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Monday, February 29, 2016

WTO decision on pharma: an opportunity

AHM Mustafizur Rahman

ON November 6, the WTO-TRIPS Council took a decision which has far-reaching developmental consequences for the least-developed countries (LDCs), but more particularly for Bangladesh. On that day, the TRIPS Council decided to grant the LDCs an exemption from obligations to implement or apply or enforce patents as well as data protection for pharmaceutical products until January 1, 2033.
The waiver allows LDCs a transition period of 17 years to comply with and implement the provisions of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement of the WTO.
It may be noted, the original stance of the LDCs was for granting of patent waiver for as long as a country remained an LDC. In the end, LDCs had to agree to a compromise version in this regard. Nonetheless, extension of the transition period of 14 years granted earlier, which is set to expire on December 31 this year, to a second and longer transition phase of 17 years was a remarkable achievement by any measure. 
The waivers are to be reviewed annually by the WTO General Council and the current decision does not preclude the possibility of further extension in future favouring the LDCs.
Whilst the original request of the LDCs to link the waiver to their graduation to non-LDC status had received broad-based support from the developing countries, the EU, UN organisations and civil societies worldwide, negotiations with the USA proved to be very tough indeed.
Ensuring the support of the US and getting the US negotiators to shift from their initial offer of extension for 10 years, inclusion of mailbox waiver and ensuring that no strings are attached to the decision -- all these must be seen as commendable achievements by the LDC negotiators and their supporters in the WTO.
Bangladesh, as coordinator of the LDCs in the WTO, has played a critically important role in giving leadership in these negotiations. Bangladesh Ambassador in Geneva Shameem Ahsan and Ambassador Christopher Onyanga Aparr of Uganda did an excellent job in securing US agreement in the high-level meeting held on October 29, which cleared the way for the aforementioned decision. 
Indeed, the Bangladesh Mission in Geneva must be congratulated for the way it has conducted these complex discussions and for steering the negotiations towards successful conclusion.
The TRIPS decision itself is important on several counts: firstly, the waiver will allow LDCs to continue to enjoy exemptions from patent obligations for pharmaceutical products stipulated in the TRIPS agreement, which will enable the LDCs to produce these items at significantly reduced costs during the transition period.
Secondly, LDCs have also secured waivers from obligations to make available the mechanism for filling patent applications for pharmaceutical products (mailbox) and from granting exclusive marketing rights to such applications for the granted period. As may be recalled, the provision of mailbox waiver was not granted to the LDCs during the first transition phase.
Thirdly, the decision does not include any conditions attached to it, which would have put restrictions on the ability of the LDCs to take full advantage of the waiver or could limit the benefits that could potentially accrue from this decision.
The mailbox and exclusive marketing rights waivers will, however, need to be endorsed by the General Council or by the Ministerial Conference which meets in Nairobi for MC-10 on December 15-18 this year.
With this decision, a modicum of life has been infused into the ongoing WTO negotiations, which had not seen any mentionable progress in the context of the ambitious Doha Development Round Agenda of the WTO. Developing countries, particularly the LDCs, were frustrated that the developmental dimensions of a Round that was hyped as a Development Round has gradually receded to the background since the time the Round was launched with such high hopes in 2001.
With the TRIPS decision, some elements of the aspiration which had informed the new Round in the first place appears to have clawed back into the negotiating table. It is also encouraging that the US, after protracted negotiations, agreed to shift from its original stance and veered towards a compromise that met the aspirations of the LDCs.
Indeed, the TRIPS decision is a pointer as to how LDC concerns and interests could be accommodated through concrete steps. This decision is also in line with the spirit of the sustainable development goals (SDGs), more specifically Goal 3 of the SDGs, where specific targets have been set with a view to ensuring healthy lives and promote well-being for all at all ages. Thus, this decision is also a reflection of coherence in view of the commitments made by the developed countries in the context of the SDGs.
The TRIPS and Pharmaceuticals decision of the WTO has important implications for the economies of all the 34 LDC members of the WTO. The decision provides the LDCs with an opportunity to provide low-cost medicine to their own people, and also creates significant export opportunities for pharmaceutical enterprises in the LDCs. 
Waiver from patenting/licensing costs gives a significant advantage to the LDC producers who will be able to keep their costs low. Consequently, their competitive strength, both in the domestic as well as the export markets, will be enhanced.
Producers, consumers and LDC economies in general should reap substantial benefit as a result of this decision. The decision has particular significance for Bangladesh. Indeed, among all the LDCs, Bangladesh is one of only a few which are in a position to reap the benefits of the decision.
Bangladesh has formidable
supply-side capacity in pharmaceuticals and is capable of catering not only to the sizeable domestic demand but also has demonstrated capacity in exporting to overseas markets. The industry has to its credit a credible track record both in terms of quantitative measure and quality standards. The more than 160 small, medium and large enterprises in the pharmaceutical industry cater to about 95 percent of Bangladesh's domestic demand.
The export target for pharmaceutical items has been set at $80.0 million in FY2015-16.
Pharmaceutical items, including active pharmaceutical ingredients (APIs) and a wide range of pharmaceutical products covering all major therapeutic classes and dosage forms, as also specialist products, are exported to more than 90 countries, albeit in small amounts.
On the other hand, the global pharmaceutical export market is estimated to be worth more than $520 billion (in 2014). Bangladesh's current share in this huge market is, thus, quite insignificant.
Preferential market access that allows Bangladesh duty-, quota-free export of pharmaceutical products to almost all developed and some of the developing country markets should now provide additional competitive advantage to Bangladesh, in the wake of the TRIPS decision.
The capacity for import-substitution and export-orientation demonstrated by the country's pharmaceutical industry is something to be proud of. However, regrettably, there is no denying that Bangladesh was not able to fully realise the potential benefits originating from the TRIPS waiver during the first transition period of 14 years (2001-2015).
The joint statement signed by a number of leading NGOs, in view of the TRIPS  decision, urged the LDCs “to actively use the created policy space that this renewed transition period provides, and accordingly to take immediate steps to amend their respective national laws to exclude pharmaceutical products from patent protection and test data protection with explicit provisions that this would be until January 1, 2033, or the expiry of such later transition period that may be granted by the WTO Council for TRIPS”.
In view of the enormous possibilities, there is a need to design a dedicated strategy which will enable Bangladesh to take advantage of the TRIPS waiver. Investment in the sector will need to be incentivised, specialised industrial areas and parks with needed infrastructure will need to be built and export-oriented FDI will need to be encouraged.
The 200-acre API park in Munshiganj needs to be fully operationalised on an urgent basis.
Bangladeshi companies have already started to make entry into developed country markets and there is a need to support these companies to strengthen their presence in these and other new markets.
Once Bangladesh graduates out of the LDC status, it will no longer be able to enjoy the preferential treatment accorded under this decision. It is likely that the UN Committee for Development Policy (CDP, which decides matters of inclusion into, and graduation from, the LDC group) will consider Bangladesh for graduation in its triennial review to be undertaken in 2018.
Following two successive reviews (of three years each), it is highly likely that Bangladesh will finally graduate from LDC group by the year 2024. The window of opportunity for Bangladesh is, thus, only for about 10 years. In this backdrop, Bangladesh should design, with the urgency that the matter deserves, an appropriate strategy to take fullest advantage of the WTO-TRIPS decision.

 The writer is the executive director of the Centre for Policy Dialogue (CPD).

The Daily Star, 19 November 2015

WTO Least Developed Country Services Waiver: Opportunities and challenges for Bangladesh

Rumana Islam

The World Trade Organisation’s (WTO) least developed country (LDC) services waiver emerged from the decisions of the eighth WTO Ministerial in 2011 in Geneva. The following Bali Ministerial Conference in 2013 ratified the waiver through a road map to speed up the implementation and operationalisation of the waiver. The objective of the services waiver, by moving beyond the WTO Most Favoured Nation (MFN) clause, is to promote LDC services trade through preferential access to markets in developing and developed countries in modes and sectors of services export interest to LDCs. The waiver also allows for other non-market access preferences, in line with the authorization of the Council for Trade in Services (CTS). In addition, developed and developing countries are supposed to indicate sectors and modes of supply where they intend to provide preferential treatment to the LDCs.

“Diagnosing the potential for trade in services is a necessity in least developed countries, especially looking at possible niche sectors which offer opportunities for diversification” said Ratnakar  Adhikari of WTO. This brief report explores the dynamics and effectiveness of the waiver on LDC services trade with special focus on the challenges and opportunities for Bangladesh.

The General Agreement on Trade in Services (GATS) identifies services trade according to the following four modes, as outlined in Table 1.The services waiver aims at service trade facilitation, especially Mode 4, by opening up WTO members’ markets to the LDC suppliers. Currently, the LDCs’ share of global commercial services export is 0.7 per cent in 2013, despite a 13 per cent growth rate in the sector. This highlights the necessity of the services waiver to promote the LDCs’ services exports with the view to expanding their market overseas as well as enhancing domestic growth.

An analysis of services trade balance for 10 LDCs, including, among others, Bangladesh shows that overall deficit is US$5.034 billion (bn) in 2013. Only three countries, Cambodia (US$1.73 bn), Afghanistan (US$8.45 bn), and Nepal (US$2.05 bn) have positive service trade balance. Bangladesh, with a negative balance ofUS$3,444.6million (m), leads the group of countries facing services trade deficit, followed by Congo (US$2,729 m) and Liberia (US$739 m). Burundi has the lowest services trade deficit at US$103 m. Bangladesh’s deficit in services trade balance at 2.0 per cent of gross domestic product (GDP) contrasts with a surplus of about 1.0 per cent of GDP in its current account of Balance-of-Payments (BoP).

However, the LDCs as a group records a surplus in the tourism sector reflecting tourism as their main services export (Figure 1). Transport and communications record the second largest surplus after tourism. In this respect, the waiver is in place to open doors for the LDCs to participate in the international market of services as service exporters beyond tourism.

BANGLADESH: Bangladesh has long been suffering from a services trade deficit in its balance of BoP as depicted in Figure 2. There has been deepening of the services trade deficit since 1998 from US$ 0.37 bn to US$ 4.10 bn in fiscal year (FY) 2013-14. The country’s services exports and imports include transportations, travel, telecommunication, computer, and information services, business services and government services.

The LDC services waiver provides Bangladesh the potential to expand its services export to other sectors of interest such as tourism, Information Technology (IT)-Business Process Outsourcing (BPO), nursing and labour services. Nevertheless, there are opportunities and challenges in each of these sectors which have to be overcome in order for Bangladesh to correct its history of service sector deficits.

TOURISM PROSPECTS FOR BANGLADESH: Bangladesh still remains at the nascent stage of harnessing tourism services as a scope for expanding the economic contribution of this sector.  Aside from being a services export component in the BoP, tourism activities have forward and backward linkages’ unleashing a lot of derived demand. The tourism sector generates employment through the purchase of local goods and services.

Bangladesh has been blessed with natural beauty, boasting the world’s largest natural beach as well as the largest mangrove forest. Despite this the tourism sector falls behind its potential. In FY13 tourism export accounted for an estimated 2.2 percent of GDP at US$5.0 billion which is only 10 per cent of the global average of US$55 billion. Bangladesh would require investment and upgradation of services in tourism to untap its latent potential as well as achieve higher economic growth.

IT-BPO: Bangladesh been ranked among the top 30 software services outsourcing destinations, with a shift from low-value added tasks such as website development and graphics design to middle-value software and application development as well as higher-end engineering and product development services. The IT market in Bangladesh has matured by means of growing tele-density, rising internet penetration, falling bandwidth costs, and a growing market for telecom services. However, challenges remain due to a lack of scale economies which prevents entrepreneurs from securing large contracts. It should also be noted that Bangladesh’s negative image due to Intellectual Property Rights (IPR) protection deters services exports in this sector.

NURSING: There is a surge in global demand for nurses arising from demographic changes, ageing population, a surge in chronic diseases, and physician shortages in primary care. Bangladesh’s key interest in export of nursing services is especially to the USA and UK markets. However, the current nurse-to-doctor ratio is 0.4 in Bangladesh, whereas international standards dictate that there should be three nurses per doctor. Internal constraints include lack of proper training, lack of appropriate skill sets and the need to update training curricula and the quality of teaching. In addition, external barriers are non-recognition of qualification, language barriers, and prohibitive licensing requirements, along with meeting the minimum skill requirement such as fluency in English, bedside manners, and the ability to handle modern medical equipment.

LABOUR SERVICES: Remittance plays a major role in Bangladesh’s economic growth, stability and poverty alleviation. There is a lack of targeted strategies which has in turn resulted in problems such as inadequate training and orientation of migrant workers and growing competition from other labour-exporting countries. Awareness of labour rights in the importing country and non-adherence by employers to the terms and conditions of employment is a serious problem. As a result, foreign employers often treat Bangladeshi expatriate labour poorly.

CONCLUSION AND POLICY RECOMMENDATIONS: The LDC community should assess their own export interests and approach the WTO with proposals to expedite the benefits of the LDC services waiver. In order to claim the benefits of the LDC services waiver in the sectors of Bangladesh’s interest, policy measures have to be enacted to augment reform in relevant areas to meet the minimum standard of global services export. In the case of standard and quality not being met, as per the waiver, these countries are not obliged to open their markets for our services and service suppliers.

To enhance competitiveness and export promotion in the IT-BPO sector, Bangladesh needs to focus on creating a supportive domestic business environment which includes a steady supply of power, trained human capital, focus on marketing and networking activities, and stronger enforcement of the Intellectual Property Rights (IPR).

The nursing sector will require a strategically planned approach with a focus on capacity creation to meet domestic as well as export demands with a change in teaching methods and curriculum. The private sector should be included in providing qualifications and adapting international standards to improve the quality of skills.

In the case of export of labour services, government should provide legal and safe channels for migrant labour services’ export including the basic set-up for training, institutional arrangement for remittance flow and saving instrument, soft loans for travel and finally the protection of the rights of its workers.

Bangladesh’s comparative advantage lies in Mode 4 of services export including nursing and labour services. These sectors require crucial attention for Bangladesh to secure the benefits of the waiver. With these reforms in place, the WTO’s LDC services waiver holds the key for Bangladesh to open doors for product and market diversification beyond its primary export of Readymade Garments.

[Rumana Islam is an Economist at Policy Research Institute (PRI).]

The Financial Express, 18 October 2015