PPE and free trade to better tackle COVID-19 in ASEAN
Author: Sithanonxay Suvannaphakdy, ISEAS–Yusof Ishak Institute The Special ASEAN Summit on 14 April emphasised the need for a collective response from ASEAN to COVID-19 that involves keeping the regional bloc’s markets open to trade. As ASEAN member states deploy all possible instruments to combat the pandemic, trade can serve as a powerful, low-cost tool to […]
Author: Sithanonxay Suvannaphakdy, ISEAS–Yusof Ishak Institute
The Special ASEAN Summit on 14 April emphasised the need for a collective response from ASEAN to COVID-19 that involves keeping the regional bloc’s markets open to trade. As ASEAN member states deploy all possible instruments to combat the pandemic, trade can serve as a powerful, low-cost tool to improve access to personal protective equipment (PPE) needed by healthcare workers. Following an indicative list of COVID-19 medical supplies published by the World Customs Organization, PPE products include five product groups — gloves, hair covers, face masks, goggles and gowns.
The total number of confirmed cases in ASEAN rose by 59 per cent from 16,749 on 10 April to 26,631 on 19 April, while the total number of deaths rose by 75 per cent from 620 to 1084 over the same period. Health care systems are being overwhelmed by patients seeking testing and care, which has increased demand for PPE. Hospitals in Malaysia have increased their usage of PPE during the COVID-19 period by more than twice the amount used in the pre-COVID-19 period.
The overwhelming demand for PPE by healthcare workers and the rise of bulk buying by the public has also led to price exploitation by sellers. Despite price control measures in Thailand, the price of face masks sold on Facebook was about five times higher than the limit set by the Thai government. On the supply side, some member states that can produce PPE still face shortages as COVID-19 containment measures prevent workers from working in the factories that are producing these products.
Some exporters to member states have also limited their PPE exports. On 12 March, Germany — one of the top five global exporters of PPE products — imposed an export licensing requirement on certain PPE products due to anticipated COVID-19-induced shortages in the country, although it has relaxed its export curb to a certain degree since 20 March. On 17 March, the Indonesian government also imposed an export curb on PPE products, which will last until 30 June.
Due to a lack of PPE supplies, some member states have sought assistance from international organisations and other countries. The World Health Organization has provided PPE supplies to four member states: Cambodia, Laos, Myanmar and the Philippines. China, the United States and Vietnam have also donated PPE supplies to Laos. But as the number of confirmed cases in ASEAN grows, bilateral assistance from international organisations and other countries is unlikely to meet demand for PPE products. An alternative is to source PPE through foreign trade.
In the pre-COVID-19 period, member states not only produced PPE products to trade regionally, but also exported them to the rest of the world. UN trade data for 2018 reveals that at least one member state was listed in the top five global exporters of each type of PPE. This includes Malaysia and Thailand for gloves, and Vietnam for gowns, hair covers, masks and gloves.
The total value of global PPE exports was US$47.5 billion in 2018. The majority of such export was in gloves, masks and gowns. More than 60 per cent of these exports were accounted for by the top five exporters.
ASEAN trade data for 2018 reveals that not every member state produces all the PPE products needed by their healthcare workers. Thailand and Vietnam were net importers of masks, while Cambodia and Indonesia were net importers of both goggles and masks. Specialisation in producing particular PPE products means that an individual member state cannot necessarily produce all needed PPE products by itself. The ability to source PPE from within and outside the region is critical.
But the importation of PPE in ASEAN has been constrained by tariffs and non-tariff measures (NTMs). The ASEAN Tariff Finder database reveals that most member states impose relatively high most-favoured-nations (MFN) tariffs on imported surgical masks from countries which do not have a free trade agreement with ASEAN. The MFN tariff rate on surgical masks, for example, is 10 per cent in Indonesia, Laos and Thailand, 15 per cent in Myanmar and the Philippines, and 20 per cent in Malaysia.
Another type of import barrier is the presence of NTMs. The UNCTAD NTM database reveals that member states impose such measures on imported gas masks, ranging from 3 measures in Cambodia to 16 measures in Malaysia. These measures include technical barriers, price control measures and quantity control measures. The price and quantity control of imported PPE products can translate into higher prices, which increases public expenditure on healthcare interventions.
Any policy to improve the effectiveness of public health interventions to tackle COVID-19 and to mitigate price exploitation by sellers should aim at stimulating production and facilitating trade of PPE products.
Export restrictions can jeopardise cooperation among member state governments, erode trust and result in retaliation. These restrictions can also result in the loss of future export sales abroad, which discourages local firms from ramping up production and investing in new capacity. In addition to promoting domestic production and exports, member states should also facilitate the importation of PPE products by streamlining NTMs and eliminating tariffs on PPE imports from non-member states. This would lower the costs of imports from ASEAN’s trading partners.
Working together, member state governments could quickly and cheaply implement trade reforms to sweep away tariff and non-tariff barriers which impede trade flows of PPE products reaching member states where they are desperately needed.
This is not a call for regional negotiations. Governments can act unilaterally, bilaterally or in groups, with some member states joining later as momentum builds. Trade reform requires bottom-up as well as top-down initiative if ASEAN is to respond to the COVID-19 outbreak in a timely manner.
Sithanonxay Suvannaphakdy is Lead Researcher (Economic Affairs) at the ASEAN Studies Centre of the ISEAS–Yusof Ishak Institute, Singapore.