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Bitter pill for India-EU trade ties

Bitter pill for India-EU trade ties
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First Published: Mon, Aug 02 2010. 08 00 PM IST
Updated: Mon, Aug 02 2010. 08 00 PM IST
The ongoing negotiations between India and the European Union (EU) on a broad-based bilateral trade and investment agreement (BTIA) have seen differences emerge in a number of critical areas, including those on intellectual property rights. What is perhaps more disconcerting is that these two negotiating partners find themselves on opposite sides of the table in a number of forums.
The most recent flashpoint is a dispute initiated by India against the EU at the World Trade Organization (WTO). EU customs authorities had seized authorized generic pharmaceutical products—in transit to Latin America and Africa— when they were transiting through ports and airports in the Netherlands. More than 20 cases of seizures took place in 2008 and 2009. While taking action, EU authorities had enforced a 2003 European Commission directive, which allows seizure of goods that are suspected of infringing the rights of intellectual property holders in the EU even when the goods are merely in transit, i.e., they have not entered the customs territory of any EU member state. Though the EU has clarified that the seized shipments were released, the inordinate delays caused in transit not only affected the commercial interests of the exporting Indian firms but also denied patients in the importing countries access to crucial life-saving medicines.
There are at least two substantive grounds on which the EU directive is in explicit violation of WTO rules and procedures. First, WTO law provides that intellectual property owners have the right to prevent third parties from making, using, offering for sale, selling or importing the protected products or processes. In other words, the rights can be enforced only when there is an explicit conflict with the commercial interests of the owners of intellectual property rights. However, in the case involving seizures of pharmaceutical products, the commercial interests of the EU intellectual property owners were in no way affected, since the products were merely in transit through the Dutch ports.
Second, there is a mutual agreement among WTO members to grant freedom of transit through their territories, through the routes most convenient for international transit, for traffic in transit to or from the territory of other members. This provision was agreed to when the General Agreement on Tariffs and Trade, or Gatt, the predecessor organization of WTO, became effective in January 1948. Importantly, during the six decades of Gatt’s existence, the multilateral trading system has seen no dispute on the issue of freedom of transit. That means this is the first time that the multilateral trading system would be considering a case where the freedom of transit has been denied by a member.
It is not only in international markets where the EU is challenging generic pharmaceutical producers. In the domestic market, these firms are facing the heat as the EU pushes for changes to Indian laws that govern marketing of pharmaceutical products. The EU is, in effect, seeking to introduce in India laws governing marketing of pharmaceutical products that are similar to its own. In the EU, any firm seeking marketing approval for a new pharmaceutical product, for which it has submitted data on clinical trials, can get exclusive marketing rights on the product for 10 years. This implies that any other producer can market a similar product only after the 10-year exclusivity period has lapsed. Introducing these provisions in India can dent the market prospects of generic producers, most of which are looking to introduce cheaper versions of patented products once their patent terms have ended.
Yet another challenge for the Indian generic pharmaceutical industry arises from the proposed Anti-Counterfeiting Trade Agreement (Acta), a plurilateral agreement, which is the result of a joint initiative taken by the US, the EU and Japan. Acta negotiations have a twofold objective: to redefine counterfeit products and to strengthen the enforcement of intellectual property rights. In fact, the proposals that Acta is considering could result in ratcheting up standards of intellectual property protection, well beyond those provided by the WTO agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
The definition of counterfeit products that has been proposed by participants such as the EU, if accepted, would expand the scope of coverage of such products. If the global standards on intellectual property rights—namely, those provided by TRIPS—were considered, the term “counterfeit” can only be applied in respect of trademark violations.
The legislative and enforcement issues that are being raised in Acta’s context encompass a number of areas, which include border measures and intellectual property protection and enforcement. The proposals that have been tabled in the Acta negotiations thus far, which are considerably more stringent than TRIPS provisions, include civil judicial proceedings to compensate for damages arising out of infringements.
Given the strong position that it has taken against “TRIPS-plus” standards in WTO, India could find itself constrained in the ongoing BTIA negotiations with the EU.
Biswajit Dhar is director general at Research and Information System for Developing Countries, New Delhi.
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First Published: Mon, Aug 02 2010. 08 00 PM IST