Analysis Peru US Trade Relationship: 10th anniver sary ofTrade Promotion Agreement

analysis

PERU - US TRADE RELATIONSHIP: 10 TH ANNIVERSARY OF TRADE PROMOTION AGREEMENT

Ambassador Hugo Claudio de Zela Martínez

Since 1826, Peru and the United States share diplomatic relations founded on our common values of Democracy and Freedom, the promotion of Hemispheric Peace and Security, and the longstanding common goal of achieving prosperity for our people through economic growth, based on a mutually beneficial and profound trade relation.

Economic ties are among the many important aspects of our bilateral relations. As a matter of fact, 2019 marks a cornerstone as the Governments of Peru and the United States commemorate the 10th anniversary of the Free Trade Agreement (FTA).

The reasoning behind the signing of the trade agreement was to secure access for Peru’s exports to a market of 300 million consumers; as well as to guarantee permanent tariffs’ exemptions from which we were already benefiting, on a temporary basis, through the Andean Trade Promotion and Drug Eradication Act (ATPDEA), previously known as Andean Trade Preference Act (ATPA).

It was also the first time we negotiated such a comprehensive agreement that included provisions in all aspects of our bilateral economic relationship: from trade in goods to investments and intellectual property, even incorporating groundbreaking provisions concerning the protection of the environment and labor rights, as highlighted by the United States Trade Re

presentative. Moreover, after concluding the negotiation process, a substantive change occurred in US Congressional Leadership, prompting supplementary negotiations and adjustments that, in the end, allowed us to reach the agreement that is currently in place. kewise, the US has become an important supplier of raw materials and intermediate products (65%), and capital goods and construction materials (25%), which in turn enhance the productivity of Peruvian industries, making our bilateral trade relationship one of the most complementary.

Peru is a rich and megadiverse country with immense natural resources. It is the largest producer of zinc, silver, and fish oil and the second largest exporter of copper and lead. For this reason, it was predictable that our initial step was going to be to consolidate our position as exporters of traditional goods. However, it was a priority to improve the competitiveness of our companies and add value to our exports, which we can now proudly acknowledge that we are in the process of achieving. Since the Peru - US FTA came into effect, our non-traditional exports have increased by more than 10 percentage points, representing 43% of the total in the last year.

Ten years after the FTA came into effect, bilateral trade reached a landmark US $17 billion in 2018. More importantly, the United States has consolidated itself as our main market for non-traditional products and our primary market for value-added goods such as agricultural exports, fisheries and textiles; all of which have significantly boosted our competitiveness and contributed to the generation of more and better opportunities for our country. LiIn 2018, one third of our agricultural exports were destined to the US market. Additionally, Peru exported US $25 million in fruits: bananas, avocados, blueberries and grapes. Since 2009, the shipments of Peruvian avocados, grapes, and mangoes to this market have grown more than 500% in total and some products that were not exported before, such as blueberries and paprika, have rapidly become popular.

We have achieved a considerable presence in the markets of asparagus, blueberries and grapes. There are still opportunities to continue improving our participation in other areas, such as coffee and avocados, where Peru’s market share is below 10%. Furthermore, there are other business opportunities worth considering for new products that are highly demanded by American consumers, such as palm oil and watermelon. Peruvian businesses must consider the possibility of expanding their shipments to include the United States.

Hugo de Zela (Photo: Ministry of Foreign Affairs, Peru)

menting the agreement represented a major commitment for our country’s development through its participation in international trade networks. We have achieved important progress in adding value to our exports and improving our companies’ productivity. However, we know that we need to keep working in these areas, while promoting additional efforts in other essential aspects like innovation, technology transfer and improvement of human resources, among others.

There are many reasons to believe that we can take advantage of the opportunities to establish even stronger commercial ties with the United States. This will allow us to maximize our potential as business partners, especially by attracting greater investment and promoting bilateral trade in areas such as agriculture, infrastructure, energy, mining, and finance.

HUGO DE ZELA. Degree in International Relations from the Diplomatic Academy of Peru. He has studies in Economic and Administrative Sciences at the Universidad de la República Oriental del Uruguay, as well as doctorate studies in Political Sciences at the Universidad del Salvador in Argentina. A career diplomat with 42 years of service, he has served as permanent representative to the Organization of American States (OAS), Peru’s ambassador to Brazil and Argentina, Peru’s national coordinator in the Rio Group, as well as a member of Peru’s delegation in border negotiations twith Ecuador from 1997-1998. He has also served as chief of staff of the General Secretariat of the Organization of American States on two occasions, from 1989 to 1994 and 2011 to 2015. From April 5, 2018, to April 21, 2019, he served as Vice Minister of Foreign Affairs. Since April 22, 2019, he is Ambassador of Peru to the United States and Coordinator of the Lima Group.