The Pandemic Protectionism Is Spreading

(Bloomberg) --

Britain’s Queen Elizabeth II on Sunday offered a vision of a world that was “united and resolute” in battling the Covid-19 pandemic.

“This time we join with all nations across the globe in a common endeavor,” she said. “We will succeed — and that success will belong to every one of us.”

It’s not what the monarch meant, of course, but the common endeavor the world is engaged in now is a protectionist one. For all the rhetoric about the united fight and the need for internal cooperation, the current obsession in almost every country is how to ban exports and hoard protective masks, clothing and ventilators.

The U.S. on Friday became the latest country to impose export controls on protective equipment, banning American companies like 3M from overseas sales.

In an era in which President Donald Trump is usually leading the protectionist wave, the U.S. is actually a laggard. Dozens of countries have imposed restrictions. China and the European Union acted weeks ago. Germany’s Angela Merkel may, like the queen, call publicly for cooperation but her government banned exports of medical equipment in early March.

To economic nationalists everywhere this is an “I told you so!” moment.

The pandemic, they argue, has exposed the false promises and underlying evil realities of international alliances and supply chains. We live in a world where every nation is for itself, they crow.

The truth is somewhat more complex and less politically potent. If there is a policy failure to learn from, it’s that governments have wasted years — and not just the early months of 2020 — in preparing for a pandemic that many predicted would arrive someday.

The U.S. federal government's inadequate stockpiles of N95 respirators and ventilators is not a failure of corporate supply chains or globalization. It’s a failure of planning for an emergency, which is the highest responsibility of governments. If we pay our taxes for any one reason, it is to be protected from calamity by our leaders, or at least our technocrats.

The quasi-black market for protective equipment exists now because of that failure. In normal times, governments are called to build up strategic reserves, whether they be of oil, grains or N95 masks, so that, in an emergency, they can be released to avoid the chaos and inflated prices and profiteering we're seeing now.

The problem now is not a lack of domestic production. That’s been made clear in the U.S. by the manufacturers from Ford and GM to Ralph Lauren who have turned their American factories to making needed equipment.

There just wasn’t a market for what is now being urgently produced beforehand because the demand wasn’t there, which gets back to the role of governments in making markets where they might eventually be needed.

What comes next? The reality check that if you throw up barriers others will too, in all likelihood.

On Saturday, the day after Trump announced his export ban on protective equipment, India imposed a ban of its own, on hydroxychloroquine, the malaria drug the U.S. president has touted as a “game changer” in the fight against Covid-19.

Trump on Saturday said he had spoken with Indian Prime Minister Narendra Modi to appeal for the release of shipments of the drug already ordered by the U.S. The best the American president could offer, though, was that he had been told India was giving his request “serious consideration.”

When one protectionist pleads with another, that’s about as good as it gets.

Charting the Trade Turmoil

Even as Asia slowly reopens after its lockdown, factories there risk running short on supplies as the virus spreads to countries that produce vital raw materials. And nowhere is the problem a bigger issue than in Africa, which provides the metals and minerals needed for just about every industrial product, and where countries heavily reliant on trade with China have been suffering from a collapse in commodity prices.

Today’s Must Reads

• Out of the blue | Across the nation, what President Trump had been hyping as a “blue-collar boom” going into November’s election is quickly turning into a blue-collar bust.
• Ground game | Airbus told employees that a return to full operations isn’t feasible in the short run because of parts shortages and an inability of struggling airlines to receive new aircraft.
• Clean hands | The maker of Purell hand sanitizer was granted exclusions from U.S. tariffs on components it imports from China, in a reversal by the Trump administration.
• Food inflation | As the pandemic penetrates more deeply into global supply chains, prices for key food staples are starting to soar in some parts of the world.
• Oil slick | Trump said he doesn’t think he’ll have to impose tariffs on imported oil to blunt the impact of a damaging price war between Russia and Saudi Arabia.
• Damage review | Samsung releases preliminary earnings Tuesday, becoming one of the first major tech companies to paint a picture of how the pandemic impacted the industry.
• Sloppy Joe | Just weeks before Brazil’s coffee harvest starts, farmers are fretting they may not have enough field hands to pick crop before beans fall from their trees and rot.

Bloomberg Analysis

• Economic plan | China's policy makers are mobilizing to steer the economy through the Covid-19 pandemic, deploying a full range of policies to contain the coronavirus and jump-start activity.
• Japan response | A declaration of a state of emergency in response to the coronavirus pandemic would heap more downward pressure on Japan's economy.
• Use the AHOY function to track global commodities trade flows.
• See BNEF for BloombergNEF’s analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
• Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.

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