New European Limits on Medical Gear Exports Put Iranians at Risk
As the world grapples with shortages of the medical equipment needed to fight the COVID-19 pandemic, the European Commission has announced a new regulation that will establish export controls for Personal Protective Equipment (PPE), a category of goods that includes the face shields, gloves, masks, and other protective gear that help medical professionals limit their exposure to bacteria and viruses. The regulation will limit the sale of these PPE items to countries outside the European Union (EU)—exports of these items were valued at USD 12 billion last year.
Analysis by Chad Bown of the Peterson Institute for International Economics makes clear how the European Commission’s move could have significant consequences for non-European countries that largely supply their healthcare systems with protective equipment made by European firms. Bown argues that the new policy could prove “self-defeating,” both because it may serve to “disrupt supply chains” and also because the new act could “block EU exports of vital equipment to the world’s poorest victims of the pandemic.”
The European Union is home to many of the world’s largest producers of medicine and medical equipment. With the support of their governments, these firms have encouraged “developing countries to open up their markets to imports, facilitating a system in which these countries have come to rely on EU suppliers for their essential medical equipment.” Iran is one such country.
When looking at EU exports to Iran of the PPE items specifically covered under the new regulation, two things become clear. First, Iran was importing significantly more of these goods prior to the Trump administration’s reimposition of secondary sanctions beginning in May 2018. Total exports to Iran fell from EUR 39 million to just EUR 13 million last year, suggesting that Iran’s healthcare system was already grappling with limited inventories of face shields, gloves, and other protective equipment even before the COVID-19 outbreak.
Second, despite the fall in trade, it is clear that EU is a significant supplier of PPE items to the Iranian healthcare system—a fact that leaves Iranian doctors and nurses vulnerable as the bloc begins to enforce the newly announced export controls. This vulnerability is made more clear when looking to EU exports in proportion to exports from Iran’s other leading trade partner: China. In the category of face shields, which account for around half the total value of world PPE exports to Iran, 35 percent of exports were dispatched from the EU.
This figure is lower than the proportion identified by Bown for many countries that trade with Europe, reflecting how sanctions have deterred European suppliers from the Iranian market over the last decade, enabling Chinese suppliers to expand market share. Nonetheless, the EU accounts for about one-fifth of all PPE exports in value terms, meaning that Iran’s healthcare system will be hit as the new export controls are implemented. Already struggling to procure goods through existing supply chains, Iranian importers—and the hospitals that depend on them—may find the supply chains cut altogether.
Moreover, the administrative burden of complying not only with the new export control regime but also with new sanctions regulations will put Iranian buyers at the back of the line for any sales that are to be licensed. European manufacturers of personal protective equipment will want to get whatever limited inventory available for sale to third party countries to the buyers who can make payment and take delivery in the shortest amount of time—Iranian importers are not those buyers.
The new regulation does indicate that some accommodations will be made for the provision of European aid. The regulation states, “exports of certain quantities of specific products may be authorized under specific circumstances such as to ensure assistance provided to third countries.” Iran has already received aid from France, Germany, and the United Kingdom as well as assistance provided by the EU itself. But the regulation has the effect of cutting long-standing commercial relationships between European manufacturers and importers in countries like Iran, and replacing them with a highly political procurement channel. It is not clear how European policymakers will prioritize who receives aid including PPE items—will it be the countries currently facing the most acute outbreaks, such as Iran, or will it be the countries where Europe sees the most favorable political and economic relations, such as Norway.
In the face of such uncertainty, China has mobilized resources to increase aid shipments and commercial sales of medical equipment to countries around the world, including Iran. But Chinese suppliers cannot replace European suppliers in each and every country as the COVID-19 pandemic spreads. As Bown, concludes, “to ensure the hospital equipment to fight the pandemic arrives where and when it is needed the most, policymakers must coordinate and cooperate globally.” The European Union is the only global actor that could effectively marshall such an approach.
As a country with a large manufacturing base, Iran can be part of the solution. Iranian firms have already taken steps to increase production of face masks, disinfectants, hospital beds and other products and equipment for which there is growing global demand. Rather than seek to cut its supply chains with non-EU countries, European authorities could seek to increase imports of basic PPE items such as surgical masks or gowns from countries like Iran, leaving European firms to focus on ramping up production of more advanced equipment such as face shields, generating a surplus for export. In short, the same notions of comparative advantage that led to the creation of today’s complex supply chains should inform their retooling during the COVID-19 crisis. Abandoning economic interdependence will put everyone at greater risk.
Photo: IRNA
