Export Restrictions in Response to the COVID-19 Pandemic

Export Restrictions in Response to the COVID-19 Pandemic

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Updated April 23, 2021
Export Restrictions in Response to the COVID-19 Pandemic
Overview of Export Restrictions
certain medical gloves, without explicit approval from
In response to the Coronavirus Disease 2019 (COVID-19)
FEMA. The rule included various exemptions, including
pandemic, countries all over the world, including the United
exports of subject goods that are destined for either Canada
States, imposed temporary restrictions on exports of certain
or Mexico. The rule also required FEMA to consider the
medical goods and some foodstuffs in order to mitigate
need to minimize disruption to supply chains, the
potential shortages of key supplies. According to the World
humanitarian impact of a restriction, as well as other
Trade Organization (WTO), for G-20 countries, export bans
diplomatic considerations. The restriction applies to an
accounted for more than 90% of trade restrictions related to
estimated $1.1 billion of U.S. exports (Figure 1). On
the pandemic. Many measures are not explicit bans, but
December 31, 2020, FEMA extended this temporary rule to
vary from licensing requirements to a right of first refusal
June 30, 2021, and added syringes and needles to the list of
for the government of the exporting country. These
restricted products.
restrictions have raised debate about the consistency of such
Figure 1. U.S. Imports and Exports of Goods now
actions with WTO rules and the potential impact on the
subject to FEMA’s Temporary Export Restrictions
global trading system. Some markets depend heavily on
countries that have implemented trade restrictions. Most
leading exporters are also major importers of critical
supplies, which put integrated supply chains at risk. The
proliferation of such measures prompted some countries to
lift restrictions or to abide by certain principles in their
temporary application.
WTO Rules
In general, WTO agreements are flexible in allowing the
use of emergency trade restrictions related to national
security or health that might otherwise contravene WTO

Source: U.S. Census Bureau, U.S. imports for consumption and U.S.
obligations; the agreements require, however, that such
exports for 2019. Based on HTS codes subject to FEMA restrictions.
restrictions be targeted, temporary, and transparent. Article
XI of the 1994 General Agreement on Tariffs and Trade
Advocates of the policy argue that it is necessary to prevent
(GATT) broadly prohibits export bans and restrictions,
evasion of U.S. domestic anti-hoarding actions by exporting
other than duties, taxes, or other charges. It allows members
goods to markets where they can command higher prices.
to apply restrictions temporarily “to prevent or relieve
Advocates contend the measure was not an outright ban, but
critical shortages of foodstuffs or other products essential”
rather prioritized U.S. demand and granted FEMA the
to the exporting country. In the case of foodstuffs, the WTO
discretion to allow the export of excess goods. Critics note
Agreement on Agriculture requires members to give “due
that the United States imports many more of the goods
consideration to the effects on food security” of importing
subject to the restriction than it exports, thus imperiling
countries. In addition, general exceptions (e.g., GATT
U.S. supplies of those goods should more of its major
Article XX) within WTO rules provide for policy
trading partners take similar actions. With the United States
flexibility, including to protect health, provided restrictions
a net importer of other kinds of PPE, critics worry that
do not “constitute a means of arbitrary or unjustifiable
counter export restrictions by U.S. trading partners might
discrimination,” or a “disguised restriction on international
quickly encompass other goods. Still others are concerned
trade,” among other conditions.
about the impact of such restrictions on countries in Latin
America and the Caribbean, many of which rely on U.S.
WTO leadership has emphasized the downside risks of
exports of the restricted goods. As one trade economist
curbs on exports and urged members to restrain their use
noted, “Jamaica … gets more than half of its total imports
and minimize disruptions to supply chains. The WTO has
of respirators, masks, and gloves from the United States.”
called on members to abide by notification obligations and
improve transparency on COVID-related trade measures.
Export Restrictions Globally
Recent U.S. Actions
Between January 2020 and the beginning of April 2021,
countries took more than 220 actions banning or limiting
In recent decades, U.S. export restrictions typically have
the export of certain products for COVID-19-related
applied to defense articles, dual-use goods and
reasons, according to Global Trade Alert (Figure 2). The
technologies, crude oil, or sanctioned entities. On April 7,
products covered by these export curbs vary, broadly falling
2020, the Federal Emergency Management Agency
into two categories: medical goods (medical supplies,
(FEMA), pursuant to the Defense Production Act (DPA)
pharmaceuticals, and equipment) and foodstuffs.
and other authorities, issued a temporary final rule banning
Most of the export restrictions came early in the pandemic,
the export of certain personal protective equipment (PPE),
peaking in March and April 2020. While many of the
including certain respirators, certain surgical masks, and
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Export Restrictions in Response to the COVID-19 Pandemic
restrictions have been rescinded, as of April 1, 2021, more
chains.” In May 2020, 42 WTO members pledged to lift
than 45 countries have more than 70 restrictions in force,
emergency measures as soon as possible; the United States,
most of which apply to medical goods
EU, and China did not participate. Following expressions of
An accurate picture of the number of restrictions is elusive,
concern, some countries removed restrictions. The WTO
as many WTO members were slow or failed to notify the
reported that G-20 countries had lifted approximately 30%
WTO Secretariat of all measures. As of mid-April 2021, 7
of trade restrictions by October 2020. At the same time,
export restrictions and 64 quantitative restrictions had been
63% of pandemic-related measures facilitated trade.
notified. With respect to medical supplies, some analysts
Some observers view the trade response to COVID-19 as
have argued that Chinese government actions in early 2020,
reinforcing the need for a plurilateral agreement on medical
including prioritizing domestic use and making large state-
goods to address broader trade issues, including the phasing
backed purchases on the international market, fueled global
out of export restrictions. In December, a group of 13 WTO
PPE scarcity and prompted the global restrictions. China
members proposed a “trade and health” initiative calling for
has selectively released PPE for export, with destinations
cooperation in various areas, including tariffs and export
seemingly chosen according to political calculations. See
policies. The WTO’s 1994 Agreement on Trade in
CRS Report R46304, COVID-19: China Medical Supply
Pharmaceutical Products addresses tariff liberalization of
Chains and Broader Trade Issues.
selected goods, but only applies to some WTO members.
Figure 2. Export Restrictions During COVID-19
Economists have advocated for a coordinated effort to
prepare for mitigating new virus variants and for global
vaccine distribution.
“Taken collectively, export restrictions can be dangerously
counterproductive. What makes sense in an isolated
emergency can be severely damaging in a global crisis. Such
measures disrupt supply chains, depress production, and
misdirect scarce, critical products and workers away from
where they are most needed. Other governments counter
with their own restrictions. The result is to prolong and
exacerbate the health and economic crisis — with the most
serious effects likely on the poorer and more vulnerable
countries.”

IMF and WTO, April 24, 2020
Source: Global Trade Alert, January 1, 2020 – April 1, 2021.
Economic Impact
Vaccines and Trade
A growing economic literature assesses the impact of past
Economists and policymakers have expressed concern that
export curbs during crises, in particular related to raw
if countries repeat the patterns observed in early 2020, they
materials and the food sector, on resource allocation, trade,
might hinder the production and equitable distribution of
and the competitiveness of industries. These studies have
COVID-19 vaccines, as well as therapeutics. Some
generally concluded that export restrictions, particularly by
countries have considered or imposed export controls on
larger producers, can have ripple effects throughout the
vaccines or inputs necessary for production. Such actions
global economy, affecting both the level and volatility of
would likely have a severe impact on vaccine availability in
supply and prices. In the short run, export curbs by larger
low-income countries. Others, such as the United States and
exporters may result in lower domestic prices and increase
India have more subtle restrictions, such as contract terms
domestic availability of scarce medical products. At the
or informal agreements with vaccine or input manufacturers
same time, such measures can reduce the total global supply
that prioritize output for the domestic population. In
and limit the availability of these goods for countries with
January 2021, the EU announced a “temporary export
limited manufacturing capacity. In addition, domestic price
transparency and export authorization mechanism,” in
restrictions in exporting countries can reduce incentives for
effect through June, which would restrict certain vaccines
firms to produce and sell at home. Economists assert that
under advance purchase contracts. There are exemptions,
export restrictions can lead to retaliatory measures that
including for exports to certain low- and middle-income
further cut off countries from essential supplies, disrupt
countries. In the first action taken, in March, the Italian
supply chains, and create uncertainty.
government utilized the EU mechanism to deny a shipment
Reactions and Global Coordination
to Australia. EU officials emphasize that shipments have
Countries and intergovernmental organizations have taken
been authorized to more than 30 countries.
some coordinated action, as concerns mounted about
growing export restrictions. In March 2020, for example,
Christopher A. Casey, Analyst in International Trade and
Germany, France, and the European Commission
Finance
negotiated an end to intra-European export restrictions on
Cathleen D. Cimino-Isaacs, Analyst in International Trade
medical supplies. That same month, G-20 countries stated
and Finance
that emergency measures must be “targeted, proportionate,
transparent, and temporary,” and must not “create
IF11551
unnecessary barriers to trade or disruption to global supply

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Export Restrictions in Response to the COVID-19 Pandemic

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