Serbia

COVID-19, EU move to permit some international travel in addition to intra-EU travel, effects on tourism

Many countries have imposed travel restrictions on visitors from other countries during the COVID-19 pandemic. The International Air Transport Association (“IATA”) reports that there are 163 countries that have some travel restrictions and that 96 countries impose quarantine requirements. See IATA, COVID-19 Government Public Health Mitigation Measures, https://www.iata.org/en/programs/covid-19-resources-guidelines/covid-gov-mitigation/.

Travel and tourism is one of the most seriously harmed economic sectors from the global COVID-19 pandemic for many countries. The UN World Tourism Organization has created “the first global dashboard for tourism insights”. https://www.unwto.org/unwto-tourism-dashboard. The dashboard indicates that COVID-19 will result in the reduction of some 850 million to 1.1 billion tourists with a loss of US$ 910 billion to US $ 1.2 trillion in revenues from tourists with the potential loss of as many as 100-120 million jobs in the sector. These are obviously staggering figures for a sector that has contributed to global economic growth over recent decades. The dashboard has ten slides which shows data for tourism through April 2020 with some projected figures for full year 2020 under various assumptions. Data are presented both globally and for some slides by regions and in a few within regions by country. Thus, in slide 2, global tourism grew 2% in January 2020, declined 12% in February, declined 55% in March and declined 97% in April for a January-April total decline of 43.8%. By region, Europe declined 44%, Asia and the Pacific declined 51%, the Americas declined 36%, Africa declined 35%, and the Middle East declined 40%. While data for May and June are not yet available and may be less severe in terms of contraction than April, the decline in global tourism through June will likely exceed 50% and possibly be even more severe. For data through April 2020 see the link, https://www.unwto.org/international-tourism-and-covid-19.

In prior posts, I have provided background on the sector and the likely toll from the COVID-19 pandemic. See April 30, 2020, The collapse of tourism during the COVID-19 pandemic, https://currentthoughtsontrade.com/2020/04/30/the-collapse-of-tourism-during-the-covid-19-pandemic/; May 3, 2020, Update on the collapse of travel and tourism in response to COVID-19, https://currentthoughtsontrade.com/2020/05/03/update-on-the-collapse-of-travel-and-tourism-in-response-to-covid-19/.

As many countries in parts of Asia, Oceania, Europe and a few other countries have seen significant declines following first wave peaks of COVID-19 cases, restrictions within countries and increasingly on international travel are starting to be relaxed.

The European Union is a large tourist destination and on June 30 announced recommendations for member states to consider in opening up for tourists from both other EU countries and for travelers from outside of the area for nonessential travel. Specifically, the Council of the European Union adopted Council Recommendations on the temporary restriction on non-essential travel into the EU and the possible lifting of such restriction on 30 June 2020. See https://data.consilium.europa.eu/doc/document/ST-9208-2020-INIT/en/pdf. Intra EU travel, travel from Norway, Iceland, Switzerland, Liechtenstein and certain other countries is not part of the third country nonessential travel affected by the recommendations (to the extent adopted by EU members).

The EU Council selected third countries whom the Council recommended have access based on criteria which “relate to the epidemiological situation and containment measures, including physical distancing, as well as economic and social considerations, and are applied cumulatively.” Page 6. The Council lists three critieria: (1) whether the number of new cases over the last 14 days per 100,000 inhabitants is close to or below the EU average (15 June 2020); (2) whether the trend of new cases over the prior 14 day period is stable or decreasing; and (3) considering “the overall response to COVID-19 taking into account available information aspects such as testing, surveillance, contact tracing, containment, treatment and reporting as well as the reliability of available information and data sources and, if needed, the total average score across all dimensions for International Health Regulations (IHR).” Page 6.

Based on these criteria, the EU Council recommends that 15 countries (with China being subject to confirmation of reciprocity by China to EU travelers) “whose residents should not be affected by temporary external borders restriction on non-essential travel into the EU” (Annex I, page 9): Algeria, Australia, Canada, Georgia, Japan, Montenegro, Morocco, New Zealand, Rwanda, Serbia, South Korea, Thailand, Tunisia, Uruguay and China. The Council may review every two weeks whether the list should be modified.

Annex II to the Council recommendations provides an identification of travelers with essential functions for whom the restrictions should not apply. These include healthcare professionals, health researchers, and elderly care professionals, frontier workers, seasonal workers in agriculture, transport personnel, diplomatic personnel, passengers in transit, passengers traveling for “imperative family reasons,” seafarers, third-country nationals traveling for the purpose of study and a few others. Annex II, page 10.

The EU Council Recommendations are embedded below as is a Council press release on the recommendations.

ST_9208_2020_INIT_EN

Council-agrees-to-start-lifting-travel-restrictions-for-residents-of-some-third-countries-Consilium

Obviously many countries are not included on the list of third countries where loosening of restrictions on travel is recommended. The United States, Argentina, Brazil, India, Indonesia, Malaysia, Nigeria, Russia, Saudi Arabia and South Africa are just a few for whom nonessential travel restrictions are not recommended to be lifted. For most of these countries, either the number of new cases has not peaked or has not receded significantly.

For the EU, getting agreement among its members to lift travel restrictions for other EU countries and to start lifting restrictions for travelers from thrid countries has been important as the summer holiday season of July-August arrives. Data from EU tourism statistics showed 710 million international visitors in 2018 (when there were 28 EU members, including the UK). 81% or 575 million visitors were intra-EU, that is traveling from one EU country to another. Thus, for the EU, the biggest return of tourism business involves reopening to travelers from other EU countries. By contrast, visitors from third countries in total were some 19% of the total or 135 million visitors. The US accounted for 11.6% of third country visitors in 2017, some 15.7 million in number. While an important source of third country tourists, The U.S. was just a little over 2.2 percent of total EU global visitors. See http://www.condorferries.co.uk (tourism in Europe statistics). Thus, for tourism, the EU’s reopening recommendations will not return travel and tourism to pre-COVID-19 levels. But the partial reopening could result in a significant rebound in its tourism sector which will be good news for EU businesses involved in the travel and tourism space. Time will tell just how much of a rebound actually occurs.

For other nations, the more countries who get COVID-19 under control and are thus able to open international travel and tourism responsibly, the greater the likely rebound in global travel and tourism will be. However, because many businesses in the travel and tourism space in any country are small businesses, the risk for many countries (whether in the EU or elsewhere) is that the rebound whenever it occurs will happen with a much smaller business base to serve customers. While governments can provide targeted assistance through legislative initiatives, operating conditions for many such businesses post opening do not permit profitable operation where social distancing and other important steps remain critical to safe functioning. So unlike other global crises in the past, there may be large and permanent job losses in the travel and tourism sector flowing from COVID-19.

Export restraints vs. trade liberalization during a global pandemic — the reality so far with COVID-19

The number of confirmed coronavirus cases (COVID-19) as of March 26, 2020 was approaching 500,000 globally, with the rate of increase in cases continuing to surge in a number of important countries or regions (e.g., Europe and the United States) with the locations facing the greatest strains shifting over time.

In an era of global supply chains, few countries are self-sufficient in all medical supplies and equipment needed to address a pandemic. Capacity constraints can occur in a variety of ways, including from overall demand exceeding the supply (production and inventories), from an inability or unwillingness to manage supplies on a national or global basis in an efficient and time responsive manner, by the reduction of production of components in one or more countries reducing the ability of downstream producers to complete products, by restrictions on modes of transport to move goods internationally or nationally, from the lack of availability of sufficient medical personnel or physical facilities to handle the increased work load and lack of facilities.

The reality of exponential growth of COVID-19 cases over weeks within a given country or region can overwhelm the ability of the local health care system to handle the skyrocketing demand. When that happens, it is a nightmare for all involved as patients can’t be handled properly or at all in some instances, death rates will increase, and health care providers and others are put at risk from a lack of adequate supplies and protective gear. Not surprisingly, shortages of supplies and equipment have been identified in a number of countries over the last three months where the growth in cases has been large. While it is understandable for national governments to seek to safeguard supplies of medical goods and equipment to care for their citizens, studies over time have shown that such inward looking actions can be short sighted, reduce the global ability to handle the crisis, increase the number of deaths and prevent the level of private sector response that open markets would support.

As we approach the end of March, the global community receives mixed grades on their efforts to work jointly and to avoid beggar-thy-neighbor policies. Many countries have imposed one or more restraints on exports of medical supplies and equipment with the number growing rapidly as the spread of COVID-19 outside of China has escalated particularly in March. Indeed, when one or more countries impose export restraints, it often creates a domino effect as countries who may depend in part on supplies from one or more of those countries, decides to impose restraints as well to limit shortages in country.

At the same time, the G-7, G-20 and others have issued statements or other documents indicating their political desire to minimize export restraints and keep trade moving. The WTO is collecting information from Members on actions that have been taken in response to COVID-19 to improve transparency and to enable WTO Members to identify actions where self-restraint or roll back would be useful. And some countries have engaged in unilateral tariff reductions on critical medical supplies and equipment.

Imposition of Export Restraints

The World Customs Organization has developed a list of countries that have imposed some form of export restraint in 2020 on critical medical supplies. In reviewing the WCO website today, the following countries were listed: Argentina, Bulgaria, Brazil, Colombia, Ecuador, European Union, India, Kazakhstan, Kyrgyzstan, Russia, Serbia, Thailand, Ukraine and Vietnam. Today’s listing is copied below.

List-of-Countries-having-adopted-temporary-export-control-measures-Worl.._

While China is not listed on the WCO webpage, it is understood that they have had some restrictions in fact at least during the January-February period of rapid spread of COVID-19 in China.

While it is surprising to see the European Union on the list, the Official Journal notice of the action indicates that the action is both temprary (six weeks – will end around the end of April) and flows in part from the fact that sources of product used by the EU had been restricting exports. The March 15, 2020 Official Journal notice is attached below.

EC-Implementing-Regulation-EU-2020-402-of-14-March-2020-making-the-exportation-of-certain-products-subject-to-the-production-of-an-export-authorisation

Professor Simon Evenett, in a March 19, 2020 posting on VOX, “Sickening thy neighbor: Export restraints on medical supplies during a pandemic,” https://voxeu.org/article/export-restraints-medical-supplies-during-pandemic, reviews the challenges posed and provides examples of European countries preventing exports to neighbors — Germany preventing a shipment of masks to Switzerland and France preventing a shipment to the U.K.

In a webinar today hosted by the Washington International Trade Association and the Asia Society Policy Institute entitled “COVID-19 and Trade – A WTO Agenda,” Prof. Evenett reviewed his analysis and noted that the rate of increase for export restraints was growing with 48 of 63 actions occurring in March and 8 of those occurring in the last forty-eight hours. A total of 57 countries are apparently involved in one or more restraints. And restraints have started to expand from medical supplies and equipment to food with four countries mentioned by Prof. Evenett – Kazakhstan, Ukraine, Russia and Vietnam.

Efforts to keep markets open and liberalize critical medical supplies

Some countries have reduced tariffs on critical medical goods during the pandemic and some countries have also implemented green lane approaches for customs clearance on medical supplies and goods. Such actions are clearly permissible under the WTO, can be undertaken unilaterally and obviously reduce the cost of medical supplies and speed up the delivery of goods that enter from offshore. So it is surprising that more countries don’t help themselves by reducing tariffs temporarily (or permanently) on critical medical supplies and equipment during a pandemic.

Papers generated by others show that there are a large number of countries that apply customs duties on medical supplies, equipment and soaps and disinfectants. See, e.g., Jennifer Hillman, Six Proactive Steps in a Smart Trade Approach to Fighting COVID-19 (graphic from paper reproduced below), https://www.thinkglobalhealth.org/article/six-proactive-steps-smart-trade-approach-fighting-covid-19

Groups of countries have staked out positions of agreeing to work together to handle the pandemic and to keep trade open. For example, the G20 countries had a virtual emergency meeting today to explore the growing pandemic. Their joint statement can be found here and is embedded below, https://www.wto.org/english/news_e/news20_e/dgra_26mar20_e.pdf.

dgra_26mar20_e

There is one section of the joint statement that specifically addresses international trade disruptions during the pandemic. That language is repeated below:

“Addressing International Trade Disruptions

“Consistent with the needs of our citizens, we will work to ensure the flow of vital medical supplies, critical agricultural products, and other goods and services across borders, and work to resolve disruptions to the global supply chains, to support the health and well-being of all people.

“We commit to continue working together to facilitate international trade and coordinate responses in ways that avoid unnecessary interference with international traffic and trade. Emergency measures aimed at protecting health will be targeted, proportionate, transparent, and temporary. We task our Trade Ministers to assess the impact of the pandemic on trade.

“We reiterate our goal to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open.”

The WTO Director General Roberto Azevedo participated in the virtual meeting with the G20 leaders and expressed strong support for the commitment of the G20 to working on the trade related aspects of the pandemic. https://www.wto.org/english/news_e/news20_e/dgra_26mar20_e.htm.

Separately, New Zealand and Singapore on March 21st issued a Joint Ministerial Statement which stated in part,

“The Covid-19 pandemic is a serious global crisis.

“As part of our collective response to combat the virus, Singapore and New Zealand are committed to maintaining open and connected supply chains. We will also work closely to identify and address trade disruptions with ramifications on the flow of necessities,”

https://www.thestar.com.my/news/regional/2020/03/21/new-zealand-works-closely-with-singapore-to-maintain-key-supply.

The Joint Ministerial Statement was expanded to seven countries (Australia, Brunei Darussalam, Canada, Chile, Myanmar, New Zealand and Singapore), on March 25th and is reportedly open to additional countries joining. See https://www.mti.gov.sg/-/media/MTI/Newsroom/Press-Releases/2020/03/updated-joint-ministerial-statement-25-mar.pdf

Conclusion

When a pandemic strikes, many countries have trouble maintaining open trade policies on critical materials in short supply and/or in working collaboratively to address important supply chain challenges or in taking unilateral actions to make critical supplies available more efficiently and at lower costs.

The current global response to COVID-19 presents the challenges one would expect to see – many countries imposing temporary restrictions on exports — while positive actions in the trade arena are more limited to date with some hopeful signs of a potential effort to act collectively going forward.

Time will tell whether governments handling of the trade dimension of the pandemic contributes to the equitable solution of the pandemic or exacerbates the challenges and harm happening to countries around the world.