Importance of TPP to Latin America

The TPP is discussed in terms of ‘pivot to Asia,’ but it is also very important to the three Latin American countries of Peru, Chile and Mexico. The TPP will not transform their economies but will allow them to enter the world stage with similar rules to the United States and other wealthy countries. CFR’s Shannon K O’Neil says that these countries will produce more value added goods in  a competitive way.

http://www.cfr.org/latin-america-and-the-caribbean/does-tpp-mean-latin-america/p36556

However, these countries already have free trade agreements and in the case of Chile and Peru, their commodities are not too high to begin with. TPP won’t be as transformative for others, but it will help them to enter the world stage and give access to more markets. So TPP is like joining  a club of wealthy and well performing countries, and if you are a part of it then you need to perform. This is the case of Vietnam who has already tried to upgrade their exports. Even though this won’t boost the trade between U.S. and these countries, it could deepen existing regional supply products like autos, electronics, and aerospace and also open up new markets, and reduce tariffs.

There are also some concerns in the Latin American countries like the IP rights and the challenge of whether prices of particular drugs will go up or make it affordable to segments of the population. In Mexico, major concerns revolve around auto parts. If they open up North American industry to heavy Japanese competition, then the domestic auto industry may suffer.

How important will the TPP be in the short term? Mexico can take the advantage quickest because of diversity in their manufacturing industry. Also, Mexico complements rather than competes with what Chile, Colombia and Peru produce. It can strengthen Mexico’s integration with the U.S. and protect the linked sectors from losing ground. If they were left out of TPP then it could have broken current U.S.-Mexico supply chains.

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