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Hello from Washington, where it has swiftly become properly freezing.
Our main piece today looks at the global vaccine trade, given that we now have a new coronavirus strain. We note that Africa has a 6 per cent vaccination rate, while here in DC many people are gearing up for a booster before Christmas.
Biden trolls the world with little just cause
We still do not know much about the new Omicron strain. But fears that the variant had already roamed around across borders have been realised. Concerns remain that it will render the existing vaccines useless. That the strain has spread around largely unvaccinated populations in South Africa prompted US president Joe Biden to say on Friday, in what some might say was trolling, that other countries needed to match America’s “speed and generosity” in donating vaccines overseas, because the US has donated more jabs than other countries combined.
We can see, thanks to the WTO-IMF vaccine exports tracker, that the US is indeed exporting quite a few vaccines. For Africa, for instance, it has delivered 90m doses, compared with the EU’s 36m and China’s 103m. The US has also donated far more of those vaccines (just under 64m) than its counterparts — most of China’s doses came via bilateral deals. But Biden’s claim to generosity assumes people will not remember the furore earlier this year, when the US was accused of hoarding vaccines and having export controls in place. It did not technically have export controls, as we pointed out, but it is true that it had stitched up quite a few contracts that were tantamount to the same thing.
Anyway, it is now the end of 2021, the US is now exporting more doses, for sure, and started generally boosting its numbers in June 2021. As of the end of October, it exported about 32 per cent of its supply of vaccines (compared with the EU’s 51 per cent). But vaccine inequity across the globe remains, to put it mildly, horrible. Across Europe, Asia, North America and South America, the rates of the double vaccinated range from 43 per cent to 55 per cent. In Africa, where the new variant was first detected, the vaccination rate is not quite 6 per cent. Wealthy countries, meanwhile, have delivered more booster doses this year than the poorest have vaccines.
This is not entirely down to production issues, or western governments’ hoarding. South Africa has more vaccines than it can jab into arms owing to high rates of vaccine hesitancy. Still, speeding up vaccine production remains critical.
The thing is, it may not be in the interests of private sector investors to build too much vaccine manufacturing capacity. Supply and demand dynamics dictate that too much vaccine will push down the price. And once the pandemic is over, the investment in extra manufacturing capacity becomes worthless.
Chad Bown, of the Peterson Institute for International Economics, suggests governments essentially need to subsidise the extra manufacturing capacity, otherwise it doesn’t happen. Ironically, given its impact on the global economy and supply chains, eradicating Covid is not something the market is incentivised to do. “The more product line they build out, the quicker [those vaccines] become obsolete,” says Bown. “If done correctly, the more money ploughed into scaling up manufacturing, the shorter the pandemic is, but it then renders that extra manufacturing capacity obsolete.” He adds: “You need to kind of incentivise or overpay the companies to build that capacity, but knowing that you’re then you’re gonna rip it down.”
Then there is the Trips waiver. In the same statement on Friday, Biden said countries should “meet the challenge” of waiving intellectual property protections for vaccines, as endorsed by the US. As we have written quite a few times before, the US has supported a waiver in principle but given no detail as to what it would accept when it comes to the particulars. Without US leadership, the talks are likely to remain stuck between India and South Africa, which want a broad waiver, and more moderate proposals put forward by the EU aimed at making it easier for governments to override patents. Critics of the waiver say supply constraints are the real issue. But there is at least one company working on vaccines in Africa that seems to disagree.
Over the coming weeks, we will learn more about how damaging to health the new Omicron virus is. We do not want to be doom-mongers here on Trade Secrets, but it seems to us that unless some government policy seriously kicks into action, even if Omicron is manageable, we will be dealing with the next iteration soon.
The New York Times has an interesting read on the fake Covid masks that are still arriving on US shores via China. There’s another great read (summarised in this Twitter thread) on how sneaker shop owners are hoarding stock owing to supply chain snags.
Every cloud has a silver lining. The chip supply shortage has reversed fortunes (Nikkei, $) along the supply chain, notably for memory chipmaker Powerchip, which will return to the Taiwan Stock Exchange after a $40bn debt crisis forced it to delist in 2012.
A Covax executive is calling on rich countries to help more in supplying poorer nations with vaccines.
Phil Levy of Flexport tells Discourse Magazine that the reason supply chains are in such a mess is high demand.
Aime Williams, Francesca Regalado and Claire Jones