World Trade Organization

Tripti Malhotra

The World Trade Organization (WTO) is the most powerful legislative and judicial body in the world. By promoting the free trade agenda of multinational corporations above the interests of local communities, working families, and the environment, the WTO has systematically undermined democracy around the world. Unlike United Nations treaties, the International Labor Organization conventions, or multilateral environmental agreements, WTO rules can be enforced through sanctions. This gives the WTO more power than any other international body. The WTO’s authority even eclipses national governments. The WTO was born out of negotiations, and everything the WTO does is the result of negotiations. The bulk of the WTO’s current work comes from the 1986–94 negotiations called the Uruguay Round and earlier negotiations under the General Agreement on Tariffs and Trade (GATT). The WTO is currently the host to new negotiations, under the ‘Doha Development Agenda’ launched in 2001.

SUCCESS:

In the years 2008 and 2009, the WTO witnessed increased economic uncertainty. Its main function is to ensure the smooth and free flow of global trade. The WTO administers agreements, handles trade disputes and monitors country-specific trade policies while training and cooperating with developing nations and other international organizations [1].

1. The WTO has not only enhanced the value and quantity of trade but has also helped in eradicated trade and non – trade barriers. WTO has also broadened the trade governance scope to trade in investment, services and intellectual property.

2. It has emerged as a greater institution than GATT and expanded the agenda by including developmental policies which further helped in settlement of disputes and improved monitoring by introducing the Trade Policy Review and the World Trade Report as well as increased transparency by removing green room negotiations.

3. WTO also encouraged sustainable trade developments. As trade expands in volume, in the numbers of products traded, and in the numbers of countries and companies trading, there is a greater a chance that disputes will arise. The WTO system helps resolve these disputes peacefully and constructively – in reality, a lot of international trade tension is reduced because countries can turn to organizations, in particular the WTO, to settle their trade disputes. The increasing number of disputes brought to GATT and its successor, the WTO, does not reflect increasing tension in the world, it rather reflects the closer economic ties throughout the world, the GATT/WTO’s expanding membership and the fact that countries have faith in the system to solve their differences.

4. The fact that there is a single set of rules applying to all members greatly simplifies the entire trade regime. The WTO cannot claim to make all countries equal. But it does reduce some inequalities, giving smaller countries more voice, and at the same time freeing the major powers from the complexity of having to negotiate trade agreements with each of their numerous trading partners.[2]

5. WTO members are now reducing the subsidies and the trade barriers which give consumers more choices, and a broader range of qualities to choose from.

6. The system shields governments from narrow interests the GATT-WTO system which evolved in the second half of the 20th Century helps governments take a more balanced view of trade policy. Governments are better placed to defend themselves against lobbying from narrow interest groups by focusing on trade-offs that are made in the interests of everyone in the economy.

7. The World Trade Organization is the single most effective international agency. With the pending inclusion of China, governments that represent 85 percent of the world’s population and about 95 percent of world trade have chosen to bind themselves to the WTO’s rules and dispute settlement procedures.

8.The WTO has been so successful that numerous groups have petitioned to use the WTO to enforce a range of nontrade rules affecting labor, the environment, and competition policy[3].

9.The WTO is the world’s only international organization that supervises 95% of the world’s global trade.[4] The WTO agreements include numerous provisions giving developing and least-developed countries special rights or extra leniency — “special and differential treatment”. Among these are provisions that allow developed countries to treat developing countries more favourably than other WTO members. The General Agreement on Tariffs and Trade (GATT, which deals with trade in goods) has a special section (Part 4) on Trade and Development which includes provisions on the concept of non-reciprocity in trade negotiations between developed and developing countries — when developed countries grant trade concessions to developing countries they should not expect the developing countries to make matching offers in return.

10. Both GATT and the General Agreement on Trade in Services (GATS) allow developing countries some preferential treatment. Other measures concerning developing countries in the WTO agreements include:

i. extra time for developing countries to fulfil their commitments (in many of the WTO agreements).

ii. provisions designed to increase developing countries’ trading opportunities through greater market access (e.g. in textiles, services,technical barriers to trade)

iii. provisions requiring WTO members to safeguard the interests of developing countries when adopting some domestic or international measures (e.g. in anti-dumping, safeguards, technical barriers to trade)

iv. provisions for various means of helping developing countries (e.g. to deal with commitments on animal and plant health standards, technical standards, and in strengthening their domestic telecommunications sectors).

11. The least-developed countries receive extra attention in the WTO. All the WTO agreements recognize that they must benefit from the greatest possible flexibility, and better-off members must make extra efforts to lower import barriers on least-developed countries’ exports. Since the Uruguay Round agreements were signed in 1994, several decisions in favour of least-developed countries have been taken. In 2002, the WTO adopted a work programme for least-developed countries. It contains several broad elements: improved market access; more technical assistance; support for agencies working on the diversification of least-developed countries’ economies; help in following the work of the WTO; and a speedier membership process for least-developed countries negotiating to join the WTO.

12. The phases of development of the special treatment of the third world countries can be studied in the form of four phases. The first phase starts from the forming of the GATT in 1948 till the beginning of the Tokyo Round in 1973. The second phase refers to the Tokyo Round itself, from 1973 to 1979. The third phase dates from the end of the Tokyo Round to the end of the Uruguay Round, that is from 1979 to 1995. The fourth phase starts from the end of the Uruguay Round until the present. The analysis that follows distinguishes five arguments that have been advanced for Special &Differential treatment. The five categories are stated as follows:

i. Special and differential treatment is an acquired political right.

ii. Developing countries ought to enjoy privileged access to the markets of their trading partners, particularly the developed countries.

iii. Developing countries ought to have the right to restrict imports to a greater degree than developed countries.

iv. Developing countries ought to be allowed additional freedom in order to subsidize exports.

v. Developing countries ought to be allowed flexibility in lieu of the application of certain WTO rules, or in order to postpone the application of rules as stated by WTO.

13. Though it is a multilateral institution, the GATT/WTO has adopted a bilateral approach to multilateral bargaining according to which reciprocal negotiations occur on a voluntary basis through time between pairs of countries or among small numbers of countries, with the results of these bilateral negotiations then multilateralized to the full GATT/WTO membership by a non-discrimination requirement that tariffs abide by the most-favored nation (MFN) principle.

14. MFN Treatment: Non- discrimination between countries – the Most Favoured Nation principle is one of the most fundamental principles of the WTO. It requires member states to accord the most favourable tariff and regulatory treatment given to the product of any one member and/or non member at the time of export or import of “like products” to all other WTO members. Under the Most Favoured Nation rule, should WTO member state A agree in negotiation with state B, which needs not to be a WTO member, to reduce the tariff on the same product X to five percent, this same tariff rate must apply to all other WTO members as well. In other words, if a country gives favourable treatment to one country regarding a particular issue, it must handle all members equally regarding the same issue.

MFN and national treatment are designed to secure fair conditions of trade. So too are those on dumping (exporting at below cost to gain market share) and subsidies. The issues are complex, and the rules try to establish what is fair or unfair, and how governments can respond, in particular by charging additional import duties calculated to compensate for damage caused by unfair trade.[5]

15. The WTO agreements, which were the outcome of the 1986-94 Uruguay Round of trade negotiations, provide numerous opportunities for developing countries to make gains. Further liberalization through the Doha Agenda negotiations aims to improve the opportunities. Among the gains are export opportunities. They include:

i. fundamental reforms in agricultural trade.

ii. phasing out quotas on developing countries’ exports of textiles and clothing.

iii. reductions in customs duties on industrial products.

iv. expanding the number of products whose customs duty rates are “bound” under the WTO, making the rates difficult to raise.

v. phasing out bilateral agreements to restrict traded quantities of certain goods — these “grey area” measures (the so-called voluntary export restraints) are not really recognized under GATT-WTO.

In addition, liberalization under the WTO boosts global GDP and stimulates world demand for developing countries’ exports.

CRITIQUE/FAILURES :

1. The foremost failure of WTO is its failure to uphold the principle of democracy. WTO is fundamentally undemocratic. The policies of the WTO impact all aspects of society and the planet, but it is not a democratic, transparent institution. The WTO rules are written by and for corporations with inside access to the negotiations. The lack of transparency is often seen as a problem for democracy. Politicians can negotiate for regulations that would not be possible or accepted in a democratic process in their own nations. “Some countries push for certain regulatory standards in international bodies and then bring those regulations home under the requirement of harmonization and the guise of multilateralism.”[16] This is often referred to as Policy Laundering.

2. WTO is highly biased towards the developed and rich nations, instances of which are as follows:

i. Rich countries are able to maintain high import duties and quotas in certain products, blocking imports from developing countries (e.g. clothing);

ii. The increase in non-tariff barriers such as anti-dumping measures allowed against developing countries;

iii. The maintenance of high protection of agriculture in developed countries while developing ones are pressed to open their markets;

iv. Many developing countries do not have the capacity to follow the negotiations and participate actively in the Uruguay Round; and

v. The TRIPs agreement which limits developing countries from utilizing some technology that originates from abroad in their local systems (including medicines and agricultural products).

3. The WTO Tramples Labor and Human Rights, it’s rules put the “rights” of corporations to profit over human and labor rights. The WTO encourages a ‘race to the bottom’ in wages by pitting workers against each other rather than promoting internationally recognized labor standards. The WTO has also ruled that it is illegal for a government to ban a product based on the way it is produced, such as with child labor. It has also ruled that governments cannot take into account “non commercial values” such as human rights, or the behavior of companies that do business with vicious dictatorships such as Burma when making purchasing decisions.

4. WTO is seeking to privatize essential public services such as education, health care, energy and water. Privatization means the selling off of public assets – such as radio airwaves or schools – to private (usually foreign) corporations, to run for profit rather than the public good. The WTO’s General Agreement on Trade in Services, or GATS, includes a list of about 160 threatened services including elder and child care, sewage, garbage, park maintenance, telecommunications, construction, banking, insurance, transportation, shipping, postal services, and tourism. In some countries, privatization is already occurring. Those least able to pay for vital services – working class communities and communities of color – are the ones who suffer the most.

5. The WTO is also destroying the Environment to a great extent – The organization is being used by corporations to dismantle national environmental protections, which are attacked as “barriers to trade.” The very first WTO panel ruled that a provision of the US Clean Air Act, requiring both domestic and foreign producers alike to produce cleaner gasoline, was illegal. The WTO declared illegal a provision of the Endangered Species Act that requires shrimp sold in the US to be caught with an inexpensive device allowing endangered sea turtles to escape. The WTO is attempting to deregulate industries including logging, fishing, water utilities, and energy distribution, which will lead to further exploitation of these natural resources.

6. The “free trade agreements” threaten to erode many of the advances in global environmental protection, endangering our planet and the natural resources necessary to support life. The North American Free Trade Agreement (NAFTA) and certain agreements of the World Trade Organization (WTO) were written to prioritize rights for corporations over protections for our shared environment. But rather than being repealed, corporate interests are negotiating the expansion of these corporate rights. The U.S.-Dominican Republic-Central American Free Trade Agreement (CAFTA), soon to go before Congress, and the proposed Free Trade Area of the Americas (FTAA), currently in negotiations, are modeled on NAFTA. In addition, negotiations are proceeding within the WTO to expand many of its policies.

These new agreements threaten global biodiversity, would accelerate the spread of genetically engineered (GE) crops, increase natural resource exploitation, further degrade some of the most critical environmental regions on the planet, and erode the public’s ability to protect our planet for future generations.[6]

7. Corporate interests are also negotiating the expansion of the WTO through an agreement on Non-Agricultural Market Access, or NAMA. Primarily involving industrial manufactured goods, NAMA also includes trade in natural resources such as forest products, gems and minerals, and fishing and fish products. NAMA aims to reduce tariffs as well as decreasing or eliminating so-called Non-Tariff Barriers (NTBs), which can include measures for environmental protection and community development.

Eliminating tariffs in natural resources would dramatically increase their exploitation. The World Forum of Fish-harvesters and Fish-workers has warned of the devastation to fish conservation posed by NAMA. Even the U.S. Trade Representative has acknowledged that eliminating tariffs on wood products would dramatically increase logging, exacerbating deforestation in some of the world’s most sensitive forests.

The WTO has already identified a wide range of environmental policy tools as potential ‘barriers to trade’: the certification of sustainably-harvested wood and fish products; restrictions on trade in harmful chemicals; and packaging, marketing and labeling requirements such as organic and Fair Trade labeling.

8. The WTO’s fierce defense of ‘Trade Related Intellectual Property’ rights (TRIPs)—patents, copyrights and trademarks—comes at the expense of health and human lives. WTO has protected for pharmaceutical companies’ ‘right to profit’ against governments seeking to protect their people’s health by providing lifesaving medicines in countries in areas like sub-saharan Africa, where thousands die every day from HIV/AIDS. Developing countries won an important victory in 2001 when they affirmed the right to produce generic drugs (or import them if they lacked production capacity), so that they could provide essential lifesaving medicines to their populations less expensively. Unfortunately, in September 2003, many new conditions were agreed to that will make it more difficult for countries to produce those drugs. Once again, the WTO demonstrates that it favors corporate profit over saving human lives. Trade-Related Aspects of Intellectual Property Rights (TRIPS) rules are more restrictive than liberalizing[7].

9. Free trade is not working for the majority of the world. During the most recent period of rapid growth in global trade and investment (1960 to 1998) inequality worsened both internationally and within countries. WTO rules have hastened these trends by opening up countries to foreign investment and thereby making it easier for production to go where the labor is cheapest and most easily exploited and environmental costs are low [8].

10. In developing countries, as many as four out of every five people make their living from the land. But the leading principle in the WTO’s Agreement on Agriculture is that market forces should control agricultural policies-rather than a national commitment to guarantee food security and maintain decent family farmer incomes. WTO policies have allowed dumping of heavily subsidized industrially produced food into poor countries, undermining local production and increasing hunger.

11. WTO supposedly operates on a consensus basis, with equal decision-making power for all. Involvement of the poor countries is less in the decision making process and they have less bargaining power. Many countries do not even have enough trade personnel to participate in all the negotiations or to even have a permanent representative at the WTO.

12. The WTO’s “Most Favored Nation” provision requires all WTO member countries to treat each other equally and to treat all corporations from these countries equally regardless of their track record. Local policies aimed at rewarding companies who hire local residents, use domestic materials, or adopt environmentally sound practices are essentially illegal under the WTO. Developing countries are prohibited from creating local laws that developed countries once pursued, such as protecting new, domestic industries until they can be internationally competitive.

13. WTO takes too long to arbitrate and settle disputes – it can take over five years from the initial receipt of a complaint from one member to the final panel ruling. Despite the WTO operating as a multilateral organisation, many member countries and trading blocs favour bilateral discussions with partners or competitors. This is because bilateral negotiations can be fully focussed and relatively quick to complete. The result is that many countries prefer to bypass the WTO process, and deal directly with other countries. The failure of the most recent round of WTO negotiations, the Doha round, is widely regarded as evidence of the inherent problems of multilateral discussions.

When the WTO met in 2001, the Trade negotiators were unable meet their goals of expanding the WTO’s reach. In Cancún, Mexico and Hong Kong, China, the WTO met thousands of activists in protest, scoring a major victory for democracy. Developing countries refused to give in to the rich countries’ agenda of WTO expansion – and caused the talks to collapse.

The talks collapsed for a number of reasons. Significantly, while the US and EU failed to agree reductions in agricultural support, many developing countries refused to agree new investment rules which would make it easier for multinationals to invest in their countries. Since the collapse, the USA and EU have returned to bilateral agreements with favoured nations, rather than entering into multilateral agreements. This highlights a major limitation of the WTO in not gaining a complete consensus that multilateral negotiations should be the method of choice of its members.

The failure of the Doha round means that the rich countries of the world still protect themselves from goods produced by the poor nations. By 2005, average agricultural tariffs imposed by the USA and EU were 60%, against average industrial tariffs of only 5%*.

14. For over 30 years, developed countries ignored GATT principles and restricted developing-country exports of textiles and clothing. WTO rules on dumping, safeguards and subsidies have been misused. Liberalization of trade in services has achieved little so far.

15. The slow processes of intergovernmental negotiation, and the need for consensus agreement, mean that the WTO can rarely make rapid or controversial decisions. Nevertheless, interest in the WTO, and in particular in this week’s Hong Kong meeting, remains high. There are several reasons for this:

i. Few people really doubt that trade liberalization can have some impact on the economy, whether that impact is welcome or not.

ii. If the Doha round cannot resolve problems of agricultural subsidies and other measures contrary to the rules, members will resort increasingly to the WTO’s effective dispute-settlement procedures, with results that are more disruptive than negotiated solutions.

iii. In past negotiations, developing countries were generally more onlookers than participants. The Doha Round is the biggest test yet of whether the WTO can focus effectively on their needs.

Whatever the outcome in Hong Kong, concern about the Doha round itself is justified. Failure could be a serious blow to international business confidence and economic prospects for the developing countries. It would also encourage further fragmentation of the trading system.

Because of this failed record, opposition has grown worldwide to the WTO model of globalization which as been driven by a narrow slice of corporate elites to suit their interests. The collapse of the Doha Round WTO expansion talks offers an extraordinary opportunity for a fundamental re-think of the direction of the global economy [9].

16. Growth and the rate of poverty reduction have slowed in most parts of the world since implementation of the WTO’s policies imposed on many developing countries by the International Monetary Fund and World Bank[10].

17. The concept of such special and differential treatment – certain laws applicable to all nations may have an element of exploitation and anti-development. By relaxing such laws when the country under question is a developing country, unfair treatment is doled out to other countries which do not have the privileged tag of being ‘developing’. There also exists a lapse in the system vis-à-vis the criteria that a country must meet in order to be eligible for privileges. As per the current system, a country may decide its own status as either developing or developed. This may lead to paradoxical situations where a country which may not require certain privileges may be put at a discriminatory advantage over other countries by the grant of these privileges. Moreover, if there are laws which have the tendency of being exploitive or harsh, they should be removed as a whole. Furthermore, there needs to be a clear understanding of the distinction between laws which may be negotiable and those which must be binding on all the countries.

18. While the weaknesses in the capacities of developing countries forms the basic reason for the continuous of such differential treatment, such benefits should only be made available to the countries which are ‘low income’ countries and those which may need help to become integrated into the international trade system, or in other words, which are in dire need for trade opportunities.

19. Although the introduction of special provisions for developing countries in the WTO policies would benefit the developing countries without affecting the developed countries too much, the counter argument to this lenient treatment is that the opportunity cost that the implementation of these provisions pose to other nations. Many countries are of the opinion that while developmentally these might be desirable, but the opportunity cost to the trade system is massive as compared to the insignificant contribution some of these least developed and developing countries would make to the international trading system. If one was to subscribe to this view, then it would be of more desirable outcome to introduce these provisions at a later stage when the country is in a position to contribute to the international trade system more significantly in return and in the meantime find better avenues which promise greater returns with regard to the attention, finance and human resources that are required for implementation of the special benefits.

The WTO faces considerable challenges as listed below:

i. Decision-making within the organization.

ii. Streamline reforms related to its dispute settlement system.

iii. Implement development-oriented policies in an effective manner.

iv. Facilitate global trade liberalization in agriculture and textiles.

v. Encourage Non Governmental Organizations or NGOs to become an important part of world trade governance.

vi. Devise ways to increase staff and resources to ensure effective regulation.

 

CONCLUSION:

Currently, the WTO trumps all other international agreements. The WTO must be scaled back so that the human rights, environmental, labor and other multilaterally agreed public interest standards already enshrined in various international treaties can serve as a floor of conduct for corporations seeking the benefits of global trade rules. For instance, the International Labor Organization provides core labor standards; there are more than 200 multilateral environmental treaties covering toxics, air pollution, biodiversity and waste dumping; and the World Health Organization and the U.N. Charter on Human Rights provide many standards on access to medicine and food security.

 

BIBLIOGRAPHY

1. “Rethinking Liberalization and Reforming The WTO”, by Martin Khor.

2. “The WTO’s Doha Negotiations And Impasse: a Development Perspective”, by Martin Khor.

3. “Reshaping the WTO” by Jagdish Bhagwati.

4. ^ Charnovitz, Steve (1999-11-01). “Addressing Environmental and Labor Issues in the World Trade Organization”. Trade and Global Markets: World Trade Organization. Progressive Policy Institute.

5. Kennedy, Kevin C. (2006). “The World Trade Organization: Ultimate Arbiter of International Sanitary and Phytosanitary Standards?”

6.”From Seattle to Hong Kong” by Jagdish Bhagwati.

7. Blackhurst, Richard (August 2000). “Reforming WTO Decision Making: Lessons from Singapore and Seattle”(PDF). Center for Research on Economic Development and Policy Reform (Working Paper No 63)

8. Schott, Jeffrey J.; Watal, Jayashree (March 2000).”Decision-Making in the WTO”.

9. “Transparency, Participation and Legitimacy Of the WTO”. Third World Network. March 1999. Retrieved 2007-03-23.

10. “Reform of the World Trade Organization and International Financial Organizations”. Global Economic Governance.

11. Davey, William J., 2001, Letter of June 3, 1997, to Beverley M. Carl, ‘Qualification as a Developing Country’ in Trade and the Developing World in the 21st Century, Transnational Publishers, New York

 

# Development Gateway available http://topics.developmentgateway.org/trade/rc/BrowseContent.do~source=RCContentUser~folderId=3364 as seen on 26/12/08

# Dhar, B.; Majumdar, A., The India-EC GSP Dispute: The Issues and the Process available at: http://www.ictsd.org/dlogue/2006-01-25/Dhar.pdf as seen on 27/12/08

# Harvard International Review, ‘Not Just Small Change’ in International Trade, Vol. 26 (2) – 2004 available at: http://hir.harvard.edu/articles/1240. as seen on 23/12/08

# Hoekman B., Michalopoulos C., Winters L.A.; Most Favorable and Differential Treatment of Developing Countries: Towards A New Approach in WTO, World Bank Policy Research Paper 3107 available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=636470 as seen on 29/12/08

# International Institute for Sustainable Development, 2003 ‘Special and Differential Treatment’ at http://www.iisd.org/pdf/2003/investment_sdc_may_2003_2.pdf as seen on 29/12/08

# Keck, Alexander and Low, Patrick,Special and Differential Treatment in the WTO: Why, When and How?(January 2004). WTO Staff Working Paper No. ERSD-2004-03. Available at SSRN: http://ssrn.com/abstract=901629

# Lipsey, R.G. & Chrystal K.A., 1999, ‘Growth in Developing Countries’ in ‘Principles of Economics’ 9th Ed., Oxford University Press, New York

# Pratap, Ravindra, WTO AND TARIFF PREFERENCES,VOL.39, Pg-1788

# Priyadarshani,Shishir,2002. Reforming trade in agriculture:a developing country perspective. Trade,environment, and development project 2.

# Ricardo Melendez-Ortiz , sustainable development and environment policy objectives:a case for updating special and differential treatment at WTO.Joint group on trade and competition, The role of “ special and differential treatment” at the trade,competition and development interface, at http://www.oecd.org/dataoecd/49/37/2072318.pdf. as seen on 27/12/08

# SPS AGREEMENT TRAINING MODULE: CHAPTER 6 http://www.wto.int/english/tratop_e/sps_e/sps_agreement_cbt_e/c6s3p1_e.htm AS SEEN ON 22/12/08

# The World Trade Organization, Understanding the WTO: Developing Countries available at:http://www.wto.org/english/thewto_e/whatis_e/tif_e/dev1_e.htm as seen on 16/12/08

 

[1] The Battle Against the World Trade Organization and Corporate Rule, By Kevin Danaher

[2] “Rethinking Liberalization And Reforming The WTO”, BY Martin Khor.

[3] Building On The WTO’S Success, by William A. Niskanen, Cato Journal, Vol. 19, No. 3 (Winter 2000)

[4] World Trade Organisation (WTO), by: EconomyWatch Date: 30 June 2010

[5] http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm

[6] http://www.globalexchange.org/resources/wto/environment

[7] Blackhurst, Richard (August 2000). “Reforming WTO Decision Making: Lessons from Singapore and Seattle”(PDF). Center for Research on Economic Development and Policy Reform (Working Paper No 63)

[8] The Battle Against the World Trade Organization and Corporate Rule, By Kevin Danaher

[9] Why the WTO Doha Round Talks Have Collapsed and a Path Forward, by Lori Wallach and Deborah James, Monday, August 14, 2006.

[10] Schott, Jeffrey J.; Watal, Jayashree (March 2000) “Decision-Making in the WTO”.

 

Dispute Settlement in the World Trade Organization

 INTRODUCTION

“Prompt compliance with recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members.”

World Trade Organization, Article 21.1 of the DSU

In 1994, the WTO members agreed on the Understanding on Rules and Procedures Governing the Settlement of Disputes or Dispute Settlement Understanding (DSU) (annexed to the “Final Act” signed in Marrakesh in 1994) . Pursuant to the rules detailed in the DSU, member states can engage in consultations to resolve trade disputes pertaining to a “covered agreement” or, if unsuccessful, have a WTO panel hear the case . The priority, however, is to settle disputes, through consultations if possible. By January 2008, only about 136 of the nearly 369 cases had reached the full panel process.

The operation of the WTO dispute settlement process involves the parties and third parties to a case and may also involve the DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts, and several specialized institutions . The General Council discharges its responsibilities under the DSU through the Dispute Settlement Body (DSB) . Like the General Council, the DSB is composed of representatives of all WTO Members. The DSB is responsible for administering the DSU, i.e. for overseeing the entire dispute settlement process. It also has the authority to establish panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of rulings and recommendations, and authorize the suspension of obligations under the covered agreements. The DSB meets as often as necessary to adhere to the timeframes provided for in the DSU .

Since 1 January 1995 to 1 March 2007 of the extent to which WTO Members have complied with adverse WTO dispute settlement rulings rendered both by dispute settlement panels and the Appellate Body. The record indicates that, generally speaking, WTO Members found in violation of their WTO obligations in dispute settlement proceedings have done a reasonably good job in taking steps to correct these violations within a reasonable period of time. While there have been some cases where compliance has been delayed or where full compliance has yet to be achieved, this should not detract from the fact that the overall compliance record of WTO Members has been quite positive, which in turn has contributed significantly to the effectiveness of the WTO dispute settlement system as a whole.

It is to be recalled that Article 3.7 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) clearly states that the preferred remedy under the WTO dispute settlement system is the withdrawal of any WTO-inconsistent measure. If and only if this is not possible on a timely basis are alternative remedies to be pursued. These alternative remedies are (i) the granting of compensation by the responding Member to the complaining Member consisting of trade liberalization measures with respect to a volume of trade comparable to that adversely affected by the WTO-inconsistent measures; and (ii) if compensation is not possible and as a last resort, retaliation by the complaining Member consisting of trade-restrictive measures of a proportionate nature against the trade of the responding Member .

Up until 1 March 2007, there have been panel or panel/Appellate Body reports adopted by the WTO Dispute Settlement Body (DSB) in 109 cases excluding reports from so-called Article 21.5 of the DSU compliance proceedings, which have occurred in roughly one out of every five cases where WTO violations have been found in the original WTO litigation proceedings . Of the 109 adopted panel or panel/Appellate Body reports, in nearly 90% of these cases the panel and/or the Appellate Body have found WTO violations.

Only 17 WTO Members—counting the European Communities as 1 Member rather than as 27 Members—or about 30% of all 150 WTO Members—counting the European Communities in this calculation as 27 Members—have ever been the object of adverse or partially adverse rulings by WTO panels and/or the Appellate Body for which compliance was required. Seven of these 17 WTO Members have been the object of only one adverse or partially adverse ruling. These seven Members are Brazil, the Dominican Republic, Egypt, Guatemala, Indonesia, Thailand, and Turkey.

Ten WTO Members have had multiple adverse or partially adverse rulings in WTO litigation proceedings. These 10 Members are (with the number of cases in which violations against them were found in parentheses) the United States (33), European Communities (16), Canada (8), Argentina (6), India (4), Mexico (4), Korea (5), Japan (4), Chile (2), and Australia (2).

COMPLIANCE RECORD OF WTO MEMBERS—SOME GENERAL OBSERVATIONS

As has been widely acknowledged by WTO Members themselves, the overall compliance record of WTO Members with adverse WTO dispute settlement rulings has generally been quite good in the cases to date in which WTO violations have been found. In virtually every one of these cases, the WTO Member found in violation of its WTO obligations has indicated its intention to bring itself into compliance and in most cases has already done so.

The record has also shown that compliance has usually been more rapid where WTO violations could be corrected through administrative action under the control of the Executive as opposed to legislative action. This outcome is not surprising since legislative action involves more complicated political processes; the enactment of corrective remedies through changes to national statutes usually takes a longer period of time in most national systems. As will be seen further, the experience of the United States in this regard is instructive.

The use of compensation as a transitional remedy until full compliance could be achieved has only occurred in one case . Thus, the WTO dispute settlement model in practice has been a ‘compliance-retaliation’ model rather than a ‘compliance-compensation-retaliation’ model.

As for the resort to retaliation, out of the 109 cases where a panel or panel/Appellate Body report was adopted, retaliation has been requested in only 18 instances of which 9 have gone through the arbitration process under Article 22.6 of the DSU to establish the proper level of retaliation. The DSB granted authorization to retaliate in only eight cases. In one case (US—1916 Act), the WTO-inconsistent measure was withdrawn soon after the arbitration was completed, thus obviating the need for final DSB authorization of retaliation. More will be said on retaliation in the final section subsequently.

Compliance Problems in WTO Dispute Settlement:

This Comment surveys the problems of compliance facing the World Trade Organization (WTO) dispute settlement system and considers reforms that might improve compliance. In general, the WTO dispute settlement system has an excellent compliance record. A recent examination of the implementation record of WTO decisions for the first ten years of WTO dispute settlement found a compliance rate of 83% . Although new problem cases continue to arise, several of the ten problem cases outstanding at the time of the study have since been resolved . This compliance rate is very good for an international state-to-state dispute settlement system .Moreover; the success rate of consultations in WTO cases that do not result in either adopted panel or Appellate Body reports is impressive . The picture, however, is not so rosy if one looks beyond general statistics and considers the quality and timeliness of compliance actions.

Timeliness also encompasses inquiries into whether the time taken by the panel and appellate processes has met the standards specified in the WTO Dispute Settlement Understanding (DSU) .

An examination of the quality and timeliness of compliance in the first ten years of the WTO dispute settlement system reveals some interesting patterns. General Agreement on Tariffs and Trade (GATT) and Trade- Related Aspects of Intellectual Property Rights (TRIPS) cases typically result in the timely withdrawal of the contested measure . The two TRIPS cases brought against the United States and the European Communities –Bananas case are the main exceptions to this trend . In other words, the desired result has generally been achieved in GATT and TRIPS cases. There have also typically been timely withdrawals of the contested measures in safeguard and textiles cases; however, the contested measures in these cases were often in place for all or most of the initially intended period of effectiveness . Thus, compliance was timely in terms of respecting the reasonable period of time for implementation set by the WTO dispute settlement process, but the overall WTO process took so long that implementation was not very meaningful in practical terms .

Finally, with respect to the overall timeliness of the panel and appellate process, a detailed examination of the time taken by panels to issue their reports shows that panels typically exceed the targets set in the DSU by many months, especially in Article 21.5 compliance proceedings .While the Appellate Body usually issues its report within ninety days of an appeal , the overall time taken by the process— especially when the “reasonable” periods of time for implementation are taken into account— is quite long . This Comment will not further consider the problem of the length of proceedings, except to note that reforms are both needed and feasible .

Taken together, the foregoing suggests that although the WTO dispute settlement system may have an admirable record overall, considerable room for improving the quality and timeliness of compliance exists. Indeed, businesses have expressed concerns about non-compliance and delays as reasons not to use the WTO dispute settlement system, which raises serious concerns for the future . Thus, it is appropriate to consider the question of what changes might be made to the system to address these problems. It has been considered that the changes in compensation and retaliation rules could resolve the dispute settlement system more perfect.

CASE STUDIES—UNITED STATES AND THE EUROPEAN COMMUNITIES:

The United States and the European Communities are the two WTO Members that have by far not only initiated the greatest number of WTO litigation proceedings against other WTO Members but that have also had the most number of litigation proceedings initiated against them. Thus, it is particularly instructive to review the compliance record of the United States and the European Communities, since together they have been the object of about one half of all adverse WTO rulings.

The United States has been the object of adverse or partially adverse rulings as a respondent in 33 cases. In four other cases, no WTO violations were found and the United States was fully exonerated. Of the 33 cases where violations were established, the United States has been able to comply or is in the process of complying solely through administrative actions in 26 cases. Sixteen of these were either anti-dumping or subsidy cases, three were textile cases, four were safeguard cases and three involved other WTO violations. As of 1 March 2007, the steps taken by the United States to implement the rulings and recommendations of the DSB in US—Upland Cotton, US—Oil Country Tubular Goods Sunset Reviews, and US—Gambling were in compliance proceedings under Article 21.5 of the DSU. In seven cases legislative action has been or is necessary to bring the United States into compliance. In four out of these seven cases, the US Congress has already passed remedial legislation . Indeed, these legislative acts to comply by the US Congress, all taken since late 2004, have been among the most noteworthy and positive developments for the WTO dispute settlement system, given the previous harsh criticism of the system emanating from certain members of the US Congress, particularly with respect to trade remedy cases. There are some transitional problems in the US—Offset Act (Byrd Amendment) case since the legislation repealing the Byrd Amendment does not take effect until 1 October 2007 and remedial legislative action is still required in the other three cases. Nonetheless, recent congressional actions to implement adverse WTO panel and Appellate Body reports have been significant and their importance for maintaining the legitimacy of the WTO dispute settlement system should not be underestimated.

As for the European Communities, it has been the object of adverse or partially adverse rulings in 16 of the 19 completed cases in which it was the responding party. In addition, the European Communities settled the matter prior to the issuance of the final panel report in three instances. In all 16 cases where the European Communities was found to be in violation of certain of its WTO obligations, the European Communities committed to bring itself fully into compliance with the adverse panel and Appellate Body reports. Its actual compliance record has also been good, although the administrative and legislative processes which must be observed to implement a decision are of course quite different from those used in the United States . While the United States and the European Communities have been the WTO Members with the most extensive compliance experience, other WTO Members, both developed and developing, have also had to comply with adverse WTO rulings and, for the most part, have done so in a satisfactory fashion. As for other developed country WTO Members, Canada has taken actions to comply in six cases . Canada has yet to comply in the two regional aircraft subsidy cases successfully brought against it by Brazil. For its part, Japan has taken actions to comply in three cases where WTO violations were found and settled the matter prior to the adoption of the final panel report in one instance. Finally, Australia has taken actions to comply in the two cases where WTO violations were found.

A problem with the implementation of WTO dispute settlement recommendations and rulings is the lack of guidance over what exactly a losing party must do to comply. The tendency has been for the losing party to take minimal steps and declare itself in full compliance. The winning party often disagrees. One solution is to refer the matter to a compliance panel under art 21.5 of the DSU.In EC—Bananas III (Ecuador) and EC—Bananas III (US) , the DSB authorized retaliation for both Ecuador and the United States against the European Communities. However, only the United States actually imposed retaliatory measures against $115 million of its trade with the European Communities. These measures were subsequently withdrawn after a bilateral settlement and are no longer in effect.

In EC—Hormones (Canada) and EC—Hormones (US) , the DSB authorized retaliation for both Canada and the United States against the European Communities and both imposed retaliatory measures—the United States against $130 million of trade and Canada against some $20 million of trade. Despite claims by the European Communities that it has brought itself into compliance with the original panel and Appellate Body reports, these retaliatory measures currently remain in place. The European Communities has initiated dispute settlement proceedings against Canada and the United States seeking their removal .

In US—Offset Act (Byrd Amendment) , the DSB authorized retaliation by the eight original complaining parties against the United States, with the amount of the retaliation to be directly tied to the amount of the anti-dumping and countervailing duties actually refunded to US petitioners under the WTO-inconsistent statute. To date, only the European Communities, Canada, Japan, and Mexico have actually imposed retaliatory measures against US trade. Following a recent US court ruling that the Byrd Amendment does not apply to Canada and Mexico by virtue of certain NAFTA provisions, Canada and Mexico withdrew their retaliatory measures. However, the European Communities and Japan have indicated that their retaliatory measures will remain in place as long as anti-dumping and countervailing duties assessed against their exports to the United States continue to be distributed to domestic producers under the Byrd Amendment. This distribution of duties assessed may continue to occur with respect to certain existing orders even after the repeal of the Byrd Amendment becomes effective on 1 October 2007.

Finally, in the regional aircraft subsidy cases (Canada—Aircraft Credits and Guarantees and Brazil—Aircraft) brought by Canada and Brazil against each other, the DSB authorized retaliation for each side against the other, but retaliatory measures have never been imposed as the two sides continue to seek a negotiated settlement to the dispute.

Implications for Panel Reform

Consideration of how the WTO dispute resolution process is perceived and the criticisms to which it has been subjected may provide useful information to policy makers in assessing how the panel process might be improved.

A. General Principles for Reform

In light of the concerns discussed above, we should arguably focus panel reform on a few central issues, such as: (i) the need for panels to exercise restraint and refrain from moving into areas where negotiated rules are unclear, (ii) the need to focus on compliance in cases where the rules are clear and there has been a violation, and (iii) the need to ensure that the capabilities of the system are realistically portrayed and appreciated by Parties.

Encouraging panelists to exercise restraint may be pursued simply through recognition of the dangers inherent in “activism” and “law making,” and in creating a culture among the community of practitioners, WTO officials, and potential panelists that reflects the importance of closely adhering to the terms of relevant agreements and applicable standards of review. More radical proposals – such as altering the negative consensus rule to allow some percentage of DSB Members to block a panel decision – would obviously be much more controversial. In terms of compliance, the Parties to the DSB have already begun consideration of ways to streamline and clarify procedures after a panel has rendered an opinion. Finally, ensuring that the capabilities of the system are realistically assessed may suggest that we should go slowly in pursuing a more “adjudicative” structure for panels – a structure that could inappropriately downplay the continued need for negotiation and diplomatic interchange to achieve resolution of disputes.

B. Specific Proposals for Reform

Concerns such as those set out above may also have implications for specific reform proposals that have been offered to increase the efficiency, consistency and transparency of panels. A few specific proposals are discussed below.

1. Permanent Body of Panelists: One proposal for panel reform that has received quite a bit of attention is the notion of establishing a permanent system of panelists, similar to that existing in the Appellate Body . In light of the challenges facing the overall dispute settlement system, however, there are other considerations that could be brought to bear on the issue.

First, are there not benefits to the current system, whereby countries play an active role in the selection of panelists? 4 Since parties to a dispute arguably bear some responsibility for the composition of panels, they may be less inclined to criticize particular panelists for bias, lack of qualifications to hear a particular matter, etc. Certainly, such criticisms would be deflected to some degree to the extent Parties participate in the selection process.

Second, would a permanent body of panelists “put a face” on the panel system that is easier to attack by opponents. Under the current system, there is likely to be a greater diversity of panelists in terms of background, outlook, and experience as parties to a dispute seek to have panelists uniquely appropriate for their particular case, and perhaps favorable to a particular country’s outlook. While this may lead to less consistency, it may also create a less definable target for opponents who want to paint the system as dominated by “international bureaucrats” set on undermining national sovereignty.

Finally, would a permanent system of panelists not raise its own questions as to the ideological bent of panelists? A permanent body might give rise to fewer concerns about the bias of individual panelists against a particular country. While this may be true, a permanent body might be perceived as more ideological and more given to developing the predispositions – whatever they may be – of professional trade officials. Arguably, an expert body might feel more comfortable, and more qualified, than ad hoc panels in venturing into ambiguous areas that are better left to negotiations – exacerbating concerns that panels are “making law.” This is not meant to suggest that these considerations are decisive or would outweigh the arguments in favor of more consistency and professionalism – only that they should be part of the mix in considering reforms .

2. Transparency

Many proposals for panel reform have focused on transparency and in some sense these reforms seem obvious. Making the system more open and less mysterious would seem to have obvious benefits, if for no other reason than that it would deprive critics of a powerful argument about democracy and fairness. While the fundamental benefit of transparency seems clear, looking at the issue with an eye toward the challenges facing the dispute resolution system in general does raise some additional considerations. Undoubtedly, many of the groups and individuals that have sought greater access to the WTO have done so out of a legitimate desire to work constructively within the system. The disruption seen at Seattle, however, raises the prospect that certain groups are interested more in destroying than improving the WTO .

This fact has implications for reform. Transparency in the context of the dispute resolution process is arguably best focused on two goals: (i) to allow interested groups and individuals to better follow and understand the workings of the system, and (ii) to the extent practicable, to allow greater input that will help elucidate the proper scope and application of WTO agreements. On the other hand, to the extent proposals for reform would heighten opportunities for activists to politicize cases or put extraneous pressure on panelists, the implications for the system may be far less positive.

 

CONCLUSION:

The incentive for governments to negotiate and abide by international trade agreements depends in part on the effectiveness of enforcement provisions. Effective enforcement is particularly important for developing countries, as they will rarely be able to exert credible threats against large trading entities that do not abide by the negotiated rules of the game and often will not appear on the ‘radar screen’ of the WTO.

Domestic enforcement is a vital dimension in enhancing the relevance of multilateral commitments to domestic stakeholders (importers, exporters, consumer groups). In most countries, including high income nations, domestic interests are restricted in their ability to contest actions by national government agencies that violate WTO commitments. Civil society has a strong interest in seeking to maximize the extent to which international treaty obligations can be invoked in national legal systems. This will remove a number of layers of uncertainty and complexity associated with bringing cases to the WTO. Strengthening national enforcement mechanisms can help make the WTO a more relevant instrument from an economic development perspective by increasing the ownership of negotiated commitments. It also relaxes the constraint of having to convince one’s government to bring a case to the WTO and will reduce the burden of DSP at the WTO level. The easiest way of making WTO commitments enforceable nationally is to expand on the type of challenge mechanisms that have been introduced in the GPA.

The private sector must play a much greater role in enforcement. In part this can be achieved by

designing domestic legal mechanisms that increase the incentive for them to collect, compile and transmit information on the measures that are being applied by governments, both their own and foreign. Thus, there is a close link to our first point — giving private interests standing in domestic fora (via a general challenge procedure) can be expected to be a great motivator for greater involvement in both the development and enforcement of multilateral disciplines. But greater private sector participation is also vital in order to ensure that developing countries can defend their rights at the WTO level. This upstream dimension of DSP at the WTO is as important as the efficacy of the downstream panel and Appellate Body process.

Developing countries have an interest in re-negotiating the existing legal framework for remedies.

Remedies in the WTO do not guarantee paritas armis among the various players and unless corrective action is taken, developing countries might have even less incentive to submit cases. On this particular issue we side with Bhagwati’s (1999) proposal to opt for re-negotiation of concessions (instead of keeping it as an option) any time a developing country’s claim prevails before the WTO but implementation raises serious political problems.

Finally, we argued in favor of a formal amendment of the DSU with respect to notification of bilateral agreements to the effect that no such agreement will be applied unless previously cleared through the DSB. The reason for this proposal is twofold: when developing countries participate in such deals along with developed countries, because of the inequality of power between the two, they might be forced to non WTO-compatible solutions. On the other hand, when they do not (which is the vast majority of cases) they might see their rights under the WTO contract diminished since the parties to such deals hardly have the incentive to respect MFN.

Bibliography:

Book:

Mitsuo Matsushita, Thomas J Schoenbaun and Petros C. Mavroidis, “The World Trade Organization Law, Practice & Policy”; Pub: Oxford University Press, 2nd Edition; 2005

John H. Jackson Et Al; “Legal Problems of International Economic Relations”; Pub Oxford University Press; Edition 5th; 2008

Prof Raj Bhala;” A treatise on the General Agreement of Tariffs & Trade”; International Trade Law Series; Pub: Thomson Sweets & Maxwell, 2005,

William J. Davey, “Expediting the Panel Process in WTO Dispute Settlement, in The WTO: Governance, Dispute Settlement & Development Countries”; Pub: Thomson Sweets & Maxwell, 3rd Edition 2008

Marion Panizzon, Nicole Pohl and Pierre Sauvé (Edited by);“GATT & the Regulation of International Trade in Services World Trade Forum”; Pub: Cambridge University Press;1st Publication,2008

Anne O Krueger; “The WTO as an International Organization”; Oxford Indian Paperbacks, 1998

David Pal meter & Petros C. Mavroidis; “Dispute Settlement in the WTO Practice and procedure”; 2nd Edition; Cambridge, 2004

Petros C Mavroidis; “The General Agreement on Tariffs & Trade- a Commentary”; Pub: The Oxford Commentaries on the GATT/WTO Agreement; 1st Publication; 2005

 Article:

Jeanne J. Grimmett, “Dispute Settlement in the World Trade Organization (WTO): An Overview”; September 7, 2010 CRS Report for Congress Prepared for Members and Committees of Congress.

William J. Davey, “The WTO Dispute Settlement System: The First Ten Years”, 8 J. INT’L ECON. L. 17, 46– 48 (2005)

 

Tom Ginsburg & Richard H. McAdams, “Adjudicating in Anarchy: An Expressive Theory of International Dispute Resolution”, 45 WM. & MARY L. REV. 1229, 1308– 12 (2004)

James C. Hecht ; “Operation of WTO Dispute Settlement Panels: Assessing Proposals for Reform”; Presented at The First Five Years of the WTO American Bar Association Section of International Law and Practice ; January 20-21, 2000 Georgetown University Law Center.

Joost Pauwelyn; “Enforcement and Countermeasures in the the WTO: The Rules and Rules-Toward a More Collective Approach”, The American Journal of International Law, Volume 94, Issue 2; Apr. ,2000

Dr. Georges T. Labaki; “The Dispute Settlement Process Before The WTO”; The Certified Accountant – October 2004; Issue: 20

Bio-Piracy: An Usurpation Of Prior Art

Zenefer Zaman and Sandip Bhosale

Meaning of Bio-Piracy:

The concept of “Bio-piracy” is commonly construed as the misappropriation of the knowledge and genetic resources of the farmers and indigenous people by individuals or institutions seeking exclusive monopoly control over these resources and knowledge. Hence, Bio-Piracy takes place in the form of applying and granting of ‘wrong patents’ or granting patents on ‘Inventions’ derived from a ‘Community Traditional Knowledge’ in other words known as “Prior Art”.

As defined by an online Dictionary, the term Bio-piracy is referred to the commercial development of naturally occurring biological materials, such as plant substances or genetic cell lines, by a technologically advanced country or organization without fair compensation to the peoples or nations in whose territory the materials were originally discovered .

Bio-piracy is the theft or usurpation of genetic materials especially plants and other biological materials by the patent process. Biological diversity or biodiversity encompasses all species of plants, animals and micro organisms and the variations between them, and the eco-systems of which they form a part. Traditional Knowledge (TK) associated with such biological resources is an intangible component of the resource itself. Such knowledge has the potential of being translated into commercial benefits by providing leads for development of useful products and processes. The commercial potential involved in biological resources and the associated TK has assumed enormous magnitude in the last couple of decades with the tremendous proliferation of the biotechnology industry. Given that most of the world’s biodiversity rich countries are developing countries located in the tropics, these nations should have been in a strong position to benefit substantially by trading in such bio-resources and the associated TK. Unfortunately, this is far from the case. More often than not it is the giant MNCs of the developed world who are instrumental in appropriation of the precious bio-resources and the allied TK of the undeveloped nations, without the Prior Informed Consent (PIC) of the legitimate holders of such resources, thereby bypassing any benefit-sharing arrangement with them. The mounting profits emanating from the commercial exploitation of these prized resources accrue solely to the corporate giants of the developed world, courtesy the exclusive patent protection obtained by suppressing the true source of the relevant bio-resource or the TK. The country of origin of the concerned bio-resources or TK however remains deprived of its legitimate share of the profits generated out of them. Such unscrupulous business practices of the MNCs have come to be known as Bio-piracy.

Many of the indigenous communities are living on the basis of the knowledge they preserved for generations. The development of new technologies and the use of traditional knowledge are posing serious threat to the survival of these communities. The modern industries are now a day’s exploiting indigenous knowledge without permission or sharing of profit with these communities . TK is capable of providing valuable leads which may result in products of high commercial value. The protection of TK would be necessary to bring equity to such unjust and unequal relations.

Another factor that calls for protection of TK is to maintain the practices and knowledge derived from traditional life styles. Preservation of TK is intended to provide self identification to these indigenous communities and thereby provide continuous existence of indigenous people. If TK is having a high economic potential, then its prospects should be used for the general wellbeing of the communities which preserved them for generations. Besides this maintenance of the distinct knowledge systems that give rise to TK is vital for the future well being, development, cultural and intellectual vitality of indigenous communities.

LANDMARK CASES

1. The Case of Basmati Rice (Oryza sativa Linn)

Basmati rice, known for its aroma and long grains has its origins in the Indian subcontinent . On 2nd September 1997, Texas based Rice Tec Inc. was granted patent number 56663484, for the genetic lines of Basmati Rice, by the U.S patent and Trademark Office (USPTO). Immediately, Rice Tec began to develop hybrids using various blends of Basmati. Promoted as an,‘American type of Basmati rice’, Rice Tec developed a new plant variety cross between American long-grain and Basmati.

Criticism from Indian rice farmers logically ensued, as many were forced to pay royalties to the conglomerate. The production and cultivation of Basmati has with it a history dating back to centuries ago. In April of 2000 Indian officials publicly pleaded with the United States Patent and Trademark Office (PTO or USPTO) to review the RiceTec Basmati case, as Indian exports were beginning to be threatened .Government officials were armed with hundreds of pages of scientific data proving that the distinguishing characteristics of RiceTec’s rice were also found in Basmati . Moreover, the use of the name ‘Basmati’ itself was misleading for customers considering that the product was a hybrid grain .The name ‘Basmati’ carries with it a reputation of culinary excellence, and RiceTec was benefiting from it. Under Article 23 of the TRIPs agreement, using words such as “kind”, “type”, and “style” is illegal, and RiceTec had used such words numerous times in advertising schemes .

Moreover, considering the geographical indicators clause of TRIPs, the entire process of approval and acquisition of RiceTec’s Basmati patent can be deemed to be illegal. Article 22 of the TRIPs agreement, (the geographical indicator clause) prohibits the use of both direct and indirect uses of a goods geographical origin. In this respect, Basmati is to the India what Champagne is to France, part of the regional identity.

On 14 August 2001 USPTO overturned a large amount of claims held under Patent No.5663484. Amidst great public scrutiny and criticism, RiceTec lost the right to use the ‘Basmati like’ advertising slogan. At the discretion of USPTO, out of 20 Basmati patent claims, 15 were withdrawn. RiceTec was able to keep their Indian-American hybrids Texmati, Jasmati and Kasmati .To the dismay and outrage of citizens and farmers, after the patent withdrawals, the Indian government publicly stated they were very satisfied and wished to drop all other charges.

The Case of Neem Tree (Azadirachta Indica)

DURING 1994, Indian farmers staged one mass demonstration after another against the proposed GATT Uruguay Round agreement. In March about 200,000 gathered in Delhi demanding, among other things, that the draft treaty known colloquailly as ‘the Dunkel draft’ after chief negotiator, Arthur Dunkel should be translated into all Indian languages. On 2 October, about half a million converged upon Bangalore to voice their fears about the impending legislation, aware of the threat that GATT poses to their livelihoods, by allowing multinational organizations to enter Third World markets at their expense .In particular, many of them began to question the Dunkel Draft’s call for an international harmonisation of property rights legislation.

The Case of Turmeric (Curcuma longa Linn)

In 1995, two expatriate Indians at the University of Mississippi Medical Centre (Suman K. Das and Hari Har P. Cohly) were granted a US patent no.5, 401,504 on use of turmeric in wound healing. The Council of Scientific & Industrial Research (CSIR), India, New Delhi filed a re-examination case with the US PTO challenging the patent on the grounds of existing of prior art. CSIR argued that turmeric has been used for thousands of years for healing wounds and rashes and therefore its medicinal use was not a novel invention. Their claim was supported by documentary evidence of traditional knowledge, including ancient Sanskrit text and a paper published in 1953 in the Journal of the Indian Medical Association. Despite an appeal by the patent holders, the US PTO upheld the CSIR objections and cancelled the patent. The turmeric case was a landmark judgment case as it was for the first time that a patent based on the traditional knowledge of a developing country was successfully challenged . The US Patent Office revoked this patent in 1997, after ascertaining that there was no novelty; the findings by innovators having been known in India for centuries.

The patenting of neem, haldi or amla underscores the urgent need to evolve legal systems to protect our indigenous biodiversity in order to prevent such piracy through patents. The trouble is India still does not allow patents on plants . Under the rules of World Trade Organisation, every nation is free to evolve its own method (sui generis) of plant protection. The US is the only country which grants patents on plants .

The Case of Bt Cotton

Prior to colonization, cotton was traded in the Indus Valley as mainly a Luxury good. It was only in the 19th century, after colonization that cotton cultivation followed a more mass production like structure.

Cotton production is a staple of the Indian agricultural economy. Some 7 million farmers depend on the crop for sustainable living, and overall 21% of all cotton produced globally comes from India. However, cotton is a very expensive crop to cultivate. Over half of India’s total pesticides (40,000 tonnes) are used in the upkeep of cotton cropland .

In 1998 Monsanto began a series of Bt cotton trial tests in India, albeit illegally. Monsanto did not apply for trial testing clearance, and was not given any sort of formal approval to conduct studies on rural land. After going public with the results of their trial tests, Monsanto promoted Bt cotton as the perfect cost-cutting crop for rural India. It was claimed that yield output would increase to 3,300 pounds per acre. Moreover, Bt cotton would need to be sprayed approximately 2.6 times less then both organic and hybrid cotton. Even though inputs were more expensive, the genetically engineered seed would be sprayed sparingly, ultimately reducing the cost of cultivation by 30% to 40% at least. With promises of higher yields and lower costs, the Indian government officially approved three Bt cotton hybrids (MECH 12, MECH 162, MECH 184) for clearance in 2002. This clearance was given to Monsanto in conjunction with the Maharashtra Hybrid Seed Company (Mahyco), which conveniently enough, Monsanto has a 26% stake in. Bt cotton was the first GM seed to be given clearance by the Indian government and is now viewed as the example of how agro-business conglomerates impact vulnerable rural communities .

Farmer suicides in Andhra Pradesh and Maharashtra have increased after Bt cotton was both approved and promoted by governing officials. The financial stress associated with Bt cotton, has indeed been grave. Moreover, with the adoption of such GM seeds and subsequent failure, many rural farmers have increasingly felt deep remorse. This sentiment of loss is a result of much regret associated with leaving cultural farming techniques, which carried with a sense of community and family. The loss of control over crop in both the indebted and sovereign sense is simply too much for many farmers.

The Case of Kava (Piper methysticum Forster)

Kava is an important cash crop in the Pacific, where it is highly valued as the source of the ceremonial beverage of the same name. Over 100 varieties of Kava are grown in the Pacific, especially in Fiji and Vanuatu, where it was first domesticated thousands of years ago. In North America and Europe, Kava is now promoted for a variety of uses. French company L’Oreal – a global giant with US $10 billion a year in sales – has patented the use of Kava to reduce hair loss and stimulate hair growth .

The Case of Ayahuasca (Banisteriopsis Caapi)

Shamans the indigenous tribals of Amazon basin were using the bark of B.Caapi to produce a ceremonial drink known as “ayahuasca” for generations. “Ayahuasca” means wine of soul and is used in religious and healing ceremonies to diagnose and treat illness. An American national Loren Miller obtained a US plant patent, Patent no 5751, issued in 1986, granting him rights over an alleged variety of B.Caapi which he had collected from a domestic garden in Amazon and was named as “Dä Vine”, which was peculiar for its medicinal properties. But in this case “Da Vine” represented a new and distinct variety of B.caapi because of its flower colour.

The coordinating Body of Indigenous Organizations of Amazon basin which represents more than 400 indigenous tribes in the Amazon region, along with others protested against granting of wrong patent for B.Caapi. They made argument that ayahuasca that had been known to the natives of Amazon basin for its medicinal uses. This argument was accepted and on re examination USPTO revoked this patent on 17th April 2001

The Case of Hoodia Cactus

Hoodia (and the similar Trichocaulon) are two succulent plants indigenous to southern Africa. For long, they have been used by San and Khoi shepherds of the harsh arid environments of southern Africa to reduce hunger and thirst. The South African Army also uses it to suppress appetite.

CSIR, one of Africa’s largest scientific and technological research institutions and the UK Company Phytopharm have entered into an agreement to develop an appetite suppressant, which has been named P57derived from Hoodia . As we all know, obesity is one of the main public health problems in developed countries, so the market potential is huge.

The international patent application WO 9846243 claims monopoly use of the P57 appetite suppressant agent of the extracts of Hoodia or Trichocaulon and its use in pharmaceutical appetite suppressants.

The Jamun Case

It is a plant; known for its anti-diabetic properties. It is common knowledge and everyday practice in India. Their use in the treatment of diabetes is documented in authoritative treatises such as the “Wealth of India”, and the “Treatise on Indian Medicinal Plants”. A US patent was granted in 1999 to Cromak Research Inc., based in New Jersey, USA. The assignees are three non-resident Indians .

The indigenous knowledge and use of the Jamun consist of prior art, that is, no patent should be given where prior art exists, since patents are supposed to be granted only for new inventions on the basis of novelty and non-obviousness. As Article 102 of the US Patent Law, which defines prior art does not recognise technologies and methods in use in other countries as prior art. Because of this, the Jamun could be patented in the USA.

LEGAL ASPECTS

The Convention on Biological Diversity

A big step was made in 1994 when the Convention on Biological Diversity (the CBD) came into force. This convention gave sovereign national rights over biological resources . One of the advantages of it is that it enables developing countries to better benefit from their result of traditional knowledge.

The objectives of the CBD are:

• to protect biodiversity

• to promote its sustainable use

• to share the benefits of such use equitably between providers and users.

The convention on biological diversity (CBD) was the result of discussion concluded at Rio de Janerio on United nations conference on earth and development (Earth Summit), 1992.The convention provides for protection of environment without compromising with the ongoing economic development17.The convention provides for recognition of knowledge of local and indigenous communities in genetic materials and sharing of benefit derived from it.

CBD can be regarded as the first international initiative to recognize the contribution of indigenous and local communities in conservation of biodiversity. In its preamble CBD recognizes the dependence of many indigenous communities on biological resources and stress on the desirability of benefit sharing.

Trade Related Aspects of Intellectual Property Rights (TRIPS agreement)

TRIPS agreement also has some provision which can be applied in a limited way for protection of traditional knowledge. Article 1 of TRIPS Agreement provides that members may but shall not be obliged to implement in their domestic laws more extensive protection than that is required by the agreement, provided that such protection does not contravene the provisions of this agreement. Many Jurists have opined that this provision can be invoked for protection of TK. They argue that absence of term TK in the agreement does not prevent any member from enacting any provision for protection of TK .

But under TRIPS it is not possible to protect TK under patent law. TRIPS requires member state to grant patent only to that inventions which are new, involving an inventive step and are capable of industrial application. But these attributes cannot be applied in the field of TK, as it is not new and is incapable of industrial application as such. But it is to be noted here that the same provision can be invoked to prevent bio-piracy. Besides this there are authors who argue that obligation to protect geographical indications provided by TRIPS agreement can be used to protect TK. TRIPS agreement by itself does create any measures for protection of traditional knowledge and innovations of indigenous people instead it creates measures for establishing alternative measures for its protection.

Traditional Knowledge Digital Library

Traditional Knowledge Digital Library (TKDL) is an innovative application of Information and Communication Technology for inventorisation of Traditional Knowledge (TK) in particular Traditional Medicine (TM) and Intangible Cultural Heritage, to preserve, safeguard, protect and get recognized Traditional Knowledge and Cultural heritage at National and International level .

The traditional knowledge information available in public domain is in local languages and in a format, which is not understandable to patent examiners. For example, books on Ayurveda containing drug formulations are in Sanskrit, for Unani system these are in Urdu, Arabic or Persian, and for Siddha in Tamil.

TKDL targets Indian Systems of Medicine, viz., Ayurveda, Unani, Siddha and Yoga available in public domain. This is being documented by sifting and collating the information on traditional knowledge from the existing literature existing in local languages such as Sanskrit, Urdu, Arabic, Persian and Tamil in digitized format, which will be available in five international languages which are English, German, Spanish, French and Japanese.

TKDL acts as a bridge between formulations existing in local languages and a Patent Examiner at a global level, since the database will provide information on modern as well as local names in a language and format understandable to Patent Examiners. It is expected that the issue of the gap on lack of access to prior art traditional knowledge shall get addressed.

World Intellectual Property Organization

In 2000 the WIPO General assembly established the IGC as a forum for discussion of intellectual property issues in relation to access to genetic resources, benefit sharing and protection of traditional knowledge and expressions of folklore. It acts as an international forum for international policy debate, development of legal mechanisms and for creating practical tools for protection of traditional knowledge and traditional cultural expressions against misappropriation and misuse. IGC work has produced large number of discussion papers on the subject of protection of TK.IGC has produced a number of practical outcomes which include, a toolkit for the management of IP in the context of documenting TK and genetic resources, a practical guide for protection of traditional cultural expressions, proposal for revision of international patent classification to contain categories of TK.

The committee has made substantial progress in addressing the practical linkages between the current intellectual property system and the custodians of TK. Committee is trying to bring about an international understanding regarding the principles that should guide the protection of traditional knowledge.

Besides all these international initiatives, last decade has witnessed many regional initiatives for laying down measures for protection of TK. African countries under Organisation of African Union prepared a model law on community rights and access to biological resources. The African Model Legislation for the Protection of Rights of Local Communities, Farmers, Breeders, and for Regulation of Access to Biological Resources aims at establishing a framework of national laws to regulate access to genetic resources and associated TK. Its provisions on access to biological resources make it clear that the recipients of biological resources or related knowledge cannot apply for any IP rights of exclusive nature. Besides this they provide for community rights over their biological resources and their right to collectively benefit from their use, rights to their innovations, practices, knowledge and technology and the right to collectively benefit from their utilization .Thus, in practice this model legislation intends to create a system which allow the community, right to prohibit access to their valuable resources and knowledge.

The World Trade Organizations (WTO)

The Ministerial Declaration of the WTO’s fourth Ministerial Conference (Doha- 9-14 November 2001) emphasized the importance of TK. It instructed the Council for Trade-Related Aspects of Intellectual Property Rights to examine, inter alia, the relationship between the TRIPS Agreement and the Convention on Biological Diversity, the protection of traditional knowledge and folklore, and other relevant new developments raised by Members pursuant to Article 71(1) In addition, it instructed the Committee on Trade and Environment in pursuing its work on all items on its agenda give particular attention to three issues, including the relevant provisions of the TRIPS Agreement. Moreover, it “recognized the importance of technical assistance and capacity building in the field of trade and environment to developing countries, in particular the least- developed among them.”

INDIA- COMBATING BIO-PIRACY

The Patent (Amendment) Act, 2005

India has amended the Patents Act in 1999 and 2002 to comply with the obligations of Trade-related Aspects of Intellectual Property Rights (TRIPS). The TRIPS agreement signed along with WTO agreement in 1995 provides for making certain changes in domestic patent laws, for reaching a uniform system of legislations relating to patent throughout the world. In order to fulfill this obligation under TRIPS patent act was duly amended in 2005. This amendment introduced into Indian IP system certain new measures for protection of TK.

Another provision is inclusion of new provision for opposition of patent, on specific grounds under section 25(1) of the Act. It provides after publication of patent application any person can in writing make an opposition to the controller of patents on the ground of lack of novelty or inventive step, or non disclosure or wrongful disclosure of source or geographical origin used in the invention and anticipation of invention by the knowledge, oral or otherwise available within any local or indigenous groups in the complete specification. Also now we can oppose a complete patent specification which was publicly known or publicly used in India before the date of claim40.

All the above provisions are defensive in nature which can help to oppose any patent granted to an invention which is based on the knowledge available within the indigenous groups of this nation. But these provisions are also not capable of covering the entire area covered by TK, which necessitates the need for a sui generis system for protection of TK.

CONCLUSION

Around the world, various local communities possess knowledge and practices gained by them through experience of centuries and transferred from generation to generation. TK is the result of intellectual activities in diverse traditional contexts. One of the challenges posed by the modern age is to find ways for strengthening and nurturing the roots of traditional knowledge so that its fruits can be enjoyed by future generation and so that the traditional communities can develop and sustain in ways consistent with their own values and interests .

There has been a growing interest in the International communities in the present times regarding these old and obsolete sources of knowledge which are highly adaptive and creative when transformed into commercially valued products. Knowledge, both modern and traditional, is under peril in the age of Globalisation. The most unfortunate part of the unfair acts of bio-piracy is that the actual holders of the TK are, most often, not aware of the unfair exploitations of their knowledge being taking place. Hence, the chances that these victims of illegal patenting would ever complaint about the infringement of their rights are meager. The International community has long ago realised that national initiatives alone are incapable for TK protection and hence the World nations are currently engaged in extensive discussion on preservation of traditional knowledge under various International Institutions.