TPP: 5 Sticking Points That Remain

♠ Posted by Emmanuel at 8/08/2015 06:31:00 PM
Negotiators, rather than protesters, will actually be more likely to waylay TPP.
TIME has an easy-to-read list of issues that remain in order for the Trans-Pacific Partnership (TPP) agreement to be concluded at the international level. Earlier this month, efforts to conclude it came to naught. It's hardly a done deal; I'll believe it when I see a deal. With traditionally FTA-averse countries like Japan in the mix--TPP would be its first plutilateral instead of bilateral arrangement outside the WTO--there are reasons to doubt. Among them are the following:

1. US Big Pharma

At issue in TPP negotiations is when cheaper generic forms of new drugs can come to market, or when that exclusivity ends. In the U.S., that timeframe is about 12 years, but most countries involved in negotiations want it to be shorter—eight years or less, though Australia is insisting on five. It makes sense that the U.S. wants the longest period of exclusivity; of the ten largest pharmaceutical companies in the world, six are based in the US.

2.  Canadian dairy farmers

Dairy accounts for more than 25 percent of New Zealand’s exports (and 7 percent of its overall economy), so the country is driving for greater market access for its dairy products, with help from Australia. It might come as a surprise that cows are so contentious, but Canada is having none of it. Their government is facing a tight election this fall, and dairy farmers hold disproportionate clout in Ottawa. How much clout? Enough that dairy imports in Canada currently face a 248.95 percent tariff.

3. Japanese "auto protectionism" (see my earlier commentary as well)

Japan’s auto sector is the most closed-off of all industrialized countries, ranking 30 out of 30 across all OECD nations. It’s import penetration rate in 2012 was 5.9%, compared to an OECD average of 58% and a U.S. import penetration rate of 47.9%. Tokyo has made it quite difficult for foreign countries to sell in Japan by throwing up “nontariff barriers,” or indirect costs.

4. Textiles

Only clothing that is wholly sourced and assembled within TPP countries will qualify for duty-free sales. This poses particular problems for Vietnam, currently the second-largest exporter of apparel and footwear to the U.S., with more than $13 billion in sales last year. In order to manufacture all those items, however, Vietnam had to buy $4.7 billion worth of fabric from China, about half of its total annual imports. By itself, Vietnam is only able to produce a fifth of the fabric that it needs to sell on world markets. Companies in countries like Vietnam have spent decades building up diversified and extensive supply chains.

5. America's "currency manipulation" schtick

But tougher currency manipulation regulations were never going to be a part of the TPP. Control over individual currencies and monetary policies are key issues of sovereignty, and countries are understandably wary of signing away that kind of control. Introducing stringent currency manipulation requirements would blow up the entire TPP on the spot. But it will make it tougher to get the deal passed. With anti-TPP Senators in the U.S. threatening to repeal Obama’s “fast-track” authority for TPP if the administration doesn’t address currency manipulation in the final agreement, Obama still has significant domestic battles ahead of him.

Japan's agricultural protectionism remains unresolved as well, though these negotiations have hardly been the most transparent as many observers have noted.