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Protectionism Trumps Free Trade At The WTO |
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by Mark Weisbrot
(No verified email address) |
09 Sep 2003
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A patent monopoly is very much like a tariff except that it is collected by a private company, rather than a government. Like tariffs, patents cause economic distortions and inefficiency, in addition to redistributing income...Here in the world's richest country, the waste and inefficiency of the patent system has spun so far out of control that we cannot even afford to pay for prescription drugs for our elderly. |
"God gave me my money," declared John D. Rockefeller in the audacious style of the robber barons who ruled America in the late 19th century. But nowadays when the rich amass huge fortunes at the expense of everyone else, and use their political clout to rig the rules of the game, they have more sophisticated justifications. Increasingly, these take the form of economic arguments -- generally flawed ones.
The World Trade Organization is bringing ministers from 146 countries -- as well as many non-governmental organizations -- to the resort city of Cancun, Mexico this week. One issue that almost collapsed these negotiations before they started is international trade in pharmaceuticals. On one side are most developing countries and humanitarian groups such as Doctors Without Borders, who want poor people to have access to cheap, generic, essential medicines. Against this proposition stand the big pharmaceutical companies, backed by their governments in the United States and Europe. They want U.S.-style patent laws enforced throughout the world, as much as possible.
The conventional wisdom is that the advocates for poor people have moral and political arguments on their side, but the drug companies have powerful economic arguments. Because of this widespread perception, the negotiations between the two sides are seen -- or at least reported in the media -- as a legitimate process designed to reach a balance that is in the public interest.
But as any economist knows, the strongest economic arguments are on the side of Doctors Without Borders. A patent monopoly is very much like a tariff except that it is collected by a private company, rather than a government. Like tariffs, patents cause economic distortions and inefficiency, in addition to redistributing income.
And since patents can raise the price of medicines by several multiples of 100 percent, they are often tens or even hundreds of times more inefficient than tariffs, which raise the price of traded goods such as orange juice or steel by a small fraction of these amounts. Just look at the anti-retroviral drugs that are used to treat HIV/AIDS: the patent-protected price is over $8,000 a year, while the generic equivalent costs less than $300.
Economists who are consistent with their belief in free trade -- for example Columbia University's Jagdish Bhagwati, one of this country's leading international economists -- oppose the use of the WTO to enforce patent monopolies. This makes sense: if you really believe in free trade, you would want free international trade in medicines, where the cost of protectionism is higher than in almost any other industry.
This issue, more than any other, shows how inaccurate and misleading it is to describe the WTO (or the proposed Free Trade Area of the Americas, or NAFTA) as a "free trade" agreement. In fact, the World Bank's own research shows that developing countries stand to lose more from the implementation of the WTO's rules on intellectual property (e.g. patents and copyrights) than they would gain from complete market access to the rich countries for all of their exports. In other words, the protectionism that these agreements lock in for pharmaceutical and other special interests is more significant, from a purely economic point of view, than their removal of remaining trade barriers by the developed countries.
The pharmaceutical companies contend that their profits must be protected from international generic competition, or there will be no incentive to develop new drugs. But clearly this is not true in the developing world, where this research does not take place. And even in the United States, where about half of all biomedical research is already funded by government and non-profit sources, it is a dubious argument. Here in the world's richest country, the waste and inefficiency of the patent system has spun so far out of control that we cannot even afford to pay for prescription drugs for our elderly.
An agreement was reached at the end of last month, which would allow some more leeway for some developing countries to import generic drugs, thus saving the Cancun ministerial meeting from collapse over this issue. But there is no reason for developing countries to trade away their rights to free trade in medicines. Stripped of its flawed economic arguments, the use of the WTO to force U.S.-style patent laws on the rest of the world can be seen for what it really is: protectionist greed, on a scale that would make our 19th century robber barons blush.
Mark Weisbrot is co-Director of the Center for Economic and Policy Research, in Washington, DC (www.cepr.net).
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Comments
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Re: Protectionism Trumps Free Trade At The WTO |
by bello
gm_bello (nospam) yahoo.com (unverified) |
Current rating: 0
10 Sep 2003
Modified: 29 Sep 2003 |
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my brother make una no go for hiyaoooooooooooooooooooooooooooooooooooooooooooooooooooo |
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Europe, U.S. Are Bully-Boys Of World Trade, NGOs Charge |
by Jim Lobe
(No verified email address) |
Current rating: 0
10 Sep 2003
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WASHINGTON -- Developing countries should not be fooled by the European Union's (EU) "development-friendly" rhetoric, which generally compares favorably to the more aggressive positions taken by the United States in international trade negotiations, according to a new report by researchers associated with several non-governmental organizations released Tuesday, on the eve of this week's World Trade Organization's (WTO) ministerial meeting in Cancun, Mexico.
In fact, just like Washington, the EU frequently resorts to "inappropriate tactics"--from outright bullying to excluding delegates from developing countries from participating in key informal meetings--in pursuit of its own commercial interests, according to the new report, entitled "The Cunning Bully: EU Bribery and Arm-Twisting at the WTO (http://www.corporateeurope.org/cunningbully/index.html)."
"Rather than supporting the positions of developing countries," according to Steven Kelk, a researcher at Corporate Europe Observatory (CEO - http://www.corporateeurope.org/) in Amsterdam, "the European Union time after time bullies these nations with self-serving power politics aimed at furthering its ambitions. Cancun could well become an arm-twisting and dirty-tricks cess-pit."
This week's meeting, which begins Wednesday and is scheduled to run through Sunday, is designed to advance a new round of global trade negotiations in a variety of sectors that was launched in November, 2001, in Doha, Qatar.
While WTO and EU officials have called for the new set of talks to serve as a "development round" focused on the reform of trading rules to benefit poor countries, trade officials from developing nations and non-governmental organizations (NGOs) that support them are concerned that the industrialized nations in North America and Western Europe will hijack the agenda in pursuit of their own narrow interests, particularly by preserving, for example, certain kinds of farm and other subsidies that make it impossible for farmers in developing countries to compete.
At the same time, rich countries are hoping to establish new rules for trade and investment in other sectors that will enable them to dominate markets in poor countries.
The United States has a long-established reputation for tough bargaining in global trade negotiations, particularly under the administration of President George W. Bush, which has threatened to economically blacklist WTO members that do not toe its line and has even forced governments to withdraw specific negotiators whom Washington deemed uncooperative, according to the new report.
On the public-relations front, the EU has a far more-favorable image. But, according to the report's author, Fatoumata Jawara, that image is undeserved. While more subtle, the EU's "carrot and stick" negotiating behavior is no less problematic for developing nations, Jawara argues.
She quotes one developing country negotiator as saying: "Both the United States and the (EU) trade negotiators take us to the slaughter house at the end of the day, the latter might be more subtle and polite about it, however, the end result is the same...we get slaughtered. I do prefer dealing with the U.S. ...at least you know exactly where you stand with them."
EU negotiators routinely offer inducements like preferential trading agreements and financial or aid incentives to divide developing countries and bring them into line, according to the report, which also stresses how the EU gets around the WTO's formal decision-making process--which provides one vote to each of its 146 members--by calling unofficial meetings or "consultations" of some members whose purpose is to "pre-cook" a consensus that can be used to pressure non-participating poor countries at formal meetings later.
"Power is best exercised in a situation of uncertainty and flexibility," according to one developing country delegate quoted in the report. "That is why process issues are so vague in the WTO."
The EU is not alone in taking advantage of this vagueness. Other members of the so-called Quad--U.S., EU, Japan and Canada--have usually joined in these efforts, according to the report. Indeed, a major charge of the report, which is based in part on a new book by Jawara and Aileen Kwa, is that the EU often works hand-in-glove with the U.S. in a kind of good cop-bad cop routine designed to win concessions from developing countries that benefit both of them.
Such undemocratic procedures were demonstrated at the Doha ministerial conference two years ago which the EU managed to extend by an extra day when some of the WTO's developing-country delegates had already flown home on pre-arranged flights. Moreover, most developing country representatives who remained in Doha were excluded from a key, 36-hour informal session in which last-minute agreements were worked out. The report also pointed out that the EU fielded 508 delegates at the ministerial--ten times as many as even the U.S.
"The pretense that the WTO is a democratic organization has lost all credibility," according to John Hilary, a trade expert at London-based ActionAid.
In light of these kinds of abuses, developing countries have called for more formal and transparent procedures to ensure that all countries are represented at key proceedings and all relevant information is made available to them. But the EU's trade minister, Pascal Lamy, while offering lip service to reform has failed to support it. "We must look for flexible instruments that can facilitate the formation of consensus without diminishing the role of the formal decision-making bodies," he said recently.
To support the poor countries' call for reform, two British-based groups--ActionAID and the World Development Movement (WDM) have issued the "Cancun Democracy Challenge" and called on London's trade minister, Patricia Hewitt, to promote it at the meeting this week. "We are challenging the British government and the EU to apply basic standards of fair play to the WTO," said Barry Coates, WDM's director.
"No developed country would contemplate running its government in this way; and yet (the EU and the U.S.) are happy both to exploit the system and to defend it against pressure for democratic reform at the international level," according to the new report. "The Western media, who would be the first to condemn such processes and practices at the country level, do not raise so much as a murmur."
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