Insights into Editorial: India needs to push for a new deal
Global trade and intellectual property are at a crossroads. In a time when multilateral consensus is deteriorating on a large number of issues, the US administration is considering pulling the U.S. out of most free trade agreements on the ground that it needs a more favourable environment for its companies and its people.
The United Nations Conference on Trade and Development (UNCTAD)’s recent Trade and Development Report calls for stronger measures to protect domestic sectors against the undue domination of large companies. There are on-going attempts by big business to push for new rules in upcoming WTO Ministerial Conference in Argentina.
The focus of the debate now is how trade deals are becoming the new Trojan horse to ensure stronger patent protection and continued profits to global companies.
Developed Countries have been pushing for the implementation of IPR
The Developed Countries have been pushing for the implementation of intellectual property rights (IPR) in developing countries, through the World Trade Organization (WTO) and bilateral or regional free trade agreements.
The fact that the Developed nations promotes IPR protection in trade agreements suggests that trade should increase with foreign patent protection.
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) embodied an international regulatory regime for the first time, in 1995
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international legal agreement between all the member nations of the World Trade Organization (WTO).
- It sets down minimum standards for the regulation by national governments of many forms of intellectual property(IP) as applied to nationals of other WTO member nations.
- TRIPS was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade(GATT) in 1994 and is administered by the WTO.
- The TRIPS agreement introduced intellectual property law into the international trading system for the first time.
- In 2001, developing countries, concerned that developed countries were insisting on an overly narrow reading of TRIPS, initiated a round of talks that resulted in the Doha Declaration.
Problem with trade deals
Since it is the developed countries who own most of the technologies and patents, they are using various international forums to pressurize higher level of protection for intellectual property. Over the last few decades they are creating Free Trade Agreements to give higher level of protection to IPRs. Often these FTAs are outside the WTO framework and hence they can give higher level of protection to IPRs there.
Since TRIPS came into force, it has been subject to criticism from developing countries. TRIPS’s wealth concentration effects moving money from people in developing countries to copyright and patent owners in developed countries are common bases for such criticisms.
- Although TRIPS represented a major compromise for most developing countries, it was only the starting point for many other nations, which have since then promoted excessive protection of private investor interests through bilateral trade agreements, often at the expense of wider public interests.
- Corporates, riding high on increased market power, continue to lobby their governments for absolute protection of intellectual property (IP) rights of corporations.
- For the U.S. in particular trade agreements are a prime vehicle to replace its strong domestic standards of IP protection in partner countries, in a bid to ensure the same level of privileges for its companies abroad.
Over the past 20 years, the American strategy has been to pursue bilateral agreements with individual countries one by one to ensure stronger IP protection across markets, by sidestepping the multilateral regime.
How these IP protection rules are changing the global corporate landscape?
The problem is that the failure of TRIPS to accelerate investment and technology flows to low-income countries, a benefit advanced by WTO members in the lead-up to the agreement’s formation.
- For years now, while patent protection is getting stronger in all sectors in a large number of countries, the conditions for its grant are becoming relaxed.
- Not only do such lax patenting requirements allow companies to claim patents more broadly – with little show of original effort as in the case of evergreening — but also patents can be claimed on all possible inventions (and discoveries) that are of relevance to the present, and even to the future.
- A large number of countries have already foregone many degrees of policy freedom by signing up to ‘TRIPS-Plus’ standards of protection.
The developed countries are not happy about the TRIPs provisions. They demand higher protection to intellectual property rights including inventions, internationally. These higher levels of protection norms are named as TRIPs Plus.
- TRIPs Plus are higher level of protection norms demanded by the developed countries that are not prescribed by the WTO’s TRIPs regime.
- Although they are named as ‘TRIPS-Plus,’ they are not formally related to TRIPs. Rather, the term is used to indicate that these requirements go beyond the minimum standards imposed by TRIPs.
- Many developing countries who are members of FTAs are under pressure to enact these tougher conditions in their patent laws.
- The developing countries have concerns over the higher level of protection demanded by the developed world. They fear that once such levels of protection are given multilaterally, it will reduce competition and may led to price rise of medicines, affecting health security in poor countrie
- The demand for Data Exclusivity protection(protection of clinical test data submitted to a regulatory agency) that have high commercial value is a major demand from the developed world which doesn’t usually come under TRIPs.
- India has consistently objected to put higher level of protection (TRIPs Plus) than provided by the TRIPs. The implication of TRIPs Plus on India is that it will restrict the operation of the countries’ generics drugs manufactures
- TRIPS plus, in conjunction with other trade measures, will disintegrate existing markets and change the established rules of the game.
- A superstar firm today is not necessarily one with the greatest technological breakthroughs or the largest research and development labs, but surely is one that has a large IP portfolio, engages in extensive litigation on patent issues, and thrives on licensing revenues.
- It argued that established companies are “becoming more entrenched” in existing markets worldwide, and made the case for reining in IP rights.
- At the global level, these sectors are stratified, with profits neatly split up between large corporations and new kinds of non-innovator firms that simply accumulate patents speculatively in upcoming, promising technologies for spurious returns.
Patents as an instrument of unfair market power across markets
For India, the fate of its pharmaceutical and software sectors swings in the balance, and guaranteeing fair and freed competition will be critical to ensure that we do not lose more ground to global companies abroad and at home.
The United Nations Conference on Trade and Development (UNCTAD)’s recent Trade and Development Report calls for stronger measures to protect domestic sectors against the undue domination of large companies, particularly in high-profit sectors such as pharmaceuticals, media and information and communications technology (ICT), where foreign companies still account for most of the transfer of profits across borders.
The report uses data for U.S. multinational companies (MNCs) and their foreign affiliates in India to show that patent reforms have led to significant increases in the rates of return to affiliates of American companies by enabling monopoly profits when compared to publicly listed and locally headquartered companies, which are increasingly being left behind.
In the pharmaceutical sector, for example, the analysis that ranges 20 years shows that profits of domestic companies are in sharp decline since the late 2000s while those for the American MNC affiliates operating in the Indian market are rising steeply. A similar trend is visible in the ICTs sector as well.
It is important to take these findings in the broader perspective of what India’s growth drivers will be in the years to come.
What India needs right now is a clear and tough stance on intellectual property both in domestic policy and at the multilateral level.
At home, support for innovation has to be accompanied with instruments that guard against the misuse of market power, coercive bargaining and aggressive merger and acquisition strategies if local firms should survive and flourish.
Heated negotiations in the run-up to the upcoming WTO Ministerial Conference in Argentina already show that these issues will be central:
There are on-going attempts by big business to push for new rules in areas such as e-commerce to slice up profit-making opportunities of the future. Other proposals being made will largely limit the ability of governments to constrain corporate behaviour in the public interest.
- In such an international context, we need to stop soft-peddling on these issues in the pretence that we aspire to be a major IP player in the same manner as the U.S.
- What we need is a return to old-fashioned pragmatism that clearly shows the West that India recognises the fallacy of the current IP system and leads the way to broker a global new deal.
- This new deal should not only call for a return to business in the WTO by tackling the forgotten issues of the Doha Round but also firmly reopen the discussion on balancing the global IP system with development.
The 11th Buenos Aires Ministerial Conference (MC) is likely to follow the footsteps of Nairobi closely. This is because; some new issues were opened at Nairobi. At least the member countries have shown interest in discussing new issues like e-commerce. In the context of this fresh willingness, the members may discuss new issues like e-commerce, enhancing the participation of MSMEs in ecommerce trade, service trade promotion etc.
At the same time, there are several issues that the Nairobi pledged to consider or finalize at the 11th MC. These include –public stockholding for food security purposes, a special safeguard mechanism for developing countries in agriculture and measures related to cotton trade.
The food security related public stock holding is of prime importance for India. At the Bali MC, WTO has promised to settle India’s food subsidy for securing food security at the eleventh MC. Such a dead line is occurring at Buenos Aires. Similarly, the Special Safeguard Mechanism (SSM) against high level of agricultural goods imports are requested by India and the issue is yet to be solved.
In conclusion, supporting IP standards that simply follow a ‘winner takes all’ ideology without emphasis on technological advancement and competitive markets will be a regrettable mistake. India should also ensure that the new deal firmly reopen the discussion on balancing the global IP system with Development.