Atlanta, October 5

Twelve Pacific Rim countries sealed the deal today on creating world’s largest free trade area, delivering US President Barack Obama a major policy triumph. The deal on Trans-Pacific Partnership (TPP), led by the US and Japan, aims to set the rules for 21st century trade and investment and press China, not one of the 12, to shape its behaviour in commerce to the TPP standards.

Here are some key points:

• It reduces over time thousands of small and large tariff and non-tariff barriers on trade between the group, from Japanese auto parts to the US market, Australian drugs to Peru, US rice to Japan and New Zealand cheese to Canada. It also allows garment exporters like Vietnam to use yarn and other materials from outside the TPP and still benefit from TPP country tariffs.

• Countries must open state procurement more to foreign competition and not give state-owned enterprises undue preference. In some cases, including for Malaysia’s Bumiputera policies favouring ethnic Malay firms, this will be phased in over time and only for companies and deals over certain sizes.

• The 12 countries agreed to resolve disputes with foreign investors before expert panels. While critics say this ‘investor-state dispute mechanism’ will leave government vulnerable to frivolous lawsuits and

extra-territorial laws, the TPP creates exceptions and barriers to frivolous lawsuits, according to negotiators.

• Establishes five- to eight-year patent protections for cutting-edge biologic drugs, less than the 12-year US threshold but more than Australia’s five years. The range reflects failure to bridge some differences and the willingness to allow some countries room to harmonise domestic laws with the treaty.

• Sets standards for the cross-border issues of e-commerce and financial services, including preventing governments from forcing companies to place their data storage servers in the country or demanding access to a company’s software source code.

• Requires countries to live up to labour rights and fairness standards of the ILO, and not to weaken labour protections to attract investment.

• Signatories are obliged to make strong efforts in environmental protection and not to undermine protections to boost trade and investment.

Exchange rate cooperation

WASHINGTON: The Pacific Rim nations that secured a free trade agreement on Monday pledged to bolster cooperation on broad economic issues, including currencies. “We are pleased to announce that we are working to strengthen macroeconomic cooperation, including on exchange rate issues, in appropriate fora,” the macroeconomic policy authorities of 12 TPP nations said in a statement. “The work to be undertaken reflects our common interest in strengthening cooperation on macroeconomic policies, and will help to further macroeconomic stability in the TPP region as well as help ensure that the benefits of TPP are realised.” — Reuters