IPI op/ed in the Financial Times on IP and WTO debate

Today, IPI has an op/ed in the Financial Times that addresses some of the issues we've been talking about in this blog about the relationship between agriculture subsidies and IP-retribution. It's particularly relevant as we move up to the WTO meeting in just a few weeks in Hong Kong, where these issues are going to be at the top of the agenda.

Europe starves developing nation innovation

By Susan Kling Finston

This autumn the focus is on the need to provide fairer terms of trade for developing countries at the forthcoming World Trade Organisation ministerial meeting in Hong Kong. The European Union’s farm subsidies are under the microscope, testing the EU’s commitment to the positions taken at last summer’s Glen-eagles Group of Eight summit. The communiqué cited an “historic moment” for a “renewed commitment” to development for Africa.

In considering next steps, it may be helpful to look beyond hype and dogma on aid, trade and Africa. There is a widespread myth, promoted by activists and vested interests, that somehow “socialist” Europe is the friend of less developed countries on aid and trade reform issues, while “capitalist” America pursues only its crass economic interests. In fact, no government has done more to hurt poor countries than the EU’s agriculture subsidies, which reward rich countries and block prospects for growth in Africa. Last week we saw EU states pull back from meaningful agricultural reforms in Geneva trade talks. Adding to the burdens of poor countries, the European Commission also supports so-called trade reforms to require disclosure obligations for biotechnology patents which, if adopted, would deal a death-blow to nascent biotechnology in Africa, as well as in Asia and Latin America.

One of the important achievements of the late 20th century was the availability of patents to inventors anywhere in the world. Through treaties administered by the World Intellectual Property Organisation, such as the Patent Co-operation Treaty, as well as the WTO, international minimum standards for patents have reduced uncertainty and transaction costs. This has led to increased foreign direct investment, technology transfer and economic growth in India, China, Brazil, Mexico, South Africa, Egypt and many other countries. The PCT is funded largely by the fees paid by US, European and Japanese companies, and provides disproportionate benefits to innovators in developing countries who otherwise would face much higher transaction costs and other barriers to gaining patent protection in the west.

PCT filings demonstrate that in the 21st century no nationality has a monopoly on good ideas. Similarly, the WTO established minimum international standards for the issuance of patents that assured investors that the same basic patent rules would be applied worldwide. This has also led to expanded investment, technology transfer and capacity building – all of which contribute to a virtuous cycle of increased patenting and industrial development. Jordan is simply the latest example of a developing country that has shown clear gains from adoption of the WTO’s Trips patent standards for pharmaceutical products.

Unfortunately, this progress is now threatened. Europe, not content with blocking genetically modified agricultural exports from Africa, now seeks to introduce restrictive patent requirements for biotechnology. These new requirements would require disclosure of the origin of the genetic resources from which a biotechnology invention is derived. What is the point of such disclosure rules? For some, the objective is to compel the owners of biotech patents to pay royalties to the countries from which the raw materials were derived. For others, including many European activists opposing all genetically modified crops, the objective is to stop all patenting of products derived from genetic resources identified by many African leaders as critical to their ability to feed their growing populations and reach export markets.

The current EU proposals increase uncertainty by making the viability of patents conditional on ambiguous disclosure obligations and would probably represent the death knell for genetic resource-based biotechnology in the developing world. What is needed to drive capital towards investments in developing country biotechnology is clear, unambiguous property rights and market incentives, such as those found internationally in the Wipo and WTO Trips agreement and domestically in the US under the Bayh-Dole Act.

There are no winners from these proposals, which would reduce the value of patents. The bottom line is: the value of genetic resources in the ground is directly proportional to the strength of the property rights, including intellectual property, associated with them. Why would anyone invest the long-term capital necessary to develop such a product without the assurance that he or she owns the property underlying that investment?

The globalisation of patent processes and current minimum standards support economic development and have been good news for an increasing number of developing countries. Given their important role in advancing development, it should cause enormous concern that the European Commission is now leading the charge in Geneva to roll back patent disciplines for biotechnology, perhaps to advance other trade priorities at biotech’s expense. Proposals currently under negotiation would marginalise poor countries in the most important new economic arena of the 21st century.

It remains to be seen whether Europe will live up to the rhetoric of Glen-eagles in the run-up to the Hong Kong meeting. In any case, let us hope that developing countries pay close attention to the interests of their own innovators and entrepreneurs who rely on biotech patents to gain a toe-hold in world capital markets. They would be ill-advised to rely on Europe’s continued “generosity” on biotech trade policy for Africa.

The writer is a research associate at the US’s Institute for Policy Innovation