A Primer on the Trans-Pacific Partnership

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.

Whither TPP?
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.

Author’s Note:
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.

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23 thoughts on “A Primer on the Trans-Pacific Partnership

  1. 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.

    Are we talking legally-produced DVDs from Singapore, or pirated DVDs? If it’s the former, what’s the justification for the policy, and why would Singapore for example agree to this provision? Sorry for the twenty questions, I know very little about this subject :) 

    What’s interesting is when it comes to environmental or labor standards, the usual excuse given is the US cannot force other countries to follow its standards even in the context of FTAs. But apparently that’s not the case for intellectual property rights.

    • Legally created copies, basically.

      Though “Parallel imports” are most common in pharma (where you import the generic, licensed version from a developing country to make up for high drug prices of the standard version), it also does happen in entertainment. Things like DVD region locks are meant to make this process more difficult.

      KEI has a decent primer on the parallel imports provision for IP.
      http://keionline.org/node/1176

  2. Pingback: IP Protection Standards In TPP Represent The Dark Side Of The Trans-Pacific Partnership - Forbes

  3. Considering that many countries’ allow practices regarding IP that are prima facie illegal in the USA, how would you propose a trade agreement be created?

    To use an extreme example to illustrate the issue:  Let’s say that Country Z permits cannibalism.  Country Z wants to have access to the USA’s domestic market, including (among other things) provision of foodstuffs.  Should the USA not make part of the trade agreement a ban on the permission of cannibalism, to avoid the possibility that the product of a practice considered extremely harmful in the USA would be sold in the US market?

    Alternatively, the trade agreement could be written as “Country Z may not sell foodstuffs to USA purchasers”, but that seems to fall under the “ban on reimportation” that you mention disapprovingly.

    • Food safety is one of those concerns that’s actually considered a legitimate reason for trade barriers and discrimination. This is also one of those things that’s being hammered out in the negotiations.

      In terms of agriculture, tariff removal and export subsidies are the two main fields that TPP is aiming to remove. There hasn’t been any real movement on issues of what constitutes a legitimate import ban and it’s doubtful that they’ll come up with anything that doesn’t meet WTO standards.

      As for IP, the agreement’s ban on parallel imports affects countries outside the US from how they do trade with other states. Essentially if TPP has the TRIPS-Plus parallel import ban, then New Zealanders can’t buy DVDs from Singapore (legal ones) if the trademark holder in the US doesn’t want them to. Now given that the US trademark holder licensed them for distribution in Singapore, this would constitute a bit of an overreach of authority, would it not?

      • I wasn’t trying to have a discussion about food safety; I was trying to describe a practice which was legal in one country, but obviously illegal in another, and asking how this difference could be reconciled.  (I guess I didn’t really need to invent an example at all, when I just write it out that way.)

        ****

        You say it’s an “overreach of authority” that a US rightsholder can prevent the sale of Singaporean DVDs to a New Zealand customer.

        But isn’t the converse–that something legally produced in Singapore must therefore be legal everywhere–just as much of an overreach?  If the license is “this is legal for sale only in Singapore”, isn’t it an overreach of authority to say “the free trade agreement says I can sell it anywhere regardless of the licensing terms”?

      • The thing is, you’re asking ”who do you prefer to protect, property owners or tresspassers?”

        Or maybe “who do you prefer to protect, people who negotiate mutually-beneficial contracts with the expectation that those contracts will not be exceeded, or people who violate contracts whenever they feel like it?”

      • Price differentiation only works when you have relatively closed markets and barriers to trade. When that goes away, you start losing the ability to enforce those differentiations unless you look for new legal tools to enforce them.
      • Isn’t the denial of price differentiation an example of a state declaring that it has power over individual liberty?  In this case, the ability of an individual rightsholder to negotiate a distribution contract with terms they consider favorable.

        See, the problem is that you’re making arguments to fit the attitude you’ve got, but then you aren’t considering what else those arguments say.  “Overreach of authority” works both ways.  And if you’re making a “collective good” argument, then that doesn’t have anything to do with rights at all–just the opposite, in fact.

      • I don’t think I’m actually going into a collective goods argument.

        I do think that one thing rights holders need to be aware of, is that attempts to regulate distribution rights is increasingly becoming irrelevant in a world where so much distribution is digital.

        My main problem with IP provisions like TRIPS-Plus is that rather than acknowledging the fact that global trade and digital communications make the price-discrimination regimes based on geography and supply-chains less controllable, the rights holders are trying to harmonize the digital domain with legacy distribution channels.

        Now when it comes to transnational trade this is a stickier problem. Parallel importation is often much less of a problem when we’re dealing with countries of a similar level of development. There’s simply less arbitrage between prices to allow meaningful differentiation.

        The larger problem is when you start involving states of multiple levels of income. Given that rights holders prefer getting something rather than nothing, they will tailor product prices to certain markets to be low enough to make piracy a non-issue. Unfortunately the advent of highspeed internet and large storage media formats makes it much easier to carry a boxful of movies sold in Vietnam for 25 cents a pop and resell them elsewhere for $2.50.

        My argument is essentially that we need a harmonized IP framework that works in a globalized environment. Now that means going against parochial state interests and will likely require adaptation for a lot of industries. On the other hand, I think the ultimate benefits of having fewer trade barriers is worth the price.

        You can disagree with this analysis and that’s perfectly valid.

      • I agree that price differentiation is not something that’s based on market efficiency.

        I don’t see how you eliminate it without also attacking either A: the right of private entities to negotiate binding contracts or B: the right of private entities to own property.

        (And, as I pointed out, not all price differentiation is the result of Evil Capitalist Bastards.  Pfizer would sell their drugs for the same price everywhere if they were legally permitted to do so.)

  4. Another topic, another post.

    You say “the backward, draconian US copyright regime”, but to what extent is this simply the result of US compliance with the Berne Convention?  US copyright law is not something created in a vacuum, and has not been since the early 1970s.

    • I’d say the Berne Convention Implementation Act didn’t really do as much to change the US copyright regime as some people would like to claim. Certainly the “modern” US IP regime has seen more in the way of harsher measures against digital IP. (DMCA is a good example of this)

      The US got a pretty good deal in exchange for its Berne compliance, by being able to get TRIPS through the Uruguay Round. That it’s now trying to build on this TRIPS regime with FTAs that enshrine harsher copyright protections is a no brainer.

  5. Very interesting article! How far does the act go on internet ‘censorship’? As well as this how far through is this agreement at present?
  6. Haven’t posted over here until now:  figured I should do some research before posting.   Thoughtful and diligent work, as usual.

    Do you have any sense of how painful a fishbone the IP requirements will be in the throats of the Knockoff Artistes?   I mean, if someone goes into any marketplace in Asia, you’ll see knockoffs in great abundance.   Here in the States, there’s some, but nowhere near as much.

    While I was digging around, trying to come up with more than a compliment, I uncovered this paper against TRIPS-plus.   I’ll grant you, it’s a bit dated (2008) and some of the drugs manufacturers have responded to the AIDS epidemic in a decent and humane fashion, allowing their drug formulae to be sent overseas.    The troubling wrinkle, for me anyway, is knowing the same markets with the knockoff Nike sneakers are also selling fake drugs.   Not merely generic equivalents, outright fake drugs, worthless or potentially harmless drugs sold as AIDS drugs.

    TRIPS-plus is a troublesome mess, I’ll grant you.  But this is more than just a couple of recording companies trying to grift us for yet another copy of the White Album in the latest format.   This is enforcing some sanity on what for all practical purposes is a caveat-emptor market in worthless drugs.

    • I think that’s the troublesome part of dealing with “Intellectual Property Rights” in general. There’s so much conflation between fields in one single term that it makes it very difficult to unpack it without creating new problems in turn.

      I’ve actually read the Collins-Chase, and the take-away I’ve always had about the TRIPS-Plus regime was that it was primarily intended as a protection regime for pharmaceutical products. We also see this sort of research being done about the TRIPS framework itself in a bunch of public health journals.

      I’ve seen proposed solutions for the IPR issue that suggest parallel importation is okay based on the level of development of each country (how a treaty would codify this of course is also a problem), and I’m sympathetic to arguments that TRIPS-Plus does help crack down on knockoff drugs.

      I think in the end the reality is that both pharma and big media need to come to grips with the global supply chain and the global market and help create regimes that work better for themselves and for people in general. I don’t have a solution here, but it’s something I’ve mulled over now and then at night with a cigar watching the sky. I may have a post about this at some point, it’s something I’d like to tackle.

      • Is it valid to describe restrictions on pharmaceutical sales as “protectionism” when the offshore-source prices are the result of regulation rather than negotiation?
  7. Pingback: TPP – The Big Brother of IP Enforcement And Worse – Urban Times

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