The Transpacific Partnership Agreement (TPP): A Model for the Creation of New Global Socio-Economic Spaces? The Case of Chile

The Transpacific Partnership Agreement (TPP) is the largest trade agreement finalized in generations. Signed in Atlanta under the leadership of the United States on October 5th after five years of negotiations, it comprises 40 percent of world trade. The TPP aims to eliminate trade barriers and set common standards among the twelve member economies: the United States, Chile, Peru, Mexico, Canada, Australia, New Zealand, Singapore, Malaysia, Japan, Brunei and Vietnam. It is the most ambitious project yet to integrate the Asia-Pacific region economically, financially, and politically – with further social and cultural alignment probable.

Leaders of the TPP Member States by Gobierno de Chile [CC BY 2.0], accessed via Wikimedia Commons

Leaders of the TPP Member States by Gobierno de Chile [CC BY 2.0], accessed via Wikimedia Commons

The most important objectives of the TPP include common market access and joint rules regarding the origin and protection of products and brand names; competition, government procurement, services, investment, e-commerce, and telecommunications; legal and intellectual property; and environment, labour and other subfields of economic cooperation. In addition, the participating nations have incorporated so-called horizontal issues such as regulatory coherence, enhanced competitiveness, stratified market development, and the improvement of the place of small- and medium-sized enterprises (SMEs) towards a more accentuated role in a wider, borderless economy – one that in the neoliberal past naturally favoured multi- and transnational corporations, or the global over the local.

Countries involved in the TTP declared that the new agreement would result in common benefit. However, this claim is disputable given the political and economic structural asymmetries between the North and South of the proposed new trade zone. For example, North and South America have been in conflict at times precisely because of the gap in productivity, accumulated and available capital, pro-capita participation in trade and profits, and competitiveness. Is the most probable option, then, that both expectations brought forward by experts will simultaneously be the case – that 1) the levels of inter-regional asymmetries will remain and potentially widen through the TPP whilst, on a relative level, 2) every nation will benefit?

In the second case, what would the combination of “nation” with “benefit” exactly mean? Is it pro-capita benefit (ie. a benefit that lets most citizens participate in more or less equal ways) or national benefit (ie. one stratified according to the domestic social differences between the classes, so that the rich may benefit more while the poor receive less)?

This potential ambiguity of the TTP is exemplified particularly well by one member country: Chile. The Andean nation stretches over 4000 km of the Pacific coastline and is currently in the midst of deep, multi-dimensional, and encompassing social change. The case is relevant in the global setting because Chile is the role model for most South American nations and the only Latin American OECD member. That means Chile is one of the countries of the Global South most integrated with the North. It is no accident that Chile has been regarded as the representative global model of “pure” application of the Chicago-style neoliberal doctrine since the 1980s. The fact that Chile is, as an effect of this doctrine, one of the most unequal nations on earth, according to both OECD statistics and the GINI index, is another aspect that places it close to Northern Western countries and the United States in particular, which is consistently ranked among the top five developed nations in inequality. On the other hand, the fact that China is currently Chile’s most important trade partner remains a dividing factor between Chile and the United States. China was invited to take part in the TPP but refused to become a member state due to fears of being “integrated” into an essentially North American economic, financial, and ideological system.

Chilean President Bachelet with Chinese President Xi Jinping by Gobierno de Chile [CC BY 3.0 cl ], accessed via Wikimedia Commons.

Chilean President Bachelet with Chinese President Xi Jinping by Gobierno de Chile [CC BY 3.0 cl ], accessed via Wikimedia Commons.

What is interesting in this constellation is that overall attitudes towards the TPP in Chile’s public sphere have been more critical and skeptical than euphoric ,and have remained so even after the signature of the TPP, at least according to some sources. This may point towards the perceived pros and cons of the TPP in the view of the majority of the Chilean population, which openly contrasts with that of politicians. However, to what extent do these two groups differ in their atittudes?

Regardless of their affiliation with the two big alliances that rule the country in the interplay between government and opposition – Nueva Mayoría (“New Majority”, the governing leftist coalition of President Michelle Bachelet) and Alianza por Chile (“Alliance for Chile”, the center-right opposition) – most of Chile’s politicians supported the TPP agreement in principle. This is unsurprising for the political right, as they think the TTP is, to some extent, the continuation of the (neo)liberal policies of the past decades. However, some leftist domestic critics consider it historically ironic that the TPP was finalized and signed by a leftist party coalition which in the past was strongly opposed to transnational liberalization, at least rhetorically.

Without doubt, the participation of Chile and Peru in the TPP is an attempt to gain better access to the Asia Pacific region, which has stood out in recent years for its high degree of economic dynamism and pragmatism. Since 1994, Chile has increasingly established itself as an economic and trade actor in the region through its participation in APEC (Asia-Pacific Economic Cooperation), and by signing bilateral free trade agreements well before the TPP with Australia, Brunei, China, South Korea, Hong Kong, Japan, Malaysia, New Zealand, Singapore, Vietnam, and Thailand.

Correspondingly, the TPP in the view of many Chileans wasn’t a real revolution forward, since most trade relations in the Asia-Pacific region had already been opened up by bilateral agreements. Nevertheless, the official reactions to the signature of the TPP on October 5th by the leftist government of Michelle Bachelet in Santiago were flamboyant and clearly more enthusiastic than those in Peru, as evidenced by the reaction of Heraldo Muñoz Valenzuela, Foreign Affairs Minister of Chile:

“We are pleased because we have achieved a very valuable agreement for Chile, protecting our interests. The TPP agreement will define the twenty-first century. We will be part of the largest and most modern economic setting in the world, considering that the TPP is the most important plurilateral negotiation of the past 20 years“.

Muñoz’s view was shared by most other negotiators and this attitude quickly spread around the world of the media. The global media trusts described the agreement as a milestone-which is quite natural, as they are themselves globalized and subconsciously tend to welcome global agreements. On other occasions, the TPP has been interpreted as an endorsement of the administration of Barack Obama and his attempt to curb the geopolitical advances of China.

Locally, however, there were more differentiated evaluations. In the healthcare sector, the fact that Chile managed to maintain its five years of data protection for biological medicines despite a dispute in which the United States demanded twelve years was assessed as a success for less developed countries by Chilean diplomats. The president of Chile’s National Society of Agriculture (SNA), Patricio Crespo said that:

“…there are many opportunities opening up now for our country. One advantage is that the TPP will systematise conflict resolution regarding agricultural trade barriers. We will not be diminished anymore by being a small and open country against other economies in Asia with other regimes.”

There was no word, though, regarding US imports to Chile in the sector which were described as being “strengthened by the abolishment of 18,000 foreign taxes imposed on U.S. goods” by President Obama, and which could cause a problem for the domestic Chilean farmers in the short and long-term. Rodrigo Alvarez, President of Chile Food and Beverages (AB Chile), highlighted the benefits for businesses and consumers saying that: “this agreement can be an important development and an engine of expansion for our industry.” Other TPP countries that are less outspoken share the same belief when looking to the Chilean market though, which is one of the most expensive and commercialized and has one of the biggest gaps between the middle and upper classes in the world. Will the TPP further the “expansion” of Chilean goods –or rather trigger a wave of imports to the nation?

Even if better permeability of Chilean food products to countries such as Japan, Canada, and Vietnam as well as countries that have previously been rather closed or lagged behind economically is underscored as one of the advantages of the agreement, it is also true that in the period 2009-2014,  the Chilean agricultural, forestry, and fisheries trade sectors had an average annual growth of 5.3 percent in exchange with the later member countries of the TPP. For example, of the more than US$3,000 million worth of exports of Chilean fresh fruit per year, 42 percent was already exported to the currently agreed-upon area of the TPP even before the TTP was enacted. This claim was made by the Chilean General Directorate of International Economic Relations (DIRECON), a public entity of the Foreign Affairs Ministry whose purpose is to execute, coordinate, and apply the government’s policies in international economic relations. It is hard to see how this performance can be stably topped by the TPP if the reverse process – cheap exports from TPP nations to Chile – will also grow stronger. That puts a question mark behind all too optimistic visions for a small nation with a population of 17.5 million (2014) now “integrated” into a space of nearly 800 million people (2014) where, against all other assertions, size and demographic numbers will count.

Chile is indeed a small country with a small economy, where the free trade agreements signed in the recent past have been crucial for economic growth, allowing the export of national core products to global markets. The day before the signature of the TPP, Chile featured 24 trade agreements with 63 markets representing 63.3 percent of the world population and 85.3 percent of the global GDP. Was it therefore fully justified to further restrict the national regulatory capacity to be part of a new strategic economic bloc that at the same time does not include crucial Asian powers like China? In short, some Chilean experts — including parts of the government — argue that the TPP does not represent significant progress for Chile’s foreign trade precisely because the nation already has free trade agreements in force with most countries participating in the TPP.

Among the opposition, consequently, the Civic Platform Chile Best No TPP expressed “its strongest condemnation of the irresponsible act of the government Michelle Bachelet” and condemned in particular that there was “absolute secrecy about negotiations behind closed doors, a scandal for a contemporary democracy, without effective participation of citizens.” In fact, the Chilean parliament repeatedly declared throughout the process of negotiation to not have any decision-relevant information about the content of the TPP. After the signing of the agreement, the Parliament now only has two options: agree or reject without the chance to modify parts of the treaty. That creates a complex position for Chile’s still fragile post-dictatorial democratic system because the parliamentarians have to take care of the interest of the nation, but on the basis of getting access to the terms of negotiation only after the TPP has been signed by the government. In addition, the current level of voter trust in the parliament is less than 10 percent in all national surveys, a fact that may further impact the legitimacy of the ratification of the TPP.

Despite such doubts, Chilean President Michelle Bachelet stated:

“We are very happy about this great result. We know it will be very beneficial for the country, and we hope that it will translate into greater well-being for our citizens. The TPP has developed new rules for international economic exchange of high standards in areas such as trade in goods, services, investment, environmental issues, labour and health, among other issues.”

She later added that: “Chile has achieved a balanced agreement, but with significant benefits, while safeguarding sensitive issues, especially those of intellectual property. We have defended the national interest.”

According to President Bachelet, the TPP “has opened up new opportunities particularly for our exporters, incorporating products that were left out of previous agreements signed in bilateral ways with now TPP member countries. These sectors will particularly benefit, and among them are especially the agro-industrial and forestry sectors. Now it will be up to the parliament to vote on the signed agreement. I’m sure that Chile’s interests prevail.”

But it is exactly this later point that is questionable in face of the fact that the lion’s share of the agro-industrial and forestry sectors — for example, the cellulose (paper) industry — belong almost exclusively to the richest family conglomerates in Chile, which do not pay taxes comparable to other OECD nations due to the country’s special (explicitly neoliberal) tax system that favors firms over individuals and allows them to keep most of the income for themselves.

The resulting cardinal question is as simple as it is complex: will profoundly unequal nations like Chile take profit from the TPP? In which ways exactly? Will the agreement trigger progress for all or just for a few? Will the TPP outside North America and “special states” such as Singapore, irrespective of rhetoric, be a new catalyst of social progress or of deepening social inequality?

Given the Asian trend towards greater inequality in countries such as South Korea where the “post-materialist” middle class is rapidly dwindling, this question is not restricted to Chile, but is a principal question in a greater global picture. Nations like Malaysia or Vietnam will be forced sooner or later to ask the same question — and find their own respective solutions.

The protracted doubts expressed by parts of the Chilean population and intellectuals come from a well-developed nation similar to the smaller European countries in size and economic performance. The issue in a globally comparative perspective thus is whether the further development of a nation such as Chile within the TPP serves as a case for smaller countries regarding, for instance, the planned Transatlantic Trade and Investment Partnership (TTIP) still under negotiation between the United States and the European Union in great secrecy. After the TPP, the TTIP may follow as the next big global liberalization agreement.  Similar to Chile, being “integrated” into a significantly expanded economic space while at the same time being no less insecure about the future could be the destiny of some European nations too.

About Author

Roland Benedikter and Miguel Zlosilo

Roland Benedikter and Miguel Zlosilo are authors of the new book: Chile in Transition: Prospects and Challenges for Latin America’s Forerunner of Development. Benedikter is Senior Research Scholar of the Council of Hemispheric Affairs Washington D.C., Research Professor of Multidisciplinary Political Analysis at the Willy Brand Centre of the University of Wroclaw/Breslau, Trustee of the Toynbee Prize Foundation Boston, and Full Member of the Club of Rome. Zlosilo is Director of Analysis and Methodology at the Social Research Institute “Opina” in Santiago de Chile.

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