Asserting national interest in trade negotiations

By Satur C. Ocampo
At Ground Level | The Philippine Star

Though we are mere uzi or bystanders in the ongoing negotiations to forge a Trans-Pacific free-trade bloc, it is interesting, and instructive, to observe the converging and clashing national interests among the 12 countries involved. Final agreement is being difficult to reach, dashing President Obama’s timetable to seal the deal before the US presidential election campaign begins next year.

There are issues wherein one or more small economies stand pat against a big one. But the most telling disagreement is between the US and the 11 others on the issue of intellectual property protection, particularly for American pharmaceutical corporations.

Nonetheless, the negotiations produced agreements on three issues: 1) broad environmental protections for some sensitive, diverse, and threatened ecosystems; 2) labelling exports with distinct geographic indications; and 3) a code of conduct and rules against conflicts of interest for arbitrators in extrajudicial tribunals to hear complaints by corporations against government actions deemed damaging to their investments.

The Trans-Pacific Partnership project — embracing 40 percent of global GDP and 33 percent of world trade — is the overarching economic goal of Obama’s “pivot to Asia” policy. The pivot calls for shifting to the Asia-Pacific region 60 percent of US maritime and other military forces by 2020. America’s objective is to assert its primacy over China as the world’s economic and military power in the 21st century. Thus, the TPP excludes China.

Participants in the US-brokered TPP are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. (The US has invited Thailand but it hasn’t joined. The Philippines has expressed its wish to join but hasn’t been invited.)

In June Obama won, by narrow votes in the Senate and House of Representatives (both controlled by Republicans), his bid for broad powers to fast-track the TPP negotiations. However, he has yet to secure legislative guarantee that once he submits the TPP to Congress it’ll be approved sans amendment.

It’s a queasy situation for Obama. Most of his fellow Democrats and the trade union federations AFL-CIO oppose the TPP as a “job-killing trade deal… negotiated in secret” and dominated by big firms. Although he has won the support of Republicans who have historically been pro-free trade, he can lose their backing if he compromises on the protection of the pharmaceutical firms. The Republicans demand firmness on this issue.

The US wants the 11 other nations to adopt its 12-year protection period for the intellectual property of major drug firms – shielding them from generics competition – as they recover the cost of developing new-generation medicines called biologics. The 11 reject the US stand, arguing that long-term protection keeps drug prices high and will deny access to biologic medicines to the people in developing and poor countries. (Actually, this has been happening for decades regarding branded drugs.)

Specifically, what impelled the 11 nations to unite against the US is a section of the TPP chapter on intellectual property, which the International New York Times discloses thus: the US opposes the language, proposed by the 11, that ensures the power of judicial authorities to force a company found to have abused enforcement procedures to compensate a party “wrongfully enjoined or restrained.”

This, plus another section in which the US and Japan want it stated that lack of enforcement resources is no excuse for failure to ensure enforcement, “shows just how isolated the (US) position is,” notes the INYT.

Other points of disagreements, wherein bottomline national interests and political dynamics come into play, are as follows:

• New Zealand, the world’s largest dairy products exporter, wants wider access to the TPP members’ markets. But Canada, whose prime minister, Stephen Harper, seeks reelection in a steep fight in October, refuses to open its poultry and dairy markets, angering not just New Zealand but many other countries.

• Mexico wants to reduce tariffs only on motor vehicles having components 65 percent made in TPP-member countries (it produces and exports trucks with US- and Japan-made parts). On the other hand, Japan insists on only 50 percent components (it sources some components from China and Thailand – both aren’t in the TPP). “I am fighting for the interest of my country,” avers Ildefonso Guajardo, Mexico’s economy minister.

• Chile, which has already sealed free-trade accords with each of the other TPP participants, is most vocal against the US 12-year protection for its pharmaceutical firms.

• Australia, a staunch US ally, rules out the American hardline position, saying its parliament will never approve pharmaceutical market protection beyond five years.

• Vietnam declares that it’s not ready to give up the trade advantages enjoyed by its state-owned enterprises, which has enabled it to become the European Union’s fifth most important trade partner among the 10 member-nations of the Association of Southeast Asian Nations.

While still negotiating in the TPP, Vietnam has already signed a free-trade agreement with the EU, reportedly the first between the EU and a developing country. The pact calls for Vietnam to eliminate 99 percent of its import duties on EU goods over 10 years, while the EU will do so over seven years. The agreement still needs to be approved by the EU governments and the European Parliament.

Vietnam’s trade offensive in Europe is impressive. In 2014 it exported 22.1 billion euros worth of products (electronics. shoes, textiles, coffee, rice, seafood, and furniture) while importing 6.2 billion euros worth in high-tech electrical machinery, aircraft, vehicles, and pharmaceuticals.

Had the Philippines been in the TPP, how would have her negotiators stood vis-à-vis the US position and other issues?

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Published in The Philippine Star
August 8, 2015

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