US and 11 other countries reach landmark Pacific trade pact

Trade ministers from 12 countries announced the largest trade-liberalizing pact in a generation on Monday. In a press conference in Atlanta, trade ministers from the US, Australia and Japan called the the Trans-Pacific Partnership an “ambitious” and “challenging” negotiation that will cut red tape globally and “set the rules for the 21st century for trade”.

The deal – in the works since 2008 – is a major victory for the US president, Barack Obama. “This partnership levels the playing field for our farmers, ranchers and manufacturers by eliminating more than 18,000 taxes that various countries put on our products,” the president said in a statement. “It includes the strongest commitments on labor and the environment of any trade agreement in history, and those commitments are enforceable, unlike in past agreements.”

While it still faces major hurdles, not least in Congress, the deal could reshape industries and influence everything from the price of cheese to the cost of cancer treatments. It is expected to set common standards for 40% of the world’s economy, become a new flashpoint for the 2016 presidential campaign, and could become a legacy-defining agreement for the Obama administration.

The deal is seen as a challenge to China’s growing dominance in the Pacific region. China had been invited to join the trade group but balked at restrictions that the deal would have placed on its financial sector and other areas.

“Long after the details of this negotiation like tons of butter have been regarded as a footnote in history, the bigger picture of what we have achieved today remains,” said New Zealand’s trade minister, Tim Groser. “It remains inconceivable that the TPP bus will stop at Atlanta.”

Lawmakers in TPP countries must also approve the deal, setting up potentially months of congressional wrangling on the deal.

The final round of negotiations in Atlanta, which began on Wednesday, had got stuck over the question of how long a monopoly period should be allowed on next-generation biotech drugs, until the United States and Australia negotiated a compromise. Negotiations went as late as 5am on Monday local time, the US trade representative, Michael Froman, said.

The TPP deal has been controversial because of the secret negotiations that have shaped it over the past five years and the perceived threat to an array of interest groups from Mexican auto workers to Canadian dairy farmers.

Although the complex deal sets tariff reduction schedules on hundreds of imported items from pork and beef in Japan to pickup trucks in the United States, one issue had threatened to derail talks until the end: the length of the monopolies awarded to the developers of new biological drugs.
Negotiating teams had been deadlocked over the question of the minimum period of protection of the rights to data used to make biological drugs, by companies including Pfizer Inc, Roche Group’s Genentech and Japan’s Takeda Pharmaceutical Co.

The United States had sought 12 years of protection to encourage pharmaceutical companies to invest in expensive biological treatments like Genentech’s cancer treatment Avastin. Australia, New Zealand and public health groups had sought a period of five years to bring down drug costs and the burden on state-subsidized medical programs.

Negotiators agreed on a compromise on minimum terms that was short of what US negotiators had sought, people involved in the closed-door talks said. The agreement would protect the data for between five and eight years, the New York Times reported.

“This is one of the most challenging issues in the negotiations,” Froman said about biologics. He said member countries believe the TPP “incentivizes the development of these new live-saving drugs while ensuring access to these medicines”.

The Biotechnology Industry Association, in Washington DC, said it was “very disappointed” by reports that US negotiators had not been able to convince Australia and other TPP members to adopt the 12-year standard approved by Congress.

“We will carefully review the entire TPP agreement once the text is released by the ministers,” the industry lobby said in a statement.

Final hours

A politically charged set of issues surrounding protections for dairy farmers was also addressed in the final hours of talks, officials said. New Zealand, home to the world’s biggest dairy exporter, Fonterra, wanted increased access to US, Canadian and Japanese markets.

Separately, the United States, Mexico, Canada and Japan also agreed rules governing the auto trade that dictate how much of a vehicle must be made within the TPP region in order to qualify for duty-free status.

The North American Free Trade Agreement between Canada, the United States and Mexico mandates that vehicles have a local content of 62.5%. The way that rule is implemented means that just over half of a vehicle needs to be manufactured locally. It has been credited with driving a boom in auto-related investment in Mexico.

The TPP would give Japan’s automakers, led by Toyota Motor Corp, a freer hand to buy parts from Asia for vehicles sold in the United States but sets long phase-out periods for US tariffs on Japanese cars and light trucks.

The TPP deal announced on Monday also sets minimum standards on issues ranging from workers’ rights to environmental protection. It also sets up dispute settlement guidelines between governments and foreign investors separate from national courts.

Activist groups vowed to continue their protest against the deal. “The TPP is a wishlist for monopolistic corporations that inherently benefits giant multinational companies while undermining small businesses and startups,” said Evan Greer, campaign director of Fight For the Future. “US lawmakers are in the spotlight now, and they should know that the public is watching them closely and overwhelmingly expects them to vote down this terrible deal.”