TPP madness: Trying to make sense of the Trans Pacific Partnership deal

TPP madness: Trying to make sense of the Trans Pacific Partnership deal
Bête noire of the left, holy free-trade grail of the right, and grist for the publishing mill of every country involved, the Trans Pacific Partnership Agreement, or TPPA, may (or may not) be the best or worst thing to happen to Pacific Rim countries ever, depending, of course on who you talk to.

Whether it’s trade minister Tim Grosser calling his own constituents “politically irrelevant” or Jane Kelsey positively tearing Mike Hosking a new one on live television, the plurilateral free trade agreement is the acronym on everyone’s lips, and everyone’s got an opinion.

The breakdown of talks over the weekend is the latest development, with not even the soothing Hawaiian setting managing to soften staunchly-held positions to push a deal over the line. 

With the news of the failure came a predictable array of responses: applause from the left that the deal is dead, disappointment from the right in the same, and quiet optimism from those perhaps closer to the issue that a deal will be struck, one way or another in the very near future.

In this country, there is a large and vocal contingent against the deal, and it’s not hard to see why: secret negotiations have a tendency to do that. The Government hasn’t gone out of its way to assuage fears, first offering assurances – particularly in terms of drug costs – then taking those assurances back, in a manner that makes it difficult to imagine how they could have conducted things worse, from a PR point of view at least.  

And as Canada moves into its general election in October and the US turns its attention to its own electoral spectacle in 2016, the failure to get a deal signed in Hawaii is certainly a spanner in the works for supporters of the TPP.

Image: Via Wikipedia

Perhaps it’s safest to assume that the TPP deal is down but not out. A deal willmost likely be signed, one way or another. Talks have, after all, been in progress since 2008 – 2006 if you go back to the original deal between New Zealand, Brunei, Chile and Singapore – and getting consensus between twelve countries is never going to be easy.

How you feel about that largely depends on where you stand in the New Zealand political spectrum. For those attempting objectivity, however, it’s difficult to know where to stand at all. Depending on who you talk to, the TPP has the potential to turn New Zealand into a well-moneyed, globally-relevant utopia, or its negotiators should be hung for treason.

The truth? Probably neither, definitely not both.

One thing’s for sure, a vacuum of information seems to offer two distinct choices: oppose the agreement in its entirety (because we don’t know what we don’t know, so the most rational step is bowing out entirely) or to simply trust the Government to do what’s in our best interests and let the chips fall where they may.

Neither seems a satisfying position.

Big pharma

So what do we know about the agreement for sure?

Precious little, but one thing seems clear: US big pharma really wants the ability to extend the life of its patents, it wants us on board with the idea, and Prime Minister Key has confirmed this is very much on the table:

“It’s highly possible, in fact highly probable that patents will run for a little bit longer, and that means the Government will have to pay for the original drug rather than the generic for a little bit longer.” 

Though Key is comfortable with the idea, critics don’t like the sound of it one little bit, and they may have a point. After all, shouldn’t copyright laws in this country be dictated solely on our own terms and according to our own domestic laws? Why should foreign right-holders get to have a say in the way we define our parallel importing laws? Big pharma obviously has a big say in the way US law gets written, and they’re hell-bent on ensuring they get the maximum return on their R&D investment, so why not draw a line in the sand and try, if we can, to stay the hell out of it?

Image: Wellington protests, November 2014, via Wikipedia

Paul Adams, CEO of EverEdge IP, says that before we panic, let’s take a look at what’s likely being proposed.

“The primary concern here is that [the US] want[s] to extend some of the provisions around patents,” says Adams.

“In the US you can seek an extension on the life of your patent for certain types of pharmaceutical compounds. They have this provision because it sometimes takes so long to get through the FDA approval process that by the time you hit the market your patent might be running out. So [the US has provisions for] a 15% increase in the length of your patent life.”

“Applying this to New Zealand, when the patent eventually falls, we get cheaper meds, which is great, but that has to be balanced against the fact that without those patents, those medicines don’t get created at all.”

“It’s about stimulating that development.”

It’s quite possible that that development might eventually become a New Zealand cash cow, rather than a purely stateside one. After all, New Zealand may not be known for its pharmaceutical development now, but health innovation could well turn into a big profit maker for this country in the future.

“Research and development is going to be very important for us,” says University of Otago doctoral researcher on international business, Pramuk Perera.

“Making this deal gives us an opportunity here. We have to invest in research and development, especially in the pharmaceutical area, because if we don’t, we won’t be [in that industry] in the future.

“When you think about intellectual property, that’s an opportunity for us,” he says.

Image: Pramuk Perera, doctoral researcher on international business at the University of Otago

Perera says that it’s been revealed the US has been looking to extend IP protection for pharmaceuticals to twelve years, New Zealand has been pushing back, demanding five year limits, and an agreement around seven or eight years seems likely.

“That’s the probable compromise,” he says.   

So while not an outright disaster for New Zealand, and, hypothetically at least, it may prove to actually benefit us in some way, the fact that New Zealand, right here and now, has a relatively small pharmaceutical development industry, raises the question: what are we giving up to gamble on these (possible) future gains?

Dairy

New Zealand’s willingness to concede points on pharmaceutical IP terms comes down to the fact that access to dairy markets offers such a lucrative opportunity to the country that our negotiators are willing to eat the frog on pharmaceuticals to gain the world in overseas dairy markets.

So are we swapping pharma for dairy?

“One of the stumbling blocks we’re facing is getting a better deal for dairy,” says Perera.

“It’s very good to have free access for dairy to all the markets. We are trying to get a better deal for dairy and to find a compromise in other areas. If you want to get the deal done you have to be a little bit flexible.”

Indeed, part of the reason the talks in Hawaii failed is because New Zealand is unwilling to sign an agreement that does not open up dairy markets for New Zealand exporters in places such as Canada, a country that currently has very high tariffs for incoming dairy products.

This situation is confirmed by Trade Minister Tim Groser, who says that “a number of challenging issues” need to be resolved before a deal is struck, including market access for dairy products.

“We will continue to work toward a successful conclusion. This is about getting the best possible deal for New Zealand, not a deal at any cost.”

Perera too remains optimistic.

“I think it’s signing the agreement for dairy that’s going to be a really big win. Countries like Canada have very high tariff barriers, so we will have to compromise a little bit. Predictions say food is going to be a really important [future market], and food supply is going to be a major issue worldwide, so this is a very important agreement for New Zealand.”

“If you look at our economy – we depend on international trade and business. We depend on Australia and China. If you take the countries in the TPP, that’s 40% of our trade and 70% of our investments. Achieving the 2025 target of 40% export from the New Zealand GDP – we need these kind of agreements. We have quite a few already, but we still don’t have agreements with the US, Japan, Peru, Canada and Mexico. All these countries come on board if we can sign this agreement.”

Investor protection

Less known, but perhaps scarier, are the rules surrounding investor protection.

A draft version of TPP negotiation papers, via Wikileaks, shows the presence of ‘investment protection’ provisions, or rules that would allow foreign companies to sue governments who changed laws to their investment disadvantage.

Julian Assange, WikiLeaks editor put it like this: “The TPP has developed in secret an unaccountable supranational court for multinationals to sue states. This system is a challenge to parliamentary and judicial sovereignty. Similar tribunals have already been shown to chill the adoption of sane environmental protection, public health and public transport policies.”

Paul Adams doesn’t see things in such dichotomistic terms.

“If you look at the opponents of the TPP, many of them are coming from the extreme left of the spectrum – they’d be against it no matter what was in it,” he says.

“Here’s what investor protection provisions are designed to do: If investors are invited to come into a country and invest, the government is then prevented from changing the rules later on.”

“Investor protection is there to stop a situation where investors are left worse off because the government changes the rules. If you’re going to sink $500m in a steel refinery with a 20-year payback, you want to make sure [governments] are not going to make an environmental regulation that prevents you from getting your investment back.”

“If [the government] was a business, what would you do? You’d sue them. If I’m going to make a big investment in your country, you can’t just change the rules under me. It’s happened in other agreements previously, so that’s why those protections are on the table.”

Whether that’s a comforting scenario or not is up for debate, but one thing about the recent non-developments in Hawaii is positive, at least. The breakdown of the talks signals that New Zealand negotiators don’t seem to be in a position where we will sign simply anything in the interests of cutting a deal.

For now, our interest is self-interest, and that, as negotiations continue, is something to hold onto.

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TPP: just the facts

  • The TPP is a trade agreement currently being negotiated between New Zealand, Australia, Brunei, Canada, Chile, Japan, Peru, Malaysia, Mexico, Singapore, Vietnam and the United States.
  • It is an extension of a 2006 deal between Brunei, Chile, Singapore, and New Zealand. In 2008 Australia, Canada, Japan, Malaysia, Mexico, Peru, the United States, and Vietnam joined the negotiations.
  • Negotiations were supposed to conclude in 2012, but have continued, with the latest round failing to reach conclusion last weekend.
  • The TPP is described as a ‘free trade’ agreement but goes well beyond that in its actual scope – chapters of the document include competition, co-operation and capacity building, cross-border services, customs, e-commerce, environment, financial services, government procurement, intellectual property, investment, labour, legal issues, market access for goods, rules of origin, sanitary and phytosanitary standards, technical barriers to trade, telecommunications, temporary entry, textiles and apparel, trade remedies.
  • Leaks of the documents have revealed requests for New Zealand to make its copyright laws consistent with the US. US copyright laws are often criticised for being very heavily weighted in favour of current right-holders, a situation that critics say stifles new innovation.
  • The negotiations are being conducted secret, as many international deals often are.