By Jason Marczak, Director, Atlantic Council’s Adrienne Arsht Latin America Center
Next week will open a new chapter in global commerce. On March 8, eleven countries will gather in Santiago, Chile, to sign perhaps the most far-reaching multilateral accord in a generation. It’s an agreement that significantly deepens the trade relationship between the Americas and Asia. And one in which the United States will sit on the sidelines.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a game changer in global trade. It covers 14 percent of global gross domestic product and 500 million people. These are much lower numbers than if the United States had stayed in it. But that’s not the point. In the absence of World Trade Organization leadership to ink big, multilateral deals, regionalism is the preferred method. And the CPTPP sets the new world standard.
What does the CPTPP mean for the Americas?
For one, by eventually slashing duties on more than 99 percent of tariff lines (95 percent for Japan) and providing for a number of tariff reductions, the CPTPP will open critical new markets and provide a new platform to double-down on the growth in trade between the Americas and Asia. In our hemisphere, Chile, Peru, Mexico, and Canada are signatories to the pact.
But expect others to want to join. What has been negotiated will serve as the de facto rules of the game and the preferred platform for Latin American countries to dock on to for the purpose of expanding intra-regional and Asia-focused trade.
Although neither U.S. presidential candidate supported the original agreement—and President Trump’s withdrawal announcement less than 100 hours into office was greeted by his supporters as a quick win—the United States stands to lose just as our friends from the Americas and Asia stand to gain.
The new agreement eliminates 20 provisions that the United States had previously pushed hard for inclusion, including many in the area of intellectual property rights. U.S. wheat growers in Montana now worry that Japan will buy from Canada or Australia. Similarly, while U.S. beef exporters to Japan face a 39 percent tariff, CPTPP countries will only pay a 9 percent tariff.
These are just some of the reasons why President Trump’s recent comments about exploring the agreement again were warmly greeted. The eleven CPTPP signatories, led by Japan, would welcome U.S. re-engagement, but under the new terms. And in the United States, twenty-five Republican Senators recently sent a letter to the President urging him to act on his recent comments.
Above all, whether it’s CPTTP countries or other U.S. commercial partners across Latin America and the world, the most important message the U.S. government could send right now is one of clear direction. While in Colombia last week, this is what I heard from some business leaders who want to invest in the United States but are apprehensive for fear that the rules may change. The one certainty for investors is the need for certainty.
What happens next? Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, and Vietnam will now take a giant leap forward with their Americas partners in making real an agreement that was once thought to be for the history books. One year from today—once half likely ratify the document and a 60-day period then follows—CPTPP will shift markets and open up new export potential for signatories. This is the next phase in the future of world trade. And three Latin American countries, at least for now, are squarely in the mix.
*Jason Marczak is Director of the Atlantic Council’s Adrienne Arsht Latin America Center. He can be followed on Twitter at @jmarczak.