Please note: the purpose of this diary series is not an argument for or against the Trans-Pacific Partnership (TPP).
There have been a great number of diaries written on this topic, and my only goal here is to provide more information regarding what TPP does, and what it doesn't do.
Part one: Understanding free trade agreements can be found here.
Part Two: Manipulating Free Trade can be found here.
In Part One, we discussed how FTAs don't create a free for all between trade partners; there are provisions that each partner must work within, and many times trade between, for example, Canada, the United States, and Mexico will fall outside of the parameters of NAFTA.
But in Part Two we learned how that can sometimes (or even often) be manipulated, so that exporters obtain preferential treatment even when products don't (or shouldn't) fall within those parameters.
We learned in both part one and part two how some countries are able to negotiate much stronger standing than other partners in a FTA. (Mexico flooding the sugar market of North America to the detriment of Canada, for example.)
Before we do the jump, let's go over a few of the necessary notes and such:
First, I appreciate all of the positive feedback I've received, and I really appreciate the questions that I get in the comments section. That helps me understand my audience a bit more and attempt to address specific questions and concerns that some readers have.
That being said, I don't think I fully appreciated what a monster this project would be until I started writing it. In fact, this started as a single diary in December. Due to the many disruptions in my life around that time I had to temporarily abandon it. When I came back to revisit it, I realized that it would have to be a series or the longest blog post ever written. (I think I've passed the "TL;DR" threshold in each diary already, so I truly do appreciate those of you have stuck with me on this.)
So there are a lot of other points about FTAs that I wanted to address before we moved on to the TPP, but we're getting to the point where we don't have a lot of time left on this subject and I'm going to have to let those things be side-notes in subsequent diaries. (Whenever this happens, I'll still make myself available in the comment sections to further elaborate on any point that seems unclear.)
And, finally, please keep in mind that as we venture on to the meat of the TPP that things might take a different tone. This is for a few reasons:
A) Where I don't have a strong opinion on FTAs in general, I do have one on the TPP. From this point on, we're going to be analyzing the TPP and I hope to keep my personal feelings out of it, but I can't promise that it will happen. Analyzing this for me means wearing a few different hats, so I apologize in advance if we veer from a "just the facts" series to a more opinionated piece.
B) Analyzing the TPP is going to be difficult given that I don't have a document to compare and contrast with previous trade agreements. Leaked documents and other reports are not the same as a final deal, so we'll all be fumbling in the dark on this point.
C) The main reason that I wanted to address the TPP is because it is not a traditional free trade agreement. That is also why I wanted all of you to have a better understanding of what a traditional free trade agreement consists of. We'll get into the hows and whys of how TPP differs from NAFTA, but the short version is: TPP goes well beyond simple trade and into much murkier waters.
This means that I can address in detail the trade part of the deal, but there are provisions that involve trade only tangentially and I am simply not qualified to analyze that with the rigor that I'd have with a compare and contrast to NAFTA and CAFTA. TPP is simply above and beyond that.
Alright, let's do the jump and understand the basics of TPP.
The TPP was preceded by the Trans-Pacific Strategic Economic Partnership Agreement (PDF warning), otherwise known as P4 (Pacific Four). This was a more traditional FTA between Brunei Darussalam, Chile, Singapore, and New Zealand.
The P4 agreement was an open one, which meant that other countries could join even after it went into effect in 2006. In September of 2008, the US announced that it would be entering negotiations to join the deal; additional nations soon followed our lead.
Early in Obama's presidency, it was somewhat unclear whether he planned to continue with the negotiations but that confusion didn't last long; the Obama administration announced in late 2009 that the US would remain in negotiations.
The countries now currently included in the TPP are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and, course, the United States. It's important to note that China has expressed interest in joining the TPP- we'll get to that later, but considering that China is the elephant in the room when it comes to the TPP, it's important to note.
(I say that China is the elephant in the room because one of the main selling points from the Obama administration for the TPP has been that it allows us to set the standard for trade in the Asia Pacific region; this is not true on a few levels, and, again, we'll get to that later. But let's keep that in mind for now.)
The single biggest question about the TPP seems to be "What the hell is it?" Forgive me for being trite, but it depends on what your definition of "is" is. The fact is that, for the most part, we simply don't know, but we do have an official outline of what it's supposed to be.
More recently, however, a report (PDF warning) was released by the Congressional Research Service and it makes a few interesting points. Some of these go back to issues that we've discussed in Parts One and Two: Japan and Canada are trying to protect their "sensitive" products (i.e. cash crops) while giving little consideration "sensitive" US exports. This is to be expected in any FTA negotiation; but it's a bit worrisome that we're this far along in the process and we've basically negotiated away our natural resources while not getting access to Japan's or Canada's.
At this point in the negotiations, the U.S. dairy industry, as represented by the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC), are pressing for greater access to certain dairy product markets within the TPP, particularly Canada and Japan. In a joint letter to Members of Congress on March 2, 2015, the NMPF and USDEC emphasized the importance of striking a TPP agreement that expands access to these markets for the U.S. dairy
industry, stating: “Our goal is an agreement that on balance offers net trade benefits to the U.S. industry. To get there, market access into the region’s most protected dairy markets—Japan and Canada is imperative.” The letter continues, “However, Japan needs to do more; in particular it needs to provide avenues for U.S. export growth in all areas.” The two dairy organizations made a pointed reference to Canada, asserting, “Likewise, Canada has yet to put forward an offer on dairy. In order for TPP to be successful and truly comprehensive, it is imperative that Canada provide significant market opening for the full range of U.S. dairy products.”
In a subsequent letter of March 19, 2015 that was addressed to Agriculture Secretary Tom Vilsack and U.S. Trade Representative Michael Froman, along with their counterparts in Australia and New Zealand, the NMPF, USDEC, the International Dairy Foods Association, together with dairy industry organizations in Australia and New Zealand, struck a similar theme. In this letter, the dairy groups highlighted the importance of achieving increased market access in Japan and
Canada, and asserted that more progress is needed on that front. Thus the letter states, “While negotiations with Japan have made progress, vital work remains.” The letter adds, “In addition, Canada now needs a great deal more focus and we urge the immediate commencement of focused dairy market access negotiations with Canada. It is imperative that Canada provide commercially meaningful market openings for all dairy products if it is to remain a participant in the treaty.”
Full disclosure: I am a former dues-paying member of USDEC.
Again, this is just run-of-the-mill FTA stuff, but it does illuminate one of the largest problems I've always seen with the way the US negotiates FTAs: we're so eager to get our goods into more markets that we end up giving them away without getting a lot back in return.
But since we're once again veering into TL;DR territory, let's look at a few more tidbits from that report then wrap this up.
The debate over patent provisions in the TPP also relate to pharmaceuticals and access to medicines, one of the more controversial provisions in U.S.-negotiated FTAs in recent years. The controversy revolves around whether to assert the more far-reaching IPR provisions of the KORUS FTA or to adopt the somewhat more flexible “May 10th Agreement” provisions found in the Colombia, Peru, and Panama FTAs. Based on published reports, it appears that U.S. negotiators are trying to develop an approach that would build on the May 10th
Agreement, which sets different standards for developed countries (as found in the KORUS FTA) than developing countries (as in the Colombia, Panama, and Peru FTAs) for certain intellectual property provisions.
In late November 2013, USTR reportedly introduced a revised proposal that would attempt to balance the provision of certain patent protections with the ability of developing countries in the TPP to access needed medicines. The new proposal tracks the intent of the May 10th provisions by reportedly providing options to developing countries in the TPP concerning certain patent protections, at least as long as they remained a developing country based on some agreed-upon
benchmark. According to reports, the proposal would allow developing countries to follow the provisions of the U.S. Peru FTA, under which
• patent term extensions, which allow for the extension of a patent term in
cases of “unreasonable” delay in market approval, would be optional;
•patent linkages—preventing regulators from extending market approval to a
generic drug without determining that an existing patent would not be
violated—would be optional provided a rights-holder would otherwise be
able to defend the patent; and
• data exclusivity, the prohibition of use by generics of clinical test data
(usually supplied by the original patent holder), would be for five years after
marketing approval for the patented product. However, the Peru FTA
permitted the clock to start on the exclusivity period at the time of first-
country market approval if the second country approved the product within
six months of the date of first market approval.
Countries reportedly would be eligible for these provisions based on an economic indicator such as per capita gross national income (GNI) or product (GDP). If the World Bank benchmark of $12,161 per capita GNI was used, Malaysia, Mexico, Peru, and Vietnam would qualify as developing in the TPP. Other countries would have to adhere to as yet undetermined standards based on language contained in the Australia, Chile, and Singapore FTAs with the United States.
[
ed note: the KORUS FTA is between South Korea and the US; the provisions about pharmaceuticals essentially prevented South Korean generic pharmaceutical makers from using safety and efficacy language created by a US patent holder, among other things. Essentially, South Korea has a rather large generic pharmaceutical industry and the US used our FTA to safeguard US patent holders of name brand pharmaceuticals.]
And, the part that has most people concerned about this agreement:
One issue that has become contentious is whether to include an ISDS provision, which allows for private foreign investors to seek international arbitration against host governments to settle claims over alleged violations of foreign investment provisions under the agreement. Except for the FTA with Australia, U.S. FTAs have included an investor-state arbitration provision. The investor-state
provision is designed to protect foreign investors from the vagaries of domestic judicial systems, particularly in developing countries, for example, in such cases as government expropriation of foreign-held assets.
Critics have argued that investor-state procedures give foreign investors greater protection than domestic investors and infringe on the sovereignty of the host government in protecting the health and safety of its citizens. However, provisions in the KORUS and other U.S. FTA on the shared understanding of expropriation states that “nondiscriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health,
safety, the environment, and real estate price stabilization...do not constitute indirect expropriation. Nonetheless, some maintain that the threat of such suits may serve as a “chilling effect” preventing nation states from considering such regulations.
Until recently, Australia has argued against including an investor-state dispute settlement mechanism—although it too has investor-state provisions in many of its FTAs—thus generating disagreement with other TPP partners. Opposition to
ISDS may stem in part from an attempt by Philip Morris International to use an investor state provision in an Australian-Hong Kong bilateral investment treaty to take the Australian government to arbitration for its requirement for plain packaging for cigarettes, which the company believes expropriates its trademarks. Philip Morris
filed the suit from its Asian operations headquartered in Hong Kong.
As noted in the report, an ISDS mechanism isn't entirely unprecedented. But it is enough to give most people cause for concern; it's one thing to negotiate such a clause with one or two nations. When it's a clause that applies to eleven other nations, there's reason to believe that it can or will be abused.
In an upcoming post I'll be delving more into the ISDS mechanism and what it means practically; probably unsurprisingly, this is a rather interesting topic.
We're also going to get into a deeper discussion on China and how it relates to the TPP because I think this is absolutely critical to the conversation. And needless to say, there are still many other topics to cover as it relates to the TPP and I will do my best to cover all of these angles.
As always, keep your questions/thoughts/concerns/criticisms coming my way.