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.