“INDIA MUST wake up to WTO ground realities” – that was an arrogant piece of advice to the Indian Government from the visiting US Trade representative (USTR) Robert Zoellick, who was in New Delhi in the run up to the fourth ministerial conference of WTO at Doha. He sort of threatened, in a public meeting, that India would find herself isolated if the Indian government persisted in its opposition to a new round. The “swadeshi” government meekly listened. The pro-saffron media, true to its comprador spirit, attempted to minimize the impact of Mr. Zoellick’s haughty remarks saying that they were subtle and mild compared to the more gung-ho attitude of previous USTRs, who were in the habit of issuing more ominous threats and admonitions at the drop of a hat when speaking on issues concerning developing countries. None in the government dared to speak out against the imperial tone of the US trade representative. Even the loud-mouthed Maran maintained a silence that was conspicuous. The rhetoric of the Seattle days was no longer heard. Zoellick’s inconsequential offer to restore duty-free status to 42 items including jewellery seems to have worked wonders in softening India’s stand on a new round. While the USTR did not harp on labour and environmental standards, Maran, far from expressing outright opposition to a new round, toned down his position to express concern only on MAI and implementation issues. Obviously, some deal has been struck behind the doors. Neither did the government make any statement in the Parliament nor did the opposition bother to raise the issue. Finally, when Vajpayee chose to speak out on the issue, at a meeting jointly convened by the Institute of Chartered Accountants of India and UNCTAD, even when the Parliament was in session, he only tried to dispel the impression that India was rigidly opposed to a new round.

Zoellick, however, made light of India’s opposition to a new round. He confidently asserted that despite its opposition to the new round the Indian Government might not be able to resist pressure from groups favouring a new round at Doha. His argument was that the US, along with the EU, was interested in starting a new round of talks. Other major players like Japan were also in favor of new round. China had expressed herself in favour of a new round even before her admission into the WTO has been formalized. And, Latin American and African countries were also slowly moving away from opposition to a new round. Hence, India had no choice but to fall in line. Nevertheless, the Bush administration thought it necessary to send a cabinet-rank official before Doha to neutralize India’s opposition. And the objective of the visit is precisely to ensure that India falls in line precisely behind the US bandwagon in the battlefield of trade negotiations.

A new round of talks means including new areas in the negotiating agenda – some of which are non-core issues raised by rich and are either a ruse for protectionism or a bargaining lever to make Third World countries fall in line. According to Zoellick, India should identify areas where it would like to agree on further liberalization so that it could also demand certain concessions from negotiating parties. Zoellick also listed out areas where India and the US can make common cause. For example, both countries are keen to see to that the high agriculture subsidies in the EU are reduced. Other areas listed include services, environment and e-commerce. In other words, since India cannot do much to avoid new round of talks it would be better for it to align itself with US interests and try to get as good a deal as possible under the given circumstances.

The advice comes in the face of stated opposition of the Government of India, as well as of informed opinion within India, to a new round and the need to restrict the Doha meet to the review of the commitments made in the earlier round of negotiations. The mandated negotiations on agriculture and services and mandated reviews of Trade Related Investment Measures (TRIMS) and Trade Related Intellectual Property Rights (TRIPS) along with work program for effective implementation of the Uruguay Round themselves constitute a broad enough agenda for Doha. The US position is a clear attempt to browbeat the Indian Government to agree to a new round of trade talks at Doha. And, as we shall see later, agreeing to that will be like going for a walk over minefields.

Forebodings of a failed meet

The forthcoming ministerial at Doha is taking place under the lengthening shadows of opposition to the way the WTO system operates. Opposition, which was evident during the failed Seattle ministerial, is getting increasingly organized and is being sustained at another level by the growing unrest in the West over takeover of community and social life by corporate interests. The opposition has, of late, taken a militant form and the death of a protester in July at Genoa G8 talks certainly marks a new watershed.

The choice of the venue (Doha is the capital of Qatar, a highly authoritarian and conservative country, with restrictions on entry of mediapersons, protesters etc.) shows signs of unease, and doubts over the future, among the principal promoters of a new round. The belligerence on the part of the US, which has hinted that it is ready to jettison WTO in case it does not cater to its interests, clearly shows that WTO is a tool for furthering western corporate interests rather than an organization with the goal – “to improve the welfare of the peoples of the member countries” – as the WTO website proudly proclaims. This apart, a wide gap in the perception of participating countries is reflected in a worried Director-General’s (of the WTO) statement on 30 July, which ends with the note that “the situation is fragile, and without generosity, good manners and good will, the process could implode and become unmanageable’’.

In fact, the real hurdle to further trade negotiations comes from the crass commercial interests of developed countries who are unwilling to yield to developing countries’ demands. Developing countries like India are demanding that developed countries address the implementation related issues of the last round, which developed countries have been skirting on one pretext or the other.

One of the causes of stalemate amongst the participants is issue of agricultural liberalization. The attack against the indefensible agricultural policy of the EU has intensified, especially after the conclusion of the Uruguay Round. The EU gives huge subsidies to its agriculture (agricultural support in OECD countries was a staggering $326 billion in the year 2000 – more than 6 times the flow of aid to the developing countries), and the strong farm lobby there has so far pressurized the EU to opt for continuing the status quo. In the past, some developed countries had tried to link food security and rural development concerns of developing countries with the preservation of rural lifestyles in the developed countries in the most odious manner. But they are now realizing that it cannot stall agricultural liberalization for long. Therefore, the EU is pressing for a new round, with a much broader agenda, so that if it is forced to concede on the agriculture front, it can extract some gains in other areas. By including environmental issues on the agenda, the protection to its farm sector could be continued through the backdoor. Developing countries are naturally wary of the move, as the amorphous environmental standards may allow the developed countries to curb imports with one ‘green’ objection or the other.

Why a new round should be opposed

Apart from the intransigent attitude of developed countries, there are very sound reasons for India to oppose the new round of talks. The need for implementation and review of past agreements is important because of the reasons listed below.

One of the expectations of the developing countries was to increase, through the WTO, their share of world trade by enhanced access to the markets of industrialized countries. But, so far, the greatest gains from tariff agreements have accrued to developed countries. Following implementation of the Uruguay Round, the average tariff on imports from the least-developed countries into the industrialized countries will be 30 per cent higher than the average tariff on imports from other industrialized countries. For developing countries as a group, it will be 10 per cent higher. This reflects the lower reductions applied to products from the world’s poorest countries.

Developing countries are losing up to US$700 billion in annual export earnings as a result of trade barriers maintained by industrialized countries. While world trade flows have tripled over the past two decades, the world’s 48 poorest countries have seen their share of exports decline by almost half, to a negligible 0.4 per cent. Had the poorest countries been able to maintain their share of world markets at mid-1980s levels, their average per capita incomes would be US$32 a year higher – a significant increase over today’s figure of US$228 a year.

Under the earlier agreements, developed countries made a commitment to removing quota restrictions from 33 per cent of their textiles and clothing imports by 2001. But by now EU and USA have removed restrictions from only 5 per cent of products that are important to developing-country exporters. The export earnings of developing countries could rise by $127 billion a year, if developed countries opened their markets to textiles and clothing imports.

Agricultural exports from developing countries face significant tariff and non-tariff barriers in developed-country markets. Moreover, the industrialized countries impose higher tariffs on processed products than on raw materials, which deters the progression of developing countries into the export of higher-value goods; for example, chocolate instead of cocoa beans. Rich countries should make substantial cuts in tariffs on developing-country exports, particularly tariffs that escalate according to the level of processing.

The WTO Trade-Related Intellectual Property (TRIPs) Agreement obliges member countries to adopt a strict patent regime, designed by and for the industrialised countries. But there is a growing campaign internationally which demands that the public good must take precedence over corporate commercial interests in the implementation of the TRIPs Agreement. The length and scope of patent protection should be reduced, and governments should be able to determine national intellectual-property regimes, including the option not to patent life forms.

In the next issue we will take up the pitfalls of a new round of trade talks in greater details.

(To be concluded)

– Girish Ghildiyal

What is WTO

WTO IS an international organization dealing with the rules of trade between the nations. At the heart of the system — known as the multilateral trading system — are the WTO’s agreements, negotiated and signed by a large majority of the world’s trading nations, and ratified in their parliaments. These agreements are the legal ground-rules for international commerce. Essentially, they are contracts, guaranteeing member countries trade rights in return for binding commitments from governments to keep their trade policies within agreed limits for facilitating trade.

The WTO’s rules — the agreements — are the result of negotiations between the members. The current set was the outcome of the 1986–94 Uruguay Round negotiations which included a major revision of the original General Agreement on Tariffs and Trade (GATT). GATT is now the principle rulebook on trade in goods. Uruguay Round also created new rules for dealing with trade in services, relevant aspects of intellectual property, dispute settlement, and trade policy reviews. The complete set runs to some 30,000 pages consisting of about 60 agreements and separate commitments (called schedules), made by individual members in specific areas such as lower customs duty rates and services market-opening.

The WTO’s top decision-making body is the Ministerial Conference, which meets at least once every two years. Doha is fourth ministerial Conference after Singapore (1996), Geneva (1998), and Seattle (1999). Below this is the General Council – normally comprising ambassadors and heads of delegation in Geneva, but sometimes officials sent from member-countries’ capitals – that meets several times a year at WTO’s headquarters in Geneva.

At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS) Council report to the general council.

Numerous specialized committees, working groups and working parties deal with the individual agreements and other areas such as the environment, development, membership applications and regional trade agreements.

The first Ministerial Conference in Singapore in 1996 added three new working groups to this structure. They deal with the relationship between trade and investment, the interaction between trade and competition policy and transparency in government procurement.

At the second Ministerial Conference in Geneva in 1998 ministers decided that the WTO would also study the area of electronic commerce, a task to be shared out among existing councils and committees.


TRIPS – Humpty Dumpty had a great fall

INVENTORS NEED some protection but under the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) they are getting far too much. Briefly stated, the Agreement, which is the product of one of the most successful corporate lobbying campaigns in history, creates effective legal monopolies for patent holders across the world, enforceable by trade sanctions.

Among other things, one of the disastrous impacts of it will be on public health where the price of vital medicines in poor countries, benefiting narrow corporate interests.

The winners will be large companies based in the North, where innovation is concentrated, and which account for 90 per cent of pharmaceutical patents. The greater protection provided by the Agreement allows them to sell their new medicines at higher prices for longer periods in more countries. The losers are the millions of people in poor countries who will be further excluded from access to these vital medicines, and their cash-strapped government health services.

It is not surprising that the TRIPS Agreement is fast becoming the epicenter of a battle which pitches some of the world’s most powerful pharmaceutical companies, backed by rich governments, against some of the world’s most vulnerable people. More widely, there is a growing sense that the Agreement is fundamentally unfair and unbalanced, a fact which threatens to bring not only the patent system but also the whole multilateral rules-based system into disrepute, and which policy makers ignore at their peril.

What is certain is that TRIPS will need serious revision if it is to stem the growing public backlash against patent rules. The recent controversy over the attempts by 39 pharmaceutical companies to block a law which allowed the South African government to shop around for cheaper patented products in other countries, and which the companies claimed violated the TRIPS Agreement, gave the world a graphic illustration of why the rules need to change....

...Attempts by developing countries to change TRIPS so that it better reflects broader social and developmental objectives have been blocked by some rich countries, particularly the US. These countries continue to repeat pharmaceutical industry’s scaremongering that any tampering with new global patent rules will reduce company profits and undermine R&D.

If the USA or other rich countries block proposals to reform patent rules aimed at protecting public health, developing countries should push the issue to a vote at the forthcoming 4th Ministerial. They have little to lose. It is true that if the USA believes its commercial interests are being prejudiced at the WTO, its commitment to multilateralism may weaken. But it would be far more damaging for public health and the multilateral system if developing countries renounced their efforts to seek pro-health and development reforms of TRIPS on these grounds. Moreover, the USA is already using bilateral pressure, including the threat of trade sanctions to ratchet up intellectual property standards outside the WTO.

[Source: “ WTO Patent rules and Access to Medicine”, OXFAM Policy Papers]


Why Brazil’s success in controlling AIDS could not be repeated under TRIPS

BRAZIL IS renowned for its success in tackling AIDS. One important factor in significantly reducing transmission, morbidity, and deaths has been the free distribution of anti-retroviral drugs since 1996, including those needed to stop mother-to-child transmission. Currently, the health service provides free ARV treatment to 95,000 people. This is only possible because ten of the twelve drugs needed are not patented in Brazil and can therefore be produced as generics, without paying the royalties or monopoly prices that have to be paid in industrialized countries. Brazil is now spending just over US$3,000 per patient per year. Thanks to hard bargaining with the companies, the price will fall further. These figures contrast sharply with the US$10,000 cost per patient in the USA.

Why can Brazil produce or import low-cost generic versions of some of the drugs that are so expensive in rich countries? The answer is simply that Brazil did not adopt pharmaceutical patenting until 1996. It could therefore legally produce equivalents of expensive medicines patented before that date in the industrialized countries, or import them from India, which also did not have patenting on pharmaceutical products. However, both countries are now obliged by the TRIPS agreement to provide patent terms of at least 20 years for all products and processes. If TRIPS had been agreed just a few years earlier, thousands of Brazilians with AIDS would not have had access to treatment and would have been dead today. This dramatically illustrates the public health problems that will flow from excessive patent protection in developing countries.

The South African case

THE SOUTH AFRICAN case provided a graphic illustration of the problem of excessive prices of patented medicines and the vital role-played by generic competition in reducing these prices. The US-patented price for triple therapy for HIV/AIDS is approximately US$10,000 per person per year. As a result of growing public concern about the harmful effects of patents, and because of the presence of cheaper generic competition, the large companies recently cut their prices to African governments to around US$1000 per person per year. But this was still more than three times higher than the cheapest offer from the Indian generic company, Aurobindo, of US$295 per person per year. The offers from companies producing generic drugs have played a vital role in bringing down patented prices. But the effects of TRIPS in India and elsewhere will mean that this important source of competition will disappear for new medicines.

[Ref. OXFAM Policy Papers]