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Drug dispute could lead to trade trouble

Bangkok Post, Thailand

Drug dispute could lead to trade trouble

US might downgrade Thailand on IP list

By Woranuj Maneerungsee Phusadee Arunmas

30 April 2007

The Thai government’s showdown with multinational drug companies over compulsory licensing could result in a downgrade on Washington’s watch list of countries with poor intellectual property (IP) rights protection, trade sources say.

A downgrade could have consequences for Thai exports that enjoy low tariffs under the US Generalised System of Preferences (GSP).

Washington is due to release its annual report on IP protection under the so-called Special 301 section of US trade law at 9 pm tonight Thailand time. Sources say that Thailand could be downgraded from the Watch List to the Priority Watch List (PWL) of IP violators.

A downgrade would be the first in a decade for Thailand, which is among dozens of countries on the regular watch list, which reflects US displeasure over lax copyright and trademark enforcement.

Countries on list could face heavy sanctions, including losing trade privileges.

About 4,600 Thai products are eligible for the GSP scheme that Washington has provided for Thailand since 1976. More than 1,000 items obtained the privileges last year, saving producers an estimated US$4.25 billion through reductions or elimination of import tariffs that normally range from 1% to 25%.

An international trade source said that Thailand’s overall record on IP protection this past year had not been any better or worse than in previous years. However, the Thai government has outraged the politically powerful and deep-pocketed pharmaceutical industry.

At issue has been the military-backed government’s decision to issue compulsory licences to override patents on some HIV/Aids and heart medications. Thailand contends it can do so under provisions in the World Trade Organisation.

Last week, a business lobby group calling itself ’’USA for Innovation’’ placed an alarmingly worded full-page advertisement in the Wall Street Journal, claiming among other things that Thailand ’’stole’’ three drugs produced by American and European companies.

Late last week, around 100 health activists rallied at the Commerce Ministry to protest the actions of Abbot Laboratories, one of the affected companies, in withdrawing the planned introductions of new drugs into the country. The activists said such conduct could violate the law.

Abbot retaliated because Thailand decided to issue a compulsory licence for Kaletra, its key Aids drug.

The US last placed Thailand on its PWL from 1989 to 1992. At the time, it cut import tariff privileges under the GSP for 19 products, mostly agricultural goods, exported from Thailand.

Thanks to improvements in IP protection in Thailand, Washington upgraded Thailand to its watch list in 1993.

Under the Special 301 Act, Washington can take trade action or seek dispute settlements against countries on either the PWL or the WL. In practice, countries on the PWL are much more vulnerable.

A Commerce Ministry official said he was optimistic that the situation would not deteriorate further. He expressed hope that no trade action would be taken to remove GSP privileges, which would hurt about 20 key products.

’’These products used up more than half of the total GSP privileges the country enjoyed from the US market last year,’’ he said.

However, he was not sure whether the ministry would take trade action itself in response, adding that publicity about IP problems could damage Thailand’s reputation.

Pornsilp Patcharintanakul, the deputy secretary-general of the Board of Trade, expressed dismay that a political problem could become trade barrier.

He said it would be better if both parties worked harder to negotiate and settle problems