It is commendable that Chile is opening (with the side letters to the TPP11) a new dimension in foreign trade policy, which will allow it to advance in regulatory actions with respect to international capital and protect itself in case of challenges. But the powers-that-be (including former ‘concertacionistas’) are opposed to this, waging war on the Undersecretary for International Economic Relations.
The harshness and persistence of the attacks directed against the Undersecretary for International Economic Relations, José Miguel Ahumada, has been unprecedented. The presentation of side letters to the other ten members of the TPP11 to modify the dispute settlement regime sent all those committed to the economic order of the last 40 years and the foreign policy that supports it into despair.
It is curious, but not surprising, the coincidence of big business and its press, the political right and politicians of the former Concertación, in their questioning of the government’s initiative to modify the dispute settlement regime contained in the TPP11. This is a fundamental initiative so that public policy decisions, if confronted, have the guarantee of a dispute settlement regime that offers balance and justice in eventual disputes between the transnationals and the government.
The powers that be and the Party of Order do not want to acknowledge that the current government has proposed substantive transformations to uninstall the neoliberal model of the last 40 years. On the contrary, they are preventing them from doing so. This resounding rejection of the end of neoliberalism is not only installed in the inventors of the system of injustice, but has unfortunately penetrated to the bone in many politicians and economists of the “centre-left” who in the past thought it was necessary to modify the basis of the abuses and inequalities suffered by the Chilean people.
The interests are powerful in defence of the current economic model. There is ideology and money involved. And, of course, the beneficiaries of the system do not accept changes to foreign policy because they realise that the regulation of international capital, and a more transparent dispute settlement regime, points to the end of neoliberalism.
Precisely in order to promote productive and social transformations that put an end to the current economic system, it is necessary to redefine the foreign trade policy of indiscriminate openness to the world. Globalisation is not alien to the internal economic reality, but rather determines it.
In the case of our country, and in contrast to Asian countries, foreign policy has not been used to promote transformations aimed at adding value to production processes, and the development of science and new technologies has been abandoned. In the FTAs, Chile has only prioritised trade liberalisation, leaving intellectual property issues, technology transfer and freedom of financial flows, among others, on the back burner. The illusion that the market will take care of these issues is contradicted by international experience.
Thus, foreign policy, unilaterally or through FTAs, has consolidated extractivism, favouring the installation of transnationals in the exploitation of natural resources and in favour of exports. At the same time, this policy has opened the doors to international capital without restrictions, also facilitating its invasive installation in the AFP, isapres and universities. Transnational capital has no restrictions in any sector of economic life.
The growth of the Chilean economy centred on the increase in the export of raw materials has shaped a regressive economy from the point of view of human development, generating precarious employment, social and regional inequalities, depredation of the environment and the progressive depletion of natural resources.
The economic model has encountered growing productive and social limits. The lack of economic diversification has multiplied informal work, has slowed down both productivity and growth itself and, at the same time, the indiscriminate opening up to international capital has served to consolidate profit in the social area (education, health, welfare, housing, etc.), negatively affecting its quality and significantly increasing the socio-economic gaps of the population.
On the other hand, the subordination of foreign policy to trade policy (and especially to FTAs) unquestioningly aligned Chilean diplomacy with the demands of developed countries, distancing our country from Latin America and the countries of the South. In practice, this policy has hindered and undermined potential efforts to act together with the countries of the South vis-à-vis world powers on key issues on the international agenda: predatory financial flows, intellectual property, corporate-state disputes, the environment, among others.
Chile has become part of globalisation, but it has done it badly. It has helped growth, but not development. Bad globalisation has prevented diversification of the economy and has served to widen inequalities. Instead of using globalisation to our advantage, it has served to favour the business of transnational corporations and the interests of developed countries, especially in the areas of their priority: intellectual property, investment protection and dispute settlement.
This is why it is so important to redefine foreign policy and, in particular, to modify some of the commitments established in the FTAs that limit the actions of our public policy. The government is concerned that the elimination of the AFP or the isapres could lead to challenges from the foreign companies that are in charge of these activities. It is also concerning, that the state will be challenged if it moves to regulate and/or redirect foreign investment flows in favour of processing sectors rather than raw materials.
This being the case, the modification of the dispute settlement regime is essential, because the current one has been proven, in various international conflicts, to be clearly biased in favour of transnationals. And this explains the proposal for side letters that the government has submitted to the members of the TPP11 .
As the President has pointed out, our country is not renouncing openness to the world, but “…my role as president is to prevent and defend Chile’s interests and that is what we have been doing” (El Mercurio, 20 November 2022). This is ratified by Undersecretary Ahumada when he states: “I believe that what is fundamental is that within the TPP 11 forum we can first safeguard our strategic autonomy when it comes to establishing public policies. And, secondly, to be able to introduce the issue of dispute settlement mechanisms in the forums in which we participate, whether it is the TPP11 or another” (DF, 19 November 2022).
Advancing the discussion with the side letters has been positive because it has installed the proposal for transformation not only in the TPP but also in the bilateral framework of the FTAs. This is what was discussed with Canada, according to Ahumada: “What we achieved with Canada is to establish a letter that on the one hand proposes opening the discussion to the reform of dispute settlement mechanisms within the framework of the TPP and also to open the door to discuss the investment chapter of the free trade agreement. In other words, we are not only opening the discussion in the multilateral framework of the TPP, but we are also opening the discussion at the bilateral level.
It is commendable that Chile is thus opening up a new dimension in foreign trade policy, which will make it possible to advance in regulatory actions regarding international capital and to protect itself in the event of challenges. It will be possible to prioritise in favour of industrial development sectors and/or sectors that add value to natural resources, without having a sword of Damocles hanging over our heads to prevent this. This will put an end to the investor “neutrality” that establishment economists are so fond of.
And, if negotiated well, it will open up a positive path with FTAs to support the installation in Chile of scientific, educational and technological development centres, in line with the change in the productive matrix. This is what China did in its negotiations with transnationals. This shows the importance of linking productive change with foreign policy.
If we persevere in this direction, we will be able to overcome the radical decline in productivity that the economy has been experiencing for the past 15 years, a structural phenomenon resulting from a narrow, poorly diversified production matrix based on natural resources.
It is clear that extractive activities do not favour innovation, do not help to generate linkages with the economy as a whole and generate precarious employment. Moreover, this production model, as in other countries, has concentrated economic power in the hands of a small elite, whose extraordinary rents have allowed them to capture the political class. This is the material basis of the inequalities and the difficulty of becoming a developed country.
A trade policy, whether unilateral or negotiated (FTAs), with a new development strategy that departs from neoliberalism must be different. Not that it should end openness to the world, because a small economy needs external markets.
As in the internal market, the movement of goods, services and capital must be regulated in favour of the productive and social priorities that the new development strategy will be proposed. And these regulations should not be challenged by dispute settlement regimes that impede them.