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Mainstream, VOL LII, No 25, June 14, 2014

S 301: Keeping Alive Gunboat Diplomacy

Saturday 14 June 2014

by Rohini Pandurangi

The recent decision of the United States (US) to continue to keep India in the ‘priority watch list’ thereby refraining from designating it as a ‘priority foreign country’ saves India from having to do another firefighting, at least for the time being. The sudden and unexpected decision of the EU to ban imports of Alphonso mangoes and four other vegetables from India has given the Commerce Ministry enough work to do. Though the actions of the US are unilateral and internal and the nations concerned need not attach any weightage, it is a pressure building exercise by the US and is very much likely to influence the investor sentiment.

The practice of US traders making petition to the United States Trade Representative (USTR) about the malpractices of the of foreign countries which puts their traders at disadvantage dates back to the 1960s. Back then provisions were enacted to give the President the power to initiate investigations against the countries that were identified, try to engage them in bilateral negotiations giving them an opportunity to “correct themselves”, and impose trade sanc-tions if they refused or failed to do so. This Act was revised in 1974 and 1984 vastly expanding its scope. It was further amended in 1988 and renamed as “Omnibus Trade and Competi-tiveness Act”. It is pursuant to Section 182 of the US Trade Act, 1974, as amended in 1988, and popularly known as Special 301 (S 301) that the US conducts annual investigations against countries which purportedly deny adequate intellectual property protection and market access to persons who rely on intellectual property. Based on the investigations a Report is released which ranks countries depending upon the level of IP protection provided by them. A background note on S 301 says that the “USTR may not designate a country as a Priority Foreign Country if it is entering into good faith negotiations or making significant progress in bilateral or multilateral negotiations to provide adequate and effective IPR protection”.

The US has a history of taking unilateral actions against countries which, it believes, do not provide adequate IP protection. It had used the threat of unilateral action against countries that did not agree to negotiate on intellectual property rights in the Uruguay Round and was successful in getting them to agree on inclusion of intellec-tual property in the negotiating agenda. It is astonishing to find that the US - the country, which as the main advocate for the establishment of a multilateral organisation for trade negotiations, can blatantly disregard and flout the principles of multilateralism. It definitely has kept gunboat diplomacy alive, albeit in a new avatar.

During their course of development several countries, that are now developed, had kept inventions in many fields out of the scope of patentability. Pharmaceuticals were the main area where patents were denied. Countries like Germany, France, and Italy expanded the scope of patentability only in the latter half of the twentieth century. Spain provided patents to pharmaceuticals only in the year 1992. In contrast, patent laws were formed in India way back in 1859. Similar was the case of the other colonies in Asia and Africa. They all inherited their patent laws from their colonial masters. India formulated a comprehensive patents policy in the year 1970. The patent law, thus promulgated, permitted only product patenting and not process patenting, enabling the production of on-patent drugs through reverse engineering. However, our patent laws have undergone changes after we became a signatory to the TRIPS Agreement. The TRIPS made it compulsory to grant patent to both products as well the process. Given the fact that the life of these patents is twenty years, generic manufac-turers will have to wait for those many years to start production of generic versions. Though the compulsory licensing mechanism gives the developing countries some leeway, the pharma majors have been all out to attempt at blocking the use of the mechanism.

The current episode is once again an attempt in the same direction. While the US has kept India in a watch list for a long time there is a sense of urgency among the pharma majors this time around because of the fact that several other developing countries are mulling over emulating Indian patent laws. If this happens it could cause a big dent in their profits.

Apart from these unilateral actions there are also attempts to block the export of generic drugs through Anti-counterfeiting Trade Agreement (ACTA). Through this Agreement the developed countries are trying to blur the distinction between spurious drugs and generics by equating deliberate trademark counterfeiting with trademark infringement disputes. The latter arises out of similar names or similar packaging which is most common with generic drugs done with the purpose of establishing medical parity. The Agreement has provisions to enable the customs officials to seize and destroy any drugs including to the generic ones on the basis of the complaint by the right holder, without giving the manufacturer of the generic an opportunity to state his case. Not only this, the Agreement also has provisions to fix third party liability also. Third parties could be suppliers of active ingredients, stockists and distributors and even NGOs which might have bought the drugs. These provisions are unprecedented and are an attempt to block the manufacture and supply of generic drugs in whatever way possible.

The USTR has said that India has not been downgraded keeping in view the fact that there will be a transition of power. It probably is betting that an ‘investment seeking’ regime might come into power and it could use this as a bargaining chip. The US is a past-master in such negotiations. Mindful of this fact, whichever government comes to power and whatever ideology they follow, the current patent law should be defended. This should be done not only in our interests but also of others who do not have the capacity to produce required drugs.

The WTO is the place where the issue needs to be settled. Given the ground reality that the US is our largest export market, India might have to engage in negotiations with the US. But any solution should take care of the concerns of the developing countries as a whole. This should include making the drugs which are on patent affordable to the patients in developing countries and putting an end to efforts like evergreening of patents, data exclusivity and other TRIPS plus measures. The time period of patents for pharmaceuticals should also be reduced. At the same time countries that have strong generic industries should encourage and support them to move beyond generics and engage in R & D to come up with their own inventions.

 The Indian pharmaceutical industry has been the beacon of hope for millions who depend upon affordable generic drugs. It has held ground for these many years. It has provided leadership on the issue of affordable medicines and public health and has built a reputation and goodwill among other developing countries. If the Indian government succumbs to pressure and yields, the unity of developing countries on this issue will break. This was how the developed countries have gotten them to agree to various rules of the WTO though they were vehemently opposed to them. Therefore this unity should be preserved at all cost.

India is the only country that is consistently in the ‘priority watch list’ ever since the US started bringing out these reports in 1989. India is at the bottom of several indices that have anything to do with development. But for once we can be proud of this record of remaining in the ‘worst’ list.

Currently a Project Fellow on a major research project of the UGC at the SIES College, Sion, Mumbai, the author is a Doctoral candidate in the Department of Political Science, Bangalore University.