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Export Wars Erupt as Officials Curb Supplies to Battle Virus

Export Wars Erupt as Officials Curb Supplies to Battle Virus

(Bloomberg) --

Most European Union officials proudly share little in common with Peter Navarro, the firebrand White House trade adviser who had a forceful hand in many of President Donald Trump’s most aggressive trade moves over the past three years.

But on Sunday the EU took a page right out of the Navarro Pandemic Playbook by imposing strict limits on exports to places outside the EU of face masks, visors and other protective equipment needed by medical personnel to fight the Covid-19 outbreak.

The restrictions on exports are part of an effort to remove intra-EU barriers on the movement of protective equipment introduced by Germany and other member states in recent weeks that would have been a blow to the EU’s free-trading single market.

The unsubtle message sent by those German moves was that there is a limit to unity in any union. Which is not hard to grasp in a crisis. In the amazing times we now live in it is fair rather than far-fetched to imagine a scenario here in the U.S. where amid an unchecked epidemic, with supplies running low, Texas health authorities, for instance, bow to a local panic and start banning interstate shipments of face masks to Oklahoma and vice versa. Or California puts similar restrictions on crucial medicines.

Navarro raised a lot of eyebrows when he warned that such fights over key equipment loomed and told Fox Business Network on Feb. 23: “People need to understand in crises like this, we have no allies.” But what then seemed potentially alarmist now looks like foresight.

None of that is good, of course. All these moves may be temporary. But they are bound to have longer lasting consequences. Any protectionism can look eminently sensible in the short run — depending on where you live — but it will inevitably weaken efforts to combat the next truly global health crisis.

Navarro told the New York Times last week that the Trump administration was working on an executive order that would tighten ‘Buy American’ rules and encourage more domestic production of medical products.

The goal is to reduce the U.S.’s dependence on China. Yet there’s always a flipside.

As Chad Bown of the Peterson Institute for International Economics pointed out on Friday, the Trump administration’s tariff attack on China over the past two years may have actually hampered preparations for this health crisis by reducing imports of vital equipment ahead of it. Moreover, the pivot away from China to other countries for imports of some products just left new vulnerabilities. Among them: U.S. imports of CT scan systems from the EU that are now vital for the diagnosis and treatment of the coronavirus.

The EU hasn’t yet put export controls on CT systems. But what if, after three years of hectoring and tariffs from the U.S., it decided it has had enough, and did some day? Or what if politicians in Amsterdam, Berlin or Paris simply put pressure on European companies not to fulfill rush orders from U.S. buyers?

The mass effort at “social distancing” underway will hopefully shorten the length of the outbreak, and flatten the infection curve. Some of the export measures being deployed are intended to do the same for countries rightly eager to protect their own citizens.

When you are fighting a virus that crosses borders easily and has led to a global crisis, though, it’s unclear that trade restrictions will benefit anyone in the long run. After two years spent learning about tariffs on imports and their unintended consequences as well as technology wars and their side effects, it looks like we’re going to get a new rush of trade lessons on national security and pandemics.

Charting the Trade War

Export Wars Erupt as Officials Curb Supplies to Battle Virus

India’s trade deficit narrowed in February as exports snapped a six-month losing streak. The gap between exports and imports was $9.85 billion last month, compared with $15.2 billion in January.

Today’s Must Reads

  • Industrial shutdown | China suffered an even deeper slump than analysts feared at the start of the year as the coronavirus idled factories, shops and restaurants across the nation.
  • Emergency room | The Federal Reserve took fresh steps to save the shuttered U.S. economy, slashing its benchmark interest rate close to zero and promising to boost its bond holdings by at least $700 billion.
  • European talks | Coronavirus paired with the British government’s pledge complete a Brexit trade deal with the EU by year end risk overwhelming businesses. Something may have to give.
  • USMCA rush | Canadian lawmakers passed an overhaul of its free-trade deal with the U.S. and Mexico on Friday at the same time that they suspended their session for five weeks due to coronavirus.
  • Arrival restrictions | Beijing will quarantine all travelers from overseas, including Chinese citizens, at designated locations for 14 days as the government shifts its focus to limiting imported virus cases.

Economic Analysis

  • Deeper hole | The coronavirus outbreak has resulted in a crunching 1Q contraction in China’s economy. 
  • Export jump | Indonesian trade strength eases interest-rate dilemma for nation’s central bank.

Coming Up

  • March 17: Japan trade balance
  • March 18: EU trade balance
  • March 23: South Korea imports/exports

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Zoe Schneeweiss

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