TPP – Brief to the House of Commons Trade Committee

By | April 13, 2016

Below is a Brief filed with the Standing Committee on International Trade on its examination of the Trans-Pacific Trade Agreement.

HOUSE OF COMMONS

STANDING COMMITTEE ON INTERNATIONAL TRADE

TRANS-PACIFIC TRADE AGREEMENT – WATCHING WASHINGTON

LAWRENCE L. HERMAN

Herman & Associates

Toronto

13 April 2016

  1. While the Standing Committee examines the intricacies of the Trans-Pacific Partnership Trade (TPP) Agreement, it’s important to closely watch what the Americans are doing, both in the Executive and the Congress.
  1. The Committee should proceed diligently with its evaluation, but Canada should not commit to the Agreement and proceed down the path to ratification until it is clear whether, and under what conditions, the US government will agree to ratify the deal.
  1. Obviously, if the Congress refuses to ratify, the whole TPP project will come to an end. Clearly Canada – and the other TPP countries – won’t approve a trade deal if it’s rejected by the US Congress. But even if the Congress eventually approves US ratification, there are some riders that could have major implications for Canada.

Timing Issues and Canadian Ratification

  1. At this point, it is not clear when Congress will even act on the TPP Agreement. Reports out of Washington are fairly certain that the Agreement won’t be tabled before the Presidential election in November. Leaders in both the Senate and the House of Representatives have made that fairly clear.
  1. After the election, the current Congress will reconvene in what’s known as the “lame duck” session, which will last from November to the end of January 2017 when the new President and the newly-elected Congress take office. It is far from clear whether the lame duck Congress will take up the TPPA.[1] There are many politicians, both Democrats and Republicans, who oppose any action until the new administration and the new Congress are in place.
  1. The Republicans control both houses and will continue to in the lame duck session. It’s to be remembered that these Republicans won’t even consider Mr. Obama’s Supreme Court nominee, saying that filling the Court vacancy is up to the new President and the new Congress in 2017. So it’s difficult to see Congress addressing the TPPA until then. This means that matters could remain fluid in Washington for close to another year.

The Implementing Bill Can Move the Goalposts

  1. Under the President’s Trade Promotion Authority (so-called “Fast-Track”), the Congress can only approve or disapprove the TPPA as submitted by the President. It can’t insist on changes to the treaty. It has to vote either year or no for the entire deal.
  1. However, there are other aspects to fast-track that are important. The first is the content of the implementing bill that the President must send to the Congress as part of the TPP package. That bill provides for the necessary changes to US laws and a host of other matters that implement the treaty domestically in the United States. It’s one thing for the US to sign and ratify a treaty. It’s another thing as to how US laws will deal with the treaty and what conditions and caveats are contained in the implementing legislation.
  2. It works in this way. When the President transmits a trade agreement like the TPPA to Congress, the majority leaders of the House of Representatives and the Senate must then introduce the President’s implementing bill on the first day on which the Senate and the House are in session.[2] Neither the Senate nor the House can amend the bill. Their respective committees have 45 days after its introduction to report the bill, or be automatically discharged, and each body must vote on it within 15 days after the bill is reported or discharged.[3]
  1. At this juncture, we don’t know the contents of the President’s bill. We know the Executive and Congressional staffers are working on drafting it but we have no idea what it will eventually contain. Canada needs to know this before it can take a final decision on ratification.
  1. It is possible for the US Congress to agree to approve the TPPA as a treaty but with provisions in the bill that condition that approval through the changes it makes to US laws that somehow alter the negotiated balance in the terms of the treaty. It’s the contents of that legislation, therefore, that are critical. This is something that Canada must examine carefully before it proceeds with its own TPPA ratification.

Executive Action Can Affect the Balance

  1. Even if US implementing legislation itself is consistent with the TPPA, there are aspects of follow-up Executive action that Canada has to be certain about. Congress can separately require the Executive to act in certain ways, regardless of the legislation, that could alter the negotiated gains and concessions in the TPPA and indirectly impose conditions on US compliance with its treaty obligations.
  1. This is illustrated in a report called the National Trade Estimates Report, issued annually by the US Trade Representative.[4] That report lists all of the alleged trade barriers to US commerce in each of the countries where the US does business. The section on Canada[5] contains a list of Canadian measures that the US doesn’t like, such as supply management, provincial wine and beer monopolies, government support to Bombardier and other Canadian laws and policies.
  1. Buried in the 2016 NTE report is a pledge from the USTR to use TPP implementation to pressure Canada on what the US claims are shortcomings in Canada’s intellectual property (IP) protection. The USTR has flagged the patent utility requirements adopted by Canadian courts and complaints by Eli Lilly that their patents have been revoked due to a judicial interpretation for patentability that requires drugs to demonstrate their utility promised by the manufacturer.[6]
  1. There is nothing in the TPPA that requires Canada to alter its patent laws in this area. However, there are many access points in the US system whereby vested interests and their Congressional supporters pressure the administration to support US industry in a variety of ways. The implication is that, bowing to industry lobbying, the USTR will pressure Canada on this front once the treaty enters into force, irrespective of any actual obligations imposed on Canada under the treaty.
  1. This is one of a number of signals that the US intends to press TPP countries following treaty implementation to address irritants the US has, not only with Canada but with other partner countries, whether there is a treaty obligation or not.
  1. All TPP parties can legitimately expect their counterparts to fulfill treaty obligations. That’s fair game. But there are aspects of the TPP and US policies that Canada needs to be clear about. It’s one thing to sign onto a treaty with the United States. It’s another to be told by the US government in advance that it expects Canada to deliver in accordance with US demands and, if not, to be subjected to US pressure in a variety of ways to secure compliance.

Conclusions

  1. The conclusion from the above is that the Standing Committee and the House of Commons at large should review the TPPA in depth and determine whether it meets Canadian negotiating objectives and is in Canada’s interests to ratify. Whether Canada proceeds to this final step, however, should only be taken when the US position on ratification is clear and in full view of the implementing bill and related Congressional and Executive commitments on the matter.

Submitted, 13 April 2016.

Footnotes

[1]Sources on both sides of the debate said the possibility of a lame-duck vote on TPP remains hard to predict. It depends on the outcome of the election, as well as which party will controls the Senate and the House in the next Congress, one congressional source said. It is impossible to handicap these factors, he said.” TPP Supporters Gear Up Lobbying Campaign Touting Benefits, Avoid Timing, World-Trade On Line, 13 April 2016.

[2] Bipartisan Congressional Trade Priorities Act of 2015, 19 U.S.C. §2191(c)(1).

[3] Ibid., paragraph (e)(1).

[4] https://ustr.gov/about-us/policy-offices/press-office/reports-and-publications/2016/2016-national-trade-estimate.

[5] Ibid., p. 69 et seq.

[6] The NTE report says that it “continues to have serious concerns about the impact of the patent utility requirements that Canadian courts have adopted.” This issue is also the subject of a NAFTA investment dispute filed by the company against Canada: Eli Lilly and Company v. Canada, http://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/disp-diff/eli.aspx?lang=eng.