Macro Business | 31 Jul 2015
TPP negotiations come down to the wire
By Leith van Onselen
With final negotiations for the Trans-Pacific Partnership (TPP) trade agreement taking place in Hawaii this week, and scheduled to conclude on Friday, there are a bunch of thorny issues still yet to be agreed on.
As reported in The AFR, the US is holding-out on granting increased access to its dairy market – a move that has frustrated both Australian and New Zealand, who are seeking to export more milk, cheese and butter into the massive US market.
Other key sticking agricultural sticking points are the US’ refusal to grant increased access to its heavily protected sugar market – a position that has infuriated the National Party of Australia, which is threatening to cross the floor and vote against the TPP if significantly improved sugar access is not granted (see yesterday’s post).
Australian trade minister, Andrew Robb, is continuing to push hard for a deal on sugar, providing further reassurances yesterday that he would not sign up to a deal if it failed to deliver for the local industry.
Another key issue for Australia is whether the TPP should extend copyright and patent protections, as demanded by the US, a key exporter of pharmaceuticals and creative works. Such a move would badly disadvantage Australia, since it is a large net importer of intellectual property, and would lead to consumers and taxpayers paying more for medicines and creative content.
Both DFAT and trade minister Robb have given multiple assurances that they will not compromise Australia’s intellectual property regime, which was already tightened under the Australia-US FTA a decade ago.
In particular, the US is pushing for data protection on so-called biologic drugs to be extended to 12 years, whereas Australia is pushing for five years (its current regime). Any extension beyond five years would lead to key drugs coming off patent later, potentially costing Australia’s PBS (read taxpayers) billions in extra dollars.
Trade minister Robb yesterday reaffirmed that data protection on biologic drugs were “showstoppers”, suggesting he won’t give ground (good news).
Andrew Robb looks likely to cede to US requests for an Investor-State Dispute Settlement (ISDS) provision in the TPP, which could open the Australian Government to law suits from foreign corporations. However, he is seeking carve-outs for health and education.
In other related news, former head of the World Trade Organization (WTO), Pascal Lamy, has come out declaring that the benefits of the TPP have been over-hyped. From The AFR:
The Frenchman who retired as WTO director in 2009 told The Australian Financial Review on Thursday on the fringes of the Boao Forum for Asia, that the importance for the world economy of the TPP would be “relatively modest”…
The talks were supposed to set new modern standards in trade for fair competition between state-owned enterprises and private firms and for protection of foreign investment, but Mr Lamy said the countries in the TPP were so diverse and at such different levels of development that the “lowest common denominator will not be very high”.
He said the other reason he was pessimistic was that the United States was not giving any sign it was willing to make major concessions itself in order to extract concessions from the other countries…
Mr Lamy was critical of the US push to use the TPP to extend the duration of intellectual property protection for patented pharmaceuticals to as long as 15 years…
“Extending this to 15 years goes too far at the expense of affordable access to medicine for quite a large number of poor people.”
Meanwhile, Fairfax’s John Garnaut has noted that the TPP is all about reasserting US dominance:
John Howard touted $5.6 billion in annual benefits from a bilateral deal with George W. Bush in the aftermath of the second Iraq War, but it turned out to be a dud. Not only did the US FTA siphon money from Australian taxpayers and patients to American pharmaceutical companies, it might have destroyed about $53 billion more trade than it created…
Obama needs the TPP so that his “rebalancing” to Asia does not look so unbalanced.
“If we don’t write the rules, China will write the rules out in that region,” Barack Obama said in an interview with The Wall Street Journal. “We will be shut out.”
In the words of Ely Ratner, at a Washington think tank: “The TPP is the most prominent and in some ways the most important manifestation of the US vision of an open and inclusive regional order in Asia”…
None of this means that we or anybody else should swallow the whole American prescription. Australia has fought a long and apparently successful fight to exempt the Privacy Act from “data flow” requirements. And the US proposals for medicines are all about industry protectionism, dressed up as free trade, and they should never be accepted.
But taken as a whole, the TPP provides a useful start to updating the rules that are needed to underpin an open, peaceful, rules-based order that can no longer be taken for granted.
We should know the outcome of the TPP negotiations on Saturday morning Australian time.