The COVID-19 crisis has highlighted the downsides of extensive international integration and many governments and businesses have now realized the risks involved in relying on complex global supply chains. While governments are closing down borders, imposing travel bans, additional visa requirements and export restrictions, the globalized world as we know it is temporarily becoming more national.
This newsletter highlights some of the immediate export challenges that the globalized world is currently facing due to the COVID-19 crisis.
A large number of governments, including China, South Korea, Taiwan, Thailand, Kazakhstan, India, Russia, Germany, France and the Czech Republic have imposed bans and/or export restrictions on medicines and medical devices in response to the COVID-19 crisis. The export bans and export controls mainly cover the export of medical devices such as respiratory masks, facemasks, gloves and protective suits. However, India has restricted the export of pharmaceutical ingredients and the medicines made from them, including paracetamol. While export controls do not necessarily mean that exports are prohibited, they make export licenses a requirement. Consequently, transactions may be delayed and potentially denied or cancelled.
Even with the free market in the EU, Germany, France and the Czech Republic have banned the export of facemasks – initially, also within the EU. Health ministers across the EU have expressed concerns about the potential shortage in protective medical equipment in some member states as a result of bans and controls on exports put in place by other governments.
As a result of the increasing export bans and controls on medical devices, also within the EU, on 15 March 2020 the EU imposed restrictions on export of personal protective equipment (Commission Implementing Regulation (EU) 2020/402 of 14 March 2020). The export restrictions cover gloves, masks, face shields and protective clothing; prohibits exports of such items outside the EU without prior authorization by the authorities of the respective member state; is in effect as of 15 March 2020 and runs for six weeks. The EU member states are obliged to process export license applications within five days, which may be extended by a further five days under exceptional circumstances.
The EU has taken this step in order to meet the vital demand of personal protective equipment arising from the spread of COVID-19. As a result of the newly implemented EU regulation, France and Germany have now removed restrictions on exports of medical devices to the EU market.
While the various restrictions on exports are not in violation of the rules of the WHO, the director-general of the WHO has earlier this week stated that governments should be easing restrictions on the export and distribution of medical supplies, adding that “This is a question of solidarity. This cannot be solved by the WHO alone, or one industry alone.” The WHO has earlier encouraged companies producing medical equipment to increase such production. The WHO is concerned that companies will not ramp up production enough as long as exports are restricted.
The globalized world as we know it is deeply dependent on complex global supply chains. Since the lockdown of China in January 2020, exports from China have decreased markedly. The shutdown of many Chinese factories has resulted in exports from China decreasing by 17 percent year-over-year and it has already disrupted the production of European cars, iPhones and other consumer goods. Not only are many offices, factories and ports in China short-staffed or closed down, causing delays, it also remains a challenge for exporters to get access to factories and port areas without the risk of facing quarantine on arrival or when returning to a larger city or a new country.
Italy has been under lockdown since 9 March 2020 and other governments are either closing down borders, encouraging or ordering citizens to stay at home, or implementing other initiatives in order to stop COVID-19from spreading even more. If COVID-19 continues to spread at its current pace, the expectation is that more countries will soon be under a lockdown similar to the lockdown in Italy. Lockdowns of countries and other initiatives to keep out COVID-19 from spreading is likely to result in a further decrease in global exports.