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Hello from Brussels, where there’s quite a lot of attention on the US at the moment, what with Joe Biden’s sort-of-State-of-the-Union speech last night in which he strongly reiterated the Buy American theme.
On that subject, an interesting announcement this week: the appointment of Celeste Drake, longtime official of the AFL-CIO labour union federation, to be the Made In America point person in the White House Office of Management and Budget. Drake is very definitely on the left, one of a series of appointments from that wing of the Democrats to the Biden administration, and generally sceptical of globalisation and trade deals.
Does this mean the administration’s domestic procurement plans are really going to bite? We’ll see. The devil here is, as always, in the detail of waivers and exceptions. One bit of evidence the other way: the Biden administration has reportedly abandoned the plan it inherited from Donald Trump to pull out of the World Trade Organization’s government procurement agreement for essential medicines to fight Covid-19.
Today’s main piece looks at another live controversy — recent developments in the WTO debate on lifting patent protection on vaccines. Tall Tales is on the post-Brexit UK continuing to confuse sovereignty with power.
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Defusing the conflict over IP and Covid
There’s one massive story in global trade at the moment, eclipsing even the UK-Australia bilateral deal (we know, right?) and that’s the production and distribution of Covid vaccines. As we’ve said before, this is fiendishly difficult stuff. Yesterday Trade Secrets looked at de facto export restrictions: today we come back to the proposal to suspend patents and other intellectual property for Covid-related drugs and medical equipment under the WTO’s Trips agreement.
During the six months we’ve been writing about this, public debate has frequently simplified the waiver issue into a political stand-off, either between right and wrong (cheap vaccines vs Big Pharma profits) or between progress and chaos (well-regulated meds vs populist free-for-all). (The fact that a complex policy issue is unhelpfully being presented as a self-evident moral certainty has been clearly signalled by the thundering arrival of former UK prime minister Gordon Brown on one side of the argument.)
The WTO convened a summit of pharma companies, health experts, campaigners and so on last week. Attendees said it was far more nuanced and less rancorous than what’s played out in public. Still, there were no simple conclusions. Ngozi Okonjo-Iweala’s summing-up is here.
If the pharma companies are right (which they are) that IP as such is less important than the transfer of manufacturing knowhow, does the patent waiver matter?
The problem is that the current model, while it has done an amazing job in producing multiple vaccines in record time, is not without flaws. Perhaps the closest to the public-private approach — preserving patents but involving technology-sharing — is AstraZeneca, where the UK government brokered a link-up with Oxford university. The aim was to produce at cost and with the knowhow simultaneously developed with the Serum Institute of India, a massive generics manufacturer. It looked pretty good to many people, including us.
However, the latest news isn’t great for that model, because other bits of the machine are shaking loose. If one or two pieces in the complex interlocking system of R&D, IP, knowhow, procurement, regulation, production and trade policy stop functioning, the whole system starts to malfunction.
AstraZeneca, aside from the controversy over contracts giving preference to the UK, continues to have serious production problems, which have led the European Commission to litigate. This is probably unwise, if only through causing reputational damage to the EU itself, but it reflects an understandable frustration in Brussels. It’s worth recalling that AstraZeneca is not traditionally a vaccine manufacturer. The UK apparently chose to partner it precisely to avoid the sort of export ban, either formal or de facto, that the US indeed did apply to American pharma companies. One dysfunction in the system led to another.
More recently, the Covid crisis in India has caused its government to block overseas sales of the AstraZeneca vaccine by the Serum Institute. Again, this is understandable but shows the dangers of relying on production in a country which, though it has a world-class drugs industry, has horribly mismanaged the pandemic at home. Chancellor Angela Merkel’s recent comments (here in German to avoid possible mistranslation) on the risk of having let India become a key supplier to the EU were clumsily phrased, but the underlying sentiment is reasonable.
What does the India situation imply for the Trips waiver, for which it, along with South Africa, is itself one of the original proponents? As usual, it’s not clear-cut. You could argue it weakens the case that patents are the limiting factor. India has all the IP and knowhow it needs and yet still can’t produce enough for itself, let alone supply the world. Conversely, it could suggest IP needs to be loosened to spread manufacturing to more countries to reduce political risk.
This is a tricky and technical enough situation that we don’t have a strong view. (It had to happen eventually.) But it seems to us that a limited waiver from Trips — narrowed precisely on vaccines, not the catch-all request currently at the WTO — might go some way to shifting the debate towards more helpful areas while not actually destroying the global IP system. You can read a very good argument for same by the academic Gary Winslett here.
Pandemics aren’t normal circumstances, and relaxing patents on Covid vaccines isn’t necessarily a slippery slope to IP Armageddon. Apart from anything else, if the pharma companies are right and patents aren’t the limiting factor, waiving the IP won’t necessarily make much difference.
One final point. A lot of these decisions by companies and governments take place in a mist of uncertainty. Arguing for more transparency in any given situation is the public policy suggestion of last resort — it may not be wrong, but it’s what you call for when you can’t think of anything else to say. Still, wouldn’t it help if we could, for example, see exactly how governments have contracted with pharma companies for vaccines? (Redact the prices if you want: they aren’t the main issue.) We’re all navigating unfamiliar territory here. We might as well have some light to see what we’re doing.
Tall Tales of Trade
The European Parliament, not being insanely destructive, this week passed the trade and co-operation agreement (TCA) that seals the future trading arrangements between the EU and UK after Brexit. We’ll have more on how Brexit is going next week, but just to address one familiar trope from the UK side, that the EU and UK are now “sovereign equals”. In theory this is true: the UK has the right to set regulations, contract treaties and so on just as the EU does. But formal sovereignty does not equal de facto symmetry.
As we were saying the other day, on data, on financial services, on a range of things, the EU sets the standards. The UK can choose not to follow, as it has done on food regulations. But it’s smaller, and so it suffers more. That’s how the trading system is. To be frank, it’s much like life in general.
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