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Chile is a member the Trans-Pacific Partnership Agreement

by | Jun 3, 2023

Now that Chile is a member of the Trans-Pacific Partnership Agreement, the treaty provides for tariff relief related to approximately 1,200 products.

As of February 2023, Chile is a member of the Trans-Pacific Partnership Agreement (CPTPP). The ambitious free trade network that connects 11 countries on both shores of the Pacific is also known as TPP11. After almost five years of negotiations, the Government of Gabriel Boric announced the entry into force of the controversial trade pact that his coalition, the Broad Front, rejected in Congress. With the promulgation of the treaty, around 1,200 products will be subject to tariff relief. “In some cases, it will benefit our exports to the countries that are members of the treaty, and in other cases, we will be able to import some products at a lower cost,” explained the Minister of Economy, Mario Marcel, when asked for comments.

The Trans-Pacific Partnership currently has ten members

Now that Chile is a member of the Trans-Pacific Partnership Agreement, it is the tenth economy to become a full member of the trade pact promoted in 2018 under the second government of Michelle Bachelet. The other countries that are part of the fourth-largest commercial integration treaty in the world are Australia, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and Brunei Darussalam. It only remains for the latter to ratify it. Together, the member countries represent 12.2% of the world economy. Other countries have shown interest in joining or have formally applied. The most advanced is the United Kingdom, which is working to become the first European member of the bloc to join this year and, as reported by the British Administration, “negotiations are progressing well.”

With the full entry into force of the CPTPP, there will be reductions in around 3,000 tariff lines: 1,228 subheadings or products, of which 48% belong to manufacturing, 33% to agriculture, and 15% to fishing and aquaculture. In 2022, 14% of Chilean exports went to the rest of the treaty’s member countries. The ten countries represent about 34% of the stock of foreign investment in Chile as of 2021 and 31% of Chilean investments abroad.

A meeting in February was the first time Chile participated as a full member in a virtual meeting of senior officials of the CPTPP, coordinated by New Zealand as the host country. This is according to the Chilean Foreign Ministry. During the meeting, the strategic aims of the treaty for the current year were discussed. These priority issues include the green economy, electronic commerce, and the integration of new members.

The Undersecretary of International Economic Relations, José Miguel Ahumada, contrary to certain aspects of the agreement, said Tuesday that the department he leads would evaluate the impact of the treaty on Chile’s export matrix, “emphasizing the analysis of products with greater technological content, environmental issues, gender and trade and the inclusion of small and medium-sized enterprises.”

Chile is a member of the Trans-Pacific Partnership Agreement that objects to its investor-state dispute-resolution mechanisms

Ahumada has insisted that the agreement produces “marginal” trade gains and has worked with the other member countries to exclude Chile from the investor-state dispute resolution mechanisms incorporated into the text. As a result, Chile and New Zealand signed a bilateral letter, or side letter, that annuls the mechanism this past February. Mexico and Malaysia have also committed to doing the same. “The Undersecretariat for International Economic Relations ( Subrei ) will continue to work together with its commercial partners within the CPTPP and in other bilateral and multilateral spaces to substantially reform the dispute resolution mechanisms between investors and States to protect the autonomy strategy of the State,” said the Subrei in a statement issued recently.

In 2019, the Chamber of Deputies approved Chile’s entry into the treaty with 77 votes in favor and 68 against. The right bloc and a few members of the Christian Democrats, the Radical Party, and the Socialist Party gave the bill the green light to continue advancing in the Senate. However, most left-wing parliamentarians, including then-deputy Gabriel Boric, rejected it, arguing possible adverse effects on Chilean interests in labor, environmental, and agricultural matters.

Chile expects that trade will expand as a result of its participation in the CPTPP

The Senate approved the entry in October last year with 27 votes in favor and ten against. “Many at that time questioned the government’s commitment to official ratification, the deposit of the instrument, and its entry into force,” said Minister Marcel, alluding to the criticism made for the slowness of ratification. “Shortly after the beginning of the year, we already have the entry into force of this treaty, which is very important. Many of that time’s fears, apprehensions, and mistrust are largely belied by the reality of what is happening,” he added. Now that Chile is a member the Trans-Pacific Partnership Agreement, the country’s trade officials anticipate that the overall value of commerce with the countries that are party to the pact will increase significantly.

 

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