FacebookTwitterRedditEmail

Stronger Drug Patents in New NAFTA To Cost U.S. Manufacturing Workers Jobs

The new trade agreement with Canada that the Trump administration announced yesterday has rules on drugs patents and related protections which are likely to cost the jobs of U.S. manufacturing workers. The deal includes a number of provisions that are explicitly designed to raise drug prices in Canada.

These provisions include a requirement of a period of ten years of marketing exclusivity for biotech drugs before a biosimilar is allowed to enter the market. The deal also requires Canada to grant a period of exclusivity for existing drugs when new uses are developed. In addition, it requires that the period of patent monopoly be extended beyond 20 years when there have been “unreasonable” delays in the granting of the patent.

The intended purpose of these provisions is clearly to make Canada pay more money to U.S. drug companies. Insofar as it acheives this result, it will mean that the United States has a larger surplus on intellectual products. That would imply a larger trade deficit in manufactured goods, and therefore less employment in U.S. manufacturing.

A basic accounting identity in economics is that the overall U.S. trade deficit is equal to the gap between domestic savings and domestic investment. This identity means that if this domestic balance is not changed, the overall trade deficit is not changed.

When the U.S. economy is below its potential level of output, a lower trade deficit can lead to more employment and income, which typically also leads to more domestic savings. However, economists typically analyze trade as though the economy is always at or near its potential level of output. If this is the case, the trade deficit is fixed by the balance of domestic investment and savings. In that case, if the trade surplus rises in one area, like intellectual products, then the trade deficit must rise to offset this increase in other areas, like manufactured goods.

The mechanism through which this would occur is, other things equal, more licensing payments to Pfizer, Merck, and other U.S. companies for their drugs will mean a rise in the value of the U.S. dollar against the Canadian dollar. If the U.S. dollar increases in price relative to Canada’s dollar, it makes goods and services produced in the United States relatively less competitive, leading to a larger trade deficit in areas other than prescription drugs.

This article originally appeared on Dean Baker’s Beat the Press blog.

More articles by:

Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC. 

bernie-the-sandernistas-cover-344x550

June 20, 2019
Robert Hunziker
The Dangerous Methane Mystery
David Schultz
The Intellectual Origins of the Trump Presidency and the Construction of Contemporary American Politics
Sabri Öncü
Thus Spoke the Bond Market
Gary Leupp
Japanese and German Doubts on U.S. Drumbeat Towards Iran War
Binoy Kampmark
The Fragility of Democracy: Hong Kong, China and the Extradition Bill
Doug Johnson
On the Morning Consult Poll, Margins of Error, and the Undecideds in the Democratic Primary
Laura Flanders
In Barcelona, Being a Fearless City Mayor Means Letting the People Decide
Martha Rosenberg
Humor: Stop These Language Abuses
Jim Goodman
Current Farm Crisis Offers Opportunity For Change
Cesar Chelala
The Pope is Wrong on Argentina
Kim C. Domenico
Lessons from D.H. : A Soul-based Anarchist Vision for Peace-making
Jesse Jackson
Mobilizing the Poor People’s Campaign
Wim Laven
We Need Evidence-Based Decision Making
Cesar Chelala
Health Consequences of Overwork
June 19, 2019
Matthew Stevenson
Requiem for a Lightweight: the Mayor Pete Factor
Kenneth Surin
In China Again
Stephen Cooper
Abolishing the Death Penalty Requires Morality
George Ochenski
The DNC Can’t Be Allowed to Ignore the Climate Crisis
John W. Whitehead
The Omnipresent Surveillance State
William Camacaro - Frederick B. Mills
Guaidó’s Star Fades as His Envoys to Colombia Allegedly Commit Fraud With Humanitarian Funds for Venezuela
Dave Lindorff
What About Venezuela’s Hacked Power Grid?
Howard Lisnoff
Try Not to Look Away
Binoy Kampmark
Matters of Water: Dubious Approvals and the Adani Carmichael Mine
Karl Grossman
The Battle to Stop the Shoreham Nuclear Plant, Revisited
Kani Xulam
Farting in a Turkish Mosque
Dean Baker
New Manufacturing Jobs are Not Union Jobs
Elizabeth Keyes
“I Can’t Believe Alcohol Is Stronger Than Love”
June 18, 2019
John McMurtry
Koch-Oil Big Lies and Ecocide Writ Large in Canada
Robert Fisk
Trump’s Evidence About Iran is “Dodgy” at Best
Yoav Litvin
Catch 2020 – Trump’s Authoritarian Endgame
Thomas Knapp
Opposition Research: It’s Not Trump’s Fault That Politics is a “Dirty” Game
Medea Benjamin - Nicolas J. S. Davies
U.S. Sanctions: Economic Sabotage that is Deadly, Illegal and Ineffective
Gary Leupp
Marx and Walking Zen
Thomas Hon Wing Polin
Color Revolution In Hong Kong: USA Vs. China
Howard Lisnoff
The False Prophets Cometh
Michael T. Klare
Bolton Wants to Fight Iran, But the Pentagon Has Its Sights on China
Steve Early
The Global Movement Against Gentrification
Dean Baker
The Wall Street Journal Doesn’t Like Rent Control
Tom Engelhardt
If Trump’s the Symptom, Then What’s the Disease?
June 17, 2019
Patrick Cockburn
The Dark Side of Brexit: Britain’s Ethnic Minorities Are Facing More and More Violence
Linn Washington Jr.
Remember the Vincennes? The US’s Long History of Provoking Iran
Geoff Dutton
Where the Wild Things Were: Abbey’s Road Revisited
Nick Licata
Did a Coverup of Who Caused Flint Michigan’s Contaminated Water Continue During Its Investigation? 
Binoy Kampmark
Julian Assange and the Scales of Justice: Exceptions, Extraditions and Politics
John Feffer
Democracy Faces a Global Crisis
FacebookTwitterRedditEmail