Tobacco clause might burn free trade agreement

The timetable for completing the world's largest free trade agreement is slipping as negotiators in Brunei express concern at US proposals to give tobacco companies the power to sue governments and to weaken government control of state-owned enterprises.

The Trans-Pacific Partnership negotiations now include Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam, as well as Japan, which joined in this year.

Australia absented itself from the trade ministers' meeting because of the election.

In a blow to US hopes of wrapping up the negotiations this year the joint statement released in Brunei described the remaining issues as "sensitive and challenging".

The US had wanted to finish talks this year to fit in with a domestic political timetable.

Before the meeting New York mayor Michael Bloomberg accused President Barack Obama of bowing to "pressure from the tobacco industry" to dump a so-called safe-harbour provision that would have protected nations such as Australia from being sued by tobacco companies for restricting the sale of tobacco products.

Earlier drafts had included the safe-harbour clause in light of "the unique status of tobacco products from a health and regulatory perspective".

Mr Bloomberg said the tobacco industry had been "joined by other business interest groups that were fearful the safe-harbour provision would lead to other products being singled".

Australia's Labor government has said it would not accept any provisions that would allow corporations to sue Australian governments. The Coalition has given no such commitment.

Malaysia's trade minister Mustapa Mohamed told the meeting he would not be bound by arbiter-proposed clauses that would loosen Malaysia's grip on state-owned enterprises and threaten its "affirmative action" program of giving preference to ethnic Malays when awarding contracts.

He said other countries shared his concern about state-owned enterprises.

The negotiations will continue at an official level before a ministerial meeting at APEC in Bali in October.