PATENTS AND DRUGS
Item
- Title
- PATENTS AND DRUGS
- extracted text
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A Quarterly Trade Magazine of Centad
Vol-1
Issue 1
April-June 2005
RF_DR_39_PART_2_SUDHA
Centad
Centre for Trade & Development
An Oxfam GB Initiative
Trading for Development
Editorial
2
Trading for Development
Lifting the Veil
3
Celine Charveriat on the Future of G20
13
Demystifying TRIPS and Public Health
Trade Arsenal
10
12
Fair Trade: For Better or Worse?
Trade Works
7
Patently in National Interests?
Trade Talk
Countries, 2001
Through the Looking Glass
6
James Love Talks to Centad
Trade Nuance
11
Key Agricultural Indicators of the G20
TRIPping on Drug Prices?
Trading Words
Trading Facts
TRIPS and Public Health Jargon
14
Editorial
Trading for Development
alf of the world’s population lives on less than US $ 2 a day and one-fourth on less than US $ 1 a day.The
H
past decades have witnessed decline in relative poverty though the absolute numbers below poverty line has
increased. One of the important policy tools to reduce poverty is aid. Notwithstanding the significance of aid, it can
only play a modest role in poverty reduction. It is important to have a mechanism that develops the productive
assets of people. In this regard an important policy tool is trade.Trade has enormous potential to lift millions of
people out of poverty. According to an Oxfam study, an increase of 5 percent by developing countries in the share of
world exports would generate US $ 350 billion .This is seven times as much as developing countries receive in aid.
However, increasing integration of the global economy through international trade has also been accompanied by
increasing disparity and inequality.Trade has not been able to live up to its potential of lifting people out of poverty.
This is primarily because the present global architecture of trade rules lacks the development focus.The rules of the
trade are rigged in favour of the rich countries and are detrimental to the interests of the poor.
,
Editor Dr. SamarVerma
Editorial Board:
Robin Koshy and
Prabhash Ranjan
It is important to understand that trade on its own cannot result in poverty reduction. It needs to be rooted in
appropriate policy framework at multilateral, regional and national levels to make a substantial dent on poverty.
The controversy surrounding trade is not whether it is desirable, but about how the multilateral, regional and
national trading regimes can operate in ways that support and foster development.
I
Inspiration for Magazine Name:
Loga Gnanasambanthan
One of the populous regions of the world where the impact of trade is felt on livelihoods and millions of people
i
Cartoons: Shared Sharma,
is South Asia. South Asia has population growing at the rate of almost similar to that for low-income countries in
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World Comics
general. About 21 percent of the world’s working population lives in this region. South Asia is also home to nearly
j
I
Caricatures: New Concept
Information Systems
40 percent of world’s poor living on less than $ 1 a day. Given these realities, the Millennium Development Goals
|
The views expressed in the
(MDGs) such as eradicating extreme poverty and hunger and developing a global partnership for development is
I
■'
j
1
'
articles and interviews in the
magazine are those of the
authors, and may not necessarily
reflect the views of Centad or
Oxfam GB.
I
i
Published by
Centre forTrade & Development
not possible till the South Asian region grows and develops.
Today, in South Asia there exists a growing need to understand the linkages between trade and development and
its implications on people at large.The Centre forTrade and Development (Centad) is an innovative, not-for-profit
institution initiated and promoted and established by Oxfam GB in response to this need. It is dedicated to make
markets work for the poor through policy oriented research and active engagement on trade and development with
(Centad)
An Oxfam GB Initiative,
the policy-makers and other key stakeholders.The principal geographical focus of Centad will be South Asia.
(2005)
# 406, Bhikaiji Cama Bhavan
Centad seeks to enhance the abilities of the government and other institutions to make economic globalisation
Bhikaiji Cama Place
work for the poor by providing access to accurate and timely information analysis, promoting better policies
New Delhi- 110066
through research, facilitating informed public discourses and building formations of stakeholders for advocacy, on
India
^Tel: + 91 - 11 - 51459226
issues of trade and development. I am happy to note that Centad has already published two working papers and
Fax: + 91 - 11 -51459227
Email: centad@centad.org
many more are in pipeline.
|
Web: www.centad.org
This magazine is a part of the advocacy and capacity building initiatives of Centad. ‘Trading Up’ will demystify the
|
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Design and printing:
New Concept Information Systems
■
issues around trade and development by providing cogent information on different themes related to trade and
development.
The first issue of Trading Up focuses on the India’s third Patent Amendment Bill and the G20 alliance.The patent
bill has drawn a lot of public glare and apprehensions have been expressed about its impact on public health and
availability of medicines to the poor not only in India but for the entire developing world. ‘Trading Up' attempts
to elucidate further on these issues through an easy to understand approach. The focus on G20 is important in
the wake of its increasingly important role in the ongoing negotiations in the WTO in arguably the most important
area i.e. agriculture.
We hope that the readers will find the style simple and the content useful in comprehending aspects of the complex
dynamics of trade and development. We would welcome comments on the structure and focus of the magazine.
Letters to the editor and short commentaries will be published.
Q Dr. SamarVerma
Regional Policy Advisor
Oxfam GB
2 | Trading Up | April - June 2005
TRIPping on Drug Prices?
0 S.K.Verma
The Patents (Amendment)
Act, 2005 has provided for
product patent in all fields
of technology, including
drugs, pharmaceuticals
and chemicals. It has also
triggered fears that product
patents in pharmaceuticals
will spur drug prices, which
will adversely affect the
public health and most of
the drugs would be out of
the reach of common man.
s mandated by Article 65 of the TRIPS Agreement, India
Given that India is a country where a large proportion of
has recently adopted the Patents (Amendment) Act,
the population lives below the poverty line, the availability
2005 (assented by the President on 4th April 2005), by
of medicines at reasonable prices has almost been of utmost
A
further amending the Patents Act, 1970. The amended Act
importance to policy-makers. However, no serious attempts
has provided for product patent in all fields of technology,
were made to estimate the quantum of the price-rise and
including drugs, pharmaceuticals and chemicals. The Act has
welfare effects on the pharmaceutical sector, once the
also dropped Chapter IVA on Exclusive Marketing Rights
product patents are introduced. Studies conducted abroad,
(EMRs) and mailbox applications, introduced as transitory
nevertheless, have thrown interesting issues and put definite
measure in 1999 by amending the Patents Act, 1970, to
numbers on the price changes and consequent welfare losses
comply with the TRIPS obligations under Article 70 (8) and
in India.
(9). It has triggered fears that the introduction of product
patents in pharmaceuticals will spur the drug prices, which
A study conducted in the USA in 2003 by a team of economists,
will adversely affect the public health and most of the drugs
based on empirical data on prices and market shares, has
would be out of the reach of common man.
concluded that in the absence of any price regulation or
Product Patents and Drug Prices
would be greater than the sales of all systemic (oral or
compulsory licenses, the total losses to the Indian economy
Before the adoption of Patents (Amendment) Act, 2005, drugs,
injected) antibiotics (which form up to 17 percent of the retail
pharmaceuticals and chemicals were subjected to process
drug sales) in 2000.' It has been pointed out that while the
patents only and were protected for a shorter period (five years
prices of patented drugs would definitely rise post-1 January
from the date of sealing of the patent). It was believed that by
2005, prices of cheaper off-patent drugs in the same class too
doing so, the prices could be kept at reasonable levels. Several
would increase when consumers opt for them and availability
studies have shown that patent protection is vastly more
of drugs would also become an issue. Normally, for customers
important to the pharmaceutical and chemical sectors than
who cannot access a domestic brand of a drug substitute,
to other industrial sectors.This can be attributed to the ease,
there would be another brand. So far, they have been shuttling
with which such products can be reversed-engineered. Patent
between the domestic brands because there are more local
claims to such products are easier to define and consequently
brands and more Indian companies than foreign. Once product
infringement is easier to control by patents.
1 Available at www.colombia.edu/~sc301/pharmaceutical-patents-2004-01.pdf
April - June 2005 | Trading Up | 3
1
January
patent comes into existence, there will
2005
not be any copying (through process
the right to a patentee in respect of
(and
after
1995),
patent), and thus there will be loss of
applications shall accrue from the date
flexibility. It is also notable that the
of grant of the patent and after a patent
foreign firms may not be in a position
is granted, the patent holder shall be
to cater to the needs of the whole
entitled to receive reasonable royalty
country as the supply may not meet
from such enterprises which have made
the demand or they would be holding
significant investment in producing and
it back to earn high profits by creating
marketing the concerned product prior
artificial scarcity.
to 1 January 2005 and continue to
manufacture the product, on the date
Other
studies,
however,
have
to
product
patent,
all
of grant of the patent. No infringement
shown that whatever the effect the
products, including those
proceedings shall be instituted against
introduction of product patents may
under patent elsewhere,
such enterprises (sec. 11 A).
have on prices, the proportion of the
which
total pharmaceutical market affected
manufactured
is not likely to be more than 11 percent
marketed
will
drugs have been allowed by amending
(rest is catered by generics and other
continue to be available
section 107A (b), (added in 2002) which
forms of medicines). This is of course
in generic form.
provided imports with the authorisation
currently
are
in
and
India
assuming, in the absence of evidence
Parallel imports of cheap or generic
of the patentee to sell or distribute the
to the contrary, that a change into the
product in the local market. Now imports
product patent alone will not, in the
are allowed if the importer is ‘duly authorised under the
short run, dramatically change this proportion. The overall
law”.
picture that emerges by calculating the weighted mean change
in prices is a price rise of 52 percent for the entire group of
♦ “Ever-greening” of a patent is not allowed, i.e., granting
patented drugs, if these drugs are subjected to product patents.
patents for relatively trivial changes. The amended Act
The highest changes, excluding acyclovir where elasticity is
provides patents only for new chemical entities. A new
small, would be in ciprofloxacin and ranitidine, as both these
form of a known substance, which does not result in the
drugs are important in their respective therapeutic groups. In
enhancement of the known efficacy of that substance, shall
India, price rise is expected above 60 percent in their case.
not be eligible for patent (sec. 3(d)).
However, where substitutes are available, or where there are
existing monopolies, there may not be any price rise at all.
It is concluded from these studies that, with the introduction
♦ Scope of patenability has been
narrowed
down
by
redefining the term “inventive step” (sec. 2(ja)) and
of product patents, the maximum mean change in prices for
new definitions of “new invention” and “pharmaceutical
the entire drug segment would be about 50 percent and only
substances” have been added.The Act, however, does not
40 percent of the patentable drug market (which translates
provide any definition of “biotechnological invention" and
to about 4 percent to the total pharmaceutical market)
“microorganism”.
would experience a significant price rise.This is a substantial
increase, and high monopolistic prices and the inability of
But these measures may not contain the drug prices or meet
producing new drugs by the domestic industry are expected
scarcity or non-availability of drugs. In such a situation, the
to be experienced immediately.The newly amended Act has
liberal grant of compulsory licenses along with a strict regime
tried to ensure the availability of drugs through the following
of price-control may be the appropriate steps to be looked
measures:
into.
♦ Despite switching over to product patent, all products,
manufactured and marketed in India will continue to be
India’s Readiness to Control Drug
Prices and its Compatibility with
TRIPS
available in generic form.The amended Act provides that
The amended Act has inserted a new section 92A, primarily
in the case of mailbox applications, filed before 1 January,
to give effect to theTRIPS Council’s Decision of August2003,
including those under patent elsewhere, which are currently
4 I Trading Up | April - June 2005
adopted in furtherance of Paragraph 6
has to depend on overseas data and
of the Doha Declaration, 2001, enabling
cost figures. It is feared that product
the grant of compulsory licence for
patent regime might result in making
countries
the DPCO redundant as it deals mainly
with insufficient or no manufacturing
with bulk drug formulations. Under the
export
of
medicines
to
capacity, to meet emergent public health
Order, the Government is empowered to
situations.This section has no relevance
fix or revise the price of a bulk drug or
for the domestic market, for which
formulation (sec. 11). Retail price once
fixed cannot be changed without the
other provisions of the Act in Chapter
XVI (Ss. 82-94) will be relevant. In
_ ____ For
produced____ !
drugs
India,
cases of extreme urgency or in case of
outside
public non-commercial use, compulsory
Government
licenses can be issued on notification by
depend
the Central Government.The Controller,
data
has
prior approval of the Government. Every
the
dealer or retailer has to display the price
to
list as furnished by the manufacturer or
on
overseas
importer at a conspicuous place in its
cost
figures.
premises. Besides, displaying the price
while granting the compulsory licence
It is feared that product
clearly on the label of the container the
has to ensure that the manufactured
patent
regime
sale of split quantity of a drug can be
patented articles shall be available to
result
in
the public at the lowest prices. As not
DPCO
redundant
many persons would be interested in
deals mainly with bulk
compulsory licenses because of their
drug formulations.
and
might
making
the
as
it
charged at a pro-rata price + 5 percent
thereof.
Doubts have been expressed, however,
non-exdusivity and limited duration,
about the compatibility of price control
to give incentive to a licensee, the
mechanism with the TRIPS Agreement.
Act provides that even when compulsory licence is granted
TheTRIPS does not have any explicit provision on the issue. On
for pre-dominant purpose of supply in Indian market, the
the contrary, it provides that the protection and enforcement
licensee may export the patented product as also when
of Intellectual Property Rights (IPRs) should be “in a manner
licence is granted to remedy a practice determined to be
conducive to social and economic welfare, and to a balance
anti-competitive (sec. 90(l)(vii) and (viii)).The compulsory
of rights and obligations” (Art. 7).The Members are allowed,
licenses may not be adequate to meet national health
while formulating or amending their laws and regulations,
emergencies if the drug concerned is new. It would take
adopt measures necessary to protect public health and
at least 36-48 months, because the production of a new
nutrition, and to promote the public interest in sectors of
generic drug requires investment in plant and machinery, as
vital importance to their socio-economic and technological
well as bio-equivalence tests and regulatory approval.
development (Art. 8.). These measures may include drug
In order to control prices, there already exists the Drugs
challenged. Control of drug prices by the governments is
(Prices Control) Order, 1995, (DPCO).The Order was passed
common even in some of the developed countries, viz.,
price control as well, and thus their legality cannot be
Japan,
to curb exorbitant profits in drug
transactions and
to
make
Spain
and
Portugal,
where
compulsory licenses are liberally granted
drugs
at
Control of drug prices by the
affordable prices. Under the Order,
governments is common even
keeping a check on prices. Nevertheless,
the prices of drugs are fixed as per
in
developed
an effective regulatory body to monitor
the formula: Retail Price (R.P.) =
countries, viz. Japan, Spain and
the prices must be constituted. In the
[Material Cost (M.C.) + Conversion
Portugal, where
compulsory
matter of issuing compulsory licenses, a
Cost (C.C.) + Cost of Packaging
licenses are liberally granted
transparent and speedy method needs to
Material (P.M.) + Packaging Charges
to meet the healthcare needs,
be evolved.
(PC.)] x [(1+ Maximum Allowable
including
available to a
Post
common
Manufacturing
man
Expenses
on
some
of
the
keeping
prices.
a
to meet the healthcare needs, including
check
Nevertheless, an
□ S.K.Verma is Professor of Law, University
(MAPE)/100)]+ Excise Duty (E.D.)
effective regulatory body to
(sec. 7). However, for drugs produced
monitor the prices must be
Institute, New Delhi. She can be contacted at
constituted.
in_sk_vemia@yahoo.com
outside
India,
the
Government
of Delhi and Former Director, Indian Law
April - June 2005 | Trading Up
Patents: Many Battles Ahead
James Love Speaks to Centad
international
to protect its own poor. Novartis says it
rivaling Canada orthe UK as a market, but
community looking at the recent Indian
considers the Indian market to be 50
they want to eliminate India as a source
Centad:
How
is
the
Patent Law amendment? Has India’s
million people.The government will have
of supply for cheap generics. The future
adoption of the product patent regime
to do something to protect the interest
will depend upon the strength of the
been a setback to the global campaign of
of the rest of the population who will
Indian social movement. Will the poor
improving the accessibility of medicines
not be able to afford medicines sold as
in India persuade their own government
to the poor?
a monopoly.
to protect their interests?
How
can
society
James/The initial reaction, looking mostly
Centad: Will the provision of producing
Centad:
at the Ordinance that was proposed by
for export under the compulsory licensing
organisations focus their campaigns for
the government, was extremely negative.
regime, as provided in the new patent
improving the accessibility of medicines
The
law, take care of this concern?
to the poor of the world in the context of
proposal
included a
number of
the growing reality of product patenting
provisions that were quite restrictive.
The law that was actually passed by
James.'The Parliament fixed the problems
the parliament addressed some of these
with the export provision. For drugs
issues, particularly the narrowing of the
grounds
for patentability, which
civil
of medicines underTRIPS?
now in the market, they will be about
James:The global battles have gone well.
will
available for export. The big question
The local battles are largely ahead of us.
reduce ever greening of patents, and
will be the new drugs that are not yet
In recent years, Brazil has threatened but
the mandatory compulsory license on all
manufactured in India. If India protects
not actually issued a compulsory license
mailbox patents that apply to products
its own poor, the poor in other countries
on a drug patent. China was pressured
now being manufactured in India. This will
will also benefit. If India does not protect
by the European Union and the USA to
give India a lot of experience with setting
its poor, other countries will have to look
forgo compulsory licenses on drug patents
in 2003. Thailand needs to move ahead.
remuneration for patents on medicines.
elsewhere for suppliers.
Also, according to Article 92 of the Indian
the only country that is facing a test of
No member of the Bangui Agreement in
law, India can easily issue compulsory
political will.
Brazil is yet to issue a
West Africa has issued legal compulsory
India is not
licenses on new products, if it wants to.
compulsory license.
Today, the concern is not so much about
China has not issued compulsory licenses.
the Indian law, but the political will in
There
are
medicines, they will have to face up
India to use the compulsory licensing
unwilling to use theTRIPS flexibilities. At
to the need for a transparent and legal
least India is starting with a large number
framework for generic medicines. One
provisions.
of
Centad: India has emerged as a big
are
many
compulsory
Thailand is timid.
countries
licenses
on
that
Mailbox
patents, thanks to the amendments.
exporter of generic medicines to many
licenses yet.
If these countries want
cheap sustainable sources of generic
solution may be the creation of a global
patent pool for essential medicines. The
local social movement could pressure
small countries, especially in Africa and
Centad: Do you envisage the possibility of
governments to issue compulsory licenses
has helped them to fight epidemics and
big multinational pharma companies using
on patent owners who do not voluntary
diseases at considerably less cost. Will
the new Indian patent regime towards
license to the pool, and the global social
the switchover to the product patent
establishing strong monopoly power in
regime hamper this ability of India,
one of the biggest pharmaceutical markets
once product patented medicines start
to the detriment of the poor of the world?
entering the Indian market?
movements could directly pressure patent
owners to license to the pool. By making
it a big global project, it might be easier
to obtain local action and buy-in.
James: Of course, that is what the big
James: In the short run, nothing will
pharma companies want. They not only
change. But over time, it will depend
want to charge high prices in India, a
upon the willingness of the government
country they think of as potentially
6 | Trading Up | April-June 2005
■ James Love is Director of Consumer
Project onTechnology (CPTech), Washington
DC, United States.
http://www.cptech.org
Patently in National Interests?
□ Robin Koshy
If the product patent regime leads to an era where even Indian domestic firms move on
to more lucrative segments of the markets, then the repercussions on public health in the
developing world could be catastrophic.
n 1977, Donald Smith and
on the route to compliance.
his father, Frank Smith, of
While campaigners for access
Orlando, Florida secured the
to cheaper medicines express
I
US Patent No. 4,022,227 for
disappointment at amendments
a hairstyle that would enable
that exceed the requirements of
‘patients’ with partial baldness
the TRIPS Agreement, coalition
to cover their pate by growing
equations and rediscovery of
hair longer on the sides and
‘national interests’ by political
the
parties paved way for a final bill
patently
that was not as excessive as it
it
combing
over. While
prevalence
of
unflattering
‘combover’
this
could have been.
style
precedes the Smiths’ patent,
remained
Several questions abound about
unabated to this day.The Smiths
the efficacy and impact of the
have, however, failed to garner
new law. Is it all good and does
its
popularity
has
it reflect a consensus of national
even a dime through royalty,
despite the sanction of the law. An Ig-
and
actors
comprising
civil
society
interests, as the government believes?
Nobel Prize for absurd and improbable
groups,
multinational
Will it be able to ensure affordable drugs
research in 2004, with no monetary
pharmaceutical firms, least developed,
and treatment in a country where the
benefits, is the biggest reward they have
developing
country
per capita health expenditure was as
yet got for their thought.
governments; economists, lawyers and
low as USS 22 in 1998? Will the current
national
and
and
developed
Bill improve access to more effective
lawmakers.
Not all frivolous patents go unrewarded.
When such patents are in the realm
treatments
From
a
simplistic
and
narrow
and
drugs
for
diseases
prevalent in India? Can the domestic
of medicines and have a public health
pharmaceutical perspective, instituting a
industry cope with the opportunities and
implication, then the reward for the
patent regime that is compliant with the
challenges that will arise?
patent holder can be at considerable
TRIPS Agreement, required repealing
costs to the larger public good. India
the controversial feature of the Indian
has been the key protagonist of a
Patents Act 1970 that enabled process
Indeed, there are many broad positives
long-drawn-out drama, to set in place
patents whereby domestic firms could
in the new bill. Pre-grant opposition that
a national patent regime that provides
develop generic copies of patented drugs
would enable a member of public to
incentives for research and development
by following a different manufacturing
challenge a patent application before it
patents
process.This needed to be replaced with
is granted has been restored.The process
protects public interests (public
a system that allowed product patents
of issuing a compulsory licence (CL), that
(R&D),
and
Some Good, Mostly Bad?
prevents
abuse
of
health in particular) while meeting its
with 20-year validity for pharmaceutical
will enable the government to authorise
international obligations under theTrade
products. Successive amendments of the
a third party to produce a patented drug
Related
Rights
Act in 1999 and 2002, an Ordinance in
in the event of a national emergency (for
(TRIPS) Agreement. A stage show, that
2004 and the recent Amendment Bill in
example, a plague epidemic) has been
has had global and national audiences
March 2005 have all been key milestones
sped up. Further, exports to countries
Intellectual
Property
April - June 2005 | Trading Up | 7
with
inadequate
manufacturing
permitted
capacities are also
under
CL. The bill also provides a measure
of immunity to producers of generic
them before 1 January 2005. These
For one, in a democracy, defining and
generic manufacturers who have made
protecting national interest is not the
‘significant investment’ will
however,
sole preserve of the government. For all
have to pay a ‘reasonable royalty’. The
the competence that the government
public
subjectivity over ‘significant investment’
machinery
and ‘reasonable royalty’ opens them for
sentiments, even if India were insular to
interpretation. Besides, where a web of
the pleas of other developing countries
patents (patent thickets) covers a single
dependent on it for cheap generic drugs,
However, considerable ambiguities that
pharmaceutical product, the prohibitive
needs to be respected.
could dilute the gains persist. Firstly, what
cumulative
versions of drugs that have application
pending in the mailbox, from excessive
royalty demands and litigation.
royalty that the
generic
popular
can be patented (scope of patentability)
producer might end up paying could
Besides,
under Section 2 of the Bill that accepts
make drugs frightfully expensive.
predominantly
economic
advance,
in
opinion
was
not
favour
of
India
reneging on its commitments, but to
‘inventive step’ as a feature that involves
technological
embody,
might
Fourthly,
the
Bill
stipulates
that
operate within the flexibilities that the
significance or both, opens up possibilities
applications for CL will be considered only
TRIPS Agreement and Doha Declaration
for pharmaceutical firms to file patents
three years after the grant of a patent.
allowed to ensure access to cheaper
for marginal improvements on known
When better drugs that can save lives
medicines and drugs. In a country where
molecules or by merely citing economic
exist, the issuance of compulsory licences
public
potential. Not specifying pharmaceutical
to ensure availability and affordability
percentoftheCDPin2002 (WDR2004),
substance as a new ‘chemical’ entity
should have been weighed by public
97 percent of the private expenditure on
could allow formulations, isomers and
health concerns, albeit with justifiable
health is out of the pockets of patients
other incrementally modified drugs to
royalties to the patent holders.
health
expenditure
0.9
was
(WHO, 1998), and less than 50 percent
of the population have access to essential
be considered as new inventions. If one
views the 8926 mailbox applications
The
for patents that the Indian Patent Office
discretionary powers to the office of
1998), public health concerns need to
received during 1999-2004 against the
the Controller of Patents in framing
be
274 new chemical entities that the US
rules and in deciding on pre-grant
defining national interests.
Bill
assigns
considerable
drugs or have been immunised (WHO,
accommodated
sufficiently
while
Federal Drug Administration approved
opposition. While such powers might
during 1995-2004, it would be naive to
enable faster decision-making process,
conclude that we are in the midst of a
it is worth debating whether the Patents
Cheaper Drugs, Better
Drugs?
pharmaceutical revolution. Evergreening
Office has the requisite management,
Will the prices of drugs and healthcare
of patents to extend monopoly rights
technical and infrastructural capacity to
rise? Kamal Nath, Union Minister for
by citing trivial advances, therefore, still
face up to the challenges that the new
Commerce and Industry, has tried to
remains a possibility.
Bill brings.
allay fears of galloping drug prices by
pointing out that 97 percent of the drugs
public and interested parties to oppose
A Consensus through
Consultations?
patents before they are granted, it is
Nevertheless, civil society organisations
unclear whether challengers to patent
(CSOs), public health campaigners and
applications will
the domestic pharmaceutical firms have
Secondly, while the
relevant
Bill
allows for
have access to all
information. What
is
clear,
been celebrating the minor gains that
however, is that the controller of patents
moderated thefinal Bill significantly from
has the final say and contestants will
the December 2004 Ordinance. In all
have no room for appeal at the pre
fairness, the turn of events that swayed
grant stage.
the governments to incorporate some
of the TRIPS flexibilities was perhaps
Thirdly, producers of generic versions
more a fallout of realpolitik and political
of new drugs
mailbox can
realignments than a willingness on the
continue to produce them even after
government’s part to listen to civil society
grant of patent, if they were producing
and public opinion.This is disconcerting.
in
the
8 | Trading Up | April - June 2005
are off patent and none of the drugs
on the Essential Medicines List are on
patents. Estimates of the value of drugs
that would get into the product patent
regime vary from US$140 million based
on the Minister’s figures to USS 700
million according to the Pharmaceutical
Research and Manufacturers Association
of America (PhRMA). How much of these
estimated values get transferred to the
end-customer as a mark-up on price
and by when, remains to be seen. India
will have to plan ahead to establish a
credible and comprehensive mechanism
to monitor and
enforce afforckhmm
and accessibility of essential medicines,
expenditure of USS 7.1 billion is roughly
If the product patent regime leads to an
once they come under patents. Canada’s
the size of the entire Indian pharmaceutical
era where even Indian domestic firms
Patented Medicines Prices Review Board
industry’s domestic and export market. It
move on to more lucrative segments of
that exclusively monitors the prices of
is estimated that the industry spends up to
the markets, then the repercussions on
patented drugs provides a model for
US$800 million to bring a new molecule
public health in the developing world
emulation.
to the market (DFID Report “The Effect
could
be catastrophic. Public policy
Property on
initiatives to address this market failure
Prospects
in
have to be strengthened. Public-private
India and China”, 2004). Even if money
partnerships, public investment in R&D,
of Changing
Intellectual
Will the current Bill improve access to
Pharmaceutical
Industry
treatment and R&D for new drugs in a
largely poor nation with a high incidence
can buy more in India, drug development
providing incentives to private firms for
of tropical and communicable diseases?
costs are astronomical. Which is perhaps
research could be some of the strategies.
Reverse engineering facilitated by the
why domestic firms, namely, Ranbaxy,
Bold approaches are also called for. The
Indian Patents Act 1970 helped create a
licenses new discoveries to multinational
Institute for OneWorld Health, a US
strong domestic pharmaceutical industry
firms
based
with the capability to develop cheaper
(Economist, September 2003). So long
for
trial
and
development
not-for-profit
pharmaceutical
company follows an interesting model.
generic versions of patented drugs. As
as this remains a viable strategy, R&D of
It gets owners to donate intellectual
a consequence the share of domestic
these companies might focus on drugs
property on drugs for diseases with huge
.
pharmaceutical firms in India increased
that are relevant to the market of the
public health impact but no market
*
from 32 percent in 1968 to 77 percent
multinational partner. Observers point out
potential (for example, diarrhoea, which
(UNCTAD, 2004). Although
that even if R&D expenditure by Indian
kills 2m people a year in developing
India accounts for only 1.5 percent of
firms go up, it is likely to focus on areas
countries), raises funds from donors
the global pharmaceutical market of USS
where they can make quick money -
and gets researchers to contribute their
480 billion, it accounts for an estimated
diseases more prevalent in rich countries,
expertise, mostly for free.
20 percent of the global consumption
such as cancer and diabetes. In 1999,
(Goldman Sachs, 2004). The difference
only 16 percent of the R&D expenditure
in value and volume would indicate that
in India was spent on infectious and
Defining National
Interests...
Indian firms service the high volume-low
parasitic diseases prevalent here (DFID,
The US Special 301 Report of 2004
priced segment of the market.
2004). Product patents will be beneficial
states rather unabashedly that the United
to India if it leads to research and
States will advance its national interests
development for the supply of new drugs
in guaranteeing a higher degree of
in
2003
Domestic Industry to the
Fore?
relevant to its disease profile.
Can the domestic industry shift from
cheap
For this to happen, Indian firms will have
generics to a developer of proprietary
to buck the current trend and invest
being primarily a producer of
intellectual property protection through
a variety of mechanisms including the
negotiation of free trade arrangements
and the use of Generalised System of
If the Indian government
systems
more in diseases such as AIDS, dengue,
Preferences.
and new chemical entities? India has
malaria and tuberculosis. Current figures
were
several advantages. It has 64 United
are heavily skewed against poor man’s
interests in such a manner, it would
States Federal Drug Authority approved
diseases.The Commission on Intellectual
be welcome to see it defining the
producing plants, the most outside the
Property Rights reported in 2002 that
accessibility and availability of drugs to
US. It has cheaper, yet highly skilled
firms tend to spend on drugs that have a
millions of poor in India and elsewhere
labour, low clinical trial and fixed asset
market potential of around $1 billion per
as one of the key guiding principles while
drugs,
new
drug
delivery
ever to articulate its national
costs. (UNCTAD, 2004) Indian firms,
annum or more, which is not often the
administering the new patent regime. A
such as Ranbaxy and Dr. Reddy’s are
scenario for drugs meant for developing
patent regime that ensures access to
committed to increasing their R&D
country markets. Of the 1223 drugs
new drugs for diseases prevalent here at
expenditure to 10 percent of their
introduced between 1975 and 1996,
affordable prices. And keeps innovative
revenues from around 7 percent today
only 13 were aimed at tropical diseases.
hairstyles and frivolous patents out.
(Economist, Sept 2003).
Only USS 400 million of the US$70
billion spent on health research was spent
□ Robin Koshy is Programme Officer with
However, these advantages have to be
on research on AIDS and malaria in 1998
Centad.Views are personal. He can be
put in perspective. Pfizer’s global R&D
(Sudip Chaudhari, 2003).
contacted at robin.koshy@centad.org.
April-June 2005 | Trading Up | 9
■ $
Trade Talk
G20: The Road Ahead
Celine Charveriat Speaks to Centad
Centad: Today, the G20 has acquired
a
position
in
the
multilateral trade
Centad: Some people argue that the
Centad: What role will political factors
G20 continues to speak in
play in deciding the future of the G20?
generic
negotiations that is much stronger than
terms on different facets of agriculture,
How will the strengthening trilateral
other existing or past coalitions. What
in particular, on market access issues of
axis between India, Brazil and South
makes the G20 different?
tariff reduction and special safeguard
Africa (IBSA) and the political equations
mechanism.
Even
the
New
Delhi
between Brazil and the US affect the
G20?
Celine: One distinctive feature of the
Declaration does not say anything new.
G20 is that this alliance includes the
There is a wide divergence between
political and economic heavyweights
the G20 members on these issues. Do
Celine: Political factors will continue
from the developing world. These key
you reckon that the G20 is avoiding
to play an important role, as well as
progress in other areas such as the
countries,
especially
Brazil,
South
the specificities of contentious issues to
Africa, India and China have forged an
prevent the possibility of any rift between
reform of the Security Council. What
alliance at the highest political level
the countries in the G20?
happens to regional integration in the
that goes beyond the remit of the World
Americas, and most specifically the Free
Trade Organisation (WTO). They also
Celine: There is a time for everything.
seem to share a grand vision, which is
At this stage of the market access
also affect Brazil’s strategy. How much
to change the “geography of trade" and
negotiations, which are still
and how this will affect the G20 still
blocked
reduce the dependence of the South on
by AVEs, the G20 can easily hide its
the North.
contradictions. But it is crucial that the
Centad: The countries in the G20 are
Trade Area of the-Americas (FTAA), will
remains to be seen.
alliance works on its internal dilemmas
Centad: What should be the agenda of
on market access so that the G20 can
the G20 in the coming days in order to
of varied nature and have different
make joint technical proposals on market
make the ongoing round of negotiations
priorities. For instance, Brazil’s interest
access when the time comes.
a truly development round?
in agriculture is diametrically different
.
from that of India. How has the G20
Centad:
predominantly
Celine: To prevent another decade of
been able to remain a cohesive unit
focused on agriculture. However there
dumping, the G20 should continue to
in spite of these differences? Are there
are indications that the G20 may also
push for effective reductions in trade
any apparent fissures that developed
focus on issues such as Non Agricultural
domestic support, promote the rapid
Market Access (NAMA) and Services.
implementation of the cotton and sugar
countries will try to exploit?
G20
has
Will expanding the agenda of the G20
panels, and opposeany new renegotiation
Celine: Any alliance which includes
weaken the group and
of the blue box by the United States. It
such a large range of members, from
position on Agriculture?
its existing
middle income agricultural exporters
commitments of developing countries
to net food importing least developing
Celine: The G20 confirmed in New
countries, is bound to have tensions,
Delhi that it would not seek to achieve
not threaten rural livelihoods and food
which will increase as agricultural talks
common positions on other issues. A
security.
proceed and details of market access
larger mandate would have made it
commitments become more specific.
even more difficult if not impossible to
But the G20 seems well aware of the
reach consensus. However, the G20 is
need for continued unity to oppose
considering progress in other areas to
a common front to the continuation
guide its approach to the agricultural
developed
negotiations, which will be crucial to its
countries. It is a matter of political
success this year, as big trade offs will
necessity if they want to achieve any
occur between agriculture, industry and
results in this area.
services negotiations.
of
i
should also ensure that market access
export
dumping
by
10 I Trading Up | April - June 2005
are limited and flexible so that they do
■ Celine Charveriat is Head of OXFAM
International’s Advocacy Office, Geneva,
Switzerland.
http://www.oxfam.org
Key Agricultural Indicators of the G20 Countries, 2001
Compiled by the Centad Team
Country
Agricultural
Total
Agricultural
Agricultural
Total
Agricultural
Agricultural
Total Exports
Agricultural
Agricultural
Agri
GDP (US
GDP (US $
GDP as a
Population
Population
Population
(USS
Exports (US
Exports as
Imports
Balance (US $
$ billion)
billion)
percent of
(million)
(million)
as a percent
million)
$ million)
a percent of
(USS
million)
total exports
million)
of total
Total GDP
population
9,779
April June 2005
269
13
4.8
37
4
10.8
26,610
10,989
41.2
1,210
Bolivia
8
1
12.5
9
4
44.4
1284.8
400
31.1
234
166
Brazil
503
47
9.3
173
27
15.6
58,223
16,060
27.5
3,209
12,851
Chile
66
6
9
15
2
13.3
17,661.4
3,169
17.9
1,063
2,106
Guatemala
20
5
25
12
6
50
2,466
1,294
52.4
806
488
Paraguay
7
1
14.2
6
2
33.3
1,174
772
65.7
295
477
Philippines
71
11
15.4
77
30
47.1
32,664
1,444
4.4
2,429
-985
South Africa
113
4
3.5
44
6
13.6
28,996.7
2,255
7.7
1,217
1,039
Thailand
115
12
10.4
64
31
48.4
63,190
7,423
11.7
2,923
4,500
Indonesia
141
24
17
215
93
43.2
56,320.9
4,368
7.7
4,085
283
China
1,159
177
15.2
1,292
853
66
581,134.6
12,993
2.2
16,393
-3,401
India
477
120
25.1
1,025
545
53.1
44,292.9
5,282
11.9
4,062
1,220
Pakistan
59
15
25.4
145
73
50.3
9,238
1,020
11
1,519
-500
Nigeria
43
15
34.8
117
38
32.4
17,261
324
1.8
1,455
-1,132
Cuba
26
2
7.6
11
2
18.1
1,660.6
753
45.3
738
15
Zimbabwe
9
2
22.2
13
8
61.5
2,000
897
44.8
71
825
Mexico
618
27
4.3
100
23
23
83,000
7,631
9.1
10,830
-3,199
Egypt
98
17
17.3
69
25
36.2
7,068.2
628
8.8
3,222
-2,594
Tanzania
9
4
44.4
36
28
77.7
776.4
410
52
311
99
Venezuela
125
6
4.8
25
2
8
27,409
314
1.1
1,900
-1,585
3936
509
12.9
3485
1802
51.7
78,426
7.3
57,972
20,952
|
Argentina
Trading Up
G20
|
11
Source:
1. G20 - Statistics, http7/www g-20.mre.gov.br/conteudo/statistics_01.pdf (Visited on 10 March 2005),
2. Compendium of food and agricultural indicators-2004 al http://www.fao.org/es/ess/compendium2004/list.asp (Visited on 10 March 2005)
3. Centad’s calculations
<
1,062,432
T hrough th e L o o kin g G lass
J
Fair Trade:
For Better or Worse?
■ Robin Koshy
n 2003, the United States exported 3.8 million tonnes of
I
long as they get preferential access, while larger developing
rice, making it the third largest exporter in the world, trailing
country exporters are kept out by high tariffs. He cites the
only behind Thailand and Vietnam.This is despite the fact that
European Union’s Everything but Arms (EBA) initiative (or
it costs twice as much in the US to grow rice than it does in
more precisely, Everything but Arms, Bananas, Rice and
the other two countries. Such sterling export performance has
Sugar initiative!), that gives duty and quota free access for
been aided by the US$ 1.3 billion (72 percent of the total
LDCS to sell at the high prices prevalent in the EU markets.
cost) that the American rice farmers got as subsidies in 2003!
(Oxfam Briefing Paper 72 : Kicking Down the Door, 2005)
William Cline of the Centre for Global Development draws
diametrically different conclusions about the impact of trade
Not all countries can afford to bankroll their way to a
liberalisation on the basis of his empirical analysis and economic
comparative advantage in trade, especially when there is
modeling in his book‘Trade Policy and Global Poverty’ (2004).
none. Certainly, not the developing countries. The dictum of
He argues that liberalisation of agricultural markets is the most
classical economic theory where trade specialisation takes
important way to reduce global poverty as three-fourth of the
place according to comparative advantages is out of operation
world’s poor (living on less than US$2 a day) are in rural areas.
in a trading architecture riddled by trade distorting domestic
Rural poor are more likely to be dependent on farming and any
support and high tariff boundaries. Will free trade that removes
increase in export opportunities will increase their income.The
these distortions especially in developed countries, restore
gains of the rural poor will outweigh the losses of the urban
comparative advantages of developing countries in agricultural
poor and there will also be a redistribution of income from
commodities, increase their export earnings, boost wages of their
cities to villages. Cline estimates that global free trade could
unskilled labour and stimulate economic growth in general?
increase agricultural prices by 10 percent, hike real wages
of unskilled labour in developing countries by 5 percent and
Arvind Panagariya of Columbia University, thinks otherwise.
boost global economic welfare of developing countries by $90
His conclusions are born out of the fact that most of the least
billion annually.This, he estimates could pull 200 million people
developed countries (LDCs) are net importers of agricultural
out of poverty, or 650 million people, if one factors in capital
commodities - 45 of the 49 LDCs import more food than
investment and a longer term period of 10-20 years. Welfare
they export. In his paper, 'Agricultural Liberalisation and the
gains are highest from liberalisation of agriculture, followed by
Developing Countries: Debunking the Fallacies’ (2004), he
textiles and apparels.
contents that if subsidies are removed, the net importers will
end up paying more for food.This loss will not be offset, unless
The US$90 billion that developing countries could gain will
they can become sufficiently large net exporters. Cut in rich
dwarf the US$ 50 billion that developing countries receive as
country subsidies will therefore benefit only big agricultural
aid. Yet another argument, in favour of freer and fairer trade
exporters such as Brazil and Argentina, while most LDCs will
over aid and preferences. Interestingly, this corroborates
be worse off than they were before. Although his arguments
Oxfam’s calculation in its trade report in 2002 (Rigged Rules,
are not backed by substantive empirical analyses, some
Double Standards) that put the loss to developing countries
other studies estimate that larger countries will benefit, while
due to rich country trade restrictions at US100 billion a year.
smaller countries in the same regions will suffer (for example
Cline cites evidence that only a sixth of the world’s poor live
India will benefit, while the rest of South Asia will lose out).
in the net food importing countries and estimates that over
If poor countries emerge as net losers, it could stem their
130 million people could be pulled out of poverty in India
enthusiasm forthe Doha Development Agenda and jeopardise
and China alone. If this were put in the perspective of the
liberalisation of trade in future.
global target of halving poverty by 2015, it would reflect
significant advances in the two biggest battlefields.
Here,
Therefore, he argues that the poorest nations are better
one of Pangariya’s arguments merits consideration - trade
off with high domestic subsidies in developed countries so
Continued on page 15
12 I Trading Up | April - June 2005
Demystifying TRIPS and Public Health
S CentadTeam
Is the agreement on Trade Related Aspects of Intellectual
The Agreement recognises the right of countries to take
Property Rights (TRIPS) within the World Trade Organisation
measures against anti-competitive practices. In cases of anti
(WTO) in conflict with public health concerns?
competitive practices, the agreement provides more flexible
conditions to grant compulsory licenses such as relaxing the
Yes, the TRIPS Agreement is in conflict with public health
condition of paying adequate remuneration.
concerns such as accessibility to medicines.The fundamental
idea behind theTRIPS Agreement is that the inventors should
Do these flexibilities imply that any conflict between the rights
be allowed to patent rights in order to foster research and
of the patent holder under theTRIPS Agreement and public
development. People would be encouraged to innovate and
health concerns can be resolved amicably?
invent only if they are assured of protection in terms of having
the exclusive right over the invented product or process. This
In spite of the flexibilities given in the agreement, there are
gives the patent holder a monopoly right to reap benefits of
concerns about the conflict that could arise while interpreting
his intellectual property. However, such a right over a medicine
the rights of the patent holder and public health concerns.
or a drug may lead to a situation where the patent holder sets
The Doha Declaration on TRIPS and Public Health, adopted
the price at such high levels that the medicine is out of the
at the WTO’s Fourth Ministerial Conference in Doha on 14
reach of common people. Hence, the conflict between TRIPS
November 2001, endeavoured to bring about clarity on this
Agreement and public health concerns.
issue.This declaration was a major step towards resolving the
conflict betweenTRIPS and Public Health. Following were the
What are the flexibilities in theTRIPS Agreement to take care
important features of the declaration:
of the public health concerns?
♦ TheTRIPS Agreement does not and should not stand in the
way of member countries from taking measures to protect
The TRIPS Agreement provides some flexibilities to take
public health.
care of the public health concerns. The Agreement allows
* TheTRIPS Agreement must be implemented and interpreted
member countries of the WTO to permit non-patent holders
in a manner that supports public health. Hence, any conflict
to manufacture patented drugs and medicines (compulsory
between public health and the rights of the patent holder
license). It also allows governments to manufacture patented
while interpreting theTRIPS Agreement should be settled
drugs or medicines for public non-commercial purposes
in favour of the former.
without the approval of the patent holder (government use).
♦ Each country is free to determine the grounds on which
However, the Agreement states that certain conditions need
compulsory licenses can be issued. Any emergency kind
to be fulfilled while issuing compulsory licenses to safeguard
of situation is not the prerequisite for issuing compulsory
the interests of the patent holder. For instance, an effort must
license. Further, on parallel imports, it states that a country’s
have been made to obtain a voluntary license on reasonable
practices in parallel imports cannot be challenged in the
commercial terms. Or, the patent holder should be paid
dispute settlement system of the WTO.
adeguate remuneration in each case taking into account the
economic value of the license.
However, it is important to remember that compulsory licenses
come at a price. When a country issues a compulsory license it
About TRIPS Agreement
has to pay ‘adequate remuneration’ to the patent holder. The
Agreement does not specify what ‘adequate remuneration’
TRIPS Agreement establishes minimum level of protection
that each member country in the WTO has to give to the
intellectual property of fellow WTO member countries. The
areas covered by the TRIPS Agreement are - Copyright
and related rights, Trademarks, including service marks,
Geographical Indications, Industrial Designs, Patents, Layout
designs (topographies) of Integrated Circuits, Undisclosed
Information, includingTrade Secrets.
means.
How are the public health concerns of the Least Developed
Countries (LDCs) addressed in theTRIPS Agreement?
TheTRIPS Agreement addresses the public health concerns of
LDCs by providing longer transition periods to comply with the
Continued on page 15
April-June 2005 | Trading Up |
13
’ ®)
Trade Arsenal
TRIPS and Public Health Jargon
■ CentadTeam
Patent
application in this field was received.
interested party to oppose the grant
n exclusive right to bar competitors
Therefore, a mailbox was set up under
of a patent while it is being processed
from
the first amendment of the
A
Indian
by the Patent Office. The third Patent
marketing, selling or importing a product
Patents Act in 1999, at the Indian Patent
Amendment Bill in India has restored
pre-grant opposition, although there is
using,
manufacturing,
invention or an inventive process for a
Office to receive these applications for
fixed period of time, say, 20 years. For a
pharmaceutical
product patents. This
no right to appeal at this stage. Pre
patent to be granted, the invention must
mailbox was opened after India became
grant opposition is useful in weeding
be new, non-obvious and have industrial
TRIPS compliant on 1 January 2005
out
application. Patent rights are territorial
through the Patent Ordinance issued by
challenger might not have access to
and are generally granted on a national
the government in December 2005.
adequate information.
of the need of the inventor to recoup the
Data Exclusivity
Post-grant Opposition grants a similar
costs sunk in research and development
Data
frivolous
patents,
although
the
basis. The rationale for patents arises out
(R&D). It
also provides incentives for
R&D in future.
exclusivity is a
measure that
right to oppose a patent after it has been
prevents the Patent Office (regulatory
granted. Atthepost-grantstage, complete
agency) from
using the data
in a
information on the patented product is
pharmaceutical
innovator’s
patent
available, making the challenge more
Patents can be of two types - Product
registration file for a specific period of
informed. Right of appeal is available at
Patent and Process Patent. A product
time, to assess an application from a
the post-grant stage, although delay in
patent grants exclusive rights relating
generic competitor seeking approval to
judicial processes can result in a patent
to a product that involve a non-obvious
sell a similar, competing drug.
holder enjoying a wrongful monopoly.
grants exclusive rights to the means of
When a generic application for a drug is
grant opposition.
manufacturing a product.
made, the Patent Office can eliminate
unnecessary animal and human trials of the
Compulsory Licence
Generics
drug, as it would already have been done
A compulsory license is a licence granted
A drug that is a bio-equivalent of an
for the innovator’s drug.The regulators can
by the government to use patents and
original drug that is either on or off
instead evaluate the application against
other types of intellectual property to
patents. It contains the same active
the data in the innovator’s registration
intervene in the market in the event of
ingredient and hence interchangeable
file. If a data exclusivity clause is in place,
a market failure - i.e. patented products
with the originator product. United Stated
then this evaluation can be done only after
not being available in right quantities or at
Food and Drug Administration (USFDA),
the period of data exclusivity is over. If the
affordable prices or in the case of a national
for example, requires a generic drug to
data exclusivity is for say, five years, then
emergency (say, a plague epidemic).
be the same as a branded drug in dosage,
it guarantees the innovator company
safety, strength, quality, mode of working,
exclusive control of the market for about
Evergreening of Patents
mode of consumption and usage.
eight years as it could take up to three
A strategy adopted by pharmaceutical
years more for that generic producers to
companies
register and market a generic version.
loopholes in the definition of what can be
India now has both pre-grant and post
inventive step, whereas, a process patent
Mailbox
to
take
advantages
of
Data exclusivity is not data protection
patented (scope of patentability) to obtain
developing
as the patent holders files are anyway
separate patents for multiple attributes
countries like India were allowed a
protected by copyright laws and are
of a single product or by citing marginal
10-year interim period to establish a
never released by the Patent Office to
improvements in the original product. If
national patent regime compliant with
third parties.
the scope of patentability does not specify
After the TRIPS Agreement came into
force
1
January
1995,
the TRIPS Agreement. Since India did
that patents will be granted only for‘new
chemical
regime for pharmaceutical products, an
Pre-grant and Post-grant
Opposition
interim holding cell for product patent
The Right of a member of public or an
incremental improvements and thereby
not historically have a product patent
14 | Trading Up | April-June 2005
entity’ then
pharmaceutical
firms can file patent applications for
extend the exclusivity guarantied by the
patents can be forthe individual chemical
patent for another 20 years. If a new use
entities that go into the product and
pharmaceutical products at the time of
of a known drug is aiso a criteria for grant
could be held by different pharmaceutical
theTRIPS Agreement. Suppose, a firm is
of patent (say, if aspirin, a medicine for
firms. A competitor wanting to produce
granted a patent and marketing approval
headache can aiso control high blood
a generic version of the drug will have
for a pharmaceutical product in a WTO
pressure), then a patent can be secured
to negotiate individually with each firm
member country, say United States.Then
for this new application. Evergreening
and pay royalty for each entity. The
it can be granted the sole authority to sell
cumulative royalties of all the patents
that product in another country, say India,
guaranteed by patent to the drug, thereby
(royalty stacking) will significantly add
for a period of five years, provided it gets
blocking out the entry of cheaper generic
to the price of the generic drug.
marketing approval in India as well.
Exclusive Marketing
Rights
Import of a patented drug sold cheaper in
extends
the
period
of
exclusivity
that did not have product patents for
alternatives into the market.
Patent Thickets
Parallel Imports
A scenario where several patents cover
Issuance of exclusive marketing rights
another country, without the approval of
a single pharmaceutical product. These
is a transitory arrangement in countries
the patent holder in the domestic country.
Continued from page 12
Fair Trade
liberalisation has adjustment costs that could impact smaller
borders. Rice imports to Haiti, an LDC, increased by 150
percent between 1994 and 2003 after the International
and poorer countries more. Hence, compensation programmes
Monetary Fund forced it to cut rice tariffs from 35 percent to
need to be designed smartly to factor these costs in and
3 percent. Ironically, three out of four plates of rice consumed
prevent these countries from being disenchanted.
in Haiti today come from the US, much to the impoverishment
of Haitian rice farmers.
However, to cite these adaptation pangs and static losses to net
food importing countries as reasons enough to preserve status
quo and debunk trade liberalisation where it is needed most,
Panagariya, A., ‘Agricultural Liberalisation and the Developing
Countries: Debunking the Fallacies’.
is strange. As strange as the American comparative advantage
in rice. Moreover, it cannot be ignored that many LDCs are
Cline, W., ‘Trade Policy and Global Poverty’, Centre for Global
net food importers today due to pressures from beyond their
Development, 2004
Continued from page 13
Demystifying TRIPS...
any country that possesses the manufacturing capability could
issue a compulsory license for exports to the notified country.
Agreement. The Agreement provides a time period of 10 years
from the date of application of agreement to LDCs to apply
Do national patent legislations of member countries of the WTO
the provisions of the Agreement. Further, LDCs do not have to
have a role in the debate surroundingTRIPS and public health?
comply with provisions related to patenting of pharmaceutical
products till 1 January 2016.
The role of national patent legislation of different countries is
very important. Countries in their national patent legislations
LDCs rely on big developing countries (Brazil, India etc.) to meet
should make use of theflexibilities given in theTRIPS Agreement
their domestic demand for generic drugs. However, as these
and frame their laws in such a manner that gives precedence
countries switch overto a product patent regime for pharmaceutical
to public health concerns over the rights of individual patent
products, the imports of these cheap generics can be affected.
holder. The Doha declaration clearly states that the TRIPS
The 30 August 2003 decision of the General Council of the
Agreement is to be implemented and interpreted in a manner
WTO was addressed towards finding a solution to the problems
that supports public health. National legislations of individual
of availability of cheap generics in these countries and other
countries should not provide for ‘TRIPS plus’ obligations
developing countries that have insufficient or no manufacturing
(obligations that go beyond the requirements of the TRIPS
capabilities in pharmaceutical sector. Such countries could notify
Agreement) such as granting of compulsory license contingent
theTRIPS Council of its intention to use the compulsory licensing
to an emergency or disallowing the grant of compulsory license
regime as an importer. Once such a notification has been made,
within first three years from the date of grant of patent.
April - June 2005 | Trading Up | 15
Aboyt Oeotad
stablished by Oxfam GB, the Centre for Trade and
E
Development is a not-for-profit organisation that seeks
to strengthen the ability of governments and communities
to make trade and globalisation work for development
through policy research, advocacy, and promotion of
informed public debates.
The last five to six decades have witnessed an unprecedented growth of global interdependence created by the explosive flow
of goods, services, people, capital and ideas across borders. Reduction of barriers, advances in technology and implementation
of radical ideas have catalysed this global integration of markets, and mobility of capital and information.
For developing nations to harness the opportunities that trade presents, they need to go beyond debates of whether globalisation
can be reversed and whether trade is necessary. More importantly, they need the capacity to protect their interests in multilateral
trade engagements, provide logical policy suggestions and build a wide network of stakeholders for dialogue and advocacy.
However, glaring gaps exist in terms of access to relevant information, policy advice based on sound research and the presence
of a wide segment of stakeholders who understand trade and can engage in a meaningful dialogue. While the establishment of
the World Trade Organisation (WTO) has galvanised civil society action and debates on trade, there is still a need to demystify
the arguments around the current processes of trade and development.
For these gaps to be addressed, there is a need to connect and enrich high-level policy research, negotiations and advocacy with
experiences of people and their organisations at the grassroots. Centad will attempt to address these gaps by:
* Developing a comprehensive knowledge centre on policy issues related to trade and development and building networks
with other such centres across the world.
»
Providing well-researched and cogently argued policy advice to governments on the linkages between trade and
development.
♦ Creating a platform for CSOs to share, debate and advocate on relevant and emerging issues of trade and development.
♦ Building the capacities of CSOs, private sector, trade unions, media, parliamentarians to understand and articulate debates
around trade and development.
♦ Educating the public to demystify the debates around trade and development.
Key Activities
1.
Undertake policy-oriented research on trade and development.
2.
Publish policy papers and briefing documents.
3.
Establish a contributory Trade and Development Report for South Asia.
4.
Organise seminars and fora for sharing knowledge and advocating on key policy issues.
5.
Engage with policy-makers to advocate and lobby for change at national as well as global levels.
6.
Develop a comprehensive, interactive website.
Forthcoming working papers of Centad
Negotiations in NAMA and South Asia: July Agreement and Beyond
Negotiations in Agriculture and South Asia: July Agreement and Beyond
For copies of Centad Working Papers, email:centad@centad.org
Wellcome to toe Focus on toe
GHobafi Souto’s DeranHer’si
Guide to toe WTO
From 13-18 December 2005, trade ministers and
delegations from the World Trade Organisation’s
(WTO) 148 country members will meet in Hong
Kong at the WTO’s sixth Ministerial Conference.
As farmers, fishers, indigenous peoples,
workers, women, mass organizations, social
movements and activists from all over the world
have repeatedly pointed out, there is nothing
even remotely developmental about the
current Doha round of WTO negotiations.
On the contrary, the Doha negotiations are
heading in a direction that will lock the world’s
peoples in a trade regime that will have disastrous
impacts on food security and sovereignty, industry,
employment, the environment, livelihoods and
the access of millions of people to essential
services, technology and health-care.
Any trade deal that emerges from current
negotiations will serve to consolidate the control
of large national and multi-national corporations
on the world’s agricultural, industrial,
technological and infrastructural capacity.
Delegates from several developing countries
— especially Africa, the Caribbean and Pacific
regions, and Least Developed Countries (LDCs)
— also share these concerns. But they appear to
be both, unable and unwilling to stop the WTO
machinery in its tracks and to demand the time
and the ‘political space’ they require to fashion
trade policies that truly serve the developmental
needs of their respective populations.
It is now up to the world’s peoples — all of
us — to bring pressure on our national law and
policy makers and trade delegates to immediately
halt the substance and direction of current trade
negotiations and urgently re-think the so-called
Doha Development Agenda.”
The Derailer’s Guide to the WTO
provides basic information about WTO agreements,
what is on the negotiating table for Hong
Kong and the remainder of the Doha Round
which will likely continue through 2006), and the
main actors in these negotiations. It also offers
ideas about how all those committed to social and
economic justice can stalemate, or derail, this
latest liberalization offensive through the WTO
parading under the guise of “development.”
As in the Seattle Ministerial Conference in
1999 and the Cancun Ministerial Conference in
2003, no deal is better than a bad deal, and
bad deal is the only possible outcome of the
direction in which the current negotiations are
heading.
Time is short and the issues are urgent and
many. If we want to protect our commons, and
our rights and capacities to shape development to
meet the priorities of our communities and
societies, it is imperative that we prevent a new
trade deal from being reached in the Hong Kong
Ministerial Conference and subsequent
negotiations.
That is, we need to DERAIL THE WTO!
We hope that you will find this
DERAILER’S GUIDE TO THE WTO, useful in
planning your strategies, actions and mobilizations
towards this goal.
1 To derail the WTO is an active strategy to shut down the WTO by preventing consensus in its negotiations.
2 Ministerial Conferences are the WTO's highest decision-making body and are empowered to take decisions on all
matters under any of the agreements within the WTO regime. At the Hong Kong Ministerial Conference, delegates are
slated to agree on the elements of a new trade deal to enable negotiations in the four year old “Doha Development
Round" to be concluded in 2006.
2
CONTENTS
1. The End of an Illusion.............................................
2. Ten reasons why this is not a development round...
3. The Agreements exposed:
- Agreement on Agriculture (AoA)
- The General Agreement on
Trade in Services (GATS)...........
- Non-Agricultural Market
Access (NAMA).....................
3
13
14
21
24
4. With a little help from its friends: WTO, IMF and
the World Bank...........................................................
28
5. The Colombo Declaration.....................................
30
6. The G-Guide Groupings in the WTO Agriculture
Negotiations.............................................................
33
7. Glossary and Trade Jargon.........................
36
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3
\The Derailer’s Guide to the WTO: Section l\
The End of an Illusion
WTO Reform, GtobaD CdvdO Society
and The Road To Hong Kong
SUMMARY
The “July Framework Agreement” is the last
nail in the coffin of the illusion that the WTO can
somehow be reformed, either piecemeal or
comprehensively, to serve the interests of developing
countries. More than ever, the Framework and its
aftermath have revealed the WTO to be an iron cage
that traps developing countries in a negotiations
game that is systematically skewed in favor of the
big trading powers of the North.
With even greater intransigence on the part of
the trading powers of the North today, as highlighted
by their paltry pre-Hong Kong offers in October and
November 2005, it is difficult to elaborate any other
strategy to protect the interests of the developing
countries and global civil society than the one that
was developed for 'Cancun-that is, derailment of the
WTO Ministerial.
Essentially, derailment involves zeroing in on the
key point of vulnerability of the WTO: its consensus
system of decision-making. Concretely, it means
working to prevent consensus from emerging in any
of the key negotiating areas prior to and during the
Sixth Ministerial in Hong Kong.
A strategy of derailment, to be successful, must,
in the months leading up to the Sixth Ministerial,
articulate lobbying and mass pressure in Geneva
with national mass campaigns directed at specific
governments, culminating in a coordinated program
of mass actions and lobby pressure in Hong Kong
and globally on D-day in the middle of December » '
2005 (I3th-I8th). .
1.
SEESAW STRUGGLE
The last few years have seen a seesaw struggle
between the World Trade Organization and civil
society. In Seattle, big power disagreements, the
revolt of the developing countries, and massive civil
society mobilization brought down the “bicycle of
liberalization”, to borrow C. Fred Bergsten’s
description
of the WTO as bicycle which can only remain
upright while it is moving forward with its free-trade
agenda. (1)
The bicycle was set upright in Doha, when the
absence of civil society mobilizations allowed the big
trading powers to bamboozle developing countries to
sign on to the so-called Doha Development Agenda to
expand the ambit of the WTO. Then in Cancun, in
September 2003, a better-organized South cum civil
society mobilizations inside and outside the Cancun
Convention Center, the tragic climax of which was the
suicide of Korean farmer Lee Kyung Hae, brought the
bicycle of liberalization down again.
Our victory was short-lived for the equivalent of
a coup was mounted at a General Council meeting in
late July 2004 in order to restart the stalled “Doha
Round” of trade negotiations on terms favorable to the
North. The WTO is upright again and is moving with
momentum towards the 6th Ministerial in Hong Kong
to be held in mid-December 2005.
Despite the apparent current stumbling blocks in
pre-Hong Kong negotiations (for example over tariff
reduction formulas, disciplining domestic support and
the elimination pf export subsidies), there are
disturbing signs of convergence. For example, India
and Brazil may be further co-opted into meeting the
demands of the EU and US in exchange for market
access (for Brazil) and concessions on the movement of
persons abroad to supply services (Mode 4) (for India).
That the WTO is an institution that can be
reformed to serve as a vehicle for a more benign kind
of globalization is one of the illusions that has been
left behind by these developments. The one positive
element in the 2001 Doha Declaration-the clear
statement that public health concerns take precedence
over “intellectual property rights”-was nullified by Big
Pharma’s successful effort to make well nigh
impossible the export of generic life-saving drugs from
developing countries with manufacturing capacity
to developing countries with none by imposing
onerous stipulations on both importers and exporters
4
So unacceptable and cumbersome were the
conditions imposed by the drug companies in the
decision adopted in August 2003 that no developing
country facing an HIV AIDS emergency took
advantage of the temporary waiver from Article 31
(f) of TRIPs provided for by the decision.
That reform is mission impossible was
underlined by the Cancun ministerial in September
2003,
when the EU and the US provoked the
collapse of the ministerial rather than significantly
reduce their high levels of support for their agricultural
interests or retreat in their effort to expand the
WTO’s jurisdiction to investment and other
economic activities beyond trade. The historic
walkout from the Green Room led by African
delegates was the only appropriate response to the
intransigence of the North.
The so-called July Framework adopted at the
WTO General Council meeting in Geneva in the late
summer of 2004 is another glaring example of
stonewalling by the developed countries. Practically al!
the key concerns of the South were subordinated to the
industrial countries’ agenda of defending their high
levels of agricultural subsidization, bringing down
non-agricultural tariffs, pushing the so-called “New
Issues” agenda, and pressing developing countries
make offers for the liberalization of services. In
contrast to more optimistic earlier assessments of the
possibilities of advancing developing country
interests in the WTO via a strategy of reform, Oxfam
International, for instance, bleakly characterized the
July Framework as “a minimal agreement that keeps
talks and the WTO afloat, but fails to bridge continuing
stark disagreements between developing and developed
countries, let alone guarantee a pro-development
outcome.” (2)
Not surprisingly, there is little talk these days
about “social clauses,” “environmental clauses,”
measures to institutionalize the priority of public
health concerns over patent rights, or agricultural
market access reforms as the key demands of an
agenda to reform the WTO. In the months leading
up to the Cancun meeting, civil society, operating
under the principle that no deal is better than a bad
deal, eventually coalesced around a strategy of
derailing the ministerial. If'anything, the prospects
of a good deal are even more distant as we move
towards Hong Kong. The strategy of derailing the
ministerial is even more relevant today.
The July Framework’s key agreements illustrate
why reform of the WTO is a dead end as a strategy for
developing countries and global civil society.
2.
THE KEY AGREEMENTS
A) INTRANSIGENCE IN AGRICULTURE
See Section 3, Part 1 of The Derailer's Guide to the
WTO for further details)
In Cancun, the firm stand adopted by the Group of 20
and Group of 33 against the demands of the United
States and the European Union for more access to
their markets while maintaining the high levels of
subsidization of American and European agriculture
prevented the initiation of negotiations for a new
Agreement on Agriculture that would be detrimental
to the interests of the South. Also key in frustrating
the agenda of the North was the tough stand of four
West African cotton producers-Benin, Burkina Faso,
Chad, and Mali-who demanded elimination of US
cotton subsidies that were ruining their production
as well as compensation for their losses.
Yet the “Framework for Establishing Modalities
in Agriculture” that emerged out of the late July
meeting produced agreements that were clearly
detrimental to the developing countries. Since July
2004,
there have not been any developments in the
offers made by the rich industrialized nations of the
north which would address these concerns.
Essentially, the Agricultural Framework:
1)
maintains or expands the key mechanisms of
“domestic support” or subsidization of EU and US
agriculture, the so-called Blue Box and Green Box;
2)
creates a new restrictive category-that of
“sensitive products”-to hamper market access for
developing country products; while
3)
makes conditional and non-time bound
. commitments to eliminate export subsidies; and
4)
pays lip service to the developing countries’
demands for the designation of “special products”
and other forms of special and differential treatment.
The flurry of proposals put forward by the EU
and US, in October and November 2005, have made
their offers in agriculture conditional on concessions
in services and industry. There is little being offered
in terms of Special Products or Special Safeguard
Mechanisms, and yet there are even greater demands
on tariff reductions and market access in developing
countries. At the same time, there is still little
progress on disciplining the Blue Box, capping the
Green Box or firmly eliminating export subsidies.
The balance of gains and losses is clearly on
the side of the trade superpowers of the North,
particularly the United States. On top of this,
developed countries rejected the demand of the West
5
African cotton producers that the elimination of cotton
subsidies and compensation for damages to their
production be treated as a separate, stand-alone item
of negotiations. Instead, the issue would be subsumed
under the general agricultural negotiations,
thus guaranteeing that its resolution would be
hostage to progress in these talks. This underlined
how eliciting even the slightest concession on an
issue that involved such manifest injustice was
next to impossible, even if that item had been a .
central factor contributing to the collapse of the
Cancun Ministerial. (3)
(B) RATCHETING UP THE PRESSURE
IN SERVICES
(See Section 3, Part 2 of The Derailer’s Guide to the
WTO for further details)
The Framework Agreement eliminates the room for
manoeuvre of developing countries in the negotiations
on the General Agreement on Trade in Services
(GATS), which were previously pursued on a separate
track from the Doha Round negotiations. (5) By
formally including them in the Doha Round, thus
effectively making them part of the “single
undertaking,” the Agreement increases the pressure on
developing countries to open up their services.
Indeed, the text calls for governments to submit initial
or revised offers of services to be opened up by May
2005.
To date only about 92 developing countries
have submitted offers owing to technical difficulties
assessing which service sectors to open up owing to
great uncertainty as to how liberalization would affect
these sectors. (6)
By formally tying the services negotiations to
the negotiations in other areas, the Framework allows
the EU and US, in particular, to hold the negotiations
in agriculture hostage to the services negotiations,
and vice versa, by conditioning their “concessions” in
one area dependent on their gains in the other.
With 50 per cent of the GDP of developing
countries now accounted for by services, access to
this market is the dominant concern of the Framework.
At stake is the privatization of public services (such as
energy and education) and the commons (such as
water) by foreign owned multinationals. Under GATS,
governments are effectively prevented from exercising
national control over these companies and would
therefore be unable to regulate prices, ensure universal
coverage of services or oversee labour standards.
Such policies and practices will be locked by GATS
and will not be able to be changed, even where they
negatively impact upon the population or the
economy.
Under current proposals, any commitments to
liberalisation in Mode 4 (presence of natural persons
abroad to supply a service) appear to be limited to the
temporary movement of skilled professionals. There is
also ambiguity and a lack of predictability with respect
to the current offers. (7)
Developed countries, led by the European Union
(EU), are now proposing a “benchmark” approach to
speed up the negotiations. This new approach aims to
identify 10 key sectors in the GATS, from which
developing countries will be asked to choose 6-7
sectors in which they must make minimum
commitments on. This process, known as
benchmarking, would remove any flexibilities under
the existing request-offer model, and enforce the
reduction of tariffs on commercially sensitive
industries vital for development.
This accelerated and binding process may be the
death knell for public services.
(C) NON-AGRICULTURAL
MARKET ACCESS AND THE SPECTER
OF DE-INDUSTRIALIZATION
(See Section 3, Part 3 of The Derailer’s Guide to the
WTO for further details)
The give-no-quarter posture of the trade superpowers
was evident as well on the issue of market access for
non-agricultural commodities (“non-agricultural
market access” or NAMA).
The agreement on NAMA, and subsequent
proposals by the US and EU, are based on the so called
“Derbez Text” floated during the Cancun
ministerial (named after the Mexican Secretary for
Foreign Affairs Luis Derbez, who was chairing the
ministerial), which was rejected by many developing
countries.
The key reasons for the rejection were a nonlinear
formula for tariff reduction, sectoral negotiations,
and weak special and differential treatment. The
non-linear formula, notes UNCTAD, would require
“deeper cuts for higher tariffs,” so that it “would result
in greater tariff cuts for many developing countries
because they generally maintain'higher bound tariff
structures.” (4) This would be contrary to the provision
of “less than full reciprocity” for developing
countries under the .principle of Special and
Differential Treatment. Despite this concern, the July
Framework provides for continuation of work on a
non-linear formula.
Developing countries with already relatively low
tariffs on non-agricultural products also expressed
concern over the “sectoral initiative” that proposed
deep tariff cuts on 100 per cent of all categories of
6
imported commodities falling under a designated
industrial sector such as, for instance, “electrical and
electronic products” or “textiles and garments.” As
UNCTAD has noted, “Many developing countries and
LDCs have already liberalized unilaterally, including
under structural adjustment programs, and their
applied rates are often low. Binding those rates close
to applied rates may thus limit their policy space for
industrial development purposes.” Indeed,
deindustrialization, which began under structural
adjustment programs, is feared to accelerate under
NAMA. On the other hand, the US National Association
of Manufacturers saw the July Framework’s
provisions on NAMA as “a huge accomplishment, and
a big win for the WTO, the United States, and the
World economy. The really big accomplishment is that
all countries have accepted the principle of big tariff
cuts and sectoral tariff elimination.”
NAMA, together with agriculture (AoA). may be
the deal breaker at the WTO in December. There is still
a lack of consensus over a number of issues including
the tariff reduction formula, the binding of tariffs, the
status of the July Framework text and acceptability of
the so-called Pakistan compromise. At the same time,
there are disturbing signs of convergence as we
approach Hong Kong.
3.
PLACING THE DEVELOPMENT AGENDA
ON THE BACKBURNER
Like the Doha Declaration of 2001, the July Framework
and on-going negotiations in the lead up to Hong
Kong, give short shrift to the main concerns of
developing countries:
Patenting under TRIPS. There are outstanding
issues related to the Trade Related Intellectual
Property Rights Agreement (TRIPs) such as the
revising Article 27.3 (b) to prohibit the patenting of
life; the relationship between TRIPs and the Convention
on Biodiversity; and the protection of traditional
knowledge and folklore. However, there is simply an
affirmation in the July Framework to move ahead in the
negotiations with no specific goals, except for members
to submit new or revised offers by May 2005.
Neither are there guidelines to revise TRIPs Article 31
(f) to institutionalize the Doha Declaration’s putting
public health concerns over intellectual property
rights.
Special and Differential Treatment. The
institutionalization of Special and Differential Treatment,
a key principle of development, remains as
distant as ever, with the Framework simply providing
for work to continue to outstanding issues. The
reason for the lack of movement here is that “developed
countries refuse to make Special and Differential
Treatment (SDT) operational and effective until the
more advanced developing countries are graduated out
of SDT. This premise is fundamentally flawed, as all
developing countries need special and differential
treatment, given widespread poverty and the need to
protect infant industries in the' developing world:
Denying them SDT would amount to kicking away the
ladder.” (8)
Implementation. Implementation has been a
burning issue for most developing countries owing to
the cumbersome process and, for many, high costs of
making their trade policies, regulations, and laws
“WTO -consistent.” Yet the July Framework does not
mention any implementation issue of significance to
the developing countries. In contrast, the only
implementation issue explicitly addressed is one that is
of concern mainly to the developed countries: the
extension of additional protection on geographical
indications (GI) on commodities other than wines'and
spirits.
4.
PROCESS: INTIMIDATING AND
OUT-MANOEUVERING THE SOUTH
How could such an Agreement come about after
Cancun, when the developing countries appeared to
have come some way towards altering the balance of
power?
The answer is by regaining control of the
negotiating process via divide and conquer tactics,
unfair negotiating tactics, and, most important, an
institutional coup. As Oxfam International saw it, “The
[July 2004] Council meeting was... characterized by a
non-transparent, non-inclusive process, dominated by
big trading powers and characterized by brinkmanship
and power play.” (9) The lesson: the procedures of the
WTO are heavily weighted against the South.
(A)
DIVIDING AND NEUTRALIZING THE G20
The G20 formation of big developing countries “broke
the monopoly over trade negotiations formerly
enjoyed by the US and the EU,” according to Brazilian
Ambassador Clodoaldo Hugueney during the Mumbai
Social Forum in January 2004. The G20 was not alone,
however, with the G33, which was formed mainly by ’
smaller agricultural countries, and the G 90, which
formed in opposition to the new issues, playing
important roles. (10)
Initially, the US response was to pursue a
unilateralist course outside the WTO via a dual
strategy of sewing up bilateral and multilateral free
7
trade agreements, while at the same time destroying
the G20. (11) By the.'spring of 2004, however,
Washington’s two-track strategy was running into
trouble. The Free Trade Area of the Americas (FTAA)
that it wanted failed to materialize at the ministerial
summit in Miami in November 2003, and it also 15’egan
to realize that bilateral agreements could complement
but never substitute for a comprehensive, multilateral
free trade framework to promote corporate trade
interests. At the same time, the G20, despite the initial
defections, held firm.
To get the WTO restarted, Washington, working
closely with Brussels, shifted gears. Instead of trying
to destroy or undermine the G20, they moved to make
its leaders, Brazil and India, a central part of the
negotiations in agriculture, which was the key obstacle
to any further moves at liberalization. Thus was formed
in early April the informal grouping called the Five
Interested Parties (FIPS or G5), composed of the US,
EU, Australia, Brazil, and India. The ostensible aim of
this move was to organize the discussion with close to
100 developing countries'by having India and Brazil
“represent” them. The FIPS, jn short, was intended as
some sort of Green Room, exdept the representation of
developing countries in it was far more limited than in
the regular Green Room. It was in close consultation
with this exclusive grouping that WTO Agriculture
Committee Chairman Tim Groser produced the proposed
agriculture text of the July Framework.
The US-EU strategy was apparently to bring
Brazil and India into the core group of the negotiations,
and then accede to these countries’ core
demands in order to detach them from the rest of the
developing countries.
India. The key concern for India was to avoid the socalled
“Swiss Formula” for cutting tariffs that would
require deeper cuts on its highest agricultural tariffs
relative to other tariffs, something on which it saw eye
to eye with the European Union. According to one
developing country negotiator, India’s main focus for
the General Council was protecting its tariffs and it
was not going to push hard on the issue of eliminating
agricultural subsidies so as not to endanger the
EU’s support for its position on tariffs. (12) Both the
EU and India were comfortable with a “Uruguay
Round” approach to tariff cuts that would focus on an
average cut across all agricultural lines and not
“discriminate” against their highest agricultural tariffs.
Such a formula, they felt, would allow them to
maintain tariff levels that would be high enough for
their most protected commodities to survive another
round of cuts. There were developing countries,
however, for which even a Uruguay Round approach
would be too drastic, for example Honduras, Sri Lanka
and Indonesia.
Brazil. For Brazil on the other hand, removing
agricultural subsidies was its concern, and here it got
its way-or thought it did. The final text affirmed the
phase-out of export subsidies as well as certain
categories of export credits. The big winner with the
phase-out of subsidies is said to be Brazil, with some
estimates placing its gains.as some $10 billion.
According to Brazilian Foreign Minister Celso Amorim,
the July decision marked the “beginning of the end” of
export subsidies. Yet, as noted earlier, the Brazilian
“gains” are nbt secure unless locked in by the
modalities of the negotiations. A specific end-date for
the elimination of export subsidies will only be
clinched in the next phase of discussions. Moreover,
even when elimination has supposedly taken place,
the EU has been known to replace export subsidies
with indirect export subsidies by, way of direct
payments to farmers under the Green Box. This is, in
fact, the intention of the current Common Agricultural
Policy (CAP) reform. Furthermore, the framework left
untouched the Green Box, which houses up to 70 per
cent of US’ total subsidies. Even the most optimistic
analysts cannot say for certain that overall levels of
support from the two agricultural giants will be
brought down. In fact, it is predicted that subsidy .
levels will be maintained if not increased.
It was not that India and Brazil were not sensitive
to the demands of other developing countries. In
fact, they were given high marks for consulting the
different developing country groupings. It was simply
that by becoming central actors in the elaboration of
the proposed framework, they had put themselves into
art impossible situation. And the more meeting their
own interests began to diverge from a strategy of
promoting the interests of the bulk of the developing
countries, the more they trumpeted the claim that the
July Agreement on agriculture was a victory for the
South. It is testimony to the prestige of India and
Brazil among other countries in the South that it was
only belatedly, a few weeks after the July Accord, that
the reality began to sink in among many developing
countries that they had been out-manoeuvered.
With a framework agreement on agriculture—the
most decisive negotiating area for most developing
countries—in place, the trade superpowers rode the
momentum to pressure developing countries into
agreements on NAMA, services, trade facilitation and
other areas.
8
(B)
WILY NEGOTIATING TACTICS
In addition to veiled threats and power plays, a wily
negotiating strategy on the part of the EU and the US
was another reason.for the developing country
setback. The moves of the trade superpowers were
calculated to put the developing countries on the
defensive. Often, working together in a coordinated
fashion, they had the negotiating advantage vis-4-vis
a much larger set of countries whose many interests
had to be reconciled with much effort into common
negotiating positions. One example of the
Washington’s skillful exploitation of its negotiating
advantage was its strategy on the Blue Box in the
agricultural talks. To get a new, expanded Blue Box,
Washington distracted the developing countries’
attention by putting forward the demand that they
reduce their de minimis domestic supports (that is, the
allowable rate of subsidization of their production).
Thrown on the defensive, these governments spent so
much energy justifying their subsidies that they were
only too relieved when the US stepped back to
compromise on the issue in return for their agreeing to
the expansion of the Blue Box. Similarly, just before
the General Council meeting, the European Union
suddenly introduced the proposal for “sensitive '•
products” to protect some 20-40 per cent of its products
from significant tariff cuts. Worried that the EU might
put blocks to their demand for protecting “special
products” or commodities essential to their food
security, the developing country negotiators
acquiesced.
(C)
INSTITUTIONAL COUP
But probably the most important process or procedural
victory registered by the trade superpowers was to
shift the effective locus of decision-making from the
ministerial to the General Council -though this was, of
course, accomplished with the support of influential
governments such as India and Brazil.
After the collapse of the Cancun ministerial, the
developed country governments apparently realized
that the ministerial, the prime decision-making
mechanism of the WTO, is also its key point of
vulnerability. The WTO Consensus rule-a process that
has been managed by the so-called Quad, composed of
the US, EU, Japan, and Canada —works best in
smaller, more non-transparent settings. (13) In a larger,
more open meeting, it can become a disaster.
Ministerials, the trade superpowers realized,
invite a debacle for several reasons:
■ They attract citizens and citizens’ groups,
thus subjecting negotiators to popular
pressure.
□
They ensure the presence of the press, thus
forcing the proceedings to be less non
transparent than usual.
□ They highlight the contradiction between
formal sessions, which are reserved for
speechmaking, and informal meetings where
the real decisions are made, thus exposing
the organization to the charge of being non
transparent and non-democratic.
□ They bring representatives of national
governments, such as trade ministers and
environmental ministers, many of whom are
more sensitive than Geneva-based
negotiators to popular pressure and are not
socialized into the Geneva culture of
negotiations.
The interaction of these elements produced the
collapse of the third ministerial in Seattle and the fifth
ministerial in Cancun, with the role of civil society
mobilizations being clearly most decisive in Seattle.
The absence of one vital element-civil society
mobilizations- in Doha, Qatar, contributed to a
manageable, successful ministerial that was a disaster
for the developing countries. (14)
Learning from Doha, the trade superpowers, with
the acquiescence of influential countries like India and
Brazil, manoeuvered to push the General Council,
which meets in Geneva, to make the major decisions
that traditionally belonged to a ministerial. The
Council meeting in Geneva at the height of summer
consisted mainly of professional negotiators and other
governmental representatives of non-ministerial rank.
Indeed, there were said to be only around 40
ministerial level representatives out of 147 present.
Equally important, there was but a sprinkling of civil
society organizations, and those who were present were
prevented from demonstrating by the Swiss police.
Many of them were also banned from being present at
the WTO proceedings, thus severely restricting their
interaction with delegates. In a very real sense, then,
the July General Council meeting was an institutional
coup, one that could provide a precedent for future
decision-making. UNCTAD warns that Hong Kong
may be transformed into a ‘stocktaking session’. (15)
5.
A DERAILMENT STRATEGY FOR HONG
KONG
A)
NO DEAL IS BETTER THAN A BAD DEAL
The dynamics of the July Framework make it highly
unlikely that the developing countries will get a
ministerial decision which would serve their interests.
The psychological war that was so prominent in the
lead-up to the July Agreement is again in motion in the
9
lead up to Hong Kong. Already, developed country
groups have warned that unless the poorer countries
make better offers on their services, “Hong Kong will
fail.” (16) Likewise, at a recent meeting in Mombassa,
Kenya, developing country demands for movement on
Special and Differential Treatment met with the same
response: the more advanced developing countries
should be graduated out of SDT. (17) But on I
November 2005, the G33 appeared to stand firm that SP
and SSM must be included with the same level of
specificity as the other areas of market access pillar.
Also, there is as yet no sign that the EU is prepared in
Hong Kong to set a specific date for the ending of
export subsidies. (18) At the same time, France is
questioning the EU’s capacity to negotiate tariff and
subsidy, reductions on its behalf, and is threatening to
veto EU proposals. And the US has reiterated that it is
no mood to make concessions on Mode 4. of GATS.(19)
The US-EU “psywar,” unfortunately, is taking
its toll on the South. Instead of standing up to
pressure from the North, the G20, in its final
declaration after its meeting in New Delhi on the
third week of March 2005, stated that an agreement
on modalities in the Hong Kong ministerial must be
compatible with the July Framework and in line with
the Doha Declaration; that negotiations on agriculture
must be “intensified to stimulate progress in all
other areas of negotiation” (a persistent demand of
the EU and US); and that a first “approximation” of
modalities must be ready for the General Council
meeting in July 2005.
With little chance of getting a conclusion to
the Doha Round that would be beneficial to the
interests of developing countries, the only viable
strategy is to prevent a ministerial agreement that
would simply perpetuate the inequities of the
current system. In Cancun, the developing countries
and civil society ultimately came around to the
position that no deal was better than a bad deal.
With the July Agreement already serving as a
framework for the Hong Kong Ministerial document,
a strategy to derail the Ministerial is even
more valid today. No deal is better than a bad deal
since the only possible deal is one that would
further consolidate the underdevelopment,
marginalization, and immiseration of the South.
In brief, here are some reasons why:
1.
The Framework Agreement for Agriculture is
nothing but a massive dumping enterprise aimed at
developing countries that will exacerbate the
massive displacement of small farmers taking place
under the current Agreement on Agriculture.
2.
NAMA (Non-Agricultural Market Access) is a
prescription for the deindustrialization of developing
countries, increased unemployment, and bankruptcy
of small, medium, and even big national enterprises.
3.
The July Framework creates unwarranted pressure
,on developing countries to open up their services to
transnational corporate control.
4.
Trade facilitation negotiations are mainly the
opening wedge for the other, more threatening new/
Singapore issues (investment, competition policy,
government procurement)
5.
The July Framework and subsequent negotiations
prioritise the agenda of the developed countries and
disregards the primary concerns of developing
countries, which are special and differential treatment
and implementation issues.
(B) NO TO A “STOCK-TAKING MINISTERIAL
If derailing the ministerial is the key strategic objective,
then it is important first of all to make sure that the
ministerial is a decision-making ministerial and is not
converted by the developed countries into a stocktaking
exercise whose input would feed in to a General
Council Meeting like the July 2004 meeting. This
danger must not be underestimated since, as noted
earlier, the big trading powers have become paranoid
about the way large mobilizations can interact in
unmanageable ways with the postures of the developing
countries at the height of negotiations.
(C) PREVENTING CONSENSUS
Assuming that the ministerial remains a decision making
ministerial, the movement must focus on the
key point of vulnerability of the WTO decision-making
process: the consensus rule. Concretely, it will mean
preventing consensus from emerging either before or
during Hong Kong in any of the key negotiating areas.
The earlier gridlock can be brought to prevail in the
negotiations the better it will be for the developing
countries.
6.
TAKING STEPS TO DERAIL HONG KONG
Derailing the ministerial will be a complex operation
that will involve articulating mass campaigns at the
national level and Geneva-based lobbying and
mobilization leading up to coordinated lobby work and
mass mobilizations in Hong Kong and elsewhere
during the mid-December ministerial.
(A) LOBBYING YOUR WTO TRADE
DELEGATION
Much of this work can take place by lobbying your
WTO trade negotiators based in your capitals or in
Geneva.
10
® Pressure Brazil'and India not to take any more
unilateral initiatives and to carefully coordinate
their moves not only with other members of the
G20 but also with other blocs, such as the G33
and the G90. India and Brazil should be pressured
to leave FIPS (Five Interested Parties) and
ppt pressure on all parties (e.g., G20 and EU) to
dissolve FIPS. To achieve this, other developing
countries should be encouraged to openly speak ■
up against FIPS as the main negotiating forum
for the agricultural interests of all developing
countries. This is rather urgent since the FIP
process has resumed following the mini-ministerial
in Kenya in early March, with much the same
dynamics. As a TIP/IATP update on events in
Geneva warns, the process has dangerous
implications not only for the agricultural negotiations:
“Some sources in Geneva say this type of
process-possibly with the addition of a few more
key co'untries-is considered as a possible model
for other areas'of negotiations, such as NAMA.
This approach to negotiations shows the
continued tendency for WTO Members to
conduct negotiations that claim to be on behalf
of everyone, yet only reflect the interests of the
biggest powers.” (20)
O Pressure the G20 to push a strong collective stand,
especially against the Agriculture Framework and
NAMA.
O Pressure G33 to strongly protest and resist efforts
by the EU to impose the category of sensitive
products and expose the lack of real commitment of
developed countries to special safeguard mechanisms
and special products.
• Pressure G90 especially to stymie negotiations on
trade facilitation by portraying this as really an
opening wedge for other, more threatening new
issues.
• Raise the process and democracy issue strongly by
denouncing the General Council as usurping the
functions of the Ministerial. Denounce and oppose
efforts to make Hong Kong a “stocktaking”
session rather than a decision-making session.
• Oppose the holding of more “mini-ministerials ”
and other informal decision-making processes.
Justified as necessary to facilitate the negotiation
process, WTO mini-ministerials, where a few
handpicked countries are invited to attend, are
informal processes that have actually been used
to undermine the formal decision-making process
of the WTO based on majority rule. Not surprisingly,
mini-ministerials are often used to reach
decisions unfavorable to the South. (21) Already,
in 2005; mini-ministerials have been held in
Davos, Switzerland, in late January, and
Mombassa, Kenya, in early April. A miniministerial
on NAMA is slated for Tokyo on April 10 and another
for Paris on May 3-4. Also to be opposed are informal
group decision-rriaking meetings such as “Senior
Officials Meetings” (SOM), one of which will be
hosted by Canada in Geneva on April 18-19, where
about 30 countries are expected to attend.
This proliferation of informal meetings
dominated by the North reveal that as Hong Kong
approaches, the decision-making process is
becoming more informal and non-transparent to
conceal the escalation of pressure on the developing
countries to make concessions.
B)
NATIONAL MASS CAMPAIGNS
'
At this level, the priorities should be to:
O Expose the transnational corporate agenda behind
the agreement on agriculture (AOA), NAMA, and
GATS.
O Concentrate on building up comprehensive national
mass campaigns against the July Framework. This
will mean getting;NGOs working on the WTO to
work more closely with trade unions, farmers’
groups, and other social movements.
O Create or consolidate lobby work on legislators and
trade bodies, and coordinate this with national
mass campaigns.
' '
O Coordinate national level lobby work and national
mass campaigns with pressure work on government
negotiators in Geneva at critical junctures.
O Work closely with media in order to get them to
report more critically on WTO processes.
C)
HONG KONG, D-DAY, 13-18 DECEMBER
2005
Hong Kong must be seen not as the start but as the
culmination of an international process that began
months before.
As in Cancun, numbers will make a difference.
Thus no effort must be spared to draw thousands of
demonstrators from all over the world, but particularly
from North and Southeast Asia and from Hong Kong
itself. Mobilizing the numbers for Hong Kong must
be a central part of the agenda of the national mass
campaigns, especially those in Northeast and Southeast
Asia. Mass demonstrations should be staged in
other parts of the world, along with acts of civil
disobedience, and these actions should be synchronized
with the Hong Kong actions.
11
We must prepare not only for demonstrations
and teach-ins but also for massive civil disobedience.
In this regard, organizers must be prepared to appeal
to Hong Kong authorities’ rhetoric about respecting
individual and civil rights to create maximum space for
different varieties of mass action. Drawing from the
successful tactics of the Our World is not for Sale
(OWINFS) network in Cancun, there must be effective
but flexible coordination of lobby strategy within the
ministerial, civil protest within the ministerial premises,
and mass protests and civil disobedience outside the
ministerial meetings.
The Hong Kong People’s Alliance on the WTO
is the coordinating center for major activities.
Broad unitary coordination with tactical
flexibility should be the principle of the mass/lobby
actions.
7.
DON’T FORGET THE SECOND FRONT
While making the Hong Kong ministerial a major
objective, we should not lose sight of the fact that the
WTO is one of two fronts where the trade superpowers
are pursuing their trade liberalization agenda. The
other is regional and bilateral agreements such as the
Free Trade of the Americas and the US-Thailand Free
Trade Agreement. The trend is disturbing. There are
215 regional trade agreements in force today and the
number is expected to exceed 300 by 2007. (22) .Many
of these are North-South RTAs where “negotiations
tend to result in deeper market access and higher
regulatory standards than negotiations at the multilateral
level.” (23) Thus'even as we focus on the WTO,
we must not let down our guard against developed
country initiatives to corral developing countries into
FTAs and RTAs. At the same time, we should not be
fooled into believing that the WTO is more acceptable
than FTAs and RTAs because it is a multilateral forum
with “universal rules” that every country, big and small,
is supposed to comply with. If recent US and EU
diplomacy is any indication, FTAs and RTAs are seen as
complementary, not contradictory to the WTO, in
pushing the interests of the trading powers. The WTO
sets an initial level of mandatory liberalization that RTAs
can build on for more thoroughgoing liberalization.
8.
ALTERNATIVES
Following a derailment strategy will bring up the
inevitable question about what the alternative is.
Components of an alternative framework .could be
informed by the following:
O the WTO is a relatively new organization, and
world trade functioned pretty well without a
centralized institution and system of rules before
its establishment in 1995;
O the alternative to a centralized global institution like
the WTO is not “chaos,” as the big trading powers
would like to paint it, but more space that would
enable countries to adopt diverse national strategies'
that respond to the values, priorities, and rhythms of
different societies (as opposed to the neo-liberal, oneshoe-fits-all model imposed by the WTO);
O the interests of developing countries can best be
served by a pluralistic system of economic governance
in which many institutions such as the United Nations
Conference on Trade and Development (UNCTAD),
International Labor Organization, multilateral
environmental agreements, regional economic blocs,
and a radically scaled down and disempowered WTO,
check and balance one another and thus provide
countries with developmental space”;
O regional economic blocs formed on the principle of
subordinating trade to development needs and
coordinating economic activities other than trade
while respecting the principle of subsidiarity (that
is, that production should, as much as possible, be
locally based) may be an important cbmponent of
the alternative to the WTO-centered governance of
neo-liberal globalization.
9.
CONCLUSION
The stakes are high as we approach Hong Kong.
One outcome could be that the WTO finally gets to be
consolidated as the engine of liberalization of trade
and other key dimensions of economic activity such as
investment. Another is that it unravels a third time and
becomes permanently crippled as an agent of the
global neo-liberal agenda. Hong Kong could be the
Stalingrad of the WTO, its high water mark, when the
drive to roll it back gets the upper hand and gains an
unstoppable momentum. The outcome, to a great
extent, depends on us-our determination, our strategy,
our tactics.
* This article first appeared in Focus bn Trade
#108, April 2005. http://www.fociisweb.org. It is updated
as at November 2005. Focus would like to thank Aileen Kwa
and Alexandra Strickner for their assistance in the preparation
of this
paper.
12
Endnotes
1.
C. Fred Bergsten, Director of Institute of International
Economics, Testimony before US Senate,
Washington, DC, Oct 13, 1994.
2.
Oxfam International, "Arrested Development? WTO
July Framework Agreement Leaves Much to be.
Done,"August 2004, p. 1.
3.
Many civil society organizations see the problem with
the AOA as going beyond the US and EU’s efforts to
retain their subsidies. Even if the EU and US were to
do away with their subsidies, they argue, the
resulting global free trade framework would be
detrimental to smallholder peasant agriculture, which
would be forced to turn from serving the domestic
market to competing as well in the international
market. In this process, economies of scale, capital
needs, and effective market penetration would
unleash a process of concentration that would lead to
the displacement of small farmers and to
concentration of production under agribusiness.
Under a WTO framework, small fanners would also
continue to be subject to a patent regime serving not
their interests but those of northern agribusiness.
For these reasons, many farmers' organizations
such as Via Campesina no longer see the WTO as a
suitable framework within which to promote the
interests of small farmers, both in the South and in
the North.
4.
United Nations Conference on Trade and
Development (UNCTAD), "Review of Developments
and Issues in the Post-Doha Work Program of
Particular Concem.to Developing Countries: a Post
UNCTAD XI Perspective,"Note by the UNCTAD
Secretariat, Aug. 31, 2004, p. 12.
5.
Alexandra Strickner, IATP, Personal Communication,
Porto Alegre, Jan. 29, 2005.
6.
Estimated from UNCTAD, p 13, and "Countries Warn
on Services Market Access, Fear Hong Kong
Failure,"Inside US Trade, Dec. 10, 2004
7.
UNCTAD, p. 14.
8.
Oxfam International, "One Minute to Midnight: Will
WTO Negotiations in July Deliver a Meaningful
Agreement?," Oxfam Briefing Paper, No. 65, July
2004, p. 8
9.
Oxfam International, "Arrested Development...,"p.1
10.
See fuller'account of this in Walden Bello and Aileen
Kwa, "G 20 Leaders Succumb to Divide and Rule
Tactics: the Story Behind Washington's Triumph in
Geneva," Focus on the Global South website, posted
Aug. 10, 2004: http://www.focuweb.org/main/html/
Artcile 408.html? In fact, as Dot Keet reminds us, it
was the G 90, not the G 20, that started the walkout
that brought down the Fifth Ministerial. Statement at
Seminar on G 20, Porto Alegre, Jan 30, 2005.
11.
Walden Bello and Aileen Kwa.. A longer account of
this is given in Walden Bello, Dilemmas of
Domination: the Unmaking of the American Empire
(New York: Metropolitan, 2005), pp. 179-192
12.
The Indian government's position on subsidies had ■
been watered down by its informal alliance with the
EU on the tariff issue after the Doha Ministerial
before the EU abandoned the Indians to align
themselves to a common position with the US in the
period leading up to Cancun.
13.
Bergsten.
14.
It must also be pointed out that there was one other
contextual factor working to the disadvantage of the
developing countries: the post-Sept. 11 atmosphere,
which the US exploited by claiming that failure of the
developing countries to move forward on multilateral
negotiations was tantamount to abetting terrorism
15.
UNCTAD, p. 7
16.
“Countries Warn on Services Market Access...,"
Inside US Trade, Dec. 10, 2004
17.
Washington Trade Daily, March7, 2005.
18.
Owing to strong reactions from developing countries,
however, the EU may set a phase-out date before or
.. during the Hong Kong Ministerial. Nonetheless, as
we have pointed elsewhere, subsidization will
continue via other channels, like the Blue Box or the
Green Box. ■
19.
“Countries Warn on Services Market Access...,"
Inside US Trade, Dec. 10, 2004
20.
Carin Smaller, "Too Much, Too Fast: What Happened
to the Doha Development Agenda," Trade Information
Project/lnstitute for Agriculture and Trade Policy
Geneva Office, March 24, 2005.
21.
See Fatoumata Jawara and Aileen Kwa, Behind the
Scenes at the WTO (London: Zed, 2003), p. 280.
22.
UNCTAD, p. 19
23.
Ibid.
13
|77ieDerailer’s Guide to the WTr.: Section!
Ten reasons why no deaS
os better than a bad deaD
At the 6>hWTO Ministerial in Hong Kong, no deal is
better than a bad deal since the only possible deal
that can come out of ongoing negotiations is one that
would further consolidate the underdevelopment,
marginalisation and immiseration of the South. Here
are ten reasons why:
1.
Dumping: A new deal would force developing
countries to open their agricultural markets further to
the entry of highly subsidized products, thereby
undercutting the prices of local produce, undermining
local livelihoods and exacerbating distress migration.
2.
Domination: A new deal is about domination of
the world’s markets by the trading superpowers and
their transnational corporations, at the expense of
peoples’ rights and livelihoods.
3.
Denial: Developing countries have repeatedly
called for mechanisms to protect their food security
and the livelihoods of their rural populations undier the
Agreement on Agricutlure. The US and EU have
consistently denied them of these options.
public services such as water, power, health and
education, limiting access to these services to only
those who can afford it and depriving everybody
By letting the Trade Related Intellectual Property
(TRIPs) Agreement remain as it is, millions of people
the world will be deprived access to essential and
saving drugs.
7. Disempowered: The General Agreement on
Trade in Services (GATS) would ‘lock-in’ countries
liberalization of services and limit the options for
developing countries to regulate these service sectors
in accordance with their development priorities. The
new proposed “benchmarking” approach in GATS
would force countries to open up sectors that they
not want to liberalize and undermine public interest
everywhere.
8. Diminished: By further entrenching the power
the rich trading nations of the North, a new deal would
aggravate the imbalance in world trade instead of
address it. This will diminish any hopes for least
developed and developing countries to have true
development.
4. De-Industrialization: A new deal would lead to
de-industrialization, and the killing off of fledgling
local and domestic industries in developing countries,
which will result in job losses, unemployment and
greater poverty.
5. Destruction: A new deal would force developing
countries to liberalise sensitive sectors such as
fisheries and forestry on which millions of rural
livelihoods depend. The Non-Agricultural Market
Access agreement (NAMA) would push for more .
exports of fisheries and forestry products, destroying
small scale fisheries and communities.
9. Danger: A new deal would lead to more not less
WTO-plus bilateral and regional free trade agreements,
as it would set the ground for deeper and faster
liberalization. Intellectual Property Rules (IPRs) under
the WTO and WTO-plus trade agreements will deepen
threats to bio-diversity, traditional knowledge and
rights of indigenous peoples all over the world.
10. Development: And finally, no deal is better
a bad deal because there is nothing developmental
about this round and there is absolutely nothing for
developing countries and majority of the world’s
peoples to gain from this deal.
6. Deprivation: A new deal would open up the
services sector to liberalisation, including critical
14
\The Derailer’s Guide io the WTO: Section 3 Part 1|
btransogemce 5m AgracuKure
Agreement On Agriculture (AoA)
What is the AoA?
The Agreement on Agriculture (AoA) is one of the
most controversial agreements under the World
Trade Organization! (WTO) regime. The objective
of the AoA, which came into effect in 1995, is to
reduce barriers to trade (such as tariffs, quotas and
subsidies) thereby making domestic and global
agricultural sectors more market-oriented. The rationale
is that the removal of such trade-distorting
measures will increase the volume in trade from which
all countries, including developing countries, will
benefit. Focus on the Global South however
questions the validity of this neo-liberal argument,
citing countless reports detailing the negative effects
of WTO-enforced liberalization on developing
countries and their mostly rural populations.
The AoA is anchored on three main provisions
or ‘pillars’ - Market Access, Domestic Support and
Export Competition. Negotiations at the WTO are
currently taking place in all three of the pillars, and
cover such topics as tariffs, export subsidies and
the permitted levels of support provided to farmers.
The three pillars of the AoA are: 2
Market access is the extent to which a country
regulates the importation of foreign products. The
market access provisions of the AoA aim to progressively
lower protectionist barriers to trade. The
agreement calls for the conversion of all non-tariff
barriers (such as quotas) to tariffs, in a process
known as tariffication, and the reduction of all
tariffs:
■ by 36% on average, and a minimum of 15 % per
tariff line for developed countries; and,
■ by 24 % on average, and a minimum of 10 %
per tariff line for developing countries.
Members are also directed to make concessions
liberalization through other mechanisms such as
tariff rate quotas (TRQs) and minimum access volumes
MAVs).3
The importance of this pillar lies in the ability of a
country to protect its domestic agricultural production
including essential crops such as rice and corn), its
local farmers and the livelihoods of its rural
populations.
That is why many developing countries are
opposed to cuts to their existing tariffs, which in the
absence of expensive subsidies, have been their only
means to support their farmers. They are demanding
mechanisms to be established to protect them from
surges of commodity impqrts or a sudden fall in the
world price of commodities. At the same time, many
developing countries are also demanding greater
access to developed country markets, through the
reduction of developed countries’ import tariffs, so that
developing countries are able sell their agricultural
production overseas.
I
Domestic Support refers to monetary support given
governments to their agricultural producers either
for production, or in more general forms, such as
infrastructure and research. The AoA classifies these
supports into three boxes:
□ the Amber Box for production and trade
distorting subsidies;
□ the Blue Box for direct payments under
production limiting programmes; and,
c the Green Box for minimally or non-trade
distorting support.
Support is also classified as either those with
ceiling levels and those without ceiling levels (caps). A
minimis clause in the agreement allows countries to
maintain a certain level of trade and production
distorting support (measured as Aggregate Measure of
Support or AMS).
1 All words in bold are defined in the Glossary included at the end of this Guide.
2 Bello, Walden and Kwa. Aileen, 'Guide to the Agreement on Agriculture: Technicalities and Trade Tricks Explained',
Focus on the Global South, 1998.
3 TRQs and MAVs are based on a percentage of volume of consumption for the base year of 1986-88. MAV is a
commitment to allow importation at a lower tariff rate called “in-quota tariff'.
15
For developed countries this level can be up to 5
% of the value of production for both individual
products (product specific) and 5 % of the value of
total agricultural production (non-product specific).
For developing countries, support of up to 10 % is
allowed in both categories.
Domestic support is one of the most controversial
issues being negotiated at the WTO. That is
because much of the support that the EU and the US
provide to their farmers is hidden or wrongly classified
in the boxes. The result is that support, which should
be illegal or at least disciplined under WTO rules,
continues to distort trade. Developing country farmers
feel the effects of this the most, as trade distorting
domestic support depresses world market prices and
results in dumping of cheap products in developing
country markets. By shifting their support for farmers
into an (expanded) blue and (uncapped) green boxes,
the EU and US will continue to dump their products
on the developing world (see below for further details).
Export Competition refers to support or subsidies
that allow countries to directly support their exporters.
The consequence is that the rich developed countries
of the north are able to export goods on the world
market at prices lower than those in their domestic
markets, and often at prices which are significantly
lower than their cost of production (also known as
dumping). As Oxfam points out, the EU exports sugar
and beef at 44 and 47 per cent respectively of their
internal cost of production. Similarly U.S. wheat is sold
abroad at an average price of 35% of what it cost to
produce it and cotton is sold abroad at an average
price of 47% of what it cost to produce.4
The AoA aims to set disciplines in export
subsidies, including among others:
□ direct subsidies, including payments in kind,
contingent on export performance;
□ sale by governments or their agencies of
noncommercial stocks at prices below
domestic market prices; and,
□ internal transport subsidies for exports.
However, the reality is that developed countries
continue to dump goods on developing countries. The
latest negotiations under the July Framework do not
explicitly set a time frame for the elimination of export
subsidies.
The Indian dairy sector under threat
from dumping
In India, the dairy sector has been hit hard by
subsidised exports from the EU. In 1999-2000 India
.imported over 130,000 tonnes of EU skim milk
powder. This was the result of EUR 5 million export
subsidies that were provided to EU producers. EU
subsidies to butter exports are also extortionately high.
Consequently, butter oil import into India has grown at
an average rate of 7.7% annually. This has had a
dampening effect on prices of ghee in the domestic
market. Ironically, India is the biggest producer of milk
in the world. What is more worrying for India is there
are now signs of declining productivity growth for
many agricultural products in India, which will have
severe implications for the majority of the population.
Devinder Sharma, WTO and
Agriculture: The Great Trade Robbery,
2003s
Government of India statistics illustrate the
consequences of subsidised commodities^
a sugar imports increased from 29000 tonnes
in 1996- 97 to 932,300 tonnes in 2004-05;
□ edible oil imports increased from 1.061
million tonnes in 1995-96 to 5.290 tonnes in
2003-04;and,
□ cotton imports increased from 29200 tonnes
in 1996-97 to 387000 tonnes in 2001-2002.
The impact of WTO induced trade liberalisation
coupled with the removal of quantitative reduction
QR) (under WTO obligations) and the reduction of
import tariffs, has resulted in the prices of several
commodities falling sharply.
For example in Kerala, since the removal of QRs
on 714 items in April 2000, most of the agricultural
commodities of Kerala have been showing a steady
decline in the market prices. The unprecedented fall in
prices of all cash crops have devastated the farmers of
Kerala.?
According to Department of Agriculture,
Government of Kerala, during 2000 the farmers of
Kerala have suffered an annual loss of Rs. 6645 croress
4 Oxfam International, A Round for Free, How rich countries are getting a free round on agricultural subsidies at the WTO,
June 2005, page 3, accessed afwww.maketradefair.com
5 As quotedin the Practical Guide to the WTO for Human Rights Advocates, 3D and FORUM-ASIA, 2004, page 62.
6 Statistics from the Director General of Commercial Intelligence & Statistics, Ministry of Commerce, India.
7 The coconut price collapsed from Rs. 6 per piece in 1999 to Rs. 2 in Jan 2001. Similarly the price of coffee is down from
Rs. 68/l<g to Rs. 26/kg.
8 One crore is 10 million.
16
due lo the price fall of major plantation crops alone,
such as coconut and rubber, making the Kerala
economy fragile and vulnerable.
‘The large scale of farmers suicide in India in
recent years is one of the severe impacts of WTO. In last
10 years and especially since [ndia joined WTO in 1995,
more than 25000 farmers in different parts of the country
have committed suicides and it is still continuing. One of
the key reasons of the farmers’ suicide is the surge of
cheap subsidised imports of agricultural commodities.’
- Senior farmer leader, Mr. Mahender Singh Tikait'
of Bhartiya Kissan Union (BKU), India.
From Doha to Cancun
WTO Ministerial take place every two years and
bring together the trade ministers from all the WTO
member countries to make final decisions on trade
negotiations. The period from the Doha (4th) to the
Cancun (5ih) Ministerial saw developing country
priorities and demands sidelined in the interests of the
larger northern trading powers.
At the WTO 4th Ministerial Meeting in Doha,
Qatar in November 2001, a new comprehensive round
of trade negotiations was launched. In agriculture, the
Doha Development Agenda (DDA) mandates ‘substantial
improvements in market access; reductions of, with a
view to phasing out, all forms of export subsidies;
and substantial reductions in trade-distorting
domestic support.’ The DDA also mandated the
establishment of new modalities for further
commitments.
What was labelled by some as a development
agenda, in fact turned out to be nothing more than a
continuation of the WTO’s liberalisation agenda.
The draft documents on new modalities were
circulated from February to March 2003 by the WTO’s
Agriculture Committee, which was headed at that time
by Stuart Harbinson. The ‘Harbinson document’ as the
text came to be known was a highly bracketed?
document that pushed for further market concessions
- with tariff cuts ranging from a low of 25 % to a high
of 60 % reductions - and the retention of domestic
subsidies in the North in the form of blue and amber
box supports.
The 13 September 2003 draft text on agriculture
was heavily criticized during the 5ihWTO Ministerial
Meeting in Cancun.
Focus on the Global South called for the rejection of
the draft text for it “[the text] does not redress the
existing imbalances in the agriculture agreement. There is
no attempt to reduce domestic supports and export
subsidies, as called for by the majority of developing
countries and also no attempt has been made to address
concerns of small farmers. In fact, it will increase these
imbalances since it very clearly allows developed
countries to continue their subsidies and dumping, even
as developing countries are asked to take on drastic tariff
cutsl’hoThe Ministerial Meeting in Cancun collapsed
with no agreements on key areas of negotiations
including agriculture, non-agricultural market access
(NAMA - see the relevant section of this Guide for
further details) and the new issues.
Revival through the July framework
The Doha round negotiations however were quickly
revived with the forging of an agreement on a framework
for the negotiations at the General Council Meeting in
Geneva in the last week of July 2004. The negotiations
that produced Annex A of the so-called ‘July Framework’
for agriculture were held only among a small group, of
five countries (Five Interested Parties or FIPS) which
included the US, EU, Australia and two of the most
influential members of the Group of 20 (Q20) - Brazil
and India.
The second draft of the framework was written by Tim
Grosser the chairperson of the Committee on Agriculture
based on the FIPS discussions. The second draft was then
discussed by a group of around 20 countries in a green
room process.n The outcome was a draft endorsed by the
20 countries. This draft was then presented to the other
WTO members. With endorsement already secured from
the major players, there was intense pressure for all
members to agree to the July Framework’s terms.
What’s wrong with the new proposal?
The framework for the agriculture negotiations will
remain focused on the three pillars - market access,
domestic support, and export competition despite the
many issues and problems that have arisen since
Doha, and the collapse of the WTO Ministerial
Meeting in Cancun in September 2003. These much
broader concerns include dumping, declining commodity
prices, food security, livelihoods, and rural development.
WTO orthodoxy is that all of these (pillars) must
be cut - despite a decade of evidence that the model
9 In WTO negotiations, the number of brackets in a document indicates the level of disagreement between negotiators.
10 Focus On The Global South: Call On Governments to Reject Agriculture Text, September 2003 Press Release.
11A green room process refers to informal discussions among a select number of WTO members. Such processes have
been criticised because they are exclusionary (particularly towards developing countries) and unaccountable.
12 Murphy, S. A “Truly Historic" Trade Agreement: Analysis of the Institute of Agriculture and Trade Policy. August 2004.
17
of agricultural ‘liberalization’ supported by these
“pillars” has been disastrous for farmers and rural
development everywhere.12
Despite the Special and Differential
Treatment (S&D) rhetoric in the Doha Declaration,
the AoA remains one of the most iniquitous
agreements in the WTO, in effect providing special and
differential treatment to developed countries rather
than developing countries. The promised benefits from
agricultural liberalization and subsidy reduction in the
OECD countries under AoA have not been fulfilled.13
A number of issues put forward by developing
countries on inter-linkage mechanisms (to allow.
flexibilities for adjustments on tariff levels as a means
of protection against subsidized imports), cotton, and
special products (to protect food security, livelihood
security and rural development) among others have
been included in the framework. The inclusion of these
sections is an attempt on the part of the WTO
Agriculture Committee to reflect the demands made by
developing countries in negotiations prior to Cancun.
Like many other demands from developing countries
however, the sections which would potentially favour
developing countries remain vague and without any
detail on clear commitments or ways to move forward.
On market access the objective of the
negotiations is to realize substantial improvements in
market access based on the following principles: [1]
tariff reductions will be made from bound rates, [2]
each member (other than LDCs) will make a
contribution, and [3] progressivity in tariff reductions
will be achieved thrpugh deeper cuts in higher tariffs
with flexibilities fo/Sensitive products. Substantial
improvements in market access (meaning tariff
reductions) will apply to all products.n
The framework mandates the use of a single
tiered formula approach for market access, but in
different bands. Tariff reductions would have to be
applied on the bound rates (something to benefit the
rich nations). Many of the issues about the number of
bands, percentage cuts for each bands, and tariff caps
remain under negotiation.
Like many other provisions in the framework, the
one on sensitive products will hurt developing
country interests twice over. First, the text recognizes
and gives a go-ahead signal for developed countries
to protect “sensitive products”, meaning rich nations
would also be given the flexibility to protect some
products that are deemed sensitive while calling for
tariff quota expansion and tariff reduction on all other
products including products of interest to developing
countries
In the area of Special Products for developing
countries, there are no details given, which the SP
group have been calling for-such as self-selection on
the basis of stated criteria and no tariff reduction. This
discussion has evolved over 7 years - from the
development box (positive list) to the negative list
approach, to strategic products and now Special
Products. The original recommendations have been
diluted each step of the way. Developing countries
have shown great flexibility in their proposals
regarding Special Products, but to date have not
received anything in return.is
On domestic support, the section at first
glance appears positive in favor of realizing substantial
reductions in the huge trade distorting domestic
support provided by developed countries to their
agricultures. But what this tiered formula actually
does is:
□ expand the definition and scope of blue box
subsidies; and
□ redefine the overall base of all trade distorting
domestic support - to include the Final Bound Total
AMS, the permitted de minimis level, and the level
agreed for Blue Box payments—upon which
reductions will be based.
Furthermore, the text actually forces
developing countries to reduce their de minimis levels
of support which now stands at 10 percent of total
agricultural output.
The expansion of the Blue Box category legitimizes
the box-shifting tactics of the United States
US). The US has been demanding an amendment to
the blue box provision to allow it to continue its
counter-cyclical payments to its farmers under the
notorious US Farm Bill of2002. This redefinition will
allow the US to shift some $9-10 billion from the
Amber Box to the Blue Box. Since the US has
currently no subsidies in the Blue Box, the agreement
thus gave the nod for the US now provide support
under the Blue Box to levels up to 5 % of agricultural
production value of period to
13 Fatoumata J. and Kwa A. (2003) Behind the Scenes at the WTO: The real world of international trade negotiations,
London: Zed Books. Pp 26-27.
14 Raghavan C. Agriculture Annex contrary to some understanding. South North Development Monitor (SUNS #5627)
August 2004.
15 Kwa. Aileen. WTO Vehicle: A Catastrophe for Development. 30 July 2004
16 Estimated at around 6320 billion.
18
be established. The EU makes significant use of the
blue box subsidies,?, above the proposed 5% limit, but
has already planned to transfer a large part of these to
the Green Box, and therefore should be able to meet
the target without effectively reducing the level of
support it provides to its farmers.is
Far from moving towards substantial reduction
of subsidies, the framework actually provides a
cushion to the US and EU to raise farm subsidies from
the existing level.
On export subsidies, the section does not
prescribe clear end dates for elimination of these
subsidies. The framework prescribes only that
commitments and disciplines will be implemented
according to a schedule and modalities to be agreed. It
goes on to state further that commitments will be
implemented by annual instalments with equivalent
and parallel commitments by Members.
Negotiations update
In agriculture, which clearly remains the key area of
negotiations and on which progress on negotiations in
the other areas are hinged, the debate is over the level
of ambition of proposed tariff reduction formulas and
clear schedules for the elimination of domestic support
and export subsidies.
October 2005 witnessed a series of proposals
submitted by the US, EU, G20, G33, ACP countries
before and after the General Council in Geneva to
speed up the AoA negotiations. However the US and
EU have made their offers conditional on the progress
in liberalisation of manufacturing and services sectors.
In exchange for its trivial offers in agriculture, they
have placed extremely heavy demands on developing
countries to open up their markets under industrial
tariff and services.
This would be contrary to the Doha round, and
of significant concern to developing countries who
maintain that these negotiations should remain
separate.
On the tariff reduction formula, the US is
pushing for a more ambitious formula that would
“harmonize’ tariff rates among countries. This
harmonizing formula or the simple Swiss formula
would deal deeper cuts to products with higher tariffs.
This could be disastrous for developing countries with
hightariffs, as the formula would require more drastic
reductions to their level of protection. The EU on the
other hand wants a less ambitious “Uruguay Round”
type formula where tariff rates are categorized into
bands and percentage cuts are prescribed per band.
A proposal from the G20 however is now being
touted as the compromise formula and the starting
point for continued negotiations. The G20 proposal
incorporates the “banded” approach of a Uruguaytype
formula with the ‘harmonizing’ effect of a simple
Swiss formula by subjecting products in the higher
bands, meaning those with higher initial tariffs, to
higher cuts than those in the lower bands. Tariff caps
would also be imposed to address the issue of tariff
peaks, so that no tariffs would be higher than 150 per
cent for developing countries and 100 per cent for
developed countries. The G20 compromise formula
however would undermine the interest of many
developing countries that still maintain relatively high
tariffs and countries that maintain a uniform tariff
structure for most if not all of its products. The
banded approach would force these countries to •
drastically and uniformly reduce all their tariffs.
With the removal of QRs and protection of
special safeguard mechanisms not available to every
developing country, a further reduction and binding of
tariff at the lower rate would be detrimental to the
agricultural based economies of the developing
countries like India.
On the areas of Special Products and the
Special Safeguards Mechanism, which are of
interest to developing countries, the G33 (see the
GGuide) is calling for greater flexibilities for developing
countries in the name of rural development, livelihoods
and food security. There are however unrelenting
efforts on the part of developed countries to limit the
scope and effectiveness of any SP/SSM provisions.
On 1st November 2005, the G33 warned the Chair of
the WTO General Council Ambassador Amina Mohamed
of Kenya, the WTO Director-General Pascal Lamy and
the Chair of the agriculture negotiations Ambassador
Crawford Falconer of New Zealand that for the G33, “it
would be difficult to agree on any text where the issues of
SP and SSM are not given the same level of specificity as
others in the market access pillar.”
The negotiations on the elimination of domestic
support have barely moved at all, with the US remaining
firm on maintaining its huge subsidies to its
farmers contained in the US Farm Bill of 2002.
While there remains no clear timetable for the
elimination of export subsidies, the EU has hinted of a
possible date for the phase-out of its export subsidies.
The EU’s announcement of this possible date might
17 The EU has Blue Box subsidies amounting to Euro 14.31 billion.
18 Khor, M. Preliminary comments on the WTO's Geneva July Decision. Third World Network.
19
just cause movements in the other pillars of the
agreement.
In short, while the negotiations for a new agreement on
agriculture appear to be stalled at the moment, the
possibilities for movement and therefore another
lopsided agreement in favor of developed countries
before or during Hong Kong remain firmly on the
table.
In view of the plethora of proposals on Agriculture,
it is extremely important for the developing
countries to evaluate them with great care. They
should not let this exercise turn into a mutual
forgiveness between US and EU for extraction of
concessions from them in industrial tariff and services.
The developing countries must do their best to protect
the food sovereignty of their people and interest of
their farmers in the forthcoming negotiations at the 6>h
Ministerial in Hong Kong in December 2005. As aptly
put by a leading farmer leader of the Via Cantpasina
from India, Chukki Nanjundaswami who demand the
removal of agriculture from the purview of the WTO
because ‘agriculture is too important to leave at the
mercy of rich nations’. 19
DERAILING the AOA
Focus on the Global South’s strategy is to derail
the WTO by actively preventing consensus in WTO
negotiations. The aim of the Derailer’s section is to
highlight where there is that lack of consensus and to
suggest ideas and strategies for promoting disaccord
among WTO country members.
How do we prevent consensus
in agriculture?
To prevent consensus we should continue to exert
pressure on the most vulnerable points or the cracks in
the negotiations. In agriculture the critical issues to
exploit are the formula for tariff reduction, the
modalities and timeframes for the elimination of
domestic support and export subsidies, including the
controversial blue box expansion, and sensitive issues
like cotton.
PRESSURE POINTS
1. The US-EU disagreement on
subsidies and tariff reduction
The EU and US have unveiled their WTO “offers” with
much fanfare. It looked as if huge concessions to the
developing world had been made. In reality, the same
game of box shifting and creative accounting, as was
the result of the Uruguay Round, has once again been
reproduced, only this time, with a much higher price
demanded of developing countries.20
The US proposal has prompted a response from
the EU that has caused quite a stir among Members of
the European Union. France has threatened a veto on
further concessions on tariff and subsidy reductions
which would have an impact on their farming sector.
Peter Mandelson, the EU Trade Commissioner has
been put in the hot seat with France questioning
whether the “final offer” that he made on behalf of the
EU to reduce farm tariffs by 60 % and eliminate farm
subsidies is too much and whether he has the authority
to make such an offer.
We should:
n
□
□
□
a
highlight the reality that these proposed cuts
are “paper cuts” amounting to no substantial
reduction of EU or US subsidies. It may in
fact result in expansion of support.
expose the expansion of the blue box and the
box shifting strategy of the US as part of their
squid tactics to skirt around commitments to
reduce subsidies.
draw attention to the fact that there are still no
restrictions on the use of the Green Box
despite recent rulings in the WTO (like the
cotton case) that certain subsidies under the
green box are in fact trade distorting.
highlight that these “paper cuts” touted as
“bold moves” on the part of the US and EU in
order to “save the round” would in fact
perpetuate dumping.
19 Said at a massive protest by farmers in Mumbai (India) on 2nd October 2005 (Remove agriculture from WTO's
purview’, Hindustan Times, 3rd October 2005).
20 Kwa, Aileen. 'Analysis of US and EU Packages: No concessions, but high price demanded of developing countries',
Focus on the Global South, 16 October 2005.
21 Kwa, Aileen, ‘Analysis of US and EU Packages: No concessions, but high price demanded of developing countries',
Focus on the Global South, 16 October 2005.
20
2. Developing countries who would
pay dearly for further tariff reductions
Whilst effectively nothing is being offered by those
that most distort agricultural trade, the US and EU are
attempting to use this occasion to extract yet more
market access openings from the developing world. A
minority of developing countries will stand to benefit
(the corporate farmers in a small number of countries)
from new market access openings, but the majority of
the developing world will not.21.
We should:
draw attention to the possible effects of
further tariff reduction on the lives of the most
vulnerable sectors in these countries.
n plug in the numbers to show what the
proposed formula would mean to local
farmers and come up with case studies
showing the impact of further tariff
concessions.
° highlight the plight of small farmers in those
countries whose livelihoods have already been
devastated under a liberalized regime - such as in
the Philippines, Thailand, and Indonesia which
have already relatively low agricultural tariffs.
b
The debate over the level of ambition of a new
tariff formula misses the whole demand of farmers
through out the developing world for greater support
and protection. What farmers in these countries need
is a respite from tariff reduction. Arguing over a new
formula is tantamount to asking whether we want a
slow or a quick and sudden death for farmers.22
3. Maximum Demands
on Special Products
The engagement with the G33 on the issue of Special
Products (SP) should be based on a maximum demand
for protection of agriculture in developing countries
on the basis of food security, rural development and
livelihood concerns. The flexibilities under the SP/
SSM provision should include exemption for further
tariff cuts, the right to impose additional duties against
subsidized imports and the right to re-instate
quantitative restrictions on certain products.
We should:
□
n
continue to put pressure on governments
within the G33 to ward off attempts by the
developed countries to reduce the scope and
effectiveness of SP/SSM. Key countries here
include Indonesia and the Philippines.
keep up the pressure on their negotiators to
oppose a new deal that would undermine food
security, rural development and livelihoods.
22
Purugganan, J., 'Philippines Cannot Afford A New Deal', paper presented before the Philippine Congress, Focus on
the Global South, 31 August 2005.
21
TheDerailer’s
Ratctetog! top the
Pressure So Services
General Agreement
©rm Trade m Sendees (GATS)
What is the GATS?
The World Trade Organisation (WTO).describes the
General Agreement on Trade in Services (GATS) as
'perhaps the most important single development in
the multilateral trading system since the GATTi itself
came into effect in 1948'. The GATS is one of 18
agreements that fall within its ambit.
The focus of the GATS is on the liberalisation
and deregulation of the services sector. The scope of
what is defined as services is deep; over 160 services
sectors fall under its jurisdiction. Almost no service
sector is excluded. It includes basic services such as
water, education and health. It also covers
infrastructure services such as energy, transport and
telecommunications. Critical sectors such as finance
fall within its ambit. The world’s largest industry travel and tourism - is also included under GATS.
These sectors represent the era of deep liberalisation
and the next frontier for corporate-led globalisation.
The subject matter of GATS is incredibly broad as
there is yet no consensus on its coverage. According to
David Hartridge, Former Director of Services Division
of the WTO, 'the push to include services within its
framework is the result .ofpressure and lobbying efforts
by the USfinancial services sector The aim of the
GATS is to promote unrestricted trade in all types of
services and to remove all forms of governmental
intervention that may be viewed as “trade restrictive.”
The GATS identifies four modes (or types) of
supply of a service:
Mode 1: Cross Border Supply (where the service is
supplied remotely from one country to
another).Example: Citibank customers in the
US get service help from a call center based in the
Philippines.
Mode 2: Consumption Abroad (movement
of individuals to a country to consume a service).
Example: Tourists traveling overseas or patients taking
advantage of cheap health-care abroad.
Mode 3: Commercial Presence (where a
foreign company sets up a subsidiary or branch within
another country in order to deliver the service locally).
Example: Foreign Direct Investment in banks,
hospitals and power plants.
Mode 4: Presence of Natural Persons (where
individuals travel to another country to supply a service
there on a temporary basis).Example: Software
programmers, nurses or doctors working in another
country. This is different from immigration because
GATS explicitly deals only with temporary movement.
GATS has been promoted as a “bottom-up”
treaty rather than ai“top-down” treaty since in theory
it allows governments to select which sectors they will
open up and when. This is called the request-offer
model, whereby WTO Member governments can
submit requests on which service sectors they want
another country to open up and in the offers, a
government can list which service sectors they choose
to liberalize. This mode! of negotiations is currently
under threat, with proposals from developed countries
requiring all countries, including developing countries,
to open a minimum number of services sectors and to a
minimum extent (see below for further details).
What does GATS mean
for developing countries?
Once a country agrees to liberalize a service sector
under the GATS, it has certain obligations from which
they cannot deviate:
1) National treatment Once a country has fully
committed a sector to liberalisation under the GATS, it
is prohibited from discriminating against foreign
1 All words in bold are defined in the Glossary included at the end of this Guide.
22
companies and corporations that provide services in
that sector, even if such services are currently provided
domestically by public or private means. National
treatment is an extremely important commitment
in the GATS and addresses qualitative restrictions
that a government may place on service provision
in a committed sector. Concretely, this means that
governments cannot set performance requirements
specifically for foreign companies. This includes, for
example, domestic environmental or labour laws,
quality standards, obligations to hire and train local
staff, or requirements to build local/domestic capacity
in their particular areas of operation. Nor ar.e they
required to source raw materials, goods or support
services domestically.
2) Market Access. Market access rules cover all
quantitative limits on services, whether they apply to
foreign or domestic firms. They also provide
opportunities for foreign firms to challenge domestic
regulation if these regulations are perceived as
restricting the entry of firms into domestic markets.
Once a government has committed a sector to full
liberalisation, it must provide foreign corporations
access to domestic markets through “least trade
restrictive” business and investment policies.
sectors to transnational corporations and accelerates
the process of privatizing essential public services,
thereby limiting access to services to only those who
can afford them. There are many examples of how
privatization has resulted in excluding the poor from
essential services. For example in Cochabamba,
Bolivia, the World Bank encouraged privatization of
water which resulted in water prices reaching $20 per
month, compared to the minimum average wage of
$ 100 per month.2 Public services and the so-called
‘commons’ including water, education, health care,
social welfare and energy, should not be subject to
multilateral liberalisation or privatization.
2) Loss of national control: Because of the
national treatment clause, governments are prevented
from exercising national regulation especially on
foreign direct investment. In some cases, governments
would have to rewrite their constitutions in order to
adhere to this. For example, the Philippines has a 60-40
regulation, which requires at least 60 percent of a
foreign company to be owned by a Filipino and a
maximum of 40 percent to be owned by a foreigner.
This will no longer be allowed under the national
treatment clause of the GATS.
3) Investment Rules: The WTO calls the GATS the
3) Most Favoured Nation (MFN) Status. Host
governments must provide equal market access to all
trading partners in a service sector that has been
opened up — i.e., they must provide Most Favoured
Nation (MFN) status to all WTO members. This means
that the national treatment must be applied
horizontally,” or across the board to service providers
of all WTO member countries. Host governments
cannot choose which foreign entities get national
treatment and which do not. Governments then, lose
their rights to develop preferential trading
arrangements for social or political reasons, or to enter
into special service agreements with regional partners.
What’s wrong with the GATS?
The GATS has proven to be one of the most
controversial of the WTO agreements and going
through it shows the many dangers that it poses to
people of both the developing and developed world if
fully implemented.
1)
What was once public becomes private:
The GATS threatens public services including health,
education and water. The agreement opens up these
world’s first multilateral agreement on investment,
since it includes the right to set up Commercial
Presence (Mode 3 in GATS language) in anotherr
country. The National Treatment clause prohibits
WTO members from treating foreign investors less
favourably than domestic service suppliers. The
clause on market access ensures effective market entry
provisions. Once countries make binding commitments
under these two clauses, GATS rules can reduce the
ability of countries to use policies that ensure equity
ceilings, obligations on technology transfer, universal
services provision (legislation that obliges private
providers in basic services such as health, education,
water to supply services to marginalised sections of
the community) and employment of local labour. The
GATS framework maximises investor rights at the cost
of development.
4) Locking bad policies into place: A
government cannot reverse a commitment made under
the GATS even if it proves detrimental to its national
economy. Developing countries are already grappling
with the adverse impacts of privatisation.
2 As a result of massive protests and public outcry, water was eventually restored to public ownership. Vandana Shiva
Water Wars: Privatization, Pollution and Profit, New Delhi, India, Research Press, 2002.
’
23
Take the example of Telecommunications in
India. India reoriented its Telecom policy in 1994 and
argued that liberalisation and private participation
would provide the additional resources for connecting
all its villages by 1997. More than 10 years after this
there are nearly 70,000 villages without telephones.
The rural - urban divide is growing with a dismal
teledensity of less than 2 phones per 100 in rural areas.
The private players have provided only about 14,000
Village Public Telephones and met only about 10 per
cent of their license commitments. The benefits of
liberalisation have been concentrated in big cities and
larger towns - which is only 20 percent of the country.
If the Indian government wants to provide rural
telephony it must strengthen the public provider and
improve regulations that force private providers to
adhere to social obligations.
Binding commitments under national treatment
and market access will not allow the Indian
government to use such policy mechanisms.
From Doha to now
The Doha Ministerial was responsible for fasttracking the GATS negotiations. The Doha Declaration
set dates for when the request phase of negotiations
would commence and when the offers phase would
start. To date, 92 of 148 member countries have
already submitted offers in the GATS, while all
developed countries have made offers.
Developed countries are fast overhauling this
request-offer framework, which offers some degree of
flexibility to developing countries. Developed
countries, led by the European Union (EU), are now
proposing a “benchmark” approach to speed up the
negotiations.
This new approach aims to identify 10 key
sectors in the GATS, from which developing countries
will be asked to choose 6-7 sectors in which they must
make minimum commitments on. The EU is also
demanding that countries bind sectors already
liberalized through autonomous national policy or under structural adjustment policies of the International
Monetary Fund (IMF). This means that these
levels of liberalisation outside of the GATS will
automatically come under GATS rules in the future.
These new proposals, also called “complementary
approaches” have been met with tremendous
opposition from developing countries because they:
□ Remove the flexibilities originally available
under the request-offer framework;
□ Require all developing countries, including
Least Developed Countries (LDCs), even if
their economies are not ready, to commit a
significant number of commercially-important
sectors to liberalization and to deepen these
commitments by removing restrictions on
market access and national treatment; and,
□ Are one-sided as they largely focus on Mode 3
(commercial presence) where corporations ave
an interest, asking for a minimum of 51%
foreign ownership.
□ The new proposals sideline developing
countries’ demands on operationalising the
mandated assessment of the GATS before
they are asked to further open up.
Like all WTO agreements, GATS is being negotiated
with little public oversight. The conclusion of these
negotiations in favour of multinational corporate
interests will mean the death knell for public
services. The entire GATS package is serious setback
to public participation and democratic oversight in the
formulation of national policies, laws and regulations.
DERAILING GATS
Focus on the Global South’s strategy is to derail
the WTO by actively preventing consensus in WTO
negotiations. The aim of the Derailer’s section is to
highlight where there is that lack of consensus and to
suggest ideas and strategies for promoting disaccord
among WTO country members.
In the run-up to Hong Kong we should:
■
□
□
□
□
■
Call for an immediate halt to market access
talks under the GATS;
Unequivocally oppose all proposals for
“benchmarking” or “complementary
approaches” to services liberalisation;
Reject the Mode 4 approach of some countries
such as India that are focused on the
movement of only skilled labour; and
Demand a comprehensive assessment of the
impact of past liberalisation and privatisation
of services.
24
\The Derailer’s Guide to the WTO: Section 3 Part
E
SMAMiA asid the Spectre
off Denrrjdustriialsataoo
Non-Agricidtural Market Access (NAMA)
What is NAMA?
NAMA and the July Framework
NAMA refers to non-agricultural market access. As its
name suggests, it is a proposal for an agreement under
the World Trade Organisation! (WTO) regime that
covers non-agricultural products, or all products
outside the Agreement on Agriculture (AoA).
The objective of the negotiations is greater
market access in non-agricultural products. That is,
non-agricultural products should be freely traded
without (or with very limited) tariffs, quotas or other
importing/exporting restrictions.
Unlike the AoA which has three pillars —market
access, domestic support and export subsidies,
NAMA’s sole objective is market access.
In WTO language, market access revolves
around the issue of tariffs - the reduction and
elimination of tariffs, tariff peaks, and the
prevention of tariff escalation as well as bound
At the Cancun WTO Ministerial in 2003, a draft text
called the ‘Derbez Text’2 with provisions for tariff
binding and tariff reduction for NAMA was rejected
by member countries.
Despite the rejection of the Derbez Text at
Cancun, negotiations were resurrected through the
July Frameworks in July 2004. The July Framework
defines the parameters for establishing modalities in
market access for non-agricultural products. It has
been criticized for respecting the major elements of
the Derbez Text.
tariff rates.
NAMA is an agreement for binding and reduction
of tariffs not just on industrial products but on
products like fish and fishery products, shoes, toys,
jeweller)' and almost anything outside the ambit of the
AoA. The significance of this agreement lies in the
scope of products and sectors that fall within its terms.
Many of these are of vital importance to the
development of developing countries and the
livelihoods of their populations. Denied the ability to
protect their emerging industrial sectors, there are
grave concerns that developing countries will be lead
down a path of deindustrialisation.
This is because any existing domestic industries will be
unable to compete with industrial products likely to
flood their markets as a result of liberalisation. NAMA
would further reduce the development options for
developing countries as it would undermine their
already limited capacity to develop their industrial
base.
What are the elements of NAMA
under the July Framework?
1. Coverage. The July Framework provides for 100
% coverage with no a priori exclusion. This
comprehensive
coverage means that there is no possibility of
exemptions similar to the provisions in the Agreement
on Agriculture (AoA). As a result of NAMA, it is
expected that developing countries will be unable to
protect domestic industries crucial to their own
development.
2. Tariff Reduction Formula. Based on the July
Framework, tariff reduction shall commence from
bound rates after full implementation of current
concessions. The formula for tariff reduction is likely
to be the non-linear Swiss style approach so that
developing countries which have higher tariffs will be
required to make proportionately greater cuts.
3. Tariff Binding Formula. For unbound tariffs, the
basis for tariff reduction shall be (2) times the MFN
applied rate in the base year defined as 2001. This
would
require all countries to bind their remaining unbound
tariff lines according to the agreed-upon formula.
1 All words in bold are defined in the Glossary included at the end of this Guide.
2 The text was named after the Chair of,the Cancun Conference. Mexican Foreign Minister Luis Ernesto Derbez.
3 Annex B of the July Framework sets out the details for NAMA.
.
'
25
Why is NAMA problematic for
developing countries?
1. The Derbez text was already rejected. The
July Framework resurrects the Derbez Text, which was
already rejected by majority of the WTO-member
countries in Cancun. Once again, the position of
developing countries has been sidelined by the
interests of the richer industrialised nations.
2. An obligation to cut tariffs across the board.
It locks-in countries to tariff structures that would be
difficult to change in the future. Some say the
obligations would be irreversible. For developing
countries this would mean closing the doors on the
use of tariff policy and the protection of key industries
as an integral part of a development strategy.
3. De-industrialistaion. Policy space for protection,
which allowed developed countries to achieve
industrialization at the turn of the 19th and 20th
centuries, is now being closed to developing countries.
This could be disastrous for developing countries,
who in the absence of a growing industrial
sector, will be forced to continue to rely solely upon
their agricultural sectors. It is feared that the
deindustrialisation
process which'began under structural
adjustment programs will accelerate under NAMA.
4. Drastic tariff cuts. They would bring industrial
tariffs to the lowest levels since the 19th and early 20th
century. Also the harmonization of tariffs between
industrial and developing countries is anchored on the
principle of full reciprocity - that is that tariff reductions
should be undertaken by developed and
developing countries alike. This is contrary to the
principle of Special and Differential Treatment.
5. NAMA requires the binding of previously
unbound tariff lines. On tariff bindings, compared to
agriculture where almost all products were bound under
the AoA with few exemptions, not all non-agricultural
products were bound under the GATT-Uruguay Round.
A considerable percentage of products and tariff lines
remain unbound. The July Framework would force
countries to bind these products.
For countries like the Philippines, whose average
applied non-agricultural tariffs amount to a mere 4.3 %,
tariff binding in fact is a critical issue. The Philippines for
example would be forced to now bind more than 39 % of
its products previously outside the ambit of the WTO.
This would include 95% of tariff lines for fisheries that
are still unbound.
Binding of remaining tariff lines now would be
tantamount to closing the door to any prospects for
industrialization in the future.
6. The inclusion of fisheries. The fisheries sector
is considered an economically important yet sensitive
sector in many developing countries. It is a sector that
provides livelihoods to millions of small fishers.
Across the globe however, small fishers remain one of
the poorest sectors.
In the Philippines for example, tariff rates on
fisheries are already quite low owing to previous
unilateral liberalization of the sector. Following the
proposed formula in NAMA would force the country
to bind fish and fishery products at rates no higher
than 20 %. A level of tariff protection that many in the
sector argue is not enough to address the many
threats facing the sector.
Furthermore, the main issue for fishers is not
market access but protection of their livelihoods that
are constantly under threat from tremendous pressures
on the resource base and the lack of government
support.
Market access would further aggravate the bias
of government in favor of export-oriented sub-sectors
like aquaculture over the interest of small fishers.
Where do country groupings
stand on NAMA?
Developed countries like the US, EU and Korea are
pushing for NAMA.
Other developing countries like Kenya, Nigeria,
Egypt, and Indonesia oppose NAMA.
Argentina, Brazil and India (ABI) have proposed
less ambitious formula for tariff reduction.
Least Developed Countries (LDCs), although
exempt from making any commitments, have opposed
NAMA on the grounds of erosion of preferences.
In general, it appears though that developed
countries are united in NAMA while developing
countries are still divided on the issue. The devil,
however is in the detail (see below).
What is the current status
of negotiations?
Apart from agriculture, NAMA could be the possible
deal maker or deal breaker of the Hong Kong
Ministerial.
At this stage, there remains major disagreements
within member countries on NAMA, particularly on
the formula for tariff reduction and binding:
26
1) Divergence of views on the July Framework.
Developing countries site paragraph 1 of Annex
B of the July Framework which states that tire content
of the agreement is still subject to negotiations and
that no agreement on the formulas prescribed in Annex
B has yet been reached. Hence, they refrain from using
the exact language in Annex B so as not to establish a
language norm which will be used in future
negotiations.
Developed countries on the other hand are
liberal in using the language and proceeding as if
NAMA is already a done deal. The reference to
paragraph 1 is where the proposal of Argentina, Brazil
and India (known as ABI proposal) is coming from.
2)
Conversion of complex tariffs into their ad
valorem equivalents (AVES). The majority of the
member countries already use the ad valorem tariff
system with the exception of countries in the European
Union which maintains complex tariffs. There is a need
to convert these complex tariffs into their ad valorem
equivalents in order for the tariff reduction formula to
apply.
3)
Differing positions on the tariff reduction
formula. There are countries like US and EU that are
aggressively pushing NAMA who want a Swiss
Formula for tariff reduction (also see glossary for
further details on tariff reduction formulas). This is an
ambitious formula that would effect bigger cuts to
higher tariffs. Countries like Argentina, Brazil, and
India (ABI) on the other hand have proposed a less
ambitious ‘Swiss-type’ formula applied line by line to
countries’ bound rates which considers average tariff
rates as part of the formula in the name of greater
flexibilities for developing countries. The ABI proposal
is for different rates of tariff reduction for developed
and developing countries in accordance to the
principle of “less than full reciprocity” and special
and differential treatment.
The US and EU criticize the tariff reduction
formula proposed by ABI as not being ambitious
enough and in fact ‘a step backward’ from the NAMA
mandate. The US also argued that getting rid of high
tariffs and tariff peaks is expected to be done by all
members and not just developed countries.
While the negotiations appear to have been
marked major disagreements there are also disturbing
signs, however, of a convergence occurring:
Despite much initial grumbling after the July
Framework deal, the developing countries have
accepted the “Derbez text”, which they rejected in
Cancun, as the basis of negotiations, as proposed by
the Framework;
There is now consensus on a non-linear Swiss or
Swiss-like formula for tariff reduction, which would
apply to all products and subject higher tariffs to
greater proportional cuts than lower tariffs, thus
disadvantaging many developing countries, which
maintain relatively higher tariffs on many key industrial
goods than developed countries.
A Uruguay Round formula, which would stipulate
an average tariff cut across industry but leave it up to
national authorities to determine the rate for particular
products, is not even in discussion, although it is
favoured by most developing countries.4
The so-called Pakistani compromise
The latest formula to emerge is the so-called Pakistani
compromise” which would factor into the formula the
average bound tariff rate, then run a coefficient of six
for developed countries and 30 for developing
countries. This would, according to the Pakistani
proponents, significantly bring down product tariffs
for everybody (a developed country concern),
harmonize tariffs within each grouping (a WTO
objective), and still preserve at least some of the
difference in average tariff levels between the developed
and developing country groupings (a developing
country concern).
It is likely that the Pakistani proposal - which
nobody rejected outright although some developing
countries were appalled - or a version of it will become
the basis of the NAMA talks when they resume.
It was more than just spin when US Deputy .
Trade Representative Peter Allgeier issued the
following upbeat statement on July 28: ‘The path
ahead on NAMA is much clearer, given the work that
has been done in the past several weeks....Several
constructive ideas are on the table. There have been
signals of flexibility from all sides about finding the
right formula and the use of coefficients to realize real
market access opportunities.’s
DERAILING NAMA
Focus on the Global South’s strategy is to derail
the WTO by actively preventing consensus in WTO
negotiations. The aim of the Derailer’s section is to
highlight where there is that lack of consensus and to
suggest ideas and strategies for promoting disaccord
4 Bello, Walden. Are the WTO Talks in Trouble? Don't Bet On It. Focus on the Global South. August 2005
5 Ibid
27
among WTO country members.
The NAMA negotiations are now racing to meet
the objective to come up with “full modalities” by '
Hong Kong. Full modalities means that final figures
are
plugged into the formula already. “This is number
crunching time; no numbers by Hong Kong would
make it highly unlikely for us to conclude the Round
as desired,” according to Ambassador Stefan
Johanesson, the Chair of the NAMA Committee.s
The priorities according to the NAMA chair are
defining formula flexibilities and the getting
consensus
over the issue of unbound tariffs based on a number
of proposals on the table which include the mark-up
approach of Canada, the AB1 proposal and the
proposal from Pakistan.
We should:
Expose the consequences of developing countries
absorbing tariff cuts to their industries, as is required
under current proposals. As country negotiators are
now grappling with the numbers, campaigners '
should
also be ‘plugging- in’ the numbers based on the
proposals on the table. This should strengthen our
argument against further liberalization especially of
important and sensitive industries and sectors.?
Exert pressure on countries with a substantial
percentage of unbound tariffs to refuse binding of
their unbound tariff lines on the basis that binding
would further restrict policy space in using tariffs as a
tool for industrialization and development.
Dramatize the plight of small fishers and how
NAMA would aggravate their already impoverished
conditions. We should continue to work with fishers
groups around the world to amplify their voice in
opposition to liberalization of the fisheries sector and
their demand for WTO to get out of fisheries.
Sensitize industry groups, thereby broadening the
base of opposition to NAMA to include industries and
sectors that would have to face the entry of cheaper
imports, as well as trade unions.
6
Statement made by Ambassador Stefan Johanneson at the Lobby Meeting with civil society in Geneva on 17 October
2005.
7
The latest and thus far most ambitious proposal from the EU to have a coefficient of 15 for developing countries and 5
for developed countries would be a good basis to make the projections on future tariff cuts.
28
The Derailer’s Guide to the WTO: Section 4
With a W- heip from its
friends...
How the WTO compfetes Ite stranglehold on
global and national policy making
The World Bank (the Bank), International Monetary ,
Fund (the Fund) and the World Trade Organisation
(WTO) are three faces of a powerful international
system that is increasingly dominating national and
global policy making, at the cost of the well-being and
livelihoods of the majority of the world’s peoples.
Their operating ideology is neo-liberah and their
driving interests are corporate.
The Bank and Fund have played significant
roles in weakening policy autonomy and dismantling
domestic self-sufficiency in the developing countries
that borrow from them. Their infamous structural
adjustment programmes - now called Poverty
Reduction and Strategy Papers (PRSPs) — have
created and entrenched policy induced poverty
across the developing world. Privatisation,
liberalisation and deregulation are the distinguishing
features of all Bank-Fund programmes and are
necessary conditions to all Bank-Fundfinancing.
Most major bilateral donors and the United Nations
(UN) agencies have aligned their aid programmes to
Bank-Fund policyframeworks. The more a developing
country liberalises its economy along the lines
prescribed by the Bank and the Fund, the more
bilateral and multilateral aid it is likely to receive.
The Bank and Fund believe that international
trade can play a crucial role in poverty reduction by
providing jobs and driving economic growth for
developing countries and that rapid economic growth
can be best achieved if countries enter export markets
through trade and strengthen their links with the
global economy.
Despite proclamations by the Bank that high
tariffs and Non-Tariff Barriers in wealthy countries
undermine the potential for economic growth and
poverty reduction in developing countries, the Bank
and Fund are unable to force the rich countries of the
OECD to reduce their own subsidies and dismantle
their trade barriers.
On the other hand, developing countries under
Bank-Fund Ioan regimes are exhorted to undertake
drastic policy reforms in all their sectors, from banking,
finance, public expenditure and trade to agriculture,
services, investment, infrastructure and even the
judiciary. The main purpose of these reforms is to open
up developing country markets to access by foreign
private investors and corporations and to remove all
barriers to international trade and investment in
developing countries. Over the past 15 years, BankFund imposed trade conditionalities have included the
removal of non-tariff barriers and quantitative
restrictions,
and tariffs and customs administration reforms.
According to the Bank and Fund, the Doha
Round “offers an unprecedented chance to free up
trade and contribute to poverty reduction on a global
scale”: which can only be achieved through an
ambitious outcome”! in the Doha negotiations. The
Bank and Fund believe that market access in agriculture
through large cuts in bound tariff rates and
bound levels of domestic supports and subsidies is
the key to success in the current negotiations. While
they accept that developed countries must take the
lead in this, they call upon middle-income countries—
especially those in the G-20—to remove tariffs and
other barriers in their agriculture markets, reduce tariffs
in manufacturing, and open up their services markets
for liberalization. Instead of pushing for “policy
space,” all developing countries must use the opportunity
of the Doha negotiations to lower trade and
investment barriers. The Bank and Fund broadly describe
their trade related work in developing countries as “aid
for trade.” World Bank “aid for trade” activities include
technical assistance, capacity building, institutional
reform, investment in trade related infrastructure, and
assistance to “offset adjustment costs”, i.e., to make the
1 All words in bold are defined in the Glossary included at the end of this Guide.
2 Aid for Trade: Competitiveness and Adjustment. Development Committee, the International Monetary Fund and the
World Bank, April 12, 2005.
3 Ibid.
29
transition from tariffs to other sources of revenue.
Much of Bank lending for trade has gone towards
trade facilitation in more than 50 countries. Basically,
the Bank works with its debtor governments to shape
national institutions, laws and regulations,
infrastructure,
services, financial systems and other sectors of
the economy to facilitate trade liberalization. The Bank
also conducts training programs through the World
Bank Institute to prepare the policy ground for trade
liberalization, often in partnership with leading think
tanks, universities and other teaching institutions in
developing countries.
The IMF on its part claims that, “The work of the
IMF and the WTO is complementary” and that, “The
two institutions work together to ensure a strong
system of international trade and .payments that is
open to all countries.”-. The partnership works on
many levels, to ensure greater coherence in global
economic policymaking. A cooperation agreement
between the two organizations, covering various
aspects of their relationship, was signed shortly after
the creation of the WTO. The IMF has observer
status at the WTO, and IMF and WTO staff participate
actively in each others’ meetings, committees and
working groups. Trade policy issues feature
prominently
in Fund surveillance activities and the WTO is
required to consult the IMF on issues concerning
monetary reserves, balance of payments, and foreign
exchange arrangements. In April 2004, the IMF
•established the Trade Integration Mechanism (TIM), a
special facility to lend to WTO member countries
whose balance of payments positions suffer as a result
of multilateral trade liberalization. The IMF anticipates
that its cooperation with the WTO will intensify in
WTO agreements on financial services, trade
facilitation,
and agriculture (in particular, the cotton sector).
A highlight of Bank-Fund-WTO collaboration is
the Integrated Framework (IF) for Trade-Related
Technical Assistance to Least-Developed Countries
(LDCs). The IF is a multi-donor program that aims to
strengthen the capacity of LDCs to formulate WTO
compliant trade policies, negotiate trade agreements,
and tackle production issues in a manner favourable to
4 http://www.imf.org/external/np/exr/facts/imfwto.htm
liberalization in their domestic economies. In
particular,
the IF ensures that poorer member countries
incorporate
“appropriate trade reforms” into their national
development policies through PRSPs, which form the
basis for loans by the Bank and the Fund.
The IF is financed through a trust fund to which
the Bank has already allocated USS 1.5 million, and
which has total pledges from donors for US $30.1
million. The IF has initially been implemented on a
pilot basis in Cambodia, Madagascar and Mauritania,
and was the driving force behind Cambodia’s rapid
accession to the WTO. The IF was then extended to
Burundi, Djibouti, Ethiopia, Guinea, Lesotho, Malawi,
Mali, Nepal, Senegal, Yemen, and Eritrea. At the end
of
March 2005, 28 LDCs were at different stages of the IF
process. During the September 2005 World Bank IMF
Annual Meetings, the Bank-Fund Development
Committee endorsed a proposal for an enhanced IF
that could be expanded to all countries that receive
concessional loans from the Bank’s International
Development Association (IDA).
High-ranking staff of the IMF, World Bank and
the WTO maintain close contact with each other and
with major bilateral donors to ensure that developing
countries do not stray away from the liberalization and
privatization paths. The Bank and the Fund produce
several research and analytical documents every year,
that promote trade and investment liberalization and
private sector development. Much of the “technical
assistance and “capacity building” they provide to
developing countries actively support the WTO
framework and disciplines.
As the two of the most powerful pillars of the
current global economic and financial architecture (the
third being the WTO), the IMF and the World Bank are
well positioned to ensure that their liberalisation
dogma is embedded deep into the domestic policies of
developing countries, even larger and more influential
ones such as India and Brazil. Fighting the WTO
regime therefore demands that we also fight the World
Bank and the IMF and the neo-liberal corporate
agenda they force on the people.
30
|77ie Derailer’s Guide to the WTO: Section
The Colombo Declaration:
10 Years ds Enonugh =
No DeaS at the WTO Hong
Kong MIonosterDaD WJeetong®
Declaration of the Organizations, Movements and Individuals
Gathered for the Asian Strategy Meeting on the World Trade
Organization, Colombo, Sri Lanka, June 6-7, 2005
From December 13 to 18, 2005, the World Trade
Organization’s Sixth Ministerial Meeting will take
place in Hong Kong . This event will have massive
consequences.
Either the WTO finally gets consolidated as
the prime mechanism of global trade liberalization, or
it unravels a third time, possibly crippling permanently
its usefulness as an institution for the promotion of
the interests of Northern transnational corporations
(TNCs).
Dismal Decade
That the WTO is suffering a deep crisis of legitimacy
and credibility as it marks its 10 th year of existence
comes as no surprise to us in Asia . When it was
founded in 1995, it was sold to developing and least
developed countries as an institution that would bring
about growth, reduce global poverty, and decrease
income inequality by expanding free trade. A decade
later, the evidence is undeniable that the WTO has
brought about exactly the opposite effects.
The Agreement on Agriculture (AOA) has proved
to be nothing but a gigantic dumping mechanism
for cheap subsidized grain and foodstuffs from the
United States arid the European Union on the
agricultural markets of developing and least
developed countries’, destroying the livelihoods of
hundreds of millions of farmers and agricultural
workers and provoking the suicide of many of them
and their dependents.
The Trade Related Intellectual Property Rights
(TRIPs) Agreement has functioned to rob our
communities of their collective right to resources,
seeds, indigenous knowledge and even life itself,
and to thwart development by allowing
transnational corporations to monopolize technological
innovations throughout the whole range of
industries. It has seriously undermined people’s
food sovereignty. By putting corporate profits
above public health concents, TRIPs has facilitated
a public health crisis in the form of HIV-AIDS that
has drastically setback many parts of Asia as well
as Africa .
The General Agreement on Trade in Services
(GATS), with its central principle of “national
treatment” providing foreign investors equal rights
as national actors, is proving to be an extraordinarily
powerful tool for TNC entry into and control of
the service sector. This situation is particularly
acute for developing and least developed countries
which accounts for more than 50% of their gross
domestic product. Especially threatened are'water, ■
electricity, telecommunications, health, educational
and other essential services that necessitate public
generation and delivery systems in order to assure
all citizens equitable access to them. GATS will lead
to the shrinking of the public sector, threatening
national sovereignty and provoking serious social
unrest.
Although it claims to provide potential benefits
to LDCs, the GATS Mode 4 (the movement of natural
persons) carries a big risk of allowing big business
control of the movement of people, resulting in the
trampling of the rights of migrant workers.
WTO-mandated liberalization and WTOsanctioned
dumping have resulted in job losses and
welfare erosion across the board, but the brunt of their
negative impacts have fallen on women, who make up
more than half of the work force in agriculture,
33
\ThejDeraile^
The ‘G^Gysdie’ groupings in th®
WTO Agdcyflture Negotiations
M Argentina, Bolivia, Brazil, Chile, China, Cuba, Egypt, India,
;W Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Philippines,
South Africa, Tanzania, Thailand, Venezuela and Zimbabwe.
The G20 currently comprises 19 developing country
members of the WTO. Led by Brazil and India, the G20
has become one of the most important groupings in
the WTO negotiation since the Cancun ministerial in
2003. The group has recently proposed a compromise
formula for tariff reduction (middle ground between
the Swiss and Uruguay round approach), which has .
been widely accepted as a basis for further negotiation.
While arguing for the limited use of “sensitive
products” (a mechanism which would mainly benefit
developed countries), the group is more supportive to
the “special products” (SPs) and “special safeguard
mechanism” (SSM) favoured by the G33. The group
has an offensive interest in reviewing domestic
supports, especially on the use of the Blue Box where
the group is the main driver of the review process to
ensure that payments under this provision are less
trade distorting than AMS* measures, and on the
Green Box where it wants to see new disciplines to
avoid box shifting. On export competition, the group
has proposed a five-year deadline for eliminating all
subsidies. (* Aggregate Measurement of Support:
support measures that need to be reduced under the
AoA, known as the Amber Box.)
i
Antigua and Barbuda, Barbados, Belize, Benin, Botswana,
China, Congo, Cote d’Ivoire, Cuba, Dominican Republic,
I Grenada, Guyana, Haiti, Honduras, India, Indonesia, Jamaica,
I Kenya, Republic of Korea, Madagascar, Mauritius, Mongolia,
I Mozambique, Nicaragua, Nigeria, Pakistan, Panama, Peru,
I Philippines, Saint Kits and Nevis, Saint Lucia, Saint Vincent and
I the Grenadines, Senegal, Sri Lanka, Suriname, Tanzania,
Trinidad and Tobago, Turkey, Uganda, Venezuela, Zambia and
I Zimbabwe.
The G33, or known as “friends of special products”
is understood to comprise of 42 countries. On the
tariff reduction formula, the group is opposing the
harmonization of tariffs across countries, and
insisting on taking into account the different tariff
structures of developing countries. The G33 is the
main proponent of SPs and SSM (see G20 above).
On SPs, it insists on self-selection on the basis of
the indicators developed. On SSM, it proposes that
this mechanism should be open to all developing
countries for all agricultural products. Moreover,
the SSM should be automatically triggered by
either import surges or prices falls. The group is
also very vocal on rejecting the developed countries’
proposal of cutting de minimis provision
allowed for developing countries.
34
Cairns Group
Argentina, Australia, Bolivia, Brazil, Canada, Chile,
Colombia, Costa Rica, Fiji, Guatemala, Indonesia,.
Malaysia, New Zealand, Paraguay, Philippines,
South Africa, Thailand and Uruguay
The group comprises of traditionally agricultur
exporting countries. The Cairns Group has an
obvious offensive interest in market access. It
seeks harmonisation of import tariff across WTO
members, and, like the US, views the G20 proposals
as “lacking ambition”. The Cairns Group would like
to limit as far as possible the sensitive products,
but the group is divided on the SPs & SSM, which
■
is also the case regarding the issue of trade distorting
domestic support, where some members are
significant users of the Amber Box. Concerning the
Blue Box, Green Box, and export competition, it
shares a similar offensive position as the G20. That
means the group is seeking restrictions in subsidies
predominantly used by developed countries^
I Bu|garia’ Chinese Taipei, Republic of Korea, Iceland, Israel,
Japan, Liechtenstein, Mauritius, Norway and Switzerland
This is the group of ten countries with the most
defensive interest in the agriculture negotiation. It
opposes the G20 formula, particularly the tariff
capping element. It argues for a free determination of
products to be designated as sensitive. The GIO also
has strong defensive position regarding domestic
support. Like the EU, it is not interested in
expanding criteria, but
wants to maintain the status quo of the Blue Box. Also,
it opposes the proposal to review and clarify criteria
for the Green Box. As for export competition, the G10
wants a long time frame for the elimination of export
subsidies. Moreover, very much like the EU, it links
this particular issue to outcomes in other areas of
negotiation such as NAMA and Services.
I
African Union/Group, ACP, least-developed countries
(also known as the G90)
Angola, Antigua and Barbuda, Bangladesh, Barbados, Belize, Benin, Botswana,
Burkina Faso, Burundi, Cambodia. Cameroon, Central African Republic, Chad,
Congo, Cote d’Ivoire, Cuba, Democratic Republic of the Congo, Djibouti,
Dominica, Dominican Republic, Egypt, Fiji, Gabon, The Gambia, Ghana,
Grenada, Guinea (Conakry), Guinea Bissau, Guyana, Haiti, Jamaica, Kenya,
Lesotho, Madagascar, Malawi, Maldives, Mali, Mauritania, Mauritius, Morocco,
Mozambique, Myanmar, Namibia, Nepal, Niger, Nigeria, Papua New Guinea,
Rwanda, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines,
Senegal, Sierra Leone, Solomon Islands, South Africa, Suriname, Swaziland,
Tanzania, Togo, Trinidad and Tobago, Tunisia, Uganda, Zambia, Zimbabwe
37
support farm incomes which were set by the US
Department of Agriculture (USDA). The total payment
to a farmer was equal to the payment rate, multiplied
by a farm’s eligible payment acreage and the
programme yield established for the particular farm.
Deficiency payment programmes in the US were
eliminated in the 1996 Farm Act and have since been
replaced by another subsidy programme, the production
flexibility contract payment.
Derailment of the WTO. Derailment involves
zeroing in on the key point of vulnerability of the
WTO: its consensus system of decision-making.
Concretely, it means working to prevent consensus
from emerging in any of the key negotiating areas prior
to and during the Sixth Ministerial in Hong Kong.
Dispute Settlement Body (DSB). The General
Council of the WTO, composed of representatives of
all member countries, convenes as the Dispute
Settlement Body to administer rules and procedures
agreed to in various agreements. The DSB has
authority to establish panels, adopt panel and Appellate
Body reports, maintain surveillance of implementation
of rulings and recommendations, and authorize
suspension of concessions or other obligations under
the various agreements.
Due Restraint Provision. The UR Agreement on
Agriculture provision that sets a 9-year period during
which domestic support policies and export subsidy
arrangements are exempt from GATT challenges.
Dumping. Occurs when goods are exported at a price
less than their normal value, generally meaning they
are exported for less than they are sold in the domestic
market or third-country markets, or at less than
production cost.
Export Subsidies. Special incentives, such as cash
payments, extended by governments to encourage
increased foreign sales; often used when a nation’s
domestic price for a good is artificially raised above
world market prices.
Formula-based Tariff Reductions. A method of
negotiating tariff reductions using an agreed upon
formula applied to tariff rates (with limited exceptions
being granted for very sensitive items) by all contracting
parties. GATT (General Agreement on Tariffs and
Trade). An agreement originally negotiated in Geneva,
Switzerland in 1947 among 23 countries, including the
US, to increase international trade by reducing tariffs
and other trade banners.
The agreement provides a code of conduct for
international commerce and a framework for periodic
multilateral negotiations on trade liberalization and
expansion.
THE FORMULA AS A HARMONIZING FORMULA:
when a formula is referred to as having a “harmonizing”
effect it is designed principally to make steeper
cuts on higher tariffs, so as to bring all the final tariffs
closer to the same level. A COEFFICIENT: the number
that determines the final tariff rate for each product.
For example, if the coefficient is set at 25, then the
formula will be designed to bring the final tariffs close
to or at 25 percent. SWISS FORMULA: this is a
harmonizing formula that uses a single mathematical
formula to produce a narrow range of final tariffs. A
“simple” Swiss formula will select an arbitrary
coefficient for all countries irrelevant of their starting
point so that everyone’s tariffs are set at the same level.
For example, countries would select a single coefficient
and all WTO members will have to bring their tariffs
close to that level.GIRARD FORMULA: this is a
harmonizing formula that uses a single mathematical
formula to produce a narrow range of final tariffs. It
differs from the simple Swiss formula in that each
country' has its own coefficient calculated on the basis
of the country’s national tariff average. It is often
referred to as a “Swiss-type” formula.URUGUAY
ROUND FORMULA: this is the formula that was used
in the Uruguay Round for agriculture tariff reductions.
Tariffs are cut by a percentage average over a number
of years. For example, developed countries agreed to
cut tariffs by an average of 36% over six years with a
minimum of 15% on each product. The combination of
average and minimum reductions allows countries the
flexibility to vary their actual tariff reductions on
individual products so that some cuts will be greater
than others.CANADIAN “INCOME TAX” FORMULA:
this is a new formula that was proposed in June 2005 in
the Committee on Agriculture. It is a harmonizing
formula. Instead of applying a single cut to the entire
tariff, different percentages are applied to different
portions of the tariff, in a similar way to which European
income tax is calculated.ABI FORMULA: the
Argentina, Brazil and India (ABI) proposal for formula
in NAMA. The formula is essentially a Girard formula.
GATT. Launched in 1947, the General Agreement on
Tariff and Trade, was established to provide and
administer the rules for a multi-lateral trading system.
Green Box. A colloquial term that describes domestic
support policies that are not subject to reduction
38
commitments under the Agreement on Agriculture.
These policies are said to affect trade minimally, and
include support such as research, extension, food
security stocks, disaster payments, and structural
adjustment programmes.
July Framework. A framework agreement mainly on
agriculture reached at the General Council of July 31,
2004 in Geneva, Switzerland. It provides the operative
framework for further negotiations on agriculture,
nonagricultural market access and other issues.
Liberalisation. A process of removing the barriers to
trade in order to achieve the free trade of goods,
services, intellectual property and investment across
international borders. A market-oriented trading
system is one which has liberalised its trading system.
Market Access. The extent to which a country
permits imports. A variety of tariff and nontariff trade
barriers can be used to limit the entry of foreign
products, thereby reducing market access.
OECD (Organization for Economic Cooperation
and Development). An organization founded
in 1961 to promote economic growth, employment, a
rising standard of living, and financial stability; to
assist the economic expansion of member and
nonmember developing countries; and to expand world
trade. The member countries are Australia, Austria,
Belgium, Canada, the Czech Republic, Denmark,
Finland, France, Germany, Greece, Hungary, Iceland,
Ireland, Italy, Japan, Luxembourg, Mexico, the
Netherlands, New Zealand, Norway, Poland, Portugal,
South Korea, Spain, Sweden, Switzerland, Turkey, the
United Kingdom, and the US.
Peace Clause. See Due Restraint Provision.
Privatisation. This is the transfer of ownership from
the public sector to the private sector. Privatisation
has been pushed by international financial institutions
as an economic tool to make the exploitation of
resources be as efficient as possible. This has been
the central issue of many struggles across the globe as
in many cases, it has limited access to essential
services to only those who can afford it.
Modalities. Methodology to be followed during the
Negotiations
Most-favored-nation (MFN) Status. An agreement
between countries to extend the same trading privileges
to each other that they extend to any other
country. The MFN rule is a founding principle of the
WTO. Under a most-favored-nation agreement, for
example, a country will extend to another country the
lowest tariff rates it applies to any third country. A
country is under no obligation to extend MFN
treatment to another country, unless they are both
members of the WTO, or unless MFN is specified in an
agreement between them. The WTO allows some
exceptions to the rule, for instance to allow developed
countries to extend more favourable trading terms to
least developed countries.
Neo-liberalism. Neo-liberalism is an economic
ideology centered around the values of globalization free market, free trade and the unrestricted flow of
capital. This rejects government intervention in the
economy.
Producer Subsidy Equivalent (PSE). A broadly
defined aggregate measure of support to agriculture
that combines into one total value aggregate, all the
transfers which arise from the different instruments of
agricultural support, both trade and supposedly nontrade
distorting. In the US, these include direct
payments to producers financed by budgetary
outlays, such as deficiency payments, budgetary
outlays for certain other programmes assumed toprovide
benefits to agriculture (such as research and
inspection and environmental programmes) and the
estimated value of revenue transfers from consumers
to producers as a result of policies that distort market
prices. The PSE seeks to reflect the full range of
economic distortions arising from agricultural policies.
Production Control. Any government program or
policy intended to limit production. In agriculture
these have included acreage allotments, acreage
reduction, set-asides, and diverted acreage.
Production Flexibility Contract Payments
(PFCP). Direct payments to US farmers for contract
New Issues. See Singapore issues.
Non-tariff Barriers. Regulations used by governments
to restrict imports from, and exports to, other
countries, including embargoes, import quotas, and
technical barriers to trade. These include health and
environmental standards.
crops through 2002 under the US 1996 Farm Act.
Payments for each crop are allocated each fiscal year
based on fixed percentage shares specified in the act.
The percentages were based on the Congressional
Budget Office’s March 1995 forecast of what deficiency
payments would have been for 1996 to 2002
39
under the 1990 farm legislation. PFCPs were initially
higher than deficiency payments paid to farmers.
However, they have been set on a descending scale,
heading for zero payments by 2002.
Sanitary and Phytosanitary (SPS) Measures.
Technical barriers designed for the protection of
human health or the control of animal and plant pests
and diseases. Special Safeguard provisions. Provisions
within the UR Agreement on Agriculture
designed to protect the products that were subject to
tariffication (as a result of implementation of the
Agreement) from surges in imports or large price
declines.
Singapore Issues. The Singapore or New Issues are
investment, competition policy, government procurement
and trade facilitation. They are called the
Singapore Issues because of the working groups
established on each issue at the WTO’s first Ministerial
in Singapore in 1996. Developing countries are
largely opposed to the inclusion of the Singapore
issues in current negotiations.
Sensitive products. This would allow developed
countries to designate certain sensitive products
which they could continue to protect. Developing
countries argue that this will prevent them from having
access to developed country markets.
Special and Differential Treatment. SDT or S&D
is less arduous treatment conferred on developing
countries in the implementation of WTO rules. For
example, developing countries may have lower tariff
reduction requirements or longer phase in periods.
Under SDT, ‘less than full reciprocity’ is expected of
developing countries in that they need not offer
reciprocal treatment to developed countries. It also
includes the proposed Special Products and the
Special Safeguard Mechanism (SSSM). Developing
country demands for SDT have largely fallen on deaf
ears in recent WTO negotiations.
Special products. The concept of Special Products
SP), would allow developing countries to have the
guaranteed flexibility to designate an “appropriate
number” of products for less market access reduction.
The operational criteria would be based on food
security, livelihood security and rural development.
Special Safeguard Mechanism, a proposal to
allow developing countries to increase their protection
in times of import surges or fluctuations in world
market prices,
Special Treatment Clause. A clause in the UR
Agreement on Agriculture that gives countries the
option of foregoing tariffication on some commodities
and instead requires minimum imports above the
minimum access commitments of 3-5 percent of
consumption. This clause was added to temporarily
placate Japan and South Korea by providing protection
for their rice sectors. In the case of Japan, for
instance, the minimum import requirements for rice are
at 4 percent of consumption in 1995, rising to 8 percent
in 2000.
Tariff. A tax imposed on imported products by a
government which consumers have to pay. A tariff may
be either a fixed charge per unit of product imported
specific tariff) or a fixed percentage of value (ad
valorem tariff). Tariffs are generally imposed when
governments do not want imported products to
compete with locally made ones. Tariffs are also
sometimes used to tax exports, in order to generate
revenue, or to keep certain products available on the
domestic market.
Tariff Escalation. When import duties are higher on
semi-processed products than on raw materials, and
higher still on finished products. This escalation
serves to keep the global market open for raw materials
but ensures that the countries producing higher-end
processed products are insulated from competition.
Effectively, this entrenches developing countries inthe
position whereby tjrey remain exporters of cheap raw
products since their processed products, if any,
are baned from entering the global market.
Tariff Peaks. High tariffs (far above the average
tariffs of a country) used to shelter some ‘sensitive’
industries or products, such as textiles, leather goods,
and food products.
Tariff-rate Quota. Quantitative limit (quota) on
imported goods, above which a higher tariff rate is
applied. A lower tariff rate applies to any imports below
the quota amount.
Tariffication. The process of converting nontariff
trade barriers to bound tariffs. This is done under the
UR agreement in order to improve the transparency of
existing agricultural trade barriers and facilitate their
proposed reduction.
40
Trade Liberalization. A term which describes the
World Trade Organization (WTO). Established
complete or partial elimination of government policies or
subsidies that restrict trade. The removal of
tradedistorting policies may be done by one country
unilaterally) or by .many (multilaterally).
January 1, 1995 as a result of the Uruguay Round,
the WTO replaces GATT as the legal and institutional
foundation of the multilateral trading system of
member countries. It provides the principal contractual
obligations determining how governments frame and
implement domestic trade legislation and regulations.
And it is the platform on which trade relations among
countries evolve through collective debate, negotiation,
and adjudication. AO
UR (Uruguay Round) Agreement. The Uruguay
Round of multilateral trade negotiations, conducted
under the auspices of the GATT, is a trade agreement
designed to open world markets. The Agreement on
Agriculture is one of the 29 individual legal texts
included in the Final Act under an umbrella agreement
establishing the WTO. The negotiation began at Punta
del Este, Uruguay in September 1986 and concluded in
Marrakesh, Morocco in April 1994
Sources:
Bello, Kwa, Guide to the Agreement on Agriculture:
Technicalities and Trade Tricks Explained, Focus on the
Global South, 1998
Smaller, Carin, Formula One Racing: Who’s Going to Win
the Grand Prix?, TIP/IATP, June 2005
Goode, Walter, Dictionary ofTrade PolicyTerms, World
Trade Organization, 2004
Dommen, C. and Kamoltrakul, K., The Practical Guide to the
WTO for Human Rights Advocates, 3D and Forum Asia,
2004.
Wikipedia, the free encyclopedia
Other organizations to check out:
there are a whole lot more,
these are just to start you off in the right direction)
Christian Aid: www.christianaid.org.uk
GATSwatch: www.gatswatch.org
Global Exchange: www.globalexchange.org
Hemispheric Social Alliance: http://www.asc-hsa.org
Institute for Agriculture and Trade Policy (IATP):
wuw. iatp. org/global
Institute for Global Justice (IGJ): www.globaljust.org
Our World is Not for Sale: www.ourworidisnotforsale.org
Oxfam: http://www.oxfam.org.uk
Polaris Institute: www.polarisinstitute.org
Seattle to Brussels Network (S2B): www.s2bnetwork.org
Thai-US FTA Watch: www.ftawatch.org/eng/
Third World Network: www.twnside.org.sg
Via Campesina: http://www.viacampesina.org
The Derajler’s Guide to the WTO: Section 8
The Road to Hong Kong
1996 Singapore: the first WTO Ministerial.
It was here that the proposal was made
to include investment, competition policy,
Government procurement and trade facilitation
in the negotiating agenda.
1999 Seattle: Proposals fori
new round of negotiations are
set against demands for an
assessment of the impacts of
the Uruguay Round. The event
is disrupted by tens of
thousands of protestors calling
for an end to the WTO and its
negotiations. WTO trade
talks collapse for the first
time.
2001 Doha: Provided the ‘mandate’ for
the launch of new multilateral trade
negotiations in the WTO. It produced the
Doha Development Agenda (DDA). The
‘development’ rhetoric was put in to ease
the concerns raised by developing
countries’ implementation issues
2003 Cancun: Supposed to be a ‘stock taking’ exercise
to assess how far the DDA negotiations have gone, yet
there were concrete proposals to begin negotiations on the
Singapore issues. Developing country groupings like the
G20, G33 and G90 emerged challenging the US-EU
agenda. Korean farmer Lee Kyung Hae takes his own life
under the slogan ‘WTO kills farmers’. WTO trade talks
collapse for the second time.
2005
Hong
Kong:
‘Strike
three and
you are
out’ for
the
WTO?
medico
309 friend
circle bulletin
February - March 2005
Constitution Violated:
Patents (Amendment) Ordinance, 2004 and Patents (Amendment) Rules, 2005'
-Advocate Narendra B. Zaverr
Re: Validity of Ordinance
promulgated?
The President could not have (Art. 74 of the
Constitution) and would not have signed or
promulgated the Ordinance on 26* December 2004, if
he knew or was informed that the Cabinet, had not
(i)
when Parliament is not in session;
taken final decision at its meeting on 24* December
(ii)
the President (i.e. as per Art. 74, the Council of
2004, either on the Patents Amendments or the
Ministers) is satisfied;
Ordinance. He must have been misinformed about
(iii)
that situation has arisen requiring immediate action. Cabinet indecision.
I. Promulgation of Ordinance Unconstitutional?
The Constitution of India by Art. 123 empowers the
President to promulgate an Ordinance:
1.1
Whether the Cabinet had approved the 13 Did the circumstances justify immediate action
by issuing Ordinance?
Ordinance?
On Friday, the 24* December 2004, after coming out of The only circumstance relied upon by the Government
to justify recourse to Ordinance powers is the obligation
the Cabinet meeting, the Commerce Minister in a
under TRIPS to introduce product patents for drugs,
televised briefing informed the waiting media people:
medicines, foods and agro-chemicals effective from
“Cabinet discussed the Patents Amendment Bill.
January 1,2005. In this context, the following facts and
Various options have been discussed to meet our
issues require consideration:
obligations under the TRI PS agreement but no decision
• The TRIPS requirements were known long since.
was taken.” and further, “We will now finalise the route
• The Bill for proposed amendments adopted for the
and what should be done to meet our obligations.”
Ordinance was already prepared and introduced in
PT1 on Sunday 26* December reported from Delhi:
the Parliament in December 2003 was readily
“The Cabinet, which had discussed the amendments
available.
at its last meeting on Friday without taking a decision,
• Apparently the UPA Government has decided to
is likely to take up the issue again next Wednesday
adopt the same Bill text, and had also prepared and
and consider the need for an Ordinance.”
kept ready the draft of the Rules with 70 Clauses,
121 pages and 27 revised forms ready. The
1.2
Was the President misinformed?
notification for amending Rules was also issued on
In absence of Cabinet advice, is the Ordinance validly
28* December2004.
' The Patents /tel 1970. the subsequent amendments
including the Ordinance 2004 and Rules 2005 are acces
sible al ^httpt/.'wmv.patentojjice.nic.in/ipr/patent/
patents.htm>
- Email: <narendraz@vsnl.net>, Ph: 022 22663201/3301
{office)
•
Why was the Bill not introduced in Parliament
earlier?
•
Why did the Government avoid introducing the
Bill in Parliament and discuss the various proposals,
mfc bulletin/Feb-Mar2005
2
and duties as per Directive Principles of State
objections etc openly in the House, or by referring
to a committee instead of private discussion?
Why did the Government wait till the Parliament
•
•
•
•
sessions were over?
Why did the Government wait till last week of
December 2004, i.e., with only few days left for TRIPS
compliance? Was this done to justify Ordinance
route?
Was the Government deliberately trying to avoid
discussions and possible adverse vote in
Parliament?
Whether in the facts of the case, was the Parliament
deprived of its jurisdiction, functions and duties to
make laws? And is now being faced with a situation
where their allies parties have to vote for the Bill to
save the Government?
Policy?
in breach of obligations under Human rights
.
Conventions?
.
to totally change and reverse the basic character
and policy ofthe law from a model welfare legislation
serving public interests and convert it into a law
designed to promote and protect private interests
(80% foreigners) giving it primacy over public
.
to undo what Parliament has done only recently in
2003 after detailed study and deliberations on
unanimous recommendations ofJPC? (few specific
instances of such amendments are provided in
Annex. 1.)
•
to appropriate to itself the powers to amend specific
and substantive provisions of the Act by
transferring such provisions to the Rules/Rule
making powers?
•
by amending the existing sec. 159 provisions
(“Power of Central Government to make Rules” in
the original Patents Act 1970), to expand the scope
of its own Rule making powers already provided in
the Act by the Parliament for the purpose,
particularly to include also the power to decide,
frame and enforce such amended Rules with
immediate effect?
interest?
1.4 Only one amendment (out of 77) required for
TRIPS compliance Removing bar of sec. 5 for product patents for drugs,
etc., effective from 1. 1.2005 was the only amendment
required for TRIPS compliance. This could have been
achieved by amending (as in sec. 4 of Ordinance), sec.
5 of the Patents Act 1970 (“Inventions where only
methods or processes of manufacture patentable”).
This could have been passed during winter session
without problem.
Why did the Government insist on the remaining 76
sections not required for TRIPS compliance being
included in the text?
Was TRIPS compliance only a pretext to bypass the
Parliament and to avoid discussion and possible
rejection of such amendments in view of left parties
opposition to some of the changes?
15 Ordinance - a Trojan horse?
Was inclusion in the Ordinance ofthe other 76 sections
involving drastic changes not required for TRIPS
compliance, and for which there was no urgency,
bonafide exercise of Art. 123 powers?
Does Art. 123 power permit the Government to undo
what the Parliament done only recently after detailed
study, deliberations and unanimous Report of JPC?
2, Can the Government exercise Art. 123 powers to
issue Ordinance?
•
•
•
•
•
in violation of Constitutional provisions:
depriving Parliament of its legislative jurisdiction,
powers and functions?
guaranteeing fundamental rights?
in respect of subject matter covered by the State
List of Schedule VII of the Constitution?
in a manner which obstructs/disables the States in
discharging their Constitutional powers, functions
The Government has also amended section 159 (3) of
the Patents Act 1970 (“The power to make rules under
this section shall be subject to condition of the rules
being made after previous publication”) to assume
powers to issue final notification for amending Patent
Rules without prior publication. This will empower the
Government to make final Rules and enforce them
without prior publication as draft Rules.
In fact in exercise of these assumed powers the
Government has already issued the final notification
on December 28,2004. This will deprive the interested
parties to make any suggestion or changes in framing
ofthe Rules.
In past the DIPP (Dept of Industrial Policy and
Promotion, Ministry of Commerce and Industry) has
abused the Rule making power to make Rules contrary
to the specific provisions of the Act and in favor of
applicants/grantees of patent/EMR, and against public
interest by making vast changes not justified by the
Act provisions. (Few specific instances of abuse of
Rule making powers are set out in Annex. 2.)
3.1 This provision will give to the DIPP very wide and
uncontrolled powers. This will directly deprive
Parliament of its powers to legislate and the people of
3
mfc bulletin/Feb-Mar2005
the benefits of assurance and protection of direct and
immediate parliamentary control over legislation,
affecting their lives and rights. It is necessary therefore
to consider the questions :
-
who in the Government will exercise these powers?
- whether there will be any external influences as
international treaties and conventions and foreign
parties are involved ?
-
“
ip,
-'
what will be the guiding considerations?
4.
Article 13(2) of the Constitution states:
“The State shall not make any law which takes away or
abridges the rights conferred by this Part and any law
made in contravention of this clause shall, to the extent
of the contravention, be void.”
Art. 12 defines ‘States’ to include the Parliament. As
such Parliament cannot make any law which takes away
or abridges any of the fundamental rights guaranteed
in Chapter 3 of the Constitution.
- whether post-facto checks under the amended (per
the Ordinance) section 159 (of the Patents Act 1970)
would be effective?
The Patents (Amendment) Ordinance 2004 takes away
or abridges the fundamental rights set out in Part 111 (of
the Constitution) as under:
32 Actual experience shows that Ministers and senior
Secretaries, who are assigned this work, have limited
knowledge of the subject, are subject to frequent
changes, their terms and time available to them are too
(i)
Violation of Art. 19(l)(a)
By sec. 10, 20 & 33 (of the Patents Ordinance), the
right of citizens to know and seek information being
part of fundamental right to freedom of speech and
expression, guaranteed by Art 19( I)(a) is taken away,
short for them to understand the requirements,
problems and implications of the complicated Patent
abridged or rendered ineffective. Publication in Gazette
and right of inspection before grant, have been
law and constitutional issues and take independent
decisions. In actual practice, most often Joint Secretaries
provided in existing act and in patent laws of most
in the Department decide and act on basis of the study
countries to enable interested parties to know and
made and notes prepared at Director’s level. They have
obtain information about patent claims, and provide
little knowledge, experience or training, in the subject
sufficient time and opportunity before grant of patent,
to take effective decisions.
to inform the Patent Office about their objections and
3.3
Such vital matters affecting the lives and also to oppose grant.
fundamental rights of people; economic, technological
(ii)
Violation of Art. 19(l)(g) & 21
and industrial development of the nation; and long
Grant of a patent entitles the patentee to exclude or
term international commitments have to be decided after
prevent all other citizens from making, using, selling,
detailed studies, open public discussions, and
offering to sell or importing the product protected by
deliberations in and out of the Parliament by collective
the patent. It thus takes away, or abridges fundamental
decisions of representatives of the people. Such
rights of other citizens to practice their profession, or
matters cannot be left to be decided in total secrecy by
to carry on their trade or business and also the right to
a few individuals - however respected and careful they
life guaranteed by Articles 19(1 )(g) and 21.
may be. The Constitution scheme also mandates this
approach.
Reasonable Restriction Exception
3.4
The Patent Law amendments have been drafted and The public interest safeguards protecting rights of other
pushed through by resorting to emergency powers
citizens through sec. 5 (of the original Patents Act 1970
under Art. 123 and sec. 159 , and on each occasion,
dealing with scheme of process patent, i.e., permitting
there has been systematic erosion of national and
production by other processes); pre-grant scrutiny (sec.
public interests, and bias in favor of applicants/
6 to 23 of the 1970 Act); pre-grant opposition (sec. 25
patentees (80% being foreigners). The present
of the 1970 Act); compulsory license/Govemment use
Ordinance deliberately, systematically and effectively
provisions of Chapter 16-17 of Patents Act. 1970)
dilutes all obligations on part of applicants/patentees;
operated to bring the existing Patents Act provisions
removes all safeguards available for other citizens and
within scope of‘reasonable restrictions’ exception to
public interest; and takes away and limits the rights of
fundamental rights.
the citizens and States even in case of emergencies
However, by deleting or diluting these public interest
and urgencies. The character of the Patents Act 1970
safeguards, as briefly referred in Annex. 1, the
has totally changed the law of the people, by the people,
Ordinance
provisions deprive such patent grant, of
and for the people in favour of a law fortheMNCsand
the safety of protection as reasonable restrictions, and
by the MNCs. Even the Constitution has not been
bring it in direct violation of fundamental rights.
spared. There is thus clear and undisputable evidence
Ordinance against Spirit of Doha Declaration
of foreign influences regulating or guiding exercise such
powers to the detriment of the people and the nation.
Doha Declaration on TRIPS is an official and binding
mfc bulletin/Feb-Mar2005
4
interpretation of TRIPS Agreement. It clearly asserts
primacy of public health over commercial interests, and
recognizes rights of members nations to take all
measures necessary to provide healthcare to their
people treating TRIPS as flexible. It also places a
moratorium on raising of WTO disputes under TRIPS
till next Ministerial Conference, to facilitate members
adopting such measures without anxiety.
Doha
Declaration thus removes scope of confusion, doubts
or disputes.
The Ordinance even goes far beyond the requirements
ofTRIPS - seriously compromising public interest and
third party rights conferred by TRIPS itself. The most
glaring example of such approach is of the provisions
for compulsory licences.
The JPC has taken
considerable care in formulating the policies and
principles (set out in proposed sec. 83) to be followed
for considering application for grant of compulsory
licences. Unfortunately however, the good intentions
get defeated by the elaborate conditions and time
consuming procedures prescribed for such grant in
proposed sec. 84,87,92 & 117A.
The Ordinance makes no exception from procedural
requirements of sec. 87, even for cases of ‘national
emergency’ or ‘extreme urgency’. Even after issue of
gazette notification and declaration by the government
of such situations, proposed sec. 92 & 87 require the
same procedure to be followed before Controller of
Patents, with right of appeal to Appellate Board as per
sec. 117A, involving delay of not less than 2 years
when every day's delay adds to the death toll in
thousands.
Neither TRIPS Agreement, nor Paris Convention,
contemplates a right to oppose holding of elaborate
inquiries or appeals for grant of compulsory licences
or government use in public interest. However, the now
amended sec. 87 prescribes such procedures permitting
even strangers to oppose the grant of compulsory
licences, which virtually nullify this vital public interest
safeguard.
Unless clear, effective, efficient and enforceable
safeguards are provided in law, it may turn out to be
‘now-or-never’ situation for the millions of poor victims
of AIDS/HIV and other pandemics - many of them
innocent children and women, and also for the generic
industry, which could be greatly marginalized.
There is no room for any complacency and ambiguity
or hesitancy. The time is to act, and act decisively and
with determination. No reliance can be placed on
promises of FD1 or R&D by foreign pharma companies
in India, particularly in view of the systematic closure
and disposal, even oftheir existing production facilities,
fixed assets, sale of brands, and withdrawal of capital
and investments from India during last 7 years.
Having regard to the pressing need to control the
health crisis; the constitutional obligations to protect
fundamental right to life for all citizens, and right to
trade for generic industry, and also in furtherance of
Directive Principles of State Policy, it is imperative that
Parliament and Government review, not only the
Ordinance, but even the Patents Act 1970, to provide
more effective safeguards for national and public
interest in respect of patents for healthcare inventions.
Crucial Issues
. Only a microscopic minority in India can afford to
pay the resulting draconian drug prices.
. Can a welfare State make or enforce a law, which
benefits less than 1% of its population, ignoring the
sufferings, and compromising interests, of the
remaining 99%?
• What good is research for modern drugs, if its
benefits are denied to the vast millions of the poorest,
leaving them to suffer their pains in silence - if at all
they survive - for 20 long years?
• Indeed the Ordinance will kill in the long-run, more
people than the unfortunate tsunami that hit our
country on December 26,2004.
Annexlire 1
Some Objectionable Features of the Ordinance
By sec.4, the Ordinance removes the bar against grant
of product patents for ‘substances intendedfor use or
capable of being used as food or medicinesbut
though permissible under TRIPS and as reaffirmed in
Doha Declaration, the Ordinance fails to provide the
following counterbalancing measures absolutely
necessary to protect and promote public interest in
view ofthe total monopoly to be allowed under product
patents:
• The words ‘product’, ‘novelty’ and ‘inventive step’
have not been defined leaving it open for the claimants
to claim, and for Patent Office to grant patents even for
common place items like dosai, pulav, varieties of ice
creams, chocolates, etc., or for wrongful claims for
product patents of matter already in public domain, or
traditional knowledge; or for “me-too” drugs with little
innovation. Such claims without contributing any
technological advance or benefit only deprive people
oftheir lawful rights to matter already in public domain
and add to the disputes, litigations and miseries for
them.
• By sec. 6 to 22 of the Ordinance, the provisions in
the 1970 Act relating to pre-grant search, examination.
1
mfc bulletin/Feb-Mar 2005
scrutiny and publication are being diluted or rendered
ineffective. This will encourage claims for subject matter
already in public domain, or is part of traditional
knowledge, and promote wrongful, frivolous,
fraudulent, excessive, repetitive claims; and there by
deprive other citizens of their lawful rights to make use
etc such knowledge and products.
• By sec. 23 of the Ordinance, the existing provisions
of section 25 of Patents Act 1970 providing for right of
other interested citizens to oppose granting of patents
on the grounds specified therein, is taken away.
• The bias in favor ofthe appl icants and against public
interest is most glaring in case of procedures prescribed
for oppositions to grant of patent (sec. 25 ofthe Patents
Act 1970 and Rules 55 to 58 of the Principal Rules as
amended by the Ordinance), and the procedure
prescribed in sec. 87 to 92 A (as amended in the
Ordinance) for opposing grant of Compulsory License
(CL). Whereas, in case of opposition to patents (sec.
25 of Patents Act 1970), public interest requires proper
procedure and thorough enquiry to eliminate wrongful
claims, in case of CL public interest requires expeditious
grant of CL. But the procedures prescribed in the
Ordinance 2004 and Rules 2005 in both cases favor
even wrongful claims made by applicants and abuses
practised by patentees and are designed to facilitate
and expedite grant of patents even for obviously
frivolous and fraudulent claims, and to delay and defeat
applications for CL even in gross cases of exploitative
prices, non-use, public emergency situations and
exports for benefit of suffering people. There is a clear
bias in favor of applicants/claimants and against public
interest.
• More effective and practicable compulsory license
provisions necessary to ensure sufficient availability
ofdrugs and medicines required for treatment of millions
of poor at affordable prices should have been made.
However, the elaborate and time consuming procedures
prescribed for grant of CL - even in case national
emergency, urgency u/s. 92(1), 92(3), & 92A (as
amended under the Ordinance) makes these provisions
totally ineffective, (sec. 92 (3) specifically required such
procedure to be avoided for drugs required for
pandemics, and now Rule 96, 97 etc., apply the same
procedure as for other CL).
5
trade or business and also the right to life guaranteed
by Articles 19 (l)(g) and 21. Such specific provision
was necessary particularly in view of the scope of
patents being extended to cover product patent for
foods, drugs and medicines and also to all fields of
technology, and providing a longer term of 20 years
with stronger protection.
Annexure 2
Specific Instances of Abuse of Rule Making Powers
The Ordinance amends many of the existing specific
substantive/procedural provisions of the Act by
substituting the words: ‘as may be prescribed’ in
several sections to transfer the powers from the Act to
the Rules which would be subject to changes from
time to time. No guidelines have been provided to
control exercise of such powers by the Government. In
past the DIPP has exercised such powers beyond the
scope of the Act provisions, and almost in all cases to
benefit the applicants/patentees and against public
interest. Two such specific examples of such misuse
are:
(i) Drastically amending the Patent Rules of 1972 by
about 66 clauses and totally substituting the fees
schedules and 28 prescribed forms in place of about 62
forms, Patent Amendment Rules 1999, consequent
upon the Patent Act 1999 containing only 9 sections,
when for identical amendments of 1994 Ordinance, the
draft Rules framed and notified by the Government on
31.12.94 contained only 4 amending clauses and 6 new
forms. All the new forms were designed to enable
applicants to suppress adverse information and avoid
giving declarations.
(ii) Rule 33 O of 1999 Rules limiting the scope of‘public
interest’ provided in sec. 24 D for Government use of
EMR and reproducing the same as Rule 53 of the 2003
Rules, ignoring Bombay High Court guidelines.
(iii)
The Patent Controller, ignoring the specific
provisions of set. 11 A (3) requiring publication in the
Gazette, of all applications after 18 months, avoiding
exception to grant of patent/EMR - though permissible
such publication by issuing a note on 31.05.2003 that
all applications filed before 31.10.2001 shall be deemed
to have been published. This will make even the pre
grant representation by opposition provisions
meaningless.
under TRIPS Agreement (Art. 30 & 31) - the Ordinance
(iv)
fails to protect fundamental rights of citizen. It thus
than 20 months. Once again the 2005 amending Rules
takes away, or abridges fundamental rights of other
citizens to practice their profession, or to carry on their
totally change the fee schedules and the forms and
introduce 70 clauses to amend the Patent Rules 2003.
•
By fai I ing to make provisions for honest/prior use
The Rules have been drastically amended in less
mfc bulletin/Feb-Mar 2005
6
Ordinance and After: Issues in Focus
-B.K.Keayla
Government of India is honoring its binding commitment to change thePatents,A ct
TRIPS provisions In this process the Act has been amended twice m 1999 and 2002 and now the Patents
Amendment) Ordinance 2004 has been promulgated in December 2004. In-depth exammatton of these
legislations reveals that safeguard measures to protect the public health are bemg comprom,^
flexibilities and freedom available are being ignored. The amended patent regime will he p the powerfu
multinational corporations to monopolies our market. The result be that the country will face high cost
economy, inflation, de-growth in certain sectors of industry and unemployment. Serious phenomena A
number of studies have also pointed out the implications ofTRIPS Agreements and made certain useful
suggestions.
Safeguard measures available within the TRIPS framework and the Doha Declaration on TRIPS Agreement
and Public Health should have been stipulated in the amending process. Some of important patent
components ignored in this regard which should now be incorporated in the Third Patents (Amendment)
Bill areas follows:
i) Appropriate definition of patent terminologies to contain volume of patent claims restricting them to the
genuine patentable subject matter need to be stipulated now. The definition of invention should be
restricted to basic novel invention. Pharmaceuticals patentability should be restricted only to new chemical
and medical molecules/entities. This will help exclusion of frivolous claims. Otherwise the volume of
claims may rise to the same level as in USA and China, which are faced with flood or patent applications
over 3 lakhs annually due to weak and unrestricted definitions. For India such proposition would be
totally unmanageable and there would be chaos, as the market would have massive volume of protected
products.
ii) Life forms including microorganisms should be specifically excluded form patentability as WTO has yet
to complete its mandated review. This has implication of widening the scope of patentability. Considering
the criticality of spread of HIV/ AIDS phenomena in the world including India, it is important to consider
exclusion of all relevant present and future drugs for this disease from scope of patentability or declare
health emergency to facilitate authorization of domestic enterprises to produce these drugs for domestic
and export demands. The expansion of patenting of technical application to software industry or a
combination with hardware also should not have been provided through the Ordinance.
iii) Pre-grant opposition of patents as available presently in the Patents Act 1970 should not be amended.
There is no TRIPS requirement to provide for any change in this provision. The proposed amendment of
stipulating pre-grant representation and post-grant opposition has serious implications. The post-grant
opposition will be directed against the Controller and he would vehemently oppose opposition, as he
would himself dispose of recommendations of Opposition Board.
iv) Role of domejc enterprises to ensure competitive environment to protect public interest about the
avadab.hty and affordab.bty of medicines ts important. In this direction Article 31 (b) ofTRIPS permits
provision .nd staid find prominent provision In our .mend^tatarejme
““
v) There are over 9000 applications in the Mail Box mviv^
■ ..
01/01/1995. Article 70 para (3) ofTRIPS Anreem ® eddarln8the transitional period of 10 years from
provided to Mail Box products if they have fallen i/" ,SpeC,lflCal.ly Provides that no protection shall be
the amendments has serious implications There I P b'C d°main- Non-inclusion of these provisions in
produced by the domestic enterprises and their t.,
3 number of Mail Box products which are being
provision should be provided for grant of auto n'f0Ver *S °Ver Rs-3°°° crores. Alternatively specific
enable them to continue their production on pavmeTt1 f COn’pulsory 'fences to these manufacturers to
and the availability of the relevant products from th° r°ya °faerwise there would be serious shortages
higher than the prices of Indian manufacturers Th- 6
holders at Prices which will be 10-15 times
-------------------------------------------- --------- ----- !2j_hlSWl11 also 8ive rise to a large number of court cases.
7
mfc bulletin/Feb-Mar2005
vii) Many small countries and LDCs are dependent upon imports of pharmaceutical products from India.
The Para of Doha Declaration procedure prescribed for imports by these countries in totally unworkable.
The main reason being that there has to be pharmaceutical companies producing the patented drugs
under compulsory licences for meeting the domestic demands in India and supply to needy small and
LDCs. Only in this way the exports from India would be viable. Almost 45 percent turnover of Indian
companies is presently being exported and it is important that the law must strengthen the role of Indian
companies in their export efforts to small and poor countries. The entire world is seriously concerned
about the weaknesses in the changes already made and those under consideration for supplies to poor
and dependent countries. Formal representations have been made by the mass organization from all over
the world to the highest authorities in India to safeguard the interest of the people in these countries.
To sum up there is a need for a serious and precision approach in framing the final amending Bill replacing
the Ordinance. There should be no haste in pushing the enactment of the Bill. Reference to Joint or
Standing Parliamentary Committee is very important and in public interest.
(Reproduced with thanks from: Keayla, B.K. Patents (Amendment) Ordinance 2004: A Critique. National
Working Group on Patent Laws, February 2005. Email: <wgkeayla@del6.vsnl.net.in>).
Patents Ordinance: Ensuring Corporate Control, Neglecting Public
Health Concerns
-Mira Shiva'
The Patent Ordinance was announced on December
26,2004 ironically the day Tsunami hit several countries
in South and South East Asia - a double disaster in
every sense.
On Feb 1, 2005, National Working Group on Patent
Laws and the Research Foundation on Science,
Technology and Ecology (RFSTE) with Transform India
organized a colloquium on Social and Economic
Implications of Patent Ordinance.
The emergency meeting was to highlight the serious
implications for public health, agriculture, food security,
food sovereignty as well as for software and IT.
Richard Stallman, founder of Freedom Software
movement emphasized that there is a significant
difference between copyright, trademark and patents.
The calculated projection of their being similar was to
confuse the public. Copyrights and trade marks are
fairly acceptable to majority. Using intellectual property
in the same breath was basically to ensure its
unquestioned acceptance as a concept specially with
the clever use of the word ‘property’ and rights.
The fact that intellectual property rights was a
substitute term for patents and patent laws - terms
which should be used was known to few.
Corporate control on knowledge on basic ideas would
not be acceptable to many as there had been built on
what existed, and it was bound to block growth and
development in software by non-patent holders of
these ideas and increase inequities.
' Email: <mshiva(q>nda.vsnl.net.in>
Since several ideas are used in a single programme,
with patenting of these ideas, their use by others would
be treated as ‘violations’ and infringements of patent
rights. Richard refuses to use the word ‘intellectual
property rights’ and actively discourages using it.
Mr. BK Keayla, Convenor of the National Working
Group on Patent Laws since its beginning in 1988,
highlighted that four People’s Commission Reports on
patents had been prepared and submitted before each
patent amendment 1999,2002,2003 and 2004.
The nation was misled by statements by the Commerce
Minister that R&D, exports, etc., wilI increase and that
access and prices of medicines will not be affected.
The letter of concern by WHO to the Health Minister
about India’s failure to use the existing TRIPS
flexibilities was noted. This would effect not just the
poor in the country but also in other poorer countries
already in deep debt which depend on India for cheaper
generic equivalents.
Mr. William Haddad of Generic Manufacturers
Association, USA, former adviser to John F. Kennedy,
and former Senator, said that generic manufacturers in
US depend on bulk drugs and raw material from India
for making cheaper generic equivalents available to
the poor in US. He emphasized that TRIPS was not in
the interest of public health and the Patent Ordinance
2004 was extremely unfortunate.
Dr. Vandana Shiva, Director, RFSTE, focused on the
implications of Patent Ordinance on agriculture with
patenting of “traits” in seeds. The changes being
mfc bulletin/Feb-Mar 2005
8
brought in the Seed Act would be disastrous for
agriculture and food sovereignty.
Representatives from mass movements, trade unions
and some Left parties shared their views as well and
assured participants that they would express their
concerns as it was a question of national sovereignty.
Key Concerns
The main concerns about the Patents Ordinance 2004
are as follows:
•
Procedural violation of Constitution bypassing the
Parliament.
•
Exclusion of many flexibilities which TRIPS allows.
• Inclusion of several sections which were beyond
TRIPS requirements and are therefore TRIPS Plus.
♦ Patentability criteria needed to be stricter allowing
patenting only for inventions based on novelty and
restricted only to new chemical entitities and not new
use of old drugs, dosage forms, drug delivery system,
etc.
• Earlier existing clauses have been removed which
could have taken care of frivolous claims.
• There continues to be the most problematic concern
about representation, implications on domestic
including public health once the 7000 patent
applications in the mailbox are granted patents.The
Post-Grant Opposition would only imply questioning
the patent granter.
affecting ACCESS TO medicines as well as PRICES.
Only 300 new drugs were patented in last 5 years world
over. Now with no pre-grant opposition per the
December2004 Ordinance, it can be well imagined
what the granting of the 7000 patent applications in
the mailbox mean to domestic industry which is already
manufacturing those drugs.
Protection of those drugs which are “already in public
domain”(that is manufactured domestically by Indian
industry as of 1. 1.2005) is permitted under TRIPS Art
70.3 but shockingly has not been ensured in the
Ordinance. This means that existing domestic
production becomes a violation and infringement of
the patents held by the patent holder. Stoppage of Rs
3000 crores worth of medicines could take place,
spiraling drug prices, increasing indebtedness,
decreasing drug availability, emergence of drug
resistance, etc., worsening the already high morbidity
and mortality suffering pain and death amongst the
most vulnerable.
No one involved in or concerned abut public health
can accept this without raising strong objections.
The Joint Action Committee against Patent Ordinance
has decided to launch nationwide protests on the
February 26,2005 joined in by mass movements health
and public health community health organisations,
farmers’ movements, social action groups,
academicians, intellectuals and activists.
• Rules Making: Many sections indicate “as per
rules” which will be made by Commerce Ministry
bureaucracy.
On February 13, 2005, Basant Panchami, RFSTEand
farmers’ movements will be involved in activities
highlighting impact of Patent Ordinance, Seed Act, etc.,
on Agriculture and Food Security.
The failure to incorporate public concerns in
presentations made to Joint Parliamentary Committee
was pointed by those who had made presentations.
Basant Panchami is celebrated in the North at a time
when yellow mustard fields are in full bloom and
customarily yellow clothes are worn.
When concerns were raised during the Is' and 2nd
Amendments, during the NDA regime, one of the key
persons involved with public health aspects of patents
was told by a senior government servant that “the
Amendments had been seen and approved by the
Americans, so why were needless objections being
made 1”
This form of policy making is unacceptable to the
citizens of a sovereign country - which belongs not
just to those involved in trade and those belonging to
large corporations, but to those
involved in public
health work and the people who give their blood, sweat
and tears to survive and to keep humanity alive.
The bottomline is that even today large majority cannot
afford to buy medicines and medical care.
With grant of patent for 20 years and EVERGREENING
of patents, extended monopolies will be ensured
Our seeds in our Hands
Our health in our Hands
Our knowledge in our Hands
for PUBLIC GOOD and not Corporate profits in the
name of Patents through UNJUST INEQUITY,
PERPETUATING trade regimes at global and national
levels.
Attention Readers
Please renew your subscription to the mfc
bulletin.
Ifyou know a life subscriber who is not getting
the bulletin, please let us know.
-Editor
mfc bulIetin/Feb-Mar2005
9
Tsunami: Some Health Considerations
-C.Sathyamala'
Disposal of the Dead and the Tsunami
The most visible area of intervention of the state was
in the disposal of the dead.
Post tsunami, there was some delay before the bodies
were cleared and thus we see photographs of a main
road littered with the bodies of the dead and people
walking around it with little concern (see for instance
India Today, Outlook, etc.). The dead were brought to
government hospitals and health centres. Those who
were identified by relatives were handed over to them
but the rest, the unidentified or unclaimed ones, were
buried in mass graves or mass cremated. Photographs
bear mute testimony to the way we handled our dead.
Bodies were “tossed into huge pits”, thrown in pellmell, men, women and children, piled up in hideous
heaps, many with their clothing awry or with no
coverings at all. The question arises, what was the
tearing hurry to dispose the dead in such a crass
manner? We need to ask this question on three counts:
extremely small. Though the human body is host to
many organisms only few are pathogenic. With death,
these too die within a short period due to lack of suitable
environment. Organisms involved in putrefaction are
not pathogenic.
However, persons (rescue workers, volunteers, and
military personnel) who deal with the disposal may be
at some risk as they handle dead bodies in large
numbers. They may be exposed to chronic infectious
hazards, particularly blood-borne infections (which is
more likely if trauma due to disaster produced severe
bleeding injuries) and tuberculosis, if adequate
precautions are not taken. Preventive measures would
include following simple rules of basic hygiene such
as hand washing, use of protective gloves, masks and
observing universal precautions for blood and body
fluids.
the extent of public health risk that bodies in
natural disaster pose,
the rights of the survivors to have had a
reasonable chance to identify their dead, and
the concept of ritual pollution in the caste
based Hindu tradition.
The greatest risk that exists is in transmission of
gastrointestinal illnesses caused when bodies, dead
animals or bones contaminate drinking water sources
although, as Morgan (2004) notes, communities will
rarely use water supply in such instances. According
to him, the risk of epidemic in the aftermath of natural
disasters is from the survivors themselves due to
unsanitary conditions and overcrowding prevailing in
the temporary camps.
The Pan American Health organization’s (PAHO)
guidelines2* on management of the dead following
natural disaster, states that the basic principle is,
“Bodies of victims of natural disasters who died as a
result of trauma do not pose a risk of epidemics.” [See
also: Claude de Ville de Goyet, " Epidemics caused by
dead bodies: a disaster myth that does not want to
die” at <http://publications.paho.org/english/
editorial_dead_bodies.pdf>
In Tamil Nadu, with notable exceptions, members of a
particular community (Dalits, belonging to the ex
untouchable castes) were brought in specifically to
remove the bodies4. They were given a pair of gloves,
a mask and plenty of alcohol to deaden senses. If
anyone was at risk of contaminating any infections
from the dead, it was these men who were probably not
given clear enough instructions on self-protection and
if they were, were in no position to follow them, being
in an inebriated state.
1.
2.
3.
Oliver Morgan2 in his scholarly work of a review of die
existing literature on the subject (which forms the basis
of the PAHO guidelines) concludes that in natural
disasters, victims who usually die oftrauma are unlikely
to have more acute or “epidemic-causing” infections
than the general population. Hence in such situations,
the risk that dead bodies pose to the general public is
' Email: <salhyamala@yahoo.com>. The complete article is
posted al <www.mfcindia.org>
Morgan O. "Infectious disease risks from dead bodiesfollowing
natural disasters". Rev Panam
Salad Publica. 2004: 15(5): 307-12. Available at <http://
publications.paho.org/english/dead bodies.pdf>
■' Morgan O.. op.cit.
4 Reports have it that they were brought from other places like
Madurai, etc (personal communication. Mr Stibbit of TMKTS).
The other populist measure that was tried out was the
use of chemicals and disinfectants. The S ecretary for
Rural Development, Ms Shanta Sheela Nair was
reported to have contacted the Gujarat State Disaster
Management Authority (GSDMA) to help dispose of
bodies still lying uncleared a week after the tsunami
disaster (Sreenivas, 2005). The GSDMA Joint CEO, V.
Thirupugazh, was reported to have sent to Tamil Nadu,
more than 10 tonnes of chemicals to hasten
decomposition and disinfectants to be sprayed on mass
graves. A team had also flown in with spraying
machines to spray chemicals and disinfectants all over
the district to counter the threat of epidemics. These
“heroic” efforts are considered to be of little use even
mfc bulletin/Feb-Mar 2005
10
were videotaped for future identification.
if the risk of infections was to be real and their value is
merely “cosmetic” (Ville de Goyet, 2004).
In the tsunami disaster, in most cases, death was due
to drowning with sand filled seawater and the bodies
that were initially removed appeared fresh with no signs
of putrefaction. Hence the question of quick disposal
because of unpleasant sight or smell due to the setting
in of putrefaction did not arise in the early stages and
therefore there was really no need for a hasty disposal.
The total lack of respect, insensitivity and utter
disregard to the sentiments of the survivors in the
manner of the disposal of the dead was yet another
injury heaped on the survivors. But the issue is not
merely that pertaining to decency we accord our dead.
The PAHO guidelines do not recommend mass
cremations5 or mass burials of unidentified bodies in
collective graves are also not recommended, again
because of the near impossibility of ever identifying
the victim. There is a compelling health reason for this
guideline (Ville de Goyet, 2004). It has been shown that
identification of the body and the following normal
process of grieving have a direct bearing on the mental
health of the survivors. By not performing death rites,
important socio-cultural-religious needs of the
survivors have been dismissed as unimportant.
Denying the right to identify the deceased or
suppressing the means to track the body for proper
grieving adds to the mental health risks facing the
affected population (Ville de Goyet, 2004). The inability
to grieve fully in the absence of a certainty allows no
closure to the loss and will add to the mental suffering
and mental illness of the surviving members for a long
time to come.
The survivors should have been given every
opportunity to identify their dead. Provisions should
have been made to preserve the unidentified and
unclaimed bodies for a few days to allow survivors
adequate time to identify their family members. By mass
cremations and mass burials, we have denied the
survivors the right to claim their dead. Could it have
had anything to do with their position in the socio
economic hierarchy? One cannot help comparing this
with the manner in which the Thai government handled
the bodies of foreign tourists who died in the tsunami
disaster. The Thai government vowed that not a single
body would be disposed off till all efforts were made to
identify it. There are also reports that in Nagai, the
volunteers from the Muslim community handled the
dead in a more humane way. In Vellankanni the bodies
•' Even if indeed there is a possibility of infection, mass
cremations are unpractical way of disposal because large
quantities of fuel Is required to achieve a high enough
temperatures of 650° C for up Io 3 hours Io make all remains
non-infectious.
Media and the Tragedy
The media played an important role in publicizing the
unfolding of the tragedy. However, often the reporting
was high pitched verging on the hysterical. The same
images were played again and again. Only in the early
phase of the disaster that one TV channel (Sun TV’s
24-hour news channel) advised the parents not to let
children view the images as they might disturb young
minds. But soon channels were vying with each other
to show gorier images and heart-rending stories. The
news was also selective with the camera refusing to
move downwards from Nagai. It was only much later
that information from Kanyakumari district, which is
also seriously affected, was brought in.
Media also indulged in passing on incorrect
information. For instance, one of the national dailies
had a headline on page 3 “Health Bomb ticks on”
(Agencies & Sharma S., 2004). Three days later, the
same newspaper announced in a front-page headline,
“Viral storm Brewing in Nicobar” (Sen, 2005). The first
paragraph reads, “Dead bodies float all around the
waters in the Nicobar islands waiting to be cleared. But
death, in the form of the V Cholera virus (sic) floats just
beneath in the estuarine environment of the Nancowrie
islands.” The reporter goes on to describe the “viral”
characteristics of the bacteria Vibrio cholerae, “...The
scariest thing about the virus is the fact that it lives
freely in estuarine areas ... the conclusion is chilling:
the virus could be in any stream or pond in the
Noncowries - are al 1 of them... The virus has remained
dormant for the last two years, but if it were to choose
a time to strike no time is better than now... With ships
- and people - moving between islands, the virus will
have no shortage of carriers”. The reporter had
apparently based his news on a published report of
the ICMR unit in Andaman & Nicobar Islands on a
cholera outbreak in 2002 in which “dozens" of people
had died. The next day, the Health authorities issued a
denial, which was carried in another national daily,
“Centre denies reports of ‘viral storm’ in Nicobar”
(Correspondent, 2005) without really taking the
newspaper that had reported the news item to task.
Physical and Mental Health Effects
Physical injuries do not appear to have been of major
consequence of the disaster in Tamil Nadu. This is
unlike what we hear about the situation in Indonesia.
But the consequence to mental health is of enormous
proportions. Psychic injury has been caused by the
traumatic event itself, loss of family members, special
problems due to loss of children,6 injury to people’s
self-esteem and self-respect (doling out of relief in a
11
mfc bulletin/Feb-Mar 2005
de-humanising manner) and the anxiety about loss of
livelihood.
The families that have been impacted adversely can be
classified into the following categories:
•
•
•
•
households with no surviving members
those who have lost some members
those who have been displaced by the evacuation
efforts; and
those whose livelihood have been affected
These categories are not mutually exclusive and the
worst affected are those who have lost members, have
been displaced and have lost livelihoods. But the
largest proportions of the families that have been
affected belong to the last two categories. It is
estimated as of January 10, 2005, more than 1,50,000
families have been adversely impacted by the tsunami.
The mental health consequences of the disaster, both
pattern and the morbidity rate, may be different in each
of these groups both because of the varying levels of
stress they would have experienced as well as the
varying abilities of coping. Coping capabilities would
be linked to former individual and community capacities
and support structures. The ability to regroup and re
form, which will be determined by the previous cohesion
of families and communities, will be an important
variable in the ability to cope. For instance, the stress
due to anxiety caused in searching for family members
will obviously have a different consequence in those
families who found all the members alive from those
who have definite knowledge that their family members
are dead to those whose family members are missing.
There would be age, class, caste and gender related
differentials. Families that have lost children will be
different from families that lost adult earning members.
The existence of extended family and community ties
such as that present in the close knit fishing
communities may have a different impact as compared
to the individualistic existence present in the urban,
peri-urban slum communities.
Three weeks have passed as of the day of writing this
report. Stage I of the mourning process, which typically
lasts up to 2 weeks following the loss, would have
passed (personal communication, Parappully). This
stage is characterized by shock, numbness, disbelief
and denial.
As the affected people begin to register the reality of
their loss, there will be irrational guilt (survivors guilt),
self-blame, and self-recrimination. We expect the pattern
» Tamil Nadu has a high lubeclomy rale with people, even those
from the working class, adopting the two child family norm;
this would affect women and men differentially with men opting
for second marriages leading to increase in desertion, and
abandonment of women.
of psychiatric morbidity to range from insomnia, panic
attacks, anxiety neuroses, depression, and suicidal
ideation. In the context of Tamil Nadu where the rate of
suicide is very high, this is an area of grave concern. A
disaster such as this will also aggravate mental health
problems in people with pre-existing disease.
The issue of Post-Traumatic Stress Disorder (PTSD) is
a complex one and again likely to affect different sub
groups varyingly. It is possible that PTSD will become
more prevalent in “land-dwellers” as compared to the
fishermen whose life is the sea. Fishing is considered
to be the riskiest occupation in the world (John, 2004).
In the state of Kerala, the accident death toll of
fishermen over the last decade was one fisherman every
four days. Fishermen, particularly those who use the
catamarans have leamt, as part of their daily living, to
deal with the sea in all its fury. Therefore, the likelihood
that this group will manifest PTSD is low. However, the
state and the media are portraying the fishermen as
being terrified of entering the sea again. This is one of
the strategy by which we believe the state is trying to
maintain a state of instability and “fear psychosis”
going to prevent normalization of these communities.
The long-term consequences of untreated or
incompletely treated trauma could be other
manifestations such as hypertension, Coronary Artery
Disease, ulcerative diseases of the GI tract, and
illnesses such as asthma. There is a likelihood of
increase in substance abuse specifically alcohol
(prevalence of chronic alcoholism is high in Tamil Nadu
among the working class population), addiction to
tranquilizers (in the second week of the disaster there
were reports that affected people were being prescribed
anti-depressants and “stress management”7 tablets).
There may be an increase in reckless behaviour (this
could be a particular problem with the fishermen), and
escalation of violent impulses (increase in domestic
violence?).
It appears then that an epidemic of mental health
problems is likely in the affected population unless
adequate steps are taken now to ensure that the effects
of trauma are minimized. The second part of this paper
will deal with this and other important issues pertaining
to long-term rehabilitation.
Acknowledgements
The information presented in this paper is based on
the first-hand account of Mr Subbu of the Tamil Nadu
Manila Kattida Tholilazhar Sangam (Tamilnadu State
Construction Workers’ Union) who visited some of
the severely affected areas in Tamil Nadu (districts of
7 The newspaper that published this information did not
specify what they were.
mfc bulletin/Feb-Mar 2005
12
Cuddalore and Nagai) in the week immediately
Sreenivas J (2005). "In TN, Gujarat shows the way”,
following the tsunami disaster and from the
The Indian Express (Nagpur edition) Jan 2, 2005, p.3.
presentations made at the Citizens’ Forum meeting on
January 1,2005 in Chennai, by representatives of mass
movements, NGOs and others who had made a field
level assessment of the devastation in the coastal area
of Tamil Nadu. I was in Tamil Nadu at that time although
Ville de Goyet, Claude de (2004). “Epidemics caused by
dead bodies: a disaster myth that does not want to
die”. Rev Panam Salud Publica/Pan Am J Public
not in any of the coastal towns. I attended the Jan 1
Table 1: Numbers of Dead and Missing
in Tsunami-Affected Countries
meeting in Chennai. I would also like to acknowledge
Dr Jose Parappully, clinical psychologist, for
health 15(5): 297-299.
Country
Number
Indonesia
1,13.306
Sri Lanka
30.513
India
9,571
Agencies & Sharma S (2004). “Health bomb ticks on”,
Hindustan Times (Delhi edition) Dec 30.2004, p 3.
Thailand
5,246
Maldives
82
Correspondent (2005). “Centre denies reports of'viral
storm’ in Nicobar”, The Hindu, Jan 3,2005.
Malaysia
68
Myanmar
53
generously sharing his knowledge and material
regarding psychological consequences of disasters.
References
<http://
Bangladesh
2
www.expressindia.com/fu!lstory.php?newsid=40650>
East Africa
187
Indian
Express
(online)
(2005).
India Today (2005). “ Apocalypse Now: 85,000 dead
and counting”, Jan. 10,2005, pp. 24-33.
Kurien JT (2004). “Tsunamis and a secure future”,
Indian Ocean Tsunami Devastate Fisherfolk, Dec 26,
2004:58:50
UTS.
<http://www.ukabc.org/
tsunamis.htm#e>
Morgan O (2004). “Infectious disease risks from dead
bodies following natural disasters”. Rev Panam Salud
Publica, 15(5): 307-12.
Pan American Health Organization (2004).
“Management of Cadavers following Natural
Disasters”, Guidelines prepared by the technical
decisions of the PAHO.
Sen A (2005). “Viral storm brewing in Nicobar”,
Hindustan Times, Jan 2,2005, pp. 1 & 11.
Source: Data as of Jan 10, 2005, reported
at<\v)v\v.rediff.com/ne)vs/tsunanu.htm>, Jan II, 2005
Table 2 : Deaths in Tamil Nadu
Place
Deaths
Nagapattinam town
2400
Others parts of Nagapattinam dist.
1000
Velankani
1500
Kanyakumari
800
Cuddalore
>500
Pondicherry
500
Chennai
200
Kalpakkatn
100
No. Injured
500
Source: Data as of Jan 10. 2005. reported
ot<\vtv\v.rediff.com/news/tsunami.htnt>, Jan 11. 2005
Available Revised Edition
Impoverishing the Poor:
Pharmaceuticals and Drug Pricing in India
Publishers: LOCOST, Vadodara and JSS Bilaspur, Dec 2004
Pages 180, Price Rs 100/For copies, write to <locost@satyam.net.in> or <jss_ganiyari@redifimail.com >
mfc bulletin/Feb-Mar 2005
13
Why the IMS Act Needs to Stay
-Radha Holla Bhar 1
Issue
Industries, Government of India, proposes to REPEAL
The IMS Act is one of the laws being repealed under
the new THE FOOD SAFETY AND STANDARDS
BILL, 2005.
the IMS Act and some other Acts. The reason: a new
Differences
January 15, 2005. The Ministry of Food Processing
proposed Bill “Food Safety and Standards Bill 2005”.
Under Section 108. Schedule 1 of the Bill, it is proposed
to repeal certain Acts including the IMS Act.
Government of India has asked for comments and
suggestions. Do we need to repeal this highly relevant
legislation concerning lives of millions of young
children?
In 1992, India became the 8* country to take a definite
There are considerable differences between the
potential impact of the IMS Act and the new Food
Safety Bill. Firstly, the former was the brainchild of the
Department of Women and Child Development: infant
health and social concerns were at the heart of the
IMS Act. The Ministry of Food Processing Industry,
in contrast, is developing the Food Safety Bill: industrial
health underlies the objectives.
Promotion of infant milk substitutes and related
Secondly, the objective of IMS Act is to protect,
promote and support breastfeeding; it prohibits any
kind of promotion of infant milk substitutes, infant
foods and feeding bottles: it ensures proper education
of pregnant and lactating mothers about breastfeeding
by providing accurate information; it ensures proper
use of substitutes, and defines the role of health
workers and their associations and health care
institutions in promoting breastfeeding as well as
prohibiting promotion of baby foods. The IMS Act
also prohibits donations and gifts, prohibits direct
promotion of baby foods and feeding bottles to
products like feeding bottles and teats do constitute a
pregnant women. Thus the IMS Act encompasses
health hazard. Promotion of infant milk substitutes and
social and health concerns of the community at large.
related products has been more extensive and
The object of this new bill is to harmonize laws related
pervasive than the dissemination of information
to food and lay down ‘science based standards for
concerning the advantages of mother’s milk and
articles of food and regulate their manufacture, import,
breastfeeding and contributes to decline in
export, storage, distribution and sale, to ensure
breastfeeding. In the absence of strong interventions
designed to protect, promote and support
breastfeeding, this decline can assume dangerous
proportions subjecting millions of infants to greater
availability of safe and wholesome food for human
stand for children’s rights. The Indian Parliament
unanimously enacted the Infant Milk Substitutes,
Feeding Bottles and Infant Foods (Regulation of
Production, Supply and Distribution) Act, 1992 (IMS
Act). The IMS Act controls marketing practices of
baby food manufacturers.
The statement of objectives presented in Parliament
during the enactment of the IMS Act clearly stated:
Inappropriate feeding practices lead to infant
malnutrition, morbidity and mortality in our children.
risks of infections, malnutrition and death...
Thus the Act had a clear intent: the saving of millions
of children’s lives and improving their nutritional status
by preventing the baby food industry from enticing
mothers and the health system to give babies artificial
foods.
In 2003, following increasing information on the
benefits of exclusive breastfeeding for the first six
months, the Act was amended to include weaning
foods.
consumption (including other matters relating
thereto)...” In an advertisement placed in the leading
newspapers of Delhi, the ministry of food processing
industries states that the law also seeks to “meet the
dynamic requirements of international trade and Indian
Food Trade & Industry.” The Food Safety and
Standards Bill, therefore, has as its basis enhancement
of trade in foods that meet safety standards.
Are Infant Foods Necessary at All?
However, the issue with infant foods is not safety
standards, rather it is the question of whether such
foods are necessary at all or not. Medical evidence
'Email: <-basbhar@nnl.com>
mfc bulletin/Feb-Mar2005
14
from across the world states categorically that infant
the trade-oriented Food Safety Bill is tantamount to
milks are not adequate substitutes for breastmilk, which
laying the lives of the India’s millions of infants at the
is the best food for infants. There is also overwhelming
feet of corporate profits.
evidence that infants who are not breastfed suffer from
Please write your letter supporting the above stand
malnutrition, and that this early malnutrition can cause
(sample letter in box).
irreversible setbacks to optimal physical, emotional,
mental and intellectual growth of infants. Further
Draft Letter
evidence exists that in countries like India, where clean
drinking water and fuel are at a premium and where
incomes are low, artificial infant milks and foods are a
leading cause of malnutrition, disease and death of
infants. Thus, medically and scientifically speaking,
infant milks and foods, even if they are of the highest
standards, are actually harmful to infant health because
they tend to deprive the baby of the best food -
breastmilk. This was the basis of the IMS Act, and this
aspect is wholly missing in the new Food Safety Bill.
Mr. A.N.P Sinha
Joint Secretary
Ministry of Food Processing Industries
Government of India
Panchsheel Bhavan, August Kranti Marg
New Delhi
Fax 91-11-26497641
Email <sumsingh@email.com>
Sub: Repeal of Infant Milk Substitutes, Feeding
Bottles and Infant Foods (Regulation of
On the whole, there are very few situations when an
Production, Supply and Distribution) Act, 1992
infant needs artificial milks and foods to survive. Such
(IMS Act) proposed by the new draft "FoodSafety
and Standards Bill 2005 ”
Dear Sir,
foods are therefore, in a way, equivalent to special drugs
needed in rare cases when patients suffer from rare
illnesses. To that extent, like other occasionally essential
quantities, but also need to meet safety standards.
We are extremely concerned to note that the Section
108 Schedule I of the “Food Safety and Standards
Bill 2005” proposes to repeal the Infant Milk
drugs, they are not just necessary in very limited
However, given their food-like nature, they have far
Substitutes, Feeding Bottles and Infant Foods
greater potential for misuse and abuse than
(Regulation of Production, Supply and Distribution)
pharmaceuticals, and thus justify the need for special
Act, 1992 (IMS Act).
laws, such as the IMS Act, which not merely prohibits
the unregulated production and marketing (including
advertising) of these foods, but also demands that there
be cautions on the containers regarding their use.
The battle to mainstream the regulation of the infant
milks and foods industry is today more than half a
century old. It saw the first coming together of the
medical profession, consumer activists, health activists,
social activists, legal activists, NGOs, governments,
UNICEF, WHO and other international bodies in a bid
to save the lives of millions of children from the
We appreciate the role of MOFPI for proposing a
new integrated “Food Safety and Standards Bill
2005 ”. However, having carefully gone through the
Bill and its objectives, and the one proposed to be
repealed among others, we feel that the two Bills are
totally different with different objectives. The Food
Bill ensures quality and deals with adulteration issues
and the IMS ACT aims at reducing child malnutrition
and reduce infant and young child mortality. No logic
is seen in repealing this highly
Bill.
socially relevant
unregulated actions of industry. The process saw
international codes being developed, international
standards being set, both for food safety as well as for
action by governments and industry. India was the
eighth country to adopt the code into law, and became
a beacon for all countries that sought to improve the
health of their children. Repealing the IMS Act, and
bringing the regulation ofthe infant food industry under
Therefore, we urge you NOT to REPEAL the Infant
Milk Substitutes, Feeding Bottles and Infant Foods
(Regulation of Production, Supply and Distribution)
Act, 1992 (IMS Act) while adopting the new “Food
Safety and Standards Bill 2005”.
Yours, etc.
15
mfcbullctin/Feb-Mar2005
A Gender and Rights Approach to Breastfeeding Promotion12
-Lakshmi Menon and Radha Holla'
Introduction
The decade of the 1990s up to the 21s1 century saw
more of the breastfeeding promotion carried out from a
rights perspective, particularly after 1995-96, when the
human rights discourse became popular within many
social movements. Several international declarations
and UN instruments supporting the rights of children
to food and health were adopted, providing a rationale
for the breastfeeding movement. The international
declarations included the Innocenti Declaration on
the Protection, Promotion and Support of
Breastfeeding of 1990, and declarations from the
World Summitfor Children in 1990 and the International
Conference on Nutrition in 1992. The UN instruments
included the International Code of Marketing of
Breastmilk Substitutes and subsequent World Health
Assembly (WHA) Resolutions, the Convention on
the Rights of the Child (CRC), 1989, and the Global
Strategy on Infant and Young Child Feeding adopted
by WHA in 2002. A CRC provision is of particular
significance: “that State Parties recognise the right of
the child to the enjoyment of the highest attainable
standard of health”. This was interpreted as implying
that children have a right to mother’s milk as the only
fully adequate form of child nutrition in the first six
months. Much of the focus of breastfeeding promotion
was thus on the child - on children’s right to be
breastfed.
Real Situation of the World’s Women
Because women constitute the core of biological
reproduction, over centuries and millennia, claims have
been made on their lives by society, by the community
and by the family. As a result of this process of
disempowerment, women have multiple burdens,
including financial contributions through their work,
resource management, household responsibilities, as
well as the care of children and the elderly. In many
societies, few women are able to exercise their social
and economic rights including rights over basic
necessities such as food and health care.
Breastfeeding and Women’s Issues
1.
Breastfeeding and Maternal Nutrition
WHO/UNICEF recommend that a baby be exclusively
breastfed for the first six months of its life. After this,
appropriate and adequate complementary foods need
to be given in addition to breastmilk, which should
continue to be given till the child is at least two years
old (WHO/UNICEF, 2002).
A breastfeeding woman produces 700 ml of milk per
day during the first six months and progressively less
till the baby is fully weaned off the breast. While
breastfeeding, she needs an additional 500 kcal per
day for the first six months; after that, this requirement
is reduced to 400kcal per day (Manual of Clinical
Nutrition Management, Picciano2003).
Studies have shown even the most undernourished
woman can breastfeed her baby adequately. How do
women who get barely enough calories to maintain
their bodily system get the extra calories required to
produce breastmilk? They use up essential body fat
and tissue, to the further detriment of their already
compromised health, to make milk fortheir babies.
However, we must keep in mind that it is women who
are actually at the center of breastfeeding. It is a truism
to say that the situation of the woman determines her
ability to breastfeed successfully. Women have,
through millennia, breastfed successfully. Even today,
in most parts of the world, women continue to
breastfeed their babies. And yet, breastfeeding
continues to be a challenge. In most cases, it is neither
adequate nor exclusive in the first six months of life. To
address these challenges, we need to look at the reality
of women’s lives, to identify what makes breastfeeding
a difficult choice, and to create a world where women
can successfully breastfeed their babies adequately
for as long as is needed.
countries shows that women generally consumed only
about two-thirds of the WHO recommended daily
allowance for energy, and that their average weightfor-height was well below the average for small-frame
women in the US (Anthology on Women). Women in
many cultures around the world, particularly in South
Asia, eaf last and least in a family. They suffer from
1 This is an edited version of the discussion paper preparedfor
IVA BA's Gender Strategy Meeting held on 2-3 December 2004
in Penang. Malaysia.
The original paper is available from: <waba@streamyx.com>
malnutrition and anaemia in the best of times. When
they become pregnant or breastfeed, the demand on
their already weakened bodies is even more, especially
2Emails: <LM-im@eth.net> and <radhahb@yahoo.com>
as they rarely get extra nutrition during this period.
Data from 32 studies examining protein energy
malnutrition (PEM) among women in developing
mfc bulletin/Feb-Mar2005
16
Women’s Health Status
Maternal deaths per 100,000 live births
Sub-Saharan Africa - 1,098
Arab States - 509
South Asia - 427
Latin America and the Caribbean
-188
East Asia and the Pacific - 144
Central and Eastern Europe and CIS - 55
Countries with high maternal deaths per 100,000
live births
| Ethiopia - 1,800
Sudan - 1,500
Nepal - 830
Lao PDR - 650
Bangladesh - 600.
Source: UNDP Human Development Report 2003
Pregnant women with anemia in 1975-91
88% in India
64% in Indonesia and Ghana, and over 50% in Bangladesh,
Nepal, Lao, Thailand, Malawi, Nigeria, Tanzania, and Trinidad
and Tobago
Source: UNDP Human Development Report 2000
Births attended by health personnel during 19952001
East Asia and Pacific - 80%
Latin America and the Caribbean
- 82%
Central and Eastern Europe & CIS - 96%
South Asia -36
Sub-Saharan Africa - 38
Yemen
- 22%
Bangladesh -12%
Nepal -11%
Ethiopia - 6%.
Source: UNDP Human Development Report 2003
No of Women with HIV/AIDS Between 15 to 49 years
in 2001
Sub-Saharan Africa - 15 million
South Asia - 1.5 million
Latin America & the Caribbean - 640,000
East Asia and Pacific - 600.000
Central and Eastern Europe & CIS
Arab states
- 270,000
- 260,000
Source: UNDP Human Development Report 2003
2. Breastfeeding and Work
The problem that women face at their work place with
regard to breastfeeding is often extremely complex and
not given to easy solutions. Across the world, the
situations of women at work vary. In some countries,
there are laws that provide maternity benefits; and
women have adequate transportation to carry the baby
to work or to a nearby creche. Though given the
facilities to breastfeed successfully, many of these
women have often chosen artificial feeding because
they are both ignorant about the benefits of
breastfeeding and have the capacity to provide safe,
affordable artificial feeding. In many cases, these women
have been the main targets of breastfeeding promotions
and campaigns.
For the majority of the world’s women, particularly
women who work in low-paid, itinerant jobs like
domestic work or vending on the streets, no affordable
or convenient creche facilities are available, and they
have no option but to continue working in distressing
circumstances because their income is crucial to their
families.
According to a UN report, “In 1990, labour force
participation rates were high for women in their 20s,
rose through their 30s and 40s, and declined only after
age 50. Increasingly women remain in the labour force
during their child bearing and child rearing years.”
(World’s Women, 2000). The report pointed out that
while women’s participation in work increased highly,
their working conditions did not improve much. It is
crucial to remember that the majority of the world’s
women work in the unorganised sector, as agricultural
labour, as contract or seasonal workers, as domestic
workers, as itinerant vendors on streets. For example,
the report pointed out that women’s participation in
non-agricultural labour force in the informal sector
during 1991-97 was 97% in Benin and Chad, 96% in
Mali, 91% in India, 88% in Indonesia, 83% in Guinea,
82% in Kenya, 74% in Bolivia, 69% in El Salvador, and
67% in Brazil.
Besides, women have also to spend much more time in
household chores than men. A particular mention must
be made of women's burden of work. A UNDP study
(2004) reported that in urban areas women work as
much as 10 hours a day and in rural areas about 12
hours a day. The time they spent on non-market
activities ranged from 60% to 69% while for men it
ranged between only 21 % and 31%. Women spent much
of this time on household chores, which is mostly
unappreciated and undervalued.
For women who work in the organised sector, often the
problem is getting paid maternity leave. While over 120
countries have laws providing for some maternity leave
(hardly any country gives paid leave for six months),
going on long leave means that the job may be taken
over by someone else. And now, under the dictates of
globalisation, workers’ protections are generally being
dismantled to allow investors to hire cheap contract
labour; in such situations, even the existence of strong
maternity protection laws does not help the woman to
successfully breastfeed, if the survival of her entire
family is at stake. In the unorganised or informal sector,
the situation is even worse. No government has yet
found ways to translate existing maternity benefits in
such ways as to make them accessible and meaningful
to women working in this sector.
The problem of combining breastfeeding with working
is further deepened by the fact that in an increasing
mfc bulletin/Feb-Mar 2005
number of cases, the woman is the single earner in the
family. In the organised sector particularly, women are
the first to lose their jobs in case of retrenchment. Thus
women are often forced into a situation where they
have to choose between breastfeeding the baby and
earning to keep the family alive.
3.
Violence against Women
Women, across all ages, caste, race, and economic
status, are victims of violence.
Besides the obvious violence, such as harassment,
beatings and rape, women are also victims of hidden
violence perpetuated by society - which has resulted
in their low social and economic status, especially in
terms of education, health and nutrition and income
In spite of the fact that women are often important
income earners, they are not only given no help in
house work, they are often also reprimanded for not
doing it properly.
In many cultures, society places women at the bottom.
Thus girl children are viewed as a burden and social
conditioning as well as social pressure cause women
to neglect themselves and their girl children. For
example, in many parts of North India, girl babies are
breastfed for shorter periods than boys, so that women
can get pregnant again quickly in the hope that the
next child would be a boy. Women have no say in any
major decisions, including how many children to have
and when, as well as what to feed them. Maternal and
child health workers, often including those promoting
breastfeeding, ignore this, and target women with their
messages. Such targetting worsens the situation by
causing the women to feel guilty and more helpless.
Yet another kind of violence against women occurs
when companies producing breastmilk substitutes,
aided by the health professionals and workers, try to
convince mothers that their own milk is valueless or
inferior to artificial milk.
Violence against women in any form, both overt and
hidden, causes stress. Stress affects breastmilk
production and secretion as the brain affects the
hormones controlling these functions. The letdown
reflex that prompts breastmilk flow is a very sensitive
reflex and can be easily inhibited by psychological
factors, and turned off by anxiety, tension and stress
(Esterik and Menon, 1996).
Women’s Rights to Health
While children’s right to “highest attainable standard
of health” is the focus of advocacy by the breastfeeding
movement, it must be remembered that women too have
the right to good nutrition and health care on which
depends the child’s nutrition and health.
Women’s rights to health are specifically enshrined in
various international instruments, starting with the
Universal Declaration on Human Rights of 1948. More
recent UN instruments adopted specifically on
women’s rights to good health were at the 1979
Convention on the Elimination of all Forms of
17
Discrimination Against Women (CEDAW). the Fourth
World Conference on Women, Beijing, 1995, and the
International Conference on Population and
Development (ICPD), Cairo, Egypt, 1994
The Convention on the Rights of the Child, 1989 also
pointed out the need, “to ensure appropriate pre-natal
healthcare for mothers”. In addition, the International
Labour Organization revised the Maternity Protection
Convention (C103) of 1952 and adopted the Maternity
Protection Convention 183 in 2000.
Rationale for Gender Perspective
In view of these stark realities of women’s lives, it is
important that the breastfeeding movement develops
a broader gender perspective instead of focusing
narrowly and exclusively on breastfeeding and
childcare. A gender perspective provides the basis for
understanding the dynamics of why women do what
they do. Though it may seem that they “choose” to do
what they do, in reality, they are in a situation where
they can exercise very little choice. Society-engendered
gender roles and demands are the driving force behind
women’s apparent “free” choice.
Without this broader gender-based understanding that
sees women and their lives in totality and in their real
situations, healthcare and childcare approaches will
be fragmented and have a very narrow focus, seeing
women as mere child-bearers and nurturers, and will
not bring about social transformation and social equity.
If breastfeeding is to be a woman’s reproductive health
right3, then meeting her other rights that ensure her
survival with dignity and health should be the first
step. As a corollary, it is equally important to recognise
that others in the family, particularly men, have duties
and responsibilities to create the circumstances where
a woman can adequately breastfeed.
Recognising men’s duties and responsibilities becomes
especially important in the context of the unequal
relationships between men and women. Men should
share equal responsibility not only in housework and
childcare, but also in fertility control, in safe sex
(particularly with rising rate of HIV/AIDS) and to treat
women with the respect due to an equal partner. This
means violence against women in all its forms must be
recognised and addressed. It must be acknowledged
that patriarchy is at the root of violence and
discrimination against women - within the home, at
the workplace, and by society (including corporate
pushing of breastmilk substitutes). The solution to
improving breastfeeding practices is thus to address
the problems caused by patriarchy, by weaving gender
justice into all aspects of breastfeeding promotion
programmes.
' The gender workshop al the Ml HA Global Forum II, Arusha
(September 2002) came up with a suggestion that breastfeeding
be recognised as a women s reproductive health right in order
Io find common ground with women's groups. This suggestion
needs Io be taken further.
mfc bulletin/Feb-Mar 2005
18
The broad framework for analysing the political,
economic, social, cultural and gendered contexts at
national and international levels must be based on.
•
•
•
•
•
•
•
•
•
Level of women’s nutritional status
Level of women’s health status
Level of women’s status in law
Women’s access to economic independence
Women’s access to independent political partici
pation
Women's power to take decisions
Involvement of men in shared responsibilities and
roles
Focus on the right health and development mes
sages
Level of women’s social status (irrespective of
relationship to men).
Human Development Report 2000. New York: UNDP,
2000.
Human Development Report 2003. New- York: UNDP,
2003.
Human Development Report 2004. New York: UNDP,
2004.
United Nations. The Worlds Women 2000: trends and
statistics. New- York UN, 2000.
Van Esterik and Menon, Lakshmi. Being Mother
Friendly: a practical guide for working women and
breastfeeding. Penang, WABA, 1996
WHO/L'NICEF, 2002. Global Strategy on Infant and
Young Child Feeding, 2002.
TOWARDS A COMMON ADVOCACY AGENDA
Gender Strategies for Promoting Breastfeeding
Recognising that such a gender perspective on social
issues would help refine action strategies to bring about
desired results for social change and equity, the World
Alliance for Breastfeeding Action (WABA) which is a
global network of individuals, organisations and
networks in 120 countries, is tuning its programmes
towards this end. In line with this view, WABA
established a Gender Working Group in 2004 to promote
gender awareness among breastfeeding advocates
calling for gender sensitivity in all breastfeeding
promotion activities.
Further, in December 2004, WABA organised a gender
training workshop for 32 participants from 15 countries.
Following this, it conducted a Gender Strategy Planning
Meeting for members of the Task Forces and Working
Groups on Mother Support, Men’s Involvement/Father
Support, and Women and Work, HIV/A1DS, Health Care
Practices/ Birthing Practices.
Statement made at the Second WABA Global Forum in Arusha,
Tanzania, 23-27 September 2002, by the workshop on Outreach
to Women's Groups
Breastfeeding is a basic human right and it is agreed that the
protection of women’s right to breastfeed is a shared position
of the women's movement and breastfeeding movement.
Women can fully exercise this right only where there exists an
appropriate social and political environment whereby women s
contribution to productive and reproductive work, including
nurturing, is recognised.
Breastfeeding is a human right.
Breastfeeding support means changes in all social environments
and policies.
•
Right to life and survival
•
Right to choose free of commercial, medical and political
pressure
•
The meeting recognised the importance of protecting,
promoting and supporting breastfeeding keeping in
view both children’s and women’s health needs and a
gender- and rights-based approach to breastfeeding
promotion. The meeting also reaffirmed the Arusha
statement (see box) as guiding principles for a gender
sensitive breastfeeding promotion.
References
“Nutrition and Agriculture”, in Jacqueline Sims (ed).
An Anthology on Women. Health and EnvironmentNutrition and Agriculture. WHO Geneva, 1994. See
also: <www.who.int/docstore/peh/archives/women/
womnut.htm>
Manual of Clinical Nutrition Management,
Morrison Management Specialists Inc., 2003. at
<http://www.utmb.edu/food/Manual2003/ >
Gender equity is basic to breast feeding movement
•
Right to food, irrespective of race, class, caste, religion,
region, age.
DEMANDS
Need for social transformation at all levels to bring about
gender equality.
Women s groups and breastfeeding groups have decided to put
on their advocacy agenda the following demands:
•
To recognise the common concern of the adverse effect
of globalisation and privatisation on healthcare services
and the increasing feminisation of poverty.
•
Women s right to accessible, affordable, comprehensible.
high quality and gender-sensitive women's health services.
•
Women s right to breastfeeding based on informed
choices, free of commercial, medical and political
pressure.
•
Social recognition and value of women's work at home
as care givers and nurturers.
Picciano, Mary Frances, “Pregnancy and LactationPhysiological Adjustments, Nutritional Requirements
and the Role of Dietary Supplements”, The American
Societyfor Nutritional Sciences J. Nutr.\33- 1907c
2002S, June 2003.
•
•
Implementation of maternity protection for women al
paid work in the formal and informal sectors.
Women s right to food, adequate nutrition, rest, safe
water and shelter.
19
mfc bul!etin/Feb-Mar2005
Book Review
On the Take”: deja vu in America
Anant Bhatt'
On the Take: How America’s Complicity with Big
companies have infused money into physicians’
Business Can Endanger Your Health, Jerome P.
Kassirer, Oxford University Press, October2004, ISBN
pockets. Young physicians, often in debt when they
0-19-517684-7 0195176847, hardback, 272 pages, Price:
$28.00
Jerome P. Kassirer is respected worldwide as clinician,
begin their practices because of large student loans (a
parallel in India would be large capitation fees in private
medical colleges), are easy prey for pharma giants.
teacher, academic and researcher. He was the editor-inchief of the New EnglandJournal ofMedicine (N EJ M),
Acceptance of lunches, dinners, and gifts from industry
explains how once idealistic medical students and
interns gradually become acculturated into accepting,
one of the leading international medical journals. The
and later even demanding, donations from industry.
publishers, the Massachusetts Medical Society, ousted
The author mentions that he is not opposed to the
him from the journal in 1999. The disagreements arose
pharma industry, or to capitalism per se, that has been
fuelling America’s phenomenal economic growth as a
from the increasing use of the NEJM for promotion of
commercial products and Kassirer’s concerns that the
fierce independence of the journal was being
superpower. Yet the same industry has also given rise
compromised by its increasing commercialization.
Being no stranger to controversy, he deals with the
advancing the cause of science and the betterment of
to a dilemma: where does the line exist between
patient care on the one hand, and the pecuniary
extent and range of physicians’ collaborations with
interests of the physicians collaborating with industry
the pharmaceutical industry in America, and its
consequences. The book is based on the author’s vast
to produce scientific advances on the other? Kassirer
experience and interactions with physicians in the
only occasional articles appear mentioning it. Even
course of his varied roles.
serious issues like deaths of research subjects have
Thin Line
short shelf lives. Pseudo-scientific studies continue to
be performed and articles published. Many physicians
In the introduction, the author speaks about the lure of
money as a powerful motivator, and how, many
physicians have become prey to the buzz of a
marketplace that values profitable bottomlines, and
promises enormous personal wealth. The author raises
the importance of asking the question whether the
commercialization of medicine and financial relations
with drug companies has led to over-ordering of tests,
and promotion of particular products and/or
medications. The pharma industry-medical profession
nexus does not stop merely at doctors acquiring trinkets
bearing drug company logos and displaying drug
company names in their chambers. It runs much deeper.
The highly profitable pharnma/medical device/
biotechnology industrial complex offers largesse and
mentions that this debate has been sidetracked and
have become marketing agents of companies. This
could lead to burdening of the patients by requiring
excessive and unnecessary visits to the doctor, being
exposed to inappropriate and dangerous diagnostic
tests, given wrong medications, forced to incur
unnecessary expenditure on prescription drugs, and
being refused valuable tests or treatments, even as
they are exposed to potentially harmful effects in clinical
research experiments. Patients need to know about
conflicts of interest. Medicine is a social institution
and depends on the public’s trust for its viability.
Patients must be able to trust that their doctors
recommend treatments that benefit them, and that their
doctors involve them in research projects for the right
reasons.
allurements to doctors in the form of sponsoring their
research, trips, meals, expenses of continuing
education, etc. Realizing that profit margins hinge on
marketing and physician prescriptions, drug
' Centre for Study in Ethics and Rights, Mumbai.
and University of Toronto Joint Centre for Bioethics. Canada;
email: <anantbhan@gmail. com>
Ignoring Conflicts of Interest
The first chapter deals with free gifts/meals/education,
and special deals. Most physicians are hard working
and dedicated, and sincerely believe that a few free
meals would not cloud their professional judgments.
However some of them go to the extreme of not only
mfc bulletin/Feb-Mar 2005
20
drug company advisory boards and speaker’s bureaus,
looks a difficult act to follow.
Pharma drug representatives make friends with interns
and give industry-sponsored clinical talks and write
and residents when they are young, underappreciated,
industry sponsored brochures. The author speaks
overworked and often debt-ridden. In this mindset, they
about the dazzling stalls at medical conventions where
’‘beautiful” people entice doctors with freebies. Doctors
are often susceptible to a narrow set of desires: more
taking sponsored meals, gifts, and trips, but also join
sleep, more encouragement, a few hours of relaxation,
often cluster around stalls making it easy for their
a little kindness, and free, accessible food. Instances
colleagues to spot where the freebies lie and often there
of pseudo-consultations for drug companies by
isjostling for trinkets like pens, notebooks and T-shirts.
The doctor ends up becoming a walking advertisement.
physicians are mentioned - the only consultations
Often gifts cannot be collected without parting
information about the doctor’s practice and answering
a questionnaire about a drug or two, and not without
hearing a sales pitch trying to ingrain a drug’s
superiority over its competitors. Doctors often receive
which wine to order, and activities such as golf, skiing
and white-water rafting.
in the mail (or through drug representatives) incentives
companies. Some receive stock, or stock options, worth
a lot of money. With the AMA mandating Continuing
to attend pharma-sponsored events. These might
include concert tickets, paid-for dinners in fancy
offered at the meetings organized in fancy resorts is
Many clinician researchers are working with companies
to develop new drugs and devices, and in this process
often become part owners of patents and small
Medical Education Programs for physicians to get re
restaurants, gift certificates, etc. Kassirer quotes from
his personal experience as well as that of others. Many
professional organizations are deeply involved with
the industry and receive payments to cover scientific
meetings, professional education, and on-going
operating expenses. There is often active solicitation
of funding from industry for this purpose with the
promise of being the conference main sponsor, banquet
registered to make sure that they keep to date with
medical trends, industry has stepped in. Meetings are
held in exotic locales and physicians sign and get credit
for attending, but do not actually attend any academic
sponsor, etc. Many physicians are on the board of
medical journals now require authors of papers to
disclose all their financial associations, and the journals
often publish these associations. Kassirer gives
drug and biotech companies or serve on scientific
committees that deal with various aspects of drug
development. Some physicians even become engaged
in the business aspects (including marketing) of
companies. In recent years in America, some of the
extraordinary subsidies that physicians take have been
revealed and the complex conflicts of interest that these
generate have been exposed. In 2001, the pharma
presentations/discussions and rather spend time
playing golf, sightseeing, etc. When there is an
academic input, it is by physicians on the company’s
pay roll who promote the company’s products. Many
examples where the conflicts of interest section is so
long that it cannot be published in the print version of
the journal and has to be made available on the journal
website.
Modus Operand!
industry spent two billion dollars in the US for meetings
and events for physicians, a figure that represents a
doubling over the previous five years. The American
Medical Association (AMA) released guidelines that
allow physicians to take gifts if they entail a benefit to
patients and only if they are not of “substantial value”
and meals if they are “modest” ones. So pens,
Having established that financial conflicts of interest
notebooks and office items would be acceptable but
not tickets to concerts, sport events or dinners with
for the speakers’ expenses and provide a substantial
spouses. In mid-2002, even the Pharmaceutical
Manufacturers Association (PhRMA) issued its own
guidelines that are similar to those ofthe AMA. Implied
in the PhRMA guidelines, is the intention to cut back
on money spent on physicians, but given the
importance of the idea of marketing to industry, this
off label uses of medicine, thus bypassing official
are rife in medicine, the author examines the industry’s
modus operand! of recruiting physicians to be members
of company-sponsored speakers’ panels. These lists
are circulated to hospitals and physician groups across
countries, which select speakers for their various
educational programs. The sponsoring companies pay
honorarium. Companies recruit physicians to discuss
channels and thereby using a potent marketing force
involving physicians. Pfizer was fined US $ 430 million
in May 2004 for this tactic for its drug Neurontin.
doctors having been paid to speak about many uses
not approved by the Food and Drugs Administration
21
mfc bulletin/Feb-Mar2005
(FDA). Other instances of doctors being used for
paid several thousand dollars per patient enrolled. The
marketing to colleagues have been described. The
oversight of clinical research needs to be revised to
abominable practice of ghostwriting, essentially
reflect some of the concerns. Using the penultimate
‘'advertising that calls itself education” has been
chapter to trace the origins of the problem, Kassirer
described. Doctors have also sold free samples and
speaks about the influence of commerce on the practice
risky dietary medications, as well as helped drug
of medicine, the rise of the academic physician, the
runaway cost of care, changing financial incentives,
companies avoid lawsuits.
Devoting a whole chapter to Conflict of Interest and
the bias it can lead to, Kassirer quotes examples from
inflated income expectations, and changes in patent
law.
articles, practice and also institutional conduct. Often
Transparency and Disclosure
detecting the bias is difficult. The reactions from many
The final chapter is the author’s blueprint for change.
phvsicians have been one of protest when attention is
He speaks about the need for adherence to the highest
brought to their surreptitious and the-not-so-
professional creeds and principles. He delves through
surreptitious wooing by big pharma. They believe that
the positive and negative implications of transparency
the occasional gifts and lunches cannot influence them.
through disclosure. Finally he opines that disclosure,
However it is well known that we feel inclined to
even with the flaws, is better than no disclosure at all.
reciprocate even if a small gift is received.
He makes a case for professional organizations to have
Psychologists believe that reciprocation is one of the
better policies, and for comparative conflict of interest
most powerful instruments of influence in our society.
guidelines that exist for lawyers, federal government
The subtle influence of culture with acceptance of gifts,
employees, etc. Regulatory agencies need to overhaul
dinners, consulting arrangements, appointments to
their policies to be more effective. Kassirer argues for
speaker’s panels, and other perks of industry among
lesser ties with industry and for a higher standard for
peers is also a driving force. The issue of complicity of
norms and values on which medicine is based. He
journal editors given the dependence on pharma for
advertisements in journals is raised. The free continuing
appeals to the public to get involved in heralding the
medical education sessions are often partial, and so
and rounds up with a proposed roadmap. Kassirer ends
are books written on clinical practice guidelines and
his book stressing that the medical professions is under
public pamphlets that promote off label use of drugs.
siege by big business and not enough was being done
The involvement of professional organizations of
to rescue it.
cardiologists,
psychiatrists,
On the Take is a landmark book. The issues raised in
pediatricians, etc., as well as the AMA, with pharma
the book have been well known to physicians and
companies is documented extensively.
people involved with research and the healthcare
pulmonologists,
change. He ends by giving some positive examples
Engaging his readers who are members of the public,
industry. However using his extensive experience to
Kassirer asks them whether they can trust their doctor.
vividly illustrate the extent of pharma’s influence on
Talking about the fee for service model and the self
the practice of medicine in the US, Kassirer does
referrals that are commonplace in America, he speaks
manage to reflect the urgency of paying attention to
about the implications for healthcare. Physicians often
the issue. The context might be American, but the book
profit from the machines, gadgets, and implants used
in the treatment of their patients. The author makes a
will appeal to an international audience as the same
issue plague healthcare in other countries too. It might
plea for incentives to be based on quality of care and
be an opportune time for an Indian researcher or author
also for a disclosure of financial incentives in direct
to take up
patient care. He then raises questions about the medical
research system and the conflicts in it. Quoting many
country too. I have a feeling a similar, if not worse,
unholy nexus of business and healthcare will be
famous examples, he demonstrates how researchers
uncovered.
have intimate ties with for profit companies that are
Conflict of Interest: The author of the review serves on
often bankrolling the research, including often stakes
the editorial committee of mfc bulletin and shares the
and share holdings. With the shift of research from Ivy
League medical schools to the community, clinical trials
distaste of Kassirer about the falling standards of the
now involve general practitioners too who might be
cudgels to unmask the situation in our
medical profession.
mfc bulletin/Feb-Mar2005
22
About Bayer's Nazi-Past
IG Farben was the only German company in the Third
Reich that ran its own concentration camp. At least
30.000 slave workers died in this camp; a lot more were
deported to the gas chambers. It was no coincidence
that IG Farben built their giant new plant in Auschwitz,
since the workforce they used (altogether about 300.000
people) was practically for free. The Zyklon B gas, which
killed millions of Jews. Gypsies and other people was
produced by IG Farben's subsidiary company
Degesch.
In Germany a growing number of people do not
understand that IG Farben’s successors Bayer, BASF
and Hoechst still refuse to apologize for their misdeeds.
It is hard to accept that after the war the companies
were allowed to keep IG Farben's entire property,
whereas the surviving slave workers received nothing.
Until today Bayer, BASF and Hoechst did not pay any
wages to their former workers.
In 1995 the coalition “Never again!” was created by
the German Auschwitz Committee, critical shareholders
and several organizations of former slave workers. In a
joint appeal the coalition demands that there has to be
an appropriate compensation by the companies for
slave-workers and their descendants. Also the
maintenance of the memorial at Auschwitz, which
reminds the public of IG Farben's victims, should be
paid by the corporations. “Never again!” states that
without verification of the past we always have to be
present so that these crimes might never happen again.
More than 1,500 individuals and about 100 German
groups have signed this platform. The activities were
organized by the Coalition against Bayer-Dangers, a
group that has monitored Bayer for 25 years.
Life as a Human Guinea Pig
For years an Auschwitz survivor has tried to win
compensation from the pharmaceutical giant that carried
out medical experiments on her. Now living in Dundee,
she tells her story in a BBCdocumentary.
Zoe Polanska Palmer never imagined she would survive
Dr Mengele’s experiments in Auschwitz.
Nor did her German doctors. Like thousands of other
children, she was destined to be gassed once her
usefulness to Nazi science had ceased.
During her two years at the camp, 13-year-old Zoe was
forced to take tablets and pills as part of a series of
pharmacological experiments, believed to be part of
early birth control tests. But Zoe refused to die. Saved
by a Russian doctor who evacuated her to Dachau,
she recovered and eventually settled in Scotland.
Now in her early 70s, she has been fighting for
compensation and an apology from the German drug
manufacturer, Bayer.
”1 still find it difficult to take aspirin,” she says. “1
remember one of the SS doctors holding my jaw open
and forcing pills down my throat. I’m still very wary of
men wearing white coats.”
Eyewitness testimonies held in the Auschwitz camp
archive claim the doctor who force-fed her pills worked
for the pharmaceutical company Bayer when it was
part of the IG Farben conglomerate.
His name was Dr Victor Capesius. It’s a name that Zoe
can never forget.
He helped Dr Mengele to conduct genetic experiments,
usually on children, and also selected thousands of
prisoners at the huge death camp, choosing those who
might be useful and sending the rest to an immediate
death with a flick of his finger.
Dr Capesius was tried in Frankfurt for war crimes in
1963 and served time in prison.
Another longtime Bayer employee, Helmut Vetter, also
worked as a SS doctor at Auschwitz. He was involved
in the testing of experimental vaccines and medicines
on inmates and after the war he was executed for
administering fatal injections.
Denial of Culpability
’’The concentration camps were used as a huge
laboratory for human experimentation,” says Wolfgang
Eckhart, the Professor of Historical Medicine at
Heidelberg University. ”We have to look upon the
camps as outposts of pharmacological research. The
Nazis wanted to sterilise the population of the east,
especially Russian people, but enable them to continue
to be useful as workers.”
Pain has yet to Heal
Bayer says the company which exists today has nothing
to do with its wartime counterpart.
A spokesperson told the B BC: “Between 1925 and 1952,
no company named Bayer existed, neither as a
subsidiary of IG Farben nor as any other legal entity.
’’Bayer has worked in good faith with the German
government to establish a fund to help those who have
suffered. The company’s contribution to this fund
amounted to more than £40m.”
23
mfc bulletin/Feb-Mar2005
Damaged beyond Repair
Although it is nearly 60 years since the end of World
War II, for survivors like Zoe the consequences of the
war are as alive today as they were in January 1945
when the Russian Army liberated Auschwitz.
After the war, Zoe married and settled in Scotland. There
she underwent several painful operations to repair the
damage done to her body. But she has never been able
to have children.
Now suffering from cancer, she is a remarkably cheerful
woman whose home in a quiet suburb is punctuated
with laughter from her jokes and tears from her
memories.
offence against Jewish belief. According to our faith,
taking possession of the cemetery without exhuming
the bodies is tantamount to defiling the graves.”
Bayer today is living off the fruits of Nazi legalism. On
paper everything was legally correct: Julius Israel Kohn
from the “Association of Jews in the German Reich”
and Bernhard Hoffmann, the representative of IG
Farben, signed the sales agreement in a notary's office,
and the copy of this seemingly standard real estate
transaction has a stamp from the Krefeld tax office.
’’They want us all to die so they won’t have to pay out
so much money,’’ Zoe says.
At the same time the former culprits are publicly
honored in Uerdingen. Fritz ter Meer served on the IG
Farben board of directors from 1926 to 1945 and was
the head officer directing the operations of the IG
Farben factory at Auschwitz. The Nuremberg War
Crimes Tribunal sentenced him to seven years in prison.
He was released after serving only four years. Not long
after, in 1956, Ter Meer was elevated to the chairman of
the supervisory board at Bayer, a position he held for
seven years. His grave in Krefeld has a meter-high
wreath on it - donated by Bayer in recognition of his
services.
Within weeks of the authorities being contacted by
the BBC, Zoe received a cheque fora little over £2,000
from the German compensation fund.
Coalition Against Bayer-Dangers (Germany)
<www.CBGnetwork.org>
<CBGnetwork@aol.com>
”1 want to make sure people remember what happened
to people like mewhen I was a child at Auschwitz,” she
says. “I was just one of thousands of children treated
in this way. But I was one of the very few lucky ones
who managed to survive.” (By Mark Handscomb, BBC
Radio 4 reporter for It’s My Story)
Fax: (+49) 211-333 940 Tel: (+49) 211 -333 911
When I first travelled to meet her in July 2002, she was
angry that she had been ignored for so long by the
authorities managing the compensation fund set up
by German industry and the German government.
She had campaigned for 28 years but received nothng.
Please send an e-mail for receiving the English
newsletter Keycode BAYER free of charge.
German/Italian/French/Spanish newsletters also
available.
Bayer “Aryanized” Jewish Cemetery
Documents show that in 1942,1G Farben's branch office
in Uerdingen, Germany, got hold of the town’s Jewish
cemetery. The forced sale price was way below the
actual market value: 100,000 square meter property for
3.000 Reichsmark. After the war the property was
passed on to IG Farben's successor Bayer AG.
The Nazis dissolved the Jewish Community of
Uerdingen in 1942. Today all traces of the Jewish
cemetery in Uerdingen have been completely
obliterated. The city archive indicates that the cemetery
was located approximately where the main gate to the
Bayer factory currently stands.
The Coalition Against Bayer-Dangers demands that
the company publicly apologize for the defilement of
the Uerdingen cemetery and affix a memorial plaque to
the main gate of the company's Uerdingen works. Hans
Frankenthal, former slave worker in IG Farben's plant
in Auschwitz and board member of the Jewish
Community: “I was terrified when 1 learned from this
Deadline Extended
10th International Women’s Health Meeting
(IWHM)
September 21-25,2005, Ashok Hotel,
New Delhi
Deadline for call for abstracts has been extended
to March 15,2005.
For more details, see the website
<www. 10iwhmindia.org>
or write to:
<convenorsecretariat@10iwhmindia.org>
mfc bulletin/Fcb-Mar2005
24
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E-mail: saromfc@vsnl.net, Ph: +91 II 26562401,
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workshop, on March 25-26,2005 at Jeevan Darshan,
Fatehgunj, Baroda.. For details contact: Jan
Swasthya Sahyog,, 1-4, Parijat Colony, Nehru Nagar,
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Contents
Constitution Violated
Ordinance and After: Issues in Focus
-Narendra B. Zaveri
1
-B.K.Keayla
6
Patents Ordinance: Ensuring Corporate Control,
-Mira Shiva
7
Tsunami: Some Health Considerations
Why the IMS Act Needs to Stay
A Gender and Rights Approach to Breastfeeding Promotion
“On the Take”: deja vu in America
-C Sathyamala
-Radha Holla Bhar
9
-Lakshmi Menon and Radha Holla
Anant Bhan
About Bayer's Nazi-Past
13
15
19
22
y
Editorial Committee: Anant Bhan. Ncha Madhiwalla, Dhruv Mankad, Amita Pitre, C. Sathyamala. Vecna Shatrugna.
Chinu Srinivasan. Editorial Office: c/o. LOCOST, 1 st Floor, Premananda Sahitya Bhavan, Dandia Bazar, Vadodara 390 001
email: chinumfc@icenet.net . Ph: 0265 234 0223/233 3438. Edited & Published by: S.Srinivasan for Medico Friend Circle.
11 Archana Apartments, 163 Solapur Road, Hadapsar, Pune 411 028.
Views and opinions expressed in the bulletin are those of the authors and not necessarily of the MFC. Manuscripts may be
sent by email or by post to the Editor at the Editorial Office address.
MEDICO FRIEND CIRCLE BULLETIN
PRINTED MATTER - PERIODICAL
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