Free Trade Causes Suffering

All costs, no benefits: How TRIPS-plus intellectual property rules in the US-Jordan FTA affect access to medicines

The USA continues to impose TRIPS-plus rules on developing countries, thus preventing poor people from accessing inexpensive, generic medicines. Jordan was required under the terms of its WTO accession package and its free trade agreement (FTA) with the USA to introduce TRIPS-plus rules. Medicine prices have increased drastically, and TRIPS-plus rules were partly responsible for this increase. Furthermore, stricter levels of intellectual property protection have conferred few benefits with respect to foreign direct investment, domestic research and development, or accelerating introduction of new, effective medicines. Medicine prices will continue to rise in Jordan, but the country will be unable to use TRIPS safeguards to reduce their cost. Other developing countries implementing or considering FTAs with TRIPS-plus rules should consider the consequences for public health.

All costs, no benefits: How TRIPS-plus intellectual property rules in the US-Jordan FTA affect access to medicines (pdf 340.8 kb)

Summary

Since enactment of the TRIPS (Trade Related Aspects of Intellectual Property Rights) Agreement in 1995, the USA has imposed progressively higher levels of intellectual property protection (TRIPS-plus rules) on developing countries, which undermines access to affordable medicines. The US-Jordan free trade agreement (FTA) introduced a rigid framework of TRIPS-plus rules that the USA continues to impose on developing countries, although subsequent FTAs have even stricter levels of intellectual property (IP) protection. Jordan was also required to increase the level of IP protection under the terms of its accession to the World Trade Organization (WTO).

Medicine prices in Jordan have increased 20 per cent since 2001. Higher medicine prices are now threatening the financial sustainability of government public health programmes. TRIPS-plus rules contributed to the increase in medicine prices, and will delay or prevent use of public health safeguards to reduce the price of new medicines in the future. In particular, data exclusivity has delayed generic competition for 79 per cent of medicines newly launched by 21 multinational pharmaceutical companies between 2002 and mid-2006, that otherwise would have been available in an inexpensive, generic form. Data exclusivity is a TRIPS-plus rule that creates a new system of monopoly power, separate from patents, by blocking the registration and marketing approval of generic medicines for five or more years, even when no patent exists.

Additional expenditures for medicines with no generic competitor, as a result of enforcement of data exclusivity by multinational drug companies, were between $6.3m and $22.04m. These expenditures have required that both public health system and individuals pay higher prices for many new medicines that are needed to treat serious non-communicable diseases (NCDs), such as hypertension, asthma, diabetes, and mental illness. For example, new medicines to treat diabetes and heart disease cost anywhere from two to six times more in Jordan than in Egypt, where there are no TRIPS-plus barriers.

Furthermore, there have been no benefits from introducing strict IP rules in Jordan, despite positive assertions made by the United States Trade Representative (USTR) and other USJordan since 2001 to synthesise or manufacture medicines in partnership with local generics companies, which also has serious implications for public health. Patients in Jordan pay from two to ten times more for some new medicines compared with patients in Egypt, where new medicines are manufactured locally through licensing agreements and partnerships. The only FDI into Jordan by multinational drug companies has been to expand scientific offices, which use aggressive sales tactics to ensure that expensive patented medicines are used instead of inexpensive generics.

Furthermore, stricter intellectual property rules have not encouraged Jordanian generic companies to engage in research and development (R&D) for medicines since passage of the FTA; these companies have not developed any new medicines. Finally, new product launches in Jordan are only a fraction of total product launches in the USA and the EU; many new medicines launched in Jordan are exorbitantly priced and unaffordable for ordinary people, and few or no units of these recently launched medicines have actually been purchased on the local market, due to their cost. government officials ever since the agreement was enforced. In particular, there has been nearly no foreign direct investment (FDI) by drug companies into

In the future, an increasing burden of non-communicable diseases will require even greater expenditure on health care and medicines. Higher medicine prices will put a strain on the public health system, and for those Jordanians without health insurance, the higher prices will require significant out-of-pocket expenditure that disproportionately harms the poorest. Yet Jordan has fewer options now that TRIPS-plus rules are in place, and the government will be unable to mitigate higher medicine prices through the use of public health safeguards.

To reduce the burden of the US TRIPS-plus agenda and its effects on access to medicines, Oxfam recommends:

Jordan

• Resist entry into the Patent Co-operation Treaty (PCT);
• Introduce exceptions to data exclusivity that reduce its impact on generic competition;
• Severely restrict scope of patentability in its IP law, and in particular, consider replicating India’s definition of scope of patentability;
• Repeal its stringent restrictions on parallel importation

USA

• Stop coercing developing countries into adopting TRIPS-plus IP protections through bilateral and regional trade agreements and through other forms of pressure and inducement.

Other developing countries

• Prevent introduction of TRIPS-plus rules in national legislation, and fully implement TRIPS safeguards to ensure production of generic medicines for domestic consumption and for export to other developing countries.

A Matter of Political Will: How the European Union can maintain market access for African, Caribbean and Pacific countries in the absence of Economic Partnership Agreements

The European Commission has threatened 76 of the world’s poorest countries with lower access to the EU market – if they fail to sign new trade deals known as Economic Partnerhip Agreements (EPAs) by the end of 2007, when their current market access preferences expire. But the threats are not justified: in the event that African, Caribbean, and Pacific (ACP) nations are not ready to sign by the end of the year, the European Union could still continue to provide them with a high level of market access, using the GSP-plus scheme, without breaching World Trade Organization rules. This level of market access would also be compatible with their developmental needs.

A Matter of Political Will: How the European Union can maintain market access for African, Caribbean and Pacific countries in the absence of Economic Partnership Agreements (pdf 249.9 kb)

GSP+ would take the pressure off

The 76 African, Caribbean, and Pacific (ACP) countries currently negotiating Economic Partnership Agreements (EPAs) with the European Union (EU) are under tremendous pressure. The current system of Cotonou Preferences, which provides ACP exporters with preferential access to the EU market, expires at the end of 2007.

The Cotonou Agreement legally requires the EU to leave no ACP country worse off after the expiry of Cotonou Preferences, in ways that are compatible with World Trade Organisation rules. But the European Commission (EC) does not appear to be taking the necessary steps to realise these legal assurances. The EC maintains that there is only one means to fulfil its obligation: a free trade agreement or EPA.

If the six negotiating regions do not sign EPAs by the end of December 2007, the EC has declared that it will not continue Cotonou Preferences. Instead, from 1 January 2008 least-developed countries will have to rely on the Everything But Arms (EBA) scheme which provides duty-free, quota-free access. All others would have to rely on the standard Generalised System of Preferences (GSP), which the EU provides to all developing countries. This is not a viable option. The standard GSP provides far lower preferences than Cotonou and could be devastating for export sectors in ACP countries.

But the EC’s current EPAs proposals pose a serious threat to ACP economies. The stakes are very high. The EU is the largest trading partner for most ACP countries. As an advanced industrialised economy, it is also one of the most powerful competitors in the world. While it is possible to design an economic relationship that benefits ACP countries, the EC’s current proposals threaten to do the opposite.

As the deadline draws close, exporters are becoming alarmed at the prospects of facing high tariffs into the EU market. The EU appears to be ‘watching the clock’, hoping that as pressure mounts, ACP countries will have no option but to accept their proposals. The EC has refused to accept many constructive offers placed on the table by ACP countries, and has failed to, or delayed in, responding to other requests.

The pressure to conclude EPAs in December, which is likely to be on the EU’s terms, would mean the abandonment by the ACP of their development proposals. An EPA signed under such circumstances would be an injustice to the millions of people whose futures depend on these negotiations. ACP and EU leaders have a legal and moral obligation to negotiate an agreement that supports development.

The choice that the EC is offering between an EPA and the standard GSP is a false one. The EC can at the very minimum offer a GSP+ system of preferences. This would provide all ACP countries with a high level of market access for their exports beyond the expiry of Cotonou Preferences, and that ACP countries could well meet the eligibility criteria for GSP+. This would be compatible with World Trade Organisation rules. With sufficient political will the EU could allow all ACP countries to join GSP+ in 2007. The EC and member states should immediately open up such avenues to ACP countries, so that negotiators can rest assured that current trade would not be disrupted after the end of 2007.


Footnotes

(1) The GSP+ or ‘Special Incentive Arrangement For Sustainable Development And Good Governance’ scheme provides preferential access that is substantially higher than GSP for countries implementing certain international standards in human and labour rights, environmental protection, the fight against drugs, and good governance. Currently, 15 developing countries, mainly in Latin America, are granted preferential access to the EU under this scheme.