This post was originally posted on the Rising Powers and Interdependent Futures blog.

In a recent special issue of Critical Perspectives on International Business Rory Horner observes how established multinational pharmaceutical firms are seeking, with different degrees of success, to alter the intellectual property institutional environment in rising power economies. The contrasting cases of India and South Africa highlight that MNEs’ attempts to fill so-called “institutional voids” may not always fit with societal best interests.

Rising power economies are potentially major growth opportunities for multinational companies. In the pharmaceutical industry, the “pharmerging” markets include the BRIC (Brazil, Russia, China and India) countries as well as Mexico, Turkey and South Korea, are a major focus for expansion.

Established multinationals counter a different institutional environment in emerging economies. Notably, they can encounter different systems of pharmaceutical patent protection – with either shorter duration and/or narrower scope of patentability in the global South.

The rising power economies are currently a key focus of contestation around the setting of IP rules. The dramatic growth of the BRIC countries could potentially challenge the trade rules around patents, including those in pharmaceuticals, which have been mostly driven by firms and countries from the Global North.

Continued business and diplomatic pressure from the Global North has and is being placed to secure and maintain extensive and long patent protection, with rising powers subject to particular attention. This was true in the formation of the World Trade Organisation’s Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement, as well as recently with intense debate around proposed recent changes in India, Brazil and South Africa.

The contrasting cases of India and South Africa are explored in this new article. Although both involve MNEs seeking to influence pharmaceutical patent law, South Africa has been quite prolific in granting patents, whereas India has been less so and has long been a thorn in the side of multinationals as a result.

India – MNEs’ struggle for institutional change
India has also been at the centre of contestation around pharmaceutical patent laws. Benefiting from local technological capabilities and restrictions on MNEs, product patents were removed in 1970 and domestically-owned pharmaceutical companies grew rapidly. With the onset of economic reforms in 1991, India has since risen to become the supplier of the third largest volume of pharmaceutical products in the world. In response, multinationals consistently sought and succeeded in securing patent law change in India, and India was even seen as a key motivation for the broader US efforts in relation to patents in the trade negotiations leading to the formation of the WTO and the Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement.

Even since TRIPs was agreed to in the late 1980s, multinationals have continued to seek to influence India’s pharmaceutical patent laws. India has constantly featured in the United States Trade Representative’s annual Special 301 Report, introduced in 1989 to identify trade barriers for US companies due to IP laws. India has never dipped below “Priority Watch List” level on the Special 301 Report in its 27 editions to 2015. This pressure continued after India issued its first compulsory license under TRIPs in March 2012 to Natco Pharma to produce Nexavar.

South Africa – MNEs’ efforts to maintain broad patentability
South Africa is a contrasting case to India, with a much wider degree of patentability. With patent legislation in place as early as 1916 and the current statute since 1978, a later Intellectual Property Laws Amendment Act was passed in 1997 (subsequently amended in 2002 and 2005) to make South Africa TRIPs-compliant. MNEs have engaged in significant efforts to maintain the relatively broad scope of patentability, notably in two quite recent controversies.

South Africa’s pharmaceutical patent laws initially came to global attention in the late 1990s with a high-profile court case over proposed reforms to the Medicines and Related Control Substances Act to allow for parallel importing and compulsory licensing. The Pharmaceutical Manufacturers’ Association (PMA) of South Africa (mainly comprised of multinational or MNE subsidiaries as members) claimed the proposed reforms were in violation of WTO TRIPs obligations and unconstitutional. The MNE campaign however was visibly challenged by civil society organisations, most notably the Treatment Action Campaign (formed in December 1998). Although the lawsuit was eventually abandoned, South Africa has continued to be quite generous in granting of patents, more than international law requires and lacking many of the flexibilities present in the WTO’s TRIPs Agreement.

Recent proposed reforms to South Africa’s laws, in the form of a Draft National Policy on Intellectual Property put forward by the South African Department of Trade and Industry in 2013, have also attracted considerable controversy. Providing for higher standards for patentability, as well as possibilities of pre-grant opposition, the draft policy has attracted concern from international business groups and pharmaceutical MNEs. For example, the proposal was noted in the US Chamber of Commerce’s (GIPC) submission (7 February 2014, USTR– 2013-0040) to USTR’s 2014 Special 301 Report. A campaign coordinated by a firm Public Affairs Engagement, funded by PhRMA and the Pharmaceutical Association of South Africa (IPASA), to derail the reforms, attracted widespread condemnation. This campaign of MNEs attracted criticism from the Director General of the World Health Organisation, from Médicines Sans Frontières and from the South African Health Minister.

Beyond the “institutional void”
Rising powers cannot be accurately characterised as “institutional voids” which MNEs should fill for societal benefit, as some business strategy literature would suggest. Instead, in emerging economies, MNEs encounter a plethora of institutions that may be suited to serving local societal interests, such as the growth of emerging economy firms and serving health interests. Ultimately, rising powers may not be expected to inevitably converge towards or emulate those institutional environments practised in the Global North, but instead are likely to set their own agendas in accordance with their increasingly heterogeneous interests.

Re-blogged from the Global Development Institute blog:

With the potential to ameliorate pain and even save lives, pharmaceutical products can have greater impact than those of almost any other. Yet, in overviews of research on development, somehow the pharmaceutical industry does not feature as prominently as, for example, extractive industries or textiles.

In a new article in Geography Compass, I argue that the pharmaceutical industry can tell key stories for development – in particularly highlighting the need to bridge the oft-present dichotomy between the economic and industrial or social aspects of development.

world_pills_image

For a long time, it appeared that there was little positive to say about the pharmaceutical industry in relation to its contribution to development. Post-independence, most developing countries found themselves relatively dependent on multinational companies for the imported supply of medicines and the sector was widely viewed as exemplifying the problems of dependent development. In the 1970s, the establishment and promotion of local pharmaceutical production attracted considerable policy interest among developing countries seeking to overcome the dependence on multinationals from the global North, with some support from United Nations Conference on Trade and Development and United Nations Industrial Development Organization. Yet, many countries, like Pakistan and Sri Lanka, faced a backlash from multinationals and few succeeded. Even in those limited cases where efforts to promote local industry did succeed, such as India and Argentina, the immediate benefits for health were questionable. Particularly from a public health perspective, the struggles with the pharmaceutical industry ranged from questions of production to such issues as essential drugs, marketing, quality control, price control, pooled procurement and the utilisation by health workers and patients.

As the policy momentum in support of local production in the Global South declined and as neoliberalism became more ascendant with the onset in the late 1980s of Washington Consensus liberalisation, research on pharmaceuticals shifted towards patent issues, a crucial aspect of the institutional environment for the industry. Considerable attention surrounded the World Trade Organisation Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement, finalised in 1994, and which came into being in 1995. This controversial agreement required all World Trade Organisation (WTO) members to sign up to standard minimum patent protection, with developing countries allowed a 10-year transition, and least developed countries a further extension to join. The agreement echoes key trends in the wider field of development in demonstrating the institutions-led agenda of global governance bodies such as the WTO and in reflecting the influence of Northern multinational corporations and states in pushing policy changes in much of the Global South. The issue could be characterised as one of institutional monocropping – importing institutions from the global North to developing countries with little sensitivity for differences in context.

More recently, however, a growing body of research has now begun to identify some positive connections between health and industry. The availability of underlying industrial capacities to produce generic medicines has been essential for the success of international political mobilisation to promote access to medicines. This notably also includes the influential Treatment Action Campaign in South Africa. Indian companies have played a key role in supplying a large share of the global purchases of anti-retroviral medicines, particularly for donor-funded purchases. Indeed, the humanitarian medical activists, Médecins Sans Frontières have even pointed to the key role of India’s “pharmacy to the developing world”, which has been a crucial industrial support for the global access to medicines campaign. A somewhat autonomous local pharmaceutical sector has pushed for public-health oriented reforms in Brazilian patent law.

To be clear, major challenges remain for fulfilling the health possibilities from the industrial capabilities of the pharmaceutical industry. Particularly in relation to new product development, an enduring question is the persistent challenge of medicines for neglected populations, where limited market incentive exists for investing in R&D and where consumers have limited purchasing power.

A long standing characteristic of development has involved negotiating between economic, or materials goals, and the social, or human, dimensions. Within development studies, both have often been presented as antithetical, or at best compartmentalised. Improved development outcomes related to pharmaceuticals often appear to draw both on an underlying material base, promoted through industrial and health policy interventions, and on civil society mobilisation over health and access to medicines. Building, and understandings connections between the economic and social aspects of development is not unique to pharmaceuticals, nor to the Global South.

Yet arguably research on the pharmaceutical industry provides a challenge particularly in relation to understandings of the conditions under which economic and health, as well as wider social goals, can be complementary. In doing so, crossing disciplinary boundaries may prove a necessity. Given ongoing challenges for global health, as well as the industry, pharmaceuticals will continue to be crucial for development outcomes globally.

These are issues I will seek to engage with in my new ESRC Future Research Leader funded-project on ‘India’s pharmaceuticals and local production in sub-Saharan Africa’. This will involve a comparative study across different African regions of the engagement of what has been referred to as India’s “pharmacy of the developing world” and its implications for efforts to promote local pharmaceutical production

Re-blogged from the Global Development Institute blog:

Rory Horner is an economic geographer and Lecturer, ESRC Future Research Leader and Hallsworth Research Fellow at GDI. He is originally from Ireland and holds a PhD in Geography from Clark University in the United States.

dsc_0863-300x199

What is the current focus of your research?

My research looks at globalisation, trade and the industrial development of the pharmaceutical industry, particularly the production and trade of generic medicines in the global South. I look at how and why production patterns emerge, and which ones under which conditions could improve social and health outcomes.

Currently, my specific focus – supported by an ESRC Future Research Leader Award (2016-2019) – is on Indian pharmaceutical companies and their engagement with Sub-Saharan Africa. I am initially trying to shine a light on the dynamics of how the value chain operates, while considering some broader issues related to industrial development and health. Indian medicines are known to many as the “pharmacy to the developing world” because of the large volume of supply at a relatively lower cost than elsewhere. For some, these imports create a health dependence issue for developing countries, which is being combatted by a push for local production across much of Sub-Saharan Africa. A big current debate questions whether developing countries should domestically produce as much of their own medicines as possible or should the pharmaceuticals supply largely come from only large developing countries (such as India or China) or even Europe or North America? And which supply may be better for public health?

 

What is the biggest hurdle in the system?

The first is that the whole system is quite opaque and there is relatively little evidence available on the dynamics of the pharmaceutical industry in this context. Policymakers need this evidence to make decisions that are actually based on a concrete understanding of the dynamics – right now, the picture is far too fragmented.

Policy coordination is another big issue. On a national level, different aspects of the pharmaceutical industry fall under the different ministries, creating competing priorities or at least some disagreement. In South Africa, for example, there is debate between the relevant departments for industry and health: the first would like to promote South African manufacturers but the latter generally finds that it is more cost effective to buy the medicines it needs from India. The counter argument from the Department of Trade and Industry is that the longer term health outcomes are better if South African manufacturers are promoted to claim more domestic control over medicine supply. Of course, the dynamics between the different stakeholders are different depending on the country in question, but most are complex.

 

Why is this ESRC Future Research Leader research project important?

India is currently sending a large volume of medicines to developing countries, and there are claims made that this benefiting all parties concerned. But is that really the case? From the India angle, we need to trace out how “India’s pharmacy to the developing world” actually plays out. Does it really function the way it is perceived and is it really a win-win situation where India and people elsewhere in the Global South (from consumers to patients) all benefit?

The other angle is to look at the dynamics in the African countries, where the issues centre around local production, the effects of the dependence on imported, and the potential situation of health insecurity on one side, but also the potential health benefit of large volumes of relatively lower-cost medicines on the other side. For countries that have had smaller regulatory capacities to govern what drugs are imported, locally produced or how they are marketed and sold, who is keeping an eye on quality? All of these issues have potential significance for social and health outcomes for millions of people.

Finally, pharmaceuticals are an under-researched industry for development. I recently wrote a paper on why pharmaceuticals are important for development theory – basic development courses will frequently talk about the natural resource curse or labour standards in textile industry, but rarely delve into the pharmaceutical industry, which has a lot of broad lessons for students and researchers on the balancing act between promoting industrial development while delivering optimal social and health outcomes.

 

How does your work address global inequalities, one of The University of Manchester’s research beacons?

In two distinct ways. Firstly, access to medicines is a huge global inequality. Most developing countries don’t have health insurance systems, and certainly not of the kind that you find in the UK. This means that most people rely on their own private expenditure to pay for their medicines. So, the price of those medicines directly affects millions – and not just whether the medicine is cheap, but is it of the same quality and will it treat just as effectively as the pricier versions? My research tries to look at the underlying industrial mechanisms that eventually determine price and access to medicines, understanding the economic and wider social, political and health dimensions of development through that.

Secondly, between different countries, there’s huge variation in the price of medicines and in the underlying capacity to produce medicine. Different countries find themselves in very different bargaining positions when dealing with global donors or setting trade policies related to pharmaceuticals, for example. A country that is dependent on multinationals from Europe and North America for their medicines may find it difficult to implement policies in favour of generic medicines. There is also a clear North/South divide on critical patent protection issues that could create significant obstacles for the supply of generic medicines.

DSC_0088-200x300.jpg

What is your favourite thing about GDI? Or what do you enjoy the most?

The international environment and context: both the student body and the colleagues I work with, who come from many different countries and backgrounds. We are also international in terms of outlook and orientation – there is broad support and interest for globally oriented teaching and research that involves fieldwork all over the world.

Also, the connectivity: there are so many opportunities to engage with different types of networks and colleagues, from workshops to high-profile guest lecturers. You feel well connected to the development studies and policy worlds, and in a good place to make new and relevant connections when working here.

 

What advice would you give to a PhD student?

It’s important to make sure that you’re producing tangible outputs (from papers to public engagement), but it isn’t all about the thesis: a PhD is a professional training that should provide you the basic skill set that you can build up as you grow as a researcher and teacher.

 

Who is your development hero?

Going by my EndNote files, probably Peter Evans and Gary Gereffi. The first has done a huge amount of work on the global economy, the latter on global value chains – but both started out doing research on pharmaceuticals! The shared interest in pharmaceuticals is coincidental though, I really enjoy and find relevance in all of their work. If I was pressed to choose one, it might be Evans, who wrote a pivotal book about the developmental state and really challenged the idea that the state didn’t matter for development.

 

What do you do when you’re not busy with research?

I used to row competitively but fieldwork cut into my training schedule. I still row, cycle, and am generally outside doing some kind of sport. Running is a favourite no-equipment option in the field!

For the upcoming Development Studies Association (DSA) Annual Conference, together with my colleague Matthew Alford, I’m organising two sessions on “Global production networks and the politics and policies of development”. With global value chains and production networks constituting the backbone of the global economy, the sessions aim to explore the economic, social and environmental challenges of GPNs and their developmental policy ramifications.

In particular, the sessions aim to provide critical reflections on the policies and politics of GPNs and GVCs, to reflect on attempts at understanding better, and engaging more effectively in, promoting positive local outcomes from global production.

The sessions (P61 in the conference programme) will take place in Room 15, The Examination Schools at the University of Oxford on Wednesday 14th September 2016 from 09:00-10:30 and from 10:30-12:00. Please join us if you are in Oxford!

The full line up of presenters, papers and abstracts is below:

 

Session 1: 09:00-10:30 – The state and industrial policy in GPNs

 

The politics of state governance in global production networks: insights from the South African fruit crisis – Matthew Alford (University of Manchester) and Nicola Phillips (University of Sheffield) – The role of the state in the governance of global production networks is under-explored. Far from being passive actors, states actively adopt different kinds of governance functions. We highlight tensions within public governance and explore the politics of those tensions in South African fruit.

 

Should GVC policies target locally-owned firms? A tale of two sectors from Malaysia – Yee Siong Tong (University of Cambridge) and Vasiliki Mavroeidi (University of Cambridge) – The debate over state intervention for GVCs rarely addresses whether policies should target locally-owned firms. A study on Malaysia’s upgrading performance, which finds capability gaps between locally-owned firms from E&E and palm oil sectors due to different sectoral policies, holds some answers.

 

Upgrading in South-South Global Value Chains: How participation in different trade-trajectories affect suppliers in the Kenyan leather sector – Giovanni Pasquali (University of Oxford) – This study looks at a value chain that is experiencing a process of “globalisation” in multiple trajectories (north; south; region) to assess whether and how different end markets affect local suppliers’ capacity to upgrade both economically as well as in terms of functions, products and processes.

 

Global decisions and local realities: the politics and policies of upgrading and their implications in agricultural global production networks – Judith Krauss (University of Manchester) and Aarti Krishnan (University of Manchester) – This paper argues that global and particularly Northern policy and politics shaping certification choices affect the local realities of Southern producers, drawing on two-case studies in agricultural global production networks involving fresh fruit and vegetables in Kenya and cocoa in Nicaragua.

 

Session 2: 11:00-12:30 – The politics of labour and sustainability in GPNs

 

Virtual Production Networks: Fixing Commodification and Disembeddedness – Alex Wood (University of Oxford), Isis Amelie Hjorth (University of Oxford) and Mark Graham (University of Oxford) – Online outsourcing platforms organize, commodify and disembed labor in an extreme and distinctive manner. Although virtual production is disembedded they are not immaterial or ethereal. We argue spatio-temporal fixes provide a useful alternative to the existing GPN use of embeddedness.

 

Labour control and the labour question in commodity chains: exploitation and disciplining in Senegalese export horticulture – Elena Baglioni (Queen Mary University of London) – This article examines the historical evolution of local labour control regimes upstream the Senegalese-European horticultural commodity chain. It shows that labour control emerges from the combined pressures of foreign firms, international institutions, the state, and households.

 

Putting the Public back into Private Governance – The Importance of Public Policy for Labour Standards in Apparel and Footwear Global Production Networks – Judith Stroehle (University of Milan) – An effort of incorporating the importance of public governance into the debate on efficacy of private labor governance, examining different levels of public governance and interaction through the use of quantitative and qualitative methods.

 

CSR standards in China: Social upgrading and industrial policy goals in GPNs – Corinna Braun-Munzinger (University of Manchester) – This paper argues that the emergence of Chinese CSR standards needs to be seen in the wider context of China’s changing industrial policy objectives in GPNs. It shows how the evolution of Chinese CSR standards corresponds to a shift from structural strategic coupling towards functional coupling.

Originally blogged on the development@manchester blog: http://blog.gdi.manchester.ac.uk/global-production-networks-social-upgrading-emerging-research-persistent-challenge/

 

In a global economy increasingly structured through global production networks, existing public and private governance approaches are struggling to promote improved labour conditions and sustainability, while new challenges are also emerging.

With this in mind, the Global Development Institute’s (GDI) Global production networks, labour and trade research grouphosted a workshop earlier this month on “Global value chains and social upgrading”, to take stock of this field and to bring together a group of more than 20 emerging scholars to discuss their recent research on this issue. The workshop was generously funded by the Brown International Advanced Research Institute (BIARI) Alumni Research Initiative, as follow-up support to alumni – GDI’s Rory Horner and Rachel Alexander, GDI alumni Shamel Azmeh, Fabiola Mieres, Vivek Soundararajan and Annika Surmeier – of their fantastic two-week annual summer school which focuses on addressing global issues. The GDI also provided considerable support, with Manchester having led much of the growing field of research on social upgrading in global production networks, notably through the Capturing the Gains project.

In her opening keynote plenary on “Global value chains, market-making and the rise of precarious work”, Jennifer Bairtraced cases of precarious work from New York city a century ago to contemporary Bangladesh to highlight how outsourcing through global value chains gives rise to challenging labour conditions.

Within global value chains, private governance has proliferated in recent years, and Greg Distelhorst, Judith Stroehle andScott Sanders all sought to explore the impacts of, and limits to, compliance with private standards. Samia Hoque provided evidence from her recent collaborative paper on Bangladesh.

Gale-Raj Reichert’s work on the electronics industry, Vivek Soundararajan’s work on sourcing agents and boundary work and Annika Surmeier’s work on tourism presented further examples of labour challenges across a variety of sectors.

Fabiola Mieres provided an alternative notion to corporate-driven mechanisms through a notion of “worker-driven social responsibility”, while Matthew Alford highlighted public-private governance challenges in South African fruit. Indeed the challenges for both public and private governance was a recurring theme in the workshop discussions.

As public governance attempts at addressing social upgrading issues, international trade agreements are also now including social standards, as highlighted through Mirela Barbu’s work on the European Union’s Free Trade Agreements, and Shamel Azmeh’s presentation on the case of the Jordan-US trade agreement.

Prospects for social upgrading must consider gender, power, and embeddedness, as highlighted through Nikita Pardesi’s work on oil and gas in Trinidad and Tobago, Eleni Sifaki’s work on grape production in Greece and Judith Krauss’s recently completed doctoral research on sustainability challenges in the cocoa sector.

The challenges for better social outcomes in GPNs also go beyond labour. Anke Hagemann explored the impact of participation in GPNs on urban areas, while Rachel Alexander demonstrated the difficulty UK cotton-garment retailers face in promoting sustainability in their extended supply networks from India.

At the same time, new challenges for social upgrading emerge. The growth of transnational online labour markets within “virtual production networks” warrants growing attention as Alex Wood highlighted. Now more than ever, in today’s increasingly multi-polar global economy with growing South-South trade, social upgrading must also be considered beyond end markets in the global North. Jinsun Bae’s work on Myanmar’s garment industry, Corinna Braun-Munzinger’s work on corporate social responsibility in China and Natalie Langford’s work on social standards and tea production in India all made this case.

Workshop participants received detailed feedback and had opportunities to discuss their work with leading scholars in this field – Jennifer Bair (University of Colorado-Boulder), Peter Lund-Thomsen (Copenhagen Business School) and Andrew Schrank (Brown) as well as Manchester’s own Stephanie Barrientos, Martin Hess, and Khalid Nadvi.

With continued challenges for both private and public regulation of labour and sustainability issues in the global economy as well as new challenges emerging, the debate must continue. Look out for the research of these emerging scholars we hosted at GDI as it pushes this conversation forward.

I, along with Vivek Soundararajan, Annika Surmeier, Fabiola Mieres, Shamel al Azmeh, and Rachel Alexander, am organising this workshop next week in Manchester. Funded by the Brown International Advanced Research Institute Alumni Research Initiative and the Global Development Institute, the workshop seeks to deepen understanding of the social consequences of global production networks.

 

Blair_poster.cdrCareer_workshop_2016_poster.cdr