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COVID-19 test-kit trade and trade policy: Implications for developing countries.

Long Hai Vo^1,2, Thai-Ha Le^3,4,5

¹Economics Department Business School The University of Western Australia Perth Western Australia Australia.

The World Economy

|May 23, 2022

Summary

The COVID-19 pandemic highlighted medical supply shortages, especially in developing nations. Trade barriers on test kits worsen supply chain disruptions and increase costs, disproportionately affecting developing countries.

Keywords:

COVID‐19 test kits developing countries disaggregated import demand medical supply chains trade restrictions

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Area of Science:

Global Health
Health Economics
International Trade

Background:

COVID-19 pandemic exposed critical medical supply shortages globally.
Weaker healthcare systems faced significant challenges in public health interventions.
Medical supply chain disruptions impacted national and international responses.

Purpose of the Study:

To estimate the price responsiveness of test kit demand globally.
To analyze the impact of import tariffs on global test kit supply chains.
To assess the resulting price increases and welfare loss, particularly for developing nations.

Main Methods:

Utilized a database of test kit trade flows and barriers.
Employed econometric methods to estimate demand price responsiveness.
Conducted simulation experiments to model the effects of trade barriers.

Main Results:

Import tariffs by leading producers can disrupt global supply chains.
Rising demand and import dependence amplify the negative effects of trade barriers.
Consumer welfare is significantly impacted, with developing countries facing more profound consequences.

Conclusions:

Trade policies on essential medical supplies like test kits have substantial economic implications.
Developing countries are more vulnerable to disruptions in medical supply chains.
Addressing trade barriers is crucial for global health security and equitable access to medical supplies.