The WTO’s survival hinges on the COVID-19 vaccine patent debate, waiver advocates warn
The World Trade Organization knows all about crises. Former U.S. President Donald Trump threw a wrench into its core function of resolving trade disputes—a blocker that President Joe Biden has not yet removed—and there is widespread dissatisfaction over the fairness of the global trade rulebook. The 164-country organization, under the fresh leadership of Nigeria’s Ngozi Okonjo-Iweala, has a lot to fix.
However, one crisis is more pressing than the others: the battle over COVID-19 vaccines, and whether the protection of their patents and other intellectual property should be temporarily lifted to boost production and end the pandemic sooner rather than later.
According to some of those pushing for the waiver—which was originally proposed last year by India and South Africa—the WTO’s future rests on what happens next.
“The credibility of the WTO will depend on its ability to find a meaningful outcome on this issue that truly ramps-up and diversifies production,” says Xolelwa Mlumbi-Peter, South Africa’s ambassador to the WTO.
“Final nail in the coffin”
The Geneva-based WTO isn’t an organization with power, as such—it’s a framework within which countries make big decisions about trade, generally by consensus. It’s supposed to be the forum where disputes get settled, because all its members have signed up to the same rules. And one of its most important rulebooks is the Agreement on Trade-Related Aspects of Intellectual Property Rights, or TRIPS, which sprang to life alongside the WTO in 1995.
The WTO’s founding agreement allows for rules to be waived in exceptional circumstances, and indeed this has happened before: its members agreed in 2003 to waive TRIPS obligations that were blocking the importation of cheap, generic drugs into developing countries that lack manufacturing capacity. (That waiver was effectively made permanent in 2017.)
Consensus is the key here.
Although the failure to reach consensus on a waiver could be overcome with a 75% supermajority vote by the WTO’s membership, this would be an unprecedented and seismic event. In the case of the COVID-19 vaccine IP waiver, it would mean standing up to the European Union, and Germany in particular, as well as countries such as Canada and the U.K.—the U.S. recently flipped from opposing the idea of a waiver to supporting it, as did France.
It’s a dispute between countries, but the result will be on the WTO as a whole, say waiver advocates.
“If, in the face of one of humanity’s greatest challenges in a century, the WTO functionally becomes an obstacle as in contrast to part of the solution, I think it could be the final nail in the coffin” for the organization, says Lori Wallach, the founder of Public Citizen’s Global Trade Watch, a U.S. campaigning group that focuses on the WTO and trade agreements.
“If the TRIPS waiver is successful, and people see the WTO as being part of the solution—saving lives and livelihoods—it could create goodwill and momentum to address what are still daunting structural problems.”
Those problems are legion.
Top of the list is the WTO’s Appellate Body, which hears appeals in members’ trade disputes. It’s a pivotal part of the international trade system, but Trump—incensed at decisions taken against the U.S. —blocked appointments to its seven-strong panel as judges retired. The body became completely paralyzed at the end of 2019, when two judges’ terms ended and the panel no longer had the three-judge quorum it needs to rule on appeals.
Anyone who hoped the advent of the Biden administration would change matters was disappointed earlier this year when the U.S. rejected a European proposal to fill the vacancies. “The United States continues to have systemic concerns with the appellate body,” it said. “As members know, the United States has raised and explained its systemic concerns for more than 16 years and across multiple U.S. administrations.”
At her confirmation hearing in February, current U.S. Trade Representative Katherine Tai reiterated those concerns—she said the appellate body had “overstepped its authority and erred in interpreting WTO agreements in a number of cases, to the detriment of the United States and other WTO members,” and accused it of dragging its heels in settling disputes.
“Reforms are needed to ensure that the underlying causes of such problems do not resurface,” Tai said.
“While the U.S. [has] been engaging [with the WTO] it hasn’t indicated it would move quickly on allowing appointments to the Appellate Body,” says Bryan Mercurio, an economic-law professor at the Chinese University of Hong Kong, who opposes the vaccine waiver. “This is not a good sign. In terms of WTO governance, it’s a much more important step than supporting negotiations on an [intellectual property] waiver.”
It’s not just the U.S. that wants to see reform at the WTO. In a major policy document published in February, the EU said negotiations had failed to modernize the organization’s rules, the dispute-resolution system was broken, the monitoring of countries’ trade policies was ineffective, and—crucially—”the trade relationship between the U.S. and China, two of the three largest WTO members, is currently largely managed outside WTO disciplines.”
China is one of the key problems here. It became a WTO member in 2001 but, although this entailed significant liberalization of the Chinese economy, it did not become a full market economy. As the European Commission put it in February: “The level at which China has opened its markets does not correspond to its weight in the global economy, and the state continues to exert a decisive influence on China’s economic environment with consequent competitive distortions that cannot be sufficiently addressed by current WTO rules.”
“China is operating from what it sees as a position of strength, so it will not be bullied into agreeing to changes which it sees as not in its interests,” says Mercurio.
China is at loggerheads with the U.S., the EU and others over numerous trade-related issues. Its rivals don’t like its policy of demanding that Chinese citizens’ data is stored on Chinese soil, nor do they approve of how foreign investors often have to partner with Chinese firms to access the country’s market, in a way that leads to the transfer of technological knowhow. They also oppose China’s industrial subsidies.
Mercurio thinks China may agree to reforms on some of these issues, particularly regarding subsidies, but “only if it is offered something in return.”
All these problems won’t go away if the WTO manages to come up with a TRIPS waiver for COVID-19 vaccines and medical supplies, Wallach concedes. “But,” she adds, “the will and the good faith to tackle these challenges is increased enormously if the WTO has the experience of being part of the solution, not just an obstacle.”
Wallach points to a statement released earlier this month by Asia Pacific Economic Cooperation (APEC) trade ministers, which called for urgent discussions on the waiver. “The WTO must demonstrate that global trade rules can help address the human catastrophe of the COVID-19 pandemic and facilitate the recovery,” the statement read in its section about WTO reform.
The WTO’s new director general, whose route to the top was unblocked in early 2021 with the demise of the Trump administration, is certainly keen to fix the problems that contributed to the early departure of her predecessor, Brazil’s Robert Azevedo.
Earlier this week, when the U.S. and EU agreed a five-year ceasefire in a long-running dispute over Boeing and Airbus aircraft subsidies, Okonjo-Iweala tweeted: “With political will, we can solve even the most intractable problems.”
However, Mercurio is skeptical about her stewardship having much of an effect on the WTO’s reform process.
“Upon taking [over she] stated it was time for delegations to speak to each other and not simply past each other, but at the recent General Counsel meeting delegations simply read prepared statements in what some have described as the worst meeting ever,” he says.
“On the other hand, Ngozi is very much someone who will actively seek solutions to problems, and in this way different to her predecessor. If the role of mediator is welcomed, she could have an impact not in starting discussions but in getting deals over the finish line.”
A spokesperson for the WTO Secretariat declined to offer comment on Mlumbi-Peter and Wallach’s suggestions that the organization’s credibility rests on the vaccine patent waiver issue, but pointed to a May speech in which Okonjo-Iweala said the WTO could help tackle vaccine supply chain monitoring and transparency, helping manufacturers scale up production, and creating a more geographically diversified manufacturing base.
In her speech, the WTO chief also said members “must address issues related to technology transfer, knowhow and intellectual property,” including the waiver proposal. “We must act now to get all our ambassadors to the table to negotiate a text,” she said.
Big Pharma’s stance on the issue is that WTO members can help the effort without backing a waiver, but instead by pushing for the lifting of export restrictions on medical goods.
“The WTO still has much concrete work to do to remove trade barriers that are hurting manufacture and distribution of vaccines, therapeutics and diagnostics globally,” says Thomas Cueni, director general of the Geneva-based International Federation of Pharmaceutical Manufacturers & Associations (IFPMA).
“The call for waiving patents is driven by a political agenda playing to the gallery and not bringing a single more vaccine short term, but could jeopardize the very framework which has helped us to respond so fast to the COVID-19 pandemic.”
Mercurio also says Mlumbi-Peter and Wallach’s suggestions are agenda-driven.
“I think the comments that the WTO’s credibility rests on the outcome of a TRIPS waiver (which I am against and have written on) are overstated, in the extreme,” he says. “People with an interest in every topic say it—environmentalists say the credibility rests on the outcome of fishery subsidies, tech people say the same on the e-commerce and services negotiations, and industrialists say the same regarding subsidies.”
However, Wallach insists that nothing about the waiver would change the system, because the system already provides for such temporary suspensions of intellectual-property protections. “This doesn’t change a comma in the actual TRIPS agreement,” she says.
“The WTO is the relevant forum and it has the relevant policy tools to respond to the current pandemic by addressing IP barriers so as to ramp-up and diversify production across the world,” says Mlumbi-Peter.
IFPMA’s Cueni says “taking away the patent won’t do anything short term for the current pandemic” as the real problems are trade barriers and scarcity of raw materials. There is also a clear need for technology transfers if new COVID-19 vaccine-making facilities are to come online—though it should be noted that the vaccine companies have all failed to contribute to the World Health Organization’s COVID-19 Technology Access Pool (C-TAP), which was set up last year as a way for them to voluntarily help other manufacturers join the effort.
Wallach insists a great deal of existing manufacturing capacity is going untapped. Pointing to statements that have been made by the likes of Israel’s Teva Pharmaceuticals, which recently complained about vaccine companies refusing to use its offered capacity, she claims the waiver could quickly unlock a billion more doses, along with the funding for further manufacturing capacity to be built out.
“The first thing you have to do is get onto the path, and there’s a locked gate,” says Wallach.
“We hope given the current pandemic and the risk of mutations and variants that will affect the efficacy of the medical products and technologies, as well as the need to save people’s lives, that the WTO Members will recognize the urgency of the matter,” says South Africa’s Mlumbi-Peter.
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