01trade-web-superJumbo[1]The United States has been working on a treaty since 2009 to create a “global trade zone” that covers 40% of global economic activity.  The agreement is called the Trans-Pacific Partnership.  There are 12 nations involved in the discussions initially, with the aim of adding additional countries later.  Those that are part of this initial group include the United States, Canada, Japan, New Zealand, Australia, Brunei, Chile, Malaysia, Mexico, Peru, Singapore and Viet Nam. This is all part of the old “new world order” philosophy that was the rage in the early to mid 90’s.

Although the discussions have been kept private, there have been enough leaks from the various negotiators to get a broad understanding what the treaty outline is.  As of now, no agreement has been reached.

The Obama Administration won a hard-fought battle with Congress to receive the ability to negotiate these trade deals with foreign governments without Congress coming in late and making changes.  Congress will only vote yes or no on the final agreement without making any changes.  This is a courtesy given to all recent Presidents.  The purpose is to stop Congress from inserting deals to protect special interests at the last moment.  Of course, the President is free to negotiate trade protections for his favorite special interests, but Congress has the ability to reject the treaty if the Administration over reaches its protections.

Canada, the largest trading partner of the United States, exports milk to its southern neighbor.  They have a 296% tariff on these exports.  Stephen Harper, the Prime Minister, is facing re-election in October and does not want to lose the support of the Canadian farmers before the vote.  Canada did offer to reduce the tariff, but New Zealand was not satisfied with Canada’s response because they want to enter the Canadian milk market.

The Pacific rim countries want the United States to reduce the 12 year protection for drug manufacturers.  They are proposing a 3 year limit of protections before they could clone the new drugs.  That is the limit most of the rest of the world uses.

Japan is willing to reduce their tariffs on pork and beef, but are holding the line on rice.  They do not want foreign rice producers to enter their market.  Japan was also in a dispute with the United States over “rules of origin” involving the source of auto parts from different countries.  The Japanese want to use parts produced in non TPP countries, such as Thailand.

Liberal Democrats in the United States are upset with the wording of the draft agreement that takes disputes to the international courts rather than using the U.S. court system.  This could reduce the frivolous lawsuits that plague the U.S. system.  They also oppose an environmental section that they say does not go far enough to eliminate global pollution.  Another area that Democrats oppose is a labor standard that is much lower than what we see in the U.S.

There is still so much we don’t know about the proposed agreement to decide if Congress should approve or reject the deal.  We need to see how the disputes (the disputes we are aware of) are settled.  When the final agreement is released, the lobbyists will descend on Washington to affect the vote.  The agreement can not be changed by Congress.


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