European duplicity undermines anti-pandemic efforts

Anis Chowdhury and Jomo Kwame Sundaram

SYDNEY and KUALA LUMPUR: Despite facing the world’s worst pandemic of the last century, rich countries in the World Trade Organization (WTO) have blocked efforts to enable more affordable access to the means to fight the pandemic.

Everyone knows access for all to the means for testing, treatment and prevention – including diagnostic tests, therapeutic medicines, personal protective equipment and vaccines – is crucial.

European deceit

In October 2020, South Africa and India requested the WTO to temporarily suspend relevant provisions of its Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). By May 2021, the proposal had 62 co-sponsors and support from more than two-thirds of WTO member States.

Despite overwhelming support from low- and middle-income countries, Western governments, Big Pharma and other industry officials dismiss this waiver request as not only unnecessary, but also undermining future technological innovation.

Although most European Parliament members support the waiver proposal, it is actively opposed by European governments and the European Commission (EC), the European Union (EU) executive.

It is also resisted by Brazil and other rich countries, such as the UK, Norway, Switzerland, Australia, Canada and Japan. However, the Biden administration now supports a temporary waiver for vaccines, but is silent on the other items urgently needed.

Misleadingly, European leaders insist that the temporary waiver request is unnecessary, but IP rights (IPRs) are essential for innovation. “IPR regimes have, at best, second-order effects upon the rates of innovation”. In fact, “when patent rights have been too broad or strong, they have actually discouraged innovation”.

They misleadingly claim access can be achieved by existing provisions for voluntary licensing (VL), technology transfer, COVAX bulk purchasing and existing TRIPS flexibilities, especially compulsory licensing (CL). But these purported solutions are known to be grossly inadequate.

COVAX is struggling due to poor funding, supply shortages and inadequate donations. Hence, many poor countries have not even applied. With IPRs strengthened internationally since 1995, TNCs find technology transfer agreements less profitable.

Big Pharma law

Strict international enforcement of patent protection is recent. Pfizer’s then chairman, Edmund Pratt successfully pushed IP onto the agenda of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), which created the WTO and TRIPS in 1995.

Fearing stronger IP rights would enhance corporate power and reduce affordable access to life-saving medicines, many developing countries resisted TRIPS. But rich countries pushed TRIPS through, using carrots and sticks to divide developing countries.

TRIPS includes CL, first introduced in the 1883 Paris Convention for the Protection of Industrial Property. A government can thus allow a third party to make or use a patented product or process without the patent owner’s consent. But this can only be for domestic use, subject to other conditions, e.g., paying “the right holder … adequate remuneration”.

Despite great efforts, rich country governments failed to increase members’ TRIPS obligations at the 1997 Singapore WTO ministerial. Nevertheless, US President Clinton tried again at the 1999 Seattle ministerial, triggering an African walkout.

After 9/11, some concessions were made before the 2001 Doha ministerial, including a new ‘Development Round’ of WTO talks. Two decades later, no conclusion is in sight as rich countries see little chance of getting what they want.

With the HIV/AIDS crisis, campaigning against TRIPS was boosted by President Mandela’s leadership. The Doha Ministerial Declaration included ‘public health exceptions’ to TRIPS. Now, there is no need to first negotiate VLs during health emergencies. Also, countries without manufacturing capacity can use CLs to import cheaper versions.

European deceptions

By insisting that existing TRIPS flexibilities are sufficient, European leaders deny all actual problems in practice. Ignoring decades of experience, they used to insist VL provisions are enough to expand output and share expertise.

In reality, VLs are often shrouded in secrecy, with patent holders choosing beneficiaries and even distributors. Thus, the AstraZeneca VL to the Serum Institute of India limits what it can produce, and prevents it from meeting Indian and other needs.

They concede when “voluntary cooperation fails, compulsory licences… are a legitimate tool in the context of a pandemic”. But CLs are only relevant for patents, not new vaccines which have not been patented, and deny other IP barriers.

EC arguments protect Big Pharma, but effectively reject the World Health Organization’s COVID-19 Technology Access Pool (C-TAP) initiative. C-TAP seeks to enable equitable access to technologies for approved COVID-19 vaccines and therapies. But industry and government officials dismiss technology sharing as unnecessary, and worse, dangerous for future innovation.

Inflexible ‘flexibilities’

For a long time, Big Pharma and their governments, including the EC, pressured developing countries not to use the very CLs they now tout as the solution. The US Trade Representative routinely threatened sanctions against countries using CLs for medicines, only recognising others’ right to use them this year.

CLs are very difficult to actually use, especially by countries with limited negotiating capacities or relevant manufacturing capabilities. Existing provisions require complicated country-by-country, company-by-company and patent-by-patent negotiations, also raising massive coordination problems.

The CL provision may be enough for some, but certainly not all needed equipment, tests and medicines. Many products need several CLs, implying “a harrowing number of CL must be coordinated and granted in multiple countries”.

Also, CL does not require sharing industrial secrets, confidential information, industrial design and other relevant knowledge necessary for viable production. These can be critical, e.g., for mRNA vaccines using new technologies.

Those countries unable to produce themselves have to find others willing to issue CLs to produce cheap generics for export. Yet more hurdles are contained in the fine print of TRIPS and the 2001 ‘flexibilities’.

Bogus claims

In fact, sharing such confidential information not only spurs competition, but also enhances innovation. Thus, Shantha Biotechnics in India developed a low-cost hepatitis B vaccine, the basis for UNICEF’s lauded global vaccination drive.

Contrary to industry and political leaders’ claims that circumscribing patents would kill pharmaceutical innovation, “a host of new drugs and improved HIV treatments” followed “the agreement on Public Health exception to TRIPS”. These new and improved treatments effectively ended that deadly pandemic.

After inventing the polio vaccine, Jonas Salk was asked, “Who owns this patent?”. He famously replied, “Well, the people I would say. There is no patent. Could you patent the sun?”

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Rich country hypocrisy exposed by vaccine inequities

Anis Chowdhury and Jomo Kwame Sundaram

SYDNEY and KUALA LUMPUR: ‘No one is protected from the global pandemic until everyone is’ has become a popular mantra. But vaccine apartheid worldwide, due to rich countries’ policies, has made COVID-19 a developing country pandemic, delaying its end and global economic recovery.

Systemic inequities

Most rich countries have been blocking the developing country proposal to temporarily suspend relevant provisions of the World Trade Organization (WTO) Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) for the duration of the pandemic to more affordably and effectively contain it.

Needed to quickly scale up production and affordable access to relevant diagnostic tests, medical treatments, personal protective equipment and prophylactic vaccines, the proposal – by South Africa and India in late 2020 – is now supported by more than two-thirds of WTO members.

The Biden administration has reversed Trump’s opposition to the proposal, albeit only for vaccines. Without necessary complementary measures, and with continued opposition from European governments, the US partial policy reversal has not had any real impact so far.

As the World Health Organization Director-General notes, the pandemic is being prolonged by the “scandalous inequity” in vaccinations. “The global failure to share vaccines equitably is fuelling a two-track pandemic that is now taking its toll on some of the world’s poorest and most vulnerable people”.

With new, more infectious, even lethal variants spreading rapidly, experts fear the worst for poor countries is yet to come. Meanwhile, vaccines will generate astronomical profits. Soaring vaccine earnings have created at least nine new billionaires, with executives becoming very rich as share prices shoot up.

Leftovers now charity

Rich countries have been hoarding far more vaccine doses than they need. The European Union (EU) secured three billion doses, or 6.6 per person, while the US got 1.3 billion, or five each. Canada got 450 million for 38 million, or twelve each, the UK over 500 million, i.e., eight each, and Australia 170 million for 25 million, or seven each!

With mainly adults vaccinated, the actual ratios are even more obscene. UNICEF found most high-income countries had acquired at least 350% of doses needed. Agreements for vaccine delivery to low- and middle-income countries up to 2023 will only cover half their populations, at most.

The headline grabbing G7 promise of a billion doses actually involves 870 million doses, far short of the 11 billion needed. Some of this involves double-counting: 130 million was previously pledged to COVAX, the arrangement to supposedly ensure equitable vaccine access.

Supplies will not begin until year’s end, i.e., after their domestic vaccination programs are largely done. Most are doses ordered well in excess of needs. Clearly, the G7 does not have a serious plan, let alone commitment to vaccinate the world.

European hypocrisy

Although most EU parliamentarians support the TRIPS waiver proposal, the European Commission (EC), the EU executive, adamantly opposes it, offering half-truths as excuses. European leaders block progress by claiming that increased production and exports are more urgent, and require patent protection.

EC President Ursula von der Leyen sees the pandemic as a chance for vaccine-producing countries to export more, while dismissively asserting that waivers will “not bring a single dose of vaccine in the short and medium term”.

Although world-class facilities in the global South have long produced medicines and vaccines, French President Macron added insult to injury. “Can we really entrust laboratories that don’t know how to produce [vaccines] with this intellectual property and expect them to be producing tomorrow?”.

Now, the EC has legalised world vaccine apartheid by only recognising four vaccines – AstraZeneca (only if produced in Europe), Pfizer, Moderna and Johnson & Johnson. Hundreds of millions in the global South vaccinated with AZ manufactured in India and many others will thus be banned from Europe!

New North-South divide

By 7 July, more than 3.32 billion vaccine doses had been administered worldwide, with 85% going to high- and upper middle-income countries, and only 0.3% to low-income countries. Africa’s vaccination rate (4% so far) is the slowest of all the continents, with some countries yet to start, while infection rates are rising fast.

Thanks to much higher vaccination rates, deaths in rich countries fell from 59% of the official world total in January to 15% in May 2021! The developing country share of pandemic deaths are underestimated at 85%, but nonetheless increasing rapidly.

The United Nations Secretary-General has warned, “Vaccine equity is the greatest immediate moral test of our times. It is also a practical necessity. Until everyone is vaccinated, everyone is under threat”.

The International Monetary Fund (IMF) has proposed investing US$50bn to help immunise at least 40% of the world population by the end of 2021 and the balance by mid-2022.

Ending the pandemic would accelerate economic recovery and generate US$9tn more in global output plus US$1tn in tax revenue by 2025. Yet, last weekend’s G20 Finance meeting refused to endorse it.

Reject new apartheid, cooperate

Outraged former UK Prime Minister Gordon Brown has rhetorically asked, “vaccines for all or vaccine apartheid?”. Scaling up vaccine production to immunise the world quickly requires unprecedented international cooperation.

Suspending patents can help contain the pandemic, but the selfish policies of the global North have made COVID-19 a pandemic of the South. This is also impeding its end and recovery for all, besides deepening the North-South divide, and inevitably, associated resentments.

Meanwhile, the IMF warns of a ‘dangerous divergence’ in economic recovery between rich and poor countries. With their limited fiscal resources, high debt burdens and weak health systems, countries in the global South must urgently reconsider their options to address the escalating catastrophe.

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Developing country solidarity needed to overcome pandemic

Jomo Kwame Sundaram and Anis Chowdhury

KUALA LUMPUR and SYDNEY: As rich countries have delayed contagion containment, including mass vaccination, in developing countries, much weaker fiscal efforts in the South have worsened the growing world pandemic apartheid.

Lessons from first wave

Despite limited fiscal resources and modest external support, government efforts also need to address unsustainability, inequality and other problems due to extant economic, social and environmental arrangements.

Early relief and recovery measures assumed that the pandemic would be short-lived and reversible. Hence, such measures were rarely sustained, let alone expanded in developing countries despite the growing need for them.

Appropriate social protection measures are needed for the longer term beyond those deemed temporarily necessary. The adverse effects of livelihood disruptions should be mitigated with income maintenance for employees and the self-employed whose livelihoods have been severely jeopardised.

Governments must try to maintain family incomes, enabling them to spend to survive, thus keeping the economy ticking and businesses afloat. With effective contagion containment, such programmes enable earlier resumption of economic activities, i.e., recovery.

Sustaining businesses, nurturing economies

A few, mainly developed countries have tried to minimise business destruction, worker layoffs and welfare losses. Developing country governments must also help revive and sustain economies and livelihoods to prevent pandemic recessions from becoming protracted depressions.

Few businesses and sectors can survive without adapting. Business survival options could include redeployment, infrastructure and facility repurposing, and staff retraining. Other options include additional credit to businesses, tax payment deferrals and even social protection.

Many businesses, especially those with less reserves, need help avoiding liquidation and paying employees. Governments may need to consider adapting American bankruptcy law to enable businesses to continue operating to work themselves out of temporary pandemic predicaments.

As early as April 2020, the pandemic had hit many businesses in over 130 countries, particularly small and medium-sized enterprises. Two of three were hard hit globally as well as in Africa, with a fifth expecting to close within a quarter!

Of course, more lending and tax breaks mainly benefit the better-off, rather than those in greatest need, most vulnerable or adversely affected.

Although policymakers typically insist on targeting and means-testing for the poor, they rarely demand the same for businesses. But some ‘easy’ targeting is desirable to identify needy, but salvageable businesses.

One size cannot fit all

Business disruption has broader implications, threatening national economies. If relations necessary for viable economic transactions – such as trust among entrepreneurs, workers and customers – are disrupted, they will need to be rebuilt, typically requiring much time and expense.

Such ‘transactions costs’ incurred in building trust, seeking and keeping clients and customers, obtaining credit, recruiting workers and sustaining other longer-term relations are typically ignored. Hence, conventional economics is considered a poor guide to understanding the economy and designing policy.

Keynesian economists typically saw governments as the ‘employer-of-last-resort’ in response to economic downturns. But governments can also help by becoming ‘payers-of-last-resort’, enabling businesses to remain solvent, e.g., on condition of keeping, instead of firing involuntarily idle workers.

Conditions for access to policy support should be strict enough to deter abuse, but not participation. Strict verification and correction can wait, even until after the worse is over.

Disbursed state grants or subsidies, later found excessive, can be converted low interest loans. Governments can recover these later, rather than treat beneficiaries as fraudulent criminals.

Economies are certainly not homogeneous, monolithic or unchanging. And COVID-19 slowdowns are unlike previous recessions. As these are invariably uneven in impact, various sectors, industries and businesses are affected differently.

Hence, no single policy can possibly be suitable for all countries, at all times. Much has to be learnt quickly ‘by doing’, i.e., from experience, including those of others. Lessons may be both positive and negative, and rapid learning is crucial for improving policy design and implementation.

Who can we count on?

Without both effective contagion containment and mass vaccination, it will be impossible to control the pandemic. And with little external support, containment, relief and recovery measures in low- and middle-income countries (LMICs) will be all the more difficult.

Thus, the worst is yet to come in the global South, which must now brace itself for the dire consequences of delayed pandemic suppression and limited fiscal efforts. Meanwhile, the North seems unmoved by the International Monetary Fund’s warning of a dangerous new economic divergence globally.

The 870 million vaccines that the world’s seven richest large nations (G7) pledged to poor countries last month will immunise half that number, from late 2021. This is only eight percent of the 11 billion doses needed, noted former UK Prime Minister Gordon Brown.

But despite ungenerous rich Western countries, the Fund has called for US$50bn to accelerate vaccination worldwide. It expects this to end the pandemic, enhance global output by US$9 trillion, and yield a trillion in additional tax revenue.

LMICs need to urgently respond to fast spreading pandemic surges. They also need to do so effectively, feasibly and equitably, expecting little help from the North. Domestic borrowing – enabled by central banks, sound policy design and South-South cooperation – will be crucial to success in these circumstances.

Relief, recovery, reform

With delays, new, more dangerous COVID-19 variants will threaten developing countries, as more effective contagion containment and fiscal efforts are slowed by the North. These will exacerbate avoidable tragedies and old inequalities.

Developing countries have no choice but to get the economy going despite reduced fiscal and monetary space and more debt. Greater government spending to address the pandemic can be financed with more domestic borrowing from central banks.

Foreign exchange is mainly needed to service foreign debt and pay import bills. Forex requirements can also be reduced by swap arrangements and restricting non-essential imports. Greater South-South cooperation can also enhance resilience and rebuilding for the future.

Recovery should not simply mean a return to the status quo ante. The decade before the pandemic left much to be desired, and there is little reason to restore it. The unsustainable, financialised and unequal pre-pandemic economy should be transformed to achieve more equitable and sustainable development.

After all, the North now undermines the very globalisation it once imposed on the South. Hence, it is imperative to instead establish new, more equitable, pacifist and principled international relations, under multilateral auspices, promoting cooperation.

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