What is national interest?

Joseph Stiglitz has a hard hitting article on trade agreements and interests that need to be protected while negotiating them in this piece in the Guardian. What caught my attention is the commercial interests versus national interest argument that I have tried to grapple with in many pieces of this blog:

"...no trade agreement should put commercial interests ahead of broader national interests, especially when non-trade-related issues like financial regulation and intellectual property are at stake. ... 

If negotiators created a genuine free trade regime that put the public interest first, with the views of ordinary citizens given at least as much weight as those of corporate lobbyists, I might be optimistic that what would emerge would strengthen the economy and improve social well-being. The reality, however, is that we have a managed trade regime that puts corporate interests first, and a process of negotiations that is undemocratic and non-transparent."

Some food for thought for trade policy negotiators around the world? Whose interests are at stake? Are not domestic business interests national interest? national interest may be a broader term but is not pursuing the interest of one's domestic industry part of national interest? Is it antithetical to common citizen's interests? Can they go together? Sometimes they do sometimes they dont? Who decides and on what terms? How does one do the balancing act? What if one's national business interest is impacting local citizen's interest in the trading partner? Is international trade about advancing one's own domestic business interest or addressing the issue of inequity worldwide? Can national interest be an amalgam of domestic corporate interest and the interest of a number of stakeholders? Like one trade policy maker stated recently can it combine the interest of the "worker, farmer, rancher, manufacturers, service providers, innovators, investors and consumers" all at once? 

Domestic policy space and TRIPS

The tension between domestic policy space or the ability to carve out public policies based on domestic political will and intrnational trade rules has been a recurrent theme of this blog. There are no easy answers and neither is the debate in black and white. It is not whether countries have domestic policy space - it is how much of space they have and how do they exercise it? A parallel theme is can the claim of domestic space be misused for blatant, discriminatory protectionism?

I have highlighted the debate around domestic space and TRIPS in this blogpost and this one regarding compulsory licensing a few months ago. Joseph Stiglitz and Arjun Jayadev in their Project Syndicate piece interestingly highlighted the importance of domestic policy space in the context of the recent decisions around patentability and TRIPS.

"According to the Indian Supreme Court, the country’s amended patent law still places greater weight on social objectives than in the US and elsewhere: the standards of non-obviousness and novelty required to obtain a patent are stricter (especially as they pertain to medicines), and no “evergreening” of existing patents – or patent protection for incremental follow-up innovations – is allowed. The court thus reaffirmed India’s primary commitment to protecting its citizens’ lives and health. 

The decision also highlighted an important fact: Despite its severe limitations, the TRIPS agreement does have some (rarely used) safeguards that give developing countries a certain degree of flexibility to limit patent protection. That is why the pharmaceutical industry, the US, and others have pushed since its inception for a wider and stronger set of standards through add-on agreements. 

Such agreements would, for example, limit opposition to patent applications; prohibit national regulatory authorities from approving generic medicines until patents have expired; maintain data exclusivity, thereby delaying the approval of biogeneric drugs; and require new forms of protection, such as anti-counterfeiting measures. 

There is a curious incoherence in the argument that the Indian decision undermines property rights. A critical institutional foundation for well-functioning property rights is an independent judiciary to enforce them. India’s Supreme Court has shown that it is independent, interprets the law faithfully, and does not easily succumb to global corporate interests. It is now up to the Indian government to use the TRIPS agreement’s safeguards to ensure that the country’s intellectual-property regime advances both innovation and public health."

Of course, the debate whether TRIPS provides policy space depends on the area of applicability one is talking about as well as the view one holds on the extent to which international rules should impact domestic policy making. However, it is interesting to see the debate shifting from whether TRIPs provides that flexibility to how one can use the flexibility to pursue national interests. And what applies to TRIPS applies to all other WTO agreements. The questions is whether developing countries can unearth and effectively engage with these flexibilities.

Joseph Stiglitz on trade wars

Joseph Stiglitz writing in the Project Syndicate has shed light on the tension between China and the U.S. on the issue of currency misalignment or manipulation. The U.S. has over the years accused China of deliberately undervaluing its currency in order to boost exports and create a trade surplus. There is a plethora of literature on the issue of currency manipulation and WTO law about which I am not discussing here. Stiglitz's piece titled "No Time for a Trade War" touches upon two aspects that I found relevant: the role of the WTO in curbing the rise of protectionism and the futility of trade wars.

"When the Great Recession began, many worried that protectionism would rear its ugly head. True, G-20 leaders promised that they had learned the lessons of the Great Depression. But 17 of the G-20’s members introduced protectionist measures just months after the first summit in November 2008. The “Buy American” provision in the United States’ stimulus bill got the most attention. Still, protectionism was contained, partly due to the World Trade Organization."

Raising the issue of the futility of a trade war by labeling China as a currency manipulator and risking retaliatory trade measures, he feels that a trade war serves nobody's interests.

"No one wins from a trade war. So America should be wary of igniting one in the midst of an uncertain global recovery – as popular as it might be with politicians whose constituents are justly concerned about high unemployment, and as easy as it is to look for blame elsewhere. Unfortunately, this global crisis was made in America, and America must look inward, not only to revive its economy, but also to prevent a recurrence."

I guess these are points that are quite evident but coming from Stiglitz it definitely requires a mention.