News
November 18, 2015

The Trans-Pacific Partnership Agreement Would Affect Diverse Sectors of the Global Economy

Advisory

After more than five years of negotiation, on October 5, 2015, trade ministers from twelve countries announced that an agreement had been reached on the Trans-Pacific Partnership (TPP). The Obama Administration released the final text of the agreement on November 5, 2015, kicking into gear the timeline for US congressional consideration established by the Trade Promotion Authority legislation passed last summer.

The TPP is the largest free trade agreement to date, encompassing twelve countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam) that represent nearly 40 percent of global GDP. It affects companies across all sectors of the global economy, including pharmaceutical, financial services, technology, and telecommunications firms, as well as any company exporting or importing goods to any member country. It also creates new rules among the member countries regarding key business issues, from intellectual property and antitrust to data flows, e‑commerce, and the acceptable behavior of state-owned enterprises, with new channels created for dispute resolution. Any company that does business in the Asia-Pacific region should take advantage of the opportunity, before the agreement enters into force, to prepare for the changes the TPP will bring.

Timeline for TPP Entering into Force

The TPP will enter into force sixty days after all twelve original signatories have completed the necessary domestic legal procedures to approve the agreement. If any signatory fails to do so within two years of the date of signature of the agreement, the TPP can still enter into force once six signatories accounting for at least 85 percent of the combined GDP of the original signatories have completed their domestic approval processes.

The timeline for foreign approval of the TPP differs from country to country, ranging from Brunei, where approval by the country's monarch is likely to be straightforward, to other countries where certain lawmakers oppose the agreement and no clear timetable has been set for approval. Major US trading partners, including Japan and Mexico, seem poised to approve the agreement sometime during 2016, but the approval process in other countries may not be so straightforward.

US Approval Process

In the United States, the Trade Promotion Authority legislation (TPA) established the necessary domestic procedures for approval and implementation of the agreement. TPA, passed after a bruising battle between the President and Congress earlier this year, provides that the TPP, like other US free trade agreements, will be approved and implemented under an expedited timeline involving special procedures and requiring an up-or-down majority vote by both houses of Congress.

Now that the text of the TPP agreement has been made public and President Obama has formally notified Congress of his intent to sign it, TPA mandates that he wait at least ninety days to do so, making February 3, 2016, the earliest date the President can sign.

Once the President signs, the next step for the TPP is consideration by Congress. TPA provides that the President must wait an additional thirty days after signing the agreement before submitting implementing legislation to Congress, so such legislation cannot go to Congress before early March 2016. But, as a practical matter, the timing of any implementing legislation also likely depends upon the International Trade Commission (ITC), which will submit a report on the agreement. The ITC report can take up to 105 days after the agreement is signed. However, this past summer, the Administration requested that the ITC begin working on its report with the information available, in order to expedite the process. Otherwise, if the ITC takes the full amount of statutorily allotted time, implementing legislation likely would not be submitted to Congress until at least mid-May 2016.

US Timeline for Approval

The Administration usually works informally with the relevant congressional committees to draft implementing legislation and then formally submits the bill under the TPA rules for an up or down vote without amendment. The informal process of working with Congress involves painstaking drafting, as well as multiple hearings and informal meetings. The speed of this informal drafting process and the President's political decision on when it is best to submit the bill ultimately will determine when the formal implementing legislation is introduced. But, as noted, the earliest that this could occur is early March 2016.

After the implementing legislation is introduced, the approval timeline is in congressional hands – within the strict ninety "legislative day" limit imposed by TPA. TPA gives specific time allotments for the House Ways and Means Committee, the full House of Representatives, the Senate Finance Committee, and the full Senate to either pass or reject the agreement. Note that there are fewer "legislative" days than calendar days, so if the various bodies take their full allotted time, the process could last well into Summer 2016, even if the implementing legislation is introduced promptly. It currently seems unlikely, though, that President Obama will permit consideration to slip beyond the end of his term on January 20, 2017, given the importance of the TPP to his legacy.

While some have expressed doubt that US approval could occur prior to the US election in early November 2016, others have argued that such an important trade agreement should not be considered by a "lame duck" Congress (the current members of Congress can hold a congressional session between the election in November and the swearing-in of the new President and the new Congress in January).

The White House has indicated that it wishes to proceed quickly with the approval process, expressing its hope that TPP can be approved before the lame duck session. Under the elaborate system of deadlines imposed by TPA, one possible scenario would involve approval sometime in May or June 2016, in the window between important primary elections and the Presidential nominating conventions held later in the summer. Of course, once the US approves the agreement, it still will not go into effect until approved by a sufficient number of other signatories.

Potential Accession of New Parties

As noted, the TPP, if implemented, will cover a broad swath of the world and nearly 40 percent of global GDP. Additional economies, notably Korea, Philippines, and Taiwan, have expressed interest in joining the TPP.

The TPP contains specific provisions governing accession. By the TPP's express terms, any member of the Asia-Pacific Economic Cooperation forum, and any other country or customs territory agreed to by the TPP Parties, may accede to the TPP if certain conditions are met. The potential acceding member must agree to comply with the terms of the Agreement, including any terms and conditions negotiated between the potential acceding member and individual TPP Parties, and any accession is subject to domestic legal approval by the acceding member and existing TPP Parties.

Implications of TPP Provisions

Given the possibility of TPP approval in the United States sometime in 2016 and the complex, broad-ranging changes that will result, now is the time for companies to inform themselves of the issues raised, changes made, and the opportunities presented in the TPP agreement.

The full text of the agreement can be found at https://ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership/tpp-full-text; and a summary is available at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2015/october/summary-trans-pacific-partnership.

The agreement's impact not only stems from its membership, which as noted will cover nearly 40 percent of global GDP, but also from its breadth of coverage. Its thirty chapters and more than 1,100 pages of text speak to core trade and investment rules, as well as areas as diverse as antitrust, anti-corruption, investor-state dispute settlement, and intellectual property rights, affecting a broad range of industries. The following is a brief summary of some of the noteworthy provisions in the thirty chapters (and numerous annexes) of the TPP agreement:

Antitrust/ Competition Policy

Chapter 16 of the TPP, entitled "Competition Policy," requires each Party to adopt and maintain national laws prohibiting anticompetitive, fraudulent, or deceptive business conduct, and to apply such laws in a non-discriminatory manner as between domestic and foreign-based entities. In addition, it guarantees basic due process and procedural rights to subjects of an enforcement action (such as the right to counsel, to present evidence in defense, to transparency in government decision-making, and to appeal adverse findings to a neutral tribunal), and requires each Party to establish an independent mechanism for persons injured by anticompetitive behavior in the jurisdiction to seek redress.

  • The agreement requires TPP Parties to have in place an antitrust law framework and process that will prevent the arbitrary or discriminatory use of antitrust prosecution as a tool to further national industrial interests. This is particularly important in the TPP Parties whose laws and processes are currently inadequate in this respect. It will benefit US exporters, US-based firms with business operations in other TPP nations, and firms from other TPP countries that already have robust competition policies.
  • Notably, however, the Chapter does not set forth substantive standards defining the parameters of conduct that are deemed "anticompetitive" in each jurisdiction. While there is likely to be consensus that conduct such as price-fixing and bid rigging is clearly unlawful, substantive standards may well differ on other issues such as appropriate levels of market concentration in merger analysis, treatment of vertical business relationships, exclusive dealing arrangements, territorial allocations, and practices that in some jurisdictions may be seen as facilitating the exercise of monopoly power.
  • In addition, the requirements of the Chapter are expressly exempted from the TPP's dispute resolution mechanisms. In the event of disagreement over implementation of the provisions, the Parties merely agree to enter into consultations on these issues upon request of another Party.
  • The agreed-upon framework appears fully consistent with existing US law and practice, so the Chapter is unlikely to change domestic US competition law, practice, or enforcement priorities.

Anti-Corruption

Chapter 26 contains important provisions seeking to enhance anti-corruption standards in TPP countries. Its goals include maintaining strong institutions and rules, as well as creating an enhanced enforcement environment to ensure that both governments and companies involved in international trade and investment are held to a high standard of conduct. The commitments made in this Chapter constitute an important step forward in fighting corruption, especially because a number of them are subject to the TPP's dispute settlement provisions. Over the long term, companies will enjoy a more level playing field and more favorable conditions for trade and investment as a result of these changes, and the risks of engaging in corruption will rise. On a practical level, companies trading in the region will want to heighten their emphasis on enhanced compliance programs and their commitment to controlling misconduct by company employees.

Key provisions of Chapter 26 include:

  • The Parties seek to eliminate bribery and corruption in international trade and investment.
  • The Parties agree to adopt laws to establish bribery of government officials as a criminal offense, and to have those laws apply not only to persons, but to entities as well. The Parties also commit to enact provisions ensuring accurate books and records and to consider enacting protections for individuals who report misconduct relating to bribery to governments.
  • The Parties are required to effectively enforce their respective anti-corruption laws.
  • The Parties commit to use appropriate measures to promote the active participation of individuals and groups in the private sector to adopt internal accounting controls to prevent or detect corruption in international trade and investment and to undertake appropriate auditing and certification procedures.

This Chapter also includes an annex specifically pertaining to transparency and procedural fairness for pharmaceuticals and medical devices, discussed below.

Improved Efficiency in Trade, Customs Rules of Origin, and Cumulation

Chapter 3 incorporates a number of customs provisions aimed at increasing efficiency and fairness, including requirements to ensure goods move through borders as quickly as possible, grant expedited treatment in certain circumstances, issue customs rulings within 150 days, and make administration of penalties impartial and transparent. In addition to these provisions, there are at least two important customs measures that companies doing business in TPP member countries should note:

  • First, the TPP adopts a detailed list of product-specific rules of origin that key off changes in tariff classifications resulting from production or remanufacturing of merchandise. These so-called "tariff shift" rules are very detailed and require careful consideration to determine whether a good produced in a TPP country involving inputs from more than one country can qualify as TPP originating.
  • Second, the TPP includes a helpful agreement on "cumulation." The TPP's cumulation provision streamlines the rule of origin process and eliminates the "spaghetti bowl" problem of multiple rules of origin requirements when goods are processed in multiple countries. Basically, if a good qualifies as a TPP good under the rules of origin when it is imported into a TPP country, the good can then be further processed in that country and treated simply as an originating input for the purposes of any further rule of origin tests on the finished product. This will promote additional trade and encourage economic integration and cooperation amongst the TPP countries.

E-Commerce

Chapter 14 of the TPP addresses e-commerce issues, with breakthrough provisions on the free flow of data, ensuring no tariffs are imposed on digital products, protections against the forced transfer of technology, as well as protections against malicious intrusions:

  • Article 14.16 provides that "the Parties recognize the importance of (a) building the capabilities of their national entities responsible for computer security incident response; and (b) using existing collaboration mechanisms to cooperate to identify and mitigate malicious intrusions or dissemination of malicious code that affect the electronic networks of the Parties." This is particularly important as it is now apparent that ISIS, and other terrorist groups, have developed sophisticated encryption and messaging techniques.
  • Article 14.11 establishes a general rule that data flows should not be restricted, stating that TPP Parties "shall allow the cross-border transfer of information by electronic means, including personal information, when this activity is for the conduct of the business of a covered person." Note that an exception in the same Article states: "Nothing in this Article shall prevent a Party from adopting or maintaining measures … to achieve a legitimate public policy objective, provided that the measure: (a) is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade; and (b) does not impose restrictions on transfers of information greater than are required to achieve the objective."
  • Article 14.3 would ban the practice of requiring e-commerce and technology companies to place data, servers, or other facilities in a participant country in order to conduct business there. This protection is very important to efficient business decisions and turns back some nationalist trends towards imposing this requirement.
  • Article 14.17 stipulates that a participant country cannot require the transfer of, or access to, software source code as a condition of import, sale, distribution, or use. Exceptions apply where the software is used for "critical infrastructure" or where release of the source code is required in certain patent contexts. Although China is not a signatory to the TPP, it is viewed as a potential future participant, and it has in the past required such transfers.
  • The TPP would eliminate duties on US exports of information and technology products, which in some places can be as high as 35 percent. As US exports of such products in 2014 were US$36 billion, this is a particularly important trade liberalization.

Financial Services

Chapter 11 covers financial services, including banking, card services, financial data processing, clearance and settlement, M&A advisory services, securities underwriting and dealing, investment management, and insurance. Important points include the following:

  • Regulatory Standards. The TPP does not ease regulatory standards for international financial firms. Providing financial services across borders is already subject to multiple international agreements and cooperative efforts among regulators, such as those led by the Basel Committee on Banking Supervision, which remain unchanged. Thus, capital, liquidity, and other standards implemented as part of the Basel III Accord will not be affected.
  • Non-discrimination. The TPP will require signatories to allow financial firms from other TPP Parties to enter and provide services in their countries on a non-discriminatory, most-favored nation basis. However, the agreement does not prevent signatories from implementing measures for the promotion of financial integrity and stability, such as temporary capital controls during periods of instability.
  • Electronic payment services. Payment network services that use proprietary networks are to be permitted to offer services more freely among TPP Parties. However, TPP Parties may impose measures on such networks for public policy purposes, including measures to protect personal data and regulation of fees, such as interchange or switching fees.
  • Dispute Resolution. The Financial Services Chapter applies the TPP's investment protection and arbitration provisions differently depending on the particular financial services commitment. Some commitments are subject to investor-state arbitration (known as "investor-state dispute settlement" or "ISDS"), which allows investors to directly challenge a TPP Party for taking actions that harm them. Other commitments are subject only to government-to-government dispute resolution. Notably, defenses and exemptions from dispute settlement are available for a TPP Party's imposition of prudential regulations and the management of credit and monetary policy.
  • Expedited Availability of Insurance Services. The TPP reflects the importance that signatories place on the expedited availability of insurance services. It recognizes that TPP Parties may promote this goal through various means, including by allowing introduction of products unless disapproved within a reasonable time, or not requiring authorization to provide an insurance line, with the exception of lines sold to individuals or compulsory insurance.

Chapter 11 of the TPP must be considered in light of the enhanced supervisory standards and increased focus that regulators have applied around the world since the financial crisis of 2008-2009. The TPP appears designed to protect the authority of regulators to impose a broad range of prudential standards in the name of financial integrity and stability. Financial providers in all TPP Parties must be aware of these standards when planning to enter new markets.

Government Procurement

Chapter 15 addresses government procurement. Eight of the eleven members of the TPP are already covered by other free trade agreements that address public procurement, but the TPP would help open new procurement markets in Vietnam, Malaysia, and Brunei on terms much like those previously agreed with other nations under the World Trade Organization's Government Procurement Agreement (GPA) and other bilateral and regional free trade agreements (FTAs). The TPP likewise would open the US$500 billion United States federal market to direct sales by contractors from Vietnam, Malaysia, and Brunei.

  • Although the TPP may stir controversy in other areas, its chapter on procurement is largely based on the text of the GPA and, for the most part, marks only an incremental step forward.
  • One notable exception, though, is TPP Article 15.18, which states that each Party to the agreement "shall ensure that criminal or administrative measures exist to address corruption" in government procurement. This provision builds on other anti-corruption provisions, discussed above, which will enhance integrity in procurement. This is an important step beyond the GPA, which broadly cites the need to fight corruption under the UN Convention Against Corruption (UNCAC) but does not explicitly require anti-corruption measures. Indeed, TPP Article 15.18 goes even further in suggesting that TPP Parties may institute measures to exclude corrupt and fraudulent contractors; while this matches the US federal practice of debarment under the Federal Acquisition Regulation (FAR), it arguably goes beyond the more limited language of Article 57 of the recent European procurement directive, 2014/24/EU, which appears to contemplate more ad hoc exclusion of corrupt contractors.
  • Most notably, with regard to coverage, the relevant US annex to the TPP, Annex 15-A, makes no provision for access to sub-central (i.e., state) markets under the TPP. This gap in the agreement – the exclusion of the states – was publicly anticipated in July 2014 by the USTR. Under Article 15.24 of the TPP, the Parties agreed to discuss sub-central coverage further, within three years of the agreement's entry into force.

Intellectual Property

Chapter 18's extensive intellectual property (IP) provisions address patents, trade secrets, trademarks, geographical indications, domain names, copyrights, and Internet service providers (ISPs), as well as other aspects of IP law. Certain of these TPP provisions create commitments among TPP Parties consistent with those provided under US IP law. Others would provide less extensive IP protection in TPP markets than offered in the US, and some provisions would expand the protection currently available in the United States. Where countries have to change their laws to provide enhanced protections, transition periods of various lengths apply, where needed, to come into compliance. The United States has not had to ask for any transition periods. Key IP provisions include:

Patents

  • Patentable Subject Matter (Article 18.37). The TPP's definition of "patentable subject matter" appears generally consistent with US law. Accordingly, US companies seeking patents in other TPP countries should find familiar requirements for patentability.
  • Grace Period for Prior Art (Article 18.38). The TPP shelters certain public disclosures from creating a bar to patentability, similar to what US law provides. This is a progressive measure that allows academics and others to publish their findings for the public benefit without precluding patentability.
  • Patent Term Adjustment Due to Patent Office Delays (Article 18.46). The TPP includes a requirement that a "Party shall provide the means to, and at the request of the patent owner shall, adjust the term of the patent" if there are "unreasonable delays" in the issuance of a patent by the Party. While U..S law provides for patent term adjustment in these circumstances, this provision offers important protections to companies applying for patents in other TPP countries.
  • Patent Term Adjustment Due to Unreasonable Curtailment for Marketing Approval of Pharmaceutical Products (Article 18.48). The TPP requires Parties to "make available an adjustment of the patent term to compensate the patent owner for unreasonable curtailment of the effective patent term as a result of the marketing approval process." This is an important corrective, given the problems with long delays in certain countries' domestic approval processes.

Trade Secrets (Article 18.78)

  • Article 18.78 adopts a generally accepted definition of trade secrets from Article 39.2 of the TRIPS Agreement, which also is consistent with the US Uniform Trade Secrets Act that is widely adopted by US states.
  • The TPP, in a first for a US trade agreement, requires the provision of limited criminal procedures and penalties for the unauthorized access to and misappropriation and fraudulent disclosure of trade secrets.

Geographical Indications (GIs)

  • GIs, protected widely in Europe, are designations used on products with a specific geographical origin that have characteristics attributable to that origin – for example, "Roquefort" for a kind of cheese from the Roquefort caves in France. This mark is also registered in the United States as a "certification mark," under US trademark law.
  • The TPP potentially contemplates broader protection for GIs than generally afforded under US trademark law, since Parties may use a variety of procedures to recognize GIs as protectable. In the US, GIs have generally received protection only if they are registrable as certification marks, collective marks, or geographic trademarks.
  • Whatever procedures the Parties use, the TPP requires them to include a means to challenge and cancel the GI protection.

Domain Names

  • The TPP protects trademark owners from unauthorized use of their trademarks in domain names. The TPP requires the Parties to adopt a specific domain name dispute resolution system for their own country code top-level domains (abbreviations for specific countries to the right of the "dot"). Some critics have expressed concern that this element of the TPP will prevent individual countries from adopting dispute resolution mechanisms tailored to their particular needs. However, the US system is consistent with TPP requirements.

Copyright

  • Performance Rights in Copyrights (Article 18.62, "Related Rights")
      • In addition to protections for fixed performances, this Article confers upon "performers" the exclusive right to authorize or prevent "broadcasting and communication to the public of their unfixed performances" (emphasis added).
    • This TPP provision may provide more certainty regarding this right for US performers because in the United States, copyrights in "unfixed" performances are only available under state laws.
  • Duration of Copyright (Article 18.63)
      • TPP provides the same copyright duration as US law for natural authors, i.e., "life plus 70 years." But for some TPP Parties, it increases the copyright protections beyond current domestic law. Accordingly, the TPP would expand the protection of US copyrighted works in those jurisdictions.
      • This change may be controversial, since it prolongs the period until copyrighted works are in the public domain, available to all to exploit freely.
  • ISP Safe Harbor Provisions (Articles 18.81-18.82)
      • This Article creates a "safe harbor" for ISPs that closely tracks the safe harbor provisions in US law. It attempts to provide reasonable protection from copyright liability to qualifying ISPs, while simultaneously assuring that copyright owners have recourse regarding infringing online content.
      • However, TPP countries may have the leeway to adopt safe harbor regimes that more strongly favor copyright owners than does the US system.
  • Technological Protection Measures (Article 18.68)
      • Copyright owners sometimes utilize software that acts as a digital "lock" to protect their works from unauthorized copying. Consistent with US law, this Article penalizes individuals who tamper with these digital locks, or help others to do so. Including this protection in the TPP will enhance the ability of copyright owners to protect their works across important markets.

Pharmaceuticals and Medical Devices

The TPP contains a variety of provisions relevant to the pharmaceutical and medical device industries. Key provisions include:

  • Tariff Commitments. The TPP provides tariff phase outs that will facilitate trade in medical devices and pharmaceuticals.
  • Chapter 8 on Technical Barriers to Trade seeks to ensure that TPP Parties' domestic standards do not create unnecessary barriers to trade. It also aims to enhance transparency and promote regulatory cooperation and good practices. While the provisions in the Chapter are consistent with current US standards, they set an important foundation for fair treatment within TPP country markets, even moving beyond the obligations in the WTO Agreement on Technical Barriers to Trade. Chapter 8 attaches separate annexes with detailed rules on pharmaceuticals and medical devices (as well as other products).
  • Chapter 8 Pharmaceuticals Annex
      • Each Party will define the scope of products included in the definition of "pharmaceutical products" and identify the agency or agencies that regulate those products.
      • The Parties are required to make pharmaceutical marketing authorization decisions on the basis of (a) pre-clinical and clinical data on safety and efficacy; (b) manufacturing quality; (c) labeling information; and (d) matters affecting the health or safety of the user. No sale or related financial data concerning the marketing of the product can be required. (Pricing data are subject to a softer commitment.)
      • Marketing authorization determinations will be made in a timely, reasonable, objective, transparent, and impartial manner, with Parties obliged to focus on developing procedures that both ensure quality and safety and minimize "substantial delays." To eliminate one key source of approval delays, no Party may require that a pharmaceutical product receive marketing authorization from the country of manufacture before the product receives authorization in that Party.
      • Each Party also has to inform applicants of marketing authorization decisions, include the rationale for the decision, and provide an appeal or review process.
      • When reviewing marketing authorization applications, each Party is required to accept application materials for review that are consistent with the principles in the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use Common Technical Document.
      • Each Party agrees to promote collaboration on pharmaceutical inspection within the territory of another Party.
  • Chapter 8 Medical Devices Annex
      • The medical devices annex contains identical or nearly identical provisions to those for pharmaceuticals regarding the basic due process required in the marketing authorization procedures, including as to timeliness, impartiality, a reasoned decision, and an appeal or review process for adverse decisions. It also reflects the Parties' obligation not to require approval in the country of manufacture as a pre-condition for marketing authorization elsewhere.
      • The Medical Devices Annex also requires the Parties to classify medical devices based on risk, and regulate accordingly.
      • The specific factors to be applied in decisions on marketing authorizations for medical devices are: 1) safety and efficacy; 2) performance, design, and manufacturing quality; 3) labeling information; and 4) any other factor that affects medical device user health or safety. No sale, pricing, or related financial data concerning the marketing of the product can be required. When a Party requires certain medical device labeling, that Party will allow post-importation and pre-sale relabeling.
  • Chapter 18, Intellectual Property, includes the Parties' commitments to foster the development of innovator and generic drug markets. The Chapter is intended to provide baseline data protection standards upon which pharmaceutical companies can rely.
      • Each Party shall make its best efforts to process applications for marketing approval in an efficient and timely manner, and – in order to avoid unreasonable delays – a Party may adopt or maintain procedures to expedite the marketing application approval process.
      • Parties shall also make available to applicants adjustments of the patent term to cover any unreasonable delay due to the marketing approval process.
      • If a Party requires submission of an undisclosed test or other data concerning safety or efficacy of a new drug as a condition for granting market approval for that new drug product, no third party may be granted permission to market the same or similar product on the basis of 1) the undisclosed test or other data; or 2) the market approval for that product, for at least five years from the date of marketing approval. Such prohibitions on the approval of generic medicines are also applicable for three years after marketing approval of a new indication for a previously approved pharmaceutical product.
      • If a Party does permit an application for marketing approval based on a previously approved marketing approval, the Party shall provide 1) a system to notify patent holders about that third party; 2) adequate time and opportunity for the original patent-holder to seek remedy; and 3) procedures to allow for the timely resolution of patent disputes.
      • With regard to protecting new biologics, a Party shall 1) provide effective market protection for at least eight years or 2) provide effective market protection for at least five years plus at least three years of market protection through other measures. Because international and domestic regulation of biologic products is in its formative state, the Parties will consult after ten years to review the period of exclusivity provided for biologics in the Agreement.
  • Chapter 26, Transparency and Anti-Corruption, requires Parties to ensure that their laws, regulations, and administrative rulings are publicly available and subject to notice and comment. A special annex establishes specific transparency and due process obligations regarding listing and reimbursement procedures for relevant national healthcare programs.
      • To the extent that a Party's national health care system includes procedures for listing new pharmaceutical products or medical devices for reimbursement purposes, or for setting the amount of such reimbursement, the Party is required to ensure timely updates to the listing; disclose methods used to assess reimbursement proposals; provide opportunity for public comment; provide sufficient information to allow comprehension of recommendations and determinations, which are to be publicly available; and make available an independent or internal review process.
      • These are best practices already fully reflected in US law and practice, and require no changes to any US healthcare program.
      • Although previous free trade agreements entered into by the US mandated independent review of government reimbursement decisions, the TPP only calls for either an independent review process or an internal review process. Additionally, despite industry requests, the TPP fails to impose a specific decision-making time frame for reimbursement determinations.
  • A number of related instruments in the TPP, pertaining specifically to Vietnam, Australia, Japan, and Peru, also address pharmaceutical issues.

Telecommunications

Chapter 13 of the TPP covers telecommunications and includes a number of measures intended to help ensure competitive telecommunications services across the TPP regions. For the first time in a free trade agreement, the TPP extends network access rules to commercial mobile services. It is in the discretion of each Party whether to meet its obligations in the Chapter by direct regulation, reliance on market forces, or other appropriate means.

Among other provisions, highlights in the Chapter include the following:

  • Access to and Use of Public Telecommunications Services by Enterprises. Each Party shall ensure that any enterprise of another Party (a) has access to and use of any public telecommunications service on reasonable and non-discriminatory terms and conditions; and (b) may use such services for the movement of information in its territory or across its borders, and for access to information contained in databases or otherwise stored in machine-readable form.
  • Obligations Relating to Suppliers of Public Telecommunications Services. Each Party shall ensure that suppliers of public telecommunications services in its territory provide interconnection, and shall grant its telecommunications regulatory body authority to require interconnection at reasonable rates. A Party must also ensure that suppliers within its territory provide timely number portability without impairment on reasonable and nondiscriminatory terms and conditions, and that suppliers of another Party are afforded access to telephone numbers on a nondiscriminatory basis.
  • International Mobile Roaming. Parties are to cooperate on promoting transparent and reasonable rates for international mobile roaming services. A Party may choose to take steps to enhance technological alternatives to roaming services by minimizing impediments to the use of such alternatives (e.g., preventing operators from blocking voice over the Internet services or disabling Wi-Fi services). If a Party chooses to regulate rates or conditions for wholesale international mobile roaming services, it shall ensure that a supplier of public telecommunications services of a second Party has access to those rates or conditions, provided that the second Party has entered into a reciprocal arrangement with the first Party or, in the absence of such an arrangement, the second Party on its own makes available to suppliers of the first Party reasonably comparable rates or conditions and meets any additional requirements that the first Party imposes.
  • Treatment by Major Suppliers of Public Telecommunications Services. Each Party shall ensure that a major supplier in its territory accords suppliers of another Party treatment no less favorable than that major supplier accords "in like circumstances" to its affiliates or non-affiliated service suppliers.
  • Competitive Safeguards, Independent Regulatory Bodies, and Government Ownership. Each Party shall (a) take measures to prevent suppliers of public telecommunications services that, alone or together, are a major supplier from engaging in or continuing anti-competitive practices; (b) ensure that its telecommunications regulatory body is separate from any supplier of public telecommunications services; (c) ensure that the decisions and procedures of its regulatory body are impartial with respect to all market participants; and (d) not accord more favorable treatment to a supplier in its territory on the basis that the supplier is owned by the national government of the Party.
  • Resale. A Party shall not prohibit the resale of a public telecommunications service, and shall ensure that a major supplier in its territory offers for resale public telecommunications services at reasonable rates and on reasonable, non-discriminatory conditions.
  • Unbundling of Network Elements by Major Suppliers. Each Party shall provide its appropriate regulatory body with the authority to require a major supplier to offer access to network elements on an unbundled basis on terms, conditions and rates that are reasonable, nondiscriminatory and transparent.
  • Interconnection, Leased Circuits, Co-Location, and Access to Poles, Ducts, Conduits, and Rights of Way. Each Party shall ensure that a major supplier in its territory provides (a) interconnection, (b) leased circuit services, (c) physical co-location or an alternative solution if physical co-location is not practical, and (d) access to poles, ducts, conduits, and rights-of-way or any other structures, as determined by the Party. Such services shall be provided on non-discriminatory terms, conditions, and rates.
  • International Submarine Cable Systems. Each Party shall ensure that a major supplier who controls international submarine cable landing stations in the Party's territory provides access to those landing stations.
  • Allocation and Use of Scarce Resources. Each Party shall administer its procedures for the allocation and use of scarce telecommunications resources, including frequencies, numbers, and rights-of-way, in a non-discriminatory manner.
  • Flexibility in the Choice of Technology. A Party shall not prevent suppliers of public telecommunications services from choosing their technologies, subject to requirements "necessary to satisfy legitimate public policy interests."
  • US Rural Telephone Suppliers. The United States may exempt rural local exchange carriers and rural telephone companies from the number portability, resale, unbundling of network elements, interconnection, and co-location obligations.

Investor-State Dispute Settlement (ISDS)

Chapter 9 of the TPP contains provisions permitting investors of one TPP Party to pursue international arbitration against another TPP Party for violations of certain enumerated commitments. Chapter 9 essentially follows the text of the 2012 US Model Bilateral Investment Treaty (US Model BIT), with certain notable exceptions.

  • Like the US Model BIT, the TPP's investment protections require the host country to accord investors and investments from another TPP Party treatment no less favorable than it accords its own investors (national treatment) or investors of any other country (Most-Favoured-Nation or MFN treatment) with respect to investments in the host country, subject to exceptions for government procurement and subsidies.
  • The host country also must abide by the customary international law minimum standard of treatment, which includes according covered investments fair and equitable treatment and full protection and security. It should be noted that the definition of fair and equitable treatment in the TPP differs from, and may be interpreted as more limiting than, that provided in the US Model BIT and the investment chapters of other trade agreements, such as NAFTA, CAFTA, and the Canada-European Union Comprehensive Economic and Trade Agreement (CETA).
  • Chapter 9 provides that TPP Parties may not expropriate a covered investment except for a public purpose, in a non-discriminatory manner, and upon payment of prompt, adequate, and effective compensation.
  • Chapter 9 makes clear that it is not intended to prevent a TPP Party from adopting or enforcing measures appropriate to regulate environmental, health, or other regulatory objectives.
  • Like the US Model BIT, Chapter 9 of the TPP provides that the arbitration process begins with a request for consultation, followed by the filing of a notice of intent to submit a claim, and then a claim. The TPP provides a longer limitations period than the US Model BIT; claims must be submitted within three and one-half years after knowledge of the violation and loss.
  • Unlike the US Model BIT and other investment agreements, Chapter 9 provides that respondent states can lodge counterclaims against claimants in investment dispute proceedings.
  • At present, it is not clear whether the arbitration rights conferred by the TPP supersede or supplement arbitration rights conferred by existing trade agreements between TPP Parties, such as NAFTA.
  • Chapter 29 (Exceptions and General Provisions) provides TPP Parties with the ability to force the dismissal of Chapter 9 investment claims that challenge tobacco control measures.

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