[Ip-health] Bridges: White House & Democrats deal on FTAs

[Judit Rius Sanjuan]

From: 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.

--
Judit Rius Sanjuan
Attorney
judit.rius@keionline.org

Knowledge Ecology International (KEI)
www.keionline.org / www.cptech.org
1621 Connecticut Ave, NW, Suite 500 Washington, DC 20009 USA
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