NDTO News Article

Exporting in the Time of COVID-19: Trade Policy

To continue NDTO’s series on the effects of COVID-19 on different aspects of global trade, we are taking a closer look into recent trade policy trends. The global economy continues to be impacted by the pandemic, magnifying disparities, trade practices, and what can be changed for the future. Trends in trade policy can ease burdens, while others may cause more problems in the long run. The pandemic has offered an opportunity to take a closer look into underlying issues in many countries’ economies and infuse trade policy to align with well-intended values for change.

There were quick reactions to COVID-19 on the trade policy front from many countries, both to liberalize and restrict imports and exports for specific products. Many pivots in policy change were made as short-term measures, while other policies were enacted without an end date in sight.

In a short period of time, large sections of the global trade shifted. One of the most comprehensive lists of trade policy updates relating to the pandemic is on the World Trade Organizations (WTO) website listed in the references below. Of this list, nearly 1000 policies are tied to medical products. While some policies removed tariffs on these types of imports, others apply export restrictions. For instance, in March 2020, Canada waved all tariffs and sales taxes on goods imported by public health agencies, hospitals, testing sites, and first response organizations. The US recently extended a restriction to export medical resources (e.g., surgical N-95 filtering facepiece respirators, PPE surgical mask, PPE nitrile gloves, level 3 and 4 surgical gowns and surgical isolation gowns, syringes, and hypodermic needles) requiring Federal Emergency Management Agency (FEMA) authorization through June 2021. Many examples like this exist across the globe, but some of these new rules and growing trade tensions have caused trade experts to revisit ideas of protectionism and its impact on the global economy.

Protectionism essentially favors domestic products and creates policies and practices to reduce competition from foreign countries. These policies and practices are seen in government subsidies, tariffs, quotas on goods, and more subtly in currency manipulation. While experts typically agree that there are short-term benefits to protectionism, the practice ultimately slows industry improvement and global competition, as noted by Kimberly Amadeo, president of World Money Watch. Free Trade Agreements (FTAs) are a good way to avoid protectionism and encourage a thriving economy. More recently, the US and many developed countries have agreed to some of the largest FTAs in history. The US Mexico Canada Agreement (USMCA) is currently the largest, but with the upcoming finalization of the Transatlantic Trade Investment Partnership (TTIP), it may have a greater impact on the global economy. The US is not currently a part of TTIP.

Under the Trump Administration, the “America First” policies will see changes as the Biden Administration announced its goals for trade policies in early March of 2021. On this agenda, COVID-19 is at the forefront to “Build Back Better” with an emphasis on a fair international trading system taking into account more than just the bottom line.

In the 2021 Trade Policy Agenda, COIVID-19 recovery is the top priority for this administration. With that, the pandemic has brought to light several areas of concern in the global trade realm, such as supply chain vulnerabilities, fair labor practices worldwide, and domestic inequities. The 2021 Trade Policy Agenda states that “In the past year, the COVID-19 pandemic exposed the devastating effect of persistent economic disparities on communities of color.” The administration seeks data and community input to take corrective action, which will, in turn, impact trade policy through labor, wages, and increased economic opportunities.

As with the US, many other countries see a magnification of social issues pertaining to business ownership, inequality in the workforce, and previously unrealized obstacles due to lockdowns and shifting economies. Trade policy can be implemented as a top-down approach, says Dr. Amarita Bahri, Assistant Professor of Law, ITAM and Co-Chair Professor, WTO Chair Program, Mexico. “This crisis presents a unique opportunity to explore how trade policies, including the pursuit of free trade agreements (FTAs), can contribute to women’s empowerment and hence place women at the heart of economic recovery in the post-COVID-19 world,” says Bahri. Although there are many existing provisions in FTAs regarding gender equality and enthusiasm as high, follow-through is often lacking. Many of the standing agreements do not provide funding, implementation, or means to favor these practices. While the policies are well intended, without proper support, many can be considered dead on arrival. Awareness is key to inserting humanitarian issues into trade policies as more than just best practices. The global pandemic has increased the visibility of economic disparities for many countries, creating an atmosphere primed for discussion for future improvement.

In September of 2020, a “Policy Hackathon” was organized by the United Nations Economic Social Commission for Asia and the Pacific (ESCAP) and a collaborative effort United Nations Regional Commissions (ECA, ECLAC, ESCWA, and UNECE), UNCTAD, and WTO. The program collected ideas from government, academia, think tanks, and private sector experts to hypothesize or develop provisions for trade policies during times of crisis (such as a global pandemic). The result was over 100 contributions from 134 individuals and 45 teams. The information takes the form of policy briefs, research papers, and team reports, all of which are publicly available through ESCAP. They are grouped into several topics, including essential goods/import-export restrictions, trade facilitation, agriculture and foodstuffs, gender and regional trade agreements, and government procurement.

The global pandemic’s impact has been significant across many sectors, and trade policy is only one of many. Though this article does not explore the vast amount of specifics, it may encourage visibility and awareness for how trade policy impacts our everyday world and what we can see for long-lasting effects.