International Economic Law and Policy Blog

WTO DG Odds

I have no idea who the next WTO DG will be.  But if you think you do (and if you're in a place where it's legal to do so), you can bet on it here: http://www.paddypower.com/bet/current-affairs/world-trade-organization?ev_oc_grp_ids=1160233 

You can also bet on the gender and the continent of origin.

Regulatory Protectionism (and Legislative Protectionism?)

My Cato colleagues Sallie James and Bill Watson have a new paper on regulatory protectionism.  On Thursday, April 18, there will be a policy forum on the paper here at Cato, with commentary by former AB Member Jim Bacchus and economist Don Boudreaux.

There's a lot going on with these issues, but I wanted to highlight one point.  Here's a passage from the paper:

Requiring agencies to consider and evaluate the impact of a proposed regulation on international trade could limit the incidence of protectionism. Agencies setting food safety measures already undertake the scientific assessment required by the SPS Agreement. These agencies and others should further undertake to assess whether a less trade restrictive alternative could also meet regulatory goals. Requiring agencies to identify alternative policies that meet regulatory goals and then to analyze the trade restrictiveness of each proposal would make it difficult to impose WTO-inconsistent regulations. The requirement might not always prevent the establishment of discriminatory standards, but by adding an apolitical element, it would pressure the agencies to justify their actions on legitimate grounds. Agencies that ignore the requirement or choose an inferior policy should be subject to effective legal challenge by adversely affected private parties.

What strikes me about these issues is that the focus is usually on regulation by executive agencies.  The goal is to make agency regulation more effective and less protectionist.

By contrast, the legislature tends to get a free pass.

But I wonder, if the agencies are simply implementing legislation, can we ignore the legislative process?  Should there be some attempt to make legislatures comply with the guidelines mentioned in the passage?  Putting constraints on regulators may be a good idea, but when the legislation is flawed, there is only so much it can do.

ADDED: To clarify a bit, what I have in mind are things like the cost-benefit analysis that U.S. agencies do under domestic law.  If legislatures don't have to do this, doesn't it undermine the constraints on regulators?

More Criticism of the Proposed EU Tobacco Measure

A couple weeks ago, I mentioned Malawi's criticism of the proposed EU tobacco products directive.  Someone pointed out to me that the Dominican Republic also made a submission on this issue.  There were two things I wanted to note in that submission.

First, in my post, I expressed surprised that Malawi did not mention TBT Article 2.1. In contrast, the Dominican Republic did:

3.1. The Dominican Republic is concerned that the Directive may run counter to Article 2.1 and 2.2 of the TBT Agreement.

3.2. Article 2.1 of the TBT Agreement requires Members to ensure "that in respect of technical regulations, products imported from the territory of any Members shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country". The Dominican Republic is concerned that, under the proposed Directive, tobacco products imported from the Dominican Republic and other developing countries would be treated less favourably than other like products originating in EU or other countries. In this regard, we are particularly disturbed by the fact that the discrimination which might ensue from the proposed ban on the use of descriptors of characterizing flavours, as well as on "slim" and flavoured cigarettes.

This seems to be a de facto discrimination claim, perhaps based on the idea that certain kinds of cigarettes come mainly from certain countries.

Second, there was this:

On 18 January 2013, the European Union (EU) notified the Committee on Technical Barriers to Trade (TBT) that the European Commission had published its final proposal for a new Tobacco Products Directive. Although the Dominican Republic shares the EU's interest for protecting human health, as demonstrated by its high import duties on such products and its restrictions on the public areas in which they can be used, this draft proposal causes the Dominican Republic great concern.

 Here, I'm not sure I see how "high import duties" shows an interest in protecting public health.  I talked to some anti-tobacco compaigners about this issue a few months ago, and they seemed to favor high taxes, not import duties.

Finally, the WTO Starts to Think About Energy (and Climate)

At the beginning of ths month, following the release of a study by the IMF showing the severely negative climate impact of fossil fuel subsidies, I published an oped in the Toronto Globe and Mail lamenting that "despite the obvious importance both to climate change and competitiveness issues, the WTO has largely avoided addressing the energy sector. (Indeed, energy is not even a trade topic listed on the WTO’s website.)" http://www.theglobeandmail.com/report-on-business/economy/economy-lab/energy-subsidies-the-ball-is-now-in-the-wtos-court/article10633014/

Now, less than two weeks later, the WTO has made public the plan to hold a workshop on energy, trade, and climate in collaboration with the Energy Charter Secretariat, "the role of intergovernmental agreements in energy policy."  A rather abstract, bureaucratic title for an issue so hot and fundamental to the future of the planet.  I won't be there because the workshop is on April 29, the date that the second meeting of the panel in the seals dispute opens.(I registered to attend a long time ago.)  I guess my absence will be a relief to the relief of atavists in the Secretariat who may be tired of my relentlessly pushing the importance of dealing with energy at the WTO.

But what is really annoying is that, despite the IMF study, they have not even put fossil fuel subsidies on the agenda as a separate presentation topic.

Anyhow, it's a start, which is good.  Here is the agenda and registration info:  http://www.wto.org/english/tratop_e/envir_e/wksp_envir_apr13_e/wksp_envir_apr13_e.htm. 

 

 

More on E-Cigarettes

In response to the Economist articles on e-cigarettes that I mentioned recently -- which noted that "a switch from smoking to vaping could improve public health, some say" -- a couple of the letters to the editor make clear that there are differing views out there.  Here is one of critical letter:

you gave short shrift to the potential adverse effects of the nicotine vapour, organic compounds (propanediol, propanetriol, diacetin) and both fine and ultrafine particulates in the e-cigarette formulation that would doubtless be delivered to the deep lung.

E-cigarettes may turn out to be safe when sufficient evidence is available, but at least three recent studies raise questions about their long-term safety. Little is known about the possible lung or systemic harm of e-cigarettes.

And here's another:

 I sat next to a heavy smoker who used e-cigarettes, which enveloped the workspace in foul, artificial odours. This person used the e-cigarettes to tide her over between chain-smoking in her own time and space, hardly an endorsement for encouraging less intake of toxic combustion components from tobacco. Millions have given up tobacco as a result of indoor air preservation laws. Rolling these restrictions back for these steaming, stinky devices will slow the progress of the current smoking bans. 

Why Can't We Discriminate in Relation to Patents Based on the Field of Technology?

Article 27.1 of the TRIPS Agreement says: "patents shall be available and patent rights enjoyable without discrimination as to the ... the field of technology."  The law is pretty clear, and doesn't leave much wiggle room.

But why is that the rule?  Why shouldn't countries discriminate in relation to patents based on the field of technology?  Aren't some patents more valuable to society than others?  Aren't patents for pharmaceuticals more valuable than patents for, say, pumpkin carving tools?  Why not give longer patent terms for life-saving drugs than for less important things?

BIICL 13th Annual WTO Conference

BIICL 13th Annual WTO Conference

Wednesday 15 May 2013 and Thursday 16 May 2013
BMA House, Tavistock Square, London, WC1H 9JP

British Institute of International and Comparative Law, organized in association with the Institute of International Economic Law at Georgetown Law, the Journal of International Economic Law, the Society of International Economic Law and Queen Mary, University of London

This year's WTO Conference will explore emerging ideas and developments in international trade law. Panels on Day 1 will address (a) Energy and Trade; (b) Economic Analysis in WTO Law; (c) Dispute Settlement Procedure; and (d) Digital Trade. Panels on Day 2 will address (a) Financial Crises and Sovereign Debt Crises; (b) International Finance and International Trade; (c) The Emergence of the TBT Agreement; and (d) Post-Doha: Where Do We Go Now?

The full program is here: http://www.biicl.org/files/6364_thirteenth_wto_conference_programme_(panel_members_and_chairs).pdf

More Support for India's Patent Policies

From economists Joseph Stiglitz and Arjun Jayadev:

The Indian Supreme Court’s refusal to uphold the patent on Gleevec, the blockbuster cancer drug developed by the Swiss pharmaceutical giant Novartis, is good news for many of those in India suffering from cancer. If other developing countries follow India’s example, it will be good news elsewhere, too: more money could be devoted to other needs, whether fighting AIDS, providing education, or making investments that enable growth and poverty reduction.

But the Indian decision also means less money for the big multinational pharmaceutical companies. Not surprisingly, this has led to an overwrought response from them and their lobbyists: the ruling, they allege, destroys the incentive to innovate, and thus will deal a serious blow to public health globally.

These claims are wildly overstated. In both economic and social-policy terms, the Indian court’s decision makes good sense. Moreover, it is only a localized effort at rebalancing a global intellectual-property (IP) regime that is tilted heavily toward pharmaceutical interests at the expense of social welfare. Indeed, there is a growing consensus among economists that the current IP regime actually stifles innovation.

"Is India undervaluing patents or is the rest of the world overvaluing them?"

Economist Arvind Subramanian comments on the Indian Supreme Court's Novartis ruling:

Critics have suggested that India is a deviant for being the only country where Novartis’ claim has been rejected. Left out is the fact that even in the United States, the Novartis application—which was really for a successor version of Glivec—was in fact first rejected by the patent office, only for a higher authority to overturn the initial ruling. The Indian verdict, like that of the US patent office, may well be more within the range of reasonable interpretations of what constitutes patentability than has been asserted by critics.

...

Other developing countries, such as Brazil, Thailand, and even China, could be emboldened by the Indian example and decide to dilute their own patent protection regimes. Even more consequential could be the impact on advanced economy patent regimes.

The US patent system has come in for intense scrutiny for its patent proliferation (including frivolous patents), its increasing tendency to hinder competition rather than promote innovation, and especially for its capture by patent owners with deep pockets. (These are explained at length in an excellent recent paper in the Journal of Economic Perspectives by Professors Boldrin and Levine of the University of Washington, St. Louis, MO). A body of opinion argues vehemently that in fact the US patent system is broken and needs radical overhaul.

At such a time, the Indian Supreme Court ruling—as a new and independent voice—could add to the momentum for a fundamental reassessment. The ruling is appealing because it asks a question that was both naïve and salient. The judges wanted to know whether the Novartis patent is a ruse to prolong an existing monopoly beyond reasonable limits, a question that has wider resonance.

Is India undervaluing patents or is the rest of the world overvaluing them? That might be one of the more intriguing questions raised by the Supreme Court ruling.

I'm not expecting a "radical overhaul" of the U.S. patent system any time soon.  But I do see a rising tide of criticism of existing IP protections.  At the least, perhaps this might prompt some debate on these issues.

Food Labelling: Can There Be Too Much Information?

A couple weeks ago, I asked the following question in relation to the U.S. COOL measure: "What will consumers think of seeing details on where the animal was 'born, raised, and slaughtered' on every package of meat?" CNN's Jake Tapper was intrigued by the same issue, and did a segment on it, with some comments by my Cato colleague Bill Watson:

 

This all reminds me a bit of the following scene from the TV show Portlandia:

 

The part I have in mind starts around 20-25 seconds in.  You kind of have to watch the whole thing. 

 So what kind of information do consumers want about their cuts of beef?  Maybe something general like "processed in the U.S., Canada, and/or Mexico" -- or whomever the relevant countries are that a meat processor buys from -- would be enough?  Perhaps a measure along these lines could give consumers relevant information, without putting such a burden on meat processors to track the origin of the cow, in a way that has a detrimental impact on foreign producers.

Seven of the Nine DG Candidates Speak Out

Thanks to the  efforts of leading WTO scholars and EUI professors Bernard Hoekman and Petros Mavroidis, today we have a better view of the perspectives and positions of seven of the nine candidates for Director-General of the WTO. Their e-book Race for the WTP Director General job: Seven candidates speak, available at http://www.voxeu.org/content/race-wto-director-general-seven-candidates-speak, begins with a useful history and overview of the selection process.

Korea's Taeho Bark recommends strengthening the WTO's relationship with regional and multilateral development banks. He is conservative about the WTO getting involved in the 21st century agenda, including food security, natural resources and water management, emphasizing the importance of the WTO "staying within the boundaries of its mandate as a trade organization." At the same time, he stresses the importance of communication with civil society.

Anabel Gonzalez of Costa Rica is wishy-washy about the 21st century agenda. On the one hand, she makes the wonderful statement that "the WTO's centrality in the world trading system today requires that no topic of relevance to the world economy be taboo for the house of trade." On the other hand, she fudges on whether to get with it now, or a la Lamy, try to complete Doha first and then deal with the subjects that are truly relevant. Gonalez recognizes that the WTO system is "robust" and, refreshingly, thus distinguishes herself from those who predict doom if Doha dies (as it will, in reality).

Kiwi Tim Groser is the consummate trade insider neo-liberal candidate-hasn't heard that Washington Consensus is in trouble. No vision beyond Doha. Fear-mongering that if the WTO doesn't work as a negotiating forum even dispute settlement won't maintain its vitality.

A very thoughtful view from Jordanian Ahmed Hindawi. He emphasizes importance of capacity building for developing countries. He alone of the candidates places emphasis on professionalizing the WTO as an institution, creating clear goals, standards for good governance, and accountability, including to "outside" stakeholders. On a similar note, HIndawi makes a pitch for greater transparency and outreach.

The candidate from Ghana, Alan Kyermaten, endorses flexibility, a WTO a multiples vitesses, getting away from the "single undertaking" orthodoxy or straightjacket. "The WTO should not be tied forever to 'One Big Round' or always to 'hard law' solutions." Kyermaten also suggests: "There is ... a need for coherence between trade policies and other policies such as macroeconomic, fiscal, agricultural and social policies. This contrasts with Bark's notion of "clear boundaries" of the WTO as a trade organization.

Amina Mohamed is, overall, the most far-seeing of the candidates. She strongly rejects the view that just because Doha is in trouble WTO not in good shape, pointing to the dispute settlement system as a great success of global governance. She doesn't buy the Lamy head-in-the-sand view that we have to invest all our energies into closing Doha, an outdated trade agenda, before talking about the real 21st century agenda. Thus, she boldy argues for refocusing the current negotiations, and "addressing the major global challenges of climate change, food security, intellectual property rights and piracy among others." On two of these issues, climate change and food security, she gives specifics. Mohamed also reminds us that she has the big picture of global governance, having worked "in other areas of governance: environmental protection, constitution drafting, targeted at domestic conflict and dispute resolution in a multi-ethnic society; poverty reduction; diplomacy and foreign policy."

The Indonesian candidate Mari Pangestu thankfully also doesn't buy the idea that the vitality of the WTO should be judged by Doha. She argues that "opening up trade must be accompanied by complementary policies to ensure that the benefits will be more equally shared and the downside risks for sectors or groups within the country are managed." Maybe the relationship between equality and gains from trade is even tighter than she suggests (read Joe Stiglitz on equality and growth), but at least here is a candidate that talks explicitly about equality.

Even if they differ in the degree of compromise with the old guard, the three women from the South really get the challenges of the 21st century. And then there is the mystery of why the two guys from the southern Western Hemisphere didn't submit to the volume. I've tweeted Roberto Azevedo about that, and maybe I'll get to ask Herminio Blanco tomorrow, when I attend his talk in NYC. Much gratitude to Bernie and Petros for putting this together-a real contribution to the transparency of the process.

Arms Trade Treaty

The General Assembly has approved the conventional weapons trade treaty.  While the treaty requires members to restrict exports in certain circumstances, it contains no reference to WTO law requirements, and Art. 26 on the relationship with other agreements seems to assert dominance. See Joost Pauwelyn's earlier post on the question of whether a WTO waiver is appropriate here.  The concerns of the Arms Trade Treaty do not seem adequately covered by the exceptional provisions of GATT.

Is This One of Those Regulatory Trade Barriers Everyone Is Talking About?

One of the big issues in the US-EU trade talks is supposedly going to be "regulatory trade barriers."  Everyone agrees there are significant economic gains to be had by eliminating these barriers.  And I can imagine there are.  But one problem is, it is not really clear what people have in mind by "regulatory trade barriers."  I've seen widely divergent types of government measures included in this conversation.

One of the things I've been working on is clarifying the possible barriers that might be addressed.  At first glance, this seems like a good candidate:

The headlights on the forthcoming Audi (VOW) A8 sedan can illuminate around corners and throw brighter-than-average beams. They’re also smarter, adjusting automatically to traffic, pedestrians, and road conditions. “Extremely trick,” admired Car and Driver magazine. Audi plans to put the sedans into showrooms around the world this year. U.S. drivers likely will have to wait longer for models equipped with the headlights. That’s because a 1968 regulation requires that headlights switch between two settings: high and low.

Audi’s so-called matrix-beam headlights, an optional feature, are more complex than that. They’re made up of numerous LED bulbs that dim or brighten individually based on what cameras and sensors in the car see ahead. The system allows drivers to ride with some high beams on at all times without blinding others on the road. Say there’s a pickup truck in front of the Audi; one or several of the Audi’s bulbs flip off, while other high-beam bulbs continue to light up the lower areas in the Audi driver’s line of sight.

...

The company is gearing up along with Mercedes-Benz (DAI), BMW (BMW), and General Motors (GM) to lobby federal lawmakers to update the headlight rule so it allows for automated features. “Lighting technology changed dramatically in the last 10 to 15 years,” says Stephan Berlitz, Audi’s head of lighting innovations. “It’s difficult to do all these innovative things in this regulation from 1968.”

In an e-mail, National Highway Traffic Safety Administrator David Strickland says he’ll hear out the carmakers’ requests. But Joan Claybrook, a former NHTSA administrator, says the agency doesn’t generally change a regulation unless manufacturers show a proven safety benefit backed up by studies. The lobbying push could be even tougher at a time of budget cuts due to the sequester, she says. “A lighting system that dims, I’m not sure that’s going to be No. 1 on their list.”

Mere details here:

But the system that Audi is developing is not allowed under rules set by the National Highway Traffic Safety Administration, Berlitz said last week at a gathering of technical experts and regulators during the Washington Auto Show.

Under the U.S. regulation, known as Federal Motor Vehicle Safety Standard 108, headlights are not allowed to shine in such a dynamic way.

Perhaps it was an effort to prevent old high beams from being too distracting. But not too long ago, Audi asked NHTSA for an interpretation of the standards to figure out whether its new design – clearly an effort to make driving safer -- would be acceptable.

This is just one of many areas where the United States and Europe have different standards. Automakers routinely spend millions of dollars (or euros) to reengineer vehicles for sale in both markets, and have pushed for trade deals that would knock down some of the differences.

For the time being, Americans will have to be content with a less ambitious feature that dims high beams for oncoming cars. Audi put the technology into its A8 sedan for the 2013 model year, calling it "high-beam assistant."

American regulators may very well interpret their rules to let matrix beam lighting hit the market -- once they are confident it is safe, of course.

But until the rules are clear, Audi will probably have an easier time introducing the feature in Europe. So will German competitors like Mercedes, BMW and Opel, which have all demonstrated versions of intelligent headlights.

That may frustrate those Americans who complain that Europeans tend to get the first crack at whatever the German car companies have to offer. And they should know that matrix beam lighting is not all that Audi has in mind.

One interesting aspect of this issue is that it seems to be the Americans that are being cautious here.  Do our car safety regulators apply the precautionary principle in these matters?  And in contrast, why are the European regulators so laid back about this, unlike with food issues? I'm digging around to try to find out more.

Novartis, the Indian Supreme Court, and TRIPS

The Washington Post reports on a big patent decision at the Indian Supreme Court:

India’s Supreme Court on Monday rejected a Swiss pharmaceutical company’s effort to patent an updated version of its cancer drug, a decision aimed at boosting a domestic generic drug manufacturing industry that supplies cheap versions of lifesaving cancer and HIV medicines for much of the developing world.

In a case closely watched by global drugmakers, Switzerland’s Novartis AG has been fighting since 2006 to patent its leukemia-treating drug Glivec in India on the grounds that it is a newer version. India revised its patent protection law in 2005.

The company challenged a clause in the Indian patent law that restricts multiple patents for a drug and denies such protection for newer versions of a “known substance” in already patented medicines unless they are significantly more efficacious.

Patents for amended versions of drugs can be granted in the United States.

But in a landmark judgment that is likely to set a legal precedent for future patent claims, India’s Supreme Court said the beta crystalline form of the salt called imatinib mesylate in the drug fails the test of “invention and patentability.”

The decision is here: http://judis.nic.in/supremecourt/imgs1.aspx?filename=40212  The Spicy IP blog summarizes the case here: http://spicyipindia.blogspot.com/2013/04/supreme-court-rejects-bid-by-novartis.html

There's some general discussion of TRIPS at pages 27-39 of the decision, but I don't see anything about whether this approach to patentability of "updated versions" of drugs is consistent with TRIPS. Article 27.1 of TRIPS says:

1. Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.⁵ ...

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5 For the purposes of this Article, the terms "inventive step" and "capable of industrial application" may be deemed by a Member to be synonymous with the terms "non-obvious" and "useful" respectively.

I'm guessing that someone has developed an argument as to why India's approach violates TRIPS, but I haven't seen it.