FTA’s Impacts on Developing Countries: the Asian Context


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FTA’s Impacts on Developing Countries: the Asian Context

  1. 1. 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
  2. 2. 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
  3. 3. 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.
  4. 4. 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.
  5. 5. 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?
  6. 6. 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
  7. 7. 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
  8. 8. 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.
  9. 9. 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?
  10. 10. 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?
  11. 11. 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?
  12. 12. 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
  13. 13. 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?
  14. 14. 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).
  15. 15. 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:
  16. 16. 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?
  17. 17. 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:
  18. 18. XVI - The Patent Act - The Trademark Act - The Copyright Act - The Plant Variety Protection Act - The Sui Generis Law on Data Exclusivity ……………………………………………………..
  19. 19. Session I: Investment Issues By Assoc.Prof. Dr.Lawan Thanadsillapakul, School of Law, Sukhothai Thammathirat Open University
  20. 20. 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
  21. 21. 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
  22. 22. 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.
  23. 23. 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.
  24. 24. 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
  25. 25. 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.
  26. 26. 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.
  27. 27. 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
  28. 28. 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:
  29. 29. 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.
  30. 30. 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.
  31. 31. 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
  32. 32. 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.
  33. 33. 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.
  34. 34. 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.
  35. 35. 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.
  36. 36. 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.
  37. 37. 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. ……………………………………………
  38. 38. 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
  39. 39. 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
  40. 40. 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,