Examination of witnesses (Questions 40
- 59)
THURSDAY 3 FEBRUARY 2000
MR DAVID
BATT, MR
JOHN ROBERTS
and MR CHARLES
BRIDGE
40. One of the other questions related to this
one is that the small farmers particularly suffer the most because
of the structure exists at the moment. Is there any provision
within the next couple of years to protect the interests of the
small farmers?
(Mr Bridge) At large or banana producers?
41. I am now talking about at large.
(Mr Batt) As a broader question I would just again
refer—
42. I know that small farmers in India are contributing
to a very great extent to the agriculture of the country and they
are very much concerned about the trade situation where they find
themselves completely excluded from the agreement and they were
actually present in Seattle during last summer.
(Mr Batt) The Special and Differential Treatment available
under the Uruguay Round agreement on agriculture to developing
countries provides a number of exemptions like investment subsidies
and input subsidies available to low income and poor farmers.
So that is one of the examples of a number of the provisions in
the Uruguay Round agreement on agriculture which we believe, on
the basis of the research which I have mentioned, do offer the
flexibility to developing countries and in this case would meet
the particular concerns which Mr Khabra has raised about poor
farmers. This may be an area, chair, where we could try to provide
a slightly more detailed answer separately.[6]
Chairman
43. Yes, the nature of subsidy in India particularly
is a complex one because of course the subsidy comes in the form
of free electricity and water pumps and so on. I do not know whether
that is included in the negotiations for the Seattle Round.
(Mr Roberts) One of the provisions in the Uruguay
Round in the agreement on agriculture is that there can be subsidies
up to a so-called de minimis limit. This limit for developed
countries is five per cent and for developing countries ten per
cent, ten per cent of the value of agricultural output, and within
the ten per cent limit if the Indian authorities think that subsidies
for electricity is what is really important that would count towards
that element of ten per cent.
Chairman: I see what the Indians are
trying to protect. Andrew Robathan?
Mr Robathan
44. I assume you know something about the Marrakesh
Decision.
(Mr Batt) Yes I do.
45. Did you roll your eyes, Mr Batt? What, if
anything, is being done to implement the decision? If nothing,
it could be one word.
(Mr Batt) I would not say nothing. I would say that
we do not see this as a well-conceived decision. It relates to
problems that were anticipated that net food importing countries
would suffer as a result of higher food prices, which we have
already touched on. I think I would make several points. Firstly,
there are factors other than trade that would affect price movements
and have bigger effects, such as the trends in exchange rate movements,
so prices did go up but we do not see it as being essentially
because of these trade measures. The second point is that we see
any movement in prices of food, be it for a combination of reasons
not just liberalisation in the Uruguay Round, as being only one
factor in the broader balance of payments position of the country
concerned. When countries get inter-border balance of payments
problems then we do need to look at ways of addressing that, but
I think food aid, which is what the Marrakesh agreement was talking
about, is not actually an effective way of addressing those broader
balance of payment problems.
46. I do not necessarily disagree with you,
Mr Batt. Was it officially part of the Uruguay Round?
(Mr Bridge) Yes, I think it was.
47. So it is something that people have agreed
to?
(Mr Bridge) Yes.
48. So it needs to be revisited at some stage
if we are not going to implement it?
(Mr Bridge) Yes.
Chairman
49. I am surprised you are not opposed to the
Marrakesh Round because it seems to me to be a serious protectionist
measure.
(Mr Batt) We think that it was a seriously flawed
approach to a problem, but we nonetheless understand why people
were concerned about it at the time.
50. I am just thinking about net food importing
countries. There could be serious distortions if you permitted
this because you would find that you were importing food which
would be to the detriment of their own home produced products
which, of course, benefits some traders in those countries but
undermines the agriculture of their own country.
(Mr Batt) Particularly undermining the poor.
Chairman: And the poor who are usually
in the farming sector. Can we go on to TRIPs, that is Trade Related
Aspects of Intellectual Property Rights in case anyone is in doubt.
Mr Worthington
51. As you know, the Uruguay Round Agreement
was given so that developing and transition countries should have
implemented the Uruguay Round, as far as intellectual property
is concerned, by the end of last month and least developed countries
have got until 2006. In the evidence that has been put to us a
lot of the NGOs say there should be a peace clause or an extension
clause, that those countries have not been given enough time to
implement intellectual property rights as laid down by Uruguay.
Does the Government agree with that?
(Mr Batt) Can I just add one point of detail on the
expiry before turning to the question? The developing countries,
as you say, have until January 2000. The one exemption to that
is that they have until January 2005 with respect to agro-chemical
and pharmaceutical innovations not previously granted patent protection
and the least developed have until 2006. This was one of the parts
of the implementation package which was being worked on at Seattle
and the specific proposal there was for the extension of Article
64 of the TRIPs Agreement which relates to a moratorium on the
use of dispute settlement procedures. That moratorium had been
applied for the first five years. The Government recognises the
genuine problems of a number of developing countries meeting the
obligations and the requirements of TRIPs. I understand there
is a proposed Community position that the moratorium should be
extended for a further period and the Government supports that
proposed Community position.
52. It is a very important issue in terms of
people's access to goods like drugs and seeds. If the impact of
TRIPs is to make such essential goods inaccessible to poor people
then we would be concerned about that. What monitoring is going
on to see what the general impact of the Uruguay Round and TRIPs
is upon poorer people?
(Mr Batt) Can I deal with one or two general points
about the provisions of TRIPs, if I may, before asking Mr Roberts
to elaborate and, in particular, to pick up anything that we can
say about the monitoring point. On pharmaceuticals, there are
two areas that I would draw out: the issues of compulsory licensing
and parallel importing. The existing provisions in TRIPs do give
governments the scope to go ahead with compulsory licensing to
require the holders of patent to grant licences on commercial
terms for local manufacturer and they define the circumstances
in which that can happen quite carefully and one of those circumstances
is national emergency. The provisions are silent on parallel importing
which means they do not preclude developing countries going on
to the world market and obtaining those drugs wherever they can
and what they do in that respect is actually a matter for their
national legislation rather than for TRIPs. Seeds—traditional
varieties can not be patented, as I think is in the memorandum.
I wanted to give that broad background because this is actually
one of the most complex areas in the whole of these agreements
and one which does create a lot of concern.
53. Monitoring the impact?
(Mr Roberts) It is obviously very early to have monitored
the impact of an agreement which is only now coming into force
and for which an extension of the transitional period is likely
to be agreed. Obviously we should be doing this in the future
and to a great extent civil society in developing countries, the
farmers for example, will complain if they feel that they are
being unfairly treated. However, there are perhaps two important
considerations. Firstly, in connection with pharmaceuticals, the
prices of pharmaceuticals are never very transparent. The pharmaceutical
companies vary their prices from country to country and as far
as patented pharmaceuticals are concerned they try to ensure that
there is very limited trade because of the terms which they use
for licensing people to manufacture their patented products in
different countries in different parts of the world. But we are
given to understand that some 95 per cent of the drugs on the
World Health Organisation's list of essential drugs are in fact
not patented. These therefore can be manufactured by generic producers.
The prices of generic drugs are known to be very much lower than
those of the branded drugs of the companies which invented them
in the first place, even after the expiry of patent. So there
is a wide spectrum of prices which are in fact practised for essential
drugs in the world market. A very important practical consideration
therefore for developing countries is to ensure that they are
getting the best available bargain when they purchase these drugs
and I would like to mention in that context an interesting initiative
which UNICEF, and organisations other than UNICEF that we know
about, have taken, namely that of purchasing drugs in bulk from
pharmaceutical companies on behalf of their clients in developing
countries, thereby making these drugs available at the best possible
price for the end user or for the donor if they are to be donated.
54. In fact, if I understood you correctly,
there is no systematic monitoring of the impact of the TRIPs agreement
in Uruguay. Are there no plans for it to be systematically monitored
to ensure that in poor countries both drugs and seeds are available
at prices that do not increase poverty? That is the issue, is
it not?
(Mr Roberts) There are no current plans that we know
of.
55. Who should do that?
(Mr Batt) I think that my initial instinct is to look
to the right point in the multi-lateral system to do it. If we
cannot find the right point then clearly it would be important
for us to come in and think about whether this is something that
we ought to be doing ourselves. So this might be WTO.
56. This is a very controversial area, is it
not? In South Africa with regard to the production of anti-AIDS
drugs there is a feeling that the pharmaceutical companies are
imposing false prices which will deny access to a country riddled
with the problem HIV/AIDS and will deny access to alleviating,
if not curative, drugs. This is a very substantial issue. It is
not just this area; it is the question of seeds as well. What
do you feel about this?
(Mr Batt) I agree with you that it is an extremely
substantial issue. My understanding of the South African case
is that this relates more to provisions of South African domestic
legislation than to the provisions of TRIPs. If I can return to
my earlier point, in the relevant article, Article 31, of TRIPs,
there is scope for compulsory licensing under certain circumstances
and TRIPs as a whole is silent on parallel importing and through
that silence does not preclude it. So my reaction to your point
is, yes, it is important but we need to disentangle within this
what the effect of TRIPs is and what is going on more generally,
what other factors are creating this problem.
57. But there is no one really with the responsibility
for monitoring this. If you take the South African instance, where
I assume mainly American pharmaceutical firms preventing the manufacturers
producing lower cost drugs. What is the means of dealing with
that issue?
(Mr Bridge) Is it not in part for the national Government
concerned to pick it up and to, for example, push that in a future
WTO Round where some of this needs to be looked at?
Chairman
58. Is there not another aspect of this? These
drugs are extremely costly to produce and to undertake the research
and development, and the cost of the drug is normally patented
(in this country anyway) for a period of 16 years and thereafter
it can be manufactured out of patent because the patent runs out
and then of course developing countries can come in. Surely, we
owe it to the pharmaceutical companies, if they are going to carry
on this very detailed and expensive research, to protect their
position?
(Mr Batt) And the patenting rules and inclusion of
minimum patenting standards in TRIPs is designed to strike that
balance between, if you like, the duty which is owed on the one
side and, indeed, the interests of all and the interests of developing
countries in ensuring that that further research goes ahead and,
on the other hand, the needs which developing countries may have
in certain circumstances to proceed with the compulsory licensing
with adequate remuneration for local production. I accept completely
that there is that balance.
Mr Worthington
59. But given some of the health problems being
faced by poorer countries, the standard mechanism of the WTO Round
seems a little inadequate.
(Mr Roberts) May I respond with reference to some
of the collaborative experiences between local governments between
donors and between pharmaceutical companies which are currently
being conducted in different parts of the world, but particularly
in Africa, to combat well-known scourges such as malaria where
pharmaceutical companies under particular programmes provide material
either cost-free or at low prices within the ambit of campaigns
of vaccination to deal with these particular scourges. I think
that is probably one of the better ways of squaring this circle
of reconciling the need for incentive for innovation with accessibility.
I think we do depend, as the Chairman said, on the pharmaceutical
companies to innovate in these areas and to find novel solutions
to the health problems of developing countries and the need to
make these products available and affordable to the health authorities
and to the populations of these countries.
6 The Institute of Development Studies (1999), The
WTO Agreement on Agriculture and Food Security. Back
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