How the Coronavirus Will Reshape World Trade

Governments have been using subsidies to prop up domestic businesses through the shutdowns. Some of the most contentious trade fights of recent years — pitting the U.S. against the EU, and nearly every major country against China — have centered on market-distorting government support for industry.

Trade experts warn of new battles over whether such funding improperly promotes exports or blocks imports, especially when justified in the name of health security. “Dealing with precautionism will be much tougher than dealing with protectionism,” said Mr. Lamy, the former WTO chief. The varied ways that countries choose to protect their populations from risks, he said, “will fragment the global trading system in a much more definitive way than tariffs.”

When similar strains emerged during the 2008 financial crisis, the WTO stepped in to quell a nascent trade war. The Geneva-based organization no longer has such clout. The Trump administration last year blocked the appointment of judges to the trade court, effectively stripping WTO’s legal system of its powers to enforce global rules. Longtime paralysis has stymied the WTO’s ability to write new ones to cover new challenges.

Some policy makers in the U.S. and elsewhere argue that the crisis calls for more integration, not less, and that moving toward more independent economies would leave the world more at risk of supply breakdowns. More than 100 governments, including the U.S., have cut tariffs and eased other restrictions on medical imports that had been imposed before the pandemic, an acknowledgment that — in the short run at least — they are better off by importing more, not trying to cut off foreign supplies.

“If more countries pursue the track of self-sufficiency, it will increase competition for scarce resources, drive up prices and deepen international hostilities,” said Phil Hogan, the EU trade commissioner. “It would be a lose-lose situation for our citizens and our economies.”

Despite the rhetoric about re-shoring, the economic factors driving production abroad will persist, said Mo lnlycke’s Mr. Twomey. Years of demands for cheaper medical products by cash-strapped public health systems had driven him to shift production to Cambodia, Myanmar, and Morocco.

Governments now asking him to localize production, he said, “will have to pay a bit more.”

Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com