Historic Pacific Trade Deal Faces Skeptics in US Congress

By Krista Hughes & Kevin Krolicki 6 October 2015

ATLANTA — Twelve Pacific Rim countries on Monday reached the most ambitious trade pact in a generation, aiming to liberalize commerce in 40 percent of the world’s economy in a deal that faces skepticism from US lawmakers.

The Trans-Pacific Partnership (TPP) pact struck in Atlanta after marathon talks could reshape industries, change the cost of products from cheese to cancer treatments and have repercussions for drug companies and automakers.

Tired negotiators worked round the clock over the weekend to settle tough issues such as monopoly rights for new biotech drugs. New Zealand’s demand for greater access for its dairy exports was only settled at 5 am EDT (0900 GMT) on Monday.

If approved, the pact would cut trade barriers and set common standards from Vietnam to Canada. It would also furnish a legacy-shaping victory for US President Barack Obama, who will promote the agreement on Tuesday in remarks to business leaders in Washington.

The Obama administration hopes the pact will help the United States increase its influence in East Asia and help counter the rise of China, which is not one of the TPP nations.

Lawmakers in the United States and other TPP countries must approve the deal. Five years in the making, it would reduce or eliminate tariffs on almost 18,000 categories of goods.

Initial reaction from US Congress members, including Democrats and Republicans, ranged from cautious to skeptical.

Vermont Senator Bernie Sanders, a Democratic presidential candidate, warned the pact would cost jobs and hurt consumers. “In the Senate, I will do all that I can to defeat the TPP agreement,” he tweeted.

Many of Obama’s Democrats, as well as labor groups, fear the TPP will cost manufacturing jobs and weaken environmental laws, while some Republicans oppose provisions to block tobacco companies from suing governments over anti-smoking measures.

Republican Senator Orrin Hatch, who heads the Senate Finance Committee, was wary. “I am afraid this deal appears to fall woefully short,” said Hatch, who had urged the administration to hold the line on intellectual property protections, including for drugs.

US lawmakers can approve the deal or vote it down, but not amend it.

Currency, Drugs, Dairy, Auto Policies

Ministers said the agreement would include a forum for finance ministers from participating countries to discuss currency policy principles. This takes into account, in part, concerns among US manufacturers and critics who suggest Japan has driven the yen lower to benefit its car exporters and other companies.

But Democratic Representative Debbie Dingell from Michigan, home of the US auto industry, said currency has not been fully dealt with. “Nothing that we have heard indicates negotiators sufficiently addressed these issues,” she said.

The United States and Australia negotiated a compromise on the minimum period of protection to the rights for data used to make biologic drugs. Companies such as Pfizer Inc, Roche Group’s Genentech and Japan’s Takeda Pharmaceutical could be affected.

The agreed terms fell short of what the United States had sought. Under the deal, countries would give drugmakers at least five years’ exclusive access to clinical data used to win approval for new drugs. An additional period of regulatory review would likely mean drug companies would have an effective monopoly for about eight years before facing lower-cost, generic competition.

Politically charged dairy farming issues were addressed in the final hours of talks. New Zealand, home to the world’s biggest dairy exporter, Fonterra, wanted increased access to US, Canadian and Japanese markets.

New Zealand Prime Minister John Key said the deal would cut tariffs on 93 percent of New Zealand’s exports to the United States, Japan, Canada, Mexico and Peru. “We’re disappointed there wasn’t agreement to eliminate all dairy tariffs but overall it’s a very good deal for New Zealand,” Key said.

The United States, Mexico, Canada and Japan agreed to auto trade rules on how much of a vehicle must be made within the TPP region to qualify for duty-free status.

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 25-30 year phase-out periods for US tariffs on Japanese cars and light trucks.

The deal between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam also sets minimum standards on issues ranging from workers’ rights to environmental protection.

Trade ministers said the TPP would in future be open to other countries, including potentially China.

“There is a real opportunity for China to be a part of this,” Malaysian Trade Minister Mustapa Mohamed said.

Though Obama painted the deal in part as a way of stopping China from writing the rules of the global economy, China’s Ministry of Commerce broadly welcomed the agreement in the hope it would “promote and make common contributions to Asia-Pacific trade, investment and economic development.”