Policy Responses to COVID-19: Lessons for the Global Trade and Investment Regime

As COVID-19 has taken millions of lives around the globe, governments everywhere have attempted to quickly mobilize to mitigate the health, social and economic impacts of the pandemic. COVID-responsive policy interventions ranging from subsidies to trade restrictions, and investment measures to government procurement initiatives, have taken precedence over traditional policy preferences that would favor market-oriented approaches. In many cases, these emergency measures could contravene the trade rules embodied in World Trade Organization (WTO) agreements, as well as other free trade and international investment agreements.

From a trade policy perspective, the interventions taken to mitigate the impact of COVID-19 present an important opportunity to identify aspects of existing trade rules that may interfere with appropriate pandemic crisis responses and areas where those rules should be reformed. These mitigation actions taken by governments should be viewed as a reflection of a variety of tensions and tradeoffs, namely between national-level and global-level health needs, between private interests in profits and expansion of market share and public interests in broad-based access to diagnostics, treatment and vaccines and between the need for efficiency in manufacturing and distribution of COVID-19 products and their equitable availability.

A new journal article in Globalization and Health from members of the Working Group on Trade Treaties and Access to Medicines investigates the relationship between global trade and investment rules and government policy responses by a sample group of six large countries – the United States, Germany, France, China, South Africa and India. It seeks to test whether the current rules, had they not been ignored or violated, would have constrained the policy space in which governments were operating and whether there remains a risk of legal challenge in international tribunals for the present suite of crisis measures.

Key findings:

• All of the countries in the study implemented trade measures, whether anti-dumping measures, or some form of export and import restrictions to maintain control over domestic supply of essential and strategic products. Similarly, measures to more tightly regulate foreign investment became commonplace in several countries in our study.
• Subsidies were the most common form of intervention to support both the pharmaceutical industry and the economy more generally, as demand for COVID-19 products skyrocketed and much of the rest of the economy struggled to maintain stability.
• The US and India wielded their purchasing power to secure access to treatments and vaccines through public procurement.
• Only France and Germany pursued policy changes to intellectual property protection through changes in legislation related to compulsory licensing.
• China, India and South Africa relied relatively more heavily on tariffs and quantitative restrictions than subsidies, possibly due to fiscal resource constraints.
• India deployed the greatest number of distinct types of interventions, with 31 distinct types in 170 interventions.
• South Africa used the fewest distinct types of interventions, at 10 distinct types in 33 interventions.
• The US implemented the most measures of any country studied, with 476 interventions.
• Perhaps a surprising outlier, China implemented the fewest number of policy interventions at 32, which may suggest either that China had existing measures in place to mitigate the pandemic effects, or that the particular interventions invoked by the Chinese government were not included in the dataset due to availability.
• The existing global rules constrain many of the policy interventions catalogued, including subsidies, tariffs, government procurement and export restrictions.

Given the potential constraints global trade and investment rules present to policymaking and considering the tensions and trade-offs in policymaking decisions, the report proposes policy recommendations along three trajectories: to end the COVID-19 pandemic; to build long-term health resilience globally; and to facilitate general economic development and resilience world-wide. These recommendations would require changes at both the global institutional level and within the domestic policies of individual countries, as well as action in the near- and long-term.

In all, the authors find the tension between government policy interventions and the rules of international trade and investments has risked greater health inequality around the world, not to mention economic instability and widening the gap between low- and high-income countries. Rather than constrain, trade and investment agreements should recognize that government actions to protect human well-being, achieve greater social equity and protect the planet are higher order priorities and as such, should be exempt from challenges under those agreements.

A previous version of this journal article was published as a report in November 2021.