Trade deal template for NZ
New Zealand Herald
10 August 2004
Fran O’Sullivan: Trade deal template for NZ
Australian Labor leader Mark Latham’s onslaught on the US free-trade deal has profound implications for New Zealand.
Particularly for the political management of New Zealand’s own quest for an FTA with the world’s richest consumer nation.
Latham’s decision to play hardball over the risk Australians face that their drug benefit scheme will be undermined by alleged tough provisions in the FTA favouring giant US drug manufacturers came at the 11th hour.
His claim that the FTA will delay the entry of generic drugs into the Australian market to the benefit of US pharmaceutical cartels has not been substantiated. Likewise his claim that there are risks around "ever-greening", where drug companies can lodge an injuction to try to stop the release of cheaper generics from entering the Australian market. Australian law differs markedly from US provisions and the FTA text does not undermine the Australian position.
The risk lies in how savagely US companies prosecute their advantage by claiming IP rights over secondary aspects to new patents - as they have done in the US and Canada.
Where Latham has been successful is in ramping up fears that US companies will inevitably try to use the deal to block Australians’ access to cheaper generic drugs through Australia’s Pharmaceutical Benefits Scheme - which is similar to New Zealand’s scheme.
The upshot after a week’s high- profile argy-bargy between Latham and Australian Prime Minister John Howard is that enabling legislation to give effect to the FTA will probably be amended to introduce new penalties against companies that seek to rort the patent laws to spuriously head off generic claims.
Cynics could say that the Labor leader’s move provides nifty political cover for an embarrassing backdown by his party on its overall opposition to the FTA.
The reality is that Howard and his Cabinet could sign the deal into law tomorrow. Unlike the US, where the President is required to get congressional and Senate approval to a trade agreement in the first place, there is nothing in Australian law that prevents the executive from entering into agreements on the country’s behalf.
Where the going gets tricky is in any subsequent law changes to give effect to the deal which require enabling legislation to be passed at both lower House and Senate levels. This is where Latham could have choked the deal.
Ironically, while Latham was cavilling at the agreement, his New Zealand counterpart, Prime Minister Helen Clark, was effusive in her praise for the deal - with the caveat that it was time to patch New Zealand into the mix.
It would be simple - but simplistic - for New Zealand business to sit on the sidelines and debunk Latham’s stance as mere election-year politicking. Just another example of his anti-Americanism which has already put him deeply at odds with President George Bush over Australia’s involvement in Iraq.
There is an even chance that Latham will inhabit the Lodge when the FTA goes into effect next January (assuming that all political obstacles are swept aside this week) and how he handles the relationship with the US will have implications for the way in which New Zealand does business.
The issues that Latham has focused on are not exclusively Australian-centric.
From a US perspective, the FTA with Australia is the first comprehensive deal it has struck with an industrialised nation. The agreement runs the gamut from high-tech market issues - including the controversial transfer of intellectual property - through to a major deepening in bilateral trade in services and greater access for Australian agriculture producers to the vast US consumer market.
The critical point is that the deal US Trade Representative Robert Zoellick has struck forms the benchmark for all subsequent bilateral deals that the US might strike with other industrialised nations - including New Zealand.
Australia’s negotiators made it clear that "this is as good as it gets" to this correspondent in briefings at the Department of Foreign Affairs and Trade in Canberra this year.
The reality is that DFAT’s negotiators did have to give way on several issues during tough talks in January to get the deal signed. The FTA is not a one-way street for Australia - but neither is it a one-way street for the US.
It is a "living document". This means that, much as with the closer economic agreement between New Zealand and Australia, it gives effect to annual consultations between industry groups across a range of sectors which will inevitably deepen bilateral relations and pave the way for other measures to be added.
The intellectual property component is one of the most critical aspects of the deal and will have ramifications for New Zealand’s nascent biotechnology and software industries. This is where the US has been particularly effective by forcing an extremist protectionist measure into the deal.
Copyright protection is also extended from 50 to 70 years after the death of a creator.
The fact is that the US owns the major share of the world’s IP in the first place and will use its muscle where it can by chasing up alleged infringements of copyright from software code-bases to discoveries around DNA.
The FTA specifically excludes New Zealand’s Fonterra from piggy-backing on its Australian subsidiary to gain greater access to the US dairy consumer market.
Where Australia - which is already the United States’ tenth-biggest market - gets to turn some of these clear negatives into advantages is by forming co-ventures between Australian and US companies where issues of IP protection melt away in favour of technology transfers to mutual advantage.
So, where to for New Zealand?
Ambassador John Wood - who has been leading New Zealand’s FTA campaign in Washington - has actively worked with the Australian team to ensure their deal got "over the line" with the US Congress and Senate.
Wood will be back in New Zealand next week where he expects to take soundings in preparation for ramping up New Zealand’s efforts with the next US Administration.
The complex issues are bound to be raised in informal briefings that MFAT is holding for a visiting congressional staffers’ delegation this week. The reality is that Australia’s US FTA will over time provide huge benefits to its economy. New Zealand is also moving towards a single market with Australia.
It is time to think about forming a three-way deal.
