Hello from Washington, from where I’m writing your shiny new DC Trade Secrets note. Though by the time you read it, I’ll be in Georgia, where things will be less swampy.
Our main piece today follows Washington’s surprise move to back a Trips waiver at the World Trade Organization, asking whether the era of Big Pharma having a big influence on trade can be consigned to the historical dustbin.
Charted Waters looks at how the EU and China are becoming ever-closer trade partners.
Please do get in touch with any thoughts you have on our revamp, or if you have some top tips for articles to include in Trade Links.
Most people who follow trade in Washington have been wondering when US trade representative Katherine Tai might stop reviewing things and actually do something. No longer.
Tai failed to show up at a World Trade Organization general council meeting on Wednesday last week to discuss the pausing of intellectual property rules for Covid-19 vaccines. Biden’s chief of staff Ron Klain had suggested earlier that week that she would attend, raising hopes that a decision on a vaccine IP waiver was close. Instead, the interim chargé d’affaires for the US Mission in Geneva appeared, and read a bland and short statement.
It turns out we were all watching the wrong meeting. The action was back in the Oval Office in Washington, where the mysterious Tai, who had allegedly never even intended to go to Geneva, met with President Joe Biden and a handful of top White House officials to deliver the startling verdict: the US should not continue to oppose the Trips waiver at the WTO, when it came to vaccine IP.
It’s tempting to see this as a clever political move. It’s a grand statement, but won’t actually have to be backed up by the Biden administration for quite some time. His team can talk with allies, many of whom oppose the waiver, and try to get something through the WTO, but it’ll take a while. In the meantime, Germany’s chancellor Angela Merkel, who immediately came out and opposed the US move, now looks like the villain that the Washington was fast becoming. The US can sit back smugly and say, with one eyebrow archly raised, that it doesn’t have any export controls and it supports a waiver to Trips for vaccines. Your move, Europe.
Who loses? Well, the pharma companies are still furious. They understand that this is essentially just the beginning of a debate at the WTO. But they still hate how this looks, and they’re still wedded to their arguments that this is a slippery slope, will hamper innovation and lead to China and Russia stealing US tech.
It’s also a moment for them in a different way: this could mark the death of the industry’s historically big influence on US trade policy.
Back when Barack Obama was trying to get his doomed transpacific Trade Partnership through the US Congress, it was Big Pharma that helped sink it. Former Republican senator for Utah Orrin Hatch, one of the industry’s supporters on Capitol Hill, essentially scuppered Obama’s efforts to strike the trade agreement with 12 Pacific Rim nations because the deal only had eight years of protection from competition for cutting-edge biologics drugs. Hatch thought pharma companies should have stronger protections.
The industry fared less well under Trump’s US-Mexico-Canada Agreement. As regular Trade Secrets readers will know, it was Tai who many credit with marshalling the deal safely through Congress from her perch in top trade Democrat Ritchie Neal’s office. Provisions protecting biologics from competition for 10 years were completely removed from the final deal.
If Big Pharma is worried about slippery slopes, it has good cause to do so. The US tends to use its existing trade deals as its starting point for the next one and support for a Trips waiver for Covid-19 vaccines was unthinkable not that long ago.
Some on the Hill saw this coming too.
Political pressure to rein in escalating US drug prices has been growing for some time. The notorious case of Martin Shkreli raising the price of Aids drug Daraprim by almost 5,000 per cent was just one of several high-profile cases that tarnished the industry’s reputation. The result of the whole Shkreli saga was that both Republicans and Democrats supported bills to tackle drug price inflation for US patients — Donald Trump even joined in, vowing to lower “unfair” costs.
One Democratic aide points back to December 2019 when the House of Representatives passed a bill aimed at lowering the cost of prescription drugs by empowering the government to negotiate prices with manufacturers. Big Pharma opposed the legislation and lobbied hard against it. The aide recounts a conversation with a pharmaceuticals company employee, who insisted the bill would never pass the Senate: “I was just like, the fact that it’s just passed the House means that your time has come.”
But Tai’s decision also reflects current circumstances. Notably the worsening of the pandemic in India, which changed many hearts on the Hill. A small band of early proponents for the waiver quickly swelled into more than 100 Democrats, earning a handful of them a meeting on Friday April 30, days before the announcement, with Tai and Jeff Zients, the White House Covid-19 response co-ordinator. The lawmakers made their case. Tai also held meetings on other days, I should point out, with senior executives at the handful of companies with vaccines either authorised for use in the US, or which are close to receiving it: Pfizer, Moderna, Johnson & Johnson and Novavax.
To say pharma’s influence is totally dead might be a bit premature. The impact that a waiver has, if any, will depend heavily on the detail of the proposed text. Pretty much all is still left to play for. One European diplomat suggested to Trade Secrets that the most sensible way forward would be for Tai to hold bilateral talks with her counterparts in countries objecting to a waiver, and then bring a fresh proposal to the WTO. This would sidestep the current India and South Africa proposal — which was put forward last year and calls for a waiver on all vaccines and treatments relating to the pandemic — and it’s not the done thing to refuse to engage with a serious US proposal.
While pharma licks its wounds and plots its next steps, advocacy groups remain stunned at their unexpected victory. “Access to medicine advocates have been bruised for decades working in Washington,” said Nicholas Lusiani, a senior adviser at Oxfam America. “To put some kind of semblance of accountability on the pharmaceutical industry, I don’t think anybody believed it would happen.”
Yesterday’s Trade Secrets looked at why the EU’s attempts to snaffle China’s trade ambitions were failing to have the desired impact in Beijing despite both sides becoming increasingly reliant on each other in economic terms. Here’s a chart showing just that:
The EU already imports more goods from China that any other country and, as the chart shows, China is also becoming an increasingly important destination for EU exports too, as the country’s middle class expands and becomes better able to afford the luxury goods Europe has to offer. Claire Jones
Our must-read is today’s edition of Europe Express, which delves into the messy fondue that is the EU-Swiss relationship. Valentina Pop and Sam Jones report that the relationship has grown particularly fractious of late as Bern renegotiates the terms of its agreement with the EU.
For those of you interested in watching how EU-China relations pan out, Alan Beattie recommends this blog, from Noah Barkin, a former Reuters correspondent and current senior visiting fellow at the German Marshall Fund.
Rising container shipping costs have been making waves (sorry), with capacity constraints and the boom in demand for consumer durables triggering a surge in prices. Harry Dempsey and Neil Hume have a great read this morning which shows the same thing is happening (albeit slightly less dramatically) to the cost of shipping raw materials.
Foreign manufacturers are scrambling to cope with India’s Covid-19 outbreak, with Nikkei ($, requires subscription) reporting that Japan’s Yamaha has suspended production at two motorcycle plants and Suzuki is prioritising medical oxygen over automaking.
US commerce secretary Gina Raimondo is planning a summit with big players in the chip industry to address the global shortage. (Bloomberg, $ — requires subscription)
King’s College London’s Holger Hestermeyer has an interesting take on the news, covered by the FT over the weekend, that manufacturers using the UK’s freeports, one of the grand ideas to boost trade, will not be able to take advantage of trade agreements signed post-Brexit.
The UK’s musicians have complained loudly about the impact of Brexit on their industry, which makes it much tougher to embark on EU tours. Trans.info reported yesterday that the government had a novel idea to ease some of that strain: use hauliers based in the EU. We’re not sure how that will go down with truckers based in the UK. As “ciaran the euro courier” put it on Twitter, was that on the bus? Claire JonesAny recommendations on articles to include in Trade Links? Send us your tips here.