Securing Medical Supply Chains Will Take Binding Trade Agreements

As the pandemic recedes, it is time to gauge what the experience indicated about (1) how the disease was fought, (2) what vulnerabilities were revealed within U.S. medical supply chains, and (3) how to engineer more preparedness into the trading system. Some have claimed international trade made the United States more vulnerable to disruptions in the supply of medicines, personal protection equipment, and medical devices, as well as that “traditional” trade agreements between willing buyers and sellers globally should be curtailed. The experience, however, can teach the United States that striking new and updated trade agreements, with trusted trade partners who commit to strong protections for U.S. intellectual property, can make medical supply chains more secure and expand access to effective medicines in the developing world.

Under the radar, the U.S. International Trade Commission (USTIC), on behalf of the U.S. Trade Representative (USTR) and Congress, has undertaken a retrospective review investigating whether waiving aspects of global intellectual property rules—hard-won legal disciplines long thought to be fundamental to innovation and the international competitiveness of U.S. firms—would support wider access in the developing world to medicines and better treatments for Covid-19.

At a hearing held on March 29, 2023, witnesses presented compelling evidence for an important conclusion: the global international property protection system, which supports an adequate return for long-term investments, provided a powerful foundation for scientists, companies, and entrepreneurs to roll out vaccines for Covid-19 from clinical trials at lightning speed, far ahead of what would be possible under less robust intellectual property disciplines.

Intellectual property protection enabled companies to explore relevant technologies years in advance of the lockdown. Without the library of patents and technologies from which effective Covid-19 vaccines were derived, launched, and tested for human safety in a few months, Americans would almost certainly still be wearing masks and seeing elderly relatives through windows, as doctors and nurses worked to curtail infection rates in hospitals and nursing homes. Witnesses at the USITC presented strong testimony that weakening global intellectual property protection could cripple responses to a future pandemic. “Weakening,” of course, is a matter of degree, but any changes to World Trade Organization (WTO) rules should be weighed cautiously, given the relative success the United States has had in fighting Covid-19 so far.

The focus of the USITC’s investigation is discerning the anticipated effects of expanding the so-called “TRIPS waiver” for Covid vaccines (approved by the WTO in June 2022) to diagnostics and therapeutics and the impact on access for patients in low-income countries. Testimony and evidence presented at the hearing demonstrated that so far compulsory licenses have not resulted in identifiable improvements in patient access. Indeed, forced technology transfer compared very unfavorably to voluntary licensing for products to treat Covid-19. Voluntary licensing partnerships delivered vaccines and treatments effectively to poor populations because they include the accompanying transfer of manufacturing and safety know-how to manufacturers. Building on what was learned treating HIV and Covid-19, advanced countries need to do better. The experience—including the mechanics of effectively delivering therapies—is being further studied and increasingly understood. The USITC, a bipartisan agency respected for pulling together “just the facts” and the relevant data, will conduct independent research and issue a report by October 17, 2023.

While “securing medical supply chains” has been a rallying cry for Biden administration officials and Congress, it is time to implement policies to make the United States less vulnerable to a limited number of foreign suppliers for certain key medical products. For example, as India has highlighted, the world should rely less on China as nearly the sole supplier for certain active pharmaceutical ingredients. In its 100-day supply chain review, the White House recommends steps to strengthen the resilience of medical supply chains through increased “international coordination.” The USTR, whose statutory mission is to advance U.S. economic interests by developing international trade and investment policy and conducting trade negotiations, has done initial outreach to Mexico, Canada, and Europe and to countries in the Indo- Pacific about coordinating on supply chain resilience. The State Department officials responsible for the Americas Partnership for Economic Prosperity are hopefully working in a similar direction.

As CSIS has recommended, the goal of identifying several trusted trade partners who seek to ramp up diversified production of a few key medical products should be pursued aggressively. Friends and allies demonstrating a willingness to improve their investment regimes in terms of good regulatory practices, rule of law, strong intellectual property protection, anti-corruption measures, and lower import tariffs—all aspects of traditional trade-expanding agreements—should be embraced. Judgments need to be made by working with manufacturers to identify key products where a targeted diversification of sourcing is wise.

In its formidable interagency coordinating role, the USTR should assess what it will take to attract the capital investment necessary to help diversify some manufacturing capacity to trusted trade partners, as a strategy to support better resiliency. This would be a new function for the USTR, growing directly out of the pandemic experience. It may be that the goal can be accomplished by sophisticated diplomacy, public-private partnerships, and foreign assistance funding and guarantees, and not traditional trade agreements, but Congress needs to ask what the president’s plan is and assess whether it will work. The United States should not lightly give up the foundations of its innovative edge. Updating and negotiating new “traditional” trade agreements that offer real market access incentives to trusted trade partners is a reliable strategy to build more security into U.S. medical supply chains going forward.

Meredith Broadbent is a senior adviser (non-resident) with the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

Meredith Broadbent
Senior Adviser (Non-resident), Scholl Chair in International Business