Economy

The uncharted road to international recovery from COVID-19

Author: Editorial Board, ANU

The horrifying scale of the COVID-19 crisis in India should be warning enough that the path of the global health and economic recovery is still unknown. Growing hubris in countries like Australia, the United States and even the United Kingdom, where isolation and comprehensive national vaccination are now embraced as elixirs for the pandemic and all its economic ills, will likely be vainglorious.

Tables at a hawker center are cordoned off in Singapore, 16 May 2021 (Photo: Reuters/Lionel Ng/ SOPA Images/Sipa USA).

Locking national borders to the COVID-19 virus has stemmed its deadly tide and help kickstart national economic recoveries. The huge monetary and fiscal sugar hit to economic activity in the major western economies has predictably given employment and incomes an enormous short-term lift: but to where?

Locking down against trade, the exchange of scientific knowledge, technologies, and movement of people, in the longer term, promises less secure global health outcomes and the prospect of long-term national and global economic stagnation, paring percentage points off future growth and human welfare.

The health and economic consequences of the COVID-19 pandemic are unprecedented. International cooperation is essential to getting health supplies, diagnostics and equipment to where they are needed and ensuring their fair and equitable distribution of vaccines. It will speed up the continuing development and global distribution of vaccines — more quickly than has ever been possible before. It is essential to establishing international health regulations, quarantine regimes and protocols that will allow the world to gradually open up again to international travel and for the global economy to realise its potential.

Without international cooperation and coordination, the world is facing a prolonged health crisis and lasting economic stagnation on a scale not seen since the 1930s. Closed economies will face slower recoveries and a future of lower incomes. International economic cooperation will be vital to managing the crisis and to supporting the recovery through trade, stabilising markets, faster reopening of business supply chains and a lower cost of investment.

There is no simple solution to the social and economic damage done by the pandemic. Different countries are still in different stages in the crisis and circumstances. National action to arrest the pandemic within borders now needs to be combined with regional and global coordination on public health and economic policies.

The world must deal simultaneously with twin challenges: the international health policy challenges and the economic policy challenges of exit from the crisis. Failure to navigate judiciously between these two has caused, and will continue to cause, social disruption, more deaths and economic hardship.

Now is a time for maximum international cooperation as we grapple with a common global threat. Yet, there’s a dearth of it, especially in getting the balance right between health and economic policies.

In the first of our two lead articles this week, Jeremy Youde points out that, ‘despite widespread acknowledgement that viruses do not respect borders, India’s devastating experience with COVID-19 calls into question the degree to which the international community is willing to translate ideas into practice. Programs like the COVID-19 Vaccine Global Access (COVAX) are supposed to ensure a more equitable distribution of COVID-19 vaccines, but the reality seems to reinforce the inequalities around vaccine distribution’.

‘A program like COVAX or donations from the United States can only do so much to resolve structural inequalities that limit access to pharmaceuticals and vaccines; it addresses the immediate issues but not the underlying root causes that give rise to maldistribution in the first place’, Youde argues.

If pharmaceuticals are to be made more accessible, key suppliers such as the United States will need to change the intellectual property rights system governing therapeutic drugs. The regime for protecting intellectual property rights for public health therapies must differ from that for other goods. In public health, making therapies that prevent communicable disease more accessible lowers risk for everyone.

Last week, US President Joe Biden blindsided European countries by announcing that the United States would suspend patents on COVID-19 vaccines in line with a WTO initiative that seeks to open up vaccine supplies to developing countries starved of them.

This is a welcome development. The United States has been hoarding vaccine stocks, so the move undercuts accusations that it is practising ‘vaccine apartheid’. It’s a move that also bravely takes on the powerful US big pharma lobby and their protected super-profits. It will be a long haul to get WTO members, including the Europeans, Australia and others to sign on, though Biden and his Trade Representative Katherine Tai now have the initiative.

But, as Ken Heydon points out in our second lead article this week, ‘even if the waiver receives the necessary support of all 164 WTO members, this will not prevent intellectual property right restrictions from stopping developing countries from acquiring knowledge of new techniques to design vaccines and to develop the cell lines needed in vaccine manufacture’. That requires ensuring the free flow of inputs within the supply chain that are vital to global vaccine production.

Trade is thus a crucial element in building global vaccine capacity and succeeding in the fight against the pandemic. And bad trade policy has been a serious impediment to the free flow of vaccines, vital vaccine inputs and the knowledge behind their production. A number of governments, including in the United States, the European Union and India, have placed embargoes or restrictions on the export of vaccines. Perversely, Heydon notes, India has had a 10 per cent customs duty on imported vaccines. More importantly, restrictions have also been placed on the materials needed for vaccine manufacture. US invocation of the Defense Production Act, which requires US suppliers of materials and equipment for vaccine production to seek approval to export, put global access to 37 critical vaccine inputs at risk.

The idea — including in Australia where the wrong-headed, shambolic commitment to building its vaccination program around early local manufacture should have been a sufficient lesson — that self-sufficiency and retreat from trade is the route to global vaccine security is a fallacy. As Heydon points out, the global shortage of bioreactor bags, critical in the vaccine supply chain, is a consequence of the US policy of prioritising domestic production. The potential for supply disruption through trade policy interference is stark: the Pfizer vaccine needs 280 components from 86 suppliers in 19 countries. Manufacturing Pfizer, Moderna or any of these vaccines anywhere requires keeping trade open not closing it down.

WTO Director-General Ngozi Okonjo-Iweala met last month with government and industry representatives to discuss ways of strengthening supply chains. A guiding principle in her work is that any restrictions should be ’temporary’. But even temporary restrictions will disrupt crucial medical supply chains, as we’ve seen in India.

Keeping trade open is one priority in international cooperation. The other is to facilitate the production and accessibility of vaccines globally.

India and South Africa have also called on the WTO to declare a public health emergency. The Doha Declaration of 2001 allows countries to ignore patent protections for pharmaceuticals when there is a public health emergency. This would include allowing countries to manufacture their own generic versions of patented drugs. Wealthy states and pharmaceutical companies continue to resist these pleas, though now the United States and China have announced that they would support a waiver in this instance.

Hopefully this international momentum will gain strength, not only on health but also for cooperation on economic recovery and reconstruction.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

This article is part of an EAF special feature series on the COVID-19 crisis and its impact.