A beginner’s guide to the Trans-Pacific Partnership
The Trans-Pacific Partnership has been hailed as “the largest, most ambitious free trade initiative in history”. It is expected to lower tariffs, reduce non-tariff barriers to trade, harmonize countries’ domestic trade regulation policies, and set up a dispute settlement mechanism.
The international trade deal currently includes 12 Pacific Rim countries: Australia, Brunei, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam and is open for more countries to join. Indonesian president, Joko Widodo, recently announced his country intends to join the TPP. It remains to be seen whether key players like China and India will make a similar move.
Although the TPP was concluded in early October, the full text of the agreement was only released nearly one month later on November 6, 2015 (read the full agreement here). Prior to the document’s release, general features of the agreement were disclosed and certain drafts were leaked to the public, which caused anxiety with regards to some aspects of the agreement.
In light of the release of the full text, it makes sense to review three areas of contention that were the source of much anxiety: the oft-mentioned secrecy surrounding the agreement, the Investor-State Dispute Settlement mechanism, and increased patent protection.
The trouble with secrecy
Critics consistently scrutinized the TPP for its secrecy. Countries involved, especially the United States, went to tremendous lengths to keep the negotiating texts secret. In a 2015 article entitled, I’ve Read Obama’s Trade Deal. Elizabeth Warren is Right to be Concerned, Michael Wessel states:
Only portions of the [TPP] text have been provided, to be read under the watchful eye of a [United States Trade Representative] official. Access, up until recently, was provided on secure web sites. But the government-run website does not contain the most-up-to-date information for cleared advisors. To get that information, we have to travel to certain government facilities and sign in to read the materials. Even then, the administration determines what we can and cannot review and, often, they provide carefully edited summaries rather than the actual underlying text, which is critical to really understanding the consequences of the agreement.
A long period of refusing to provide the exact language of the TPP has meant attacks leveled at the agreement have mostly been shots in the dark rather than concrete criticisms. However, leaked texts did give commentators some opportunity to dissect this elusive agreement.
There may be some good reason for the secrecy up to this point. Trade agreements that deal with tariffs and quotas need to be conducted in secrecy because, by participating in the agreement, the government may be forced to relinquish protection for some domestic industries in favour of access to other markets for other industries. Moreover, negotiations often involve advancing tactical positions for the sake of getting concessions. Too much transparency may bind a country to that proposal, making it difficult to back away.
Nonetheless, the TPP is not a traditional trade agreement that simply deals with tariffs and quotas. Its proponents have often cited lowered tariffs as the go-to reason for defending the agreement. However, all the emphasis on tariffs overlooks the fact that, with a few notable exceptions, tariffs are at their lowest. Lowering them any further would have modest benefits. The TPP goes much further than tariffs—it delves into domestic laws and regulations and has important public policy implications. William Krist, in his article Negotiations for the Trans-Pacific Partnership: Closing the Deal (2015), notes:
Complex issues such as intellectual property protection, investor-state dispute settlement, regulatory changes, and services need to have far more transparency that the more traditional border issues. These issues are all very complex and affect many stakeholders; having broad input into the negations on these issues can help prevent future problems.
Discussions with diverse stakeholders are necessary for an agreement like the TPP that touches such a broad swath of the public. Ironically, Wessel further notes that of the 600 advisors in the United States who are cleared to have some access to the text of the agreement, the vast majority of them represent business interests. Limiting outside input to a single type of stakeholder means parties are often unable to foresee the diverse array of possible complications.
The full text has since been released but criticisms of the final text will now be of limited practical import as the agreement has already been concluded and can no longer be amended by states that wish to sign on.
Investor-State Dispute Settlement
The World Trade Organization framework allows a state to initiate dispute resolution mechanisms against another state that has violated trade terms. NAFTA expanded these powers by allowing private foreign investors to sue a state for legislation or regulations that hinder trade—even if they were implemented for valid public policy reasons. It was expected the TPP would contain a similar provision.
This is understandable since Investment-State Dispute Settlement (“ISDS”) mechanisms encourage foreign investment. Investors want the security of knowing their investments will not be the subject of arbitrary expropriation or the host country’s draconian laws. This anxiety is more salient in developing countries that cannot guarantee strong judicial systems immune to political corruption. ISDS guarantees investors an independent avenue to resolve dispute over their investments. Furthermore, it increases investment between countries that have vastly different legal systems.
In the 2015 article Public Health and the Trans-Pacific Partnership Agreement, Andrew Mitchell and his colleagues note, “[t]he security provided by ISDS may be particularly important for investments involving high up-front infrastructure and similar costs . . . where a change in the regulatory or other aspects of the host state environment cannot be easily addressed through a move to another country”. The more upfront and immobile the investment, the higher safeguards the investor would require.
Nonetheless, it will be vital to scrutinize the ISDS mechanism carefully. In a 2015 article by Arne Ruckert and colleagues, The Trans-Pacific Partnership Agreement: Trading away our health?, states that in Canada, there have already been 35 ISDS challenges under NAFTA, with a total of more than $10 billion US dollars in claims. While many claims have been dropped, the Canadian government has already paid around $215 million US dollars in compensation and there are pending claims that are worth billions of dollars. Under NAFTA, Canada has only faced lawsuits from corporations in Mexico and the US whereas under the TPP, Canada could face potential lawsuits from corporations in 11 other countries.
Critics argue ISDS provisions have been used to challenge legitimate public policy decisions made by governments that look out for public health or environmental degradation. Article 1110 in Chapter 11 of NAFTA, the “Tantamount of Expropriation Clause”, has been notorious for causing a chilling effect in the regulatory arena—lawmakers and regulators have become “overly cautious when designing public policy in areas such as the environment, lest they be sued”.
Rucker and colleagues noted the ISDS provisions in the TPP were expected to be more investor-friendly than those in previous Free Trade Agreements. The hope was that the TPP would attempt to limit the scope of its dispute resolution mechanism in some way—carve out a broad public health and environmental exception that would allow governments to enact regulations in this area without unnecessary legal repercussions.
Increased Patent Protection
Prior TPP proposals and leaked texts suggested the TPP would push towards increased protection of pharmaceutical patents. After the release of a US proposal regarding patents and the IP chapter of the TPP, there had been rightful concern about decreased access to medicines. Patents increase drug prices because of the monopoly granted by patent rights. High drug prices lead to less accessibility. The possibility that the TPP would increase the scope of patentable subject matter and that slight changes in a drug that don’t increase its efficacy (a term called “ever greening”) would lead to prolonging patent terms, was a source of much contention.
Andrew Mitchell and colleagues highlight the resistance the US’s high patent protection proposals faced:
Australia has stated that it “would not accept an outcome in the TPP that would negatively impact upon the integrity of Australia’s public health system”; Malaysia “has strongly raised objections towards proposals that could delay the entry of generic drugs into the market” or increase the price of medicines; and Peru has indicated that it will not accept harsher intellectual property terms than those in its trade agreement with the US.
Increased intellectual property protection is problematic because of the different levels of development of the various TPP countries. Imposing developed world levels of IP protection on countries that are insufficiently advanced to benefit from them would simply serve the interests of transnational corporations and pharmaceutical companies.
It remains to be seen how the final text of the TPP has attempted to address these concerns. Now that the full text of the agreement has been released, it is only a matter of time before critics start to grapple with its repercussions. In the meantime, as a recent article in the Globe and Mail rather eloquently put it: “Is it a good deal for Canada? I don’t know—the 6,000 plus pages were dumped on us only late last week”. We must wait for the dust to settle before moving to further unpack the agreement.
Editor’s Note: This article was written before the full text of the TPP was released, and has since been edited.
Mariam Awan is in 3L. She is a staff writer for Juris Diction.