The Plot Thickens
May 10, 2021
The obvious topic this week is the Biden administration’s decision to support an intellectual property (IP) rights waiver at the World Trade Organization (WTO) for vaccines. I have ranted about that in the past and will not go through the arguments again. Suffice it to say it was an unwise decision that does not address the real problems, will not promote vaccine distribution in real time, undermines global IP protections and the U.S. position as a leader on that issue, and will make it easier for our adversaries to steal our technology. If I thought it would actually accelerate the process of vaccinating the world this year, I would have a different view, but it won’t, so I don’t.
So, instead of running that debate into the ground, let’s instead speculate on why the administration made this decision after signals suggested it was taking a different path. Statements by administration officials and reports of Ambassador Tai’s conversations with CEOs of vaccine-producing companies seemed to suggest it was trying to push the companies to voluntarily increase production and allocate more of it to poorer nations—a good idea that would certainly have a greater short-term impact than the IP waiver. In the midst of that, however, it changed course and announced support for the waiver. I can think of several reasons why.
First, officials were not getting the level of cooperation from the companies they wanted, although there does not seem to be public evidence of that.
Second, the administration demonstrated again that it is vulnerable to pressure from the party’s left wing, as it did previously with increasing the refugee cap. Whether one agrees with the move or not, showing vulnerability to lobbying pressure is noteworthy. My former colleagues on K Street are no doubt glad to see that.
Third, officials viewed it as a moral decision and decided it was important to signal U.S. determination to disseminate vaccines as widely as possible. (That would be more persuasive had they encouraged vaccine exports much earlier.)
More interesting is the idea that this is a clever Machiavellian move in which the Biden administration gets credit from its progressive left and from developing countries, makes other developed countries, particularly in Europe, look bad, and ultimately does not give up much anyway. The decision is being widely praised in the developing world, and the European Union has been put on the defensive and had some of its moral ground cut out from under it, even though its record of exporting vaccines is better than ours (which they have been quick to point out). In addition, since a waiver requires consensus at the WTO, there is a good chance that it will either never be implemented because others continue to object or that negotiations over the actual wording will take so long that it will be irrelevant by the time it’s finished. (Remember that what Ambassador Tai said the United States would support is significantly short of what India and South Africa have been demanding.) In that case, while the president takes a short-term hit from drug companies and Republicans, in the long term none of the things they are worried about will actually happen. That may be a political win for now, but if the administration doesn’t have a plan to actually get vaccines to developing countries, it will squander any goodwill it has created.
That might be a flight of cynicism on my part, but if you look elsewhere you can see a pattern forming. Treasury Secretary Yellen’s proposal on a global minimum tax rather cleverly reignited the Organisation for Economic Co-operation and Development (OECD) tax negotiations and at the same time put the European Union in an awkward position by recommending a significantly higher tax than the EU proposal and expanding the roster of corporate victims well beyond the small number of U.S. companies the European Union has been targeting. The result is that the European Union looks weak and hypocritical, and U.S. companies, while still targeted, can take some comfort in knowing that they are not alone.
Another example is the EU-China Comprehensive Agreement on Investment (CAI) that was agreed to under heavy German pressure at the end of last year. There too, the United States seized the moral high ground with bipartisan political support by taking a strong position on Chinese human rights violations in Xinjiang and Hong Kong while the European Commission appeared more interested in expanding trade with China, only to see its position undercut by its own public and by member state governments unwilling to quietly go along with Chinese behavior.
These examples suggest the United States’ return to global leadership is being cleverly pursued in ways that make us look good, largely at the expense of Europe, and which may not end up costing us all that much. It will be interesting to see if the administration can be equally adroit when it comes to digital trade and privacy issues and the European Union’s desire for “strategic autonomy.”
More important, it remains to be seen whether the administration can be equally clever with China. So far, we seem to be marking time, but, as Sherlock would say, the game is afoot, and it is a much more complicated game with much higher stakes than the game with the European Union.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.
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