38 of 1997, and consequently such provision is in conflict with Section 44(4) of the Constitution read with Sections 231(2) and 231(3) of the Constitution;[vi], Each party to the lawsuit made references to international laws/agreements on patents as well as the SA Patents Act 57 of 1978. All content published from 2020 onward is subject to a Creative Commons "Attribution" (CC-BY) License unless otherwise noted. Free trade by increasing the general mass of production diffuses general benefit and binds together by one common tie of interest and intercourse, the universal society of nations throughout the civilised world.. This and the cost of many other biologics prompt many in the international community to suggest that breaking the patent to make biosimilars under the aegis of justice may be deemed ethical. In the wake of the HIV/AIDS pandemic, Brazil, South Africa, and Thailand defiantly broke international protocols on patent protection and manufactured patented medicines for their citizens at relatively affordable prices. It is ironic that violators of patents make a claim to justice and yet refused to accord the inventors their concurrent claim for a just use of their intellectual property. This theory demonstrates that it benefits all countries to be involved in international trade, even if they do not have an absolute advantage. But it is important to ensure that inventors are properly compensated when such emergencies subside. The theory states that a country has a comparative advantage in the production and export of the good that is relatively intensive in the countrys relatively abundant factor. No matter how attractive and must have your product or service seems to be, a strictly limiting yourselfto your domestic market will have a finite capacity. It is a concave curve which means that wheat is labour- intensive and cloth is capital- intensive. However, A possesses a comparative cost advantage in producing X. Before publishing your articles on this site, please read the following pages: 1. Jeremy Bentham posited an important question as to whether something is utilitarian by asking What is the use of it? One country may be more efficient than another, as measured by factor inputs per unit of output, in the production of every possible commodity, but so long as it is not equally more efficient in every commodity, a basis for trade exists. The classical approach, in terms of comparative cost advantage, as presented by Ricardo, basically seeks to explain how and why countries gain by trading. 3. Similarly, WNBC1 is Englands efficiency locus and point B is its pre-trade equilibrium position. Being dissatisfied with the application of classical labour theory of value in the case of foreign trade. In our illustration, since country A has comparative cost advantage in commodity X, as per Ricardo s theorem, this country should tend to specialise in X and export its surplus to country in exchange for (i.e., import of from B). (iv) If natural resources are included as a third distinct productive factor, it is possible that the results would show America to be both labour-abundant, but natural resources-scarce country. Prohibited Content 3. After completing my post graduation I thought to start a website where I can share management related concepts with rest of the people. Thus, absolute price differences known from the exchange rates indicate which of the factors are cheaper and which are dearer in each country, and consequently, in which commodities each country will specialise. Therefore, there is a need for a separate theory of international trade. When the two countries trade with each other, something more is happening than a simple exchange of goods. Pre-trade equilibrium of India is at point A in view of its demand for wheat and cloth. Many Gulf nations are rich in oil and gas resources; South Africa is rich in diamond mines. This is why some of these patents have been broken with impunity. We are accredited with internationally recognised quality standard ISO 9001:2015, translation quality standard ISO 17100:2015 and post-editing machine translation output standard ISO 18587:2017. Most of them chose to work hard and endured lots of pain in order to obtain these patents. Thus, experience has shown that the classical theory of comparative costs based on different productivity levels emerges as an important determinant of trade patterns. Labour, for example, is qualitatively identical in two countries. It states that an increase in the relative price of the labour- intensive good will increase the labour price relative to both commodities prices and reduces the other factor prices relative to both commodity prices. Table 1 Cost of Production in Labour Units: It follows that country A has an absolute advantage over in the production of X while has an absolute advantage in producing Y. 3. Take advantage of currency fluctuations export when the value of the pound sterling is low against other currencies, and reap the very real benefits. Content Filtration 6. Economists have attempted to explain the Leontief paradox and to reconcile the contradictory result with the theoretical prediction: (i) If human capital as well as physical capital were included in the analysis, the results might have shown the American exports to be capital intensive. But, if a commodity is not actually produced, cost can exceed price. [i] William W. Fisher III et al The South Africa AIDS Controversy: A Case Study in Patent Law and Policy in The Harvard Law School. WKC1L1 is the resource box of England, indicating that it has abundance of capital. This leads to the equalisation of the factor prices in the two countries. This is why, it has been suggested that breaking patents or allowing local governments to issue compulsory licenses on patents could be a bad precedent. Overtly emphasizing the maximization of pleasure does not address the specific circumstances in each ethical decision. After all, the demand for factor of production is a derived demand. Doing Addition: How to do Addition Using a Fast Calculating Method? The Heckcher-Ohlin theory and the factor-price equalisation theorem can be illustrated alternatively through Figure-3. Take our Scorecard to discover where you are with the international trade! There are many ethical principles gleaned from the legal precedents above, and I intend to focus on some of these issues in the next section. Companies such as Microsoft, Oracle, and Netscape, develop this software for use at home and for export. The SA legal case therefore has become significant in clarifying and reaffirming WTO TRIPS. VIII. It indicates basic relationship- (a) between relative commodity costs and relative commodity prices; and (b) between relative factor prices and relative commodity costs. (iii) Cost differences exist because of the factor-price differences in the two countries. As such, when trade takes place, A specialises in X and exports its surplus to and specialises in and exports its surplus to A. Ricardo argues that if there is equal cost difference, it is not advantageous for trade and specialisation for any country in consideration (see Table 2). One example of this is in the electronics and software industries. Important factors influencing the pattern of trade between two countries are- (a) differences in the supply of factors of production; (b) differences in factor efficiency; (c) differences in the state of technology; (e) differences in the economies of scale; (f) differences in population growth; (g) differences in the rate of capital formation; (h) differences in the development of new products, etc. He remarked- International trade is but a special case of inter-local or inter-regional trade.. Factor-Price Equalisation Theorem 5. The cookie is used to store the user consent for the cookies in the category "Analytics". In other words, more labour is embodied in Indias exports than in its imports. But faced with such national pandemics, the SA government promulgated its new laws to ensure that victims of the HIV/AIDS would have access to affordable medicine which they asserted was consistent with international laws. This is common among industries. Such specialization is facilitated by the exchange of surplus production through international trade. But, using data for the year 1947, Leontief found that the American exports were labour-intensive and its imports were capital-intensive. The difference between the international trade and internal trade arises due to various types of differences between the countries, such as- (a) differences in efficiency in producing different goods; (b) immobility of factors of production; (c) barriors caused by distance and other physical factors; (d) use of different currencies; (e) existence of artificial barriers, such as customs duties and other restrictions on trade; etc. In February 1998, pharmaceutical companies filed a lawsuit before the High Court of South Africa alleging that SA was violating international laws such as Article 27 of TRIPS, as well Articles 25, 44, and 231 of the SA constitution which prohibits the use of patents without permission and compensation. Why is the South African (SA) case significant in 1996? [xx]Everyone is guaranteed an equal protection of life which implicitly includes access to health care even in humanitarian crises such as an pandemic or the flu. This paper has argued that patent infringement is legal within the context of international laws. I believe the actions of patent infringement within the context of Section 15C of MRSCA and the patent provisions of WTO was justified as millions of lives were saved. The European Union and WTO supported the SA position, and later, SA pledged to comply with TRIPS agreements.[x]. [ix], In brief, both parties agreed on the substantive fact that there was a dire medical need, but the main issue was whether the insertion of Section 15C to the MRSCA contravened TRIPS as evident in the lawsuit. Or do these laws/agreement actually support such actions? The factors of production- land, labor, enterprise, and capital- all potentially contribute to the development of competitive advantage. This assumption has been criticised on the ground that in reality factors of production have never been immobile internationally. But is that possible? Thus, while Marshall explains the time- dimension of general theory of value, Heckscher-Ohlin theory explains the space-dimension (i.e., international trade) of the general theory of value. The products in different countries are usually differentiated. Plagiarism Prevention 4. Thus, more effective use of the worlds resources is made possible through international trade. For instance, if scientist X decides to hide an essential therapeutic formulation that could potentially save many lives, it means that during a potential humanitarian crises, the larger society could pay dearly for it. When India and England trade with each other, their relative prices converge. In the absence of trade, the equilibrium for India is at point 1 and the equilibrium for England is at point 3. The rationale among other things was ostensibly to provide affordable antiretroviral medicines for the victims of the HIV/AIDS pandemic. SA countered these allegations by first responding that MRSCA was promulgated to grant powers to the Minister of Health in order to circumvent patents in consonant with Article 31 of TRIPS. According to Table-1, there are four factors P, Q, R and S in both the countries India and England. In short, each country can consume more by trading than in isolation with a given amount of resources. Therefore, there is a need for a separate theory of international trade. These differences provide a country an opportunity to specialize in the production of some specific commodities. The lawsuits in part states: 2.4 it is discriminatory in respect of the enjoyment of patent rights in the pharmaceutical field which discrimination is in conflict with the provisions of Article 27 of the Trade Relates Aspects of Intellectual Property Rights Agreement [hereinafter referred to as the "TRIPS Agreement"], an international agreement binding the Republic and to which Parliament has given effect by the promulgation of the Intellectual Property Laws Amendment Act, No. Assuming a given demand, it follows that a capital-rich country has cheaper capital or lower capital price and a labour-abundant country has a relatively lower labour price. It ignores the demand side. Thus, India (the labour-abundant country) exports wheat (the labour-intensive good); England (the capital-abundant country) exports cloth (the capital-intensive good). If both countries continue to produce both goods with free trade, their factor prices will actually be equal. The following are the general features of the modern theory of international trade: According to the classical economists, international trade was basically different from internal trade. As compared to this, the modern Hackscher-Ohlin theory has limited predictive value. Plagiarism Prevention 5. We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. The basis of international trade lies in the diversity of economic resources in different countries. Mill added a quantitative component to Benthams theory by suggesting that an action is ethical if it brings about the greatest amount of pleasure for the greatest number of people. Infringem Another aspect to consider is that no single nation can produce everything it requires for survival. In other words, India will have a larger relative supply of wheat than England at a given relative price of wheat. Ricardo demonstrated that countries benefit from specializing in those areas where they offer the greatest relative (or comparative) advantage. Are they the most vulnerable? Book Podcast Scorecard Publications. (iii) One product is capital intensive and the other is labour intensive. This line of thinking and justifications seemingly aligns with the ethical principle of utilitarianism. Moreover, by producing these medications locally, they have also created some jobs for the local population.
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