Could Vaccine Nationalism Spur Disputes At The WTO; TRIPS Waiver Talks Update

Newsletter Edition #38 [The Friday Deep Dives]

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Hi,

From the view on the street in Geneva, pandemic policy-making is unmistakably being shaped at the World Trade Organization, riding on the momentum generated when Director-General Ngozi took office earlier this month.

After speaking on her first day at work at the General Council meeting earlier this month, her interventions on addressing the trade aspects of fighting the pandemic have been swift. She also spoke at the COVID-19 Vaccines Manufacturing Summit earlier this week. Alongside the political discussions on the TRIPS waiver, a few countries have come together asking her direct intervention to alleviate production shortages of vaccines by engaging with the industry. We bring all this for you, and more in this edition.

In our story this week, we explore the possibility of whether vaccine nationalism can result in disputes at the WTO. The opinion on this divided. However, we would not be surprised if commercial and political interests eventually far outweigh the public health implications of such potential disputes.

We also bring you a brief update on the TRIPS waiver discussions at the TRIPS Council meeting at WTO from earlier this week. Seasoned watchers believe that the waiver might just be able to get a critical mass of support. Stay tuned, it is going to get interesting and not pretty. Vacuous statements on solidarity that we have witnessed from political leaders might finally translate into some real meaning in the coming weeks and months.

Read these stories collectively. One leads to the other. It has been interesting to report on the pandemic with issues simultaneously straddling these different worlds of health and trade.

In other news from us, happy to share that Geneva Health Files participated in this report on how the institutions of International Geneva responded to policy-making for the pandemic. (“Covid-19: Que Fait La Genève Internationale? by Annick Chevillot)

Finally, we continue to be encouraged by the steadily growing numbers of our supporters. We are making it work because of you. Thank you. Do spread the word around and let your tribe grow!

Please note that we are making an exception and will make this exclusive edition public after a few days, to accommodate regular readers who are in the process of making a transition into paid subscriptions. Thank you for understanding.

Until next week!

Best,

Priti

Write to us: patnaik.reporting@gmail.com or genevahealthfiles@protonmail.com; Follow us on Twitter: @filesgeneva


1. Story of the week

WILL VACCINE NATIONALISM LEAD TO WTO DISPUTES?

Experts believe that the solution to vaccine nationalism is not filing disputes, but negotiations. But lawyers anticipate disputes even if filed simply for political leverage.

Vaccine nationalism, a condition that has flourished during COVID-19, is loosely understood as the tendency of countries to hoard vaccines. But protectionist trade practices of hoarding medical supplies began as soon as the pandemic hit. This is now taking a serious turn with export restriction measures adopted by some countries. This could lead to a real possibility of countries taking the legal route to file disputes at the WTO, even if only for political leverage, experts say.

Geneva Health Files spoke to legal experts, lawyers and delegations of some countries for this story. Will rising protectionism to address the pandemic relate to a rash of WTO disputes? Yes and no, depending on who you speak to.

Earlier this week, Ngozi Okonjo-Iweala, WTO DG, said that 59 members and 7 observers, had some pandemic-related export restrictions or licensing requirements in place at the end of February, primarily for personal protective equipment. She pointed out that these figures were lower than the 91 countries that had brought in such measures over the past year. 

Image Credit: Photo by Anete Lusina from Pexels

EU-AUSTRALIA

When EU announced measures for export authorization earlier this year, amidst prevailing conditions of scarcity of vaccines production, it was met with near-ubiquitous criticism.

Our interest was piqued when Italy decided to block export of AstraZeneca vaccine doses to Australia. It is understood that Australia had discussed these concerns with DG Ngozi.

It was reported that Australia intended to work with other countries including Canada, Japan, Norway and New Zealand, “to pressure European officials in Brussels as a group.”

We reached out to the Australian Permanent Mission to the WTO in Geneva, to find out if the country had plans to file a dispute. In response to our question on whether there has been any formal consideration at this stage to file a WTO dispute against the EU, a spokesperson of the mission answered in the negative.

“Australia intends to work cooperatively with like-minded states, including the EU, to deliver vaccines as a global good.  Our view is that vaccines should not be subject to restrictive trade measures,” the spokesperson told Geneva Health Files.

We were also told that Australia’s Minister for Trade, Dan Tehan had spoken to the EU Trade Commissioner Valdis Dombrovkis on Australia’s approach. The spokesperson also confirmed that the minister had spoken to the WTO DG on the matter.

Does this mean we will witness no disputes as a result of protectionist measures during the pandemic, will countries opt for negotiation over a litigious route to address vaccine shortages?

WILL DISPUTES ARISE?

One Geneva-based trade source on the condition of anonymity said, “The way the EU was excoriated at the [WTO] General Council meeting (earlier this month), in response to its trade restriction measures, shows that this issue will not go away anytime soon. There is a real possibility of members filing disputes.” (One diplomatic source called discussions at the General Council meeting last week as “a slaughterhouse”)

The view on whether members will rush in to file disputes is divided – not the least because of what it means to go through the dispute settlement process at the WTO in the midst of a pandemic.

For one, there is the issue of time constraints. Disputes at the WTO can take long. This is apart from the current crisis facing the international trade court – WTO’s Appellate Body which is not currently functional.

Disputes around the pandemic will need to be resolved quickly to have any impact. It could take up to 18 months to get a panel report in the WTO disputes settlement system. So experts feel that WTO disputes system may not be suitable for these kinds of urgent challenges.

While it is too soon to dismiss the possibility of trade disputes, experts believe that the way to address competition for medical products during the pandemic will be through negotiation.

Experts point to the 2001 dispute brought by the U.S. against Brazil, during the AIDS crisis, which ended up as mutually agreed solution. (See DS199: Brazil — Measures Affecting Patent Protection). The dispute involved Brazil’s local working requirements in its industrial property law.

Joost Pauwelyn, Professor of International Law, who also heads the department at The Graduate Institute in Geneva, believes that the focus is and should be on finding solutions, practical ways to address concerns, not litigation. Last year, Pauwelyn analysed the legal framework of export restrictions at the EU and WTO level. (See Export Restrictions in Times of Pandemic: Options and Limits under International Trade Agreements)

"There is no GATT/WTO ruling that addresses the issue (of the use of export restrictions in the health area) directly. The IP-related disputes that arose during the AIDS crisis were negotiated. It was dealt with at the political level (TRIPS council, General Council etc.) and ultimately via a waiver and TRIPS treaty amendment, not in the dispute settlement system," Pauwelyn says.

Asked whether the crisis in the Appellate Body will dissuade countries from filing disputes, Pauwelyn says, “WTO dispute settlement is currently broken given the option to block panel outcomes to a non-existent Appellate Body. In addition, the process takes about 4-5 years, but under this status quo, it means that by the time the case is settled, the world may already be facing the next pandemic so to speak. So in practical terms, filing a dispute could be a non-starter.”

Pauwelyn is also one of the WTO Appeals Arbitrators, nominated by the EU for the Multi-party interim appeal arbitration arrangement (MPIA). The MPIA is a temporary solution till the Appellate Body is functional again. It allows participant WTO members to have access to a 2-step dispute settlement system in the WTO, including the availability of an independent and impartial appeal stage.

WTO EXPORT RULES TOO BROAD?

Remember that EU has said that its measures are consistent with WTO rules. But that does not mean it cannot be challenged. It is widely acknowledged that these rules are too broad in their framing, giving WTO members ample leeway to take measures during emergencies and in the context of public health concerns.

Two provisions in The General Agreement On Tariffs And Trade 1994 come up in this discussion : (we cite this from the legal text)

THE GENERAL AGREEMENT ON TARIFFS AND TRADE 1994

Text of Article XI

General Elimination of Quantitative Restrictions

1.     No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.

2. The provisions of paragraph 1 of this Article shall not extend to the following:

(a)   Export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party;

Article XX: General Exceptions

Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:

(a)  necessary to protect public morals;

(b)  necessary to protect human, animal or plant life or health;

Experts say that EU or any other country bringing in export restriction measures can demonstrate that measures have been taken “temporarily” to prevent or relieve critical shortages of “essential” products. Vaccines, raw materials for vaccines, and other medical products can be deemed essential. [See Art XI 1 above.]

Lawyers believe that members will most likely cite the Article XX. The provision enables countries to take measures on account of public health concerns. [See Article XX (b)]

“In general, as far as export restrictions are concerned, WTO law is fairly relaxed. It allows members to do quite a bit,” a trade expert said.

However, as production shortages of vaccines hit both rich and poor countries, manufacturers are concerned about export restrictive measures. (See this report from the summit earlier in the week: Towards Vaccinating The World Landscape of Current COVID-19 Supply Chain and Manufacturing Capacity, Potential Challenges, Initial Responses, and Possible “Solution Space”)

DG Ngozi has acknowledged the supply chain problems linked to export restrictions and prohibitions. “Because vaccine production relies on sourcing components and ingredients from multiple countries, she said, trade restrictions would slow down production, and make it more expensive,” according to a WTO press release this week on her comments at the vaccines summit with manufacturers.

Serum Institute of India’s Adar Poonawallah, for example, has raised concerns on the Biden administration decision to invoke the Defense Production Act to prevent exports of certain materials needed to manufacture vaccines. The SII is India’s vaccine powerhouse meeting the demand for both bilateral and multilateral vaccine deals.

To protect domestic manufacturers and constituencies, countries may resort to filing disputes, if only to send a signal to other members, experts believe. To be sure, this is not only about vaccines. Going forward, export restrictions on raw materials can have implications for therapeutics as well. So the threat of a dispute may be a tool to deal with competition for scarce medial products during the pandemic, experts say.

Although trade restrictive measures are short-sighted and not a preferred policy option, governments see them as powerful instruments to meet political goals, to send a message to domestic stakeholders, sources said.

“My hunch is that all countries are sort of sitting on both sides of the fence. On the one hand, governments would like to maintain the discretion and the ability to impose export restrictions if they need to or if they think they need to. Whether that is medical products or personal protective equipment. On the other hand, everybody dislikes it when other countries impose export restrictions. So I think there is enough of an incentive for countries to sit down and negotiate,” one legal expert noted.

Sources also pointed to political declarations last year where WTO members came together and said that they would not impose restrictive trade measures. “In order to be constructive, countries decided that they were going to signal to members that will not introduce exports restrictive measures even though it may be expedient to do so,” one trade expert said. The way out, some feel, is to find solution to placing limits on export restrictions.

WHY DISPUTES ARE A REAL POSSIBILITY

It is not just trade restrictive measures that could result in trade disputes. The heated political discussions on the TRIPS waiver at WTO is also aggravating the potential for disputes, according to experts involved in litigations in international trade in Geneva. Therefore these ostensibly independent processes, can catalyse disputes.

“The waiver discussion is very heated and it is aggravating the discussion on the EU's export restrictions. If the waiver succeeds, then the opposing members cannot do anything about it. So they will be looking at other ways to beat up on behavior they do not like on the COVID-19 front,” one trade law expert said.  Do not rule out disputes against supporters of the TRIPS waiver proposal, in case the waiver is adopted, the source added.

In their statement at the WTO General Council meeting last week, the EU said, “In order to ensure that vaccines and their ingredients are not directed to export destinations in unjustified volumes, the European Union had no choice but to introduce a transparency mechanism on Covid-19 vaccine export transactions.” The EU has said that the measures are WTO-consistent.

It added “Since the entry into force of the scheme on the 1 February, we have received 150 requests for export authorisation. All of them have been accepted. I repeat, all of them.” This week, the European Commission extended transparency and authorisation mechanism for exports of COVID-19 vaccines.

The EU is also a part of the Ottawa Group proposal on Trade and Health that also spells out commitments towards export restrictions. (See also E.U. Exports Millions of Covid Vaccine Doses Despite Supply Crunch at Home)

“Members bring disputes all the time, even when they know that it's going to take a long time to get a result and often they bring a dispute as leverage for negotiations. Filing a dispute does not mean they are looking for a solution. It does not mean the dispute will be litigated all the way to the end,” a trade lawyer said.

It could also result in a negotiated arrangement, like it was in 2001 in the U.S.-Brazil case. “Why did the U.S. bring a case against Brazil? It gave them leverage in negotiations, and to satisfy domestic stakeholders,” the lawyer added.  

The impasse at the Appellate Body may not be a deterrent for countries to dissuade countries from bringing a dispute, some believe.

“The Appellate Body not being functional is not a problem. Countries have recourse to Article 25 under the Dispute Settlement Understanding (DSU) that provides for ‘expeditious arbitration as a alternate means to dispute settlement’,” a source involved in the WTO litigation process said. (The EU, for example, is a signatory to the Multi-party interim appeal arbitration arrangement, MPIA.)

While disputes may take up precious energy and resources of members already stretched in fighting to address the pandemic, it may likely be a strategy to address trade protectionism. Not all agree.  

“I think the law is not really an answer here, I hate to say that because I'm a lawyer. But I really don't think the law is an answer because the law is so generically drafted right that and it's politically so sensitive. Which WTO panel will tell a member that restricting vaccines is not legitimate? It will ultimately harm the legitimacy of the trading system,” the person added.

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2. Trade & Health Update:

TRIPS TALKS AT WTO

Nearly six months from when South Africa and India, first pushed a bold proposal to waive certain obligations under an intellectual property agreement at the WTO, the proponents have ratcheted up support from more than 100 WTO members, and counting. Even seasoned observers who had dismissed the proposal, are now sitting up and taking notice.

“They might just be able to get the numbers. Many members who were hitherto undecided seem to have made up their mind to support the proposal,” a Geneva-based trade expert told us on the condition of anonymity.

In a debate that lasted three hours, as many as 34 delegations took to the floor to discuss the TRIPS Waiver proposal at a formal TRIPS Council meeting at WTO this week. The waiver proposal was one of the many items on the agenda of the meeting. The deliberations also saw participation from WHO that has an observer status.

The next informal meeting has been suggested for mid-April, although proponents want it sooner. The next formal TRIPS Council meeting is scheduled for June 2021.

South Africa and India, have had the support from 57 other WTO members as co-sponsors for the proposal including: Kenya, Eswatini, Mozambique, Pakistan, Bolivia, Venezuela, Mongolia, Zimbabwe, Egypt, the African Group and the LDC Group. These members have consistently pushed towards a move for text-based negotiations of the proposal.

The proponents of waiver received support from the floor including from Jamaica (for the ACP Group), Afghanistan, Argentina, Bangladesh, Cambodia, Cameroon, Cuba, Egypt, Honduras, Indonesia, Maldives, Mali, Mauritius, Namibia, Nepal, Nicaragua, Nigeria, Qatar, Sri Lanka, Tunisia and Vanuatu.

Significantly, WHO, the leading agency in coordinating the response to the pandemic has been appealing for support for the proposal in the face of more than 2.6 million deaths from the COVID-19, took to the floor at the meeting and emphasized that "the COVID-19 Technology Access Pool (C-TAP) has not been utilized so far by owners of knowledge."

Members including UK, the U.S., EU, Switzerland, Norway among others, continued to oppose the proposal.

Ambassador Xolelwa Mlumbi-Peter of South Africa, the out-going chair of the TRIPS Council, asked members to focus on a "result-oriented process" for boosting productive capacity for products to address COVID-19, sources said.

STATEMENTS FROM MEMBERS

A number of countries made statements that reflected greater nuance, a transition from outright opposition or criticism of the proposal to phrasing such as “we have not rejected the proposal, however these are our concerns…”, proceeding to state their reasons for opposition, diplomatic sources said.

While there has been no absolute change in positions of certain countries, this is somewhat being overshadowed by the growing support from other members.

Here are some descriptions of statements from members:

China said it has donated COVID-19 vaccines to 69 developing members, and worked on vaccine R&D and manufacturing cooperation with more than 10 members. China underlined that vaccines should be a public good globally and said that it is open to engagement on the waiver discussions.

Singapore, Japan and Chinese Taipei continued to oppose the waiver but were open to further discussions. Chile, Colombia, Ukraine and El Salvador pushed for constructive dialogue, sources said.

While Canada effectively continued to oppose the waiver, sources said that its position was somewhat more nuanced than before. Canada wanted to know "how would a waiver incentivize the requisite collaborative relationships between technology licensees and licensors".

(In its interventions during the meeting South Africa pointed out: "Canada was willing to quickly ensure that this simplified pathway to a compulsory license for government use was in its toolbox very early in the pandemic, but that it did so without waiting for patent barriers to arise." The South African delegate was alluding to the continued demand for evidence to support the waiver proposal from opposing countries, despite the fact proponents of the proposal have furnished information and arguments over the last few months in several rounds of consultations among members.)

Australia reported said "We have not sought to block the waiver but rather we have asked proponents for specific evidence of underutilized manufacturing capacity, have steps have been taken to secure a voluntary license, are TRIPS obligations hindering members' efforts," according to source familiar with the proceedings of the meeting.

Citing the example of AstraZeneca in striking manufacturing agreements with companies in India, South Korea, and Brazil, among others, the UK said, "the IP system has already been shown to support and encourage research and innovation, while at the same time allowing licensing agreements that help scale up manufacturing of medical products." It continued to oppose the proposal.

Opposing the proposal, the EU said there is no silver bullet. "We should focus on the cooperation with the industry to ensure that they enter into license agreements with companies with production capacities,  export the vaccines to any lower income countries w/o production", according to sources.

Switzerland continued to oppose waiver and is understood to have said, that the mRNA vaccine technology is complex. "Only the IP system provides the necessary incentives for cooperation between vaccine developers and manufacturers. IP enables technology and know-how transfer", trade source said.

Brazil, a country under tremendous burden of the pandemic, continued to oppose the proposal, the only developing country to do so. It pushed for the use of TRIPS flexibilities including compulsory licensing, if necessary, to fast track access to medical products to address the pandemic.

Diplomatic sources noted that the statement from the U.S., that appeared to be less forceful in its opposition to the waiver. The U.S. said, “…So that members can better understand and consider the challenges with respect the licensing, manufacturing, procurement and distribution of Covid-19 diagnostics, equipment, therapeutics and vaccines, and how those relate to the TRIPS agreement, we welcome further engagement with the sponsors of the waiver, including hearing further responses to the questions posed by Australia, Canada, Chile and Mexico in IP/C/W/671 taking into account the latest developments with the pandemic response.”

South Africa, proponent of the proposal, continued to emphasize the limits to persuading industry actors on voluntary licensing approaches. It said:

“This should teach us a critical enough lesson that while governments can continue to appeal and encourage voluntary actions, it is a matter of decision making and accountability for governments to intervene and use other measures to tackle the inherent limitations of voluntary license.”

South Africa

South Africa listed countries facing criticism for using TRIPS Flexibilities, including Russia and Hungary for issuing compulsory licenses during the pandemic; Colombia & Indonesia for easing related procedures, The Netherlands; EU;  Chile for having discussions on compulsory licensing, and the continued resistance to the waiver proposal brought forward by South Africa and India.

Speaking on pressures applied by opposing countries on the use of TRIPS flexibilities, South Africa: “…We would appreciate delegates of the US and the EU to shed a light on whether the final report of Special 301 review this year and the upcoming EC report on IP enforcement in third countries will both refrain from criticising countries legitimate actions of using and discussing TRIPS flexibilities for public health safeguarding.”

THE FUTURE OF THE TRIPS TALKS:

The way these consultations on the waiver proposal will proceed over the coming weeks will be subject to factors including on how the DG brings together opposing groups, her emphasis on voluntary approaches to address the pandemic and a call by some members to engage with the industry.

Forces outside of the WTO discussions will also play an active role in the future of the waiver proposal. (The Geneva Observer reported that the recent vaccine summit was an attempt “to cut the legs from the WTO [waiver] proposal”.)

We spoke to a Geneva-based trade lawyer to understand how the TRIPS waiver discussions were being viewed: “I mean to be perfectly honest, the law is what we want it to be, you know, so if if there is political will , sure we could have a waiver”.


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