COVID-19 and Trade Policy: Why Turning Inward Won’t Work by Richard Baldwin and Simon Evenett published by VOXEU (2020).
“The COVID-19 pandemic has sparked broad-based resort to export restrictions on medical supplies and food. This eBook asks: Should governments react to the health, economic, and trade crises by turning inward? The authors provide an unequivocal answer: No. Turning inward won’t help today’s fight against COVID-19. National trade barriers in a world of internationalised manufacturing processes will make it harder for every nation to produce vital medical supplies. Trade is not the problem; it is part of the solution. Insular policies will also fail to foster economic recovery, and they are a threat to the collaborative spirit that the human race will need to defeat this threat.
On 26 April 2020, as we wrapped up this eBook, the world had suffered over three million confirmed cases of COVID-19 and over 200,000 deaths. Those are frightening numbers. But what is even more disturbing is the growth rate; today’s death toll is twice what it was two weeks ago (Roser et al. 2020).1 This sort of explosive growth has led to emergency policy reactions.
To slow the spread of the disease, governments around the world have imposed draconian containment policies – what the IMF has called “The Great Lockdown”. Restrictions on our economic, personal, and social lives – strictures that would have been absolutely unthinkable just three months ago – are viewed as normal and necessary. Quite simply, the pandemic has changed the world faster than most expected and in ways few anticipated.
One of the least anticipated aspects has been the trade effects and policy responses – that is what this eBook is about: COVID-19, trade, and trade policy. It addresses a simple question.
Should governments react to sharp falls in national income, collapsing world trade, and the prospect of a second global wave of COVID-19 by turning inward and further weakening cross-border commercial ties? This eBook provides an unequivocal answer: No. Turning inward won’t work – it won’t help here and now in the fight against COVID-19 and it won’t foster economic recovery.
The contributions to this volume make their case by assessing the trade and investment policy changes taken by governments so far during this global pandemic, by taking account of commercial realities on the ground including international supply chains, by drawing upon relevant precedents and analysis, and by considering alternative policy responses to protectionism.
A recurring finding is that many governments urgently need a shift in mindset. They need to understand that international trade is not a problem in this crisis; it is a core element of the solution. They need to realise that in the 21st century, open trade routes and international supply chains are critical to controlling and defeating the pandemic. The foundation of greater domestic policy effectiveness is undertaking inter-governmental cooperation on a number of fronts. Cooperation would yield great benefits.
On the positive side, the world’s manufacturing can be used to produce vital medical supplies and critical medicines, and – eventually – to produce a few billion doses of the vaccine that will finally put the COVID-19 crisis behind us. On the negative side, a 1929-style vortex of short-sighted, nationalistic retaliations could hobble productive capacities for the whole world. If ever there was a time for world leaders to come together and cooperate in a common cause, it’s now. The time for go-it-alone approaches is over. Quite literally, international cooperation is a matter of life and death.
To get historical perspective on today’s policy reactions, we quickly review previous trade collapses and protectionist responses, starting with the 2008-2009 breakdown…”
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