Welcome back, dear reader. Fresh from the waters of history, we move on to a different kind of ship. Today we tackle the beast known as the Trans-Pacific Partnership. The 21st century will see an acceleration in the center of gravity from the Trans-Atlantic region to the Pacific. Recent US foreign policy has tried to shift its focus from terrorism to engagement in the Asia-Pacific. The cornerstone of this effort is to create a Trans-Pacific Free Trade Area in the form of the Trans-Pacific Partnership (TPP). This is an attempt to explain the basics of TPP in plain english.
A Short History of Trans-Pacific Trade Agreements
The office of the US Trade Representative (USTR) would like you to believe that TPP is an American initiative. It isn’t. The basic framework for TPP comes from an earlier agreement known as “P4” signed in 2005 by Singapore, New Zealand, Chile and Brunei. P4 was a comprehensive trade agreement between these four countries that would have called for a reduction of tariffs to zero by 2017 on all goods. Unlike most Free Trade Agreements (FTAs) the P4 was notable for being multilateral, including tariff elimination for agriculture and spanning a wide geographic area.
The countries hoped that P4 would serve as an APEC-wide model and included an “open accession” provision which would allow APEC countries to join P4 with minimal fuss. When the time came for the P4 countries to expand the agreement into the realm of financial services and investment, the United States signalled a willingness to take part in the agreement. Australia, Peru and Vietnam followed in expressing interest in joining.
With the inclusion of these additional countries the new framework was renamed the “Trans Pacific Partnership”. With the inclusion of the US, the USTR has become increasingly focused on pushing TPP as the primary trade promotion goal of the Obama Administration. At the 2011 APEC Summit in Honolulu, TPP participation was an important subject between Prime Minister Noda of Japan and President Obama.
APEC over ASEAN: Hoping for a Pacific World
USTR would like us to believe that TPP is an economic agreement. Yet the US already has FTAs with Australia, Singapore, Chile and Peru. The size of the markets available in New Zealand and Brunei are negligible, and Vietnam only joined after the US expressed an interest in TPP. The US interest in TPP, while economic in some fashion, is also a means to engage the Asia-Pacific region in a Trans-Pacific format.
Unlike the intra-Asian focused ASEAN and East Asia Summit agreements, TPP also aims to include Oceania and the Americas. This makes it an important forum for the US to set the agenda in terms of trade promotion.
Further the scale of TPP is key to its importance. While most FTAs carve out exceptions, TPP is a comprehensive agreement aimed at all market sectors and products. The original P4 agreement had created a market access schedule that would have lowered all tariff barriers to zero by 2017. While this timeline is unlikely to remain in any final TPP agreement, the strongest participants are pushing for the removal of trade barriers on a unified schedule that applies to all countries rather than selective schedules on a country-by-country basis. In essence this would mean that there would be fewer “protected” areas of commerce, such as agriculture.
Trade liberalization on a trans-Pacific rather than Asia Regional scale also has important implications for creating a more open trade regime in the world as a whole. At present there are three major “trading blocs”. There is the European Community, the ASEAN + 3 framework and the Americas. While there is some overlap between these trade blocs, these are often bilateral agreements rather than a unified set of standards. If TPP succeeds in creating a trans-Pacific Agreement that can bridge the Asian and American regional differences by a raising standards of market access, future expansion of this free trade area would become easier and more attractive.
The apparent failure of the Doha Trade Rounds make for an important contrast. Doha aims to create negotiations with everyone at the table. This can often lead to juggling impossible and conflicting demands. The TPP method instead is likely to create a workable framework in which other countries can join as economic conditions allow. If the current negotiations over TPP prove fruitful, this sort of high-standards open access multilateral framework will prove a useful tool for addressing issues other than trade promotion.
Devil in the Details: TRIPS-Plus and IP Protection Standards
Reduction of tariffs, removal of non-tariff barriers and multilateralism, all sounds quite good, doesn’t it? Unfortunately like amny FTAs there are a number of devils in the details and perhaps the biggest potential disaster is in the IP Protection Standards section of TPP.
While the WTO usually enforces the Trade-Related Aspects of Intellectual Property Rights (TRIPS), the US tacks on IP protection provisions that are consistent with its own copyright protections in the form of an architecture known as TRIPS-Plus. Provisions in TRIPS-Plus agreements include longer copyright terms, data exclusivity on medical testing data, bans on parallel importation (essentially importing cheaper versions of patented items from another country), and specifying what precisely can be patented.
In negotiating TPP, the USTR has been an aggressive advocate of “up-harmonizing” the IP protection rules in TPP by requiring copyright and patent terms that adhere to US standards. In addition the USTR has pushed for stronger copyright infringement mechanisms and rules to prohibit parallel imports of copyrighted works. This system prevents New Zealand from importing cheaper DVDs of a movie from Singapore rather than buying them from the US. As a result the provisions for IP Rights in TPP resemble an importation of American domestic law, with a particularly strong emphasis on pharmaceutical and multi-media prohibitions. The internet safe haven provisions for example may as well be lifted straight from DMCA.
This is clearly a problem. The attempt to formalize the backward, draconian US copyright regime puts at risk countries that have developed their own new intellectual property standards. Chile and New Zealand for example have tried to create more progressive and open systems, which would fall under the weight of a fines system. Not only does this make TPP a substantially less attractive agreement for many countries, but the insistence on pushing bans for parallel imports may create a negative impact on public health sectors.
The USTR should use TPP as a way of testing more flexible IP rights regimes. Rather than using TPP as a means of expanding the outdated US patent system, it may be a good way to import some of the best practices of other countries.
So what should we do about TPP? Should it be praised or should it be fought tooth and nail?
Part of the problem is that the office of the USTR is often more responsive to limited commercial interests. Industry lobbies do have disproportionate strength in these areas and often important players who could change the discussion aren’t sufficiently involved. The IP provisions provide a stunning example of how a small, limited interest group can put in danger the wider goals of a good framework.
Fighting provisions like ACTA or TRIPS-Plus within FTAs is a laudable goal, but it’s time we moved past this. Trade advocates should see IP provisions as an obstacle to free trade, and market access promoters should engage more deeply with the idea of Free Trade Agreements as a way to promote their agenda. It’s definitely both a danger and an opportunity. Let’s work to make it the latter.
TPP is a difficult subject to write about in any detail because the actual TPP negotiations framework is done behind closed doors. It’s hard to tell why the USTR has decided to make this an entirely closed process without access to the negotiating documents.