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Executive Summary

SOVIET UNION 20-YEAR PATENTS CONTAINED IN TRADE AGREEMENT that, President Bush said in Moscow July 30, will be forwarded to Congress. The agreement provides the Soviet Union with Most Favored Nation tariff treatment and states that the Soviet Union will "provide product and process patent protection for all areas of technology . . . for a term of at least 20 years from the filing of an application or at least 17 years from the grant of the patent." The agreement, which also stipulates that the U.S.S.R. will "provide broad protection for trade secrets," was signed by President Bush and Soviet President Gorbachev in June 1990. The President agreed to submit it to Congress after the Soviet Union passed legislation broadening its emigration policies. The U.S. and U.S.S.R. also established an intellectual property issues working group under the agreement. Over the past year, the working group has reached general accord that the Soviet Union will not impose "working requirements" for imported products. That is, the U.S.S.R. will not require companies to set up manufacturing facilities there. Other matters, such as compulsory licensing, continue to be discussed by the working group. Twenty-year patent protection is a key trade issue for the Pharmaceutical Manufacturers Association. PMA is pursuing the concept as it follows trade negotiations worldwide, including the current round of talks on the General Agreement on Tariffs and Trade (GATT). In a July 30 statement, the White House said the Soviet agreement offers "strong intellectual property rights protection" and will be sent to Congress under "fast track" trade rules. Congress will be required to vote on the agreement, without any amendments, within 90 days. The agreement also must be ratified in the Soviet Union. PMA President Mossinghoff testified at two recent House subcommittee hearings on trade and competitiveness issues -- before the Science and Technology/Technology and Competitiveness Subcommittee on July 30 and the Ways & Means/Oversight Subcommittee on July 18. Mossinghoff reiterated PMA's endorsement of current efforts to strengthen and harmonize patent protections in GATT, the North American Free Trade Agreement, and negotiations sponsored by the World Intellectual Property Organization. The U.S. Trade Representative's negotiators have "supported the industry's position" on intellectual property issues during the GATT talks, though they have "been unable to win the approval of India and some other developing countries," Mossinghoff's written testimony to the Science subcommittee notes. "The USTR has been successful, however, in gaining broad acceptance in the GATT negotiations of the elimination of custom duties on pharmaceutical products and intermediates -- a position strongly supported by the industry." PMA estimates that zero tariffs on pharmaceutical products and ingredients imported into Canada, Japan and Europe could save U.S. firms $ 250-300 mil. yearly. Regarding domestic policies, PMA urged that the Sec. 936 tax credit for companies with plants in Puerto Rico and the Caribbean Basin be retained and that the R&D tax credit be made permanent. PMA also called for resolution of tax policies about how domestic research expenses should be allocated to U.S. versus foreign- source income when calculating the R&D credit.

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