Historic Trans-Pacific Partnership trade deal
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 a.m. 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 U.S. 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 U.S. 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.
U.S. 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 U.S. 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 U.S. 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 U.S., 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 U.S. 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”.
Should India be worried about Trans-Pacific Partnership?
Overall, the pact’s major impact on India would be through standards, or non-tariff measures, according to experts
A group of 12 Pacific rim nations led by the US on Monday hammered out the largest mega regional trade agreement which is expected to set higher standards for goods and services.
Although the deal aims at sidestepping China in setting rules of international trade, it is also expected to impact India.
The Trans-Pacific Partnership (TPP) is a trade agreement under negotiation among 12 nations: Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam, which comprise 40% of the world’s gross domestic product (GDP).
The other two large regional trade agreements being negotiated are the Transatlantic Trade and Investment Partnership (TTIP) between the US and the European Union, and the Regional Comprehensive Economic Partnership (RCEP) between the Association of Southeast Asian Nations and its four free-trade partners, including China and India.
In addition to greater market access for goods and services, the areas of negotiations covered by TPP include intellectual property rights, foreign investment, competition policy, environment, labour, state-owned enterprises, e-commerce, competitiveness and supply chains, government procurement, technical barriers to trade, transparency in healthcare technology and pharmaceuticals, and regulatory coherence.
Most experts, however, say that overall, a much larger impact of TPP would be through standards or non-tariff measures. Harsha Vardhana Singh, former deputy director general of the World Trade Organization, in a discussion paper on TPP last year, said the inclusion of two of the largest economic markets (the US and Japan) in this group implies these norms will effectively become global standards.
“In this situation, to adequately benefit from international markets, other countries such as India will have to improve their capacities both for developing policies and the capabilities of their producers to upgrade standards in line with the higher requirements. Some other countries have already begun to do so,” he added.
Speaking at an event in April, Sujata Mehta, economic relations secretary in the foreign ministry, had said that agreements like TPP and TTIP will have huge implications for India.
“From an Indian perspective, we would hope that the result would not be states accepting restrictions through trade instrumentality which they otherwise would not be willing to accept in the relevant forum or relevant discipline,” she said. “In other words, trade should not be an arena for settlement of debates on other issues which are not strictly related to trade.”
“They may endanger food safety, they may curb access to medicines by putting constraints on the pharmaceuticals sector and eventually may have an impact on sovereign issues. The net outcome will be blurring the local, domestic, regional and global,” she added.
The big regional trade deals are expected to allow foreign investors to have their grievances against governments arbitrated by dispute-specific panels under the investor-state dispute settlement (ISDS) mechanism clause, she said. “What impact it would have on other investment promotion agreements is a matter of grey area,” she said.
There are different estimates on the material impact on India not being part of the TPP.
The Peterson Institute for International Economics (PIIE) in a report released in September said that if China and the rest of the Asia-Pacific Economic Cooperation (Apec) forum join a second stage of the TPP that continues to exclude India, India’s annual export losses will approach $50 billion. However, many analysts claim such projections are exaggerated.
Quoting a study by the East-Centre, Abhijit Das, professor at the Indian Institute of Foreign Trade, said trade diversion as a result of India not joining the TPP will not be more than $4-5 billion over 10 years. “India is not in a position to undertake obligations finalized under TPP with respect to intellectual property rights such as evergreening of patents,” he added.
Indian Pharmaceutical Alliance secretary general D.G. Shah said the branded medicines industry will be a major beneficiary of the trade pact, while the generic drugs industry in India will suffer. “It (branded medicines industry) will be able to improve its price realization in the low-priced markets. It will be able to delay generic competition in all markets, including the US and the EU. The generics decline will be discernible from the end of 2017. The full-blown impact of these mega trade deals will be felt by 2020,” he added.
D.K. Nair, secretary general of the Confederation of Indian Textile Industry, said the TPP will adversely impact the textiles industry because of the yarn forward provision. The yarn forward rule requires clothing to be made from yarn and fabric manufactured in one of the free trade partners to qualify for duty-free treatment under the trade pact. “At present, we export yarn and fabric to Vietnam which then makes the textiles and exports to countries like the US. Now, because of the yarn forward rule, they will be under pressure to develop local production,” he added.
While Vietnam will have zero-duty access to the US market for textiles, Indian players will have to pay 14-32% duties, which will make them uncompetitive, Nair said. “We are in favour of India joining TPP. We should also fasttrack the RCEP negotiations so that the textiles industry can have some advantages in the Asian region,” he added.
Lobby group Confederation of Indian Industry in a statement on 1 September said India should join the Apec forum, which accounts for nearly 60% of global GDP. This, it said, would provide a pathway for greater integration into the region’s economy.
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 a.m. 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 U.S. 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 U.S. 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.
U.S. 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 U.S. 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 U.S. 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 U.S., 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 U.S. 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”.
Should India be worried about Trans-Pacific Partnership?
Overall, the pact’s major impact on India would be through standards, or non-tariff measures, according to experts
A group of 12 Pacific rim nations led by the US on Monday hammered out the largest mega regional trade agreement which is expected to set higher standards for goods and services.
Although the deal aims at sidestepping China in setting rules of international trade, it is also expected to impact India.
The Trans-Pacific Partnership (TPP) is a trade agreement under negotiation among 12 nations: Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam, which comprise 40% of the world’s gross domestic product (GDP).
The other two large regional trade agreements being negotiated are the Transatlantic Trade and Investment Partnership (TTIP) between the US and the European Union, and the Regional Comprehensive Economic Partnership (RCEP) between the Association of Southeast Asian Nations and its four free-trade partners, including China and India.
In addition to greater market access for goods and services, the areas of negotiations covered by TPP include intellectual property rights, foreign investment, competition policy, environment, labour, state-owned enterprises, e-commerce, competitiveness and supply chains, government procurement, technical barriers to trade, transparency in healthcare technology and pharmaceuticals, and regulatory coherence.
Most experts, however, say that overall, a much larger impact of TPP would be through standards or non-tariff measures. Harsha Vardhana Singh, former deputy director general of the World Trade Organization, in a discussion paper on TPP last year, said the inclusion of two of the largest economic markets (the US and Japan) in this group implies these norms will effectively become global standards.
“In this situation, to adequately benefit from international markets, other countries such as India will have to improve their capacities both for developing policies and the capabilities of their producers to upgrade standards in line with the higher requirements. Some other countries have already begun to do so,” he added.
Speaking at an event in April, Sujata Mehta, economic relations secretary in the foreign ministry, had said that agreements like TPP and TTIP will have huge implications for India.
“From an Indian perspective, we would hope that the result would not be states accepting restrictions through trade instrumentality which they otherwise would not be willing to accept in the relevant forum or relevant discipline,” she said. “In other words, trade should not be an arena for settlement of debates on other issues which are not strictly related to trade.”
“They may endanger food safety, they may curb access to medicines by putting constraints on the pharmaceuticals sector and eventually may have an impact on sovereign issues. The net outcome will be blurring the local, domestic, regional and global,” she added.
The big regional trade deals are expected to allow foreign investors to have their grievances against governments arbitrated by dispute-specific panels under the investor-state dispute settlement (ISDS) mechanism clause, she said. “What impact it would have on other investment promotion agreements is a matter of grey area,” she said.
There are different estimates on the material impact on India not being part of the TPP.
The Peterson Institute for International Economics (PIIE) in a report released in September said that if China and the rest of the Asia-Pacific Economic Cooperation (Apec) forum join a second stage of the TPP that continues to exclude India, India’s annual export losses will approach $50 billion. However, many analysts claim such projections are exaggerated.
Quoting a study by the East-Centre, Abhijit Das, professor at the Indian Institute of Foreign Trade, said trade diversion as a result of India not joining the TPP will not be more than $4-5 billion over 10 years. “India is not in a position to undertake obligations finalized under TPP with respect to intellectual property rights such as evergreening of patents,” he added.
Indian Pharmaceutical Alliance secretary general D.G. Shah said the branded medicines industry will be a major beneficiary of the trade pact, while the generic drugs industry in India will suffer. “It (branded medicines industry) will be able to improve its price realization in the low-priced markets. It will be able to delay generic competition in all markets, including the US and the EU. The generics decline will be discernible from the end of 2017. The full-blown impact of these mega trade deals will be felt by 2020,” he added.
D.K. Nair, secretary general of the Confederation of Indian Textile Industry, said the TPP will adversely impact the textiles industry because of the yarn forward provision. The yarn forward rule requires clothing to be made from yarn and fabric manufactured in one of the free trade partners to qualify for duty-free treatment under the trade pact. “At present, we export yarn and fabric to Vietnam which then makes the textiles and exports to countries like the US. Now, because of the yarn forward rule, they will be under pressure to develop local production,” he added.
While Vietnam will have zero-duty access to the US market for textiles, Indian players will have to pay 14-32% duties, which will make them uncompetitive, Nair said. “We are in favour of India joining TPP. We should also fasttrack the RCEP negotiations so that the textiles industry can have some advantages in the Asian region,” he added.
Lobby group Confederation of Indian Industry in a statement on 1 September said India should join the Apec forum, which accounts for nearly 60% of global GDP. This, it said, would provide a pathway for greater integration into the region’s economy.
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