Pandemic agreements: The trade connection

Kent Jones
Professor of Economics
Babson College

The world is in dire need of a pandemic agreement, if not to manage the continuing Covid outbreaks today, then to deal with inevitable new outbreaks in the future.  The 191 members of World Health Organization (WHO) are currently negotiating a pandemic agreement, but is it enough?   It sets out to establish a legally binding accord on issues such as disease reporting requirements and distribution of vaccines, but many key WHO members are unwilling to submit to such terms on sovereignty grounds.  In addition, many of the critical pandemic issues are related to trade in vaccines, medical products, and services, which the WHO cannot negotiate within its mandate.  The pandemic negotiations should therefore include relevant trade issues, which could address many of the worst policy failures during the Covid crisis, and also make progress in WHO issues of reporting, financing and other health-related areas of cooperation.

Pandemic prevention and mitigation are the ultimate global public goods, and require global cooperative and coordinated measures that go beyond what countries acting individually can do. Trade agreements can play a role in this process by committing countries to open their markets on a reciprocal basis, gaining from the international exchange and specialization of medical products.  Such gains contribute to public health by increasing the availability of hospital masks, ventilators, vaccines and the services of medical professionals to treat and foreshorten the disease.  Many of the worst policy failures of the Covid pandemic came from a lack of cooperation on trade policy.  Import tariffs and bans on exports of medicines and medical products raised prices and reduced access to treatment for Covid victims.  Hoarding of vaccines by rich countries has denied poor countries access to them. Medical professionals were often restricted from crossing borders to help overworked nurses and doctors because of visa restrictions.  During a pandemic, the disease spreads in waves from one region to another, and a pandemic trade agreement would make it possible to assure that medical goods and services can move more freely from places where they are available to places where they are needed.

Trade negotiations on medical products would set up pandemic cooperation through a system of reciprocal benefits and obligations, neutralizing the sovereignty issue by establishing rules that benefit all participants as long as everyone follows them. The key is to identify benefit-obligation trade-offs that countries are willing to bargain for.  This feature not usually available in WHO regulations and agreements.  Enforcement could be direct, as with reciprocal import tariff reductions and bans on export restrictions.  Participants comply because a violator would lose the benefit of foreign market access if it denied similar access to its own market.

Compliance could also be enforced by cross-retaliation, as for example, when a refusal to abide by an agreed vaccine distribution program could be met by a suspension of the violator’s market access in other areas critical to its own efforts to combat the disease.  The world has become highly interdependent in terms of vaccine, therapeutics, and medical equipment supply chains, so that increasing the coverage of disease-fighting products, components and services increases the incentive of every country to abide by it. Shared sovereignty in such agreements is superior to the unilateral sovereignty of protecting one’s own markets, which would hamper a country’s access to medical products and allow the pandemic to rage outside its borders, only to return later in the form of new variants.

Pandemic trade agreements could also include cooperation in non-trade areas, including WHO regulations and financing.  For example, an “early warning” agreement might guarantee future access to vaccines and mitigation measures in exchange for compliance with WHO reporting requirements of new diseases within its borders.  Some agreements would necessarily be limited to smaller numbers of countries, as in vaccine development and production cooperation.  Vaccine distribution and other preventive measures would need to account for needed transfers from rich to poor countries. Under current World Trade Organization (WTO) provisions, more differentiated agreements on health regulations, funding and trade measures could be negotiated under special plurilateral agreements.

Achieving an effective global pandemic agreement will not be easy in a divided world. Yet in any case the negotiations will need to establish enforcement mechanisms and include the major pandemic trade issues on the agenda.  WTO-like negotiations will provide a workable framework for bargaining, enforcement and dispute settlement that will also address the ever-present sovereignty issue.

Expert article 3274

>Back to Baltic Rim Economies 4/2022

To receive the Baltic Rim Economies review free of charge, you may register to the mailing list.
The review is published 4-6 times a year.