PHM-Exch> TRIPS Council on 15-16 October should agree to extend the transition period that exempts LDCs from implementation of WTO TRIPS Agreement

[Claudio Schuftan]

From: South Centre <south at southcentre.int>

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SOUTHNEWS
No. 342,  7 October 2020

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*The TRIPS Council on 15-16 October should agree to extend the transition
period that exempts Least Developed Countries from implementation of the
WTO TRIPS Agreement *
The least developed country  (LDC) members of the World Trade Organization
(WTO) have submitted a request to the upcoming session of the TRIPS
(Agreement on Trade-Related Aspects of Intellectual Property Rights)
Council for an extension of the transition period available to LDC members
under Article 66.1 of the TRIPS Agreement, for as long as they remain LDCs,
and for an additional period of 12 years following their official
graduation from the LDC category as determined by the United Nations (UN)
General Assembly.

The South Centre encourages all WTO members to support the proposal in the
upcoming TRIPS Council meeting on 15-16 October 2020.

Article 66.1 of the TRIPS Agreement exempts LDC members of the WTO from
implementing the substantive obligations for protection and enforcement of
intellectual property rights contained in the Agreement during the
transition period. This period was initially granted 10 years at the time
of entry into force of the TRIPS Agreement, but the LDC members of the WTO
also have the right to seek and be granted further extensions of this
transition period based on a duly motivated request. The TRIPS Council is
mandated by Article 66.1 to grant such extension based on such request by
any LDC member. Accordingly, the transition period has been extended twice
by the TRIPS Council, following negotiations on the period of each
extension, and is currently available till 1 July 2021. The request by Chad
on behalf of the LDC group is to further extend this transition period.

The extendable transition period under Article 66.1 is given to LDCs in
recognition of their special needs and requirements, the economic,
financial and administrative constraints faced by LDCs, as well as their
need for flexibility to create a sound and viable technological base. There
is no restriction under Article 66.1 in terms of the duration and scope of
the transition period, nor are LDCs required to comply with any other
condition in order to benefit from the transition period. Indeed, the
transition period has been extended by the TRIPS Council in the past for
both varying duration and scope. While the transition period has been
generally extended for all LDC members twice, it has also been specifically
extended twice with regard to certain obligations under the TRIPS Agreement
in relation to pharmaceutical products, pursuant to the 2001 Doha
Ministerial Declaration on TRIPS and Public Health, and is currently
available to LDCs until 1 January 2033 or upon graduation before that date.
However, there is no requirement under Article 66.1 to limit the transition
period for LDCs.

The present request of the LDC group points to the difficulties that LDCs
continue to face in reaching their development goals and significant
setbacks that they have experienced towards achieving the Sustainable
Development Goals (SDGs), which have been further aggravated by the
COVID-19 pandemic, as acknowledged by the UN Secretary-General and a number
of reports by the UN Department of Economic and Social Affairs. The request
by LDC members specifically notes that the COVID-19 pandemic will adversely
impact the economies of all LDCs, including those LDCs that are on the
verge of graduation, due to decline in exports, fall in commodity prices,
supply chain disruptions and the bleak prospect of an impending balance of
payments crisis. To address these aggravated challenges and increased
vulnerabilities, LDCs need to enhance their productive capacities for which
a sound and viable technological base is crucial. As Article 66.1 of the
TRIPS Agreement seeks to support the LDCs in the establishment of a sound
and viable technological base, extension of the transition period exempting
LDC members from implementing the substantive obligations under the TRIPS
Agreement is necessary. As the development of a sound and viable
technological base is a long term process, progress towards which has been
hampered and possibly reversed by the COVID-19 pandemic, the LDCs need a
long term continuation of the transition period until their graduation.

The request also points out that sustainable and smooth transition to
graduation for LDCs necessitates the continuation of flexibilities
available to the LDCs beyond graduation, as acknowledged in the 2016 United
Nations Conference on Trade and Development (UNCTAD) LDC Report. Two UN
General Assembly Resolutions (resolution 59/209 of 20 December 2004 and
resolution 67/221 of 21 December 2012) concerning smooth graduation of LDCs
have also specifically requested the WTO to consider the possibility of
continuation of the LDC flexibilities beyond graduation. Hence, the present
request also calls for an additional extension of the transition period for
12 years after graduation of an LDC member. Unlike previous decisions on
the matter, the proposal does not set a specific date for all LDCs for the
termination of the transition period. That approach has proven to be
unrealistic and impractical given the enormous hurdles that most LDCs have
faced to reach the graduation level, a situation that has only worsened
with the COVID-19 pandemic. The new proposed approach, establishing the
extension for as long as a country remains a LDC and following graduation
for a defined period, is the most rational in this context, and fully
compatible with Article 66.1 of the TRIPS Agreement.

The full proposal, contained in document IP/C/W/668
<https://southcentre.us5.list-manage.com/track/click?u=fa9cf38799136b5660f367ba6&id=5a79d43fd0&e=4fac633f11>
follows below.

----

*EXTENSION OF THE TRANSITION PERIOD UNDER TRIPS ARTICLE 66.1 FOR *
*LEAST DEVELOPED COUNTRY MEMBERS*

Communication from Chad on behalf of the LDC Group

1. Least developed countries (LDCs) represent the poorest and weakest
segment of the international community, characterized by constraints such
as low per capita income, low level of human development, and economic and
structural handicaps to growth that limit resilience to vulnerabilities.[1]
<#m_-5429444686169293364__ftn1>

2. LDCs continue to face many difficulties in reaching their development
goals, even as the period for implementing the Istanbul Programme of Action
for the Least Developed Countries for the Decade 2011-2020 adopted by the
Fourth UN Conference on the least developed countries, comes to an end.

3. The United Nations Secretary General has observed that "…the least
developed country group as a whole, which comprise 13% of the world's
population, has not succeeded in combating poverty through high rates of
economic growth, achieving structural transformation and building
productive capacity, nor through increasing its global share of exports.
The high degree of vulnerability from which the least developed countries
suffer, both to economic and climate shocks, has caused significant
setbacks to progress towards sustainable development and the achievement of
the Sustainable Development Goals. Declining commodity prices have
diminished the value of exports and foreign currency earnings, exacerbating
debt burdens, while natural hazards, especially climate‑related phenomena
such as hurricanes, cyclones, flooding, drought and landslides, have caused
devastating loss and damage to lives, livelihoods and infrastructure."[2]
<#m_-5429444686169293364__ftn2>

4. The COVID-19 pandemic has further exacerbated the challenges that the
LDCs continue to face. The United Nations Department of Economic and Social
Affairs in its analysis concludes that "COVID‑19 threatens to have
devastating consequences in LDCs. Health systems may be unable to cope with
a precipitous increase in infections and these countries lack the resources
to cope with the socio‑economic consequences of lockdowns around the world.
Unless bold policy actions are taken by the international community,
achieving the Sustainable Development Goals (SDGs) by the 2030 deadline
will likely slip out of reach".[3] <#m_-5429444686169293364__ftn3> The
lockdown and slump in global demand has particularly impacted LDCs that are
dependent on exports of finished products.

5. It is evident that the COVID-19 pandemic will have far-reaching
implications for the global economy and especially for LDCs including those
on the path to graduation. Exports of LDCs are anticipated to be severely
affected, primary commodities prices are in decline, supply chains
disrupted, and the tourism industry largely at a standstill.[4]
<#m_-5429444686169293364__ftn4> There is also strong likelihood of a
balance of payments crisis in LDCs.[5] <#m_-5429444686169293364__ftn5>

6. A viable technology base is a crucial driver of productivity growth
especially in the present era of digital economy. If developed and
harnessed properly, it has great potential to change the development
landscape of LDCs. However, LDCs have often not been able to move beyond
outdated technologies that characterize their production processes and
outputs. Acquiring new technologies and building domestic capacity and a
knowledge base to be able to fully utilize acquired technologies and
promoting indigenous capacity on a sustainable basis for research and
development are needed to enhance productive capacities in least developed
countries.[6] <#m_-5429444686169293364__ftn6>

7. Importantly, LDCs lag significantly far behind in science, technology
and innovation. Between 2011 and 2017, LDCs' research and development
expenditure as a share of GDP was 0.6% or less, compared with more advanced
economies, which have a value of approximately 2% of their much larger GDP.
[7] <#m_-5429444686169293364__ftn7> If the current trend continues, LDCs
risk being left further behind, given the increasing role of innovation and
technology in the economic activity in the present day.[8]
<#m_-5429444686169293364__ftn8>

8. The lack of domestic financial resources, high debt levels, and fragile
health system presents a crucial challenge for the LDCs. What has emerged
as a health crisis in the short term may well have far-reaching impacts on
education, human rights, employment, food security, and economic
development in the long term. Notwithstanding the health impacts, with
commodity market turmoil, the pandemic presents a major and unprecedented
economic crisis for LDCs. Oil, minerals, food and other commodities account
for more than 70% of merchandise exports from LDCs[9]
<#m_-5429444686169293364__ftn9>. The pandemic has undeniably pushed the
LDCs out of the progress track and these countries will need much longer
duration only to regain their current state of development. They will need
to redesign many of their priorities to restart their journey. In the near
future, implementation of TRIPS provisions will be much beyond the capacity
of the LDCs.

9. Developing a viable technological base is a long-term process. LDCs need
a continuing exemption from the Agreement on Trade-Related Aspects of
Intellectual Property Rights ("TRIPS Agreement") in order to be able to
grow economically viable industrial and technological sectors, to
consolidate capacity, and to work their way up the technological value
chain. To overcome the difficulties confronting LDCs, magnified manifold by
the COVID-19 crisis, LDCs need maximum policy space *inter alia* to access
various technologies, educational resources, and other tools necessary for
development and to curb the spread of COVID-19 pandemic. Most intellectual
property (IP)- protected commodities are simply priced beyond the
purchasing power of least developed countries.

10. Article 66.1 of the TRIPS Agreement accorded least developed country
Members a ten-year exemption from most obligations under the TRIPS
Agreement in view of the special needs and requirements of the least
developed country Members, their economic, financial and administrative
constraints and their need for flexibility to create a viable technological
base. Since then this exemption has been renewed on two occasions. On 29
November 2005, a TRIPS Council decision (IP/C/40) extended this general
transition period until 1 July 2013. Subsequently on 11 June 2013, TRIPS
Council decision (IP/C/64) renewed the transition period until 1 July 2021.

11. Least developed countries continue to face serious economic, financial
and administrative constraints and are still struggling with various
challenges to uplift the socio-economic conditions with very limited
capacities. Such a situation is restricting them to divert resources from
other areas, where there is utmost necessity to improve the socio-economic
condition of their people. The COVID-19 pandemic has further exacerbated
the situation in those countries. Article 66.1 provides that the Council
for TRIPS "shall, upon duly motivated request by a least developed country
Member, accord extensions of this period." Since the rationale behind the
transition period under Article 66 is to provide LDCs maximum
flexibility (by exempting them from most TRIPS obligations) in view of
their constraints, special needs and requirements including a viable
technological base, the need to extend the transition period will continue
to exist so long as these elements have not been addressed.

12. Essentially the provision laid down in Article 66.1 acknowledges that
the TRIPS Agreement may not be conducive to the social and economic
circumstances of LDCs and that LDCs need to have policy space and
flexibility to address their development challenges and to create a viable
technological base. Moreover, implementation of TRIPS involves substantial
economic, financial and administrative costs, which may be untenable for
LDCs.

13. It has not been determined when individual LDCs will be able to
overcome their economic, financial, and administrative constraints that
prevent them from applying the provisions of the TRIPS Agreement and from
creating a viable technological base. Therefore, the transition period
should remain in force for as long as a country remains a least developed
country.

14. Sustainable and smooth graduation is a challenge for the LDCs. The 2016
UNCTAD LDC report summarises some of the challenges faced by LDCs: "*The
process of development beyond graduation merits much greater attention,
even during the pre-graduation period — that graduation itself should not
be the primary focus of LDCs and their development partners, but should
rather be viewed as one milestone in LDCs' longer-term sustainable
development. Graduation does not represent a solution to all the graduating
country's development challenges; neither does a new set of challenges
emerge out of nothing at this point. Rather, the challenges of the
post-graduation period are a continuation of those that characterized the
pre-graduation period*"[10] <#m_-5429444686169293364__ftn10>. Addressing
this concern in the WTO requires that LDC-specific flexibilities continue
to apply after graduation, to be phased out progressively. Such approach
would also be consistent with UN resolutions 59/209 of 2004 and 67/221 of
2012 as well as the LDCs Buenos Aires Ministerial Declaration of 2017. In
this spirit, the LDCs after graduation must be exempted for additional
years from applying the provisions of the TRIPS Agreement.

15. Thus, if the need for developing productive capacities is a permanent
need for all LDCs, including graduating LDCs, the availability of a sound
and viable technological base is indispensable. Hence, in order to build a
sound and viable technological base, all LDCs, including graduating LDCs,
would need a further extension of the transition period with maximum
flexibility.

16. Least developed countries hereby submit a duly motivated request for an
extension of the transitional period (that ends on 1 July 2021) and request
the TRIPS Council to adopt the annexed decision text.


------------------------------
[1] <#m_-5429444686169293364__ftnref1> The Istanbul Programme of Action for
the Least Developed Countries for the Decade 2011-2020 adopted by the
Fourth UN Conference on the Least Developed Countries.
[2] <#m_-5429444686169293364__ftnref2> Implementation of the Programme of
Action for the Least Developed Countries for the Decade 2011–2020
Report of the Secretary-General (A/75/72–E/2020/14)
[3] <#m_-5429444686169293364__ftnref3> UN/DESA Policy Brief#66: COVID-19
and the least developed countries
[4] <#m_-5429444686169293364__ftnref4> UN/DESA Policy Brief#66: COVID-19
and the least developed countries
[5] <#m_-5429444686169293364__ftnref5> UN/DESA Policy Brief#71: COVID-19
pandemic deals a huge blow to the manufacturing exports from LDCs.
[6] <#m_-5429444686169293364__ftnref6> The Istanbul Programme of Action for
the Least Developed Countries for the Decade 2011-2020 adopted by the
Fourth UN Conference on the least developed countries.
[7] <#m_-5429444686169293364__ftnref7> Implementation of the Programme of
Action for the least developed countries for the Decade 2011‑2020
Report of the Secretary-General (A/75/72–E/2020/14)
[8] <#m_-5429444686169293364__ftnref8> Implementation of the Programme of
Action for the least developed countries for the Decade 2011‑2020
Report of the Secretary-General (A/75/72–E/2020/14)
[9] <#m_-5429444686169293364__ftnref9> UN-OHRLLS: World's most vulnerable
countries lack the capacity to respond to global pandemic;
http://unohrlls.org/covid-19/
<https://southcentre.us5.list-manage.com/track/click?u=fa9cf38799136b5660f367ba6&id=bb5df1d643&e=4fac633f11>
[10] <#m_-5429444686169293364__ftnref10> The UNCTAD Least Developed
Countries Report 2016, p. 126

*_______________*

*Annex*

*EXTENSION OF THE TRANSITION PERIOD UNDER TRIPS ARTICLE 66.1 FOR *
*LEAST DEVELOPED COUNTRY*[1] <#m_-5429444686169293364__ftn1> *MEMBERS*

DECISION OF THE COUNCIL FOR TRIPS

The Council for Trade-Related Aspects of Intellectual Property Rights (the
"Council for TRIPS"),

*Having regard *to the transition period for least developed country
Members provided for in paragraph 1 of Article 66 of the TRIPS Agreement
(the "Agreement");

*Recalling *that this transition period was extended for a second time by
the Decision of the Council for TRIPS of 11 June 2013 (IP/C/64) until 1
July 2021;

*Recalling *that, unless extended, the transition period granted to least
developed country Members under Article 66.1 of the Agreement will expire
on 1 July 2021;

*Recognizing *that Article 66.1 of the Agreement provides that the Council
for TRIPS "shall, upon duly motivated request by a least developed country
Member, accord extensions of this period";

*Having regard *to the duly motivated request from least developed country
Members, dated 1 October 2020, for a further extension of this transition
period, contained in document IP/C/W/668;

*Recognizing *the special needs and requirements of least developed country
Members, the economic, financial and administrative constraints that they
continue to face, and their need for flexibility to create a viable
technological base;

*Recalling *the United Nations General Assembly resolutions 59/209 of 20
December 2004 and 67/221 of 21 December 2012, inviting all Members of the
World Trade Organization to consider extending to graduated least developed
country Members the existing special and differential treatment measures
and exemptions available to least developed country Members for a period
appropriate to the development situation of the country;

*Recognizing further* that sustainable graduation of least developed
country Members requires the continued development of productive capacities
by allowing maximum flexibility to least developed country Members;

*Noting with concern *the threat to human health, safety and well-being
caused by the coronavirus disease 2019 (COVID-19) pandemic, which has
spread all around the globe, as well as the unprecedented and multifaceted
effects of the pandemic, including the severe disruption to societies,
economies, global trade and travel and the devastating impact on the
livelihoods of people;

*Noting with concern* the reversal of progress towards sustainable
development due to the long-lasting economic impacts of the COVID-19
pandemic on least developed country Members;

*Recognizing* that individual LDCs are yet to overcome their economic,
financial and administrative constraints that prevent them from applying
the provisions of the Agreement;

*Decides *as follows:

1. A least developed country Member shall not be required to apply the
provisions of the Agreement, other than Articles 3, 4 and 5, as long as the
Member remains in the category of least developed country and for a period
of twelve years from the date of entry into force of a decision by the
UN General Assembly to exclude the Member from the least developed country
category.

2. This Decision is without prejudice to the right of least developed
countries to seek further extensions of the period provided for in
paragraph 1 of Article 66 of the Agreement.


------------------------------
[1] <#m_-5429444686169293364__ftnref1> As designated by the United Nations
*__________*


*Author: Nirmalya Syam is Senior Programme Officer of the Health,
Intellectual Property and Biodiversity (HIPB) Programme of the South
Centre. *
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