Impact of export controls on Covid-19 vaccine supplies and the economic case for vaccine equity
Dear Commission President,
As the institutional representative and global voice of over 45 million businesses, I am writing to express the global business community’s concern at proposals – which we understand have been tabled by the Commission this week – to impose controls on the export of COVID-19 vaccines manufactured in the European Union.
While we, of course, appreciate that the draft regulation is ultimately well intentioned, I hope that you may be willing – together with your college of Commissioners – to reflect on the negative consequences of trade restrictions on the supply of vaccines for EU citizens when viewed in a broader context.
In this connection, I would like to emphasise two important frames of reference. First, from discussions with businesses with experience operating within vaccine supply chains, we understand that the introduction of export restrictions risks creating artificial chokepoints in the manufacturing and distribution of COVID-19 vaccines – arguably undermining the core intent of the proposals to speed vaccine rollout across the EU.
As you will be aware, vaccine supply chains are inherently global in nature – indeed, some inputs required for approved COVID-19 vaccinations can only be sourced in a handful of countries. In this context, our immediate fear is that the proposed EU export controls risk triggering retaliatory actions by third countries that could very rapidly erode essential supply chains.
Such a chain of events – which seems entirely foreseeable given the rapid escalation in trade barriers on personal protective equipment at the outset of the pandemic – would have devastating implications on the supply of vaccines globally, including across EU member states.
Second, while we appreciate the clarification provided by the Commission that “humanitarian deliveries” would not be affected by the envisaged regulation, we are cognisant that vulnerable populations in many countries depend on manufacturing facilities in Europe for their supply.
Aside from the moral case for ensuring equitable access to vaccines across the world – a point you have made very eloquently in previous public interventions – I would encourage you to consider the potential effect of a prolonged pandemic in the developing world on the European economy.
In this connection, I am pleased to share with you a new study – that I launched together with the Director-General of the World Health Organization on Monday – which shows the enormous costs that risk being imposed on the real economy should the supply of vaccines remain heavily constrained in emerging markets.
Using a sophisticated model to capture the complex web of trade and production linkages between countries and across sectors, the paper – developed independently by leading economists from Harvard, Koc and Maryland universities – reveals the current scarcity of vaccines in middle- and lower-income countries risks imposing losses to global economy in the range of US$4 – 9 trillion in 2021.
Around half of these losses will be borne by advanced economies – regardless of the speed of their domestic vaccination campaigns – owing to continued supply and demand disruptions in global value chains. Worryingly, the study shows these costs would be heavily concentrated in several sectors with large employment footprints in the EU – including automotives, retail and textiles/apparel.
While we are mindful of the weight of public pressure to speed local vaccination campaigns, I hope that the research will provide a compelling “business case” for investing in cooperative efforts to distribute vaccines equitably. Simply put, only by taking a global approach to ending the pandemic can any government set the necessary foundations for a durable economic recovery at home.
I hope that this new research will be of use to you and your colleagues in considering the potential unintended consequences of any EU export controls on shipments of vaccines.
As an aside, we have also written to G20 Finance Ministers this week encouraging them to take action to ensure the ACT Accelerator is fully capitalized without delay – not as an act of generosity, but rather as an investment capable of generating significant domestic returns. Thank you for your leadership in supporting this vital initiative to date.
Please find enclosed for your attention a copy of the full study, together with a short summary for policymakers. I am, of course, available at your convenience should you wish to discuss any aspect of the report’s findings.
John W.H. Denton AO Secretary General International Chamber of Commerce