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Honest approach required in Korea-U.S. FTA negotiation

Hankyoreh, Korea

Honest approach required in Korea-U.S. FTA negotiation

By Cho Won-dong

Director of the economic policy bureau, Ministry of Finance and Economy

15 May 2006

I read an article by Woo Seok-gyun, an official from the Korea Federation of Medical Groups for Health Rights (KFHR), regarding the Korea-U.S. Free Trade Agreement (FTA) negotiation on medical care and education. Mr. Woo described the upcoming negotiation as a ’game of truth’ by the government.

I don’t think that the government alone can predict the demands of the U.S. Collecting opinions from experts from diverse fields would be in the national interest. But if the government distorts these views in the process of collecting them, there will be no benefit reaped.

As Mr. Woo pointed out, the issue of pharmaceuticals is expected to be included in the core agenda of the FTA negotiation on medical care. Mr. Woo predicted that the U.S. would demand that South Korea apply the average price paid by the seven advanced countries (A7) to all drugs supplied, and would also demand the ability to extend pharmaceutical patent periods, as well. But we can’t jump to that conclusion.

In my opinion, it is true that the U.S. is highly interested in protecting its pharmaceutical firms, so it may demand that South Korea disclose its drug pricing system more transparently and grant the U.S. the right to file complaints over pricing. But regarding the patent period extension, South Korean patent law already compensates for a clinical demonstration period, along with providing a patent period extension available within five years. Therefore, the U.S. demand can be interpreted as asking Korea to honor the clinical demonstration period for U.S. companies. Making people worry in advance by exaggerating the expected U.S. demands, with no solid foundation, is not an honest approach.

Currently in Korea, the price of newly-developed drugs is decided after negotiating with pharmaceutical companies. Prices of drugs included in the public insurance program also have to be decided in the same way. Consequently, possible U.S. demands of guaranteed transparency in the drug pricing system and granting opportunities to file complaints are already being met. The U.S. may have other related demands. But we can cope with them confidently because Korea’s system, already in place, applies to both domestic and international pharmaceuticals.

Mr. Woo forecast that the private health insurance program would be an important issue in the negotiations between South Korea and the U.S. He noted that Canada slashed its medical budget after signing the North American Free Trade Agreement (NAFTA) and cancelled an introduction of public health insurance in Ontario. However, Mr. Woo admitted that there were no separate healthcare-related regulations in neither the FTA signed between Canada and the U.S. in 1987 nor the NAFTA that Canada and the U.S. signed with Mexico in 1992. After signing the FTA, Canada still operates a nationwide public health insurance program, together with a supplementary private program. It is true that Canada reduced its medical budget, but the reduction was because of prior excessive financial burden, rather than the effect of their FTA with the U.S. Taking the Canadian model into consideration, the possibility of the U.S. targeting the South Korean health insurance market directly is very low. Normalization of the private health insurance system is a task for the South Korean economy, independent of the FTA.

According to recent opinion polls on the Korea-U.S. FTA, over 70 percent of respondents thought that the medical and education markets should be opened earlier than the legal and accounting markets, and even the auto market. It’s time to consider the meaning of these findings.