Dairy farmers in Pennsylvania. Auto-parts workers in the Midwest. Pharmaceutical companies concentrated around New Jersey. These pivotal groups, not to mention consumers across the country, are among those who can expect a wide range of changes in the years ahead from the newly concluded Trans-Pacific Partnership trade deal.
By lowering trade barriers among the United States and 11 nations scattered around the Pacific Rim from Japan to Chile, the pact - which needs approval from Congress and lawmakers elsewhere to go into effect - is intended to help countries specialize in producing and exporting whatever goods and services they can make most efficiently, while relying on imports for others. In the long run, that could help modestly decrease some of the prices consumers see in stores.
But the details of the agreement are a complex hodgepodge of new rules, some of them intended to protect the way business is conducted by a number of powerful industries, while others will open the door to new markets.
For American dairy farmers, the agreement means new opportunities to start selling some milk to Canada, a nearly closed market now. For cattle ranchers in the Midwest, the pact means a gradual reduction over the next 15 years in steep Japanese tariffs on beef imports that have protected Japan's famous producers of tender but costly Wagyu beef.
One of the final sticking points to making a deal was agreeing on a standard for temporarily protecting the drugs made using biotechnology from competition. In the end, negotiators agreed to a five-year minimum period of market exclusivity in each country, plus options for additional years, before these drugs could face competition from cheaper imitations known as biosimilars.
"The agreement recognizes that we can travel on different roads but end up at the same outcome," said Andrew Robb, Australia's minister for trade and investment. Michael Froman, the United States trade representative, described it as "at least five years of data protection plus other government measures that can achieve a comparable outcome."
The pharmaceutical and biotechnology industries had pushed for 12 years, the same period granted in the 2010 Affordable Care Act. The 12-year standard will remain in effect for the American market, but the pharmaceutical industry wanted that for all of the countries in the pact.
"We are disappointed that the ministers failed to secure 12 years of data protection for biologic medicines, which represent the next wave of innovation in our industry," John Castellani, president of the Pharmaceutical Research and Manufacturers of America, said in a statement Monday. "This term was not a random number, but the result of a long debate in Congress, which determined that this period of time captured the appropriate balance that stimulated research but gave access to biosimilars in a timely manner."
Critics of the pharmaceutical industry, while welcoming the shortening of the exclusivity period, said that the trade agreement as a whole would still impede access to affordable medicines, particularly for the less-developed countries in the pact.
"They've been able to eliminate a number of harmful rules from the agreement, and that will save many lives," said Peter Maybarduk, director of the access-to-medicines program at the public-interest group Public Citizen.
"The agreement could have been much worse."
Still, Maybarduk said the agreement as a whole imposed new patent and market exclusivity rules on countries that now do not have them.
"For us, any T.P.P. is making things worse," he said. "The industry will have many more tools with which to defend its monopoly business model."
For steel makers, auto-parts manufacturers, garment companies and solar panel producers, as well as their hundreds of thousands of workers, one question is whether the gradual reduction of import tariffs and other trade barriers will unintentionally provide a back door for more Chinese goods to enter the United States.
The agreement has elaborate "rules of origin" that determine which goods will qualify for duty-free treatment. In the auto industry, for example, 45 per cent of the value of each car or light truck will need to be produced in a Trans-Pacific Partnership country for the vehicle to be charged little or no duty by customs officials.
By comparison, the North American Free Trade Agreement used a different methodology that effectively required 53 per cent to 55 per cent of the components by net cost to be produced in North America. So the new agreement has the effect of allowing slightly more components to come from outside the trade region, most likely from China.
Drug companies take issue with data protection provisions in the trade deal. Credit Ramin Rahimian for The New York Times
Labor leaders and companies vulnerable to import competition warned that the deal could lead to job losses in the United States. "It's complete devastation of the auto supply chain," Leo Gerard, the international president of the United Steelworkers, said in a telephone interview. "If you look at the autos these days, they're assembled from parts from all over the place."
The Obama administration contends that the system will be tightly enforced to make sure that the minimum content standards are met.
Chinese auto parts are already pouring into the United States in large volumes anyway, as Detroit automakers increasingly use them in their factories.
Much depends on the precise legal language and formulas used to calculate the rules of origin for each product, and the fine print of the pact will not be released for a month. "The details will be critical," said Tim Brightbill, a trade-law partner at the Wiley Rein firm in Washington who represents American steel and solar panel manufacturers.
One surprise on Monday came when the Treasury announced that, in addition to lowering trade barriers, the 12 Trans-Pacific Partnership member nations would "strengthen macroeconomic cooperation, including on exchange rate issues, in appropriate fora." The 12 countries are discussing a possible arrangement for senior finance ministry and central bank officials to meet periodically. Congress put considerable pressure on the Obama administration last spring to insist on an enforceable currency provision in the trade pact. But the administration and the Federal Reserve fought back, saying that it might someday be used against American policy makers to limit their flexibility to set short-term interest rates and adopt other monetary measures.
Foreign governments said that a currency provision could be a deal breaker. It was opposed not only by Japan but also smaller countries like Singapore that informally peg their currencies to the dollar. Many American companies put their intellectual property in Singapore subsidiaries for legal reasons and tax reasons, and warned that they might not support the final agreement if Singapore left the negotiations over the currency issue. Congress ended up urging but not requiring the administration to negotiate a currency provision.
Detroit automakers were the main American industry that favored an outright ban on currency manipulation. The Japanese yen has lost a third of its value against the dollar in the past three years, allowing Japanese automakers to fatten their profits on shipments to the United States.
The Ford Motor Company strongly criticized the Trans-Pacific Partnership on Monday for not including a currency provision in the actual trade agreement. "To ensure the future competitiveness of American manufacturing, we recommend Congress not approve T.P.P. in its current form, and ask the Administration to renegotiate T.P.P. and incorporate strong and enforceable currency rules," said Ziad Ojakli, Ford's group vice president for government and community relations.
Food safety is another issue. Critics contend that it will become easier for contaminated seafood to enter the United States with less inspection from big seafood exporters like Vietnam. Noting that final language has not been released, Lori Wallach, the director of Public Citizen's Global Trade Watch, said that the pact raised the potential for outbreaks of disease that could hurt public confidence in all seafood, including products of the American fisheries industry.
But the Obama administration has repeatedly denied that the agreement will affect food safety. Gavin Gibbons, a spokesman for the National Fisheries Institute, an industry trade group, said that the pact would not undermine the reliability of import inspections.
From the start, the negotiations have been as much about geopolitics as about commerce. The Obama administration has promoted an overarching regional trade deal as a way to strengthen relationships with American allies as tensions have increased with China. At the same time, American trade officials have also suggested that it could be a model for an eventual pact with China itself.
China has emerged as the largest foreign investor in many Asian countries as well as the biggest exporter to them, and that has given China a stake in greater openness.
"I don't think China is that much concerned about the T.P.P.," said He Weiwen, a former Chinese commerce ministry official who is now the co-director of the influential China-US/E.U. Study Center at the China Association of International Trade in Beijing. "China will learn more and apply whatever is appropriate."
©2015 The New York Times News Service
