Tag Archives: pharmaceuticals

Of Cotton Subsidies and Essential Medicines

On Monday, the World Trade Organization [glossary] granted partial approval to Brazil’s proposal to impose countervailing sanctions against U.S. goods after the United States failed to comply with an earlier order to end illegal subsidies to cotton farmers. The ruling is the latest development in a trade dispute that stenches back several years. In 2002, Brazil failed suit against the United States, claiming that U.S. subsidies [glossary] to cotton farmers violated WTO rules and cost Brazil more than $3 billion per year in revenue lost due to distorted global prices. Brazil won its case in 2004, but the U.S. Congress has been slow to remove the subsidies.

Under WTO rules, Brazil would has the right to impose countervailing tariffs against U.S. exports to Brazil, up to the amount that the WTO certified Brazil is losing due to U.S. policy, in this case $3 billion. But for countries in the developing world, such an option is often unpalatable for two reasons. First, the imposition of tariffs could lead to higher consumer prices for goods, which can be politically unpopular. Second, the relative size of the markets means that Brazil’s loss of access to U.S. markets has a greater impact than the U.S.’s loss of access to Brazilian markets, even if the two losses are equal in absolute terms. Consequently, developing countries have made significantly less use of the WTO’s dispute resolution system and, even when victorious, have been more hesitant to use countervailing tariffs to enforce WTO decisions.

But Brazil’s proposal was an interesting one. After the United States continued to refuse to remove the trade distorting subsidies, it appealed to the WTO for an alternative recourse. Brazil proposed to impose the WTO penalty not by imposing tariffs on U.S. goods exported to Brazil, but by infringing patents on U.S. pharmaceutical products.

Brazil’s proposal is interesting in three respects. First, it makes the WTO’s dispute resolution system much more accessible to the countries of the global south. Enforcement, which has historically been difficult for countries in the global south, would be become more feasible. Second, it hits the United States in an area of much greater significance. The United States has long pushed for stronger intellectual property protections worldwide, campaigning against expanding the World Health Organization’s essential medicines list, for example. The political value of a ruling against U.S. pharmaceutical interests would be much higher as a result. Finally, and most importantly, such a ruling would link the agricultural subsidies dispute—which has been at the center of WTO talks in recent years—directly to the health and medicines debate. Farmers in the global south, whose lose an estimated $300 billion per year as a result of agricultural subsidies in the global north, could potentially benefit as a result of access to cheaper generic medicines manufactured in the global south.

So, on Monday, the WTO ruled. It denied Brazil’s request to bypass intellectual property protections, but confirmed that such a request could, in principle, be granted in the future. Indeed, last year, the WTO granted Antigua the right to do precisely that in its trade dispute over U.S. gambling laws. In the Brazilian case, the WTO decided that the current level of subsidies is not high enough to warrant such a radical step. A small victory for both sides, perhaps, but certainly a warning to the United States that intellectual property rights may be an effective tool to influence U.S. trade policy.

Five Stories You Might Have Missed

The terrorist attacks in Mumbai, India’s financial center and most populous city, has dominated recent headlines.  The attacks claimed at least 192 lives and have the potential to undermine both Indian economic development and the warming of Indian-Pakistani relations. The political fallout is also likely to be steep.  Already, Shivraj Patil, India’s Home Minister, has resigned, and many are speculating that the attacks may cost India’s ruling Congress Party dearly at the polls.

Here are five other important stories from the past week:

1.  Barbara Hogan, the new Minister of Health in South Africa, has announced a new program to address the HIV/AIDS crisis.  Under the program, the South African government will expand its support for its anti-HIV program with the help of the British government.  South Africa has the highest rate of HIV inflection in the world; an estimated 1 out of every 8 Sought Africans is HIV positive.  But the administration of previous President Thabo Mbeki had refused to acknowledge the connection between HIV and AIDS, choosing to treat HIV with traditional healers rather than conventional medicine.  South African AIDS activists are celebrating the new program.

2.  Ethiopia has announced its intention to withdraw its troops from Somalia by the end of the year.  Ethiopia has maintained a force of 2,000 to 3,000 soldiers in Somalia since 2006, when it invaded in order to oust Islamic militants who had seized power.  But the interim government of Somalia has been unable to assert authority outside of a small region in the capital, and the African Union has not fully funded its peacekeeping operation in the country.  Somalia has become a failed state, home to piracy which threatens shipping through the Suez Canal.  Some have speculated that the announcement of the Ethiopian withdrawal is intended to put pressure on the United Nations to establish a new peacekeeping operation in Somalia.

3.  Flooding near the Port of Itajai, one of Brazil’s most important ports, threatens to undermine Brazil’s agricultural exports.  The River Itajai broke its banks, flooding the port and killing at least 100 people.  The flooding threatens to close the port for as long as two weeks, undermining exports from Santa Catarina state, a major exporter of meat and chicken.  The flooding could affect global food prices, potentially rekindling concerns of a global food crisis.

4.  A French program intended to address the global financial crisis has been blocked by European Union officials.  The European Commission, the bureaucracy of the European Union, has refused to permit France to proceed with its plan to recapitalize its banks through a $13.3 billion support package.  The French government has reacted angrily to the veto, calling the decision “stupid” and “ridiculous.”

5.  A European Union probe has concluded that pharmaceutical manufacturers have engaged in unfair practices intended to delay or block the release of generic drugsadding billions to the cost of healthcare.  The investigation involved raids on several of Europe’s leading drug producers leading some to believe that the EU may pursue criminal and civil cases against the largest offenders.