Rohinton P. Medhora is president of the Centre for International Governance InnovationSupplied
Rohinton P. Medhora is president of the Centre for International Governance Innovation (CIGI) and a member of the Commission on Global Economic Transformation, and The Lancet and the Financial Times Commission on Governing Health Futures 2030.
The story of the rapid development of COVID-19 vaccines is a true scientific miracle, but also presents a major public policy conundrum that reveals the crucial connections between innovation, technology, national and international policies, and public welfare. In the week that the federal Budget 2021 themed on recovery and resilience was tabled, a parliamentary committee is also holding hearings on the international trade dimension of COVID-19 vaccines and Canada’s domestic capability to develop and produce them.
An International Chamber of Commerce study found that a combination of “vaccine nationalism” by developed countries and resulting prolongation of the pandemic in poorer parts of the world could result in GDP losses of up to US$9.2-trillion in 2021 alone. These losses would be borne by all countries, Canada included. In the presence of negative spillover effects from the pandemic, positive spillover effects from vaccines and a very interconnected world, nationalism is neither a winning health proposition nor a winning economic one. Recovery from the pandemic must be broad-based.
Solutions must shed a nationalistic viewpoint – not just for important humanitarian reasons, but as enlightened self-interest. As the arc around the development of vaccines indicates, today’s economy, driven by intellectual property (IP) and big data, requires particular attention to the development and execution of innovation policies in Canada and the global rules on trade, investment and technology.
In this context, the government of Canada’s announcement for domestic vaccine production (Novavax, produced by Sanofi) is a welcome one, but still in the better-late-than-never category. Canada’s lack of COVID-19 vaccine production capability – for its citizens and global humanitarian efforts – is symptomatic of a deeper issue: our mediocre innovation performance.
Over all, Canada is a net importer of IP. Using World Bank and Statistics Canada figures, Centre for International Governance Innovation senior fellow Dan Ciuriak calculated that payments for IP made to other countries have exceeded payments received for Canadian IP from abroad. This annual deficit now stands at about $9-billion. If we add the imbalance in payments for data and data-related services (for which methodology and estimates vary), the deficit almost certainly widens.
The IP-, digital- and data-driven economy has changed the structure of value creation and prosperity. In smartphones, for example, the World Intellectual Property Organization estimates that about a half their value lies in IP, with significant amounts then going to other intangibles such as branding, distribution and retailing. It is estimated that just 3 per cent to 5 per cent goes toward labour.
Do we wish to play in the ballpark where two-thirds of value creation lies, or one where it comprises a fraction, such as 5 per cent? When it comes to COVID-19 vaccines – and new technologies more broadly – for Canada, the choice should be clear.
There are three principal lessons on innovation to be derived from the current situation with COVID-19 vaccines.
In the short term, any and all measures to maximize the availability and delivery of vaccines to as many people as possible, as early as possible and in every part of the world should be pursued. This should include reflections on how vaccines that were subsidized by the public purse are priced and the global trade and IP regime governing such matters.
Remarkably, despite billions of dollars in direct subsidies and funding of basic science on which vaccines were developed, and the positive spillover effects from their use, they are sold at “market prices.” Indeed, developing countries appear to be paying more for their vaccines than developed ones, because of opaqueness in negotiations and contracting with vaccine producers.
In the medium term, our innovation strategy must be geared toward developing and producing high-value, high-impact products in Canada. Budget 2021 pays unprecedented attention to innovation and new technologies, with a plethora of investment initiatives in biosciences, artificial intelligence, quantum computing, photonics and other streams of scientific inquiry.
The most important component of these, though, is the planned Strategic IP Program Review. In the digital era, we need to pivot away from the subsidization of inward foreign investment to build branch plants. There is no substitute for having a strong domestic innovation sector that generates Canadian-owned IP, because the value generated from IP today far exceeds the economic benefits of having a primarily branch-plant economy.
We have an architecture problem in addressing these issues internationally, using trade agreements as the vehicle to deal with issues they were not designed to cover. This leads to anomalies, such as the Canada-United States-Mexico trade agreement pronouncing on digital platform content regulation and data localization, and the World Trade Organization’s e-commerce negotiations grappling with data flows without taking into consideration their non-economic dimensions.
A new generation of institutions and processes is needed to deal with the IP-, digital- and data-driven economy. In this respect, the possibility of Canada joining the Digital Economy Partnership Agreement (DEPA), currently signed by Chile, New Zealand and Singapore, might provide a template for future international adjudication in this area.
These avenues ensure that our prosperity, equity and health reinforce each other, creating the virtuous cycle our public policy and initiatives need. Through improved innovation performance and its sound management, we can help to change the trajectory of the pandemic’s effects in Canada and globally. Now, more than ever, the dictums, “We’re in it together,” and, “We’re not safe until everyone is safe,” stand true.
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