The TRIPS Agreement is one of the most controversial agreements of the Uruguay Round in terms of its objectives and consequences. This is clearly shown by many of the references listed in the bibliography (see page 47).
Some authors, in favour of the TRIPS Agreement, argue that the protection of pharmaceuticals by patents should lead to:
• an increase in the flow of technology transfer and direct foreign investment to the benefit of developing countries, so improving dissemination of know-how at the global level;
• an increase in the resources devoted to R&D by local pharmaceutical companies in developing countries, resulting in the development of new drugs more suited to their own needs (patents being regarded as a stimulant to innovation, encouraging inventors to divulge and to market their inventions);
• an improvement in the welfare of the population, resulting from a wider range of better quality products;
• the end of the “brain drain” from developing to industrialized countries caused by the absence of protection for their inventions in their countries of origin.
Other writers, less optimistic or even opposed to the Agreement, respond that:
• The prices of patented drugs and the amount of patent royalties will increase with the strengthening and prolongation of the patent holders’ monopoly.
• There could be a real concentration of production in industrialized countries: multinational firms will be free to export finished or semi-finished products rather than transferring technology or foreign investment directly to developing countries.
• The introduction and strengthening of patents for pharmaceutical products will certainly not lead to an increase in R&D investment by enterprises in developing countries, which have to contend with a lack of technical infrastructure, and financial and human resources. Likewise, the non-patentability of pharmaceutical products existing prior to the TRIPS Agreement gave developing countries the opportunity to progress and to acquire basic technology through reverse engineering before being able to invest in R&D.
• The replacement or adaptation of existing infrastructures set up for the development of imitations of patented products will involve considerable costs.
• The implementation of the Agreement will involve substantial administrative costs.
It is at present very difficult to assess the impact of the TRIPS Agreement in developing countries: the market structure, the situation of the local pharmaceutical industry, the balance of payments, consumer habits, the legal environment, the country’s pharmaceutical policy are all factors that make each State a special case, particularly in its perception of the effects of globalization.
There are, however, a number of points that should be mentioned.
• Intellectual property rights were included in the agenda of the Uruguay Round on the initiative of industrialized countries, following pressure from a variety of economic groups. A number of factors prompted this initiative: firstly, certain countries still refused to sign the Paris Convention, and there was no legal mechanism to constrain States to comply with its provisions. At the same time, freedom of trade and globalization were facilitating imitation of branded* products, resulting in significant financial losses for multinational companies. Finally, in the pharmaceutical sector in particular, the strengthening of intellectual property rights would make it possible to contain the growing competition from the generic drugs industry (through more sustained investment in R&D as a result of patents).
• The previous rounds of GATT negotiations had been confined to discussion of ways to eliminate trade barriers at national frontiers to bring about an optimal expansion in international trade and better use of the world’s resources of wealth. The Uruguay Round, much more ambitiously, set out to harmonize national trade policies, in particular in regard to the protection of intellectual property, thereby enlarging the domain of international trade and the competence of the international organizations active in that domain, and reducing the sovereign national jurisdiction of States. Because the geographical distribution of know-how is concentrated in industrialized countries, this harmonization is likely to strengthen their existing economic superiority, in particular by prohibiting developing countries from copying a new product by reverse engineering, and thereby developing their own technology.
• The Agreement spells out universal standards of protection of intellectual property, which are in practice the standards applied in industrialized countries. It also lays down some general obligations for compliance with these standards. Thus, the Agreement establishes a minimum uniform regime for intellectual property rights applicable to all Members of the WTO, irrespective of the differences in their level of development (apart from the transitional periods). This fact marks a radical break with the earlier GATT strategy of differential and more favourable treatment for developing countries adopted at the Tokyo Round.
• The TRIPS Agreement establishes, in Article 2.1, that the substantive provisions of the Paris Convention (which provides rules related to patents) shall be applicable to all WTO Members. By making this reference, the Agreement forces Member States that have not signed this convention to be bound by it, which amounts to an express obligation to apply a treaty without having signed it.
It is thus very clear that the Uruguay Round negotiations were largely dominated by industrialized countries and that developing countries were constrained to accept commitments sometimes running counter to their economic and social development. According to the World Development Report for 1997, “Poor countries often lose out because the rules of the game are biased against them - particularly those relating to international trade. The Uruguay Round hardly changed the picture.”3
3 UNDP. Human Development Report 1997. New York & Oxford: Oxford University Press; 1997.
It is therefore imperative to be aware of the possible consequences of the WTO agreements, especially the TRIPS Agreement in the area of pharmaceuticals, and to optimize the mechanisms as well as the freedom provided in the Agreement to ensure availability of drugs and fair competition.