Regulation of international trade within the framework of the world trade organization (WTO)

Regulation of International Trade under WTO rules: objectives, functions, principles, structure, decision-making procedure. Issues on market access: tariffs, safeguards, balance-of-payments provisions. Significance of liberalization of trade in services.

Рубрика Международные отношения и мировая экономика
Вид курс лекций
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Дата добавления 04.06.2011
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Additional commitments




(4) Unbound, other than for

(a) temporary presence, as intra-corporate transferees, of essential senior executives and specialists and

(b) presence for up to 90 days of representatives of a service provider to negotiate sales of services.

(3) Authorization is required for acquisition of land by foreigners.



C. Retailing services

(CPC 631, 632)

(1) Unbound (except for mail order: none).

(2) None.

(3) Foreign equity participation limited to 51%.

(4) Unbound, except as indicated in horizontal section.

(1) Unbound (except for mail order: none).

(2) None.

(3) Investment grants are available only to companies controlled by Arcadian nationals.

(4) Unbound.

“Unbound” means the Member has taken no commitment in respect of that mode of supply in this sector. In other words, the Member is free to impose any restriction on market access or national treatment in respect of that mode in this sector.

“None” means the Member will not put any limitation on market access or national treatment relating to this mode in this sector.

Special treatment of developing countries

· Due respect for national policy objectives and the level of development of developing Members

· Opening up fewer sectors and liberalizing fewer types of transactions

· Extend market access progressively in line with their development situation

· Strengthening domestic service capacity, access to technology and access to information channels and networks while allowing market access to foreign service suppliers

Modification of schedules

A Member may modify its schedule of specific commitments by offering alternative equivalent concessions three years after the application of the particular commitment. The modifying Member and the affected Member or Members may get into negotiations to reach an agreed compensatory adjustment which will be applicable to all Members. If no agreement is reached, the affected Members may refer the matter to arbitration and abide by its decision. Without compensatory adjustment in accordance with the findings of the arbitration, the affected Members may modify or withdraw substantially equivalent benefits from the modifying Member. With no agreement and no arbitration, the modifying Member is free to modify or eliminate its commitments as was proposed in its notice to the Council for Trade in Services.

5. General Obligations and Disciplines

Most-favored-nation (MFN) treatment

Under Article II of the GATS, Members are held to extend immediately and unconditionally to services or services suppliers of all other Members “treatment no less favorable than that accorded to like services and services suppliers of any other country” (whether a Member or not). It is permissible to accord more favorable treatment to Members than to a non-Member. This amounts to a prohibition, in principle, of preferential arrangements among groups of Members in individual sectors or of reciprocity provisions which confine access benefits to trading partners granting similar treatment.

Favor one, favor all. MFN means treating one's trading partners equally. Under GATS, if a country allows foreign competition in a sector, equal opportunities in that sector should be given to service providers from all other WTO members. (This applies even if the country has made no specific commitment to provide foreign companies access to its markets under the WTO.)

MFN applies to all services, but some special temporary exemptions have been allowed. Derogations are possible in the form of so-called Article II-Exemptions.

· initial exemptions: Members were allowed to seek initial exemptions before the Agreement entered into force. Individual Members have listed their initial exemptions in their schedules after consultation with interested Members.

· New/ Later exemptions: New/ Later exemptions can only be granted to new Members at the time of accession or, in the case of current Members, by way of a waiver under Article IX:3 of the WTO Agreement. In the latter case, a request for such a waiver will be made to the Council for Trade in Services. The Ministerial Conference will decide on this issue. A waiver can be allowed only by a decision of three-fourths of the Members.

All exemptions are subject to review; they should in principle not last longer than 10 years. The obligation to apply MFN treatment does not prevent adjacent countries from exchanging advantages in order to facilitate exchanges of services limited to contiguous frontier zones where such services are locally produced and consumed. Further, the GATS allows groups of Members to enter into economic integration agreements or to mutually recognize regulatory standards, certificates and the like if certain conditions are met.

Illustration of a schedule of exemption


Sector or


Description of measure indicating its inconsistency with Article II

Countries to which the measure applies

Intended duration

Conditions creating the need for the exemption

Audiovisual services

To confer national treatment to audiovisual works covered by bilateral or plurilateral agreements on coproduction in the field of audiovisual works, in particular in relation to access to funding and to distribution

All countries with whom cultural cooperation may be desirable (at present agreements exist with member countries of the Council of Europe and with Canada)


Promotion of common cultural objectives

Measures granting the benefit of support

programmes, such as MEDIA and EUruguayI-

MAGES, and measures relating to the allocation of screentime which implement arrangements such as the Council of Europe Convention on Transfrontier Television and confer national treatment,

to audiovisual works and/or to suppliers of audiovisual services meeting specific

European origin criteria

European countries


Promotion of cultural objectives based on long-standing cultural links

Concessions for the operation of radio or television broadcast stations may be granted, normally on the basis of bilateral agreements, to persons of countries other than Switzerland

All countries with whom cultural cooperation may be desirable


Promotion of common cultural objectives, and to regulate access to a market limited in scale (given the size of Switzerland) in order to preserve diversity of supply

Source: Damien Geradin/David Luff (eds.), The WTO and Global Convergence in Telecommunications and Audiovisual Services, Oxford University Press 2003.


Services activities are typically subject to heavy domestic regulation, which makes transparency even more important than in any other Agreements. GATS says governments must publish all relevant laws and regulations. If publication is not practicable, such information must be made available publicly. Within two years (by the end of 1997) they have to set up inquiry points within their bureaucracies to provide information on laws and regulations affecting trade in services. Foreign companies and governments can then use these inquiry points to obtain information about regulations in any service sector. And they have to notify the Service Council of the WTO, at least annually, of any changes in regulations that apply to the services that come under specific commitments.

Domestic regulations

Since domestic regulations are the most significant means of exercising influence or control over services trade, the agreement says governments should regulate services reasonably, objectively and impartially. Disciplines are prescribed in respect of the following aspects:

Review of decisions: A Member must establish an administrative or judicial procedure for the review of administrative decisions affecting trade in services. If a service supplier is dissatisfied with an administrative decision, recourse to such a review should be possible for an objective and impartial consideration of the issues.

Authorization for supply of service: In case any authorization is needed for the supply of a service for which specific commitments have been made, the decision of the authorities has to be conveyed within a reasonable period of time to avoid trade barriers caused by unnecessary delays.

Qualification, standards and licensing: Members are required, in sectors where they have scheduled specific commitments, to ensure that measures relating to qualification requirements (necessary qualifications of the service supplier), technical standards ( of the service) and licensing requirements and procedures (for providing the service in a Member country) do not constitute unnecessary barriers to trade in services. For this purpose, a Member must ensure that:

· qualification requirements are based on objective and transparent criteria;

· technical standards are not more burdensome than necessary to ensure the quality of the service;

· licensing procedures are not in themselves a restriction on the supply of service.

Recognition process: Members are expected to adopt criteria or standards for the authorization, licensing or certification of service suppliers. Such recognition may be granted through harmonization, may be based on a mutual recognition agreement or an arrangement with other countries, or may be accorded autonomously. Different level of qualifications means different treatment granted to service suppliers, wherever the suppliers come from. When two (or more) governments have agreements recognizing each other's qualifications (for example, the licensing or certification of service suppliers), GATS says other members must also be given a chance to negotiate comparable pacts, or to join such harmonization agreements. The recognition of other countries' qualifications must not be discriminatory, and it must not amount to protectionism in disguise.

In order that there be at least some degree of harmonization among these standards and criteria, GATS provides that a Member may recognize:

· the education or experience obtained in another country,

· the requirement met in another country,

· the licenses or certifications granted in another country.

· Balance-of-payment provision

If there is a situation of serious BOP difficulties and external financial difficulties, or if there is a threat of such difficulties, a Member may adopt or maintain restrictions on trade in service on which it has undertaken specific commitments and adopt or maintain restrictions on payments or transfers for transactions related to such commitments. Such measures have to be non-discriminatory, temporary, avoid unnecessary damage to the commercial, economic and financial interests of other Members and must be phased out progressively.

Monopoly suppliers of service

In some cases, governments regulate certain service activities (usually services constituting inputs to other service activities) by granting monopoly or exclusive rights to certain entities to supply the service. Or sometimes a government establishes or provides authority to a small number of service suppliers, and substantially prevents competition among those suppliers in the country. GATS does not prohibit the maintenance of such monopoly right, but the behavior of such service suppliers must be consistent with the general obligations and specific commitments of the Member concerned.

Requirements in respect of monopoly suppliers of service:

· A Member has to ensure that a monopoly supplier of service of its territory does not act in a manner inconsistent with the obligations of the Member regarding MFN treatment and specific commitments;

· When such a supplier competes for the supply of a service outside the scope of the monopoly and yet in a sector covered by the obligations of the Member, the Member has to ensure that the supplier does not abuse it monopoly position to act in a manner inconsistent with the commitments of the Member.

· A new monopoly right in the area of trade in service granted after 1 January 1995 has to follow the procedure for modification of a Member's commitments.

Cases of monopoly: telecommunications, financial services, insurance, railway transport service

For example, if a telecommunications monopoly allows interconnection to suppliers of value-added telecommunications, it should do so without discrimination between suppliers of other Members. If the Member concerned has undertaken a national treatment commitment in value-added services, it must ensure that its telecommunications monopoly provides interconnection to service suppliers of other Members on a national treatment basis.

Competition-restrictive practices

If a Member considers that the business practices of a service supplier are restraining competition and are thereby restricting trade in services, it may request consultation with the Member concerned. The other Member has to enter into consultation with a view to eliminating these practices.

Economic integration

A Member may enter into an agreement of integration for liberalizing trade in services among parties to the agreement, whether the parties are Members or not. Such an agreement must have substantial sectoral coverage. A Member may also enter into an agreement providing for full integration of labor markets among parties to the agreement, such as free entry into the employment markets of the parties.

International payments and transfers

Capital transaction and international transfers and payments for current transactions relating to services activities covered by specific commitments should not be restricted by Members.

If a Member has undertaken a commitment of market access through the cross-border mode of supply of service and if cross-border movement of capital is an essential part of the service itself, the Member, in such a case, is committed to allowing such movement of capital. Further, in the case of a commitment of market access through the mode of commercial presence, a Member is committed to allowing related transfers of capital into its territory.

Once a government has made a commitment to open a service sector to foreign competition, it must not normally restrict money being transferred out of the country as payment for services supplied (“current transactions”) in that sector. The only exception is when there are balance-of-payments difficulties, and even then the restrictions must be temporary and subject to other limits and conditions.


General exceptions: The GATS permits Members in specified circumstances to introduce or maintain measures in contravention of their obligations under the Agreement, including the MFN requirement or specific commitments. The relevant Article provides for measures necessary to:

· protect public morals or maintain public order;

· protect human, animal or plant life or health; or

· secure compliance with laws or regulations not inconsistent with the measures necessary to prevent deceptive or fraudulent practices or to protect privacy of individuals and safety.

Security exceptions: A Member has the flexibility to take measures which it considers necessary for the protection of its essential security interests and those which it takes in pursuance of its obligations under the UN Charter for the maintenance of international peace and security.

Government procurement: The obligations of MFN treatment, specific market access commitments and specific national treatment commitments will not apply to laws, regulations or requirements governing procurement by government agencies for governmental purposes. This exception does not extend to government procurement for commercial resale or for use in the supply of services for commercial sale.

Moreover, the Annex on Financial Services entitles Members, regardless of other provisions of the GATS, to take measures for prudential reasons, including for the protection of investors, depositors, policy holders or persons to whom a fiduciary duty is owed by a financial service supplier, or to ensure the integrity and stability of the financial system.

Finally, in the event of serious balance-of-payments difficulties Members are allowed to temporarily restrict trade, on a non-discriminatory basis, despite the existence of specific commitments.

Progressive Liberalization

In services, the Uruguay Round was only a first step in a longer-term process of multilateral rule-making and trade liberalization. Observers tend to agree that, while the negotiations succeeded in setting up the principle structure of the Agreement, the liberalizing effects have been relatively modest. Barring exceptions in financial and telecommunication services, most schedules have remained confined to confirming status quo market conditions in a relatively limited number of sectors. This may be explained in part by the novelty of the Agreement and the perceived need of Members to gather experience before considering wider and deeper commitments. Moreover, many administrations needed time to develop the necessary regulation -- including quality standards, licensing and qualification requirements -- that ensures that external liberalization is compatible with, and conducive to, core policy objectives (quality, equity, etc.) in socially or infrastructurally important services.

More than six years have passed since the Agreement's inception, and the economic importance of services -- in terms of production, income, employment and trade -- has continued to rise. There thus appears ample scope for new and/or improved commitments in new negotiations.

6. The Annexes: Services Are Not All The Same

International trade in goods is a relatively simple idea to grasp: a product is transported from one country to another. Trade in services is much more diverse. Telephone companies, banks, airlines and accountancy firms provide their services in quite different ways. The GATS annexes reflect some of the diversity.

Movement of natural persons

This annex deals with negotiations on individuals' rights to stay temporarily in a country for the purpose of providing a service. It specifies that the agreement does not apply to people seeking permanent employment or to conditions for obtaining citizenship, permanent residence or permanent employment.

Financial services

Instability in the banking system affects the whole economy. The financial services annex says governments have the right to take prudential measures, such as those for the protection of investors, depositors and insurance policy holders, and to ensure the integrity and stability of the financial system. It also excludes from the agreement services provided when a government exercising its authority over the financial system, for example central banks' services. Negotiations on specific commitments in financial services continued after the end of the Uruguay Round, ended in late 1997 and entered into force 1 March 1999.


The telecommunications sector has a dual role: it is a distinct sector of economic activity; and it is an underlying means of supplying other economic activities (for example electronic money transfers). During the Uruguay Round, many governments made commitments in value-added telecommunication services, however very few offered commitments on basic telecommunications. The annex says governments must ensure that foreign service suppliers are given access to the public telecommunications networks without discrimination. Negotiations on specific commitments in telecommunications resumed after the end of the Uruguay Round. This led to a new liberalization package agreed in February 1997.

Air transport services

Under this annex, traffic rights and directly related activities such as the carriage of passengers or freight are excluded from GATS's coverage. They are handled by other bilateral agreements. However, the annex establishes that the GATS will apply to aircraft repair and maintenance services, marketing of air transport services and computer-reservation services.

Maritime transport

Maritime transport negotiations were originally scheduled to end in June 1996, but participants failed to agree on a package of commitments. The talks have resumed with the new services round which started in 2000. Some commitments are already included in some countries' schedules covering the three main areas in this sector: access to and use of port facilities; auxiliary services; and ocean transport.


1. Does the GATS define "service" as a legal term?

2. When is e-commerce a service, when is it trade in goods?

3. Consider the economic role of services in developed and developing countries as it evolved since the end of World War II. Why has the liberalization of trade in services not surfaced earlier?

4. What kind of services are tradables and non-tradables?

5. Why do you think there have never been tariffs levied on the cross-border provision of services? Consider reasons of historical coincidence, but also aspects of practicability.

6. Consider the nature of regulatory restrictions which impede the cross-border provision of services. Think of typical examples in professions you know where specific licenses, diplomas etc. are required for the lawful exercise of a professional activity

7. Look up those provisions of the GATS which relate to competition and investment. Are such rules more important in the context of services than in connection to goods?

8. Why does the GATS highlight the importance of “domestic regulation” so much?


1. John H. Jackson, The World Trading System: Law and Policy of International Economic Relations (2nd ed., Cambridge, MA: MIT Press, 1997). p. 247-277.

2. Jackson/Davey/Sykes, 666-756, 757-814, 815-843.

3. OECD Secretariat. 2004. “Services Trade Liberalisation Opportunities & AMP.”

4. Trading into the Future - WTO, 3rd edition, Revised August 2003

5. see Trade topics; Trade in Services; GATS

Lecture 7. TRIPS

World trade organization

Ideas and knowledge are an increasingly important part of trade. Most of the value of new medicines and other high technology products lies in the amount of invention, innovation, research, design and testing involved. Films, music recordings, books, computer software and on-line services are bought and sold because of the information and creativity they contain, not usually because of the plastic, metal or paper used to make them. Many products that used to be traded as low-technology goods or commodities now contain a higher proportion of invention and design in their value -- for example brand-named clothing or new varieties of plants. Creators can be given the right to prevent others from using their inventions, designs or other creations. These rights are known as “intellectual property rights” (IPRs).

Ideas and knowledge are an increasingly important part of trade. Most of the value of new medicines and other high technology products lies in the amount of invention, innovation, research, design and testing involved. Films, music recordings, books, computer software and on-line services are bought and sold because of the information and creativity they contain, not usually because of the plastic, metal or paper used to make them. Many products that used to be traded as low-technology goods or commodities now contain a higher proportion of invention and design in their value -- for example brand-named clothing or new varieties of plants. Creators can be given the right to prevent others from using their inventions, designs or other creations. These rights are known as “intellectual property rights” (IPRs).

1. Intellectual property rights - basic concepts

Definition of IPRs

Intellectual property rights are the rights given to persons over the creations of their minds: inventions, literary and artistic works, symbols, names, images, and designs used in commerce. They usually encourage and reward creative work, and give the creator an exclusive right over the use of his/her creation for a certain period of time.

Types of intellectual property rights

Intellectual property rights play an important role in an increasingly broad range of areas, ranging from the Internet to health care to nearly all aspects of science and technology and literature and the arts. They take a number of forms. For example books, paintings and films come under copyright; inventions can be patented; brand names and product logos can be registered as trademarks. These forms can be classified as follows:

1. Copyright and related rights

2. Trademarks, including service marks

3. Geographical indications, including appellations of origin

4. Industrial designs

5. Patents, including the protection of new varieties of plants

6. Layout-designs (topographies) of integrated circuits

7. Undisclosed information, including trade secrets and test data

Intellectual property rights listed above are customarily divided into two main areas: 1) copyrights and related rights, 2) industrial property rights.

1) Copyright and rights related to copyright.

The rights of authors of literary and artistic works (such as books and other writings, novels, poems and plays, films, musical works, musical compositions, computer programs and films, drawings, paintings, photographs and sculptures, and architectural designs) are protected by copyright, for a minimum period of 50 years after the death of the author.

Also protected through copyright and related (sometimes referred to as “neighbouring”) rights are the rights of performers (e.g. actors, singers and musicians), producers of phonograms (sound recordings) and broadcasting organizations.

2) Industrial property, inventions (patents), trademarks, industrial designs, and geographic indications of source

Industrial property can usefully be divided into two main areas:

One area can be characterized as the protection of distinctive signs, in particular trademarks (which distinguish the goods or services of one undertaking from those of other undertakings) and geographical indications (which identify a good as originating in a place where a given characteristic of the good is essentially attributable to its geographical origin).

Other types of industrial property are protected primarily to stimulate innovation, design and the creation of technology. In this category fall inventions (protected by patents), industrial designs and trade secrets.

Objectives of IPRs

IPRs are intended to give the creators adequate returns so that there are enough incentives for creativity. For example, the social purpose of industrial property rights of the second area is to provide protection for the results of investment in the development of new technology, thus giving the incentive and means to finance research and development (R&D) activities.

IPRs can further ensure fair competition and protect consumers, by enabling them to make informed choices between various goods and services and to differentiate counterfeit commodities. This objective is particularly attributable to the protection of industrial property rights of the first area (distinctive signs). The protection may last indefinitely, provided the sign in question continues to be distinctive.

A functioning intellectual property regime should also facilitate the transfer of technology in the form of foreign direct investment, joint ventures and licensing.

To sum up, the protection and enforcement of intellectual property rights should contribute

- to the promotion of technological innovation,

- to the transfer and dissemination of technology,

- to the mutual advantage of producers and users of technological knowledge in a manner conducive to social and economic welfare, and

- to a balance of rights and obligations.

2. Trade related aspects of IPRs

Background for the Negotiation of the TRIPs Agreement.

So far, we have understood that creations should be accorded protection. However, the general public that benefits from such creations should not be expected to pay unreasonably high prices. The balance between the remuneration to the innovator and artist on the one hand, and the genuine interests of the public on the other, has been a subject of debate for a long time. Various countries tried to have their own balance. The extent of protection and enforcement of intellectual property rights varied widely around the world; and as intellectual property became more important in trade, these differences became a source of tension in international economic relations. Although the World Intellectual Property Organization (WIPO) has laid down some rules for the protection of intellectual property, many developed countries feel that the protection of IPRs needs much more strengthening than what is possible through the WIPO agreements. In the wake of rapid technological development, reaping the full benefits of their technological innovations is important for them. In the emerging world economic and trade scene, their prospects lie mainly in knowledge-intensive, high technology sectors of industrial production and services. It is vital for them to provide strengthened and assured protection to their innovations, particularly in the sectors of pharmaceuticals and electronics where copy is much easier. New internationally-agreed trade rules for intellectual property rights were seen as a way to introduce more order and predictability, and for disputes to be settled more systematically.

The 1986-94 Uruguay Round achieved this goal in spite of the initial objection from a large number of countries participating in the negotiations to the inclusion of IPRs in GATT negotiations on the grounds that the subject was covered by another organization, i.e., the World Intellectual Property Organization, and that the GATT had jurisdiction only in the field of trade (As a compromise, the subject of the negotiations was termed trade-related intellectual property rights, and it was thought that it would cover only the matters related to trade. But finally, it was agreed that all issue relating to IPRs, including the standards of protection, would be negotiated, and the link with trade has almost vanished.). The TRIPS Agreement (Agreement on Trade-Related Aspects of Intellectual Property Rights), which came into effect on 1 January 1995, is to date the most comprehensive multilateral agreement on intellectual property.

Issues Covered by the TRIPs Agreement.

The agreement covers five broad issues:

- how basic principles of the trading system and other international intellectual property agreements should be applied

- how to give adequate protection to intellectual property rights

- how countries should enforce those rights adequately in their own territories

- how to settle disputes on intellectual property between members of the WTO

- special transitional arrangements during the period when the new system is being introduced.

Objectives of the TRIPs Agreement.

The TRIPS is an attempt (i) to narrow the gaps in the way these rights are protected around the world, (ii) to bring them under common international rules, and (iii) When there are trade disputes over intellectual property rights, the WTO's dispute settlement system is available.

The general goals of the TRIPS Agreement are contained in the Preamble of the Agreement, which reproduces the basic Uruguay Round negotiating objectives established in the TRIPS area by the 1986 Punta del Este Declaration and the 1988/89 Mid-Term Review. These objectives include:

- the reduction of distortions and impediments to international trade,

- promotion of effective and adequate protection of intellectual property rights, and

- ensuring that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade.

Main Features of the TRIPs Agreement.

The three main features of the Agreement are:

1) Standards. In respect of each of the main areas of intellectual property covered by the TRIPS Agreement, the Agreement sets out the minimum standards of protection to be provided by each Member. Each of the main elements of protection is defined, namely the subject-matter to be protected, the rights to be conferred and permissible exceptions to those rights, and the minimum duration of protection.

The Agreement sets these standards by requiring, first, that the substantive obligations of the main conventions of the WIPO, i.e., the Paris Convention for the Protection of Industrial Property (Paris Convention) and the Berne Convention for the Protection of Literary and Artistic Works (Berne Convention) in their most recent versions, must be complied with. With the exception of the provisions of the Berne Convention on moral rights, all the main substantive provisions of these conventions are incorporated by reference and thus become obligations under the TRIPS Agreement between TRIPS Member countries.

Secondly, the TRIPS Agreement adds a substantial number of additional obligations on matters where the pre-existing conventions are silent or were seen as being inadequate. The TRIPS Agreement is thus sometimes referred to as a Berne and Paris-plus agreement.

2) Enforcement. The second main set of provisions deals with domestic procedures and remedies for the enforcement of intellectual property rights. The Agreement lays down certain general principles applicable to all IPR enforcement procedures. In addition, it contains provisions on civil and administrative procedures and remedies, provisional measures, special requirements related to border measures and criminal procedures, which specify in detail the procedures and remedies that must be available so that right holders can effectively enforce their rights.

3) Dispute settlement. The Agreement makes disputes between WTO Members about the respect of the TRIPS obligations subject to the WTO's dispute settlement procedures.

In addition the Agreement provides for certain basic principles, such as national and most-favored-nation treatment, and some general rules to ensure that procedural difficulties in acquiring or maintaining IPRs do not nullify the substantive benefits that should flow from the Agreement. The obligations under the Agreement will apply equally to all Member countries, but developing countries will have a longer period to phase them in. Special transition arrangements operate in the situation where a developing country does not presently provide product patent protection in the area of pharmaceuticals.

The TRIPS Agreement is a minimum standards agreement, which allows Members to provide more extensive protection of intellectual property if they so wish. Members are left free to determine the appropriate method of implementing the provisions of the Agreement within their own legal system and practice.

Basic principles of the TRIPs Agreement: national treatment, MFN, and technological progress.

As in GATT and GATS, the starting point of the intellectual property agreement is basic principles. And as in the two other agreements, non-discrimination features prominently: national treatment (treating one's own nationals and foreigners equally), and most-favored-nation treatment (equal treatment for nationals of all trading partners in the WTO).

National treatment.
National treatment is a key principle in other intellectual property agreements outside the WTO. As in the main pre-existing intellectual property conventions, the basic obligation on each Member country is to accord the treatment in regard to the protection of intellectual property provided for under the Agreement to the persons of other Members. These persons are referred to as “nationals” but include persons, natural or legal, who have a close attachment to other Members without necessarily being nationals. The criteria for determining which persons must thus benefit from the treatment provided for under the Agreement are those laid down for this purpose in the main pre-existing intellectual property conventions of WIPO, applied to all WTO Members whether or not they are party to those conventions. These conventions are the Paris Convention, the Berne Convention, International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (Rome Convention), and the Treaty on Intellectual Property in Respect of Integrated Circuits (IPIC Treaty). These obligations cover not only the substantive standards of protection but also matters affecting the availability, acquisition, scope, maintenance and enforcement of intellectual property rights as well as those matters affecting the use of intellectual property rights specifically addressed in the Agreement.
Most-favored-nation treatment.
While the national treatment clause forbids discrimination between a Member's own nationals and the nationals of other Members, the most-favored-nation treatment clause forbids discrimination between the nationals of other Members. In respect of the national treatment obligation, the exceptions allowed under the pre-existing intellectual property conventions of WIPO are also allowed under TRIPS. Where these exceptions allow material reciprocity, a consequential exception to MFN treatment is also permitted (e.g. comparison of terms for copyright protection in excess of the minimum term required by the TRIPS Agreement as provided under Article 7(8) of the Berne Convention as incorporated into the TRIPS Agreement). Certain other limited exceptions to the MFN obligation are also provided for.
Technological progress.
When an inventor or creator is granted patent or copyright protection, he obtains the right to stop other people making unauthorized copies. Society at large sees this temporary intellectual property protection as an incentive to encourage the development of new technology and creations which will eventually be available to all. The TRIPS Agreement recognizes the need to strike a balance. It says intellectual property protection should contribute to technical innovation and the transfer of technology. The agreement says both producers and users should benefit, and economic and social welfare should be enhanced.
Exhaustion has an implication for the limitation on the exclusive rights of the IPR-holder. According to the principle of exhaustion of IPRs, once the IPR-holder has sold the product covered by the IPR, the IPR-holder cannot thereafter have any control on the later stages of the marketing of the product. The IPR is deemed to have been exhausted after the first sale.
For example, when a patent-holder sells the patented product, the buyer is free to use it in any way he/she likes, including selling it and exporting it to another country. Suppose that a product is patented in a country C and it is sold to a buyer in that country. A person in another country D imports it for sale in country D where this product is also patented. Since the patent right has been exhausted in country C after the first sale in that country, the patent-holder cannot stop the export of the product to country D. This process has been called “parallel import”, to distinguish it from the normal import of the product with the authorization of the patent-holder. If the patented product normally sells at higher prices in country D, the parallel import from country C may push the prices down, thus the consumers will benefit.
A Member is free to have its own provisions regarding the exhaustion of IPRs in their domestic laws and practices. In fact, it may be an important tool to protect the interest of consumers and to ensure the availability of industrial and agricultural inputs as well as essential drugs at competitive prices.

How to protect intellectual property.

The second part of the TRIPS agreement looks at different kinds of intellectual property rights and how to protect them. The purpose is to ensure that adequate standards of protection exist in all member countries. Here the starting point is the obligations of the main international agreements of the World Intellectual Property Organization (WIPO) that already existed before the WTO was created:

- the Paris Convention for the Protection of Industrial Property (patents, industrial designs, etc).

- the Berne Convention for the Protection of Literary and Artistic Works (copyright).

Some areas are not covered by these conventions. In some cases, the standards of protection prescribed were thought inadequate. So the TRIPS agreement adds a significant number of new or higher standards.

3. Copyright and related rights

Copyright includes literary and artistic works such as novels, poems and plays, films, musical works, artistic works such as drawings, paintings, photographs and sculptures, and architectural designs. Rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and those of broadcasters in their radio and television programs.


During the Uruguay Round negotiations, it was recognized that the Berne Convention already, for the most part, provided adequate basic standards of copyright protection. Thus it was agreed that the point of departure should be the existing level of protection under the latest Act, the Paris Act of 1971, of that Convention. Members are obliged to comply with the substantive provisions of the Paris Act of 1971 of the Berne Convention, i.e. Articles 1 through 21 of the Berne Convention (1971) and the Appendix thereto (Article 9.1). However, Members do not have rights or obligations under the TRIPS Agreement in respect of the rights conferred under Article 6bis of that Convention, i.e. the moral rights (the right to claim authorship and to object to any derogatory action in relation to a work, which would be prejudicial to the author's honor or reputation), or of the rights derived thereof.

The provisions of the Berne Convention referred to deal with questions such as subject-matter to be protected, minimum term of protection, and rights to be conferred and permissible limitations to those rights. The Appendix allows developing countries, under certain conditions, to make some limitations to the right of translation and the right of reproduction.

In addition to requiring compliance with the basic standards of the Berne Convention, the TRIPS Agreement clarifies and adds certain specific points.

Copyright protection shall extend to expressions and not to ideas, procedures, methods of operation or mathematical concepts as such (Article 9.2).

Coverage of copyright

- Literary and artistic works, including computer programs and databases

- Cinematographic works

- Works of architecture

The TRIPS agreement ensures that computer programs will be protected as literary works under the Berne Convention and outlines how databases should be protected. Computer programs, whether in source or object code, shall be protected as literary works under the Berne Convention (1971) (Article 10.1). This provision confirms that computer programs must be protected under copyright and that those provisions of the Berne Convention that apply to literary works shall be applied also to them. It confirms further, that the form in which a program is, whether in source or object code, does not affect the protection. The obligation to protect computer programs as literary works means that only those limitations that are applicable to literary works may be applied to computer programs. It also confirms that the general term of protection of 50 years applies to computer programs. Possible shorter terms applicable to photographic works and works of applied art may not be applied to computer programs.

Databases are eligible for copyright protection provided that they by reason of the selection or arrangement of their contents constitute intellectual creations. The provision also confirms that databases have to be protected regardless of which form they are in, whether machine readable or other form. Furthermore, the provision clarifies that such protection shall not extend to the data or material itself, and that it shall be without prejudice to any copyright subsisting in the data or material itself.

Rental right.

It also expands international copyright rules to cover rental rights. Authors of computer programs and producers of sound recordings must have the right to prohibit the commercial rental of their works to the public. A similar exclusive right applies to films where commercial rental has led to widespread copying, affecting copyright-owners' potential earnings from their films. Authors shall have in respect of at least computer programs and, in certain circumstances, of cinematographic works the right to authorize or to prohibit the commercial rental to the public of originals or copies of their copyright works. With respect to cinematographic works, the exclusive rental right is subject to the so-called impairment test: a Member is excepted from the obligation unless such rental has led to widespread copying of such works which is materially impairing the exclusive right of reproduction conferred in that Member on authors and their successors in title. In respect of computer programs, the obligation does not apply to rentals where the program itself is not the essential object of the rental.

Term of protection to copyright.

According to the general rule of the Berne Convention as incorporated into the TRIPS Agreement, the term of protection shall be the life of the author and 50 years after his death. TRIPS Agreement provides that whenever the term of protection of a work, other than a photographic work or a work of applied art (in this case, the term will be at least 25 years from the making of the work), is calculated on a basis other than the life of a natural person, such term shall be no less than 50 years from the end of the calendar year of authorized publication, or, failing such authorized publication within 50 years from the making of the work, 50 years from the end of the calendar year of making.

Related (neighboring) rights.

The agreement says performers must also have the right to prevent unauthorized recording, reproduction and broadcast of live performances (bootlegging) for no less than 50 years. Producers of sound recordings must have the right to prevent the unauthorized reproduction of recordings for a period of 50 years.


- unauthorized fixation and reproduction of such fixations

- unauthorized broadcasting by wireless means of their live performance

- the communication to the public of their live performance

According to the provisions on protection of performers, producers of phonograms and broadcasting organizations, performers shall have the possibility of preventing the unauthorized fixation of their performance on a phonogram (e.g. the recording of a live musical performance). The fixation right covers only aural, not audiovisual fixations. Performers must also be in position to prevent the reproduction of such fixations. They shall also have the possibility of preventing the unauthorized broadcasting by wireless means of their live performance and the communication to the public of their live performance. However, it is not necessary to grant such rights to broadcasting organizations, if owners of copyright in the subject-matter of broadcasts are provided with the possibility of preventing these acts, subject to the provisions of the Berne Convention.

Members have to grant producers of phonograms an exclusive reproduction right. In addition to this, they have to grant an exclusive rental right at least to producers of phonograms. The provisions on rental rights apply also to any other right holders in phonograms as determined in national law. This right has the same scope as the rental right in respect of computer programs. Therefore it is not subject to the impairment test as in respect of cinematographic works. However, it is limited by a so-called grand-fathering clause, according to which a Member, which on 15 April 1994, i.e. the date of the signature of the Marrakesh Agreement, had in force a system of equitable remuneration of right holders in respect of the rental of phonograms, may maintain such system provided that the commercial rental of phonograms is not giving rise to the material impairment of the exclusive rights of reproduction of right holders.

Term of protection to related right.

The term of protection is at least 50 years from the end of the year of fixation or performance for performers and producers of phonograms, and 20 years from the end of the year of broadcast for broadcasting organizations.


Any Member may, in relation to the protection of performers, producers of phonograms and broadcasting organizations, provide for conditions, limitations, exceptions and reservations to the extent permitted by the Rome Convention (Article 14.6). The Convention provides fro exceptions for private use, short excerpts, teaching and scientific research, etc.

Article 13 requires Members to confine limitations or exceptions to exclusive rights to certain special cases which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder. This is a horizontal provision that applies to all limitations and exceptions permitted under the provisions of the Berne Convention and the Appendix thereto as incorporated into the TRIPS Agreement. The application of these limitations is permitted also under the TRIPS Agreement, but the provision makes it clear that they must be applied in a manner that does not prejudice the legitimate interests of the right holder.

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