Interesting developments are afoot in the United States Senate when it comes to international trade and the protection and enforcement ofintellectual property rights.

A new bill, entitled "The International Intellectual Property and Enforcement Act of 2008", could make it tougher for developing countries to benefit from preferential access to the US market or even continue to enjoy access to federal government procurement markets if they are found to be lacking in the enforcement ofintellectual property rights.

The bill starts by establishing special rules for countries on the United States Trade Representative (USTR) Priority Watch List. The Priority Watch List is one of several administrative categories created by USTR in application of Section 301 of the Trade Act of 1974. Section 301 was strengthened considerably by the 1988 Omnibus Trade and Competitiveness Act, which created so-called "Special 301", a set of provisions which require USTR to carry out an annual review of foreign countries' intellectual property regimes.

Under current law, within thirty days of publishing its annual National Trade Estimate Report on Foreign Trade Barriers, USTR is required to make a determination on which of the countries named therein are to be designated "Priority Foreign Countries", on the basis of their failure to extend IP protection in a manner and to a degree which has market access implications for US economic interests. The IPR practices of any countries so identified by USTR must then be investigated.

Under existing legislation, USTR may move to suspend trade concessions and impose import restrictions or duties, as well as entering into binding agreements with priority countries the intent of which is to remove policies, actions, practices and the like which are currently undermining the effective protection and enforcement of intellectual property rights.

The special rules that the new bill, if enacted, would usher into law, provide that USTR take specific action with regard to those countries that have been identified by it for inclusion on the Section 301 Priority Watch List and which have remained there for at least one year. Such specific action would entail the development of an action plan, containing benchmarks by means of which the country in question would be assisted in achieving "adequate and effective protection of intellectual property rights" as well as "fair and equitable market access" for US economic interests which rely on IP protection in order to penetrate and operate on the market of the country in question. The benchmarks described would constitute legislative, institutional or enforcement measures, "or other actions as the Trade Representative determines to be necessary".

Section 2 (2) entitled "Failure to Meet Action Plan Benchmarks" contains a number of discretionary actions that the US President, in consultation with USTR, can take against those countries which fail to substantially comply with the benchmarks developed for it.

The first such action is to suspend, restrict or prohibit new or renewed government procurement contracts from the foreign country in question.

Another measure the US President could take against the offending country is to suspend, restrict or prohibit the approval of new financing by the Overseas Private Investment Corporation (OPIC) for any investment project located in the foreign country in question.

Yet another discretionary measure which the US President could take under the new bill is to suspend, restrict or prohibit the approval of Export-Import Bank financing for US exports of goods and services to that country.

Another, potentially powerful measure the President could take against the offending country is in the area of funding from multilateral development banks, such as the World Bank, or the regional development banks such as the Asian Development Bank, the African Development Bank, or the Inter-American Development Bank.
The new act also provides that the President could suspend restrict or prohibit any assistance the offending country might be receiving or receive in future from the United States Trade and Development Agency (USTDA).

Finally, and perhaps most importantly, the new act would authorize the President to suspend, limit or withdraw any preferential treatment for which the offending country might qualify under the General System of Preferences, the Caribbean Basin Economic Recovery Act, the Andean Trade Preferences Act, or the African Growth and Opportunity Act (AGOA). This is perhaps the most significant part of the new act for developing countries already benefiting from such preferential access under one of the above mentioned schemes, but which are either on the Priority Watch List or the Special 301 Watch List.

Although none of the countries benefiting from preferential access to the US market under AGOA have been explicitly singled out in the Special 301 Report, the National Trade Barriers Estimate Report regularly mentions the fact that legislative frameworks and enforcement of intellectual property rights are weak in many of the sub-Saharan African countries. In the case of the 2008 Report, this was certainly the case for Angola, Cameroon, Cote d'Ivoire, Kenya, Nigeria, although not for Ethiopia and Ghana, whose intellectual property regimes were not criticized in the 2008 Report.

Market access to the United States for Sub-Saharan Africa was worth almost USD 59 million in 2006, of which just over USD 44 million&nbsp, (i.e. more than two-thirds) entered the market thanks to either AGOA or the GSP. Thus the financial implications of any potential loss of or reduction in market access under these schemes due to lax IP protection or enforcement could be very serious indeed.

What this potentially means for exporters in these countries is that depending on both developments in the domestic US political context, as well as their own economic size and the financial scale of any losses caused to US economic interests by lax protection and enforcement of intellectual property rights, export volumes from these countries to the US could start shrinking due to a loss of the preferential access they have enjoyed under AGOA. Although this will not happen without warning, and without the offending country being offered ample opportunity to avoid such penalties, it is nevertheless a contingency risk that exporters in these countries would need to factor into their medium and long-term commercial and business decisions should the bill ever become law.

The good news is that, even if it becomes law, countries will have the opportunity to avoid the sanctions contained in the act by engaging actively and meaningfully to show that they are trying to tackle the shortcomings outlined in any eventual action plan drawn up under this legislation.

With the relative importance of IP owners and exporters to the US legislative and trade-policy formulation processes, it is no surprise that strong intellectual property protection has long been something the US has tried to export, by stick and carrot, to countries and regions where its economic interests warrant it. With the computer, pharmaceutical, motion-picture, publishing, software and apparel industries all big and powerfully positioned owners and exporters of US intellectual property, and with the US trade deficit continuing to widen, increased pressure for the most obvious, significant and systematic IP offenders is really only to be expected. The question, particularly for developing countries on the receiving end of this sort of negative attention, is really how to manage it actively, constructively and effectively to preserve and even further their own development and market access interests.

A more detailed report on the precise actions envisaged by the bill and their implications can be downloaded here.

By Simon Lacey
© Trade Law Chambers 2008