June 08, 2005

Free Trade and Pharmaceuticals

The average NGO or civic group does not have adequate capacity to actively participate in the increasingly complex policy and legal environment of global trade. This puts decisions and actions taking place in corporate headquarters and multilateral assemblies out of reach of the ordinary citizen. Here is the short-version international legal framework for essential medicines, proprietary drugs, and CAFTA.

From GATT to the WTO
The end of WWII saw the creation of the World Bank (WB) and the International Monetary Fund (IMF) to regulate international economic cooperation. These are known as the "Bretton Woods" institutions, named for the town in Vermont, USA, where negotiations took place. The package of trade rules which came out of this gathering was the General Agreement on Tariffs and Trade (GATT 1947). It began with 23 countries, dealing only with trade in goods, and affecting just 10% of global trade. Thus began international trade liberalizations through progressive reductions of protectionist measures (ie tariffs), ensuring a tremendous momentum of trade growth.

GATT was legally only a provisional agreement and not a governing body. It did such a good job of reducing tariffs and promoting trade that governments had to develop other forms of protections for sectors threatened by overseas competition. Bilateral market-sharing agreements and subsidy structures were then created and implemented in effort to protect domestic products. Unable to respond to the vast overhaul of the global trade environment, the recessions of the 1970s and 80s, and increasing globalization, the Charter's relevance soon diminished.

Multi- and plurilateral accords between contractual member countries were added to GATT during negotiations called “trade rounds”. At the Uruguay Round of 1986-1994, the World Trade Organization (WTO) was created to replace GATT. This Geneva-based intergovernmental body binds all members to global commercial agreements which are multilateral, mandatory, and permanent. It contains a dispute-resolution mechanism to enforce their mandates. In addition to trade in goods, this new organization added trade in services and intellectual property (IP) to its mandate. Trade in services is covered under GATS (General Agreement on Trade of Services) and trade in IP is covered under TRIPS (Trade Related Aspects of Intellectual Property).

WTO has 148 member countries as of February 2005. It accounts for over 90% of global trade.

TRIPS covers literary works, phonograms, computer programs. It also covers industrial designs such as copyrights, trademarks, trade secrets, geographical indications, patents, undisclosed information, and is an increasingly important component of trade. Minimum standards of protections against counterfeiting and piracy were laid out at WIPO (Paris Convention for the Protection of Industrial Property and the Bern Convention for the Protection of Literary and Artistic Works). Member states are given a transition period (periodically revised to accomodate country-by-country capacities) to adapt enforcement laws for TRIPS-compliance: 1 January, 1995 for developed countries; 1 January 2005 for transition economies; 1 January 2016 for least developed countries.

A 3rd WTO Ministerial Conference was summoned in Seattle, US, on December 1999 to plan the next round of negotiations, the Millennium Round. But irreconcilable disagreements among the members, aggravated by a massive global movement in protest of the status quo, led to the meeting’s collapse.

WTO/TRIPS/DOHA/Compulsory Licensing and Parallel Importing
The effect of international trade laws on the procurement of essential medicines is a topic of much concern. Patent protections are essential to promote investment and innovation by an industry. But effective legislation must balance all interests and prevent abuse by the patent holder. Pharmaceutical companies, governments, and advocacy groups have been embroiled in legal clashes over this issue, particularly with medicines for the treatment of HIV/AIDS, or combination anti-retroviral therapies (ARVs) for reducing viral load. Almost 90% of HIV/AIDS is in the lowest 10% geographically in terms of GDP.

TRIPS treats pharmaceuticals like any other article of trade, even though these are not just another commodity. These are life-saving consumerables. Pharmaceuticals are covered by patents which grant a monopoly period to the innovator company for 20 years from the date of filing. Without the safety mechanisms in TRIPS, given the existing market structure, drug therapies are not affordable to people of the developing world. The two provisions in TRIPS for health emergencies are compulsory licensing and parallel importation.

Compulsory licensing is a legal intervention for removing the monopoly rights given by a patent, in order to obtain cheaper generic versions of medicines. Parallel importation is the purchase of proprietary drugs from the cheapest source, from someone besides the authorized distributor, because drug prices fluctuate from market to market.

Both of these are powerful tools in creating the competitive environment which forces prices down. These mechanisms must be included in the language of national laws for a country to employ it in leverage against corporate interests in periods of crisis.

In November 2001 at the 4th Ministerial Conference convened in Doha, Egypt, Bush signed the DOHA Declarations under tremendous pressure from developing countries and civil society. DOHA essentially reiterates the right of member countries to break patent monopolies in TRIPS for the purpose of protecting public health, particularly in promoting “access to medicines for all”.

CAFTA/FTAA a.k.a. Monroe Doctrine II...
The Central American Free Trade Agreement (CAFTA) is an expansion of the 1993 North American Free Trade Agreement (NAFTA) further into the hemisphere, and is key to advancing the Free Trade Area of the Americas Accords (FTAA). FTAA talks were shut down by fierce opposition at the 5th Ministerial Meeting in Cancun, Mexico, 2003. Ongoing disputes between the US and Brazil further raises doubts about this pact. Elimination of tariffs as CAFTA-DR is designed to do comes with a theoretical economic boon but have far-reaching ramifications on basic rights, environment, and sustainable development.

Elsewhere, bilateral FTAs are aggressively pursued by the US government. Patent protections for proprietary drugs will be extended beyond the 20 years required under TRIPS. The new language weakens or eliminates a government’s ability to launch generic competition to lower the cost of medicines. It blocks test data from release within the patent period, denying generic manufacturers access to critical safety and efficacy information. It blocks the temporary override of a patent that compulsory licensing allows. CAFTA countries will be required to divert scarce resources to implement more stringent protection infrastructures, in compliance with rules counter to the broader interests of public health. Sanctions by WTO keep signatories from violating these charters.

These priority agendas from the Bush administration are drawing intense opposition from the global South. Even the World Bank has acknowledged the challenges these pacts will have on the participating members. A small number of transition countries who have won landmark legal battles of their own now lead this growing resistance-- Brazil, South Africa, India, Thailand.

Fierce lobbying now surrounds this pivotal trade pact. CAFTA is aiming for a floor vote before the July 4 recess of the US Congress.

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