After multiple extensions of negotiations in Atlanta, Georgia, the Trans-Pacific Partnership (TPP) Ministerial Meeting concluded early Monday morning with the announcement of a final deal. TPP negotiators spent Saturday into Monday morning hashing out final compromises on biologics exclusivity, dairy market access, sensitive products, investor-state dispute settlement, and other last-minute issues. The deal culminates negotiations that stretch as far back as President George W. Bush’s Administration, which made the decision to engage with the TPP countries in negotiating a free trade agreement that covers 40 percent of global trade.
President Barack Obama welcomed the final deal. The White House released a fact sheet this morning proclaiming:
The Trans-Pacific Partnership (TPP) is a new, high-standard trade agreement that levels the playing field for American workers and American businesses, supporting more Made in America exports and higher-paying American jobs. By eliminating over 18,000 taxes – in the form of tariffs – that various countries put on Made in America products, TPP makes sure our farmers, ranchers, manufacturers, and small businesses can compete – and win – in some of the fastest-growing markets in the world. With more than 95 percent of the world’s consumers living outside our borders, TPP will significantly expand the export of Made in America goods and services and support American jobs.
The full text of the 30-chapter deal is not expected to be available for several weeks. With that in mind, below is a summary of some of the developments reported in recent days by a variety of media sources and theOffice of the U.S. Trade Representative. We also note some initial responses from select Members of House and Senate Leadership and some next procedural steps ahead for Congressional review of the deal.
Biologics. U.S. Trade Representative Michael Froman said the final deal would entail at least five years of exclusivity for data used to show the safety and efficacy of advanced drugs known as biologics. This protection would be complemented by other mechanisms that TPP countries already have in place in order to encourage innovation in this sector. The deal reached is far short of the 12 years of market exclusivity provided under U.S. law and for which Senate Finance Chairman Orrin Hatch (R-Utah) and the U.S. brand-name pharmaceutical industry had advocated.
Automobiles. The United States and Japan reportedly reached agreement in principle on automobile market access and rules of origin in talks that also included Canada and Mexico. Under the TPP, the United States will eliminate its 25 percent tariff on trucks after 30 years and its 2.5 percent tariff on automobiles after 25 years. The deal will also reportedly eliminate U.S. tariffs on 80 percent of auto parts immediately, effective the first day the deal goes into force.
With respect to automotive rules of origin, or the percentage of auto components that must originate in a TPP country, the deal reportedly requires 45 percent net-cost domestic content rules for cars, 45 percent of net-cost content for “core parts,” and 40 percent for other parts.
Investor-State Dispute Settlement. Negotiators in Atlanta also agreed to reform the Investor-State Dispute Settlement (ISDS) process to make it easier for foreign governments to defend themselves and to have frivolous claims dismissed. Although the agreement still allows corporations to challenge government actions that damage their investments, the updated provision would require investors to prove all the elements of their damage claims. Other changes also address conflicts of interest among lawyers who decide the cases by establishing a new arbitrator code of conduct, and would make clear that companies cannot challenge a country’s laws or regulations simply because they impact the company’s expected profit. Finally, language reportedly contained in the agreement’s “preamble” emphasizes that a country retains the right to impose regulations that promote the public interest, including in the areas of health, safety, and the environment.
State-Owned Enterprises (SOEs). According to USTR, the TPP agreement includes the first-ever disciplines to ensure that SOEs compete on a commercial basis and that the advantages SOEs receive from their governments, such as unfair subsidies, do not have an adverse impact other TPP countries’ workers and businesses. TPP countries have also agreed to share a list of their SOEs and to provide, upon request, additional information about the extent of government ownership or control and the non-commercial assistance they may provide to SOEs. There are also some exemptions to the SOEs chapter, which includes country-specific exceptions set out in annexes.
Intellectual Property. According to USTR, the TPP agreement’s Intellectual Property (IP) chapter covers various forms of IP (including patents, trademarks, copyrights, industrial designs, geographic indicators, and trade secrets) and the enforcement of IP rights, as well as other related areas where the parties agree to cooperate.
Textiles/Apparel. The TPP parties reportedly agreed to eliminate tariffs on textiles and apparel; while most would be eliminated immediately, other more sensitive products will see their tariffs reduced over time. The agreement also includes specific rules of origin that require the use of yarn and fabric from TPP countries, allowing for a “short supply list” of those not widely available in the region. Finally, the textiles chapter reportedly includes provisions on customs cooperation and enforcement and special safeguards to protect against any sudden surges in imports.
Labor/Environment. Labor groups in the United States, including the AFL-CIO, have expressed concerns that the agreement does not do enough to ensure that TPP partners, such as Malaysia, Brunei, Mexico, and Vietnam, will comply with internationally recognized labor and environmental standards. However, the agreement’s supporters argue that the deal features the strongest labor provisions ever contained in a free trade agreement. Specifically, the agreement would reportedly require Vietnam to allow the creation of independent labor unions and compel Malaysia to address forced labor and human trafficking concerns. In addition, the final agreement stipulates that all TPP member states must abide by core International Labor Organization (ILO) standards, which prohibit forced labor, child labor, and employment discrimination. Under the agreement, the United States could impose trade sanctions on countries who fail to come into ILO compliance.
TPP’s environmental chapter contains provisions against illegal wildlife trafficking and illegal or unsustainable logging or fishing practices, and the agreement includes enhanced protections for various marine species, including sharks. TPP members have also agreed to work together to address other important environmental issues, including global warming and ozone pollution, conservation and sustainable use of biodiversity, and lowering emissions standards.
Sensitive Products. According to U.S. Department of Agriculture Secretary Tom Vilsack today, the TPP will significantly reduce tariffs on U.S. products and deter non-science based sanitary and phytosanitary barriers that have put American agriculture at a disadvantage in TPP countries in the past by removing trade barriers on meat, poultry, dairy, fruits, vegetables, grains, oilseeds, cotton and processed products exports. The White House fact sheet specifically highlights that TPP will eliminate import taxes as high as 40 percent on U.S. poultry products, 35 percent on soybeans, and 40 percent on fruit exports.
- Dairy. While New Zealand and Australia advocated to reduce trade barriers that block imports of dairy products like cheese, butter, and milk powder, U.S. producers insisted that the deal open up Japan and Canada’s markets enough to compensate them for any sales that they lose at home to new foreign competition. The deal reportedly guarantees that 3.25 percent of Canada’s annual dairy production will be allotted to foreign dairy imports. While Japan’s state-owned trading company would apparently be allowed to continue to regulate dairy imports, Japan has agreed to establish a quota for imports of powdered skim milk and butter.
- Rice. The United States will reportedly be able to sell over 100,000 tons of additional rice per year to Japan. In a move viewed as favorable to U.S. rice exporters, Japan has apparently provided the United States a country-specific quota and agreed to reallocate some of its World Trade Organization import quota to medium-grain rice.
- Sugar. The United States reportedly only gave a modest amount of new sugar market access through country-specific quotas for Australia, Canada, and a few other countries. Australia is reportedly satisfied that a mechanism has been established to allow its sugar producers to gain access to future growth in U.S. sugar demand. The American Sugar Alliance said it still needs to review the final language and verify details in the TPP deal but expressed cautious optimism about details it has learned thus far.
- Pork. Under the final deal, Japan reportedly would be able to maintain its system that establishes minimum price at which pork imports are allowed to enter the country. The National Pork Producers Council expressed confidence today that the TPP will provide new market access opportunities for U.S. pork products.
Currency. Reports indicate U.S. officials are close to concluding a side agreement to the TPP that seeks to address congressional concerns over currency practices. The deal would reportedly require governments to work to find common ground on exchange rate policies, develop a transparent system for reporting on currency policy decisions, and meet yearly on this issue.
However, the side deal – reportedly negotiated separately among the negotiating parties’ finance ministers and central banks – may not appease those Members of Congress who have demanded enforceable provisions directly tying trading partners’ currency policies to the deal’s benefits. Ford Motor Company has already issued a statement calling on Congress to reject the TPP agreement because it does not contain enforceable currency provisions. It remains unknown whether the TPP text will directly reference this or any other side deal.
Washington Responds. Congress’ responses to the announcement of a TPP deal have ranged from disappointment to cautious acceptance. Many are reserving judgment, pending the public release of the final deal.
- President Barack Obama, U.S. President: “Trade ministers from the 12 nations that make up the Trans-Pacific Partnership finished negotiations on an agreement that reflects America’s values and gives our workers the fair shot at success they deserve.”
- Senator Orrin Hatch, Senate Finance Committee Chairman: “While the details are still emerging, unfortunately I am afraid this deal appears to fall woefully short. Over the next several days and months, I will carefully examine the agreement to determine whether our trade negotiators have diligently followed the law so that this trade agreement meets Congress’ criteria and increases opportunity for American businesses and workers. The Trans-Pacific Partnership is a once in a lifetime opportunity and the United States should not settle for a mediocre deal.”
- Senator Ron Wyden, Senate Finance Committee Ranking Member (D-Oregon): “I’m pleased to hear reports that the deal reached today includes, for the first time, an agreement to curb currency manipulation and new and enforceable obligations on countries like Vietnam and Malaysia to uphold labor rights. I also understand that the agreement will include commitments to stop trade in illegal wildlife and first-ever commitments on conservation. … I look forward to the details of this agreement becoming public as soon as possible, so Oregonians and the rest of the American public can weigh in.”
- Representative Paul Ryan, House Ways and Means Committee Chairman (R-Michigan): “Only a good agreement … will be able to pass the House,” Ryan said in a statement. “I am reserving judgment until I am able to review the final text and consult with my colleagues and my constituents. In particular, I want to explore concerns surrounding the most recent aspects of the agreement.”
- Representative Pat Tiberi, House Ways and Means Subcommittee on Trade Chairman (R-Ohio): “Today the administration announced there was an agreement reached in the Trans-Pacific Partnership (TPP) negotiations, and I look forward to reviewing the text closely to ensure it follows the objectives Congress laid out in passing Trade Promotion Authority (TPA). TPP has the potential to increase American influence and provide access for American businesses to sell their products and services around the world. However, there are many complex issues involved in this agreement that require careful consideration to ensure that the outcome is beneficial for the U.S. economy and jobs. I am pleased the passage of TPA earlier this year will allow the public to fully review the text of TPP, and I look forward to receiving input from my constituents and other stakeholders.”
- Representative Sander Levin, House Ways and Means Committee Ranking Member (D-Michigan): “Progress has been made on important issues, with the outcome on a multitude of issues still requiring deeper scrutiny, and others falling short of the results we seek. Indeed, at the heart of any trade agreement is its impact on jobs and economic growth. But as we have seen during the course of these negotiations, there are new issues that impact the terms of competition, and others that are vital to the integration of the TPP economies. We have to get this agreement right, which is why no one should be surprised if the 90-day period results in additional changes, particularly since many of these issues are the subjects of bi-lateral negotiations. The most important objective is to get the strongest agreement that benefits American workers and the U.S. economy for generations. The role of Congress now is as important as ever.”
- Outgoing Speaker of the House John Boehner (R-Ohio): “More trade means more jobs, better pay, and more opportunities for our workers, farmers, and small businesses. More trade also gives us the opportunity to advance America’s leadership around the world. Because of recently-enacted Trade Promotion Authority, the American people have the chance to closely review this agreement and Congress must ensure it meets the highest standards before moving forward.”
- House Majority Leader Kevin McCarthy (R-California): “I will be discussing this agreement with my constituents and Congressional colleagues to ensure that it lives up to the high standards of a 21st century trade agreement that safeguards and promotes innovation, expands access for agricultural producers, and ensures that U.S. standards and protections are upheld.”
- Senate Majority Leader Mitch McConnell (R-Kentucky): “This deal demands intense scrutiny by Congress and the legislation we passed earlier this year provides us the opportunity to give this agreement that scrutiny. We are committed to opening trade in a way that benefits American manufacturers, farmers, and innovators, but serious concerns have been raised on a number of key issues.”
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