The Trans-Pacific Partnership (TPP) was conceived in 2003 as the Trans-Pacific Strategic Partnership Agreement TPSEP as a path to trade liberalisation in the Asia-Pacific. The original participating countries were Chile, New Zealand and Singapore with Brunei joining in 2005. In 2008 the United States of America (USA), Australia, Peru and Vietnam joined, followed on by Malaysia, Mexico, Canada and Japan. Free Trade Agreements (FTA) deal mostly with goods being imported at a certain price with certain environmental and labour standards met. What’s different about the TPP is that the treaty has 29 chapters, dealing with the whole scope of tariff and agricultural quota removal and market access on sensitive products, but in particular agricultural goods. It also includes provisions over non-tariff issues such as intellectual property rights, the environment, state-owned enterprises, and investment.
Japan was the last to join in 2013, as agriculture as well as the auto industry have long been a sticking point in Japanese trade liberalisation and had held up the TPP negotiations with the USA. However agricultural reforms made by Japan’s Prime Minister Shinzo Abe, has tipped the power of balance back into the governments favour and away from Japan’s most powerful farm lobby, the Japan Agriculture Cooperative. Japan offered to import more rice from the USA while keeping existing tariffs in place, and the USA agreed to stop demanding that Japan ease its car safety standards. Progress was also made on issues such as state-owned enterprises, environmental protection, and investment. This not only paves the way for greater market liberalisation and deregulation in Japanese agriculture but was meant to enable Mr Obama’s plan to “fast track” push for Congress approval to conclude the TPP before the end of his Presidency.
What is of the most concern is the provisions over not only the aforementioned non-tariff issues of intellectual property rights, the environment, state-owned enterprises, and investment but the Investor State Dispute Settlements provisions (ISDS). ISDS allows multinational corporations to sue governments if they’re deemed not to be acting in their best “interests”. It can potentially place limits on governments being able to develop their domestic laws and policies in areas such as public health, patents on medicine, the environment, food labeling, Internet use and privacy and even local media content. Australia had a long-running investor-state dispute with Philip Morris Asia, due to the introduction of the ‘Tobacco Plain Packaging Act 2011′ in 2011. The laws were introduced by the former Prime Minister Julia Gillard’s Australian Labor Party (ALP) government as a health measure but Philip Morris Asia amongst the many breaches, believes that it infringes their intellectual property. Previous ALP and Liberal National Party governments had in the past only included ISDS in trade agreements with developing countries that didn’t have any investments in Australia and they were not included in the US-Australia FTA. American corporations are the most frequent users of ISDS and the safeguard clauses that countries employ to protect themselves in FTA’s can and have been re-interpreted and over-turned through the arbitration process. Philip Morris International Inc in an Australian case for example, challenged the tobacco plain packaging legislation under a 1993 Agreement between the Government of Australia and the Government of Hong Kong for the Promotion and Protection of Investments.
Even where corporations do lose they have dragged governments through lengthy and expensive legal processes with dispute settlement cases that are heard by tribunals of three private-sector lawyers. The tribunals tend to be more concerned with assessing potential damage to corporate investments rather than the protection of the government’s or public’s interest. In December 2015 Australia won its four year international legal battle with Phillip Morris Asia and there are now currently 608 ISDS cases globally. More than $3bn has been paid by out governments, or taxpayers, to corporations under existing US trade and investment agreements alone. African countries are increasingly becoming involved in ISDS cases with the majority of these in the gas, oil and mining sectors. According to the International Centre for Settlement of Investment Disputes (ICSID), out of the ISDS cases registered with them until 2014, 26% were concentrated in the oil, gas and mining sectors. It was 35% for the year 2014 alone, compared to 2000 when there were only three pending cases. Investors have challenged many government measures such as: licenses that are revoked in mining, telecommunications and tourism; alleged breaches of investment contracts; the withdrawl of previously granted subsidies and changes to domestic regulatory frameworks in gas, nuclear energy, the marketing of gold and currency regulations.
An examples of an ISDS case against a government is one from Canada by Lone Pine Resources which filed a $250m lawsuit against the Canadian government when Quebec placed a moratorium on it and banned drilling and fracking processes for oil and gas underneath the St. Lawrence River for an environmental evaluation. “Based on the principle of precaution, the Quebec government’s response to the concerns of its population is appropriate and legitimate,” said Martine Châtelain, president of Eau secours! (The Quebec based Coalition for the responsible management of water). “No companies should be allowed to sue a State when it implements sovereign measures to protect water and the common goods for the sake of our ecosystems and the health of our peoples” Ms Châtelain added.
And there is the case of Eli Lilly and Company when an American global pharmaceutical company (and it’s fifth biggest), filed a $500m law suit against Canada. It was for allegedly violating its obligations to foreign investors under the North American FTA for allowing its domestic courts to invalidate patents for two of its drugs. Canadian courts had found that there was a lack of evidence supporting the drug’s alleged benefits.
According to Forbes in 2013 the biggest profit margins produced be USA corporations are in the pharmaceuticals. In 2013, US pharmaceutical Pfizer, the world’s largest drug company, made a 42% profit margin. As one industry veteran put it: “I wouldn’t be able to justify [those kinds of margins].” In the UK that year, there was widespread anger when the industry regulator predicted energy companies’ profit margins would grow from 4% to 8% for the year. In 2014, five pharmaceutical companies made a profit margin of 20% or more, these were – Pfizer, Hoffmann-La Roche, AbbVie, GlaxoSmithKline (GSK) and Eli Lilly. And in 2015 Johnson & Johnson was named the world’s largest drug and biotech company, edging out Pfizer and Swiss company Novartis once again. In 2015 Johnson & Johnson made $16.3bn in profits, held $131bn in assets and it’s market value was $276bn.
The problem isn’t just with the massive amounts of profiteering but the fact that the drug companies spend far more on marketing drugs than on developing them. Johnson & Johnson’s total revenue for 2013 for example was $71.3bn with a profit of 13.8%, it spent 8.2% on research and development and 17.5% was spent on sales and marketing. Drug patents in the US are usually awarded for 20 years, but 10-12 of those years are spent developing it at a cost of up to $2.5bn, leaving eight to ten years to make money before the formula can be taken up by generic drug companies. Once this happens, sales fall by over 90%. Joshua Owide, director of healthcare industry dynamics at research company GlobalData, explains, “Unlike other sectors, brand loyalty goes out the window when patents expire.” This is why pharmaceutical companies go to such extraordinary lengths to extend their patents, a process known as “evergreening”, employing “floors full of lawyers” for this express purpose, one industry insider has said. And with a drug raking in $3bn a quarter, even a one month extension can be worth a lot of money. Some drug companies, including the UK’s GSK, have been accused of more underhand tactics, such as paying generics to delay the release of their cheaper alternatives. This is a win for both industries, as it has been said that the loss of the big pharmaceuticals far outweighs the generic industries revenue.
The source of contention between Australia and the US to seal the TPP deal now in 2016, is the difference in the monopoly period (the time-frame that it can’t be taken up by generic companies) for medicines or biologics between the two countries. Biologics are “next generation” drugs and Australia’s time-frame to protect medical intellectual property is five years whereas the US had been bargaining for eight years. Meaning that no generic or cheaper drugs could come onto the market for nearly a decade. Last month TPP supporter, US Senator Orrin Hatch, accused Australia of trying to steal American medicine patents and said that he wants it to be changed to twelve years.
The former Abbott government and the current Turnbull government have an appetite for signing FTA’s with their eyes on more with India, Indonesia and an Asian trade deal to rival the TPP called the Regional Comprehensive Economic Partnership. The TPP has been many years in the making and has been fraught with difficult negotiations that could impact on us really hard in an already uncertain economic environment. The secrecy in our Australian political environment in particular around FTA’s and the public’s growing unease with them needs to be heeded. If the government won’t listen we need the opposition, independents and the senate to come together and put the countries future and needs first, no matter how big the opportunities are for for a few investors in this country. Can you imagine what could be in store for us if we allow multinational corporations and trade ministers to ultimately decide our economies, laws and policies? With the global spend on medicines projected to be worth up to $1.2 trillion for 2017, low global growth and profit hungry corporations, the stakes are too high.