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Trans-Pacific Partnership Seeks New Global Standard in Free Trade and Intellectual Property

As we discussed in our recent pieces about the Stop Online Piracy Act (SOPA) and the Anti-Counterfeit Trade Agreement (ACTA), online communities have grown increasingly agitated by efforts to globalize the U.S. intellectual property regime.    But the Trans-Pacific Partnership Agreement (TPP), a free trade agreement that liberalizes far more than intellectual property protection, has so far not sparked the type of viral outrage that halted SOPA and ACTA.

The TPP seeks to establish an entirely new free trade zone among Pacific Rim nations.  The agreement originated in 2006 between Chile, New Zealand, and Singapore but participants now include Australia, Brunei Darussalam, Malaysia, Peru, the United States and Vietnam.  Canada, Japan, and Mexico have expressed an interest in joining talks, but membership could require significant changes to domestic laws – for example, Canada may be required to cease its protectionist dairy supply management regime.

TPP responds not only to the breakdown of world trade talks within the framework of the WTO, but also specifically to the emergence of China, whose exclusion from talks is no accident.  As much a successor to NAFTA as to ACTA, the TPP seeks to eliminate all tariffs on a broad range of goods and services (including intellectual property) between members, to establish new rules for determining an import’s country of origin, and to create a new regime of legal remedies available to foreign businesses against national governments.  According to Ron Kirk, the U.S. Trade Representative, the agreement “sets modern trade standards, including ensuring worker rights and protecting the environment.”

One of the means the TPP employs in reaching these stated aims is to prohibit nations from using capital controls (regulation of the flow of speculative capital).  Capital controls remain popular in Asia, where they are sometimes credited with shielding India, China, and Malaysia from the effects of the 1997 Asian Financial Crisis.

TPP’s business community advocates see the agreement’s limitations on regulation of capital controls as an important way to promote foreign investment and job creation – but civil society organizations, trade and labor unions, and technology firms in particular have adopted a less rosy view.  Some policy groups argue that failure to adequately regulate capital markets lies at the core of the global financial crisis.  Last month, a group of over 100 economists from around the world signed a statement issued by the Global Development and Environment Institute of Tufts University, urging that TPP protect governments from shareholder lawsuits for implementing capital controls, especially during periods of crisis.

Lawsuits over capital control measures are not the only type of liability governments could be exposing themselves to by joining TPP.  TPP’s investor state dispute settlement provisions (ISDS) would permit foreign corporations to sue a member government to enjoin regulatory actions that interfere with business activities.  Supporters of TPP assert that ISDS provisions “mirror” American constitutional protections against arbitrary governmental action and taking of property without compensation – and provide a critical “backstop” for foreign investors who undertake massive risks.

But TPP’s opponents see ISDS in a very different light.  They assert that multinational corporations could use ISDS provisions in TPP to roll back or prevent meaningful public health and environmental regulation.  Critics also claim that corporations have heavily litigated similar provisions in NAFTA and other agreements– meaning that nations could be ‘chilled’ from even trying to regulate companies entitled to ISDS.  Citing similar concerns, Australia announced this month that it would oppose strong ISDS provisions in TPP.

However, while capital control prohibitions and ISDS provisions have attracted some attention, it is TPP’s U.S.-drafted intellectual property chapter that is most likely to give it eventual traction in the Twittersphere.  Indeed most of what is known about TPP comes from leaks, and most of the leaked material pertains to these provisions.

As with ACTA, the TPP’s intellectual property rules would effectively export an enhanced version of the American Digital Millennium Copyright Act (DMCA), a scheme critics allege erodes ISP ‘safe-harbors’ and converts ISPs into ‘copyright police.’  Similarly, the IP chapter draft contains anti-circumvention provisions that would criminalize interference with digital rights management (DRM), seemingly even in cases where no actual infringement has occurred.  TPP would also require member countries extend copyright duration to match U.S. copyright terms.

On the patent side, the TPP likewise imposes a version of the U.S. system, which would mean a considerable expansion of the scope of patent in other member countries.  For example, the leaked TPP chapter expressly requires patent protection for software, plants and animals, as well as surgical and therapeutic methods, all of which are currently excludable under the TRIPS Agreement.  The U.S. draft also mandates patent protection for any “new form, use, or method of using” an existing invention – a move opponents say could undermine development of generics.

TPP’s proponents, like the U.S. Business Coalition for TPP, argue that a robust global patent system is essential to driving drug innovation and stimulating investment in research.  But public health advocates like Doctors Without Borders say that the draft would create a conflict between trade policy and existing commitments to health initiatives in developing nations, as well as threaten national public health programs in member states.  Lead by Australia, some TPP member nations have recently expressed disapproval of the U.S. intellectual property provisions, meaning that TPP’s impact on IP could shift as talks proceed.

The USTR has not responded to criticism of its text, but talks are scheduled to continue in May in Dallas, Texas and in September in Santiago, Chile.

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