This week ends with a lot of activity within the Pacific Alliance. I would like to recall two important events:

Photocredits: Ikuni/FreeDigitalPhotos.net

• The 34th Meeting of the High Level Group (HLG) comprised by deputy ministers of trade and foreign affairs to follow up on the progress in several fields, including the work plan 2015-2016 on financial issues proposed by the Ministers of Finance of the PA members and the CEAP recommendations. The HLG also reviewed the progress of the technical groups on external relations, institutional matters, SMEs, services and capital, among others between the 25th-26 April. The technical groups met prior to the HLG assessment of progress.

• The Commercial Protocol will finally enter into force on the 1st May 2016. Public sources often refer to the benefits of the protocol that include liberalisation in 92 per cent of goods with a commitment to gradually reduce the tariffs of the remaining 8 per cent of goods. However there are some caveats for a better understanding of the real benefits of the commercial protocol. In fist place the actual levels of liberalisation in goods through the protocol are not as high, considering the already high levels of liberalisation achieved through previous bilateral FTAs. Gains here are then more marginal than what is suggested, including some goods that were previously excluded in the liberalisation schedules. Potential gains move in the direction of the rules of origin negotiated and the possibility of accumulation of origin rather than the actual levels of tariff reductions achieved. The flexibility on the rules of origin and accumulation/cumulation between the member states is one means to progress and build regional value chains.
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Carlos Arturo Villagrán PhD Candidate from the Melbourne Law School has shared with the Pacific Alliance Blog his insights on the role that Costa Rica has played and continues to play in Central America and particularly in the Central American integration.

Photocredits: Stuart Miles/FreeDigitalPhotos.net
Costa Rica’s relationship with and within integration processes has been, and continues to be unique and different to its regional partners in Central America.
Since the 1950’s, the Central American region has been attempting to consolidate a regional integration scheme; however, these efforts continue to display and repeat the same old differences and pathologies since the fall of the Central American federation in 1838.
In this enterprise for integration, Costa Rica displays itself as an interesting outlier. Costa Rica, different to its regional neighbors, has been historically interested in consolidating its export industry and agricultural diversification. In addition, Costa Rica has been successful in maintaining a stable and democratic rule since the 1950s. This had aided Costa Rica to provide its citizens a higher quality of life than its regional counterparts. This has made Costa Rica, understandably, weary of its neighbors and to remain outside of the regional struggle.

Nevertheless, Costa Rica during the regional turmoil period, between 1975 and 1985, understood itself as not part of the regional problem, but as affected by it. In those years the Central American common market, born in the early 1960s, halted and, also due to the external conditions, Costa Rica fell into economic depression.

In this pursuit of economic recovery, Costa Rica became a leader for the return of the region to democracy and peace. Nevertheless, Costa Rica promoted a policy of ‘intervention without integration’. Following this line of thought, Costa Rica was not particularly against integration, rather it focused on using regional machinery, or the integration process, in order to successfully insert itself into the international markets. This position has led Costa Rica to become a reluctant player within the new Central-American integration enterprise, founded in 1991.

This reluctance has been displayed by the fact that it has not ratified many of the Central-American integration treaties, including those agreements  to become a member of the regional parliament and the court. In addition, Costa Rica aided for the creation of a new WTO-like dispute settlement scheme in the region, taking away the competencies of the newly established regional court.

Photocredits: Tuomas Lehtinen/FreeDigitalPhotos.net

As you may already be aware, one of the requirements for new members to enter into the PA is that it has signed free trade agreements with every of the other PA members. This is one of the reasons why Colombia and Costa Rica sped up the negotiations and process to conclude an FTA, since it was the only country of the PA that Costa Rica did not have an FTA with. After the approval by the Colombian Constitutional Court the entering into force of the agreement is expected sometime in next quarter of the year. But what comes next for Costa Rica as an observer candidate to the PA? To start this means that the country is one step closer to becoming a PA member.

Costa Rica has conducted a study on the feasibility of entering into the PA and an internal review process is under way  to make a final decision after a shift in the government intentions with the change in presidency. Among the issues  at the national level that could hinder the entering of Costa Rica to the PA is the agricultural sector opposition. It seems very concerned with the impact that a future PA membership will have on it prospects.

Last week a friend from a government agency asked me in a mesmerising way: Are there already publications on the Pacific Alliance? Well, there are in fact three dedicated edited books on the Pacific Alliance!

I would like to review these recent publications on the Pacific Alliance for the general public to get a sense of what they can get from them.

1. Alianza del Pacífico: en el Proceso de Integración Latinoamericano (the Pacific Alliance in the Latin American Integration Process) by CIEPLAN and the Interamerican Development Bank. This 2014 edited exploratory publication provides general insights on several aspects of the Pacific Alliance such as the relational issues with Mercosur and Brazil. An interesting approach is proposed by Alexandro Foxley in his short contribution on productive integration. As mentioned the book is only exploratory and does not provide details on the particular challenges of the PA to move forward. The book is available for free at: www.kas.de
2. La Alianza del Pacífico Mitos y Realidades (The Pacific Alliance: myths and realities). This is a 2015 edited publication that offers more in-depth analysis on particular topics and issues of the Pacific Alliance. It examines the Pacific Alliance in the regional and the global context with contributions by several authors. The publication briefly addresses some of the general challenges that arrive from the current institutional structure posing the question on how it does not conform with the institutional requirements to establish a common market. Moreover, the book includes a section on the challenges and cooperation avenues on security issues related to drug trafficking, money laundry, and organised crime for the PA members.  The book is available for free at: www.kas.de
3. Perspectivas y Oportunidades de la Alianza del Pacífico. (Opportunities and Prospects of the Pacific Alliance). This is a 2015 edited contribution by Universidad CESA and Universidad del Desarrollo. The book delves into more detail on the achievements that the PA has made up to this point and also touches on particular aspects of the PA, including contributions on particular countries such as Chile and Peru. The chapter by Edgar Vieira is worth exploring since it provides interesting insights from a theoretical and practical point of view. Some general recommendations on steps forward come from the contributions while a strong economic focus on their analysis persists in most of the chapters. Photocredits: Panaawat/FreeDigitalPhotos.net

Early this month the Colombia Constitutional Court declared the law approved last year by which the Pacific Alliance members created a Cooperation Fund unconstitutional.

The Cooperation Fund is the mechanism designed to finance and put in operation all the core cooperation initiates within the Pacific Alliance including: social development, innovation, climate change and environmental action, and SMEs. The Fund is made up from the yearly financial contributions of the members and other contributions by third parties.

The decision was adopted because the Law 1749/2015 did not comply with all the formal procedures required by the Colombian Constitution for its approval by the Congress when it was issued last year.

This means that Colombia will need to start a new process for incorporation of the agreement for a cooperation fund with further delays for the fund to enter into operation which is not foreseen for early 2017.

It is not the first time a situation like this has taken place. If we remember back, the Colombian Constitutional Court declared the law approving the Framework Agreement of the Pacific Alliance unconstitutional for procedural reasons in 2014.

In the meantime, the Corporation Fund Agreement that was signed in May 2013 is in its final stages of incorporation by the other member states. Peru issued the formal Supreme Decree (N° 073-2015-RE) incorporating the Cooperation Fund Agreement in late 2015, after the congress approval of the agreement.  Procedures are also now finished in the Chilean Congress.

sources: www.corteconstitutional.gov.co
www.elperuano.com.pe
www.leychile.cl

Photocredits: Jan Pietruszka/FreeDigitalPhotos.net

The first week of March the High Level Group (HLG) of the Pacific Alliance gathered in its XXXIII official meeting in the city of Bogota, Colombia to follow up on the commitments and mandates of the last presidential declaration and to prepare for the presidential meeting programmed for July 2016.

Photocredits: alianzapacifico.net

The meeting of the HLG was preceded by two days of discussions within the technical groups. The Deputy Ministers examined the progress in areas such as institutional matters, cooperation, the movement of people,  SMEs, single window clearance systems, trade facilitation, customs cooperation and the communication strategy. The technical group on Genre Focus met for the first time.

The HLG also discussed the progress of the Ministers of Finance working plan for 2015-2016 and the situation in regard to the recommendations and proposals presented by the Pacific Alliance Business Council.

The next meeting of the HLG will be at the end of April 2016.

sources: www.alianzapacifico.net
www.sela.org

by Eric Leroux

The objective of the Pacific Alliance with respect to trade in services is to “build in a participatory and consensual way an area of deep integration to move progressively towards the free movement of […] services.” The key word in this sentence is “progressively”, and the missing, but (at least) equally important, one is “seriously”.

If one were to speak of the Pacific Alliance’s achievements in the services area in speed terms, one would say that it still is in first gear. Not that this is any different from what is taking place under other trade-liberalizing agreements; to the contrary, the Pacific Alliance is dutifully espousing the existing models reflected in, on the one hand, the NAFTA, and on the other, the GATS. The Pacific Alliance’s services disciplines negotiated thus far draw on both models, using, presumably, what is considered to be the best of both models. The problem is that those two models are now flawed: they no longer reflect the reality of the marketplace, nor truly tackle head-on those issues that will be determinative of real, significant, liberalization of services trade in the coming decades.

I would like to share with you some insights on what I see are issues in which the PA should focus attention during 2016:

1. The Commercial Protocol entering into force early in the year and the corresponding steps for the implementation of many of its provisions. Two examples are the provisions on mutual recognition of professional licencies/authorisations/certifications to professional services suppliers, and the working plan on harmonization for sanitary and phytosanitary measures. The particular implementation of the commercial protocol should be accompanied with a road map allowing follow up on the progress made.
2. Definition of the steps forward for the formation and consolidation of regional value chains through the design of regional policies in this regard, including strategies for participation of SMEs. This issue is a basic example of how important the design and construction of regional policies will be for the long term vision of the PA. The PA as a whole should not underestimate the importance of the members insertion into other regional value chains, for instance in Asia, with products and inputs of more added value rather that just primary raw materials.