Wednesday, December 17, 2003
Leader: This article is translated from September, 2003 issue of information Technology & Standardization, a publication of China Electronic Standards Institute (CESI). It is intended to share the viewpoints of the Chinese towards global standards.
Abstract: With the foundation and development of WTO, tariff barriers are fading gradually. However, non-tariff barriers are tending to increase. It is really worth paying attention to technology barriers related to intellectual property. This paper analyses the regulations on technology barriers and intellectual property within the framework of WTO; discusses the strategy of intellectual property protection that the developed countries utilize to protect their international trade, and suggests to our government.
During the Chinese WTO membership negotiation process, we were generally concentrating on tariff reduction. However, besides tariff, intellectual property barriers have long been established. This scenario has become more serious within the WTO framework. Examples are last year’s cigarette lighter case in Wenzhou and the license fee levied on DVD players. These cases had sounded the alarm for us. It made us aware that under WTO, Trade Related Intellectual Property Security (TRIPS) rules can be used to protect intellectual properties in trade. On the other hand, Trade Barrier Treaty (TBT) can be used under the mask of standardization, patents and intellectual property rights to obtain most world trade advantages. This article is to review the fight back strategy on intellectual property barrier. It also lists out suggestions on formulating our post WTO strategy.
1. Technology Barriers relationship with intellectual property and their influence on trade
Following the “Ecuador?resolution, World Trade Organization was established. It was based on the principle to strengthen multi-facet world trade system. At the settlement of the GATT negotiation, tariff barriers were gradually being eliminated. However, the developed countries leaded by the U.S. have implemented another kind of non-tariff trade barrier. They surprisingly built trade barrier based on technology.
The term “Technology Barrier?refers to the use of laws, directives, regulations and standards to regulate trade between countries. Utilizing certification, inspection and such process to impose new requirements on import goods based on technology, health concern, packaging and labeling. On the surface, it is to raise the quality standard of the merchandize, but the ultimate is to limit import. In this tariff verses non-tariff era, the standards set for technology barriers are said to protect the welfare of the consumer and thus favored by all countries. Since it improves the quality and protects consumer rights, it is therefore, accepted and implemented in different countries. Following the establishment of international trade rules, trade tariff has been greatly reduced. The advancement on technology and the Internet have cause technology gap to be widened between developed and developing countries. The developed countries are facing a serious cost competition from the developing countries. That is the reason they are building barriers based on their technological advantage. In fact, technology standard has become a barrier for importing goods. Technology barriers are normally set on international treaties and laws. They appears to be for human safety and health purpose.. Therefore, it is difficult to distinguish if they are deliberate import barriers. But when a technology barrier policy is applied on a specific product, it usually triggers a chain reaction. It can pass down from one country to another to throughout the globe. Due to the broad effect, legal implication, hidden nature, and multi-facet nature, technology barrier has become an important weapon used by the developed countries. It’s position as a non-tariff barrier is becoming more obvious.
Last year, the cigarette lighter incident in Wenzhou was a typical case of technology barrier. It was the first incident our country came across after becoming a WTO member. It is difficult to see from the law that sets the technology standard. European Union, when applying technology barrier to keep our cigarette lighters from importing, included a patented technology in their rectified standard. This specific technology is used in many European Union countries. It has thus become an IP centric technology barrier. We had only two choices. One is to develop new technology to replace the patented idea. The other is to pay license fee to use their patent. The first one would result in lost of opportunity while the second choice would lose cost competitiveness. Therefore, we would incur serious disadvantage either way. One can, therefore, see the killing power of technology barrier.
Overall, the technology barrier protection tactics for the developed countries are summarized to be in three aspects. They are technology standards, packaging and labeling requirements, environmental standard and information technology barriers. The expression of technology barrier is to set tough technical standards. They tightly control the inspection process. The developed counties deliberately include their IP technology in the process of standardization. They have also made their verification and inspection difficult and tedious. During the standardization and control law setting process, they often implicate their own IP technology onto the import goods. This essentially blocks out importing goods legally. It has become a technical barrier for technology product import. One can see the plot behind Intellectual Property protection, product standardization, and uniform IP standardization laws. In summary, it is to use technological advancement and IP position to counter the price advantage of the developing countries. For that, we should research and develop counter measures. We need to learn from the foundation of the developed countries. We should set our strategy on forming standards and Intellectual property laws within the framework of WTO.
2. WTO Regulations on Technology Barrier
According to “article 20?(general exception) and “article 21?(safety exception) of GATT, nations have the right to protect the safety of its people and its plants. When safety is threatened, they can take exceptions from GATT in setting technical standards. This is outside the rules that regulate import quota base on the national per capita income rule. However, as mentioned, technical standards are usually wrongfully used in international trade for self-protection. It has become means to limit import. It has become barriers to free trade. The Ecuador resolution results in the TBT treaty, , hereon referred as SPS Treaty. Besides the treaty, there are also other conditions that constituted WTO’s restriction on utilizing technology barrier on international trade.
The essence behind TBT is that the use of technology standard should conform to the rules. There are standard and process to judge and to evaluate these rules. It requires members to guarantee that these technology rule setting would not bring unnecessary barrier to international trade. It also sets the boundary of technology standards only to the security of the country, limiting fraud, to assure the health safety of human race and for the protection of living creatures as well as vegetations. It also require members to set technology standards according to the actual characteristic of the product and not to the design functionality. The purpose is to avoid technology discrimination and excuses to limit international trade. The level for judging on technology standard should be based on most favorable country rules and the average per capita income rules. All technical standard limitations should be built on the principle of no discrimination between imported and similar locally produced products. To encourage all countries to create and to adopt the same unified standard. In case there are no unified standard, members are encouraged to make their process transparent during their standard setting. They should recognize and consider the right and the technical capability of other members.
SPS Treaty sets the rules on quarantine of life plants. Since health quarantine usually involves a lot of sanitation standards as well as human safety and environmental issues, SPS is the attempt to set their boundary of regulations. This is similar to the TBT. It states that it should be restricted to the absolute necessity of protecting the life and well being of human as well as plants around us. It should not be an apparatus to limit international trade. Instead, it is to encourage every country to apply the same international standard and to avoid different level of treatment on the life and well being of human and plants. It suggested that the rule setting should be transparent. In the assessment of health and environmental risk, it should consider all geographical locations and conditions. Inspection rules and process should be set accordingly.
Overall, SPS and TBT had set restrictions on setting technology barriers. However, due to the technological level difference between countries, unified standard setting is not achieved. On the contrary, SPS and TBT rules are being used by developed countries to legalize their higher technical standards. They thus use these standards to limit trade and investment from aboard and to protect its own market share. Although SPS and TBT had allow the developing countries some lead way but yet they cannot overcome the protection laws set by different countries. Standards and quarantine procedure had thus cause unnecessary barriers. Because of that, some members already push forward a proposal geared on difference in national income. This way, the lower national income countries can be more exemplified and more efficiently work within the WTO framework.
2.2 TRIPS ?Treaty on Trade Related Intellectual Properties
Reviewing the history on GATT negotiations. Since the last negotiation round in Tokyo, agenda was already beyond the tariff issue. It had touched on topics of intellectual properties. Later at the Equador meeting, the question of intellectual property was brought up and caused a debate between the developed and the developing countries. Whether IP issues should be included into the trade negotiations? Under the strong influence of United States, this question was finally included into the trade related matter category. That lead to the TRIPS treaty, which formed as part of WTO rules. From this example, we can see that intellectual property and trade barriers do have strong connection.
The developed countries, lead by United States, wanted to connect intellectual property with trade issues. They do that not for the reason of developing world trade but is to maintain their technological advantages on their high end products. As they wrote IP into WTO rules, they will be able to use WTO and TRIPS to protect their intellectual property standards. Under TRIPS, this is more stringent than most international treaties. In the name of consumer protection, it had included protection on not-yet-disclosed information. In comparison to the Paris Treaty, it actually had expanded the role of company trade mark protection to cover other similar products. In the area of copyright law, it had extended protection to software , multimedia and digital storage. Of that, the United States is the leading thrust in this area. In another aspect, the TRIPS treaty bears characteristic that is not with other treaties. It went as far as detailing the judicial policies and procedures for catching violations. Especially on evidence, product sanction, damage compensation, border patrolling and guideline for punishment. Together with the essence in the TBT and SPS treaties, we can see that the rules are under the control of the developed countries. Due to the difference in judicial system, they are setting very straight rules to regulate our export. On the other hand, they have set elusive principles on our import control. Although the TRIPS treaty limits competition in Intellectual Property right products, it also set the rules for abuse. However, we can see that overall, they serve the developed countries to protect their export. In other words, TRIPS is the standardized tool used among the developed countries to suppress the developing countries.
3. Our Country Status and Counter Strategies
3.1 Our country’s laws on trade
Due to the lower economic and technical status of our country, our laws on technology, health and environmental protection are quite different from the developed countries. That is why we always run into technology barriers on trade. The area involved is broad and includes low-tech products, and labor-intensive products. We often run into trade barriers based on technology when they are in conflict with the foreign manufacturing communities. Examples are high consumption products like vegetable, fruit, and meat. In 2002, our honey export was met in Europe with technology barrier concerning their antibiotic contents. It also started a chain reaction that caused the tightening of inspection in Japan, Canada and the U.S. As the tariff barrier is removed, the developed countries will use technology barriers as the main excuse to protect their industry. Our labor intensive, conventionally processed products will definitely run into more and more technology barriers.
In the pace of our export program, our product standardization process is not encouraging. Presently, we have federal standard, local standard, and industry standard applied simultaneously. Their boundaries are very confusing and often contradicting. The standards are primitive. It also lacks system for enforcement. We are weak in the area of health and quarantine. These are definitely mismatches to the world trade standard. It sometime cannot even satisfy the safety requirement of the local consumers. According to the TBT treaty, countries should set their standard in line with the common international standard whenever possible. Exceptions are allowed only when geographic and local weather prohibits. All standard settings should be based on international standard as their foundation. Because if we allow the level of standard to drift lower, that will only benefit manufacturers in the short term. This would, however, sacrifice our competitiveness in the long term. Moreover, we will never break out of the technology barrier. These particularly apply in the area of environmental protection. If we kept the lower standard, it will hinder the future of our country and endanger the life and health of our people.
3.2 Suggested Counter Strategies
First, we need to use the patent system to promote our technological advancement. On one hand, we have to have technology breakthrough at the entrepreneur level. We should enable them to apply for timely patents. On the other hand, the government should help companies to innovate, and to apply for patents. Presently, there are programs in Shanghai and in Beijing to assist invention and patents. Technology barriers are also a race in technology between countries. Due to technology barrier standards, health inspection and quarantine procedures are full of hi-tech and IP’s. To pay high prices for license is just a short-term solution for the immediate market. For the long term, we should elevate our technology R&D level. Owning our own IP is the only way we can cross over the technology barriers set by the developed countries.
Secondly, we should have the proper legal system and co-ordinations. We should adopt and participate in setting international standards. In our legislation, we not only have to encourage standard setting but also rules for implementation and creation of new standards. For the emerging high technology, the government should vigorously support setting of pioneer standards. Companies should also be encouraged to participate in setting international standards. For products that will benefit their industry, we should speed up the compliance under TBT requirement and standard. We should also push them to become international standards. For example, in the areas that our Chinese herbal technology can over perform western medicine, we should push for setting international standards. Besides, in the modern standard setting process, we should accelerate our merger into international standards. This will not only elevate our product competitiveness, but also allow us to break through the technology barriers in international trade.
Thirdly, we should take full advantage of the TBT and SPS treaties. We will take all the exemptions within them to remove technical barriers imposed on us. We will utilize the rules to avoid double standard and unfair treatments. For those obvious discriminations, we should take them up with the WTO for arbitration. We should apply all self-protection and fight for our legal rights. At the same time, we should use TBT and SPS wisely especially on the “exemption?clauses. This will help change our position from defensive to offensive.
For the time being, there will be more technical barriers built. We should use the patent system to promote advance in technology. We should have a standardized legal system. We should participate in setting international standards. We should also observe and practice the standards. Further, we should make good use of the TBT and SPS rules to resolve technology barriers within the WTO framework. We should protect our international trading rights. At the same time, we should be aware of the patents that the developed countries used to mark their territory. Sources say that 90% of the patents issued in China goes to foreigners. Therefore, our path to break the cycle of technology barrier is yet long and difficult ahead.
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