Did economic cooperation encourage trade in essential medical goods? Empirical evidence from the Asia–Pacific during COVID‐19

• Published date: 01 March 2024
• Author: Rahul Sen,Sanchita Basu Das
• Date: 01 March 2024
• DOI: http://doi.org/10.1111/asej.12317

ORIGINAL ARTICLE

Did economic cooperation encourage trade in essential

medical goods? Empirical evidence from the Asia–Pacific

during COVID-19

Rahul Sen

1

| Sanchita Basu Das

2

1

Department of Economics and Finance, AUT Business School, Auckland, New Zealand

2

Economic Research and Regional Cooperation Department of the Asian Development Bank (ADB), Philippines

Correspondence

Rahul Sen, Department of Economics and Finance, AUT Business School, Auckland, New Zealand.

Email: rahul.sen@aut.ac.nz

Funding information

Asian Development Bank

Abstract

Our paper empirically investigates the role of economic cooperation involving trade in coro-

navirus disease (COVID-19)-related essential medical goods—vaccines and their value

chains, personal protective equipment, and diagnostic test kits—across 29 Asia and the

Pacific economies. The paper incorporates vaccines and their global value chain products

trade for the first time in the empirical literature. We further investigate whether trade facili-

tation, proxied by membership in regional trade agreements (RTAs), can help mitigate any

adverse impact on trade in essential medical goods, applying a structural gravity framework.

The results confirm that while trade is critical for Asian economies, its nature differs. Low-

income economies are largely dependent on imports, whereas selected middle- and high-

income economies are part of two-way trade and engaged in the low end of the vaccine

value chain. We find that the onset of the pandemic has hurt exports of these goods. This

adverse effect is found to be lowered for economies engaged in RTAs. This emphasizes the

role of governments in committing to RTAs and implementing trade facilitation measures.

KEYWORDS

Asia–Pacific, COVID-19, essential medical goods, RTAs, vaccine supply chain

JEL CLASSIFICATION

F12, F13, R11

DOI: 10.1111/asej.12317

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs

License, which permits use and distribution in any medium, provided the original work is properly cited, the use is

non-commercial and no modifications or adaptations are made.

© 2024 The Authors. Asian Economic Journal published by East Asian Economic Association and John Wiley &

Sons Australia, Ltd.

Received: 19 April 2023; Accepted: 13 February 2024

Asian Econ. J. 2024;38:35–60. wileyonlinelibrary.com/journal/asej 35

1|INTRODUCTION

The COVID-19 pandemic created global havoc during 2020–2022. Starting as a

major health crisis, the adverse impact of the virus was soon felt in larger parts

of economies. International trade came under pressure in 2020 and the pain was

felt differently in different regions and commodity groups (Arriola et al., 2021).

The pandemic brought to the fore vulnerabilities and challenges in sourcing

products or parts and components from other countries. While in some cases,

inventories built up due to a fall in demand, in others, the concept of lean

manufacturing and just-in-time inventory systems backfired due to supply short-

ages. Nonetheless, for selected product categories such as essential medical

goods and food supplies, cross-border trade continued. Thus, global trade fell

much less than earlier expected as aggregate demand increased in certain catego-

ries of goods (WTO, 2020,2021a).

While the coronavirus disease (COVID-19) was ongoing, the vaccine rollout

in early 2021 brought some relief. This remains uneven across countries, how-

ever. For example, as of the end of March 2022, vaccine doses administered per

100 people in Asia were high (more than 200) for countries such as China,

South Korea, Malaysia, and Singapore. It is relatively low for Bangladesh,

Laos, Nepal, and Indonesia (below 140). Availability of other COVID-

19-related medical goods was also uneven across countries.

Several reasons explain the disparity in the availability of COVID-19 essen-

tial medical goods. While not all countries were self-sufficient in producing them

(OECD, 2020a), production and export capacity were concentrated in a handful

of countries (WTO, 2021b). Most countries imported these goods, thus provid-

ing a strong case for international trade.

However, trade had encountered its own limitations, leading to supply short-

ages. Major suppliers of medical goods had imposed export bans during the

high COVID-19 burden (Hayakawa & Imai, 2022). This had implications for

importing countries as well as manufacturers that rely on ingredients from other

countries, affecting part of the global value chain (GVC) for producing medical

goods. Supplies of COVID-19 medical goods also suffered, as countries such as

China, Malaysia, and Thailand—which accounted for the major share of medi-

cal goods production (face masks, gloves)—experienced local shocks, like

worker illness, strict lockdowns, and manufacturing shutdowns. International

trade also suffered due to transport and shipping constraints or port congestion

due to workers’illness or social distancing measures, leading to supply chain dis-

ruptions (ESCAP & ADB, 2021).

The impact of COVID-19 on medical goods trade is an under-researched

area, with virtually no empirical analysis of the vaccine value chain trade and

the role of regional cooperation, particularly trade facilitation and agreements.

Against this backdrop, the aim of our paper is to understand the importance of

regional cooperation and trade facilitation for the cross-border supply chain of

36 SEN and DAS