Hello and welcome to today’s Trade Secrets. I’m off for the next two weeks, with some attractive and talented FT colleagues standing in, and by the time I’m next writing the newsletter on June 13 we’ll already be into the big World Trade Organization ministerial meeting in Geneva. So today I’ll give a state of play in the run-up to the meeting and particularly the most high-profile item, the patent waiver for Covid-19 vaccines which will amend the WTO’s “Trips” agreement on IP protection. Charted waters looks at how Italy’s particular dependence on Russian oil is contributing to the country’s economic woes.
As ever, if you have any thoughts to share, I’m all ears and eyes on alan.beattie@ft.com.
Textual healing
The set-piece WTO ministerials are supposed to happen every two years and the last one was in 2017, the pandemic having put paid to any in the interim. So in theory there ought to be plenty of business that’s piled up, right? In practice they’ll be doing well to be measuring progress in terms of agreeing actual policies rather than creating work programmes.
In fact, it will be quite an achievement to hold a ministerial at all without Russia’s presence being the main issue. Vladimir Putin’s invasion of Ukraine has concentrated minds among some governments about trade issues, but it hasn’t exactly led to harmony in multilateral organisations — not least because big chunks of the emerging market world don’t share the US/European revulsion for the Russian president and certainly don’t want to use the WTO to make political statements against Russia.
In small discussions, as at the G20 finance ministers’ meeting in Washington last month, it’s easy enough for the likes of the EU, US and UK to walk out in protest when the Russians start to talk. It’s going to be a bit harder with a plenary session of 164 WTO members. (It will also underline that the large majority of countries aren’t participating in the boycotts.)
The Russia situation also places a big premium on the Geneva-based ambassadors getting ready finished or near-finished texts of agreements before the meeting so that ministers can ceremonially sign them off rather than having to negotiate through the night.
And so to the main issue at hand (barring a sudden breakthrough on reforming fishing subsidies). The change to WTO intellectual property protections that started off in 2020 being proposed by India and South Africa as a full waiver on all forms of IP on all drugs and treatments for Covid has now been watered down to a plan to make it easier, in theory, for certain developing countries to use existing powers to override patents for vaccines.
Last week, after months of discussions in the Quad, the inner cabal of four WTO members (the EU, US, India and South Africa), the text setting out that proposal was punted to the full membership, though with none of the four except the EU wanting to be seen backing it. WTO director-general Ngozi Okonjo-Iweala appeared at the meeting of ambassadors last week to try to giddy them up to agree a text for the ministerial.
But different governments tried to pull the agreement in different directions with a whole bunch of proposed amendments: the revised draft we saw floating around last week was a mass of track changes and phrases in square brackets. To give a flavour of this I’ve written the rest of the newsletter in the style of a yet-to-be-finalised negotiating text.
Like it or not, the provisions to suspend IP aren’t going to get a lot more expansive than the draft. They just aren’t. There is too much opposition from the rich countries such as the EU, the UK and Switzerland with [voluble pharmaceutical industries] a strong commitment to intellectual property rights. Switzerland and the UK in particular also have concerns about the legitimacy of the small-group consultative process [are sulking at being left out of the Quad] and [have some concerns about the timetable] are not going to be rushed just to have something to show at the ministerial.
The EU has largely got its way [feels the Quad text provides a good basis for a balanced consensus outcome] and suggests that a prompt coalescing around it will enhance the WTO’s credibility as a negotiating body [enable it to talk about something else, anything, please.]
The US has run away from [yet to take a position on] the latest text and is currently consulting with domestic stakeholders to forge a balanced consensus view of the situation [trapped between its leftwing health campaigners and the pharma industry] to reach an agreement commensurate with its commitment to the organisation [not have everyone roll their eyes at the erratic Americans again].
India, which often blocks everything at the WTO on principle [styles itself a champion of developing countries], has been surprisingly constructive in not killing the proposal as yet. South Africa, one of the countries whose pharma industry might actually benefit from laxer IP rules, has largely maintained developing nation solidarity [silently wished India were less difficult]. The Africa Group of countries wants the provisions to cover therapeutic drugs as well as vaccines and last for at least five years [an indefinite free-for-all].
In conclusion, then, WTO members say the situation is fluid and have vowed to redouble their efforts to reach a prompt deal [no one knows anything but it doesn’t look great]. Three weeks to the ministerial. Time is tight.
As well as this newsletter, I write a Trade Secrets column for FT.com every Wednesday. Click here to read the latest, and visit ft.com/trade-secrets to see all my columns and previous newsletters too.
Charted waters
Italy has not been having the 2022 it expected. As my colleague Amy Kazmin writes, the year began with the optimism of a strong rebound from the pandemic plus plans for buoyant growth and structural reforms, underpinned by prime minister Mario Draghi’s assured leadership and a €191bn chunk of the EU’s €750bn Covid recovery plan.
But inflation is wrecking the economic plan, such that recession this year is now likely. The catalyst has been soaring energy prices due to Italy’s high reliance on Russian gas, as the following chart shows.
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Much is made of Germany’s high reliance on Russian gas supplies. But observers, including former director-general of the Italian treasury Lorenzo Codogno, note that Italy’s reliance might be even higher. Not a good position for a country to be in at the moment. (Jonathan Moules)
Trade links
Business leaders at Davos say the three-decade period of globalisation is ending, which is the kind of received-opinion thing that business leaders at Davos tend to say.
Egypt, the world’s largest wheat importer, says millions of people may die if the food crisis arising from disruption to Ukrainian and Russian production and exports is not resolved.
The FT’s James Kynge says pessimism is engulfing the Chinese economy as foreign investment fades.
The story we flagged last week about the US’s baby formula shortage has continued, with relief supplies literally being airlifted to the US from an air base in Germany. There are some excellent papers here, especially this one about the intersection of regulation, trade and corporate lobbying that’s brought us here.
Staunch Brexiter and former cabinet secretary David Davis remains convinced of the comical notion that UK prime minister Boris Johnson doing a tour of the leaders of Europe rather than negotiating with the European Commission will help Britain gets its way on Northern Ireland despite nearly six years of solid evidence to the contrary.
Source: Economy - ft.com
