Competitive Enterprise Institute | 1899 L ST NW Floor 12, Washington, DC 20036 | Phone: 202-331-1010 | Fax: 202-331-0640
<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Membership in the World Trade Organization (WTO) is a very big deal. It offers benefits in the form of market access and trade protections. <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />China lobbied desperately for membership, and Russia actually agreed to the Kyoto Protocol in return for European Union endorsement of their WTO bid.
Therefore, it seems curious to watch Thailand abrogate its own WTO membership. They are doing so by breaking patents, something they are bound to respect under WTO rules.
Recently, Thailand has begun openly overriding American patents developed at great expense. Simply put, this is theft. And it is something against which the United States government must act.
The U.S. government's options are many. They include the removal of preferential treatment here of Thai goods, or increasing our tariffs on Thai industries like shrimp and jewel production. In fact, the Louisiana Shrimp Association recently called for an investigation into Thai business practices. These industries are as important to them as protecting American innovation is to us.
A WTO member for over a decade, Thailand is the second-largest economy in fast-growing Southeast Asia. Thais have enjoyed average annual growth since World War II of 8 percent. And just last year the U.S. Congress extended to Thailand a handful of additional trade benefits under what is called the Generalized System of Preferences, giving their goods preferred access to our market.
Despite its growing wealth and expanded access to American markets, Thailand is not abiding by protections they promised to afford as a WTO member.
Last year the Thai military ousted the country's prime minister. Shortly after that, the Thai Ministry of Health, an agency fabled for corruption and self-dealing, announced it would issue government-use "compulsory licenses" on three drugs produced by two American companies (and one European producer). In doing so Thailand has moved from its long history of tacitly allowing piracy to actively participating in it.
There are a few exemptions allowing compulsory licensing under the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights, or "TRIPs." But none of them applies for Thailand.
One exemption is upon failure of "efforts to obtain authorization from the right holder on reasonable commercial terms and conditions." Thailand never bothered with such negotiations. In a government white paper written pre-seizure that telegraphed its intentions, Thailand freely admitted its philosophy of going straight to expropriation to save time. A more damning admission is hard to imagine.
Worse, this white paper flaunts a Thai government goal of encouraging other countries to simply seize such property, or threaten to in order to bring patent holders to unfavorable terms. Sure enough, in the wake of Thailand's seizure Brazil did just that, making it ever more important that the U.S. not allow this to stand as precedent.
Unfortunately, one company, Merck & Co., just signaled an appeasement strategy, which will fail as spectacularly in the commercial realm as in the diplomatic. It seems the company felt compelled to take this approach because the U.S. government so far has done nothing to protect American innovation. We can expect more appeasement, and more theft, if the U.S. government continues to sit on its hands.
Another exemption for expropriating the work of others is if Thailand faces a national health emergency. Here, the particular stolen property is AIDS drugs. Thailand has a comparatively low rate of AIDS infection at less than 1 percent of its total population. Fellow WTO members have infection rates as high as 20 percent and yet have not resorted to stealing intellectual property.
Further, by spending a mere 3.3 percent of its gross domestic product on health care, far below peer nations and even many poorer ones, Thailand affirms the absence of a health crisis.
A final excuse a WTO member may invoke to compulsorily license someone else's property is "in cases of a non-public, non-commercial use."
But Thailand's Government Pharmaceutical Office (GPO) is known for selling medical products even to fellow government agencies at prices marked up as high as 1,000 percent. That sounds a lot like commercial use. What's more, Wanchai Suppajaturas, deputy director of the GPO, said the drug was "good and cheap," yet admitted a 20 percent drug resistance. This means, sadly, that 2 in 10 HIV-positive Thais is being administered substandard drugs. Hardly good medicine.
Investigative journalist Daniel Ten Kate notes in the Asia Sentinel that now the GPO is looking to double its revenues by 2010, revealing a possible true motive for Thailand's theft: profits.
The U.S. government cannot allow countries like Thailand and Brazil to defy WTO law. Such piracy demands an immediate response from Washington, beginning with congressional hearings considering the removal of Thailand's benefits derived from the Generalized System of Preferences (GSP), including tariffs on important Thai exports like shrimp and auto parts.