Drop the tariffs and save some lives. Quick

Hi from Brussels. Having watched Boris Johnson’s announcement of the lockdown that Belgium managed to implement some time ago, we’re mainly open-mouthed in astonishment that the UK spent so long going round the houses before accepting the inevitable. Remember when Britain was a well-run, pragmatic country that did the sensible thing briskly and without fuss? First Brexit, now coronavirus. You could have got very long odds a decade ago against the UK being able to learn governance lessons from Belgium, and yet here we are. Today’s main piece is on what can be done to prepare the developing world, especially sub-Saharan Africa, for the pandemic hitting.

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Trade and aid policy need to pull in same direction

Developing countries and emerging markets haven’t got that much attention during the coronavirus pandemic. Either, as in east Asia, they have enough state capacity experience of crises to respond quite well. Or, as in sub-Saharan Africa, the virus hasn’t hit on a large scale yet, or hasn’t been recorded as such.

We realise we keep coming back to comparisons with the global financial crisis a decade ago, but it seems like it’s one of the best ways of working out how the world copes with a shock. And guess what? Things seem likely to be worse for lower-income countries now than they were then.

Back then, low-income economies were relatively unaffected by the credit crunch. Many had built up substantial foreign exchange reserves (few people would ever have thought that Brazil would have done a better job of dealing with a debt crisis than the US). But actual contagion might be harder to contain than the financial variety. 

In sub-Saharan Africa, in particular, health systems are weak. African countries have received large amounts of health-related aid spending in the past, including that related to the HIV-Aids pandemic. But some of that tended to be disease-specific, and didn’t necessarily create flexibly functioning health systems capable of dealing with new problems.

So far, the number of recorded cases in Africa is small, despite strong trading links to China and large Chinese populations. But if and when it does hit, countries are unprepared. Reports from even a relatively well-off and functioning country such as Kenya show intense alarm among medical staff that they have neither training nor protective equipment to combat coronavirus.

As we have noted before and has been eloquently argued by Chad Bown of the Peterson Institute in Washington DC, if the export restrictions among rich countries continue to spread, particularly to much more expensive equipment like medical ventilators, which are largely made in advanced economies, this could make the situation worse. Defenders of the EU’s export restriction (sorry, “authorisation”) regime for protective gear like gloves and masks say that permission to export can be granted on humanitarian grounds. But how much permission is given and how long the process takes remains to be seen.

Simon Evenett of the Global Trade Alert (GTA) project at the University of St Gallen in Switzerland has suggested a package of trade and aid policies for the developing world during coronavirus. One proposes a (valuable but rarely-seen) synergy of trade and aid policy.

Some 110 countries impose tariffs on coronavirus test kits and related apparatus © Joseph Prezioso/AFP/Getty

A remarkable number of developing countries still tax imports of medical devices, gear, disinfectant and soap. One hundred and ten countries, for example, impose tariffs on coronavirus test kits and related apparatus, while 156 nations tax disinfectants and sterilisation products, often at rates of 10 per cent and above. It seems bizarre that any poor country would tax soap and detergent, but we presume it’s a useful revenue raiser since demand for those products is price inelastic, and many developing countries will have domestic producers to protect.

Prof Evenett says developing nations outside the G20 take in about $2bn in tariff revenue on these categories each year. Aid donors could compensate them for eliminating those tariffs out of petty cash: total development aid by richer countries last year was about $150bn.

Sure enough, the World Bank is currently proposing more aid. It is also making what sounds superficially like the right noises: “For those countries that have excessive regulations, subsidies, licensing regimes, trade protection or litigiousness as obstacles, we will work with them to foster markets, choice and faster growth prospects.”

But as usual with such announcements, it is not clear whether the aid is on top of existing commitments. And anything that means involving the slow and painful process of traditional World Bank aid conditionality makes the heart sink. You can unfortunately well imagine bank staff, especially under the institution’s current ideologically motivated president, starting to design an elaborate programme to eliminate poorly targeted subsidies rather than essentially saying: you need the soap; here’s the cash; now there’s no excuse to keep the tariffs.

History is against anything like Prof Evenett’s plan happening quite that quickly and neatly. But if ever there were a time to get trade and aid policy pulling in the same direction in the developing world at high speed, this would be it.

Charted waters

There may now be concerns about supplies of surgical gloves after the Malaysian government, which supplies 50 per cent of US imports of gloves, restricted face mask exports. Our chart shows there was already a surge in shipments to the US by Owens & Minor, while others’ have declined.

Policy watch

US trade representative Robert Lighthizer’s office hinted that it may consider further removals of tariffs from Chinese medical goods © Mark Wilson/Getty

The US trade representative’s office signalled that it could consider further removals of tariffs from Chinese medical goods, launching a consultation late on Friday evening, writes Aime Williams.

The public, businesses and government agencies were all invited to submit “comments on possible further modifications to remove duties from additional medical care products” in relation to coronavirus.

The Trump administration has been engaged in a nearly two-year long trade war with China, imposing tariffs on goods imported from the country, although companies can apply for exclusions.

The USTR’s office said its call for comments would be open until late June, and would not replace the existing process businesses can use to apply for tariff exclusions.

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