Trans-Pacific Partnership: A Western Hemisphere View

Speakers

• Luis Alberto Moreno, President, Inter-American Development Bank
• Antoni Estevadeordal, Manager of the Integration and Trade Sector, Inter-American Development Bank
• Francisco Sánchez, Under Secretary for International Trade, U.S. Department of Commerce
• Arturo Fermandois, Ambassador of Chile to the U.S.
• Harold W. Forsyth, Ambassador of Peru to the U.S.
• Arturo Sarukhan, Ambassador of Mexico to the U.S.
• Paul Robertson, Minister of Economic Affairs, Embassy of Canada to the U.S.
• Eric Farnsworth, Vice President, Americas Society and Council of the Americas (moderator)

Summary

Americas Society and Council of the Americas (AS/COA) held an event on January 31, 2012, in association with the Inter-American Development Bank (IDB). Speakers commented on the economic and political prospects of the Trans-Pacific Partnership (TPP), exploring its potential benefits to the Asia-Pacific region. AS/COA has been a long-time supporter of increased Asia-Americas trade ties and, according to AS/COA Vice President Eric Farnsworth, “The reality is that, in trade terms, TPP is the most promising game in town.” The dialogue focused specifically on the involvement of Chile, a signatory member of the Pacific-4 (P-4) trade bloc, the precursor to the TPP; Peru and the United States, two countries currently in TPP negotiations; and Mexico and Canada, which have expressed interest in joining the TPP. Farnsworth noted that the prospect of including Mexico and Canada—the United States’ two North American partners—has changed the dynamic of the TPP in a positive way and that the two countries merit inclusion in the TPP and should be allowed to join as soon as possible.

IDB View: The Benefits of Multilateral Liberalization

To begin the panel discussion, IDB President Luis Alberto Moreno described the economic situation of advanced economies today: high unemployment and low growth. Emerging markets, on the other hand, are fighting inflation and current account deficits. Low-income countries have seen growth but are susceptible to global fluctuations, such as commodity price volatility. At the same time, in response to these economic troubles, countries turned to trade protectionism, which in turn is slowing global economic growth. According to Moreno, the TPP could advance market access, get rid of “behind-the-border barriers,” and facilitate greater regulatory coherence. In doing so, the TPP could facilitate greater economic integration in the Americas. While Moreno acknowledged the benefits of countries liberalizing, he noted that multilateral liberalization provides even more advantages. “Open trade, and the economic growth that follows, can lift millions out of poverty.”

IDB Manager of the Integration and Trade Sector Antoni Estevadeordal suggested that the TPP could institutionalize a new production model, developing in Asia, based on integrated supply chains that lower communication and coordination costs. “Asia is changing the way we think about integration,” he said, and the TPP is the perfect forum to negotiate those changes—customs procedures, legal and regulatory frameworks, relationships between firms—while consolidating bilateral FTAs. This is particularly relevant to the Asia-Pacific region as trade across the Pacific grows in importance; the share of trade from Asia to Latin America has increased 25 percent in the past decade. The TPP could strengthen the competitiveness of the whole hemisphere, Estevadeordal noted.

Chile: TPP as “Twenty-First-Century” Integration

Ambassador of Chile to the U.S. Arturo Fermandois noted that with 3,000 miles of Pacific coast, trade between Chile and Asia-Pacific countries is both natural and logical. Chile is involved in numerous trade agreements on both sides of the Pacific Ocean, and is an original member of the P-4 along with Singapore, Brunei Darussalam, and New Zealand. Chile already has trade agreements with all TPP countries, but sees the TPP as a way to develop “twenty-first-century integration” that includes all sectors and goes beyond just commercial rules. Chile will not only benefit from greater access to TPP markets, according to Fermandois, but also from a multilateral enforcement authority. “We needed to integrate [with] the world,” he said, and the TPP is necessary for this process.

Peru: Latin America’s “Main Door for Entry” for Asia-Pacific Economies

“Peru is the main door for entry into Latin America for economies in the Asia-Pacific,” said Ambassador of Peru Harold Forsyth. The TPP negotiations are a part of Peru’s continuing integration into the global economy, creating opportunities for trade, investment, and development that will lead to job creation. Peru hopes that, with the signing of the agreement, Peru’s trade within the TPP will increase substantially and allow Peru to market its products to over 500 million people. Because the TPP goes beyond traditional tariff reduction agreements, Peru will advocate for the promotion of women’s business opportunities, technology transfers, mobile human resources, corporate social responsibility, and investment in trade infrastructure that would allow rural areas access to international markets. “The TPP has the potential to become the most important commercial area in the world,” Forsyth concluded.

Mexico: TPP as the Next Generation of Trade Facilitation

Ambassador of Mexico to the U.S. Arturo Sarukhan defined the TPP as the next generation of trade facilitation. Sarukhan said Mexico is interested in joining the TPP for five principal reasons. First, Mexico has been a standard bearer of free trade agreements (FTAs), with 14 across the world. Second, with the Doha Round of the World Trade Organization stalled, “TPP could be the proverbial Drano in the system” that unclogs the global trade negotiation pipes, according to Sarukhan. He also noted that the TPP should allow for multiple speeds of accession; countries should be permitted to join as soon as they are ready. Third, the TPP’s agenda is Mexico’s agenda. Sarukhan pointed out that the trade developments between Mexico and the United States under President Obama are in line with what the TPP has done. Fourth, Mexico’s inclusion in the TPP enhances North American competitiveness. Mexico is the second-largest destination for U.S. exports, therefore more Mexican exports mean more U.S. exports. In addition, because of integrated North American supply chains, for every dollar spent in Mexico, 40 cents supports U.S. exports. Finally, Sarukhan noted the important geopolitical role of the TPP. He called it a critical component of the post-Cold War architecture and said: “Mexico is more than just another brick in the wall.”

Canada: Reengaging the Western Hemisphere through Trade

Minister of Economic Affairs at the Embassy of Canada to the U.S. Paul Robertson emphasized Canada’s desire to engage in trade on both sides of the Pacific Ocean. Twenty years after the creation of NAFTA, Canada is reengaging the Western Hemisphere in trade; it has FTAs in force with Chile, Peru, Costa Rica, and, most recently, with Colombia, and it has signed an agreement with Panama and concluded negotiations with Honduras. Thus, the TPP is an opportunity to deepen Canada’s existing engagement in the region as well as “to work hand-in-hand with our partners in the Americas to reach these new and growing markets in Asia,” Robertson said. Canada’s participation in the TPP would promote jobs, stimulate growth, and make firms more competitive. Robertson also cautioned that Canada’s exclusion from the TPP could negatively impact supply chains across the Americas; exporters in TPP countries that source from Canada, such as the United States, would not be able to meet rules of origin requirements. As one of the most open and competitive economies in the world—with trade equivalent to 64 percent of its economy—Canada is prepared to enter TPP negotiations as a responsible and contributing member, according to Robertson.

United States: The TPP as a “Model for the Future”

Undersecretary for International Trade at the U.S. Department of Commerce Francisco Sánchez said the TPP is essential to U.S. economic success because 95 percent of the world’s consumers lie outside U.S. borders. Furthermore, the TPP creates a natural partnership with Latin America—U.S. neighbors—and with the Asia-Pacific, which is the fastest-growing region in the world. Sánchez welcomes the expression of interest by Mexico and Canada (and Japan) and said, “The United States is proud to work with our partners in the Americas to advance our common agenda.” He concluded by emphasizing that the TPP should be “a model for the future.”