Trade Agreements

To protect access to medicines, Ottawa should concede to Trump on NAFTA arbitration system

Photo: Foreign Affairs Minister Chrystia Freeland at the Fortune Most Powerful Women 2017 Summit. By Fortune Conferences/Stuart Isett.
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NAFTA talks have taken yet another turn, with the Trump administration declaring its intent to sign a trade agreement with Mexico and “Canada, if it is willing.” Ottawa must now decide whether to join a deal that restricts access to affordable medicines for those who desperately need them.

Trump boasts that the U.S. holds the upper hand and expects Canada to back down. But it’s not that simple.

Already, one in five Canadians say a member of their household cannot afford medications prescribed to them.

A major sticking point is Washington’s insistence on more restrictive intellectual property (IP) rules favoured by Big Pharma. Another is Ottawa’s stubborn attempt to keep a dispute-resolution mechanism that benefits deep-pocketed corporations. Both could affect millions of Canadians by spiking drug prices and making it more costly to get universal pharmacare in this country.

But there is a sensible way for Ottawa to address both issues in a way that safeguards access to medicines.

Leaks indicate that the Trump administration bullied Mexico into accepting even stricter IP rules than those currently in place. These new rules would extend the time before generic manufacturers can produce a drug at a lower cost.

Already, one in five Canadians say a member of their household cannot afford medications prescribed to them, according to a 2015 Angus Reid study. But their costs could skyrocket if the U.S. gets its way.

Until now, Canada has taken a moderate position on IP, offering to adjust NAFTA to reflect terms it accepted in a deal with the European Union. It’s not been a strong defence of the public interest regarding access to affordable medicines, but at least Canada was refusing to cave entirely. Now it’s essential that Ottawa continue to hold this line.

And if Ottawa were to rethink its baffling position on the issue of dispute resolution, Canada might even strengthen that defence.

NAFTA’s Chapter 11 sets out an arbitration system known as the “investor-state dispute settlement” (ISDS) mechanism. It allows foreign companies to bypass a country’s courts to sue governments for policies, regulations and even court decisions that hurt their profitability, in front of closed-door tribunals comprised of corporate lawyers.

Canada bears the responsibility of protecting access to life-saving medicines for the most vulnerable — not only within its borders but across North America.

The Trump administration says the availability of this mechanism encourages job outsourcing to Mexico and wants to make this chapter optional. But Ottawa remains in the pro-ISDS camp. This is deeply ironic — Canada has been sued nearly 40 times through ISDS. Since 2010, these lawsuits have cost taxpayers $314 million, with corporations challenging public health and environmental regulations and creating a chilling effect against officials who try to regulate in the public interest.

ISDS also threatens to undermine access to medicines. Exhibit A is the recent attempt by pharmaceutical powerhouse Eli Lilly to use this mechanism to force changes to Canadian patent laws. Fortunately, the company (mostly) lost its attempt to manipulate the current wording of NAFTA to cover IP issues — but Big Pharma is pushing hard to change this in any new deal.

Prime Minister Trudeau and Foreign Affairs Minister Chrystia Freeland have said they will only sign a deal that is in the best interest of Canadians. But if Canada continues to stand by the ISDS, it is clear which Canadians the government has in mind — powerful corporate stakeholders, and certainly not the millions of Canadians who cannot afford to refill their prescriptions.

Herein lies Ottawa’s power at the NAFTA negotiating table. Canada should concede on dismantling ISDS — a Trump administration proposal that would actually be beneficial to Canadians. And they should leverage this concession to stand firm in rejecting the U.S. demands on IP, so that drug prices don’t increase further.

With the U.S. pandering to Big Pharma, and Mexico apparently strong-armed into submitting, Canada bears the responsibility of protecting access to life-saving medicines for the most vulnerable — not only within its borders but across North America. If the government is serious about protecting the best interests of Canadians, now is the time to rise to that challenge.

Nicholas Caivano is a policy analyst and Richard Elliott is executive director of the Canadian HIV/AIDS Legal Network.

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