U.S. dairy fears holding up TPP deal, source says Presented by Semiconductor Industry Association

With help from Doug Palmer, Adam Behsudi and Jennifer Shutt

U.S. DAIRY FEARS HOLDING UP TPP DEAL, SOURCES SAY: A fear by U.S. dairy producers of competition from New Zealand is proving to be among the final challenges to wrapping up the Trans-Pacific Partnership talks, Pro Trade’s Doug Palmer reports from Atlanta.


After four days of negotiations there, trade ministers are scheduled to arrive today to try to resolve the toughest issues. Several snags remain, including the U.S. dairy industry demand that any reductions in U.S. trade barriers be offset with a nearly equal opportunity to sell U.S. cheese, butter, powder and other dairy products to other countries in the proposed 12-nation pact.

“The United States is the blocker at the moment because they're not making a decent offer,” Robert Pettit, a trade specialist at Dairy Australia, told POLITICO. Because the United States is holding back, so are Canada and Japan, he said.

A government-appointed New Zealand industry representative spread the blame more broadly among all the participants in the dairy talks. “In my view, the level of ambition right across the talks on dairy is not high enough,” said Mike Petersen, New Zealand's special agricultural trade envoy. Petersen reports that New Zealand Trade Minister Tim Groser, who is in New York for United Nation meetings, is mulling whether it's worth his time to fly to Atlanta. Pros can read more about the TPP dairy standoff here: http://politico.pro/1MG2QBW.

IT’S WEDNESDAY, SEPT. 30! Welcome to Morning Trade, where we’re thinking this past month has felt more like a year. What should we be watching out for in October? Let me know, at [email protected] or @vtg2 .

PROGRESS IN AUTO RULES TALKS: Mexican Economy Minister Ildefonso Guajardo told POLITICO in Atlanta Tuesday evening that there had been progress in talks on automotive rules-of-origin since the last ministerial two months ago in Maui, where Mexico and Canada were unpleasantly surprised by the terms of a deal worked out by Japan and the United States.

“Yes, there's been some progress,” Guajardo said, echoing remarks from Japan's TPP minister Akira Amari to reporters on Tuesday. “Right now, we're going to find whether's [there is] enough progress,”” he said just before a meeting with Mexican negotiators.

HATCH TO USTR: DON’T BE IN A HURRY: The difficult slate of issues still left to resolve in areas like autos and intellectual property protections for biologics prompted speculation the TPP talks could be extended until Friday, despite USTR's current plans to wrap up on Thursday with a closing press conference. But Senate Finance Committee Chairman Orrin Hatch, in a floor statement Tuesday, said the United States shouldn’t be in a hurry to close the negotiations “if it means getting a less-than-optimal result for our country.”

“If the administration and our negotiating partners do conclude an agreement this week, they can be sure that I will examine it very carefully to ensure it meets these standards,” Hatch said, referring to market access, intellectual property and other priorities laid out in the trade promotion authority law passed by Congress this summer. “And, as I have stated many times before, if the agreement falls short, I will not support it. And, I don’t think I’ll be alone on that.” Click here to read the full speech: http://1.usa.gov/1GfmzDG .

NCBA HAS NO BEEF WITH TPP: But U.S. cattle producers are preparing for a TPP victory and expect to make a concerted push for the pact on the Hill if it’s completed this week, an industry official told Morning Trade on Tuesday in Atlanta.

“We have a 38.5 percent tariff in Japan right now,” Kent Bacus, associate director of legislative affairs at the National Cattlemen's Beef Association. “With TPP, whatever that final deal is, it will be better than what we have now.”

He could not confirm a Japanese news report that Japan would cut its beef duty to 27.5 percent upon entry of the agreement then reduce it to 15 percent after 10 years and 9 percent after 15 years. It's important to get an agreement, Bacus said, because Australia already has wrapped up a free trade deal with Japan, putting U.S. beef exporters at a disadvantage to a major competitor. The industry still hopes tariffs will get as close to zero as possible under the pact, he said.

TECH COMPANIES ALSO OPTIMISTIC: Meanwhile, TPP language on data flow and server localization rules are likely to pass muster with U.S. tech companies.

“I'm a cleared adviser, so I need to be a little bit circumspect,” said Jennifer Sanford, Cisco’s senior manager of international trade and energy policy, at a data center event hosted by the Telecommunications Industry Association, in Washington. “But the e-commerce chapter, the telecom chapter, they look good. They're solid.”

Sanford added, however, that she couldn’t guarantee these chapters would read the same way when the deal is done.

U.S. companies have pressed for a final deal to include binding, enforceable rules requiring governments to open their borders to the unfettered flow of data. Companies are also pushing for rules that would prohibit a government from forcing local storage of data as a condition for doing business there.

BIDEN, ABE POWWOW IN NEW YORK: Vice President Joe Biden and Japanese Prime Minister Shinzo Abe met Tuesday afternoon in Tuesday, where they covered multiple topics including TPP. They “agreed that their negotiating teams would work closely together — and with other partners — with the goal of resolving the limited number of outstanding issues at the upcoming Ministers meeting in Atlanta,” according to a White House press release. U.S. Trade Representative Michael Froman also attended the meeting.

WATCHDOG GROUPS BLAST TRANSPARENCY OFFICER CHOICE: Fifteen open government groups today are raising alarm to Froman about the potential conflict of interest posed now that General Counsel Tim Reif has also been named the USTR’s transparency officer.

“Our concern does not arise from the appointment of General Counsel Tim Reif personally. He is a well-respected public servant,” the letter says. “Rather, there is an inherent structural conflict of interest between the role of general counsel, whose role is to defend the agency’s existing practices, and the role of the new U.S. Trade Representative transparency officer, a position that Congress established in the Fast Track legislation to alter and improve what many in Congress consider an unacceptable lack of transparency by this administration with respect to trade policy in general and the TPP specifically.”

Among the groups to sign the letter: the Electronic Frontier Foundation, OpenTheGovernment.org, Public Citizen, the Sunlight Foundation and the Society of Professional Journalists. The letter is also signed by five individuals. Click here to read it: http://politico.pro/1M05u2u .

EU AMBASSADOR HOPES FOR TPP CONCLUSION: EU Ambassador to the U.S. David O'Sullivan said Tuesday that despite the U.S. presidential elections and “other political things going on” next year, O’Sullivan believes Brussels and Washington could complete their bilateral trade deal in 2016.

“Is it possible to do that next year? Yes. Is it possible we might miss that target? Yes, it’s possible, because a negotiation isn’t done until it’s done,” he said at an event hosted by Johns Hopkins School of Advanced International Studies. “But that is the common objective, and ... I’m absolutely confident we are on a timeline that makes that feasible.”

As for the shape of a final deal, O'Sullivan held open the possibility that breakthroughs might not be reached in every regulatory sector under negotiation, but said discussions could continue in those areas after a deal is signed. “Maybe we haven’t got there in every sector in a way we would like, but we can still close the deal and announce what we’ve been able to agree and have a built-in agenda for the rest,” he said.

SAFE HARBOR 2.0 ‘CLOSE’ AS ECJ RULING LOOMS: Meanwhile, the United States and European Union are “very close” to concluding negotiations for revamping an agreement that governs data transfers from Europe to participating companies in the states.

“We feel we’re close and we expect and hope for the consultations to conclude very soon,” Michael Rose, a policy adviser at Commerce’s International Trade Administration, said at a Tuesday event hosted by the Telecommunications Industry Association.

The EU demanded that the “safe harbor” agreement, which allows the storage of EU citizens’ data in the U.S., be strengthened after news of U.S. spying broke in 2013. The Europeans made 13 recommendations, which would create some new requirements for U.S. companies.

The safe harbor deal has come under greater scrutiny in recent days with the anticipation of a European Court of Justice ruling early next week that could kill the agreement. The court’s ruling is expected to be influenced by an opinion by Yves Bot, an advocate general to the court, who stated that European nations should have the right to suspend the agreement despite it being negotiated on the EU level. The U.S. this week blasted that opinion in a statement: http://1.usa.gov/1PMeKL7 .

GOP ENERGY LEADERS AIM TO BOOST LNG EXPORTS: Republican leaders on the House Energy and Commerce Committee have added language to a larger energy bill that would set a 30-day deadline for the Obama administration to rule on natural gas export proposals, one of several high-profile additions ahead of a markup that began Tuesday afternoon. The manager's amendment to the committee's bill, for which Republicans have long hoped to win bipartisan support, gives the Energy Department a narrower window to rule on plans for export of liquefied natural gas than the bipartisan Senate energy bill.

New Jersey Rep. Frank Pallone, the committee’s top Democrat, responded to Republicans' changes by declaring his opposition to the bill, calling it “the unfortunate result of what could have been a bipartisan process.”

INTERNATIONAL OVERNIGHT

The U.S. and India don’t see eye to eye on trade, but their relationship is complicated by China, according to Foreign Policy: http://atfp.co/1GfOROw .

Hundreds of dairy farmers with tractors and milk cows stood in front of Canada’s parliament Tuesday to protest TPP, The Globe and Mail reports: http://bit.ly/1O6PGBg .

THAT'S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: [email protected] and @ABehsudi ; [email protected] and @vtg2 ; [email protected] and @tradereporter ; [email protected] and @mjkorade ; and [email protected] and @JsonHuffman . You can also follow @POLITICOPro .

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DEBRIEF INTERVIEW: DOING BUSINESS WITH IRAN. If Iran meets its nuclear goals, sanctions will start lifting and the Middle East's largest economy will rejoin the world. Global corporations are already champing at the bit to get involved. But how does the U.S. navigate relations with a nation that still sponsors terrorism? Darren Samuelsohn sits down with Chris Backemeyer, head of the sanctions policy office at the State Department, to walk through what comes next. His crucial message for American business: Don’t hold your breath. Find out more on this week’s Debrief video from The Agenda: http://www.politico.com/agenda-video/?ml=na#

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