The National Pulse

Hypocrisy: Trudeau Slams Trump for Tariffs, Ignores Canada’s Protectionism

After the recent G-7 Summit, Canadian Prime Minister Justin Trudeau raised eyebrows when he gave a blistering press conference calling out President Trump for his protectionist tariffs. Trudeau’s remarks were met by some, uh, colorful language by a senior member of the Trump administration, who was none too pleased by the Canadian leader’s political grandstanding.

While I share the concerns of many about the potential impact of a trade war, and I consider free trade to be a cornerstone of American prosperity, Trudeau’s press conference brings to mind a certain proverb about removing the plank in one’s own eye before addressing the speck in someone else’s. A new report from the Committee to Unleash Prosperity (with which this columnist is professionally affiliated) reveals how protectionist policies from nations like Canada are raising drug costs for Americans and stifling potentially life-saving innovations.

As Stephen Moore recapped for the Washington Times:

Many of our major trading partners — including rich countries like Canada and the European Union members — have long enjoyed the fruits of American-funded progress on the cheap thanks to state-sponsored price controls. They have been doing so for years.

This “free rider” problem raises drug prices here at home because when foreigners pay below-market prices for the drugs, they escape the cost of underwriting the critical research and development (R&D) investments. American consumers are the suckers who have to pick up the tab. Given that the cost of developing new life-saving drug can be as much as $2.5 billion — nearly the entire cost gets shifted to American consumers.

It is grossly unfair that Canadians or Germans pay less than Americans do for drugs that were developed in the United States. The average American spends $876 per year on prescription drugs, compared to $503 for the European Union. No surprise, our investment in pharmaceutical R&D is also much higher, at $233 per capita compared to just $73 in Europe.

Foreign price controls also slow scientific progress and the race for cures. A study from the U.S. Department of Commerce found that price controls in just a small number of Organization for Economic Co-operation and Development (OECD) countries had reduced R&D funding by between $5 billion and $8 billion per year, preventing the development of three to four new drugs annually.

Another study using data from the National Institutes of Health and the Centers for Medicare & Medicaid Services calculated that if OECD countries lifted all price controls on prescription drugs, the resulting increase in pharmaceutical R&D investment would yield eight to 13 new drugs per year through 2030.

The Committee to Unleash Prosperity’s study gives critical insight on the damaging consequences of OECD price controls. The potential suffering that could be alleviated (if these price controls were eliminated) should leave all clamoring for less protectionism internationally. Whether or not President Trump’s tariffs or threatened tariffs will ultimately lead to a world with less protectionism — Stephen Moore refers to this as the “Zero Tariff Solution” — is yet to be seen. But as this study reveals, if President Trump is able to achieve a “better deal,” the benefits could be remarkable. There is no greater reward than potentially having the ability to save more human lives.

So if Prime Minister Trudeau insists on maintaining Canada’s drug price controls, he deserves to be slammed for the hypocrite he is.

Photo credit: DoD News via Flickr, CC BY 2.0

Jonathan Decker

Jonathan Decker is the Chief Economic Correspondent for TheNationalPulse.com.