Chile to host APEC 2019. A follow-up review

Chile will be hosting APEC summit 2019. Therefore, preparations have already started.  For Chile, the Asia-Pacific area is considered a strategic target to hit and efforts to penetrate this market go from the signature of FTA's to the Pacific Alliance's drive to establish a bigger commercial platform, and the initiative to revive the mega-deal TPP, which had failed with America's withdrawal in Jan 2017.

What went on in 2017?

Country Risk Chile follows up on the analysis of the Pacific Alliance's "drive against protectionism"  in the wake of President Trump's withdrawal from the TPP mega-trade deal announced Jan 2017.  In the article of June 2017, 3 main points were brought to attention by Country Risk Chile, namely anti-protectionism, innovation, and inclusive growth.

1.    The Pacific Alliance member countries (Mexico, Peru, Colombia, and Chile) unified to expand membership status to Australia, New Zealand, Canada and Singapore through the legal implementation of  "Associate State Member". Indeed, during the PA summit of Cali, Colombia, 2017, negotiations that commenced in that line, culminated January 2018 with the second round of talks aiming at greater penetration into the Asia Pacific markets and the creation of a wider commercial platform.

2.    Despite USA's withdrawal from the TPP, Chile announced to continue strengthening ties "with all countries interested in deepening commercial deals, whether that includes China or in the best case the USA"  said Chilean Foreign Minister, Heraldo Muñoz, back in March 2017, during Viña del Mar summit.  According to Minister Muñoz, Chile is a small economy and requires to continue to increase its flux of commerce. 

"We are a small economy depending on foreign trade and the existence of international rules and regimes as orderly as possible, with clear norms and the rule of law, and those will continue to be the standards for Chile", said Muñoz ahead of the summit

3.      The PA, in general, has innovated with the implementation of LAB4+ to aid SME's to comply with the entrepreneurship ecosystem fostered by the Technical Committee of the PA (crowdfunding, Angel investor, venture capital) and the Competitiveness Division of the InterAmerican Bank. The PA has also innovated through a scholarship program (Becas Alianza del Pacífico) to foster academic/student mobility in Science, Innovation, Environment, Climate Change, within the area of the 4 member countries. Chile, in particular, has had an incredibly busy 2017. By September, Chile celebrated the 5-year-old trade deal with Hong-Kong during the 3rd version of the Chile Week China organized by ProChile. According to DIRECON's Director, Paulina Nazal, this is significant for Chile. "This deal is significant as both Chile and Hong-Kong are the natural gates to Latin-America and Asia respectively," said Nazal at the press release. 

In October, in Tokyo, Chilean authorities inaugurated Chile's first commercial office in the region to attract investment through Invest Chile, the governmental unit fostering a public-private initiative to strengthen commercial ties.  Japan ranks Nr 4 in Chilean export destinations, after China, the USA, and the UE. Chile took the opportunity to celebrate 120 years of diplomatic relations and a 10-year-old bilateral commercial deal (with a view to modernizing it) and which features an increase in food, wines, salmon and Japanese investment during the first quarter of 2017. 

During the Apec Summit 2017, November, in Vietnam, Chile deepened its bilateral deal with China in force since 2005.  The upgrade included a chapter on e-commerce, rules of commerce, services, rules of origin, technical and economic cooperation, among other issues.  China is Chile's Nr 1 export market today totalizing USD 17,232 M, 6,6% more than in 2016. Trade volume in 2016 totalized USD 31,474 M.  Non-copper sales such as agriculture have also increased 35 times more than in 2006 since the FTA came into force (DIRECON figures). 

At the summit, President Michelle Bachelet signed 3 cooperation agreements with the hosting country Vietnam, on child protection rights, public policy formulation, and diplomatic cooperation.  Bachelet agreed to back the nomination of Vietnam as a member of the Security Council for the period 2020-21. 

 What is new?

Chile continues to lead in initiatives to foster economic integration and reduce asymmetries for a more inclusive commerce, according to WTO rules.  That way Chile has set up an informal group initiative to aid SME's in the global chain of commerce, to give them visibility and presence at the heart of the WTO's ministerial round of Buenos Aires, Argentina, Dec 2017.  "Amigos de MIPYMES" talks (Friends of SME's) seek to ease the barriers imposed on small- and medium-size companies in terms of red tape and other major obstacles impeding their full integration to international trade. Such initiative at the heart of the World Trade Organization is a key strategy for Chile to bridge the gap between multinationals and SME's. 

Since the summit held in Viña del Mar, organized by Chile in the wake of America's withdrawal from the TPP, ex-member countries met at the Apec summit in Hanoi in November,  with the intention to revive the mega-deal (known as CPTPP now).  As result, the signature could materialize in March 2018 in Santiago. Thanks to considerable advancement in the negotiations held in Tokyo, last January, the TPP11 signatory countries (the ex TPP member countries without the USA) are ready to sign the CPTPP deal soon now.  For the CPTPP to be ratified, a quorum of 6 countries will be needed, or 50% +1.   "This is good news for job creation and prosperity in the Asia Pacific region", said Chilean Foreign Minister, Heraldo Muñoz at the press release.

Some observations:

The unifier factor in the PA initiative to launch the "associate status member" to include 4 competitive economies such as Canada and Australia lies at the heart of leadership and the necessity of smaller economies to see their commerce expand for the prosperity of their citizens. Hence, the strategy to reach the Asia-Pacific market area is significant.  However, the full integration of Latin-America as a bloc to negotiate food exports for example to Asia, in particular to China,  should be considered a key strategic target.   In that regard, the convergence between the PA with Mercosur or separately with the rest of Latin American countries should be pursued to bring the Latin-American region into a much more robust position to negotiate with the big trading partners of the world, and enable the region to enjoy a stronger bargaining power n the near future to push for sustainable growth, green investment, renewable energies, equity and especially on the quality of transactions. 

Soledad Soza, February 8, 2017