International Trade Committee on Oct. 6th, 2016

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Peterson.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

So better is always possible when it comes to drafting these things.

[The Chair, Liberal, Mark Eyking]

Your time is up.

We're going to move over to Madam Lapointe.

Go ahead.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you, Mr. Chair.

Hello and welcome to all the witnesses.

Thank you for being with us. Your views will help us.

I'd like to come back to Ms. Ramsey's question. Drug prices and intellectual property have been discussed at length. A bit earlier, you were unable to answer Ms. Ramsey's question. There was a lot of doubt.

Do you think extending the duration of intellectual property could increase the likelihood of the TPP being signed?

[Kirsten Hillman]

Will it cause drug prices to increase? Is that your question?

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Yes, that's right.

[Kirsten Hillman]

There are two aspects to the answer.

Let me start by saying that we've heard the same thing as you. There is concern on the subject. The first thing to clarify is that the changes to the TPP to grant an additional two years of protection for certain drugs, are the same changes contained in the agreement with the Europeans. So the TPP, as such, will not change our Canadian system.

That said, with respect to drug prices, it's difficult, at the present time, to estimate the result of these changes, because several factors must be taken into consideration. The variables can't really be known. For example, we can't identify the drug, determine the price of the generic equivalent, or know the other provincial and federal policies for establishing drug prices.

There are initiatives to adopt federal and provincial policies on the subject. All of that makes a difference.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you.

Indeed, I know there will be projects aimed at controlling drug prices at both the provincial and federal levels.

Let's talk about the implementation of the intellectual property rights provisions. Since this is an area of shared jurisdiction, do you think there could be a problem, if only with regard to drug prices? Health is an area of shared jurisdiction.

[Kirsten Hillman]

Is it a problem vis-à-vis the TPP?

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Yes, among other things. Jurisdiction is shared between the federal and provincial governments. We are talking about drug costs and intellectual property. Do you think there's a problem in this regard?

[Kirsten Hillman]

No, because our responsibilities toward our international partners are what they are. It's up to us how we take them into account here in Canada. If there are challenges to achieving a federal-provincial agreement on the subject, that situation will not have been created by the TPP, and the TPP will not make it easier or more difficult.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you.

With respect to investment protection, how similar is the mechanism proposed in the TPP for investor-state dispute settlement, or ISDS, to the Canada-EU CETA?

On this issue, between the TPP and the CETA, would one agreement be better for, or more favourable to, Canada?

[Kirsten Hillman]

As I said earlier, it's clear that the CETA is the agreement that has enabled us to go the furthest in terms of giving the governments the power to regulate, and that gives us the most assurance that the process is independent, clear and fair.

I think the CETA is the high-water mark for us on ISDS. It has a number of features that the TPP doesn't have.

There are some similarities. Both the CETA and the TPP have underlined the right to regulate in the public interest. Both the CETA and the TPP have instituted codes of conduct, but the CETA has additional procedural elements in ISDS that go above and beyond what we have in the TPP, which are designed to ensure impartiality of the arbitrators. We don't have that in the TPP. There's also an appeal mechanism in the CETA that's already under way, whereas in the TPP there is a commitment to talk about it in the future.

[The Chair, Liberal, Mark Eyking]

Thank you, Madam Lapointe.

We'll move over to Mr. Van Kesteren.

You have the floor. Go ahead, sir.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Mr. Chair.

Thank you for being here. I think all of us agree that whenever you're here, it's a great eye-opener. You certainly do give us good direction.

I have just a quick question, perhaps for Ms. Hillman.

With the allegations that the TPP will increase the cost of drugs because of the patent rights, wouldn't there also be an argument that there would be more people in the playing field and therefore more competition, which would drive down the cost of drugs?

[Kirsten Hillman]

Possibly. As I say, my understanding of projecting the drug price impacts for the TPP is that at this time there are many variables at play that will determine what will happen. Some of them have to do with domestic policy and federal-provincial co-operation in this area. Some of them have to do with the sector: what drugs are being created; how prevalent they are in Canada; if they're being prescribed a lot, or if they're not being prescribed a lot; if other generics that can be substitutes are available on the market or aren't available on the market. If they aren't, they may be more expensive, and if they are, they may be less expensive.

From the conversations I have had on this with Loris and with colleagues from Health Canada, at this point in time, given all of those factors at play, it's very, very difficult to assess. I think it's important to note that cost impacts for this agreement, if it comes into force, won't be expected for many years after it comes into force. It's an extension on an existing patent, once the TPP enters into force for Canada and everybody else.

We're talking quite a few years down the road, which makes it even more difficult to predict what the environment will be at that time.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Okay.

I'm not an academic. I have received my training, for the most part, right in committee. We constantly have the good pleasure of being schooled by people such as you and by the reading we do. But I am a free-market thinker. The older I get, the more convinced I am about the free market.

Maybe I should direct this to you, Mr. Downs. Isn't this a question between the free-market system versus maybe a new school of thought that we need to regulate these things? Don't we just step out in faith, when we make these agreements, trusting, looking back on the past, looking at what's been the result of a free-market system, that these things will play out in a positive way? Am I wrong in thinking that?

[André Downs]

Your question is more a philosophical one than an economic one, but indeed essentially the old principle of trade policy is based on the capacity of markets to adapt to changes. Of course in some cases, it could warrant government intervention if there are externalities that the government would like to take into account. But overall, the trade policy changes are based on the assumption that markets will readjust to the new environment.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

How much time do I have, Chair?

He's not paying attention so I'm going to quickly grab it.

There's one thing that concerns me, and I haven't gotten an answer for this. What we always hear—and I think you're basically telling me what I think I know and I've experienced—when we talk to the small businesses and when we talk to the medium-sized and even the large corporations in Canada is that there's this mysterious group of multinationals that are going to take over the world. That's a tough one to really argue against. It's not that they're right, because it is just that, this mysterious...but what about that question? Is that something we as parliamentarians need to be concerned about? I know my colleague says yes.

I know I'm not giving you much time.

[André Downs]

I'd say it's not for me to answer. I think it's not related to trade policy. You're essentially talking about the rise of corporate power in the world economy. Market power can be exercised under any trade policy environment, so it's a much wider concern than what we are talking about today.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

So it really doesn't make any difference. It could happen in either system. Whether we have a closed market system or an open market system, that's still always a danger and something that we have to—

[André Downs]

There's essentially always a danger associated with market power.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

This is not enabling those groups.

[André Downs]

No, on the contrary, trade policy provides a level playing field for all players whether they're small or large. In that sense, trade policy is conducive to a better functioning of markets and a reduction in market power.

Usually trade policy is very pro-competition.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Good. Thanks.