world trade’ World Trade Organization, available at https://www.wto.org/english/tratop_e/covid19_e/covid19_e.htm, accessed on 2 April 2020.

[5] ‘Trade  in Medical Goods in the Context of Tackling COVID-19’ World Trade Organization, available at https://www.wto.org/english/news_e/news20_e/rese_03apr20_e.pdf, accessed on 2 April 2020.

[6] ‘COVID-19 and world trade’ World Trade Organization, available at https://www.wto.org/english/tratop_e/covid19_e/covid19_e.htm, accessed on 2 April 2020.

[7] ‘DDG Wolff outlines measures taken in response to COVID-19, highlights key role of WTO’ World Trade World, available at https://www.wto.org/english/news_e/news20_e/ddgaw_01apr20_e.htm, accessed on 2 April 2020.

[8] ‘DDG Wolff outlines measures taken in response to COVID-19, highlights key role of WTO’ World Trade World, available at https://www.wto.org/english/news_e/news20_e/ddgaw_01apr20_e.htm, accessed on 2 April 2020.

[9] ‘Agency chiefs issue joint call to keep food trade flowing in response to COVID-19’ World Trade Organization, available at https://www.wto.org/english/news_e/news20_e/igo_26mar20_e.htm, accessed on 2 April 2020.

[10] ‘Agency chiefs issue joint call to keep food trade flowing in response to COVID-19’ World Trade Organization, available at https://www.wto.org/english/news_e/news20_e/igo_26mar20_e.htm, accessed on 2 April 2020.

[11] ‘Agency chiefs issue joint call to keep food trade flowing in response to COVID-19’ World Trade Organization, available at https://www.wto.org/english/news_e/news20_e/igo_26mar20_e.htm, accessed on 2 April 2020.

[12] ‘Agency chiefs issue joint call to keep food trade flowing in response to COVID-19’ World Trade Organization, available at https://www.wto.org/english/news_e/news20_e/igo_26mar20_e.htm, accessed on 2 April 2020.

[13] ‘DDG Wolff outlines measures taken in response to COVID-19, highlights key role of WTO’ World Trade Organization, available at https://www.wto.org/english/news_e/news20_e/ddgaw_01apr20_e.htm, accessed on 2 April 2020.

[14] ‘DDG Wolff outlines measures taken in response to COVID-19, highlights key role of WTO’ World Trade Organization, available at https://www.wto.org/english/news_e/news20_e/ddgaw_01apr20_e.htm, accessed on 2 April 2020.

[15] ‘DDG Wolff outlines measures taken in response to COVID-19, highlights key role of WTO’ World Trade Organization, available at https://www.wto.org/english/news_e/news20_e/ddgaw_01apr20_e.htm, accessed on 2 April 2020.