Covid-19 patients at a temporary hospital. Governments are over-purchasing vaccines to make sure they are priority customers © Maxim Shemetov/Reuters

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So on Sunday one of the biggest trade deals was signed by 15 Asia-Pacific nations accounting for a third of global gross domestic product. Did you notice the seismic tremors as the tectonic plates of global commerce shifted beneath your feet? Not exactly, right? The Regional Comprehensive Economic Partnership (we’ve written about it here) is a child’s paddling pool the width of an ocean: very broad but rather shallow. As you’d imagine for a deal economically anchored by China — though credit for the diplomatic initiative goes to the Asean governments — it creates a bit more market access on goods. However, there’s not much on services, and the rules ensuring cross-border data flow have loopholes big enough to march the People’s Liberation Army through.

Does it do anything worthwhile? One thing at least: it liberalises and unifies rules of origin for the bloc, meaning it’s easier to build flexible supply chains, shifting stages of production around between countries without suddenly falling foul of tariffs. If you’re China and you fear more punitive duties from the US, that could be handy. But to go beyond this and rival the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) as a detailed model for trade and economic growth is going to require Beijing to allow many more external constraints on its state-directed growth strategy than hitherto. Don’t wait up for that one.

The trade deal signed by the Asia-Pacific nations liberalises and unifies rules of origin for the bloc © Chris Ratcliffe/Bloomberg

Today’s main piece asks whether, as the second wave of the pandemic is upon us (or some of us), it’s actually stress-testing multilateral governance enough to produce meaningful changes therein. In Tit for tat, Victoria Espinel, the first chief US negotiator for intellectual property, answers three questions, while our chart of the day shows how Britain’s biggest container terminal — Felixstowe — is lagging behind rivals.

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Dumb luck and half-measures as a second wave hits

During the first wave of the pandemic in spring the gaping holes in global governance were pretty obvious. Governments around the world slammed on disruptive export controls on personal protective equipment with impunity, there were warnings of disruptions to international goods trade, particularly food, and there began a disorganised scramble to develop a vaccine.

There were some valiant attempts to fill the governance gap. The now-familiar right-minded gang of countries in the World Trade Organization including New Zealand, Australia, Chile and Singapore inveighed against export controls of essential goods, especially medical equipment. The existing machinery to develop, deliver and administer vaccines for developing countries was expanded to create Covax, an international agency to buy and distribute doses equitably between nations.

Half a year later, good ideas are still being pumped out at a fine rate. Last week an interesting collection of proposals appeared in the latest ebook from the Centre for Economic Policy Research. Looking through the subjects it covers, though, it’s striking not just that not many big changes in governance have been made — it’s a bit early for that — but that there doesn’t seem to be a sense of urgency among governments to do so. 

The initiative from New Zealand et al has not reached critical mass: the big trading economies have not signed on. There remain no effective legally binding disciplines on export restraints on PPE or other emergency medical gear. Nor is there global co-ordination in PPE production and delivery. 

Why? Well, some of the potential problems didn’t materialise, others have been fixed just enough to get them out of the headlines, and some are likely to affect those countries without enough clout to get changes made.

The crisis that didn’t happen was a big disruption to the supply of goods worldwide, including the feared food shortages. A few commodity exporters put in export controls, but they had little effect on global markets. The food crisis of 2007-08, where export bans drove prices higher, was touched off by several harvest failures at a time of surging demand, which was not the case this year.

More generally it turns out that a capital-intensive goods trading system, operated by relatively few socially distanced workers, can cope with a pandemic surprisingly well. So can services delivered remotely. It’s the domestically orientated parts of the services sector that have lots of people gathering closely together that have suffered. (The UK, sliding towards a no-deal Brexit, is shaping up to provide an object lesson in what a real goods supply shock looks like.)

After the great rush into PPE manufacture in the spring, supranational, national and local authorities have been working on stockpiles to see them through the second wave © Frederik Florin/AFP/Getty

Meanwhile, as the second wave of the pandemic comes around, at least to countries that have not worked out an effective means of squashing it early on, short-term fixes have hidden longer-term problems. After the great rush into PPE manufacture in the spring, supranational, national and local authorities have been working on stockpiles to see them through the second wave. They are far from perfect, but they are bigger and better than last time.

As for vaccines, the relief at the development of any effective treatment may well overshadow concern at the inequity and inefficiency of distribution. Covax was intended to use the established technique of encouraging vaccine development through guaranteeing purchases in advance and ensuring that poor countries got their share. But judging by the massive orders separately put in by the rich nations, any new vaccine will end up primarily being allocated by income rather than by need.

A vaccine free-for-all is damaging to efficiency as well as equity: governments are clearly over-purchasing to make sure they are priority customers. But will there be enough of an outcry about developing countries to mean that a comprehensive global procurement and distribution system is created for the future? We wouldn’t bet on it. 

Few would argue that global co-operation coped well with the initial collective problems of the pandemic. It’s still very early days for long-term policy responses, and perhaps new international mechanisms will be created. But a combination of some problems being smaller than expected, some being met with short-term fixes and some happening mainly to poor people doesn’t bode well for a radical improvement in governance for the future.

Charted waters

Chart showing ships spend longer than average at Felixstowe port, average hours vessel spends in port, Jan to Sep 2020

Britain’s biggest container terminal — Felixstowe — is the worst-performing port among key competitors in Europe and Asia, according to new data, raising fresh questions about its claim to be the “port of Britain”. Figures from information provider IHS Markit on port efficiency for the first nine months of the year showed the Suffolk container terminal lagging far behind European rivals including Rotterdam, Hamburg and Bremerhaven.

Tit for tat

Victoria Espinel, president and chief executive of BSA, which represents the international software industry, joins us to answer three questions.

How do you see a Biden administration differing from the Trump administration in its approach to intellectual property?

As I saw when I worked with him as White House IP enforcement co-ordinator, Biden is a longtime champion of intellectual property rights and views IP as an important part of the US economy. I think a Biden administration will work with other countries with similar views on IP rights to make progress on areas where there is agreement and collectively raise shared concerns. I also anticipate that a Biden administration will be forward looking in supporting America’s leadership in emerging technologies, including AI and quantum computing. That requires funding for R&D, education and worker training at home, and flexible legal frameworks globally, such as copyright laws that enable data analytics and the development of AI services.

‘Biden is a longtime champion of intellectual property rights and views IP as an important part of the US economy’ © Carolyn Kaster/AP

The IP provisions were watered down a lot in the TPP after the US left. Do you think the US could rejoin with the rules as they now are?

When the US withdrew from TPP, certain copyright enforcement and pharmaceutical protections were removed. But many of TPP’s IP provisions remain strong, creating high standards, and allowing flexibility, such as allowing for IP rules that enable data analytics and the development of AI services. If the administration is interested in rejoining, it makes sense to discuss reverting to the IP provisions negotiated previously with trading partners. The administration should also determine if there is interest in updating TPP to include additional provisions on the growing area of digital trade.

Where do you see the most conflict between the US and China on IP issues, and where, if anywhere, can they be resolved?

The US is a leader in innovation and IP. These are central to America’s economic success. For China, IP is not yet an overarching economic imperative, although that may change. Economic espionage continues to be a significant concern — but the issues between the US and China are of course broader than IP. What we need is to create fair market access, ensure data can be transferred securely, and protect the software supply chain, without simply prohibiting software created in one country from being used in another.

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Tokyo talk

The best trade stories from Nikkei Asia

  • Taiwanese iPhone suppliers Foxconn and Pegatron have pledged to continue investing in US plants on the heels of Joe Biden’s win, suggesting that the global tech supply chain will still shift even after Donald Trump leaves office.
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  • Opening a regional travel corridor in the Association of Southeast Asian Nations will be more difficult than leaders suggested at their annual summit last week, with Indonesia and the Philippines still reporting more than 1,000 new cases daily. 
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