Written by Ian Cardenas, Paralegal
The Trans-Pacific Partnership (TPP-11) is a trade agreement that links Chile with 10 Pacific Ocean countries.
Signed in February 2018, this free trade agreement determines tariff reductions for the Asia-Pacific countries that are part of it, also considering labor, gender and environmental issues. The ratification of this agreement at the local level has been promoted as an opportunity to boost the entry of Chilean products into large international markets.
This is the third largest Free Trade Agreement in the world and is made up of 11 Asia-Pacific countries: Australia, Japan, Singapore, Vietnam, Brunei Darussalam, Canada, Malaysia, Mexico, New Zealand, Peru and Chile.
According to its promoters, the agreement will allow Chilean products to enter markets with zero tariffs to more than 500 million people. The most benefited sectors would be agriculture, fisheries, dairy and meat, and forestry. It also covers labor, gender and environmental issues.
What’s coming for Chile
The Chilean Foreign Ministry said that since it became a full member of the agreement, it has been holding virtual meetings with senior officials of the CPTPP (SOM), coordinated by New Zealand as the host country.
“The government is advancing in the implementation of this treaty through the Inter-Ministerial Committee for International Economic Negotiations (Comité Interministerial de Negociaciones Económicas Internacionales). And with this entry into force, the proper application of the CPTPP will be coordinated with the actors involved,” the Foreign Ministry said.
The Foreign Ministry, through the Undersecretariat for International Economic Relations (SUBREI), will focus on working together with its treaty trading partners and in other international forum to advance the reform and modernization of investor-state dispute settlement mechanisms.
The benefits of the TPP-11
The executive director of Horizontal, Juan José Obach, remarked that more than 3,000 products will benefit from tariff reductions:
- The deepening of access to some States with which they have closed some areas, which – because of the CPTPP – are opening up.
- In a macroeconomic analysis, the country would have greater trade competitiveness, generating new opportunities for workers and businesses, reducing the poverty rate and promoting sustainable growth.
- The potential use of rules of origin that allow productive linkages between the States Parties.
- The creation of a common regime that allows exporters to take better advantage of economies of scale. Many products could see the cost of tariffs reduced, to a large extent or in their entirety. It should be noted, however, that this reduction would be gradual, so a better performance of national exports could be projected over a longer period.
- Not having to be bound by the specific rules of each bilateral agreement. In addition, it sends a signal of stability to foreign investors that Chile has been promoting in the last few decades.
Conclusion
The greatest potential of this treaty lies in the possibility that Chile can not only trade on more favorable terms with other countries, but also integrate more closely as a productive link in the global value chains that operate in the most economically dynamic region in the world.
Chilean companies, large and small, will be challenged to take advantage of the framework offered by the TPP11 to exploit this potential, adding value and competitiveness to their products, transforming them into inputs appreciated by their partners, as well as goods valued by their consumers.
