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Korean Civil Societies Statement on 2nd Round of Korea-US FTA Talks

- What the Korean government should take away from the crippled talks of 2nd
round is not to withdraw certain negotiating teams but to stop the
negotiation itself -

The second round of FTA talks between Korea and United States ended on July
14, 2006 with cancellation of the final day¡¯s entire schedule.  In the
second round, drug pricing policy of the Korean government became the central
issue.  The Korean government announced to reform its drug pricing policy of
the national healthcare system by adopting measures to positively list
reimbursable prescription drugs rather than the current ¡°negative list¡±,
which only lists the exclusions. This positive list system was planned on May
2006 and is expected to take effect on September 2006 when the third round of
the KORUS FTA talks will be held in Seattle. 

The US negotiators refused to attend the Pharmaceutical and Medical Device
Working Group meeting from July 11 and expressed its strong opposition to the
positive list system. Wendy Cutler, Assistant USTR and chief American
negotiator, blamed that the system ¡°can be used to discriminate against
innovative drugs,¡± which are usually supplied by U.S. and thereby ¡°limit
the access of Korean patients and doctors to most innovative drugs in the
world.¡± Subsequently, the U.S. negotiating teams did not attend the sessions
for trade protection and service sectors and Korean side followed suit on
Friday by canceling the meetings for commodity trade and environment. 

We would first like to discuss the actions of both Korean and U.S.
governments towards the new drug pricing policy planned by Korean government.
The positive list system has been in operation in many OECD countries. If it
discriminates against innovative drugs and limits patients¡¯ access to these
innovative drugs, the positive list system would already be abolished and
failed to exist. However, the potential problems that the U.S. chief
negotiator argued did not occur in any countries. The U.S. position on the
positive list system is motivated by its aim to keep high prices on drugs
supplied by U.S. pharmaceutical companies and ignores constitutional
obligation of Korean government to implement comprehensive and systematic
policies to maintain public health. In this regard, the U.S. government
deserves reproach.

However, the Korean government should be the focus of greater criticism since
it provided an excuse. Before the official launch of KORUS FTA this February,
the Korean government made a promise the U.S. to address, as a precondition
of the KORUS FTA, four areas of concern to the U.S.: beef; automobiles;
pharmaceuticals; and screen quotas. With respect to the pharmaceuticals,
Korean government agreed at the trade action agenda meeting last October,
that no new drug reimbursement pricing policies would be introduced in the
near future. Further, Korean government promised to set up an independent
mechanism under which pharmaceutical companies could appeal the drug
reimbursement decisions.

We view the actions of both governments¡¯ negotiators to be intentional
performances to disguise the substantive issues surrounding the problem. To
the U.S. negotiators the Korean government¡¯s pharmaceutical drug policy
becomes the weapon for obtaining another greater concessions from the Korean
side during the next round of talks. The U.S. pharmaceutical companies, even
under the positive list system, has the power to file a suit against the
Korean government through investor-government dispute and/or non-violation
provisions after the KORUS FTA becomes effective. Reportedly, both sides have
agreed to the investor-government dispute provision and as such the U.S.
pharmaceutical companies may claim damages from the Korean government and
request for abolishment of the positive list system. Further, when Korean
side concedes to accept the U.S. request to introduce patent term extension
and independent appeal system in drug pricing process, the positive list
system loses its effect. Moreover, the U.S. pharmaceutical company, usually a
patent holder for the drugs, is a single producer and the Korean
government¡¯s power to negotiate the drug price would be limited. In
addition, the independent appeal system would further weaken the negotiating
power of the Korean government. Therefore, the strong opposition displayed by
the U.S. to the positive list system is merely negotiating strategy and
tactic to gain more leverage in order to intervene on such matters as Korean
drug policy and obtain term extension on drug patent, and linkage between
patent and drug approval process from Korean side.

Likewise, the action of the Korean government is nothing more than fabricated
performance. The Korean government has already agreed to protect intellectual
property right holders as the investors, which would certainly weaken the
effective function of the positive list system. During the second round, tens
of thousands citizens intensely protested against the KORUS FTA, and public
opinion in Korea took a turn from pro-FTA. The Korean government¡¯s action to
cancel the final day¡¯s meeting was to appease the public and nothing more.

The dramatic performance staged by both sides clearly reveals the presence of
significant problem in connection with free trade talks, as the nation¡¯s
public policy such as national healthcare system becomes a political pawn
subject to trade negotiation. This will happen regularly when the proposed
KORUS FTA is signed. Free trade agreement, in particular the KORUS FTA, would
allow every public policy to be controlled by business interests. The shows
played by both governments should be stopped. The business interests cannot
take precedence over public interests.

July 14, 2006

Association of Korean Doctors for Health Rights
Association of Physicians for Humanism
Health Right Network
IPLeft, Intellectual Property Left
KANOS, Korea HIV/AIDS Network of Solidarity
Korea Dentists Association for Health Society 
Korea Leukemia Patients Group
Korea Social Insurance Trade Union
Korean Federation of Medical Groups for Health Right
Korean Pharmacists For Democratic Society
Korean Progressive Network ¡®Jinbonet¡¯
Nanuri+ HIV/AIDS Human Rights Advocacy Group of Korea
Public Pharmaceutical Center
Solidarity for Worker¡¯s Health

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