"Vaccine patents should be suspended"

 

On October 2, 2020, India and South Africa proposed a temporary waiver of TRIPS, an agreement through which the WTO protects intellectual property at the international level. According to the proposal, the waiver has the potential to mitigate the vast resource inequality between developed and developing countries in the fight against Covid-19.

 

Opponents of the waiver have made a handful of arguments against it. One frequent argument is that the waiver would not help, as developing countries are unable to immediately start producing vaccines even if they are allowed to do so. However, there are several historical counterexamples to this; developing countries do, in fact, already produce several medical products using frontier technology. Moreover, while it is true that the diffusion of technological know-how might also be important to maximize the production of high-quality vaccines, this is not necessarily an argument against the waiver per se. It only suggests that the waiver alone is not the optimal solution.

 

Another set of opponents are concerned about the waiver's adverse economic impacts, especially on the economic position of developed countries. Armed with the new technology, so goes the argument, China or Russia may overtake America and Europe as leading pharmaceutical producers. While this may be true, the claim that this hurts the West in absolute terms goes against standard arguments for the benefits of free trade. If the East is indeed better at producing certain products, such as vaccines, it is actually better for everyone if they produce them and export them to the West. The West can, in turn, produce goods and services that they are better at. In the end, both the West and the East gain from specializing according to their comparative advantage.

 

A related concern is that innovation in vaccine technology is at least as important as the production of already existing vaccines. While India's and South Africa's proposal only concerns already existing technology, waiving vaccine patents might send a signal to pharmaceutical innovators that this may happen again in the future. As a result, these innovators might decide to cut back on their future innovation. Thus, humankind would pay for the current suspension of patent protections during the next pandemic.

 

While an extraordinary and temporary suspension of patent protection is not necessarily a signal of anything, it is in fact not even clear that lifting international protection permanently would have an adverse effect on innovation. In a famous paper, Elhanan Helpman shows that lifting international intellectual property protection has two opposing effects. As a direct effect, it decreases innovators' profits and hence the incentives to innovate. But as an indirect effect, it increases the volume of world trade, which in turn increases the incentives to innovate. Helpman shows that the second effect always dominates the first in the long run. Moreover, it usually also dominates in the short run.

 

All in all, the waiver of vaccine patents is unlikely to hurt the global economy, while it has the potential to significantly shorten the pandemic.