Creation of the World Trade Organization
The World Trade Organization (WTO) is the international organization dealing with rules of trade between nations. Although the WTO became officially operational only in January 1995, it is the successor to the GATT multilateral trading system founded in 1947. In becoming Members of the WTO, countries undertake to abide by its rules. As of 30 November 2000, the WTO counted 140 Members.
The WTO is charged with setting the legal ground rules for international trade. Its objectives are to promote: (1) non-discrimination (2) progressive liberalization of barriers to trade (3) predictable policies and transparency (4) competition and (5) special provisions for developing countries.
In joining the WTO, Members adhere to 18 specific agreements annexed to the Agreement establishing the WTO. They cannot choose to be party to some agreements but not others (with the exception of a few “plurilateral” agreements that are not obligatory). Of greatest relevance to the health sector are: the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS); the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS); the Agreement on Technical Barriers to Trade (TBT); the General Agreement on Tariffs and Trade (GATT); and the General Agreement on Trade in Services (GATS).
Of these agreements, TRIPS is expected to have the greatest impact on the pharmaceutical sector. The TBT Agreement should be of particular concern to producing countries, since its implementation may affect export markets.
Implementation and dispute settlement
The WTO Agreement is a treaty that creates international obligations among its Members. These obligations include refraining from taking actions that are inconsistent with the agreement, and implementing certain provisions via national legislation.
The various parts of the WTO Agreement, including the TRIPS Agreement, require that such national legislation embodies certain specific standards. However, in many areas, the WTO Agreement affords considerable discretion in how its obligations are implemented. This discretion, combined with the potential impact of national legislation on health, make it imperative that health officials work closely with other parts of government, such as the trade department, and use top-level legal, trade and pharmaceutical expertise when legislation is being drafted. (See Box 1.)
Disputes can arise when countries differ in their interpretation of the WTO Agreement. The WTO provides a dispute settlement process that may proceed from a consultation phase, to the establishment of and decision by a dispute settlement panel, and appeal to the Appellate Body. Trade sanctions may only be imposed if the dispute settlement process has run its course and the losing country has failed to comply with the decision made. Thus, WTO Members may not unilaterally impose trade sanctions based on alleged failures to comply with TRIPS.
Box 1 - Points for policy-makers
q TRIPS establishes intellectual property standards for WTO Members, historically based on the standards of developed countries.
q TRIPS requires patent protection for all products and processes, with a minimum duration of 20 years from the original date of filing, without any special consideration for pharmaceuticals.
q The TRIPS Agreement permits Members some discretion in enacting and amending their laws and regulations, which can help promote public health goals.
q When establishing standards of patentability for pharmaceuticals countries should consider the implications for health of those standards. Standards which are too broad may lead to inappropriate extension of patent life beyond the period required by TRIPS.
q WTO free trade provisions can stimulate generic competition and reduce the prices for off-patent drugs, but TRIPS may also significantly delay the introduction of new generic drugs, depending on the way in which national legislation is designed and implemented.
q Developing countries should be cautious about enacting legislation more stringent than the TRIPS requirements (“TRIPS-plus”).