Free Trade Agreements Should Promote Strong IP Protections

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Posted by Alexander Hendrie on Thursday, February 11th, 2016, 3:00 PM PERMALINK

Last week, U.S. Trade Representative Michael Froman signed the Trans-Pacific Partnership trade agreement, a largely symbolic act that is just one step on the long road toward ultimate approval of the agreement by Congress. While free trade is ultimately a good, there are several alarming provisions in the agreement that must be fixed as Congress continues considering the TPP.

For one, the weak biopharmaceutical intellectual property protections could create a global economy where property rights do not receive the sufficient protection. In its current form, the agreement grants biopharmaceuticals just five years of exclusivity, far below the 12 years that the U.S. grants.

This 12 year figure is not one plucked out of thin air, but was legislated by Congress following careful consideration of the extensive development costs associated with medicines.

It costs researchers an average of $2.6 billion and over ten years to take a new medicine through the pre-approval period.  And the costs don’t end there. The countless regulations and mandates in the post-approval periods cost over $20 billion every year.

Despite these steep costs, strong IP protections allow the U.S to remain a leader in innovative new medicines. In 2014 alone, pharmaceutical firms spent over $51 billion on research, while over 50 new drugs entered the market. But in order to maintain this rate of innovation, companies are faced with a delicate balance to ensure they are able to finance new research and development.

Ensuring IP rights are promoted and protected should not be solely a U.S. interest, because it will benefit all TPP partners.  

IP allows local, innovators to flourish by putting them on equal footing with foreign industries and ensuring they receive just reward for any creation. With more innovation & competition, everyone gains.

Indeed, free trade is a positive force as it eliminating barriers to global commerce through removing discriminatory tariffs, trade quotas, and regulations.This means less money taken by foreign governments out of the pockets of American workers and business owners. And it means more competition and access to more products at lower prices for consumers across the country.

But regrettably, there are several provisions in the TPP that go in the opposite direction – they create new burdensome regulations that restrict innovation, competition, and the free market by imposing new costs on business.

Another problem with the pacific trade deal is a provision excluding tobacco producers from access to investor-state dispute settlement (ISDS), a procedure that allows investors to seek arbitration and redress in a neutral court if a country is not meeting internationally agreed-upon and binding trade rules.

Opposition to this “carve-out,” as it is known, should not correspond to approval for smoking or tobacco.  This provision is needlessly discriminatory and should be removed because it creates the precedent for adding new regulations in an agreement that is supposed to be about going in the opposite direction.

Similarly, a provision removing the financial services from restrictions on forced data localization could hit U.S. interest hard. At worse, the provision will drastically reduce the ability of the industry to safeguard vital, sensitive data, while imposing unnecessary costs on American business.

Finally, while the agreement contains weak protections for IP, the aggressive labor regulations could very well increase the costs of trade, and hurt U.S. jobs and businesses.

Although the TPP is not the perfect free trade agreement, the fundamentals of the deal are good. It contains as many as 18,000 tax cuts on American exports, and over the next decade, will cut $15 billion in tariffs, which will significantly reduce government interference in international commerce.

This will lead to striking benefits for American families and businesses. In fact, the Peterson Institute for International Economics estimates the agreement could lead to as much as $131 billion in annual increased income through 2030, and increase annual exports by $357 billion.

The bottom line is that this agreement is too good an opportunity to pass up. But before this agreement is passed by Congress, it must be fixed.



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