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Should Thailand sign a bilateral Free Trade Agreement with the U.S.? That would be a tempting idea to any Thai who works for a firm selling to the U.S. market. And Thai consumers would value the reduction in the prices of U.S. imports to Thailand. But there would be at least one important drawback for Thailand of signing an FTA: the government commitment to treat all people with AIDS might cost Thailand as much as $3.2 billion more over the next 20 years, according to a recent World Bank analysis. The possible effects of the FTA on Thailand's AIDS program will be the focus of discussion at a CGD event next Monday.
Along with Brazil and Botswana, Thailand has been at the forefront of developing countries in making AIDS treatment freely available to all who need it. By authorizing their own pharmaceutical firm to produce a generic version of patented AIDS drugs, Thailand has been able to afford to put almost all of its estimated 80,000 patients on so-called "first-line" therapy. Unfortunately, all patients on AIDS treatment will eventually develop resistance and require second-line drugs when the first-line drugs stop working. This is where the proposed FTA with the U.S. will raise difficulties. Even if the U.S. grants Thailand the right to continue producing generic first-line drugs, any effort by Thailand to expand production of generics to include the second-line drugs might be disallowed by a treaty that bans compulsory licensing.
So what should Thailand do? The benefits of the FTA to Thailand must be weighed against all the costs, including the potential additional $3.2 billion in the cost of second-line AIDS treatment. Since Thailand exports about $17 billion to the U.S. each year under the current trade arrangement, even a 2% or 3% increase in these exports from an FTA would be worth more than enough to offset the $3.2 billion in extra AIDS drug expenditures. But once having made the decision to accept the FTA, the Thai would then have to face the decision of whether to spend the extra money on AIDS treatment, rather than other important government programs, with interest group politics ultimately determining the outcome. So it would be easier for Thai AIDS patients and for the Thai health ministry if the FTA included an exception for AIDS drugs -- or were never signed at all.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.