General Agreement on Tariffs and Trade(GATT)

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GATT: General Agreement on Tariffs and Trade

1.1 Abstract:

Developed world has a long time complaint that their innovations in medicine and research outcomes have been used by the developing and the least developed countries (LDCs) through unlawful means. As patent rights are not uniform in all the countries and as medicines from developed countries face various tariff and non-tariff barriers while entering the developing and least developed countries, they feel that World Trade Organization (WTO) has a positive role to play.

Thus they framed Trade Related Aspects of Intellectual Property Rights (TRIPS) as regulatory framework where provisions are made that getting a patent in one country will automatically mean a global patent i.e. this patent right would be applicable for all the countries of the world. That means that the patent receiving company does not need to go to countries to countries for patent rights. That further means that no country can object to any patent because the world is now under a new process named ‘globalization’. Poor countries strongly objected to this WTO and TRIPS and organized protest rallies globally to make understand that their respective national economy will be in jeopardy.

In case of medicines, the patents become very highly priced which the poor population would be able to buy, thus public health of the poor countries will be at stake. In response to the increasing global uproar against WTO and TRIPS, Doha Declaration came up in 2000 with some patent waivers for the LDCs up to 2015. The provisions are not enough but the poor countries made a temporary sigh of relief. Bangladesh being the only LDC amongst the 50 very poor countries that has a relatively strong backbone of pharmaceutical industries, supplying 95% of its annual demand of medicines by itself and having cut the multinational pharmaceutical companies’ share in the annual production to only 7%, has initiated to avail this scope of Doha Declaration and has started to export its medicines to 68 countries though on a limited volume.

The question is whether Bangladesh can succeed to gain from the TRIPS regulations or a gloomy future awaits. The present research work tried to focus on this question against the backdrop of global scarcity of raw materials, lack of technology transfer, absence of any bioequivalence test or clinical research facilities, lack of initiative by the government and the trade bodies to get prepared for 2015 etc1. h.

1.2 Survey of Related Work and Literature:

World Trade Organization is helping to maintain the business relationship between the member countries. It has divided the countries into three categories. Least Developed Countries (LDC) is one of them. Bangladesh is one of the LDCs. Some are of opinion that because of being least developed it is getting a lot of opportunities till 2015. An idea regarding the opportunities what these LDCs are availing has been analyzed from different websites of WTO.

TRIPS is now a very important issue for all the member countries of WTO. A lot of paper works has been conducted to find the obligations of TRIPS. From those papers the opportunities of TRIPS for different countries can also be gained.

TRIPS was not adopted in a day. It has a long heritage. The journey for common business started from the end of Second World War. After that GATT has started its journey. The consequence of GATT is WTO and then TRIPS. To get idea about the history of TRIPS the analysis of different papers was reviewed. Annual reports of WTO helped in this perspective.

To understand TRIPS it is necessary to understand the background of TRIPS. So in this thesis paper the history of GATT has been incorporated. To get a clear view regarding GATT different websites have been analyzed thoroughly. Different report on TRIPS in different journal has also been reviewed to get a clear concept about the consequential change in different clauses in GATT and the adaptation of amendment in different clauses in TRIPS.

TRIPS is a result of lot of discussion of different ministers in different countries. After different discussions different amendment has been occurred. To understand the effect and opportunities of TRIPS the changes from each meeting to meeting is necessary to be known. The details of each and every meeting are available from the website of WTO. In this website the meeting minutes of each and every meeting is available which may give an idea regarding the amendment of the member countries of WTO.

In Doha Charter some amendment was made by the member countries. WTO claims that TRIPS may alleviate the business difference between different countries. TRIPS gives opportunities to different sectors of the LDCs, so that they can develop their business at a certain level which will help to compete after 2015. TRIPS gave the pharmaceutical industry of LDCs a lot of opportunities. To get an idea regarding the TRIPS the entire clauses of TRIPS and GATT were studied.

To analyze the opportunities of Bangladesh in this sector getting clear information about the present capacities of pharmaceutical industry in Bangladesh is very significant. To get idea about the industry the most accruable thing can be IMS. Interviews of different personnel from the top management can be a very good resource to understand the trend and situation. It is a matter of easiness for the students that interview of the top personnel are available in different company’s website. Again opinions of experts are available in the magazines and also in the journals.

Before predicting a definite opportunity from TRIPS it is necessary to know about different company’s capacity to produce products according to the export quality. From the website of the companies, their plan to expand the facilities can be easily known. From the view of the company’s top management it can be assumed regarding the consciousness for TRIPS. To build up new facilities huge investment is required. To find out the investment condition right now in Bangladesh an idea regarding the economic situation in Bangladesh is necessary. A lot of investigators worked on the economic prospects of Bangladesh. Publications on this issue are available in the website of CPD, Statistical Bureau, and different magazines on economics.

The main motto of TRIPS is the intellectual property rights of the companies which are discovering anything in the research. Drug (Control) Ordinance 1982 was a milestone for the pharmaceutical industries of Bangladesh. Patent situation or current patent law is also very significant as it has to be matched with TRIPS. To understand the patent situation the patent laws of 1911 has been analyzed as till now it is the backbone of our patent laws. Some amendment has been done to match the patent laws with TRIPS. For this purpose the patent laws in 2007 has been thoroughly analyzed.

As a developing country India is facing a lot of problems from the rules of TRIPS. Bangladesh will be able to enjoy the exemption till 2015. After this period Bangladeshi companies will have to face the same problems. For this it is necessary to know the possible problems to be happened so that remedy from this problem can be prepared. A lot of paperwork is available on this issue.

Not only India and China but also other developing countries in this region have to face the same problems. In this thesis paper the example of Thailand has been discussed. Lots of thesis papers are available. Analysis on the effects of TRIPS on business especially on the pharmaceutical industry is available in different web site. It is also available in different journals which have been studied to find out the effect of TRIPS on this country’s pharmaceutical industry. Bangladesh may have to face same situation after 2015. So this analysis may be helpful to sort out the ladder to be taken by the government and by the companies to protect this industry.

Different economic reports have been found in different Asian journals which was rich with the economic situation analysis of these countries. Again lots of situational analysis on the health sector which has been affected by TRIPS was obtained from different reports of these journals. These journals gave an idea regarding the effect of TRIPS on the pharmaceutical sectors especially in India and China.

Bangladeshi companies face a lot of problems to export the pharmaceutical goods. It is necessary to solve all these problems otherwise pharmaceutical export will not be able to enjoy more share in the total exportation. The problems regarding the country image, bureaucratic way of workings, lack in the expert personnel and others are discussed in different paper works of different personnel.

Contract manufacturing and compulsory licensing are also important issues of thought as there are huge opportunities for Bangladesh to invite MNCs for contract manufacturing. A lot of thesis works, paper work are available about this. From this paper works a lot of solution can be obtained.

Research and development is an important part in pharmaceutical industry. The situational analysis on the situation of research in India has been conducted. In the same time the same thing has been conducted for Bangladesh. To convey this analysis different report on the research facility in India and Bangladesh has been studied.

Comparison in between the situation of Bangladesh and India is also necessary to understand regarding the ladder already taken by Bangladesh and the other ladders to be taken. This analysis has been conducted with the help of a research work done by UNU (United Nation University).

It is necessary for the Bangladeshi companies to know which product will be off-patented within this time period (2015). So a list on the value of products which will be off-patented within 2015 has been added in this thesis paper. Also a short list of molecules has been attached in this thesis paper. These have been taken from different websites on the patent condition in USA as most of the pharmaceuticals patent their products in USA first. It has been found that the patent system in USA is granted by other developed countries also.

TRIPS is now a burning issue for all the member countries of WTO. It has some applicability for all the categories (Developed, Developing and Least Developed Countries) and also some disadvantages for each of them. So a lot of works had to be done on this issue.

1.3 Rational:

There is a long heritage for setting the TRIPS by WTO. In the history of WTO formation first time GATT was applied for the promotion of the global trade between members through a reduction in tariffs. In the consequence of GATT, WTO has been formed and they adapted Trade Related Aspects of Intellectual Property Rights (TRIPS).

1.3.1 GATT: General Agreement on Tariffs and Trade;

An agreement signed in 1947 whose purpose was to promote global trade between members through a reduction in tariffs. The formation of GATT – and its subsequent amendments up to 1994 – laid the framework for the creation of the WTO in 1995. Institutional framework signed in 1948 by 23 nations, including the United States, for the purposes of fostering multilateral trade agreements among members. A basic tenent of GATT was the most-favored nation principle, which provided the best contract terms received by any single nation within the framework. GATT provides a set of rules and principles that were committed to the liberalization of trade between member nations, and the member nations met every two years to negotiate new tariff agreements. As of 1991, 108 nations were participating in GATT, representing over 80% of the total volume of international trade.

1.3.2 WTO: World Trade Organization;

WTO negotiates with the members so that the interests of the members can be attained. It is also named as Globalization. The World Trade Organization deals with the rules of trade between nations at a near-global level; it is responsible for negotiating and implementing new trade agreements, and is in charge of policing member countries’ adherence to all the WTO agreements, signed by the bulk of the world’s trading nations and ratified in their parliaments. Most of the WTO’s current work comes from the 1986-94 negotiations called the Uruguay Round, and earlier negotiations under the GATT. The organization is currently the host to new negotiations, under the Doha Development Agenda (DDA) launched in 2001.

WTO is governed by a Ministerial Conference, which meets every two years; a General Council, which implements the conference’s policy decisions and is responsible for day-to-day administration; and a director-general, who is appointed by the Ministerial Conference. WTO’s headquarters are in Geneva, Switzerland.

The general Agreement on Tariffs and Trade (GATT) was nucleated in 1944 to foster a reduction in tariffs and quotas to arrive at ground rules for an effective trade liberalizing agreement. The GATT came into effect in 1948 and was mainly negotiated in 1947. In the 1970s, this graduated to include in its scope and coverage matters like technical standards and regulations, subsidies, and dumping and government procurement. The Uruguay round between 1986 and 1994 resulted in the formation of the WTO. It elaborated many prior GATT obligations and extended its umbrella to service industries and substantive rules of intellectual property law within the scope of Trade Related Intellectual Property Rights (TRIPS). These agreements and working procedures are expected to build business confidence and become key fact guiding decisions related to trade and investments.

1.3.3 TRIPS: Trade Related Aspects of Intellectual Property Rights;

TRIPS is an international agreement administered by the World Trade Organization (WTO) that sets down minimum standards for many forms of intellectual property (IP) regulation. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994. Specifically, TRIPS described about the requirements that nations’ laws must meet for: copyright rights, including the rights of performers, producers of sound recordings and broadcasting organizations; geographical indications, including appellations of origin; industrial designs; integrated circuit layout-designs; patents; monopolies for the developers of new plant varieties; trademarks; trade dress; and undisclosed or confidential information to be involved in WTO. It is now a day very important for a country to be a member of WTO; otherwise the business can be hampered. TRIPS also specify enforcement procedures, remedies, and dispute resolution procedures.

The TRIPS agreement introduced intellectual property law into the international trading system for the first time, and remains the most comprehensive international agreement on intellectual property to date. In 2001, developing countries concerned that developed countries were insisting on an overly narrow reading of TRIPS, initiated a round of talks. This round of Talks resulted in the Doha Declaration: a WTO statement that clarifies the scope of TRIPS. An example can be set, that TRIPS can and should be interpreted in light of the goal “to promote access to medicines for all.”

1.3.4 The requirements of TRIPS;

TRIPS require member states to provide strong protection for intellectual property rights. For example, under TRIPS:

· Copyright terms must extend to 50 years after the death of the author, although films and photographs are only required to have fixed 50 and 25 year terms, respectively.

  • Copyright must be granted automatically, and not based upon any “formality”, such as registrations or systems of renewal.
  • Computer programs must be regarded as “literary works” under copyright law and receive the same terms of protection.
  • National exceptions to copyright (such as “fair use” in the United States) must be tightly constrained.
  • Patents must be granted in all “fields of technology,” although exceptions for certain public interests are allowed (Art. 27.2 and 27.3 [1]) and must be enforceable for at least 20 years (Art 33).
  • Exceptions to patent law must be limited almost as strictly as those to copyright law.
  • In each state, intellectual property laws may not offer any benefits to local citizens, which are not available to citizens of other TRIPS signatories by the principles of national treatment (with certain limited exceptions, Art. 3 and 5 [2]). TRIPS has a most favored nation clause.

It has been observed that most of the rules enlisted in TRIPS have been taken from different agreement. Many of the TRIPS provisions on copyright were imported from the Berne Convention for the Protection of Literary and Artistic Works and many of its trademark and patent provisions were taken from the Paris Convention for the Protection of Industrial Property.

1.3.5 Access to essential medicines;

Since TRIPS came into force it has received a growing level of criticism from developing countries, academics, and Non-governmental organizations. Some of this criticism is against the WTO as a whole, but many advocates of trade liberalization also regard TRIPS as bad policy. TRIPS’ wealth redistribution effects. And its imposition of artificial scarcity on the citizens of countries that would otherwise have had weaker intellectual property laws, are a common basis for such criticisms. The socialist claimed that TRIPS was moving money from people in developing countries to copyright and patent owners in developed countries

The most visible conflict has been over AIDS drugs in Africa. Despite the role, which patents have played in maintaining higher drug costs for public health programs across Africa, this controversy has not led to a revision of TRIPS. Instead, an interpretive statement, the Doha Declaration, was issued in November 2001, which indicated that TRIPS should not prevent states from dealing with public health crises. After Doha, PhRMA, and the United States and to a lesser extent other developed nations began working to minimize the effect of the declaration.

A 2003 agreement loosened the domestic market requirement, and allowed developing countries to export to other countries where there is a national health problem as long as drugs exported are not part of a commercial or industrial policy. Drugs exported under such a regime may be packaged or colored differently to prevent them from prejudicing markets in the developed world.

In 2003, the Bush administration also changed its position, concluding that generic treatments might in fact be a component of an effective strategy to combat HIV. Bush created the PEPFAR program, which has received approximately $3 billion each year to 2007. Despite wavering on the issue of compulsory licensing, PEPFAR began to distribute generic drugs in 2004-5.

1.3.6 Motive of this research work:

In Bangladesh, garments sector enjoyed the status of the only developed business sector of the country. The situation has been changed after 2005 as the ESP and the quota of USA has been withdrawn. This sector now in faces sharp competition with the cheaper rated textiles from China and India.

Many believe that pharmaceutical sector can be a very prospective sector for Bangladesh. India and China are also most important competitors in this sector too. However, Bangladesh can gain a competitive advantage in this sector if it can cautiously use TRIPS regulations. One objective of this study is to identify those would be cautious moves.

From this thesis work knowledge regarding the real situation of the pharmaceutical industry can be gathered. And the lacking of this sector to cope the opportunities provided by TRIPS can be disclosed. So from this thesis work an idea to improve the current condition of pharmaceutical sector can be evolved, which may help our pharmaceutical industries as well as to enrich the economical condition of Bangladesh.

1.4 Methodology

As the objective of this study is to find out the actual potential of pharmaceutical sector to export the pharmaceutical finished goods, a situation analysis in the time period between January 1983 to May 2007 of the pharmaceutical sector of Bangladesh was done using both quantitative and qualitative techniques keeping in mind that among all the LDCs, Bangladesh is developed in the pharmaceutical sector and can enjoy the opportunity provided by the TRIPS. Thus the regulations of TRIPS, how they evolved and their possible impact were also studied.

WTO has given some opportunity to the LDCs so that they can manufacture the patented medicines without taking license from the originator to maintain the public health and public interest up to the year 2015. How these opportunities might benefit the Bangladeshi pharmaceutical industries were also analyzed comparing the case studies and examples available globally. Procedure followed was to go through different journals, literature, websites and others. The work procedure of this study can be divided into the following stages:

Firstly, a background study on and the chronological changes of GATT, WTO and TRIPS has been carried out from different documents and journals on WTO. As TRIPS has shown its impact on different sectors in different countries, pharmaceutical sector is no exception. Case studies from Indian and Chinese pharmaceutical sectors have been analyzed as those were affected a lot by TRIPS.

Secondly, surveys guided by data generated through the background report and a pilot survey has been conveyed to find out the effect of TRIPS on the pharmaceutical sector on different developing countries. To find out the effects different literature and research works by different institution and personnel were taken under consideration. The annual report of WHO was also reviewed to get an idea about the situation. Reports of WHO from 1999 to 2007 were reviewed cautiously. In this stage we tried to find out the possible effect of TRIPS on the pharmaceutical sector in Bangladesh. Innovation and the main incentives, which play a role in driving the pharmaceutical sector in Bangladesh, were ascertained in this stage.

Economic condition is not a static one rather it is dynamic in nature. Bangladesh has to face natural disasters each year. However, as the economic condition is improving day by day and currently, the GDP growth of Bangladesh is about 6, and as the industrialization of a country is very much dependent on the political, economic and social conditions of a country, so to find out the possible situation on investment a survey on the economic condition also has been performed. To do this the researcher reviewed different publications from CPD, Statistical Bureau and the Democracy Watch.

Though Research and Development (R&D) is very important for the industrial development of pharmaceutical industries, and as in Bangladesh there are very few companies which are maintaining an R&D because most of them are generic companies, the situation of the generic market has been analyzed. For this generic product companies, cautious investigation was also performed to identify the molecules that are going to be off patented. The problems the generic manufacturers from Bangladesh are facing have also been taken into consideration. In this respect, a comparative study of the pharmaceutical industries of India and Bangladesh has been done.

Drug regulations of Bangladesh have a great degree of impact on our pharmaceutical industries. Drugs Act of 1940 and Drug (Control) Ordinance of 1982 were reviewed to find out its effects on the pharmaceutical industry of Bangladesh

TRIPS have given the situation where all the member countries have to maintain the property laws. So patent situations in different countries has been analyzed, especially those of USA, Europe and Japan has been taken under consideration. The patent law of Bangladesh which was adapted in 2007 has also been reviewed to find out what might be the impact of TRIPS on it.

By 2015 a lot of current drugs will be out of patent, a list of such molecule has been made. Reverse engineering can have a role to play at that time. How Bangladesh can adopt reverse engineering to synthesize new generics were compiled through discussion and case studies.

Thirdly, in keeping with the framework for analysis, the study was conveyed to find out the real condition of pharmaceutical industries in relation to R&D. Formal group discussions and informal interviews with the university professors and personnel in Product Development have been conducted.

Bangladesh may enjoy the opportunity of technology transfer. The top pharmaceuticals already developed huge facilities for the export purpose. Further investors are trying to set new facilities for manufacturing world class products. Some got the international certifications; others are in the process to get these. Thus multinational companies may think about Toll Manufacturing as the labor cost of Bangladesh is very cheap than that of other countries. To find out the opportunity of Bangladesh in this sector a lot of data have been analyzed.

In various developed and developing countries, pharmaceutical companies are involved in R&D works in collaboration with different universities. So formal and informal group meetings and interviews were also arranged to come across with the actual scenario in this sector.

The data and information collected as above were compiled and analysis was done.

2.1 Brief history of GATT

The WTO is actually the consequence of the GATT. From the history an idea can be attained that GATT was established on a provisional basis after the Second World War. At that time period there was a wake of other new multilateral institutions, which dedicated to international economic cooperation – notably the “Bretton Woods” institutions.

At that time it was just acting as like as World Bank and International Monetary Fund. These two organizations are the main institutions maintaining the business relationship of all the countries. WTO is trying to maintain the business relationship in such a way so that all the countries can be benefited by the rules. But there are a lot of views regarding their activities that is totally against their activities. According to the socialist, where World Bank and IMF moved to a country in the view of so called helping that country was in a great disaster.

To maintain the international business in a right way these two institutions and the countries engaged in international business observed that tariff was the most significant protection for making business in abroad for the multinational companies. To make an early boost to trade liberalization after the Second World War – and to begin to correct the large overhang of protectionist measures which remained in place from the early 1930s – tariff negotiations were opened among the 23 founding GATT “contracting parties” in 19461.a..

45,000 tariff concessions affecting $10 billion – or about one-fifth – of world trade was the result of the first round of the GATT12. By early – and largely “provisional” – acceptance of some of the trade rules in the draft ITO Charter the signed countries were trying to protect the value of these concessions. They termed this rule as “General Agreement on Tariffs and Trade”. It has been started its journey from January 1948.

Although the ITO Charter was finally agreed at a UN Conference on Trade and Employment in Havana in March 1948 ratification in national legislatures proved impossible in some cases. However problem arose when the United States’ government announced, that it would not seek Congressional ratification of the Havana Charter. They announced at 1950, and then ultimately ITO was effectively dead. Despite its provisional nature, the GATT remained the only multilateral instrument governing international trade from 1948 until the establishment of the WTO.

Although, in its 47 years, the basic legal text of the GATT remained much as it was in 1948, there were additions in the form of “Plurilateral” – voluntary membership – agreements and continual efforts to reduce tariffs. Much of this was achieved through a series of “trade rounds”.

The WHO Model List of Essential Drugs and the under pinning concept were developed in the 1970s to stimulate the rational availability of medicines in developing countries. Essential drugs are those that meet the health needs of the majority of the population; they should be available at all times in adequate amounts and in appropriate dosage forms. The WHO Model List of Essential Drugs enables countries to identify priorities and make their own drug selection.

2.1.1 Progression on GATT Packages;

In the life cycle of GATT, the most important part was the different rounds that were held and in these rounds different decisions have been taken. It was not easy to come to a premise of common interests by so many member countries.

In each and every trade rounds, there was an offer of a package approach to trade negotiations; an approach with a number of advantages over issue-by-issue negotiations. By adapting the rules in GATT all the members could not be satisfied. Some members might face problems regarding any clause of the agreement. Thus that member country asked for removal of that clause or at least to amend the clause. And the leaders took decisions depending on the Former problems, which occurred due to some rules, and regulations and then they amended the problems. It generally took a marathon meeting between the members. None would want to be a loser. Firstly, a trade round allowed participants to seek and secure advantages across a wide range of issues. Second, concessions which are necessary but would otherwise be difficult to defend in domestic political terms can be made more easily in the context of a package which also contains politically and economically attractive benefits. Third, developing countries and other less powerful participants have a greater chance of influencing the multilateral system in the context of a round than if bilateral relationships between major trading nations are allowed to dominate. Finally, overall reform in politically sensitive sectors of world trade can be more feasible in the context of a global package – reform of agricultural trade was a good example in the Uruguay Round.

Tariff was the suppose concern for GATT. At that time international trade was really faring this problem a lot. Most of GATT’s early trade rounds were devoted to continuing the process of reducing tariffs. The results of the Kennedy Round in the mid-sixties, however, included a new GATT Anti-Dumping Agreement. The Tokyo Round during the seventies was a more sweeping attempt to extend and improve the system.

2.1.2 Formation of new Rules to maintain the Trade:

102 countries participated in the Tokyo round and this round was conducted between 1973 and 1979.

The Tokyo Round continued GATT’s efforts to progressively reduce tariffs. The results included an average one-third cut in customs duties in the world’s nine major industrial markets, bringing the average tariff on manufactured products down to 4.7 per cent compared with about 40 per cent at the time of GATT’s creation. Over a period of eight years have been required the tariff reductions phased in involved an element of harmonization, bringing the highest tariffs down proportionately more than the lowest.

However this round also faced a lot of problems also. Nothing was there regarding the measures which can be taken in case of emergency import. From the effect of the GATT we can see that actually the developed countries gained a lot from this by maintaining a lot of non-tariff barriers among them. However the least developed and developing countries failed to take advantages from this that much.

The members who were a part of the GATT agreement were trying to maintain the codes. They include the following agreements:

Subsidies and countervailing measures – interpreting Articles VI, XVI and XXIII of the General Agreement

Technical barriers to trade – sometimes called the Standards Code

Import licensing procedures

Government procurement

Customs valuation – interpreting Article VII

Anti-dumping– interpreting Article VI and replacing the Kennedy Round Anti-Dumping Code

Bovine Meat Arrangement

International Dairy Arrangement

Trade in Civil Aircraft

These codes were not static it was actually dynamic. Depending on the applicability the members of GATT amended and extended the clause of agreements. The member countries adapted the change in Uruguay and formed World Trade Organization (WTO).

Technical barriers to trade, import licensing, customs valuation and anti-dumping, are now multilateral commitments within the WTO Agreement -in other words, all WTO members are committed to them.

Though WTO was stated due to some problems associated with the rules of WTO, it should be agreed that WTO made the international trade easier as tariff was really a big problem in this trade case. By analyzing the effectiveness of TRIPS the following is observed.

The success of GATT in promoting and securing the liberalization of much of world trade over 47 years was really significant. During the 1950s and 1960s the percentage of growth of world trade has been increased by almost 8 percentages on an average. It was due to the reduction of the reductions of tariffs. And the momentum of trade liberalization helped ensure that trade growth consistently out-paced production growth throughout the GATT era. The rush of new members during the Uruguay Round demonstrated that the multilateral trading system, as then represented by GATT, was recognized as an anchor for development and an instrument of economic and trade reform.

The achievement of the Tokyo round was only on tariff reduction. But a difficult time came after that. In 1970s and in the early 1980s, a series of economic recession occurred which forced the government to devise other form of protection in the sections in which a lot of overseas competition started. Governments in Europe & North America started to sign bilateral market-sharing arrangements with competitors because of unemployment and constant factory closure. And these raised a question regarding the credibility and effectiveness of GATT.

In 1980s it has been found that GATT was not actually relevant to the realities of world trade. GATT started in the 1940s. However World Trade has become far more complex and important in 1980s. In the GATT rules there were a lot of limitations. The globalization of the world economy was underway, international investment was exploding and trade in series not covered by the rules of GATT. GATT failed to get any success in case of agriculture where a loophole in the multilateral system as it was heavily exploited. In this case liberalization in agriculture trade became successful but the success rate was very much negligible. In the textiles & clothing sector an arrangement existed at the time of GATT. It was named as Multi Fiber Agreement (MFA). As GATT was not that much successful so GATT members took a decision to reinforce and extend multilateral system be attempted. The consequence was Uruguay Round that led the formation of WTO.

2.2 Start of the Journey of a New Era:

At a ministerial meeting of GATT members they thought something new to start with because GATT failed to support the members for which it was established. The meeting was held on 1982 in Geneva. In that meeting they were trying to launch a major new negotiation. They were emphasizing on the agriculture issue and were trying to sort out the reason of this failure. They set an agenda and they took decision to arrange a meeting in Uruguay. They formed the basis of the Uruguay round negotiating agenda. It was not an easy task to form the basis. It took almost four years of exploring and clarifying issues and pains taking consensus- building, before ministers met in September 1986. They met in Punta del Este in Uruguay. They agreed to launch the Uruguay round there. They accepted a negotiating agenda that gave emphasis on trade in services and intellectual property. And the committee set a dateline for four more years so that they member countries could prepare themselves. In 1988 they reached a stage “Mid Term Review”. The meeting held in Montreal, Canada ad it led the committee for the second stage of the round. They offered some concessions on market access for tropical products. They claimed that these would help the developing countries. They also set a trade policy review mechanisms, which provided for the first comprehensives, systematic and regular reviews of national trade policies and protections of GATT members.

In 1990, the meeting held in Brussels. Earlier the members agreed to the issues; however some arguments arose in this meeting. A requirement to change the rules on agriculture has been raised. So they changed the rules and a comprehensive draft text of the “Final act” which contained legal texts fulfilling every part of the Punta del Este mandate. However following two years, the negotiations lurched from impending failure to prediction of imminent success. The major points of conflict were between USA & Europe communities on services, market access, and anti-dumping rules. Thus they took a decision to establish a new institution. At the end of December 1993 member could finalize the way to market access of the goods & services. Finally on 15th April 1994, the ministers approve the deal. 125 member countries participated in the meeting and they signed in the treaty.

The World Trade Organization is totally different from the set up or from the foundation of GATT. Many people may think that all are same. They may think that WTO is just an extension of GATT. However it is not factual. WTO replaces its predecessor and maintaining to totally a new characteristic.

· GATT was applied on a “provisional basis”. After forty years of the set up of GATT the member countries agreed to treat it as a permanent commitment whereas from the very beginning WTO was permanent and the commitments were full.

· GATT was applicable to trade in merchandise goods whereas WTO covers trade in merchandise goods along with trade in services and trade related aspects of intellectual property.

· If we go through the formation system then we will see that GATT was nothing but an accumulation of some rules. GATT was a multilateral agreement. It was not established through a institutional foundation. GATT maintained a small associated secretariat which and its origins in the attempt to establish an international trade organization in 1940s. However WTO was maintaining a total institutional form.

· In the beginning of its Journey GATT was a multilateral gadget; nevertheless by the 1980s many new agreements had been added of a plurilateral and therefore selective nature. However the agreements, which were signed by the WTO, are almost all multilateral and, thus involve commitments for the entire membership.

It has been approved that the basis for the formation of WTO and GATT was same to make the trade smoother. All the countries signed these treaties were trying to get a better opportunity to raise their trade with other countries. And by adapting with these rules the trade of the world has been increased day by day. The “GATT 1947” existed till the end of 1995, so that all the members got proper time to adapt themselves with the new rules. It also permitted an overlap of activity in areas like dispute settlement. Moreover, GATT lives on as “GATT 1994”, the amended and up-dated version of GATT 1947, which is an integral part of the WTO Agreement and which continues to provide the key disciplines affecting international trade in goods.

The 30th August 2003 Decision of the WTO contains a waiver on the TRIPS requirement that compulsory licensing is predominantly for the domestic market (Article 31), and provides the mechanism through which this can be actualized. In a further attempt, the 06 December 2005 Decision of the WTO transforms the waiver contained in the 2003 decision to be a permanent amendment to the TRIPS Agreement. A minimum of two-thirds of the WTO members is required to ratify this change, for it to become a permanent amendment of the TRIPS Agreement. Until December 2007 that is the deadline for the ratification process, the waiver under the 30 August 2003 decision is in place.

The pre-TRIPS era saw the world divided into groups of nations;

a) Allowing patenting in all fields of technologies8: The developed countries were included in this area. As most of the companies which are involved in the research and development sector are originated from these developed countries so they adopted the patent laws. And their companies were protected from the imitation and other illegal works in those countries. However they lost their business in the third world countries as the prices of the original products were really very high and the imitation of the products available.

b) Having restrictive patent: Developing countries and Least Developed countries were part of this sector. They adopted patent laws in those sectors where they had competitive advantages. However in those sectors that were directly related to public interest government didn’t adopt the patent laws.

Laws providing for process patents in all fields of technologies except for product patents in selected fields such as foods, agrochemicals, drug and pharmaceuticals, chemical entities etc. In addition the term of patents, conditions for compulsory licensing, whether importation should be considered as working of patents, etc. Varied, based n existing national laws. TRIPS attempts to harmonize the IPOR laws by bringing the disparities into focus.

Since the formation of the world Trade Organization (WTO) on January 1, 1995,1 several nations have made significant changes in their national laws governing IPR. Proper understanding and utilization of the IPR laws in various countries would help in the global positioning of pharmaceutical companies.

2.3 The Doha Declaration On Trips And Public Health;

Some governments were unsure of how these TRIPS flexibilities would be interpreted, and how far their right to use them would be respected. The African Group (all the African members of the WTO) was among the members pushing for clarification.

A large part of this was settled at the Doha Ministerial Conference in November 20011.c.

. In the main Doha Ministerial Declaration of 14 November 2001, WTO member governments stressed that it is important to implement and interpret the TRIPS Agreement in a way that supports public health — by promoting both access to existing medicines and the creation of new medicines.

They therefore adopted a separate declaration on TRIPS and Public Health. They agreed that the TRIPS Agreement does not and should not prevent members from taking measures to protect public health. They underscored countries’ ability to use the flexibilities that are built into the TRIPS Agreement, including compulsory licensing and parallel importing. And they agreed to extend exemptions on pharmaceutical patent protection for least-developed countries until 20161.i..

On one remaining question, they assigned further work to the TRIPS Council — to sort out how to provide extra flexibility, so that countries unable to produce pharmaceuticals domestically can obtain supplies of copies of patented drugs from other countries. This is sometimes called the “Paragraph 6” issue, because it comes under that paragraph in the separate Doha declaration on TRIPS and public health.

These flexibilities include:

– Each Member has the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses are granted.

– Each Member has the right to determine what constitutes a national emergency or other circumstances of extreme urgency, it being understood that public health crises, including those relating to HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a national emergency or other circumstances of extreme urgency.

– The effect of the provisions in the TRIPS Agreement that are relevant to the exhaustion of intellectual property rights is to leave each Member free to establish its own regime for such exhaustion without challenge.

Article 31(f) of the TRIPS Agreement says products made under compulsory licensing must be “predominantly for the supply of the domestic market”. This applies to countries that can manufacture drugs — it limits the amount they can export when the drug is made under compulsory license. And it has an impact on countries unable to make medicines and therefore wanting to import generics. They would find it difficult to find countries that can supply them with drugs made under compulsory licensing.

The legal problem for exporting countries was resolved on 30 August 2003 when WTO members agreed on legal changes to make it easier for countries to import cheaper generics made under compulsory licensing if they are unable to manufacture the medicines themselves. When members agreed on the decision, the General Council chairperson also read out a statement setting out members’ shared understandings on how the decision would be interpreted and implemented. This was designed to assure governments that the decision would not be abused.

The decision actually contains three waivers97:

??Exporting countries’ obligations under Article 31(f) are waived — any member country can export generic pharmaceutical products made under compulsory licences to meet the needs of importing countries.

??Importing countries’ obligations on remuneration to the patent holder under compulsory licensing are waived to avoid double payment. Remuneration is only required on the export side.

??Exporting constraints are waived for developing and least-developed countries so that they can export within a regional trade agreement, when at least half of the members were categorized as least developed countries at the time of the decision. That way, developing countries can make use of economies of scale.

Carefully negotiated conditions apply to pharmaceutical products imported under the system. These conditions aim to ensure that beneficiary countries can import the generics without undermining patent systems, particularly in rich countries. They include measures to prevent the medicines from being diverted to the wrong markets. And they require governments using the system to keep all other members informed, although WTO approval is not required. At the same time phrases such as “reasonable measures within their means” and “proportionate to their administrative capacities” are included to prevent the conditions becoming burdensome and impractical for the importing countries.

All WTO member countries are eligible to import under this decision. But 23 developed countries have announced voluntarily that they will not use the system to import: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom and the US.

After they joined the EU in 2004, another 10 countries have been added to the list: Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic and Slovenia.

And 11 more countries said they would only use the system to import in national emergencies or other circumstances of extreme urgency. They are: Hong Kong, China, Israel, Korea, Kuwait, Macao China, Mexico, Qatar, Singapore, Chinese Taipei, Turkey and United Arab Emirates.

After that, several potential exporting countries changed their laws and regulations in order to implement the waivers and to allow production exclusively for export under the compulsory license. By September 2006 Norway, Canada, India and the EU have made the necessary changes.

The 2003 waivers are interim; the ultimate goal is to amend the TRIPS Agreement itself, and a decision to do this was reached in December 2005. The amendment, which is a direct translation of the waivers, enters into force when two thirds of the members accept it.

Arguments against the TRIPS policy emphasized that the agreement would create strong benefits for pharmaceutical firms in advanced countries. Critics expressed concern that temporary patent monopolies would not be effective at stimulating technology transfer or inducing research on diseases that were relevant to patients in developing and least-developed countries for a range of reasons, including the inability of the poor to pay the prices charged by leading pharmaceutical firms.

Recognizing the potential impact of patent monopolies, the WTO later adapted the TRIPS Agreement in four major ways.

First, developing countries and countries in transition from central planning could delay the implementation of TRIPS until 1 January 2000, and some won concessions to delay until 1 January 2005 (permitted under Article 65.4 of the WTO). Least-developed countries were initially given until 1 January 2006 to comply, but this deadline was extended in 2005 during the Doha Round to 1 January 2016.

Second, TRIPS allowed several exemptions under which countries could deny patents: (i) if the invention’s commercialization would harm human, animal or plant life or health; (ii) if the patent covered a specific method for treating humans or animals; and (iii) for certain plant and animal inventions (WHO Fact Sheet 2006).

Third, TRIPS included an exemption called the Bolar Provision that allowed a patented invention to be used for research.

Fourth, the Doha Declaration in 2002 included another important adjustment: A country would be allowed to evoke a “compulsory license” during a period of national health emergency.

This meant that a country could require a pharmaceutical company in another WTO country to provide a local manufacturer with a license under emergency circumstances as long as the manufacturer (or the country) compensated the patent holder with a “reasonable” payment (Loff 2002). This provision was criticized by representatives from least-developed countries as ineffective because of the absence of indigenous manufacturers to which a license could be assigned.

Different Ministerial announcement


20 November 2001

Declaration on the TRIPS agreement and public health1.c.

Adopted on 14 November 2001

1. We recognize the gravity of the public health problems afflicting many developing and least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics.

2. We stress the need for the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) to be part of the wider national and international action to address these problems.

3. We recognize that intellectual property protection is important for the development of new medicines. We also recognize the concerns about its effects on prices.

4. We agree that the TRIPS Agreement does not and should not prevent members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO members’ right to protect public health and, in particular, to promote access to medicines for all.

In this connection, we reaffirm the right of WTO members to use, to the full, the provisions in the TRIPS Agreement, which provide flexibility for this purpose.

5. Accordingly and in the light of paragraph 4 above, while maintaining our commitments in the TRIPS Agreement, we recognize that these flexibilities include:

In applying the customary rules of interpretation of public international law, each provision of the TRIPS Agreement shall be read in the light of the object and purpose of the Agreement as expressed, in particular, in its objectives and principles.

Each member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted.

Each member has the right to determine what constitutes a national emergency or other circumstances of extreme urgency, it being understood that public health crises, including those relating to HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a national emergency or other circumstances of extreme urgency.

The effect of the provisions in the TRIPS Agreement that are relevant to the exhaustion of intellectual property rights is to leave each member free to establish its own regime for such exhaustion without challenge, subject to the MFN and national treatment provisions of Articles 3 and 4.

6. We recognize that WTO members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPS Agreement. We instruct the Council for TRIPS to find an expeditious solution to this problem and to report to the General Council before the end of 2002.

7. We reaffirm the commitment of developed-country members to provide incentives to their enterprises and institutions to promote and encourage technology transfer to least-developed country members pursuant to Article 66.2. We also agree that the least-developed country members will not be obliged, with respect to pharmaceutical products, to implement or apply Sections 5 and 7 of Part II of the TRIPS Agreement or to enforce rights provided for under these Sections until 1 January 2016, without prejudice to the right of least-developed country members to seek other extensions of the transition periods as provided for in Article 66.1 of the TRIPS Agreement. We instruct the Council for TRIPS to take the necessary action to give effect to this pursuant to Article 66.1 of the TRIPS Agreement.


17. We stress the importance we attach to implementation and interpretations of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) in a manner supportive of public health, by promoting both access to existing medicines and research and development into new medicines and, in this connection, are adopting a separate declaration.

18. With a view to completing the work started in the Council for Trade-Related Aspects of Intellectual Property Rights (Council for TRIPS) on the implementation of Article 23.4, we agree to negotiate the establishment of a multilateral system of notification and registration of geographical indications for wines and spirits by the Fifth Session of the Ministerial Conference. We note that issues related to the extension of the protection of geographical indications provided for in Article 23 to products other than wines and spirits will be addressed in the Council for TRIPS pursuant to paragraph 12 of this declaration.

19. We instruct the Council for TRIPS, in pursuing its work programme including under the review of Article 27.3(b), the review of the implementation of the TRIPS Agreement under Article 71.1 and the work foreseen pursuant to paragraph 12 of this declaration, to examine, inter alia, the relationship between the TRIPS Agreement and the Convention on Biological Diversity, the protection of traditional knowledge and folklore, and other relevant new developments