Joe Biden won’t be doing much interesting stuff on trade, they said. US trade representative Katherine Tai will be a competent technocrat, none of your colourful combative Bob Lighthizers, they said. No need to keep watching Twitter late into the European evening for big trade news out of the US, they said. And then last night: BOOM, Tai announced support for a waiver of intellectual property protection for Covid-19 vaccines under the World Trade Organization (WTO) Trips agreement.
As trade news in the modern world goes, it beats the hell out of Trumpian gibberish about tariffs on steel and China buying American soyabeans. It’s rather overshadowed the other developments this week: WTO director-general Ngozi Okonjo-Iweala appointed her four deputies, all solid characters representing a politically necessary geographical spread, and the EU unveiled an anti-subsidy instrument, the latest in an array of new weapons to go after unfair trade wherever it may be found, ie, China, which we’ll write about next week.
The Trips waiver is the subject of our main piece today, while Tall Tales (the last ever TT before the slot is gracefully retired ahead of Trade Secrets’ revamp on Monday) focuses on that rich source of trade myths, Brexit.
Big Pharma gets a very nasty shock
Well, that was a surprise. Coming from an administration that talks a lot about alliances in trade, Katherine Tai’s announcement evidently wasn’t co-ordinated with prominent waiver sceptics such as the EU, Switzerland, the UK and Brazil, which are now scrambling to determine their positions.
It also creates an interesting position for WTO director-general Ngozi Okonjo-Iweala, who has trodden a fine line over intellectual property. We said a while back that the WTO could find a new lease of life as a forum to discuss a coherent strategy for vaccines. But we didn’t think it would happen quite like this.
We wrote about the Trips issue recently and came down tentatively on the side of a limited waiver, not because IP is the obvious constraint to expanding production of Covid-19 vaccines, but because at the margin it might remove one obstacle to a coherent global strategy.
Make no mistake: the symbolism is remarkable.
The US pharma industry, or at least its IP-protected part, has received bipartisan support from US trade policy for decades, well before the inception of Trips. The US government’s annual “Special 301 Report” on global IP protection released just six days ago gave the standard line (page 27): “USTR continues to seek adequate and effective protection for pharmaceutical and other health-related IP around the world to ensure robust American innovation in these critical industries to fight not only the current, but also future pandemics.” True, Donald Trump’s administration annoyed the pharma industry by taking away some protection for biologic drugs manufacturers when negotiating the USMCA deal with Mexico and Canada. But allowing fresh loopholes in multilateral IP protection is a much bigger deal.
What happens now? It’s notable that Tai did not express support for the India-South Africa proposal for a broad waiver on all medical products related to Covid-19, which dates back to last October. As we said at the time, having talked to the proponents, that was always a tactical position designed to start a debate, identify possible support and flush out opponents rather than a likely outcome. To that end, it seems to have worked rather well. Pretoria and New Delhi are in any case in the process of reworking and narrowing their text, with progress likely in a few days. Our supposition is that the US will come up with its own tightly drawn proposal and negotiations will start.
Substantively, what difference would a waiver make?
As the technocrats will tell you, countries can make use of existing flexibilities under Trips, which allow governments to override IP protection in their national laws without breaking WTO rules. Article 31 of Trips allows national governments to override patents by issuing compulsory licences and Article 73 offers a general national security exemption.
Of course, they are right. National governments have some room to move. The Senate in Brazil recently passed a bill making it easier to override IP on Covid-19 vaccines, for example, despite the Brazilian government’s opposition to the India-South Africa proposal. But using Trips flexibilities isn’t politically or bureaucratically costless. One such provision, to allow countries to produce under compulsory licence for export, is so complex it has only ever been used once.
This is why the symbolism is so important. In practice, the US government looking more kindly on overriding IP will probably make other governments more confident that they won’t face a lot of political pressure or potential litigation on the issue.
If you’re an emerging market minister thinking of issuing a compulsory licence, it’s going to be a lot easier facing down a multinational pharma company lobbying hard against you if you can simply tap the framed printout of Tai’s Trips waiver tweet you have prominently displayed on your desk and smile knowingly. The so-called “Doha declaration” of 2001 that expanded the use of flexibilities under Trips may not have led to a huge flood of compulsory licences, but it certainly helped governments in developing countries negotiate for low-priced antiretroviral drugs to treat HIV-Aids.
Given the time (months at least) it will take to negotiate a waiver, in practice we can imagine the US initiative mainly being used by governments to put pressure on pharmaceutical companies to do better on licensing and transferring technology, which are far bigger constraints than patents in producing Covid-19 vaccines. There’s a reasonable probability there will never be a formal Trips waiver granted, just a series of commitments by the pharmaceutical industry designed to head it off.
That’s often the outcome that waiver proponents want anyway, particularly with hugely complex products such as mRNA vaccines. It’s not just the recipe you need, it’s advice from the chef. Whether or not there are enough fully equipped kitchens round the world capable of replicating the dish is, of course, a highly pertinent question, and one that sceptics of the waiver proposal have rightly posed.
Anyway, that’s our immediate take: the US announcement is, more than anything, a means of creating leverage against the pharmaceutical companies. Whether it works, rather than forcing them into a defensive corner or causing them to exit the vaccine sector altogether, is a tactical question we’re not at all equipped to comment on.
What should be clear is that the Biden administration has made a huge political shift, not just in the WTO but with regard to one of its major domestic constituencies. Big Pharma just lost out to the left wing of the Democratic party, and the US is leading the debate inside the WTO again. Bob who? Never heard of him.
Tall tales of trade
We note with amusement today that Global Britain With Its Commitment To Building Alliances For International Good Governance is sending in gunboats to protect a few fishermen in the Channel Islands, admittedly amid daft provocation from France about cutting off electricity to Jersey.
More generally, we think it’s fair to say the UK is making a hash of Brexit, blaming the EU for the entirely predictable emergence of friction in the Irish Sea border which Boris Johnson’s government dishonestly claimed would never happen. The Northern Ireland issue would largely be solved if the UK agreed a sensible EU proposal for Great Britain to accept (as temporarily as it wants) the bloc’s rules on food standards and animal health, which would ease the need for border checks. London says it can’t sign up to indefinite “dynamic alignment” with EU regulations, changing its rules in lockstep with Brussels in perpetuity. But no one’s asking it to. The offer is for a temporary deal: if the UK wants to leave it to sign a chemical-washed chicken deal with the US, it can. In no sense is this a fundamental loss of sovereignty.
The UK is already following the EU food hygiene rules it inherited from membership, and neither British consumers nor farmers appear to be clamouring for the regulations to be relaxed. This isn’t the exercise of meaningful independence: it’s pure symbolism with a potentially serious political cost to stability and peace in Ireland. But that’s Brexit for you.
Want to know how the pharma industry has reacted to the patent move? Not well, it turns out, saying it sets dangerous precedent.
Chinese jab makers are another group that are no doubt not best pleased about the waiver. Tom Hale writes about the sell-off of their shares earlier today.
India’s coronavirus surge is adding to the woes of the global shipping industry and its customers, with the crisis leading several ports to turn away vessels staffed by crew from the south Asian country.
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