FTA’s Impacts on Developing Countries: the Asian Context
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    FTA’s Impacts on Developing Countries: the Asian Context FTA’s Impacts on Developing Countries: the Asian Context Document Transcript

    • Regional Workshop : FTA’s Impacts on Developing Countries: the Asian Context 17 March 2009 ITD Training Center th 15 Floor Chamchuri Square Office Tower Bangkok, Thailand
    • Regional Workshop “FTA’s Impacts on Developing Countries: the Asian Context” March 17, 2009 at ITD Training Center, th 15 Floor, Chamchuri Square Office Tower- Bangkok, Thailand 08.30 - 09.00 Registration 09.00 - 09.15 Welcome Remarks By Dr. Sorajak Kasemsuvan, Executive Director, ITD 09.15 - 09.30 Deliver Background and Objectives of the Workshop By Thanphuying Dr. Suthawan Sathirathai, Chairwoman of GSEI 09.30 - 10.15 Session I: Investment Issues Speaker • GSEI Researcher - Assoc.Prof. Dr.Lawan Thanadsillapakul, School of Law, Sukhothai Thammathirat Open University 10.15 - 10.30 Coffee Break 10.30 - 11.15 Session II: Intellectual Property Rights (IPRs) Issues Speaker • GSEI Researchers - Assoc.Prof.Dr. Jiraporn Limpananont, Social Pharmaceutical Unit, Faculty of Pharmaceutical Sciences, Chulalongkorn University - Dr.Jade Donavanik, Faculty of Law, Siam University 11.15 - 12.00 Comment & Open Discussion Moderator: Dr. Watcharas Leelawath, Deputy Executive Director, ITD Commentator : Assoc.Prof. Henry Gao, School of Law, Singapore Management University 12.00 - 13.00 LUNCH 13.00 - 13.30 Launching of “SEATRANET"by ITD 13.30 - 13.45 SEATRANET Q & A 13.45 - 14.30 Session III: Environmental Issues Speaker • GSEI Researcher - Dr.Sujitra Vassanadumrongdee, The National Center of Excellence for Environmental and Hazardous Waste Management, Chulalongkorn University 14.30 - 14.45 Coffee Break 14.45 - 15.30 Session IV: Labour Issues Speaker • GSEI Researcher - Ms. Theerada Suphaphong, , ASEAN Inter-Parliamentary Myanmar Caucus 15.30 - 16.15 Comment & Open Discussion Moderator: Assoc.Prof.Dr. Kiti Prasertsuk, Associate Dean for International Affairs, Faculty of Political Science, Thammasat University Commentator: Assoc.Prof. Henry Gao, School of Law, Singapore Management University 16.15 - 16.30 Closing ceremony
    • I The Preparation of the Framework Guidelines for Evaluating the FTA Impacts Project Executive Summary One important activity in the preparations for the negotiation of a free trade agreement (FTA) is the study and assessment of possible impacts as well as potential benefits and costs of such an agreement for Thailand. The focus of such studies and assessments done so far of both the positive and negative effects of an FTA has mainly been on the economic impact from trade, and there are limitations in the capability to assess two critical aspects of the costs of an FTA, namely its environmental and social costs. As a consequence, the government often lacks comprehensive information for policy decision-making, and decisions are largely made on the basis of economic and trade data. This is one reason the results of those studies and policy-making on FTAs not quite acceptable to the public, particularly to people directly affected by the social and environmental impacts of the agreements. In this connection, if a framework can be developed for an assessment of both the overall impact of an FTA and of specific issues which may have broad impacts on Thailand in the agreement, then this will add clarity to the country’s strategy on FTA negotiation and make the strategy more comprehensive in terms of making preparations for the negotiation and minimizing negative economic, social and environmental impacts. Such a framework will also add transparency and fairness to the consideration of the interests of various groups, and appropriate measures can then be devised to cushion the impacts and provide remedies to those sectors of the society which may be affected by FTAs. In this study, a framework has been developed to assess the impact of FTA negotiations, comprising two parts. These are (1) a framework for overall assessment of FTAs and (2) a framework for assessment of six specific issues, namely: environment, labour, investment, agriculture, intellectual property and dispute settlement. The aforementioned assessment framework contains a check list of issues and information to be used in detailed consideration of such important issues as controversial issues, sensitive issues, demands which Thailand should not accept, and issues which are in conflict with Thailand’s obligations under relevant international agreements.
    • II 1. Framework for overall assessment In reviewing approaches used by other countries in assessing the impacts of FTAs, we have found that the European Union (EU)’s is an interesting model. The EU applies the concept of sustainable development as a framework for impact assessment and policy decision-making on its FTA negotiation. In 1999, the European Commission decided to integrate the concept of sustainable development into trade negotiation. It has developed an assessment tool called “Trade Sustainable Impact Assessment” (Trade SIA) which the EU has employed in its trade negotiations with other countries. The main principles of Trade SIA are: the assessment has to encompass all three aspects of sustainability – economic, social and environmental; the assessment process has to be conducted with transparency; stakeholders have to be involved; the assessment outcome must be revealed to the public; the selection of people to conduct the assessment must be done openly; the people to conduct the assessment must be independent, work with transparency and use scientific information and evidence in their work. In Thailand’s case, the overall assessment of FTA negotiation has largely focused on its economic aspect, looking at economic growth rates, changes in exports and imports or the effect on balance of trade. The main tools used are economic models such as Global Trade Analysis Project, or GTAP, model. An overall assessment that is based on the concept of sustainable development, encompassing economic, social and environmental aspects, has not yet been conducted. Such an approach is partly why FTA negotiations have become a subject of social contention in the country, drawing broad opposition from the civil society sector. Several parliamentary commissions have continually monitored the government’s policy and actions on FTAs. In drafting the 2007 Constitution, the Constitution Drafting Committee also attached much importance to the process of FTA negotiation, aiming to resolve problems that had occurred and prevent future problems. It sought to amend the concerned provisions to take into account changes in political and economic contexts at both domestic and international levels. In the end, Section 224 of the 1997 Constitution was amended and became Section 190 of the 2007 Constitution.
    • III We propose in this study that, to keep to the intent and provisions of the Constitution and to address past problems, an impact assessment of Thailand’s FTA negotiation should be conducted in 3 stages, as follows: Stage I – pre-negotiation assessment: This is to study and assess impacts in various aspects – both positive and negative – which may arise from concluding an FTA. The framework for such a study may be based partly on the framework proposed in this study report. (See details in Chapters 2 to 8.) The result of Stage I assessment will be useful in the drafting of a “negotiation framework” as stipulated in Section 190 paragraph three (which will be addressed in more detail in the next part). Stage II – impact assessment of the draft FTA: This is to study and assess impacts of an FTA after the negotiations have produced the final draft, and details about the substance, provisions and obligations are known. The result of Stage II assessment will be useful for the government in making a decision whether to sign and/or give consent to be bound by the FTA. It will also provide useful information for preparing measures to resolve problems or provide remedies for those who would be affected by the FTA (in accordance with Section 190 paragraph 4) Stage III – assessment of the implementation of the FTA: This is to study and assess actual impacts of the FTA on various sectors of the society after the agreement has been implemented for a certain period of time. Follow-up assessments should also be conducted every year during the first five years after the agreement enters into force and every three years thereafter. In making a policy decision whether to sign or give consent to be bound by an FTA, most governments tend to explain to their publics that concluding an FTA has both positive and negative sides, and in making the decision, the government has to look at “the overall picture.” Such a line of explanation is a main problem that causes disagreement in the process of policy decision-making concerning FTAs because it is not clear what “the overall picture” means. Is it the sum of all positive and negative effects that an FTA has on all production sectors or of all negotiating topics under the agreement being calculated for net output? What groups would benefit and what groups would lose? Why should particular groups benefit or lose from the agreement?
    • IV In response to these questions, we make the following proposals on impact assessment of an FTA and policy decision-making: An impact assessment of an FTA should address both positive and negative effects of the agreement and encompass economic, social and environment aspects. (See details of this proposal in Chapters 2 to 8 of the report.) Benefits and impacts from each issue (or each chapter), whether positive or negative, cannot be traded off among one another, such as those between the increase in exports due to reduced tariffs and the problem of patients’ access to medicines due to extension of patent protection, as this would amount to a trade-off between economic numbers and human lives. Hence, overall consideration of an FTA is not simply calculating the benefits and losses in all issues together for net output. (There is also a problem about the practicality of such an approach, as not all impacts of an FTA can be translated into numbers, such as the costs and impacts from changing the legal regime to protect plants into patent law, and the costs of impact on national food security.) As a result, overall assessment must be compared with a “reference framework” or “criteria for consideration” that are higher than the benefits from each chapter of the agreement. (In other words, it should not be a comparison between chapters or sectors within the FTA.) Reference frameworks which can be used as a framework for decision making are, for example, the development strategy and development goals specified in the National Economic and Social Development Plan, the sustainable development approach, and the Sufficiency Economy philosophy. Regarding the assessment process, we propose that impact assessment of an FTA should be conducted with the principle of “public participation in impact assessment” so that academicians, stakeholders and interested members of the public can participate in the process of studying and assessing the impacts of each FTA. Public participation in the impact assessment process are divided into 2 main stages, namely, in the selection and identification of issues to be assessed, or public screening & scoping, and in the consideration of assessment reports, or public reviewing. Public screening & scoping is a process in which the public, stakeholders and academicians join in formulating an assessment framework, making comments and
    • V recommendations on issues or topics the impacts of which should be studied. At an initial stage, the six issues for assessment framework proposed in this study can be used as examples. Then, those participating in public scoping can then choose, improve or identify issues to form an assessment framework as appropriate and in line with the different contexts, negotiating topics and demands in the negotiations of each FTA. Public reviewing is a process in which the public, stakeholders and academicians give additional inputs, comments or recommendations to an FTA impact assessment report in order to make the report more complete and comprehensive. It will also contribute to improving communication and create common understanding about the positive and negative effects which may arise from concluding an FTA with each country, on the basis of data from the study. The participation of various sectors in public reviewing should be done on a continual basis – from the stage of making an inception report and progress reports to that of drafting of the draft final report. Section 190 paragraphs three and five and Section 303 (3) of the 2007 Constitution contain provisions related to the negotiation process of a treaty (as stipulated in paragraph two) specifically on the issues of public participation, preparation of a “negotiation framework” and conduct of studies in order to prepare for the negotiation of a treaty. In this connection, we make the following proposals for an FTA impact assessment process which is consistent with the preparation of a “negotiation framework” as provided for by the 2007 Constitution. The details of the proposals are divided into 4 stages: (1) Conducting studies for the purpose of making preparations before the negotiation of a treaty This stage involves studies and/or assessment of potential impacts of concluding an FTA before the negotiation starts with the purpose of making preparations. It may include impact assessment as well as other necessary studies, depending on the context of the negotiations to be undertaken with each partner country. (Public participation in this stage is through public scoping and public reviewing as proposed above.) (2) Making of a “draft negotiation framework” (first draft) This stage involves analyzing the study results from Stage (1) together with other related information such as the government policy, the plan for the administration of state
    • VI affairs (pursuant to Section 76 of the Constitution), and National Economic and Social Development Plan, and coming up with the first “draft negotiation framework”. (3) Public hearing and making of a “negotiation framework” (second draft) This stage involves submitting the first “draft negotiation framework” to public hearing process in accordance with Section 190 paragraph three, and taking in recommendations from the hearing to revise the draft negotiation framework. The draft that passes through the consideration by the National Assembly will be the final draft of the “negotiation framework” which will be used in the formal negotiation. Systematic public involvement from the stage of conducting impact assessment to that of submitting the negotiation framework will ensure their meaningful participation, which is not only done in order to be in compliance with the law. It will also benefit the negotiation. 2. Assessment framework for specific issues In coming up with the assessment framework, we drafted a conceptual framework for impact assessment drawing on recommendations from those involved in the first meeting of the focus group. We then worked on the details of 6 specific issues to be assessed in accordance with the said conceptual framework and present the outcome to the meeting of focus group twice in order to listen to comments and recommendations from those involved in the negotiations as well as stakeholders in different sectors. We subsequently revised each issue in the FTA impact assessment framework again based on the comments and recommendations. We submitted the revised framework to those concerned again on 20 October 2008 for final comments and revised it into the final version of the impact assessment framework. The contents of the impact assessment framework for specific issues appear in Chapters 2 to 8 of this report. They are structured as follows: (1) Topics/issues to be assessed; (2) Reasons/needs for being assessed; (3) Means/tools for assessment; (4) Outcome of the assessment; (5) Proposals for the negotiation and/or proposals for prevention of and remedies to minimize impacts; (6) Persons in charge.
    • VII 2.1 Assessment framework of FTA’s impact on the environment We propose 8 issues, classified into 3 groups, that should be assessed for their impact on the environment: • Group I: Regulatory impact related to oversight of natural resources and the environment Issue 1: Are there any demands in FTA negotiations that will require Thailand to change its environmental law and enforcement of such law, and if so, to what extent? Issue 2: Are demands in the FTA negotiations consistent or inconsistent with the obligations under multilateral environmental agreements (MEAs)? • Group II: Environmental impact due to regulatory changes as a result of concluding an FTA Issue 3: Will demands related to protection of investment in the FTA negotiations affect the country’s ability to protect the environment, and if so, to what extent? Issue 4: Will demands related to protection of intellectual property affect the country’s ability to protect the environment, and if so, to what extent? • Group III: Environmental impact due to expansion of economic activities as a result of the FTA Issue 5: Will the FTA negotiation affect the country’s resource base (such as forest resources and forest products, water resources, mineral resources, fishery resources), and if so, how? Issue 6: Will the increase in investment, production and consumption as a result of the FTA lead to an increase in green house gas emissions and in wastes and residues, and if so, to what extent? Issue 7: Will the FTA negotiation lead to an increase or decrease of goods which pose high environmental and public health risk (e.g. used products, hazardous wastes, prohibited hazardous substances)? Issue 8: Will the FTA negotiation affect the country’s biodiversity and ecosystem, and if so, how?
    • VIII 2.2 Assessment framework of FTA’s impact on investment We propose 26 issues, classified into 13 groups, that should be assessed for their impact on investment: • Group I: Impact on treaty-making process and the 2007 Constitution Issue 1: Negotiations of an FTA under Section 190 of the present Constitution and the problems in the process of making treaties in accordance with international law, in which Thailand has much less bargaining power, will in principle affect national sovereign authority. • Group 2: Regulatory impact related to supervision of investment Issue 2: Are there any demands in the FTA negotiations which will require Thailand to change its investment laws and regulations and enforcement of those laws and regulations, and if so, to what extent? Issue 3: Will the FTA negotiations lead, directly or indirectly, to changes in any investment-related laws and regulations, and if so, to what extent? Issue 4: Are there any demands in the FTA negotiations which are consistent or inconsistent with obligations under bilateral or multilateral agreements that Thailand has concluded with other partners? Are these demands different from the WTO rules, and if so, to what extent? • Group 3: Impact on natural resource base and environmental protection as a result of demands of the FTA Issue 5: Will the demands in the FTA negotiation on national treatment together with laws and regulations that will be abolished or changed under the FTA open access to the country’s national resource base once prohibited to foreign investment? Issue 6: In relation to the lack of laws and regulations to determine the nationality of legal personalities and lax nature of Thai laws, do such legal loopholes allow foreign investors to register as Thai legal personalities without falling under the Foreign Business Action, restrictions on land ownership, and prohibitions against doing businesses in the negative list of industries which are not liberalized? Issue 7: Does the defined scope of Thai Government’s responsibility in the enforcement of domestic laws, rules and regulations affect the enforcement of laws protecting natural resource bases and the environment?
    • IX Issue 8: Does the demand under the FTA which requires Thailand to take greater responsibilities than provided for in international law on state responsibilities affect the organic law on public hearing, the exercise of freedom of expression under the Constitution through assembly, demonstration and protest against foreign investments such as against a nuclear power plant? Issue 9: Will the provisions under the FTA stipulating that a State party do not have be accountable under MEAs if it is not a State party to those MEAs affect Thailand’s environmental protection, and if so, to what extent? Will these affect the enforcement of domestic laws and any international obligations? • Group 4: Impact on labour, unemployment and employment conditions, workplace health and safety Issue 10: Will the FTA negotiation which obliges Thailand to open its labour markets at both the executive level and other levels of employment to executives and workers coming in with investments, with no requirement on their nationalities, affect the country’s employment problem? Will this lead to unemployment among Thais? Issue 11: Does the FTA negotiation require that Thailand take responsibilities in enforcing laws that affect investment, such as labour law, employment standards and standards regarding the workplace, work periods and wages? Can Thailand enforce these laws in cases where foreign investors use hiring contracts or subcontractor agreements, instead of employment contracts in accordance with the labour laws to avoid legal responsibilities for the employees? Can Thailand enforce the laws on workplace health and safety if foreign investors use hiring contracts instead of employment contracts, and if so, to what extent? • Group 5: Impact on growth of domestic industries Issue 12: Will the FTA negotiation which include pre-entry national treatment thereby affecting the screening of investors and investment zoning in accordance with the country’s long-term economic plan, and prohibit the use of TRIMs or investment measures which Thailand has been using, affect the growth of Thai industries? Issue 13: Will the enforcement of intellectual property product laws which is more stringent than WTO rules, such as on drug patents and industrial designs, affect the self- reliance of these industries? Will this lead to rising costs? Will it close the opportunity for long-term development as a result of the need to pay for these patents?
    • X Issue 14: Where Thai investors are effectively discriminated by not being provided with investment promotion privileges because they do not meet such requirements as those related to investment caps and investment for export, and are therefore not granted those privileges accorded to foreign investors and have to pay business taxes, import duties and other taxes, Thai investors will then have to bear higher production costs while foreign investors are granted investment promotion privileges, tax and non-tax incentives as well as exempted from paying income taxes and import duties. Will this situation affect the existence and development of domestic industries? What are the benefits and losses when foreign nationals can use natural resources without paying taxes while Thai nationals have to pay taxes but are discriminated against in terms of lesser privileges? • Group 6: Impact on national revenues and taxes Issue 15: Will the government has to be responsible if under the FTA, it is prohibited from enforcing laws that adversely affect investment, including tax measures, but the complexity of tax problems causes the government to significantly lose revenues from business and personal income taxes, and its effective enforcement of tax laws has caused foreign investors to pay taxes in full or be assessed with accurate interpretation of facts? In this case, there are a number of ways to legitimately but dishonestly avoid taxes such as transfer pricing, thin capitalization, and treatment of gain and loss from foreign exchange. Issue 16: What is the ratio between the government’s loss of revenues due to reduced tariffs and the consumers’ benefits, when also comparing with impacts on domestic industries and production which may fall and ensuing unemployment? • Group 7: Impact on intellectual property protection Issue 17: How much effect will the FTA obligations that Thailand has to make its intellectual property laws stricter have on Thai people’s living conditions in each aspect such as medical issues, medicines, costs drug patents, treatment and diagnosis, and effect on the agricultural sector (See impact of intellectual properties on medicines and agriculture)? How will other intellectual property-related problems affect the costs in terms of both visible and invisible losses? Issue 18: Do demands under the FTA that Thailand has to amend its laws along the line of the other State party and then to enforce such laws affect the country’s sovereign authority when its legislative, administrative and judicial branches may not exercise their
    • XI respective authorities in enacting, enforcing and adjudicating on the laws independently but are forced to follow foreign laws? • Group 8: Impact on the zoning of agricultural, investment, conservation and concession areas Issue 19: Will that fact that the investment zone covers the whole country so that no specific investment zone can be defined, affect the zoning of agricultural, investment, industrial and conservation areas? Will a problem arise when the territorial coverage of the treaty and the investment area which are different are merged as the same issue? Issue 20: When the agreement stipulates that foreign investors shall be protected from expropriation and if the government through its officials either by mistakes or fraudulently permit foreign investors to invest in a conservation area, is the government able to withdraw such investment permission without making compensation for the expropriation? Or in the case of concessionary investments, if a concession expires and it is withdrawn, does the government have to compensate for the expropriation because this is a case where enforcement of domestic laws affects foreign investors’ investment activities under the provisions on protection of investment? • Group 9: Impact on liability to provide diplomatic protection for foreign nationals Issue 21: Because Thailand has no law on nationality of legal personalities, foreign legal personalities can in practice register as Thai and have a status as Thai legal personalities, which create liability to provide protection for these foreign legal personalities as Thai nationals under international law, namely diplomatic protection. • Group 10: Impact on financial stability Issue 22: FTA negotiation obliges Thailand to allow free movement of capital and profits out of the country. Fund transfer conditions which Thailand used to impose, such as requiring that outward transfer be made in installments, may no longer be applied. In addition, the broader definition of investment also broadens the scope of how investment outputs are classified, and funds can be transferred out of the country unhindered because they are profits from investment. Will these affect financial control? Are there any effective measures for short-term capital control, as this issue could have severe and swift effect on financial stability?
    • XII • Group 11: Impact on “public policy making” and “crisis management” Issue 23: The FTA may put limits on state power in setting public policy and crisis management measures such as limits on the use of compulsory licensing policy if such policy would affect investors, or on the privatization policy. • Group 12: Impact on sovereign authority in legislative, administrative and judicial aspects Issue 24: Negotiating an FTA with a superpower may indirectly affect national sovereign authority in enacting laws as laws must be enacted in line with those of the said superpower, such as laws on intellectual property protection. Enactment of laws should appropriately reflect social, economic and political conditions as well as the living conditions of people in each country. In a sense, the legislative power to enact laws may emanate from the people but does not reflect their needs. Issue 25: The requirement on the use of arbitration as a dispute mechanism is widely accepted in both public and private sectors as well as in domestic and international trade and investment. However, in using this mechanism, issues of public interests need to be separated from other obligations. They cannot and should not indiscriminately be subject to this mechanism. • Group 13: Impact due to multi-layered agreements, particularly those under the framework of ASEAN Issue 26: Thailand is an ASEAN member country and has been bound by many liberalization commitments within the ASEAN framework, and under the provisions on the ASEAN Investment Area (AIA), Thailand has already made horizontal liberalization for every country through the definition of “ASEAN investors”. The impact therefore has to be considered also at the regional level. 2.3 Assessment framework on FTA’s impact on agriculture We propose 7 issues, classified into 2 groups, that should be assessed for their impact on agriculture: • Group 1: Core issues Issue 1: Non-tariff measures (NTMs) on technical barriers to trade, such as packaging and labeling requirements, and sanitary and phytosanitary measures (SPS).
    • XIII Issue 2: Non-tariff measures on rules of origin (RoO) and change of tariff classification (CTC). Issue 3: Amendment/change/making of domestic laws and their conflict with the obligations of Thailand under international agreements. Issue 4: Structural changes in Thailand’s production and marketing structure. • Group 2: Specific issues Issue 5: Genetically modified organisms (GMOs) Issue 6: Food and health security Issue 7: Agriculture and water resources 2.4 Assessment framework on FTA’s impact on agriculture We propose 5 issues, classified into 3 groups, that should be assessed for their impact on labor: • Group 1: Regulatory impact related to implementation of labor policy Issue 1: Are there demands that would result in Thailand changing its labor laws? Issue 2: Are there demands that are consistent or in conflict with Thailand’s obligations under multilateral agreements? Issue 3: How will demands, if any, affect the enforcement of labor law? • Group 2: Indirect and persistent impacts Issue 4: Impacts resulting from changes in the business sector; industries positively or negatively affected by the FTA; impact issues, e.g., employment, wages, labor skill development, productivity enhancement, compensation, etc. • Group 3: Sensitive issues Issue 5: Impacts that are sensitive issues. 2.5 Assessment framework on FTA’s impact on dispute settlement We propose 6 issues, classified into 2 groups, that should be assessed for their impact on dispute settlement:
    • XIV • Group 1: Regulatory impact related to dispute settlement Issue 1: Are there demands in the FTA negotiations that would result in Thailand changing its laws on dispute settlement and the enforcement of such laws? If so, to what extent? Issue 2: Are there demands in the FTA negotiations that would affect the issuance of measures to protect and maintain the public interest of Thailand? If so, to what extent? Issue 3: Are there demands in the FTA negotiations on investment protection that would affect the sovereign authority of the Thai courts? If so, to what extent? Issue 4: Are there demands in the FTA negotiations that are consistent with or in conflict with obligations on dispute settlement mechanisms in multilateral environmental agreements? If so, to what extent? • Group 2: Social impact resulting from the dispute settlement process and the substance/provisions of the FTA Issue 5: Are the substance/provisions in the FTA fair (e.g., responsibility for compensation for indirect damage)? If so, to what extent? Issue 6: Is the dispute settlement process under the FTA transparent and open to public participation? If so, to what extent? 2.6 Assessment framework on FTA’s impact on intellectual property 2.6.1 Assessment framework on issues related to drugs We propose 6 issues, classified into 4 groups, that should be assessed for their impact on intellectual property related to drugs: • Group 1: Regulatory impact related to intellectual property and drugs Issue 1: Are there demands in the FTA negotiations that will result in Thailand changing its patent laws? If so, to what extent? Issue 2: Are there demands in the FTA negotiations that are consistent or in conflict with obligations specified in TRIPs Plus? Issue 3: In the FTA negotiations, will demands on intellectual property protection affect regulatory changes in the registration of drug formulas?
    • XV • Group 2: Impact of FTA demands on access to drugs Issue 4: In the FTA negotiations, will demands on intellectual property protection affect access to drugs, both in terms of value and patient quality of life? • Group 3: Impact of FTA demands on drug self-reliance Issue 5: In the FTA negotiations, will demands on intellectual property protection affect the country’s capacity to develop its pharmaceuticals industry? If so, to what extent? • Group 4: Impact on penalty clauses for violation of intellectual property on drugs Issue 5: In the FTA negotiations, are there demands regarding the violation of drug patents, drugs considered to be counterfeit, and criminal penalty clauses? 2.6.2 Assessment framework on impact on other issues related to intellectual property We propose 3 groups of issues that should be assessed for their impact on intellectual property related to other issues: • Group 1: In the FTA negotiations, are there demands that will result in Thailand entering into other international agreements, namely: - The Paris Convention for the Protection of Industrial Property - The Patent Cooperation Treaty (PCT) - The Convention for the Protection of New Varieties of Plants (UPOV) - The Brussels Convention Relating to the Distribution of Programme-Carrying Signals Transmitted by Satellite of 1974 - The WIPO Copyright Treaty of 1996 - The WIPO Performances and Phonograms Treaty of 1996 • Group 2: In the FTA negotiations, are there demands the scope of which exceed the international agreements to which Thailand is party, namely: - The Berne Convention for the Protection of Literary and Artistic Works - The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs) • Group 3: In the FTA negotiations, are there demands that will require Thailand to change its laws on intellectual property and other legal rules and regulations, namely:
    • XVI - The Patent Act - The Trademark Act - The Copyright Act - The Plant Variety Protection Act - The Sui Generis Law on Data Exclusivity ……………………………………………………..
    • Session I: Investment Issues By Assoc.Prof. Dr.Lawan Thanadsillapakul, School of Law, Sukhothai Thammathirat Open University
    • 1 The Preparation of the Framework Guidelines for Evaluating the FTA Impacts: Investment Issues Impact Issues 1: Impacts on the Treaty Making Process and the Constitution of Thailand, B.E. 2550 Issues Recommendations for Negotiation Issue 1:In the FTA negotiation under Section Issue 1:To enact law and regulations relating to 190 of the present Constitution and problems the treaty making process in order to set the related to treaty making process under standard and ensure that the treaty is made in international law, Thailand has much less accordance with the Constitution and essential bargaining power, which, in principle, affects legislations. the sovereign of the nation. Impact Issues 2: Regulatory Impacts on Investment Supervision Issues Recommendations for Negotiation Issue 2 :Whether and how the FTA negotiation Issue 2: To establish a center to supervise the will result in Thailand being obliged to change treaty making process and to monitor its investment laws and regulations and the obligations in and commitment on the implementation of such laws and regulations. implementation of the treaty. There should not be an effort to avoid bringing the treaty to the parliamentary process under the Constitution by enacting a legislation to support the treaty in advance. In addition, legislations relating to international investment should be systematized. Issue 3 : Whether and how the FTA Issue 3: To review, revise and categorize all negotiation will result in the change on other legislations relating to the obligations under the laws and regulations related to investment. treaty at every level. Issue 4 : Whether the FTA contains obligations Issue 4: To prepare a matrix on all international which are consistent or inconsistent with other agreements which Thailand has entered into bilateral or multilateral agreements which with other nations and/or international Thailand is party to and whether and how they organizations in order to show whether an are in compliance with the WTO regulations. obligation is consistent or inconsistent with existing legislations and whether there is a need to enact a new legislation. Impact Issues 3: Impacts on Natural Resources and Environmental Protection under the FTA Issues Recommendations for Negotiation Issue 5: Whether the FTA containing a Issues 5 and 6 There should be national requirement on National Treatment and the legislations which cover all the aspects and termination and change in the legislation relating mend the loopholes on the existing thereto will result in a foreign country gaining legislations. For example, the unclear access to Thailand’s natural resources in which criteria in determining the nationality of a foreign investment used to be forbidden. juristic person which allows foreign persons
    • 2 to conduct business which are preserved for Issue 6: Whether, due to the absence and Thai nationals under Thai laws e.g. land law unclarity of law and regulation regarding the which forbids foreign persons to own Thai nationality of juristic persons and the loopholes land unless there is an exception. There in Thai legislation, foreign investors have been should also be legislation on the protection of able to registered themselves as Thai juristic natural resources and sustainable use of persons and therefore are exempted from the natural resources. There should be an Alien Business Act, the prohibition of foreigner amendment of law relating to concession to own Thai land and the specific list of which shall not be superseded by the FTA and forbidden business for foreigners under FTA JTEPA. The amendment should provide clear (negative list) specified in the FTA. benefit sharing between Thailand and foreign investors. Issue 7: Whether the government’s Issue 7: There should be a clause which responsibilities regarding the implementation of stipulates that the implementation of laws national laws and regulations affect the shall be in good faith and shall not be implementation of legislations regarding the superseded by FTA and JTEPA. Certain protection of natural resources and environment. legislations, for example: legislations relating to environment, shall supersede FTA and JTEPA. Issue 8: Whether a clause in the FTA which Issue 8: The negotiation team should hold on requires Thailand to take more liabilities than the to the principles of international law and existing international law on State should not agree to any request which will Responsibilities affects the public referendum oblige Thailand to take more responsibilities process under the Constitution and constitutional than it already has under international law as rights regarding freedom of expression such as it is inconsistent with human rights which holding an assembly and public demonstration stipulate that all persons in the country have against foreign investment, e.g. protest against participation right in the joint decision the establishment of a nuclear plant. making of the people and the right regarding freedom of expression as guaranteed by the Constitution. Issue 9: Whether and how the FTA which Issue 9: It is recommended that the craft-out stipulates that the member parties shall not be principle is used or to that the reservation on liable under the MEAs if such member country is national sovereignty regarding environmental not party to MEAs affects the environmental protection and preservation is made and the protection in Thailand. And whether and how it country party shall comply with Thailand’s affects the implementation of national reservations under the treaty. legislations and international obligations. Impact Issues 4: Impacts on labor problems, unemployment and employment conditions, occupational safety and health Issues Recommendations for Negotiation Issue 10: Whether the FTA negotiation which Issue 10: Thailand must negotiate for two- results in Thailand being obliged to open its way liberalization in labor market with labor market both at executive and other levels developed countries and Thailand must retain without the restriction on nationality will affect its right to specify measures regarding labor problems and create unemployment substantive requirements and procedural
    • 3 problems in the country. requirements of workers and professionals even though there is an obligation on Mutual Recognition under ASEAN. Thailand must also have an institution which stipulates the standards on supervision and monitoring of professional occupations and labor. Issue 11: Whether and how the FTA negotiation Issue 11: Thailand still lacks law and will result in Thailand being obliged to regulations relating to institutional implement other legislations which have an supervision on occupational health and safety. effect on investment, for example: the Its national laws relating thereto must be implementation of labor law, standard of effectively and strictly enforced. Regardless employment conditions, working hours, working of whether the employers opt for employment environment and wages. In case foreign investors contract or hire of work contract, the opts for hire of work contract rather than employers must comply with laws and employment contract or hire of services to avoid regulations on occupational safety and health responsibilities under labor law, whether and in working environment and also with the how Thailand can enforce its labor law and laws standards on machinery, chemicals, relating to occupational safety and health. employment conditions, work place, working hours, welfare, employment security and good living conditions as stipulated under the labor laws. Impact Issues 5: Impacts on Thailand’s industrial growth Issues Recommendations for Negotiation Issue 12: Whether the FTA negotiation which Issue 12: The negotiation shall be based on liberalizes investment even before the investment the principles of TRIMs without causing any is actually made (pre-entry national treatment) growth reduction, e.g. no prohibition on will affect the screening of investors and the technology transfer. The application of the stipulation of investment areas under the long FTA should be non-discriminating among the term national economic plan. Whether it will parties. The negotiation should also prohibit the use of TRIMS or investment emphasize on technology transfer and measures which have been used in Thailand. Thailand should not agree to any TRIMS – And whether it will affect the industrial growth Plus. It should be ensured that Thailand of the country. retains its ability to prepare and implement the sustainable national development plan in accordance with the economic plan. Issue 13: Whether the application of legislations Issue 13: Thailand should enact legislations relating to intellectual property will be stricter relating to the protection of intellectual than the WTO regulations, e.g. pharmaceutical property which emphasize on development and industrial design patent, and whether the and do not create obligation at WTO-Plus patent fee will affect the self-reliance of such level. It should allow Thailand to specify its industries, cause higher production cost and own public policies on heath and medical lessen the long-term development opportunity. treatment. An independent center which shall distribute knowledge and assist the registration process in a friendly manner should be established.
    • 4 Issue 14: Thai investors are discriminated as they Issue 14: Thailand should enact legislations are not eligible to receive investment promotion, which allow self development of small and e.g. measures on the specification of investment medium enterprises (SMEs) and SMEs shall amount and investment for export etc, which be eligible to obtain privileges by receiving result in Thai investors not receiving the same investment promotion. The types of business benefits as foreign investors. Thai investors also which are eligible to receive the promotion have to pay corporate income taxes, import may be classified. It should be ensured that taxes and other taxes which results in higher Thai investors will not be subject to pay more production costs while foreign investors receive taxes than foreign investors. There should privileges, both tax and non-tax benefits, are not also be legislation on tax and effective tax subject to pay income tax and get exemption collection system, training on international from import tax. The issue which should be taxes for officers, measures to prevent considered is whether these circumstances affect dishonest tax evasion and tax evasion in form the status and development of local industries of tax structure. Local entrepreneurs may and what are the advantages and disadvantages? obtain the same rights as foreign investors Foreign investors can use Thailand’s natural even though the investment amounts are resources and get tax exemption while Thai different. nationals have to pay taxes and get less benefits. Impact Issues 6: Impact on National Income and Tax Issues Recommendations for Negotiation Issue 15: Under the FTA, the government is Issue 15: In the FTA negotiation, tax issues prohibited from enforcing legislations affecting shall not be considered as indirect investment, including tax measures. The expropriation of property. There should be complications of tax problems have caused the effective tax legislation and collection system, state to lose much of its income from the training on international taxes for officers, collection of corporate and individual income preventive measures for dishonest tax evasion taxes. It should be considered whether the state and in form of tax structure to effectively deal will be hold liable if the effective enforcement of with legal tax evasion; for example: the tax laws will cause foreign investors to pay taxes effective use of arm’s length measures to in full or to be assessed to pay tax by the tackle transfer pricing problems, tax structure, interpretation of the circumstances. Regarding e.g. thin capitalization, in order to collect this, there are many legal but dishonest ways for taxes from investors in full. tax evasion, e.g. transfer pricing, thin capitalization and treatment of gain and loss from foreign exchange etc. Issue 16: How much the decrease of the state’s Issue 16: To study the advantages and income caused by import tax reduction is in disadvantages of the liberalization in all proportion to the consumers’ benefits and in systems and at every level, e.g. production comparison with the impact on local industry cost since the entry to Thailand until the that will have to close down and unemployment. remittances are made to overseas, the fact that local industries are being forced to exit the market and the production is being replaced by importation.
    • 5 Impact Issues 7: Impact on the Protection of Property Rights Issues Recommendations for Negotiation Issue 17 : Whether and how much the Issue 17: To enact intellectual property law obligations under the FTA which results in that emphasizes on sustainable development. stricter intellectual property law will affect the (Please conduct study on intellectual property livelihood of Thai people in each sector, e.g. and other issues.) medical treatment, medicine, patent fee, diagnosis of disease, nursing and the impact on agriculture (please consider the impact of intellectual property relating to medicine and agriculture) including other problems relating to intellectual property. Whether and how much visible and invisible loss it will cause. Issue 18: Whether the obligations under the FTA Issue 18: There should be a legal framework which oblige Thailand to amend and enforce its and institute to consider the enactment of legislation will have an effect on its sovereignty legislations in accordance with the FTA and on its legislative, executive and judicial powers in compliance with the Constitution and the by losing the opportunity to enact, implement Treaty Making Act. and enforce the law independently and in accordance with the wish and consideration of the state without having to enact, implement and follow the laws which have the characteristics of foreign legislations. Impact Issues 8: Impacts on the Specification of Agricultural Areas, Investment, Reserved Areas and Concession Areas Issues Recommendations for Negotiation Issue 19: Whether the investment area that covers Issue19: It is the duty of the negotiation the whole territory of the country which results in team to study the issue thoroughly. Thailand not being able to specify its investment areas will affect the specification of the agricultural, investment, industrial and reserved areas. The problem on the specification of the territorial coverage of treaty and the specification of the investment areas are combined, even though they are different issues. Issue 20: The agreement stipulates the protection Issue 20: To enact effective legislations for foreign investors from the expropriation of regarding concession which are not property. In case that the government lets foreign superseded by the FTA. investors invest in preserved areas by mistake or corruption, can such investment be revoked without compensation? Or, in case of the expiration and cancellation of the concession, does the government have to compensate for the expropriation of property? This is because it is the
    • 6 case of the implementation of internal law which affects foreign investment under the investment protection section. Impact Issues 9: Impacts on Diplomatic Protection Issues Recommendations for Negotiation Issue 21: In practice, many foreign entities can Issue 21: To enact laws or specify and register and have the legal status of Thai juristic standardize regulations regarding the persons due to the fact that Thailand does not have nationality of juristic persons, taking future legislation on the nationality of juristic persons. benefits into consideration and in This creates the state’s liability to such foreign accordance with the international allocation entities as Thai nationals who shall have the of persons. protection under the principles of international law which is diplomatic protection. To supervise and amend measures under the Nationality Act to prevent loopholes which may result in a person getting Thai nationality dishonestly. Impact Issues 10: Impacts on Financial Stability Issues Recommendations for Negotiation Issue 22: The FTA negotiation obliges Thailand to Issue 22: To stipulate effective financial allow free remittances of capital and profits measures and supervision. overseas without falling under the conditions used in the past, e.g. Thailand can no longer request the remittances to be made in installments. In addition, the fact that the definition of “investment” is very broad results in a broader definition of investment products which can be remitted overseas without limitation as investment profits. Will this affect financial control and is there any effective short term capital control which rapidly and directly affects financial stability? Impact Issues 11: Impacts on Public Policies and Crisis Management Issues Recommendations for Negotiation Issue 23: Whether the FTA agreement will result in Issue 23: To specify public policies before the limitation of state power in issuing public the entry into FTA negotiation and ensure policies and crisis management, e.g. limitations on that the state’s public policies supersede the policies on the enforcement of rights over patent the FTA and JTEPA. if it affects investors and privatization of public services.
    • 7 Impact Issues 12: Impacts on Legislative, Executive and Judicial Powers Issues Recommendations for Negotiation Issue 24: To enter into FTA agreement with a Issue 24: The FTA should clearly specify superpower country may indirectly affect the the legislative rights and sovereignty to legislative power by the state being obliged to enact regulate the state as the liberalization at legislations whose characteristics are similar to that the bilateral level in the present model of such superpower countries, e.g. intellectual which uses preferential treatment hinders property law etc. It should be noted that laws should market mechanism. The cancellation of reflect the society, economy and politics of each state’s measures, legal framework and state. In this case, even though the law is enacted by regulations, both tariff and non-tariff the legislative power, it does not reflect the actual barriers, without proper mechanisms to need of the people. regulate private sectors and manufacturers will result state’s barriers being replaced by significant market powers and significant market factors which will distort market competition and lead to more serious market failure as there is no state power to supervise and the people will have no one to rely on. In market mechanism, the state shall maintain its sovereignty in supervising and monitoring as it has duty to take care of its people while business entities do not. Issue 25: The obligation to use arbitration to solve a Issue25:Legislations regarding arbitration dispute in trade and investment is widely used and shall clearly stipulate the differentiation of accepted at private, public and national levels both disputes which can be brought to nationally and internationally. However, when using arbitration and disputes that cannot this mechanism, public interest should be (Arbitrability). In addition, this also differentiated from other obligations and this involves the petition to reconsider the case mechanism should not be applied in all or the revocation of the arbitration’s circumstances. decision relating to factual or legal issues. If there is no clear indication, in case the arbitrators misinterpret the law in their decision, such decision cannot be revoked and this will cause damage to the state. Therefore, there should be an amendment of the relevant legislations. Impact Issues 13: Impact from Agreements at Different Levels, especially under ASEAN Framework Issues Recommendations for Negotiation Issue 26: Thailand is already an ASEAN member. Issue 26: The issue has to be solved Under the ASEAN Framework, Thailand is obliged through ASEAN channel which is quite to significant liberalization. The ASEAN Investment difficult as it is a regional resolution. Area – AIA has already liberalized investment to all However, what Thailand must do is to members under the definition of “ASEAN Investor”. enhance and develop its capacity to Therefore, the impact must be considered at the benefit from the liberalized market and regional level. not to be solely taken advantages of because of market liberalization.
    • Session II: Intellectual Property Rights (IPRs) Issues By Assoc.Prof.Dr. Jiraporn Limpananont Social Pharmaceutical Unit, Faculty of Pharmaceutical Sciences, Chulalongkorn University & Dr.Jade Donavanik Faculty of Law, Siam University
    • 1 The Preparation of the Framework Guidelines for Evaluating the FTA Impacts: Intellectual Property Rights on Pharmaceuticals During the past decade, “drug patents and access to medicine” have been a much-argued issue both at national and global levels. The interests of the drug patent system have triggered research and development in medicine that groups of international pharmaceutical companies in developed nations have generally used as a response to the challenge of the negative effects of drug patents on access to needed medicines. One example is the anti-HIV virus medicine in developing nations and underdeveloped countries, which is very expensive when compared with the cost of living for the people in such countries because of the marketing that occurred at the time of the patents. According to reports from the stock exchange, the pharmaceutical industry is a highly profitable industry. , It has had a great influence on the development of the economy and politics in the United States of America by using the mechanism of monopolization in connection with the drug patent system, as can be seen from the efforts of the US in pushing forward the Agreement on Trade-Related Aspects of Intellectual Property Rights under the framework of the WTO until it succeeded in negotiations with Uruguay in 1994. Furthermore, the US continues to strive for more stringent rights protection of intellectual properties, called “TRIPs-plus”, which can be seen from the bilateral Free Trade Agreements made between the US and other countries. This includes the demands of the US in supporting TRIPs-plus during the drafting of the Thai-US FTA, which is an example of how the US creates terms to protect rights for intellectual properties at a higher level than the guidelines specified by TRIPs. While the domestic pharmaceutical industry is a generic drug industry that does not enjoy the level of research and development of new medicines, the long- standing monopolization and other domination mechanisms used by transnatinal pharmaceutical companies affect the development of national industries and causes national pharmaceutical instability. The framework for the evaluation of the impact of FTA agreements regarding the chapter on drug patent is as follows:
    • 2 Issues: That Should be Evaluated by Impact Issue Groups Table 1: Issues that should be evaluated by impact issue groups: Impact Issue Groups Impact Issues Evaluated Regulatory impacts associated Issue 1: with intellectual properties In negotiating FTA agreements, are there any and medicine. demands that will prompt Thailand to change its patent laws or not? If so, to what extent? Issue 2: In negotiating FTA agreements, are there any demands to conform or not with cases that specify more stringent multilateral agreements in the area of intellectual properties (TRIPs Plus)? Issue 3: In negotiating FTA agreements, will the demands regarding protection of intellectual properties affect the changing of regulations of the drug registration process Impacts on access to medicine Issue 4: In negotiating FTA agreements, will the demands regarding protection of intellectual properties affect access to medicine, both in terms of price and the quality of life of the patients? Impacts on self-dependence in Issue 5: medicine In negotiating FTA agreements, will the demands regarding the protection of intellectual properties affect the local drug manufacturers? If so, to what extent? Impacts on penalties for the Issue 6: infringement In negotiating FTA agreements, are there any demands regarding the patent infringed product is counterfeit? Are there any criminal sanctions? Note: This document explains the details of issues that should be evaluated for issues 4-6 only.
    • 3 1. The evaluation of impacts in terms of quantity associated with demands for the accessibility and the local generic drug industry The evaluation of the impacts of Free Trade Agreements in terms of quantity on the pharmaceutical market is a challenging issue because the characteristics of this market are specific, complex and may also be in general a good example for explaining markets with large varieties of products. These varieties have arisen because medicine is marketed in different dosages, forms, package sizes and trading names. The differences of these varieties have resulted in, firstly, evaluations of the consumption, demand, and medical expenses that affect public policies for the pharmaceutical market by making the latter more stringent, and, secondly, evaluations using economic simulations with complex dimensions and numerous hypotheses that are difficult to understand. However, a literature review revealed that researchers have developed research instruments for the evaluation of impacts of the extension of drug patents by using economic instruments since about 1990. The studies associated with the findings of this research can be summarized as follows: • Chaudhuri and colleagues (2003) 1 investigated the impacts of drug patents on prices, expenses and consumer welfare by studying the quinolones medicine group in India and using the two-stage demand estimation approach. The research findings indicated that, in cases where there was no price control in India, the product patents in this group caused the pharmaceutical industry in the country to lose 50 million US dollars in profit, while consumer welfare was reduced by 713 million US dollars. • Chutima Acklipan and colleagues (2005) 2 studied the impacts and guidelines of bilateral Free Trade Agreements. Projected impacts of the expansion of rights protection for intellectual properties on the price and access to medicine, as seen in this study, are predictors for the expenses that will occur if the patent right protection is expanded for 1-10 years. Based on calculations fusing the lists of new medicines registered with the Food and Drug Administration from 1999 to 2004 (with an average per year of 60 items), it was found that the average annual medicine expenses would increase from 257.24 to 2,636.78 million baht if monopolization was 1 Chaudhuri S., Goldberg PK., Jia P. Estimating the Effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinolones in India. Working Paper, 2003. 2 Chuttima Ackalipan, Atchara Aeksangsri, Roongpet Sakunbamroongsin, Suwit Wiboonponprasert, Siripa Udomacksorn, Wiroj Tangsatien and colleagues. The impacts and guidelines of bilateral Free Trade negotiation: expected impacts on the issue of expanding rights protection in intellectual properties on prices and access to medical supplies. Research Report. 2005.
    • 4 extended for one year; they would increase from 33,466.69 to 216,456.53 million baht per year if monopolization was extended for 10 years Serna (2549) 3 studied the impact of data monopolization on the price of medication and access to medication by using the Almost Ideal Demand System. The findings of the study indicated that the prices of medication would increase to 9.6% in the first year under the Free Trade Agreement and rise to 55% and 100% at the 6th and 12th years respectively. Furthermore, the generic names in the pharmaceutical market would be reduced by 40% in the 6th year to 30% in the 12th year. Gamba MEC (2549) 4 studied the impact of the USA-Columbia Free Trade Agreement by using the Model of Impact of Change in Intellectual Property Rights developed by Rovira, 2006, on the recommendations of the PAHO Working Group on the Aspects of the TRIPS Agreements and Access to Medicine, 2004. The research findings indicated that, according to the terms laid down by the US extending the monopoly of drug patents, if Columbia accepted the proposals in their entirety, medication prices in 2020 would increase by 40% and the medication expenses would increase by 919 million US dollars. Jiraporn Limpananont and colleagues (2008) 5 calculated the impact of American trade conditions on Thailand’s access to medicine and health during negotiations for a Thai-US Free Trade Agreement (FTA). The trade restrictions sought by the US examined in the study emerged when discussing Intellectual Property Rights in the 6th round of Thai-US FTA negotiations. This study calculated the impact on the access to medicine resulting from the extension of patent term for 2, 5, and 10 years and the data exclusivity for 5 and 10 years. The extension of the patent period could be from the delay of patent approval, drug registration, or linkage between patent and drug registration. The econometric analysis of the impact from various contributing factors was developed from the Model of Impact of Changes in the Intellectual Property Rights (MICIPR) proposed by Rovira (2006). In the cases of the extension of patent term for 2, 5, and 10 years, the periods during extension of patent term resulted in more of a monopoly or less of one. The extension of patent terms could also affect the IP system and drug system, which would then have be balanced and checked by the system administration. However, the study did not cover other consequences from this factor. 3 Serna J.P. Possible Impact of US-Peru FTA on Access to Medicines Due to Data Exclusivity Protection for Drugs. Conference entitled “Developing a Methodology to Assess the Impact of TRIPS-Plus Provisions on Drug Process” 31 July- 1 August, 2006 organized by ICTSD, WHO and the World Bank Institute. 4 Gamba MEC. Intellectual Property in the FTA: impacts on pharmaceutical spending and access to medicines in Colombia. Mision Salud and Fundacion IFARMA. 2006. 5 Jitraporn Limpananon and colleagues (2008) report “The impact and measures to handle the case of extended protection of the rights to intellectual property associated with the US-THAI FTA: dimensions of impact on access to medication and health”, received financial support from the Food and Drug Administration
    • 5 In the cases of the market monopoly due to data exclusivity, the study showed that the results could vary. If the patented drugs came to the market faster, the period of market monopoly due to data exclusivity might not extended past the life of the patent. However, if the government decides to implement government use, data exclusivity will limit the Thai Food and Drug Administration’s ability to register such generic drugs. It appears that data exclusivity has more negative consequences in a situation where a new drug has no patent or the existing patent term is shorter than the data exclusivity period. To assess the impact, MICIPR was conducted based on the following assumptions: (1) the patent term of new patented drugs remains 14 years, which is longer than a market exclusivity period of 5 and 10 years from the data exclusivity; (2) the number of new drugs (new originals and new generics) coming to the market annually is constant; (3) one new patented drug is marketed once every three years; and (4) this model does not include the parameter of government use of a drug patent. From these assumptions the data exclusivity will not extend the market monoploly after 2054 (around the next 50 years) because all new drugs are patented. Comparing the negative impacts from the extensions of the patent term with the data exclusivity, the results yielded differrences along the same time frame. In the next 5 years (in 2013), the economic impact from 5 years of data exclusivity is 81,356 million Baht which is greater than the impact from 5 years of patent term extension which is 27,883 million Baht. But in the next 15 years (in 2023), the economic impact of 5 years of data exclusivity, which is 125,888 million Baht, is less than the impact from 5 years of patent term extension which is 136,922 million Baht. 2. The evaluation of impacts associated with pharmaceutical demands on the health of the population In the area of health impact, no studies were found on the direct impact of the extension of rights protection of drug patents on people’s health. However, the impacts from not being able to access the medicine on health problems could be used for comparison. The researcher found the following examples of studies about the effects of receiving anti-AIDS virus on people’s health problems. Freedberg KA and colleagues 6 compared the budget-effectiveness of access to 3 anti-viral drugs (anti-AIDs virus medicine) to analyze life years saved and the quality adjusted life years gained by patients by using the Markov Model and the CD4 value to measure the progression of the disease. The data imported into the model came from large RCTs.It was found that the group of patients who were unable to access anti-AIDs virus medicine had between 1.97-4.61 flife years saved and between 1.53-3.96 QALY gained. On the other hand, the patients who were able to access the 6 Freedberg KA, Losina E, Weinstein MC, Palteil AD, Cohen CJ, Seage GR, Craven DE, Zhang H, Kimmel AD, and Goldie SJ. The cost effectiveness of combination antiretroviral therapy for HIV disease. N Engl J Med 2001; 344(11): 824-831.
    • 6 3 anti-AIDs virus medicines had between 3.51-7.45 life years saved and between 2.91-6.63 QALY gained. Miners AH and colleagues 7 compared the budget-effectiveness of the use of 2 anti-viral drugs compared with the use of 3 anti-viral drugs over a time period of twenty years in order to analyze the life expectancy, life years saved and quality- adjusted life years gained. They used the Markov Model over this time period to analyze the progress of the disease, funds and outcomes of medication use. It was found that the group of patients who accessed 2 anti-viral drugs for twenty years had 11.6 years’ greater life expectancy and 9.3 years of life quality gained, while the patients who could access 3 anti-viral drugs had life expectancies of 14.5 more years and 11.7 more life quality years gained. • Wood E and colleagues 8 Wood E. and colleagues analyzed the impact of not receiving anti-AIDs virus medicine in the cases of the number of babies infected at birth, the total number of AIDS patients and the average life expectancy at birth in the South African population during the period between 2000-2005. They formed a population projection model to predict the future impact on 4 situations using anti-AIDS medication and found that if there was no use of anti-AIDS virus medicine in the years from 2000 to 2005, there would be 276,000 infants infected with HIV and 2,302,000 million people with AIDS. Furthermore, this lack of medication would cause the average life expectancy of the South African population to be 46.6 years in 2005. This prediction was compared with a reduction in the number of people with AIDS to 430,000 people and possible increases in life expectancy of 3.1 years from birth if anti-AIDS medicine was available for 3 uses by infected people and AIDS patients for 25% of the population. Jiraporn Limpananont and colleagues (2008) 9 The analysis on the impact on health was based on Markov modeling of the use of antiretroviral therapy among HIV/AIDS patients in hospitals in Thailand. The results from the analysis of the impact of access to health from Thai-US FTA on HIV/AIDS drug patents in Thailand were as follows. Under the extensions of market exclusivity, the total cost of treatment during the lifetime of HIV/AIDS 7 Miner AH, Sabin CA, Trueman P, Youle M, Mocroft A, Johnson M, and Beck EJ. Assessing the cost- effectiveness of highly active antiretroviral therapy for adults with HIV in England. HIV Medicine 2001; 2: 52-58. 8 Wood E, Braitstein P, Montaner JSG, Schechter MT, Tyndall MW, O’Shaughnessy MV, and Hogg RS. Extent to which low-level use of antiretroviral treatment could curb the AIDS epidemic in sub-Saharan Africa. The Lancet 2000; 355: 2095-2100. 9 Jitraporn Limpananon and colleagues (2008) report “The impact and measures to handle the case of extended protection of the rights to intellectual property associated with the US-THAI FTA: dimensions of impact on access to medication and health”, received financial support from the Food and Drug Administration.
    • 7 patients will increase, resulting in the increase of government expenses. If the government can issue a CL, have generic drugs available as soon as the patent expires, and face no additional barriers from the Thai-US FTA, then the cost of lifetime treatment for HIV/AIDS will substantially decrease. If the patent term is expanded to 10 years, after which the government could procure a generic drug that is five times cheaper than the original product, the results indicated that the total cost would be 1,031,299 Baht. This cost is one hundred percent higher than if the government issued a CL, which would only cost 586,564 Baht. The impacts on the access to medicine were evaluated in terms of life-year gained (LY gained), and disability-adjusted life-year (DALY) averted. Assuming that the government had a fixed budget of 3 billion Baht for 120,000 HIV/AIDS patients, the study reported the impact from patent extension. The longer the patent extension, the greater the limitation on access to medication, resulting in the decrease of LY gained and DALY averted. The scenario in which access to medicine is the hardest is when extending market exclusivity for 10 more years while having a generic drug that costs five times less than the original product. Although the patents of ARV drugs have expired, the government will not be able to provide the ARV program that could cover all HIV/AIDS patients. Due to drug resistance, HIV/AIDS patients need access to the third line ARV regimens, which are more expensive than the first and second line ARV regimens. The substantially higher costs of the third line ARV regimens result in higher total lifetime costs of treating HIV/AIDS patients, which is also more than the government budget. 3. The evaluation of impacts associated with demands regarding the violation of medical patents, consideration of counterfeits, and criminal penalties This is a new issue and currently no studies have been found on this topic. There should, however, be studies about the impact on the administration and management of the government, the agencies responsible, and the expenses that would be incurred, including the impact on the national pharmaceutical industry. Suggestions for Negotiations 1. Use the evaluation as a process of participation by various sectors in negotiating the framework of the agreement. 2. If the evaluation results find that demand generates negative results for Thailand: 2.1 Unacceptable for the following reasons: • The access to medicine is the issue of human right, the health of the people, or the sovereignty of the country. • The demand exceeds standards or goes against international agreements.
    • 8 • The demand requires laws to change in order to be implemented, the change depending upon the legislative body that has a separate authority from the administration. 2.2 Offensive measures should be used during the negotiations by stipulating terms for each of the US demands, such as in the following cases: (1) In cases of extension of the pharmaceutical market monopoly to exceed the term of the patent because of the delayed issuance of patent documents. • The US must help develop the setting up of patent databases in order for patent procedures using digital systems to be flexible, accessible and capable of searching in both Thai and English before implementing measures to extend monopolies in the pharmaceutical implementation of exceed the term of the patent due to the delayed issuance of patent documents. • Specify the nature of the delay caused by the applicant’s own fault e.g. in cases where the applicant for the patent was unable to send the documents within a week after the application date, or where the applicant did not apply to request an inspection of the patent within a week after the announcement that the request was not entitled to an extension of the term of the monopolization due to delay. (2) In cases where the extension of the pharmaceutical market monopoly exceeds the term of the patent due to a delay in registering the medication formula. • In applying for registration of the medication formula, notification must be given requesting the correct status of the patent of that medication. If the notification is incorrect, the right to request an extension of the monopoly as a result of the delay will be forfeited. • Specify the nature of the delay caused by the applicant’s own fault in requesting registration for the medication formula, such as in cases where the applicant registers the medication formula but could not send all of the documents within a week after submitting the request to register it; as a result, the applicant will not have the right to request an extension of the pharmaceutical market monopoly that exceeds the term of the patent due to the delay in registering the medication formula.
    • 9 (3) In cases involving a link between the registration of the medication formula and the patent status. A link between the registration of the medication formula and the patent status increases the burden on government officials. Therefore, the standard time period for considering the medication formula registration that is used as the basis for the consideration of the delay must be extended. • Government officials are not guilty of civil or criminal offenses in registering the formula of a new generic medication that is still patented in the following cases: if the owner of the registration of the original medication formula did not notify the patent status of that medication when registering the new formula; or if s/he did not report everything; or until it is proven that the government officials intended to violate the law or intended not to proceed to change the registration of the new generic medication upon receiving notification from the owner of the original formula. (4) In the case of DE • Due to new measure regarding monopoly in the pharmaceutical market, a preparation period is designated wherein bargaining may take place for as long as possible. There must be a minimum preparation period of at least 10 years. • The monopoly in the pharmaceutical market is canceled if that medicine has no patent. • Limit the boundaries of monopolies of DE to include only new medications that are new chemical compounds; government officials have demanded some of the information used in registering the medication formula as trade secrets only, because the US demands monopolies in the pharmaceutical market for the reason that Thailand does not give protection according to the TRIPs agreement, section 39.3, (see above) but gives protection specifically for new medications that are new chemical compounds and gives some of the information used in registering the medication formula as trade secrets. • During the period of monopoly under DE,exceptions must be made to enable registration of new generic drug in cases where the patent rights are exercised by the government (Government Use) according to Measure 51 under the Patent Act of 1979 (vol. 3), amended in 1999.
    • 10 2.3 Accept on the condition of having compensatory standards by using the interest that some branches receive from the agreement in order generate acceptance from every branch with a fair distribution of interest, rather than clustering only in specific branches. 2.4 Accept those demands arising from the results of the evaluation that have minimal impact on the goals of an acceptable negotiation framework. ……………………………………………
    • 1 The Preparation of the Framework Guidelines for Evaluating the FTA Impacts: Intellectual Property Rights (Excluding Medical Products) Shall consider both the positive and negative impacts and specific impacts such as the fact some areas obtain benefits and others lose benefits; shall evaluate the economic, technological, social and environmental dimensions. The topics for evaluation are classified into 3 groups as follows. Group of Issues Issues 1. Whether the FTA − Paris Convention for the Protection of Industrial preparation shall make Property requests such that Thailand − Patent Cooperation Treaty – PCT participates in other international agreements, or − Convention for the Protection of New Varieties of not. Plants – UPOV − Convention Relating to the Distribution of Programme-Carrying Signals Transmitted by Satellite (1974) or Brussels Convention − Copyright Treaty of the World Intellectual Property Organization in 1996 − Treaty Regarding Shows and Sound Recorders of WIPO in 1996 2. Whether the FTA − Berne Convention for the Protection of Literary and negotiation has too many Artistic Works requests compared to the − The Agreement on Trade Related Aspects of international framework Intellectual Property Rights –TRIPs where Thailand acts as a member, or not. 3. Whether the FTA − Patent Act negotiation makes requests affecting Thailand so the − Trademark Act country has to change its intellectual property laws and − Copyright Act other laws and regulations, or − Plant Protection Act not. − Data Exclusivity Law. 1. Proposals for Negotiation 1.1 Initiate the processes for evaluating the participation of several parties in the negotiation framework Regarding the negotiation of bilateral agreements with other countries in the past, the organizations and negotiating team have attempted to request several parties to participate in the negotiation, but on close consideration, we can find that the participation of several parties and the duties of the organizations or negotiators are different. This is because the negotiators perceived that they themselves have the right to identify the country’s intentions and have the right to oblige the country, which is
    • 2 an important mechanism for peace and happiness among Thai people. This is a narrow view. With a broad and open view, we find that those who have the actual rights are the people throughout the country and that the word “people” does not mean “Non Government Organizations (NGOs), since people is a more meaningful concept. The main question is that not all the parties participate in the negotiation since they are powerful in society. Thus, the thing to do is to participate with them and apply the data obtained from them during negotiation, since such data is obtained from observation and empirical study; it is not generated data. If we are able to coordinate theoretically or use theory to coordinate practically or pragmatically in negotiations with counterparties by indicating that the actual power comes from the people, not the government or negotiators, then various issues shall rely on the field data and the grounded theory. U When such items are included in the proposals in bilateral agreements, they shall be used in the actual situation without any advantages / disadvantages for the negotiators on the basis of game theory or a win-win outcome. Normally, people understand that it is not feasible to achieve such an outcome as win-win; thus, the win-win situation is assumed and so we accept the negotiation outcomes or the outcomes of other actions. If we are able to act like this, negotiations will be beneficial to Thailand. If not, we shall have to find other appropriate guidelines in the future. If we go the wrong way or cannot find the right way, this may be damaging for the nation and the people. 2. If the outcome of the evaluation shows that such requests negatively impact Thailand, then: 2.1 The requests should not be accepted for the following reasons: 1) There are impacts on human rights, health or the country’s sovereignty; 2) The requests exceed the standard or are inconsistent with international agreements; 3) The requests lead to an amendment of the law, and this depends on the fact that the legislative branch has a separate authority from the administrative branch. All of the three above-mentioned issues are examples of guidelines for denying the acceptance of proposals or requests politely and in general terms. One such proposal appeared in the FTA between Singapore and the USA. Considering that the USA will make the same proposal to Thailand, Thailand should not accept the following. • Well-known trademarks and geographical indicators should not be considered as the same issue, and trademarks should not have priority, since the geographical indicators are characteristic rights of communities, i.e. the rights of the majority of people. Thus, we should pay attention to this issue first, and in case of any disputes in the field of trademarks, we will have measures for solving any problems. • Another issue is participation in the Internet Corporation for Assigned Names and Numbers (ICANN), especially in terms of dispute resolution, (since ICANN is the consulting company of the US government only) and the dispute resolution process of ICANN is no different from dispute resolution according to general theories. In addition, the acceptance of such resolution
    • 3 processes may lead to the fact that the processes in Thailand are threatened in terms of fairness. • The issue of the protection of copyrights for temporary data storage in electronic form. Such temporary data storage does not cause any damage to the owners, except when storage is for a specified period of time and for trading, or when the storage concerns computer programs or is permanent. This kind of data storage may be considered to be a “violation”. • The extension of the copyright period from 50 years to 70 years is not necessary, since the extension is is for protecting the heirs of the author. In addition, in the case of a juristic person, the 50-year period for benefiting from the copyrighted work is appropriate. • The protection of encoded satellite signals, since the prevention of the violation of copyrights on the contents is sufficient. • The protection of patents concerning plants and animals, in addition to protection of higher life forms, which is a minor issue. Regarding the protection of patents concerning plants and animals, if the potential of Thai scientists is not realized, the agricultural field may be monopolized by multinational companies and foreign researchers. Thus, it is inappropriate to acceptthis proposal at the present time. • The restriction of the use of compulsory licenses concerns the submission of a proposal or request that contradicts the context of the Doha Declaration, according to which the use of compulsory licenses is expanded because a country needs to access patented inventions, especially medical products and can have access to inventions essential for life. If there are any restrictions, it will be necessary to identify an acceptable definition of technology that can restrict compulsory licenses, since the USA is one of the countries that uses compulsory licenses in patented technologies. • Data exclusivity in the pharmaceutical and agro-chemical areas enjoys 5-year and 10-year periods respectively. It is a form of protection that looks like market monopoly and may limit access to the agro-chemicals that are necessary and can be found from other sources not imported by the owner of the prototypes. In addition, such products are imported by the owners into the patent protection system. Thus, it is not necessary to protect the release of such products to the market. Accept conditions for example having measures to indemnify damages by taking the benefits that some areas may obtain from an agreement in order to distribute them to the areas that lose the benefits. (1) The registration of trademarks regarding scent, since this represents an expansion of the characteristics of trademarks; the use of scent as a symbol for Thailand has not been seen much or may never have been seen. The creation of a distinctive scent is not difficult. Thus, it is impossible to protect Thai people to the same extent as foreigners. But the main concern is the method for auditing the trademark regarding scent so it may be necessary to expand the auditing unit, namely,
    • 4 the Department of Intellectual Property, Ministry of Commerce in case this proposal is accepted. (2) The protection of effective technological measures, since the use of equipment to find channels violating such measures is illegal, according to other laws such as the laws regarding telecommunications. In addition, all the equipment used to find channels violating other people’s rights is protected by patents. Thus, increasing such protection just means stricter protection, which we are able to provide; but we need to coordinate with the Royal Thai Police to ask for their opinion since they are the main supervisory body. (3) The protection of rights management information. According to the definition, it refers only to information used for management of visual and sound recordings that are copyrighted and similar rights. Thailand has already enjoyed this protection under the trade secrets act. However, we must be careful that the enjoyment of such protection is favourable to business, leading to an expansion of the protection of patents, since there are problems about protection, even in the USA. (4) The expansion of the protection of actors’ rights. These are rights already protected under Thai law but should be expanded with additional protection arising from the proposal or request, since actors / actresses are always cheated by the business people, who have a higher power of negotiation. (5) The expansion of the patent protection period in case of delay after the verification of patents. In case of inappropriate delay, there shall be measures to extend the period of protection, but only in special cases, which should be considered thoroughly beforehand. 3. Policy Recommendations for Negotiations One of the issues that should be considered is the fact that industrial nations use bilateral trade agreements, or Free Trade Agreements, as instruments to push forward laws within the country, or to designate policies or politics within the country, in a manner that diverts from the direct proposal of their own legislation, presenting outside factors that benefit the country. This is to provide laws that, if enacted, will yield benefits or ensure the acceptance of policies that will expand the economy of the country in question or create markets to support the promulgation of products from the business sector. This is the case of the United States of America. The issues that must be considered at the policy level concern the methods that the United States’ government uses in moving from multilateral frameworks to bilateral frameworks and the use of the benefits from these bilateral trade agreements, wherein foreign businesses, or businesses outside the country, are able to benefit domestic businesses or the issuance of domestic laws, especially on the topic of intellectual property. Interestingly, the US moved the base of negotiations about intellectual properties from the trade-related aspects of intellectual property rights (TRIPs) to the bilateral negotiations under Free Trade Agreements. This will benefit
    • 5 the US in the following two ways: 1) the US could grant different benefits to countries agreeing to bilateral trade agreements with the US because this practice does not fall within the scope of performance under the Most Favored Nations (MFN) principle; 2) the US could prevent TRIPs from being changed and reduce their current intensity. Although the intensity level of TRIPs would only be a low-level standard in the eyes of the US and other industrial nations, the aforementioned standards are high enough to provide higher levels of protection for rights to intellectual property than those proposed by developing countries. The problem is that the US uses bilateral agreements as an instrument for issuing domestic laws, which means that in some cases US proposals within the boundaries of negotiation continue to be a point of contention. However, if the US signs bilateral agreements with many countries with the same content, the mere presentation of these agreements to Congress will ensure that Congress accepts them. Furthermore, when the potential benefits are realized, Congress will issue laws accordingly, thus enabling the government’s failed proposals to Congress to succeed indirectly, in the case of foreign countries, and eventually in Congress. One example is the case where the US applied the Digital Millennium Copyright Act with the Free Trade Agreements with Chile and Singapore, even though the stipulations were still problematic in the US. Similarly, people in the US were still arguing about the necessity of extending the term of rights protection, but the US government went ahead by specifying in advance the required term in the US in FTAs with Singapore and Australia etc. The topic we must consider in terms of policy is the fact that bilateral agreements on intellectual properties have turned out to be political instruments in the US, especially when the government uses a backdoor negotiation route around laws that are internally problematic This will cause the proposals the US government has not been able to propose directly through Congress to be proposed indirectly when the contents of the FTAs are put forward, thus ensuring that the laws the government wishes to issue are in fact finally drafted by Congress because a binding case between two countries has already been established. Generally speaking, the negotiation partner will not benefit other than obtaining a basis or arena for political actions by the US, which uses foreign advantages to generate domestic advantages. Help can be found in considering groundwork for negotiating policies which may be based on theoretical views. Furthermore, the discovery of a practical method yielding maximum results may include consideration of the following topics to use both as a conceptual framework and guidelines for further planning strategies and strategic moves in the negotiations:
    • 6 1) Bargaining framework From the history of international businesses, we have witnessed various countries switching their binding obligations from an agreement with one country to another agreement with another country so that obligations specified by each agreement will yield maximum benefits for their respective countries. Moving from one obligation to another by abandoning the former obligation, as though it had never existed, or abandoning a practice that complied with that obligation, however, is not easy; this is especially true under agreements that transform themselves into regimes consisting of the specifications of the agreements and the organizations supervising the agreements. However, abandoning any agreement is difficult due to the members’ obligations and various terms and conditions that have different levels of stringency and leniency i.e. the stricter and more controlling, the harder they are to avoid or ignore. If, for example, we consider the topic of intellectual property, we find that most countries, especially industrial nations, were once members that made a major contribution under the framework of the WIPO. However, the status of the WIPO disallows those countries from being able to push strongly for giving protection of rights for intellectual property in various parts of the world, especially in developing countries and the least developed countries. Therefore, the industrial nations found a way to transform WIPO into a new regime under the WTO. Thus, TRIPs came into being. On entering the WTO/TRIPs, the industrial countries found them to be a forum offering significant benefits. As time passed, however, the developing countries and the underdeveloped countries also tried to find themselves space for the topic of patents for living things including human rights issues such as farmers’ rights, by switching to the Convention on Biological Diversity to balance various TRIPs specifications. At the same time, there are no agreements sufficiently broad in scope for industrial nations, developing countries and underdeveloped countries to work together appropriately. Therefore, the industrial nations must find a way to shift the balance back in their favor by using bilateral negotiations instead and switching between various forms of bilateral agreements, or even unilateral acts, until there are multilateral agreements with potential benefits for all parties. Then there will be a return to the framework of multilateral negotiations once again, wherein the aforementioned multilateral agreements may be existing agreements either with additions or equivalent terms and conditions. 2) The development of regimes When various countries have ideas going in a similar direction, they will be receptive to the ideas of each party. Furthermore, if these general ideas can be used to benefit their countries, they will be willing to collaborate to a certain degree. After a
    • 7 period of development, regimes may be created. The primary theory behind the emergence of a regime is the interest-based theory, which states that various countries join regimes or agreements between others because, under the framework of the regime, or the agreement between countries, benefits are obtained for themselves: the primary benefits individuals and most countries want to occur are based on self- interest because having a regime will help support the generation of benefits in at least three ways: 1. Having a regime will help the market system, and the countries that are in the same regime will exchange information amongst themselves, arguing with one another about the political issues under that regime, thus resulting in less loss outside the regime; 2. Having a regime as the center of negotiations will make transactions less costly; 3. Under the regime, hidden agendas or concealments of various issues are more difficult because there are checks and balances on many sides. However, interest theory alone cannot explain the occurrence of regimes due to the fact that countries may lose most of their interests but acquire some additional interests by joining the regime. This latter may be explained by the second and third theories, namely the power-based theory and the knowledge-based theory. The formation of intellectual property agreements into regimes shows the power-based theory quite clearly. For example, when the Berne Convention was drafted, the leading country arranging the meeting, Switzerland, did not have much leverage, but the European world powers joining at that time, whether France, Germany or England, made the meeting successful. In the end, the Berne Convention was formed. The world powers didn’t join the Berne Convention because they felt obligated to Switzerland, but because they saw that checks and balances for one another under the interest-based theory would be more feasible when they were sitting at the same negotiation table. Therefore, they joined the Convention. Later on, developing countries also joined the Berne Convention because it raised standards for the world powers to see that the members were ready to practice according to an international framework in order to avoid unilateral actions; this in turn showed that the power- based theory also appeared when the TRIPs were included in the framework of the WTO at the next stage of negotiation and implementation. Why do many countries that have not received any benefit and not felt that they are being forced to join international agreements, or any regime, choose to enter the cycle or the framework of any international agreement or regime in the first place? It is because they want to develop their knowledge from meeting, seeing, contacting and exchanging with those who come from various other countries, especially educated members from industrial countries. Therefore, the knowledge-based theory comes into its own to stimulate the push for joining regimes, which is also the origin
    • 8 of the regime. One reason why the countries join together is to exchange and gain knowledge from one another. This is similar to the world powers. They continue to seek knowledge from one another and continue to desire to display their knowledge so that other countries follow them. Therefore, when the interest-based theory, the power-based theory and the knowledge-based theory are combined, the creation of any regime becomes possible. On the topic of intellectual property, at least during this time period, a number of industrial countries led by the USA saw that relying solely upon TRIPs was not consistent with these three theories. If the settings of TRIPs could not be changed, however, they would choose other ways in which it would be clear that the method of bilateral negotiation will be replaced because it cannot respond to the three theories quickly enough by negotiating in pairs: a general negotiation will trigger exchanges among many countries. Moreover, at this time, the industrial countries still don’t want to form regimes, or be a part of a regime, with many other countries. Therefore, the collective regime theory may not be implemented with respect to intellectual property at this time because it would push for a hegemonic regime, which would require undertaking the practices of other countries with the regime’s own guidelines or stipulations appearing in the laws of these countries instead of using the context created by joint drafting and designating guidelines. 3) Global Lawmaking In the past, the issuance of laws was the business of each country, which designated its own stipulations, guidelines or various contents of its laws independently. Once the world entered the age of discovery of new lands, however, colonization occurred. The colonizing nations stipulated that their colonies practice according to the boundaries they designated and adopt laws, including traditions, cultures and other practices, as guidelines. Later in the transition phase, when the colonization age was over, the issuance of laws took place on an international level to comply with agreements and to take account of negotiations. This was also true in the case of intellectual property, where enforced compliance has become less effective and progress has led to specifying regulations in international agreements instead. Although current trends may lead back to the age of bilateralism or unilateralism once again, the difference now is that the people who draft the laws, or who are key players in the formation of intellectual property under international law, have been states led by governments. This has been the case since the time when international law was active in the area of intellectual property rights, from the initial stages to the beginnings of many large scale agreements or regimes; these laws were processed primarily by civil servants. In today’s world, however, the scene has changed.
    • 9 The people who produce the main mechanisms for drawing up policies, including both domestic and international laws, especially in the area of intellectual property, are no longer from the government sector. Rather, the private sector and the non-governmental sector are focusing on these issues, whereas the government sector is merely the messenger. The head of the commission of intellectual properties established by the British government has the following explanation. “It is frequently the case that the benefits of the producer are considered more important than the development of policies about intellectual properties, and the interests of the true consumers are either unheard or ignored. Therefore, policies are usually drawn up with the interests of the private sector system user in mind rather than being based upon the principle of no division for the public interest. In the discussion of intellectual properties between industrial countries and developing countries, the aforementioned imbalances have also occurred. The representatives of the industrial nations have been motivated by the interests of the producers gained by possession of stronger intellectual properties in foreign countries with markets that support the export activities of these private sectors, while on the other hand the consumer countries, which are usually developing countries, will specify little or show very little interest when compared with the industrial nations”. Therefore, if the governmental sector, which is the primary negotiator on the international stage, either at the multilateral or bilateral level, cannot see who will be the true beneficiary and how they should proceed, an imbalance will be created, and loss of benefits would be so long-lasting that it could not be remedied. 4) Uniformity or Harmonization In aiming for uniformity or harmonization in order to achieve practical success, we must realize that uniformity is a procedure or process that is not the ultimate goal. This is because making things the same is categorization by dividing into spectra; we find that one end of the spectrum is marked by difference or diversification and the other end is uniformity or harmony. If we push too far in any direction, problems will occur because every country has its own similarities and differences with respect to others, especially in the area of intellectual property creativity. The requirement for all policies and laws to be similar or different is not feasible; changes according to the categories on the spectrum are the answer. Furthermore, there will always be times when uniformity is the process i.e. when changes in intellectual properties occur, adaptation of rights protection in intellectual properties will follow. The process of uniformity or harmonization of laws was explained splendidly by Stephen Ladas .
    • 10 “The discussion of the unification or harmonization of laws causes difficulty because of the initial incorrect hypothesis that the law is the only difficult concept. When we think of the law as an instrument that the agencies of the Department of Justice and the administration will specify as acquisition, maintenance and enforcement of the rights to industrial properties, we will find four different factors in the law. Ladas said that these four factors were explained by the Dean (Pound) as follows: 1) laws and regulations will include the rule of law and implementation processes; 2) the decision of the Justice Department and the administration will depend upon the interpretation of those laws; 3) the original techniques and methods of implementation for legal documents; and 4) the ideas and ideals in literature, politics and ethics, which is an important part of modifying laws, decisions and various techniques. Moreover, when we speak of the unification or harmonization of laws at an international level, most people would think of only the first factor. But we must always understand, however, that the other three are the factors that will designate laws. When the factors are unified under judiciary and professional principles, the existing factors will bring the law to life and make the law as it should be, not an illusion of the law”. If we implemented this idea in the context of international negotiations on intellectual properties, we would find that the designation to practice according to any standards in the law, without considering the particular conditions of each country, would result in opposition and no practice. Therefore, modifications must match the status of the economy, society and cultures by focusing on forming laws that should be drafted, not laws that people want to draft. Therefore, the law should be at a level that is strict enough to control activity, but with sufficient flexibility for practice. 5) Judicial Trends If we search properly, we will find that we don’t have world-wide intellectual properties, but we have intellectual properties in each country. For example, we don’t have rights throughout the world but have rights in the United States of America, England, India and Thailand, for example. If we keep on listing countries, we may eventually cover almost the entire world, but boundaries remain. We must understand, however, that these boundaries are becoming more and more porous, especially since globalization has spread to every corner of the Earth, without even the exception of the judicial arena. Putting it this way does not mean that the judicial arena will be altered or moved by globalization. However, it must adapt. First, the laws, regulations or rules in the area of intellectual properties have a higher rate of adaptation, so that almost every advanced country has obligations concerning intellectual properties in their constitutions, just as Thailand does. Therefore,
    • 11 intellectual properties will no longer be private laws. Rather, intellectual properties will shift to become a part of constitutional law and a part of constitutions, where the latter will be broader in scope than the former, and will also decide the implementation of the former. Second, intellectual property laws, especially international laws, are laws with multiple origins attached to old and new technologies, both simple and complex, and include laws from several countries relating to the obligations of each area of the protection of rights for intellectual properties. Therefore, management and administration play important roles in deciding how to resolve various conflicts, especially in the judicial area, where judges must have knowledge of international and foreign law. Moreover, judges must also have technological knowledge, or they will not understand the direction of the arguments. Knowledge of not only the judicial sector but also of the legislative sector is required for drafting laws, while it is the administration that implements laws and must be both aware and knowledgeable as well. Third, the interpretation of intellectual property laws is not only a private issue but a public concern, because intellectual properties have become an important part of people’s lives and have permeated into many areas such as food and medication. Therefore, neither policies nor the use of intellectual property laws can be implemented by private thinking systems alone, but require public thinking systems, especially for intellectual properties on a macro-level namely international negotiations about intellectual properties, whether on a multilateral or bilateral level. The issuance of intellectual property laws as well as the implementation and interpretation of the aforementioned laws are the factors that combine to form an accurate judicial process. As for the topic of trial procedures, genuine disputes between private entities could still be interpreted by private laws. Therefore, the people who are associated with various intellectual properties and every individual citizen must have a certain degree of knowledge and understanding about intellectual properties, including rights protection of intellectual properties, in order to protect themselves and their countries. …………………………………………….
    • Session III: Environmental Issues By Dr.Sujitra Vassanadumrongdee The National Center of Excellence for Environmental and Hazardous Waste Management, Chulalongkorn University
    • 1 The Preparation of the Framework Guidelines for Evaluating the FTA Impacts: Environmental Issues The conduct of Environmental Impact Assessments (EIA) in free trade agreements (FTAs) requires careful study of content which explicitly addresses environmental issues, e.g. the environmental chapter in US FTAs and provisions on environmental cooperation in European Union FTAs, as well as other sections expected to have an environmental impact, or inconsistent with the goals specified in the environmental chapter, e.g., the chapters on investment, liberalization of services and intellectual property. As the environmental impact from FTAs is a complex and multi-dimensional issue, the author has classified environmental impact into three categories: 1. Impact on laws and regulations pertaining to the oversight of natural resources and the environment; 2. Environmental impact due to regulatory changes resulting from an FTA; 3. Environmental impact due to expansion of economic activity resulting from an FTA. Issues that should be evaluated according to impact category Table 1 - Summary of issues that should be assessed according to impact category Impact Category Impact Issues Evaluated Impact on laws and regulations Issue 1: pertaining to the oversight of Do the FTA negotiations include requirements for natural resources and the Thailand to modify its environmental laws and their environment enforcement? If so, to what extent? Issue 2: Do the FTA negotiations include requirements that are consistent or incompatible with obligations specified in Multilateral Environmental Agreements (MEAs)? Environmental impact due to Issue 3: regulatory changes resulting from In the FTA negotiations, will the requirements on an FTA investment protection affect the country’s ability to protect its environment? If so, to what extent?
    • 2 Impact Category Impact Issues Evaluated Issue 4: In the FTA negotiations, will the requirements on intellectual property protection affect the country’s ability to protect its environment? If so, to what extent? Environmental impact due to Issue 5: expansion of economic activity Will the FTA negotiations affect the country’s resource resulting from an FTA base (e.g. forest resources and products, water, minerals, fisheries)? If so, to what extent? Issue 6: Will the increase in investment, manufacturing, and consumption as a result of the FTA lead to an increase in pollution, greenhouse gas emissions and waste? If so, to what extent? Issue 7: Will the FTA negotiations lead to an increase or decrease of goods which pose a high risk to the environment and public health (e.g., used goods, hazardous waste, banned/hazardous substances)? Issue 8: Will the FTA negotiations affect the country’s biodiversity and ecosystems? If so, how? Note: This document will address only Issues 1-7. Issue 1: Do the FTA negotiations include requirements for Thailand to modify its environmental laws and their enforcement? If so, to what extent? An issue that needs to be considered is how the demands of trading partners on environmental issues or in the environmental chapter of the FTA will affect the country. Studies have previously been conducted by civil society organizations, e.g., a research project report titled “An Environmental Review in Preparation for the Thai-US FTA” by the Good Governance for Social Development and the Environment Foundation (GSEI) (Suthawan Sathirathai et al., 2007) and a paper “The Politics of FTA Negotiations on Environmental Issues: the Case of the US FTA” (Buntoon Sethasirote, 2008). They analyzed both the positive and negative impacts of
    • 3 demands in the environmental chapter, particularly by the US, which may affect Thailand both positively and negatively in terms of trade, the environment and sovereignty, as follows: • Positive Impacts 1) Provisions requiring the negotiating countries to enforce environmental laws more strictly may help improve environmental quality in Thailand. 2) Provisions requiring a higher level of environmental protection and efficient law enforcement may lead to the improvement and reform of environmental law as well as the system and mechanisms of environmental law enforcement in Thailand. However, whether and to what extent both positive impacts occur depend significantly on government policy, as well as the preparedness and efficiency of legally empowered state agencies. • Negative Impacts 1) Should Thailand take serious action in raising the level of environmental protection and strict enforcement of environmental laws, it would re-internalize what used to be external costs back to the business operator. This would result in higher product costs, due to higher environmental management costs. Small and medium enterprises that are unable to adjust will have trouble competing. However, if producers and operators can adapt appropriately, the problems may be short-term. 2) Although Thailand has the right to set its own level of environmental protection, the US sets the direction for negotiating partners to raise the level of protection. This higher level of environmental protection may cause problems in implementing the provisions on efficient enforcement of environmental laws. 3) US demands for strict supervision of the environment would enable the US to employ environmental law enforcement standards as legal trade barriers (compensating for tariff concessions given to Thai products), which would affect the export of goods to the US and other countries. Recommendations for Negotiation 1. It should be clearly stipulated that the FTA negotiations shall not impose restrictions on any actions by Thailand to care for and protect the environment, public health, or the public interest, as such actions are a fundamental responsibility of the State in protecting environmental
    • 4 quality as required by the Constitution. Also, it should be clearly stated that any policy or measure by the state to raise the stringency of law enforcement or standards of environmental protection, public health or the public interest shall not be offered as grounds for legal action, even though such measures or policies may increase costs or affect the investor’s business operations. 2. There should not be any provisions in the FTA that undercut Thailand’s sovereignty or allow the negotiating partner to intervene in the legislation or enforcement of Thai environmental laws, as the formulation of environmental regulations and law enforcement are the sovereign right of each state. 3. In case Thailand is unable to negotiate changes to the demands of its negotiating partner, such demands should be used to support action on the environment in the country, for example, negotiations on intellectual property protection. Should the negotiating partner wish to increase the level of protection for intellectual property, Thailand must demand that the negotiating partner exempt the enforcement of intellectual property protection in the area of clean/green technologies and transfer such technologies to Thailand. This would help Thai business operators comply with the environmental laws as required (Buntoon Srettasirote, 2008). Issue 2: Do the FTA negotiations include requirements that are consistent or incompatible with obligations specified in Multilateral Environmental Agreements (MEAs)? If the FTA negotiations include demands for the negotiating partners to comply with obligations under only those MEAs to which both sides are party, this can have both positive and negative impacts, as follows: • US-Thai FTA negotiations 1) Positive Impact The reaffirmation of the relationship between the FTA and MEAs will enhance cooperation or support for compliance with the MEAs to which both countries are party. 2) Negative Impacts • Thailand is a signatory to several MEAs, while the US has signed only a few. This creates a disparity in those MEAs to which Thailand is party but the US is not, such as the
    • 5 Convention on Biological Diversity, the Kyoto Protocol, and the Protocol on Biosafety. If measures or instruments established under such MEAs conflict with provisions under the FTA, such as on protection of intellectual property or investor rights, it may constrain or even nullify Thailand’s rights to use such measures or instruments against US investors. (Suthawan Sathirathai et al., 2007; Buntoon Sethasirote, 2008). o Example of intellectual property protection - The US’s requirement to expand patent protection to cover all types of living organisms will result in restrictions on Thailand’s right to access and utilize plant genetic resources, which contravenes the principles and obligations under the Convention on Biological Diversity (CBD), to which Thailand is party but the US is not. For this reason, if Thailand were to exercise its right under the CBD to deny protection for patents on biological resources or to proceed according to its CBD obligations, the US may be prompted to oppose Thailand’s action and a dispute may ensue. Conversely, if the Thai government were to accept US demands, it would be restricting its own right to deploy measures and provisions under the CBD. This may cause Thailand problems in complying with the CBD and constrain the sustainable management of Thailand’s biological diversity. 1 o Examples of investor rights protection - Thailand’s compliance with the MEAs may require the issuance of certain measures that pose barriers to US investment, which may result in lawsuits by US investors claiming breach of the principle of investor rights protection agreed upon in the FTA. This could happen even though the measures are in the interest of environmental protection (see example in Framework 2). • Thailand’s consequent inability to comply with the MEAs to which it is party may cause the country image problems for failure to carry out its obligations under international agreements. • EU-ASEAN FTA 1) Positive Impact Ratification of the Basel Convention Ban Amendment by the EU will be beneficial for the protection of the country’s environment, as the Amendment obligates The Annex VII countries (Convention parties that are members of the OECD, the EU and Lichtenstein) not to 1 For example, conditions in the Investment Chapter, such as in the US-Singapore FTA, restrict the state’s power to set performance requirements, e.g. prohibiting compulsory technology transfer etc., while the CBD (Section 16) has provisions promoting the transfer of technologies related to the conservation and sustainable use of biological resources.
    • 6 export hazardous wastes under the Convention to non-Annex VII countries (developing countries). This would lower the risk of hazardous wastes being imported into Thailand. 2) Negative Impacts As the EU has ratified several MEAs, the negative impacts are different from those of the US, i.e., Thailand may be affected by demands to undertake trade and environmental measures consistent with the MEAs to which the EU is party but Thailand is not as of present (May 2008). A case in point is the EU’s joint ratification of the United Nations Agreement for the Implementation of the Provisions of the United Nations Convention on the Law of the Sea relating to the Conservation and Management of Straddling Fish Stocks and Highly Migratory Fish Stocks and the Council decision of 6 July 2006 on the signing, on behalf of the European Community, of the Southern Indian Ocean Fisheries Agreement (Official Journal of the European Union, L 196 Volume 49, p. 14), which may affect trade in Thai fisheries products from the Southern Indian Ocean. Although the main focus of the agreement is the conservation and management of straddling fish stocks and highly migratory fish stocks in the Southern Indian Ocean, it is expected that after the Convention’s signing, ratification and permanent entry into force, the EU will push for its member countries to enforce stricter control and inspection of aquatic animal products from third countries with maritime boundaries in the Southern Indian Ocean. Furthermore, it is also expected that the EU will be able to invoke this agreement to protect legitimate fishing within the relevant waters and use it against exporting countries that violate fishing rights and exploit fishing resources, taking measures in the form of trade sanctions which may affect fishery exports from Thailand to the EU-25 in the future (Office of Agricultural Affairs, Mission of Thailand to the European Communities, 19 October 2006). Recommendations for Negotiation 1) It should be clearly stated that, in the event of a dispute between Thailand and the negotiating partner over environmental issues arising from the MEAs to which both countries are party, the parties are entitled to resort to the dispute settlement mechanisms established under the MEAs as well, rather than being required to use only the dispute settlement mechanisms stipulated by the FTA. 2) It should be clearly stated that the provisions in the FTA must not have the effect of curtailing the rights of either negotiating party, nor obstructing or posing barriers to the
    • 7 negotiating parties’ compliance with the MEAs to which they are party, or will become party to in the future. Issue 3: In the FTA negotiations, will the requirements on investment protection affect the country’s ability to protect its environment? If so, to what extent? In addition to the Environmental Chapter, provisions in other chapters of the FTA, in particular the Investment Chapter, may constrain efforts by the parties to protect the environment. • The case of the Thai-US FTA negotiations In preparing the FTA, the US had set up a clear framework on investment protection, found to exist since early bilateral trade negotiations, from NAFTA (Chapter 11) to present-day FTAs. The main articles are National Treatment, Most-Favored Nation Treatment (MFN), Minimum Standard of Treatment, Performance Requirement, and Expropriation and Compensation. The articles in 1)-3) were set forth to protect the interests of US investors, the objective being for them to receive equal treatment with domestic and other investors, including legal protection. In addition, the performance requirement article is stipulated so that US investors do not have to comply with terms that the trade partner country may desire e.g. technology transfer, or domestic content requirements in manufacturing. Furthermore, there must also be a guarantee against seizure of assets or termination of operations by the state under the article on Expropriation and Compensation. Moreover, to ensure effective investment protection, the US has put in place a mechanism for investor-state dispute settlement, which allows US private investors to sue the government of its trade partner by claiming violations of investment protection, most of which come under this category (Suthawan Sathirathai et al., 2007). • The case of the ASEAN-EU FTA negotiations The 2nd part of the EU Draft Mandate for ASEAN, which sets the guidelines for negotiating the ASEAN-EU FTA, does not set out provisions on investment and investment protection as a standalone chapter. However, investment promotion is included in the chapter on economic cooperation, similar to the EU-Chile FTA, which, under “TITLE I Economic Cooperation, Article 21: Promoting Investment”, addresses cooperation on setting up mechanisms for dissemination of information on rules and regulations, investment opportunities and the development of legal frameworks conducive to investment, with member countries
    • 8 allowed to negotiate bilateral agreements with Chile on investment promotion and protection and avoidance of double taxation. Chapters on investor protection against direct expropriation, and provisions on investor- state dispute settlement mechanisms do not appear in the EU’s bilateral agreements but usually appear in the Bilateral Investment Treaties (BIT) of the member countries. The EU may draw upon such provisions in the negotiation of the EU-ASEAN FTA. Therefore, the negotiating team should carefully consider relevant articles and chapters such as on the definitions of “indirect expropriation” and “substantial business operation.” (TDRI, 2007). Impacts of the aforementioned chapter Because the US makes the clearest and broadest demands on the liberalization and protection of investment, sample forecasts of the impact focus on the Thai-US FTA, which creates both positive and negative impacts on Thailand’s ability to protect its environment, as follows: Positive Impacts (1) Investment liberalization under FTAs makes investors in the trade partner countries more interested in investing in Thailand. If the investment involves the use of green technology, it will make the industrial sector employ more environmentally friendly manufacturing practices. However, the expected environmental benefits depend upon the provisions on investment protection in the FTA. (2) The FTA presents an opportunity for foreign investors to invest in environmental products and services, e.g., wastewater treatment and hazardous waste disposal, which would help solve environmental problems in Thailand. However, it is necessary to consider the approach which would truly benefit Thailand, the efficiency of environmental budgetary management, and issues of adequate, universal and fair access to environmental services. Negative Impacts (1) The inclusion of investor-state dispute settlement mechanisms makes the FTA in the section on investment protection partly responsible for causing the “roll-back hypothesis” (referred to in Issue 2). Studies of past NAFTA disputes show examples of the impact of investment protection provisions on environmental protection efforts, including the ability to pass environmental legislation or any action involving the environment (other than the case of S D Myers already referred to in issue 2), for example:
    • 9 - The case of Methanex Corporation v. the Government of the United States of America (1999) Similar to that of Ethyl Corp., this case involves Methanex of Canada suing the US government for a ban on the use of methyl tertiary butyl ether, or MTBE, in the state of California on the grounds that research had indicated that this substance was harmful. The ban adversely affected Methanex, which manufactured methanol, a key compound in the production of MTBE. Although six years have passed, the case is still not settled. If the US government loses this case, as it did with Ethyl Corp., the outcome will fit the roll-back hypothesis. But even if the US government wins the case, this is still an issue on which the US has had to spend several million dollars defending its environmental protection laws. - The case of Crompton Corporation v. the Government of Canada (2001) Crompton Corp. of the US, an insecticide manufacturer which uses lindane, a persistent organic compound (POP), filed a lawsuit against the Canadian government for attempting to gradually reduce the use of this insecticide. Crompton alleged that the Canadian government had violated NAFTA investment protection, both with respect to national treatment and performance requirement, because this policy would benefit Canadian producers of lindane substitutes. Crompton also sued for violation of Section 1110 on expropriation. This case has not been decided either. However, if the Canadian government loses, a private company will have obstructed efforts to reduce the use of harmful chemicals, an environmentally beneficial policy. - The case of Metalclad Corporation v. the Government of Mexico (1996) In this case, Metalclad, a US hazardous waste treatment company, filed a lawsuit against the government of Mexico for damages of 90 million dollars, because the local Mexican government would not issue the company a construction permit for an area that had been declared as a special ecological preserve. The lawsuit claimed violation of investment protection, under Chapter 11 of NAFTA, in both Article 1105 (Minimum Standard of Treatment) and Article 1110 (Expropriation). It was the only case where the NAFTA tribunal, under the International Centre for Settlement of Investment Disputes (ICSID), returned a verdict of indirect expropriation and ordered the government of Mexico to pay Metalclad 16 million US dollars in damages. If the FTA is signed, Thailand risks being sued by private companies, especially in cases similar to Metalclad, because from time to time, the approval of government projects creates disputes in local areas, especially for projects with potential environmental impact. In addition, if the difficult and time-consuming process of issuing or amending the environmental laws of
    • 10 Thailand is taken into account, the problem of roll-back from the FTA would undermine efforts to protect the domestic environment (Suthawan Sathirathai et al., 2007). (2) The performance requirement provision is specified so that US investors would not have to comply with the terms sought by the trade partner country. The investment recipient country is unable to set as conditions for accepting investment or granting investment promotion privileges measures such as technology transfer, knowledge development, management and marketing. Although exceptions allow for adopting or maintaining measures, including environmental measures, several issues remain unclear, for example, the ability to set investment conditions requiring transfer of environmental technology, as well as the general issue of climate change. This causes concern that if Thailand passes laws to regulate investment taking into consideration the release of greenhouse gases, or requires the transfer of environmental technology to local business operators, it may be viewed as a violation of the provision on performance requirement. Also, the fact that the chapter on investment clearly specifies that such measures must not be inconsistent with the FTA (“laws and regulations that are not inconsistent with this Agreement”) indicates that environmental exceptions remain within the remit of the chapter on investment, should investment be affected and give rise to a dispute (Suthawan Sathirathai et al., 2007). Recommendations for Negotiation 1. The environmental chapter should be drawn up in a “carve-out” manner, rather than falling under the mandate of the Agreement on investment liberalization, or should be given precedence over the investment chapter in cases where disputes arise. Furthermore, the investment chapter should be drawn up so that private investors may not file lawsuits against the State if the latter’s actions are in the interest of protecting natural resources, the environment and public health, even though such measures or policies result in cost increases for the investor or affect the investor’s business operations. 2. If investors’ minimum standards for Environment Management System are established, it should be negotiated so that the negotiating partner is unable to use such provisions as grounds for a lawsuit. 3. If there is to be a performance requirement provision, an exception should be negotiated for environmental technology transfer, which would help Thai business operators comply better with environmental laws.
    • 11 4. There should be a push for the negotiation of economic cooperation in various fields, as in the EU-Chile and EU-South Africa FTAs, which clearly specify the promotion of green technology transfer and usage under cooperation in the energy sector. Guarantees should be specified that cooperation projects, especially those related to the environment, are seriously and concretely implemented, e.g., setting a clear timeframe for the signing of MoUs among the relevant institutes and organizations, and preparation of an action plan for each cooperation project. Issue 4: In the FTA negotiations, will the requirements on intellectual property protection affect the country’s ability to protect its environment? If so, to what extent? Negotiating an FTA with a developed country tends to include discussions on intellectual property, raising the objective of the negotiation on raising the level of intellectual property protection for the negotiating countries to an equal level and making reference to the Trade- Related Aspects of Intellectual Property Rights (TRIPS) under the WTO. However, similar to the case of the investment chapter, the demands on intellectual property are connected to environmental issues and environmental demands as well. The significant environmental impact arising from the demands on intellectual property protection is the effects on the conservation and use of bioresources in Thailand that would occur if Thailand agrees to amend its domestic laws - namely the 1979 Patent Act and the 1999 Plant Variety Protection Act - to expand the protection of patents to cover all living organisms in accordance with the demands of its negotiating partners, especially developed countries such as the US, Japan and the EU. These demands exceed what is stipulated in the TRIPS, which permits member countries to choose to adopt the patent system, sui generis system, or both, for plant protection. The case of the negotiations for the Thai-US FTA The two key demands by the US on intellectual property protection that will affect Thailand’s environment are: 1) for the negotiating partner to expand patent protection to cover all living organisms including plants, animals, and microorganisms, and 2) for the negotiating partner to become party to the International Convention for the Protection of New Varieties of Plants 1991, or the UPOV convention, which means acceptance of the UPOV convention’s plant variety protection system.
    • 12 These demands appear in the US’s Trade Promotion Authority (Sec. 2102 (b) (4)(ii)) and in the Thai-US negotiation framework, according to the documents submitted by the USTR to the US Congress. In addition, in the 6th round of the Thai-US FTA in January 2006, the US submitted to the Thai side written demands regarding patents for living organisms, calling for Thailand to expand patent protection to cover all living organisms, including plants, animals and microorganisms. To date, negotiations on this issue have not reached conclusion (Buntoon Sethasirote, 2008). • Negative Impacts The two US demands are not different in their implications. The US wants Thailand to amend its legal system to provide legal protection for intellectual property on inventions involving living organisms and it wants Thailand to use patent law to protect invention involving all living organisms, including plants, animals and microorganisms. Potential impacts (Suthawan Sathirathai et al., 2007; TDRI, 2004) are as follows: (1) Impact on the amendment of Thai patent laws: current Thai patent laws provide protection only for artificially created microorganisms, not plants or animals. Additionally, impacts would be felt in the amendment of the Thai legal system on plant variety protection, namely the 1999 Plant Variety Protection Act, as the principles, terms, and practical guidelines for plant variety protection under this law differ greatly from patent law and the protection system under the 1991 UPOV Convention. (2) The expansion of patent protection to cover all living organisms will have an unfair impact on the regulation of access to and benefit-sharing from the use of biological diversity, on farmers’ rights in the conservation and sustainable use of biological diversity, etc. This is because patent law does not include provisions to consider the source of the genes used as the basis for the invention, nor conditions requiring fair benefit-sharing between the inventor and individuals or communities that own such genes. Therefore, if patent protection is expanded to cover plants and animals, it may create more problems involving bio-piracy of Thai biological resources, affecting the conservation and use of biological resources in Thailand. (3) Impact on farmers’ rights and the ways of local communities. Protection under patent law prohibits farmers from keeping patented seeds for further cultivation or exchanging plants with neighbors or other communities to improve the plant variety, traditional local community practices that are both protected and permitted under Thai law. Amendment of patent law to cover all living organisms would restrict farmers’ rights in the use of patented seeds and force them to only purchase seeds from the patent owners. Moreover, if the patent is owned by some
    • 13 group, R&D on plant variety may be more difficult as using patented plants in research may violate the patent owner’s rights to such plants. (4) The impact on biological diversity. If the development of plant varieties is commercially driven, it may result in the reduction of biological diversity, as patent owners will focus only on the development of plants that are commercially profitable. (5) Impact on the transfer of biotechnology. If the biotechnology patent system is accepted, its access, transfer and development in developing countries will be more difficult, especially in cases where the patent provides broad protection without clearly specifying what technological processes are covered by the patent, for example, indicating only production processes that involve genetic modification may result in broad claims of rights under the patent and restrict transfer of the technology to developing countries, as in the case of Agracetus, which was granted patents for both genetically modified cotton plants and cotton seeds. Recommendations for Negotiation 1. Reject demands on the issue of plant and animal protection under the patent system. Thailand must insist on the principles and rights of the WTO’s member countries as specified in TRIPS, which gives the right to member countries to reject plant and animal protection under the patent system. 2. Thailand should make clear that it will not expand IP protection to cover all patented living organisms. It should insist that Thai law for protecting plant varieties, according to the 1999 Plant Variety Protection Act, is consistent with TRIPS and provides protection and promotion for the improvement and development of new plant varieties and adequate and fair protection of the rights of plant breeders, as part of a legal system designed to suit the economic and social conditions and needs of Thailand, an agricultural society. Hence there is no need for the UPOV Convention or patent system for plant variety protection. 3. Thailand should propose that the principles specified in the Convention on Biological Diversity regarding access, use, and fair benefit-sharing from the use of genetic resources be included in the FTA. This would prevent the illegal use of genetic resources and increase efficiency in protecting Thai genetic resources. Measures may include, for example, requiring disclosure of origin for genetic materials used in varietal improvement, prior informed consent for access to plant genetic resources, and benefit-sharing between plant breeders and genetic source owners.
    • 14 Issue 5: Will the FTA negotiations affect the country’s resource base (e.g. forest resources and products, water, mineral, and fisheries resources)? If so, to what extent? • Positive Impacts 1) The FTA would increase the volume of goods – raw materials, intermediate and finished products – from the trade partner countries. If the imports require energy- and resource- intensive manufacturing, it would help the country partially conserve its energy and natural resource base. 2) The FTA increases market access opportunities for organic agricultural products, such as in the trade partner countries, particularly the EU. 3) Increased revenue from exports will allow farmers and the government to invest more in technologies to increase productivity. 4) The adoption of environmental measures to deter the destruction of natural resources and the environment in the trade partner country, together with liberalization of trade in goods (non-trade barriers), could be beneficial to that country. For example, the EU requirement for wood furniture importers to produce certificates of origin for the wood and raw materials used makes business operators unable to purchase wood from farmers and capitalists who encroach on forest land to plant rubber trees, as the wood would come from land without proper titles. • Negative Impacts The increase in monoculture of such crops as rice, corn and rubber leads to the expansion of production areas and growing use of factors such as chemical fertilizers, pesticides and insecticides, water, land, etc. This depletes soil nutrients, accelerates soil erosion and leads to forest encroachment to expand the cultivation area. Although the government attempts to encourage farmers to increase productivity instead of expanding the cultivation area, farmers have not been motivated to change their attitudes, resulting in the expansion of mono-cultural farming along with forest encroachment. Examples include forest encroachment in Mae Jam District, Chiang Mai, to increase the cultivation area for corn (Prachatham News Institute, 28 April, 2008), and the encroachment on land preserves in the South to plant rubber trees. 2 The economic gains that farmers (and the country) derive from higher yields will only be short-term. The long-term impact will, however, be the deterioration and depletion of the 2 The Director of the Forestry Management Research Bureau, Forestry Department, spoke of the problem of forest encroachment in conservation areas to plant para-rubber trees in the South of Thailand, where approximately 1.2 million rai have been encroached upon (Manager Online, 23 June 2009).
    • 15 resource base. The growing use of chemical fertilizers and other agricultural chemicals in production, processing and transportation will also create pollution hazards that impact the environment and farmers’ health. As for marine resources, the FTA will lead to an increase in manufacturing and land use for aquaculture, especially of seawater prawns, an important export of Thailand. Suthawan Sathirathai et al. (2007) forecast that the Thai-US FTA would result in the expansion of prawn farming, of both the tiger and white varieties, into freshwater areas. This would have impacts on soil, water and coastal ecosystems. Environmental problems caused by low-salinity tiger prawn farming became severe during 1997-1998, as reported in the survey of facts and impacts by the 3 Commission to Study Tiger Prawn Farming in Freshwater Areas (1998). It was found that the environment was affected in several ways, as follows: - Soil quality: there was an accumulation of salt; salinity exceeded critical levels at almost every level, depth and distance. - Water quality: salinity was found in all areas including cultivation ponds, equalizing tanks and moats around the ponds. Most had salinity levels that exceeded drainage standards. - Impact on plant growth: rice showed subnormal tillering, thinner grains, poor or uneven growth, etc. - Impact on society: changes in the use and ownership of land, water disputes, conflict among occupational groups, etc. An evaluation of the environmental impact from tiger prawn farming by the Faculty of Economic Science, the University of Agriculture (1999) 4 calculated the impact of the practice on soil, water, mangrove forests and fishery resources. The study found that the average total environmental cost of shrimp farming was 40,337 baht/rai/year for Chantaburi Province and 42,683 baht/rai/year for Nakhon Sri Thammarat Province. Fishing of other marine animals such as tuna and skipjack provides important raw materials for Thailand’s canned fish industry. Although Thailand imports most of its tuna (over 80%), some proportion is from Thailand’s own fishing industry. If the FTA increases Thailand’s canned fish exports, it would encourage more fishing in both Thai territorial waters (which 3 The Commission to Study Tiger Prawn Farming in Freshwater Areas (1998), Executive Summary, Findings of the Survey on the Facts and Environmental Impact of Low-Salinity Tiger Prawn Farming, Ministry of Science, Technology and the Environment. 4 ibid.
    • 16 already suffers from overfishing) and the high seas, such as the Andaman Sea and the Indian Ocean, possibly leading to overfishing and impacting the marine ecology of the high seas. Moreover, if the government does not strictly control pollution from the seafood processing factories, their increased production, thanks to the expansion of export markets, would affect the country’s resource base and environment. This is because the seafood processing industry requires the intensive use of energy and freshwater in the production process. Effluent from the production process contains high levels of organic pollutants such as phosphates and nitrates, as do wastewater from the piers and cold storage facilities. However, the negative environmental impact can be prevented or mitigated to a certain degree. If the FTA focuses on increasing opportunities for exporting to organic/green markets, this would motivate sustainable production methods, as exporting to these specific markets would require business operators to obtain certificates for seafood product standards such as Code of Conduct (CoC) certification for prawn farms, 2003 Good Agricultural Practice (GAP) standard certification for prawn production, and HACCP certification for processing factories. The products may also need to obtain environmental labeling in the importing country. 5. Recommendations for Negotiation 1. In negotiating agricultural trade liberalization, an important goal should be the enhancement of competitiveness and opportunities to export organic agricultural goods to the trade partner country, which would help domestic production to comply with the principles of sustainable development. Negotiations should also seek to add to the list of organic product items and raw materials in the schedule of concessions. 2. In addition to negotiating to expand the organic agricultural market, negotiations should also be held to increase cooperation in the facilitation of organic agricultural exports, in particular recognition of Thailand’s organic agricultural standards certification (for which Thailand also needs to step up its system’s readiness and develop personnel for evaluation and certification), and the streamlining of procedures in applying for standards certification by institutes in negotiating partner countries, such as Germany’s Naturland Institute on organic product standards. 3. Cooperation should be proposed on capacity building to promote the capability of business operators throughout the entire supply chain on meeting international sanitary standards for sustainable manufacturing and production.
    • 17 Issue 6: Will the increase in investment, manufacturing, and consumption as a result of the FTA lead to an increase in pollution, greenhouse gas emissions and waste? If so, to what extent? The FTA will lead to the reduction or elimination of tariff and non-tariff barriers to trade, opening up opportunities to export goods to trade partner countries. The expansion of domestic industrial manufacturing will increase the use of production factors such as chemicals, raw materials both imported and domestic, energy and water, which would lead to increased industrial pollution. However, the FTA also results in products from the trade partner country entering the country. If the products are of the type that creates high pollution, importing rather than manufacturing them domestically would partly reduce pollution from production. In addition to trade, the FTA also leads to the liberalization and expanded protection of investment. If the negotiating country is a developed country with more capital investment, especially the US or EU, the FTA would result in more investors incoming from these countries than Thai investors outgoing, even though FDI helps increase the competitiveness of Thai products in foreign markets. If investment is in environmental services, e.g., wastewater treatment, waste and hazardous waste disposal, it would help with Thailand’s environmental problems. However, FDI will negatively affect the country’s environment, if the environmental policies and measures of the recipient country are ineffective or not strictly enforced. In negotiating the FTA, the positive and negative impacts must be evaluated and weighed, and ways drawn up to prevent and mitigate the expected impacts. • Positive Impacts 1) The FTA opens up investment opportunities in high-value, non-energy intensive industries. It also opens up opportunities to invest in production processes that use clean technology (both in the production process and the management of the resulting waste) in place of traditional high-pollution production processes, while also increasing opportunities for access to environmental products and services such as wastewater treatment, hazardous waste treatment, and clean technology/energy conservation. However, in liberalizing environmental products and services, it is necessary to consider the country’s technological R&D capacity. There should be information about domestically developed environmental technologies that could be further commercialized, and which should be exempted from tariff reduction under the FTA. 2) As with the agricultural sector, entering into an FTA will increase market access opportunities for green niche products such as soaps, organic shampoos, natural cotton clothing
    • 18 and hand woven fabrics in the trading partner countries, especially the EU. If these products are needed by the consumers in the trading partner countries, it will spur production growth in these products in Thailand and motivate business operators toward more environment-friendly production. 3) Higher export revenues would enable business operators to invest in environmental products and technologies, which would happen if the country is pushed to strictly enforce environmental laws, there exist environmental regulations in the trading partner countries and consumer demand – both domestically and in the trading partner countries – for environment- friendly products. • Negative impacts Even though Thailand has adopted the Environmental Impact Assessment system to help screen large-scale projects that may affect the environment, Thailand’s EIA system still has many loopholes that prevent it from being an effective instrument in screening or preventing the impact from various countries’ investment projects. A major problem found in the EIA is the system’s structural shortcomings that allow project owners to hire consulting companies, who thus cannot provide independent evaluations, but must draw up reports for the EIA to pass and be approved. The quality of the reports is another problem, as they generally lack a process for monitoring the impact by the community or public, lack in-depth assessment of such considerations as carrying capacity (e.g., assessment of the stress loads that can be borne by water sources or the air), and lack strict follow-up processes. It was also found that completed projects did not in fact carry out the impact prevention measures proposed in the reports, and that there were no provisions for penalties. Other than the EIA, Thailand also has problems regarding environmental management, which remains compartmentalized, law enforcement and lack of environmental and social responsibility on the part of some business operators. If the government still does not recognize this problem and quickly address it, the move to liberalize trade and investment – whether due to FTAs or the government’s own policies – will heighten the risks and threats to the country’s natural resources and environment. Although economic revenue will increase thanks to the ability to attract investment from abroad and higher employment, but if we calculate the social cost in terms of pollution, public and worker health, the net gain the country enjoys from receiving the investment may be lower
    • 19 than the set target or may even be negative if the environmental impacts are difficult to remedy, e.g., loss of biological and ecological diversity, or contamination of aquifers. In a survey of empirical and qualitative studies, it was found that many such studies indicate environmental impacts from Thailand’s trade and investment liberalization policies in the past. However, as most of the studies did not address the impacts of FTAs concluded with specific countries, the research findings merely present an overall picture of the impact of trade and investment liberalization. (1) Mukhopadhyay (2006) studied and evaluated the environmental impacts of trade with the OECD countries during 1980-2000. The OECD countries are important trading partners of Thailand and have a significant FDI presence in the country, especially in the industrial sector, where they account for 62.6% in 2000. The study, using input-output table and associated data, found that the pollution terms of trade in 2000 had a value exceeding 100 for all three pollutants (CO2, SO2, NOx), indicating that Thailand exported more polluting products than it imported. This was in line with the direction of change in the country’s production structure from primarily agricultural production to export-oriented industrial manufacturing. This led to growing imports of capital-intensive goods (i.e., machinery) for the manufacture of such goods as electronic components and equipment, industrial machinery and metal products. Mukhopadhyay also pointed out the environmental impact of FDI from the OECD countries by linking data on exports and pollution generated. The calculations showed that the amount of pollutants from export products from FDI accounted for over 80% of the amount of total pollutants generated by exportation. (2) Li (2005) applied the Computable General Equilibrium (CGE) model to forecast the impacts on the economy, environment and social welfare by simulating the scenarios under three policy options: 1) an environmental policy which levies a carbon tax to reduce greenhouse gas emissions; 2) a policy to liberalize trade by ending the collection of tariffs (of 25%); and 3) a combination of policies 1) and 2). The analysis of the results showed that the trade liberalization policy (the second option) will help increase GDP growth by 0.1% and lead to trade expansion of 2.38% for exports and 3.25% for imports. However, the opening up of trade also led to growth in high-pollution activities, creating the high-pollution manufacturing sector to grow by 1.32% above the benchmark, while the production share of the non-highly-polluting sector have lower growth rates: the non-energy-intensive industrial sector would undergo a 0.60% decline in production, and the agricultural sector will expand by less than 0.40%. In terms of environmental
    • 20 impact, trade liberalization would cause CO2 emissions to increase by 0.07% and particulate matter (PM10) emissions by 0.41%. (3) Merican et al. used a time-series analysis and an Auto Regressive Distributive Lag model to evaluate the impact of FDI on the amount of CO2 emissions in 5 ASEAN countries - Malaysia, Thailand, Indonesia, Singapore and the Philippines - using CO2 emissions and FDI data from 1970 to 2001. The research found that FDI caused more pollution in Malaysia, Thailand and the Philippines, but reduced pollution in Indonesia, while no relationship between FDI and pollution was found in the case of Singapore. In the case of Thailand, it was found that industrial manufacturing value-added and FDI factors had a significant influence on the emissions of CO2. A 1% increase in manufacturing value-added would cause 1.82% growth in CO2 emissions, while a 1% increase in FDI causes a 2.4% increase in CO2 emissions. The results of this study indicate that structural changes in economic and investment policies affect the level of CO2 emissions. (4) In the report on the research project “Environmental Review in Preparation for the Thai- US FTA Negotiations (cited), the research team applied the STELLA Model to evaluate the social gains and costs of expansion of the electronics industry, one of the country’s main industries. A comparison was conducted between a scenario of having no FTA (with hypothetical expansion of 10% per year) and having an FTA (with hypothetical expansion of 20% per year). The study found that in the case of no FTA, the benefits that Thailand would receive from the electronics industry would be lower than if it had an FTA. However, when the environmental and health costs were factored in with the added value from the electronics industry (about 10% of export value), it was found that the net benefit Thailand would receive from the electronics industry would have a negative value in the early years but increase steadily in later years. The explanation may be that the FTA creates economies of scale with higher production, enhances proficiency, reduces production cost per unit, promotes technological development, increases production efficiency and may enable the electronics industry to have higher value-added per unit. However, in the simulation where the health and environmental costs increase hypothetically in tandem by 50%, Thailand would have negative aggregate net benefits.
    • 21 Recommendations for Negotiation 1. Thailand’s FTA negotiation strategy should support environmentally friendly industries and industries that could help solve the country’s environmental problems; negotiations should demonstrate Thailand’s desire to support these industries. 2. Increase the proportion of negotiations to reduce tariffs for environmentally friendly products (such as substitutes for hazardous substances used in industrial manufacturing). 3. Should not encourage liberalization of investment in industries that generate large amounts of greenhouse gases such as the steel, petrochemical, cement and paper industries. 5 If this is unavoidable, it should be proposed that responsibility should be shared for the greenhouse gases that will be released, through environmental tax measures. 4. Should push for more negotiations on environmental and energy cooperation, such as on production upgrading, cleaner technologies, and transfers of environmental technologies. 5. If the FTA includes performance requirement provisions, exceptions should be added to exempt enforcement with regard to measures to address global warming (referring to Thailand’s obligations under the UNFCCC), promotion of the transfer of environmental technologies, and the use of environmental measures as tools in designating and regulating investment sites or factory sites to prevent pollution exceeding the critical load of the ecological system in question. 6. In cases where the negotiation partner is a developed country, such as the EU, negotiations should be aimed at supporting cooperation between the Thai private sector and the negotiation partner country in developing and improving social and environmental standards according to the concept of Corporate Social Responsibility, through learning and implementation of best practices from the companies in the negotiation partner countries. The cooperation should be both in the form of training and sending experts to advise and transfer the concept of CSR for concrete implementation by the Thai private sector. Issue 7: Will the FTA negotiations lead to an increase or decrease of goods which pose a high risk to the environment and public health (e.g., used goods, hazardous waste, banned/hazardous substances)? The liberalization of trade and investment will lead to growth in production and consumption. If such growth occurs in environmentally friendly products and services, it would 5 The Center for Clean Air Policy, a US non-profit think tank proposed the regulation of greenhouse gas emissions according to industry, with the target industries being electricity, iron and steel, oil refining, cement and lime, paper, and pulp and printing (Helme, 2005).
    • 22 be to the benefit of the environment and the population’s safety. Conversely, if the FTA causes growth in high-risk products, it would subject the country to the risks of their hazards. In some cases, these products or chemicals may not result in clear or immediate damage to the environment, e.g., persistent organic pollutants and waste electrical and electronic equipment. However, if not managed appropriately, the toxins and chemicals in these products will contaminate and build up in the environment, such as soil and water, including the water table, which will lead to contamination of the food chain and eventually impact on public health. • Positive impact If the FTA liberalizes trade in products that are substitutes for hazardous chemicals, and environmentally friendly products and technologies, it would be beneficial to production and consumption in the importing countries. • Negative impacts If the negotiating countries have highly different environmental standards and regulatory approaches, it would cause the transfer of environmentally hazardous goods to the country with lower environmental standards or more lax regulation. This may occur in many ways, including: 1) The reduction/removal of tariffs on chemicals, products containing such chemicals, and hazardous waste governed by such international agreements as the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes, the Vienna Convention for the Protection of the Ozone Layer and the Montreal Protocol on Substances That Deplete the Ozone Layer, and the Stockholm Convention on Persistent Organic Pollutants, including chemicals and waste products regulated under Thai law, such as used batteries and used vehicle tires. 2) The reduction/removal of tariffs on chemicals, products containing such chemicals, and hazardous waste designated as controlled or banned substances, or hazardous waste in partner countries, but not regulated in Thailand. 3) The reduction/removal of tariffs on used products containing elements of or contaminated by banned or hazardous substances, such as waste electrical and electronic equipment which contain ozone-depleting substances, or other hazardous substances that are hard to detect. Examples of studies on impacts On the issue of trade in hazardous waste, there are studies that anticipated the impact of the Japan-Thailand Economic Partnership (JTEPA) on the risk to Thailand from the increased import of hazardous waste. Examples include the work of FTA Watch (2007) and Sujitra
    • 23 Watsanadamrongdee (2007), which found that products classifiable as hazardous waste under the Basel Convention, as well as hazardous waste as defined under Thai law (such as used batteries and used car tires), were included in the schedules of concessions. Although the Thai government has explained that importation and exportation must comply with international law (the Basel Convention) and Thailand’s domestic law, the problem lies not with the laws themselves, but with the country’s regulatory weaknesses. A study by the Waste and Hazardous Substances Management Bureau, Department of Pollution Control (2008) indicated that Thailand must enforce Thai laws more rigorously and develop the capacity of its officials in the control and inspection of such imports to strengthen the country’s immune system against the risks of imported hazardous goods, including those for which permits are directly sought and those imported in the guise of used goods. Recommendations for Negotiation 1. The primary negotiating agency should coordinate with the agencies that oversee the environment and multilateral agreements on the environment to draw up a list of exemptions to the negotiation, such as the hazardous wastes regulated by the Basel Convention, which could be studied in the World Customs Organization Table Establishing an Interconnection between the Harmonized System and Selected International Conventions, 6 The chemicals under the Vienna Convention for the Protection of the Ozone Layer and the Montreal Protocol on Substances That Deplete the Ozone Layer, and the Stockholm Convention on Persistent Organic Pollutants. 2. If the negotiating partner wishes to include such definitions or to add to the FTA draft lists of items classifiable as high-risk products, such as hazardous waste or persistent organic pollutants, the primary negotiating agency should refer to domestic laws and Thailand’s obligations under relevant international conventions. 3. Negotiations should be held on cooperation between the negotiating partner countries to strengthen the system and mechanisms for monitoring, regulating and managing hazardous wastes to build the country’s capacity on environmentally friendly management of hazardous waste, such as cooperation projects on recycling and clean production technologies. ……………………………………….. 6 The Secretariat of the Basel Convention has made available the WCO Table (of Jan. 2007) on its website: http://www.basel.int/techmatters/wco_hsc/correlationtablesEngJan2007.pdf (per search on 19 Sept. 2007).
    • Session IV: Labour Issues By Ms. Theerada Suphaphong ASEAN Inter-Parliamentary Myanmar Caucus
    • 1 The Preparation of the Framework Guidelines for Evaluating the FTA Impacts: Labor Issues The relationship between labor issues and free trade contains two significant implications: 1. Disguised protectionism The criticism has been made that the inclusion of the labor issue in FTAs is a reaction by developed countries in response to negotiating partners with cheaper labor to prevent unfair advantage. Although trade liberalization is beneficial for the economy and the income of developed countries, it has negative effects on unskilled labor and businesses that import from developing countries. Developed countries are also concerned that competitive disadvantage would lead to a lowering of wages in their countries. At the same time, developing countries disagree with the linking of trade with labor standards, since developed countries tend to introduce labor conditions as a trade barrier, for example, the imposition of penalties for failure to enforce labor standards, when labor rights are a matter of human rights and should not be tied to trade. 2. The promotion and protection of labor rights Labor regulations are instruments to provide minimum guarantees according to international standards as specified by the ILO in the form of conventions. The inclusion of the labor issue may be regarded as seeking to uphold the rights of workers to receive fair treatment in terms of hiring conditions, working conditions, well-being, as well as state guarantees and social welfare, which have positive effects on workers. It is therefore argued that labor standards should be included in trade negotiations so that they may be enforced in various countries. From this viewpoint, it should be borne in mind how international trade will promote labor protection and the enhancement of occupational value, which would have positive effects on a country’s sustainable economic development.
    • 2 Issues that should be evaluated according to impact category Table 1: Summary of issues that should be evaluated according to impact category Impact Category Impact Issues Evaluated 1. Regulatory impact associated Issue 1: Are there demands that will result in Thailand with the conduct of labor policies. changing its labor laws? Issue 2: Are there demands that are consistent or in conflict with the obligations under multilateral agreements to which Thailand is party? Issue 3: Are there demands that will affect the enforcement of labor laws? 2. Indirect and/or persistent Issue 4: Impact from changes in the business and impact industrial sectors due to the FTA, such as employment, wages, development of labor skills, productivity enhancement, compensation etc. 3. Sensitive issues Issue 5: Impacts that are sensitive issues such as child labor, female labor etc. A review of the labor provisions in the FTAs of the US and the EU found certain shared characteristics: 1) a reference to core labor standards; and 2) insistence that labor standards will not be lowered for gains in trade and investment. In this study, examples will mainly be taken from the US FTA, as it is complex and contains many hidden sensitive issues. The content of the provisions on labor in current US FTAs was developed from the labor provisions in NAFTA, which is considered the “prototype” for labor provisions in FTAs that the US entered into with various countries. The US also specified the framework for negotiation of labor provisions in the Trade Promotion Authority Act (TPA) 2002. It is apparent that US FTAs observe the following principles: 1) The parties shall respect the rights of labor and of children under the Core Labor Standards (CLS) of the ILO (in TPA, section 2113(6)). 2) The parties shall do their utmost not to lower or relax the protection of labor rights according to the law in the promotion of trade (in TPA, section 2102(a)(7)).
    • 3 3) The parties are encouraged to join the ILO Convention concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour, 1999, also known as ILO Convention No. 182 (in TPA, section 2102(a)(9)). Since the enforcement of TPA 2002, it has been observed that “the labor regulations the US insists on enforcing with trading partner countries differ in their mounting intensity, depending upon with which country and when the FTA was done.” 1 Issue 1: Are there demands that will result in Thailand changing its labor laws? Points to be considered: 1) The labor provisions in the US-South Korea FTA contain no explicit language for the parties to ratify the convention in accordance with the the ILO Declaration. However, the words “shall adopt and maintain” indicate an obligation that the parties must adopt the aforementioned principles. If a party has not integrated the principles from the Declaration into its domestic laws, it must adapt the principles and put them into practice or use them as a reference model to amend the law accordingly. If a party has adopted the principles in its domestic laws, it must be able to satisfactorily explain to the other party how the enactment and implementation of such laws and regulations are in compliance with its obligations. 2) As the US position and intensity of its negotiations on the labor issue depend upon the its domestic political situation, if the US insists upon using a “new model” in further negotiations on the labor issue with Thailand, Thailand will have to watch whether the US will change its position or continue to insist upon the principles conveyed to the Thai negotiation team. It had informed the Thai team that “the chapters on labor and the environment do not obligate the parties to recognize US labor and environmental standards or to raise its standards, and do not require either party to amend any laws.The chapters require only that the parties enforce their domestic laws effectively.” 2 1 Wilailak Tiranutti. How are Labor and FTAs Related? International Institute for Trade and Development (ITD) www.itd.or.th 2007. 2 Summary of outcome of meeting to prepare the free trade agreement between Thailand and the USA, the negotiation team for the Thai-US FTA, Foreign Trade Ministry http://www.mfa.go.th/tusfta/round3.htm (last visited website on 28 September 2008).
    • 4 3) Is it necessary to depend upon the mechanisms in the FTA to determine the approach in proposing, reviewing, amending and revising Thailand’s labor laws to meet international standards according to the 8 main conventions of ILO? FTAs set the conditions for trade, in contrast to ILO which has a high degree of flexibility in that Thailand is allowed to consider domestic readiness. Issue 2 : Are there demands that are consistent or in conflict with the obligations under multilateral agreements to which Thailand is party? 1) If the US insists upon using a “new model” in future negotiation with Thailand on the labor issue, it will be a commitment that goes beyond what Thailand has agreed to in multilateral agreements and the position Thailand took in earlier negotiations with the US. Allowing negotiations on and inclusion of the issue of labor standards in a trade agreement can be regarded as using labor standards to increase trade protection and barriers, and raises questions on the competitive advantage of low-wage developing countries. Therefore, this probably conflicts with the agreement in the WTO Ministerial Declaration in Singapore mentioned earlier, and with the Trade and Investment Framework Agreement used in the Thai-US FTA negotiations. This framework refers to the agreements at the WTO level: “both sides give importance to the core labor standards specified in the Doha Ministerial Declaration at the WTO meeting in Doha, which reaffirmed the agreement in the Singapore Ministerial Declaration at the WTO meeting in 1996”. Therefore, in the negotiations with the US on this chapter, those involved in formulating Thailand’s position and negotiations should consider the impacts in a comprehensive manner, by insisting upon the principles in multilateral agreements that reject the use of labor standards for the purpose of trade protection and obstruction, and the right of countries to have their own labor standards, as well as the right to implement or adapt the ILO’s CLS principles in line with their own labor laws. Issue 3: Are there demands that will affect the enforcement of labor laws? 1) Are the mechanisms for enforcing laws and various conditions on dispute settlement in the labor chapter linked with the chapter on dispute settlement consistent with Thailand’s present
    • 5 capacity for action? Negotiation on matters on which Thailand cannot put into practice will have 3 more negative than positive effects. 2) Consideration must be given to whether the governmental sector is actually capable of enforcing the law according to the provisions of the FTA. If there are also obligations under with the FTA framework, enforcement must be strict and entail more procedures. If these cannot be enforced consistently and are considered an attempt to gain unfair advantage in trade and investment, there are penalty clauses which result in fines. Recommendations for Negotiation 1. Use the assessment as a process to include the participation of various sectors in the framework agreement under negotiation. 2. If the assessment results show that certain demands have negative effects on Thailand: 1) Reject the demands for the following reasons: • The demand affects Thailand’s sovereignty or human rights. • The demand exceeds the standards of, or conflicts with international agreements • The demand requires the amendment of supporting laws, which depends on the legislative branch, which has powers separate from the executive branch. 2) Accept with conditions, i.e., put in place damage compensation measures by using the additional benefits that some subsectors enjoy from the agreement, building acceptance in every subsector, being a fair distribution of benefits rather than clustering such benefits for only certain subsectors. 3) Accept some demands that the assessment shows to have the least impact and acceptable goals for the negotiation framework. 3 Interview with Ukrit Musikphan, Legal Affairs Division, Department of Welfare and Labor Protection, 16 July 2008.
    • 6 Issue 4: Impact from changes in the business and industrial sectors due to the FTA, such as employment, wages, development of labor skills, productivity enhancement, compensation etc. Points to be considered are the nature of the impact from economic activity under the FTA – in terms of tax reduction, trade in services, agriculture, investment and others – on various labor segments, domestic employment problems and lack of personnel for national development, as well as the impact on rights protection, worker security and quality of life. Nature of Impact 1. The problem of domestic employment: How will it affect Thailand’s employment problems? For example: - Will there be a relocation of production bases from Thailand to other countries, or to Thailand’s FTA partner country? - How will the partner country’s liberalization of investment and services for Thailand affect Thailand’s unemployment problem? Tax reductions and the liberalization of investment and services in Thailand affect the employment of labor in various segments, for example: 1) Impact on industrial labor - Producers’ desire to cut costs and change the forms of employment lead to layoffs or reduction in the permanent workforce, changing to lump sum payments or outsourcing. The burden falls on the workers to find new jobs or change occupations, an economic impact whereby the production sector loses comparative advantage in the face of more imports, incurring costs of structural adjustment. The study “Approaches to workforce development in preparation for FTAs” found that in the short term there would be increased employment in export industries and the agro-industrial sector. In the long run, however, employment would decline due to the possibility that Thai agro- industrial goods will be replaced by those increasingly imported from the trade partner country. In the meantime, in industries manufacturing goods that are substituted by imports – such as electrical appliances, aluminum, passenger vehicles, and steel products for gas storage and for use in construction – and in the service industry, the study suggests a similar trend, i.e., an
    • 7 increase in employment during the first year of the FTA, but lower net expansion after the initial 4 period of trade liberalization. 2) Informal sector labor is a group that will likely be deeply affected by FTAs, since employment is through sub-contracting or outsourcing by small enterprises that do not provide the labor or social security benefits enjoyed by workers in the formal economy. The informal economy is largely a source of employment and income for those lacking opportunity in education, skills and capital. 3) The impact on labor in the agricultural and livestock sectors The effects of the Thailand-Australia and Thailand-New Zealand FTAs on labor were a result of the continual reduction of tariffs on milk products, especially powdered milk from trade partner countries. This resulted in dairy farmers in Thailand having higher production costs than farmers in Australia and New Zealand. This sector suffered a tremendous impact, having to bear an increased burden in addition to already high production costs. Farmers in this sector had to cut costs by giving up dairy farming and effectively ceasing to hire labor. The structure of dairy farming in Thailand has the characteristics of family farming. Workers and family members are therefore compelled to seek employment in the industrial sector instead. There remain around 5 19,000 families engaged in dairy farming, from around 25,000 families previously. 2. Shortage of personnel for developing the country: Will there be a “brain drain”? If so, how? 1) Domestic problems, e.g., an increase in Thai doctors migrating from public to private hospitals to provide services to foreigners has resulted in a shortage of doctors. 2) How and in which areas has migration abroad resulted in a shortage of personnel to develop the country? 3. Impact on law enforcement 1) The right to law enforcement: Does the FTA result in Thailand being responsible for the enforcement of various laws that affect investment, e.g., the enforcement of labor law, hiring 4 Office of Policy and Strategy, Office of the Permanent Secretary, Ministry of Labor, assigned the Economic Research and Training Center, Faculty of Economics, Thammasat University, as a consultant for the study. 5 Interview with Miss Siriwan Hanjarus, Manager, Dairy Cooperatives Federation of Thailand, 12 June 2008.
    • 8 standards, workplace standards, employment duration and wages? If so, how? Will Thailand be able to enforce occupational health and safety, and to what extent? 2) Loopholes in law enforcement: Will there be a domestic increase in labor exploitation? Previously, a number of mechanisms or pretexts have been used to evade the law: - Alterations to contracts and forms of employment: Foreign investors use hiring or sub-contracting contracts instead of employment contracts drawn up under labor law to avoid their responsibilities to employees under Thai labor law. - Pretexts on “skills training”: There have been cases where foreign investors took a number of Thai workers for “skills-training”, which required working for the parent company in a foreign country for 3-6 months. However, the Thai workers received the same wages and rights protection as they would receive in Thailand, which is inconsistent with the cost of living and living conditions abroad. Recommendations for Negotiation 1. Use the assessment as a process to include the participation of various sectors in the framework agreement under negotiation. 2. If the assessment results show that certain demands have negative effects on Thailand: 1) Reject the demands for the following reasons: • The demand affects Thailand’s sovereignty or human rights. • The demand exceeds the standards of, or conflicts with international agreements • The demand requires the amendment of supporting laws, which depends on the legislative branch, which has powers separate from the executive branch. 2) Accept with conditions, i.e., put in place damage compensation measures by using the additional benefits that some subsectors enjoy from the agreement, building acceptance in every subsector, being a fair distribution of benefits rather than clustering such benefits for only certain subsectors. 3) Accept some demands that the assessment shows to have the least impact and acceptable goals for the negotiation framework.
    • 9 Issue 5: Impacts that are sensitive issues A point to consider is: which labor groups have their human rights and right to work severely violated, and are protected by the ILO conventions on core labor standards, such as: 5.1 The use of alien child labor in the fishing sector – There are 3 sensitive issues: 1) Child labor - Children should receive protection according to the core labor standards. The termination of the use of child labor is one of four core labor standards according to the ILO Declaration that Thailand ratified in ILO Convention No. 138 (1973) concerning Minimum Age for Admission to Employment (ratified on 11 May, 2004), and ILO Convention No. 182 (1999) concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labor (ratified on 16 February, 2001). - The USA places a lot of importance on this issue. Thus, the USA specifies in the trade law or the TPA, Section 2102(a)(9), that the contracting party is to be encouraged to become party to the 1999 ILO Convention number 182, on the subject of the prohibition of child labor and immediate action to eliminate the worst form of child labor exploitation. 2) Alien labor This issue is fraught with social, national security and economic sensitivities. Most alien labor originates from neighboring ASEAN countries, such as Myanmar, Laos and Cambodia, which are involved in regional FTA negotiations. 3) Liberalization of Fisheries Labor rights violations in the fisheries sector have long been the subject of trade disputes between Thailand and the USA as well as between Thailand and the EU. 5.2 Female Labor 6 The Puean Ying (Friends of Women) Foundation found that from a gender perspective, among workers laid off due to downsizing or termination of business, female workers are laid off before male workers. The use of labor relations laws to solve the economic crisis has been an utter failure, as employers use legal powers to interfere in the work of labor unions by laying off 6 Bundit Paenwiset, The Quality of Life of Female Workers, Krungthep Thurakij, 17 March 2005.
    • 10 female labor leaders, using violence against workers, and using the machinery of the state to solve problems. Furthermore, discrimination is evident in negotiations, wherein the employer fails to honor agreements, forcing employees to resort to filing suit in the Central Labor Court. Job insecurity – with employers using various forms of employment, many laid-off female workers being older women with no skills and limited opportunities for job selection – drives female workers into informal sector employment, including sub-contracting, lump sum wages, piecework or work obtained through supervisors or temporary employment agencies. Even worse is the hiring of school and university students, which involves low wages, no benefits, unstable employment, and daily rates or lump sum payments, causing stress regarding income as well as health and safety risks because they are obliged to work in buildings or houses that are tightly packed and unsafe as workplaces. Recommendations for Negotiation 1. Use the assessment as a process to include the participation of various sectors in the framework agreement under negotiation. 2. If the assessment results show that certain demands have negative effects on Thailand: 1) Reject the demands for the following reasons: • The demand affects Thailand’s sovereignty or human rights. • The demand exceeds the standards of, or conflicts with international agreements • The demand requires the amendment of supporting laws, which depends on the legislative branch, which has powers separate from the executive branch. 2) Accept with conditions, i.e., put in place damage compensation measures by using the additional benefits that some subsectors enjoy from the agreement, building acceptance in every subsector, being a fair distribution of benefits rather than clustering such benefits for only certain subsectors. 3) Accept some demands that the assessment shows to have the least impact and acceptable goals for the negotiation framework. ……………………………………………..