Chile officially joins the Trans-Pacific Partnership after nearly five years of discussion

Chile officially joined the Trans-Pacific Partnership (CPTPP) this Tuesday, the ambitious free trade network linking 11 countries on the two shores of the Pacific Ocean, also known as TPP11. After nearly five years of processing, Gabriel Borik’s government has announced the entry into force of the controversial trade agreement that his coalition, the Broad Front, rejected in Congress. With the enactment of the treaty, about 1,200 products will be subject to the tax exemption. “In some cases this will benefit our exports to the treaty member states and in other cases we will be able to import some products at a lower cost,” said Economy Minister Mario Marcel this afternoon.

The South American country is the tenth country to gain full membership in the agreement promoted in 2018, under the second government of Michelle Bachelet. Other countries that are part of the fourth largest integration treaty in the world are: Australia, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and Brunei Darussalam. It remains only for the latter to ratify it. Together they account for 12.2% of the global economy. Other countries have expressed 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 the British administration stated, “negotiations are going well.”

With the entry into force of the CPTPP, there will be reductions in about 3,000 tariff lines: 1,228 sub- or product lines, 48% of which are for manufacturing, 33% for agriculture and 15% for fishing and aquaculture. In 2022, 14% of Chilean exports will go to the rest of the treaty’s member states. The ten countries will represent about 34% of the stock of foreign investment in Chile by 2021 and 31% of Chilean investment abroad.

This Monday night was the first time that Chile participated as a full member in a virtual meeting of senior officials of the CPTPP, coordinated by New Zealand as the host country, according to the Chilean Ministry of Foreign Affairs. During the meeting, they discussed the strategic axes of the treaty for this year, such as the green economy, electronic commerce, and the integration of new members.

Contradicting some aspects of the agreement, the Undersecretary of the Ministry of International Economic Relations, José Miguel Ahumada, said on Tuesday that the department he heads will assess the impact of the treaty on the export matrix, “emphasizing the analysis of products with greater technological content, environmental and gender issues, trade and the inclusion of small and medium-sized enterprises.”

Ahumada has insisted the agreement produces “marginal” trade gains and has worked with other member states to exclude Chile from the investor-state dispute settlement mechanisms included in the text. Last Friday, Chile and New Zealand signed a bilateral letter (side message, in English) which renders the mechanism ineffective. Mexico and Malaysia also committed to do the same. “The Undersecretary for International Economic Relations (Subrei) will continue to work with his business partners within the CPTPP and in other bilateral and multilateral fields to significantly reform dispute settlement mechanisms between investors and states, in order to protect the autonomy strategy of the state,” Subrei said in a statement on Tuesday.

In 2019, the House of Representatives approved Chile’s entry into the treaty by a vote of 77 in favor and 68 in favor. The right-wing bloc and some members of the Christian Democrats, the Radical Party and the Socialist Party gave the bill the green light to continue processing in the Senate. It was rejected by the majority of left-wing parliamentarians, including then-MP Gabriel Boric, arguing the possible negative effects on Chilean interests in labour, the environment, and agricultural affairs.

The Senate approved the entry in October last year by 27 votes in favor and 10 against. Minister Marcel said this afternoon, “Many at that time questioned the government’s commitment to the official ratification, the deposit of the instrument and its entry into force,” referring to criticism of the slow ratification. “Shortly after the beginning of the year, we actually entered into force of this treaty, which was very important. Many of the fears, apprehensions and mistrust at the time were largely belied by the reality of what was happening,” he added.

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