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U.S. a big winner if Canada-EU sign trade deal

Of the world’s top 12 health care companies by revenue only three or four (depending on how the data are compiled) are resident in the EU.

Deborah Baic/The Globe and Mail

Negotiations resumed in Ottawa last week to move the Canada-EU Comprehensive Economic and Trade (CETA) deal forward. Europe continues to push Canada on pharmaceutical patents, urging Ottawa to adopt higher standards than the EU is itself even willing to embrace. So far, Canada has refused to agree.

The public debate surrounding CETA has not looked closely enough at the consequences of providing the greater patent protection for brand-name drugs that the Europeans are demanding.

First of all, U.S. brand-name pharmaceutical companies would be the biggest winners in a deal between Canada and the EU. Under CETA, most concessions will be exchanged on a preferential basis between Canada and the EU. This is particularly true for border measures like tariffs. However, changes to intellectual property protection and other internal measures will apply to anyone.

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So, although the EU is asking Canada to change its patent regime, it is not possible to do so just for the EU. The actual beneficiaries would be all of the world's brand-name companies – not just those from the EU. Of the world's top 12 health care companies by revenue only three or four (depending on how the data are compiled) are resident in the EU.

An objective in any trade negotiation is to obtain reciprocity, to get paid for concessions being made. Normally those concessions would be negotiated with the principal beneficiary – in this case the United States. Negotiating with Europe on a deal that benefits the U.S. would mean giving a free ride to the Americans and getting nothing in return. This would be a strange move, particularly when we are just beginning a negotiation with the United States in the TransPacific Partnership negotiations.

Secondly, more attention needs to be focused on the potential cost of the EU proposals on the health care costs of Canadians and the possible effects on the country's life-sciences sector.

In arguing for Canada to accept the EU proposals, Peter Harder suggested that "fear mongering" was behind the debate over increased health care costs that would result from CETA.

However, the only detailed study on the matter estimated the EU proposals would delay the availability of generic drugs by an average of 3.5 years at a cost to Canadians of $2.8-billion annually. While proponents of the EU position point out that the study was funded by the generic industry, they have been unable to develop evidence to question its accuracy.

The brand-name and generic pharmaceutical industries each employ about the same number of Canadians, with the generic industry serving as Canada's primary pharmaceutical manufacturers and exporters. Brand pharmaceutical companies say the EU proposals would spur more investment in research in Canada.

However, the 2011 annual report of the Patented Medicine Prices Review Board shows that annual domestic research and development (R&D) expenditure by the brand-name drug industry has slipped to 6.7 per cent of Canadian sales revenue from a promised level of 10 per cent when amendments to the Patent Act – favourable to the industry – were made in 1987.

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The government needs to think long and hard before it formulates final positions on these matters.

John Weekes, a senior business adviser at Bennett Jones LLP, was Canada's ambassador to the WTO and chief negotiator for the NAFTA. He provides advice to the Canadian Generic Pharmaceutical Association.

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