The US is acting on President Donald Trump's call to renegotiate existing trade agreements.
The United States Trade Representative confirmed an instruction from President Trump to notify South Korea it plans to renegotiate the agreement signed in 2012.
In a statement, the USTR said it is calling a special Joint Committee meeting under the terms of the US-Korea Free Trade Agreement (KORUS) to "start the process of negotiating to remove barriers to U.S. trade and consider needed amendments to the agreement. The USTR acted in accord with the President’s intention of reducing the trade deficit and giving Americans a better chance to succeed in global markets."
President Trump recently instructed the USTR to conduct a study of pharmaceutical price differences between the US and other countries with possible action through trade agreements.
The KORUS contains a pharmaceutical chapter with many of the transparency, accountability and process elements included in the US-Australia Free Trade Agreement (FTA).
The FTA contains a Joint Committee structure, like the KORUS, which allows for dispute resolution or amendments to the agreement.
However, unlike South Korea, which maintains a significant trade surplus with the US, Australia currently has a substantial trade deficit with the US.
“President Trump continues to keep his promises to lower our trade deficit and negotiate better trade deals for American workers, farmers, ranchers, and businesses,” said USTR Lighthizer. “Since KORUS went into effect, our trade deficit in goods with Korea has doubled from $13.2 billion to $27.6 billion, while U.S. goods exports have actually gone down. This is quite different from what the previous Administration sold to the American people when it urged approval of this Agreement. We can and must do better.”
It is unclear whether the US is seeking changes from South Korea in relation to pharmaceutical pricing and intellectual property. Any move against Australia on the FTA could target this key issue for US industry. Australian pricing has long been the source of significant frustration in the US, with the recent emergence of intellectual property as another area of concern.
PhRMA, the representative association of the US-based pharmaceutical industry, has questioned Australia's implementation of its obligations under the FTA, specifically in relation to the introduction of a patent notification system.
The US FDA maintains a list of products and current uses under patient in its 'Orange Book'. It will not grant marketing approval for a generic copy of a product that would potentially infringe a patent listed in the 'Orange Book'.
In contrast, while a system was introduced in Australia following ratification of the FTA, it does not involve any substantive role for the TGA and gives patent holders virtually no capacity to challenge a product until after it is registered.
The system requires companies seeking marketing authorisation to simply declare to the TGA their application does not breach any patent. The TGA will not register a product if a company declares it will infringe a patent. Yet the regulator has no obligation to test an applicant's declaration.