To TPP or not to TPP ?

Published 20150524

Australia has had some recent success in negotiating new free trade agreements with Japan, Korea and China, three of the nations largest trading partners. The general consensus of analysts is that these agreements will deliver significant benefits, especially to Australian agricultural exporters, because they will reduce some of the tariffs and trade restrictions imposed on Australian agricultural imports into those countries. The next cab off the trade agreement rank is the Trans Pacific Partnership (TPP), and it is fair to say that this proposed agreement in generating angst in the community, with some groups proposing that Australia should not sign up. Separating scaremongering from reality, and identifying exactly how Australian agriculture would fare under the TPP is a challenging task, but it seems that Australia will be better off being a member of this agreement, than remaining outside it.

Given that the TPP is still subject to intense negotiations between representatives of the twelve nations involved in the negotiations ( Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States of America and Vietnam ) it is not surprising that the specific details of the proposed agreement have not yet been released publicly. However, the twelve nations involved account for almost 40% of global GDP, 25% of world trade, and one third of Australia’s two-way trade, highlighting the potential significance of a successful conclusion to the negotiations.

Opposition to Australia’s participation in the TPP has come from a range of different sources. Organisations such as GetUp! have mounted on-line campaigns opposing the TPP; mainly on the basis that the TPP would enable foreign companies to sue the Australian Government under the Investor State Dispute Settlement provisions, that the TPP would result in increases in medical and health costs through changes to patent laws, and that the TPP would effectively prevent the Australian Government enacting environment protection laws. These concerns are shared by organisations such as the Australian Fair Trade and Investment Network, (see here and here ). In the US, a coalition of union, environmental and community organisations are also opposed to the TPP, and are trying to stop the US Congress granting ‘fast-track’ approval powers to President Obama. 

Interestingly, the Youtube video animation being used by Australian anti-TPP groups is the same one being used by the US anti-TPP groups – except it has a narrator with an Australian rather than a US accent! Both groups are using the same name for their campaigns – “The dirtiest trade deal you’ve never heard of”.

The issue most commonly raised by opponents of the proposed TPP is the Investor State Dispute Settlement (ISDS), which, if included in the TPP, would mean that overseas companies could sue the Australian Government if the Australian Government effectively took action to expropriate the assets of the overseas company. 

Those opposing the TPP claim this would mean that the Australian Government would be unable to pass laws, such as the tobacco plain packaging laws or environmental laws, for fear that it would trigger a law suit by affected overseas companies. However, as the Department of Foreign Affairs points out, Australia has signed up to 25 trade and investment agreements that have ISDS clauses in them, and over the past thirty years there has only ever been one instance where a foreign company has attempted to sue the Australian Government (the tobacco plain packaging case). At the same time, numerous Australian companies have used the ISDS provisions to protect their investments overseas from unfair or illegal actions by government. 

In relation to the tobacco case, the Australian High Court has rejected claims that tobacco companies should be compensated under Australia law, and the dispute is still being progressed internationally under the auspices of Australia’s 1993 investment agreement with Hong Kong. Given the fact that ISDS clauses are so common in international agreements and that they protect Australians investing overseas, the argument that the TPP should be opposed purely on the basis of the ISDS provisions does not appear justified.

On the issue of patent protection, the claim is made that by Australia agreeing to the TPP, overseas companies would be able to extend the length of patent protection they are able to enforce, preventing competing companies from introducing generic versions of their products at the expiration of the normal patent period, and thereby forcing up the cost of medicines in Australia. The Getup! campaign uses the example of an asthma inhaler, which it claims costs $50-$100 in the USA and $10 in Australia, as an example of the likely cost increases. 

What this ignores is that the cost of medical treatment and medicines in the USA has always been considerably higher than in Australia for a range of reasons, and also that these cost differences have not changed, despite an Australia-USA FTA having been in place for over ten years. If Australia was able to resist pressures on this issue in a bilateral agreement with the USA, it would seem highly unlikely that the TPP, which involves a much larger number of nations negotiating with the USA, would result in a different outcome.

From the perspective of Australian agriculture, given that Australia already has some of the lowest levels of trade protection for its agriculture sector of any nation on earth, there does not seem to be a great deal of downside to the proposed agreement, assuming the Australian Government exercises sufficient rigour in the negotiations. On the other hand, if the TPP negotiations bring added pressure on  the USA, Canada and Japan to remove some of the trade restrictions they maintain on products such as dairy and sugar, then that would be to the advantage of Australian farmers.

The Australian Government has already made it clear that biosecurity regulations will not be subject to negotiation, and given that Australian biosecurity laws are compliant with WTO rules, there is no real justification for these to be part of the negotiations. 

There is no doubt that the TPP negotiations still have some way to go, and to a large extent the ultimate fate of the agreement probably depends on the US President being granted fast-track authorisation by Congress in the next few weeks. By giving the President fast-track authority, an agreement can be negotiated by the President, and the Congress can only approve or disapprove it in its entirety, without engaging in endless amendments or extended debate. If fast track is not authorised, then the chances of the TPP being agreed and approved in its entirety by the US Congress are almost non-existent, and there is unlikely to be any real prospect of progress until the US Presidential election process is completed in November 2016.

Ultimately, it seems the opposition to the TPP comes mainly from groups opposed to globalisation and large multi-national corporations. Ironically, those groups utilise the technologies developed and delivered by those very same corporations to run their campaigns, although perhaps the irony of this has not yet occurred to them!

The future of Australian agricultural trade will be discussed at a two day conference to be held in Canberra by the Australian Farm Institute on June 10th and 11th, 2015. Details of the conference, including the programme and registration details, can be accessed here.


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