UNCTAD - ICTSD Project on IPRs and Sustainable Development, Issue Paper No. 12, Feb. 2006

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During the past several years, the United States has concluded a substantial number of bilateral and regional free trade agreements (hereinafter “FTAs”), largely with developing countries. Each of those FTAs includes substantial commitments in the field of intellectual property rights (IPRs) and related regulatory matters. These commitments exceed those required by the TRIPS Agreement which establishes minimum substantive standards of protection and enforcement for all WTO Members.

There is a relatively consistent view among economists studying intellectual property rights that the interests of countries with respect to standards of protection varies depending upon the level of development and other characteristics of the country adopting such protection. The TRIPS Agreement provides some flexibility to WTO Members with respect to the level of protection, allowing developing countries a measure of leeway. Since there has been little enthusiasm at the WTO for raising standards of IPRs protection above that mandated by TRIPS, the United States has shifted its attention to other fora to accomplish its objective of securing greater levels of IPRs-based rents or royalties. The U.S. FTA policy weakly takes into account developmental interests. In some areas, such as the protection of pharmaceutical patent holders, U.S. policy threatens to cause harm to the interests of comparatively poor populations. 

IPRs and related regulatory standards deemed appropriate for the United States may not be appropriate for developing countries. Even so, within the United States the law establishes a particular balance between the interests of IPRs holders and consumers. Most U.S. IPRs rules are formulated in terms of general principles, with limitations and exceptions to them. The FTAs negotiated by the United States largely reflect the general rules of application, though not in all cases. What the FTAs do not adequately reflect is the interplay between rule, limitation and exception that establishes the balance. This is of special importance in areas such as public health regulation where incomplete familiarity with the flexibility inherent in the U.S. system may lead its trading partners to conclude that restrictive implementation of the FTAs is required. Differences in the capacity of the United States and many developing countries to create and manage legal infrastructure may lead to a disparity in the way FTA rules are implemented. 

In the negotiating process, developing countries should carefully consider whether the capacity of their domestic legal and regulatory system will permit them to balance interests as does the United States. It is probably unwise to accept commitments that will strain domestic capacity and which may lead to the application of rules in a more restrictive manner than the agreements require. If commitments are accepted, developing countries should pay careful attention to implementing them in a way which properly reflects the domestic public interest.

In conclusion, this study suggests that it is not only the public in developing countries that encounters risk from these FTAs. The U.S. public faces similar risks. The USTR assures the United States Congress that the agreements do not tie the hands of the domestic legislator. This is a position perhaps comfortably asserted within the more powerful of the parties to an FTA. Yet it is almost inevitable that when Congress considers changing domestic law, arguments will be made by industry groups that to do so may violate America’s international obligations and damage the national interest. Congress may choose to ignore U.S. international obligations, but it would be surprising if Congress were not at least somewhat reluctant to do so. The United States is increasingly bound by a set of highly restrictive intellectual property and regulatory commitments that may not over time be seen to be consistent with the American public interest.