Trade ministers from a dozen nations have gathered at a beachside hotel in Maui on Tuesday for talks aimed at knocking down tariff barriers, clearing political hurdles and sealing a new Trans-Pacific Partnership agreement that would bind countries on both sides of the vast ocean. For the U.S. delegation, these late-stage negotiations may be the last chance to close the deal before it gets swamped by 2016 election politics.
President Obama has vowed that the agreement, which would cover 40 percent of the global economy, would not only tear down trade barriers but also establish tougher labor, environmental and human rights standards. But foes of the deal — including most liberal Democrats and labor unions — fear that the negotiations being held in secret will not do enough to protect American workers, consumers and small businesses. And human rights groups say the administration is turning a blind eye to abuses in countries such as Malaysia and Brunei.
After six years of negotiation, the Obama administration is feeling pressed for time. Unless the ministers reach an agreement on major issues this week, there might not be enough time to get the trade bill through Congress before the end of the year, raising the chances that lawmakers will be too worried about their political survival to vote for the deal in an election year. The fast-track bill passed in June says Obama must notify Congress 90 days before he signs it.
Aware of the stakes and urgency, representatives from major companies and industries have flown to Hawaii in the hope of cornering trade officials and putting in a word about their issues.
Those issues include items such as the length of protection for pharmaceutical research data, steep dairy tariffs in Canada, access of foreign rice growers to the Japanese market and greater access to the U.S. market for Japanese automakers, especially for pickup trucks. One major U.S. technology company, typical of others in an industry that faces duties of up to 35 percent in TPP countries, expects to save hundreds of millions of dollars because of lower tariffs across Asia.
Obama has also argued that the TPP deal, which excludes China, will help make sure that Beijing does not set the rules for the road when it comes to trade.
The more than 20 chapters in the accord include rules that would curtail wildlife and human trafficking, reduce the amount of logging and impose international labor standards. But many critics remain skeptical about whether those chapters will be effectively enforced. A coalition of environmental, liberal and labor groups is planning to gather in front of the trade negotiators’ beachside hotel Wednesday and have a record number of people blowing conch shells simultaneously to draw attention to the agreement’s flaws.
“There are some major humps,” Rep. Sander Levin (D-Mich.), ranking member of the House Ways and Means Committee, said before flying to Hawaii Tuesday night. “I’m going because I think Congress needs to be included in the resolution of these issues. It is very difficult to change anything after agreement at the ministerial level. . . . And once the horse is out of the barn, it doesn’t do much good to watch the horse race.”
Noting the narrow margin by which lawmakers voted in June to give Obama so-called fast track authority to negotiate a deal and submit it to Congress for an up-or-down vote, Levin added, “Unless there are some major improvements in where they’re going, I think it places the TPP bill itself in peril.”
But the office of the U.S. trade representative, Michael Froman, has argued that U.S. companies and exporters stand to gain the most. It says that the average U.S. tariff rate is 1.4 percent and that the average tariffs in countries like Vietnam and Malaysia are three times as high. While the United States exports nearly $2 billion a day to TPP countries, exports could grow once TPP removes obstacles in other nations.
People close to the negotiations believe that a few major issues stand out from among the more than 100,000 specific line items in the agreement.
Biologics: As part of the Obama health care reform, Congress approved 12 years protection for data belonging to pharmaceutical companies working on biologics, a class of drugs and treatments isolated from natural sources and often produced by cutting edge biotechnology firms.
Most countries seeking to join the TPP have much shorter protection periods ranging from three to seven years. Shorter protection periods are favored by groups eager to make medications cheaper and more broadly distributed. Doctors Without Borders has been running ads saying TPP “will lock in high prices and block millions from accessing the medicines they need.” Obama in his budget proposals has suggested, without success, a protection period of seven years in the United States.
A compromise around seven years might be possible for TPP entry, but the industry’s powerful trade group, Pharmaceutical Research and Manufacturers of America, would adamantly oppose a shorter protection period in the United States, saying it would stifle innovation.
Japanese food: Japan’s government is eager to strike a deal, yet its domestic market for food has been tightly closed. A compromise might include the phasing out tariffs on pork and beef, but it remains unclear whether Japan is willing to let foreign firms compete with its rice farmers.
Canadian dairy tariffs: Conservative Prime Minister Stephen Harper has a competitive election coming and little appetite for roiling Canada’s dairy farmers. Yet the dairy farmers are worried. In the lakeside town of Roberval 160 miles north of Quebec, hundreds of Canadian dairy farmers marched Monday, carrying signs in French saying “strong and united” in support of longtime import tariffs that the World Trade Organization says range as high as 296 percent on goods such as milk, butter and cream.
Vietnam’s labor standards: The TPP agreement will almost certainly include higher labor standards and greater freedom for independent trade unions, but whether the Vietnamese government would follow through is uncertain. Vietnam’s ruling communist party closely controls the country’s labor unions as well as freedom of association.
Thea M. Lee, deputy chief of staff and chief international economist at the AFL-CIO, doubts that any TPP language will alter Vietnam’s behavior. “Vietnam has a labor system that is wildly out of compliance with any international labor organization’s standards,” she said. She said it was difficult to plant democratic trade unions in a country that is not a functioning democracy and lacks freedom of association and the right to organize and bargain collectively. Vietnam’s unions currently answer to the government, not their members, she said.
Some sources have suggested Vietnam might phase in greater rights. “If Vietnam can’t be in compliance on day one, Vietnam should not get the full benefits of membership on day one,” Lee said.
The AFL-CIO is not sending a representative to Hawaii, though. “If they haven’t listened to us for five years, I don’t know why they’d start listening to us in Maui,” Lee said.
Vietnam is seeking greater access to the United States for its textiles; U.S. retailers favor a deal with Vietnam for access to more inexpensive clothing.
Malaysia state-owned enterprises and human rights: Trade negotiators have been pressing Malaysia to curtail preferences for its state-owned enterprises and for ethnic Malays. In addition, Malaysia has been pressed to stop human trafficking, which would be a direct violation of the basic international labor standards barring forced labor.
On Monday, the United States upgraded Malaysia’s status to Tier 2 from Tier 3 in its report on human trafficking, infuriating rights groups. Levin said the move was done “without evidence of significant changes on the ground.” He said it was an example of bending the rules to reach a trade agreement rather than using the trade agreement to enforce rights.
Meanwhile Malaysia has its hands full. The country’s prime minister, Najib Razak, has been besieged by a financial corruption scandal and on Tuesday sacked his deputy and attorney general and installed more loyal supporters.
Investor-State Dispute Settlement: The awkward phrase is shorthand for an international arbitration process that many liberals, led by Sen. Elizabeth Warren (D-Mass.), say could be used by multinational companies to invalidate laws and regulations in the United States. Australia has resisted such an arbitration process and could play a key role on this matter. In practice, there have been few cases, so far.
Whether the talks can be wrapped up this week depends on how these issues are resolved. Political sensitivities will matter too, especially for Malaysia’s leader, as well as for Canada’s government, which stands for election in October.
Laura Toole, spokesman for General Motors, said “we are monitoring the negotiations closely” and said “it is too soon to tell if this week will produce an outcome, as details on the auto-related negotiations have not been released, yet.”
But some experts say the Obama administration is right to press on.
“In a global world there are no choices if you want rules,” said Mickey Kantor, who was President Bill Clinton’s U.S. trade representative. “We tend to play by the rules in the U.S. and our companies are protected if they play by the rules. But you have to draft rules and that’s what trade agreements all about.”