Source: World Trade Online
3 Sep 2014
At an informal round of talks taking place Sept. 1-10 in Hanoi, Trans-Pacific Partnership (TPP) negotiators are poised to confront some of the most contentious issues in the negotiations, including intellectual property (IP) protections for drugs and disciplines on state-owned enterprises (SOEs). But with no plans to actually resolve any of these tough issues in Hanoi, observers are questioning whether it is realistic to expect that the Obama administration will achieve its goal of reaching a substantial TPP outcome by November.
The talks on pharmaceutical IP and SOEs, for example, will focus on so-called “technical” work. In practical terms, this means the negotiators will be trying to further clarify and define the various options for resolving these issues, without actually pulling the trigger. Some of these decisions can made by TPP chief negotiators, who will be in Hanoi, but most are likely to be left up to ministers.
On SOEs, the parties have come close to agreement on how to craft a definition for which entities will be covered, and are now focusing the bulk of their energy on negotiating country-specific exceptions to the disciplines. Countries where SOEs dominate the economy, like Vietnam, have made this phase of the talks arduous, and it will likely take ministerial-level talks to resolve it, sources say.
The talks on drug IP also involve a series of complex issues that will likely have to be resolved at the political level. TPP countries have generally coalesced around a U.S. proposal under which less-developed members would be able to temporarily provide a lower standard of drug IP protection than more developed members. But they are still at odds over the mechanism for transitioning between the two standards, as well as what will be the core obligations for both standards on issues like patent linkage and exclusivity periods for clinical trial data.
Both aspects are technically difficult, politically sensitive and hotly debated between the 12 TPP parties. The United States specifically has faced significant pushback on its demands and has already backed down from its initial position.
In the span of the 10-day informal round in Hanoi, the negotiating groups on IP and SOEs will meet almost every day, as will the group dealing with the painstaking rules of origin (ROO) chapter. The other negotiating groups meeting will be textiles, investment, environment, and legal issues, according to informed sources. In addition, negotiators will hold meetings on market access for goods, services and investment, but not government procurement.
But those are not the only issues on deck for Hanoi. Felipe Lopeandia, Chile’s chief TPP negotiator, disclosed in an Aug. 21 briefing with stakeholders that one of the key objectives of the round will be to make progress on the final outstanding issues in the chapters on sanitary and phytosanitary (SPS) measures, labor rights, technical barriers to trade (TBT), and services, according to a Chilean government press release. His comments suggest that these four topics will be tackled by the chief negotiators, while lower-level officials will discuss the other issues.
Even if negotiators further clarify potential compromises in Hanoi, the next steps for the TPP negotiations are unclear. One informed source said TPP countries have not yet confirmed that they will hold a TPP ministerial meeting in October, as the U.S. has proposed, and probably will not make a decision on that until after the Hanoi informal round.
In addition, it is still unclear what type of outcome on TPP the U.S. is seeking for a November meeting of Asia-Pacific Economic Cooperation (APEC) leaders, this source said. Observers say it would be extremely difficult to reach a partial agreement of any kind due to the links between the different aspects of the negotiations. Every concession a party makes is conditioned on gains in another area, meaning that without the whole picture, a deal will continue to be elusive.
Meanwhile, officials from South Korea are slated to attend the informal round in Hanoi to keep an eye on how the TPP talks are unfolding. Korea has announced its interest in joining the TPP negotiations and held consultations with all current participants, some of them multiple times, but has still not formally sought entrance.
The U.S. has been abundantly clear in saying that it wants to conclude the deal with the current 12 participants before welcoming anyone else to the table, while at the same time saying that Korea’s willingness to resolve bilateral issues will impact U.S. support for an eventual Korean TPP bid. Seoul, meanwhile, has continue to hold open that it should be able to join the talks while they are still ongoing if they drag on much longer.
The linchpin of the whole TPP deal has long been perceived to be Japan’s willingness — or lack thereof — to improve its market access offer for sensitive agricultural products. In this discussion, the U.S. and Japan are the key players.
The two countries claimed they found a path forward on bilateral issues during President Obama’s trip to Tokyo in April, when the U.S. dropped its demand that Japan eliminate tariffs on beef and pork. U.S. negotiators have since claimed that Japan is now engaging more seriously on agricultural market access with other TPP parties. They also claim this is unlocking some of the difficult issues in the rules negotiations.
There are indications this has happened to some degree since a May informal TPP round in Ho Chi Minh City, Vietnam, but not with any great speed. Sources say Japan has discussed agricultural market access for its sensitive areas with parties beside the U.S., but only in a general way. Talks on specific tariff lines appear to far away.
In light of this, Canada — which has agricultural offensive interests and but also significant import sensitivities due to its supply management systems for dairy, poultry and eggs — is not expected to come to Hanoi with any new flexibility, sources said. While U.S. officials have charged that Ottawa is hiding behind Tokyo on agricultural market access, other sources sympathetic to Canada take exception to that argument.
One source noted that all TPP parties, including the U.S., are holding off on making politically difficult concessions until the parameters of a market access deal with Japan become clearer. In that regard, Canada is no different, although its major sensitivity happens to be agriculture, this source argued.
Amid all of this, a potential game-changer could be if the U.S. and Japan follow through with a July pledge to disclose to other TPP parties the details of their bilateral discussions on market access in October. That could generate momentum in the negotiations, although some observers say it would still be difficult to wrap up all outstanding issues before November.
Even some top-level political officials do not seem to think the talks will unfold quickly enough for a deal to materialize by the end of the year. In early August, New Zealand Trade Minister Tim Groser became the second minister from a TPP country to predict that the negotiations will not be concluded in 2014.
Groser’s comments echoed Australian Trade Minister Andrew Robb, who said in June he did not think the TPP talks would be finished this year and that a more likely timeline for their conclusion is the first half of 2015.
President Obama said following a June summit with New Zealand Prime Minister John Key that by the time of the November APEC meeting, “we should have something that we have consulted with Congress about, that the public can take a look at and we can make a forceful argument to go ahead and close the deal.” Chilean President Michelle Bachelet said on July 1 that the U.S. is seeking a “draft” TPP deal by the APEC meeting.
Some observers say they feel a sense of deja vu about the current dynamic. Around this time last year, U.S. Trade Representative Michael Froman announced that the TPP talks were in the “end game.” In November 2013, he said the time is “now” for TPP parties to make the difficult political decisions needed to complete the deal.
In a conference call with reporters on Aug. 28 from Myanmar, where he attended meetings with economic ministers from Southeast Asia and other trading partners, Froman said the U.S. is looking at the Hanoi round “as an opportunity to make further progress on the outstanding issues and expect it to be very productive.” He said he discussed the TPP negotiations in bilateral meetings with several TPP trade ministers in Myanmar, but did not stop in any TPP countries before returning home.
Since the 19th round of TPP negotiations in Aug. 2013, held in Brunei, TPP parties have stopped calling their gatherings “rounds” and have not had a formal role for stakeholders during negotiating meetings. But they have held a slew of meetings at different levels since.
These include a chief negotiators meeting in Washington in September 2013, an informal round in Salt Lake City in November 2013, and a December 2013 ministerial in Singapore. Another informal round and ministerial were held in