Quad leaders’ pledge being undermined by vaccine nationalism
16 Mar 2021|

Economic nationalism is already threatening to derail the headline commitment of last weekend’s Quad leaders’ summit to manufacture and distribute 1 billion doses of Covid-19 vaccines to poorer nations, which is intended to counter China’s ‘vaccine diplomacy’.

US President Joe Biden has extended his predecessor’s use of the Defense Production Act to block exports of key Covid vaccine raw materials, bringing complaints from both India and the European Union.

Channelling St Augustine’s promise of chastity, but not yet, Biden has vowed to help ease the global shortage of Covid vaccines, but only once the US has looked after itself.

‘If we have a surplus, we’re going to share it with the rest of the world,’ Biden said last week. ‘We’re going to start off making sure Americans are taken care of first, but we’re then going to try and help the rest of the world.’

He said his administration would continue to invoke the Defense Production Act to expedite critical materials in vaccine production.

The US has used the act to block the sale of key ingredients to India, which manufactures 60% of the world’s vaccines. The chief executive of the Serum Institute of India, Adar Poonwalla, told a World Bank forum last week: ‘We are talking about having free global access to vaccines, but if we can’t get the raw materials out of the US—that’s going to be a serious limiting factor.’

He warned that his institute’s licensed production of the Novavax and AstraZeneca vaccines would be slowed unless the US lifted its restrictions on exports of key inputs. The Serum Institute is the world’s largest vaccine manufacturer.

The president of the European Council, Charles Michel, has also complained about what he described as ‘outright bans’ on exports of vaccines and key vaccine ingredients by the US and the UK, which he contrasted with the limited export controls the EU has used to block the export of 250,000 doses of the AstraZeneca vaccine to Australia.

A new World Bank study explores whether the mutual dependence of the key vaccine-producing countries on raw material supplies from each other will act as a constraint on ‘vaccine nationalism’. ‘The government of a nation where final vaccines are manufactured might fear retaliation from those governments where it sources … final vaccines or the ingredients for those vaccines,’ it says.

It tied this hypothesis to the economic theory that ‘the presence of extensive cross-border value chains shifts the political calculus away from beggar-thy-neighbor policies’. However, there is little evidence of this effect so far.

Around 20 different ingredients are needed to manufacture and distribute Covid vaccines, and all producing countries are dependent on imports for at least some of them.

The study found that most of the ingredients required to manufacture and distribute Covid vaccines come from other vaccine-producing nations, so any inhibition on protectionism wouldn’t extend beyond the small group of vaccine producers.

The study counts 13 nations in what it calls the Covid vaccine producers’ club: Argentina, Australia, Brazil, Canada, China, the EU, India, Japan, Russia, South Korea, Switzerland, the UK and the US.

It cites EU data showing that Australia is one of only three club members that doesn’t also export vaccine ingredients; the others are Canada and Brazil. The EU therefore faces little fear of retaliation from Australia.

As with much of its manufacturing, Australia is exclusively an importer of key inputs. It gets 47% of the ingredients it needs to manufacture vaccines from the US, 25% from the EU, 6% from the UK, 5% from China and 17% from the rest of the world.

The essential problem is that supplies of the various vaccines are running far short of demand. The World Bank says that between 3.2 billion and 4.1 billion people need to be vaccinated to defeat the virus, translating to a need for between 6 and 8 billion doses.

However, the members of the vaccine club, including Australia, have ordered many times their actual requirements, greatly inflating global demand, and there’s only been mixed success so far in meeting the manufacturing challenge of such a massive ramp-up in production.

Just seven club members—Australia, Canada, the EU, Japan, South Korea, the UK and the US—have collectively ordered 4.3 billion vaccine doses, or more than three times their total population. Australia has made advance purchases of 140 million doses, which is at least three times as much as it needs.

The EU imposed its export restrictions after vaccine manufacturer AstraZeneca encountered difficulty filling contracted advance orders. It ruled on 30 January that an export could be prohibited if it threatened the EU’s prior advance-purchase agreements.

Other major vaccine producers are imposing less formal restrictions. Turkey has complained that China delivered only 3 million of 10 million contracted doses of its Sinovac vaccine. China’s foreign ministry explained that domestic demand for vaccines was huge, and that it could only provide support to poorer nations ‘within our capacity, according to their needs’.

India’s Serum Institute is subject to the same pressures. Poonwalla admitted that he had been ‘directed to prioritise the huge needs of India, and along with that, balance the needs of the rest of the world’, urging that foreign governments be ‘patient’.

The UK health minister, Matt Hancock, has used language similar to that of the Chinese, saying, ‘We will protect UK supply and we’ll play our part to ensure the whole world can get the job’, but with the government’s advance-purchase agreements from UK-based manufacturers requiring exclusive supply.

Australia is attempting to push back against the European export ban through a World Trade Organization forum focused on securing medical supply chains. The forum was established last year by a group of 13 members—half of them vaccine producers—with a commitment to exercising ‘restraint in the imposition of any new export restrictions, including export taxes, on essential medical goods and on any prospective vaccine or vaccine materials’.

Trade Minister Dan Tehan has reminded the EU that it was a signatory, and complained that the European restrictions will prevent Australia from exporting vaccines into the wider Pacific region. ‘The more we can put collective pressure on them, the more they will realise what they are doing is wrong,’ he said. There has been no public response so far.