George Monbiot
Tuesday March 12, 2002
The Guardian


The most surprising aspect of the steel war launched by the United States
last week is that anyone is surprised. For all the talk of increasing
freedom, the only certain and consistent trend in global trade rules over
the past 10 years has been the drift towards protectionism.
The rich nations have repeatedly promised to phase out agricultural
subsidies and to remove the tariffs on textiles imported from the poor
world, but those promises have been broken. Instead they have battened down
the hatches by granting to the corporations they shelter new laws defending
"intellectual property".

At the world trade talks in November, the poor nations appeared to win some
ground. They would be allowed to continue to import cheap copies of the
patented drugs required to fight epidemics. But, though few people spotted
it, there was a catch. While nations will be permitted to buy these drugs,
by 2005 the countries manufacturing them will be forbidden to sell them,
with the result that the rules defending public health won't be worth the
paper they're written on. At a meeting last week, the European Union seemed
prepared to compromise on this issue, but the US wouldn't budge.

New global trade rules have also allowed big corporations to patent crop
varieties and, in effect, the genes of plants, animals and human beings.
This has grave implications both for food security and the accessibility of
medicines. But the corporations argue that this new protectionism is
essential to stimulate both innovation and investment. There are many ways
in which this claim could be challenged, but I may have just stumbled
across a novel and fascinating one. It is contained within the histories of
the very companies which now insist that intellectual property rights are
the pre-requisites of development.

In Industrialisation without National Patents, published in 1971, the
economic historian Eric Schiff tells the story of the emergence of some of
Europe's biggest corporations. They came into being in Switzerland and the
Netherlands during the period (1850-1907 in Switzerland; 1869-1912 in the
Netherlands) in which neither country recognised patents. Some of them
appear to owe their very existence to this exemption.

In the Netherlands the old patent laws were clumsy and poorly drafted. The
government decided they were unreformable, and simply scrapped them. In
Switzerland, the confederation developed without them, and decided to keep
it that way. Contrary to all current predictions of what the impact of such
abrogations would be, in both nations they appear to have contributed to
massive economic growth and innovation.

Switzerland was a poor country without many natural resources, whose
economy was largely reliant on farming. But in 1859 a small company based
in Basel "borrowed" the aniline dying process which had been developed and
patented in Britain two years before. The company, later called Ciba, soon
became a massive industrial enterprise, swiftly outstripping competing
firms in Britain. In 1995, Ciba merged with another Swiss firm, Sandoz, to
form the conglomerate Novartis. Novartis was one of the companies which
successfully lobbied for the European convention allowing companies to
patent genes. It was also one of the firms which spent three years fighting
the South African government's attempt to buy cheap copies of its patented
drugs, in order to treat patients infected with HIV. Now, having merged
with Zeneca to form an even bigger company, Syngenta, it is extending its
intellectual property rights still further by developing seeds which don't
reproduce.

But Switzerland's economic growth during this period did not rely solely
upon purloining other nations' patented processes. Industrial innovation
flourished, especially in food technology. No country, Schiff notes, has
ever contributed "as many basic inventions in this field as did Switzerland
during her patentless period". In 1875, for example, Daniel Peter invented
milk chocolate. In 1879, Rudolf Lindt developed chocolat fondant. In 1886,
Julius Maggi invented powdered soup. A few years later he developed stock
cubes. All these men founded companies which still bear their names today.
But the biggest food firm to emerge in this period took root in 1865, when
Henri Nestle developed a cereal for children.

In 1998, the International Chamber of Commerce lobbied the World Trade
Organisation in support of corporate rights over plants, animals and genes.
It argued that "the protection of intellectual property" is "essential for
economic growth". Its chairman at the time was Helmut Maucher, who was also
the chief executive of Nestle, the company which arose and conquered the
world without any intellectual property protection whatever.

In the Netherlands too, the absence of patents appears to have done little
to arrest the growth of manufacturing industry. In the early 1870s, two
companies, Jurgens and Van den Bergh, commandeered a patented French recipe
and started manufacturing a brand new product called margarine. They soon
became Europe's biggest producers. Jurgens and Van den Bergh later merged
with a British company to form the conglomerate Unilever. Like Novartis and
Nestle, Unilever is one of the most influential members of Europabio, the
lobby group now pressing for ever stricter patent protections for big
corporations.

In the 1890s, Gerard Philips, unhampered by intellectual property laws,
started manufacturing the incandesent lamps developed by Thomas Edison in
the United States. The absence of patent protection did not prevent him
either from holding off European competition or from developing several
important new designs. But, in its recent submission to the European
Commission's consultation on patent rights, Philips insists that
intellectual property "is one of its key business tools".

Switzerland and the Netherlands eventually adopted patent laws in response
to threats from other industrialised nations. This, Schiff argues, was a
political decision, not an economic one. It is, he notes, "difficult to
avoid the impression" that the absence of patent laws "furthered, rather
than hampered development". The two countries relied for their growth not
upon exclusive rights but upon high educational standards and technical
ability.

These examples do not necessarily suggest that the abandonment of patent
protection is an essential precondition for development. But they do
indicate that it can, in the right circumstances, be an effective tool.
This tool has been denied to poor nations, partly as a result of energetic
lobbying by the very companies which once made use of it.

Those who have challenged the inequalities of global trade have pointed to
the fact that some of the world's richest nations once used tariff barriers
to devastating effect in building their economies. But the history of
patent protection suggests that that is not the only means by which the
rich nations have raised the drawbridge after entering the castle. When it
suits the rich countries to impose free trade, they do so. When it suits
them to impose protectionism, they argue that this is the only path to
development. But woe betide the poor nation which seeks to apply the
lessons of the past