While countries impose bans on medical exports amid the Covid-19 pandemic, World Bank president David Malpass has urged leaders against hoarding medical and food supplies, and not to use shortages as a reason to step up protectionist measures.
“It’s important for all those involved in the food supply chain and also the medical supply chain to maintain open markets,” Malpass said during a virtual press conference on Friday. “I’ll say the same thing on the import side, that countries need to allow trade in order to have prosperity or to cushion the blow now from the economic downturn.”
Countries across the world are imposing bans or restricting the export of medical goods. The Global Trade Alert team at Switzerland’s University of St Gallen reports that 75 countries have now introduced export curbs on medical supplies.
“Most governments didn’t prepare properly and so many are now scrambling to try and acquire supplies wherever they can. Fears that there are supplies in their country that might be lost have led to export bans,” Simon Evenett, trade policy analyst and MBA director at the University of St Gallen, tells GTR.
European countries have introduced temporary restrictions on the export of medical supplies to counter domestic shortages. Elsewhere, in Asia, India has prohibited the export of ventilators, breathing appliances and, most recently, diagnostic kits.
Meanwhile, the US Export-Import Bank (US Exim) has revealed that it is temporarily withdrawing all financing support for exports of critical medical equipment and supplies, including respirators, face shields, gloves and other protective equipment. The exclusion order, which will remain in place until September 30, was unanimously approved by the US export credit agency’s board of directors.
“What we have here are paid contracts with companies and governments that are not being fulfilled, which is extraordinary,” says Evenett.
Malpass said he hopes that Covid-19 does not lead to longer-term protectionist measures put in place by countries around the globe. “I think countries need to step forward and say, ‘we’re not going to use the crisis as a reason to close our markets or to block our markets’. The world needs to work together to share among countries that have clinical supplies of certain things and not get into a barter system where you’re trading those off – we should allow markets to function, markets to clear and the supplies to go to those most in need.”
US Exim’s announcement follows President Donald Trump enacting the Defense Production Act – legislation passed in 1950 that gives the government more control of industrial production in emergencies – at the start of April to acquire the “appropriate” number of N95 respirators from US manufacturer 3M and its subsidiaries. Referring to the law, Trump tweeted: “We hit 3M hard today after seeing what they were doing with their Masks. ‘P Act’ all the way. Big surprise to many in government as to what they were doing – will have a big price to pay!”
3M CEO Mike Roman struck back, saying that Trump’s suggestion that the manufacturer was doing something wrong was “absurd”. “The idea that we are not doing everything we can to maximise deliveries of respirators in our home country – nothing is further from the truth,” he told CNBC.
The US government and 3M have since reached an agreement that will see the company import masks to the US from its Asia facilities in the coming months, while also exporting from the US to Canada and Latin America.
Global Trade Alert’s Evenett makes the important point that export restrictions do not boost domestic supplies. “There is no way to fix the underlying problem, which is a surge in demand, as that surge in demand needs to be met by higher production.” The reason production has not increased, he says, is because leaders have failed to realise that most of the medical goods in short supply are produced in international supply chains, which require the co-operation of governments to function.
There are many different critical Covid-19 medical equipment and goods, including masks, ventilators and medical gowns, in demand globally and where these are produced varies widely. Bans on exports of domestically-manufactured products do not address the demand for vital medical supplies that need to be imported from elsewhere.
World Bank data shows that China has an overwhelming market share when it comes to medical face mask exports (56.7%). The country also marginally has market share of ventilators (13.4%), followed by the US with a 13.1% slice, and Australia at 12.1% . In terms of the export of liquid soap and humidifiers, Germany has the biggest market share for both at 14.4% and 16.7%, respectively.
Evenett says that many of these countries that hold a substantial market share of certain products have imposed export restrictions. “A lot of the bigger suppliers have got export bans in place, except for Canada, Mexico, Japan and Australia,” he says.
Manufacturers and governments also face other problems when shoring up their supply of medical goods in the current crisis. Earlier this month, a shipment of 3M protective equipment was allegedly seized and diverted by US authorities while in transit from China to Berlin – a move which Andreas Geisel, Berlin’s interior minister, hailed an act of “modern piracy”.
However, the manufacturer said in a statement on April 5: “3M has no evidence to suggest 3M products have been seized. 3M has no record of any order of respirators from China for the Berlin police. We cannot speculate where this report originated.” It added that it has extended an offer to help the German authorities try and determine if this allegedly false report is the result of fraud.
Elsewhere, fake shipments of Covid-19 medical supplies are being reported. Interpol revealed in a statement last week that a complex fraud scheme using compromised emails and advance payment fraud involving the sale of non-existent masks had been uncovered by financial institutions and authorities across Germany, Ireland and the Netherlands.
“Those arrested in this case had no connections to the medical equipment industry. They were simply experienced fraudsters who saw an opportunity with the outbreak of Covid-19,” said Jürgen Stock, Interpol’s secretary general.