>>> US After Hours Summary: COUP -3% following earnings/guidance, ILPT

After Hours Summary: COUP -3% following earnings/guidance, ILPT +7% on S&P SmallCap 600 addition news

After Hours Gainers:

Companies trading higher in after hours in reaction to news: VRAY +27.9% (announces collaborations with Elekta and Medtronic; commences public offering of $75.0 million of shares of its common stock), ILPT +7.2% (to join S&P SmallCap 600), ARDX +7% (to host conference call on December 3 at 8 a.m. ET to review results from the pivotal phase 3 PHREEDOM study), ASLN +6.7% (after closing 36% higher on the day), DOMO +3.1% (Verizon, Domo, and Amazon Web Services to demonstrate new enterprise-strength asset tracking solution at AWS re:Invent 2019)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: COUP -2.8%

Companies trading lower in after hours in reaction to news: CBL -33.3% (is suspending all future dividends on its common stock, 7.375% Series D Cumulative Redeemable Preferred Stock and 6.625% Series E Cumulative Redeemable Preferred Stock), PLUG -8.4% (commences underwritten public offering of 40 mln shares of its common stock), KOD -7.4% (commences underwritten public offering of $250 mln shares of common stock), TUFN -5.6% (files for 3.5 mln ordinary share offering by selling shareholders), TTEC -3.8% (announces commencement of 3.0 mln share common stock offering by CEO Kenneth Tuchman), ARWR -3.2% (to offer and sell 4,000,000 shares of common stock in an underwritten offering pursuant to its existing automatic shelf registration), CCC -1.6% (light volume; announces that shareholders intend to offer an aggregate 36 mln ordinary shares in an underwritten public offering)

WSJ : The Water Wars that Defined the American West Are Heading East

The Water Wars that Defined the American West Are Heading East
Urban growth and surge in irrigation fuel fight between Georgia and Florida; soybeans or oysters?

CAMILLA, Ga.—Water stress, a hallmark of the American West, is spreading east.

The shift is evident on Casey Cox’s family farm in Georgia’s agricultural heartland, where she turned on five giant rotating sprinklers to see her sweet corn through weeks of hot, dry weather last spring.

“If we hadn’t had irrigation, our crop would have burned up completely,” said Ms. Cox, who with her father also produces soybeans, peanuts and timber on 2,400 acres.

More water to save Ms. Cox’s crops, though, often means less for neighbors to the south such as Rickey Banks. He gave up his life as a Florida oysterman when his fishery, which depends on water from the same river basin as Ms. Cox’s farm, collapsed during a drought.

Increasing competition for water is playing out across the Eastern U.S., a region more commonly associated with floods and hurricanes and one that was mostly a stranger, until recently, to the type of bitter interstate water dispute long seen in the West.

Eastern farmers’ rising thirst for water, together with urban growth and climate change, now is taxing water supplies and fueling legal fights that pit states against each other. The shift has exposed the region to changes in water supply occurring globally as swelling populations, surging industrial demand and warmer temperatures turn a resource seen as a natural right into a contested one.

In the U.S., burgeoning coastal populations have lowered water tables and dried up streams in Long Island, N.Y. Near Tampa, Fla., groundwater pumping has drawn saltwater into aquifers, drained lakes and triggered sinkholes. Decades of pumping by farmers and others have led to sharp declines in critical aquifers that flank the lower Mississippi River.

“What keeps me awake at night is not western water issues—it’s the East,” said Lara Fowler, an attorney and professor of water law and policy at Pennsylvania State University.

In 2013, Florida and Georgia’s long-running conflict over the Apalachicola-Chattahoochee-Flint River basin landed before the U.S. Supreme Court, the sole arbiter of interstate water disputes.

The legal battle inched forward in early November when a “special master” appointed by the high court, the second one the dispute has had, heard arguments from the states’ attorneys in a courtroom in Albuquerque, N.M. Special masters are servants of the Supreme Court, conducting hearings, building a record and issuing a report for justices to consider in cases that don’t move through lower courts. Ultimately, the special master will likely say which party should prevail and why.

One striking marker of expanding stress is the 100th meridian, a divide between water-rich and water-poor areas drawn nearly a century and a half ago by geologist and explorer John Wesley Powell. According to a team of scientists including those at Columbia University’s Lamont-Doherty Earth Observatory, the boundary—severing states from North Dakota to Texas—has shifted about 140 miles eastward since 1979 because of warmer temperatures or reduced rainfall. The scientists predict the West’s drier climate will continue to push eastward and pressure water supplies for farms and cities alike.

The threat is a familiar one for Mr. Banks in Florida, who in 2012 watched the oyster fishery that had sustained his family for decades fade amid a withering drought.

Florida blames Georgia farmers such as the Coxes, along with metropolitan Atlanta’s thirst, for the loss of such livelihoods. It says the explosion of irrigated agriculture in southern Georgia and Atlanta’s dramatic growth have drained too much water from the states’ shared river system, shrinking flows to Florida’s Apalachicola Bay.

The reduction, Florida argues, caused salinity to surge in the bay, fueling an invasion of oyster-eating predators such as conchs and sponges. Only a handful of oystermen ply the bay’s waters today, down from hundreds a decade ago. Local restaurants that once boasted their “seafood slept in the bay last night” now import oysters from Texas or Louisiana.

Mr. Banks left Florida in search of carpentry work, eventually returning to launch a charter service that takes guests fishing and hunting for wild boars and alligators.

“Oystering was a heritage, not only a job,” said Mr. Banks, 49, who began working on his father’s oyster boat at the age of five.

Irrigated acreage in Georgia increased 15-fold from 1960 to 2015, according to U.S. Geological Survey data, as farmers sought to boost the predictability of their harvests. Much of the increase is along lower portion of the Flint River, which rises near Atlanta and runs south through some of Georgia’s most productive farmland.

Crop yields in the state have soared. President Jimmy Carter, who ran his family peanut farm before he ran the country, once honored Georgia farmers who harvested a ton of peanuts per acre. Their descendants can raise triple that. So critical is irrigation, farmers say, that most bankers won’t finance their operations without a system installed.

At peak times in the growing season, farmers in the lower Flint River basin pull hundreds of millions of gallons of water a day from an aquifer called the Floridan that helps feed the river through fissures in the limestone below ground. Gordon Rogers, executive director of an advocacy group called the Flint Riverkeeper, says that during brief periods, the farmers’ water draw equals that of metropolitan Tokyo.

The area around the Cox farm, in the southwest corner of the state, bordered by Alabama and Florida, is blessed with rain, an average of 52 inches a year. Winter and early spring are particularly wet in this area.

For a farmer, however, timing is everything. Two or three weeks without rain during critical phases of crop development can sharply reduce the yield as well as the quality of a crop such as sweet corn.

In a wet year, rainfall quickly replenishes the Floridan aquifer. But as irrigation wells have multiplied, far less water has flowed from Georgia into Florida during droughts. In 2012, water in the Flint dropped dramatically. Creeks that flow into it, with names from the region’s Native American heritage—Ichawaynochaway, Kinchafoonee and Muckalee—almost or entirely dried up.

Beyond Georgia, farmers across the Eastern U.S. have steadily embraced irrigation, outfitting fields with rotating sprinklers to precisely control when their crops get water and how much. Irrigated acreage quadrupled in Tennessee and more than doubled in Indiana, Delaware and South Carolina between 1997 and 2017, according to government data.

Irrigation’s eastern push lies at the heart of Florida v. Georgia, one of three interstate water disputes pending before the Supreme Court. Western states have sent such disputes to the high court for more than a century. Now eastern states are the combatants in two of the three water cases before the court.

Florida seeks to limit Georgia’s water use. In 2015, Florida’s attorneys subpoenaed the Cox farm, arriving during the fall harvest to collect a decade’s worth of irrigation records and more. The two states have submitted more than seven million pages of documents, said a person familiar with the case.

The special master appointed by the court recommended the Supreme Court deny Florida’s request for a cap on Georgia’s water use, saying he wasn’t certain that a cap would result in enough additional water at the right times to benefit Florida.

That is because of the central role of the U.S. Army Corps of Engineers, which manages dams and reservoirs in the region and controls when and how much water is released. Since it isn’t a party to the case, the Corps wouldn’t be bound by any court order, the special master said. The recommendation echoed Georgia’s argument, which also calls Florida’s problems largely self-inflicted.

After a hearing before the Supreme Court last year, the Justices decided 5-4 to reject the special master’s proposal. They named a second special master.

At her farm near Camilla, Ms. Cox, 28, called irrigation the single most effective risk-management tool a farmer can have and said irrigation technology has grown more efficient over time. “If you took it away from us, we would not be able to farm,” she said, as she checked one of her family’s nine center-pivot sprinklers, stretched like a winged bird over a field of sweet corn.

Every few minutes, her phone dinged with a message from the center-pivot, telling her when it had turned on or off or had changed direction. “My pivot will not stop texting me,” she said.

En route to another field, Ms. Cox wound past pine-tree plantations and live oaks draped in Spanish moss, ticking off achievements irrigation made possible. Georgia produces more peanuts than any other state. A predictable water source means its farmers are reliable suppliers to candy companies such as Hershey Co. and to peanut-butter makers like J.M. Smucker Co.

Irrigation has also enabled farmers to plant higher-value but thirsty vegetable crops that can boost profits, and helps produce robust grain crops to supply chicken producers such as Tyson Foods Inc. Along with related businesses, agriculture contributed $16.7 billion to southwest Georgia’s economy in a recent year, according to the University of Georgia.

“Irrigation is the linchpin of our economy,” said Glenn Cox, Casey’s father, who is 64.

Throughout the East, newer industrial activities such as oil-field hydraulic fracturing also are demanding more water. “Out West, those states were water-stressed before any Europeans showed up,” said Matthew Draper, an attorney who specializes in transboundary water disputes. “Out East, we’re just now starting to bump up against that limit where someone using water means someone else is going to go without.”

The Coxes said the multiyear drought in California prompted vegetable growers there to invest in farmland in southern Georgia and northern Florida. Bo Abrams, a professor of water law at Florida A&M University College of Law in Orlando, predicts that over time, water shortages will drive ranching and field-crop production eastward from Arizona and the Great Plains.

At the same time, in Georgia, “What we’re seeing is periods of drier dries and wetter wets,” said Murray Campbell, a farmer who grows cotton and peanuts 20 miles east of the Coxes.

That trend is likely to continue, according to the latest U.S. National Climate Assessment, a legally mandated report spearheaded by the National Oceanic and Atmospheric Administration. More frequent and severe droughts in places such as the Southeast could increase conflicts over water, experts say, even as periods of heavy precipitation like those that brought flooding to the Midwest last spring occur more often. Flooding drowns fields in too much water, and drought conditions still can develop between fewer, larger storms.

More states in the East are placing first-ever restrictions on permits for water use, said Barton “Buzz” Thompson, a professor of natural-resources law at Stanford University, who served as special master in a decadelong fight between Montana and Wyoming over Yellowstone River water.
Some water experts say eastern states are still unprepared for scarcity, armed with a patchwork of regulations and laws that assume water will remain plentiful. Unlike in the West, where most major river basins are governed by interstate compacts, only a few such agreements exist in the East.

In Georgia, a moratorium on new drilling into parts of the Floridan aquifer has slowed expansion of irrigated farmland in the Flint River basin for now. Farmers are allowed to drill into deeper aquifers, although that is more costly.

Uncertainty about the Supreme Court case has introduced new risks. Restrictions on agricultural water use could make a land purchase seem foolish, said Mr. Campbell, the cotton and peanut farmer. “That’s the kind of thing guys lay awake at night thinking about—what if I can’t irrigate that land?” he said.

“We see the conflicts and realize you’ve got to do something,” Mr. Campbell said. “But it would be difficult for us to turn the water off.”

>>> US Close Dow -0.96% S&P -0.86% Nasdaq -1.12% Russell -1.04%

The S&P 500 lost 0.9% on Monday, as weak manufacturing data and some trade angst contributed to a rough start to December. The Dow Jones Industrial Average (-1.0%), Nasdaq Composite (-1.1%) and Russell 2000 (-1.0%) slightly underperformed. 

Leading the decline were the real estate (-1.8%), industrials (-1.6%), and information technology (-1.4%) sectors, all of which fell more than 1.0%. The consumer staples (+0.3%) and energy (+0.03%) sectors finished in positive territory, with the latter finding support from higher oil prices ($55.99, +0.82, +1.5%). 

The day began relatively unchanged, but selling quickly ensued and accelerated after the ISM Manufacturing Index for November declined to 48.1% (consensus 49.2%) from 48.3% in October. The deceleration in activity was disappointing but was especially disheartening after manufacturing PMIs from China and Europe showed improvement. 

Dampening risk sentiment was President Trump declaring he will restore tariffs on steel and aluminum imports from Argentina and Brazil after the countries devalued their currencies. On a related note, reports continued to present the existing tariffs on Chinese imports and the Hong Kong Human Rights and Democracy Act as roadblocks to a trade deal. 

Other underperforming stocks included those in the trade-sensitive Philadelphia Semiconductor Index (-1.5%) and many highly-valued growth stocks like Roku (ROKU 136.07, -24.30, -15.2%). The latter was downgraded to Underweight at Morgan Stanley with a $110 price target for valuation reasons.

The mood on Wall Street wasn't as negative as the losses would suggest, though. The market had a great month of November, and today might have been exacerbated by some profit-taking interest. It's also worth reminding that the U.S. is more a services economy than a manufacturing economy. 

Consumer spending appeared in good shape on this Cyber Monday. Adobe Analytics estimated online sales would total $9.4 billion by the end of today after Black Friday registered a record a record $7.4 billion in online sales.

Elsewhere, longer-dated U.S. Treasuries succumbed to increased selling pressure after the Financial Times reported that the Fed is considering a rule to allow inflation to exceed its 2.0% target. The 2-yr yield increased two basis points to 1.84%, and the 10-yr yield increased six basis points to 1.84%. The U.S. Dollar Index declined 0.4% to 97.84. 

Reviewing Monday's economic data, which included the ISM Manufacturing Index for November and the Construction Spending report for October:

  • The ISM Manufacturing Index for November registered a 48.1% reading (consensus 49.2%) versus 48.3% for October. The dividing line between expansion and contraction is 50.0%, so the November reading connotes a deceleration in activity from the prior month.
    • The key takeaway from the report is that it reflects ongoing weakness in the U.S. manufacturing sector, evidenced primarily by the fourth straight decline in the New Orders Index (to 47.2% from 49.1%).
  • Total construction spending declined 0.8% m/m in October (consensus +0.3%) on the heels of a downwardly revised 0.3% decline (from +0.5%) in September.
    • The key takeaway from the report is that private construction spending remains weak (down 1.8% yr/yr), saddled by a downturn in nonresidential spending (down 4.3% yr/yr) that has stemmed in large part from a 17.7% decline in commercial spending.

Investors will not receive any notable economic data on Tuesday.

  • Nasdaq Composite +29.1% YTD
  • S&P 500 +24.2% YTD
  • Russell 2000 +19.2% YTD
  • Dow Jones Industrial Average +19.1% YTD

FT : Zara founder Amancio Ortega to pay £600m for London’s Post Building

Zara founder Amancio Ortega to pay £600m for London’s Post Building
Former Royal Mail sorting office is McKinsey’s headquarters in the UK

Amancio Ortega, the founder of retailer Inditex, is close to acquiring McKinsey’s London headquarters for £600m, in the billionaire’s latest bet on the top end of the UK property market.

A person with knowledge of the transaction confirmed that the purchase of the Post Building by Pontegadea, the 83-year-old’s real estate vehicle, was due to be announced imminently.

Pontegadea, which holds a majority stake in Inditex, the group whose brands include Zara and Massimo Dutti, uses the retailer’s dividends to buy property. It acquired the Adelphi building, the art deco headquarters of The Economist for about £600m last year.

Its real estate portfolio has increased markedly this decade as Inditex profits have risen, and totalled just under €10bn last year, including assets such as the Picasso Tower in Madrid and offices for Amazon, Facebook and Primark.

People close to the investment company, which has a small workforce of 69 people, argue that its strategy of focusing on prime real estate in major cities is relatively low risk, depsite the uncertainty caused by Brexit.

The group does not sell its assets, focusing instead on rental income. The Post Building acquisition would mark one of its biggest transactions to date.

The complex is a former Royal Mail sorting office redeveloped by Brockton Capital and Oxford Properties, the real estate investment arm of Omers, the Canadian pension scheme. Much of the building is offices, which have been let to McKinsey and Rothesay Life, the life insurance company.

Demand for office space in London’s West End has been rising. According to research from Savills, the property agency, take-up of space this year is expected to be 2 per cent ahead of the long-term average, driven by demand from serviced office suppliers as well as the media and financial sectors. Savills says that a quarter of the development pipeline for the next four years has already been pre-let.

Investors have been taking notice. According to property agency Knight Frank, there was “a resurgence in interest in London assets, particularly from…overseas” in the third quarter. Knight Frank has said that rising geopolitical tensions in Asia and the Middle East have “made London look like a relatively safer haven once more”.

The picture is not so rosy for west end retail space. Last week Shaftesbury, a big West End landlord, said that the value of its portfolio had fallen for the first time in more than a decade as valuations fell in Covent Garden, which is just a stone’s throw from the location of the Post Building. Retail property owners across the country have been hit by a string of insolvencies in recent years

FT : US jury clears Privinvest salesman in ‘tuna bond’ trial

US jury clears Privinvest salesman in ‘tuna bond’ trial
Acquittal of Jean Boustani in corruption case in Mozambique a blow to prosecutors

A central figure in the multibillion-dollar “tuna bonds” scandal in the southern African nation of Mozambique was cleared of all charges by a jury in New York on Monday.

Jean Boustani, a Lebanese salesman for Privinvest, an Abu Dhabi-based shipbuilder, was acquitted of three counts of conspiracy to commit fraud and money laundering.

His acquittal is a blow to US prosecutors and a victory for Mr Boustani and Privinvest, who have consistently denied wrongdoing.

“We are gratified and relieved, and thank the jury for its service,” said Michael Schachter, an attorney for Mr Boustani.

“The jury’s verdict completely exonerates Mr Boustani and confirms what Privinvest has said for the past four years — there was absolutely no wrongdoing with respect to the Mozambique maritime projects,” the shipbuilder said in a statement.

A spokesman for the US attorney’s office for the eastern district of New York declined to comment.

The verdict came after three former Credit Suisse bankers pleaded guilty for their role in diverting hundreds of millions of dollars from $2bn of loans for maritime projects in Mozambique in order to pay kickbacks, including to themselves.

Two of the bankers, Andrew Pearse and Surjan Singh, took the stand in the trial and told the jury they had received about $50m in payments from Privinvest.

Mr Pearse testified that in 2013 he had been offered a bribe by Mr Boustani to secure a reduction on the fees for a Credit Suisse loan. The conversation happened poolside at a hotel in Mozambique, he testified.

“I remember it very clearly because it was a significant point in my life where it was the first time I’d been offered a kickback,” Mr Pearse testified.

Mr Boustani disputed the claims when he took the stand, saying the bankers were simply paid to join a Privinvest subsidiary.

The case had centred on whether US-based investors in the loans, which Mozambique had guaranteed and later defaulted on, had been defrauded. The loans had been arranged by Credit Suisse and Russian bank VTB between 2013 and 2016.

The Privinvest salesman’s attorneys argued he had nothing to do with the disclosures made to investors who would have known that Mozambique was a country where corruption was common.

“Jean has sold nothing to investors, he was a salesman only to Mozambique,” said Randall Jackson, another attorney for Mr Boustani, in closing arguments last month.

US prosecutors have charged eight individuals in connection with the so-called tuna bonds scandal, including three former Mozambique government officials and another executive at Privinvest in addition to Mr Boustani, the only defendant so far to face trial.

Mozambique, one of the world’s poorest nations, was thrown into a deep financial crisis by the collapse of the tuna bonds and the revelation in 2016 of other hidden debts relating to the maritime projects.

The ruling Frelimo party of President Filipe Nyusi, which won re-election last month, has been rocked by evidence of bribes paid to officials in connection with the tuna bonds.

FT : US threatens EU with new tariffs in Airbus-Boeing battle

US threatens EU with new tariffs in Airbus-Boeing battle
Washington and Brussels tensions escalate over national aerospace champions

The US has threatened the EU with a raft of new tariff increases related to the Airbus subsidy case at the WTO, a move destined to further sour transatlantic economic relations as Donald Trump arrives in London for the Nato summit. 

Robert Lighthizer, the US trade representative, raised the possibility of higher levies after securing Washington’s latest legal victory in the long-running dispute, with a WTO panel on Monday saying that Brussels had failed to comply with its rulings. 

“Strong action is needed to convince the EU that its interest lie in eliminating these market-distorting subsidies now and in the future so that our industries can compete on a level playing field,” Mr Lighthizer said in a statement.

The US already slapped tariffs on up to $7.5bn of EU goods in connection with the case in October, including cheese, wine and aircraft, but USTR said Washington might go beyond that. 

“In light of today’s report and the lack of progress in efforts to resolve this dispute, the United States is initiating a process to assess increasing the tariff rates and subjecting additional EU products to the tariffs,” it said. 

The threat of new tariffs against EU goods could provide for a tense economic backdrop to the Nato summit in London, which Mr Trump is attending this week with other leaders of the alliance.

The US is separately expected to release the results of a probe on France’s digital services tax on Monday, which could pave the way for separate punitive measures against Paris. Based on national security grounds, Washington continues to impose tariffs on EU metals, and while it has not pressed ahead with plans to impose tariffs on EU cars and car parts, it has not ruled out doing so in the future.

Brussels reacted angrily to the WTO’s ruling on Monday, accusing the Geneva-based body of “serious legal errors” in the case. 

The WTO’s appellate body on Monday said the EU and four of its member states — France, Germany, Spain and the UK — had failed to comply with a 2016 ruling to eradicate all illegal state support to Airbus for its A350 mid-range twin-aisle aircraft and the A380 superjumbo.

This is the second time that a WTO panel has rejected the EU’s claim of compliance. However, it is far from the end of the 15-year dispute. The WTO is expected to rule next spring on whether the EU will be allowed to impose tariffs on US imports as a result of illegal subsidies to Boeing. 

The European Commission reacted sharply to the findings. 

“We consider that the panel has made a number of serious legal errors in its assessment of EU compliance,” a spokesperson said. “The report also contains statements concerning workable ways to comply with the WTO rules on subsidies that would be very problematic for a larger part of the WTO membership to comply with.”

The commission was considering an appeal “to have these legal errors corrected”, the spokesperson said.

In particular the EU is expected to challenge the WTO’s finding that the US continues to experience harm as a result of subsidies to the A380 programme, which was cancelled in February. 

The WTO has rejected the EU’s argument that it had eradicated any wrongful subsidies by modifying the contracts granting favourable loans to Airbus for the launch of the A350 XWB. Moreover, simply repaying outstanding principal and interest accrued did not end the subsidy, the WTO argued. 

The EU has also failed to show that amendments to the four A380 loan agreements had ended the wrongful support, according to the WTO. The panel rejected a new claim by Boeing that certain research and technological development caused harm to the US.

The tit-for-tat battle has left Washington and Brussels at odds over how to support their aerospace champions.

The dispute — launched by the US in 2004, the year after Airbus’s deliveries overtook Boeing’s for the first time — reached a head in 2010 and 2011. The WTO ruled that both companies had collected billions in unlawful assistance — Boeing from government money through contracts for defence and space business as well as tax breaks, and Airbus through aid to launch many aircraft repayable on delivery. 

Washington initially claimed that $22bn in illegal funding found its way to Airbus, while the EU alleged more than $23bn had been channelled to Boeing. 

Since then the dispute has spiralled through appeal and counter-appeal, as additional allegations piled up. 

Both sides have called for negotiations to reach a new settlement on support for aerospace, yet each refuses the other’s terms laid down for starting talks. The urgency to find a solution is growing as new competitors emerge in China and Russia, where state support for aircraft programmes is strong.

Both Boeing and Airbus are also facing other sizeable challenges. Boeing is struggling to regain the confidence of airlines and passengers amid the crisis over its 737 Max single-aisle plane, which suffered two crashes within five months. Airbus, meanwhile, has had to cancel its A380 superjumbo due to a lack of orders. 

“Today’s ruling is a complete loss for Airbus and its government sponsors,” Boeing said in a statement. “It confirms what has long been clear: the EU has failed to comply with WTO rulings despite having years to do so, and billions of euros of illegal government subsidies to Airbus continue to harm the US aerospace industry. We hope that Airbus and the EU will now finally turn their energies to resolving this case.”

Airbus said it would support the EU in an appeal against the findings. It also reiterated a call for negotiations to end the long trade battle. “A negotiated settlement is the only way to restore and preserve the free, fair competition and open trade that is essential for an essential and global aviation industry,” the company said. 

WSJ : U.S. Considers Easing Drug Protections to Break Logjam Over Trade Pact

U.S. Considers Easing Drug Protections to Break Logjam Over Trade Pact
Democrats push to reduce length of time that biologic drugs would be protected from generic imitators in U.S.-Mexico-Canada agreement

WASHINGTON—The Trump administration is considering scaling back intellectual-property protections for big drugmakers to help win Democratic support for a new trade pact with Mexico and Canada, according to people familiar with the matter.

Many Democrats, backed by labor unions and consumer groups, are pushing the administration to reduce the length of time that leading biologic drugs would be protected from generic imitators in the U.S.-Mexico-Canada Agreement, or USMCA.

The accord, which must be ratified by Congress, now protects these drugs for 10 years. That compares to 12 years under U.S. law.

Democrats and others want that time period reduced, or at least new language to allow for a reduction in the 10 years if U.S. domestic law changes.

The Trump administration, eager to win passage of USMCA, is considering easing the standard, the people said. That assessment was bolstered by Jesus Seade, Mexico’s senior envoy to North America.

“There has been some accommodation—we will have to see how much,” Mr. Seade told reporters in Ottawa on Friday when asked about a shorter time frame for protection of biologic drugs, which are frequently high-priced medicines produced from living cells or tissue.

Mexico City and Ottawa would have to agree to any changes to the three-way agreement they signed a year ago.

The U.S. trade representative’s office, which is leading the negotiations with Congress, didn’t respond to a request for comment.

Ratification of the trade pact has been held up by House Democrats who are also seeking other changes, including making new labor rules in USMCA more strictly enforceable.

Democratic lawmakers remain skeptical of trade agreements that don’t have sufficient safeguards to prevent jobs from going abroad, especially to Mexico. They are eager to work with unions to get the biggest possible toolbox to enforce labor rules south of the border.

Some Democratic lawmakers are pushing House Speaker Nancy Pelosi (D., Calif.) to have a vote on the deal this year.

“I would still bet on it being pre-Christmas, that’s sort of the general sentiment,” said Rep. Jim Himes (D., Conn.), an advocate of deals that safeguard trade. A senior Democratic aide said that negotiations continued over the holiday week, and that a vote by the end of the year was “not out of the question.”

Administration officials say it is possible they will strike a deal with Democrats this week, but one official close to the talks said it could take a little longer, while still asserting optimism for passage.

“By all accounts, a deal is close on USMCA,” Sen. Chuck Grassley (R., Iowa), chairman of the Senate Finance Committee, said Monday on the Senate floor. “If a deal cannot be reached by the end of this week, I do not see how USMCA can be ratified in 2019.” Mr. Grassley and other proponents of USMCA have warned that trade legislation will be difficult if not possible to pass in the height of the 2020 election year.

Democrats in competitive districts campaigned on working with the president when it benefited their constituents. They see passing the trade agreement as a sign that they can do that, even as the caucus moves forward with its impeachment inquiry against President Trump.

Mr. Trump and Republicans have criticized the Democrats for focusing on impeachment rather than shared policy goals, so clearing the way for a vote on the trade pact would address some criticism of Mrs. Pelosi as the 2020 election year approaches. “It would appear that impeachment is going to get USMCA over the finish line,” said Chris Krueger, an analyst at Cowen & Co.

Yet trade experts say the biologic drug debate shouldn’t be underestimated, since a fight over that issue helped scuttle congressional consideration of the 12-nation Trans-Pacific Partnership, or TPP, in 2015 and 2016.

Many Democrats are critical of rules that benefit big drug companies, including the market exclusivity period for biologic drugs. Big pharmaceutical companies want the longest-possible protection period for their drugs so that producers of so-called biosimilars can’t quickly take advantage of data from their medical trials to market their own products.

The big drugmakers see trade agreements as a way to set a blueprint for intellectual property protection for biologic drugs, similar to the patent protection enshrined in trade pacts. Trade officials, business-friendly Republicans and many moderate Democrats see longer periods of exclusivity as wins for the U.S. in international negotiations, since American pharmaceutical companies dominate the global industry.

But generic producers and other critics say expensive intellectual-property policies should be decided through domestic law rather than international agreements.

The generic and biosimilar producers say the current time period may be too long once biosimilars are developed more quickly in the future.

“We believe that setting a floor of 10 years does not allow exclusivity to adjust when the research and development process gets more efficient,” said Jonathan Kimball, vice president for trade and international affairs at the Association for Accessible Medicines, which backs generic and biosimilar drugs.

The Pharmaceutical Research and Manufacturers of America has said a long period of exclusivity helps pay for innovation by recouping expensive research and development costs. “If those protections are diminished, it will embolden foreign governments who want to steal American intellectual property and free ride on our world-leading biopharmaceutical research and development,” said Priscilla VanderVeer, a spokeswoman for PhRMA

Democrats seeking rules to limit drugmakers previously had a harder time enacting such policies, in part due to the influence of former Republican Senate Finance Committee chairman, Orrin Hatch, who made defending intellectual property and pharmaceutical firms a priority.

The current chairman, Sen. Grassley has voiced more concern for the affordability of medicine, a priority for Democrats as well as the Trump administration.

The pharmaceutical industry says the provisions in USMCA, if enacted, won’t directly affect U.S. law or drug affordability for Americans.