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Legal Effects and Policy Considerations for Free Trade Agreements: What Is Wrong with FTAs?

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Intellectual Property and Free Trade Agreements in the Asia-Pacific Region

Part of the book series: MPI Studies on Intellectual Property and Competition Law ((MSIP,volume 24))

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Abstract

The correlation between the motives and the results behind TRIPS-plus FTAs appears flawed. FTAs currently entail a shift from a fair balance of interests (if it ever existed) towards the interests of developed countries and there is need for action on the level of international law. Remedies must therefore be developed that correspond to the true significance of intellectual property (IP) provisions in FTAs and that defend a fair balance of interests. With a view to providing a starting point for a better understanding of the political, economic and social linkages and parameters underpinning FTA provisions and, on that basis, for a development of remedies, this chapter undertakes to examine two main issues: first, the relationship under international law of TRIPS-plus FTAs to the pre-existing TRIPS regime and the relationship among the provisions of the various FTAs in order to assess the combined legal effect of the applicable rules of international law and of the TRIPS-plus obligations laid down in FTAs; and second, taking into account that background of legal effects, the motives or incentives for states at various levels of development to enter into negotiations over TRIPS-plus standards and to conclude respective FTAs are questioned. By way of conclusion, some initial thoughts on suitable ways to remedy the alleged asymmetries between short-term negotiation trade-offs and negative long-term macroeconomic effects of FTAs are sketched out.

R.M. Hilty: Professor Dr., Director. Full Professor ad personam at the University of Zurich. Honorary Professor at the University of Munich.T. Jaeger: PD Dr., LL.M. (KUL), Senior Research Fellow.

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Notes

  1. 1.

    Agreement on Trade-Related Aspects of Intellectual Property Rights, opened for signature 15 April 1994, 1867 UNTS 299 (entered into force 1 January 1995) Annex 1C to the Marrakesh Agreement Establishing the World Trade Organization (TRIPS Agreement); see also Watal (2014), pp. 41 et seq.

  2. 2.

    See Roffe (2014), pp. 18 et seq.

  3. 3.

    International Law Commission (2006a), part C, para. 2.

  4. 4.

    See also International Law Commission (2006b), para. 21 et seq.

  5. 5.

    See also International Law Commission (2006b), para. 27 et seq.

  6. 6.

    For a comprehensive definition of conflict in international law, see Pauwelyn (2008), pp. 5 et seq.; Vranes (2009), pp. 10 et seq.; Sadat-Akhavi (2003), pp. 5 et seq. See also WTO Panel Report (1998), para. 5.169.

  7. 7.

    Of course, forms of conflict other than legal conflict may arise and be relevant in practice even for norms or outcomes that are not binding. They are, however, not dealt with here. For extensive treatment on non-legal conflicts, see Shelton (2000), pp. 17 et seq.

  8. 8.

    See also Vranes (2009), p. 38.

  9. 9.

    For a more detailed and complete illustration of conflict situations, cf. Vranes (2009), pp. 23 et seq.; Sadat-Akhavi (2003), pp. 7 et seq.

  10. 10.

    Art. 4 TRIPS Agreement.

  11. 11.

    See WTO Panel Report (1998), para. 5.349; Pauwelyn (2008), pp. 240 et seq.; Vranes (2009), p. 56; Borgen (2005), pp. 638 et seq.

  12. 12.

    Regarding the TRIPS see Roffe (2014), pp. 24 et seq.

  13. 13.

    Art. 1(1) TRIPS Agreement.

  14. 14.

    The draft of 23 July 1990 by the chairman of the negotiating group on TRIPS, MTN.GNG/NG11/W/76, even stated explicitly ‘nothing […] shall prevent Parties from granting more extensive protection to intellectual property rights than that provided in this agreement’: Negotiating Group on Trade-Related Aspects of Intellectual Property Rights, including Trade in Counterfeit Goods (1990), p. 4, para. 3A.

  15. 15.

    See, e.g., the principle of a fair balance of procedural rights laid down in Art. 42 TRIPS Agreement or the right to indemnification of the defendant laid down in Art. 48 TRIPS Agreement.

  16. 16.

    Art. 1(1) TRIPS Agreement.

  17. 17.

    See Art. 3 TRIPS Agreement.

  18. 18.

    See Art. 4 TRIPS Agreement.

  19. 19.

    See. Sadat-Akhavi (2003), pp. 142, 168.

  20. 20.

    See Art. 20 Berne Convention for the Protection of Literary and Artistic Works. Note: the Berne Convention for the Protection of Literary and Artistic Works, opened for signature 9 September 1886 (entered into force 5 December 1887) [828 UNTS 221] revised at Paris in 1896 and at Berlin in 1908, completed at Berne in 1914, revised at Rome in 1928, at Brussels in 1948, at Stockholm in 1967 and at Paris in 1971, amended in 1979, 1161 UNTS 30 (Berne Convention).

  21. 21.

    See. Art. VIII and XIX Universal Copyright Convention, as interpreted by the Inter-Governmental Copyright Conference, cf. Records of the Inter-Governmental Copyright Conference 1952, p. 254, para. 1270, and p. 203, para. 734. Note: the Universal Copyright Convention, opened for signature 6 September 1952, 216 UNTS 132 (entered into force 16 September 1955) and revised 24 July 1971 (Copyright Convention).

  22. 22.

    See Arts 21 and 22 Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations. Note: Done at Rome, the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, opened for signature 26 October 1961, 496 UNTS 43 (entered into force 18 May 1964) is often referred to as the ‘Rome Convention’.

  23. 23.

    See Art. 34 Vienna Convention on the Law of Treaties. Note: the Vienna Convention on the Law of Treaties opened for signature 23 May 1969 UNTS (entered into force 27 January 1980) (VCLT). For more, see Arts 35–38; Degan (1977), pp. 413 et seq.; Stein and von Buttlar (2009), pp. 36 et seq.

  24. 24.

    See the contribution by T. Jaeger, this volume (The EU Approach to IP Protection in Partnership Agreements).

  25. 25.

    See Art. 4 TRIPS Agreement.

  26. 26.

    However, TRIPS is not deemed to be a self-executing agreement in terms of yielding a direct domestic law effect. Without entering into the discussion of TRIPS conformity of such a policy, the United States has, for example, not yet accorded MFN trading status to Cuba, although Cuba has been a WTO member since 2007: see Schaffer et al. (2008), p. 306. This is a peculiarity of the MFN clause laid down in TRIPS, as MFN clauses generally are mostly deemed capable of having self-executive effects. See, e.g., Wallace (2002), p. 365; opposed § 1A-01-6.

  27. 27.

    All citations Art. 4(1) TRIPS Agreement.

  28. 28.

    This term is chosen to indicate that, for lack of self-executing character of the TRIPS Agreement, the precise legal effects of the de facto redundancy of less favourable FTA provisions depend on the legal system concerned.

  29. 29.

    See Art. 3(1) TRIPS Agreement.

  30. 30.

    Art. 3(1) TRIPS Agreement.

  31. 31.

    See also Pires de Carvalho (2006), pp. 132 et seq.

  32. 32.

    See WTO Panel Report (1998), para. 5.349; Pauwelyn (2008), pp. 240 et seq.; Vranes (2009), p. 56; Borgen (2005), pp. 638 et seq.

  33. 33.

    This might also to be one of the situations envisaged by Pauwelyn (2008), pp. 23 et seq., when talking of a realistic conflict potential between the various branches of WTO law.

  34. 34.

    Pauwelyn also sees a realistic problem of normative conflict between the various branches of WTO law: Pauwelyn (2008), pp. 23 et seq. Such conflicts, if they exist, would however not be specific to the ‘spaghetti bowl’ setting or to IP enforcement.

  35. 35.

    See Art. 64 VCLT. Art. 53 VCLT defines ius cogens as ‘a peremptory norm of general international law is a norm accepted and recognized by the international community of States as a whole as a norm from which no derogation is permitted and which can be modified only by a subsequent norm of general international law having the same character’. For more, see International Law Commission (2006b), para. 361 et seq.; Orakhelkashvili (2008), passim; Barnidge (2008), p. 199 passim.

  36. 36.

    See International Law Commission (2006b), para. 85; further Vranes (2009), pp. 51 et seq.; Pauwelyn (2008), pp. 13, 89 et seq.; reflective Weiler and Paulus (1997), pp. 562 et seq.

  37. 37.

    General Agreement on Tariffs and Trade, opened for signature 14 April 1994, Marrakesh Agreement establishing the World trade Organization Annex 1A. 1867 UNTS 187 (entered into force 1 January 1995) (GATT 1994).

  38. 38.

    General Agreement on Trade in Services, opened for signature 15 April 1994, Marrakesh Agreement establishing the World Trade Organization, Annex 1B. 1869 UNTS 183 (entered into force 1 January 1995) (GATS).

  39. 39.

    See, e.g., WTO Panel Report (2005), para. 7.208, as to the co-existence of GATT and TRIPS; WTO Appellate Body Report, point IV, as to the co-existence of GATT and GATS; WTO Appellate Body Report of 14 December (1999), para. 81, as to the co-existence of GATT and the Agreement on Safeguards.

  40. 40.

    The enabling clause permits developed countries to lay down more favourable trading conditions for developing and least developed countries in special exception to the so-called MFN clause of Art. 1 GATT. See GATT, Decision of the contracting parties to GATT of 28 November 1979, Differential and more favourable treatment reciprocity and fuller participation of developing countries, L/4903 of 3 December 1979.

  41. 41.

    See Art. 24(5) GATT.

  42. 42.

    I.e. the provisions of the Marrakesh Agreement establishing the WTO and laying down its scope and functions in particular. Note: the Marrakesh Agreement establishing the World Trade Organisation, opened for signature 15 April 1994, 1867 UNTS 2 (entered into force 1 January 1995) (Marrakesh Agreement).

  43. 43.

    Cf. Art. XVI(3) Marrakesh Agreement.

  44. 44.

    This applies notwithstanding the fact that, of course, conflicts of FTAs with the WTO regime may be considered an infringement of WTO obligations in a dispute settlement procedure. See, e.g., Petersmann (1995), p. 193; Lamy (2006), p. 976; see also Correa (2014), pp. 89 et seq.

  45. 45.

    See Vranes (2009), p. 150; different Pauwelyn (2008), pp. 21 et seq.

  46. 46.

    See also Pauwelyn (2008), pp. 95 et seq.

  47. 47.

    More extensively on those tools, see, e.g., International Law Commission (2006b), para. 46 et seq.; Pauwelyn (2008), pp. 275 et seq. and 327 et seq.; Sadat-Akhavi (2003), pp. 47 et seq.; Vranes (2009), pp. 39 et seq. Some of these authors (e.g. Vranes 2009, pp. 65 et seq.) argue that there is a certain hierarchy among these principles, so that some would have to be applied before others. This possibility is, however, irrelevant in the present context and not explored further here. See also Aleman (2014), p. 83.

  48. 48.

    See Art. 64 VCLT.

  49. 49.

    See the examples listed by the International Law Commission (2006b), paras. 374 et seq., which all relate to jus in bello and/or are of an humanitarian nature (inter alia the prohibitions of aggression, genocide, slavery, torture and the like).

  50. 50.

    Not contained in the VCLT is the principle of lex specialis, which resorts from the general principles of international law. See, for many of them, Pauwelyn (2008), p. 386.

  51. 51.

    For a criticism of the inadequacy of those conflict rules for conflicting obligations towards different states in particular, cf. Sadat-Akhavi, Methods (fn. 5), pp. 70 et seq.

  52. 52.

    See Art. 6 VCLT.

  53. 53.

    See Arts 26, 42 VCLT.

  54. 54.

    See Arts 34, 40, 41 VCLT.

  55. 55.

    See Art. 30 VCLT.

  56. 56.

    See the references cited by the International Law Commission (2006b), para. 56 et seq.

  57. 57.

    See also Pauwelyn (2008), pp. 244 et seq.

  58. 58.

    See Art. 31(1) VCLT.

  59. 59.

    See Arts 34, 40, 41 VCLT.

  60. 60.

    See Art. 30 VCLT.

  61. 61.

    See the references cited by the International Law Commission (2006b), para. 56 et seq.

  62. 62.

    See Art. 59 VCLT.

  63. 63.

    See Arts 39, 40 VCLT.

  64. 64.

    See Art. 41 VCLT.

  65. 65.

    See Art. 41 VCLT.

  66. 66.

    See Art. 1(1) TRIPS Agreement. This raises the issue not discussed here, in regard to the extent to which non-trade related objectives in FTAs, for example, in the EU’s EPAs [discussed in the contribution by T. Jaeger, this volume (The EU Approach to IP Protection in Partnership Agreements)] may or may not fit into the WTO agenda. Notwithstanding a closer examination however, the emergence of an incompatibility that would be relevant for the purposes of Art. 41 VCLT seems extremely unlikely.

  67. 67.

    See Art. 30(2) VCLT.

  68. 68.

    See Art. XVI(3) Marrakesh Agreement.

  69. 69.

    Art. 2(2) TRIPS Agreement.

  70. 70.

    See Arts 3(4), 41(1) VCLT.

  71. 71.

    See Preamble to the TRIPS Agreement, first and second indent.

  72. 72.

    See Hilty (2007), The Law against unfair competition and its Interfaces, pts. 1 et seq., 47 et seq., 49 et seq; Hilty (2005–2006), pp. 114 et seq.; Landes and Posner (1989), pp. 332–333, 341, 343; Davis (2005), pp. 1005 et seq.; equally Wissenschaftlicher Beirat beim Bundesministerium für Wirtschaft und Technologie (2007), p. 5.

  73. 73.

    On this well-documented subject, see, e.g., Abbott (2005), p. 393; Abbott (2006), p. 145; Correa (2000); Hestermeyer (2007); Mercurio (2006), p. 1; Reichman (1997), p. 23; also Grosse Ruse-Khan et al. (2013), pp. 880, 882.

  74. 74.

    See, e.g., the approaches by Maskus (2000), pp. 2221 et seq. (distinction between IP exporters, high-income IP importers, IP followers und low-income IP importers), or McCalman (2005), pp. 592 et seq.

  75. 75.

    Differentiated in Yang (1998), pp. 814 et seq.; Helpman (1993), p. 1275; concerning the strategic goals of EU Trade Policy see Pitschas (2014), pp. 211 et seq; concerning the development objectives in EU Trade Agreements see Maskus (2014), pp. 173 et seq.

  76. 76.

    See Chen and Puttitanun (2005), pp. 475, 489 et seq.

  77. 77.

    See, e.g., Hilty (2009), pp. 894 et seq.; Kuruk (2007), pp. 684, 689 et seq.

  78. 78.

    See, e.g., Homere (2004), p. 277; Finger and Schuler (2003). However, a distinction between groups C and D undertaken here is generally not undertaken in literature, to the effect that economic research specifically on LDCs (and not on developing countries in general) is rare and, where it exists, typically deals with singular aspects only (for example, access to AIDS medication, as one popular subject).

  79. 79.

    See Falvey and Foster (2006), p. 59; Helpman (1993), p. 1274; also Yu (2014), pp. 122, 123.

  80. 80.

    See Grosse Ruse-Khan et al. (2013), pp. 880, 882.

  81. 81.

    See Shadlen et al. (2005), p. 65; and Lai and Qui (2003), pp. 203 et seq., for an economic analysis taking into account such trade-offs.

  82. 82.

    See Drahos (2002), p. 787; Hunter Wade (2003), p. 625.

  83. 83.

    See Drahos (1997), pp. 206 et seq.

  84. 84.

    The enabling clause permits developed countries to lay down more favourable trading conditions for developing and least developed countries in special exception to the so-called MFN treatment clause of Art. 1 GATT. See Decision of the contracting parties to GATT of 28 November 1979, Differential and more favourable treatment reciprocity and fuller participation of developing countries, L/4903 of 3 December 1979.

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Acknowledgement

The authors are grateful to Mr. Christoph Heinrich and Mr. Malte Symann for their valuable work on the manuscript for this paper.

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    Reto M. Hilty & Thomas Jaeger

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    Christoph Antons

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    Reto M. Hilty

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Hilty, R.M., Jaeger, T. (2015). Legal Effects and Policy Considerations for Free Trade Agreements: What Is Wrong with FTAs?. In: Antons, C., Hilty, R. (eds) Intellectual Property and Free Trade Agreements in the Asia-Pacific Region. MPI Studies on Intellectual Property and Competition Law, vol 24. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-30888-8_3

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