Will the EU still have Big Pharma’s back overseas?

Hello from Trade Secrets, coming from Coronation Britain, and God save the King! (“I intend, I think the King should be saved. It’s a good idea. And if anyone is going to save him, God is him.”) But I digress. Remember that big barney on the Covid-19 vaccine patents at the World Trade Organization, which created a lot of electoral hype and then took two years of intense negotiations to yield little? Well, the other week the EU did something big with its intellectual property rules which looks pretty cool in that light. Tracked waters it is on the achievements of China’s Huawei going local to evade US sanctions.

The EU is not quite the HYPOcrite it might seem

At first glance, it seems like the kind of double-dealing that Eurosceptics regularly accuse Brussels of. Between 2020 and 2022, the EU fought hard in the WTO to water down a cross-sectoral approach waive the protection of intellectual property rights (IP). for Covid vaccines and other treatments. The proposal, initially made by India and South Africa, briefly seemed possible when the Biden administration pretended to support it to make American health activists disgusting, but then ended up as a small clarification to existing practices.

Last week the EU he seemed relatively dismissive on the protection of pharmaceutical intellectual property in its market. He proposed giving himself more compulsory licensing (CL) powers to ignore patents during emergencies and reduce drug companies’ “data exclusivity” rights to the information rivals need to make medicines. A “total hypocrisy,” said the People’s Vaccine Alliancewho campaigned on the issue, and even developing countries who supported the renunciation muttered darkly in private.

EU officials would argue that their move is fully compatible with their position in the WTO. Technically, they’re right. But in terms of political economy and lobbying power Big Pharma, which opposed last week’s move, as did his Praetorian Guardit’s a little more complicated than that.

To recap: The EU (backed by other drug-heavy economies like Switzerland and the UK) opposed the WTO opt-out idea and said it was both bad for vaccine innovation and uncalled for . The WTO The “Trips” agreement on IP is already foreseen that countries use their powers to issue CL without causing a WTO case. In any case, Covid vaccines are complex biological medicines: the main obstacle to their production in developing countries is manufacturing know-how, not intellectual property.

The problem here is that CLs, which make it easier for local manufacturers to make copies of patented drugs, are in many law books around the world, but aren’t used much. It is often technically complex to issue them, and governments often encounter heavy-handed countermeasures from drug companies who claim they would hurt investment in the country. Companies also involve their national governments: here is the The US pharmaceutical industry urges the White House to get tough with foreign countries using CL.

As the EU says, their new intellectual property announcements are in line with their position at the WTO, which is to publicize and simplify the use of CLs rather than ignore patents altogether. Reasonable enough argument, but political economy is not that simple. Resisting the pharmaceutical industry is relatively easy for the EU to do at home, since companies cannot credibly threaten to leave such a lucrative market. But internationally, the EU has often followed the orders of pharmaceutical companies, not just at the WTO but in bilateral trade agreements, where it is written into data exclusivity protections. (See, for example, the recently updated Rule 25.46 EU agreement with Chile.) If activists can push the EU to adopt a similar line of industrial skepticism abroad as at home, we could see some changes in the use of CLs internationally.

Like many people in trade, I have always thought about the WTO opt-out talks they were a bit of a sideshowbut a good outcome would have been a warning to the pharmaceutical industry that their national governments did not automatically have their back, as well as sending a general signal about the need to IP political space during medical emergencies. If the EU wants to show some courage and lean on its pharmaceutical companies to ease pressure against CL abroad, this would be a good opportunity to do so.

Tracked waters

Since 2019, Washington – which says Huawei is a security risk and fears it could facilitate Chinese espionage – has barred American suppliers from selling to Huawei without export licenses and barred the company from using any U.S. technology for design and chip manufacturing. But as the graph below shows, from an great analysis by FT reporter Qianer Liu, the company has received a little help from its (government) friends.

A second chart shows how this prevented a significant drop in earnings after the announcement of US sanctions from turning into a deadly list.

Huawei has done this by targeting its sizeable domestic market, both for sales and suppliers. Beijing approves, but it clearly came at a cost to the government. (Jonathan Moules)

Commercial Links

Remember that hoo-hah about countries dethroning the dollar (e.g. India and Russia regulating trade in rupees), a trend I’m skeptical of? Well, the India-Russia initiative it’s not happening. As a currency and debt guru Brad Setser points outRussia doesn’t want to be left with a cargo of Indian rupees it may not be able to use.

The Biden administration has promised to impose controls on foreign investment in China and on Chinese companies investing in the United States. Martin Chorzempa of the Peterson Institute he says it is proving difficult.

The FT looks at what companies are like that maintain supply chains between China and other countries meet challenges with cross-border regulation, litigation and arbitration.

Francisco Rodríguez of the University of Denver explains in the FT how sanctions imposed by rich countries can harm vulnerable people in poor ones.

EU promises to open exciting new front in intellectual property wars by reclaiming ‘geographical indications’ protected designations for artisanal and industrial products as well as food and drink. Placing GIs for hundreds of GI names — prosecco, for example — is already a key demand in their bilateral trade deals, something that vexes the US to no end.

Six alumni of the Biden administration reflect on its active industrial policyincluding Jennifer Harris, who has spearheaded much of the work on the links between industrial policy and trade.

Speaking of industrial policy, the Trade Talks podcast looks at how China’s industrial policy works has or hasn’t worked in the past.

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Trade Secrets is edited by Jonathan Moules