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article image12 Pacific countries seal huge free trade deal

By Paul Handley (AFP)     Oct 5, 2015 in Business

Twelve Pacific rim countries sealed the deal early Monday on creating the world's largest free trade area, delivering President Barack Obama a major policy triumph.

Working around the clock for days past their deadline, haggard trade ministers announced they reached agreement on the ambitious Trans-Pacific Partnership just before dawn, capping five years of difficult talks led by the United States.

The deal aims to set the rules for 21st century trade and investment and press China, not among the 12, to shape its behavior in commerce, investment and business regulation to the TPP standards.

"After five years of intensive negotiations, we have come to an agreement that will create jobs, drive sustainable growth, foster inclusive development, and promote innovation across the Asia Pacific Region," said US Trade Representative Michael Froman.

Trans-Pacific Partnership
Trans-Pacific Partnership
A.Leung / G. Roma, AFP

The hard-won deal to create the world's largest free-trade area, encompassing 40 percent of the global economy, came after five days of round-the-clock talks in an Atlanta hotel.

Obama, who made the TPP a priority of his second term, said the accord "reflects America's values and gives our workers the fair shot at success they deserve."

"When more than 95 percent of our potential customers live outside our borders, we can't let countries like China write the rules of the global economy," Obama said in a statement.

"We should write those rules, opening new markets to American products while setting high standards for protecting workers and preserving our environment."

- 'Trade deal for 21st century' -

The deal earned a strong endorsement from International Monetary fund Managing Director Christine Lagarde.

US President Barack Obama signs H.R. 2146 Defending Public Safety Employees' Retirement Act  wh...
US President Barack Obama signs H.R. 2146 Defending Public Safety Employees' Retirement Act, which includes fast track trade promotion authority that allows Obama to negotiate trade treaties, including the TPP, in Washington DC on June 29, 2015
Saul Loeb, AFP/File

"The agreement is not only important because of the size... it also pushes the frontier of trade and investment in goods and services to new areas where gains can be significant," she said.

The accord involves significant market openings from Canada, the United States and Japan for farm products from sugar and rice to cheese and beef.

Japan has made major concessions to lower tariffs and reduce non-tariff barriers, a chronic sore point with major food exporters like Australia, New Zealand and the United States.

The United States agreed to lower its tariffs on Japanese car parts from non-TPP locations like China and Thailand, even though that hurts the privileged position in the US market that the 1994 NAFTA trade pact gave Canada and Mexico -- both in the TPP deal.

But more broadly, the agreement establishes mechanisms to handle disputes between foreign investors and governments; requires governments to not discriminate between their own state companies and foreign investors in major contracts; and demands countries like Vietnam, Mexico and Malaysia improve labor standards.

The TPP accord involves significant market openings from Canada  the United States and Japan for far...
The TPP accord involves significant market openings from Canada, the United States and Japan for farm products from sugar and rice to cheese and beef
Yoshikazu Tsuno, AFP/File

It also addresses new issues like data trade and intellectual property that have not been covered in multilateral trade pacts of the past.

Canada Trade Minister Ed Fast called the deal "truly transformational, saying: "The magnitude and importance of rules for 21st century issues can't be underscored enough."

The talks went four days past deadline to resolve conflicts over Canada and Japan opening up their dairy markets to New Zealand exports, and objections from Australia, Peru and Chile to the US push for longer biologic patent protections.

The negotiators said everyone had given in some areas and gained in others to reach a deal.

"We are satisfied with the result…. We've defended all our country’s most sensitive issues," said Chilean Foreign Minister Heraldo Munoz.

Concretely, Fast said, the deal will result in significant reductions of bureaucratic and tariff barriers to trade and investment among the 12 countries.

Protestors call for the rejection of the Trans-Pacific Partnership trade deal under negotiation in A...
Protestors call for the rejection of the Trans-Pacific Partnership trade deal under negotiation in Atlanta, Georgia on October 1, 2015
Paul Handley, AFP/File

"Red tape is consuming so much world activity... this is a massive achievement in reducing that red tape," he said. TPP "is going to lead to far more seamless trade."

- Ratification challenge -

The accord still must be signed and ratified by the respective countries, which also include Singapore and Brunei. But that could be a challenge in several of them.

Many of the details of the deal were negotiated in deep secret, drawing persistent criticism that business interests dominated the talks and that the public interest in many countries was being thrown aside.

Once made public, the details of the TPP could spur a backlash, especially in Canada, facing a national election in two weeks, and in the United States, with elections coming in one year.

US President Barack Obama (3rd R) taking part in a meeting with leaders from the Trans-Pacific Partn...
US President Barack Obama (3rd R) taking part in a meeting with leaders from the Trans-Pacific Partnership (TPP) at the US Embassy in Beijing in 2014
Mandel Ngan, AFP/File

US members of Congress have already warned that they will not ratify any deal that gives up too much in US interests.

Powerful Senator Orrin Hatch warned that he will scour the deal "to determine whether our trade negotiators have diligently followed the law so that this trade agreement meets Congress's criteria and increases opportunity for American businesses and workers."

Leftist Senator Bernie Sanders, who is running for the Democratic nomination for president, said the TPP agreement "follows failed trade deals with Mexico, China and other low-wage countries that have cost millions of jobs and shuttered tens of thousands of factories across the United States."

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