The huge trade deal you’ve probably never heard of

July 30, 2016

By Mark Koba, CNBC

It's called the Trans-Pacific Partnership. And it could be the biggest trade deal since the World Trade Organization formed in 1995. The thing is, most people don't know much about it.

Few have closely followed the talks negotiating the possible deal between the U.S. and other Pacific Rim countries. Not even members of Congress can get their hands on all the details, as several have had to formally request the specifics. That's after five years of trade negotiations.

Despite—or perhaps because of—the stealthy atmosphere around the talks, there is plenty of controversy surrounding the deal, referred to simply as TPP.

"Some information has come out, but this is politically charged and there's been more secrecy around the TPP than in past agreements," said Maria Toyoda, a professor of political science and a trade expert at Villanova University.

"Because it's so consequential and would have such a major impact, many of the parties want to keep the details a secret," Toyoda said. "People remember the riots in Seattle in 1999 over the WTO and how that deal came under scrutiny afterward. There's fear something like that could happen again."

The Trans-Pacific Partnership is an expansion of what's called the Trans-Pacific Strategic Economic Partnership— conceived in 2003 by Singapore, New Zealand, and Chile as a path to trade liberalization in the Asia-Pacific region.

The U.S. started talks in 2008 under the Bush administration to expand the group. Those efforts were intensified with the Obama White House in 2010.

Now, 11 other nations are negotiating to be in the bigger TPP. They include Japan, Australia, Peru, Malaysia, Vietnam, New Zealand, Chile, Singapore, Canada, Mexico, and Brunei. South Korea, invited into the talks, has taken a wait-and-see attitude for now.

"This is extremely complicated and there are many angles to it," said Andreas Hauskrecht, an international economics professor at Indiana University.

"We have trade agreements with several of the countries involved, but this would be bigger and far more reaching," Hauskrecht said.

Some information about the 29 known chapters or provisions has leaked—WikiLeaks being one source—but most information about the proposed pact has trickled out through the Office of the United States Trade Representative.

Even that agency says secrecy is part of the deal: "To create the conditions necessary to successfully reach agreement in complex trade and investment negotiations, governments routinely keep their proposals and communications with each other confidential," says a statement on the USTR website.

What's known so far is that only five of the 29 sweeping provisions in the pact cover such trade areas as tariffs, government subsidies and quotas.

The other policies being discussed would set new rules for food safety and prices for medicine, create tighter provisions for Internet freedom, provide stricter copyright laws, as well as extend the length of generic patents for drugs. All countries in the TPP would have to follow the rules set out by the agreement instead of their own country's regulations.

"This is why we are fighting this," said Lori Wallach, director of Global Trade Watch for Public Citizen, a non-profit consumer group. "We supported almost all the major trade agreements in the past, but this goes beyond free trade. It's become a Trojan Horse for all these other provisions of one-size-fits-all."

Tobacco and Food Safety Issues

Take tobacco regulation, for instance. A deal to let countries create their own tobacco rules as a member of TPP is still being worked out. But critics are worried it might not happen.

"As it stands now, tobacco companies could sue a pact member directly over tobacco regulations" they don't like, said Chris Bostic, deputy director for policy for Action on Smoking and Health, an anti-smoking group.

"Just even the thought of a lawsuit could stack the deck in favor of the tobacco companies," Bostic said.

Food safety is another key issue in the deal, said Wallach.

"The U.S. would have to import food like meat, poultry and fish from member nations even if it doesn't meet U.S. standards," she argued. "The food can be to their standards but not to ours."

Critics also point to provisions in TPP to let pharmaceutical companies challenge local laws that keep medical costs down as well as rules giving firms incentives to re-locate jobs offshore and having regulations that prohibit bans on financial products like derivatives.

"The real motive behind this is that a lot of companies don't like Obamacare or financial regulations from Dodd-Frank so they're doing what they can to get what they want with TPP," said Wallach.

Winners and Losers

But other analysts say what's going on with the TPP is business as usual.

"The financial regulations and other parts of TPP are nothing new in trade negotiations," said Scott Lincicome, an international trade lawyer with White Case.

"For instance, the North American Free Trade Agreement (NAFTA) set rules on banking to help integrate the deal and improve investment between the U.S, Canada and Mexico," Lincicome said.

"There are some new wrinkles here, but the issues are basically the same as in any deal," he argued.

The perceived drawbacks of the TPP are actually typical of overseas trade deals, said Indiana University's Hauskrecht.

"There are always winners and losers in globalization," Hauskrecht said. "But there is no alternative here. The Pacific Rim is important, and the U.S. would be stupid not to be proactive."

"I think a big winner is U.S. pharmaceutical firms in that they could get longer terms for their generic drug patents and can control costs," said Maria Toyoda. "I think a big loser could be the American auto industry since Japan is in the talks now. They could limit access to their auto markets."

Another loser is American sugar, said Hauskrecht.

"The industry is heavily subsidized by the government and protected by tariffs. If those get removed in the deal, which is what Australia wants, the sugar cane growers, as small as they are, would take a big hit," he said.

But trade pacts have a more far-ranging effect than just opening or closing markets, said Wallach.

"This hurts across the board," Wallach argued. "Wages go down for those that have jobs because of off-shoring, and when a pact like TPP has all these other regulations, it hurts food safety and freedom of speech among other things."

Can It Become Law?

The next round of talks for TPP begins next month in Malaysia. President Obama has called for the negotiations to wrap up by the fall so he can sign the deal.

Any deal would have to be OK'd by Congress, since the president currently does not have "fast-track" approval to sign a deal without Congressional passage.

Whether a deal makes it or not anytime soon is still up in the air, say experts.

"It's very hard to say if something gets done," said Villanova professor Toyoda. "There's a lot of skepticism around Japan and whether they will really open their markets to other countries."

"It has great potential, but it's far from certain if something will be realized," said trade attorney Lincicome.

"I don't think any optimism is warranted. No one's agreed on when to open up their markets and there's still a lot of disagreement over issues like agriculture and textiles within the countries themselves," he said.

But one analyst says the U.S. has reason to get something done sooner than later.

"America wants a solid presence in the Pacific region and the real goal of the deal is to eventually bring China into the TPP," said Hauskrecht.

"But if China doesn't come in, then the deal would isolate it, which might also work to U.S. plans," Hauskrecht argued.

"In other words," Hauskrecht added, "The TPP is a strategic tool for the U.S."