USMCA (NAFTA 2.0): tightening the constraints on the right to regulate for public health

TRIPS-Plus refers to intellectual property rights which extend beyond those provided for by the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Like data protection, ‘market protection’ applies to the clinical trial data submitted to regulators and commences from the date of marketing approval for the originator product. However, market protection differs from data protection in that the regulator can accept and evaluate an application for a follow-on product during the period of market protection (although marketing approval can’t be granted until the market protection period expires).

It is not possible to make identical generic copies of biologics due to their complexity, but biosimilars, which are highly similar to the original biologic and have the same therapeutic effect, can often be made at a lower cost than the original biologic.

The USMCA chapter on Good Regulatory Practice further requires Parties, in an annual retrospective review of their regulations and at the instigation of any “interested person” from any other Party, to “consider…common approaches to the display of product or consumer information”, another potential way for the US to initiate a challenge to Canadian or Mexican front-of-pack interpretative nutritional labeling.

A US corporation sued a provincial government after an environmental impact assessment rules against its massive quarry and marine shipping terminal, in part because it was contrary to community values. Despite the investor winning the suit, the panel, noting the quarry was unlikely ever to go ahead, denied the US$477 million investor claim for 50 years of lost profit and awarded only US$17 million for lost opportunity costs [38].

As with other new FTAs, such as the CPTPP, the USMCA has been promoted for the positive impact it will have on economic growth and employment creation. But there is also the question of who benefits from such an agreement. To date there have been two econometric studies attempting to estimate economic and employment gains arising from the USMCA, both focusing on the US. In April 2019 the US International Trade Commission (USITC) released a lengthy study in which it forecast gains of US$68.2 billion and 176,000 new jobs [42]. However, these simulated gains rest on several assumptions, including only slight restrictions on the ability of dislocated workers to move to other employment, and an attempt to model “reduced policy uncertainty”, a novel approach not embraced by many other economists. Remove the “reduced policy uncertainty” assumption and the US economy declines slightly, losing US$22.6 billion in value and almost 60,000 jobs. The second study, published one month earlier by the IMF and using similar econometric modelling to the USITC report but without the “reduced policy uncertainty” assumption, concluded that, at most and across all three countries, the USMCA would generate an additional US$540 million in aggregate GDP [55]. Canada and Mexico both gain while the US loses, but the amounts are so low that “the effects on members’ real GDP is negligible” (p.12). However, if the US steel and aluminum tariffs and Canadian and Mexican retaliatory taxes are all removed, the USMCA could generate an additional $US2.5 billion in aggregate welfare, most of it going to the US.

Other measures of the USMCA can also have negative environmental and subsequent health impacts. As with continuing ISDS provisions between the US and Mexico with respect to fracking and oil drilling, a side letter agreement between Canada and the US guarantees either country access to their pipelines for purposes of importation. This could increase oil and natural gas transmissions with subsequent risk of fugitive leaks and emissions, posing both environmental and human health risks.

The WTO Appellate Body (AB) is comprised of seven ‘judges’ appointed for a fixed term, and has the power to uphold, modify, or reverse a dispute panel decision. At least three members of the AB must render a final decision for any action on a dispute to be binding. The US considers the AB to be exercising ‘judicial activism’ particularly regarding disputes over anti-dumping measures, which the US has raised with regard to both China and the EU, and generally loses on appeal to the Appellate Body. The US has a particular concern over how China’s system of ‘state capitalism’ threatens its model of liberalized international trade, which it believes is the foundation of the WTO. With the US blocking new appointments to the AB, however, the WTO dispute settlement process could break down and with it, the entire multilateral trading system creating what some trade analysts characterize as a ‘return to the wild west of trade’ [60].