President Obama talks trade

The ins and outs of the TPP

Tracey Samuelson Oct 6, 2015

Trade ministers from 12 countries assembled in Atlanta Monday to announce a trade agreement they heralded as ambitious, comprehensive, complex and transformational.

The Trans-Pacific Partnership was first conceived by four countries in 2005. The U.S. decided to join the agreement in 2009. After more than five years of talks, including a highly anticipated negotiating round in Hawaii in July that broke up without an agreement, ministers finally reached an agreement just before sunrise Monday morning.

In doing so, they overcame issues that had derailed earlier rounds of talks, including market access for the sugar and dairy industries, rules governing what percentage of automobiles and their parts must come from TPP countries and intellectual property standards for medicines.

Who’s in?

The biggest players are the U.S. and Japan, based on their size of their economies and the fact that they don’t currently have a free trade agreement between them.

Other countries in the agreement: Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Who’s not?

China, for now. Since China joined the World Trade Organization in 2001, it has eliminated a range of barriers to trade, but it has also stubbornly protected its own domestic industries and state-owned enterprises at the expense of foreign companies. The TPP aims to eliminate this type of protectionism through enforceable rules, and that’s one big reason China won’t be joining the TPP anytime soon.

What’s next?

The legislature of each member country must now ratify the agreement, which could be a difficult process in many countries. The TPP has already become an election issue in Canada and the United States, where simply granting the president the negotiating powers needed to pursue the deal was a close call in Congress. President Obama personally lobbied members of Congress, eventually passing the “fast track” or Trade Promotion Authority by a slim margin with largely Republican support. TPA ensures Congress will give the TPP a straight yes or no vote, without filibuster or amendments, but its path forward will still be difficult.

Senate Majority Leader Mitch McConnell, who helped pass TPA, expressed reservations about the agreement negotiators reached Monday.

“Serious concerns have been raised on a number of key issues,” he said in a statement, adding the deal “demands intense scrutiny by Congress.” Speaking about Republicans to the Business Roundtable recently, President Obama said, “a party that traditionally was pro free trade now has a substantial element that may feel differently.”

Members of the president’s own party have been outspoken critics of the deal, including Massachusetts Senator Elizabeth Warren and Senator Bernie Sanders of Vermont, who’s currently seeking the democratic presidential nomination.

What’s covered?

There are 30 chapters in the TPP, covering a wide-ranging set of topics. There are the traditional tariff reductions that are the backbone of many trade agreements, covering sectors like automobiles, agriculture and textiles. But there are also chapters devoted to newer technologies, such as e-commerce and telecommunications, which free companies from having to maintain servers in countries where they operate, among other things.

The agreement also commits member countries to certain labor and environmental standards, such as the right to unionize and prohibitions on illegal wildlife trafficking. The environmental standards, in particular, have already both been heralded by green groups as well as criticized for not being strong enough. Teamsters President James Hoffa said the TPP looks like a bad deal.

Still other provisions seek to reduce red tape for businesses operating across borders, both by making customs procedures more transparent and by harmonizing regulations between member countries.

One of the more controversial elements of the agreement has been how disputes will be handled, either between member countries or companies operating in TPP countries. The so-called Investor-State Dispute Settlement mechanism established in independent international tribunal to hear cases. The U.S. has had ISDS provisions in all its free-trade agreements, except with Australia. But because the provision allows companies to sue governments for actions that damage their investments, critics worry the system could be used to limit governments’ ability to regulate. TPP, therefore, includes a “carve out,” which allows countries to prevent tobacco companies from bringing these kinds of cases.

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