US SENATE APPROVES CAFTA; HOUSE APPROVAL PENDING

On 30 June, the US Senate approved the Central America Free Trade Agreement-Dominican Republic (CAFTA-DR) in a 54 to 45 vote. The vote passed with the lowest margin relative to recent similar agreements with Australia, Morocco, Singapore, and Chile. The accord faces stiff opposition from labour groups as well as textile and sugar producers, but gained support in the Senate after the White House promised to limit sugar imports through 2007 by paying CAFTA-DR countries not to ship sugar to the US or by buying the sugar so it can be made into ethanol.

CAFTA-DR would eliminate more than USD 33 billion in tariffs on goods traded between the US and Costa Rica, Honduras, Nicaragua, El Salvador, Guatemala, and the Dominican Republic. It also locks in and expands the duty-free access CAFTA-DR countries already have to the US market.

Earlier the same day, the US House of Representatives Committee on Ways and Means -- which reviews bills relating to trade and tariffs -- formally voted 25 to 16 in favour of CAFTA-DR. This moves the legislation to the floor of the chamber, where it is likely to face a full vote before the US Congress' August recess. After the committee approval, Chair Bill Thomas, a Republican from California, said he was working on legislation to address various trade issues with China, which may include the collection of duties assessed on Chinese imports in dumping cases and the authorisation of new trade enforcement efforts. Thomas wants the House to act on China legislation before considering CAFTA-DR.

"Senate Approves Central America Free Trade Pact", NEW YORK TIMES, 1 July 2005; "Senate Passes Cafta; Companies Await House Decision", BLOOMBERG, 1 July 2005; "Thomas Sees China Action Before Final Vote on DR-CAFTA", INSIDE US TRADE, 1 July 2005; "US Senate backs Central America trade pact", FINANCIAL TIMES, 30 June 2005.

BRAZIL SET TO GRANT COMPULSORY LICENCE FOR AIDS DRUG

A deadline set by Brazil for a cut in the price of a key AIDS drug manufactured by a US pharmaceutical firm looks set to expire, leading to the possibility that Brazil will issue a compulsory licence for the manufacture of the drug by public bodies.

Brazil announced its intention to produce a generic version of Abbott Laboratories' Kaletra drug last month if the company refused to implement a steep enough price cut by 6 July.

Under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), governments can approve the domestic production of generic versions of patented drugs during emergency public health situations if they fail to reach an agreement with the patent holder.

Brazil has previously announced similar decisions for drugs manufactured by Merck and Roche. In each case, the firms subsequently reached agreements with the Brazilian government on lower prices for the patented drugs.

Brazil said it had no plans to export the generic version of the drug. If production goes ahead, however, it could encourage other developing countries to issue compulsory licences for patented drugs. Humberto Costa, Brazil's Health Minister, said "We do not want to make this situation a showcase, but I think we can stimulate with this decision that other countries use this legal mechanism".

The move comes as the Brazilian Senate considers legislation that would allow the government to produce generic versions of all patented AIDS drugs (see BRIDGES Weekly, 8 June 2005).

ICTSD Reporting; "Brazil Aims For Cheaper AIDS Drug", ASSOCIATED PRESS 3 July 2005; "Brazilian Health Minister Urges Countries to Use WTO Rules to Challenge Drug Companies to Lower AIDS Drug Prices", MEDICAL NEWS TODAY, 1 July 2005.

TIMBER NEGOTIATIONS STRUGGLE WITH SCOPE, CERTIFICATION

Delegates meeting in Geneva between 27 June - 1 July for a third round of negotiations on a successor pact to the International Tropical Timber Agreement 1994 (ITTA-1994) were unable to agree on a new text. Participants did, however, try to balance trade and sustainable development concerns amid questions about the financial and organisational structure of the agreement (see BRIDGES Weekly, 1 September 2004).

The ITTA-1994 is a commodity agreement negotiated under the auspices of the UN Conference on Trade and Development (UNCTAD) that both addresses international trade issues and promotes sustainable forest management (SFM). The accord expires at the end of 2006.

The negotiations on the draft successor agreement have seen disagreement on several issues. The US, for example, supports including ecological services and non-timber forest products in the objectives of the new agreement. Most producer developing countries, however, counter that these environmental elements should be limited to the preamble of the agreement in order to ensure that the new ITTA is a commodity agreement and not a new multilateral environmental agreement. They also want references to genetic resources be eliminated.

Brazil, the US and others opposed language that would have had the ITTA Secretariat, known as the International Tropical Timber Organization (ITTO), encourage members to address illegal logging and trade, arguing that this could impede on national sovereignty. Instead, Brazil suggested that the international community could provide financial support to national efforts to encourage legal harvesting, trade and certification.

Participants failed to agree on whether to explicitly encourage the ITTO to promote certification, following controversy about SFM certification and its potential effects on market access and price. Nevertheless, delegates said that they expected ITTO work on this subject to continue.

ICTSD reporting; EARTH NEGOTIATIONS BULLETIN, Vol 24 No. 59-63.

SUPACHAI, ANNAN PUSH DOHA ROUND NEGOTIATORS AT UN MEETING ON MDGs

At a high-level meeting of the UN Economic and Social Council (ECOSOC) held in New York City from 29 June - 1 July, UN Secretary-General Kofi Annan and WTO Director-General Supachai Panitchpakdi stressed the importance of successfully completing the Doha Round negotiations for the achievement of the Millennium Development Goals (MDGs). At the gathering, ministers, senior government officials, and representatives from international organisations, academia and business discussed prospects for the MDGs. A document adopted at the meeting called for the elimination of tariff peaks and tariff escalation against the exports of developing countries.

Supachai told a session on the world economy, international economic co-operation and the MDGs that trade talks needed to address tariff peaks and escalation that prevent countries from diversifying their economies, a view that was reflected in the meeting's ministerial statement. He also pointed out that the negotiations could also create problems for small and vulnerable countries that could be addressed through trade-related technical assistance and duty-free and quota-free market access for least developed countries (LDCs).

Both Supachai and Annan stressed that countries must demonstrate both "strong political will" and a "willingness to compromise" if they are to reach an agreement at December's WTO Ministerial Conference in Hong Kong, as well as in the Doha Round overall. Supachai added that trade, if it is to support the pursuit of the MDGs, must be made to "work as a tool for development, which can only arise if openness is implemented in the context of coherent economic policies" at the national level.

"Press Release Ecosoc/6157," ECOSOC, 30 June 2005; "Press Release Ecosoc/6156," ECOSOC, 29 June 2005; "Press Release Ecosoc/6155," ECOSOC, 29 June 2005; "Draft Elements of a Ministerial Declaration," ECOSOC, 16 May 2005.

WIPO DEVELOPMENT AGENDA TALKS TO FOCUS ON SPECIFIC PROPOSALS

Discussions on how to integrate a development agenda (DA) into the functioning of the World Intellectual Property Organization (WIPO) turned towards specific proposals during the 20-22 June meeting of the second session of the body's Inter-governmental Inter-sessional Meeting (IIM). The gathering saw proposals from Bahrain (co-sponsored by several Arab countries) and the UK. The UK proposal built upon a submission made to the first session of the IIM (see BRIDGES Weekly, 13 April 2005).

The UK submissions (IIM/1/5 and IIM/2/3) argued that reinvigorating WIPO's Permanent Committee on Co-operation for Development Related to Intellectual Property (PCIPD) would be suitable for taking care of the DA. One delegate argued that the actual WIPO body in which work on development takes place is not crucial so long as the work is carried forward in an appropriate manner. The Bahrain-led proposal also expressed general support for the current nature of WIPO activities.

Canada echoed the UK proposal, though it expressed willingness to look at PCIPD's mandate if needed. However, Argentina -- a proponent of wide-ranging changes to the organisation's mandate and functioning -- disagreed, arguing that issues apart from technical assistance should not be considered within the PCIPD. Brazil, India, and Colombia, took similar positions.

The negotiation process eventually went forward based on a modified version of a list of action-oriented proposals put together by Brazil. The proposals were extracted from statements made by various delegations prior to June 2005. The real success of the meeting was the shift in debate from process to substantive discussions on specific proposals. The third session of the IIM is scheduled for 20-22 July.

ICTSD reporting.

HELSINKI PROCESS CALLS FOR IMPROVED WTO DECISION-MAKING

The Helsinki Process on Globalisation and Democracy launched a report entitled "Mobilising Political Will" at Chatham House in London on 29 June. The report is the result of a three-year process bringing together a wide range of stakeholders to find workable solutions to problems posed by globalisation -- a process that will culminate in a conference in Helsinki from 7-9 September this year.

Covering five broad areas, namely, poverty and development, human rights, environment, peace and security, and governance, the report proposes measures such as: creating a new Human Rights Council; improving donor governance of large programmes for events such as the Indian Ocean tsunami of December 2004; creating a World Environmental Organisation; and seeking steep reductions in greenhouse gas emissions.

On trade, the report called for continued reduction of agricultural subsidies and improved decision-making, negotiation procedures and transparency at the WTO. According to the report, "Development and combating poverty have to be a central concern in WTO negotiations." Developing country capacity needs to be strengthened and "they must be able to fully utilise the space provided by special and differential treatment and strengthened provisions for this principle." The report also cautions that liberalisation policies need to be carefully managed and assistance to deal with adjustment costs should be targeted towards vulnerable groups.

The Helsinki Process is run by the Finnish and Tanzanian governments. The Helsinki Group members include, among others, Susan George, Irene Khan, Martin Khor, Ann Pettifor and Vijay Pratap. It is chaired by Erkki Tuomioja and Jakaya M. Kikwete, the foreign ministers of Finland and Tanzania, respectively.

For further information and to download the Helsinki Process report, visit http://www.helsinkiprocess.fi/netcomm/news/showarticle.asp?intNWSAID=38499&intIGID=33&CatTypeNumber=1&LAN=EN&Thread=38499,38502,38202,&intThreadPosition=0.

ICTSD reporting; "Helsinki Process Calls For Change Amid Global Governance Deficit: G20+ to complement G8 and include more states from the Southern hemisphere - especially Africa," HELSINKI PROCESS PRESS RELEASE, 29 June 2005.

CHINA-ASEAN TARIFF CUTS COME INTO FORCE

China and the ten member states of the Association of Southeast Asian Nations (ASEAN) are reducing tariffs on some 7000 types of industrial goods this month. These cuts, which came into force on 1 July for some ASEAN countries including Thailand, are the first part of implementing their 29 November 2004 agreement to cut duties on close to 95 percent of industrial goods to between zero and five percent by 2015 (see BRIDGES Weekly, 1 December 2004). Other members of the Southeast Asian trading bloc, such as Malaysia, are set to lower tariffs on 20 July, after taking some extra time to finalise new customs procedures.

Tariffs are to be axed by 2010 for the six most advanced ASEAN members, i.e., Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand. The four poorer member states -- Laos, Vietnam, Cambodia, and Myanmar (Burma) -- will have until 2015 to comply. Liberalisation is taking place under a multiple track system. For the richer ASEAN countries, products in the standard track will be cut to zero and five percent by 2010. Duties on products identified as sensitive will not reach this level until 2018; those on highly-sensitive products will go no lower than 50 percent. Different countries have classified products including rice, cement, and automobiles as sensitive.

This round of tariff cuts was preceded by an 'early harvest' of liberalisation in some agricultural products at the start of 2004, as per the terms of China's original 2002 deal with the trading bloc. A research paper from global financial services giant Merrill Lynch projects that ASEAN countries are likely to increase natural resource exports to China while increasing their imports of manufactured goods.

Bilateral trade between China and ASEAN grew 20 percent annually after 1990 to reach USD 105.9 billion in 2004.

"China-ASEAN agro trade on fast track," CHINA DAILY, 9 August 2004; "China-ASEAN FTA to boost regional integration -Merrill Lynch," PHILIPPINE DAILY INQUIRER, 1 June 2005; "China, ASEAN discuss regional trade opportunities," XINHUA, 4 July 2005; "China, Asean to lower tariffs from July 20," NEW STRAITS TIMES, 2 July 2005; "China-ASEAN trade pact presses Korea," KOREA HERALD, 1 July 2005.