Transcript Slide 1

Geoffrey Hale
Political Science 3170
The University of Lethbridge
November 23, 2010
Outline
 Climate change, energy and environmental policies – a
multi-level game
 Intellectual property
 What it is?
 The international context – bilateral and multilateral.
 Intellectual property – The Canadian context
 Key legislation
 The WTO context
 Intellectual property & the pharmaceutical industry
Climate change, energy & economic
policies – A multi-level game
 Global diplomacy
 Cooperation with U.S. in international fora to make inclusion of
developing countries key condition for new climate deal
 Reluctance to make climate change basis for new international system
of transfer payments / foreign aid.
 Global character of climate policy makes future initiatives worthless
without two largest GHG emitters (China, U.S.)
 Bilateral regulatory and research initiatives with U.S.
 Extensive information sharing on “clean energy”, new technologies with
U.S. Government
 Focus on technical cooperation with U.S. Executive Branch
 Parallel environmental regulations for (highly integrated)
transportation equipment sector
 Parallel nominal U.S. GHG reduction targets in official strategy
(largely symbolic).
Climate change, energy & economic policies
– A multi-level game
 Engagement with U.S. Congress
 Multiple legislative initiatives in U.S. Congress since 2006 to explore
cap-and-trade system, less visible regulatory measures to limit foreign
energy imports
 Embassy lobbying effort to maintain market access, level regulatory
playing field for Canadian energy exports to U.S. (multi-sectoral)
 U.S. domestic, economic interests primary in gridlock on energy,
climate change policies since 2001 . . . Canada playing at margins.
 Limits capacity for development of N. American cap-and-trade system
based on intergovernmental cooperation.
 Accommodation of cross-border province-state regulatory initiatives
 Western Climate Initiative / Regional Greenhouse Gas Initiative stateled measures with participation by Cdn. prov. governments attempting
to ensure inclusion within U.S. regulatory umbrella.
Climate change, energy & economic policies
– A multi-level game
 Engagement with U.S. Congress
 Multiple legislative initiatives in U.S. Congress since 2006 to explore
cap-and-trade system, less visible regulatory measures to limit foreign
energy imports
 Embassy lobbying effort to maintain market access, level regulatory
playing field for Canadian energy exports to U.S. (multi-sectoral)
 U.S. domestic, economic interests primary in gridlock on energy,
climate change policies since 2001 . . . Canada playing at margins.
 Limits capacity for development of N. American cap-and-trade system
based on intergovernmental cooperation.
 Accommodation of cross-border province-state regulatory initiatives
 Western Climate Initiative / Regional Greenhouse Gas Initiative stateled measures with participation by Cdn. prov. governments attempting
to ensure inclusion within U.S. regulatory umbrella.
Intellectual property
 Definition
 information that has econ0mic value when put into use in the
marketplace” (H&K)
 “creations of the mind used in commerce” (WIPO)
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Industrial property – e.g. inventions (patents), trademarks,
industrial designs, and geographic indications of source
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May be “knowledge goods” arising from research, technical
specialization or legal instruments to permit “product
differentiation”
Copyright  includes “literary and artistic works such as novels,
poems and plays, films, musical works, artistic works such as
drawings, paintings, photographs and sculptures, and
architectural designs”
Intellectual property: : economic relevance
 Economic relevance / rationale of intellectual property varies by
type of intellectual property
 Public goods  “marginal cost of distributing an additional unit
good of a knowledge good is zero” (H&K)
 Intellectual property rights (IPRs) necessary to provide economic
incentive to inventors, knowledge entrepreneurs to invest in R&D
activities, especially those with longer time horizons
 IPRs provide inventors, authors, artists etc. with “temporary
monopoly” on use of invention, reproduction of a work.
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Create incentives for innovation
Also facilitate diffusion of innovation, knowledge by linking public
access to economic compensation.
Public benefits of “free access” after period of IPR protection may vary by
type of information or product.
Intellectual property
Relevance to trade policies
 Spread of industrial capacity to developing nations
increases relative importance of technological innovation
in advanced industrial (usually ‘high wage’) economies
 Trade-offs between reductions of trade barriers by
industrial countries – allowing market access to (usually
‘low wage’) developing countries, increased protections for
IPRs
 IPR protection also addresses challenge of counterfeit
goods and services that attempt to replicate ‘brand
reputations’ – or take undue advantage of product
development and marketing efforts of others.
Intellectual property
Existing institutional structures
 World Intellectual Property Organization (WIPO) – 1967, 1979
 184 contracting parties (larger than WTO)
 Administers 24 treaties including:
 Paris Convention (industrial property: patents, trade names, industrial
designs) – 1883 ++
 Berne Convention (copyright) – 1886 ++  WIPO Copyright Treaty (1996)
 distribution and rental of copyright works (+ encryption issues)
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Patent Law Treaty (coordination of national laws) - 2000
 Lisbon Agreement (appellations of origin) – 1958 (new rules 2010)
 Rome Convention (live performance recording, “phonograms”, broadcasts)
- 1961
 Brussels Convention (broadcast signals via satellite) – 1974
 Nice Convention (trade mark classification) – 1957 ++  Trade Mark Law
Treaty (1994)  Singapore Treaty (2006) – trade marks
Intellectual property
Evolving politics of trade policies
 US Trade Act of 1974
 Aggressive unilateral enforcement of patent and other IPO rights
through private action under Section 301, USTR action under “Super
301” with potential for restrictions on foreign exports where “name
and shame”, negotiation unsuccessful.
 Unilateral actions under Section 337 of US Patent Act (1930)
 Paralleled to lesser extent by EU
 US
 Impetus for Uruguay Round negotiations leading to TRIPS
agreement of 1995
 Trade-off between expanded WTO disciplines to support IPRs (e.g.
access to dispute resolution) and to limit unilateral actions by US
and EU under domestic or regional trade and patent laws.
Service exports and U.S. trade strategy
 Goods trade deficit 2009 - $ 507 bn.
 Services trade surplus 2009 - $ 132 bn.
 about 1/3 of total U.S. exports
 projected to be largest source of export growth in coming
years
 Share of U.S. service exports
 “Other private” (mainly professional
47%
and financial services)
 Travel and tourism
19%
 Royalties and licencing
18%
Implications for Canada
 Services about 12.5% of Canadian exports (2005)
 Increase from 3.3% of GDP in 1990 to 4.5% in 2005
 Markets more diversified than those for merchandise trade
 Modest trade deficit in services account
 Industry sector mix, mix of homegrown R&D + technology
transfer from foreign investment give Canada smaller R&D
levels vs. GDP

Cdn GERD (2006) – 1.98% of GDP U.S. – 2.62%
EU27 – 1.76%
Implications for Canada
 Three major sets of policy challenges
 International harmonization of patent laws
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Greatest political relevance to pharmaceutical industry since Bill C22 (1987) and Bill C-91 (1992)
Closely linked to pharmaceutical R&D (Quebec-centered) and
provincial policy regimes for purchasing pharmaceuticals, esp.
generic drugs (Ontario-centered).
 International harmonization of copyright laws
 Canada still debating terms of new Copyright Act
 Protection of “cultural industries”
 e.g. Ownership and domestic content controls for broadcasting,
magazines; ownership controls for publishers and other sub-sectors.
The Patent Law Debate
 U.S. Patent laws provided IPRs for 17 years from time of
registration (since 1861)  paralleled in Canadian law until 1987
 Patent Act debate closely linked to debate over “compulsory
licencing” of drug patents to enable manufacturing in Canada.
 Bill C-22 (1987) extended Patent Act protection to 20 years,
matching EU patent law (U.S. followed suit in 1995); compulsory
licencing abolished in 1992 (Bill C-91)
 Uruguay Round’s TRIPs agreement provided for generalized 20 year
protection
 European countries successfully challenged Canada’s pre-1987 patent
law limits in WTO dispute resolution process in 2000, requiring
uniform extension of patents.
The Patent Law Debate and the
Canadian Pharmaceutical Industry
 Canada 9th largest global market for pharmaceuticals, and one of
fastest growing (Industry Canada)
 Industry divided between proprietary (“brand-name”) drug
manufacturers (Pharmaceutical Manufacturers Assn. of Canada
aka “big pharma”) and generic industry
 Brand Name firms
 Generic firms
% of sales (2009)
% of volume
78%
22%
52%
48%
 Canada major importer of drugs
 67% of Cdn. Market still supplied by (mainly EU) imports in 2009
 56% of Cdn. Production exported in 2009 (mainly to U.S.)
Source: Industry Canada. Canadian Pharmaceutical Industry Profile. (http://www.ic.gc.ca/eic/site/lsgpdsv.nsf/eng/h_hn00021.html)
Industry location & market share (2009)
“Brand-name” firms
Generic firms
 Pfizer (Montreal)
 Apotex (Toronto)
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13.4%
Astra-Zenica (Mtl.)
6.6%
Schering-Plough (Mtl) 6.0%
(formerly Merck)
Johnson & Johnson
(Markham / Guelph) 5.3%
Novartis (Toronto)
4.2%
GlaxoSmithKlein (Tor.)4.o%
Abbott (Montreal)
3.9%
Roche (Montreal)
3.1%
7.o%
 Novopharm (Toronto)4.2%
The Patent Law Debate and the
Canadian Pharmaceutical Industry
Promoting “brand name”
pharma
 Attracting high-end employment, R&D
spending (2nd largest R&D sector; major
“biotech” spillovers)
 PMAC firms divisions of major global
drug companies
 PMAC firms committed 8% of sales to
R&D in Canada (2009 – 10% of sales)
 Average R&D costs per new drug
~ $US 600 mm. over 12-13 years
(much higher when failures included)
 Strong support by Quebec gov’t as part
of broader industrial strategy
 Regional R&D – ON 47%; QC 43%.
Promoting “generic” pharma
 Less R&D, lower prices
 Drug costs rapidly rising element in
total health care expenditures (100%
increase 2000-2008)
 Governments purchase 42% of total
sales, individuals & private
insurance 58%
 Mixture of federal regulation (on
brand-names), prov. drug
purchasing oligopoly have kept avg.
price increases below inflation since
1992.
The Patent Law Debate and the
Canadian Pharmaceutical Industry
 Other issues
 Debate over mandatory licencing of AIDS drugs in Africa
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Qualified exceptions to patent laws
Humanitarian objectives vs. “leakage”
 Government efforts to contain drug costs as alternative to
hospitalization
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Long-lead times in securing drug approvals (safety + cost of new drugs)
Comparative access vs. U.S.
 Internet pharmacies and cross-border trade
 Conflict between U.S. consumer interests (Cdn. prices generally lower due to
regulation, greater U.S. affluence, market structure) and implicit trade-offs
(official exports at market prices help subsidize Cdn. drug prices)
 Decline since 2003 to 1.5% of total drug exports.