Korean Civil Societies Statement on 2nd Round of Korea-US FTA Talks

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- What the Korean government should take away from the crippled talks of 2nd round is not to withdraw certain negotiating teams but to stop the negotiation itself -

The second round of FTA talks between Korea and United States ended on July 14, 2006 with cancellation of the final day’s entire schedule.  In the second round, drug pricing policy of the Korean government became the central issue.  The Korean government announced to reform its drug pricing policy of the national healthcare system by adopting measures to positively list reimbursable prescription drugs rather than the current “negative list”, which only lists the exclusions. This positive list system was planned on May 2006 and is expected to take effect on September 2006 when the third round of the KORUS FTA talks will be held in Seattle.

The US negotiators refused to attend the Pharmaceutical and Medical Device Working Group meeting from July 11 and expressed its strong opposition to the positive list system. Wendy Cutler, Assistant USTR and chief American negotiator, blamed that the system “can be used to discriminate against innovative drugs,” which are usually supplied by U.S. and thereby “limit the access of Korean patients and doctors to most innovative drugs in the world.” Subsequently, the U.S. negotiating teams did not attend the sessions for trade protection and service sectors and Korean side followed suit on Friday by canceling the meetings for commodity trade and environment.

We would first like to discuss the actions of both Korean and U.S. governments towards the new drug pricing policy planned by Korean government. The positive list system has been in operation in many OECD countries. If it discriminates against innovative drugs and limits patients’ access to these innovative drugs, the positive list system would already be abolished and failed to exist. However, the potential problems that the U.S. chief negotiator argued did not occur in any countries. The U.S. position on the positive list system is motivated by its aim to keep high prices on drugs supplied by U.S. pharmaceutical companies and ignores constitutional obligation of Korean government to implement comprehensive and systematic policies to maintain public health. In this regard, the U.S. government deserves reproach.

However, the Korean government should be the focus of greater criticism since it provided an excuse. Before the official launch of KORUS FTA this February, the Korean government made a promise the U.S. to address, as a precondition of the KORUS FTA, four areas of concern to the U.S.: beef; automobiles; pharmaceuticals; and screen quotas. With respect to the pharmaceuticals, Korean government agreed at the trade action agenda meeting last October, that no new drug reimbursement pricing policies would be introduced in the near future. Further, Korean government promised to set up an independent mechanism under which pharmaceutical companies could appeal the drug reimbursement decisions.

We view the actions of both governments’ negotiators to be intentional performances to disguise the substantive issues surrounding the problem. To the U.S. negotiators the Korean government’s pharmaceutical drug policy becomes the weapon for obtaining another greater concessions from the Korean side during the next round of talks. The U.S. pharmaceutical companies, even under the positive list system, has the power to file a suit against the Korean government through investor-government dispute and/or non-violation provisions after the KORUS FTA becomes effective. Reportedly, both sides have agreed to the investor-government dispute provision and as such the U.S. pharmaceutical companies may claim damages from the Korean government and request for abolishment of the positive list system. Further, when Korean side concedes to accept the U.S. request to introduce patent term extension and independent appeal system in drug pricing process, the positive list system loses its effect. Moreover, the U.S. pharmaceutical company, usually a patent holder for the drugs, is a single producer and the Korean government’s power to negotiate the drug price would be limited. In addition, the independent appeal system would further weaken the negotiating power of the Korean government. Therefore, the strong opposition displayed by the U.S. to the positive list system is merely negotiating strategy and tactic to gain more leverage in order to intervene on such matters as Korean drug policy and obtain term extension on drug patent, and linkage between patent and drug approval process from Korean side.

Likewise, the action of the Korean government is nothing more than fabricated performance. The Korean government has already agreed to protect intellectual property right holders as the investors, which would certainly weaken the effective function of the positive list system. During the second round, tens of thousands citizens intensely protested against the KORUS FTA, and public opinion in Korea took a turn from pro-FTA. The Korean government’s action to cancel the final day’s meeting was to appease the public and nothing more.

The dramatic performance staged by both sides clearly reveals the presence of significant problem in connection with free trade talks, as the nation’s public policy such as national healthcare system becomes a political pawn subject to trade negotiation. This will happen regularly when the proposed KORUS FTA is signed. Free trade agreement, in particular the KORUS FTA, would allow every public policy to be controlled by business interests. The shows played by both governments should be stopped. The business interests cannot take precedence over public interests.

July 14, 2006

Association of Korean Doctors for Health Rights
Association of Physicians for Humanism
Health Right Network
IPLeft, Intellectual Property Left
KANOS, Korea HIV/AIDS Network of Solidarity
Korea Dentists Association for Health Society
Korea Leukemia Patients Group
Korea Social Insurance Trade Union
Korean Federation of Medical Groups for Health Right
Korean Pharmacists For Democratic Society
Korean Progressive Network ‘Jinbonet’
Nanuri+ HIV/AIDS Human Rights Advocacy Group of Korea
Public Pharmaceutical Center
Solidarity for Worker’s Health

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