Preferential exports account for about 13 percent of total non-oil exports to the three major markets covered in the analysis. I/ While the reduction in preferential margins is larger than the MFN tariff reductions, the loss in exports in the three major markets due to this effect is estimated at about $2 million (or 2 percent of preferential exports). Thus, excluding textiles and clothing, the loss in exports from the erosion in preference margins is outweighed by the gains from tariff reductions on items subject to MFN trade, although the difference is insignificant and both effects are very small.

# **3. Intellectual Property Rights2/**

A major result of the Uruguay Round was the Agreement on Trade Related Intellectual Property Rights (TRIPs). Protection of intellectual property (IP) has become increasingly prominent in policy dialogue recent years, and can also be expected to figure in any trade agreement with the EU. This section summarizes some of the key provisions of the TRIPs agreement and discusses possible implications for Egypt.

# 1. TRIPs in a Nutshell

(a) General obligations: The most important general obligation under the TRIPs agreement is national treatment, which requires all members to treat nationals of other countries no less favorably than their own nationals on all IP matters-standards, enforcement, and acquisition-subject to certain exceptions (Article 3). This obligation is not likely to require legislative changes, as most countries, including Egypt, already grant national treatment in their domestic laws.3/ (b) Patents: Perhaps the most difficult issue in the negotiations was the demand to provide protection for pharmaceutical products. It was in this sector that patent regimes differed most starkly, with several developing countries such as Egypt providing very little or virtually no protection for pharmaceutical products, while industrial countries had strong patent regimes and were seeking to further strengthen them by increasing the term of protection.

Under TRIPs, no field of technology can be excluded from patent protection, effectively disallowing any exemption for pharmaceuticals from protection (Article 27.1). Further, all countries have to provide a minimum term of protection of 20 years (Article 33). There is also a tight nondiscrimination provision (Article 27.1) that would have important economic implications: it would disallow discrimination in the grant of protection (such as certain features of the US first-to-invent system), it would prevent more permissive rules for compulsory licensing in the pharmaceutical sector, 1/ Although preferential exports to the EU are lower in the simulation exercise than that reported in the SMART database, the latter is recognized as overstating the extent of preferential treatment. This is because quotas or ceilings may be applied to products receiving GSP treatment, with normal MFN rates applying to exports above these ceilings.

2/ This section draws heavily on Subramanian (1 995a, 1995b). For an overview of the issues and the outcome of negotiations, see also Primo Braga (1995).

3/ The second general obligation-an innovation in the field of IP-is that of most-favored-nation (MFN) treatment (Article 4). This requires countries to treat nationals of any one country no less favorably than nationals of another country. MFN has limited significance in the IP area as it is irrelevant once national treatment is granted. MFN becomes operative only when a country is treating nationals of another country more favorably than its own nationals; in such an event MFN becomes necessary to prevent discrimination between foreigners.

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