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US-Uruguay free trade agreement

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Choike | August 2006 | Versión español

US-Uruguay Free Trade Agreement

Source : La Diaria

Roberto Bissio

Two articles by Roberto Bissio [1], analysing the irreparable mistakes that Uruguay could be making in case of signing an FTA with the United States with regards to the imposition of intellectual property regulations and the opening of state services to competition. The likely impact of the FTA on medicines is also analysed. With more expensive medicines and increased operation costs, the National Health Plan should be postponed and health care would become more expensive.

Warning : The FTA is dangerous to health

August 16, 2006

Médecins Sans Frontières (Doctors Without Borders), the non-governmental organization that was awarded the Nobel Peace Prize in 1999, has issued an unusual warning in Geneva : bilateral free trade agreements (FTAs) promoted by the United States include provisions that represent a damage to health in developing countries. Since this is an organization manifestly reluctant to make political statements and pursuant to its statutes it refrains from making alliances with governments, companies or other NGOs, the warning issued by volunteer doctors should certainly be taken into account.

After analysing the wording and enforcement of the FTAs signed with the United States by Australia, Chile, Canada, Mexico, Singapore and Morocco, Médecins Sans Frontières concludes that ‘the devil is in the details’ and explains that ‘the fine print in these agreements includes provisions that go well beyond the intellectual property measures agreed within the framework of the World Trade Organization, since they put trade interests before public health’.

Although many governments have excluded health services from those the FTA would open to free competition with foreign investors, the FTAs have a huge impact on medicines.

The FTAs extend many years (if not indefinitely) the monopoly of large pharmaceutical firms on the medicines they manufacture, even when they have no patents registered in the country that the FTA is being signed with. Those patents that have expired can be renewed by ‘disclosing’ new uses of the same drug or in fact be maintained by forcing whoever wants to register the same product with another trademark to prove again its usefulness, since not only the formula but also the scientific evidence on which the initial authorization was granted is considered as ‘protected intellectual property’. Not just the manufacturing of generic drugs would be practically forbidden in Uruguay in case an FTA including these clauses was signed, but it would also be rendered impossible to import cheaper medicines from third countries.

Under the FTAs recently signed by the United States, the State remains unable to fix maximum prices on drugs and even to authorise the production or import by third parties of those medicines that for some reason the patent owner would not be willing to sell. It is hard to estimate how much these increased levels of intellectual property protection would cost to Uruguay, but let us take the cost of AZT treatment for HIV-positive patients as example : the introduction of generics in Brazil has caused the dose prices to drop from one thousand to one hundred dollars ! It was precisely the impossibility to treat the HIV-AIDS pandemic with extremely expensive monopolised medicines which led the WTO, after the joint pressure exerted by NGOs and poor countries, to establish exceptions to allow the production or import of generic medicines by poor countries.

Senator Edward Kennedy introduced in 2002 an amendment that requires US negotiators to ‘respect’ the Doha Declaration which places the right to health care before intellectual property rights ; however, in real-life FTAs this clause is ignored. The 2002 “Trade Promotion Authority” Act (also called ‘fast-track’) which sets time-frames and limits to US trade negotiators, requires those FTA including intellectual property regulations (and until now they all do) not to admit less protection to patents than that enjoyed by drug companies in the United States, that is, the highest level of protection in the world. Also in 2002, transnational drug companies employed 675 lobbyists (professionals in terms of political pressure) in Wasghington, nearly seven for every senator. Eighty per cent of electoral contributions from the 25 major drug companies were allocated to the Republican Party and total expenditure on political influence by the pharmaceutical industry between 1997 and 2002 is estimated at 650 million dollars.

With more expensive medicines and increased operation costs, the National Health Plan should be postponed and health care would become more expensive. Health care institutions, Uruguayan laboratories, Public Health authorities, the Medical Union (SMU) and Uruguayan Health Federation (FUS) should not remain absent from consultations on the FTA.

FTA : It’s time to do maths

August 7, 2006

The web site of Ms. Susan Schwab, president Bush’s trade representative, registers a number of free trade agreements (FTAs) currently under negotiation and awaiting approval (with Ecuador, the United Arab Emirates, Korea, Lesotho, Malaysia, Panama, Thailand and countries in Southern Africa - Botswana, Namibia, South Africa, Lesotho and Swaziland). Uruguay is not among them. And this is for two good reasons. The first one is that the Uruguayan government has not decided yet whether it wants an FTA or a less strict type of agreement (which the US does not want). The second reason is that the time-frame granted by Congress to the president to submit this type of agreements is due by the middle of next year, which means that there are only a few months left to negotiate an agreement that normally takes several years.

Before we decide to negotiate an agreement against the clock, running the consequent risk of making mistakes that could turn out to be irreparable, we, Uruguayans, should do our maths and balance the carrot and the stick, that is, potential profits or losses of the FTA. On the one hand, there is the hope to have greater access to the world’s largest market ; on the other hand, not only is the opening to US goods but also the imposition of much stricter intellectual property regulations (not just Cinemateca Uruguaya is going to disappear but the whole Uruguayan pharmaceutical industry), the obligation not to discriminate products and companies from that country in state purchases (including entities and municipalities, thus amputating an essential arm in any attempt to promote a “productive country” by the government) and the opening of services to competition (including finance, telecommunications and water, which in turn may call for a constitutional reform).

If the list of concessions to be made is overwhelming, expectations with regards to profits in the agricultural area are not precisely high. To begin with, Ms. Schwab is prevented by law (the so-called 2002 Bipartisan Trade Promotion Authority Act) from signing an FTA including tariff reductions on agricultural products that go beyond those agreed at the World Trade Organization. And, as it is well known, the WTO Doha Round has just failed as a result of the US refusal to make concessions in the agricultural area.

If we are not going to be granted tariff reductions, nor, least of all, cuts in US agricultural subsidies, all our hopes are placed on the widening of quotas. It is not going to be easy.

Australia, a developed country with much greater power of negotiation than Uruguay, signed an FTA with the US in 2005. Despite the fact that the government repeatedly announced ‘no sugar, no deal’, the Australian sugar quota of 87,402 tonnes per annum remained exactly the same.

The same as Uruguay, Australia’s main export to the US is beef. In this field, the Australian government did manage to negotiate an 18.5 % increase in quotas. However, this was confined to manufacturing-grade beef (hamburger mince or pet food) and was conveniently spread over 18 years. As analysed by Australian economists, the FTA benefits for beef farmers will be equivalent in terms of exports to half a cow more per farm per year. And the US has reserved the right to employ safeguards and raise tariffs again if, by any chance, the price of Australian beef changes suddenly.

On the other hand, the US - the world’s leader agricultural exporter - expects FTAs, according to the statement made by deputy trade representative, Karan Bathia, before the foreign affairs committee of the House of Representatives in Washington, ‘to create opportunities for US farmers, workers and businesspeople’. In that order. The ‘farm’ (to be read as agroindustry) comes first.

Thus, for example, the FTA signed by the US and Mexico provided for the total liberalisation of agricultural products by 2008 (including a 15-year adjustment period for corn and beans). Mexican imports of corn (the main agricultural product in the country) nearly tripled and the domestic price has dropped. Imports of soybean, wheat, poultry and beef have risen over 500%, displacing domestic production. Mexican exports of fruits and vegetables indeed have risen but this failed to compensate for the import rise and 1.7 million rural jobs were lost since the entering into force of the FTA.

Maybe, contrary to what is being said, it is not ideology and manifestos that which ministers are putting on the table when discussing the FTA, but calculators. (END)