Stupid, Stupid, Stupid

Published: The Financial Express,January 03, 2003
By Pradeep S Mehta

The negotiations at the World Trade Organisation (WTO) have not got off to a good start in 2003. This is certainly the opinion of Pascal Lamy, the EU’s Trade Chief, who has branded the US pharmaceutical lobby to not allow the government to agree a settlement on access to essential medicines “very stupid.” In rejecting the compromise on the interpretation of the TRIPs Agreement, the US government succumbed to the pressure by the pharmaceutical lobby, which is scared that a flood of generic drugs produced in developing countries will und-ermine their profit margins. Th-ese arguments are implausible, given that very few poor countries have the capacity to manufacture medicines, let alone export them. “If people want to be stupid, they will be stupid” was Mr Lamy’s comment.

The EU had put forward a modified proposal after the winter break to end the deadlock over TRIPs and Public Health negotiations. The EU formula proposes to involve the World Health Organisation in decisions on whether a particular disease would be covered by the solution. The EU’s initiative found a less-than-enthusiastic welcome among developing countries, while health activists strongly criticised the proposal, arguing that it might be the most opportune time to move the debate out of the WTO. In a letter to Financial Times, I have also argued that the case is now ripe for the TRIPs agreement to be moved to the World Intellec-tual Property Organisation, where it rightly belongs. Some developing countries argued that each country should be able to define which diseases are “epidemics” or “pandemics.” Perhaps not surprisingly, Lamy finds this a “stupid question” to which the EU was attempting to give “an intelligent answer.”

The US, on the other hand, initially did not react and waited five days before giving the same answer they had been making throughout the discussions: that it provides inadequate protection for drug patents. Failure to reach an agreement means that the WTO members have now missed two of their first deadlines in the packed negotiating agenda mapped out at Doha. With the round due to be completed by the end of 2004, missing even some of the more minor deadlines could accumulate into major setbacks. Mr Lamy is due to complete his term as Trade Commissioner at the end of next year, so the EU can be counted on to push for completion of the round on schedule.

Negotiators, back in the meeting rooms, have a challenging task ahead as crucial negotiations take place on agriculture, TRIPs and Special & Differential Treatment (S&DT). But tensio-ns between the EU and US are not helping. The US greeted the new year by firing its first major salvo towards its trading partners: a strategy for dealing with WTO rulings that have eroded the US’ ability to impose import restrictions on products ranging from lamb meat to steel. Earlier, angered by a series of reverses at the Dispute Settlement Body (DSB) of the WTO, the Congress gave the Bush Administration until the end of 2002 to come up with a plan to reverse that trend and maintain the US’ ability to act against what it determines are unfairly traded imports. Pur-suant to this, the Administration submitted a report to the Cong-ress in which it noted that the US has benefited from the WTO dispute settlement system.

The US has recently faced two major reverses at the hands of the DSB. First, a WTO panel report concluded that the Conti-nued Dumping and Subsidy Offset Act 2000 (Byrd Amend-ment) of the US, is incompatible with WTO rules. The US’ appeal on the ruling was rejected on January 16th. This was followed by rulings on Foreign Sales Corporation (FSC) provisions of the US tax law, which authorises the EU to impose $4.043 billion in trade sanctions.

A possible motive of the US could be to avoid a possible third major debacle after Byrd Amendment and FSC. Next spring, the WTO is expected to issue its preliminary ruling on President Bush’s decision in March 2002 to slap tariffs of up to 30% on steel imports to help struggling US companies get back on their feet.

There are eight complainants in a WTO panel investigating US steel tariffs. But what is really holding up the negotiations is something much more serious: the EU’s refusal to take real steps toward the liberalisation of agriculture. I and many other experienced trade watchers see a replay of the truncated Uruguay Round and the Seattle Ministerial when agriculture often proved an insuperable obstacle. The EU has put its limited proposals on the table. However, a 35% cut in export tariffs may not be enough to make a difference for poor country producers trying to break in to a very difficult market. The EU has acknowledged the food security concerns of these countries and included a ‘development box’ in their proposal, but the price to pay will be the EU’s ‘green box’ of demanding health and environment standards. Fed up by the continued deadlock over farm trade liberalisation, three lobby groups, representing more than 260 million farmers in the EU and Asia, recently came together for their first organised excha-nge of views in the run-up to next month’s crucial WTO meeting on agriculture negotiations.

Delegates to the two-day meeting in Brussels agreed that farming is not just a trade issue but is also vital to the lifeline of any society. This is likely to be on the pattern of “type-II” initiative of the Johannesburg world summit held last year. Whatever the domestic pressures, in the eyes of almost every other country at the WTO, the EU proposals are not good enough. Time is fast running out as we are moving closer to the Cancun Ministerial Conference. If more progress is not made, the delicate inter-dependence of the negotiating agenda could lead to its collapse and a re-run of Seattle. The consequences could be even more serious this time. As WTO Chief, Supachai Panitchpakdi warned recently, inability to reach a consensus on the Doha Development Agenda could kill the concept of multilateralism.

Copyright © pradeepsmehta. All rights reserved.