Stumbling over the TRIPS agreement

“Daniel Drezner”:http://www.danieldrezner.com is a clever advocate for liberal market policies. He ventures some “criticisms of EU ambitions”:http://techcentralstation.com/091903D.html in the WTO in his latest TechCentralStation article that I agree with. But he trips-up along the way. bq. Until TRIPS(Agreement on Trade Related Intellectual Property Rights), there was a very clear dividing line between what the global trade regime covered and what it didn’t. The trade rules were designed to liberalize barriers to the exchange of products. Except for extreme circumstances, those rules said nothing about the processes through which products are made. It was generally accepted that if the global trade body intervened in such questions, it would constitute an unwarranted intervention into the national regulations of member countries. And for good reason—it’s relatively costless for countries to remove border-level barriers to trade, but relatively expensive to enact and enforce new domestic regulations over production processes. TRIPS, however, was expressly designed to regulate production processes—namely, whether firms respected intellectual property rights in their operations. Well, no. This is confused in some places and wrong in others (in Drezner’s defense, he seems to have picked up these ideas from “Keith Maskus”:http://www.iie.com/publications/wp/2000/00-1.htm) Confusion: there is a debate within WTO about whether some WTO rules would allow governments to discriminate among ‘like product’ imports based on differences in production processes. But that debate doesn’t implicate TRIPs. It’s about the SPS(Sanitary and Phytosanitary Measures) Agreement and aspects of GATT (Article XX) that touch on environmental conservation. Incidentally, the problem with such discrimination between ‘like products’ has nothing whatever to do with the expense or difficulty of making such distinctions as Drezner implies: it’s about the impact of such disctinctions on comparative advantage. Wrong: TRIPS is not about the regulation of production processes or even about ‘whether firms respected intellectual property rights in their operations.’ TRIPS is about the uniform global adoption and enforcement by governments of certain standards in the existing international IP treaties (the “WIPO” treaties on patents, trademarks, copyright etc). It also marginally extends some aspects of those treaties on matters such as the term of patents and it provides a multilateral disputes process through the WTO. In other words TRIPS is an agreement about which laws the member governments of WTO have on their books and how governments enforce those laws: it does’t directly regulate any firm or production process. Only national governments can do that. This difference is crucial. Because TRIPS is about creating a ‘floor’ for the IP standards that national governments must enforce, it leaves a lot of the decisions about whether the actual standards adopted nationally are ‘strong’ or ‘weak’. Governments decide for themselves what standards (other than the global minimums) they wish to enforce nationally; which trade-marks or patents they’ll register nationally; what duration of copyright protection they’ll enforce … In fact, TRIPS leaves untouched the fundamental principle of 19th century IP treaties on which it builds, that IP rights are territorial, not global, in scope and implementation. A good example of the latitude that TRIPS leaves in the hands of national administrations is the developing country use of the ‘compulsory licensing'[⇒ related story] provisions of the Paris Convention on patents. This is a provision that is scarcely ever used by industrialized countries but is a big potential source of the ‘patented’ drugs manufactured in and exported from developing countries that are said to be needed for public health emergencies in other developing countries. TRIPS enshrines the right to use the ‘compulsory licensing’ provision, spelling out some scope and compensation provisions. The effect of the recent agreement[⇒ related story] on ‘TRIPS and Drugs’ is to further relax the interpretation of the scope of application of this provision. Another example: parallel importing of CDs and books. In the English-speaking world, British and American publishers of books and music have for many years maintained regional restrictions on the distribution of their different British and North American editions. TRIPS confirms the conformity of parallel importing practices that get around these commercial restrictions and the price discrimination that they sustain. The Canadian and Australian governments both sanction parallel importing: much to the chagrin of US and UK global media conglomerates. Drezner claims that TRIPS has burdensome compliance requirements, but he doesn’t offer any evidence or references to evidence for this claim. I agree that this criticism may be valid in connection with WTO agreements such as Customs Valuation. But it has become a sort of urban myth. TRIPS has extensive specific requirements for admisitrative and judicial intervention as well as notifications to the WTO. But the WTO is not a code of law: compliance is only ever tested on very specific grounds in a disputes process. A country that ‘loses’ such a dispute is obliged only to rectify the specific deficiency considered in the dispute. It’s an open secret that, as a result, few poor countries find themselves bothered with the details of compliance most of the time. There are other criticisms of TRIPS that would, I think, suit Drezner’s case much better. Here’s one: the key difference between TRIPS and every other WTO Agreement is that TRIPS contains specific standards (albeit minimum standards)for implementation by member governments. Every other WTO agreement is about outcomes. It’s very difficult to adopt standards—even the minimum standards contained in TRIPS—that are universally suitable for application in different member countries and that deserve the same priority in different member countries. Are poor countries really better off with a law that provides detailed standards for the protection of ‘undisclosed information’ (‘trade secrets&#8217); are they really helped by having a law that allows patent owners who have secured registration in their country to require siezure of potentially non-compliant imports at the port, when their ports are already crowded and plagued by delay? There’s a lot more detail on the TRIPS agreement in my ‘TRIPS Manual’ available on my “World Trade Rules“:http://www.worldtraderules.com/trips site.

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