How did it come to this?
There has been growing discord across continental Europe about the slow pace of vaccine rollout which lags well behind the UK (chart above). For the British government, which this week came under renewed pressure as the UK death toll topped 100,000, it is important that the vaccination rollout is a success after the failings in many other parts of the Covid response programme. Indeed, despite the apparent success (so far) of the UK vaccination rollout, it cannot detract from the fact that the UK has one of the highest per capita mortality rates in the world. But this is about more than just the UK.
In June 2020 the EC set up a scheme whereby vaccine purchases are negotiated centrally on behalf of all member states. This was not a compulsory scheme but all members signed up to it on the basis that the enhanced buying power of the EC would reduce costs and ensure that all would be treated equally. Under the terms of the agreement, no member can negotiate with a supplier who is already in discussions with the EC. However, the German government did a side deal with Pfizer in September, with whom the EC was already in negotiations, by signing up for an additional 30 million doses.
The German action was in part motivated by the EC’s slow progress towards signing contracts with vaccine producers. One reason for this was that the EU insisted that the drug companies assume liability for any side effects resulting from the use of the vaccine, which slowed down the negotiation process. Accordingly, the EU signed its first contract with AZ only in August, three months later than the UK. Similarly, the EU only signed a contract with Pfizer in November whereas the UK signed up with them in July. The EU was also a bit slower to approve the first coronavirus vaccines than the UK and US. The UK approved the Pfizer vaccine on 2 December, just over a week earlier than the US, whereas the European Medicines Agency did not grant approval until 21 December. This is not necessarily a criticism of the EU approach. Its cautious approach to the science was justifiable and it was buying in much larger quantities than the UK.
The Commission’s real problem is with AstraZeneca
But where the EC can be criticised is that although it signed contracts with AZ much later than the UK, it still expected deliveries to be made at the same time – a point made by the company’s CEO Pascal Soriot, who is ironically a French national. At this point, the legal implications of the case start to get murky. The EU believes it has the right to insist that AZ delivers on its contractual obligations and was so convinced of the rectitude of its position that it released online a redacted version of the purchase agreement (here). The first thing that jumped out at me was the sentence “AstraZeneca shall use its Best Reasonable Efforts to manufacture the Initial Europe Doses within the EU for distribution.” This is a standard legal phrase which basically means that AZ will do the best it can to deliver but it does not specify that it must do so at any cost.
The EU’s objection is that if it can be shown that AZ is producing in the EU to satisfy orders outside the region, this constitutes a breach of contract. There is no clear cut answer to this. If there were, neither side would be engaged in dispute in the first place. But the Commission believed that a breach of contract had occurred and in retaliation invoked Article 16 of the Northern Ireland protocol which allows the EU or UK to unilaterally suspend cross border trade if either side considers that trade actions lead to “economic, societal or environmental difficulties.”
It is important to understand the implications in this case. The EC initiated trade sanctions against a third party despite no evidence that the UK government did anything wrong. AZ is responsible for the production and delivery of the vaccine and any action that the Commission wanted to impose should have been directed at the company. I am obviously not an expert on contract law but surely the EC should have taken its dispute against AZ to a court of law, arguing for non-fulfilment of contract, rather than impose border controls without having the courtesy to inform the Irish government first. After all the talk from the EU during the Brexit negotiations about protecting the open border in Ireland, as enshrined in the Good Friday Agreement, this kneejerk reaction from the EC seems rather ill-advised. The fact that the Commission quickly backed down after discussions between Brussels, Dublin and London suggests it realised it had acted too hastily.
Two unfortunate consequences: (i) Shaky UK-EU trade foundations
There are two obvious consequences which flow from this unfortunate spat. In the first instance it acts as a reminder that the post-Brexit trade deal is built on shaky foundations. Just 29 days after the trade agreement came into force, with the ink barely dry and exporters on both sides of the Channel struggling to come to terms with the new arrangements, we have a demonstration of the weakness of the UK’s position. Such capricious behaviour does nothing to bolster confidence that there will not be similar tit-for-tat actions which will disrupt trade flows in future. Obviously the EU has no need to take account of British public opinion when taking action but the events of recent days act as a propaganda gift to Brexit supporters who have railed against the EU’s overbearing attitude and will lead to calls to revisit the treatment of Northern Ireland in the trade agreement. Admittedly the British government has form when it comes to dealings in international law, but as the old saying goes “two wrongs don’t make a right.”
(ii) The ugly spectre of vaccine nationalism
A second, and perhaps more worrying, aspect is that this is a demonstration of vaccine nationalism that the WHO long ago warned about. In response to concerns that AZ is prioritising deliveries to the UK at the expense of EU countries, the EC imposed controls on vaccine exports to keep track of how many doses were leaving the EU and where they were going. Although EC Vice-President Valdis Dombrovskis told the press that “The measure is not targeting any specific country," the list of countries exempt from the controls unsurprisingly excluded the UK. The EU may call this a transparency measure but in reality it looks like a targeted export ban.
Poorer countries are vulnerable to the actions of the industrialised nations. The UK and Canada have options to purchase enough vaccine to immunise their population four times over whilst the much larger EU has purchased 1.6 billion doses – more than three times the population. This has given rise to accusations of hoarding and the concerns raised by international bodies such as the WHO appear to be falling in deaf ears. Although the COVAX programme is designed to ensure access to Covid-19 vaccines for all countries, many people in world’s poorer nations will not be immunised in the course of this year. Unequal distribution of the vaccine will impose economic costs, with the Rand Corporation suggesting it could knock $1.2 trillion off world GDP.
Whilst vaccine nationalism is understandable as governments seek to protect their populations, it is not a zero-sum game. From an economic perspective, there are spillover effects from ensuring that poorer countries also gain access to the vaccine (e.g. there will be less disruption to global supply chains from which industrialised nations benefit). From a health perspective, it helps to ensure faster global herd immunity. As the head of the WHO said last September, the vaccine should initially reach "some people in all countries, rather than all people in some countries." Viewed in that light, the actions of the EC do not look good.
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