When Chile joined Brunei, New Zealand and Singapore as founding members of the Trans-Pacific Partnership in 2006, it was no accident. Chile’s first big step toward becoming a pioneer country — one that has been working for decades to achieve better conditions for worldwide trade, particularly within the Pacific basin area — took place when we joined APEC in 1994. This early understanding of the need to expand our economic activities towards new markets, thereby boosting economic growth rates and bringing economic stability and prosperity, was a turning point for our country in the international trade field.
Since then, Chile has been feverishly signing free trade agreements — it now has 23 agreements with 60 countries. Canada has been there since the very beginning when it signed an FTA in 1997 and has become one of our most valuable partners in a successful alliance that this year celebrates its 15th birthday. Some of our other notable free trade partners include Mexico (1999), the European Union (2003), United States (2004), South Korea (2004), China (2006,) Japan (2007) and India (2007) and recently, we signed trade agreements with Malaysia and Vietnam, Japan, among others.
Since its inception, more countries (Australia, U.S., Peru, Vietnam, Japan and Malaysia) have joined the TPP’s founding four, and the agreement has been called the most important growing Free Trade Zone in the world because it brings together developed and developing economies both in Asia and America. Its ambitious goal is to create an intercontinental free-trade area, and it has become particularly innovative in matters not covered yet by previous treaties, including regulatory coherence, competitiveness and business facilitation. These are the topics of the 21st Century.
The new advantages
From the Chilean perspective, the benefits of joining the TPP are found in trade of goods, regulatory services, investments and in solving possible trade differences among all nine parties.
The experiences of APEC and studies from the World Bank show that existing trade agreements have a ways to go. The TPP improves on other agreements, partly because transportation costs could be lower. It’s also expected that the TPP will benefit not only large corporations but also small and medium enterprises. I should also point out that the TPP is meant to be complementary to APEC, and not competitive with it.
Lastly, it is important to mention that the TPP offers potential for government procurement, something that is currently contentious in the Canada-Europe agreement currently being negotiated. And, it may also end up with better tariff reductions than in bilateral agreements. In the same sense, the TPP will complement bilateral agreements previously signed, which, for example, may not contain chapters on services and investments.
Another advantage of multilateral trade agreements is the potential for a wide variety of suppliers to produce one end product. If a good is made in Chile, with materials from Vietnam and Malaysia, each of those three economies benefits.
Like other existing agreements, the TPP will incorporate an important institutional mechanism of administration in which all countries will participate. This structure will include technical committees for the most important sections of the agreement. Member countries will be able to consult those committees to settle trade differences.
The negotiation process
The latest negotiation process which started in March 2010, has been slower than expected but progress is still undeniable. Negotiations were expected to close in November 2011, during the APEC Leaders’ Summit in Honolulu but due to the great number of actors, it was not possible to conclude the negotiations then. But leaders of the nine member countries announced the general framework of the agreement, including long-term goals and the general scope of the future agreement. Further progress was expected in June 2012, when APEC’s Ministers of Commerce Summit took place. So far, five rounds have been scheduled for 2012, as well as other inter-sessional meetings.
Heading for new developments
An important element of discussion at the APEC Summit was the possible accession of new members to the negotiations process. Canada, Japan and Mexico have formally expressed their interest in joining the process. At this stage, for practical purposes, the use of bilateral consultation before the entrance has been upheld in order to discuss the admission of future partners. Chile’s view on new membership has always been favourable. Getting additional qualified members involved in the agreement unquestionably results in more winners in the general outcome. Since Canada is a relevant free-trade partner and main investor in Chile, we welcome its entry.
The visit by Prime Minister Stephen Harper in Chile in April reinforced our mutual engagement for prosperity in the region. The chance to capitalize on the additional advantages that come from sharing access to the Pacific Coast offers a huge potential in reaching attractive Asian markets. Such a promising possibility deserves to be explored by two traditionally good partners.
