Jim Watson / AFP / Getty Images

US, 11 Pacific Rim nations reach agreement on landmark trade pact

Controversial Trans-Pacific Partnership would cover some 40 percent of the world economy

Pacific trade ministers have reached a deal on the most sweeping — and to many the most controversial — trade liberalization pact in a generation, in a move that will cut trade barriers and set common standards across the bloc, but potentially at a cost to consumers and employees, say public health advocates, environmentalists and labor groups.

Leaders from a dozen Pacific Rim nations are poised to announce the pact later on Monday. The deal could reshape industries and influence everything from the price of cheese to the cost of cancer treatments.

The Trans-Pacific Partnership would affect 40 percent of the world economy and would stand as a legacy-defining achievement for U.S. President Barack Obama, if it is ratified by Congress.

Lawmakers in other TPP countries must also approve the deal.

The final round of negotiations in Atlanta, which began on Wednesday, had snared on the question of how long a monopoly period should be allowed on next-generation biotech drugs, until the U.S. and Australia negotiated a compromise.

But the pact has proved controversial for a number reasons.

One contentious aspect would allow an international court of arbitration to settle economic disputes between multinational companies and countries arising from purported violations to the agreement.

Critics like Sen. Eizabeth Warren argue that the so-called “Investor-State Dispute Settlement” provision would mean in practice that rulings which would affect millions of Americans could be decided outside of U.S. courts.

Labor groups have also panned the pact. U.S. unions argue that the deal — by opening up members to competition abroad — would lead to jobs being shipped to other countries. Labor groups have argued that a major result of the landmark NAFTA agreement signed in 1994 with Mexico and Canada resulted in U.S. job losses.

“We are disappointed that our negotiators rushed to conclude the TPP in Atlanta, given all the concerns that have been raised by American stakeholders and members of Congress,” AFL-CIO President Richard Trumka said in a statement. “The Administration had a hard time reaching this deal for good reasons: it appears that many problematic concessions were made in order to finalize the deal.”

Aid groups, meanwhile, have argued that the TPP protections concerning pharmaceutical drugs will lead to companies raising prices and restricting access on products needed by some of the world’s poorest populations.

But U.S. Secretary of State John Kerry praised the agreement, saying it will “spur economic growth and prosperity, enhance competitiveness, and bring jobs to American shores.”

“[B]y setting high standards on labor, the environment, intellectual property, and a free and open Internet, this agreement will level the playing field for American businesses and workers,” said Kerry.

The TPP deal has also been lambasted because of the secret negotiations that have shaped it over the past five years and the perceived threat to an array of interest groups, from Mexican auto workers to Canadian dairy farmers.

Much of the negotiations have been spent on hammering out complex and detailed agreements between a several industries across 12 countries.

Although the complex deal sets tariff reduction schedules on hundreds of imported items from pork and beef in Japan to pickup trucks in the U.S., one issue had threatened to derail talks until the end — the length of the monopolies awarded to the developers of new biological drugs.

Negotiating teams had been deadlocked over the period of protection to the rights for data used to make biologic drugs. The U.S. had sought 12 years of protection to encourage pharmaceutical companies to invest in expensive biological treatments like Genentech’s cancer treatment Avastin. Australia, New Zealand and public health groups had sought a period of five years to bring down drug costs and the burden on state-subsidized medical programs.

Negotiators agreed on a compromise on minimum terms that was short of what U.S. negotiators had sought. The Washington, D.C.-based Biotechnology Industry Association said it was “very disappointed” by reports that U.S. negotiators had not been able to convince Australia and other TPP members to adopt the 12-year standard approved by Congress.

“We will carefully review the entire TPP agreement once the text is released by the ministers,” the industry lobby said in a statement.

A politically charged set of issues surrounding protections for dairy farmers was also addressed in the final hours of talks, officials said. New Zealand, home to the world's biggest dairy exporter, Fonterra, wanted increased access to U.S., Canadian and Japanese markets.

Separately, the U.S., Mexico, Canada and Japan also agreed rules governing the auto trade that dictate how much of a vehicle must be made within the TPP region in order to qualify for duty-free status.

The North American Free Trade Agreement between Canada, the U.S., and Mexico mandates that vehicles have a local content of 62.5 percent. The way that rule is implemented means that just over half of a vehicle needs to be manufactured locally. It has been credited with driving a boom in auto-related in investment in Mexico.

The TPP would give Japan's automakers, led by Toyota MotorCorp, a freer hand to buy parts from Asia for vehicles sold in the U.S. but sets long phase-out periods for U.S. tariffs on Japanese cars and light trucks.

Al Jazeera and Reuters

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