At the time of writing, multiple new vaccines are reported to be effective in protecting against the COVID-19 infection. This heartening news signals an end to a long wait, but there is no time to be complacent: a range of policies need to be in place for the majority of the world's population to access the vaccines.
Trade is a key component of this effort. The manufacturing and distribution of COVID-19 vaccines and other medical products will rely on trade, and trade will also be crucial in fostering innovation as the world looks to build back better in a post-pandemic era.
Trade is essential to ensure access to life-saving vaccines
International trade plays an important role in ensuring that COVID vaccines and other life-saving medical goods reach those in need.
A recent WTO study mapped out the trade issues related to the COVID-19 vaccine rollout.
First is the development of effective vaccines. Cross-border exchange of scientific information and data is essential for researchers to develop the vaccines. The development of the vaccines that have proved to be effective draws on contributions from across the world.
BioNTech, the first company that announced positive results of its COVID-19 vaccine, was founded by a first-generation Turkish immigrant in Germany, in partnership with
Pfizer, a US multinational company headed by a Greek executive. The technology that the Pfizer-BioNTech and Moderna vaccines are based on,
known as mRNA, is the result of years of research by a Hungarian biochemist who worked with an American immunologist. Work on the COVID-19 vaccines started a few weeks after Chinese researchers
published the genetic sequence of the SARS-CoV-2 virus. Globalisation has allowed the world's best minds to work together in finding a solution.
Once a vaccine is developed and approved, the next step is to manufacture the vaccine at scale. Companies that hold the patents for the vaccines can license them to local companies or set up their own production facilities. The manufacturing of vaccinations is a complex process that requires coordination among many countries. Take the example of "adjuvant", a key substance common in vaccines that improves the immune response. The manufacturing of
adjuvant uses a key ingredient made of soapbark tree, found in the warm temperatures of central Chile, and is processed in Sweden before being added to the antigen in vaccines. The ability to access raw materials, components and other inputs will be crucial to expedite the production of vaccines.
The manufacturing of adjuvant uses a key ingredient made of soapbark tree, found in the warm temperatures of central Chile, and is processed in Sweden before being added to the antigen in vaccines. The ability to access raw materials, components and other inputs will be crucial to expedite the production of vaccines
Trade is not only crucial for the immediate approval and distribution of vaccines but also to ensuring that the supply chains of vaccine run smoothly. Not every country will have the capacity to produce vaccines themselves, and thus the international distribution of vaccines is crucial. As many goods pass through ports, airports or territories of other countries before reaching their final destinations, efficient customs procedures and border measures will be needed to ensure that the vaccines are safe
en route. The vaccines developed so far require refrigeration at low temperature, and predictable and expedited customs clearance are crucial to make sure that the medical consignments cross borders efficiently. Luckily, governments have agreed on a
set of rules to expediate transition at the border and have taken steps to prioritise clearance for COVID critical goods.
Trade also allows countries to more effectively use resources. No one single country can be fully self-sufficient in providing medical goods in combatting the pandemic.
A note by the WTO highlights that Germany, the US and Switzerland supply 35% of the world's medicines and medical supplies, while China, Germany and the US export 40% of personal protective products (hand sanitisers, face masks and protective spectacles). By specialising in the production of certain types of goods, countries can focus their resources on the most productive activities in the areas of innovation, research, production of basic medical products or the manufacturing of pharmaceuticals.
Trade also allows countries to more effectively use resources. No one single country can be fully self-sufficient in providing medical goods in combatting the pandemic
Trade can also act as a buffer in times of crisis
The COVID-19 pandemic also underlines that even if factories are not directly affected by the virus or quarantine measures, they nevertheless need inputs originating from a potentially affected area. A disaster happening half a planet away can be felt at home through the complex global supply chains.
Such unexpected disruptions are not rare. A
study by McKinsey Global Institute finds that companies can now expect supply chain disruptions lasting a month or longer to occur every 3.7 years, resulting from increased occurrence of natural disasters, epidemics, terrorist or cyber-attacks or trade policy uncertainty.
In response to the rising risks, many policy makers call for self-sufficiency in a time of crisis. However, self-sufficiency is not in itself a guarantee of greater security.
Research suggests that eliminating reliance on foreign production and inputs means increased reliance on domestic production, which may also be equally subject to adverse shocks.
As a matter of fact, international trade can act as a buffer in case of unexpected events by increasing the level of diversification: if a factory in one location closes, companies can swiftly switch to other suppliers in another location. By allowing countries to diversify their sources of demand and supply,
research shows that openness to international trade can reduce exposure to domestic shocks and reduce volatility. Companies with more diversified suppliers and customers are more resilient following an adverse shock such as the
2011 East Japan Earthquake.
By allowing countries to diversify their sources of demand and supply, research shows that openness to international trade can reduce exposure to domestic shocks and reduce volatility. Companies with more diversified suppliers and customers are more resilient following an adverse shock such as the 2011 East Japan Earthquake.
In the long term, international trade is also crucial to fostering innovation. As the
latest World Trade Report argues, open trade guarantees access to larger markets, giving business more reason to venture into the unpredictable endeavour of innovation; trade also allows more developing countries to access the most advanced technologies through imports of intermediates and capital goods, enabling them to participate in global value chains; trade also brings more competition, keeping companies on their toes and motivating them to keep innovating. The ability to innovate is crucial in the face of increasing shocks: digital solutions have allowed many to work from home, and
3D printing has enabled on-demand solutions for a wide spectrum of needs ranging from personal protection equipment to medical devices and isolation wards.
The COVID-19 pandemic has shown us that in an interconnected world, outbreaks in one country can easily transmit to another countries within days. No one is safe until everyone is safe. As the world is ready to roll out life-saving vaccines, international trade and cooperation are needed more than ever. A few WTO members have proposed to
reach a deal to eliminate customs tariffs for medical goods and enhance international rules and disciplines relating to essential goods in crisis situations.
The COVID-19 pandemic has been a common experience for humanity, it can also be a good reason for countries to work together in a concerted effort to prepare for the future.
(The author is a research economist at the World Trade Organization. The views expressed above belong to the author. They are not intended to represent the positions or opinions of the WTO or its members.)
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