Stephen Booth is Head of the Britain in the World Project at Policy Exchange.
This week, leaders across Europe announced a step-change in their response to the coronavirus pandemic. “We are at war”, declared Emmanuel Macron in a televised address to the nation on Monday. France is now in lockdown for an initial period of 15 days, with only the most essential movement permitted. Angela Merkel announced similar measures in Germany. Tourist travel has been banned and bars, theatres, museums, cinemas and non-essential shops have also been closed.
The UK has also brought in new public guidance following evidence that the virus is spreading more quickly, particularly in London, than initially thought. The UK’s approach has been questioned for appearing to lack the urgency of some countries but others, such as the Netherlands and Sweden have adopted a similar strategy. Rather than a full lockdown, the focus has been on managing the caseload facing healthcare systems by imposing the measures scientific advisors believe to be sustainable and most likely to suppress the spread of the virus.
Meanwhile, the EU is trying to restore a sense of coordination to the European response after witnessing a raft of individual national measures. Several EU states – the Czech Republic, Cyprus, Denmark, Hungary, Latvia, Lithuania, Poland, Slovakia, and Spain – unilaterally closed or partially closed their borders to non-nationals. Long queues have formed at Poland’s border with Germany, with reports of lorries facing tailbacks of up to 40 kilometres. Several countries, including Germany, have also imposed bans on the export of medical equipment, including to other EU states.
These countries are within their rights to pursue a national course, since the EU treaties grant a great deal of leeway over matters of public health or in a national emergency. However, the European Commission has introduced EU-wide measures in an effort to persuade governments not to impose such controls on their fellow member states. This includes a 30-day travel ban on non-EU nationals entering the Schengen passport-free area and a six-week ban on the export of key medical equipment outside the bloc, which only can be overridden by government authorisation.
This is not only an urgent global public health crisis. The economic implications of the measures adopted by governments across the globe will be immense and the economy will need life support. The UK has adopted Mario Draghi’s pledge, made during the height of the eurozone crisis, to do “whatever it takes”. France and Spain have also unveiled emergency packages including direct payments to employees as well as loans and guarantees for companies to mitigate the impact of quarantining measures on demand across the economy.
The concern, however, is that certain members of the eurozone will need more help. In Italy, the European country hit hardest by the virus, yields on government bonds have already risen as the crisis weighs on its economy and adds to its already sizeable sovereign debt. Debate is already underway about how the eurozone’s bailout fund and the various instruments open the European Central Bank might play a role in ensuring adequate access to financing. Many Italians felt abandoned by the EU during the eurozone and refugee crises, helping to launch anti-establishment parties into government. Can the EU afford a repeat over this crisis?
It is understandable that the short-term measures taken by governments have been rather uncoordinated. Ultimately, above all, they are responsible for the safety and wellbeing of their own citizens. However, it is increasingly clear that we will be dealing with this crisis for the long haul and therefore it is important that there is a coordinated international response. While the fiscal response of governments may be turning free market thinking upside down, as Ryan Bourne described on this site yesterday, the UK should continue to make the argument for free trade to ensure that medical equipment gets to where it is needed.
According to experts at the Word Bank, seven countries account for 70 per cent of world exports of ventilators for artificial respiration. If export bans become the norm, global supply will be reduced and prices will increase for everyone, affecting the poorest countries the most. Clearly current demand is unprecedented but protectionism can be self-defeating. Hamilton Medical, the Swiss-based global market leader in the manufacture of ventilators, is reportedly facing supply bottlenecks because Romania recently classified a required component as a “medical device”, restricting its export. Keeping markets open is essential to provide confidence to foreign companies willing to invest in producing this equipment.
Inevitably, the impact of the pandemic on the Brexit negotiations is becoming a live issue. Given the scale of the current crisis, understandably the government is now focused on little else but battling the virus. However, there are two distinct questions that arise. Firstly, will the economic impact of the pandemic alter the type of future relationship the UK might seek with the EU? It is difficult to see why this would be the case. Secondly, what logistical impact will there be on the process? The answer to this second question could yet have a bearing on whether the UK and EU consider extending the transition, which is currently due to end on 31 December 2020.
The UK is expected to publish its preferred draft trade agreement text soon, but this week’s round of talks has been postponed and both sides are exploring whether video-conferencing can be used for future negotiating rounds. Undoubtedly, some officials will be able to use technology to continue working on Brexit, and progress on reaching a deal could well be made this year. Indeed, the crisis might impress on politicians the need to find a way through. However, the bigger challenge is likely to be implementing whatever results from this year’s talks, be it a “Canada-style” deal or “Australia-style” no deal. Both outcomes will require intensive cooperation between UK and EU governments and the private sector to ready new systems and processes at a time when there are much bigger issues at stake.
Extending the transition would be politically tricky. The government points out that the current deadline is enshrined in law. There would also need to be another discussion about money. Nevertheless, an extension in the new circumstances we find ourselves in would be very different from the extension proposed by many at the very outset of this process. We have left the EU. If talks on the future relationship are effectively paused, with the UK and EU focusing their attention elsewhere, an extension would provide more of a reset than extra time, which might have been used as negotiating leverage.
Ultimately, the battle against the virus is now the primary concern and a decision on transition does not need to be taken right now. However, the question of a delay is likely to return sooner rather than later.