top of page

Covid 19 Impacts on trade and the economy: Hard Choices for the EU.

Professor of Political Science and Deputy Director, Jean Monnet European Union Centre of Excellence Dalhousie University (JMEUCE).

20 August 2020

The global economic and trading system, already buffeted by nationalism, populism and American unilateralism under President Trump, faced a rapid paralysis in economies from the spread of the deadly Covid 19 pandemic. The EU has been a key architect of the liberal international order with its combination of multilateral and regional trade and economic institutions. As the economic crisis from Covid spread, the Union was forced to seek solutions to preserve and protect that order, even as it confronts Brexit, Euro skepticism and nationalist challenges from its own membership. And like partner states such as Canada, the EU had to choose between competing potential futures - further withdrawal from globalization as sought by populists and an increasingly isolationist America or a renewed, revised, reinvigorated internationalism after crisis.

European countries, especially Italy, were among the hardest hit early on by Covid-19. The instinctive response of many states was to retrench to national interests and space. While mobility within the Union is a core principle, free movement of persons in the pandemic threatened further spread, so many member states quickly closed national borders. Public health crises are an accepted reason for such closures under the Lisbon treaty article 45. The CJEU permitted closures within reason, though courts may eventually be asked to address whether less stringent measures could be employed. The EU encouraged member states to engage in “proportionate management of national borders” focussing on measures to reduce the possibility for sick persons to travel undetected while ensuring proper care for those who did cross and preserving essential cross-border travel for work reasons. The Union wisely eschewed a push for uniformity, given the very different pace of the pandemic and local social situations and health care capacities. But solidarity eventually emerged as countries like Germany eventually engaged in a supportive fashion by taking in Covid patients from hard hit Italy and France. Newly reopened borders remain a worry, and could fuel a second wave of the virus.

Covid depressed all economies in the EU and limited or reversed GDP growth. At the same time, it necessitated measures to support both citizens and economic interests. This produced prolonged debate during negotiations between cautious states such as Sweden, Denmark, Austria and the Netherlands which favoured restraint, and those facing worse problems from the pandemic, notably Italy and Spain seeking more economic stimulus. After emotional interventions from leaders like Emmanuel Macron, who worried inaction would further EU disunity, the Council approved a variety of policy measures, including an ambitious recovery plan with some €390bn in grants and €390bn in low interest loans to help to address the economic impact of the pandemic in the 27-member bloc.

In its relations with other states and regions, the Union was forced to choose between those who thought the pandemic required nationalist responses of protectionism and economic preference (to ensure preferred access to PPE, vaccines, ameliorative treatments etc); and those who believed that international institutions would have to become stronger still to manage global challenges like the Covid pandemic. Major states, notably the US, precipitated a free for all by hoarding critical supplies of essential equipment and medicine. Internally, states such as Hungary seemed willing to use the crisis to further consolidation of government authority in illiberal fashion, by enabling rule by decree. The EU so far has been unable to respond effectively to such illiberal threats from outside and within, which have been encouraged by crisis conditions.

Initially major suppliers like Germany restricted exports of essential medical supplies. To cope with unilateral bans by member states, the EU devised a common licensing system to govern essential Covid related exports to cover EU members, some candidate states and EFTA partners. Special export authorization was required for sales, notably of masks to other countries. Despite internal pressures towards self-interest, the EU championed a collaborative effort to develop vaccines and combat the pandemic, leading an international conference to discuss challenges. The EU eschewed the WHO COVAX initiative however, seeking cheaper vaccines for its population as it balanced a global approach with member state self-interest. But the EU joined countries like Canada in defence of international fora like the World Health Organization and World Trade Organization as well as reaffirming global sustainability and climate commitments in any economic restoration and renovation. With Canada and other partners the EU called on WTO members to be transparent about trade adjusting measures taken in response to insecurities over supply chains for essential equipment and medicine; these partners agreed that deviation from the rules based trading order could inhibit economic recovery from the ravages of Covid.

While collaboration with trade partners may be desirable, EU patent holders in medical technology and pharmaceuticals may eventually balk at abrogating or weakening patent exclusivity in deals like CETA. Canada has already been chastised by courts for not properly granting regulatory approval for new patent medicines under the CETA Implementation Act. The partners will have to work out collaborative mechanisms if they intend to ensure broad access in their jurisdictions and throughout the world to essential medicines and technologies. With pressures from both the US and China looming, it is no exaggeration to suggest the EU’s responses will help determine the direction of global economic interdependence and governance going forward.

Globalization as usual – including worrisome dependence on outside sources of essential PPE, potential vaccines and therapies etc. – could inspire a reconsideration of liberalization and a renewed call for national regulatory and productive capacity. Yet a global transborder crisis like the pandemic illustrates why international institutions should not be lightly discarded in the retrenchment to the populist nationalism now favoured by several great powers. It will be interesting to determine in the next months whether the EU has the internal unity, economic capacity and political resolve to overcome member states’ challenges and lead the international community towards effective governance to address future crisis of health, climate and economy.


bottom of page