IX. The cookie is used to store the user consent for the cookies in the category "Other. Report a Violation, 11 Criticisms to the Theory of Comparative Costs, Difference between Absolute and Comparative Advantage of International Trade. But in most of the cases, such as in South Africa, Brazil, and Thailand, patent owners have not been compensated even though their patents and innovations have been used in making pharmaceuticals and therapies to save lives. In the case of the HIV/AIDS pandemic, it clearly posed existential threat to both patients and the global health at large. Equal protection under the auspices of justice as fairness means that society must ensure adequate compensation to patent owners as well. 20, the factor prices of England in terms of Indias currency is expressed in column (4). On the contrary, in the capital-abundant country (England), capital price is low relative to labour price. If this occurs, it means that the larger society may not have access to valuable knowledge and these could be costly in the wake of humanitarian health crises. Proportions of labour and capital used in Wheat = slope of WA, Proportions of labour and capital used in Cloth = slope of CA, Proportions of labour and capital used in wheat = slope of WB, Proportions of labour and capital used in Cloth = slope of C1B. Also Norman DanielsJustice, Health,and Healthcarein American Journal of Bioethics, (December 7, 2010) p2-16. The exchange of these goods usually results in lower local product costs and increased volume worldwide. [xiii]In evaluating a course of ethical action, one has to adhere to universal principle akin to a call to duty such that anyone, anytime, and anywhere may make the same ethical decision. This theorem relates trade with economic growth. This cookie is set by GDPR Cookie Consent plugin. This then leads to the third element, benefit. Both the United States and Canada also expressed their willingness to use the Doha Declaration to override Bayers patent to manufacture Ciprofloxacine (Cipro) in case of a hypothetical outbreak of anthrax which could constitute a case of national emergency. In the words of Ohlin- Generally, abundant factors are relatively cheap, scanty factors are relatively dear, in each region. In the US, if the opportunity cost to produce one portable radio were equivalent to producing two pieces of software, then the country would find it beneficial to trade with Japan, where software is not produced to any great extent, and they could establish a one-to-one trade ratio between electronics and software. But is it true that international laws such as WTOs TRIPS prohibit such infringements? Voices in Bioethicsbrings together diverse views through an academically rigorous online format and seeks to identify issues and present workable long-term solutions. Before publishing your articles on this site, please read the following pages: 1. In fact, UKTI statistics show that businesses believe that exporting leads to innovation increases in break-through product development to solve problems and meet the needs of the wider customer base. Do you want to expand further in 2021 and seize more exciting international opportunities but feel unsure about where to start? Hence the trade will occur between India and England. Thus, specialisation based on comparative cost advantage clearly represents a gain to the trading countries in so far as it enables more of each variety of goods to be produced cheaply by utilising the abundant factors fully in the country concerned and to obtain relatively cheaper goods through mutual international exchange. Patent, Patient rights, TRIPS, Access to medicine. But, the results of an empirical study made by Leontief point out that a capital-rich country like America exports labour-intensive goods and imports capital-intensive goods. According to Section 28 of TRIPS, A patent shall confer on its owner the following exclusive rights: (a) where the subject matter of a patent is a product, to prevent third parties not having the owners consent from the acts of: making, using, offering for sale, selling, or importingfor these purposes that product. The theory or the principle of utility suggests that when one is confronted with moral choices or liberties, one has to choose an action that leads to the highest or maximal amount of pleasure or good for a greater number of people while concurrently minimizing any harm as much as possible. This paper examines the arguments for sustaining international patents and explanations for patent infringements, especially when there are serious medical needs of pandemic and global proportions within the context of TRIPS and ethical principles. Hence, the trade between two countries will not take place. Since, after trade, proportions of labour and capital used to produce goods in both countries are equal, this implies that the ratio of labour price to capital price in both countries is equal. Commodity Prices Determine Factor Prices: According to the modern theory, factor prices determine costs and thereby the commodity prices. (ii) In each country, the economic structure, in the form of output combinations, shifts in the direction of increased specialisation in the production of that commodity which use relatively more of abundant factor. It was first formulated by Swedish economist Heckscher in 1919 and later on fully developed by his student Ohlin in 1935. He stresses that free-trade is the pre-requisite of gains and improvement of worlds welfare. Part I of the table shows that Leontief paradox still exists. In the case of patent infringements, the principle of utility does not take into account the inventors and the companies who owned these patents and have invested substantial amount of time and resources in research and development. Benefit from the economies of scale that the export of your goods can bring go global and profitably use up any excess capacity in your business, smoothing the load and avoiding the seasonal peaks and troughs that are the bane of the production managers life. Tech. This indicates that, in the absence of trade, the relative price of wheat is lower in India and higher in England. On the other hand, country has least comparative disadvantage in production of Y, though she has absolute cost disadvantage in both X and Y. The data compares the factors of production used to produce one million dollars worth of the U.S. exports with those used to produce the same value of U.S. imports. A rise in the labour price relative to capital price increases the cost of the labour-intensive good (wheat) relative to that of the capital-intensive good (cloth). This is why, it has been suggested that breaking patents or allowing local governments to issue compulsory licenses on patents could be a bad precedent. (vi) No change occurs in the available supplies of productive factors. WTOIntellectual Property - Overview ofTRIPS Agreement, www.wto.org/english/docs_e/legal_e/27-trips_04c_e.htm, U.S. Patent Laws, Regulations, Policies & Procedures, Genetically Modified Organisms (GMOs) Part I, Voices in Bioethics: Archives (2014-2015), The Quest for Ethical Isometric Principles in Cross-Cultural Bioethical Research, Some Ethical Paradigms In View Of Equipoise and Randomized Clinical Trials, An Ethical Expose on the Oral Arguments in Sebelius v. Hobby Lobby and Conestoga Woods v. Sebelius, Voices in Bioethics Podcast (columbia.edu), Creative Commons "Attribution" (CC-BY) License. [i] William W. Fisher III et al The South Africa AIDS Controversy: A Case Study in Patent Law and Policy in The Harvard Law School. Table-2 shows the factor content of the U.S. exports and imports. It ignores the demand side. Indeed, the relative gains of the two countries will be conditioned by the terms of trade and one is likely to gain proportionately more than the other but it is definite that both will gain. Conversely, Englands exports embody more capital than its imports and thus England is indirectly exporting its cheap capital. Let us illustrate Heckcher-Ohlin theory with an example of two countries India and England. A second principle is that nations may develop a competitive advantage relative to other nations, based on skills, access to resources, and the competitive situation arising from domestic competition. For utilitarians, an action is ethical if it is useful; hence the principle of utility. Furthermore, patents should be protected but each attempted infringement should be analyzed based on specific needs, and infringers (as in the case of non-emergency situations) should be sanctioned under the laws. Principles of Biomedical Ethics(Oxford University Press: London, 2009). This website uses cookies to improve your experience while you navigate through the website. [ix], In brief, both parties agreed on the substantive fact that there was a dire medical need, but the main issue was whether the insertion of Section 15C to the MRSCA contravened TRIPS as evident in the lawsuit. Heckscher-Ohlin theory involves the following arguments: (i) Two countries A and B involve in trade if relative prices of goods X and Y are different. As Adam Smith pointed out, if there is an absolute cost difference, a country will specialise in the production of a commodity having an absolute advantage (see Table 1). Patent Protection and the Global Access to Essential Pharmaceuticals Infringem Mill added a quantitative component to Benthams theory by suggesting that an action is ethical if it brings about the greatest amount of pleasure for the greatest number of people. SA countered these allegations by first responding that MRSCA was promulgated to grant powers to the Minister of Health in order to circumvent patents in consonant with Article 31 of TRIPS. Similarly, in country , IX = 0.6 domestically, after trade, its gain is 0.4Y. It is important to note that the general public interest exemptions were stipulated in Article 8 (1) of TRIPS which categorically requires members to adopt measures necessary to protect public healthand to promote the public interest in sectors of vital importance. Commodities requiring for their production much of the former and little of the latter are exported in exchange for goods that call for factors in the opposite proportions. This analysis makes the case that it is possible to set aside stringent patent laws in the wake of emergencies. It was formulated by David Ricardo in 1815. A country specializes in a specific commodity due to mobility, productivity, and other endowments of economic resources. We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. And once you have reached saturation point, what then? Or have you already taken the plunge but found youre unable to perform well in the new market? He remarked- International trade is but a special case of inter-local or inter-regional trade.. (iv) There is perfect competition in both commodity market and the factor market. The European Union and WTO supported the SA position, and later, SA pledged to comply with TRIPS agreements.[x]. Patents are negative legal rights that act as stop signs to prevent non-innovators from making, using, or selling inventions without expressed permission from inventors. Furthermore, the WTO TRIPS (Article 31) anticipated such emergencies and therefore stated among other things in situations of national emergency or other circumstances of extreme urgency, the right holder[of a patent] shall, nevertheless, be notified as soon as reasonably practicable. When international trade occurs, India, the labour-rich country tends to specialise increasingly in the labour-intensive wheat and move to point M on its efficiency locus. General Features of Modern Theory 2. In addition Article 30 indicates that Members may provide limited exceptions to the exclusive rights conferred by a patent cognizant of the interests of third parties. There is, therefore, only a single categorical imperative and it is this: act only in accordance with thatmaxim through which you can at the same time will that it become a universal law. Table 3 Cost of Production in Labour Units: It will be seen that country A has an absolute cost advantage in both the commodities X and Y. Terms of Service 7. By breaking the patents, these two countries were able to provide enough and affordable medications to their patients. In our illustration, since country A has comparative cost advantage in commodity X, as per Ricardo s theorem, this country should tend to specialise in X and export its surplus to country in exchange for (i.e., import of from B). It should be noted that, to know the comparative advantage, we have to compare the ratio of the costs of production of one commodity in both countries (i.e., 10/15 in the case of X in our example) with the ratio of the cost of producing the other commodity in both countries (i.e., 20/25 in the case of in our example). Because, India is labour-abundant, it will produce a higher ratio of wheat to cloth than England at a given ratio of the price of wheat to that of cloth. Heckscher-Ohlin theory, also called the factor endowments theory of international trade, attempts to explain that international trade is simply a special case of inter-local or inter-regional trade, and there is no need for a separate theory of international trade. These cookies will be stored in your browser only with your consent. Unemployment was at 31 percent with a per capita income of $2,700, compared to $37,500 in the United States. 8 Theories of International Trade: Explained, PPT Available - Gk Education In the absence of trade, the equilibrium for India is at point 1 and the equilibrium for England is at point 3. The similarity between internal trade and international trade is clear from the following points- (a) Immobility of factors is not a special feature as between countries, but can exist even in different regions of the same country; (b) similarly, labour and capital can move both within a country as well as between the countries; (c) cost of transport is always there in both internal and international trade; (d) existence of different currencies does not pose any problem for international trade because different currencies are connected with each other through a system of exchange rate. Heckscher-Ohlin theory supplements, and not supplants, the Ricardian comparative cost theory of international trade. If factor endowments theory is correct, then a country should export factors for which factor share exceeds the income share and import factor for which it is less. In Figure-3, PP curve represents the relative factor-commodity price curve. The software cannot necessarily be considered a commodity but it has become an essential component of most businesses in the US and abroad. See also Lissett Ferreira Access to Affordable HIV/AIDS Drugs: The Human Rights Obligations of Multinational Pharmaceutical Corporations in Fordham Law Review Volume 71(2002), [xiii] Immanuel Kant Kant's Grounding for the Metaphysics of Morals (1985), [xv]Tom Beauchampet al. Content Filtrations 6. [i]It is important to note here that these countries are all signatories to the World Trade Organizations (WTOs) Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). Similarly, in England, as a result of trade, the abundant factor (capital) becomes more scarce and its price tends to rise, while the scarce factor (labour) becomes more abundant and its price tends to fall. For, comparatively, country As labour cost involved in producing 1 unit of X is only 66 per cent of Bs labour cost involved in producing X, as against that of 80 per cent in the case of Y. Thus, in India, as a result of trade, the abundant factor (labour) becomes more scarce and its price tends to increase, while the scarce factor (capital) becomes more abundant, and its price tends to fall. Testing of this hypothesis might substantiate the factor- endowments theory. It states that an increase in the relative price of the labour- intensive good will increase the labour price relative to both commodities prices and reduces the other factor prices relative to both commodity prices. WAMC is Indias efficiency locus, describing the set of output alternatives for the production of wheat and cloth depending upon different production possibility curves. The relative demand curve for wheat (RD) has been assumed to be the same for both the countries. If, for example, India specialises in wheat production, while England produced both goods, then Englands costs are equal to relative prices OW2, but Indias costs will be somewhat less, say OW2. Plagiarism Prevention 5. [v]But was this lawsuit justified? [xxvi]Nonetheless, the TRIPS grants some exemptions for circumventing patents in the case of national emergencies such as epidemics. Since, in absence of trade, proportions of labour and capital used to produce goods in both countries are different, this implies that ratio of labour price to capital price in both countries is different.