United States-Australia Free Trade Agreement Implementation Act

UNITED STATES-AUSTRALIA FREE TRADE AGREEMENT IMPLEMENTATION ACT

Mr. SCHUMER. Mr. President, I will be brief. I thank my colleague from Iowa. I don't want to get into a debate about the Energy bill right now. We have our differences there. The only point I would make is, without six Members on his side of the aisle, we never would have succeeded. It was not just this side of the aisle.

I definitely want to reduce energy dependence, as do most of my colleagues. The bill had virtually no conservation, which many of us are for. I am for both new production and conservation. The bill had no conservation, and, of course, there is the "e" word which is very good for Iowa but not so good for New York. I will not get into the "e" word issue here. But there are different ways to increase conservation.

In the views of many of us, this bill was not a bill that would have reduced energy dependence the way it should have. Certainly, it didn't get much bang for the buck. I don't want to get into a debate with my colleague. I know we all want to vote. I appreciate the sincerity and eloquence which he brings to all of the debates. I enjoy having them with him, but today we will not.

I rise reluctantly against the US-Australia Free Trade Agreement before us today, for one reason only. There have been other issues with this agreement. In my State, we are very concerned about dairy. But I think the people who put the agreement together were mindful of that. While the dairy farmers of New York State are not overwhelmingly pleased with the provisions in the agreement, they believe they have come a long way. I think the agreement does do some good for manufacturing export, and I care about that. But what bothers me is one provision in this agreement. It bothers me so that it leads me to vote against the agreement; that is, the provision dealing with the importation of drugs.

It has become clear in recent weeks that the pharmaceutical industry has not only done everything in its power to thwart drug reimportation legislation before this Congress, but now they have hijacked the trade agreement negotiation process as well. That practice has to end.

Given that we have fast-tracked, many of us, when we see an odious provision put into the agreement, have no choice but to vote it down and hope it will come back without that provision. Frankly, that provision has very little to do with the guts of the Australia Free Trade Agreement. Prescription drug reimportation is a policy that has gained more and more bipartisan support as this year has progressed. My guess is that if, say, the bill from the Senator from North Dakota would get a vote on the floor, it would pass. It would pass in a bipartisan way. That, of course, is because the cost of drugs is going through the roof, and it is harder and harder for our citizens to pay for these miracle drugs. They are great drugs. I salute the pharmaceutical industry for coming up with them.

But one of the great problems we face is that the research is borne not by the citizens of the world but only by the citizens of the United States, even though the drugs are sold throughout the world. We have to do something to change that.

But as usually happens these days, as a proconsumer idea such as reimportation gains more and more momentum and support, the pharmaceutical industry begins to see the writing on the wall, and they look for every way possible to prevent it from becoming reality.

Now it seems, of all things, the US-Australia Free Trade Agreement has become the perfect vehicle to begin the march to put the kibosh on importation.

It is no longer enough that this administration refuses to stand up to PhRMA and negotiate lower drug prices.

The Medicare prescription drug bill, now law, that we have before us, is a failure. It is not even being mentioned by the President in his campaign because they refuse to let Medicare negotiate with the pharmaceutical industry for lower prices.
That costs about $200 billion, and that means there was not enough money to create a good program. But that is not enough.

Now that we have come up with another way to deal with the high cost of drugs, reimportation, the administration actively, through trade agreements, is helping the big drug companies ensure that they can get the same exorbitant prices in every market around the globe, and at the same time putting up a barrier around our borders to prevent lower drug costs from coming in. That has gone too far.

The administration says it is unacceptable that foreign price controls leave American consumers paying most of the cost of pharmaceutical research and development-I couldn't agree more. That hits the nail on the head.

We have to relieve U.S. consumers of some of the burdens of the cost of research and development by making sure that other equally developed countries pay their fair share. But that is not what we are talking about with the US-Australia Free Trade Agreement. Absolutely not.

What the administration is doing is giving the drug companies the tools to raise prices in other countries while pushing policies that keep low drug costs out of this country.

Is that fair? Does that provide any relief to the American consumer? Absolutely not.

I have heard the argument that this provision doesn't have a practical effect because the Australian Government doesn't allow the exportation of its drugs anyway.

First of all, if you look closely at the way it is written, it isn't limited to restricting importation from Australia.

As they say in Shakespeare, there's the rub.

If they really were just concerned with Australia, they would say nothing in this provision would affect importation anywhere else. But that is not the case.

This proposal creates an obligation for the United States to pass laws that prohibit importation not just from Australia but from everywhere, including Canada.

If it truly doesn't have a practical effect, or if it is not reasonable to assume that Australia would hold us to our obligations-who knows-for all we know, the Australian Government could make a deal with the pharmaceutical company to lower their prices-why is the provision in the agreement at all?

Why aren't pharmaceuticals at least exempted? Everyone knows what is going on in this Chamber about reimportation.
Everyone knows what is going on in this country. In my State of New York, citizens from Buffalo, Rochester, the North Country, and even New York City get on buses and go for hours to buy drugs in Canada.

If this provision has no practical effect in this trade agreement, then its only purpose must be to make it more difficult to pass a drug importation bill. It can and might become precedential-we have it in Australia; we should put it elsewhere.

The provision was put in the Australia Free Trade Agreement to set a precedent, to lay the groundwork. The Industry Advisory Committee to the USTR on these issues has clearly stated this purpose. Their report states that "each individual FTA should be viewed as setting a new baseline for future FTA/s"-that this should be setting a floor, not a ceiling.

If that is the case, that is bad news for the millions of Americans who must pay for prescription drugs and had hoped lower costs of imported drugs would prevail.

Simply put, this provision fortifies the administration's opposition to importation and makes the law that much harder to change. Beyond that, this trade agreement may even affect our ability to negotiate prices in the few programs in which the Federal Government still has some control.

The provision is nothing more than a backdoor opportunity to protect the big pharmaceutical companies' profits and keep drug prices high for U.S. consumers. I have had some talks with the heads of the pharmaceutical industries. Some of the more forward-looking progressive ones realize that something has to give; that the U.S. consumer cannot pay for the cost of research for drugs for the whole world; that the prices are getting so high that we have to do something; that the balance between the dollars of profit that are put into research versus the balance of dollars that are put into all kinds of salesmanship has to change. I hope those leaders in industry understand that putting this provision in this agreement undercuts that kind of view.

The nature of trade agreements is changing. They are not just about tariffs anymore. They are getting into other substantive policy issues which dictate the parameters for health care delivery around the world.

These are fundamental policy decisions with serious implications for access to affordable health care which can and will affect millions of people both overseas and, of course, here at home. Yet PhRMA is the only health care expert at the table for these negotiations. That has to end.

I also argue that adding provisions such as this, virtually extraneous provisions that come from someone else's agenda, and putting them into trade agreements hurts the argument for fast track. This is just what people who are opposing fast track said would happen. Here it is, a year later, it has.

There are all kinds of questions swirling about how this trade agreement may affect Medicare, Medicaid, the VA, and DOD programs, and to be honest, no one seems to be able to explain what its effects on these programs will be.

My view is we cannot, we must not wait until after these agreements are put together to consider their potential effects on U.S. policy. I warn my colleagues, vote for this and then you find out that you have locked yourself into something on drug policy that you never imagined. This Member is not going to do that. This Senator is not going to do that.

This provision can be stripped from the agreement and we can come back and pass it next week, next month. We cannot have it as an afterthought-something we are all scrambling to understand the day before the vote.

Frankly, drugs are not the same as tractors. There are huge public health implications to the decisions made by the USTR. It is frightening to think these decisions are being made without the input of a neutral public health advisory committee. We have to put an end to the practice of PhRMA inserting provisions into trade agreements that affect policy elsewhere. There must be someone at the table to protect access to affordable drugs and other health care in this country. The risks are too great to ignore.

For that reason, I will vote no on this agreement in the hopes we can strip out this odious provision and then move forward with the proposal which I will then support.

I ask unanimous consent that a related article from the New York Times be printed in the RECORD.

There being no objection, the material was ordered to be printed in the Record, as follows:

[From the New York Times, July 12, 2004]

TRADE PACT MAY UNDERCUT INEXPENSIVE DRUG IMPORTS

(By Elizabeth Becker and Robert Pear)

WASHINGTON, July 11.-Congress is poised to approve an international trade agreement that have the effect of thwarting a goal pursued by many lawmakers of both parties: the import of inexpensive prescription drugs to help millions of Americans without health insurance.

The agreement, negotiated with Australia by the Bush administration, would allow pharmaceutical companies to prevent imports of drugs to the United States and also to challenge decisions by Australia about what drugs should be covered by the country's health plan, the prices paid for them and how they can be used.

It represents the administration's model for strengthening the protection of expensive brand-name drugs in wealthy countries, where the biggest profits can be made.

In negotiating the pact, the United States, for the first time, challenged how a foreign industrialized country operates its national health program to provide inexpensive drugs to its own citizens. Americans without insurance pay some of the world's highest prices for brand-name prescription drugs, in part because the United States does not have such a plan.

Only in the last few weeks have lawmakers realized that the proposed Australia trade agreement-the Bush administration's first free trade agreement with a developed country-could have major implications for health policy and programs in the United States.

The debate over drug imports, an issue with immense political appeal, has been raging for four years, with little reference to the arcane details of trade policy. Most trade agreements are so complex that lawmakers rarely investigate all the provisions, which typically cover such diverse areas as manufacturing, tourism, insurance, agriculture and, increasingly, pharmaceuticals.

Bush administration officials oppose legalizing imports of inexpensive prescription drugs, citing safety concerns. Instead, with strong backing from the pharmaceutical industry, they have said they want to raise the price of drugs overseas to spread the burden of research and development that is borne disproportionately by the United States.

Many Democrats, with the support of AARP, consumer groups and a substantial number of Republicans, are promoting legislation to lower drug costs by importing less expensive medicines from Europe, Canada, Australia, Japan and other countries where prices are regulated through public health programs.

These two competing approaches represent very different ways of helping Americans who typically pay much more for brand-name prescription drugs than people in the rest of the industrialized world.

Leaders in both houses of Congress hope to approve the free trade agreement in the next week or two. Last Thursday, the House Ways and Means Committee endorsed the pact, which promises to increase American manufacturing exports by as much as $2 billion a year and preserve jobs here.

Health advocates and officials in developing countries have intensely debated the effects of trade deals on the ability of poor nations to provide inexpensive generic drugs to their citizens, especially those with AIDS.

But in Congress, the significance of the agreement for health policy has generally been lost in the trade debate.

The chief sponsor of the Senate bill, Senator Byron L. Dorgan, Democrat of North Dakota, said: "This administration opposes re-importation even to the extent of writing barriers to it into its trade agreements. I don't understand why our trade ambassador is inserting this prohibition into trade agreements before Congress settles the issue."

Senator John McCain, an author of the drug-import bill, sees the agreement with Australia as hampering consumers' access to drugs from other countries. His spokesman said the senator worried that "it only protects powerful special interests."

Gary C. Hufbauer, a senior analyst at the Institute for International Economics, said "the Australia free trade agreement is a skirmish in a larger war" over how to reduce the huge difference in prices paid for drugs in the United States and the rest of the industrialized world.

Kevin Outterson, an associate law professor at West Virginia University, agreed.

"The United States has put a marker down and is now using trade agreements to tell countries how they can reimburse their own citizens for prescription drugs," he said.

The United States does not import any significant amount of low-cost prescription drugs from Australia, in part because federal laws effectively prohibit such imports. But a number of states are considering imports from Australia and Canada, as a way to save money, and American officials have made clear that the Australia agreement sets a precedent they hope to follow in negotiations with other countries.

Trade experts and the pharmaceutical industry offer no assurance that drug prices will fall in the United States if they rise abroad.

Representative Sander M. Levin of Michigan, the senior Democrat on the panel's trade subcommittee, voted for the agreement, which could help industries in his state. But Mr. Levin said the trade pact would give a potent weapon to
opponents of the drug-import bill, who could argue that "passing it would violate our international obligations."

Such violations could lead to trade sanctions costing the United States and its exporters millions of dollars.

One provision of the trade agreement with Australia protects the right of patent owners, like drug companies, to "prevent importation" of products on which they own the patents. Mr. Dorgan's bill would eliminate this right.

The trade pact is "almost completely inconsistent with drug-import bills" that have broad support in Congress, Mr. Levin said.

But Representative Bill Thomas, the California Republican who is chairman of the Ways and Means Committee, said, "The only workable procedure is to write trade agreements according to current law."

For years, drug companies have objected to Australia's Pharmaceutical Benefits Scheme, under which government officials decide which drugs to cover and how much to pay for them. Before the government decides whether to cover a drug, experts analyze its clinical benefits, safety and "cost effectiveness," compared with other treatments.

The trade pact would allow drug companies to challenge decisions on coverage and payment.

Joseph M. Damond, an associate vice president of the Pharmaceutical Research and Manufacturers of America, said Australia's drug benefit system amounted to an unfair trade practice.

"The solution is to get rid of these artificial price controls in other developed countries and create real marketplace incentives for innovation," Mr. Damond said.

While the trade pact has barely been noticed here, it has touched off an impassioned national debate in Australia, where the Parliament is also close to approving it.

The Australian trade minister, Mark Vaile, promised that "there is nothing in the free trade agreement that would increase drug prices in Australia."

But a recent report from a committee of the Australian Parliament saw a serious possibility that "Australians would pay more for certain medicines," and that drug companies would gain more leverage over government decisions there.

Bush administration officials noted that the Trade Act of 2002 said its negotiators should try to eliminate price controls and other regulations that limit access to foreign markets.

Dr. Mark B. McClellan, the former commissioner of food and drugs now in charge of Medicare and Medicaid, said last year that foreign price controls left American consumers paying most of the cost of pharmaceutical research and development, and that, he said, was unacceptable.

Mr. SCHUMER. I yield the floor.