Developing Country Trade Issues: Standards, IPRs and Dispute Settlement

1 December 1997

The CUTS-ICTSD Roundtable on Trade Issues for Developing Countries was held from 27-28 November in Geneva (see cover story for an overview). The first session focused on  multilateral trade rules of particular importance to developing countries.

Standards

While a few developing countries have managed to diversify their exports during the evolution of the GATT, most still primarily export basic commodities, particularly agricultural products. These exports, rarely challenged until recently, are now increasingly in danger of being rejected by developed countries on the grounds of sanitary and phytosanitary (SPS) standards and other technical barriers to trade (TBTs).

SPS measures relate to the protection of animal, plant and human life within the territory of WTO members regarding the entry, establishment or spread of pests, diseases, additives, contaminants, toxins, disease-causing organisms, etc. Technical regulations pertaining to product characteristics or their related production processes (including or exclusively dealing with terminology, symbols, packaging, marking or labeling requirements) fall under the Technical Barriers to Trade Agreement (TBT). All products - industrial and agricultural - are subject to TBT regulations.

Both TBT and SPS use standards set by other bodies. The SPS Agreement permits governments to justify their barriers only on the basis of scientific findings, but this provision does not apply to technical barriers to trade. Developing countries should be aware that rapidly proliferating standards will make it technically more difficult for them to abide by importers' regulations. Under the circumstances, Ms Gretchen Stanton, Secretary of the WTO Committee on SPS Measures, offered the following suggestions for developing countries' consideration:

  • increased involvement in the activities of international standard-setting bodies such as the Codex Alimentarius, to address their interests;
  • transparent national standards regulations to avoid future conflicts during discussions on standards; and
  • increased spending on upgrading standards of processed goods if found below currently accepted international norms rather than incurring expenditure on just increasing the output, especially in the area of agricultural products.

Participants identified several critical issues for the future, as well as steps developing countries could take to lessen the impacts of standards and technical regulations on their exports:

  • focus on developing processes that work well for them and prove their equivalence with respect to internationally  accepted norms;
  • participate in discussions at the WTO Committee on Trade and Environment to reduce the risk of environmental standards becoming a major obstacle to trade;
  • exercise caution while using genetically modified seeds as the produce of such seeds might face non-tariff barriers in the future; and
  • participate in discussions taking place on labour standards in the ILO as some measures (for instance, setting an age limit on labour or banning child labour) could result in additional TBTs on their exports.

Intellectual Property Rights

As developing countries try to move up the ladder in terms of producing value-added goods or making structural shifts in their production - venturing into areas such as bio-technology - they will now need to be careful of the Trade-Related Intellectual Property Rights (TRIPs) Agreement.

The TRIPs Agreement rests on three fundamental principles:

  • general GATT principles, including national treatment, most favoured nation treatment and non-discrimination;
  • signatories are bound by the provisions of already existing intellectual property rights (IPR) treaties; and
  • signatories must provide minimum level of protection for IPRs.

The right for inventors to hold patents on their inventions is an important one. However, the benefits of including IPRs in the GATT/WTO are still being vociferously debated (most developing countries resisted including intellectual property rights protection in the WTO agreements during the Uruguay Round negotiations, preferring to leave such matters under the World Intellectual Property Organisation, WIPO). Several participants noted that the issue of TRIPs was conveniently relegated to the background during the Singapore Ministerial Meeting at the cost of new issues such as investment and competition policy.

Professor Jagdish Bhagwati, Chair to the session, argued that economic logic did not support the inclusion of IPRs under GATT and saw their inclusion in the multilateral trading system as a `political settlement'. He seemed exasperated about the minimum level of protection laid down, e.g. 20 years for patents, 10 years for industrial designs and 50 years for copyrights. He fired questions to the audience: was there any economic justification for the time frames identified for these protection periods? If not, could the TRIPs provisions be taken up as an issue for the millennium round of 1999? If developing countries supported the idea, could WIPO help them put up a case?

Mr Carlos Fernandez-Ballesteros of WIPO said that while developing countries may have lost by agreeing to TRIPs, once TRIPs was on the Uruguay Round `single undertaking' agenda, they either had to sign on or stay out of the WTO altogether. Renegotiating the patent provisions would be very difficult but developing countries should position themselves to take advantage of the upcoming revision of other TRIPs clauses. Mr Fernandez-Ballesteros drew attention to a new unit WIPO was establishing to deal with global issues affecting developing countries, including biodiversity, folklore and cultural heritage. He also pointed out the benefits of having intellectual property rights under the `tooth and claw' of a binding and enforceable agreement, through which other treaties could be enforced.

Dispute Settlement

An effective dispute settlement system goes a long way in protecting the rights underprivileged countries.

The multilateral trading system provides for a common system of rules and procedures applicable to disputes arising under any of its legal instruments. The main responsibility for administering these rules and procedures lies with the General Council which acts as the Dispute Settlement Body (DSB). Because of the inclusion of time-limits in the Dispute Settlement Understanding (12 months maximum on appeal, nine months normally), the wronged member can expect to receive compensation within a year to 18 months. One of the important principles of the dispute settlement process is that a dispute can only be brought to the DSB once efforts to settle it through bilateral consultations have failed. Professor Ernst-Ulrich Petersmann, Legal Advisor to the WTO, expressed his satisfaction regarding the rising number of cases settled through consultations.

Either of the parties involved in the dispute can appeal against the decision of the DSB. The Appellate Body consists of seven people of recognised authority who are unaffiliated with any government. Of the seven, only three persons are called to serve in any one case. Professor Petersmann stressed that the Appellate Body had to confine itself to legal issues contained in the panel report. Its mandate was to interpret these legal issues and submit its report to the DSB within a period of 60-90 days.

Noting that 105 cases had been brought to the dispute settlement mechanism in a span of just of two-and-a-half years, Professor Petersmann said the frequent use of the procedures reflected the WTO membership's confidence in the system's efficiency and fairness. One-third of the complaints had been filed by developing countries, many more than under any other international treaty, resulting in some precedents in interpretation that could prove helpful in the future. Active participation in the dispute settlement process could assist developing countries in identifying their strategic interests  a useful excercise in view of the full review of the dispute settlement procedures slated to take place in 1998. Better use of the dispute settlement system could also reduce the costs borne by developing country industries and consumers during unending political negotiations, Professor Petersmann said.

Given the potential benefits of the dispute settlement mechanism, the question is how equipped are developing countries to reap these benefits. Many of them lack the legal and financial resources to hire the services of foreign experts and have few or no lawyers of their own specialising in WTO law. Professor Bhagwati and Professor Petersmann both made strong requests to the WTO and UNCTAD to strengthen developing country expertise in dispute settlement. This could be included as an agenda item to the 1998 review.

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