The following are notes taken by Steven Knievel from Public Citizen, who attended the hearing. The full hearing can be viewed at http://waysandmeans.granicus.com/ViewPublisher.php?view_id=2
TPFTA Hearing, House Committee on Ways and Means, Subcommittee on Trade
Panel 1, Dec. 14, 2011
Witness: Ambassador Demetrios Marantis, Deputy U.S. Trade Representative
Overall, the representatives on the committee were strongly in favor of the TPFTA. Congressmen and Marantis continually referred to TPFTA as a “21st century agreement,” and to the necessity of having “high [IP] standards.” Questions raised related to Japan’s entry, the influence of TPFTA on relations with China, access to medicines, biologics, tobacco, SOEs, investor-state dispute settlement and, generally, how the arrangement would create American jobs.
Access to Medicines:
In his opening statement, Ranking Member on the Subcommittee, McDermott (D), said we need to “…ensure that TPP lives up to its billing of a 21st century agreement.” Rep. McDermott underscored the need to “incorporate and, where appropriate, build upon” the May 10, 2007 Agreement, and that the May 10th Agreement involved “…state of the art thinking on a range of critical issues including labor, environment and intellectual property.” He continued, “May 10th has to be the basis for TPP and all other FTAs going forward.” McDermott added, “I think we got it pretty close to right in the May 10th Agreement on IPR access to medicines.” McDermott stated that he was very disappointed by USTR’s move away from the May 10th policy. McDermott’s opening statement is at ~6:40 into the video.
Marantis responded, “I just want to underscore this administration’s commitment to using trade policy to drive access to medicine in a way that fosters innovation. That was the goal of May 10th, and we very much uphold and affirm that goal. The approach that we’re taking in TPP, though different in language from May 10th, is very much as effective, we believe, in terms of driving access to medicines in the developing world. What we’ve tried to do, Mr. McDermott, is we’ve tried to create increase legal certainty and predictability for generics as well as innovative producers so that they get into the market in the developing world as quickly as possible. And the goal that we have is to propel the TPP countries to the front of the line for important innovative products as well as the generic competition that follows. So we think that the proposal we’ve made, both in the IP chapter, but as well as in other areas of the agreement with respect to tariffs, customs, trading rights and distribution, provide really the best way to drive access to medicines in the developing world as quickly as possible in a way that achieves the balance that we sought to achieve in May 10th that fosters innovation as well.” See this response at ~24 minutes into the video.
Rep. Reichert (R) stated that IP language in KORUS, U.S.-Columbia and U.S.-Panama FTAs was strong and “…we don’t want to see a weaker version of that language as we look at TPP; I think that would hurt our relationship, friendship and partnership in the agreement that we have with three previous countries that I just mentioned.”
Marantis stated they were seeking a balance that would provide access to medicines in the developing world and foster innovation. Later in the hearing, Marantis spoke about how the “access window” would inspire “innovative” companies to launch their products within a particular time window so they can benefit from “high standard” IP protection, and data protection would be included in these yet to be defined “access window” IP protections.
Biologics production and R&D was raised several times in questions from the subcommittee members in the context of needing strong IPR protections to foster innovation. Many argued that the production of biologics was an important job creator in the U.S.(supporting 4 million U.S. jobs according to Rep. Herger (R)) while Rep. Schock (R) and Rep. Larson (D) emphasized that data protection for biologics should last 12 years, as it is does in the Affordable Care Act. In response, Morantis stated that the provision related to biologics data protection had not yet been tabled and USTR hasn’t yet decided its approach.
Tobacco
Rep. Davis (R) from Kentucky highlighted the importance of tobacco for his state (Kentucky produces over 25% of the tobacco in the U.S. and has a 9.5% unemployment rate) and wanted assurance that there would be no carve out for tobacco. He referenced an October 7th letter the Kentucky delegation sent to Kirk opposing USTR’s consideration of excluding products from the TPP, specifically tobacco. They received a response from the Office of the USTR that they are still developing their negotiating position for the TPP. Rep. Davis was concerned a tobacco carve out would be “devastating” for his state’s economy.
Marantis replied he didn’t have a lot of new news on this issue, but added they have received a lot of input on this issue from across the spectrum. He added that as they review the input they’ve received, they will develop their approach on this issue with close consultation with the committee. He assured Rep. Davis that they will be involved in the dialogue.
Rep. Doggett (D) (~46 minutes into the video): “… this administration has been a leader in trying to prevent the continued efforts of the tobacco industry to addict our children at home, and I hope in the terms of good public policy it would follow the same objective abroad.” Continuing, “…I assume that whether the issue is flavoring of product in Canada or the excellent efforts in my opinion of Australia to prevent addiction with its packaging laws, that a first objective of USTR is to comply with existing law, longstanding law, that prevents you from being involved in the promoting, the sale or export of tobacco/tobacco products or to seek the reduction or removal by any foreign country of restrictions on the marketing of tobacco or tobacco products. And USTR does attempt to comply with that law, does it not?” Rep. Doggett also referenced investor-state and the current dispute Australia is facing over its plain-packaging law. Doggett used fairly aggressive language to suggest that investor-state dispute settlement should not be used where there are mature courts established (such as in Australia and New Zealand), and asked if USTR was considering differential treatment of TPP countries due to the very different systems and conditions in the countries involved.
Marantis responded, “Yes, sir,” in response to the question on the Doggett Amendment. He added that USTR is attempting to negotiate single standards “across the board” for the TPP, in all sectors and on all issues (environment, labor, etc.).
SOEs
Several members and Ambassador Marantis also stressed that a critical component of any TPP agreement would place private enterprises on a level playing field with SOEs. McDermott specifically cited unfair protectionist measures for SOEs in Japan.
Timetable
Chairman Brady (R) questioned the USTR witness on the timeframe for conclusion of TPP negotiations, adding he would like to see them completed by July 2012.
Marantis responded that negotiators are working to schedule more negotiating rounds and bilateral meetings to meet the goals set for them by their leaders.
McDermott also questioned Marantis on issues surrounding Japan joining the negotiations. Marantis replied that USTR and Congress need to discuss whether Japan is ready to take on the “high standard commitments” in the TPP that USTR is negotiating with their counterparts. He added that right now it looks as though there will be two parallel tracks: The track USTR is on with the 8 other TPP countries right now, accelerating negotiations to try and conclude them as quickly as possible, and a track with applicant countries, like Japan, Canada and Mexico, where USTR will determine with Congress and stakeholders if applicant countries are willing and able to address their concerns. At some point those tracks theoretically will merge. The time that happens will be determined by discussions with Congress, stakeholders and the applicant countries themselves.
Labor
Chairman Brady urged the administration to follow the approach in recent trade agreements relating to labor, emphasizing that if the administration goes beyond recent trade agreements, it might jeopardize Congressional support for the TPP.
Marantis responded that regardless of subject, the administration is trying to ensure that the TPP address the concerns that businesses and workers face in the 21st century economy. USTR has not yet tabled a proposal on labor, and hope to table a proposal before the end of the year.
Our Participation
Global Trade Watch, Trade Justice (NY), Steve and Steph went to the hearing wearing t-shirts with various slogans including, “Make trade fair for the 99%” and “USTR v. PEPFAR.” At the end of the hearing, we stood by the door as people were leaving and potentially attracted some attention from the media. A security officer came up to us as we exited the building, asking that we warn him if we planned on engaging in future civil disobedience.
Audience
Ambassador Beasley (AUS), Ambassador Mike Moore (NZ) and Ambassador Forsyth (Peru) were in attendance.
TPFTA Hearing, House Committee on Ways and Means, Subcommittee on Trade
Panel 2, Dec. 14, 2011
http://waysandmeans.granicus.com/ViewPublisher.php?view_id=2
Witnesses:
- Devry S. Boughner
Director, International Business Relations
on behalf of Cargill, Inc. and the U.S. Business Coalition for TPP
- Angela Marshall Hofmann
Vice President, Global Integrated Sourcing and Trade
Wal-Mart Stores
- Michael Wessel
President, The Wessel Group
Issues addressed by the second panel included ISDS, SOEs, regulatory coherence, supply chains, rules of origin and, of course, jobs, among other issues.
Boughner Testimony
Cargill is in the international food business. The company is invested in 63 countries, and trade with well over 130. Cargill is in full support of TPP. Boughner claims that TPP would address regional food security concerns, eliminating trade barriers “…so food can move unencumbered from places of surplus to places of deficit. TPP will feed hungry people.” She called for the U.S. to “…conclude a commercially meaningful agreement as soon as reasonably possible.” She then cited 3 key elements to make TPP meaningful agreement:
Boughner first called for the TPP to cover all products and sectors in all TPP economies, specifically citing the need for Australia to agree to ISDS, Malaysia to open its government procurement market, Singapore and Vietnam to open their financial markets, and the U.S. not to exclude any agricultural products, textiles or apparel.
Second, she called for “…high standards for intellectual property and investment protection, transparency, competition policy, provisions to ensure that the internet works without interference for companies to take full advantage of TPP, and science- and risk-based sanitary and phytosanitary, known as SPS standards.”
Third, Boughner stated that the TPP must include “the right subset of Asia-Pacific economies,” citing the inclusion of Japan as critical for the TPP to be “commercially significant.”
In conclusion, Boughner urged the administration to complete negotiations by mid-2012.
Marshall-Hoffman Testimony
Marshall-Hoffman again echoed support for a “high standard, 21st century” TPP agreement.
Her stated goals included:
No product or sector exclusions
A common set of rules of origin, that allow for trade between and among all TPP partners
High standards service and investment agreements that provide market access and protection for retail and distribution rights
Expansion of the TPP to include new partners in the region
Marshall Hoffman saw the TPP as an important vehicle to improve the efficiency of global supply chains in a “holistic” way. She stated that you can’t “have a 21st agreement with 18th century rules of origin.” Finally, she called for membership to expand beyond the current parties and supported the inclusion of Japan, Mexico and Canada, but reiterated that all new members must support the “high standards” of the agreement and shouldn’t slow down the progress of negotiations.
Wessel Testimony
Wessel stated our goal in the TPP must be to maximize employment and opportunity first for U.S. workers, and secondarily for workers in the TPP countries.
“If it results in simply maximizing profits for companies, many of which are increasingly globalizing their supply chains, it will sadly be another trade agreement that fuels our trade deficit, promotes overseas investment, contributes joblessness and widens the income gap that exists in this country and in others.”
He added:
“An agreement properly constructed…requires updating and informing the existing approach and much work remains to be done to achieve that goal.”
Wessel expressed concern over SOEs’ access to U.S. markets, as their interests are by definition aligned with those of a foreign government. Wessel worried that SOEs may “…establish token presences in the U.S. market to benefit from the legal standing we give to domestic manufacturers while keeping almost all the employment in their protected home market,” among other issues. He called for all transactions to be based on commercial considerations, rather than state interests. He continued:
“Where that is not the case, an effective remedy should be made available to the private sector to fight for its interests when a SOE is operating here in our market, not that one that depends on dispute resolution within the context of an agreement and on the U.S. government’s willingness to act. Our trade laws need to provide that SOE’s right to block action by injured parties here in the U.S. can be severely restricted.”
Wessel also cited rules of origin as a critical area of the TPP. He called for maximization of production and sourcing within the signatory countries and to limit the benefits of the TPP to third parties (“leakage”).
Q&A
Rep. Brady asked the Boughner and Marshall-Hoffman how the TPP would facilitate trade.
Boughner responded that barriers go beyond tariffs to behind-the-border issues. She called for common agreement on food safety standards and phytosanitary and safety standards to facilitate the trade of food and agriculture products. She additionally called for a TPP oversight mechanism that would be able to come in to settle disagreements over the way a standard is applied at a border/port which would be able to resolve the conflict within days rather than weeks or months. Marshall-Hoffman echoed the sentiment that TPP must simplify rules or origin that would allow Wal-Mart to build platforms into other markets.
Rep. McDermott asked Wessel to speak on Japan.
Wessel referenced a history of protectionist measures for their auto industry, amongst those in other sectors. He then stated that the problem with trade in Japan isn’t tariffs, primarily, it is, “…a system of interlocking homogenous attitude towards imports that in the past had to be broken down with what was called the market-oriented sector-specific talks, where there were actually targets.” Wessel was skeptical that a “one size fits all agreement” would work with Japan.
Rep. Davis asked for comments on how the TPP would benefit small- and medium-sized enterprises (SMEs) that Cargill and Wal-Mart work with in the U.S.
Boughner & Marshall-Hoffman replied that there was ample room for SMEs to grow and that the success of their larger companies has a positive impact on SMEs.
Rep. Reichert asked what the panelists are doing to spread the word around the U.S. that trade is good.
Boughner responded they are benefiting their employees on the benefits of trade. Marshall-Hoffman stated that they have been actively participating in business coalitions in Washington and elsewhere. Wessel stated that the lack of data and lack of analysis of the TPP by stakeholders was problematic and prevented the trade subcommittee and other committees from appropriately responding to challenges and opportunities of the agreement.
Rep. Herger asked Boughner why TPP sanitary and phytosanitary rules should go beyond WTO rules.
Boughner stated that TPP would get countries to commit to processes around areas like regulatory coherence and applications of standards by industries. This would remove inefficiencies from industrial processes.
Rep. Buchanan asked how the TPP’s removal of trade barriers would create jobs.
Boughner cited that every 1 billion dollars of agricultural exports is linked to 9,000 jobs. Marshall-Hoffman emphasized that expansion into new markets allows for job expansion. Wessel added that for every 1 billion dollars in trade deficit, 9,000 jobs are displaced, so “…we can’t just do this as a referee calling one side’s score.”
Rep. Smith asked how opportunity would be created with TPP compared to previous trade agreements.
Boughner cited that current TPP countries go beyond previous agreements because current TPP countries account for about 500 million people, and if Japan, Canada and Mexico were included, TPP would cover about 779 million people. Even with only the current TPP countries, this is a larger number of people being reached than any previous trade agreement. Wessel called the TPP an opportunity to set a template for future trade agreements with 21st century standards and appropriate enforcement mechanisms. Marshall-Hoffman repeated the importance of the TPP having no product or sector exclusions.
Rep. Jenkins asked Boughner and Marshall-Hoffman how the TPP would address new and emerging trade challenges.
Boughner referenced that the agreement would address challenges surrounding technology, sanitary and phytosanitary standards, and rules of origin. Marshall-Hoffman added that TPP could address issues for services as well as goods.
Rep. Schock asked Boughner what investments her company and other companies might make as a result of TPP. He also asked if she agrees that U.S. investors need the protection of ISDS in all TPP countries.
Boughner stated ISDS and other protections were a top priority for Cargill, and questioned how the U.S. could possibly accept an agreement without ISDS. Wessel added that it’s necessary to go deeper to understand competitive challenges and opportunities where to go in the future, as multinational companies more than doubled their exports of services to their foreign affiliates as they reduced U.S. based employment by 1.9 million people. Boughner retorted that Cargill has increased its employment year on year since NAFTA and implementation of the WTO.
Rep. Paulsen applauded Cargill for educating its employees and on educating the panel on the importance of SE Asia for exports. He then asked the panel how establishing strong rules in TPP would help the U.S. address China’s trade barriers.
Wessel responded that TPP will set a rules template that will help address problems with China long term. Boughner stated that the TPP would create “a new system of peer pressure in the region” and that if we get the provisions right, it will create a system where “other countries are going to want to be in the club.” Marshall-Hoffman sees the TPP as an opportunity to simplify and clarify rules.
In closing, Brady stated we must move forward as quickly as possible and welcome new member countries which are willing to meet “high standards” and not delay the process of the negotiations in order to enjoy the benefits of the TPP.
