Pacific Rim trade pact gets skeptical greeting in Congress

 

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2 hours ago • By Richard Cowan and David Lawder • Reuters2

Cranes load containers onto the ships at the Port of Los Angeles, Tuesday, Feb. 17, 2015, in Los Angeles. (AP Photo/Jae C. Hong)
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Updated at 11 a.m. Monday

WASHINGTON • A 12-nation Pacific Rim trade pact hammered out over the weekend in Atlanta got a rocky response in Washington on Monday from U.S. lawmakers, indicating it has a long, difficult road ahead as Congress considers whether or not to approve it.

Even influential Republicans, who had championed the Trans-Pacific Partnership (TPP), initially criticized the result but didn’t pinpoint specific concerns.

“I am afraid this deal appears to fall woefully short,” said Republican Senator Orrin Hatch, who chairs the Senate Finance Committee that oversees trade.

Earlier this year after a bruising battle, Congress gave Democratic President Barack Obama the green light to wrap up talks on the TPP, which would liberalize trade among countries ranging from Japan to Chile and covering 40 percent of the world’s economy.

Obama had hoped to quickly conclude talks on the agreement so Congress could review and vote on it before the U.S. presidential campaigns shifted into full swing. That hope was dashed by delays around the negotiating table, however.

Now the pact is unlikely to come before Congress for an up-or-down vote until well into the presidential primaries, exposing it to the full rhetoric of the campaign season.

Many of Obama’s fellow Democrats in Congress and organized labor fear the trade pact will hurt American jobs.

Senator Bernie Sanders, an independent seeking the Democratic nomination for president, blasted the agreement saying, “Wall Street and other big corporations have won again.”

Months are likely to go by as the TPP package is finalized, reviewed and debated by Congress. Under “fast-track” authority granted by Congress, lawmakers have the power to review the agreement and cast an up-or-down vote, but not amend it.

Representative Sandy Levin, the senior Democrat on the House Ways and Means Committee that also oversees trade, warned that a 90-day review period could result in adjustments.

Levin applauded the pact for making progress on worker rights issues in Vietnam and Malaysia and on tobacco issues. He added, however, that Mexico must do more to comply with an existing free-trade deal with the U.S.

The Obama administration is hoping a well-coordinated campaign over the next several months will convince lawmakers that the free-trade deal will have more benefits than costs.

Republican Representative Kevin Brady, a senior member of the Ways and Means Committee, said in a statement: “Done right, this agreement will open a billion middle class customers to American goods and services.”

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Our earlier story, from Reuters, posted at 7:33 a.m. Monday

ATLANTA • Pacific trade ministers have reached a deal on the most sweeping trade liberalization pact in a generation that will cut trade barriers and set common standards for 12 countries, an official familiar with the talks said on Monday.

Leaders from a dozen Pacific Rim nations are poised to announce the pact later on Monday. The deal could reshape industries and influence everything from the price of cheese to the cost of cancer treatments.

The Trans-Pacific Partnership would affect 40 percent of the world economy and would stand as a legacy-defining achievement for U.S. President Barack Obama, if it is ratified by Congress.

Lawmakers in other TPP countries must also approve the deal.

The final round of negotiations in Atlanta, which began on Wednesday, had snared on 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.

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 to the rights for data used to make biologic drugs, made 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 U.S. negotiators had sought and that would effectively grant biologic drugs a period of about eight years free from the threat of competition from generic versions, people involved in the closed-door talks said.

The Washington, D.C.-based Biotechnology Industry Association said it was “very disappointed” by reports that U.S. 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 U.S., 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 percent. 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 in 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 U.S. tariffs on Japanese cars and light trucks.

The TPP deal being readied for expected announcement 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.

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Our earlier story, from Reuters, posted at 3 p.m. Sunday

ATLANTA • A dozen Pacific nations closed in on a sweeping free trade pact on Sunday in Atlanta after a breakthrough over how long a monopoly pharmaceutical companies should be given on new biotech drugs.

The issue has pitted the United States, which has argued for longer protections, against Australia and five other delegations who say such measures would strain national health care budgets and keep life-saving medicines from patients who cannot afford them.

The compromise would preserve Australia’s existing five-year protection period but would also offer flexibility on longer drug monopolies, potentially creating two tracks on future drug pricing within the trading bloc, a person close to the negotiations said.

The terms of that compromise, hammered out after a third all-night round of negotiations between Australia and the United States, still had to find support from other nations such as Chile and Peru, other people involved in the talks said.

Mexican Economy Minister Ildefonso Guajardo said he could not reveal details of the compromise on biologics “until everyone has signed up and we are all on the same page.”

But officials were increasingly confident of completing a deal that has been in negotiations for five years. Japan’s Economy Minister Akira Amari said he had called Prime Minister Shinzo Abe to notify him that a deal was within sight.

The United States offers 12 years of exclusivity for the clinical data used in developing drugs like cancer therapy Avastin, developed by Genentech, a division of Roche in order to encourage innovation. Australia insisted on five years of protection to bring down drug prices more quickly.

The trade pact, the Trans Pacific Partnership, or TPP, would lower tariffs and set common standards for 12 economies led by the United States and Japan, which together account for 40 percent of global output.

President Barack Obama has pushed for a deal as a way to open markets to U.S. exports, including financial services and pharmaceuticals. U.S. officials have also promoted the deal as a counterweight to China and that rising power’s vision for Asia.

The talks in Atlanta were extended by 24 hours to a fifth day on Sunday. A handful of protesters unfurled a “Stop TPP” banner at the Westin hotel, where the talks were taking place, on Sunday morning. They were escorted away by security and police.

By Saturday, the United States and Japan had reached agreement in principle on trade in autos and auto parts in talks that had also included Canada and Mexico. That agreement is expected to give U.S. automakers, led by General Motors and Ford, two decades or more of tariff protection against low-cost pickup truck imports from Thailand or elsewhere in Asia, people briefed on the talks have said.

But the TPP deal taking shape would also give Japan’s auto industry, led by Toyota Motor, a freer hand to source parts from Asia, including from plants outside the TPP-zone like China, on vehicles sold in North America.

A “rule of origin” would stipulate that only 45 percent of a vehicle would have to be sourced from within the TPP, down from the equivalent ratio of 62.5 percent under NAFTA, officials have said.

New Zealand wants to ensure its dairy industry, dominated by Fonterra, the world’s largest dairy exporter, comes out as a clear winner in a TPP deal by opening markets like Canada, Mexico, Japan and the United States.

If U.S. Trade Representative Michael Froman, who is chairing the Atlanta talks, manages to steer them to a conclusion on Sunday, that would mark the start of a political fight to get the deal approved in the United States.

The Obama administration relied on Republican votes to win fast-track trade negotiating authority from Congress in July, setting up a straight yes or no vote on any deal.

Many Democrats and labor groups have raised questions about what the TPP would mean for jobs in manufacturing and environmental protections. Meanwhile Republicans, including Sen. Orrin Hatch, the powerful chairman of the Senate finance committee, have urged the administration to hold the line on intellectual property protections, including for biologic drugs.

Additional reporting by Lincoln Feast in Sydney.

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