Photocredits: antpkr/FreeDigitalPhotos.net
It has already been documented that one of the main reasons for the early success of the Pacific Alliance lies in its ability to show and prove real results by tackling areas and projects where member states share common views and interests. These refer to non-contentious areas such as cooperation in education, innovation, science and technology, as well as the promotion of SMEs.

However sooner than later the PA will have to deal with more sensitive areas of the deep integration process if it is to live up to the expectations created. The PA needs to work on the high hanging fruits and test the political will to tackle these areas which include:

Labour Mobility: this field comprises not only flexibility of migratory requirements for high and medium skill professionals and technical personnel, but also the recognition of their qualifications and requirements to practice in the territory of the parties.

Financial Integration: although parties are working into integrating their stock markets through MILA the operations undertaken within it continue to be low due to hurdles from different sources including differences in regulatory frameworks, barriers to institutional investors such as pension funds and inefficiencies coming from dual fees and non-unified clearance systems.

Unleash the potential of energy integration: Marczak and George call on the need to work on a comprehensive integrated energy matrix within the PA using the Central American (Central American Interconnection System) experience as a precedent.

Progress in these areas requires high levels of regulatory harmonization and convergence that could trigger disagreements among domestic stakeholders benefited by the status quo regulation. Moreover, engaging the private sector participation in funding long-term projects continues to be a challenge. Again harmonisation of regulatory frameworks regarding public-private partnerships constitutes a step in this direction.

I look forward to hearing your insights on areas of work that continue to be high hanging fruits of the Pacific Alliance Integration.

Sources: Jason Marczak and Samuel George, ‘Pacific Alliance 2.0: Next Steps in Integration’ (Atlantic Council and Bertelsmann Foundation, May 2016)

A question that has puzzled me for quite a while is what  the Pacific Alliance and its members really mean with deep integration.

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This is not a minor issue considering that deep integration is one of the main goals of the Pacific Alliance. In the future deep integration and what it entails could serve as a proxy for the success or failure of the Pacific Alliance, thus more clarity on its meaning is necessary.

I have addressed the question and tried to solve the query through different sources.

First, the text of the Framework Agreement accompanying the concept could give an indication as to the meaning and scope of the deep integration goal. Article three prescribes three goals for the PA. The first one is building an area of deep integration to advance progressively towards the free movement of good, services, capital and persons. The qualification provided is that the area of deep integration will be built in a consensual and participative way. The programmatic reference to ‘advance’ in the free movement of factors has omitted the reference to what in the common typology of Balassa refers to the common market.

Second, traditional approaches to defining the concept refer to deep integration opposing it to the concept of shallow integration. The concept was first used by Robert Laurence. It refers to a kind of commercial agreement that deals with behind the border issues. They include disciplines such as services, factors movement, harmonisation of regulatory regimes, environmental standards, and in general domestic policies that affect international competitiveness. In contrast, shallow agreements refer to agreements that deal with border issues preventing trade between two parties. The concept has been used in the literature to refer to NAFTA (North American Free Trade Agreement). Commercial agreements north-south have been also characterised as deep integration agreements, while  south-south agreements have commonly been considered shallow agreements in some academic literature. In this context, the concept seems to have a commercial connotation.

Photocredits: Stuart Miles/FreeDigitalPhotos.net
Recently commentators and politicians have stressed the success of the PA scheme and compare it to the uncertain state of affairs in the European Union and the unexpected Brexit referendum results. They present the PA as a reference to follow.

However, I see that there are important lessons for the PA to learn from the EU situation and the British exit decision likely to materialise within the next two years. The reasons for the UK exit point to three important factors, identity conflicts paired with nationalistic rebirth, social inequality, and immigration concerns. The factors speak about the discontent of some sectors of the population over labour migration and the worsening of working conditions and paying for less qualified workers in the agriculture and services industry. The insufficient development of social policies and infrastructure (education, housing, and health) that could cope effectively with the demands of a growing population exacerbate tensions between social groups by overstretching the capabilities of the system in detriment of essential public service supply. These factors and the discontent of some groups of the population with the distribution of the benefits from the EU integration have created appropriate conditions for the nationalist sentiment to be revived and be fed by the pro exit campaigners. The results are evident, voters feeling disenfranchised with the integration project and paying the collateral costs voted to leave and won.

There are lessons worth considering for the PA to move forward in the future:

The Presidents of the Pacific Alliance gathered to discuss the progress and steps forward in Puerto Varas, Chile on the 1st July 2016. The last meeting of the Presidents took place almost a year ago.

The highlights of the Presidential Summit and  the meetings on the outskirts of it include:

• General Guidelines on the Relational Aspect: The presidential mandates defined the basic activities to undertake in the short term regarding relations with observer states based on cooperation in four key areas: (i) trade facilitation; (ii) education; (iii) internationalization of SMEs; and (iv) science, technology, and innovation. A meeting with ministers of the 49 Observer states took place on the 30th June. Moving forward the PA will negotiate a Cooperation Framework with ASEAN and work on the areas agreed with Mercosur and the European Union. The PA recently signed an ‘Association Agreement with Canada’ setting the basis of the future cooperation between the two. Moreover, PA is examining the feasibility of a FTA with New Zealand.
• A large list of mandates is developed through the Presidential Declaration with nineteen areas for further action along with the agenda with third states. The mandates refer to activities in the areas of green development and sustainability, education, gender, joint work by health authorities, trade facilitation and customs cooperation, exploratory works in the area of labour and labour mobility, movement of people and migratory transit, specific cooperation within this technical group, services, consumer protection, regulatory cooperation and technical barriers to trade regarding specific products, SMEs, participation of SMEs in government procurement, tourism, innovation, pilot program to speed up patent processes, promotion of cultural products, sustainable mining and good practices, and promotion activities of the promotion agencies.
•  The Council of Ministers of Finance received a mandate to develop an action plan for the next year to further activities in the four key areas of work defined within the Paracas Declaration last year. These areas cover (i) financial integration, (ii) the development of a mechanism for infrastructure investment; (iii) catastrophic risk management; (iv) fiscal transparency.
• The ad hoc institutional structure keeps growing with the establishment of the Technical Group on Environment and Green Growth, The Labour Group and the Sub-Group on Digital Agenda.

The Presidential Summit was preceded by the III Business Summit of the PA gathering entrepreneurs and SMEs from the members, Brazil, Argentina, Costa Rica and Canada. The XVI meeting of the Council of Ministers also took place on 30th June 2016. After these meetings, Chile will assume the Presidency of the intergovernmental mechanism for the next year.
Photocredits: the photo in this post has been published under a Creative Commons license on Flickr under the user “David Ubilla” link: flickr.com
Sources: canadainternational.gc.ca
alianzapacifico.net
infolatam.com

The Pacific Alliance has approved the incorporation of Argentina as the 43rd observer state of the integration scheme. The decision constitutes an effort by new Argentina’s President Macri to establish closer ties with the PA.

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What does it mean for Argentina? This move sends a political message from Argentina that the new government is taking serious steps to move away from his predecessor’s -Cristina Kirchner- foreign policy who was very critical of the PA’s approach to regionalism.

President Macri volunteers to become the middle man between the PA and Mercosur to look for means in which both groups could converge. At the political level, this sounds like convincing rhetoric, however, at the practical level it seems more difficult to reach a unified view within Mercosur on how to engage with the PA. More importantly, the political and domestic situation in Brasil and Venezuela raise concerns as to the progress that Mercosur could make in the short term, let alone on its relations with third parties.

What does it mean for the PA? at the political level, it builds momentum for the PA reinforcing the relevance of its open regionalism approach that seems to have faded for more than a decade.

At the strategic and policy level?  The step means an opportunity for the PA to examine and develop a real policy behind the status of observer states and the role they could play. It seems that different states pursue different goals by becoming observer states, some are merely political, while others involve economic and more general cooperation interests. Does the status of observer state suit all the range of purposes and expectations that third states have when expressing their interest to built closer ties with the PA? Probably not, but I’m interested to hear your views in the comments!

Finally, Argentina’s decision proves once again the enormous influence that political leadership and the ideological views of the governments in place have in developing regional ties and convergence.

President Macri will attend the next Presidential Meeting of the PA to be held on 1 July 2016.
Other new observer states of the PA include Czech Republic, Norway, Slovakia, Egypt, Ukraine, and Romania. The total number of observer states is currently 49.

sources: infolatam.com

The Pacific Alliance wraps up the week with a couple of interesting highlights:

Photocredits: KROMKRATHOG/FreeDigitalPhotos.net
First, The fourth forum of innovation and entrepreneurship LAB4+ sponsored by the Pacific Alliance and the promotion agencies of the four members. The event held in Lima, Peru between 1-2 June aimed to connect and strengthen the entrepreneurial and innovation ecosystems of the region. The two main focuses of this year’s event were social innovation and ICTs. This event consisted of a series of seminars, investment rounds, thematic workshops and demo days.

Second the creation of the Strategic Observatory for the Pacific Alliance. An academic initiative looking to link the  government, the productive sector, and academia. The initiative is developed by four of the leading universities across the country members and will be physically based in Chile. The Observatory emerges as a form of think-tank to inform and support the technical work within the working groups of the PA.

It is worth noting that this is not the first initiative in this direction and other universities also have special programs to investigate the Pacific Alliance (see: icesi.edu.co). I guess this situation suggests that efforts should be made to integrate and coordinate the initiatives that emerge in relation to the study of the PA. Sharing a common technological platform on the projects that have been developed and will be developed would be a great way to ensure academic coordination, reduce the risk of overlapping and duplication efforts and encourage incremental knowledge. Moreover, it would be interesting to explore to what extent universities from other observer members could also join this promising initiative!

sources: http://magisterenderechollm.uc.cl

With the signature of the Transpacific Partnership Agreement (TPP) in early February, a recent trend seems to have emerged on the expanding number of mega-regional agreements. The Transatlantic Trade and Investment Partnership (TTIP) between the United States and the EU; the Trade in Services Agreement (TiSA) between 23 WTO members including the EU, focused on services and services related disciplines; and the Regional Comprehensive Economic Partnership (RCEP), the Asia-driven quota that includes the 10 ASEAN members and six countries including China, India and Japan. All these agreements are expected to be concluded by the end of 2016.

If they are meant to be more than preferential agreements, what are the mega-regional agreements ? Recent literature suggests that these agreements are in fact preferential trade agreements between countries or regions with a major share of global trade and FDI, with two or more parties that have either a driver position or act as hubs in global value chains. If this is the case and the PA is not another mega-regional agreement not only by definition but also attending to its particular goals of deep integration,  free movement of factors, towards social inclusion and reduction of socio-economic inequality then: What is the relation between the PA and these mega-regional agreements? How would they impact the PA developments? This seems an interesting issue to look at.