Stumbling over the TRIPS agreement

Daniel Drezner”: is a clever advo­cate for lib­er­al mar­ket poli­cies. He ven­tures some “crit­i­cisms of EU ambitions”: 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”:–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”: site.

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