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Economist urges caution on Australia's free trade agreements -

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MARK COLVIN: The Nobel Prize winning economist Professor Joseph Stiglitz has warned Australia of hidden dangers in the proposed free trade agreement called the TPP, or Trans Pacific Partnership.

Selling the budget this year, the Treasurer Joe Hockey said his assumptions about economic growth were based in part on recent free trade agreements. Professor Stiglitz urges caution on that too.

His latest book is called The Great Divide: Unequal Societies and What We Can Do About Them. On the line from London I asked him first about the secrecy surrounding the TPP.

JOSEPH STIGLITZ: Well fortunately we know quite a bit about it because of Wikileaks. The US government not only has not revealed the negotiating position, actually has classified it. So we can't even use Freedom of Information Act to find out about it.

This is really, in my mind, an outrage and the reason why it's such an outrage is that what we're doing here in this trade agreement is not just lowering tariffs - that would be one thing - but we're setting the rules of the game for the 21st century; rules about regulation, rules about drugs. These are really critical aspects for the running of our society, affecting our health, our environment.

Just to give you one example, about 30 years ago we passed in the United States something, a law called the Hatch-Waxman Act, which represented an attempt to reach a compromise, a balance between big pharma, the patent drugs and generics. We realised we needed to have innovation but we also realised that we needed to get, have access at a reasonable price to drugs.

Well, from what we can tell, and let me say one other reason I know what's going on, I've talked to all the other trade negotiators involved in the drug provisions, we know that the US is negotiating for a position that would make it much more difficult to get access to generic medicines, that would drive up drug prices. They're asking for something that even the president of the United States has opposed. That is to say, exclusive datas, provision to extend generic medicine, to extend the life, effective life of a patent for biologics to 12 years.

MARK COLVIN: So how would this affect, say, Australia's PBS, the pharmaceutical benefits scheme, and the PBAC which stands behind it which negotiates with international drug companies and sets the prices the patients end up paying?

JOSEPH STIGLITZ: Effectively they're trying to undermine your ability to have that. You know, the long and the short of it is there are actually two parts of these negotiations. One is to restrict your ability to have safe formularies. So you would have a list and here are the drugs that are most cost effective and there would be a presumption that you'd have to use those unless there was a compelling reason not to. They're trying to undermine your ability to do that.

MARK COLVIN: And how would they do that? Would they be able to…

JOSEPH STIGLITZ: Well just outlaw it. Just say you can't do that.

MARK COLVIN: But what would, how would they enforce it? They'd be able to sue Australia rather as they tried to sue us, two of the big tobacco companies, tried to sue Australia over plain packaging, is that what you're saying?

JOSEPH STIGLITZ: Exactly. Exactly, and that's a second separate part that have gotten Americans across the board, both on the left and the right, really, really angry. And that is, they're trying to create a new judicial system as it were, a private one.

You know, we used to think that one of the basic functions of government is dispute adjudication, resolution of disputes, and they're creating this very, very expensive system of dispute resolution only available to corporations. Not available to civil society if there is a violation in the agreement, only to corporations.

MARK COLVIN: Australia has negotiated a number of regional free trade agreements and is enthusiastic about the TPP. The Australian Government says that it will be an enormous boost for our economy. Will it?

JOSEPH STIGLITZ: Almost surely not. You know, these are really, in terms of trade, minor. In terms of what Australia exports, even less important.

MARK COLVIN: Who does benefit then from a TPP like that?

JOSEPH STIGLITZ: Our drug companies, our drug companies. Let's put it - they are the big, big, when I say drug companies, it's our big pharma.

The generic drug companies in the United States are actually opposing this.

The tobacco industry will like it because it will make it easier for them to sue any country in the region who signs up, if they try to regulate tobacco, even mild regulations about package labelling…

MARK COLVIN: But won't there be a net increase in exchanges of goods, services and even labour?

JOSEPH STIGLITZ: There will be some, and this is where I said the impact will differ from country to country. Countries like the United States that export mostly capital intensive goods, like airplanes, they'll find net almost surely the job destroying effects of imports greater than the job creating effects of exports. So net we will find lower demand for labour. So we're, this is going to be job…

MARK COLVIN: Is that why it's been blocked, why president Obama has been blocked from pushing it forward?

JOSEPH STIGLITZ: That's one of the reasons. Let me emphasise it's just one of the reasons. It's, it's what it's going to do to our drug prices, particularly ironic because Obama's major signature achievement has been Obamacare, our provision of healthcare which one of the intents was to bring the costs of medicine down and now he is pushing an agenda that will lead to higher prices.

MARK COLVIN: Economist, Professor Joseph Stiglitz, whose book is called The Great Divide: Unequal Societies and What We Can Do About Them. There will be a longer version of that interview on our website this evening.