Rich Country Protectionism Puts WTO on the Slow Track
Knight-Ridder/Tribune Media Services, November 16, 2001
"Free trade" ideologues scoffed at the Teamsters and turtles that converged on Seattle two years ago, protesting the WTO's disregard for the environment and labor. The WTO was the last best hope for the world's poor, they said.
But the rules of the WTO are, by any honest accounting, a net loss for the developing countries of the world. In fact, that is one of the main reasons for the lack of progress at the ministerial meeting just concluded in Doha, Qatar: these countries are beginning to defend their interests.
It is ironic but fitting that one of the major sore points between North and South was disagreement over "intellectual property rights." A compromise was reached at Doha, but it will by no means resolve this contentious issue. The WTO has presented itself as an organization dedicated to "free trade," yet its rules on intellectual property—for example, patents—constitute the most costly and dangerous form of protectionism in the world.
If we add up the cost of this protectionism to developing countries, it runs into the tens of billions of dollars annually—perhaps even more. Even if the United States, Europe, Japan, and other rich countries were to open up their markets beyond anyone's expectations to developing countries' exports, it would not make up for their losses due to foreign intellectual property claims.
A growing number of prominent economists have begun to see this protectionism as unfair, and inconsistent with the free trade agenda that most of the profession supports. These economists include Joseph Stiglitz, winner of this year's Nobel Prize; Columbia University's Jagdesh Bhagwati; and senior economists from the World Bank.
From an economic point of view, monopolies created by patents or copyrights are analytically the same as the distortions created by tariffs or import quotas. The main difference is that patent monopolies raise the price of the protected product by many times more than a typical tariff. So it is only natural that economists would oppose rules that extend these government restrictions on international competition, especially in an organization supposedly dedicated to spreading the benefits of "free trade."
On the other side are trade officials from the United States, Switzerland, Japan, and other nations that are home to major players in the pharmaceutical industry. Much to their shame, these officials have sought to limit as much as possible the right of developing countries to increase access to essential medicines through generic competition.
The life-and-death consequences of this protectionism have become clear in the last few years, as it became known that the anti-AIDS drugs that keep people alive in the US for $10,000 a year are available in generic form for less than $350. In the last three years, the US government and pharmaceutical companies have three times been forced by international embarrassment to abandon attempts to keep these generic drugs from people in developing countries—some 36 million of whom have HIV or AIDS.
The most recent instance was a case at the WTO itself. In January the Clinton administration challenged Brazil’s laws dealing with the manufacture and import of generic AIDS drugs. These laws formed an important part of Brazil’s remarkably successful AIDS treatment program, which has cut by half the number of AIDS-related deaths there in recent years. The Brazilian government stood firm, and Washington dropped its case in June.
The compromise at Doha did not change the WTO's legal language on pharmaceuticals, but offered a political declaration that is thought to make it easier for developing countries to use generic drugs for health emergencies. But there is no saving a structure that is rotten at its foundations. Even if we were to fix TRIPS (Trade Related Aspects of Intellectual Property Rights), there is still TRIMS (Trade Related Investment Measures) and the GATS (General Agreement on Trade in Services). All of this alphabet soup has the same basic function: to limit the development options available to representative governments, and subordinate the needs of developing countries to those of transnational corporations and banks.
It has become a truism that the WTO must go forward, because the poor and the weak need a "rules-based system" for international commerce. But that depends on the rules. There may be a way to make expanding international trade and investment serve the needs of humanity, but it will not be found within the World Trade Organization.