Trade expert Felbermayr on the patent suspension of vaccines

Mr. Felbermayr, the head of the WTO, Okonjo-Iweala, sees the results of the ministerial conference as a success. How do you see it?

The Director-General must, of course, present the result as a success. But the fact that there was an agreement at all after the very tough negotiations, which apparently were on the verge of being broken off several times and were concluded 36 hours late, is indeed to be seen as positive for the WTO. The organization is alive. But some of the proposals had to be watered down, and the discussions once again exposed the fundamental problems of the world trading system. In the agricultural sector, the WTO could not deliver at all. This is very regrettable in view of the impending bottlenecks in the global food supply and the already sharp increase in agricultural protectionism, for example in the form of export bans or restrictions.

What do you think of suspending patents on vaccines?

It relates very closely to the vaccines against Covid-19. That severely limits the agreement. What applies in the next pandemic? In addition, the decision comes so late that it is unlikely to have any effect, because the world’s supply of Covid-19 vaccines, even cheaply produced ones, is now significantly better than it was 18 months ago, when India and South Africa suspended patent protection initially requested. This delay isn’t a bad thing, given that the drug inventors have made huge profits over the past 18 months that should cover the development costs of the entire industry. As a result of this decision, there is no reason to fear that the incentives to develop new vaccines (or other research-intensive medical products) will be damaged.

The planned reduction in fisheries subsidies fell short of the original plans. Why?

Subsidies to fishermen, especially subsidies for fuel bills, are a very important socio-political issue in many countries. It’s a political issue there. Much more would have to be offered, including by the wealthy WTO members, to help the developing countries to cope with structural change. There has to be more from the EU, the USA or even Japan. Overfishing of the seas can only be tackled effectively if the costs are true. But the fact that there is finally, after 21 years of negotiations, a multilateral agreement on fisheries, with a ban on fishing in overfished waters and the fight against illegal fishing, is very important for the WTO. However, the work to contain the subsidies must go on.

India in particular proved to be a blocker in the negotiations? Do you have an explanation for that?

India demands, with some justification, that it be taken seriously on the world stage. It is expected to be the most populous country in the world by next year. But the share in global trade in goods is less than 2 percent. Part of the explanation for India’s behavior probably lies in the fact that it is permanently expanding its position of power and establishing itself as a further pole of power in the world economy in relation to the “West” and China. The country is apparently willing to accept collateral damage – its blockade on agricultural issues is certainly not alleviating hunger in the world. However, India also has some fundamental substantive concerns that clash with applicable WTO law, for example in the strategic storage of agricultural products, or in the area of ​​digital services, where the country wants to achieve what China has achieved in goods trading. You want to keep as much flexibility as possible.

So what should the WTO do next?

More needs to happen to ecologize world trade. This requires multilateral rules, otherwise national or regional unilateral actions, such as climate tariffs, could damage the world trading system. The international division of labor can make the transformation significantly more cost-efficient, but this must not result in new protectionism. It would be crucial to create cost truth in international transport by subjecting the CO2 emissions of ships, airplanes or trucks to a price.

What could a reform of the WTO look like?

The WTO would have to modernize the conditions for plurilateral agreements. These bring progress where it is currently impossible to take all members with you. But for this to happen, veto rights would have to be restricted, the conditions for other countries to join such agreements would have to be defined, and their demarcation from preferential free trade agreements would have to be clarified. The global economy has become so heterogeneous and complex that one-size-fits-all approaches rarely work. Ultimately, this would mean that the multilateral (actually: omnilateral!) basis of the WTO would become thinner, but that various “clubs” would be formed that would lead the way on a sectoral basis. But it is imperative that this happens within the WTO framework. A revival of the arbitral tribunals of the WTO would also be urgent; I’m more skeptical and think that this can only succeed in a package with a major reform of the WTO.

How do you assess the work of WTO boss Okonjo-Iweala, who has been in office for a good year?

The director-general has taken on an almost impossible job made even more difficult by the war in Ukraine by Russia, a major member of the WTO. In this respect, yesterday’s success in Geneva is also a success for Okonjo-Iweala. It seems to have played a key role in building bridges between developing countries and rich countries on the most important points. She is able to moderate compromises, of course at the price of significantly thinned out decisions. Somehow she reminds me of Angela Merkel’s role in the EU.