Some countries are truly bent on free international trade. Chile is one of them.On March 9, 2018, Chile signed the expanded and renewed TPP agreement, also called CPTPP—the acronym for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The original TPP agreement hammered out in 2016 had to be replaced by the CPTPP after the United States pulled out of the accord. The American government had demanded tariff protection for twenty-two of its key industries, a notion which the Trump administration would have only made more repugnant.
The other nations could not agree with the terms sought by the Land of the Free. That is because TPP—and now CPTPP—are quite simple agreements. Most tariffs, duties, value added taxes are eliminated immediately between member countries. Most related regulations are, too—although a few irksome ones are still included. However, the CPTPP is not a Behemoth document like NAFTA. It is, instead, rather simple.
The main complications in 2018 were found in that some countries will phase-in most tariff and tax reductions over four years, instead of immediately, with a few being phased-in over ten to fifteen years. As far as I could tell, Chile only phased-in tariff elimination for iron and steel products over a few years. Tariffs and VAT for nearly all items were eliminated on March 9, 2018, and a few other countries followed suit. Overall, considerable immediate relief is good, and waiting a few years for most of the rest to come into play is not too bad.
Since the participating country list is now longer, Chilean consumers will benefit from lower prices. Chile’s tariffs were already low, 6% across the board for new goods and 9% for used ones. Since 2005, Chile had connected with New Zealand, Brunei and Singapore to eliminate all trade barriers (i.e., import duties, value added taxes, and onerous import/export regulations) between them via the original TPP treaty. Chile already has separate free trade agreements with the United States and the European Union.
Now, in 2018, the list of CPTPP participating countries has expanded to eleven: with Canada, Australia, Malaysia, Vietnam, Japan, Mexico and Peru now included—representing a total population of 516.7 million people and featuring eight OECD-members or otherwise developed small countries. Moreover, Taiwan, the Philippines, Colombia, Thailand, Laos, Indonesia, Cambodia, Bangladesh, South Korea, India and Sri Lanka have all expressed interest in joining CPTPP—which would bring the total number of countries to twenty-two—representing a total population of 2.6 billion people and featuring ten OECD-members or otherwise developed small countries. Thus, CPTPP is already a big nearly-free market and will probably get much larger.
Businesses also benefit from facilitated trade between these countries, no matter in which of the countries their headquarters is located. Furthermore, CPTPP features a mechanism whereby investors or companies have the right to sue foreign governments for treaty violations. CPTPP also significantly paves the way for pharmaceutical development and distribution among its members, likely providing great access to better healthcare for member countries and lower cost.
The least attractive parts of the CPTPP are its imposition of environmental standards imposed by radical ecologists (which most of the signatories were already doing anyway) and strict human rights rules, including damaging child labor laws. Both of those things will tend to increase poverty and dampen economic growth. Stricter intellectual property rights provisions will be applied as well. Nevertheless, albeit the CPTPP is pretty far from strict libertarianism, it is overall a libertarian-favored policy that should bring many benefits to people living in member countries, like Chile.
John Cobin, Ph.D. Twitter
Visit AllAboutChile.com for discussion and forums about the country. Non-wealthy immigrants to Chile should also create a portable income by signing up to be a 51Talk online English teacher. Read more details about the job in my previous post on the subject.
For a brief introduction consider Dr. Cobin’s abridged 2015 book (56 pages): Chile: A Primer for Expats ($19), offering highlights (somewhat outdated) found in the larger book. Buy Dr. Cobin’s Public Policy books at Amazon.com: