by Chakravarthi Raghavan

Geneva, 7 Apr 2000 -- The Dispute Settlement Body of the World Trade Organization adopted Friday the ruling of a dispute panel in a dispute over pharmaceutical patents raised by the Europeans against Canada.

The panel had upheld the validity of a Canadian law, applicable to all patents requiring regulatory sanctions that enables producers of generic drugs to undertake work on a patented product right up to the stage of submitting and getting marketing clearance from regulatory authorities that would enable production and marketing of the generic drug as soon as the patent expires.

The panel had however found the Canadian provision enabling such generic producers also to produce and stockpile such generic drugs for marketing immediately on expiry to be invalid.

In other actions, the panel heard a statement from Ecuador on the ruling of the arbitrators in its request for authority to suspend concessions from the EU members under the TRIPS agreement for the failure of the EU to implement the banana ruling.

The arbitrator's report had fixed the Ecuador damage at $201.6 million, rather than the $450 million claimed by Ecuador, and had suggested that Ecuador put in a new authorization request for $201.6 million. The arbitrators had also suggested that Ecuador should withdraw for a partial extent of damage, concessions in respect of consumer goods from the EU members in terms of GATT 1994 (trade in goods), withdrawal of concessions under GATS for 'wholesale trade in services', and under TRIPS in the areas of copyright and related rights for sound recordings, geographical indications and industrial designs.

Ecuador in a statement said it still preferred compensation from the EU rather than take the retaliatory sanctions, but that if no quick solution was reached, it would put in a revised request for taking sanctions.

The arbitrator's report brings out the failings of the dispute settlement system, relying on retaliatory sanctions, in cases involving developing countries and developed country with considerable imbalances of trade, and the possibility that even when a sanction for the trade damage is authorized the developing country may find itself unable to implement the suspension without damage to its own economy.

In other actions, the US indicated that it would carry out the ruling on the US Foreign Sales Corporations law, which has been held to provide through a tax regime, prohibited export subsidies to the US corporations. The United States told the DSB that it would implement the ruling to comply with the WTO obligations, but ensuring that its corporations are not placed in a competitive disadvantage.

While under the subsidies agreement, parties providing a prohibited export subsidy are required to immediately refrain from doing so, the panel, taking account of the time needed to change a tax law, had provided the US time till 1 October 2000 (the beginning of the new US budget year 2001) to change its law.

The DSB also accepted the recommendation of a selection committee and appointed Prof George Michel Abi-Saab of Egypt and Mr. A.V.Ganesan of India to a four-year term on the Appellate Body.

Abi-Saab and Ganesan are to replace Mr. El-Nagar (of Egypt) and Mr.Matsuito of Japan.

The DSB also had before it a dispute raised by Colombia against Nicaragua involving some disputed maritime boundaries in the Caribbean Sea (involving Colombia, Honduras and Nicaragua), where Nicaragua has invoked its Art XXI security exception rights, and has imposed higher duties on imports from Colombia and Honduras, but within its tariff bindings.

The dispute and panel request came up before the DSB for the first time, and Nicaragua exercised its prerogative to deny consensus.

Earlier, the DSB again was told by the EC that it was still trying to reach an agreement with interested parties to implement the banana ruling, but said the interested parties were still divided. The US said that the EC problems lay in differences among its members and the EU should not blame the other parties. But the EU responded by referring to what it saw were contradictory positions of the US and Ecuador, over the base year to be taken to fix the tariff quotas - the US wanting pre-1993 figures, and Ecuador insisting on latest data. (SUNS4644)

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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