International Business and Political Economy

D. Basu, V. Miroshnik

• Publisher: Palgrave Macmillan
• Year: 2015
• ISBN:
  9781137474865
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

This book is divided up into three sections. The first deals with the problem of the World economy and the most important issues affecting the World economy. The second analyses problem mainly affecting the developed countries. The third analyses the issues in the developing countries particularly in the BRIC countries.

1

World Trade Organization and World Economic Architecture

Since the Doha meeting in November 2001, the WTO has started a round of negotiations on new agendas. The opposition of the developing countries, particularly India, has been neutralized. A careful analysis will show these meetings are nothing but a series of defeat and collective suicide of the developing countries.

In theory, the WTO, with 142 members including 47 African countries, operates by consensus. All countries have the right to participate in negotiations affecting them. In practice, however, key decisions, including formulation of documents presented as ‘consensus’ positions, take place in smaller informal meetings that are closed or unannounced. These meetings involve primarily the rich countries and sometimes representatives of a few key developing countries. Even when meetings are open, India, African and other developing countries are often unrepresented simply because they do not have enough personnel to send to many simultaneous meetings (www.ictsd.org/downloads/2008/06/dsu_2003.pdf). The unspoken rule is that if a country is not present or does not speak up at a meeting, it is considered to support the ‘consensus’ later presented by WTO staff. Even when there is vocal dissent, the positions of developing countries are often totally excluded from the emerging statements. On October 27, 2001, the chairman of the General Council of the WTO presented final draft texts for the Doha meeting of trade ministers. In principle, points of disagreement are supposed to be highlighted within brackets in the text. But the final text simply omits almost all areas of disagreement. As the Nigeria delegation commented, ‘The text generally accommodates in total the interests of developed countries while disregarding the concerns of the developing and least developed countries.’ The analysis given below shows the areas that were discussed and the results (www.ictsd.org/downloads/2008/06/bown-slides.pdf).

Issues on public health

Patent rights, by granting temporary monopolies to drug manufacturers, keep drug prices and company profits up. As a result, the pharmaceutical industry has higher profit rates than any other major industrial sector. In 1994 the World Health Organization (WHO) agreement on ‘trade–related aspects of intellectual property rights’ (TRIPS) mandated that member countries bring their laws into accord with restrictive standards that maximize the rights of patent holders. Both the Nobel Prize winner Joseph Stiglitz and Muchkund Dubey, India Chief Negotiator to the 1994 Treaty in Uruguay, have remarked that the 1994 agreement was ‘unequal’ and ‘driven by commercial interests’ (naosite.lb.nagasaki-u.ac.jp/dspace/.../KJ00004433185.pdf). The agreement does include the option for countries to use generic alternatives to patented drugs in emergencies, as the United States threatened to do recently to bring down the price of the patented antibiotic Capra. In practice, however, using this option requires strong political will, economic clout, and high–powered lawyers to face up to pressure from drug companies and their home governments. Even though South Africa forced the drug companies to back down on a court case on the issue of HIV/AIDS drugs in April 2001, the intimidation factor is still extremely powerful. While Brazil, India, and Thailand have aggressively used generic drugs to push down costs, despite US pressure, only a few African and other developing countries have taken hesitant steps to do so (thomsonreuters.com/products/ip ... /04 ... /newport-deals.pdf).

Developing countries have proposed a clear declaration from the WHO meeting that ‘Nothing in the TRIPS agreement shall prevent Members from taking measures to protect public health.’ While not changing the text of the existing agreement, such an explicit statement would make it much easier for developing countries to take advantage of the loopholes in TRIPS. The USA, Switzerland, and other rich countries have opposed this statement, and have proposed a weaker wording that sounds similar but would mean little change in the status quo.

The rich countries are also offering to change the deadline for patent laws compliance by ‘least developed countries’ from 2006 to 2016. But by applying only to ‘least developed countries,’ this would exclude precisely those developing countries most able to produce and export generic drugs, including Brazil, India, and such African countries such as Cote d’Ivoire, Ghana, Kenya, Nigeria, and South Africa (http://icdasecretariat.tripod.com/wtoimpactlist/).

Issues on agriculture

Trade liberalization, its proponents promise, will bring benefits to all countries. The World Bank, for example, calculates that ‘full’ trade liberalization could bring between $200 billion and $500 billion in additional income to developing countries (fpif.org/africa_and_the_world_trade_organization_the_issues_in_brief). First, these forecasts are just as good as astrological forecasts, as they are nothing but assumptions build upon assumptions. In practice, the rich countries take full advantage of the openings they press on developing countries, while failing to open their own markets. This is particularly clear in agriculture, where agricultural subsidies to farmers in the USA, Europe, and Japan rose to almost $1 billion a day –more than six times the amount these countries provide in development assistance (www.globalpolicy.org/global-taxes/27731.html).

Together with other measures such as tariffs (Japan has 500 percent tariffs on imports of rice) and quotas, these subsidies make it difficult for developing countries to compete in rich country markets (www.nytimes.com/2003/08/10/opinion; www.ers.usda.gov). Even more damaging, they allow agricultural exports from the rich countries to drive small farmers out of business even in their home countries. This threatens domestic food security as well as undermining export potential. The previous Uruguay Round of trade negotiations that ended in 1994 promised greater market access in the rich countries for developing countries’ exports. This has not happened (www.ces.ncsu.edu/depts/agecon/trade).

Developing countries wanted this failure to be addressed before they accept another round of negotiations. However, their request fell upon deaf ears. The Doha declaration only mentioned abolition of export subsidies but very little in detail about various tariffs and non-tariff restrictions on imports, production subsidies, and price–supports in most developed countries that cause unfair trade advantages against the farmers of developing countries both in their exports and domestic markets (www.who.int/intellectualproperty; www.tni.org/archives/reports/wto).

New issues for negotiations

Agriculture is only one example of the many trade sectors in which developing countries have not benefitted as promised from previous agreements. They wanted a comprehensive reevaluation of existing agreements before starting up a new series of complex negotiations on additional sectors. They wanted the WHO to consider the empirical evidence on benefits and damages. They also want to remedy the difficulties they have faced in setting up legal and administrative systems for implementation of trade rules. In short, they want to address the systematic imbalance that ensures that rich countries benefit disproportionately, while the poor countries’ ‘development deficit’ only grows (www.epi.org/publication/ib233).

Developing countries have identified at least 104 specific ‘implementation’ issues they want to address. A few examples include the US use of ‘anti-dumping’ barriers to restrict exports of steel from developing countries, including India, the impact of lower industrial tariffs in devastating domestic industries in many developing countries, and the failure of the rich countries to provide adequate technical assistance to enable developing countries to comply with trade regulations and compete effectively (www.uncsd2012.org/futurewewant.html; www.fao.org/docrep/w5830e/w5830e0f.htm). Developing countries have also led a fight to oppose the use of intellectual property rights to patent life forms, a trend that threatens developing country control over genetic stock vital for agricultural production.

The bottom line is that while developing countries have been forced into opening their markets, allowing cheaper imports to undermine domestic agriculture and industry, rich countries have failed to lower their own trade barriers, which cost developing countries some $100 billion in lost opportunities. Instead of addressing these concerns, the rich countries and the WHO secretariat have pressed for a new round while offering practically nothing to address these implementation issues (www.iccindiaonline.org/reports/Peterson_Report.pdf).

The agenda of the new round accepted by the rich countries includes extending WHO negotiations to include matters related to the policies of countries for regulating investment, competition, transparency in government purchasing, and trade facilitation (such as customs procedures). The effect, should negotiations be completed on these topics, would be to make even larger areas of economic life in all member countries subject to complex WHO regulations. As in the agreements already in place, developing countries are at a particular disadvantage in defending their interests in negotiating or implementing such agreements. Developing countries have repeatedly voiced their disagreement with proposed consensus statements. The draft declaration presented in Doha simply ignored these disagreements (www.wto.org/english/thewto_E/understanding_E.pdf).

All previous trade agreements, including the Uruguay Round concluded in 1994, recognize in theory that developing countries have disadvantages that may warrant ‘special and differential treatment.’ In other words, these countries may and should be granted better market access, be allowed greater flexibility in implementing trade rules, and be allowed to sign agreements with developed countries that do not require full ‘reciprocity’ (www-wds.worldbank.org/servlet/297990018213149971x.pdf).

The Uruguay Round assumed that such treatment would be very temporary, and that developing countries could quickly adopt the general standards after brief transition periods with the aid of technical assistance from rich countries. The catch was and is that almost all the ‘special and differential treatment’ provisions were not mandatory but instead dependent on the political will of the rich countries to implement them. As a result they have rarely been implemented. Developing countries have demanded that the non–application of special and differential treatment provisions should be reviewed, and that they should be mandatory and binding on developed countries (frankackerman.com/.../trademodeling/Shrinking_Gains_Trade.pdf). The draft declaration for Doha does include a commitment for a committee to study existing provisions for special and differential treatment and consider the option of making some of them mandatory. This commitment, however, falls far short of the extensive review developing countries regard as essential.

2

Patent Laws and the Developing Countries

The levels of tension between rich and poor countries are now at even higher levels than in Seattle. Instead of taking the opportunity for dialogue, rich countries have offered little or nothing to address the concerns of the developing countries. The poor are asked to accept the agenda whether they like it or not and to swallow their rage as rich countries, claiming to represent global interests, once again impose their minority views. On the Draft Declaration on Intellectual Property and Access to Medicines, there were two options (www.who.int/intellectualproperty/topics/ip/tHoen.pdf):

Option 1

Nothing in the TRIPS Agreement shall prevent Members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement shall be interpreted and implemented in a manner supportive of W.H.O. Members’ right to protect public health and, in particular, to ensure access to medicines for all. In this connection, we reaffirm the right of W.H.O. Members to use, to the full, the provisions in the TRIPS Agreement which provide flexibility for this purpose (www.who.int/intellectualproperty).

Option 2

We affirm a Member’s ability to use, to the full, the provisions in the TRIPS Agreement which provide flexibility to address public health crises such as HIV/AIDS and other pandemics, and to that end, that a Member is able to take measures necessary to address these public health crises, in particular to secure affordable access to medicines. Further, we agree that this Declaration does not add to or diminish the rights and obligations of Members provided in the TRIPS Agreement (apps.who.int/medicinedocs).

While the difference in language seems small to the non-specialist, Option 2, aggressively pushed by the USA and Switzerland, makes little change to the status quo. In contrast, Option 1, advocated by the developing countries, as well as nongovernmental groups, clears the way for more effective use of TRIPS safeguards on public health to make drugs available to those who need them. The broader title ‘Public Health’ is the one favored by developing countries. On November 1, Harvey Bale, director general of the International Federation of Pharmaceutical Manufacturers Associations (IFPMA), denounced Option 1 as ‘nutty’ and said it would destroy the industry (www.africafocus.org/docs01/wto0111.php). The same day, however, the European Parliament passed a resolution affirmed their ‘clear and unambiguous support for the position of the developing countries,’ and in particular the wording that ‘nothing in the TRIPS agreement must be used to prevent W.H.O. members from taking measures to protect public health.’ At the end in Doha, Option 2 was accepted thereby undermining the vital interests of the developing countries on public health (www.ictsd.org/2008/08/ip27oct.pdf).

The Trips agreement requires developing countries like India must become compliant with product patents rather than process patents. The worst affected would be the patients in India and in all poor countries that depend on the cheap generic drugs manufactured in countries like India, Brazil, and South Africa.

The Indian government is going far beyond what is required under WTO rules. The patent amendment bill proposes to extend patent protection to new uses of known drugs, a level of protection not required by the TRIPS agreement, and one that could allow foreign pharmaceutical companies to maintain monopoly control over a drug long after their original patent expires. In addition, the new legislation proposed by the Indian government and some of its elements as ‘TRIPS-plan clauses’ do not fully take advantage of flexibilities available under TRIPS in order to safeguard accessibility and availability of drugs and medicines. Most notably, the bill does not fully incorporate the August 30, 2004 decision of the TRIPS Council on aiding countries without manufacturing capacity to access medicines, since it makes the granting of compulsory licenses for export purposes contingent upon the existence of a compulsory license for importation in the purchasing country. This could make it impossible for the less developed countries (LDCs) to import drugs from India. Since LDCs do not ...

Table of contents

• Cover
• Title
• Introduction
• 1  World Trade Organization and World Economic Architecture
• 2  Patent Laws and the Developing Countries
• 3  Free Trade or Trade Management
• 4  A New Reserve Currency
• 5  Doha Climate Talk of the UN: Science vs Market
• 6  Economic Policy in the Developed Word before 2008
• 7  The Economic Crisis of 2008: Causes and Solutions
• 8  Financial Stability and the International Monetary Fund
• 9  The Greek Tragedy and Its Lessons
• 10  Russian Reforms and Its Consequences
• 11  Economic Reforms in India
• 12  Privatization
• 13  Privatized Pension
• 14  Inflation in India
• 15  Labor-Market Reforms in India
• 16  Privatization of Electricity
• 17  Economic Reforms in China
• 18  Industrialization and Land Question
• 19  Evaluation of the Millennium Goals of the UN for Africa
• 20  Economic Roots of the Middle-East Crisis
• References
• Index