DEPUTY DIRECTOR-GENERAL ALAN WM. WOLFF

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Geopolitics and Economy: Impact on global businesses and the Health & Healthcare industry During the Current Pandemic

Remarks of Alan Wm. Wolff, Deputy Director-General, World Trade Organization

World Economic Forum, Health and Healthcare Industry Action Group (virtual meeting), 12 November 2020

  • The pandemic, like climate change, is a global problem and it requires a global solution.
  • In this regard, the world trading system faces two immediate challenges:
    • To facilitate cross border trade in essential goods and services to deal with COVID-19, and
    • To support the global economic recovery.

The WTO has provided since early in the pandemic the information needed for national governments to make more informed decisions.  This was a factor in the pull-back from the imposition of export controls on food, for example. 

More is needed.

  • Tariffs on pharmaceuticals and medical supplies should be removed.
    • The 1996 Pharmaceutical Agreement should be updated (last done in 2010) to increase product and country coverage (which has dropped from 90% to 66% of world trade).
    • Medical supplies should be included.
  • Medical equipment should be included in an immediate update of the Information Technology Agreement which provides for duty-free treatment.
  • Export controls should be subject to an agreed code of conduct.
    • Countries imposing export restrictions should first consider their impact on other countries before imposing the controls.
    • Where feasible, prior notice should be given.
    • An opportunity to consult should be offered.
    • Export controls should be time-limited, tied to need, objectively determined.
    • Immediate international review of export restrictions should be provided for.
      • When export controls are being considered, both countries and businesses should recognize that they would pay a high price in terms of future participation in the world economy were they to become unreliable suppliers.
  • The WTO Secretariat needs to be given the resources and mandate to make its monitoring far more complete.
  • Cross-border telemedicine/e-health should be facilitated during the pandemic.
    • The crisis has stimulated a surge in the use of telemedicine services.
    • Health care providers have increasingly been seeking to provide services across borders, either to foreign patients, or more commonly to foreign colleagues or foreign health institutions (e.g. tele diagnosis, teleradiology, second opinions).
    • International cooperation at the governmental level, in particular among health, IT, telecommunications and trade policymakers (as well as the industry), is needed to address the challenges of a reliable and sustained increase supply of services related to telemedicine.  The first goal is to provide  patient access to essential services while ensuring safety and privacy.  Issues to be addressed involve registration, licensing, qualifications, and their recognition. There is need for more regulatory cooperation, in particular to address the divergence of regulations, improve transparency, provide more certainty for services suppliers active in the field of health-related services.
  • WTO negotiations will ultimately have to address data flows, privacy, data storage/server localization, new services market access commitments that will have a direct impact on the remote provision of health services — especially if such provision is across borders.
    • The evolution of digital trade may blur the boundary between Goods and Services.
      • For example, is a X-ray that would, in the past, be transmitted on a plastic support - but is now simply transmitted across borders electronically, a «digitized good» that may be subject to a duty — if Members agree that the Moratorium covers «content » and the Moratorium on duties on electronic transmissions is not extended or made permanent.
        • What about a 3D printable hip replacement or an orthopaedic cast transmitted electronically across borders?

On innovation and trade

  • It is imperative to maintain the free exchange across borders of ideas, inputs, and financing to help generate new ideas and technologies.
    • This has been dramatically demonstrated in the case of the Pfizer-BioNTech collaboration on a promising new COVID-19 vaccine.
    • The vaccine, which takes a never-before-used approach to inducing an immune response, was developed by a German company called BioNTech. That company did not have the resources to do clinical trials, so it teamed up with US pharma giant Pfizer to develop the vaccine.  BioNTech is listed on the NASDAQ exchange in New York, and has also received funding from the German government, the European Investment Bank, and Fosun, a Chinese investment conglomerate. The company’s founder is the son of a Turkish autoworker who moved to West Germany to build cars on a Ford assembly line.
    • We can only hope that this and other vaccines will prove effective and scalable. But we can be sure of two things:
      • In a world of less-open borders, innovation would be slower.
      • Without meaningful international cooperation, it will take much longer to scale up the production and deployment of vaccine kits around the world — meaning more deaths, longer disruption to children’s education, and more economic damage.
    • With respect to intellectual property, an optimal balance needs to be struck between private rewards and public benefits in the shape of lower prices and the ability to stand on the shoulders of first movers for follow-up innovation.
    • Governments, international agencies and philanthropic organizations have set up a number of initiatives to speed up the development and deployment of vaccines, therapies and diagnostics. To succeed, however, they will need more funding, and just as importantly, co-operation with respect to the equitable sharing of supplies as they become available.
    • Solutions cannot be both workable and limited in terms of availability.

On the feasibility of localization

  • Trade this year has proved to be essential to meet the world's needs for medical supplies.  National stockpiles proved inadequate. Investment was only part of the answer. 
    • Trade played a critical role in meeting the vastly increased demand for medical goods and medicines. WTO data show that trade in personal protective equipment (PPE) more than doubled from May 2019 to May 2020.  It was a key factor in creating supply resilience, even though some shortages persist even in advanced economies.
    • Purely domestic supply chains would have been unable to meet a surge in demand of the suddenness and magnitude experienced.  Export controls may have exacerbated the problems, even though many have been subsequently rolled back.
    • It appears that the shock persisted in policymakers’ minds in many countries, following initial calls for re-shoring manufacturing production for key products.
    • Supporters of localization tend to portray it as risk-free. This is wrong. Concentrating industry at home might insulate it from turbulence elsewhere, but the domestic sources of supplies are more vulnerable to localized disruptions, such as from a hurricane or an outbreak of disease. In addition, the economics dictate that complete self-sufficiency is unworkable for any country, rich or poor.
    • Deep and diversified international markets offer the most promising and cost-effective path to supply resilience. But its viability will hinge on whether countries and their citizens feel that international markets can be trusted in a crisis

On reliance on global supply chains

  • Economics will be the key determinant of the resilience of international supply chain. 
  • If countries can be confident that they will be able to rely on international markets for imports when they need them, they will have less reason to restrict exports.
    • The preliminary evidence suggests that moves to diversify supply chains have primarily seen production shift from one low-cost country to another.
    • Increasingly sophisticated machines have already been diminishing the importance of labor cost arbitrage in the choice of manufacturing location.
    • Productivity will be a key determinant of which firms are able to go compete internationally.
    • A few years ago, the Brookings Institution looked at five key determinants of the manufacturing environment: 1) overall policies and regulations; 2) tax policy; 3) energy, transportation, and health costs; 4) workforce quality; and 5) infrastructure and innovation. It is instructive that when the study made recommendations for how to improve the manufacturing environment, at the top of their list was political and economic predictability, including open trade policies.
    • On shoring and near-shoring have to obey these economic rules if they are going to play an increasing role in national choices.

On geostrategic tensions and global trade

  • The fact that the trade relationship between the United States and China is fraught with mistrust and difficulties, and that the U.S. and Europe are busily imposing increased tariffs arising out of the Boeing-Airbus dispute, is no basis on which to assume that it will be impossible for those with either sustained or temporary difficulties to work together against a common threat.
    • Throughout history, this has been true of rivals.  A prime example is the composition of the allies during the Second World War.
    • Today we confront enormous health and economic challenges, not to mention a growing climate crisis. These crises demand collective responses.
    • Trade and trade policy cannot alone solve today’s problems. And they are likelier to reflect geopolitical tensions than to resolve them. But trade can contribute to solutions. All countries have substantial common interests. International institutions like the WTO exist to make it easier for governments to pursue shared interests. Rivalry should not become an excuse for inaction.

The role of those in the industry

  • Producers of essential goods, medicines and vaccines and suppliers of healthcare services must be relied upon to help craft public policies that meet the challenge of the pandemic. 
  • You have an opportunity to shape international understandings that will promote international co-operation to deliver the most effective responses to COVID-19 globally. 
  • Our Member governments and we in the WTO Secretariat need your active engagement.

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