On Monday, a dozen Pacific Rim nations announced that they finally agreed on the largest new trade agreement in 20 years: the Trans-Pacific Partnership.
The TPP, as it is called, is a mega-regional trade deal that affects 40% of the world economy, including the US, Japan, Mexico, Malaysia, and others bordering the Pacific.
Congress still has to vote on the TPP, and were unlikely to see anything set in stone for months.
In aggregate, the TPP is should boost global economic activity, HSBC senior trade economist Doug Lippoldt wrote in a recent note to clients.
“The accord will open markets and provide an enhanced rules-based framework for the conduct of trade, reducing red tape and uncertainty,” Lippoldt said.
“[A]n accord among countries representing a large swath of the global economy sends a positive signal worldwide. The substantial, coordinated policy initiative represents a meaningful step towards much-needed structural reforms and demonstrates the feasibility of such initiatives in the current environment,” he added.
Basically, what all of that means is that the increased market openness thanks to this trade policy reform could be good news for global growth, good news for corporations, and also good news for consumers, who could have better access to competitive products.
However, as with every politicized decision, there are also negative side-effects. In this case, one such notable angle is that prescription drug prices could be jacked way up.
According to a leaked draft copy obtained by Politico back in May, the TPP “would give US pharmaceutical firms unprecedented protections against competition from cheaper generic drugs, possibly transcending the patent protections in US law.”
In English, that means that makers of generic drugs will have a harder time competing with the big brand name companies abroad.
Additionally, “those provisions could also help block copycats from selling cheaper versions of the expensive cutting-edge drugs known as ‘biologics’ inside the U.S., restricting treatment for American patients while jacking up Medicare and Medicaid costs for American taxpayers,” according to the Politico report.
“By extending US copyright and patent protections to consumers in the rest of the TPP, which will dramatically increase the prices of prescription drugs, the treaty will shift billions in profits to big pharmaceutical companies while denying access to life-saving medicines to countless poor consumers,” writes Robert E. Scott, the director of trade and manufacturing policy research at the Economic Policy Institute.
“The big losers in the TPP are patients and treatment providers in developing countries,” according to a statement from Doctors Without Borders.
“The TPP will still go down in history as the worst trade agreement for access to medicines in developing countries.”