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Free Trade and Rent Seeking Euro Pharma

I have always detested the normative descriptor “free” in front of international trade deals.  On one level it is oxymoronic ™ to call something “free” when it is in the furtherance of buying and selling more things not about increasing the supply of free things.

On a more serious plane, trade agreements are not about removing regulations but more often than not about harmonizing them.  For example, in the negotiations between Canada and the EU to conclude a bilateral trade deal the Europeans are leaning heavily on Canada to change its patent regime on pharmaceuticals so that European drug makers can bilk an extra 3 billion a year in prescription drug costs.  An article over at the globe summarizes the proposal as follows:

  • Extending the term of patent protection by up to five years if drugs are stuck in the regulatory approval process;
  • Lengthening the period of data exclusivity, which prevents generic companies from using data from clinical trials to create similar drugs, from eight years to 10 years or more; and
  • Strengthening notice of compliance regulations, which ensure that generic companies are respecting patents, by adding an appeals process.

Shorter, increase the length of patent protection for Big Pharma thus increasing the time for them to harvest monopoly profits.  This is classic rent seeking behaviour.  Interestingly most free trade fan boys (economists) push trade deals because they promise to undermine rent seeking by domestic producers.

It is time to normatively rename free trade agreements (FTA) to Rent Seeking Trade Agreements (RSTA).

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