Inside US Trade
AFRICAN GROUP REJECTS EU TRIPS AMENDMENT PROPOSAL
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Date: October 7, 2005

The African group of World Trade Organization members has spurned the
European Union¹s request for it to endorse an EU proposal for a
controversial amendment to WTO rules covering the production and
export of cheap, generic copies of patented drugs, although the two
sides are likely to continue talking, according to Geneva-based
sources.

The EU proposal, which is opposed by the U.S. for different reasons
than the African countries, is still under discussion with the African
group, but those countries would like the EU to accept several
modifications that the European Commission believes would make the
proposal unacceptable to other WTO members, delegation sources said.
Without those changes, sources close to the African group said, they
would not join the EU proposal.

This complicates efforts to reach an agreement on the proposed
amendment to the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS) before the Hong Kong ministerial, which is
something the EU had hoped its proposal would make possible, according
to government sources. An agreement on this issue would clear one
potential distraction to other talks on agriculture, services and
industrial market access in Hong Kong, these sources said.

At issue are negotiations on converting a 2003 decision adopted by the
WTO¹s General Council into an amendment to TRIPS. The decision grants
a waiver from TRIPS rules so that poor countries can import generic
copies of patented drugs that are produced under a compulsory license
in another country. WTO members committed to adopting the amendment
when they agreed to the decision, but have so far been unable to agree
on how to do this.

The EU offered a proposal last summer to amend Article 31 of TRIPS to
introduce a reference to a new annex to TRIPS. Under the proposal,
that annex would include the August 2003 decision virtually word for
word, with two minor exceptions (Inside U.S. Trade, Aug. 5, p. 8).

The African group has asked that the EU proposal be modified so that
some parts of the decision are reflected in the actual text of the
amendment, and not in the annex, according to two sources close to the
African group.

For example, paragraph 3 of the TRIPS decision states that
compensation to a patent holder of a drug produced under a compulsory
license for export should be paid by the country exporting the drug
and also waives any requirement on the importing country to pay
compensation provided compensation is paid by the exporting country.
African group countries want similar language in the text of the
amendment.

One developing country delegation source said the EU saw the
possibility of including this language in the TRIPS agreement instead
of in the annex with the rest of the 2003 decision as opening the door
to new negotiations on issues that should have been settled during
lengthy talks on the TRIPS decision. Delegation sources said the
African group was not proposing a word for word inclusion of paragraph
3 of the decision in TRIPS, although one developing country source
said it was ³almost² a word for word repetition.

This source also said the annex and the TRIPS agreement have the same
legal standing, as the source said the EU and other WTO members have
said, it should not matter if some parts of the decision are included
in the agreement while some of the decision is in the annex.

But another source said it would be politically difficult to break off
bits of the decision for inclusion in the actual TRIPS agreement while
leaving the rest of the decision in the annex, even though technically
the annex and TRIPS should have the same legal standing. ³I don¹t see
why there should be a pick and choose, where some would be in the
article and some in the annex. What justification would there be?²
this source said.

Some observers of the talks have charged that some members of the
African group appear to be trying to use these negotiations to win
victories on points that were lost in the initial negotiations on the
decision, and that this could be one reason why they are pushing for
some parts of the decision to be placed in the TRIPS.

Another reason for demanding changes to the EU proposal could be that
this would make it more likely that a final decision would not be made
until the Hong Kong ministerial, a developed country government source
said. However, African group sources said they would like to reach an
agreement before the Hong Kong ministerial.

A second modification proposed by the African group deals with
paragraph 6 of the TRIPS decision, which allows generic drugs produced
under a compulsory license for export to be shipped by that importing
country to other countries with which it shares a regional trade
agreement, provided those countries share the same health problem
being addressed by the imported medicine. This is intended to allow
groups of least developed countries to pool resources to meet the
hurdles of issuing a compulsory license and it provides a waiver from
TRIPS Article 31(f), which requires a compulsory license to be issued
predominantly for the domestic supply of the country issuing the
license. Paragraph 6 states that this waiver should not prejudice the
³territorial nature² of the patent rights in question.

The African group also proposed that this waiver be included in the
amendment proposed by the EU, and not in the annex.

The most controversial part of the EU proposal from the U.S.
perspective is its call for a chairman¹s statement, read at the time
of the decision¹s adoption and placing certain restrictions on the
ability of advanced developing countries to use it, not to be included
as even a footnote to the annex. The EU proposed that the chairman¹s
statement just be re-read when the amendment is adopted, but the U.S.
has insisted that there must be some reference to the chairman¹s
statement in the actual amendment to TRIPS.

The U.S. has argued that WTO members could make statements after the
chairman¹s statement is read that would undermine the amendment.