Through trade treaty, U.S. hopes rules that favor its companies will become the norm

December 24, 2013

When Vietnamese officials issued new Internet rules this year, the U.S. tech industry gave a shudder.

The regulations clamp down on political speech, require companies such as Facebook and Google to invest in local computer infrastructure to store information on Vietnamese users, and could force chipmakers to strip standard encryption features from their processors.

As the United States and 11 other nations near a new trade agreement in the Pacific region, it is those sorts of restrictive local standards that have become the chief battleground in a debate that could shape the future of industries considered vital to U.S. economic growth.

Like earlier trade agreements, the TransPacific Partnership involves its share of old-school disputes: whether U.S. sugar subsidies are unfair to sugar farmers in other countries, for example, or whether Japan will fully open itself to buying foreign-made cars.

But the more significant fights — and the reason why the Obama administration has placed such a priority on the agreement — are over issues such as the regulation of the Internet and e-commerce, the rules for the patent and sale of biopharmaceuticals, and the oversight of logistics, consulting, energy management and other service industries where the U.S. holds an edge.

Vietnam may be a small country. But in the fight over the future of the global economy, its efforts to regulate the Internet are symbolic of a fundamental fork in the road, with one path leading to a more restrictive and expensive environment for business and the other toward a freer global flow of commerce.

U.S. government and industry officials hope that if an agreement can be struck with the 12 nations involved — including Vietnam, Japan, major U.S. trading partners such as Canada and Mexico, and small but economically influential states such as Singapore — it will prove broadly influential and set the terms of commerce throughout the rapidly growing Asia-Pacific region.

For many emerging technology and other industries, the global rules for trading and investment have yet to be set, and “the goal here is to have more U.S.-based policies” rather than ones more typically found in countries such as China that try to force companies to invest locally or turn over technology to local partners, said Michelle Wein, a researcher for the Information Technology and Innovation Foundation. “It is about bringing the rest of the world up to the level of the U.S.”

Opponents say there is a flip side to that debate: that fewer local restrictions means less local control. Through some 20 rounds of negotiation, the TPP talks have been criticized as broadly undemocratic, setting what could become important domestic regulations through diplomatic negotiation rather than through an open legislative process. That may serve the United States well when it comes to generating research jobs in pharmaceutical companies or expanding the reach of Silicon Valley, but it could leave other countries with higher drug prices and less local technology investment, opponents contend.

Similar criticisms are surfacing over a separate agreement between the United States and Europe that is founded on efforts to align health, safety and other regulations between the two economies. Critics worry the treaty will lead to the weakest set of rules becoming the norm.

Negotiations over the TPP are thought to be nearing completion. An initial legislative battle over U.S. trade policy is expected early next year, when Congress will be asked to grant President Obama the same “fast track” authority that allowed his predecessors to negotiate trade treaties and receive a quick up-or-down vote in Congress.

Some influential figures in that debate, including U.S. Rep. Sander M. Levin (D-Mich.), are arguing for the upcoming discussion to be as robust and detailed as possible, in part to diminish concerns that Congress will have no power to amend the TPP treaty itself once a fast track law is adopted.

There will certainly be no shortage of prominent, leading-edge industries lined up to make the case for approval.

Logistics and other service firms see immense potential for the United States if markets throughout Asia can be deregulated, allowing them to overhaul shipping, retail distribution, management and other systems. Biotechnology companies hope the agreement can extend to other nations the 12 years of protection they now have under U.S. law on the research data used in the development of new biopharmaceutical products.

Countries “are just now developing and coming up with their rules” for the patent protection that will be offered to biotechnology compounds and the research needed to prove effectiveness, said Mark Grayson, a spokesman for the Pharmaceutical Research and Manufacturers of America. “This is forward thinking. . . . Biologics is where the value and the research are going.”

The administration may face some unusual challenges. At a public hearing on the treaty with Europe last week, Maine state Rep. Sharon Treat (D) argued that both the proposed pact with Europe and the TPP may run counter to the United States’ constitutional division of power between the state and federal governments. She said she worried, for example, that states would end up with less power to set local water quality or pesticide rules for fear of violating the treaty and being challenged under provisions that let investors sue states through a separate international tribunal rather than in a local court.

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December 24, 2013

When Vietnamese officials issued new Internet rules this year, the U.S. tech industry gave a shudder.

The regulations clamp down on political speech, require companies such as Facebook and Google to invest in local computer infrastructure to store information on Vietnamese users, and could force chipmakers to strip standard encryption features from their processors.

As the United States and 11 other nations near a new trade agreement in the Pacific region, it is those sorts of restrictive local standards that have become the chief battleground in a debate that could shape the future of industries considered vital to U.S. economic growth.

Like earlier trade agreements, the TransPacific Partnership involves its share of old-school disputes: whether U.S. sugar subsidies are unfair to sugar farmers in other countries, for example, or whether Japan will fully open itself to buying foreign-made cars.

But the more significant fights — and the reason why the Obama administration has placed such a priority on the agreement — are over issues such as the regulation of the Internet and e-commerce, the rules for the patent and sale of biopharmaceuticals, and the oversight of logistics, consulting, energy management and other service industries where the U.S. holds an edge.

Vietnam may be a small country. But in the fight over the future of the global economy, its efforts to regulate the Internet are symbolic of a fundamental fork in the road, with one path leading to a more restrictive and expensive environment for business and the other toward a freer global flow of commerce.

U.S. government and industry officials hope that if an agreement can be struck with the 12 nations involved — including Vietnam, Japan, major U.S. trading partners such as Canada and Mexico, and small but economically influential states such as Singapore — it will prove broadly influential and set the terms of commerce throughout the rapidly growing Asia-Pacific region.

For many emerging technology and other industries, the global rules for trading and investment have yet to be set, and “the goal here is to have more U.S.-based policies” rather than ones more typically found in countries such as China that try to force companies to invest locally or turn over technology to local partners, said Michelle Wein, a researcher for the Information Technology and Innovation Foundation. “It is about bringing the rest of the world up to the level of the U.S.”

Opponents say there is a flip side to that debate: that fewer local restrictions means less local control. Through some 20 rounds of negotiation, the TPP talks have been criticized as broadly undemocratic, setting what could become important domestic regulations through diplomatic negotiation rather than through an open legislative process. That may serve the United States well when it comes to generating research jobs in pharmaceutical companies or expanding the reach of Silicon Valley, but it could leave other countries with higher drug prices and less local technology investment, opponents contend.

Similar criticisms are surfacing over a separate agreement between the United States and Europe that is founded on efforts to align health, safety and other regulations between the two economies. Critics worry the treaty will lead to the weakest set of rules becoming the norm.

Negotiations over the TPP are thought to be nearing completion. An initial legislative battle over U.S. trade policy is expected early next year, when Congress will be asked to grant President Obama the same “fast track” authority that allowed his predecessors to negotiate trade treaties and receive a quick up-or-down vote in Congress.

Some influential figures in that debate, including U.S. Rep. Sander M. Levin (D-Mich.), are arguing for the upcoming discussion to be as robust and detailed as possible, in part to diminish concerns that Congress will have no power to amend the TPP treaty itself once a fast track law is adopted.

There will certainly be no shortage of prominent, leading-edge industries lined up to make the case for approval.

Logistics and other service firms see immense potential for the United States if markets throughout Asia can be deregulated, allowing them to overhaul shipping, retail distribution, management and other systems. Biotechnology companies hope the agreement can extend to other nations the 12 years of protection they now have under U.S. law on the research data used in the development of new biopharmaceutical products.

Countries “are just now developing and coming up with their rules” for the patent protection that will be offered to biotechnology compounds and the research needed to prove effectiveness, said Mark Grayson, a spokesman for the Pharmaceutical Research and Manufacturers of America. “This is forward thinking. . . . Biologics is where the value and the research are going.”

The administration may face some unusual challenges. At a public hearing on the treaty with Europe last week, Maine state Rep. Sharon Treat (D) argued that both the proposed pact with Europe and the TPP may run counter to the United States’ constitutional division of power between the state and federal governments. She said she worried, for example, that states would end up with less power to set local water quality or pesticide rules for fear of violating the treaty and being challenged under provisions that let investors sue states through a separate international tribunal rather than in a local court.

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