Nov 28, 1988

FREEDOM FOR TRADERS, PROTECTION FOR MANUFACTURERS.

By Surendra J. Patel

GENEVA, NOVEMBER 25 (IFDA)— The Uruguay round of negotiations on Trade-Related aspects of Intellectual Property Rights has been going on since 1987 in GATT. The acronym for them, appropriately but perhaps unwittingly, is TRIPS ...

Why are these negotiations taking place in GATT, which had previously played only a peripheral role in this area? Why abandon other, more universal, more relevant and more competent fora, such as the United Nations, UNCTAD, and WIPO, where these issues have been under far-reaching negotiations for the last 25 years?

Why are developed countries now so strikingly silent about all the commitments they solemnly made during negotiations in the above fora? Why have developed countries made such a complete turn-around in their submissions in GATT? Why this great reversal ...?

The answers to these questions affect the very strategic bases of the future development of the third world countries...

The mandate for the GATT negotiations on TRIPS were carefully negotiated ... the U.S. and Japan insisted on its inclusion, the European community was hesitant for a while. The developing countries clearly opposed from the very beginning any negotiations in GATT on intellectual property...

The balance between these two views was found in a weak operational directive at the end of the first paragraph (of the TRIPS mandate). It restricts negotiations merely to a clarification of existing GATT provisions. New rules and disciplines which may be elaborated in this area were qualified by the additional phrase, as appropriate...

Despite all these qualifications and safeguards, the developed countries insist that the GATT negotiations should deal with all trade-related aspects of intellectual property rights ... these proposals are far-reaching in character ... they go well beyond the marginal concern of the GATT in the past with TRIPS...

There is now an impasse in GATT on the interpretation of the very mandate of the Uruguay round...

The developed countries want all trade-related issues on the intellectual property system to be negotiated in GATT. The developing countries have insisted that these negotiations be limited only.

To the issues within GATT competence for example, counterfeiting of goods.

The developed countries have placed themselves in an embarrassing position. They want to move in two mutually conflicting directions.

On the one hand they want liberalisation of trade in goods, even in services ... at the same time they want to impose and enforce their mirror-image of an intellectual property system, which constrains and binds the world production and trading system to a further consolidation of the already highly privileged monopolistic interests of their enterprises.

Thus on the same platform, they plead for freedom for their traders and protection for their manufacturers...

The third world countries have refused to be tripped. The GATT mandate, they maintain, is strictly for trade in counterfeit goods. That too, is to be confined only to what is relevant to GATT.

The refusal of the third world is not a sudden I eruption of obstinacy on the part of a few countries. It has a long and painful past.

The participation of developing countries in the shaping as well as in the operation of the patent system has been only peripheral. Their patent laws were imposed by colonial masters to reserve these new markets only for the metropolitan manufacturers. To legitimise this reservation the Paris convention was established in 1893 upon the insistence of the advanced industrial countries.

Since independence, the developing countries have come to recognise how poorly placed they are in the snapshot of the world industrial property system.

The world stock of patents granted runs to some 3.5 million. Of these, nations of the third world hold only 30,000 ... all others are held by foreigners, mainly the transnational corporations of five major developed market economy countries.

Not even five percent of patents granted by developing countries are used in production processes in these countries. The system plainly operates to protect the interests of outside monopolies. Of all the relationships between the developed and developing countries, the patent system is the most unequal and the most iniquitous...

Nearly all the patents granted by the developing countries to foreigners have been used to secure mere import monopolies.

The import costs have been exorbitant. prices have been discriminatory. Attempts to use the patents in furthering production have been thwarted by weak provisions on compulsory licensing, and abusive and restrictive practices imposed upon them in technology agreements and arrangements.

In consequence, their own national laws have created and the international conventions have legitimised the highly perverse situation under which the patent system plainly operates for them as a reverse system of preferences, reserving their own national markets for foreigners.

Once this perception dawned, action followed quickly.

National laws were revised in all the major developing countries. Several subjects and processes of critical significance to national development were excluded from patentability. Patent application from foreigners began to be rigorously examined. Inordinately high duration for patent rights and licences were reduced. Laws on compulsory licensing were tightened. Foreign patent holders were not allowed to hide behind the patent monopoly to import goods, which could be domestically manufactured. Patents were revoked if they were not used in domestic production. Abusive practices began to be monitored and regulated.

These changes set the stage for revising the Paris convention, particularly its article 5 which ... equates imports with use. The entire system came under revision.

Diplomatic negotiations began in WIPO to revise the Paris convention with a view to making it an effective instrument for the development of the third world. Negotiations on establishing a wholly new instrument, an international code of conduct on transfer of technology began in UNCTAD in response to the vigorous initiatives of the group of 77.

The developed countries too joined in these processes. They committed themselves to the revision of the Paris convention and the establishment of the UNCTAD code the commitments were taken seriously by all concerned. This should not be forgotten - even by developed countries...

Then came the crises. The world economy slowed down, the third world's exports fell. foreign debt mounted. agriculture faltered. economic growth in several countries fell. Pressure on the balance of payments became severe. Social tensions mounted. Developing countries became more vulnerable.

In the developed countries, new administrations, conservative in outlook, came to power. The vulnerability of the third world began to be exploited. The negotiations on the UNCTAD code were stalled. Those on the revision of the Paris convention were blocked. The global round was abandoned. Commitments were forgotten. Confrontation replaced cooperation. The retreat had begun.

That is the background to the impasse on the interpretation of the mandate ... despite this deadlock, the developed countries went ahead and presented their proposals on TRIPS.

These proposals mark a great reversal.

Instead of extending the scope of exclusions, the developed countries asked for a reduction. Instead of reducing the duration, they wanted an extension. Instead of opening wide the window of golden opportunity towards new technologies, they wanted it to be closed tight. Instead of putting more teeth into compulsory licensing, they wanted to weaken, even abolish it. Instead of prohibiting abusive practices, they wanted to provide grounds for perpetuating them.

Instead of expanding flexibility of national laws in the third world, they wanted these laws to be carbon copies of their own laws. Instead of revising the Paris convention in the interests of developing countries, they wanted a new agreement in GATT promoting, protecting and enforcing their interests.

The king, it now appears, has taken off his clothes.

This reversal is not just a modest change of the directions pursued in the past. It is a complete reversal. It is a reversal of past commitments by the developed countries to assist in promoting the development of the third world.

The clock is not simply being put back. It is to be remade to move only backward.

This is the background to the impasse in GATT, to the refusal of developing countries to modify the mandate of the Uruguay round on TRIPS, to the recent for through conclusion of the south commission that "this unbalanced and inequitable approach can never command the willing support of the developing countries ... its acceptance would severely inhibit technical change and act as a major barrier to the development of the third world"...

There was a history before these negotiations. To omit it, to close one’s eyes to it, to distort it, to rewrite it – that is not the way to achieve understanding among sovereign countries.

A viable framework for the future will have to take into account the past concerns, the past initiatives, the past commitments ... the current impasse poses severe choices before the negotiating parties: either a greater gallstone in GATT ... or proceeding as if nothing had happened.

A positive approach will require building upon what has been built before. That will call for completing the ongoing negotiations in WIPO and UNCTAD. (Their) successful conclusion ... will provide an electrifying spark to improve world understanding ... the treads can then be picked up in GATT. The negotiations can then proceed in what is germane to GATT competence – counterfeiting of goods...

I may well be that the good deeds may not be done ... the stronger may believe in asserting their strength. That could lead to more pressing, more pushing, more arm-twisting, and more tripping of the weaker states – one by one. Witness the pressures exerted on the Republic of Korea, Taiwan province of China, Singapore, Mexico, and several other states.

The imposition of trade sanctions by the United States against Brazil ... illustrates the relentless pursuit of the negative approach. Instead of trade liberalisation, there is now trade war.

Talk free trade, start trade wars. The scene bring to mind the 1939 meeting in the league of nations which was talking on harmonisation of traffic signs in Europe on the same day on which nazi armies had violated all traffic signs and crossed into Poland.

Where would be then the objective of more liberalisation of trade, more freedom of competition, in shambles.

Where would be the commitments solemnly given in all earlier negotiations? In the dustbin of history.

These commitments include even those embodied ... in the general principles governing negotiations on the Uruguay round ... "developed countries do not expect ... shall therefore not seek, neither shall less-developed Contracting Parties be required to make concessions that are inconsistent with the latter’s development, financial and trade needs".

How hollow do they sound now?

The very posing of these questions contain their answers.

(The author was the Director of UNCTAD’s Technology Division until his retirement. He is now senior adviser to UNO/WIDER, Helsinki. The above is excerpted from his study, published by the Commonwealth Secretariat. Copies are available from Marlborough House, Pall Mall, London Sway 5hx, U.K.).