It’s looking increasingly possible that the conflict between the Pharmaceutical Benefits Scheme and the US-Australia Free Trade Agreement will become the central issue of the election. It is also increasingly apparent that, contrary to all the reassurances we got when the agreement was announced, that the FTA and the PBS are in mortal conflict, and that only one of the two can survive.
Today’s developments include a statement from US Ambassador Schieffer that the US may not certify that our legislation implements the FTA and more commentary from sources close to the government, all suggesting that this is a really big deal.
Reading Christopher Pearson’s column in particular, it is notable how thoroughly it undermines the claim that the FTA presents no danger to the PBS. He talks about the remedies available to the US in relation to Labor’s amendments. In addition to the possibility that the Americans will walk away from the agreement altogether, he points out two further possible courses of action.
The second aspect of the amendments likely to cause concern is that trade agreements are negotiated on the basis of “standstill”. In other words, once an agreement is reached, the parties are expected not to introduce legislation that would alter their relative positions.
Finally, the Americans could argue that the amendments are likely to give rise to a dispute under the “reasonable benefits” clause, in the event that their drug companies are unable to realise benefits that they anticipated would flow from the agreement.
What’s critical to note here is that these points have nothing to do with the specific content of Labor’s amendments. They apply to any legislation concerning the PBS that an Australian government might seek to introduce in the future and, arguably, to any administrative decisions made by Ministers. If Pearson is correct, the FTA gives the Americans an effective veto power over anything we might attempt to do to improve the functioning of the PBS. It’s notable that Pearson’s points are almost identical to those that have previously been made by critics of the deal, and pooh-poohed by the government.
It is critical, in both policy and political terms, for Labor to hold its ground. Even without the threat to the PBS, this was a lousy deal. If the Americans refuse to certify, Labor should announce its intention to renegotiate the entire deal, this time on equal terms.
fn1. Pearson is clever and well-informed, but he’s never shown any previous knowledge of international treaty law. In the absence of references to independent experts, I think it’s reasonable to take these claims as coming from sources inside the government.