The WTO’s Strike against U.S. Intellectual Property — and What’s Next

L ast month the World Trade Organization fractured the global rules protecting intellectual-property rights knows as TRIPS. Though the decision was unanimous, it was set up by the Biden administration. And there’s more fracturing to come.

The Trade-Related Aspects of Intellectual Property Rights agreement (TRIPS) began with the Reagan administration in 1986 when even developed countries such as Japan and France lacked adequate protections for American intellectual property. As countries debated extending global trade rules to form the World Trade Organization, President Reagan demanded rules for intellectual property be included.

The recent TRIPS “waiver” (I wrote a piece for Capital Matters warning that this might well be on the way, which you can find here) invites developing countries, including (incredibly) China, to ignore intellectual-property rules requiring “effort to obtain authorization from the right holder on reasonable commercial terms” before authorizing a third party to produce Covid vaccines without permission.

Also included in the waiver is the removal of key limitations requiring the vaccines produced without permission to be primarily for the domestic market and for the rights holder to receive “adequate remuneration.”

The waiver’s key effect will be to permit the infringement of American and German mRNA patents as they are the main vaccines the generic industry in India and South Africa haven’t been able to get permission to produce. They already produce AstraZeneca and Johnson & Johnson Covid-19 vaccines through license agreements.

But, focusing on the waiver and its impact on the pharmaceutical industry misses the forest for the trees. TRIPS-waiver proponents relied on the belief that intellectual-property rights inherently create inequities resulting in a “vaccine apartheid.” The Biden administration has adopted the same view.

The U.S. trade representative, Katherine Tai, tried to wave away criticisms, saying that the pandemic was an “extraordinary circumstance.” She asserted that the waiver was more about getting “as many safe and effective vaccines to as many people as fast as possible” instead of weakening intellectual-property rules.

As it turns out, at the time of the waiver, there was a global surplus of Covid vaccines — 2.1 billion excess vaccine doses. Even the Indian trade minister, a main protagonist of the waiver, said that “there is no demand for vaccines anymore.” Furthermore, the only country to impose an export prohibition on finished vaccines meant for the developing world was India.

However, the waiver doesn’t address the distribution and demand problems the U.N. and the WHO say are at the heart of closing the vaccine equity gap.

The next steps for developing countries to benefit from the waiver, assuming they take the polite but optional step of notifying the WTO they intend to use it, entail several years and billions of dollars to build up the capacity they don’t already have to produce the doses.

That’s because a main reason firms in these countries weren’t able to secure licensing agreements to produce mRNA vaccines is that they lack the capacity to do so. Moderna CEO Stéphane Bancel explained any outcome of the waiver in the form of more vaccines is years away as “there is no idle mRNA manufacturing capacity in the world. This is a new technology, you cannot go hire people who know how to make mRNA — those people don’t exist.”

Fortunately, the private market, bolstered by intellectual-property rights, succeeded spectacularly in developing cutting-edge vaccines, and manufacturers all over the globe expanded production and forged partnerships with companies, governments, and health organizations to deliver billions of doses around the world.

Gone is the argument of “extraordinary circumstance,” or the need to boost vaccine supply. All that is left is the complete adoption by the Biden administration of the argument, as destructive as it is absurd, that intellectual-property rights, held privately, are an unfair trade barrier imposed by America on the world.

The Biden administration gave them away with the inevitable consequence of supporting the generic industries in India, South Africa, and China to not only make mRNA Covid vaccines but to compete for R&D funds against American mRNA innovators using their technology.

The administration has been too trusting of China, which stated it will not use waiver. India, South Africa, and other developing countries with existing capacity to make vaccines are also apparently “encouraged” by the waiver to make a similar “binding” statement. They are expected to use it wholeheartedly.

And China’s promise is about as firm as Jell-O nailed to a tree. It is already on America’s Priority Watch List for intellectual-property theft and faces more than $250 billion in tariffs for forcing American companies to transfer their technology to China. At any point, China can unbind itself with a similar statement.

Further, there are no WTO rules preventing China’s state-owned or state-affiliated businesses participating in the Belt and Road Initiative across the developing world from taking advantage of the waiver.

This new policy position won’t stop with Covid vaccines. Included in the waiver is a provision requiring a vote in no less than six months on whether to extend it to Covid diagnostics and therapeutics. The U.N. secretary-general has already targeted intellectual-property rights for “green energy” including solar, wind, batteries, electric-vehicle components, and other frontier industries — many of which are up for negotiation in the administration’s Indo-Pacific Economic Framework. The American people should expect a similar weakening of intellectual-property rules, opening the lid still further on this particular Pandora’s box.