Canada seeking to keep cross-border supply chains open in face of growing COVID-19 export controls
One early casualty of the COVID-19 crisis has been the international supply chain for medical supplies and medical products. To date, governments of at least 54 countries, including India, China, the United Kingdom, the European Union (with certain exemptions and carve outs), and Russia, have enacted restrictions on the export of medical supplies and devices.
These export restrictions mainly apply to such medical devices as masks, gloves and protective suits. Yet, some countries have expanded the list. For example, the European Union, the world’s biggest global trade player, has restricted export of personal protective equipment, including protective spectacles, visors and face shields. Due to the rapid escalation of the COVID-19 crisis, the EU Regulation imposing the restriction stresses that the list might be revised. India has taken a step further and restricted export of hydroxychloroquine and formulations made from it, a drug that is used to treat malaria, on the wake of rumors that it could be a potential coronavirus drug. In the case of Russia, export bans have recently been extended to some foodstuffs.
These export controls are generally enacted because countries believe that doing so will drive supply to local hospitals and medical practitioners. Unfortunately, in some cases these bans may result in the opposite occurring – as manufacturers have only a limited market and therefore are discouraged from producing as much personal protective equipment and testing apparatus as possible. The availability of an export market can be a lucrative carrot to entice massive up-scaling of capacity.
Restrictions on exports may also lead to breakdowns of cooperation with other governments – who may view such restrictions as a “sicken your neighbour” policy – at a time such cooperation is increasingly necessary.
It is encouraging that on March 26, 2020 the Canadian government joined with the governments of Australia, Brunei Darussalam, Canada, Chile, the Republic of the Union of Myanmar, New Zealand and Singapore in issuing a declaration to confirm the need for open supply chains. This includes a specific affirmation of the need to abolish any and all export controls or other restrictions on international trade in medical devices.
One element that is common to these countries is a reliance on international trade and international markets for their goods. None of these countries has a domestic market for its products the size or scale of the European Union or the United States. With the exception of Myanmar, these countries are also all members of the Comprehensive and Progressive Trans Pacific Partnership Agreement and are already working to promote inter-party trade.
While Canada has not enacted an export ban or restriction in response to the COVID-19 pandemic, it had also not expressly ruled one out in the future. Under the Export and Import Permits Act, the Governor in Council has the authority to implement trade restrictions, including export control measures, for various reasons including to ensure that there is an adequate supply and distribution of goods in Canada.
Canada has given no indication to date that it is contemplating implementation of export controls on COVID-19 related items. This joint declaration reflects the efforts of Canada and the other countries in keeping international trade flows of medical equipment flowing and not enacting export bans. As such, it may provide some assurance to manufacturers that investments in retooling or increasing capacity will not be limited to only a Canadian market. It also reaffirms Canada’s commitment to continued movement of goods and trade throughout this crisis.