3.1 RTA cooperation during the COVID-19 pandemic

gone further by including protocols on the acceptance of good manufacturing practice (GMP) for pharmaceutical products and the acceptance of GMP certificates issued by authorities they recognize as equivalent. These RTAs also include provisions for discussion on standards, regulations, and conformity assessment procedures through committees or subcommittees. These institutional mechanisms—and more generally the regular interaction between member-state governments—can facilitate joint action to respond to shared emergencies (box 3.1).

Box 3.1 RTA cooperation during the COVID-19 pandemic

Several regional trade agreements (RTAs) took concerted action to facilitate trade during the COVID-19 pandemic. They reduced tariffs and certain impediments to trade associated with nontariff measures such as the World Trade Organization’s (WTO’s) Sanitary and Phytosanitary (SPS)a and Technical Barriers to Trade (TBT) Agreement provisions; maintained open trade channels and simplified customs procedures; and offered longer-term financial and other support for businesses and small and medium enterprises.

For example, in June 2020, the Eurasian Economic Union (EAEU) temporarily lifted tariffs on a range of medical products and personal protective equipment, and its move to simplify SPS and TBT requirements was joined by others such as the Pacific Alliance (Chile, Colombia, Mexico, and Peru) and the Southern Common Market (MERCOSUR). The Pacific Alliance in 2021 eliminated TBT requirements for medical devices and domestic cleaning products among the parties.b The European Union (EU) and MERCOSUR also tried to keep trade channels open by establishing “green lanes” or “green channels.”c EU members also agreed to follow a centralized procurement procedure for COVID-19 vaccines.

EU members avoided an outright ban on exports of vaccines and agreed instead on an export authorization mechanism. The EAEU Council also lifted a ban on exports of products including hospital sheets, certain types of textiles, cotton wool, and adhesive bandages.

Longer-term policies to facilitate trade and provide financial support have included the following: • European Union: The EU enacted the €50.6 billion Recovery Assistance for Cohesion and the Territories of Europe (REACT-EU) programd to support the recovery from the pandemic and provided additional funding through the European Investment Fund. The EU, which already had a comprehensive recognition scheme for recognizing the qualifications for health professionals, issued new recommendations during the pandemic: “Guidance on Free

Movement of Health Professionals and Minimum Harmonisation of Training Requirements in • Relation to COVID-19 Emergency Measures” (EC 2020b). Pacific Alliance: The trade bloc issued a “Plan of Action against COVID-19” in April 2020 that includes exchange of information; trade facilitation; support for market access and the tourism sector; and a focus on digital transformation, including for education (PA 2020). The plan was funded through the group’s Cooperation Fund. • ASEAN: In November 2020, members of the Association of Southeast Asian Nations (ASEAN) signed a “Memorandum of Understanding (MOU) on the Implementation of Non-Tariff Measures

(Continued)

Box 3.1 RTA cooperation during the COVID-19 pandemic (Continued)

(NTMs) on Essential Goods” under its Hanoi Plan of Action on Strengthening ASEAN

Economic Cooperation and Supply Chain Connectivity in Response to the COVID-19

Pandemic (ASEAN 2020a, 2020b). It commits members to refrain from imposing restrictive trade measures on more than 150 essential goods and supplies (mostly medical goods based on a list maintained by the World Customs Organization and

World Health Organization) except in public health emergencies.

For several regional groups, the use of digital technologies has played a key role in both trade facilitation during the pandemic and as part of a longer-term strategy. The ASEAN Comprehensive Recovery Framework (ACRF), with its supportive ASEAN Digital Integration Framework (ADIF), identifies priority areas such as facilitating digital trade and enabling seamless digital transactions. The Pacific Alliance’s Digital Agenda Group adopted a road map to accelerate the region’s digital agenda (PA 2017). The EAEU’s Strategy-2025 also includes digital initiatives in health care and the development of a common market for medicines and medical devices.

a. The SPS Agreement refers to the WTO Agreement on the Application of Sanitary and Phytosanitary Measures.

b. Steps taken include a common definition for medical devices, mutual recognition of the parties’ sanitary registration of low-risk medical devices (procedure still to be agreed on), and good manufacturing practice requirements. c. “Green lanes” are defined as lane border crossings open to all freight vehicles, whatever goods they are carrying. Under green lane or green channel provisions, crossing the border, including any checks and health screening, should take no longer than 15 minutes (EC 2020a). d. For more information, see “REACT-EU” (web page), European Commission website: https://ec.europa .eu/regional_policy/en/newsroom/coronavirus-response/react-eu/.

Regional coordination and cooperation need not be limited to RTAs. The Asia-Pacific Economic Cooperation (APEC), for example, is a forum to share good practices, coordinate responses, and cooperate to ease trade in medical goods and the movement of essential personnel.2

Challenges to trade cooperation during global emergencies

The characteristics of the market for medical goods make it challenging to sustain trade cooperation during a global health emergency. Given that demand for certain medical goods can spike in response to global emergencies, geographic concentration in supply may disrupt regular trade patterns if products are allocated to satisfy national demand first. Governments are important players: They are large buyers and also regulate the production, distribution, and consumption of medical products, which often are subject to problems of asymmetric information and market failures.

In anticipation of possible emergencies, governments may seek to guarantee the availability of essential goods. Actions may include supporting domestic production, stockpiling, diversifying supply sources, and building capacity for flexible manufacturing. However, building up or extending production capacity in essential goods requires diverting resources from other sectors, which is costly. More generally, promoting domestic production would reduce the benefits of international specialization.

During a pandemic or other crisis, a government may also take direct policy measures to avoid critical shortages of essential goods or services in the short run. For example, it may impose export restrictions on domestic producers, creating a potential conflict between trade rules and unilateral government efforts to improve health security. As discussed in the following section, trade agreements provide for such situations.

Beyond trade, governments may subsidize the development of essential products and investment to expand production capacity. Also, governments could take measures to retain health personnel to respond to an internal shortage of staff in medical establishments.

Gaps revealed during the pandemic and need for cooperation beyond trade

The pandemic revealed the critical importance of trade as a way to source medical products from countries with a comparative advantage or the capacity to rapidly scale up production. It also revealed the challenge of meeting domestic needs for essential products when global demand far outstrips global stocks and supply capacity is expanded primarily to meet local needs rather than foreign demand.

In principle, international coordination to ensure the provision of essential goods under a regime of open trade comes with large economic benefits. It can address the time inconsistency problem that occurs when a net importer of essential goods, anticipating export restrictions during a crisis, supports domestic production of products for which it lacks a comparative advantage (Leibovici and Santacreu 2021). International cooperation can also help governments avoid costly and ineffective reshoring policies as a response to a crisis by increasing the robustness of global value chains and creating systems that support information exchange and policy transparency. Cooperation in the area of pricing policies is also key to ensure universal health coverage of medical goods (box 3.2).

Trade agreements, whether multilateral or regional, are mostly designed for “normal” times. They do not include robust frameworks to guide cooperation in times of crisis and do not address the time inconsistency problem. All trade agreements include provisions for emergencies, but these generally are limited to recognizing that governments may perceive a need to restrict trade to safeguard or enhance access to essential goods or services. They permit the use of trade measures on an exceptional basis that otherwise would be prohibited.