TPP trade deadlock: Pacific countries near deal after biotech breakthrough

A dozen Pacific countries have closed in on a sweeping free trade pact after a breakthrough over how long a monopoly pharmaceutical companies should be given on new biotech drugs.

The issue has pitted the US, which argued for longer protections, against Australia and five other delegations which said such measures would strain national healthcare budgets and keep life-saving medicines from patients who cannot afford them.

However, as befitting for negotiations that have been going on for five years, plans to announce the deal at the talks in Atlanta, Georgia on Sunday night were delayed.

The last-minute hitch was caused by New Zealand’s insistence on greater access to overseas markets for its dairy exports, people involved in the talks said. “The thing that’s missing is (an agreement) on dairy market access,” one official said.

US officials said a joint news conference had been postponed until early on Monday.

The compromise on medicines thrashed in Atlanta would preserve Australia’s existing five-year protection period but would also offer flexibility on longer drug monopolies, potentially creating two tracks on future drug pricing within the trading bloc, a person close to the negotiations said.

The terms of that compromise, hammered out after a third all-night round of negotiations between Australia and the US, still had to find support from other nations such as Chile and Peru, other people involved in the talks said.

Mexican economy minister Ildefonso Guajardo said he could not reveal details of the compromise on biologics “until everyone has signed up and we are all on the same page”.

But officials were increasingly confident of completing a deal that has been in negotiations for five years. Japan’s economy minister, Akira Amari, said he had called Prime Minister Shinzo Abe to notify him that a deal was within sight.

The US offers 12 years of exclusivity for the clinical data used in developing drugs like cancer therapy Avastin, developed by Genentech, a division of Roche, in order to encourage innovation. Australia insisted on five years of protection to bring down drug prices more quickly.

The trade pact – the Trans Pacific Partnership, or TPP – would lower tariffs and set common standards for 12 economies led by the US and Japan, which together account for 40% of global output.

President Obama has pushed for a deal as a way to open markets to US exports, including financial services and pharmaceuticals. US officials have also promoted the deal as a counterweight to China and that rising power’s vision for Asia.

The talks in Atlanta were extended by 24 hours to a fifth day on Sunday. A handful of protesters unfurled a “Stop TPP” banner at the Westin hotel, where the talks were taking place, on Sunday morning. They were escorted away by security and police.

By Saturday, the US and Japan had reached agreement in principle on trade in autos and auto parts in talks that also included Canada and Mexico. That agreement is expected to give US automakers, led by General Motors and Ford, two decades or more of tariff protection against low-cost pickup truck imports from Thailand or elsewhere in Asia, people briefed on the talks have said.

But the TPP deal taking shape would also give Japan’s auto industry, led by Toyota, a freer hand to source parts from Asia, including from plants outside the TPP-zone, like China, for vehicles sold in North America.

A “rule of origin” would stipulate that only 45% of a vehicle would have to be sourced from within the TPP, down from the equivalent ratio of 62.5% under Nafta, officials have said.

New Zealand wants to ensure its dairy industry, dominated by Fonterra, the world’s largest dairy exporter, comes out as a clear winner in a TPP deal by opening markets like Canada, Mexico, Japan and the United States.

If US trade representative Michael Froman, chair of the Atlanta talks, manages to steer them to a conclusion on Sunday, that would mark the start of a political fight to get the deal approved in the US.

The Obama administration relied on Republican votes to win fast-track trade negotiating authority from Congress in July, setting up a straight yes or no vote on any deal.

Many Democrats and labour groups have raised questions about what the TPP would mean for jobs in manufacturing and environmental protections.

Republicans, including Senator Orrin Hatch, the powerful chairman of the Senate finance committee, have urged the administration to hold the line on intellectual property protections, including for biologic drugs.