By Carlos M. Correa
GENEVA, Oct 15 2015 (IPS)

The pharmaceutical industry from the US and Europe scored a major victory with the adoption, in 1994, of a binding agreement on intellectual property (Agreement on Trade Related Aspects of Intellectual Property Rights – TRIPS) in the context of the nascent World Trade Organization (WTO).

While some transitional periods were allowed, the TRIPS Agreement did not leave any space for a special and differential treatment based on the countries’ levels of development. In particular, it imposed on all World Trade Organisation members (WTO) the obligation to grant patents in all fields of technology.

The lack of patent protection promotes price competition in the pharmaceutical market and, in some cases, clears the way for the development of generic pharmaceutical industries. The most noticeable case is that of India, which developed a strong pharmaceutical industry and is known today as “the pharmacy of the developing world.”

The Trans-Pacific Partnership (TPP) is an ambitious trade agreement between the U.S. with 11 other countries (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam).

Notably, there are major differences in the level of development of these countries (for example, Vietnam’s gross domestic product per capita (GDP) is approximately 43 times less than the US GDP per capita). Despite this, Washington seeks the application of the same standards of protection to all parties in the partnership.

In fact, tariffs are already low among the TPP negotiating countries. There are very little gains to be obtained from the TPP in this regard.

What these agreements tend to be really about are issues such as intellectual property rights. And the most important strategic reason of this initiative for the US is likely to be to counter China’s growing influence in the Asia-Pacific region, and to make the region less hospitable for the Chinese “state capitalism.”

The enhanced protection of pharmaceutical products was a key concern for the US in trade negotiations that led to the adoption of the TRIPS agreement. Despite the significant enhancement of the international standards of intellectual property protection that that agreement entailed, the pharmaceutical industry from the US and the European Union remained unsatisfied. They aimed at even higher standards of protection.

However, it soon became evident that it would not be possible to obtain such higher standards within the relevant multilateral organizations, WTO and World Intellectual Property Organisation (WIPO), where developing countries resisted further increases in intellectual property protections.

In this scenario, developed countries opted to seek the enhanced protection demanded by the pharmaceutical industry and other constituencies through bilateral or plurilateral trade agreements, where the bargaining position of individual countries is weaker and the promises of market access, or other real or expected trade advantages, make agreements of intellectual property more viable.

Thus, while under the TRIPS Agreement patents must last for 20 years from the date of application, the free trade agreements (FTAs) promoted by the US oblige the partner signatory countries to extend the patent term to compensate for “unreasonable” delays beyond a certain period in the procedures for the marketing approval of a medicine as well as in the examination and grant of patent applications.

FTAs also oblige, among other things, to grant patents based on “utility” rather than industrial applicability and, importantly, to secure market exclusivity on the basis of the protection of test data required for the marketing approval of pharmaceuticals, generally for five years from the date of such approval in the country where protection is sought. FTAs also require partners to establish a “linkage” between the marketing approval of medicines and patents, thereby granting pharmaceutical companies with rights that, under some FTAs, are also stronger than those available under the US law.

For instance, a study found that the patent term extension would generate in Colombia an increase in pharmaceutical expenditures of US$ 329 million and a reduction in pharmaceutical consumption of 7 per cent by 2025.

With respect to the potential impact of the TPP, in particular, a study by Australian and US researchers estimated that, in Vietnam, the government would only be able to provide anti-retroviral therapy to 30 per cent of people in living with HIV (down from its current rate of 68 per cent) since the cost per person per year of treatment would increase to US$ 501 under the US proposal from its current level of $127.22.

The negative impact of TRIPS-plus standards on access to medicines has been found even in developed countries that are not net exporters of intellectual property rights, such as in Canada and Australia.

The costs incurred by the smaller partners in FTAs are disproportionately high in relation to the benefits that accrue to pharmaceutical companies.

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Excerpt:

Poorer countries will find it hard to gain access to bilateral trade agreements unless the WTO helps them do so. Credit: Amantha Perera/IPS

By Amantha Perera
TOKYO, Nov 29 2013 (IPS)

For years, it was the power chamber at the headquarters of the World Trade Organisation (WTO) in Geneva – the Director General’s Conference Room, more popularly known as the Green Room, where a handful of delegates would gather for important discussions and meetings.

The traditional power quad – the U.S., EU, Japan and Canada – would gather in the Green Room to “decide on global trade deals,” according to Masahiro Kawai, the head of the Tokyo-based Asian Development Bank Institute (ADBI), a think tank. That, however, was in the past.

“They sat in the Green Room and came up with agreements, but not any more,” Kawai said.

The erosion of power within the Green Room discussions, and more specifically that held by rich nations like the U.S. or Japan, is primarily linked to the rise of emerging nations such as India and China, and of newer, leaner and meaner trade groups like BRICS (Brazil, Russia, India, China and South Africa), as well as the change in traditional global supply chains.

A quarter of a century ago the share of global GDP held by emerging and developing economies was below 20 percent, according to World Bank and International Monetary Fund statistics.

As of 2012, they had almost caught up with the G7 powerful industrialised nations (Canada, France, Germany, Italy, Japan, UK and U.S.). The G7 share was around 48 percent while the emerging nations’ share was just below 40 percent.

They have already overtaken the G7 as the largest trading bloc in the world, accounting for just over 40 percent of all global trade. The G7 share of global trade has fallen from a peak of above 50 percent in the first half of the 1990s to around 35 percent.

“No wonder the voices of the emerging and developing nations have risen at the WTO,” Kawai said.

Another reason for the erosion of power held by the G7 is the change in global supply chains. Whereas decades back global trade would be dominated by end-products, now it is predominantly a market for intermediary products.

“Today, nearly 60 percent of the world merchandise trade is trade in intermediary products,” Kawai said.

When he researched the supply chain of the iPhone, ADBI Director of Capacity Building and Training Yuquing Xing came up with a starling statistic. Of a production cost of 178.96 dollars (2010 values), China’s manufacturing cost was a mere 6.50 dollars. The remaining costs came from over a dozen companies in five countries. The most expensive component, according to Xing’s research, was the flash memory, at 24 dollars, which came from Toshiba Co in Japan.

This new trading pattern allows China to export over 11 million iPhones a year to the U.S., the country where it was developed and where the company that markets the product is located, Xing said.

But this reinvention of global trade negotiations does not bode all that well for poorer nations and lower-middle-income nations, according to ADBI experts and others. Why? Because the emerging nations and G7 members are now eagerly negotiating and entering into regional and bilateral free trade agreements, mostly with equally powerful trading partners.

According to ADBI, there are 379 such trade agreements in force globally, with more being negotiated. There are ongoing discussions for the Trans-Pacific Partnership, which would bring together 10 countries on either side of the Pacific: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S., and Vietnam.

Equally closely watched are the discussions on the jumbo Association of Southeast Asian Nations (ASEAN) Plus Three partnership that would bring together the ASEAN nations and Japan, South Korea and China.

“The non-tariff trading regimes are the current weapons of choice,” said Rodolfo Certeza Severino, the former secretary general of ASEAN between 1998 and 2002 and currently the head of the ASEAN Studies Centre at the Institute of Southeast Asian Studies in Singapore.

What these jumbo and super powerful trading agreements do is leave middle-income and poorer countries in an unenviable position of being left on the sidelines, unable to get in.

For example, none of the eight countries in the South Asian Association for Regional Cooperation (SAARC), a political association, feature among India’s fifteen largest trading partners.

India’s largest South Asian trading partner is Sri Lanka, with which it did four billion dollars worth of trade last year. But here too the trade has been lopsided, with Indian exports amounting to over 3.4 billion dollars in 2012.

“These free trade agreements are setting the new realities,” Kawai said.

These new realities dictate that while the richer nations negotiate, argue and cajole for more preferential trade, the world’s poor are being left further adrift.

A recent report by the U.N. Conference on Trade and Development said that the 49 least developed nations recorded job growth of just over two percent in the last few decades, barely above population growth levels.

ADBI’s Kawai however sees a role for the WTO to break the trading cycle that favours the rich. The organisation should act as a catalyst for trade negotiations and as an effective arbitrator of disputes, he said. More multilateral and regional trade agreements should be promoted, with the WTO playing a critical central role, he added.

“A revamped WTO process could achieve global trade and investment liberalisation through consolidation of regional agreements, creation of cross-regional agreements, and harmonisation of rules across agreements,” he said.

Former ASEAN Secretary General Severino agreed. “In fact most of the provisions in these [free trade] agreements have to be WTO-consistent,” he said.

But with the WTO hobbled, still unable to conclude the Doha round of negotiations that started in 2001, the chances of it playing a decisive role in trade negotiations remain low, at least in the short term, both experts agreed.