Fraser Forum

Blame Obama if the Trans-Pacific Partnership fails

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Fraser Institute scholars such as Prof. Herb Grubel and Prof. Livio Di Matteo have described how the Trans-Pacific Partnership, a massive multilateral free-trade deal among 12 countries, would bring opportunities to Canada and the United States that would increase prosperity.  Unfortunately, Prof. Steve Globerman notes, “it will effectively become no deal at all if the U.S. Congress fails to approve the agreement which, at this point in time, seems more likely than approval.”

Congressional failure to ratify the TPP would almost certainly collapse the deal. For the TPP to come into effect, countries representing 85 per cent of the aggregate GDP of the 12 participating nations must ratify it. The U.S. represents nearly 62 per cent of the group’s GDP. Losing the U.S. alone would prevent reaching 85 per cent.

President Obama poisoned the congressional well by failing to negotiate adequate protection of intellectual property rights in biologic medicines in the TPP, which alienated supporters in Congress. On Nov. 6, only one day after the final text was released, U.S. Senator Orrin Hatch, Chairman of the Senate Finance Committee, repudiated the TPP in a speech to the U.S. Chamber of Commerce. More recently, House Speaker Paul Ryan has expressed skepticism that the deal will pass Congress; and Senate Majority Leader Mitch McConnell doubts it will even come to a vote before next November.

The Administration’s failure to secure intellectual property rights in biologic medicines has led to a complete turnaround among politicians—especially Senator Hatch—who had previously been enthusiastic about giving the president so-called “fast track” authority to make a deal.

“Fast track” commits Congress to an “up or down” vote, with limited time for debate and no amendments. This gives other countries confidence a deal will not get bogged down in domestic American politics after it’s finalized. Last summer, Senator Hatch led a bipartisan effort to give President Obama this authority. Senator Hatch and many of his previously enthusiastic colleagues have now repudiated the TPP because, again, it fails to guarantee adequate protection of intellectual property in biologic medicines.

Biologic medicines differ from most prescription drugs in that they are made from living matter (such as human cells, bacteria or yeast) instead of synthetic chemicals. The Food and Drug Administration approved the first biologic medicine, Eli Lilly & Co.’s human insulin, in 1982.

To win regulatory approval, innovators submit reams of research data to the FDA. U.S. law prevents the FDA from disclosing this data to competitors for a period. This so-called data exclusivity, as well as marketing exclusivity on top of the patents, partially compensates the innovative company for the commercial cost of waiting for FDA approval.

U.S. law grants four years of data exclusivity plus eight years of market exclusivity, for a total of 12 years. This is longer than in other countries, and it has had a positive impact. According to Ernst & Young, U.S. firms similarly dominate research and development (R&D) investment, accounting for 81 per cent of all biotech R&D expenditures globally ($29 billion out of $35 billion in 2014. TPP, however, gives only eight years of data exclusivity or five years of data plus regulatory or administrative procedures to achieve a comparable outcome.

For years, President Obama has called for the period of exclusivity in the U.S. to be reduced to seven years. So, it’s not surprising he did not insist the current U.S. standard be enshrined in the TPP. Nor is it surprising that Congress, where a majority support current U.S. law, cannot ratify the TPP as written.

If the TPP and its expanded trading opportunities do not come into effect, Canadians can blame President Obama’s wrong-headed use of the fast track Congress gave him.


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