MercoPress. South Atlantic News Agency

Chile in US list of “intellectual property” rigging

The Office of the U.S. Trade Representative (USTR) announced this week that Chile has been elevated from its “Watch List” to its “Priority Watch List” for alleged failure to comply with U.S. standards for intellectual property rights protection. The USTR cited the software and pharmaceutical industries in Chile as presenting the greatest threats to American business interests.

"Chile's importance as a U.S. trading partner continues to grow, due in no small part to our Free Trade Agreement," said USTR director Susan Schwab. "As such, our expectations for Chile's respect of intellectual property rights are quite high. This review reflects our concern that Chile is not protecting sufficiently intellectual property." The two countries signed the Free Trade Agreement (FTA) in 2003, a fact which further complicates the status change as Chile is now the only country on the "Priority Watch List" that has such an agreement with the U.S. "This is the major league, and Chile is playing in the major league now, so the expectations are higher," said U.S. Embassy spokesperson Timothy Stater. Many Chilean officials are reacting with surprise and frustration. Both government and private agencies are claiming that Chile is doing everything in its power to meet the terms of international accord with the U.S. The general sentiment seems to be that the North Americans are simply expecting too much. "This decision is very disappointing because the government has worked hard in this area," said Economic Minister Alejandro Ferreiro. "We believe this work is evident and that it is sufficient to comply with the Free Trade Agreement." Chilean Association of Pharmaceutical Laboratories vice-president María Angélica Sánchez maintains the country's drug producers are doing all they can. "The standards for them [the U.S.] are never high enough," she said. The U.S. government's decision comes just days after Chile's Senate rescinded passage of a bill that would have strengthened intellectual property enforcement within the pharmaceutical industry. Currently, patent compliance is regulated by a joint effort between Chile's Department of Intellectual Property (ISP) and the Institute of Public Health (ISP). Critics say the agencies are failing to regulate drug production as delineated in agreements between the U.S. and Chile. In a break from Chile's general party line on the issue, Jose Manuel Cousino, executive vice-president of the Chamber of the Pharmaceutical Industry (CIP), said about the dropped bill "We have lost a great opportunity to correctly implement the Free Trade Agreement with the United States." General Directorate for International Economic Affairs (Direcon) leader Carlos Furche insists that "Chile complies with international standards for intellectual property rights protection. But we do feel there is room for improvement and we are working towards this with the different interested parties." There are currently 12 other countries on the "Priority Watch List." Chile joins Brazil, Venezuela and Argentina as the fourth Latin American country on the list. China, Russia, Israel and Egypt are also on the list. The April 2006 review that motivated the status elevation was conducted "out of cycle," signifying that Chile's performance in the protection of intellectual property required further investigation than would normally be conducted for a country on the "Watch List." The report highlighted pharmaceutical production and the pirating of movies, music, and software as the two most troubling areas of patent infringement. Violations in these areas caused losses of 106.7 million US dollars in 2004. "It's the most significant commercial barrier in the (otherwise) excellent Chilean business market. If it were eliminated, it would potentially raise U.S. imports to Chile by 10 to 25 million USD dollars" said the Department of Commerce report. In Chile, 66% of all computer software is pirated, a three percent rise from 2003, according to a study by the Association of Software Distributors. Overall, the report criticized Chile for failing to fulfil its promise to investigate and prosecute intellectual property theft. It also noted that while some government agencies are working to curb patent infringement, Chile lacks the political will to effect large scale change and has not passed the laws necessary to really attack the problem. The USTR expressed disappointment with the effectiveness of the alliance between Chile's DPI and its ISP in preventing patent violations in the pharmaceutical industry. The report alleges that the ISP has acted in ways that encourage the illegal production of patented drugs by failing to communicate properly with the DPI when awarding pharmaceutical labs with permission to produce certain drugs. While the "Priority Watch List" is by definition a mechanism for identifying countries the U.S. considers to be in need of surveillance, it does not necessarily imply immediate consequences. Still, experts are speculating about what could be the next step. Furche emphasized that the classification is "an internal mechanism of the U.S. and stands outside the Free Trade Agreement between Chile and the U.S. So, the change in classification does not have concrete effects on bilateral trade." Minister Ferreiro echoed Furche's analysis of the development and noted, "If there are differences with respect to the application of the treaty, the treaty itself includes mechanisms for resolving the problem. This is not necessarily the same as the definition set unilaterally by one of the countries involved." Chilean Association for Industrial Property president Rodrigo Cooper disagrees and thinks Chile should take this warning seriously. "The U.S. could adopt unilateral measures against Chile that would affect trade, institute higher tariffs or retract some of Chile's free trade benefits as punishment for not complying with trade agreements," he said. The Santiago Times