Pacific free trade deal fails to make headway

February 28, 2014
The proposed deal extends far beyond the usual trade parameters of free trade deals.

Four days of talks in Singapore for the proposed TransPacific Partnership (TPP) ended inconclusively on February 25.

It is clear big disagreements still exist between the negotiating countries. Combined with unease among the populations in negotiating countries, this is likely to prevent the deal being finalised this year.

The TPP is a free trade deal being negotiated between the US, Japan, Mexico, Canada, Australia, Malaysia, Chile, Singapore, Peru, Vietnam, New Zealand and Brunei. If implemented, it will become the biggest trade deal the world has seen, covering 40% of world GDP and a third of global trade.

Much like the previous Singapore round in December, negotiators went into this meeting full of optimistic rhetoric that the talks would bring big advances. The talks ended with trade ministers releasing a statement saying: “While some issues remain, we have charted a path forward to resolve them in the context of a comprehensive and balanced outcome.”

This bland statement gives little hope to the deal's advocates. It says there are still unresolved problems and they are trying to work out how to advance.

It is good news, however, for the hundreds of millions of people living in the negotiating countries.

The proposed deal extends far beyond the usual trade parameters of free trade deals. A core aspect of a free trade deal is the lowering or elimination of tariffs. This participating countries seek to protect their nation's most powerful industries from foreign competition while trying to get other countries to lower their protections.

Given the international power balance, this usually translates as powerful rich nations from the global North, such as the US, forcing weaker and poorer nations to open their markets to foreign products while continuing to subsidise their own industries.

Such negotiations can be difficult when there are just two countries involved, but this deal involves 12.

One of the main stumbling blocks is agriculture, especially the five “sacred” commodities named by Japan that it refuses to remove tariffs on: rice, beef/pork, wheat, sugar and dairy. The US, Australia and others have rejected those exclusions.

Australia wants US access for its sugar exports, which US rejected in its bilateral deal with Australia. The US has declared it will not negotiate new market access with countries with which it already has free trade agreements, largely to appease the powerful US sugar industry.

New Zealand wants access to US and Canadian markets for its dairy exports. But the dairy lobby has strong bipartisan support in the US too, and is itself demanding better access to Canadian markets.

The US insists Japan be subject to a special bilateral agreement providing concessions relating to the auto trade, and access for US beef. Japan has agreed to this, but strong opposition from unions and the beef industry will make negotiating terms hard.

The US wants national government contracts to be available to firms from all TPP countries on equal terms. But US negotiators face domestic opposition, as many Democratic and Republican members of Congress support the “Buy American” campaign.

Malaysia also opposes proposals for it to remove its bumiputera policy, which guarantees government contracts for its ethnic Malay population. This policy was implemented after violent attacks against the country’s Chinese population, which dominates its business sector.

The other provisions in the TPP face opposition from the general public, especially environment, health and development groups.

These include intellectual property rights, which would expand the applicability of patents, greatly strengthening monopolies and limiting consumer choice. This is especially worrying in pharmaceuticals, where drug patents could severely limit the ability to provide cheap generic drugs and affect the free health services of many countries, including Australia and NZ.

The US is pushing for greater enforcement of environmental standards, which are quite weak in the TPP and are mainly public relations cover. However, no other nation backs the US push to make any environmental provision enforceable by use of sanctions and other penalties.

The US is pushing such a line under pressure from Congress, with Democrats refusing to support any deal that does not include such provisions, which were mandatory even in the deals signed under George W Bush's presidency.

But liberal Democrats are wary of US trade representative Michael Froman's public statements on the matter, as he has been less than firm on the stance in private meetings.

A big hurdle for the deal is the “fast track authority” that US President Barack Obama is seeking from Congress. If granted, it means the president can present Congress with a finished deal for a straight yes or no vote, without possibility of amendment.

It looks unlikely that Congress will grant fast track authority, as members on both big parties face public opposition and conflicting corporate lobbying. Also Republicans, who normally cannot wait to pass another pro-corporate free trade deal, are quite happy to see Obama fail to deliver a deal for reasons of political opportunism.

Both sides appear happy to wait until after the November US elections to deal with the issue.

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