Healthy Skepticism Library item: 18909

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Publication type: Report

Patel SJ
Freedom for traders, protection for manufacturers
Commonwealth Secretariat 1988 Nov 25

Full text:

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…

It 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 brings 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.).