GENEVA--Developing country members of the World Trade Organization have given unenthusiastic reviews to two proposals put forward by the European Union aimed at breaking a WTO deadlock over the issues of access to essential medicines and special and differential treatment for poorer members. Officials told BNA that developing countries are opposed to the EU's suggestion that discussions on the two issues could drag on for the duration of the Doha Round of trade talks, due to end by January 2005. WTO members originally agreed at their Doha ministerial meeting last year to reach a deal on the access to medicines issue and to formulate recommendations on addressing special and differential (S&D) treatment demands by the end of this year.

The EU proposals were presented to a meeting of senior officials from some two dozen key member countries taking place on the outskirts of Geneva Nov. 5-6. The event, hosted by the EU, is in preparation for a WTO "mini-ministerial" in Sydney, Australia later this month.

Deputy United States Trade Representative Peter Allgeier is heading the U.S. delegation in the Geneva talks while the EU team is being led by the European Commission's Director General for Trade M. Peter Carl.

One of the main items at the Sydney meeting will be how to comply with the mandate under paragraph 6 of the Doha Declaration on the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and Public Health.

Paragraph 6 notes the difficulties faced by some developing countries without sufficient domestic manufacturing capacity in utilizing compulsory licensing provisions under TRIPS to override patent rules and secure low-cost generic equivalents from abroad. It calls on WTO members to find an expeditious solution to this problem by the end of 2002.

Under current WTO rules, compulsory licensing can only be used for the domestic production of generic equivalents.

Negative Impact on Cancun Conference

Some trade diplomats have warned that failure to reach a deal on the medicines issue by the end of the year could sour the mood among developing countries and have a negative impact on the WTO's upcoming ministerial conference in Cancun, Mexico next September.

Although members generally agree on the need to make TRIPS provisions more flexible to allow for the import of generic medicines produced under compulsory licenses, the debate has become bogged down in technical issues such as which illnesses and medicines should be covered under the exemption, which countries should be allowed to produce generic equivalents of patented medicines for export, which countries should be allowed to benefit from the mechanism, and whether the TRIPS Agreement should be formally amended to accommodate the mechanism.

In addition, major proprietary pharmaceutical producers such as the United States, the EU, and Switzerland are insisting on the adoption of safeguards which would prevent generic medicines produced under compulsory licenses from being diverted to developed country markets and illicitly sold for huge profits.

EU Proposal on Exemptions

The EU compromise proposal states that any exemption to existing TRIPS rules should be limited to the production of medicines "where the gravity of public health problems afflict developing and least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics." Product coverage would include patented pharmaceuticals and diagnostic test kits needed to address the public health problems mentioned above.

Countries benefiting from the exemption should include least developed countries and developing countries classified as low income economies by the World Bank. Other developing countries would be able to benefit if the low-cost medicines are needed to address situations of "national emergency or extreme urgency." Eligible countries would also have to show that they have no or insufficient manufacturing capacity in the drugs sector (i.e. no plants manufacturing active ingredients) and that it would not be able to create such capacities in the short term.

All WTO members should qualify as producers of the essential medicines, the EU proposed. Some members of the Quad Group (the United States, EU, Japan and Canada) as well as Switzerland had earlier insisted that production should be curtailed to developing countries in order to minimize the possibility of cheap medicines being sold on rich country markets.

Safeguards

As for safeguards, the EU proposed that producers and importers should take necessary measures to prevent trade diversion, including making the low-cost medicines clearly distinguishable through labeling, marking and packaging. In cases of substantial trade diversion where a producing or importing member is accused of not taking adequate measures to prevent such diversion, the matter shall be discussed in the WTO's TRIPS Council, the EU said.

As for the legal mechanism, the EU proposed that members immediately agree to a waiver from WTO rules for the scheme or a moratorium on challenges to the scheme under the WTO's dispute settlement system. Members would then agree on an amendment to the TRIPS Agreement formally recognizing the scheme by the time the Doha Round of trade talks ends in Jan. 2005 at the latest.

Developing country officials said that while the EU initiative was welcomed, several aspects of the proposed exemption system were worriso= me.

A trade diplomat from Brazil--one of the key proponents for the TRIPS/public health declaration in Doha--told BNA that while the EU proposal "could be positive" for the TRIPS/public health debate, "we feel that it addresses some false problems and non-issues."

One example he cited was the provisions on the disease and product coverage of the exemption mechanism. "We think that the Doha declaration already makes it clear as to what should be covered by the mechanism," he declared, citing the declaration's specific reference in the opening paragraph to HIV/AIDS, tuberculosis, malaria and other epidemics.

Concern Over Temporary Solution

Another concern was the EU proposal for a temporary solution in the form of a waiver or moratorium while formal amendments to TRIPS are being formulated for the mechanism.

"They're trying to put this within the framework of the Doha Round timetable, which it shouldn't be," the Brazilian official said. "The declaration calls for a definitive solution by the end of this year, not by the end of the round. What good are deadlines if they can just be pushed aside?"

The EU's proposal on special and differential (S&D) treatment received a decidedly cooler reception from developing countries, who complained it would create further divisions among the WTO membership, according to officials who attended the senior officials meeting. The proposal calls for WTO members to work on a set of S&D principles or guidelines which would provide orientation to a work program on the issue already established within the WTO's Committee on Trade and Development (CTD).

The guidelines will "help organize the debate around the numerous proposals of the African Group and others," the EU said. "It will in doing so make it easier to consider the merits of the specific proposals made, and take decisions, since we will have some broad criteria by which to analyze them."

Many of the WTO's existing agreements contain provisions recognizing the need to offer S&D treatment to developing country members, but developing countries complain that these provisions are often ignored by their rich country counterparts. In response, WTO members agreed in Doha that the CTD to examine ways to make S&D provisions more effective and to consider the legal and practical implications of converting S&D treatment measures into mandatory provisions.

The CTD was instructed to report to the General Council with clear recommendations for a decision by July 2002, but the deadline came and went without an agreement. A new deadline for recommendations was fixed for the end of this year, but recent discussions have revealed little willingness by the Quad to take on any of the proposals in the submissions made by developing country members to date.

Work to Continue in 2003

The EU said that while it was committed to achieving "significant results" on the issue by the end of 2002, "it will be necessary to foresee continued work on (S&D) after this year, in view of the large number and complexity of the proposals, and their connection in many cases with the [Doha Round] negotiations, themselves at various levels of advancement."

Developing country officials said they were not only concerned with the EU's plans to extend the talks beyond the end of the year deadline but also by the EU's suggestion that members should cease resorting to S&D provisions once they reach a certain stage of development and that "graduation" criteria should be developed for some S&D provisions.

The WTO agreements contain no definition of what constitutes a developing country, leaving it to members themselves to decide how to classify themselves. Least developed countries are those classified as such by the United Nations; 29 WTO members, most of them from sub-Saharan Africa, fall under this category.

By Daniel Pruzin, Wednesday, November 6, 2002ISSN 1529-4153 News