International Trade Committee on Nov. 29th, 2016

[Jim Keon]

We're asked that question regularly. The answer depends critically on how the bill is implemented, and that's one of the changes we're proposing. The changes should only apply on a prospective, go-forward basis, which means that extra patent protections should only be given to new drugs approved after the coming into force of the agreement. If that occurs, the extra costs will only occur eight or ten years down the road. These extra costs arise from the fact that generics, which are sold, on average, at maybe 20% of the original brand, are going to be delayed two more years from coming to market. It means that for two more years, for all new drugs, you're going to pay those high brand-name prices. That is where the extra costs come from. As I said, if this is done properly, that will only occur down the road, eight or 10 years in the future.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Basically, you are telling me that if the necessary changes are made, then in the next eight to 10 years the consumer on the ground will not see a negative effect.

[Jim Keon]

That is correct, and it is one of the proposed amendments we have suggested. Make it crystal clear that the implementation is only to be on a go-forward basis.

If you take a $100 million drug—and there are many, many of those in the Canadian market—and you delay a generic competitor for two years, who would sell it at 20% of the price, you're adding $80 million a year just for one drug. These costs are very significant and should not be ignored. As I said, if done properly, the CETA negotiations and the bill should ensure that they occur only in the future.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

My question is to Claire.

This committee travelled in western Canada. The general consensus from the farmers was that they are in favour and support free trade. In particular, you mentioned 500 million people in Europe who are going to take advantage. Do you think the farmers will be able to meet the demands moving forward? Right now, the way I see it, Asia is a big market for farmers, particularly those in western Canada, when it comes to grains. Do you think they will be able to meet the demands?

[Claire Citeau]

Absolutely. In terms of capacity, we're not going to run out of food in this country. We're the fifth-largest exporter of agricultural and agrifood products in the world, and our farmers and producers/exporters are able to meet the capacity. In some sectors they are operating at under capacity. CETA will provide the opportunity to diversify markets, reduce reliance on the U.S. market and other markets, and get better value for some other products in Europe.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

When you say they will get better value, do you think the costs or prices will go up for the local consumers?

[Claire Citeau]

What I mean by that is that for some products, the EU consumer is able to pay more for the quality of some of our products than in some other markets, for example.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

I'm talking about consumers in Canada. I'm not talking about consumers in Europe right now.

[Claire Citeau]

Can you repeat your question, then?

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Okay. Now you say that they will get a better price when they export to Europe, and I'm sure they're getting a better price when product goes to the Asian markets, including India. My concern is with local western Canadians. Once those prices go up, do you think that increase will impact the cost to local consumers in western Canada?

[Claire Citeau]

I meant prices going up for products sold overseas. I didn't comment on prices going up locally.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

No? Okay.

[The Chair, Liberal, Mark Eyking]

We're going to move over to the NDP now.

Ms. Ramsey, you have the floor for five minutes.

[Tracey Ramsey, NDP, Essex, ON]

Thank you so much.

Thank you for your presentations.

I want to cut to the chase. I'm pleased to have someone from generics speaking here since 25% of this legislation will involve changes to the Patent Act, something that will impact every Canadian at the end of the day. Whether it's eight or ten years down the road, the cost of drugs will increase.

I'm stunned to hear that there are many things here that are not required by CETA. We would welcome those amendments as well, and we would work with anyone on the committee to ensure that they go forward for all Canadians.

I have a question for you. We're signing on to two additional years. When we talk about patent extensions, how much difference does one year make?

[Jim Keon]

There are two aspects to that. From a cost perspective, as I've said, generics on average now are selling at something like 20% to 25% of the price of an equivalent brand-name product. If you delay for two years, you're paying an extra 75% to 80% on that product for an extra two years. That affects provincial drug program budgets; it affects employee plans; and it affects people who pay out of pocket, and those costs are very significant.

Second, it is very important that we have a strong generic industrial base. We manufacture products here. We sell, as I've said, to over 115 countries. It is critically important that we're able to get on the market when patents expire in Canada and around the world. One aspect of Bill C-30 we do support strongly is this ability to export during the extension period. That is very important. We are very supportive of that, and in our view, it's nicely drafted and should go forward.

[Tracey Ramsey, NDP, Essex, ON]

Okay, so we'll welcome those changes that you'll supply to the committee for those amendments.

Gus, I want to go to you quickly before you have to go.

You've also raised some amendments to the ISDS and to the chapters there that we are looking at. I think one of the things you mentioned is important and is a big piece of this. Right now, the way it stands is that it's being provisionally applied, and we're mirroring that here, although it's not entrenched in the legislation we have going forward. At this point we're basically signing on to the court system without any clear definition of what that is.

If a member state requests the removal of the investor-state provisions as a precondition for ratification, but here in Canada we pass Bill C-30 with the ISDS ICS included, what position will that leave us in here in Canada?

[Dr. Gus Van Harten]

I don't think there's a clear answer to that question, but I think the best answer is that it depends on what the federal government is saying to the Europeans outside of the legislative process, because the federal government has the right under the agreement to not apply parts of the agreement that the Europeans are not applying, which is the obvious thing to do. I do trust that the federal government isn't missing that point.

I think it would be very useful for the public and for parliamentarians to hear from the federal government clearly that we are not going to be unilaterally applying any parts of the agreement, and above all, one of the most controversial elements, which is the ISDS or the ICS provisions because of their profound implications for sovereignty. That's why I suggest that the most reliable thing would be if the legislation itself, in the section stating that the agreement is approved, were to clarify that it's approved for purposes of provisional application reciprocal to the provisional application agreed to by the Europeans. Then the federal government will be bound by the will of Parliament not to apply any elements of the agreement unilaterally.

[Tracey Ramsey, NDP, Essex, ON]

As it stands right now, some of the provisions of the ICS are unclear. We have been told by the negotiating team that these provisions will be adopted after. If that is not entrenched in the language, what do you see us signing onto with the ICS that could end up impacting our jobs as parliamentarians and certainly as regulators and legislators?

[The Chair, Liberal, Mark Eyking]

Please give a short answer.

[Dr. Gus Van Harten]

If I were a betting man, I would say the ISDS and ICS provisions in CETA are probably dead in Europe for political reasons, not to mention the other hurdles at the European Court of Justice.

At the very least, I think it's highly likely that the current provisions in CETA are going to change, because the Europeans are pushing for a multilateral investment court. They can't approve ICS; or they could, but it would be questionable for them to approve ICS before they know what the multilateral option is going to look like, because they would be undermining themselves.

If anyone tells you the ICS will just be tweaked, I wouldn't put a lot of stock in that myself.

You aren't signing on to a blank cheque, but it's a cheque with very blurry writing on it.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We're going to move over to the Liberals now.

Mr. Peterson, you have the floor.

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

Thank you, Mr. Chair.

Thank you, witnesses, for being here today.

Professor Van Harten, I want to follow up a little on the ICS and that line of thinking. I believe you mentioned off the top that the foreign investment provision, in your opinion, isn't necessary in trade agreements. Did I get that right? I think that's what you said, but I don't want to put words in your mouth.

[Dr. Gus Van Harten]

I think it's not necessary and it is regressive when the trade agreement is between developed countries with mature, reliable court systems.

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

Okay, and in this case with Europe and Canada, you're suggesting that obviously we both have sophisticated court systems. In CETA that provision is not necessary, in your opinion.

[Dr. Gus Van Harten]

Where there would be doubts about that, I think they are already covered by Canada's existing FIPAs with some central and eastern European states. That's a different debate. However, keeping that in mind, yes, I would agree with what you said.