LDC TRIPS exemption approved to mixed reactions

 After months of difficult negotiations, the poorest member states of the WTO will now be able to defer their implementation of the trade body’s intellectual property rules for another eight years.

by Sangeeta Shashikant

LONDON: The members of the World Trade Organization (WTO) adopted a decision on 11 June for the world’s poorest nations to exercise their right to be exempted from implementing the organization’s intellectual property rights agreement.

 In a hard-won decision, least developed countries (LDCs) can now defer for another eight years the implementation of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), except for Articles 3, 4 and 5.

 The decision does not include the highly contentious “no-rollback” clause contained in the previous exemption decision (WTO document IP/C/40) taken in 2005 and which expires on 1 July.

 This latest decision brings to an end months of uncertainty over the fate of the “duly motivated request” submitted by Haiti on behalf of the LDCs last November seeking an unconditional extension of the transition period to implement the TRIPS Agreement for as long as a country remains an LDC.

 The LDC request, while receiving massive support from developing countries, industry, civil society, UN agencies and academics, was fervently opposed by the developed countries led by the United States and the European Union.

 The eventual decision is the result of many sessions of lengthy pressure-packed closed-door negotiations over the last month, facilitated by Ambassador Alfredo Suescum of Panama, the Chair of the WTO’s TRIPS Council, between rich countries (the US, the EU, Japan, Australia, Canada, New Zealand, Switzerland) that opposed the LDCs’ formal request and a handful of LDCs.

 The Chair did hold informal briefings for other WTO members but countries that unreservedly supported the LDCs’ formal request were not invited to the closed-door negotiations. The Chair-led negotiations were preceded by weeks of informal consultations between developed countries and LDCs, facilitated by Australia.

 The deal that was finally concluded between the developed countries and the LDCs received mixed reactions from other members of the WTO.

Decision of the TRIPS Council

The preamble of the decision contains the following paragraphs:

 “The Council for Trade-Related Aspects of Intellectual Property Rights (the ‘Council for TRIPS’),

 “Having regard to the transition period for least developed country Members provided for in paragraph 1 of Article 66 of the TRIPS Agreement (the ‘Agreement’);

 “Recalling that this transition period was extended by the Decision of the Council for TRIPS of 30 November 2005 (IP/C/40) until 1 July 2013;

 “Having regard to the request from least developed country Members, dated 5 November 2012, for a further extension of this transition period, contained in document IP/C/W/583;

 “Recognizing the special needs and requirements of least developed country Members, the economic, financial and administrative  constraints  that  they continue to face, and their need for flexibility to create a viable technological base;

 “Recognizing the continuing needs of least developed country Members for technical and financial cooperation so as to enable them to realize the cultural, social, technological and other developmental objectives of intellectual property systems;”

The operative paragraphs of the decision state the following:

 “Decides as follows:

 “1. Least developed country Members shall not be required to apply the provisions of the Agreement, other than Articles 3, 4 and 5, until 1 July 2021, or until such a date on which they cease to be a least developed country Member, whichever date is earlier.

 “2. Recognizing the progress that least developed country Members have already made towards implementing the TRIPS Agreement, including in accordance with paragraph 5 of IP/C/40, least developed country Members express their determination to preserve and continue the progress towards implementation of the TRIPS Agreement. Nothing in this decision shall prevent least developed country Members from making full use of the flexibilities provided by the Agreement to address their needs, including to create a sound and viable technological base and to overcome their capacity constraints supported by, among other steps, implementation of Article 66.2 by developed country Members.

 “3. This Decision is without prejudice to the Decision of the Council for TRIPS of 27 June 2002 on ‘Extension of the Transition Period under Article 66.1 of the TRIPS Agreement for Least-Developed Country Members for Certain Obligations with respect to Pharmaceutical Products’ (IP/C/25), and to the right of least developed country Members to seek further extensions of the period provided for in paragraph 1 of Article 66 of the Agreement.”

Points of contention: rich vs poor

One of the most contentious points in the informal negotiations leading to the decision was the no-rollback (NRB) clause. This clause, found in paragraph 5 of the previous extension decision (IP/C/40), states: “Least-developed country Members will ensure that any changes in their laws, regulations and practice made during the additional transitional period do not result in a lesser degree of consistency with the provisions of the TRIPS Agreement.”

 According to trade sources, the US and the EU in particular wished to retain this clause in the current extension decision, while LDCs were opposed to its inclusion, repeatedly arguing that it was antithetical to Article 66.1 of the TRIPS Agreement.

 (Article 66.1 states: “In view of 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, such Members shall not be required to apply the provisions of this Agreement, other than Articles 3, 4 and 5, for a period of 10 years from the date of application as defined under paragraph 1 of Article 65. The Council for TRIPS shall, upon duly motivated request by a least-developed country Member, accord extensions of this period.”)

 Developed countries were generally not in favour of finalizing the timeframe of the transition period until discussions on NRB were completed, sources say, and thus a number of different formulations were presented and considered during the informal negotiations before the final formulation in paragraph 2 of the decision was arrived at. LDCs firmly rejected any obligatory NRB.

 Thus, the decision only makes a reference to paragraph 5 of decision IP/C/40, with LDC members expressing their “determination to preserve and continue the progress towards implementation of the TRIPS Agreement.”

 However, the decision also reinforces that nothing in the decision prevents LDCs from utilizing flexibilities available to them under the TRIPS Agreement, which should include the flexibility under Article 66.1 to roll back existing intellectual property protection.

 According to trade sources, an earlier formulation presented by the US to the LDC Group, i.e., that “LDCs are encouraged to continue that progress towards (implementation of/compliance with) the TRIPS agreement”, was subsequently withdrawn by the US. At a later stage, the US proposed: “LDC Members express commitment to preserving and continuing that progress towards full implementation of the TRIPS Agreement.”

 This formulation was not agreeable to LDCs, sources say, leading US Ambassador Michael Punke to suggest other alternatives to replace “commitment”, such as “dedication” and “resolve”, at an ambassadorial-level meeting on 4 June. Finally, all the countries settled on “determination”, a suggestion by the US at that meeting. Proposals by LDCs were not accepted.

 The duration of the transition period was also heavily disputed. Throughout the negotiations, developed countries favoured short timeframes, with the US going as low as five years.

 According to trade sources, Australia proposed a slightly longer timeframe of 10 years but subject to a TRIPS Council review of the progress made in implementing the TRIPS Agreement. Such a review would have been an additional condition beyond Article 66.1 and thus was not acceptable by the LDCs. The final duration agreed upon is eight years, an increase over the previous extension of 7.5 years.

 According to trade sources, following agreement on the NRB clause, and as discussions proceeded to the timeframe issue, the EU emerged with a new proposal that would require the WTO to present after [x] years a report on the progress made in the development of intellectual property systems by LDCs and any difficulties they encountered in that regard with the view to providing technical assistance.

 This proposal was not acceptable to LDCs and even some developed countries, sources say. Thus, the final decision does not include this point.

 However, during the TRIPS Council meeting, the EU reiterated a similar proposal but under the agenda item on technical cooperation. The EU reaffirmed its commitment to providing technical cooperation, but added that it needs information. It said that the previous decision required LDCs to provide information on their technical and financial cooperation needs to implement the TRIPS Agreement but such an exercise was a challenge, so it proposed that the WTO secretariat should prepare a report in 2014 on the progress of LDCs in implementing the agreement and difficulties faced.

 Nepal (the LDC coordinator) clarified that the extension decision does not make reference to needs assessment, and that such an assessment which pertains to TRIPS implementation under Article 67 should not be associated with the extension decision under Article 66.1.

 It also added that the needs assessment exercise agreed in 2005 did not work well as LDCs that prepared needs assessment received no response. Thus, during the negotiations, there was “mutual agreement” to drop reference to needs assessment as a condition in the new decision on the transition period. Nepal stressed that LDCs do not agree to the secretariat preparing a report, while also clarifying, however, that it was open to a discussion on technical assistance.

 India, in supporting Nepal, stressed that Article 66.1, which concerns an extension of the transition period, has no linkages with needs assessment. It added that since developed countries did not wish to burden the secretariat on other intellectual property issues, similarly, the secretariat should not be burdened to prepare a report on LDCs.

 India’s intervention was supported by Brazil and South Africa.

 The Chair took note of the statements and added that the TRIPS Council will revert to the matter at its next meeting.

Mixed reactions of WTO members

The deal concluded between the developed countries and the LDCs, adopted by the TRIPS Council, received mixed reactions from members of the WTO.

 Nepal, on behalf of the LDC Group, stressed that the transition period provided under TRIPS Article 66.1 is a critical element of special and differential treatment for LDCs. It is a flexibility provided specifically to LDCs in recognition of their particular situation in terms of their capacity constraints and their need to develop a sound and viable technological base. It added that the LDCs, through their formal request in IP/C/W/583, had sought an extension of the transition period as their situation remains the same in terms of their poor technological base and capacity constraints.

 It added, “Our request received a huge support from Members of this Council, for which we are thankful. Beyond this house, LDCs’ duly motivated request enjoyed support from lawmakers, UN development agencies, civil society and academicians. We are thankful to them as well.”

 It further added that the LDCs engaged in “direct talks with developed country partners” as well as through “Chair-led consultations” and with other members of the WTO, describing the outcome as “an accomplishment of months-long, intense negotiations”. It is a “compromise outcome we can live with”, Nepal said.

 It further said, “Now LDCs will have eight more years of transition period. The years ahead are going to be challenging for LDCs as they aim to advance on the path of development. The Istanbul Programme of Action has set the timeline of 2020 for at least half the number of LDCs to reach the graduation threshold. We sincerely hope that our partners will be forthcoming in providing enhanced support measures to LDCs, including in  the  areas of trade and transfer of technology. As LDCs’ situation improves and as they advance from marginalization to greater participation in global trade and multilateral trading system, they will find greater incentives for participation in TRIPS provisions.”

 Haiti, while welcoming the compromise, said that the original LDC request contained “no notion of conditionalities” and the extension would be in place until a country graduates (from being an LDC). It added that the transition period will enable the LDCs to develop a viable technological base and to achieve a certain level of socioeconomic development.

Compromise decision

India said that it has consistently supported the LDCs’ request for an extension of the transition period under Article 66.1 without any conditionalities.

 It further said, “The compromise decision reached today, to grant an extension of eight years, is far removed from the legitimate request of the LDCs for a transition period for as long as they remain LDCs. This would have allowed the LDCs much needed time to address the extensive development and technological challenges facing them. Regrettably, despite overwhelming support from developing countries and a few developed countries, an outcome has been negotiated which is a derogation from the provisions of Article 66.1.”

 India said it would join the consensus to adopt the extension decision “since the compromise decision represented a step forward from the 2005 decision”.

 It also stressed its “systemic concern about the process adopted in reaching this decision which was negotiated between a small group of countries, to the exclusion of the larger membership. This would no doubt have broader implications for negotiations in other areas as well and is something that is best avoided in the interest of the system and its membership.”

 India expressed hope that “any future request by the LDCs for extending the transition period for pharmaceuticals which will expire in 2016, would be looked at in a positive manner without any conditionalities being imposed on them.”

 Brazil welcomed the result but said it shared the systemic concern voiced by India, stressing that future consultations should aim at including a broader membership in the negotiation process.

 South Africa aligned itself with the statements made by India and Brazil. It said that it was not satisfied with the duration but could live with it. It also stressed that the outcome is far removed from the legitimate request of the LDCs despite the widespread support the request received. However, it said that it could join the consensus since the decision is a “step forward from the 2005 decision”.

 China welcomed the “compromise decision”, expressing its understanding that the outcome was not easily achieved. It noted that the no-rollback clause was not included in the decision, which recognized the right of LDCs to make full use of the flexibilities. It added that no conditionality should be attached to LDCs in as far as treaty language does not require it. It echoed the views of Brazil, India and South Africa that encourage more inclusive negotiations.

 Lesotho said that in the decision, LDC members declared their determination to move towards TRIPS compliance; however, this determination is “importantly hinged on the acquirement of capacity by the LDCs to meet their developmental needs including: economic, financial, and administrative needs and also the need for the creation of viable technological base”.

 “It is this ‘needs-based approach’ that is key to ensuring that LDCs are integrated  into the multilateral trading system in a true  sense of  the phrase ‘Integration into the MTS’,” Lesotho added.

 On the timeframe, Lesotho said that “while a much longer timeframe would have been desirable ... the arrival at eight years’ timeframe is a decisive expression by [WTO] members that the needs of the LDCs are key determinants of the extension timeframe”.

 It also stressed that the extension decision “highlights the centrality of the impending need to preserve the flexibilities of the LDCs, be they those in the TRIPS Agreement itself or those in the [other] WTO agreements”. Reference to flexibilities in the decision is “a resounding reassurance by members that quells any doubt concerning the ability of LDCs to use the available policy space provided by such flexibilities”.

 Rwanda thanked all stakeholders that supported the LDCs. It reiterated the rationale of Article 66.1 and expressed hope that LDCs will take advantage of the transition period to build a sound technological base and overcome structural constraints.

 Developed countries supported the outcome. The US simply supported adoption of the outcome reached with the LDCs. Japan said that the decision supports the needs of LDCs and will assure the private sector.

 New Zealand said that the decision is in keeping with the spirit of Article 66.1, adding that it had always supported a meaningful extension, and it was a “positive outcome on the whole.”

 The EU welcomed the decision, stressing that the decision recognizes that intellectual property is good for development and provides LDCs more time to implement the TRIPS Agreement. (SUNS7604)                                         

Third World Economics, Issue No. 548, 1-15 Jul 2013, pp 8-10