Five things you need to know about the Trans-Pacific Partnership

After eight years and 19 rounds of negotiations that began in Melbourne in 2010, the Trans-Pacific Partnership Agreement has been concluded in Atlanta.

The agreement will create a free trade zone among 12 nations, including Australia, the US, Japan and New Zealand. Together, the TPP nations account for 40% of global GDP and 24% of the world’s trade in services.

The multilateral trade deal will eliminate 98% of all tariffs levied by signatory countries, on products including beef, dairy, wine, sugar, rice, horticulture and seafood. It also extends to manufactured goods, resources and energy, and services.

Here are five of the key things you need to know about it.

1. We still don’t have the full text of the agreement, so many people are reserving judgement

Despite some leaks of various chapters of the agreement the TPP has largely been shrouded in secrecy.

Once the wording of the agreement is finalised it will be posted on the Department of Foreign Affairs and Trade website. This is expected to happen within 30 days.

2. The deal still has to be ratified in national legislatures, including the US Congress, which has been hostile

Jeffrey Wilson, Lecturer in Politics and International Studies, Murdoch University:

Negotiating a text for the TPP was only half the political challenge – governments now have to implement the agreement through a process known as “ratification”. This involves a country amending its own domestic laws to ensure they comply with the specified treaty commitments.

In case of the TPP this is a major task, as its provisions range across a wide range of areas as diverse as trade, investment government procurement, telecommunication, labour rights, environmental protection and financial services. Many interest groups have already indicated they will try and sink the deal by obstructing ratification in national legislatures.

It is expected that ratification will be unproblematic in Singapore, Brunei, Vietnam, and New Zealand, where governments currently have the political capacity to legislate for the required changes.

I predict that ratification will be relatively straightforward in Australia as well. While the LNP government requires support from the ALP in the Senate, most of Australia’s core requests (particularly tobacco ISDS safeguards and biologic drug restrictions) were obtained during negotiations. Australia also stands to make major gains in agriculture and services, which have eluded us in bilateral FTAs with China and Japan. It would be a “courageous' political move” for the ALP to block the deal.

The key “problem” countries are Japan, Canada and the US.

In Japan and Canada, there will be widespread opposition to some agricultural liberalisation provisions from farm and rural groups. Japanese Prime Minister Abe likely has the support to push these reforms ahead, but Canada’s position hinges on the outcome of the October 19 election.

Paradoxically, it is the US – the key driver of the TPP - where it faces the hardest domestic sell. In June 2015, President Obama obtained “fast-track” authority from the US legislature, which means the TPP will now be put to the Congress for a “yes or no” vote in 90 days. However, Obama relied on support from moderate Republicans to gain fast-track authority, and a number of prominent Democrats (including Presidential Candidate Bernie Sanders) oppose the deal. The current Presidential primaries will also cloud the US policy debate. For what it is worth, Donald Trump is against the TPP.

Further reading:

Explainer: Negotiators reach landmark Pacific trade deal, so what’s next?

3. There is an Investor State Dispute Settlement clause in the agreement

Elizabeth Thurbon, Senior Lecturer in international Relations, UNSW Australia:

ISDS clauses allow foreign investors to sue host country governments for regulatory changes that “harm” their investments. In agreeing to the inclusion of ISDS in the TPP (and in the Korea and China deals) the Abbott and Turnbull governments have ignored the advice of the Productivity Commission, which has argued strongly against ISDS clauses since its 2010 review of Australia’s Preferential Trade Deals.

As the PC points out, ISDS clauses can promote “regulatory chill” by disinclining governments from regulating in the public interest, lest they be subject to action by foreign firms. ISDS clauses are also inherently discriminatory, in that they grant arbitration privileges to foreign but not local companies. Furthermore, those arbitrations are carried out by small groups of legal experts who are not required to consider legal precedent and whose decisions are not open to appeal. The decision to accept ISDS in KAFTA, CHAFTA and the TPP marks a significant departure from the previous Labor government’s explicit and principled objection to the inclusion of ISDS in any future trade deals (which is largely what held up CHAFTA and KAFTA under Labor).

In agreeing to ISDS, Australia is now swimming against the tide of other advanced economies including France and Germany, which have both taken a strong stance against it. This follows the German government being sued by Swedish energy firm Vattenfall for its decision to shift away from nuclear power following the Fukushima disaster in Japan.

Both the US and Australian governments have indicated in their TPP announcements that the ISDS clauses negotiated have been designed to exempt “public interest” regulation from appeal, to make transparent the arbitration process and to discourage “frivolous” ISDS claims. As the text of the agreement is not yet available, it is unclear whether these exemptions extend to regulations aimed, for example, at transitioning away from a fossil fuelled economy towards more a sustainable energy footing.

Further reading:

When trade agreements threaten sovereignty: Australia beware

Sovereign risk fears around TPP are overblown

4. Medicines are not likely to end up more expensive in Australia as a result

The Australian government has signalled the deal will have “no impact on the Pharmaceutical Benefits Scheme”. The Department of Foreign Affairs and Trade has also claimed it would not accept an outcome that increases the price of medicines for Australians. If this is correct, Australia may have avoided adopting intellectual property measures that would increase the cost of medicines in the country.

Australia has apparently resisted attempts by the United States to extend data exclusivity protection on biologic drugs beyond five years. This move will likely save taxpayers millions of dollars a year by preventing unnecessary additional delays in the introduction of biosimilars (also known as generics).

While this would be a great outcome for patients, it remains to be seen what Australia actually has agreed to given the text is still secret. It is very likely, however, that the final TPP intellectual property chapter contains measures that will delay market entry of generic or biosimilar medicines in low and middle income countries party to the agreement. Delays in generic competition often result in paying higher prices for originator medicines under monopoly. This creates problems for access when medicines are priced out of reach.

Further reading:

Trans-Pacific Partnership puts member countries health at risk

5. Labour protections are included, but that doesn’t mean the unions will support it

Tim Harcourt, J.W Nevile Fellow in Economics, UNSW Australia

The TPP parties are all members of the International Labor Organization (ILO) and have agreed to “have laws governing minimum wages, hours of work, and occupational safety and health”. In reality, most countries pay above the minimum wage in the ILO, but it’s probably a good provision to have.

Ultimately all the developing countries and emerging countries that sign the agreement aspire to have better labour conditions. The whole idea of having trade agreements is to lift standards up, not drag them down. How that happens is often complex but most economists support the idea that if you pay efficiency wages you improve productivity.

I would think if anything the union movement would be more opposed to the TPP than CHAFTA given the sectors involved. Most of the CHAFTA provisions involving labour are about taking executives from state-owned enterprises to work on Chinese projects.

My research has found that exporters, on average, are more likely to be unionised, pay 60% higher wages than non-exporters, provide better levels of occupational health and safety, more education and training, and equal opportunity provisions.

Further reading:

Australia can get the balance right on free trade and worker’s rights