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WTO faces new battle over COVID tests, drugs

Less than a month after a hard-won deal was reached on a partial waiver of intellectual property rights for COVID-19 vaccines, a fresh battle may be looming…

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WTO faces new battle over COVID tests, drugs

10:54 AM EDT

By Emma Farge

GENEVA, July 7 (Reuters) – Less than a month after a hard-won deal was reached on a partial waiver of intellectual property rights for COVID-19 vaccines, a fresh battle may be looming at the World Trade Organization over extending the waiver to treatments and tests.

The June deal includes an agreement to debate waiving certain IP rights for tests and drugs, which the pharmaceutical industry says could lead to a broader unraveling of protections for treatments for other diseases. read more

A group of six countries has set a six-month time frame for securing an agreement to extend the partial IP waiver, according to a document seen by Reuters.

Test tubes labeled “COVID-19 Omicron variant test positive” are seen in this illustration picture taken January 15, 2022. REUTERS/Dado Ruvic/Illustration

“Extension of the policy tools… to therapeutics and diagnostics will help developing countries to address IP barriers to the expansion and diversification of production,” said the document, backed by India, South Africa, Pakistan, Indonesia, Egypt and Tanzania.

“This will increase the accessibility of these crucial life-saving COVID-19 tools.”

The document, shared with other WTO members, foresees a decision by the WTO’s top decision-making body, the General Council, in November or December.

A WTO spokesperson was not immediately available for comment.

Three trade sources who attended a closed-door meeting on Wednesday said that developed countries including the United States, have not yet set their positions.

One source said there was a potential for renewed conflict between wealthy countries, which opposed a full waiver on the grounds that it would restrict research and investment, and proponents such as India and South Africa.

“There is going to be a massive battle,” said the Geneva-based ambassador who declined to be named, adding some countries had agreed to the partial waiver only because of the possibility of it being extended.

PANDORA’S BOX?

For opponents, the stakes are higher than ever.

Many COVID drugs and tests are also used for other diseases. Research from science information and analytics company Airfinity showed that 63 current COVID tests can be used for other infectious diseases such as flu, while 123 COVID treatment projects are being used for 95 other infectious diseases.

“It’s a Pandora’s box and sends completely the wrong signal for future pandemic preparedness,” said Thomas Cueni, head of global pharmaceutical industry group IFPMA, adding it would undermine quality control and incentives for research.

“It is a coalition of countries who are fundamentally opposed to IP and they are trying to set a precedent to undermine (it),” he added.

Advocates said a broader agreement would be much more meaningful than the June deal that they argue is largely symbolic since demand for COVID vaccines has plummeted and many countries are destroying unused stockpiles.

Anna Marriott, policy lead for the People’s Vaccine Alliance and health policy manager at Oxfam, said a waiver to cover tests and treatments could make a significant difference. She too expected a “fight” ahead.

“Big pharma won’t want to give up their chance to charge eye-watering prices for COVID-19 treatments,” she added.

Initial negotiations over the COVID waiver began in October 2020 but deadlocked because the WTO relies on consensus among its 164 members to take any decision.

WTO Director-General Ngozi Okonjo-Iweala helped overcome the stalemate by calling for a parallel set of “quad” talks between four parties: India, South Africa, the United States and the European Union.

It remains to be seen whether she will use her convening powers this time. The debate over the vaccines waiver was at times acrimonious, with campaign groups and poorer countries heavily critical of wealthy countries.

The United States, which initially opposed the waiver but then switched positions, has previously indicated that it would only consider one limited to vaccines.

Additional reporting by Jennifer Rigby in London Editing by Philip Blenkinsop and Frances Kerry

Our Standards: The Thomson Reuters Trust Principles.

Source: Reuters

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iPhone Maker Foxconn Investigated By Chinese Authorities

Foxconn, the Taiwanese company that manufactures iPhones on behalf of Apple (AAPL), is being investigated by Chinese authorities, according to multiple…

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October 23, 2023

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Foxconn, the Taiwanese company that manufactures iPhones on behalf of Apple (AAPL), is being investigated by Chinese authorities, according to multiple media reports. Foxconn’s business has been searched by Chinese authorities and China’s main tax authority has conducted inspections of Foxconn’s manufacturing operations in the Chinese provinces of Guangdong and Jiangsu. At the same time, China’s natural-resources department has begun onsite investigations into Foxconn’s land use in Henan and Hubei provinces within China. Foxconn has manufacturing facilities focused on Apple products in three of the Chinese provinces where authorities are carrying out searches. While headquartered in Taiwan, Foxconn has a huge manufacturing presence in China and is a large employer in the nation of 1.4 billion people. The investigations suggest that China is ramping up pressure on the company as Foxconn considers major investments in India, and as presidential elections approach in Taiwan. Foxconn founder Terry Gou said in August of this year that he intends to run for the Taiwanese presidency. He has resigned from the company’s board of directors but continues to hold a 12.5% stake in the company. Gou is currently in fourth place in the polls ahead of the election that is scheduled to be held in January 2024. The potential impact on Apple and its iPhone manufacturing comes amid rising political tensions between politicians in Washington, D.C. and Beijing. Apple’s stock has risen 16% over the last 12 months and currently trades at $172.88 U.S. per share.  

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Tesla stock hits 4-month low as DoJ range probe adds to list of concerns

Tesla said the DoJ is looking into claims about vehicle driving range, add to a growing list of investor concerns for the clean energy carmaker.

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October 23, 2023

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Tesla  (TSLA) - Get Free Report shares moved lower Monday, sending the stock to a fresh four-month low, as a Department of Justice probe into the carmaker's claims over driving range, as well as expanded spending plans, added to a growing list of investor concerns. Tesla said Monday that the DoJ has requested documents related to the group's autopilot system, as well as "certain matters associated with personal benefits, related parties, vehicle range and personnel decisions". The group also said its 2023 capital spending will likely top its previous estimate of between $7 billion and $9 billion, as it ramps-up production of key models, including the Cybertruck, while expanding its new facilities in Germany and Texas. "Our capital expenditures are typically difficult to project beyond the short-term given the number and breadth of our core projects at any given time, and may further be impacted by uncertainties in future global market conditions," Tesla said in a Securities and Exchange Commission filing. "We are simultaneously ramping new products, building or ramping manufacturing facilities on three continents, piloting the development and manufacture of new battery cell technologies, expanding our Supercharger network and investing in autonomy and other artificial intelligence enabled training and product," the filing noted. Tesla shares were last marked 1.4% lower in early Monday trading to change hands at $209.23 each, after hitting a four-month low of $202.51 earlier in the session. Last week, CEO Elon Musk cautioned that its Cybertruck will likely weigh on cash flows over the coming year as it accelerates production of the long-awaited flagship in an unusually cautious update that followed disappointing third quarter earnings. Musk noted that "stormy' economic conditions, rising interest rates and uncertain demand have clouded the group's near-term outlook and appeared to back away from the company's stated goal of growing overall deliveries by 50% each year. Tesla did, however, reiterate its 2023 delivery target of 1.8 million vehicles – which will require a fourth quarter tally of around 477,000 to achieve – following a muted September quarter. Tesla's third quarter profits were down 37% from last year to 66 cents per share, even as revenues jumped 9.1% to $23.4 billion, thanks in part to a series of price cuts in key markets aimed at expanding the group's market share. Adjusted automotive margins were 16.1%, Tesla said, well south of the 18.7% figure recorded over the first quarter and last year's second quarter tally of 23.2% following a series of price cuts in its biggest global markets. Gross margins were 17.9%, down from 25.1% over the same period last year and the 18.2% figure recorded over the second quarter. Wall Street forecasts hovered between 17.8% and 18.2%. Musk also suggested the group could delay plans to launch its latest 'gigafactory' in Mexico, citing both the growing global economic uncertainty and the relentless rise in U.S. interest rates. "I think we want to just get a sense for the global economy is like before we go full tilt on the Mexico factory," Musk told investors last week. "If interest rates remain high or if they go even higher, it's that much harder for people to buy the car. They simply can't afford it."
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A further examination of the state of the economic tailwind

  – by New Deal democratWith no big economic news today, I thought I would pick up where I left off Friday, when I identified three major reasons for…

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October 23, 2023

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- by New Deal democrat   With no big economic news today, I thought I would pick up where I left off Friday, when I identified three major reasons for the economic tailwind that prevented a recession from happening in the past 12 months.
1. Commodity prices generally and gas prices specifically
I am beginning to think that all economic forecasts should come with an open caveat on the order of “subject to the trend in gas prices, which are set by a few geopolitical actors.” Certainly that was the case in 2022, when the War in Ukraine drove prices skyward, and then they fell back to ground as Europe in particular dealt with their reliance on Russian fuel.
This year prices rose as the economy strengthened, but they have fallen again in the past month, and averaged $3.50/gallon when I pulled this graph this morning, which is about -8% lower than 1 year ago:
 
Historically gas prices have a complex relationship with the economy. As shown in the graph below, gas prices averaged quarterly have a broad positive correlation with real GDP for the same quarter:
 
Which is another way of saying that large moves in gas prices affect the economy almost immediately (as in, “the remedy for high prices, is high prices.”)
But note the exceptions of 2006 and 2016. In both cases gas prices retreated sharply, even as an expansion continued (first due to the ebbing effects of Katrina, the second due to the success of fracking production in the US). A similar situation appears to be playing out in the past 12 months, where a big YoY decline in gas prices has been driving a sharp increase in GDP (which is expected to continue in the Q3 report this Thursday).
I also track industrial metals, which exclude the direct inclusion of energy prices. These also declined sharply this year. They appeared to be stabilizing, but in the past month have declined to new 12 month lows:
 
This may be traders’ reaction to the Israel/Gaza situation. But it may also have to do with continued weakness in China. So the commodity tailwind may be starting up again.
2. The slowdown in China
Below is a graph of imports to and exports from China measured YoY:
 
While I take all statistics about China with multiple grains of salt, if I saw this chart coming out of any transparent economy, I would treat it as recessionary. And because China is such a huge consumer of raw materials, I would treat it as placing further deflationary pressure on commodities, which we may be seeing with industrial metals in the past few weeks in the graph above.
3. Pandemic disruptions in the supply chains for houses and motor vehicles
As I have noted many times, mortgage interest rates lead sales. With mortgage rates having hit 8% last week, let’s update the YoY graph of rates (inverted,*10 for scale) vs. housing permits:
One year ago mortgage rates hit 7%. But then they declined to 6% in the spring before rising to new highs more recently. So we cannot project current rates forward. But *IF* this uptrend in rates does not promptly reverse, then it is likely that permits will decline to new cycle lows below 1.350 million annualized, shown in the below graph of absolute mortgage interest rates and permits:
 
In fact, with interest rates about 10% higher (7%*1.10) than they were last year, a decline during winter to 10% below 1.350 million, or about 1.225 million, is possible.
And sooner or later, the big downturn in permits and starts is going to catch up with housing units under construction, which as I noted Friday are only down 2% so far.
The situation is much less clear when it comes to motor vehicles.
This past spring SP Global wrote:
“S&P Global Mobility estimates that in 2021 more than 9.5 million units of global light-vehicle production was lost as a direct result of a lack of necessary semiconductors, with the third quarter of 2021 experiencing the largest impact with an estimated volume loss of 3.5 million units. Another 3 million units were impacted in 2022.
“During the first half of 2023, however, losses identifiable as specifically related to the semiconductor shortage fell to about 524,000 units globally.”
They also supply the following graph comparing backlogs in chip shipments compared with normal (normal=1):
At that time, the backlog was still about 3X the usual pre-pandemic time.
“Car manufacturers are struggling to keep up with the demand for new vehicles, as the shortage of chips has resulted in a shortage of critical components needed for production. It has also led to higher car prices as manufacturers pass on the additional costs to consumers.”
“Overall, the auto industry stocked 60 days’ worth of vehicles at the beginning of October. That’s considered a normal supply of inventory by historical standards, and it’s also the highest since early spring 2021”
But needless to say, it varies considerably with the popularity (or lack thereof) of the vehicles being sold:
“brands like Dodge, Chrysler, Lincoln, Infiniti, Volvo, Ram, Jeep, and Mini offer plenty of new vehicle stock. In contrast, inventory levels still sit well under normal for Honda, Toyota, Kia, Subaru, Lexus, Cadillac, Land Rover, and Hyundai.”
To summarize the situation with motor vehicles, the chip shortage itself may be mainly over, but there is roughly 10,000,000 vehicles worth of pent-up demand that is far from being addressed. The net result for now is that vehicle prices have reached a new, stratospheric equilibrium, that is also constraining sales from satisfying that pent-up demand.

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