Paragraph 6 Negotiations: No End In Sight

TWN Info Service on WTO Issues (June03/2)Third World NetworkGeneva (June 7, 2003)

1. General

The TRIPS Council meeting on June 4-6, in its last formal session before the Cancun Ministerial Conference in September, did not make progress towards agreement on a solution for the Paragraph 6 problem.

Although they had not expected a breakthrough at this meeting, many developing country negotiators expressed their frustration at the seemingly unbreakable impasse in the negotiations. The US had reinforced this perception by stating that a consensus was not yet possible, in response to the Kenyan negotiator's comment that there appeared to be no objection to the December 16 text.

The TRIPS Council considered two submissions, one from the group of African, Caribbean and Pacific (ACP) countries, and the other, from the European Communities (EC).

2. Letter from the ACP

The TRIPS Council had received a communication from the African, Caribbean and Pacific Group of States, in the form of a letter dated May 23, 2003 from the Deputy Minister of Vanuatu, in his capacity as the President in office of the ACP Group of states Council of Ministers.

This communication caused some surprise in the Geneva missions of the ACP countries, it having been submitted directly to the WTO Secretariat without apparently having been first sent to the Geneva missions.

Expressing grave concern at the impasse in the negotiations on how to resolve the difficulties of countries with no or inadequate drug manufacturing capacity commonly known as the Paragraph 6 problem of the Doha Declaration on TRIPS and Public Health), the ACP called for a solution that was 'straightforward and easy to implement' and one that 'should not be made so cumbersome as to be effectively unworkable'. In view of the outbreak of new diseases such as SARS, said the ACP, a solution was now a matter of urgency.

Referring to the December 16 text, the ACP expressed regret that the US had not joined in the consensus to accept the text as a compromise. The US withholding its consensus had meant that the deadline of 31 December 2002 as set out in the Doha Declaration could not be met.

[The US objection to the December 16 text was based on the issue of scope of diseases and the reference to Paragraph 1 of the Doha Declaration which refers to 'the public health problems afflicting many developing and least developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics'. The reference to 'public health problems as recognised in Paragraph 1 of the Declaration' was too broad for the US. The US had then proposed that the scope of diseases in the December 16 text should be limited to 'HIV/AIDS, malaria, tuberculosis or other infectious epidemics of comparable gravity and scale, including those that may arise the in the future'. This had been opposed by the majority of the WTO Members as an attempt to limit the scope of diseases already agreed to at Doha.]

The ACP criticised the US action and position as 'an attempt to effectively redefine and limit the scope of public health problems reflected in the Doha Declaration'. According to the ACP, it valued the Doha Declaration as a significant achievement, and it would therefore 'not accept any attempts to roll-back the commitments made in the interest of public health by all the Ministers at Doha'.

The ACP also said that it could not accept the EC proposal. In an effort to persuade the US to join the consensus on the December 16 text, the EC had suggested that WTO Members could agree on an initial list of diseases that would be covered by the December 16 text, and any Member wishing to import medicines to meet a public health concern that was not explicitlycovered in the list would be encouraged to seek WHO advice on the matter. Although it welcomed the EC's effort to break the deadlock in negotiations, the ACP said that its position was that any text that restricts the agreement (on a Paragraph 6 solution) to a set list of diseases, even one involving the WHO in assessing public health concerns, would constitute an unacceptable attempt to restrict the ACP's use of compulsory licensing. 'The scope of diseases was already extensively discussed in Doha, and the consensus text included in the Doha Declaration rejected any limitations', said the ACP.

The ACP submission also rejected attempts to confine the application of the Paragraph 6 solution to national emergencies and other circumstances of extreme urgency. 'Limiting the agreement to national emergencies and other circumstances of extreme urgency would also be deviating from the content and understanding of the Doha Declaration', the ACP asserted.

This was a reference to the proposal by the previous Chair of TRIPS Council (Ambassador Perez Motta of Mexico) that there should be a 'statement ofunderstanding' put on record before the adoption of the solution to the paragraph 6 problem, as provided for in the December 16 text. A crucial element of the Chairman's statement of understanding was that the applicability of the system proposed in the December 16 text would be restricted only to national emergencies or other circumstances of extreme urgency.

The ACP submission also highlighted the issue of national implementation and technical assistance. 'With regard to other aspects of the Declaration, most governments of the ACP States need assistance and support in integrating the TRIPS public interest safeguards into their legislation. Least-developed countries need to be provided with advice on how to take advantage of the extended deadlines for pharmaceutical patenting, since many have already implemented, or are in the process of implementing,TRIPS-compliant rules. In so doing, some of the LDCs have failed, due to lack of capacity, to take advantage of the extended transition period agreed at Doha', said the ACP.

To this end, the ACP called upon WIPO and WHO, as well as the WTO, to ensure that all the aspects of the Doha Declaration are fully integrated within their technical assistance programmes.

The ACP letter also called on the pharmaceutical companies to ensure that their patent policies, practices and lobbying activities are compatible withthe Doha Declaration. In respect of developed country Members of the WTO, the ACP urged them to adapt their intellectual property enforcement policies according to the Doha Declaration. 'This means respecting therights of governments to use the TRIPS public health safeguards', the ACP said.

3. The EC communication

In its communication, the European Communities asked WTO Members to focus on the implementation of the Doha Declaration itself, pending agreement on a solution for the Paragraph 6 issue. The paper made little mention of Paragraph 6 itself but focussed instead on national implementation of other aspects of the TRIPS Agreement and the Doha Declaration. In that context, the EC highlighted four areas: technical assistance and capacity building, parallel imports, regional cooperation and compulsory licensing.

In language rather similar to that in the ACP letter, the EC highlighted the importance of national implementation of the Doha Declaration and said that such implementation 'may require legislative, administrative or policy adjustments' in developing or least developed countries. In such instances,technical assistance and capacity building will be required to help countries 'recognise and act on the implications of the TRIPS Agreement and establish workable law, procedures and practices to give effect to the Doha Declaration'.

Sound technical advice, which must be 'balanced, transparent and unbiased', will be needed to integrate the Doha Declaration into intellectual property policies and practices. Thus, the EC called on WIPO and WTO to fully integrate the Doha Declaration in their technical assistance policy.'The WIPO-WTO legal and technical assistance programmes must therefore integrate fully and completely the effects of the Doha Declaration and begeared towards standards appropriate to the specific needs and level of development of the recipient country', said the EC.

The EC also called on Members to take advantage of the expertise of the WHO on health matters. The EC noted that the WHO has been engaged in technical assistance to help countries develop informed approaches toaddressing the health implications of the multilateral trade rules.

With regard to exhaustion (of intellectual property rights) and parallel imports, the EC paper said that the Members have the freedom to opt for a national, regional or international exhaustion regime.

However, the EC paper urged that account be taken of the possible impact of international exhaustion regimes on the diversion of reduced-price supplies of pharmaceuticals, since one of the most important meansof low-priced medicines supply is through price reductions offered by manufacturers. 'An essential condition for the implementation of effective tiered pricing policies by companies is that markets need to be segmented to prevent low priced products from flowing back to high price markets. Otherwise this may lead to trade diversion, which will disincentivise companies to engage in differential pricing', said the EC.

The EC added that regional or sub-regional cooperation on IP matters was highly instrumental in implementing the TRIPS Agreement, including the Doha Declaration, by pooling resources of the participating countries.According to the EC, regional institutions in Africa, such as OAPI and ARIPO, have already shown they can play a vital role in the implementation of the TRIPS Agreement and could play a similar role as regards Doha Declaration. 'For instance, the implementation of an effective compulsory licensing system for production and import of products to address public health problems may likely take the form of a regional arrangement, based on a common patent system'. Therefore, the EC encouraged Members to engage into regional cooperation arrangements.

On compulsory licensing, the EC confirmed the right of Members to determine the grounds for the grant compulsory licences, but noted that the procedural requirements under Article 31 of TRIPS may require administrative and legal infrastructure that is absent in many developing and least developed countries. Technical assistance may therefore, beneeded in developing countries to ensure, among others, that patent legislation clearly defines the grounds for the grant of licences, administrative and/or judicial procedures are transparent and equitable while avoiding unnecessary delays. In addition, the EC paper also called for equitable guideline for setting royalty rates for remuneration to the right holder.

4. The EC's footnote

It had been pointed out by some negotiators and other observers that perhaps the most interesting point in the EC communication was to be found not in the main body of the paper, but rather in footnote number 3 ofthe paper. The footnote, relating to the section heading entitled 'Specific technical and political issues raised by the Doha Declaration' stated that 'itshould be borne in mind that the principles of the Doha Declaration can also be carried through to issues other than compulsory licensing or parallel imports, such as exceptions to exclusive rights or other policyoptions'.

This reference to exceptions to exclusive rights had a number of the negotiators speculating as to whether the EC might be referring to use of exceptions to patent rights under the Article 30 approach (which hadbeen proposed by the developing countries, but which had been opposed by the US and the EC, in favour of the Article 31 approach).

However, during the discussions the EC negotiator said it was concerned about the Paragraph 6 deadlock, stating that the December 16 text was still the best basis. He welcomed the ACP statement for signallingthe need for a solution.

The issue of alternative approaches to a solution was raised by Indonesia and the Philippines in their statements. The Philippines reminded the Council that it had not been in favour of the December 16 text andwas keeping an open mind in terms of exploring other possibilities, including making changes to the December 16 text, in order avoid its rights being limited. The EC response was that it was dangerous to take this route as it might unravel the whole text.

In concluding the meeting, TRIPS Council chair, Ambassador Vanu Gopala Menon of Singapore, told the meeting that he would continue to hold consultations in small groups and bilaterally, and that Members could also consult among themselves. He also asked members to be prepared for a special meeting of the TRIPS Council that may be called at short notice. The Chair said that he was hopeful that a conclusion to the Paragraph 6 negotiations could be reached before the Cancun Ministerial Conference or better, by the General Council meeting on 24 July.

5. Talk outside the meeting

For this TRIPS Council meeting, it seemed that discussions taking place outside the meeting room seemed more interesting than the statements made in the conference room. The absence of the usual posse of USTR officials from Washington at the TRIPS Council had been remarked upon, and a developing country negotiator said that this did not send a good signal of the US' willingness to work towards a consensus solution.

Another topic of conversation in the coffee shop outside the conference room was Robert Zoellick's recent remark to the Philippines President Arroyo that the US did not consider the Philippines eligible to use the system proposed in the December 16 text. One negotiator (from a country that had just signed a FTA with the US) said that Zoellick's comment was unfortunate timing, given the state the negotiations were in. It would raise the question of whether other developing countries, particularly middle-income countries, would be asked (or told) not to use the system.

While the December 16 text left the determination of eligibility to the Members themselves (the Annex to the text provides the criteria by which a Member could determine whether or not it had sufficient manufacturing capacity), the USTR's move will raise obvious questions of whether pressure may be applied to other developing countries not to use the solution. This could be viewed as another attempt to limit the scope of the solution proposed in the December 16 text. The first two attempts had been rejected by the developing countries, highlighted by the ACP in its communication; namely, the limitation on the scope of diseases and the restriction of the use of the system to situations of emergency or extreme urgency.

Another topic of interest was the observation that both the EC and the ACP statements were much alike in substance. This, coupled with the fact that the submission of the ACP had bypassed the Geneva missions, also raised some eyebrows.