Deal breakers and the TPP

Published: Oct 19 , 2015
Author: Hunter Shannonhouse

The Trans-Pacific Partnership has been agreed upon after eight years of negotiations. Australian Trade Minister Andrew Robb and his people must have been on their game. Their preparation must have been clear, at least on some of the variables, to bring about such a favourable outcome for Australia and in particular the pharmaceutical industry.

Mike Froman, the US Trade Representative is a formidable negotiator who has admirable credentials and speaks with authority. Froman was told by powerful people in U.S. business and politics that he should, one way or another, force Australia to agree with the U.S. demands on the pharmaceutical patenting period of 12 years. But his authority, compelling manner and persuasion were not enough. Why?

Andrew Robb was prepared to “kill the deal” if the Americans didn’t back down on this issue and agree to a 5-8 year patent period. He knew without question how far he was willing to go.  So Robb was able to present a firm position on this issue, with the very important, and confidence-building, backing of his key stakeholders.  In addition, Robb and his team understood the need behind the U.S. proposal and some of the other variables at play. That gave him the option of playing a more sophisticated game than just “yes or no”.

Both Robb and Forman had to contend with significant domestic political pressures in negotiating this deal. Robb had to be seen as not backing down and had the pressure of knowing that the Senate would not allow a deal which impacted the Pharmaceutical Benefits Scheme. Froman had a number of domestic pressures, notably the end of Obama's term and the upcoming presidential elections which put time pressure on the U.S. delegation.  Judging the relative power and pressures is essential, but if you lack clarity or conviction on your “deal breakers" you will feel even more pressure. Being able to gauge the pressure on the other party allows you to make informed proposals.

Robb traded on other variables, no doubt mixed with a bit of persuasion, to protect the Australia’s position on pharmaceuticals and secured a deal which has the support of the prime minister and, at least for now, the opposition leader – this is no small feat.

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Hunter Shannonhouse



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Hunter Shannonhouse
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