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Unpublished Paper
ExpressO (2009)
  • Shamnad Basheer
The recent World Trade Organization (WTO) mini ministerial negotiations came a cropper: despite intense negotiations over several weeks, India and the United States could not agree on the extent of tariffs to protect poor farmers against import surges. In the wake of this failure, a number of member states are expected to resort to the WTO dispute settlement mechanism to extract concessions out of scofflaw states. Brazil is one such country that had won a case against the US on illegal cotton subsidies several years ago. However, despite WTO Panel and Appellate Body rulings in Brazil’s favour, the US refused to comply and dangled hopes of further concessions at future WTO talks. Now that the latest round of talks has failed, Brazil is seriously considering “retaliating” against the US in order to secure its compliance. What is unique about Brazil’s strategy is that it wishes to “cross retaliate” by suspending the intellectual property rights (IPR) of US corporations. Contrast this with “traditional” retaliation that has been thus far followed by member states, under which Brazil would impose tariffs on US goods that are imported into Brazil. The desire to cross retaliate is easy to understand. Given the highly disparate value of trade between Brazil and the US, and the lower value that the US places on its exports to Brazil, traditional retaliation would not provide a serious enough disincentive to force the US to comply. Besides, given the higher relative value that Brazil places on US goods, such a retaliation may be tantamount to Brazil shooting itself in the foot. Contrast this with an IP suspension strategy, which has a better potential of inducing compliance by defaulting developed countries, since strong IP lobbies in such countries are likely to pressurize their governments into a compliance or settlement. Although cross retaliation authorizations have been granted in two cases, they have never been implemented in practice. Consequently, there is considerable uncertainty in terms of the kind of IP suspension model that might induce compliance, as also ensure that the value of loss from the suspension of IP is amenable to relatively objective. This uncertainty is likely to be exploited by defaulting developed countries that are pitted against economically weaker developing countries. Unfortunately, there is no scholarly article or other policy paper that recommends any concrete IP suspension model. This paper seeks to fill the void by proposing a “Tiered IP suspension model”, where certain kinds of IP are targeted first for suspension before others, depending on the ease of objectively ascertaining the value of IP and thereby the harm caused by the unauthorized use of such IP and/or the potential to induce compliance by the defaulting state. Illustratively, copyrights over sound recordings that have established rates for public performance are targeted first. If working with this tier of IP subject matter does not yield desired results, then the complaining state moves on to other IP where it is relatively more difficult to compute the loss caused to the IP owner (such as pharmaceutical patents) but which may be a more powerful tool to induce compliance. To this extent, this paper offers a very concrete “development” oriented international trade law remedy. This paper will also demonstrate that cross-retaliation also fits conceptually better within the world trading system and what it stands for. To this extent, it needs to be positioned as the primary retaliatory mechanism for developing countries and not just a secondary resort. Since developing countries constitute the majority at the WTO, such a paradigmatic shift will go a long way towards preserving the “fairness” and legitimacy of the WTO.
  • WTO,
  • Developing Countries,
  • Retaliation,
  • TRIPS,
  • Intellectual Property Rights,
  • Cross Retaliation,
  • Antigua Gambling Dispute
Publication Date
March 1, 2009
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