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Last week’s agreement on provisions under which developing nations can gain access to cheap medicines should not lead to over-optimism about the outcome of broader trade talks later this month.

Ask any economist to name the single most important way to encourage technological innovation, and top of the list — higher, indeed, than strong public funding for research and development — is the need for an economic environment that encourages investment. The reasoning is straightforward: such an environment is likely to stimulate efforts to promote new technologies by both the public and the private sector. Its absence means that the capital needed to achieve this will go elsewhere.

This is one of the many ways in which the ministerial meeting of the World Trade Organisation (WTO), which takes place in Cancún, Mexico, later this month, is of vital importance to all those concerned not merely with the economic growth of the developing world, but also with the ways in which science and technology can contribute to such growth. Indeed, in many ways the overall goal of the current round of global trade negotiations is to promote an environment that enhances the prospects for achieving precisely this.

At the last ministerial meeting, held in Doha, Qatar, in 2001, it was agreed that a particular priority within these negotiations would be the needs of developing countries. There was an implicit acknowledgment that one of the main factors impeding the growth of such nations is the lack of an attractive investment environment. And that this is the result of a range of impediments and distortions to the marketplace that put developing nations at a clear disadvantage when attempting simultaneously to meet their domestic social needs and to participate in the global economy.

An agreement last week on the terms under which these nations will be allowed to import generic copies of patented drugs from other developing countries is a step in the right direction. And, politically, it sends an important signal from the industrialised world that progress is possible in reconciling pressures to achieve a global free market that meets the development needs of the poorer parts of the world. Indeed failure to achieve such an agreement would have doomed the Cancún meeting to failure, even before it had opened.

Yet the difficulties experienced in thrashing out this agreement — which should have been reached last December (See Can 'the spirit of Doha’ be kept alive?, 6 January 2003) — indicate the size of the challenge ahead. An even tougher fight can be predicted over agricultural subsidies. As with pharmaceuticals, pressure from domestic constituencies — whether cotton producers in the United States or small-scale farmers in France and Germany — threatens to negate previous political commitments by the world’s richer countries to a level playing field on trade. In doing so, it will also place a large question mark over their commitment to a fairer deal for the poor.

A limited achievement

Admittedly last week’s deal on generic drugs should not be seen in too positive a light. The final package did not secure everything that developing countries were seeking in the negotiations; for example, they are still required to make formal commitments not to exploit for commercial or industrial purposes the exemptions to WTO rules on patents that will be granted. And the powerful influence of the US and European pharmaceutical industries can also be seen in the language used to ensure that developing states take steps to prevent drugs intended for their own populations finding their way illegally to foreign, more profitable, markets.

The demands imposed on developing nations to make these and other concessions are reflected in the lack of enthusiasm with which the deal has been greeted by pressure groups such as Oxfam and Médicins sans Frontières. They also add credence to claims that the agreement may be more about public relations than substance; one can be relatively confident that the major pharmaceutical manufacturers — many of which admit that a relatively low proportion of their profits comes from the developing world — will be already be hard at work seeking ways to capitalise on their apparent benevolence while minimising any impact on shareholder value.

Yet even public relations has its value. One of the most successful strategies of development action groups has been to demonise the activities of particular companies, in order to highlight the injustices of current practices (particularly in the use of international patent law to control market access). Many shareholders — though unfortunately not institutional ones — are prepared to respond to appeals to their conscience. And many companies, particularly those that have been targeted by protesters, are beginning to realise that the publicity generated by supporting non-profitable activities has its own commercial benefits (if only in terms of reducing local opposition to their activities).

The roots of underdevelopment

But the Cancún meeting needs to go much further than public relations if it is to make a significant impact. At its heart must be the recognition that many of the pressures to which the governments of the industrialised world will be responding have deep political roots. And that — as exemplified by the issue of agricultural subsidies in both the United States and Europe — it is a failure to address these pressures adequately that creates the greatest threat to the developing world.

For many of the structural roots of underdevelopment continue to lie in the domestic policies of the industrialised nations — and that includes the relative lack of capacity in science and technology. One important reason for the underachievement of many developing countries in these areas is not a lack of indigenous talent, but the fact that the most talented find better-rewarded jobs in the laboratories and high-tech companies of the developed world. Another is that funds that could have been used to build up infrastructures are needed to pay off long-term debts. A third factor is the wide disparity in the ease (and costs) of access to scientific information. And a final cause is the continued determination of patent holders, the vast majority of whom come from the developed world, to exploit their ownership rights globally, with little thought about the social consequences for those unable or unwilling to pay the required licence fees.

One meeting of trade ministers will not solve all this. Many fundamental changes are required — and many vested interests must be confronted on the way — if the global knowledge economy is to be given a genuinely equitable social basis. Last week’s deal on pharmaceuticals points in the right direction. But it does not open any magic door to a broader, fairer agreement on the conditions for world trade. For that, the battle needs to continue.