THE FREE TRADE WING OF BUCHANACONSERVATISM

Mercantilism, USA (Llewellyn H. Rockwell, Jr., July 26, 2003, Mises.org)

Should Americans be able to buy American-made prescription drugs from other countries at cheaper prices than they would have to pay in the US? Of course, the answer is yes. All that free traders are asking is that US firms be willing to let Americans buy US drugs at market prices when they are imported from other countries. The only possible reason to pay more would be if you want to dump vast sums of money on the US drug industry for no good reason. Consumers might want to-they can send Eli Lilly a fat check--but they shouldn't be forced to.

And yet some free traders have gotten on board with the desire to use protectionist means to boost prices and thereby add fuel to the fire of socialized medicine. It's expected that politicians sell their souls. But what about think tanks? The American Enterprise Institute, Cato, Competitive Enterprise Institute, the Heritage Foundation, the National Center for Policy Analysis, National Review, and many other organizations and "free market" publications have come out for banning re-importation. Why? They say that re-imported drugs are unsafe, would undercut US drug makers, dry up research funds, and make drugs more difficult to regulate.

Doug Bandow of Cato, for example, argues that because foreign countries do not have free markets for drugs, they shouldn't be permitted to export to the US which does. Of course that is precisely the same rationale used by the catfish and textile industry to ban competitive products. If anything, the claim is even more absurd since we are not talking about competitors but the very same firms that already sell in the US. So hysterical has been the campaign that re-imported drugs are said (by Michael Krauss) to be "an
invitation to terrorists."

As with other protectionist schemes, it is really about taxing Americans and imposing price floors to benefit a politically influential industry. Krauss actually admits this when he says: "Do we want pharmaceutical progress? Then we must pay for these goods, even if other nations don't do their part." But protectionist profits are not the reason for pharmaceutical progress. The reason is innovation, which depends in no way on patents and protectionism in drugs any more than with any other form of innovation. The proof is precisely that American firms are willing to sell at such low prices to foreign nations; they must be making a profit.

The Republican leadership is fighting a losing battle here and for not much reason. The argument that Americans should pay higher prices so that drug companies can make their profits here assumes a generosity on our part that is inconsistent with human nature. Sure, we're richer than anyone else, so it's been nice of us to help hold their prices down, but such a system couldn't last, especially as global markets loosen. If ending that regime leads to higher prices in other countries, so what? If it leads to less innovation, well, conservatives aren't exactly thrilled with the way medical experimentation is trying to change human beings anyway, are we? And if the quality of re-imported drugs can't be guaranteed, if they might even be fake, that seems like a risk folks should be allowed to assume for themselves. Besides, most of the effect of the far too many drugs folks take nowadays is probably just placebic anyway, isn't it? Stacked against these paltry objections is one big benefit that we'd do well not to turn up our noses at in a country where health care is already 14% of GDP: re-importation will reduce medical costs. What's not to like? Posted by Orrin Judd at July 28, 2003 4:45 PM