Richard Melson

June 2006

South Bulletin No. 127

www.southcentre.org

South Bulletin 127 30 June 2006

This issue of the South Bulletin focuses

on the challenge of global leadership.

In this Issue:

The Challenges Before An East Asian Community

The cooperative endeavour to build an East Asian community now stands on the threshold of its second decade. Addressing the 12th international conference on ‘The Future of Asia’ in Tokyo, Malaysia’s Prime Minister Abdullah Ahmad Badawi highlighted three critical challenges that must be met: cohesion, conviction and implementation.

Asia-Pacific: Jobless Growth Neglects the Poor & Agriculture

The first of an annual Asia-Pacific Human Development Report by the UNDP focuses on ‘Trade on Human Terms.’ In the fast emerging ‘factory of the world,’ the booming trade has actually created lesser jobs than in previous decades, is skipping the poor and the rural countryside. The proposed 8-point agenda has much to do with the on-going WTO negotiations.

Making UNCTAD More Effective & Efficient

The Panel of Eminent Persons established by UNCTAD Secretary-General Supachai Panitchpakdi in October 2005 submitted its report on 21 June 2006. The report makes 21 specific recommendations. It also acknowledges the input provided by the South Centre (by way of the report ‘Re-inventing UNCTAD’).

Development through Globalization? – (III)

The rules of the game for the world economy need to be reshaped to create more space for the pursuit of national development objectives. Ensuring decent living conditions for people, ordinary people, would naturally emerge as a fundamental objective, says Prof. Deepak Nayyar, a member of the South Centre Board. The third and concluding part of a recent paper by Prof. Nayyar published recently by the United Nations University’s World Institute for Development Economics Research (WIDER).

Biopiracy: Making WTO’s TRIPS Respect Disclosure of Origin

A growing number of developing countries have been pushing hard to make it obligatory on the part of patent applicants to disclose the source of their biological materials or traditional knowledge. This they want to do by introducing an amendment in the WTO’s Trade-Related Intellectual property Agreement (TRIPS). But there is resistance from leading industrialised countries.

More in this issue

Disclosure Amendment Makes TRIPS More Robust - Brazil

Disclosure Requirement – Responding to Questions Raised.

‘Time for a New Approach to the Multilateral Trading System’

News

South Centre News

Editorial: ‘Biopiracy: Time to Move Beyond Debate’

The Challenges Before An East Asian Community

The cooperative endeavour to build an East Asian community now stands on the threshold of its second decade. Addressing the 12th international conference on ‘The Future of Asia’ in Tokyo, on 25 May 2006, Malaysia’s Prime Minister Abdullah Ahmad Badawi highlighted three critical challenges that must be met: cohesion, conviction and implementation. Mr. Badawi is concurrently the chairman of three important groupings - the Association of Southeast Asian Nations (ASEAN), the Non-Alligned Movement (NAM) and the Organisation of the Islamic Conference (OIC). Presented below are extracts from his address.

"I am pleased to have been invited yet again to speak at this important Conference, my third time in as many years. On the two previous occasions that I was here, I spoke about East Asian Regional Integration. I spoke about why it is needed, why it is logical and, indeed, why it is inevitable. I argued that the process must transcend economics to include political, social and security community building. I also stated my firm conviction that the ASEAN Plus Three process must be at the centre of community building efforts. To my mind, no other option is as sensible or feasible. I further argued that the ASEAN Plus Three process is entirely consistent with the principles of openness and inclusiveness.

At this conference, I would like to share with you my thoughts on some of the continuing challenges that lie in the way of East Asia community building. This is an important subject because of the new developments that have taken place since our last meeting, the most important of which has been the initiation of the East Asia summit in Kuala Lumpur in December 2005. It is also an important subject in view of the powerful geopolitical and geo-economic pressures that are building in the region and globally.

Let me begin by tracing the key landmarks in the evolution of the historic community building initiative of East Asia. The first step was taken when Malaysia proposed an East Asia Economic Group in 1990 as a way of overcoming the impasse in the Uruguay Round of multilateral trade negotiations, following the failure of the Brussels Ministerial Meeting. The idea then was that the EAEG could be a force, much as the cairns group was, and still is, in the agricultural sector. The EAEG was, in other words, a response to a problem. In the interest of time, I will not go into all the reasons why this proposal was misunderstood, intentionally and otherwise. Suffice it to say that, although ASEAN saw its significance and adopted it as the East Asia Economic Caucus in 1992 as a means of promoting cooperation in economic matters, some other countries in the region thought otherwise.

The lack of consensus made the East Asia Initiative largely dormant until 1997. It took the financial crisis that descended upon the region that year to convince the countries of East Asia that they would really need to work together if their greatest concerns are to be better addressed. Throughout the region there was capital flight, currency collapse, soaring interest rates, extreme financial distress, depressed equity markets and unprecedented economic recessions. The lack of comprehensive assistance from countries outside of the region and from international organisations made it clear that East Asian countries were on their own. They realized that they would have to do something for themselves because no one else would. As usual, the threat of economic collapse created the powerful incentives for cooperation that the euphoria of economic prosperity could not.

The alarming situation prompted regional states to hold the First ASEAN Plus Three Summit on an informal basis in Kuala Lumpur during the commemoration of the 30th anniversary of ASEAN. The initiative to build an East Asian Community gained momentum since then. The East Asia Vision Group and the East Asia Study Group, in which we all participated fully, outlined the vision and objectives of the East Asia Community. We committed ourselves to no less than 26 high priority measures in pursuit of the stated objectives to realise our Common Vision.

Out of the desire to meet our common needs, schemes such as the New Miyazawa Initiative and the Chiang Mai Initiative were born. The New Miyazawa Initiative, announced in October 1998, provided for 30 billion US dollars of financial assistance by Japan to Indonesia, Malaysia, Philippines, South Korea and Thailand, out of which 21 billion dollars was eventually allocated. I would like to record again my profound appreciation to the government of Japan for the timely assistance to Malaysia. The spirit of caring that Japan demonstrated to fellow East Asian countries when they were in distress demonstrates what being part of a community is all about.

The Chiang Mai Initiative of May 2000 comprised cooperation in monitoring capital flows, regional surveillance, personnel training and a bilateral currency swap arrangement network. i must commend the good work of our finance ministers for enhancing and fine-tuning the swap arrangements and bolstering domestic debt markets. The size of the currency swap agreements today has doubled to US $71.5 billion from US $39.5 billion when we met in this conference last year. The work may have been slow but persistence has paid off.

The convening of the first East Asia Summit at the end of 2005 marked another milestone in the evolution of the East Asia Initiative. India, Australia and New Zealand joined the East Asia Countries in a Forum For Dialogue on broad strategic issues of common interest to promote community building in the region.

This is where we are now. Many challenges remain. I believe that we should not be deterred by challenges, however intimidating they may appear to be. Indeed they should act as a spur to prod us into taking more concerted action. Challenges are not unique to the East Asia initiative. History tells us that every grand enterprise entering into uncharted waters confronted its own set of challenges. Sixty years on, the European Union, the oldest and most successful regional enterprise so far, also continues to confront many challenges. We should therefore persevere.

Among the challenges we face, let me highlight the three that I think are the most crucial and the most urgent. I will call the first the challenge of cohesion; the second the challenge of conviction; and the third the challenge of implementation.

I have placed the challenge of cohesion first on the list for good reason. If there is no solidarity among members of a collective enterprise, that enterprise is doomed to fail. And I am sure we will all concede that in the last two years our solidarity has been seriously dented. You would remember that last year, the dark clouds of Sino-Japanese relations hung low over this conference. I was disappointed that the bilateral meeting between Prime Minister Koizumi and Vice Premier Wu did not take place. I was not alone. I said then that we had to be careful not to return to a history when Asia was divided and carved up at the whims and fancies of others.

I am afraid I have to be candid and say that the situation has worsened. Our economics is pushing us in one direction, but our politics is pulling us in another. in addition to the difficulties between Beijing and Tokyo, relations between Seoul and Tokyo have also become further strained. Southeast Asia too contain many unresolved problems. We must expect some differences between states. They are only natural. But when differences lead nations to pull in different directions, then we will all suffer the consequences. The repercussions will be even more disastrous if some of our actions result in the undermining of the East Asia community initiative that we nurtured and launched together.

We must put an end to this unhealthy slide in our relations. We must close ranks over the East Asia enterprise and restore our cohesion. If we cannot resolve our differences easily, we should at least attempt to moderate our sentiments towards each other. Above all, we should not let our bilateral differences get in the way of building the East Asia community. We should not allow regional cooperation to be held hostage to bilateral constraints. Many of the members of ASEAN, for instance, also have outstanding bilateral issues. But we have never allowed them to frustrate cooperation within as ASEAN, and each of us would always exercise care not to undermine ASEAN as an organization.

China, as a giant economy, and still growing, has given rise to certain apprehensions. It has led many regional countries to believe that China is becoming a threat. This will affect our relationships with China. This will lead to unnecessary hedging against China. Such an attitude will affect our cohesiveness and dampen our efforts at community building in East Asia. The so-called "China threat", it seems to me, needs to be examined more dispassionately.

Let me proceed now to the second challenge, the challenge of conviction. for instance, there are apprehensions that if East Asia cooperation becomes strong, ASEAN cooperation will become weak. There are also concerns that coming into being of the east Asia community will be at the expense of the ASEAN community that is envisaged in Bali concord ii (two).

Such apprehensions are unfortunate indeed. They will only serve to contribute to our mutual detriment, not to our mutual good. All the different processes - ASEAN, ASEAN plus three, East Asia summit - are meant to complement and support each other, not to balance and check each other. Each process has its own logic and purpose, and each deserves its own measure of conviction. Each needs to be promoted in earnest, not against each other, but in tandem with one another.

Let me be crystal clear on Malaysia’s position. Malaysia believes that the core of the East Asian community must be ASEAN. ASEAN has some weaknesses and disadvantages as a regional organisation. But only ASEAN has the requisite credentials and characteristics upon which to anchor an east ASEAN community. Its organisational norms, behaviour and practices are well established. It is committed to promoting regional cooperation for peace and prosperity. it is a force for moderation and a threat to none. It believes in open regionalism and working with all for mutual good. ASEAN’s agenda is regional first, all others second.

I am convinced therefore that ASEAN is the appropriate anchor of all regional initiatives in the region. ASEAN shall also drive both the ASEAN plus three as well as the East Asia summit processes, with the active participation of all the other countries involved. ASEAN will not allow any country to dominate the processes because the "ASEAN way" disapproves of domination. ASEAN will therefore continue to chair both processes. It has become commonplace to speak of ASEAN as being in the driving seat of East Asian cooperation. In fact, ASEAN is more than just the driver. In many respects, it is also the engine.

Malaysia is fully committed to the proposition that ASEAN plays a central role in promoting regional cooperation. At the same time Malaysia is fully and totally committed to the ASEAN Plus Three and East Asia summit processes as well. Our commitment to these two processes will be in complete conformity with their respective intended purposes. The Kuala Lumpur declaration of the ASEAN plus three summit in December last year stated unambiguously that the ASEAN plus three process - and I quote – "will continue to be the main vehicle" to realise an East Asian community.

We are likewise committed to the East Asia summit process in accordance with the Kuala Lumpur declaration on the East Asia summit last December. The declaration says that the summit will be - and I quote - "a forum for dialogue on broad strategic, political, and economic issues of common interest and concern in East Asia". The declaration further states that the summit’s role in promoting community building in the region will reinforce the realisation of the ASEAN community, and that it "will form an integral part of the evolving regional architecture".

This regional architecture will be the subject of much deliberation in the months ahead. The ASEAN plus three process has been tasked to produce the second joint statement on East Asia cooperation at its tenth anniversary in 2007. The East Asia summit will convene in the Philippines in December this year, and it will attempt to take the summit a step forward from the inaugural meeting held in Kuala Lumpur last year. In both instances, much will depend upon ASEAN, because it chairs and drives both processes.

The countries of East Asia must renew their conviction in the ASEAN Plus Three process. That process should remain as the primary vehicle for community building in East Asia. I see at least three very good reasons why this process must remain the primary vehicle.

First, because we achieved full consensus on the East Asia community building process from the very inception of our initiative to build an East Asian community. This consensus was no ordinary consensus. It was a consensus forged in the members of the Asian financial crisis, when none outside the East Asian circle felt moved enough to come to our help in our hour of great need.

Second, because we have already invested nine years in building this community through the ASEAN plus three process. We worked hard at this, each doing our bit to lay the foundations of the East Asia community that was based on a clear vision of what this community should look like and the purposes that it should serve. We are now looking to the next ten years to build on the progress we have made so far. There is little to be gained by diverting from the path we have set for ourselves.

Third, and most importantly, because it makes eminent sense. What we are engaged in is not mere cooperation. it is community building, something that is more exacting and which requires greater commonalities among the parties involved. A community must be built by the people of that community, in their own mould.

The people of a community must share more than a common economic or security space. They must also share a broadly common social and cultural space. Only then can that community bond together and endure. in other words, the east Asian community must comprise east Asians, and it must be built by east Asians.

If I sound like I am advocating a closed East Asian community, let me hasten to correct any such impression. I believe that the East Asian community must engage fully with the outside world. Only then can it prosper. We must engage fully with all the nations that are important to us, through all the forums and vehicles most important to us. It is for this purpose that we embarked upon the East Asia summit initiative, and it is for this reason that we should welcome and further develop this process. The summit process enables the ASEAN Plus Three countries to engage and cooperate fully with the other participants of the process for mutual benefit.

As participants in the East Asia summit process, there is much that India, Australia and New Zealand can offer to the community building effort in East Asia. Their contribution towards trade and economic development will be particularly important. Similarly, a dynamic and growing East Asia also provides many opportunities to these three countries as well. It is in this context that the East Asia summit also promotes community building in East Asia, and is a part of the evolving regional architecture.

Let me turn now to the third challenge, that is the challenge of implementation. We need cohesion and cooperation among the East Asian countries. We need to strengthen conviction in the processes that we have established and the roles that we have assigned for them. But all these will not count for much if we do not commit ourselves to fully implementing the various initiatives and programmes that we have agreed upon and those that we will adopt in the future.

The challenge of implementation is not unique to the East Asia enterprise. Back home, in Malaysia, one of my greatest challenges is to implement the plans that we have approved and deliver on the promises that I have made. My greatest challenge now is to successfully implement the ninth Malaysia plan, an ambitious five-year development plan, which represents the final push for achieving the status of a fully developed nation by 2020. I have labelled it as the national mission, to reflect the importance of the way forward and the sanctity of the objectives.

We lag behind in the implementation of several of the measures that we had agreed upon. Not surprisingly, we need to do much more in the field of poverty alleviation, an area of core concern for nearly every developing country in the region. We are also well behind in realising our initiative to build an East Asia Free Trade Area. We identified it as a long-term measure albeit of high priority, but the failure of the World Trade Organisation to achieve substantial progress in the multilateral trade negotiations in the Doha Development Round so far, makes it imperative that we pursue, with greater urgency and seriousness, an East Asia Free Trade Area (FTA).

We should make greater effort to consolidate and link the many bilateral and sub-regional FTA’s that we already possess. A region-wide FTA that creates a market of almost two billion people will be the largest in the world. Once established, it will be the most impressive achievement yet of cooperation and community building in East Asia.

When we met in 1997 at the first ASEAN Plus Three summit, we launched an initiative of profound historical significance. That was the first difficult step in the direction of building the East Asian community. Despite many constraints and obstacles, as well as some disappointments, we made steady progress. We can be proud of some of our accomplishments. But we are at a critical juncture now. The unifying impulse of the Asian financial crisis appears to have lost some of its momentum. In the years that intervened, new anxieties and doubts have developed. Some of us appear to be tugging in different directions.

We must ensure that we do not falter or drift. Above all, we must not stray. As we stand poised on the threshold of the second decade of our cooperative enterprise, let us come together and re-dedicate ourselves towards realising the vision of an East Asian community that is built on powerful resolve, common purpose and united endeavour.

It is my deepest wish that when we gather again here in Tokyo next year, we will be able to report good and sound progress."

Asia-Pacific: Jobless Growth Neglects the Poor & Agriculture

The inaugural issue of the annual Asia-Pacific Human Development Report 2006 by the UNDP focuses on ‘Trade on Human Terms.’ It provides a sobering picture to the perceived notion in the rest of the world of a region fast emerging as the ‘factory of the world.’ The recent boom in trade has actually created lesser jobs than in previous decades. Young men and women aged 15 to 14 constitute half of the region’s total jobless population. In the face of trade barriers and distorted prices, agriculture has stagnated and the region is becoming a major importer, affecting both food security and rural livelihoods. The following are extracts from the new report, summarizing a proposed eight-point agenda also valid for governments outside the region. These policy recommendations re-enforce developing countries’ expectations from the on-going WTO negotiations on the Doha Development Agenda in Geneva.

The rest of the world sees the Asia-Pacific region as a key player when it comes to globalization. But these other countries, and particularly the richest, have a fairly single-minded view: that in a more liberalized trading environment the other global regions face a threat from Asia and the Pacific, which is emerging as the factory of the world and is capable of under-cutting the developed countries in the production of everything from clothing to footwear to electronic goods.

The picture looks different within the region. In one sense it mirrors the global one, though in this case it is the poorest countries of the region who look towards China with some trepidation – perceiving their giant neighbour as a strong competitor capable not just of capturing some of their export markets for textiles and garments, for example, but also of displacing even some of their humbler domestic industries. Nor do they see many offsetting opportunities for exporting to China – which mainly requires raw materials, machinery and high-tech equipment.

Within the region the trade flows also look much more complex, and in many respects even more crucial, because the new patterns of trade are not just directing flows of goods and money, they are also reshaping national development.

For the poorest people in the poorest countries, these are matters not just of strategy but of survival. A call-centre worker in the United Kingdom or the United States, say, whose job migrates to Delhi or Manila can be rapidly redeployed elsewhere or can use the cushion of the social security system to search for a suitable alternative job. But a Bangladeshi woman making shirts on piece rates for a garment manufacturer may have little or nothing to fall back on when told she is suddenly surplus to requirements.

That is why this Report has embedded human development concerns within the heart of international trade. First, pointing out the multiple ways in which trade shapes people’s lives – affecting how they live, what they do and what they can be. Second, showing how human development and international trade have multiple links; in some senses a two-way street, in others a multi-lane intersection.

Some people wish to avoid this complexity by shying away from the subject altogether. At one extreme, there are those who would prefer to erect higher trade barriers and aim for national self-reliance; why depend on imports when you can make something similar yourself? At the other extreme are the proponents of free trade who would opt for no barriers at all; why try to manipulate trade flows when a free flow of goods or people would allow global production to reach its natural levels – letting the market dictate the most economically suitable location?

Neither extreme makes much sense. Total national self-reliance – autarchy – has an emotional appeal but soon runs into practical difficulties. Does this mean that every small country should have its own pharmaceutical industry or try to survive without vaccines for measles, or treatment for HIV/AIDS? People in the twenty-first century have social and economic rights that can only be met through international trade.

More seductive and plausible is the free trade option. But this too is fallacious – for it involves trade between unequal partners. Perhaps it appeals because it has appropriated the trigger-word ‘free’. Look more closely, however, and it is clear that this is freedom for goods and for money, not freedom for people. No small farmer in Indonesia who has been told that she will get 30 per cent less for the crop this year because free trade has let in unlimited quantities of subsidized rice from the US will feel any sense of liberation. Maybe ‘unleashed trade’ would be a more realistic description of a tariff-free world – indicating that for safety’s sake at certain times the leash should be carefully in place.

That is why this Report has argued for policies more grounded in reality. It recognizes the value of the private sector as the main engine for economic growth but says that some of this energy needs to be harnessed or guided if it is to serve human development. This should come as no surprise in a region which in the latter part of the twentieth century set the template for modern trade-led economic growth. Anyone tracing the footsteps of the ‘Asian Tigers’ will recognize that they took a very strategic position – choosing which infant industries to nurse and when to liberalize – before taking the world by storm with their flow of goods. And no need to select only Asian examples: look further back to the nineteenth century at the ‘mercantilist’ policies of the now-developed countries for a record of restrictions on trade, including on textile imports from Asia, which gave these countries the breathing space before their infant industries were mature enough to sell their goods across the world.

Trade has never been a matter for private industry alone. It has always been subject to active intervention from the State. This central role for the state may not seem an encouraging prospect. Can it be trusted? Trade regulation, after all, offers both politicians and public officials considerable authority and discretion. At the very least, this risks overloading people who have limited capacity or time to deal with complex commercial matters that are typically laden with impenetrable acronyms and jargon. At worst, it opens wider the doors to venality and corruption.

However, there are more promising signs. Civil society groups and the media at both international and national levels are now shedding greater light on trade negotiations that only a few years ago would have taken place behind closed doors. They rightly demand far greater transparency, consistency and fairness. There is still secrecy, and many of the doors remain closed, but at least nowadays trade officials who emerge blinking into the dawn from all-night negotiations know that they will frequently have to cope with the glare of television cameras.

Many people are now asking hard questions about the direction and momentum of international trade. If the developed countries are so keen on free trade why, for example, do the EU and the US persist with huge market-distorting subsidies on agriculture? Why are they enthusiastic about free flows of capital into poor countries but suddenly switch gears when discussing the opportunities for the flows of labour into their own? And why are they now becoming more reluctant to allow Asian countries to demonstrate the remarkable potential of the Internet to allow people all over the world to work together by outsourcing software production or call centres or back-office administration?

Meanwhile the new global trade regime is limiting the freedom of developing countries to manage their own economies. A decade or so ago, under the previous regime, the GATT, countries were more free to choose tariff levels and import quotas and apply foreign exchange controls. Now IMF conditions and the rules of the WTO have narrowed the options – especially for the newcomers to the WTO club, the LDCs, who remarkably have to sign up to an even more intrusive list of rules than the existing members. This makes life much more difficult for the many countries that are now simultaneously trying to pursue export-led growth. Indeed, it raises the question of whether we may now be reaching the limits of a model that has served many Asian countries so well.

How should the countries of Asia and the Pacific respond in this demanding new environment? Clearly, there can be no standard blueprint – especially for such a huge and diverse region. Each country has its own priorities and will pursue its own agenda; in international negotiations countries may, therefore, have not just different priorities but even opposing interests. The food-exporting countries, for example, will see things differently from the food importers; Indonesia will take a different position from that of Thailand or Viet Nam. The more highly developed countries will feel more at ease with global competition than the poorer ones.

Nevertheless, there is a way of encompassing this diversity – by viewing trade issues through a human development lens. This helps focus attention on the issues that matter for the poorest people, and especially those in the Least Developed Countries. In earlier chapters, this Report has followed this philosophy as it has identified some of the detailed issues in agriculture, manufacturing and services. Some of these will appear common sense, and many will already be part of the human development consensus. Others may be less obvious, and apparently more technical, but could still make a huge difference to the lives of poor people. Rather than be driven by commercial lobbies, the centrality of human development should inform national priorities. Eight that have some of the most general application are as follows.

1. Invest for Competitiveness

In a globalizing world, public investment needs to take into account both national and international considerations. Generally the type of investment will remain much the same, but it may need adjusting with an eye to boosting international competitiveness. Thus, when looking at basic infrastructure, governments will need to ensure that they have the roads, railways, ports and telecommunications systems that align with national needs and also with the requirement of getting goods and services quickly and cheaply to international markets.

The physical infrastructure is just as important as human capital. The most successful trading countries have invested heavily in human development – generating a healthy and well educated workforce that has the stamina, the skill and the flexibility to cope with a changing trading environment. China, for example, long before it started opening up to the world at the end of the 1970s, already had good basic human development indicators. Education has to start with strong and universal primary schooling, but nowadays all countries need to make sure they have sufficient people with technical and managerial skills. India’s success in selling IT services is a reward for heavy investment in technical education, almost all of it funded by the government. Few smaller countries will be able to match this, but at the least, all should be aiming at least at a balance of skills. People with good primary or secondary education can only make use of their potential for international trade if they have the support of others with higher levels of education, in engineering, for example, telecommunications, or accountancy. Men and women alike should have equal opportunities to realize their full potential.

At the same time, many countries will need to invest more in R&D that specifically addresses the needs of poor people. The Republic of Korea, for example, has reaped the benefits of a huge investment in technological infrastructure and by 2004 had the world’s highest university enrolment rates. At the broadest level, R&D can include ‘foresight studies’, as have taken place in Thailand, for example, to anticipate future demands and link science and technology to economic and social needs. But competitive countries also need to continually explore the most appropriate current technologies that will capitalize on national strengths. Some of this can be carried out through public-private partnerships, perhaps combining venture-capital funds and government equity, though most of the R&D into opportunities specifically for the poor is likely to take place in the public sector.

2. Adopt Strategic Trade Policies

In a world of giant global players and fierce competition, no developing country now has the luxury of entering global markets and hoping for the best. Instead, just as the OECD states and those of the Asian tigers did before them, states have to identify a few sectors and industries that have long-term potential in international markets and guide enterprises towards them. Asia’s miracle economies – as well as those of China or India, which are now being lauded as success stories – only liberalized after they had established the basis for diversified export industries.

The chosen industries will vary from country to country. But they could include, for example, those such as basic engineering goods that have the greatest potential linkages with other industries and will train more people in essential skills and thus have important spillover benefits for the rest of the economy.

Picking ‘winners’ is not, of course, a simple task and will demand much stronger capacity within a government. And it will be important not to foster collusion between public officials and company bosses – reproducing more of the ‘crony capitalism’ whose shallow foundations collapsed during the Asian financial crisis. Instead, the aim should be to achieve a transparent policy compact between government and the private sector, by using a carrot-and-stick approach.

The carrot will include the opportunity to operate behind tariff walls until companies are strong enough to compete internationally. China, for example, until it started to open up to the outside world had an average tariff rate of around 40 per cent. Tariffs should be low on essential imports such as raw materials and high-tech capital goods, higher on goods that compete with the selected strategic industries.

The stick is that such industries will be closely scrutinized to see that they are living up to their side of the bargain and developing steadily more competitive products and services for export. They will also be subject to a domestic competition policy designed to prevent them abusing a monopoly position.

The essential requirement for engagement in international trade, however, is that the process should be strategically planned and carefully sequenced. Thus, higher tariffs should be rigidly time-bound. In order to avoid creating cosy monopolies that never mature into vigorous export enterprises, tariffs should automatically be scaled down after a predetermined period.

3. Restore a Focus on Agriculture

Many countries with ambitions to boost their presence in international markets have concentrated most of their energies on industry in urban areas – leaving the rural areas to cope as best they can. A trade strategy based on human development, however, must have agriculture at its core. This is not because agriculture offers export opportunities, but because in many countries farming is still the primary source of income for the poor; so no trade strategy that undermines rural livelihoods can claim to be promoting human development.

For food-importing countries in particular, it will often make sense to maintain tariffs on food imports so as to protect poor producers. In WTO negotiations, therefore, developing countries should insist on the right to protect ‘special products’, including safeguard mechanisms that will be triggered when food imports reach certain prices or volumes.

This also has the strategic advantage of preserving national food security in a world that in just a few years down the line could be moving towards food shortages – precisely because larger developing countries like China have let agriculture stagnate and have become net importers. Tariff protection, or if necessary price support, should, however, be designed specifically to protect farmers rather than simply offer higher profits for traders or for the food industry.

And if this results in higher prices that cause hardship for the poorest consumers, governments will need to prepare appropriate social safety nets.

As well as protection, farmers also need progress. In many countries investment in rural development has been on a steep downward curve. This has to be reversed, particularly through investment: for example, in irrigation, in village electrification and in farm-to-market roads.

4. Combat Jobless Growth

Most countries that embark on industrialization typically do so with labour-intensive production in industries like garments, textiles and footwear that take advantage of ample supplies of low-cost labour. But as industrialization proceeds, competitive pressures, greater ambitions and changing market conditions start to push them higher up the value chain. In addition, enterprises often prefer to mechanize if they find machines easier to cope with than people. As a result, the most successful trading countries, primarily in East Asia, are now creating jobs far more slowly – the phenomenon of ‘jobless growth’.

To some extent, this process is understandable. Less comprehensible, however, is why governments should exacerbate this trend by maintaining low real interest rates – effectively giving capital preference over labour. That may seem like the best strategy for rapid growth, but it is storing up problems for the future. By all means allow enterprises to choose the lowest-cost option for production, but this choice should not be biased away from labour: interest rates should, therefore, reflect the real price of capital, not the rate that industrialists would prefer. In a similar vein, states should phase out fiscal incentives to enterprises; these may attract investment, but not necessarily in businesses that maximise human development potential because such tax breaks artificially raise the return on capital and again encourage capital-intensive investments.

Another reason why enterprises may be reluctant to take on new workers is that labour contracts can be too rigid. In rapidly changing markets, companies that find it difficult to predict future demands may prefer to invest in machinery rather than commit themselves to a larger permanent workforce. This creates a persistent duality – a small and protected group of ‘insiders’ with secure employment influenced by national regulations, and a large casual, and often exploited, workforce working on piece rates. Instead, more workers should steadily be absorbed into formal employment but on contracts sufficiently flexible that they can readily be deployed to other sectors or companies as trading conditions change.

Governments can assist in this process by providing some support to workers through health insurance and social security and by active labour market policies to encourage retraining and redeployment.

5. Prepare a New Tax Regime

Liberalization is a common prescription for economic success, but it has a debilitating side effect – it means foregoing a predictable and easy-to collect source of government revenue. Many of the poorest countries have relied on customs duties for a high proportion of public income, in some cases up to 70 per cent. If they suddenly drop tariff rates, they will lose vital revenue.

It might be argued that economic growth itself would take care of this problem, as corporate and income taxes would automatically rise to fill the fiscal gap. But this is unlikely, and certainly not in the short term, when both local and foreign enterprises may have been given generous tax breaks as an incentive to invest.

Instead, governments need to have an alternative tax regime in place before embarking on liberalization.

Care will need to be taken, however, to ensure that these new taxes are progressive and do not hurt the poor. Customs duties, for example, are often quite progressive since they are typically highest on the luxury items that are of greater interest to the rich. Corporate taxes too can be levied progressively, though many people escape the net since the lawyers of the largest corporations are skilled at techniques of tax planning, while most enterprises in the informal sector simply evade tax collectors altogether. Much the same is true for income tax, which tends to be paid more by middle-income workers in government or the formal sector.

Garnering more income from corporate or income tax will mean overhauling the tax codes to close loopholes and considering other options such as ‘withholding taxes’ at points where informal entrepreneurs have no choice but to provide documentation, as when commercially importing inputs.

Governments can also consider taxes on real estate or on capital gains. They can also adopt the value added tax (VAT), for example, which can generate quite high and predictable revenues but assumes a well-documented economy and needs to be developed with care; in any case, it should exempt food and other necessities of the poor.

The key point is that these new sources of revenue should be up and running prior to liberalization, or falling revenues could lead to severe cuts in public services that will harm human development.

6. Maintain Stable Exchange Rates

One thing that hampers international trade and discourages investment is a volatile exchange rate that makes it difficult for states or enterprises to plan ahead. It is important that the rate is realistic: too high, and it will jeopardize employment by penalizing exporters as well as farmers and other local producers who will face more competition from imports; too low, and there is a risk of a rise in the domestic price level, with adverse impact on the cost of living of the poor.

Exchange rates are likely to fluctuate, especially in small and open economies that are powerless against the rise or fall in international commodity prices. With floating exchange rates, these economies are also susceptible to the ‘Dutch disease’, in which inflows of capital without sufficient investment opportunities to absorb them can push the exchange rate to unrealistic levels. This can happen as a result of rising commodity prices, as with the oil price for Timor-Leste. But it can also be a consequence inflows of aid, for example, or as a result of the arrival of funds for disaster relief as with the tsunami.

Currency devaluations, while seeming to offer a short-term boost, have generally been ineffective. Most of the successful Asian trading countries, compared with those in Latin America, for example, have benefited from long periods of relative exchange rate stability based on active currency management.

Initially, rather than having a freely floating exchange rate, countries that are becoming more involved with international trade can consider a ‘managed float’ that permits their currency to depreciate slowly. Many countries have combined trade liberalization with a gradual depreciation of the currency that prevented an unsustainable buildup of trade deficits. The overall priority, however, is to ensure that the rate remains relatively stable and realistic.

7. Persist with Multilateralism

The slow pace of progress in the Doha Round of multilateral trade negotiations has discouraged many developing countries. They can see this ‘development round’ running into some familiar impediments, especially the resistance from the developed countries over agricultural subsidies. This is leading at best to pessimism, and at worst to a crisis of falling expectations that could cause the developing countries to abandon multilateralism altogether.

Despairing of the WTO negotiations, many countries are also seeking bilateral trade agreements with the developed countries. Some would argue that in terms of trade these are better because they give preferential access. But in terms of human development, they may impose high costs. Bilateral agreements typically involve much deeper tariff concessions from the developing countries and make demands on issues like intellectual property rights that go far beyond what WTO members require of each other – and can threaten the health and livelihoods of the poor.

Many countries of the region would do better to resist the immediate temptations of a bilateral embrace and build up slower, but ultimately more productive, multilateral relationships that can lead to more durable human development outcomes.

8. Cooperate with Neighbours

Rather than seeking bilateral agreements, governments would do better to seek trade and other agreements with other countries in their region or sub-region. These could include regional pacts such as the South Asian Free Trade Agreement, the ASEAN Free Trade Agreement, or the Pacific Island Countries Trade Agreement. These have the advantage of being quicker to negotiate than multilateral agreements while posing less of a risk to human development than bilateral ones. In addition, they dovetail well with the region’s many integrated cross-national production systems and lead to trade creation.

Regional trade agreements can also be complemented by other forms of cooperation, particularly in the financial area. Many countries in the region have accumulated vast foreign exchange reserves – $1.9 trillion in total, half of which is in China – partly to protect themselves against another Asian financial crisis. These funds could be put to better use if they were pooled so that countries facing sudden balance of payments crises caused, say, by a spike in oil prices could draw on this shared Asian resource. Governments can also consider using the reserves to expand the Asian Development Fund, which could put resources to work for investment in large-scale infrastructure and in human development priorities such as health and education.

Reaching a Different Frontier

With or without new multilateral agreements, globalization will continue to power ahead. And millions more workers in the Asia Pacific region will find themselves producing goods for people on the other side of the globe – as well as buying at lower prices goods their parents could scarcely have dreamed of.

The main hazard, however, is that millions of others will fall by the wayside – abandoned in rural areas where agricultural economies have drifted into decline, or scratching a living on the fringes of Asia’s mega-cities as a permanent underclass. Even those currently in work may find themselves later discarded from ever more sophisticated production systems. This not only denies people their basic rights to decent work and a reasonable standard of living; it also heightens the risk of future unrest. Globalization does not just distribute products but also disseminates new ideas and information that change people’s expectations.

The countries of the Asia-Pacific region are renowned for the speed at which they have developed economically. Now they find themselves at a different frontier – trying to combine accelerated trade-driven economic growth with equally rapid poverty reduction and, more broadly, human development. In many ways, this is a more complex and difficult task, and just as before, they will need to work out their own solutions. Some of these have already been highlighted in this Report; others will only emerge in the light of experience. One thing is certain – that Asia and the Pacific will remain at the forefront of global development and will offer fresh lessons to the rest of the world.

Making UNCTAD More Effective & Efficient

The Panel of Eminent Persons established by UNCTAD Secretary-General Supachai Panitchpakdi in October 2005 submitted its report on 21 June 2006. Chaired by Fernando Henrique Cardoso, the panel members included Dr. Gro Harlem Brundtland, Jagdish Bhagwati, Joaquim Alberto Chissano, Tarja Halonen, Yongtu Long, Benjamin Mkapa, and Lawrence H. Summers. The report makes 21 specific recommendations. It also acknowledges the input provided by the South Centre (by way of the report ‘Re-inventing UNCTAD’). Presented below are extracts from the above-titled chapter of the panel’s report.

UNCTAD’s interactive and mutually reinforcing pillars of work consist of international consensus-building, research and policy analysis, and technical cooperation. The rationale for this three-dimensional approach remains valid. However, there is room for improving the respective functioning of the three pillars and their interaction, so as to contribute to enhancing UNCTAD’s development role and impact on the ground. The Panel proposes the following ideas for improving the functioning of the organization.

A. Research and policy analysis

The Panel has already noted that UNCTAD’s record of research and policy analysis is substantial. However, a number of challenges must be overcome in order to improve the organization’s standing and credibility on this vital function.

The Panel has been informed that UNCTAD’s research sometimes confuses developing-country policy makers because different strands of its research lead to conflicting prescriptions. It is therefore important that there be an effective mechanism within the organization to address the internal incoherence that may from time to time characterize the various flagship and other reports.

There has also been a proliferation of publications (with over 100 official publications per year, plus technical materials and parliamentary documents), some of which have only marginal significance and impact. Furthermore, there is concern that UNCTAD’s research and policy analysis fails to be communicated effectively to the developing countries; the supply chain may be strong in production but can break down if distribution is weak, and hence fails to achieve the organisation’s objectives.

The Panel cannot emphasize enough that UNCTAD’s research needs to stay "ahead of the curve" in its fields of competence, by addressing emerging and strategic development issues on the national and international agenda through its integrated approach. The Panel has suggested several illustrative areas where such leadership can be exercised.

UNCTAD could establish a Global Network of Development Think Tanks to serve as the focal point for think tanks specialized in development policy advocacy and strategy-setting in different countries. UNCTAD could host the Network’s conferences and provide an online discussion forum. Such a forum could serve for the exchange of views, experiences and best practices among its members. This would help not only to enhance the relevance of UNCTAD’s research work but also to disseminate UNCTAD’s output of policy analysis.

Ensuring the quality and coherence of UNCTAD’s output requires strong leadership, effective communications and a shared sense of direction. In addition, a rigorous peer review mechanism should be established. The Panel suggests that the Secretary-General create a consultative group consisting of eminent development economists to provide advice to the overall research approach and comment on the policy thrust of the flagship publications.

UNCTAD publications should be rationalized. UNCTAD should focus its resources on the established "flagship" products. Other publications should be grouped into a limited number of major study series on key and emerging issues. The number of ad hoc publications of marginal significance and impact should be reduced. This would help improve the quality, increase the impact and ensure consistency and systematic treatment of key development issues.

UNCTAD also needs to identify more efficient and effective modalities for transmitting the findings of its research and policy analysis, and for adapting them to each country’s specific needs in its policy-based advisory services. Ways and means should be identified to ensure that products and audiences match and that UNCTAD’s key policy messages reach high-level policy-making processes, such as the various ministerial and heads-of-government meetings held year round in different regions and regional groupings.

UNCTAD’s international consensus-building efforts rest largely on its intergovernmental machinery. However, there has been general dissatisfaction with the functioning of the existing machinery.

The underlying problems and difficulties relate, among others, to the effectiveness, relevance and impact of the outcomes at international and national levels, the effective involvement of other development stakeholders and the declining participation of capital-based experts from all groups of countries, in particular developing countries.

1. Building a partnership spirit

The current process of UNCTAD’s intergovernmental work is handicapped by occasional resort to rhetorical exercises. The Panel urges focus on pragmatic development solutions and the operational implications of the organization’s outputs. The debate in the intergovernmental machinery at the policy level also lacks a reality check as to what is important for development on the ground. As a result, the outcomes are difficult to implement and follow up, and therefore lack relevance and impact.

The value of outcomes should not be judged by their format, i.e. whether they are resolutions, decisions, agreed conclusions or recommendations, or chairman’s summaries, nor should that value be judged by their number. What matters is the value they add to the development endeavour.

The challenge is to change the mentality and "culture" in UNCTAD’s normative work. To make a difference on the ground, UNCTAD needs to come up with pragmatic development policy solutions. This requires overcoming confrontational attitudes, building trust and creating a comfort zone that nurtures a spirit of development partnership and "shared success".

The Panel has reviewed the traditional functioning of UNCTAD within the framework of the Group system in which member States are rigidly assigned according to geographical criteria. This makes flexible adaptation to the shifting realities of the changed development landscape (see Section A of Chapter I above) even more difficult. It is indeed surprising that the old Group system is still the primary method of transacting UNCTAD business. It implies that UNCTAD looks at the present and into the future through the lens of the past. The Panel believes that the system has now become too rigid.

Groups may be usefully retained for decision-making at the strategic level, such as to set the direction and priorities for the organization and bargain collectively on key decisions. But it could be handled more flexibly in UNCTAD’s think-tank deliberations and arguably also in consensus-building on specific development issues for pragmatic solutions. All member States, particularly the small and weak among them, should be encouraged to participate actively and effectively in the debates on development issues at UNCTAD.

Financing of developing countries’ participation remains a challenge. One way to deal with this issue would be to establish a Secretary-General trust fund. Another would be to mobilize resources through bilateral and/or multilateral (i.e. UNDP) development assistance programmes at the national level. This would require making participation in UNCTAD’s normative work part of national development assistance programmes (with a view to facilitating interaction between national and international processes so as to ensure coherence and human capacity-building and exchanges of national experiences).

2. Enhancing the relevance and impact of the outcomes of the intergovernmental process

The first issue to be addressed in this context relates to the usefulness and relevance of the intergovernmental machinery for UNCTAD’s clients. Currently, the three-to-fiveday deliberations on a specific topic lead to reports that are generally not useful to member governments. In general they suggest agendas for the secretariat and are frequently unnecessary, as the work of the secretariat is guided principally by the overarching and comprehensive mandates from the quadrennial conferences.

Admittedly, UNCTAD is not a rule-making body. Nevertheless, it can still provide pragmatic inputs to national policy formulation and international rule-making processes. Outcomes could, for example, take the form of: Inventories of best practices – e.g. inventories of effective policy measures in trade promotion; or of best practices in setting up regional integration schemes; or of best practices of home country measures in promoting outward investment and technology transfer to developing countries, particularly LDCs;

Checklists – e.g. checklists of elements in formulating trade policies; or of elements for national development strategies; or of elements for consideration in formulating technology and intellectual property policies; or for reviewing crossborder mega mergers and acquisitions;

Indicative guidelines – e.g. a guideline for setting national corporate responsibility and reporting standards;

Sets of criteria/principles – e.g. criteria for testing the development-friendliness of international investment agreements, or a set of principles similar to the existing set of UN rules and principles on restrictive business practices;

Model frameworks – e.g. a model framework for enabling investment for development, or for national ICT development strategies.

A related process could involve a four-staged cycle. Specifically, the secretariat’s research and policy analysis would provide a basis for intergovernmental deliberations (stage 1). These would result in the formulation of prospective outputs at the expert level and a review of policy implications at the policy-making level (i.e. the Commissions and/or the Trade and Development Board) (stage 2). The secretariat could then provide technical assistance to selected developing countries or selected cases in applying the outcomes achieved, and collect feedback from their implementation (stage 3). This could then be reported back to the respective intergovernmental bodies for further improving the relevance and effectiveness of these outcomes (stage 4).

3. Improving the process

The second critical issue concerns the type of process that would effectively support the achievement of these outcomes. The current structure of the intergovernmental machinery could remain the same, i.e. consisting of four levels: expert meetings, commissions, the TDB and the Conference. However, the processes by which each of these levels is implemented would need to be improved.

a. Expert level

62. The intergovernmental expert meetings could be converted into Standing Expert Groups with a possible life span of two-to-four years, each focusing on a key development aspect and with the clear objective of formulating pragmatic outcomes. The Groups’ deliberations would need to revolve around topics that are central to the priority areas set by the Conference. Experts and the secretariat should interact throughout the lifetime of the Groups, including inbetween the sessions. This would automatically establish continuity in topics and create a cohort of experts associated with UNCTAD. It could also provide an intellectual home for policy makers and other development stakeholders, which in turn could make the "normative" dimension of UNCTAD’s work more attractive to country experts who would come for their own reasons.

b. Commissions

UNCTAD’s commissions could benefit from a rationalization and consolidation that would foresee two main commissions, namely, an Investment Commission and a Trade Commission. This appears possible as almost all the issues currently dealt with by the Enterprise Commission (trade facilitation and enterprise internationalization) could be incorporated into the remaining two. The issues related to information and communication technologies (ICTs), as currently covered by the Enterprise Commission, and those related to technology, as currently covered by the Investment Commission, could be assumed by ECOSOC’s Commission on Science and Technology for Development (CSTD). The Panel suggests that, should the CSTD be reoriented to focus on ICT issues (in line with the decision of World Summit on the Information Society), a third new commission could be the UNCTAD Commission on Technology. This body would deal with traditional technology issues, enjoy the same status (intergovernmental and open-ended) as the other commissions and report to the TDB.

The commissions would deal with emerging issues that are key to development in the areas of trade, investment and technology. They would also provide guidance to the Standing Expert Groups and review their final outcomes by endorsing the Groups’ outcomes and considering their policy implications and implementation.

The commissions need to explore avenues for improving their effectiveness and impact. Efforts to increase their relevance should focus on broadening both the recipient and participant base.

c. The Trade and Development Board

The work of the TDB also needs to be improved, with a view to creating more dynamic deliberations that focus on broad development paradigms and strategies, as well as on the integrated treatment of trade, investment and technology issues. The Board should continue to be the governing body of UNCTAD’s work and to deal with cross-cutting issues, such as interdependence, South-South cooperation, the LDCs and Africa.

The high-level segment of the TDB, which has proved ineffective (in part because it lacks high-level participation from capitals), could be replaced by a multi-stakeholder dialogue on key emerging global issues and development strategies or by a biennial Global Forum for Trade, Investment and Development, while leaving the ministerial involvement to the conferences. The topics for such a forum would need to be carefully chosen in line with existing mandates, and its mechanisms spelled out. Additionally, an interactive session with worldwide think tanks on economic development could be envisioned that would lend itself to more substantive deliberations within the TDB. The Global Network of Development Think-Tanks proposed above (paragraph 47) could hold its conferences back-to-back or in parallel with those of the TDB.

d. The Conference

In the current set-up, the quadrennial conference is a catch-all event that tends to lack focus and attract only one set of decision-makers in member States, i.e. usually the ministers responsible for the trade portfolio.

Alternatively, consideration could be given to converting the quadrennial full-fledged conferences into biennial conferences focused on one overarching theme at a time (such as trade and development, the information economy and development, investment and development, technology and development, etc.). Such a biennial conference would also help attract ministers from the relevant line ministries, increase the frequency of high-level government exposure to the organization’s competence and align the conferences with the budget cycle of the United Nations.

Be it biennial or quadrennial, the time-consuming, resource-intensive and ineffective preparatory process of the Conference (10 to 12 months) should be shortened and improved..

C. Technical cooperation

UNCTAD’s technical assistance has helped strengthen the human and institutional capacity of developing countries in international rule-making (e.g. trade diplomacy and international investment agreements), improve national policy-making (e.g. investment policy reviews and competition policy), and streamline systems and procedures at the country level (e.g. debt management and Customs reforms).

At the same time, the organization faces a number of challenges in its technical assistance delivery. UNCTAD’s technical cooperation is spread widely over a large number of projects, supported by relatively modest and dwindling resources. Most crucially, it lacks participation in countrylevel development programmes in the framework of the MDGs. Furthermore, at the national level there are generally several different counterparts with which UNCTAD cooperates, which only compounds the fragmentation. As a result, the potential contributions of UNCTAD’s technical assistance have not been fully recognized at the country level by governments and others.

To address these problems, UNCTAD needs to realign its technical assistance activities to the overall strategic shift within the UN’s technical assistance efforts to create "a more effective, efficient, coherent, coordinated and better-performing United Nations country presence" (2005 World Summit Outcome).

The focus of UNCTAD’s technical assistance work should be based on its reputation for, and comparative advantage in, technical excellence in economic policyrelated matters and its integrated approach to the delivery of technical assistance. Within this context, an appropriate portfolio of balanced national and international (global, regional and/or subregional) projects needs to be ensured. While the international dimension is more effective in reaching groups of countries on general issues and permits a broader exchange of national experiences, national projects can be tailored to the specific needs of a particular beneficiary country.

Increased participation in UN country-level mechanisms is a must, as is joining hands with UNDP, UNIDO, WTO, the World Bank and other organizations, including regional integration organizations, in delivering holistic and multidisciplinary technical cooperation through country-level programmes and regional initiatives. Such participation in country programming and follow-up could be facilitated by the establishment within UNCTAD of country focal points, particularly for individual LDCs, which should be in close touch with UN Resident Coordinators. These focal points could also join hands with the Regional Commissions and other regional organizations in formulating regional development programmes. To respond to the aspirations and mandates of member States, as affirmed at Saġ Paulo, it is imperative to depart from the present "ad-hoc-ism" in technical cooperation and adopt a more consistent and consolidated approach.

The huge number of projects (currently over 400, most of them small in scale) should be consolidated and grouped into four-to-five mega programmes centred on overarching themes, with a view to maximizing impact and increasing efficiency and coherence. While technical assistance work should be demand-driven, it should also be geared towards those developing countries with the greatest needs, particularly the LDCs and African countries.

Securing stable, adequate and predictable funding remains a major challenge. The need for this sort of funding for technical cooperation activities, commensurate and consistent with the programme priorities as identified in the Saġ Paulo Consensus, cannot be overstated.

UNCTAD has not fully exploited the opportunities available through bilateral country programmes, primarily owing to its lack of field presence. This should be overcome through a process of more systematic and regular contacts with bilateral donors’ representatives located in developing recipient countries, as well as with developing countries’ counterpart agencies, in executing national development projects. In addition to the traditional sources of finance, other possibilities that should be explored include other international and intergovernmental organizations, the private sector, regional development banks, nongovernmental organizations, etc.

One means of addressing this issue could be to create an advisory body for UNCTAD technical assistance. The membership could comprise heads of development assistance agencies and heads of recipient agencies in developing countries (i.e. member States would be represented by capital-based experts in multilateral development assistance/recipient agencies).

The advisory body would provide guidance/advice to the Secretary-General of UNCTAD in formulating institutional strategies for technical cooperation and reviewing the impact of UNCTAD’s technical assistance activities. It could also be the central body for fundraising efforts, with one annual pledging conference taking place during the annual meeting of the TDB. This mechanism would ensure that fundraising is undertaken in a concerted, centralized and coordinated manner and that the technical assistance undertaken by UNCTAD is in line with the general orientation and priorities set by member States.

In order to increase UNCTAD’s relevance and maximize its development impact, the synergies between the organization’s research and policy analysis, international consensus- building and operational activities should be further developed. All three pillars of the organization are equally important and need to stand on an equal footing.

Interdivisional arrangements should be set up whereby experts from different key disciplines would be on call to respond promptly to urgent needs of developing countries (e.g. responding to financial crises and tsunamis) through a "fire-fighting" capacity or "quick response" mechanism that could react in timely fashion, in terms of both policy analysis and technical cooperation.

UNCTAD could consider establishing an ad hoc core strategic policy advisory team that could, for example, offer to deliver presentations for a new cabinet on trade, investment and technology issues immediately after a change of government in (small) developing countries and LDCs, as well as at times when countries are reformulating their national economic development policies and strategies. Such a team could also brief parliaments of developing countries on strategic trade and investment issues.

To ensure synergy among the three pillars, it is important to avoid compartmentalization within the secretariat. A central mechanism should be established for vertical and horizontal coordination and to ensure synergy both among the three pillars and the Divisions, as well as cooperation with other international organizations within and outside the UN system.

Development through Globalization? – (III)

Presented below is the third and concluding part of the extracts from the above titled-paper by Deepak Nayyar of the Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi. The first two parts were published in the previous two issues of the South Bulletin. This part explores how the rules of the game for the world economy need to be reshaped to create more space for the pursuit of national development objectives. Ensuring decent living conditions for people - ordinary people - would naturally emerge as a fundamental objective, says Prof. Nayyar, who is also a member of the South Centre Board. The paper was published recently by the United Nations University’s World Institute for Development Economics Research (WIDER).

International context: governing globalization

It is clear that, during the first quarter of the twenty-first century, development outcomes would be shaped, at least in part, by the international context. It is also clear that unfair rules of the game in the contemporary world economy would encroach on policy space so essential for development. This situation needs to be corrected. The correctives should endeavour to make existing rules less unfair, introduce new rules where necessary and recognize that even fair rules may not suffice. But this endeavour cannot succeed without more democratic structures of governance in the world economy.

In this process, interestingly enough, the role of nation states would be critical. In reshaping unfair rules, it need hardly be said that the nature of the solution depends upon the nature of the problem. Where there are different rules in different spheres, it is necessary to make the rules symmetrical across spheres. Where there are rules for some but not for others, it is necessary to ensure that the rules are uniformly applicable to all. Where the agenda for new rules is partisan, it is imperative to redress the balance in the agenda. [38]

There is a clear need for greater symmetry in the rules of multilateral trading system embodied in the WTO. If developing countries provide access to their markets, it should be matched with some corresponding access to technology.

If there is almost complete freedom for capital mobility, the draconian restrictions on labour mobility should at least be reduced. The enforcement of rules is also asymmetrical. In the Bretton Woods institutions, enforcement is possible through conditionality. Such conditionality, however, is applicable only to developing countries or transition economies that borrow from the IMF or the World Bank. In the WTO, enforcement is possible through retaliation.

But most developing countries do not have the economic strength, even if they have the legal right, to retaliate. The reality, then, is that the countries that are poor or weak conform to the rules, whereas countries that are rich or strong can flout the rules. And the hegemonic powers, often, simply ignore the rules.

The enforcement of rules for the rich and the powerful is, therefore, essential. In addition, the agenda for the new rules needs careful scrutiny for it is shaped by the interests of industrialized countries while the needs of development are largely neglected. For instance, if the proposed multilateral agreement on investment is so concerned about the rights of transnational corporations, some attention should also be paid to their possible obligations. In any case, such an agreement should not be lodged in the WTO. The issue of labour standards, of course, is simply not in the domain of the WTO.

But that is not all. There are some spheres where there are no rules, such as international financial markets or cross-border movements of people, which are not even on the agenda. The time has come to introduce some rules that govern speculative financial flows constituted mostly by short-term capital movements, sensitive to exchange rates and interest rates, in search of capital gains. It is also perhaps necessary to think about a new international financial architecture in which a World Financial Authority would manage systemic risk associated with international financial liberalization, co-ordinate national action against market-failure or abuse, and act as a regulator in international financial markets. [39] Similarly, it is worth contemplating a multilateral framework for consular practices and immigration laws that would govern cross-border movements of people, akin to multilateral frameworks that exist, or are sought to be created, for the governance of national laws, or rules, about the movement of goods, services, technology, investment and information across national boundaries. [40] The essential object should be to create a transparent and non-discriminatory system, based on rules rather than discretion, for people who wish to move, temporarily or permanently, across borders.

Rules that are fair are necessary but not sufficient. For a game is not simply about rules. It is also about players. And if one of the teams or one of the players does not have adequate training or preparation, it will simply be crushed by the other. In other words, the rules must be such that newcomers or latecomers to the game, for example developing countries, are provided with the time and the space to learn so that they can become competitive players rather than push-over opponents. In this context, it is important to stress that, for countries at vastly different levels of development, there should be some flexibility, instead of complete rigidity, in the application of uniform rules. Indeed, uniform rules for unequal partners can only produce unequal outcomes. Thus, we should be concerned with the desirability of the outcomes and not with the procedural uniformity of rules. It is, in principle, possible to formulate general rules where application is a function of country-specific or time-specific circumstances, without resorting to exceptions. It implies a set of multilateral rules in which every country has the same rights but the obligations are a function of its level or stage of development. In other words, rights and obligations should not be strictly symmetrical across countries. And there is a clear need for positive discrimination or affirmative action in favour of countries that are latecomers to development.

The reshaping of rules is easier said than done. Much would depend upon structures of governance. The existing arrangements for global governance are characterized by a large democratic deficit.41 In terms of representation, the existing system is less than democratic. For one thing, representation is unequal, in part because of unequal weights in representation in institutions such as the IMF and the World Bank, and in part because of exclusion from representation in arrangements such as the P5 or the G7 or even the OECD.

For another, representation is incomplete in so far as it is confined mostly to governments, with little that could be described as participation by civil society or corporate entities, let alone people or citizens. In terms of decision making, the existing system is even less democratic. Where some countries have more votes than others and yet other countries have no votes, the system is obviously undemocratic. Even the principle of one-country-one-vote, however, does not ensure a democratic mode. Much also depends on how decisions are made. The right of veto in the Security Council of the UN is explicitly undemocratic. But decision making by consensus, as in the WTO, can also be undemocratic if there is bilateral arm twisting or a consensus is hammered out among a small sub-set of powerful players, while most countries are silent spectators that are in the end a part of the apparent consensus.

It is difficult to imagine more democratic structures of governance in a world of such disparities, economic and political, between countries. But democracy is not simply about majority rule. It is as much about the protection of rights of minorities. The essential corrective, then, is to create institutional mechanisms that give poor countries and poor people a voice in the process of global governance. Even if they cannot shape decisions, they have a right to be heard. In addition, wherever existing rules constrain autonomy or choices in the pursuit of development, there is a need for the equivalent of an escape clause. Such a provision to opt out of obligations embedded in international rules, without having to forsake rights, could provide countries that are latecomers to development with the requisite degrees of freedom in their national pursuit of development objectives. It is important to recognize that, in democratic situations, exit has as much significance as voice.

In the international context, where the distribution of economic and political power is so unequal, the nation state is, perhaps, the only institutional medium through which poor countries or poor people can attempt to influence or shape rules and institutions in a world of unequal partners. This is because only nation states have the authority to set international rules. Groups of countries with mutual interests are more likely to be heard than single countries by themselves. There will always be some conflict of interest but there will always be areas where it is possible to find common cause and accept tradeoffs.

In principle, it is possible to contemplate co-operation among nation states to create rules and norms for the market that transcend national boundaries, just as the nation state created rules and norms for the market within national boundaries. In practice, however, a recognition of the benefits of such co-operation might not be motivation enough. Co-operation among nation states is far more likely to materialize, much like stable coalitions, if and when the costs of non-co-operation cross the threshold of tolerance. In either case, the nation state is the most important player in the game. Therefore, it is not possible to imagine good governance in the world without nation states, just as it is not possible to have good governance in countries without governments.

Conclusion

In considering the prospects for development during the first quarter of the twenty-first century, it is time to reflect on a new agenda for development. In this reflection, the concern for efficiency must be balanced with a concern for equity, just as the concern for economic growth must be balanced with a concern for social progress. It is also time to evolve a new consensus on development, in which the focus is on people rather than economies. Such a consensus must be built on a sense of proportion which does not reopen old ideological battles in terms of either-or choices, and on a depth of understanding which recognizes the complexity and the diversity of development.

This thinking should not be limited to the sphere of economics. It must extend to the realm of politics. For substantive democracy, which creates a political accountability of governments to the people, must be an integral part of the new agenda for, and the new consensus on development. In such a world, ensuring decent living conditions for people, ordinary people, would naturally emerge as a fundamental objective. Development must, therefore, provide all men and women the rights, the opportunities and the capabilities to expand their freedoms and exercise their own choices for their wellbeing.

In this process, people would be participants rather than beneficiaries. The distinction between ends and means would remain critical. And, in the pursuit of development, the importance of public action cannot be stressed enough. It must be an integral part of development strategies, which should not be forgotten in the enthusiasm for markets and globalization.

Notes

38. The following discussion on the rules of the game in the world economy draws upon earlier work of the author (Nayyar 2002a; 2003a).

39. For a discussion on the rationale for, and contours of, such a World Financial Authority, see Eatwell and Taylor (2000).

40. For a discussion on the rationale for such a multilateral framework to govern cross-border movements of people, see Nayyar (2002c). The World Commission on the Social Dimension of Globalization (2004) makes a similar proposal.

41. The democratic deficit is analyzed, at some length, in Nayyar (2002a).

References

Akerlof, G.A. (1970). ‘The Market for Lemons: Quality Uncertainty and the Market Mechanism’, Quarterly Journal of Economics 84(3): 488-500.

Anand, S., and A. Sen (1994). ‘Human Development Index: Methodology and Measurement’, HDRO Occasional Paper 12, UNDP: New York.

Amsden, A.H. (1989). Asia’s Next Giant: South Korea and Late Industrialization, Oxford University Press: New York.

Amsden, A.H. (2001). The Rise of the Rest: Challenges to the West from Late Industrializing Economies, Oxford University Press: New York.

Arrow, K.J. (1950). ‘An Extension of the Basic Theorems of Classical Welfare Economics’, in J. Neyman (ed.) Proceedings of the Second Berkeley Symposium in Mathematical Statistics and Probability, University of California Press: Berkeley CA.

Bairoch, P. (1993). Economics and World History: Myths and Paradoxes, University of Chicago Press: Chicago IL.

Baker, D., G. Epstein, and R. Pollin (eds) (1998). Globalization and Progressive Economic Policy, Cambridge University Press: Cambridge.

Banerjee, A.V. (1997). ‘A Theory of Misgovernance’, Quarterly Journal of Economics 112(4): 1289-332.

Baster, N. (1972). ‘Development Indicators’, Journal of Development Studies 8(3): 1-20.

Bhaduri, A. (2002). ‘Nationalism and Economic Policy in an Era of Globalization’, in D. Nayyar (ed.) Governing Globalization: Issues and Institutions, Oxford University Press for UNU-WIDER: Oxford.

Bhaduri, A., and D. Nayyar (1996). The Intelligent Person’s Guide to Liberalization, Penguin Books: New Delhi.

Bhagwati, J. (2004). In Defence of Globalization, Oxford University Press: Oxford.

Chang, H.-J. (1996). The Political Economy of Industrial Policy, Macmillan: London.

Chang, H.-J. (2002a). Kicking Away the Ladder: Development Strategy in Historical Perspective, Anthem Press: London.

Chang, H.-J. (2002b). ‘Breaking the Mould: An Institutionalist Political Economy Alternative to the Neoliberal Theory of the Market and the State’, Cambridge Journal of Economics 26(5): 539-59.

Coase, R. (1960). ‘The Problem of Social Cost’, Journal of Law and Economics 3: 1-44.

Eatwell, J., and L. Taylor (2000). Global Finance at Risk: The Case of International Regulation, The New Press: New York.

Hahn, F. (1984). Equilibrium and Macroeconomics, Basil Blackwell: Oxford.

ul Haq, M. (1995). Reflections on Human Development, Oxford University Press: New York.

Kaplinsky, R. (2005). Globalization, Poverty and Inequality, Polity Press: Cambridge.

Killick, T. (1990). A Reaction Too Far: Economic Theory and the Role of the State in Developing Countries, Overseas Development Institute: London.

Lall, S. (1990). Building Industrial Competitiveness in Developing Countries, OECD Development Centre: Paris.

Maddison, A. (1995). Monitoring the World Economy: 1820-1992, OECD Development Centre: Paris.

Morris, M.D. (1979). Measuring the Conditions of the World’s Poor, Pergamon Press: Oxford.

Mukherji, A. (2005). ‘Development Economics and Governance: A Theoretical Perspective’, mimeo, Centre for Economic Studies and Planning, Jawaharlal Nehru University: New Delhi.

Nayyar, D. (1997). ‘Themes in Trade and Industrialization’, in D. Nayyar (ed.) Trade and Industrialization, Oxford University Press: Delhi.

Nayyar, D. (2002a). ‘The Existing System and the Missing Institutions’, in D. Nayyar (ed.) Governing Globalization: Issues and Institutions, Oxford University Press for UNU-WIDER: Oxford.

Nayyar, D. (2002b). ‘Capital Controls and the World Financial Authority: What Can We Learn from the Indian Experience’, in J. Eatwell and L. Taylor (eds) International Capital Markets: Systems in Transition, Oxford University Press: New York.

Nayyar, D. (2002c). ‘Cross-Border Movements of People’, in D. Nayyar (ed.) Governing Globalization: Issues and Institutions, Oxford University Press for UNUWIDER: Oxford.

Nayyar, D. (2003a). ‘Globalization and Development Strategies’, in J. Toye (ed.) Trade and Development, Edward Elgar: Cheltenham.

Nayyar, D. (2003b). ‘The Political Economy of Exclusion and Inclusion: Democracy, Markets and People’, in A.K. Dutt and J. Ros (eds) Development Economics and Structuralist Macroeconomics: Essays in Honour of Lance Taylor, Edward Elgar: Cheltenham.

Nayyar, D. (2004). ‘Economic Reforms in India: Understanding the Process and Learning from Experience’, International Journal of Development Issues 3(2): 31-55.

Nayyar, D. (2006). ‘Globalization, History and Development: A Tale of Two Centuries’, Cambridge Journal of Economics 30(1): 137-59.

North, D.C. (1990). Institutions, Institutional Change and Economic Performance, Cambridge University Press: Cambridge.

North, D.C. (2001). ‘Needed: A Theory of Change’, in G.M. Meier and J.E. Stiglitz (eds) Frontiers of Development Economics, World Bank: Washington DC.

Sachs, J., and A. Warner (1995). ‘Economic Reforms and the Process of Global Integration’, Brookings Papers on Economic Activity 1: 1-118.

Samuelson, P.A. (2004). ‘Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization’, Journal of Economic Perspectives 18(3) 135-46.

Seers, D. (1972). ‘What Are We Trying to Measure?’, Journal of Development Studies8(3): 21-36.

Sen, A. (1989). ‘Development as Capability Expansion’, Journal of DevelopmentPlanning 19: 41-58.

Sen, A. (1999). Development as Freedom, Alfred E. Knopf: New York.

Shapiro, H., and L. Taylor (1990). ‘The State and Industrial Strategy’, World Development 18(6): 861-78.

Soros, G. (1998). The Crisis of Global Capitalism, Little Brown: New York.

Stewart, F. (1985). Planning to Meet Basic Needs, Macmillan: London.

Stiglitz, J.E. (1989). ‘On the Economic Role of the State’, in A. Heertje (ed.) Economic Role of the State, Basil Blackwell: Oxford.

Stiglitz, J.E. (1998). ‘More Instruments and Broader Goals: Moving Toward the Post-Washington Consensus’, WIDER Annual Lecture 2, UNU-WIDER: Helsinki.

Reprinted (2005) WIDER Perspectives on Global Development, Palgrave Macmillan for UNU-WIDER: Basingstoke.

Stiglitz, J.E. (2002). Globalization and its Discontents, Allen Lane: London.

Streeten, P. (1981). First Things First: Meeting Basic Human Needs in Developing Countries, Oxford University Press: Oxford.

Wade, R. (1990). Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization, Princeton University Press: New Jersey.

Wolf, M. (2004). Why Globalization Works, Yale University Press: New Haven and London.

World Commission on the Social Dimension of Globalization (2004). A Fair Globalization: Creating Opportunities for All, ILO: Geneva.

Biopiracy: Making WTO’s TRIPS Respect Disclosure of Origin

A growing number of developing countries have been pushing hard to make it obligatory on the part of patent applicants to disclose the source of their biological materials or traditional knowledge. This they want to do by introducing an amendment in the WTO’s Trade-Related Intellectual property Agreements (TRIPS). In so doing, they would like to make the TRIPS agreement support an important environmental agreement – the Convention on Biological Diversity (CBD). But there is resistance from leading industrialised countries. The following communication and the proposed text was circulated on 29 May 2006 by India - also on behalf of Brazil, China, Cuba, Pakistan, Peru, Thailand and Tanzania. It is followed by an explanatory comment made by the Indian delegation on 6 June 2006.

"In the Doha Ministerial Declaration, Ministers agreed that negotiations on outstanding implementation issues shall be an integral part of the Work Programme they established. The relationship between the TRIPS Agreement and the Convention on Biological Diversity (CBD) is an outstanding implementation issue. In addition to the intensive technical work in the TRIPS Council since then, the Director General has undertaken dedicated consultations through his Friends, including more recently through Mr. Rufus Yerxa, Deputy Director General. There have been extensive discussions in these processes on the introduction into the TRIPS Agreement of a mandatory requirement for the disclosure of origin of biological resources and/or associated traditional knowledge used in inventions for which intellectual property rights are applied for.

In the Hong Kong Ministerial Declaration, the Ministers requested the Director General to intensify the consultations and to report to each regular meeting of the TNC and the General Council. Further, the Ministers instructed that the General Council shall review progress and take any appropriate action no later than 31 July 2006. In order to enable the Members to take appropriate action by this date, a number of Members have proposed moving towards text-based negotiations on the disclosure of origin requirement. Accordingly, this communication presents a proposal for such a text, taking into account the objectives of the requirement as well as the questions, comments and concerns raised by various Members in the negotiations so far. The proposed text will assist the consultations being undertaken by the Director General.

The said text is attached.

The proposed Text

Article 29bis

Disclosure of Origin of Biological Resources and/or Associated Traditional Knowledge

1. For the purposes of establishing a mutually supportive relationship between this Agreement and the Convention on Biological Diversity, in implementing their obligations, Members shall have regard to the objectives and principles of this Agreement and the objectives of the Convention on Biological Diversity.

2. Where the subject matter of a patent application concerns, is derived from or developed with biological resources and/or associated traditional knowledge, Members shall require applicants to disclose the country providing the resources and/or associated traditional knowledge, from whom in the providing country they were obtained, and, as known after reasonable inquiry, the country of origin. Members shall also require that applicants provide information including evidence of compliance with the applicable legal requirements in the providing country for prior informed consent for access and fair and equitable benefit-sharing arising from the commercial or other utilization of such resources and/or associated traditional knowledge.

3. Members shall require applicants or patentees to supplement and to correct the information including evidence provided under paragraph 2 of this Article in light of new information of which they become aware.

4. Members shall publish the information disclosed in accordance with paragraphs 2 and 3 of this Article jointly with the application or grant, whichever is made first. Where an applicant or patentee provides further information required under paragraph 3 after publication, the additional information shall also be published without undue delay.

5. Members shall put in place effective enforcement procedures so as to ensure compliance with the obligations set out in paragraphs 2 and 3 of this Article. In particular, Members shall ensure that administrative and/or judicial authorities have the authority to prevent the further processing of an application or the grant of a patent and to revoke, subject to the provisions of Article 32 of this Agreement, or render unenforceable a patent when the applicant has, knowingly or with reasonable grounds to know, failed to comply with the obligations in paragraphs 2 and 3 of this Article or provided false or fraudulent information."

Explanation by India

"Mr. Chairman, thank you for resuming the consultations on this extremely important outstanding implementation issue on the relationship between the TRIPS Agreement and the Convention on Biological Diversity. It will be recalled that discussion on the two sets of issues identified by you during the dedicated consultations held on 4 May, 2006 were suspended with a view to enable proponents of the disclosure proposal to submit a text for an amendment to the TRIPS Agreement. A number of delegations have now submitted a text contained in document No.TN/C/W/41 and WT/GC/W/564. I would like to take this opportunity to introduce this text.

This has been drafted taking into account the objectives of the disclosure requirement as well as the questions, comments and concerns raised by Members in the negotiations so far. I will briefly explain the contents of the text with a view to help further these negotiations towards an appropriate outcome.

The text provides for an amendment to the TRIPS Agreement by inserting a new Article 29 bis. The location of the Article has been suggested in light of the fact that the purpose of the disclosure requirement is to provide for conditions on applicants applying for a patent. The suggested title of the Article takes into account the objectives of the demandeurs of the disclosure proposal, and to limit such conditions on patent applicants to the disclosure of origin of biological resources and/or associated traditional knowledge. It takes into account some concerns expressed regarding the breadth and scope of the proposed disclosure requirement and the subject matter on which these requirements would apply.

Para 1 of the text captures the common accepted objective of the WTO membership that there can and should be a mutual supportiveness between the objectives and the principles of the TRIPS Agreement on the one hand and the objectives of the CBD on the other. The basic parameters of the nature and scope of obligations under the TRIPS Agreement apply to this paragraph as well. Therefore, this Article would create only the minimum standards necessary to meet the objectives of the two inter-governmental treaties and would not oblige Members to implement more extensive disciplines than required. As will be seen in the later paragraphs, a Member would retain the freedom to determine the appropriate method of implementing the obligations under this Article within its own legal system and practice.

Paragraph 2, on the one hand, limits the subject matter of these obligations, and on the other hand, specifies them with the clarity required for implementing agencies to determine the minimum standards necessary to be complied with. As regards the subject matter, it is limited to situations where the application either concerns, or is derived from, or is developed with biological resources and /or traditional knowledge associated with such biological resources. There have been a number of questions and concerns regarding subject matter during past discussions. Therefore, care has been taken to use internationally agreed language as far as possible (like using the word ‘concerns’ as used in the Bonn guidelines) while at the same time ensuring that derivatives of biological resources on which rights of traditional knowledge owners exist are not excluded. We are mindful of the fact that the CBD uses both the terms ‘biological resources’ and ‘genetic resources’, and that some Members have concerns regarding the scope of the former term. The concern of the demandeurs, however, is that a narrow interpretation of the term ‘genetic resources’ should not deprive owners of biological resources which are not strictly genetic resources as defined in the CBD or in the scientific literature from benefits of this amendment. Nevertheless, we are open to discussion to clarify any remaining concerns. In order to take into account certain concerns of some Members the text has been drafted to limit the disclosure of the country of origin to cases where the country of origin is known after reasonable enquiry. Thus, a patent applicant need not wait until the country of origin of a biological material has been scientifically determined.

The second sentence of paragraph 2, unlike the first sentence, limits the obligation to providing information including evidence of PIC and ABS as obtained based on the applicable legal requirement in the providing country. The purpose of this sentence is only to ensure the availability of the information regarding legal access of the biological resources and/or associated traditional knowledge. This sentence does not purport to create any substantive patentability criteria in respect of PIC and ABS. As would be shown by subsequent paragraphs, however, this information would remain a formal requirement for a complete application for a patent.

It is likely that some of the requisite information for an adequate and full disclosure may become available to the applicant after an application has been filed. Paragraph 3 of the text takes that contingency into account by obliging Members to enable applicants to provide this subsequent information.

Since the entirety of the information and the evidence disclosed in compliance with paragraph 2 does not involve determination based on the patentability criteria by patent offices, availability of this information to administrative and other authorities in Member countries implementing the CBD is paramount. Such availability would enable them to track legitimacy of access of the biological material and/or associated traditional knowledge and pursue compliance within or outside the patent system. Paragraph 4 takes this objective into account by obliging Members to publish all the information disclosed by the patent applicant. Where on the one hand flexibilities provided under paragraph 3 to facilitate applicants to provide information that comes to light after the application has been made, it has been provided in paragraph 4 that such later information shall be published without undue delay.

In accordance with Article 1 and part III of the TRIPS Agreement, enforcement procedures to ensure compliance with obligations under this Article have been left to national legal systems and practices. Paragraph 5 of the text obliges that these enforcement procedures be effective. This would ensure that these procedures meet the over-arching objective of mutual supportiveness of CBD and TRIPS as well as specific compliance requirements for obligations contained in paragraph 2 and 3 of the Article. Non-compliance with these obligations must result in prevention of further processing of the application at the pre-grant stage and revocation at the post-grant stage. It further provides that where the applicant knowingly fails to comply, authority should exist to render the patent unenforceable.

Such would also be the case where the information provided is patently false or fraudulent. We recognize that this paragraph creates new obligations on the administrative authorities in Members where patent applications are made. In recognition of the need to keep these administrative procedures least burdensome for the patent offices of Members, attempt has been made to closely track the existing obligations on enforcement as well as consequences arising out of the conditions on patent applicants already existing in the TRIPS Agreement, such as in Article 29.

Mr. Chairman, we shall be happy to provide additional explanations and respond to any additional concerns or questions that Members may wish to raise on this text.

Inspite of the years of discussions and technical work undertaken on this issue in the WTO, some Members have still continued to ask for more evidence or more experiences of the reasons driving developing countries towards the disclosure requirements. While we can continue holding such academic discussions in the TRIPS Council, perhaps for some more time to come, we would request Members to focus on the text presented today and focus their suggestions on improving the text to make it more meaningful for the demandeurs while at the same time keeping the new obligations arising out of this text the least burdensome possible for Members, our patent offices and our patent applicants.

Mr. Chairman, many Members have stated in the TRIPS Council, TNC and the General Council that we should move towards text-based negotiations on this issue as in the other issues under negotiations. This text is before the Members now. We hope that this text can constitute the basis for an appropriate outcome on the disclosure proposal. This should also enable the DG in his capacity as the Chairman of the TNC to report progress on this aspect of the development dimension."

Disclosure Amendment Makes TRIPS More Robust - Brazil

The amendment being sought by developing countries in WTO’s TRIPS agreement highlights the political and economic importance they attribute to the issue of misappropriation of biological resources and associated traditional knowledge - more commonly referred to as biopiracy. "This is part of the balance that can be brought to bear on the Intellectual Property system, so that issues of concern to developing countries can also be addressed through a solution that is ingrained in the IP system of minimum international standards of protection against piracy and theft," according to the Brazilian delegation. The Convention on biological Diversity recognizes countries as the sovereign owners of their biological resources and of communities that are the holders of associated traditional knowledge. Following are extracts from a statement by Brazil on 12 June 2006.

"The proposal for an amendment to the TRIPS Agreement establishing a requirement in patent applications for the Disclosure of Origin of Biological Resources and/or Associated Traditional Knowledge, circulated as document WT/GC/W/564 of 31 May 2006, attempts to translate into treaty language a negotiating objective under the current Doha Round supported by a broad majority of developing countries. Their views in favor of such an amendment have been presented extensively both in formal documents to the TRIPS Council and in the informal consultations held by the different friends of the DG on this issue to date in the context of discussions on implementation issues under the DDA.

The presentation of a draft amendment on disclosure is in keeping with the Doha Ministerial mandates on the relationship between TRIPS and the Convention on Biological Diversity (CBD) – paragraphs 12 and 19. It responds, in particular, to the mandate received from Ministers in Hong Kong, last December 2005, to the effect that:

We request the Director-General, without prejudice to the positions of Members, to intensify his consultative process on all outstanding implementation issues under paragraph 12(b), if need be by appointing Chairpersons of concerned WTO bodies as his Friends and/or by holding dedicated consultations. The Director-General shall report to each regular meeting of the TNC and the General Council. The Council shall review progress and take any appropriate action no later than 31 July 2006 (Paragraph 39).

As has been stated in previous rounds of consultations, Brazil is of the view that the introduction of a disclosure requirement in the TRIPS Agreement is an essential element of the development outcome that is expected from the Doha Development round. All developing countries have acknowledged this in one way or another. Among the outstanding implementation issues, this is the one that has the clearest and broadest support of developing countries as a whole, and it is the one that has matured both politically and technically, to the extent that proponents find themselves not only in a position to respond to all technical questions put forth by other Members, both orally and in written form, but, most importantly, they now find themselves in a position to propose concrete text for an amendment, thus moving from theory into practice.

The efforts to arrive at a concerted position regarding language for an amendment highlights the political and economic importance proponent developing countries attribute to the issue of misappropriation of biological resources and associated traditional knowledge (more commonly referred to as biopiracy). This is part of the balance that can be brought to bear on the Intellectual Property system, so that issues of concern to developing countries can also be addressed through a solution that is ingrained in the IP system of minimum international standards of protection against piracy and theft. This time around, developing countries are demanding that the system provides protection to countries that are recognized by the CBD as the sovereign owners of their biological resources and of communities that are the holders of associated traditional knowledge.

The proposed amendment reflects a pro-intellectual property stance on the part of proponent developing countries. It seeks not to destroy water down or otherwise encumber the International Intellectual Property system represented in the WTO by the TRIPS Agreement. It seeks the very opposite of this, that is: to make the system more robust in general, better suited to enforcing the moral principles on which IP protection should stand, by supporting the objectives of reducing the margin for misappropriation of biological resources and/or associated TK. Immoral conduct should not be rewarded by the patent system, through granting of patent to inventions obtained by dishonest practices. With the amendment, the international IP system would show itself to be responsive to the particular needs and concerns of developing countries, in particular the megabiodiverse ones, not through compensatory mechanisms of technical cooperation in return for ever higher standards of protection, but through a mechanism that protects the rightful and legitimate owners of biological resources and associated TK from downright theft.

The issue is not at all different from normal copyright protection of CDs and DVDs, or the adequate enforcement of the rights of patent holders under the relevant international treaties and national legislations.

In fact, through the introduction of a disclosure requirement, Members would actually broaden the scope of protection of the TRIPS Agreement as well as make the patent system stronger by enhancing patentability requirements to include information that would make the monitoring of dishonest practices viable and enforceable internationally.

The amendment is also compatible with the evolving nature of science and technology, especially in the biotechnological field, the development of which has considerably reduced the cost, mitigated the efforts, and shortened the time taken to develop a biological resource of a Member into the subject matter of a patent claim anywhere in the world – especially if the "developer" can have a free ride on BRs and any associated TK.

Therefore, the proposal for an amendment also gives heed to the argument usually presented by "demandeurs" of new and additional IP protection in the WTO and WIPO regarding the need for the international standards of protection to respond to the ever changing nature of science and technology. This same argument is made by proponents of new international IP standards regarding protection of broadcasting signals in new digital media against piracy. They were also made in regard to the innovative WIPO Internet Treaties of 1996, which extended protection in response to challenges posed to copyright owners by developments in digital and telecommunications technologies.

Brazil’s response to questions posed by Members on the technical aspects of the amendment and on the general objectives that it is expected to fulfill is spelled out extensively in the submissions that it has co-sponsored with other developing countries, namely documents IP/CW/420, 429, 438, 442, 443 and 459. Those documents, in addition to documents presented by other developing countries proponents of the amendment, such as India, China and Peru, make up a substantial source of information that has led the disclosure group to understand that time is ripe for moving discussions ahead to a text-based phase, which would give effect to the instruction of intensifying consultations for appropriate action no later than 31 July 2006, as mandated by our Ministers in Hong Kong.

In the last round of consultations, Brazil, along with other developing countries supporters of the disclosure amendment explained the purpose, the mandate, the nature and the technical characteristics of the amendment text put forth for the consideration of all Members. We hope these explanations, along with existing written submissions would help to clarify the inner workings of the draft text. We stand ready to provide additional information and we hope that all Members can engage in the discussions constructively with a view to working towards a concrete development outcome regarding the relationship between TRIPS and the CBD.

As for the amendment itself, it is built on the central element of including in the TRIPS Agreement a requirement for patent applicants to disclosure, as an integral element of their application, information on the country providing biological resources and/or associated TK where their claim concerns, is derived from or developed with biological resources and/or associated TK. For the disclosure requirement to be effective in terms of supporting the CBD objectives of preventing misappropriation and ensuring enforcement of PIC (Prior Informed Consent) and ABS (Fair and Equitable Benefit Sharing) the applicant would also be required to provide information regarding evidence of compliance with PIC and ABS in the country providing the BR and TK used in the claimed invention. The additional burden of providing this information (which will evidently be known to the applicant as an integral part of the research developed for the invention) and of verifying that the information was provided (a minor non-substantive administrative task from the point of view of the patent office and examiner) would be minimal. It would be nothing compared to the burden of substantive examination of claims against the ever enlarging, and multilingual, pool of existing prior art.

The required information would not undergo any substantive examination, and therefore could not be considered a new (or a fourth) patentability requirement, in addition to inventive step, prior art, and industrial utilization.

Obviously, any attempt on the part of patentees to circumvent the disclosure requirement, be it through fraudulent fulfillment of the requirement with the objective of concealing facts that would reveal misappropriation of BR and/or TK used in the claimed invention should not be rewarded by means of the granting of a patent. This would be tantamount to extending copyright protection to pirated goods, so long as the pirates conceal information about their wrongdoings, or rewarding patent infringers with patents, so long as they are able to conceal information material to adequately describing the claim(s) and/or determining prior art. Therefore, non-compliance of the disclosure requirement to be established within the patent system, or its fraudulent compliance, produces the commensurate and proportional effect of preventing the patent examination from proceeding as if it were "business as usual", and can be grounds for invalidation and revoking of patents. Members would be called to ensure this as a TRIPS obligation through their national legislations, putting in place effective enforcement procedures, as indicated in Article 5 of draft the amendment.

Publishing of information provided on BR and/or TK used in inventions that are the object of patent claims would be a transparency measure, very typical of the IP system in general, and would allow better tracking and enforcement of legitimate rights of Members as the sovereign owners of their biological resources and of communities as legitimate holders of their TK."

Disclosure Requirement – Responding to Questions Raised

Brazil, India and the other countries that have taken the lead in proposing changes to the TRIPS agreement to make it mandatory on patent applicants to disclose the origin of their biological materials and associated traditional knowledge, have responded to a number of queries and concerns. While they expect this amendment to be resolved in the coming months, the following is a compilation of responses to some of the major concerns that have been raised, along with an indication of the country that primarily flagged those concerns with respect to the draft amendment to TRIPs, Article 29 bis.

1. Whether there is any need to disclose more than source (Switzerland).

There is a clear need to disclose the country providing the resources as well as the source. The country of origin would be subject to the reasonable inquiry criteria. There are a number of reasons for this.

Firstly, disclosing only the source, say person A or lab A., without indicating the country providing the resources would not achieve the objectives of the proposed amendment. Lab A, for example, could be a multinational company lab in various countries and the simple indication of a name will give no clue as to which lab of the many provided the resources.

Secondly, there are definitions in the CBD for both "country of origin" and "providing country", and disclosing information on them is an essential requisite for the patent system to become supportive of the CBD in regards to its recognition of countries’ sovereignty over their natural resources.

Finally, disclosure of country providing and country of origin is needed to address the international dimension of the misappropriation issue, because through patenting in one country rights may be conferred to individuals or companies or other entities over resources that may have been misappropriated in other countries.

Source is equally relevant information, and its disclosure has been included in the draft amendment. But it is not enough, per se, to address the international dimension of the misappropriation issue.

2. Why is the term biological resource instead of genetic resources used? (EC & Philippines)

The CBD recognizes that "States have, in accordance with the Charter of the United Nations and the principles of international law, the sovereign right to exploit their own resources...". Thus, the power enjoyed by the States is not limited to regulation of genetic resources. Accordingly, the fact that article 15 of the CBD addresses "access to genetic resources" should not be interpreted as preventing States from regulating access and benefit-sharing relating to biological resources.

Furthermore, the term biological resources, which is broader, is intended to ensure that all possible cases of biopiracy are covered and to keep pace with technological developments especially with respect to biotechnology. This terminology is similar to the term "biological material" which had been used in earlier submissions and which is, for example, used in the EU Biotechnology Directive (Directive 98/44 of 6 July 1998) at recital paragraph 27 and defined in article 2 of the said Directive.

3. How would the three triggers "concerns", "derived from" and "developed with" work or rather what do they mean in practice? (EC)

These three triggers seek to encompass the relevant situations in which biological resources and/or associated traditional knowledge contributed to reaching an invention, while providing margin of flexibility for the national competent authorities of the country where the patent is sought to define whether the applicant has effectively complied with the rule or not. Two of the triggers – "concerns" and "derived from" – have meanings that are already known to Members who have used them in their legislation.

The term "concerns" refers to cases where a predominant or substantial part of the invention incorporates the genetic resources. This usage would be similar to that of the EU Biotechnology Directive at article 3.1.

The term "developed with", in contrast, may not necessarily incorporate any of the genetic resources but the resources and/or associated traditional knowledge is critical in the development of the claimed invention. This will be particularly the case with respect to traditional knowledge associated with the genetic resources where the traditional knowledge may be rarely incorporated in the claimed invention but the knowledge was indispensable in the development of the claimed invention.

The term "derived from" is intended to cover derivatives. It appears in Article 8.1 of the EU Directive, referring to propagation or multiplication from the original biological material.

4. Who will decide whether there has been reasonable inquiry as contemplated under paragraph 2 of the proposed article 29bis and what does reasonable inquiry mean? (EC & Philippines)

"Reasonable inquiry" is similar in nature to the expressions of the type "reasonable ground to know" commonly used in many legislations of Members and in the TRIPS Agreement itself ("reasonable efforts", Article 34; "reasonable ground to know"; Article 37; "reasonable steps under the circumstances", Article 39).

The applicant would initially determine what enquiry is reasonable to satisfy the requirement, which is generally understood to mean due diligence.

The role of the patent office would be limited, in principle, to confirming that the patent application discloses information in the prescribed form.

5. Does the word "including" in the second sentence of para 2 and para 3 mean there are additional requirements other than evidence of PIC and ABS? (EC)

The word "including" in paragraph 2 does not require the applicant to disclose additional information other than evidence of PIC and ABS. If the applicant furnishes evidence of PIC and ABS he would have met the requirement.

6. What is to be understood by the term associated traditional knowledge? (EC)

The proponents intend to give its ordinary meaning to the term traditional knowledge. The word "associated" is prefixed to TK in order to restrict the disclosure to TK that has some relevance to the biological resources used in developing or concerning the subject matter of the invention. Therefore, not all forms of traditional knowledge are covered.

The term is not new or unheard of. Many patent offices use the concept of traditional knowledge in determining prior art.

7. Will the requirement to publish require publication with the patent or separately from the patent application? (EC)

Publication will be at the discretion of each member. The requirement is that the disclosure information be published at the same time as or simultaneously with the patent application or patent grant, whichever is first. A member can choose to publish the disclosure information in the same document of the application or grant or in a separate document accompanying the application or grant. In the case of supplementary or correctional information under paragraph 3, this will in most cases be published separately.

8. How would the concept of unenforceable work under paragraph 5 of the draft article including in those countries where there are only provisions for revocation? (EC & Chinese Taipei)

Paragraph 5 presents unenforceability as an alternative to revocation. It means that patent holders failing to comply with disclosure are not entitled to go to court to enforce their rights. Under common law, this is similar to the principle that you can not go to a court of equity with unclean hands.

The situation is not unheard of. For example, in countries where renewal fees is payable, a patent holder who has not paid renewal fee on the due date can not go to court to enforce the rights under a patent for which maintenance fees is not paid.

9. Why is the substance of the text broader than what the title says? (New Zealand)

In the TRIPS Agreement titles usually give a general sense of the issue and not all the elements of an article. Article 30, for example, is titled "Exceptions to rights Conferred", but does not mention any exception; instead, it establishes the three-step-test. Article 27, "patentable subject matter", also refers to exclusions to patentability. Notwithstanding this fact; it is not titled "Patentable Subject Matter and Exclusions from Patentability".

10. Will there be a transitional period for implementation in addition to the period to be given for ratification of the amendment? (Philippines)

Because it is predominantly in the interest of developing countries to contain biopiracy, and the problem has not been tackled adequately for ten years since the entry into force of TRIPS, the proposed amendment does not foresee additional transitional periods. Save for LDCs, whose general transition period has been extended to 2013 under the TRIPS Agreement as a whole, with possible additional extensions for all treaty obligations, the proposed amendment would enter into force within the period given for ratifications. It is considered that the period between the adoption of the amendment and ratification will be sufficient to allow countries to make the necessary changes in law.

11. If there is no PIC or ABS requirements in the providing country, would a declaration of providing country and source together with a declaration that there are no PIC and ABS requirements suffice? (Philippines)

The applicant is required by the proposed amendment to present information including evidence of compliance with the applicable legal requirements in the providing country for PIC and ABS. If the providing country does not have any applicable legal requirements for PIC and ABS a declaration to this effect by the applicant shall suffice with regard to the obligation contained in the second part of paragraph 2 of the amendment. The patent office would not have to assess the validity of such information. The mechanism would work based on prima facie assumptions that the information was provided correctly and in good faith.

However, the applicant would still be required to disclose the country providing, from whom in that country the biological resource and/or associated TK was obtained and, as known after reasonable inquiry, the country of origin.

12. To which applications will the requirement apply to? Only those made after the entry into force of the amendment? (Philippines)

The obligations under the amendment will apply only to applications made after the assumption of the obligation under the proposed article by WTO Members.

13. What does "with reasonable ground to know in paragraph 5 mean? (Philippines)

The phrase "know or having reasonable grounds to know" adds no novelty to the patent system. It is a widely used legal concept, found in many legislative provisions. Indeed, this terminology is used in the TRIPS Agreement itself, for example in articles 44 and 45. In paragraph 1 of article 44 on injunctions the TRIPS Agreement provides inter alia that "Members are not obliged to accord such authority in respect of protected subject matter acquired or ordered by a person prior to knowing or having reasonable grounds to know that dealing in such subject matter would entail the infringement of intellectual property right". Similar language is used in paragraph 1 of article 45 regarding damages. The words in paragraph 5 of the proposed article 29bis will have a similar meaning to that in articles 44 and 45 of TRIPS

This is a legal concept which essentially means that: considering the knowledge of the applicant, the resources available to them and normal business and scientific practices, they are expected to know.

So for example, if there is a ABS law in the country providing the resources, the applicant would be reasonably expected to know of this law and its requirement. It also implies that the applicant is expected to exercise ordinary due diligence and not be reckless and careless.

14. Does paragraph 1 of the proposed article mean that non-CBD Members will have to comply with CBD requirements? (Chinese Taipei)

Paragraph 1 indicates the broader objectives that will be served by the proposed TRIPS amendment. Once introduced, the disclosure provision will be a TRIPS requirement and not a CBD obligation, notwithstanding the objective sought of mutual supportiveness between the two treaties, which is in accordance with the relevant Doha Ministerial Mandates.

The amendment does not bind non-CBD Parties to the provisions of the Convention, as the disclosure obligations are acquired exclusively under and in accordance with the TRIPS Agreement.

This is normal practice, particularly in the case of TRIPS which has transposed several provisions contained in international treaties negotiated outside of the Organization into the realm of the WTO. Reference in TRIPS to provisions taken from of the Paris Convention or several other WIPO treaties on intellectual property rights does not mean that non-WIPO Members are complying with WIPO obligations.

15. Does the requirement for correction of information only apply to the pre-grant period or also to post-grant period? In other words, will there be a continuing obligation under paragraph 3 once the patent has been issued?

The requirement applies to the pre-grant and post-grant periods. This is made clear by the use of the words "applicant" and "patentee". Since failure to comply with the obligation under the proposed article can prevent the further processing of an application or result in revocation of the patent, the flexibility for submitting additional information which might prevent this from happening clearly benefits the applicant or the patentee as the case may be. In other words, in both the pre-grant and post-grant periods there will be a continuing opportunity for providing supplemental or corrective information that is relevant to the fulfillment of the obligation.

16. With whom would benefits be shared and with whom would benefit sharing contracts be negotiated? (Chinese Taipei)

The legal requirements of each WTO Member will determine with whom the benefit sharing contracts are negotiated. The amendment does not intend to impose a uniform approach on WTO Members.

17. Can Members impose fees on applicants to cover any costs associated with this obligation? (Philippines)

It is anticipated that the obligations under the proposed amendment will not impose undue burden and costs on the patent applicants or holders or on patent offices in Member countries. For this reason, unless demonstrated otherwise, it is not foreseen that additional fees will need to be charged to cover the costs. However, where a Member considers it relevant, they could take this obligations into account in setting fees together with any other considerations they make in determining fees. In essence, the intention of the proponents is to leave this issue to the discretion of Members subject to any other rules in the TRIPS Agreement or other treaties such as the Patent Cooperation Treaty (PCT) that those Members may be party to.

‘Time for a New Approach to the Multilateral Trading System’

Over a 100 Civil Society groups have written to the Trade Ministers to develop a new approach to the multilateral trading system. They denounce the mini-ministerials as exclusive. "The current negotiations now preclude any possibility of benefiting the majority of the world’s people, particularly those living in impoverished developing countries," the letter states. "Instead, many of the proposals on the table will radically foreclose domestic policy options for developing countries." The letter, dated 26 June 2006, is reproduced below.

"As civil society members from all over the world we are appalled at the direction of the current WTO negotiations. Launched in 2001 as a "Development Round," the current negotiations now preclude any possibility of benefiting the majority of the world’s people, particularly those living in impoverished developing countries. Instead, many of the proposals on the table will radically foreclose domestic policy options for developing countries. Developing country proposals that attempt to regain some of that policy space are consistently rejected by the major powers, particularly the U.S. and EU. Rather than building a multilateral trading system that guarantees human rights, promotes sustainable economic growth and ensures access to decent employment while protecting our shared environment, the current negotiations are set to dramatically curtail this vital agenda.

Attempts by the EU, U.S. and the WTO’s Director-General, Pascal Lamy, to cast the Doha Agenda as a multilateral effort to advance development are completely hypocritical. They fly in the face of both 11 years’ of countries’ experience under the Uruguay Round agreements with the WTO as well as in the face of recent independent projections of what this agenda will bring for developing countries. To try to push such an agenda to conclusion through a mini-Ministerial, in which a majority of WTO members will not be represented, can only do further damage to the WTO’s legitimacy.

We are writing to you with three basic demands:

Object to the legitimacy of the June mini-Ministerial and withdraw support. As a basic rule of democracy, and out of respect for the WTO’s procedures and mandate, any Ministerial called by the WTO Secretariat must allow for the effective participation of all Ministers.

Reject any attempt by Director-General, Pascal Lamy to draft his own text for Ministers’ consideration.

Start now with a new approach to the multilateral trading system. The Doha Agenda should be buried. New rules should focus on policies that promote human rights and people-centered ecologically sustainable development.

The reason for our demands is outlined below. A series of economic reports on the projected outcomes of the Doha Round from the World Bank, U.N. and several think tanks including the Carnegie Endowment for International Peace, quantify the costs of the Doha Agenda. These analyses predict that most of the gains expected under the Doha proposals as they stand will flow to the developed world. The remaining gains are distributed among a few exporters from middle-income developing countries. The majority of the population in African countries, other least-developed countries (LDCs) and many other developing countries are projected to lose. According to the Carnegie Endowment for International Peace, "Bangladesh, East Africa, and the rest of Sub-Saharan Africa are adversely affected in every Doha scenario modeled, regardless of whether the ambition is modest or high". The European Commission’s own Sustainability Impact Assessment concludes, "in Sub-Saharan Africa for example, poverty may worsen as they stand to lose economically from trade liberalization and face severe supply side constraints". This is an unacceptable outcome from multilateral talks.

There are severe problems with all three of the principle areas of negotiation: agriculture, non-agricultural market access (NAMA) and services. Many developing countries agreed to launch new talks in the WTO to redress imbalances in the Agreement on Agriculture. Yet instead of using the review of the Agreement on Agriculture to address the livelihood and survival needs of hundreds of millions of family farmers worldwide, agriculture talks have focused on expanding global markets for exporters from developed and to a lesser extent developing countries. While the promises from the last round of increased market access to developed countries for some developing countries remain unrealised, we know that uncontrolled imports of agricultural products into local markets in developing countries is having a devastating effect on local livelihoods. The benefits from the promised market access, wherever it has been fulfilled (including in medium income net farm exporting developing countries), have not reached the majority of the population including small family farmers, peasants and agricultural workers that have instead been displaced and pushed out of the market (including the domestic market), by the exporting agribusiness sector that benefits from such market access.

At the same time, urgent agricultural trade problems are not addressed in the negotiations. Dumping of agricultural exports originating in the U.S. and EU continues, driving down world prices for crops that the poor depend on, such as cotton, maize, rice, poultry, dairy, and sugar. Simulations by WTO members illustrate that the offers by the U.S. and EU to reduce their domestic support will not actually change current spending levels. And while the market distorting activities of state trading enterprises are under scrutiny, the much greater power of a small number of agribusiness firms in a number of commodity markets is left unchecked. The G33 proposal on Special Products and Special Safeguard Mechanism - supported by a broad alliance of over 100 WTO member countries – built upon the established set of food and livelihood security and rural development criteria to define appropriate mechanisms for developing countries to protect their agricultural sectors from these distortions. The proposal is being resisted by the major powers.

A recent proposal by the African Group (an alliance of 41 African countries) on how to manage trade in agricultural commodities offers a way forward to address the crisis in agriculture within multilateral trade rules. The proposal emphasizes the need to ensure stable, equitable and remunerative prices for commodity producers and to deal with structural oversupplies in commodity markets, with measure including taxes on exports and other export restrictions to promote development. The African proposal is one of the few serious attempts to realize the original promise of the Doha Agenda as a positive contribution to development.

In the negotiations under NAMA on natural resources (or raw materials) and industrial tariffs, the tariff cuts proposed by developed countries will have a significant and detrimental long-term effect on the industrial base of developing countries and the environment. Since developing countries’ bound tariff rates are significantly higher than those of developed countries, the effect of the proposals now on the table would mean much higher percentage cuts in developing countries’ tariffs than in those of developed countries – directly contradicting the negotiating mandate, which was to require less than full reciprocity in reduction commitments from developing countries. South Africa’s Congress of South African Trade Unions (COSATU) warns the proposals could leave countries, "seriously de-industrialised," becoming producers of primary products with the loss of jobs and wealth that the loss of value-added activity entails.

COSATU’s conclusions are substantiated by the Carnegie report, which finds the poorest developing countries and regions—Bangladesh, East and Sub-Saharan Africa—"actually lose unskilled jobs in manufacturing industries", as well as "market share in some or all manufactured products". In addition, developing countries will lose through the drastic cuts in tariff revenues, estimated to be worth some US $63.4 billion in the industrial sector alone. This loss is ten times greater the projected gains for developing countries as a whole from the Doha Round (US $6.7 billion).

Deindustrialization combined with the proposed complete or sharp tariff liberalization of natural resources under NAMA (which is planned to include fisheries, forestry and mineral resources) could also push countries into increasing dependence on commodity exports. Most commodity exports generate relatively small returns. Diverting natural resources to exports is also associated with severe negative economic effects on poor communities directly dependent upon these resources for their livelihoods. For example, 350 million people live in or next to dense forests; relying on them for subsistence or income and 60 million indigenous people are directly dependent upon forest resources for all their needs – for food and fuel, medicines and materials. Some 30 million people are directly employed in small-scale artisanal fishing. All these livelihoods are jeopardized by efforts to appropriate the natural resource base for export.

The third main area of the talks - services - is also anti-development. The pressure from the developed countries to get developing countries to liberalise services continues unabated. The demandeurs in these negotiations are calling for countries to remove market access restrictions on foreign companies and to deregulate domestic service sectors to allow foreign corporations to operate without restriction in domestic markets.

Yet most experiences of services liberalization in developing countries to date - in water, energy, health, education but also in the financial sector or in retail distribution - have been negative. In particular public access to privatised services, especially for the poor, is often diminished while the quality of service is compromised and local employment declines.

Despite these experiences, developed countries continue to pressure for further liberalisation of services under the GATS. We are also concerned that some developing countries targeted for services demands have indicated they will bind some of their service sectors that have been liberalized outside the WTO framework. We strongly disagree with such a course of action: not only will this curtail the policy space of governments to regulate their service sectors in the future, but such offers are made in return for what are actually empty offers from developed countries in agriculture.

To placate developing countries, the developed world is proposing an "Aid for Trade" scheme to address the "adjustment costs"— costs such as the short-term increases in unemployment and the destruction of some industrial sectors (for example those developed under the auspices of preferential treatment). We are completely opposed to the current Aid for Trade mechanism, the content and timing of which will be tied to recipients’ acceptance of the liberalization imposed by the Doha Agenda.

The exchange is absurd: money will not buy back policy space; nor is there even new money on the table. Instead, donors propose to simply repackage existing development assistance commitments, diverting yet more money to trade facilitation.

The current Doha package is a bad deal. It serves the private interests of the biggest corporations around the world, most of them headquartered in the developed world.

It fails to respond to a series of publicly identified public policy priorities for trade: full employment under decent conditions, sustainable management of our natural resource base, the generation of domestic capital to build virtuous economic circles in poor countries, the need to curb dumping of under-priced agricultural commodities in world markets, the market distortions created by monopoly and oligopoly power exercised by a small number of firms in many sectors of the global economy (including banking; food and commodity exports, processing and distribution; and, oil.)

It is time to start now with a new approach to the multilateral trading system. The Doha Round should be buried, starting by withdrawing support and objecting to the legitimacy of the June Mini-Ministerial, and opening the way for new rules that focus on policies that promote human rights and people-centered ecologically sustainable development."

News

Launch of NAM News Network

Kuala Lumpur, June 20 (Bernama) -- Information Minister Datuk Zainuddin Maidin will launch the NAM News Network (NNN) online news portal on June 27 here, marking the realisation of yet another initiative to keep citizens of the 116 member countries of the Non-Aligned Movement (NAM) well-informed of events and issues in each other’s country.

Bernama General Manager Datuk Syed Jamil Jaafar said the NNN replaces the now-defunct NANAP or the Non-Aligned News Agencies Pool and would serve as a new mechanism for sustained flow of information and as a communication tool for NAM citizens that is not only affordable but also speedy since it is Internet-driven.

The resurrection of the NANAP to the NNN was the outcome of the sixth conference of the Ministers of Information of Non-Aligned Countries (COMINAC VI) hosted by Malaysia in November 2005 and which was attended by more than 80 NAM member countries.

"Activated in mid-April 2006, the NNN is a Malaysia-initiated endeavour to carry general and economic news items and pictures as well as other informative, accurate, credible and timeless content concerning NAM member countries," Syed Jamil said in press statement issued jointly by Bernama’s Corporate Communication Department and the NNN Secretariat here Monday.

The web-site carries daily an average of 60 news items plus pictures contributed by 35 participating news agencies and news organisations of NAM member countries in Asia, West Asia, Africa, Latin America and Europe.

It is anticipated that eventually most if not all the national news agencies of all NAM member countries would participate in the NNN programme. With Dominica and Antigua-Barbuda as its two latest additions, the NAM now has 116 member countries.

IPU and EP call for Concrete results in WTO

Geneva, 23 June -- The Steering Committee of the Parliamentary Conference on the WTO - co-organized by the Inter-Parliamentary Union (IPU) and the European Parliament (EP) - gathered for a two-day meeting at The House of Parliaments, the IPU Headquarters to discuss progress in the Doha Round, according to IPU sources. After their meeting with the World Trade Organization (WTO) Director-General, Mr. Pascal Lamy, the parliamentarians from developed and developing countries issued a statement in which they call on all WTO Members to come to Geneva next week open-minded and politically determined.

"We are convinced that concrete results in the areas of agriculture and non-agricultural market access are both politically indispensable and possible. The Doha Round is about development. It is our common responsibility. There is no "Plan B", they said after a meeting with the WTO Director-General, Mr. Pascal Lamy.

For the Doha Round, the moment of truth is now and we cannot hide our concern. We are convinced that declarations by Heads of State and government will not suffice unless they are translated into practical agreements. Failure to act on the expressions of intent will set back the prospects for enhancing growth and reducing poverty, and increase the space for tensions in international relations. The danger is real", stressed the legislators.

Environmental Exposure Causes One-Fourth of All Disease

Geneva, 16 June -- As much as 24% of global disease is caused by environmental exposures which can be averted. Well-targeted interventions can prevent much of this environmental risk, the World Health Organization (WHO) demonstrates in a new report.

The report, Preventing disease through healthy environments - towards an estimate of the environmental burden of disease, is the most comprehensive and systematic study yet undertaken on how preventable environmental hazards contribute to a wide range of diseases and injuries.

"The report issued today is a major contribution to ongoing efforts to better define the links between environment and health," said Dr Anders Nordström, Acting WHO Director-General. "We have always known that the environment influences health very profoundly, but these estimates are the best to date. This will help us to demonstrate that wise investment to create a supportive environment can be a successful strategy in improving health and achieving development that is sustainable."

The report estimates that more than 13 million deaths annually are due to preventable environmental causes. Nearly one third of death and disease in the least developed regions is due to environmental causes. Over 40% of deaths from malaria and an estimated 94% of deaths from diarrhoeal diseases, two of the world’s biggest childhood killers, could be prevented through better environmental management. The four main diseases influenced by poor environments are diarrhoea, lower respiratory infections, various forms of unintentional injuries, and malaria. Measures which could be taken now to reduce this environmental disease burden include the promotion of safe household water storage and better hygienic measures; the use of cleaner and safer fuels; increased safety of the built environment, more judicious use and management of toxic substances in the home and workplace; better water resource management.

"For the first time, this new report shows how specific diseases and injuries are influenced by environmental risks and by how much," said Dr Maria Neira, Director of WHO’s Department for Public Health and Environment. "It also shows very clearly the gains that would accrue both to public health and to the general environment by a series of straightforward, coordinated investments. We call on ministries of health, environment and other partners to work together to ensure that these environmental and public health gains become a reality."

This research, which involved systematic review of literature as well as surveys of over 100 experts worldwide, identifies specific diseases impacted by certain well-known environmental hazards -- and by how much. "It brings together the best evidence available today on environmental links to health in 85 categories of disease and injury. Since the research focuses strictly on environmental hazards that are amenable to change, we can also see where preventive health measures combined with better environmental management and cleanup can have the biggest impact. In effect, we now have a ‘hit list’ for problems we need to tackle most urgently in terms of health and the environment," noted Dr Neira.

Chairman’s Visit

The Chairman of the South Centre Board, Dr. Boutros Boutros-Ghali paid a visit to the Centre on 13 June, 2006. At a meeting with the staff, he spoke of the various initiatives being undertaken to strengthen the Centre.

Executive Director

The Executive Director of the South Professor Yash Tandon participated in a conference in Brussels, organized by the Green Group in the European Parliament, on the Carnegie Endowment study "Winners and Losers" - the effects of trade liberalization on development and poverty eradication, and resulting needs for WTO negotiations in Hong Kong and beyond (29 June, 2006).

South Intellectual Platform

The South Centre is organizing a 2 day brainstorming workshop on "New Challenges for the South: Opportunities and Risks" under its South Intellectual Platform (SIP) Initiative. Over 20 leading intellectuals and experts working on South issues have been invited to participate in this workshop. Participants will reflect on the new issues and challenges for the South which have emerged since the work of the South Commission 15 years earlier. For more details, please refer to the website: http://www.southcentre.org/SIP/sipindex.html

Trade for Development Progreamme

- Recent research and publications

· During the last fortnight, the Chairman leading the agriculture negotiations in the WTO circulated several documents related to the agriculture modalities which contain elements on how to operationalize objectives set out by the negotiating mandates on agriculture. These texts have been subject to intensive consultations to produce decisions by end June and by the end July.

In order to help prepare developing country delegations for actively participating in these consultations, the South Centre produced the following informal notes: "South Centre comments on the revised consolidated draft modalities on the market access pillar", "South Centre comments on the revised consolidated draft modalities on export competition pillar", "Considerations on the decision-making process on Agriculture Modalities" and "Comments on the domestic support section of draft modalities on agriculture".

· The Services Project produced an informal note for LDCs on domestic regulation which summarises the various proposals on domestic regulation which contain references to LDCs and the implications for LDCs.

- Program of work with delegations in Geneva

· On the 26 June, the Trade for Development Programme organized a working lunch at Ambassadors’ level to undertake a collective assessment of the current state of play in the WTO negotiations and discuss the possibility of joining efforts, as necessary, to influence the process, in particular taking into account the forthcoming decision-making juncture at the end of June.

· South Centre Staff participated in meetings organized by Small Vulnerable Economies to analyze market access-related issues in the context of the draft agriculture modalities.

· Services Project provided assistance to LDCs on the Understanding on Special Priority and held several informal meetings on 15 June and 21 June.

· Services project held a small group meeting on domestic regulation on 14 June to discuss the state of play of negotiations and strategies for developing countries. Another meeting organized by LDCs inviting developing countries was facilitated by South Centre to discuss the Understanding on Special Priority on 21 June.

- Participation in conferences and in meetings outside the centre

· Services Project participated in a workshop organized by UNCTAD/OECD on Services Sectors, on 27 June.

Global Governance for Development

The staff under this Program:

· Together with Services Project, provided assistance to LDCs on the Understanding on Special Priority and held several informal meetings on this issue on 15 June and 21 June.

· Provided technical assistance to LDCs and other developing countries with respect to the trade facilitation negotiations.

· Prepared comments on the draft decision on a "Transparency Mechanism for Regional Trade Agreements" at the request of an LDC delegation.

· Participated in the first meeting of the International Advisory Group for the Wildlife Trade Policy Review Initiative of the UNEP-UNCTAD Capacity Building Task Force on Trade, Environment and Development (CBTF), the CITES Secretariat, and the Graduate Institute of Development Studies (IUED. The meeting was held at UNEP on 19-20 June 2006.

· Took part in multi-stakeholder consultations on "Rethinking the Role of National Development Banks" on 27 and 28 June in Paris. The consultations were organized by UN-DESA’s Finance for Development Office, Groupe Agence Francaise de Developpement, the European Investment Bank, and KfW.

· Participated in a discussion on "the Future of Global Economic Governance: What Role for the IMF and the World Bank". Organized by The Graduate Institute of International Studies (HEI) and Duke University’s Terry Sanford Institute of Public Policy, the discussion was held on 29 June in Geneva.

· Together with the ED, discussed the work of the South Centre with visiting students from the Institute of Social Studies (ISSD) based in the Hague, on 23 June 2006.

Innovation, Access to Knowledge and IP

The staff under this Program attended the second session of the Provisional Committee on Proposals Related to a WIPO Development Agenda (PCDA), from 26-30th June 2006 in Geneva. They helped assess the progress in the discussion of the development agenda, providing necessary technical assistance to developing country delegations during the negotiation.

Editorial

Biopiracy: Time To Move Beyond Debate

It has been ten years since the idea was formally brought into the World Trade Organization. But the developing countries are still being given a hard time. Yet, it is such a simple demand – that you recognize the role of the custodians of natural heritage on which intellectual property titles like patents are built. So much of wealth has been created using traditional and indigenous knowledge – which itself has evolved over thousands of years of interaction with the sinews of nature’s ecosystems. Yet, little if any advantage has been recycled to those regions and communities. This state of affairs must change. What developing countries want the WTO to do is make a beginning in this direction. That itself may not be the panacea for adequately compensating the countries and communities which nurse the building blocks of so many technological inventions which carry with them monopoly protective rights which ensure a continuous stream of pecuniary benefits over 20 years or more.

There may not be international agreement over how to define such downright theft of biological materials and associated traditional knowledge. The term often in common parlance is ‘biopiracy.’ But developing country negotiators have been using the term ‘misappropriation’ to suggest that not only is the source of origin not being identified, there has been no prior informed consent and so no question of benefit sharing arrangement either. Even ‘misappropriation’ happens to be an established legal concept with attendant civil and criminal consequences.

Piracy is so clear, nevertheless, when it comes to counterfeiting goods, especially the high-cost luxury consumer brands. The European Union and the United States have in fact launched a joint action programme of enforcement to fight against global counterfeiting and intellectual property ‘theft’. "The issue of intellectual property protection goes to the heart of the ability of the EU and the US to compete in the global economy because our high-value goods have strong intellectual content," the EU Trade Commissioner Peter Mandelson has reportedly observed. With piracy, "Our industry won’t be able to win the global race with rock-bottom prices and low quality" observes another senior EU official. In addition to cooperation at the Customs, proposals are said to include joint enforcement in third countries, including the creation of teams of EU and US diplomats in third country embassies specially tasked with data and intelligence sharing and joint surveillance.

So it seems perfectly legitimate for developing countries, many of whom are magadiverse – accounting for over 70 per cent of the biological diversity on earth – to be demanding the introduction of disclosure requirement in patents with an intention to put an end to theft that is not even acknowledged as such right now. The gene and biochemical hunt over the components of biological diversity is largely driven by their use, value or the knowledge associated with those resources, without which bio prospecting loses much of its content. This knowledge associated with the biological resources is also a product of the human intellect, which is recognized under the Convention on Biological Diversity (CBD) as deserving of protection. Hence, the protection of the components of biodiversity and associated traditional knowledge from bio piracy must be integrated within the framework of the Trade-Related Intellectual Property Rights (TRIPS) Agreement. The TRIPS Agreement as it stands today, whilst promoting the granting of patents to products based on genetic resources and associated traditional knowledge, contains no effective provisions to protect those resources and associated knowledge from misappropriation and theft. It is the absence of such provisions in the TRIPS Agreement that certainly does not support the implementation of the CBD. On the other hand, the inclusion of provisions in TRIPS to protect genetic resources and associated traditional knowledge from misappropriation would, in practice not only support fulfilment of the objectives of the CBD, but would also be in line with the fundamental objectives of TRIPS.

After all, it all started out with the objective of studying the counterfeiting of well-known trademarks and copyrights that led to the launch of the TRIPS negotiations at Punta del Este in 1986. Practically all of the disciplines in the agreement – 73 Articles in all – are intellectual property specific, not trade-related. Only Article 40 is said to be remotely trade related as it bears on anti-competitive behaviour.

Procrastination on this front, as is evidenced from the nature of the debate in the WTO (more of which will be dealt with in the next issue of the South Bulletin), will only sap the confidence of developing countries who are finding it hard to see tangible Development benefits from a trade round dubbed as ‘Development.’ Building a protective element for an intellectual property they clearly hold and nurture is but a fair demand – and perfectly in line with what TRIPS is about. It is also trade-related. In any case, the zeal to fight ‘piracy’ of one kind (counterfeiting) while pretending to ignore rising cases of biopiracy, cannot go far. If anything, it would even undermine a legitimate fight against counterfeiting. Attempts to play this issue in the WTO as part of a bigger compromise is not likely to go down well either with a number of developing countries.

Attached please find the latest issue of the: 
South Bulletin no.127 in pdf and word formats. 
Focus on moves by developing countries to stop biopiracy.

With best regards,

See attached file: bulletin127.pdf
See attached file: South Bulletin127Word.doc

Someshwar Singh Senior Editor
South Centre
Ch. du Champ d'Anier 17
1211 Geneva 19
Switzerland
Tel-(4122)7918044
Fax-(4122)7988531
singh@southcentre.org
web site: www.southcentre.org

Latest issue of the South Bulletin no.127

Attachment: bulletin127.pdf (0.18 MB), SouthBulletin127Word.doc (0.29 MB)

singh@southcentre.org

Friday, June 30, 2006