Bogota, Colombia (Source: Thomson Reuters)
In the past few years, it seemed that global trade and economic integration would experience drastic changes with the entry of the Trans-Pacific Partnership (TPP) Agreement—an agreement that represented some of the world’s largest economies and brought them together into one super bloc, representing more than 40% of the global economy.
In fact, most thought that this agreement would be a pathway in the history of FTAs, setting a new model for future agreements where Asian economies would be included more often.
Among other factors, TPP has come to a standstill due to protectionist measures happening among key players within the global economic scene.
Nonetheless, in the last few months, the Pacific Alliance bloc has emerged as a beacon, aiming to play a serious role in trading for economic blocs. The Pacific Alliance will try to recover some of the key components amongst economies in the Pacific that the TPP intended to boost.
The Pacific Alliance bloc—which includes Mexico, Peru, Chile, and Colombia—as a community represents the ninth largest economy in the world, and makes up more than half of all Latin American trade. The Pacific Alliance bloc has chosen not to be just a passive spectator of what is happening in the global economic picture, but instead has chosen to be a leading actor by enhancing its current position and creating a 2.0 version of itself. They are doing this by incorporating new economies in the agreement – and potentially whole economic blocs—within its scope.
Additionally, under the “Associate Member” practice, the Pacific Alliance aims to expand trade between blocs even further. In June, they admitted Singapore, Australia, New Zealand and Canada as a step towards expanding their trade flow and investment reach.
In recent statements, the commercial director of PromPerú, Luis Torres, commented that these new initiatives “will create conditions for stronger and deeper value chains in the eight countries” and that he would not be surprised to see other countries willing to join as the negotiations progress. (In fact, the Central American bloc seems ready to ally, as they have said.)
Under the framework of the Pacific Alliance, efforts are being made to keep the ties of commercial unification alive in the Pacific in these times of trade uncertainty caused by protectionist actions.
Moises Garcia is Free Trade Agreements analyst at Thomson Reuters ONESOURCE Global Trade.