The Suspension of IP Provisions in the TPP Negotiations and NAFTA: What’s the Connection?

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The image above poses the classic riddle; is the glass half full (i.e. positive and moving toward fulfilment) or the opposite, half empty. It depends on how you interpret recent developments affecting the possible outcome of the Trans-Pacific Partnership (TPP) trade negotiations that occurred in Danang, Vietnam, where the TPP leaders met. At Canada’s instigation, a planned statement on an “agreement in principle” was modified to an “agreement on core elements” with more work to be done on a number of issues, with some others set aside for now. The “new TPP” is composed of 11 countries (Canada, Australia, Mexico, New Zealand, Peru, Singapore, Chile, Malaysia, Brunei and Vietnam), down from the original 12 since the US pulled out, and is now apparently to be known as the Comprehensive and Progressive Trans-Pacific Partnership, the CPTPP. (Probably both supporters and skeptics can agree that this new moniker is a mouthful.)

Canadian copyright skeptic Michael Geist, cheered on by like-minded commentators in the US such as Mike Masnick of TechDirt has written gleefully about what happened in Danang, claiming that Canada is “rethinking IP in the TPP” by suspending “unbalanced” patent and copyright rules. Among the suspended elements were several provisions of Chapter 18, the intellectual property (IP) chapter of the Agreement.

The media were fixated on the fact that Prime Minister Trudeau did not attend the planned meeting to announce the agreement in principle, after having being tied up in prolonged discussions with Japanese Prime Minister Abe, one of the drivers of the modified TPP agreement. Canada still had some unresolved issues it wanted addressed—for both optical and substantive reasons– before it was prepared to join the consensus. It is not unusual for individual negotiating members to have specific “sensitive” areas that need to be addressed, but it seems Canada did not do a very good job of alerting the other countries, who seemed blindsided. It was, as I put it in a commentary piece, Canada’s “Danang Moment”.

There were several issues on Canada’s short list including concerns about auto rules of origin, protecting the ability of TPP signatories to support “culture”, intellectual property commitments and the desire for inclusion of so-called “progressive” elements in the agreement. These include labour and environmental commitments that Vietnam and Malaysia reportedly wanted to roll back. Before the Leaders left Vietnam, and before the moment of opportunity had passed, they released a statement indicating they had reached an agreement on core elements and had agreed to work toward completion of the negotiations while addressing several issues still in contention.

With regard to the decision to suspend some provisions of the IP chapter, Prof. Geist was quick to claim victory and proclaim that “no deal is better than a bad deal”. Clearly for him the glass is half empty, a flawed agreement from which some elements have been removed. Geist reproduces some well-worn arguments; Canada “caved” to US pressure in the original negotiations, and the agreed terms on such issues as copyright term extension, digital rights management and anti-circumvention of technical protection measures, as well as patent issues like term restoration for unreasonable delay, represent sell-outs to the US that are against Canada’s economic interests. This is far from the case, as was pointed out by lawyer Richard Owens in an article in the Financial Post.

Term extension is a particular bugbear of Prof. Geist. Each time he talks about the issue he insists on trotting out the old canard that term extension will result in a cost to the Canadian economy of tens if not hundreds of millions of dollars. There is zero evidence for this, but Geist always cites a discredited study done in 2009 for the New Zealand government that estimated the cost to the New Zealand economy of extending the term of copyright protection in that country by 20 years at $55 million NZD annually. Since he cites this source repeatedly, I have no choice but to be equally repetitive and make the point that this study is badly flawed in terms of methodology. As I pointed out in an earlier blog, the respected economist Dr. George Barker from ANU reviewed the New Zealand study and concluded that the model used was “fundamentally flawed” and had overestimated the import transfer cost by 230 times. He speculated that possibly a decimal point had been misplaced. When benefits for artists were added to the model, the result could well be a net benefit to New Zealand of up to $150 million per year rather than a net loss of $55 million. In any event, whatever the impact is on New Zealand, it is not relevant to Canada as each situation is different. However despite being fully aware of the shortcomings of the New Zealand study, I fully expect that Dr. Geist will continue to drag it out on every possible occasion.

Apart from term extension, there were several other copyright provisions that were suspended. (All suspensions, by the way, whether in the area of intellectual property or in other areas such as investment, express delivery, trade in endangered species etc. are subject to the negotiating parties reaching consensus on several other issues, including state owned enterprises, an issue raised by Malaysia, dispute settlement, raised by Vietnam, coal, a concern of Brunei and Canada’s “cultural exception”. Clearly there is some heavy horse-trading going on). The suspended articles cover, in addition to commitments to extend the term of copyright protection by twenty years (where countries have not already done so), criminalization of the circumvention of technological protection measures and rights management information if done wilfully and for the purposes of commercial gain, civil and criminal penalties for pirating encrypted cable and satellite signals and the article dealing with legal remedies and safe harbours for ISPs.

It is not clear whether all the IP suspensions were proposed by Canada. The pirating of cable and satellite signals, for example, has been a problem in Canada with Canadian pay-TV platforms bringing lawsuits against distributors of Kodi “add-on” boxes. It is likely that this article was suspended at the instigation of a country like Vietnam, where pirating of broadcast signals for redistribution within the country is a longstanding problem. While Canadian negotiators may feel that suspending this particular article will have no direct impact on Canada because Canadian law already deals with the issue, this is a short-sighted view because pirating of content inevitably affects television productions filmed in North America. A good number of these, although considered US content, are filmed in Canada and when the distribution of North American production is compromised through cable and satellite piracy in Asia, this affects jobs in the creative sector in Canada.

But what about the other suspended IP articles? While there is no question that the commitments made by Canada in the original TPP were on the list of objectives sought by the US, they were also good for Canadian creators and innovators and would have helped the Canadian economy. Thus, they were an easy “concession” to give. In trade negotiations it is very common for needed domestic economic reforms to be blamed on demands made by trading partners as part of the negotiating process. This helps the affected economy to overcome the influence of narrow but powerful lobby groups by arguing that the “concession” was required as part of a larger deal to gain wider market access of benefit to the economy at large. For example, if Canada ever dismantles its dairy supply management system, as it should for the greater good, it will be sold as a necessary trade-off in order to secure broad access in other sectors. The government simply does not have the political will to enact the needed domestic reforms without external pressure. In my view, the same principle applies to many of the IP reforms brought in through the original TPP negotiations.

You might well ask why, if these IP reforms are positive for Canada’s economy, they were provisionally pulled off the table—(i.e. “suspended”, not ditched)—in the revised TPP? The answer comes down to one acronym—NAFTA.

The outcome of the NAFTA renegotiation, demanded by the Trump Administration, is unknown at this point. The US has made some hard-line demands (five year sunset clause, elimination or neutering of the dispute settlement mechanism, closing the US procurement market, impossibly high rules of origin for the auto industry) that many observers have concluded are deliberate “poison pills” that neither Canada nor Mexico can accept. As a consequence NAFTA could collapse—or, it could be salvaged at the last moment. If it is to be salvaged it will be because the Trump Administration thinks it has secured enough “wins” to be able to proclaim victory. Amongst these “wins” could well be items in the NAFTA IP chapter that reflect commitments made by Canada and Mexico in the original TPP. (The updated US NAFTA negotiating objectives recently released by USTR encompass all of the suspended TPP IP issues). Therefore, it makes no sense for Canada unilaterally to give away its negotiating coinage in the TPP at a time when the NAFTA negotiations are entering their end game.

US Commerce Secretary Wilbur Ross is reported to have said, “A card laid is a card played”. Canada has just picked up the IP cards and put them back into its hand, and is holding that hand close to its vest. Does this mean that the IP provisions, including those in the copyright area that were part of the original TPP, were bad outcomes for Canada? No, or Canada would not have agreed to them, despite all Prof. Geist’s talk about Canada “caving” to US pressure. The IP chapter was not the kind of “deal-breaker” in the TPP that some of the current US demands in the NAFTA negotiations surely are. At the end of the day, Canada could grant those “concessions” knowing full well that they will benefit rather than harm the Canadian economy, and while the IP commitments in the TPP are currently “on the shelf” (suspended) they could be brought back into play through a revised NAFTA. This would doubly benefit Canada by helping to save NAFTA while bringing about improvements in Canada’s IP regime.

Needless to say, I see the TPP glass as half-full or a bit more. Canada’s “Danang moment” allowed the Trudeau government to put its own stamp on the TPP, an agreement that it had inherited from the previous Conservative government. The government also wisely kept its NAFTA powder dry by ensuring that any commitments made in the TPP, whether on rules of origin or intellectual property or market access, do not undermine the ongoing NAFTA negotiations. They also bought time by pushing the TPP train down the road at least 6 months without derailing it, thus providing enough time for NAFTA negotiations to be completed, or terminated.

Assessing whether NAFTA will survive is beyond the scope of this blog, but suffice to say that Canada is banking on the fact that significant elements of the US economy will be negatively affected by a sudden termination of NAFTA, and that these interests will eventually succeed in convincing the Trump Administration not to shoot itself in the foot (as it did with TPP withdrawal). This approach assumes that reason and facts will prevail over emotion and raw politics—a risky gamble these days—but one where Canada has no choice. In the meantime the suspended IP provisions in the revised TPP–measures that if implemented would be of significant benefit to Canadian creativity and innovation–will provide collateral that can be used to sweeten the pot if the US looks like it is finally going to get to “yes” on NAFTA. That is less about rethinking IP in the TPP and more about joining all the dots and using smart negotiating tactics to get the best deal possible in NAFTA.

© Hugh Stephens, 2017. All Rights Reserved.

 

One thought on “The Suspension of IP Provisions in the TPP Negotiations and NAFTA: What’s the Connection?”

  1. Quite a technical but interesting discussion. I believe Japan was accidentally left off your list of the eleven countries currently negotiating the CPTPP. Japan was one of the original 12 and Trudeau was discussing trade issues with Prime Minister Abe at the time of the missed meeting.

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