Why the United States-Mexico-Canada Agreement is Important to FDA

FROM A GLOBAL PERSPECTIVE

By Anne Kirchner and Joseph Rieras

July 1, 2020

 

The United States-Mexico-Canada Agreement (USMCA) becomes effective today. From FDA’s point of view, it aligns regulatory standards with agency practices, betters the quality of products available to American consumers, and levels the playing field for American businesses.

Trade policy is a topic that doesn’t necessarily come to mind when thinking about FDA. But, in fact, there’s two reasons why FDA follows trade policy closely: to protect our regulations and authorities and to use trade agreements as a vehicle to advance public health.

Before we elaborate, here’s a bit of background. The World Trade Organization (WTO) is the multilateral organization which established the basic rules of trade between its 164 Member nations, including the United States. Under the WTO are two non-tariff agreements which directly relate to FDA’s regulatory authorities: the Agreement on the Application of Sanitary and Phytosanitary Measures or SPS (food and feed safety measures essential to protecting human and animal health) and the Agreement on Technical Barriers to Trade or TBT which covers the technical regulations essential to assuring that products meet FDA requirements (labeling and packaging, transparency, standards-related measures, and conformity assessment).

In addition to its work with the WTO, the United States has concluded trade agreements with 20 countries that cover a range of topics, from tariffs on goods and agricultural market access to intellectual property and environmental matters. For FDA, the specific topics of interest are those chapters in the agreements concerning regulatory issues including SPS measures, TBT, and Good Regulatory Practices – as well as sector-specific chapters on cosmetics, medical devices, and pharmaceuticals, should they exist. FDA helps to establish the United States negotiating proposals and FDA actively participates in trade negotiation meetings.

The USMCA updates and supersedes the 25-year-old North American Free Trade Agreement (NAFTA). Work on the new agreement took several years, had to be approved by both houses of Congress and required that the three countries certify their compliance with various measures in the agreement. Certifications are now done, allowing the agreement to enter into force. Going forward, as of July 1, 2020, USMCA rules will apply.

Here’s a rundown of those sections in the USMCA that impact FDA:

Chapter 9 – Sanitary and Phytosanitary Measures (SPS)

The SPS chapter creates rights and obligations related to the measures that WTO members apply to ensure the safety of imported food, feed and plants. For FDA, the SPS chapter applies to food and feed regulations, import requirements, specified test methods, and so on.

The U.S. government’s chief objective for the SPS Chapter was to strengthen the scientific basis of SPS measures. This single objective advances both the public health and trade and is reflected in provisions throughout the SPS chapter. But this objective is most directly advanced in the SPS chapter article on Science and Risk Analysis which, for example, requires the Parties to withdraw measures that are no longer supported by scientific evidence or risk principles and to document and provide an opportunity to comment on risk analyses and risk management decisions. These obligations afford FDA an opportunity to engage with Canadian and Mexican regulatory officials on scientific and technical issues to ensure that public health is protected while trade is facilitated. At the same time, these obligations will not require FDA to change its current regulatory approach.

From an operational standpoint, FDA equities are protected and advanced in the SPS chapter. FDA’s import procedures – such as requiring that sampling and testing be based on risk and affording importers an opportunity to provide evidence to contest an adverse test result are reflected in the Import Checks article of the agreement.

FDA’s Office of Regulatory Affairs, which oversees our field offices, will not need to change its import procedures to comply with this article. But U.S. exporters will benefit from having Canada and Mexico adopt FDA’s procedures. And, importantly, FDA’s right to conduct overseas inspections is expressly protected in the SPS chapter, despite pressure from Mexico and Canada to only permit each Party to audit another country’s regulatory system.

Chapter 11 – Technical Barriers to Trade (TBT)

The TBT chapter is a significant upgrade from NAFTA. It covers items that might affect trade among Parties including standards, technical regulations, and conformity assessment procedures, (evaluation of products to ensure that they meet requirements).

Embodied in the chapter are the important regulatory principles of non-discrimination or national treatment (applying the same standards to domestically-produced and imported products), and the importance of transparency when proposing and adopting TBT-related measures.

Specifically, the chapter includes a strong provision on the development and use of international standards. It states that regulators must conduct an impact assessment of their regulatory activities, periodically review their technical regulations, and establish a process for a Party to petition regulatory authorities to review a technical regulation or conformity assessment procedure they believe to be obsolete.

On transparency, the chapter features commitments that closely track the U.S. Administrative Procedure Act. Further, it requires Parties to accredit or otherwise recognize U.S. testing and certification bodies under no less favorable terms than Canada or Mexico accord their own testing and certification bodies.

Chapter 12 – Sectoral Annexes on Cosmetics, Medical Devices, and Pharmaceuticals

Sector-specific chapters on FDA-regulated products were not included in most prior trade agreements, including NAFTA. Therefore, USCMA’s inclusion of these annexes is an innovation not only in U.S. trade policy but for international public health.

The Medical Device Annex encourages cooperation among the Parties in international fora like the International Medical Device Regulators Forum (IMDRF); and endorses the Medical Device Single Audit Program (MDSAP) which enables medical device manufacturers to complete one quality systems audit to meet the surveillance requirements of the program’s member countries by requiring USMCA countries to accept MDSAP audit reports. The United States and Canada are members but not Mexico.

Under the Pharmaceuticals Annex, FDA will need to perform an assessment of Mexico’s and Canada's ability to safeguard trade secret information. If, after conducting these assessments, FDA certifies that Mexico and Canada are able to protect confidential information, the Pharmaceutical Annex requires that FDA establish mechanisms to exchange confidential information with the regulatory bodies in each country on pharmaceutical inspections. This is an improvement over NAFTA and will enhance public health.

Both the Medical Device and Pharmaceutical Annexes require that market authorization procedures be transparent, predictable and science-based; and an authorization be based on information related to the safety, effectiveness, and quality of the product.

As for the Cosmetics Annex, it requires that duplicative regulatory requirements be avoided or not be maintained. Importantly, each Party must also apply a risk-based approach to regulating the safety of cosmetic products. In applying this approach, the regulatory authority in each Party must take into account that cosmetic products generally present a lower potential risk to human health or safety than medical devices or pharmaceutical products.

Chapter 20 – Intellectual Property

The USMCA sets the highest standard of any U.S. trade agreement for strong, effective protection and enforcement of intellectual property rights. It represents a significant upgrade from NAFTA. That said, significant changes were made to the intellectual property chapter in December 2019 after negotiations to revise the USMCA text that had been signed in November 2018.

For example, the initial chapter included a provision requiring a biologics-specific regulatory data protection term of 10 years. Under the revised text, the United States agreed to remove this provision. Congress also removed a requirement that the Parties provide exclusivity for a period of at least three years “with respect to new clinical information submitted as required in support of a marketing approval of a previously approved pharmaceutical product covering a new indication, new formulation, or new method of administration.” Congressional Democrats stated that they sought removal of this requirement because it allegedly would enable pharmaceutical manufacturers to “delay competition and access to affordable medicines.”

Chapter 28 – Good Regulatory Practices

Finally, the chapter on Good Regulatory Practices, or GRPs, covers internationally-recognized processes and procedures that are intended to improve the quality and cost-effectiveness of domestic regulations, a topic not included in NAFTA.

It recognizes that applying GRPs can support the development of compatible regulatory approaches among the Parties, and reduce or eliminate unnecessarily burdensome, duplicative, or divergent regulatory requirements. At the same time, nothing in the chapter prevents a Party from pursuing its public policy objectives (including health and safety) at the level it considers to be appropriate.

The GRP chapter tracks U.S. administrative practice by identifying the usefulness of internal regulatory coordination and review, and by promoting the use of high-quality, statistically-sound information to support regulations. The chapter also aligns with the U.S. Administrative Procedure Act with respect to transparency in developing regulations and it identifies best practices for advisory groups in a manner consistent with the Federal Advisory Committee Act. Finally, the chapter encourages the use of regulatory impact assessments in appropriate circumstances when developing proposed regulations that have anticipated costs or impacts that may have a significant effect. These provisions provide an opportunity for regulatory agencies in the United States, Canada and Mexico to benefit from each other’s scientific and technical expertise.

Summing it all up: there are many provisions in the USMCA that advance public health and FDA’s regulatory approaches. Now that the agreement has entered into force, we’ll continue to follow what it means for FDA, for public health, and for our regulated industries.

Anne Kirchner, J.D., is a Senior Advisor in the Office of Trade, Mutual Recognition, and International Arrangements. She focuses on trade negotiations and issues governed by the SPS Agreement.

Joseph Rieras, J.D., is a Senior Advisor in the Office of Trade, Mutual Recognition, and International Arrangements. He focuses on trade negotiations and issues governed by the TBT Agreement.