I would like to thank the Bertelsmann Foundation and the Council of the Americas for putting this event together and for providing me with an opportunity to share my views on the Pacific Alliance and the new Bertelsmann Foundation report called The Pacific Pumas.
A unique process
To paraphrase George Orwell in Animal Farm, “all free trade agreements are equal, but some free trade agreements are more equal than others.” Indeed, there are dozens of FTAs in force, and Mexico and Chile are the two countries with the largest FTA networks.
But the Alliance it is not a run-of–the-mill trade initiative. In fact, it represents a very ambitious, and at the same time very pragmatic initiative among like-minded countries. It is a new, pragmatic, results-oriented and market-friendly model of open regionalism. Pacific Alliance members mean what they say, and then do what they say.
In its three pillars of trade, mobility, and cooperation, the Alliance encompasses a broad array of topics beyond common trade and investment initiatives.
The Alliance will provide for the free movement of goods, services, capital and people, to make the most out of synergies between Pacific Latin American countries, and also to serve as a bridge to the Asia Pacific.
We have managed to achieve a very high level of ambition in a surprisingly short timespan through a flexible engagement process. Instead of waiting to achieve agreements in all three pillars before letting any of them enter into force, we have opted to follow an early harvest approach, whereby we implement agreements when they are achieved and keep momentum moving forward with new initiatives on a broad spectrum of topics.
The Alliance is thus best understood as a dynamic process, rather than a trade and investment agreement.
The Alliance has elicited a great deal of interest, a reflection of the opportunities many countries see in this process. There are currently thirty observer countries.
(Countries that currently have observer status are: Australia, Canada, China, Costa Rica, Dominican Republic, Ecuador, El Salvador, Finland, France, Germany, Guatemala, Honduras, India, Israel, Italy, Japan, Morocco, New Zealand, Panama, Paraguay, Portugal, South Korea, Spain, Switzerland, The Netherlands, Singapore, the United Kingdom, United States, Turkey, and Uruguay).
The fact that there are ten European observer countries and that the Bertelsmann Foundation just issued The Pacific Pumas report also reflects the high degree of interest that the Alliance is generating in Europe.
There are several reasons for this. First, and perhaps foremost, as I mentioned at the outset we deliver what we promise. For seasoned trade negotiators and observers, it has become the norm to see negotiations drag on and on, with no end in sight. In contrast, the Alliance achieved a very ambitious trade agreement in both scope and coverage through a quick negotiation process.
Secondly, given that the four Alliance members are like-minded countries, this initiative has maintained support and momentum despite several changes of governments and provides privileged access to Latin America and the Asia Pacific. The aim of the Alliance members is not merely to liberalize tariffs, but to reduce transaction costs across the board in order to facilitate trade and investment flows in the region. The great care and attention that is being given to reducing or eliminating non-tariff barriers and to facilitating business transactions will open new opportunities for those companies willing to invest in the Alliance countries.
They will have access to a market of over 218 million people in the most stable and dynamic Latin American economies, and be able to source from the most competitive providers in the region. Mexico, on its own, is already the second largest destination for US exports. In fact, the US exports more to Mexico than to Brazil, China, Russia and India combined. And the Pacific Alliance countries buy more products from the US than the European Union ($273 USD billion v $262 billion).
In addition, given that three Alliance members are also participating in the Trans-Pacific Partnership (TPP) negotiations, foreign companies that establish themselves in any of these countries and fulfill rules of origin requirements will also have privileged access to nations in the Asia Pacific. European companies don’t have to decide whether to focus their resources in Latin America or the Asia Pacific. By investing in the Pacific Alliance, they can literally get the best of both worlds: preferential access to Latin America and to the Asia Pacific.
Third, the flexible nature of the Alliance means that for observer countries there is no one-size fits-all model for engagement. For instance, the United States has expressed an interest in regulatory cooperation, social and environmental responsibility, travel facilitation and customs modernization. This provides ample scope for engagement with the Alliance on issues where there are natural complementarities and synergies. The ten European countries that are currently Alliance observers will also have ample scope to engage with Alliance countries on a broad array of cooperation issues.
Fourth, the flexible nature of the process means that the issues currently covered under the three pillars can evolve and, indeed, new pillars can be included if there is consensus among Alliance members. One such pillar that may be worth exploring –and please note that this is just an idea that has not yet been approved by Alliance leaders– is cooperation on energy issues. The availability of reliable sources of energy at competitive costs is absolutely key for the competitiveness of a country or region, so imagine the huge positive impact that further cooperation in this arena would have on the Alliance economies and on the foreign companies that decide to invest there.
In short, the Alliance countries taken together are the world’s eighth largest economy, they have an ambitious trade and investment liberalization process in place, their macroeconomic stability will stand them in good stead for future growth, they have maintained staunchly pro-business policies and provide different ways to engage, either through observer status or by accepting new members. They are a bastion of stability amid international economic instability and should share a bright future.