TRIPS and the LDCs: Monitoring mechanism needed to ensure rich countries meet technology transfer obligations to LDCs
A central premise of the World Trade Organization (WTO) Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) was that it would enhance technology flows to developing countries. Special consideration was given to the Least Developed Countries (LDCs) in the TRIPS Preamble and Article 66.2, which requires developed country WTO members to provide incentives to induce technology transfer to LDC members. The question of whether TRIPS can be implemented in a manner conducive to technology transfer is becoming more urgent, as the end of the (extendable) transition period for LDCs to implement the Agreement is rapidly approaching in 2013 (2016 for pharmaceutical patents).
This article presents findings from an analysis of reports submitted by developed countries regarding their implementation of Article 66.2, and has found that the existing reporting system is insufficient to monitor Article 66.2 implementation in a meaningful way. It then outlines the main elements of a proposed monitoring mechanism to improve the functioning of Article 66.2 to induce more relevant, timely and sufficient transfer of technology to the LDCs.
Country submissions to the TRIPS Council (1999-2010)
TRIPS Article 66.2 establishes a binding legal obligation on "developed country" members of the WTO, as follows:
"Developed country members shall provide incentives to enterprises and institutions in their territories for the purpose of promoting and encouraging technology transfer to least-developed country Members in order to enable them to create a sound and viable technological base."
Developed country member governments are not obligated to carry out technology transfer themselves, but rather are to provide incentives to their "enterprises and institutions" to encourage technology flows to LDC members. WTO members began to submit regular reports on their activities after the 2001 Ministerial Conference in Doha mandated that the TRIPS Council put in place a monitoring mechanism for Article 66.2. Developed members must submit full reports on activities undertaken to meet these obligations every three years, beginning in late 2003, with annual updates to be provided in subsequent years.
An analysis of all developed country reports submitted from 1999-2010 (79 reports totalling about 1200 pages) sought to discern the extent to which the Article 66.2 obligation led developed countries to provide additional incentives over business-as-usual for encouraging technology transfer to LDC members. It did not analyse the volume or nature of the technology that has actually been transferred, but rather, examined the actions taken by developed countries to encourage such a transfer.
Which countries report?
Reporting by developed countries is irregular and many countries do not submit reports at all. A total of 21 countries (and the European Union) have ever submitted a report, with an average of 13.5 countries reporting each year between 1999-2010. The WTO does not formally classify countries as "developed." If we consider members of the Organisation for Economic Cooperation and Development (OECD) as "developed" countries, then 70 percent of required members have ever submitted a report, and on average 45 percent report each year. In contrast, if we consider all High-Income Countries (HIC) as "developed" (per capita income of more than $12,196 in 2009), then less than one-third of 69 countries have ever participated. The mere act of submitting a report provides some (albeit limited) indication of a government's commitment to meeting its Article 66.2 obligation.
To what extent do policies target LDC WTO members?
Many of the policies and programmes reported either barely targeted or did not at all target LDCs. Overall, out of 384 unique programmes reviewed, 33 percent were targeted specifically towards LDC WTO members; 18 percent were targeted towards LDC non-members, and the remainder were targeted either to non-LDC developing countries (17 percent), to regions (in which LDCs may or may not be present) (24 percent), to developing countries as a whole (29 percent) or globally (all foreign countries) (7 percent) (see Figure 1) . While it is possible that LDCs benefited from technology transfer as a result of broader policies covering all developing countries, a key aspect of Article 66.2 was to single out LDCs for targeted action. Presumably, one reason for this preferential status was that LDCs would be less likely to receive technology transfer through regular market channels if they competed directly with middle-income countries.
Figure 1: Proportion of reported activities qualifying as incentives for technology transfer to LDC members
To what extent do programmes and policies encourage technology transfer to LDC members?
The analysis adopted a relatively broad definition of technology transfer, and included incentives such as financing the purchase of technologies; incentives for foreign direct investment in technologically-oriented fields; providing insurance against the risk of doing business in LDCs for technology-related firms; training and other general activities intended to improve an LDC’s capacity to absorb technology. Had this analysis adopted a narrower definition, the proportion of reported activities deemed to fulfil the Article 66.2 obligations would have been even lower.
Despite adopting a broad definition, many of the programmes or policies reported by developed countries were either not technical in nature or did not include a technology transfer component, for example: “good governance” programmes, trade agreements, support for building a conducive business environment, general budgetary support for the EU or multilateral institutions (World Bank, UN agencies), and activities that did not specify any technological component nor arrangements for transfer.
Of the 384 programmes listed by the reporting countries, only 11 percent met the criteria of targeting an LDC WTO member with a programme or policy that encourages technology transfer (see Figure 1).
In general, there was almost no evidence of additionality – that is, that new incentives had been put in place as a result of Article 66.2. Assessing additionality is important for two key reasons. First, inducing technology transfer from the most industrialized countries to the LDCs may be particularly challenging, given the wide gaps in levels of economic development between them; additional incentives especially targeted to the LDCs are likely to be necessary to induce a sufficient level of transfer. Second, technology transfer is part of the bargain inherent in TRIPS. The implementation of IP protection and enforcement systems in LDCs requires significant human, financial and political resources, and may narrow down paths to technology acquisition and industrialization followed by many of today’s developed countries. If technology transfer is intended to counterbalance the costs to LDCs of TRIPS implementation, it ought to be additional. If Article 66.2 does not produce any additional technology transfer, the rationale for the LDCs to invest considerable resources in implementing other parts of TRIPS is weak.
Building a monitoring mechanism to better operationalize TRIPS Article 66.2
A more robust monitoring mechanism for Article 66.2 is needed. Such a mechanism should both improve actual technology flows to LDCs, and strengthen capacity to assess how well Article 66.2 is functioning overall. The 2001 Doha Ministerial Declaration mandated the creation of a monitoring mechanism – a request reiterated by several LDC members – but to date none has been established.
We propose the establishment of a Monitoring Mechanism Group (MMG) comprised of about 7-10 persons, which could improve the operation in practice of Article 66.2. The MMG could include individuals from WTO delegations (6-8 persons from LDC, developing and developed country Members), with a few seats reserved for independent experts (e.g. 2-4 persons).
The MMG would have two primary functions: informational and evaluative.
First, the MMG’s informational function would track the provision of incentives over time. As an essential first step, a uniform, digitized, searchable reporting format should be agreed upon that would make monitoring efforts both more feasible and meaningful. Next, it will be necessary to agree on which countries are considered “developed” and therefore obligated by Article 66.2 to provide incentives. Finally, it will be critical to clarify what types of incentives actually meet Article 66.2 obligations, by developing a positive and negative list of qualifying incentives.
Second, the MMG would carry out an evaluative function by assessing how well the incentives achieved improved technology flows. LDCs should clearly identify priority areas in which they need improved access to technology. LDCs could submit periodic reports to the TRIPS Council specifying their priorities and gap assessments with respect to technology transfer, along with independent assessments of how well existing incentives are functioning. These assessments could be used by the MMG to carry out a global evaluation of Article 66.2, and to generate improved practices over time.
Finally, information and case studies are needed regarding best practices of countries that have successfully implemented incentives for technology transfer to LDC Members. This type of research could inform the development of the positive/negative lists suggested above.
While the MMG should improve the quality and user-friendliness of the information provided by reporting countries, and evaluate the effectiveness of provided incentives, it could not assess developed country compliance with Article 66.2, a function reserved for the WTO Dispute Settlement Body (DSB). It may become necessary to assess compliance formally if, even after the establishment of the MMG, it becomes clear that developed countries are not putting in place effective incentives.
Further legal research is needed regarding available remedies for inadequate compliance with Article 66.2. One possibility is that the DSB could authorize an LDC to suspend obligations/concessions within TRIPS or in another WTO Agreement in retaliation for non-compliance. On two occasions, the DSB has authorized a developing country to suspend some TRIPS obligations in retaliation for non-compliance by a developed country member with other WTO obligations (see Dispute DS 27 involving Ecuador/European Union and Dispute DS267 involving Brazil/US). However, no LDC has ever brought a TRIPS-related complaint to the DSB.
There is little evidence that TRIPS Article 66.2 has resulted in significant additional incentives beyond business-as-usual for transferring technology to LDC Members. The existing reporting system does not function as an effective monitoring mechanism. In order to operationalize Article 66.2 more effectively, the TRIPS Council should establish an effective monitoring system as described here.
Knowledge and technology are playing an increasingly important role in addressing global development challenges, yet gaps in technological capacity and access between rich and poor countries remain vast. Developing countries and LDCs have pressed for enhanced technology transfer in a variety of forums, such as the WTO, WIPO (in the context of the Development Agenda) and in multilateral environmental agreements such as the UNFCCC. At the same time, promises and commitments by developed countries in this area have played a critical role in helping to reach international agreement on difficult issues such as climate change. The credibility of such promises and commitments is essential. Building an effective global system for genuine, meaningful technology transfer is therefore in the interests of all countries, and the case of TRIPS Article 66.2 is a compelling place to begin.
Suerie Moon is instructor at the Harvard School of Public Health, and Associate Fellow in the sustainability science program at the Center for International Development, Kennedy School of Government, Harvard University. Her work focuses on analyzing the relationship between access to medicines, innovation and intellectual property rights policies, technology transfer, and the implications for global equity in public health.
This article summarizes the findings of a more detailed Policy Brief by the author, “Meaningful technology transfer to the Least Developed Countries: A Proposal for a Monitoring Mechanism for TRIPS Article 66.2.” ICTSD, Policy Brief #9, April 2011. Available: http://www.ictsd.org/sites/default/files/news/2011/05/technology-transfer-to-the-ldcs.pdf
 Percentages do not add up to 100, since some policies targeted more than one category, e.g. a specific LDC as well as specific non-LDCs.