Peru, Australia Clinch Free Trade Pact

16 November 2017

Officials from Australia and Peru announced last week that they have finished talks on a bilateral trade accord, concluding a negotiating process that was announced last year and formally launched just seven months ago.

The agreement was announced on the sidelines of the Asia-Pacific Economic Cooperation Forum (APEC) Leaders’ Week, held in Da Nang, Vietnam. Leaders from both trading partners flagged the potential gains, particularly in goods and services market access, as well as the opportunity to deepen a bilateral economic relationship that has already made strides in recent years.

For example, the Australian government notes that bilateral goods and services trade has lately been on the rise, hitting A$590 million (US$447 million) last year, already a significant boost from the year prior.

The new Peru-Australia deal will eliminate over 90 percent of tariffs on each side, officials say, along with covering areas ranging from investment and services to intellectual property and digital trade. Pedro Pablo Kuczynski, Peru’s President, stated on social media site Twitter that the deal will bring “more investments and jobs for the country.”

“The deal generates countless opportunities for Peruvian exporters in a market where GDP per capita is nearly US$50,000,” Peruvian Minister of Foreign Commerce and Tourism Eduardo Ferreyros said in a formal statement.

According to comments reported by El Comercio, Australian Prime Minister Malcolm Turnbull stated that both countries “have much in common, being two of the only countries to sustain uninterrupted economic growth for over a decade.”

Trading relationships

The two countries are both members of the Trans-Pacific Partnership (TPP), which was recently renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) during a separate meeting in Vietnam last week, also on the APEC sidelines. (For more on the CPTPP, see related story in this edition)

That accord will still require further negotiations, along with signature and ratification, to move forward. Meanwhile, Australian and Peruvian officials have flagged a bilateral FTA as an opportunity to build on the expected CPTPP gains.

Furthermore, Australia is one of the four countries currently negotiating to become an associate member of the Pacific Alliance, a four-country Latin American trading coalition that includes Peru as one of its full members. (See Bridges Weekly, 2 November 2017)

Eyes on agriculture, minerals

For Peru, the accord will increase market access for its agricultural products, particularly fruit and fish, as well as various mineral and some machinery exports. Meanwhile, Australian agriculture exports of sugar, beef, and dairy are expected to see tariff cuts when entering Peru.

In a press release, Turnbull said that the agreement will grant Australian sugar producers “more than any other sugar exporting country […] and equivalent to roughly 30 percent of Peru’s sugar imports.”

Minerals is another key area for both economies. For example, Peru is a leading global producer of copper, zinc, tin, and gold. According to an Australian government summary, the new accord would make it easier for Australian businesses to become involved in minerals extraction in the Andean nation, such as by taking steps to give investors more legal certainty, along with eliminating tariffs on mining equipment, technologies, and services exports (METS).

The accord’s investment terms include a series of investor protections, including foreign investment screening and an investor-state dispute settlement (ISDS) mechanism, as well as provisions aimed at ensuring the “right to regulate in the public interest.”

Its services provisions are designed to facilitate the exchange of professional services, including by improving the recognition of labour market qualifications and degrees. The accord would also aim to make it easier for Australian lawyers, accountants, engineers, and architects to bid for public contracts in the South American nation.

The bilateral agreement now needs to undergo a few technical steps, followed by signature and ratification in each side’s domestic legislature.

ICTSD reporting; “Peru-Australia free trade deal to boost sugar, beef, rice and wine for exporters,” ABC NEWS, 10 November 2017; “Peru, Australia to sign declaration of intent on bilateral FTA,”  ANDINA, 7 November 2017,” “Perú y Australia firmaron compromiso para concretar un TLC,” EL COMERCIO, 10 November 2017; “Peru and Australia sign free trade pact at APEC Summit,” PERU REPORTS, 10 November 2017.

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