The Informationist

The Moral Issues Stem from the Economic Issues

Yes, I said it, and I stand by it.

The issue was pharmaceutical patents. The impetus for the discussion was a query from Erin Daly, a reporter for IP Law 360. Erin was looking at the issues surrounding a new tactic by American trade negotiators to get developing countries to retreat from the Doha declaration as part of bilateral trade pacts.

Erin was kind enough to secure permission for The Informationist to reprint a .pdf version of her article. You can access the entire IP Law 360 website here.

Let’s back up a bit. In the 1990s, the Uruguay Round of the GATT led to the founding of the World Trade Organization. That development was an unequivocal good thing for the world and all of its people, despite the inevitable difficulties of implementing a global free trade system. Parts of the Uruguay Round negotiations, however, also led to a number of “adjuncts,” or agreements that transcended normal free-trade issues. One of these adjuncts was TRIPs, or “Trade Related aspects of Intellectual Property.”

TRIPs accomplished two goals. First, it increased respect for general IP concepts around the globe. That, again, is an unequivocal boon. IP law allows people to securitize their ideas, and they can then leverage those securities to generate investment capital. Second, it imposed the basic structures of developed-world patent and copyright law on economies at multiple levels of development just as we left the industrial age and headed into the information age. That accomplishment is more problematic. At a bare minimum, you would have thought that someone must have analyzed the applicability of these standards to LDCs. You would be wrong. The LDCs themselves were more interested in trading IP rights for agricultural subsidies. (SUCKERS! Boy, did they lose on that deal!)

TRIPs went into effect on January 1, 1995. Since then, a couple of things have happened. Numerous developing countries have begun to think long and hard about ways to use IP law to their own benefit. (My recent trip to India focused on that country’s efforts in this respect). Numerous people around the world have also come to question the applicability of IP law to pharmaceuticals, particularly when patents curb poor peoples’ access to critical drugs. That concern led to the Doha declaration, in which WTO countries (including the U.S.) agreed to back off on imposing developed-world norms on developing-world drug distribution under certain sets of circumstances.

Now it turns out that the U.S. is trying to reclaim in bilateral negotiations what it relinquished in a multilateral setting. I believe, for example, (though I should probably check), that we got Thailand to backtrack on Doha as part of a pending bilateral free trade deal. Erin was looking into this issue. In particular, she asked me to comment on the morality of the situation.

I pointed her toward two moral concerns--only one of which worked its way into her article. The one that didn’t appear dealt with the merits of free trade. Morality dictates that we should do whatever is necessary to maximize welfare both for America and for the world. As a result, we should drop our barriers unilaterally if necessary, without any necessary preconditions. Granted, that’s not likely to happen any time soon. Pending that development, though, we should at least negotiate as many free trade deals as we can. In those negotiations, we should certainly raise any and every issue that we think is important, but we should never hold the deal hostage to them. Multinational corporations who would oppose a free trade deal because of their disdain for foreign IP laws are as immoral as the antiglobalists who would oppose the deal because of disdain for foreign labor or environmental laws. By all means, raise the issues and push our trading partners to improve their standards. But don’t make America and the world poorer out of spite. That’s morality issue number one.

Morality issue number two is the one that Erin did raise--and one that arose repeatedly during my Indian trip. It relates to the anomaly of timing. Suppose that a pharmaceutical company approached us today and told us that it was thinking about investing significant resources into finding a cure for [insert your favorite disease here]. Now suppose that it posed the following question: “We’re not certain about making this investment. What will you offer us to convince us to go ahead?” In all likelihood, we would be rather generous--and feel hugely moral in having successfully induced investment in a socially beneficial direction. Now suppose that that same company came to us and told us that it had found the cure. All of a sudden, morality would seemingly impel us to insist that the company do whatever is necessary to disseminate that cure as quickly and as widely as possible. The moral quandary is that we can only get away with that sort of bait-and-switch once.

In the final analysis, the moral dilemma is time delimited. In the years before a cure exists, we feel moral about inducing investment. In the years after the patent expires, we feel moral about allowing distribution to proceed under a marginal cost pricing model. During the relatively brief period of the patent’s life, however, we feel like we’re doing something wrong: sacrificing public health on the altar of private profit.

My contention is that a moral system must recognize all three time windows--and note that we’re clearly doing the right thing in all but the narrowest of them (where reasonable doubt can remain). That doesn’t mean that we shouldn’t fix the system to be better. Nor, for that matter, does it mean that anyone should overpay. Perhaps a U.S. patent without any worldwide counterparts would suffice to motivate investment. In that case, the monopoly prices that Americans pay for prescription drugs and patented healthcare procedures would become a form of foreign aid--a subsidy that we absorb to make such remedies affordable worldwide. These are all legitimate perspectives.

No matter how you cut it, though, I keep coming out at the same place: the moral calculus emerges from the economic calculus.

Posted by Bruce Abramson from on 06/08 at 03:33 PM in The Not-Quite-Yet Information Economy, Foreign Affairs and the World beyond Our Borders