ATLANTA, Oct 4 (Reuters) - Talks between a dozen Pacific nations in Atlanta on a free-trade deal, extended to a fifth day on Sunday, hinged on resolving a dispute over how long a monopoly pharmaceutical companies should be given on new biotech drugs.
The issue pits the United States, which argues for longer protections to encourage innovation, against Australia and five other delegations who say such measures would strain national healthcare budgets and keep life-saving medicines from patients who cannot afford them.
The United States offers 12 years of exclusivity for the clinical data used in developing drugs like cancer therapy Avastin, developed by Genentech, a division of Roche. Australia has argued for five years of protection.
"You know, just splitting it down the middle is not the answer, and we've had to try to work through that," Australian Trade Minister Andrew Robb told the Australian Broadcasting Corp. "If we don't, it will have a major impact on whether we conclude or not."
Japan's Kyodo news agency reported on Sunday that the United States and Australia had reached a compromise on granting protection that would amount to eight years. Reuters could not immediately confirm the report.
Negotiators have been trying to broker a deal on the Trans Pacific Partnership, or TPP, which would lower tariffs and set common standards for 12 economies led by the United States and Japan, which together account for 40 percent of global output.
U.S. President Barack Obama has pushed for a deal as a way to open markets to U.S. exports, including financial services and pharmaceuticals. U.S. officials have also promoted the deal as a counterweight to China and that rising power's vision for Asia.
After more than five years of negotiations, delegates were due to meet for a fifth day in Atlanta on Sunday after the talks were extended by 24 hours. Officials involved in the talks said the set of remaining politically charged issues that could scuttle a deal had been sharply narrowed.
By Saturday, the United States and Japan had reached agreement in principle on trade in autos and auto parts in talks that had also included Canada and Mexico. That agreement is expected to give U.S. automakers, led by General Motors and Ford, two decades or more of tariff protection against low-cost pickup truck imports from Thailand or elsewhere in Asia, people briefed on the talks have said.
A separate bilateral deal between Washington and Tokyo would also pledge an opening of Japan's market and a reduction in the non-tariff barriers that U.S. officials and auto industry representatives have said kept imported vehicles to less than 10 percent of the Japanese market for decades.
But the TPP deal taking shape would also give Japan's auto industry, led by Toyota Motor, a freer hand to source parts from Asia, including from plants outside the TPP-zone like China, on vehicles sold in North America.
A "rule of origin" would stipulate that only 45 percent of a vehicle would have to be sourced from within the TPP, down from the equivalent ratio of 62.5 percent under NAFTA, officials have said.
With Japan's crucial issues largely resolved by Saturday, Japanese trade minister, Akira Amari, set an ultimatum for the TPP negotiators: find a deal on biological drugs by Sunday or risk having the talks break down with an uncertain timetable for resumption.
"I told them that now is not the time to be playing games. Now is the time to be negotiating in good faith," a visibly irritated Amari told reporters just after midnight Sunday after a meeting of ministers to assess progress.
New Zealand Trade Minister Tim Groser warned that failing to reach a deal in Atlanta would have worrying long-term implications for efforts to bind countries together through trade and investment.
New Zealand wants to ensure its dairy industry, dominated by Fonterra, the world's largest dairy exporter, comes out as one of the clear winners in a TPP deal. It wants to open markets like Canada, Mexico, Japan and the United States for dairy products.
If U.S. Trade Representative Michael Froman, who is chairing the Atlanta talks, manages to steer them to a conclusion on Sunday, that would mark the start of a political fight to get the deal approved in the United States.
The Obama administration relied on Republican votes to win fast-track trade negotiating authority from Congress in July, setting up a straight yes or no vote on any deal.
Many Democrats and labor groups have raised questions about what the TPP would mean for jobs in manufacturing and environmental protections. Meanwhile Republicans, including Sen. Orrin Hatch, the powerful chairman of the Senate finance committee, have urged the administration to hold the line on intellectual property protections, including for biologic drugs. (Reporting by Krista Hughes; Additional reporting by Lincoln Feast in Sydney; Editing by Kevin Krolicki and Susan Fenton)