Pull Up Your Socks – The TPP Is Done

The odds for a final signature under the Trans-Pacific Partnership went up and down since negotiations of the regional trade agreement re-started in Atlanta last Wednesday. In the final hours, the delegations of the 12 Pacific-Rim countries fought hard over data exclusivity terms for biologic drugs and access to dairy. Now the deal, the first of a new generation of regional mega-agreements, is done and while opponents are concerned about the selling out of patients, workers and consumers rights, Perrin Beatty from the Canadian Chamber of Commerce recommends to the naysayers to “pull up your socks” and face competition.

The TPP deal which has been negotiated in secret for more than five years, is the first of a new type of mega-deals, covering 40 percent of world trade spanning the United States, Japan, Canada, Australia, New Zealand, Mexico, Chile, Peru, Singapore, Malaysia, Vietnam and Brunei. A follow-up to the North American Free Trade Agreement (NAFTA), it extends the geographical reach and goes well beyond classical tariff-reduction and market access aspects and includes also far-reaching harmonisation of IP protection in the digital world.

The trade ministers’ official statement is available here. It appears to suggest that the text of the agreement will be made public after some technical work (Note: Intellectual Property Watch has been fighting along with the Yale Law School Media Freedom and Information Access Clinic for three years to get the agreement text released: IPW, Bilateral/Regional Negotiations, 30 September 2015.)

A summary of the agreement was published today, and is available here.

During five late night sessions, ministers gathered in Atlanta had to settle on the minimum of 5 years of data exclusivity instead of 12, while at the same time allowing for flexibility to shape additional protection in the TPP member states. New Zealand in the early morning hours gave in to some limitations with regard to market access for dairy products in Canada, clearing the way for the final announcement, New Zealand’s Trade Minister Tim Groser reported.

Rules of the Road for Asia-Pacific Trade

Journalists attending the press conference today in Atlanta that had been delayed over and over again for days applauded when USTR Ambassador Michael Froman came out with the final result: “We the trade ministers are pleased to announce that we have successfully concluded the Trans-Pacific Partnership.”

Froman called the agreement “ambitious, comprehensive, high-standard” and at the same time a “balanced achievement that will benefit our populations.” It will “take into account our different levels of development [and] reduce poverty,” he said. At the same time, it has the strongest labour and environmental protection of an FTA so far.

Asked for the message to China, Froman offered that the TPP parties looked forward to other Asia Pacific countries to share what has been developed now as “rules of the road for trade in the region.”

Groser, said that given the broad scope and depth of the TPP, the bigger picture, not the tons of butter, “will be profoundly important to generations of people in our respective countries.” His Australian colleague Andrew Robb call the agreement “transformational” and very much “onward looking also with regard to digital trade, e-commerce and global supply chains.”

Key Controversy – IP Chapter

The final breakthrough for the deal came when the US accepted a 5 year maximum required protection of clinical data for biological or life-cell drugs, used to treat cancer patients. After that the Japanese Trade Minister called home to say the deal was “in sight”. The US had pushed for the 12 year protection which includes an 8 year term during which potential generics cannot apply for market licences.

[Note: More details on the IP chapter are provided by USTR below]

While notably already cut back in US legislation because of the considerable cost for the US health care system, in the TPP the US favoured the longer exclusivity, which would secure companies like Pfizer, Roche Group’s Genentech or Japan’s Takeda Pharmaceutical Co high profits. Ploughing a lonely field here, the US finally had to cave in, a move already criticised by US Senator Orrin Hatch and the US Biotechnology Industry Association.

For many of the TPP parties, data exclusivity for the life-saving drugs, which results in a delay for more affordable generic variants, is completely new. Mexico, Vietnam, Malaysia and Brunei so far provide no exclusivity for biologics. Chile, Australia, New Zealand and Singapore provide five years, but for Chile it is unclear if the five extend to biologics. Only Japan and Canada provide eight.

Chile’s chief negotiator said in the briefing that he was pleased with the final result on biologics, not going into detail about potential changes of legislation in his country. Peru’s chief negotiator, the only woman at the table, said that while Peru had come with high expectations to the TPP, her government was had been looking at a balance and that “public institutions were prepared to make the necessary legislative changes.” Peru’s interest in the agreement was to “bring more jobs” to the country and better opportunities also to women.

In another area, the agreement contains dispute settlement procedures, but it is not clear if it includes investor-state dispute settlement (ISDS), which allows private companies from other countries to sue governments directly for policies the governments take.

Worst Trade Agreement Ever?

Activists working in the field of public health are not at all convinced. Manon Ress of Knowledge Ecology International, an advocacy organisation for patients and consumer rights, said there were still many bitter pills for consumers to swallow: beside the data exclusivity for all TPP parties, extension of copyright terms, caps on damages and the extension of patent terms with patenting old drugs for new uses – the so-called ever-greening.

Médecins Sans Frontières (MSF, Doctors without Borders) therefore expressed its “dismay that TPP countries have agreed to United States government and multinational drug company demands.” The organisation expects a rise in cost for medicines for millions and also delays for price-lowering generic competition.

“The big losers in the TPP are patients and treatment providers in developing countries,” MSF wrote.

Despite improvements over initial demands, the TPP would 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,” said MSF. Effects will be felt also beyond the 12 TPP countries. “We will be paying for this for a long time,” Ress said.

Touching on other parts of the IP chapter, Ress also said the US negotiators was “throwing its auto workers and farmers under the bus for Hollywood and pharma. And they are not even looking back.”

In another highly critical comment, Public Citizen wrote that people could find a “disheartening answer” as to “why medicine prices are so high” in the TPP negotiations: “the pharmaceutical industry has purchased tremendous influence with political leaders.”

Other provisions in the IP chapter according to the text leaked in May 2015 push for more intermediary liability of internet service providers, harmonised civil and criminal remedies as well as enforcement and border control actions. Provisions such as the indemnification of internet service providers for the “good faith” removal of material potentially infringing copyright could result in false take downs and violations of free speech.

Meanwhile from the copyright holders’ side, Motion Picture Association of America Chairman Chris Dodd issued the following statement, indicating that he had not yet seen the final outcome:

“We’d like to congratulate Ambassador Froman and USTR for successfully concluding the TPP negotiations, and thank them for the tireless hard work they’ve committed throughout this entire process. Enacting a high-standard TPP is an economic priority for the American motion picture and television industry, which registered nearly $16 billion in exports in 2013 and supports nearly two million jobs throughout all fifty states. We look forward to reviewing the agreement’s final text.”

Winners and Losers

The real effects of the mega-deal will in fact still have to be analysed over years to come.

While Canadian Trade Minister Ed Fest, who is in front of an election in two weeks’ time, categorically denied that there would be any job losses for Canada, academics in the field look at this in a more balanced way.

“There will be winners and losers from the TPP deal,” said Leonardo Baccini, assistant professor for international regulation at McGill University (Canada). “It is not that the US, the driver of the process, will only win and Japan, who came late in the game and is historically more reserved on trade deals, will only lose.”

Instead, it was an “interesting story playing out at the level of specific industries and even at the firm level,” said Baccini, who is also prepared to acknowledge that the gains would be rather concentrated. Describing himself as a trade optimist by profession, Baccini at the same time pointed out the more critical view harboured by many of his students in trade. “They are much more critical and consider the rise of income inequality as a growing concern,” he said.

Baccini’s students are not alone. Well-known critical economists like former World Bank economist Joseph Stiglitz or Paul Krugman, Nobel Prize in Economic Sciences awardee, are rejecting the mega-deal for this reason, too. Positive effects from the TPP will play out, Baccini said, only in the mid-term and negative effects might have to be addressed by governments. Canada’s government, for example, is considering financial subsidies for farmers during a transition time, Canadian media reported. Separately, the Geneva-based International Centre for Trade and Sustainable Development (ICTSD) issued a report suggesting that the TPP could reshape world trade in food and agriculture.

The agreement may still face tough scrutiny in congresses and parliaments back home. For example, US Congresswoman Linda T. Sánchez (California), a Democratic member of the House Ways and Means Committee, today issued the following statement:

“I have said throughout the negotiations that I will oppose any trade agreement that does not protect American workers and human rights, create jobs, and help hard-working families in my district. Now, in the scrutiny of daylight, the challenge for TPP proponents is whether or not this agreement meets these criteria.

“During the negotiations there was little evidence that this was going to be a good deal for the majority of American workers. Congress will use the 90-day review period to see if the U.S. Trade Representative has addressed the numerous concerns I – and many others – have raised and the impact of this agreement on hard-working families. I look forward to reviewing the final agreement.”

The US Trade Representative’s office published a summary of the agreement. Below is the section on IP rights:

“TPP’s Intellectual Property (IP) chapter covers patents, trademarks, copyrights, industrial designs, geographical indications, trade secrets, other forms of intellectual property, and enforcement of intellectual property rights, as well as areas in which Parties agree to cooperate.  The IP chapter will make it easier for businesses to search, register, and protect IP rights in new markets, which is particularly important for small businesses.

The chapter establishes standards for patents, based on the WTO’s TRIPS Agreement and international best practices. On trademarks, it provides protections of brand names and other signs that businesses and individuals use to distinguish their products in the marketplace.  The chapter also requires certain transparency and due process safeguards with respect to the protection of new geographical indications, including for geographical indications recognized or protected through international agreements.  These include confirmation of understandings on the relationship between trademarks and geographical indications, as well as safeguards regarding the use of commonly used terms.

In addition, the chapter contains pharmaceutical-related provisions that facilitate both the development of innovative, life-saving medicines and the availability of generic medicines, taking into account the time that various Parties may need to meet these standards.  The chapter includes commitments relating to the protection of undisclosed test and other data submitted to obtain marketing approval of a new pharmaceutical or agricultural chemicals product.  It also reaffirms Parties’ commitment to the WTO’s 2001 Declaration on the TRIPS Agreement and Public Health, and in particular confirms that Parties are not prevented from taking measures to protect public health, including in the case of epidemics such as HIV/AIDS.

In copyright, the IP chapter establishes commitments requiring protection for works, performances, and phonograms such as songs, movies, books, and software, and includes effective and balanced provisions on technological protection measures and rights management information.  As a complement to these commitments, the chapter includes an obligation for Parties to continuously seek to achieve balance in copyright systems through among other things, exceptions and limitations for legitimate purposes, including in the digital environment.  The chapter requires Parties to establish or maintain a framework of copyright safe harbors for Internet Service Providers (ISPs).  These obligations do not permit Parties to make such safe harbors contingent on ISPs monitoring their systems for infringing activity.

Finally, TPP Parties agree to provide strong enforcement systems, including, for example, civil procedures, provisional measures, border measures, and criminal procedures and penalties for commercial-scale trademark counterfeiting and copyright or related rights piracy. In particular, TPP Parties will provide the legal means to prevent the misappropriation of trade secrets, and establish criminal procedures and penalties for trade secret theft, including by means of cyber-theft, and for cam-cording.”

William New contributed to this report.