Human Rights, Development, and the WTO: The Cases of Intellectual Property and Competition Policy

[H]uman beings must be at the centre of the world we are building, a world that must be able not only to think, create, reason and dream, but also to dialogue.¹

INTRODUCTION

The role of the World Trade Organization (WTO) and its various agreements have sometimes been portrayed as being at odds with the protection of human rights.² Two subjects whose treatment in the Organization has sometimes been viewed with particular concern are intellectual property rights (IPRs) and competition policy. These perceptions are based, in our view, at least in part, on misunderstandings regarding both the nature and role of the multilateral trading system and the implications of existing or possible agreements in these areas. Rules to promote transparent and non-discriminatory conditions for participation in international markets and procedural fairness in the implementation of related government policies (core aspects of the WTO’s mission) are a necessary response to the dilemmas of globalization and contribute to, rather than hinder, the fulfilment of human rights. Trade liberalization, by enhancing possibilities for voluntary exchange according to the principles of comparative advantage, creates wealth for all participants and thereby helps to generate the resources needed for the fuller realization of human rights, in particular economic, social, and cultural rights. Furthermore, and as will be elaborated in this article, both IPRs and competition policy, properly designed and implemented, can be important tools of development and, therefore, instruments for the advancement of human rights.³

The foregoing is not to suggest that the multilateral trading system works perfectly or that all participants have benefited equally; clearly, continuing efforts are needed to promote development and enhance the share in the growth of trade enjoyed by developing and least developed countries. This is recognized explicitly in the Marrakesh Agreement Establishing the WTO (WTO Agreement), which is the legal foundation of the WTO.⁴ In any case, the WTO and its treatment of particular issues continue to evolve, partly in response to legitimate pressures from outside the system. As an illustration, reference will be made, in this article, to the recent agreement to amend the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement)⁵ to facilitate access to medicines in response to public health needs. We also do not believe that human rights are the only lens through which these issues can usefully and legitimately be assessed; on the contrary, in our view, the multilateral trading system serves important ‘utilitarian’ functions and can be defended on this basis alone. However, in view of the questions that have been raised about the implications of various WTO Agreements and activities for human rights and development, it seems important to explore and reflect further on these issues.⁶

At one level, the question of the relationship between the WTO and human rights is a jurisprudential one. Relevant questions here are whether and, if so, how far and subject to what doctrinal limits general international law relating to human rights may be drawn upon by WTO panels and/or the Appellate Body in resolving legal disputes relating to the WTO Agreements. These and related questions are the subject of ongoing scholarly debate.⁷ They are not, however, the focus of this article. Rather, this article is concerned with more basic questions concerning the overall significance of trade, trade liberalization, and the role of the WTO for human rights and development. These questions are explored both generally and with reference to developments concerning the particular subjects of intellectual property (IP) and competition policy, and their treatment in the WTO.

In this article, the concept of ‘human rights’ includes both civil and political rights (e.g. freedom of expression and freedom from arbitrary procedures) and economic, social, and cultural rights (e.g. the right to just and favourable conditions of work and remuneration, an adequate standard of living, etc.). This is consistent with the approach of the Universal Declaration of Human Rights (UDHR).⁸ An important nuance is that, following Petersmann⁹ and earlier thinkers such as Smith,¹⁰ Paine,¹¹ and Kant,¹² we emphasize the historic importance of freedom to participate in markets (absent private or publicly imposed distortions) as an aspect of civil and political rights. Our argument will be that (i) the rules and procedures of the WTO are directly supportive of civil rights in the sense of freedom to participate in markets and freedom from arbitrary governmental procedures and (ii) the system also makes an essential contribution to development and to the realization of broader economic, social, and cultural rights, by stimulating economic growth and thereby helping to generate the resources that are needed for the fulfilment of such rights.

The remainder of the article is organized as follows. Section I reflects broadly on the significance of markets and international governance mechanisms such as the WTO for the protection and enjoyment of human rights and for development. Sections II and III develop and extend these arguments with reference to the specific policy areas of IPRs and competition policy, and their treatment in the WTO. Section IV provides concluding remarks.

I. HUMAN RIGHTS, DEVELOPMENT, AND INTERNATIONAL GOVERNANCE IN THE TWENTY-FIRST CENTURY: THE SIGNIFICANCE OF MARKETS AND RELATED LAWS AND INSTITUTIONS

This part of the article reflects broadly on the relationships between human rights, development, and international governance in the twenty-first century. At the outset, we wish to make clear the following caveats. First, these topics and the relationships between them are obviously broader and more complex than can be reflected in a single section of an article such as this. We emphasize, therefore, that, in these pages, we are not seeking to give these topics a comprehensive treatment; rather, we are simply pointing to a few particular relationships which, it seems to us, have sometimes been lost in discussions on these issues. Second, in what follows, we will sometimes be emphasizing questions of economic values and the allocation of economic resources in relation to development and the fulfilment of human rights. We nonetheless do not suggest that other values and rights (e.g. freedom of expression) are unimportant—quite the contrary. The freedom and well-being of individuals will not be well served if traditional ‘core’ human rights such as freedom of expression are subordinated to perceived collective rights, entitlements, and sensitivities.¹³ We favour, rather, an approach such as that of Amartya Sen, which recognizes the intrinsic value and interdependence of economic, political, and social freedoms, and the importance of each for development and human fulfilment.¹⁴ It follows from this approach that economic values and efficiency in the allocation of resources certainly are not irrelevant to human rights, welfare, and dignity, though they are by no means the whole story.

Third, we do not suggest that the WTO is immune to criticism, from the perspective either of human rights or of development. Legitimate criticisms have been, and no doubt will continue to be, made of the system by thoughtful observers—something that can usefully contribute to its future evolution. Indeed, as noted, the system is already evolving, partly in response to concerns that have been voiced. The recent amendment to the TRIPS Agreement to facilitate access to medicines in response to public health crises, which is outlined in this article, is a case in point. We believe, however, that there is a side to the debate which has sometimes been missed: that trade liberalization contributes importantly to economic development; that the legal framework for the multilateral trading system which is embodied in the WTO Agreements represents, in some measure, a necessary response to the problems of globalization; and that the system is more subject to democratic control than is commonly pictured. For these reasons, the system is also more conducive to the realization of human rights than has sometimes been suggested.

To elaborate, it seems to us that there is a strong case to be made that the promotion of well-functioning markets, domestically and internationally, is a necessary and inevitable consequence of concern with human rights.¹⁵ This is so for at least two reasons: first, well-functioning markets are necessary to provide the resources that are required if human rights are to be meaningfully advanced and protected by societies (and not merely given lip service), and to promote development. Meaningful fulfilment of rights such as those to adequate food, housing, education, and employment will not be achieved without enhanced economic dynamism in the developing and post-Communist regions of the world. Certainly, the role of markets and related institutions is emphasized in modern economic literature on development-related themes.¹⁶

Second, properly constituted markets (i.e. markets subject to appropriate governance structures) are a form of social organization which makes possible a high degree of personal autonomy and tolerance for individual diversity. As such (and subject, in our view, to other necessary mediating mechanisms which must be provided by governments and civil society), they provide a hospitable environment for individual self-fulfilment and choices.¹⁷

This dual contribution of markets to human welfare and development—both in terms of the results they deliver and as a vehicle for the exercise of individual choices—is captured effectively by Sen:

The ability of the market mechanism to contribute to high economic growth and to overall economic progress has been widely—and rightly—acknowledged in the contemporary development literature. But it would be a mistake to understand the place of the market mechanism solely in derivative terms. As Adam Smith noted, freedom of exchange and transaction is itself part and parcel of the basic liberties that people have reason to value.¹⁸

As is made clear by the foregoing quotation from Sen, the concept of freedom to participate in economic markets absent from private or governmental restraints as an element of liberty and human rights is well anchored in the ideas of the Enlightenment, particularly the Scottish Enlightenment. It was a core concern of Adam Smith in the Wealth of Nations,¹⁹ much of which is devoted to cataloguing the deleterious effects of unwarranted governmental and private restrictions on the operation of markets on the welfare of citizens. As pointed out by Sen, for Smith, markets were important not solely for utilitarian reasons but also, very much, as aspects of liberty itself. In fact, Smith referred to the system that he envisioned as the system of ‘natural liberty’, rather than ‘the market economy’ or ‘capitalism’ as such. The importance that Smith attached to markets and to related laws and institutions and their importance for prosperity (i.e. the ‘Wealth of Nations’) and human happiness built, in turn, on the insights of other Scottish Enlightenment thinkers such as David Hume, Lord Kames, and Francis Hutcheson.²⁰

The idea of ‘the pursuit of happiness’, an ‘inalienable right’ included by Thomas Jefferson in the American Declaration of Independence of 1776 (the same year in which the Wealth of Nations was published), derived at least in part from the writings of Scottish Enlightenment and related thinkers.²¹ As such, it implicated, in its historical context, the idea of freedom to participate in and seek personal advancement through markets in addition to other important aspects of human happiness and liberty.²² As pointed out by Petersmann, Kant, who read and was influenced by Smith, posited that international commerce, in a context of appropriate rules and institutions (i.e. republican self-government), could support ‘perpetual’ international peace.²³

A healthy market economy, reinforced by appropriate institutions, can support tolerance and human rights in other, more subtle ways. As pointed out by Benjamin Friedman in his important recent study of the links between economic growth, morality, tolerance, and political freedom in the United States and elsewhere:

Only with sustained economic growth, and the sense of confident progress that follows from the advance of living standards for most of its citizens, can even a great nation find the energy, the wherewithal, and most importantly the human attitudes that together sustain an open, tolerant and democratic society.²⁴

Recognition of the role of markets as both an instrument for material advancement and an aspect of individual freedom is not a blanket apologia for capitalism or a defence of laissez-faire. Adam Smith himself saw an important role for government in areas such as the administration of justice, the provision of economic and social infrastructure, and education.²⁵ Both modern economic theory and practical experience make clear that markets are subject to failures and therefore that appropriate governance mechanisms (i.e. rules and institutions) are needed to ensure their sound operation. Two such mechanisms are competition or anti-monopoly policy, which addresses market failures arising from the existence of cartels, monopolies, and other anti-competitive practices, and IPRs, which provide a mechanism for capturing the value inherent in ideas and their application and hence can facilitate beneficial exchange and technology transfer.²⁶

More generally, the efficient operation of markets requires (at a minimum) a functioning system of property rights (including but going beyond those embodying IP) and mechanisms for the enforcement of contracts.²⁷ Another essential aspect of the institutional framework for the satisfactory operation of markets is adequate rules to deal with ‘externalities’ such as environmental degradation. Markets without rules and institutions to deal with these and other failures perform sub-optimally. Indeed, it must be acknowledged that, in many cases, privatization and other ‘market-oriented’ reforms in developing and transition economies have not always lived up to expectations. In many cases, the failure of such reforms has been attributable to an associated failure to introduce appropriate rules and institutions to govern markets and to change the incentives facing newly privatized assets in ways that will improve performance.²⁸ Recognizing these failures, recent developmental literature emphasizes the importance of effective laws and institutions for the governance of markets as distinct from market opening or privatization per se.²⁹ Like many, we would also agree that the operation of markets should be mediated by measures to address unjustifiable inequalities of income and wealth. Yet it remains that efficiently functioning markets, backed up by appropriate laws and institutions, are central to any realistic programme for development³⁰ and hence to the fulfilment of human rights.³¹

Globalization has the potential to make immense contributions to human prosperity, cultural development, and happiness, by extending the benefits of markets across borders.³² It nevertheless also entails immense challenges in adapting social rules and institutions to the internationalization of markets. In a globalizing economy characterized by extensive interdependencies between regions and nations, the necessary rules and institutions (‘governance mechanisms’) will also increasingly be international in scope.³³ Of particular importance here are rules to ensure the efficient functioning of transborder markets and the provision of international public goods.³⁴ Governance at the international level does not replace but complements national laws and institutions, to the extent that the latter are unable to optimally address conduct that ‘spills over’ national borders. An obvious example is the need for international rules to protect fungible resources, such as the oceans and clean air, which are part of the ‘global commons’ and cannot, therefore, be protected through national measures alone. A perhaps less obvious example is the need for rules to address transnational anti-competitive practices, which cannot be adequately addressed through national rules alone.³⁵

A key requirement in facilitating the more efficient functioning of international markets for the welfare of all participants is the progressive removal, over time, of barriers that prevent or make more difficult beneficial exchanges between producers and consumers located in different countries. This is a core aspect of the WTO’s mission. The need for such an organization arises from the fact, widely acknowledged by practitioners and documented in the economics of international trade, that for political–economic reasons governments often find it difficult to unilaterally liberalize their trade regimes, even when doing so would achieve net welfare gains for their citizens. Beneficial liberalization is made easier in an international bargaining process that implicates the interests of those who will gain from other countries’ market-opening measures, in addition to their own.³⁶

The removal of barriers that thwart mutually beneficial exchanges across national boundaries has important developmental linkages. The preamble to the WTO Agreement explicitly reflects these connections between trade and development:

relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development.³⁷

Modern economic analysis provides broad empirical support for the proposition that trade liberalization promotes growth, which in turn supports investment in the creation and protection of human rights.³⁸ This is despite the fact that the underlying relationships are complex and may be subject to exceptions. In fact, there is evidence that the demand for human rights is income elastic—that is it increases at least proportionately with income levels.³⁹ Without suggesting that all participants have benefited equally from trade liberalization or that further adjustments to existing rules may not be needed, for us it is clear that the progressive removal of barriers that separate societies and suppress voluntary exchanges between their citizens consistent with the rule of law is likely, on balance, to be strongly pro-development and welfare-enhancing. As illuminated by the modern theory of ‘endogenous growth’,⁴⁰ the reasons have as much to do with the learning effects that flow from international and cross-cultural exchanges as from the traditional economic ‘gains from trade’ (though the latter are substantial and should not be overlooked).⁴¹

Of course, trade is not a panacea. Experience overwhelmingly rejects the existence of developmental ‘magic bullets’.⁴² The potential benefits of external liberalization often will not be realized if countries fail to introduce complementary domestic policy reforms. These include taking steps to reduce costs and enhance the efficiency of infrastructure sectors such as telecommunications and transportation; to promote flexibility by eliminating artificial restrictions on entry, exit, and pricing in manufacturing and other industries; and to establish and strengthen incentives for investment, innovation, the creation of efficient management structures, and productivity improvement. This implies a clear need to assist developing countries to implement necessary internal policy reforms, if they are to benefit from globalization.⁴³ Yet it remains that trade liberalization, complemented by other appropriate reforms, can effectively promote growth and development by strengthening competition in national economies, facilitating a more efficient allocation of resources within and across economies, and, as emphasized in the above-noted literature on ‘endogenous growth’, by facilitating cross-national learning and technology transfer. In addition, international arrangements can help developing countries to implement domestic policy changes that promote growth and development, by overcoming systemic ’collective action’ problems.⁴⁴

As one of many possible examples, the ongoing ‘leap forward’ of India clearly builds on both its burgeoning role in providing IT and related services to developed country markets and the resulting inward transfers of technology and human capital formation.⁴⁵ The momentous progress of China over the past decade reflects a similarly multi-faceted though by no means identical set of benefits accruing from reciprocal market opening, inward foreign investment, learning, and structural change.⁴⁶ The contrast with societies that close themselves to international and cross-cultural commerce and other forms of interaction (e.g. North Korea today, the Soviet Union in its declining years, India at various times in the past, and China itself for several centuries following the closure of its borders to international trade by the Ming dynasty in the fifteenth century) is striking.

In this context, Petersmann argues that the WTO represents an (as yet imperfect) effort to provide an essential ‘constitutional’ framework for the regulation of international markets—a framework that is ultimately necessary for the fulfilment of human rights.⁴⁷ The qualifier ‘constitutional’ reflects the presence, in the WTO, of four distinct elements that, in Petersmann’s view, are characteristic of international law of a constitutional nature:

1. the existence of legislative, executive, and judicial powers that interact within a legal framework characterized by checks and balances;

2. the supremacy of ‘constitutional’ or ‘basic’ law (in this case, the WTO Agreement) over subordinate law (in this case, the various agreements annexed to the WTO Agreement);

3. substantive rights that are created by the various agreements to freedom of trade, non-discriminatory conditions of competition and access to courts or independent tribunals, which in turn support deeper values such as freedom of commercial exchange, an international rule of non-discrimination in international commerce, procedural fairness, ‘cosmopolitan relations’ among competing producers, investors, traders, and consumers, in addition to their respective governments,⁴⁸ and the rule of law generally; and

4. the existence of appropriate mechanisms for the enforcement of the rights created by the WTO Agreements, in particular, the role of dispute settlement panels, the Dispute Settlement Body, and the WTO Appellate Body, which acts as a ‘court of appeal’ from the findings of individual WTO panels with respect to matters of WTO law. In this regard, the requirements for procedural fairness in the WTO are more far-reaching than is commonly portrayed.⁴⁹

From Petersmann’s point of view, the various elements referred to above are themselves supportive of human rights—particularly, the right to participate freely in undistorted economic markets and procedural rights such as transparency of government measures and access to fair procedures in the adjudication of administrative matters. The WTO Agreements also embody a number of balancing provisions or exceptions that attempt to ensure that matters such as food safety, public health, and morals, etc. are not subordinated to market freedoms.⁵⁰ The system is, nonetheless, manifestly imperfect in Petersmann’s view, inter alia for the following reasons: (i) the WTO Agreements themselves, and related jurisprudence, have not explicitly adopted the objectives and terminology of human rights concerns⁵¹ and (ii) certain additional balancing elements, notably provisions integrating the role of national competition (anti-trust) policies with the rules and objectives of the WTO, are missing from the system.⁵²

Petersmann’s characterization of the WTO will strike some (perhaps many) observers as idealized. Critics point out that the fact that the WTO’s principles and procedures appear to be consistent with human rights objectives at a broad and abstract level does not guarantee that such objectives will be given due weight in individual enforcement proceedings. Furthermore, an abstract relationship to human rights begs important questions as to whose rights will be given priority, in what contexts, etc.⁵³ Yet Petersmann’s central arguments seem to us to be both important and valid, at least as far as they go. The globalization of markets necessitates that issues of economic governance be addressed, at least to a degree, at the international level, for the simple reason that all conflicts affecting the welfare of citizens cannot be satisfactorily resolved at the national level.⁵⁴ The WTO is not a static framework but a forum in which national economic policies impacting adversely on the citizens of other countries can be addressed. An example is the issue of agricultural subsidies and market access barriers imposed by developed countries, which are viewed by many as an impediment to growth and prosperity in developing countries—and which, as a result, have become a central focus of the current Doha Round of multilateral trade negotiations.⁵⁵ If the world lacked a forum in which to deliberate and reach enforceable decisions on such issues, it would need to create one.

None of this is to suggest that the existing multilateral trading system is fair in all respects or that the international agreements and policy changes needed to redress existing distortions to international markets are easy to reach or implement. Indeed, issues such as the elimination of welfare-reducing distortions in international agricultural markets implicate a plethora of interests that can only be reconciled—if at all—through difficult negotiations. Facilitating such negotiations is one of the primary functions of the WTO. We also do not suggest that economic and political powers are without influence in international policy-making, in the WTO or other fora. However, it is vital to understand that the constitutional nature of the WTO—particularly the cornerstone principle of non-discrimination and the rule of consensus which permits any individual Member to block the reaching of an agreement—creates greater leverage for smaller and poorer countries than they would enjoy in a world of naked bilateral power relationships. The fact that WTO dispute settlement procedures are based on the ‘rule of law’ (i.e. the impartial enforcement of the rights, commitments, and obligations set out in the agreements which have been adopted by consensus) rather than on national interests per se is also of critical importance.⁵⁶

Recently, the challenges faced by the world economy have been made more specific and concrete in the Millennium Development Goals.⁵⁷ These include goals relating, for example, to (i) the eradication of extreme poverty and hunger; (ii) combating HIV/AIDS, malaria, and other diseases; (iii) ensuring environmental sustainability; and (iv) developing a global partnership for development. No doubt, enhanced international aid, cooperation, and development assistance have an important role to play in meeting these goals, perhaps particularly with respect to current public health and environmental concerns. Experience nevertheless suggests that aid has its own intrinsic limitations as a developmental tool and that truly sustainable development will not be achieved without measures to reduce current distortions in the international trading system, enhance economic dynamism, and create better-functioning markets in the developing world.⁵⁸

In addition to the role of the multilateral trading system in general terms, it is instructive to reflect on the implications for human rights and development of WTO Agreements and activities in specific policy areas. This can provide a more specific and concrete appreciation of the relationships involved. This is the purpose of the next two parts of this article. These reflect, respectively, on the implications for human rights and development of the treatment in the WTO of two specific subjects, namely (i) IPRs and (ii) competition policy.⁵⁹

II.HUMAN RIGHTS, DEVELOPMENT, AND THE TREATMENT OF IPRs IN THE WTO⁶⁰

A. Human rights and the public interest as complementary grounds for the protection of IPRs

Both human rights and the public interest in the sense of economic and other utilitarian standards have been used to justify the protection of IP since the establishment of early IP systems. The human rights approach was first explicitly manifested in the French revolution. The 1789 Declaration of the Rights of Man and of the Citizen included ‘property’ among the ‘natural and imprescriptible rights of man’. In the context of the adoption of the Law of 1791 providing a right of representation to authors, it was argued that ‘the property of the work which is born of the writer’s thought is the most sacred, the most legitimate, the most unassailable, and the most personal of all properties’. In the modern context, the notion of a ‘natural right’ might often be replaced by an appeal to a sense of equity and fairness: it is seen as fair that, for example, a freelance journalist, a composer, or an inventor would draw some benefit from others using the fruits of his or her creative efforts for economic gain.

The US Constitution of 1787 justifies the legislative authority granted to the Congress in IP matters on grounds of public interest: ‘The Congress shall have power . . . to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries’. The objective of the authority is to promote the progress of science and useful arts; the means to this end is the provision, for limited times, of exclusive rights to authors and inventors.

The right to benefit from the protection of moral and material interests resulting from creative work is recognized in international human rights instruments. Article 27.2 of the UDHR provides that ‘[e]veryone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he is the author’.⁶¹ The right to benefit from such protection is also recognized, in identical terms, in Article 15.1(c) of the International Covenant on Economic, Social, and Cultural Rights (ICESCR).⁶²

The United Nations (UN) Committee on Economic, Social, and Cultural Rights adopted on 21 November 2005 a General Comment⁶³ on Article 15.1(c) of the ICESCR (General Comment) with the view to assisting States parties to it to implement its provisions. In paragraph 1 of the General Comment, the Committee has attempted to draw a distinction between the human right in question and present IP systems. It states that the human right recognized in Article 15.1(c) ‘derives from the inherent dignity and worth of all persons’ and that ‘[t]his fact distinguishes [it] from most legal entitlements recognized in intellectual property systems’. Exploring the interaction between human rights and public interest, it adds that ‘[h]uman rights are fundamental as they are inherent to the human person as such, whereas intellectual property rights are first and foremost means by which States seek to provide incentives for inventiveness and creativity, encourage the dissemination of creative and innovative productions, as well as the development of cultural identities, and preserve the integrity of scientific, literary, and artistic productions for the benefit of society as a whole’.

It should be added that the protection of IPRs is also the main means by which States give effect to the fundamental rights deriving from Article 15.1(c). Therefore, Article 15.1(c) rights and IPRs do overlap. At the same time, it is clear that this is not the only public policy goal that States pursue through IP legislation and, hence, such legislation generally has a much broader scope than and does not fully coincide with what is required under Article 15.1(c). It should also be noted that the objectives that the General Comment describes as the public policy goals of IPRs relate to the realization of other economic, social, and cultural rights. In any case, human rights of authors, on the one hand, and the broader public interest in promoting the benefit of the society as a whole, on the other hand, both remain the underpinnings of modern IP systems. While traditionally, in particular in the area of copyright, the civil law tradition might have emphasized more the first and the common law tradition the second approach, these two conceptual starting points are complementary rather than mutually exclusive.

B. The TRIPS Agreement and human rights

How does the TRIPS Agreement relate to these two underpinnings? Article 7 of the Agreement, which refers to the objectives of IP protection, puts emphasis on the public interest rationale. This Article, entitled ‘Objectives’, states that ‘the protection and enforcement of IPRs should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations’. This corresponds with the objectives of Article 15.1(a) and 15.1(b) of the ICESCR, which recognize the right of everyone to take part in cultural life and to enjoy the benefits of scientific progress and its applications. Given that the TRIPS Agreement is contained in Annex 1C to the WTO Agreement, the overall objectives of the WTO such as ‘raising standards of living’ worldwide, as reflected in the Preamble to the WTO Agreement, also concern the TRIPS Agreement.⁶⁴

Although the expressly stated objectives of the WTO Agreement and the TRIPS Agreement lay emphasis on promoting social and economic welfare, Article 27.2 of the UDHR and Article 15.1(c) of the ICESCR underline the need to protect the interests of authors in the results of their intellectual efforts not only for the sake of the broader public interest but because they are recognized as worthy of protection as such. However, it can be argued that the TRIPS Agreement, including the pre-existing IP conventions incorporated into it, also seeks to give effect at the multilateral level to the rights in relation to the material interests recognized under Article 15.1(c) of the ICESCR.⁶⁵ This would appear, for example, to be indicated by the statement in the Preamble to the TRIPS Agreement that recognizes that IPRs are private rights.

However, looking at IP through the Article 15.1(c) human rights lens would require moving from state-centred international relations in this area towards increased focus on human beings and their empowerment domestically and cross borders through adequate protection of their creative work. As Petersmann notes more generally, ‘respect for human dignity requires that human beings be treated as ends in themselves and as legal subjects rather than mere objects of government policies’.⁶⁶

It should be added that the TRIPS Agreement promotes also other values deemed essential for the realization of human rights, such as non-discrimination (Articles 3–5) and the rule of law at the national level (section III). It also makes TRIPS disputes subject to the WTO dispute settlement system, which aims to ensure the rule of law in international trade relations through the impartial and effective resolution of disputes between governments.⁶⁷

Paragraph 4 of the General Comment emphasizes the interdependence of all human rights. According to it, Article 15.1(c) rights are ‘intrinsically linked’ to the other rights recognized in Article 15, namely the rights to take part in cultural life and to enjoy the benefits of scientific progress and its applications, and the freedom indispensable for scientific research and creative activity.⁶⁸ The relationship between these rights ‘is at the same time mutually reinforcing and reciprocally limitative’. Paragraph 4 also states that Article 15.1(c) is ‘closely linked’ with the rights to the opportunity to gain one’s living by work which one freely chooses and to adequate remuneration and standard of living.⁶⁹ Furthermore, its realization ‘is dependent’ on a number of other rights, such as the freedom of expression including the freedom to seek, receive, and impart information and ideas of all kinds.⁷⁰ Paragraph 22 of the General Comment provides that Article 15.1(c) rights ‘must be balanced with the other rights recognized in the Covenant’.

The tensions inherent between the rights provided under subparagraphs (a) and (b), on the one hand, and subparagraph (c) of Article 15.1, on the other hand, as well as the interdependency with other human rights, are those that underlie also the considerations of balance in IP systems. An objective of IP protection is to promote long-term public interest by means of providing exclusive rights to right holders for a limited duration of time. After the expiration of the term of protection, protected works and inventions fall into the public domain and anyone is free to use them without prior authorization by the right holder. Hence, in the long term, there is no conflict but rather a mutually supportive relation between the interests of promoting creativity and innovation and maximizing access. However, during the course of the term of protection, there is potential for conflict between these two considerations, which can also mirror differences between the interests of right holders and users. The challenge of the national and international rule-maker is to find the optimal balance between various competing interests with a view to maximizing the public good, while meeting also the human rights of authors. This can be done by properly determining the definition of protectable subject matter, scope of rights, permissible limitations, and term of protection. This balance is constantly developing both at the national and at the international level in response to economic and technological as well as political developments.

As regards the TRIPS Agreement, its Article 7 emphasizes the need for balance: ‘the mutual advantage of producers and users of technological knowledge’ and ’a balance of rights and obligations’. The Agreement is a minimum rights agreement that leaves a fair amount of leeway to Member countries to implement its provisions within their own legal system and practice and fine-tune the balance in the light of domestic public policy considerations.⁷¹

As an example, we look at how this balance is achieved in the area of copyright. In terms of protectable subject matter, copyright protection does not cover any information or ideas contained in a work; it only protects the original way in which such information or ideas have been expressed.⁷² Thus everyone is free to use the information contained in a work, including for the purpose of creating new works. An artist is free to apply the ideas and style of another artist. Even the expression is protected only to the extent that it reaches the level of originality (although the required level of originality varies between jurisdictions). This carefully crafted scope is critical in, for example, establishing a mutually supportive relationship between the rights of authors of works and freedom of expression. Another key feature in achieving a proper balance in IP regimes is granting protection only for a limited period, after the expiration of which the work or invention falls into the public domain.⁷³,⁷⁴ In addition, copyright legislations contain numerous general or specific limitations to take into account competing public interests.⁷⁵

In present discussions, this need to pursue a balance within IP systems is often characterized as a conflict between private and public interests. Although in a concrete case there may be a conflict between a specific private interest and a public interest, the problem from a policy maker’s perspective is rather how to strike a balance between competing public interests, that is the long-term social objective of providing incentives for future inventions and creation, and the short-term objective of allowing people to access and use existing inventions and creations.

However, finding and maintaining an optimal balance at the national level within the IP system between competing public interests is a challenging task in an ever-changing technological and economic environment. Agreeing on a suitable framework for protection at the international level between countries with different political and economic systems and different levels of development is even harder. Although much of the recent international debate on the appropriate level and scope of protection of IPRs has focused on the developmental significance of IPRs,⁷⁶ a related discussion is ongoing within developed countries on whether the present balance is optimal.⁷⁷ Finding right answers to these challenges is important for countries at any stage of development so that IP systems can best serve the traditional objectives of IP protection.

Article 8 of the TRIPS Agreement recognizes that an important part of IP policy may be that governments take appropriate measures in other areas of economic and social policy that enable the society to benefit from IP and to prevent its abuse. The latter aspect, referred to in the second paragraph of that Article, will be discussed in the next section of the article.

Paragraph 4 of the General Comment draws a link between the protection of intellectual and physical property. It states that ‘the realization of [Article 15.1(c)] is dependent on the enjoyment of . . . the right to own property alone as well as in association with others’, as recognized in Article 17 of the UDHR.⁷⁸ De Soto argues that many people cannot participate in an expanded market because they do not have access to a legal property rights system.⁷⁹ Although De Soto’s arguments have been developed primarily with respect to tangible property, they can readily be expanded to empowering authors to earn their living from their creative work and their ability to convert their work into capital.

Rights under Article 27.2 of the UDHR and Article 15.1(c) of the ICESCR together with other human rights will be best served, taking into account their interdependent nature, by reaching an optimal balance within the IP system and by other related policy responses. Human rights can be used—and have been and are currently being used—to argue in favour of balancing the system either upwards or downwards by means of adjusting the existing rights or by creating new rights. Which way best serves the objectives of human rights and other areas of public policy is often a matter of social and economic analysis and empirical evidence.

C. Recent developments concerning the TRIPS Agreement and access to medicines

The issue of patent protection for pharmaceutical products is one where the problem of finding a proper balance within domestic and international IP systems is particularly acute. On the one hand, it is especially important from a social and public health point of view that new drugs and vaccines to treat and prevent diseases are generated and the incentives provided by the patent system are particularly important in this regard. On the other hand, precisely because of the social value of the drugs so generated, there is strong pressure for such drugs to be as accessible as possible as quickly as possible.

This same tension exists within international human rights instruments. Article 25.1 of the UDHR provides that ‘[e]veryone has the right to a standard of living adequate for the health and well-being of himself and of his family . . .’. Article 12.1 of the ICESCR more specifically provides that the States parties to it ‘recognize the right of everyone to the enjoyment of the highest attainable standard of physical and mental health’. The General Comment, in its paragraph 35, underlines the need to strike an adequate balance between Article 15.1(c) of the ICESCR and other rights guaranteed in that Covenant. In this context, it refers to the right to health, including the need to prevent unreasonably high costs for access to essential medicines.

Earlier in this chapter, we discussed in general terms how the TRIPS Agreement attempts to strike a balance between competing public policy considerations. As regards medicines in particular, while requiring patent protection of pharmaceutical products, the Agreement provides flexibility for governments to pursue relevant social goals. For example, it allows certain exemptions from patentability (Article 27), exceptions to the rights conferred (Article 30), and use without authorization of the right holder provided that certain conditions are met; these conditions are relaxed in certain cases, including national emergencies and anti-competitive practices (Article 31). Moreover, the Agreement specifically recognizes that Members may adopt measures necessary to protect public health, provided that such measures are consistent with its provisions (Article 8).

In order to respond to the concerns that had been expressed about the possible implications of the TRIPS Agreement for access to medicines, the Doha Ministerial Conference, which took place in 2001, adopted a ‘Doha Declaration on the TRIPS Agreement and Public Health’⁸⁰ (‘Declaration’). Reflecting the two competing public policy considerations, the Declaration emphasizes the scope in the TRIPS Agreement to take measures to promote access to medicines, but also recognizes the importance of IP protection for the development of new medicines and reaffirms the commitments of WTO Members in the TRIPS Agreement.

Although, as noted above, the TRIPS Agreement allows countries to take various kinds of measures that can qualify or limit IPRs, including for public health purposes, some doubts had arisen prior to the adoption of the Declaration about the nature and limitations of such flexibility. The Declaration responds to these concerns in a number of ways. It emphasizes that the TRIPS Agreement does not and should not prevent countries from taking measures to protect public health and reaffirms the right of countries to use, to the full, the provisions of the TRIPS Agreement which provide flexibility for this purpose. It signals an acceptance by all WTO Members that they would not seek to prevent other Members from interpreting the Agreement in a pro-public health way. It contains a number of important clarifications of some of the flexibilities contained in the TRIPS Agreement, especially with respect to the freedom to determine the grounds upon which compulsory licences are granted and the right to permit parallel imports. It further makes it clear that each Member has the right to determine what constitutes a national emergency or other circumstances of extreme urgency (when a compulsory licence can be granted without a prior effort to obtain a voluntary licence) and that public health crises, including those relating to HIV/AIDS, tuberculosis, malaria, and other epidemics, can represent such circumstances.

In regard to least developed country Members of the WTO, the Declaration together with a subsequent Decision of the TRIPS Council⁸¹ accorded them an extension of their transition period until the beginning of 2016 in regard to the protection and enforcement of patents and rights in undisclosed information with respect to pharmaceutical products.

An issue that arose in the work on the Declaration was that of the ability of countries with limited manufacturing capacities to make effective use of compulsory licensing. It is not in dispute that Members can issue compulsory licences for importation as well as for domestic production. However, there was concern about whether sources of supply from generic producers in other countries to meet the demand from countries who want to import under a compulsory licence would be available, given the requirement in Article 31(f) of the TRIPS Agreement that, normally, any compulsory licences granted in potential supplying countries shall be ‘predominantly for the supply of the domestic market of the Member’ granting the compulsory licence. The Declaration recognized the problem in its paragraph 6 and called for an expeditious solution.

This was achieved through the establishment of a system that enables production and export of pharmaceutical products under compulsory licence to meet the needs of countries with inadequate domestic manufacturing capacity. The system is subject to a number of conditions to ensure transparency in its operation and to safeguard against the risk of diversion of the exports to unintended markets. This system was established in two stages: first, in August 2003, in the form of a decision granting certain waivers from the TRIPS rules⁸² and, secondly, in December 2005, through agreement on an amendment to the TRIPS Agreement which will replace the provisions of the waiver decision once it enters into force after acceptance by two-thirds of WTO Members.⁸³ The advantage of the waiver decision, although waivers are by definition temporary measures, was that it became effective as soon as it was adopted. The amendment, once in force, will bring the system into a permanent form.

No notifications of a grant of a compulsory licence for exports under the system have been made so far. Up until now, non-patent sources of generic drugs have been available and therefore it has been possible to import generic drugs without recourse to the system. For newer drugs, this is likely to begin to change as India, and important supplier of generic drugs to the developing world, starts granting patents for pharmaceutical products under the legislation that it put in place in the beginning of 2005. In order to use the system, at least exporting countries will normally have to modify primary legislation to embody the additional flexibility. Inevitably, this takes time. As of June 2006, the European Communities, Canada, China, India, Norway, and Korea had already completed this process. Moreover, the effects of the system, like any compulsory licensing system, should not only be measured by the frequency of its use. It can be very important in influencing the prices and terms on which the products will be supplied by the right holder, or voluntary licences granted by it.

It should not be forgotten that the system established by the waiver and amendment decisions is only one small component of a much larger network of efforts required, both at the national and international levels, to address the grave public health problems afflicting many developing and least developed countries and to facilitate their access to medicines. It is encouraging that the international community is increasingly seized with these problems, but further concerted action is required in the relevant fora, including to increase funding, to develop social and health infrastructure, and to increase R&D for neglected diseases that mainly afflict the developing world.

III.COMPETITION POLICY: ITS SIGNIFICANCE FOR DEVELOPMENT AND HUMAN RIGHTS, ITS TREATMENT IN THE WTO, AND ITS ROLE VIS-À-VIS IPRs

A. The significance of competition policy for human rights and development generally

In debates and discussions on development and the WTO, the term ‘competition policy’ has sometimes been misunderstood. It is important, therefore, to define the term clearly at this stage. Competition policy consists in the measures that governments employ to promote the efficient and competitive operation of markets and to remedy certain deficiencies or ‘market failures’ that would otherwise arise in the operation of markets. These deficiencies or failures result, first and foremost, from anti-competitive practices of firms such as cartels and collusive practices, abuses of a dominant position or monopolization, and mergers that create a dominant position or otherwise stifle competition. Competition policy is not, therefore, synonymous with laissez-faire; in fact, it entails a limited but important degree of government intervention to ensure the proper functioning of markets in the public interest. In some jurisdictions, competition policy also addresses market failures associated with restrictions on competition that arise from the role of government itself. The main tools through which competition policy addresses these deficiencies in market performance are competition or anti-trust law—that is, legal prohibitions or other remedial measures relating to the practices in question—and ‘competition advocacy’ (i.e. activities other than legal proceedings aimed at preventing anti-competitive practices and promoting efficient market performance).

The need for competition policy is typically explained in economic or utilitarian terms; however, it can also be explained in constitutional or human rights terms, particularly as being necessary for the fulfilment of economic, social, and cultural rights. In economic terms, competition policy and, particularly, competition laws are needed because, in their absence, markets will often be subject to failures attributable to practices such as those mentioned above (cartels, abuse of dominant position, etc.). These practices diminish the welfare of citizens in their capacities as both final consumers of goods and services and as producers (whose input costs are artificially raised by cartels, monopolies, or other anti-competitive practices). The inevitability of such practices absent measures to prevent them was recognized as early as Smith, who famously pointed out (again in the Wealth of Nations) that ‘People of the same trade seldom meet together, even for merriment or diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices’.⁸⁴

In the 1990s, extensive evidence surfaced that such ‘conspiracies against the public’ (i.e. cartels) were alive and flourishing in the globalizing economic environment. Investigations conducted by the competition authorities of the United States, the European Communities, Canada, and other jurisdictions revealed the existence of major cartels in the sale of (to cite but a few of many possible examples) graphite electrodes (an essential input to steel mini-mill production), bromine (a flame retardant), citric acid (a major industrial food additive), lysine (an agricultural feed additive), seamless steel pipes (an input to oil production), and vitamins. In many such cases, these cartels had operated throughout the developing world, substantially raising the costs of developing countries’ imports of the affected products.⁸⁵

The costs imposed by these arrangements on the world economy and, specifically, on developing countries have been shown to be in the multi-billions of dollars annually. Looking at 16 products subject to the operation of cartels, Levenstein and Suslow (2001) noted that:

Examining these sixteen products—which were cartelised at some point during the 1990s and for which we were able to obtain reasonably reliable trade data—the total value of such ‘cartel-affected’ imports to developing countries [in 1997] was $81.1 billion.

The impact of cartelization on the prices charged for imports of the affected products is commonly assumed to have been in the range of 20–30% on average. If so, this would imply a total overpayment by developing countries for their imports of something in the order of US$10–24 billion annually in respect of these cases alone.⁸⁶

The accuracy of the original Levenstein–Suslow estimates has been questioned, and the authors themselves have subsequently put forward alternative, lower estimates of the total value of imports affected by cartelization in the 1990s.⁸⁷ On the other hand, the actual value of developing country imports affected by cartels may, in fact, have been greater than the original Levenstein–Suslow estimate, in that the latter was based only on publicly disclosed cartels that had been prosecuted by developed country competition authorities; undisclosed cartels were not counted. Yet there is no reason to assume that all cartels operating in the 1990s were, in fact, publicly disclosed.⁸⁸ Of course, international cartels are only one form of anti-competitive practices that affects developing countries; such countries are also affected by domestic cartels, by domestic and transnational abuses of a dominant position, and by other practices.⁸⁹

A related practice that imposes significant costs on all economies—developed and developing alike—where it goes undeterred is that of collusive tendering in relation to government procurement of goods and services (i.e. ‘bid-rigging’). This is actually a form of cartelization which involves the coordination of bids submitted by alternative suppliers to raise the price paid by the public authorities and/or to minimize the costs to be incurred by the winning supplier. Such coordination is normally done in secret (to avoid detection by relevant authorities) and may take a variety of forms such as ‘bid suppression’ (agreement by a competitor not to submit a bid), ‘cover bidding’ (the submission by an ostensibly competing supplier of a bid that is deliberately set too high to win), or ‘bid rotation’ (coordination of bids submitted in response to periodic calls for tenders to ensure that each of a group of suppliers ‘wins’, in a planned sequence). Because a prime purpose of competitive tendering is to ensure maximum value received for the outlay of governmental resources, collusive tendering directly undercuts the goals of public policy in this sphere and of related liberalization initiatives.⁹⁰

Anti-competitive practices such as those referred to above directly undercut the purchasing power of consumers, no less so in developing as opposed to developed countries, and hence directly and adversely affect their economic welfare. For some, this in itself might be recognized as an abuse of human rights. In addition, anti-competitive practices can be seen as impinging on the individual’s ‘economic freedom’, an ‘indivisible’ aspect of his or her economic, social, cultural, civil, and political rights.⁹¹ The reality of this proposition may be seen from the fact that, in the majority of cases, cartels and other anti-competitive practices concern the pricing or supply of business inputs (i.e. intermediate goods). Such practices therefore impact on individuals in their capacities both as consumers and as producers.

In addition to reducing consumer welfare and raising business input costs, the existence of monopolies and unjustifiable barriers to entry to markets thwarts entrepreneurship and prevents individuals from fulfilling their potential as self-determined participants in a market-based economy. Such barriers may be particularly significant in developing and transition economies. More generally, North stresses the importance, for development and growth, of ensuring that ‘humanly devised constraints’ on social interaction and initiative encourage rather than deter innovation and value-enhancing investments.⁹² Of course, this concern implicates a range of economic and social policies not limited to competition law as such. Nevertheless, competition law and policy (including policy advocacy) would appear to be relevant to the extent that, traditionally, they have been a principal tool through which societies have addressed entry-deterring practices and monopolies.

As to the significance of anti-competitive practices for human rights, the role of monopolies and related barriers to social mobility is addressed directly in Thomas Paine’s classic treatise on ‘The Rights of Man ’. In discussing the significance of ‘chartered monopolies’ (of both a political and an economic nature) in eighteenth-century England, he notes that:

Within these monopolies are other monopolies . . . . A man, even of the same town, whose parents [are] not in circumstances to give him an occupation, is debarred, in many cases, from the natural right of acquiring one, be his genius or industry what it may.⁹³

Paine’s observation makes clear that, from his point of view, the monopolies and other practices cited impacted on individual citizens’ prospects for self-development and not merely on their welfare as consumers.

In a related vein, in the Wealth of Nations, Adam Smith decried the restrictive impact on competition and the free movement of labour of regulations and ‘exclusive privileges of corporations’ that artificially limited entry into trades and professions.⁹⁴ Anticipating modern political–economic literature on the use of legislative and regulatory processes by private interests for purposes of ‘regulatory capture’, ‘producer protection’, and ‘rent-seeking’,⁹⁵ he referred to protective legislation and regulations ‘which the clamour of our merchants and manufacturers have extorted from the legislature, for the support of their own absurd and oppressive monopolies’.⁹⁶

Recognizing the threat posed by anti-competitive practices to the welfare of citizens, competition laws are sometimes conceived as serving a constitutional function in respect of the market economy, ensuring that the rights and freedoms of citizens are not undermined through practices such as those discussed above. This role of competition law was captured by the US Supreme Court in its opinion in a landmark anti-trust case, United States v Topco Assoc. Inc.:

Antitrust laws . . . are the Magna Carta of free enterprise. They are as important to the preservation of economic freedom and our free enterprise system as the Bill of Rights is to the protection of our [other] fundamental freedoms.⁹⁷

The importance of competition policy does not imply that it is easy or straightforward to implement. Indeed, expertise is required in a variety of technical matters, such as in defining markets, distinguishing horizontal from vertical agreements and arrangements, evaluating possible efficiency claims, etc. Moreover, enforcement doctrines and approaches in this area continue to evolve in response to economic learning, an observation which counsels against any excessively detailed ‘locking in’ of enforcement standards.⁹⁸ It is nonetheless striking that, currently, some 100 WTO Member countries, including about 70 developing countries, have competition laws. Moreover, a number of developing countries have implemented, or are in the process of implementing, modern enforcement regimes. The proliferation of national competition laws implicates the international community and possibly also the WTO in various ways. First, it creates an enhanced need for technical assistance to support the implementation of such laws and ensure that they are used in ways that are consistent with sound economic principles. Although this need is being addressed, at least in part, by the work of various existing organizations and developed country governments, there are indications that the need for assistance outstrips what is currently available. Second, it raises the growing possibility of conflicts in the application of national competition laws and policies.⁹⁹ Important examples relate to the issues of (i) multi-jurisdiction merger review, where individual mergers are assessed under the laws of a number of different countries, and (ii) transnational abuses of a dominant position, where the remedies imposed by different jurisdictions may sometimes conflict.¹⁰⁰

B. The interaction of trade and competition policy: the treatment of competition policy in the WTO

In the Wealth of Nations, Adam Smith, in addition to outlining the role of markets as both an engine of growth and an aspect of human freedom and diagnosing their susceptibility to underperformance due to of collusion and the operation of public and private monopolies, also pioneered the modern interest in the interaction of trade and competition policy. He deplored the monopoly power of the British East India Company, which, in his view, hurt both India and the UK. In fact, most of chapters VII and VIII of Book IV of the Wealth of Nations is concerned with the costs imposed on societies (both the colonies and the imperial powers) of the colonial trading monopolies of the eighteenth century. Smith’s analysis showed prescience in drawing attention to the significance of international anti-competitive behaviour for trade and development and to the symbiotic role of private and public actors in this regard.¹⁰¹

Issues concerning the implications of anti-competitive practices for international trade and development and the perceived need for measures to address such practices as an adjunct of the multilateral trading system have been debated since the origins of the system. In the context of preparatory deliberations on the post–World War II international order, in 1944, US President Franklin Delano Roosevelt wrote to Secretary of State Cordell Hull, observing that ‘Cartel practices which restrict the free flow of goods in foreign commerce will have to be curbed’.¹⁰² Responding to this concern, provisions to address ‘restrictions imposed by private combines and cartels’ were a key element of the US proposal for an International Trade Organization at the conclusion of World War II. The rationale for these proposals remains instructive:

when a private agreement divides the markets of the world among the members of a cartel, none of [the goods affected] can move between the zones while the contract is in force. Clearly, if trade is to increase as a result of the lightening of government restrictions, the governments concerned must make sure that it is not restrained by private combinations.¹⁰³

Reflecting these concerns, the Havana Charter, which ultimately formed the basis for the original General Agreement on Tariffs and Trade (GATT) 1947, contained an entire chapter, chapter V, on the subject of restrictive business practices, including a requirement for members to police anti-competitive practices of an international nature:

Article 46 (1). Each Member shall take appropriate measures and shall cooperate with the Organization to prevent, on the part of private or public commercial enterprises, business practices affecting international trade which restrain competition, limit access to markets, or foster monopolistic control, whenever such practices have harmful effects on the expansion of production or trade and interfere with the achievement of any of the other objectives set forth in Article 1.¹⁰⁴

In addition, under the proposals in chapter V, the proposed International Trade Organization would have been called upon to investigate any complaints not resolved by consultation and make recommendations for action in a report. As is well known, however, chapter V and other elements of the International Trade Organization were not included in the GATT 1947 when it was adopted, due principally to opposition in the US Congress.

Notwithstanding the GATT founders’ decision not to proceed with implementation of a comprehensive body of rules on competition policy as an integral component of the multilateral trading system, in practice it has proven impossible to exclude competition policy considerations altogether from the system. The importance for the system of measures to ensure the competitive operation of markets is reflected in a number of provisions and subordinate instruments that have been incorporated in the various Agreements over the years and particularly with the 1994 transition from the GATT to the WTO. For example, Articles VIII and IX of the General Agreement on Trade in Services refer, respectively, to monopolies and exclusive suppliers and to anti-competitive practices that may restrict trade in services. Article 11:3 of the Agreement on Safeguards prohibits Members from encouraging or supporting the adoption of non-governmental measures equivalent to voluntary export restraints, orderly marketing arrangements, or other governmental arrangements prohibited under Article 11:1. This was considered to be necessary if the latter (explicitly governmental) arrangements were not to be replaced by private cartels having similar effects that were encouraged or orchestrated by governments.

Article 40 of the TRIPS Agreement provides authority for Members to take measures against anti-competitive practices relating to the licensing of IPRs. In effect, this provision recognizes that the application of competition policy measures may be necessary to ensure that the rights provided under the TRIPS Agreement ultimately serve the welfare of citizens (see, for related discussion, section III(C), below). Another example is provided by the Reference Paper on regulatory principles, which was adopted by a number of Members as an outcome of the Negotiations on Basic Telecommunications Services—which were completed in 1997—and which commits such Members to adopt measures to prevent anti-competitive practices by major suppliers.¹⁰⁵ Even though these and other examples represent, at best, a partial and ad hoc integration of competition policy concepts and provisions into the multilateral trading system, they demonstrate that such considerations cannot be entirely excluded from the system.¹⁰⁶

The threat posed by restrictive business practices, including at the international level, to the welfare of citizens and the trade and development prospects of poor countries is the animating concern of UN (1980) (the ‘Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices’, or simply ‘the Set’). The latter refers specifically to

the need to ensure that restrictive business practices do not impede or negate the realization of benefits that should arise from the liberalization of tariff and non-tariff barriers affecting international trade . . . .¹⁰⁷

To address this concern, the UN Set calls for

. . . action to be taken by countries in a mutually reinforcing manner at the national, regional and international levels to eliminate or effectively deal with [such practices] adversely affecting international trade, particularly that of developing countries, and the economic development of these practices.¹⁰⁸

In addition, the Set prescribes a detailed but voluntary set of measures to address such practices. Although the terminology and science of competition law and policy have evolved since the adoption of the Set in 1980, its basic relevance to development and trade have been affirmed in separate review conferences held, respectively, in 1985, 1990, 1995, 2000, and 2005. As noted below, the Set and related work by UNCTAD were an important input to the work of the WTO Working Group on the Interaction between Trade and Competition Policy (WGTCP) between 1997 and 2003.

Mindful of the foregoing concerns and existing WTO provisions, WTO Ministers, meeting at the Singapore Ministerial Conference in December 1996, established a WGTCP. The mandate given to the Working Group was to consider issues raised by Members relating to the interaction of the two policy fields, including anti-competitive practices, and to identify any areas that might merit further consideration in the WTO framework.¹⁰⁹ Between 1997 and 2003, a wide-ranging examination of the relationships between trade and competition policy, and between competition policy and economic development, was carried out in the WTO WGTCP. The work of the Working Group took account both of the above-noted existing WTO provisions and the UN Set. In addition, the Group’s work was supplemented by extensive analysis in other intergovernmental fora such as the OECD Joint Group on Trade and Competition Policy, the OECD Committee on Competition Law and Policy, and the UNCTAD Intergovernmental Group of Experts on Competition Law and Policy.

The exploratory work of the WTO WGTCP led eventually to a protracted debate, in the Group and outside,¹¹⁰ of the merits and demerits of a possible ‘multilateral framework on competition policy’. In the view of the proponents of such a framework, it would have comprised five main elements:

1. A commitment by WTO members to a set of core principles relating to the application of competition law and policy, including transparency, non-discrimination, and procedural fairness.

2. A parallel commitment by member governments to the taking of measures against hardcore cartels.

3. The development of modalities for cooperation between member states on competition policy issues. These would have been voluntary in nature and would have encompassed cooperation on national legislation, the exchange of national experience by competition authorities, and aspects of enforcement.

4. A commitment to ongoing support for the introduction and strengthening of competition institutions in developing countries through technical assistance and capacity building, in the framework of the WTO but in cooperation with other interested organizations and national governments.

5. The establishment of a WTO standing committee on competition policy that would administer the agreement and act as a forum for the ongoing exchange of national experiences, the identification of technical assistance needs and sources for such assistance, and so on. The committee would also have provided a forum for discussion of policy issues such as market access barriers arising out of a combination of government policies (or tolerance of anticompetitive conduct) and private actions.¹¹¹

Notwithstanding the efforts of the European Community and other proponents, this work has not thus far resulted in the initiation of negotiations on a multilateral agreement or framework on competition policy. At the WTO Ministerial Conference in Cancun, Mexico, in September 2003, the majority of developing countries rejected the launching of negotiations on a multilateral framework on competition policy as had been proposed by the European Union and various other countries in the run-up to the conference. Subsequently, the General Council of the WTO decided, as part of the so-called ‘July package’ of 2004, that no further work would be undertaken towards negotiations on competition policy (or on the separate issues of investment and transparency in government procurement) as part of the Doha Round.¹¹²

The rejection of negotiations on competition policy by developing countries at the Cancun Ministerial Conference and in the subsequent July package merits careful reflection. In addition to possible tactical considerations, the reasons underlying this rejection included concerns about a lack of negotiating capacity in this area; a perception that the proposals intruded on developing countries ‘policy space’; and, for some, a sense that the proponents’ proposals were unbalanced and might not, in the end, yield tangible benefits in the form of cooperation for developing countries.¹¹³ It should also be noted that the US Administration, notably the Department of Justice, had long voiced reservations regarding possible misuse of a multilateral competition framework.¹¹⁴ For most Members, however, the opposition to negotiations did not reflect a view that the issue of competition policy had no relevance to the goals of the multilateral trading system. Indeed, without yielding a consensus on negotiations, preparatory work in the WTO Working Group had catalogued a variety of ways in which anti-competitive practices can adversely impinge on the objectives of the system, and a number of possible synergies between the system and the work of national competition authorities.¹¹⁵ In addition, even participants sceptical of the desirability of negotiations have noted the usefulness of the WTO work programme on competition policy in promoting positive interest in the subject and wider understanding of competition policy concepts and tools.¹¹⁶

In any event, although the possibility of WTO negotiations on competition policy has been categorically ruled out for the duration of the Doha Round, the issue has not been definitively dropped from the WTO work programme. The relevant decision of the General Council provides only that no further work towards negotiations on this issue will take place within the WTO for the duration of the Doha Round. Indeed, there are reasons for believing that the issue might re-surface at some stage in the future, perhaps as part of a post-Doha work programme. As pointed out above, evidence continues to mount that the gains from trade can be nullified both by private anti-competitive practices such as international cartels and by arrangements involving mixed private and governmental conduct that undermines competition and impedes access to markets. Moreover, experience shows clearly that certain manifestly harmful anti-competitive practices (e.g. international cartels) cannot be remedied by external (or internal) liberalization alone, for example where the relevant arrangements cover the main foreign firms in addition to any domestic firms operating in the relevant markets.¹¹⁷ Most recently, the WTO Panel Decision in Mexico—Telecoms¹¹⁸ has affirmed the close logical connections between competition policy and the objectives and modalities of the multilateral trading system.¹¹⁹

Clarke and Evenett postulate two sources of positive spillovers that provide rationales for international collective action in the area of competition policy. First, public announcements of cartel enforcement actions in one country tend to stimulate enforcement efforts in other countries, particularly where there is an established relationship between the relevant enforcement authorities. In this way, trading partners benefit from active enforcement abroad. Second, the investigation and prosecution of arrangements such as international cartels can be greatly facilitated by accessing information about the nature and organization of the arrangement from another jurisdiction that has successfully completed such an investigation. These considerations highlight the potential benefits of some form of international accord committing the participating countries to take action in this area.¹²⁰ In addition, international agreements may assist developing countries to implement pro-competitive policies that are to their own advantage, but which they might otherwise be precluded from adopting by political–economic considerations.¹²¹

The likelihood that competition policy will eventually undergo further discussion at the multilateral level is reinforced by developments at the regional level. A majority of recently concluded regional free trade or similar agreements implicating countries in Latin America, Africa, and Asia in addition to Europe and North America contain provisions requiring the adoption of laws or policies dealing with anti-competitive practices and/or mandating cooperation between relevant agencies of the participating countries.¹²² The proliferation of these provisions calls into question both the idea that competition policy is unrelated to the realization of trade objectives and the perception that the subject is so complex that it cannot be meaningfully reflected in trade agreements. Indeed, in the light of the large and growing number of provisions on competition policy in regional trade agreements, the issue is no longer whether competition policy and trade liberalization can be meaningfully linked but whether the relevant synergies will be harnessed only in regional arrangements or also in the multilateral context.

C. The significance of competition policy vis-à-vis IPRs: relevant provisions of the TRIPS Agreement and questions unanswered

As noted in the preceding section of this article, the area of IPRs is one sphere in which the role of competition policy is already directly reflected in an existing WTO Agreement, the TRIPS Agreement. At a broad level, Article 8.2 of the Agreement stipulates that:

Appropriate measures, provided that they are consistent with the provisions of this Agreement, may be needed to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.

In the same spirit but focusing on the specific issue of licensing practices, Article 40.1 of the Agreement notes that:

Members agree that some licensing practices or conditions pertaining to intellectual property rights which restrain competition may have adverse effects on trade and may impede that transfer and dissemination of new technology.

To address this concern, Article 40.2 recognizes the right of Member governments to take measures to prevent anti-competitive abuses of IPRs, provided that such measures are consistent with relevant provisions of the Agreement. Article 40.2 also contains a short illustrative list of practices that may be treated as abuses.¹²³ Article 40.3 includes a provision under which a Member considering action against an IP owner that is a national or domiciliary of another Member can seek consultations with that Member. The latter Member is required to cooperate through the supply of publicly available non-confidential information of relevance, and of other information available to that Member, subject to domestic law and to the conclusion of mutually satisfactory agreements concerning the safeguarding of its confidentiality.

Competition policy considerations are also embodied in the TRIPS Agreement provisions relating to compulsory licensing in respect of patents and the layout-design of integrated circuits. Article 31 of the Agreement sets out detailed conditions that must be respected in the granting by Member states of any compulsory licences. However, subparagraph (k) of Article 31 stipulates that Members are not obliged to apply a number of these conditions¹²⁴ in circumstances where the compulsory licence is granted ‘to remedy a practice determined after judicial or administrative process to be anti-competitive’. For example, requirements to show that a proposed user has made efforts to obtain voluntary authorization from the right holder on reasonable terms and conditions and such efforts have not been successful within a reasonable period of time, or limiting the scope and duration of licences that are issued, are not applicable in these circumstances.

The existence of the foregoing provisions reflects a concern articulated by some countries, especially developing countries, during the negotiation of the Agreement that the various commitments embodied in the Agreement regarding standards of protection for IP be balanced by a recognition of the right of Members to take appropriate measures to address resulting abuses.¹²⁵ They provide broad discretion to WTO Member governments to implement competition policy remedies in regard to anti-competitive licensing and other practices.¹²⁶ As such, they represent an important aspect of the flexibility that is built into the Agreement and that can help to ensure that it is applied in a manner consistent with human rights. These provisions raise, however, important related questions. For example, they do not define the basis on which practices may be deemed to be anti-competitive, or provide guidance as to the remedies to be employed in particular cases. Arguably, the resulting uncertainty calls for further guidance as to the appropriate use of these provisions, perhaps in the form of voluntary guidelines drawing on recent economic learning and experience in enforcing competition law at the national level.¹²⁷

Indeed, recent economic learning and national enforcement experience provide important insights relevant to the application of the TRIPS Agreement provisions relating to competition law and policy. To begin with, economic thinking and related jurisprudence increasingly recognize that, at least at a broad level, the protection of IPRs is not inconsistent with the goals of competition policy. Rather, if appropriately designed and administered, IPRs strengthen competition in the long run by providing incentives for the development and production of new products and production processes. Furthermore, in most (not all) cases, substitutes are available for products that are protected by IPRs. This implies that the mere existence of IPRs, by itself, should not be seen as intrinsically in conflict with the objectives of competition law or as proof of the existence of market power.

The foregoing has important implications for the treatment of licensing and related practices. For example, in the past, competition law in the United States was guided by a presumption that the mere existence of patents or copyrights gives rise to the existence of market power, which in turn was treated as an important threshold condition for the application of ‘per se rules’ (i.e. rules embodying a blanket prohibition of relevant practices) in regard to practices such as tying arrangements.¹²⁸ However, economic analysis and Guidelines adopted by the US Department of Justice and Federal Trade Commission in 1995¹²⁹ called this view into question, pointing out the availability of substitutes for many protected works or technologies. Acceding to this approach, the US Supreme Court, in its decision in Illinois Tool Works, Inc. v Independent Ink, Inc.,¹³⁰ has struck down the old presumption, accepting the conclusion that patents do not necessarily confer market power. Accordingly, in future cases involving tying arrangements, plaintiffs in the United States will be required to prove the existence of market power in the tying product market.

Nevertheless, experience has made clear that IPRs can indeed give rise to significant market power in particular cases and that the exercise of such rights can conflict with the content and/or the objectives of competition law in a variety of ways. Conflicts with competition law are most likely to arise in regard to three main categories of practices: (i) the acquisition of IPRs, for example through mergers, (ii) technology licensing arrangements, and (iii) cooperative arrangements among innovating firms, including patent pools. In fact, IPRs have figured importantly in many recent competition law cases.¹³¹ An obvious reason for this is the increased importance of knowledge as a factor of production and strategic asset in key industries and in the world economy generally.

An issue of particular interest from the human rights perspective is that of refusals to license IPRs. In the European Community, the Magill TV¹³² and IMS Health¹³³ cases have made clear that such refusals can indeed constitute an abuse of dominance, depending on the circumstances and, in particular, whether they impede the development of new products. By contrast, in the United States, there is a strong or, in the view of many commentators, absolute presumption that patent holders are entitled to refuse to license their patented inventions (the situation is less clear with respect to copyright). The issue continues to be debated.¹³⁴

Other potentially anti-competitive practices associated with the use of IP include grant-backs, tie-ins, territorial market limitations, and field-of-use restrictions. The trend in competition law jurisprudence internationally is to treat such practices on a case-by-case or (as it is known in the United States) a ‘rule of reason’ basis.¹³⁵ Certainly, economic learning is supportive of such an approach in that it makes clear that these practices can, at least in some circumstances, serve legitimate pro-competitive functions. Under this approach, licensing arrangements are assessed on the basis of factors such as the following:

• The structure of the markets affected;

• The extent to which the licensing arrangements impose exclusivity;

• Their implications for the degree of rivalry and the pace of innovation in the markets affected; and

• Possible efficiencies resulting from the arrangement.¹³⁶

A case-by-case approach to the treatment of these practices may strike some as unduly permissive or lenient. In the past, some developing countries have advocated a stricter approach. An unduly strict or per se approach is likely, however, to be self-defeating. Sweeping prohibition of restrictive practices in international licensing agreements would raise the costs and/or reduce the incentives for technology owners to enter into voluntary arrangements that are generally pro-competitive and are an important vehicle for international technology transfer. This does not, however, imply that restrictive licensing arrangements should be immune from scrutiny; rather, the suggestion is simply that such scrutiny should be carried out using the market power and other screens and tests that are suggested by relevant economic literature and case experience.¹³⁷

The foregoing has only touched on some of the complex issues at the interface of IPRs and competition policy. It is well to remember that competition policy is a second best remedy for market distortions associated with the exercise of IPRs; it is not a substitute for getting the scope and extent of IP protection ‘right’. Furthermore, to be effective, competition policy must be applied in a manner that is consistent with sound economic principles. Nevertheless, it is also clear that competition policy is viewed, in many jurisdictions (including leading developed jurisdictions), as providing an essential balance to the exercise of IPRs, helping to minimize the possibility that such rights will be used in ways that monopolize markets or otherwise restrain competition or access to protected technology or materials unnecessarily. Countries not applying well-balanced competition policies in this area forego an important tool for ensuring that the exercise of IPRs is consistent with the goal of maximizing the economic welfare of citizens—and arguably, therefore, with human rights objectives, as well.

IV.CONCLUDING REMARKS

This article has surveyed various linkages between human rights, development, and the multilateral trading system, both generally and with respect to the treatment of two particular issues—IPRs and competition policy. Our overall argument has been that (i) the rules and procedures of the WTO are directly supportive of civil rights in the sense of freedom to participate in markets and freedom from arbitrary governmental procedures and (ii) the system makes an essential contribution to the realization of broader economic, social, and cultural rights by helping to generate the resources that are needed for the fulfilment of such rights. In addition, the multilateral trading system recognizes, as it must, other societal interests relating to public health, safety, and morality.

In making these points, we do not wish to overstate the relationship between the WTO and human rights. Clearly, the protection of human rights is a multi-faceted challenge of which economic governance is only one aspect and which requires the involvement of diverse organizations and elements of society at both the international and national levels. In addition, as noted in the Introduction, in this article we have not taken a position on jurisprudential questions such as whether and, if so, how far general international law relating to human rights can or should be drawn upon by WTO panels and/or the Appellate Body in resolving legal disputes relating to the WTO Agreements.

We do, however, maintain that the legal rights and obligations constituted by the WTO are the beginning of a system of international market governance, which is necessary to address the challenges of a globalizing economy. As Pascal Lamy, Director-General of the WTO, states:

[We] need to ‘reform globalization’ with a clear view to enhancing the development of social, economic and ecological aspects of humanity. This is also in line with the Millennium Development Goals that can be achieved through a ‘reform of globalization from within and for development’ . . . . [The] reform of globalization implies enhanced ‘global governance’.¹³⁸

Furthermore, as is emphasized by Sen and goes back to Adam Smith and his colleagues, economic development, prosperity, markets (both national and international), and human rights are intrinsically linked. Well-functioning markets are necessary to provide the resources that are required if human rights are to be meaningfully advanced and protected. Freedom to participate in markets absent unjustified governmental or other constraints is itself an element of human freedom to be valued in its own right.

Recognition of the role of well-functioning markets in development and as a vehicle for the exercise of individual choices by no means diminishes the role of governments or civil society. Modern economic theory and experience confirm the need for collective action to establish the institutions of a market economy, to address various market failures and to provide public goods, including a well-functioning system of justice. Effective public interest advocacy is also vital to ensure that the relevant rules and institutions are not ‘captured’ or distorted by private interests. The risks posed to economic welfare and development by the related phenomena of regulatory capture, ‘producer protection’, and rent seeking are well documented in modern economic literature.¹³⁹ As we have seen, Smith himself—champion of unfettered markets and international commerce that he was—was also deeply concerned about the undue influence of business elites on social and economic policy and saw important roles for government in areas such as the provision of economic and social infrastructure, education, and the administration of justice.

With respect to the issue of IPRs and their treatment in the WTO, we have pointed out that such rights give effect to authors’ human rights as recognized in disparate national and international instruments and that their use also serves economic and developmental objectives (i.e. promoting innovation and the diffusion of new technologies). Such rights are also, however, capable of being cast in overly broad terms. The TRIPS Agreement recognizes this and emphasizes the corresponding need for balance. The recent agreement on an amendment of the TRIPS Agreement to facilitate access to medicines in response to public health emergencies demonstrates the willingness of WTO Members to make changes where necessary to ensure that the Agreement is used in ways that advance public health and related objectives.

As to competition policy, the argument has been made that such policy constitutes an important aspect of ‘governance’ in successful market-based economies. It has a role to play both in addressing traditional anti-competitive practices such as cartels and in balancing the role of IP protection. The need for such policy can be understood both in economic or utilitarian and human rights terms. To the extent that markets and economic activity (and therefore also anti-competitive practices) are increasingly global or at least international in scope, there is a clear case to be made for cooperation arrangements that are also international or potentially global in scope. Whether such arrangements are pursued in the WTO or in other fora is a matter for governments to decide, and on which further reflection may be warranted.

To conclude, globalization and the proliferation of market-based economies have tremendous potential to contribute to human prosperity, development, and happiness. However, experience cautions that their potential will not be fulfilled in the absence of appropriate rules and institutions to address market failures and ensure that the potential gains for human welfare are not eroded by either public or private restraints on competition. From this perspective, the challenge is not one of ‘human rights versus globalization and capitalism’ but rather one of adapting and refining our laws and institutions—both national and international—to ensure that markets and globalization contribute optimally to human welfare and happiness. The WTO, IPRs, and competition policy in addition to traditional instruments of human rights have, we submit, important and largely complementary roles to play in realizing this vision.

This article was stimulated, in part, by our participation at two workshops on the subject of Intellectual Property, Competition, and Human Rights held at the School of Law of the University of Edinburgh, in December 2004 and March 2006. We are grateful to the organizers of those workshops, Charlotte Waelde and Abbe Brown, and to other participants at the workshops; to Adrian Otten, Director of the WTO’s Intellectual Property Division, who provided very helpful comments on an earlier draft; to Professor Dr. Ernst-Ulrich Petersmann for sharing his insights on the underlying issues and encouraging us in this work; and to the referees and editors of the JIEL. Anderson also thanks William A. Jordan and Ian Ross for stimulating his interest in the issues discussed herein. The article has been prepared strictly in a personal capacity. The views expressed must not be attributed to the WTO, its Secretariat, or any of its Member governments.