Policy Monitor December 8th 2020

Health

On December 2^nd the United Kingdom became the first country to approve a COVID-19 vaccine tested in a large clinical trial when the Medicines and Healthcare products Regulatory Agency (MHRA) granted emergency-use authorisation to the vaccine developed by the pharmaceutical giant Pfizer and its German partner BioNTech. The first batch of the Pfizer-BioNTech vaccine has arrived on British shores and the first shots were administered on December 8th. In an elaborately designed programme based on categories and age cohorts, laid out by the Joint Committee on Vaccination and Immunisation for Britain’s Department of Health & Social Care, nursing home residents, healthcare workers and people over the age of eighty will be first in line.

The speed of the decision caught many by surprise. The American Food and Drug Administration’s (FDA) vaccine advisory committee only meets to decide on emergency authorisation of the Pfizer-BioNTech vaccine candidate later this week, on December 10th. The same decision will be made on Moderna’s vaccine candidate on December 17^th. The equivalent choice dates for the World Health Organisation (WHO)––operating in partnership with the European Medicines Agency (EMA)––will be December 29^th and January 12^th.

With these approvals, the pandemic moves into a new phase. What remains unclear is when––once vaccines have been approved––different countries will receive the vaccine doses they have ordered and paid for. The United States, the European Union and the United Kingdom have between them confirmed purchases of vaccine doses enough to vaccinate over 1.5 billion people. However some shipments have already been affected by production delays and it will still take some time for companies to ramp up production to meet their existing commitments. The jockeying for supplies and shipment dates is set to intensify.

Economy

With many months expected to be needed before widespread vaccination can be achieved, the world’s biggest economies are lining up new fiscal stimulus programmes. In the United States, a number of Senate Republicans and Democrats are rallying behind a a new $908 billion bipartisan stimulus bill, titled the “COVID Emergency Relief Framework”.  President-elect Joe Biden has also urged lawmakers to forge an interim deal during the current ‘lame duck’ session of Congress. Speaker of the House Nancy Pelosi and Senate Majority Leader Mitch McConnell reportedly hope to attach desperately needed COVID-19 relief to a broad $1.4 trillion spending bill. A spending bill would also be needed to avoid a government shutdown before the December 12th-13th weekend.

The exact size of the plan is still under negotiation. But the $908 billion draft would allocate $288 billion in aid to small businesses; $180 billion towards unemployment insurance; $160 billion to state and local governments; $82 billion towards education; $35 billion in relief for healthcare providers; $25 billion toward housing assistance and tens of billions towards childcare and other smaller items. Americans relying on unemployment benefits would receive $300 each week in payments from the federal government on top of existing state unemployment benefits. The plan will also likely include another round of funding for the Paycheck Protection Programme (PPP), a system of forgivable small-business loans, intended to stave off mass layoffs by incentivising businesses to keep their workers on their payroll.

Meanwhile in the world’s third-largest economy, Japan, on December 8^th Prime Minister Yoshihide Suga outlined a Y73.6 trillion ($706 billion) package, which will be the country’s third stimulus since the pandemic began. According to Nikkei Asia Review, the largest portion of this package will consist of Y51.7 trillion in support of structural economic changes expected in the post-pandemic world, including money to support digitalisation in schools, the repatriation of offshore production, development of research infrastructure at universities and research and development for the promised move to net-zero greenhouse gas emissions.

Although Japan has suffered a mortality rate from Covid-19 that is one-fiftieth of that of the United States (see ARGUMENT, “The Lessons from East Asia”), its economy is forecast by the OECD to contract in 2020 by around 5.3%, against America’s 3.7%.

Politics

China’s “wolf-warrior diplomacy” is moving from bark to bite. The Chinese government has imposed tariffs of up to 212% on the import of Australian wines. The move was only the latest in a string of policies targeting the Australian economy. In October, Chinese importers were told to stop accepting shipments of Australian coal and Australian imports of timber, copper, sugar and even lobster were either officially or unofficially banned. Tourists and students have also been warned against travel to Australia, with the government citing the country’s local reputation for racism. In mid-November, Chinese diplomats circulated a list of 14 grievancesagainst the country to Australian media.

In April and again in September, the Australian government called for a global inquiry into the origins of the global COVID-19 pandemic––effectively singling China out. The move appears to have incensed the Chinese authorities. Beijing’s grievances with Canberra, however, go back years. In 2018, Australia became one of the first countries to ban the Chinese technology giant Huawei from its 5G network and passed a law against foreign interference in domestic politics, largely referencing China. In 2019, the Australian government expressed its support for the pro-democracy protests in Hong Kong and has also raised concerns about reported human rights violations in Xinjiang province.

The Australian experience, however, is not unique. Among others, Canada, South Korea and Japan have all been targeted, the Canadians especially harshly in response to that country’s detention of the chief financial officer of Huawei following an American extradition demand. The Australians, however, may face a steeper economic price than others as its economy is unusually dependent on its relationship with China, which in August accounted for a record 48.8% of Australian merchandise exports, according to the Australian Financial Review and, on a longer-term and broader view, nearly 25% of the country’s total goods and services trade.