Welcome to Coronavirus Government Global Briefing, Mandarin Premium’s morning update on everything in local and global government responses to the COVID-19 outbreak.
How COVID-19 hit the global supply chain
Researchers at the UNIDO Department of Policy Research and Statistics have examined the impacts of COVID-19 to date on global supply chains.
While it could be too early to understand the exact consequences, researchers posit that the early shutdown of factories in China — where industrial production fell by 13.5% in January and February compared with 2019 — may have, for just one example, created a drop in vital production parts for electronics, computing and textile manufacturing sectors in both North America and parts of Europe.
Outside of just China, Reuters reports that South Korea’s exports have fallen to the worst decline since 2009.
Secondly, the team examines how shutdowns in other countries have led to a drop in demand that, for manufacturers in China — “the first country to go through a full cycle of the epidemic” — has created a “second shock” even as production ramps back up.
“This ‘second shock’ is not confined to production and trade only, but is quickly spilling over to investments as well. Most recently, the International Monetary Fund (IMF) has reported a staggering US$83 billion of capital outflows from emerging markets, which were the largest outflows ever recorded, while at the same time an unprecedented number of more than 80 countries have requested emergency financing.”
Moving forward, researchers argue that a coordinated policy response between world governments is likely the most promising path to overcoming the cycle of supply bottlenecks and falling consumer demands, while calls for “sovereign” manufacturing reforms — for example, a call from the French Minister of Economy and Finance to the EU — risks reducing “diversification of suppliers in the world economy and reduces opportunities for developing and emerging economies, especially those outside Southeast Asia, to benefit from GVC-associated capital flows and access to international markets, human capital and knowledge”.
In something of a counter-argument, other UNIDO researchers have argued that automation and reshoring both mitigate economic risks for firms, and that industrial policies aimed at reducing a country’s healthcare sector’s dependence on global supply chains could further accelerate the trends.
What can Australia expect?
On the domestic end, economist Tim Harcourt has outlined at the Lowy Institute’s The Interpreter’ eight ways the crisis will affect globalisation:
- An immediate impact on world trade.
- Realignment of alliances to reduce the heavy dependence on China.
- A half to offshoring — or what trade economist Richard Baldwin called “the great convergence” — amidst governments’ focus on supporting domestic jobs.
- Telecommuting in select service delivery jobs fast-tracked and potentially maintained post-pandemic.
- Heavy impact of ‘tyranny of social distance’ on trade in services — i.e. call centres, hospitality, aviation, tourism — and possible permanent impact on consumer choice.
- Acceleration of artificial intelligence and automation trends, already rising in manufacturing before COVID-19, along with calls for self-reliance.
- Steadiness of ‘rocks and crops’, with domestic steel production and demand for iron ore holding steady throughout even the worst of our crisis and demand for Australian agriculture increasing as global supplies are affected by the crisis.
- Closer scrutiny of foreign investment.
For further reading, check out:
- ‘Economic recovery from coronavirus means resisting the urge to back away from globalisation’, from business writer David Uren at ASPI’s The Strategist.
- ‘Here’s how Australian manufacturing could be revived by the pandemic’, by former Finance deputy secretary Stephen Bartos at Crikey.
- ‘Technology will unite the post-virus world order’ ($), by former secretary of the Department of Industry, Innovation and Science Heather Smith and international affairs academic Allan Gyngell at the Australian Financial Review.
- ‘Who will be the winners in a post-pandemic economy?’ by Mohit Joshi, President and Head of Financial Services, Insurance, Healthcare and Life Sciences at Infosys Limited, writing for the World Economic Forum.
- Finally, there’s ‘The Grattan Econ Tracker’, a new public dashboard illustrating the impacts of COVID-19 on Australia’s business activity, jobs and unemployment, and consumer spending and mobility.
Political pressure, sketchy science and a reproduction rate: Germany faces fresh warnings as restrictions ease
According to a new Science article, German Chancellor Angela Merkel has sparred with state leaders this month who, since last week, have began reopening schools and business despite her plea to prolong lockdown measures and “dry out” the virus.
A March lockdown, early tracing efforts and a robust healthcare system has meant that Germany — despite recording 158,768 cases, the fifth highest in the world — has thus far escaped the death rate of neighbouring countries, with a toll of 6128 compared to 23,521 in Spain and 26,977 in Italy.
How German politics led to loosening the lockdown
While Merkel introduced two-person social distancing rules, closed the border and cancelled public event, German states, like American and Australian counterparts, have the power to reopen schools, shops, churches, and cafes. In an agreement with Merkel, many of the sixteen Länder leaders begun loosening business and school restrictions last week, and
As NPR reports, regions have also begun enforcing masks on public transport and in shops, while, according to CNN, Volkswagen made 100 changes to the way it operates — including reduced shifts, hours, and health measures — ahead of reopening on Monday.
However, according to Science, Merkel and local health experts had pushed for at least a few more weeks of lockdown measures in order to “dry out” the virus to a point where new cases could be tracked; with over 38,000 active cases, researchers note that, while ideal, an “elimination” goal — akin to New Zealand’s — would likely not be possible even after 3 to 4 more weeks.
Either way, some Länder leaders pushed ahead with reopening business, and hoped to expand further at the next round of meetings 6 May.
Complicating the politics of reopening the country was a small, unpublished study in the hard-hit German town of Gangelt, which — based on antibody tests, which the WHO has warned do not confer immunity — alleged the town was “on its way to herd immunity” and could begin lifting restrictions.
Not only was the study led by a virologist who has long questioned the seriousness of the pandemic, Science reports that “the Gangelt study had political overtones from the start:”
“It was funded in part by the state of North Rhine-Westphalia, whose minister president, Armin Laschet, has been an outspoken advocate of lifting restrictions. And publicity was managed by a public relations firm linked to German industry. At the 9 April press conference, Laschet praised the work and said it would play an important role at a 15 April meeting between Merkel and state leaders to discuss how and when to relax restrictions.”
A spike in COVID-19 reproduction rates
According to Reuters, Germany’s situation report on Monday — over at the Robert Koch Institute (RKI), for those interested — put the country’s estimated infection rate at 1.0, meaning that, on average, each currently infected person had passed the virus on to one other.
Further, as the report explains, the reproduction rate (R) refers to the:
“…mean number of persons infected by a case. R can only be estimated and not directly extracted from the notification system. The current estimate is R= 1.0 (95% confidence interval: 0.8-1.1) and is based on current electronically notified cases (27/04/2020, 12:00 A.M.) and an assumed mean generation time of 4 days.”
That figure is up from rates as low as 0.7 in mid-April, and while a short rate bump does not undo long-term gains, rates, on average, need to stay below 1.0 to ensure long-term falls in new cases.
For a local comparison, see how Australia’s rates — which, as the ABC shows, have dropped from an average of 1.20 on 24 March to our lowest rate of 0.71 on April 24, then jumped back up to 1.10 last weekend before falling back below 1 — correlate with new confirmed cases.
Like in Australia, Germany’s rate has fallen again; the RKI institute’s latest report shows their infection rate dropped to 0.9 on Tuesday.
But, as Merkel warned earlier this month, a prolonged period of an infectious rate of over 1 could seriously destabilise the country’s healthcare system and plunge the country back into another, stricter lockdown.
“Even if we assume that one person infects 1.1 others, we would reach the limits of what our health system and intensive care beds can manage in October,” Merkel warned earlier this month.
“If we assume a rate of 1.2 … we would reach the health system’s limit in July. And with a rate of 1.3 – it doesn’t sound like much – we would get there in June already.”
For how Germany’s neighbours with some of the worst infection and death rates are preparing to ease business, school and travel restrictions, see the World Economic Forum’s timeline for Spain, Italy and France.
In a relatively-short update on state government announcements:
- The Victorian government, according to The Age, will today announce a relief package for international students worth tens of millions of dollars.
- The NSW government has announced that, from Friday, 1 May up to two adults and their dependent children will be allowed to visit another household, and provided an update on the first round of fast-tracked planning projects launched under the state’s COVID-19 response plan;
- Queensland has waived $33.8 million in state land rent, to cover more than 6000 farmers, businesses, tourism operators, and community and sports clubs, for 1 April to 30 September;
- The South Australian government has launched new Export Fundamentals Program, a training initiative to be delivered in partnership with employer association Ai Group and provider of trade and export development firm Hydra Consulting, and announced that more than 400 nurses and midwives in the state’s public hospital sector have completed training to upskill in readiness for a COVID-19 surge.
A qualitative global ranking, although your mileage may vary
Finally, in case you missed it earlier this month, the Hong Kong-based consortium Deep Knowledge Ventures began ranking 150 nations’ responses to the pandemic based on the following four key criteria:
- quarantine efficiency, including the timely and effective imposition of travel restrictions;
- monitoring and detection, including mass testing and contact tracing quality;
- emergency treatment readiness, including the quality of healthcare institutions; and
- overall government management efficiency.
Israel has thus far topped the list, followed by Germany, South Korea, Australia (!) and China (?) — although, as The Philippine Daily Inquirer notes, researchers admitted that figures from that last country should probably be taken with a grain of salt.
Still, check out Israel’s score below if you’d like to see how these kinds of things are quantified!