In response to the Covid-19 pandemic, most nations have shut down borders, with some imposing lockdowns to restrict movements in cities and regions. But while such drastic actions may yield success in controlling the spread of the coronavirus, they will likely lead to severe damage to economies that may be felt for years, writes Heribert Dieter of the Asia Global Institute.
Stay at home: Closing borders could yield short-term gains in controlling the spread of the coronavirus but is likely to result in deep and long-lasting economic pain (Credit: GoToVan)
The coronavirus has temporarily interrupted the openness of many societies. Most countries both restrict the domestic movement of people and have closed their borders for most non-essential travel. But when will these restrictions be lifted? The answer to this question is particularly difficult for the countries or regions that have been very effective in fighting the spread of the coronavirus. Yet that success results only in a Pyrrhic victory for these economies: They may eradicate the virus but in the process, they will have severely harmed their economies for years. Even a lost decade might be the result of the current policies.
Australia, Hong Kong, New Zealand and Taiwan have won praise for their handling of the crisis. As of May 12, Taiwan had recorded fewer than 500 cases and just seven deaths. Hong Kong has also been effective in its fight against the virus with a mere four casualties. In a regular flu season, the number of recorded fatalities is about 90 times that figure. Both Australia and New Zealand are not far behind and can also claim success.
Amid the hysteria that has gripped the world, both policymakers and citizens have reduced the evaluation of a society’s performance to just one indicator: the number of new coronavirus cases is watched day after day with undue intensity. All other indicators – rising domestic violence, the dramatic increase of alcohol consumption in certain countries, and the significant negative effects on homebound students – are ignored. What makes the situation in the four high-performing economies so special is that they are facilitating the destruction of their own economic model in record time.
Take Australia. In early April, the country’s prime minister, Scott Morrison, urged 2.1 million people with temporary visas to leave the country. “As much as it’s lovely to have visitors to Australia in good times, at times like this, if you are a visitor in this country, it is time to make your way home,” he said in a press briefing. His government is not providing any support for foreign students, and it would be hard to that Chinese or Indian parents would be willing to pay significant amounts of money for the education of their children in a country that could display such selfishness in a turbulent time.
The export of education services is no small matter for Australia. In the year to June 2019, the turnover from international students was A$37.6 billion (US$24.5 billion). If overseas students are not be able, or are unwilling, to return to Australia, the country’s economy is expected to suffer a loss of A$60 billion (US$39 billion) over the next three years. The entire collateral damage from the closure of the border is potentially even bigger. Real estate valuations, for instance, will drop if many people with temporary visas leave the country.
Yet Morrison is the most popular prime minister Australia has seen in years, though he had been one of the most unpopular just five months ago because of disapproval for his handling of the national bushfires crisis. A poll taken in late April shows him with a personal approval rating of 68 percent, the highest reading any Australian prime minister has seen in a decade. Apparently, Australian citizens are content with the self-imposed isolation of the country and either do not mind the economic consequences or cannot imagine the full negative effects.
While Hong Kong and Taiwan are not as dependent on educational services as either Australia or New Zealand, there has been no answer to the looming question of when will their borders be opened again for visitors and business people. The success in fighting the virus domestically has created a dilemma. Citizens have been told that this a dangerous disease. Whether that is correct or not does not matter: People believe it and expect their governments to protect them.
A Taiwan government statement is revealing. On May 6, Health and Welfare Minister Chen Shih-chung said that as long as there is neither a vaccine nor a drug for treatment of the virus, Taiwan’s borders will remain sealed. Considering that there is no vaccine for the other six known coronaviruses, Taiwan may have to wait quite a while before it will welcome international travellers again. Hong Kong is in the same situation. Chief executive Carrie Lam Cheng Yuet-ngor’s government, still shaken by pro-democracy protests that began last year, appears to want to keep the city closed and is willing to gamble away the city’s economic future.
What the star performers seem to forget is that large countries – China, the European Union, the United States – can live for a long time without the rest of the world, whereas small, open economies will suffer dire economic consequences if they stay closed. As a matter of prestige, it is entirely unrealistic to expect larger countries to open travel to their countries asymmetrically. The member countries of the EU will probably not open their borders for New Zealanders as long as Europeans are not permitted to fly to New Zealand.
Of course, alternatives to the current closed border policies exist. Countries could demand virus tests before leaving and after entry as well as two weeks of health monitoring, possibly with smartphone apps. The requirement of a two-week quarantine, currently standard in many countries even for their own citizens, is draconian and is hardly an incentive for anybody to board a plane.
With good intentions, the border sealers have created a potentially disastrous situation. Their citizens expect protection, but as long as the coronavirus ravages the outside world, the price for that security will be a severely reduced level of prosperity. The real risk is not the virus itself but unconsidered and short-sighted policies to combat it.
Daud, Florencia. (April 15, 2020) “The Bioethics of Covid-19: Should Governments Let the Virus Run its Course?”, AsiaGlobal Online, Asia Global Institute, The University of Hong Kong.
Trilling, Daniel. (April 26, 2020) “Coronavirus offers an excuse to close borders. That would be a mistake”, The Guardian, London.
Yglesias, Matthew. (April 28, 2020) "The successful Asian coronavirus-fighting strategy America refuses to embrace", Vox.
Asia Global Institute