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TPP Standstill at US Dairy Hurdle
August 1, 2015

Progress on a potential major Pacific Rim trade and investment agreement appears to be stumbling as the United States holds out on opening up its protected dairy sector, frustrating a push by Australia and New Zealand to sell more milk, cheese and butter into the lucrative US market.

Participants at a crucial meeting in Hawaii are less confident trade ministers will strike a deal by Friday’s deadline because of differences over market access for agriculture, according to trade professionals in Maui.

Trade ministers from 12 countries, including Australia, Japan, Canada, Mexico and Peru, arrived in Maui this week, talking up the prospects of an historic deal on the mooted Trans-Pacific Partnership (TPP) covering 40 per cent of the world economy.

As expected, cutting US import limits for Australian sugar and stronger intellectual property rights for US-designed medicines are key sticking points after two days of negotiations.

Officials and industry groups attending the meeting said the TPP talks were “intense”. Several conceded they were not progressing as smoothly as hoped. One source said progress had had taken a “backwards step on some issues”, while a foreign trade official said progress on market access for agriculture had “stalled”.

New Zealand is believed to be particularly upset by the US failure to cut tariffs and quotas for Kiwi dairy farmers such as national champion Fonterra. Australian industry is understood to share similar concerns, amid a complex standoff on diary between the US, Canada, Japan and Mexico.

The 12 TPP countries believe clinching an in-principle agreement this week is vital because further delays risk talks dragging into the Canadian election in October and US presidential and congressional elections next year.

Trade and Investment Minister Andrew Robb said he was “70 to 80 per cent confident” a deal could be concluded this week, saying compromise was required. “A satisfactory dairy conclusion amongst several countries is still the elephant in the room,” he said, listing the US, Canada, Mexico and Japan as the key players.

Promisingly, Canada has belatedly begun talking about steps to open up its protected supply management system that shuts out foreign dairy. It was hoped such a move could smooth the way for the US to open its dairy market to other countries, but now the US appears to be less co-operative.

Access to Canada for Australian dairy farmers would be welcomed, but local industry sees the much larger US market as the big prize because its population of 320 million people is about 10 times larger than Canada’s.

Underlining the complex trade-offs in the negotiations, the Obama administration is pressuring Australia and other countries to grant longer patent protection for US-designed medicine data, known as biologics. Japanese press reported the US had cut its demand to 10 years from 12 years. Australia is worried that extending the patent from the current five years will increase the cost of drugs under the Pharmaceutical Benefits Scheme.

Republican chairman of the US Senate finance committee, Orrin Hatch, said it was “very unlikely” he could support a final TPP deal without 12 years of data protection for biological drugs.

By John Kehoe
Source: The Australian Dairyfarmer


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