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Trans-Pacific Partnership (TPP) Presents Opportunities and Risks for the Region’s Countries

3 December 2015|News

The accumulation of origin and better access to Asian agricultural markets are among the benefits, but there is concern about the agreement’s possible impact on the price of medications and on the region's textile producers.


Photo of medications
There is concern about the agreement’s possible impact on the price of medications.
Photo: EFE/Paolo Aguilar

The successful end to negotiations on the Trans-Pacific Partnership (TPP) was announced last October 5. This agreement will create the world's biggest free trade zone and will inject more dynamism into the global exchange of goods and services. Once concluded, it is estimated that it could boost global income by $295 billion dollars by 2025 and that global exports will increase by $444 billion dollars in the same year.

In its Latin America and the Caribbean in the World Economy 2015 report, ECLAC indicates that the 12 countries that make up the TPP (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam) represent 36% of global GDP and in 2014 were responsible for 23% of global exports and 26% of imports.

Trade between TPP members reached $2.1 trillion dollars last year, although its importance as a trading partner varies among the participating countries: for Chile and Peru this represents around one third of their total trade, while for Mexico its relevance is much greater (85% of its exports to the world and 59% of its imports). The United States alone concentrated 94% of Mexican exports to the TPP in 2014.

According to ECLAC's analysis, the TPP presents opportunities and some risks for the region's countries that are joining it.

One of the main opportunities is the possibility of the accumulation of origin between the 12 member countries. For example, in the TPP a Chilean costume maker could theoretically incorporate an unlimited amount of Peruvian cotton in the garments that it exports to the United States. In addition, Chile, Mexico and Peru will improve their agricultural products’ access to markets that are highly protected in that sector, such as Japan, Canada and Malaysia.

Among the potential risks is the possible increase in the price of medications due to greater difficulties for generic versions to enter the market. Additionally, and despite the fact that they are not part of the accord, the opening of the US textile market is a sensitive issue for Central American producers, mainly because of the competition that Vietnam represents.

The accord includes the elimination of tariffs on the greater part of goods trade among its members, as well as commitments to open the trade of services, investment and public hiring. Furthermore, it contains dispositions on matters that to date have largely not been regulated by the agreements of the World Trade Organization (WTO), such as digital trade, state companies, regulatory coherence, the protection of intellectual property on the Internet and diverse labor and environmental issues.

The signing of the TPP is expected to take place at the beginning of 2016 and it will be ratified afterwards by the legislatures of member countries. Once in effect, it will coexist with the numerous existing accords among the nations that participate. In any case, the commitments for liberalization negotiated in the TPP surpass those of other existing agreements, such as the North American Free Trade Agreement (NAFTA) and the bilateral accords signed by Chile, Mexico and Peru with Asian countries.

The three participating Latin American countries are also members of the Pacific Alliance. Colombia, which has expressed interest in accessing the TPP, could join them.