[Ip-health] U.S. - Dominican Republic to miss latest date for CAFTA implementation

[Judit Rius Sanjuan]

Inside US Trade
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U.S., DOMINICAN REPUBLIC TO MISS LATEST DATE FOR CAFTA IMPLEMENTATION
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Date: September 29, 2006

The U.S. and Dominican Republic will miss an October 1 target date for impl=
ementing the Central American Free Trade Agreement, and may need several mo=
re months to negotiate issues on pharmaceutical patents and textile rules o=
f origin, according to government and private sector sources.

Some of these sources said the two sides now have an informal Nov. 1 target=
 date for concluding their work, but they predicted this deadline would als=
o be missed. =93The unofficial word is they are still months away,=94 one U=
.S. industry source said. A second industry source said his impression was =
that the gap between the two sides on pharmaceutical patents =93is still pr=
etty wide.=94

Textile industry sources said the two sides also remain far apart on the co=
ncessions the U.S. would grant Dominican Republic in exchange for that coun=
try changing the deal=92s rules of origin so that pocketing in garments wou=
ld have to be sourced from the U.S. or region in order to qualify for acces=
s under the CAFTA. They continued to predict these talks would not move for=
ward unless there was a breakthrough in the other areas.

The U.S. has taken the position that agreements on the pocketing change mus=
t be reached before the CAFTA is implemented with a specific country.

In response to the impasse, the Dominican Republic has requested a meeting =
between its secretary of industry and commerce and Assistant USTR for the A=
mericas Everett Eissenstat, the lead USTR official on CAFTA. No meeting has=
 been scheduled so far, sources said.

One informed source said the Dominican Republic is seeking the meeting part=
ly because it sees technical officials as having done as much as they can t=
o move forward the talks on pharmaceutical patents. Those talks focus on pr=
otections the Dominican Republic will provide under CAFTA for data generate=
d by brand name drug manufacturers to show the efficacy and safety of a dru=
g to regulators that give them marketing approval. These =93data exclusivit=
y=94 provisions are intended to give brand name manufacturers a measure of =
protection against competition from generic manufacturers in addition to th=
eir patent protection.

The two sides also differ on the linkage of patents to marketing approvals,=
 with the U.S. focused on ensuring that copies of patented drugs will not b=
e given marketing approval in the Dominican Republic. Industry sources said=
 the U.S. is motivated on this point by problems in implementing the Chile =
FTA. The Pharmaceutical Research and Manufacturers of America (PhRMA) has c=
omplained that Chile is granting marketing approval to drugs that are still=
 under patent, and USTR has launched an out-of-cycle Special 301 review of =
Chile in response.

U.S. officials have rejected the most recent copy of a draft Dominican Repu=
blic law on the patent issues as insufficient. Sources said the sides seem =
focused on how to define a new pharmaceutical product, with the U.S. wantin=
g to ensure a broader definition of what would be considered a new drug so =
that data exclusivity would have to be provided for that new entity.

The CAFTA calls on participants to provide five years of data exclusivity f=
rom the date on which a pharmaceutical product is submitted for marketing a=
pproval, and 10 years of data exclusivity for agricultural chemicals.

One informed source insisted the Dominican Republic has provided draft text=
 for changing its national law that matches language in the CAFTA, and that=
 the U.S. has wanted something additional. U.S. industry sources said USTR =
is trying to be as explicit as possible to make sure the kinds of problems =
with the Chile FTA are not repeated. One of these sources also said the Dom=
inican Republic offer has improved, but that it still needs to go further t=
o satisfy the U.S.

The Dominican Republic is also making changes to its national laws on other=
 intellectual property rights issues, including copyright terms, but source=
s said the two sides seem closer to an agreement on this issue. The Dominic=
an Republic wants to make the changes to its laws on IPR and pharmaceutical=
 patents at one time, so the IPR changes are waiting for an agreement on th=
e pharmaceutical issues.

On textiles, the two sides have disagreed over the economic impact to the D=
ominican Republic of making the pocketing rule of origin. The Dominican Rep=
ublic and Costa Rica, the only two CAFTA countries with which the U.S. has =
yet to implement CAFTA, are the two largest exporters of pants among the CA=
FTA countries.

As compensation for accepting the pocketing change, the U.S. had offered to=
 reduce the tariff on some other apparel items by 25 percent, according to =
an informed source. However, the Dominican Republic rejected this proposal =
because it estimated the value of this concession at about $1.5 million. In=
 contrast, it estimates $50 million in higher production costs if it had to=
 purchase pocketing from U.S. textile mills instead of using pocketing from=
 third countries.

One informed source said the different estimates of the value of the pocket=
ing result partly because the U.S. was only estimating the cost of pocketin=
g in pants, while the Dominican Republic noted that its producers use pocke=
ting in other apparel items as well, including skirts. In response, the U.S=
. said it would consider adjusting its numbers, an informed source said.

--
Judit Rius Sanjuan
judit.rius at cptech.org
www.cptech.org

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