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Senator Warren raises some important questions about an element of the Trans-Pacific Partnership (TPP) called Investor-State Dispute settlement, or ISDS.

There are good answers.

The purpose of investment provisions in our trade agreements is to provide American individuals and businesses who do business abroad with the same protections we provide to domestic and foreign investors alike in the United States.  

ISDS is an arbitration procedure – similar to procedures used every day by businesses, governments, and private citizens across the globe – that allows for an impartial, law-based approach to resolve conflicts and has been important to encouraging development, rule of law, and good governance around the world. ISDS does not undermine U.S. sovereignty, change U.S. law, nor grant any new substantive rights to multinational companies. 

The reality is that ISDS does not and cannot require countries to change any law or regulation. 

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ISDS has come under criticism because of some legitimate complaints about poorly written agreements. The U.S. shares some of those concerns, and agrees with the need for new, higher standards, stronger safeguards and better transparency provisions. Through TPP and other agreements, that is exactly what we are putting in place.

It is an often repeated, but inaccurate, claim that ISDS gives companies the right to weaken labor or environmental standards, for example, suggesting that a trade agreement could result in the United States having to lower its minimum wage.

The reality is that ISDS does not and cannot require countries to change any law or regulation. Looking more broadly, TPP will result in higher levels of labor and environmental protections in most TPP countries than they have today. If TPP is passed by Congress, it will also create strong, enforceable new labor protections that would allow the United States to take action – on its own, or on the basis of a petition from labor unions or other interested parties – against TPP governments that don't honor their labor commitments. The same is true for enforcing environmental commitments.  

Similarly, the investment provisions under TPP are designed to protect American investors abroad from discrimination and denial of justice.

Under our Constitution, the Government has wide powers to regulate on behalf of the public interest even if that impacts private property. But when government takes its citizen’s property from them – be it a person's home or their business – the government is required to provide compensation. This is a core principle reflected in the U.S. Constitution and recognized under international law and the legal systems of many countries.

Unfortunately, foreign courts have not always respected this principle, and U.S. investors often face a heightened risk of bias or discrimination when abroad. That’s why governments have looked to international arbitration to resolve such disputes for centuries. Earlier in our history, the United States used gunboat diplomacy, sending our military to defend our economic interests abroad. The decision was made by our predecessors that it was better to rely on neutral arbitration instead.

Over the last 50 years, 180 countries have entered into more than 3,000 agreements that provide investment protections, the vast majority of which have some form of neutral arbitration. European countries are party to more than 1400 of those agreements. The U.S. is party to about 50.

Those thousands of agreements contain a wide range of standards, some that strongly protect a government’s right to regulate, others that do not. The U.S. has been at the leading edge of updating, upgrading and clarifying these standards; protecting the right to regulate; and drawing lessons from previous agreements to ensure that our agreements have the highest possible standards. TPP incorporates and builds on those efforts and goes beyond them by:

• Further raising the standards: TPP will make it absolutely clear that governments can regulate in the public interest, including with regard to health, safety and the environment, and narrowing the definition of what kinds of injuries investors can seek compensation for.
• Adding safeguards: TPP will include the ability to dismiss frivolous claims quickly and award fees against the claimant to deter such suits; making it possible for governments to provide binding direction to the arbitrators; and creating additional filters for cases having to do with financial services.
• Closing loopholes: For example, TPP will prevent sham corporations from accessing the investment protections provided by the agreement.
• Creating transparency: All arbitration proceedings under TPP will be open and non-parties, including labor unions and civil society organizations, will be able to file briefs to inform the outcome of cases.

There have only been 13 cases brought to judgment against the United States in the three decades since we’ve been party to these agreements. By contrast, during the same period of time in our domestic system, individual and companies have brought hundreds of thousands of challenges against Federal, state, and local governments in U.S. courts under U.S. law.

We have never lost an ISDS case because of the strong safeguards in the U.S. approach.

And because we have continued to raise standards through each agreement, in recent years we have seen a drop in ISDS claims, despite increased levels of investment.

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Through TPP, we can set a new, higher set of standards, stronger safeguards and better transparency provisions.

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The truth is that it is difficult for a claimant to win under our agreements and, if they have a legitimate claim, they tend to bring it under our domestic court system.

Senator Warren alludes to a number of specific cases, most of which are not under U.S. agreements and based on different standards, but each one of which is instructive:

• In the only U.S. case alluded to in Senator Warren’s op-ed, a regulation was adopted banning a chemical used in gasoline additives made only by a Canadian company. An arbitration panel found in favor of the government and underscored the right of governments to regulate for public purposes, including regulation that imposes burdens on foreign investors, and noted that investors cannot expect that environmental or health regulations will not change.
• The French-Egyptian case is instructive for two reasons.  First, we don't know much about it because the facts and briefs are not public. Our proposal creates transparency to address that issue.  Second, the information currently available on the case suggests it is not based on the fact that there was an increase in the minimum wage, but rather on a claim that the government has not honored its contract to pay a fixed percentage of the operating costs.
• The Swedish suit against Germany is also instructive. Here, too, details on the case are not public, unlike cases under U.S. agreements. But available information suggests that the case is not about whether Germany can change its national energy policy to do away with nuclear power, but whether Germany needs to provide compensation for abrogating its existing commitments. German domestic courts have upheld claims relating to these issues in cases filed by Germany's domestic energy companies under German law. This case is also instructive because the Swedish company is pursuing claims both in German domestic courts and through neutral arbitration. Our reforms would prevent this kind of forum shopping.
• In the case of the Dutch bank’s lawsuit against the Czech government, the investment agreement at hand had a different standard than what we are proposing in TPP. Our approach is more demanding and, among other things, would affirm the right of governments to take prudential measures to protect the financial system.

Senator Warren also questions the integrity of the arbitrators who decide cases, suggesting that they are biased against governments. In fact, ISDS panels more frequently side with respondent governments. The U.S. government, for example, has won every single case concluded against it.

The arbitration rules used under TPP require the independence of arbitrators and provide for challenge and disqualification in the event of conflict of interest or bias. They also provide a central role for the government being sued to determine which arbitrators hear the case.

We share a number of the theoretical concerns Senator Warren raises. But we disagree with her suggestion that we leave it to the free market to put in place basic rule of law and protections. That hasn't worked in the past and government has a role to play.  

We can’t change the standards in the more than 3,000 agreements among other countries. Most of those agreements will continue to exist, with or without TPP. But through TPP, we can set a new, higher set of standards, stronger safeguards and better transparency provisions.

That's exactly what we're doing.

Learn more about ISDS and it's role in our trade agreements here.

Below are copies of letters sent by a number of Congressmen to USTR Ambassador Michael Forman and from the Governor of Virgina to Froman, Ag Secretary Thomas Vilsak and Sec of Commerce Penny Pritzker on the issue.

02 20 2015 TPP Froman Pritzker Vilsack Letter.pdf

Amb Froman TPP-Tobacco 2015 FINAL.PDF 

"An apple. A swoosh. Two golden arches. Most citizens of the world equate those three iconic symbols with a brand.

Branding is essential for the economy and provides a fundamental service to the consumer, differentiating competing products from one another. This differentiation has several benefits; it makes producers accountable for their own goods, it ensures that consumers can find the quality products they seek, it helps protect consumers choose the products they trust and it helps distinguish legal from black market goods. Customers will go to great lengths to access brands they like and trust.

Unfortunately, brands are under attack. Legislation recently passed in Ireland and the UK that will eliminate trademarks – vital to brand integrity – on tobacco packaging. Proponents of the effort cite similar legislation in other countries and a perceived drop in smoking rates. However, the facts are not on their side, and such action does an enormous disservice to consumers who value choices and choosing the brands they trust.

While we welcome efforts to reduce smoking, eliminating one of the tools consumers search for when looking for a brand they trust is the wrong approach. Two years ago, Australia enacted a plain packaging law for cigarettes that for the first time denied manufacturers of a legal product the ability to distinguish their product from those of their competitors through trade dress.  The unintended consequence of that policy decision has been to drive consumers not away from smoking but into the unregulated black market for cigarettes, which makes it easier for criminal enterprises – which thrive on the black market – to enter the legitimate supple chain.

Three studies make the case that plain packaging is not meeting the public health objectives of the law and is having an impact on the black market:

First, a study by the London Economics group (“An Analysis of Smoking Prevalence in Australia”) analyzed the impact of plain packaging on smoking prevalence among Australians, and found that “the data do not demonstrate that there has been a change in smoking prevalence following the introduction of plain packaging and larger health warnings despite an increase in the noticeability of the new health warnings.”

A second study, by KPMG (“Illicit Tobacco in Australia, 2013 Full Year Report”), shows significant increase of illicit branded manufactured cigarettes following the implementation of Australia’s plain packaging laws.

And the KPMG report from last year (“Illicit Tobacco in Australia, 2014 Full Year Report”) found that since the enactment of plain packaging, the decrease in the consumption of legal cigarettes has been counterbalanced by an increase in consumption of illegal cigarettes. Perversely, the only place an Australian smoker can go today to buy a branded cigarette is to the black market. It’s illogical.

As the KPMG reports remind us, legal cigarette volumes have been steadily declining for many years in Australia, but this historic rate of decline has eased following plain packaging implementation. The increase in illegal tobacco has been greater than the decline of legal tobacco, leading to an overall increase in the consumption of tobacco in Australia.

The lesson here is that two wrongs never make a right. Australia’s efforts to reduce smoking, while understandable, have been ill-served by the choice of policy tools that deny consumers access to a legal product, remove the important consumer protection given by branding, and drive consumers to the unsecure black market.

Plain packaging has not only demonstrably failed to work in Australia, but it has arguably put Australia in violation of international trade rules intended to protect the rights of brand owners in the global marketplace.  Currently, the Australian measure is being challenged by five of its trading partners at the World Trade Organization (WTO), with 35 more countries weighing in as interested parties. The measures recently adopted in the UK and Ireland will likely face similar challenges in the courts. Lawmakers need to take a long look at the cautionary tale of Australia’s plain packaging fiasco and not fall victim to a similar situation. New Zealand, for example, has chosen to wait until the WTO issues its ruling on whether or not plain packaging violates international trade law, rather than recklessly push forward with an initiative that may soon be found in violation.

Brands matter, and consumers demand them. While today’s debate is about tobacco “plain packaging” there have been similar calls for plain packaging of spirits and wine. No doubt there will be other candidates down the road.

That’s one of the reasons why more than 145 prominent global business organizations joined the U.S. Chamber of Commerce in signing a joint statement in opposition to trademark destruction through plain packaging.

There are better ways for governments to educate consumers about the ramifications of smoking than by denying them appropriate choices and trusted brands.  Consumers deserve better".

by Geoff Popham, Business Development Manager, Burnard International Limited - Geoff@burnard.co.nz

Congestion in Los Angeles-Long Beach has reached a crisis stage with 20 container ships stuck at anchor Tuesday 3^rd Feb in the largest U.S. port complex — and no relief in sight.

The Marine Exchange of Southern California reported that the vessels at anchor increased by four since Monday. Shipping lines say vessels in recent weeks have been sitting at anchor for seven to 14 days, and when they proceed to berth, it takes another six to eight days to work the ships. Vessels in the trans-Pacific have been thrown so far off schedule that at least one line has no vessels available to carry containers from Asia because all of its ships are stuck on the West Coast.

Meanwhile, contract negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association appear to be going nowhere. Significant progress was made when the PMA on Jan. 26 confirmed that a tentative agreement was reached that would allow ILWU mechanics to inspect all chassis before they leave the marine terminals.

However, with hopes raised that a settlement could be forthcoming in a matter of weeks, ILWU negotiators reportedly stunned employers by returning to the bargaining table the next day with a dozen new demands, some of which are considered to be highly controversial.
A teleconference between the parties is scheduled for today, with media to be present.

Arrivals and departures in New Zealand are continuing to be seriously delayed, as lines struggle with schedule integrity in the US – NZ – AU – Asia loops which are all connected.

We suggest our clients, both importers and exporters – discuss with suppliers and customers, ways and means to add at least 10 - 14 days to current lead time expectations.
We hope the parties will soon reach agreement.

https://www.youtube.com/watch?v=7JePgLGRE5o&feature=youtu.be

Congratulations to Mark Gilbert who was today sworn in by Vice President Joe Biden as Ambassador-Designate to New Zealand & Samoa. The ceremony took place in The Benjamin Franklin State Dining Room at the Department of State’s headquarters in Washington D.C.

Defence Minister Gerry Brownlee travels today to the United States and Canada for calls at the United Nations in New York, attendance at the Halifax International Security Forum, and a bilateral visit to Washington, including a meeting with US Secretary of Defense Chuck Hagel. 

“The United Nations Secretariat is responsible for the day-to-day operations of 16 current peacekeeping deployments, and I’m glad to be visiting it so soon after our recent election to the United Nations Security Council,” Mr Brownlee says.

After New York, Minister Brownlee travels to Halifax, Nova Scotia, where he will meet with Canadian Minister of National Defence Robert Nicholson and other Ministers while attending the Halifax International Security Forum. 

The Halifax Forum brings together key decision-makers from governments, military, business and academia to discuss emerging global threats.  This year’s discussions will focus on the growing tension in the Middle East, increasing competition for resources and cyber security.

In Washington Mr Brownlee will undertake a range of calls, including on Secretary Hagel. 

Mr Brownlee says Secretary Panetta’s visit to Wellington in 2012, followed by his predecessor Jonathan Coleman’s visit to Washington in 2013 has set a pattern for regular Ministerial-level contact.

“I am very pleased to be able to meet with Secretary Hagel so soon after taking up the Defence role. 

“I expect to have a wide ranging discussion with the Secretary, including the United States’ leadership role in the coalition to counter the Islamic State of Iraq and the Levant (ISIL), and our current exploration of a potential New Zealand contribution.

“Canada and the United States are key defence partners for New Zealand.  I’m looking forward to meeting my counterparts to exchange views on global security issues, as well as discussing how we can enhance our defence relationships.”

Since the last TPP Leaders meeting a year ago, the 12 TPP Ministers and our negotiating teams have made significant progress in setting the stage to finalize an historic, ambitious, comprehensive, balanced, and high-standard TPP agreement in accordance with the instructions you gave us in Bali last year.  Over the past several months, we have concentrated on working together to resolve the remaining issues between us, and, as a result of this work, the number of outstanding issues is now limited, and the pace of our progress has accelerated.  With the end coming into focus, Ministers are strongly committed to moving the negotiations forward to conclusion.  Our determination is based on a recognition of Leaders’ common vision and their joint commitment to a next-generation, transformative agreement that further increases the trade and investment among us, and sets high-standard rules to address the issues that our businesses, workers, and farmers face in the 21^st-century global economy.  We also are working to achieve the Leaders’ objective of ensuring that the TPP promotes innovation, enhances our competitiveness, spurs economic growth and prosperity, supports job creation in our countries and ensures that the benefits of the agreement are broadly shared among our citizens.  

Ministers have been actively engaging, and we have developed a joint work plan to accelerate the process and agree on mutually acceptable outcomes on the remaining challenges. Key among these is identifying the pathway to conclusion of ambitious packages of commitments that will open our markets to each other, including for goods, services, investment, financial services, temporary entry of businesses persons, and government procurement.  We also are continuing to seek solutions on the remaining issues in the text of the agreement, including related to intellectual property, State-owned enterprises, environment, and investment.  Ministers made further progress in narrowing the gaps between us on these issues in Beijing, and our discussions will guide the work of our negotiating teams in the weeks ahead.  However, sensitive and challenging issues remain that will require our continued involvement. 

As we work to find solutions to the remaining issues, we will continue to seek the detailed input of stakeholders as their perspectives have been invaluable to our efforts to understand the wide-ranging views and perspectives on many issues under negotiation.  Ministers will continue to work to craft an agreement that carefully balances the range of interests for each country in order to achieve an agreement that provides broadly shared benefits for all our citizens. 

We have reviewed our progress toward achieving the objectives that Leaders articulated for TPP, which will ensure the greatest benefit from the agreement, distinguish TPP from other trade agreements, and serve to boost the competitiveness of our economies regionally and globally. 

Comprehensive Market Access

Ministers and the 12 TPP negotiating teams continue to focus on achieving our goal of an ambitious, high-standard market access package that provides comprehensive, commercially meaningful and duty-free access to each other’s goods markets and simultaneously lifts restrictions on services, investment, financial services, temporary entry of business persons, and government procurement. 

• On goods market access, TPP countries are working to finalize tariff packages with one another.  Trade among us already accounts for about one-third of total global trade, and we are seeking ambitious market-opening outcomes that can further increase opportunities for our companies, farmers, workers, and consumers.  Efforts to achieve this goal are well advanced among many countries, but work remains on the treatment of certain products and with regard to certain countries.  We are focusing intensively on finding ways to address these products while ensuring that the goals Leaders set for ambition are met, and that we achieve outcomes that result in sustained, commercially-meaningful market access for each of us.   

• On market access for services, investment, financial services, government procurement, and temporary entry of business persons, work continues as well.  Services trade among us already accounts for nearly one-third of total global services trade, and Ministers recognize the critical part that market liberalization in these areas can play in promoting efficiency, competition, and the development of the economic infrastructure needed to ensure that the full benefits of the TPP can be realized.  We also have made significant progress on commitments seeking to eliminate barriers to investment, which we recognize play an important role in driving trade flows and regional supply chains, and we have agreed to couple those with a new, strong standard of protections to preserve governments’ ability to regulate in the public interest.  Since last year, we have moved much closer to conclusion of packages on these issues, but some outstanding work remains to ensure a high-standard outcome for all countries consistent with Leaders’ objectives. 

Regional Agreement

Since the TPP Leaders last met, we have significantly advanced our work on promoting integrated regional trade that will make trade between us more seamless, supporting jobs by making it much easier for our workers and businesses, both large and small, to take advantage of the agreement.  Exporters, importers and investors are seeking fairness and predictability so by setting common high-standard, transparent, and balanced rules across the region, we are promoting trade and investment among us.

• The 12 countries have made substantial progress on common rules of origin on the majority of products, which is critical to facilitating and strengthening production and supply chains between us.  We have set out a plan for concluding the remaining work to complete the rules of origin that support seamless supply chains. 

• To support the development of value chains among TPP members, our teams are far along toward agreement on such issues as customs, trade facilitation and logistics, which will cut the red tape of trade and make it faster, cheaper, and easier for businesses to get their products to market.  We also are working to finalize cooperation commitments to support each other’s efforts to stop smuggling and illegal transshipments, so we can be sure that the benefits of the agreement flow to businesses and workers from the TPP Parties.  

• To further promote the integration of regional trade, we also are near agreement on ways to eliminate non-tariff barriers, which have increasingly replaced tariff barriers as the key obstacle businesses face in accessing foreign markets, and on work to promote cooperation on approaches to regulatory issues.  At the same time, we all have been careful to do so in a way that preserves our governments’ ability to protect the public interest, including on health, safety, and environmental protection. 

New Trade Issues

To help sustain the future dynamism and competitiveness of our economies, we have made significant progress toward developing common approaches to new issues that have emerged in the global economy since the last generation of trade agreements.  In developing rules on these issues, we have approached them in a serious and careful manner.  We are close to agreement in these new areas.

• Recognizing the economic potential of the Internet, including for small businesses looking to reach new markets, and noting that the number of Internet users worldwide has proliferated in the past several years and will only continue to grow, we are far along in reaching agreement on rules that will promote the development of the digital economy, in a manner consistent with governments’ legitimate public policy interests, such as regulating for the purpose of privacy protection. 

• We also have advanced our work to promote fair competition among us, including by establishing rules to ensure that State-owned enterprises and private-sector businesses are able to compete on a level playing field.  This pioneering work on TPP will reinforce efforts by many of our governments to promote efficiency and the competitiveness of our economies.

• We appreciate that innovation is an important source of benefits for our people and growth and competitiveness for our economies, and have worked hard to develop balanced commitments on intellectual property that promote and share the benefits of innovation.   This is one of the most complex and challenging areas of the agreement, but we have made substantial progress in developing common approaches that will promote creative and technological advances that will benefit all of us.  We also have worked hard to strike an appropriate balance that ensures our citizens’ access to medicines and to fair use of on-line content, and that reflects the diversity of TPP economies. 

• Recognizing the commitment of all TPP countries to strong environmental protection and conservation, we have made progress toward agreement on a set of enforceable environmental disciplines. 

• To ensure that the benefits of trade are broadly shared, we are close to agreement on a set of enforceable commitments on labour rights that embody key ILO labour rights.

Cross-Cutting Trade Issues

The 12 teams are close to finalizing our work on cross-cutting issues that we believe are important to fully achieving the goals Leaders have set for TPP, and maximizing the potential benefits for our citizens from all the provisions of the agreement. 

• Reinforcing other work in the agreement on standards and various regulatory issues, we have agreed on ways to improve our regulatory practices and encourage regulatory coherence, including through measures to promote transparency and conduct regulatory processes in a more trade-facilitative manner.

• To promote further integration and competitiveness, we are near conclusion on work to deepen production and supply chains, and to ensure that the provisions of the agreement promote jobs in our markets.

• Recognizing the important role that small- and medium-sized enterprises play in all our economies, we have agreed on ways to ensure that these businesses, which account for much of the job creation in many of our countries, can take full advantage of the agreement.

• In order to ensure that increased trade and investment go hand in hand with benefits for our citizens, we have worked to develop commitments to ensure transparency and good governance, and strengthen anti-corruption efforts.

• Promoting development and capacity building of current and future TPP countries is key to the success of the TPP, and we have agreed on ways to ensure that all 12 countries can realize the benefits of the agreement, including by provision of capacity building in areas that developing countries identify, transitions for commitments where capacity is still being developed, improving access to economic opportunity for women and low-income individuals, and incentivizing public-private partnerships. 

Living Agreement

We have continued to engage with economies that have expressed interest in joining TPP in the future.  Reflecting Leaders’ commitment to develop TPP as a potential platform that can expand participation to other economies across the region that are prepared to take on its high-standard commitments, we are close to agreement on the structure and process that will make the TPP a living agreement.  We also have advanced work across the agreement on how to ensure that TPP can continue to evolve as appropriate in response to future developments in trade, investment, technology, or other emerging issues and challenges, or areas of common interest. 

Next Steps

Given the significant progress on TPP since Leaders last met, and further acceleration of the pace of the negotiation in the run-up to this meeting in Beijing, Ministers have committed to redoubling our efforts to get the agreement over the finish line, recognizing that substance will drive the precise timing of conclusion.  Concluding a complex and ambitious agreement like TPP among countries that are as economically, developmentally, and geographically diverse as those in the TPP is challenging.  However, all 12 countries are committed to making completion of the negotiation a priority, and will dedicate the resources needed in order to do so, recognizing the important contribution TPP will make to our economic growth and development and to our competitiveness regionally and globally.  To do so, we will have to find compromises and to work pragmatically, flexibly, and creatively to find solutions that can address each of our needs while remaining steadfast to the high-standard and ambitious outcome that Leaders have identified as their shared goal.

We, the Ministers and Heads of Delegation for Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam have completed our three-day ministerial meeting to lay the groundwork for the conclusion of the Trans-Pacific Partnership Agreement negotiations.  Our meeting followed a week of officials’ level discussions in Canberra, from 19-24 October 2014.

We are pleased to report that, over the past weeks, we have made significant progress on both component parts of the TPP Agreement: the market access negotiations and negotiations on the trade and investment rules, which will define, shape and integrate the TPP region once the agreement comes into force.

Over the course of our weekend meeting, we have spent a considerable portion of our time in one-on-one discussions.  That has allowed us to make further progress in the negotiations on market access for goods, services and investment.  We met in a plenary format to make decisions on a range of issues that will help set the stage to bring the TPP negotiations to finalization.

We consider that the shape of an ambitious, comprehensive, high standard and balanced deal is crystallizing.  We will continue to focus our efforts, and those of our negotiating teams, to consult widely at home and work intensely with each other to resolve outstanding issues in order to provide significant economic and strategic benefits for each of us.

We now pass the baton back to Chief Negotiators to carry out instructions we have given.

We will continue to build on the progress we made at this meeting and will meet again in the coming weeks.

The Strategic Importance of TPP

Washington, D.C.

September 18, 2014

*As Delivered*

“The stakes for U.S. trade policy have always reached beyond the economic realm. As nuclear strategist and Nobel Prize winning economist Thomas Schelling once noted, “Trade is what most of international relations are about. For that reason trade policy is national security policy.”

“What’s remarkable about Schelling’s observation is that it was made during an era when economic power was viewed largely as an ancillary power to military power. During the Cold War, and for much of the 20^th century, economic policy – including trade policy – was seen largely as an enabler:  The role of a strong economy was to support a strong military.

“Military power still has deep economic roots, and as history has shown, when those roots dry up, it is not long before our military forces begin to wither as well. But the world has changed dramatically since Schelling’s time, and the sum of those changes has brought economic and strategic aspects of trade into even closer alignment.

“In the 21^st century, the oldest and strongest strategic argument for trade – its contribution to the U.S. economy – has only grown stronger.  Increasingly, though, economic clout is a key yardstick by which power is measured and a principal means by which influence is exercised. Today, market changes are watched just as closely as military maneuvers, and decisions in boardrooms can matter as much as those made on battlefields.

“Strengthening the U.S. economy is not simply a means of enabling military might, but rather a key strategic goal in itself.  As such, it’s critical that we continue to evaluate trade agreements first and foremost on their economic merits.  Those agreements must support jobs, spur economic growth, and strengthen the middle class.

“For the United States, the economic merits of trade have never been clearer than they are now. Over the past five years, the increase in U.S. exports has generated nearly one-third of our economic growth, and over the past four years, this surge has supported 1.6 million new jobs.  Last year, U.S. exports hit an all-time high, $2.3 trillion dollars of U.S. goods and services, with record-breaking performances across the whole economy, from agriculture to manufacturing to services.

“Building on these successes, President Obama’s trade agenda aims to make the United States the world’s production platform of choice – the top destination for investment.  To paraphrase Chairman Wyden, we want to make it here, grow it here, add value to it here and sell it everywhere – sell it all over the world. 

“We already have many of the pieces in place: We are a $17 trillion economy, we have strong rule of law, a skilled and productive workforce, an entrepreneurial culture, and now new sources of abundant and affordable energy.

“Layered on top of this is a trade agenda that would give American businesses and workers unfettered access to two-thirds of the global economy, boosting investment and manufacturing policies that have already begun to bring manufacturing jobs back to our shores.

“The economic case for trade is the longest pole in the strategic tent, but the tent extends well beyond economics. U.S. trade policy is a central part of what may be the most consequential strategic project of our time: revitalizing the post-World War II international economic order.

“That order, as John [Hamre, President of CSIS] just said, has ushered in prosperity and peace and developed that is unparalleled in history, not only for the United States, but for every nation that has been willing to embrace the pillars of openness and fairness. In recent years, however, a series of seismic shocks – globalization, technological change, and the rise of emerging markets – have shaken the foundation of this order.

“We’re now engaged in a major effort to ensure that as the current order evolves, it continues to reflect our interests and our values, and that the United States continues to play a leading role in it. And trade is one of our most promising tools for that project. Now I could talk here today about T-TIP, TiSA, or ITA, or EGA or TFA, but I know you’ve gathered here to talk about TPP, the Trans-Pacific Partnership, and so I’ll focus on that as the perfect example of how the economic and strategic logic of U.S. trade policy are mutually reinforcing.   

“As you all know, TPP is an ambitious and comprehensive agreement that the United States and 11 other Asia-Pacific countries are trying to complete. Economically, TPP is an opportunity to bind together a group that represents 40 percent of global GDP.

“In today’s global economy, our workers and our firms are already competing against others who do not share our high standards in labor rights, environmental protections, intellectual property rights, a free and open internet, and other issues.

“By setting high standards, TPP will help level the playing field for American workers and businesses, who are among the most productive in the world.  We already know that when the game is fair, that we can compete and win.  And having already lowered most of our barriers, we stand to gain disproportionately from encouraging others to do the same.

“Those standards that we are seeking include are the highest labor and environmental standards of any trade agreement – standards that will be fully enforceable.  They include advancements in intellectual property rights protection, both to spur innovation and ensure access to it.  This agreement will include the first-ever disciplines on state-owned enterprises, which will ensure that when SOEs compete against private firms, they do so on a commercial basis.  And this agreement will break new ground by translating trade principles from the physical economy into the digital economy to ensure that there is a free and open Internet – which is so critical for small and medium-sized businesses being able to access the global market.

“These standards reflect both our values and our interests.  There are alternative models bring promoted as well.  Ones that are based more on mercantilist policies; ones that do not focus on labor and environmental standards; ones that do not focus on protecting intellectual property rights or leveling the playing field between State Owned Enterprises and private firms or maintaining a free and open Internet.  These models do not reflect our interests and our values. 

“So we want to see a race to the top, not a race to the bottom that we cannot win and should not try to run.

“But looking beyond just the trade elements, TPP is a central component of America’s rebalance to Asia.

“At a time when there are unresolved territorial and maritime disputes, TPP can reinforce our presence in the region and our interest in establishing methods of cooperation and mechanisms for resolving frictions.

“At a time when there are crises on multiple fronts, TPP can demonstrate that the United States is and always will be a Pacific power and be a concrete manifestation of our enduring commitment to the region.

“At a time when there is uncertainty about the direction of the global trading system, TPP can play a central role in setting rules of the road for a critical region in flux.

“The stakes for setting new rules of the road for the global trading system have never been clearer, and yet it has become increasingly difficult to do just that.  One barrier to progress has been the emergence of emerging economies that have been unwilling to date to assume enhanced responsibilities commensurate with their increased role in the global economy.

“At the WTO, for example, where recently we’ve seen a handful of countries block the implementation of the Trade Facilitation Agreement, which would have brought significant benefits to developing countries and developed countries alike by making border and customs procedures more efficient.

“In the face of these challenges, we must keep moving forward and working with others who share our commitment to setting higher standards.

“Motivated by these stakes, both economic and strategic, we’ve made substantial progress in the TPP negotiations to date. We can see the light at the end of the tunnel, but it will take a final push, a collective effort, and a willingness to stretch to achieve an agreement that is consistent with our high ambitions.

“Central to that collective effort and the future of TPP are our ongoing negotiations with Japan.

“Japan asked to join TPP three years into the negotiations, after much consultation, based on its own assessment of its strategic and economic interests. Japan did so with a clear commitment to meet the same level of ambition as the rest of the TPP partners, and it on that basis that President Obama and the other TPP Leaders welcomed Japan’s participation. 

“But Japan’s entry into TPP was about more than just a commitment to its partners. It was about a bold and compelling vision laid out by Prime Minister Abe to end Japan’s prolonged period of stagnation by using structural reforms, as well as fiscal and monetary policy, to contribute to economic revitalization.

“Because Japan’s success is so important, we are all watching its economy very carefully.  The record is uncertain.  We’ve seen growth, and we’ve seen contraction.  Right now, in the final weeks of the third quarter, both internal and domestic demand are weak.  Real incomes and consumer spending are down.  And as Christine Lagarde at the IMF recently said, all of this puts a premium on Japan delivering on the third arrow of structural reform.

“In London, the Prime Minister said, “The Japan that I am pursuing is a Japan that leads to being wide open to the entire world.” 

“He asked, “How will we achieve growth? We will open up the country and open up Japan's markets. This is a philosophy that has coursed through my veins consistently ever since I entered politics.”

“This vision matches TPP both in its ambition and its objectives – to support growth and prosperity by unlocking new opportunities for business and workers as well as new benefits for consumers, to tap new sources of domestic demand, to implement reforms in key markets, and to spur productivity.

“It’s a vision that the United States has wholeheartedly supported not only because Japan is one of our closest allies, but also because its success as the world’s third largest economy is vitally important to the global economy.  Ending two decades of stagnation and returning Japan to a path of sustainable growth, based on domestic demand, is in everyone’s interests.

 “As Prime Minister Abe made clear, TPP has a key role to play in putting Japan on that path. 

“When talking about TPP, he said, “What is necessary for Japan's revival is a powerful catalyst that will restyle the old Japan and then make the ‘new’ Japan even stronger.”

 “But for TPP to succeed in being that catalyst, it needs be as bold as the Prime Minister’s vision.  It needs to be an ambitious, comprehensive and high-standard agreement. 

“We’re now at a critical juncture in this negotiation. We are working hard with Japan to achieve our shared objectives.  Now is the time for that bold vision to be translated into concrete progress at the negotiating table.  We know this is tough, but as the Prime Minister said, “there is no alternative.” 

“Undertaking this kind of structural reform is difficult.  We know.  We did it in autos, we did in in the financial sector, and we’ve done it in health care.  But it can be done with political will.  Quoting the Prime Minister one more time, “Achieving this will require robust political power that takes on vested interests.”

“We have worked well and hard with Japan in TPP, hand-in-hand, to promote strong rules that reflect our shared interests.  We look forward to doing the same to achieve the high level of ambition in terms of opening markets which reflects not only the commitment to all TPP members, but the vision that Prime Minister Abe and the Japanese people have for their own country.

“Now is the time.  From the United States’ perspective, there is no premium in delay.  Others are certainly not standing on the sidelines.

“The European Union is negotiating FTAs with Japan and Vietnam and finalizing a deal with Canada. 

“China is negotiating an FTA with Korea and Australia and, of course, RCEP.

“Australia recently concluded deals with Japan and Korea. 

“Right now, there are 500 million middle class consumers in the Asia-Pacific region.  That number is expected to grow to 2.7 billion by 2030.  They are going to want more protein, a higher nutrition, better and safer food.  They’re going to need everything from machinery to and consumer goods.  And they’re going to want a wide choice in services, from entertainment to health care.  We want to be part of their future.  The Made-In-America brand is a strong one.  And exporting more Made-in-America products drives the creation of good jobs here at home.

“The economic costs of failing to compete are clear. But consider also the strategic costs.

“The United States would forfeit its seat at the center of the global economy.  It would be left to be shaped by globalization, rather than be in a position to shape it.

“We’d watch standards deteriorate rather than improve, and that just cannot be in the interest of American workers and American firms.

“And we’d see our partnerships deprived of the strength that comes from enhanced economic engagements in a world that is increasingly unpredictable.

“As President Eisenhower warned Congress six decades ago, “If we fail in our trade policy, we may fail in all.  Our domestic employment, our standard of living, our security, and the solidarity of the free world – all are involved.”

“The stakes of our trade policy, economic and strategic, are even greater in this century than they were during the last. 

“Thank you very much.”

Hanoi – Trans-Pacific Partnership (TPP) chief negotiators completed 10 days of intensive meetings today, making important progress across a range of issues as they continue their drive toward a comprehensive, high-standard agreement.

"We have committed to a focused work plan, which will allow us to boost momentum and make continued progress,” said Barbara Weisel, U.S. Chief Negotiator for TPP. "All countries involved want to reach a conclusion to unlock the enormous opportunity TPP represents.”

Through the TPP, the United States is working to establish a trade and investment framework in the dynamic Asia-Pacific region that supports U.S. job creation by expanding trade, which accounted for about a third of U.S. economic growth in the past five years.

The United States is also taking steps to establish innovative rules that promote core U.S. values in the agreement, such as transparency and good governance and strong and enforceable labor and environmental standards.

During the session in Hanoi, Vietnam, the United States and its TPP partners – Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam – successfully resolved many issues and narrowed gaps in other areas.  The teams made important progress on State-owned enterprises, intellectual property, investment, rules of origin, transparency and anti-corruption, and labor.  They also continued to move forward with their work to construct ambitious packages for preferential access to each other’s markets for goods, services/investment, financial services, and government procurement.

Having reduced the number of outstanding issues, the United States and the other 11 TPP countries share a commitment to resolve the remaining issues as quickly as possible, including both on the text and market access packages.

To advance this work, Ambassador Michael Froman will work bilaterally with many of his TPP counterparts in the coming weeks.  Next week, he will meet with Vietnamese Deputy Prime Minister Ninh in Washington, DC and other meetings with TPP ministers are expected to follow.

Source: USTR