"We are all in it together" – is a common refrain in these troubled times. From local politicians to national leaders to the WHO all have pointed out that we can only overcome this crisis if we all cooperate. From an Indian perspective, nowhere has this sense of global solidarity been more obvious than when shipments of Hydroxy Chloro-Quinine (HCQ) were sent across the world. Many countries conveyed their gratitude with the government of Brazil even invoking the Ramayana, with India playing Hanuman bringing sanjeevani when it was needed most. HCQ is a cheap drug used often in malaria-stricken countries like India. Its widespread availability is why, despite some criticism, the Indian government has maintained that it has sufficient reserves. When supply is not a limiting factor, cooperation and sharing of resources are rarely of major concern. But can this bonhomie extend to resources that are not in abundant supply?
The suffering of great masses of migrant labour across India brought the vulnerability of marginalized groups into sharp focus. As we grapple with the enormity of our domestic problems, we must not be blind-sighted by the potential fallouts of asymmetry in endowments across countries, both economic and otherwise. All of the 195 countries in the world are in competition to procure equipment, particularly Personal Protective Equipment (PPE), to equip their health workers and it is not a fair fight. Fractures in inter-country cooperation are beginning to show up, with even rich countries like Germany and the Netherlands voicing their concerns. Countries in Africa are struggling to source from an international market where prices are denominated in US dollars. India has also faced problems with sourcing materials in the required quantity and of expected quality. The USA has complained that many of its firms are facing difficulties in exporting out of their factories in China. In the face of the emerging acrimony, some have continued to rally global cooperation. But in a situation where cooperation and sharing can jeopardize one's prospect of survival, we would do well to temper our expectations from the rest of the world.
Many any countries have placed severe restrictions on exports of critical equipment citing the need to take care of their own first. These moves, along with undermining global solidarity, have also served to severely restrict supply in the global market. Parts of the world with limited manufacturing capabilities cannot manufacture the required equipment, and even among those who can there are few, if any, that can produce all they need. This has led almost all of them to rely on supplies from a few countries, mostly in East Asia. Not only is the supply from these countries limited, it is also precarious. Any indication of another outbreak in these countries and the supply would shrink very rapidly.
On the demand side, countries that are facing a surge in COVID cases need medical equipment urgently. But the urgency of stocking up before the surge hits is not lost on the other countries. Lockdowns cannot last forever and the inevitability of the spread of the virus in its aftermath means that the urgency of the latter group of countries is not less than the former. The difficulty in predicting the quantity of equipment required makes matter worse. This uncertainty drives countries to build as large a stockpile as they can. The buying patterns that emerge in a situation like this is akin to hoarding.
The urgency and uncertainty that is driving demand and the concurrent lack of supply have made the procurement of essential medical supplies a zero-sum game between states. In such a game the only way for a player to win is for the others to lose. There are no win-win scenarios. If people are dying in two countries, and both of them cannot have all the PPE they need. Then, every PPE that goes to country A, doesn't go to Country B putting country B's medical staff at risk. It would, therefore, make sense for country B to try and get as many PPEs as possible and it can only do that that by denying country A.
Government's across the world are under intense pressure to buy equipment and buy them fast. With a few sellers and many, many desperate buyers, this is a seller's market. In the ensuing bidding war, buyers who can afford to will offer to pay higher and higher prices, driving market prices up for everyone. If every country and state had the same amount of resources, higher willingness to pay would simply signal relative urgency. But that is not the case. An economy the size of India, given the quantity it needs, will struggle to bid and win consistently against US states like California or New York, which are also bidding against each other. Consequently, many of the countries will either end up with less quantity than required or worse, with equipment that will not be of the desired quality.
The competition on price is not the only problem that has emerged in recent times. The ability of some countries to wrest away supplies by either paying in cash, or by abuse of power remains a constant threat. Allegations of international piracy is already showing that enforcing international contracts, which is difficult in the best of times, might turn out to be almost impossible in the middle of a global crisis. If the pandemic lasts for as long as the Spanish Flu did, it is not inconceivable that the countries in which most of the suppliers are based will increasingly get to choose winners and losers.
The need of the hour for a country like India is to recognize the dynamics of this fast-evolving market. We will have to concede that in the short run, the only way to get high-quality equipment will be to match the price being offered by richer countries. But given the limited resources at the government's disposal, this cannot be sustained for too long. Therefore, there is an urgent need to ramp up the domestic capability to produce medical equipment. Hastening the process of providing permits will go a long way in improving domestic manufacturing capabilities. Some states like Punjab, have taken the lead in this regard and others should follow suit. Concerns around quality should be mitigated by the fact that with international shipment severely restricted, the domestic market will have a few large buyers in the form of state governments, creating more of a buyer’s market. In any case, concerns about the quality of the final output should not hinder granting of permissions to firms that are willing to produce the required equipment. Not only will concerted efforts in this direction alleviate the current shortages, it will also create a mechanism for the government to provide some fiscal stimulus to the domestic industry.
The troubles that emanate from the frantic demand and limited supplies will make global solidarity more difficult to sustain. There will still be cooperation: more shipments of medicines, sharing findings on the vaccine and leading countries might even come together to create a new version of the Bretton Woods. The world will rally in our collective fight against the virus but to expect solidarity to be a solution to all our problems will be unwise. As an old saying goes, the best place to find a helping hand is at the end of your own arm.
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