The Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP) is a free trade agreement between 11 countries in the Asia-Pacific region. The countries that are a part of the region are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
Three member countries of the Trans-Pacific Partnership are in Latin America and a fourth, Colombia, is hoping to join after this year. Chile, Mexico, and Peru are a part of what is known as the most significant trade agreement in recent years.
Together, the Trans-Pacific Partnership economies account for 13% of the global domestic product (GDP). The member countries also account for about 15% of global trade and represent approximately 500 million people. This agreement is the world’s largest trade bloc after the European Union (EU) and North American Free Trade Agreement (NAFTA). Negotiations and conversations for new trade deals have taken several years before CPTPP was signed in Chile in 2018.
We explore the details behind the deal and what this could mean for greater cooperation between Latin America and Australasia.
Less red tape for Peru
For Peru, the CPTPP enables the country to avoid non-tariff barriers for Peruvian agricultural and industrial products in more markets. Peru will be taking greater prominence in the Asia-Pacific region as its economy grows steadily. The region cultivates important global economies, high economic dynamism and broad market potential. The agreement will contribute to converting Peru into a hub which will attract investments into staple markets, and a higher number of exports to other CPTPP members. Further trade agreements between Peru and the Asia-Pacific are expected, following the recently-signed FTA with Australia. With cheaper exports and a more accessible market, investment into Peru is expected to increase substantially.
Mexico looks at export opportunities
Numerous export industries in Mexico are eyeballing new attractive markets across the Pacific, with attention particularly focused on agricultural livestock products. Import duties are set to reduce gradually toward elimination over the next 10 years under the CPTPP. Mexican producers are hoping to achieve double-digit annual growth in meat exports to the lucrative Japanese market during this period. Shipments of beef, chicken, and pork are expected to increase significantly.
There are also hopes of increased exports of avocados, orange juice, berries, tequila and beer as well. Business Analysts suggest that the competitiveness of the Mexican food and beverage products in the CPTPP markets will benefit from the absence of the United States in the agreement. Other industries include the Mexican industrial sectors such as automotive, aerospace, medical and devices and cosmetics.
Improving Chile’s ties with the Asia-Pacific
The CPTPP expands market access for Chilean products. It will help deepen Chile’s ties with Asia Pacific, which is considered the world’s most dynamic region in the economic sphere. It encourages and liberalizes the flow of goods, services and investments.
It includes issues addressed for the first time in a trade agreement, such as an anti-corruption disciplines, benefits for small and medium-sized enterprises and a gender perspective. This will assist with Chile and its Latin American neighbours’ market consistency and transparency. Economies with clear compliance procedures and operational expectations will support business confidence in foreign investors, bringing more FDI and business to stabilizing markets.
The CPTPP agreement also serves as a reference for other regional economic integration agreements, and even for future negotiations in the World Trade Organization.
What does the CPTPP mean for Australasia?
The CPTPP agreement will have an impact in key trade and commerce areas across the Australian economy. The Australian government believes “It will help support Australian businesses to grow and see annual benefits of up to $15.6 billion to our national economy by 2030”. Dramatic changes include the elimination of tariffs on AU$12.7 billion of Australia’s exports to countries party to the CPTPP. The CPTPP was designed to facilitate a flow of trade and investment between state parties. It provides Australian businesses with future growth opportunities, benefits in supply chains and certain protections for Australian investors.
New Zealand ratifies CPTPP
New Zealand joins Japan, Mexico and Singapore as the small group of members that have ratified the agreement. For New Zealand this agreement means businesses will be able to take advantage of improved trading conditions and lower tariffs. As a smaller country, multilateral deals have given New Zealand greater access to big markets that may not have otherwise been achievable through bilateral agreements.
Good news for business operating in these countries
Members of this collaboration are high-standard producers of the digital innovation and services, investment, financial services, labor and environmental solutions. They can establish a roadmap aimed at achieving country-specific and collective impacts across areas of common interest.
The depth of opportunity enabled by this agreement is challenging to grasp, as its geographical, political, and economic scope is vast. It offers a broad range of opportunities for further cooperation between member countries. Relations between Australasia and Latin America have historically been limited.
In connecting Asia-Pacific countries, Australasia and Latin America can offer complementary markets and improve their competitiveness with the help of the CPTPP. Mexico’s heavy manufacturing-oriented economy can supply New Zealand’s needs at more cost-effective prices. Australia and Chile are empowered to cooperate further on best mining practices. New Zealand’s famed agribusiness and agritech innovations can gain exposure to large, long-standing farming communities. As members open their markets, and drop barriers to trade, the Australasian powerhouses are welcomed into the fold.
Contact us for help
Thinking of incorporating in the Asia-Pacific? You may want to know more about how the CPTPP agreement could benefit you. Speak with the experts about how to set your business up for long term success in Latin America or Australasia.
At Biz Latin Hub we have a team of local and expat professionals with the knowledge and expertise of these markets to ensure success for your business venture. For more information, please contact our friendly team at [email protected] to find out how we can support your market entry and back-office needs.