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Relevance Of WTO

Relevance Of WTO






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    Relevance Of WTO Relevance Of WTO Presentation Transcript

    • Relevance of WTO
      (91025)Shanky Jaiswal
      (91026)Karan Khanna
      (91030)Manish Kumar Verma
    • Scope
    • IP Rights and the Pharmaceutical Industry.
      The argument for a stronger patent regime for pharmaceutical companies is often made on the basis of the heavy capital investment costs (for R&D) that goes into the creation of a new drug.
      “Most of the value of new medicines and other high technology products lies in the amount of invention, innovation, research, design and testing involved.” – WTO.
    • TRIPS (Trade Related Intellectual Property Rights)
      negotiated in the 1986-94 Uruguay Round under strong pressure from major industrialized countries.
      “aims to protect the IP rights of the creator.” - WTO
      “IP rights are the rights given to people over the creations of their minds.” –WTO.
      “Creators can be given the right to prevent others from using their inventions, designs or other creations — and to use that right to negotiate payment in return for others using them.” – WTO.
      Failure to meet a TRIPS standard could result in a reduction of the export quota of the non-complying country.
    • What’s wrong with TRIPS?
      The IP issue relates to the collection of royalties on patents and does not belong to the WTO in the first place.
      Big Pharmaceutical companies have muscled their way into the WTO and turned it into a royalty collection agency simply because the WTO has the authority to apply trade sanctions.
      The optimal patent period must reflect a balance of two forces: on one hand the protection provided by IPP provides an incentive to innovate; on the other hand, it slows down the diffusion of benefits to potential users. …The patent period under TRIPS is uniformly extended to 20 years – a period so long that few economists of repute can be found who would call it efficient in terms of balancing the two opposing forces.
    • Myths & Facts: 1
      Myth: Drug companies spend their maximum resources on research and development.
      Fact: In 2008, the pharma industry spent only 14% of its revenue on R&D.
    • Myths & Facts: 2
      Myth: The R&D spending is aimed at developing new drugs.
      Fact: In excess of 40 per cent of the industry's R&D is aimed at producing minor variations of existing drugs, not at turning out new ones.
      Two-thirds of the drugs approved from 1989 to 2000 were modified versions of existing drugs or even identical to those already on the market, rather than truly new medicines.
    • Myths & Facts: 3
      Myth: Pharma Companies are the major source of innovative research.
      Fact: Taxpayers and Academic institutionsare by far the largest funding sources to research.
      Fact: Public researches often tackle the riskiest and most costly research, which is basic research, making it easier for industry to profit. The NIH report discovered that only 14% of the drug industry’s total R&D spending went to basic research, while 38% went to applied research & 48% was spent on product development.
      This begs the question: Who should really own the patent rights for a drug?
    • Myths & Facts: 4
      Myth: Pharmaceutical sales are not sufficient to cover R&D costs.
      Fact: With normal profit margins ranging from 11% to 25% in 2008 for eight top companies, the research based pharmaceutical sector is amongst the most profitable of all industries in spite of research spending.
      Since 1999, the rate of growth in research investment is slower than the growth in net income within the pharmaceutical industry.
    • Myths & Facts: 5
      Myth: High R&D layouts entitle the pharmaceutical industry to more IP-protection than other industries.
      Fact: The pharmaceutical industry enjoys the highest Return On Capital of any industry.
    • Myths & Facts: 5 (cont’d)
    • Myths & Facts: 6
      Myth: Generic Companies merely copy brand-name products using originator company data, with no R&D costs.
      Fact: Generic Companies invest 6%-8% of annual revenues into R&D and never see originator data.
    • Regional Trade Agreements
    • Regional Trade Agreements
      Characteristics of the FTA/RTA
      More than 200 RTAs till July 2008
      Recent RTA are different from the ones in the 60s and 70s
      Includes economies that had not entered into any FTAs before
      Stagnated multilateral liberalisation process like the WTO and APEC
      Perceived tendencies toward regionalism in Europe and Americas
      The strong sense of need to help themselves within East Asia
    • RTAs Contd.
      Market integration within FTAs, causing the creation of new and competitive business through the increased productivity and price depreciation
      Attempts to include agreement on
      Tax and investment
      Trade facilitation measures
      Integration of financial markets
      “Ecotech” activities between developed and developing countries
    • Potential Negative Effects of the FTA Proliferation
      Various local agreements will emerge depending on the circumstances that each FTA faces
      If it is hard for a government to undertake structural adjustment, forming an FTA is the only option available
      Content of every FTA differs from each other when participants differ
    • FTAs to complete goal of WTO
      FTAs should become multilateral and non-discriminatory if they are to become truly consistent with the global MFN trade that the WTO ultimately pursue
      Two ways in which WTO can become multilateral and non-discriminatory
      From Outside
      By Themselves
    • USA and Trade Agreements
      Bilateral: Australia · Bahrain · Chile · Israel · Jordan · Morocco · Oman · Peru · Singapore
      Multilateral: Dominican Republic–Central America Free Trade Agreement (DR-CAFTA) · North American Free Trade Agreement (NAFTA)
    • Source: USITC
    • Source: USITC
    • USA and Morrocco
      “A free trade agreement bolsters Morocco’s courageous economic reforms, creates economic opportunities for both of our peoples and solidifies our strong relationship with a key partner.”
      – Robert B. Zoellick, U.S. Trade Representative
    • U.S. exports to Morocco $1518 million annually,
      Imports from Morocco contributed to 4% of Total, with $878 Million in 2008.
      Source: http://www.moroccousafta.com
    • Source: http://www.moroccousafta.com
    • World Growth Vs Exports
      1995 to 2008
      Source: Business Victoria
    • Most Favored Nation
    • Most Favored Nation (MFN)
      In WTO, MFN means non-discrimination
      Each member treats all the other members equally as “most-favoured” trading partners
      Agreements under WTO grants all members MFN status automatically
      Eg: if a country lowers trade barrier or opens up market, it has to do so for the same goods or services from all its trading partners
    • MFN: Advantages
      Promotes equality
      Save time and resources on negotiation and monitoring
      Possible for nations to import form the most efficient suppliers
      Countries tend to support the liberalized status quo
      Reduces the cost of determining point of origin
    • MFN: Problems & Criticism
      Agreements are first made in bilateral negotiations, which usually lack transparency
      Continual awareness is needed to ensure MFN status is not abused
      Issues are complex - rules try to establish what is fair or unfair and how government can respond
      WTO agreements aim to support fair competition – agreements on government procurement extends competition rules to purchases
    • MFN & Developing Economies
      Generalized System of Preferences (GSP) - developed countries grant preferential tariff rates to developing country
      Enabling Clause (1979) - one-way tariff preferences and certain other preferential arrangements
      In 2004, the WTO Appellate Body ruled a clause that allows developed countries to offer different treatment to developing countries
    • MFN & Developing Economies
      But what about tariff barriers under environmental issues, Child labor and Others
      Generalized System of Preferences (GSP) - developed countries grant preferential tariff rates to developing country
      Enabling Clause (1979) - one-way tariff preferences and certain other preferential arrangements
      In 2004, the WTO Appellate Body ruled a clause that allows developed countries to offer different treatment to developing countries
    • Singapore-India Economic Agreement
      The agreement provides:
      Investment liberalisation commitments
      Guarantees of 'national treatment' for investors and investments alike
      Protection against direct and indirect expropriation
      It does not provide for:
      Fair and equitable treatment
      Full protection and security
      Provision for MFN treatment
    • Rounds of Negotiation
    • Round of Negotiations: Uruguay
      Market access: Tariff only system
      Domestic Support: Green Box, Amber Box & Blue Box
      Export Subsidies: Reduction in subsidies
      Provision to apply for anti-dumping activities
      Safeguard actions to protect a specific domestic industry
    • Uruguay Round: North-South bargain
      Bargain: The developing countries would take on significant commitments in new areas such as intellectual property and services, where industrial country enterprises saw opportunities for expanding international sales
      Reasons for this outcome
      Developing countries lacked of experience in WTO negotiations
      Intensified mercantilist attitude
      WTO put small countries in a matter of concern
    • Reasons for acceptance of unbalanced outcome
      Tradition of casual analysis
      No tally attempted to calculate tariff concessions given versus received at the round
      Information was not available
      No data was available for analysis
      Argentina had limited information on the service sector and the one which was available was inaccurate
      WTO creation changed developing countries options
    • WTO Rounds
      Singapore Ministerial
      Conference from 9 to 13 December 1996
      Examined issues related to the work of WTO's first two years of activity
      Established permanent working groups
      Transparency in government procurement
      Trade facilitation
      Trade and investment
      Trade and competition
    • WTO Rounds
      Geneva Ministerial
      Millennium Round
    • WTO Round
      Doha Ministerial
      November 9-13, 2001
      Negotiations in agriculture and services
      Agreement on TRIPS
      Doha Development Agenda (DDA)
      Three pillars of the agricultural negotiations
      Special and differential treatment for developing countries
      Cancun meeting
    • Doha Ministerial: Other Negotiations
      Cotton subsidies
      C4 countries proposal for elimination
      Trade-distorting domestic support
      Export subsidies
      Reforming current GATS rules and principles
      Each member country to liberalize its service sector
    • Other Negotiations Contd..
      Reduction in tariff and non-tariff barriers
      Tariff peaks
      Tariff escalation
      Agreements on Antidumping (AD)
      Subsidies and Countervailing Measures (ASCM)
    • Doha: Importance & Difficulties
      World Bank report on full-liberalization
      Global gains from global trade $290 billion
      30-70 to developing and developed countries
      Decline in poverty in economies which take advantage of increased opportunities for agricultural exports
      Result of cut in farm subsidies in developed countries
      Preferential tariff
    • Doha Dreams: Still Distant
      Cancun, 2003: Meeting collapses
      Geneva, 2004: Agreement on broad principles
      Hong Kong, 2005: Very low expectations met
      Geneva, 2006: Doha Round “suspended”
      Potsdam, 2007: Meeting collapses
      Geneva, 2008: Nine-day meeting collapses
    • “Doha Lite”
      The deal on the table in July would have:
      reduced tariffs that high-income countries impose on agricultural products from an average of about 15% to about 11%
      reduced tariffs that developing countries impose on agricultural products from an average 13.4% to 13.3%
      This deal was still just a portion of what a final agreement would constitute; negotiators had not yet dealt with other issues such as anti-dumping and services.
      (source of figures: World Bank)
    • But: “Anti-protectionism insurance”
      For many countries, “bound” tariffs (legal ceilings) are much higher than “applied” tariffs (currently imposed levels).
      The deal that was on the table in July 2008 would have lowered bound tariffs fairly significantly – not enough to reduce applied tariffs much, but enough to help constrain protectionism.
      For example, developing countries’ bound tariffs on manufactured goods would have fallen from an average of 19.1% to 11.8%.
      Brazil India Indonesia
      (Manufactured goods; bound tariffs
      In light blue, applied in dark blue)
    • Indian Farmers
    • WTO & Indian Farmers
      Agriculture: Subsidies and Growth
      Most powerful instrument for accelerating agricultural growth
      Seed-water-fertilizer revolution in 1970’s
      As the time passed subsidies resulted in huge burden on the state and central government
      Centre for Indian Development Studies,2006
    • WTO & Indian Farmers
      Awareness to the Indian farmers about the policies of the WTO and AOA
      Centre for Indian Development Studies,2006
    • Suicide of Indian farmers
      Relation between suicide of Indian farmers and the WTO/AOA
      Centre for Indian Development Studies,2006
    • Conclusion
      If WTO becomes a successful organization with zero tariff barriers, Free flow of trade, no discrimination, The volume would be of more priority than value. Thus Countries like India, which have more potential to grow the output in large volumes, have a very shining future.