The Trans-Pacific Partnership: Taking Globalization to the Next Level

Chile has spun a web of free trade agreements with more than 50 countries. These include agreements with the United States, China and the European Union, as well as with many of Chile’s neighbors in Latin America and key players in the Asia-Pacific region such as Japan and Australia. The mutual benefits are clear – Chile’s leadership in forging strong trade ties has generated economic growth and greater well-being for its people and its partners.


But Chile has not stopped there. As discussed in bUSiness Chile’s Spotlight section this month, it has participated in 16 rounds of negotiations towards the proposed Trans-Pacific Partnership (TPP) agreement. This would bring together at least 11 countries in the Asia-Pacific region, including Chile and the United States, that are committed to making a groundbreaking leap forward on trade.


Chile already has trade agreements with all of the countries participating in the negotiations, including with Japan that could join talks in the coming months. So why should Chile participate in this agreement?


In the first instance, trade is not a static issue. Most of Chile’s existing agreements focus on the movement of goods rather than services. Often there is no reference to the protection of intellectual property. As Chile innovates and develops its value-added exports, including in the areas of technology and advisory services for industries like mining, the old agreements are simply insufficient. New agreements are needed to further develop areas that are becoming increasingly important for Chile’s more service-oriented, entrepreneurial environment.


Second, barriers to trade are becoming more subtle – related to import rules that can become highly bureaucratic and, at times, arbitrary and expensive. State-run businesses do not always compete on a level playing field with the private sector.  These issues are real challenges to the future of trade in the region and need to be addressed to ensure the free flow of goods and services. 


Third, business is becoming more specialized as countries focus on their competitive advantages. To produce a more competitive product, inputs may need to come from several countries. This means that cumulative rules of origin are essential. However, bilateral trade agreements cannot address this issue. Given the increasing number of countries that understand the importance of free trade and which are, as a result, entering into more bilateral trade agreements, sharpening Chile’s competitive edge requires agreements that involve more than one partner. The TPP would do this by ensuring that, among other things, rules of origin are cumulative.
 
The bottom line – according to some estimates, Chile could increase its exports by US$2.9 billion annually through 2025 – means more opportunities for Chile’s people.


Of course, this does not mean that Chile should agree to the proposed terms without considering their long-term impacts. In such a long process of negotiation (16 rounds and counting) some countries are bound to have differing views on certain issues, but Chile and its fellow members have shown their willingness to overcome these differences.


Overall, a successful TPP agreement could increase Chile’s competiveness and accelerate its trade opportunities, particularly with Asia that is a region of high growth. It is complementary to Chile’s other trade initiatives, including the Pacific Alliance (with Mexico, Colombia and Peru), and it positions Chile as a leader in next-generation trade. It is of particular value to small and medium-sized businesses.


Presidents Piñera and Obama have indicated their intention to try to conclude the TPP negotiations later this year. The goal is ambitious but doable. Both countries have leadership roles to play in making sure this happens.


We at AmCham believe this is an excellent initiative. It is important for our member companies as a means to take globalization to the next level in an increasingly complex and competitive world. We will be working to highlight the benefits of the Trans-Pacific Partnership to our members and we encourage the governments of the participating nations to meet the goal of concluding negotiations during 2013.



 

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