By: Doug Palmer
KAANAPALI, Hawaii — Top trade officials from the United States, Canada and 10 other Pacific rim nations fell short of concluding the biggest trade pact in history on Friday because of differences over agricultural, autos and pharmaceuticals, but said significant progress had been made.
“We’re confident that TPP [Trans-Pacific Partnership] is within reach,” U.S. Trade Representative Michael Froman said Friday. ”We’ve agreed that we are going to continue to engage intensively…with the goal of resolving the outstanding issues.”
But the inability to reach an agreement in Maui complicates President Barack Obama’s effort to rope together nations that produce 40 percent of the world’s economic output, from giants like Japan and the U.S., to developing nations like Peru, Malaysia and Vietnam. A TPP agreement is key to Obama’s “pivot” to Asia, aimed at anchoring the United States firmly in a region increasingly dominated by China and at raising labor and environmental standards.
The longer it takes to complete the pact and schedule a vote in Congress, the greater the chance it will become 2016 campaign fodder — with Hillary Clinton and liberal Democratic lawmakers likely facing intense pressure from union and environmental groups to disavow it.
“It would be a very significant setback if they don’t reach a deal in Maui,” Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics said Friday before the announcement had been made. “I don’t think it’s fatal, but what I think they would need to do is reach an agreement by mid-August.”
The trade officials did not announce a date for their next meeting and Froman was vague about how much longer it might take to reach an agreement. Negotiators will meet one-on-one and in small groups to resolve some issues, while other meetings would require all 12 ministers, he said.
If a deal is struck soon, Obama might still push the agreement through Congress before Iowa and New Hampshire hold their early presidential primaries. If a deal happened much later than that, though, Clinton might be forced by opponents such as Sen. Bernie Sanders into a position of opposing the agreement or promising to renegotiate if elected president.
“That would put enormous pressure on the 28 Democrats who voted for trade promotion authority” to withhold their support for the TPP deal, Hufbauer said.
Trade promotion authority, also known as fast track legislation, allows Obama to submit trade deals to Congress for a straight up-or-down vote without any amendments. The White House persuaded Congress to approve the legislation only after tough fights in both the House and the Senate.
The delay in reaching a deal is also a problem for Canadian Prime Minister Stephen Harper. Harper faces re-election in October, and Canadian dairy farmers are adamant about maintaining decades-old protections that keep prices — and their profits — stable. An agreement this week would have gotten the issue behind Harper, instead of hanging over his head as the Canadian campaign moves into full swing.
But Canadian Trade Minister Ed Fast dismissed the idea that electioneering will hold the talks back. “When our partners reconvene, which I trust will be very soon, Canada will again be at the table as a constructive partner with a sincere desire to complete these negotiations,” Fast said.
Despite their inability to cross the finish line, negotiators say they made significant progress on a variety of issues, but some of the thorniest disagreements remained.
U.S. drug manufacturers say they need 12 years of data protection for new biologic medicines to recoup research and development costs. A group of countries led by Australia have insisted drug makers should get no more than five years of protection to hasten development of cheaper generic or “biosimilar” drugs, which are more affordable for consumers. Many expect the negotiations to settle around seven or eight years, but an agreement had not been reached.
Dairy market access was major stumbling block throughout the eight days of talks in Maui. Canada’s unwillingness to significantly lift import restrictions dampened U.S. interest in opening its own market and forced New Zealand and Australia, two major dairy exporters, to scale back their hopes.
New Zealand Trade Minister Tim Groser scoffed at the idea that his tiny country was demanding too much in the talks or would drop out of the deal in a huff.
”No, we will not be pushed out of this agreement,” Groser said, noting the New Zealand had already given up on its goal of elimination of all dairy tariffs. “The proposition that having made this huge concession that New Zealand is now hanging out for something that is completely impossible for our negotiating partners is something I would reject.
U.S.-Japan auto and rice negotiations also remained up in the air. But both U.S. and Japanese officials say the two sides have significantly narrowed gaps since Japanese Prime Minister Shinzo Abe visited Washington earlier this year and are in striking distance of closing a bilateral deal.
“If I can be accused of anything, it’s putting myself to the front to really push the interests of my country,” Mexican Economy Minister Ildefonso Guajardo said, when asked about rumors that his country’s position on the matter is holding up the entire agreement.
Mexico is seeking a “rule of origin” equal to the one included in NAFTA, which would require 62.5 percent of the content of a vehicle to originate in the TPP region to qualify for duty-free treatment. Japan, by contrast, wants a low rule of origin in the autos sector.
Japanese Minister Akira Amari said the issue was not settled, but offered few details. “I believe there has been major progress made,” he said through a translator, adding that the parties are “about to reach a landing zone.” For his part, Froman said the U.S. was seeking an outcome in autos that would drive production in the region
The United States also remains in talks with Vietnam to bring the Southeast Asian nation into compliance with new labor obligations. Many Democrats are closely watching that issue, concerned that American companies will shift production to Vietnam to take advantage of lower wages.
The White House has promised the TPP will be the “most progressive trade agreement” in history when it comes to labor and environmental protection, and many Democrats will be heavily scrutinizing the terms of an expected labor action plan with Vietnam to see if Obama has lived up to that pledge.
Negotiators are believed to have reached agreement on environmental rules, but some groups preemptively dismissed that as inadequate.
“History gives us no reason to believe that TPP rules on conservation challenges such as the illegal timber or wildlife trade will ever be enforced,” Sierra Club Executive Director Michael Brune said in a statement.
A source familiar with the text said groups like Sierra Club will probably be unhappy that rules to combat shark finning and illegal logging won’t require countries to explicitly prohibit those activities. The final chapter is also expected to require only that countries “adopt, maintain and implement” just a few of the seven international environmental agreements the U.S. had demanded other countries enforce in previous trade deals.
Adam Behsudi and Victoria Guida contributed to this report.
Originally Published: Politico