FACTBOX-New Pacific free trade pact sticks on old hurdles

by Reuters
Saturday, 22 February 2014 01:32 GMT

WASHINGTON, Feb 21 (Reuters) - Pacific Rim trade partners meet in Singapore this weekend to try to advance talks on an ambitious trade pact which aims to set common standards on a range of issues from regulation to labor and environmental protection.

But trade officials from the 12 nations involved in the Trans-Pacific Partnership (TPP) have made it clear many of the final hurdles involve more concrete trade barriers such as tariffs on imported goods and caps on imports of sensitive goods.

"It's ironic that we all give these speeches about a 21st century agreement and new issues and rules and state-owned enterprises, but at the end we are arguing about Japanese rice, Australian sugar, New Zealand butter and Vietnamese clothes. The same old things we have been arguing about for 50 years," said National Foreign Trade Council President Bill Reinsch.

Japan, which has tried to protect its rice, wheat, beef and pork, dairy and sugar from outside competition, is in particular focus as farmers in big agricultural exporting nations push for elimination of all tariffs.

Below is a list of some of the tricky issues left on the table as negotiators from Australia, Canada, Mexico, Japan, Brunei, Malaysia, Vietnam, Chile, Peru, New Zealand and Singapore gather.


Dairy producers - New Zealand, Australia, Canada and the United States - are keen for more access to what they see as a growing market in Asia, for example for whey products, which are used as an ingredient in foods and drinks.

Canada is also in focus because of its farm milk quota system, which ensures steady prices for producers, and import restrictions. According to Dairy Farmers of Canada, 5 percent of dairy products sold in Canada are imported tariff-free: trading partners would like this share to be higher.

Some TPP countries are also concerned about market concentration in New Zealand, where farmer cooperative Fonterra is the world's biggest dairy exporter and controls nearly a third of the world's dairy trade.


Japan's food safety rules as well as tariffs and quotas are a source of concern for trading partners. Access to Japan is a particularly big issue for Canada and the United States, who lost share in the Japanese market to Australia, and to a lesser extent New Zealand, after Japan banned beef imports after an outbreak of mad cow disease. The limits have since been eased. The Japanese pork market is protected by a network of tariffs known as the "gate price", which acts as a barrier to imports of lower-priced cuts of meat. Trading partners want to remove it.


A major focus of Australia after sugar was excluded from a free trade deal with the United States 10 years ago. The United States supports domestic sugar prices through a combination of tariffs and quota restrictions. Australia has one of the largest shares of the quota, but failed to win any additional access under the 2005 pact. Australia is allowed to export 87,402 metric tons of raw cane sugar quota at low tariffs in 2014, just over half of Brazil's allocation.


Rice-eating countries like Japan and Malaysia are worried about competition from lower-cost producers in the United States, Vietnam and Australia. The United States and Vietnam are the biggest rice exporters in the bloc, according to the Peterson Institute for International Economics. Japan caps rice imports at around 8 percent of domestic consumption, with a prohibitively high tariff on imports above this level. It has promised to phase out subsidies to local farmers by 2019.


Vietnam wants duty-free treatment of clothes made with fabric from other countries, which would reverse a U.S. insistence that yarn used to make clothes also come from an FTA country. Malaysian textile manufacturers estimate exports of textiles and clothes would rise 20 percent if tariffs on Malaysian goods were abolished by TPP nations.


TPP leaders vowed to address barriers to business and consumers adopting digital trade, but concerns remain about the freedom of cross-border data flows. According to U.S. software industry group BSA, Australia, Canada, Mexico, Peru, Chile and Vietnam have adopted or proposed rules that would make it hard for companies to transfer personal information. Vietnam also wants providers of certain internet services to have at least one local server, BSA said.


A November draft of the environment chapter, leaked by Wikileaks, showed the United States was at odds with all other TPP parties over plans to sanction countries which break environmental promises. The Sierra Club said an updated U.S. proposal, dated Feb. 14, showed a softening of provisions for indigenous communities to share in the benefits of marketing genetic resources such as herbal remedies, an issue for countries like Peru.


Tensions remain between the United States, which is pushing hard to protect the rights of copyright and patent holders such as pharmaceutical companies, and poorer countries which are worried about the cost of medicines. There is also a question mark over how long copyright should protect books, films and art, with Hollywood pressing for extended durations.


Japan wants the United States to set a timeline for scrapping tariffs of 2.5 percent on imports of passenger cars and 25 percent on light trucks. The United States wants a commitment that Japan will allow the import of the maximum 5,000 vehicles of each type under a preferential handling procedure agreed last year. American automakers complain that Japan, where imported cars make up less than 10 percent of the market, sets up other barriers to imports such as strict dealership limits, regulation and taxes, while Japanese automakers argue that European manufacturers have gained market share with small cars which are popular with domestic consumers.


Proposals to level the playing field between state-owned companies and private competitors is controversial in countries from Japan, where Japan Post dominates the insurance sector, to Malaysia and Singapore. The United States also has "Buy America" provisions in government procurement rules, which are eyed by many trading partners as a form of protectionism. (Reporting by Krista Hughes; Editing by Robert Birsel)

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