Remarks on the Seventh Anniversary of the U.S.-Peru Trade Promotion Agreement

Charles H. Rivkin
Assistant Secretary, Bureau of Economic and Business Affairs
University of the Pacific
Lima, Peru
February 8, 2016

Thank you for your warm welcome, and thanks to the University of the Pacific for hosting today’s event. I’m particularly glad to be here with Minister Silva, and I want to take this opportunity to congratulate her on her recent trip to New Zealand for the signing of the Trans-Pacific Partnership. I would also like to thank in advance economics professor Dr. Fernando Gonzalez Vigil for moderating today’s discussion. This university should be proud to be the institution whose academics have helped shape Peru’s economic and trade agenda.

Peru is such an important partner of the United States in so many areas. We share a commitment to democracy, a respect for human rights, a belief in the rule of law, and support for open markets. Our bilateral relationship is stronger than it’s ever been.

But today I want to talk specifically about how our economic relationship has grown and how it stands to become even stronger. Peru has played – and continues to play – an important role in promoting open markets and regional integration in Latin America and beyond. We need only look at Peru’s role as this year’s APEC Chair as an example of this commitment to building global open markets. I want to thank Minister Silva and the Government of Peru for assuming this important role and guiding this process.

U.S.-Peru Trade Promotion Agreement

Last week, we celebrated the seventh anniversary of the entry into force of the U.S.-Peru Trade Promotion Agreement, or the PTPA. Simply put, the PTPA has been a resounding success. It’s become a cornerstone of our bilateral relationship. We can see the impact it’s made and the opportunities it’s created for so many individuals – individuals like Rachelle Olortegui, an entrepreneur here in Lima, whom President Obama invited to the White House last year for a Global Entrepreneurship meeting.

Back in 2008, Rachelle founded a business called EcoInca, which works directly with farmers in the Andes to produce organic herbal teas and grains. Rachelle’s company provides farmers with technical assistance, micro-loans, seeds, and fertilizer, and it’s involved every step of the way, from planting to harvest. After about five years of building her business, Rachelle’s company began exporting to the United States for the first time, where grains like quinoa are in high demand. Now success didn’t happen overnight. But thanks to the PTPA, and a lot of perseverance, the company’s exports gradually began to bear fruit, and are now supporting farmers and local communities in the Andes.

Rachelle’s story is just one of many. So many people in both of our countries have benefited from this agreement. And the numbers bear that out. Over the past seven years, the PTPA has led to nearly $100 billion in two-way trade, driving growth and employment in both countries. The United States is now one of Peru’s top trading and investment partners.

And the agreement hasn’t just helped increased two-way trade, which has grown from $9 billion in 2009 to $14 billion in 2015. It has helped Peru diversify its exports, as well, especially in high-value agriculture, which supports job creation in Peru. Since the PTPA was first implemented, our two-way trade in food and agricultural products has more than doubled, surpassing $3.1 billion in 2014, and holding steady in 2015. I know your products well and regularly savor your fresh blueberries and grapes, your asparagus and avocados in my local supermarket.

The agreement has stimulated job growth as well – particularly in Peru’s agriculture, food, and processing sectors, where a large share of the labor force is engaged.

Beyond the figures, the agreement helped firmly anchor Peru in the free trade camp, driving Peru to negotiate free trade agreements with its other major trade partners, including China, Japan, and the European Union. And, of course, Peru also founded the pro-trade Pacific Alliance with key partners Chile, Colombia, and Mexico.

Small and Medium-Sized Enterprises

Over the past decade, Peru has been one of the fastest growing economies in Latin America. And this trade-driven growth has created opportunities for millions of people, as poverty levels have been cut in half since 2004. But I don’t have to tell you about the success of Peru’s economic transformation – you’ve lived it.

As we go forward, it’s important that we enlarge the circle of trade, even more, so that all citizens can share in the prosperity we seek. The benefits of trade should be spread to more and more sectors of society to achieve equitable, inclusive growth.

So, we need to do more to help small businesses participate in international trade. Small and medium-sized businesses, or SMEs, are the backbone of our economies. They employ more than half of the Western Hemisphere’s workforce. And yet, very few of them sell to customers beyond their own borders.

In Peru, 99.5% of businesses are SMEs, but only 0.4% export. Enhancing SME’s ability to export, connecting them with partners abroad, and formalizing these relationships, will be a driver for future growth and job creation. Being integrated into the global supply chain is critical in today’s world.

That is a big reason why the United States, Peru, and 10 other nations, worked together to conclude the Trans-Pacific Partnership. The TPP is a high-standard, comprehensive agreement that reflects a shared vision of the future of global trade and investment, and promotes a rules-based, market-driven system. That, in turn, will promote opportunities for businesses of all sizes and give consumers more choices across this region.

Thanks to the special efforts of Peru, the Trans-Pacific Partnership is the first trade agreement to have a full chapter specifically devoted to helping small and medium sized enterprises.

By simplifying procedures, TPP will make it cheaper, easier, and faster for small businesses to export. And the agreement will require each member country to create a website specifically for SMEs, with user-friendly information about how small businesses can take advantage of the agreement. What’s more, small and medium sized businesses will now have an ongoing means to engage with TPP governments through a new committee that ensures the agreement is benefiting small firms as intended.

This emphasis on SME’s will be of special importance to businesses owned or operated by women, like Rachelle Olortegui.

As U.S. Secretary of State John Kerry has said many times, no society can prosper when it leaves half of its population on the bench. That is why it is so important we continue investing in women entrepreneurs – in building their skills and connecting them to equal resources and opportunities.

Data has shown that women entrepreneurs invest up to 90% of their earned income back into the prosperity of their families and communities – so, ensuring our policies are inclusive will help level the playing field for all small businesses, and in turn, help our societies prosper.

That’s why we have worked to implement the Women’s Entrepreneurship in the Americas initiative, or WEAmericas, which aims to reduce barriers and increase opportunities for entrepreneurial women in the Western Hemisphere. Its programming and partnerships with the private sector, governments, and NGOs help women gain access to markets, capital, and mentorship opportunities so they can hone their skills. And since we launched it in 2012, twenty-thousand women in more than 20 countries in the region have been empowered by the initiative.

Small Business Network of the Americas

There is broad recognition that reducing long delays and high costs on international commerce leads to increased trade, greater export diversification, enhanced foreign investment and improved competitiveness.

Of course, reducing tariffs is important to promoting trade. But often, the most significant obstacle blocking potential traders is the labyrinth of border and behind-the-border procedures and associated costs. These prevent them trading altogether or at least diminish the ability to expand into neighboring and global markets.

These burdens fall especially on small businesses. That’s why President Obama has announced we’re expanding the Small Business Network of the Americas, or SBNA. The Network of community-based centers is already helping more than two million entrepreneurs create jobs. Its further expansion will help micro, small, and medium-sized enterprises and entrepreneurs throughout the region.

Making it easier to open and operate a business will create opportunities for your citizens and encourage foreign investment. Facilitating business registration will stimulate entrepreneurship, increase the size of the above-ground economy, reduce corruption, and generate more tax revenues to fund public services and sustainable development.

Trans-Pacific Partnership

As I noted earlier, Minister Silva has just returned from the signing of the Trans-Pacific Partnership. Going forward, our number one trade priority is getting the TPP through the domestic process for each of the twelve TPP members. It represents such a tremendous opportunity for Peru, for the region, and for all the Americas.

For Peru, it will be a platform on which you can diversify export destinations among the 11 partner countries. The potential is there: the TPP bloc currently represents 36% of Peru’s non-traditional exports. And Peru will also gain access to five new commercial partners with a potential market of over $2 billion.

TPP will strengthen existing supply chains and build new ones throughout the Americas. It will help drive economic reforms in the region. With its promotion of strong labor and environmental standards, and open and transparent rules, it marks our path towards more open trade and investment, as well as deeper economic integration.

Collectively, we have the opportunity to strengthen both our economic security and our strategic relationships in the Asia-Pacific region long into the future. And now more than ever, I’m confident that we can seize this opportunity and build this future, together.

Thank you very much and I look forward to talking with you further.