OFFICE OF TRADE NEGOTIATIONS

for trade matters

SPECIAL OTN Update

April 22, 2013

In nov a ti on A ne w fron ti er i n trad e m ultila teralis m

Innovation is emerging on the multilateral agenda arguably as the new frontier of multilateral cooperation at the WTO. This is not surprising for a number of reasons. It is clear that innovation as a development issue would increasingly influence the multilateral trade agenda because as the Global Knowledge and Creative Economy deepens, developed and developing countries are becoming concerned about the important linkage between innovation performance and trade performance and competitiveness. Although there are many factors that affect international competitiveness, innovation is the only factor that allows countries regardless of their current stages of development, to achieve sustainable economic growth and competitiveness in the long term. Innovation is in its own way amassing a political economy within the global knowledge and creative economic system in the sense that the ability to harness and wield innovation effectively will determine the future winners of this economic landscape and

can be a tool to close the development gap between rich and poor countries. The prospects for the evolution of the multilateral trade agenda are also worth some consideration. As barriers to trade progressively reach de minimis levels, the WTO agenda as it currently stands will eventually reach natural conclusion. The question that emerges is what will be the future of multilateral trade cooperation?

OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

The removal of barriers to trade should be considered but a single component of a wider comprehensive framework to ensure the effective and sustainable participation of both developed and developing countries within the global trading system. Arguably, an essential next step for trade multilateralism is facilitating the promotion of trade. Given that the nexus between innovation and trade is inherently trade promoting, there should be room for this issue within a multilateral trade agenda that is predicated on trade promotion. The TRIPS Council Discussion on the Nexus between IP and Innovation In light of the foregoing, it is noteworthy that in November 2012, a new agenda item, Intellectual Property (IP) and Innovation, was proposed for debate and discussion by the United States of America (U.S) and Brazil at the meeting of the WTO TRIPS Council. In addition to the US and Brazil, a number of countries participated in the discussion including, China, Egypt, India, Bangladesh, Chile, Chinese Taipei, Mexico, Peru, Canada, Australia, New Zealand, Switzerland, Japan, the European Union (EU), and Korea. In addition to recording measures that are being adopted by WTO Members within their own

jurisdictions to encourage and promote innovation, the Meeting revealed a range of perspectives on the role of IP in innovation development and promotion. Amongst the various interventions that were offered by the participating WTO Members, which offered perspectives with varied nuances, certain trends in viewpoint emerged. It appeared that all the Member States concurred that intellectual property protection is important for innovation development but IP protection is but one of a larger mix of different tools to promote innovation. With respect to providing IP rights protection that optimally encouraged innovation development, there were concerns articulated about finding the appropriate balance of rights and obligations. Such concerns primarily related to balancing such rights and obligations with respect to the health and pharmaceuticals sectors. In this regard, primarily developing countries such as India and Brazil emphasized the need to take advantage of the TRIPS flexibilities. On the other hand, the EU cautioned about the use of TRIPS flexibilities, signalling that measures adopted under the TRIPS flexibilities should not be construed as the norm but as the exception otherwise IPR regimes would be rendered uncertain and unsustainable. These opposing comments between developing countries and developed countries seem to reflect that frictions still remain regarding the interpretation of TRIPS flexibilities. The debate on the TRIPS, including the TRIPS Flexibilities, to some degree, pitted developing countries against developed countries prior to the adoption of the Doha Declaration, which affirmed categorically that the TRIPS can and should be interpreted and implemented in a manner supportive of WTO Members right to protect public health and in particular, to promote access to medicines for all. The recognition of the need to maximise the use of

OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

TRIPS flexibilities does however underscore a previous point that the WTO Members did themselves observe, which is that IP protection is not enough to facilitate innovation development. It is clear moreover that IP protection regimes are insufficient to achieve sustainable innovation performance evenly across both developing and developed countries. Defining the Appropriate WTO Forum for Innovation Development Issues The observation cogently made by Egypt that there exists an innovation divide amongst WTO Members that needs to be bridged in order to secure innovation for all, provides an interesting segway that takes the discussion about innovation outside the narrow confines of the protection of IP and the TRIPS agenda. If it is accepted that innovation development is concerned with a number of variables other than appropriate levels of IP protection, and that innovation development is necessary for trade promotion and trade competitiveness, then outside of the TRIPS Council, what would be the appropriate WTO forum to deal with trade and innovation development issues in a manner that would engender innovation for all and as a corollary, promote effective trade participation and competitiveness for all? The answer to this question is not immediately apparent. However, arriving at a solution is not insurmountable. The circumstance under which innovation has appeared on the WTO agenda is not dissimilar to the circumstance that defined how intellectual property and trade were initially linked in the multilateral trade agenda. Although the GATT 1947 does mention types of intellectual property rights, there was no reference to a programme to address the trade related aspects of intellectual property rights per se. The linkage

between IP and trade that culminated in the TRIPS Agreement was advanced primarily through the influence of the United States. Similarly, notwithstanding the textual reference to innovation under the TRIPS Agreement, there is no distinct programme to address innovation development as a specific trade issue within the WTO. A linkage between innovation and trade in the WTO, albeit under a discussion about IP, has been promoted through the initiative of two countries Brazil and the U.S. An important distinction is that unlike the context that led to the TRIPS Agreement, with respect to innovation, a developed and a developing country have both influenced the agenda. This coalition of interests between a developed and developing country augurs well for the potential for creating a platform for innovation within the WTO. The creation of such a platform would not be impaired by a perception that the platform itself would benefit developed country interests alone a status that beleaguered the IP and trade agenda prior to the conclusion of the Uruguay Round. An early multilateral consensus that innovation is critical and that it is linked to trade competitiveness

OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

can help lead to the negotiation and adoption of a specific and appropriately calibrated agenda or agreement on trade and innovation within the WTO in the future.

Significance for CARICOM At this juncture however, it is essential that CARICOM countries enter the fray before the dust settles in order to weigh in on this subject matter and related agenda as it evolves. Just as other WTO members have done at the meeting of the TRIPS Council it would be useful for CARICOM to register how it regards the linkage between IP and innovation. Importantly it would be necessary for CARICOM to go further to provide its own advice on how it perceives the context of trade and innovation development for small developing economies and what kind of multilateral cooperation, platform and rules of engagement would be appropriate to deal with that context. As long as the subject of innovation remains on the agenda of the TRIPS Council, CARICOM should utilise opportunities to participate in upcoming TRIPS Council Meetings to ensure that the agenda for trade and innovation is not dismissed and that it is influenced in a manner that is not inimical to small developing states interests. It should be remembered that with respect to the subject of the nexus between trade and innovation, CARICOM has already been a distinct leader and pioneer. In its bilateral trade negotiations with developed countries namely the European Union and Canada, CARICOM has been seeking to persuade with the argument that innovation is inextricably linked to trade performance and competitiveness, and that for this reason, innovation needs to be treated squarely within the trade cooperation agenda with its trading partners. Within the multilateral trade arena, CARICOM should exploit its trade diplomacy and capital that it has been leveraging within the bilateral trade arena. Furthermore, in this regard, CARICOM should seek to encourage consensus and to make strategic alliances with other WTO Members that would bolster its position on this issue which is central to its economic development. The OTN invites you to participate in dialogue on trade and innovation development by registering with your respective economic planners and trade representatives within your own countries your perspectives on the linkages between innovation, trade performance and sustainable economic development. The summary of the discussion on IP and Innovation from the Minutes of the November TRIPS Council Meeting is available on the OTN website for your reflection and discussion. Please access the Minutes on the OTN website homepage at http://www.crnm.org/index.php?option=com_docman&Itemid=113&task=doc_download&gid=1444

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OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org