FOR THE Obama administration, the heady feeling over congressional passage of trade-promotion authority in June has given way to at least temporary frustration. Twelve-nation talks in Hawaii that many thought might produce a final Trans-Pacific Partnership (TPP) agreement instead broke up at the end of July with no deal. Sticking points range from a three-way dispute over truck tariffs involving Mexico, Japan and the United States to market access for New Zealand’s dairy products in North America. Canada’s election campaign may paralyze that nation’s ability to cut a deal well into the fall; and if things drag on much longer, the trade pact could get entangled in U.S. presidential election politics.
No issue caused more conflict in the latest round of talks — or in the general political debate over the TPP — than the question of intellectual property and other protections for the U.S. pharmaceutical industry. To be sure, the word “protection” wouldn’t seem to belong in a discussion of free trade to begin with. Many critics of the proposed deal argue that Big Pharma, abetted by President Obama’s negotiators, is nevertheless trying to use the TPP to grab greater control of the world market in medicines. This is not only economically inefficient but also morally repugnant, the argument goes: The patent infringement and market-access rules U.S. drug manufacturers are demanding would raise prices for cutting-edge cures in poor TPP countries such as Peru or Vietnam, and even put pressure on developed nations such as Australia or New Zealand to weaken drug cost controls embedded in their single-payer health systems.
The other side of this inflammatory charge is that, to some extent, the United States already pays more than its fair share of the world’s costs for developing and distributing new pharmaceuticals. That’s because only the United States offers drug-makers the ability to recoup the high costs of discovering cures through a combination of strong patent protection and pricing power when dealing with government health-care programs such as Medicare. Other countries’ health-care systems, meanwhile, import products and sell them for less than they would fetch in the United States. From the U.S. industry’s point of view, then, some TPP countries are trying to free ride off a drug-development system that ultimately rests on the higher prices paid by U.S. consumers and taxpayers.
On this one, Big Pharma has a point — up to a point. The profit-driven system in this country has its inefficiencies, including high marketing costs and the like; but on balance it has served the United States, and the world, well, by promoting more innovation than a state-dominated system of research probably would have. Brandishing leaked (but now out-of-date) drafts of the TPP, the Obama administration’s critics say it’s acting as a “lobbyist” for drug companies — as if governments don’t normally represent their domestic industry in trade negotiations. The administration’s policy is to seek accommodations for the poorer TPP countries so that the costs of patent protection for drug-makers fall on those who can best afford them. That’s the right goal, and U.S. negotiators should be judged on how well they achieve it in a final deal, not on the charges and counter-charges that crop up during the talks.