The wto-minus Strategy: Development and human rights under wto law

3.4 Transferring technology and the ‘single undertaking’

All developing countries need access to new technology as an essential ingredient in building up their industrial sectors and increasing the productivity and efficiency of their agricultural sectors. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIMs) requires all Member countries, except the LDCs, to take costly steps to introduce minimum levels of intellectual property protection into their domestic law. Of particular significance in this context are patents, which are exclusive, enforceable rights to exploit an invention commercially. Most past and current inventions occur in industrialised countries. Until the introduction of TRIPs, the intellectual property laws of developing countries tended to help build local industries by fostering “opportunities for local firms to access foreign innovations” and encouraging “learning and technological progress via imitation.”¹³⁹ Under TRIPs, imitation as an option for technological development in industry and agriculture has been greatly restricted. The circumstances in which patent rights may be denied are limited and the rights must be protected under domestic law for a minimum of 20 years.¹⁴⁰

This change is of particular significance for developing countries because, as Shadlen observes, “a country’s patent regime … has important effects on the acquisition, development and diffusion of technologies throughout the economy.” Although there is still some flexibility within TRIPs by which developing countries can gain less restricted access to new technologies¹⁴¹ (‘technology transfer’), by and large, they must now access the new technologies on commercial terms. Most developing countries are “net consumer[s] of knowledge,” which knowledge they must now purchase from sources which are increasingly private, commercial institutions.¹⁴² Yet the only special and differential treatment provision in TRIPs for ordinary developing countries on the crucial issue of technology transfer is article 67, which merely exhorts industrialised countries to assist developing countries to implement the TRIPs agreement and to enforce intellectual property rights.
Singh argues that the fact that developing countries agreed to TRIPs at all in the Uruguay Round “reflects the economic and political weaknesses” these countries suffered from in “the ‘lost decade’ of the 1980s.”¹⁴³ Their dependence on international financial assistance following the debt crisis “reduced [them] … to the status of being supplicants before the International Financial Institutions”¹⁴⁴ during the period of the Uruguay Round negotiations. In his view, the TRIPs agreement is “anti-development” for countries which are not already industrialised¹⁴⁵ and developing countries should be given the choice of opting-out of it. Their development was better supported, he argues, by the “a-la-carte” approach to GATT 1947 taken during the 1960s and 1970s, than by the single undertaking approach of the WTO-Minus strategy, under which WTO Members must sign all of the trade agreements, including TRIPs.¹⁴⁶
This presents the ‘single undertaking’ feature of the Uruguay Round agreements itself as a constraint on the development strategy options available to ordinary developing countries. The human rights approach to development would question whether the single undertaking requirement contributes positively to a development process which is broad, inclusive and equitable, facilitates the realisation by all of human rights and fundamental freedoms and avoids any retrogression of rights and freedoms. Because technology transfer, like industrial subsidies, can be a very powerful development stimulant, there are compelling human rights and development arguments against the single undertaking.

3.5 Constraints on agricultural exports

Under the efficiency model, all countries should develop export industries in areas where they have a comparative advantage. In the real world, however, this is not necessarily possible. Protectionist measures restrict access for the exports of ordinary developing countries to their obvious markets, in two ways. First, relatively high protective tariffs on the part of the industrialised countries greatly restrict openings for the typical exports of ordinary developing countries. On the positive side of the ledger, tariffs imposed by industrialised countries have been brought down over many decades to an average of less than 4 percent for industrial goods, with a large proportion entirely duty free.¹⁴⁷ Most of these tariffs are now bound at low levels¹⁴⁸ and only a small proportion of exports from ordinary developing countries now face tariffs of more than 15% in the markets of industrialised countries.¹⁴⁹ On the negative side, however, tariffs still remain high for the most common, agricultural exports of ordinary developing countries, particularly for raw commodities and other unprocessed agricultural goods, such as food staples, vegetables and fruit, sugar and dairy products.¹⁵⁰ Added to this, tariffs on processed agricultural goods tend to be much higher than on raw goods, “virtually excluding” ordinary developing countries’ from diversifying their exports into the considerably more profitable processed foods industry.¹⁵¹

Secondly, such benefits as have flowed from reductions in the agricultural tariffs of industrialised countries have been largely ‘offset’ by the domestic subsidies these countries provide to their agricultural producers for produce destined for their own consumers (as opposed to produce destined for export). Domestic subsidies are still permitted, although those which stimulate production have been subject to reductions since 1995.¹⁵² Both the US and EU extensively subsidise the production of some agricultural goods for domestic consumption, thus diminishing the opportunity for developing countries to export their products at prices which cannot compete, because they reflect their true cost of their production. Unfortunately, as with tariffs, the subsidy reductions imposed on industrialised countries in the early years of the AoA were met through cuts for product lines of little interest to developing countries, with reductions lowest for those agricultural products with most advantageous export potential.
By leaving ordinary developing countries in a position of being unable to exploit their comparative advantage, WTO law constrains the development strategy options open to them. The principal response of WTO law and the WTO-Minus strategy to these particular problems has been to maintain the system of waivers permitting industrialised countries to discriminate in favour of the exports of developing countries. The Generalised System of Preferences was formalised in 1979 and is the principal, but not the only, such preferential arrangement which has been authorised.¹⁵³ The purpose of the Generalised System of Preferences was to sanction a mechanism through which industrialised countries might give preferential market access to most industrial, and a limited range of agricultural, exports of developing countries without violating the non-discrimination obligation under GATT 1947.¹⁵⁴ The scheme was intended to help developing countries industrialise, especially to build up their infant industries, by offering tariff-free or reduced tariff entry for industrial goods. However, it has many weaknesses, not least the fact that the preference-giving country unilaterally decides which products will be favoured under its scheme. Typically, schemes have not given preferential terms to agricultural exports, which remain of greatest importance to ordinary developing countries, nor to the more profitable, processed agricultural goods, and the market advantage given by low or zero industrial tariffs under the schemes has diminished as tariffs overall have come down.
Of greater benefit would be for industrialised countries to lower their tariffs and withdraw their domestic subsidies for those products of particular export interest to ordinary developing countries. Industrialised countries have resisted pressure to do this, partly because they want to continue to protect those industries in their own countries but also because of their on-principle reluctance, discussed earlier, to confer trade concessions on a non-reciprocal basis. Once again, the absence of a clear and settled understanding in the WTO-Minus approach as to why and when trade law should differentiate in favour of developing countries hampers rational discussion of this important development constraint.
However, in the light of earlier analysis, the question must be asked whether the pursuit of comparative advantage through increased agricultural exports will bring ordinary developing countries closer to the style of development process set out in the Development Declaration. The majority of developing countries export unprocessed commodities and agricultural goods, so that improving access for these exports to wealthy country markets may have the negative effect of locking them into low profit, highly volatile export sectors. Moreover, as Thomas Palley warns,
“it is doubtful that all developing countries can grow via export-led manufacturing. The global market is limited and an excessive focus on exports stands to generate degraded competition between Southern economies. Countries will find themselves crowding each other out and pushing down the prices of the goods they sell.”¹⁵⁵
As explained earlier, developing countries which have experienced development through (amongst other things) diversifying their exports away from the typical commodities have tended to do so using a wide range of domestic industry supports. Dani Rodrik explained that successful supports have,
“tend[ed] to be country-specific, requiring local knowledge and experimentation for successful implementation. They [have been] targeted on domestic investors and tailored to domestic institutional realities.”¹⁵⁶
He argues that,
“a development-friendly international trading regime is one that does much more than enhance poor countries' access to markets in the advanced industrial countries. It is one that enables poor countries to experiment with institutional arrangements and leaves room for them to devise their own, possibly divergent solutions to the developmental bottlenecks that they face. It is one that evaluates the demands of institutional reform not from the perspective of integration ("what do countries need to do to integrate?") but from the perspective of development ("what do countries need to do to achieve broad-based, equitable economic growth?").¹⁵⁷