The Covid protectionism that stays covert

As a comms strategy it was distinctly odd. The revised proposal from a big developing country caucus for a waiver on Covid-related World Trade Organization intellectual property rules emerged late on Friday, just after the end of a global health summit in Rome, when it was published by a campaigning NGO.

It wasn’t just the timing that underwhelmed. The proposal, led by India and South Africa, was intended to refine their request from last October that kicked off a big debate and induced the US to support a patent waiver in principle. But whatever the underlying issues — we’re modestly supportive of a narrow waiver on political economy grounds — the new proposal isn’t a basis for a compromise with the US, let alone more sceptical WTO members like the EU.

It’s still unrealistically broad. It covers more types of IP (copyright, trade secrets) than just patents and applies to these categories: “health products and technologies including diagnostics, therapeutics, vaccines, medical devices, personal protective equipment, their materials or components, and their methods and means of manufacture for the prevention, treatment or containment of Covid-19.” I mean, come on. The waiver is also in effect open-ended as it requires a consensus of member governments to end it. If and when the US produces its own text for a waiver, there’s going to be a gap of galactic proportions.

Sorry to say, because we thought the original proposal started a useful debate, this reads like a grandstanding exercise set up to blame other governments when it fails. Any negotiation with this as a basis will stretch out for months or years. You might argue this proposal is objectively reasonable. You can’t argue it is politically realistic.

Today’s main piece is also on vaccines, but mindful of our views last week that the conversation needs to pivot away from IP, and notwithstanding what we’ve just written, we’re going to try to do it without mentioning patents once. Wish us luck. Charted waters looks at the impact of the shortfall in production from India’s Serum Institute on global vaccine supply.

A transparent cure for a murky malady

OK, so no more mention for today of the p-word, the one that rhymes with “latent”. Instead, we’ll look at how old-fashioned trade restrictions in vaccines and other medical goods have got us to this point. This is of course acutely relevant to the whole IP/tech transfer issue. Why are pharma companies being urged to shift vaccine production to low-capacity regions like sub-Saharan Africa anyway? Because those countries can’t trust rich-world governments (or India) to keep trade open. That’s even though distributing meds globally from a few hyper-productive manufacturing centres is the most efficient model.

Politically, big public rows over export restrictions have gone away a bit. The EU managed to get its own vaccine supply rising sharply and so the resentment against the UK for hogging domestic production and AstraZeneca for production shortfalls has quietened. However, while the official number of export and other trade curbs has fallen back, the real level is probably a lot higher.

Appearing in front of the European parliament’s trade committee last week, WTO director-general Ngozi Okonjo-Iweala said the number of coronavirus-related export restrictions had dropped from 109 early in the pandemic to 51. That’s good, and certainly the panicked upwards spiral of face mask export bans has been reversed. But countries have a lot of ways to discourage exports short of formal legal restrictions and the WTO doesn’t necessarily record them.

The Global Trade Alert (GTA) project, which monitors the murkier kinds of protectionism, reckons there are more than twice as many export restrictions on medical goods still in place as official stats suggest, plus 66 (and rising) measures to curb imports too. The graphic below highlights some of the worst offenders, which include much of Europe, alongside big emerging markets such as China, India, Brazil and Argentina.

The WTO isn’t studiously ignoring reality: its secretariat has limited authority to compel countries to report Covid-related trade restrictions, and could do with more. This is a case put very well by European University Institute professor Bernard Hoekman in chapter 2 of this excellent collection of ideas for improving the multilateral system, which also gives more detail on actual-vs-recorded restrictions. Transparency doesn’t stop shameless governments, but it might restrain those that care about public opinion. 

Speaking of which, where are the governments that will take a lead against Covid-related protectionism by writing binding rules to constrain it? The problem is, as the graphic shows, there are few innocent countries that can draft a meaningful agreement about transparency and free trade without looking like hypocrites. The EU prides itself on the transparency and limited use of its export restriction regime. But while it’s nothing like as bad as the US’s Defense Production Act, the EU is still accused of operating de facto export restrictions by deterring companies from obtaining export permission (a charge it denies).

A variety of constellations of countries have put out statements, but none is a binding commitment that has achieved critical mass. The G20 emitted one of its usual vague bromides last March: we doubt many trade ministers fret about their fidelity to it. The “Ottawa Group” of 13 like-minded countries — intended to be representative of the WTO membership — has been talking about a global health and trade initiative since last June, but it has so far failed to come up with any specific commitments. That’s not surprising: the founder of the GTA, Simon Evenett of the University of St Gallen in Switzerland, reckons Ottawa Group countries are responsible for more than 40 per cent of the export curbs on medical goods imposed since the beginning of the pandemic.

Meanwhile, a gaggle of the usual free-trading teachers’ pets (New Zealand, Chile, Singapore) have been putting out statements against medical protectionism for a year. Some of their governments will try to push the issue through the Asia-Pacific Economic Cooperation grouping, but that forum hasn’t achieved much for a while.

To be fair it’s hard to draft binding rules. WTO laws give wide leeway to governments blocking exports in an emergency. But so far we haven’t seen much attempt to try, or any radical expansion of transparency. Meanwhile, old-fashioned protectionism on goods is a risk for any government that depends on Covid medical supplies from abroad.

We did it. We got through a Trade Secrets main piece on Covid meds without mentioning the p-word. From the relative attention it gets, you might think that the issue of trade restrictions is mundane and has reduced sharply in importance, but some aspects of it look disturbingly durable.

Charted waters

The second wave of the pandemic playing out in India is having a dramatic impact on vaccine supplies in other developing economies. The Serum Institute, the India-based manufacturer that is the world’s biggest vaccine maker, is no longer exporting any of the doses of AstraZeneca and Novavax that it has been contracted by Covax, the World Health Organization-backed programme aimed at providing jabs to the world’s poorest countries, to make.

As the FT reported last week, the Serum Institute now plans to extend that freeze until the end of the year, after having said the ban could be lifted in June. The chart above highlights the impact that this is likely to have on the Covax programme, delaying delivery of about half of the vaccines that were expected in the third quarter and a little less than half of the supply expected for the final quarter. Claire Jones

Trade links

Peter Ungphakorn, a veteran of the WTO secretariat, has a very good Twitter thread on why the IP waiver tabled on Friday will prove politically unpalatable. We’d also recommend this interesting paper — from the chair of the European parliament’s international trade committee, Bernd Lange, — setting out an EU trade strategy with China. Given the rising anti-China sentiment there, it’s well worth a read.

A global tax deal is looking more likely after it emerged that the G7 is close to an accord on how to tax multinationals. That’s after the US signalled it was willing to lower the globally agreed minimum from 21 per cent to 15 per cent.

Supply chain logjams are leading to rising prices and all sorts of concerns about inflation. Martin Sandbu argues that the fears are overdone, and that these cost pressures are unlikely to prove that stubborn. Indeed, once the logjams ease, we could see cheap goods flood to market.

Nikkei has a great read ($, requires subscription) on how the world’s sailors have been hard hit by the pandemic, with many being stranded or spending month after month on board as a result of travel restrictions. India’s coronavirus crisis is affecting Taiwanese manufacturers, desperate to reduce their reliance on China, which had hoped to use the country as an alternative production base. Alan Beattie and Claire Jones 

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