Blood feud with US brewing

8 February 2007, Australian Financial Review, By John Breusch and Tracy Sutherland

A trade row is brewing with the United States after state governments indicated they would reject plans to scrap the monopoly over Australian blood plasma supplies held by the sharemarket-listed CSL.

The states' resistance poses one of the first tests to the US Free Trade Agreement, under which the commonwealth committed to review its blood fractionation service and recommend to state governments that future supplies should be opened up to tender. Blood fractionation is the separation of blood into its component parts.

The US Embassy said yesterday it would not comment until a final decision is made. But it challenged the findings of the government-commissioned review, conducted by former Foreign Affairs Department secretary Philip Flood, which warned that overseas processing could threaten the quality of Australia's blood supply.

However, Trade Minister Warren Truss denied Australia has breached its obligations under the FTA.

The issue will be discussed at a meeting of state health ministers in Melbourne tomorrow, ahead of a formal decision being reached at the next meeting of the Australian Health Ministers Conference.

South Australia and Victoria have already said they would reject the commonwealth's request. The states' consent is required before any changes can be made to the blood supply system, and a formal rejection would effectively kill the tender proposal.

"We've met our commitment under the FTA," Mr Truss told The Australian Financial Review. "The commitment was to conduct a review . . . and we have asked the states, we have done everything we can do within our sovereign powers. We're quite satisfied we've met the obligations. I'm not saying [the US] won't continue to raise the issue with us."

The outcome is expected to gall the US, which pushed for its companies to be given a chance to compete with CSL for the blood plasma business. It is understood the federal government believes there is no legal basis for Washington to impose sanctions on Australia as a result of the issue.

However, the US is likely to raise the matter at the next formal ministerial review of the FTA which will be held in Australia in late June.

A US Embassy spokeswoman said she would not comment on the matter until a final decision had been reached, but she questioned the justification for retaining the status quo.

"We believe it is clear that US-based blood fractionators, if allowed under an open tender arrangement, can supply the very safest, highest quality supply of blood products to Australia using blood collected in Australia," she said.

"The safety and security of the handling of blood products would be assured by contractual arrangements and at a saving to the Australian taxpayer over the current monopoly practice."