Trans-Pacific trade talks: Toughest issues remain

Dairy cows wait to be milked at a farm in Granby, Quebec, on July 26, 2015.
Dairy cows wait to be milked at a farm in Granby, Quebec, on July 26, 2015.REUTERS

WASHINGTON (REUTERS) - Trade ministers from 12 Pacific Rim nations head to Hawaii this week to tackle the tough decisions needed to finalise a trade deal that will free up global commerce and set common standards for nearly half of the world's economy.

The trickiest issues, requiring high-level political buy-in and painful compromises, have been left until the end of the Trans-Pacific Partnership negotiations and range from market access to monopoly periods for medicines.



The United States, New Zealand and Australia are pushing hard for Canada to open up its protected dairy market and allow more imports, complaining that the country has not given its trade partners a sign it is ready to talk and even mulling a TPP without Canada.

With a national election scheduled for October, Canada's Conservative government is wary of angering farmers by altering the supply management system, which keeps dairy and poultry prices artificially high by restricting supply.

Canada's dairy industry says it supports 215,000 jobs and contributes C$18.9 billion (S$19.8 billion) to the local economy.


Australia, which exports more than 80 per cent of its sugar, is determined to win more access to the US sugar market, with the support of some US refiners and sugar users who say US protections for local canegrowers artificially inflate prices.

Sugar refiner Imperial Sugar, part of Louis Dreyfus Commodities, says Australia should be allowed to ship up to half the amount allocated to Mexico under a recent deal allowing the United States' southern neighbour to make up the bulk of any US supply shortfall.

But US sugar growers are opposed, noting Australia already is America's fifth largest foreign sugar supplier.

Australia can ship 87,402 tonnes of raw sugar to the United States next fiscal year, 8 percent of total reduced-tariff imports.


The United States wants TPP countries to agree to protect the data used to develop next-generation biologic drugs for 12 years, in a boon for companies like Pfizer and Japan's Takeda Pharmaceutical.

Although such a move would push up the cost of state-subsidised medical programmes in Australia and New Zealand, the pharmaceutical industry argues it would accelerate the introduction of cheaper, generic drugs by giving developers more certainty.

The United States has said it will balance the needs of developing countries to access affordable medicines.

Countries also have to agree on the length of copyright periods for published works.


State-owned enterprises or controlled businesses play a significant role in the economies of Vietnam, Malaysia and Singapore, which are under pressure to cut back on their support for such firms and offer foreign competitors equal levels of access to secure government contracts, for example.

The definition of a SOE, exceptions for specific industries or firms, and transition periods are not yet settled.


US textile firms such as synthetic yarn maker Unifi are insisting on strict rules to stop Vietnam from flooding the US market with cheap clothing made from Chinese fabric once tariffs are removed under the TPP.

A list of fabrics allowed to be sourced from outside the region is largely complete, according to one textile industry official, but there are still intense discussions over the timeline for cutting tariffs on sensitive clothing items.

US clothing companies and retailers want a minimum 50 per cent duty cut for sensitive products and for at least 75 percent of garments to be duty-free immediately.


Malaysia offers preferential treatment in business, housing and education, including greater access to government contracts, to ethnic Malays and other indigenous people, known as bumiputra.

The TPP would seek to put foreign suppliers on an equal footing in terms of government procurement.

The country also is under pressure over human trafficking, with some US lawmakers pressing to prevent the TPP from benefiting from a fast track through Congress if the country remains on the State Department's black list in a report due out on Monday.


A bilateral agreement between the United States and Japan on agricultural and auto trade, long a sticking point in the broader TPP talks, is largely complete.

But the partners still have to get buy-in from other countries on a formula for how to decide a vehicle has enough local content to qualify for duty-free access, which Japan wants to be on more liberal terms than the current North American standard, for example.


A draft text released by whistle-blowing website WikiLeaks in March showed countries were seeking exceptions from proposed investment protection rules, which would allow companies to sue foreign governments.

Australia, whose plain cigarette packaging law is being challenged by Marlboro maker Philip Morris' Asian arm, was ready to opt out completely, the draft showed.

The United States has floated an exception to the rules for tobacco, sources briefed on the talks said.

More broadly, TPP countries have not yet determined how to address tobacco public health issues in the agreement.

Malaysia and anti-smoking groups want to completely exclude tobacco from the deal and keep tariffs on US tobacco products.