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Regional Integration in Latin America - The Pacific Alliance a Way Ahead
Editor's choice, Posts

Services and the Way Ahead after the Sinking of TiSA

watcharakun-services-techPhotocredits: 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

December 27, 2016by Ana Maria Palacio
Editor's choice, News, Posts

The Pacific Alliance after Trump

I would like to share with you some views on the foreseen implications of  Trump’s future presidency for the PA.

 Photocredits: coward_lion/FreeDigitalPhotos.net trump_coward_lion
Unlike the enthusiasm showed by Obama about the establishment and progress of the PA, it is expected that President Trump will not give high relevance to the PA in his foreign trade policy, especially if his manifested approach is bilateral agreements rather than regional. It will be interesting to see if he decides to withdraw the status as an observer state of the process, but this move will certainly not be a priority on his list of concerns. This decision would have political costs that he might not be interested in paying, especially because there has not been a particularly strong working agenda with the US derived from its position as an observer.

The PA has concluded cooperation agreements with Canada and ASEAN but not the US. The likelihood of a future partnership or cooperation agreement between the PA and the US during Trumps’ presidency is rather low, to say the least.

Trumps’ Presidency represents an opportunity for Mexico to strengthen its economic ties with its other PA allies to diversify its commercial partners to reduce the economic dependency on the US.  The new scenario could benefit and push the PA economic outcomes. This time driven not only by desire but also by eventual economic necessity based on the actual approach that Trump decides to take towards Mexico once in charge.

Elected President Trump has not expressed any support or interest for the peace talks in Colombia, in fact he has kept quiet on this topic. The future implementation of the peace agreements in Colombia, if approved, has lost an important regional ally —the United States. Possible economic, technical or capacity building support to the implementation process of the agreements seems off the table today.

Trumps’ approach to the region ultimately could lead to a decline in the regional leadership of the US within the Americas, because the domestic agenda that brought him to the White House will take precedence over any regional issue that is not directly under the radar of its electors.

The chances of TPP being approved by the US Congress during the lame duck, fade with the days, and this was the last and only chance for the agreement to be approved. As the Congress returns this week, TPP is not part of the agenda, while Senate majority leader, Mitch McConnell, has stated that “it is certainly not going to be brought up this year.” The possible failure of the TPP would represent the loss of economic opportunity for the PA members individually (Mexico, Chile and Peru), especially for Peru which was estimated to benefit the most. It would be a lost chance to update bilateral trade agreements for Chile and Peru, and NAFTA in the case of Mexico.
Continue reading

November 16, 2016by Ana Maria Palacio
Contributions, Editor's choice, Posts

The High Hanging Fruits of the Deep Integration in the Pacific Alliance

coconut-tree_antpkr

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)

October 1, 2016by Ana Maria Palacio
Editor's choice, News, Posts

Interview to the PA Presidents: What Did They Have to Say?

The presidents of Chile, Colombia, Peru and the Mexican Secretary of Economy were interviewed on the 21 September at an event by the Americas Society/Council of the Americas.

What did they talk about that could give us an indication of their perspectives about the PA?

The discussion tackled all sort of issues including, to a large extent, domestic concerns of the PA members such as the peace agreement in Colombia and how it could increase prospects of trade in tourism services and agricultural industries, as well as a package of domestic reforms to encourage formalisation of businesses in Peru promoted by President Kuczynski. The panel members presented their views on the likelihood of Trump becoming the next US president with the Mexican Secretary bringing out a colourful remark. The crisis in Venezuela and the question of whether the PA should be doing a bit more on this subject matter was also raised. No clear common view on a positive action of the PA members in this topic was envisioned.

With this range of issues on the table, a couple of interesting points were mentioned about the PA.

President Bachelet pointed out that the main topics of interest to  work on during Chile’s pro-tempore presidency were: education, innovation, science and technology, trade facilitation, internationalisation of SMEs, the implementation of the Commercial Protocol, the cooperation agenda with the 49 observer states and finally convergence with ASEAN and APEC. The ambitious list of topics refers greatly to matters related broadly to intergovernmental cooperation, but there is still the query on the extent to which the priority topics relate to the goal of deep integration and the free movement of services, people, capital, and goods. President Bachelet did not refer to the particular instruments and mechanisms through which the priority topics will be addressed but in practice they include interesting efforts such as the SMEs Observatory (alianzapacifico.net) and an Entrepreneurial Capital Fund, the interoperability of the single window clearance systems and later mutual recognition of the authorised economic operators once the program of authorised economic operators is fully implemented by the members.

Ildefonso Guajardo, Mexico’s Secretary of Economy, referred to some aspects in which the PA should be working on in order to achieve real economic integration. He brought up services liberalisation among the PA members as a strategic issue, new ways to approach common markets more efficiently and more generally alluded to better public policies to support this integration. Despite the relevance of all the topics mentioned by Guajardo it was not clear to me how much progress the PA has made on this front and whether these topics are part of the PA agenda in the short and long term. In addition, he presented a view calling on the need to make the PA a priority for the members and the call to ‘open up to action.’ These views imply the relevance of addressing topics that are more controversial and sensitive among the PA members if deep integration is to be achieved. These topics include regulatory coordination and reduction of heterogeneity in areas like taxation regimes towards deeper capital market integration.

Finally, the signature of an agreement with ASEAN was announced during the event which hopefully could lead the PA to more concrete activities and the development of an agenda towards the enhancement of an economic relation with the Asia Pacific Region.

To see the full webcast, please visit the link below.

sources: www.as-coa.org

September 23, 2016by Ana Maria Palacio
Editor's choice, Featured, Posts

What does the Pacific Alliance Mean by Deep Integration?

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

Photocredits: Kaisorn/FreeDigitalPhotos.net
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. Continue reading

August 18, 2016by Ana Maria Palacio
Editor's choice, Posts

Lessons from Brexit for the Pacific Alliance

Lessons Brexit

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: Continue reading

July 22, 2016by Ana Maria Palacio
News, Posts

Results of Puerto Varas Presidential Summit of the PA

Puerto Varas_David Ubilla
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

July 15, 2016by Ana Maria Palacio
Editor's choice, News, Posts

The Pacific Alliance Welcomes Argentina as a New Observer State

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.

Argentina 2_domdeen

Photocredits: domdeen/FreeDigitalPhotos.net
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

June 13, 2016by Ana Maria Palacio
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Hello my name is Ana Maria Palacio. I have a PhD from the University of Melbourne. This blog is about my thesis project, the Pacific Alliance.

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