WTO becomes India’s protector, not predator

When the World Trade Organisation (WTO) was created in 1995, critics protested that India must not join this vehicle of US imperialism, whose tough patent rules would ruin India’s agriculture and pharmaceutical industry. They could not have been more wrong. Both Indian agriculture and pharma have flourished under WTO rules. And today, the WTO is India’s greatest ally against US pressure on patents.

US drug companies complain that India has rejected patents for some blockbuster drugs (like Novartis’ Gleevec), while issuing a compulsory licence (which ignores patent rights) for Bayer’s anti-cancer drug. They say India is flouting established norms on intellectual property rights (IPR), cheating patent owners of billions, and conferring a bonanza on Indian producers of cheap substitutes (generic drugs). US companies want the US International Trade Commission to investigate India’s treatment of IPR, and recommend sanctions (under Section 301 of US trade laws) if required.

Few countries stand up to the threat of US sanctions : the costs typically exceed the benefits. But India has refused to co-operate even in a USITC visit to New Delhi, saying its bureaucrats are too busy with other things. India has told the US that WTO rules provide for all members to settle patent disputes through that body, not through unilateral action. India is confident that its IPR rules are WTO compliant. For that very reason, the US has avoided WTO, and is attempting bilateral pressure instead.

Indian patent laws are far more restrictive than those of the US or Europe, but WTO rules allow this. Critics claimed falsely in 1995 that WTO rules would condemn India to servitude. In fact they allowed India considerable freedom to be strict on patents, allowed price control, and allowed the forced issue of compulsory licences for drugs critical to public health.

Foreign companies complain that India rejects patents given widely across the globe (as with Gleevec). India says it has since 2005 granted over 4,000 drug patents (mainly to US companies) and issued just one compulsory licence. This conforms fully to WTO rules.

If the issue goes to the WTO, India will point out that even the US courts have rejected hundreds of drug patent applications. The US government itself has used compulsory licensing and price control for drugs regarded as critical for public health (as in the anthrax scare after 9/11). So, India looks on a good wicket.

Still, the dispute will not disappear. The US says that although thousands of patents may have been given, only 45 are for innovative drugs, of which nine are being contested. It accuses the government of trying to favour Indian companies making cheap generics. This is not untrue.

Some Indian NGOs want wholesale rejection of patents to keep medicines cheap. That would be cheating on India’s pledges to WTO. It would also be counterproductive, inviting retaliatory sanctions. India is full of adulterated, sub-standard and bogus drugs, so let nobody pretend our conditions are ideal, or that all Indian drug producers are noble promoters of cheap medicine.

In a recent study, India ranks at the bottom of 25 countries in IPR protection. Arguably this classification is unfair (strictness in issuing patents is interpreted as weakness). But certainly IPR protection in India leaves a lot to be desired. Bollywood will tell you how piracy plays havoc with copyright, echoing complaints from Hollywood. Software piracy is rampant, hurting Indian IT companies as well as foreign ones.

Finding the WTO inadequate, the US now aims to forge one free trade deal with Europe (Transatlantic Trade and Investment Partnership), and another with Japan and the Pacific Coast (Trans Pacific Partnership), apart from dozens of bilateral deals. All these will have far stricter IPR rules than the WTO, and indeed aim to make WTO irrelevant. India needs to guard against this by being more pro-active in WTO, and not revel (as in the past) in the role of a spoiler.

India’s future lies in high-tech areas. Let’s be clear: these need IPR protection. By rejecting labour flexibility, India has forsaken the labour-intensive export route to prosperity taken by the Asian tigers and China. Its key export successes are in brain-intensive areas — software, BPO, pharmaceuticals, engineering goods. India will keep rising up the brainpower ladder.

Its comparative advantage lies in skills, and need a climate encouraging such skills. India should be strict on drug patents. But it must reject the NGO attempt to sabotage all IPRs, claiming these are western impositions on the poor. Brainpower should be paid for no less than manual labour. We need a proper balance between the needs of consumers and brainpower producers. The US goes too far, but so do our NGOs.

What do you think?