[Ip-health] Under Trump, U.S. Companies Face a Rough Road on Trade

Kim Treanor kim.treanor at keionline.org
Tue Nov 21 08:36:45 PST 2017


Under Trump, U.S. Companies Face a Rough Road on Trade
Other nations are plowing ahead on the TPP deal, without the provisions
America wanted. Will NAFTA go any better?
Michael Grunwald in Politico on 21 November 2017

In October 2015, as President Barack Obama was hoping to rush the newly
signed Trans-Pacific Partnership trade deal through Congress, he invited
leaders of the pharmaceutical industry in the White House. The industry had
emerged as a key obstacle to the largest free trade agreement in history,
insisting that TPP didn’t provide enough protection for an expensive class
of nature-based drugs called biologics.

In fact, Obama’s negotiators had already fought hard to protect U.S. drug
manufacturers in the TPP deal, securing protections almost all the other 11
TPP nations opposed. For biologic drugs, they had won eight years of market
exclusivity, insulating American-made name-brand products from competition
from generic knockoffs.

Global aid groups were denouncing the provision as a corporate giveaway
that would limit access to medicine in the developing world. But pharma was
still demanding 12 years of exclusivity in Asia, to match the protections
it already had in the U.S., and Senate Republicans were refusing to move
TPP without the industry on board.

In the Roosevelt Room meeting, Obama made the case for pharma’s leaders to
accept half a loaf: The eight years they’d get under TPP were way better
than the zero years they’d get without it, and his administration would
have no way to extract a better deal if it tried to reopen negotiations.
The industry reps did not dispute either point. But they said they would
still oppose the trade deal, even though it beat their status quo.

“So what do you want me to do?” Obama asked in frustration.

“Everyone just looked at their shoes,” one attendee recalled.

Ultimately, Congress punted on TPP, and President Donald Trump formally
withdrew from the pact in January. But now the deal is moving forward—just
without the United States, and without 20 provisions originally included at
the behest of the United States. One of the provisions the remaining 11 TPP
nations deleted was the eight years of exclusivity for biologics. What the
drug industry got, in the end, was zero.

As the U.S. continues its effort to renegotiate the North American Free
Trade Agreement with Canada and Mexico this week, the Trump Administration
is now facing its own version of the biologics challenge, multiplied
wildly. The U.S. negotiators have demanded a slew of concessions they say
are necessary to improve what the president has called “the worst trade
deal ever made,” and Trump has threatened to walk away from NAFTA if the
demands aren’t met. But multilateral trade deals are usually more about
mutually painful compromises than my-way-or-the-highway tactics, and free
traders point to TPP as evidence that countries that leave the table tend
to get added to the menu.

Pharma wasn’t the only U.S. loser in the new version of TPP. The
minus-America deal now moving forward also deletes a provision that would
have expanded access for U.S. express delivery services like UPS and FedEx,
and several additional intellectual property protections that would have
benefited U.S. software, music and publishing companies. It also dropped
measures promoting wildlife conservation and labor rights that U.S.
environmental groups and unions had considered too weak, but were clearly
stronger than nothing. U.S. exporters will also be unable to take advantage
of TPP’s lower tariffs on 18,000 products. And in general, the U.S. will
lose some of its influence along the Pacific Rim.

“You never get everything you want in these deals. You have to be willing
to compromise,” says Wendy Cutler, who helped negotiate TPP as Obama’s
deputy U.S. Trade Representative. “When you’re too greedy, you can end up
with nothing.”

The dispute over biologics may sound arcane, but even the biggest trade
deals are just collections of arcane-sounding issues. And the financial
stakes are huge. Biologic drugs are a massive growth driver for pharma, an
industry that says it invested nearly $60 billion in research and
development in the U.S. in 2015, supporting 4.5 million jobs. It argues
that manufacturers would have less incentive to develop name-brand biologic
drugs like Avastin for cancer or Humira for autoimmune diseases if they
weren’t assured a long period of protection from copycats. The industry’s
critics say its monopoly protections merely protect its windfall profits
while restricting access to life-saving medicines; the annual cost of
biologics range from over $40,000 for cystic fibrosis and hepatitis C drugs
to drugs costing over $500,000 a year to treat very rare diseases. Copycat
generic drugs are much more affordable, accounting for nearly nine of every
ten prescriptions in the U.S. but barely one in every four dollars spent.

Trade negotiators often carry water for their biggest exporters, and the
U.S. pharmaceutical exports top $50 billion a year. So Obama’s TPP
negotiators tried to help pharma expand its reach in the Pacific Rim,
making its case so aggressively that in July 2015, a TPP draft was leaked
to POLITICO to expose how, in the words of one industry critic, “there’s
very little distance between what Pharma wants and what the U.S. is
demanding.” The biologics dispute was one of the three thorniest
issues—along with dairy and cars—that dragged out the TPP negotiations
until that fall, long enough for fiery populist rhetoric by Trump and
Bernie Sanders to drag down support for the deal among Republicans as well
as Democrats. Even Hillary Clinton, who had praised TPP quite lavishly as
secretary of state, came out against the final product, fearful that
otherwise Democratic labor unions would endorse Sanders.

Still, Republican Senate leaders generally supported free-trade deals, and
Obama aides believed they had the votes to pass TPP. But Senate Finance
Chairman Orrin Hatch (R-Utah) made it clear the deal was going nowhere,
because he wanted 12 years of exclusivity for biologics. That wouldn’t have
been the only obstacle to quick passage; Senate Majority Leader Mitch
McConnell (R-Ky.) had problems with TPP’s tobacco provisions, and some
Republicans would have been happy to delay the deal until a GOP president
like Jeb Bush or Marco Rubio could sign it. But the Pharma delay turned out
to be deadly, because by the time Trump became the party’s nominee, Senate
Republicans were never going to ratify a deal he hated.

One Republican aide said that Obama’s negotiators should only blame
themselves, because they should have demanded 12 years of exclusivity for
biologics, instead of signaling they were open to compromise. “They could
have pushed harder,” the aide said. “They made it clear this wasn’t their
top priority.” The aide said it was disappointing that the remaining TPP
nations retained no protections for biologics, but he said eroding the
12-year standard would have set a terrible precedent for future trade
deals, diminishing the incentive of U.S. biotech and pharmaceutical
companies to plunge hundreds of millions of dollars into researching a
single drug that might never make it to market.

“TPP was supposed to be a state-of-the-art agreement for intellectual
property. A little better than the status quo isn’t good enough,” the aide
said. “It’s unfortunate that the other TPP countries are going backwards,
but this way we preserve the flexibility to fight for higher standards in
the future.”

A Pharma spokeswoman declined to comment on the record, pointing instead to
the group’s website and its comments on the NAFTA talks, which emphasize
how intellectual property protections abroad promote life-saving innovation
at home. And even though President Trump has vowed to lower drug prices
because the industry is “getting away with murder,” his NAFTA negotiators
are now pushing for the 12 years of exclusivity for biologics that Pharma
wanted, and couldn’t get, in TPP.

Some industry critics suspect the main reason the drug industry has been so
insistent on 12 years of exclusivity for biologics in trade deals has its
roots in domestic policy: to avoid backsliding on the 12-year standard the
Congress established for biologics in America. Obama once proposed in his
budget to reduce the exclusivity period to seven years, a move that would
have reduced costs for consumers and taxpayers and profits for the
industry. In his first year in office, Trump has avoided substantive
battles with pharma, and recently nominated an Eli Lilly executive to be
his next health secretary.

“What the drug companies really care about is maintaining their monopoly in
the U.S. market, locking in these unsustainable prices,” says Maria Fabiana
Jorge, a trade consultant who has represented manufacturers of generic

Can Trump do better with NAFTA? Global trade experts say there’s no way
Mexico or Canada would agree to 12 years of exclusivity on pricey biologic
drugs—just one of a litany of issues where the Trump administration appears
to be making demands they expect to be rejected. The president wrote a book
about the art of the deal when he was a Manhattan real estate developer,
and he has made it clear he believes that playing hardball is always the
best way to force reluctant negotiating partners to make concessions. He
sees negotiations as zero-sum games where the strong dictate terms to the

But global trade is supposed to be a win-win game, where the promise of
economic gains for both sides fuels agreements that often have political
risks. And the demise of TPP is a reminder that hardball has its limits if
the ultimate goal is a deal. The longer the negotiations drag out—and the
closer they get to elections—the harder they can be to complete. And when
negotiators make intransigent demands their counterparts can’t possibly
meet, the usual result is an impasse that doesn’t provide benefits for
anyone. “At some point, you’ve got to be realistic about what’s achievable
and what’s never going to happen,” Cutler says. “Otherwise, you’ll never
get to yes.”

The fifth round of NAFTA talks are now underway, and the Trump team has
made a litany of harsh demands—about dairy, cars, government procurement,
dispute resolution and more—that no one expects Mexico or Canada to accept.
The prospects for common ground will only get bleaker as next summer’s
Mexican elections approach, further reducing the desire of Mexican
politicians to make concessions to a president who wants to wall off their
country at their expense.

U.S. automakers, farmers, and other business groups have urged Trump to
take a more realistic approach to NAFTA. But he's still the politician who
had the chutzpah to close his rallies with "You Can't Always Get What You
Want" by the Rolling Stones. He’s already walked away from TPP, despite its
business support, as well as the Paris global climate deal. He’s already
threatened to walk away from NAFTA, which he’s called “the worst deal
ever.” He doesn’t seem all that interested in getting to yes.

Kim Treanor
Knowledge Ecology International
kim.treanor at keionline.org
tel.: +1.202.332.2670 <(202)%20332-2670>

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