How Trade Barriers Keep Africans Adrift; West’s Farm Subsidies Drive Ghanians Out of Rice Market, Fueling Poverty and Migration

Tamale, Ghana — ON THE LUSH savannas of northern Ghana, rice farmer Kpalagim Mome lets half his rice paddies lie fallow as he watches his community break up and leave for Europe.

The 42-year-old son of a once-prosperous farmer, Mr. Mome blames his misfortunes on high U.S. and European agricultural subsidies, which have priced his own produce out of Ghana’s market.

“We can’t sell our rice anymore. It gets worse every year,” Mr. Mome says. His father’s broken-down Mercedes sits on wooden blocks outside his hut. Years of economic hardship have driven three of his brothers to walk and hitchhike 2,000 miles across the Sahara to reach the Mediterranean and Europe. His sister plans to leave next year.

Mr. Mome’s plight is repeated throughout farm communities in Africa and elsewhere in the developing world. Grinding poverty, often exacerbated by Western agricultural subsidies, has compelled thousands of Africans to attempt difficult — and usually illegal — journeys to Europe, frequently by boarding rickety boats for hazardous voyages across open seas to the Spanish Canary Islands or to Italy. Thousands die every year as they cross the Mediterranean at ever-more-dangerous spots to avoid detection by European patrols.

After global trade talks at the World Trade Organization collapsed this summer, the chances that rich countries will cut agricultural subsidies — and that others will reduce their import tariffs — have become even smaller, darkening the outlook for agriculture in the developing countries of Africa, Latin America and Asia. Like Ghana, many run strict open-market regimes advocated by the World Bank and International Monetary Fund, with no payments to farmers and limited import tariffs.

Some Western politicians see the danger. “Subsidies are a scourge for poor farmers in developing countries,” says Peter Mandelson, Europe’s top trade negotiator. “They make it more difficult for poor farmers to compete, increasing poverty and, in some instances, driving migration. This is one of the key reasons why a successful conclusion of trade talks is so important.”

Yet trade ministers face strong lobbies that make it politically difficult to cut aid to their own farmers. High trade barriers in major rice-importing nations, such as Japan and Indonesia, also lower world demand and depress prices.

Defenders of farm payments say U.S. rice farmers, faced with rising exports from Thailand and Vietnam, would go out of business without subsidies. U.S. aid also helps poor consumers buy cheap staples.

Critics say U.S. and European subsidies depress world rice prices and make it harder for Africans such as Mr. Mome to compete. The U.S. paid its 9,000 rice farms $780 million of subsidies in 2006, according to the Department of Agriculture.

“Acre per acre . . . rice is the most distorted market in the world,” says Daniel Griswold, director of Cato Institute’s Center for Trade Policy in Washington.

Ghana is the U.S.’s biggest rice market in Africa. An average ton of U.S. rough rice cost $240 to sow, tend and harvest this year. By the time that rice left a U.S. port in July, U.S. subsidies cut the price to foreign buyers to $205, the USDA says.

That discount prices Mr. Mome and farmers in other developing countries out of the market. Using equipment that ensures U.S.-level rice quality, Mr. Mome’s costs come in at $230 a ton, he says.

“U.S. farmers have gotten too greedy. Until there is some change in this, you’ll have a huge part of the population in poor countries trying to leave and raising hell,” says Stephen Gabbert, Managing Principal at international business consultancy Gabbert & Associates.

Mr. Gabbert is rallying support from 25 countries — including Ghana, Mexico and India — to fight U.S. rice subsidies at the WTO. Prior legal challenges have succeeded: In 2005, Brazil won a legal battle over cotton subsidies against the U.S. at the WTO. Mr. Gabbert says the rice sector’s complaints mirror those of cotton farmers.

Even so, officials in Ghana’s cinderblock trade ministry in Accra point to the gulf that separates a powerful trading nation such as Brazil from African minnows.

“We don’t have the capacity or the legislation to sue the U.S,” says Lawrence Sae-Brawusi, director at the Ghana Ministry for Trade and Industry. “We don’t do so well when it comes to the arm-twisting.”

In the 1970s and early 1980s, rice harvested around Tamale and further north fed Ghana and boosted exports to neighboring nations. Crop-dusters and combine harvesters worked the fields. Mr. Mome’s father took bankers for rides in his Mercedes and slaughtered four bulls to celebrate the end of Islamic holy month of Ramadan.

In 1983, Ghana adopted free-market changes, followed by more in 1986. It earned accolades from the World Bank as the most promising West African economy after cutting duties and eliminating the aid that protected its rice sector. While the country’s overall economy is expanding, poverty in the rural north has spiraled. Farming has been set back decades: Men harvest with small, hand-held sickles; women clean and sort rice by hand. According to the Ghana Rice Interprofessional Body, the country’s three-ton-per-hectare (2.47 acres) yield is half what it could be.

As farm income shrinks, communities are fragmenting. Thirteen miles east of Tamale, the 800 villagers of Tugu are saving up to send Yussif Yakubu to Europe. They hope the 32-year-old psychology graduate will find work and send money home.

Men are leaving despite the uncertainty of the journey. Though some find success — Siba Mohammed turned the soccer tricks Mr. Mome taught him into a University of Maryland scholarship — the majority struggle as illegal aliens. Patrols caught and returned Mr. Mome’s younger brother, who tried to leave Ghana in the anchor cabin of a freighter. One year later, he made off again, this time hitchhiking across the Sahara. The last time Mr. Mome heard from him, he was cleaning office buildings in Libya and looking for a boat ride to Europe.

The main option for women and girls — unless they leave with their husbands as Mr. Mome’s sister did — is to make their way to Accra, about 310 miles south. They work by day as porters, carrying on their heads the shopping and firewood of richer Ghanaians for 20 or 30 cents a load.

“Our families are scattering. It’s not surprising people are getting angry against the West,” said Adam Mohammad Nashiru, President of Ghana’s Peasant Farmers Association.

Rejuvenating Ghana’s rice production will be tough. Irrigation ditches have largely silted up, and the cost of getting them back into production is high. Many farmers are searching for other crops, from cotton to shea nuts and sugar cane.

All of these plans face obstacles. Textile factories in the south use inexpensive imported cloth from Indonesia and Hong Kong. Attempts at shea-tree plantations have failed, with trees mysteriously failing to produce nuts. High European Union tariffs block other projects. Still, some farmers are tied to their fallow fields.

“I would like to leave, but I can’t,” says Mr. Mome. “Who will look after my father? Who would look after all of this?”

Juliane von Reppert-Bismarck. Wall Street Journal. (Eastern edition). New York, N.Y.: Dec 27, 2006. pg. A.5

EMPIRES with EXPIRATION DATES

Empires drive history. But the empires of the past 100 years were short lived, none surviving to see the dawn of the new century. Today, there are no empires, at least not officially. But that could soon change if the United States – or even China – embraces its imperial destiny. How can they avoid the fate of those who came before them? | By Niall Ferguson

[Sidebar]

Publicly, the leaders of the American and Chinese republics deny that they harbor imperial designs. Yet there are moments when the mask slips.

[Sidebar]

[ Want to Know More? ]

For more on the challenges facing modern-day empires, see Niall Ferguson’s Colossus: The Price of America’s Empire (New York: Penguin Press, 2004). In “Impenal Amnesia” (FOREIGN POLICY, July/August 2004), John Judis draws parallels between America’s current imperial experiment in Iraq and its failed efforts in the Philippines and Mexico decades ago.

Edward Gibbon’s classic Decline and Fall of the Roman Empire (New York: Hurst and Company, 1880) explores the longevity of the Roman Empire. For a look at the history of Eastern empire, see John Julius Norwich’s Byzantium (New York: Knopf, 1989).

The seminal work on empires of the modern world is The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000 (New York: Random House, 1987) by Paul Kennedy. Mark Mazower’s Dark Continent: Europe’s Twentieth Century (New York: A.A. Knopf, 1999) examines the failings of 20th-century European empires.

For links to relevant Web sites, access to the FP Archive, and a comprehensive index of related FOREIGN POLICY articles, go to www.ForeignPolicy.com.

[Author Affiliation]

Niall Ferguson is Laurence A. Tisch professor of history at Harvard University and senior fellow at the Hoover Institution at Stanford University. His latest book is The War of the World: Twentieth Century Conflict and the Descent of the West (New York: Penguin Press, 2006).

Niall Ferguson. Foreign Policy. Washington: Sep/Oct 2006., Iss. 156;  pg. 46, 6 pgs

Vietnam Must Map Its Own Flight Plan

WHETHER ONE IS sitting at a sidewalk café in a major city of Vietnam, or wandering the countryside-where 70% of the Vietnamese population resides-growth and development are the persistent impressions. The country has taken the much traveled road of allowing foreign direct investment to flow in and drive exports, which has in turn spurred the domestic economy in two long spurts of growththe first between 1991 and 1997, and the second from 2000 until who knows when. This strategy, coupled with strong government infrastructure spending has produced very good outcomes in the past 20 years of doi moi. Vietnam is now witnessing a second wave of foreign investments unseen since 1997. In 2004 and 2005 the growth in new FDI was 41% and 50% respectively, when compared to the previous year. Cumulative FDI (on a pledged basis to the end of 2006) is now almost $60 billion, whereas about $35 billion had been realized by the end of 2005.

Vietnam’s economic growth rate in the past five years has averaged 7.5%. This was the best among all member states of the Association of Southeast Asian Nations, but of course second to China in the East Asian region. Annual per capita income is now $640. Absolute poverty is climbing down while income inequality has inched up. Land prices in the center of Hanoi and Ho Chi Minh City are among the highest in East Asia. Outbound tourism has exceeded inbound tourism, and the demand for consumer goods is immense, with overseas shopping trips frequent for the rich. Shares of GDP by manufacturing and services together have climbed up to exceed 70% and each are both above the share of agriculture, which is expected to eventually drop to 20% by 2020.

Similar But Different

AT THE HEART of Vietnam’s successful strategy is economic reform first, administrative reforms second, and political reforms last-as evidenced by the frequent clamping down on dissident voices that call for greater political freedoms. Like its counterpart in China, the Vietnamese Communist Party believes that economic performance is the key pillar of its legitimacy, allowing the Party to brush aside concerns about the lack of political reforms. By keeping the Vietnamese Communist Party in charge and pushing liberal democratic changes off the stage, political stability thus achieved has provided a predictable environment for domestic and foreign business. This lopsided strategy has, however, sprung fundamental socioeconomic changes that the socialist ideology must explain and justify. Certainly, the Chinese joke about “signal left but turn right” still applies to both countries to a large extent. Both still suffer from the abscess of a dominant state sector that is funded chiefly by the state budget, and a huge state contribution to the GDP. The state still dictates economic activities and if economic activities endanger the political supremacy of the Party, inevitably the pace of economic growth has to slow down. Both countries also suffer from rent seeking corruption, and a single dominant political party leads each country.

The key ingredient for the success that Vietnam and China have had in drawing in FDI is their cheaper labor costs as well as huge domestic markets that are often perceived as ready for foreign penetration. The power of these comparative advantages, true when we compare Vietnam and China with the older members of Asean (such as Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand), somehow become dimmer when we compare Vietnam only with China. These two are after all two competing economies; while they do not produce all the same goods, costs structures of their manufacturing goods are similar, with China having an advantage because of its much bigger market and thus lower costs of production for Chinese producers. For Vietnam to succeed in the rising age of China, it has to distinguish itself from China, although past mimicking had elevated Vietnam to present developing dragon status. Vietnam will have to map its own flight plan. The question is: Can it do it?

A Flight Plan for Vietnam

FIRST, VIETNAM’S GOVERNANCE- political and corporate-has to become much more nimble and accountable than China’s. Inevitably, larger countries tend to be more chaotic than smaller countries. So Vietnam-as a relatively small nation-has no excuse not to perform well in this area. Simply put: Good governance attracts investment. Like China, Vietnam is stymied by years of socialist bureaucracy. According to government surveys, bureaucrats are severely underpaid compared to costs of living. In particular, the government needs to play especially close attention to ensure the quick disbursement of pledged foreign investments-which run to almost double the amount of realized investments.

Second, Vietnam should make sure that its comparative advantages in a market economy are in specific areas that do not target mass markets in the way Chinese comparative advantage does. The processing of agricultural goods is a good example. Many of the agricultural goods Vietnam produces are inherently different from those produced in China. While a shining performer-and likely to benefit from Vietnam’s upcoming WTO entry-agriculture is, however, on the decline. Growth of the agriculture and fisheries sector was only 4% in the last five years, compared to 7% for services, and above 10% for industry and construction.

There are two key manufacturing industries that Vietnam needs to develop to get ahead of China. In the electrical and electronics industry, “Made in China” still continues to pose a problem in the minds of some consumers worldwide, many of whom equate it with poor quality. Vietnam should exploit this by striving to produce good quality, mid- to high-end products. Japanese electronics firm Canon seems to be the biggest believer as it has almost doubled its investments in recent years. In November, Intel announced plans to increase its investment in Vietnam to $1 billion from the $300 million it pledged in February. The chipmaker will build a plant close to Ho Chi Minh City, which is expected to go into production in 2009. While few expect Vietnam to make any rapid jump up the value chain on its own steam, it seems plausible that many multinational corporations will be willing to offer Vietnam a helping hand, especially if it helps the MNCS diversify some risk away from China.

Hot on the heels of Intel’s move, Bill Gates’ decided to come to Vietnam and see for himself what opportunities the country holds-this time in the software industry. This is the second high value-added industry in which Vietnam has a comparative advantage. The use of the Latin alphabet in the Vietnamese language puts it ahead of the character-based Chinese language in terms of responding to the needs of the software industry. Already Vietnamese companies are conducting outsourcing and subcontracting for many software companies overseas. While not a regional giant yet, the tendency for Vietnamese, especially youths, to take quickly to new and hot technology will drive the Information Communications Technologies (ICT) market in Vietnam and, overtime, greatly increase the ability of Vietnamese firms to supply to the global market.

In the race with China, one point to note is Vietnam is probably not competing directly with the inner provinces of China, but those that are on the coast and are attracting huge amounts of FDI and domestic investments for export industries. The production networks in southern and coastal China are not necessarily relocatable into Vietnam, but perhaps planners in Hanoi need to see how such networks can be established across its own provinces. In order to do so, an immense boost in education and training for the market in close consultation with investors is essential for success. It is oft-repeated that Vietnam has a literacy rate of over 90%, but the quality of education-even basic education-leaves a lot to be desired.

Chop-chop!

IT SHOULD ALSO be said that Vietnam’s leaders-advised by economic, foreign policy and defense officials-are not reacting quickly and positively to Chinese moves to integrate Vietnam and the rest of Southeast Asia with the southwestern provinces of China. While there is agreement at the highest political level, movement on the Vietnamese side to realize the “One Circle, Two Corridors” initiative is slow. Here is an enormous opportunity to spur growth in the northern Vietnamese provinces, but the government machinery is not getting its act together.

Vietnam should also move quickly to restructure and reorganize the state sector of its economy. In most countries, the private sector is usually more efficient and quicker to respond to market needs than state enterprises. Achieving this faster than China should put Vietnam in an advantageous position. Again, however, I am also pessimistic on this because the Chinese have shown they are more willing to chop and change quickly and to rally around goals defined by a set of strong leaders than are the Vietnamese. Years after a declaration to reform its state enterprises, there remains little hard evidence of such reform. The bright spark on the horizon is that becoming privatized and eventually becoming a public company is now a very attractive prospect for many major state enterprises, as a number of listings late last year and in 2006 have shown. Hopefully such benefits could persuade directors of state companies to work towards listing and subject themselves more to market discipline than bureaucratic inertia. In this sense the stock exchange, too, clearly will have to strengthen its watchdog role.

[Photograph]

In November 2006 chipmaker Intel announced plans to increase its investment in Vietnam to $1 billion.

But perhaps the most important element of Vietnam’s flight plan is the need to reignite enthusiasm for and allegiance to strong leadership. A disunited leadership in Vietnam appears to be the root cause behind the slow pace in many areas of reform-state enterprise; ideological; and administrative reform, including reform of the system for government appointments and promotions. The last time any semblance of a policy aimed at quickly promoting talent was introduced-namely the Cadre Rotation System (in place during the period 2001-06)-it was severely criticized by the Ninth Central Committee for being loaded with factional overtones.

The greatest challenge to the system is the fairly even distribution of power, and the fragmentation of authority. Almost every area of public policy has several masters to answer to, and appointments of ministers often have to pass through more than 10 authorities before a nod can be given. Previous prime ministers, as recent as Phan Van Khai (1998-2006) have lamented that they do not even have the freedom to hire and fire ministers as they wish and yet must be responsible for the government’s performance. Shifting factionalism, based on everchanging interests rather than ideology or firm beliefs and loyalties, divides the Vietnamese leadership. Peaceful, socialist Vietnam has not produced another charismatic leader able to pull all factions behind him as Ho Chi Minh did so well. To be like Ho Chi Minh is to have a vision; now the construction of this vision is so mired in the capitalist versus socialist controversy, and the security versus growth debates, that vision is simply impaired. What follows is a high tendency to compromise and strike consensus. Therefore, the Communist Party holds much power over society, but within the Party this power is fragmented. Corruption has gradually become the single most effective method of increasing power by any political faction, but the more this method is used, the less any leader would have authority over the others alongside and everybody else below. Thus the fight against bureaucratism and corruption in Vietnam is one that is decades old rather than one born after doi moi in 1986.

A Positive Prognosis

YET THE PROGNOSIS for Vietnam seems to weigh in more on the good than the undesirable, with some problems thrown in between. So long as the economic performance is good and employment available, society is likely to be stable and therefore performance legitimacy will kick in. On the margins, a small number of activists make a lot of noise but are getting nowhere near to dislodging the Communist Party. They will stay on the margins so long as the media is still under the tight leash, as it is now. In industrial relations the state will continue its facilitating stance toward business by effectively outlawing labor strikes. Per capita income will continue to grow, pulling consumer demand along. GDP will grow at about 8% per annum which should see the economy double in the next 10 years, when compared to present levels.

Of course, there is always the possibility of Vietnam being beset by hubris. In this scenario Vietnam does little to try to exert itself but instead sits proudly on its current achievements and becomes a hardto-please player in the globalized world. This hubristic stance occurred once before, in the mid-1990s, just prior to the Asian Financial Crisis, which led the Vietnamese to rethink their FDI and domestic macroeconomic policies. Could a second bout of smugness emerge? This is possible if the current wave of investment surges greatly and Vietnam succeeds beyond its own dreams in the next three to four years. “The world needs Vietnam” would be the slogan of this conceit. I am not quite sure that Vietnamese bureaucrats (rather than leaders) fully feel the intensity of the longterm competition from the country’s north, as the opportunities for reform and successes in the last 20 years have led them to feel that the most they need to do is to continue with current economic policies and the investors will come. The reality, of course, is quite different.

Another scenario is one where Vietnam leaps to a higher point in the value chain compared to where it is now. There is some evidence that a little of this is happening but in only baby steps. Yet the potential is considerable. As mentioned, Vietnamese youths take to computers very quickly and there is much potential in the ability of the ICT industry to excel, espedaily the software sector. The government does have a vision to try to lift the country into the top 15 software-producing countries of the world by 2015. Perhaps this vision does not necessarily have to be confined to ICT. Other high value-added industries that Vietnam might start, develop, and achieve encouraging results in include: high-end services in tourism; evolving into a financial hub for southwestern China and Indochina; and excelling as an export and services hub for southwestern China and Indochina, posing a very strong challenge to Thailand and to Singapore. In addition, Vietnam is probably the only country in Southeast Asia that knows Eastern Europe more than the other countries, given its historic ties to the socialist economies of the region. This could allow Vietnam to forge partnerships with other Southeast Asian countries such as Singapore that wish to have stronger economic linkages with Eastern Europe.

A particularly worrying issue is how Vietnam will stand up to competition from China. For sure, it will be overwhelmed by China in many areas, but will manage to defend itself in areas where it has a nonefficiency-based advantage. Vietnam is currently experiencing a boom because its policies have improved compared to three years ago and many foreign investors seek to diversify away from China. Inevitably, some hubris will return, but some lessons have been learned and it is unlikely the country’s leaders will become as complacent as they have been in the past when faced with economic success. Within Vietnam the awareness that the country cannot stand still but has to adapt and change will heighten; however, the ideological and political problems will continue to be insurmountable in so far as they are firmly entrenched in a fear of the unknown. This may drive Vietnam to keep a watchful eye on other countries’ (read China’s) flight plans for some time to come.

David Koh. Far Eastern Economic Review. Hong Kong: Dec 2006.Vol.169, Iss. 10;  pg. 53, 5 pgs

Asia’s Problematic Patent Laws

WHEN TRADE MINISTERS adopted the Declaration on the TRIPS Agreement and Public Health at the 2001 WTO Ministerial Conference in Doha, they hailed it as “proof that the multilateral trading system could respond to global public-health concerns.” The Doha Declaration had confirmed the right of governments to use public-health safeguards available in the TRIPS Agreement which were intended to ensure that intellectual property rules-like drug patenting-did not get in the way of achieving public-health objectives such as access to affordable medicines. However, very few countries have used the mechanisms cited in the Doha Declaration to increase access to medicines, and recent developments in trade negotiations give rise to concern that the use of these safeguards is being compromised.

A number of reasons may explain the scant use of the Doha Declaration and the public-health safeguards it was intended to provide: First, there has been increased donor funding available for the procurement of antiretroviral drugs (ARVS), which has reduced pressure to find cheaper treatments. Secondly, drug companies have offered price discounts on some ARVS to a number of eligible countries. Thirdly, public-health safeguards affirmed by the Doha Declaration have been underused by developing countries because they are not well understood. These safeguards include practices like compulsory licensing, which allows for the import or local production of generic versions of patented drugs, and parallel importation, which enables the import and re-sale of patented drugs from countries where they are sold at a lower price. Finally, the availability of the cheaper generic versions of ARVS from Indian drug manufacturers has enabled many countries to put more people on ARV treatment.

But this last factor is gradually changing. Indian manufacturers have been able to produce generic versions of ARVS thanks to a provision in the TRIPS agreement that allowed countries to delay patent grants on pharmaceutical and agrichemical products until 2005. But now India has had to put into place a product patent regime, with the effect that generic production of new drugs that will come under patent protection in India will no longer be permitted.

Of great interest in India now is the opening of the patent mailbox-where thousands of applications for patents on pharmceutical and agrochemical products were regularly deposited since 1995-and the decision of the Indian patent offices to grant or reject these applications. The patent mailbox is the system by which countries that have chosen to use the grace period to delay granting of pharmaceutical product patents, are required to receive such product patent applications, and to grant or reject them at the expiry of the period. Where a patent is granted on a pharmaceutical product, this may bar the production of that product in India.

The new Indian law, however, includes provisions that permit the continued production of generic drugs, even though a patent application in the mailbox is granted, if generic production predated the grant of the patent in India and the generic producer makes payment of royalties to the patent holder. For new drugs that have yet to come on the market however, this may mean that no generic versions will be produced until the expiry of patent protection-unless generic companies in India decide to make use of TRIPS public-health safeguards to permit the local production of patent-protected drugs before patent expiry.

Second-line drugs

THIS SHOULD BE an impetus for countries to seriously consider the use of the publichealth safeguards, such as compulsory licensing and parallel imports. As new medicines are typically patent-protected for 20 years in all but the least developed countries, generic suppliers, including those in India, will not be able to reproduce patented medicines without compulsory licensing. This is already the case of medicines such as second-line HIV treatments. International efforts, such as the World Health Organization’s “3×5″ campaign, have generated awareness on the need for treatment and have helped to put more people on treatment. But it has also increased the need for second- or thirdline ARVS, as patients need to switch to these drugs to continue effective treatment after they develop resistance to firstline drugs.

But the competition from generic drugs that brought about big price drops for firstline ARVS does not exist for the newer second-line medicines. Producers in India have not started producing many of these second-line drugs, for a variety of reasons, including uncertainty over the current patent situation, and the lag time between developing a product and rolling it out. So prices of second-line ARVS can be six to 12 times higher than their first-line counterparts, with problematic implications for already overstretched health budgets.

In light of this, there are signs that alternative strategies are being developed to ensure the future sustainability of ARV treatment in Asia. In India, as patent applications in the mailbox are examined, there have been a series of patent opposition cases which seek to challenge the patent applications. These challenges are made on the basis that the applications do not meet the criteria for patenting as required in the Indian patent law, and the public-health interests do not justify the grant of such patents. The Lawyers Collective in India, working in tandem with the Indian Network of People Living with HIV, has sought to challenge applications for patent protection of key HIV/AIDS medicines on the grounds that they are deemed frivolous or of a nonsubstantive nature. In Thailand, there has also been a series of challenges of patents granted on pharmaceutical products. In 2002, the Thai courts ruled that because pharmaceutical patents can lead to high prices and limit access to medicines, patients are injured by them and can challenge their legality. More recently, the Thai Network of People Living with HIV has challenged the legality of a patent application by a pharmaceutical company which eventually led to the withdrawal of the patent application for a specific ARV formulation in Thailand. Increasingly, patents are being challenged on legal and ethical grounds, as well as from the standpoint that access to HIV medicines is a fundamental human right.

In Malaysia, the government decided to permit the imports of generic ARVS in 2003. Since these ARVS were patented in Malaysia, the government used a form of compulsory licensing that allowed public hospitals to procure generic ARVS from India. Indonesia in 2004 on the basis of a similar provision in its patent law, also granted a license to enable local generic production of two ARVS that are currently patent-protected in the country. The net effect in Malaysia was a substantial reduction in the prices of a range of HIV/AIDS medicines, in some cases by as much as 80%.

Beyond TRIPS and Doha

ASIAN COUNTRIES MUST take care that trade aspirations do not undermine the ethical and legal imperatives of providing adequate access to treatment. In the case of the HIV/AIDS pandemic, trade regimes have a direct impact on human lives. While the Asian region has lower rates of HIV prevalence compared to Africa, for example, there is still an imperative to provide treatment to all who need it, not only as a matter of respecting the human right to health, but also to prevent the spread of the disease.

In 2001, having adopted the Doha Declaration on TRIPS and Public Health, trade ministers also pledged to great fanfare that they would make trade liberalization benefit even the poorest countries. Five years on, however, negotiations for the so-called Doha Round have come to a standstill, and talks were suspended in July this year. Because multilateral trade negotiations have proved difficult, a number of countries have been pursuing a strategy of bilateral and regional trade negotiations. Such free trade agreements (FTAS) are sometimes employed to influence other partners in the multilateral negotiations and to establish precedents that can consolidate positions on problematic issues.

In the Asia-Pacific region, a number of countries are now negotiating or entering into negotiations of bilateral trade agreements that may include higher levels of patent protection. The so-called “TRiPS-plus provisions” include extensions of the minimum 20-year term of patent protection, restrictions on the use of compulsory licensing and parallel imports, and requirements for exclusive rights over the use of data from clinical trials that are submitted as part of the drug-approval process. The effect of these types of provisions will be essentially to extend the period of market exclusivity of patented products, which would potentially make them more expensive, given the delaying of competition.

Developing-country FTA signatories usually have defensive negotiating interests on intellectual property. Nonetheless, a number of them have been willing to accept stronger intellectual property rules as a quid pro quo for concessions in other areas, such as preferential access to developed countries’ markets for agricultural and manufactured products. But there is insufficient evidence that this is an equal bargain. There is, therefore, an urgent need for further research and empirical data before policy makers make decisions such as these that can incur a heavy human cost.

Cecilia Oh,  Caitlin Wiesen. Far Eastern Economic Review. Hong Kong: Dec 2006.Vol.169, Iss. 10;  pg. 50, 3 pgs