International Economic Law and Policy Blog

Guest Post: The TRIPS Vaccine Waiver Controversy

This is a guest post from law professor Michael Trebilcock and lawyer Dan Poliwoda:  

 

THE TRIPS VACCINE WAIVER CONTROVERSY*

By

Michael Trebilcock

Emeritus University Professor of Law
University of Toronto

 

 

Dan Poliwoda

Lawyer, Dickinson Wright LLP

University of Toronto (J.D., 2020)

 

 July 12, 2021

*We acknowledge the invaluable research assistance of Daniel Scarpitti, University of Toronto, Faculty of Law, 2L, in preparing these comments.

 

Table of Contents

INTRODUCTION.. 1

1. THE TRIPS AGREEMENT.. 2
2. THE ESSENTIAL MEDICINES DEBATE PRIOR TO THE COVID-19 PANDEMIC.. 4

III.       THE PROPOSED TRIPS WAIVER.. 6

1. THE CASE FOR AND AGAINST A COMPREHENSIVE TRIPS WAIVER.. 8
2. REVIEWING ALTERNATIVE OR COMPLEMENTARY PROPOSALS FOR ACHIEVING COVID-19 GLOBAL HERD IMMUNITY.. 12

CONCLUSION: A MULTILATERAL SOLUTION FOR ADDRESSING EMERGING CHALLENGES DURING THE COVID-19 PANDEMIC.. 14

 

INTRODUCTION

This paper is motivated by the tension between international intellectual property (IP) protection and countries’ abilities to respond to public health emergencies by accessing essential medicines, a tension which has re-emerged in the context of patents, copyrights and trade secrets related to COVID-19 vaccines, diagnostics, therapeutics and other health products. More specifically, the vastly differing rate at which developed and developing countries have been able to procure COVID-19 vaccines has exposed major inequities in global vaccine access, a major concern in light of high mortality rates in developing countries and the threats posed by deadly variants to countries even with high vaccination rates.[1] In an effort to boost developing countries access to COVID-19 vaccines, it has been proposed that the World Trade Organization (WTO) grant a broad IP waiver to enable more widespread vaccine production, a proposal that has thus far been opposed by some developed WTO members, including some G7 countries.[2]

This paper proceeds as follows: section 1 introduces the TRIPS Agreement (defined below), the most comprehensive multilateral agreement on IP to date; section 2 reviews the access to essential medicines debate prior to the COVID-19 pandemic; section 3 introduces the recently proposed patent waiver regarding COVID-19 vaccines and other health products, and how WTO members have responded to it to date; section 4 considers the three main schools of thought that have emerged relating to the proposed WTO patent waiver; and section 5 considers recent policy proposals that have been advanced to address inequities in global vaccine access. Finally, we conclude with our recommendation for implementing the proposals considered in section 5. Specifically, we propose the creation of a committee (or war cabinet) formed by the heads of the four leading multilateral institutions – the International Monetary Fund (IMF), the World Bank, the World Health Organization (WHO), and the WTO – to address and implement solutions for emerging global issues as the COVID-19 pandemic continues to evolve.

I.                   THE TRIPS AGREEMENT

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement or TRIPS) is a multilateral agreement that binds WTO members to maintain certain minimum standards for the protection of various forms of IP.[3] TRIPS was negotiated during the Uruguay Round (1986-1994) of the General Agreement on Tariffs and Trade (GATT), and introduced IP protections to the multilateral trading regime.[4] TRIPS is comprehensive, covering a wide range of IP – patents, trademarks and copyrights, including computer programs and databases – and mandatory enforcement procedures, remedies and dispute resolution procedures.[5]

TRIPS, as originally negotiated, contained in Article 31 a vigorously debated provision permitting compulsory licensing of IP rights subject to relatively stringent conditions. These included efforts by the proposed user to obtain authorization from the rights holder within a reasonable period of time – a requirement that may be waived by a WTO member during national emergencies or other circumstances of extreme urgency, which were undefined. Further, such use would be nonexclusive and authorized predominantly for the supply of the domestic market of the member authorizing such use, and subject to the rights holder being paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization (again without further definition).

Prior to TRIPS, international IP protection did not factor in the multilateral trading system’s legal framework, and the GATT is mostly silent on the relationship between international trade and IP rights. As a result, IP producers were often subject to varying jurisdictional rules, largely shaped by the extent to which each jurisdiction linked trade policy to IP standards. In the United States (US), as for most developed countries,[6] trade policy and IP standards have consistently been linked, a pattern which can (at least partially) be traced back to extensive lobbying by senior management at US-based technology and pharmaceutical firms.[7] For example, since at least the 1980s, Pfizer Inc. has been involved in mobilizing other US firms and stakeholders to lobby US policymakers on the issue of international IP protection. This was largely motivated by pharmaceutical firms’ commercial considerations, i.e. stronger patent protections usually result in higher drug prices. In turn, maximizing IP privileges for producers became, and has generally continued to be, a fixture of US international trade policy priorities.[8]

II.                THE ESSENTIAL MEDICINES DEBATE PRIOR TO THE COVID-19 PANDEMIC

The TRIPS Agreement has been the subject of intense criticism by some who allege that TRIPS subjects developing countries to the prices charged by pharmaceutical companies for essential medicines, practically denying the most vulnerable citizens of these countries access to potentially lifesaving drugs and preventing access to much cheaper generics (like HIV/AIDS antiretrovirals).[9] On the other side of the debate, proponents of TRIPS argue that committing WTO members to minimum IP standards resolves a collection action problem among developing countries, and they argue that in the absence of strong IP protections, pharmaceutical firms have little incentive to invest R&D resources for producing cures for diseases afflicting citizens of developing countries. They argue that TRIPS solves this problem, at least in principle, incentivizing pharmaceutical companies to address certain tropical and related diseases through the financial rewards associated with stronger IP protections.[10]

            In response to concerns over access to essential medicines and TRIPS, especially in the context of the HIV/AIDS epidemic in the late 1990s, the WTO Ministerial Conference in Doha adopted the Doha Declaration on the TRIPS Agreement and Public Health (the Declaration) in 2001.[11] The Declaration reaffirmed certain flexibilities built into TRIPS which allow WTO members to circumvent patent rights for better access to essential medicines, including during public health emergencies or circumstances of extreme urgency. Specifically, the Declaration affirmed members’ rights to determine what constitutes a national emergency or circumstance of extreme urgency, and to establish their own regimes for the exhaustion of IP rights without challenge. In 2003, the WTO General Council (the Council) decided to adopt an additional set of provisions (the Decision) to ensure developing countries with insufficient pharmaceutical manufacturing capacities could make effective use of the flexibilities set out under Article 31 of the TRIPS Agreement.[12] In this respect, the Council determined that compulsory licenses could be issued to generic drug manufacturers in exporting countries and complementary compulsory licenses could also be issued by importing countries that lacked domestic manufacturing capacities.[13]

            The Decision would eventually serve as the basis for a formal amendment to TRIPS Article 31 taking effect in 2017,[14] but several questions still remain regarding the most effective means for developing countries to access affordable medicines. For example, generic drug manufacturers and governments have faced challenges concluding licensing agreements in the absence of straightforward legislative steps and administrative procedures, which would help establish clear decision-making processes and responsibilities. Likewise, setting adequate compensation, as required under TRIPS Article 31(h) has never been predictable or easily administered.[15] Additionally, and of similar importance, other questions remain outstanding, including which countries qualify for parallel imports,[16] navigating the complexities of licensing agreements,[17] ensuring timeliness during public health emergencies,[18] and achieving cooperation from pharmaceutical companies who arguably have little incentive to cooperate.[19]

III.              THE PROPOSED TRIPS WAIVER

On October 2, 2020, India and South Africa submitted a proposal to the WTO requesting a waiver from certain TRIPS provisions applying to COVID-19 vaccines and other health products for the “prevention, containment and treatment of COVID-19.”[20] As originally proposed, the waiver would be comprehensive, covering obligations in four sections of the TRIPS Agreement – copyright and related rights, industrial designs, patents, and protection of undisclosed information – and extend for an unspecified period of time. This comprehensive waiver proposal has subsequently been revised to clarify its scope, now applying to “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.”[21] The revised proposal also clarifies the proposed waiver’s duration, namely a three-year waiver to be reviewed by the WTO General Council on an ongoing basis. Finally, and unlike the original proposal, the revised proposal reflects an explicit goal of balancing competing interests. The waiver proposal’s preamble now highlights the ongoing uncertainties regarding COVID-19, the spread of concerning variants, the “urgent need to diversify and scale-up production,” while acknowledging the importance of “preserv[ing] incentives for research and innovation, and that these should be balanced with the public health interest.”

Generally, support for the TRIPS waiver has reflected members’ stage of development. Whereas many developing countries have signed on to sponsor or support the waiver (around 100 countries total), several developed countries have opposed the waiver or favour alternative approaches to increasing global vaccine equity.[22] For example, Germany has expressed its opposition to a TRIPS waiver in any form.[23] The EU has submitted an alternative proposal to the WTO that mostly involves existing WTO mechanisms, namely “trade facilitation and disciplines on export restrictions,” “support for the expansion of production” (including through voluntary licensing agreements), and “clarifying and simplifying the use of compulsory licenses [under TRIPS] during crisis times.”[24] The US has expressed its support for text-based negotiations at the WTO over a narrower TRIPS waiver, applying specifically to COVID-19 vaccines.[25]

On June 9, 2020, the TRIPS Council decided to move to text-based negotiations of the revised proposal regarding a TRIPS waiver for COVID-19 vaccines and therapeutics.[26] At writing, the delegates to the WTO are working to prepare a draft that attempts to satisfy all of the different constituencies – waiver proponents and waiver skeptics alike – in time for the WTO General Council meeting scheduled for July 21-22.

IV.             THE CASE FOR AND AGAINST A COMPREHENSIVE TRIPS WAIVER

As of the end of May 2021, poor developing countries have received less than 1% of vaccines administered. Broken down by continent, only 1.2% of the population of Africa, 4.8% of the population in Asia, and 14% of the population of South America have been vaccinated.[27] With the emergence and rapid spread of more deadly variants of the COVID-19 virus, dramatically and rapidly increasing vaccination rates globally is widely recognized as the most urgent global priority at the present time.

In this context, sharply divergent opinions have emerged as to whether IP rights in COVID-19 vaccines and their inputs are part of the solution or part of the problem in addressing this priority. One school of thought argues that IP rights are a serious impediment to dramatically expanding vaccine production capacity, especially in developing countries. Another school of thought takes the view that the relaxation or elimination of IP rights may be marginally beneficial, but that significantly more proactive and coordinated international policy initiatives are required to address this priority. A third school of thought argues that a sweeping waiver of IP rights in vaccines and their inputs is likely to have a deleterious impact on advancing this priority. We briefly review each of these three schools of thought below, drawing on prominent representatives of each school.

Prominent representatives of the first school of thought that favours a comprehensive TRIPS waiver are Joseph Stiglitz and Lori Wallach.[28] They argue that IP rights confer monopoly powers on the holders thereof, and like all monopolists they will seek to maximize profits by restricting supply and raising prices. They reject the idea that developing countries lack the manufacturing capacity or expertise to produce vaccines, noting existing agreements with the Serum Institute in India and Aspen Pharmacare in South Africa to produce vaccines in voluntary licensing or joint venture arrangements with proprietary vaccine manufacturers. They point to evidence that a number of developing countries with experience in producing other vaccines have substantial capacity to produce COVID-19 vaccines, and that proprietary vaccine manufacturers have thus far been reluctant to fully utilize this potential through voluntary licensing and joint venture arrangements. In their view, much of this potential manufacturing capacity could be deployed to COVID-19 vaccine production within a matter of months. They reject arguments that a waiver of IP rights will diminish economic incentives for the biotech sector to invest in future medical innovations, noting that even under a comprehensive TRIPS waiver they would be entitled to adequate compensation for generics derived from their proprietary products or processes and that several current proprietary vaccine manufacturers have been recipients of major public subventions. They also argue that current TRIPS flexibilities are inadequate to address the thicket of IP regulations along global supply chains, given the case-by-case nature of compulsory licensing they provide for.

We take as prominent representatives of the second school of thought Peter Hotez, Maria Elena Bottazzi and Prashant Yadav, three prominent US medical specialists, who argue that COVID-19 vaccines, especially the high-performing MRNA vaccines, entail extremely complex and sophisticated technological scientific and logistical processes, involving more than 100 components, sourced from a number of specialized input providers in a number of different countries.[29] They conclude that replicating these processes in many developing countries is not a realistic objective, at least in the near-term. They contrast these processes with the much simpler steps involved in producing HIV-AIDS antiretrovirals facilitated by the expanded TRIPS flexibilities post-2001, which allowed generic producers to enter the market for these medicines relatively quickly.[30] In the longer-term, they recommend that the international community make major investments in a select number of virus and vaccine R&D and production hubs on each major continent, although acknowledging that this does little to address urgent priorities in the near-term.[31]

The third school of thought, principally articulated by prominent representatives of the pharmaceutical industry, argue that a comprehensive TRIPS waiver would have a deleterious impact on near-term vaccine production and distribution priorities, especially because it would promote an uncoordinated scramble for critical vaccine inputs, many of which are already in short supply.[32] In addition, new manufacturing facilities in developing countries producing generic versions of proprietary COVID-19 vaccines would presumably be required to meet widely accepted standards of safety and efficacy, requiring some form of credible regulatory oversight and approval if public concerns in these respects, along with increased vaccine hesitancy, are to be minimized. Proponents of this school of thought also point out that proprietary COVID-19 vaccine manufacturers are already employing a form of tiered pricing with higher prices for vaccines in high-income countries, lower prices for middle-income countries, and lower prices again for low-income countries. They point out that even monopolists do not make money by pricing their products beyond the reach of citizens in poor countries. Indeed, the profit-maximizing strategy for a monopolist is to engage in price discrimination that reflects differential elasticities by country or customer group, and that any price above marginal cost in a given low-income market is better than selling no products at all, as long as fixed costs can be recovered in other high-income markets and these markets remain effectively segregated to preclude product arbitrage. Finally, proponents of this school of thought have expressed concerns over the effect of a comprehensive TRIPS waiver on long-term incentives for investments in medical R&D and innovation, especially for smaller highly specialized biotech companies.

In general, we find the second school of thought the most persuasive and that a comprehensive TRIPS waiver, standing alone, is likely to have only a marginal impact on near-term, urgent global priorities. Thus, we favour either suspending a vote in the WTO on the TRIPS waiver, or approving it, but then suspending it as long as measurable targets for increased output fully exploiting all potential voluntary licensing or joint ventures are met within defined timeframes. To achieve the priority of dramatically expanding vaccine output and ensuring effective deployment to most developing countries, it is becoming increasingly clear that complementary domestic capacities are required in terms of delivery and storage technology, trained healthcare workers, and credible public information campaigns to ensure substantial take-up. Thus, in the fifth section of this paper, we turn to more comprehensive policy proposals for addressing these priorities in the near-term.

V.                REVIEWING ALTERNATIVE OR COMPLEMENTARY PROPOSALS FOR ACHIEVING COVID-19 GLOBAL HERD IMMUNITY

It has become a truism among policymakers that unless everyone in the world is safe from the COVID-19 virus, nobody is safe, given the ability of the virus and its variants to be transmitted rapidly across borders. For those who take the view that a sweeping waiver of IP rights, by itself, is unlikely to have any dramatic effect on achieving this goal, especially over the near term – a view that we share – it is important to explore alternative or complementary strategies.

In a thoughtful article by Raj Shah, President of the Rockefeller foundation and former head of USAID, Shah organizes the challenges that must be addressed in boosting global vaccine production and distribution into three categories: (1) supply; (2) delivery; and (3) financing. Shah also sketches proposals for addressing constraints in each of these three categories.[33] Other commentators, such as Chad Bown and Thomas Bollyky,[34] draw on Operation Warp Speed, the Trump Administration’s public-private partnership aimed at facilitating and accelerating the development of COVID-19 vaccines, proposing a globally coordinated set of initiatives designed to minimize cross-border constraints on global supply chains, and to subsidize expansions of capacities to relieve bottlenecks in these chains where necessary. They recognize that a “global coordinating body” will be needed to achieve these objectives, i.e. “an effective and transparent administrator who is in one part general contractor and one part ombudsperson” (but not further specified).

In a more recent study undertaken by the International Monetary Fund (IMF), “A Proposal to End the Covid-19 Pandemic,” Ruchir Agarwal and Gita Gopinath outline a set of detailed proposals that elaborate on Shah’s three categories of challenges.[35] Their proposals target: (1) vaccinating at least 40% of the population in all countries by the end of 2021 and at least 60% by the first half of 2022; (2) tracking and insuring against downside risks; and (3) ensuring widespread testing and tracing, maintaining adequate stocks of therapeutics, and enforcing public health measures in places where vaccine coverage is low. They estimate that their proposals’ benefits – approximately $9 trillion to the global economy – far outweigh the estimated costs of $50 billion (of which $35 billion would be paid by grants from donors and the residual by national governments potentially with the support of concessional financing from bilateral and multilateral agencies).

A recent editorial in the Economist magazine, “The West is Passing Up the Opportunity of the Century,” drawing on the IMF study, states: “imagine an investment that would earn a return of 17,900% in four years. Better yet, the initial outlay would be easily affordable. Who on earth would pass up such an opportunity?”[36] On May 31, 2021, in an op-ed published in the Washington Post, the heads of the four leading multilateral institutions – the IMF, the WHO, the World Bank, and the WTO – issued an unprecedented collective call to action, identifying key and complementary roles that each of their organizations can and should play in achieving vaccine equity and overcoming the challenges posed by the pandemic in the near term.[37]

CONCLUSION: A MULTILATERAL SOLUTION FOR ADDRESSING EMERGING CHALLENGES DURING THE COVID-19 PANDEMIC

We are persuaded that these detailed proposals, especially those advanced in the IMF study, warrant early and urgent consideration and implementation. However, the IMF study and earlier studies, such as that by Bown and Bollyky, are disappointingly thin on the institutional arrangements required for their effective implementation. For instance, the top-down, command-and-control initiatives pursued by the Trump administration during Operation Warp Speed are not readily replicated at the international level. Furthermore, coordinating the policy initiatives of the four leading multilateral institutions with overlapping but not identical membership, and with very different internal decision-making processes, poses its own challenges. For our part we see virtues in the constitution of a pandemic “war cabinet” or committee, composed of the heads of the IMF, the WHO, the World Bank, and the WTO, or their senior designates, and supported by a seconded secretariat, that over the near term would meet on a weekly basis with a checklist of issues to be addressed from week-to-week. Minutes of each meeting would be made public in the interests of transparency and accountability (with exceptions for commercially sensitive information relating to contractual and similar negotiations). Meetings of our proposed cabinet would be chaired by each of the heads of the four institutions on a rotating basis.

Given the threat posed by variants and the related concern that variants may spread more quickly than vaccination rates, time is of the essence. Implementation of well-conceived proposals, such as those advanced in the IMF study, is the critical challenge, along with institutional arrangements at the international level focused relentlessly on this challenge.

 

[1] See Kristalina Georgieva et al., “Here’s Our Plan to Increase Vaccine Access and End the Pandemic Faster”, Washington Post, 31 May 2021, online: <https://www.washingtonpost.com/opinions/2021/05/31/why-we-are-calling-new-commitment-vaccine-equity-defeating-pandemic/>; Raj Shah, “COVID’s Haves and Have-Nots”, Foreign Affairs, 4 June 2021, online: <https://www.foreignaffairs.com/articles/world/2021-06-04/covids-haves-and-have-nots>.

[2] Saeed Shah and Gabriele Steinhauser, “Europe Pushes Alternative to Waiving Patents on Covid-19 Vaccines,” The Wall Street Journal, 3 June 2021, online: <https://www.wsj.com/articles/europe-pushes-alternative-to-u-s-backed-covid-19-vaccine-patent-waiver-plan-11622732952?page=1>;Yuka Hayashi and Jared S. Hopkins, “U.S. Backs Waiver of Intellectual Property Protection for Covid-19 Vaccines,” The Wall Street Journal, 6 May 2021, online: <https://www.wsj.com/articles/u-s-backs-waiver-of-intellectual-property-protection-for-covid-19-vaccines-11620243518?page=2>; Ann Danauya Usher, “South Africa and India Push for COVID-19 Patents Ban,” (2020) 396 The Lancet 10265.

[3] See generally, Michael Trebilcock and Joel Trachtman, Advanced Introduction to International Trade Law, 2nd ed (Cheltenham: Edward Elgar, 2020) at chapter 12, and A. Taubman, et al., A Handbook on the WTO Trips Agreement (Cambridge: Cambridge University Press, 2012).

[4] Peter Drahos and John Braithwaite, Information Feudalism (New York: New Press, 2003) at chapter 4.

[5] TRIPS also incorporates by reference the provisions on copyright from the Berne Convention for the Protection of Literary and Artistic Works, with the exception of moral rights. It also incorporates by reference the substantive provisions of the Paris Convention for the Protection of Industrial Property.

[6] During the Uruguay Round, negotiations over TRIPS were led by the US with strong support from EU, Japan, and other developed countries.

[7] Susan K. Sell, Private Power, Public Law: The Globalization of Intellectual Property Rights (Cambridge: Cambridge University Press, 2003) at 3-4.

[8] Ibid.

[9] See Drahos and Braithwaite, Information Feudalism.

[10] See Alan O. Sykes, “TRIPS, Pharmaceuticals, Developing Countries and the Doha Solution” (2002) 3(1) Chicago Journal of International Law 47.

[11] Doha Declaration on the TRIPS Agreement and Public Health (WT/MIN(01)/DEC/2), Doha WTO Ministerial, 14 November 2001, online (pdf): <https://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.pdf>.

[12] Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health (WT/L/540 and Corr.1), WTO General Council, 30 August 2003, online: <https://www.wto.org/english/tratop_e/trips_e/implem_para6_e.htm>; Amendment of the TRIPS Agreement (WT/L/641), WTO General Council, 6 December 2005, online: <https://www.wto.org/english/tratop_e/trips_e/wtl641_e.htm>.

[13] See Sisule Musungu and Cecilia Oh, “The Use of Flexibilities in TRIPS By Developing Countries: Can They Promote Access To Medicines,” 1 August 2005, online (pdf): Commission on Intellectual Property Rights, Innovation and Publish Health, World Health Organization <https://www.who.int/intellectualproperty/studies/TRIPSFLEXI.pdf?ua=1>.

[14] “An Amendment to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS),” 2017, online: <https://www.wto.org/english/tratop_e/trips_e/tripsfacsheet_e.htm>.

[15] Musungu and Oh, “The Use of Flexibilities in TRIPS By Developing Countries.”

[16] Rojina Thapa, "Waiver Solution in Public Health and Pharmaceutical Domain under TRIPS Agreement," (2011) 16 Journal of Intellectual Property Rights 470; Carlos Correa, “Access to Drugs under TRIPS: A not so expeditious solution” (2004) 8:1 Bridges 21.

[17] Thapa, “Waiver Solution in Public Health and Pharmaceutical Domain under TRIPS Agreement.”

[18] Ibid.

[19] Vera Zolotaryova, “Are We There Yet? Taking "TRIPS" to Brazil and Expanding Access to HIV/AIDS Medication” (2008) 33:3 Brooklyn Journal of International Law 1099.

[20] Waiver from Certain Provisions of the TRIPS Agreement for the Prevention, Containment and Treatment of COVID-19 (IP/C/W/669), Council for Trade-Related Aspects of Intellectual Property Rights, 2 October 2020, online (pdf): <https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/IP/C/W669.pdf&Open=True>.

[21] Waiver from Certain Provisions of the TRIPS Agreement for the Prevention, Containment and Treatment of COVID-19 (IP/C/W/669/Rev.1), Council for Trade-Related Aspects of Intellectual Property Rights, 25 May 2021, online (pdf): <https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/IP/C/W669R1.pdf&Open=True>.

[22] Daniel Crosby et al, “Update on the Proposed TRIPS Waiver at the WTO: Where is it Headed, and What to Expect?” JD Supra, 8 June 2021, online: <https://www.jdsupra.com/legalnews/update-on-the-proposed-trips-waiver-at-8411942/>.

[23] Dharshini David, “COVID: Germany Rejects US-Backed Proposal to Waive Vaccine Patents,” BBC News, 6 May 2021, online: <https://www.bbc.com/news/world-europe-57013096>.

[24] Draft General Council Declaration on the TRIPS Agreement and Public Health in the Circumstances of a Pandemic (IP/C/W/681), Council for Trade-Related Aspects of Intellectual Property Rights, 18 June 2021, online (pdf): <https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/IP/C/W681.pdf&Open=True>.

[25] Statement from Ambassador Katherine Tai on the COVID-19 TRIPS Waiver,” Office of the United States Trade Representative, 5 May 2021, online: <https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/may/statement-ambassador-katherine-tai-covid-19-trips-waiver>.

[26] Andrew Green, “WTO Council Offers Hope for TRIPS Vaccine Proposal,” Devex International Development, 10 June 2021, online: <https://www.devex.com/news/wto-council-offers-hope-for-trips-vaccine-proposal-100125>.

[27] Shah, “COVID’s Haves and Have-Nots.”; As of July 11, 2021, only 1.61%, 6.09%, and 62.45% of all administered vaccines have been administered in Africa, South America, and Asia respectively. See “COVID-19 Vaccine Doses Administered by Continent,” Our World in Data, 11 July 2021, online: <https://ourworldindata.org/grapher/cumulative-covid-vaccinations-continent?stackMode=relative&country=Africa~Asia~Europe~North+America~Oceania. ~South+America>.

[28] Joseph E. Stiglitz and Lori Wallach, “Will Corporate Greed Prolong the Pandemic,” Project Syndicate, 6 May 2021, online: <https://www.project-syndicate.org/onpoint/big-pharma-blocking-wto-waiver-to-produce-more-covid-vaccines-by-joseph-e-stiglitz-and-lori-wallach-2021-05>.

[29] Peter J. Hotez, Maria Elena Bottazzi and Prashant Yadav, “Producing a Vaccine Requires More Than a Patent: Intellectual Property is Just One Piece of an Elaborate Process,” Foreign Affairs, 10 May 2021, online: <https://www.foreignaffairs.com/articles/united-states/2021-05-10/producing-vaccine-requires-more-patent>; Chad Bown & Chris Rogers, “The US Did Not Ban Exports of Vaccine Supplies. But more help is needed.”, Peterson Institute for International Economics, 7 June 2021, online: <https://www.piie.com/blogs/trade-and-investment-policy-watch/us-did-not-ban-exports-vaccine-supplies-more-help-needed>.

[30] Hotez, Bottazi and Yadav, “Producing a Vaccine Requires More Than a Patent.”; Rojina Thapa, "Waiver Solution in Public Health and Pharmaceutical Domain under TRIPS Agreement" (2011) 16 Journal of Intellectual Property Rights 470.

[31] See also, Bryan Mecurio, "WTO Waiver from Intellectual Property Protection for COVID-19 Vaccines and Treatments: A Critical Review" (Forthcoming 2021) Virginia Journal of International Law.

[32] Albert Bourla, “An Open Letter from Pfizer Chairman and CEO Albert Bourla,” Pfizer, 7 May 2021, online: <https://www.pfizer.com/news/hot-topics/an_open_letter_from_pfizer_chairman_and_ceo_albert_bourla>; Michelle McMurry-Heath, “Michelle McMurry-Heath on Maintaining IP Amid COVID-19,” The Economist, 20 April 2021, online: <https://www.economist.com/by-invitation/2021/04/20/michelle-mcmurry-heath-on-maintaining-intellectual-property-amid-covid-19>.

[33] Shah, “COVID’s Haves and Have-Nots.”

[34] Chad P. Bown and Thomas J. Bollyky, “Here’s How to Get Billions of COVID-19 Vaccine Doses to the World,” Peterson Institute for International Economics, 18 March 2021, online: <https://www.piie.com/blogs/trade-and-investment-policy-watch/heres-how-get-billions-covid-19-vaccine-doses-world>.

[35] “A Proposal to End the COVID-19 Pandemic, 1 May 2021, online (pdf): International Monetary Fund, <https://www.imf.org/-/media/Files/Publications/SDN/2021/English/SDNEA2021004.ashx>.

[36] “The West is Passing Up the Opportunity of the Century,” The Economist, 12 June 2021, online: <https://www.economist.com/leaders/2021/06/09/the-west-is-passing-up-the-opportunity-of-the-century>.

[37] Georgieva et al., “Here’s Our Plan to Increase Vaccine Access and End the Pandemic Faster.”

 

The EU's Counterproposal on COVID-19 Vaccines and Treatments

After the surprise of the United States coming out in support of a TRIPS waiver for COVID-19 vaccines and related products, everyone has been looking to the EU and other wealthy countries to see if they would come around and support the general idea of a waiver. Negotiating a waiver will be a challenge even if every WTO Member supports it, because agreeing on specific language will be difficult. But support in principle is a necessary step.

From what the EU just announced today, it is clear they do not support a waiver at the moment. Here are some documents that describe the EU position: Questions and answers; EU communication to the WTO General Council; EU communication to the WTO TRIPS Council. The three key components of the EU's proposals are:

1. limit export restrictions and facilitate trade;
2. encourage the expansion of vaccine and treatment production, in collaboration with industry; and
3. address intellectual property issues.

Here are a few quick thoughts on each.

On the issue of export restrictions, the EU says:

All WTO members should be ready to subscribe to the G20 commitment to ensure that any export restrictive measures relating to health products are targeted, transparent, proportionate, and temporary, and consistent with WTO obligations. Such principles have been incorporated into a draft Declaration on the Trade and Health Initiative (‘Covid-19 and Beyond: Trade and Health (JOB/GC/251/Rev.2’) that the EU along with 12 other WTO members put forward back in December 2020. It is encouraging that 50 WTO members (including 27 EU Member States) have signed up to this initiative but the involvement of the whole WTO membership is required for it to have a significant effect. This initiative constitutes a basis that WTO membership should build on not only in a response to the current crisis but also in anticipation of any future emergency.

The draft Declaration develops further the concept of temporariness, and strengthens Members commitments regarding transparency and proportionality.

I have a sense the EU is trying to play up its differences with the U.S. in this area. Back in April, someone in the White House put out a long Twitter thread trying to defend the U.S. position, but in the process seemed to confirm that the U.S. measures were a de facto export restriction. One of the tweets in the thread stated:

To make vaccine here in the US we have used the DPA to ensure we have access to all needed supplies with many US companies. DPA in these cases just means U.S. companies must prioritize their government contracts ahead of other orders, it doesn’t mean an export ban

This seems to refer to vaccine inputs as opposed to vaccines themselves, but the same principle applies in that context. Maybe there's no export "ban," but if the DPA has signed purchase contracts with pharmaceutical companies that require prioritizing sales to the U.S. government, practically speaking this means the U.S. is restricting exports. The Biden administration has tried hard not to acknowledge any of this, but from what I can tell it's a real problem in terms of getting vaccines to the rest of the world. The Biden folks do seem to be looking for workarounds, but it's difficult when this is the starting point. Just today, the Washington Post reported: "Responding to criticism that the United States has hoarded lifesaving coronavirus vaccines, the Biden administration on Thursday announced a plan to share 25 million doses globally in what officials described as a down payment on tens of millions more doses to come." This is good, although it doesn't really deal with the underlying problem.

Next we get to the point about encouraging production. Here the EU says:

Governments should strongly encourage vaccine and therapeutics manufacturers and developers to contribute towards the objective of expanding production and ensuring affordable supply of vaccines and therapeutics to low- and middle-income countries during the pandemic. Such actions could include licensing agreements, providing for the sharing of knowhow, tiered pricing which involves a non-profit sale to the low-income countries, contract manufacturing and new investments in manufacturing facilities in developing countries.

This could mean a number of things. It could mean strongly worded requests by governments for manufacturers to agree to licensing agreements; it could mean government payments to the manufacturers to do so; or it could mean laws or regulations that require the manufacturers to do so. Here, I think it's worth noting that some day it might become clear that the U.S. support for a TRIPS waiver may have been designed as the "strong encouragement" the EU mentions.

Finally, on intellectual property, the EU seems to be pushing for an easier use of compulsory licensing:

In the absence of voluntary licences, compulsory licences are a legitimate tool to ensure that intellectual property rights do not hinder the expansion of production during the pandemic. The EU therefore calls on WTO members to agree that:

1. the pandemic is a circumstance of national emergency, and therefore the requirement to negotiate with the rights holder may be renounced;
2. we need to support manufacturers who are ready to produce vaccines or treatments at affordable prices under a compulsory licence, and that the level of remuneration paid by that manufacturer to the patent holder should reflect such affordable prices;
3. the compulsory licence could cover any exports to countries that lack manufacturing capacity, including via COVAX.

The EU also sets out the following view of intellectual property in this context:

6. The rapid development of several safe and effective COVID-19 vaccines has shown the value of intellectual property, in terms of the necessary incentives and rewards to research and innovation. With the support of public financing, pharmaceutical and biotechnology companies throughout the globe have built on their expertise and invested resources to find solutions against COVID-19. ...

Maybe some day we'll have a debate on the extent to which 20 year patent terms contribution to innovation. Is 20 years the right number? Would prizes work better? It's hard to get governments to think about these things. Anyway, it's great that the pharmaceutical companies came up with the vaccines, but I think the TRIPS waiver is not quite what some people are making it out to be. As I read the various exceptions and flexibilities in the TRIPS Agreement, there are pretty strong arguments that governments can do all the things they want to do (e.g., issue compulsory licenses) under the existing rules. The TRIPS waiver just gives them a little additional certainty that they won't be challenged at the WTO (and possibly in domestic courts as well, although it's hard to get a handle on how that would play out). I'm not sure why the EU is drawing the line where they are, but they seem determined not to budge and support anything called a "waiver."

Additional Katherine Tai Exchanges on Vaccine Production/TRIPS Waiver

Following up on my last post, here are two more good exchanges between members of the House Ways and Means committee and U.S. Trade Rep. Katherine Tai on vaccine production/TRIPS waiver:

Congressman Wenstrup:

... So I'm concerned about the intellectual property rights and, but at the same time sharing the goal of getting everyone vaccinated. And I worry that a waiver could do more harm than good. And, you know, Pfizer, for example, recently said that their vaccine utilizes 280 different materials supplied from 19 different countries, and an IP waiver could severely disrupt those supply chains to them, if others could just get it because they're producing basically a generic. And I'm worried about unlicensed producers who may not be able to replicate with the same safety and quality, which really, if they say oh this is the Pfizer vaccine that we're making here now, and the quality is not good and it's not working or there's some kind of contamination or whatever the case may be, it's really going to increase vaccine hesitancy, around the world. And I worry that, you know, waiver could could lead to innovators being less likely to engage in public private partnerships, what we saw with Operation Warp Speed so successfully. And that would leave us less, I think, a little more exposed and unprepared for the next pandemic, which probably will happen.

So I think we have to consider the future safety and health security, not only of Americans, but maintain those protections for good reasons for health reasons, safety reasons, and it's important as we move forward with further vaccines, and especially with this vaccine.

I know many of my colleagues are raising the issue about this, and asking about it, so I'll somewhat leave it there, but I do want to question whether there's any analysis being done by USTR about the potential impact of waiving IP rules, and what effect that may have on the supply of vaccines, and how you can ensure that any agreement to weaken the IP rules will not have a disastrous effect somewhere else where we don't have the same safety margins, we don't have the same oversight, regulatory effects, you know, so how do we assure that it's the same capabilities and we have a product that's capable of quality, safe, and one thing that crosses my mind is, you know, if countries are in need, if they could make it very simple for a company like Pfizer to manufacture in their country, that may be a solution rather than a waiver, and then, we would be, of course, hoping, they would want to make sure that it's the same quality and oversight.

Ambassador Tai:

Congressman, thank you so much for your comments and your engagement here. I appreciate you raising your concerns about unintended consequences and you're very very clear affirmation that, as a doctor, you care, you care about saving lives, and saving lives outside of our borders. It really is going to help us save lives inside of our borders because we are all interconnected and this virus knows no borders, right.

So, I want to say this. I have also heard the concerns of industry and directly from the manufacturers themselves, and I take them very seriously. I think that because a possible waiver of intellectual property protections at the WTO could lead to negative consequences or unintended consequences, is actually a reason for us to engage at the WTO. I think that the dynamic that had developed in Geneva, prior to last week, with us leaning in to say let's all roll up our sleeves and talk about this and figure out a solution, was that you had WTO members like ourselves sitting on the sidelines, saying, well, we're not quite sure that, you know we need to know more about the waiver, are there unintended consequences, and then factors leading to complete paralysis. I don't think that's tenable and I don't think that's the role that the United States should play in the world. I think that we should be part of the solution, always.

And so I want to say there is room to have these conversations and I also want to urge industry, the manufacturers, don't be so nervous and afraid about what this means. This is actually an opportunity for them to lean in and build on the incredible work that they've done in research and development and developing these vaccines, to really also becoming part of the solution. And I've invited them to seize this opportunity for leadership, to join us. There is a lot that they could do voluntarily that would obviate what we would need to do at the WTO, but because we are not there, we have significant portions of the global economy telling us that they are in trouble, that they need access, and that they need to do something through the rules, because otherwise they're not getting any progress and their hopes and dreams and their recovery are really held back because of it. So that's what I'd like to convey is that, we're going to have a process, we will talk through these issues, and that is what I really am going to lean into having the WTO produce.

Congressman Wenstrup's comments about possible manufacturing in factories in developing countries ("if countries are in need, if they could make it very simple for a company like Pfizer to manufacture in their country") could be taken as a subtle nudge in the direction he thinks this all should go. Tai's response was perhaps a little less subtle as a nudge to the pharmaceutical industry to go in that direction ("There is a lot that they could do voluntarily that would obviate what we would need to do at the WTO").

Congressman Smucker:

... I share some of the concerns on the intellectual property, and for me it's sort of a fundamental question, and I'm somewhat new to trade, being new to the committee, but like, I think it's a fundamental property rights question. How is it not, how can we give away the property of a company that has developed it on its own without consideration?

Ambassador Tai:

Well, thank you for your question. ... You know, it will be helpful to unpack a little bit. What this waiver means, and one point that's occurred to me that is important for me to get on the record here is that a temporary suspension of intellectual property protections at the WTO is because of a global pandemic, because of a very critical public health situation, is actually something that we have precedent for in the early 2000s. We did just that. We were able to agree at the WTO to temporarily suspend IP protections for AIDS and HIV drugs because of what was happening on the African continent with respect to populations of patients facing the dire consequences of the disease, but not being able to afford the medicines, and the technology that we had actually already developed and were available here in the United States. We're not, we're not talking about giving away intellectual property what we're saying is that we are allowing for. This is what the, ..

Congressman Smucker:

Why wouldn't that be done ... why wouldn't we do that in conjunction with a company and provide consideration for that, I guess, we're maybe not giving it away but we're giving away future earnings based on investments that they made.

Ambassador Tai:

Well I think that these are parameters for discussion, absolutely. But I think that you know in terms of what's been proposed at the WTO it's been this serious cry for help that's been met with silence for months.

Tai's response here may be an indication that what many of us have been saying about offering Pharma money to do more licensing deals is on the table and is a realistic possibility.

Nunes-Tai Exchange on Vaccine Production/TRIPS Waiver

At yesterday's House Ways and Means committee hearing on the Biden administration's trade policy agenda, Congressman Nunes and U.S. Trade Rep. Katherine Tai had the following exchange on the TRIPS waiver and vaccine production:

Congressman Nunes:

.. I want to turn to this agreement on TRIPS that many people have talked about, the trade related aspects of intellectual property rights. It would force the American developers of COVID-19 vaccines and therapeutics to relinquish their intellectual property rights to these medicines and essentially show foreign nations how to produce these drugs themselves. Now, I understand your point about, we really want these vaccines to get out, but at the same time this is American technology that we spent billions of dollars developing. And one of the concerns I have is, really the only country that could quickly make these types of vaccines, that could implement this, would be China. I know that India and others are saying that, but it really seems like they want to steal this very new technology, especially as it relates to the Moderna and Pfizer vaccines. So did you conduct any analysis on this front, of what would happen, who could actually make these vaccines?

Ambassador Tai:

Thank you, Congressman Nunes. Yes, this decision was made after a lot of deliberation. And we have adopted, what I think is an unusual practice, at least for USTR, starting in mid-April I began consultations with interested parties, labor organizations, civil society, public health advocates, public health experts, both inside and outside of the government, and also the manufacturers themselves.

We take policymaking extremely seriously, and so my short answer to you is, yes, we are thinking through, we have really dug into the policy implications. And let me say this, in terms of our announcement of support for waiving intellectual property rights at the WTO, support for the goals of the proponents at the WTO, what we are committing to is starting a process at the WTO, to find a solution at the WTO that is going to have to, through these negotiations, take into account, concerns from all sides, so that we can have something that is effective and practical in saving lives.

Congressman Nunes:

So, we're obviously, we're very proud that, another one of our staff longtime staff, Ms. Ellard, is going to be going to the WTO, but WTO has really been a beacon of of light and freedom. They've had tremendous issues, as you're well aware, and I know we're always trying to work and fix and make the WTO function better, but you did mention the manufacturers, and that to me is the is the key here, manufacturers who develop this, who developed these vaccines, they're US companies. And just to turn over that intellectual property to these other nations, especially China who we still don't have a full understanding of the origins of this virus at this time and what their involvement was. Do you know, I mean, when you met with the US manufacturers, did they explain to you, express to you, their concern about China being able to utilize this and be the only one that could really make the vaccine?

Ambassador Tai:

Well, I want to be a little bit circumspect about exactly what the manufacturers told me and how they told me, but let me offer you a couple observations and insights from my conversations with the individual manufacturers and also with their trade associations, which is that the manufacturers, there are quite a number of them. They're not a monolithic group. They're, actually, their technologies are different, their leadership personalities are different, and their corporate philosophies are actually quite different as well. And some of these manufacturers do think of themselves, not just as businesses with obligations to shareholders, some of them do see themselves as important actors in the public health ecosystem in the world.

Congressman Nunes:

So let me just get to a specific question, so how long would it take a country to build the facilities that it would take to produce these vaccines, did you look at that?

Ambassador Tai:

Sure, yes.

Congressman Nunes:

So, how long would it take them to build them.

Ambassador Tai:

Well, let me put it this way, in order to for you to have access to the best information, I am probably not the best source for the answers that you're looking for. But let me just assure you, yes, we are looking at the full picture, we are looking at the IP piece in the WTO, but also in the context of how this and other actions will work together to translate into increased manufacturing, more equitable distribution.

Over the last two days of Senate/House hearings on the Biden administration's trade policy agenda, there has been a lot of talk about the TRIPS waiver, with many of the comments from members of Congress essentially being "waiver good" or "waiver bad." The Nunes questions at least got closer to some of the underlying issues. I'm not sure how Ambassador Tai could answer many of them, though. Even if she knew the answer, this wasn't necessarily a forum where she could or should tell everyone what her strategy is. The last question is particularly important, and I assume someone in the Biden administration has a sense of this, and that we will hear some details at some point.

The China issue seems like a red herring to me, if this all goes the way it should. If we end up with a blanket waiver of certain patents under various countries' domestic law, then yes, China and Russia and others would have access to the technology. But if, instead, the pharmaceutical companies agree to license the technology to specific companies/factories, which is the sensible direction to go here, that shouldn't be an issue.

As a final point, her characterization of the differences between the pharmaceutical companies was interesting. Kind of feels like it was sending a message.

My Take on the Vaccine/TRIPS Waiver Issue: Buyout Pharma Now, Rebalance the IP System Later, and Meh on the Waiver

After almost two days of intense discussion on Twitter and elsewhere, here's where I am now on the issue of vaccine production and the TRIPS waiver. The most important point here is whether additional factories around the world could produce vaccines. In order to do so, they would need to have licensing deals with the pharmaceutical companies who have the patents and the know how to make the vaccines (obviously, the situation of the mRNA vaccines and the more traditional ones is a bit different). There seems to be a factual debate on whether, or to what extent, other factories would actually have the capability to do this production. I haven't seen anything definitive about what's possible here, but if it can be done at all, we need to make it happen as soon as possible. 

So how to make it happen? It seems to me the quickest way is to pay Pharma a lot of money to get them to go along with it. People keep throwing out $100 billion as a figure, and that's a nice round number I can get behind, but the precise number doesn't matter too much. Whatever it takes.

I suggested this Pharma buyout plan to a progressive friend of mine, and this person seemed reluctant. I understand that Pharma already has made a lot of money here, and that there may be options that involve something more along the lines of governments taking the technology from Pharma. There are a number of problems with this approach, however, one of which is that it will be slower than a buyout. People are dying and we need to act fast.

I think people are aware that I'm a skeptic on IP protection. In my view, it goes too far in many ways at the moment (e.g. this). However, while rethinking the balance of the IP system is important, we can't do it right now. Again, people are dying and we need to act fast. When the pandemic is over, I'm all for a reconsideration of patent policies in general and how they relate to medicines in particular. (Bryan Mercurio and I tried to raise these issues a year ago, but didn't get much traction.)

What about the TRIPS waiver? I don't object, but I'm not sure it adds much to the existing exceptions and flexibilities. Does a TRIPS waiver give a bit more leeway to governments who want to do something that might not be in accordance with TRIPS? I guess it does. But WTO dispute settlement probably isn't a practical option for preventing governments from acting here anyway (even putting the Appellate Body crisis aside), and I'm not convinced that WTO rules are a real barrier to action. The key issue is the positions of the U.S. and other wealthy governments. If they will push for more licensing, we are in good shape, regardless of what is happening at the WTO.

Now, if the waiver is more of a negotiating tool for the talks governments are having with Pharma, it makes a little more sense to me. If that's what the big shift in the U.S. position on the waiver was designed for, I get it and I hope it helps get us to some more licensing arrangements. But it would be crazy, in my view, to wait for the waiver to be signed before pushing Pharma to do more licensing, as some news articles today seemed to imply would be the case. The talks with Pharma should be the priority. The WTO is a great place to discuss the big picture policies, but what's needed now is for governments, who are the ones with the power, to act.

Assigning Blame for the Impact of COVID-19 on Developing Countries: Markets or Governments

This is from remarks by U.S. Trade Representative Katherine Tai yesterday at a WTO virtual conference on COVID-19 vaccine equity:

We hope to hear more today about how the market once again has failed in meeting the health needs of developing countries.  As part of that we have to consider what modifications and reforms to our trade rules might be necessary to reflect what we have learned.

I don't feel like I've been following vaccine production and distribution issues as closely as some other people have, but nevertheless my sense is that many of the problems result from patents and other IP issues (which are government intervention rather than the free market) and from the way developed country governments structured their purchases of the vaccines (which, again, is the government not the market). And, of course, there were a wide range of new export restrictions imposed by governments, and plenty of existing tariffs, that got in the way of trade in all of the various products needed by developing countries.

I don't know what exactly would have happened if we had a free market in all of the various health products at issue here, and no doubt there would have been some problems. But I think that developed country governments need to consider how their actions have directly led to the failures in meeting the health needs of developing countries. There is still time to change course and I hope the Biden administration is serious about this.

Soaring Prices and Access to Vaccines: A New Mission for WTO TRIPS flexibilities?

A must-read article that appeared in the New York Times a couple of days ago nyti.ms/1t8ugtz details the soaring cost of vaccines and the potentially disastrous public health consequences (some of which are already being felt).   This seems an ideal case for compulsory licensing.  I would note that under Article 31 (b) of TRIPs the normal condition of compulsory licensing, that "the proposed user has made efforts to obtain authorization from the right holder on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time" may be waived in the case of "public non-commercial use".  Vaccination programs of public health authorities would clearly count as "public non-commercial use."

The NYT article is US-focused but one can imagine the global consequences are even more severe. The article does allude to some initiatives whereby pharamaceutical companies sell vaccines to least-developed-countries at low prices (the GAVI public private/partnership is one of those the article may be referring to).  But the public health implications for countries not eligible for such initiatives are huge.  Unfortunately, since they also do some real good, Initiatives such as GAVI tend to obscure one basic root of the problem, which is the incentives and rents confered by patent protection.

Concerted resort to compulsory licensing, or threat thereof, by large countries-BRICs and perhaps others as well -is likely to bring down the price of vaccines considerably (perhaps more than bargains between individual countries and big pharma, though that's just an intuition based on some game-theoretical instincts, and information asymmetries; at a minimum governments should be discouraged from entering into confidentiality undertakings with respect to the deals they receive, and it would be great to have an information exchange about such deals).  Concerted action is also likely to be more effective in countering political pressures originating with the pharma lobbies.  Of course, as is well-presented in this 2009 WHO/UNICEF study bit.ly/1ol7F6o, there are factors that affect the costs of vaccines that are not attributable to the monopoly rents big pharma earns due to patent protection.   Nevertheless the NYT article notes the extraordinary profitability of vaccines to big pharma relative to other drugs.  The Times observes with respect to just one vaccine, "Pfizer, the sole manufacturer ahd revenues of nearly $4 billion from its Prevnar vaccinelast year, about double what it made from high-profile drugs like Lipitor and Viagra, which now face generic competitors." So clearly the monopoly rents from patent protection are a significant contributor to the problem.

I offer these observations not as an expert on the issue of vaccines and communicable diseases-I'm not by any means that,obviously-but because it seems to me that the TRIPs flexibilities offer one avenue to help address the challenge, and we ought to be starting a discussion about how to bring that in.  Mainly, I'd just like to encourage everyone to read the Times piece and think about how international economic law can be part of the solution not the problem.

 

             

Mitchell and Voon on the WTO and Health

From Andrew Mitchell and Tania Voon, Implications of the World Trade Organization in Combating Non-Communicable Diseases, on SSRN.  From the abstract:

The World Health Organization (WHO) has proposed a number of strategies to combat non-communicable diseases such as cancers, cardiovascular diseases, chronic respiratory diseases, and diabetes, by targeting the risk factors of tobacco use, harmful use of alcohol, and poor diet. A number of the domestic regulatory responses contemplated by the WHO and individual countries have the potential to restrict or distort trade, raising the question whether they are consistent with the obligations imposed on Members of the World Trade Organization (WTO). In this article, we demonstrate that WTO rules do limit Members’ flexibility in implementing public health measures to address these diseases. However, the focus of WTO provisions on preventing discrimination against or between imports and the exceptions incorporated in various WTO agreements leave sufficient scope for Members to design carefully directed measures to achieve genuine public health goals while minimising negative effects on international trade.

And from the paper:

Using WTO Subsidies Disciplines to Combat Unhealthy Food

Enhancing consumer information through labelling and providing price incentives through taxation or related schemes may become all the more important as global food prices rise while the cost of choosing healthy over unhealthy food appears to increase.52 However, WTO rules are also relevant in understanding why the price of certain (often unhealthy) foods is low or falling. While the rest of this article has explored how to ensure that trade‐related health measures comply with WTO law, we now wish to emphasise that WTO disciplines on agricultural and other subsidies may themselves be used to support health policies.

Domestic politics may explain why WTO Members, far from using subsidies as a tool to promote healthy eating habits, have instead often chosen to directly or indirectly subsidise culprits in the fight against non‐communicable diseases53 such as sugar,54 butter,55 and high fructose corn syrup.56 Subsidies are permitted in the WTO, subject to compliance with stringent conditions set out in the Agreement on Subsidies and Countervailing Measures (SCM Agreement) and (in the case of agricultural products) the Agreement on Agriculture.57 The disciplines established in these agreements can and should be brought to bear on massive subsidies of unhealthy food products, particularly where they fall within the categories of export subsidies (contingent on export)58 or import substitution subsidies (contingent on the use of domestic over imported goods).59 In addition to undermining health policy goals, these subsidies are often counterproductive from an economic perspective, shielding non‐competitive domestic industries from foreign competition, while simultaneously driving those foreign competitors (frequently from developing countries) out of business.

This kind of policy has always aggravated me.  Governments often take a variety of actions to promote public health.  But then they undermine these actions by using subsidies that worsen public health, and also lead to trade disputes.  One of the best ways to promote public health would be to stop using subsidies that encourage the consumption of unhealthy products, which would have the added benefit of reducing trade friction.

More Asbestos Case Follow-Up

Following-up on this follow-up post, here's more about current disagreements over trade in asbestos:

Controversy over asbestos exports continued to dog Quebec Premier Jean Charest right up to the very last day of a trade mission to India.

Indian unions and other groups twice called on Charest during the week-long mission to put a halt to the export of the cancer-linked material that is used in construction.

And just days prior to leaving on the mission, more than 100 scientists from 28 countries lent their support to a letter urging the premier to put a stop to asbestos exports from the province.

But the premier insisted Saturday the debate over risks related to the use of asbestos - also called chrysotile - is a thing of the past.

"We reflected a long time over chrysotile and it is politically part of our history," he said. "The Quebec position is well known and, I believe, where it needs to stand."

Charest said it was necessary to make do with the risks related to asbestos even in developing countries where labour standards are not always respected.

...

He maintained it was the Indian government's responsibility to ensure proper use of the product.

The Clove Cigarette Case: Indonesia Goes to the WTO

Not a DSU complaint yet, though. Just a communication to the TBT Committee.  Here's a link:  http://docsonline.wto.org:80/DDFDocuments/t/G/TBT/W323.doc  (Note that it's a Word document).  In the communication, Indonesia briefly sets out the legal issues, and then has the following questions for the U.S.:

(a) Section 907 prohibits a cigarette or any of its components from containing a natural or artificial flavour (other than tobacco or menthol) or an herb or spice. Why was menthol singled out as the only flavour, herb, or spice excluded from this provision.

(b) We know that clove cigarettes are an important industry in Indonesia. Are clove cigarettes also produced domestically in the United States?

(c) Section 907 further indicates that the prohibition on a natural or artificial flavour, herb or spices applies if it is “a characterizing flavour” of the tobacco product or the tobacco smoke. However, the bill does not define what elements of a cigarette constitute a “characterizing flavour”.  How does FDA plan to interpret the concept of a “characterizing flavour”?

(d) Cigarettes contain many ingredients other than tobacco. Under Section 907, how will it be possible to distinguish certain “ingredients” from “characterizing flavours”?

(e) Menthol is an artificial flavour derived from mint, which is clearly an herb or spice.  Does the United States believe that menthol cigarettes would fall under the provisions of Section 907 and would be prohibited absent the exception granted in the bill?

(f) Physically, both clove and menthol cigarettes contain tobacco with an herbal flavour additive with soothing properties.  The end use of both clove and menthol cigarettes is the same, i.e., both are used to smoke tobacco.  Does the United States believe that clove cigarettes and menthol cigarettes are like products?

(g) A primary purpose of the bill, as stated in the bill’s finding, is to reduce the incidence of youth smoking.  The findings further indicate that additional regulation of tobacco products and tobacco marketing is necessary to prevent under-age youth from obtaining cigarettes.  However, the evidence available to us indicates that many more youth smoke menthol cigarettes than clove cigarettes.  Are you aware of any data to the contrary that indicate clove cigarettes are used by youth in greater quantities than menthol cigarettes?

(h) The WTO does allow members to take measures to protect human health, but these measures must be based on sound science. Are you aware of any scientific studies that show that clove cigarettes pose a greater health risk than menthol cigarettes?

(i) Several of the other flavoured cigarettes that would be prohibited by Section 907 (e.g., cherry, strawberry, chocolate) were created and marketed to appeal to youth. Clove cigarettes have been sold for decades and are not marketed to youth. Clove cigarettes are sold primarily through speciality tobacco shops.  Are you aware of any specific advertising of clove cigarettes that has been viewed as targeting or appealing to youth?

(j) Flavoured cigarettes other than menthol are banned under Section 907. Menthol cigarettes will be subject to study and regulation by the FDA.  Why is it necessary to ban other flavours but only necessary to study and regulate menthol cigarettes?

For background, see these posts:

http://worldtradelaw.typepad.com/ielpblog/2009/06/the-clove-cigarette-issue-and-the-impact-of-wto-rules-on-government-regulation.html

http://worldtradelaw.typepad.com/ielpblog/2009/06/more-on-kreteks.html

http://worldtradelaw.typepad.com/ielpblog/2009/06/canadian-tobacco-ban.html

http://worldtradelaw.typepad.com/ielpblog/2008/08/kreteks.html

http://worldtradelaw.typepad.com/ielpblog/2007/08/another-wto-sin.html

 

Market Access for Safe Toys

Whenever I am talking with someone about the purpose of the WTO (or trade agreements generally), I like to draw the distinction between discrminatory trade barriers and non-discriminatory trade barriers, with the point being that we may want to treat the two categories differently.  Putting aside the difficult question of how to define discrimination, I find there is often confusion about what exactly I mean by a non-discriminatory trade barrier.  For many of the examples I come up with, some people see a discriminatory intent buried in there.  Well, this might be a good, clear example:

Worries over lead paint in mass-market toys made the holidays a little brighter for handcrafted toy makers last year, but now the federal government's response to the scare has some workshops fearful that this Christmas might be their last.

Without changes to strict new safety rules, they say, mom-and-pop toy makers and retailers could be forced to conduct testing and labeling they can't afford, even if they use materials as benign as unfinished wood, organic cotton and beeswax.

"It's ironic that the companies who never violated the public trust, who have already operated with integrity, are the ones being threatened," said Julia Chen, owner of The Playstore in Palo Alto, which specializes in wooden and organic playthings.

A spokeswoman for the Consumer Product Safety Commission said Wednesday the agency is working to set up some exemptions.

Lead paint spurred the recall of 45 million toys last year, mostly made in China for larger manufacturers. Parents flocked to stores like The Playstore in the recall's aftermath searching for safer alternatives.

Lawmakers also responded. In August, President Bush imposed the world's strictest lead ban in products for children 12 or younger by signing the Consumer Product Safety Improvement Act.

Small toy makers strongly back the restrictions in the bill, which they say reflect voluntary standards they have long observed to keep harmful substances out of toys. But they never thought their products would also be considered a threat.

Under the law, all children's products must be tested for lead and other harmful substances. Toy makers are required to pay a third-party lab for the testing and to put tracking labels on all toys to show when and where they were made.

Those requirements make sense for a multinational toy manufacturer churning out thousands of plastic toys on an overseas assembly line, said Dan Marshall, co-owner of Peapods Natural Toys and Baby Care in St. Paul, Minn.

But a business that makes, for example, a few hundred handcrafted wooden baby rattles each year cannot afford to pay up to $4,000 per product for testing, a price some toy makers have been quoted, he said.

...

One European toy maker has already announced it will stop its exports to the U.S. because of the law's costs and uncertainties. Selecta Spielzeug, a German company, said earlier this month that it will stop shipping its wooden push toys, games and other products to 1,200 U.S. stores after Dec. 31.

As noted in the article, there's talk of clarifying the rules to make sure they do not apply to companies that use only products that are not harmful.  Regardless, though, the law at issue is clearly a "trade barrier" in some sense.  As the article states, a European toy maker is stopping its exports because the cost of complying with the law is too great.  Despite the clear impact on trade, though, the law seems to be non-discriminatory, as some domestic producers are hurt by it, too (it's not clear whether there is an overall disparate impact on foreign toy makers).

So what should international trade rules say about such measures?  Should there be limits on non-discriminatory trade barriers such as this one?  If there are limits, how strict should they be?

Follow-up on the Asbestos Case

The WTO asbestos dispute seems long over (thank goodness, many people would say), but some issues related to exporting asbestos are still out there.  The Economist reports:

FOR more than a decade, workers in hazmat suits have been boring into the walls and ceilings of Canada’s parliament buildings to remove tonnes of asbestos insulation. This tedious and expensive work is to protect the health of lawmakers and their staff: even limited exposure to asbestos can cause lung cancer or mesothelioma, a deadlier cancer. These risks have prompted most rich countries, and many poor ones, to ban all forms of asbestos.

But they have not stopped Canada from exporting large quantities of the mineral to developing countries, especially in Asia, nor discouraged the government from paying to promote its use abroad. This is “corporate welfare for corporate serial killers”, says Pat Martin, a former asbestos miner who is one of the few members of parliament to denounce the hypocrisy.

Campaigners hope that it will end at a meeting in Rome, starting on October 27th, of the Rotterdam Convention, a registry compiled by the United Nations of hazardous substances which require “prior informed consent” before they can be exported from one country to another. Canada has lobbied vigorously to prevent chrysotile, or “white” asbestos—the only kind still mined—from being included.

The article mentions India, Iran, Kyrgyzstan, Peru and Ukraine as other countries opposing the listing of asbestos in the UN registry.  Thus, even if Canada bans asbestos mining, which the article suggests it might do, there are still other countries who will be trading it, and possibly raising trade disputes over it in the future.

Why Do We Have SPS Agreement Article 5.1?

Every time I think about SPS Agreement Article 5.1, as we have been in relation to the Hormones II AB report, the following question occurs to me:  Why is there an international trade rule requiring SPS measures to be based on a risk assessment?  Put another way, what is the purpose of this provision?

I suppose one way to answer these questions is that certain U.S. industry folks wanted the provision as a way to pry open the European beef market.  That may not be the whole story, but I'm pretty sure I've heard this mentioned at some point as part of the explanation.

But aside from that political explanation, what is the best way to characterize the provision's purpose based on its terms?  I see two possibilities (there may be others):

-- Article 5.1 is about promoting efficient, effective regulation ("good governance").  SPS measures with no scientific basis are not efficient, so we prohibit them.

-- Article 5.1 is a proxy for rooting out disguised protectionism.  National Treatment rules can be ineffective in some situations, and therefore we have come up with a way to uncover hidden protection, as sham SPS measures with no scientific basis are sometimes used to protect domestic products.

Is it one of these?  Something else entirely?  I'm curious to hear people's thoughts on this.

Tainted Milk and Trade Rules

I often hear trade critics say that WTO rules prevent countries from taking action to ensure food safety, but do they really?  In response to the terrible Chinese tainted milk scare, some countries are taking action against imports.  For example:

the European Union will require testing of all imported products containing more than 15 percent milk powder, beginning this week, the European Commission announced.

And:

Suriname has become the first Caribbean country to ban Chinese milk and dairy products on the heels of a tainted milk scandal.

Now China has raised trade concerns about this at a WTO meeting (I assume it was an SPS Committee meeting, although the article did not say):

[China] urged the WTO's 153 members to base import restrictions on scientific risk assessments, and to make use of the global trade body's official notification mechanism if they impose any ban.

It seems clear that some action to restrict Chinese imports in this situation would be justified under WTO rules.  China probably knows this, and just wants to make sure no abuse takes place.  But it is a fine line, and could lead to controversy.

Thank You For Smoking (Certain Kinds of Cigarettes)

The issue of a ban on clove cigarettes is still lingering.  In an article on legislation that would give the FDA authority to regulate tobacco, the NY Times notes:

The bill would ban candy, fruit and spice-flavored cigarettes, including clove cigarettes, but menthol cigarettes would be exempt from the ban. Menthol cigarettes make up 28 percent of the United States cigarette market.

Indonesia, which exports a clove-flavored cigarette called kretek, has objected to the favorable treatment of menthol over other flavorings, Mr. Leavitt said. “The government of Indonesia has repeatedly objected to the bill on the ground that this disparate treatment is unjustified and incompatible with W.T.O. trade rules,” Mr. Leavitt wrote, in reference to the World Trade Organization.

But the article also says that a veto is likely, so Indonesia may not need to worry just yet.

BYOM: Bring Your Own Meat

From Reuters:

China expressed regret on Thursday at reports the U.S. Olympic team would bring its own meat for the Beijing Games over concerns of drugs tainted food, and said it could guarantee safe supplies.

The New York Times has reported that the U.S. Olympic Committee has arranged with sponsors to ship 25,000 pounds of lean protein to Beijing for the Games, in response to concerns about the potential impact of veterinary drugs and insecticides on athletes.

"I personally feel rather regretful," Kang Yi, head of the Catering Division at the Beijing Organising Committee for the Olympic Games, told a news conference.

I can't figure out where exactly this falls in the non-discrimination framework.  Normally, non-discrimination occurs in relation to products imported into the market of the country doing the discriminating.  But here, the discrimination is against foreign products when nationals of a country consume those products abroad. The whole thing has kind of a GATS feel to it.  Perhaps that's it:  It's discrimination against foreign catering services under the consumption abroad mode.

Trade and Health Care

Over at Eyes on Trade, Todd Tucker says: "a move to universal health care could be challenged as a limitation on market access for health insurance companies."  Upon reading this, my first thought was to look at the relevant part of the U.S. GATS Schedule to see what commitments had been made.  However, when I did so my eyes immediately glazed over.  There are lots of "nones" and "unbounds" and "horizontals."  I assume I could figure it out if I really tried, but I couldn't get up the energy just now.  But an interesting thought did occur to me:  As long as private insurance companies are still involved, couldn't universal health care expand market access by increasing the number of insured people (that is, the number of customers)?

Ben Muse on Cuba Trade and the U.S.-Korea FTA

I wanted to point out a couple recent Ben Muse posts.

First, he has one today arguing that it is "time to move away from the Cuban trade embargo," and also describing various Presidential candidates' position on the issue.

Second, he had a post a little while back asking whether the U.S.-Korea FTA would undermine Korean anti-smoking efforts:

The Koreans generally impose 20% tariffs on unprocessed tobacco and 40% tariffs on processed tobacco products - suggesting that the tariffs play a role in encouraging domestic manufactures as well as in smoking policy.  Processed and unprocessed tobacco products alike fall into the "staging category" G, which means that tariffs will be removed in ten equal annual increments, starting the day the agreement enters into force, eventually going to zero.

[The Center for Policy Analysis on Trade and Health (CPATH)] thinks the drop in tariffs will reduce domestic Korean prices and encourage increased tobacco consumption.  Note that increased competition in the Korean market may also be associated with increased marketing efforts.

I suspect that, all other things equal, that might happen, noting that: (a) there would be some offsetting reductions in domestic production and in imports from other countries, (b) some of the impact on U.S. imports may represent a shift from unprocessed to processed product. 

Korea would presumably be free to impose non-discriminatory sales taxes on tobacco products to offset any price impacts and restrain consumption.  I assume it could also limit advertizing and promotional efforts in non-discriminatory ways.

[The Center for Policy Analysis on Trade and Health (CPATH)] thinks the drop in tariffs will reduce domestic Korean prices and encourage increased tobacco consumption.  Note that increased competition in the Korean market may also be associated with increased marketing efforts.

I suspect that, all other things equal, that might happen, noting that: (a) there would be some offsetting reductions in domestic production and in imports from other countries, (b) some of the impact on U.S. imports may represent a shift from unprocessed to processed product. 

Korea would presumably be free to impose non-discriminatory sales taxes on tobacco products to offset any price impacts and restrain consumption.  I assume it could also limit advertizing and promotional efforts in non-discriminatory ways.

Obama's Import Ban

In response to the recent safety scares related to toys imported from China, Barack Obama says: "I would stop the import of all toys from China."  Does he really mean that?

First off, this sounds like campaign rhetoric more than a policy proposal.

In addition to that, it seems that the ban would be a temporary measure, to be followed by more thorough inspections:

"We have the power right now to set up our own inspection systems in China," said Obama, who is in a tight race with Democratic front-runner Sen. Hillary Clinton of New York according to polls.

"The Japanese do this on food, they basically say to China, you cannot import food unless you meet our safety inspectors. They sent Japanese inspectors to China, set up the testing system, and oversee and make sure that every single bite of food that is sent into from China has been tested," he said.

So perhaps the bark is likely to be worse than the bite.

From Last Night's Republican Debate

Some trade questions from last night's Republican Presidential debate:

On agriculture subsidies:

Ted Faturos: Hi, I'm Ted Faturos from Manhattan Beach, California.

Mmmmmm, nothing says delicious like cheap corn subsidized by the American taxpayer. For a lot of Americans, however, a bitter taste is left in their mouth when they learned about how the U.S. taxpayer bankrolls billions of dollars in farm subsidies that mostly go to large item business interests.

I'm curious which candidate could label themselves fiscally responsiblee, will endorse the elimination of farm subsidies if they are elected president in 2008.

Cooper: Governor Romney, a lot of folks in Iowa interested in this answer.

(Laughter)

So I hear.

Romney: Not to mention Kansas, Missouri, North Dakota, South Dakota and so forth. We don't want to find ourselves, with regards to our food supply, in the same kind of position we're in with regards to our energy supply. And so it's important for us to make sure that our farmers are able to stay on the farm and raise the crops that we need to have a secure source of food. And so I believe in supports that will allow us to do that.

And the same time, I recognize that we're also investing in new technologies to get ourselves energy independent. And I happen to believe that some of the best sources for having renewable energy come from the farm. And so we're investing with subsidies in those areas to create new technology that otherwise wouldn't be ready for the market yet. So I support these programs.

And finally, I'd say this. We have, in our nation, about one out of three acres that are planted are for sale overseas.

We send products around the world. We're competing with European and Brazilian and other farmers, and we're competing in a marketplace where they are heavily subsidized, at great disadvantage for our farmers. And so, if we're going to change our support structure, we want to make sure that they change their support structure.

And we do this together, as opposed to unilaterally saying: We're going to put our farmers in a tough position and have the farmers in the rest of the world continue to be subsidized.

So, open markets, let our goods go around the world and secure our source of food.

Cooper: Mayor Giuliani, 30 seconds.

Giuliani: The governor's right. It isn't a level playing field. The subsidies in Europe are far higher than they are in the United States. We could reduce subsidies here if they would do it there. But we shouldn't do it on our own.

And also, we have to be very aware of the fact that we have to have our own supply of food. We can't be dependent on foreign countries for our food.

So, both of those reasons would say that although simplistically, it might seem like you'd want to get rid of all the subsidies, you've got to do this very carefully, and you have to do it in concert with these free-trade agreements and other agreements you're making so that European countries reduce their much heavier subsidies.

Key points:  (1) no reduction unless the Europeans do it; (2) must have a secure food supply; and (3) must protect farmers' incomes.

On the safety of Chinese imports:

LeeAnn Anderson: My name is LeeAnn Anderson and I am from Pittsburgh, Pennsylvania, and these are my kids Evan and May. Maya is from China and we adopted him to give her a better life. We never dreamed that she would that she'd be exposed to lead after leaving China, and now we find trains like this that are covered with lead in our home.

My question for the candidates are, what are you going to do to make sure that these kind of toys don't make their way into our homes and that we have safe toys that are made in America again and we keep jobs in America?

Cooper: Congressman Tancredo, you have 90 seconds.

Tancredo: It is illegal to import that kind of thing. The problem is, of course, no one really pays a lot of attention to a lot of our laws, with regard to immigration of both people and, now in this case, of course, items, goods and services.

I voted against permanent normalized trade relations with China -- this is one reason why. It wasn't -- that was never devised simply to be a place for us to sell our products; it was devised to be a place where we could get cheap labor to then import products to the United States.

So, one of the things you'd have to do, and I certainly would intend to do, is to change our trade arrangement entirely -- with China, by the way, in particular, but with other countries, as well, that violate those agreements.

Cooper: Congressman Hunter, you have 30 seconds.

(Applause)

Hunter: China is cheating on trade, and they're using that $200 billion trade deficit over the United States to buy ships, planes and missiles. They are clearly arming.

And it's in the interest of the United States...

(Applause)

... to stop China's cheating. My bill, incidentally, that's up right now would do that.

But what we all ought to do in this Christmas season, with about a month to go before Christmas is buy American.

That might hire the young person. That'll result in a...

(Applause)

You know, that just might keep your neighbor from losing his job, and it might help that young person coming back from Iraq and Afghanistan in uniform to have a job when they get back.

Let's buy American this Christmas season.

It's too bad Romney and Giuliani didn't get to answer this latter question.