The 12 countries negotiating the Trans-Pacific Partnership (TPP) free trade agreement (FTA) have completed round 19 of discussions and plan to have most of the remaining work completed by the end of the year. Agricultural issues have not been the center of attention, but are of major importance to about half of the countries. Market access and sanitary and phytosanitary (SPS) issues are the most significant agricultural issues.
The negotiations began in Melbourne, Australia in November 2010 among Australia, Brunei, Chile, New Zealand, Malaysia, Peru, Singapore, Vietnam and the U.S. Mexico and Canada joined the talks in October of 2012. Japan became a full partner in negotiations in August of this year. The 19th round of negotiations were held in Brunei concluding on August 30. The agreement has been hailed as a high-standard, 21st century agreement that covers all industries, including agriculture, eliminate all tariffs and address concerns like labor and the environment.
Judging talks in progress is always difficult. The best measuring post for U.S. agriculture may be letter sent to U.S. Trade Representative (USTR) Michael Froman by 39 U.S. farm organizations and food companies that support more open trade. The July 15 letter outlines seven core principles for a successful agreement: 1) comprehensive, covering all trade and investment; 2) no product or sector inclusions; 3) all tariffs and other market access barriers phased out; 4) risk based scientific decision making, regulatory convergence and equivalence, no non-science based SPS measures; 5) a “Rapid Response Mechanism” to provide for shipment specific trade facilitative obligations; 6) commitments beyond those in the WTO must be subject to TPP enforcement provisions, including SPS issues; and 7) be a single undertaking (nothing is final until everything is finalized).
The principles of a comprehensive agreement and a single undertaking continue to be the basis for the negotiations. A risk is always present that as the talks move toward conclusion, more difficult issues will be dealt with by excluding them from the agreement. At this time there is no public indication of that happening.
No sectors have been excluded from the agreement, but countries have tried to exclude individual products. Australia has vigorously pushed to have additional access to the U.S. sugar market. The USTR has a general rule of not including in the TPP negotiations countries that the U.S. already has a FTA with that has not been fully implemented. The U.S.-Australia FTA which came into force in 2005 did not include additional access for Australian sugar in the U.S. market. The U.S. is in a surplus sugar supply situation with the government buying sugar for use in ethanol production to support prices, and now is a poor time to talk about market access.
Agricultural groups in Japan have proposed that dairy, wheat and barley, beef and pork, rice and sugar be excluded from negotiations. That is not surprising given the protectionist policies for agriculture in Japan. No one expected immediate tariff-free access, but Japan would not have been allowed to join if major agricultural countries thought these would be excluded. Removal of tariffs and other barriers may require 10 or 20 years, but principle number three is that all barriers are eventually eliminated. This was also a goal of the original countries in the TPP.
Canada is expected to remove barriers for imports of dairy and poultry products. U.S. producers are interested because dairy and poultry products were excluded from the U.S.-Canada FTA that became the U.S.-Canada relationship in NAFTA. If U.S. dairy producers gain more access to the Canadian and Japanese markets they may have less trouble with the U.S. government providing more access to the U.S. dairy products market for New Zealand, an industry dominated by export-oriented Fonterra which has about one-third of world trade in dairy products.
Offers of proposed reductions in tariffs are just now being set with countries using one of two approaches. Some countries are attempting to establish one set for tariffs rates for all of the 11 TPP partner countries. Others, like the U.S., are going to use the tariff rates agreed to under existing FTAs and a common set of tariffs for all other TPP countries. Most of the attention is on Japan because of their high tariff rates and other market access barriers. According to Inside U.S. Trade, a government official said Japan plans to set tariffs for countries based on their ability to compete against sensitive products in the Japanese market.
While reducing tariffs and other market barriers are important, the most critical issues for U.S. agriculture are those associated with core principles numbers four and six on science-based SPS measures. The news here is less than encouraging. The goal of the U.S. agriculture industry was to achieve a WTO plus agreement that was built on the WTO SPS agreement and had fully enforceable dispute settlement in areas like risk-based scientific decisions for regulations impacting trade. The USTR has proposed a consultative process for issues beyond the WTO agreement.
The SPS chapter of the TPP agreement is considered to be ‘substantially closed’ meaning technical level negotiators have done all they can and are waiting for final decisions in other chapters or decision by policy making officials. This has resulted in letters from Senators and Representatives in Congress pushing USTR Froman to support a binding fully enforceable dispute resolutions process for SPS issues.
President Obama in a recent telephone call with Prime Minister Abe of Japan underscored his view that the TPP negotiations should be concluded this fall. The next chance for the 12 TPP heads of state to meet is during the Asian-Pacific Economic Cooperation (APEC) leaders meeting in Bali, Indonesia, on October 7-8. Many of the 29 negotiating groups will meet in coming weeks to further narrow differences. Another formal round of negotiations is not planned before the APEC meeting, but there have been unconfirmed reports that chief negotiators will meet September 18-21 in Washington, DC.
As in all trade talks, some of the toughest issues are left to the end. This includes the tariff rates, other market access issues and the final agreement on SPS issues. As a single ‘undertaking’ continues to be the goal, ’nothing is final until everything is finalized’. The next month will be critical in shaping the final outcome of the negotiations.