CME: WAGES SHOULD BE DETERMINED BY THE MARKET, FOCUS ON EDUCATION AND LABOUR REFORMS
Saturday, 15 May 2021: The Biden administration plans to strip intellectual property rights from American vaccine manufacturers. Katherine Tai, U.S. Trade Representative, declared that the “administration believes strongly in intellectual property protections, but in service of ending this pandemic, supports the waiver of those protections for COVID-19 vaccines”.
The Malaysian government has not yet taken position on the issue, but Klang MP, Charles Santiago, has intervened asking Putrajaya to support a push by several countries to temporarily waive intellectual property (IP) rights on Covid-19 vaccines.
The Center for Market Education (CME) warns that the proposal, sincerely moved by the good intention of helping developing countries in gaining access to vaccines, may backfire. “As in other occasions before, CME calls for a deeper understanding of economic processes, with a particular emphasis on policy negative unintended consequences”, said Dr Carmelo Ferlito, CEO of the Center for Market Education and a Senior Fellow at the Property Rights Alliance in Washington, DC. “What we risk here – he added – is to eliminate supply side incentives (after heavy investments have been made), reducing the chances for developing countries to have access to vaccines and increasing the risk for counterfeited products to reach the market”.
In line with what declared by the Property Rights Alliance, the Center for Market Education, argues that the intellectual property rights of innovators are not a barrier to the rapid acceleration of COVID-19 production the world needs. “The world GDP severely contracted because of lockdowns – Dr Ferlito added – and the outlook, in particular in Asia, does not look promising for 2021. We cannot imagine to keeping our countries into a stop-and-go mode with lockdowns, we need different strategies and a clear exit plan. Despite not being in favor of the vaccination passport, it is clear that serious research on medical responses against Covid-19 is the best key for changing pace, rather than insisting on non-medical interventions”.
Some numbers will help to understand why it is important to protect intellectual property (IP) rights:
- 15 countries enabled by robust property protections are responsible for 85% of COVID-19 therapies in development. Leveling up IP protections will allow more countries to participate in breakthrough innovations.
- Only 10% of the world’s people enjoy the highest protections of property rights and they produce 49% of world GDP.
Overriding patent protection is a dilemma that emerges every time there is a health pandemic. This dilemma is an endless ideological debate driven more by countries that believe in a free-rider and anti-market ideology rather than real innovation based on patent protection. On one hand, the anti-IP block is now led by the USA under Biden, India, South Africa, China as well as more than 100 developing countries and international charity organizations. On the other hand, the pro IP block, led by the European Union, Japan, Norway, Canada, Australia, U.K., and Switzerland, is defending intellectual property rights as the backbone of innovation noting without it, it would not be possible to discover vaccines and treatments and to prevail over global health emergencies. It is not IP rights that are limiting the access to vaccines around the world but mainly the lack of production sites, distribution plans, logistics, and rule of law without mentioning bureaucracy and corruption.
The IP waiver is an attack on our health because stripping patent protection will reduce the incentive to production (creating shortages) and will affect the quality control of vaccine manufacturing especially on the quality of raw materials. Producing vaccines is not like producing candies, it implies a high standard of production and consolidated manufacturing plants. We should move away from this emotional and ideological approach that removing IP will end the pandemic. We should focus on the real problem that is affecting the global vaccination system: the different export bans implemented until now, for example, by the Biden administration and the United Kingdom.
The problem that should be addressed is manufacturing bottlenecks. The lack of vaccine distribution is related to non-trade measures (NTMS) not on IP rights. WTO created the TRIPS agreement to make sure IP, as well as patents, are protected in a way to create legal access to IP for any countries without stripping the fair IP protection. One solution during pandemic times is an appropriate IP licensing system that aims not only to defend inventors but mainly protect all citizens.
Removing IP rights would make it more difficult for innovators to share the technology and know-how needed for manufacturers to produce genuine and effective vaccines. Without firm IP rights, authorities will have difficulty determining genuine products from the sea of counterfeit, substandard, and falsified vaccines the waiver invites. Vaccine hesitancy will likely increase.
Consequences for developing countries like Malaysia are simple to imagine: no IPs, no vaccines, no lives saved.
About CME: The Center for Market Education (CME) is a boutique think-tank based in Kuala Lumpur, Malaysia. As an academic and educational institution, CME aims to promote a more pluralistic and multidisciplinary approach to economics and to spread the knowledge of a sounder economics, grounded in the understanding of market forces. In order to do so, CME is not only involved in academic initiatives, but it organizes seminars, webinars and tailor-made economics classes for students, journalists, businesspeople and professionals who wish to better understand the relevance of economics for their daily lives and activities. Economics matters and needs to be presented in a fashion in which the link with reality is clearly visible. In this sense, we look not only at theoretical economics but also at policy making, with an emphasis on the unintended consequences generated by political actions.