Public Health and Big Pharma Monopoly Protections: Why a WTO Waiver on IP Rules Is of the Essence

By Daniel Rangel

With growing momentum behind the global campaign for a temporary, emergency waiver of some of the World Trade Organization’s (WTO) intellectual property (IP) to boost production of COVID-19 vaccines, treatments and tests, the pharmaceutical industry is arguing the initiative is not necessary or helpful. These claims, while not original, are still worth debunking, given they distract from the mission at hand: removing legal and political obstacles to scale up manufacturing of the critical goods we need to combat a raging pandemic.

There are several accounts that thoroughly explain why waiving certain provisions of the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is critical and how it could contribute, along with other efforts, to ramping up production of vaccines, treatments, diagnostic tests and equipment so that we can end the pandemic as quickly as possible. (You can see our contribution here.)

The IP-maximalists — the usual Pharma CEOs and various associations and spokespeople — started from the old hymnal: (i) IP is not really an obstacle, (ii) developing countries do not have the capacity to produce and (iii) TRIPS has incorporated flexibilities that allow countries to balance their public health needs with the IP protection.

This December 2020 brief from Doctors Without Borders does a nice job taking down these “myths.” However, as these claims have been disproved, some new arguments are rising.

One theme is that the TRIPS waiver would not be enough to make a difference, and thus countries would fare better if they focused their efforts elsewhere, such as on COVAX. (While COVAX is an important initiative, its reach should not be overstated. If it has the funds and vaccines supply to reach its most ambitious goal, COVAX would cover the 20% most at-risk portions of low- and middle-income countries’ populations. That is far below the percentage needed to achieve herd immunity and crush the virus.)

Why would the TRIPS waiver not be enough to make a difference? Because countries would need to make swift changes to their own laws, which would be difficult, if not impossible, this argument goes. It’s a rather odd argument, given that more than 100 countries are supporting the WTO proposal precisely because they want to adjust their domestic IP policies and practices in the face of the pandemic. A major point of the waiver is to gain policy space to act without the risk of facing a WTO challenge and legal defense expenses or other WTO nations’ sanctions.

Countries, faced with the COVID-19 disaster, have not hesitated to act swiftly and enact all sorts of measures to deal either with the public health crisis or the struggling states of their economies, as documented by COVID AMP, a project led by the Georgetown University Center for Global Health Science and Security, that tracks policies taken in response to the pandemic. Countries have enacted nearly 250 pieces of legislation, at the national level, to adjust their legal frameworks to make them more suited to the innumerable challenges posed by the pandemic.

Parliaments around the world have adopted legislation to approve unprecedent fiscal stimulus packages; compel health providers to serve everyone, without delay and free of charge; allow health authorities to restrict large gatherings, sport events and commercial activities; ban financial intermediaries from collecting debt; and impose national mask-wearing mandates. After all of that, making changes to intellectual property regimes so as to ensure the public has access to vaccines, treatments and tests to crush the pandemic hardly seems impossible, especially if the right message is sent from the WTO.

In fact, rich countries, such as Canada, Germany and France, already passed legislation streamlining and expediting the process for getting compulsory licenses for patented inventions. Notably, Canada — a country that has opposed the WTO TRIPS waiver — reformed its Patent Act in March 2020, as a part of its COVID-19 Emergency Response Act, to expand the federal government’s power to authorize a compulsory licensing system in the context of a national health emergency to facilitate production and sale of patented products without having to seek authorization from the patent holder and regardless of its capacity to satisfy the domestic demand.

Unlike many developing countries that are largely deprived from access to COVID medical goods, Canada has ample legal resources to battle out at the WTO whether this new policy complies with TRIPS requirements for compulsory licensing. But most low- and middle-income countries that support the waiver proposal and that now have no or very limited vaccine access have neither the legal capacity nor the political clout to do as Canada has. Indeed, when these very countries have tried to use the existing flexibilities in the WTO TRIPS Agreement, they are often bullied by the United States or the European Union to alter their plans or face trade disputes and sanctions. This is why a waiver that defangs the usual legal and power plays both is the necessary signal for developing countries and their manufacturers to invest and act.

Perhaps more importantly, as Doctors Without Borders noted, even with this new legislation, Canada was not able to convince or compel COVID-19 vaccine developers to manufacture doses in its territory while it was negotiating its purchasing agreements. This leads to a major point: even for a country like Canada that has the legal capacity and political clout to expand its legislation on compulsory licensing, the existing TRIPS flexibilities — which are expressed domestically in the form of compulsory licensing systems for patented inventions — are just not enough to overcome the myriad of challenges that countries are facing to kickstart COVID-19 vaccine production in their territories. Challenges go from the thicket of patents covering every step of vaccine development and manufacturing to the undeniable need of knowledge and technology transfer from vaccine developers to manufacturers around the world, to the sizable investments required to retool existing facilities and create new ones. Whereas the waiver, as opposed to the current flexibilities, would allow countries to undertake actions to get rid of the first challenge, there are clearly more steps required to deal with the second and third ones.

There is much that could be said about these issues, and they probably warrant a different entry on this blog. For the purposes of this piece, it is enough to clarify that the waiver would give every country, but particularly those in the developing world, the policy space needed to undertake bold legislative and administrative action, which could be crucial to expand vaccine production wherever it is technically feasible. 

The latest “novel” argument against the waiver is that many developing countries have entered into free trade agreements (FTAs) with TRIPS-plus obligations, i.e., terms that require governments to provide Pharma firms protections beyond those afforded by the TRIPS Agreement. This indeed is a problem, one that arises when — behind the façade of trade liberalization — countries enter into “trade” deals full of provisions that are not related to the exchange of goods and services across borders and instead are behind-the-doors concessions to corporate interests. For decades, civil society groups have warned of the risks that these kinds of agreements represent for the democratic debate both in developed and developing countries.

However, these FTA TRIPS-plus terms are not grounds for quashing a TRIPS waiver. Rather, the waiver would provide a foundation for FTA parties to issue démarches agreeing to equivalent temporary, emergency waivers or cease-fire agreements renouncing the use of trade-pact dispute settlement to enforce IP related to products necessary to fight the COVID-19 pandemic. Especially since a TRIPS waiver would be adopted by consensus at the WTO General Council, it’s highly unlikely that countries agreeing to waive IP rules at the multilateral level would do the opposite via bilateral deals. Attempts to do so would face global condemnation.

The truth is that South Africa and India, which initiated the waiver proposal, along with other governments, civil society groups and think tanks, have produced swaths of evidence that support the waiver. And, no one has claimed that if a WTO TRIPS waiver is approved, somehow, magically, production facilities will sprout in every country. However, the waiver is the critical first step towards boosting production. It would be pivotal to make other global initiatives work, such as the World Health Organization COVID-19 Technology Pool, and to empower countries worldwide in the colossal effort of bringing the COVID-19 pandemic to an end everywhere and for everyone.

More Than 70 U.S. Health, Consumer and Other Groups Demand Elimination of NAFTA 2.0 Terms That Would Lock in High U.S. Medicine Prices

Letter to Congress: Giveaways to Big Pharma Must Be Removed From Revised NAFTA

WASHINGTON, D.C. – After overwhelming public demand to reduce medicine prices helped propel Democrats to a majority in the U.S. House of Representatives, today more than 70 U.S. organizations launched an effort to remove new monopoly protections for pharmaceutical firms added to the revised North American Free Trade Agreement.

In a letter to Congress, the groups – representing tens of millions of Americans – demand that the pact’s giveaways to Big Pharma that would keep medicines unaffordable be removed before the pact is sent to Congress

The diverse group of patient advocacy, faith, consumer, labor and other public interest organizations that signed the letter took aim at NAFTA 2.0 terms that would “lock in place existing U.S. policies that have led to high medicine prices, undermining the authority of this and future Congresses to implement important reforms to expand generic and biosimilar competition, lower medicine prices and expand access.”

Among other dangerous requirements is that each NAFTA country guarantee a minimum of 10 years of marketing exclusivity – that is, longer monopoly protections – for cutting-edge biologics, which includes many new cancer treatments and even vaccines. This would lock the United States into its current system that keeps prices for biologics sky-high and export it to Mexico, which does not mandate a special exclusivity period for biologics, and to Canada, which now has an eight-year period.

Some of the signatory organizations have identified ways in which the NAFTA 2.0 text improves on the original NAFTA and are calling for strengthened enforcement of the revised pact’s new labor and environmental terms. But one way in which NAFTA 2.0 is dramatically worse than the original is the addition of a slew of new monopoly rights for pharmaceutical corporations that would help them avoid competition from generic and biosimilar products and keep medicines unaffordable.

The letter notes that a decade ago, congressional Democrats and then-President George W. Bush agreed on a standard for trade-pact intellectual property terms that strove to promote innovation and access to affordable medicines. That standard is not met in the NAFTA 2.0 text.

With one in five people in the United States failing to fill prescriptions due to their cost, the letter signers urge the new Congress to demand “that the administration eliminate the provisions in the NAFTA 2.0 text that undermine affordable access to medicines.” Focus on widespread public anger over health care costs helped propel the Democrats to victory in the midterm elections.

The full letter and list of signing organizations are available here.

Please see below for quotes from representatives of Consumer Reports, Doctors Without Borders, NETWORK Lobby for Catholic Social Justice, Social Security Works, the AFL-CIO and Public Citizen.

• “Prescription drugs are priced out of reach for too many Americans. But, there are provisions in the NAFTA 2.0 proposal that would lock in prolonged monopoly pricing for prescription drugs. These provisions do not belong in any trade agreement that is supposed to benefit American consumers and workers. We urge Congress to insist on taking these provisions out. We should all be working to make prescription drugs more affordable, and this proposal would just further tighten the monopoly grip of drug makers.” – Dena Mendelsohn, senior policy counsel at Consumer Reports
  
  
• “It’s absolutely reckless and counterproductive for the U.S. government to support this deal despite evidence that it keeps drug prices high and further reduces access to lifesaving medicines. This agreement is not only a threat to patients in the United States, Mexico and Canada, it also sets a dangerous precedent for future trade deals involving countries all over the world, including many in which Médecins Sans Frontières works.” – Leonardo Palumbo, advocacy adviser at the Médecins Sans Frontières (Doctors Without Border) Access Campaign
  
  
• “Pope Francis says that to be faithful, the economy must serve people first, not wealthy corporations. NAFTA 2.0 does not meet the mandate because it preferences giveaways for powerful drug companies that will harm patients. This new trade deal bars Congress from reducing drug prices, putting American lives at risk. Nearly one in four Americans report they or a family member have not filled a recent prescription because of costs, and prices continue to skyrocket. This needs to change. There is new bipartisan interest in Congress to begin tackling the issue of drug pricing. We cannot allow “big pharma lobbyists” to undermine the needs of our people. The profits of big pharma should not be prioritized over the health of people. Trade deals should not endanger the health of Americans. The Trump administration must eliminate these immoral provisions of NAFTA 2.0.” – Sister Simone Campbell, executive director of the NETWORK Lobby for Catholic Social Justice
  
  
• “It is unacceptable that provisions in the NAFTA 2.0 (USMCA) prioritize profits and protect special interests over high-quality health care and affordable medicines. America’s working families deserve better. We will continue to fight for fair trade rules that protect their wages, their rights on the job and their access to affordable medicines.” – Cathy Feingold, director of the International Department at the AFL-CIO
  
  
• “NAFTA 2.0 contains massive handouts to big pharma that will raise our drug prices. We need to smash pharmaceutical monopolies in the United States, not allow these corporations to use trade deals to make it impossible for us to lower our prices. Many members of Congress in both parties claim they want to take on big pharma and bring down prescription drug prices. But they will all be liars if they don’t also demand changes to NAFTA 2.0 to eliminate the handouts to drug corporations.”  – Alex Lawson, executive director of Social Security Works
  
  
• “With consumer anger mounting, Big Pharma aims to use NAFTA 2.0 to lock in the government-granted monopolies that give drug corporations their power to price gouge consumers in the United States and around the world. The idea was to sneak a provision into the trade deal that would prevent the United States, Canada or Mexico from reducing monopoly terms in their domestic law for cancer and other important medicines. But here’s the bad news for Big Pharma: Congress is aware of the pharmaceutical corporations’ sneaky effort to lock in high drug prices using NAFTA 2.0, and if those terms are not eliminated, it’s hard to imagine how a deal gets through Congress. – Robert Weissman, president of Public Citizen

In Memory of Zahara Heckscher

All of us at Public Citizen lift up in loving memory our dear friend and peaceful warrior Zahara Heckscher, who passed away on February 24 at the age of 53, after her years-long battle with breast cancer. 

Among her many talents as a writer, poet, teacher and facilitator, Zahara was a fierce, creative and committed activist. As she valiantly battled advanced breast cancer, she became determined to fight for all patients to have access to the cutting-edge cancer medicines that extended her life. 

When she learned that prescription drug companies were using the Trans-Pacific Partnership (TPP) negotiations to lock in extended monopolies that threatened access to affordable medicines, Zahara became a passionate trade justice advocate on behalf of cancer patients around the world. 

She galvanized testimony from people living with cancer and HIV/AIDS from the United States and other TPP countries to protest what she dubbed the “TPP death sentence clause” — a provision that would require governments to grant monopoly periods for biologic medicines used to treat cancer and other serious illnesses and thus deny patients access to more affordable generic and biosimilar medicines.  

The battle over biologics and access to cancer treatment was responsible for dragging out TPP talks for years. In October 2015, she carried those patients’ stories with her to the final round of TPP negotiations in Atlanta to demand that the TPP negotiators drop the “death sentence clause”. She was arrested as she attempted to enter the negotiations, holding an IV-pole, calling on the U.S. Trade Representative (USTR) to drop its insistence on demanding the extended monopoly period for biologic medicines. 

The video of her arrest was shared widely on social media, and her subsequent media interviews on Democracy Now, The Big Picture and others contributed to the national conversation about the dangers of the TPP for health. Due in part to the advocacy of public health advocates like Zahara, the pharmaceutical industry and USTR failed to convince the other TPP nations to accept the full twelve-year monopoly they had been demanding, but the final TPP did include a five-year period.

Zahara insisted that cancer patients cannot wait even one additional year for access to medicines that can keep them alive, so she turned her efforts to stopping Congress from ratifying the TPP.

On World Cancer Day in February 2016, she and fellow cancer survivor Hannah were arrested blocking the entrance to PhRMA, the pharmaceutical industry’s lobby that had pushed the TPP death sentence clause, to warn the public and Congress about TPP’s dangers for access to cancer medicines.  Together, Zahara and Hannah then co-founded Cancer Families for Affordable Medicines, creating public education and advocacy materials for cancer patients and their loved ones to support access to medicines by convincing their members of Congress to vote no on the TPP. 

As the pressure on Congress to pass the TPP mounted in the summer of 2016, Zahara took her message directly to Capitol Hill, getting arrested a third time at the office of Congressman Polis, and traveling to speak in-district to undecided members of Congress to demonstrate what was at stake in the TPP for cancer patients and their loved ones. Despite the fact that TPP passage was a top priority of the White House, Republican congressional leadership and Chamber of Commerce, the district-by-district activism by people like Zahara ensured that the TPP could not achieve majority support in Congress.

In the last year, Zahara’s waning physical strength did not stop her from continuing her trade justice activism. Concerned by reports that the Trump administration was pushing for the same “death sentence clause” in its renegotiations of the North America Free Trade Agreement (NAFTA), just last month, Zahara made an educational video to urge people to take action to ensure that NAFTA renegotiations not further undermine access to essential medicines.

Until the very end, Zahara used every tool at her disposal — from her razor-sharp intellect to her poetic spirit to even the cancer itself — to bless the world and to change it for the better. Her strategic and creative trade justice activism was just one small piece of her multi-faceted legacy. She was an inspiration. We will miss her dearly.

Transitions at Eyes on Trade

This blog post is a farewell of sorts.  After three years, today is my last day at Public Citizen.  In a couple weeks, I’ll be continuing to push for a more just trade model over at Sierra Club’s climate and trade program as senior policy advisor. Eyes on Trade, of course, will still be here in the good hands of my colleagues at Global Trade Watch. 

It has been a treat to have this space to amplify the call of many for a new trade model, document the damage wrought by our existing trade deals abroad and at home, fact-check dubious economic projections and predictable spin jobs for pending trade deals, spotlight the threats those deals pose to our health/environment/economy/democracy, and witness the growth of the largest, most diverse coalition ever to oppose an expansion of the trade status quo.  

I started working on trade when I realized that three lawyers in an investor-state tribunal could trump basic tenets of democracy and rule against health and environmental protections for which many of us have fought.  When I saw how a particular model of trade has contributed to the growing gulf between the rich and the rest of us.  When I realized that multinational corporations could obtain special protections that restrict consumers' access to life-saving medicines and still get away with calling it "free trade."  

Of course, one need not work on trade to know about trade.  It is little wonder that majorities of Republicans, Democrats and independents alike oppose the status quo trade pact model.  More than two decades of NAFTA, the WTO and NAFTA expansion pacts have contributed to surging U.S. trade deficits, widespread job loss, a flood of agricultural imports, downward pressure on middle-class wages and unprecedented levels of income inequality.  Behind the aggregate data lie shuttered factories, lost livelihoods and struggling communities.

These outcomes directly contradict the rosy promises made by corporate interests to sell these controversial deals to a skeptical U.S. Congress and public.  They also contradict President Obama’s stated economic agenda to revive U.S. manufacturing, boost middle-class wages and tackle inequality – an agenda that the TPP would undermine.  The Obama administration’s push for yet another NAFTA expansion deal casts a blind eye to the damaging legacy of the current trade model.

With opinion polls showing that the U.S. public is painfully aware of this legacy, the administration’s TPP push faces stiff opposition in the halls of Congress and the court of public opinion.  Turning a blind eye to the lived realities of the status quo trade model is unlikely to prove a winning strategy. 

And with that, at the risk of making this my shortest blog post to date (a perhaps not difficult feat), I bid you adieu.  It has been an honor to work with Public Citizen, and to work alongside many of you in pushing for a fair trade policy.  I look forward to continuing to do so from my new post. 

CAFTA’s Decade of Empty Promises Haunts the TPP

Ten years ago, after a flurry of backroom deal-making, Congress passed the Central America Free Trade Agreement (CAFTA).  In the dead of night.  By a single vote.  

Exactly one decade later, today trade ministers are gathering in Hawaii to try to conclude deadline-missing negotiations on the Trans-Pacific Partnership (TPP) – a sweeping deal that would expand the CAFTA model of trade across the Pacific.

In attempt to quell the controversy surrounding the TPP, the administration is recycling the same lofty promises that were used to push for passage of CAFTA: the deal would safeguard public health, spur economic prosperity at home and abroad, and protect workers, consumers, and the environment.

After 10 years of CAFTA, the emptiness of such promises is on full display. Today in Central America, life-saving medicines are more expensive due to monopoly protections that CAFTA gave to pharmaceutical corporations – protections that are slated for expansion in the TPP.  And the headlines from several CAFTA countries do not report economic prosperity, but economic instability, drug violence and forced migration.  Meanwhile, CAFTA’s labor provisions have failed to halt the assassination of dozens of Central American union workers who were trying to end unmitigated labor abuses like wage theft.  In contrast, the pact’s foreign investor privileges, which the TPP would expand, have succeeded in empowering multinational corporations to challenge domestic laws, including consumer and environmental protections.

Worse than repeating the mistakes of the past, the TPP would repeat the mistakes of CAFTA’s present.

Making life-saving medicines unaffordable

During the debate over CAFTA, health experts warned that by handing pharmaceutical firms greater monopoly protections, the deal would restrict Central Americans’ access to more affordable generic versions of life-saving drugs.

Unfortunately, they were right.  Take, for example, Kaletra, a drug used to fight HIV/AIDS.  Under CAFTA rules, Kaletra has enjoyed monopoly protections in Guatemala, making generic versions unavailable, for the entire first decade of CAFTA.  Without a generic alternative, Guatemala’s public health system pays about $130 per bottle of Kaletra.  In contrast, the generic version of Kaletra costs less than $20 per bottle, according to the Pan American Health Organization reference price.  For Guatemala’s taxpayers, paying more than six times the generic price for Kaletra under CAFTA means less money to build schools or bridges.  For Guatemala’s HIV/AIDS patients, it can mean the difference between life and death.

Like CAFTA, the TPP is slated to include extreme monopoly protections for pharmaceutical corporations.  Indeed, the deal even omits limited provisions to protect access to affordable medicines that were included the most recent U.S. free trade agreements.  That’s why Doctors without Borders has described the TPP as not only worse than CAFTA in restricting access to medicines, but “the most damaging trade agreement ever for global health.” 

Turning a blind eye to labor abuses

One decade ago, the Office of the U.S. Trade Representative sold CAFTA as the “best ever trade agreement on labor,” boasting “world class” labor provisions.  Those provisions failed to prevent the murder of 68 Guatemalan unionists over the course of seven years without a single arrest.  In 2008, the AFL-CIO and Guatemalan unions filed an official complaint under CAFTA’s labor provisions, calling for an end to the rampant anti-union violence, wage theft, and other abuses.  It was not until six years and dozens of unionist murders later that the U.S. government moved to arbitration on the case.  Today Guatemala’s union workers still endure frequent attacks with near-total impunity.

CAFTA’s labor provisions have proven similarly ineffective in the Dominican Republic, where sugar cane workers endure 12-hour workdays in hazardous conditions without receiving legally-required overtime pay.  A Spanish priest who filed an official CAFTA complaint in attempt to rectify the abuses was informed by U.S. Department of Labor officials, “Nothing is going to happen on account of not complying.”  Indeed, nothing has happened.  Despite CAFTA’s “world class” labor provisions, the Dominican Republic’s underpaid cane workers continue laboring in squalid conditions.

Why has CAFTA, like U.S. trade agreements before and since, failed to curb widespread labor abuses?   Kim Elliot, a member of the Department of Labor’s National Advisory Committee on Labor Provisions of U.S. Free Trade Agreements, recently offered this blunt explanation: the labor provisions of U.S. trade deals “are in there because they’re necessary to get deals through Congress.”  She added, “It’s really all about politics and not about how to raise labor standards in these countries.”

Now, in attempt to get the TPP through Congress, the Office of the U.S. Trade Representative is parroting the same promise it made for CAFTA, claiming that the deal would include “the highest-ever labor commitments.”  While the TPP’s labor provisions have been described as more “enforceable” than those in CAFTA, this is nothing new.  The last four U.S. Free Trade Agreements (FTAs) already included such “enforceable” terms, but still failed to end on-the-ground offenses, according to a 2014 U.S. government report.  Colombia’s unionists have faced dozens of assassinations and hundreds of death threats despite the Colombia FTA’s inclusion of TPP-like labor provisions.  And last year Peru explicitly rolled back occupational health and safety protections for workers despite the Peru FTA’s “enforceable” labor provisions.  Neither country has faced penalties under the FTAs.  It’s unclear why the TPP’s replication of such unsuccessful labor provisions should be expected to curb the systematic labor abuses in TPP countries like Vietnam, which bans independent unions, uses forced labor, and, by the Vietnamese government’s own estimate, has more than 1.75 million child laborers.

Empowering corporate attacks on consumer and environmental protections

In contrast to CAFTA’s unenforceable “protections” for workers, the deal granted highly enforceable privileges to foreign corporations.  This includes empowering them to bypass domestic courts and challenge domestic consumer and environmental protections before extrajudicial tribunals via “investor-state dispute settlement” (ISDS).

Corporations have not held back in using this controversial parallel legal system to challenge pro-consumer policies, including government efforts to keep electricity affordable.  In 2010 a U.S. energy company with an indirect, minority stake in Guatemala’s electric utility used ISDS to challenge Guatemala’s decision to lower electricity rates for consumers.  The next day, the company sold off its minority share.  A three-person ISDS tribunal generously decided to treat the firm as a protected “investor” in Guatemala and ordered the government to pay the corporation more than $32 million.  In another energy-related CAFTA case, a U.S. financial firm challenged the Dominican Republic’s decision not to raise electricity rates amid a nationwide energy crisis.  The government decided to pay the firm to drop the case in a $26.5 million settlement, reasoning that it was cheaper than continuing to pay legal fees.

CAFTA countries also face an increasing array of ISDS cases against environmental protections.  A U.S. mining company, for example, has launched a claim against the Dominican Republic for delaying and then denying environmental approval for an aggregate materials mine that the government deemed a threat to nearby water sources.  Other U.S. investors in the Dominican Republic have threatened to launch a CAFTA claim against the government for denying environmental approval for their plans to expand a gated resort.

The TPP would dramatically expand the controversial ISDS system, newly empowering more than 28,000 additional foreign-owned firms to ask private tribunals to order taxpayer compensation for commonsense environmental and consumer protections.

Fueling economic instability

Ten years ago, CAFTA proponents promised the deal would bring economic prosperity to Central America, making it “the best immigration, anti-gang, and anti-drug policy at our disposal.”  Today, CAFTA countries Honduras, El Salvador, and Guatemala are plagued by drug-related gang violence and forced migration.  While the causes are many, “economic stagnation” has fed the crisis, according to the U.S. State Department.  CAFTA clearly failed to deliver on its promise of economic growth for the region.

Worse still, CAFTA has contributed to the region’s economic instability.  Before the razor-thin passage of CAFTA, development organizations warned that the deal could lead to the displacement of the family farmers that constitute a significant portion of Central America’s workforce, by forcing them to directly compete with highly-subsidized U.S. agribusiness.  Indeed, agricultural imports from the United States in Honduras, El Salvador, and Guatemala have doubled since the deal went into effect, while the countries’ agricultural trade balance with the United States has dropped, spelling farmer displacement. 

And despite promises that CAFTA would make up for rural job loss by creating new jobs in apparel factories, apparel exports to the United States from Honduras, El Salvador, and Guatemala have actually fallen $1.6 billion, or 21 percent, since the year before CAFTA took effect.  Not only has the promise of new factories disappeared – so have existing factories.  

If the TPP were to take effect, the apparel jobs of Central America would be expected to decline even quicker, contributing to further economic instability.  That’s because the TPP includes Vietnam, a major apparel exporter where independent unions are banned and where the minimum wage averages less than 60 cents an hour – a fraction of the minimum wages in Central America (or even in China).  Central America is already losing the race to the bottom.  It will only fall further behind if the TPP makes Vietnam the newest low-wage competitor. 

The promise-defying track record of CAFTA need not be repeated.  When the TPP negotiators meeting today in a resort hotel in Hawaii finish this round of negotiations, we are likely to hear a familiar litany of promises about how the TPP would benefit consumers, workers, and the environment.  With those promises punctured by a decade of CAFTA’s stark realities, we have a unique opportunity to say “enough is enough.” 

Seven Corporations that Could Sponsor Obama’s Controversial Trade Deal (If His Nike Endorsement Falls Flat)

President Obama apparently has a flair for irony. He selected the headquarters of offshoring pioneer Nike as the place to pitch the controversial Trans-Pacific Partnership (TPP) trade deal in a major speech on Friday. As Obama tries to sell a pact that many believe would lead to more U.S. job offshoring and lower wages, why would he honor a firm that has grown and profited not by creating U.S. jobs, but by producing in offshore sweatshops with rock bottom wages and terrible labor conditions?

Less than 1 percent of the 1 million workers who made the products that earned Nike $27.8 billion in revenue in 2014 were U.S. workers. Last year, one-third of Nike’s 13,922 U.S. production workers were cut. Most Nike goods, and all Nike shoes, are produced overseas, by more than 990,000 workers in low-wage countries whose abysmal conditions made Nike a global symbol of sweatshop abuses.

This includes more than 333,000 workers in Nike-supplying factories in TPP nation Vietnam, where the average minimum wage is less than 60 cents per hour and where workers have faced such abuses as supervisors gluing their hands together as a punishment. Instead of requiring Nike to pay its Vietnamese workers more or ending the abuse they endure, the TPP would allow Nike to make even higher profits by importing goods from low-wage Vietnam instead of hiring U.S. workers.

If using an offshoring pioneer to rally support for the beleaguered TPP does not succeed for some reason, here are seven other U.S. corporations that Obama might consider as equally fitting backup options: 

1.      Philip Morris

Sure, Philip Morris International – the world’s second-largest tobacco corporation – may not be the world’s most-loved corporation, but Obama would find an enthusiastic TPP corporate sponsor in the firm.  Philip Morris has explicitly lobbied for controversial TPP provisions that would empower multinational corporations to bypass domestic courts, go before extrajudicial tribunals of three private lawyers, and challenge domestic laws that millions of people rely on for a clean environment, a stable economy, and healthy communities. Indeed, Philip Morris is already using this parallel corporate legal system, known as “investor-state dispute settlement,” to attack landmark anti-smoking policies from Australia to Uruguay. The TPP would newly empower thousands of multinational corporations to launch “investor-state” attacks against countries’ health, environmental and financial protections. In one fell swoop, the deal would roughly double U.S. exposure to “investor-state” attacks against U.S. policies.

2.      Goldman Sachs  (and other Wall Street firms)

If Obama’s Nike promo falls flat, maybe he should turn to a Wall Street bank as the next TPP corporate cheerleader. It’s no surprise that Wall Street firms like Goldman Sachs love the TPP.  The deal includes
binding rules, written before the financial crisis under the advisement of the banks themselves, that would require domestic policies to conform to the now-rejected model of deregulation that led to financial ruin. And for the first time, the TPP would empower some of the world’s largest 20 banks to directly challenge new U.S. financial protections before extrajudicial tribunals on the basis that the regulations frustrated the banks' "expectations."

3.      Pfizer  (and other Big Pharma corporations)

Pharmaceutical corporations like Pfizer are likely candidates for further corporate TPP-peddling given that the pharmaceutical industry has lobbied for the TPP more than any other. Small wonder – the deal offers pharmaceutical corporations a buffet of handouts that would allow them to raise medicine prices while restricting consumers’ access to cheaper generic drugs. One TPP chapter would give pharmaceutical firms expanded monopoly protections that would curb access to essential medicines in TPP countries like Vietnam, where it is projected that 45,000 HIV patients would no longer be able to afford life-saving treatment. Another TPP chapter would establish new restrictions on government efforts to cut medicine costs for taxpayer-funded programs such as Medicare, Medicaid and veterans' health programs. A third TPP chapter would empower foreign pharmaceutical corporations to directly attack domestic patent and drug-pricing laws in extrajudicial tribunals.

4.      ExxonMobil  (and other fracking corporations)

Maybe Obama’s next TPP photo op should be in front of a natural gas fracking drill owned by TPP-supporting ExxonMobil, the world’s largest publicly traded natural gas corporation. Natural gas firms are hopeful about TPP provisions likely to spur a surge in natural gas exports. For the rest of us, that would mean an expansion of dirty fracking and an increase in electricity costs. Implementing the TPP would require the U.S. Department of Energy to automatically approve natural gas exports to TPP countries, waiving its prerogative to determine whether those exports, and the resulting incentive for more fracking, would be in the public interest. As states like New York ban fracking to protect against health and environmental dangers, the TPP would move in the opposite direction. Indeed, the TPP would open the door to more “investor-state” attacks on anti-fracking protections, like the one Lone Pine Resources has launched against a Canadian fracking moratorium that prevents the firm from fracking under the Saint Lawrence Seaway.

5.      Time Warner  (and other Hollywood corporations)

Hollywood corporations like Time Warner Inc. already have been partnering closely with the Obama administration in stumping for the TPP – recent leaks reveal that the Motion Picture Association of America literally has asked the administration to vet the corporate alliance’s pro-TPP statements. The corporations are pining for stringent TPP copyright protections that could threaten Internet freedom by pushing Internet service providers to police everyday content sharing, resulting in blocked or censored websites. Leaked proposals for the deal would even make the common, non-commercial sharing of copyrighted content (e.g. remixed songs, reposted video clips) a prosecutable crime. 

6.      Red Lobster  (and other corporations using imported fish and seafood)

U.S. chain restaurants and agribusinesses that profit from imports of fish and seafood, at the expense of U.S. independent fishers and shrimpers, could also serve as willing backers of Obama’s TPP pitch. The deal would likely reduce or eliminate U.S. tariffs on imports of more than 80 types of fish and seafood products, increasing further the already massive flow of fish and seafood imported into the United States. Even without the TPP, the U.S. Food and Drug Administration (FDA) only physically inspects less than 1 percent of imported fish and seafood for health risks, despite that the Centers for Disease Control and Prevention has found that imported fish are the number one cause of U.S. disease outbreaks from imported food. The TPP would exacerbate this public health threat by enabling more fish and seafood imports from major exporters like Malaysia and Vietnam, where widespread fish and seafood contamination has been documented. For example, the FDA has placed 193 Vietnamese fisheries on a “red list” due to risk of salmonella contamination.

7.      Chinese Corporations in Vietnam

If Obama is willing to use Nike to promote the controversial TPP despite its reliance on low-wage labor in Vietnam, maybe he’d be willing to also solicit TPP endorsements from the Chinese corporations that are setting up shop in Vietnam in hopes of using the TPP to undercut U.S. businesses. The Chinese and Vietnamese press report that many Chinese textile and apparel firms are now building factories in Vietnam in hopes of taking advantage of the TPP’s planned phase-out of U.S. tariffs on apparel imported from Vietnam. This not only would place U.S. textile producers in direct competition with Chinese-owned firms using low-wage labor in Vietnam, but also would eliminate the jobs of workers in Mexico and Central America who now make the clothes that were made in the United States before the North American Free Trade Agreement and Central America Free Trade Agreement. In addition, the TPP’s gutting of Buy American policies would newly empower Chinese firms operating in Vietnam to undercut U.S. businesses to get contracts for goods bought by the U.S. government, paid for by U.S. taxpayers. For all firms operating in TPP countries like Vietnam, the United States would agree to waive "Buy American" procurement policies that require most federal government procurement contracts to go to U.S. firms, offshoring U.S. tax dollars to create jobs abroad. 

10 Tall Tales on Trade: Fact-Checking Obama’s Top Trade Official

Yesterday was a difficult day for U.S. Trade Representative (USTR) Michael Froman.  He had to go before Congress and explain how the administration’s plan to expand a trade model that has offshored U.S. manufacturing jobs and exacerbated middle class wage stagnation fits with President Obama’s stated “middle class economics” agenda.

Inconveniently for Mr. Froman, it does not.

That did not stop Froman from trying to paint the last two decades of Fast-Tracked, pro-offshoring trade deals – and the administration’s plan for more of the same – as a gift to the middle class. 

The facts he cited to support this depiction actually sounded great.  They just didn’t have the added advantage of being true. 

Here’s a rundown of the top 10 fibs and half-truths that Froman uttered before the Senate Finance Committee and House Ways and Means Committee yesterday in his sales pitch for the administration’s bid to expand the NAFTA “trade” pact model by Fast-Tracking through Congress the controversial Trans-Pacific Partnership (TPP).

1. Fast Track Puts Congress in the Driver’s Seat (of a Runaway Car, without Brakes or a Steering Wheel)

Froman: “[Fast Track] puts Congress in the driver’s seat to define U.S. negotiating objectives and priorities for trade agreements.”

Okay, let’s go with this analogy.  If reviving Fast Track puts Congress in the driver’s seat, it also removes the brakes and steering wheel.  Reviving Fast Track would empower the administration to negotiate and sign a sweeping “trade” pact like the TPP – implicating everything from the cost of medicines to the safety of food to the reform of Wall Street – before Congress had any enforceable say over the deal’s contents, even if they contradicted Congress’ stated negotiating objectives.  Goodbye steering wheel.  Congress’ role would be relegated to an expedited, no-amendments, limited-debate vote on the already-signed deal.  Goodbye brakes. 

Also, if we’re talking about Fast Tracking the TPP, the car is already going 60mph.  As a couple of members of Congress pointed out to Froman, the administration has been negotiating the TPP for more than five years, and Froman himself stated that TPP negotiations are in their endgame.  Even if Froman’s assertion were true that Fast Track allows Congress to define priorities for trade agreements (rather than ensuring that such priorities are not enforceable), it’s a little late for members of Congress to be naming priorities for a deal that has been under negotiation since 2009 and that Froman hopes to close in the coming months.

2. A Trade Surplus with Our FTA Partners (Does Not Appear in Official Government Data)

Froman: “You take all of our FTA partners as a whole, [and] we have a trade surplus. And that trade surplus has grown.”  Froman also claimed that the United States has a trade surplus in manufactured goods with its FTA partners.  And he tried to use red herrings to explain away the surging U.S. trade deficit with Korea under the Korea FTA.

These claims defy official U.S. government data.  Data from the U.S. International Trade Commission show that the United States has a $180 billion U.S. goods trade deficit with all free trade agreement (FTA) partners (in 2013, the latest year on record).  In manufactured goods, the United States has a $51 billion manufacturing trade deficit with all FTA partners.  Froman claimed otherwise, in part, by counting billions of dollars’ worth of "foreign exports" – goods produced abroad that simply pass through the United States without alteration before being “re-exported.”  These goods, by definition, do not support U.S. production jobs.

Contributing to our FTA deficit is the 50 percent surge in the U.S. goods trade deficit with Korea in just the first two years of the Korea FTA, which literally was used as the U.S. template for the TPP. This deficit increase, owing to a drop in exports and rise in imports, spells the loss of more than 50,000 American jobs in the FTA's first two years, according to the ratio used by the administration to claim the pact would create jobs. Froman tried to explain away the ballooning U.S. trade deficit under the Korea FTA as due to decreases in corn and fossil fuel exports.  But even if discounting both corn and fossil fuels, U.S. annual exports to Korea still fell under the FTA, and the annual trade deficit with Korea still soared.  Product-specific anomalies cannot explain away the broad-based downfall of U.S. exports to Korea under the FTA, which afflicted nine of the top 15 U.S. sectors that export to Korea. The disappointing results also cannot be blamed on low growth in Korea since the FTA.  Though Korea's growth rates in the last several years have not been spectacular, the economy has still grown since the FTA (3 percent in 2013), as has consumption (2.2 percent, adjusted for inflation, in 2013). Koreans are buying more goods, just not U.S. goods. 

 

3.  We Wish to Ensure Access to Affordable Medicines in the TPP (but Big Pharma Won’t Let Us)

Froman: “In negotiations, like TPP, we are working to ensure access to affordable life-saving medicines, including in the developing world, and create incentives for the development of new treatment and cures that benefit the world and which create the pipeline for generic drugs.”

These words play politics with people’s lives. They cloak the tragic reality that if the TPP would take effect as USTR has proposed, with leaks showing even greater monopoly protections for pharmaceutical corporations than in prior pacts, people would needlessly die for lack of access to affordable medicines. A new study finds, for example, that the TPP would dramatically reduce the share of Vietnam’s HIV patients who have access to life-saving antiretroviral medicines.  The study reveals that while 68 percent of Vietnam’s eligible HIV patients currently receive treatment, U.S.-proposed monopoly protections for pharmaceutical corporations in the TPP would allow only 30 percent of Vietnam’s HIV patients to access antiretrovirals.  As a result, an estimated 45,000 people with HIV in Vietnam who currently receive antiretroviral treatment would no longer be able to afford the life-saving drugs.

Froman also indicated in the Senate hearing that USTR is pushing to include a special monopoly protection for pharmaceutical firms that contradicts the Obama administration’s own stated objectives for reducing the cost of medicines in the United States. President Obama’s budget proposes to reduce a special monopoly protection for pharmaceutical firms with regard to biologic medicines – drugs used to combat cancer and other diseases that cost approximately 22 times more than conventional medicines.  To lower the exorbitant prices and the resulting burden on programs like Medicare and Medicaid, the Obama administration’s 2015 budget would reduce the period of Big Pharma's monopoly protection for biologics from 12 to seven years. The administration estimates this would save taxpayers more than $4.2 billion over the next decade just for federal programs. However, Froman suggested yesterday that USTR continues to push for the 12 years of corporate protection in the TPP, which would lock into place pharmaceutical firms’ lengthy monopolies here at home while effectively scrapping the administration’s own proposal to save billions in unnecessary healthcare costs.

4. Most Exporters are Small Businesses (that Have Endured Slow and Falling Exports under FTAs)

Froman: “15,600 firms export from Pennsylvania. Almost 90 percent of them are small and medium sized businesses. And the question is whether with these trade agreements we can create more opportunities for these kinds of businesses.”

Implying that exporting is mainly the domain of small businesses because they make up most exporting firms is like implying that the NBA is a league of short people because most NBA players are shorter than 7 feet tall.  The reason small and medium enterprises (defined as 500 employees or less) comprise most U.S. exporting firms is simply because they constitute 99.7 percent of U.S. firms overall (in the same way that those of us below 7 feet constitute more than 99 percent of the U.S. population).  The more relevant question is what share of small and medium firms actually depend on exports for their success. Only 3 percent of U.S. small and medium enterprises export any good to any country. In contrast, 38 percent of large U.S. firms are exporters.  Even if FTAs actually succeeded in boosting exports (which they don’t, per the government data noted below), exporting is primarily the domain of large corporations, not small businesses.

As for whether “with these trade agreements we can create more opportunities” for small firms, the record of past FTAs suggests not. Under the Korea FTA, U.S. small businesses have seen their exports to Korea decline even more sharply than large firms (a 14 percent vs. 3 percent downfall in the first year of the FTA). And small firms’ exports to Mexico and Canada under NAFTA have grown more slowly than their exports to the rest of the world. Small businesses’ exports to all non-NAFTA countries grew over 50 percent more than their exports to Canada and Mexico (74 percent vs. 47 percent) during a 1996-2012 window of data availability. The sluggish export growth owes in part to the fact that small businesses’ exports grew less than half as much as large firms’ exports to NAFTA partners (47 percent vs. 97 percent from 1996-2012).

5. We Try to Be Transparent (with the Corporate Advisors Who Can Access Secret Texts)

Froman: “And to ensure these agreements are balanced, we seek a diversity of voices in America’s trade policy. The Administration has taken unprecedented steps to increase transparency… We have held public hearings soliciting the public’s input on the negotiations and suspended negotiating rounds to host first-of-a-kind stakeholder events so that the public can provide our negotiators with direct feedback on the negotiations.”

“A diversity of voices” is an odd way to describe the more than 500 official trade advisors with privileged access to secretive U.S. trade texts and U.S. trade negotiators.  About nine out of ten of these advisors explicitly represent industry interests. Just 10 of the more than 500 advisors (less than 2 percent) represent environmental, consumer, development, food safety, financial regulation, Internet freedom, or public health organizations.  It’s little wonder that so many of these groups, excluded from setting the content of the TPP, have denounced leaked TPP texts as presenting threats to the public interest.  And as for the claim of “unprecedented steps to increase transparency,” the reality is closer to the opposite. When the Bush administration negotiated the last similarly sweeping trade pact – the Free Trade Area of the Americas – USTR published the negotiating text online for anyone to see amid negotiations. In a step backwards from the degree of transparency exhibited by the Bush administration, the Obama administration has refused repeated calls from members of Congress and civil society organizations to release TPP texts. This secrecy limits the utility of the public hearings and stakeholder events that Froman touts, as it is difficult to opine on a text you are prohibited from seeing.

6. Supporting Manufacturing and Higher Wages (Is a Goal in Spite of Our Trade Policies)

Froman: “In 2015, the Obama Administration will continue to pursue trade policies aimed at supporting the growth of manufacturing and associated high-quality jobs here at home and maintaining American manufacturers’ competitive edge.”

The only objectionable word in this sentence is “continue.” Since NAFTA, we have endured a net loss of nearly 5 million manufacturing jobs – one out of every four – and more than 57,000 manufacturing facilities. While not all of those losses are due to NAFTA, the deal’s inclusion of special protections for firms that relocate abroad certainly contributed to the hemorrhaging of U.S. manufacturing. The U.S. manufactured goods trade balance with Canada and Mexico in NAFTA’s first 20 years changed from a $5 billion surplus in 1993 to a $64.9 billion deficit in 2013. The U.S. Department of Labor has certified (under one narrow program) more than 845,000 specific U.S. workers – many of them in manufacturing – as enduring “trade-related” job losses since NAFTA due to the offshoring of their factories to Mexico or Canada, or import competition from those countries. And under just two years of the Korea FTA, U.S. manufacturing exports to Korea have fallen. Overall, the United States has a $51 billion trade deficit in manufactured goods with its 20 FTA partners. Reviving manufacturing and reviving Fast Track for the NAFTA-expanding TPP are incompatible.

Froman: “At a time when too many workers haven't seen their paychecks grow in much too long, these jobs typically pay up to 18% more on average than non-export related jobs.” 

Froman neglects to mention a key reason that too many workers haven’t seen their paychecks grow: NAFTA-style deals have not only incentivized the offshoring of well-paying U.S. manufacturing jobs, but forced these workers to compete for lower-paid service sector jobs, which has contributed to downward pressure on wages even in non-offshoreable sectors.  According to the U.S. Bureau of Labor Statistics, about three out of every five displaced manufacturing workers who were rehired in 2014 experienced a wage reduction. About one out of every three displaced manufacturing workers took a pay cut of greater than 20 percent. As increasing numbers of American workers, displaced from better-paying jobs by current trade policies, have joined the glut of workers competing for non-offshoreable jobs in retail, hospitality and healthcare, real wages have actually been declining in these growing sectors. A litany of studies has produced an academic consensus that such trade dynamics have contributed to the historic increase in U.S. income inequality – the only debate is the degree to which trade is to blame. The TPP would not only replicate, but actually expand, NAFTA’s extraordinary privileges for firms that relocate abroad and eliminate many of the usual risks that make firms think twice about moving to low-wage countries like Vietnam – a TPP negotiating partner where minimum wages average less than 60 cents an hour, making the country a low-cost offshoring alternative to even China.

7. The TPP Supports an Internet that Is Open (to Lawsuits for Common Online Activity)

Froman: "We will continue to support a free and open Internet that encourages the flow of information across the digital world."

Repetition of this platitude has failed to assuage the concerns of Internet freedom groups that point out that leaked TPP texts do not support Froman’s assurances. In a July 2014 letter, an array of Internet service providers, tech companies, and Internet freedom groups wrote to Froman about leaked TPP copyright terms, some of which resemble provisions in the defeated Stop Online Piracy Act (SOPA), which could “significantly constrain legitimate online activity and innovation.”  Noting the deal’s terms on Internet service provider liability, the groups stated, “We are worried about language that would force service providers throughout the region to monitor and policy their users’ actions on the internet, pass on automated takedown notices, block websites and disconnect Internet users.”

8. Our Exports Have Grown (More Quickly to Non-FTA Countries)

Froman: “Our total exports have grown by nearly 50 percent and contributed nearly one-third of our economic growth since the second quarter of 2009. In 2013, the most recent year on record, American exports reached a record high of $2.3 trillion...” “By opening rapidly expanding markets with millions of new middle-class consumers in parts of the globe like the Asia-Pacific, our trade agreements will help our businesses and workers access overseas markets...”

U.S. goods exports grew by a grand total of 0 percent in 2013.   The year before that, they grew by 2 percent.  As a result, the administration utterly failed to reach President Obama’s stated goal to double U.S. exports from 2009 to 2014. Most of the export growth Froman cites – which is less than half of the administration’s stated objective – came early in Obama’s tenure as a predictable rebound from the global recession that followed the 2007-2008 financial crisis.  At the abysmal export growth rate seen since then, we will not reach Obama’s stated goal to double 2009’s exports until 2054, 40 years behind schedule.  

Froman ironically uses this export growth drop-off to argue for more-of-the-same trade policy (e.g. the TPP).  The data simply does not support the oft-parroted pitch that we need TPP-style FTAs to boost exports.  In the first two years of the Korea FTA, U.S. exports to Korea have fallen 5 percent.  Overall, growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade.  That’s not a solid basis from which to argue, in the name of exports, for yet another FTA. 

And if we’re seeking to export to those countries that are growing the fastest, then the TPP is the wrong trade pact.  Of the TPP countries with which we do not already have an FTA, all but one are actually growing more slowly than the per capita growth rate of the East Asian and Pacific region overall.     

9. Increases in Food Exports (Have Been Swamped by a Surge in Food Imports)

Froman: “In 2013, U.S. farmers and ranchers exported a record $148.7 billion of food and agricultural goods to consumers around the world.”

Yes, U.S. food exports have increased, but not nearly as much as food imports. In 2013, the total volume of U.S. food exports stood just 0.5 percent higher than in 1995, while imports of food into the United States had more than doubled (growing 115 percent since 1995). Existing FTAs have contributed to the imbalanced food trade. The average annual U.S. agricultural deficit with Canada and Mexico under NAFTA’s first two decades reached $975 million, almost three times the pre-NAFTA level. And under the first two years of the Korea FTA, U.S. agricultural exports to Korea plummeted 34 percent. Smaller-scale U.S. family farms have been hardest hit. About 170,000 small U.S. family farms have gone under since NAFTA and NAFTA expansion pacts have taken effect, a 21 percent decrease in the total number.

10. The TPP Takes Heed of NAFTA’s Mistakes (and Builds on Them)

Froman: “I think the President has made clear that as we pursue a new trade policy, we need to learn from the experiences of the past and that’s certainly what we’re doing through TPP and the rest of our agenda. For example, when he was running for President, he said we ought to renegotiate NAFTA. What that meant was to make labor and environment not side issues that weren’t enforceable, but to bring labor and environment in the core of the agreement and make them enforceable just like any other provision of the trade agreement consistent with what Congress and the previous administration worked out in the so-called May 10^th agreement.”

When candidate Obama said in 2008 that he would renegotiate NAFTA – a pact that had become broadly unpopular for incentivizing the offshoring of U.S. manufacturing jobs – most people probably didn’t imagine that he meant expanding those offshoring incentives further. But the TPP would extend further NAFTA’s extraordinary privileges for firms that relocate abroad to low-wage countries (like TPP negotiating partner Vietnam).  Most people also probably would not expect “learning from the experiences of the past” to lead to an expansion of the monopoly protections that NAFTA gave to pharmaceutical corporations, thereby reducing the availability of generics and increasing the cost of medicines. But Froman himself stated yesterday that such corporate protections – antithetical to textbook notions of “free trade” – are part of the TPP’s NAFTA-plus provisions.

And though Froman touts the May 10 deal as an improvement over NAFTA for labor rights, a recent government report has shown the May 10 provisions to be ineffective at curbing labor abuses in FTA partner countries. A November 2014 report from the U.S. Government Accountability Office found broad labor rights violations across all five surveyed FTA partner countries, regardless of whether or not the FTA included the labor provisions of the vaunted May 10 deal, including unionist murders in Colombia and impunity for union-busting in Peru.  Several of the TPP negotiating partners are notorious labor rights abusers – four of them were cited in a recent Department of Labor report for using child and/or forced labor. Vietnam, meanwhile, outright bans independent unions. Why would incorporation of the same terms that have failed to curb labor abuses in existing FTAs be expected to end the systematic labor rights abuses of TPP partners? 

And despite the May 10 deal’s environmental provisions, the TPP’s extraordinary investment provisions would empower thousands of foreign firms to bypass domestic courts, go before extrajudicial tribunals, and challenge new domestic environmental protections as "frustrating their expectations." Corporations have already used such foreign investor privileges under existing U.S. FTAs to attack a moratorium on fracking, renewable energy programs, and requirements to clean up oil pollution and industrial toxins.  Tribunals comprised of three private attorneys have already ordered taxpayers to pay hundreds of millions to foreign firms for such safeguards, arguing that they violate sweeping FTA-granted investor privileges that the TPP would expand.  Provisions, such as those in the May 10 deal, that call for countries to enforce their environmental laws sound hollow under a TPP that would simultaneously empower corporations to “sue” countries for said enforcement. 

Obama vs. Obama: The State of the Union's Self-Defeating Trade Pitch

In his State of the Union address tonight, President Obama called for job creation, reduced income inequality, more affordable healthcare and better regulation of Wall Street. 

He also called for Fast Tracking the Trans-Pacific Partnership (TPP) – a controversial “trade” deal that would undermine all of the above.

Here's a side-by-side analysis of how Obama's push to Fast Track the TPP contradicts his own State of the Union agenda:

Obama’s Agenda	The TPP’s Counter-Agenda
Income Inequality: “Will we accept an economy where only a few of us do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?”	An “economy where only a few of us do spectacularly well” is actually the projected outcome of the TPP. A recent study finds that the TPP would spell a pay cut for all but the richest 10 percent of U.S. workers by exacerbating U.S. income inequality, just as past trade deals have done.
Manufacturing revival: “More than half of manufacturing executives have said they’re actively looking at bringing jobs back from China. Let’s give them one more reason to get it done.”	The TPP would give manufacturing firms a reason to offshore jobs to Vietnam, not bring them back from China. The TPP would expand NAFTA’s special protections for firms that offshore American manufacturing, including to Vietnam, where minimum wages are a fraction of those paid in China. Since NAFTA, we have endured a net loss of more than 57,000 U.S. manufacturing facilities and nearly 5 million manufacturing jobs.
American jobs: “So no one knows for certain which industries will generate the jobs of the future. But we do know we want them here in America.”	TPP rules would gut the popular Buy American preferences that require government-purchased goods to be made here in America, preventing us from recycling our tax dollars back into our economy to create U.S. jobs.
Exports: “Today, our businesses export more than ever, and exporters tend to pay their workers higher wages.”	Those who wish for more exports should wish for a different trade agenda. U.S. exports to countries that are part of TPP-like deals have actually grown slower than exports to the rest of the world, according to government data. Under the Korea deal that literally served as the template for the TPP, U.S. exports have actually fallen.
Small businesses: “21st century businesses, including small businesses, need to sell more American products overseas.”	Small businesses have endured declining exports and export shares under pacts serving as the model for the TPP. Small businesses suffered a steeper downfall in exports than large firms under the Korea trade pact, and small businesses’ export share has declined under NAFTA.
Economic growth: “Maintaining the conditions for growth and competitiveness. This is where America needs to go.”	An official U.S. government study finds that the economic growth we could expect from the TPP is precisely zero, while economists like Paul Krugman have scoffed at the deal’s economic significance.
Middle class wages: “Of course, nothing helps families make ends meet like higher wages.”	The TPP would put downward pressure on middle class wages, just as NAFTA has, by offshoring the jobs of decently-paid American manufacturing workers and forcing them to compete for lower-paying, non-offshoreable jobs.
Legacy of past trade deals: “Look, I’m the first one to admit that past trade deals haven’t always lived up to the hype, and that’s why we’ve gone after countries that break the rules at our expense.”	Past trade deals have resulted in massive trade deficits and job loss not because the pacts’ rules have been broken, but because of the rules themselves. The TPP would double down on NAFTA’s rules – the opposite of Obama’s promise to renegotiate the unpopular pact – by expanding NAFTA’s offshoring incentives, limits on food safety standards, restrictions on financial regulation and other threats to American workers and consumers.
Affordable medicines: “…middle-class economics means helping working families feel more secure in a world of constant change. That means helping folks afford …health care…”	The TPP would directly contradict Obama’s efforts to reduce U.S. healthcare costs by expanding monopoly patent protections that jack up medicine prices and by imposing restrictions on the U.S. government’s ability to negotiate or mandate lower drug prices for taxpayer-funded programs like Medicare and Medicaid.
Wall Street regulation: “We believed that sensible regulations could prevent another crisis…Today, we have new tools to stop taxpayer-funded bailouts, and a new consumer watchdog to protect us from predatory lending and abusive credit card practices…We can’t put the security of families at risk by…unraveling the new rules on Wall Street…”	Senator Warren has warned that the TPP could help banks unravel the new rules on Wall Street by prohibiting bans on risky financial products and “too big to fail” safeguards while empowering foreign banks to “sue” the U.S. government over new financial regulations.
Internet freedom: “I intend to protect a free and open internet…”	The TPP includes rules that implicate net neutrality and that would require Internet service providers to police our Internet activity – rules similar to those in the Stop Online Piracy Act (SOPA) that was rejected as a threat to Internet freedom.
National interests: “But as we speak, China wants to write the rules for the world’s fastest-growing region. That would put our workers and businesses at a disadvantage. Why would we let that happen?”	With the TPP, multinational corporations want to write the rules that would put our workers at a disadvantage and undermine our national interests. TPP rules, written behind closed doors under the advisement of hundreds of official corporate advisers, would provide benefits for firms that offshore American jobs, help pharmaceutical corporations expand monopoly patent protections that drive up medicine prices, give banks new tools to roll back Wall Street regulations, and empower foreign firms to “sue” the U.S. government over health and environmental policies. Why would we let that happen?

Pharmaceutical CEO: This Controversial Deal Will Be Great for Us…And You (Trust Us)

In an op-ed appearing in Forbes on Tuesday, the CEO of Eli Lilly, a U.S. pharmaceutical corporation, paints a glowing picture of how the proposed Trans-Atlantic Free Trade Agreement (TAFTA) would benefit consumers on both sides of the Atlantic – but it’s pure fantasy.

It is not surprising that Eli Lilly is cheerleading this controversial deal. This is the same pharmaceutical firm that is using the North American Free Trade Agreement (NAFTA) – TAFTA’s predecessor – to challenge Canada’s legal standards for granting patents and demand $500 million in taxpayer compensation.

John Lechleiter, Lilly’s CEO, shrouds his arguments under the guise of “free trade,” while in reality Lilly’s TAFTA proposals are a plea for increased government protection for his company and expansion of the monopolistic business model upon which the multinational pharmaceutical industry relies.

This post will take on Mr. Lechleiter’s claims, one by one.

TPP: Limiting the U.S. Government’s Ability to Control Rising Drug Costs

This is the third post in a three-part series on how the Trans-Pacific Partnership (TPP) could increase medicine prices in the United States.  Click here for the first post's introduction to the problem, and here for the second post's outline of new rights that the TPP would give to Big Pharma. 

A leaked draft TPP annex with the Orwellian title “Transparency and Procedural Fairness for Healthcare Technologies” would set broad limits on governments’ prerogatives to negotiate or mandate lower drug prices, including for taxpayer-funded programs such as Medicare, Medicaid and veterans’ and military health programs. Pushed by U.S. negotiators, these proposed TPP rules would conflict with existing and proposed policies to reduce healthcare costs for seniors, military families and the poor.

Rolling back medicine cost savings for U.S. veterans:

The U.S. government uses automatic price reductions to secure lower drug costs for U.S. veterans who benefit from health programs administered by VA. U.S. law allows VA to access drug prices at 24 percent below average market prices, and requires drug companies to offer these reduced prices for VA-administered programs as a condition for their medicines being included in other government health programs.

However, this cost-saving mechanism could run afoul of the proposed TPP annex, which requires government drug reimbursements to be based on “competitive, market-derived prices,” or on a system that “appropriately recognizes[] the value” of the drugs. The government-mandated price-setting system for VA programs would be subject to challenge as not being “competitive” and “market-derived.” VA-secured prices that fall significantly below the prices of patented drugs also could be challenged under the TPP as not “appropriately recognizing” drugs’ value. These TPP provisions, if enacted, could expose the U.S. government to challenges before international tribunals for not rolling back policies that cut healthcare costs for veterans and taxpayers.

Threatening policies that make medicines more affordable for the poor:

U.S. federal and state governments currently use several methods to tamp down the prices of drugs provided to low-income families through Medicaid. For example, the U.S. federal government requires drug corporations, as a condition for having their drugs covered by Medicaid, to sign discount agreements that oblige the firms to provide the state and federal governments with rebates to lower the cost of the drugs. These rebates have resulted in a 45 percent reduction in Medicaid spending for brand-name drugs.

State governments can further cut costs by, for example, negotiating lower prices with drug companies in return for placing their medicines on a Preferred Drug List (PDL) – a list of medicines that the state’s Medicaid program will cover without requiring prior authorization from a doctor. States have calculated substantial cost savings from usage of PDLs: New York saved an estimated $381 million in one recent year, while Texas saved an estimated $115 million and Utah saved an estimated $434 million.

Such Medicaid cost containment measures could be challenged under the TPP. Leveraging the government’s buying power to set prices could be attacked as not being “market-derived” or as “appropriately recognizing” the value of patented drugs. Some argue that the TPP provisions would primarily target federal policies, while Medicaid is administered by state governments. But even if limited to federal policies, the pact’s proposed terms directly contradict Medicaid’s federal cost control efforts, such as requiring drug firms to sign discount agreements. And state-level tools like PDLs could still be challenged under the TPP as part of a program created and controlled by the federal government.

Challenging Obamacare cost reductions for seniors:

Before implementation of the landmark Patient Protection and Affordable Care Act of 2010, seniors faced a gap in Medicare drug coverage. After passing a given threshold of drug costs, Medicare beneficiaries went from having to pay 25 percent of a drug’s cost to having to pay 100 percent out of pocket, until reaching a second threshold at which Medicare again covered most costs. Closing this “doughnut hole” was a key objective of the Affordable Care Act, which required drug manufacturers to offer a 50 percent drug price discount to Medicare beneficiaries within the coverage gap if they wanted their drugs to continue being covered under Medicare. As a result of this discount and a gradual increase in Medicare coverage, Medicare beneficiaries within the coverage gap were only responsible for 47.5 percent of brand-name drug costs in 2013 and will be responsible for only 25 percent by 2020.

But under the TPP, the requirement for drug companies to halve the price of their drugs within the coverage gap could be challenged for neither reflecting “competitive market-derived” prices nor “appropriately recognizing[] the value” of patented drugs. The Obama administration’s TPP healthcare annex thus threatens the cost savings that the administration’s own signature health law has provided to seniors.

Chilling future reforms that could further reduce healthcare costs for retirees:

Governments in countries ranging from New Zealand to Japan have kept healthcare costs in check by leveraging the government’s large purchasing power for taxpayer-funded public health programs to negotiate lower drug prices with pharmaceutical corporations. In contrast, for Medicare, which covers more than 50 million Americans, the U.S. government is barred by law from directly negotiating drug prices with pharmaceutical corporations.

Many policymakers, healthcare professionals and even President Obama have called for changes to this law so that the government could ask drug companies to provide lower prices in exchange for getting subsidized access to millions of Medicare recipients. Other reform proposals, including legislation now pending, would have the federal government set maximum prices for drugs covered by Medicare (as it does for health programs provided to veterans) or require that drug companies provide drug rebates (similar to the rebates required under Medicaid). Indeed, the White House itself has proposed requiring drug companies to pay Medicaid-like rebates to providers for treating low-income Medicare beneficiaries. The administration estimates this would deliver $117 billion in savings over 10 years.

However, the TPP presents an obstacle to these proposals to control soaring Medicare costs. All of the above-mentioned policies involve direct government intervention in price setting, conflicting with the TPP requirement for market-derived prices, and inviting challenges for failing to “appropriately recognize” the value of patented drugs. 

Undermining drug discounts for underserved communities:

Under a program known as 340B, the U.S. federal government enables nongovernmental health centers – including migrant health centers, homeless health centers, children’s hospitals and family planning centers – to offer their diverse constituencies more affordable drugs. The federal government requires pharmaceutical firms to offer discounted drug prices to 340B-covered health centers via rebates, as a condition for having their drugs covered by Medicaid.

As a federally-run program that mandates below-market prices, the program could be challenged as a violation of the proposed TPP rules requiring drug prices to be market-derived or to reflect the value of patented drugs. In addition, the leaked TPP annex would require the U.S. government to allow pharmaceutical corporations to appeal drug pricing decisions such as the rebate amounts set under the 340B program, though they have very limited appeal rights for such decisions under U.S. domestic law. The TPP would thus give pharmaceutical corporations a new means of challenging 340B policies that reduce drug prices for underserved populations. 

TPP: Expansive Rights for Big Pharma, Expensive Medicines for U.S. Consumers

This is the second in a three-part series on how the Trans-Pacific Partnership (TPP) could increase medicine prices in the United States.  Click here for the first post's introduction to the problem. 

Leaked draft intellectual property texts for the TPP reveal broad monopoly protections for pharmaceutical corporations, which elevate the costs of medicines and medical procedures. Inserting these sweeping corporate privileges into the pact would undermine U.S. efforts to make healthcare more affordable.

Some of the leaked TPP monopoly protections for Big Pharma could require scrapping the Obama administration proposal to save more than $4 billion on biologic medicines. Biologics – the latest generation of drugs to combat cancer, rheumatoid arthritis and other diseases – are exceptionally expensive, costing approximately 22 times more than conventional medicines.

Under U.S. law, pharmaceutical corporations enjoy monopoly protections for biologic drugs, even in the absence of a patent, for a 12-year period of “exclusivity.” During these 12 years, the Food and Drug Administration is prohibited from approving more affordable versions of the drugs, inflating the cost of these life-saving medicines as pharmaceutical firms accrue monopoly profits.

To lower the exorbitant prices and the resulting burden on programs like Medicare and Medicaid, the Obama administration’s 2015 budget would reduce the exclusivity period for biologics from 12 to seven years. The administration estimates this would save taxpayers more than $4.2 billion over the next decade just for federal programs.

However, at the request of Big Pharma, U.S. trade negotiators are demanding the 12-year exclusivity requirement for biologics in the TPP. This would lock into place pharmaceutical firms’ lengthy monopolies here at home. That is, Obama administration negotiators would effectively scrap the administration’s own proposal to save billions in unnecessary healthcare costs and lock in rules that would forbid future presidents or Congresses from doing so.

Investor Privileges: Empowering Big Pharma to Directly Attack U.S. Health Policies

Another TPP text - the leaked draft investment chapter - reveals that the deal would grant foreign firms the power to skirt domestic courts, drag the U.S. government before extrajudicial tribunals, and directly challenge patent laws and medicine cost containment policies as violations of their new TPP foreign investor “rights.”

The tribunals, comprised of three private attorneys, would be authorized to order unlimited taxpayer compensation for domestic policies perceived as undermining pharmaceutical corporations’ “expected future profits.” Effectively, this system would elevate individual pharmaceutical firms to the same status as the countries that may sign the TPP, empowering such firms to privately enforce the public agreement.

Such extreme “investor-state” rules have been included in past U.S. “free trade” agreements, forcing taxpayers to pay firms more than $430 million for toxics bans, land-use rules, water and timber policies and more. Just under U.S. pacts, more than $38 billion is pending in corporate claims against patent policies, pollution cleanup requirements, climate and energy laws, and other public interest polices.

This includes a $500 million claim that U.S. pharmaceutical corporation Eli Lilly launched in 2013 against Canada’s legal standard for granting patents. The firm is demanding compensation because Canadian courts enforcing Canadian patent law ruled that two of Eli Lilly’s medicines failed to meet the Canadian standard to obtain a patent, which requires demonstrating a drug’s promised utility. This is the first attempt by a patent-holding pharmaceutical firm to use the extraordinary investor privileges provided by U.S. “trade” agreements as a tool to push for greater monopoly patent protections.

The TPP would vastly expand the investor-state threat to U.S. public health policies, given the thousands of corporations based in TPP countries that would be newly empowered to launch cases against U.S. laws on behalf of any of their more than 14,000 U.S. subsidiaries. 

Stay tuned for post #3 on yet another way that the TPP could limit the U.S. government's ability to control rising drug costs. 

TPP: The “Trade” Deal that Could Inflate Your Healthcare Bill

Much has been said about how the Trans-Pacific Partnership (TPP) threatens to raise medicine prices in TPP developing countries, thanks to the deal's proposed expansion of monopoly protections for pharmaceutical corporations.  

Less has been said about the proposed TPP rules that could increase medicine prices in the United States.  

Americans pay far more for healthcare than people in any other developed country, even though U.S. life expectancy falls below the average for developed countries. A major contributor to our bloated healthcare costs is the high prices for medicines in the United States. According to the Government Accountability Office, U.S. drug prices increased more than 70 percent faster than prices for other healthcare goods and services over 2006-2010. As a result, millions of Americans cannot afford the medicines they need to live healthy lives.

Soaring drug prices also drive up the amount that taxpayers must pay to fund public health programs such as Medicare, Medicaid and programs covering the U.S. military and veterans. Indeed, rising healthcare costs are the number one contributor to the U.S. government’s projected long-term budget deficits.

To try to combat the twin problems of unaffordable healthcare and unsustainable deficits, U.S. federal and state governments already use several tools to tamp down the cost of drugs – for Medicare, Medicaid and for military healthcare under TRICARE and the Department of Veterans Affairs (VA). Many more such cost containment policies have been proposed.

Yet, the TPP threatens to chill such proposals and even roll back existing policies to rein in exorbitant medicine prices. Leaked draft TPP texts – an intellectual property chapter, investment chapter and healthcare annex – contain expansive rules that would constrain the ability of the U.S. government to reduce medicine prices. Getting these terms into the TPP was a key objective of large U.S. pharmaceutical corporations that stand to reap monopoly profits from expansive patent terms and restrictions on government cost containment efforts. This incentive may explain why pharmaceutical corporations have lobbied Congress for the TPP more than any other industry.

The TPP’s threats to the affordability of U.S. healthcare have spurred major groups that have not traditionally taken part in trade policy debates to warn against the TPP’s provisions. For example, AARP – representing more than 37 million Americans over the age of 50 – joined unions and consumer groups in a November 2013 letter to President Obama to express “deep concern” that texts proposed for the TPP would “limit[] the ability of states and the federal government to moderate escalating prescription drug, biologic drug and medical device costs in public programs.” The groups concluded that the TPP could “undermine[] access to affordable health care for millions in the United States and around the world.”

Stay tuned for post #2 on specific TPP threats to affordable U.S. healthcare: Expansive Rights for Big Pharma, Expensive Medicines for Consumers.

Fact-checking Froman: The Top 10 Myths Used by Obama’s Top Trade Official

U.S. Trade Representative Michael Froman tried in a speech yesterday to defend the Obama administration’s beleaguered trade policy agenda: the controversial Trans-Pacific Partnership (TPP) and Trans-Atlantic Free Trade Agreement (TAFTA) pacts and an unpopular push to Fast Track those sweeping deals through Congress.  The list of those publicly opposing the Fast Track push includes most House Democrats, a sizeable bloc of House Republicans, House Minority Leader Nancy Pelosi, Senate Majority Leader Harry Reid, and 62% of the U.S. voting public. 

In attempt to justify the administration’s polemical pacts, Froman resorted to some statements of dubious veracity, ranging from half-truths to outright mistruths.  To set the record straight, here are the top 10 Froman fables, followed by inconvenient facts that undercut his assertions and help explain the widespread opposition to TPP, TAFTA, and Fast Track.

1. Access to affordable medicines

• Froman:  “[In TPP] we’re working to find better ways to foster affordable access to medicines…” 

• Fact:  This is one of the bigger whoppers to escape Froman’s mouth during the speech.  Leaked negotiating texts reveal that U.S. proposals for the TPP go beyond prior U.S. pacts in handing large pharmaceutical corporations unprecedented monopoly patent protections that would restrict the availability of life-saving generic medicines and raise healthcare costs in TPP countries.  The U.S. TPP proposals would empower pharmaceutical firms to extend medicine patents beyond what the World Trade Organization allows, to patent even the methods for treating patients, and to re-patent existing medicines without actually inventing anything new.  A broad array of public health groups have condemned the overreaching U.S. TPP proposals, warning that they would “jeopardize many, if not millions, of lives.” 

2. Income inequality

• Froman:  “Our trade policy is a major lever for encouraging investment here at home in manufacturing, agriculture and services, creating more high-paying jobs and combating wage stagnation and income inequality.”

• Fact:  First, study after study has shown no correlation between a country’s willingness to sign on to TPP-style pacts and its ability to attract foreign investment, casting doubt on Froman’s promise of a job-creating investment influx.  But more importantly, Froman opted to ignore a big part of why U.S. workers are currently enduring such acute levels of “wage stagnation and income inequality.”  He did not mention the academic consensus that status quo U.S. trade policy, which the TPP would expand, has contributed significantly to the historic rise in U.S. income inequality.  The only debate has been the extent of trade’s inequality-exacerbating impact.  A recent study estimates that trade flows have been responsible for more than 90% of the rise in income inequality occurring since 1995, a period characterized by trade pacts that have incentivized the offshoring of decently-paid U.S. jobs and forced U.S. workers to compete with poorly-paid workers abroad.  How can the TPP, a proposed expansion of the trade policies that have exacerbated inequality, now be expected to ameliorate inequality? 

3. Internet freedom

• Froman:  “I’ve heard some critics suggest that TPP is in some way related to SOPA [the Stop Online Piracy Act].  Don’t believe it.  It just isn’t true….”

• Fact:  Froman’s attempt to assuage fears of a TPP-provided backdoor to SOPA-like limits on Internet freedom would be more convincing if a) he offered details beyond “it just isn’t true,” or b) if his statement didn’t directly contradict leaked TPP texts.  A November leak of the draft TPP intellectual property chapter revealed, for example, that the U.S. is proposing draconian copyright liability rules for Internet service providers that, like SOPA, threaten to curtail Internet users’ free speech.  Indeed, while nearly all other TPP countries have agreed to a proposed provision to limit Internet service providers’ liability, the United States is one of two countries to oppose such flexibility.

4. Corporate trade advisors

• Froman:  “Our cleared advisors do include representatives from the private sector… [but] they [also] include representatives from every major labor union, public health groups…environmental groups…as well as development NGOs...” 

• Fact:  About 90% of the members of the official U.S. trade advisory system explicitly represent industry interests.  These “advisors” are granted privileged access to U.S. negotiators and secretive trade negotiating texts.  Less than 9% of the advisors represent the union, public health, consumer, or development organizations that Froman touts.  And most of those non-industry representatives are cloistered into just two of the advisory system’s 28 committees, while 16 of the committees have zero non-business representatives.  These industry-only committees meet with administration representatives three times as often as the system’s single labor committee, as highlighted by AFL-CIO president Richard Trumka in a recent letter criticizing the lack of TPP consultation with union representatives who ostensibly serve as “advisors.”  

• Froman:  “I’m pleased to announce that we are upgrading our advisory system to provide a new forum for experts on issues like public health, development and consumer safety.  A new Public Interest Trade Advisory Committee, or PTAC, will join the Labor Advisory Committee and the Trade and Environment Policy Advisory Committees to provide cross-cutting platforms for input in the negotiations.”

• Fact:  Froman’s announcement of a new “public interest” committee – a response to the outcry over the vast imbalance of this corporate-dominated advisory system – offers too little, too late. Amid a slew of advisory committees exclusively devoted to narrow industry interests, the “public interest” now gets a single committee?  And how much influence will this committee have in changing the many core TPP provisions that threaten the public interest, now that the administration hopes to conclude TPP negotiations, which have been going on for four years, in the coming months?  Proposed as a TPP afterthought, this new committee comes across as window-dressing, not a genuine restructuring of a system that gives corporations insider access to an otherwise closed trade negotiation process.

5. Fast Track

• Froman:  Fast Track is “the mechanism by which Congress has worked with every administration since 1974 to define its marching orders on what to negotiate…”  We can use Fast Track to “require[] future administrations to require labor, environmental and innovation and access to medicines [standards]…”

• Fact:  Under Fast Track, Congress has not given the administration “marching orders” so much as marching suggestions.  Though Congress inserted non-binding “negotiating objectives” for U.S. pacts into past Fast Track bills – a model replicated in the unpopular current legislation to revive Fast Track for the TPP and TAFTA – Democratic and GOP presidents alike have historically ignored negotiating objectives included in Fast Track.  For example, Froman stated that Fast Track could be used to require particular labor standards.  But while the 1988 Fast Track used for the North American Free Trade Agreement (NAFTA) and the establishment of the World Trade Organization (WTO) included a negotiating objective on labor standards, neither pact included such terms.  The history shows that Fast-Tracked pacts that ignore Congress’ priorities can still be signed by the president (locking in the agreements’ contents) before being sent to Congress for an expedited, ex-post vote in which amendments are prohibited and debate is restricted. 

6. Currency manipulation

• Froman:  In response to a question of whether currency manipulation is being addressed in the TPP: “We take the issue of exchange rates or currency manipulation very seriously as a matter of policy…”

• Fact:  U.S. TPP negotiators have not even initiated negotiations on the inclusion of binding disciplines on currency manipulation, much less secured other countries’ commitment to those disciplines.  The U.S. inaction on currency in the TPP contrasts with letters signed by 230 Representatives (a majority) and 60 Senators (a supermajority) demanding the inclusion of currency manipulation disciplines in the TPP.  Unless U.S. negotiators take currency manipulation more “seriously,” the TPP may be dead on arrival in the U.S. Congress. 

7. Labor rights

• Froman:  “In TPP we’re seeking to include disciplines requiring adherence to fundamental labor rights, including the right to organize and to collectively bargain, protections from child and forced labor and employment discrimination.” 

• Fact:  The TPP includes Vietnam, a country that bans independent unions.  And Vietnam was recently red-listed by the Department of Labor as one of just four countries that use both child labor and forced labor in apparel production.  While Froman acknowledged such “serious challenges,” he did not explain how they would be resolved.  Is Vietnam going to change its fundamental labor laws so as to allow independent unions?  Is the government going to revamp its enforcement mechanisms so as to eliminate the country’s widespread child and forced labor?  Barring such sweeping changes, will the U.S. still sign on to a TPP that includes Vietnam?  

8. Environmental protection

• Froman:  “We’re asking our trading partners to commit to effectively enforce environmental laws…”

• Fact:  While Froman touted several provisions in the draft TPP environment chapter as requiring enforcement of domestic environmental laws, he didn’t mention the draft TPP investment chapter that would empower foreign corporations to directly challenge those laws before international tribunals if they felt the laws undermined their expected future profits.  Corporations have been increasingly using these extreme “investor-state” provisions under existing U.S. “free trade” agreements (FTAs) to attack domestic environmental policies, including a moratorium on fracking, renewable energy programs, and requirements to clean up oil pollution and industrial toxins.  Tribunals comprised of three private attorneys have already ordered taxpayers to pay hundreds of millions to foreign firms for such safeguards, arguing that they violate sweeping FTA-granted investor privileges.  Froman’s call for countries to enforce their environmental laws sounds hollow under a TPP that would simultaneously empower corporations to “sue” countries for said enforcement.

9. TPP secrecy

• Froman:  “Let me make one thing absolutely clear: any member of Congress can see the negotiating text anytime they request it.”

• Fact:  For three full years negotiations, members of Congress were not able to see the bracketed negotiating text of the TPP, a deal that would rewrite broad swaths of domestic U.S. policies.  Only after mounting outcry among members of Congress and the public about this astounding degree of secrecy did the administration begin sharing the negotiating text with members of Congress last June.  Even so, the administration still only provides TPP text access under restrictive terms for many members of Congress, such as requiring that technical staff not be present and forbidding the member of Congress from taking detailed notes or keeping a copy of the text.  Meanwhile, the U.S. public remains shut out, with the Obama administration refusing to make public any part of the TPP negotiating text.  Such secrecy falls short of the standard of transparency exhibited by the Bush administration, which published online the full negotiating text of the last similarly sweeping U.S. pact (the Free Trade Area of the Americas). 

10. Exports under FTAs

• Froman:  “Under President Obama, U.S. exports have increased by 50%...”  “Today the post-crisis surge in exports we experienced over the last few years is beginning to recede.  And that’s why we’re working to open markets in the Asia-Pacific and in Europe...”

• Fact:  U.S. exports grew by a grand total of 0% last year under the current “trade” pact model.   The year before that, they grew by 2%.  Most of the export growth Froman cites came early in Obama’s tenure as a predictable rebound from the global recession that followed the 2007-2008 financial crisis.  At the abysmal export growth rate seen since then, we will not reach Obama’s stated goal to double 2009’s exports until 2054, 40 years behind schedule.  Froman ironically uses this export growth drop-off to argue for more-of-the-same trade policy (e.g. the TPP and TAFTA).  The data simply does not support the oft-parroted pitch that we need TPP-style FTAs to boost exports.  Indeed, the overall growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade.  That’s not a solid basis from which to argue, in the name of exports, for yet another FTA. 

Leaked Documents Reveal Obama Administration Push for Internet Freedom Limits, Terms That Raise Drug Prices in Closed-Door 'Trade' Talks

U.S. Demands in Trans-Pacific Partnership Agreement Text, Published Today by WikiLeaks, Contradict Obama Policy and Public Opinion at Home and Abroad

Secret documents published today by WikiLeaks and analyzed by Public Citizen reveal that the Obama administration is demanding terms that would limit Internet freedom and access to lifesaving medicines throughout the Asia-Pacific region and bind Americans to the same bad rules, belying the administration’s stated commitments to reduce health care costs and advance free expression online, Public Citizen said today.

WikiLeaks published the complete draft of the Intellectual Property chapter for the Trans-Pacific Partnership (TPP), a proposed international commercial pact between the United States and 11 Asian and Latin American countries. Although talks started in 2008, this is the first access the public and press have had to this text. The text identifies which countries support which terms. The administration has refused to make draft TPP text public, despite announcing intentions to sign the deal by year’s end. Signatory nations’ laws would be required to conform to TPP terms.

The leak shows the United States seeking to impose the most extreme demands of Big Pharma and Hollywood, Public Citizen said, despite the express and frequently universal opposition of U.S. trade partners. Concerns raised by TPP negotiating partners and many civic groups worldwide regarding TPP undermining access to affordable medicines, the Internet and even textbooks have resulted in a deadlock over the TPP Intellectual Property Chapter, leading to an impasse in the TPP talks, Public Citizen said.

“The Obama administration’s proposals are the worst – the most damaging for health – we have seen in a U.S. trade agreement to date. The Obama administration has backtracked from even the modest health considerations adopted under the Bush administration,” said Peter Maybarduk, director of Public Citizen’s global access to medicines program. “The Obama administration’s shameful bullying on behalf of the giant drug companies would lead to preventable suffering and death in Asia-Pacific countries. And soon the administration is expected to propose additional TPP terms that would lock Americans into high prices for cancer drugs for years to come.”

Previously, some elements of U.S. proposals for the Intellectual Property Chapter of the TPP had been leaked in 2011 and 2012. This leak is the first of a complete chapter revealing all countries’ positions. There are more than 100 unresolved issues in the TPP Intellectual Property chapter. Even the wording of many footnotes is in dispute; one footnote negotiators agree on suggests they keep working out their differences over the wording of the other footnotes. The other 28 draft TPP chapters remain shrouded in secrecy.

Last week, the AARP and major consumer groups wrote to the Obama administration to express their “deep concern” that U.S. proposals for the TPP would “limit the ability of states and the federal government to moderate escalating prescription drug, biologic drug and medical device costs in public programs,” and contradict cost-cutting plans for biotech medicines in the White House budget.

Other U.S.-demanded measures for the TPP would empower the tobacco giants to sue governments before foreign tribunals to demand taxpayer compensation for their health regulations and have been widely criticized. “This supposed trade negotiation has devolved into a secretive rulemaking against public health, on behalf of Big Pharma and Big Tobacco,” said Maybarduk.

“It is clear from the text obtained by WikiLeaks that the U.S. government is isolated and has lost this debate,” Maybarduk said. “Our partners don’t want to trade away their people’s health. Americans don’t want these measures either. Nevertheless, the Obama administration – on behalf of Big Pharma and big movie studios – now is trying to accomplish through pressure what it could not through persuasion.”

“The WikiLeaks text also features Hollywood and recording industry-inspired proposals – think about the SOPA debacle – to limit Internet freedom and access to educational materials, to force Internet providers to act as copyright enforcers and to cut off people’s Internet access,” said Burcu Kilic, an intellectual property lawyer with Public Citizen. “These proposals are deeply unpopular worldwide and have led to a negotiation stalemate.”

“Given how much text remains disputed, the negotiation will be very difficult to conclude,” said Maybarduk. “Much more forward-looking proposals have been advanced by the other parties, but unless the U.S drops its out-there-alone demands, there may be no deal at all.”

“We understand that the only consideration the Obama administration plans to propose for access to affordable generic medicines is a very weak form of differential treatment for developing countries,” said Maybarduk.

The text obtained by WikiLeaks is available at wikileaks.org/tpp. Analysis of the leaked text is available at www.citizen.org/access.

More information about the Trans-Pacific Partnership negotiations is available at www.citizen.org/tpp.

38 Million Retirees Join Workers and Consumers to Say No to "Trade" Deal Terms that Would Make Medicine More Expensive

The chorus of critics of the Trans-Pacific Partnership (TPP) – a sweeping U.S. pact under negotiation with 11 Pacific Rim countries – keeps expanding.  

Today the largest U.S. nonprofit, nonpartisan group – the American Association of Retired Persons (AARP), representing 38 million members – joined the American Federation of State, County and Municipal Employees (AFSCME), Consumers Union and other U.S. health and consumer advocacy groups in sending a letter to President Obama to express "deep concern" that TPP rules will thwart efforts to control escalating healthcare costs.  

The groups outline an array of U.S. policies and proposals to make healthcare more affordable that are jeopardized by TPP provisions "being advanced by the United States Trade Representative." These threatened cost-saving measures include Medicare prescription drug discounts under the Affordable Care Act (Obamacare), an administration proposal slated to save $134 billion by providing rebates to low-income Medicare beneficiaries, and state-level Medicaid policies used to control drug costs.  

The groups also state their opposition to Big Pharma's agressive push for U.S. trade officials to grant pharmaceutical corporations special monopoly rights in the TPP for biologic drugs, which are some of the costliest on the market. In another letter late last month, AARP warned that this TPP proposal alone could cost Americans billions in additional health expenditures annually and undermine the Obama administration’s efforts to ensure more affordable healthcare.

Biologic medicines – the latest generation of drugs to combat cancer, rheumatoid arthritis, and multiple sclerosis, among other diseases – are exceptionally expensive, even for those with comprehensive insurance coverage. Derived from living organisms, these treatments cost approximately 22 times more than conventional medicines. According to AARP, patients can face annual treatment costs of $400,000.

While the Obama administration pushes for measures at home to contain rising health care costs, Big Pharma is urging the administration to include measures in the TPP that would increase costs by expanding pharmaceutical monopoly protections. The proposed TPP measure under consideration, a 12-year period of data exclusivity protection, would allow brand-name companies to obtain an automatic monopoly on biologics even in the absence of patent protection.

During this period, access to cheaper versions of the drugs would be restricted, as governmental regulatory bodies would be prohibited from relying upon the brand-name company’s clinical trial data to approve biosimilars – more affordable versions of the high-cost drugs. While exclusivity is in force, biosimilar applicants would have to replicate costly, time-consuming clinical trials despite already-known outcomes. This would prevent many biosimilar groups from even seeking market approval, keeping their more affordable, life-saving drugs off of pharmacy shelves for years as pharmaceutical corporations accrue monopoly profits.

Although U.S. law currently requires 12 years of data exclusivity for biologics, the White House has repeatedly proposed reducing this period to tamp down spiraling costs. According to the White House budget for fiscal year 2014, shortening exclusivity to 7 years could save federal programs such as Medicare and Medicaid more than $3 billion over the next ten years. But if Obama administration trade officials propose 12-year exclusivity for the TPP at the request of Big Pharma, the binding pact could lock into place pharmaceutical firms’ lengthy monopolies here at home, barring the administration’s proposed cost-cutting changes.

That’s right – Obama administration officials are contemplating TPP rules that would effectively scrap the administration’s own proposal to save billions in unnecessary healthcare costs.

Other TPP countries have been rejecting U.S. pressure to include data exclusivity and other pharmaceutical monopoly protections in the deal, given the large humanitarian cost and financial burden of delaying access to more affordable drugs.  In fact, no other TPP country allows a special data exclusivity protection period for the high-cost biologic drugs.

However, in addition to data exclusivity protection, U.S. trade officials are urging TPP countries to accept egregious measures that would lengthen and broaden patent rights and drug monopolies, stifle cost-cutting generic competition, and favor pharmaceutical companies in court.

Stronger drug monopolies would force consumers to pay high drug prices for longer and would have devastating humanitarian and financial consequences in developing countries. According to the World Health Organization (WHO), more than 100 million individuals fall into poverty due to catastrophic health payments each year. In developing countries including Vietnam, a TPP country, patients often have to pay 50 to 90 percent of pharmaceutical costs out-of-pocket, making medicines the second-highest household expenditure after food.

But this problem is not only a developing country issue.  In the United States, medical expenses account for 60% of bankruptcies.  And in three-fourths of those cases, the person even had health insurance. As AARP, AFSCME, the Consumers Union and others make clear in today's letter, we cannot afford to roll back cost-saving policies and lock in unaffordable healthcare costs via a “trade” deal.

As we strive to recover from an economic crisis, reduce the government deficit, and expand access to health care, it is imperative that our “trade” policy not undermine these goals.  How can the Obama administration continue pushing abroad a secretive trade pact designed by and for Big Pharma while pushing at home access to affordable medicines?

--Stephanie Rosenberg, Public Citizen's Global Access to Medicines program

Businesses Crowd Corporate-Hosted Government Hearing on Trans-Atlantic "Trade" Deal

As the Obama Administration gets ready to negotiate a Trans-Atlantic "Free Trade" Agreement (TAFTA) with the European Union that takes aim at a host of health, financial, environmental and other regulations, a smorgasbord of corporate representatives (and a sprinkling of consumer groups) voiced their wishes for the pact this week. The occasion was a standing-room-only "stakeholder session," hosted by the administration's Office of Management and Budget and the European Commission, to get input on what TAFTA should or should not entail.  

What neutral territory did the administration choose to consider such a critical question?  Perhaps one of the many government-owned venues in downtown DC?  Nope.  They went with the headquarters of the Chamber of Commerce.  The Chamber's not exactly a disinterested party in a pact that could implicate a wide swath of U.S. regulation used to balance big business's quest for profits with the public's quest for financial stability, a healthy environment, safe products, and affordable medicines.  The venue choice is akin to the Environmental Protection Agency hosting a forum on offshore drilling...on an offshore drill.  

But at least the administration granted public interest groups like us some time to offer input.  As in, a half hour.  Total.  For all consumer groups.  In a 1.5-day-long forum otherwise filled almost exclusively by industry representatives.  If relative allotment of time is indicative of the relative importance the administration attributes to industry views on TAFTA vs. the views of everyone else, big business "stakeholders" hold 76% of the administration's attention, technical standards organizations hold 11%, and the opinions of the rest of us are worth 13%. 

During that half hour, I squashed Public Citizen's initial take on TAFTA, one of the largest "trade" deals proposed to date, into a five-minute statement.  For a nutshell view of what's at stake in TAFTA, here's the statement:

Expanded Analysis: U.S. Pharmaceutical Corporation Uses NAFTA Foreign Investor Privileges to Attack Canada’s Patent Policy

In December we reported that Eli Lilly, the fifth-largest U.S. pharmaceutical corporation, had announced its intent to use the extreme foreign investor privileges enshrined in NAFTA to directly challenge Canada's entire basis for granting patents.  Eli Lilly's audacious attempt, sparked by Canadian courts' invalidation of an Eli Lilly medicine patent, marks the first time a patent-holding pharmaceutical corporation has tried to use the extraordinary investor privileges provided by U.S. “free trade” agreements (FTAs) as a tool to push for greater monopoly patent protections, which increase the cost of medicines for consumers and governments. Because Canada has dared to enforce its own patent policy, Eli Lilly is demanding $100 million in compensation from Canadian taxpayers. 

We've just released an updated and expanded analysis of this worrisome NAFTA attack, available here.  In this expanded briefing paper, we uncover more bogus but dangerous legal claims that Eli Lilly asserts as backing for its attempt to take down Canada's entire legal basis for granting patents.  For example, the corporation accuses Canada of using a patent policy that "contravenes" the company's "expectations."  Eli Lilly claims that NAFTA guarantees the company the "right" to see its expectations fulfilled by the Canadian government.  To make such a cavalier claim, the company ignores the consistent opinions of multiple governments (including the U.S. government) that even NAFTA's sweeping investor protections guarantee no such "right," instead drawing on the inventive interpretations of FTA investor-state tribunals comprised of three private attorneys.  As the U.S. government stated in another NAFTA investor-state case, "if States were prohibited from regulating in any manner that frustrated expectations – or had to compensate for any diminution in profit – they would lose the power to regulate." 

Eli Lilly also invokes the national treatment privileges that NAFTA provides to investors (that governments should treat foreign and domestic investors alike), but instead of using NAFTA's already broad provisions, the company decides to invent a wholly new goverment obligation to foreign investors.  Eli Lilly complains that Canada's patent standards are different from those found in the U.S. and EU, and then asserts that Canada is obliged by NAFTA to enforce those foreign standards.  The notion of such a bizarre obligation is rather unprecedented even among the musings of creative investor-state tribunals.  In short, Eli Lilly is alleging that Canadian taxpayers should fork over $100 million because their government enforced its own patent laws rather than those of other countries.  

Not yet finished, the company alleges an additional national treatment violation by claiming that the Canadian courts' invalidation of its patent for an ADHD drug gives a prohibited advantage to Canadian generic firms that are now allowed to sell the drug.  Um, of course the removal of patents helps generic producers – it always does, but it does so regardless of whether the generic firms and/or the patent holders are foreign or domestic. Were Eli Lilly’s skewed logic to be accepted by the investor-state tribunal, any invalidation of a foreign investor’s patent, regardless of the basis, could be construed as a violation of FTA-protected investor privileges. 

Finally, Eli Lilly argues that Canada's invalidation of its patent monopoly in accordance with the country's established patent policy constitutes an "indirect expropriation" of the pharmaceutical giant's investment.  This avant garde legal claim, one rejected by most nations' courts, would require a government to compensate a corporation even for a nondiscriminatory regulatory policy that happens to diminish the value of the company's "property" (including, according to Eli Lilly, a patent monopoly).  In making this allegation, Eli Lilly skirts the fact that even NAFTA allows nations the flexibility to determine their own patent policy standards, and that such autonomously-defined standards cannot be the basis for claims of "expropriation."  

As far-fetched as Eli Lilly's allegations are, the anomalous investor-state system enshrined in NAFTA-style deals now empowers three attorneys sitting on a FTA-created tribunal (a body that has become notorious for imaginative and sympathetic approaches to investor claims), to determine the validity of Canada's patent policy.  Unfortunately, this radical system would be expanded by the Trans-Pacific Partnership (TPP), a NAFTA-style deal being negotiated between the U.S., Canada, and nine other countries.  The TPP's leaked investment chapter would extend the scope of NAFTA's investor privileges to explicitly cover "intellectual property," making it easier for pharmaceutical corporations to launch Eli-Lilly like attacks on sovereign governments' patent polcies. 

Will Eli Lilly prove successful in undermining Canada's patent laws to protect its patent monopoly in the ironic name of "free trade?"  The outcome of the corporation’s investor-state attack under NAFTA is critical for those seeking to safeguard countries’ ability to determine their own patent standards, a prerogative that is essential for preventing patent “evergreening” and ensuring access to affordable medicines. It is critical not just so that Canadian taxpayers can make sure that the demanded $100 million goes to more worthy ends than enhancing Eli Lilly’s profit margin, but to avoid emboldening other pharmaceutical firms contemplating the launch of similar investor-state demands against other governments that dare to set their own patent policies. As the Eli Lilly case gets underway, negotiations for the TPP and its proposed expansion of the investor-state system continue. Stopping the NAFTA expansion deal presents health advocates with today’s biggest opportunity to halt the advance of the system that empowered Eli Lilly’s audacious threat.

For more analysis of this threat, click here to see our newly expanded briefing paper.  

WSJ: Forget TPP's Threat to Medicines. "Free Trade is Good for Health!"

Today the Wall Street Journal published an op-ed with the glowing title, “Free Trade is Good for Health.”  The piece gussies up the Trans-Pacific Partnership (TPP) as a healthy dose of medicine for the developing countries that are negotiating the NAFTA-style deal with the U.S. and other Pacific Rim nations.  The op-ed first takes on those who argue that the TPP poses a danger to access to medicines (i.e. the major health and development organizations from nearly every TPP country).  It then frames the deal as part of a benevolent “free trade” legacy which should be given unqualified credit for the wealth health of nations.  The op-ed’s omissions in the first argument are as large as its sweeping conclusions in the second. 

The TPP’s proposed intellectual property chapter includes even greater monopoly protections for pharmaceutical companies than seen in past U.S. “free trade” agreements (FTAs).  The extension of such anti-competitive protections, while safeguarding profits for large pharmaceutical firms, threatens to block generics and elevate the cost of medicines in TPP countries like Vietnam. 

One such protection that has been hotly debated within the TPP context is “data exclusivity.”  The brainchild of the pharmaceutical industry, data exclusivity goes even beyond patent protections by barring generic drug manufacturers from accessing the clinical test data required to market cheaper, generic forms of a drug, whether patented or not, for years.   Should we be concerned about the implications of such corporate protections for the cost of medicines?  Apparently not.  According to the op-ed, such concerns are the handiwork of “scaremongering NGOs.”  (I don’t recall that adjective making it into our mission statement.)  The author, Philip Stevens, argues that data exclusivity for chemical drugs is currently granted in the U.S. for five years, and “the chances that the TPP will lengthen the exclusivity period are very low.”   

But the point is not whether the access-curtailing U.S. data exclusivity periods will be “lengthened,” but whether they will be exported to ten other TPP negotiating countries.  Also, the author neglects to mention the U.S.’s new and significantly longer monopoly protection period of 12 years for biologic drugs—used to treat cancer, heart disease, and other deathly illnesses.  Pharmaceutical companies and their cheerleaders have been calling for this extreme, prolonged generics prohibition to be spread to TPP members, diminishing access to life-saving treatments from Vietnam to Peru. 

Indeed, this corporate push was recently emblazoned on the very same opinion pages of the Wall Street Journal, with former U.S. Trade Representative Charlene Barshefsky calling for the U.S. to use the TPP to export its 12-year exclusion of generics for biologic drugs.  Our own Peter Maybarduk retorted with a letter to the editor, arguing, “It would be cruel to impose this rule on the many people suffering from treatable conditions in the Asia-Pacific region who cannot afford the extraordinary monopoly prices…”

While the TPP’s intellectual property chapter could export the U.S.’s monopoly protections for pharmaceutical corporations, the leaked investment chapter would allow those corporations to directly challenge governments for access-to-medicines policies that they allege as violating the monopoly protections.  The Wall Street Journal op-ed comes on the heels of Eli Lilly’s announcement, detailed in our post last week, that the pharmaceutical corporation plans to use NAFTA to directly challenge the Canadian government before a NAFTA-created, three-person tribunal over the Canadian courts’ decision to invalidate Eli Lilly’s patent.  The courts made the decision after determining that Eli Lilly’s drug had failed to deliver on promised utility.   In response, Eli Lilly is demanding $100 million in taxpayer compensation. 

As we mentioned, but as the op-ed failed to, the TPP goes even beyond NAFTA in empowering pharmaceutical corporations to launch such attacks on access-to-medicines policies.  NAFTA implies that a corporation could claim “intellectual property” as an “investment” protected by the deal, allowing it to demand compensation for government policies alleged to be a violation of that “investment.”  But the TPP makes that possibility explicit by naming “intellectual property rights” under the definition of “investment,” raising the prospect of an increase in Eli-Lilly-like challenges to access-to-medicines policies under the TPP.   

After wiping aside or completely omitting these concerns that the TPP poses a sincere health hazard, the op-ed author framed the TPP as the continuation of a “free trade” legacy that has played a nearly unparalleled role in improving global health standards.  (That’s not my near-hyperbole, but his: “there have been few more powerful forces for improving health in the history of humanity.”)  He reasons that trade means growth in income, which means growth in living standards:

Prior to the 1950s, the majority of the world's population lived a precarious life as subsistence farmers. Since then, the opening of global markets, first by the General Agreement on Tariffs and Trade and then by the WTO, has transformed the health prospects of millions by raising incomes. That, and not IP flexibility, made decent food, sanitation, and new medical technologies available.

That's how the Asian countries involved in the TPP—Malaysia, Singapore, Brunei and Vietnam—have witnessed startling improvements in the health prospects of their citizens since the middle of the last century. Singapore signed GATT in 1973, and by 1993 there were no import duties for any product except alcohol, tobacco and automobiles, a situation that largely persists today. Singapore now surpasses many European countries for life expectancy, with Malaysia not far behind.

Oh my.  Where to begin?  How about Singapore.  The author’s poster child for the trade-equals-growth-equals-health argument turns out to be a pretty counterproductive candidate.  Stevens, the author, cites 1973 as the year Singapore began opening the door to unfettered trade, with the door cast mostly wide open by 1993.  But the years of highest growth for Singapore happened while the door was still closed.  In the decade before 1973, Singapore’s average inflation-adjusted GDP growth rate per person was 9%.  In the decade following its GATT accession, that average growth rate fell to 6%.  In the decade following the declared 1993 free trade finish line, Singapore’s annual per capita growth dropped further to just 3%.  One could be pardoned for expecting Stevens to conclude from his Singapore example that nations looking to boost incomes and health standards should reject across-the-board free trade, not embrace it. 

Singapore’s experience is not unique.  A study by Mark Weisbrot and Rebecca Ray over at the Center for Economic and Policy Research found that from 1960-1980, a period characterized more by import-substitution than by free trade, Latin America as a whole experienced a cumulative growth rate of 92%.  But during the free trade era of 1980-2000, the region’s cumulative growth plummeted to a measly 6% over the entire twenty-year period. 

Such findings, like the Singapore data, do not necessarily mean that free trade causes lower growth.  Other factors could of course be at play in this history.  But the facts show that the opposite certainly cannot be claimed.  Free trade cannot be categorically credited for higher growth, much less recommended as an unmitigated prescription for better health.  Op-eds making such a sweeping claim would seem to be driven more by ideology than by evidence.  Those struggling to pay for medicine in Vietnam could probably do without more ideology.  

Concerns about TPP's IP Chapter Grow Among Civil Liberties and Human Rights Groups

As the 14^th round of TPP negotiations begins in Leesburg, apprehension about how the intellectual property (IP) chapter could affect free speech, global health and human rights continues to grow among prominent watchdog groups.

Last week, the American Civil Liberties Union (ACLU) described the TPP as "the latest threat to free speech in guise of IP reform” and criticized the negotiations for lack of congressional oversight.

Amnesty International chimed in on Thursday urging the TPP to “put people ahead of profits” and uphold basic principles of transparency and human rights.  Amnesty particularly stated concern that TPP would raise the cost of essential medicines by "stifling" generics.  For more information on how the IP chapter stands poised to jack up medicine costs, check out Public Citizen's Access to Medicines page.

Can you say "Déjà vu" in Spanish?

Dear Neighbor:

Congratulations on your inclusion in the elite group of states that are currently negotiating the Trans-Pacific Partnership (TPP) Agreement! Your acceptance into this proposed “historic, 21^st century trade agreement” means that much of the “burden” of making laws and regulations for your nation will be taken off of you. No worries; lobbyists for Hollywood and American pharmaceutical companies and more than 600 official “corporate trade advisers” to the Office of United States Trade Representative (USTR) will help take care of the details.

Sorry to mention it, but we’re afraid many of your laws pertaining to intellectual property (IP), affecting issues from Internet privacy to access to affordable medications, might need a little “tweaking” to ensure they comply with the specifications of U.S. corporate “advisers.” The USTR’s demands at the TPP negotiations read like a wish list from the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Recording Industry Association of America (RIAA), and YOU have the opportunity to grant all their wishes.

You see, the condition the U.S. imposed for Mexico to get a seat at this corporate banquet was that Mexico agree to accept everything that the other countries already have negotiated over the past three years. Sure, NAFTA required some nasty changes to your IP laws. Remember the millions your government wasted trying to lift the U.S. patent on common yellow beans that a bio-prospector filed after NAFTA? Well, wait until you get a look at the 21^st century NAFTA on steroids!

As a part of the “historic” TPP negotiations, it is time for your laws to truly reflect your new “21^st century” status. For instance, you need to expand pharmaceutical patent protection and create new pharmaceutical monopolies in Mexico. You also need to extend copyright protection to device memory buffers and criminalize circumvention of technological protection measures, limiting fair and educational uses of all kinds of literary and artistic content. Overall, you are expected to introduce new, draconian provisions into Mexican law to lengthen, strengthen and broaden IP monopolies in Mexico.

The strict IP enforcement in this scenario may seem very familiar to you. In fact, you fought off a very similar – although less extreme – attack on your privacy and rights on the Internet in 2011 in the form of the Anti-Counterfeiting Trade Agreement (ACTA). Some objections to ACTA expressed by Mexico Senator Carlos Sotelo Garcia in September 2010 included the opaque nature of the ACTA negotiations, stringent IP enforcement measures (championed by the U.S.), and the “erosion” of access to information technology for approximately thirty million Mexican citizens.

A look at any current media coverage of the TPP will reveal a scene that is eerily familiar and equally concerning. Sorry to break the news, but the opacity of the TPP negotiations makes the ACTA process look like a pinnacle of open government. The TPP has been negotiated entirely in secret, with the only glimpse of the text coming from leaks of the IP, investment and other chapters. Furthermore, each of the negotiating nations has agreed to keep all documents besides the finalized text a secret for four years following the conclusion of negotiations, whether it is ever finalized or not. So whereas the same report by Senator Garcia implemented a working group to review the provisions of ACTA, no such legislative oversight would be possible in the TPP. Apparently the only way to get a look at the “21^st century agreement” – even for legislators of the countries in the negotiations – is to introduce a resolution demanding they be allowed to see how trade negotiators are rewriting a nation’s laws. In the U.S, the chairman of the Senate committee with official jurisdiction over TPP, U.S. Sen. Ron Wyden (D-Ore.), has done just that. Yup, the chairman of the Senate Finance Subcommittee on International Trade, Customs, and Global Competitiveness and his staff were explicitly refused access to even the U.S. negotiators’ proposal to the TPP negotiations.

The legislature of Mexico has already expressed its opinion of trade agreements that restrict privacy and rights on the Internet. On June 21, 2011, the Mexican Congress passed a resolution that urged that the Federal Executive not become a signatory of ACTA:

The Standing Committee of the H. Congress, respectfully urges the Federal Executive Power to, within the framework of its powers, instruct the ministries and agencies involved in negotiating the Anti-Counterfeiting Trade Agreement (ACTA), not to sign the Treaty.

Reading this sort of language coming from the national legislature of a sovereign nation, one might draw the conclusion that ACTA is doomed in that country. But foreign corporate interests have found another foothold in the laws of Mexico – in the form of the TPP. You may have believed that ACTA was dead in Mexico, but, like el chupacabras, it is rising again and this time it is even stronger.

Welcome to the 21^st century, dear neighbor.

 

Follow Public Citizen's Global Access to Medicines on Twitter: https://twitter.com/#!/PCMedsAccess
Read more at our webpage: http://citizen.org/Page.aspx?pid=4955

Just Relax, Canada. U.S. Pharma Will Handle It

Dear Fellow Canadians:

Welcome to the Trans-Pacific Partnership (TPP) negotiations! Since you are fresh off a bruising fight getting provisions that protect Internet freedom and privacy into Canada’s copyright Bill C-11, I’m sure that you are exhausted with defending your rights. Take heart. With the TPP, you will not have much of a say on laws or policies threatening your privacy, rights on the Internet or access to affordable medicines. Instead, lobbyists from major American industries and some 600 “corporate trade advisers” have helped lay out some of what the Office of the United States Trade Representative (USTR) expects from you.

These are the same industries that forced major concessions on C-11’s approach to digital locks despite near-universal criticism. Hundreds of pages of new non-trade policy contained in the most sweeping “free trade agreement” could face a mere up or down vote in the House of Commons. And the USTR proposes intellectual property provisions that cover dramatically more than copyright law. They touch a wide range of IP issues.

You thought NAFTA was a pill? Sure, Big PhRMA used NAFTA to attack our drug formulary system and all of those compulsory licenses for affordable meds. But back then, our government drew a line. Despite some considerable hysteria from the U.S. drug industry giants, you did not give away all of our policy space. This time, however, the TPP gives Prime Minister Stephen Harper a way to write all of us a real prescription for high drug prices and cement his view of Canada as an extended playground for corporate America.

Here are some of the highlights of the U.S. proposed IP chapter:

• Expand patent evergreening and create new pharmaceutical monopolies, raising medicine costs;

• Dramatically increase the life of a copyright term from 50 years in most cases under C-11 to 95 years;

• Increase penalties for circumvention and reduce the exceptions for individuals; and

• Establish an American-style notice-and-take down system for online copyright infringement.

This seems like a lot. If you were worried, however, that we had some duty to at least read the proposals for the law and voice our democratic concern, fear not. Negotiators act in secret. The only glimpse of the actual agreement so far has come from leaked copies of the text from the IP, Investment and other chapters. Remember in the good old days of ACTA when the University of Ottawa filed an access-to-information request but received a blacked out document with only the title visible? Expect similar treatment during TPP negotiations. While lobbyists and corporate liaisons are granted electronic access to the agreement, your parliamentary representative might have to walk down to the Department of Foreign Affairs and International Trade to speak personally with The Honourable Ed Fast P.C. , M.P., Minister of International Trade.

Moreover, if you are distressed by the fact that our respectable Department of Trade will have lots of work reviewing all the work done so far once Canada’s negotiators get hold of these secret drafts, you will be relieved to hear that Canada has a lesser role in the negotiations. By coming late to the table, Canada has achieved a second-tier position. This status requires Canada to agree to all the settled chapters, which its officials have not even read, and Canada cannot veto current provisions. Thus, not even lobbyists or the trade minister need concern themselves with settled provisions. The TPP negotiations shut individual citizens and even members of parliament and ministers out of the process.

The public response to C-11 proved that civil engagement has made a difference on intellectual property issues in Canada. The people—frustrated, fearful and bedraggled—woke up to the oppressive measures of industry groups and fought hard. But this is far from the end. In upcoming years, we might still witness the implementation of a multinational corporations’ wish list, which seeks to criminalize copyright infringement, implement ACTA-plus provisions and restrict Canadians’ access to affordable medicines. Through the TPP, the USTR seeks to achieve all these goals and more—without too much of a voice from us. Will we allow American industry to dictate to the Canadian people our rights—or stand up and demand that Canada step down from these negotiations?

Follow Public Citizen's Global Access to Medicines Program: https://twitter.com/#!/PCMedsAccess

James Cormie is a legal intern at Global Access to Medicines Program.  Originally from Edmonton, Alberta, James blogs on issues of trade, IP, and international law.

TPP could undermine Medicare, Medicaid and Veterans’ Health - hurting seniors, military families and the poor

You've read about how the leaked chapter of the Trans-Pacific Partnership (TPP) that surfaced yesterday will outsource our judicial system and allow corporations to attack our laws.

But did you know that an earlier leaked text shows that the TPP could also undermine Medicare, Medicaid and Veterans' Health? This could hurt access to affordable medicines for our seniors, military families, and poor.

Indeed, it has been an open secret among trade negotiators that U.S. pharmaceutical companies have pushed to limit drug price containment measures, such as through the recent bilateral trade deals with Korea and Australia.

But, in our new public interest analysis, Public Citizen shows that Medicaid, Medicare, the Department of Defense’s TRICARE program for active military personnel, and the Veterans Health Administration and the 340B program are all threatened by the TPP.

We also show how proposed changes to Medicare championed by President Obama would clearly risk violating the TPP. Throughout, we show how trade tribunals are less likely to defer to national healthcare regulators than do national judges, including conservatives like Justices Scalia and Thomas. We conclude with suggested changes to the TPP to insulate smart drug price containment strategies.

Read the full memo here.

TPP Chiefs Raise Doubts about USTR’s Corporate IP Wish List

At the May 13th stakeholder briefing of the Trans-Pacific Partnership (TPP) trade talks outside Dallas, at least six countries' Chief Negotiators began to openly distance themselves from the Office of the United States Trade Representative (USTR), particularly from USTR’s radical intellectual property (IP) proposals, which would expand the scope and duration of pharmaceutical monopolies and challenge internet freedom.

In the past, these stakeholder briefings have felt like exercises in the art of saying little. USTR has sought to keep all nine countries on a common, limited message. But perhaps USTR can only push other countries and the public so far.

Early in the session, I asked the Chiefs:

The past year has witnessed the rise of an internet freedom social movement, with more than 3 million people petitioning the US Congress to block SOPA [the Stop Online Piracy Act] and tens of thousands protesting in the streets across Europe to shut down ACTA [the Anti-Counterfeiting Trade Agreement]. I think in Poland, these may have been the largest demonstrations since the Solidarity movement. Even Germany’s ministry of economic development is recommending against developing countries signing ACTA. Given that you are not releasing the TPP text, how will you assure people that the TPP will not pose similar problems?

Chile kicked things off, answering:

We are nine countries with many different positions—we are not all the same.

This may sound tame, but for those listening to the evolution of TPP sound bites, it was a surprisingly public distancing from USTR and its copyright and enforcement demands. And it set the pace for the day.

More Tumult at the TPP: Secret Negotiations Against Internet Freedom Continue this Week in Chile; Big Pharma Allies Attempt to Shut Down Critics’ Event (Again)

Talks on the Trans-Pacific Partnership Agreement (TPP), which the U.S. is negotiating with Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam, are continuing this week (April 9-13) in Santiago, Chile in the form of an “intersessional meeting” on intellectual property (IP) – focusing on internet policy. The last time such a meeting was convened on IP in January in Hollywood, a stakeholder event organized by public interest groups in the same hotel as the negotiations was cancelled after the hotel received pressure from the Office of the United States Trade Representative (USTR). Simultaneously, USTR made sure the Motion Picture Association of America (MPAA) had access to negotiators, as they were given an exclusive tour of 20th Century Fox Studios guided by a representative of the studio’s government relations office.

USTR is clamping down on public participation to minimize the spread of information which challenges their hardline IP maximalist agenda. In addition to increasing reliance on intersessionals, like this week’s Santiago meeting, where stakeholders are not given a forum to participate, USTR has now effectively reduced stakeholder participation in the official negotiating rounds by eliminating their opportunity to give presentations to negotiators in an official forum. USTR’s response signals the substantial impact critics of the TPP are having. At the March negotiating round in Melbourne, one stakeholder presentation after another criticized USTR’s aggressive pro-Big Pharma patent proposal, filling most of the afternoon. Now TPP countries are resisting USTR demands that would imperil their access to medicines.

Cozy relationships with government aren’t the only way corporations are influencing these talks. This week, American University and the University of Chile arranged to host an event to present analyses critical of particular proposals in the TPP. These include leaked provisions that would greatly favor Big Pharma, expand drug monopolies and raise medicine prices. The keynote speaker was to be Senator Ricardo Lagos, a major political figure in Chile considered to be a possible candidate for the Presidency. Nevertheless, the public University of Chile law school canceled the event on less than two days’ notice, evidently on the advice of a member of the faculty who is a paid advisor of the multinational pharmaceutical companies’ association in Chile (the Cámara de Industria Farmacéutica, or CIF).

The cancellation sent organizers scrambling for a new venue, which they found in Chile’s Catholic University.

Stakeholders from a spectrum of communities concerned with the implications of the TPP are continuing to shine light on the negotiations. Criticism of the TPP process is mounting from members of both state and federal government in the United States. Internet activists in Chile are calling on their government to defend the rights of their citizens from what could be the next SOPA, while analyses from academic experts on IP show that the U.S.-proposed TPP provisions go beyond those seen in ACTA. Meanwhile, USTR claims that allowing 600 corporate advisors to examine the negotiating text, including representatives of the Recording Industry Association of America (RIAA) and the Entertainment Software Association (ESA), while keeping it hidden from the general public justifies their claim of “unprecedented” transparency in the negotiations.

SOPA proved that the netroots can beat IP maximalism and rulemakings from Washington designed to curb internet freedom, while the populist response to ACTA has shown that policy laundering attempts by industry and their allies in government will face serious resistance. Ambitious, secret economic agreements have been defeated before through public awareness and organizing. Now it’s time to stand up and tell our governments we will not stand idly by while our rights are under siege.

Senator Wyden files amendment for more transparency in the TPP negotiations

A couple of weeks ago we reported about Senator Wyden's lively exchange with U.S. Trade Representative Ron Kirk regarding transparency in the Trans-Pacific Partnership Free Trade Agreement (TPP).

Senator Wyden has now increased pressure on USTR by filing a legislative amendment for more transparency in the TPP negotiations related to intellectual property and the internet. Our colleagues at KEI posted a short blog about the amendment.

November Deadline for Obama’s First Trade Deal Falls Away as Controversies Roil Chicago Trans-Pacific Trade Talks

American Medical Assoc. Enters Fray Over Inclusion of Tobacco, Alcohol in Deal; Obama Administration Proposal Limiting Access to Medicines Stirs Fury

CHICAGO – A range of controversies, mostly on health issues, has emerged at negotiations of the Trans-Pacific Free Trade Agreement (FTA) in Chicago this week, such that the vaunted deadline to complete the deal – the November Asia-Pacific Economic Cooperation (APEC) summit in Hawaii – will not be met. And after this eighth round of negotiations, troubling signs are emerging that the Obama administration’s first trade deal could roll back initial reforms made on affordable access to medicines made during the last round of George W. Bush-era trade deals, Public Citizen said today.

“While the administration keeps touting this potential first Obama trade pact as a new 21st century model, and instead of implementing the many specific trade reforms President Obama pledged as a candidate to avoid more job loss and ensure import safety, it appears the administration is pushing for something like NAFTA on steroids with Vietnam and Malaysia,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

Growing controversy over the trade deal’s threats to domestic regulation of cigarettes and alcohol escalated when the American Medical Association (AMA) made its first foray into the trade debate, sending a letter on Sept. 8 to U.S. negotiators demanding that tobacco and alcohol be excluded from the pact. The AMA and other public health groups intensified their focus on trade talks after the World Trade Organization (WTO) ruled recently that the U.S. ban on clove, cola and candy-flavored cigarettes in the 2009 legislation to combat youth smoking violated WTO requirements, and ordered the policy changed. This followed an attack by tobacco giant Philip Morris Asia against Australia’s proposed cigarette “plain packaging” rules using an international commercial agreement that follows on a similar assault by a Swiss Philip Morris unit on a similar Uruguayan law initiated last year. Both attacks use the “investor-state” private enforcement system the Obama administration is pushing for in the Trans-Pacific pact.

Meanwhile, various countries and U.S. health, consumer and development groups reacted with ire as the Obama administration sought to distract attention from a proposal it was submitting earlier this week to roll back Bush-era 2007 improvements for affordable medicines access by expanding trade pact patent rules. While the U.S. proposal was being submitted behind closed doors, a paper was released publicly announcing a U.S. “Trade Enhancing Access to Medicines (TEAM) initiative” that was advertised as revealing a new policy to increase access to medicines for consumers. In fact, this initiative simply repackaged many of the most problematic aspects of the long-standing, retrograde U.S. position on trade patent rules that restrict medicinal access.

“It is insulting that the Obama administration released this paper on ‘access to medicines’ on the same day that it put forth its most controversial and access-restricting provisions at the Trans-Pacific FTA negotiations,” said Peter Maybarduk, director of Public Citizen’s Global Access to Medicines Program. “The U.S. intellectual property proposal rolls back even some of the few protections for access to medicines in the Bush-negotiated trade pacts. The administration is heading rapidly in the wrong direction, at the expense of global public health.”

The Obama administration’s attempts to roll back the “May 2007” reforms of trade pact patent rules relating to medicine access, its insistence over objections by Australia and other countries that private corporate “investor-state” enforcement be included, and its rejection of exclusions for any product from the deal is likely to add more dead weight to its efforts to pass pending Bush-negotiated trade deals with South Korea, Colombia and Panama. These deals were signed in 2007. After months of insisting votes would happen “within weeks,” it is increasingly likely that Congress could consider the deals in October. These three trade deals contain the same foreign investor rights and private enforcement used by Philip Morris to attack tobacco regulation in other countries.

“Obama folks always say that there just was not much they could do to fix the Bush-negotiated Korea, Colombia and Panama deals, but that when the new administration negotiated its own trade pacts, it would do them differently,” Wallach said. “Well, now they’re negotiating their own trade deal, and it’s looking like a Bush NAFTA-style deal in key respects – and even worse in some areas – and that only builds even more opposition to Obama’s call to pass Bush’s  old deals.”

Trans-Pacific FTA negotiations currently include Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam. The next round of Trans-Pacific FTA negotiations will be held next month in Lima, Peru. No high-level negotiations will take place at the APEC summit in Hawaii in November.

Bombshell Australian Report Finds FTAs "Oversold"

Yesterday, the Australian Government's Productivity Commission released a 400-page report examining the effects of Australia's "Free Trade" Agreements (FTAs). The Productivity Commission is the Australian Government’s independent research and advisory body on economic and social issues. The Age reports:

The Productivity Commission has told the government there is little evidence to suggest Australia's six free-trade agreements have produced ''substantial commercial benefits''....

Copyright provisions inserted in the US-Australia Free Trade Agreement could eventually cost Australia as much as $88 million per year....

The report also rails against investor-state lawsuit provisions like NAFTA's Chapter 11 that allow foreign corporations to sue sovereign governments for taxpayer compensation when governments take necessary action to protect the health and safety of their citizens: "There does not appear to be an underlying economic problem that necessitates the inclusion of ISDS [Investor-State Dispute Settlement] provisions within agreements.....Experience in other countries demonstrates that there are considerable policy and financial risks arising from ISDS provisions." The report goes on to note that millions of dollars of taxpayer funds has been paid out to multinational corporations due to corporate lawsuits filed under NAFTA's investor-state dispute settlement provisions. 

The report recommends that the Australian government "seek to avoid the inclusion of investor-state dispute settlement provisions in [FTAs] that grant foreign investors in Australia substantive or procedural rights greater than those enjoyed by Australian investors."  Australia excluded investor-state lawsuit provisions from the U.S.-Australia FTA due to justified fears that foreign corporations would demand compensation if environmental or public interest laws reduced their "expected profits."  The Australian trade negotiators would be wise to heed the well-reasoned recommendations of the Productivity Commission and ensure that investor-state lawsuit provisions are excluded from the proposed Trans-Pacific Partnership.
 
The report notes that the totality of evidence on FTAs "suggest that the economic value of Australia’s [FTAs] has been oversold." That sounds familiar. Oh, that's right, Public Citizen found that the same was true for U.S. FTAs in our September report, "Lies, Damn Lies, and Export Statistics: How Corporate Lobbyists Distort the Record of Flawed Trade Deals," in which we revealed that U.S. exports to FTA partners have grown at half the pace of U.S. exports to the rest of the world. There seems to be a consensus developing here.

University of California Study Finds that CAFTA Intellectual Property Rules Hinder Access to Medicines in Guatemala

A new study from the University of California concludes after rigorous analysis that the Central American Free Trade Agreement (CAFTA) elevates the prices of medicines in Guatemala while removing cheaper, generic options from the market. 

Guatemala is a low-income country with a domestic generic drug industry.  CAFTA’s intellectual property rules affect the drug market not as much through patent protections, but through data protection (or data exclusivity), which inserts an administrative barrier to generic drugs entering the market even if there is no patent in place, providing one company with a monopoly. Not only are generics denied registration and entry into the market by CAFTA’s market protections but generics already in the market are removed. 

The study looked at drugs used to treat some of the most common causes for sickness and mortality in Guatemala, including cancer, pneumonia, diabetes, and cardiac disease and stroke. The intellectual property rules in CAFTA have had a significant effect on medication costs in Guatemala, making many of them prohibitively expensive. In every case included in the study, the data-protected drug was more expensive than its generic equivalent. For example, the insulin Lantus, used to treat diabetes, costs 846 percent more than its generic equivalent. The antifungal Vfend, used to treat infections, costs 810 percent more than the generic medication. 

In fact, CAFTA’s rules on intellectual property provide even stronger monopoly protections than U.S. law or the WTO’s Agreement on Trade-Related Aspects of Intellectual Property (TRIPS).  Unfortunately, Guatemala is a prime example of the effects of CAFTA’s intellectual property rules and the Guatemalan people are paying the price, literally and figuratively. 

For more information, see GTW’s information on CAFTA and access to medicines.

The University of California article, entitled “A Trade Agreement’s Impact on Access to Generic Drugs,” can be found here. 

Botox protectionism

Defenders of the trade status quo sometimes like to point out that the economic argument in favor of free trade is identical whether you're talking about trade between countries, individuals or state lines. And that's true, so long as you believe the models and are willing to dismiss the notion of a national interest. Some interest gets protected at the expense of another: there may be a surplus created, but who can say where this goes without looking at specific distributions?

In the latest news off of Roll Call, it's Botox that's getting protected:

Those wrinkle-busting Botox injections can cost $500 a squirt, but if you were waiting for the price to come down when a generic version hits the market, well, get used to your frown lines.

That’s if a bill introduced late last week by Reps. Anna Eshoo (D-Calif.) and Joe Barton (R-Texas) makes it into law.

The measure, which would create a pathway for generic versions of biotech drugs, exempts pharmaceuticals that contain “select agents and toxins,” such as Botox’s botulinum toxin type A, mainly on the the grounds of national security, according to people on both sides of the issue...

A lobbyist for the generics industry said the national security argument doesn’t hold up. “They spin it as a national security issue — that botulism could be used in terrorist plots,” said this lobbyist. “I don’t know how in the hell they justify how generic botox is any more of a terrorist threat than brand-name Botox.”

The fact that this is a protectionist measure that is not free trade that benefits Botox producers at the expense of other segments of society is not discussed in the article. Barton, who voted against fair trade on 19 out of 20 votes, says on his website that "I firmly believe that free and open trade benefits all people." Eshoo claims to have a good trade record because she supports labor standards and trade adjustment assistance, but she was only marginally better and voted against fair trade on 15 out of 19 occasions, including through her votes for NAFTA, WTO, and the Peru FTA. Isn't this discrepancy worth a mention?

On the other hand, as our own Health Research Group at Public Citizen has pointed out, to the extent that Botox is dangerous, maybe it's a good thing that it's made out of reach for more people!

Nobelists on trade, globalization

Leonid Hurwicz, Roger Myerson, and Eric Maskin were awarded the Nobel in Economics yesterday for their work in mechanism design theory. Alex Tabarrok at Marginal Revolution has a pretty good explanation of this work, and Maskin told the Times:

Mechanism design, Professor Maskin explained, can be thought of as the “reverse engineering part of economics.” The starting point, he said, is an outcome that is being sought, like a cleaner environment, a more equitable distribution of income or more technical innovation. Then, he added, one works to design a system that aligns private incentives with public goals.

One recent subject of Professor Maskin’s wide-ranging research has been on the value of software patents. He determined that software was a market where innovations tended to be sequential, in that they were built closely on the work of predecessors, and innovators could take many different paths to the same goal. In such markets, he said, patents might serve as a wall that inhibited innovation rather than stimulating progress.

What Maskin is writing about is the textbook theory of the value of free trade. It also complements work in the development economics literature about how "late developers" can adopt the technological advancements of rich countries, thus "leapfrogging" a stage of development. It should be noted that this is something that our current WTO- and NAFTA-enforced intellectual property protectionism regime sharply limits.

Maskin has also written recently on inequality and globalization:

Supporters of the anti-globalization movement argue that “globalization has dramatically increased inequality between and within nations” (Mazur, 2000), and in particular that it has marginalized the poor in developing countries and left behind the poorest countries. Meanwhile, more moderate mainstream politicians argue that the poor must invest in education to take advantage of globalization (Clinton, 2000). Such views are difficult to reconcile with a standard Heckscher-Ohlin trade model with two countries, two goods, and two factors (skilled and unskilled labor, or alternatively capital and labor) [which predicts that] inequality will rise in the rich country and fall in the poor country...

There are, however, at least two empirical problems with the Heckscher-Ohlin story. First, it predicts that bilateral trade will be greatest when factor endowments are most different, ceteris paribus (Vanek, 1968). There is little trade between advanced countries such as the U.S. and very poor countries such as Chad. A second problem with the Heckscher-Ohlin model is that evidence from examination of specific developing countries following trade liberalization and from cross-country studies does not suggest that trade liberalization generally reduces inequality in poor countries and in fact frequently suggests that trade liberalization can increase inequality...

We propose a model of production by workers of different skill-levels (Kremer and Maskin, 1997) that is consistent with 1) the small scale of trade between countries with very different factor endowments and 2) the possibility that globalization may increase inequality in both rich and poor countries.

Their model shows that it's possible that the least-skilled masses in poor countries will be totally marginalized under globalization, and that inequality can thus rise in both rich and poor countries. Maskin and co-author Michael Kremer conclude, "if people measure their status relative to others in their own society, then they will perceive inequality increasing. This analysis corresponds to the view of many anti-globalization protestors that globalization benefits elites in both rich and poor countries."

Nine Inch Nails, Radiohead embrace free trade

Nine Inch Nails just announced that they're following Radiohead's lead and making their music available for download at whatever price fans want to pay. Conversation over at Dani Rodrik's blog has already spoken about some of the economic issues involved.

This is huge. Technological change is unraveling the entertainment industry's ability to use protectionist devices like copyright and patents to have the nanny state enforce their monopolies. As Dean Baker writes:

Whether or not copyright protection is a desirable public policy, it is undeniably a huge government intervention in the market. In the case of prescription drugs, patent monopolies raise the average price of protected drugs by more than 200 percent, and in some cases by as much as 5,000 percent. In the case of copyright protection, items like software and recorded music and movies that would otherwise be available at zero cost over the Internet, can instead be sold for hundreds of dollars. Clearly these forms of protection are substantial interventions in the economy.

The fact that copyright and patent protections are forms of intervention does not mean that they are bad, but it is essential to at least recognize this fact in order to assess their merits. Suppose we eliminated all welfare to needy mothers in the form of cash benefits from the government, and instead assigned them the right to control traffic intersections in major cities. Then we allowed these poor mothers to charge people to make turns from the intersections. These women could have the police arrest anyone who crosses the intersection under their control without paying them their royalty, just as Bill Gates will have the police arrest anyone who sells Windows without paying him a royalty. The royalties they collect could provide enough income to support them without any money from the government. In this way, we could get rid of welfare - the classic big government social program — and still ensure that poor mothers have the income needed to support their family.

Giving people the right to charge royalties to cross intersections is government intervention in the economy and is every bit as much “big government” as if the government taxed people and redistributed the money to low-income mothers. It would not change anything if we declared the right to charge fees at an intersection a “copyright.” Government intervention by any other name is government intervention.

But trade agreements like NAFTA and the WTO, although often described as "free trade" agreements, in fact contain provisions that extend the reach and length of government intervention on behalf of copyright holders. This is not surprising, since these industries are among the top lobbyists for NAFTA-style trade pacts.

Progressives should reject these NAFTA expansions to Peru and other countries. These deals will increase patent protectionism at the expense of the poor and sick in Peru. And while copyrights may seem like a less burning issue, pacts like CAFTA have already cut away at free trade in Central America by forcing a crackdown on vendors engaging in free trade in music and computer programs, much as Nine Inch Nails and Radiohead have done to the delight of their fans.

Drinking, Dieting, Industrial Policy

As I recently noted, Ha-Joon Chang is coming out with a book very soon in the US - "Bad Samaritan: Rich Nations, Poor Policies and the threat to the developing world." The book has spawned a sharp debate over at the Financial Times over the desirability of active trade and industrial policies.

After having studied industrial policies myself, I remember being surprised to hear a presenter at the American Enterprise Institute say that "the arguments for industrial policy don't hold up to closer scrutiny." Granted, any argument for or against industrial policy has to be sensitive to local conditions (landlocked Chad is unlikely to build a successful shipbuilding industry, as Martin Wolf notes), so I didn't quite understand what the presenter was referring to... was the statement meant to discredit the boom years of Latin America in the 1960s, Korea in the 1970s, China in the 1990s? It couldn't have been to celebrate the experience of Latin America or Africa for the last quarter century - during which time practically no industrial policies were practiced (except in Chile, as I talk about here.), right?

So I have still been waiting for further clarification from orthodox economists about what is meant by this pooh-poohing of the lessons of history. Here are the arguments, summarized from the FT debate, with the quick and dirty response taken from Ha-Joon:

• Orthodoxy: Dude, industrial policy is so 19th century. Sanity: Latin America, Asian, and Scandinavian development did not happen in the 19th century, dude.
• Orthodoxy: Korea didn't use industrial policy (that's why it grew before the late 1970s), except when it did (that's why it didn't grow in the late 1970s, early 1980s). Sanity: That is so 1980s of you. Korea used industrial policy before, during, and after the period in question, and it grew the whole time, except when it didn't, and that was due to a little something called a world recession.
• Orthodoxy: Free trade is the best! But if you practice free trade and you don't grow, blame it on on some other policy. Sanity: Where are we, Middle Earth?

The whole debate is worth a read, and it is not as idiotic in tone as I have made it seem. But the days when orthodox economists could shove facts under the rug for 20 years is gone, and you can tell it's causing some growing pains. To part, here are some choice Hajoonisms:

• I feel like a man being accused of promoting a copious consumption of vodka when all I have done is to recommend moderate amount of red wine as a part of balanced diet.
• It may be possible to dismiss the US as an "exception", but if there are another two dozen countries that have to be dismissed as "exceptions", then the theory has simply too many holes (the exercise reminds me of the pre-Copernican practice of drawing "epi-circles" in order to square evidence with geo-centrism).
• I think it is wrong to dismiss one’s opponent’s theory by labelling them with negative words (‘nineteenth-century’). How would Alan feel if I described him and his colleagues as "defenders of free-trade theory that was so strongly advocated by American slave-owners and opium-trafficking British imperialists"?
• I am a man whose book recommending the Mediterranean diet has been reviewed by a well-known anti-fat dietician, who unintentionally misrepresented me as praising beneficial qualities of all fats, when I had only praised olive oil. This was bad enough, but then a few other anti-fat dieticians read the review, go into a Pavlovian reaction on seeing the word, "fat", and accuse me of promoting excessive consumption of all fats, brandishing American obesity figures and Scottish heart-attack statistics. I regretfully have come to conclusion that I was absolutely right to say what I said at the end of chapter three in the book – "Trade is simply too important for economic development to be left to free trade economists".

Sherrod Brown and Tom Allen Demand Pro-Public Health Trade Policy

Well, Sen. Sherrod Brown (D-Ohio) and Rep. Tom Allen (D-Maine) have done it again. While the Deathstar Deal is needlessly splitting party unity on trade, they are showing the positive fair trade alternative. Check out this Dear Colleague that they are circulating, and go to the Essential Action page to learn more about the issues at stake.

July 9, 2007

*Support our Nation's commitment to the Doha Declaration on TRIPS and Public Health*

Dear Colleague:

We write today to invite you to co-sponsor a resolution that reaffirms the commitment of the United States to the 2001 Doha Declaration on TRIPS and Public Health (S. Res 241) and (H. Res 525).

The 2001 Doha Declaration on the TRIPS Agreement and Public Health, to which the United States and all WTO members are signatories, "affirm[s] that the [TRIPS] Agreement can and should be interpreted and implemented in a manner supportive of WTO members' right to protect public health and, in particular, to promote access to medicines for all." This international agreement properly emphasizes the importance of public health considerations in implementation of patent rules.

However, the Bush administration included Thailand on its 2007 Special 301 Report for intellectual property violators, citing "a weakening of respect for patents."

Health groups bash process and substance of "deal"

Health Gap, Essential Action and Student Global AIDS Campaign - some of the nation's leading groups fighting for access to life-saving medicines - have released a statement bashing the process and substance of the "deal." Their conclusion, even with the "deal" fixes, the FTAs "restrict rather than expand access to lifesaving medicines." Read the full analysis after the jump.

Civil society putting Big Pharma on the defense

Around the world, news is streaming in that civil society - and even governmental pressure - is putting Big Pharma on the defensive, deepening the people's revolt that David talked about here.

First off, Brazil. According to the Working Group on Intellectual Property (GTPI) from the Brazilian Network for the Integration of Peoples (REBRIP), the Brazilian federal government has decided

to issue a compulsory license for the antiviral drug, Efavirenz, whose patent is current held by Merck Sharp & Dohme. This historical decision reinforces the efforts of civil society groups fighting for access to medicines, for the sustainability of public health policies, such as universal and unlimited access to antiretroviral medicines used in the treatment of HIV/AIDS, and for the strengthening of the Brazilian public health care system, the Unique Health System (SUS).

Next stop, Thailand. Here, too, civil society is successfully pressuring governments to issue compulsory licenses for life-saving drugs. According to Congress Daily (sorry, not linkable):

U.S. officials added Thailand to the Priority Watch List in their Special 301 report, partly because of Thailand's handling of compulsory licenses it issued to import generic versions of two HIV/AIDS drugs and a heart medication ... Health activists and advocates of fewer restrictions on the use of intellectual property criticized the move. One of them, James Love, executive director of Knowledge Ecology International, said, "The sanctioning of countries for using legitimate and important flexibilities in the [WTO] agreement brings shame to all U.S. citizens who are increasingly seen in Thailand and elsewhere as bullies and hypocrites."

And, final stop, the U.S. of A. Here, public health groups and fair trade activists' pressure on House Democratic leadership may be leading to a groundbreaking reversal of the "patent protectionism" long practiced by the Clinton and Bush administrations in trade deals. Says Mark Drajem of Bloomberg (not linkable):

The negotiators also want to remove requirements that drug patents be extended if the companies face long delays in getting approval to sell their products in those countries, they said. The proposals, if adopted as part of a larger package of changes, would mean House Ways and Means Chairman Charles Rangel and the White House would cut provisions the U.S. insisted upon when those trade agreements were being negotiated... Health activists back the changes, saying they will mean cheaper life-saving medicines for AIDS victims and others in poor nations, according to Rohit Malpani of Oxfam America.

Needless to say, Big Pharma is not happy about these changes, which is why it's crucial that we continue to make our voices heard by clicking here.

Rangel speak at IIE

House Ways and Means Chairman Charlie Rangel (D-N.Y.) gave a speech last night to the Peterson Institute for International Economics.

Worth noting is the continued deliberations over what/how/if labor rights may/could/should/will be incorporated into FTAs and Fast Track. Follow the full verbatim transcript after the jump.

Corporate lobbyists hate Americans, part deux

Well, we've already heard from the U.S. Council for International Business and the Emergency Committee for American Trade, and they told us that they hate working Americans. Today, we found out (not that this is really a huge surprise or anything) that the National Association of Manufacturers does too! NAM will oppose any free trade agreement that includes new labor standards for American workers. This from Bloomberg's Mark Drajem - sorry, not linkable:

The National Association of Manufacturers, the largest industrial lobbying group, said it will oppose new trade agreements unless Democrats agree to exempt the U.S. from new labor provisions. [...] The business group is joining organizations such as the U.S. Chamber of Commerce in objecting to proposals, pushed by Democrats in Congress, that the organizations say may force revisions in state and federal labor laws such as those that limit the ability of workers to strike.

Also, in a rare moment of candor, NAM president John Engler actually said this, as reported in the article: "In addition to the labor provisions, the manufacturer's group opposes Democratic proposals to change the intellectual property provisions of the pending agreements so that developing countries can make cheaper versions of generic drugs sooner, Engler said."

In other words: "Our profit is more important than your wages or life-saving medicines." Catnip anyone?

Because drug prices aren't high enough already

As predicted, the U.S.-Korea FTA (what should we call this thing? SKFTA? SKOFTA? KORUS, like USTR is calling it? Hmm...) will almost certainly lead to an increase in drug prices — apparently not just in Korea, but maybe in the U.S. as well. According to a PharmaTimes story yesterday:

As part of the FTA, Korea has agreed to abandon its policy of requiring drugmakers to negotiate prices with the government in order for their products to be placed on the national health care system's positive reimbursement list. This policy was reported to be a major stumbling block at the talks, with US negotiators regarding it as a potential barrier to trade. Korea has also agreed to extend its patent period on innovative drugs [...] the Korean Federation of Medical Groups for Health Rights has forecast that these concessions will increase costs to Koreans by 1 trillion won over the next five years, while US critics have warned that they could also increase drug prices in the USA.

Interestingly, doesn't the Korean price-negotiation scheme that U.S. negotiators nixed sound awfully like the Democrats' Medicare drug bill that the House passed in January?

For more on this issue in general, over at Beat the Press, Dean Baker frequently riffs on how patent protection for drug companies is, ironically, a kind of protectionist boondoggle for Big Pharma, despite being promoted by "free-traders" as a necessary part of new FTAs.