Notes from today’s hearing on the proposed US-Korea Free Trade Agreement

Mike Palmedo
March 14, 2006

Today the Trade Policy Staff Committee (TPSC) held hearings on the upcoming FTA negotiations with Korea. The TPSC is an inter-agency body comprised of negotiators from the US Trade Representative’s office, as well as advisors from the Departments of Agriculture, Commerce, Labor, State and Treasury. The purpose of the hearing was to solicit advice for the USTR to consider when it is “amplifying and clarifying negotiating objectives” and for the public “to provide advice on how specific goods and services and other matters should be treated under the proposed agreement.” An Economic Minister from the Korean embassy, two union representatives, and 24 business representatives testified. Written comments can be submitted until March 24 – guidelines for submissions are listed in the Federal Register notice requesting comments. Below are brief notes from some of the testimony given at the hearing.

Korean Ambassador Seok-young Choi testified that the US-Korea FTA is one of the Korean’s top priorities, citing a report from the Korea Institute for International Economic Policy predicting that the agreement would lead to a 2% increase in Korea’s GDP and create 100,000 new jobs. Nevertheless, it is important the FTA does not favor one party over the other – it should be a win-win situation for both parties.

Choi further said that, like the U.S., Korea has “jumped on the bandwagon of competitive liberalization. It is currently engaged in many simultaneous bilateral FTA negotiations, and it is currently studying the possibility of beginning negotiations with China.

Richard Holwill, representing the U.S. Korea Business Council (part of the American Chamber of Commerce) testified that U.S. drug companies have problems gaining market access in Korea, and complained that the Korean process for pricing was not “science-based” and did not reflect the cost of drug development. Regarding intellectual property, he said TRIPS should be built upon, and that obligations in article 39.3 (data protection) needed attention.

Joe Damond from the Pharmaceutical Research and Manufacturers of America gave testimony that Koreans want greater access to new American pharmaceuticals, but that their National Health Insurance (NHI) was structured in a way that made this difficult. PhRMA contends that the FTA should reform Korea’s reimbursement system, which is biased against non-Korean companies; lacks transparency; does not take into account the cost of drug development; is not “science-based;” favors generics; and discourages innovation and technological development in Korea. Damond’s comments focused mostly on the NHI instead of intellectual property, though he also said data exclusivity and patent/regulatory linkage provisions should be included in the FTA.

In contrast, the Generic Manufacturer’s Association’s Shawn Brown stressed that rules concerning the pharmaceutical industry (both national laws and international agreements) need to balance the need for innovation with access to existing medications. The intellectual property provisions in recent FTAs, however, often exceeds US law and delays generic entry – therefore raising the price of medicines. His testimony offers examples of such provisions, including:

• U.S. law contains strict limits to the length of patent extensions. FTAs do not.
• U.S. law includes a five year period of data exclusivity for strictly defined New Chemical Entities. Some FTAs require data exclusivity for “same or similar” products for periods of “at least” five years.
• U.S. law and FTAs both link marketing approval of generic drugs to the expiration of the originators patent. However, U.S. law includes safeguards not found in the FTAs, such as limits on the types of patents that can be listed.

Workshop on "IP, FTAs and Sustainable Development" Highlights Continuing US Pressures on Trading Partners to Toughen IP

March 3, 2006
Mike Palmedo

On February 27 and 28, American University hosted a workshop on "IP, FTAs and Sustainable Development." Negotiators, advisors and other members of civil society attended; some from countries that have completed FTAs with the US and some from countries still in FTA negotiations. The stories told involved the US seeking ever high levels of intellectual property protection, which will soon result in higher prices for medicines and copyrighted goods for consumers.

Many of the speakers went through the technical details in the IP chapters of the various FTAs. Fred Abbott presented his paper outlining provisions in the FTAs that exceed the level of protection found in US intellectual property law. For instance, patent extensions to compensate for delays in the granting of patents and marketing approval are found in both domestic US law and in the FTAs. However, the American legislation includes limits to these extensions that are not found in the trade agreements. Similarly, "linkage" provisions forbidding national regulatory authorities from approving the sale of generic drugs while the originator's drug is under patent exist in both US law and the FTAs - but there are limits to this in the US system that are not included in our FTAs.

Fabiana Jorge, an advisory to both Chile and Colombia in their FTA negotiations, reminded the crowd that from the US point of view, these FTAs are all about money - specifically the movement of money from trading partners to American firms. She stressed the importance of writing good implementation legislation, and that pressures from the US to toughen IP laws do not end once the FTA is signed. In places where a provision could be interpreted one way or another, expect that the US will expect you to use the interpretation that would furthest strengthen IP protection. Others at the conference from nations in the FTA-implementation stage offered examples of this.

Hanan J. Sboul, a representative from the Jordanian pharmaceutical industry, reported that in their implementation debate, the U.S. sought data protection for new uses. She also said that the USTR asked Jordan to remove its bolar provision from its implementation law. (A bolar provision is a clause that allows a generic company to use the drug in tests needed to win marketing approval from a nation's regulatory authority while the drug is still under patent. It allows the generic firm to be ready to market its product as soon as the name-brand drug's patent expires.)

Luis Velasquez, representing Guatemalan generics, also reported that the U.S. is seeking data exclusivity for new uses. He stresses that Guatemala has had to change its law on data exclusivity multiple times since 2003. The U.S. also seeks "universality" of patents between the two countries - meaning that Guatemala should simply honor patents issued in the U.S. as if they had been filed in Guatemala.

No one at the conference argued that the IP chapters of the FTAs are good for the nations negotiating them with us - not even Jennifer Haverkamp, a former Assistant US Trade Representative.

The main message of the conference seemed to be that these IP agreements are deliberately meant to raise prices; and that once a country signs an FTA, the US pressure continues.