COMPETITIVE LIBERALIZATION, COMPETITIVE IMPERIALISM, AND ... · Maxwell 2005), International Trade Law: Theory and Practice (Lexis 2nd ed. 2000, 3rd ed. forthcoming 2008), and Trade,

RAJ BHALA*

COMPETITIVE LIBERALIZATION, COMPETITIVE

IMPERIALISM, AND INTELLECTUAL PROPERTY

ABSTRACT. Aggressive pursuit of free trade agreements (FTAs) and customs

unions (CUs) by major and minor trading powers alike challenges the conventionalwisdom in favor of such pursuit – competitive liberalization. An equally plausibleexplanation for an active bilateral and regional trade agreement policy, one which

effectively de-emphasizes multilateralism, may be competitive imperialism. Theprotection and enforcement of intellectual property rights is one area in which newprovisions, going beyond multilateral rules, are being negotiated and written into

FTAs and CUs. Such provisions may yield insights into which characterization ofbilateralism and regionalism – competitive liberalization or competitive imperialism– is more apt.

KEY WORDS: competitive imperialism, competitive liberalization, customs union,

developing, free trade agreement, intellectual property, least developed, World TradeOrganization

INTRODUCTION

Inside the Washington, D.C. beltway, the conventional wisdomabout regional trade agreements (RTAs) is they make good sensefor practical political reasons. Negotiating RTAs – be they free

* Rice Distinguished Professor, The University of Kansas, School of Law, Green

Hall, 1535 West 15th Street, Lawrence, KS 66045-7577, USA. Tel. +1-785-8649224.Fax. +1-785-8645054. www.law.ku.edu. J.D., Harvard (1989); M.Sc., Oxford(1986); M.Sc., London School of Economics (1985); A.B., Duke (1984). MarshallScholar (1984-86). Member, Council on Foreign Relations, Royal Society for Asian

Affairs, and Fellowship of Catholic Scholars. Author, Modern GATT Law (SweetMaxwell 2005), International Trade Law: Theory and Practice (Lexis 2nd ed. 2000,3rd ed. forthcoming 2008), and Trade, Development, and Social Justice (Carolina

Academic Press 2003).I am thankful to my Research Assistant, Mr. David R. Jackson (B.A., George

Mason University, 1992; J.D. Class of 2007, University of Kansas), for his indis-

pensable help on this work. I also am grateful to Dr. Mohammed El Said, Universityof Central Lancashire (UCLAN), for his consistent support and friendship, and forwhat he has taught and continues to teach me about international trade and intel-

lectual property.

Liverpool Law Review � Springer 2007DOI 10.1007/s10991-007-9017-2

trade agreements (FTAs) or customs unions (CUs) – is a way ofasserting leverage. The leverage is put in policy terms – ‘‘competi-tive liberalization.’’ What is this strategy, and is it riddled withflaws? Is the reality of seeking FTAs and CUs better described as‘‘competitive imperialism’’ among hegemonic trading powers?Finally, among the many controversial dimensions of non-multilateraldeals, are intellectual property (IP) provisions, especially commit-ments that go beyond World Trade Organization (WTO) obliga-tions, perhaps indicative of competitive imperialism?

The present article focuses on these three questions. Part IIexplores the theory and probes the praxis of competitive liberaliza-tion. Part III outlines an alternative characterization of recentdevelopments in the world trading system at the FTA and CUlevel, namely, competitive imperialism. Part IV discusses so-called‘‘WTO Plus’’ commitments in IP. The article does not pretend tooffer definitive answers to the questions. Rather, the article is prop-ositional – and, it is hoped, provocative – in nature. At bottom, itsgoal is to call into question, but not absolutely debunk, theconventional wisdom.

COMPETITIVE LIBERALIZATION AND ITS DEFECTS

Does the strategy of ‘‘competitive liberalization work in practice?Allegedly, former Singaporean Prime Minister Lee Kuan Yewdeveloped the strategy in 1993, in the context of the Asia PacificEconomic Cooperation (APEC) forum.1 In the context of a domes-tic economy, it means implementing economic reforms to enhanceinternational competitiveness. To help achieve this goal, trade liber-alization is necessary at three levels – multilateral, regional, andbilateral. In turn, developing FTAs and CUs, on a regional orbilateral basis, can lead to liberalization multilaterally through theWTO.

1 Spring 2003 conference on FTAs, held at Institute for International Economics,Washington, D.C. (presentation by various panelists, not including the Singaporean

Prime Minister, and witnessed by the author). The term or concept of ‘‘competitiveliberalization’’ graces the pages of Foreign Affairs magazine. See, e.g., Zoellick,Robert B Campaign 2000: A Republican Foreign Policy, 79 Foreign Affairs (January/

February 2000); Sutherland, Peter The Case for EMU: More than Money, 76 ForeignAffairs (January/February 1997); Bergsten, C. Fred Globalizing Free Trade: TheAscent of Regionalism, 75 Foreign Affairs (May/June 1996), available at www.fore-

ignaffairs.org.

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Prime Minister Lee apparently argued if the US were seriousabout competitive liberalization of its domestic economy, then itwould invite any Asian country to join the North American FreeTrade Agreement (NAFTA) that also was committed to deregula-tion. There would be tension with some Asian countries, in whichchanging economic structures and policies is a slow process (e.g.,Japan). But, within five years any recalcitrant Asian country wouldacquiesce, liberalize expeditiously, because it could not afford tostay out of an FTA with the US.

In brief, competitive liberalization means moving as aggressivelyas possible toward the goal of global free trade by pursuing tradeliberalization on three levels – multilateral, regional, and bilateral –simultaneously. In theory, at least, this pursuit is mutually reinforc-ing. For example, an FTA can encourage movement in WTOnegotiations, and vice versa, as Susan Schwab explains:

My experience as US Trade Representative [for President George W. Bush] is thatthey [bilateral, regional, and multilateral trade deals] are in fact mutually reinforc-ing. The negotiated bilateral and regional deals are gold-standard agreements. Theyare very deep in that virtually everything opens up. It�s not a way of negotiating

around sensitivities but a way of coming to grips with sensitivities. Here in thesebilateral negotiations, you develop a precedent that could at some point be trans-lated in a multilateral setting. In some cases, you really need a multilateral approach

to get at issues like piracy and counterfeiting. I have found in Geneva our very bestallies for a strong Doha Round have been current and former [free trade] partners.2

Thus, none other than a leading advocate of competitive liberaliza-tion, Fred Bergsten, the Director of the Institute for InternationalEconomics in Washington, D.C., urged creation of a Free TradeAgreement of the Asia Pacific Region (FTAAP) in August 2006,right after the Doha Round negotiations collapsed in July.3

His argument was two-pronged. First, an FTAAP would revivethe Doha Round, the way the first summit of the Asia PacificEconomic Cooperation (APEC) forum shocked Uruguay Roundnegotiators into completion of that Round, after they missed theirinitial 1990 deadline. They missed the deadline because of EUobstinacy against reform of the Common Agricultural Policy(CAP). When EU negotiators learned the November 1993 APECsummit yielded a commitment to free trade (which APEC leaders

2 Rayasam, Renuka Free-Trade Evangelist, US News World Report, 21 August

2006, at 22 (QA: Susan Schwab).3 Bergsten, Fred Plan B for World Trade: Go Regional, Financial Times, 16 August

2006, at 9.

COMPETITIVE LIBERALIZATION

reiterated at their 1994 summit), they agreed to CAP reforms –knowing the alternative to a failed Uruguay Round was a vastFTA in the Asia Pacific region. In brief, Bergsten urged that eventhe prospect of an FTAAP is leverage to complete a multilateraltrade round. After all, the 21 APEC members account for over halfof world GNP and nearly half of world trade. Better to have a suc-cessful multilateral round than be left out of an FTAAP. The gainsfrom an FTAAP would be for members, and non-members wouldsuffer trade diversion.

However, Guy de Jonquieres of the Financial Times casts seriousdoubt on the Bergsten argument:

[T]he argument is tenuous, being based on a version of history subscribed to inWashington but nowhere much else.

It holds that the Uruguay Round came to closure in 1993 because APEC leadersscared a recalcitrant Europe into resuming negotiation by making a vague, US-inspired call for closer intra-regional links. But if Europe was swayed at all it was

because it feared the US was preparing to unplug itself from multilateralism notbecause it seriously believed a grouping as formless, disparate and strife-ridden asAPEC could agree on much. The conventional explanation of the Uruguay Round�sendgame remains the most plausible: Europe�s internal agricultural reforms allowedit to offer just enough on farm trade to escape blame for scuppering the talks, whilethe US settled for a far weaker deal than it had been holding out for.4

The best alternative to multilateralism, then, is not bilateralism orregionalism, but unilateralism – that is, unilateral dismantling oftrade barriers, exactly as David Ricardo�s law of comparativeadvantage suggests, and as Australia, Chile, China, Hong Kong,Singapore, and to a lesser degree, India, all have done in recentdecades, with ensuing net welfare gains. Moreover, neither thequote from Ambassador Schwab nor the FTAAP idea mentionsunderlying domestic catalysts – or retardants – for competitiveliberalization. In truth, competitive is driven – or held back – bydomestic-level economic reforms, i.e., deregulation and theadvancement of a free market system. Might it, then, be moreaccurate to call the strategy ‘‘complimentary liberalization,’’ or (asit euphemistically is sometimes dubbed) ‘‘parallel liberalization’’?

Labels aside, it is necessary to examine domestic-level reformstrategies and visions, neither of which is homogeneous or staticacross countries. For many countries, including some APECmembers, the important part of the rubric ‘‘Doha Development

4 de Jonquieres, Guy Do-it-Yourself is Free Trade�s Best ‘‘Plan B,’’ Financial Times,

24 August 2006, at 9.

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Agenda’’ was the middle word. Would competitive liberalizationadvance development, and in particular, would address growing in-come disparities? Consider Asian free trade bastions like Singapore:

The social contract under which Singaporeans gave up certain civil liberties inreturn for prosperity is under threat.…

Shortly after the [May 2006 general] election [in which the ruling People�s ActionParty (PAP) experienced an 8 percentage point drop in support], the government

revealed that the income gap was bigger than at any time since independence in1965. The bottom 30 percent of households have seen incomes fall since 2000.

Singapore�s Gini coefficient, a measure of income inequality, places the city stateat 105th in the world, between Papua New Guinea and Argentina.

‘‘A two-speed, dual economy appears to be emerging in Singapore,’’ saidCitigroup.

‘‘Globalization, for a small open economy, may be having a disproportionatelylarge impact.’’5

China faces the same problem on a much larger scale.6 A timeseries analysis of relevant statistics, including Gini coefficients,indicates in 1986, income distribution in China resembled Germanyand Sweden. By 1986, the rich-poor gap had widened to a degreemaking China more unequal than Russia or the US, and approach-ing Brazil and Mexico. Why? China�s development model, whichfavored investment on the coast, a large number of labor surplusworkers shifting from non-productive work in the rural sector intomanufacturing and service jobs, and corruption were among theculprits. Aggressive trade liberalization may well have been at leasta handmaiden.

The point is, whatever label is used for ‘‘competitive liberaliza-tion,’’ the policy presumes shared interests within and among coun-tries in freer trade at bilateral, regional, and multilateral levels. Inturn, it presumes the interests are impelled by shared, or at leastcomplementary, visions of desirable domestic policies and the roleof each country in the trading system.

Competitive liberalization also suffers from conceptual andpractical problems. Consider the following questions:

5 Burton, John Singapore�s Social Contract Shows Signs of Strain, Financial Times,

19–20 August 2006, at 3.6 McGregor, Richard China Seeks to Reduce Gap Between Rich and Poor, 8–9 July

2006, at 2.


Integration of Reforms

How does trade liberalization feed back to domestic-level reforms?This question is particularly acute in special or sensitive sectors likeagriculture and textiles and apparel.

The Bicycle Theory

How do multilateral, regional, and bilateral trade liberalizationefforts relate to one another? In particular, is the ‘‘Bicycle Theory’’of trade negotiations correct, whereby these efforts must continue(as a cyclist must keep pedaling to move forward) or they willcome to a halt (as a cyclist would stop, even fall off)? Competitiveliberalization presumes there are three bicycles, and trade talks atthe multilateral, regional, or bilateral level will spur such talks onanother level, or the other two levels. But, the right metaphor fortrade negotiations may be not a bicycle but a hedge. The FinancialTimes� Guy de Jonquieres puts the concern this way:

Washington has claimed … that its use of muscular bilateral trade diplomacy willre-energize the multilateral trading system by unleashing a wave of ‘‘competitiveliberalization.’’ The Doha [Round] debacle has exposed that theory for what it is.In practice, bilateralism has fed off itself, intensifying the rush into preferential

deals while draining energy from the Doha talks, polarizing the US Congress andfurther diminishing its appetite for trade initiatives of all descriptions.7

Moreover, a reverse causal directional arrow may exist: stalled orfailed talks at one level (e.g., the Doha Round) may bring out callsfor talks at another level (e.g., bilateral FTAs).8 There is plenty ofevidence in favor of a reverse directional arrow. Israel, for example,began pursuing FTA negotiations with MERCOSUR in December2005, the month of the unsuccessful WTO Hong Kong MinisterialConference, and talks continue apace.9 India boasted FTAs withSingapore, Sri Lanka, and Thailand. In light of the July 2006collapse of Doha Round negotiations, India announced it would

7 De Jonquieres, supra, n.4, at 9.8 See, e.g., Swann, Christopher Alden, Edward Focus on Bilateral Trade Deals, Bushis Urged, Financial Times, 4 April 2006, at 7 (discussing advice to President George

W. Bush from Rep. Bill Thomas, Chairman, House Ways Means Committee, tofocus efforts on FTAs, because the US and EU have irreconcilable differences in theDoha Round).9 Haskel, David MERCOSUR, Israel to Exchange Duty-Free List of Products forInclusion in Free Trade Pact, 23 International Trade Reporter (BNA) 542 (6 April

2006).

RAJ BHALA

pursue FTAs vigorously, including with the EU and Japan. EvenChile, well disposed to unilateral trade barrier reduction, has notsat on the sidelines. It has FTAs with China and South Korea, a‘‘Partial Scope Agreement’’ with India, and (as of June 2006) isdiscussing a comprehensive ‘‘Economic Association Agreement’’with Japan.

The Collective Action Problem

WTO Members did not commitment themselves to ensuring regionalintegration compliment their Doha Round negotiations. They couldhave entered into an ‘‘RTA Peace Clause,’’ whereby they placed astandstill on all new FTAs and CUs until they completed the Round.Instead, they raced each other to seal RTA deals.

Does this behavior suggest it would be easier for the roughly150 WTO Members to reach consensus in a multilateral traderound if they did not have the option of joining an FTA? That is,does this option give them an exit strategy, which in turn creates acollective action problem – namely, no one Member is willing toforego the RTA option unless all other Members do, but eachMember passes the responsibility to others to take the lead inexerting discipline.

Erosion of the Global Economic Order

Is competitive liberalization a fair concept, particularly when itdiscriminates through an RTA, within the context of non-discrimi-natory treatment under GATT–WTO rules, and results in elaboratepreferential rules of origin in each FTA or CU? Arguably, competi-tive liberalization means competitive discrimination, trade diver-sion, and erosion of the global economic order. That is preciselythe argument of the Asian Development Bank, which in TheRoutes for Asia�s Trade (2006) warned FTAs undermine globaltrade liberalization and exacerbate divisions within Asia, leavingthe poorest countries worst off.10

To take a technical example, suppose under NAFTA�s yarn-forward origin rule, the US accords duty-free treatment to cotton

10 See Asian Development Bank, The Routes for Asia�s Trade (2006), available atwww.adb.org/Documents/books/ado/2006/documents/ado2006 – part3.pdf; Hopf-ner, Jonathan ADB Suggests Asian Nations Face Risks with Pursuit of Bilateral Free

Trade Deals, 23 International Trade Reporter (BNA) 611–612 (20 April 2006).


shirts imported from Mexico, but only if they are made from yarnspun into cotton fabric in Mexico. The US imposes a tariff on thesame kind of shirts if the yarn is spun into fabric in Pakistan. Logi-cally, Mexican garment manufacturers will source the input (yarn)from within NAFTA. Economically, the US has exported its tariffto Mexico, i.e., the effect of the origin rule is as if Mexico imposeda tariff on the Indian input. That effect undermines any previously-agreed multilateral tariff reduction on the input.

The foundation of the global economic order is the multilateraltrading system, characterized by non-discriminatory treatment andthe progressive lowering and binding of barriers. A preferencegranted to one country is discrimination visited on all other coun-tries. Because discrimination is incongruous with the multilateraltrading system, it erodes the global economic order. Nonetheless,WTO Members, and GATT contracting parties before them, haveentered into FTAs and CUs – under the cover of GATT ArticleXXIV and GATS Article V.

Consider the example of Mongolia. As of August 2006, thiscountry was the only WTO Member not to have joined an RTA.As Damedin Tsogtbaatar of the Mongolian Development StrategyInstitute explains, Mongolia has put more into the WTO than ithas obtained from it, because it ‘‘chose, ironically, a rather Bud-dhist path of self-perfection and good WTO-consistent behavior,without regard to whether other countries were doing the same.’’11

Yet, query whether this ‘‘Buddhist path’’ is precisely what otherWTO Members ought to follow, and thus whether competitiveliberalization is a road for apostates. Indeed, if every one of the149 WTO Members struck a bilateral FTA with every otherMember, then there would be 11,026 bilateral deals.

The International Rule of Law

How does competitive liberalization contribute to the internationalrule of law? On the one hand, adjudicatory mechanisms andoutcomes under an RTA may prove useful as guidance, even path-breaking in legal theory or rationale, for WTO panels and theAppellate Body. They also may provide for forum selection, andcontribute to healthy competition among adjudicators in differentbodies by encouraging them to better quality proceedings andoutcomes.

11 Quoted in Least Favored Nation, The Economist, 5 August 2006, at 68.

RAJ BHALA

On the other hand, RTA dispute settlement schemes may lead toforum shopping. They also may be an un-level dispute settlement play-ing field. Would, for example, it be preferable to resolve alleged tradeviolations of China through ASEAN or through the WTODSU?

Alignment of Benefits

Does competitive liberalization failure to align properly economicand non-economic benefits from trade liberalization? Consider rentsfrom tariffs in comparison with rents from intellectual propertyrights (IPRs). Tariff rents arise from government collection of tariffrevenue. IP rents are associated with the ability of a patent, tradeor service mark, or copyright owner to exclude all others frommanufacturing, distributing, or licensing the good or serviceembodying the IP, and thus to hold a monopoly position withrespect to that good or service.

Suppose competitive liberalization were extended to the extremethrough RTAs, whereby the US had an FTA with every country inthe world. Rents from tariffs would disappear. That is because withall trade accorded duty-free treatment, neither the US nor its FTApartners gain tariff revenue. Would IP rents disappear?

The answer is ‘‘no.’’ Holders of patents, trade and servicemarks, and copyrights – from Addidas to Sony Pictures, fromAmazon.com to Roche – assuredly would press the US and itsFTA partners for textual provisions to ensure strict IP protectionand enforcement. Thus, exporters and importers of goods wouldenjoy the disappearance of tariff rents. IP holders would enjoy themaintenance of IP rents. This alignment could create tension.

The first group (exporters and importers) would focus on theeconomic dimensions of the FTAs. The second group (IP rights hold-ers) would be keenly sensitive to IP infringement, and urge rigorousprosecution and penalties. The first group would prefer diplomaticpeace to preserve its economic benefits. The diplomatic interests of thesecond group might call for confrontation to enforce their IP rights,possibly with some disruption in the economic status quo. In brief,competitive liberalization in the extreme might not necessarily bringinto alignment all economic and non-economic features of RTAs.

Administration

Finally, competitive liberalization suffers from an administrative prob-lem. It is a strategy only rich countries can pursue effectively. It


requires a considerable number of talented international trade lawyersto pursue three-track negotiations, and the lawyers on each track mustcoordinate with the lawyers on all other tracks. That is a challengeeven for the USTR, and a fortiori it is a close-to-insurmountable taskfor trade ministries in the Philippines, Suriname, or Togo.

Clearly, then, from a systemic perspective, competitive liberaliza-tion is at best an imperfect justification for an active FTA policy.

That said, the fundamental point to observe is that competitiveliberalization itself is not a purely economic strategy. As suggested,encouraging trade negotiations on three tracks simultaneously is aself-interested hedge against the political risk of failure on one ortwo of the tracks. In American terms, it avoids the US ‘‘putting allits trade eggs in the multilateral basket.’’ More bluntly, it ensuresUS efforts to obtain market access in other countries are not sub-ject to a veto by any one country, such as France or India, or byany one domestic constituency, such as steel or textile and apparelinterests. If blockage occurs on one level, then progress might bemade on another level.

COMPETIVE IMPERIALISM?

Emphasis in American trade policy on FTAs is more than merelycurious. Possibly, it is a watershed shift in American foreign policy.Before the Uruguay Round, the US regarded RTAs as the work ofthe devil, and the GATT as the exorcist. American leadership guar-anteed the multilateral trading system as the foundation of the glo-bal economic order, and consistently pushed for non-discriminatorytrade relations and the progressive lowering and binding of tradebarriers. However, since that Round, and especially since the late1990s, the US has pursued FTAs with the zeal of a recentconvert.12 From an American perspective, of course, the EUstarted the FTA race and continues to sprint.

For example, in May 2006, the EU launched FTA talks with Cen-tral America, and pushed for an FTA with the 10–country Association

12 Among the countries the website of the United States Trade Representative lists

as ones with which the US is pursing FTAs as of November 2006 are several ArabMuslim countries, plus Korea (negotiations commenced in 2004), Malaysia(negotiations commenced in June 2006), and Thailand (negotiations commenced in

2004).

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of South East Asian Nations (ASEAN).13 It also pursued strengtheningtrade links with the Andean Community, consisting of Bolivia,Colombia, Peru, Ecuador, and (until April 2006, Venezuela). InSeptember 2006, EU Trade Commissioner Peter Mandelson called fora ‘‘Global Europe Strategy’’ that would involve a ‘‘more �activist�approach to opening foreign markets by … negotiating new FTAs,particularly with Asian nations’’ such as India, Korea, as well asASEAN.14 French Foreign Trade Minister Christine Lagarde not onlyechoed his call, urging a ‘‘more active, more pragmatic, and better pre-pared’’ FTA policy than in the past, but added a key reason for thechange: the US is ‘‘aggressively pursuing bilateral and regional deals,so France and Europe must join in, or risk being left behind.’’15

Put aside the inconvenient chronology in some instances thatmight undermine the American case for zeal in reaction to Euro-pean perfidy, including a de facto moratorium on bilateral dealsthe EU implemented after violent anti-free trade protests at theNovember 1999 WTO Ministerial Conference in Seattle.16 InMarch 2006 the Central American Free Trade Agreement (CAFTAor CAFTA–DR) entered (partially) into force, suggesting the EUmay be sprinting to catch up. Indeed, in October 2006 EU govern-ments and European businesses expressed concern they were fallingbehind the US in the race to sign developing countries up toFTAs.17 In other instances, the race might be rather too close tocall. In December 2005, the US completed FTA negotiations withPeru, and did so with respect to Colombia in February 2006. Thesedeals, in the words of Venezuelan President Hugo Chavez, ‘‘mor-tally wounded’’ the Community.18 In at least one technical sense,

13 Gutierrez, Jason Mandelson Says European Union to Discuss Free TradeAgreement with ASIAN Members, 23 International Trade Reporter (BNA)763–764 (18 May 2006); Haskel, David EU, Central America Agree to Start Talks

On Free Trade; Mercosur, Andean Talks Stall, 23 International Trade Reporter(BNA) 766–767 (18 May 2006).14 Yerkey, Gary G EU Needs to Take More ‘‘Activist’’ Approach To Trade, Launch

New FTAs, Mandelson Says, 23 International Trade Reporter (BNA) 1366 (21September 2006).15 Speer, Lawrence J. France to Push EU for Bilateral, Regional Trade Deals as WTOTalks Founder, 23 International Trade Reporter (BNA) 1407 (28 September 2006).16 See Von Reppert-Bismark, Juliane EU Is To Focus on Bilateral Deals After Failed

Global Trade Talks, Wall Street Journal, 2 October 2006, at A4.17 See Von Reppert-Bismark, ibid, at A4.18 Quoted in Chauvin, Lucien O. Ecuador Disrupted by Free Trade Talks with UnitedStates; Andean Pact Threatened, 23 International Trade Reporter (BNA) 640 (6

April 2006).


he was correct. Those FTAs complicated the efforts of the Commu-nity to adopt a common tariff. Without a common tariff, it wouldbe unlikely the Community could negotiate a trade accord with theEU. Had the US effectively blocked EU efforts by dividing andconquering the Andes? In August 2006, the US signed a Trade andInvestment Framework Agreement (TIFA) with ASEAN.19 Thefollowing month the EU approved exploratory FTA talks withASEAN. In sum, it is open to question whether US moves are pre-emptive or reactive. The best answers probably are ‘‘both’’ and ‘‘itdepends on the case.’’ Never mind, however, from an official Amer-ican perspective: the truth is or must be that EU behavior justifiesAmerican zeal for FTAs.

For the US, then, traditionally, RTAs were a tool of the weak,like the original European Community (EC) nations. Now, it is atool in the hands of a large, potent counterweight to the US on theworld stage. So, it must also be in the toolkit of the largest andmost powerful economy, the US. The need to counter preferentialinroads of others, particularly major industrial countries, now is alodestar of American trade policy.

Should ‘‘pre-emption’’ or ‘‘rebuttal’’ (depending on the vantagepoint) be an appropriate criterion for entering into an FTA? Thatis, should countering the trade strategy of another country be amotive for negotiating an FTA? To put the question provocatively,are FTAs a tool used by hegemonic trading nations in their raceagainst one another to create neo-colonialist spheres of influence indeveloping and least developed regions, and thereby vie foreconomic and political influence with one another? The FinancialTimes, hardly leftist leaning, suggests is a possibility, commentingthat bilateral trade deals ‘‘have tended to be heavily tilted in favorof the powerful and decked out like Christmas trees with provi-sions for special interests.’’20 In brief, do competitive liberalizationand economic, political economy, political, and national securitycriteria explain FTAs? Or, are FTAs really about competitionamong imperialist powers?

Overall (as of May 2003), the EU has approximately 30 RTAs,with at four additional accords under active negotiations. For

19 See Hopfner, Jonathan ASEAN, U.S. Ink Trade, Investment Pact; Pledge to Workfor Breakthrough on Doha, 23 International Trade Reporter (BNA) 1296–1297 (7

September 2006); John Burton, Washington Signs Pact with ASEAN Nations,Financial Times, 26–28 August 2006, at 5.20 Bilateral Trade Deals: A Dangerous Affair, Financial Times, 27 July 2006, at 12.

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example, in the Middle East, EU RTA policy proceeds on threetracks:

Euro-Med Agreements

These association agreements are between the EU and individualcountries in the Mediterranean region, including Algeria, Egypt, Is-rael, Jordan, Lebanon, Morocco, the Palestinian Authority, andTunisia. They are streamlined so as to be similar in substantivecontent, thereby establishing a template-like arrangement betweeneach country and the EU.

The Agadir Agreement

This Agreement is between the EU, on the one hand, and Egypt,Jordan, Morocco, and Tunisia, on the other hand. It bears someresemblance to the Euro-Med Agreement, and in effect constitutes asubset of them. However, the Agadir Agreement is structured toform the basis of an FTA among the four countries. Whether theEU plans to be part of this FTA is unclear.

Gulf Cooperation Council (GCC) FTA

This FTA, which the EU is pursuing, is a traditional one betweenthe EU and GCC.

Given EU activism in the RTA field, American companies feeldisadvantaged, and demand of their government a leveling of thecompetitive playing field. Arguably, MEFTA, a vision articulatedby President George W. Bush in May 2003, and US negotiationswith the Southern African Customs Union (SACU), consisting ofBotswana, Lesotho, Namibia, South Africa, and Swaziland, laun-ched in 2003, are a response to this call, and thereby an effort tocounter European economic (and, in turn, political) influence in theIslamic and developing world. To be sure, official US rhetoric oftencasts RTAs as in the self-interest of poor countries. Seventy percentof the tariffs paid by developing countries are paid to other devel-oping countries. Surely, then, the USTR does poor countries afavor by pushing a zero-tariff regime.

Maybe, depending partly on whether those countries can offsetthe loss of tariff revenue with other sources of government funding,such as income taxes. Questions of structural reform aside, the factis the job of the USTR is to promote American economic interests.An FTA with the US is neither an entitlement nor an act of


charity. It must (or ought to) be a net benefit to each party. As forAmerican economic interests, they are a component of a largerforeign policy agenda. That is true for the EU. In the Mediterra-nean region, EU RTAs are motivated strongly by geo-political andeconomic factors, and EU trade policy has out run and out maneu-vered US trade policy.

Notably, the EU has an association agreement with Egypt, andan FTA covering most other Arab countries, called the ‘‘Arab FreeTrade Area’’ (AFTA). Under the EU–Egypt association agreement,Egypt is phasing out its tariffs on EU products over 3, 9, 12, and15 years (depending on the merchandise). Under AFTA, tariffs arefalling by 10 percent per year. Obviously, if and when fully imple-mented, these accords will supplement the already considerableeconomic, and concomitant political, influence of the EU in theArab world. The US cannot stand idly by.

American exporters would be disadvantaged if only their Euro-pean competitors had duty-free market access to these regions.Likewise, US producers needing inputs from these regions wouldface higher costs relative to foreign competitors if the competitors,but not them, could import inputs free of duty. One end resultwould be a diminution of political leverage in the Middle East rela-tive to the EU. Political realists and energy strategists would pointout the importance of such leverage, especially as China and Indiaadd themselves in the mix with the EU and US as competitors forstrategic resources held by some Middle Eastern nations – oil andnatural gas.

A similar argument can be made with respect to US negotiationswith SACU, namely, that they are designed to counter economic(and, in turn, political) influence of the EU in this resource-rich partof the Third World. The EU and Asia heavily dominate the patternof trade of Southern African countries, with NAFTA a distant third.The EU has long-standing preferential arrangements in place withmost Sub-Saharan African countries, including the Lome and Coto-nou Conventions. In 1999, the EU and SACU, which is comprised ofBotswana, Lesotho, Namibia, South Africa, and Swaziland, enteredinto an FTA – though the deal is not a comprehensive one.

Here, again, the US cannot stand idly by. Moreover, aside fromforeign policy benefits of a SACU FTA, there are potentialeconomic benefits for the US. From SACU, the US imports autoparts, diamonds, and platinum for catalytic converters. An FTAwould introduce the discipline of rules of origin for such imports.

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US exports to SACU have not grown much. An FTA might helpboost exports. To be sure, the margin of preference would decline,because SACU members are reducing their tariffs, and tend towarda free-trade orientation vis-a-vis the rest of the world, as many oftheir exports are sold outside Southern Africa. The US also mightsee greater access to services markets and enhanced IP protection.The latter point suggests consumers in SACU could be obligated topay higher prices for IP products that their governments now allowthem to buy at cheap prices, or even provide for free. In effect,they would pay the rents to US IP holders, which the US wouldregard as a condition for increased market access for SACU ex-ports (especially textile and apparel), and which would give the USincreased economic influence in SACU.

How would SACU benefit from an FTA with the US, especiallyif the US does not maintain its July 2005 commitment to exerciseflexibility in the negotiations? If SACU adroitly leverages negotia-tions with the EU and US, then it might win better market accessconcessions for agricultural and non-agricultural goods, and obtainreasonable provisions on IP protection, from both powers than itwould have from isolated talks. An FTA with the US also wouldbe a hedge for SACU against expiration of the African Growth andOpportunity Act (AGOA), the US trade preference program forSub-Saharan Africa.21 Finally, SACU members would gain dutyfree access for textile and apparel exports to the US. Such accesswould help them in view of the 31 December 2004 expiration ofquotas under the Multi-Fibre Agreement (MFA), pursuant to theWTO Agreement on Textiles and Clothing (ATC). Textile and appa-rel exports from SACU to the US were not quota-constrained, butMFA expiry meant the loss of guaranteed market access andcompetition with the likes of China and India.

In practice, however, whether SACU realizes the full potential ofan FTA depends on two important questions. First, will SACU dedi-cate itself to internal reform, especially expanding its regime to in-clude agriculture, services, and government procurement? Americanbusinesses have a keen interest in exporting farm products, andproviding services, overseas. Yet, SACU provides duty-freetreatment only for goods. That is, SACU is a common policy on

21 See Bhala, Raj ‘‘The Limits of American Generosity’’ 29 Fordham InternationalLaw Journal (2006), 299–385; Yerkey, Gary G. U.S., SACU Agree to Create‘‘Framework’’ But Free Trade Agreement Now Longer Term, 23 International Trade

Reporter (BNA) 621–622 (20 April 2006).


industrial tariffs. If SACU as a group does not enlarge its regime,then the undesirable result may be hub-and-spoke arrangements withthe US, with the U.S. at the hub, and specific spoke arrangementstailored for individual SACU members on agriculture and services.Also, American businesses are interested in bidding on governmentprocurement projects abroad. Traditionally, SACU has shown astrong preference for doling out contracts to local suppliers in anon-transparent manner.

Second, will SACU build the institutional and legal capacity tofollow through on its own commitments, and enforce obligationsincumbent on the U.S.? Poor capacity remains a great constrainton Sub-Saharan African development. Preferential rules of originare just one illustration in which SACU will need an expandedcadre of trade lawyers. With the 1999 EU–SACU FTA, an accordbetween SACU and the Southern African Development Community(SADC), and an FTA with the US, exporters and importers willneed sound counsel on three different sets of origin rules to takeadvantage of duty free treatment.

These two questions are poignant in light of a theme emergingfrom some economic analyses, including by the World Bank, of theeffects of the Uruguay Round on the Third World. That theme ismost of the positive economic benefits from the Round came fromliberalization entered into by developing and least developed coun-tries. In other words, internal reforms, not gains through greaterexports, are the predominant source of benefits from a Round –and, by extension, an FTA.

Consider, too, the trade coverage of the US FTAs – withCanada and Mexico through NAFTA, with most Central Americancountries (Costa Rica, El Salvador, Guatemala, Honduras, Nicara-gua, plus the Dominican Republic) via CAFTA–DR, and withAustralia, Bahrain, Chile, Israel, Morocco, Jordan, and Singapore.These FTAs cover roughly one-third of total American trade(mostly accounted for by NAFTA). The US has pursued additionalFTAs that would push the figure up to about half of its total trade.Query whether the strategy is to develop a two-tier structure where-by MFN rates apply to European products, and preferential ratesapply to merchandise from the FTA partners.

Lest the question sound preposterous, consider the fact that theEU has done just that with respect to the US. The number ofRTAs and preferential arrangements in which the EU is involved isso large that the EU has MFN relations with only seven countries.

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That is, for imports into the EU, MFN rates apply only to goodsfrom Australia, Canada, China, Japan, New Zealand, Taiwan, andthe US Goods from the rest of the world enter under an RTA oran assistance scheme for poor countries.

As another example of one trade power using an FTA to rebutanother, consider the US–Chile FTA, signed in June 2003. Chilehas a unified and uniform MFN tariff rate of 6 percent. (Admira-ble as that is to free traders, Singapore has no tariffs on mostitems.) US Exporters wanted to eliminate this duty on merchandisethey shipped to Chile. They were losing market share to Canadianexporters, under an FTA already in existence between Canada andChile. For example, Caterpillar, Inc., complained to the USTR thatone of its machines imported into Chile was disadvantaged byabout US $13,000–14,000, relative to Canadian like products, be-cause of the Chilean duty. The disadvantage also hurt Idaho pota-to farmers in their competition with Canadians to export theirmerchandise – used, of course, in French fries – to Chile. Not sur-prisingly, the US responded with an FTA with Chile.

Yet one more example of competition for FTAs among majortrading nations is a dramatic alteration by Japan of its historic andexclusive emphasis on multilateralism. In the late 1990s, the Japa-nese government began to explore, both informally and formally,FTAs. In 2002, Japan and ASEAN signed a ‘‘Comprehensive Part-nership. Japan has a keen interest building with ASEAN an EastAsian FTA (EAFTA), which would link it with China, (includingHong Kong), Korea, and Taiwan – and, possibly, Australia, NewZealand, and India.22 Surely, Japan took note of the lack of pro-gress toward an FTA with the US, coupled with the US pursuit ofaccords with countries other than Japan. In April 2006, Japan an-nounced it would propose creation of an East Asian economic andtrade area that would easily rival the sizes of NAFTA and EU byembracing 16 East Asian countries, including all 10 members ofASEAN, thereby covering about one half of the global popula-tion.23 These efforts have led to FTAs (between Japan and Singa-pore, Mexico, Malaysia, and the Philippines. Notably, Japan�s FTAstrategy is global. In September 2006, Japan and Chile agreed to a

22 See Hopfner, Jonathan ASEAN Ministers Cool to Japanese Proposal To BeginStudying Regional Free Trade Zone, 23 International Trade Reporter (BNA) 1297–98

(7 September 2006).23 See Aritake, Toshio Japan to Propose Economic, Trade Area to Rival NAFTA,

European Union, 23 International Trade Reporter (BNA) 572 (13 April 2006).


framework for an FTA that would eliminate tariffs on mostproducts – except agriculture – over 10 years.24 Also that month,Japan commenced FTA negotiations with the GCC.25

The Philippine accord, signed in September 2006 after negotia-tions commenced in February 2004, is commercially noteworthy forits coverage, and its treatment of sensitive sectors and immigra-tion.26 Upon entry into force, the Japan–Philippines FTA immedi-ately lifts duties on 97 percent of Japanese exports to thePhilippines, including apples, grapes, pears, and other fruit, and 60percent of Japanese steel imports. It cuts to zero immediately dutieson 92 percent of Philippine exports to Japan – a significant boon toJapanese companies, for which the Philippines is a manufacturingbase for semi-finished goods. Those companies make electricalproducts and machinery in the Philippines, and then export themto Japan (or third countries) for further work. The FTA givesJapan 10 years to phase out tariffs on Philippine bananas, andallows Japan to set a tariff-free quota for pineapples of 1,000 tonsannually (growing to 1,800 tons in 5 years). The FTA also givesJapan 5 years to eliminate duties on tuna and bonito fish, as wellas cut tariffs and set low-tariff quotas on chickens and sugar. ThePhilippines can retain until 2010 its 30 percent tariff on vehicleswith an engine size of 3 liters or less, with renegotiations on therate in 2009, but must eliminate duties on vehicles of larger enginesizes by 2010. The Philippines is entitled to send laborers, includingan initial number of 1,000 nursing care assistants, to Japan.

Notably, countering China�s moves sometimes impels US tradepolicy proposals. In 1993, China announced its desire to joinASEAN, including the ASEAN FTA, also called ‘‘AFTA.’’ FearingAmerican dominance, ASEAN excludes the US. In 2002, Chinacame to agreement about ASEAN and AFTA membership. Presi-dent George W. Bush reacted by announcing an ‘‘Enterprise forASEAN Initiative.’’ However, this ‘‘EAI’’ has been ineffectual.

If competition among imperial powers underlies the drive forFTAs, then is there a danger it becomes enmeshed with, or at leastperceived as, a ‘‘Divide and Conquer’’ strategy reminiscent of

24 Aritake, Toshio Japan, Chile Reach Framework For FTA on 92 Percent of Goods,23 International Trade Reporter (BNA) 1411–1412 (28 September 2006).25 See Japan, GCC To Hold First FTAMeeting This Week, Khaleej Times (UAE), 20September 2006, at 49.26 See Aritake, Toshio Japan, Philippines Sign Free Trade Agreement AfterDifferences Resolved, 23 International Trade Reporter (BNA) 1335 (14 September

2006).

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empires past? For example, would MEFTA – by design or effect –effectively vitiate the CU envisaged by the GCC? Likewise, would aFree Trade Area of the Americas (FTAA) offset the power ofMERCOSUR, and Brazil in particular? Competition even withMexico, a NAFTA partner, may figure in the calculus. Mexico hasa large number of FTAs, covering most of its export markets inLatin America, and is working on an accord with MERCOSUR.27

Or, to apply the phrase of Sir James Robertson, the British CivilSecretary, who in December 1951 wrote in his diary in the contextof the Mahdist–Anti-Mahdist rivalry in the Sudan, would it beaccurate to say: ‘‘They divide and we rule’’?28 In other words, if themajor trading powers of today use RTAs as an instrument forprominence, and sometimes dominance, then what countries – theruling or the ruled – do the dividing?

IP AND THE CONCEPT OF ‘‘TRIPS PLUS’’

Competitive liberalization and competitive imperialism play out inthe practical context of FTA negotiations. These talks cover abroad spectrum of issues, and the way in which they cover them –both substantively and stylistically – may reveal insights about thetwo paradigms. One highly-charged issue set concerns IP, that is,the protection and enforcement of copyrights, patents, and trade-marks through FTAs. Are there patterns in US. FTAs on IP issues,especially of late? If so, what might they say about competitiveliberalization or competitive imperialism?

To begin, even America�s first FTA, with Israel in 1985, spokeof IP rights. That accord reaffirmed the commitment of the twocountries to existing bilateral obligations on IP rights. It did notadvance the cause of IP protection, in the sense of establishing newor higher-than-extant duties. But, it provided a minimum, or floor,ensuring neither country would tolerate a lowering of commit-ments. In NAFTA Chapter 17, the US, Canada, and Mexico com-mitted themselves to IP protection at the level provided by theleading world conventions and treaties on patents, trademarks, and

27 See O�Boyle, Michael Mexico, Argentina Sign Accord to Expand Limited FreeTrade, Will Continue Talks, 23 International Trade Reporter (BNA) 917 (15 June

2006).28 Quoted in Balfour-Paul, Glen The End of Empire in the Middle East – Britain�sRelinquishment of Power in Her Last Three Arab Dependencies, 4 (1991).


copyrights. The strong, comprehensive rules in this Chapter servedas a basis, even template, for the WTO Agreement on TradeRelated Aspects of Intellectual Property Rights (TRIPs).

Invariably, the minimum commitment in an FTA with the USallows for the creation, maintenance, and enforcement of patents,trademarks, and copyrights. Typically, the FTA partner must agreenot to promulgate such laws, or to make amendments where neces-sary – it must have done so already before the FTA is imple-mented. A promise of future legislative or regulatory reforms willnot do, because once the negotiations are over, the US loses con-siderable leverage to influence legal reform in the FTA partner.Additionally, enforcement is essential to secure the interests of theAmerican IP sector – and, therefore, to US trade negotiators. Putbluntly, whining from developing or least developed countriesabout a lack of judicial or law enforcement resources will fall ondeaf ears.29 It may be met with an argument that IP piracy in thosecountries may well be benefiting a corrupt elite.

Many of America�s newer FTAs, especially accords negotiatedafter the Uruguay Round, call upon partner countries to gobeyond IP protection and enforcement measures set out in theTRIPs Agreement. In part, that reflects America�s bitter experiencewith lax IP enforcement in major markets like China. US tradenegotiators relied, to the detriment of the American IP sector, onpromises made by China of future implementation and enforcementduring talks for China�s accession to the WTO, which culminatedin a November 1999 US–China bilateral agreement, and accessioneffective 11 December 2001.30 The subsequent history, from the USvantage point, was one of failure to adhere to the promises. Onelesson learned by US trade negotiators was to insist on results –actual implementation and enforcement – before accession. Theydrilled the point in WTO accession talks with the Kingdom ofSaudi Arabia, which culminated with a bilateral accord in the fallof 2005, and accession on 11 December 2005.31

29 See generally Chon, Margaret ‘‘Intellectual Property and the DevelopmentDivide’’ 27 Cardozo Law Review (2006) 2821–2912 (articulating developing countryperspectives); Ann Mota, Sue ‘‘TRIPs: Ten Years of Disputes at the WTO’’ 9Computer Law Review and Technology Journal (2005) 455–478, (discussing WTO

adjudications on IP matters).30 See Bhala, Raj ‘‘Enter the Dragon: An Essay on China�s WTO Accession Saga’’

15 American University International Law Review (2000) 1469–1538.31 See Bhala, Raj ‘‘Saudi Arabia, the WTO, and American Trade Law and Policy’’

38 The International Lawyer (2004) 741–812.

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A second lesson from the adverse experience with China was touse FTAs as a vehicle to go beyond the TRIPs Agreement, i.e., todemand TRIPs Plus commitments from a would-be FTA partner.Consider the following examples:

� In the U.S.–Jordan FTA, Jordan agreed to ratify and imple-ment within two years two IP agreements that are not part ofits TRIPs obligations: the World Intellectual Property Orga-nization (WIPO) Copyright Treaty, and the WIPO Perfor-mances and Phonograms Treaty. The aim of these agreements,which are known as ‘‘Internet Treaties,’’ is to protect copy-righted works in a digital network environment. Thus, forexample, they provide a creator with the exclusive right tomake its creative works available online. The same TRIPsPlus provisions, incorporating the most up-to-date interna-tional copyright protection standards, exist in theU.S.–Morocco FTA.

� In the U.S.–Chile FTA and U.S.–Singapore FTA, Chile andSingapore agreed to TRIPs Plus commitments not only forpatents, trademarks, and copyrights, but also for tradesecrets. The two countries also accepted the obligation ofensuring its legal system contains meaningful penalties forpiracy and counterfeiting.

� In negotiations for a U.S.–Australia FTA, the US had twokey objectives concerning IP. First, it sought better IP protec-tion, especially with respect to grey (parallel) market prod-ucts. The US achieved this objective through provisions inthe FTA that not only complement, but also enhance, exist-ing international standards for both protection and enforce-ment of IP rights. These TRIPs Plus provisions includestrong penalties for counterfeiting and piracy. Second, theUS opposed the Australian pharmaceutical benefits scheme ofpricing. On this point, agreement proved difficult and the endresult – though TRIPs Plus – was nebulous.

The two countries affirmed their shared objectives of (1) maintain-ing high quality healthcare and (2) improving public health stan-dards. They agreed on three principles in pursuit of theseobjectives: (1) the importance of innovative pharmaceuticals, (2)the significance of research and development in the pharmaceuticalindustry, with appropriate governmental support including IPprotection, and (3) the need for timely and affordable accessto innovative pharmaceuticals through procedures that value


objectively pharmaceuticals based on their therapeutic relevance.The sticking point was the procedures by which a federal healthcare program lists and prices new pharmaceuticals for reimburse-ment. Both sides agreed the procedures should demand transpar-ency and accountability. But, how could the US be certainAustralia would not discriminate against drugs from US pharma-ceutical companies when listing and pricing medicines in its Phar-maceutical Benefits Scheme? From Australia�s perspective, howcould its consumers be assured they would have access to effectiveUS drugs at non-astronomical prices?

The FTA establishes a Medicines Working Group to continue theconversation between the two countries on pharmaceutical issues,and creates in Australia an independent review process for listingdecisions. The conversation indeed continues on this and other con-troversies. For example, when approving the FTA, the AustralianParliament added an ‘‘Anti-Evergreening’’ amendment to Australianlaw.32 This change blocks a pharmaceutical company from everg-reening a patent or using the judicial process to preclude introductionof a generic medicine. The US opposes the amendment.

� In June 2006, NGOs – 416 of them, including the AFL-CIO,Citizens Trade Campaign, Communications Workers ofAmerica, Friends of the Earth, National Farmers Union,Sierra Club, and United Steel Workers – signed a letter urg-ing Congress to reject the U.S.–Oman FTA (which Congressultimately passed that summer.) They argued the accord notonly lacked meaningful labor and environmental protections,but also would hurt poor and sick Omanis. The FTA IPprovisions benefited large pharmaceutical companies byprotecting their ‘‘unprecedented monopoly rights’’ of largepharmaceutical companies, forbidding for extended periodscompetition from generic products, and limiting access toaffordable medicines.33

32 See. Rugaber, Christopher S Portman Raises Drug Patent Issues in Meeting withAustralian Trade Minister, 23 International Trade Reporter (BNA) 361–62 (9 March2006).33 Rugaber, Christopher S Baucus Slams Administration for Omission of ForcedLabor Amendment from Oman FTA, 23 International Trade Reporter (BNA) 1034 (6

July 2006).

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� In the U.S.–Colombia FTA, signed in February 2006, but notimplemented as of November 2006, Colombia agreed to jointhe WTO Information Technology Agreement (ITA).34 TheITA, an outgrowth of the Uruguay Round, lists a large num-ber of computer and computer-related products subject toduty-free, quota-free treatment. However, it is a plurilateralaccord, hence joining is required neither by TRIPs nor anyother WTO accord.

� In January 2006, the US and Thailand were engaged in FTAnegotiations, which commenced in June 2004. US insistence onTRIPs Plus IP commitments contributed to large-scale protestsin Chiang Mai, Thailand, against an FTA, and brought talksto a halt.35 Four specific TRIPs Plus controversies arose:36

(1) The US insisted on 25-year span for patent protection,beyond the TRIPs Agreement norm of 20 years.

(2) The US called for compensatory patent extensions by theThai government to pharmaceutical companies, if the govern-ment ‘‘unreasonably’’ delayed either the grant of a drugpatent, or approval of a drug for market use. The TRIPsAgreement does not contain this mandate.

(3) The US sought a data exclusivity provision not found in theTRIPS Agreement. This provision would preclude manufac-turers of generic drugs (which, of course, tended to be Thaicompanies) from using clinical trial data, or other scientificinformation, from any other company (e.g., an Americanpharmaceutical giant), to prove its generic product was safeand effective after the product had entered the market. Thai-land�s Government Pharmaceutical Organization (GPO) ob-jected. The GPO provides ‘‘first line’’ anti-retroviralmedicines (i.e., older ones, some of which the patent hadlapsed) to 80,000 AIDS patients (as of 2006), and sought toexpand this program to 150,000 patients (by 2008). The GPOplanned to offer generic ‘‘second line’’ drugs (i.e., newer,

34 See Brevetti, Rossella Colombia and U.S. Reach FTA After Resolving AgricultureIssues, 23 International Trade Reporter (BNA) 318–319 (2 March 2006).35 In January 2006, the author and his family personally witnessed their peacefuldemonstration while on holiday staying at the Sheraton Chiang Mai, where a roundof the FTA negotiations happened to be held.36 See Kazmin, Amy, Jack Andrew Beattie, Alan Patent or Patient? HowWashington Uses Trade Deals To Protect Drugs, Financial Times, 22 August 2006,

at 9.


more sophisticated medicines still subject to a patent). Dataexclusivity would inhibit its ability to do so. Further, dataexclusivity would apply even to an unpatented drug, whereno patent had been sought because the market for the drugwas thought to be too small.

(4) The US required tight language that would limit the termsand conditions under which the GPO could effect a compul-sory license of a new drug. The US offered a side letter assur-ance that the language would be consistent with theNovember 2001 Doha Ministerial Conference Declaration onTRIPs and Public Health. Again, the GPO replied the lan-guage would adversely affect its ability to provide drugs toThai AIDS patients.

Thousands of Thai health care workers, AIDS victims, and activ-ists – fearful of high-priced medicines should their government‘‘cave’’ to the demands, demonstrated noisily, but peacefully (infront of the Sheraton Chiang Mai!) for about two days. Farmers,who were upset at US demands concerning agricultural trade (e.g.,that Thailand reduce rice tariff barriers), joined them. The USteam left the Sheraton as inconspicuously as possible, through aside door behind the concierge desk, into an unmarked van, anddown a side street. The USTR blamed the ensuing stall in negotia-tions on Thai political unrest.37

Not surprisingly, some international trade law scholars offerpersuasive arguments for the proposition that ‘‘TRIPs Plus’’ is‘‘TRIPs Minus’’ for poor countries. For example, Dr MohammedEl-Said of the University of Central Lancashire cogently arguesTRIPs Plus commitments in deals like the U.S.–Jordan andU.S.–Bahrain FTA end up doing greater harm than good to the USpartners, hence rendering those countries worse off than underWTO disciplines.38

37 See Rugaber, Christopher S. U.S.–Thailand FTA Talks On Hold, But U.S. Not‘‘Giving Up,’’ 23 International Trade Reporter (BNA) 801–802 (25 May 2006).38 See, e.g., El-Said, Mohammed ‘‘The Evolution of the Jordanian TRIPS-Plus

Model: Multilateralism vs. Bilateralism and the Implications for the Jordanian IPRsRegime’’ 37 IIC International Review o Intellectual Property and Competition Law 5(2006) 13; El-Said, Hamed El-Said, Mohammed ‘‘TRIPS, Bilateralism, Multilat-

eralism Implications for Developing Countries: Jordan�s Drug Sector’’ 2 ManchesterJournal of International Economic Law (2005) 59–79; El-Said, Mohammed ‘‘TheRoad from TRIPS-Minus, to TRIPs, to TRIPS-Plus: Implications of IPRs for the

Arab World’’, 8 The Journal of World Intellectual Property 1 (2005) 53–65.

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This line of argumentation would appear to be consistent withthe competitive imperialism paradigm. In that paradigm, majortrading powers race against one another to get the best possibledeal for themselves. They neither intend to, nor hope to see, the IPprovisions in their FTA and CU deals multilateralized. Obviously,if their provisions become WTO law, then their benefits no longerare specially tailored. All WTO Members, consisting of a notinconsiderable number of free riders (from the American or Euro-pean perspective, at least), would enjoy whatever benefits they canrealize for whatever IP industry they have.

To be sure, arguments about TRIPs Plus commitments are notall one way. In a competitive liberalization paradigm, the multilat-eralization of WTO Plus commitments in FTAs and CUs may beprecisely what the likes of the US and EU seek. They have acomparative advantage in IP products, and seek maximum marketaccess through IPR protection and enforcement for these products.Further, as a general matter, to the extent a country is an actual orpotential producer of goods and services embodying patents, trade-marks, and copyrights, such commitments may redound to the ben-efit of its economy. IP protection is necessary to ensure inventorsmake sufficient returns on their investment in research and develop-ment (R&D), without which the financial incentive for creativitywould be gone. Innovation, in turn, is a healthy dynamic influenceon economic growth and competitiveness. Moreover, generic manu-facturers may produce drugs sub-par in quality, and may lack thecapacity to meet market demand. There also is the harsh truth thatin some developing and least developed countries, the real enemyto efficacious delivery of medicines is not high prices charged byAmerican pharmaceutical companies, but decrepit infrastructureand rampant corruption.

What is the empirical record? US trade negotiators insist there isno proof TRIPs Plus commitments either injure the pharmaceuticalindustry of an FTA partner or limit access to medicines in thatpartner. They point to Jordan, claiming that since the U.S.–JordanFTA took effect, the number of new innovative pharmaceuticalslaunched has increased, and Jordanian generic manufacturers havethrived. Of course, the Jordanian market is small, relative toThailand, not to mention China or India. Indeed, when confrontedwith a compulsory license threat in a large country, is the officialAmerican reaction noticeably stronger?


Consider the 2005 case of the AIDS drug Kaletra, invented byAbbott Laboratories of the US.39 To ensure low-cost provision ofKaletra to patients, Brazil nearly issued a compulsory license. Itbacked off, allegedly because of phone calls from the White Houseand Congress, and threats of retaliation. Brazilian President LuizInacio da Silva compromised on a deal in which Abbott wouldkeep its patent but offer Kaletra for 6 years at a reduced price.

Another example where pressing for TRIPs Plus commitmentsengenders heated debate arose in the U.S.–Korea FTA negotiations.In June 2006, the Korean Ministry of Health and Welfare announcedit would adopt a ‘‘Positive List’’ system for reimbursement of phar-maceuticals. Only medicines explicitly put on the List would be eligi-ble for reimbursement. With a Negative List, reimbursement isprovided for all medicines, except those drugs not on the List. It isinherently a more free-trade policy than a Positive List approach,which potentially discriminates against foreign pharmaceuticals.Fixated on market access for its big drug companies, the USexpressed ‘‘grave concern’’ at the announcement.40 Surely the Minis-try had in mind its responsibility, and Korea�s sovereign right, todesign a system that would avoid sending Koreans needlessly to theirgraves, and would control costs to ensure their access to affordablemedicines. Yet, when Korean negotiators stuck to their position inJuly 2006, American negotiators simply walked out of the pharma-ceutical talks.41 Fortunately, the next month the two sides agreed tocontinue discussions on the basis of a Positive List, but with coverageof transparency, pricing, and reimbursement.

Equally touchy is the subject of the rate at which Korea�sNational Health Insurance (NHI) reimburses generic pharmaceuti-cals. Roughly 73 percent of reimbursement expenditures are ongenerics. The reimbursement rate is about 70 percent of the priceof the original brand-name medicine, in contrast to the rate in the

39 See Kazmin, Jack Beattie, Supra, n. 36, at 9.40 Brevetti, Rossella Early Progress in U.S.–Korea FTA Talks Bodes Well forCompletion, U.S. Official Says, 23 International Trade Reporter (BNA) 907 (15 June

2006). See also Rugaber, Christopher S. U.S.–Korea FTA Talks Remain On Track,U.S. Trade Official Says, 23 International Trade Reporter (BNA) 1134 (27 July2006).41 See, U.S., Christopher S. Rugaber Korea Agree on ‘‘Way Forward’’ OnPharmaceuticals in Free Trade Talks, 23 International Trade Reporter (BNA)

1225–1226 (17 August 2006).

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US for generics – 20–30 percent of the original drug.42 USlobbyists, notably the Pharmaceutical Research and Manufacturersof America (PhRMA), say the high rate paid to firms that imitate,not innovate, is disguised industrial policy to hinder foreign firmsseeking to expand business, investment, and research and develop-ment (R&D) in Korea. Not surprisingly, these lobbyists call for thesame WTO-Plus provision on independent board review in a KoreaFTA that exists in the U.S.–Australia FTA to prevent systematicover-valuation of generics and undervaluation of new medicines.

SUMMARY

The conventional wisdom about competitive imperialism is well-expressed by Professor I.M. Destler in his stimulating account,American Trade Politics, and the comments on which he drawsfrom former US Trade Representative Robert Zoellick:

By combining global, regional, and bilateral negotiations, he [AmbassadorZoellick] said [in an April 2002 address in Phoenix, Arizona], ‘‘the United States iscreating a competition in liberalization, placing America at the heart of a networkof initiatives to open markets.’’ We would ‘‘proceed with countries that are ready’’

to open their markets, and success would create pressure on others.’’43

Part II of this article offers several questions suggesting the conven-tional wisdom may be flawed.

First, how does trade liberalization, brought about by competi-tive liberalization, lead to integrated economic reforms? Second,does competitive liberalization actually keep the ‘‘bicycle’’ of tradenegotiations moving forward, or cause it to slow down, even top-ple, particularly on the multilateral path? Third, does competitiveliberalization create a collective action problem, whereby no oneWTO Member is willing to forego FTA or CU negotiations unlessthey all do, but no Member is willing to be the first to abstain?Fourth, does competitive liberalization – insofar as it is successfulon the bilateral and regional level – erode the global economicorder by creating a complex web of rules the very purpose of whichis blatantly discriminatory? Fifth, what effect do new dispute

42 See. Rugaber, Christopher S U.S., South Korea Aim for Quick Start To FTATalks; Will Exchange Text in May, 23 International Trade Reporter (BNA) 411–412

(16 March 2006).43 I.M. Destler, American Trade Politics, 299–300 (Institute for International

Economics, 4th ed., June 2005).


resolution mechanisms established by FTAs and CUs – again, as aproduct of competitive liberalization – have on the internationalrule of law, especially multilateral adjudicatory procedures andoutcomes? Sixth, to what degree does competitive liberalizationassist, or hinder, the appropriate alignment of economic and non-economic benefits from freer trade? Finally, as a practical matter,how can countries (especially developing and least developed coun-tries) afford the administrative costs of implementing competitiveliberalization – indeed, how can they create and enhance the legalcapacity needed to do so?

Part III suggests a radically different approach to competitiveliberalization. It asks whether what is really going on is neo-imperi-alistic (or new-imperialistic) competition among the Great Pow-ers?44 The motivation may be conscious or not. Or, possibly thiskind of competition is less the original intent, and more the effect,of aggressive pursuit of FTAs and CUs. Perhaps, further, thepursuit creates a motivation. Regardless, the facts speak for them-selves. The US and EU are in a race with one another, and severalother countries, such as India, and countries with traditional multi-lateral orientations, such as Japan, have joined in. The degree towhich the resulting deals create open trade is dubious, as mostaccords are riddled with sensitive sector exceptions and specialsafeguards, lengthy phase in or phase out periods, and omissions ofentire sectors. No matter. In this paradigm of competitive imperial-ism, free trade is subservient to the goal of projecting influence toanother country or throughout a region, and checking actual orperceived reciprocal efforts by another power.

As Part IV intimates, IP is one among many areas in FTA andCU negotiations in which rules are competitively liberalized – or, inwhich, major trading nations compete to assure each gets a betterdeal than the other. This area is new generally to internationaltrade law, attracting multilateral attention in the 1986–1994Uruguay Round, which yielded (inter alia) the TRIPs Agreement.Aside from IP treatment in the U.S.–Israel FTA and NAFTA and afew other bilateral and regional accords, it is in the post-Uruguay

44 Amusingly, Professor Destler suggests an individualistic Washington, D.C.version of this – namely, competition among individuals for the attention of the

President and influence in the White House:…[T]hough the USTR [AmbassadorZoellick] could not say this – his success in concluding FTAs buttressed his standingwithin the Bush administration. He was not close to the president; whatever

credibility he achieved, therefore, had to come from visible results.Destler, Ibid, 43.

RAJ BHALA

Round era that IP issues have been pushed aggressively in FTAsand CUs. The US negotiating position, and outcomes in severalUS FTAs, suggest powerful trading nations with well-organized IPindustries are seeing WTO Plus commitments in non-WTO deals. Ifcompetitive liberalization describes accurately the pursuit of tradedeals on multiple tracks, then WTO Plus commitments in FTAsand CUs might be a harbinger of a future WTO Plus TRIPs-typeaccord. If competitive imperialism is the pattern, then once satisfiedwith IP protections and enforcement for their industries, the majorpowers might be disinclined to multilateralize the outcome.

School of Law, The University of Kansas,Lawrence, KS, USAE-mail: [email protected]
