Limits to the human face of WTO

22 December 2005

With protests now becoming an integral part of WTO ministerials it is hardly surprising that the organisation likes to project those of its decisions that it believes have a human face.

The decision on patents and public health taken in the prelude to the Hong Kong ministerial is one rather obvious case.

The original TRIPS agreement did recognise that there could be times when patents came in the way of public health. The agreement thus allowed countries to compulsorily licence the production of the required drugs for their domestic market when they believed it was necessary.

But this did not help poor countries that did not have the capacity to produce these drugs. At the Doha ministerial in 2001 it was decided that the domestic market condition would be waived for these countries, allowing them to import the drugs. The specific terms of this waiver were worked out in 2003. And a week before the Hong Kong ministerial, the WTO decided to make this waiver permanent.

If this decision fundamentally altered the way the WTO is perceived by its critics, it has been a well-kept secret. Director-general Pascal Lamy was forced to admit at the inauguration of the Hong Kong ministerial that the WTO was not the most popular international organisation around.

But the fact remains that the waiver can provide the poorest nations greater access to some essential drugs than they would have had under the original TRIPS agreement. And a closer look at the factors that have contributed to this waiver does reveal a great deal about when, and to what extent, humanitarian considerations can play a role in WTO negotiations.

Ironically enough, the space for such humanitarian gestures is created by a harsh economic reality. When pharmaceutical companies use their patents to recover the costs of their R&D, and more, they almost inevitably price the drugs out of the reach of a section of those who may need them. The poorest AIDS patients in Africa cannot afford the drugs produced by the global pharmaceutical majors.

Once such groups are priced out of the market of the global pharmaceutical majors, these companies theoretically have no reason to worry if someone else supplies these groups the drugs they need. The only concern for global majors would be that the cheaper drugs supplied to these groups could somehow enter the market in the better-off world.

The negotiations on the waiver were thus focused on ensuring the division between the two markets was watertight. And a variety of measures have been built in to ensure that this is indeed the case. While the decision allows all WTO members to import the drugs required for specified diseases like HIV, 23 developed nations have voluntarily given up their right to import drugs under this system.

As they include the richest countries in the developed world, their decision protects the main market for high cost drugs. And this protected space has also grown through decisions outside the WTO framework. The expansion of the European Union has automatically added another 10 countries to this list. In addition 11 other countries have announced that they will use the system only in the event of an emergency.

The separation of the two markets has also not been left entirely to voluntary measures. The decision includes a number of clauses that are designed to prevent the movement of the drugs from the poorer market to the richer one.

The manufacturers supplying the poorer markets are expected to give their drugs a separate shape and colour or, when that is not possible, separate labelling or marking. The importing country is also expected to take measures to prevent the re-export of the imported drugs. And the Council for TRIPS will review every year the working of this system, evidently to ensure that the wall between the two markets is not breached.

The reinforcement of the wall between the two markets brings out the limits of the humanitarian factor in WTO negotiations. It is now quite clear that a human face for the WTO does not include a blind eye to the fundamental economic logic of TRIPS. The markets of the patent holders are to be fully protected.

Care has in fact been taken to ensure that even the principle of patents as the mechanism for financing research and development has not been diluted. The patent holder still has the right to be paid for the authorised copies of the product. The only difference is that the amount to be paid will be decided by the country concerned.

Sadly, and again rather ironically, the price for the wall between the two markets will be paid not so much by the developing world as by the poor in the developed world. If poor HIV infected patients in a developed country cannot afford the high priced drugs available in that country they could be worse off than patients in the poorest parts of Africa. It is tempting to assume that the developed world can ensure that all its patients will always have access to the high priced drugs they require. But this is not always the case.

And with poorer countries in east Europe becoming members of the EU, and hence a part of the high-priced drug market, there is a distinct possibility of poor patients in parts of the developed world being worse off than at least some patients in the poorest parts of Africa.

In other words, in addition to the economic limits to humanitarian considerations, there is also a nation state limit. Once a country decides its interests lie on one side of a debate within the WTO, those within the country who are on the other side of the debate will be left to take care of themselves.

And this is not confined to the issue of patents and public health. India would like to protect a poor farmer by limiting access to the markets of the developing countries. But in the process it might be impoverishing another poor farmer who would benefit from exporting his products to another developing country.

The scars on the human face of the WTO are often the result of actions of national governments. While protesters at the ministerials do help focus attention on the humanitarian wounds in trade relations, the WTO can, on its own, do little to heal them.

Source:The Economic Times

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