[Ip-health] Financial Times editorials on FTAs

[Judit Rius Sanjuan]

Two excellent editorials from the Financial Times of today.

*Do-it-yourself is free trade=92s best =91plan B=92*
By Guy de Jonqui=E8res
Published: August 23 2006 19:29
Source:
https://registration.ft.com/registration/barrier?referer=3Dhttp://www.ft.co=
m/comment&location=3Dhttp%3A//www.ft.com/cms/s/e2d496bc-32cc-11db-87ac-0000=
779e2340.html

When gardens are neglected, weeds sprout. The withering of the Doha
world trade round has led, predictably, to a flourishing crop of
alternatives. As well as accelerating the growth of preferential
bilateral deals, which frequently generate more political puffery than
economic substance, the collapse of the talks has revived interest in
grand initiatives spanning entire regions.

One is Japan=92s big idea of expanding existing plans for an east Asian
economic community to include India, Australia and New Zealand. A yet
more ambitious proposal, floated by Fred Bergsten, director of the
Institute for International Economics in Washington DC, on this page
last week, is for a free trade area of the Asia Pacific (FTAAP)
embracing the 21 members of the Asia Pacific Economic Co-operation forum
(Apec).

Such schemes may excite diplomatic war-gamers. But as trade liberalising
tools they are no magic bullets. Mr Bergsten thinks fear of exclusion
from an FTAAP would shock Doha laggards out of their inertia. But even
leaving aside the fact that the Doha talks have foundered partly on US
agricultural protectionism, the argument is tenuous, being based on a
version of history subscribed to in Washington but nowhere much else.

It holds that the Uruguay round came to closure in 1993 because Apec
leaders scared a recalcitrant Europe into resuming negotiation by making
a vague, US-inspired call for closer intraregional links. But if Europe
was swayed at all it was because it feared the US was preparing to
unplug itself from multilateralism =96 not because it seriously believed a
grouping as formless, disparate and strife-ridden as Apec could agree on
much. The conventional explanation of the Uruguay round=92s endgame
remains the most plausible: Europe=92s internal agricultural reforms
allowed it to offer just enough on farm trade to escape blame for
scuppering the talks, while the US settled for a far weaker deal than it
had been holding out for.

In similar vein, Washington has claimed more recently that its use of
muscular bilateral trade diplomacy will re-energise the multilateral
system by unleashing a wave of =93competitive liberalisation=94. The Doha
debacle has exposed that theory for what it is. In practice,
bilateralism has fed off itself, intensifying the rush into preferential
deals while draining energy from the Doha talks, polarising the US
Congress and further diminishing its appetite for trade initiatives of
all descriptions.

The belief that faster progress can be made in regional groupings than
in the World Trade Organisation also defies abundant objective evidence
to the contrary. Apec=92s dreams of freeing by 2020 all trade and
investment in the Pacific rim remain dreams. Plans for a free trade area
of the Americas (FTAA) are moribund. South America=92s Mercosur is in
trouble, as are its talks on closer links with the European Union.
Disputes between the 10 members of the Association of Southeast Asian
Nations (Asean) have dogged their efforts to implement even a limited
liberalisation agenda, and their vows this week to speed it up face
daunting obstacles. South Asia=92s plans for a customs union look like a
joke, excluding as they do trade between India and Pakistan.
Regionalism=92s only big successes are the EU and the North American Free
Trade Agreement =96 and the former is too sui generis to be replicable.

Worthwhile deals demand committed leadership and drive, such as Germany
once gave to Europe and the US to Nafta. Those ingredients are missing
from other regional schemes, although just possibly China=92s economic and
political weight will enable it to pull off a planned deal with Asean.
Who will get most out of it, however, is another question.

In the absence of strong leadership, regional trade talks simply rake
over the same problems that have proved insoluble in other forums. It is
optimistic, too, to suppose the US and China could manage their
differences better in an FTAAP than bilaterally. More likely,
transposing their squabbles to a bigger stage would exacerbate them and
set off a struggle for regional influence =96 just as fierce hemispheric
rivalry between the US and Brazil torpedoed the FTAA.

So, with the Doha talks suspended, bilateral deals delivering few real
gains and the outlook for regional integration projects unpromising, has
trade liberalisation hit the buffers? Not necessarily. One =93plan B=94 has
proved its worth: it is for governments to stop leaning on each other to
open markets and just do it by themselves.

Economic analysis has found repeatedly that the benefits from removing
trade barriers unilaterally are vastly greater than from negotiating
them away =96 even when negotiations succeed. That is no mere theory.
China, Singapore, Hong Kong, Australia, Chile and, to a lesser extent,
India have put it into practice and reaped rich economic dividends.

Unilateral market opening works, partly because it requires governments
to commit themselves from the outset to a clear strategy, rather than
being prodded grudgingly into action by pressure from trade partners.
Second, in every case where it has delivered the economic goods, it has
been buttressed by purposeful concurrent domestic reforms.

The lesson is that the best trade liberalisation begins at home. Of
course, it takes more political blood and sweat than do lofty, and
usually empty, summit declarations, futile haggling or grand designs
that stand little chance of completion. That, no doubt, is why only
those who seriously mean business attempt it.

guy.dej@ft.com
Copyright The Financial Times Limited 2006


*Medicine and markets*
Published: August 24 2006 03:00
Source: http://www.ft.com/cms/s/77e9d28c-330c-11db-87ac-0000779e2340.html

Like a recurring nightmare, the conflict between pharmaceuticals
industry profits and poor countries' desperate need to treat diseases
such as Aids and malaria just will not go away. After bitterly dividing
the World Trade Organisation, it is now threatening to break out all
over again in the World Health Organisation.

The reason this time is US insistence, in bilateral trade talks, that
developing nations agree to stiffer patent protection rules. As well as
restricting competition by generic drug makers, the rules would, most
crucially, set tighter conditions on poor countries' freedom to use
compulsory licences to override patents and import essential medicines
they cannot produce locally.

A hard US line on that issue also provoked a furore in the WTO, which
was eventually settled by a compromise that protected poor countries'
compulsory licensing rights. Although Washington claims its bilateral
provisions are consistent with the WTO agreement, they look suspiciously
like a backdoor way to circumscribe it, at the urging of US drug
companies and their powerful allies in Congress.

The use of American political and industrial might to impose demands
roughshod on weaker partners is an unedifying spectacle - the more so
because the US itself toyed with compulsory licensing after its 2001
anthrax scare and has recently begun approving imported generic copies
of Aids treatments. Given the rarity of compulsory licensing worldwide,
the US campaign also looks like an overreaction.

That said, there is a genuine problem at the heart of the dispute. The
industry's incentive to innovate would be weakened if widespread erosion
of patent protection enabled generic drug makers to eat away its
profits. However, the moral and practical case for providing poor
countries with access to essential medicines, at a price they can afford
to pay, is equally compelling.

Public criticism has shamed some western drugs companies into stepping
up research into diseases found mainly in very poor countries and
selling them medicines at discounted prices. But the results so far have
barely dented the problem. Other solutions are needed. Some can come
from more innovative co-operation between business, aid organisations
and community groups, notably to improve health systems and medicines
supply. Philanthropic bodies, such as the Bill & Melinda Gates
Foundation, can contribute towards the cost. But the scale of market
failure also calls for a much greater commitment of public resources, to
promote the development of treatments for diseases that are particularly
common in poor countries and help pay for them.

United Nations members have pledged to ensure poor countries' access to
affordable essential medicines, in partnership with industry. Better
ways to honour that pledge must be found. Trade bullying of the weak by
the strong is not one of them.

Copyright The Financial Times Limited 2006

--
Judit Rius Sanjuan
judit.rius at cptech.org
www.cptech.org

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