Third World Network Information Service

TWN Info Service on Trade, Intellectual Property and Health
10 March 2021
Third World Network

WTO DG’s “third way” to fight COVID-19 a tough sell
Published in SUNS #9302 dated 10 March 2021

New Delhi, 9 Mar (Biswajit Dhar*) – On 1st March, Dr. Ngozi Okonjo-Iweala assumed the responsibilities as the seventh Director-General of the World Trade Organization and was hailed as the first woman and a person from the African continent to be in this position.

The WTO announced that the new DG had “hit the ground running”, which she indeed had, given that she had laid down her priorities even before she took over.

Undoubtedly, the most awaited response from Dr. Okonjo-Iweala were on issues directly related to addressing the COVID-19 pandemic so that societies and economies can hasten their return back to normalcy.

But among these issues, nothing was more important than ensuring that during these pandemic times, vaccines, medicines and other medical products were made accessible and affordable to all.

Towards realising this objective, India and South Africa had made a joint proposal to the Council for Trade- Related Aspects of Intellectual Property Rights (TRIPS) of the WTO in October 2020, seeking temporary waiver of the obligations of Members to implement or apply four forms of intellectual property rights (IPRs) for the prevention, containment, or treatment of COVID-19.

The rationale behind the “waiver proposal” was to free up COVID-19 related medicines, vaccines, and medical products from the encumbrances of IPRs, which would allow these critical products to be made available to humanity at affordable prices. In other words, the primary objective of the “waiver proposal” was to ensure that these products are treated as global public goods.

The proposal has already garnered the support of about two-thirds of the WTO members, including two major country groupings, namely, the African Group and the group of Least Developed Countries.

However, the “waiver proposal” did not find favour with Dr. Okonjo-Iweala, though she sounded the right notes when she spoke of the need for “intensifying cooperation to make equitable and affordable access to vaccines, therapeutics, and diagnostics a key plank of the recovery” and emphasising the need to broaden access to “promising new vaccines, therapeutics, and diagnostics”.

Calling upon the WTO Members “to reject vaccine nationalism and protectionism”, Dr. Okonjo-Iweala suggested that there “should be a “third way” to broaden access through facilitating technology transfer within the framework of multilateral rules”.

The WTO DG argued that her “third way” would “encourage research and innovation while at the same time allowing licensing agreements that help scale up manufacturing of medical products”.

Interestingly, Dr. Okonjo-Iweala seems to be favouring a six-decade-old demand of the developing countries for transfer of technology through successful licensing of proprietary technology and on terms that the recipients of technology, namely, the developing countries, can afford.

Unfortunately, as we shall see below, each of the initiatives taken in this regard has ended in failure, since developed countries have a record of unwavering support for the corporations that control the market for technology and that have been singularly focused on charging excessive rents from the rest of the world.

The first step in this direction was a Brazil-initiated submission that had led to the unanimous adoption on 19 December 1961 of the United Nations General Assembly (UNGA) Resolution 1713 (XVI), “The Role of Patents in the Transfer of Technology to Under-Developed Countries”.

The Resolution recognised that “access to knowledge and experience in the field of applied science and technology is essential to accelerate the economic development of under-developed countries (terminology used to describe “developing countries”) and to enlarge the overall productivity of their economies”.

A study conducted as a follow-up to this Resolution summed up the constraints faced by the developing countries as prospective technology recipients as follows: “Governments of under-developed countries have a legitimate interest in preventing excessive exploitation of their one-sided technological and financial dependence”, which they could address by “screening and control of license agreements, and avoidance of unduly restrictive features”.

The key recommendation of the report was that the “world community and the Governments of more developed countries can assist by inducing patentees not to be unduly restrictive in the conditions and terms on which they are willing to spread technology into under-developed countries”.

Soon after in the June 1964 Final Act establishing the United Nations Conference on Trade and Development (UNCTAD), the following recommendation was made on transfer of technology: “Developed countries should encourage the holders of patented and non-patented technology to facilitate the transfer of licences, know-how, technical documentation and new technology in general to developing countries, including the financing of the procurement of licences and related technology on favourable terms”.

The adoption of the International Development Strategy for the Second United Nations Development Decade in UNGA Resolution 2626 (XXV) of 24 October 1970 led to a number of initiatives for addressing the vexed issue of technology transfer.

The overall context in this regard was provided through UNGA Resolution 3202 (S-VI) of 1 May 1974 on “Declaration on the Establishment of a New International Economic Order”, which was based on the proposals made by a number of developing countries.

But in operational terms, the most significant decision of the UNGA was to convene negotiations for the adoption of an international code of conduct on the transfer of technology (Resolution 32/188 of 19 December 1977) to set norms and standards to facilitate technology transfer on fair and equitable terms. This decision to initiate the Code negotiations was facilitated by telling evidence provided in several UNCTAD reports.

A 1975 report titled “Role of the Patent System in the Transfer of Technology to Developing Countries” found that “agreements, entered into by developing countries, concerning use of patents through foreign investments or licensing arrangements frequently contain not only high royalty payments and charges for technical services raising the direct costs of obtaining the technology, but also restrictive practices and in some instances abuses of patent monopolies, either explicitly embodied in the contractual agreements or implicitly followed by subsidiaries and affiliates of transnational corporations, which impose heavy indirect or “hidden” costs through overcharging for imported inputs”.

Another study conducted on the basis of inputs obtained from 26 technology-receiving countries provided evidence of “a wide variety of problems confronting the developing countries in acquiring access to technology on fair and reasonable terms”.

The Code negotiations were initiated in 1978 but were upstaged by the Uruguay Round trade negotiations for strengthening the norms and standards on IPRs that began in 1986. And, just as the TRIPS Agreement was being operationalized in 1995, the Code negotiations were all but abandoned with then UNCTAD Secretary-General conceding “that the conditions do not currently exist to reach full agreement on all outstanding issues in the draft code of conduct”.

Developing countries resurrected the discussions on technology transfer in the WTO after a proposal by a group of 12 countries led to the establishment of the Working Group on Trade and Transfer of Technology (WGTOT) as a part of the Doha Development Agenda.

After nearly two decades since the WGTOT began deliberating on transfer of technology, expectedly, no progress has been made. But what is surprising is that the WTO secretariat itself does not seem to recognise the on-going work in WGTOT: “trade and transfer of technology” is not included in the list of “Trade Topics” that find a mention on the Organization’s website.

This should be seen as a reflection of the credibility that “transfer of technology” receives as a topic in the WTO.

The six-decade-long deliberations on the issue of technology transfer show that technology licensing has been one of those issues that has continuously reinforced the North-South divide.

It may, in fact, be argued that this issue has become even more contentious as the North has been able to ratchet-up the norms and standards of intellectual property protection following the adoption of the TRIPS Agreement and has continued to push for a TRIPS-plus agenda on intellectual property protection, especially in bilateral, regional and plurilateral trade/economic partnership agreements.

Evidence from the post-TRIPS era (that only started in 1995) shows that pharmaceutical companies often use licensing agreements to prevent potential competitors from using the TRIPS flexibilities. These licensing agreements are used to segmentize and control the global market, keeping potential generic manufacturing competitors in line, including when patent applications are pending.

As long as technology transfer to developing countries remains un-implementable because the developed countries have never supported fair and equitable technology licensing, Dr. Okonjo-Iweala will have a tough job to convince the overwhelming majority of the WTO membership that her “third way” will succeed.

[* Biswajit Dhar is a Professor at the Centre for Economic Studies and Planning at Jawaharlal Nehru University in New Delhi.]

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