IPR protection, Special 301 Report - 2013 Annual Report out

For those interested in intellectual property protection issues around the world and the US view on enforcement of these rights the 2013 Special 301 Report was released yesterday. It is found here. I had blogged about the previous year's report here.

As usual I am not commenting on the details of the report but confining myself to the aspects of dispute settlement that were referred to here. The report stated:

"The United States continues to monitor the resolution of disputes announced in previous Special 301 reviews. The most efficient and preferred manner of resolving concerns is through bilateral dialogue. Where these efforts are unsuccessful, the United States will not hesitate to use the WTO dispute settlement procedures, as appropriate."

No surprises here in the use of dispute settlement at the WTO to pursue perceived national interest. I was curious to know if any reference to the the proposed measures by Antigua in relation to the US Gambling case (DS285) would be referred to in terms of cross retaliation in the intellectual property space. Reference to this, though not directly related to that dispute, made interesting reading:

"Also of concern is the distribution over the Internet of software that allows for the circumvention of technological protection measures used by rights holders to protect their content. A particularly troubling example is that of SlySoft, a company headquartered and operating in Antigua, which developed and sells a program called “Any DVD HD” enabling the user to defeat the encryption technology embedded in Blu-ray Discs that prevents unauthorized reproduction and distribution. Antigua’s Copyright Act makes it illegal to manufacture or import for sale or rental any such circumvention device. The consortium of electronic manufacturers, software companies, and motion picture studios that developed these technological protection measures has worked with the criminal enforcement authorities in Antigua for over 5 years to enforce this statute and have this case prosecuted. However this case has proceeded very slowly."

I was just trying to envision the implication of this technology for Antigua's next moves on the cross retaliation issue in the US Gambling case. No bets on this issue!

Is it time for GATS 2.0?

While the GATT and other WTO Agreements deal with the trade in goods, the General Agreement on Trade in Services (GATS) deals with the trade in services. It is the multilateral agreement dealing with the trade in services with individual member countries underrating varying commitments in different service sectors.

Now there is news that several countries are undertaking an exercise to enter into a new international services agreement to go beyond the GATS to further liberalize the services sector. The failure of the Doha round to achieve further liberalization of the services sector is put forth as one of the reasons for this move. It is another example of the "plurilateral" route that many countries are taking to international agreements with the failure of multilateralism. The USTR website explains the rationale for seeking fresh negotiations in this area with 20 other trading partners quoting USTR Ambassador's letter seeking fresh negotiations. Coverage of new services not covered under GATS, ensuring greater transparency and predictability in regulations covering services of trading partners and addressing new issues that arise int he global market place and the way services trade is conducted are offered as the reasons for entering into a new agreement apart from increasing access to markets for national services sectors. Stewart and Stewart summarizes the move well in this analysis. Peterson Institute for international Economics in this paper has suggested a new framework for an international agreement on services.

Will this be a movement towards GATS 2.0? While the US intends to enter into negotiations with 20 trading partners initially (Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, European Union, Hong Kong, China, Iceland, Israel, Japan, Korea, Mexico, New Zealand, Norway, Pakistan, Panama, Peru, Switzerland, Turkey), the notably absentees in this initial round are Brazil, Russia, India and South Africa. Will we see more countries joining the bandwagon or will it remain a plurilateral agreement without many emerging economies? What implications would this have on developing economies that have strong service sectors? It is clear that the US is leading this endeavour of a new agreement - a classic case where liberalization of the services regulation is linked to increase one sports of their services worldwide. This letter of the USTR Ambassador is clear about the intention of entering into new negotiations - more access to markets and more jobs at home.

While change in the way trade is conducted often does not get reflected in existing agreements making agreements not only obsolete but requiring change, what is the best route to go about it? Is this new international agreement in services another example of the failure of the WTO to address the realities of trade? Is it a triumph of plurilateralism over multilateralism? How should the WTO respond? A good analysis of whether the agreement should be within or outside the WTO and its implications is found here. How should developing countries outside the initial negotiations respond? Would there be a coalition of developing economies against this negotiation or will they eventually join viewing it as beneficial? Countries strong in the services sector would have to analyze their relative strengths and weaknesses and potential for their national service sector with increasing market access.

Dispute settlement and developing countries - How does one engage?

WTO disputes have been a recurring theme of this blog. The dispute settlement mechanism is considered as the crown jewel of the WTO system bringing credibility, predictability and certainty to the system with focus on a rule-based resolution of disputes rather the a power-based system.

A dispute in the WTO can only be brought forth by a member government. The State is the only party before a dispute resolution process even though the interests of private businesses are impacted. For example, in the case of the Airbus and Boeing case at the WTO though the affected parties are large, private aircraft manufacturers, the parties to the dispute are the European Union and the U.S.

Disputes at the WTO require sufficient preparation, competence and thorough groundwork before it is launched. An ICTSD paper titled "Where do WTO cases come from?" highlights the importance of preparation and assessment of cases in the context of the complexity and sensitivity of the issue involved.

"In short, undertaking a WTO dispute requires a significant commitment of nearly full time personnel, which can be a real challenge for WTO Member governments. Some governments, such as the US and EU participate in so many disputes that they can rationally hire a very large staff of in-house WTO litigators, but even these two countries struggle when local industry does not contribute legal support for a case. A comprehensive and detailed assessment of a case done early on in the process somewhat alleviates the work during the very busy litigation proceedings."

The paper notes that loss or impact on market access is one of the primary reasons for WTO litigation by member countries, usually on behalf of their private business interests. WTO litigation is all about preparation and competence involved of experts preparing the case.Many countries engage outside counsel for their cases. Private industry is also expected to contribute to the expenses of the case. Brazil, amongst developing countries, has been at the forefront of engaging with the dispute settlement system to further its national agenda.

"An example of a mechanism in a developing country that is in part similar to USTR’s cooperation with outside counsel but very different with respect to the funding and accessibility of WTO litigation is Brazil. A small office of highly sophisticated WTO experts in the Foreign Ministry, many with experience in Brazil’s mission to the WTO in Geneva, manages the cases. However, cases are usually brought only if the local industry agrees to pay for outside counsel to help.The outside counsel may provide research and submission drafting support but the office in Itamaraty remains in charge. The difference between both models of litigation management became clearly visible in the Brazilian Cotton Case, where unlike the Brazilian counterpart, the US cotton industry did not pay for a large legal support effort. Consequently, USTR was outnumbered by the Brazilian officials as well as US lawyers and US academics all working on the side of Brazil.The US might have lost the case even with more resources, the example underlines the ability of some developing countries to use the WTO dispute settlement process on an equal (or better) footing with larger WTO Members."

The paper discusses the considerations involved in a legal and economic assessment of WTO disputes before they are initiated. It gives a detailed account of the need for expertise, assessment and recommends how disputes must be handled by member countries, especially developing countries, at the dispute settlement process at the WTO. It stresses on pre-litigation legal, economic and strategic assessment of disputes before initiation of a trade dispute at the WTO. The importance of creating in-house WTO expertise is often cited as a pre-requisite to a succesful engagement with the multilateral trading system. The paper, inter alia recommends:

"Create in-house WTO expertise. Most, although not all, developing countries have a mission in Geneva with people assigned to the WTO. Monitoring the daily functioning of the WTO, with its numerous committee meetings, as well as observing litigation as a third party, should be part of the mission’s responsibility. And equally important, delegates who have served in those roles in Geneva should remain involved with WTO issues when they are posted back home. Often, there are bureaucratic obstacles – such as if the mission is part of the foreign ministry – to keeping people on WTO assignments, but a conscious attempt should be made to track people who have served in the mission to the WTO and recapture them from time to time in their career so the expertise is not lost. In addition, many developing countries have students in programs such as the World Trade Institute at the University of Berne or at universities such as Georgetown University Law Center, Columbia Law, National University of Singapore, Cambridge and Geneva and many others. Many of those students would be very valuable as interns in a country’s mission to the WTO in Geneva, or working in related offices in the capitols. Efforts could be made to seek those people out, or at least welcome them when they apply."

How many developing and underdeveloped countries can undertake this exercise of competency building? While facing WTO disputes against developed countries one is confronted with highly qualified legal experts from law firms with years of experience. How does a developing country counter this? Countries increasingly rely on the same set of international law firms to fight their cases. This is one of the dealings with the issue. Another way is to systematically develop internal expertise, engage legal academics within the country and ensure that a local talent pool is nurtured and developed with sufficient expertise to assist the government in WTO cases.This would require long term strategic planning and involvement of a large number of stakeholders. It is, perhaps, the only way to engage with the multilateral legal system.

How will Russia engage with the multilateral system?

Strong opposition to trade policies and measures not only get expressed by filing of trade disputes at the dispute settlement mechanism of the WTO. The Councils at the WTO also provide important platforms for countries to express their reservations against measures they see as discriminatory or incompatible with the WTO. How much of this leads to a resolution of the dispute is debatable, but the Councils do act as platforms where all members can align and realign their positions.

The recently held   Council on Trade in Goods saw such an expression of opposition to Russia's measures after it entered the WTO. I had earlier blogged about Russia's recycling fee as a possible violation of WTO rules here and here. Several members including Japan, EU and the US raised concern on the recycling fee as unfairly impacting imported vehicles while not impacting locally made automobiles.

"The EU expressed concern over what it described as a surge of protectionist measures taken recently by the Russian Federation. It criticized two measures in particular: the ban on importation of live animals, especially slaughtered pigs; and the recycling fee for automobiles, which imposes fees on imported cars but gives a choice of non-payment to domestic cars. The EU said it is consulting with Russia on these measures. 

Japan also expressed concern that the recycling fee discriminates against foreign car companies. The US shared the concern about the recycling fee. In addition, it urged Russia to take the final step to join the WTO’s Information Technology Agreement (ITA), and to notify its Customs Union to the WTO. Norway expressed concern over Russia’s system of permits subject to veterinary control. 

Russia requested all comments in writing so it could respond in writing."

Russia's entry into the WTO will expose it to various kinds of challenges which it must be prepared for. WHile it was not a WTO member such domestic measures were hardly questioned. Now they become the centre of every trading country which has an interest. How will Russia respond?  How will it equip itself with the legal and technical capacity to fight these cases? It will need multidisciplinary teams of trade policy analysts, legal experts, lawyers, economists and domain specialists to take on a slew of dispute settlement cases. It will have to take on the might of the USTR and EU Trade Commissioner. How Russia will fare will become increasingly clear in the coming days as disputes will be filed against it at the dispute settlement mechanism. Russia would have to recognize that it is part and parcel of being a multilateral member rather than an "assault" on its sovereignty. Will it have to carefully and creatively engage the multilateral system like, perhaps, China did? Early times for Russia still.

U.S. takes on Argentina now - Import licensing procedures challenged

This was expected for some time. The U.S. finally initiated a dispute against Argentina by requesting for consultations for what it called "restrictive import licensing procedures" that violate Argentina's commitments at the WTO. I have earlier blogged about Argentina's measures here, here and here. The E.U. and Japan are the other members that have also taken Argentina to the DSM. Reports of Argentina striking back with a complaint against Spain's biofuel policy is reported here. MoneyBox has a succinct analysis of the "tit for tat" policy surrounding some of these trade measures which typifies a "protectionist" trend necessitated by domestic compulsions.

The gist of the US request is reproduced below:

"Argentina often requires the importers of goods to undertake certain commitments, including, inter alia, to limit their imports, to balance them with exports, to make or increase their investment in production facilities in Argentina, to increase the local content of products manufactured in Argentina (and thereby discriminate against imported products), to refrain from transferring revenue or other funds abroad and/or to control the price of imported goods. 

The issuance of CIs and the approval of DJAIs are being systematically delayed or refused by the Argentinean authorities on non-transparent grounds. The Argentinean authorities often make the issuance of CIs and the approval of DJAIs conditional upon the importers undertaking to comply with the above-mentioned trade-restrictive commitments. 

These measures restrict imports of goods and discriminate between imported and domestic goods. They do not appear to be related to the implementation of any measure justified under the WTO Agreement, but instead appear to be aimed at advancing Argentina's stated policies of re-industrialization, import substitution and elimination of trade balance deficits. 

... 

Argentina's measures appear to be inconsistent with Argentina's obligations under the following provisions of the covered agreements: 

(i)  Articles III:4, X:1, X:2, X:3(a) and XI:1 of the GATT 1994; 

(ii)  Article 2 of the TRIMs Agreement; 

(iii)  Articles 1.2, 1.3, 1.4, 3.2, 3.3, 3.4, 3.5, 5.1, 5.2, 5.3 and 5.4 of the Import Licensing Agreement; and 

(iv)  Article 11 of the Safeguards Agreement." 

The USTR officially announced this request for consultation here. This also seems to be one of the first disputes wherein the new agency created for trade violation enforcement in the U.S. - The Interagency Trade Enforcement Center - seems to have played a role. I had earlier blogged about setting up of this agency here. 

The Center has been established within the USTR itself and is headed by an Assistant USTR named as the Director of the Center. The setting up of the Interagency Trade Enforcement Center with representatives from Agriculture,Homeland Security, Justice, State, Treasury and the Intelligence Community is a good example of interdepartmental co-ordination to take on trade disputes with other WTO members. Most of the times WTO disputes are not the preserve of the Ministry dealings with Commerce alone. It has an impact on the jurisdiction of other departments as well and is usually concerned with areas concerning other departments. An agency that can co-ordinate this effort with a strong team of law experts, trade analysts and researchers, is perhaps, what is required for effective engagements within the WTO. Can this Center be a model for other countries, albeit with local modifications, to engage with the multilateral system?

Deep divide on accession - Russia inches towards WTO membership

Russia's entry into the WTO looked more certain with its accession having been ratified by the Parliament by a slender majority. The majority 238-208 vote itself showed the sharp divide domestically to the accession to the WTO. It also shows internal domestic pressures with respect to multilateral trade rules and this dichotomy will continue even s Russia becomes an active member of the WTO.The Bill would now move to the upper chamber of the Russian parliament and would then have to be signed by the President for it to become law.


(Courtesy Reuters/Denis Balibouse)

The accession news was widely reported in the BBC, Reuters, Chicago Tribune, The Moscow Times and the RT. The official U.S. reaction to the Duma approving the accession came from the USTR:

"U.S. Trade Representative Ron Kirk welcomed the news of the Russian Duma’s ratification of Russia’s World Trade Organization (WTO) accession package.

“We are pleased to hear that Russia has completed this critical first step in its domestic process for approving the terms for becoming a Member of the World Trade Organization. Russia’s membership in the rules-based global trading system of the WTO will contribute to Russia’s economic growth as well as provide us with new opportunities to guide and grow our bilateral economic relationship. We reiterate our call on Congress to act now on Jackson-Vanik and Permanent Normal Trade Relations legislation,”Ambassador Kirk said."

This piece in The Moscow Times offered the rationale for viewing WTO membership as being positive for Russia:

"But maybe the biggest and most important benefit that WTO membership will bring is that it should bring the cost of goods down.

The cost of living in Russia (and especially Moscow) is famously high. Journalist Yulia Latynina once poignantly asked why a cup of coffee in Moscow cost as much if not more than the same in London or New York when the average income was less than half of those in the West.

The reason, of course, is the closed nature of the Russian market, which allows big companies to charge huge margins with impunity and has lead to the astronomical growth and creation of a super-rich class filled by all businessmen that have successfully set up and captured a market niche. That will start to change.

This will also have important political consequences. Going into the Duma elections last year, a survey found that the No. 1 biggest concern among voting Russians was the high cost of living. WTO-inspired competition could start bring down prices from this year to a level more appropriate to Russia's income levels. Making life more affordable will make life better and so make President Vladimir Putin more popular. If he does have ambitions to stand again for the presidency in 2018 (the gossip in the Kremlin is that he won't, but that could change), then he will be able to point to lower prices as a real and significant (and vote-winning) achievement of this term in office."

There is a recognition that WTO membership will be a trade-off and there will be benefits with costs. there will be winners and losers in the process. How Russia will address the loss and cope with the challenges would be interesting considering that a large segment of the democratic process were not in favour of the accession.

On the other side, what is the validity of the Jackson Vanik Amendment of the U.S. in relation to the PNTR status for Russia. Will address this issue in another blogpost. 

USTR IPR Report 2012 - Some thoughts

The USTR publishes every year an annual review of the state of Intellectual Property Rights (IPRs) protection and enforcement in trading partners around the world popularly known as the Special 301 Report. The Report for 2012 can be found here. While I am not dwelling into many controversial aspects of the country "watch lists" and the like, two sections caught my attention:

1. Implementation of the WTO TRIPS Agreement

2. WTO Dispute Settlement

The report alluded to the state of TRIPs compliance as perceived by the United States today:

"The TRIPS Agreement, one of the most significant achievements of the Uruguay Round, requires all WTO members to provide certain minimum standards of IPR protection and enforcement.  The TRIPS Agreement is the first broadly-subscribed multilateral IPR agreement that is subject to mandatory dispute settlement provisions.

Developed country members were required to implement the TRIPS Agreement fully as of January 1, 1996.  Developing countries were given a transition period for many obligations until January 1, 2000, and in some cases, until January 1, 2005.  Nevertheless, certain members are still in the process of finalizing implementing legislation, and many are still engaged in establishing adequate and effective IPR enforcement mechanisms. 

Recognizing the particular challenges faced by least-developed countries (LDCs), in 2005 the United States worked closely with them and other WTO members to extend the implementation date for these countries from January 2006 to July 2013.  The LDC members in turn pledged to preserve the progress that some have already made toward TRIPS Agreement implementation. Additionally, the LDC members have until 2016 to implement their TRIPS Agreement obligations for patent and data protection for pharmaceutical products, as proposed by the United States at the Doha Ministerial Conference of the WTO.  

In December 2011, WTO Ministers decided to invite the TRIPS Council to give full consideration to a duly motivated request from LDC members for an extension of the TRIPS Agreement transition period.  The U.S. supports this decision and looks forward to continuing to work with LDCs and other WTO members in this regard.     

The United States participates actively in the WTO TRIPS Council’s scheduled reviews of WTO members’ implementation of the TRIPS Agreement and also uses the WTO’s Trade Policy Review mechanism to pose questions and seek constructive engagement on issues related to TRIPS Agreement implementation.  Furthermore, the United States continues to work with other WTO members to encourage a discussion within the WTO TRIPS Council on implementation of the enforcement-related provisions of the TRIPS Agreement.  The United States hopes that the TRIPS Council can generate a useful sharing of experiences related to IPR enforcement to ensure effective implementation of enforcement obligations."

On the Dispute Settlement mechanism it referred to specific cases it had brought against China and EU and had this to say:

" The United States will continue pursuing the resolution of WTO-related disputes announced in previous Special 301 reviews and determinations.  The most efficient and preferred manner of resolving concerns is through bilateral dialogue.  Where these efforts are unsuccessful, the United States will not hesitate to use the dispute settlement procedures, as appropriate."

The reliance on WTO dispute settlement procedures to further one's domestic national interests is portrayed in the Report which is a sharp contrast to some voices in the US to abandon the WTO process after the adverse rulings of the Panel/AB in COOL, Cloves Cigarettes and Tuna cases. It is evident from the para relating to implementation of the TRIPS that the US actively engages the multilateral trade rules to further its national interests. It is often argued that the WTO and multilateral trade rules are a hindrance to national sovereignty. However, it is worthwhile to analyse how one can engage with the multilateral system in its various fora (including Dispute resolution) to further one's legitimate trade interests. While every dispute settlement need not be viewed as a trade war, developing countries should develop the capacity to effectively engage with the dispute settlement process to protect what they perceive as domestic interests be it producers, consumers or the economy as a whole.Engaging with the WTO can be done at two levels - one, using the existing provisions (exceptions) to further one's domestic policies and two, seeking remedies under the Agreements to ensure market access and unfair restrictions on trade are not imposed. However the engagement comes at a cost - and that is one needs to accept the multilateral trading system as a rule based, fair system as well as being a credible player in terms of compliance and action. With domestic compulsions and realities these are tough tightrope walks - but globalised governance and its impact was never going to be a simple cakewalk.