[A2k] Bridges Weekly: WHITE HOUSE, DEMOCRATS REACH DEAL ON BILATERAL FTAs, SPARKING HOPES FOR TPA

[Thiru Balasubramaniam]

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In response to Democrats' complaints that the intellectual property
protections in FTAs were restricting access to lifesaving medicines in
developing countries, the new template for trade agreements will allow
trading partners to bring generic drugs to market more quickly. For
instance, pharmaceutical test data will not be protected in partner
countries beyond the period that it is in the US, which will make it
possible for generics to be brought to market at the same time in both.
A public health exception from data exclusivity obligations will also
be introduced. Furthermore, patent extension requirements for
pharmaceutical products will be softened, and drug regulatory agencies
will be allowed to approve generics without having to first establish
that no patents have been violated. Finally, the new policy calls for
making side letters on public health concerns part of the formal text
of the FTAs, along with a reaffirmation of countries' right under WTO
agreements to suspend patents in order to expand access to essential
medicines.


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BRIDGES Weekly Trade News Digest - Vol. 11, Number 17 16 May 2007

WHITE HOUSE, DEMOCRATS REACH DEAL ON BILATERAL FTAs, SPARKING HOPES FOR
TPA

The Bush administration and senior Democratic lawmakers have struck a
deal on environmental, labour, and drug patent protections in pending
US bilateral free trade agreements, boosting their chances of receiving
Congressional approval. Movement towards broader bipartisan cooperation
on trade may also herald brightened prospects for the troubled Doha
Round multilateral negotiations at the WTO.

As per the accord, which was the product of months of negotiation
between Congress and the White House, Washington will seek to modify
its FTAs to require the enforcement of some International Labour
Organization (ILO) standards as well as several multilateral
environmental agreements (MEAs). It will also change intellectual
property rights rules in FTA to make it somewhat easier for developing
country trading partners to expand access to generic copies of patented
drugs. These changes were largely in line with a list of objectives set
out by senior Democrats at the end of March (see BRIDGES Weekly, 28
March 2007, http://www.ictsd.org/weekly/07-03-28/story2.htm).

According to the House Ways and Means Committee, the powerful body with
jurisdiction over trade issues, the agreement "clears the way for
broad, bipartisan support for the Peru and Panama FTAs." Unresolved
concerns about the already-concluded agreements with Korea and Colombia
means that their future remains murky.

The compromise on trade policy was announced on 10 May by Democratic
House Speaker Nancy Pelosi (California), Congressional leaders from
both parties, and top administration officials. Charles Rangel, the New
York Democrat who chairs the Ways and Means Committee, played a major
role in brokering the deal with Republican lawmakers and the White
House.

US Trade Representative Susan Schwab said that the administration and
Congress had "seized an historic opportunity to restore the bipartisan
consensus on trade." Notably, she added that "the new trade policy
template also opens the way for bipartisan work on trade promotion
authority (TPA)."

The White House's current TPA mandate, which lets it require Congress
to vote either for or against trade agreements without the possibility
of amendments, expires at the end of June. This 'fast-track' will have
to be in force for WTO Members to be able to finalise a Doha Round
agreement - without it, other countries would be reluctant to sign an
agreement that could then be picked apart by US lawmakers.

Labour, environment, pharma patent rules

Ironically, the countries that signed bilateral FTAs with the US in
time for them to be considered under TPA now face last-minute
modifications -- or else risk having the deals torpedoed by Congress.

Under the bipartisan agreement, the FTAs will have to require countries
to enforce worker protections set out in the ILO's 1998 Declaration of
Fundamental Principles and Rights at Work. These include freedom of
association, the right to organise, and prohibitions on forced and most
kinds of child labour. They will also have to implement seven MEAs,
including the Montreal Protocol on Ozone Depleting Substances, the
Convention on International Trade in Endangered Species (CITES), the
Convention on Marine Pollution, and the Ramsar Convention on Wetlands.

Significantly, both the labour and environmental obligations would
become subject to the same dispute settlement procedures as the core
commercial rules on tariff cuts. Furthermore, it would be more
difficult for countries to plead insufficient resources as a reason for
not enforcing labour laws. However, violations of both sets of
provisions would only become subject to dispute settlement if they
demonstrably affect trade and investment. This and the fact that the US
has adopted the ILO principles in question appear to have assuaged
fears among some Republicans that worker protections in FTAs could be
used by union groups to force changes to US labour legislation.

The accord specifically directs the US trade representative to
negotiate a new annex on forest sector governance with Peru, aimed
principally at beefing up rules to prevent trade in endangered forest
products.

In response to Democrats' complaints that the intellectual property
protections in FTAs were restricting access to lifesaving medicines in
developing countries, the new template for trade agreements will allow
trading partners to bring generic drugs to market more quickly. For
instance, pharmaceutical test data will not be protected in partner
countries beyond the period that it is in the US, which will make it
possible for generics to be brought to market at the same time in both.
A public health exception from data exclusivity obligations will also
be introduced. Furthermore, patent extension requirements for
pharmaceutical products will be softened, and drug regulatory agencies
will be allowed to approve generics without having to first establish
that no patents have been violated. Finally, the new policy calls for
making side letters on public health concerns part of the formal text
of the FTAs, along with a reaffirmation of countries' right under WTO
agreements to suspend patents in order to expand access to essential
medicines.

Additional modifications to the FTAs will include a provision in the
preamble making clear that foreign investors in the US will not benefit
from stronger protections than domestic investors. Washington's earlier
model for FTAs included investor protections so far-reaching that they
were often accused of undermining the ability of governments to
regulate in the public interest.

US trade officials say that they are working with partner countries to
see how these changes can be made into new legal language in the FTAs.
Whether or not this will require a new legislative vote in countries
such as Peru that have already ratified the agreements remains to be
seen.

To complement the new provisions in the FTAs, the compromise also
provided for expanded worker assistance and training in the US, along
with support for making health and pension benefits portable between
different employers. In theory, these policies would help soften the
blow of trade-related adjustment, and make it easier for workers to
change jobs without losing benefits.

The agreement may only smooth the Congressional passage of the FTAs
with Peru and Panama. Democrats want the administration to seek greater
access to the Korean market, particularly with regard to automotive,
agricultural, and services trade. They also want the Colombia FTA to
include special judicial measures to address violence against trade
unionists.

Under the previous Republican-controlled Congress, trade-related
legislation passed by razor-thin majorities. Moreover, upporting trade
deals will not be easy for all Democrats, several of whom were helped
to power in last November's elections by anxieties over trade-related
job losses. However, the Bush administration's willingness to renounce
its past opposition to stronger environmental and labour protections
might help trade legislation receive support from enough Democrats to
succeed.

Possible cooperation on TPA?

Lawmakers from both sides of the aisle broadly welcomed the deal,
although not without some grumbling from more trade-sceptical sections
of the Democratic caucus.

Rangel said that "for decades now, trade has been a polarising issue in
Congress, but today's agreement signals a new direction and a renewed
spirit of bipartisanship." He expressed hope that the new policy would
help boost employment and thus make "trade work, not just for
shareholders, but for all Americans." Wally Herger, the California
representative who is the top Republican on the House trade
subcommittee, said that the "breakthrough agreement" provided a way
forward not only on the FTAs, but also on the "reauthorisation of TPA."

Nevertheless, fast-track extension faces an uphill struggle. Speaking
to journalists in Geneva on 11 May, US WTO Ambassador Peter Allgeier
said that the agreement was "a very important step in the process
toward TPA renewal." However, he noted that "what would be most helpful
now [for encouraging renewal] is to give the Congress a real indication
that we here in Geneva are going to be able to produce a genuinely
market access opening agreement." The extent of tariff and subsidy cuts
continues to leave WTO Members deeply divided. The AFL-CIO, a major US
union, has indicated that it will oppose TPA extension despite the deal
in Washington. The spike in the US' trade deficit for March will make
the issue even more politically contentious.

Of course, TPA is not technically necessary for negotiating - US trade
diplomats will still be able to bargain with their WTO counterparts
after it expires in a few weeks. However, officials from many other
countries say that it will be difficult to seriously negotiate with the
US in the absence of signs that TPA renewal is genuinely in the offing.

ICTSD reporting; "Bush and Democrats in Accord on Trade Deals," NEW
YORK TIMES, 11 May 2007; "Labour, Drugmakers Not Sold on New Trade
Accord Rules," BLOOMBERG, 11 May 2007; "Bush, Congress Agree on Trade
Standards," WALL STREET JOURNAL, 11 May 2007.

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Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
voice +41.22.791.6727
fax +41.22.723.2988
mobile +41 76 508 0997
thiru@keionline.org
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