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The controversial Trans-Pacific Partnership has had a long and troubled journey. By all accounts it has now truly hit the rocks – and some say it’s sunk
Critics are urging governments to walk away from a controversial free trade deal after negotiators missed a key deadline at the end of July. Opponents say the Trans-Pacific Partnership agreement’s hidden costs – namely compromised sovereignty, food safety, public health and environmental quality – far outweigh any free trade benefits. Looming elections in the US and Canada, coupled with the absence of an agreed date for the next round of talks, are fuelling speculation that the TPP may be shelved.
Failure to gain resolution on the TPP negotiations at the end of July in Maui prompted critics to suggest that the controversial trade deal may be foundering. Disagreements over how much market access to give on sensitive products such as dairy and a dispute over intellectual property rules have again stalled the five-year-long negotiations. While the negotiators were disappointed by the missed deadline, TPP critics are viewing it as a stay of execution for healthcare and the environment.
The sheer scale and combined economic clout of the TPP members, which account for 40% of global GDP and one-third of world trade, makes the TPP one of the most powerful free trade agreements ever to have been negotiated. The deal seeks to eliminate tariffs and standardise environmental, labour, and intellectual property regulations across Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam.
Despite being negotiated behind closed doors, leaked documents indicate that the gains to be had from increased access to some of the TPP’s heavily protected markets will be undermined by crucial tradeoffs. This has created a groundswell of opposition to the deal in many of the member countries.
Documents leaked so far reveal that the US is aggressively pushing an agenda for intellectual property and foreign investment that threatens to increase the cost of healthcare and undermine governments’ ability to enforce or implement laws that protect national interests such as labour, health and environmental quality.
In August, a leaked TPP chapter on intellectual property rights revealed extensive discord among its members. The text is “bristling with hundreds of brackets”, indicating that despite the agreement being at the late-stage draft, many TPP negotiators remain opposed to the terms, notes TPP commentator Professor Deborah Gleeson of Australia’s La Trobe University.
"Our goal in TPP is to raise standards across the board, from promoting strong labour and environmental protections to upholding the rule of law," US State Department spokesman Kerry Humphrey told Reuters journalist Alison Tang in August, suggesting that a standardised set of rules would raise the bar on trade practices, supporting sustainable business practices among its members.
Given the potential influence of the TPP, non-governmental organisations such as WWF and sustainable oceans foundation Oceana had initially seized upon the TPP as an opportunity for its members to introduce stronger obligations on issues such as illegal trade in natural resources and the phasing out of fishing subsidies. Other advocates, such as the US Coalition for TPP, say it promises to give businesses access to about 600 million people with the result of increasing the gross domestic product of its member countries.
For smaller economies such as New Zealand, the prize is the reduced price volatility via increased market liquidity that trade liberalisation promises to confer. For New Zealand’s farmer cooperatives such as Fonterra, which are feeling the sting of China’s cooling economy, it’s a theoretically compelling deal. With 35% of New Zealand’s exports comprising dairy, it is little surprise that industry body Dairy Companies Association of New Zealand is urging New Zealand farmers not to miss a “once in a generation deal”.
Yet agriculture, along with autos and pharmaceuticals was a key sticking point at the July Maui talks. Talks are set to resume in the “near future”, but with Canada’s federal elections looming in October, lowered tariffs are unlikely to win the vote of its powerful farm lobby, making New Zealand’s objective of increased access to Canada’s lucrative dairy market a distant aspiration.
Japan’s ambition for increased access to the US and Mexico automotive parts markets is similarly being stymied. The US and Mexico are concerned that accessions to Japan will undermine aspects of the North American Free Trade Agreement, such as rules of origin on components.
In any case, the trade-offs in others areas of the economy may prove too significant for countries to ratify the deal. “The benefits are vastly overstated,” says Barry Coates, former executive director of Oxfam NZ, citing a range of hidden business costs embodied within the TPP, such as changes to patent laws “which, if anything, will inhibit business innovation”.
No such thing as a ‘free trade’
The concept of free trade within the TPP has been steadily eroded since the negotiations on broadened TPP terms and the unresolved investment and financial services chapters began in 2010. Rather than engendering solidarity and cooperation for dismantling trade barriers, the successive TPP negotiations have instead fostered brinkmanship among its growing membership, with some members quietly cutting deals on the side.
One such example is the Healthcare Transparency Annex. Having originally been strongly rejected by TPP members, it was reintroduced in an updated format within the 2014 draft TPP agreement following sideline negotiations between US, Japan and Australia. Instead of promoting free trade, the Annex tightly specifies the operation of countries’ schemes for subsidising pharmaceuticals and medical devices.
Such items set a “terrible precedent” for using regional trade deals to tamper with other countries’ health systems, says LA Trobe’s Gleeson. The Annex could restrict the options available to developing countries seeking to introduce pharmaceutical coverage programmes in future, she warns.
Ruling out sustainable development?
The TPP does include an environment chapter, which contains a handful of binding clauses that support sustainable fisheries. Specifically, these prohibit new and existing subsidies that target the fishing of overfished stocks; and subsidies to flagged fishing vessels while listed by the flag state for illegal, unreported or unregulated fishing.
In this way, “the TPP will promote long-term conservation of marine resources, including sharks and other threatened species”, says US Trade Representative Michael Froman earlier this year. For depleted Pacific fish stocks such as Tuna, this is good news. But for broader sustainability issues, the good new ends about there.
The remaining body of the environment chapter advises its members to favour “flexible, voluntary mechanisms [to protect natural resources and the environment] … that avoid the creation of unnecessary barriers to trade”. The dispute settlement mechanisms it creates are cooperative instead of binding; there are no required penalties and no proposed criminal sanctions for damage to the environment by foreign corporations and investors.
The weak wording of the environment chapter contrasts starkly with the prescriptive language of the TPP’s investment and intellectual property rights chapters. The Investor-state Dispute Settlement provision (ISDS) within the investment chapter enable corporations to sue governments via closed-door tribunals for policies and regulations that erode a foreign corporation’s profits.
A number of TPP partners are small countries for which the threat of multi-million-dollar litigation from large foreign corporations would be enough to discourage regulators from pushing through reforms designed to protect the public interest, says the Sustainability Council of New Zealand's executive director Simon Terry. “The environment and health sectors would be the chief casualties,” he says.
In countries such as New Zealand, whose agricultural and marine policies are shaped by environmental and biodiversity considerations, this could have a “regulatory chill” effect.
In Canada alone, under the North American Free Trade Agreement’s ISDS, 35 lawsuits have been levelled against the government. Of these, 63% involved challenges to environmental protection or resource management programmes that allegedly interfered with the profits of foreign investors.
ISDS tribunals are also being used to subvert regulations designed to protect public health and labour rights. Australian taxpayers have already shelled out $50m in litigation with Philip Morris, which is currently suing their government for implementing plain packaging laws designed to protect the health of its citizens. Labour issues, too, are at stake. Last month, activists at a migrant labour conference hosted in Jakarta by the Solidarity Centre highlighted that ISDS has been used to pressure states not to raise the minimum wage or enact labour reforms.
Yet, despite a growing opposition to ISDS that includes former judges, law professors and prominent lawyers from TPP nations who urge TPP negotiators to exclude the Investor-State system from the agreement, Australia’s remains the only voice at the TPP table calling for an exemption from the ISDS rules.
And the winner is…
The most hotly contested area of the TPP is intellectual property rights, patents and data exclusivity. The TPP chapter on intellectual property covers all intellectual property types included in Part II of the World Trade Organisation’s Trade-Related Aspects of Intellectual Property Rights (Trips) agreement, plus some others, including not only patents, copyrights and trademarks, but also “undisclosed information”, test data for the registration of drugs, industrial designs, layout-designs of integrated circuits among others, says James Love, director of Knowledge Ecology International (KEI).
Above all, Big Pharma is the big winner. A document leaked in August by KEI in the wake of the Maui talks reveals excessive intellectual property protections for medicines. US negotiators have aggressively pushed for 12 years of data exclusivity for biologic medicines, which include vaccines and drugs to treat conditions such as cancer and multiple sclerosis.
The leaked document, while pre-dating the Maui talks, indicates that the data exclusivity period has been reduced to eight years. Even in its watered down version, the TPP threatens to make national healthcare agencies such as New Zealand’s Pharmac the big losers.
Data exclusivity provides an alternative monopoly to patents. It prevents regulatory authorities from allowing price-competitive generic competitors to enter the market with previously generated clinical data. Unlike a patent, data protection cannot be challenged in court. It also presents a potential impediment to compulsory licensing, which has historically served as an important public health safeguard.
Keeping these drugs under monopoly is likely to cost the Pharmaceutical Benefits Scheme in the order of hundreds of millions of dollars per year, says Gleeson. “It’s a terrible deal for access to affordable medicines,” concurs Manica Balasegaram, executive director of NGO Medecins Sans Frontiere’s Access Campaign.
Other contested areas of the intellectual property rights chapter include copyrights and patents. The US, under pressure from Hollywood lobbyists, has leaned on TPP members to accept a broad definition of a criminal violation of copyright where even non-commercial activities could result in a criminal conviction; excessive copyright terms of 70-plus years after an author’s death; and provisions that enable judges to unilaterally order the seizure, destruction, or forfeiture of anything that can be traceable to copyright infringement activity.
Under such obligations, law enforcement could become ever more empowered to seize laptops, servers, or even domain names, warns US NGO Electronic Frontier Foundation’s Maira Sutton. The broader impact on business will be to inhibit, rather than foster, innovation.
Given the division among members on major issues like pharmaceuticals, autos and agriculture, critics say it is unlikely that the TPP will ever see the light of day. “People simply don’t believe that a deal that raises the price of medicines and handcuffs the right of governments to regulate is in their national interests,” says Jane Kelsey, law professor at Auckland University.
Articulating prevailing public sentiment within the 12 countries engaged in on-going TPP negotiations, Kelsey notes: “The underlying reason for the gridlock is the domestic opposition in almost all the TPP countries … politicians know they can’t sign a final deal that they can’t sell at home”.
TPP quick facts
The Trans-Pacific Partnership was originally a tripartite trade agreement called the Trans-Pacific Strategic Economic Partnership, between New Zealand, Chile and Singapore, conceived of on the sidelines of an Asia Pacific Economic Cooperation summit back in 2002. In 2006 the agreement came into force among its four final members, or the P-4 (Brunei-Darussalam having signed up in 2005).
What has changed since 2006?
The Trans-pacific Strategic Economic Partnership, while designed to facilitated greater trade liberalisation, was worded to protect member governments’ discretionary powers to safeguard national priorities. The preamble that informed the 20 chapters of the agreement explicitly recognised “the rights of [the four] governments to regulate in order to meet national policy objectives”; and preserve “[the government’s] flexibility to safeguard the public welfare”.
2002: New Zealand, Chile and Singapore enter into negotiations over terms of the Trans-Pacific Strategic Economic Partnership. The partnership is dubbed the Pacific Three (P3).
2005: Brunei joins the negotiations.
2006: The Trans-Pacific Strategic Economic Partnership, dubbed the P-4, comes into effect, with the exception of the financial services and investment chapters. Negotiations on these two chapters are deferred for two years.
March 2008: Negotiations on the financial services and investment chapters begin. US president George W Bush announces US intentions to enter the agreement, pending a decision whether to participate in a negotiation for an expanded TPP agreement.
September 2008: US announces its decision to fully participate in negotiations. Australia, Peru and Vietnam also enter negotiations.
2009: TPP talks delayed due to a change in the US administration. In November, president Barack Obama reaffirms US participation in TPP negotiations.
March 2010: Negotiations for an expanded agreement begin.
October 2010: Malaysia enters the TPP negotiations.
November 201: Leaders of the nine TPP countries announce the broad outlines of an ambitious, TPP agreement.
June 2012: Canada and Mexico are formally invited to join the TPP negotiations.
November 2012: Seven TPP Leaders expressed desire to see an agreement concluded in 2013.
December 2012: Canada and Mexico enter TPP negotiations.
July 2013: Japan enters TPP negotiations bringing TPP membership to 12.
July 2015: Deadline to conclude TPP talks expires without resolution on intellectual property rights, agriculture and automobiles.TPP trade free trade New Zealand Chile Singapore US healthcare