South supports LDCs’ TRIPS transition period, North creates obstacles

While it gained widespread backing from developing nations, a request by the least developed countries for a waiver from implementing the WTO’s intellectual property treaty has met with reservations from developed countries.

by Simran Gathani

GENEVA: A “duly motivated request” by least developed countries (LDCs) to obtain an exemption from obligations under the World Trade Organization’s intellectual property rights agreement for as long as a country remains an LDC has received overwhelming support from many developing countries.

The Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement explicitly recognizes, in Article 66.1, the “special needs and requirements of least-developed country Members, their economic, financial and administrative constraints, and their need for flexibility to create a viable technological base”. Accordingly, LDCs are currently not required to apply the provisions of the TRIPS Agreement (other than Articles 3 to 5), and upon a duly motivated request by an LDC member, the WTO’s TRIPS Council “shall” grant extendable transition periods.

This latest request was discussed during the TRIPS Council meeting in Geneva on 5-6 March.

However, hopes that the Council would decide in favour of the poorest and most vulnerable segment of the international community by adopting the draft decision text proposed by the LDC Group were dashed, particularly as several developed countries backtracked on their legal commitments under Article 66.1 and resisted adoption of the proposed text.

No decision was reached on the matter, and it will be taken up again at the next TRIPS Council meeting on 11-12 June. In the interim, the newly appointed Chair of the TRIPS Council, Ambassador Alfredo Suescum from Panama, will conduct informal consultations.

The LDC Group had submitted the “duly motivated request” to the TRIPS Council last November. Annexed to the request is a draft decision text for the consideration of the TRIPS Council which states: “Least developed country Members shall not be required to apply the provisions of the Agreement, other than Articles 3, 4 and 5, until they cease to be a least developed country Member.”

An extension of the transition period will give LDCs maximum flexibility in determining the level of intellectual property (IP) protection and enforcement that should be in place nationally. The TRIPS Agreement recognizes that this flexibility is important for LDCs to address the developmental needs as well as to develop a viable technological base.

The previous extension of the transition period granted to LDCs in 2005 comes to an end in June 2013. Unless it is extended, LDCs will have to fully implement the TRIPS Agreement.

That extension was subject to conditions such as “no rollback”, which prevents an LDC from undoing existing IP protections and from providing reduced protection once its laws contain provisions that move towards becoming TRIPS-compliant. It also contains elements on technical cooperation for TRIPS implementation, issues not linked to an extension of the transition period.

Members’ views

At the TRIPS Council meeting, Nepal, on behalf of the LDC Group, officially presented the request and called on the Council to adopt the proposed decision text.

The LDCs argued for an extension on the basis of their worsening socioeconomic situation, weak innovative and technological capacities, and uncertainty when LDCs would be able to overcome their constraints and develop a viable technological base. LDCs also argued that developed countries had not fully fulfilled their commitments to transfer technology to LDCs as required by Article 66.2 of the TRIPS Agreement.

They stressed that the TRIPS Agreement mandated an “automatic extension” once a “duly motivated request” was submitted to the TRIPS Council and does not allow other WTO members to condition the request on clauses such as the “no rollback” clause found in the previous extension decision. LDCs also stressed that WTO members should not confuse the extension flexibility provided under Article 66.1 with the technical assistance for implementing the TRIPS Agreement, which is a separate matter under Article 67 of the Agreement.

According to an LDC delegate, the interventions by the US, the European Union, Canada, Switzerland and Japan focused on LDCs’ compliance with the TRIPS obligations, and subjecting any further extension to a series of conditions, thus effectively limiting the policy space intended by Article 66.1.

The US, according to sources, said that its support for previous extensions was “premised on promoting IP protection and enforcement”, adding that it was “essential to preserve” LDCs’ implementation of IP laws and enforcement. It added that it had “questions and significant concerns” and thus was “not in a position to support” the LDC request at the TRIPS Council meeting.

The EU said that it was “willing to consider an  extension” but it was important to consider  “where we are now” and “where we are going”. It said that a study on LDCs’ progress in implementing IP systems could be a “valuable starting point for our discussion and the question of what challenges are outstanding regarding TRIPS implementation.” The study is financed by the Swedish government and facilitated by the WTO secretariat.

It added that the LDC proposal “lacks both a clear and predictable perspective and remains silent on how IP and the TRIPS Agreement could specifically help LDCs in building a viable technological base”.

Switzerland, according to sources, countered the LDC request, stating that it had “systemic implications” for the WTO, while questioning whether the transition period will benefit LDCs. Canada and Australia also questioned the parameters of the LDC request.

(Commenting on the outcome, Professor Brook K Baker from the Northeastern University School of Law in the US said: “There’s no excuse for the TRIPS Council having failed at its March meeting to grant what is a mandatory extension of the LDC transition period pursuant to LDC’s proper motivation. Granting monopolies to transnational IP companies in the poorest countries in the world is guaranteed to slow development in both technology and human capacity. Access to medicines, educational, informational, and cultural resources, agricultural inputs, and green technologies is critical to human rights and survival in these countries. The efforts of the US and EU to pare down and conditionalize this extension-of-right must be condemned.”)

“An important flexibility”

Ambassador Shanker Das Bairangi from Nepal, on behalf of the LDC Group, in officially presenting the LDC request and draft decision text to the TRIPS Council, said the extendable transition period was “an important flexibility” granted to LDCs.

Nepal argued that “LDCs need the continuation of flexibility as their situation has not changed significantly over the years”, “their marginalization continues”, and “they have not been able to develop their productive capacities which limit their meaningful integration into the world economy”.

“LDCs continue to be characterized by multiple structural constraints that include low per capita income, low level of human development and extreme vulnerabilities to external shocks. LDCs are home to more than 50% of over a billion people who live in extreme poverty. These countries are the most off-track in the achievement of the internationally agreed development goals, including the Millennium Development Goals. They bear considerable health burdens – of both communicable and non-communicable diseases. In 2011, according to UNAIDS, some 9.7 million of the 34 million people living with HIV worldwide lived in the LDCs. Of these people, only 2.5 million had access to antiretroviral treatment,” Nepal stressed.

Nepal also said “LDCs’ economic indicators have not changed since 2005. Trade in goods and services has not improved much – in fact trade deficit in both goods and services have increased; per capita GDP growth has fallen”.

Nepal further said: “All LDCs are net payers of royalties. These countries have not been able to spend even a small fraction of their national budget to research and development as they have to concentrate more on basics like health and education. The developmental schemes for transfer of technology provided in TRIPS Article 66.2 have not effectively and adequately materialized.”

Nepal also argued, “The level of technological development in the LDCs has remained low. In UNDP’s Technological Achievement Index, LDCs are at the bottom. So are they in UNIDO’s Competitive Industrial Performance Index and UNCTAD’s Innovation Capability Index. Numbers from WIPO reports indicate that LDCs have not been able to enter the race of technology and innovation.”

“In Istanbul Programme of Action, we all recognized that LDCs are lagging behind in the critical areas of science, technology and innovation. Unless LDCs have flexibilities to adopt policies to stimulate technological catch-up with the rest of the world, they will continue to fall behind other countries and face deepening marginalization,” Nepal said.

“In terms of future outlook, the 2012 UNCTAD LDCs report has noted that ‘LDCs have to prepare for a relatively prolonged period of uncertainty, with possible escalation of financial tensions and real economic downturn’,” Nepal added.

Nepal further argued that the transition period has been granted in consideration of LDCs’ special situation and it is not possible to predict when LDCs will be able to overcome their constraints. It added that the TRIPS Agreement recognizes in its preambular language that LDCs have “special needs” and thus need “maximum flexibility in the domestic implementation of laws and regulations in order to enable them to create a sound and viable technological base”.

Nepal argued that in its view “the most logical and predictable approach is not to set an artificial timeframe”. “Our proposed approach gives more certainty and predictability – once you graduate, you need to comply. We find precedence of such exemption in Article 15(2) of the Agreement on Agriculture,” Nepal added.

It said that LDCs’ request has been motivated by the need for policy space to “conserve the autonomy to determine appropriate development, innovation, and technological promotion policies, according to local circumstances and priorities”, quoting from a United Nations Development Programme (UNDP) policy brief on the matter.

“They need such space to ensure access to various technologies, educational resources, medicines and tools necessary for development. Most IP-protected goods and services are simply beyond the purchasing power of least developed countries and their people,” Nepal stressed.

It also quoted Michel Sidibe, Executive Director of the Joint UN Programme on HIV/AIDS (UNAIDS), who stated, “An extension would allow the world’s poorest nations to ensure sustained access to medicines, build up viable technology bases, and manufacture or import the medicines they need.”

Nepal highlighted that Article 66.1 of the TRIPS Agreement “specifies an obligation to grant extensions” once the TRIPS Council receives a duly motivated request from LDCs. It also referred to paragraph 2(iii) of the Uruguay Round Decision on Measures in Favour of LDCs, which states that “sympathetic consideration shall be given to specific and motivated concerns raised by the least-developed countries in the appropriate Councils and Committees”.

Nepal recalled the statement of UN Secretary-General Ban Ki-moon in 2007 at the opening of the UN Economic and Social Council (ECOSOC) session, which said, “The rules of intellectual property rights need to be reformed, so as to strengthen technological progress and to ensure that the poor have better access to new technologies and products.” Nepal added, “What LDCs are seeking today does not go to the extent of reform of IPR [IP right]. We are simply asking for the continuation of flexibility already agreed in 1995 – with reasons.”

Nepal also highlighted that the LDC request and draft decision text has received strong support from the UN development agencies, civil society as well as from industry.

Nepal called on WTO members to extend support to the LDCs’ request, which is duly motivated, and to adopt the draft decision.

Policy space and autonomy

Cambodia, a member of the LDC Group, stressed that an extension of the transition period “will preserve the policy space and autonomy to determine policies and to develop the necessary policy and law to balance IP”.

Cambodia said that it had benefited from the exemption to exclude pharmaceutical product patents, giving an example of generic medicines that are now priced at $140 compared to $10,000. This extension will definitely enable LDCs to gain access to affordable generic medicines. Cambodia sought full support for the LDC request and draft decision.

The Solomon Islands, also a member of the LDC Group, said that it found it extremely difficult to take on TRIPS compliance, adding that it does not have the capacity or infrastructure to implement IP let alone to ensure compliance. It also said that research and development (R&D) is not even on the agenda of its institutions, adding that the level of education of its people is quite basic.

It also pointed out that developed countries had yet to fulfil their technology commitments under Article 66.2 of the TRIPS Agreement, adding that developed countries had yet to agree to the reporting format on its technology transfer commitments. It stressed that LDCs needed the continuation of flexibility as the LDC situation had not changed.

On the issue of the duration of the transition period, the Solomon Islands stressed that the proposed period was “the most realistic, predictable and transparent”, adding that the “process of graduation is a gradual process. It does not happen overnight. To opt for a given timeframe is an arbitrary option with no basis”.

Morocco, on behalf of the African Group, said that it fully supported the cause of LDCs, adding that Article 66.1 does foresee the possibility of renewing the transition period based on economic and financial constraints.

Ambassador Wayne McCook from Jamaica, on behalf of the African, Caribbean and Pacific states (ACP Group), expressed strong support for the LDC request, adding that once LDCs submit a request, Article 66.1 states that the “Council of TRIPS shall accord” the extension. The ACP Group said that there can be no question that the extension must remain as long as LDCs face constraints.

Brazil said it was ready to support the LDC request and the draft decision text proposed by LDCs. It based its support on three reasons:

(i) Provisions on special and differential treatment to be found in the various agreements that form the acquis of the WTO, including the TRIPS Agreement, are an important systemic component. The role performed by this systemic component is to ensure that the international trading system becomes an effective instrument of social and economic development for all member states.

(ii) Brazil supports the principle that the international IP system should have policy space for countries to adjust and calibrate their national legislation in accordance with their respective stages of social and economic development.

(iii) The incorporation of developing countries, in particular the least developed ones, into the so-called knowledge economy has proved to be a daunting challenge, the complexity of which could barely be assessed almost 20 years ago when the Uruguay Round was completed.

Comprehensive

India supported the motivated request, and said that the LDC request was a comprehensive one, highlighting the vulnerability of their poor population, the marginal role their economies still play in world trade and the very limited productive capacity and technological infrastructure that they possess.

It added that the framers of the TRIPS Agreement rightly understood the special needs of the LDC members and their need for maximum flexibility in the domestic implementation of laws and regulations in order to enable them to create a sound and viable technological base. Article 66.1 of the Agreement therefore mandates the TRIPS Council to grant them an extension from the obligations of the Agreement on the basis of a motivated request. The provisions of Article 66.1 are precise and do not provide discretion to the TRIPS Council to either deny the request or impose any further conditions on the LDCs, India stressed.

It noted that the link between Article 66.1 and Article 67 “was unnecessary and had created confusion”, adding that there is absolutely no relation between the transition period, which is meant to assist the LDCs in developing a viable technological base, and Article 67, which is an obligation on the developed countries to provide technical assistance to the LDCs to help them implement the TRIPS Agreement.

India also emphasized that the “no rollback” provision in the previous extension decision has no place in the TRIPS Agreement and had in fact reduced the policy space for the LDCs in utilizing the TRIPS flexibilities during the transition period to engage in technological development and ensure access to affordable goods for their citizens.

China said it recognized that LDCs faced constraints and needed maximum flexibility to meet their developmental challenges, expressing hope that the extension will give maximum flexibility to LDCs to address access to essential goods that would allow them to participate more effectively in the global trading system.

South Africa, in expressing support for the transition period, said that the circumstances that gave rise to the transition period had not changed and that LDCs face resource and human constraints and weak innovative capacities. This, it said, makes a strong case for an extension which should remain in force as long as a country remains a LDC.

Bolivia also expressed support for the LDC request and draft decision text on the basis that it was reasonable as the data showed that LDCs’ situation had worsened. It also pointed out that intergovernmental organizations and non-governmental organizations (NGOs) had expressed their support for the transition period. It stressed that the issue of extension should not be considered as part of the package of issues that will be addressed at the WTO Ministerial Conference in Bali (in December 2013), adding that the issue pertains to the regular work of the TRIPS Council.

Cuba also supported the LDC request. It similarly stressed that it was not an issue that should be linked to the Bali Ministerial Conference.

Rwanda, a member of the LDC Group, reiterated that the economic situation of LDCs has not changed, and the technological base has not been developed due to lack of technological infrastructure, qualified personnel, necessary skills and technology transfer. This is evidenced by the composition of exports, which is dominated by a handful of commodities without any technological and skill-intensive products. Rwanda added that the share of LDCs in total trade was 3% in 1954 compared to the current share of only 1%!

Referring to the language of Article 66.1 of the TRIPS Agreement, Rwanda said that “all WTO members including developed countries have a legal obligation to accept the proposed decision text”.

It stressed that conditions attached to the previous extension, especially the “no rollback” clause, “should and shall not” be attached to the current decision text, adding that the LDC Group’s request is a new request under Article 66.1 and thus LDCs are not bound by the conditions of the previous decision. The “no rollback” clause severely hindered use of the flexibilities by LDCs, Rwanda said, adding that such a provision was provided for in TRIPS Article 65.5 but it pertained only to developing countries and not to LDCs.

Rwanda also stressed that the transition period provided by Article 66.1 is to address the special needs of LDCs and to develop the technological base and is not for TRIPS compliance, adding that the issue of technical assistance is a separate issue under Article 67 of the Agreement.

On the duration proposed by LDCs, Rwanda said it was specific and practical and any shorter period would not be practical, adding that the last negotiated extension of 7.5 years was absolutely inadequate for LDCs to deal with their development challenges and to develop a viable technological base. Such a limited timeframe is of limited practical value to LDCs and creates uncertainty as to whether LDCs will obtain another transition period, making it impossible for LDCs to maximize use of the policy space available during the transition period. The timeframe is also insufficient to develop a technological base, it added. Developed countries also get predictability and certainty as they are clear that as an LDC nears graduation it will comply with TRIPS obligations, Rwanda said.

Rwanda also highlighted that the LDC request and draft decision text received very strong support from civil society groups, certain UN agencies as well as from industry. Letters and statements in support have been received from more than 375 civil society organizations including trade unions from around the world representing millions of people, from UNDP and UNAIDS, from the Electronic Information for Libraries (EIFL) that works with libraries worldwide to enable access to digital information in developing countries, and from the Computer and Communications Industry Association (CCIA), an organization that represents the interests of a wide range of companies in the computer, Internet, information technology and telecommunications industries such as Google, Facebook and Yahoo.

Rwanda mentioned that the CCIA in its press statement noted that the implementation of the TRIPS Agreement would be counterproductive, adding costs to public health systems and other administrative burdens at a moment when these countries are contending with human and technological barriers to modernization. It cited CCIA President and CEO Ed Black as saying, “We look forward to the day when there are no more LDCs. But as long as any country’s people are living on two dollars a day, they should have complete flexibility in IP protection.” This statement is in line with the preamble of the TRIPS Agreement and consistent with the empirical evidence, Rwanda said.

LDC challenges

Angola called on the WTO membership to support the LDC proposal, stressing that LDCs represent the poorest and face many challenges, suffering from a high disease burden, inadequate sanitation and low agricultural productivity. The situation of LDCs had not changed since 2005, Angola said, adding that their productive capacities continue to be limited and they face serious problems in infrastructure and technology transfer.

Zambia said that the LDC request has been necessitated by the multiple difficulties LDCs had to deal with over the past transition periods in developing the necessary national conditions that would facilitate access, assimilation, adaptation and enforcement issues in the face of weak institutional capacities and limited but often competing financial resource needs. It is clear from the 2005 extension that the challenges faced by LDCs require a timeframe that is not arbitrarily determined, but one that takes into account the prevailing economic, financial and administrative constraints faced to ensure that IP facilitates the creation of a sound and viable technological base, added Zambia.

It further said that the LDC economies are faced with economic, financial and administrative constraints as well as special needs and requirements that necessitate maximum flexibilities under the TRIPS Agreement to enable them to build the necessary conditions that would facilitate the effective protection of IP while maximizing economic benefits from exploitation of IP.

“The need for maximum flexibility is not an invention of our own. This is something acknowledged in the preamble of the TRIPS Agreement and the objective is clear: to enable LDCs to create a sound and viable technological base,” Zambia said, adding that it looked forward to members’ positive consideration of the LDC Group’s request.

Tanzania said that no country wants to remain an LDC. Short extensions will not give LDCs the time to overcome capacity constraints and to develop a viable and competitive technological base. Overcoming these problems takes contextually specific strategies, policy flexibility, greater financial resources, but it also takes time – decades not years.

Bangladesh explained that LDCs are not asking for full autonomy. Even under the transition period, LDCs will need to implement Articles 3, 4 and 5 of the TRIPS Agreement. The idea behind the flexibility is to create a sound and viable technological base, and not for LDCs to become TRIPS-compliant.

It stressed that the extension anticipated by Article 66.1 was “automatic” as it states “shall”, and there is no way of interpreting it otherwise. The last extension was granted seven years ago. Out of this, for four years LDCs suffered financial and food crises. LDCs were hardest hit and their marginalization increased. Imports rose more than exports, while no technology transfer took place from developed countries. Thus, it is only natural that LDCs are assisted by this extension.

According to sources, other countries that supported the LDC request for an extension of the transition period were Saudi Arabia, Argentina, Mexico and Sri Lanka. (SUNS7541)                    

Third World Economics, Issue No. 541, 16-31 Mar 2013, pp 5-8