FACTBOX-Trans-Pacific trade deal in 2013 requires hard bargains

WASHINGTON, March 11 (Reuters) - The United States and 10 other countries are pushing to strike a deal on a regional free trade agreement known as the Trans-Pacific Partnership by the end of the year, and possibly as soon as a regional leaders meeting in Bali in October.

Negotiators from the United States, Canada, Mexico, Australia, New Zealand, Chile, Peru, Vietnam, Malaysia, Brunei and Singapore are wrapping up the sixteenth round of talks on the TPP pact this week in Singapore.

To reach a deal in the three-year-old talks by the Asia Pacific Economic Cooperation (APEC) summit meeting in Bali, here are some of the tough issues they have to resolve:

AGRICULTURE

The United States is under pressure from domestic dairy and sugar groups not to open the U.S. market to additional imports of those farm goods. But every item that Washington takes off the table gives other countries an excuse not to make market-opening concessions in their own sensitive sectors.

U.S. dairy producers are particularly worried about New Zealand, one of the world's largest dairy exporters.

Australia's sugar producers see the TPP as a chance to boost exports to the United States, something they were denied under a bilateral U.S.-Australia free trade agreement struck in 2004.

Canadian farmers want to keep domestic "supply management" programs that limit imports of dairy, chickens and eggs.

Japan, which could ask to join the negotiations, is expected to try to maintain its barriers on rice imports and potentially a long list of other farm goods.

TEXTILES, APPAREL, FOOTWEAR

Vietnam, one of the world's largest clothing exporters, wants increased access to the U.S. clothing market as part of the TPP deal, but that's a difficult demand for the United States where employment in the textile industry has already fallen from more than 700,000 in 1990 to about 238,000.

U.S. tariffs on clothing from Vietnam are expected to be phased-out in the pact, so the real negotiation is over the "rules of origins" that determines whether a garment qualifies for duty-free treatment.

In most of its free trade pacts, the United States has applied a "yarn forward" rule, meaning that the yarn used to make the garment or textile can't come from a country outside the pact, like China. The provision is intended to support U.S. textile jobs as tariffs are cut.

Vietnam would like a "cut-and-sew" rule allowing it to import textiles from countries like China and South Korea and transform those textiles into clothing that it can export duty-free to the United States and other TPP partners.

Vietnam, a major shoe exporter, is also pushing for a phase-out of U.S. footwear tariffs, which range from 11 percent to nearly 70 percent, and more flexible rules of origin. The U.S. shoe industry is tiny, but has vocal supporters in Congress.

STATE-OWNED ENTERPRISES

A big U.S. goal in the talks is to establish rules for State-Owned Enterprises (SOE) that currently may benefit from government subsidies, regulatory exemptions and other forms of favorable treatment that private firms don't get.

This is a difficult area for Vietnam, since many segments of its economy, such as telecommunications, are state-run. Chile's largest copper company, Codelco, is an SOE and Singapore has two significant state-owned investment firm, Temasek and the Government Investment Corporation.

Rules on SOEs are being crafted with an eye on China, home to some of the world's largest SOEs, even though it is not currently a part of the TPP talks.

Should Tokyo join the negotiations, it will face pressure to reform Japan Post, an SOE that is the country's largest financial institution and insurance provider.

PHARMACEUTICALS

The United States is pushing for stronger patent and data protection for pharmaceuticals, arousing the concern of groups like Oxfam and Doctors Without Borders.

Critics say the U.S. proposals would keep drug prices out of the reach of poor people by restricting production of generic versions of the drug.

U.S. drug manufacturers say strong protections are needed to help recoup the billions of dollars they spend on research and development for the drugs.

OTHER CONCERNS

Negotiators are also grappling with other difficult issues including how to resolve investment disputes between companies and governments; the length of copyright protections; the amount of new market access for financial and other service sector firms; what rules should govern the movement of electronic data across borders; and how to protect workers and the environment from potentially negative trade-related effects.

(Reporting By Doug Palmer; Editing by Todd Eastham)