North gets bulk of COVID-19 medical supplies – UN report

Exports of medical equipment needed to deal with COVID-19 are mainly flowing to the rich nations, with low- and middle-income countries largely missing out on the increased supply of these essential products, a United Nations report has revealed.

Lean Ka-Min

THE UN Conference on Trade and Development (UNCTAD)’s ‘Global Trade Update’ released on 21 October stated that since April 2020, trade in COVID-19 medical supplies has risen by more than 50% on average on a year-over-year basis. These supplies include personal protective equipment, disinfectants, diagnostic kits, oxygen respirators and other related hospital equipment.

‘International markets have contributed to meet the surge in overall demand for products necessary to combat the diffusion of COVID-19,’ noted UNCTAD. Exports of COVID-19 medical supplies from China, the European Union and the United States shot up from about $25 billion to $45 billion a month between January and May.

However, this increase in supply ‘has been largely to the benefit of wealthier countries’, the report pointed out. ‘There is substantial evidence that middle- and low-income countries have been largely priced out from access to COVID-19 related products. Despite efforts to facilitate access to COVID-19 supplies, trade statistics show that only a tiny fraction of the additional world production of COVID-19 related supplies [has] reached low-income countries.’

Elaborating on this, the report said that since the onset of the pandemic, each resident of high-income countries has benefited, on average, from an additional $10 per month of imports of COVID-19-related products. In contrast, the corresponding figures for middle- and low-income countries are only about $1 and $0.10 respectively.

‘In other words, per capita imports of the medical goods essential to mitigate the COVID-19 pandemic have been about 100 times larger in high-income countries in comparison to low-income countries,’ the report stated, describing this difference as ‘staggering’.

The report attributed this stark disparity not only to the differences in income but also to the pandemic’s impact on government budgets. ‘While the wealthiest countries have been able to mobilise resources so as to increase healthcare spending, many poor or highly indebted countries have found themselves with little budgetary space to do so. It is very possible that without additional funding sources, the pandemic will remain unchecked in many parts of the world with negative repercussions on the global economy, including international trade. This also indicates that the COVID-19 pandemic may exacerbate pre-existing social and economic inequalities.’

Beyond medical equipment, the need for equitable access to supplies is, if anything, even more pressing when it comes to a vaccine, which the report saw as ‘the most promising way to assuage the pandemic and revive the global economy’. However, poorer countries may be even more hamstrung in their ability to secure access to a vaccine than in the case of other COVID-19 medical products. This, explained the report, is because some low-income countries are at least capable of manufacturing some protective equipment domestically but lack the production and logistic capacities for vaccines.

Warning that current initiatives to make vaccines available in developing countries may be insufficient, the report underlined the need ‘to mobilise additional funding to fight the COVID-19 pandemic in developing countries and to support financial mechanisms, such as the global COVAX initiative, to provide safe and effective COVID-19 vaccines to poor countries’.

Wider trade trends

The expanded trade in COVID-19-related goods is reflected in the sectoral trade figures published in the UNCTAD report. The textiles and apparel sector, which includes protective gear such as masks, recorded increases in global trade value of 3% and 6% in the second quarter (Q2) of 2020 and in July-August 2020 respectively compared with the corresponding periods of 2019.

In addition, with the pandemic leading more people to work from home, the demand for home office equipment has propelled increased trade in the office machinery and communication equipment sectors.

These sectors bucked the general downward trend which saw, for example, the value of international trade in the automotive and energy sectors effectively halving between the second quarters of 2019 and 2020. Over the same timeframe, there were also significant trade declines in the chemicals, machineries, metals and ores, and precision instruments sectors, as the economic disruptions triggered by COVID-19 hit hard.

Overall, according to the report, global trade plunged some 19% in the second quarter of 2020 in comparison with the same period the previous year. Preliminary data for the third quarter of 2020 did show a rebound from the second quarter, but global trade growth remained in negative territory at -4.5% on a year-over-year basis.

Leading indicators such as the Purchasing Manager Indices (PMIs) still signal substantial uncertainty for international trade in the coming months, cautioned the report. ‘It is expected that Q4 2020 will remain on a negative trend, about 3% lower than in Q4 2019. However, this figure is still very uncertain due to persistent concerns about the effects of COVID-19 on economic activity in the coming months, which may result in a double dip trend.’

For 2020 as a whole, UNCTAD expected global trade to fall by about 7%, on the assumption that the trend observed in Q3 continues into Q4. However, if there is a resurgence of the pandemic and sudden increases in trade-restrictive policies, global trade could shrink by some 9%.

Developing and developed countries alike were similarly affected by the sharp and widespread decline in international trade in Q2 2020, the report found, although trade in developed countries fell marginally faster. Developed-country imports and exports dropped 20% and 22% respectively during this quarter on a year-over-year basis, compared with 18% and 17% dips for developing countries. South-South trade among developing countries was relatively more resilient, decreasing by some 16% in Q2 followed by an 8% decline in July.

While all regions of the world suffered falls in trade in Q2, East Asia took a lesser hit, according to the report. Its exports contracted by 9% even as other regions experienced double-digit drops. This contrast was even more pronounced in July, when its exports and imports shrank by just 1% and 4% respectively. At the other end of the scale, the West and South Asia region was the worst hit, registering 41% and 35% dives in exports and imports respectively in the second quarter of the year.

East Asia’s relatively better performance was likely to have been driven to a large extent by China’s trade patterns, which the report said diverged from other major trading economies. ‘After falling in the early months of the pandemic, Chinese exports stabilised in Q2 2020 and rebounded strongly in Q3 2020, with year-over-year growth rates of almost 10%. Overall, the level of Chinese exports for the first nine months of 2020 was comparable to that of 2019 over the same period. On the import side, the Chinese demand for imported products recovered following a decline in Q2 2020. Contrary to other major economies, Chinese imports stabilised in July and August then  grew  substantially  in September.’           

*Third World Resurgence No. 345/346, 2020, pp 37-38