Business Governance & Environment - World Trade Organization & TRIPS

Business Govt. & Environment
Assignment

WTO & TRIPS
An assignment on
Business Government & Environments

Prepared By: Manohar M. M. Iyer
XMBA Batch 19 , ITM Vashi, 2012.

Purpose
Assignment

• To Learn why Nations Trade.
• To get an overview on World Trade Organization
(WTO) , it’s functions, role & Impact on
International Trade.
• To understand Intellectual Property Rights (IPR)
and examine Trade-Related aspects of IPR
(TRIPS)
• Understanding impact of WTO & TRIPS through
some famous disputes

Assignment

Why Nations Trade?


Nations Trade
Assignment

• To Procure Items not available within Nation enough to
fulfill domestic demands. e.g. Petrol in India
• To Procure Items at Costs < Domestic cost of production.
e.g. Gold & Diamond in India
• To sell items that is surplus in production e.g. Tea in India
In Macro economic terms
• To Gain from it’s own Absolute Advantage
• To Benefit from other Nation’s Comparative Advantage
• Increase the Total World Output

Hypothetical Examples #1
Assignment
Consider Simple Economy
– 3 people (Ram, Rahim & Robert)
– 3 needs (Roti, Kapda Aur Makan; Wheat, Clothes & House )
• Ram: B.Sc.(Agri), Well Built, Produces Wheat
• Rahim: Dip. In Fashion Tech. Produces all 3.
• Robert: M.E.(Civil), Produces all 3.
Questions
• Ram need to Trade surplus Wheat to fulfill his needs, but why would others buy?
• Are Trade relations required between Rahim & Robert, who are self reliant?
It is evident that
– Rahim & Robert cannot produce wheat as efficiently as Ram.
– Clothes produced by Robert will not be of same quality as produced by Rahim
– Houses constructed by Rahim will not be as strong & spacious as done by Robert.
Trading will give raise to Specializations, Division of Labor & Economics to scale.
Note: Just like Ram, Rahim, Robert, Nations also differ in their factor endowments
(Natural Resources, HR, Capital , Wisdom) Prepared By: Manohar M. M. Iyer

Assignment

Per unit resource Prod. Mobiles Laptops Per Trade Price Ratio
US with 2 unit resources 20 10 20:10 = 2:1
UK with 2 unit resources 10 15 10:15 = 1:1.5
World Output 30 25
Amount of resource used per unit output
US 1/20 = 0.05 1/10 = 0.1 Mobiles < Laptops
UK 1/10 = 0.1 1/15 = 0.066 Laptops < Mobiles

It is evident US has Absolute Advantage in Mobiles & UK in Laptops
If US & UK decide to trade Mobiles & Laptops respectively, then
• US will use both unit resources for Mobiles increasing the world output to 40
• UK will use both unit resources for Laptops increasing the world output to 30
• US can procure 1 laptop for price less than 2 mobiles (for same unit resources)
• UK can procure 1 mobile for price less than 1.5 laptops (for same unit resources)

Assignment

Per unit resource Prod. Wheat Cloth Per Trade Price Ratio
India with 2 unit resources 50 50 50:50 = 1:1
China with 2 unit resources 20 40 20:40 = 1:2
World Output 70 90
It is evident that India exceeds China in production of both items. But
– India : To produce 1 unit of wheat , need to give up 1 unit of cloth
– China : To produce 1 unit of wheat , need to give up 2 units of cloth
– India : To produce 1 unit of cloth , need to give up 1 unit of wheat
– China : To produce 1 unit of cloth , need to give up only half units of wheat
So China has a Comparative advantage on production of cloth.
If India & China decide to trade Wheat & Cloth respectively, then
• India will use both unit resources for Wheat increasing the world output to 100
• China will use both unit resources for Cloth increasing the world output to 80
• India can procure 1 unit of Cloth for price < 1 unit of Wheat (for same unit resources)
• China can procure 1 unit of Wheat for price < 1 unit of Cloth (for same unit resources)

Assignment

World Trade Organization (WTO)


WTO
Assignment

An global international organization dealing with
the rules of trade between Nations.
• Location: Geneva, Switzerland
• Established: 1st January, 1995
• Created by: Uruguay Round negotiations (1986-94)
• Membership: 157 countries on 24 August 2012
• Budget: 196 million Swiss francs for 2011
• Staff: 640
• Head: Pascal Lamy (Director-General)

What is WTO?
Assignment

An International organization:
• To liberalize trade between Nations.
• To legalize the ground-rules for International commerce.
• To help Governments to negotiate trade agreements.
• To Solve trade disputes between Nations.
The main goal is to protect & give confidence to producers
of goods and services, exporters, and importers to
conduct their business across globe, and thus help
Nations to meet their social and environmental
objectives.

Evolution of WTO
Assignment The World Economic climate:

• U.S. speculative Mkt. boom 1920, Smoot–Hawley Tariff import Act
1930, Plunge in Intl. Trade, Mkt. Crash, 9k Bank Fail, Domino effect
across world resulted in Great Depression of the 1930.
• Climate of extreme protectionism, Imports reduction, declining
output and trade among Nations.
• Economic Needs, Trade Bias, Ignorance, Envy & Greed among
Nations led to World War 2 between 1939 – 1945.
• Lessons learned, need for economic security and better
instruments of international cooperation.
• U.S. Bretton Woods Conference in 1944, IMF & World Bank created
to deal with currency instability & post war reconstruction finance

Evolution of WTO
Assignment Birth of GATT:
• Nations realized that for post war economic recovery & progress:
– Open markets & liberalized trade are needed.
– Degree of stability and predictability in system are required for secure Trade
• An interim agreement was reached between a 23 Nations with a
mutually agreed set of rules, binding on all members and
enforceable through dispute settlement.
• This arrangement took the form of General Agreement on Tariffs and
Trade (GATT )in 1948.
• Now Trade were to be conducted according to rules & not power of
individual nations.


Evolution of WTO
Assignment GATT Principles:
• Each member Nation’s trade policies must treat all GATT members
equally.
• No member shall discriminate between the members of GATT in
the conduct of international trade.
• Members of GATT agree to apply principle of ‘most favored nation’
to all trade duties (refraining from discriminatory Tariff rates) .
• National Treatment : Foreign goods, services, or investment are to
be treated “no less favorably” within a Nation’s domestic markets
than competing products or services produced locally.


Evolution of WTO
Assignment Effectiveness of GATT:
Achievements:
• World trade grows @6% PA vis-a-vis world output @4% PA
• One quarter of world production are traded
• 18-fold increase in world trade volumes
• Exports of manufactured goods are now 43 times higher
Weaknesses:
• GATT was ad hoc and provisional
• Had contracting parties
• Allowed continuance of existing domestic legislation even if its in
violation of Trade Agreements
• Was less powerful, dispute settlements were slow & less efficient,
its ruling could easily blocked

Evolution of WTO
Assignment GATT MTN Rounds:
• Geneva Round - 1945 (23 nations)
GATT formation, 45,000 tariff concessions affecting $10 billion of trade
• Annecy Round - 1949 (13 nations)
Countries exchanged some 5,000 tariff concessions
• Torquay Round - 1951 (38 nations)
8,700 tariff concessions were made
• Geneva Round - 1955-1956 (26 nations)
$2.5 billion in tariffs were eliminated, Japan Included
• Dillon Round - 1960-1962 (26 nations)
$4.9 billion reduction in tariffs, creation of EEC.
• Kennedy Round - 1962-1967 (62 nations)
$40 billion in tariffs were eliminated. Anti dumping(import SP< Local SP)
• Tokyo Round - 1973-1979 (102 nations)
Regulations for non-tariff barriers and voluntary export restrictions. Concessions of
$190 billion.

Evolution of WTO
Assignment Birth Of WTO:
Uruguay Round - 1986-1994
The main objectives were:
• Expand the competence of the GATT to important areas like services,
capital, intellectual property, textiles, and agriculture
• To reduce agricultural subsidies
• To put restrictions on foreign investment, and
• To open trade in banking and insurance.
• Draft a code to deal with copyright violation and other forms of
Intellectual Property Rights.
The Round transformed the GATT into the World Trade Organization


WTO Principles
Assignment

• Non discrimination
• Free Trade between nations through MTNs.
• Stability in the trading system: Member countries are
committed not to raise tariff and non tariffs barriers
arbitrarily.
• Promotion of Fair Competition: WTO provides for
transparent, fair and undistorted competition.
• It discourages unfair competitive practices such as export
subsidies and dumping.


WTO better than GATT
Assignment

• WTO and its agreements are permanent
• WTO has members instead of contracting parties
• WTO Trade Agreements are binding on existing domestic
legislation.
• WTO is more powerful than GATT, dispute settlement
faster and more efficient, very difficult for member
nations to block the WTO rulings.


WTO Functioning
Assignment

• The institutional structure is such that it is headed by a
Ministerial Conference composed of all members of the
WTO and meets at least once every two years.
• Below them, the General Council exercises the functions of
the Ministerial Conference.
• The General Council also meets as the Dispute Settlement
Body and as the Trade Policy Review Body.
• At the next Level are the Goods Council, Services Council &
the IPR council.


WTO Dispute Settlement
Assignment

• First Stage (60 days): Consultation through mediation
• Second Stage (45 days): Panel set up to make rulings
– Each side to submit its case in writing to the Panel before hearing
– First hearing: each side to present it’s case in front of the Panel
– Rebuttals: To provide written Rebuttals to Panel & Argue orally
– Experts: Appoints Technical expert review & advisory group
– First Draft: Panel provides report of facts & arguments to each.
– Interim Report: Panel provides findings & conclusions to each.
– Review: each side given 2 weeks to review the report & respond
• Final Report (6 Months): Final report is submitted to each
• Ruling: The report becomes ruling unless rejected by consensus
within 60 days.
• Appeals: Both sides can appeal between 60 - 90 days

Assignment

Questions?


Note on Current MTN –
Assignment
Doha
The Fourth Ministerial Conference, Doha, Nov 2001 MTN
• Focus is on helping developing countries to join the global
marketplace, and boost their economies as a result.

• Includes negotiations on agriculture and services.

• Approved a linked decision on implementation — problems
developing countries face in implementing the current WTO
agreements.

• Ministerial discussions took place in Cancún 2003, Geneva 2004,
Hong Kong 2005 and Geneva in 2006 and 2008

Doha Agenda
Assignment

• Goal is to make it easier for goods and services to be
bought and sold across national borders.
• It means
– cutting import taxes/ tariffs – on everything.
– restricting countries' use of subsidies for farmers and
fishermen
– lowering taxes and regulatory barriers that affect the
cross-border trade in services, such as banking and
consulting;
– negotiating new Intellectual Property rules on things
such as drugs and copyrighted works.By: Manohar M. M. Iyer
Prepared

Assignment

Intellectual Property Rights (IPR)


What is IPR?
Assignment

The exclusive rights given to people over the creations of their minds
and use of his/her creations for a certain period of time.
IPRs are divided into two main categories:
• Copyright and rights related to copyright: i.e. rights granted to authors of
literary and artistic works, and the rights of performers, producers of phonograms
and broadcasting organizations. The main purpose of protection of copyright and
related rights is to encourage and reward creative work.
• Industrial property: This includes
– The protection of distinctive signs such as trademarks and geographical
indications
– Industrial property protected primarily to stimulate innovation, design and the
creation of technology. In this category fall inventions (protected by patents),
industrial designs and trade secrets.


Difference
Assignment

• Copyrights, patents, trademarks, etc apply to different types of creations or inventions &
are also treated differently.

• Patents, industrial designs, integrated circuit designs, geographical indications and
trademarks have to be registered in order to receive protection.

• The registration includes a description of what is being protected — the invention, design,
brand-name, logo, etc — and this description is public information.

• Copyright and trade secrets are protected automatically according to specified conditions.

• They do not have to be registered, and therefore there is no need to disclose, for example,
how copyrighted computer software is constructed.

• Other conditions may also differ, for example the length of time that each type of
protection remains in force

TRIPS
Assignment

• Trade Related Aspects of Intellectual Property Rights
(TRIPS) is an international agreement administered by the
WTO.
• Negotiated at the end of the Uruguay MTN Round of GATT
• Introduced IPR laws into international trading system.
• Requires member states to provide strong IPR protection
• Contains requirements that Nations' IPR laws must meet.
• Details enforcement measures, remedies & dispute
resolution procedures.


TRIPS content
Assignment

The agreement covers five broad issues:
• How basic principles of the trading system and other international
intellectual property agreements should be applied
• How to give adequate protection to intellectual property rights
• How countries should enforce those rights adequately in their own
territories
• How to settle disputes on intellectual property between members of
the WTO
• Special transitional arrangements during the period when the new
system is being introduced.


TRIPS Basic Principles
Assignment

Basic principles
• National treatment: Treating one’s own nationals and foreigners
equally

• Most-Favoured-Nation treatment: Equal treatment for nationals of
all trading partners in the WTO.

• Balanced protection: IP protection should contribute to technical
innovation and the transfer of technology. Both producers and users
should benefit, and economic and social welfare should be enhanced


TRIPS & WTO
Assignment

TRIPS has so much importance in WTO that:

• Ratification of TRIPS is a compulsory requirement
of WTO membership

• All WTO members must enact the strict domestic IP
laws mandated by TRIPS


TRIPS IPR requirements
Assignment

Examples:
• Copyright terms must extend to 50 years after the death of
the author. (Art. 12 and 14)

• Copyright must be granted automatically, and not based
upon any "formality," such as registrations(Art. 9)

• Computer programs must be regarded as "literary works"
under copyright law and receive the same terms of
protection.

TRIPS IPR requirements
Assignment

Examples:
• Patents must be granted for "inventions" in all "fields of technology"
provided they meet all other patentability requirements (Art. 27.2
and 27.3)and must be enforceable for at least 20 years (Art 33).

• IP laws may not offer any benefits to local citizens which are not
available to citizens of other TRIPS signatories under the principle of
national treatment (with certain limited exceptions, Art. 3 and 5).

Note: TRIPS provisions on copyright were taken from the Berne Convention for the
Protection of Literary and Artistic Works whereas Trademark and patent provisions
were modeled on the Paris Convention for the Protection of Industrial Property.


TRIPS safeguard provisions
Assignment

• Compulsory licensing:
Allows Nations to permit an entity to produce a patented product for domestic usage
without the Patent holder's consent. This is a temporary license & is usually exercised
during national emergency. The producer must pay a market-rate fee to the patent holder
or enter into voluntary license agreement on reasonable commercial terms.

• Parallel importing:
A product produced under a patent held in one country, but sold at lower prices in another
country, can be imported by WTO members from that second country without permission
from the patent holder, provided the decision is cost based & not discrimination on the
grounds of the nationality of the patent holder.

• Bolar provisions:
Allows generic manufacturers to prepare for production facility and fulfill regulatory
procedures before original patents expire, so that products are ready for sale as soon as the
patent ends.


Assignment

Understanding impact of WTO &
TRIPS through some famous
disputes


Disputes case #1 –
Assignment
Healthcare
AIDS in South Africa - Public health or corporate profits?
• Anti-retrovirals significantly decrease the virus' replication speed
• U.S. and European pharmaceutical companies have exclusive patents
• These regimen of drugs for one patient at US prices costs US$15,000
• In South Africa nearly 1 in 10 citizens are HIV positive i.e. 4.2m
• Only .001% of Africa's AIDS patients receive anti-retroviral treatment
• Drug companies had been unwilling to reduce prices.
• South Africa's 1997 Medicines Act allowed Compulsory licensing for
generic versions & parallel importing.
• 39 Western pharmaceutical companies filed suit with WTO
• However Government of South Africa ultimately won

Assignment
Bio-piracy
The Neem Tree
• In 1971, an US timber company found neem tree's (Azadirachta
indica) usefulness as pesticide & patented the process.
• In 1992, W.R. Grace secured the rights to formula for making
pesticide from Neem tree's seeds.
• It began suing Indian companies for making the emulsion.
• India has been using neem trees for over 2000 years for various
purposes such as pesticides, spermicides and toothbrushes.
• Per India such claims of discoveries by US are actual stealing
and pirating of indigenous practices and knowledge.


Assignment
Bio-piracy
BASMATI
• In 1997, RiceTec Inc, was granted a patent (#5663484) by the US
patent office to call the aromatic rice grown by them as 'Basmati‘.
• This allowed the company to label its aromatic rice Basmati within
the US and even for its exports.
• This type of rice has been grown in the foothills of the Himalayas for
thousands of years.
• India was already exporting half a million tonnes of Basmati to the
Gulf, Saudi Arabia, Europe and the United States worth $250 million


Assignment
Bio-piracy
Turmeric
• In 1995, A U.S. patent on Turmeric was awarded to the University of
Mississippi Medical Center, specifically for the "use of turmeric in
wound healing."
• This patent also granted them the exclusive right to sell and
distribute turmeric.
• India's Council of Scientific and Industrial Research challenged the
novelty of the University's "discovery,“
• Turmeric in wound healing traditionally practiced in India for
thousands of years & its proof exists in ancient Sanskrit writings
which mentions turmeric’s extensive and varied use throughout
India’s history.

Disputes on Bio-piracy…
Assignment

Points to ponder:
• Does use of turmeric in wound healing, Neem tree as pesticide &
Basmati rice should have qualified as a patentable U.S. product?
• Whether it meets the legal criteria of "Novelty, Non-Obviousness,
and Utility“?
• Isn’t obvious that WTO rules largely mimic and support the U.S.-style
patent system with same biases and pose a threat to the sanctity of
indigenous knowledge?
• Isn’t "biopiracy" a threat to the economies of developing Nations
and their biodiversity?


Disputes #5 –
Assignment
Recent Case
Cipla Patent case over lung cancer drug Tarceva
• In Jan 2008, Swiss drug maker F Hoffmann-La Roche Ltd , alleged that
Cipla had infringed its patent by launching a generic copy of Tarceva
in the local market.
• This is was first launch of a generic copy of a patented drug after
product patent regime for pharmaceuticals was introduced by India
in 2005.
• Tarceva costs about `Rs.1.4 lakh for a month’s treatment
• Cipla's generic version is priced at Rs.25,000 for the same dosage.
• The verdict on Sept 2012 was
Cipla’s generic version was a polymorph B variant of Roche’s
patented drug and it didn’t actually infringe any patent in India.

Assignment
Bollywood
• Believe it or Not One of the three case studies related to TRIPS violations
published in the international WTO site is related to Bollywood. (Ref Link:
http://www.wto.org/english/res_e/booksp_e/casestudies_e/case3_e.htm )
• Petitioners : Miles, a very popular Bangladeshi music band.
• Defendants: Mahesh Bhat (producer), Anu Malik (music director), of Amir
Jamal (Singer), Saregama (India) Ltd (Music recorder) and RPG Global Music
(London) (Audio Co.)
• Case: Defendants had collaborated on copying core elements from the
petitioners’ song ‘Phiriye Dao Amar Prem’ in the soundtrack ‘Jana Jane
Jana’ of the movie Murder, gross infringement of the International IPR as
well as Copyright Act’. As compensation for the ‘injury’ caused to the
business interests of the petitioners, 50 million rupees were demanded
• Verdict: Petitioners won the case


More on WTO & TRIPS
Assignment

Some interesting reads related to WTO & TRIPS:

• Wikipedia:
http://en.wikipedia.org/wiki/Agreement_on_Trade-
Related_Aspects_of_Intellectual_Property_Rights

• “Made in the World”
http://www.wto.org/english/res_e/statis_e/miwi_e/miwi_e.htm

• World Intellectual Property Organization
http://www.wipo.int/portal/index.html.en

• Traditional Knowledge Digital Library (TKDL)
http://www.tkdl.res.in/tkdl/langdefault/common/Abouttkdl.asp?GL=Eng

Assignment

I thank one and all who have provided me with the opportunity to handle this
responsibility and the knowledge & support to prepare this Presentation.

Please feel free to forward your valuable feedback, comments, queries and
suggestions related to this presentation at mumbai_man1977@Yahoo.com

Thank you,

Warm regards,

Manohar M. M. Iyer
XMBA Batch 19 , ITM Vashi, 2012


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