EDITORIALS & ARTICLES
7th May 2021
Intellectual property waiver for Covid-19 vaccines
Recently, the United States has announced support for waiving intellectual property protection for Covid-19 vaccines.
- In October 2020, India and South Africa had asked the WTO to waive certain conditions of the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement that could impede timely access to affordable medical products to combat Covid-19.
- The countries had asked the TRIPS Council to recommend a waiver on the implementation, application and enforcement of four sections in the second part of the agreement.
- These sections 1, 4, 5, and 7 pertain to copyright and related rights, industrial designs, patents, and the protection of undisclosed information.
- The proposal had said that developing countries “especially”, may face institutional and legal difficulties when using flexibilities available in the TRIPS Agreement.
Key Highlights
- The US will pursue “text-based negotiations” on the waiver at the World Trade Organization (WTO).
- The text-based negotiations involve negotiators exchanging texts with their preferred wording and then thrashing out a consensus on the working.
- All 164 WTO members must agree on the draft, and any one member can veto it.
Meaning of intellectual property waiver for Covid-19 vaccines
- The IP waiver might open up space for production of Covid vaccines with emergency use authorisations (EUA).
- Most production is currently concentrated in high-income countries and production by middle-income countries has been happening through licensing or technology transfer agreements.
- The US support for an IP waiver stems from a proposal by India and South Africa in the WTO last year.
- The proposal had called for a waiver on all Covid interventions, including testing diagnostics and novel therapeutics.
- The countries including Canada, South Korea, and Bangladesh have shown interestin making Covid vaccines if they can get a patent waiver.
What are the deterrents for the waiver?
- The pharma companies including Pfizer and AstraZeneca had opposed the proposed waiver saying eliminating IP protections would undermine the global response to the pandemic.
- It could create confusion that could potentially undermine public confidence in vaccine safety and create a barrier to information sharing.
- The argument that these countries do not have the capacity to speedily produce vaccines goes against earlier moves towards a patents regime for generic drugs.
What are patents and IP rights?
- A patent represents a powerful intellectual property right.
- It is an exclusive monopoly granted by a government to an inventor for a limited, pre-specified time.
- It provides an enforceable legal right to prevent others from copying the invention.
- The patents can be either process patents or product patents.
- A product patent ensures that the rights to the final product are protected, and anyone other than the patent holder can be restrained from manufacturing it during a specified period.
- A process patent enables any person other than the patent holder to manufacture the patented product by modifying certain processes in the manufacturing exercise.
- India moved from product patenting to process patenting in the 1970s, which enabled India to become a significant producer of generic drugs at global scale.
Reasons for demand to waive patents on Covid vaccines
- At present, only drug companies which own patents are authorised to manufacture Covid vaccines.
- The lifting of patent will allow the recipes to be shared and there will no longer be an embargo.
- Any company which possesses the required technology and infrastructure can produce vaccines after waiver of patent.
- It will lead to cheaper and more generic versions of Covid vaccines.
- It will also mean two things that vaccines will be more affordable and this will be a big step in overcoming vaccine shortage.
- The inequitable distribution of vaccines has opened up a glaring gap between developing and wealthier countries.
Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement
- It is the most comprehensive multilateral agreement on intellectual property (IP).
- It came into effect on 1 January 1995.
- It is to date the most comprehensive multilateral agreement on intellectual property.
- It plays a central role in facilitating trade in knowledge and creativity, in resolving trade disputes over IP, and in assuring WTO members the latitude to achieve their domestic policy objectives.
- It frames the IP system in terms of innovation, technology transfer and public welfare.
- The Agreement is a legal recognition of the significance of links between IP and trade and the need for a balanced IP system.
- It is a minimum standards agreement, which allows Members to provide more extensive protection of intellectual property if they so wish.
Significance of 5G Trial for Indian Telecommunication
Recently, the Department of Telecommunications has allowed private telcompanies (telcos) to start trials for 5G technology as well as its applications in various sectors.
- It allowed private telcos Bharti Airtel, Reliance Jio Infocomm and Vi and well as state-run telco Mahanagar Telephone Nigam Limited (MTNL) to start trials for 5G technology.
Fifth Generation (5G)
- 5G or fifth generation is the latest upgrade in the long-term evolution mobile broadband networks.
- 5G mainly works in 3 bands, namely low, mid and high-frequency spectrum.
Why are the trials for 5G technology important for telcos?
- The telecom market in India is left with only three private telcos, with the rest having surrendered to the low returns on investments over the years.
- Apart from the private telecommunication companies, the two state-run companies, MTNL and Bharat Sanchar Nigam Limited (BSNL) have also survived but are making losses.
- It is pertinent for telcos to start offering the new 5G technology as soon as possible in order to increase their average revenue per user.
What will 5G trials in India entail for now?
- In the initial phase, the 5G trials will be for 6 months, including a 2 month period forprocurement and setting up of the equipment.
- In these 6 months, telcos will be required to test their set up in urban areas, semi-urban areas as well as rural areas.
- The telcos will be provided with experimental spectrum in various bands, such as themid-band of 3.2 GHz to 3.67 GHz, the millimeter wave band of 24.25 GHz to 28.5 GHz, and others.
- The low band spectrum has shown great promise in terms of coverage and speed of internet and data exchange.
- It implies that while telcos can use and install it for commercial cellphone users who may not have specific demands for very high speed internet, the low band spectrum may not be optimal for specialised needs of the industry.
- The mid-band spectrum offers higher speeds compared to the low band, but has limitations in terms of coverage area and penetration of signals.
- It may be used by industries and specialised factory units for building captive networks that can be moulded into the needs of that particular industry.
- The high-band spectrum offers the highest speed of all the three bands, but has extremely limited coverage and signal penetration strength.
- The internet speeds in the high-band spectrum of 5G has been tested to be as high as 20 Gbps (giga bits per second).
RBI wants moderate bond yields
Recently, the Reserve Bank of India’s decision to step up purchase of government securities under the government securities acquisition programme (G-SAP) led to the yield on the benchmark 10-year bond falling below 6%.
Current movement of Bond Yields
- The yield on the 10-year benchmark 5.85%, 2030 bond fell by 0.62% and closed at 5.978%.
- The RBI under G-SAP has so far bought Rs 25,000 crore worth of government securities (G-secs).
- The 10-year bond has declined 15 basis points from 6.15% in the last one month.
- The movements in yields, which depend on trends in interest rates, can result in capital gains or losses for investors.
- It implies that if an individual holds a bond carrying a yield of 6%, a rise in bond yields in the market will bring the price of the bond down.
- A drop in bond yield below 6% would benefit the investor as the price of the bond will rise, generating capital gains.
Reasons for softening of Bond Yields
- The fall in bond yields in India could also be due to a sharp decline in US Treasury yields or the economic uncertainty caused by Covid-19.
- The announcement of a bond-buying programme G-SAP played a crucial role in turning the market sentiment.
- The RBI continued to send strong yield signals by cancelling and devolving government debt auctions.
Impact of low bond yields on markets and investors
- The experts say that the structured purchase programme has calmed investors’ nerves and reduced the spread between the repo rate and the 10-year government bond yield.
- A decline in yield is also better for the equity markets because money starts flowing out of debt investments to equity investments.
- It implies that as bond yields go down, the equity markets tend to outperform by a bigger margin and as bond yields go up equity markets tend to falter.
- It says the yield on bonds is normally used as the risk-free rate when calculating the cost of capital.
- It implies that when bond yields go up, the cost of capital goes up.
- When bond yields go up, it is a signal that corporates will have to pay a higher interest cost on debt.
- The risk of bankruptcy and default also increases as debt servicing costs go higher and this typically makes mid-cap and highly leveraged companies vulnerable.
Why is the RBI keen on keeping yields in check?
- The RBI has been aiming to keep yields lower as that reduces borrowing costs for the government while preventing any upward movement in lending rates in the market.
- A rise in bond yields will put pressure on interest rates in the banking system which will lead to a hike in lending rates.
- The RBI wants to keep interest rates steady to kick-start investments.
Possibility of a Second Scottish Independence Referendum
Recently, Scotland took to the polls to vote for its next parliament with a third of the results expected to be announced.
- Scottish First Minister Nicola Sturgeon, who leads the pro-independence Scottish National Party (SNP), has described this election as the most important in her country’s history.
- The Scottish election campaigns have been widely dominated by discussions around another independence referendum.
Arguments for independence
- The support for Scottish independence has registered near or above 50% of supportover the last year, largely due to widespread opposition to Brexit and Johnson’s government in London.
- In the 2016 Brexit referendum, 62% of Scottish voters opposed leaving the European Union only to be overruled by the rest of the United Kingdom.
- The Scottish politicians and voters have been outspoken in their support for European unity and have looked for ways to maintain Scotland’s ties with Brussels.
- Nearly 90% of the UK’s population is English and despite parliamentary seats being created to over-represent Scotland, England still has 532 out of 650 seats.
- The Scottish industries have been badly affected by Brexit and voters believe that independence would give them the opportunity to mitigate that damage and take control of their economy.
- The independence would give Scottish fisheries a chance to re-establish trade relations with the EU, thus ending years of bureaucratic red tape caused by Brexit.
- It would give Scotland full autonomy over its oil and gas revenues which are currently shared with London.
Arguments against independence
- A large share of Scottish voters sees advantages in remaining a part of the UK by putting aside the need to hold a second costly referendum so soon after the first one.
- Britain has a population of 64 million compared to Scotland’s population of 5 million.
- Being a part of a relatively large global power confers upon Scotland significant bargaining power in trade agreements and security pacts.
- It also provides it with greater resilience against economic shocks.
- England is by far Scotland’s largest trading power and destroying the common market and establishing border controls would have severe ramifications on the Scottish economy.
- Scotland is also currently fiscally dependent on the UK, paying less to union coffers than it receives in return.
- If Scotland were to leave the UK, it would likely have to raise taxes in order to maintain current public spending.
How Scotland could push for another referendum?
- A referendum held without the consent of the British would struggle to gain international recognition similar to the 2017 Catalonian movement that was rejected by Madrid.
- Under the Scotland Act of 1998, the Union between England and Scotland is a matter reserved for the British parliament.
- Scotland will have limited options to hold a legally binding, internationally recognised referendum without the green light from London.
Impact of Scottish independence
- The independence of Scotland from the UK would have widespread ramifications for both England and Scotland, as well as on the stability of the union as a whole.
- The London School of Economics has predicted that independence from the UK would cost Scotland up to three times as much in lost revenue as Brexit will.
- The negotiating of a trade deal with the EU or re-entering the bloc altogether will be a costly and time-consuming process.
- Scotland would also have to bolster its defence capabilities, extract itself from British public funding schemes and establish independent trade and security arrangementswith other countries.
- England and Scotland would both have to consider the matter of creating a physical international border and account for the considerable number of people and goods that currently cross between the two nations.
- The success or failure of the hypothetically independent Scottish state would have ramifications on the Northern Irish and Welsh independence movementsrespectively.
Global Risks Report 2021
Recently, the World Economic Forum (WEF) has released the Global Risks Report 2021.
Key Highlights
- The 2021 edition has listed infectious diseases as the top global risk and displaced climate change.
- The report notes that Covid-19 is an immediate threat for the world for the next two years.
- The WHO estimates that the pandemic halted immunisation drives in 68 countries, putting 80 million children under the age of one the risk of vaccine-preventable diseases.
- The report also mentions 12 new risks i.e. deteriorating mental health, mass youth disillusionment, prolonged economic stagnation, systemic collapse of important industries, social security systems and multilateral institutions etc.
- The report found out that with melting permafrost, increase in the geographic spread of tropical pathogens because of warming, infectious diseases are going to be a bigger threat because of climate change.
- Economic fragility and societal divisions are set to increase: The underlying disparities in healthcare, education, financial stability and technology have led the crisis to disproportionately impact certain groups and countries.
- The pandemic’s economic shockwave such as working hours equivalent to 495 million jobs were lost in the second quarter of 2020 alone will immediately increase inequality.
- Growing digital divides and technology adoption pose concerns: COVID-19 has accelerated the Fourth Industrial Revolution, expanding the digitalization of human interaction, e-commerce, online education and remote work.
- A widening digital gap can worsen societal fractures and undermine prospects for an inclusive recovery.
- A doubly disrupted generation of youth is emerging in an age of lost opportunity: The risk of “youth disillusionment” is being largely neglected by the global community, but it will become a critical threat to the world in the short term.
- Climate continues to be a looming risk as global cooperation weakens: The responses to the pandemic have caused new domestic and geopolitical tensions that threaten stability.
- The digital division and a future “lost generation” are likely to test social cohesion from within border exacerbating geopolitical fragmentation and global economic fragility.
Global Risks Report
- The foundation of the report continues to be WEF’s annual Global Risks Perception Survey.
- It is completed by over 650 members of the WEF’s diverse leadership communities.
- The 16th edition of the World Economic Forum’s Global Risks Report analyses the risks from societal fractures such as risks to human health, rising unemployment, widening digital divides, youth disillusionment, and geopolitical fragmentation.
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