TCS Daily

World Health Assembly Coverage: The Costly Diversion

By Alan Oxley - May 18, 2005 12:00 AM

GENEVA -- Critics of trade say it is heartless -- it delivers profit and growth but ignores the human dimension, like the HIV/AIDS crisis. Getting the World Trade Organization to focus on this dimension has been Africa's contribution to the Organization. Securing a guarantee that WTO rules on intellectual property would not deny AIDS-ravaged countries access to life-saving drugs at affordable prices was virtually Africa's pre-condition for supporting negotiations in the WTO to reduce trade barriers.

They got the guarantee, but the whole issue has turned out to be fraudulent. The drugs in question were neither cheaper nor effective. HIV sufferers in developing countries are no better off and consumers in these poor countries have been denied for several years the opportunity to improve their lives by having access to cheaper imports.

There is widespread belief that patented drugs are more expensive and WTO rules which require drug manufacturers to respect patents and pay royalties close off the supply of these cheaper drugs. But numerous contributors to TCS have pointed out that claims that WTO intellectual property law denies poor countries cheaper, "generic" HIV/AIDS drugs are wrong.

Important new research by the Hudson Institute ("The Full Cost of HIV/AIDS Treatment") shows that "copy" drugs (they are popularly called "generics", but copy is a more accurate term) are not, on average, cheaper than patented drugs. Worse, one of the most common copy drugs, produced in India, may be contributing to resistance to HIV/AIDS in countries where it is used such as Brazil. This will require more expensive, second round treatment which significantly increases the overall cost of treatment.

Trade officials are entitled to be peeved. They have provided platforms to enable NGOs like Oxfam, Jamie Love (Consumer Project on Technology), Medecins sans Frontier and Martin Khor (Third World Network) to make their exaggerated claims and have listened patiently. They negotiated with South Africa and Kenya who carried the case to ensure access to these copy drugs were not prevented by WTO rules.

Agreement on launching the Doha Round was held up until this issue was settled. Precious time preparing for the WTO Ministerial meeting at Cancun in 2003 was taken up on this issue. Trade officials knew this was not a matter for the WTO (it is basically a health issue, not a trade issue) but accepted the need to show a human face.

They are now entitled to ask "to what end?" The producers of the copy drugs knew they were deficient. Once questions started to be asked about their medical effectiveness, many were withdrawn from the market. The US Food and Drug Administration offered to fast track testing of the quality of these drugs to give them international verisimilitude (there is no international standards authority capable of doing this nor is there an appropriate national agency in India where most of them are manufactured) but the Hudson Study shows no one took it up.

Trade officials should now ask a second question? Did the African countries who pressed this matter so hard really care anyway about using trade remedies to strengthen their capacity to tackle such serious disease problems? Another study just released by a new group, the "No taxes on Drugs and Devices initiative" (NtDDi), reveals that developing countries themselves restrict the supply of drugs to treat HIV/AIDS and other serious diseases by taxing them with internal taxes and tariffs.

The WTO provides a golden opportunity to support treatment of HIV/AIDS by eliminating these trade measures. There is already a framework in the WTO for removing tariffs on pharmaceutical products. Poorer developing countries have ignored it. Furthermore, many are now arguing that developing countries should not have to reduce barriers to imports in the Doha Round negotiations, egged on by the very same NGOs who put together the cheaper drugs campaign.

This is public policy idiocy. Campaign to have a trade organization turn itself inside out to provide access for health treatment which turns out to ineffective and costly, but turn the back on simple and concrete action available in the organization to reduce trade barriers and increase availability of treatments that are effective.

Trade officials from African countries who have pushed for this state of affairs in the WTO will have to explain themselves. Trade barriers are higher in poor countries than rich countries and are restricting growth. These officials need to justify the delay all this activity has contributed to efforts in the WTO to agree on measures to reduce trade barriers and raise the living standards of their people. The completion of this current round of trade negotiations (the Doha Round) is way past due. It should have started in Seattle in 1999. The Doha Round itself should have finished last year. The best guest for completion now is 2007.

The NGOs don't have to explain themselves. Their position is clear. Their statements show their objective in this so-called "affordable access" campaign is to promote what they call "public health". They want intellectual property rights circumscribed because they object to the fact that they create private property rights. The apparent puzzle is why they have chosen the WTO as the vehicle to push a health campaign. The answer is simple. It is, of course, the leading international institution which promotes free markets and private property rights.

Let us hope our trade officials finally work this out and spend no more time on this costly diversion. Their efforts in the WTO should be spent on improving the economic welfare of people in poor countries by reducing trade barriers.

Alan Oxley is a former Ambassador of Australia to the GATT and host of the Asia Pacific page of Tech Central Station.


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