8:53 AM Jun 23, 1995

TRIPS/SUSTAINABLE DEVELOPMENT INTERFACE AT CTE

Geneva 23 June (Chakravarthi Raghavan) -- The World Trade Organization's Committee on Trade and Environment (CTE) is to further pursue and explore issues of compatibility and complimentarity of the TRIPs accord of the WTO and some of the multilateral accords like those on biodiversity convention and protection of the ozone layer, as well as issues of sustainable development, technology transfer etc.

This appeared to be the outcome of this week's meeting of the CTE, chaired by Amb. Sanchez Arnau of Argentina, which addressed for the first time the issues in its mandate in the area of TRIPs and GATS accords and questions of environment protection with a view to promoting sustainable development.

The presentations at the meeting of some major developing countries, and the detailed exposition of some of the issues, appears to have clearly taken the United States by surprise.

The US at earlier informal consultations had suggested that there was really nothing to look at in this area, and had apparently hoped that beyond a proforma discussion, the issue could be closed.

A secretariat note, while providing a negotiating history of the TRIPs, the UN Convention on Biodiversity and the Ozone treaty provisions, appeared to suggest that there is no conflict and the objectives of Technology transfer in the latter agreements could be achieved without any changes or need for modifying the TRIPs.

But initial presentations at the CTE by some major developing economies made clear that in their view there is a whole complex of issues, sustainable development concerns in the developing world, ethical and moral concerns in the South and North and issues of equity and social justice that have to be explored and addressed, and that they were merely flagging some of the issues, without taking any particular positions or stands at this point.

This viewpoint was presented at CTE where there was a first exchange of views on the issues of environment protection and promotion of sustainable development and the Trade-related Intellectual Property Rights (TRIPs) and General Agreement on Trade in Services (GATS).

Earlier meetings of the CTE, and its predecessor in the old GATT, have mainly been looking at the provisions of the GATT and trade-related environment measures and some multilateral environment agreements.

Nigeria, India, Malaysia for the Asean group of countries and South Korea were among those who raised a number of issues of complex interface between TRIPs and the issues of sustainable development as well as technology transfer issues and the bio-diversity and ozone treaty accords. Copies of the prepared statements of India, ASEAN, and Korea were later made available to the TWN.

India also raised the question of 'safety' and 'public health' questions involved in the genetic manipulation, and release of such transplanted gene varieties of organisms.

Apart from some of the direct issues which may or may not involve conflicts of TRIPs with the wider objectives and specific multilateral environment agreements and their related provisions in the areas of technology, the ASEAN also stressed the need for the WTO and the CTE to keep track of the discussions, debates and decisions in other fora relating to sustainable development and equity and social justice questions, and any actions that may be called for in the WTO on these.

In effect, these countries contended, that the TRIPs agreement, particularly its patent provisions and the dispute settlement mechanisms, would need to be looked at from this perspective, and if necessary changes made in them to promote the wider objectives of environment protection and sustainable development.

According to some participants, Brazil, Argentina and Mexico seemed to take the position that there was no conflict or contradiction between TRIPs and the biodiversity convention and other MEAs. Brazil thought that the CTE might need to monitor and follow the biodiversity convention and its work programme including on technology transfer and access questions.

The United States, European Union, Switzerland and Japan saw no conflict or contradiction, and insisted that implementation of TRIPs, and the protection and privileges to IPR holders, would promote technology innovation and sustainable development.

Canada said it would 'reflect' on the issues raised and views expressed. Norway said, while not necessarily accepting the issues of incompatibility raised, agreed that they would need to be explored.

Nigeria, which was the first speaker, took a very cautious stance, implying that at first glance it did not see any conflict between TRIPs and the environment/sustainable development nexus of issues, but that these issues need to be explored at the CTE.

India's Amb. Narayanan referred to the CTE's own mandate, the central objectives of TRIPs, the objectives of the Convention on Biodiversity (CBD) and the Montreal Protocol on Ozone layer, and said at first glance it could appear that the scope, subject matter and intent of TRIPs on the one hand and the CBD and Montreal protocol might seem very different.

While WTO secretariat document, has proceeded on the basis that there is no disharmony between them -- for e.g. that TRIPs did not prevent a government or an international financial mechanism from providing financial aid to privately held proprietary technology on concessional terms, it could be argued with equal conviction that there was nothing in TRIPs to provide specific mechanisms for achieving the objectives of sustainable development and environmental protection, the Indian delegate said.

While at this stage India would hesitate to view this complex interface of issues as involving conflict or contradiction, they did raise issues that the CTE should look at.

Art 16 of the CBD dealt with IPR issues, access to and transfer of technology and environment and sustainable development. On the one hand it spoke of technology transfer to be accomplished on terms recognising and consistent with adequate and effective protection of IPRs. It also recognized that patents and IPRs might have an influence on the implementation of the CBD and that parties to the CBD should cooperate, subject to national legislation and international law, to ensure that IPRs are supportive of and don't run counter to its objectives.

The issue, Narayanan said, was whether the CBD authorized use by countries of measures to limit or restrict IPRs on the ground that it was consistent with the CBD's objectives, specially on transfer of technology (TOT).

Part of the problem was that IPRs may or may not always impact on TOT. The secretariat argued in this regard that most of the technology was in public domain and nothing prevented a government to transfer the technology on concessional grounds - when the technology, patented or otherwise, is in their control -- and that TRIPs would not prevent a government or an international financial mechanism from providing financial assistance to enable voluntary transfer of privately held technology.

"This may be correct," Narayanan said, "but it still begs the question whether IPRs, atleast in some cases, impede the achievement of the Biodiversity Convention's objectives".

The relevant IPRs involved -- and relevant to the TOT under the CBD -- were patents, plant breeders rights (PBRs) and Trade Secrets.

The TRIPs agreement (Art. 27.2) enabled members to exclude from patentability, inventions the prevention of whose commercial exploitation within their territory was necessary to avoid serious prejudice to the environment. There was thus a clear acknowledgement that exclusions from patents were sometimes necessary to avoid serious prejudice to the environment.

The provision in Art 27.2 uses language similar to that of Art XX of the GATT, and the word 'necessary' in it could be interpreted to mean the "necessity" test used in GATT panel reports.

But there could also be an argument on need for a "broader interpretation" in the light of the multilateral agreements rather than panel rulings of GATT on Art XX (b).

As for patents visavis the CBD, could a country implement the CBD by resort to compulsory licensing of or excluding entirely from IPR protection a crop variety using genetic resources from its territory.

Such an exclusion could be justified as a means of encouraging TOT to the country which is the source of genetic resources, and India would like to hear the views of other members.

As for the controversial issue of patenting life forms, Art 27.3 (b) while excluding from patentability plants and animals, had not included within its scope micro-organisms which though were living organisms whose patenting had been called "the slippery slope that could ultimately lead to patenting of all life forms".

This topic, the Indian ambassador stressed, had controversial dimensions of ethics, value judgements and morality with implications for plant and animal life.

As for PBRs, Art 27.3(b) of TRIPs required WTO members to provide for protection of plant varieties either by patents or an effective sui generis system or any combination. But Art 8 of the CBD set out the main set of obligations to conserve biological diversity, including 'in situ' conservation of plant and animal crops which depend heavily on natural habitat for protection.

It could be argued that IPRs for plant varieties would militate against in situ conservation and would promote monocultures with negative implications for biodiversity.

"Perhaps the worst casualty, in an IPR regime for plant varieties, is the knowledge, innovations and practices of indigenous and local communities embodying traditional lifestyles relevant for conservation and sustainable use of biological diversity which is highlighted by Art.8 (j) of the Convention."

It was possible he added, to contemplate a sui generis regime in accord with this provision of the CBD, in which new forms of IPRs are created for traditional knowledge and innovations of local and indigenous communities. This, by itself, might not conflict with TRIPs, which only provides for minimum international standards, and not maximum or harmonised standards.

But could a country challenge another country's IPR regime on the ground it failed to give adequate protection to informal innovations originating in indigenous or local communities and thus violating Art. 8(j) of the CBD. The answer could lie in evolving a sui generis system encompassing "Common Intellectual Property Rights" that would fully respect the CBD provision.

Trade Secrets (in TRIPs) are used to protect subject matter which was either unpatentable or does not fit the criteria for patenting or because its holder does not want to publish the subject matter for fear of a competition using the information. These can be applied to a wide range of information e.g. protection of scientific information or a traditional healer's knowledge.

The CBD Art. 8(j) requires traditional knowledge to be more promoted and made more widely available. But two important points were involved: the knowledge must only be used by others with the 'approval and involvement' of the original holders of that knowledge; secondly, the communities concerned must receive a fair share of benefits from use to which others put this knowledge.

This was critical since knowledge of traditional communities provided scientists with a "short-cut" to developing new products, particularly in the field of agriculture and medicine. Virtually all the drugs derived from plants and used in modern Western medicine were discovered from their use in traditional societies.

Hence, new legislation and codes of conduct, including changes in notion of 'trade secrets' may be needed to ensure that communities which are the source of the knowledge receive benefits from its exploitation. But this was a difficult task since communities usually did not have a legal identify and knowledge concerned might not be confined to a single village or group. It would pose problems of deciding precisely who should derive the benefit and how.

The CBD also reaffirmed the sovereign rights of States over the biological resources in their territories and these states had the principal responsibility for conserving this biodiversity and using it in a sustainable manner.

In India's view MEAs such as the CBD were the best means to tackle the environment and sustainable development issues on the basis of consensus and international cooperation.

On the issue of genetically modified organisms (GMOs) produced by evolving technologies, Narayanan pointed out that thee GMOs were basically genetic combinations from widely different types of organisms that would not occur in nature. The GMOs were thus alien to the ecosystems in which they were released and could pose risks to biodiversity and to the environment.

There was hence much debate aimed at ensuring that GMOs don't injure health or environment, and that there should be biosafety regulations. Developing countries had argued for international agreements on biosafety standards and international cooperation was necessary for this. GMOs were unique: they could not reproduce themselves, but could migrate sometimes without human intervention and could not be expected to respect international frontiers once released into the environment.

There was also concern that some industrialized countries export products in this context which posed a risk to the environment or health -- an issue relevant to the CTE's discussions on 'Domestically Prohibited Goods'.

On the other conflicts possible, Narayanan referred to Art 15 (2) of the CBD and asked whether a party could discriminate among other parties seeking access to the genetic materials found in its territory, according to whether the use to which the access seeker puts the resource to use would be environmentally sound? This might involve Articles I (MFN) and XI (export/import restrictions) of the GATT. Similarly a country challenging the biosafety access conditions, imposed under the CBD, would have to think of obligations/rights under the WTO Agreements on Sanitary and Phytosanitary Standards as well as the Technical Barriers to Trade.

While very important, they were not very different from the CTE discussions on these and the MEAs (in the goods trade area). The scope of Art XX (b) or (g) -- exception clauses of the GATT -- would also be critical.

The relationships between MEAs like the CBD thus raised a host of questions. The CBD directly addressed relationship with other agreements under its Art 22 and said CBD provisions shall not affect rights and obligations of any Contracting Party derived from any existing international agreement, "excepting where the exercise of those rights and obligations would cause serious damage or threat to biological diversity".

Could this be interpreted to mean that where the CBD and another agreement conflict, the CBD "trumps the other agreement" if exercising the latter's provisions would seriously damage or threaten the biological diversity.

The Montreal protocol was an environmental agreement for phasing out of CFCs and other substances depleting the ozone layer. Projects for phasing out of CFCs were presented to the multilateral fund for financing, and these almost always involved a TOT. Here too IPRs were central to deciding the direction and content of the TOT.

Unless multilateral rules on transfer of IPR protected technology were framed, those countries in possession of such technology would have the discretionary power to make access to technology difficult on one hand and on the other try and impose trade restrictions on products from environmentally unsound technologies.

This issue should be looked at by the CTE in some detail.

The question of the WTO's dispute settlement mechanism and those of the MEAs were also relevant to the relationship between IPRs and Environment/Sustainable Development.

This issue was also relevant to the Goods and Services issues as for TRIPs.

While raising all these complex, important and relevant issues, in order to promote a meaningful discussion and find answers and solutions, India had an open mind and was willing to work constructively to achieve a mutual understanding on these complex issues.

Speaking for the ASEAN (Brunei Darussalam, Malaysia, Thailand, Indonesia, Singapore and the Philippines), Malaysia's Amb. Haron Siraj, expressed concerns about the environmental, social and ethical problems that may arise from the patenting of living organisms and biological materials.

Haron said there were public concerns that the patenting of crops may accelerate the loss of biodiversity and marginalise the interests of farmers in developing countries At the same time, the patenting of life forms also involved complex ethical, moral and religious issues.

There was also growing concern from a wide variety of organisations (including development, environmental, scientific, and religious groups) that implementation of the TRIPS agreement will lead to the compulsory patenting (or other forms of intellectual property protection) in WTO members countries of many types of life-forms.

Most countries now exclude living organisms, such as plants, crops and human or animal genes, from their patent laws But Art. 27 of TRIPS implied that some types of living organisms or biological materials would have to be subject to patenting or other types of intellectual property protection.

According to the concerned groups, Haron said, this would open the door to the "patenting of life," as the member countries of WTO will have to change their national legislation to comply with the TRIPS ruling.

On the environmental aspect, Haron raised concerns that "the patenting of genes, genetic materials and genetically engineered crops and plants will promote or accelerate the process by which plant and agricultural biodiversity is eroded."

The erosion of biodiversity, the ASEAN statement said, was recognised widely as a major environmental problem, which can also have serious development consequences.

"There is an additional concern from scientists and ecologists that the introduction of the patent regime to plants and crop varieties will greatly contribute to the spread of genetically-engineered crops (or transgenic crops), and that this spread can lead to serious ecological problems, such as proliferation of unwanted super weeds, erosion of traditional plant varieties, and spread of herbicide-resistant characteristics to surrounding plant life.

"This Committee should be aware of such concerns, and mechanisms should be set up whereby the discussions on this issue in other fora, such as the Biodiversity Convention, can be fed back into this Committee."

The ASEAN statement also raised social and equity concerns, that the intellectual property rights system that will apply to biological materials, would tend to recognise and reward corporations that undertake genetic engineering of plants, crops, animals, and that manufacture biotechnology products in agriculture and medicine.

"At the same time, the IPR system is not suited to recognising or rewarding the knowledge and innovations of the non-formal sector, that is, the farmers and indigenous peoples whose knowledge of crops and medicinal plants has been the basis for much of the development of agriculture and medicine, especially in the developing countries. There is a legitimate fear that the real innovators and owners of knowledge on biodiversity will be unrecognised and marginalised, and that worse, in future they may be in an unfortunate situation of having to pay for the patented products.

"For example, there is a concern that farmers in developing countries will have to pay for patented and genetically- engineered seeds."

Haron also pointed out that there were ethical and moral concerns relating to the appropriateness of patenting life forms, since according to religious belief, life is created by God.

"In recent months, there have been prominent news reports about the concerns and reservations expressed by religious leaders and some public interest groups on the patenting of life forms.

"Although genetic engineering may shuffle genes or alter the form of living things, it does not by itself create new life. Therefore, can the products of such genetic engineering be said to fall under the criteria of patentability?"

Haron said this was a complex issue being discussed in other fora, including scientific, philosophical, religious and ethical fora The WTO Committee should be aware of such discussions so that they can be considered when TRIPS was being deliberated upon in the context of trade and environment.

Haron also referred to Art. 27.3 (b) of the TRIPS agreement, which deals with the right of countries to exclude only some types of living organisms from patentability. The paragraph is very complex and contains several technical terms

The main issue, he said, would be how to interpret more precisely the scientific and practical meanings and definitions of the terms in the paragraph, such as "plants, animals, microorganisms, plant varieties, biological processes, non-biological and microbiological processes and effective sui generis system."

Reminding the Committee that its objective was the protection of the environment and the promotion of sustainable development, Haron said it was clear that the WTO, whilst creating greater disciplines and a more conducive trade environment, also had the responsibility to contributing towards the promotion of sustainable development.

This need not necessarily mean that the scientific, philosophical, religious and ethical issues involved should be deliberated upon in the Committee. "But it is extremely important and relevant that members and the WTO be seized with the developments and take into account discussions taking place elsewhere. We need to examine the implications in the context of TRIPS and the WTO, especially bearing in mind the need to review the relevant provisions within the next few years."

He added that there were implications of costs, both financial and social, in respect to the transfer of technology, and that subsequently there would be implications on trade, including market access and prices of products to consumers.

South Korea's Amb. Seung HO, said that the issue was coming up for substantive discussions for the first time in the GATT/WTO framework, and was interlinked to other items still under discussion in the CTE. The agenda item dealt with complex issues with far-reaching socio-economic and legal implications.

Since negotiations of most MEAs incorporating IPR relation provisions had been entangled with confrontations and discrepancies of views, in HO's view there was need for the WTO to give the MEAs a certain level of guidelines or principles dealing with IPR related issues so as to avoid ambiguity or possible conflicts.

In dealing with IPRs with MEAs, Articles 7 and 8 of TRIPs, about its objectives and principles, as well as its various provisions striking a delicate balance between rights and obligations of IPR holders and users and between need to promote innovation and need to promote abuses of IPRs would serve as important guidelines.

Art 27.2 of TRIPs explicitly dealt with patenting requirements necessary to protect human, animal and plant life or health or avoid serious prejudice to the environment.

Since the objectives of the MEAs and multilateral trade accords were different it was necessary to make their differing objectives mutually supportive on IPR. For this, it would necessary to interpret Art 27.2 of the TRIPs in such a manner as to be conductive to the objectives of the MEAs, while not derogating from the TRIPs.

But it would be desirable at this stage to take a cautious approach since there has been little experience about IPRs containing MEAs and the TRIPs in regard to implementation.

The CBD had been negotiated to strike a balance between technology transfer and access to biological diversity and its Art 16 was still in the very early stage of implementation, awaiting further clarification for its full operation.

As for the role of TRIPs in transferring environmentally sound technology, Korea agreed that there was a need for stronger IPR protection to foster innovation of for environmental protection.

In this regard, it would be desirable for MEAs to strengthen the protection of the subject technology for their respective objectives.

On the other hand, if the patent holder of an environmentally sound technology were to be allowed to "unreasonably" refuse to license the technology, the actual transfer would be impossible even on a commercial basis and the patent holder could secure monopolistic profits.

In the case of the Montreal protocol, after CFC is regulated or prohibited, HCFC production technology becomes crucial as an alternative technology. But if access to this alternative technology is denied even on commercial terms, it might put technology users into an unfair disadvantage.

In Korea's view it was not so clear that TRIPs could provide a satisfactory solution for the specific needs of protecting the environment.

"It seems to be desirable to review Art 27, and articles relating to compulsory licensing and anti-competitive practices, in order to confirm whether the provisions are sufficient to strike a balance between the protect of rights of patent holders and patent users for wider diffusion of environmentally sound technology," HO added.

Meanwhile all efforts should be made to promote technology transfer consistent with MEAs and TRIPs.

HO said that, as agreed in Chapter 34 of Agenda 21, technologies owned by the public or that have fallen into public domain should be freely transferred to countries needing them for attaining the MEA objectives. Also various ways and means to encourage transfer of privately owned technologies should be explored.

It was also essential to closely follow developments of MEAs with IPR provisions, in particular the CBD and UPOV and developments of emerging IPR-related concepts, such as Farmer's Rights and Plant Breeder's rights in relevant international organizations.