OPINION:
While NAFTA, which created the largest free-trading bloc in the world, has been a boon to the North American economy, President Trump’s USMCA makes some clear improvements. But, because of seriously misguided opposition, it may never be approved. That would be a disaster for the White House and America.
Among other beneficial changes, the USMCA (for United States-Mexico-Canada Agreement) opens dairy markets for U.S. farmers, increases the proportion of a manufactured car’s components that must come from North America, prohibits duties on digital products like music and e-books, and advances intellectual property (IP) protections.
Just as important, the USMCA lacks NAFTA’s reputational baggage. The 25-year-old agreement was disparaged — unfairly, in my view — by both parties. USMCA is a positive brand that will sustain beneficial trade among the countries for decades.
All three presidents signed the USMCA a year ago, but so far it has been ratified only by Mexico. Canada is waiting for the United States to act, and U.S. acceptance depends mainly on Democrats in the House of Representatives. Their complaints about enforcement guarantees are relatively easy to handle, but they are also hung up on increased foreign IP protections for made-in-USA specialty pharmaceuticals — a strange obsession, to say the least.
Biological products, or “biologics,” are drugs manufactured from living systems such as plants or animal cells. Biologics are among the most powerful and expensive medicines, many of them targeting cancer or autoimmune disease, such as Humira, the top-selling drug in the world. The USMCA protects IP for biologics by setting the period of “effective market protection,” or exclusivity, at 10 years. After that time, drug regulators can approve biosimilars — or follow-on medicines with no clinical differences — to compete with the patented originals.
Currently, the market exclusivity period is eight years in Canada and five years (or less) in Mexico. In the United States, it’s 12 years, a term set by President Obama’s Affordable Care Act. The pharmaceutical industry tried but failed to establish 12 years for the USMCA, but 10 is a major improvement.
It’s not hard to understand why some Canadians and Mexicans might have concerns about raising the exclusivity period: It might be a longer wait before Canadian and Mexican firms can copy the work product of U.S. researchers. But why would Americans object? Benefits from the change will primarily flow to the United States. Longer-term IP protection means that foreign markets, which currently freeload on U.S. innovation, will have to pay a larger share of drug development costs.
That will allow the Trump administration to take a major step toward its goal of spreading the pharmaceutical-cost burden to other countries.
The change will mean more R&D, more new medicines and more American jobs. And enshrining 10 years in the USMCA will advance the standard for future global trade agreements. Other developed countries, such as Australia, New Zealand and Chile, have only five-year protections. Japan has eight years.
So why the opposition to longer exclusivity for biologics in Canada and Mexico? A letter from 100 Democrats to U.S. Trade Representative Robert Lighthizer in July argued that the USMCA would “limit Congress’ ability to adjust the biologics exclusivity period, [by] locking the U.S. into policies that keep … drug prices high.” But that’s nonsense.
A paper by Miriam Sapiro, who was deputy U.S. Trade Representative in the Obama administration, shows clearly that “USMCA obligations would not constrain Congress’ authority or ability to revise U.S. law or policy.” And Congress has stated in the past that trade deals must aim to bring other countries up to U.S. standards.
In fact, opposition to IP protections seems driven, not by reasonable objections, but by a maniacal animosity toward drug companies and toward President Trump. To some in Congress, a firm engaged in inventing, developing and manufacturing life-saving medicines is a malefactor, period. Thus, a provision that would increase that firm’s revenues by extending IP protections — not in the United States, but abroad — is evil on its face. As for President Trump, it’s hardly a surprise that, with an election coming, some Democrats don’t want him to win credit for anything — even a trade deal that boosts the U.S. economy.
It would be a disaster if the House manages to scuttle the USMCA, but, equally, it would be a disaster if the White House caves in and kills an IP provision aimed at Canada and Mexico.
As a report by the President’s Council of Economic Advisers on the gap between pharmaceutical prices at home and abroad put it, “Our current policies are neither wise nor just. Simply put, other nations are free-riding, or taking unfair advantage of the United States.” By passing an intact USMCA, Congress can start to remedy that injustice, while at the same time encouraging more medical innovation to improve the well-being of everyone in North America.
• James K. Glassman, undersecretary of State for public diplomacy under George W. Bush, is an adviser to health care companies.
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