Did Canada agree to a 'Trump veto' and costlier drugs in USMCA?
OTTAWA -- As trade experts look deeper into what exactly Canada signed onto as part of the United States-Mexico-Canada Agreement, questions are arising about what the new trade deal will mean for drug costs, and whether or not Canada just tied its hands when it comes to trade diversification.
The trilateral deal will replace NAFTA once all three countries’ legislatures approve and ratify the wide-spanning agreement, which took 14 months of renegotiation.
Limits on trade with 'non-market' countries
The new deal includes a chapter that has raised the eyebrows of some trade experts, and critics of the federal Liberal government.
The opposition Conservatives are calling it a “Trump veto,” and it’s thrown into question how it could impact future trade deals Canada makes, specifically with China, given the trade threats and tariffs that U.S. President Donald Trump has levelled against the Asian nation.
Chapter 32 of the new USMCA is called “Exceptions and General Provisions” and includes an article on “non-market country” free-trade agreements. It states that the signatories are required to give notice to the other countries in the deal, if they intend to negotiate a free trade agreement with a “non-market” country that is not already in a free trade agreement with one of the UMSCA countries.
For the purpose of this deal, a “non-market” country is one that any of the parties to the deal have declared to be such, and could apply to any country that none of the USMCA countries have a trade agreement with.
The other two countries in USMCA would then have at least 30 days to review the full text of whatever agreement is reached to assess what impact it would have on the USMCA.
Ultimately, it allows for one of the countries to trigger the USMCA’s six-month pullout mechanism, should one of the signatories agree to enter into a trade deal with a “non-market” country.
Canada has moved towards formally engaging China in free-trade talks, though they stalled late last year, with little movement since. Meanwhile, Trump has engaged China in a trade war, with indications that it’s set to ramp up now that NAFTA talks have wrapped.
“While Article 32.10 does not expressly identify China by name, it refers to a ‘non-market country’… this article will have implications for Canada’s future trade negotiations with China,” wrote Tereposky & DeRose LLP in its analysis of the new NAFTA.
“The big battle, in fact the big war is between the U.S. and China, and they’re looking for some support in dealing with China,” international trade lawyer Lawrence Herman told Don Martin, host of CTV’s Power Play.
Though, Herman cautioned it might not be cause for concern, given how far off formal trade talks are with China. He said there could be a new president in the White House by the time Canada and China are at a negotiating table.
Seizing on this provision in question period, Conservative MPs questioned why the Liberals “gave Trump a veto power over our other trade deals.”
NDP MP and trade critic Tracey Ramsey also questioned the clause, saying it would hold Canada “hostage” if it decides to trade with another country.
“Experts have called this concession a severe restriction on Canadian independence… Why did the Liberals give the go-ahead for the U.S. to pull us into their trade wars?” she asked.
In response, Foreign Affairs Minister Chrystia Freeland defended the deal she negotiated, saying that “Canada retains full sovereignty and complete control over our trade relations.” This echoed her initial comments on this chapter yesterday, when she said that each country should have the right to decide if it wants to stay in a trade agreement, and pointing out that it includes the same six-month withdrawal clause that comes with the whole deal, as it did with NAFTA.
Prime Minister Justin Trudeau also sought to dispel concern over this aspect of the new deal on Tuesday, and said he intends to further trade talks with China.
Speaking with reporters in British Columbia, Trudeau said China is “a significant growing player on global trade and we, as always, will look for ways to engage, deepen, and improve our trading relationship with them.”
Though, Trump’s economic adviser Larry Kudlow said Tuesday that the signal China should take from the deal writ-large was that “there is a trade coalition of the willing, that is beginning to fix a lot of broken areas in our international trading system and getting on the same page and co-operating. And that coalition will stand up to China… I hope the Chinese are listening. The rest of the world wants them to play fair, quit breaking the rules.”
On CTV’s Power Play, Deputy Conservative Leader Lisa Raitt said that “bragging” by Kudlow about China bugged her.
“You can’t tell me that that clause is meaningless because it’s not meaningless to that guy, and that guy is Donald Trump’s surrogate.”
Some drugs will cost more
In Chapter 20 of the USMCA deal, patents on biological drugs have been extended to 10 years, up from the current eight-year wait for market access to more affordable generic drug versions. This applies to drugs used to treat conditions such as Multiple sclerosis, Crohn's disease and rheumatoid arthritis.
This means that for Canadians hoping for cheaper generic versions of these drugs, they’ll be waiting an additional two years, though not until the new agreement comes into force, which could be quite some time.
“Right now seven out of 10 the bestselling patented drugs in Canada are biologics. We’re spending $7 billion a year currently on these drugs, so the competitors come in [at a] roughly 25 per cent discount… more money is going to be spent on drugs no matter who is paying,” Dr. Joel Lexchin, a board member at Open Pharma and University of Toronto emergency medicine professor told CTV News.
Biological drugs are pharmaceuticals that are made from living organisms, often used in vaccines or for cancer treatments. Some examples of biologic drugs are: Anti-inflammatory Humira, and white blood-cell stimulator Neulasta.
“Biologic medicines represent the fastest growing cost segment of health-care spending, and these delays will be costly to patients, businesses that sponsor employee drug plans, private payers and our industry,” said Jim Keon, President of the Canadian Generic Pharmaceutical Association in a statement.
NDP MP and health critic Don Davies questioned how the federal government agreeing to this provision aligns with its promise to explore implementing a national pharmacare plan.
“We know that Canadians pay among the highest prices for prescription drugs in the world. And one in four Canadians skips necessary medicine because of costs. Yet the Liberals just signed a trade agreement with the U.S. and Mexico that extends the data protection for biologic drugs… making medicines crucial for Canadians health more expensive,” Davies said.
“With Canadians struggling to afford medication why would this government agree to a trade measure that increases the cost of prescription medicine?”
Health Minister Ginette Petitpas Taylor said that she is aware the deal could impact the price of drugs, but pointed to other regulatory changes the government is looking at to decrease drug costs.
“Our government recognizes that Canadians do pay too much for drugs and that’s why we’ve moved forward with specific concrete actions to make sure we can lower the drug costs for Canadians,” she said.
Sign up for our political newsletter