International Trade

Covid-19 and trade of personal protective equipment

May, 2020

By: Stefano Riela

University of Auckland

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Covid-19 triggered a global hunt for personal protective equipment (PPE) and ventilators revealing a major weakness of the globalisation that guaranteed the availability of more convenient products. As far as PPE is concerned – e.g. face masks, gloves, goggles – this is used by healthcare workers to protect themselves and patients from being infected and infecting others.

With the Covid-19 emergency outbreak, many countries faced an increasing demand for PPE due to its booming use, misuse and panic buying; insufficient stockpiles and national productions could have caused a shortage in net importers such as New Zealand.

Figure 1 (refer to header image) shows the difference between NZ’s import and export for a selection of PPE: made-up articles of textile materials such as face masks (code 630790), clothes made of plastics (code 392620), of rubber (code 4015), and protective spectacles and goggles (code 900490).

The positive global demand shock for PPE has been accompanied by a global negative supply shock. PPE manufacturing is concentrated in Southeast Asia and main exporters (Figure 2) have been themselves affected by Covid-19; the ensuing lockdowns curbed production and part of the products previously exported have been retained to cope with the domestic emergency.

Moreover, products that could have been exported faced a disrupted transport system due to significant reduction of air freight and shipping cargo services.

Some countries with stockpiles and/or some national production of PPE – such as the US, the EU, France, Germany and Poland – introduced restrictions and bans on their export.

Each country wanted to be sure that essential goods were available on its territory, especially in case of emergency. However, this self-sufficiency would be neither possible (e.g. raw materials are not present equally in all countries) nor convenient. The localisation of economic activities and free trade allows greater efficiency and it is for this reason that most countries are part of the WTO. However, especially in times of emergency, countries think first about their own interests and may decide not to export the goods they deem essential.

Between the impossibility and inefficiency of self-sufficiency at national level and the uncertainty of the global level, there could be a role for a regional and plurilateral agreements like the ones proposed by New Zealand and Singapore.

After having put together a commitment for no restrictions on essential goods such as PPE with Canada, Australia, Chile, Brunei and Myanmar (25 March), NZ and Singapore have proposed that idea at WTO level (15 April) with the realistic aim to extend the commitment to a subgroup of like-minded countries that are part of the organisation. Differently from multilateral agreements, which require the unanimous support of all WTO members (currently 164), a plurilateral agreement would only bind the members that want to participate.

This proposal serves the purpose of reminding us that the reward of selfishness in the short-run nullifies the advantages of cooperation. However, when an emergency is capable of threatening decades of cooperation as within the EU, the strengthening of international relations should go hand in hand with building larger stockpiles of essential goods.

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