No, And Hopefully Never Will Be

- Murray Horton

The Government is rushing to bring into effect a Free Trade Agreement (FTA) with the US, by means of the US becoming a member of the Trans-Pacific Partnership Agreement (TPPA) which is currently being negotiated among nine countries (including NZ and the US). The Obama Administration originally stated that it wanted the deal all ready for signing at the November 2011 Asia Pacific Economic Cooperation (APEC) Leaders’ Summit in the President’s home state of Hawaii – less than a fortnight before NZ’s November 26th election - but, as is often the way with these sorts of negotiations, that deadline appears more aspirational than realistic.

Such a US/NZ free trade agreement has always been held out to the NZ public by both National and Labour as the Holy Grail of NZ’s trade and foreign policies. Indeed the process to set this proposed Agreement in place started in 2008, in the final months of the Clark Labour government. In 2011 Labour has called for wider scrutiny of the TPPA and for a greater range of groups, including unions, to be consulted about it. Labour also criticised the secrecy surrounding the negotiations. It, and the Greens, unsuccessfully supported a petition from a range of groups calling for the negotiation text to be made public It is a start and is commendable, as far as it goes, but “consultation” is not nearly enough. Nor is openness, which may simply mean that we get stabbed in the front rather than in the back. The past quarter of a century has seen lots of “consultation” on all sorts of things and none were stopped or substantially modified because of it.

As far as the actual details of the TPPA are concerned, Maryan Street, Opposition Spokesperson on Foreign Affairs and Trade, in a Letter to the Editor published in the Winter 2011 issue of The Maritimes (the journal of the Maritime Union of New Zealand) wrote: “For the record, Labour has several concerns about the TPP negotiations, including their lack of transparency, agreements around investment including land sales, intellectual property provisions and threats to Pharmac. Our policy is to break open the process surrounding free trade negotiations, and in fact to put a group together including unions, employers, academics and NGOs, which could provide the Minister with contestable advice about the extent to which any free trade deal might enhance or compromise New Zealand’s interests. And this includes workers’ interests, as well as our ability to own our own future…”

That’s all encouraging but she went on to say that: “It is true that we support advances in New Zealand’s fortunes as a trading nation, for the sake of all New Zealanders…”. Meaning that, Labour supports the principle and essence of “free trade”. So there is a bipartisan consensus between the two major parties on this subject. After all, it was Labour under Clark and Goff which proclaimed the 2008 Free Trade Agreement with China to be that Government’s greatest achievement in trade policy, and one of its greatest in foreign policy. So simply replacing National with Labour won’t solve this problem.

Isn’t Free Trade The Answer To All Our Prayers?

But what’s wrong with the TPPA? Isn’t “free trade” good for the country, as nearly all of our politicians, business leaders, academics and media “experts” tell us? The first point to make is that like all such agreements it has very little to do with trade as you and I understand it. All of that stuff has basically already been signed and sealed. As with all so-called “free trade” agreements, the TPPA comes with a major foreign investment component, an investment agreement embedded in it which will throw open what remains off limits in the NZ economy to the tender mercies of American transnational corporations working hand in glove with the US government. It includes a financial services agreement which will commit the member nations to institutionalise the very same horrendous practices which caused the 2008 global financial crisis. It will push up the price of medicines by potentially hundreds of millions of dollars a year by attacking Pharmac; make access to digital recordings more expensive and copying more restricted; attack our genetic engineering and tobacco controls and food labelling and food and appliance safety standards; and weaken our controls on food imports where they might carry diseases. And the whole process is both secret and fundamentally undemocratic in the way in which it is being negotiated and then ratified by Executive decree – meaning that MPs will not get a vote on the TPPA, not until after it has already been signed, anyway, which is NZ’s standard procedure on free trade agreements and treaties in general.

I’ll single out the very big and extremely important health sector for special mention here, by way of example. There is an excellent fact sheet entitled “TPPA Alert - Hands Off Our Public Health System”, which I recommend that you all read and that it be as widely distributed as possible. It can be read online and downloaded at That makes clear that the TPPA targets not only Pharmac, but also ACC and proposed restrictions on cigarette packaging and sales. It will also have effects in areas such as foreign ownership of aged-care chains; health and safety rules for products; and health qualifications.

Booze & Tobacco Barons Throw Their Weight Around

These are real concerns, not hypothetical ones. In March 2011, an international expert on intellectual property litigation gave evidence to Parliament’s Justice and Electoral Select Committee on behalf of his client, Independent Liquor, an alcohol transnational corporation. He warned that proposed changes to liquor laws that target RTDs (ready to drink – the alcopops aimed at teenagers, and very popular with young girls) would breach NZ’s obligations under both the Closer Economic Relationship with Australia and the World Trade Organisation’s Agreement on Technical Barriers to Trade, because the proposed changes would prejudicially target one form of alcohol over another by restricting named products – “a submission Green MP Sue Kedgley said represented ‘a veiled threat’ to our sovereignty” (Listener, 25/6/11, “The Booze Minefield”, Jane Clifton).

The tobacco control implications alone are huge and equally real. Right now, Philip Morris the giant tobacco transnational corporation is taking legal action against the government of Uruguay because of the latter’s tobacco control measures. Although an American company Philip Morris is using a 1991 Swiss/Uruguay bilateral investment agreement as the legal basis for its action, because it has an operations centre in Switzerland. Basically it is claiming that Uruguay is “expropriating” the company’s profits by imposing conditions on tobacco sales and “discriminating” against it. Philip Morris also claims that Uruguay’s proposed law violates the World Trade Organisation’s Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). And the bullying has worked – Uruguay has agreed to amend the legislation, to fend off the complaint and comply with international trade obligations. Its President, Tabaré Vázquez, himself an oncologist (cancer specialist), said: “The only thing that Philip Morris is trying to do is show its power over a small country that has set an international example on this issue” (Citizen News Service, 8/7/11, “Beware The Tobacco Bullies: Do Not Let Them Use Free Trade Agreements To Endanger Public Health”, Shobha Shukla,

This is standard operating procedure for tobacco transnationals. In 1994 RJ Reynolds Tobacco Company threatened to bring a claim under the North American Free Trade Agreement’s (NAFTA) investment chapter as part of its successful campaign to stop Canada introducing laws which would force cigarettes to be sold only in unbranded plain packaging without logos or trademarks. And now it is happening much closer to home. Australia, which is one of the nine countries negotiating the TPPA, has announced that it intends to introduce plain packaging legislation in 2012. Immediately both Philip Morris and British American Tobacco said they would mount legal challenges, with BAT saying damages may amount to billions of dollars (BAT NZ is well known to CAFCA members, having won the 2008 Roger Award for the Worst Transnational Corporation Operating In Aotearoa/New Zealand. The Judges Report can be read at Philip Morris Asia, based in Hong Kong, is using a 1991 Hong Kong/Australia bilateral investment agreement as the legal basis for its action. But this time the tobacco bullies have come up against a bigger and more resolute opponent. The Australian Prime Minister, Julia Gillard, said: “We're not going to be intimidated by Big Tobacco's tactics, whether they're political tactics, whether they're public affairs kind of tactics out in the community, or whether they're legal tactics. We're not taking a backward step. We've made the right decision and we'll see it through" (Citizen News Service, ibid).

The implications for New Zealand are clear. The Government has announced plans to introduce plain packaging, among other tobacco control measures. In a joint press release with Pat Ranald of Australia, Jane Kelsey said: “Philip Morris is a US company. In a classic exercise of treaty shopping, it is using an obscure bilateral investment treaty that Australia signed with Hong Kong in 1991 to bring the case in an offshore international tribunal and seek billions of dollars in compensation for lost revenues. New Zealand has a similar bilateral investment treaty with Hong Kong that was signed in 1995.

“The champions of these agreements dismiss concerns that they could be used to challenge public policies that are in the national interest, such as tobacco controls, offshore mining regulation or stricter telecommunications laws. They have claimed that there isn’t a problem because similar powers exist in some of our other agreements, and have never been used against us – like our 1995 agreement with Hong Kong. This development should send shock waves through the Parliament, local government and ordinary citizens. It’s clearly not enough to stop these powers being included in a TPPA. All New Zealand’s trade and investment agreements that have investor-state enforcement powers need to be revisited as well” (27/6/11, “Tobacco Firm Sues Australia Over Plain Packaging, Confirms Risks Of Trans-Pacific Partnership Deal”).

TPPA As Weapon Against Tobacco Control Laws

Philip Morris has moved aggressively to use the TPPA negotiations to limit restrictions on tobacco marketing. This blatant bullying has led to the mainstream NZ media to come out swinging against Big Tobacco. For example, the Sunday Star-Times editorial (3/7/11, “Free Trade Deals Don’t Come Cheap”): “The Big Tobacco dispute is quite simply a battle between good and evil. Big Tobacco is at it again, trying to save its licence to kill. This time the cancer companies want to stop Australia bringing in plain packaging for their lethal products. New Zealand wants to bring in plain packaging too, so it has a vital interest in the court case between Philip Morris and the Gillard government. The dispute is quite simply a battle between good and evil, between democracy and money, between health and death. It also contains a warning about the risks of sloppy free trade deals.

“The Australian government is leading the world with its plain packaging campaign. It is a direct assault on the dishonest marketing the companies use to spread the habit. The plain packs will be a nasty green colour which, research has shown, is disgusting to smokers. They will have huge and vile photographs of rotting body organs. And the brand names – the Horizons, Holidays, and all the other lying labels – will be confined to the small print. This would be a great step forward. The false glamour of smoking would be dealt a hard blow.

“No wonder the companies are determined to stop it. Legal experts, however, reckon their chances of winning in court are slim. Philip Morris bases its claim on a little known and entirely indefensible investment promotion and protection agreement signed between Australia and Hong Kong in 1991. It allows an investor to make trouble for the Government, and Big Tobacco is trying it on not only with Australia, but also Uruguay. Two Australian National University academics, Kyla Tienhaara and Thomas Faunce, say the company faces an uphill battle. To win, it must convince a judge that the Government’s action was ‘manifestly unfair’ or discriminatory.

“There’s no discrimination. The plain packaging will affect all the cigarette companies, not just one, and so it should. Nor is it unfair: quite the opposite. It aims to harm the cigarette trade, which kills millions of people every year. The case could, however, waste time and money in a lengthy court case, and it shows the dangers of such trade agreements. The Gillard government is ruling out any similar deals in future. In fact, both Australia and New Zealand need to get the existing one with Hong Kong changed….”.

Giving Transnationals Power To Sue Governments

This illustrates one other major danger of the TPPA – it includes what are called “investor rights” provisions, meaning that companies from the signatory countries can sue the governments of those counties if the companies feel that they are the victim of “expropriation” or “discrimination”. To clarify – I’m not talking about the signatory governments taking legal action against each other (of the sort involved in New Zealand’s attempts to get our apples into Australia) but companies from one country suing the Government, either at the local or central level, of another signatory country. These cases are heard in secret by international tribunals and deliver rulings that are binding in international law. There is nothing new about this – it is the model that already exists under the North American Free Trade Agreement (NAFTA), one which has resulted in numerous cases in which US corporations have so far been awarded a total of hundreds of millions of US dollars in damages against local and central government in both Canada and Mexico. This is what New Zealand will face under the TPPA. At first Prime Minister Key denied that this was the case, describing it as a “somewhat farfetched scenario”. But American negotiators bluntly stated that New Zealand had accepted “investors’ rights” as part of the TPPA. Who do you choose to believe – the organ grinder or the monkey? Key has since said that New Zealand will have to “swallow” unprecedented demands from the Americans in order to get the TPPA concluded. Are you reassured?

Ironically the thuggish behaviour by the tobacco transnationals – companies which profit by selling a product which kills thousands of their NZ customers every year and addicting replacements – has done a big favour to the campaign against the TPPA and “free” trade and investment agreements in general. “Even before its notice of claim was sent in June, Philip Morris’s aggressive use of investment law to challenge tobacco regulations may have backfired. In April, Australia’s government announced that it would no longer support the inclusion of investor-State arbitration in its free trade agreements, explicitly linking its new position to the attempts to ‘limit [Australia’s] capacity to put health warnings or plain packaging requirements on tobacco products’ (Gillard Government Trade Policy Statement: ‘Trading Our Way To More Jobs And Prosperity’, April 2011, available at The tobacco industry’s aggressive use of investment rules could prove to be an effective strategy for opposing restrictions on tobacco marketing. Yet given the widespread support for tobacco regulations, it seems just as plausible that this strategy could result in a backlash against investor-State arbitration. Accordingly, the growing tension between tobacco regulations and investor-State arbitration should be a subject of interest not only for tobacco companies and public health advocates, but also for anyone interested in the future of investor-State arbitration” (Investment Treaty News, 12/7/11, “Philip Morris v. Uruguay: Will Investor-State Arbitration Send Restrictions On Tobacco Marketing Up In Smoke?”, Matthew C Porterfield & Christopher R Byrnes,

Threat To Pharmac’s Existence

The biggest issue thus far in the unfolding TPPA saga is the American demand for NZ to get rid of Pharmac, the State drug buying agency (founded by the 1990-99 National government). This came out into the open in May 2011 when 28 US Senators wrote to President Obama expressing concern that “intellectual property” was not sufficiently protected in the proposed Agreement. By which they meant US pharmaceutical transnational corporations’ drug patents. This set alarm bells ringing right across the spectrum of NZ public opinion. The New Zealand Herald editorialised (25/5/11, “Pharmac More Important Than US Deal”): “If patent protection is the extent of the US drug companies' concerns about Pharmac, it should not be too hard to reach a compromise in the Trans-Pacific Partnership. But if they hope to undermine Pharmac's role as a public purchaser, New Zealand must stand firm. There is nothing in Pharmac's role that offends any principle of free trade. Pharmac does not decide what medicines may be traded in New Zealand; it decides which ones will be bought at public expense. If the unsubsidised price puts a drug out of most people's reach, that is a matter for the companies that set the price. They cannot expect their products to be subsidised by the New Zealand taxpayer as of right.

“Pharmac's job is to shop around, drive hard bargains and get the best value for public money. Public purchasing policy can be a trade barrier when it favours domestic suppliers over foreign competitors, or any nation's suppliers over another's, but Pharmac does neither. It gets the best deal it can for the taxpayer regardless of where it finds it. And it has done remarkably well. A survey of 14 developed countries last year found New Zealand spent the least on medicines, at $US2,510 ($3,152) a person, and the United States spent the most, $US7,290. America has the world's most expensive health services and the developed world's poorest coverage. It is struggling to reform its health system while setting its plans firmly against a publicly funded single purchaser of services for those who cannot afford competitive private insurance. Until it solves the conundrum it has set for itself, it is in no position to insist that trade partners abandon a system that works well.

“Pharmac's medicine selections do not always please everyone in this country. Its professional decisions are often open to argument, and it was overruled after the last election by the newly elected Prime Minister who decided he was a better judge of the value of Herceptin for a type of breast cancer. But he has said he will take ‘a fair bit of convincing’ that Pharmac should be altered for the sake of the Trans Pacific Partnership. His Trade Minister, Tim Groser, who as a negotiating official has heard the American case many times before, remains unmoved. He has described Pharmac as ‘an outstandingly successful institution’ that in five years has saved the taxpayer the equivalent of the cost of the Starship Hospital. If only the whole public health system was as hard-nosed in its purchases. Pharmac must not be a bargaining chip in any trade negotiation. If the US is going to make it a deal-breaker, so be it”.

Fighting talk indeed from Granny Herald. The Dominion Post editorial was more equivocal (11/6/11, “We’d Need An Awfully Big Carrot”): “…The truth is that Pharmac gets the Government - and the consumer - good value for the $710 million it spends. Between 1993 and 2006, New Zealand increased its spending on drugs by 11%. Over the same period, Australia's increased 212%. Some of that is no doubt due to the wider range of drugs Australians have access to, but it is also true that Australia is paying more for some drugs than New Zealand is…

“It is naive to believe that placing restraints on Pharmac would not see an inevitable rise in the cost of drugs as the big pharmaceutical companies flexed their considerable muscle. What has happened in Australia, where drug supply was a similar point of contention in free trade negotiations, is proof enough of that, with that country's Government forced to legislate to stop companies blocking generic competitors. New Zealand's negotiators must remember that achieving a free trade agreement at any cost is not the point of the exercise. It is what that free trade agreement delivers to New Zealanders that is important. The carrot that would make it worthwhile to hobble Pharmac would need to be awfully big and awfully appetising. There are no signs so far that the Americans have one like that to offer”. And the Sunday Star-Times editorialised (3/7/11, “Free Trade Deals Don’t Come Cheap”): “…The drug companies hate Pharmac, which helps this small country keep its drug bills down. Some US Senators, influenced by the drug companies, have called for action against Pharmac, and a New Zealand PR campaign has been launched to back them. New Zealand must not succumb to this. We must not give away a huge health asset in our enthusiasm for a Free Trade Agreement with the world’s richest market…”.

“Get Lost, America”

Gareth Morgan is definitely not on our side of the political spectrum but he is when it comes to Pharmac. He wrote an opinion piece in the New Zealand Herald (24/5/11, “Pharmac Bashers Need A Dose Of Reality”): “Despite being the chief advocate for free trade, the United States has a reputation for negotiating trade deals that turn out to have more fish hooks in them than a Japanese long-liner. Could the Trans Pacific Partnership deal be shaping up to be another example? Behind the scenes, drug companies are spreading misinformation to undermine our State monopoly drug purchaser Pharmac.

“The official argument from the drug companies is that Pharmac is anti-competitive. Anyone who looks at the pharmaceutical industry and reckons that is a competitive market has to be a bit loopy. It is an oligopoly at best, with a handful of huge players running the show across the entire globe. Pharmac is a little bit like forming a union to have equal bargaining power with big employers - it negotiates and purchases medicine on our behalf. In New Zealand, the public's health is regarded as a social good, so we levy taxes and the State provides the public health services.

“We have rejected the private competition model for this sector. The US is slowly coming around to the fact that places like Canada and New Zealand deliver a better average health service. The US system is great if you are crook and have the bucks, it sucks if you don't. The drug company claims that Pharmac has failed are based on the fact that New Zealand's pharmaceutical budget is much lower and is growing slower than other countries. To suggest this is a bad thing completely misses the point of having Pharmac in the first place. If anything this is a sign of Pharmac's success.

“While spending in most health sectors around the world (ours included) has been out of control, since its inception in 1993 Pharmac has stuck to its budget. So now spending is lower than elsewhere, and makes up a lower proportion of our otherwise bloated health system. Another claim is that our access to medicines is much lower than overseas. Wakey wakey, folks. New Zealand is not as rich as the countries we like to compare ourselves to. …We have fewer resources, and so can afford fewer pharmaceuticals. Pharmac is actually the envy of other countries which have far deeper pockets than us.

“Pharmac's job is to get the best value for the budget it manages, and it does this job very well. It does this by buying the medicines that add the most years of healthy life for the money spent, and striking the best deal with the pharmaceutical giants. Clearly these bullies are not used to someone standing up to them in the playground. As a result, Pharmac spends around one fifth of the amount on statin drugs - which lower cholesterol levels and so reduce the risk of a heart attack - than the Aussies do. Given the colossal size of our heart disease problem this makes a huge difference to our drug bill.

“And this is what we should judge Pharmac on: not how much it spends, not whether it buys the latest unproven experimental drugs, but the value it gets for every dollar spent. If we decide as a nation that we want more pharmaceutical spending, which National clearly did in the last election, it should have given the extra money to Pharmac and let it work out how to spend it. That way it can ensure we get the greatest number of extra healthy lives from every dollar of spending. Rationing like this isn't a pleasant job - someone always misses out and will inevitably complain. Not everyone likes the decisions that Pharmac makes. But at least these decisions are made in a fairly transparent, evidence-based way. There is no better way of making these difficult decisions.

“The problem is not Pharmac, the problem is that the rest of the health system isn't more like Pharmac. If the rest of the health system was more like Pharmac then we could more easily see where the best place is to put any extra money. In the meantime, the current system is working pretty darn well. But of course the drug oligopoly wishes it could control our drug budget, and will no doubt be seeking the backing of US government negotiators. Tough. Leave Pharmac alone, America, just buy our butter and wool and we'll buy your Harley-Davidsons. Or get lost and we'll deal with China instead”.

Feisty Little Agency Prepared To Say No To Big Pharma

Pharmac is admired overseas, precisely because it is such a successful and economical model of public health that stands in stark in stark contrast to the bloated, extremely expensive and unsuccessful American free market health system which is dominated by the big drug transnationals and private health companies. Colleen Flood is a Canadian academic specialising in health law and policy. She wrote an opinion piece in the Toronto Star (2/6/11, “Wrestling With Big Pharma”) which is worth reproducing in full.

“Canadians spend a lot of money (public and private) on health care and much of that is spent on drugs — some $C23.4 billion in 2008. Provincial insurance plans are desperately trying to cope, looking to initiatives like the recently passed Ontario law that caps prices of generic drugs at 25% of the brand name equivalent. In New Zealand, a small country of just four million people, they do things a bit differently. They don’t rely on law to set prices, they use the market itself. An arm’s-length Government agency, Pharmac, is allocated a budget from Government and within that budget it makes the best decisions it can on which drugs to fund for New Zealand’s health insurance plan.

“Unlike Canada, all Kiwis are covered for medicines and pay just a few dollars out-of-pocket at the pharmacy for each medication. Pharmac is small, just 60 people, and its job is to wrestle with the Goliaths in the pharmaceutical industry to negotiate from them the best prices and overall deals they can. What enrages the drug industry is that Pharmac is prepared to say no to things like me-too drugs and new innovations, and simply walk away from the deal if the price of the drug is too high given the health benefit promised.

“Being willing to say no means that Pharmac can negotiate prices with drug companies. If the price comes down, the cost-effectiveness ratio improves and thereafter the drug could be included in the insurance plan. It pays to drive a hard bargain: the Organisation for Economic Co-operation and Development in 2008 found New Zealand spent approximately $316 (Canadian) per capita on drugs compared to $864 per capita in Canada and $1,104 per capita in the US. And there is little appreciable difference between the range of drugs funded in New Zealand and countries of comparable wealth.

“Pharmac, of course, is not without its critics and in New Zealand there are concerns that some new drugs should be funded that are not. The Government, however, can increase the size of Pharmac’s budget, as it has done over the last few years, if it considers that resources are better spent there than on, for example, reducing wait times for elective surgery or primary care access. But it is important to remember, as much as we conveniently ignore the fact, that in health care, money spent on one thing simply can’t be spent on another.

“This feisty behaviour on the part of a small country at the edge of the world is now the focus of attention of the US. New Zealand is in the process of free trade negotiations with Singapore, Brunei, Chile, Australia, Malaysia, Peru and Vietnam and the partners are looking to include the US. Ironically, as part of this ‘free trade’ negotiation New Zealand is being pressured to give up its market approach. Big Pharma’s latest move has been to rally 28 US Senators to write to President Barack Obama singling out Pharmac as flouting intellectual property rights. But they are blowing smoke as Pharmac does not by law or other means compromise patent rights. What it does is leverage taxpayers’ bargaining power to insist on lower prices. This is exactly what US private health insurers do - they use their market power to negotiate with drug companies using many of the same strategies that Pharmac uses - and they would never pay the sticker-price posted for drugs for their insured populations.

“Following the Christchurch earthquake, New Zealand’s relatively small economy is on shaky ground and it may be prepared to concede much in exchange for better access to US markets, particularly for its dairy products. No matter what the outcome of this David vs. Goliath battle, there is much to be learned from the Pharmac experience for Canada. Drug companies release and heavily promote drugs of relatively small benefit and bring enormous pressure, particularly upon provincial governments and other public payers, to cover these drugs. A little bit of market pressure back wouldn’t go astray”.

Making An Example Of Pharmac To Discourage Others

It is precisely because Pharmac is internationally admired that the drug transnationals and their US political mouthpieces want it destroyed. “American pharmaceutical interests are not particularly worried about the dent to their bottom line from the way Pharmac goes about its business, which must be miniscule. What really worries the industry is the precedent it sets if other countries adopt a drugs-buying model similar to Pharmac and the TPP does nothing to stop it. The threat is magnified if the TPP is expanded to include more countries and becomes the template for the hoped-for Free Trade Area of the Pacific, including all 21 APEC countries.

“So what is it at Pharmac that US pharmaceutical industry wants to stop in its tracks? What are the non-transparent and arbitrary practices that irk it so much? Medicines New Zealand, the drug industry's local representative, says it is disadvantaged by not being able to present its case directly to the independent committee of experts that advises Pharmac on which new drugs to subsidise. The allegation is that Pharmac puts its own slant on the drugs companies' applications, while the assessments of whether or not a new drug will be subsidised are behind closed doors and not open to scrutiny.

“That is not the way it is done in the United Kingdom or Australia, where the big drugs companies are able to present to advisory committees directly and wheel in their own experts. Pharmac defenders rubbish the criticisms. They say the Pharmacology and Therapeutics Advisory Committee in New Zealand takes advice from experts from around the world on new drugs, rather than that of the 'guns for hire' used by the drugs companies. And, it adds, minutes from all of the Committee's deliberations are published online for anyone who cares to look.

“What the industry really doesn't like, Pharmac's defenders say, are the hard bargains it drives. Unlike drugs-buying agencies in the UK and Australia, Pharmac's budget does not increase in line with population growth or inflation, forcing it to go looking for good deals to maintain existing purchases and fund new ones. That approach is expected to save the taxpayer $1 billion this year. A trade source has recently told Radio New Zealand that a ‘hikoi of dairy farmers, marching on the grounds of Parliament’ would not be enough to convince the Government to make major changes to Pharmac. That's because, the source says, the improvement in market access for New Zealand's farm exports the Americans could offer in return in the TPP are likely to be pitifully small.

“In return for a poor deal on dairy and sugar, Australia, in its trade deal with the US in 2004, made changes to its drug-buying scheme, the Pharmaceutical Benefits Scheme. While they were not major changes, they are thought to have watered down the scheme's effectiveness by excluding some drugs from the reference pricing that helps it drive better deals from the pharmaceutical industry. Will New Zealand consider similar changes to make some small gains for Fonterra's access to heavily protected American markets from the TPP? Because of the secrecy of the negotiations, New Zealanders won't know what the Government has agreed to until a deal between the TPP countries is signed and sealed, possibly as early as the APEC meeting in Hawaii in November. By then it would be a fait accompli, and unlikely to be renegotiated. In the meantime, Tim Groser, a former top ranking official at the World Trade Organisation in Geneva, fends off such questions with answers approximating to: ‘Trust me; I know what I'm doing’.

Patent Reform Is Bigger Target

“An even bigger target for the US pharmaceutical industry in the TPP is patent reform. The issue is likely to have flown under the radar of most New Zealanders because politicians here haven't been asked about it; the drug-buying policies of Pharmac hogging the limelight instead. But change in this area is potentially just as damaging for Pharmac. The Economist magazine has reported that patents for $US50 billion worth of products are due to expire in the next three years. The drugs then face competition from generics and sell at a fraction of their previous price, ending the cash bonanza for the companies that pour vast quantities of cash into their development.

“The pharmaceutical companies are furiously pushing in the TPP for ways to extend the life of patents. Because Pharmac is a big buyer of generic drugs, that would have either the effect of pushing up its drug buying costs, or, more likely given its cost-conscious approach, keep patent-protected drugs off their shopping list for longer. The Government hasn't made much comment so far on this particular campaign from Big Pharma. But a leaked paper from New Zealand's negotiating team before the TPP talks held in Auckland last year, made it clear it is being resisted. That paper argued countries like New Zealand with less invested in intellectual property, whether it be patents for drugs or new software, or copyright for movies and music, have less to gain from strict intellectual property laws, which tend to favour countries with industries that have invested heavily in these areas in the past, like the US…”(Radio New Zealand News, 8/6/11, “Pharmac Trade Row Heralds Wider Threat”,

US Embassy Covertly Meddles In NZ Politics

“…The push from the pharmaceuticals lobby against Pharmac has been building for a long time. A 2004 US Embassy cable said, ‘US pharmaceutical companies consider New Zealand to be hostile ground’, and that the companies were ‘unable to meet their sales and profit targets’. The cable from then Ambassador Charles Swindells, released by WikiLeaks, said the industry had given up trying to get the Government to change its Pharmac policies. Instead, ‘the drug industry is taking another tack: reaching out to patient groups with information designed to bolster their demands for cutting-edge drugs not already covered by Government subsidy’. The Embassy would be ‘working with the industry to identify speakers and engage in other public diplomacy efforts that could help educate New Zealanders on the benefits of gaining access to a wider range of effective pharmaceuticals’. Cue the Herceptin wars. Now the long simmering feud between Pharmac and the big pharmaceutical companies has reached the arena of trade talks. And in New Zealand at least, Pharmac is getting more widespread public support than it has ever enjoyed before” (Listener, 11/6/11, “Hard To Swallow”, Ruth Laugesen,

That’s the irony, isn’t it? This American campaign of overt and covert bullying has actually raised the public profile of, and made popular, an obscure and resented pennypinching State agency such as Pharmac. This is a blatant attempt to impose the American health system onto New Zealand, a system where “the market” imposes skyhigh drug prices upon the long suffering American people (who have responded by initiatives such as organised cross-border trips to buy subsidised drugs from the “socialist” Canadian public health system). It is a further irony that the same 1990-99 National government which created Pharmac, to impose “fiscal discipline” on the notoriously expensive sector of drugs bulk-buying, also tried to impose the American model onto the NZ public health system - by setting up hospitals as profit-driven business units (remember CHEs?) and trying to bring in user pays to hospitals. The latter was defeated by a massive grassroots public civil disobedience campaign. For example, in Christchurch, CAFCA was part of the Can’t Pay, Won’t Pay, Don’t Pay Twice Campaign, consisting of people (including me) who refused to pay their hospital outpatients’ bills, because we’d already paid them via our taxes. The highlight of that was a public burning of our bills in the Square. That whole ideological exercise in market fundamentalism was soundly defeated and proved that New Zealanders, right across the board, don’t want a bar of the hopelessly inefficient and grotesquely profiteering American health system imposed on our public health system. Leave Pharmac alone.

This article (and others in this issue, by Bill Rosenberg, Jane Kelsey and Viola Palmer) has highlighted specific sectors under threat from the proposed TPPA – such as laws aimed at alcohol and tobacco control and, most ominously, Pharmac. There are plenty of other reasons to oppose the TPPA, starting with the indefensible secrecy with which it is being negotiated. If it becomes a binding multilateral treaty, then New Zealand will be even more subject to domination by transnational corporations in every sector of the economy. For instance, see Maire Leadbeater’s article in this issue for details of the handful of community-owned and publicly-owned not for profit aged care facilities left in the country. That is just one “industry” which has been taken over by Big Business, predominantly transnationals, in the last few years. One rest home resident nominated the foreign chain which owns her home for the 2010 Roger Award (it was the runner up) and, most memorably, gave as her reason “factory farming of the elderly”.

The Myth Of Dairy Access To US

Of course NZ’s ideologues and their political mouthpieces, plus lobby groups such as Federated Farmers, say it is all worthwhile because this is “our” chance to get NZ dairy products into the lucrative US market. Dream on. The American dairy industry is heavily subsidised and politically well connected to both the Democrats and Republicans. It makes no secret of the fact that it will fight tooth and nail (or should that be, hoof and udder) to protect its home market and keep out foreign competitors from the likes of NZ. It sees Fonterra as a major threat and has consistently and misleadingly lobbied the US government to treat Fonterra as simply a new version of the former NZ Dairy Board i.e. a State dairy trading monopoly. Ask Australian sugar cane growers what benefit they have got out of their country’s existing Free Trade Agreement with the US – the Americans wouldn’t sign until Australia agreed to drop the subject of sugar exports to the States for between one and two decades.

As business commentator Bernard Hickey wrote (New Zealand Herald, 23/3/10, “Why Bother With A US FTA?”, ”These FTAs are never about free trade from an American point of view. They are about creating another opportunity to strong-arm smaller countries into granting trade concessions to large American businesses. ..You only have to ask the Australian sugar farmers about the Australian FTA with America to find out how good that was. American sugar interests blocked sugar from the deal. American drug companies tried to shut down Australia's version of Pharmac.

“Australia's exporters have hardly benefited from the deal. Australian Bureau of Statistics trade data shows that Australian exports to the United States rose 0.9% in the first five years of its FTA with America. That compares with export growth in the previous ten years of 105% and import growth from America of 8.5% in the first five years of the deal. Get the picture? The Australian FTA with America failed to significantly increase exports to America. In fact, export growth already happening was stunted to almost nothing. But on the other side of the ledger, American imports to Australia continued to grow. Why would it be any different here? Remind us again why we want a FTA with America?”.

So What Can We Do About It?

Many people have commented on the similarities between the proposed TPPA and the aborted MAI of the 1990s. The Multilateral Agreement on Investment was the pinnacle of hubris by the capitalist triumphalists of that decade – it was an attempt to achieve, with one king hit, a binding, globally enforceable, international treaty to subject the world to transnational corporate rule. For the conspiracy theorists that get excited by “one world government” and “the New World Order” this really was an attempt to convert that into reality. The people of the world have grown used to increasingly gigantic corporate takeovers; this was the daddy of them all, an attempt by Big Business to take over the world. And it failed miserably. It was defeated by an inspirational campaign, both in New Zealand and right around the world. If you were involved with the Alliance or New Zealand First or the Maori movement or any one of a number of other groups in the 90s, you will remember the issue and the campaign very clearly. That campaign was a model of both national and international campaigning. It was a shining light in a decade where transnational corporate capitalism saw itself as being the status quo for the indefinite future, backed up by the unchallengeable military might of the world’s sole superpower, the US. It was the decade where history was declared to have ended. This was a battle fought and won well before the massive anti-capitalist and anti-World Trade Organisation protests of the late 90s and turn of the century; before the massive international anti-war and anti-imperialist movement of a decade ago; and before the global financial crisis rendered capitalism a rather more shaky proposition than only a few years before.

I mention that because people get the message rammed down their throats by politicians, academics, “experts” and the media that “you can’t fight City Hall”. Oh yes you can, and the complete defeat of the MAI proves exactly that point. Actually try telling that to the people of Egypt or Tunisia, if you want more current examples. This is election year and we need to take full advantage of that to put the heat on MPs and candidates of all parties and to make sure that stopping the TPPA goes to the top of the political agenda. Elsewhere in this issue you will find details about the New Zealand Not For Sale Campaign petition and the postcards available to send to either the Prime Minister or an MP of your choice, to give a couple of examples of actions that anyone can take.

People Power

But, important as it is to lobby politicians and generally engage with that whole Parliamentary process, that is a top down and essentially passive approach, asking our elected representatives to actually represent us. You don’t need me to spell out the whole history of betrayal, sellouts, compromises, and flat out lying that has involved in the past. So it’s not enough to trust politicians to do it for us, or even rely on a change of government to make it all good. We have to do it for ourselves; we need some People Power in New Zealand. We’ve seen it in spectacular action in the Arab world in 2011 but they are very different societies. Within our country we have seen the most magnificent grassroots mobilisation and community action in response to the seemingly never ending earthquakes crisis in Christchurch. There we witnessed ordinary New Zealanders – students, farmers, women, workers, the unemployed, brown, white – take charge of things in their own streets, neighbourhoods, suburbs and city, rather than helplessly waiting for somebody else to do something about it. Just to single out one group – I speak as a student activist from decades ago, and one who was cynical about the calibre of “today’s young people”. I stand in awe of the Student Volunteer Army which mobilised somewhere between 10,000 and 20,000 students to get stuck into the most basic of tasks, namely digging the city out from under the ocean of silt, and muck and shit that engulfed it. Now, what I’m talking about is an emergency response to a life and death catastrophe, and not what is commonly perceived to be a “political” issue. But there is nothing more political than spontaneously organising people at the grassroots level to take control of their own communities. New Zealanders care very deeply about their communities and our country, despite the best efforts of the ideologues to turn us into a dog eat dog society. That people power is a truly formidable force.

It takes a lot of work to compile and write the material presented on these pages - if you value the information, please send a donation to the address below to help us continue the work.

Foreign Control Watchdog, P O Box 2258, Christchurch, New Zealand/Aotearoa. August 2008.


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