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 Turkey, and the United Kingdom. Ambassador Zoellick was pleased that these governments have recognized the importance of setting an example in this area and expects that these decrees will be fully implemented. The United States looks forward to the adoption of similar decrees, with effective and transparent procedures that ensure legitimate use of software, by additional governments in the coming year.

Intellectual Property and Health Policy

At the WTO Doha Ministerial in November 2001, WTO Ministers issued a separate Declaration on the TRIPS Agreement and Public Health. In paragraph 6 of the Declaration, Ministers recognized that WTO Members with "insufficient or no manufacturing capacities in the pharmaceutical sector" could have difficulty using the compulsory licensing provisions of the TRIPS Agreement.

On August 30, 2003, the WTO General Council adopted the TRIPS/health "solution," which is comprised of a Decision and an accompanying Chairman's Statement that sets out the shared understandings of WTO Members on how the Decision should be interpreted and applied. Under the solution, Members waive Article 31(f) to allow Members to issue compulsory licenses to export pharmaceutical products under certain circumstances.

Under the terms of the solution, a country may issue a compulsory license to export needed pharmaceuticals to a country that lacks manufacturing capacity. The solution requires exporting and importing countries to comply with certain transparency and notification obligations. It also requires countries and companies to adopt specified anti-diversion measures (e.g., differential coloring/shaping/packaging of pills) to ensure that drugs reach the intended recipients and are not diverted to more lucrative markets. The Chairman's Statement emphasized the importance of the purpose of the solution and noted that the solution was not to be used as an instrument to pursue industrial or commercial policy objectives.

The TRIPS Council was instructed to incorporate the waiver into an amendment of the TRIPS Agreement by June 2004. We support an amendment that reflects the agreement reached in August 2003, and will work towards that goal. In the meantime, the solution will continue to be available.

The U.S. Government also remains committed to a policy of promoting intellectual property protection, including for pharmaceutical patents, because of intellectual property rights' critical role in the rapid innovation, development, and commercialization of effective and safe drug therapies. Financial incentives are needed to develop new medications. No one benefits if research on such products is discouraged.

Regulation and Sustainable Innovation

The ability of innovative industries to continue to develop new products depends largely upon two factors: (1) a strong and effective intellectual property system; and (2) a regulatory regime that allows industry to market new products during the period of time when the exclusive intellectual property rights exist. While intellectual property is a necessary condition for encouraging innovation, it is the ability to market products effectively that provides the incentive for continued innovation and generates the returns on investment necessary to fund new investment. This cycle of innovation produces significant social benefits by accelerating economic growth and raising standards of living.

The Special 301 process focuses on intellectual property protection, and this has been the primary subject