Singapore, NZ have acted in poor taste

Abhijit Das | Updated on April 24, 2020 Published on April 24, 2020

Food for thought Medicine and food exports must be made affordable   -  Getty Images/iStockphoto

Their proposal at the WTO to get their exports labelled as ‘essential’ in the context of the pandemic smacks of profit-seeking

What would be your reaction, if you were told that cut flowers, ice-cream, beer, wine and vermouth are some of the essential goods for combating the Covid-19 pandemic? Dismiss it as fake news, or have a hearty laugh? Well, if we are to believe New Zealand and Singapore, then this is not only true, but actually quite a serious matter.

At the WTO, these two countries made a formal proposal on April 16, 2020, seeking a commitment from WTO members for ensuring that “during the Covid-19 global pandemic, production and trade in essential items such as medical supplies and food continue to flow freely to their intended destinations”. It is perhaps not a coincidence that a few weeks ago some former trade negotiators of the US had aired similar views. The New Zealand-Singapore joint proposal carries this narrative forward.

Could it be that New Zealand and Singapore are privy to some esoteric knowledge about the relevance and effectiveness of the products mentioned earlier in combating Covid-19, while rest of us are ignorant? Or is the joint proposal part of a larger game-plan of firms in developed countries to use the pandemic as an opportunity for making windfall commercial gains by extracting concessions at the trade-front from developing countries? Examining the implications of the joint proposal and assessing its effectiveness in combating Covid-19, provides useful pointers about the true intention of joint proposal.

Commitments sought

It is relevant to briefly mention the essential details of the joint proposal. It seeks to create new obligations in two categories of essential goods — medical products and agricultural products — supposedly to combat Covid-19. It may be noted that ice cream, cut flowers etc are included in the category of agricultural products. But what does the joint proposal entail?

First, it requires that willing WTO members eliminate customs duties on a list of medical products, including pharmaceuticals, consumables for hospital and laboratory use, medical equipment and personal protective products. Second, the countries participating in the joint initiative of New Zealand and Singapore will not apply export prohibitions or restrictions on the specified medical products.

Third, the participants will endeavour not to apply export prohibitions or restrictions with respect to the specified agricultural products. Fourth, a participant may enter into arrangements with another participants to eliminate customs duties on agricultural products.

It is relevant to mention here that the operative part of the joint proposal appears to suggest that the commitments required to be taken by the participating countries would not be confined to the period of the Covid-19 pandemic, but would go well beyond it. What the developed countries failed to achieve through agriculture negotiations, and sectoral negotiations on chemicals and healthcare products during the Doha Round, is now sought to be bulldozed under the thinly-veiled pretext of combating Covid-19.

Skewed advantage

In order to discuss the implication of these commitments for developing countries such as India, it is crucial to identify the main exporting countries involved in medical products.

According to a recent WTO report, out of the total exports of medical products valued at $995 billion, 95 per cent originate in developed countries. Germany ($136 billion), the US ($116 billion) and Switzerland ($90 billion) are the top three exporting countries.

If the countries participating in the New Zealand-Singapore initiative eliminate their tariffs on medical products, the main beneficiaries will be the exporters — who are almost entirely based in developed countries.

With the exception of China, India and other developing countries do not figure in the list of top 10 exporting countries. At this juncture, with the objective of protecting the interest of consumers, India and other developing countries can voluntarily, and on a temporary basis, reduce their customs duties on imports of medical products to zero. They do not need to participate in the New Zealand-Singapore initiative for doing this.

The ongoing Covid-19 pandemic has highlighted the need for countries to be self-sufficient in products that may be required for current and future medical emergencies. This has become a stated goal of even developed countries, such as France. Given this imperative, if India and some other developing countries seek to create a manufacturing base for medical products, then the nascent industry will require tariff protection for a few years. The joint proposal will eliminate this possibility. Developing countries would perpetually remain at the mercy of firms in the developed countries for meeting their needs in this area, during the Covid-19 pandemic and thereafter, as well.

Easier access?

Let’s now turn to the proposal of New Zealand and Singapore to prohibit export restrictions. It should be accepted that during periods of crisis such as Covid-19, the primary responsibility of any government is to secure the health and livelihood of its citizens. The key lies in preventing domestic and international shortages from arising in the first place. This can be achieved if multilateral trade rules do not constrain the ability of developing countries from establishing domestic manufacturing capabilities, which can be scaled up to meet their needs and the requirement of other nations.

Some could argue that prohibiting export restrictions would make access to medical products and food easier for developing countries. This appears to ignore the ground reality that during times of shortages, a producer will sell to those who are willing to pay the highest price. Developing countries are unlikely to match the deep pockets of the buyers in developed countries. Thus, banning export restrictions on medical products and food items is unlikely to be a panacea if developing countries face shortage of these products, including those aimed at combating Covid-19.

At a time when the world is grappling with death, destruction and desolation, it is shocking that responsible countries are eyeing business opportunities in products such as ice creams, cut flowers, wines etc, which are not even remotely linked to combating Covid-19. This completely unmasks the true commercial intent of the joint proposal.

In conclusion, the New Zealand-Singapore joint proposal at the WTO will not alleviate the problems being faced by developing countries in combating the Covid-19 pandemic. It will essentially support the quest of developed countries’ firms to have unhindered access to the markets in developing countries, while putting fetters on developing countries to establish domestic manufacturing capacities.

The joint proposal could also endanger farm livelihoods in developing countries. If the two countries, and indeed the global community, are serious about trade-related measures aimed at combating Covid-19, then a useful starting point should be to remove multiple hurdles for access to medicine at affordable prices created by the lopsided WTO rules for protecting intellectual property.

The writer is the Head, Centre for WTO Studies, Indian Institute of Foreign Trade, New Delhi. Views are personal

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on April 24, 2020
This article is closed for comments.
Please Email the Editor