17 FTA policy- Making in the EU and its Effects: Policies on Geographic Indicators andMedicines/Medical Equipment (*)
Overseas Researcher: Momoko NISHIMURA(**)

Recently, the European Union has shifted external trade policy priority from multilateral negotiations tobilateral talks, growing aggressive about concluding bilateral or regional free trade or economic partnershipagreements. The EU’s recent FTAs concluded amid the shift have growingly included new protection provisions
on intellectual property rights that are tougher than TRIPs (Trade-Related Aspects of Intellectual PropertyRights) Agreement standards, attracting attention along with U.S. FTAs. Generally, the EU’s policy shift has
been discussed only from the viewpoint of stalled trade liberalization talks at the World Trade Organization. Incontrast, this study discerns how political relations within the EU have influenced the EU’s FTA policy
including the IPR protection policy. Specifically, it focuses on two topics: access to drugs and geographicalindications -- and analyzes how EU healthcare and agricultural policy changes over the past more than 10years have led to new IPR protection provisions in EU FTAs.

Ϩ Introduction
In response to stagnant multilateral tradenegotiations at the WTO over recent years,
industrial countries including the United Statesand EU nations have growingly attempted torealize IPR protection tougher than the TRIPs
Agreement through regional trade agreements,
particularly FTAs, instead of WTO talks. Amongsuch attempts to enhance the TRIPs Agreement
through FTAs, this paper takes up the moves ofthe EU. While the United States and Asian
countries including Japan had begun to emphasize
bilateral and regional FTA negotiations ratherthan WTO talks, the EU had long retained a trade
policy pillar of promoting multilateral WTO talks.
Recently, however, the EU has reversed thepolicy and made clear its attitude of giving
priority to concluding FTAs with other countries.
Reversing the EU policy was a trade strategy
titled “Global Europe: Competing in the World”
released by the European Commission in October
2006. Actually, the EU struck the Canada-EU
Comprehensive Economic and Trade Agreement,
known as CETA, in October 2014, after signing
FTAs with South Korea and Singapore. In 2013, itlaunched FTA negotiations with Japan and theUnited States.
This paper focuses on the problems of accessto drugs and geographical indications in therecent EU FTAs. Drug and agriculture industries
have long been mainstay industries for the EU
and have grown even more important asexporters. Nevertheless, the EU’s recent FTA
negotiations indicate that EU countries have been
more aggressive than other industrial countries interms of geographical indications while being lessenthusiastic than the United States about drug
access. Why has the EU taken such different
approaches on the two problems? The EU is now
a large union of as many as 28 countries so thatits decision-making process reflects various EU
organizations’ positions, member countries’
national interests and various interest groups’opinions. This paper’s objective is to ascertain
how the EU’s FTA policy regarding the two
IPR-related problems of drug access andgeographical indications is linked to its healthcareand agriculture policies under such situation, byanalyzing interviews with EU experts andprimary materials.

(*) This is an English translation of the summary of the report published under the Industrial Property Research
Promotion Project FY2014 entrusted by the Japan Patent Office. IIP is entirely responsible for any errors in
expression or description of the translation. When any ambiguity is found in the English translation, the original
Japanese text shall be prevailing.
(**) At the University of London, School of Oriental and African Studies, over a period of approximately 5 months fromApril 2, 2014 through August 29, 2014, and at Max Planck Institute for Innovation and Competition, over a period ofapproximately 4 months from August 30, 2014 through December 17, 2014, as an Overseas Researcher under theProgram for the Fiscal Year 2014.
IIP Bulletin 2015 Vol.24● 118 ●

ϩ EU Trade Policy and IPRs
Generally, all EU external economic policies
including trade policies are first drafted andconsidered by the European Commission before
being submitted to the EU Council. In response,
the Council authorizes the Commission toconduct external negotiations. The most central
actor in this process is the Commission thatdrafts trade negotiation policies and serves as theonly EU trade negotiator. Particularly importantis its policy drafting. Trade policies are drafted bythe Trade Directorate-General and subjected toits consultations with other directorates-general
before being presented to the Council. Internalmarket matters are referred to the InternalMarket and Services Directorate-General andagricultural matters to the Agriculture and RuralDevelopment Directorate-General. The Trade
Directorate-General usually consults with thetwo other departments on trade policies. Since
trade problems have recently been related to theenvironment, development and other matters,
however, it has growingly consulted with theInternational Cooperation and Development
Directorate-General and the Environment
Directorate-General as well. Based on suchinter-department consultations, the European
Commission analyzes roadmaps and policy effects
regarding the policies. After these consultations,a group of relevant commissioners considers draftpolicies. Trade policies are considered at theTrade Policy Committee. The TPC informs otherEU organizations of the Commission’s tradepolicies and notifies EU member countries of theCommission’s policy implementation. Finally, thedraft policies are submitted to a college meetingof European Commissioners and then to the EUCouncil.
Unlike European Parliament members,
European Commissioners are not elected througha direct election. Unlike EU Council members,
the Commissioners are not given any credentials
from member countries’ parliaments. Therefore,
each directorate-general of the Commission
positively contacts non-state actors throughregular or ad hoc civil society dialogue and publicconsultations. Non-state actors participating inmany of these meetings include both non-profit
organizations like rights and social groups, andprofit-making institutions such as enterprises andbusiness groups. Over recent years, enterprises
and business groups have rapidly expanded theirlobbying of EU organizations instead of theirrespective governments. In response, the EU

created a lobbyist registration system in 2011 tohelp secure the transparency of lobbying inpolitical processes.
In this way, various opportunities are given
for various non-state actors to participate in theprocess for making trade policies while theEuropean Commission nominally plays a central
role in the policy-making process with which theEU Council and Parliament as well engage.
Essentially, however, the European Commission’sroles in making EU trade policies have greatlychanged through the history of European
integration. Particularly, these changes havegrown more remarkable sine the EU became
proactive about concluding new FTAs in themid-2000s. While the EU has shifted trade policypriority from the WTO to FTAs, effective
authorities to make trade policies haveconcentrated in the European Commission moreand more. There are three factors behind theconcentration. The first factor is thediversification or complication of trade problems.
In recent years, the scope of problems discussed
in the trade area has expanded to cover not only
tariff and nontariff trade barriers but also
intellectual property rights, the environment andinvestment. Human resources who are wellversed in both trade and each of these problems
are limited. Therefore, officials in the EuropeanCommission’s Directorate-General for Trade,including the IPR Unit, have decisive influenceson the trade policy-making process. Second,details of recent FTA negotiations have mostly
been kept confidential. A general trend for today’s
FTA negotiations is that progress in negotiations
is sequentially and briefly reported with details
kept confidential. This is the same case with theEU’s FTA negotiations. EU member governments
are given opportunities to raise opposition todetails of negotiations only when FTA
negotiations enter the final stage with FTA
provisions mostly fixed. Third, FTA negotiations
on IPRs have recently tended to specialize inissues given priority by negotiating countries. In
negotiations on traditional IPR treaties,
participating countries had generally begun withdiscussions on basic matters such as definitions
and scopes of all IPRs including patents,
trademarks and copyrights in a bid to set
international standards that all these countries
could implement. In most recent FTA
negotiations between industrial countries,
however,participatingcountries
haveconcentrated discussions and made consensus
only on specific IPRs that they want to protect.

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Therefore, European Commission negotiators canconcentrate their knowledge and information on alimited range of areas, making it more difficult forothers to raise objection to agreements drafted bythese negotiators.

Ϫ International Discussions on
Drug Access and Geographical
Indications
Issues cited as IPR problems related to drug
access include the protection of drug patents andconditions for compulsory licenses. In response
to international opinions sympathetic to poor
countries over drug access, however, the U.S.
government has eased its once tough attitude onthese problems. Some developing countries like
India are now attempting to develop drug patent
systems to the advantage of its drug industry’s
international competitiveness. While many
operational problems are left unsolved, countries
with extreme opinions seeking to exempt drugs
from patent protection or exceptionally admit
compulsory licensing now belong to a minority.
Therefore, these problems are not discussed
frequently at trade negotiations among industrial
and emerging countries.
Rather, international discussions on drugs
are making progress in response to drug
technology development and drug distribution
expansion. Major issues at present include (1)extending drug patent protection periods, (2)protecting drug approval application data, (3)generic drug promotion systems, (4) protecting
medical technology patents and (5) protecting
biotechnology-related
drugpatents.
No
consensus exists on these issues both between
industrial and developing countries and between
industrial countries. At a time when multilateralnegotiations at the WTO remain stagnant with
developing countries’ opinions growing dominant
at other international organizations, how theseissues would be solved through other frameworks
such as regional and bilateral talks is attracting
attention. Particularly, the U.S. government gives
priority to the first, second and third issues in
FTA negotiations.
As for geographical indications, the TRIPs
Agreement, though providing definitions, falls
short of specifying how any goods should beprotected. It only provides for protection to avoid
consumers’ misperception or confusion about
geographical indications. But the agreement calls
for protection for geographical indications forwines and spirits irrespective of consumers’
IIP Bulletin 2015 Vol.24

misperception or confusion. The EuropeanCommunity had given top priority to theprotection for wines and spirits at the Uruguay
Round. After the creation of the WTO, the EU
strongly urged other countries to expand therange of products for the “additional protection”
to cover not only wines and spirits but also others.
But the United States, Australia, Canada, New
Zealand and Chile raised strong opposition to theEU proposal, leading the whole of WTO
negotiations to stagnate with no consensus
formed on the matter. Meanwhile, the WorldIntellectual Property Organization has set up aworking group to revise the Lisbon Agreement,
the only international system for the international
registration of appellations of origin. Despite
vigorous discussions at the group, the number ofparticipating countries is limited.
At present, no international treaty requires
countries to take specific measures to protect
appellations of origin or geographical indications,leaving protection measures to differ fromcountry to country. The United States andAustralia protect them under trademark systems
including certification and collective trademarks,
while the EU and India have identified
geographical indications as an independent IPR
for their respective protection systems. Someother countries adopt both protection systems.

ϫ Drug Access in EU and FTA
PolicyThe drug industry has traditionally been amainstay industry in European countries. Europe has
the second largest share of the global drug market
after the United States. In 2013, the U.S. share stoodat about 41% against around 27.4% for Europe.
Research and development spending at large
companies in Europe, though less than in the UnitedStates, grew smoothly from 1990 to 2010.
Since the early 2010s, however, the European
drug industry has faced a difficult situation. R&D
spending has stagnated since 2011. While R&D
costs for new drugs in Europe have grown greatly
as in other industrial countries, European drugmakers are required to develop new leading
products with patents for their present leading
products planned to expire in a few years. As seen
in other industrial countries, generic drugs’
penetration rate has increased in Europe. In
addition to the problems seen in other industrial
countries, the EU drug industry has uniqueproblems. First, each EU member country’s drug
market share is very small, with the European drug

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market saturated. Since the principle of freemovement of goods works in the EU, goods withprices differing from country to country areimported from countries with lower prices to thosewith higher ones. Particularly, such parallel importsof drugs can expand due to lower transportation
costs, discouraging drug makers from stepping up
R&D operations.
As explained above, the European drug
industry has reached regional and international
turning points. Policy harmonization in the drugarea started only in 2006, giving priority tocorrecting healthcare inequality. Moves toharmonize policies to raise healthcare technology
levels throughout Europe have yet to gain
momentum. EU member countries strongly resist
harmonizing their drug IPR systems. The EU’s
recent IPR policy has given priority to making abalance between old and new drug market players.
Within the EU, conflicts exist between old industry
players and between old and new players. EU
member countries also have disputes over drug
price gaps. Relevant EU policies thus give priorityto balancing between different interests. Therefore,
the EU is not as proactive as the United States
about promoting old drug market players’ R&D
operations or making it easier for generic drugmakers to enter the market through IPR policies.
This is the same case with the EU’s FTA policy.
Drug IPR provisions in the EU’s recent FTAs withothers indicate that the EU has asked FTA
negotiation partners to adopt provisions similar toU.S.-requested ones for extending patent protection
periods and protecting drug approval application
data, while being less proactive about taking up inFTAs other problems such as regulating third-party
licensing before patent period expiration andprotecting healthcare technology patents. Ratherthan setting new international rules on patent
systems, the European Commission wants to
expand cooperation in procedures for inspection
regarding the code of conduct for drug production
and in drug regulation procedures such as thesimplification of generic drug approval systems.
The Commission’s Trade Directorate-General stillemphasizes improvement of the IPR protectionlevels in developing countries and vows to enhanceefforts to provide developing countries withlegitimate drugs through appropriate routes byenhancing regulations to block the fast-expanding
market for counterfeit drugs and by improving theefficiency of the tiered pricing system. Such FTA
policy of the European Commission still remains
under fire among citizen and rights groups but ispopular among European drug makers and industry

groups.

Ϭ Geographical Indications in EUand FTA Policy
Agriculture as well is the EU’s mainstay
industry. The Common Agricultural Policy, known
as CAP, transformed European countries plaguedwith serious food shortages during and after WorldWar II into big agricultural countries. The CAP
initially gave priority to stable food supply. As
overproduction grew chronic in the 1980s, surplus
products were exported with export subsidies
provided. Then, CAP spending expanded. As new
European Community members had less production
capacity and output than original members, growing
gaps between EC members emerged as a serious
problem. In response, the MacSharry reform wasdecided on in 1992 to shift the CAP model fromprice support to direct payments to farmers. TheMacSharry reform was designed to address regional
problems. But the eventual bold model reform
responded primarily to external relations,particularly U.S. pressure. In the 1990s, EC grain
exports began to exceed imports, prompting theUnited States, exporting grains to the EC, to takeadvantage of the Uruguay Round launched in 1986
under the General Agreement on Tariffs and Trade todemand the abolition of EU price support and export
protection. As a result of the Uruguay Round, a farm
trade agreement came for the tariffication ofquantitative import restrictions and other nontariff
trade barriers, the reduction of domestic support andexport subsidies, and other measures. The CAP waslater reformed several times. CAP spending has
expanded in line with an increase in the number ofmember countries. But CAP spending’s share of total
EC/EU spending has declined since a peak in 1985.
In this way, the EU’s agriculture grewsmoothly based on the CAP that was maintainedwith priority shifting from productivity tocompetitiveness and to sustainability. But theglobal financial crisis in 2008 and a subsequent
slump of the real economy greatly affected the EU’sagriculture. The EU’s agricultural income plunged
substantially in line with an agricultural output fall.
EU agricultural exports declined sharply in 2009
after expanding smoothly from 2003. Later,
however, agricultural exports recovered fast while
the EU’s economic slump was prolonged with
agricultural output leveling off. The EU achieved
an agricultural trade surplus in 2010 after a deficit
and has expanded its surplus year by year. Driving
agricultural export growth since 2010 have been
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vermouth and processed food products.
In response to the 2009 agriculture slump
and later agricultural export growth, theEuropean Commission’s Directorate-General for
Agriculture and Rural Development has
growingly emphasized influences of theprotection of geographical indications on the EU’s
external trade in its agriculture policy. It has
concluded that as the enhanced protection ofgeographical indications grows more and more
important in future international economicnegotiations,appropriateprovisionsongeographical indications are a prerequisite forFTAs. The directorate-general has paid attention
particularly to growth in final product exports
including wines and spirits. At present, most wineand spirit geographical indications protected
within the EU are subjected to protection inforeign countries through the TRIPs Agreement,FTAs and agreements specialized in wines andspirits. The European Commission seeks tofurther boost exports by expanding geographicalindication protection in foreign countries to cover
final agricultural products including cheese andprocessed meat.
Such strategy of the European Commission
has been remarkably indicated in its FTA policy
over recent years. A working paper of theAgricultureandRuralDevelopment
Directorate-General calls for giving priority topreparing a list of EU geographical indications tobe protected in third countries, to expanding thescope of additional protection in the TRIPs
Agreement to cover not only wines and spirits but
also other food products and to attempting tohave geographical indications coexist withexisting trademarks. The EU’s recent FTA policy
hasattractedattention
bycallingfor
EU-registered geographical indications to beprotected in FTA partner countries, rather thanmaintaining the EU’s past attitude of seeking tocreate a new multilateral system similar to theEU system. Such EU attitude had been seen at
WTO negotiations. The policy seeks to use
value-added such as quality and brands forenhancing products having less international
competitiveness to promote exports.
The EU and the private sector haveestablished consensus on the FTA policy of theEuropean Commission. EU agricultural groups
have consented to the advantage that foreigncountries’
protectionofEU-registeredgeographical indications for products will add
value to the products. Few conflicts of interest
have emerged between EU member countries

IIP Bulletin 2015 Vol.24

over the protection of geographical indicationsregistered in the EU. No EU member country hasraised an objection to providing a list ofgeographical indications for protection to FTA
partner countries. As EU members differ overreforming the present geographical indication
system or expanding the scope of geographicalindication protection to cover non-agricultural
products as well, some members are cautious
about allowing the geographical indication
protection system itself to be considered at FTA
negotiations. But such cautious countries’
opinions are now seen as unlikely to block theEuropean Commission from promoting FTA
negotiations.

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