TPP trade deal signed. Now for the detail

By Leith van Onselen

The Trans-Pacific Partnership (TPP) agreement – a multilateral trade deal between 12 Pacific Rim nations (including Australia) – was finally concluded overnight in Atlanta after five intensive days of talks, and five years of overall negotiations.

Agreement was reached after Australia and the US brokered a deal on so-called “biologic” drugs, which paved the way for agreement in the other remaining issues.

As expected, the TPP is being hailed as a landmark agreement that will open up markets for Australian services providers in mining equipment, finance, education, engineering and logistics, along with Australian farmers, which will receive greater access to North American and Asian markets.

According to Australian Trade Minister, Andrew Robb, the TPP will be “truly tranformational” because “to have one set of rules for 12 destinations is going to turbo charge regional supply chains and global supply chains and reduce costs”.

To Robb’s credit, he did push back hard against intense US pressure to extend protections on “biologic” drugs, an important new class of medicines produced from living organisms that are used to treat cancers and diseases such as rheumatoid arthritis.

Australian patent law currently gives pharmaceuticals 20 years of protection. Rival pharmaceutical companies must then wait another five years to access the clinical data needed to create similar and cheaper versions, known as “biosimilars”.

In the TPP negotiations, the US first pushed for 12 years of data exclusivity on biologics before reducing its bid to 8 years. However, Australia was successful in keeping protections to 5 years, as applies currently, thus limiting cost increases for drugs in Australia.

As reported yesterday by John Kehoe at The AFR, “each extra year of data exclusivity delays the entry of cheaper “biosimilar” drugs and would cost the federal budget through the Pharmaceutical Benefits Scheme more than $100 million a year, a figure that would rise as new biologics were developed”. So Andrew Robb looks to have done well on this issue; although we’ll have to await the final text to be certain.

Developing countries, by contrast, will be worse-off under the TPP, since their pharmaceutical protections are not as strong as Australia’s, and will need to be increased. According to Medecins Sans Frontiers (AKA Doctors Without Borders):

“MSF expresses its dismay that TPP countries have agreed to United States government and multinational drug company demands that will raise the price of medicines for millions by unnecessarily extending monopolies and further delaying price-lowering generic competition. The big losers in the TPP are patients and treatment providers in developing countries. Although the text has improved over the initial demands, the TPP will still go down in history as the worst trade agreement for access to medicines in developing countries, which will be forced to change their laws to incorporate abusive intellectual property protections for pharmaceutical companies.

For example, the additional monopoly protection provided for biologic drugs will be a new regime for all TPP developing countries. These countries will pay a heavy price in the decades to come that will be measured in the impact it has on patients…

The negative impact of the TPP on public health will be enormous, be felt for years to come and it will not be limited to the current 12 TPP countries, as it is a dangerous blueprint for future agreements.”

There are other potential gremlins lurking in the TPP, which could be detrimental to Australia’s interests. These include:

  • An Investor-State Dispute Settlement (ISDS) clause, which could allow foreign corporations to sue the Australian Government (taxpayers) if they can show that their property was seized or that they were targeted by or treated unfairly under new regulations.
  • New copyright protections, which could raise the cost of content in Australia.
  • Additional intellectual property protections to allow evergreening of patents, thus raising monopoly power.

With the TPP to number over 20 chapters and thousands of pages, the details of the agreement will come out over coming weeks and months. Only then will we have an idea about the true costs and benefits of the deal.

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Unconventional Economist
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  1. It still looks as if Congress is Australia’s best option so anything that is negative for the US, in an election year, will surely help the chance of non ratification.

    • Look, from what I have read about the this agreement, it appears not that much to be afraid off, maybe some price hikes in a couple of things, but nothing transformative… obviously we await the detail. If you have lived in the the EU, of which this will be a nothing… the biggest gripe is a extrajudicial process for international trade disputes – formalising that. Which I suppose has to be done at some stage anyway.

      Compare that with the China FTA which is simply a Trojan horse, I think we are worrying about the wrong thing here…

      • “from what I have read about the this agreement”: which for the subjects of the deal is not much as it’s been confidential. Chafta is also egregious but more exposed to analysis.

      • Incorrect, and there is a lot of ignorance on this website about this agreement, whereas there has been no real detail given on the China FTA… the TPP the kind agreements occur in other jurisdictions, for example the one between the US and EU. They are primarily about equal trade and more importantly conflict resolution/subsidies – it does not cover cigarette packaging etc. Thats a national health issue.

        The China FTA has a specific clauses regarding immigration, and investment hurdles, which any project of any significance could jump – and into the future, the stipulated benchmark will inevitable lessen.

        The difference comes down to two points – the TTP is about trade, but more importantly uniform rules and conflict resolution. The other is about the absence of national sovereignty regarding labour, investment and price/cost transfer.

        Entirely different propositions… UE should be pointing that out.

        Simply because both agreements have entirely different intents. Very poor analysis by fellow bloggers on one of these agreements compared to the other IMHO. Nuance guys, nuance…

      • Ronin8317MEMBER

        The trade between USA and Australia is hardly equal, that being said, it’s still a much better agreement compared to China’s FTA. I don’t think our trade minister even considered the implication of “unlimited number of visas”. If the deal is signed as is, go long on airlines flying between China and Australia.

    • The TPP will be ratified in the US as well. There is a reason it excludes China. The agreement is as much about isolating China as part of Obama’s silly “pivot” to Asia.

  2. ah crap!

    I guess now we’ll just have to wait and hope that it falls afoul of the parliamentary process on the back of the details that emerge between now and when it is voted on. With any luck it’ll be pretty clear who’s been shafted and somebody will take exception on their behalf, however experience tells me that the patsy is never so readily identifiable in these types of deals…

    Leith, thanks for your continued efforts to highlight the most insidious aspects of this deal as it has unfolded in recent months and prior.

    • yeah big win, like tobacco is the only bad thing we consume with a potential being super – taxed or prohibited in future, how about sugar, fat, medicine, GMO food, pesticides, … IT addictions of all kinds and other mental health effects of new technology, coffee, … just wait for new research

      ISDS can be used for anything, e.g. if we decide to increase subsidies to farmers (in an attempt to save them from unfair competition), food exporters from USA or some other heavily subsidised country may request damages

      • Winners = lawyers as per usual

        I would have been pushing for a negative dumping clause ie can’t export at a higher price than local market price +-5% after forex

        I would also be looking at putting in a carbon tax – not only on Aussie exports as the greens/labour did, however on imports as well – the reason being that it would offset the excise revenue loss (2-30b$ per annum) that the government will be hit with. Potentially more trade is good, however the correlation from extra trade to increase tax rev once excise is removed is about 0.2 which is < 1.

      • Sorry, sugar, as a complex CHO, in the absence of swathes of fat isn’t inherently bad.

        It’s used as fuel for the brain and body.

        Sugar, in the presence of fat and salt, however….

        [Precis: sugar in and of itself isn’t a baddy. Try running your brain without sugar. Ooops. Brain runs on glucose.

      • @ Note to

        pointless off topic and wrong at the same time

        this was about TPP no about health benefits of sugar but ….

        brain runs of sugar but the one our body derives from various foods, all kinds of carbohydrates, fats and even proteins. There is no need to eat glucose to feed brain with glucose.

        when people say eating sugars is bad for health they almost always think about refine sugars added into other food

        eating refine sugars is not natural – we didn’t evolve eating refine sugars (we started eating them as significant source of food less than 200 years ago) so it cannot be good

    • Yes, but this still opens the door for the other industry that is copying the tobacco industry playbook – the Fossil Fuel Industry

      So when we pass legislation to put a price on carbon, that can be deemed harmful or a restraint on trade for a big global fossil fuel/coal company will allow the company to sue our Government for damages in lost income.

  3. We already determined that there are only a few thousand families that will benefit in total from the sugar access granted from this TPP. However, is it really fair to slap the other millions of families with IP protection which requires meta data retention in turn increased costs across the board for internet?

    That is just one example.

    Also, in 10 years time, how do we know that some nasty back clause isn’t going to cost AU a tonne of money in legal costs like the ciggarette companies are doing so with a 20 year old trade deal out of Asia?

    There are way too many downsides to this deal. No prudent person would recommend such a deal unless they had personal gain. The world is currently at war, not in the general sense but a trade war. Signing of this deal will give AU a disadvantage which in my books is nothing but a treasonous act worse than ISIS or some extremist could ever hope to achieve from a pure economic damage point of view.

    • Lab, there is no upside for sugar.
      Already there is 6 months supply in storage and a bumper crop expected from Brazil this season
      But Sugar is the next Nicotine. Once a few of these legal cases which highlight the tobacco like marketing of sugar get some traction, sugar is dead.
      This is going to be a major hurdle for the economy of QLD, but for the moment it is being kept under wraps.

      • WW I would not see sugar as much in terms of what goes into tea but more the molasses that go into stock feed for cattle.

      • Sa Good point.
        I was out at Port of brisbne the other day and they ahve a whole monster size storage shed full of cane trash which has been compressed in to standard hay bale size and liberally dosed whit molasses.
        On an warm day you can smell it al over the place.
        It is sold as cattle fodder to Indonesian feed lots, the boys out there told me they had been working on it for 3 years. It is used as low value backloading on ships to Indonesia.
        What’s in it for Australia?
        The Government says the TPP deal will eliminate 98 per cent of all tariffs on everything from food to manufactured goods, resources and energy.

        Sugar: Access into US to increase from 107,000 tonnes to 207,421 tonnes. Could see exports to US climb above 400,000 tonnes by 2019/20

        Beef: Deal liberalises exports to Japan, and eliminates tariffs into Mexico, Canada and Peru

        Dairy: Japan tariffs will be eliminated on a range of cheeses covering over $100 million in existing trade

        Rice: For the first time in over 20 years, Australia will be able to export more rice to Japan

        Resources and energy: Immediate elimination of tariffs on iron ore, copper and nickel to Peru

        Manufacturing: Immediate elimination of tariffs on iron and steel products exported to Canada, and to Vietnam within 10 years

        Intellectual property: TPP will not require any changes to Australia’s patent system and copyright regime

        Biologic medicines: Australia’s existing five years of data protection for biologic medicines will not change.

        Tobacco: Companies will not have extra power to challenge the plain packaging legislation under the TPP.

        You will note the sugar deal only gives us access to the market, but the prevailing price is lower than the cost of production, here. So no real outcome for sugar.

  4. Expect endless good news stories about how countries that we impose few if any tariffs on have agreed to reduce some of their tariffs and quotas on some of our exports at some point. It will be interesting to see just what these concessions prove in practice to be.

    Expect close to zero commentary on what we gave up because that bit will be the bit they tell us about last.

    It would be nice if a few interviewers asked Mr Robb specifically what concession were granted. Short odds they involve:

    1. The ability to regulate unproductive capital inflows.

    2. The ability to regulate foreign investments in Australia without crippling ISDS damages claims. Keep in mind that the only carve outs sought by Robb concerned health and the environment.

    3. Greater protection for foreign IP (exports)

  5. so basically we are getting “free” access to extremely subsidized American (and even more subsidized Asian) food market to compete with everyone so we have almost no chance of selling much while they are getting more protection for monopoly intellectual bullshit to be able to charge us more for the crap.

  6. Terror Australis

    20 chapters and i will wager there is NOTHING in it for sugar farmers.

    Some Nat politicians will have some red faced explaining to their electorates.

  7. I would have also been putting in a clause on IP to recognise patents that were not protected by the inventors and were stolen.
    Would being the power board back into play – Peter Talbot, working under Frank Bannigan at Kambrook, invented the power board. This allows multiple electrical devices to be powered where only a single wall socket is available. This is a well-known example of failing to protect intellectual property. Kambrook was more interested in immediate commercial release than patenting its idea and has never received any royalties from this now ubiquitous product.

  8. TPP media spin:

    “There are winners and losers but overwhelmingly this will drive enormous job growth and create all sorts of wonderful opportunities,” Trade Minister Andrew Robb said.
    Under the deal 98 per cent of tariffs across TPP countries will be slashed on products including beef, dairy, wine, sugar, rice, horticulture, seafood, manufactured products, resources and energy.

    The countries involved are Australia, the US, Canada, Singapore, Brunei, New Zealand, Chile, Peru, Vietnam, Malaysia, Mexico and Japan.
    Last year, about a third of Australian exports – worth $109 billion – went to TPP countries.

    Half of that duty free export of dirt and gas to Japan while import was worth almost $100b

    In agriculture, sugar producers will get more access to the US market and Australia will be able to export more rice to Japan.
    rice constitutes less than 0.085% of our export to Japan – $40m pa even if it doubles benefits would be nothing
    Tariffs on wheat and barley exports to Mexico and Canada will be scrapped, as will those on wine to Peru, Malaysia and Vietnam.
    seriously ? these countries don’t even import much barley ($30m combined) and wine (<$150m combined) and one of our main competitors got the same deal (Chile).

    In resources, tariffs on iron ore, copper and nickel to Peru will be eliminated and Vietnam’s import taxes on refined petroleum, butanes, propane and LNG will go seriously? selling ore and metals to a mining country ? we are world’s largest importer of refined petroleum (as percentage) while Viet Nam is not importing LNG

    When it comes to manufacturing, iron and steel product tariffs to Canada will be scrapped, paper and paperboard duties will be phased out to Peru, and Australian companies will now be able to bid to supply goods used by the governments of Brunei, Canada, Malaysia, Mexico, Peru and Vietnam.
    When it comes to manufacturing … what manufacturing, we don’t manufacturer anything, we don’t even manufacture for our previously “protected” market

    Mr Robb said the deal was “particularly good” for Australian services, with better access for education, transport, telecommunications, financial advice and health providers to TPP countries.
    How much particularly? They will not tax their students when the come to study in Australia? who would pay for a financial advise from an Australian anyway everybody knows what it is – leverage big to buy small property -> repeat

    The deal will also raise the foreign investment screening threshold for non-sensitive sectors from $252 million to over $1 billion.
    bingo … they will be allowed to freely buy few remaining things owned by us