Free trade agreement not all good news
New Zealand Herald, Auckland
7 August 2004
Paul McIntyre: Free trade agreement not all good news
Australia’s free-trade agreement with the United States was on a rollercoaster to somewhere all this week and the most seasoned observers hadn’t a clue where the thing would end up.
Canberra’s press gallery was even dazed - a point critics argue is hardly unusual.
Nonetheless, after what industry, media and most politicians expected on Monday would be a no-brainer for the Coalition Government - to win Labor support for its free-trade deal - great wads of mud ended up flying at Prime Minister Howard and friends for protecting multinational pharmaceutical companies.
By midweek, talkback radio switchboards were firing - about the only thing Canberra takes any notice of outside of Canberra. The problem?
At the start of the week most of the country’s policy elite overlooked two fine-print amendments necessary for Labor’s support of the Government’s FTA with the US.
But within 24 hours Opposition Leader Mark Latham had slammed all the upbeat sentiment hard into reverse. Labor, Latham said, would back the FTA if current locally produced media content quotas were enshrined in legislation and generic drugs were protected against the evils of the international pharmaceutical industry.
Prime Minister Howard pretty much rolled on the first. Free-to air TV, for instance, can now expect Australia’s current rules to be legislated, requiring 55 per cent of prime-time programming to be locally produced. They are currently at the behest of the Australian Broadcasting Authority.
Latham’s concern was that the Americans insisted a ratchet mechanism be included in the FTA making it impossible to increase or restore local content rules once they were cut or removed.
By incorporating the current quotas in the Broadcasting Services Act, any changes will require the backing of both Houses of Parliament. Deal done.
But it was Latham’s second amendment which turned the political landscape into a slide more slippery than an Alaskan oil slick.
The central issue is Australia’s publicly funded $5 billion Pharmaceutical Benefits Scheme (PBS), a political sacred cow which subsidises prescription medicines.
Labor stole the political momentum by parking it in the same camp as the global drug giants.
Latham’s beef, and his coup with the punters, was that the deal with the US would allow drug companies to practise "evergreening", a tactic where spurious patent claims are lodged to block cheaper generic medicines hitting the market.
The Government’s USFTA has allowed a clause which would tip off proprietary drug manufacturers to when generic producers planned to launch similar products.
One of Latham’s demands was to create an offence if proprietary drug makers stopped or forced delays in the launch of generic medicines by lodging questionable patent claims.
It was electoral dynamite for a country wondering when the Prime Minister will call an election and eyeing an FTA due to kick off early in the new year.
Six generic drug manufacturers have already saved the PBS $2 billion with their products and a further $8 billion in savings is expected by 2010.
What didn’t help the Coalition were revelations that a swag of former Coalition advisers are now in the lobbying and communication ranks of drug companies such as Pfizer, GlaxoSmithKline and Merck Sharp & Dohme.
"We want to cut out that sort of dodgy litigation and dodgy patent claiming and that’s what this is all about," one of Labor’s attack dogs, Julia Gillard, said this week.
By Thursday no one knew whether America was on or off the trade bandwagon.
The Prime Minister initially buried any chance of a compromise. And on Thursday he accused Latham of misunderstanding Australian patent law - very, very different law to our good friends in the United States of America, he said.
It was a reasonable point.
Within two days, Latham had moved from the dodgy lodgement of patent applications to the courts dealing with claims once they were proven spurious. "He’s now not talking about applications, he’s talking about litigation," the Prime Minister told Parliament.
It might well have gone somewhere but for a few of the Prime Minister’s frontbenchers indicating the Government wanted a free-trade deal and might bring in its own amendment relating to medicines.
That led to Latham’s claims on Thursday that the Government was policy poaching.
For all the rhetoric, Labor will back the US deal if the drugs issues is cleared up, although the two sides still are poles apart in what the economic benefit is to Australia.
Government-backed analysis of the free-trade agreement puts the annual increase in value to the Australian economy at $6.1 billion. Labor has pointed to research by Australian National University economist Dr Philippa Dee valuing the gain at just $53 million.
Let’s not hold our breath here but as the Prime Minister was preparing to fly to Samoa on Thursday for the South Pacific Forum, he told the Sydney Morning Herald: "I am sure it will go through."
Labor is expected to introduce its amendments early next week. If trade reigns supreme, we can expect a US free-trade deal early in the new year.
Those most unhappy will be Australia’s sugar industry and cattle producers - market access gains to the US beef market, for instance, are subject to an 18-year phase-in. Prescription drugs aside, wallaby farming has never looked better.
* Paul McIntyre is a Sydney-based journalist
