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New comprehensive economic modelling shows the global economy stands to lose trillions of dollars in 2021 through vaccine nationalism, and no economy will recover until everyone is safe.
A new study commissioned by the
International Chamber of Commerce Research Foundation which we are part of has found that global GDP could shrink by a sobering $12.6 trillion, or 7 per cent, if governments fail to ensure developing economies have equal access to Covid-19 vaccines.
Economic benefits of funding multilateral efforts to make vaccines available to poorer nations dwarf the costs and inflame risks of a stunted recovery especially for countries dependent on exports and open trade like New Zealand. That is alarming.
At present, rich countries with just 16 per cent of the world’s population have bought up 60 per cent of the world’s vaccine supply. Many of these countries aim to vaccinate 70 per cent of their adult population by mid-year in pursuit of herd immunity and set up their economies for recovery. We are aiming for end of the year vaccination at the earliest.
But Covax, led by WHO and alliance partners to ensure that vaccines reach all people everywhere, is struggling to purchase enough doses to cover just 20 per cent of the population of lower-income countries by the end of 2021.
It would take a $37.2 billion investment on the part of advanced economies to plug the shortfall which would generate returns as high as 166 times the investment.
While other analyses have highlighted the economic costs of vaccine nationalism, this new study is the first to incorporate both supply and demand shocks, domestic and foreign, at the sector level, for an open economy operating within global supply chains.
The research shows the full possible ramifications of vaccine nationalism, which is significantly higher than previous best estimates. It shows the cost to economies and global trade flows of selective vaccine distribution directed to susceptible populations.
The expected cost to the US of its vaccine nationalism policies is estimated to be between $61.5 billion-$1.78 trillion this year, the UK economy stands to lose $11.6 billion-$99.7 billion and Germany’s GDP will plunge between $19 billion-$339 billion.
The crippling drops in GDP would reduce significantly if developing countries were being vaccinated in tandem with rich countries.
The ICC modelling shows that construction, textiles, retail and automobile sectors are highly exposed and global output will contract by about 5 per cent in 2021. Even if developing countries were able to vaccinate half of their populations by the end of the year, total global costs would only go down to $6 trillion — 53 per cent of which would be borne by advanced economies, amounting to $3.3 trillion in lost GDP.
That is telling us that we, meaning the whole world, not just fortress New Zealand and all those economies promoting protectionism and lockdowns, need to look beyond their ring-fenced borders. Wake up. We are all in it together. There can be no gaps in distribution and access.
No one is safe until we are all safe – something to be mindful of as we roll out the first wave of vaccinations and move to comprehensively cover the whole country from frontline workers at the borders to our health workers, the aged and vulnerable and, eventually within a year, the whole population.
We’re after rapid herd immunity for New Zealand and our Pacific neighbours who we will also inoculate. But it won’t be job done. As an economy and society, we are still vulnerable to incursions and the health and wealth of international trading partners is paramount to our sustainable recovery and wellbeing. We do not stand alone and thinking that we are safe now we are all vaccinated is wrong on so many levels.
Vaccine allocation must not become a zero-sum game. Vaccine nationalism is not just morally indefensible, it is unconscionable that people will be dying elsewhere, waiting in a queue, when the technology, science and learnings improve daily on how to contain, quarantine and stamp out flare-ups.
The longer we wait to provide vaccines, tests, and treatments to all countries, the faster the virus will take hold, the potential for more variants will emerge, the greater the chance today’s vaccines could become ineffective, and the harder it will be for all countries to recover.
The world must act in unison. There are compelling economic, social, moral and health incentives for accelerating and joining forces to achieve global vaccination. We as individuals hold the power to make the change to act as one world.
Truly, no one is safe until everyone is safe is the message we must heed.
• Michael Barnett is the chief executive of Auckland Business Chamber.