Policy Briefs

Policy Brief 63, June 2019

‘Phase 1B’ of the African Continental Free Trade Area (AfCFTA) negotiations

The African Continental Free Trade Area (AfCFTA), which entered into force on 30 May 2019, represents a unique collaborative effort by African countries to bolster regional and continental economic integration, in a world marked by increasing protectionism and use of unilateral trade measures.

In order to make the agreement operational for trade in goods, negotiations on tariff concessions need to be concluded and negotiating outcomes need to be inserted into the agreement. This policy brief focuses on the expected economic impacts of tariff liberalization under the AfCFTA, the tariff negotiation modalities and discusses some legal and practical issues related to the implementation of these modalities.

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Investment Policy Brief 18, June 2019

Legitimacy Concerns of the Proposed Multilateral Investment Court: Is Democracy Possible?

Growing concerns in Europe about international investment regimes and investor-state dispute settlement systems pushed the European Union into pursuing the creation of an investment court system and a multilateral investment court. The European Union (EU) started this reform through the Comprehensive Economic Trade Agreement, the Vietnam-EU Free Trade Agreement, and by direct persuasion of other countries to start negotiations at the United Nations Commission on International Trade Law. Visible reasons for the change include concerns over the perception of a lack of transparency, coherence, and arbitrators’ partiality, all of which diminish the legitimacy of the multilateral investment court. Other reasons might be laid on the budgetary risks of more than 213 claims against EU countries. To address these legitimacy concerns, the EU wants to replace traditional party-appointed arbitrators with a two-tiered investment tribunal system comprised by a roster of members selected by the state parties on the treaty. This Essay argues that the creation of the multilateral investment court needs to follow democratic principles in order to be legitimate. History has shown us that the EU has abused its power in the past when implementing resolution systems. Foregoing negotiation, comment by member nations, and implementing a tribunal at its own behest has shown this. The EU multilateral investment court proposal has legitimacy deficiencies because the EU has relied on its power to impose its views so far, i.e. its proposal was not previously negotiated multilaterally amongst other member nations. It is thus possible that the appointment of the future judges to this court will likely be subject to the political constraints and veto that the International Court of Justice or World Trade Organization appointments suffer today. This could leave small economies at a disadvantage because they might be subject to permanent, politically biased judges. A superior solution would be to adopt better arbitrator disqualification rules, clear interpretation directives to avoid law creation, and stricter arbitrator qualifications.

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Policy Brief 62, June 2019

Intellectual Property and Electronic Commerce: Proposals in the WTO and Policy Implications for Developing Countries

This policy brief explains the mandate of the World Trade Organization (WTO) on electronic commerce under the work program on e-commerce, which was adopted by the WTO Ministerial Conference in 1998 and periodically renewed by subsequent Ministerials. It describes what has taken place on intellectual property related issues pertaining to e-commerce in the WTO TRIPS (Agreement on Trade Related Aspects of Intellectual Property Rights) Council. It also summarizes various proposals and suggestions that have been advanced in the Council since the Nairobi Ministerial Conference in December 2015 as well as recent proposals that have been advanced in the General Council until December 2018, some of which contain specific intellectual property (IP) related issues. As part of the recently launched plurilateral negotiations on e-commerce, a forum that is likely to become more prominent for this discussion, proposals have been re-submitted in March 2019, as well as others which have been tabled in April and May 2019. Finally, this brief presents an explanation of how IP issues may also affect other elements of e-commerce and the digital economy. Such issues are not the subject of existing proposals in the WTO, but may feature in future discussions.

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Policy Brief 61, May 2019

The US-Mexico-Canada Agreement: Putting Profits Before Patients

In the US-Mexico-Canada Agreement (USMCA, NAFTA 2.0), the U.S. Trade Representative negotiated intellectual property provisions related to pharmaceuticals that would enshrine long and broad monopolies. This policy brief focuses primarily on the negative effects of the USMCA intellectual property provisions on access to medicines in the U.S.  Such effects may be even worse for Canada and Mexico. The impact of this trade agreement goes well beyond the three countries involved as this is the first one negotiated by the Trump Administration and is likely to set a precedent for future trade agreements.  A careful review of the USMCA text raises very serious concerns about the impact that this agreement would have on the  generic/biosimilar industry and therefore on access to more affordable drugs throughout the world.

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Policy Brief 60, May 2019

Exploding Public and Private Debt, Declining ODA and FDI, Lower World GDP and Trade Growth—Developing Countries Facing a Conundrum

Recently international institutions repeatedly cut the projections for world gross domestic product (GDP) growth of 2019, revealed further worsened accumulation of debt, reported declining official development assistance (ODA), highlighted consecutive drops of foreign direct investment (FDI) flows and showed decelerated international trade and intensified trade tension. A closer examination of the performance of developing countries in these datasets shows clearly the economic conundrum that developing countries are facing. The most dangerous sign is the rising levels of public and private debt, and debt sustainability challenges for developing countries. It is worrisome that over 40 percent of low income countries are facing a high risk of debt distress or are in debt distress. The cloudy patches over the world economy are gathering together and getting darker. It seems a storm is coming soon for those developing countries which are facing a combination of weak economic fundamentals. Yet, there seems to be limited room for policy makers to take actions as downward pressure is coming from different directions at the same time and creating constraints which would make policy measures ineffective or feeble. In some cases, policy tools used to limit negative effects of one problem could trigger negative impact on other problem(s) in hand.

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Investment Policy Brief 17, April 2019

Challenges of Investment Treaties on Policy Areas of Concern to Developing Countries

Country experiences have revealed that international investment agreements (IIAs) could have an adverse policy impact on various policy areas that are generally important for developing countries in relation to the achievement of their development objectives. This policy brief gives an overview of challenges resulting from IIAs to major policy areas of concern to developing countries. These policy areas include industrial policy, tax reform, handling debt crisis, the use of capital controls, intellectual property rights, public-private partnerships, and climate change action in relation to investment in clean technologies.

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Policy Brief 59, April 2019

The ‘obvious to try’ method of addressing strategic patenting: How developing countries can utilise patent law to facilitate access to medicines

The current patentability standards for pharmaceutical inventions, as well as strategic patenting used by pharmaceutical companies, have substantially impacted access to affordable medicines. This has been especially detrimental for developing countries, which are under significant pressure to remain compliant with their international and bilateral obligations, while also providing their people with essential drugs. In order to improve access to medicines, developing countries may choose from a range of various mechanisms that may help to facilitate such access, while also allowing them to remain compliant with their international and bilateral obligations. This policy brief suggests that one of such mechanisms is to strengthen the obviousness requirement by applying the ‘obvious to try with a reasonable expectation of success’ test to pharmaceutical follow-on inventions. It is argued that the application of this test may be an effective tool in addressing the negative effect of strategic patenting. It may help to prevent the extension of patent protection and market exclusivity of existing drugs by pharmaceutical companies and, as a result, may open such medicines up to generic competition.

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Investment Policy Brief 16, March 2019

The Future of Investor-State Dispute Settlement Deliberated at UNCITRAL: Unveiling a Dichotomy between Reforming and Consolidating the Current Regime

Reform of investor-state dispute settlement (ISDS) is being deliberated at the United Nations Commission on International Trade Law (UNCITRAL) Working Group III, which will be meeting in New York between the 1st and 5th of April 2019. For several years, the ISDS regime has been under scrutiny from voices in both developed and developing countries. ISDS reforms have been addressed in multiple forums, including national, bilateral, regional and multilateral levels, such as the United Nations Conference on Trade and Development (UNCTAD). Reforms could include moving away from arbitration as the norm for dispute settlement between foreign investors and host states or end up by introducing adaptations that  might make arbitration in ISDS cases perform in a more acceptable way. Finding one-size-fits-all solutions in these deliberations is unlikely. Advancing relevant reforms would require full and effective participation of interested countries, equal opportunity for different points of views to be heard and integrated into the design of any potential outcome, and effective mechanisms to address any potential conflicts of interest within this forum.

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Investment Policy Brief 15, March 2019

UNCITRAL Working Group III: Can Reforming Procedures Rebalance Investor Rights and Obligations?

The work of the United Nations Commission on International Trade Law (UNCITRAL) provides an opportunity to rebalance the international investment regime – but only if the full gamut of key issues are identified. Requiring investors to uphold standards of responsible business conduct (RBC) is largely a function of substantive rights and obligations, but it also presents procedural dimensions that fall within the purview of the UNCITRAL process. This policy brief explores the issues and discusses possible options for reform.

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Policy Brief 58, March 2019

Why the US Proposals on Development will Affect all Developing Countries and Undermine WTO

US submitted two highly problematic proposals to the WTO in January and February 2019, undermining the place of Special and Differential Treatment (S&D) for developing countries at the WTO. In the first paper (WT/GC/757), US criticises the practice of self-declared development status by developing countries arguing that the North-South construct no longer makes sense due to “great development strides”. The second paper (WT/GC/764) – a proposed Decision for the General Council – provides a way to operationalise what was in the first paper. It gave criteria that would exclude 34 Members or 53.6 percent of global population from S&D treatment in “current and future WTO negotiations”. This fundamentally changes S&D from an unconditional right for all developing countries to a concession that may or may not be provided. Even for those developing countries that are not part of the 34 excluded Members, the US notes that in sector-specific negotiations, other Members could also be “ineligible for special and differential treatment.” This paper critiques the US approach on Special and Differential Treatment and concludes that these papers by the US cannot be the basis for any further discussions. All developing countries must be able to decide the pace of their adjustment to trade rules.

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Investment Policy Brief 14, March 2019

Building a Mirage: The Effectiveness of Tax Carve-out Provisions in International Investment Agreements

The present policy brief analyses the language of taxation carve-out provisions incorporated in International Investment Agreements (IIAs), and its effectiveness with regards to restricting the protection and dispute settlement provisions of IIAs only to non-tax-related claims. It illustrates that even in cases where such carve-out provisions have been incorporated into IIAs, the broad language and lack of clarity in the drafting of such provisions have effectively allowed Investor-State Dispute Settlement (ISDS) tribunals to scrutinize tax measures adopted by States, and even determine that such measures resulted in a breach of State’s obligations under the agreement. It makes recommendations on how States could effectively implement such carve-outs when negotiating, reforming or drafting new international investment agreements.

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Tax Cooperation Policy Brief 7, February 2019

Developing Countries and the Contemporary International Tax System: BEPS and other issues

This policy brief addresses the design of international taxation and tax cooperation in the context of issues presented in the Organisation of Economic Co-operation and Development (OECD)/Group of Twenty (G20) Base Erosion and Profit Shifting (BEPS)Project. It further considers their significance for developing countries and provides the Brazilian approach to those issues. The brief concludes by exploring the importance of regional cooperation vis-à-vis international organizations and highlights relevant considerations for developing countries engaging with the contemporary international tax system.

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