• Gaps between commitments and actions
  Dhaka Daily, August 21, 2007

• There is no ambiguity in Indian legislation
  The Financial Express, August 20, 2007

• Doha Development Agenda from LDCs' perspectives
  Dhaka Daily, August 18, 2007

 In Media Archive...

Gaps between commitments and actions
Dhaka Daily, August 21, 2007

By M. Abu Eusuf

NUMEROUS studies indicate that services have the potential to provide a significant development outcome to the Doha Round of negotiations. Unfortunately, progress in this area is directly linked to breakthroughs in Agriculture and Non-Agricultural Market Access (NAMA) negotiations. Before the suspension of the Round in July 2006, around 30 revised offers were made. There weren't much for the least developed countries (LDCs) in those offers as modes and sectors of interest to the LDCs were not included.

Since the resumption of the negotiations this year, no revised offers were made. In the services negotiations, the negotiating architecture has provided the LDCs maximum flexibility and opportunity to seek enhanced market access in sectors and modes of supply of export interest to them. The modalities for special treatment for the LDCs were adopted in 2003.

At Hong Kong Ministerial Conference, Members decided to develop methods for the full and effective implementation of the LDC modalities, particularly through developing appropriate mechanisms for according special priority to the LDCs. In March 2006, the LDCs submitted a proposal asking developed countries, and developing countries in a position to do so, to accord non-reciprocal special priority to the LDCs in sectors and modes of supply of export interest to them. The proposal though not very clear on how special priority to the LDCs in terms of market access would be provided, alluded to preferential market access to the LDCs in the area of services. There have been a number of meetings to specifically discuss this proposal and on the overall implementation of the LDC modalities, both before and after the resumption of the negotiations. The developed countries are opposed to provide preferential market access to LDCs in the area of services within the general agreement on trade & services (GATS) framework. There is, however, limited support to go for a WTO waiver approach which the LDCs should explore further.

Another key issue for LDCs in the services negotiations is seeking commitments for semi-skilled service providers under mode 4. Mode 4 accounts for 2.0 per cent of world trade in services, and yet there is virtually no progress on the movement of natural persons under mode 4. The current offers and revised offers continue to exclude categories of interest to the LDCs. Many offers still focus on categories linked to commercial presence.

The LDC Group has submitted a collective request on mode 4 and has defined the categories they are interested in such as Independent Professionals, Business Visitors, Contractual Services Suppliers, and 'others'. The LDCs would need to further work on this submission and make it more sector specific. Effective access to mode 4 will also require actions in the area of rules' negotiations, particularly in Domestic Regulation. Recently, the Working Party on Domestic Regulation discussed for the first time a text by the Chairman on possible disciplines on domestic regulation pursuant to Article VI: 4 of the GATS. An agreement on horizontal disciplines on domestic regulation might be within reach but again whether that would facilitate movement of natural persons is an open question.

It is a bit disappointing that in a development Round, the work programme for operationalizing the Special and Differential (S&D) provisions has not moved much. It may be recalled that as a part of this work programme, a total of 88 Agreement-specific proposals were tabled by the African Group and the LDCs. Out of these, five decisions in favour of the LDCs were adopted at Hong Kong while 28 proposals were agreed in principle at Cancun in 2003. Developing countries have questioned the economic value of these 28 proposals but are inclined to adopt the package given a favourable movement in other areas of the negotiations. A total of 54 proposals still remain on which Members are yet to come up with recommendations. Although at Hong Kong, Ministers had instructed that work on the remaining proposals to be completed by December 2006, it could not be done due to the suspension of the negotiations. In the post Hong-Kong phase, text based discussions has taken place only for a few proposals and progress there has also been limited. The LDCs virtually has not pursued any additional proposals in the S&D negotiations, and has only been concentrating on the implementation of the DFQF decision.

It is interesting to note that negotiations on trade facilitation which was added to the Doha Round through the July Package in 2004 has witnessed rather an active period in the last two years. More than 100 proposals have been submitted in the negotiations, some of them are now called third generation proposals reflecting a mature phase of negotiations, in the areas of trade goods transit, import/export fees and formalities and trade regulations centering on Articles V, VIII and X of the GATT 1994.

Developing countries, which were not a demander of this area of negotiations, are now becoming active participants. The LDCs have also tried to engage themselves in the negotiations with few of them teaming up with other countries in submitting proposals. Although the negotiations in this field have not yet reached a full drafting mode, what is important for the LDCs to ascertain is whether the proposed measures contained in the submissions of Members are consistent with their trade, development and finance needs or administrative and institutional capacities. Careful examination is also required in respect of benefits and implementation costs of such proposals. The needs' assessment in the LDCs for trade facilitation support is also to be pursued so as to make effective technical and financial assistance proposals in the negotiations.

Much of the negotiating energy of the LDCs in the post-Hong Kong phase was invested in negotiating the enhanced Integrated Framework (IF) for trade-related technical assistance for the LDCs. Perhaps the suspension of the Round allowed Members to devote more time to this agenda which is not a part of the single undertaking. The Ministers at Hong Kong agreed to enhance the IF on the basis of three criteria: (i) additional and predictable resources; (ii) strengthening in-country capacity to implement the programme; and (iii) enhanced global governance.

After Hong Kong, a Task Force was established to develop recommendations to implement the Hong Kong mandate. Following the recommendations (which inter alia proposed a new Secretariat for the IF), several interim bodies were set up to develop proposals for implementing those recommendations. The final package of recommendations were adopted only the beginning of this month, and there still remains some outstanding issues to resolve such as the recruitment of the Trust Fund Manager and an Executive Director for the new Secretariat of this programme. It is a bit frustrating that in the whole episode of negotiating the enhanced IF, much attention had been given to governance issues (several terms of references of the bodies that would constitute the enhanced IF and of processes to access funding were negotiated). The fundamental conceptual underpinning of the programme, the efficacy of which was questioned before, remains as such. In the past it was highlighted that mainstreaming of trade into national development plans (one of the objectives of the IF) is too indirect an approach to make a real contribution to address the needs of LDCs in trade, in particular tackling supply-side constraints. The enhanced IF is already behind schedule (was supposed to enter into force no later than December 31, 2006), and the indicative financial target of US$400 million over a period of five years is too distant to achieve. It is up to the LDCs to find out whether the model that they have negotiated will find its way in bringing true benefits for them.

Finally, let us have a quick look on the "Aid for Trade" work programme that aims to "help developing countries, particularly LDCs, to build the supply-side capacity and trade-related infrastructure that they need to assist them to implement and benefit from WTO agreements and more broadly to expand their trade". Since Hong Kong, the agenda has moved rather in a less convincing manner. A Task Force was created to develop recommendations on how to operationalize "Aid for Trade". The recommendations, which were adopted in October 2006, fell short of some practical suggestions or mechanisms to address the trade needs of the developing countries.

What has happened is that the WTO has assumed the role of monitoring the "Aid for Trade", which are now taking place on three levels: (i) a global review of "Aid for Trade" flows at the WTO; (ii) donors self assessment; (iii) in-country assessment by recipients. It remains to be seen how the WTO would coordinate these various levels of monitoring, and whether this approach would ultimately bring the much needed resources for building trade infrastructure in the LDCs. The LDCs made a submission in the WTO reflecting on the scope, architecture, instruments and governance of the "Aid for Trade", prior to the adoption of the Task Force recommendations. In that submission, the LDCs, inter alia, proposed a multilateral trade facility for financing projects relating to trade enhancement. However, that proposal did not attract support from donors and thrust of the Task Force recommendations was to work through the existing channels. The LDCs should now undertake an analysis of whether, and to what extent, the aid channels are supporting projects in trade sector. The challenge here is to connect the aid or development community with the "Aid for Trade" work programme in the WTO.

From the above review, it appears that the LDC issues in the Round are so far half-cooked. Unless the commitments taken in Hong Kong are given effect through meaningful follow-up actions, the Round will not bring tangible benefits for the LDCs. Meaningful implementation of the DFQF decision taken at Hong Kong (in particular in the US market), operationalisation of some critical provisions of the LDC modalities in services negotiations, elimination of cotton subsidies, finding a mechanism to secure resources from "Aid for Trade" initiative, operationalisation of technical assistance and capacity building aspects of Trade Facilitation negotiations are some of the unfinished business of the Round.

There is now a call to complete the Round by end of 2007. The Chairs of negotiating bodies are now working towards revised text. The Round nevertheless has faltered since its launch and, with each phase of negotiations, the ambitions set at Doha are eroding gradually. The challenge for the LDCs is to ensure that the commitments made since 2001 through successive Declarations are translated into meaningful actions.

The writer is Assistant Professor, Department of Development Studies, University of Dhaka.

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There is no ambiguity in Indian legislation
The Financial Express, August 20, 2007

By Pradeep S Mehta

Novartis is upset with the Madras High Court for its judgement striking down its patent on its drug Glivec, used to treat blood cancer, because it was really not an invention, but the same stuff with marginal add-on value. However, Novartis will not challenge the judgement. This has lead to a huge debate in the country on the future progress in R&D of drugs and pharmaceuticals in India.

Novartis had challenged Section 3(d) of the Indian Patent Act, which deals with such situations, and argued that the provision is arbitrary and inconsistent with the World Trade Organisation’s trade-related aspects of intellectual property rights (Trips) agreement. Novartis and many other pharma giants argue that this unfavourable judgement would undermine incentives for pharmaceutical innovation, incremental innovation in particular.

Why was such a decision taken? The Indian Patent Amendment Ordinance, 2004 is perhaps the only law in the world that included a provision to protect public health from companies who seek extension of their patents by marginal value addition. The law states that “patents would not be given for the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant”.

Parliament, in its wisdom, incorporated this clause to address the sham of patent life extension while ensuring patentability of known substances when the inventor is able to demonstrate enhancement of known efficacy. In other words, this provision promotes incremental innovation, but restrains evergreening. Albeit difficult to discern evergreening from incremental innovation, in practice, though, the so-called evergreening process is importantly different.

To legally draw a line to differentiate these two is a Herculean task. To follow the usual practice of referring the laws of rich countries in this matter does not arise as India is the first in the world to legally address this problem. But, if we go by the WHO report of the Commission on Intellectual Property Rights, Innovation and Public Health, 2006, Section 3(d) is legally sound. The report says legislation through this provision tries to make a distinction in law between evergreening and incremental innovation. Moreover, the Trips agreement gives complete freedom to WTO members to use this flexibility.

This entire dispute arose merely because of a lack of clarity on how to determine the “enhancement of a substance”. This was not addressed by the high court in its verdict, giving ample scope for future litigation in this area. But the growing fear that the decision would have an impact on future R&D within the country is a pettifogging ploy.

Under our Act, patents are granted for 20 years according to the WTO’s timeframe to sufficiently remunerate an inventor. Even after this, if an inventor creates a modified version of the original product with improved efficacy then the law explicitly recognises it under Section 3(d).

What it restrains is the practice of extending the patent term beyond 20 years by tweaking the composition of the original product without any enhanced efficacy. In other words, it tries to restrain the firm’s monopoly.

What the current situation demands most is minor clarification of this controversial provision to avoid future challenges. The ideal situation would have been for the Madras High Court to come out with its own interpretation, after due consultation with the patent and health authorities, of Section 3(d) in its verdict. However, it has not done so. On the contrary, in its verdict, it claimed that the provision does not suffer from vagueness, ambiguity or arbitrariness and contains reasonable in-built protection for patent applicants—a statement which cannot be denied.

But, for a better understanding, either we can wait for a similar dispute to be raised in court, or could come up with an addendum in the law giving greater clarity to the provision by setting up some criteria for judging the enhanced efficacy of a new drug. Nevertheless, none of these steps are imperative as the provision is consistent with the Trips agreement.

The author is Secretary General, CUTS International, a leading research, advocacy and networking group and can be reached at psm@cuts.org. The article was prepared with the research assistance of Simi TB, researcher at CUTS.

This article can also be viewed at: http://www.financialexpress.com/

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Doha Development Agenda from LDCs' perspectives
Dhaka Daily, August 18, 2007

M. Abu Eusuf

THE Doha Round of negotiations is in its seventh year. The Round has now reached a decisive moment. Ever since the first failure registered at Cancun (Mexico) in 2003, the Round has staggered. The WTO Director-General Pascal Lamy suspended the negotiations when negotiations among the six major players, the G-6 countries namely Australia, Brazil, EC, India, Japan and the United States broke down in July 2006. Progress in all areas of work was put on hold. That break did not cut loose the fate of the Round. The negotiations resumed on a "soft" mode in November 2006, and full-scale negotiations across the board were resumed in February 2007. 

Although multilateral negotiations have now been resumed, the progress in the talks critically depends on a breakthrough among the G-4 countries namely Brazil, European Communities, India and the United States. The gaps among these countries are still wide, and their stalemate has paralysed the multilateral process. Though a series of meetings of the G-4 countries were taken place in Potsdam, Germany on June 19 - 21, 2007, they were unable to bridge their differences and talks among them broke down amidst persistent divisions on cutting industrial tariffs and farm subsidies.

The least developed countries (LDCs) are marginal players in world trade, and it is common knowledge that they will not benefit the way other Members of the WTO will, with a successful completion of the Round. Progress was made on issues of interest to the LDCs which were reflected in the July Package (2004) and in the Hong Kong Ministerial Declaration (2005). The Hong Kong Declaration has reaffirmed that the LDCs are not required to undertake reduction commitments in agriculture, non-agriculture market access (NAMA) and in services negotiations. Most important among the decisions in Hong Kong was the one on providing the LDCs with duty-free and quota-free (DFQF) market access. The LDCs are also given flexibility in undertaking obligations in trade facilitation negotiations, and much of the commitments are linked with adequate provision of technical and financial assistance to them. Some feel that with all these decisions, the LDCs demands in the Round are already met. Perhaps due to this notion, and due to the nature of the post-Hong Kong phase of the negotiations, issues of interest to the LDCs did not receive much attention from the wider Membership of the WTO. However, there are certain critical decisions, which require effective implementation without which the commitments at Hong Kong will remain an unfinished business.

The decision to provide DFQF market access to the LDCs was one of the most important decisions reached at Hong Kong. In case of difficulties of Members, the decision stipulates to provide DFQF access to the LDCs for at least 97 per cent of products originating from the LDCs by 2008 or no later than the start of the implementation period of the Round. There was lack of clarity in the drafting of the decision as it is subject to interpretation whether the developed countries should provide DFQF market access in 97 per cent of its national tariff lines; or whether the 97 per cent threshold of products originating from the LDCs applies only to tariffs lines on which the LDCs are currently exporting.

In both scenarios, there is scope for the developed countries to choose product coverage in a manner that could cripple market access opportunities for the LDCs. It may be noted here that barring the United States, the LDCs enjoy DFQF market access to all major developed country markets and most of those countries such as the European Union (EC), Canada already satisfy the 97 per cent threshold. Recently, Japan has adopted an enhanced DFQF market access scheme for the LDCs allowing 98 per cent of its tariff lines, defined at the nine-digit level, duty-free and quota-free for the LDCs. The scheme is, however, not without exceptions such as rice, certain leather and fish products. While Japan should be commended for granting this facility to the LDCs on an autonomous basis, a study is required whether it would result in enhanced exports from the LDCs and whether their current rules of origin criteria and standards potentially pose a threat to the LDCs.

The LDCs have made efforts to engage the developed countries in implementing the commitments on the DFQF market access to the LDCs. The LDCs in March 2006 had made a submission in three negotiating bodies (agriculture, non-agricultural market access or NAMA and Special Session of the Committee on Trade and Development) on how they would like the decision to be implemented. There has virtually been no discussion on this issue in the agriculture and NAMA negotiations (LDCs would need to be vigilant to see whether the modalities in these areas factor in the decision taken at Hong Kong).

Countries such as the United States do not consider the implementation of the decision as a negotiating issue, and considers the implementation as a part of the single undertaking. They, however, have launched the procedural steps required to implement the decision. A consultative process initiated by the USTR's office has now been completed. The USITC is also investigating the probable economic effects on the US producers and consumers associated with the implementation of the decision. Different stakeholders including the LDCs have submitted their comments to the US on this matter with some associations arguing against the implementation of the decision.

It may be noted that the current tariff structure of the US is biased against the LDCs (and in particular against the exports from Bangladesh). In 2006, the average tariff on all imports from the LDCs was 3.8 per cent while the figure for the Organisation for Economic Cooperation & Development (OECD) countries was 0.8 per cent. These average tariffs on the LDCs thus represented more than five times higher than the average tariffs imposed on the OECD countries. Moreover, the average tariffs faced Bangladeshi exporters was 14.9 per cent. DFQF facility to the US market thus assumes a special significance for Bangladesh. The LDCs (and Bangladesh) should make allout efforts to follow up with the US administration to ensure a meaningful implementation of this decision in the US market.

What the LDCs should also start pursuing vigorously is to engage developing countries to provide DFQF market access to the LDCs. Countries such as Brazil, China, India, Korea have already indicated that they are working on to provide improved market access to the LDCs. In fact, China in 2005 had announced to grant 39 LDCs enhanced market access to LDC products. There needs to be a systematic follow-up with the authorities of these countries, and with other developing countries, for better market access of the LDC products to their markets.

An associated issue with the DFQF market access is the rules of origin. Although preferential rules of origin were not subject to WTO rules, the Hong Kong Decision has brought this issue into the negotiations. Members were asked to ensure that rules of origin are transparent and simple and contribute to facilitating market access for the LDCs. Although the LDCs submitted a proposal in the negotiations suggesting single value-added criteria for conferring origin, there is a disagreement on the forum where such issues should be addressed. The rules of origin Committee in the WTO deals with non-preferential rules of origin and so far has not carried out any multilateral review of preferential rules of origin. The European Commission (EC) has long been stating that reforms of its rules of origin in the GSP schemes are underway. Advancing the LDC agenda on rules of origin in the WTO will be a complex and lengthy task.

One of the critical areas of the negotiations is non-agricultural market access (NAMA). Although modalities in this area are yet to be agreed upon by Members, issues concerning the LDCs such as exemption from tariff reduction commitments and the flexibility for the LDCs on the level and coverage of bindings enjoy consensus among Members and have not been questioned in the post-Hong Kong phase of the negotiations. However, a number of components of the modalities could have indirect but substantial consequences for the LDCs.

There appears to be an increasing convergence on a simple Swiss formula with two coefficients for the modalities for tariff reduction. It is not difficult to understand that under an aggressive Swiss formula in NAMA, the expected tariff cuts for developed countries on certain products of export interest to the LDCs (for example textiles and clothing) would be much steeper, which would erode the margins of preferences currently enjoyed by the LDCs. Erosion of preferences has become a highly contentious issue in the negotiations. In recent times, there has been attempt to assess the scope of the problem. Although the problem will affect a group of developing countries and will affect only a limited number of products, the issue is significant from the LDC perspective.

The question is what would be a right formula that could minimise erosion of preferences on products of export interest to the LDCs, and what could be the possible range of solutions. Although the negotiations have witnessed heated debate on the issue, there was lack of progress in identifying possible solutions. A number of countries are opposing a trade solution in this area while others are alluding to find a solution in the "Aid for Trade" context. The LDCs are yet to pronounce themselves in this area.

It is time for the LDCs to submit a proposal on how they would like the issue to be addressed. It may be noted here that preference erosion could also hit agricultural exports from the LDCs and a solution is also needed in the context of agricultural modalities.

Another divisive issue in the NAMA negotiations is its sectorial tariff component, which is being actively pursued in an informal Member-driven process. Around fifteen sectors have been proposed for negotiations. If sectors of export interest to the LDCs are included here, this initiative is likely to erode even further the preferential margins enjoyed by the LDCs.

An equally important and integral part of NAMA negotiations is addressing the non-tariff barriers (NTBs). Unfortunately, this area of the negotiations did not receive priority attention from Members since the launch of the Round. There has been a sporadic effort to advance NTB negotiations. In addition, whenever NTB issues were taken up, Members had devoted a lot of attention to procedural matters and its scope within the NAMA negotiations. It is also becoming clearer that the majority of notified NTBs could be addressed either in regular WTO Committees or in other negotiating groups. For instance, several of them pertain to technical barriers to trade (TBT), trade facilitation, customs valuation, sanitary and phytosanitary (SPS) measures, etc.

Despite resource and capacity constraints, two LDCs -- namely Bangladesh and Senegal -- did submit NTB notifications. The Hong Kong Ministerial Declaration recognised the need for submitting specific negotiating proposals. This is indeed a complex area of work and the LDCs have struggled to identify and make suitable proposals in the negotiations. Only few LDCs have initiated a dialogue with the private sector to feed inputs into the negotiations. Without a proper survey of the private sector, it is difficult for any Member to submit specific proposals.

Let us turn to Agriculture which is the stumbling block of the Round- and remains as such. Without a balanced outcome in the agriculture negotiations, there is little chance of success in other areas of the negotiations. World trade in agriculture accounts for less than 10 per cent (agriculture's contribution to GDP in the OECD countries is currently around 2.0 per cent), yet positions among the big countries are entrenched in this area. The Chairman of the Agricultural negotiating group recently issued a "challenges" paper highlighting where divisions lie in the talks, and suggesting some ways to close the gap. The paper has drawn harsh criticisms from all quarters. The three biggest sticking points are: how much the US should cuts its ceiling level for domestic support, how much the EU should cut its tariffs on average, and how many "sensitive" and "special" products should be allowed to shield from deeper tariff cuts.

It is difficult to make the US reduce the limit on overall trade-distorting domestic support to single figures as it is difficult to have an upper limit to the number of special products. While these issues do not affect the LDCs directly, it needs careful assessment on the degree to which the tariff cuts would undermine the preferential margins enjoyed by the LDCs and how the net food importing LDCs would fare with the elimination of subsidies. Interestingly, although agriculture constitutes more than 50 per cent of exports for half of the group, the LDCs are not active players in the negotiations. Perhaps, exemption of reduction commitments in agriculture and promise of DFQF market access has made the LDCs complacent in this area of the negotiations. So far, the LDCs have submitted only one proposal (together with the African Group) in a less controversial area of food aid, which falls under the pillar of export competition.

However, on the agricultural dossier, one important part of the equation is cotton. The July Package in 2004 as well as the Hong Kong Declaration have given clear mandate to address cotton ambitiously, expeditiously and specifically within the agricultural negotiations. At Hong Kong, decisions were