World

Delicate China; No dice on rice. By Hamish McDonald.

Robb holds firm over Big Pharma in TPP

US President Barack Obama meeting agriculture and business leaders on the benefits of the Trans-Pacific Partnership.
Credit: Corbis

Initial coverage here to the conclusion of the 12-nation Trans-Pacific Partnership agreement centred on the gains promised for our sugar exports, with predictable whinges Trade Minister Andrew Robb hadn’t somehow managed to free up the United States sugar market completely.

One sugar farmer was even shown complaining it would raise the income of the average cane grower by “only” about $3000 a year. That the rest of us should be so lucky.

But why blame the TV stations? Increases in quotas and lower tariffs for farm goods are the most tangible benefits in what we know about the TPP so far. Video footage of giant harvesters swathing through fields of sugar cane, gantries pouring raw sugar into ships and so on all make easy viewing for a dry subject. Robb will be hoping it stays that way. Barnaby Joyce’s threats of a Nationals rebellion over sugar are all part of the pantomime.

However, trade in tangibles is not the main part of the TPP, which is mostly about setting rules for services and strengthening protection for intellectual property. It also has some welcome chapters that, in theory, strengthen labour rights, requiring member countries to act against child labour and to allow workers to form independent trade unions that can carry out collective bargaining – a big concession for Vietnam in particular. There are some environmental protections, too, aimed at reducing depletion of fish stocks and banning trade in endangered species.

But with the US having moved in to take the lead in the TPP negotiations as the Obama presidency started, the key areas have been those in which powerful US industry groups have been seeking to reinforce their dominance. The open internet provisions will protect cloud-based data systems, as well as ensuring freedom of information. Copyright enforcement for software and creative works will get tougher.

Most critically, has Big Pharma got its way? It seems not, or at least, not entirely. The Americans wanted the US model of 12 years’ data protection against cheap copies for new drugs such as biologics, made from living organisms. Robb held out for Australia to keep its existing five-year protection, supported by Peru. Other big players such as Japan already have eight years’ protection, and this was the US fallback offer.

Robb seems to have got away with a fudge that is either a face-saver for Obama’s trade negotiators to show to Big Pharma and its lobby in congress, or a concession that will eventually show up in Canberra when it adds to the cost of the Pharmaceutical Benefits Scheme (each year of protection against generics for some so-called miracle drugs can cost the scheme hundreds of millions of dollars).

The agreement is for a five-year “minimum” of data protection, with options for a further three years achieved by administrative means. Robb says no legislative change is required in Australia. During negotiations he argued that procedural delays usually stretched out protection to six or seven years anyway. We won’t know exactly what he has signed us up to until the text is revealed to us mere citizens, which may take several weeks and will not then be subject to amendment.

The howls of disappointment from Big Pharma and its friends such as Republican senator Orrin Hatch do suggest Robb has held out, and not made things much worse. Likewise the dismay of tobacco state congressmen with the exclusion of the tobacco industry from use of the investor-state dispute settlement (ISDS) provisions of the TPP, which allow corporations to take governments to arbitration panels for changing the rules after they invest. The ISDS provisions will also require corporate complainants to prove their claimed damages, have more scope for frivolous claims to be dismissed, and bar conflicts of interest for arbitrators who might have previously worked for complainants. Republicans in general don’t like labour protection, too.

“The TPP looks better than it did, which infuriates much of congress,” blogs US “progressive” economist Paul Krugman, who described himself as previously a “lukewarm opponent” of the TPP, on grounds of excessive protection for intellectual property and enhancement of corporate power against regulation.

Delicate China

The TPP is as much or more about strategy than economics, however, having been raised as a pillar of Obama’s pivot or rebalance to Asia. It is supposed to seize the rule-setting leadership again for the US, setting the bar higher amid the 12 countries that together account for about 40 per cent of the global economy.

The US and Japan make up 80 per cent of the TPP total economy, so the immediate effect is to tighten the embrace between these two countries, and make them the joint rule-setters for cross-Pacific trade. Yet how does this affect China, the biggest trading partner for many of the countries involved?

In January this year, Malcolm Turnbull told the Australia–US leadership forum, a non-government invitation-only group, that “the effectiveness of the TPP will be considerably enhanced by the inclusion of China, whose constructive participation in regional elements is a central element in its peaceful rise”.

Japan’s Shinzō Abe is not rushing to lay the welcome mat for the Chinese. “The TPP has been created by countries that share a basic sense of values, namely liberal democracy, basic human rights and the rule of law,” he said this week, conveniently overlooking the inclusion of Vietnam. “It will create a free, fair and open international economic system and predominantly strengthen rule of law in the economy.”

The TPP still has many obstacles before it can think of widening membership, even to non-controversial entrants such as South Korea. Congress gave Obama “fast-track” negotiating authority to conclude the TPP, which means legislators can either accept or reject the draft agreement as a whole, without amendment, within 90 days of it being presented.

Enough congressmen and senators on the normally pro-free trade Republican side are now possibly sufficiently riled to join labour-affiliated Democrats to vote against it. Hillary Clinton hedged her bets on a TPP she previously supported as Obama’s secretary of state. “As of today, I am not in favour of what I have learnt about it,” she said. Yet the “strategic” imperative will be a strong factor against US sectional interests, with the TPP forcing open Japan a bit more, coaxing Vietnam closer to political reform, and tightening the sense of shared interest with friends such as Australia, New Zealand, Singapore and Malaysia in the region. That said, the US congressional debate will continue into the presidential election year when posturing takes over.

No dice on rice

Meanwhile, is the TPP likely to be the “third arrow” of Abenomics to revitalise the Japanese economy, applying structural reform to the previous shots of fiscal and monetary stimulus?

Not so far, at least in removing absurd levels of farm protection. Abe’s ruling party and the bureaucracy have devised special funds to counter the TPP’s greater competition for the domestic rice, beef, pork, wheat and dairy industries. The government will buy up the extra quotas of rice allowed from the US and Australia for its “national reserve”, where it will rot or be given as food aid, in order to keep up prices for homegrown sticky rice.

 

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This article was first published in the print edition of The Saturday Paper on Oct 10, 2015 as "Robb holds firm over Big Pharma in TPP". Subscribe here.

Hamish McDonald
is The Saturday Paper’s world editor.