Hello from Brussels. Remember Sunday’s firm and final deadline for the EU-UK post-Brexit trade deal? The one we were so sneerily dismissive of on Thursday? Turns out we were right. It’s the long experience of covering the Doha round that has made sneery dismissal our default response to solemn talk of deadlines in trade talks, and it’s served us well. There is a genuine hard stop at the end of the year, when the UK falls out of the EU trade regime. But there are days, even weeks, of potential faffing-about before then, depending on how much time the European Parliament insists on to ratify the deal. Today’s main piece examines how, back on Planet Earth, outside the gravitational pull of the Brexit implosion, grossly unequal access to Covid-19 vaccinations is causing another look at trade-related patents, technology transfer and whose jab it is anyway. Tit for Tat is Chad Bown of the Peterson Institute think-tank answering questions about the challenges for Katherine Tai, nominated by president-elect Joe Biden as the new US trade representative.
A swift jab to the arm for the lucky few
Santa Claus comes earlier to some countries than others. For the UK, the white-bearded gift-giver pitched up several weeks before Christmas with the first shiny Covid-19 vaccines out of the box, courtesy of Pfizer. (Please enjoy a strong late entry for Trade Secrets’ Person of the Year, 91-year-old Martin Kenyon, describing the inoculation and reacting to his subsequent internet fame with peerless British understatement.)
But developing countries? They’ll be waiting a long time for their turn: it will be months and years before many of the world’s poor get a chance of being inoculated. In protest against the vaccine shortage, developing countries and their NGO allies are making this a drugs patent issue at the World Trade Organization. This precise demand is somewhat missing the point. But their wider point about technology transfer and access to medicines is spot on.
The inequitable distribution reflects, quite simply, speed and money. “The fundamental problem is that the high-income countries have put themselves at the front of the queue,” says Ellen ‘t Hoen, a Dutch expert in medicines and intellectual property law. The UK was first in the game, having put in advance orders for 40m doses of the Pfizer vaccine, enough to inoculate 20m people. The EU and others are swiftly following. (Incredibly, the US managed to pass up the chance to acquire enough of the Pfizer product early on, which seems to have been simple ineptitude rather than anything more sinister.)
Meanwhile, Covax, the collective purchasing scheme for vaccines for developing countries, is under-resourced and has moved much more slowly. To its credit, the UK has also pledged to become one of the biggest donors to Covax, but for the rich world collectively charity has very much begun at home. Naturally, China is leaping at this opportunity for vaccine diplomacy in the developing world, just as it did with face masks during the first wave of Covid. You can never have too much geopoliticisation of human tragedy, after all.
As we have previously reported, India and South Africa — now with a bigger group of developing countries on board — have asked fellow WTO members for a waiver of patent protection for a wide swath of medical products. The idea has met implacable opposition from rich countries. In a WTO meeting last week the EU and US lined up to say that IP rules were part of the solution, not the problem, and that licensing arrangements were already available to provide low-cost medication to poor nations.
It is true that the patent waiver is somewhat beside the point. Covid vaccines based on biologics aren’t like antiretrovirals for HIV-Aids: it’s not just a question of giving generics manufacturers the molecule and letting rip production. Vaccine production involves a great deal of technology and manufacturing capability that can’t instantly be transferred.
Still, governments and companies have a role in nudging, even firmly shoving, the market, especially when public money is funding so much of the research. As Ellen ‘t Hoen points out, the global need is an argument for structuring vaccine development the way that one of Pfizer’s rivals, the Oxford university-AstraZeneca version, has done. As well as its promise initially to sell the vaccine at cost price to developing countries, the Oxford-AstraZeneca project has shared technology with high-volume producers from early on, specifically India’s Serum Institute, to boost supply.
“What will help much more than just making patents available is to transfer knowledge and knowhow to increase production capacity around the world”, ‘t Hoen says, noting that the Serum Institute has already been manufacturing vaccines in anticipation of regulatory approval. It’s also helpful to developing countries that the Oxford-AstraZeneca vaccine can be stored at fridge temperature rather than requiring freezing.
Governments have all sorts of ways of leaning on pharmaceutical companies beyond simply overriding patents. Earlier this year the Dutch competition authority, together with the European Commission, successfully pressured Roche into releasing material used to make Covid test kits.
As it happens, some of the more constructive countries (Australia, Canada, Mexico, Chile) at the WTO, while not exactly supporting the India/South Africa waiver proposal, have called for a wider investigation into how IP rights more generally might be impeding the development and distribution of vaccines and how governments might help. We’ll be watching those discussions with interest.
Pricing and access to the Covid vaccine isn’t a simple WTO patent rights issue. It’s a nexus of IP, government procurement, competition policy, development aid, public R&D subsidies and the workings of academia and the global pharma industry, all wrapped up in a highly politicised package with a social justice bow on top and millions of lives at stake. Happy Christmas, children. Try not to fight over the toys.
Sterling rallied on Monday after the EU and UK decided to “go the extra mile” and continue Brexit trade negotiations. The pound climbed 1.4 per cent against the dollar in morning dealings in London to $1.3405, leaving it on track for its best day since late October. It advanced 1 per cent against the euro to €1.1030, helping partially reverse last week’s 1.6 per cent fall.
Tit for tat
This week’s guest is Chad Bown, senior fellow at the Peterson Institute think-tank in Washington DC.
If Katherine Tai is confirmed as the new USTR, what will be the big contrasts between her and the incumbent Robert Lighthizer?
Their track records offer some clues. Lighthizer was a steel industry lawyer — Trump gave protection to steel. He negotiated managed-trade agreements with Japan as a 1980s deputy USTR — that’s the treatment Korea, Canada and China just got. He opposed WTO dispute settlement from its 1990s beginnings — and killed off the appellate body. He thought America was better off negotiating bilaterally.
Katherine Tai, on the other hand, has a mandate from president-elect Biden “to get us back on the same page with our allies”. Among other accomplishments, she recently reworked Trump’s new Nafta — the USMCA — in order to obtain support from even trade-reticent Congressional Democrats. Prodding allies on China will require even more of those coalition-building skills.
Biden has said international trade will initially take a back seat to domestic policy in his administration. Do you think that’s possible, or will events intrude?
Events will definitely intrude. The phase 1 agreement with China requires revisiting, as it was written as a temporary truce. Many of America’s allies remain unhappy that Trump labelled them a national security threat and are still retaliating against US exports. The epic Boeing-Airbus dispute may remain unresolved, with retaliatory tariffs still on the table. France and Europe are on the brink of digital services taxes, and Brussels is itching for a carbon border adjustment tax as part of its Green Deal.
Either the new administration engages early, helping to shape implementation; or it may find itself forced to respond with trade policy on defence.
In the first year of the Biden administration, what will the US do to revive and reform the WTO?
An early gesture could be to confirm Ngozi Okonjo-Iweala as the WTO’s new director-general. Next up may be a compromise on the appellate body, and so reviving the organisation’s enforcement mechanism. That could drag on beyond the first year, though, as the Biden team agrees with many of Lighthizer’s critiques. Making WTO rules enforceable again may mean partners agree to substantive change, such as allowing more permissive use of antidumping and other trade defence instruments.
The other priority requires agreeing with Europe and other allies on a long-term vision for the WTO. Do they continue the consensus-based approach and risk the WTO remaining stuck as a middling, lowest common denominator agreement? Or do they form smaller groups and push ahead on tougher topics — eg industrial subsidies, environment, services, or ecommerce — in order to get something done?
An unexpectedly strong rise in confidence at large Japanese manufacturers has boosted hopes for a solid recovery next year from the Covid economic shock even as the country’s virus outbreak continues to spread. The Bank of Japan’s quarterly Tankan survey improved to a level of minus 10 in the final quarter of the year, compared with minus 27 in the third quarter, and beating analyst expectations for a reading of minus 15.
France’s economy is expected to rebound by 5 per cent next year and to reach its pre-pandemic level of output only by mid-2022 after shrinking 9 per cent this year, the Banque de France, the central bank, said in its quarterly report on Monday. The forecasts were slightly more pessimistic than those of the bank’s previous predictions in September.
The Federal Reserve is poised to issue new guidance extending its emergency bond-buying programme, as it grapples with the need for another monetary boost to buttress the US economic recovery. At this week’s meeting, US central bankers are widely expected to approve language specifying that the $120bn a month in debt purchases launched at the start of the pandemic will continue until the recovery meets certain conditions, according to senior economists and Fed watchers.
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