Could the TPP shake-up Latin American trade?

Could the TPP shake-up Latin American trade?
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The proposed Trans-Pacific Partnership (TPP) includes some of the world’s biggest economies on both sides of the Pacific and could very well offset China’s growing economic power, potentially shaking-up Latin America’s top economies in the process.

United States President Barack Obama is attempting to achieve “fast-track” negotiating authority from the US Congress in order to sign a trade deal without dealing with congressional amendments. Obama faces resistance from the political left, however, who fear the agreement will hurt US jobs and economic allies from the south.

If the vaunted TPP takes place, it could assist a handful of Latin American countries. But even as it helps some countries, it could also cut off top countries like Brazil and Venezuela from the world economy.

If the TPP succeeds, it would account for about 40% of the world’s economy.

Citizens from Latin America believe TPP will be as destabilizing as its predecessor, the North American Free Trade Agreement (NAFTA). As a direct result of NAFTA, Mexico was flooded with low agricultural imports from the US, putting a sizable number of rural Mexican farmers out of business.

Economists believe that within Latin America, Mexico would be the country with the most to benefit from TPP. Mexico is highly incorporated into the US economy, where Mexican factories produce auto parts and other goods for the US.

Chile, on the other hand, may not benefit as much as Mexico. Chile has trade agreements with all TPP member countries, but could face stiff competition from Asian countries concerning its exports of foods and vegetables to the US market.

Brazil and Venezuela are both expected to be big losers, as these countries rely heavily on commodity exports and need to diversify exports in order to sustain long term growth.

But if Brazil and Venezuela are left outside TPP and other proposed mega-trade blocs in Europe and Asia, they may find themselves isolated from the global economy.

Though the immediate costs may outweigh the benefits, strong Latin American involvement within the TPP can go a long way to strengthen the Partnership and the stability of the region.

Yet, problems remain. Despite the accomplishment of uniting many countries in the southern hemisphere, coordinating the dozens of bilateral agreements that exist between members and non-members in Latin America remains a significant obstacle. Additionally, the current wording of the TPP makes bringing other Latin American countries into the trade agreement difficult.

Failure to reach an agreement to address Latin American needs could mean an increase in levels of political and economic instability surrounding trade and business. Unfortunately, historically unsuccessful multilateral trade negotiations show that it is more than likely that the TPP will take much more time to be accomplished and fulfilled.

In the meantime, future similar bilateral trade agreements will continue to undermine efforts to achieve multilateral solutions to Latin America’s agricultural trade and business challenges.

If signed as is, the TPP could pose a major risk to the strengthening of the regional integration process by widening the capacity of free-trade principles and leading Latin American trade and business to foreign countries.

Categories: Economics, Latin America

About Author

Yesenia Lugo

Yesenia Lugo has written and worked on global governance and international financial institutions (IFIs) for a Washington, D.C. NGO. Her interests include economic opportunities, emerging financial markets and fiscal transparency reform. Yesenia holds a Masters in Diplomacy and International Relations from Seton Hall University, where she specialized in economic development and international security.