Trans-Pacific Partnership: Industry Discord Threatens Quick Approval Of TPP Trade Agreement

WASHINGTON -- Six years of negotiations on a massive free-trade agreement among Asia-Pacific nations have produced an accord that’s generating lukewarm support from corporate America. Skepticism from industries as diverse as pharmaceuticals and financial services is now dimming the prospects for approval of the Trans-Pacific Partnership before U.S. President Barack Obama leaves office.

Delegations from 12 Pacific Rim nations wrapped up the text of the agreement Oct. 5 in Atlanta to widespread relief that the long-running talks had finally run their course. But growing murmurs of dissent have led to private discussions among business groups about revisiting or adding to the current deal in order to lock in widespread support.

The disunity has fed worries that the United States, the driving force behind the trade agreement, will fail to ratify the deal as it currently stands by next year as disgruntled industries maneuver for changes or unrelated sweeteners as the price for their support.

“As long as this idea of tweaks to the agreement is out there, it’s dangerous,” Edward Alden, a senior fellow at the Council on Foreign Relations, said. “No one will want to full-out endorse it if they think they can get a tweak that will benefit them.”

Indeed, groups such as the U.S. Chamber of Commerce, the largest U.S. business lobby, and the Business Roundtable, a grouping of top CEOs, are now mulling how and when to endorse the TPP as it stands, according to several lobbyists. They’re likely to back it while asking to address individual gripes about the deal through an as-yet-unspecified process next year.

Dissent among some industries has overshadowed broad support for TPP among other sectors, notably agriculture. Pork producers, rice growers and citrus farmers stand to benefit from the accord, which would crack open Japan’s long-protected market to a greater extent than seemed possible even five years ago.

Under pressure from organized labor, most Democrats oppose new free-trade deals, and Hillary Clinton, the former secretary of state who backed TPP talks, has also spoken out against the deal. With a faction of Republicans also opposed, convincing a majority of lawmakers to back the agreement will be tough without industry unity, Alden said.

The cool reception of the proposed Pacific Rim agreement contrasts sharply with the stance taken by the American business lobby earlier this year, when it aided the White House in a furious push to obtain enhanced negotiating powers from Congress. Companies from virtually every major sector of the U.S. economy united to help win approval of so-called fast-track negotiating authority, which allows the president to submit trade deals to Congress for a quick up-or-down vote.

The situation also turns decades of trade debates on their head.

For years, industries that stood to lose protection from imports in the form of tariffs and quotas -- textiles and apparel, footwear and other products that are now seldom made in the United States -- constituted the strongest opposition. Now the Obama administration finds itself managing dashed expectations, especially among drug manufacturers that wanted more out of the deal.

“The pharma industry usually gets most of what they want, and that’s very significant this time around,” said Mac Destler, a professor at the University of Maryland and a historian of the politics of U.S. trade policy.

Obama administration officials have flatly rejected suggestions that it revisit the TPP text even though other trade agreements, such as one with Korea that took effect in 2012, were reopened to accommodate congressional objections. They’ve privately warned industry groups that a deal with 11 other countries is a far more complex and precarious undertaking.

"This is isn't one of those agreements where you can reopen an issue or renegotiate a provision,” U.S. Trade Representative Michael Froman said Oct. 15. His Japanese counterpart, Akira Amari, has also warned against revisions.

The opposition to the agreement emerged most forcefully in the pharmaceutical industry over the TPP’s rules on patents.

Companies such as Pfizer and Amgen have invested heavily in drugs known as biologics, so named because they use living organisms to treat illnesses. U.S. law keeps data on clinical trials confidential for 12 years, a lockup period that raises the value of patents because the information can’t be used to ease regulatory approval of similar therapies.

Froman made a yearslong effort to replicate the 12-year rule in the TPP but ran up against the intense opposition of Australia, which has a 5-year period in its law, and poorer countries such as Peru that have minimal or no protection for biologics. The result is a murky compromise that would require countries to impose a lockup period of no less than 5 years but would give regulators the flexibility to extend it another 3 years.

The Pharmaceutical Researchers and Manufacturers of America immediately criticized the deal struck in Atlanta. The trade group has a powerful political patron in Sen. Orrin Hatch, the Utah Republican who heads the Senate Finance Committee. He called the agreement “woefully short” of what it needs to be.

John Lechleiter, CEO of pharmaceutical giant Eli Lilly, hinted last week that his industry wouldn’t back the TPP anytime soon. Froman’s deal fell short of the “correct” result, he said. "I think the timeline in which this could be approved or might be approved is very difficult to speculate on," he added.

A 12-year rule was never a remote possibility in the TPP negotiations. Lurking behind the opposition of Eli Lilly and other brand-name drugmakers is a fear of what might happen to U.S. law if the TPP agreement goes forward.

The Obama administration has repeatedly sought to reduce the 12-year period to seven years but has been blocked by Hatch and other Republicans. Clinton, the front-runner for the Democratic nomination for president, has endorsed the proposal amid a general debate in the United States about high drug prices.

“They are concerned about how this will translate into the U.S. context,” said Judit Rius Sanjuan, manager of the U.S. campaign for access to medicines run by Doctors Without Borders, a global aid group. “The high price of medicines is now a major issue here.”

Recent events have stoked the debate in the United States.

An 18-month investigation by two U.S. senators, Ron Wyden, Democrat of Oregon, and Charles Grassley, Republican of Iowa, revealed what they termed a "calculated scheme" by drugmaker Gilead Sciences to charge high prices for a hepatitis C drug for the purpose of "maximizing revenue, regardless of the human consequences." Also, Martin Shkreli, a former hedge fund manager who now runs Turing Pharmaceuticals, reaped a public relations nightmare when he raised the price of a drug that fights toxoplasmosis from $13.50 to $750 overnight.

Financial services, long a pillar of the industry coalition supporting free trade, has also chimed in with complaints about the TPP.

One section of the 29-chapter agreement dealing with e-commerce would bar countries from requiring that companies store and process data locally, a practice known as forced localization. This raises costs by preventing firms from harnessing the economies of scale offered by innovations such as cloud computing. However, at the insistence of the Treasury Department, TPP countries would have the flexibility to impose these rules on banks, insurers and brokers.

“If the administration were to change its position on the exclusion of financial services in the e-commerce chapter, that would make a big difference,” Peter Allgeier, president of the Coalition of Service Industries, said.