Trans Pacific Partnership Agreement Negotiations Closed Tuesday, 6 October 2015

Article by Jo Moir and Laura McQuillan,

New Zealanders will not face increased medicine costs as a result of the Trans-Pacific Partnership deal.

Australian officials took an ANZAC approach to patent protections on biologics over the last three days and dug their heels in on the issue on behalf of Australians and Kiwis.

This single-handedly stalled the TPPA deal while also giving Trade Minister Tim Groser more time to strike a better deal over dairy.

New Zealand and Australia won't have to change any existing policy settings on biologics as a result of the agreement and that has created some negative feedback from American pharmaceutical lobbyists.

"This will complicate the Americans' job of selling it to their people. We pushed back and got a result that's as good as we could have possibly expected," Groser said.

"Now our American friends have got a problem but I don't think it's unmanageable."

Groser said Kiwis will not pay any more for medicine as a result of the TPPA and the "cost of the subsidy bill will not go up [by] any large extent".

It will cost roughly $4.5 million in the first year to set up the software to provide the additional information that negotiating partners wanted.

After that operating costs will be about $2.5m a year - a "tiny rounding error" on what is a large health budget, he said.

Prime Minister John Key welcomed news of the deal, saying it would give Kiwi exporters much better access to a market of more than 800 million people with expected financial benefits of at least NZ$2.7 billion a year by 2030.

"As a country, we won't get rich selling things to ourselves. Instead, we need to sell more of our products and services to customers around the world, and TPP helps makes that happen."

Key acknowledged disappointment with the lack of gains on dairy tariffs, but said the agreement was "overall a very good deal for New Zealand".

Economic Development Minister Steven Joyce described the deal as a "big win for regional New Zealand", with areas such as the Bay of Plenty, Hawke's Bay, Manawatu and Whanganui set to benefit from the removal of tariffs.

"It's not everything we wanted in dairy by any manner of means, but you can't ignore these other industries.

"The meat industry, the fruit industry, the wine industry, the forestry industry, the manufacturing industry - all of these get the benefits," Joyce told TV3's Paul Henry.


Fonterra was "very disappointed" by limited gains for dairy in the TPPA, with the Government admitting it was "too difficult" to lift all tariffs in the newly-agreed trade deal.

Several countries had refused to remove all blocks to free trade for New Zealand's dairy and beef exports, under the deal finalised in Atlanta overnight.

"I'd never be satisfied with anything less than total liberation, even if it took forever and a day," Groser said.

"All I can say is it's the best we could get against the massive resistance we met from the four giants of Mexico, Canada, the US and Japan."

"It will take us forward on dairy absolutely, but in the most sensitive areas, only a little bit at this point."

Fonterra's chairman John Wilson said the deal was "far from perfect" and "failed to reach its potential" for the dairy industry, due to a pushback from farmers in other member countries.

But regardless, he said the TPPA was a small but significant step forward for the sector.

Groser said the dairy deal was a "long game" that would eventually lead to elimination of tariffs on cheese exported to Japan and elimination of one part of cheese tariffs to the US.

"At the end of the day the trade negotiation game isn't that sophisticated. You negotiate as well as you can with whatever weapons you've got - political, logic, whatever - and when you sense the bus is going to take off you jump on board. It's as simple as that," he said. 


International relations got "pretty close" to breaking down on more than one occasion and the negotiations took their toll on officials, Groser said.

"Our guys are dead on their feet. One had to have a doctor called in because they're so dead."

"I've had to control my own temper with certain people that I regard as good people," he said.

TPPA negotiations were awash with lobbyists from each country and the Japanese and US politicians in particular were being pressured not to budge.

"The pressure works and it forces the negotiators to leave everything to the last minute. If you are representing a deeply defensive industry in any country and seen to be making concessions too early you're regarded as naive."

The deal is a political hot potato for Canada, just days out from its general election.

Canadian officials confirmed the deal would only offer up just 3.25 per cent of the Canadian dairy market and around two per cent of the poultry market over five years.

Farmers said during the negotiations that they could be crippled if Canada gave up too much of its supply management system, which imposes strict production quotas and export tariffs to keep domestic dairy and poultry prices high.


Labour's acting leader Annette King said the detail was "scant" and she wasn't convinced that there wouldn't still be costs down the line in the health sector.

"We don't know about the protection of Pharmac because Doctors Without Borders are saying it's in effect 8 years of patents on biologics." 

"The whole argument is it's definitely five years now for us. If they're saying at least five with further extensions being interpreted as 8 years internationally, that is a huge cost on us and we want to know that sort of detail."

The US and Canada will be taking will be taking it to congress and Parliament respectively for a full debate and King said we need that kind of commitment also.

"That way we can judge whether we have swallowed a lot of dead rats...or made lots of ugly compromises as Groser said."

Green Party co-leader James Shaw said for the most part the TPPA looked to be delivering status quo.

He said it was "hard to tell" if New Zealand would be worse off not being part of it.

"For the most part the deal is actually the status quo...for something that's taken five years to negotiate but only adds 1 per cent to our GDP, it doesn't sound like it's that good a deal."

Shaw had concerns about the Investor-State Disputes Procedures and while he said it was good news that tobacco companies had been carved out of that there was still opportunity for other companies to sue.

"If we decide that we want to protect Maui's dolphin by not exploring for oil in the area where Maui's dolphin lives then we'll still be open to being sued by oil companies for loss of profits."

He said the extension on copyright by 20 years would have a "suppressing effect" on some New Zealand creative industries, who now have a 70 year copyright to deal with.

New Zealand First leader Winston Peters said the promise of a "Gold Standard TPPA" hadn't come through and while the details remain sketchy it looks like "dairy and meat industries have taken a real hit".

"New Zealand was promised a stretch limo and we're getting a low-price sedan."

"Two of our critical primary industries, on which we rely so much, know that they have been sold out," he said.

Staunch critic of the TPPA, Auckland University law professor Jane Kelsey, has previously said the Government was doing a deal "shrouded in secrecy".

But Groser said he was "absolutely convinced" the deal was a good one but the critics would "never see themselves silenced".

"We'll still hear the 'TPP kills babies' crowd but in my view they won't have a factual leg to stand on.

"Then we'll hear that we should have walked away because it wasn't good enough on dairy, which is naive frankly," he said.


Negotiators agreed on a minimum period of data protection for next-generation biologic drugs of at least five years, after a deadlock over rights for drug manufacturers including Pfizer Inc, Roche Group's Genentech and Japan's Takeda Pharmaceutical Co.

The United States had sought 12 years of protection to encourage pharmaceutical companies to invest in expensive biological treatments like Genentech's cancer treatment Avastin.

US Trade Representative Michael Froman

But Australia, New Zealand and public health groups had sought a period of five years to reduce drug costs and the burden on state-subsidised medical programmes.

The outcome is a two-track system with an 8 year protection for biologics and status quo for all other drugs.


Trade representatives at the press conference gave only limited details of the deal's contents.

"To formalise the outcomes of the agreement, negotiators will continue technical work to prepare a complete text for public release," US Trade Representative Michael Froman said.

Froman described the deal as "ambitious, comprehensive, high standard and balanced".

The TPPA would give Japan's carmakers, led by Toyota, a freer hand to buy parts from Asia for vehicles sold in the United States but sets long phase-out periods for US tariffs on Japanese cars and light trucks.

The trade deal also set minimum standards on issues ranging from workers' rights to environmental protection. It also set up dispute settlement guidelines between governments and foreign investors, separate from national courts.

The agreement followed days of delays that saw a press conference scheduled for 9am Monday (NZ time) repeatedly put off, before being postponed to 2.20am Tuesday.

Watch the TPP Atlanta Ministerial Press Conference