The U.S. Trade Agenda and the Trans-Pacific Partnership

Thursday, October 15, 2015
Yuya Shino/Reuters
Jerry Seib

Washington Bureau Chief, Wall Street Journal

U.S. Trade Representative Michael Froman discusses the Trans-Pacific Partnership.

SEIB: Hi. Thanks, all. This is Jerry. So I’m with The Wall Street Journal, and welcome to the Council on Foreign Relations conference call on—and I say the telephonic turnout here is quite large, which is an indication of the interest in the topic we’re going to discuss today with—which is the Trans-Pacific Partnership. And we’re happy to have Michael Froman, the United States Trade Representative, to join us. Think you all know Mike. He’s been USTR since mid-2013, and I think is probably fair to say has spent a high percentage of his time since then working on the subject we’re going to discuss today, which is TPP. Prior to that, Mike was deputy national security adviser for international economic affairs.

And the way we’re going to proceed here is I’m going to ask Ambassador Froman to just talk for a few minutes to give us an overview in his eyes about TPP, what it is, and where it’s going. I’ll ask him questions for a while, and then about 15 minutes in or so I will turn over to your questions. So Ambassador Froman, you can take it away.

FROMAN: Well, thanks very much, Jerry, and thanks to Irina and her team for setting this up. And it’s good to be with some fellow CFR members. So thanks, everyone, for taking the time.

You know, this has been a very exciting time for U.S. trade policy over—you know, it’s taken five and a half years, but in Atlanta a couple weeks ago we finally concluded the Trans-Pacific Partnership agreement. It brings together, as you know, 12 countries, 40 percent of the global economy, and it meets the very high standards that President Obama set out and that Congress set out in terms of both tearing down barriers to other markets and raising standards around the world.

You know, we’ve talked about how there are—it’s really 18,000 tax cuts, 18,000 cuts on taxes, on U.S. exports ranging from beef to tractors, really across the economy. But it also deals with services, government procurement, and it also raises standards, whether it’s labor and environmental standards, intellectual property rights, putting standards and disciplines around state-owned enterprises, establishing for the first time rules of the road for the digital economy. In all of these areas, it has really advanced the ball.

And first and foremost: Trade agreements should be evaluated on their economic benefits, but the area I want to focus on today are really its strategic—its strategic merits. You know, traditionally, people looked at economics—and CFR has been a center for thinking about this over time—at—looked at economics as a foundation of support for strategic issues in terms of how it allows a country to exert military strengths. But over recent decades, it’s been clear that economics and economic influence itself is a tool of influence and power around the world.

And as we entered into TPP, the goal and the challenge was really whether we could meet the ultimate strategic test of our time, which is whether the U.S. could revitalize the rules-based trading system that has led since World War II. For seventy years that trading system has greatly benefited the U.S. economic as well as economies all over the world. But in recent years, there have been a series of significant shifts—globalization, technological change, the rise of emerging economies—that have combined to put threats on the global trading system. And we can see that stress around the world where we see alternative models, more mercantilist models, presenting a challenge. So our overarching strategic aim of the—of our trade policy was to help revitalize that order, both for the benefit of the U.S. and for the global system itself.

And we believe TPP does that really in three major ways: first, by establishing rules of the road to ensure that tomorrow’s global trading system is consistent with American values and American interests; secondly, by strengthening partnerships with our trading partners around the world, laying a foundation for pursuing broader mutual interests; and thirdly, by promoting inclusive development so that the benefits of global trade are both greater and more widely shared. And that helps—both by encouraging good governance, transparency, anti-corruption measures, sustainable growth, all of that can help contribute to the alleviation of poverty and hence the promotion of stability around the world.

For all these reasons, TPP has been a centerpiece of our rebalancing strategy towards Asia and perhaps as the most concrete manifestation of that strategy and underscores that the U.S. is a Pacific power—we always have been, we always will be—and that our partners in the region want us to be deeply embedded with them, both on economic issues and on broader issues.

But the strategic stakes of the—extend actually beyond the Asia-Pacific because fundamentally, it presents—TPP presents a choice between two futures, one in which the U.S. is helping to lead on trade and starting a race to the top in terms of global standards, and the other where we take a backseat or sit on the sidelines and allow a race to the bottom that would undermine U.S. influence around the world and result in a lower standard, less open global trading system.

So there is a lot at stake here onto a TPP, but in terms of the economics and the strategic interest, and I look forward to discussing all of that with you. Jerry, I’m happy to get back to you.

SEIB: Thanks, Mike. Just a reminder to all that we are talking on the record here. Let me—let me start, Mike, by trying to draw you down a little more specifically on economic impact and benefits for the U.S. here. What do you think are the most salient potential benefits for the—for U.S. companies, for the U.S. economy? Which exports would gain most directly from TPP in your opinion?

FROMAN: Well, let’s start with manufacturing. TPP will eliminate tariffs on manufactured exports from the U.S. And right now we have 70 percent tariffs on U.S. autos for some countries, 55 percent tariffs on engines, 50 percent tariffs on equipment, tractors and things of that sort. And all of those will go to zero. And we’re globally competitive in these products. And some of these are the fastest-growing markets that need these kinds of capital goods, and we think that we’re going to be able to increase our exports significantly in that area.

On agriculture, you know, we face 40 percent tariffs on poultry, in Japan alone 38 ½ percent tariffs on beefs—all of these are going to be either eliminated or greatly reduced. And we see agriculture as being a big winner here, both in terms of market access to Japan but also other markets that have been closed to our exports over time.

Services—we’re the global leader in services exports. We have a huge trade surplus in services. And TPP is going to open these markets and lock them into being open so that our service providers can benefit.

So really, it’s across the economy. And I should’ve—I should’ve stated starting from the top, Jerry, that we went into this in the context of the fact that the U.S. is already an open market, that our tariffs are 1.4 percent on average, that 80 percent of the goods coming in from TPP countries already come into our market duty-free and that we don’t use regulations as a non-tariff barrier to trade. But when we look abroad, we see much higher tariffs, significant non-tariff barriers. And TPP will get at those and level the playing field for our exports.

SEIB: So one area that has attracted some controversy is pharmaceuticals. The drug industry is unhappy because I think it feels it isn’t adequately protected from generic competition under the terms of the agreement. Can you just address that concern?

FROMAN: Sure. I mean, this has been one of the most difficult issues in the whole negotiation because we—much of the innovation around life-saving medicines and treatments comes from the United States and from—and from U.S. companies. And we want to make sure we’re creating an environment that promotes innovation, and at the same time ensure access to affordable medicines, particularly in developing—in developing countries. The package overall I think does that very well, and it does strike a very important balance there while strengthening protections across the region.

The issue that’s become most controversial I’d say is the issue around biologics, which is sort of the cutting edge of new—of new medicines, where the question came down to how many years of data protection should biologics have. You know, right now five countries have zero years, four countries have five years, two countries have eight years, and we have 12 years. And where we ended up is a commitment by all the TPP countries that they shall provide effective market protection for biologics, and they shall do so one of two ways: either by providing at least eight years of data protection in their law or by providing at least five years of data protection law plus take other measures that deliver a comparable outcome. And we feel that creates the right environments in the region to make sure that there is an important incentive for innovation here in the United States and around the region but at the same time allows these drugs ultimately to make their—make their way to market.

SEIB: Let me ask you a couple of questions before we open it up to the group about the road ahead in terms of approval and launch. I’m curious what you think the specific timetable looks like given the politics that surround this: You have Canadian elections in the next week, Japanese elections next year as well as—not to lose sight of the fact there’s one here as well. What’s the—what’s the timetable as you see it for actually winning approval and getting implementation started?

FROMAN: Well, we’re going to work with congressional leadership and the committee leadership on the precise timetable. Right now what we’re doing is working to finalize the details of the text. It’s too early to tell right now exactly what the pathway will be. And trade promotion authority, as you know, lays out a series of procedures and milestones that we’ll be going through. For example, we have to give notice at least 90 days before the agreement is signed. We have to make sure that it’s out there in the public for at least 60 days before it’s signed. And then there’s a series of reports and legislative procedures that are specified under the TPP law—under the TPA law—to help guide us on this.

Right now our focus is to make sure that we’re demonstrating what the benefits of the agreement are. We’ve been briefing stakeholders, briefing Congress, briefing the public on what the ultimate resolution of key issues were in the agreement so that there’s a full understanding and we can have a full and open debate about the agreement, whatever the timetable is ultimately for approval.

SEIB: And do you anticipate any side agreements before the TPP is actually sent to Congress? Or is it the basic agreement that heads there?

FROMAN: No. I mean, the agreement itself is pretty comprehensive. It’s very comprehensive. And, you know, that’s the agreement that will be negotiated. You know, this is a different kind of agreement than other FTAs we’ve negotiated. You know, other negotiations have tended to be between the U.S. and, you know, one other trading partner at the other side of the table. It’s infinitely more complex when you’ve got 11 other trading partners at the table.

So this isn’t one of those agreements where, you know, you can, you know, reopen an issue or renegotiate a provision. This is one where, you know, every issue is tied to every other issue and every country’s outcome is balanced against every other country’s outcome. And so that’s the agreement that we’ll be putting forward under TPA for a vote by Congress.

SEIB: And are you disappointed at this point in the kind of support you’ve gotten from business and industry groups? Some have seemed fairly timid in speaking out in favor of TPP, at least to this point.

FROMAN: No, no. I’ve been spending a fair amount of time talking with stakeholders over the last week and a half since the agreement was completed. You know, understandably they want to see the final agreement in black and white before they make a final decision. And we’re very eager to get it finalized and get it out in the public as soon as possible. But we’ve been having very good conversations with the groups. And I’m actually quite comfortable and confident in the depth and breadth of the support by stakeholders.

You know, we worked very hard to find solutions that could address the broad range of stakeholder interests here, even when we had conflicting interests here in the U.S. I’ll take textile as an example. You know, we have a domestic textiles industry that’s been investing in more production in the U.S., growing their employment in the U.S. And obviously we have a strong sector of our economy that brings in apparel from other countries, apparel importers and retailers. We worked very closely with both groups of stakeholders to come up with a solution, to come up with an outcome that we think both will be comfortable with and both will be supportive of. And that’s been very important to us to try and address the broad range of U.S. stakeholder interests, whether it’s labor, environment, importers, exporters, to make sure we’re covering everybody’s interests well.

SEIB: So one last question from me before I open it up to the group. I’m just wondering if you might talk for a minute about the implications for the U.S. if, for whatever reason, this deal were not approved and were not implemented here in the United States.

FROMAN: Well, you know, I think this agreement is, as I mentioned, perhaps the most concrete manifestation of our rebalancing strategy towards Asia. But even more than that, it is a manifestation of U.S. leadership in the world. And it’s got broad strategic implications for the U.S. role in the world. And I think as we talk with members of Congress—and I know there’s a lot of interest in this agreement from the foreign policy community and the national security community—I think there will be a keen understanding of the significance of this to U.S. leadership and the, you know, potential ramifications of a failure to exercise that leadership.

The rest of the world is not standing still. Our competitors are not standing still. As we speak, other negotiations are going on for other approaches to the global trading system, more mercantilist approaches, more protectionist approaches, approaches that allow for forced transfer of technology or forced transfer of intellectual property, agreements that don’t have labor and environmental provisions or that don’t put disciplines on state-owned enterprises or that don’t maintain free and open Internet.

And, you know, that—living in that world is much more to the advantage of American workers, farmers, ranches, firms of all sizes, if we’re living in a world where TPP defines the rules of the road than if we’re sitting on the sidelines and those rules of the road are set by somebody else. And I think that will become very clear through this debate to members of Congress. And as a result, I’m confident we’ll ultimately have their support.

SEIB: All right. Thank you, Mr. Ambassador.

I will now turn this over to the operator to take your questions. A reminder again that this call is on the record. The operator will announce your name and your affiliation when you’re called upon to raise a question for Mike Froman.

OPERATOR: At this time we’ll open the floor for questions.

(Gives queueing instructions.)

Our first question will come from Scott Harold with the RAND Corporation.

Q: Ambassador Froman, thank you so much for taking time today. I actually have two questions for you. First, could you talk a little bit about the challenges and how you resolve them in the ultimate negotiations over managing SOEs in countries that have traditionally had weak rule of law and weak IP defenses or protections? And then, second, could you talk a little bit about the road ahead beyond this first tranche of TPP partners? If we do get an approved deal by all 12, where do you see us heading with countries that have expressed interest, like the Philippines, Indonesia, South Korea, potentially Taiwan, and of course even China?

FROMAN: Oh, thank you. Both good questions.

You know, I think, on the first one, this has been—one of the reasons this took five and a half years is because we were taking on some new issues and taking them on among a diverse group of countries, from the most—from the richest and most developed countries to some of the poorest and least developed countries. And that’s important, because together it was the 12 of us helping to define these standards and these rules.

And, you know, you have a country like Vietnam, which is obviously sort of among, I guess, the least wealthy and least developed of all the TPP countries and one that has a very large state-owned enterprise sector in its economy. But it came to the table very much looking to TPP to help promote reform in its own country, including of its SOE sector.

And so, working with Vietnam and the other countries, I think we’ve come up with a very strong set of disciplines on SOEs. I could say the same thing about intellectual property rights protection and the like where they see that TPP is going to help them reform their economy and help it go into the direction that they want to take it in the future and that it plays well into their domestic reform debate.

You know, I think one of the key challenges is going to be negotiating this agreement and getting it passed by our respective domestic processes is really only the first step. Then comes the implementation and the enforcement of it. And for a lot of these countries we recognize that they’re going to need capacity-building to technical assistance to be able to meet the obligations that they signed up to. And we’ve been working with them and working interagency with the other departments in the U.S. government to identify expertise and identify resources to help make these obligations real.

So whether it’s setting up, you know, a stronger patent system in some of these countries or helping to promote the development of independent unions in these countries, we’ve identified specific areas where they’re going to need capacity-building. And we’ll be working with them to do that.

On your second question regarding the tranche, the tranches of folks, you know, TPP has always been viewed potentially as a platform to which other countries who are able and willing to meet the high standards could potentially accede, consistent with each of our domestic processes and our consensus. So, one, they have to be able to demonstrate that they can meet the high standards. Two, we’ll be consulting obviously closely with Congress—and that’s a key part of our domestic process under trade promotion authority—about any expansion of TPP. And thirdly, all 12 of us have to agree to allow another country. No country will be allowed in in our system without a vote by—ultimately without a vote by Congress.

But as you said, even since Atlanta we’ve been contacted by a number of countries, some of whom have been public about it, others who haven’t, who have expressed interest in seeing the facts, getting briefed up, and potentially starting consultations towards being considered ultimately for membership. And that’s one of the great strategic benefits of TPP is that it will be a platform that we expect will grow over time and help raise everybody’s standards in the region. Even non-members are going to have to raise their game to compete in a TPP world. And we think that’s good for everybody.

OPERATOR: Thank you. Our next question will come from Merit Janow with Columbia University.

Q: Congratulations on this agreement after so much time and hard work. My question is really if you could share a little bit more, coming out of the complexities of TPA, around the politics of passage and what kind of—I see USTR is starting to issue sort of state-by-state benefits from TPP. And I wonder if you could just comment further on how you think you can generate, you know, the requisite support in Congress for it and how we can help.

FROMAN: Thanks, Merit.

You know, we, having just come off the TPA process of getting TPA approval through Congress, we’re going to build on that. I think we have a keen sense of where members’ interests lie, what their concerns are, what their constituent interests are. And we’ll be working very closely to lay out the case of how this is good for manufacturing, for agriculture, for services, for innovators, for entrepreneurs, particularly for small businesses, and making that case across the country.

We’re working with our fellow agencies. USDA has been putting out information about—state by state about the benefits of the agricultural package, commodity by commodity. We’re going sector by sector in the manufacturing part of the economy to do the same. We’ll be having an all-hands effort.

You’ve already seen the president out there in the first two weeks of this effort aggressively talking about this in his weekly address, in his statement, and a number of his other meetings. And you’ll be seeing the Cabinet out there around the country, as I was in Delaware on Friday with Senator Coons and Senator Carper talking about the benefits there to both small and large businesses of—and the agricultural sector—of TPP. I will be working with our allies in Congress to do this as well.

I think there’s a lot of interest in this in Congress, a lot of enthusiasm—people who voted for TPA, who did so because they wanted to see actual trade agreements get done, and people who may not have voted for TPA but who’ve kept an open mind on TPP. And we’re going to be reaching out to all of them to make the case and to try and earn their support.

I also think, if I could just add, Merit, you know, we’re obviously focused very much on the economics of this. We’ll be doing that state by state, district by district. But equally important or very much important will be the strategic dimension of this. And I think a number of members of Congress feel very strongly about that, understand what’s at stake here strategically. And we’ll be making that case as well.

Q: Okay, thank you.

OPERATOR: Thank you.

(Gives queueing instructions.)

Our next question will come from Dan Drezner with Tufts University.

Q: Hello, Ambassador. And again, congratulations on completing the negotiations.

I wanted to ask about whether there are any currency provisions or provisions to deal with currency manipulation in TPP. I’ve heard occasional criticism that TPP doesn’t have sufficient provisions on this. But I have also heard that, in fact, there is something of a deal or a side deal that does at least include something about monitoring currency manipulation, and I was wondering if you could enlighten us on that point.

MR. FROMAN: Well, thanks, Dan. A good question. I think everyone has an appreciation of how important this issue is and how much interest there is in it Congress and around the country. This will be the first trade agreement that—where the trading partners have come together to have a currency arrangement. And the Treasury Department has negotiated with its 11 counterparts around TPP. And we’ll be rolling this over time as we move forward with the agreement overall.

But what I can say this point is that it’s a—I think a significant step forward in addressing this issue, it lays out criteria for responsible exchange rate policy, drawing from the G-7, the G-20, the IMF kind of standards, and build on that, with other provisions that allow the countries to come together and consult about their currency policies. I think I’ll let Treasury give you the details of the rollout at the appropriate time. And we’re finalizing that now. But I think this will be seen as a—as a step forward in that regard.

OPERATOR: Thank you. Our next question will come from Marshall Bouton with Asia Society.

Q: Congratulations as well. It’s an enormous achievement. Hopefully it will get ratified in the next months. My question is about the alphabet soup of regional agreements of various kinds, and including trade and gatherings in Asia, whether it RCEP or APEC, ASEAN. Now TPP is added to that. What are the implications for TPP, assuming it’s passed, for some kind of rationalization of how trade discussions happen under the regime?

MR. FROMAN: Well, you know, APEC five or six years ago set out to create what they called the free trade area of the Asia-Pacific. And it recognized that there were multiple pathways, multiple building blocks toward that aspiration. And one of them was TPP. There are others as well. And these aren’t mutually exclusive, necessarily, but we think that the one that makes the most sense for the U.S. to be involved in is TPP, because it’s a high-standard agreement, and it establishes those rules of the road, as we talked about, that reflect our interests and our values.

So we’re going to continue as TPP evolves or develops and other countries potentially join it, if—consistent with all those requirements that I laid out before, that it could become a broader and broader platform for economic integration. But we’ll be working with APEC and ASEAN countries who are not part of TPP to deepen our trade and investment relationships with them as well.

OPERATOR: Thank you. Our next question will come from Tim Webster with Case Western Reserve University.

Q: Hi. Thank you. And it’s kind of a follow-up to that last question. You mentioned at the beginning this way to move forward, to sort of reinvigorate the global trading system. At the same time, these preferential trading agreements are seen either as stumbling blocks by some, stepping stones as others, towards that revitalized global trading system. So I’m wondering how you would—how you would make the case that TPP supports the global trading system, because it is obviously a regional one, and in particular whether there is any attempt to harmonize things like rules of origin, which are often sort of the most protectionist elements of an individual trading agreement? Thank you.

MR. FROMAN: Sure. So I think it’s very much a stepping stone towards a strengthened multilateral trading system. You know, our approach has been, through TPP and then TTIP, that if we can set high standards across these various issues through those two agreements, that represents two thirds, or more, of the global economy. And that makes it easier, then, for those kinds of norms to be taken into the multilateral trading system and become a multilateral standard as well.

I think we’ve already seen the effects of these regional initiatives on the multilateral trading system, in that by moving forward with TPP and with TTIP, I think it helped reinvigorate some of the discussions in the WTO in Geneva that led to the first multilateral trade agreement since the WTO was created, the Trade Facilitation Agreement back in Bali in 2013. It’s led to progress in the Information Technology Agreement, the Environmental Goods Agreement, the trade and services agreement negotiations.

And it’s led to a reinvigorated discussion, as we speak, in Geneva about the future of the multilateral trading system, the status of the Doha Round, and how to move forward towards the ministerial conference in Nairobi in December. So I think showing that there can be momentum on trade liberalization I think has further underscored the dynamic, even within the multilateral trading system, of the importance of furthering its function as a negotiating body. And in that way, we think TPP and TTIP are very much supportive of that effort.

OPERATOR: Thank you.

(Gives queuing instructions.)

Our next question will come from Earl Carr with Momentum Advisors.

Q: Thank you, Ambassador. And I appreciate your sentiment. My question relates to China. China has chosen not to participate in TPP. Could you give us an analysis of why China has chosen not to? And then as a follow-up question, do you in the future foresee China participating in TPP? And if you could, maybe give us a basic time horizon of where you could see that possibly envisioned?

MR. FROMAN: Well, TPP isn’t directed against any particular country, but it is directed at setting high standards for the region. And as I mentioned earlier, countries would have to demonstrate that they were able and willing to meet those high standards if they were ever to want to join TPP. With China, our focus is at the moment on the Bilateral Investment Treaty, in part because the Bilateral Investment Treaty is similar to the investment chapter of TPP. So it’s a good test case to see whether China can—is willing and able to meet the high standards that we insist on in terms of our trade and investment partners. And that’s where our focus is at the moment.

You know, my sense is, though, that whether—you know, whether or not China is ever a member of TPP has, it has, I think, a long way to go to be able to meet its standards, it’s going to have to live in a TPP world, where its neighbors are offering basic labor and environmental standards, dispute settlement, stronger intellectual property rights protections, protections against trade secret theft, disciplines on state-owned enterprises, free and open Internet. And that means that China is going to have to up its game and raise its bar in order to complete in that world. And I think that’s good for all of us.

Q: Thank you.

OPERATOR: Thank you. Our next question will come from Glen Fukushima with Center for American Progress.

Q: Mike, congratulations on concluding the deal. My question has to do with the fact that, as you mentioned, negotiating a good deal is the first step, but implementation and enforcement are also critical. From the business community, I think obviously making sure that the monitoring and compliance, as well the dispute resolution mechanisms, are adequate to make sure that the agreement produces the kind of result that are expected. And I wonder if you could tell us—give us an overview quickly of what innovations, what new things are included in the monitoring and compliance and dispute resolution to reach the high standard, 21st century agreement that the TPP is?

MR. FROMAN: Well, thanks. Very good question. Look, our approach to this has been, first let’s make sure we get the clearest and strongest obligations, because it’s much easier to enforce obligations when they are clear and strong than otherwise. Secondly, let’s make sure that they’re all fully enforceable. And that’s meant a strong dispute settlement chapter with very clear time tables for consultations, setting up panels, decisions by panels, decisions on remedies, implementation of trade sanctions as necessary, and other dispute settlement procedures throughout the agreement.

For example, in the sanitary and phytosanitary standards chapter, we have not only the traditional dispute settlement mechanisms, but we’ve created something called CTC, whose name I will try and remember here, but it’s a sort of rapid response mechanism for dealing with SPS issues as they arise. You know, when shipments get held at the border because of an SPS problem, you don’t want to have to wait for the full dispute settlement procedure. You want some mechanism or technical experts to get together immediately and clear up the problem and allow the shipments to move forward. So we’ve tried to find other mechanisms like that that can also help to resolve these issues.

Ultimately, you know, you’ve got—you’ve got strong provisions, they’re fully enforceable. Now the key is to make sure that they actually are monitored and enforced. In that regard, we’re working—we’re working with Congress, we’re working with the other agencies to develop a full plan for the monitoring and enforcement of TPP. And we’re working with the Department of Labor on the enforcement of labor provisions, working with our embassies, people on the ground who can help monitor the implementation and cite enforcement issues as they arise.

And in the customs bill, which is currently being conferenced between the House and the Senate, there are some important innovations. There’s the authorization of our Interagency Trade Enforcement Center, which brings together resources from around the government to be able to monitor and enforce and put together better cases for enforcement of our—under our trade agreements. There’s a fund to be established for enforcement and for technical assistance that will help in the implementation and enforcement of TPP. And so we are very supportive of and encouraging Congress to move forward with their conference and get the customs bill passed as well.

OPERATOR: Thank you. Our next question will come from Katherine Hagen with Global Social Observatory.

Q: Thank you very much. (Inaudible)—and very interested in what is happening at the WTO. Congratulations on your success with this particular agreement. And also, your remarks are very interesting with regard to when you see the WTO being revitalized. I know that there is a great deal of interest in a reformulated architecture coming out of the Nairobi conference—(inaudible). And I’m wondering if you can describe a little bit what you see as part of that reformulated architecture, particularly in the context of the sort of new and emerging issues that might be integrated into the negotiating process at the WTO. I know that at the European Union is very interested, China too, on some of these new issues, or actually old ones that didn’t get put into the WTO on investment, competition, and so forth. Would you—can you please comment? Thank you.

MR. FROMAN: Well, thank you. And as you know, those discussions are ongoing in Geneva and around capitals. And I think there are some very constructive and important discussions going on—both about how to move forward with elements of the Doha agenda and see if there are—as the Director-General of the WTO, Roberto Azevedo, has described it, see what’s doable in terms of getting agreement around elements of the Doha agenda, but also making sure that we’re revitalizing the WTO to both continue work on any unfinished business, but also take on the new issues facing the global economy, because I think we all believe ultimately the multilateral system is the highest and best form of trade liberalization.

It’s important that it be a vibrant system. We want to make sure that after 14 years of discussions grounded to a high agenda that we’re finding ways to move forward, and both in terms of those issues, but also other issues that have emerged as important to the global economy. And that’s the kind of discussion that’s going on now that we hope will produce positive results at the Nairobi ministerial in December, and that would then lead to further work going into next year in Geneva at the WTO.

OPERATOR: Thank you. Our next question comes from Len Bracken with Bloomberg BNA.

Q: Good morning, Ambassador Froman. Would you discuss the biotechnology annex in the TPP, and what you were able to achieve with regard to cooperation on approvals of GMOs?

MR. FROMAN: Well, I think—I’m happy to say this is an area where there was very good discussion among countries about the importance of science-based decision making, around transparency and predictability of approval processes. And some of those issues are the ones that are included in the annex. And those details will be rolled out and announced along with the release, ultimately, of the text.

OPERATOR: Thank you. Our next question will come from Lee Woarworral (ph) with the University of Illinois.

Q: Thank you. It’s generally understood that the adjudication process on disputes of trade will be taken care of by a council or a committee that is appointed by the international corporations. So this would suggest that there’s a movement of sovereignty from the nation-state to the corporations, or to the world business powers, rather than to a supranational authority. To what extent is this true? And to what extent is this really damaging to democracy around the world?

FROMAN: Well, I’m afraid I disagree with that—with that description. There are two forms of dispute settlement in the agreement. There’s state-to-state dispute settlement, where governments come together and they appoint arbitrators, if necessary, to resolve disputes among them if they can’t resolve them through consultations.

The other is investor-state dispute settlement, where, again, it’s governments and investors who may be parties to these arbitration. Each appoint arbitrators. So it’s not corporate, it’s government as well. And of course, the third one has to be agreed to by both parties, so the government has a strong role in that as well.

Through TPP, we have negotiated a series of safeguards, loophole closings. We’ve raised the standard around investor-state dispute settlement to make it absolutely clear, for example, that governments can regulate in the public interest—health, safety, and the environment as examples; to make it clear where the burden of proof lies, that the claimant has to prove all elements of their claim, including what constitutes a violation of minimum standard of treatment as defined by customary international law. We have allowed procedures for dismissing frivolous claims, awarding attorneys’ fees, making the proceedings transparent, allowing for labor unions or NGOs or anybody to participate in the proceedings by filing—(inaudible)—of amicus briefs. We made it clear that a(n) investor’s expectations of profits themselves is not a judiciable claim—that you can’t sue for having, you know, a disappointment in your expectations, per se.

So we have worked to try and make sure that, in fact, ISDS, while ensuring basic protections for investors—the kind of protections that we provide both domestic and foreign investors in the United States under the Constitution—make it so that those are available in other countries, but also make sure that it works from the government’s perspective in terms of the ability to regulate. This is the most modern form of ISDS of 3,000 agreements out there on this issue, has more safeguards, raises the standards higher. And I think we have a pretty good record under the kinds of ISDS provisions that the U.S. has negotiated. You know, there have only been 17 cases brought against the U.S. in 30 years. Thirteen of those cases have gone to conclusion, and the government has won every one of those cases. So I think—I think on the whole we’ve addressed this in a way that I think addresses many of the concerns that people have raised about dispute settlement and about sovereignty, which obviously no country is going to give up in the context of a trade agreement.

Q: Thank you very much.

SEIB: Is there a last—is there a last question?

OPERATOR: That’s all the time we have for questions now. I would now like to turn the conference back over to Jerry Seib.

SEIB: Well, I want to thank you, Ambassador Froman, for joining us, and the group for calling in. It’s obviously an important topic. Something tells me we may have more chances to discuss it down the road. So thank you all for participating today.

FROMAN: Thank you. Thanks, Jerry.

SEIB: OK. Thanks.


This is an uncorrected transcript.

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