With Pacific Rim Talks, Trade Enters New Era

Posted July 9, 2012 at 12:00am

When House Democrats wrote to the White House last month to voice concerns about talks over a Pacific Rim trade accord, they pointed to familiar issues: labor and environmental standards and the risks of weakening “Buy America” laws that help U.S. manufacturers win government contracts.

But they spent far more time focused on seemingly arcane matters such as “investor- state privileges” and “regulatory convergence.”

The letter reflected liberal unease with not only the Trans-Pacific Partnership (TPP) — the centerpiece of the Obama administration’s international trade agenda — but also the changing nature of global commerce.

Although manufactured goods and farm commodities still get most of the public attention, U.S. financial institutions and other services sector companies have been playing a growing role in influencing U.S. trade policy, particularly since the creation of the North American Free Trade Agreement in 1994.

And perhaps more than in any other trade negotiations, the TPP is focused on a wide range of what are regarded as “21st century” issues: investor rights; regulations on cross-border financial transactions; state-owned enterprises in Vietnam and other nations; and intellectual property rights for engineers and pharmaceutical researchers alike.

Such sectors have opened up new opportunities for corporations and unions, and new opportunities among countries — as well as new areas for dispute. “This is the kind of stuff that you need to break ground on,” said Charles W. Dittrich, vice president of regional trade initiatives at the National Foreign Trade Council. “We all recognize that stuff isn’t easy.”

It’s one reason the TPP talks are so complex and slow-moving. On Tuesday in San Diego, negotiators from the nine member countries will wrap up their 13th round of negotiations since March 2010. And the White House formally notified Congress on Monday that the members are bringing Mexico into the talks. A similar notification is expected soon for Canada.

The White House hopes a deal can be cut this year, but that is unlikely to happen, particularly given election year politics in the United States.

Moreover, it remains unclear whether Japan will seek to join the talks amid opposition from its domestic farm lobby or whether the United States would even allow Tokyo in, given opposition by U.S. automakers such as Ford Motor Co.

Because previous rounds of global trade negotiations wiped away many tariffs and quotas, companies are now focused more on domestic laws. And accelerating globalization has more tightly integrated trade laws and financial regulations, government procurement policies and a host of related matters. Corporations have been eager to use the TPP as a way to streamline their supply chains in the Pacific and make it easier and cheaper to move goods, services and financial data across borders.

In many cases, these issues are of importance to the services sector, which employs the majority of workers in the modern U.S. economy.

Several major business groups, for example, wrote to negotiators in late June pushing for provisions that help companies such as Citi and Google avoid restrictions on data flows.

“To compete effectively in international markets, enterprises and individuals need to be assured that they can move and maintain information and data across borders in a reliable and secure manner,” wrote the groups, among them the U.S. Chamber of Commerce and the National Foreign Trade Council. “It is therefore critical that the TPP negotiations ensure that trade and investment rules promote, rather than inhibit, the growth of the digital economy.”

Data Flow Questioned

But consumer watchdog groups such as Public Citizen’s Global Trade Watch have argued that such changes could result in foreign challenges to U.S. financial regulations, despite assurances from the administration that they would not.

Democratic Reps. Barney Frank of Massachusetts and Sander M. Levin of Michigan wrote to the administration this year, urging it to clarify that U.S. trade and investment treaties allow governments to limit the flow of capital in order to maintain financial stability.

And concerns extend beyond financial issues. House Oversight and Government Reform Chairman Darrell Issa, R-Calif., and Sen. Ron Wyden, D-Ore., who led the charge to shelve proposed Internet anti-piracy legislation that was debated earlier this year, have expressed concern that TPP negotiations could lead to the same kind of Internet intellectual property restrictions.

The TPP negotiations are expected to yield more robust protections of labor and environmental standards than previous deals, in part because they’re being negotiated by a Democratic president. But labor unions, which had been hoping that President Obama would bring a different approach to trade relations than George W. Bush did, have been lukewarm to the TPP talks so far.

“In some areas it’s better; in some areas it’s worse; it’s some areas it’s the same,” said Thea Lee, policy director and chief international economist at the AFL-CIO. “There were opportunities for some more-innovative thinking, but in too many respects the TPP looks quite similar to past trade deals, and that’s not a good thing.”

In their June letter, 132 Democrats noted that the TPP would “establish rules that extend far beyond traditional trade matters” and criticized the secrecy of the talks and their substance.

The TPP “represents an opportunity to create a new sustainable model that respects domestic policy choices and promotes economic development with shared prosperity,” the letter said. “Unfortunately, reports indicate the agreement is likely to repeat, rather than improve upon, the existing trade template.”

The letter suggests that winning House Democratic support for any deal, and for the fast-track trade negotiating authority the president will need to seal any deal, might be tougher than the White House would have thought.

But negotiators most likely face many more rounds of talks before the administration has to think about congressional approval.

A version of this article appeared in the July 10, 2012 print issue of CQ Today