Effects of the US-Peru Trade Promotion Agreement

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Obama (Source: Global Trade Review)

Also published on LatAm Observer.

The US-Peru Trade Promotion Agreement (TPA) came into effect on 1 February 2009. The Office of the USA Trade Representative claims that from 2009-2013 total trade between the countries increased from $9-16 billion. However, this increase in trade cannot be attributed solely to a FTA, more likely Peru’s quick recovery after the global recession had a greater effect.

The agreement has its roots in Andean Trade Preference Act (ATPA) between the US and Peru, Bolivia, Columbia and Ecuador. However, when this agreement expired the individual Andean nations opted for individual bilateral treaties with the US.

The TPA was created to eliminate tariffs between the two countries as well as give US investors the same right as local investors and allow the employment of US citizens in Peruvian companies. In addition to increasing foreign direct investment, the agreement also included clauses for the protection of the Peruvian environment. Supporters also claim that both countries are obligated to comply with international labour laws, in particular reducing the amount of child labour in Peru.

The website Public Citizen claims that in April 2006 60,000 signatures were submitted by Peruvian citizens requesting a referendum. However, the agreement was supported by then president Alejandro Toledo, although it has been heavily criticised by his successors Alan Garcia and Ollanta Humala.

It can be argued that bilateral treaties with the US forces the Andean nations to compete with each other for trade with US. Also the introduction of cheap US agricultural imports would hurt small farmers in Peru, possibly forcing them to switch to more profitable crops such as coca.

A higher level of integration with the world economy will naturally see the integration of more transnational corporations to the detriment of small/medium local firms. However, this usually has the effect of improving local production standards, bringing them up to international standards. This then lowers prices for consumers.

Critics describe the agreement as undemocratic as there was no public consultation as to the clauses of the agreement, which was then passed in a lame duck session. However, the TPA should be seen as part of a wider trend of trade liberalisation which includes the currently debated TPP and the Pacific Alliance.

source: LatAm Observer