Between Farm & Pharma, Nothing Special About Differential Treatment

Published: The Financial Express,, January 06, 2003
By Pradeep S Mehta

When negotiators at the WTO broke for the winter holiday, champagne bottles were not uncorked as none of the deadlines could be met. First, the TRIPs and public health clarification ended in a stalemate. The US pharma lobby insisted on a coverage of very limited number of diseases under the window of compulsory licencing and the power of poor countries to import them if they did not have a domestic manufacturing capacity.

Second, the issue of farm talks, did not move forward on their desire to liberalise more than what was agreed during the Uruguay Round. Third, and this was the Like Minded Group’s (LMG) pet issue: special and differential treatment (S&DTs) provisions to be made enforceable was stuck between ‘hee haw’ and ‘hum haw’ (Who moved my cheese?). The LMG comprise of countries like Egypt, India, Malaysia, Zimbabwe, Pakistan, etc.

One worried soul is the WTO Director-General, Supachai Panitchpakdi. He had made an impassioned plea in the Financial Times of 16th December: “World trade must not be tripped by drugs”, but that did not work before a very stubborn US. This is in spite of the fact that the US position can well derail one of the crucial development aspects of the Doha round of the WTO: the flexibility aspects of TRIPs and public health. It will not only reinforce the comments by sceptics, who questioned the word ‘development’ in the Doha agenda, but will marshall forces which are inimical to the whole trade liberalisation agenda. That will be bad for both the rich and the poor in the world.

In trying to balance his views on the issue of access to life-saving drugs, Supachai also argued about the protection of the patent rights of the pharma industry, otherwise the billions of dollars required for research will not come forth. This is a flawed argument, because the pharma industry invests in research from current revenues, which have been raised from its existing customers, and not the future ones. Of course, it is cyclical, but the pharma industry is not doing any charity.

Coming to fundamental issues, many have argued about the validity of the TRIPs agreement in the WTO. Protagonists argue that if TRIPs was not there, the US will walk out of the WTO. So what, if it does. Anyway, by its ‘ugly American’ behaviour, it causes enough problems, whether at Geneva or out of Washington. For example — and this has not been reported widely — when Iran’s application for an observer status at the WTO came up at the General Council meeting in October, the US delegate shot it down, with words to the effect that “it does not even have to give any reasons for its objection”.

As a share of the world trade, the USA’s imports in 2001 was 18.3% and exports: 11.9%. On the other hand, the EU’s share for imports was 36.26% and 37.16% for exports. Not that the EU doesn’t come up with unfair actions, but at least it doesn’t throw its weight around obscenely. Thus, one of the ways forward for the Doha agenda to move is to get the TRIPs out of the WTO and dispatched to the World Intellectual Property Organisation, where it belongs. Until the combined wisdom of the global community sends the TRIPs to the WIPO, one will still need to deal with at the WTO. The original deadline for the TRIPs debacle was set at the end of December 2002. The negotiations have now been postponed to February 2003. But, as happened at the Sydney Ministerial, many fear that there will be no breakthrough by that time. The breakdown of these highly visible talks on medicines may have some serious implications on other negotiations. One thing that’s sure is it would release a considerable amount of pressure from the EU to fulfil its commitments on agriculture under the Doha Development Agenda.

Agriculture, too, is important, as progress in this area would have a profound impact on other elements of the negotiations. However, at present, the Cairns group and the EU are at loggerheads on this issue and most of the poor countries are merely passive onlookers.

Given the deadline, the EU might have yielded and submitted a proposal for modalities in the WTO farm negotiations. But this proposal has not yet been ratified by the EU member states. Further, we must not forget that the EU farm lobby is no less powerful than the US pharma lobby. The leading EU farm lobby, COPA, has blown the bugle of opposition to some elements of the proposal. So what the US has done to TRIPs can easily be a role model for the EU’s approach to farm talks. The long-awaited EC proposal on agriculture calls for a reduction of EU export subsidies by 45%, eventually eliminating export subsidies on products such as wheat, oilseeds, olive oil and tobacco. In addition, “trade distorting” farm subsidies would be cut by 55% while reducing agricultural tariffs by 36% on average.

There are serious drawbacks in this proposal. First, the Commission wants a reduction in trade barriers to be staggered over six years, starting 2006. This means farmers in poor countries will have to wait until 2013 for the EU to halve its export subsidies. Second, the EC’s proposal does not embrace fundamental reform in global agricultural trade as it has little intention to reform its Common Agricultural Policy (CAP), which would have enabled them to go for deeper tariff and subsidy cuts. This was even admitted by the EU Agriculture Commissioner, Franz Fischler, when he said, “these proposals can be carried out by us without having to make further reforms to the CAP”. Third, the EC conditioned its proposal on allowances for animal welfare and food safety support to farmers. Only two days after the EU submission, Stuart Harbinson, Chair of the negotiating session of the Committee on Agriculture (CoA), circulated an ‘overview paper’ that outlined the current status of negotiations on establishing numeric targets, formulas and other ‘modalities’ for countries’ commitments to be met by March 31, 2003. Negotiators will continue to have sleepless nights in the ensuing first quarter of the new year.

As regards S&DT provisions, the Trade and Development Committee of the WTO could not bridge the gap and thus failed to meet the second deadline. Having already missed a mandated July 31, 2002 deadline, members postponed the date to report to the General Council “with clear recommendations for a decision”, on a review of “all S&DT provisions, with a view to strengthening them and making them more precise, effective and operational” to December 31, 2002.

The discussions on S&DT over the last few weeks were split into two thematic groups. The first focussed on coming up with a first basket of decisions for immediate action. In this regard, Chairman Ransford Smith, prepared (on his own responsibility) 22 potential recommendations for agreement-specific proposals. The second thematic group dealt with how, and in what time frame, to proceed with the remaining issues.

On the last day of talks before the winter break, members could not agree on either of the two tracks. On agreement-specific proposals, only four out of the 22 on the Chair’s list were acceptable to all. On the way forward, members could not agree on future deadlines or the procedure to handle the remaining proposals. Finally, members agreed that Ambassador Smith would go ahead and make a factual interim report to the GC on the state of S&DT discussions.

Overall, the year 2002 ended on an extremely disappointing note for the poor countries. Frankly, there is no pundit who can forecast which way things will turn. Clearly, the overloaded developing country negotiators will be had pressed to deal many issues simultaneously. A country like India will be more burdened, because of the claims on its time by other poor countries. The energy that will be spent won’t be directly proportional to the gains that India might make. How we respond to the realpolitik will be an acid test for Arun Shourie, our new commerce minister.

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