The blog Shaping the Pacific Alliance is introducing a new feature that aims to contribute to the ongoing academic and non-academic research about the Pacific Alliance. The new feature is a library that encompasses more than 200 publications examining the Pacific Alliance. From books to journal articles, general articles and briefing papers, the library provides visitors with a substantive number of documents produced mainly in  Spanish and English.

Visitors will be able to research the publications through the general search engine. Users can also employ key terms to find the materials they are looking for. Publications can also be found by their type (eg journal article, working paper) and language. A research cloud depicting the most common terms used in the publications is also available on the right-hand side, at the bottom of the library page. In case you want to have a bit of fun with your research you can give it a go!.

The Pacific Alliance closes the year with a busy last week. A couple of significant events took place and deserve some consideration. First the meeting of the technical groups in Bogota from the 11 to the 13 December. Second the presidential election in Chile.

The meeting in Bogota gathered more than a dozen technical groups and subcommittees on issues regarding tourism, gender, institutional matters, digital agenda, education,  regulatory cooperation, innovation, external relations and SMEs. Around 160 government officials from the four countries attended the meeting to discuss progress in the different areas and the action plans for 2018.

In the face of the fourth industrial revolution, the settling of disruptive technologies and the non-stoppable pace of digitalisation it is timely to question the role that regional mechanisms/institutions play as enablers and governance instances of these technological developments. This is not only because of the economic and welfare benefits arising from them but also for the need to address the tensions and dilemmas they pose to traditional economic systems, patterns of production and labour.

Aware of this context and the challenges it presents, the PA recently launched a roadmap for its Digital Agenda focusing on four main pillars: (i) digital economy; (ii) digital connectivity; (iii) digital governments; (iv) digital ecosystems.  The PA proposes an ambitious goal towards the creation of a regional digital market. The PA members commit themselves to the development of an internationalisation strategy for their IT industries and digital entrepreneurs. The content and scope of this strategy on a regional level is yet to be defined.

NAFTA parties decided last week to hold only one extra round of negotiations before the end of 2017, after previous announcements that seven rounds would be carried out before the end of this year.  The decision was motivated by a stalemate reached during the fourth round of negotiations when some proposals made by the US were not well received by its Canadian and Mexican counterparts. The WTO-minus proposals made by US negotiations raised concerns over the likely success of the renegotiation process. Other controversial proposals included a sunset clause for the renewal of the agreement every five years, the elimination of the investor-state dispute mechanism and the more stringent rules of origin.

Photocredits: Ikpro/FreeDigitalPhotos.net
However, it is not likely that it would be Canada and/or Mexico who would put an end to NAFTA with a very thorny road ahead. Withdrawal from the US is also remote. Extensive legal debates on the matter include whether the US president could withdraw from the agreement without congressional approval and how far the executive’s powers go regarding foreign affairs relations.  An arsenal of legal and judiciary tools will be ready to prevent and block such an outcome (see CRS).

The reinvigorated interest of closer relations with the PA by some of the observer states is partly attributed to the uncertain future of the TPP. With a grey cloud over the TPP,  the negotiating countries are hoping to update and expand their network of commercial agreements through new channels. It is not a coincidence that, except for Colombia, the rest of original members and all the potential associate members were previous TPP negotiating parties. It would not be a surprise that they would attempt to capitalise on the issues already agreed on the TPP table when negotiating their associate member agreements. I will discuss here some concerns around the future negotiations.

Firstly, as the Pacific Alliance members and the candidates to associate members have started the negotiating process for future commercial agreements of ‘high standards’ it is timely to examine what the original PA members have in mind to put real content into an agreement of this kind. It is necessary to set the expectations and offensive interests that the PA members will put forward as a group rather than individually. Hopefully, the association agreements would be more than a form of a TPP-minus accord, where the concessions made in response to the US pressures in the context of the TPP would be withdrawn from these association agreements, and the rest will be kept untouched in the form of informal diffusion of TPP rules.

It would also be important to set a standard as to how the PA will push to incorporate disciplines in the areas of cooperation that are of interest for the mechanism: (i) movement of persons, (ii) education, (iii) trade facilitation, (iv) science technology and innovation and SMEs.

The Pacific Alliance had a busy week closing with the Presidential Summit on Friday 1 July where new mandates to guide the progress of the integration mechanism were decided on.

The presidential summit was preceded by meetings of the High Level Group, The Free Trade Commission, The Ministerial Council and the Metting of Ministers of Finance. The IV Business Metting also took place on the 29th June. In addition, the third meeting of higher education institutions of the PA on the 21 and 22 June was an opportunity to discuss the role of the academic and student mobility platform for the integration of the PA countries.

Steps were taken this week on various fronts. First the PA members approved an accord that sets the tax rate on pension funds investments returns at 10 percent. This agreement covering the pension funds from the four members is an effort to boost investment in infrastructure projects while opening up the pool of investment options for these entities within the region. However this is a ceiling rate that will only require implementation by Mexico since Chile and Peru have a rate that is already  5 per cent, while Colombia has a zero per cent rate for pension funds from the PA. In addition, a decision on the creation of a regional infrastructure fund is still pending.

Photocredits: yodiyim/FreeDigitalPhotos.net
Mexico is the biggest economy within the Pacific Alliance. Members praise in being the 7th or 8th largest economy in the world, but this is in great part attributed to Mexico’s membership.

This is why it is worth questioning the relevance that Mexico will give to the PA agenda during times of uncertainty regarding the future foreign policies and diplomacy by its neighbour and largest commercial partner the US.

As  Trump seems to follow through on some of his campaign proposals, Mexico will need to work out its strategy towards the US and define its corresponding offensive and defensive interests. It will soon become the number one priority of Mexico’s foreign policy which could deviate the attention from the PA implementation.

One scenario is if the NAFTA renegotiation takes place. Renegotiation would be a time-consuming endevour that would demand extensive public consultations and the involvement of several interest groups. As some experts have pointed out, this would be the only way to reach a deal that looks after the defensive and offensive interests of Mexico while balancing the negotiation with the US. The original NAFTA negotiations took a long time, and general wisdom suggests that similar agreements take at least two years or more to be concluded and the same time to enter into force. If TPP (Transpacific Partnership) was at the forefront of the main concerns of trade officials in Mexico, its place will be taken by NAFTA renegotiation instead of PA implementation. This scenario is still uncertain because future renegotiation has been bogged down with the recent announcement by President Trump that the construction of the border wall with Mexico will commence soon. In the meantime, Canada has signalled an intention to renegotiate a trade deal with the US with or without Mexico in it.

NAFTA update could bring indirect benefits to the PA by pushing additional regulatory and domestic policy reforms. However, this outcome is contingent on the approach taken by a future negotiation between the three NAFTA members and final approval by the US Congress.

A second scenario is that tensions between Mexico and Trump will escalate with the implementation of further measures by the latter that follow a populist and nationalist approach to its role in the presidency. This situation will likely push Mexico to divert its economic dependency towards more diversified markets in Asia, Europe and down in Latin America. This would be a process that takes time and for which Mexico and the Mexicans are not well prepared.

Up to this point, Mexico has not signaled an interest in becoming the leader driving the progress of the PA, despite its economic power that would suggest it as the natural leader. This is due to some extent with the lower levels of economic interdependence and commercial ties with its South American counterparts. There are no real economic incentives that would retribute on that leadership. However political pressures of the current relations with the US could trigger more proactive actions by Mexico to implement the free markets that PA attempts to pursue.

Time will tell…

Sources: wilsoncenter.org

wilsoncenter.org

latinamericagoesglobal.org

Photocredits: watcharakun/FreeDigitalPhotos.net
All the built up expectations last year towards the possibility of concluding a plurilateral agreement on services on a large scale have now moved into limbo in the last month. The  23 parties announced in early December that negotiations were suspended after the US presidential election and due to difficulties in getting the EU to engage on key issues. Progress on the front of other mega-regional agreements such as TPP is even less likely.

The recent decision calls for the need to push forward with the services agenda within the Pacific Alliance which keeps a humble approach on this field. There is a lot to be done on this front starting with the development of an overarching regional policy that is certainly not exhausted by the aggregation of single services offers of each member.

Services exporting baskets in the PA members continue to be low when compared to other developing countries in Asia Pacific. Trade balances systematically show a deficit on services trade despite some progress and rapid growth. Transport and travel continue to play the most import role in the services export baskets of the countries while the potential of other commercial services, including business services, continues to be unleashed. A regional policy requires enhancing services exports within the PA and beyond.

Many issues should be considered for a regional services policy, but I would like to call the attention to some of them in this post. First, the need for regional strategies that help developing, not only competing but also complementing and integrated services offers. The members  provide competing services today in sectors such as engineering, software and IT services, health services, animation and video games. Second, regulatory coordination and harmonisation to facilitate services trade within the PA and with third countries. Moreover, it is worth examining the offers and general provisions contained in the TiSA agreement to improve some of the commitments made by the PA parties in the current agreements.

It seems that the global political scenario makes the PA the only foreseeable option for the members to move forward at a regional level in the field of services in the forthcoming years.

Sources: Bloomberg, WTO Reporter