Deal reached on giant 12-nation trade pact

ATLANTA - Negotiators from the U.S., Japan and 10 Pacific Rim nations on Monday cinched the biggest trade pact in recent history, setting the stage for President Barack Obama to send the deal to a divided Congress early next year.

"We, the trade ministers... are pleased to announce that we have successfully concluded the Trans-Pacific Partnership negotiation," United States Trade Representative Michael Froman declared shortly after 9 a.m. to a loud round of applause. "After more than five years of intensive negotiations, we have come to an agreement that will support jobs, drive sustainable growth, foster inclusive development and promote innovation."

The pact, if approved by the member nations, would tear down trade barriers and establish rules in areas like labor, the environment and e-commerce for countries that produce 40 percent of the world’s economic output, from giants like the U.S. and Japan to developing nations like Peru, Malaysia and Vietnam. The Trans-Pacific Partnership is key to Obama’s “pivot” to Asia, aimed at anchoring the United States in a region increasingly dominated by China.

But the decision to address currency manipulation in a side deal, rather than in the pact itself, was expected to disappoint lawmakers on both sides of the aisle. U.S. auto manufacturer Ford is already urging Congress to renegotiate the agreement on that basis.

Trade ministers stayed four days past their expected departure to make the final, difficult concessions on auto, dairy and drug protections— knotty issues that will likely shape the votes in Congress, as well as in the legislatures of other nations.

A congressional vote is likely months away, next February at the earliest, and perhaps later if Obama waits for final details to be ironed out before he gives Congress the legally mandated 90-days notice that he intends to sign it.

But Senate Finance Committee Chairman Orrin Hatch signaled trouble for the deal right out of the gate.

“While the details are still emerging, unfortunately I am afraid this deal appears to fall woefully short,” Hatch said in a statement, likely referring to the U.S.' inability to secure 12 years of patent protection for biological drugs, as he had sought.

House Ways and Means Committee Chairman Paul Ryan, who along with Hatch and Sen. Ron Wyden drafted the trade promotion authority bill, said he is reserving judgment until he sees the final text.

“[O]nly a good agreement … will be able to pass the House,” Ryan said in a statement.

Senate Majority Leader Mitch McConnell, without identifying specific issues, said in a statement that "serious concerns have been raised on a number of key issues" and said the deal “demands intense scrutiny by Congress."

Business groups have pushed for comprehensive tariff cuts and strict intellectual property protections. U.S. pharmaceutical companies in particular wanted 12 years of monopoly protections for a new class of life-saving medicines called biologics, but U.S. negotiators faced stiff opposition from other countries and had to settle for far less — five years of guaranteed protection and the possibility of additional time under two options that countries could elect.

As for the currency manipulation side deal, it would give the administration a range of options, such as “cooperative mechanisms, enforceable rules, reporting, monitoring, transparency, or other means, as appropriate.” But it would not do what lawmakers have repeatedly requested, which is to directly punish currency manipulators by withdrawing their benefits under the trade deal.

Still, the administration is banking that the overall economic heft and geostrategic importance of the agreement will overcome concerns in Congress about individual provisions. They argue that many farmers and businesses could benefit greatly from the agreement, especially in markets like Japan, Malaysia and Vietnam, where they now face significant trade barriers.

“Whether you’re an orange grower in Florida, a rancher in Nebraska or a boat builder in Washington state, TPP will include cuts to trade barriers, like tariffs” that currently block exports, an Obama administration official said.

The agreement throws another variable into the volatile 2016 presidential election campaign, with Republican front-runner Donald Trump criticizing the pact before it was even complete and Democratic front-runner Hillary Clinton adopting a wait-and-see approach on a major geopolitical play she touted as Obama’s secretary of state.

The new trade deal also sets the stage for another potentially bruising battle in Congress, following this summer’s debate over trade promotion authority, which was narrowly approved in the House. That law allows Obama to submit the deal to Congress for straight up-or-down votes without any amendments, greatly easing its chances for approval. But it also allows lawmakers to strip that “fast track” provision if they feel the administration has not adequately consulted with them or followed congressional negotiating objectives.

As Froman and his team pushed for the final deal, senior members of Congress grumbled that they weren’t being kept up to date about developments on key issues. “We expect you to intensify these consultations and coordination immediately,” the top Republicans and Democrats on the Senate Finance Committee and House Ways and Means Committee said in a letter to Froman on Wednesday.

U.S. trade officials, however, bristled at the suggestion they haven’t kept Congress informed. Froman has met with 100 members since a previous TPP ministerial meeting in Maui in late July, including with the Senate and House advisory groups on negotiations, they said. Froman said on Monday that he would start briefing lawmakers about the final deal as early as the afternoon and added that he was “confident that people will see this as a very strong deal, very much consistent with the directives of Congress with regard to trade promotion authority.”

The AFL-CIO labor federation and many environmental groups lined up behind congressional Democrats in the unsuccessful attempt to defeat the fast track trade bill. Still, the administration hopes what it describes as groundbreaking labor and environmental provisions will soften the opposition if not completely quiet it.

“TPP will include the most robust enforceable environment commitments of any trade agreement, and will allow us to address pressing issues like wildlife trafficking, illegal logging and illegal fishing,” an administration official said. “TPP will put American workers first by including the strongest enforceable labor standards of any trade agreement in history, including in areas like child labor and forced labor and wages.”

As part of the agreement, all 12 TPP member nations would have to abide by international standards that allow for the right to collective bargaining, prohibit child labor and prevent employee discrimination. Vietnam would be required to allow independent unions and Malaysia would have to address human trafficking concerns.

Among the groups of lawmakers who will be taking a close look at the details of the deal will be those from dairy states, who sent letters this week expressing concern about U.S. producers giving up more sales in their home market than they gain in exports under the pact.

Another high-stakes battle involved auto trade between Japan and the three North American Free Trade Agreement partners — the United States, Canada and Mexico. There, the U.S. auto industry won long phase-outs of the 2.5 percent tax on imported passenger cars and 25 percent tax on imported trucks.

The final tussle was over how much of each vehicle had to be made from parts manufactured within the 12-nation TPP region to qualify for reduced duty treatment under the pact. Japan wanted a much lower standard than the 62.5 percent requirement for autos and 60.0 percent for auto parts under NAFTA, but had to reopen negotiations after Canada and Mexico pushed back.

Those negotiations also produced a flurry of letters and op-eds from lawmakers and union leaders as negotiators shuttled between rooms at a hotel in downtown Atlanta searching for agreement. “We must do better under the TPP by increasing rules-of-origin standards, not lowering them,” a group of 23 House Democrats led by Rep. Marcy Kaptur of Ohio, said in a letter to Froman on Thursday.

Meanwhile, many agriculture-state lawmakers were irked by Froman’s decision to insert language in the agreement that would prevent companies from challenging anti-smoking regulations and other “tobacco control measures" under an investor-state dispute settlement forum that is a standard feature of free trade agreements and investment treaties.

The change was driven by an unresolved case brought by Philip Morris against Australia’s plain-packaging law critics hold up as a classic example of how ISDS can undermine government public health regulation. Opponents of the move argued that it would create a bad precedent to exclude any legal product, no matter how unpopular, from investment provisions of the trade deal.

Sen. Thom Tillis said he would vote against TPP if the tobacco “carve-out” was included and 17 members of the House Agriculture Committee also expressed concern about the provision in another letter to Froman. Still, 21 Democrats who backed Obama’s request for trade promotion authority this summer urged Froman to include it in the deal.

The agreement is also expected to contain a number of other reforms to the investor-state dispute settlement provisions in response to criticisms raised by many Democrats, including Clinton and Sen. Elizabeth Warren.

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Deal reached on giant 12-nation trade pact