TORONTO, November 7, 2001 -- Canada has been unable to defend its trade interests at the World Trade Organization (WTO) -- especially in areas of public health, and in industrial and regional policy -- raising questions about whether Ottawa needs to rethink its trade-dispute strategy, say the authors of a study at York University’s Robarts Centre for Canadian Studies. They also criticize the WTO’s incapacity to address the social effects of trade -- the ‘social deficit’-- pointing to the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement which treats patents on life-saving drugs in the same manner as patents on ice-cream machines.

The study, entitled The First Seven Years of the WTO and Canada’s Role at Centre Stage: A Report Card on Trade and the Social Deficit, examines Canada’s record at the WTO in four leading trade disputes -- patent protection of pharmaceutical products and the availability of generic drugs; the North American Auto Pact; Brazilian aircraft subsidies; and France's ban on asbestos – and the resulting social deficit in each case. Canada won only the aircraft subsidies dispute.

Among the principle findings of the study:

• In Canada’s dispute with Europe over the extent of patent protection on pharmaceutical products, intellectual property rights are at odds with the need to provide the world population with affordable drugs. The 20-year patent protection period emerged unscathed, making it difficult for generic drug producers to provide cheap generic drugs to the public.

• Canada’s aircraft subsidies dispute against Brazil reflects the difficulties developing countries have in competing on the international market in high-technology industries and the barriers to entry created by the WTO’s dispute panel. The issue in dispute was the right of middle-income nations to use export subsidies to secure overseas markets. The panel decided that Brazil’s subsidies were inconsistent with international trade rules but was silent on Canada’s subsidy practices. A subsequent panel questioned the appropriateness of the Canadian government’s support for its aircraft manufacturing sector.

• In dismantling the Auto Pact, the WTO not only disregarded Canada’s national interests, but also raises difficult questions for governments that wish to make domestic arrangements for developing an infant industry into a world-class producer. The WTO supported Japan and the European Union’s argument that the North American Auto Pact discriminated unfairly against certain countries by giving wrongful duty exemption to the "Big Three". Nevertheless, Canada’s claim that it is WTO-compliant is strong. There was no discrimination based on the origin of the products themselves because companies that qualified for Auto Pact status were able to import vehicles form anywhere in the world.

• Canada’s challenge to France’s ban on asbestos, a carcinogenic substance, was rejected by the panel on public health grounds. At the centre of the dispute was Canada’s need to appease the Quebec-based asbestos industry by securing their right to sell asbestos internationally despite having banned asbestos for domestic use. This dispute opens the door for future Panels to subject domestic policy to WTO review, thereby increasing the intrusiveness of the WTO in domestic policy areas. The asbestos dispute effectively demonstrates the limits of the WTO dispute settlement system because in circumstances where the evidence of the threat to public health is less obvious than is the case with asbestos, a trade-biased panel may deny the importing government an exception. This approach will endanger democratic choices in important areas of social, environmental, or cultural policies. Furthermore, this case demonstrates how WTO decisions are never black and white in their resolve. Public health advocates, in France and Canada, were clearly winners by any standard. The dilemma for observers is to establish criteria with which to determine a win from a loss. Few nation states are prepared to accept that a loss may be in the global public interest.

Robarts Centre Director Daniel Drache, who led the study, says that the narrowness of many of the WTO's decisions undermine the ability of governments to implement policies in the public interest and foster international cooperation. "It raises questions of whether other international bodies are needed to address complex policy issues that arise from the world trading system that would ensure a proper balance between the need to trade with the social effects of trade," he said.

Drache notes that the WTO’s perceived effectiveness is further compromised by the organization’s uneven and disappointing litigation, and an almost non-existent capacity to legislate. He adds that unless the WTO finds a way to address the social impacts of trade and reduce the social deficit, its credibility and legitimacy as an institution will remain under attack by the anti-globalization movement in a post-Quebec summit world.

The full report card is available at the Robarts Centre’s Web site: www.robarts.yorku.ca. A second report card on the WTO’s performance will be published in December 2001. It will examine culture, public health, and work and employment standards in developing countries.

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For a copy of the study or for more information, please contact:

Daniel Drache	Laura Taman	Cim Nunn
Robarts Centre for Canadian Studies	Robarts Centre for Canadian Studies	Director, Media Relations
York University	York University	York University
416-736-5415	416-736-5499	416-736-2100, ext. 22087
drache@yorku.ca	llt@yorku.ca	cimnunn@yorku.ca

YU/122/01