India in the WTO

There has been some discussion in the blogosphere on whether the Indian Supreme Court ruling from 1984 in Gramophone  Company of India Ltd v. Birendra Bahadur Pandey and Others, [(1984) 2 Supreme Court Cases 534] supports the Dutch seizure of Indian generics bound for Brazil.  See previous posts on this issue. The decision can be found here.

I do not agree with SpicyIP bloggers that this 1984 decision would help the Netherlands on the generics seizure issue. Before I set out my reasons, let me first quote the arguments made by SpicyIP that I disagree with. 

Shamnad Basheer of SpicyIP writes on the International Economic Law and Policy blog:

However, countries may define import more broadly. And this is exactly what the Indian courts did in the Gramophone Company of India case that Brian cites in his post (involving pirated casettes to Nepal). We discuss this case in an article dealing with the infamous Novartis case and whether the Indian court was correct in ducking the TRIPS issue claiming it had no jurisdiction to rule on this. If you’re interested, is is available on SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1329201

In the Gramophone case, the Supreme Court interpreted "import" to mean any inflow into India, whether or not it was meant for the Indian market. Sample this extract from the court:

"36. It was submitted by the learned Counsel for the respondents that where goods are brought into the country not for commerce, but for onward transmission to another country, there can, in law, be no importation.

It was said that the object of the Copyright Act was to prevent unauthorised reproduction of the work or the unauthorised exploitation of the reproduction of a work in India and this object would not be frustrated if infringing copies of a work were allowed transit across the country. If goods are brought in only to go out; there is no import, it was said.

It is difficult to agree with this submission thought it did find favour with the Division Bench of the Calcutta High Court, in the judgment under appeal. In the first place, the language of Section 53 does not justify reading the words ‘imported for commerce’ for the words ‘imported’. Nor is there any reason to assume that such was the object of the legislature."

Since the term "import" has not been defined by the TRIPS agreement, a panel is more likely to defer to the concerned member states’ definition (within reasonable bounds of course). I’m therefore not entirely sure that a panel would necessarily interpret import in the restricted way that you envisage. Therefore, at least on this count, my own view is that the EC may prevail in a TRIPS challenge by India or Brazil.

His co-blogger on SpicyIP Prashant Reddy writes that India has also seized goods in transit in the past for IP issues. He goes on:

“In fact the irony is that India itself has been impounding shipments destined for Nepal whenever those transit shipments infringe Indian intellectual property laws. In the 1984 Supreme Court case of Gramophone Company of India v. Birendra Bahadur Pandey Indian custom authorities had impounded a shipment of pirated cassettes that were being sent through India to Nepal by a Singapore based company. The case eventually reached the Supreme Court and in an excellent judgment by Justice Chinappa Reddy the Court held that the term ‘import’ used in the Copyright Act covered the activity of transit. In para 39 of the judgment the Supreme Court held that

39. We have, therefore, no hesitation in coming to the conclusion that the word ‘import’ in Sections 51 and 53 of the Copyright Act means ‘bringing into India from outside India’, that it is not limited to importation for commerce only but includes importation for transit across the country. Our interpretation, far from being inconsistent with any principle of International law, is entirely in accord with International Conventions and the Treaties between India and Nepal.

…

Given the fact that India itself has defined ‘import’ as covering even those goods which are under ‘transit’ it is rather hypocritical of India to expect the E.U. to follow a different set of rules.”

Why do I think this old decision does not help the Netherlands case?

Well, first the Gramophone decision itself states in para 27 that “import” can mean different things in different places and takes color from the context where it occurs and that the sense of the statute is important. The Supreme Court expressly relied upon international opinion that protects copyright (para 29)as established by both international copyright and transit trade conventions. The Court ruled (para 29) “If this much is borne in mind, it becomes clear that the word “import” … cannot bear the narrow interpretation sought to be placed upon it to limit it to import for commerce. It must be interpreted in a sense which will fit the Copyright Act into the setting of the international conventions.”

This is the context in which the Supreme Court ruled that import would include importation for transit in addition to importation for commerce. The gramophone case dealt with copyright violation on which international opinion was clearly against such violations.

The present case is of patent infringement or alleged counterfeiting of generics. The policy context as well as international opinion as manifested by international law and treaties is completely different here. I think the Supreme Court (if this issue were ever to come before it) would take the different context into account and rule differently.

Both the export of generics by India and their import by Brazil are legal and supported by the flexibility provided under the TRIPS agreement in balancing public health and IP rights.

Second, and I will not discuss this here, the Gramophone decision is not in my opinion well-reasoned at all. It is dated and on many issues might not stand the test of time. Most obviously, it cannot be applied without modification to the TRIPS era and to the new IP regulation in India.

Are there any later Indian Supreme Court decisions after 1984? Prashant writes that “India itself has been impounding shipments destined for Nepal” but then only cites this one case from 1984.

I also have a question: Was the Dutch action based upon alleged patent infringement or on alleged counterfeiting?

Update

I have had an interesting discussion on this issue with Shamnad Basheer of SpicyIP on the International Economic Law and Policy Blog. I had posted the above post as a comment in the thread running there. For sake of continuty, here is the conversation:

Shamnad Basheer said…

Dear Seema,

Thanks for your post. I think you must keep my post/analysis on this issue (on this blog) separate and distinct from Prashant’s analysis on SpicyIP. As you will appreciate, although we’re part of the same blog, we think independently as well.

My short point in pointing to the Gramophone case was this: the term "import" does not have just one meaning. It is not defined in TRIPS. How then is it to be interpreted?

Henning makes some really valid points about how it might be differentially interpreted even within TRIPS keeping the context in mind. And you may perhaps be right (as Henning also argues) that given the context of Article 51, imports cannot include "in transit" consignments that violate patent rights..

ps: The Dutch action had nothing to do with counterfeiting–but was based on patents (to be best of my knowledge)

Reply January 30, 2009 at 04:31 AM

Seema Sapra said…

Dear Shamnad,
Mea culpa! I was responding to both Prashant’s SpicyIP post as well as your initial comment in this thread.

But leaving aside my references to Prashant’s post, my comment on the substantive issue of the relevance of gramophone was also addressed to your initial comment in this thread, when you wrote that:
“However, countries may define import more broadly. And this is exactly what the Indian courts did in the Gramophone Company of India case that Brian cites in his post (involving pirated casettes to Nepal). … Since the term "import" has not been defined by the TRIPS agreement, a panel is more likely to defer to the concerned member states’ definition (within reasonable bounds of course). I’m therefore not entirely sure that a panel would necessarily interpret import in the restricted way that you envisage. Therefore, at least on this count, my own view is that the EC may prevail in a TRIPS challenge by India or Brazil.”

But I agree with you that reference to domestic interpretations would be relevant, and that policy contexts would also determine the meaning of import.

Apparently there is an ECJ decision Montex Holdings Ltd. v. Diesel SpA (Case C-281/05), where the court held that there could be no infringement by virtue of goods merely passing through a member state if the goods are not in free circulation there. I get this reference courtesy a comment posted on SpicyIP. For the link see http://www.jenkins.eu/mym-spring-2007/keep-on-trucking.asp

This brings some more information to mind that I found while googling. Don’t know what to make of this or whether this would influence the issue we are discussing. According to http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=1907716:
“Spanish Court Finds in Favor of Stada in Generic Losartan Case Against Merck, Sharp & Dohme 10/4/2007
A high-level Spanish tribunal (APB) in Barcelona has found in favor of the Stada against Merck, Sharp & Dohme, a part of US drugmaker Merck & Co., in a case that followed the commercialization of Stada’s copycat version of the angiotensin receptor blocker Cozaar/Hyzaar (losartan).” Losartan is the very same product seized by the Dutch.”

Thanks for clarifying about whether the Dutch action was for patent infringement or counterfeiting. I ask because the EC regulation allows action for both and a lot of the news reports talk about the relevance of the WHO’s discussions on how to define counterfeiting. Plus I think I read somewhere quotes from some Indian pharma guys as well as Commerce Secy Pillai which mention the issue of counterfeiting in the context of the Dutch action. Let me see if I can dig up one of these reports again.

Reply January 30, 2009 at 05:27 AM

Shamnad Basheer said…

Dear Seema,

No worries. I think I might have made a mistake as well in assuming that the prospect of a successful TRIPS action by India was really weak. I am now reconsidering my position and have just shot off my initial thoughts to Bryan and Henning on private email. Once I am clearer on this, I will run another post on SpicyIP and I will look forward to your insights and inputs.

Reply January 30, 2009 at 08:22 AM

Shamnad Basheer said…

you’re also right abotu the fact that the WHO anticounterfeiting issue has been conflated with this issue. And I warn against this conflation in my very first interview with Mint on this theme. And yes, some EU cases suggest that the "transhipment" part of the EU council regulations have been read down–which might mean that India could moot a challenge in the EU courts itself. I am still studying these cases.

The whole thread can be accessed here.

The Hindu Business Line reports that Indian authorities have launched their first anti-subsidy investigation against China.

Following a petition by Deepak Nitrite Ltd, which accounts for more than 50 per cent Indian production, the Designated Authority in the Directorate General of Anti-Dumping & Allied Duties has initiated the countervailing duty probe on imports of sodium nitrite from China. The petitioner has alleged that producers of sodium nitrite from China have benefited from a host of countervailable subsidies. They advanced evidence showing existence of certain schemes/programmes claiming that the same constitute countervailable subsidies to vindicate initiation of a probe.

The actionable Chinese subsidies alleged by the Indian petitioner include "China’s grant programmes, preferential lending, income tax programmes conferred by the Chinese authorities for foreign invested enterprises (FIEs), corporate income tax refund programme for reinvestment of FIE profits in export-oriented enterprises, preferential tax policies for R&D for FIEs, income tax credits on purchases of domestically produced equipment applicable to domestically owned companies, provision of electricity, natural gas, water utilities for less than adequate remuneration and provision of land for less than adequate remuneration."

The period under investiigation is from April 1, 2007 through to March 31, 2008, and China claims that many of its schemes and programmes had been revoked or modified in this period.

India already imposes anti-dumping duty on Chinese sodium nitrite and the news report states that a mid-term review of these has been carried out.

Xinhua reports that the Chinese government has expressed serious concerns over this investigation. It also protested an Indian special safeguards investrigation launched into sodium carbonate imported from China. 

I can’t find details online regarding this subsidy investigation by the Indian authorities, but India seems to have taken the unilateral option of an anti-subsidy investigation. I suspect the measures under challenge may overlap with those challenged by the US and others before the WTO dispute settlement mechanism in WT/DS387/1 as prohibited subsidies under Article 3 of the SCM agreement.  In this request for consultations made as recently as 7 January 2009, the US has listed as many as 107 Chinese measures and claimed that these constitute prohibited subsidies, violate China’s accession protocol, and appear to violate China’s national treatment oligations under GATT article III.  In an earlier request for consultations (WT/DS358/14) the US had made a similar complaint about Chinese subsidies which was mutually settled by an MoU between China and the United States in January 2008.

Well, this should be a long and difficult investigation by India. I suspect that the issue will eventually be mutually settled.

Well, the issue has heated up now …

The background

Dutch authorities seized Indian generic exports of blood pressure drug bound for Brazil. The Dutch action took place under EC regulation 1383/2003.

Indian commerce secretary has described it as an act of piracy by the EU and both India and Brazil are threatening complaints to the WTO. See previous posts.

The Business Standard has a good story that provides some additional background information.

This might seem like a singular attempt by the EU to show extreme zeal in protecting the rights of pharmaceutical patent holders in the EU. But it has to be viewed against the backdrop a of a host of moves initiated by the developed world to ramp up intellectual property (IP) protection, far in excess of what is required under the TRIPS regime of the World Trade Organization (WTO), under the guise of public health concerns. These initiatives to enforce ever higher standards of IP protection have roped in global organisations with completely different mandates, such as the World Health Organisation (WHO), the World Customs Organisation and Interpol among others.

Leading the charge is the EU which apart from Regulation on trans-shipments is also planning to amend another directive (2001/83/EC) that seeks to prevent the entry of “medicinal products which are falsified in relation to their identity, history or source” into the legal supply chain through a change in the definition of such products. Interestingly, the new definition is based on the proposal accepted at a 2007 meeting of the controversial WHO agency IMPACT or International Medical Products Anti-Counterfeiting Taskforce which critics claim is a cover for protecting IP rights of MNCs. The US and other Organisation for Economic Co-operation and Development (OECD) countries are not far behind in ratcheting up IP enforcement through a host of initiatives ranging from a secretive multilateral treaty called ACTA, or the Anti-Counterfeit Trade Agreement, to a purely regional arrangement like The Security and Prosperity Partnership of North America that brings together North American Free Trade Agreement (NAFTA) signatories (the US, Canada and Mexico). But more on these initiatives later.

A new battleground between big pharma and public health activists over generics is emerging. The Business Standard story goes on:

Big Pharma is very clearly setting the agenda for these changes, according to public health activists promoting access to medicines and domestic industry associations. This charge has been affirmed by trade analysts and academics who point out that recommendations made by Pharmaceutical Research and Manufacturers of America (PhRMA), the powerful lobby of the world’s biggest drug corporations, to the US Trade Representative on ACTA are identical to the ‘Principles and elements for national legislation’ endorsed by IMPACT. The latter is supported by the International Federation of Pharmaceutical Associations (IFPMA) and there are reports that suggest 8 per cent of the funding for the WHO agency is provided by industry.

Developments at the WHO on this issue are being reported by ICTSD:

In a particularly contentious exchange at the WHO meeting, the Brazilian ambassador criticised the seizure. She stated that the “Brazilian Government considers that the decision by the Dutch authorities to detain an input which is strategic to public health in a developing country, and exported in conformity with the existing international norms, represents a grave drawback in the treatment of the issue of the universal access to medicines

The Netherlands’ decision represented a “distorted use of the international intellectual property system, supposedly upheld by European Union legislation, and contrary to the spirit and provisions of the Doha Declaration on TRIPs and Public Health,” the ambassador added.

Brazil indicated that “other possible reactions will be taken into consideration according to how this problem evolves, including within the World Trade Organisation (WTO)”.

This ICTSD story has more. Here is the full story:

Intellectual property was one of the contentious issues debated at the recent World Health Organisation Executive Board (EB) meeting, which concluded on Tuesday after just over a week of talks. Discussions centered on the WHO report and draft resolution on counterfeit medicines and on the global strategy and plan of action on public health, innovation and intellectual property.

Controversy over Counterfeit Medicines

The recent seizure of a shipment of generic medicines, headed to Brazil, by the European Union (EU) customs officials energized debate on the issue of counterfeit medical products. Brazil expressed “great concern” over retention of the hypertension medicines by the Dutch Authorities and indicated that it was considering taking further action in response. (see related story, this issue).

This debate also sparked questions regarding the definition of the term ‘counterfeit’, especially as it relates to the WHO mandate. . Some developing countries, as well as an NGO pointed out that as it stands the term ‘counterfeit’ is associated with trademark violations as defined in the WTO’s Trade-related Aspects of Intellectual Property Agreement (TRIPS). The Swiss delegate suggested that perhaps given the mandate for WHO in the protection of public health, the term ‘counterfeit medical products’ is more appropriate.

At the same time, however, some members questioned why the WHO is focusing on the definition of ‘counterfeit’ rather than directly addressing health issues associated with spurious and substandard drugs. Furthermore, a source present at the meeting suggested that the delegates were apprehensive to use the term ‘counterfeit’ as it can be used to facilitate and expedite the IP enforcement agenda under the guise of working to combat the falsification of medical products and other such illegalities that are a risk to public health.

But the US delegation indicated that it was disturbed that the “WHO secretariat originally circulated a document with a draft resolution with language that significantly widened the scope of the ‘patent’ exclusion to an exclusion for “all intellectual property.” The original WHO report stated that “disputes about, or violations of, intellectual property rights are not to be confused with counterfeiting.” However the US representative added that “such a broad exclusion is technically incorrect” and asked the “secretariat to explain how such a mistake occurred, given the importance of this issue to member states.”

In response, Director General Dr. Margaret Chan apologised, stating that use of the term “intellectual property was unintentional.” The WHO consequently issued a correction to the definition, reverting to the term ‘patents’, as set out in the IMPACT version, instead of ‘intellectual property’.

Concerns about IMPACT

Some members, primarily developing countries, expressed some concerns over the role and working methods of the IMPACT, which was launched in 2006 following a WHO conference in Rome. Included in the mandate of IMPACT, as outlined in the Rome Declaration, is the task of raising awareness among national authorities and decision-makers about counterfeit medicines, and calling for effective legislative measures to combat the spread of the spurious drugs. The taskforce is also charged with promoting coordination among different anti-counterfeiting initiatives.

Members’ concerns focused on the fact that the chair of IMPACT’s working group on technology is also the Director General of the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA), an association of multinational companies. Other members of the IMPACT board include the Organisation for Economic Cooperation and Development (OECD), INTERPOL, and the International Federa¬tion of Pharmaceutical Wholesal¬ers.

Developing countries and several NGOs were also uneasy about what appears to be an endorsement of IMPACT’s work by the WHO. The Secretariat’s report and draft resolution for the Executive Board meeting were propelled largely by the work of its partnership with IMPACT.

Such direct private-sector participation in a WHO initiative could raise serious issues of conflict of interest, some members say. One non-governmental source expressed concern that such endorsement could establish a significant precedent of private sector involvement in WHO activities.

Given these issues, many members were not keen to adopt the proposed resolution. Paraguay on behalf of the group of Latin American and Caribbean Countries (GRULAC) stated that its members were not ready to support the draft in its current form. This position was endorsed by other countries, including Barbados and Uruguay. Ultimately, members agreed that the WHO Secretariat should prepare further reports on the impact of counterfeit medicines on public health, as well as a new document, without resolution, on the way forward to the World Health Assembly in May of this year.

Public Health, Innovation and IP

While the issue of counterfeit medicines gave rise to extensive discussions, the agenda item on public health, innovation and intellectual property was dealt with more swiftly.

The WHO revealed the costing estimates for the implementation of the WHO strategy on global public health and intellection property, giving a detailed breakdown of the funding required from 2009 to 2015 to “carry out the activities associated with each specific actions at two levels: national and international.” The activities include building and improving innovative capacity, promoting the transfer of technology, and improving the application and management of IP. The total cost of the estimated needs (excluding research and development) exceeds US $2 billion; national-level activities constitute approximately 60 percent of this total figure.

On research and development the funding is expected to be as much US $147 billion. Those funds will cover R&D, the education of R&D workers, R&D infrastructure, and support units. Taken together, the implementation of the strategy and action plan is budgeted at US $149 billion, or US $20 billion per year.

These estimated funding needs were one of the outstanding components of the plan of action that the member states had requested the Director General to finalise during this meeting of the EB.

The Medecin Sans Frontieres’ Campaign for Access to Essential Medicines contended that “further work is needed” by the WHO Executive Board on this issue. James Arkinstall, an MSF spokesman called for specific actions on this front, and urged the EB to adopt qualitative indicators as part of Global Plan of Action. “It’s not just the number or the process that needs to be measured, it is the effect and the impact,” the spokesman said.

Barbados and Bolivia presented a proposal on ways to use the ‘prize fund model’ to encourage research with respect to diseases that disproportionately affect developing countries. Both countries requested confirmation from the Secretariat that the proposals would be examined by the expert working group the Director General had established. The Secretariat indicated that the proposals would be examined at the second meeting of the working group later this year. The WHO has also encouraged other member states to submit proposals on ways to encourage research into diseases that disproportionately affect developing countries.

Discussions on counterfeit medical products and the global strategy and plan of action are likely to receive significant attention at the next meeting of the World Health Assembly.

ICTSD reporting; “India may drag EU to WTO on Seizure of Drugs,” HINDUSTAN TIMES, 18 January 2009; “Brazil to object to Dutch Seizure of generic drug,” REUTERS, 23 January 2009; “WHO Puts nearly $150 Billion Proce Tag on Global R & D Strategy for Neglected Diseases,” IP-WATCH, 22 January 2009; “Hope for Consensus on WHO and Counterfeits Moves to May assembly,” IP-WATCH, 27 January 2009.

For some animated discussion in the blogosphere, see the exchange at the International Economic Law and Policy Blog.

In an earlier post I had written about the Indian government’s protest against the EU seizing certain Indian generic pharma exports in transit to third country importers.  Reuters is now reporting that the Brazilian government has issued a statement threatening a WTO complaint against the EU. A new battleground in the fight to the right to public health versus patent protection seems to be emerging here … will keep an eye on this.

Brazil said it would file a complaint at the World Trade Organization over the seizure by Dutch authorities of a shipment of a generic high blood pressure drug made in India.

Local foreign and health ministries said a company claiming to have intellectual property rights to the arterial hypertension drug losartan in the Netherlands requested customs authorities seize a shipment of a generic version of the drug in transit from India to Brazil, two countries where the patent is not protected.

The Brazilian government can withhold intellectual property rights for a drug if it considers it “in the public interest.” Its health-care system provides free drug treatment for certain conditions such as AIDS and high blood pressure.

“The Brazilian government feels that the decision by the Dutch authorities to detain the basic material critical for the public health of a developing country … a serious step backward on the question of universal access to drugs,” said the note released by the Brazilian ministries late Thursday.

The statement also said the government would take its complaint to the executive council of the World Trade Organization in Geneva.

High blood pressure is one of the leading causes of death among Brazilians.

The cargo of generic losartan that was seized in Rotterdam was sent back to India, where it was manufactured by Dr. Reddy’s, the ministries’ note said. The drug was being imported by Brazil’s EMS.

Losartan is the generic name for the drug Cozaar that was co-developed by Merck & Co and DuPont Co.

Brazil’s statement that it can withhold IP rights in public interest is interesting. Is there a compulsory licence issue here?

According to news reports, the Indian Directorate General of Foreign Trade (see website) has banned imports of Chinese toys for six months. And apparently, the notification issued does not give any reasons. Newspapers speculate protectionist reasons, but the Commerce Secretary says it is for public health. But surely, the notification itself should have included the reasons. Indian administrative law would require this, besides WTO obligations. Will China complain or react? Will this fall under the GATT article XX exemption, since there are apparently no existing Indian safety standards for toys to make it a TBT issue? Also, don’t think it raises any SPS issues.

The Indian Express writes:

“We are surprised that the government has taken this step. In most likelihood, it has been done to protect India’s labour engaged in this sector,” said Rajesh Arora, general secretary, Toys Association of India (TAI). “We are following toxicity standards and there is no reason why we should make any such recommendation,” Arora said.

“We are not aware of this development,” said Dinesh Rai, Secretary, Ministry for Small and Medium Enterprises said. The organised sector makes up $1 billion of the total $2.50-billion toy industry. The per capita expenditure on toys in India is just 50 cents, it’s $34 per capita in the US.

The Business Standard article states:

According to industry estimates, Chinese toys account for half the country’s toy market. According to commerce ministry data, toys worth more than $24 million (or Rs 120 crore) were imported in April-June 2008-09.

The Toy Association of India’s President, Raj Kumar said the ban would severely hit imports of Chinese toys, but Indian authorities had likely taken the step in the interest of the economy.

“You see Chinese toys everywhere. The good, upper-end toys are made in India, but the cheap toys in the street and small shops were being dominated by them. They are bringing in toys without safety norms,” he said.

The Press Trust of India writes

While the government notification did not cite the reason for the ban, sources said it was concerned over a rise in imports of toys.
A concern had also been raised over the safety of children playing with the Chinese toys, which were found to be toxic.
Most of the varieties, including wheeled toys, dolls, stuffed toys, toyguns, wooden and metal toys, musical instruments, electric trains and puzzles are covered under the ban.
The Toys Manufacturers Association of India said it was pleasantly surprised by the decision of the Commerce Ministry to prohibit shipments of cheap toys from China.
"We welcome the decision. It is good for the industry," association President Raj Kumar said, adding it is in the interest of the country.
In the face of global downturn, Indian industry has been clamouring for protection from aggressive Chinese manufacturers.
Industry officials said there has been a surge in the import of handicraft and toys by Rs 1,000 crore during April -November 2008.
However, trade expert Arun Goyal said, "The ban would encourage smuggling of toys through Nepal borders. That would be more dangerous… It is bad, especially for the slum children, who an afford the cheap Chinese toys only." PTI

CNN IBN quotesthe Commerce Secretary as citing public health reasons.

A health concern or an economic compulsion? Following India’s the ban on import of milk, milk products and chocolates from China, the Commerce ministry has announced the ban on some Chinese toys for a period of six months.

The commerce secretary has told CNN IBN that, " The reason for the ban is a concern for public health. Chinese toys are known to have high content of poisonous substances like lead."

International and Indian studies in the past have shown that Chinese toys contain high amounts of lead.

In fact, a CNN-IBN special investigation one year ago, tested a random sample of toys for lead.

The results revealed that Chinese toys contained higher levels lead than their Indian counterparts.

The study also showed that the highest content of this heavy metal was in products like teethers for newborn and toddlers.

But its story also suggests possible protectionist reasons.

However, a closer look at the categories that have been banned by the Indian government include items like tricycles, pedal cars, recreational models and puzzles.

These are not necessarily toys that lend themselves to being constantly chewed or ingested- the one way by which lead actually leaches out can cause lead poisoning in children. So it looks like the commerce ministry has other concerns. Many say this temporary ban is a means of providing protection to domestic manufacturers, against cheap competition.

After all, over 70 per cent of all toys sold in India come from China.

Perhaps this is the governments way of heeding distress calls of small scale toys manufactures in a tough economic market.

And CNN IBC drops this interesting piece of information:

Meanwhile chew this fact- India continues to have no safety standard of all toys in India -Chinese or Indian.

The Business Standard carries an article today on the new steel quality control order that will come into effect from 12 February 2009. But all stakeholders are not supporting the new norms. And Japanese industry is already complaining that the new standards would amount to a technical barrier to trade.

The Steel and Steel Products (Quality Control) Second Order, 2008, is supposed to be operational from February 12. It was first scheduled to come into effect from September 12, 2008. The order requires all domestic steel producers as well as international companies selling steel to India to register with the BIS. Secondary steep producers have urged the government to delay the implementation of the order.

“Sub-standard or defective steel and steel products shall be disposed of as scrap,” the order says. But steel exports from India have been exempted.

“The order is very much there but the ministry is discussing if it should be implemented from the stipulated date or not. It has been postponed once. There is a request from secondary steel producers to postpone the implementation further,” said Steel Secretary PK Rastogi. He said the order was also applicable to steel imports.

The Cold Rolled Steel Manufacturers Association (CORSMA) has asked the ministry to introduce quality standards based on the application of steel. “Foreign suppliers are not keen to get BIS registration and might stop exports to India.

The Japan Chamber of Commerce and Industry has written to the commerce ministry against the proposed standards since they amount to technical barrier under the WTO norms,” said SC Mathur, executive director, CORSMA. Mathur added the order would benefit a few major domestic producers who face competition from cheap steel imports.

Sources in the secondary steel industry said the order amounted to a backdoor ban on steel imports and forcing them to depend entirely on domestic producers.

“The grade of steel required for the automobile industry is not the same as the quality of steel needed to produce a trunk. So introducing uniform quality specifications is not practical,” said a secondary steel producer.Bottom of Form

A copy of the gazetted order can be accessed here.

I had a quick look at the Order and it does not seem discrimnatory at least. All steel used in India whether domestic or imported will need to comply. Steel meant for export is exempt provided specifications provided by foreign buyers are at least “not less” than the specified Indian standards. Do these new standards comform to the TBT agreement?

Update:

The Economic Times reported earlier that Indian tin can makers are opposed to the new standards, while domestic tin plate manufacturers whose product is used to make tin cans support the standards.

As per the Metal Containers Manufacturers Association of India (MCMAI), can makers will have to scrap non-BIS certified tin plates lying as inventories and in-transit, which will amount to losses of more than Rs 200 crore. Tin plate is a high-priced steel product and constitutes 60% of the price of a tin can.
Under the BIS directive, global tin plate producers such as ArcelorMittal & Tata-owned Corus will have to pay annual marking and processing fee, which will increase their overall cost by 2%. This in turn will be passed on to the Indian tin plate importers, feels MCMAI.
“Since can makers have long term contracts with end users, it’s difficult to pass on the increased cost burden to them. Also, the users have option to import empty tin cans from abroad,” said MCMAI vice-president Sanjay Bhatia.
Countering the demand of can makers, domestic tin plate producers alleged that huge quantities of seconds and defective tin plates are being exported to India at low prices and has reduced demand for domestically produced products. Therefore, quality check on imported products is imperative.
India’s three big tinplate makers–Tata Group-owned Tinplate Company of India, SAIL and Gujarat-based GPT Steel–cumulatively produce 6.8 lakh tonne annually. The metal packaging industry requires 4 lakh tonne of tin plate annually, of which about 40% is imported.
“Domestic production capacity is being under-utilised as some end users manage to import seconds and prime tin plate at low prices. Use of unscrupulous products usually leads to contamination of food and non-food items,” said a top executive of a large domestic tin plate firm.

Wonder if the standards will be implemented given that the government will find it difficult to satisfy all stakeholders?

Business Line published an article recently that discusses ministerial turf battles in the way trade policy is made in India. Here is the article in full with items of interest highlighted for those interested in trade policy formulation issues:

Harish Damodaran

New Delhi, Jan. 15 The Centre has rejected the proposal to accord statutory status to the Commission for Agricultural Costs and Prices (CACP) while also extending its mandate to provide advice on tariff policy and other trade-related matters.

The Cabinet Committee on Economic Affairs (CCEA), which met here on Thursday, did not accept the recommendation by an Expert Committee under Prof Y.K. Alagh to confer statutory status to the CACP.

The proposal, had it gone through, would have made it mandatory for the Centre to fix the minimum support prices (MSP) for various crops at levels recommended by the CACP. The underlying idea here was to insulate fixation of MSPs from political pressures and subject these, instead, to rational economic principles.

But the Expert Committee’s suggestion was rejected by the Cabinet, ostensibly at the instance of the Union Agriculture Ministry. The latter held that the CACP recommends MSPs well before the start of the cropping season, whereas the crop gets harvested much later.

‘No flexibility’

If the Centre was bound by the MSPs recommended by the CACP, there would be no flexibility to respond to changing market conditions and fix procurement prices accordingly. In such a situation, it was felt that the CACP’s present status as a purely ‘recommendatory body’ be maintained, official sources told Business Line.

The CCEA also rejected the Expert Committee’s proposal to extend the CACP’s terms of reference so as to include, “To advice from time to time on the tariff structure and other measures relating to imports and exports of agricultural commodities and their processed products”.

This would, in effect, have made it mandatory for the Centre to consider the CACP’s views regarding increases or decreases in import tariffs for any agri-commodity and measures to restrict or ban export/import of particular products.

“The opposition in this case came mainly from the Commerce Ministry, which expressed reservations on any role for the CACP to advice on trade and tariff matters, so as to integrate these with MSP policy,” the sources said.

“The Commerce people felt the CACP cannot be authorised to advice on what the tariff levels for individual commodities should be, so as to maintain the MSPs recommended by it. This may result in trade distortions which go against the basic economic principles of free trade,” they pointed out.

The Commerce Ministry, on the contrary, held that the CACP incorporate a member representing the Ministry. This would, in turn, ensure that the CACP would recommend MSPs and related actions that “do not come in conflict with broad trade objectives” and “are compatible with the World Trade Organisation and other bilateral and multilateral arrangements,” the sources added.

The CCEA also rejected the Expert Committee’s suggestion to expand the coverage of MSP and the official cost of Cultivation Scheme to horticulture crops, i.e. fruits and vegetables.

Methodological issues

The Prof Alagh-headed Committee was constituted by the Agriculture Ministry on May 7, 2003 to study various methodological issues in fixing MSPs of crops. Its terms of reference also included examining the existing mandate of the CACP and whether or not to reposition its role so as to provide greater teeth to its recommendations.

The Committee submitted its report on May 31, 2005, which was then forwarded to other Ministries (Finance, Commerce, Food, Planning Commission) for seeking their views before being placed for the Union Cabinet’s consideration.

The author of the report in question, Prof Alagh discusses ministerial turf battles and the difficulties of policy coordination because of bureaucrats unwilling to give up power. See his comment in the Financial Express here. An excerpt:

Finally the real differences. Apparently the government, or parts of it, does not want tariffs to be integrated with price policy in agriculture. It therefore does not agree with the Alagh Committee’s real concern that integrated policy should be followed to give incentives for a competitive agriculture. The report takes crops, works out the efficient farmer set and shows how within tariff bounds, with some monetary policy built in (the Venugopal Reddy simulation), it is possible to hold the farmer’s hand for the transitional period in which he moves over to a lower cost per unit of output, not land, or in which global trade is modernised following Kamal Nath. The report describes this in terms of ‘efficiency pricing’ or other variants of long-range marginal cost pricing, fully aware that it is not talking of industry. Anybody who reasons against this needs to do serious home work.

There seem to be sections of government that don’t want this. We don’t know why. Turf battles could be one reason. Policy coordination is always easy in a textbook and a report but normal persons don’t like to give up power. Only the exceptional become more powerful by shedding power and coordinating for the larger good. Another reason could be the fear of rule based systems for these can dilute the power play in weak coalition regimes. There is a trend in not having a chapter on perspectives in the Eleventh Plan and not accepting the challenge of creating a medium term environment for competitive agriculture. But then you are in real trouble, for to have MSPs and separately free imports is like pouring water in a leaking bucket. You did this at great cost a few years ago in the grain crisis period. Finally there could be the fear of the unknown.

But we are traveling in uncharted territory. After the dithering of the nineties, we are doing a superb job in the WTO. I am sure whatever the first reaction, having accepted a trade dominated regime, we will finally accept the challenge of the rational transition to it. The friendly ghost of the Alagh Committee will keep on coming back and will be exorcised only when we are fully competitive in our agriculture.

Those interested in going deeper, can find out more about the Commission on Agricultural Costs and Prices (the CACP) here.

Doesn’t look very likely though…

I came across this report in the Economic Times recently, quoting Indian commerce secretary that India might ask for DSU consultations with the EU on what has elsewhere been described as acts of piracy committed by the EU.

The Economic Times report was not very illuminating as to what the issues were. A Mint story is more enlightening. Also see the post on this story by the blog Spicy IP.

Here is the Mint story in full:

Dr Reddy’s consignment of drugs to Brazil seized

This is the first time a shipment of a large Indian company has been held on charges of patent infringement

Radhieka Pandeya

New Delhi: A consignment of drugs sent by Dr Reddy’s Laboratories Ltd (DRL) from India to Brazil has been seized in transit by Dutch customs on charges of patent infringement.

This is the second such action in the Netherlands in three months. IPA has urged serious action

India’s commerce department has reacted strongly against such seizures in the European Union (EU), this being the second such seizure in the Netherlands in three months.

DRL’s consignment, worth $500,000 (Rs2.4 crore), was of bulk drug losartan used to lower blood pressure. The patent for losartan in the Netherlands is held by US-based DuPont under the Cozaar brand.

Commerce secretary G.K. Pillai said the department has taken up the matter with the European Commission (EC) and has written to them. “This is an act of piracy by the European Union. The consignment was going to Latin America and was seized in Europe… This is a dangerous thing happening, which is totally uncalled for. It is part of the strategy by these countries to target generic drugs from India.”

Mint had reported on 12 December that an increasing number of shipments of Indian small and medium-sized bulk drug makers were being seized at European ports on charges of patent infringement. This is the first time a shipment of a large Indian company has been seized.

To be sure, some Indian patent lawyers argue that the EU is following local laws and India cannot question their implementation.

“If the consignment does infringe a patent, then you cannot question the EU for seizing it under their patent laws,” said Shamnad Bashir, a professor in intellectual property law at the National University of Juridical Sciences, Kolkata.

Rajeshwari Hariharan, a partner at law firm K&S Partners, agreed. “There are cases where a product is in transit and is seized at a transit point. If this DRL product was in transit via the Netherlands, and was seized there due to patent infringement, it is a valid argument for the EU,” she said. “In fact, India takes the same stance.”

Others, however, view this as a public health issue. “The EC regulations that have led to the seizure of Indian generic drugs in transit to Brazil have created barriers to the export of affordable, quality, low-cost generic drugs from India to other developing countries. This is part of the IP (intellectual property) enforcement agenda,” said lawyer Leena Menghaney, who is also India project manager for the Campaign for Access to Essential Medicines, an initiative of Medecins Sans Frontieres, a non-profit organization.

“The fallout will be on patients’ lives in the developing world who will not be able to access affordable life-saving drugs from India,” she said.

Industry lobby group Indian Pharmaceutical Alliance (IPA) has also urged serious action on the matter.

“We are concerned that all our exports of generic medicines to South America and Africa passing through Europe will come to standstill unless the government were to challenge the EU Council Regulation of 22 July 2003 and seek its amendment,” D.G. Shah, secretary general, IPA, has written in a letter to the commerce department.

A medium-sized Indian company, whose consignment worth $100,000 was also seized at a European port while going to Latin America, said it now sends the drug through a different route. It also said it was not big enough to fight an expensive legal battle in the EU.

The commerce department seems to be gearing up to tackle that, too. “We are willing to assist the company through the Pharmaceutical Export Promotion Council (Pharmexcil),” secretary Pillai said.

However, Pharmexcil executive director P.V. Appaji admitted that India should not expect drastic changes in EU regulations since “we cannot dictate our terms on them”. At the same time, Pharmexcil is encouraging smaller drugs makers to get advise the issue. “We will provide the company with our adviser, who will highlight all potential legal issues with regard to patent before they ship a consignment through a particular route. This adviser will be available to these companies at throwaway prices,” Appaji said.

Emails to the European Commission, World Health Organization and World Trade Organization remained unanswered. A DRL spokesperson said the company was unavailable for answer owing to a holiday.

Asit Ranjan Mishra in New Delhi contributed to this story

Castro and Arcuri have an interesting article titled “How Innovative is Innovative Enough? Reflections on the Interpretation of Article 27 TRIPS from Novartis v. Union of India’ on SSRN.

Access it here

Here is the abstract:

In 2006 a major lawsuit was initiated by Novartis AG against the Union of India. Novartis petitioned the High Court of Madras to declare Section 3(d) of the Indian Patents Act, as amended in 2005, to be non-compliant with the TRIPS Agreement and/or to be unconstitutional. Section 3 of the Patents Act identifies the cases of inventions which are not patentable and its letter (d), as amended in 2005, lists as such ‘the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.’ On August 6, 2007 the High Court of Madras reached a verdict rejecting all the petitioner’s requests. In relation to the non-compliance with the TRIPS Agreement, the Court did not enter into the merits of the question as it held to have no jurisdiction on this issue.

The present analysis begins where the verdict of the High Court of Madras ends; while the judgment invites reflection on a number of interesting issues related to the role of WTO law at national level, this paper focuses only on the substantive question (left almost entirely unaddressed by the Indian Court) about the compatibility between Section 3(d) of the Indian Patent Act and the TRIPS Agreement. The core of the question relates to the interpretation of Article 27 TRIPS, and in particular to its paragraph 1 where the criteria for patentability are set (i.e. an invention should be non-obvious, novel and useful); clearly, a narrow or a broad interpretation of these criteria is likely to have a significant impact on patents regimes worldwide. This paper builds an interdisciplinary theoretical framework to answer the compatibility question raised by Novartis AG; it does so by combing a purely legal analysis, based on the general interpretative canons used by the WTO Appellate Body to solve disputes, with an economic analysis that aims at showing the socio-economic impact of different interpretations of the above mentioned criteria. Finally, the paper shows the extent to which this theoretical framework could be applied should such a case ever be brought before the WTO DSB.

An article by Kasturi Das titled “Coping with SPS Challenges in India: WTO and Beyond” looks interesting.

Citation Journal of International Economic Law 2008 11(4):971-1019

Here is the abstract:

The Agreement on the Application of Sanitary and Phytosanitary Measures (SPSA) was negotiated with a view to setting in place an array of multilateral rules that would, on the one hand, recognize the legitimate right of WTO Members to adopt sanitary and phytosanitary (SPS) measures necessary to protect human, animal, or plant life or health, and on the other, enshrine certain checks and balances to cope with the possibility of these measures emerging as non-tariff barriers (NTBs). However, the experiences of developing countries including India with SPS requirements imposed particularly by the developed countries bear testimony to the fact that SPSA has thus far proved rather ineffective in living up to the latter objective. This is largely attributable to the fact that, its dual objective notwithstanding, SPSA has left considerable ‘space’ for WTO Members to use SPS measures for protectionist purposes under the guise of their ‘legitimate’ concerns. This ‘space’ seems to have been further reinforced by the mode of interpretation of SPSA by the WTO Dispute Settlement System. Written against this backdrop, the present article brings to the fore some of the key SPS challenges facing the developing countries by taking India as a case in point and explores certain plausible strategies to cope with such challenges in an effective manner.