Delegates at the World Trade Organization (WTO) conference in Doha, Qatar, emerged on November 14 from six days of intense haggling to announce a compromise agreement that sets out an agenda for a new round of talks. The 10-page declaration also allows poor nations better access to cheap drugs. In practice the deal gives the world’s 48 least-developed countries a 15-year grace period to implement WTO rules on drug patents. It also allows those suffering from devastating pandemics to skirt WTO rules on pharmaceutical patents to produce or buy generic drugs.
The declaration said: “We recognize the gravity of the public health problems afflicting many developing and least developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics.” It added that while WTO countries reiterated their commitment to the TRIPS intellectual property accord, members have the right to “protect public health, and in particular to promote access to medicines by all.” This is a significant victory for the poor nations, enabling them to override drug patents without the threat of litigation or retribution. This success was made possible by the fact that developing countries were prepared, united and had a clear agenda.
The issue of patent rules was one of the hottest issues in the Doha meeting. Rich nations, led by the US, Canada and Switzerland with support from Japan and European Union countries, had sought to make developing countries commit themselves to a stricter implementation of TRIPS rules. These countries and their pharmaceutical companies insisted that patent protection was vital for continued revenues to finance research on new medicines. They also argued that a looser implementation of TRIPS rules would open the door to wholesale piracy of drugs and medicines.
Last year the US took Brazil to the WTO’s Dispute Settlement Body over a move to establish Brazil’s right under domestic law to compel drug-firms to license local companies to produce cheap versions of patented AIDS drugs. 39 pharmaceutical firms had earlier launched a legal challenge to South Africa, through its national courts, over a South African law that permits the purchase of cheap generic anti-AIDS cocktails. Both cases were dropped because of a fierce international outcry. However, the rich countries have recently inadvertently undermined their case: in the recent anthrax scare, the United States and Canada threatened to override patents on Cipro, an antibiotic made by Bayer AG and used to treat anthrax.
The new round of trade talks envisaged in the agreement will be the first for the WTO since it was established some seven years ago. The declaration has set a deadline (January 1, 2005) for member-states to complete negotiations. But meeting the deadline will be a monumental task. The talks will have to cover complicated areas such as reducing import tariffs and other barriers, particularly on products important to developing countries; eliminating trade-distorting agricultural subsidies; cutting subsidies for goods like steel and textiles; increasing access to banking, insurance and other services; setting new rules on the free movement of workers; establishing the link between WTO rules and international environmental agreements; transparency in government procurement and customs procedures; easing red tape at customs offices; and investment and competition policies of member states.
The WTO is supposed to finalize the new round in three years’ time. But it is safe to expect the process of juggling a myriad of competing national and regional interests to last a decade. The most recent set of global free trade negotiations, the Uruguay Round that concluded in 1994, lasted seven years. It produced more than 550 pages of legal texts, all negotiated phrase by phrase. The WTO tried to open a new round in Seattle, but irreconcilable differences between developing and rich nations led to failure. Some of the same differences threatened to sabotage the Doha meeting until the last minute.
The new round will involve more countries than before. Applications for membership by Taiwan and China, two of the largest economies in the world, were accepted at the Doha meeting. But the official entry of China and Taiwan to the WTO could further complicate the already immensely complicated bargaining process. Both countries will need time to adjust to the requirements, rules and obligations of membership. China’s membership is sure to lead to friction, especially with the US and the EU. One likely cause of trouble is the enforcement of intellectual property rights in China. Pirated-goods factories provide significant support to many local economies there.
The agreement was made possible by compromises on the part of various nations. As well as compromising on the poor countries’ access to patented drugs, these compromises include a US gesture on steel imports and a promise to review anti-dumping laws.
The EU accepted a compromise on phasing out trade-distorting farm-export subsidies. The compromise involves an exercise in verbal gymnastics whereby the term “phasing out” in the declaration was preceded by “without prejudging the outcome of the negotiations.” This was done mainly to placate France, the world’s second-largest agricultural exporter, which has a strong agricultural lobby and where presidential elections are due next spring. The issue of agricultural subsidies has always hampered efforts to liberalize global commerce. It underscores the fact that the countries of the EU and North America are not the paragons of free trade they claim to be. Despite their insistence on maximum openness from developing countries, agriculture in the EU and North America remains heavily subsidized and protected. By subsidizing the export of their agricultural products, rich countries effectively undercut local markets in poor countries.
In return, poor countries agreed to include environmental issues on the agenda of the new round. The EU insists that environmental agreements, such as the Kyoto accord on global warming, should take precedence in cases of conflict related to global trade. Poor countries are wary of environmental protection and labour standards, for fear that they could be used as a cover for protectionism to keep their goods out of western markets. Many developing countries feel disillusioned by earlier WTO and other global trade agreements, which they argue benefit mainly the richer nations.
There was hardly anything altruistic about the Western nations’ decision to give ground on the issue of diluting drug patents. Instead, political and economic considerations figured prominently. Apart from seeking to induce reluctant poor nations to support their “war on terrorism,” Western nations hoped to restore renewed confidence in the flagging global economy and to restore credibility to an organization traumatized by its failure in Seattle two years ago. Statements by Western officials made little attempt to disguise their fears of the effects of a repitition of the Seattle fiasco. US trade representative Robert Zoellick told delegates at Doha: “Today the members of the WTO have sent a powerful signal to the world. We have removed the stain of Seattle.”
But the American compromises in Doha have upset the domestic steel and car industries. Just before Zoellick arrived in Doha, the US House of Representatives passed a resolution calling on him not to upset America’s trade safeguards. To be able to go into the new trade talks the Bush administration needs to obtain a new negotiating authority from Congress (the last one expired in 1994). Winning that authority will probably not be easy. Political back-stabbing by an infuriated US Congress will add yet another complication to the WTO’s road ahead.