To seal a blockbuster trade deal that would let the United States export rice to Japan and dairy products to Canada, free trades advocates say, the Obama administration must concede at least one sweetener: More sugar imports from Australia.
Other sticking points include Vietnamese shoes, New Zealand milk and privacy worries involving Big Data as the U.S. and other countries approach the 19th round of talks for the Trans-Pacific Partnership.
The round is scheduled to begin Thursday in Brunei and last 10 days. It’s seen as especially important because it will feature “ministerial-level” officials, including U.S. Trade Representative Michael Froman and his foreign counterparts, rather than just their negotiators.
The 12-country deal could boost U.S. exports by as much as $124 billion by 2025, generating hundreds of thousands of jobs, the U.S. Chamber of Commerce maintains, based on a recent study. But the clock is ticking: The 2014 campaign season will soon kick into high gear, making it more difficult to overcome obstacles at home — including opposition from domestic lobbies like the powerful U.S. sugar industry.
“The tough issues inevitably are the market access questions,” National Foreign Trade Council President Bill Reinsch, a top Commerce Department official under President Bill Clinton, told a roundtable of 20 reporters Friday.
In particular, Reinsch and other trade experts said negotiators must resolve a situation that has simmered since the United States locked the sugar industry in Australia – the world’s eighth largest producer, at 3.5 million tons per year – out of a 2005 deal that otherwise expanded trade between the two countries. The United States consumes more than 10 million tons of sugar annually, but allows only 89,000 tons of Australian cane sugar imports before imposing high tariffs on anything above that quota.
However, as might be expected, domestic sugarcane growers don’t want the 2005 deal re-opened. That deal came the same year that the sugar industry joined labor and environmental groups in mounting a fierce battle against President George W. Bush’s Central America Free Trade Agreement, although Congress ultimately approved it.
“It just doesn’t make sense to make additional market access commitments on sugar,” said Don Phillips, a trade adviser for the American Sugar Alliance. The domestic industry produces 8 million tons of sugar per year, and the United States already imports as much as 2 million tons annually from Mexico. That’s enough of a supplement, he said.
The U.S. sugar industry has powerful allies in Congress, including House Ways and Means Chairman Dave Camp (R-Mich.) and Senate Finance Chairman Max Baucus (D-Mont.), Phillips said.
Strong lobbying will be needed to overcome the objections of the U.S. sugar industry, which has spent years lining up friends in Congress from Florida as well as several Great Lakes and Plains states, Reinsch said Friday. Additionally, free trade advocates can expect to battle foes representing various other industries and unions, he warned.
“You’ve got to have a bunch of people marching up to Congress and saying, ‘This is good, we win. We get better market access, we get better rules.’ Whatever it is, you have to have people who win,” he said. “In this particular case, I think we’ve got a good shot at that.”
Former World Trade Organization Director-General Mike Moore agreed.
“It’s easy to build a coalition to protect products,” said Moore, who’s now New Zealand’s ambassador to the United States. “It’s harder to build a coalition of those who may benefit.”
Other obstacles remain in front of a TPP deal, said Reinsch, Moore and Alan Wolff, a top U.S. trade official under President Jimmy Carter.
Vietnam is eager to ship more T-shirts, shoes and other apparel to the United States, but cannot because of “yarn forward” rules that apply selective tariffs that are triggered when any stage of production occurs outside the countries included in the deal.
New Zealand would like to export more of its huge supply of dairy products to North America – but to do so, Canada would have to drop its prohibitively high tariffs on dairy imports.
And a number of countries, including the United States, Australia, Vietnam and Malaysia, hope to sell more rice to Japan, which now employs a 778 percent tariff to protect its domestic growers’ premium-grade product.
“This has to be a comprehensive elimination of all tariffs,” said Moore. He added that there are clear indications the United States will make concrete offers in the upcoming negotiating round. “We can see movement happening – accelerating the pace,” he said.
But not all the barriers to the TPP deal relate to domestic production quotas or tariffs. Moore also identified “buy local” procurement requirements that exist at state-owned enterprises, intellectual property rights — especially in the pharmaceutical realm — and the sharing of individual and government data across borders.
“On ‘Big Data,’ there are some cultural differences and it’s not going to be easy,” Moore said. He said that in New Zealand, citizens tend to trust the government with their information but dislike handing personal details over to private companies – and that the opposite is true in the United States.
The most recent wrench thrown into the Trans-Pacific Partnership negotiations is Japan’s July entry. Still, Moore said, that development might not cause much of a delay.
“You’d be naive to think there haven’t been conversations with the Japanese for the last several years,” Moore said. “We have to negotiate in good faith. What gives me confidence in Japan is the amount of internal work that’s going on with their think tanks, inside their ministries. This has been bubbling up.”
Ahead of the upcoming talks, Froman visited Tokyo on Monday and, in a speech at the Japan National Press Club, called on the country to open two key markets to U.S. imports: autos, where imports account for only 6 percent of the vehicles sold in Japan, and insurance, which is dominated by a state-owned company.
“Barriers to access to Japan’s automotive and insurance markets and non-tariff measures in other sectorial and cross-cutting areas hold back growth and innovation,” he said. “They undermine competitiveness, and they hurt workers, business and consumers in both our countries.”
Many of the countries involved in the talks are conducting intense one-on-one negotiations parallel to the broader talks, Moore noted. “The lights are on. People are focused. The pizzas have been called to all embassies.”
Other countries participating in the Trans-Pacific Partnership negotiations are Brunei, Chile, Mexico, Peru and Singapore.