U.S. and 11 Pacific Rim nations reach deal on massive trade accord

Published online: Oct 05, 2015 News

After more than six years of stalled progress and political wrangling, negotiators from the U.S. and 11 trading partners across the Pacific Rim announced a deal Monday on a landmark trade accord linking 40% of the global economy.

The agreement on the Trans-Pacific Partnership clears the way for what would be the world's largest regional trade pact.

The accord would phase out tariffs on thousands of goods and establish uniform rules of commerce. It was announced Monday morning after extended talks in Atlanta that were marked by repeated delays and last-minute hitches. Officials worked feverishly over the last five days to overcome sharp differences on drug patents, dairy markets and auto manufacturing rules.

The breakthrough on the controversial deal represents a significant victory for President Obama in his pursuit of a legacy-making goal to expand America’s influence in the Asia-Pacific region.

It sets the stage for what is almost certain to be a huge political battle, intensified by the 2016 presidential campaign, that pits the White House, many Republicans and supporters of free trade against organized labor, civic groups and many lawmakers from Obama's own party, who fear the deal will hurt workers and the environment.

Congress, which must approve the final agreement, won't vote on it for at least a few months.

Obama has argued that the Trans-Pacific Partnership will not only boost opportunities in fast-growing Asia but embed a U.S.-led system of trade and investment in a region where China has emerged as a challenger to America’s long-held dominance.

Obama, in a statement Monday, said the agreement "reflects America’s values and gives our workers the fair shot at success they deserve.

"We should write those rules, opening new markets to American products while setting high standards for protecting workers and preserving our environment," he said.

"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."

Private studies suggest that the Pacific accord would add only modestly to U.S. economic growth and have little overall effect on jobs, in part because the U.S. already has free-trade pacts with several of the Trans-Pacific Partnership nations.

Expanding Pacific trade, however, would have a proportionately larger effect in California.  Trade plays a bigger role in its economy, and the state’s strengths in agriculture, technology and entertainment figure to be among the biggest beneficiaries of an agreement.

U.S. industries such as auto, textiles and dairy, however, could experience some losses as they are likely to face greater competitive pressures from Vietnam, Japan and New Zealand. The rest of the Trans-Pacific Partnership nations are Canada, Australia, Mexico, Malaysia, Singapore, Chile, Peru and Brunei. Conspicuously absent is China, which has the biggest economy in Asia.

Major business groups applauded the agreement, although they remained cautious about its potential impact as they awaited details. Ford Motor Co. spoke out in opposition to the deal, saying the package failed to address the problem of countries unfairly using currency exchange rates to boost trade.

Since the U.S. committed to undertaking negotiations in 2008, progress has been stymied by the breadth of issues involved and competing interests from nations facing intense domestic pressures. Critics have complained about the lack of transparency in the process, as only small, select groups of people have been allowed to view working texts of the agreement, and then only under very strict confidentiality rules.

The last round of talks two months ago in Maui ended in an embarrassing stalemate. Trade ministers had warned as talks began Wednesday that time was running out on them, especially with the U.S. presidential election possibly complicating congressional action on it. Although Republicans have traditionally backed free trade, GOP front-runner Donald Trump has blasted the Pacific deal, and other candidates from both parties have expressed misgivings about it.

The thorniest of the issues that dominated the negotiations in Atlanta was over patent lengths for certain complex drugs known as biologics. U.S. trade officials had pressed for eight years of intellectual property protection for these drugs before the release of data could lead to generic substitutes. Most of the Trans-Pacific Partnership countries have drug exclusivity for five years or less, and countries led by Australia were loathe to go along with longer periods that could strain state-subsidized health programs.

Trade officials in Atlanta indicated that the sides had reached a compromise that established at least a five-year period of exclusivity, leaving wiggle room for the U.S. to seek protections for longer duration. Pharmaceutical firms in the U.S. had lobbied hard, arguing that longer patents were needed to preserve innovation given the cost of developing biotech drugs. Consumer and doctor groups, along with protesters, were in Atlanta pushing for shorter terms that they said were critical for patients to have timely access to affordable medicines.

Resolution on drug patents apparently enabled trade ministers to move ahead on another big sticking point. The U.S. agreed to allow more imports of sensitive dairy goods, a top priority for New Zealand, after Canada and Japan made concessions to open up dairy markets more in their countries.

"Based on the little information we have heard so far, it appears that the dairy agreement provisions are better than the unbalanced dairy market access picture that had emerged in recent weeks," said Jaime Castaneda, senior vice president of the National Milk Producers Federation. California is the largest milk producing state in the U.S.

Negotiators also struggled over how much foreign content would be acceptable in cars and car parts before they could be traded tariff-free among the Trans-Pacific Partnership countries. They agreed to a new, lower threshold on so-called rules of origin—a change that was sharply criticized by organized labor as a giveaway to countries that are not part of the Pacific deal, as such nations would be able to take advantage of the reduced requirement on local content. The new standard essentially revised a standard in the North American Free Trade Agreement among the U.S., Canada and Mexico.

“When you water down rules of origin and add nine countries, it's like a double whammy,” said Thea Lee, the deputy chief of staff at the AFL-CIO. “It really incentivizes a lot of outsourcing.... It's a huge surprise, and it's outrageous.”

Organized labor is expected to lead a vigorous campaign to persuade and pressure lawmakers to vote against the Pacific accord.

The AFL-CIO had already mobilized its large membership in an effort to defeat legislation giving the president powers to expedite passage of trade accords by preventing lawmakers from amending a final agreement. That authority, called fast track, was approved narrowly by Congress during the summer after a virtual revolt by Democratic lawmakers. It paved the way for the Obama administration to conclude the Pacific deal. Now lawmakers will only be able to accept or reject the accord, without making changes.

“The intense national battle over trade authority was just a preview of the massive opposition the TPP [Trans-Pacific Partnership] will face given that Democratic and GOP members of Congress, and the public soon will be able to see the specific TPP terms that threaten their interests,” said Lori Wallach, director of Public Citizen’s global trade program.

Some Democratic lawmakers said they would consider supporting the Pacific trade deal if it included strong language preventing countries from using currency exchange rates to boost exports. A provision on enforceable currency rules was not seriously considered in the negotiations, but U.S. officials were working on a side agreement that would bring all the members of the Trans-Pacific Partnership to agree to adopt high standards on currency practices.

Under the fast-track legislation, the text of a trade agreement would be published 30 days after the president gives notice to Congress of his intent to sign the trade accord. The public has 60 days to review it, and then the International Trade Commission, an independent agency, has up to 105 days to produce an economic impact assessment. In this scenario, it would be next spring before Congress could vote on the package.

Source: www.latimes.com