The World Trade Organization or WTO and Its History - Essay Example

HOW SHOULD WTO MEMBER S RESPOND TO THE ISSUE OF ACCESS TO MEDICINES AS PROVIDED FOR IN THE DOHA AGREEMENT FOR TRIPS 1 TABLE OF CONTENTS Abstract 3 Introduction 3 The Regulation of International Trade 4 The World Trade Organization or WTO and Its History 4 Doha Round and the TRIPS Agreement 8 The Problem of Accessibility of Medicines 9 How WTO Member States Should Respond To The Problem of Accessibility of Medicines 12 Conclusion 18 2 TABLE OF AUTHORITIES Legislation: Intellectual Property Laws Industrial Property Act of 2001 Patents Act of 1978 Medicine and Allied Substances Control Amendment Act of 1997 Institutions: World Trade Organization Breton Woods Conference of 1944 International Trade Organization GATT European Union: European Parliament , EU Motion For Resolution Cases: Thai Cigarette Case India- Mailbox Case 3 Abstract The issue of access to medicines is an important, strategic issue which if not answered immediately will entail loss of million of lives. At the moment, the HIV/AIDS epidemic is raging like wild bushfire in Africa. In Kenya alone, 300 people die daily because of AIDS while1.5 million people carry the HIV virus . In other countries, the statistics are even more mind-boggling. The Doha Agreement on TRIPS and the strict intellectual property laws on patents had been pinpointed as at the heart of the failure to access medicines needed to treat HIV, TB, malaria and other diseases prevalent in LDCs or least developed countries. This paper traces the history of the Doha Agreement and finds solutions to the problem of accessibility pointing out weaknesses in the TRIPS Agreement. Finally, it suggests ways of how WTO member states be able to do their part in ensuring that millions of lives be saved by a steady supply of affordable, generic drugs to LCDS and how these can be encouraged to manufacture their own drugs using compulsory licenses easily obtainable through TRIPS provisions and furthermore export these drugs to other LCDs similarly situated as them. Introduction International trade in the olden days was often marked with conflicts, disputes or even violence that threatened sprouting of wars between contracting nations. Thus, the lex mercatoria or law merchant came into being to govern international trade, all international merchants and especially monopolistic chartered companies such as the East India Company, South Sea Company and the Hudson Bay Company which needed to be reined over to protect small-scale merchants1. Suddenly, international commercial arbitration governed by lex mercatoria was utilised to settle international trade disputes. Here, an aritrator applied the usages and customs of international trade and the "rules of law which are common to all or most of the states engaged in international trade"2. But despite this, the problem of diversity of sales laws in some 200 trading 4 countries, forum shopping by nations in dispute, no level playing field, high transaction costs demanded that conflict rules of international law be applied to avoid rising incidents of disputes3. The Regulation of International Trade As international trade metamorphosed into a highly complex trade deals that involved tariffs and non-tariff barriers, dumping of goods, trade in services, trade in intellectual property, patents, trademarks, copyright rights etc., institutions designed to supervise, police and liberalise international trade as well as negotiate and implement trade agreements, had to be established. Moreover, as authors Trebilcock and Howse pointed out, there was an imperative need to regulate international trade because a favourable balance of trade had to be perpetually maintained and this meant formulating policies that encouraged aggressive exportation while at the same time restricted importation. The same authors also maintained that it was a necessity that importation of manufactured goods be circumscribed and instead domestic manufacturing and processing of raw materials be encouraged. The rationale behind is that such importation could result to local unemployment and a weakened local production. Thus, institutions that would negotiate, establish and implement new trade agreements to be inked by almost all, if not all trading countries globally must be organised and pushed4 The World Trade Organization or WTO and Its History Today's WTO or World Trade Organization, which is the behemoth institution in the area of international trade, counting in its fold 153 members states which comprise more than 95% of the total world trade, did not come to being all at once. It is marked by a long history of struggle for its erection and reinforcement. 5 The Bretton Woods Conference of 1944 served as impetus to any move to consolidate an economic trade institution that regulates global trade. The Conference may not have negotiated for an agreement that embraced trade but it did propose for an International Trade Organization or ITO to complement IMF or International Monetary Fund and the World Bank, which institutions were both conceived in July 1944 during the UN Monetary Financial Conference. Since both institutions are meant to offer financial and technical assistance to hard-pressed countries especially developing countries, it was but natural that an institution that would try to resolve trade barrier problems and domestic unemployment, unfair business practices, investment obstacles also be set up. Thus in February 1946, saw the proposal for the drafting of the charter of the ITO, which purportedly worked to lay down basic rules for international trade including restriction of national trade policies and limitation of discriminatory tariff preferences. It however, fizzled out because some trading nations particularly USA were gripped by fear that it may end up interfering into internal economic issues. From ITO's ashes emerged GATT or the General Agreement on Tariff and Trade in 1947. GATT was contemplated upon as a de facto treaty that would serve the purpose of resolving trading relations and problems of nations for the meantime that ITO has not been fully enforced. Since this never materialised, GATT went on to bear the brunt of resolving trade dilemmas among nations as well as enforcing international governmental cooperation on trade matters especially the reduction or cuts in tariffs and the quantitative subsidies and restrictions on trade5. 6 What was intended to be an interim organisation lasted for 5 decades until 1994 when WTO or World Trade Organization took over to finish GATT's functions. But before WTO could commence its work, GATT had already achieved so much. It had fostered post-war economic recovery in Western Europe through its obtaining binding agreements among trading nations as to the reduction of tariffs and the subsequent phasing out of import quotas and foreign exchange controls6. During the Geneva Round in 1947, GATT was able to secure 45,000 tariff concessions that affected trade worth $10 billion. In the 1949 Annecy Round, 5000 tariff concessions were exchanged by 13 countries while in the 1950 Torquay Round 8700 tariff concessions were exchanged. The 1956 Geneva II Round brought tariff reductions worth $2.5 billion while the 1960 Dillon Round and the 1964 Kennedy Round brought tariff concessions valued at $4.9 and $40 billion, respectively. The Kennedy Round was memorable because for the first time, GATT Anti-Dumping Agreement was agreed upon. The Tokyo Round was just as important as it adopted measures that are non-tariff in nature, which brought about tariff reductions that were worth more than $300 billion. But the most monumental GATT Round was the 1986 Uruguay Round because it expressed the GATT's resolve to adapt to an overweening globalisation of world economy. Its efforts were not in vain as it brought major tariff reductions; reformed trade in agriculture and textiles that resulted in agricultural subsidies and cooperations for the allowance of full access of textiles from developing countries; extended intellectual property rights; liberalised trade in 7 services and finally led to the creation of WTO7. Uruguay Round's Final Act, which established the WTO Regime was inked in Marrakesh, Morocco in April 1994 during the Ministerial Conference meeting and was thus known as the Marrakesh Agreement8. WTO was finally established on 1 January 1995 with 153 member states and with headquarters in Geneva, Switzerland. The WTO is the creation of states and "thus its actions and decisions are democratically legitimate"9. Since GATT had already successfully reduced tariffs to practically zero , what remains to be accomplished by WTO is the "task of determining when a regulation genuinely serves an environmental or health and safety purpose or when on the other hand, it is a disguised restriction on trade where a complainant country formally complains of its adverse trade effects"10. As such cases may be submitted before WTO's Dispute Settlement Body and opportunities to appeal that body's decision may be tendered to the WTO Appellate Body, the WTO is an effective dispute adjudicating body11. To insure dispute prevention, a Council for TRIPS was established, which had adjudicated on 16 TRIPS disputes12. The most interesting of the cases brought to it was the India-Mailbox case, which decision suggested that the "WTO will accord substantial deference to national and regional rules which manifest good faith compliance 8 with the basic standards of TRIPS Agreement"13. There are more cases decided but they do not properly belong to this paper which theme is all about access to medicines. Another GATT/WTO case though which stands out was the Thai Cigarette Case, where Thailand outlawed cigarette importation because such carries an existence of risk but the WTO/GATT Dispute Settlement Body, chosing to ignore WHO reports, held the ban to be discriminatory and was an unjustifiable restriction on trade because such banning was not accompanied by a similar banning on locally produced cigarettes. It further held that Thailand should be compelled to keep its market open14. It should be noted that GATT remained to be WTO's umbrella treaty for trade in goods. The Doha Round and The TRIPS Agreement WTO is governed by the Ministerial Conference which meets every 2 years. Such meetings produced 6 ministerial conferences, the most important of which is the 4th i.e. the Doha Development Agenda of 2001 or the Doha Round15 which aims were to push further trade liberalisation and to formulate new trade rules and to settle disputes and to come to the aid of developing countries especially Third World Countries or LDCs. To ease the conditions of the world's poverty-stricken nations, the Doha Round intended to slash trade barriers and agricultural subsidies. Another function of the WTO is to oversee more or less 60 various agreements bearing the status of international legal texts. Some of these agreements are one on technical barriers to trade (TBT); trade in services (GATS); agriculture (AoA); sanitary and 9 phyto-sanitary(SPS) and the most important as far as this paper is concerned, the Trade-Related Aspects of Intellectual Property Rights Agreement or TRIPS 16. TRIPS lays down minimum standards for various intellectual property regulations. TRIPS forces all member states to respect and enforce all intellectual property laws which include that on patents, copyrights, trademarks, industrial designs, geographical indications and other confidential information. Correlated to this is the establishment of remedies, dispute resolution procedures amd enforcement mechanisms in cases where they are contravened17. Developed nations such as the USA, European Union and Japan were in the forefront of a strict implementation of the TRIPS-mandated intellectual property laws, made ratification of such a sine qua non requirement for WTO membership. USA in fact, made intellectual property standards the bases for trade policies following the US pharmaceutical company Pfizer's strategy of maximising intellectual property protection by linking it to US trade policies18. The Problem of Accessibility to Medicines The hereinabove situation, which is also practiced by other developed countries such as USA and the European Union, where major pharmaceutical companies are based, seems to be at the heart of the health problems of least developed countries or LDCs such as Kenya, Malawi and Lesotho, which are reeling from an epidemic of AIDS infection. TRIPS regulations as contained in paragraphs 6 and 17-19 of the Doha Declaration on TRIPS Agreement and Public Health had been ineffective in curtailing the daily march to the graves because of AIDS in countries like Kenya where an average of 300 Kenyans die due to AIDS-related disease. The 10 Director of the National AIDS Control Council, Dr. Patrick Orege, was quoted as saying that "there are 1.5 million people living with HIV/AIDS in Kenya "19. TRIPS and patent regulations under TRIPS Agreement had been singled out as the main culprit in Kenya's and other LDCs' failure to stem the tide of HIV/AIDS raging epidemic. Antiretroviral drugs are simply too expensive and thus are outside the reach of most Kenyans. And the identified scapegoats to the impossibility of accessing AIDS drugs are first, the giant pharmaceutical companies' insistence on payment of royalties for patents they hold, which is also enshrined in intellectual property laws protected by TRIPS. Second, Article 31f of the TRIPS agreement mandates that the use of compulsory licensing be restricted only to those countries which are able to manufacture the pharmaceutical product domestically for the local market. Most of the LDCs, including Kenya, simply has no capacity to do this, being too poor to even set up factories for such purpose. Likewise, there is the sheer impossibility to attract enough investment in the pharmaceutical sector as the domestic market is just too insignificant. In Kenya's case too, its Industrial Property Act of 2001 which prohibits parallel importation of cheaper drugs added to the heap of problems20. In LDCs racked by public health crises, which other than HIV/AIDS epidemic include TB, malaria, Ebola virus infection and other national emergency cases where these countries are hindered from accessing the necessary drugs to their prohibitive costs, there is pervasive feeling that TRIPS regulations are utilised by affluent manufacturing member states as instruments "to pursue industrial or commercial policy objectives"21. While paragraph 6 of the Doha 11 Declaration on TRIPS Agreement recognises the problem, still it remains a recognition. While Article 31b takes exception in cases of "national emergency or other circumstances of extreme urgency or in cases of public non-commercial use" and 31f in cases where it is "predominantly for the supply of the domestic market yet Article 31b underscores the fact that these poor countries must negotiate authorisation from the patent holder on "reasonable commercial terms and conditions" and Article 31h strikes down with the words "adequate remuneration must be paid to the right holder". Articles 31b and h emasculate paragraphs 1 and 4 , which recognise the LCDs right to protect public health and promote access to medicines to all and which provides flexibility, and paragraph 5c which is the right to determine what is national emergency or cases of extreme urgency. With paragraph 6 remaining unresolved, it is therefore no longer shocking to know that many hold the opinion that TRIPS Agreement as regulator of global trade serves the purpose of managing global trade merely for profit. For such countries as Kenya, Lesotho, Djibouti and Malawi, the only possible ray of hope is the importation of cheaper generic pharmaceutical products from such countries as India and Brazil. As for example India's CIPLA produces generic HIV drugs that "cost only $350 a year for the treatment". This is such an opportunity as Western firms charge extravagant prices for the same branded drugs which reaches up to $15,000 per patient per year22. But the problem is that Article 31f blocks any chance as it contains a condition which hinders those who wish to import generic drugs that are produced under compulsory license. The limitation involves the restriction of the amount to be exported as dependent on the "predominantly for the supply of the domestic market" clause. It is clear that removing Article 12 31f and increasing the use of quality-assured generic medicines are the keys to improve access and affordability of required medicines to LDCs. TRIPS Agreement needs revision to allow compulsory licensing and differential pricing agreement schemes. Medicine prices are vital for accessibility of such medicines and everything should be done to lower medicine costs. Legal provisions to allow procurement of lower-priced generic drugs from India and Brazil and the availability of generics in private pharmacies. To further make medicines more affordable, governments should take a direct hand in the procurement of such generics while applying pharmacy markup across the total procurement price rather than to the components and abolishing the propaganda payment to pharmaceutical companies. Legal provisions for a national medicine policy and price transparency and a monitoring system to regularly evaluate medicine prices are sorely needed. How WTO Member States Should Respond To The problem of Accessibility of Medicines WHO statistics detailing that 39.5 million people mostly living in Africa are suffering from HIV/AIDS and that there are 15 million HIV/AIDS orphans badly needing antiretroviral drugs are just too staggering. Thus, WTO member states must join forces to prove that indeed global trade is managed to address the public health problems of many developing countries especially LDCs and not merely for profit. As paragraph 2 underscores, "We stress the need for the WTO Agreement on TRIPS to be part of the wider national and international action to address these problems". WTO member states, especially that in the European Union, therefore, must move heaven and earth to remove barriers that block access of generic, cheaper medicines to such LDCs that badly need them. Paragraphs 4 and 5 are already steps in the right direction, both of which allow flexibilities. These TRIPS flexibilities have the capability to promote access to medicines yet paragraphs 4 and 5 had not been fully utilised for all its potentials and one 13 reason is that political leaders of WTO nations have failed "to understand and appreciate the policy space that the flexibilities offer"23. Likewise, the LDCs have failed to address the issue of "nonpatentability of new and second uses of medicines". WTO members especially from EU can do so much by liberalising the issuance of compulsory licenses to LDCs and by waiving the predominant domestic supply requirement under Article 31f. Another barrier which must be removed is Article 31h of the TRIPS Agreement which provides that "the right holder shall be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization". This adequate remuneration requirement must be partially waived and this means that this "obligation is waived in the importing country provided that adequate remuneration was paid in the exporting country" and such payment must take into account "the economical value to the importing country of the use that was authorised in the exporting country"24. WTO members must also pressure big pharmaceutical companies under their helm to agree to differential pricing agreements in order that life-saving medicines sorely needed by LDCs be made affordable to them by a pricing scheme where prices be adapted to the purchasing power of governments and households in such LDCs. WTO members must also exert efforts to restrict parallel trade of drugs that are needed by LDCs. This is to protect the public especially those suffering from AIDS, malaria, TB etc from fake drugs and from faulty repackaging and inappropriate and inadequate storage of 14 pharmaceuticals. Moreover, restriction of parallel trade neutralises drug price markups and favors price discrimination in favor of LDCs25. WTO members which have public health problems should incorporate the TRIPS flexibilities enshrined in paragraphs 4 and 5 and make enough space to accommodate their own patent and their own intellectual property systems to solve their health problems. A good example of such WTO member is South Africa, which using the Patents Act of 1978 and the Medicine and Allied Substances Control Amendment Act of 1997, manufactured their own HIV/AIDS drugs as well as other necessary drugs in compliance with the TRIPS Agreement. With voluntary licenses issued to Aspen Pharmacare Holdings Ltd. , it was able to manufacture and export to other Sub-Saharan countries generic drugs like "stavudine, nevirapine, lamivudine and zidovudine" carrying on a royalty payment of 5%26. The hereinabove situation with South Africa though, cannot be said to be the same as other poor African countries as Kenya. While South Africa has the capacity to pay royalties to patent holders, others cannot. These WTO member states are left with no recourse but to ask for amendments to the TRIPS Agreement where there should be guaranteed a balance of rights and duties between the patent holders and the poor WTO members or the LDCs. Although patent holders' rights must also be protected but the law on intellectual property must be relaxed to facilitate and promote research and development. Although Article 2 of the 2003 Decision implementing paragraph 6 of the Doha Declaration waived the obligations of an exporting country under Article 31f concerning the conferral of compulsory license, yet the developing nations feel that it is but an interim measure 15 that can be subject to repudiation at any moment's notice. They also proposed that Article 30 of the TRIPS Agreement be elucidated in order to express the right of WTO members to manufacture drugs severely needed to address public health crises without the consent of patentees. This proposal was partly responded to by the 2003 Ministerial Conference in Cancun, Mexico where it was agreed upon that a patented technology needed for the manufacture of drugs and other important medicines be easily accessed to by qualified WTO members on favourable terms27. In order to show that global trade should be managed for common people's welfare and not for profit, all WTO members must be one in allowing stimulation of generic production of HIV and other drugs by local manufacturers and for those who have no such manufacturing capacity, to easily allow them to import cheap generic drugs. Such might be antagonistic to the interests of the big pharmaceutical firms but such will foster keen competition and will ultimately lead to considerable price reductions. That the 2003 Cancun Ministerial Conference somehow was effective was shown by the fact that Cosmos Industries of Kenya was able to successfully manufacture HIV drugs zidovudine and larnivudine and exported such to Burundi, Rwanda, Uganda and Tanzania, where they are severely needed. This was done after negotiations for a voluntary license between Cosmos and the German firms Glaxo Smithkline and Boehringer Ingelheim. It started when Cosmos applied for a compulsory license with the Kenyan government which is allowed under the flexibility clause of the TRIPS Agreement. Both German firms were forced to offer a 16 voluntary license. Thus, opening the door to access of these essential drugs not only to Kenya but to other LDCs in Africa28. Despite the above, the Cancun Ministerial Conference was deemed to be a failure because of the rift between developed and developing countries over the controversial "Singapore Issues"29. WTO members must also support the Protocol amending TRIPS Agreement that was decided upon on 6 December 2005 and which has yet to be fully accepted because it is so far the best option for accessibility of medicines to LDCs where they are needed. It is the best option because it removes all the barriers as written in the Doha Declaration on TRIPS Agreement. It liberalises the issuance of compulsory license that is needed to manufacture pharmaceutical products and eases conditions for export to eligible WTO members. While respecting intellectual property laws, it encourages differential pricing agreements, where the remuneration shall be dependent on the economic status and the urgency of the need of the developing country. It also facilitates the domestic manufacture of such drugs. It further allows the pharmaceutical products manufactured under a compulsory license to be further exported to other LDCs.30 This hereinabove Protocol received full support from the European Community so much so that on 9 July 2007, it came up with a European Parliament Motion for Resolution. It is a landmark resolution because it proves that a band of non-LDC nations or mostly developed nations selflessly attempt to respond to the pressing problem of access to medicines by LDCs facing national health emergency. The resolution expressed 19 declarations of belief that are strongly worded. The first declaration expresses belief that LDCs must have "access to 17 affordable pharmaceutical products" and that such in the end will contribute to poverty reduction and promote sustainable development. The second one holds the firm belief that it must be the policy of the EU to maximise the "availability of pharmaceutical products at affordable prices in the developing world. It even believes that it is EU's obligation to take urgent measures to encourage "transfer of technology, research and help with registration so that the developing countries may manufacture the needed pharmaceutical products themselves and that the European Commission and the EU states "provide concrete, financial support for pharmaceutical-related transfer of technology to the LDCs. In correlation with this, it requests the European Council to fund the upgrading or construction of pharmaceutical manufacturing facilities owned by citizens of LDCs. It further asks the Commission to actively support research and development efforts in order to combat "poverty-related, tropical and neglected diseases". It calls upon the Council not only to support the 2007 Protocol and the WTO decision which try to solve the problem of access to medicines by LDCs but all other measures for the improvement of health care and the necessary infrastructure that come with it. It then fully expressed support to the notion of flexibilities as expressed in paragraphs 4 and 5 of the TRIPS Agreement and encourages LDCs and other developing countries to fully take advantage of these flexibilities and other means such as compulsory license and the mechanism provided by Article 30 so that they may be able to provide essential medicines and solve their national health problems. It also encourages big pharmaceutical firms "to pursue pricing alternatives involving a high-volume, low-margin approach, which could enhance access to medicines". This EU Motion For Resolution is monumental because it proves that EU nations are not concerned with their own economic welfare but with the appalling conditions and the urgency of 18 health problems of the poor nations in the world which have to bear health emergency problems such as HIV/Aids, TB, malaria, Ebola virus etc. This should be emulated because this is ideally how WTO members must respond to the issue of access of medicines by developing countries especially LDCs afflicted with epidemics and other health problems31. Conclusion As Daniel Gervais once said "TRIPS was a difficult but essential measure to jumpstart global economic development"32. With the activism of all those concerned with the plight of countries and people suffering from HIV/AIDS and other afflictions, TRIPS has gone a long way in addressing accessibility of HIV drugs and other medicines by developing countries and other LDCs. 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