Hello from Washington, where the Biden administration is coming under fire for hoarding vaccine supplies using what, on the face of it, appear to be export controls.
We delve into this topic in today’s main piece. As India battles with perilously low oxygen supplies and a spiralling Covid-19 death toll, this looks set to remain an issue here in DC and in other advanced economies that are far on with their immunisation drives in the coming weeks.
Charted Waters, meanwhile, looks at whether the US is about to reach a limit in the proportion of its population that is vaccinated.
We’ve touched on the debate raging over intellectual property trade rules for vaccines, here at Trade Secrets. Today we want to talk about another trade mechanism that’s generating heat in Washington (and attracting criticism from around the world) — US export controls.
The US has come under fire from vaccine makers and manufacturers, as well as trade experts, over its export controls on key ingredients and inputs, such as syringes and filters and vials, needed by other countries to make Covid vaccines.
Notably, the chief executive officer of the Serum Institute of India, Adar Poonawalla, asked President Joe Biden on Twitter to “lift the embargo of raw material exports” from the US to allow for boosted vaccine manufacture. Serum is the world’s largest vaccine manufacturer and the biggest supplier to the Covax programme set up to provide jabs to poorer countries (although it was itself recently told to stop exporting).
There’s a problem with these criticisms, though, and that is that the US export controls don’t exist. At least in the traditional sense.
When it comes to bickering, much of the world’s attention has so far been on the EU and the UK. The EU touted export controls on doses of the Oxford/AstraZeneca vaccine after London and Brussels argued who should get first dibs on jabs made in a Dutch factory. Ursula von der Leyen, European Commission president, reportedly told German media that the message to AstraZeneca was: “You must fulfil your contract with Europe first before you start delivering to other countries.”
Until recently, nobody paid much attention to what the US was doing — and that’s because it doesn’t have export controls on vaccines or vaccine materials, ingredients and so on. However, it does have mechanisms in place that essentially achieve the same result.
Export controls are usually decided and managed by a smallish bureau within the Department of Commerce. Not so this time. What the US has done instead is use its own legal capabilities to mandate that any company manufacturing useful things on US soil fulfils US government contracts ahead of any other contracts. The law it’s using is the Defense Production Act. This doesn’t mean that a manufacturer can’t take other orders or export its products — but it can only do that once it’s fulfilled the terms of the US government order. Any company subject to the DPA is, in theory, totally free to export things wherever it likes. But maybe by the time it has fulfilled the US contract, it doesn’t have leftover capacity.
Along with funding vaccine makers through trials and helping them scale up manufacturing through Operation Warp Speed, the Trump administration, and then the Biden administration, used a combination of the US International Development Finance Corporation and the Biomedical Advanced Research and Development Authority to put cash where it was needed and buy up bioreactor bags, syringes, vials and needles — all of which the US is a top global exporter of in normal times, according to this little slide deck from the OECD. It’s also awarded millions of dollars to companies making various bio particles, syringes and filters to expand their capacity (current list here).
The chief executive of one Indian pharmaceutical company, Mahima Datla of Biological E, understands this. Instead of referring to export controls, he’s accused Washington of hampering global manufacturing by forcing suppliers to prioritise US contracts. This seems more accurate. Reporters have asked Jen Psaki, the White House press secretary, about export controls repeatedly in press briefings, and she can truthfully say that there are none. It’s the wrong question to ask. And when we continue to talk about export controls, the US administration can dodge real questions, such as — at this point, does the US really need all of those syringes it has bought more urgently than India needs them? What would be the effect on the US rate of vaccination if it redirected some of the supplies it has acquired through DPA elsewhere? Does it makes sense for the US to have millions of doses of the AstraZeneca shot in storage given the situation in India?
As the tragedy in India has unfolded, the US has been forced to clarify in more detail its position on exports. It essentially argued that there just weren’t enough of the ingredients and inputs needed for vaccines available to meet global demand. Tim Manning, the White House Covid-19 supply co-ordinator, on Monday wrote a long Twitter thread where he pointed out that “making vaccine requires specialized materials, and there’s just not enough of them”. Using the DPA, he insisted, “doesn’t create the shortages — there is just more global manufacturing happening everywhere than the suppliers can support.” The US is making sure it’s at the front of the queue — but the people at the back are out of luck.
It’s not an easy position to morally defend. There is an argument you could make that this is the US government doing its job, spending taxpayer dollars to generate a life-saving item for its citizens. It’s also a decent political gamble. But perhaps realising that the tide of public opinion is turning a little on this, the Biden administration announced on Monday it would share up to 60m doses of AstraZeneca’s vaccine with other countries in an effort to stem further surges in other parts of the world. This time, India is expected to be at the front of the queue.
The FT’s data guru John Burn-Murdoch has done a superb job of crunching the numbers and keeping us all informed on the scale of the coronavirus pandemic. Thankfully, he’s also now increasingly focusing on immunisation drives, with the chart below showing that the US has, along with the UK and Israel, been one of the best performers in terms of getting shots in people’s arms quickly.
The US may, however, be about to reach a critical juncture in its immunisation drive. The reason being that a greater proportion of US citizens are sceptical about taking a shot.
If the US vaccine drive keeps pace, we shall see in the coming weeks if this scepticism becomes more of an issue. Our hope would be that, as more family and friends take the jab, some of the doubters are won over. Either way, it’ll be an interesting case study for the rest of the world. Vaccine scepticism remains an issue in several European countries, including France. Claire Jones
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