The Trans-Pacific Partnership: A Breakthrough In Trade Relationships

Friday, January 24, 2014 - 10:24

The Editor interviews Stephen S. Kho, who practices in the international trade policy and international dispute resolution arena, and Brian Pomper, who practices in the area of public policy, particularly as it affects international trade and intellectual property. Both are partners at Akin Gump Strauss Hauer & Feld in its Washington, DC office.

Editor:  Stephen and Brian, please summarize your backgrounds in terms of international trade policy, both in terms of your former duties in government and now with Akin Gump. In what areas of trade policy do you concentrate your practices?

Kho: Prior to joining Akin Gump, I spent about 10 years at the U.S. Trade Representative's office, first in the general counsel’s office, covering issues from classic trade import-export matters to intellectual property. I was stationed in Geneva for three years as the legal advisor to the U.S. Mission to the World Trade Organization, where I managed the dispute settlement portfolio for the U.S. Returning to the U.S., my last job was that of acting chief counsel for China enforcement in the general counsel’s office representing the USTR in initiating and litigating cases on behalf of the United States against China at the World Trade Organization. Since coming to Akin in 2007, my work has involved representing private sector and government clients on trade policy issues, including negotiations, bilateral and multilateral disputes at the WTO, investor’s state issues, and market access issues across the board, from trade in goods and services to intellectual property.

Editor: Brian, would you share your background with us?

Pomper: I worked for four years for the Senate Finance Committee under then-Ranking Member and now-Chairman Max Baucus, ending my time there as a chief international trade counsel. In that role I was responsible for advising Chairman Baucus and the other members of the Committee on all aspects of the Committee’s international trade and economic agenda.

Today, I work as a lobbyist in Akin Gump’s public law and policy group. Much of my work deals with international trade or intellectual property, and often both. My practice, unlike Steve’s, tends to be focused on political strategy in Congress and with the administration.

Editor: Which nations were original signatories to the Trans-Pacific Partnership’s predecessor, the Trans-Pacific Strategic Economic Partnership Agreement (TPSEPA)? What additional nations are expected to be signatories to the Trans-Pacific Partnership? Are additional nations expected to join at a later date since the treaty has an accession clause?

Pomper: The original nations were New Zealand, Brunei, Singapore and Chile.

There are eight additional nations expected to be signatories based on the current negotiations of the TPP. Other nations may join the agreement once it is concluded. South Korea is probably the farthest along in meeting with the current negotiators in expressing interest. Others that may wish to join at later dates are Taiwan, The Philippines, Thailand and even China. There is no intent to exclude any countries as long as they can meet the high standards of the agreement.

Kho: TPP originally had been envisioned to be a precursor to a broad APEC FTA of which China and other Southeast Asian countries were a part. There are competing precursor APEC FTAs out there, one of which is the Regional Comprehensive Economic Partnership (RCEP), which consists of many of the TPP countries including China but not the United States.  

Editor: What are some of the areas of trade the agreement encompasses?

Kho: There are about 30 chapters currently under discussion in the TPP. There are some cross-cutting issues such as state-owned enterprises; regulatory coherence; small and medium-size enterprises; e-commerce; competitiveness and supply chain issues; some market access issues dealing with agriculture products, such as dairy and sugar; textiles issues, including footwear and apparel; services issues covering general services, but also including financial services, telecommunications and express delivery services; a government procurement chapter; a sanitary and phytosanitary (SPS) chapter; a non-tariff barrier chapter called Technical Barriers to Trade (TBT); a large intellectual property rights chapter, which covers everything from patents to pricing to biologics to Internet and copyright issues, trade secrets and geographical indications; an investment chapter; a rules of origins chapter; and labor and environment chapters.

Some of the following issues are unique to this TPP: state-owned enterprises, regulatory coherence, supply-chain issues, small and medium-size enterprises, biologics, along with new rules regarding e-commerce. There are also temporary entry issues related to the movement of people who provide services.

Editor: I understand the intellectual property issue is one that is provoking some controversy.

Kho: It is often controversial. In intellectual property matters, the United States is often the party seeking rules that will better protect intellectual property rights, since the United States has a general comparative advantage in intellectual property. Some of these issues include data exclusivity, patent term extension, patent linkages and, as we’ve mentioned, Internet service providers – how to deal with them in terms of potential copyright violations.  

Editor: Are there other areas besides IP?

Pomper: Textiles remain pretty controversial.  Vietnam, in particular, which is a major country in terms of population and an important component of the TPP negotiations, has a primary interest in increased textile apparel market activity in the United States.  Agriculture is a very controversial issue: in particular, Australia’s desire to have increased access to the U.S. sugar market and New Zealand’s desire to have increased access to the U.S. dairy market. Equally controversial is the U.S.’s desire to increase its market access to Japan’s agricultural market, which historically has been closed, along with market access with respect to automobiles and automobile parts in Japan.

Editor: Describe the consternation in the U.S. Congress that it has not been given access to the documents under negotiation. How does this play into the resistance being expressed in some quarters to “fast track” approval? Is the treaty likely to be approved without a fast track approval?

Pomper: As in the overall negotiations, the argument that the Congress has somehow been shut out of this negotiation is very much overblown. If you speak to USTR officials, they will say that any member of Congress is welcome to look at the negotiating texts.  They will also say that they have had far more consultations on the TPP Agreement than on any other trade agreement in history. If you look at the recently introduced Trade Promotion Authority bill (TPA), it contains mechanisms to formalize these consultations and respond to some of the criticisms. Without a doubt, there could be improvements made in how USTR consults with Congress, but I believe the arguments about transparency and lack of consultation are made more for political purposes. The question of whether TPA will get quick approval is unknown since it was recently introduced and the Senate Finance Committee has just held its first hearing. The last time a TPA bill passed, in 2002, it took about a year from its introduction to congressional passage. The administration would like to have TPA in place as soon as possible so that it can close out the TPP negotiation. Because of the change in leadership of the committee, with Chairman Baucus on track to be the next U.S. ambassador to China, along with the political difficulties that remain to be tackled, I suspect the bill will take some time to complete.

Editor: The TPP is expected to include an international investment agreement whereby an investor has the right to initiate disputes against a sovereign state. What is the fear that this provision might force countries to lower standards in terms of environmental protection or be open to suits for damages?

Kho: My view is that these detractors are misstating the case, perhaps because they do not understand what this chapter is intended to cover. The investment chapter first and foremost is dealing with situations where a government expropriates an established investment, and it provides obligations for ensuring just and equitable compensation under due process rules. The rules generally require that due process that is afforded under domestic law in the country in which the investment takes place is made available for all investors, including foreign investors. When viewed that way, the investment chapter serves to encourage foreign investment overseas, which every country needs. Ironically, the countries that complain about the investment chapter are often the ones actively seeking foreign investments in their country! Frankly, it is up to a government to sign onto the investment chapter or not.

Pomper: These investment provisions give companies assurance that they will be accorded fair and equitable treatment in any country, in accordance with the rule of law, when they invest in overseas markets. One argument made by detractors is that by giving comfort to U.S. companies in setting up factories overseas, it accelerates the movement of jobs overseas. I think many would disagree with that argument, but, nevertheless, it is a talking point for those who criticize this provision.

Editor: What is required for the TPP Agreement to become law in the U.S.?

Pomper: It is an executive agreement, so the executive branch can sign the agreement without any congressional input whatsoever if it so desires, but it is not self-implementing. What Congress actually considers is domestic legislation implementing the commitments that the President has made in the executive agreement. It is subject to the same consideration by both the House and the Senate – a majority vote. To be accurate, Congress does not vote on trade agreements per se, but on legislation to implement trade agreements.

Editor: What are the benefits that will accrue to the participating nations once they have signed the treaty?

Kho: The benefits of any free trade agreement are market access in terms of goods and services, but also the development of new disciplines in light of how trade has evolved in the 21st century. New agreements involve putting out new rules that governments have agreed to follow to encourage more trade, more trading cooperation and the lowering of barriers to these trades. In the modern era, we are dealing with non-tariff barriers, such as formalized standards, consumer protection issues, health and safety issues or environmental protection restrictions. While all the restrictions are generally legitimate, the new rules would seek to establish that these restrictions are not intended to discriminate against foreigners and their products or services. I think that’s the benefit of joining these agreements.

Pomper: Yes. The benefits lie in the commitments of trading parties since we have very open markets in the U.S., and we already have a very strong commitment to the rule of law. When our trading partners commit to these free trade agreements, they, too, are committing to the rule of law as they open their markets to U.S. products.

Editor: Do you expect the agreement to be approved by all participants?

Pomper: While there are rumors that various countries are dissatisfied and may bail out, I suspect that, at the end of the day, you will find that all the negotiators are on board since their intent has been to engage in this undertaking. We’re still in negotiation, so you can expect to see various arguments, but I believe compromises will be reached.

Kho: I think some compromise will be reached on all the difficult issues. Every country has its own non-negotiable positions, but every country also has flexibilities that it has yet to show, so I think that, as we get near the end of deliberations, the countries are all going to find a way to find compromises that all can live with. There seems to be political will to get this done!


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