Peru Submits Pacific Trade Pact to Congress for Approval

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By Lucien O. Chauvin

July 21 — Peru's government July 21 submitted to Congress a broad trade pact that joins 12 Pacific Rim countries just one day before new lawmakers take their seats in the country's 130-member unicameral Congress.

Prime Minister Pedro Cateriano announced that documentation for approval of the Trans-Pacific Partnership (TPP) had been sent to Congress, saying it will be up to the next Congress to approve the agreement.

“This is a fundamental step for our development,” Cateriano said. It puts Peru “alongside the most powerful countries in the world.”

President Ollanta Humala's government leaves office in eight days. President-elect Pedro Pablo Kuczynski, who takes over on July 28, has already said he will sign the pact following its approval.

“I will sign the agreement once it is approved,” Kuczynski told Bloomberg BNA during a June interview shortly after his razor-thin victory (113 ITD, 6/13/16).

The TPP, which includes the U.S. and Japan, was signed Feb. 4 in New Zealand. The signing kicked off a ratification process in the 12 countries that could stretch into 2018. The agreement needs to be approved by six countries, representing a combined 85 percent of members' gross domestic product, for it to be implemented.

Mexico's Senate already has begun its review of the trade pact and a decision on its ratification is expected by the end of the year (83 ITD, 4/29/16).

Road Ahead

The incoming Congress, despite being dominated by the opposition, will probably approve the agreement without much ado. The dominant party, the Popular Force with 73 lawmakers out of 130, included approval of the TPP in its government plan.

Kuczynski's party, called PPK after his initials, is squarely on board. The party has 18 lawmakers. Several smaller parties also support the agreement. In addition, incoming Foreign Trade and Tourism Minister Eduardo Ferreyros held the same post 2010-2011 during a previous administration and was Peru's first negotiator for the TPP when talks began late in the last decade.

The only opposition will come from the Broad Front coalition, which has 20 seats. The Broad Front doesn't have the votes to stop TPP's approval, but it could complicate future relations with Kuczynski's government. The party supported Kuczynski in his June 5 run-off against the Popular Force's Keiko Fujimori, helping him secure a victory of less than 50,000 votes out of more than 18.3 million ballots cast (72 ITD, 4/14/16).

“Popular Force supports the TPP, so with their votes and ours this will be approved. It will not be fast-tracked, first going through commissions. There will be protests against its by the left, but I am confident we will have it approved by the end of the year,” PPK Congressman Carlos Bruce told Bloomberg BNA.

Labor Complications

One complication is Peru's labor legislation, which could create problems for the TPP, as well as the existing free-trade pact with the U.S., in place since 2009.

A March report by the Office of Trade and Labor Affairs (OTLA), a division of the U.S. Department of Labor's Bureau of International Labor Affairs, was highly critical of Peruvian legislation regarding the use of temporary contracts (59 ITD, 3/28/16).

Decree Law 22342, in place since the 1990s, allows agricultural firms to employ workers with short-term contracts on an unlimited basis. Other sectors, such as garments and textiles, may use the short-term contract mechanism to employ a worker for up to five years.

Next Administration

The OTLA report, however, said there are “significant concerns regarding whether the system in place to protect the right of freedom of association of workers employed on unlimited consecutive short-term contracts in the NTE (non-traditional exports) sectors is sufficient to protect the right to freedom of association.”

President Humala's administration agreed to review the legislation and met with labor unions to draft an executive order addressing the OTLA concerns. The National Federation of Textile and Garment Workers on Peru (FNTPP) said the government appears unwilling to budge, despite assurances that the executive order would be published.

“The government still has time to publish the decree eliminating distortions, but we are not hopeful because they have had months to do it. They are kicking this to the next administration, which will have to act,” said Jose Chahua, spokesman for the FNTPP.

To contact the reporter on this story: Lucien O. Chauvin in Lima, Peru, at correspondents@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

For More Information

The OTLA report is available at http://src.bna.com/g0Q.

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