Why TPP sucks

On June 10th the Washington Post’s editorial page chastised Congress for “making free trade difficult”. Champions of Trade Promotion Authority and the Trans-Pacific Partnership (TPP) continue to label all skeptics as “opponents of free trade.” Many skeptics actually favor free trade, but the Trans-Pacific Partnership appears to be less about “free trade” and more about domestic regulatory harmonization. The post-WWII trade regime has been very successful in its aims of reducing tariffs and barriers to trade, expanding global market access, and integrating new players into the global trade regime. The spectacular economic rise of countries such as China, India, and Brazil is testament to the value of the trade route to lift millions out of poverty.

The House may vote on Trade Promotion (“Fast Track”) Authority (TPA) as early as Friday, June 12th. The Senate has already voted in favor of TPA and Obama has been working hard to get skeptical House Democrats on board to support it. If the House grants Obama TPA, it ties its hands to an “up or down” vote on TPP with no possibility for amendment. There is much at stake and citizens and representatives need to know who is drafting it, what it means for US democracy and sovereignty, and the effects it will have on public health.

Lobbyists representing corporate, not consumer, interests, drafted much of the TPP. William New, editor of IP-Watch and visiting fellow at Yale Law School, sued the Office of the United States Trade Representative (USTR) under the Freedom of Information Act and obtained hundred of pages of e-mails sent between the 600 or so “cleared advisors” and USTR. Though heavily redacted, the e-mail demonstrated an extraordinarily chummy relationship between corporate lobbyists, CEOs, and USTR. As New points out, many of the industry representatives are former USTR officials. For instance, Stan McCoy – former USTR negotiator of TPP – left USTR in April 2014 for a position as Senior Vice President and Policy Director for the Motion Picture Association. Former USTR Mickey Kantor became a lobbyist for the Pharmaceutical Research and Manufacturing Association (PhRMA). The revolving door between USTR and K Street creates incentives skewed against the public interest. Corporate interests have unparalleled access to USTR while consumers and citizens have been shut out.

TPP will give foreign investors the right to directly sue our government over domestic regulations. In March 2015 Wikileaks released a draft of the investment chapter that includes Investor-State Dispute Settlement. If investors win there is no chance to appeal. Energy companies could sue the government for unlimited damages if states or the federal government pass legislation to protect the environment. Foreign drug companies could sue for taxpayer dollars over policies designed to contain medical care costs; Eli Lilly currently is suing Canadian taxpayers for $500 million after Canada’s Supreme Court upheld Canadian patent policies that contain drug costs. Phillip Morris, International is suing the governments of Uruguay and Australia for plain packaging of cigarettes. Phillip Morris claims that it is not getting the expected benefits of its investments due to the public health regulations designed to reduce the appeal of smoking. With TPP the United States will be vulnerable to lawsuits in which private foreign investors can sue taxpayers for public regulations. 3 lawyers decide the cases in secret and there is no right to appeal their ruling. This process is a direct threat to both democracy and sovereignty. Consumers, environmentalists, and public health advocates have no similar right to sue.

TPP will raise the costs of medical care. US citizens already are reeling over prescription drug prices, which rose 13% in 2014. The hepatitis C drug Sovaldi costs $80,000 a year; very few patients can afford this drug and many governments have protested this price tag. Providing this drug at this price would economically cripple both Medicare and the Veterans’ Administration. The Intellectual Property chapter expands the monopoly rights of PhRMA and if passed, will lead to even higher drug prices. For example, USTR is proposing a 12-year period of data exclusivity for biologic drugs. That will prevent regulatory agencies from registering a generic version for 12 years, delaying cost effective generic competition. Obama’s 2016 budget calls for reducing this period from 12 to 7 years, claiming a savings of over $4 billion in the coming decade. Obama’s own trade negotiators are pushing for the longer period. This clearly undermines Obama’s professed commitment to affordable care.

On June 10th Wikileaks released a TPP Annex on “Transparency and Procedural Fairness for Pharmaceutical Products and Medical Devices”. PhRMA seeks transparency in public health care decision making over drugs and pricing, yet refuses to reciprocate by offering transparency in its costs and pricing policies. Some believe that the Annex is aimed at New Zealand’s Pharmaceutical Management Agency (Pharmac) that keeps drug costs low and promotes access to medicines for low-income citizens. Public health advocates see New Zealand’s system as a model for cost containment and access, and PhRMA does not want other countries to emulate it. If the United States negotiated drug prices with firms as aggressively as Canada, the government would save an estimated $229.7 billion, state governments $30.8 billion, and consumers $47.7 billion over a decade. The Annex would allow PhRMA to participate in public health deliberations over the choice and reimbursement rates for covered drugs. PhRMA directly could review and appeal Medicare and Medicaid Services decisions over choice and pricing. It would also allow direct-to-consumer advertising for drugs and medical devices. PhRMA companies could challenge domestic health regulations under Investor State Dispute Settlement if they can claim that those policies hindered investment or reduced their expected return on investment.

If Congress grants Obama Fast-Track Authority to conclude the Trans-Pacific Partnership Agreement, the TPP will be here to stay. The US is eager to spread this problematic new set of standards globally and knows it could never achieve these kinds of skewed provisions in an open, multilateral forum. That is why it is negotiating in secret, with countries already yoked to standards that go far beyond the World Trade Organization Agreements. The true targets are China, India, Brazil, South Africa, Argentina, and Thailand, but none of these countries is at the table and each would reject many of the provisions. Congress should act to block TPA so that politicians will not be forced to defend a bad deal that caters to the wishes of the “cleared advisors” at the expense of the public interest.