RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/WGTTT/M/12 
20 September 2005 
 
 (05-4149) 
Working Group on Trade and Transfer of Technology 
Twelfth Session  
 
 
NOTE ON THE MEETING OF 6 JULY 2005 
 
Chairperson:  H.E. Mr. Manuel A.J. Teehankee (Philippines)    
  
A.
 ADOPTION OF THE AGENDA ........................................................................................................1  
B. ANALYSIS OF THE RELATIONSHIP BETWEEN TRADE AND TRANSFER OF TECHNOLOGY ............1  
C. ANY POSSIBLE RECOMMENDATIONS ON STEPS THAT MIGHT BE TAKEN WITHIN THE 
MANDATE OF THE WTO  TO INCREASE FLOWS OF TECHNOLOGY TO DEVELOPING 
COUNTRIES ............................................................................................................................... ...2 
D. OTHER BUSINESS ........................................................................................................................4  
 
 
A. ADOPTION OF THE AGENDA  
1. The agenda was contained in Airgram WTO/AIR/2607 of 21 June 2005.  The Chairman  
informed Members that under agenda item B UNCTAD would introduce a study titled ''Taxation and Technology:  Key Issues''.  Additionally, under "Other Business" UNIDO would make a presentation 
on their study ''National Programme for Developm ent of Indian Machine Tool Industry''.  
2. The agenda, as amended, was adopted. 
B. A
NALYSIS OF THE RELATIONSHIP BETWEEN TRADE AND TRANSFER OF TECHNOLOGY  
3. The representative of UNCTAD  introduced a study titled ''Taxa tion and Technology Transfer:  
Key Issues''.  The study raised a number of issues with regard to the implications of various tax 
instruments on transfer of technology from th e perspective of both technology importing and 
exporting countries.  In identifying some of the tax -related policy instruments that could be used to 
promote technology transfer to developing countries, the study underlined the important role that tax 
policy could play on flows of technology, both as an  incentive to attract technology and as a stimulant 
to technology exports.  However, for technology importing countries, the study showed that the 
challenge was to balance the need to facilitate t echnology acquisition by providing tax incentives with 
the need to maximize revenue collection.  Sim ilarly, technology exporting countries had to find the 
balance between the level of tax incentives that coul d be provided to encourage local firms to export 
technology, and the need to maximize tax revenue collection from income generated by the activities 
of these firms abroad.  The study also found that ta xation affected technology transfer;  firstly, by 
increasing the cost of the actual transfer, thereb y making the process of technology transfer more 
difficult and secondly, from an exporting country persp ective, it could have the impact of reducing the 
returns to the owner of technology, thereby discouraging the transfer of technology.  
4. According to the representative of UNCTAD, th e study found that the tax structure of a 
country was a determinant factor in the nature and flow of technology.  It highlighted the mitigating WT/WGTTT/M/12 
Page 2  
 
 effects of excessive corporate income tax, high  import duties, excessive taxation of dividends, 
royalties and technical fees and high withholding tax es on technology transfer.  It also found that from 
an international perspective, bila teral taxation treaties could facilita te technology transfer by, among 
others, reducing or eliminating double taxation, lowe ring the rates of withholding tax on royalties and 
technical fees and creating a conducive environment fo r Foreign Direct Investment (FDI) inflows.  A 
clear vision of national development goals whic h prioritized among economic activities coupled by 
carefully targeted tax incentives was considered to pl ay an important role in investment decisions and 
efforts to acquire technology through trade and FDI flows.  Similarly, tax incentives including exemptions, repatriation of royalties and fees, R esearch and Development (R&D) incentives were 
seen to have a dual impact in encouraging R&D act ivities in host countries and facilitating the transfer 
of technology, knowledge and skills. 
5. Underpinning the significance of a holistic approach to a better understanding of the interface 
between trade and transfer of technology, Members f ound the study to be a valuable contribution to 
the deliberations of the Working Group.  Although Members only offered preliminary views, a useful discussion took place on issues related to national ta x regimes and their implicit relation with FDI 
flows and technology transfer.  They felt that taxa tion policies had  elements of both home country 
and host country measures and hence had a vital role  to play in promoting technology transfer and 
competitiveness.  One Member noted that the study underscored the fact that developed countries had very few programmes which provided fiscal in centives to encourage technology transfer to 
developing countries.  In that context, attention was drawn to some of the fiscal incentive schemes 
which the developed countries had effectively used  to promote technology relocation in nationally 
disadvantaged regions and the need to emulate such  programmes in an intra-country model.  Some 
Members pointed to the dilemma faced by developi ng countries in striking a balance between revenue 
collection and encouraging technology transfer.  
6. Members agreed to continue their considerati on of the study at the next meeting of the 
Working Group.  
C. A
NY POSSIBLE RECOMMENDATIONS ON STEPS THAT MIGHT BE TAKEN WITHIN THE 
MANDATE OF THE WTO  TO INCREASE FLOWS OF TECHNOLOGY TO DEVELOPING COUNTRIES  
7. Before taking up the first two recommendati ons contained in document WT/WGTTT/W/6 on 
possible recommendations on steps that might be ta ken within the mandate of the WTO to increase 
flows of technology to developing countries, Members considered the communication from Cuba contained in document WT/WGTTT/W/9.  The comm unication focused on the need for the General 
Council to take decisions that could guide the work of the Working Group in the period up to the Hong Kong Ministerial Conference.  Underscori ng the need to encourage different modes of 
technology transfer to developing countries, including promotional measures to establish a sound 
technological base and modes of capacity building that would ensure proper assimilation of the 
technologies transferred, the delegation of Cuba stat ed that it was necessary that  developing countries 
secure a share in the growth of international tr ade commensurate with their economic development 
needs.  They felt that in order to ensure that developing countries properly integrated into the 
multilateral trading system, it was necessary to re view the effectiveness of the provisions on 
technology transfer in the WTO Agreements and to assess the extent to which these agreements 
hindered flows of technology to developing countries.  
8. The representative of Cuba
 suggested that the Working Group step up its work  during the 
second half of the year with the objective of adop ting concrete recommendations at least as regards 
the first two recommendations contained in WT/WG TTT/W/6, namely;  (i) an examination of the 
different provisions contained in va rious WTO Agreements relating to technology transfer;  and (ii) 
the provisions contained in various WTO Agreements which may have the effect of hindering transfer  WT/WGTTT/M/12 
 Page 3 
 
 
 of technology to developing countries and that these recommendations be presented to the Sixth 
Ministerial Conference.  In that context, it was s uggested that at the General Council meeting in July, 
Members approve a number of policy decisions as guidelines for the work of the Working Group in the coming months.  These included:  (i) a reitera tion that the WTO was the appropriate forum to 
address the issue of trade and transfer of technology;  (ii) a reaffirmation of the importance and 
relevance of the Working Group to developing count ries in the WTO framework and in that context 
account be taken of the implications of the provisi ons relating to technology transfer in various WTO 
agreements;  and (iii) a reiteration of  the urgent  need for the Working Group to agree on concrete 
recommendations for adoption at the Hong Kong Ministerial Conference on the basis of a set of recommendations made by a group of developi ng countries in document WT/WGTTT/W/6 of 
7 May 2003. 
9. Agreeing with the broad thrust of the submi ssion, some Members stated that it brought to 
light the slow progress made by the Working Group on addressing the need for technology transfer for developing countries.  They felt that several  aspects of Cuba's communication pointed to the 
direction that Members needed to move in thei r work in the run up to the Hong Kong Ministerial 
Conference, for example, the need to  focu s on the first two recommendations contained in 
WT/WGTTT/W/6 with the objective of developing concrete recommendations for adoption by the 
Conference.  In that context, those Members insisted  that it would be important to intensify the work 
and more meetings of the Working Group would n eed to be held from now until the Hong Kong 
Ministerial Conference.  
10. Other Members, however, stated that the reas on work in the Working Group had been rather 
slow was because the issue was complex and Members needed to fully explore all related aspects of it 
to develop a clear understanding of the nexus between  trade and transfer of technology.  Secondly, 
they felt that the proponents had neither ela borated upon the proposals contained in document 
WT/WGTTT/W/6 nor had they come up with specific examples to support the argument that WTO Agreements hindered technology transfer.  Moreove r, the fundamental question of the relationship 
between trade and transfer of technology still rema ined unclear.  A number of these Members felt that 
recommendations, if any, should organically flow fro m the analysis of the relationship between trade 
and transfer of technology.  The fact that the issue was complex and Members' understanding of it 
was still superficial called into question the rep eated demand for developing recommendations.  They 
felt that considering the complexity of the issue, it was unrealistic to assume that more meetings of the 
Working Group could lead to possible recommendations by the forthcoming Ministerial Meeting.   
11. Other Members disagreed and stated that the Ministers had clearly mandated the Working 
Group to come up with recommendations on how tran sfer of technology to developing countries 
could be facilitated.  They insisted that Members engage in substantive discussion rather than in a 
procedural debate.  One delegation pointed to the n eed for coherence in work being done on the issue 
of technology transfer in different WTO bodies with a view to bringing the key elements of those 
discussions into the deliberations of the Working Group.   
12. The Chairman
 noted that in the absence of further contributions by Members, in particular by 
the proponents,  progress would remain elusive.  He  indicated the possibility of holding an informal 
meeting of the Working Group before the new session.  
13. Members, thereafter, continued their c onsideration of the first two recommendations 
contained in document WT/WGTTT/W/6.  One Me mber reiterated its earlier stance that the 
implementation and  review of provisions in vari ous WTO Agreements were under the purview of 
relevant WTO bodies and that the Working Group lack ed technical expertise to undertake such an 
examination.  A better understanding of technology transfer and its nexus with trade would only be 
possible if Members considered the issue in a holis tic manner rather than attempting to look at the 
WTO provisions in isolation.  Another Member sought  clarification, information and analysis on what WT/WGTTT/M/12 
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 the recommendations focused on as well as specific examples on how provisions in WTO Agreements 
hindered technology transfer.   
14. The proponents on the other hand felt that it would be perfectly legitimate for the Working 
Group to look at the provisions relating to technol ogy transfer in the WTO Agreements and to assess 
their effectiveness or otherwise in the context of the mandate contained in paragraph 37 of the Doha 
Ministerial Declaration.  In that context, one Me mber alluded to Articles 7, 30, 31 and 66.2 of the 
TRIPs Agreement and suggested that in the next meeting of the Working Group the TRIPs Council be 
requested to brief Members on the work carried ou t by the TRIPs Council on provisions related to 
technology transfer in the TRIPs Agreement.   
D. O
THER BUSINESS  
15. Under "Other Business", the representative of UNIDO  made a presentation on a case study on 
the ''National Programme for Development of Indian Machine Tool Industry''.  The study examined 
the successful growth of the Indian Machine Tool  Industry and the current challenges faced by the 
sector.  It highlighted the crucial role played by public-private partnership in the  programme which 
had resulted in rapid growth in production and horiz ontal expansion in a variety of machine tools.  
The study showed that an open market economy a nd strong linkages between public policy, research 
institutes and other organs of the private sector fa cilitated the transfer of technology.  Commenting on 
the study, some Members felt that it was a useful contribution to the deliberations of the Working 
Group in that it pointed to various ways in which both private and public sector could play a role in 
the process of technology transfer through cohesive  partnerships.  These Members thought that the 
Working Group could benefit from UNIDO's work in  the area of technology transfer.  It was 
suggested that UNIDO undertake more studies relevant  to the deliberations of the Working Group. 
16. Wrapping up the discussion on UNI DO's presentation, the Chairman  indicated that he will 
soon consult with the representative of UNIDO with a view to find out how best UNIDO could 
contribute to the deliberations in the Working Group. 
17. In closing, the Chairman informed Members that the next meeting of the Working Group was 
tentatively scheduled for Tuesday, 11 October 2005.  
 
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