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Public Statements

United States-Australia Free Trade Implementation Act

Location: Washington, DC


Mr. KENNEDY. Mr. President, I support the United States-Australia Free Trade Agreement. It has significant benefits to American manufacturers in all our States who have suffered too much in our troubled economy. In the past 4 years this vital sector has shed 2.5 million good jobs that may well take years to replace.

The agreement will immediately remove all Australian tariffs on virtually all goods manufactured in the United States. In doing so, it will provide a modest competitive advantage in the Australian market for U.S. manufacturers over competing firms in Asia.

In the past 4 years, the administration has done very little to combat the unfair trade practices of other nations to open their markets to more U.S. goods, and this agreement will help at least in part to redress the balance.

Massachusetts companies exported $254 million in goods to Australia last year, much of which were products in modern high-tech fields. If this agreement had been in place then, 98 percent of those products would have been duty free.

In addition, the fact that Australia has strong labor and environmental laws mean that this agreement will not result in a "race to the bottom" that drives down wages and degrades the environment. Many of us are concerned that the administration, in negotiating the agreement, was so reluctant, because of its ideology, to try to resolve some of our differences with Australia on specific labor issues, but those differences are not sufficient to cause rejection of the agreement. Good-paying jobs in the United States will not be replaced by low-wage jobs abroad in harsh and exploitive conditions.

In other trade agreements, that problem can be extremely serious, and we must continue to be vigilant that trade agreements respect the need for strong protection for labor conditions and for the environment as well.

A more serious problem in this agreement however, is its treatment of prescription drugs. These provisions are a blatant attempt by the administration to bypass Congress and set an irresponsible precedent for blocking the reimportation of prescription drugs. They build on similar provisions in the Singapore trade agreement. They are a statement of the priorities of the Bush administration that put profits of drug companies first and affordable drugs for patients last.

The current rules on importation or reimportation of FDA-approved drugs manufactured in FDA-approved plants are indefensible. They prohibit anyone except a drug manufacturer from importing drugs into the United States. They create a shameful double standard under which Canadians, Europeans and other foreign patients can buy American drugs at affordable prices, while American drug companies charge exorbitant prices to American patients.

The central issue is fairness for millions of Americans struggling to afford the soaring cost of prescription drugs. Americans understand fairness. They know it's wrong that for the same prescription drugs, U.S. patients pay 60 percent more than the British or the Swiss, two-thirds more than Canadians, 75 percent more than Germans, and twice as much as Italians.

Prescription drugs often mean the difference between health and sickness-or even life and death-for millions of Americans. Drug companies are consistently the most profitable industry in the Nation, yet they overcharge countless families. It's wrong for patients to go without the drugs they need because the Bush administration won't stand up for patients against the price-gouging of the pharmaceutical industry.

Senator SNOWE, Senator DORGAN, Senator MCCAIN, Senator DASCHLE, and I and other colleagues have proposed legislation to give American patients a fair deal at long last. Our proposal will legalize imports of safe U.S.-approved drugs manufactured in U.S.-approved plants. U.S. consumers will be able to buy FDA-approved drugs at the same fair prices as they are sold abroad.

The drug industry and the Bush administration argue that imported drugs jeopardize the health of American consumers because of the possibility of counterfeiting or adulteration. Under our proposal, that argument can't pass the laugh test.

Our proposal sets up iron-clad safety procedures to guarantee that every drug imported legally into the United States is the same FDA-approved drug originally manufactured in an FDA-approved plant-whether the drug is manufactured abroad and shipped to the United States, or whether it is manufactured in the United States, shipped abroad and then imported back into the United States.

Compare our rigorous requirements with what happens today. Fraudulent dealers throughout the world can establish Web sites or advertise low-cost drugs in other ways and claim to be Canadian pharmacies. Individuals have no way of knowing whether they are purchasing safe or unsafe drugs or whether the seller is legitimate or not. All such sales are illegal. The only rule is let the buyer beware.

The FDA has eloquently testified about the Wild West situation that American consumers face every day under the current rules. As long as it is illegal to buy safe drugs at low prices, the trade in unsafe drugs will flourish. As long as we bury our heads in the sand and fail to guarantee the availability of safe and legal imported drugs, millions of American patients will continue to risk their health on potentially unsafe, unapproved, and counterfeit drugs. Our bipartisan proposal gives patients access to drugs at prices they can afford, and it protects them against the danger of the essentially uncontrolled and uncontrollable counterfeit drugs they face today.

It is because of the rigorous safeguards in our bill that Dr. David Kessler, who served under both Republican and Democratic Presidents as Commissioner of the FDA, has stated that our proposal "provides a sound framework for assuring that imported drugs are safe and effective."

Dr. Philip Lee, one of the Nation's leading authorities on prescription drugs, a physician who served as the Assistant Secretary of Health under two Presidents, and a former Chancellor of the University of California at San Francisco, has emphasized that our proposal "will reduce rather than increase the likelihood of counterfeit drugs entering the U.S. supply chain from abroad and that drugs imported under the program will meet FDA standards for safety and effectiveness."

On imported drugs, safety is the first responsibility-and it is a responsibility that our bipartisan proposal fulfills. But legalizing safe drug imports is only half the battle to bring fair prices to consumers. Legalization is meaningless unless it is backed by strong measures to prevent drug manufacturers from manipulating the market to subvert the law.

Already, American drug companies are retaliating against imports from Canada by limiting the amount of drugs they sell to Canada and denying drugs to pharmacies that re-sell them to American patients. A few weeks ago, a group of senior citizens was forced to cancel a bus trip to Canada because the Canadian pharmacies they relied on for affordable drugs were effectively shut down by U.S. drug companies.

Our proposal includes strict rules to close the loopholes that drug companies use to evade the law. Violations will be considered unfair trade practices, and violators will be subject to treble damages. Any proposal that does not include comparable protections is a fig leaf, not a solution.

The provisions of the Australian Free Trade Agreement, however, opens a gaping hole in these protections. One way that a drug company can circumvent an importation law is by claiming that an American importer who purchases a drug from a European wholesaler has violated the patent held by the drug company.

It has long been a settled feature of patent law that the first sale of a product in the domestic market exhausts the patent. If you buy a car and then resell it to a friend, the car manufacturer can't sue you for violating its patent. A recent court decision, however, stated that the rule of exhaustion through first sale does not apply to international sales. Therefore, a drug company can make a condition of its contract that a foreign buyer won't resell a drug to a United States importer. If the foreign buyer does so, the importer could be sued for a violation of the patent.

Broad application of this rule to drug company sales would nullify any reimportation bill that Congress passes. That is why our legislation specifically states that reimportation of a prescription drug is not a patent infringement. The Australia Trade Agreement, however, states that it is an obligation of the United States to "provide that the exclusive right of the patent owner to prevent importation of a patented product . . . without the consent of the patent owner shall not be limited by the sale or distribution of the product outside its territory." This obligation does not apply just to drugs imported from Australia, but to drugs imported from anywhere in the world. If this obligation could be enforced, it would nullify any drug importation bill passed by Congress, and guarantee that drug makers could continue gouging American consumers, no matter what the Congress does.

This prohibition was not added to the agreement because the Australians wanted it. Their domestic drug industry is small, and their own laws generally do not allow reimportation to the United States. The prohibition was added because the U.S. Trade Representative insisted on it.

It's there because the pharmaceutical industry wanted it as a model for future agreements. It's there because the Bush administration puts the interests of drug companies higher than the interests of American patients.

Fortunately, this provision has limited practical significance. The only party with standing to enforce the agreement is the Australian Government, and it is unlikely to bring any enforcement action. But it puts our country in the awkward position of endorsing a principle against the best interests of our people, and it is an ominous indication of what the Bush administration will try to do in future agreements.

I intend to vote for this agreement, because of the advantages it offers to American business and consumers. The attempts to bar drug reimportation included in the agreement are not enforceable in any meaningful way. But we must be vigilant against attempts to include any such provision in future trade agreements.

Year in and year out, drug industry profits are the highest of any industry in the United States. Yet year in and year out, patients are denied life-saving drugs because those astronomical profits are possible only with astronomical prices-prices that drug companies can't charge anywhere else in the world, because no other country in the world would let them.

A broad coalition of groups representing senior citizens and consumers have endorsed our bipartisan proposal. It's time to end the shameful price gouging. It's time for basic fairness in drug prices. It's time for this Congress to pass a genuine drug import bill. It's time for the U.S. Trade Representative to start standing up for the interests of the American people, not just the interests of the pharmaceutical industry.

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