Hello from Trade Secrets, which comes to you from Coronation Britain, and God save the King! (“I mean, I think the King should be saved. It’s a great idea. And if anyone’s going to save him, God’s the very chap.”) But I digress. Remember that big barney about Covid-19 vaccine patents at the World Trade Organization, which created a lot of campaigning noise and then took two years of intense negotiations to produce not very much? Well, the other week the EU did something big with its own IP rules that looks pretty interesting in that light. Charted waters is on the results of China’s Huawei going local to sidestep US sanctions.
The EU’s not quite the IPocrite it might seem
On the face of it, it looks like the kind of double-dealing of which Eurosceptics regularly accuse Brussels. Between 2020 and 2022 the EU fought hard in the WTO to water down an across-the-board waiver of intellectual property (IP) rights protection for Covid vaccines and other treatments. The proposal, initially made by India and South Africa, briefly looked possible when the Biden administration pretended to back it to suck up to American health campaigners, but it then ended up as a minor clarification to existing practices.
Last week the EU appeared relatively cavalier about protecting pharmaceutical IP in its own market. It proposed giving itself more compulsory licence (CL) powers to override patents during emergencies and reducing pharma companies’ “data exclusivity” rights over the information needed by rivals to produce meds. A “total hypocrisy”, said the People’s Vaccine Alliance, which has campaigned on the issue, and developing countries that backed the waiver also muttered darkly in private.
EU officials would argue their move is entirely compatible with their stance in the WTO. Technically, they’re right. But in terms of political economy and the lobbying power of Big Pharma, which opposed last week’s move, as did its praetorian guard, it’s a bit more complicated than that.
To recap: the EU (supported by other pharma-heavy economies such as Switzerland and the UK) objected to the WTO waiver idea and said it was both damaging to vaccine innovation and beside the point. The WTO’s “Trips” agreement on IP already has provision for countries to use their powers to issue CLs without provoking a WTO case. At any rate, Covid vaccines are complex biologic meds: the main obstacle to producing them in developing countries is manufacturing knowhow, not IP.
The issue here is that CLs, which facilitate local manufacturers making copies of patented drugs, are on lots of statute books around the world, but they don’t get used much. It’s often technically complex to issue them, and governments often encounter heavy-handed counter-lobbying by drug companies saying it will damage investments in the country. The companies also get their home governments involved: here’s the US pharma industry urging the White House to get tough on foreign countries using CL.
As the EU tells it, their new IP announcements are bang in line with their WTO position, which is to publicise and streamline the use of CLs rather than ignore patents altogether. Reasonable enough argument, but the political economy isn’t quite that straightforward. Standing up to the pharma industry is relatively easy for the EU to do at home, since the companies can’t credibly threaten to leave such a lucrative market. But internationally, the EU has often done the drug companies’ bidding, not just at the WTO but in bilateral trade deals, where it’s written in protections for data exclusivity. (See, for example, Article 25.46 in the recently updated EU deal with Chile.) If campaigners can press the EU to take a similarly industry-sceptical line abroad as at home, we might see some changes in the use of CLs internationally.
Like a lot of people in trade, I always thought the WTO waiver talks were a bit of a sideshow, but one good outcome would have been a warning to the pharma industry that their home governments didn’t automatically have their back, plus sending a general signal about the need for IP policy space during medical emergencies. If the EU wants to show a bit of spine and lean on its drugs companies to ease off lobbying against CLs abroad, this would be a good opening to do it.
Charted waters
Since 2019, Washington — which claims Huawei is a security risk and fears it might facilitate Chinese spying — has barred American suppliers from selling to Huawei without export licences and prevented the company from using any US technology for chip design and manufacturing. But as the chart below shows, from an excellent analysis by FT reporter Qianer Liu, the company has been getting a little help from its (government) friends.
You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.
A second chart shows how this has stopped a significant plunge in earnings following the US sanctions announcement turning into a death roll.
You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.
Huawei has done this by focusing on its considerable domestic market, both for sales and suppliers. Beijing approves, but it has clearly come at a cost to the government. (Jonathan Moules)
Trade links
Remember that hoo-hah about countries dethroning the dollar (for example, India and Russia settling trade in rupees), a trend about which I’m sceptical? Well, the India-Russia initiative isn’t happening. As currency and debt guru Brad Setser points out, Russia doesn’t want to be left with a load of Indian rupees it might not be able to use.
The Biden administration has promised to impose controls on outward investment into China as well as on Chinese companies investing in the US. Martin Chorzempa from the Peterson Institute says it’s proving difficult.
The FT looks at how companies maintaining supply chains between China and other countries are encountering challenges with cross-border regulation, litigation and arbitration.
Francisco Rodríguez from the University of Denver explains in the FT how sanctions imposed by rich countries can hurt vulnerable people in poor ones.
The EU promises to open up an exciting new front in the intellectual property wars by claiming “geographical indications” protected names for craft and industrial products as well as food and drink. Putting GIs for hundreds of GI names — prosecco, for example — is already a key demand in their bilateral trade deals, something that irritates the US no end.
Six alumni from the Biden administration reflect on its active industrial policy, including Jennifer Harris, who drove much of the work on the linkages between industrial policy and trade.
Speaking of industrial policy, the Trade Talks podcast looks at how Chinese industrial policy has or hasn’t worked in the past.
Trade Secrets is edited by Jonathan Moules
Source: Economy - ft.com
