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Trade expert Peter Clark is in Lahaina, Hawaii, where he will be reporting on talks at the Trans Pacific Partnership Ministerial meeting.

Lahaina, Hawaii – The eagles have landed on Ka’anapali Beach. Canada’s Trade Minister Ed Fast arrived Monday evening to join United States Trade Representative Ambassador Michael Froman and 8 other TPP decision makers. Peru’s Minister of Trade and Tourism Magali Silva came in a day later. And Brunei will not be represented.

The Day One plenary session was closed to the public. It would have been a series of set pieces, pep talks and cheerleading.

The ball game is approaching an end – the starters have been pulled and Ministers have been called up from the bullpen – without a lot of time to warm up.

The Ministers must focus on resolving differences. They appear determined to conclude TPP this year. There is no other option if passage on Obama’s watch is the objective. Delay and further meetings will make this an issue for the next U.S. Administration – a very uncertain future indeed. There are up to 132 separate deals on market access. No one seems to understand how they will be integrated into a single text or into the numerous pre-existing bilateral agreements among the members.

This is the result of the hub-and-spoke approach which suited Washington. This is a matter of details but concluding this spider’s web of deals is very time consuming.  Important horizontal issues are unresolved.

It is time for all participants to abandon the extreme demands and posturing for the folks back home and seek reasonable compromises. Stakeholders are on call waiting to be called on to discuss real bottom lines or to be urged to take one for the team. They must take what can now be had or risk a great unraveling. Years of effort may be wasted if this opportunity is missed.

A U.S. Chamber of Commerce briefing on Intellectual Property (IP) protection concluded with a “let’s be real about ambition” message. The same messaging is being repeated all over the Ka’anapali Beach resorts where the meetings are being held. Three quarters of a loaf is much better than none.

Minister Fast met with Ambassador Froman on day two (today). There will probably be several Canada-U.S. meetings to narrow and eliminate differences. It is time to drop the confrontation and public criticism and jawboning: this is a negotiation – it is time to negotiate.

Japanese Trade Minister Akira Amari commented that Canada was engaging and it was reported that Canada has begun discussing sensitive agricultural products with the United States. There have been denials not of more active participation by Canada in the talks but of any dealing with the U.S. on agriculture prior to the Ministers meeting today.

New Zealand will no doubt hold out for more. Its dairy industry expanded to serve China and that market is soft. There is a glut and falling prices and the super co-op Fonterra is being accused of mismanagement.

New Zealand special agricultural trade envoy Mike Peterson claimed that his Government will delay the conclusion to ensure it gets a good deal on dairy. Rumours about the Japanese offer suggest it is for 70-75,000 MT for all TPP members, for all dairy products in any form, but that the processed products may be converted back to milk equivalents.  One MT of cheese will equate to many more tonnes of milk. This is not a good deal for New Zealand.

New Zealand’s hope, of course, is that refusal to deal will hold the other Ministers and the deal hostage, leading to concessions. It would carry more weight if Kiwi Trade Minister Tim Groser was saying this.

Washington has set the bar quite high for these negotiations. Other participants shared the ambition. The reality is that it is necessary to aim high to achieve a reasonable result. Even based on what has been agreed now, the TPP would yield impressive results. But does it have the critical mass needed to sell it in Congress and to the 11 other legislatures which must approve it?

The TPP risks becoming a victim of its own overhyped advance billing.

The mood is still upbeat, particularly among the Americans who are working around the clock. The spirit is willing but problems keep getting in the way.

The Intellectual Property issues are primarily but not exclusively related to U.S. demands for 12 years data exclusivity for Biologic Pharmaceuticals. There have been suggestions that the meeting may need to go another three days to deal with the various differences on IP.

The negotiations appear to be about to go into extra innings for at least three more days. Talking about extensions is dangerous. Negotiators who will break the code of silence claim they are returning on Saturday and that hotels have not been booked for an extension. Was this wishful thinking, reality or concern about removing pressure for early consensus?

Given the record of serial failures of Trade Ministers’ meetings on the WTO Doha Round and the TPP, the fact that a further extension appears necessary is a clear danger signal.

The U.S.-Japan Market access bilaterals are not over as Froman is pressing Amari for further concessions on agricultural and automotive products. The deal is very close but time and U.S. priorities are on Amari’s side.

There are apparently efforts to include provisions on exchange rate policies – currency manipulation. These would not likely be binding enough for Congress. Introducing a new proposal prior to the closing meeting may be politically expedient but it is very inefficient.

There are many stakeholders from Canada and other member countries. They are active in meetings with counterparts (and the likeminded) from other countries. Doctors without Borders is lobbying against any 12 year protection on biologic medicines.

Negotiators passing through the lobbies and outdoor cafés at the Westin are scrummed or chatted up – every little bit helps – to feed the rumour mill. And occasionally, to enlighten. Seeing them is rare – everything they need, including food, is provided inside the hotel.

So much here is about optics. The communiqué will be as important as the news of signing. Failure could be terminal. There simply is not enough time to reconvene to rescue a saleable package and pass it on Obama’s watch.

Don’t be surprised to see a phase 2 to address what is not harvestable now. The issues that are likely to be punted into the future include Intellectual Property (which is in trouble) and State Owned Enterprises, Investment, Government Procurement and a range of market access issues which could benefit from more time – or die on the vine.

 

Peter Clark, president of Grey, Clark, Shih and Associates, is one of Canada’s leading international trade strategists. His clients in Canada and around the world include governments, corporations and trade associations. He is a frequent media commentator and columnist.  Follow him on Twitter at @jpclark14

 

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