I have repeatedly labelled the Australia-United States Free Trade Agreement (AUSFTA) a terrible deal for Australia that massively favours the US and disadvantages Australia.
The Crawford School of Public Policy at the ANU conducted a study of the Australia-US FTA, and found that a decade after signing, the agreement has diverted more trade than it has created.
The ANU’s Peter Drysdale has also estimated that “Australia alone has suffered trade losses [from AUSFTA] the annual equivalent of the current price of around 18 Japanese, German, Swedish or French submarines through this deal”.
However, the worst aspects of AUSFTA were that it included extensions to both patent and copyright terms, which raised the cost of pharmaceuticals and copyrighted materials.
The Australian National University’s Thomas Faunce found that AUSFTA has contributed to the blowout in the cost of the Pharmaceutical Benefits System (PBS), thereby putting enormous strain on the federal budget.
Peter Martin raised similar concerns, noting that AUSFTA “cost the government $200 million per year by slowing the entry of cheap generic drugs into the pharmaceutical benefits scheme”.
“Generic manufacturers have missed out on an estimated $2 billion over eight years”, Martin wrote. “70% of drug patents expire later in Australia than in other countries”.
The Pharmaceutical Research and Manufacturers of America (PhRMA) has called on Donald Trump to impose ‘punitive’ tariffs on Australia because of its PBS.
The PhRMA contends the $18 billion PBS, which provides subsidised medicines to Australians, impacts the earnings of US pharmaceutical firms and undermines their innovativeness.
It has labelled the PBS an “egregious and discriminatory” program that lowers drug prices and blocks American exporters.
“Egregious and discriminatory pricing policies in several markets including Australia, Canada, the European Union, Japan and Korea undervalue American innovation, threaten billions of dollars in lost sales and undermine American competitiveness, jobs and exports”, says the formal submission from the Pharmaceutical Research and Manufacturers of America, known as PhRMA.
The PhRMA alleges the Pharmaceutical Benefits Advisory Committee, which provides advice to the government on what medicines should go on the PBS, conducts health technology assessments that are biased against US firms, while it claims it takes too long for medicines to be added to the PBS.
“PBAC conducts biased health technology assessments that compare innovative medicines to the lowest-cost comparator”, the submission says, claiming that US companies are being punished.
PhRMA has also blamed the PBS for “unreasonable patient access delays” because the Australian government takes time to consider new medicines and decide whether they should receive a public subsidy to lower the cost for consumers.
The formal complaint, lodged with President Trump’s trade chief on 11 March, calls for tough action to end the “damaging pricing policies” in Australia and other countries in order to add billions of dollars to exports and fix America’s trade deficits.
Australian National University law professor Peter Drahos warned that “US pharmaceutical lobby is one of the world’s oldest, most highly organised lobbies – they have a track record of success when it comes to influencing domestic law via trade agreements”.
Trump due to make an announcement on reciprocal tariffs in early April.
As illustrated below by DFAT, Australia runs a massive trade deficit with the US.
In 2023-24, Australia exported $37.5 billion worth of goods and services to the US, versus $88.2 billion of imports.
Australia also exported only $1.6 billion of pharmaceuticals to the US in 2023-24.
The AUSFTA was always a dud deal for Australia. In light of the Trump administration’s reluctance to stick to the spirit of the deal, the Australian government should tear the AUSFTA up.
