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Summary: The Trans-Pacific Partnership - What's at Stake for the Western Hemisphere?

U.S. Congressman Gregory Meeks. (Image: Jorge Merino)

June 03, 2015

Keynote Speaker:

  • Gregory Meeks, U.S. Representative (D-NY); Co-Chair, Friends of the Trans-Pacific Partnership Caucus

Panelists:

  • Luis Miguel Castilla, Ambassador of Peru; former Minister of Economy and Finance
  • Miriam Sapiro, Senior Fellow, Global Economy and Development Program, Brookings Institution; former Deputy U.S. Trade Representative
  • Kurt Tong, Principal Deputy Assistant Secretary, Bureau of Economic and Business Affairs, U.S. Department of State
  • Indira Lakshmanan, Senior Correspondent, Bloomberg News (moderator)

Summary

On June 2, AS/COA hosted a discussion on the political and economic implications of the Trans-Pacific Partnership (TPP) for the Western Hemisphere. AS/COA Vice President Eric Farnsworth introduced U.S. Representative Gregory Meeks, who delivered keynote remarks on the opportunities and challenges that the Americas might face upon ratification of the trade agreement. Bloomberg News Senior Reporter Indira Lakshmanan moderated a panel of experts composed of Peruvian Ambassador Luis Miguel Castilla, former Deputy U.S. Trade Representative Miriam Sapiro, and Principal Deputy Assistant Secretary of State Kurt Tong.

TPP is a challenge that requires thorough preparation

Eric Farnsworth initiated the discussion by highlighting how AS/COA has consistently promoted the idea that TPP should be seen as critical and relevant to promoting trade in the Western Hemisphere. The Council, he noted, has been instrumental in arguing for the inclusion of Canada and Mexico in the negotiations, while also highlighting the need to preempt unintended consequences of the agreement through job creation in Central America and continued collaboration between TPP and non-TPP economies. Farnsworth reminded the audience, however, that Congress must first approve Trade Promotion Authority (TPA) and conclude TPP negotiations before the agreement can be passed and implemented.

On the implications of the trade agreement for the Americas, Congressman Gregory Meeks foresees opportunities for all participants and potential future members. Meeks highlighted the interconnection between the Trade Promotion Authority bill and the TPP deal, while urging his House of Representatives colleagues to pass Trade Promotion Authority legislation next week.

Congressman Meeks encouraged the United States to adopt a “post-Cold War vision” towards its southern neighbors, where TPP could constitute a powerful force for integration. In the wake of a recent trip to Colombia, Peru, El Salvador, and Panama, Rep. Meeks discovered these countries’ eagerness to reduce reliance on commodity exports, to diversify their economies, and to remain competitive. Although Peru is the only party to the TPP negotiations among these four countries, non-TPP members recognize the potential benefits and pitfalls of the agreement and the necessity to prepare for them. In addition, some countries, such as Colombia, have voiced their interest in joining the negotiations, whereas others, such as Brazil, are closely monitoring the progress of the negotiations.

TPP raises standards and locks in reforms

According to Congressman Meeks, “TPP is a force for positive change across the board for all countries, whether or not they belong to TPP,” although this transformation will require rigorous action. Countries in Central and South America understand that economic reforms and harmonized trade rules are only one side of the coin. On the reverse side, they are committed to addressing socio-political demands, inequality issues, violence, and the informal sector in the economy. Peru is providing technical assistance and training to future exporters, for example. With Colombia on the verge of becoming a member of the Organization for Economic Co-operation and Development (OECD), Bogotá is engaged in uprooting pockets of political violence in the Pacific areas. Meanwhile, El Salvador is committed to regional cooperation in fighting drugs transshipments and violence, and Panama has also stepped up efforts to conclude the enlargement of the canal in order to cope with larger trade flows.

In this scenario, the United States can also help them address specific issues by advocating for strong enforceable standards in the agreement. According to Ambassador Castilla, trade has represented an unprecedented growth opportunity for Peru, not only because it has helped expand market access but also because trade helped Peru discipline itself, lock in structural reforms, and comply with better standards.

TPP connects small and medium enterprises and reinforces integration forces in the region

In the words of Miriam Sapiro, trade has a geo-economic and strategic dimension and can help “strengthen partnership with Latin America” in a world of uncertainty. Kurt Tong added that TPP could foster additional dialogue and integration in the region. He added, however, that other initiatives such as the Small Business Network of the Americas, which connects and advises small and medium sized businesses through more than 2,000 support centers in the Western Hemisphere, are gaining momentum. “TPP is the end game but it is not the end point,” said Tong.

Ambassador Castilla reiterated the importance of small business networks and supply chain integration to maintain competitiveness. Several TPP and non-TPP countries have expressed their concerns vis-à-vis third parties, such as Vietnam, that could undercut competition in certain labor-intensive sectors, such as textiles. Unlike the former U.S.-Peru free trade agreement, which did not mention accumulation provisions, TPP will include strong rules of origin that will provide Latin American TPP members with cheap inputs and maintain the competitiveness of their exports, while strengthening the continental supply chain.

Finally, the panelists agreed trade liberalization has been a powerful engine of growth in certain Latin American countries, although it poses several challenges to both countries that embrace it and countries that reject it. Trade diversion is a by-product of free trade agreements, and trade-creation benefits can outweigh those costs providing that countries are prepared to support inevitable losers and assist them in rejoining the job market.