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News April 27, 2020

WTO: PPE Export Restrictions May Worsen Pandemic

The restrictions, coupled with reports of “nationalized” N95 factories in China, are affecting supply chains. Some promo firms are experiencing the fallout.

By  Christopher Ruvo

Mounting restrictions on exports of personal protective equipment (PPE) and medical supplies by countries around the world stand to “prolong and exacerbate” the health and economic crisis that the coronavirus pandemic has created.

That’s according to the World Trade Organization (WTO) and the International Monetary Fund (IMF). In a joint statement, the WTO and IMF urged both nations and customs territories that have imposed export restrictions to reverse course and instead facilitate exports of critical products like drugs, protective gear and ventilators.

Kristalina Georgieva and WTO Director-General Roberto Azevêdo

IMF Managing Director Kristalina Georgieva and WTO Director-General Roberto Azevêdo said PPE export restrictions could worsen the coronavirus pandemic.

Global trade rules allow for temporary export restrictions to prevent or relieve critical shortages.

Still, IMF Managing Director Kristalina Georgieva and WTO Director-General Roberto Azevêdo said in their joint statement that, while such restrictions can make sense in isolated emergencies, they can be “severely damaging during a global crisis. Such measures disrupt supply chains, depress production, and misdirect scarce, critical products and workers away from where they are most needed. 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.”

On April 23, the WTO issued a report that said 80 countries and custom territories had implemented restrictions that limit or prohibit export of items like face masks, protective gear, gloves and more. Of those nations, 72 belonged to the WTO, which requires members to give it notice when such restrictions go in place. Only 13 nations had done so.

“The lack of international cooperation in these areas risks cutting off import-reliant countries from desperately needed medical products and triggering a supply shock,” the WTO report said. “And by interfering with established medical supply chains, such measures also risk hampering the urgently required supply response.”

Both the United States and China, the world’s two largest national economies, have instituted export restrictions on PPE/medical products. China has also implemented rules and related procedures it says are designed to ensure the quality of PPE being exported, but those regulations are reportedly causing bottlenecks in getting product shipped.

Perhaps even more troubling, reports indicate that Beijing has essentially “nationalized” large factories in China that produce N95 masks. Forbes reported that’s making it more difficult and more expensive for stateside companies, including promotional products firms, to import the much sought-after PPE supplies.

Chicago-based iPROMO (asi/229471) is among the promo distributorships that have pivoted to selling PPE. The company has been importing tens of millions of masks, according to Forbes. However, that came to an abrupt halt because of what CEO Leo Friedman said is nationalization of Chinese factories making the N95s.

“All of our orders, for millions of N95 masks, were canceled last week,” Friedman told Forbes. “They were for hospitals and state governments. We told them last week that we can’t get them.”

Friedman continued: “Our China partners said they couldn’t get them to us because the government nationalized them a month ago. There are only a handful of N95 factories in China and now they are all enforcing the nationalization. They are busy with back orders to service Russian and European orders, I was told. This is the first time in my 20 years in business that I had to cancel orders and give money back.”

Journalist Kenneth Rapoza, who reported the story for Forbes, noted that “the nationalization doesn’t mean (N95 factories in China) are not serving export markets anymore. It just means that they are not taking new, factory direct orders and those who are selling internationally are only doing so through third parties who are Uber-surging because of demand.”

While the pivot to PPE has helped some promo firms to generate revenue and aid in the fight against the pandemic, the coronavirus has still caused sales in the promotional products industry to plummet – a reality reflected by the first year-over-year quarterly decline in distributor sales in more than a decade. In addition to issues related to availability of quality PPE items, promo firms and other would-be buyers have had to contend with scams and price gouging.