Do’s and Don’ts of Trade Policy in the Response to COVID-19

OVERVIEW

Despite the initial inclination of policy makers to close borders, maintaining trade flows during the COVID-19 pandemic will be crucial. Trade in both goods and services will play a key role in overcoming the pandemic and limiting its impact in the following ways:

• by providing access to essential medical goods (including material inputs for their production) and services to help contain the pandemic and treat those affected,
• ensuring access to food throughout the world,
• providing farmers with necessary inputs (seeds, fertilizers, pesticides, equipment, veterinary products) for the next harvest,
• by supporting jobs and maintaining economic activity in the face of a global recession. Substantial disruption to regional and global value chains will reduce employment and increase poverty.

Trade policies will therefore be an essential instrument in the management of the crisis. Trade policy reforms, such as tariff reductions, can contribute:

• to reducing the cost and improving the availability of COVID-19 goods and services,
• to reducing tax and administrative burdens on importers and exporters,
• to reducing the cost of food and other products heavily consumed by the poor and contributing to the macro-economic measures introduced to limit the negative economic and social impact of the COVID19 related downturn,
• to supporting the eventual economic recovery and building resilience to future crises.

Governments with industries producing COVID-19 medical goods or food staples can further contribute by committing to refrain from limiting exports through bans or taxes. If export restrictions must be used, then they should be targeted, proportionate, transparent, and temporary.

Measures to streamline trade procedures and facilitate trade at borders can contribute to the response to the crisis by expediting the movement, release, and clearance of goods, including goods in transit, and enabling exchange of services. Reforms can be designed to reduce the need for close contact between traders, transporters and border officials so as to protect stakeholders and limit the spread of the virus, while maintaining essential assessments to ensure revenue, health and security. Interventions to sustain and enhance the efficiency of logistics operations may also be critical in avoiding substantial disruption to distribution networks and hence to regional and global value chains.